An Overlooked Development: Ethereum, IBM ADEPT and the Internet of Things (IoT)

IBMEther

It has certainly been an eventful start to 2015. The majority of headlines have dealt with bitcoin price volatility, regulated U.S.-based bitcoin exchanges, and… well… bitcoin price volatility. Amidst the flurry of headlines I believe the most significant development in decentralized systems has been wildly overlooked — that of the IBM ADEPT publication and the functional IBM / SAMSUNG demo from the 2015 CES Conference built with Ethereum’s beta protocol — the implications of which are significant. I’d like to briefly shine my humble little spotlight on these here.


First – some relevant links; If you’d like to really dig into what I’m about to address you can view both the IBM ADEPT paper (pre-publication), the IBM paper on “Device Democracy” and a video of the IBM / Samsung ADEPT demo from the 2015 CES Conference. Links below:

IBM ADEPT Pre-Publication — Cliffnotes version: IBM states their case that decentralized P2P solutions (blockchain technology) are the preferred approach to enabling the future “Internet of Things” (IoT). Claims centralized approaches are too costly, not scalable, and lack privacy. The ADEPT (Autonomous Decentralized Peer-To-Peer Telemetry) platform describes how this approach might address these issues and enable a more ideal IoT.

IBM on “Device Democracy” and the Internet of Things — Cliffnotes version: Gives context to the scale of the future IoT (billions of interconnected devices) and describes the shift from ‘special purpose computing’ to ‘general purpose’ computing with greater capability.

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Source: IBM Device Democracy Paper (2015)

IBM / SAMSUNG ADEPT Demo (CES 2015 – Las Vegas, NV) Cliffnotes version: IBM and Samsung have built a functional demo (based on the Ethereum Protocol beta-release) which demostrates the use of blockchain-based smart-contracts for appliance warranties. This is a big deal — one of the first working examples of such a use-case.


As described in the papers and demo above — the potential impact that blockchain technology may have on the Internet of Things (IoT) is significant. As a more cost-effective, scalable, and secure solution blockchain technology will enable millions (possibly billions) of interconnected devices to behave autonomously in very sophisticated ways that were never before possible.

What is most profound and game-changing is the ability for devices to behave autonomously and participate in not only the ‘Internet of Things’ but the ‘Economy of Things’. In the demo the presenter shares a use-case where a dishwasher detects that it is low on detergent and automatically proposes a new order of detergent. Such a capability foreshadows a host of future innovations for decentralized autonomous organizations (DAOs). Picture a self-driving Uber-equivalent refueling independently, getting an oil change, ordering new tires, paying tolls, renewing registration, etc. — all while paying for such services with it’s own earning from fares.

In the second use-case demonstration we see something with implications equally as significant — the ability of a device to diagnose a failed part and reference the blockchain-based warranty contract. In such scenarios a remarkable amount of work is removed from the process of verifying warranty claims and providing services for repair or replacement. Currently most warranty claims involve significant costs — phone calls to customer service, employee salaries for customer service reps, time for verifying contracts, storage and security for warranty contracts, capital and labor for repair or replacement… the list goes on.

In a world where devices operate autonomously — where warranties are completely secure and verifiable on a blockchain — such costs become almost non-existant. The device can sense a part failure, automatically verify the terms of the warranty contract, schedule the next necessary action (part replacement, repair, re-order, production, etc.), pay for the required actions, and even schedule a proposed replacement date based on the secure calendar of the owner. When you combine this with a future where 3D printing is common another such scenario might include the proactive delivery of a computer-aided design (CAD) spec — so owners have the option to print and replace the part themselves. When considering devices with enhanced self-diagnostic techniques the pre-order of parts in anticipation of failure could significantly reduce down-times or the over-production of replacement parts.


When discussing a future where the IoT is a reality many express fear that it will lead to a “1984-esque” scenario where privacy no longer exists and must be sacrificed to experience the benefits of interconnectedness. This is worth addressing here as the implications I’ve just discussed will most certainly raise the eyebrows of those sharing such concerns. Thanks to blockchain technology the benefits of a completely interconnected P2P world may be feasible with little-to-no sacrifice of personal privacy — blockchain technology is more likely to provide even more security and privacy then we currently experience in our less-connected existence — all the while reducing cost and enhancing experience. We may eventually have a world where we enjoy benefits we are only just beginning to imagine — where we get our cake and eat it too.

It is year 6 of the post-blockchain world and we are only beginning to see the implications of decentralized autonomy. These early demonstrations are humble — but like the first brief flight by the Wright Brothers — they chart an entirely new realm of future possibility.

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Ryan’s “Traits of Money” Series ( Part I )

This is Part 1 of a series of posts discussing the “Traits of Money” Chart

In May 2014 I published an article on CoinDesk discussing the traits of money in the context of Universal Darwinism. You can view it here. Imbedded within the piece was a chart I created displaying the traditional “traits of money” as recognized historically as well as some “new traits” now made possible by blockchain technology.  It ended up making the rounds over the past 9 months making its way across twitter, reddit and even into Pantera Capitals most recent monthly bitcoin letter. I have been pleased to see its been well received and also stirred up some great debate and discussion. My only regret is that I have yet to give it the full and thorough explanation it well deserves to defend the traits I chose to include and my initial ratings of each.

It is worth noting I recognize it has become a seemingly unpopular opinion nowadays to claim bitcoin is a good or better form of money. I’m finding more and more opponents, and even proponents, choosing to attack or deny this possibility. Proponents often boast bitcoin will find its niche as a payment platform or intermediary for exchange ignoring the “form of money” debate altogether — possibly in an effort to be taken more seriously in a professional world wrought with criticism (I can empathize with this and also acknowledge they may very well be right too). Opponents often have direct but wildly uninformed arguments often referencing 150 years of economic theory interwoven with biased opinion. It is my belief that irregardless of whether bitcoin or cryptocurrencies succeed or fail we need look no further than the inherent traits of money to determine which is best.

For those interested in diving deeper into this subject… before you read on I only ask you take 10 seconds right now and do your best to detach yourself from your traditional understanding of money. As best you can, wipe the slate clean and think not of money as paper bills or metal coins but as a tool that requires specific traits to fulfill its purpose. You’ve been dropped off onto planet earth for the first time and you’re tasked with the job of creating the tool the world will use for money… no pressure.

Here is the chart again for your reference:

TraitsofMoney

I spent a significant amount of time designing the table and pondering which traits to include as well as the degree (Low, Medium, High) to which each form of money fulfills each trait. As no such table yet existed I realized this may become a useful reference for many in the future so I didn’t want to drop the ball.

Traits vs. Characteristics

It is important to understand why I chose to use the term “trait” instead of “characteristics”. In biology traits are heritable through the genotype (genes). They are the intrinsic elements that determine our makeup. Characteristics on the other hand are expressions of a genotype within a given environment — this is known as a phenotype.

Stated more simply — characteristics are the result of traits.

The chart below may provide added context (‘Scarcity’ is a trait while having ‘High Scarcity’ is a Characteristic):

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I make this point because I’ve seen many people claiming that bitcoin is inherently “too volatile” to be used as a form of money. Take only the most recent “Ponzi” whistle-blower Gary North’s article from Kernel.

“Bitcoins are too volatile in price ever to serve as a currency.” – Gary North

The mistake these individuals make is that they perceive price volatility to be a “genotype” of money (intrinsic) when it is in fact a “phenotype” (extrinsic).

I’ve seen many individuals in the commentary of the article and on reddit make the same mistake. They propose that certain traits be added to the table when in fact they are referring to extrinsic characteristics. One such example is “Network Effect”. It is easy to recognize that network effect is not an intrinsic trait of any form of money — rather “network effect” it is the result of a money’s inherent traits thriving in a given environment. The first person to ever find gold didn’t pick it up and say “hey – this has incredible network effect!” — most likely they said, “wow – shiny!”. Over time golds scarcity, durability & fungibility were likely big contributors to its success and network effect.

In Part 2 I will begin to break down my position on each trait and give context to what may appear to be a system of sweeping generalizations. Let’s be honest, a “Low, Medium, High” rating system is so I look forward to adding context.

The Lens of Improvement and the Blockchain

Working in the field of process improvement one gains a powerful lens through which to view processes and society — one demanding greater empathy. You learn to analyze all systems as an engineer and recognize the host of dynamic variables that impact them. When something doesn’t go right it is often our first reaction to seek out the responsible party — one version might include internalizing the phrase “who fucked up?” … or not internalizing it.

This type of finger-pointing is a fallacy. By objectively analyzing systems one quickly realizes that even the most blatant errors can often be diagnosed as a symptom of poor design. By focussing on the individuals operating within them (cogs in a wheel) and not the inherent shortcomings of the system itself we miss the greater opportunity. The real questions we should be asking are “how is this error possible?” or “why do we still do it this way?”.

This reality is not limited to service-oriented processes or product design but applies to all facets of life and society.

I would consider any instance of an infant being electrocuted by a wall-socket a HUGE ‘error’. This should never happen under any circumstances. That said, if such a horrific instance were to occur, would we blame the child? I certainly would not. I would likely look at the environment provided by the childs caretaker(s). Did they use socket caps? Put couches and furniture in front of such outlets? Leave door open to rooms with active open sockets? etc.

While all of these are seemingly reasonable questions to ask a far more productive question is “why are children at risk of being hurt by modern electrical sockets?”. Could it be that these ports could be better designed to never allow children the risk of being electrocuted? Why not have them placed higher on the walls, designed in a child-proof manner to prevent the insertion of foreign objects, or completely eliminate the need for hard-wired devices through the creation of ‘super-batteries’? By addressing these issues the opportunity for human-error is removed and thus the root-cause of the problem is directly addressed. In this case the root cause is not that children stick their fingers in outlets — it is that outlets allow the possibility of electrocution.

I see such themes playing out today with regards to the state of the world, decentralization and cryptocurrencies such as bitcoin but also realize it will take time for society to recognize that it’s less about punishing the bad actors now as it is making such ‘bad acts’ impossible in the future. This can be displayed by various examples of modern ‘bad acts’, the reactive costs they result in,  and some potential solutions made possible by applications of decentralization and blockchain tech:

Chart

I am not naive enough to claim such applications will solve all of the worlds problems — but it can certainly improve if not solve many of them. Furthermore, it is likely that by addressing the root causes of these issues (the fact that we live in a world where it is possible to steal identities, manipulate markets, rig elections, suppress freedoms) we may avoid a host of costly reactions society incurs today. Hackers will always exist as long as they can achieve success. Dishonest bankers will always scheme (cough! cough! — Goldman Sachs) – literally its what they’re paid to do and quite frankly I wouldn’t expect a good moral compass to be a job requirement, quite the opposite in fact – as long as they believe they can keep their dealings from the public eye. Power hungry dictators will always exist, even more so when they can rig elections.

A child will always be at risk of electrocuting themselves in a room full of open outlets but a room where outlets are no longer necessary poses no risk. Similarly, a world where the results of a nations first democratic election can not be manipulated but are cryptographically verifiable is a better one. A world where the manipulation of a nations monetary supply to the detriment of its citizens by a minority (intentions good or bad) is no longer possible is a better one. A world where proof that your government is torturing people can not be deleted or covered up — rather can be freely shared on a secure and distributed database is a better one.

There are a lot of wrongs in the world today. In a perfect world those responsible would be brought to account. That being said – I believe the way to truly create a brighter future is not by focussing on the bad actors of the past, but by making it harder (or impossible) for the bad actors of the future to accomplish bad acts. I truly believe blockchain technology will lead to a more honest and transparent future — here’s to error-proofing the fundamentals of modern society; democracy, our financial system and beyond. I have a feeling blockchain tech will be crucial to this.