Summary: Block

Read the summary and the most important questions on block

• 1 Introduction

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• How does Bettina Warburg describe the economic significance of blockchain technology? What can blockchain technology (potentially) accomplish to facilitate faster and more efficient trading?

  Institutional economics
  - Institutions ensure/enforce the rules of conduct in market places
  - BT "a new technological institution that will change how we change value"
  - Shift from centralised institutions to decentralised platforms
  
  BT will lower uncertainty associated with transactions
  - Identity management
  - Asset tracking
  - Reneging on deals

• What are the benefits of BT?

  - No more intermediary or middle man, facilitates peer-topeer transactions
  - Faster transactions
  - Cheaper transactions

• What are problems with the trusted third party? (6)

  - Corruptibility
  - Monopolist transaction fees
  - Ability to 'rewrite history'
  - Single point of failure
  - Control over users' data
  - Rationing access
  

  • competitive advantage
  • shirking
  • political exclusion

• What are the 2 layers of the Internet as we have it today?

  1. The basic protocols, which were open and owned by no one, these protocols still exist: HTTP, POP, SMTP
  

  • This first layer was open and decentralised, it still is
  • What was missing: secure open standard to establish identity

  
  2. Closed-protocol era
  

  • Controlled by centralised for-profit corporations
  • Winner takes it all-economy

  Why this outcome?
  

  • need to store data
    
  • need somebody to organize trading and transactions
  • platform switching costs are high for consumers

• What could be considered the 3rd layer of the Internet?

  Blockchain layer 3: Return to the open-protocol era
  

  • Data stored in a decentralised way on blockchains
  • Everybody would own their data and decide which part to provide to services
  • Peer-to-peer transaction without intermediary

• How would a blockchain-based version of Uber look like?

  - Standard protocol (or smart contract) for transportation transactions
  

  • Register drivers
  • Book & pay a ride
  • Still need a platform on top?

  
  
  - Who would provide the infrastructure and why?
  

  • A developer collective rewarded by tokens
  • Early adopters and drivers rewarded by tokens
  • Where does the token value stem from?

• What was the source of the succes of Silk Road?

  - An easy to access marketplace for illegal goods
  - Reputation to be relatively reliable (trusted third party with yet a high amount of uncertainty)
  - No ID (anonymity)

• What was the ultimate challenge for Silk Road?

  - To enforce the rules!
  - Solutions:
  

  • sanctions
  • thread of violence/repercussions

• How anonymous was Silk Road really?

  - Buyers: had to give their home address
  - Sellers: could exit anytime with a scam, otherwise stay in the dark
  - Buyers & Sellers had to cash in and cash out Bitcoin

• 2 Basics of Blockchain Technology

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• How can you prove that you have created digital content at a certain point in time?

  1. You could register your data with something like a patent office: 2. You bring your data, 
  3. they store it and issue a receipt, 
  4. record the storing time in a ledger, 
  5. post it online (like SSRN)