Sunday, February 22, 2015

The Blockchain: Evolution of the Corporate Nucleus


by Guest Author @ 2015-02-22 02:13 PM

Are corporations reliant upon humans to survive? Over the course of the last 100 years, the answer has been increasingly no. Corporations are continuously shuffling capital inside their organizations, as we have seen, but more and more of it is being devoted to automation and computing power.
They do so because their survival is heavily dependent upon the labour output of its employees and the value created for customers — both of which roles are now being filled by machines with the introduction of bitcoin technology.
The bitcoin payment system represents a first of its kind economic model – a decentralized, autonomous corporation. This type of corporate model is fundamentally different in its makeup because — among other things — it is capable of functioning completely devoid of human intervention and holds the potential to be owned by no single entity.

Machines Are the New Employees

In the information age, machines are the employees rather than as humans were in the industrial age. The role of the employee, and the producer of labour, is solely as a machine. In terms of the bitcoin mining function, the product of labour would be the hashing power necessary to verify blocks of transactions. For this function, the network pays each node (employee) who contributes, a 25 BTC compensation roughly every 10 minutes.
When we come to understand this shift in the very makeup of the corporation, we see that the core of its very function has undergone a significant alteration. The blockchain network concept is such an altering framework for conducting business, that it shakes the very foundations of what we believe to be a legitimate corporation. Truly, the blockchain network concept represents a major milestone in technology innovation.
I don’t claim to have a perfect conceptualization of the corporation, but I do believe this illustrates a crucial point: that the nucleus of the corporation has evolved beyond human function.
Employees are now considered machines in the information age rather than humans in the industrial era. Customers are humans now, but soon to be machines as well with the implementation of self-executing contracts. A stakeholder describes any party which is affected by the operations of the corporation. This can vary widely as anything from nature to someone financially invested could be considered a stakeholder.
As some have already discussed, bitcoin is an early prototype of a decentralized autonomous corporation, one where owners of bitcoin can be seen as shareholders and miners the employees. The parties which actually use the payment system and spend money through it are the customers. Bitcoin requires no human intervention to operate as it is designed to, but it does not have any purpose until some party comes along, fires it up, and puts it to use. Because miners do not have the capability to conduct transactions automatically, they cannot be described as the customers of the bitcoin electronic payment system. However, smart contracts, which promise to enable this idea of automatic transactions, are already in development and will have game-changing implications.

Smart Contracts Have No Need for You

Smart contracts between machines will facilitate increasingly complex transactions where no human counterpart is required. Smart contracts (which are already in development) will allow self-executing transactions that occur only once predetermined conditions have been met, and will only effectively be governed by the computer algorithms, which architect its use.
Networks of smart contracts will have empirical objectives (able to be determined through observation) which will be made transparent through open-source technology. Because of this, corporations will be adopting a transparent mindset, by provably committing to a new organizational process which is incapable of ‘cheating’. How can a network truly ‘cheat’ if its functionality is made completely open for interpretation? The only instances of misuse will come from failing to understand the objectives of the contract or network.

Rise of Computing Dominance

If you recall back in the early days of the computing revolution, the only institutions which were capable of housing such infrastructure were governments and large universities. At these places, a large number of people shared the machines and often you had to schedule of buy time to use the computer.
As can quite easily be seen, personal computing allows individuals to then own their own computer. But with collective hash networks such as the bitcoin blockchain, one ‘computer’ now controls many, many human counterparts. It is an exact reversal of how the computing revolution began.
In a similar manner to this passage from Alan Turing, humans will come to work for these networks of machines rather than machines working for networks of humans.
“Once the machine thinking method has started, it would not take long to outstrip our feeble powers. […] At some stage therefore we should have to expect the machines to take control, in the way that is mentioned in Samuel Butler’s Erewhon.”
 – Alan Turing, Intelligent Machinery, A Heretical Theory, 1951
As machines climb the ladder of exponential improvement (Moore’s Law) they increasingly exercise dominance over the biological domain because they write completely new rules which are governed by the architecture of cyberspace. No physical interest will be able to directly influence these networks. Because of this, biological intelligence will be incapable of keeping pace with computational intelligence which will represent a form of law subversive to human judgement. This process is one of evolution, and therefore should not be met with resistance but seeking to understand and explore this inevitable trend. Those who empower themselves with the understanding of this change will benefit tremendously.


The blockchain concept brings with it a fundamental shift in the paradigm of the corporation. No longer are the employees humans, but rather machines which are tasked with production and output of the organization. Smart contracts will allow increasingly complex autonomous corporations of this type to execute transactions with predetermined conditions. In doing so, humans will be sent down the corporate ladder into increasingly replaceable positions.
This transition is inevitable and should not be met with resistance, but rather a focus on how we can make it as painless and beneficial as possible. What implications do you see coming from the evolution of the corporate nucleus?

About the author

Travis Patron is a singularity researcher and cybereconomist most well-known for his thought leadership into digital economies such as bitcoin. As a respected public speaking authority and author, he has helped audiences, ranging from small teams to large university classrooms, understand the implications of non-political, programmable money for the average consumer. You can find him in Toronto, apathetic towards voting while hunting banksters for spare organs. Read his latest book: The Bitcoin Revolution: An Internet of Money.

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