Bitcoin has taken quite a beating for its libertarian design biases, price volatility due to speculation, and the questionable practices of some currency-exchange firms. But whatever the real or perceived flaws of Bitcoin, relatively little attention has been paid to its “engine,” known as “distributed ledger” or “blockchain” technology. Move beyond the superficial public discussions about Bitcoin, and you’ll discover a software breakthrough that could be of enormous importance to the future of commoning on open network platforms.
Blockchain technology is significant because it can validate the authenticity of an individual bitcoin without the need for a third-party guarantor such as a bank or government body. This solves a vexing collective-action problem in an open network context: How do you know that a given bitcoin is not a counterfeit? Or to extend this idea: How do you know that a given document, certificate or dataset -- or a vote or "digital identity" asserted by an individual -- is the “real thing” and not a forgery?
Blockchain technology can help solve this problem by using a searchable online “ledger” that keeps track of all transactions of all bitcoins. The ledger is updated about six times an hour, each time incorporating a new set of transactions known as the “block” into the ledger. What makes the blockchain so revolutionary is that the information on it is shared by everyone on the network using the Bitcoin software. The ledger acts as a kind of permanent record maintained by a vast distributed peer network, which makes it far more secure than data kept at a centralized location. You can trust the authenticity of a given bitcoin because it’s virtually impossible to corrupt a ledger that is spread across so many nodes in the network.
What does all this have to do with the commons? you might ask. A recently released report suggests that blockchain technology could provide a critical infrastructure for building what are called “distributed collaborative organizations.” (One variation is called “decentralized autonomous organizations.”) A distributed organization is one that uses blockchain technology to give its members specified rights within the organization, which are managed and guaranteed by the blockchain. This set of rights, in turn, can be linked to the conventional legal system to make those rights legally cognizable.