Blockchain: Is 'the trust machine' analogy an understatement?

Cover art of Money & State's article on blockchain technology. 

Cover art of Money & State's article on blockchain technology. 

The Economist published an article on blockchain technology in its latest issue. For someone with little knowledge of blockchain technology, the author gave the following analogy: 

To understand the power of blockchain systems, and the things they can do, it is important to distinguish between three things that are commonly muddled up, namely the bitcoin currency, the specific blockchain that underpins it and the idea of blockchains in general. A helpful analogy is with Napster, the pioneering but illegal “peer-to-peer” file-sharing service that went on line in 1999, providing free access to millions of music tracks. Napster itself was swiftly shut down, but it inspired a host of other peer-to-peer services. Many of these were also used for pirating music and films. Yet despite its dubious origins, peer-to-peer technology found legitimate uses, powering internet startups such as Skype (for telephony) and Spotify (for music streaming)—and also, as it happens, bitcoin.

The article also lists some of the practical uses of blockchain technology. 

One idea, for example, is to make cheap, tamper-proof public databases—land registries, say, (Honduras and Greece are interested); or registers of the ownership of luxury goods or works of art. Documents can be notarised by embedding information about them into a public blockchain—and you will no longer need a notary to vouch for them. Financial-services firms are contemplating using blockchains as a record of who owns what instead of having a series of internal ledgers. A trusted private ledger removes the need for reconciling each transaction with a counterparty, it is fast and it minimises errors. Santander reckons that it could save banks up to $20 billion a year by 2022. Twenty-five banks have just joined a blockchain startup, called R3 CEV, to develop common standards, and NASDAQ is about to start using the technology to record trading in securities of private companies.

On October 30, a day before this Economist published this article, Erik Voorhees of published an article describing why the narrative around bitcoin and blockchain has changed recently. People seem to be obsessed with the blockchain in a way that they never were with bitcoin. 

And “Bitcoin,” as a thing somehow distinct from “blockchain,” has been left by the wayside, ignored like an embarrassing relative at a family gathering.

His thesis is that bitcoin became a taboo subject, a word associated with buying illegal things, "somewhere between Ponzi Scheme and 'money used by bad people.'" However, bankers knew that something needed to change and that disintermediation technology had the potential to save billions of dollars. He points out that blockchain is simply a distributed database, not exactly novel technology, but it is forcing banks to innovate in a way they were never required to before now. 

It remains to be seen how long it takes for the financial industry to realize that the true valuable innovation is not the distributed ledger of the blockchain (which has existed in other forms prior), but rather the open platform of financial inclusion with no trusted party or cartel (which has never existed).
It is precisely Bitcoin’s openness which, like the internet before it, brings revolutionary change to how humans interact. Bitcoin wasn’t revolutionary because it could move money faster, or more cheaply, than banks. Most of the banks’ delay isn’t due to technology – they’re just sending digital messages representing virtual money, after all – it’s due to regulation, bureaucracy, and habit.

Voorhees believes that the real revolution in blockchain technology is not about efficiency but rather the removal of censorship and central control of money itself. 

Is the internet remembered as the means by which Time Warner more quickly delivered its content to readers? Is the printing press remembered as the means by which the Church more aptly conveyed its prognostications to the devout?
It was the openness of these technologies – the fact that anyone, in any country, could access them, build with them, & experiment with them. One did not have to be 18 to sign up. One did not have to be on a government-approved list. One could write whatever she wished, communicate with whomever she felt relevant.
Blockchain technology, properly understood, is decentralized. It is an open platform. It does not pass judgement on human actions, it simply enables more action, more easily, to everyone. A blockchain strategy that doesn’t appreciate this is doomed in the same way and for the same reason as AOL and CompuServe. Does industry really need that lesson again?

The real revolution, then, is not simply about the myriad use cases of blockchain technology. Rather, it's about a fundamental breaking down of the silos of financial networks.