Blockchain Technology and Decentralised Autonomous Organisations

At a lecture in 1951, Heidegger said the following: “But so long as the essence of technology does not closely concern us, in our thought, we shall never be able to know what the machine is” (2004: 24) . With these words, Heidegger referred to the rapid development and application of technology, such as production machines, electricity, television and aircraft, in his day. The manifestations of this technology rapidly changed the world at the time, while people never stopped to think about the essence of these technological developments and the ensuing social impact.

Today, we again find ourselves on the eve of a similar global change, where machines as physical and stand-alone devices are no longer centre stage, as they are evolving into devices that, through the use of algorithms and software, can communicate and interact in networks. This development is turning the devices produced by modernity into cyber-physical systems that can function and make decisions autonomously based on data and information. These changes, in turn, reveal new organisational possibilities based on a kind of interconnectedness that enables cyber-physical systems to jointly make decisions. Again, the question that arises is whether we can still fathom, or even want to fathom, the scope and essence of such a technology-based development.

Decentralised Autonomous Organisations

In a white paper published by Ethereum in 2014[2], Buterin states that “the general concept of a ‘decentralized organization’ is that of a virtual entity that has a certain set of members or shareholders.” Buterin alludes to the capabilities of a whole of networked individual computers, algorithms and software to make decisions by consensus as a whole or as an autonomous virtual entity and to autonomously perform transactions based on these decisions. The rules governing the virtual entity’s decision-making process are recorded in what Szabo (1994)[3] calls ‘smart contracts’, which are, essentially, algorithms and software that jointly make up a protocol based on which transactions can be performed autonomously by the virtual entity, i.e. without human intervention. In 2015, Wright and Primavera de Filippi[4] put it as follows: “Over time, as internet-enabled devices become more autonomous, these machines can use decentralized organizations and the blockchain to coordinate their interactions with the outside world.” This quote links the application of consensus algorithms, smart contracts, decentralised operating autonomous organisations to the rapid development and application of concepts such as the (Industrial) Internet of Things and cyber-physical systems. A 2019 report by the US National Institute of Standards and Technology[5] claims that although these concepts have different origins, they do overlap to a considerable degree, as they all refer to a similar development, which the report describes as “trends in integrating digital capabilities, including network connectivity and computational capability, with physical devices and systems”. The increasing digital capabilities of random combinations of networked cyber-physical systems, which people use every day or that produce information output that is applied, engender new organisational models that, in turn, can be considered decentralised autonomous organisations. These are organisations that are made up of autonomously operating cyber-physical systems that are able to communicate and interact, as well as to jointly make decisions and perform transactions without any kind of human involvement.

Organisation design

In his 2019 dissertation[6], Mark van Rijmenam asks how new technologies such as big data, artificial intelligence and blockchain technology influence our thinking on how to develop organisations and organisational models. He explores “how blockchain requires us to rethink organisation design theory by redefining the decentralised and autonomous form of organisation design; and how agency theory helps us solve the principal–agent problem when dealing with artificial actors that behave differently than intended”. Van Rijmenam defines a decentralised autonomous organisation as an organisation that is made up entirely of networked computers, (consensus) algorithms and software, which operate jointly based on what are known as smart contracts. The data and information transactions that these autonomous organisations perform without human involvement are regulated by protocols that are captured in software code, which is used to manage the rules based on which joint transactions can be performed. According to Van Rijmenam, this development marks the first time in history that “machines can collaborate automatically and even autonomously with other machines and even humans, while ensuring the outcome aligns with what has been already agreed upon”. This development will lead to organisations becoming increasingly entangled with the technology they use, even more so than they already are. As this entanglement increases, there will be a rapidly growing need to use forms of artificial intelligence/machine learning to manage and control autonomously performed transactions. It is inevitable, in Van Rijmenam’s view, that this development will force people at these organisations to (learn to) collaborate with networked cyber-physical systems. This collaboration means, in Van Rijmenam’s view, that “the material and the artificial should exist in coherence and interact with each other without negatively affecting one another”. The latter point leads to questions that potentially touch on the ethical nature of this development. Is it true that, as Van Rijmenam claims, interconnected cyber-physical systems in this development are by definition subordinate to human ethics and that “the material is bound by the norms and principles of our society and the culture within an organisation and the social is not subordinate to the material and the artificial”? Is it not more likely that, in a situation where people work with several intelligent or large numbers of interconnected cyber-physical systems that have originated from different cultures, humans inherently become subordinate to this virtual entity? Will this development not see people transfer their (ultimate) responsibility for the performance of transactions to the new virtual entity of a decentralised autonomous organisation a lot faster than expected, based on the excuse that it so complex?

Consequences

As described previously, the International Telecommunication Union (ITU) is working on studies into the standardisation of a blockchain of things. The research proposal that the governments of Egypt and China, and a number of Chinese companies submitted to ITU in 2017 concerned only one study. This number has meanwhile grown to twenty-four. The first results are expected in late 2019. The standards that these studies will define are inevitably going to play a role in shaping and implementing a blockchain of things based on the capabilities of cyber-physical systems and their mutual communication in future 5G networks. These standards will enable new and global decentralised and autonomous organisations that can consist of random combinations of cyber-physical systems. These will be organisations that are made up of the cyber-physical systems we use on a daily basis, such as computers, smartphones, cars, toothbrushes and fridges, or more uncommon cyber-physical systems, such as MRI scanners, infusion pumps, patient monitors and implantable glucometers. Electronic or physical infrastructures, such as electronic networks, railways and roads, energy applications or military applications, will also be part of these new decentralised autonomous organisations. Algorithms and software are increasingly being built into all the devices we humans use on a daily basis, enabling these devices to participate in the new form of a decentralised autonomous organisation. It is high time that we in Europe take Van Rijmenam’s lead and take a serious look at the increasing autonomy of cyber-physical systems that ensues from the widespread use of algorithms and software. At the same time, we, in Europe, are going to have to think about conditions based on which we want to allow and enable decentralised and autonomous organisations to function within our European culture. Given the great pace of these developments, we do not have a lot of time to develop the new knowledge required for the design and analysis of such virtual entities based on European values.

  1. Heidegger, M. (2004) What is Called Thinking? Translated by Gray, J. G., New York, Harper Perennial. ISBN 006090528X Original version: Was heißt Denken? (1954)
  2. Buterin, V. (2014) Ethereum White Paper. A Next Generation Smart Contract & Decentralized Application Platform http://blockchainlab.com/pdf/Ethereum_white_paper-a_next_generation_smart_contract_and_decentralized_application_platform-vitalik-buterin.pdf
  3. Szabo, N. (1994) Smart Contracts http://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/smart.contracts.html
  4. Wright, Aaron and De Filippi, Primavera, Decentralized Blockchain Technology and the Rise of Lex Cryptographia (10 March 2015). Available at SSRN: https://ssrn.com/abstract=2580664 or http://dx.doi.org/10.2139/ssrn.2580664
  5. Greer, C., Burns, M., Wollman, D., Griffor, E. (2019) Cyber-Physical Systems and Internet of Things. NIST Special Publication 1900-202, March 2019
  6. Rijmenam, M. van (2019) Sociomateriality in the age of emerging information technologies: How big data analytics, blockchain and artificial intelligence affect organisations. A thesis for the degree of Doctor of Philosophy in Management. UTS Business School, University of Technology Sydney, Management Discipline Group. 5 February 2019.

Ben van Lier works at Centric as Director Strategy & Innovation and, in that function, is involved in research and analysis of developments in the areas of overlap between organisation and technology within the various market segments.

Ben van Lier, Business Development Manager

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Ben van Lier, Business Development Manager

Voor meer informatie neem je contact op met Ben van Lier via +31 6 51 10 94 39 of per mail ben.van.lier@centric.eu.