Book review

The Truth Machine: The Blockchain and the Future of Everything by Michael J. Casey and Paul Vigna

Title: The Truth Machine: The Blockchain and the Future of Everything

Authors: Michael J. Casey and Paul Vigna

Publisher: Harper Collins

Unlike the populations of stable societies, with institutions and records, the displaced and the disoriented in a Syrian refugee camp in Jordan can only carry their immediate necessities, not documents accumulated over lifetimes. Bank accounts, birth certificates, records of education and employment and other data that peaceful countries take for granted are often lost to the winds.

The United Nations High Commissioner for Refugees camp at Azraq, a small town in central-eastern Jordan, home to more than 30,000 displaced Syrians, is “now the scene of a radical experiment in new models of community governance, institution-building, and the management of resources,” Michael J. Casey and Paul Vigna of The Wall Street Journal write in The Truth Machine: The Blockchain and the Future of Everything. At the heart of that effort is blockchain technology, the decentralized ledger-keeping system that promises a more reliable, immediate way to trace transactions.

The World Food Programme, a UN agency that feeds 80 million people worldwide, is putting 10,000 refugees through a pilot that uses this system to better coordinate food distribution, attempting to ensure that everyone gets their fair share of food.

Such issues of trust and verification have permeated human society from the beginning. The book takes a broad sweep of historical attitudes to such issues, from Babylon to the Bible, to the birth of bookkeeping at the pen of Luca Pacioli, who wrote Summa de arithmetica, geometria, proportioni et proportionalita, the first comprehensive accounting manual.

After this early discourse through Western civilization, the blockchain story becomes firmly established in Asia. Bitcoin was launched in 2009 by a person or persons using the pseudonym Satoshi Nakamoto, who might or might not be Japanese. “Blockchain,” the authors write, “promised a new way around processes that had become at best controlled by middlemen who insisted on taking their cut of every transaction, and at worst, the cause of some man-made economic disasters.”

Yet bitcoin was beset by its own issues, becoming synonymous with illegal transactions – notably drugs and guns – and massive volatility, falling from nearly US$20,000 per bitcoin in December 2017 to less than US$3,500 in December 2018. Many countries cracked down on cryptocurrency, arguing that initial coin offerings (ICOs), a cryptocurrency product, were unlicensed securities. In September 2017, Chinese regulators banned ICOs altogether.

Yet China is at the forefront of the underlying blockchain technology, with President Xi Jinping declaring it a national priority and Chinese researchers filing the most blockchain-related patents. Foxconn, the electronics manufacturer, incorporates blockchain into its supply chain management and Tsinghua University in Beijing works with Walmart and IBM to follow the movement of pork in China via blockchain.

The authors note the impressive ambitions of the Hong Kong-based Belt and Road Blockchain Consortium, which includes companies like KPMG, HSBC and Li & Fung. Founder Pindar Wong sees China’s Belt and Road initiative as a “complex set of supply relationships across 65 different jurisdictions with varying degrees of trust.” That requires a “distributed information-sharing paradigm if it is to work,” he tells the authors, citing an opportunity for blockchain technologies to function as an international governance system.

But is blockchain as significant as Casey and Vigna suggest in their title? Does it really augur for the future of everything? They argue that the “blockchain could represent the very first time that human society has a system for creating an unbroken historical record.” Power “stems from control over our information. This is as important as ever now,” they add, “with a U.S. president who believes he alone can define the boundaries of what constitutes fake news and publishes dubious official information that his minders describe as alternative facts.”

Blockchain’s potential to subvert authority has already been demonstrated, the authors note. “It might surprise you to read this, but the most subversive, controversial, anti-authoritarian idea in the world of finance, an idea so powerful every government on the planet is trying to figure out whether to co-opt it or outlaw it, the dream of the most fervent libertarian, dark-web denizens, is a ledger.”

Author interview: Michael J. Casey 

Michael J. Casey said he first encountered bitcoin and, by extension, the concept of a blockchain only in 2013. “I was writing columns for The Wall Street Journal about currencies at the time and this new digital currency concept intrigued me. I didn’t really get the concept, but was curious. I wrote a rather ordinary column about it, mostly warning that it was likely a dangerous investment for people.”

The turnaround for Casey was his six years in Argentina. “I had written extensively about the role that untrusted record-keeping and broken institutions play in the perpetuation of poverty and economic failure in Latin America and it dawned on me that bitcoin, or at least the core idea behind it, could be a solution.”

Casey separates the “core idea” – blockchain – from the flurry of ICOs and other peripheral products that have sprung from that idea. “I agree that blockchain has become a bit of a buzzword,” he says. “We need a lot more clarity about what it means and what constitutes a decentralized, permissionless system – the real benchmark by which any project that touts itself to be a blockchain should be judged.”

Bitcoin, he says, is the closest approximation of that ideal as distinct from “ICOs claiming to be decentralized and private, permissioned ledger systems claiming to be a blockchain. In those cases, he says, “the user is at risk of being scammed because, in both cases, someone is in control of information to which they are not privy.”

Blockchain has ramifications for the future of the global financial system, says Casey. But the form, he argues, will be the key to its success. “The approach that China is taking to it, investing heavily in research and development into private distributed ledgers but rejecting and constraining the pure, permissionless “crypto” model, tells us much about where the world is headed.”

Beijing’s model, he says, is far from ideal, resembling China’s great Internet firewall. “At worst, it will foster monopolies of economic power – whether state-run, or private-run-but-state-endorsed – with an unchecked power to determine who gets to transact and who doesn’t.”

Casey has equally little confidence in the ability or willingness of the United States to foster cryptocurrencies.

“The problem is that U.S. financial regulatory policy is captured by Wall Street, which in turn, is a function of the dollar’s power as the world’s reserve currency. For U.S. policymaking, it’s like a drug, because to embrace a more constructive open, monetary system entails giving up on an addiction to all the cheap inflows of money that the dollar’s status generates. History tells us that the dollar will do as all past reserve currencies have done and fall from its pedestal.”

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