The Robot Economy Will Run on Blockchain

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What finance will look like when it is controlled by machines.

BY ALEKSANDR KAPITONOV & IVAN BERMAN

Our future will be bright, fast—and full of robots. It’ll be more Asimov than Terminator: servant robots, more or less similar to us. Some will be upright androids, but most will be boxes filled with computer chips running software agents. And there will be a lot of them. Forecasts predict that, within just three years, we’ll have 1.7 million robots in industry, 32 million in our households, and 400,000 in professional offices.1

Robots will begin to run our factories. Autonomous sensors will monitor infrastructure. Robots will order parts for themselves and raw materials for production. Logistics will be run by chains of unmanned vehicles stationed at autonomous bases. Factories will communicate with each other. Drone traffic control systems will request weather information from meteorological stations belonging to other companies.

All of this will be based on the exchange of information. Not just technical information—robots will need to develop and maintain economic relationships. Whether for a parts order or a service agreement with another company, many aspects of their work will revolve around currency transactions. Human operators will be too slow to oversee these transactions, which we can expect to happen at 20,000 transactions per second (assuming there is at least one robotic device per person). Therefore, for the future we are building, we will need to invent not just robots—but robot money and robot markets.

Kapitonov_BREAKER
Isaac AsimovShutterstock

Like with any other economy, the robot economy (or robonomics) will need to solve the problem of trust. It might seem that the very act of carrying out transactions in the digital world is a solution to the trust problem. Unfortunately, that’s not the case. Automation can help find and fight fraud, but it can also create super-efficient scam agents. What’s more, transaction costs can spiral out of control when high-frequency algorithms begin to act opportunistically. The cost of verifying that a contract has been properly executed is another problem. In the world of people, the outcome of a transaction is confirmed by the contract signatories. How autonomous agents will do that is not so clear.

A naïve solution is to create a centralized digital “bank,” just as we’ve done in the world of human transactions. For each robotic service, a centralized program would be established that would be responsible for the collection and processing of commercial information, the conclusion of contracts, the execution of transactions and the control of autonomous agents.

Capital will become the dominant means of controlling robot behavior.

The problem with this approach is that it doesn’t scale. As the number of transactions grows, so does the load on the centralized bank. This translates into higher bandwidth and computing costs, which eventually become prohibitive. In addition, a centralized network will attract the attention of scammers and hackers, and is more vulnerable to malfunctions. These problems could be partially addressed by transferring some power from the central body to intermediary bodies and building a management hierarchy. But this would increase transaction costs without providing a complete market solution.

Fortunately, there is a technology that can potentially solve the economic and technological difficulties of robot markets. It’s called blockchain.

Briefly put, the blockchain is a public ledger whose information is stored in consecutive “blocks” of information, and is protected by a consensus algorithm. Blocks can be changed only when a majority of the network agrees that they should be—or, in other words, that a change transaction is valid. Incorrect changes to the blockchain, whether from mistakes or malicious intervention, are protected against.

Blockchain was first successfully implemented for crypto-currencies like bitcoin, creating mathematically protected trade operations independent of external administrators like banks or state bodies. Then, in 2015, the Ethereum platform was launched, allowing for smart contracts to be placed on the blockchain. These are contracts of arbitrary complexity that can be verified by a public network in the same way that cryptocurrency transactions are verified. They unite into one digital object the terms of a contract, and its execution.

In our opinion, the robot economy should be built on these smart contracts. They naturally solve the issue of monitoring the fulfillment of obligations. They reduce friction among contracting parties. Information on transactions is verifiable and unchangeable. The unambiguous recording of information allows reliable reputation scores to be created. The blockchain can be organized so that network participants do not benefit from discrediting it…

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http://nautil.us/issue/65/in-plain-sight/the-robot-economy-will-run-on-blockchain
F. Kaskais Web Guru

 

 

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