Welcome back. You may remember our discussion of the Ethereum blockchain from our previous courses. It's hard to talk about distributed ledgers and not really mention Ethereum. Vitalik Buterin, a Canadian of Russian descent, was only 19 in 2013, when he came up with the idea for Ethereum. He told Bitcoin's core developers that the platform needed a robust scripting language for developing applications, and they reject him. So he decided to build his own platform. The day Ethereum went live in July of 2015, Don Tapscott and I were visiting the Brooklyn offices of consensus systems known as ConsenSys, and Ethereum production studio. There were high fives all around as the Ethereum network created its genesis block. Miners all over the world were racing to win the first block of ether, Ethereum's native currency. Ethereum runs decentralized applications such as smart contracts. It runs them as programmed, without the risk of downtime, censorship, fraud, or third party interference, according to its website. Like Bitcoin, ether is an incentive for participation. It attracts a network of peers to work together, to validate transactions, secure the network, and ultimately to achieve consensus on the blockchain. Unlike Bitcoin, the Ethereum platform allows for much greater creativity. Developers can create applications as diverse as online games to stock exchanges and not just currencies. ConsenSys's co-founder, Joseph Lubin, wants to do more than just build a great company. He wants to solve the world's biggest problems using blockchain technology. The apps that consensus and others building on the Ethereum network are developing could shake up a dozen industries. Projects include a distributed triple-entry accounting system that could change audit, an open energy market that could transform utilities, and prediction markets for business, sports, and entertainment, also rights management platforms for artists and musicians, and collectible digital assets like CryptoKitties. ConsenSys is pioneering important new ground in management science. The consensus management model takes its cues from the so-called Holacracy movement where individuals define and align the work they need to do together just to get the job done. There's no hierarchy in the traditional sense or no middle managers per se, but Lubin told us that Holacracy still feels a bit too rigid and structured. So, ConsenSys is adapting a lot of its philosophies into a new model. Instead of traditional job descriptions, ConsenSys employees have more dynamic roles. Authority is distributed not delegated. Rules are transparent to reduce office politics, and the enterprise is built to respond quickly to changing needs. ConsenSys works really more like a blockchain platform itself than a traditional corporation. How it creates value and how it manages itself is very different from the typical corporation or even technology company. Lubin believes that we need to change capitalism if we want to survive. Today's networks help us to communicate faster, better, and cheaper than ever before. But the old command and control hierarchies are really still the rule in most corporations. Blockhain challenges those top-down structures. Lubin told us, "Global human society can now agree on the truth and make decisions in 10 minutes or even 10 seconds." He believes that giving people more of a voice can lead to greater prosperity for everyone. ConsenSys operates according to a plan. The plan was developed, voted on, and adopted by all the members of ConsenSys. Joe Lubin describes its structure as a hub rather than a hierarchy. Each of its projects is a difference spoke. Major contributors to each spoke hold equity. As noted, participants are members not employees. Now, these members choose from two to five projects to work on at any point in time, no top-down assignments. Lubin said, "We build small, agile teams, but there's collaboration among them." They share as much as possible. The watchwords here are agility, openness, and consensus. A member sees a piece of work to be done, the member jumps in and pushes it a little or a lot as appropriate given the members role. Now, lots of open communication makes people aware of their priorities, but priorities can and do change, and they do so constantly. ConsenSys is a blockchain-based company or blockcom as opposed to what we call a.com. A blockcom is a company formed and functioning on blockchain technologies. The company runs on Ethereum really as much as possible. This includes funding, day-to-day tasks and projects, as well as software development and testing. That also includes hiring, it uses reputation systems where members can rate one another as collaborators. Boundaries are blurred in this new model. The ConsenSys ecosystem can form new spokes if they reach consensus on the spoke strategy, architecture, capital performance measures, and governance. They may launch a company to compete within an existing market or they may try to create a new market. The decentralized structure leaves him free to communicate, to be creative, and to adapt. This is a radical new experiment in creating value. Unlike every new experiment, it has experienced growing pains since that fateful day when Ethereum went live, ConsenSys has exploded to an organization that has over 1,000 members all around the world. Market volatility recently has forced the company to rethink its strategy and downsize, but the ethos and practice of the distributed enterprise still reigns. Regardless of whether ConsenSys itself succeeds, this new business model powered by blockchain is a profound change from the status quo of the old corporation.
