 So far in this course, we've been talking largely about blockchain as a technology, but technologies are just tools that enable us to do things. The interesting part of the blockchain is really what it enables in terms of new forms of distributed organization. As one commentator noted, the blockchain is an institutional technology, not an information technology, there's an enormous difference between the two. Institutional revolutions are things that don't happen very often. Blockchain technology enables new forms of networked, distributed organizations, something that runs very much contrary to our existing organizational paradigm, and that's what makes it somewhat difficult for us to understand. The organizational model of the industrial age that we inherit today was one of centralization in order to achieve economies of scale through mass production, thus reducing unit cost and providing for a mass society. The technologies of the industrial age selectively favored centralization of production with enclosed hierarchical organizations. Manufacturing is in centralized factories. Transport systems are centralized around transport hubs, education within schools and universities, entertainment centralized within mass media organizations, and governance centralized within state-run organizations and so on. The information revolution is in the process of taking us into a new world of distributed networks as the organizational paradigm of the information age. The combination of telecommunications networks and computerized coordination enables us to replace centralized management within closed hierarchies with open networks. As the underlining technology matures, we're able to convert more and more systems that were previously closed and centralized and have them managed through automated networks, and the blockchain is just one more stage in this process. We saw this with the rise of the online platforms like eBay, Uber or Alibaba, social networks, blogging, etc. that built massive networks of users exchanging goods and services. But these platforms were still dependent upon the centralized organization to manage the shared database for the computing infrastructure, for the algorithms, for financial transactions, and to enable trust and authentication in the network. The decentralized web takes these platforms a step further by offering a shared, open and secure database that can be trusted by all parties and a set of protocols for the secure exchange of value between organizations and individuals peer-to-peer. The web platforms are open networks. This means they do not just optimize within a given organization, but can enable coordination across whole industries. Indeed, this is why and how they're quickly supplanting the closed organizations. What centralized organizations enabled was trust, cooperation and coordination within organizations. But what the blockchain enables is trust, coordination, and cooperation between organizations and between individuals. If we look at how our society and economy is currently organized, we'll see many closed organizations that are internally optimized. But when we look at the inter-organizational space, it's extremely inefficient along many dimensions. If we look at the way businesses coordinate along a supply chain or the way nation-states inter-operate in the global political system, we will see there is huge redundancy and friction caused by discontinuities. A classic example of this is the border system between nation-states and the bureaucratic procedures for obtaining a visa for moving from one nation to another, which creates a massive amount of friction at the inter-organizational space. And it's because those organizations don't have an effective inter-organizational infrastructure for collaboration and coordination. This greatly reduces the overall effectiveness of these systems and the delivered outcome for the end user. When we look internal to these organizations, they look like efficient, well-oiled machines. But when we look between them, the whole space is very inefficient. The whole space is very ineffective at delivering overall outcomes. And this is part of the significance of the blockchain because it provides a shared, trusted database between organizations. It has the potential to switch the dynamics within economy and society from competition between closed centralized organizations to collaboration between organizations and greatly strengthen working capacities across organizational boundaries. The results of this would be much more efficient overall societal and economic outcomes. Indeed, we can note that achieving coordination across organizations could result in quantum leaps in delivering outcomes and our capacity to tackle major global challenges of today, such as environmental degradation, where weak existing inter-organizational institutional infrastructure has gained little traction. In this respect, the blockchain has the potential to give us not just incremental improvements, but an order of magnitude greater capacities within society through collaboration within whole ecosystems. It is precisely this coordination across organizations, industries, nations and people that is required to provide the resources needed to tackle some of today's most complex challenges. And it's precisely this that is significantly absent within existing institutional structures. Because of the centralizing forces prevalent within the industrial age, we live in societies that are operated by many different closed organizations, many different companies all producing cars and competing for market share, many different governments that all focus on the interests of their citizens over those of others, many different healthcare providers, transport providers etc. The result of this is though a huge amount of inefficiency and redundancy when taken as a whole, many different companies all recreating the wheel within their own organizations and expending huge amounts of time and energy on trying to get ahead of their peers. We assume that this is the normal state of operations that it's just human nature in some way, but in fact it's really just a function of the institutional structures we have built over the past centuries. As game theory will tell us, people respond to the incentives and the socioeconomic forces acting on them. In the absence of cooperative structures, competition is often the optimal strategy for individuals and organizations. But once there is the institutional structures to enable trust and coordination between members, cooperation can become a much more viable strategy for the agents involved. Because the blockchain enables this shared and trusted database that doesn't belong to any single organization, it makes it greatly more possible and viable for organizations to collaborate on a single solution or single source and achieve much better results for each organization and the economy as a whole. As an example of this cooperation across different closed organizations, we could think about the design and construction of a building. There may be many different companies involved in this process, all creating their own designs and diagrams for the building, with each having to continuously contact each other to access, exchange and cross-reference all this information. Given a single shared database, they could though or collaborate on a single design of the building, making for a greatly more efficient overall process, while at the same time each organization would benefit, and thus the overall results are more efficient. Likewise, the same is true for identity. We currently have many different copies of our identity spread across many different organizations, governments, social networks, employees etc. But each of these only has a partial understanding of us. Currently we're recreating the wheel for each organization, while data and reputation does not move well between them. Instead a single identity could be created on the blockchain that belongs to the individual, with each organization then contributing to this data, as they work together to create a more complete record of identity and reputation. In so doing we've moved from all those frictions between these closed organizations to collaboration and synergies between them, creating something that is greater than any of the parts they had before. The same for a supply chain, instead of each participant holding their own documents and records during each stage in the supply chain, a single record for the item could be created on the blockchain, with each organization then contributing their information to it, to create a single source of truth that is accessible to all as needed. While at the same time being more secure than having separate records in each centralized database. The end result of this new institutional technology is a much greater capacity for inter-organizational collaboration and powerful ecosystems that are greater than the sum of their parts. Given that all our current systems of organization that are centralized could be decentralized in this fashion using blockchain technology, we can see how it really could enable a reorganization of society and economy. Organizations within society rarely operate in isolation, they function as parts of ecosystems and the value for society is not created by any one but instead by the flow of value across the ecosystem. It's not Apple that delivers our iPhones, it's a massive global supply chain of hundreds of different organizations collaborating. Whereas our previous institutional structures optimize for individual organizations, the blockchain optimizes for the value within the whole ecosystem and thus potentially a much greater value for society as a whole. The information revolution is changing the world from disconnected to connected, the genie of hyperconnectivity is out of the bottle and connectivity along virtually all dimensions is proliferating daily. As a consequence our systems of organization will change from being based around fixed structures and boundaries to being coordinated via connections. Instead of the control of components through fixed hierarchical structures, organization will emerge out of the interaction and the exchange of value along those interactions. Enabling that will require a massive build out of secure friction-less information networks, this global cloud computer of the blockchain. To understand better how this shared database that enables inter-organizational collaboration works, we'll talk about distributed ledger technology in the coming video.