by Phil Wilson

Will Blockchain Save Unions?

If you’re reading this then you, like me, must have missed your big Bitcoin payday. Or else you’re reading this on your own private island. In that case the only explanation is that you’re overcome with heat sickness.

Bitcoin (and several thousand other so-called cryptocurrencies) are built on top of something called blockchain technology. I will quickly get out of my depth here, but blockchain basically works like this:

You want to pay someone out of a file of transactions. You’re a “node” and your file is a “ledger.” When you attempt payment other computers (“miners”) that have your same “distributed” ledger race to confirm your transaction. Why? Because the first to confirm it gets paid – everyone else loses out. The first to confirm you can afford the payment lets everyone else know (called “proof of work”) which ends the race. Your payment is confirmed and they “mine” some coin. This whole process works on “blockchain” technology.

Here are the keys to blockchain. First, the “distributed” part. If you just wanted to trade something with someone you know you don’t need any help – you find them and trade. But for anything other than direct trade or barter you need a market. Markets require trust. And that trust is often built on intermediaries.

The blockchain is all about distributing the market so it works more like barter or trade, cutting out intermediaries. In the example above we’re talking about cutting out banks. That’s who confirms ledgers today. But not just anyone can become a bank. And where you have a limited number of people doing anything you have a built-in inefficiency in the system which almost always leads to “rent-seeking” behavior. In other words, the banks demand a slice of the pie for confirming your transaction.

But blockchain isn’t only about payment transactions. Any transaction or event that can be tracked on a ledger can be disrupted by blockchain. Any situation where an intermediary is stepping in to represent another party in a transaction is a place ripe for disruption. Especially where those intermediaries don’t act on behalf of their constituents and are overpaid for the value they deliver.

A very interesting article in The Weekly Standard asks whether labor unions might be transformed by blockchain. It suggests:

In a blockchain-based union, the good teachers in a school system, for example, could vote to kick out the ineffective teachers while simultaneously protecting the rights of the high performers and the group as a whole. Do not be surprised if we see an Initial Coin Offering for a decentralized union organizing platform. In this model, membership would be represented by crypto-tokens and, as the union actually delivers meaningful benefits to its constituents, the value of those tokens increase. The increase in the value of the token further incentivizes new members and provides tangible evidence of the value associated with collective organization and action.

I encourage you to read the entire article. I’ll admit that I don’t think this blockchain teachers union thing is fully baked, but I’ve been talking about the idea of a distributed union for a long time and this is exactly the sort of thing that would facilitate such a change. Most importantly it solves one of the biggest problems with a “distributed union” model which is how it is monetized.

If coins are “mined” based on actual value created by this new association (in terms of problems solved, items negotiated, etc.) and the tokens rise in value as the total value created goes up, blockchain could be the answer.

We already live in a distributed world. Twitter and other social media have blown up traditional media (and are being used more and more in organizing efforts). Disruptive technologies have zapped intermediaries in all kinds of businesses including retail, taxis, logistics, hotels, housing and many service-related businesses.

Advancements in AI, self-driving vehicles and robots, and distributed energy and manufacturing (solar and 3D printing) will become mainstream in the next few years. As they do, more and more intermediaries will be ground to dust. I have a hard time believing unions will be the last intermediary standing.