Sunday, November 12, 2017

Abraham: Forefather of Bitcoin and the Blockchain

This was the sermon I gave at my synagogue yesterday (Nov. 11).
Some concepts may be unfamiliar to some readers, but either way, I think/hope you'll enjoy it.

Avraham: Forefather of Bitcoin and the Blockchain

Before I begin, I want to take a moment to acknowledge the fact that today is Veterans Day and I’d like to thank all of you in the audience today who have served this great country of ours.  

I also want to thank my wife, Tamar, who, as I like to say, “helps put the ‘Torah’ in my “Dvar Torah.””

If you have had a conversation with me in the past 18 months, you know that I pretty much have a one-track mind.  Yep, all I think about is Bitcoin and the technology that underlies it, the blockchain.

For the 3 people in this room who haven’t heard of it from me, the key thing to understand is that just like email or a browser is an application that uses the Internet, Bitcoin is an application that uses a blockchain. And just like the Internet has spawned millions of applications, blockchains will (and are) spawning an entire new set of applications.

What makes blockchain so powerful is that it mimics the power of the Internet in terms of speed, cost, and ease of transmission of items of information, but does it with assets or items of value, all without the need for any 3rd party intermediary.  

So, any institution such as a bank, a brokerage, the better business bureau, that serves as an intermediary trust agent between two parties is no longer needed.

Now, I realize that the concept of a blockchain is not easy to comprehend as, on the surface, it represents a pretty significant paradigm shift.

But it’s really not.

In fact, this week’s parsha, Chayyei Sarah, shows us that Avraham Avinu laid the philosophical groundwork for blockchain in his purchase of the cave of Machpelah from Ephron the Hittite.

What we see, upon closer examination, is that the concept of the blockchain serves as Avraham’s “original intent” for how assets should be transferred in order to protect property rights and maintain civil society.

The major difference between then and now is the fact that our hi-speed internet and powerful computers and phones allow us to do business in the exact same way that Avraham intended, just at global scale.

Let’s take a look by starting at Chapter 22, verse 10.

“Now Ephron was sitting in the midst of the children of Heth; and Ephron the Hittite answered Abraham in the hearing of the children of Heth, even of all that went in at that the gate of the city”

In Nahum Sarna’s book, “Understanding Genesis,” he explains that “it was the practice to conduct the affairs of the community in the gateway, a popular meeting place for public gatherings.”

The gate as a locus for asset and information exchange is something that is familiar throughout Tanach.

For example,
  • Lot was sitting at the gate when the messengers came to him
  • Boaz goes to the gate to redeem Elimelech’s estate
  • Amos asks of Israel to “establish justice in the gate.”

It turns out that many ancient Near Eastern documents end with a formula “the tablet was written after the proclamation in the entrance of the gate.”

Sarna writes, “the idea was to give the widest possible publicity to the settlement and to obtain the confirmation of the entire community, so that the likelihood of future litigation might be eliminated.”

There is a concept in the study of biblical text called a “Milah Mancha” which basically is a thematic word that repeats itself multiple times in a given section in order to drive home a specific point.

In this story, it is the root “shin--mem---ayin’ which forms the word שמע and of course means “hear.”  

This root word appears 6 times in the story, signifying the importance of multiple confirmations in a transaction.

I would argue that the repetition of the word “hear” is not just for Avraham and Ephron, it’s for everyone listening so that the story can be retold and a collective memory is established

Lastly, the transaction took place directly between Avraham and Ephron. No intermediaries

So, let’s think about the reason why Avraham insisted on a direct transaction with no intermediaries, with multiple confirmations, the need for an established collective memory, and to do it all in an open space that anyone could verify was for one reason.

He needed immutability.

When all was said and done, there could be no doubt at any point down the road that the transaction had occurred. Avraham needed to be recognized as the legal owner of the land.

This was particularly acute because Avraham knew that as a “resident alien” he was at a legal disadvantage, so he needed a large consensus to provide additional security.

Now, let’s get back to my favorite topic, blockchain.

Blockchains work by cryptographically securing a certain number of entries in a global ledger in a box, or a “block” of data. Each block is then cryptographically linked to the block that came before it and the block that comes after it.  A series of blocks linked together and you have a chain. Hence, “blockchain.”

These records are not kept in one place on one computer.

Instead, they are decentralized among many different computers in the network.  In short, blockchain technology offers the same thing that Avraham sought...a tamper-resistant immutable record of transactions.

The reason for this is because you have removed the risks associated with centralization of information.

In order for the Avraham’s deal to be rolled back, Ephron would have to corrupt every single person who was a witness to the transaction or a passerby at the gate.

Similarly, to change a blockchain database requires changing not one computer but the majority of the computers in the network.

In both cases, they are doable, but they are also potentially very expensive and time-consuming tasks.

Blockchain transactions occur on a peer-to-peer basis with no intermediaries.

One person sends an item of value to another person directly. Other computers and people in the network can verify that the transaction happened.  The blockchain is open and its history and transactions can be viewed by anyone. In other words, anyone can stand in the blockchain gate, if they want.

As for direct witnesses, in the Bitcoin world, we call them “miners.” They serve to confirm that a transaction actually went through.

And for those of you who remember that the word “שמע” appears 6 times in this story, you may take comfort in knowing that a Bitcoin transaction isn’t considered final until it has been confirmed by a constant pre-defined number of blocks.  That number?  Six.

Since the release of the Bitcoin blockchain on January 3, 2009 by Satoshi Nakamoto, interest in the past and future of blockchains has grown dramatically.  Many of the earliest pioneers are celebrated for their groundbreaking work...and rightfully so.

To that list, I am proud to add Avraham Avinu.

His thoughtful and conscious parameters for creating a transactional environment that could serve the test of time, protecting citizens and resident aliens alike, is the biblical foundation for the blockchain revolution which we are witnessing.

Shabbat Shalom

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