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What is the point of blockchain anyway?

What is the point of blockchain anyway?

Since its inception a decade ago, blockchain has struggled with an identity crisis. Originally distributed to a mailing list of activists and computer science professors as the “Peer-to-Peer Electronic Cash System”, it was clearly intended as the technological basis for a digital currency. Since the development of Ethereum in 2015, attention has been turned to the wider use of the blockchain. But a clear understanding of what exactly this technology is has proven difficult to define, even with scandals such as the collapse of Sam Bankman-Freed’s FTX last week cynical observers suggest it may be nothing more than a new-fashioned digital front for old-fashioned schemes. pyramids.

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At a basic level, blockchain is a digital communication tool, a way to transfer and record information. With a cryptocurrency like bitcoin, the information you broadcast is your account balance. Different blockchains can support different kinds of broadcasts: media blockchains like Mirror allow creators to broadcast short texts to users; Social media-based blockchains like Rally allow users to submit feedback to creators. There have even been smart ideas for using blockchains in supply chains as a way to securely track products by broadcasting their position as they move from distributor to retailer. All of these ideas play on understanding the blockchain as existing on the same evolutionary path as the Internet, only immune to its viruses such as censorship and data mining.

A direct consequence of the blockchain’s resilience as a medium is its powerful ability to store records. As Balaji Srinivasan points out in his excellent book The State of the Net, the unique advantage of blockchain over the Internet as a disseminator of information is that it reduces the number of data warehouses – pockets of data hidden from view by intermediaries like Facebook or Google. In doing so, it allows the network to reach consensus on a common story; or, as Srinivasan suggests, a set of moral values. Since the past of the blockchain is always transparent, each of them can develop a certain purity and sense of social responsibility that more Byzantine dissemination of information tends to cloud. Decentralized Autonomous Organizations, or DAOs (blockchains like MakerDAO, Uniswap, and Lido Finance) can organize themselves around a single set of well-defined – literally codified – goals, maintaining transparency and clarity of focus not possible in traditional business structures.

The Twitter biography of Vitalik Buterin, head of the Ethereum Foundation and arguably the most influential figure in the industry, simply reads: “Repeal daylight saving time and leap seconds.” As parts of the blockchain history are published at regular intervals, blockchains slowly build their own calendar with blocks instead of seconds and “epochs” (many blocks – the term has different meanings on different chains) instead of years. The original vision for NFTs was that they could represent transactions or copyrights in countries without the infrastructure to securely process documents. The copy, after all, will always appear later than what it copies. Blockchain copyright protection avoids bureaucratic delays, as well as the possibility of corruption in the government; Philosophical proponents of cryptography sometimes refer to “immutable time” as the only blockchain innovation.

And this creation of uniqueness in time or rarity is another possible way of development. This is usually related to the original vision of the blockchain as a digital currency engine. The fact that there is a maximum number of bitcoins that can be minted, making it deflationary rather than inflationary, is widely debated in the debate about bitcoin’s viability as a large-scale economic model. But the reason why the number of bitcoins can be limited is because each coin has an independent existence that cannot be imitated by any technological wizardry. Sufficiently talented counterfeiters will always be able to recreate a physical currency, but the fact of the mathematics behind the blockchain is that the individual elements in the blockchain are unique and cannot be counterfeited.

The four possibilities are closely related to each other, but each of them inspires very different perspectives on the role of blockchain in the society of the future. The performance of blockchain currencies on a large scale, such as Bitcoin in El Salvador, is an interesting test. But if it turns out to be cumbersome as a financial instrument, the potential of blockchain technology as a whole will not be greatly reduced.

Cryptocurrency, the original application of this technology, is only part of a set of possible interpretations ranging from secret communications to the public market, from anonymity and identity protection to the creation of new modalities for group decision making and self-government.

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The views expressed by the authors in this section are their own and do not reflect the views of Al Arabiya English.

Written by khirou

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