Blockchain — Why Does it Matter?
There’s a lot going on with Blockchain these days, mostly around Bitcoin and Ethereum price talk, tokens and exchange discussions. However, the implications of blockchain technology are far more important, but often get lost in the discourse.
What is a blockchain, why do we need them and where is all this innovation going?
What is a Blockchain?
A blockchain is a distributed database network that enables digital scarcity and exchange without a central authority, through a combination of cryptography, mathematics, game theory and computer science. Blockchains are also transactional databases that are replicated by the entire network, providing useful properties such as immutability and fault tolerance.
A public blockchain (Bitcoin, Ethereum) is permission-less and open source, allowing anyone to join the network. A private blockchain more closely resembles a simple distributed database. Public blockchains, their development evolution and ecosystems are more interesting in my opinion.
Why do we need Blockchains?
Let’s examine this from a lens of the aforementioned properties.
Digital Scarcity and Exchange Without Centralization
I write a song and upload it to Sound Cloud. It’s downloaded by someone who publishes it on a paid streaming service, say Spotify. They’re now making money from my intellectual property. I complain to the streaming service who either doesn’t care or believe my claim. My song has now been streamed 1 million times and I am penny-less.
We can choose to trust YouTube, iTunes or whatever gatekeepers to handle disputes over who owns what value. Or we can develop systems where we trust the protocol of how we create and exchange value in the first place.
In our current situation, the centralization of trust and arbitration end up costing much more than we think. We don’t realize this because it is simply rolled into the price of our services, while centralized entities take a percentage and grow without constraint.
Not only does this issue exist with value extracted from intellectual property. Think about modern banking fees, taxes and interest rates. The price we pay for the centralized control of our value and our lives is immense and has been going on for centuries.
Immutability and Fault Tolerance
Issues with traditional database models like SQL or key value stores abound. The primary issue is that data can be overwritten or lost without proper replication. A blockchain follows a transactional model using a data structure known as a Merkle Tree. This provides a paper trail of every modification performed and in a blockchain identification is included and sealed through public key cryptography.
Permission-less and Open Source
Can you view the source code of Spotify? Or contribute as a developer to improve the backend or user interface? Can you create new features or interactions between users? Can you simply un-plug your uploaded work and join another service?
The answer to these questions is obviously no. Current systems are closed source and so is their data, usually our data until we surrender it.
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Facebook and Google sell attention, by re-selling us our own data, and we consume whatever they serve us.
If all your thoughts and photos were not locked in a specific platform, your friends and family would have no reason to join.
Regaining Control and Responsibility
We lost something along the way. We lost control over our money, goods and services, data and now our attention.
“our life experience would ultimately amount to whatever we had paid attention to” ~ William James (Attention Merchants by Tim Wu)
The blockchain ecosystem is exploding with innovation right now. Several key projects are aligned with helping us regain control over our value and how we transact with one another. This will lead to greater exchange, understanding and prosperity.
Here are some of the most interesting projects I have found
- http://internetofagreements.com/
- http://openlaw.io/
- https://www.uport.me/
- https://ipfs.io/
- https://www.bigchaindb.com/
These and many more projects are working hard to enable more open, transparent and equitable societies. It’s time for you to get involved.
Thanks to some of the leaders of these projects: ConsenSys, Vinay Gupta, Juan Benet, IPFS Consortium, BigchainDB, ethereum, … and too many others to mention.
