Why I’m Interested in Blockchain

Mid 2018 is probably a good time to explain my interest in blockchain.

In December 2017, I posted this on Facebook:

As of October 2018, Bitcoin dropped about 65% from that day’s price, so the heat is certainly there.

Of course, like in the last downswings, now people come out saying “I told you so”, Bitcoin is a scam, ponzi scheme, Tulip mania.

The mainstream coverage on crypto focuses on the “get rich quick” price development.

My more technical friends make fun of blockchain. Slow, energy-inefficient and worst of all, attracting suits hoping to get rich quick. I have found that most techies are slow to adapt to new environments. They made fun of the Internet (BBS were perfectly fine), graphical user interfaces (command line is much faster) or the web (who needs domains).

I believe the reason for this is that a new platform, when first introduced, is generally much worse than the one before.

The first smartphones were less powerful computers with a clumsy user interface.

But a platform wins when it offers something radically new.

Cue blockchain.

My interest in blockchain goes beyond Bitcoin or new all-time-highs.

I see blockchain as a fundamentally new computing platform, on par with main frames, personal computers and smart phones.

Blockchain is radically new because it offers a decentralized, trust-less programmatic environment.

Cryptographic

A blockchain is essentially a distributed, immutable database of records. Each record is verified by  consensus, often reached by using cryptographic computation.

If you are as old as me, you may remember that at once point cryptography was classified as a weapon in the US. Phil Zimmermann, the inventor of Pretty Good Privacy (PGP) was prosecuted for “illegal weapons export” when he made the encryption tool available for download on the web.

Indeed, cryptography was picked up early by those who saw the potential dark side of the Internet.

If everything is digital and online, the temptation is great for governments to take control of – well, everything.

The cypherpunk movement took to cryptography to guarantee strong privacy.

As the 1993 Cypherpunk Manifesto said:

Privacy is necessary for an open society in the electronic age. … We cannot expect governments, corporations, or other large, faceless organizations to grant us privacy … We must defend our own privacy if we expect to have any. … Cypherpunks write code. We know that someone has to write software to defend privacy, and … we’re going to write it.

Decentralized

The Internet was a promise for a distributed network, sort of a global democracy, bringing everyone closer together. Didn’t really turn out that way. All power is concentrated in Google, Facebook, Amazon.

The crypto movement is also a reaction to this. Let’s build a decentralized platform that does not rely on a few entities or geographical locations.

We have seen that with ICOs. In its origin story, an ICO is a way to raise funds globally, from people investing their coffee money to those investing millions. With no regulation or restriction, it turned out that you don’t have to be on Sand Hill Road to get funding for your idea.

Trust-less Computing

Blockchain’s political roots are in the libertarian, anarchic communities, often around the philosophy of the Austrian School of Economics. Free market. No government intervention, regulation or control. No central banks. With Bitcoin, no credit or fractional banking.

The blockchain has built-in trust, defined by code and math.

With a contract defined by programming, you don’t need an arbitrator. You inspect the code.

With a system defined by programming, you don’t need a central bank. The system is operating within its defined parameters.

Where We Are Today

Blockchain is in the infrastructure phase, with the first apps (Bitcoin) seeing breakout successes.

[…] Light bulbs (the app) were invented before there was an electric grid (the infrastructure). You don’t need the electric grid to have light bulbs. But to have the broad consumer adoption of light bulbs, you do need the electric grid, so the breakout app that is the light bulb came first in 1879, and then was followed by the electric grid starting 1882.
(usv.com)

Clearly, we have not yet reached the deployment phase, where the technology is broadly adopted by society.

To stay calm during the hype, it’s helpful to keep to a few principles, which I would suggest apply to blockchain companies too:

  • Things generally take 10 years longer than we estimate. Hyperbolic predictions are useless.
  • Every new protocol claims to be the “future” of something, to be better than all others, and to fix all the shortcomings of others. Let’s not exaggerate on promises.
  • Experimentation is just the start of product development.

In the dotcom boom, companies just appended a .com to their name and their stock rocketed. So people said this Internet thing is stupid, I’m not gonna spend my time or money on it. It turns out that just the fact that there were some dumb people in the industry didn’t mean much. In fact, it was probably pretty dumb not to invest in the Internet. I think the same goes for blockchain today.

Blockchain and everything around it will change the technology landscape. That’s not a hyped statement, because I’m not putting a deadline on it. There will be some hard work ahead before it really happens, but… it’s going to happen.