Blockchain Isn’t a Revolution
These days it’s hard to avoid pronouncements about how cryptocurrencies and blockchain technology could change everything (or at least, create massive wealth). Yet there’s an equally loud chorus labeling them a massive scam, useless, and dangerous. And a surprisingly large audience still doesn’t understand what’s going on. One big reason for the confusion is that we’re not all talking about the same things.
The truth is that there isn’t a blockchain phenomenon to be for or against. There are three.
The three communities share a basic set of design principles and technological foundations — but the people, goals, and prospects are almost completely distinct. Those involved don’t help much by sniping constantly about which is the “real” movement. So, let me try to clarify things.
- There is cryptocurrency: the idea that networks can securely transfer value without central points of control.
- There is blockchain: the idea that networks can collectively reach consensus about information across trust boundaries.
- And there are cryptoassets: the idea that virtual currencies can be “financialized” into tradable assets.
The first truly is a revolutionary concept… but the jury is still out on whether the revolution will succeed. The second and third are game-changing innovations on the path to significant adoption… which are nonetheless essentially evolutionary.
A useful mnemonic is to remember three “Ts”: Trust-minimizing, Tracking, and Trading.
“Trust-Minimizing” — Cryptocurrency
Cryptocurrency is what you’ve probably heard the most about, starting with Bitcoin. The easiest way to understand it is not to puzzle over the details of mining or digital cash. Instead, focus on the decentralization of trust, as I do in my forthcoming book.
Many activities require trust. Without trust, a twenty-dollar bill is just a green piece of paper, a vote in an election is a pointless ritual, and someone offering me a ride in their car is a potentially-dangerous stranger. Traditionally, trust meant depending on partners, institutions, or…