The promise of blockchain technologies to the world brings the creation of value, transaction, and movement between humans as fast and as free as that of electrons. In fact, blockchains are so integral to humanity that it is the author’s belief that they are the vanguard technology of a new age where information — and now value — can flow together freely and seamlessly around the world. We are not there yet, however, not even close.
Yes, we have seen the beginnings of institutional and mass adoption as the total market cap valuation of crypto has hit an all time high of $800B fairly recently, but much of this value is purely speculative. We have yet to witness the first so-called killer app of the blockchain space. Blockchains, as present-day place-markers for a future in which they inhabit and dominate, have mainly become stores of value rather than media of exchange. Just like the dotcom craze of the early 2000s, ideation is significantly ahead of an almost-certain future reality.
That leaves us at still a very foundational point for the technology. We do not know yet what a world where blockchains are inherent looks like. We have an idea, but the finer grain is not there, and no doubt the volatility of the space thus far is evocative of that. After all, if there was certainty, there would be stability.
Much of the uncertainty has less to do with the utility of the technology and more to do with how humans will incorporate it into their lives. Blockchains change the game on what it means to be human at a mass scale: they theoretically allow heretofore unseen decentralized systems and actor-actor relationships that had never before existed. It’s a massive P2P reboot of the world that’s just begun.
That reboot has its own implications for how we order the world around us and how we associate and negotiate the new symbiosis of blockchains and humans. When it comes to money, the most important aspect of its utilization and free flow is its equality with any other money. That is to say: “my dollar equals your dollar equals his dollar, and even equals that dollar I found on the ground.” The big word for this is fungibility.
Fungibility cannot work without something else though. We cannot go around saying my dollar is a little more special, or that yours is a little less special because mine looks pristine and yours ragged, or that I got mine from a celebrity and you got your from a drug dealer, etc. The only real way to ensure that this does not happen is to ensure that I have no idea where your dollar came from, and if I did, that it doesn’t really change its value at all. It’s very likely that at one point it could have been in the US President’s pocket, or a serial killer’s, and that’s a good thing for money, and value, because the person who takes my money just cares about the next person taking theirs — a story about who had it shouldn’t matter. The reason why is that it is just a story. Fungibility is anonymity. The two, when it comes to free flow of value, are one and the same. As a further example, take the historic case of Crawfurd vs The Royal Bank in the mid-1700s. Crawfurd had sent some banknotes to an associate that he duly marked and catalogued in the case they should go missing, which, on their way to said associate, they did. One note found its way to the bank eventually and was reported. Crawfurd then asked the bank to reimburse both notes and a legal battle ensued. Ultimately, the courts decided in favour of the bank, as the identification of the notes in effect would invalidate their widespread use. Currency could not be confused with property, and non-anonymity of a bank note, like non-anonymity of a cryptocurrency, in effect destroyed its ability to be used interchangeably with any other unit — its fungibility.
How do we ensure anonymity and thus fungibility, and thus the original aim of bitcoin and blockchains — the P2P reboot of the world via the simplest most comprehensive use-case of blockchain, money and currency — is achieved? Unfortunately, the basic mathematics and cryptography behind Bitcoin and other ascendant blockchains falls short of allowing this.
Perhaps this is why there has been healthy interest in so-called “privacy chains” like Monero and Zcash, and we look forward to exploring how privacy chains work in our next segment.
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