A Rigorous Analysis Of Blockchain’s Empiric Value
Learning more about how society values blockchain technology
As of recently, there has been a gradual rise of renewed interest within the applications of cryptocurrency, whereas Blockchain continued to gain traction.
Enormous sums of capital from institutions are being sunk into Bitcoin, while financial titans are scrambling software engineering teams to configure Blockchain into their outmoded infrastructure
There is a lot of interest surrounding it, but everyone outside the industry, from a high-powered finance executive to the grandma in Nebraska, has the same burning question: why?
— Blockchain’s Empiric Value —
The empiric value of Blockchain is the removal of trust in third parties within any business transaction requiring a middleman
Hence, the surface-level benefits would be more streamlined operations via the reduction of overhead, faster transaction times and real-time enforcement of integrity for all parties involved in the deal
Extrapolating those fundamental principles of value into one of Blockchain’s numerous applications, cryptocurrency (if based on Satoshi Nakamoto’s original democratic, trustless, peer-to-peer design) is currency that is not controlled by any one individual or party that will win by making all others lose, via engineering the properties of the currency to suit their interests
A critical mass of the stakeholders, the users, have vested interest in the preservation of the currency. They will naturally oppose the smaller contingent that fundamentally operates on dishonesty and attempts to bend the system to their will
Because the laws of the Blockchain dictate that a critical mass of the population must support a transaction to be approved and because the ones who have vested interested in the ecosystem vastly outnumber those who seek to subvert it, Blockchain is engineered to naturally support the needs of the many over the few
Essentially, Blockchain is an immutable, censorship and corruption-resistant, digitized version of democracy, compatible with any business ecosystem
— How Blockchain Works —
To fully appreciate Blockchain’s empiric value, it is critical to understand the mechanisms that make it work
From a high-level standpoint, Blockchain works by having a network of computers that compete in a race to solve rigorous math problems that verify transactions. Those that get the right answer first are traditionally rewarded with cryptocurrency (a mining reward)
This ensures that enough people, at any given time, are contributing enough computational resources to verify transactions to support that Blockchain- and all of its applications. All those transactions are packaged into “blocks”, which are then cryptographically linked in a chain (hence, “Blockchain”)
The summation of all transactions ever submitted are recorded on that chain. Those transactions are public to all stakeholders and cannot be undone
In order to successfully bend the system to your will, such as forging a transaction or having the ability to duplicate a currency or digital asset, one must incite a critical mass of the computers to support the wrong transaction
Fundamentally, current transactions are linked to prior transactions that were proven correct. If an attacker wanted to fool the network into supporting his transaction, he needs to either hijack enough computers or spend enormous sums of money to get his own to compete
The attackers are outnumbered and outmatched. Practically speaking, if there is enough support for a cryptocurrency, it is extremely difficult, if not impossible within practical constraints, to take down
The more the Blockchain grows, the harder it is to take down
And after a certain point, it becomes impossible to stop
— Implications: The Future Belongs To Us —
Blockchain is a valuable technology for a new paradigm of the Internet, Web 3.0, which is a model that allows users to be in control of the release of their valuable digital assets, such as personal data
As of this current point in time, there are three predicted stages for Blockchain’s evolution, which is part of Internet 3.0:
- Blockchain 1.0- Cryptocurrency and Financial Technology (Fintech)
- Blockchain 2.0- Peer-To-Peer, Decentralized Markets
- Blockchain 3.0- Government and Institutions
The industry is currently within the midst of Blockchain 1.0, pushing for mass-adoption, with the infantile groundwork of Blockchain 2.0 being seeded in parallel
Blockchain 1.0, when mass-adoption is reached, essentially details exchanges and payments via cryptocurrencies in full force. The industry is currently trying to break into that direction, as cryptocurrencies are losing their pre-2017 bubble crash identity as volatile investment vehicles
Blockchain 2.0, when brought to full-fruition, details decentralized marketplaces embodying the peer-to-peer exchange of digital assets as well as physical goods and services. The rise of automation technologies will work in concert with Blockchain 2.0, as Blockchain acts as the compliance layer for autonomous transactions, processes, and business models
Blockchain 3.0, where obsolete centralized models cannot compete with the new decentralized transactional zeitgeist, essentially details Blockchain-enforced voting, secure data transmission, and verification for mission-critical systems and a digital avatar of every citizen and user to interact with a smarter, more interconnected world and all its services
In essence, Blockchain removes the need to trust middlemen within all business transactions and naturally fosters an ecosystem where people who play by the rules, win
There are multitudes of applications for Blockchain’s fundamental value: a decentralized Amazon, the rise of practical smart city infrastructure, a resilient monetary ecosystem independent from the traditional central banking model
But the most exciting part is the very real possibility, that, the most astounding, highest-utility, “killer use-case”, hasn’t been invented yet. Something that serves billions of people across the globe. Something that shifts the balance of power back into the hands of the users
And that we can be the ones to build it!
Disclaimer: The views expressed by the author above do not necessarily represent the views of the Ethereum Foundation.
