The internet has touched all aspects of our everyday lives and has fundamentally altered our social and institutional realities. The internet’s great promise was characterised by the free transfer of information and, to a large extent, this vision has been actualised. Yet, as the digital universe expands it remains highly flawed in security of communications and user confidentiality. As a result, a solution has been sought in blockchain.
Blockchain promises to usher in a decentralised internet whose infrastructure will rely on a blockchain-powered ecosystem where users can interact without third-party centralised intermediaries. In theory, blockchain is poised to do for value what the internet has done for information, allowing for the radical transmission of value between global peer-to-peer (P2P) networks while ensuring security and privacy.
At this stage, this remains a futuristic vision. While it’s easy to fantasise about the potential for a technological oasis heralded by blockchain and a new internet of value, this article will attempt to ground blockchain in its social reality. By looking at the fundamentals of blockchain we can explore how society may embrace or reject the various realities that blockchain technology offers.
The Problem of Centralisation
Centralised structures make up modern society. Social networks, access to information, or taking out a loan are all typically controlled and managed by third-party, privately-owned entities. The centralisation of human interactions makes us dependent on intermediary bodies of power. This is not always bad; Google optimises search offerings, social networks provide a platform for communication, and banks facilitate monetary transactions. The value these companies provide comes at a cost, which typically involves fees or the monetisation of personal data.
It is our dependency on intermediary bodies — governments, companies, and banks — that introduces a critical social element between users and service providers, the requirement of trust. As our social and economic interactions are increasingly digitised, our dependency grows and so too our trust in the intermediary to protect user data and security.
Accordingly, the motivation for a decentralised infrastructure of social and economic relations has been catalysed by waning trust in poorly incentivised, profit-driven, vulnerable, and corrupt entities. With blockchain, trust in the social and political credibility of institutions, governments, and corporations is replaced by trust in the protocol and the agreed rules (or consensus) by which the network operates.
At its core, blockchain is simply a database. By combining technological and cryptographic elements, blockchain creates an exchange network that is sustained by the participants of the system. Fundamental to blockchain is the notion of a shared ledger which acts as a decentralised and transparent database of all state changes between all participants. Importantly, the state of the ledger is always accessible by every user.
The overarching goal of the ‘world-wide ledger’ is to create a trust setting for users to engage in frictionless and disintermediated interactions. As opposed to siloed data repositories, blockchain validates and preserves a permanent record of all activity while guaranteeing the privacy of user data. As a result, user-information is sequestered while user-transactions are substantiated.
Blockchain provides the infrastructure for ensuring the exchange of value without the need for a third-party guarantor. Under this model, the concept of ownership is revolutionised in the digitised world. The keeping of public registries (i.e., determining who owns different types of data) is a necessary foundation for our social and economic life. This can include birth certificates, land rights, mortgages, and pretty much any other information that needs to be recorded.
With blockchain as the central bookkeeper, the validation and authentication of ownership no longer relies on centralised authority. Accordingly, we can sidestep the common abuses perpetrated by those centralised authorities who have exclusively possessed the right to ‘update the ledger’. David Chaum — the developer of one of Bitcoin’s main predecessors — had already predicted in the 1980s that the rise of decentralised networks could solve ethical issues of mass surveillance, digital accessibility, and democratic governance.
Blockchain Use Cases
Since its first implementation by Satoshi Nakamoto, blockchain has moved far beyond its initial use case as a cryptocurrency. Blockchain has developed to include sophisticated ‘smart contracts’ that are capable of fulfilling contractual obligations (e.g., property and insurance contracts) as well as implementing ‘distributed governance’ models such as voting systems and decentralised governance of companies and organisations.
It is important to remember that blockchain is a technology still in its infancy and can potentially be deployed in almost all facets of society. It is even likely that some of the most innovative applications of blockchain technology have yet to come about. Thus, blockchain is not only capable of reconstituting the way we think about money, but also governance of society broadly. The following are some examples of applications and sectors where blockchain technology is currently be employed:
- Central bank digital currency (CBDC).
- Energy markets and infrastructure.
- Self-sovereign digital identity and data where users have control over their digital footprint.
- Novel capital markets such as decentralised finance (DeFi) where settlement processes are disintermediated.
- Decentralised gambling that dispenses with casino operators and improves transparency and regulation.
The Future of Blockchain
As blockchain technology grows increasingly sophisticated, the implementation of algorithmic trust models and decentralised ecosystems will most likely be widely adopted.
With blockchain serving as a basis for digital interaction, a future of disintermediation, localisation, and individual empowerment beckons but is not guaranteed. Whether blockchain reaches its full potential is still dependent on a wide range of social and political factors as it is influenced by and must contend with existing hierarchies of power and capitalist dynamics.
Blockchain will almost undoubtedly play a significant role in configuring our social reality. As blockchain remains in its inception, the narratives and collective ideas that we attach to it will guide its development and implementation.
Understanding the fundamentals of blockchain is not just a technical matter but is dependent on the social world we build around its technical components. Gaining insight into blockchain’s protocol as well as the social context it exists in will both empower users and help make the internet of value a reality.
Disclaimer: This assessment does not consider your personal circumstances, and should not be construed as financial, legal or investment advice. These thoughts are ours only and should only be taken as educational by the reader. Under no circumstances do we make recommendation or assurance towards the views expressed in the blog-post. The Company disclaims all duties and liabilities, including liability for negligence, for any loss or damage which is suffered or incurred by any person acting on any information provided.