The meteoric rise in the value of crypto assets has piqued the interest of developers, entrepreneurs, governments, media, central banks, regulators, and the investing public. It has catapulted these digital assets and the underlying blockchain technology, which was previously the domain of a few ardent technologists, into the mainstream. Although blockchain and cryptocurrencies are inextricably linked, the technology has a variety of other useful applications besides the exchange of digital value. What sets blockchain apart is not its relative nascency as a technology but its revolutionary relationship to trust-building.
Blockchain technology represents a decentralized and tamperproof ledger system, eliminating the reliance of trust on a third party to execute information exchange, record management, and value transfer. As a result, blockchain effectively revolutionizes the internet as we know it.
Blockchain Technology as a Trust-building Protocol
Over the past decade, there has been a growing decline in public confidence in governmental institutions due to the global financial crisis of 2008, revelations of communication technologies used for surveillance, the spread of misinformation, and public coercion. Furthermore, high-profile data and privacy breaches on large online platforms like Facebook with the Cambridge Analytica scandal in 2018 have further reinvigorated skepticism on the degree of trust placed in third-party centralized institutions, whether governments or corporations.
In response to this trust crisis, the introduction of bitcoin propelled blockchain technology to the fore. In fact, Satoshi Nakamoto, the pseudonymous creator of bitcoin, makes several references to the term trust in the whitepaper.
Blockchain technology promotes trust by offering a decentralized and transparent system for record-keeping and verifying transactions. Each transaction is recorded in a block that is connected to the block before it, forming an immutable chain of information that cannot be modified or removed without consensus from the network. Features such as immutability, transparency, and reliability of blockchain technology are brought about by the technology’s working mechanisms of nodes, distributed ledgers, and smart contracts.
Blockchain technology revolutionizes the traditional notion of digital interactions by removing the need for a trusted third party or a central institution to facilitate and guarantee information and value exchange. Blockchain thus emerges as an authentication and verification technology that reduces the risks associated with relying on a single or central institution to store and transfer data. This has led blockchain to be viewed as a trustless or trust-free protocol.
The Transition to a New Era of The Internet
The internet of information has existed for nearly four decades, bringing us email, the World Wide Web, social media, the mobile web, big data, and cloud computing. This has dramatically increased data flow within and between organizations and people. Furthermore, it has lowered the entrance hurdles for new media and entertainment, novel forms of retailing, and unprecedented digital initiatives. Overall, the internet has brought about many significant developments, but it has yet to revolutionize how individuals conduct business. This is because the internet’s initial phase was designed to transfer information, not value, from person to person.
Consider sending a document or photograph to an individual over email; what we are essentially doing is sending a copy of our original. This data is both plentiful and perishable. Anyone can copy, edit, and distribute it to another individual. In contrast, we cannot email money directly to someone to accelerate a business transaction — not only because copying money is prohibited but also because we cannot be certain of our recipients’ identities. Information about identity must be scarce, permanent, and immutable. As a result, we use powerful mediators to establish trust and integrity.
Banks, governments, and even large technological corporations verify identities and allow individuals to move assets. They clear and settle transactions and keep track of them. However, the limits of these intermediaries are becoming increasingly evident, such as their operational opacity, vulnerability to hackers, and unscrupulous employees. Conducting business over the internet still requires a leap of faith at this stage. This infrastructure lacks much-needed protection since we frequently have to place abundant trust in these middlemen.
This is where blockchain technology enters the picture, emerging as a second phase of network computing that offers a native digital medium for value, allowing individuals to manage, store, and transfer any asset safely and discreetly without the need for faith in a third party. Instead, cryptography, collaboration, and clever code are used to establish trust. As a result of this process, a new type of algorithmic trust emerges, challenging the monolithic and traditional view of value transfer.
Trust in the Ideological Roots of Blockchain Technology
Looking past the excitement and mania, not to mention the fear, uncertainty, and doubt, blockchain technology represents a profound phenomenon taking place. Bitcoin was the initial step in a protracted effort to build an entirely new technology stack for the internet, enabling the first native digital medium for value. While the identity of Satoshi Nakamoto remains unknown, the origins of bitcoin and its underlying blockchain technology can be traced back to the libertarian ideals of cypherpunks. Deep mistrust of centralized power structures was at the heart of the 1990s cypherpunk movement. They argued for using cryptography and decentralized systems to build a more trustworthy and open society.
Libertarianism is a close relative of cypherpunk, the original philosophical core of cryptography. Privacy is a central tenet of the cypherpunks movement, while libertarians have a more profound goal of wanting to abolish all forms of coercion. Therefore, it stands to reason that libertarians would gravitate toward a technology that undermines the nation-states’ and centralized institutions’ ability to dictate how information and value are transferred. As a result, Bitcoin, other cryptocurrencies, and blockchain technology as a whole represent more than just a decentralized peer-to-peer electronic cash system. Instead, it represents a new way of approaching economics, philosophy, politics, human rights, and online social interaction.
Conclusion
The adoption of blockchain technology is spurring a debate on the significance of a protocol that allows ordinary individuals to create trust through clever code. The technology enables trusted transactions between two or more parties, authenticated by mass collaboration and driven by collective self-interest rather than by large corporations motivated by profit.
Blockchain is ushering in a new era for the internet. One that challenges traditional concepts of centralized power structures while reconfiguring social trust.
