When we last left our exploration of blockchain technology we focused on the critical theme of decentralization. Today we will dive further into the other attributes that make blockchains such a game-changing technology. We will also spend some time exploring the larger area of criticism that has been levied upon blockchains.
So, what's the big deal?
Just in case distributed ledger systems and decentralized networks wrapped in advanced computer cryptography are not impressive enough technological innovations, there are still many other reasons why this technology has been garnishing so much global attention. To the "what's the big deal" question, there is of course a long and wide-ranging technical answer that is quite suitable for classrooms and computer labs. However, for the purposes of Rational Exuberance, I am going to focus on sharing two additional attributes of blockchains at a high level which are, in their own right, transformational. Perhaps none is bigger than the fact that blockchain technology has the potential to eliminate the need for middlemen. Just think about that for a moment—a technology that has the power to eliminate the middleman is about as revolutionary as a technology can get. So many of today's digital computer networks are controlled by companies that profit directly from the flow of information while adding little to no value. Banks and financial institutions are two of the most notorious. Perhaps this explains why some of the earliest public critics of blockchain and cryptocurrencies were the very same financial institutions that stood to suffer the most disruption. Speaking of said financial institutions, would it surprise you to learn that they have been some of the largest investors in blockchain technologies? Or that they have been literally hoarding talented computer engineers and scientists as well as racking up the largest number of patents in blockchain technology innovation? No? I didn't think so!
Trust is Overrated
Another radical element at the core of blockchain technologies is that blockchains create a trustless system. Right now, when you and I make purchases online, there are any number of entities we have to trust. In fact, there are so many we often do not even think to stop and consider how many there are. Obviously, there are the sellers, the credit card companies, the underlying payment systems, the banks we do business with and, of course, the merchant websites. Blockchains create a network system that does not require the same levels of trust and allows the exchange of goods and services without all of the dreaded third parties. Remember, it was in the aftermath of the Great Recession, a period when the world teetered on the brink of financial disaster that blockchain technologies first emerged. That crisis has been largely attributed to the reckless behavior of financial institutions and to the global monetary system that historically people have had no choice but to participate in and trust. Indeed, for many in the wake of the Great Recession, trust became overrated. With the emergence of the bitcoin blockchain more than a decade ago, the world has started to realize that there may be alternatives to the traditional financial model, alternatives that are trustless and rely on blockchains to power them.
All is Fair in Love and Blockchain Criticism
To be fair, there are many legitimate criticisms of blockchain and its present limitations. For starters, there are valid questions that ask "why do you need to build a rocket ship to cross the road", an argument that could be applied to many of the early use cases of, and attempts at, various blockchains and blockchain-related technologies. There are still major computational puzzles that need to be solved in order to address the broader issues of scalability and the speed of transactions, a criticism that has quite fairly been made of both Ethereum and Bitcoin, the two largest blockchain-based technologies. Yet, while criticisms are warranted, fair, and should always be welcomed, at Rubicon Crypto, we think it's especially important to remember that blockchain technology and its potential impact is still in its infancy. In other words, we have a very long view and encourage everyone to do the same.
As always, whether or not you are crossing the
digital divide with Rubicon Crypto…please remember to do so with common
sense…and with Rational Exuberance.