The Library of Satoshi is named after Satoshi Nakamoto, the founder(s) of the first public blockchain. The impact Satoshi Nakamoto has had thus far, in spurring a revolution in the way value is transacted online, is already profound. I believe the underlying technology and principles of Bitcoin, the currency Satoshi created, is likely to drive structural innovation in industries across the board in coming years. The whole landscape will be vastly different as the incumbents are about to be disrupted. And it all starts with the blockchain.
Enter the Blockchain
The blockchain refers to a type of infrastructure in which people and communities exchange value with one another online. It is a sort of real-time digital ledger that all network participants have a copy of. It is not stored or maintained in one central location, but distributed and secured amongst many points called nodes. Distribution is one of its defining characteristics as we'll soon find out.
The large central entity
Until the last decade or so, the vast majority of value exchanged online from one person to another, has required the use of a centralized intermediary to be the trusted escrow between two transacting parties. The issue with this system is that trust-designated intermediaries often end up with a monopoly or oligarchy on this service. In other words power becomes centralized, bringing with it transparency, and ironically, trust issues.
We only have to think of banks and governments to see where problems have arisen due to centralization of power. The 2008 global financial crisis is the most glaring recent example of what can happen when we require large entities to secure our finances, log our data, and to transact on our behalf with little oversight. In allowing this, we've seen our bank deposits used as a sort of security for complex and risky financial instruments, our personal data collected and sold, and our wealth being eaten away by out-sized fees.
But it is not just banks and governments who we have to trust - the rise of large aggregating services have also centralized the way in which goods and services are delivered to consumers. This leaves the primary producers of value with a share of payment disproportional to the sweat equity they have invested. Common examples include Spotify who pay minimal royalties to recording artists, and Western Union who take close to 10% in fees for simply remitting an individual's money abroad. It is the same story of all the value being sucked up, stored in a big silo and unfairly distributed.
Blockchain technology, along with their native tokens cryptocurrency, aims to change all of this by solving the two biggest issues that the online world has faced in relation to transacting value:
- The double spend problem
- The need for trust
These two issues are big obstacles that make it difficult to transact peer-to-peer and allow middlemen to capitalize at the individual's expense.
The double spend problem
The double spend problem in a nutshell is this:
When I spend my currency on an item or service online, I can't still be holding the currency
Currency is used in this statement, but it can be replaced with anything that has value, whether it be land titles or digital eBooks. At present, we use intermediaries such as clearing houses to verify that currency is not spent twice. These institutions can take days to weeks, depending on which country the individual we're transacting with resides in, to settle the transaction and update the ledger. And they require the use of vast resources, both human and machine to do so. Considering that we live in a borderless internet age, where information can be sent in an instant, and answers can be found in a matter of seconds, this does seem rather odd.
Blockchain technology solves this issue by having an open-source distributed network carry out the process of transfer, clearing and settling in real-time. And it does this in a way where all parties can see what is happening at every step of the process. If one user on the network tries to spend twice, the distributed network of thousands of nodes won't confirm the transaction. Anyone who chooses to can help to maintain the network and be rewarded. Most importantly anyone can use the network without having to ask permission - There's nothing fairer than open access for all.
The solution to the need for trust is a trustless system
Solving the double spend problem in turn resolves the need for trust. As you'll soon discover, through cryptographic encryption, distribution of the ledger, and clever code, individuals are able to transact peer-to-peer securely, quickly, cheaply and without needing to know anybody on the network. Individuals don't even need to know the person they are transacting with because both parties can see the same single ledger being updated in real time. When the progress of a transaction is out in the open ledger for all to see, there will be no cheating by either party. There need be no oversight from some authoritative agency as it is hard-coded into the system. And amazingly all this transparency is afforded while your identity and privacy are maintained.
Driving the future: Industry and the social economy
The implications of this technology on the mass of established industries and their incumbent economic players is likely to be immeasurable. The technology can bring a transparency and efficiency to supply-chain, lowering costs, synchronizing transportation, and benefiting us all. By enabling trustless transactions, we are able to protect what matters most - our privacy and our personal data.
On a social level, the implications on economic equity and access for people currently excluded from the global economy, for simply being born in the wrong place, are also potentially game changing. Blockchain is already bringing the developing world into the global finance system, and it has great potential to accelerate the development of infrastructure in this area. It can also allow consumers to track where each product they purchase is constructed, from the labour, to the sourcing of fair trade material. The blockchain is designed to be open and immutable, so there's no changing the record of what has happened. History is written as it is made, with integrity, not in retrospect by those who 'won the war'. It's not just about creating a whole new economy and interfacing with the old; it's also about bringing in those excluded from the global economy for far too long.
It's true that there are no certainties and for all intensive purposes, the blockchain as a technology could all but fade to nothing. But I personally wouldn't bet things panning out that way, because I struggle to think of any single technology that has the potential to disrupt everything for the better. We may not be able to connect the dots until it all plays out, but by educating ourselves, we can stay ahead of the curve and work towards an exciting, fairer future through a peer to peer, borderless economy.