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Blockchain
Satoshi Nakamoto's invention represents a new source of consensus. This is the first new source of consensus humanity has invented in thousands of years. Satoshi Nakamoto is remembered not because he invented Bitcoin, but because of the grander essence behind what Bitcoin represents. It is this insight, through clever design, that we can create systems bounded by cryptography and driven by human incentive measures, together providing a source of native digital consensus. Nakamoto used this new source of consensus to create the first blockchain application: Bitcoin. This paved the way for broader space in Bitcoin's design, leading to the first and most widely adopted programmable blockchain, Ethereum.
However, like components and institutions, blockchain is not perfect; it has both advantages and disadvantages:
- Blockchain itself is digital, accessible, and interactable by anyone with internet connectivity. However, this is also a limitation, as the consensus of blockchain depends on the technological civilization's ability to maintain the internet and other infrastructure.
- Blockchain does not rely on any institution but does require manual maintenance. Blockchain, to some extent, depends on human behavior and can be created and maintained anonymously by anyone anywhere with Ethereum clients.
- Blockchain consensus is highly transparent. The specific cryptographic tools used by blockchain are public and available for research. The cost of attacking the system to disrupt it is known, and we can accurately estimate it, such as through the so-called "51% attack."
- Blockchain is created using software. Software may be poorly written, contain errors, and most people cannot read or write software themselves. Minor mistakes contrary to our intentions, if not subject to human discretion (as present in institutions), can have serious consequences. However, anyone on Earth can have the opportunity to learn to write and read software. Anyone can upload contracts to Ethereum, but no one can unilaterally make laws themselves.
- Blockchain requires creating new institutions based on consensus. Anyone can create assets and define the parameters of those assets, which cannot be achieved in any other way. With the concept of consensus, the utility and importance of blockchain can be easily explained. Blockchain, like institutions, is a source of consensus. We need consensus because it enables us to build complex global coordination tools such as laws, governance, and currency.
But blockchain has different trade-offs and objectives compared to institutions. They can govern areas where institutions cannot reach, do things that institutions cannot achieve, and are more resilient to certain failures than institutions. It is also worth noting that the type of consensus I call "blockchain" is likely to develop beyond blockchain, and cryptographic innovations such as secure multiparty computation and homomorphic encryption may have equally important contributions to the toolkit of human-created consensus tools. But Satoshi Nakamoto's invention marks a moment when our understanding of how to use cryptography and economic incentives to create consensus went from zero to one, so I use the term blockchain now. Understanding blockchain as a source of consensus also helps us understand the dazzling narratives and buzzwords used to understand them:
- Blockchains can be trustworthy and neutral because their rules are transparent and verifiable, and it is difficult for blockchains themselves to enforce these rules.
- Ethereum supports composability between applications, where applications deployed on the mainnet remain there, allowing developers to build on top of what has already been built.
- Ethereum supports protocols that run indefinitely because the consensus source provided by blockchain makes it highly likely that structures built on it will continue into the future.
- Ethereum supports decentralized finance (DeFi) as it allows us to create sufficient programmable hardness to rebuild the complex network of cross-relationships unique to traditional finance. Traditional finance is built on institutional consensus (such as legal contracts), while DeFi is built on blockchain consensus.
- Blockchains can be trustless because they create consensus without relying on individual or institutional behavior.
- Ethereum supports web3, an ecosystem of web services, protocols, applications, and communities, whose foundation is primarily based on blockchain consensus rather than institutional consensus. The digital environment of people's identities, their properties, their business means, their collective ways of managing themselves, and their ways of disseminating information to the world are primarily based on blockchain consensus rather than institutions.
- When blockchains collapse into another institution, they no longer become new contributions to human infrastructure. In other words, when they become centralized, they rely on specific groups. Digital institutions may still be useful, but they bring the same advantages and disadvantages as traditional institutions. Humans inherently need consensus for systems to coordinate, and we rely on these consensuses to bring predictability to our civilization. However, the institutions currently controlling the internet are not suitable sources of consensus, and our interests are continually compromised when we attempt to cooperate with them. In ZZ around the world, many people are increasingly suspicious that traditional institutions that rely on are serving finance/power, which has a significant impact on our lives. We hope to lay a solid foundation for global civilization, one that does not change with each election or the rise and fall of individual American companies.
Conclusion
Imagine components, institutions, and blockchains as a balancing system. Use them together to build critical infrastructure for our civilization, making it more resilient and less restricted by the disadvantages of any one of them. They are a set of building materials, used together to form a stronger whole. The development of a global digital civilization mediated by the internet has accelerated our reliance on institutions, extending them to a tipping point. Blockchains will not replace institutions as our sole source of consensus. However, they will compete with and complement them.
Humans now have a choice: for the first time, a consensus market has emerged that can be used to produce the consensus needed for modern civilization. Blockchain consensus will be used where institutions cannot go, while institutional consensus will fill the void of human discretion. A new ZZ dimension has opened up, where we will not only discuss which systems to use, what forms of governance, what kind of market, but also discuss what consensus resources should be used to build these systems. |
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Post time 30-3-2024 10:01:08