If you take away the hype, blockchains remain mega-cool

Photo by Johny Goerend on Unsplash

I see some very smart peo­ple being crit­ic of blockchain tech, some­times almost salty. They bring valid points: it is a very inef­fi­cient data­base, there’s noth­ing sub­stan­tial­ly new peo­ple are doing with it, DeFi is self-ref­er­en­tial. All of these are true! At least in part. On top of this the indus­try is over-hyped and inun­dat­ed by star­tups with mil­lions in fund­ing and flashy web­sites with a lot of buzz­words. This makes the prob­lem worse because the real tech and inno­va­tion is obfus­cat­ed and often hard to find.

The root prob­lem is that blockchain is hard and the tech is still in a prim­i­tive phase, often still sub­ject to active research. I think this is a new era of com­pu­ta­tion and we are still fig­ur­ing out the par­a­digms — of course the qual­i­ty of the appli­ca­tions is going to be all over the place. Think how cum­ber­some it must have been pro­gram­ming com­put­ers with punched cards. I’m sure peo­ple were promised a brand new era of automa­tion even back then! But it took decades to get there, with many bumps on the road.

At their core blockchains work by a clever com­bi­na­tion of cryp­tog­ra­phy and game the­o­ry. I find many engi­neers often under­es­ti­mate the impor­tance of the lat­ter. The eco­nom­ic incen­tives are used in a blockchain to cre­ate a very hos­tile envi­ron­ment: nodes com­pete to get rewards. As a side effect they run the infra­struc­ture of the blockchain for oth­ers to use. The com­pe­ti­tion is kept hon­est by cryp­tog­ra­phy (i.e. you can’t cheat), but it is the eco­nom­ic aspect that makes it a palat­able propo­si­tion for the nodes.

The whole idea is to cre­ate a com­pu­ta­tion mod­el where you, the user that ben­e­fits from the com­pu­ta­tion being done, does not have to trust a sin­gle actor. Your trust is rather put in the archi­tec­ture of this math­e­mat­i­cal, cryp­to­graph­ic and eco­nom­ic sys­tem. This would be a per­fect fit for “appli­ca­tions” typ­i­cal­ly run by gov­ern­ments such as: iden­ti­ty cer­ti­fi­ca­tion, tax sys­tems, ten­ders, online vot­ing and of course the bank­ing sys­tem. I think blockchain is even­tu­al­ly going to be the back­end tech for many of these use-cas­es. How­ev­er, while gov­ern­ments are still fight­ing a tech they (and most of us) don’t under­stand, peo­ple are find­ing oth­er use-cas­es to make some­thing with it. And yeah many ride the hype wave and don’t real­ly add value.