There are two idioms that drive this week’s newsletter: if you can’t teach it, you don’t understand it well enough yet, and, the best time to plant a tree is 20 years ago, the second best time is now.
Last weekend I was at a friend’s cookout and the conversation turned, naturally, to all the reasons none of us were rich yet. We decided it was because none of had bought Bitcoin back before anyone knew what Bitcoin was, only to realize that none of us could actually explain how Bitcoin worked.
And yet, the technology underlying Bitcoin (and all the other new currencies popping up everywhere) may be a cornerstone of public information technology in the coming years. This week’s letter is my attempt to explain why.
In this issue:
What We’re Learning: All About That Blockchain, Baby
What We’re Reading: Soonish: Ten Emerging Technologies That’ll Improve and / or Ruin Everything
Down the Rabbit Hole: Crypto, Alts, and ICOs, Oh My!
Let’s get to it.
What We’re Learning:
All About That Blockchain, Baby
Blockchain technology is an open-ledger system, wherein each transaction is recorded on a public-facing ledger. It is secure, transparent, and private. It is based in a form of mathematics that
Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data… By design, a blockchain is resistant to modification of the data…For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority.
Thanks. That helps. Let’s try again. Here are a couple of different explanations I found that might make it a little clearer.
Website Blockgeeks likens the technology to the difference between a Microsoft Word Doc and a Google Doc - it used to be that to share a document between two parties, you had to copy the document and give one copy to each party. This lead to lots of opportunities for corruption, both accidental and willful. With a Google Doc, the document resides in a central location that everyone has access to. More importantly, any changes to the document are recorded and timestamped along with the ID of whomever made the change. Blockchain technology works like a Google Doc, only at a much larger scale.
On the other hand, Forbes attempts to simplify things with a simple list of attributes:
Trustless (it's not based on a system of trust)
Secured by cryptography
Can be made public
While all of that still doesn’t tell us how it works (the simple answer is complicated math) it does start to identify just what the technology can do. However, just to throw as many resources as possible at the problem, here are a few more attempts at explaining this technology that I found useful:
Michele D’Aliessi uses several charts and graphics in his explanation.
And on Quora, several users work together to make a comprehensive picture.
So, now what?
All of which begs the question, why is this so revolutionary? I mean, I get what the technology is, but why is it so important? Is it just because Bitcoin made a few people very rich very quickly? Not quite.
Let’s begin with the public ledger idea. Lifehacker has this to say:
If you send Bitcoin (or some other cryptocurrency) to a friend, or sell it, that information is publicly available on the blockchain. Other people may not know your identity, but they know exactly how much value has been transferred from one person to another.
Many people see blockchain as an alternative to traditional banking. Instead of needing a bank or some other institution to verify the transfer of money, you can use blockchain and eliminate the middle man. (Boldface done for emphasis by me.)
Hmm. No banks. I like that idea. But the idea has more gas than that. I think what gets lost in the shuffle, quite often, and including in everything I’ve written so far, is that the technology can be used for so much more than just currencies. Even if “so much more” just means very specific uses of very specific currencies.
Two examples from CNBC of how blockchain technologies might be used:
Ethereum is essentially a blockchain platform that specializes in smart contracts. It has a digital coin known as ether linked to it…Ethereum does something similar, allowing people to build “decentralized apps” on its platform, leveraging its blockchain and potentially using the digital coin ether to power their product.
Ripple is a blockchain specifically designed for cross-border currency transactions. The movement of money from one currency to another across the world, particularly for large businesses, is expensive and takes a long time. The process involves lots of different parties from banks to clearing houses. Ripple’s blockchain system, known as xCurrent, helps to cut out some of the intermediaries, cutting down a cross-currency transaction to seconds.
Both of those sound very intriguing to me. And yet they’re both still currencies, more or less. Even though Ethereum is based on smart contracts, it is being operated as a currency. And, perhaps that will end up being the most enduring use of blockchain, variations on the theme of currency.
Maybe it would be better, or more true, to say that blockchain will enable better currencies than what we currently have. Although Bitcoin is prized for its anonymity and its divisibility and even its relative stability, it is still a currency, as in, it is designed to be a medium of exchange for goods and services. But there are, and will be more, interesting, possibly world-changing uses for blockchain technology.
One big use that ought to be implemented just as soon as humanly possible, is to prevent vote-fraud. From Forbes, again:
In the same way blockchain acts as a public ledger for cryptocurrencies, it can also create a permanent and public ledger for votes as tallied—promising a future of equitable democratic elections around the world.
Another, less glamorous but more applicable to everyday life, perhaps, is being fronted by companies like Storj, who promise to use the technology for distributed cloud storage. Even given the fact that “cloud storage” is a much mis-appropriated buzzword at the moment, this is still ground-breaking as it promises a future where data breaches are a thing of the past, where companies never have to worry about customers’ information being compromised.
Somewhat relatedly, your individual health data can be decentralized using blockchain technology; to give a real world example: right now, in Japan, I have three different doctors who do not communicate with each other.
At different times of the year, I need to see a gp for a physical, an ENT for allergy meds, and a dermatologist for a whole host of things. I need to maintain different records and cards for each of them. Imagine if all my data was on a secure, decentralized platform where each doctor could see the other doctors’ notes without needing to copy or request data from their offices. I know it sounds a little scary, but if blockchain is truly as secure as its proponents tout, then I’ll sacrifice a little privacy in the interest of good health.
These are just a few examples, of course, but there are dozens of start-ups looking at ways to solve current data storage and exchange (including money) problems using the blockchain.
I’m intrigued by all this. And while I’m not quite on board with all the investment managers who want me to give them my money for the latest crypto-currency, I am all in favor of at least a few newer uses of blockchain technology that have inserted themselves into my daily use of the internet.
I’ve written before about the Steemit platform, but to recap, it is a blogging platform where creation, curation, and participation are rewarded with their crypto-currency, Steem. In other words, instead of publishing something and waiting for ad or affiliate revenue, I am rewarded by people liking and commenting my posts with actual currency.
I don’t know that I, or most of you reading this, need an engineer’s in depth knowledge of the math behind blockchain technology, but I do think that this is a technology that is not going away anytime soon. I like to compare this to the dawn of transistors - we had radio and t.v. and record players before them, but they were nothing compared to the ones that came after. Similarly, I don’t think blockchain technology is a brand new force in the world, rather it is the refinement that will change everything.
What We’re Reading:
by Kelly Weinersmith and Zach Weinersmith
I’m tired. From the book’s website:
What will the world of tomorrow be like? How does progress happen? And why do we not have a lunar colony already? What is the hold-up?
In this smart and funny book, celebrated cartoonist Zach Weinersmith and noted researcher Dr. Kelly Weinersmith give us a snapshot of what's coming next--from robot swarms to nuclear fusion powered-toasters. By weaving their own research, interviews with the scientists who are making these advances happen, and Zach's trademark comics, the Weinersmiths investigate why these technologies are needed, how they would work, and what is standing in their way.
New technologies are almost never the work of isolated geniuses with a neat idea. A given future technology may need any number of intermediate technologies to develop first, and many of these critical advances may appear to be irrelevant when they are first discovered. The journey to progress is full of strange detours and blind alleys that tell us so much about the human mind and the march of civilization.
To this end, SOONISH investigates ten different emerging fields, from programmable matter to augmented reality, from space elevators to robotic construction, to show us the amazing world we will have, you know, soonish.
If you like what I’m doing and what to support this newsletter, click on the subscribe button above. The free version gets this very newsletter sent to your inbox every week. The paid subscription lets you add comments and likes to every issue.
Down the Rabbit Hole:
The news is full of words like crypto currency, alt-coin, and ICO. Here are a few of the links and research I found while researching this week’s main article:
Lots of crypto-currencies have come and gone. CNBC says over 800* are now dead even while Bitcoin is only at 70% of its record. (*not a typo)
The Verge has a good list of the ones that were just too good to be true. Especially when endorsed by celebrities!
After all this, if you’re feeling bullish on crypto-currencies, CCN* says now is the time to buy! Then again, they may be biased… (*still not a typo)
You know what? There’s too much. The biggest problem with crypto right now is learning how to sort the wheat from the chaff and I don’t know how to do that yet. Maybe next week will be better.
The Last Word:
That’s it. Stay strong, stay healthy. Learn something.