Bitcoin and blockchain 101: Why the future will be decentralized
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We’ve all heard terms like Bitcoin, blockchain, and cryptocurrency being thrown around in the past few years, but what do they mean? Consider this your crash course.
Experts from across the spectrum of money and tech provide a history of commerce dating back tens of thousands of years, explain what blockchain and Bitcoin are and how they work, and offer insights into the differences between centralized and decentralized systems.
Because blockchain is incredibly difficult to hack, it has massive implications for elections, banking, shipping, land ownership—any domain where corruption is rampant. While the technology may feel abstract now, programmer Brian Behlendorf compares it to explaining the concept of email to people in 1993. One day, blockchain will be a seamless part of our lives.
Check Tony Saldanha’s book “Why Digital Transformations Fail: The Surprising Disciplines of How to Take Off and Stay Ahead” at https://amzn.to/36iaOCH
WENCES CASARES: It’s hard to have a rigorous discussion about Bitcoin without understanding money. And the best way to understand money, is to understand the history of money. Anthropologists agree that there is no tribe, much less a civilization, that ever based its commerce on barter. There’s no evidence, barter never happened. And that’s counter intuitive to most of us, because we are taught in school, that we first bartered and then we made money because barter was too complicated. Well, barter never happened, and that’s one of the key sort of myths about money. So then, you would ask the anthropologists like, okay so how did we do commerce before money, if there was no barter? There was no commerce? No, there was plenty of commerce. And the way that commerce would happen is that, let’s say that someone in our tribe had killed a big buffalo and I would go up to a person and say, “Hey, can I have a little bit of meat?” And that person would say, “no,” or “Yes, Wences, here’s your meat.” And then, you would go up to the person and say, “Hey, can I have a little bit of meat?” And that person would say “Yes, here’s your meat.” And basically, we all had to keep track, in our heads, of what we owed other people, or what other people owed us. And then someone would come to me and say, “hey, Wences, can I have a little bit of firewood?” And I would say, “Sure, here’s your firewood.” And now, I have to remember that I owe that person a little bit, that this person owes me a little. And we all went around about our business, with these ledgers in our minds of who owes us what, and what do we owe to whom. Very subjective system.
Often, these debts didn’t clear, or cleared in ways that were not satisfactory to both parties, until about 25,000 years ago. Someone very, very intelligent, came up with a new technology that really took off, which they came to me and said, “Hey, can I have a little bit of firewood?” And I said, “Sure, here’s your firewood.” And this person said, “This time, we’re gonna try something different. Here are some beads for you.” And I said, “I don’t want beads, I don’t care for beads, I don’t need beads.” He said, “It’s not about that. We’re gonna use beads, as the objective ledger of our tribe. Instead of each of us having to remember what we’re owed, the beads are gonna keep track for us, an objective ledger to keep track of debts.” And it was such a successful technology that it took off. And in a couple thousand years, it became impossible to find a tribe or civilization that didn’t have some form of objective ledger. In some cases it was one point shells. In other places, it was salt, in other places, rocks or beads. But, this form of keeping track of debts, with an objective ledger took off, and anthropologists go as far as saying that, if you describe a tribe’s environment in detail, they can predict what’s going to emerge as an objective ledger, as money. Because it’s always something that has six qualities, the most important of which, is that it be scarce. And it makes sense, because if it’s not scarce, we can create, you know, if we were to use tree leaves, for example, we could create debts that are owed to us out of thin air, and that wouldn’t be good, that wouldn’t be a good ledger. But also has to be durable. If it’s something that decays or corrodes, it doesn’t store the information well. It has to be divisible. It has to be transportable, recognizable, and fungible.
And this system really worked until about, 5,000 years ago, when trade began to extend a lot geographica…
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