Blockchain Revolution

Principle: The system distributes power across a peer-to-peer network with no single point of control. No single party can shut the system down. If a central authority manages to black out or cut off an individual or group, the system will still survive. If over half the network attempts to overwhelm the whole, everyone will see what’s happening.

Problem to Be Solved: In the first era of the Internet, any large institution with a large established base of users, be they employees, citizens, customers, or other organizations, thought little of their social contract. Time and time again, central powers have proven that they’re willing and able to override users, warehouse and analyze user data, respond to government requests for data without users’ knowledge, and implement large-scale changes without users’ consent.

Breakthrough: The energy costs of overpowering the bitcoin blockchain would outweigh the financial benefits. Satoshi deployed a proof-of-work method that requires users to expend a lot of computing power (which requires a lot of electricity) to defend the network and mint new coins. He was inspired by cryptographer Adam Back’s solution, Hashcash, to mitigate spam and denial-of-service attacks. Back’s method required e-mailers to provide proof of work when sending the message. It in effect stamped “special delivery” on an e-mail to signal the message’s importance to its sender. “This message is so critical that I’ve spent all this energy in sending it to you.” It increases the costs of sending spam, malware, and ransomware.

Anyone can download the bitcoin protocol for free and maintain a copy of the blockchain. It leverages bootstrapping, a technique for uploading the program onto a volunteer’s computer or mobile device through a few simple instructions that set the rest of the program in motion. It’s fully distributed across a volunteer network like BitTorrent, a shared database of intellectual property that resides on tens of thousands of computers worldwide.

To be sure, this shields the network from the hands of the state, which could be good or bad depending on the situation—say a dissident in a totalitarian country fighting for women’s rights versus a criminal in a democratic country conducting extortion. Totalitarian regimes could not freeze bank accounts or seize funds of political activists. States could not arbitrarily seize assets on the blockchain as Franklin Delano Roosevelt’s administration did through FDR’s Executive Order 6102, which required citizens to turn their “gold coin, gold bullion, and gold certificates” over to the government or risk fines or imprisonment.¹¹ Josh Fairfield of Washington and Lee University put it bluntly: “There’s no middleman to go after anymore.”¹² The blockchain resides everywhere. Volunteers maintain it by keeping their copy of the blockchain up to date and lending their spare computer processing units for mining.

No backdoor dealing. Every action or transaction is broadcast across the network for subsequent verification and validation. Nothing passes through a central third party; nothing is stored on a central server.

Satoshi also distributed the mint by linking the issuance of bitcoins to the creation of a new block in the ledger, putting the power to mint into all the hands of the peer network. Whichever miner solved the puzzle and submitted proof of work first could receive a number of new bitcoins. There is no Federal Reserve, central bank, or treasury with control over the money supply. Moreover, each bitcoin contains direct links to its genesis block and all subsequent transactions.

So no intermediaries are required. The functioning of the blockchain is mass collaboration at its best. You have power over your data, your property, and your level of participation. It’s distributed computing power enabling distributed and collective human power.