RARELY before has such an obscure and complex technology captured the popular imagination quite like the one announced in a nerdy corner of the internet in 2008 by its inventor, Satoshi Nakamoto, a mysterious person or persons whose real identity still isn鈥檛 known for certain.
The metaphors used to describe the blockchain are appropriately grabby, too. It鈥檚 a mind virus. It鈥檚 the internet of money. It鈥檚 the end of capitalism.
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Or think of it like a bicycle, says of the cryptocurrency news site Coindesk. 鈥淲e had wheels and chains and saddles, but the magic happened when the thing was made to roll on two wheels and everyone said, 鈥極h my goodness, I didn鈥檛 think that was possible鈥�.鈥�
All clear? Well, this much we do know: the blockchain was invented to build trust in the first cryptocurrency, bitcoin, a digital and decentralised way to move money. Bitcoin鈥檚 roots are in anarcho-capitalism, a movement that aspires to reproduce the mechanisms of the free market without the need for banks or state bodies to enforce rules. 鈥淚t was designed to get governments and law enforcement out of the way,鈥� says at Imperial College London.
Blue-chip buzzword
In effect, the blockchain is simply a database. It stores arbitrary information such as bitcoin transactions in units called blocks. New blocks get stuck to the end of an ever-growing chain via some heavyweight number-crunching, and are copied to many computers on the internet. This elaborate, distributed process makes the blockchain tamper-proof, an unfalsifiable record of the transactions that made it.
There are now hundreds of different blockchains powering projects from trading solar power and real estate to tracking the provenance of food and diamonds and enabling new forms of voting. Sprouting far from its roots, the blockchain has also been embraced by governments, banks and blue-chip companies as a secure and efficient way to log transactions. In the first week of 2018, using the buzzword, compared with five in the same period the year before.
Beneath the corporate hype, blockchains could genuinely bring greater transparency to government spending or banking transactions, for example. And because they cut out middlemen such as estate agents, they could make buying and selling property quicker and cheaper.
A potential bubble-popper, however, is the rise of crypto-crime. Newer cryptocurrencies such as Zcash and Monero run on souped-up blockchains that obfuscate the transaction list, making it hard to see who paid what to whom. Such anonymity makes them an unpoliceable form of money that seems almost an open invitation to criminals looking to make nefarious transactions. 鈥淚t鈥檚 almost frightening what they鈥檝e done there,鈥� says Knottenbelt.
But the most dramatic downside may be the technology鈥檚 propensity to guzzle energy, because of the vast amounts of computing power required to add new blocks to a blockchain. Last November, the bitcoin blockchain alone started to consume more electricity than Ecuador 鈥� and appetites have only grown since.
This article appeared in print under the headline 鈥淗ow to think about鈥� The blockchain鈥�
