The Computer vs the Casino
From cuneiform to cryptography
Blockchains are computers that can make commitments. They invert the traditional power relationship where hardware controls software. Instead, the software is in charge and can make strong, software-enforced commitments to users.
When it comes to Web3 technology, all you ever hear about is the idiots who bought Bored Ape, or the cat NFTs that shit rainbows. You hear about Doge Coin and SBF.
When what we should be talking about is how blockchain technology could help us:
Certify elections and ensure a fair democratic process.
Record housing deeds and avoid tedious hours in probate court.
Allow for an inflation resistant currency that everyone around the world could use.
Enable a censor-proof social platform to ensure the integrity of free speech.
From cuneiform to the printing press, writing has long revolutionized the spread of news ideas, and allowed us to record them with ever increasing efficiency.
And with cryptography, humanity will continue to innovate and create new modes of expression to simplify our lives and democratize opportunity for all.
What actually is blockchain technology?
Blockchain is a new class of computer. It is not a physical device you can hold, but rather, a network of hardware devices controlled by software. It’s similar to the internet.
Millions of different hardware nodes connecting to a distributed software network in order to share information.
If you’ve ever played Mass Effect, it’s similar to the concept of the Geth.
The key aspect that characterizes a blockchain, is that the software itself governs the network, rather than a person or organization controlling the hardware and software.
This allows a blockchain to establish inviolable rules in code at its inception, and make strong commitments about how the ecosystem will behave in the future.
By combining the benefits of open protocols, with the capabilities of corporate networks, we can solve problems that earlier network architectures could not.
How do they work?
Blockchains are a type of distributed database that stores information in blocks which are then chained together. Hence the name.
The idea comes from an original white paper, published by the pseudonymous creator(s) Satoshi Nakamoto.
You can read the original white paper → here.
Blockchains use a decentralized network of computers to collectively maintain a secure, transparent, and immutable digital ledger of transactions.
This allows blockchains to operate without a central authority controlling the network.
Data sharing is stored in the digital blocks: When a new digital interaction between stakeholders occurs, it is placed in a block, and that block is placed in a queue with other recent transactions.
Distributed network verifies transactions: The blockchain network of distributed computers, called nodes, verifies the validity of each transaction, before it can be added to the blockchain.
In order for a transaction to be accepted to the blockchain, thousands of nodes have to complete complicated mathematical algorithms, which cost time, energy and money. That’s the skin in the game, so to speak.
In order for a node bent on censorship or maleficence to complete its goals, it would need to solve these “proof-of-work” equations faster than the entire rest of the network.
Due to the natural constraints of how fast a computer can work, and the energy required, doing so would be impossible.
The broader network, and the aligned incentives therein, ensure the integrity of the system.
When a group of nodes working in good faith validate a transaction by solving the proof-of-work equation, they are granted a certain amount of currency as a reward for the time, effort, and compute they expended to ensure the integrity of the system.
These “miners” work to make sure the system remains infallible. This process is known as proof-of-work or proof-of-stake.
Blockchains can store more than just transactions: While cryptocurrencies like Bitcoin store coin transactions, blockchains can also store other types of data like contracts, digital identities, and intellectual property. This means their applications can be much broader than just a simple financial ledger.
Why do we care?
If the concept of blockchain can endure past the invention of quantum decryption, we will likely think of the beginning of cryptographically verifiable history as on par with the beginning of written history millennia ago.
Future societies may think of the year 2022 AD as the year 13 AS, with “After Satoshi” as the new “Anno Domini,” and the block clock as the new universal time.
This is a breakthrough in digital macro-history that addresses the issues of silos, bots, censors, and fakes.
They provide new tools, like staking and ENS-style identity, that allows for separation of bots from humans.
In an age of androids that suddenly doesn’t seem so science fiction, your proof of personhood could be tied to a blockchain. Identifying how many traffic lights are in a picture might not cut it.
And in the much nearer future, blockchains can incorporate many different proof techniques, including proof-of-existence, to address the problem of deep fakes.
In decentralized form, the ledger of record allows an individual to resist the Stalinist rewriting of the past. It is the ultimate expression of the bottom-up view of history as written to the ledger, rather than history as written by the winners.
Enabling New Applications
Smart contracts enable new types of internet-based applications and business models that were not possible before.
This unlocks the potential for more user-centric, economically viable internet services.
For example, you could crowd fund a movie in decentralized communities similar to Reddit.
But instead of getting no monetary value from your efforts, and having your data sold to Google, you would retain ownership of the underlying intellectual property.
And if and when that concept is made into a movie, through traditional means or through new AI technologies, you would have a direct channel through which to be compensated.
Immutable Rules
Centralized social networks make it easier for you to start. (𝕏, Meta, Wix, etc). But at the end of the day, there is no guarantee that they won’t change their rules or policies.
I once asked a friend who’d built a multi-million dollar business on Facebook what it was like. He said it felt like owning the most successful McDonalds franchise in the world, but it was built on an active volcano that could erupt at any moment.
—Tim Ferriss
𝕏 is now throttling Substack links. Instagram and TikTok can play with the dials of their algorithm, so once you reach a certain level of organic growth, it stops and you have to pay for more growth. And so on.
The reason behind this is simple. In the early days they don’t want to be reliant on one Mr. Beast type creator for all their traffic.
So they will boost a bunch of other accounts to get a good seeding of popular channels.
And once they have a solid number of popular channels, it will restrict the organic growth of those channels, so you have to pay to receive more growth, rather than purely organically through the algorithm.
Don’t Be Evil
Another good case study of these practices is Google itself. Its former motto was “don’t be evil”, and it started with a clean homepage with no ads or news stories. This, combined with its superior PageRank algorithm, allowed it to dominate the search market.
When Google introduced ads, it was just one ad the top of the page, which was very clearly an ad. Now, at least the top four results are ads, and you have to pay to be listed higher in the search results.
A blockchain protocol, in contrast, would be transparent in telling you what the rules of the application were. And the way it would work would be written in self executing code.
So the rules of the platform can’t be changed unless most of the millions of nodes all over the world choose to change it (very unlikely).
Google, if it was built on a blockchain, would remain as it was when users and shareholders were aligned. A clean landing page, one or no ads per search, and an algorithm based on PageRank, not exhorted fees.
Instead, today we have a Google that releases things like their woke and inaccurate Gemini LLM model, and a pay to be ranked search algorithm.
The Casino and the Computer
Blockchain technology has a marketing problem. The most visible parts of the technology are evangelists who ended up being revealed as bad actors. Sam Bankman-Fried and the Binance fiasco come to mind.
These are people who focus too heavily on cryptocurrency and the “casino culture” it enables. The idea of the "crypto casino" refers to those who are primarily interested in blockchains for speculation and fast money-making.
It’s the same people who try to make a quick buck in the traditional equity markets.
Casino crypto culture has dominated the public narrative around blockchains, with media coverage focusing on tales of fortunes won and lost.
But the much more important part of this technology is the "computer culture”, which is the culture I laid out above. Building decentralized applications on top of a blockchain, and why it matters.
That’s why the subject of this article is blockchain, not crypto. I don’t really care about “crypto” all that much, just like I don’t really care about day trading equities. It seems short sighted, it’s not my style, and provides no value to society.
Cryptocurrency is what allows the blockchain system to function. But in contrast to blockchain protocols, it’s just a part of the underlying technology.
It would be like referring to the United States as “the dollar”. The dollar is how we record and transfer units of value and time. But the US system, culture, and beliefs are so much broader than anything that can be defined by “the dollar”.
And the dollar is also the least interesting part of the American system, just like the pound sterling was the least interesting part of the previous British system.
Blockchain as “the computer” represents the true promise of the technology.
Regulators and builders should work together to encourage the innovation and development of the computer culture, while working to rein in the excesses of the casino culture.
Towards a Type One Civilization
A Type One Civilization, as defined by the Kardashev scale, is is a civilization that has harnessed all major forms of energy available on its home planet.
To do this would require an unprecedented level of global cooperation. We are currently about a Type .75 Civilization. English is a global language, Liberal Capitalist Democracy is a global political system, and soccer is a global sport.
But in order to truly become a type one civilization, we probably need a global, federalized government, a global currency, and a global system of uncensored communication.
Personally, I think over the next several years, (or decades) we are going to go through an unbundling of the world system (whether peacefully or violently). On the other side of that cycle will be a re-bundling into a more global society.
The empire, long divided, must unite; long united, must divide. Thus it has ever been.
This is not a new idea. The Romance of the Three Kingdoms is a 14th-century historical novel set in the turbulent years towards the end of the Han dynasty and the Three Kingdoms period in Chinese history.
The cycle of unbundling started in 184 AD and ending with the reunification of the land in 280 by the Western Jin.
We’ve seen empires rise and fall, from Rome, to Spain, to the Ottomans, to Britain.
Albert Einstein called for a supranational polity which would serve as a federal global government, all the way back in 1947.
And Ray Dalio, one of the most successful hedge fund managers of all time and famous for formalizing his principles of clear thinking, has been vocal about his concerns about the recent macro picture.
Bitcoin could serve as the reserve currency for a new global, federalized government, and get us one step closer to being a Type One Civilization.
And Ethereum could serve as a global computer and system of communication. Accessible to everyone and immune to censorship in places like China.
That’s the true value of this technology.
From cuneiform to the printing press, writing has revolutionized the spread of ideas. And with advanced cryptography, humanity will continue to innovate and create new modes of expression to simplify our lives and democratize opportunity for all.
Thank you explaining such complex concepts & current technologies in a way that connects them easily and articulately so that I get it!!!! Mostly!!! 🧐