The Yet To Be Fulfilled Promise Of Blockchain

Every 3 years or so, a certain part of media gets hyped about a seemingly unexplainable appreciation of a certain asset. The media we’re talking about is mainly business and economic related, and the asset is Bitcoin (or crypto-currencies, if you prefer). This sudden appreciation, if you really take the time to look into it, follows very simple economic processes, related to supply and demand. Basically, the more scarce a certain asset is, the more value we assign to it (and there is less and less Bitcoin available as times goes by). We’re at the beginning of such a trend now, by the way, the last major one was in 2017.

There’s a lot more to talk about this, there are technical and economical aspects to it that really deserve some time to dig into, but, as pleasurable as this task might be for me, I’ll leave this for another time. I’m going to focus on a more mundane aspect of this crypto-currency craze and, for that, we need only a very minimal introduction, just to make sure we know what we’re talking about.

The Basics Of Blockchain

First of all, the “blockchain” is made of a few disparate technologies that were lingering around for decades (like peer-to-peer connectivity, or cryptography) but assembled in a revolutionary way. If you tear it apart, there isn’t any part that is revolutionary by itself, but the whole final technology, well, it is.

At its core, a blockchain is a distributed ledger. As a ledger, it holds digital information (that you can ascribe financial value to it) in a verifiable and mathematically unbreakable way – meaning that if I hold a certain asset, nobody else can have access to it, ever, if he doesn’t have its “private key”. It’s also a medium for transactions between actors that choose to hold the said digital assets – it allows these assets to be moved from one holder to another, and all transactions are recorded identically (in a chain of blocks of transactions, if you prefer).

Any actor in this economic process uses the same version of the ledger (in technical terms, we say a blockchain is “immutable”). This is achieved by a cleverly engineered incentive process, which makes the participants who want to validate these assets movements, to behave in a relatively ethical way.

Another fundamental property of a blockchain is that it’s “decentralized”. As opposed to a bank, or a certain market, which is managed by a single entity, in a blockchain this management is distributed among all actors, all having the same level of access. Because it’s decentralized, a blockchain eliminates the “middle man” problem, which means it lowers the risk for tampering with transactions with a malicious intent, by a single controlling entity.

There are nuances to everything that’s written above, but, in a very simplified form, that’s how a blockchain works.

The Sovereign You

After this brief introduction, we’re now ready to talk about blockchain’s yet unfulfilled promise.

And that’s the “sovereign you”.

The legendary founder of Bitcoin, Satoshi Nakamoto (again, we’re not gonna dive in an endless discussion about who he was / is, if he is a group of people, etc) created the blockchain with the aim of generating “financial independence”. To escape from a system in which money is controlled by centralized entities, which, sooner or later, get corrupted and prey on the people they were supposed to lead and protect.

We’re way closer to this ideal than we were before Bitcoin, but, in all honesty, we’re still very far away from it.

Here are a few reasons (all derived from my humble experience and limited knowledge on this topic).

Greed and Speculation

Every beginning is messy. And, in every beginning, there are things that go off, that steer away from the intended direction.

That’s what the speculation part of the crypto world is, for me, just a part of the messy beginning. Being financial independent has little, if any, to do with all this shilling, empty promises, scams and other nefarious activities that are taking place in this sector, all driven by greed and speculation.

We need more time for all this to settle, to get consumed and slowly fade away, but, at least for now, this is acting like a fog wall, one that hijacks the attention of people from a legitimate tool for survival, into the more toxic area of “getting rich quick” mirage.

Lack of Financial Education

Very few people understand how money works.

Even fewer understand how cryptocurrencies work, and that’s a major barrier in front of the “sovereign you”. Caught in the daily fight for survival, the majority of people takes money – or, in more precise terms, the creation of money – for granted. Well, money is not something happening out of thin air. There are causes for money to be generated, there are ways in which financial discipline can be enforced, and that, in time, will lead to a more responsible individual.

We need more financial education. Otherwise, people will continue to be enslaved by their own ignorance.

Lack of Personal Responsibility

Of all reasons, this is the one that saddens me the most.

Our society works by delegating trust to certain actors, from bottom to top (democracy, in Greek, comes from “demos” – people, and “kratos” – power). Lately, we’ve seen how this delegation goes a little too far when it comes to money, especially when the top structures are preying on the people who elect them (by bailing out corrupted banks, printing money without limits, etc). Yet, still, people choose to play along: “It’s the government job to take care of this, I won’t dabble into it”.

As surprising and as irresponsible as this is, that’s how many people think, and that’s what, eventually, leads to their own financial demise. Of course you should take care of your own money, and of course it’s not (only) the government responsibility. On the contrary.

We need more courage an accountability. Otherwise, people will continue to be enslaved by their own misplaced trust in outdated social structures.

The Black Swan Event That Can Accelerate The Process

This article is written in the middle of a global pandemic, an event which can be safely labeled as a “black swan”. No one predicted such a thing when crypto were created. Yet, this is happening and its effects are rippling deep down in the fabric of our world.

And although this event is unpleasant (to say the least), maybe it will have the ability to turn the tides. Maybe, with all the economic problems it creates and the endless printing of more money, generating inflation and distrust, maybe it will accelerate the process in which people may start to rely more on themselves, and less on centralized protocols.

Fingers crossed.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.