Editor’s note: Orange Silicon Valley’s next Hello Wednesday event on May 5 will discuss ways that blockchains are being used to build trust in business and society. We hope to see you there.
The Bitcoin whitepaper authored pseudonymously under the name Satoshi Nakomoto was posted to the Cryptography Mailing List on October 31, 2008. The network the whitepaper envisioned started up shortly thereafter, on January 3, 2009. It has been creating blocks ever since, while along the way sparking global debates and inspiring use cases for the underlying technology that reimagine marketplaces and inspire new forms of cooperation among individuals, businesses, and organizations.
The Bitcoin design solved a problem that had stumped computer scientists for years – how to design a digital currency that did not rely on a central server, while ensuring that only the legitimate owner of a unit of currency could spend it, and that they could spend it only once. The resulting solution has come to be known as a blockchain, and a currency on a blockchain is termed a cryptocurrency.
For Bitcoin, the currency itself is the product and raison d’être. Other creators were inspired by Bitcoin to use blockchain technology to realize different ambitious ideas. In 2013, the Ethereum team had a vision to implement a “world computer” where programs could be made to run on a blockchain. The Ethereum blockchain, which launched in 2015, implements the Ether cryptocurrency, but the primary purpose of the network is to enable programmers to build and run smart contracts. That project owns the second highest cryptocurrency token market capitalization after Bitcoin.
In the years since, blockchain technology has been used to create decentralized networks for many purposes including file storage, cloud computing and IoT connectivity. There has also been a flourishing of ideas in the design of the blockchain networks themselves. Bitcoin and Ethereum were designed using Proof-of-Work, an ingenious way to align incentives by imposing a cost on the block generators (miners) that validate and include new transitions. The security of the blockchain depends on the miners who have acquired hardware and consume electricity as they compete to be the next block producer. More recent designs have replaced miners with validators that stake currency so that they are allowed to be included in the block validation process. Some designs have innovated by encrypting transactions in a manner so that they can be validated – even as the parties and amount of the transaction remains secret. Other innovators have sought to lower costs, increase transaction throughput, and shorten the time to finality (the point at which all parties agree a transaction is irreversibly completed). The academics, engineers, and product designers in the field are all innovating at a fast pace.
Yet, much of what the general public hears about blockchains and cryptocurrency is tinged with negativity. Detractors point out that the amount of energy consumed by Bitcoin miners is comparable to the electric use of a moderately sized nation. Governments point to the use of cryptocurrency is associated with ransomware and other illegal activity. The media report about the hype associated with cryptocurrency investing – or more recently the amazement as NFTs began selling for as much as $69 million.
In truth, there is a lot of hype in the industry. But there is also a lot of hard work required. NFTs are not new; people have spent years defining the standards, creating infrastructure, and developing marketplaces that led to their “overnight” success. During the same time, other serious and focused companies and organizations have been building technologies to increase trust and transparency, protect privacy, create efficient marketplaces, and otherwise provide people and businesses with the digital tools for a responsible and sustainable future. Some of the most important work can be seen in the areas of self-sovereign identity, clean energy markets, carbon credits, food certification and safety, and supply chain tracking.
If you are interested in these topics and more, consider attending our next Hello Wednesday event, where a panel of experts will delve into some of these designs for products and services. We will discuss the laudable missions and purposes of the organizations and explore how blockchain technology helps them achieve these goals.