The emergence of the cryptocurrency Bitcoin late in the last decade, fired the imaginations of many who want to break free from centralized authority. They see cryptocurrencies as an enabler for a world where corrupt governments and evil corporations no longer control the agenda, a world where individuals, people, can interact with other individuals without the “man” taking a cut, or withholding permission. This is not a delusional position, the New York Times published an interesting article last April (2015) on the use of Bitcoin in Argentina in which they describe how individual money changers were swapping US Dollars for Bitcoin to circumvent currency exchange controls. This narrative, focused around the reinvention of money for the betterment of the common man, may, or may not, be true, but it is entertaining, and it catches people’s attention. The problem is that it focuses on the money, and misses the real revolution enabled by the blockchains that support cryptocurrencies.
A blockchain is a Secure Distributed Transactional Database, on its own, the technology is revolutionary enough to keep a generation of Computer Science graduate students busy churning out papers, and, the occasional thesis. The integration of the idea of a cryptocurrency into the mix creates something never seen before: Publicly accessible distributed computer infrastructure supported by an integrated economic model. That is what almost everyone is missing. The infrastructure supports the maintenance of a ledger for cryptocurrency transactions (and other things), while the cryptocurrency serves as the motivation to participate in the peer-to-peer network that supports the infrastructure; it is a kind of “cyber-symbiotic” relationship, one can’t survive without the other. It is this self supporting distributed infrastructure, as embodied by the peer-to-peer network, that is the real game changer; it is new, money is not.
Where does this all lead?
The computer infrastructure that supports a blockchain extends the technology trend started with the invention of cloud computing. This is the idea that you could use someone else’s infrastructure for your own purposes. Blockchains unleashes this idea from the data centers of the world, and create the possibility of disruptive innovation that is otherwise impossible or doesn’t make economic sense, or both. The peer-to-peer network maintaining a blockchain has the potential to scale to many millions of devices, and potentially many more beyond that. Whereas a large data center has on the order of ten thousand machines; the potential computational power available through blockchain technology is orders of magnitude greater than the potential of that contained in data centers, even when the data center computers are much more powerful, there just aren’t enough of them. The cost of leveraging that power is likely to be much less than that of data center based computation. The potential for the peer-to-peer network to grow is not constrained by the physical confines of a data center, so the supply of computer power is also not so constrained; market forces should work to keep prices low.
I’ve been careful to avoid mentioning specific Blockchain technologies, Bitcoin and Ethereum, in particular. It’s not that they aren’t interesting, disruptive, and important, they are all of that, but because these are early days for the technology, and the particular instance doesn’t really matter, not in the long run anyway. The key disruption is the innovation of having publicly accessible distributed computer infrastructure be support by an integrated economic model. It’s not really clear that any of the current implementations of that concept embody best practice in this regard, given their immaturity, they likely don’t. This is good news for CS graduate students.