Blockchain is proclaimed as the future during the months of the bull run.
As long as you laid your hands on any popular ICOs, your return of the investments can be doubled or even tripled when the token is listed on an exchange. Suddenly, we became venture capitalists, being able to utilized tokens on hand provided opportunities to rethink whether conventional industries are the solution to money making. Would you like to invest in decentralized Facebook? Or decentralized Youtube? Or the new blockchain as a combination of AI and Internet of Things (Who knows what that even means)? With cryptocurrency prices climbed crazily, our hearts soaked in the sense of superiority and happiness. Cryptocurrency made us the new bourgeoisie. Who needs to explore traditional investment instruments. We became early adopters of a new financial technology, the first 15% of population to accept this new technology, giving it a trend to the whole economy.
Then the market collapsed to a new low.
This year, the crypto market went in to a deep recession. Doubts and speculation surrounded cryptocurrency and ICOs instead of the fanatical support. People commented with absolute certainty that blockchain is a bubble. And the slump of crypto market to some extend provides the evidence, proving that this technology lacks of concrete foundation. Limitations of blockchain technology also has been scrutinized, from scalability of the blockchain network, current regulations against cryptocurrency, to the gap between crypto usage and habits of the public. People suddenly realized blockchain is still miles away from the comprehensive real world application. Now, take a step back and think carefully, we do not even have a proper definition of blockchain. These problems always seem minute when the only thing we focus about is how to make money from trading cryptocurrency.
We should rethink this question: Is blockchain really a bubble?
Is Blockchain a Bubble?
If a bubble means the drop of cryptocurrency price, to be honest, I am not particularly worried. We experienced a recent burst of bubble,however viewing it from a long-term perspective, the fluctuation of virtual currency price always happen periodically. Every time when the bubble burst, scam projects will be eradicated. Projects that truly generate solutions to current problems, having a supportive community, and embracing the spirit of decentralization may survive after the bubble popped. Year after year, we witnessed the crypto world hyped around various topics. The earlier ones were focused on mining equipments, altcoins, and smart contract platforms. Where the recent ones focused on scalability, IoT (Internet of Things), and security tokens. The extravagant publicity over these topics simultaneously pushed up the price of tokens issued by relating projects. Although these topics are hot, they may be bubbles in the future. The history has educated us, that wave of technology innovation will thrive in a shattered form whenever the bubble burst, every time. Once we focus on core values of blockchain, even the road is bumpy, the efforts we made would eventually pay back.
You probably would say, if I believed that the market value would peaked again after the bubble popped, this may just be nothing but a belief. The nature of this so-called bubble, should be as hollow as Tulip Mania (Dutch: tulpenmanie). When these bubbles burst, there is no chance for the market to recover. Would it be, that I am being a fanatic, and everything I trust is erroneous? Would it be, that blockchain is not needed for the world?
As a long-term holder of Ether and an employee in crypto industry, without doubt, I believed in blockchain. I trust that the technology can eliminate the hindrance between human’s value transfer, recreating a trust-worthy internet on which the society can rely. The smart contract platform of Ethereum is the best laboratory. This brand-new developer space attracts enormous creativity for development. With this creativity, we can build a freer and more open financial system together.
Yet what if I am wrong? If the blockchain I believed in fails?
Perhaps the technology of Ethereum cannot fulfill our aspiration, and the critical element we need is a completely different smart contract blockchain.
Perhaps the concept of smart contracts is eventually proved as unachievable. That we fail to design a trustless information resource, leading smart contracts to become meaningless. Only the blockchain network which focuses on store of value like bitcoin is correct, not a fancy smart contract platform.
Perhaps in the future, the term blockchain disappears. We have designed a technology different from blockchain, but offers everything better than what blockchain promises. Maybe what we need is not blockchain after all.
This thought experiment can continuously develop, overturning all my expectations towards blockchain. But there’s one thing that grows more certain as I reflected upon myself. That is, the development of technology is not random, but following a specific path. Blockchain is undoubtedly on the path of technology innovation. Blockchain, is the inevitable of technology development.
The so-called inevitable means that no matter what we do, a particular type of technology innovation will irresistibly be created. Even if the tech is not named as blockchain, people will invent “some technology”. The innovation will break through limitations and boundaries, being handed over to humans, entering into a new civilization in the end.
My thoughts over technology innovation derives from The Inevitable, written by the technology philosopher Kevin Kelly. “Though we can never know the exact pathway of technology development, there are certain paths on which it follows.” Kelly states in his piece. The emergence of internet is inevitable, yet not the phenomenon of people tweeting every 5 minutes. Among the five important directions of technology development, one is regarding to the right to use. People gradually value more about the right to use, instead of the right of possession. We want the right to use, but not willing to make efforts on possession and maintenance. As a result, cloud service is invented. Datas are stored on the cloud, only being retrieved when we need them. In the context of money and value exchange, we also need a shared, not exclusive ledger as a medium of data storage. Which is, the reason of the emergence of blockchain.
I agree that blockchain (or bank) can help us to get rid of the notion of the right of possession. Yet I prefer to look at blockchain from different angles. The reason why I consider blockchain as the inevitable of technology simply is: Blockchain is a more efficient method. Being a more efficient method, is the inevitable of technology innovation.
In Homo Deus: A Brief History of Tomorrow, the author Yuval Noah Harari has an exceptional argument regarding what is a more efficient method. He argued that, what makes capitalism overpowers communism around the globe is the efficiency of capitalism as a social structure. Not because of moral and ethical reasons, the sacredness of individual liberty, nor the arrival of God’s wrath on communists, but the lack of efficiency of a centralized government implemented in communist state. Communism artificially controls the market price through centralized means, resulting in its relative inefficiency comparing to the free market mechanism of capitalism. Communism, as a social structure, resembles a centralized system. It congregates the greatest talents yet still fails to manage a large scale of complex market information. On complicated economic issue, centralized system struggles to make the right decisions, whereas the cost of making mistakes is extremely high. In contrast, capitalism is more of a decentralized system. Its free market mechanisms automatically derive market prices. Not only is it more efficient, it also mitigate the likelihood for capitalistic economy of making mistakes.
Harari enlightens us, that socio-economic structure appears to be irrelative to technology, yet it can be deciphered from a technological perspective. In fact, we have already been used to observing the world from the technological perspective. We are confident that if there’s anything wrong, it can all be fixed by technology. Harari defines this mindset as dataism. The followers of dataism believes that datas forms the world, and every phenomena can be explained by algorithm. For dataism, decentralized means is more efficient than centralized one. Looking back, technology innovation follows this path. Technology shifts the world from centralization to decentralization, from top-down to bottom-up.
The information we absorbed every day is generated in a decentralized form. Before the advent of internet, merely a few medias held the power to publish contents, and the information produced is limited. But now with internet, everyone can freely receive and publish information. People are now granted the power to control over datas. Soon, we have numerous websites, posts, and clips that we could never finish viewing. Undoubtedly, the amount of unimportant datas has increased when the power to control over datas is distributed to everyone. Yet simultaneously, valuable information has become more than it ever was.. In terms of generating information, the new model is certainly more efficient.
At this moment, do we need “some technology” to grant everyone the right to control their assets? What will happen if everyone can freely send, receive, and manage their digital assets? 20 years ago, it would have been difficult to picture this age of bombarded information, and hard to imagine the reformation of financial market by a new technological force. Yet now we can predict, that the market will always become more efficient. In crypto world, we describe this kind of technology as “decentralization”. However, the concept of being distributed is a technological trend appeared before the existence of blockchain. Technology innovation continuously repeat the same pattern. Which is, through the distribution of originally centralized power, improving the overall efficiency of systems.
Blockchain as a Relatively Efficient System
It’s a bit unusual to think of the term “efficient” when speaking of blockchain, since its inefficiency is the most criticized feature of the technology. Comparing to centralized server, bitcoin network, as an example, consumes lots of electricity to mine and to maintain its operation. Any centralized server merely has to consume a small amount of electricity to manage a large number of transactions. In terms of processing efficiency, centralized server definitely outshines blockchain. Yet this standard of comparison is inaccurate. A value exchange primarily needs people’s trust to attract usage. We should not measure how many transactions your system can transfer, but examine whether you can provide the trust to people who needs to transfer large amounts of assets. If no one wants to use your value exchange system, it has no value.
Similar to communism, a centralized government sure can make a decision rapidly, but the decision made is not necessarily the best one. Hence in the competition of setting market price, due to its inefficiency, communism eventually was defeated by the distributed capitalism. Likewise, the transfer system you built with a centralized server seems to be very effective, but you cannot convince anyone to use it for cross-border transfers. In other words, your system does not generate trust. If you want to win my trust in a centralized means, you have to invest more effort. You, the endorsement of a credible organization, more backup mechanisms, and a security system to secure your product. The cost is far greater than you imagine. But if you tell me your system is decentralized, maintained by many characters such as unable to control the money flow by yourself, it will be easier for me to believe in it. Therefore, a decentralized system generates more trust. Though we do not possess an appropriate scale to measure the level of trust or to compare the trust provided by two systems respectively. What we can learn, is that building trust through a traditional centralized means is extremely pricy.
Blockchain generates trust more efficiently, because it distributes the power of recording transactions, sending assets, and receiving assets.
Years after, if blockchain do win in this kind of technology race and becomes the cornerstone of the new financial system, the reason of its winning will be how noble the decentralized ideal is, or the bank is too sinful to exist. But a financial system which distribute power to every user, is fundamentally more efficient.
When cryptocurrency price dropped, greediness and blindness shatters simultaneously, but not the confidence in technology development. Every blockchain project that I knew could possibly fail, yet the decentralized FinTech would undergo a rebirth. Currently, blockchain can’t be comprehensively adopted because it faces various problems in terms of technology limitation, regulations and public recognition. Before the settlements to these problems, the future of blockchain is still vague. However, if blockchain is on the inevitable path of technology innovation, no one can stop it from further development.
The relationship between blockchain and open source is closely linked. Concepts of being public and transparent is the basic of earning trust. The color of financial sector offers new incentives to make the open source project relied on enthusiasm more attractive. The key to rapid technology innovation is more R&D talents dedicates themselves to the innovation. Blockchain does face the technological difficulties such as scalability, cross-chain, and privacy. But we have also learned from past experiences of data storage, cryptography and peer-to-peer transaction to resolve these problems. Just like every growing technology, once the development path is blocked, blockchain will find a new way itself and move forward.
Governmental unfriendliness towards blockchain is not an issue either. Regulations can’t truly restrict people from using decentralized technology, but adapting itself as technology when it enters daily life. A long time ago, the only source of information was traditional media, government could ask all information to be reviewed before publishing. However, after the advent of internet, everyone can publish comments online and the method to regulate becomes reviewing after publishing. Unless you post on the internet that you will place a bomb in the subway, or the government has no right to interfere your speech. I am optimistic that in the foreseeable future, regulations will continue to loosen and these restrictions will be focus on avoiding serious financial crimes.
As for the ease of using blockchain, it is not a concern as all technology has a level of difficulty in usage. Once the technology continues to develop, the market mechanism will naturally attract businesses to lower the threshold of usage, making blockchain easier to use. Like the emergence of Apple brought personal laptops and smartphones to mass market, the maturity of basic technology would encourage businesses to create products which were simpler to use. Users need time to change their habits, like people spent years to learn to use mobiles. Now, we also need time to learn how to utilize blockchain as a new tool to manage assets.
Believing in the inevitable of technology doesn’t indicate that we can stand aside, waiting the technology to grow by itself. It is a reinforcement of our confidence in solving the problems. Because we know, we are on the correct path of technology innovation.
Article by Pei, JOYSO