Businesses wanting to engage with the blockchain community need to understand its real ideals and drivers. Here they are.
Blockchain technology is a young, dynamic field, in which new developments and applications are constantly emerging. But another factor that is at least as exciting about this field is that the actors in this scene are driven by a multitude of ideals and principles, which constitutes a convincing ideology on the user side.
A closer look at this ideology is essential in order to trace the historical origins, but also to understand the ongoing discussions of the Blockchain Community. It also reveals an important area of tension juxtaposed with commercial economic interests, which are increasingly taking over the development of blockchain technology.
Publication of the Bitcoin Whitepaper — The Blockchain Story begins…
Even though there have been earlier theories and concept proposals, the history of the blockchain begins with the publication of the Bitcoin White Paper at the end of 2008, the publication of which must, in turn, also be viewed in a historical context.
2008 marked the beginning of the international financial and economic crisis, which began with the bankruptcy of US lender Lehman Brothers, and captured the entire global economy within the span of a few weeks. The ultimate cause was the US subprime crisis: too many banks, out of a short-term greed for profit, granted loans to financially-weak individuals that should never have been approved.
More and more loan repayments failed to materialize, until finally, the whole house of cards built up on credit finally began to collapse. The primary raison d’être of a central bank, such as the Federal Reserve — and namely the possibility of counteracting such a situation through effective interest rate and monetary policy — also failed to have any effect.
Apart from the personal tragedies caused by private bankruptcies, pension cuts and job losses, disillusionment and a clear sentiment also spread among the population:
The evil Wall Street banks and their greed for profit, as well as the Federal Reserve, are to blame for everything! They can (never again) be trusted!
Driven by disappointment, scepticism and despair, the search began in earnest for alternative, decentralized and less-to-non-manipulable possibilities to replace this obviously inefficient and disadvantaged, failing system. And it was precisely this massive need of the general population into which Bitcoin was able to market, and where it could establish itself over time as the promised miracle solution, even if this process took a long time.
For the first five to six years of its existence, from 2008 to 2013/2014, the blockchain scene was largely identical to the Bitcoin scene, since it had its origins in the latter. Even though the ideals in Satoshi Nakamoto’s white paper are hardly mentioned (yet still shine through, at times), the Blockchain Community was, and still is, driven by some core ideals.
They are, in particular order (and expressed as viewed by the community)…
Decentralization: the supreme and most important principle is, and remains, decentralization. Central intermediaries, such as the so-called “central bank”, are the cause of all the disadvantages experienced, such as high costs, manipulability and concentration of power. In general, a centralized solution exists only because it is the only way to solve the problem of double spending, and it has been the only conceivable way to manage a currency. Because of all these disadvantages, then, the highest possible degree of decentralization is desirable for each ecosystem. Transactions should be able to take place on a directly peer-to-peer basis between people.
Freedom of censorship: within a system, a central or dominant player has the possibility to determine which data or information is accessible, and which is not. One thinks of autocracies like China or Turkey, where numerous web services are censored or deactivated, and access to various websites is banned. In a monetary system, it is conceivable that actors are excluded from participation. Decentralized systems are something to be aimed for, in which everyone can participate and no one has so much influence as to be able to censor or limit access for others.
Democratization: in centralized systems, decision-making is placed in the hands of a few people, who then decide on key aspects affecting the lives of a large group of people who are largely (or completely) excluded from participation. If centralized decision-making can no longer be justified with the argument of increased efficiency, then the greatest possible participation of stakeholders is preferable. Systems should therefore be designed in such a way that everyone interested and/or concerned can join and participate with appropriate weighting in the decision-making process.
By means of blockchain, decentralized, anonymous votes can be held quickly, cost-effectively, and without manipulation, because they are traceable for everyone.
Anonymity: somewhat separate (and yet linked) to the centralization of systems, there is a need for participants to disclose and prove their identity to the intermediary. In the ideal-typical scenario of the monetary and banking system, this is also provided for in a legally binding manner by AML and KYC provisions. However, central players cannot be trusted, and anonymous participants can be difficult to censor. Therefore, democratic participation in decentralized systems is ideal and desirable. It should not be possible for outsiders to track or reconstruct between which persons transactions have taken place.
Freedom of trust/Trustlessness: built on the basic assumption that individual actors, especially profit-oriented organizations and authorities, generally cannot be trusted, systems should be constructed — or transactions should take place — in such a way that other parties do not have to be trusted. Ideally, a system can be designed in which all transactions are open to everyone, so that actors need not be trusted, since everything is transparent and unchangeable. “Don’t trust the party, trust the protocol.”
Immutability: Data on transactions should be recorded or stored in such a way that this data is unalterable. This works to serve several principles, but primarily provides users with security for two reasons: for one, this makes subsequent manipulation by participating parties impossible, and additionally, it also rules out malicious manipulation by outside parties.
Transparency: all transactions taking place in the ecosystem should be documented publicly, and in a way that is comprehensible for everyone. Thus, there is no information advantage for any actors, and any attempted manipulation of entries can be traced, which should then make it possible to exclude them.
Ideals Remain the Core Drivers of the Community
These ideals are, and remain at, the heart of the Blockchain Community. They are the driving force for users to promote the use of the technology. It is a means to an end for them to know that these ideals have been implemented in the best possible way.
Yes, even if one could get the impression that it is greed and speculation that dominates the scene. However, these phenomena are to be limited exclusively to the area of cryptocurrencies. Remember that cryptocurrencies are just one of the countless applications of blockchain technology — which is why I advocate for the educating of oneself on blockchain use cases outside of cryptocurrencies.
Business Interests Conflict With Community Ideals
Of course, a large number of projects and startups have launched in the blockchain area over the past few years, and practically all of them have a profit motive. In principle, there are no objections to this — and from a commercial point of view, this is also the most promising way of stimulating and promoting technological progress, as well as further development in the interests of society.
However, all of these projects must always respect the ideals of the community, and may only violate them to a limited extent. The more these ideals can be met, the higher the acceptance by the community can be expected. Of course, it should certainly not be ignored that many implementations will be done in-house, or just within the B2B area, where the ideals of the community can be neglected.
Nevertheless, the most exciting dynamic within the community is that more and more businessmen and pragmatic entrepreneurs are now joining in, largely ignoring the principles and ideals, and wanting to use the promising technology exclusively to satisfy their economic interests.
Will Ideology or Profit-Orientation Prevail?
It is this tension and interplay that will be incredibly interesting to follow, in the coming months and years. Surely it is also a matter of definition, whether one wants to ask if one of these two sides is going to “win”? Will that be a “win” for anyone? Or shouldn’t we, rather, wish for a “win” for both ideals and implementations?
Ever-more increasingly, it looks as if the economic interests of existing technology and industry giants will benefit and dominate…