Thoughts on Blockchain
I think blockchain is a technology that, for the first time, made practical the exchange of trustworthy information in an open environment where there is no reason for participants to trust one another and where even the list of participants cannot be known in advance. For now it is used mainly as a tool for speculation and fraud, but it is a technology with potentially great value.
My Interest in Blockchain
For one reason or another, I had been mildly interested in it. Some indirect reasons:
- 2000, 2001: I once participated in a project to encrypt confidential documents. Thanks to that, I studied the very basics of cryptography. Of course, I lacked far too much of the necessary background knowledge, such as number theory, to understand it deeply, so I only studied enough to be able to pick up existing algorithms and use them appropriately for my purposes.
- 1999, 2000: As P2P technology became popular(Napster, Soribada, SETI@Home), I too studied the related technology and indulged in various grand(?) imaginings. I remember thinking at the time about how to solve the peer discovery problem better than others, but not finding any particularly good method.
- 2001: I designed and developed a micro-payment solution for electronic money. The method was to charge a fixed amount in the form of points and then spend it in units of 1 won. I remember being filled with anticipation, imagining a world where charging or remittance could be done with one click and no transaction fees, without depending on banks or card companies. Of course, since there was a central server, unlike Bitcoin, it was not technically a special project.
In 2008, the Bitcoin white paper(Bitcoin: A Peer-to-Peer Electronic Cash System) was published, but I knew nothing about it at all. I had heard here and there that there was something called Bitcoin, but I did not know any specifics and was not very interested.
Much later, I got a direct reason: in 2022, a company where I was working became deeply involved in the blockchain business, so I began studying it. I read the Bitcoin white paper (it was surprisingly short), studied Ethereum, and read various writings by Vitalik Buterin. I did not understand everything deeply, but thanks to the indirect reasons mentioned earlier (cryptography, P2P, electronic-money micro-payments), I was able to understand the broad outline.
The Value of Blockchain
So many people are committing fraud that notoriety, resentment, and theories of blockchain’s uselessness keep piling up, but I think blockchain is clearly a technology that has created a new kind of value that did not exist before.
The essential value of blockchain is that it enables trustworthy information exchange among entities that have no reason to trust one another (hereafter trustless information exchange), and the core technical element that made this possible is the consensus mechanism.
Strictly speaking, blockchain did not first raise the problem of trustless information exchange itself. The problem of consensus among participants mixed with traitors had already been formalized as the Byzantine Generals Problem(1982), and the practical solution PBFT appeared in 1999. In cryptography as well, public key infrastructure and digital signatures had long dealt with the problem of authentication between parties who do not know each other. Even the proof of work that Nakamoto directly cited in the white paper was taken from 1997 Hashcash.
What is novel about blockchain is that it moved this problem into an open environment where the list of participants does not have to be fixed in advance, and suppressed the Sybil attack, in which anyone can create identities without limit, through economic cost. Existing Byzantine fault-tolerant consensus assumed “you know who the participants are,” so removing that assumption is the decisive difference. The reason I criticize proof of authority below is the same point. If you fix the participants to specific companies, you are giving up this novelty from the outset.
I once read an article on the internet claiming that git is a blockchain because it is a bundle of connected commits, uses a Merkle-tree structure to guarantee integrity, and has no centralized server, but this claim is wrong because git lacks a consensus mechanism and does not support trustless information exchange. Git and blockchain merely share some of the same technical elements.
Misuse of Blockchain
Using blockchain in situations where trustless information exchange is not needed is a misuse of the technology.
I think many people see no value in blockchain because a considerable number of blockchain applications are used in places that do not require trustless information exchange.
I believe the reason there is so much misuse of blockchain is not that people do not know any better, but that they knowingly lie in order to make money. There are far too many smart people in the “coin scene” who have studied the subject quite a lot for this to be chalked up to ignorance. By “coin scene” here, I mean people who do business with coins or blockchain.
Calling Things Blockchain When They Are Not
It is a problem not only to misuse blockchain where it is not needed, but also to call things blockchain when they are not.
For example, a system that adopts proof of authority (PoA) as its consensus mechanism significantly damages the essence of blockchain. The proof-of-authority method gives up the anonymity of validation nodes and explicitly states that the entities operating the validation nodes are specific offline companies or individuals, appealing in effect, “Would a company this famous and large commit fraud?” If you are going to depend on trust accumulated offline and on legal contracts in the first place, then why use blockchain at all?
Moreover, in the cases I encountered, while using the proof-of-authority method, all validation nodes were operated/managed by a single company. At that point, I do not think it can be called blockchain anymore. What this system has implemented is not a distributed consensus mechanism but merely a distributed fee-collection mechanism among participating companies.
A private-chain type of system adopting PoA might, if one really wanted to speak favorably, be regarded as something like “a different kind of distributed ledger technology,” but I do not think the design of the company in question leaves much room for charitable interpretation.
Outlook
I believe that only when the number of people trying to commit fraud with blockchain, or treating coins as a means of speculation, decreases far more than it has now, will the value of blockchain finally be properly recognized. I believe even the much-talked-about and much-troubled NFT has a clear value (a trustless guarantee of conceptual scarcity). I just think that fraudsters are actively damaging that value.