Blockchains, The New Frontier of Computing

I like to think of a blockchain as a virtual computer with cryptographic and game-theoretic properties that allow a decentralized community to collectively contribute to the computer’s software. Different from older computers like mainframes, personal computers, and smartphones, blockchains’ open-source and self-policing software guarantees that its code will continue to run as designed without relying on a centralized corporation like Amazon Web Services.

Bitcoin: An Application-Specific Blockchain Computer

In 2008, the Bitcoin White Paper was published by Satoshi Nakamoto. Bitcoin is the simplest possible blockchain computer. Its whole stack is optimized for just one application – to be a global store of value, similar to how a Fitbit is made for just tracking exercise. Bitcoin’s decentralized and collectively owned software guarantees that there will only ever be 21 million Bitcoins, there can’t be double-spending, and users can have genuine ownership of their Bitcoin. These guarantees make Bitcoin valuable like precious metals that are scarce in the natural world and perhaps even more credible than fiat money as governments can lower interest rates. Bitcoin was just the beginning, soon other people came along and realized that blockchain computers could guarantee more things than just money and transactions.

Ethereum: A General Purpose Blockchain Computer

In 2013, the Ethereum White Paper was published by Vitalik Buterin. Ethereum is a more complex blockchain computer. It unlocks third-party developer creativity by supporting a general-purpose programming language – Solidity, similar to how the iPhone has a programming language – Swift, that lets developers build iOS apps. Ethereum’s decentralized and collectively owned software guarantees that the applications deployed on top of it are also decentralized, collectively owned, and can make guarantees. This lets applications built on Ethereum to be also open-source and self-policing like Bitcoin, executing correctly every time without the need for mediating authorities. Ali Yahya beautifully encapsulates Ethereum’s potential in one sentence, “for the first time, we have the ability to program trust.”

What Problems Do Blockchains Solve?

I believe that new computers like blockchains don’t need to immediately solve problems. In fact, most existing computers don’t directly solve problems either. Instead, they unlock new capabilities and enable a design space for application-level entrepreneurs to solve problems. When the iPhone was first released in 2007, it was incredibly expensive and slow. It had very few applications, but it came with a GPS and a camera. Over time, as more applications were built on top of the iPhone, its hardware got exponentially better, and so did its applications, kicking off a virtuous flywheel where new applications and the new computer reinforced each other. A few years later, in 2009, Travis Kalanick took advantage of the iPhone’s GPS and founded Uber for ride-hailing. In 2011, Evan Spiegel took advantage of the iPhone’s camera and founded Snapchat for photo sharing. The reality is that no computer by itself solves any problems. It takes a while for smart people to try things out and innovate. After all, innovation is a multi-step process.

I see a similar pattern playing out with blockchains, where there will be better user experience, usability, and scalability over time. I truly believe that blockchains have the potential to reshape the world as the internet did. If you’re like me and have always felt that you were born too late to get involved in the internet during its formative stages, this could be your opportunity.