Dazzled by Bitcoin
Bitcoin grabs the headlines but look at the smart money. They are pouring into Blockchain – the underlying technology – and calling it the next Internet. Yeah, the Internet, how well did that really work out for us?
At one point we all thought the Internet was going to be an unalloyed good, a new utopia. No more dependence on monopoly telephone companies, or monopoly news, or monopoly broadcasters. It would free us from the shackles of big banks and big government while spreading knowledge and goodness planet-wide.
Instead we got Facebook with trolls, fake news and the Russians meddling in our elections. We got Google who got caught by the EU using its secret algorithms to crush competition. We got Amazon who seems determined to monopolize everything. And, not to mention that all of them know way more about you than your mother does. Speaking of private information, don’t forget we also got the likes of Equifax that not only loses all your private information to likely thieves and extortionists but also denies you a loan and maybe a job without recourse. Sounds more like a Dystopia.
Now here we are again. Just as the centralization and monopolization of the Internet has become apparent, just as the love affair with Silicon Valley sours, comes a technological savior – Blockchain.
Blockchain emerged when Bitcoin was established in 2009, in a paper by the mysterious and still unidentified “Satoshi Nakamoto”. He offered a way to assure secure transactions that transferred value (think money) between parties without a trusted intermediary like banks, governments, etc. Many speculate that this was a direct reaction to the loss of credibility most institutions suffered as the result of the financial crisis in 2008, a staggering failure of big banks and big government.
Be that as it may, the paper brilliantly described an underlying cryptographic technique we call Blockchain. By 2013, more brilliant people, notably Vitalik Buterin of Ethereum, built upon this concept to expand it to all kinds of transactions beyond exchanging payments. Consider all the non-financial situations in your life today that require you to place your trust (and your information) in the hands of third parties. What if you did not really need them anymore? Are we saved or could this be déjà vu?
In 2010, just between the rise of Bitcoin and the broader vision of what Blockchain could do (and years before we began to see the Internet dystopia emerging), Tim Wu authored: “The Master Switch”. Wu describes the repeated rise of information technologies from entrepreneurial and hobbyist roots to eventual maturation into centralized, monopolistic entities. He calls this repeating play the Cycle.
Over and over the Cycle repeats itself in information industries: Telephony, Radio, Journalism, Film, and Television/Cable. He seems prophetic because now we find ourselves in a similar situation with the Internet. What to do? Self choose to limit usage like one of the founders of Facebook forbids his children to use it. Or, perhaps we need new regulation as we did in 1933 to rein in Ma Bell and as the EU increasingly contemplates with Google.
Don’t think it couldn’t happen again due to the very nature of Blockchain with its widely distributed “miners” needed to actually create and maintain the ledger? Here’s some speculation based on my admittedly layman’s understanding. Miners are voracious consumers of electricity in support of their ever-larger server farms. We are talking about a staggering amount of power, in fact Cryptocurrency mining in Iceland is using so much energy, the electricity may run out.
Guess who already run the world’s most datacenters and are the most energy efficient? Yep, it’s Facebook, Amazon and Google. Monopolies love to perpetuate themselves. Imagine that any or all of them see Blockchain as a threat (which it is). Imagine them marshaling their scale and expertise to outcompete most other miners.
Here’s the good news. It took forty years for the bloom to come off the Internet rose. During that time a lot of money was made and a lot of new and exciting developments did emerge. Blockchain is just getting started. There will be lots of opportunity. So, the future will be decentralized – until it isn’t.
By John Pientka