For today's post I’ll do something a bit different. Mrs. Non-Fungible Thoughts, my main reader and commenter, has asked me to dive into the crypto landscape after my post on Bitcoin. So today I thought I would take some time to dive into blockchains, what they are and why I find them interesting. This will most likely be a series of posts as I outline a map of the crypto landscape. One thing I will stress here is that crypto is actually a larger topic than any one person could ever hope to cover. I will also stress that I will only be drawing the map as I see it. You should never mistake the map for the terrain. Cartographers are known to fill in the blanks with their own imaginations. Whatever I describe, I can assure you that crypto is broader, weirder and more fascinating than I can cover in a short series of blog posts. I will also get things wrong, but I will try to get things broadly right.
With those comments out of the way, lets talk about truth, falsehoods, and blockchains.
How old were you when you realized that the stuff you read on the internet could be false or untrue? I don't remember an exact time. But I do remember being in middle school and chasing down links on the internet trying to figure out what was the source of a particular quote or get the original source for an idea. I think for anyone older than that, it quickly becomes obvious that not everything you see on the internet is true.
The internet is permissionless, anyone can post whatever they want. In addition, computers are very powerful nowadays. With some skills, anyone can make a deepfake image of a politician or celebrity. With generative AI, you can make realistic (but completely fake) videos of puppies playing in snow, waves crashing on a coastline, people walking the streets of tokyo, etc.
The internet is awash with entertaining falsehoods. Everywhere and all the time...except…for one small but rapidly growing niche of the internet. There is a place on the internet where what is true is known and verifiable. Where you can check and be certain that this item belongs to this person, this person indeed said this quote, and that this person created this thing. It is a weird and strange part of the internet, which is quite unlike anything else you might have become familiar with. This niche area of the internet is the part governed by blockchains.
What is a blockchain? There is of course a technical description. But this description is a bit boring and unhelpful for understanding why blockchains are interesting. The fascinating thing about blockchains is that they are Truth Machines.
How do you decide if something you see on the internet is true? You might look to see if it was published by an authority figure. You might poll your friends and see how many of them think it is true. You might check the comments section for disagreement, arguments, or counterpoints. You might see how much work someone put into publishing it. You might try to understand the incentives of the poster and see if they are incentivized to publish something false or something true. In essence you run a type of unconscious truth algorithm.
Blockchains make these unconscious truth algorithms explicit and conscious. Every blockchain is governed by a truth algorithm (although you'll typically see websites use the term "consensus algorithm" instead). And the people actually working on blockchain infrastructure are obsessed with how to determine what is true and what is false in a world where anyone can say anything. There are different types of blockchains run with different types of truth algorithms. I'll outline a few common ones here.
Proof-of-Authority (PoA) chains rely on a set of trusted parties to publish information to the network. Similar to how you might believe an article if it is published by your favorite news source. However, similar to news networks (think MSNBC vs FOX News), not everyone trusts every news network, so these blockchains are limited in use. You really only find them in private use cases. They are mostly uninteresting as they don't scale beyond a few entities in tight agreement of who to trust with authority.
Proof-of-Work (PoW) is the original formulation of a blockchain truth algorithm. Many older blockchains like Bitcoin and dogecoin run on PoW. In PoW, the group that works the hardest to post data gets to decide what is true. By way of analogy, it is similar to a formalized edit war you might see on wikipedia. The person willing to spend the most energy correcting the page to their "truth" will win. The page (chain) with the most edits (blocks) is considered the one which is most "true". PoW blockchains are interesting, as they can establish a "universal" truth without a trusted authority. However, similar to edit wars, they economically and energy inefficient. The more popular the blockchain becomes and the more value is stored on it the more energy must be expended to make sustainable edits to the blockchain. The "truth" can also never be considered finalized, as someone can come along and do more work to overwrite the previous truth (chain reorg) with what is called a 51% attack.
Proof-of-Stake (PoS) is a popular type of truth algorithm for newer blockchains. In PoS, in order to propose an edit (block) to the historical record (blockchain), proposers must put up economic collateral (stake). If they are found to have violated the rules of editing the historical record by other participants who have also put up stake (validators), the economic stake put up by the proposer can be destroyed (slashed). If the edit (Block) proposed by the proposer is found to be "truthful" by the validators, the edit (Block) is formally added to the historical record (blockchain) and finalized. To use an analogy, this is similar to scientific publications. In a scientific publication the author of a scientific article (the proposer) will submit it to a journal (chain), the journal will distribute the article to a group of peer-reviewers (validators), who will check its scientific merit. If the article is deemed to have merit (is a valid block), it will be published in the journal (added to the blockchain). The main difference is that in scientific journals, authors and reviewers stake their reputations as scientists instead of something with direct economic value.
PoS is more efficient than PoW, so many newer blockchains start with a PoS model. The "truth" can also be assured to be “finalized” after a supermajority of the network of validators signs off on the block. Ethereum was a PoW blockchain which switched to PoS to become more economically and energy efficient. The hazards of PoS chains (similar to scientific journals) is that the quality of the chain (journal) is highly dependent on the quality of the validators (peer-reviewers). A chain with many different validators putting up large amounts of stake can be considered more trustworthy than a chain with a few validators of a similar background who are not required to put capital at risk. Especially with newer PoS chains, capital can be highly concentrated in a few early adopters and investors. In worst case, they basically revert to PoA chains.
As you can see, a core component of what defines a blockchain is how it comes to determine the “truth”. If you understand this, many of the quirky things about crypto culture make more sense.
The almost religious zeal some crypto participants have for their favorite blockchain (their source of “truth”).
The tribal nature of crypto networks and why different blockchains cannot easily talk to one another or to the outside world (incongruence between my “truth” and your “truth”).
Why cypto natives want to put literally everything on their preferred blockchain (align the world to their "truth").
When you recognize that a blockchain is primarily a digital record of accepted truths, all sorts of weird and fantastical things start to look possible. Non-state digital money, digital property rights, digital identity, verifiable online governance and voting, and decentralized finance. Even verifiability of AI created content and verifiable video/photos of politicians and celebrities are considered target use cases for blockchains.
You can also start to understand why people believe blockchains have value. Blockchains provide a truth and verification service. Similar to a notary. If you submit something to a blockchain (a transfer of value, an art creation, a message) the blockchain can take it in and spit out a verified record of it for all the world to see. How much would you pay to have an action be certified as true? For some people the answer is "alot".
This also affects why certain blockchains are more valuable than others. At a very high level, the blockchains that are considered the most trustworthy, the most likely to publish the truth by their users, have the most value. High value blockchain's like Bitcoin and Ethereum are considered to be extremely secure, decentralized, and "truthful" about the records posted on them.
There are many other things to learn and understand about crypto and blockchains, but the idea that blockchains are truth machines is one of the most important to understand and internalize. Remember this as we go forward in exploring the sometimes weird, sometimes crazy, always interesting, crypto landscape in future posts.
