Would you enter into a (transaction) relationship of value with someone whom you’ve never met, and therefore are unaware of the identity of the person and don’t trust the person? The answer to the question is probably no and, in some cases, certainly no. The cost of setting governance and legal structure is quite high to verify and validate such a transaction. One way to solve such a dynamic situation is to depend on third parties or trusted intermediaries to settle such transactions. And this does not come free, and one has to pay a hefty amount to complete the transaction. While web 1.0 revolutionised the information, the interactions have been transformed by web 2.0. Web 2.0 brought us social media and e-commerce platforms and facilitated peer-to-peer (P2P) interactions on a global scale by bringing producers and consumers of information, goods, and services closer in a participating network. But such interactions were constrained by the involvement of the middleman. The middleman, on behalf of the untrusted or unknown parties, was responsible for verifying and validating the transaction. The platforms governed by a middleman in the P2P networks impose several rules and protocols for the participants and have control over the data. We have evidence of digital high tech companies that have taken advantage of the “lack of trust” settlement layer to build their billion-dollar business models. Firms like Amazon, eBay, Airbnb, Uber are such offerings that have emerged due to the lack of a trustful native value-settlement layer in the business transactions.
The internet that we see today and use for varied purposes is broken. Neither we own or control the data, nor we have the native value settlement layer. Every time we interact with the peer over the Internet, copies of our data get sent to the server of the service providers. Today’s internet doesn’t have a native mechanism to transfer ‘state’ a key to managing values. The “state” helps us to identify and recognise the status of (1) who is who, (2) who owns what, (3) who is accountable for what, and (4) who has the right to do what. It is very evident that if one does not hold the value as “state” over the internet, then one does not transfer value without the involvement of centralised institutions acting as clearing entities. The exchange of information is seamless over the internet. However, due to the presence of stateless protocols, the sender or receiver of the information is entirely unaware of each other’s state.
The work of Satoshi Nakamoto in 2008 has redefined the relationship and transaction space, where participants can enter into the transaction relationship without the need for trusted intermediaries. Moreover, now it is possible to formally establish the relationships between people and organisations and the assets portfolio they own, entirely on the peer-to-peer network, without the need for trusted intermediaries. Bitcoin, a protocol and a (BTC) cryptocurrency, initially gained a lot of attention and fame due to its underlying technology – blockchain. There are more than 1700 cryptocurrencies in the world. As per the leading report, the total cumulative market capitalisation of the cryptocurrency is 587 billion USD and Bitcoin accounts for over 50 per cent of the total cryptocurrency market cap. The Bitcoin and similar blockchains propounded the mechanism to execute transactions of value, in a digitally native format, by storing and managing the states of the actors involved in the transaction over the p2p network without the involvement of the trusted intermediaries. The consensus mechanism of the blockchain technology helps the participating network to collectivelymanage, remember and control the past events and user interactions by providing the single source of reference, as “single truth”, for who holds and received what and when. Cryptography is an integral part of the blockchain consensus protocol. It maintains the privacy of the actors, securely manage the tokens in a network of untrusted actors, and provide transparency in the interactions. The technology thus solves the problem of “double-spending” and is now considered to be a game-changer. The actors in the participating network are incentivised with crypto-tokens for managing the universal state layer. For the first time in history, with the help of a unique settlement layer, it is now possible to settle the value over the internet.
The proponents of the blockchain technology and cryptocurrency tend to project a utopian future in which the world and humanity prosper, people and institutions have sustainable and transparent relations, participating parties need not have any bias and legal bindings, and single universal trust prevails. While the skeptics envision a dystopian future where technology can be made open to abuse for an illegal purpose, and one can easily be a victim of breaking “right to be forgotten”. While many countries have banned cryptocurrencies, there are countries where the use and trading of cryptocurrencies are legal. On March 4, the Supreme Court of India overturned the de facto ban of Reserve Bank of India on cryptocurrency. Kelly propounded, “Protopia is a state that is better today than yesterday, although it might be only a little better.” Thus, it is essential to look at the technology from the perspective of the protopian, and we can notice that blockchain technology and cryptocurrency will undergo protopian progress, which will continue to serve us in a more meaningful manner. The internet bubble was caused by the excessive speculation followed by the popularisation of the World Wide Web in the late 1990s. We are in a cusp of witnessing a blockchain bubble and a value-driven Internet. Why wait? As a protopian, think small progressive step forward for the blockchain technology and cryptocurrency.