What is a Blockchain? Is It Hype?

January 26, 2021 Editor Blockchain 0

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Maybe you’ve read about the blockchain and don’t get the fuss. (I am sheepishly raising my hand.) Maybe you’ve never heard of it.

My colleague Nathaniel Popper will explain what you need to know and separate the blockchain hope from the hype.

Nathaniel spoke to me about why some technologists can’t shut up about the blockchain and, in researching his latest article, what he found about how it might — or might not! — help people remodel the internet with less control by giants like Google and Facebook.

Shira: I need this explained to me repeatedly. What is the blockchain? And how is it different from Bitcoin?

Nathaniel: The blockchain in the simplest terms is a ledger — a method of record keeping — that was invented for Bitcoin, which is a cryptocurrency. Unlike conventional records kept by one bank or accountant, the blockchain ledger uses a bunch of computers that each add new entries visible to everyone.

The blockchain design that Bitcoin inspired has been adapted for other kinds of records. The underlying principle is there is no central authority controlling a single ledger. Everyone who is part of the system controls a decentralized and shared record.

What’s an example of how this might work?

A normal currency exchange might take your money, hold it and also hold the currency you buy. If it gets hacked, you could lose your money. With decentralized financial exchange based on the blockchain design, like what Bitcoin uses, you don’t have to trust an authority with your money. Two people are automatically matched up through software, and they make the exchange directly with one another.

Blockchains sound pie-in-the-sky.

That’s what I believed for a long time. But these blockchain ideas are shifting from concepts to living — though still clunky — experiments.

On social networks like LBRY and Minds, people can see for themselves how it’s different from YouTube or Facebook. The concept is that no company is in control or can delete your account. Each user can see that a posted video or other material wasn’t altered by anyone else.

Whether you agree or disagree with Twitter for kicking out Donald Trump’s account after the attack on the Capitol, it’s an interesting idea that under a blockchain-based design, he might have been able to take his more than 80 million Twitter followers to another social network instead of losing them all.

It’s going to be awhile before people can assess whether these blockchain applications really do what they propose and are an improvement over the status quo. Bitcoin has been around for a while and smart people still disagree about whether it’s useful.

There are always downsides. What are they for the blockchain?

One big downside is that central authorities are efficient at building reliable software and fixing it when things break. With a decentralized network of computers and programmers, there’s no boss to say that this flaw must be fixed in 20 minutes.

And when there’s a centralized system in finance or social networks, a government or another authority can stop terrorists or other criminals from using it. With blockchain-based designs, it’s harder to exercise control.

Why is there such fanatic devotion to Bitcoin and blockchains?

Bitcoin is like a social movement. The people using the system feel like they’re in charge because in essence they’re making the system run. That’s true for blockchain designs, too. They make people feel empowered in a way they aren’t with conventional software.

Bitcoin started with a lofty idea to democratize money. But now it’s like Beanie Babies — a thing people buy to make money. Will the blockchain concept also degrade into something less pure?

It’s true, many people using Bitcoin are just betting it will go up in value. But Bitcoin also gives people an incentive to get used to the weird concept of big systems that aren’t controlled by a single authority. It’s likely that the excitement and even some of the greed around Bitcoin helped fuel these blockchain experiments.

I’ve been transfixed for days by the saga of a Reddit message board and its crusade involving the video game retailer GameStop.

The short version: Several Wall Street professionals are betting that the price of GameStop stock will fall and are smugly confident they’re right. A Reddit group called Wall Street Bets has been trying to prove them wrong or just mess with them by organizing to drive up GameStop’s share price. The company’s shares are going haywire. It’s all weird and there are no heroes in this tale. (Check out Matt Levine’s column in Bloomberg Opinion about this.)

When I see the Redditors versus the Wall Street dudes, I’m reminded of how being online has changed the way we relate to one another. There is no bright line between internet life and real life.

Wall Street Bets exhibits the same kind of engaged, hyper-online social momentum that helped drive the presidential candidacies of Mr. Trump and Andrew Yang and is behind the Korean pop fans who make sure their favorite bands trend online and who engage in political activism.

The GameStop campaign’s swarming behavior, unity around a common cause and inside jokes — like the one about chicken tenders — have similar mechanics as the gaggles who harass gay and transgender video creators on TikTok and got a research ship named “Boaty McBoatface” a few years ago. (To be clear, stock trading campaigns aren’t the same as harassing teenagers.)

Ryan Broderick, an internet culture writer, wrote in his Garbage Day newsletter that the GameStop saga showed the similarities between social media and the stock market. “If you can create enough hype around something, through memes, conspiracy theories, and harassment campaigns, you can manifest it into reality,” he wrote.

My colleague Nellie Bowles wrote this week about the ways that working through screens has started to infuse office culture with the worst elements of aggressive internet conversations. That’s not dissimilar to what’s happening with this dark corner of stock market speculation. Humans are adapting to online life in ways that sometimes feel thrilling — and other times nihilistic and horrifying.

May we all experience the joy that Nia Dennis, a U.C.L.A. gymnast, is having in this routine. (Thanks to our California Today writer, Jill Cowan, for featuring this video.)

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