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Blockchain is not an experiment, but a breeding ground for experimentation

It is predominantly the interest in cryptocurrencies as a speculative investment and (secondarily, as we are forced to concede) the technological advancements promised which dominate the discussion of blockchain projects and their tokens. That is somewhat unfortunate, because they have proven and continue to prove an incredible ground for experimentation, far beyond that of just advancing cryptography. Bitcoin itself was a remarkable experiment — not merely from a technological perspective, but also an economic and social one. It proved that a digital token under the right circumstances can have real value on a global scale, and this value can be completely left to market forces to decide. It also demonstrated that the prospect of extra-governmental currency was enough to compel millions of individuals to go to great lengths to adopt — Bitcoin wallets in the early stages were not as user-friendly as they are now, and required some knowledge of coding to interact with. The explosion in the number of altcoins has only pushed this idea further — now we have a playing field for competition, and thousands of currencies testing new ideas and principles. Below are just three areas in which current blockchains facilitate experimentation and the resulting observation on a large and dynamic scale. There are many others, it seems a given that even more unforeseen ideas will be tested in the future.


1. Trust and immutability


Those looking forward to a world where real-world purchases are done with crypto, as opposed to credit cards or third-parties like Paypal, always run into the same problem: immutability. Simply put, once a transaction is sent, there’s no taking it back. If the seller never delivers the product you paid for, you will never claw that money back from them. Attempts made to address this usually involve an escrow in combination with an oracle — an off-chain service that verifies external conditions (such as a delivery being signed for). This is not a perfect solution, not least because the reliance on third party trust is one of the elements blockchain is designed to avoid. It is not disastrous, however. There are models by which cryptocurrency can be used for real-world purchases reliably.


The Silk Road proved this. It was, to borrow from a space-based sci-fi epic, an online hive of scum and villainy: a marketplace existing only to deliver that which is illegal. One would expect that sending money to those vendors and even worse, money you could never refund, would be too much risk for even the most daring herbal enthusiast. But that was not the case. Indeed, if you did send the requisite amount of money to purchase a plant-based product on the Silk Road, there were two likely outcomes: you received it, or a customs agent did. It was incredibly uncommon for scams to occur, due to a rating system which made it far more worthwhile to act in good faith. The same could be arranged, one would presume, for products outside of mind state-altering chemicals.


The Lightning Network ‘Trust Torch’ is another, less nefarious experiment on the trustworthiness of crypto adopters. This is an experiment started in January by hodlonaut — a crypto enthusiast on Twitter. They sent 100,000 satoshi — about $3 — to another Twitter user, who then was tasked with adding 10,000 satoshi and sending the total to another user he trusted. The chain is still going, and is now worth over 35 million satoshi, almost 1,500 US dollars. Last week the torch was passed to and passed on by an 88 year old grandmother and crypto adopter. It has also been passed to notable figures in the industry, including Binance CEO CZ, Tron’s Justin Sun and Youtube blogger IvanOnTech. The torch has been passed around 200 times, with no breaks in the chain thus far.


Of course, this is not fully representative of everyday transactions. The torchbearers know the identity of the next receiver — which will not be the case in online purchases. Nonetheless, both of these examples show that immutability is not ruinous, and crypto users are more trustworthy than some give them credit for.


2. Supply models


Among its many revolutionary properties, Bitcoin introduced the idea of a geometrically declining currency supply with a fixed total cap. This was designed to mirror the supply of precious metals or natural resources — in that the effort required to receive the same amount of new resources increases over time, and the resource itself is finite. This is worlds away from existing fiat currencies, which can be increased arbitrarily at the whim of central banks and, although for developed nations this is generally decided based on economic need and projections, other countries are not so lucky. We discussed this in relation to the economic woes of Venezuela, where Bitcoin’s volatility pales in comparison to the bolivar’s historic devaluation. Quite distinct from any other currency or store of value up to that point, Bitcoin’s total supply at any given time in the future can be predicted with tremendous accuracy. Its value in fiat terms is another story, but the certainty provided by a fixed issuance rate and the reward halving events have contributed to massive value spikes in the past.


Of course, with the advent of thousands of new cryptocurrencies there are almost as many supply models. Some are hyper-inflationary, which has been the downfall of many masternode-supporting chains. Some are hyper-deflationary also — Bomb Token is a currency fixed at one million coins, which destroys 1% of any transaction sent. XRP’s supply is controlled by Ripple Labs, which releases an amount of their choosing every month {almost mirroring the role of central banks in fiat currencies). This diversity presents the potential of testing the success and viability of supply models in a way that otherwise would not be possible.


3. Governance


Similarly to supply model organization, the innumerable blockchain governance models in existence vary wildly. Roughly summed up, governance on a blockchain refers to the consensus around the rules and rewards in producing new blocks, improvement updates, fixes and the forks which will be adopted. The actors involved can vary also. In Bitcoin, miners have a tremendous amount of power. Although developers can propose new improvements and upgrades, it is up to the mining community to implement these when continuing the chain. As a result, having the support of the vast majority of the mining community is crucial for any change, such as a Bitcoin Improvement Proposal (BIP). End users also have a significant vote in processes like hard forks or side-chain additions, electing to adopt them or not. So it is fair to say that although developers propose the changes to Bitcoin’s operation, users and miners are they key decision makers in what gets selected.


Ethereum is slightly different. Miners in this ecosystem tend strongly to back the Ethereum Foundation’s development team, even in the most controversial of proposals. None was more controversial than the DAO hack and subsequent hard fork — despite the decentralized consensus mechanism, the Ethereum Foundation was able to convince a huge majority of miners to accept the fork, and we know that Ethereum Classic has not come close to competing in terms of user interest and acceptance. As mentioned, Ripple Labs has even more power over XRP, also controlling the majority of coins which are issued out on a monthly basis at the discretion of the dev team.

Then there are platforms taking a radically different approach to governance. Cardano, for instance, bases updates and roadmap markers on peer-reviewed articles similar to that of academics and scientists. Functionally speaking, this resembles a technocracy in real-world political terms — governance by scientists and experts. Tezos has an on-chain governance model resembling representative democracy — you delegate to a node that shares your vision for the future of the project, and the node then votes on proposals (which have been debated in advance).


Will experimental blockchain governance ever inform real-world governance models? Probably not — but the ability to observe the efficiency, success and level of user influence on blockchain amendments and updates remains a useful side effect of the proliferation within the industry, and will certainly shape the types of organization we see in the next generations of digital currency and distributed ledgers.


Medium Link:

https://medium.com/viewnodes/blockchain-is-not-an-experiment-but-a-breeding-ground-for-experimentation-6cfdf6ed4da7

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