Why does everyone need to understand blockchain technology?

Source: Medium

Translation: First Class (First.VIP)

 

What impact will the blockchain wave have on us? We should ride the wind and waves instead of going down the river.

There is a lot of information on the blockchain, but most of it is inaccessible. To a large extent, people don't understand why they should care about the blockchain, and I haven't found any information that can explain the blockchain well. Here, I will talk about my views on the new technology wave and the impact it has on us.

We live in a market society

For the past 3-4 centuries, we have been living in a market society, relying on market and economic forces for daily interaction with others. Historically, the concept of a "market" was limited to the physical market used to exchange goods. We rely more on traditional values ​​and reciprocity as a means of mutual communication. Today, the concept of market has surpassed the traditional urban market and has become a part of society and defines our interactions. It also determines the value of everything from commodities such as food and land to more abstract things, such as Labor and time.

The middleman is the catalyst

The market society has brought about a world where you can buy any goods and services, and this is largely due to the motivation to bring goods to the market and get money back. This is the premise of capitalism and has brought unparalleled value creation to our world.

Brokers and intermediaries have become the key to providing this value to people on a large scale. They naturally became third-party mediators, intermediaries, and witnesses. In essence, they are catalysts for commodity trade. A few examples:

  • As a farmer, historically, it has been difficult to establish and maintain relationships with crop buyers, so you sell your products to middlemen who will store your goods and sell them to merchants or grocery stores. Today, there are a large number of intermediaries in the farm-to-table supply chain, each of which provides their "approval stamp" and draws a small portion of the profits from the value generated by this process.
  • Centuries ago, traders exchanged their local goods with completely different goods produced by people thousands of miles away (for example, Chinese silk was exchanged for British wool), and traders were catalysts in the process. Today, the entire industry has a crazy network of trade brokers to exchange these goods.
  • Banks are also intermediaries, they are middlemen of funds. They provide escrow services for your money and also lend money to people who need a loan.

In fact, this market society has brought us unprecedented benefits. As consumers, we don't need to learn basic skills to enjoy these benefits. You don't have to worry about making a t-shirt for yourself; you can spend $ 8 on a piece of clothing made on the other side of the world, and you don't need to know how the clothes came to you. In essence, we exchange money for producers and middlemen to do the work for us, which is why a market society exists.

Market society naturally leads to inequality

This market society is not without its challenges. The biggest problem is that market society naturally tends to inequality. Power and control are concentrated on a few people.

Market societies naturally tend to be unequal.

Over time, society becomes more and more unfair, due to (1) the positive feedback loop that wealth generates more wealth, and (2) middlemen manipulate or distort the value of goods.

You don't need to find evidence too far:

  • In a world of endless opportunities and great value, does it surprise you that 71% of people live on less than $ 10 a day? At present, global wealth is highly concentrated in the hands of a small number of people, and the gap between the rich and the poor is widening. With the rise of OECD countries, inequality within the country is also increasing. If you are one of these 71%, we do not even know that you can enjoy basic services such as banking, medical care, insurance, retirement funds, consumer protection, etc., but these services are indeed not yours. How difficult is it to accumulate wealth, innovate or start a small business without a bank account?
  • There are fewer and fewer assets available for public investment. You can see this in the reduction of listed companies and the increase in privatization financing. This is because major funds such as ordinary retail investors and pension funds lack many channels to increase wealth. Wealthy investors and institutions now have more opportunities to make money, whether it is company equity, real estate, commodities, etc. Such a trend greatly reduces the chances that most people share their wealth creation.
  • In many industries, the increase in middlemen levels has led to distortions and inefficiencies in the value chain. When goods are produced and delivered to consumers, they will pass through multiple middlemen, and each middleman will charge a slightly higher "service fee" to the next middleman. For middlemen, charging 1% doesn't sound like much, but it does raise consumer prices in a 15-step supply chain. This is not to say that all middlemen are unnecessary, but there are some obvious examples to prove it. Agriculture, healthcare, clothing / accessories … These industries have huge supply chains with many middlemen.
  • Intermediaries are usually bad people, which means that they act deliberately for their own benefit and harm consumers and producers. In economics, this problem is called the principal-agent problem and moral hazard. We can cite a large number of examples of bad actors. The most recent and obvious example is the housing crisis of 2008, when banks informed of bad loans. The real consequence of such actions is the collapse of the entire economy.

Oddly, Ray Dalio talked about some of these observations and the trend towards greater inequality in a recent article.

The transformation brought by blockchain as a demonstration

What does this have to do with blockchain? In short, blockchain can bring greater transparency to the world, give consumers and producers more control, and help reverse the trend of increasing inequality.

Blockchain is a decentralized, immutable public ledger.

Blockchain is a series of immutable data records managed by thousands of computers that do not belong to any single entity.

Think of it this way: Blockchain is the next innovation in databases. In today's world, databases are usually managed by a company. By default, the data is confidential, and they can change or falsify the data at will.

Let's imagine a set of databases that work like a network, where the databases interact with each other, sharing their content with everyone and each company, and we can be sure that the data they report is true and has not been tampered with.

The blockchain can be thought of as a series of databases that work like a network. This database is a network that is shared with everyone and managed by everyone. Anyone can connect to the network and ensure that the data reported is true.

These characteristics of blockchain technology will bring about a movement of trustlessness and autonomy.

Trustless trust makes democratizing access to goods

The core of the blockchain is redefining trust. They shift the role of authenticating and validating transactions from brokers and brokers to thousands of random computers located around the world. These computers communicate with each other to maintain the authenticity of transaction records stored across computers. In order to manipulate records in the blockchain, hackers need to attack 51% of computers to rewrite records held by those computers. This is much more difficult than bribing a middleman or letting a broker act maliciously, and the parties to the transaction can determine the transaction records and can easily access them.

This potential premise greatly reduces the problem of principal-agent, because in many cases we do not need an agent! The absence of an intermediary will democratize goods and services because it removes the barriers that previously raised prices or made it difficult to provide services to underserved people. Here are a few examples:

  • Now, we can directly transfer and exchange funds with each other through the blockchain in a seamless, fast and cheap way, without involving banks. No need to worry about bank fees and international surcharges. Bitcoin is probably the best example, and many other cryptocurrencies also facilitate value exchange. Now we can exchange value with each other very cheaply and ensure successful transactions.
  • "Tokenization" brings hope to the democratization of social wealth creation. Tokenization refers to the ownership of assets through digital tokens on the blockchain, which behaves almost like stocks. Imagine a world where many of our daily entities are represented as "stocks on the blockchain" and you can have your own tokens that represent part of the ownership of that new local cafe / bar on the street and represent you Favorite emerging sports team or brand, or your favorite startup. You can even use tokens to split your home equity. By greatly reducing the friction and number of intermediaries required to create, sell and buy securities, "tokenization" offers the prospect of a more efficient financial world. It does help to reverse the tendency for ordinary investors to participate in fewer ways to create wealth.
  • Many legal services do not require a lawyer and can produce cheaper and more certain results. Legal services are expensive, complex, and often require multiple parties to enforce them. In fact, many contracts between enterprises can be executed through the blockchain. Blockchain objects called "smart contracts" can incorporate legal obligations into automatically executed functions. These functions are executed when predetermined conditions are met, and can be less Intermediaries, higher transparency and lower costs to accomplish this.
  • Streamline the supply chain. Blockchain can greatly reduce the complexity of the supply chain and the number of middlemen. In short, they provide complete transparency and certainty about the origin and status of goods, thereby reducing the number of participants required in the supply chain and making goods more accessible and cheaper for end consumers. (Maybe 15% cheaper).

Autonomy

Blockchain will also bring a transfer of autonomy, in which people will be able to control their physical and digital products. This includes individuals' sole ownership and management of their funds, assets, online data and their identity.

Autonomy means that individuals can act as their own banks without dealing with banks, and individuals can act as their own lawyers without the need for lawyers to handle legal matters. This phenomenon stems from the mistrust of trust and the ability to easily and surely participate in peer-to-peer interactions. Because blockchains can provide certainty of interacting directly with each other, and using them as "digital network arbiters" to build systems is much cheaper and easier, we are more likely to become autonomous citizens.

This is not the case in today's world. Instead, your data is held by hundreds of organizations. By default, these organizations allow you to collect the information you provide. Your money is managed by banks and other intermediaries. Lawyers need to perform simple operations and only God knows how many organizations have access to your "identity."

Here are some examples of what a self-sovereign world looks like:

  • Become your own bank. Not only can we use other cryptocurrencies like Bitcoin to trade with others without an intermediary, and soon we will also be able to set up our own escrow service, lend our own funds, and provide our own company Funds are not required to be listed on the New York Stock Exchange or the New York Stock Exchange, and other financial activities are carried out in the most deterministic manner. No intermediaries are required, and the cost is greatly reduced.
  • Have your own identity. Autonomous identities will give people complete control over all aspects of their identity with the world, and will also bring a higher degree of trust to daily interactions with people and brands. We will be able to seamlessly require someone to provide proof of certain qualifications to confirm that they are trustworthy, without requiring them to reveal implicit information about them.
  • Be your own lawyer. You can sign a smart contract with your landlord or your business client to enforce the agreement without having to hire a lawyer to enforce the terms and results.
  • Pay only for what you use. Thanks to the micro payment function on the blockchain, you will soon have more control over the specific content you can consume and pay for. In short, you will oversee a digital wallet that allows you to pay 3 cents seamlessly to read a Wall Street Journal article without buying its $ 100 annual subscription, or you can spend 1 cent to skip Youtube sports hotspots The two ads in the middle.

Autonomy, as well as trustless trust, are the core tenants of the blockchain and the upcoming "web3" world. By setting up these services by themselves, consumers will have better access to banking and legal services, and people will be able to acquire assets of untapped wealth through asset tokenization. Communities can rely on blockchain to bring new levels of Cooperation and certainty.

Most importantly, blockchain will help bring a more fair world, which will increase the overall wealth creation of our society. Compared with large-scale redistribution activities and bureaucracy, blockchain is a more effective tool that will democratize resources and achieve fairer results. This mechanism reserves our market and capital for ordinary people in the world Ideal of a socialist society.

To be honest, to achieve this vision, blockchain has many challenges to overcome. The current blockchain field feels like the Internet in 1993. For most people, he is really difficult to use and is in the gray area of ​​the law. Most people do n’t really understand what it is (you can go Check out the 1994 funny video about the Internet). However, with the passage of time, more innovation and deepening understanding, blockchain will become a key part of our daily life.