The October 31 issue of The Economist featured the blockchain in its cover: “The Trust Machine: How the technology behind Bitcoin could change the world.” Its two articles on the subject explain what blockchains are about, as well as why we should care about an exotic technology that involves concepts from cryptography, game theory and distributed computing.
Right up front, the Economist distinguishes between three different notions that are often muddled up when discussing blockchains:
- Bitcoin, the best known and most widely held digital currency, whose users can transact directly with each other with no need for a central authority, - be it a bank or government agency, - to certify the validity of the transactions.
- The blockchain architecture underpinning bitcoin, whose protocols were specifically designed to control the creation and transfer of bitcoins.
- The general concept of blockchain, a distributed database architecture with the ability to handle trust-less transactions where no parties need to know nor trust each other for transactions to complete.
Bitcoin has had a mixed reputation, due to its wild fluctuations in value and past links to illicit activities. And, bitcoin-specific blockchain concepts like mining might well be perceived as too wasteful of computing power and energy by all but the most libertarian of bitcoin supporters. But the advanced technologies and architectures underlying blockchains are being increasingly accepted as having important implications far beyond bitcoin and other cryptocurrencies.
The blockchain holds the promise to revolutionize the finance industry by bringing one of its most important and oldest concepts, the ledger, to the Internet age. Beyond finance, the blockchain “offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned. It is a way of making and preserving truths.”