Guest blog by Svein Ølnes, Vestlandforsking
Bitcoin as a computer system just turned 10 years. Satoshi Nakamoto fired off the system by hand-coding the first block in the system, block #0, and the rest is history. However, the history is still short, and we still do not know what impact cryptocurrencies and blockchain technology will have on our society as a whole or the financial sector in particular.
It is useful to make a comparison with the development of the Internet since blockchain technology is a generative technology establishing an infrastructure for possibly new disruptive applications. It took a decade from the concept of Internet technology to the first popular application in the form of an email. Then a new decade of development led to establishing the current Internet core components of TCP/IP. Fast forward another decade and we had mass uptake of Internet technology with the web. It thus took more than 30 years from outlining the concept to mass adoption was achieved. Another important lesson from the Internet development is that no government would approve it as a global communication standard. It became the standard despite, not because of, governmental policy.
Like most emerging technologies blockchain technology is also subject to a range of misunderstandings and downright false information. We struggle to understand distributed or decentralized systems. Bitcoin’s main innovation was the elimination of the middleman in an online trade, and the Nakamoto Consensus was the brilliant solution. Contrary to common belief, the blockchain structure itself was not the core innovation, but rather an ordinary storage structure. Hash-linked and time-stamped documents had existed for 20 years when Bitcoin was invented.
Another common misunderstanding about Bitcoin is that the energy consumption required for the “proof of work” is to “mint” new bitcoins. The energy use is to secure the overall system and new bitcoins are only payment for the work. The crypto society must bear a lot of responsibility for the misleading “mining” term. It gets very serious when political decisions are made based on these misunderstandings. The recent decision of cutting out cryptocurrency-based computer services from the reduced energy tax is unfortunately based on the false premise of energy being used to mint new crypto-coins.
Bitcoin has no spokesman or council or PR management. That is a good thing, but it is also a problem when information gets distorted and misinterpreted. There is no one in charge of righting the wrong information. Information responsibility is also distributed, like the system itself.
«Bitcoin is a tool for freeing humanity from oligarchs and tyrants, dressed up as a get-rich-quick scheme», says well-known Silicon Valley entrepreneur and writer Naval Ravikant. Unfortunately, the get-rich-quick part has gotten too much attention and pushed the real potential to the background. With decreasing exchange rates and overall value, it is reason to hope that development of both the infrastructure and useful applications will continue with less distraction. MIT Technology Review predicts 2019 as a boring year for cryptocurrencies. And boring is good!