Blockchain and crypto’s education problem
The ultimate bottleneck. Teaching a non tech-person blockchain and crypto.
''This blog contains over-simplifications and analogies to make a difficult subject clear. This is not an in-depth guide but a starter in blockchain and crypto''. To skip to the explanation of blockchain please start at ‘’ Blockchain explained by an analogy’’.
The ultimate bottleneck
Blockchain. Perhaps the buzzword since 2015. Since then, once in every few years, ferocious hype cycles can be observed with gigantic gains and record losses. Every few years, suddenly everyone is talking about blockchain and crypto. That one uncle during Christmas or a colleague during a work break. These periods of awareness are often short-lived. The cycle periodically collapses and we enter a market downturn (bear market), during which 90% of ''investors'' lose their money. Yet there is always a small but ever-growing group of people left who continue to believe in this parallel economy.
If you are currently in this market, you belong to that small group of people. For example, you are building something, you are holding your coins and quietly scaling back in to the market. Or your investment is worth so little that there is no point in selling. Each of these people will recognise the following problem. It is almost impossible to explain blockchain and crypto to a non-tech person.
Non-tech (and even some tech) people are tired of hearing about blockchain and crypto. And who can blame them? A large proportion of ‘’blockchain-tourists’’ from the market upturn (bull market) are self-absorbed speculators. That shove a full bucket of technical jargon and imbecilic self-assurance about the garbage token they own down your throat. Crypto has a chronic problem of opportunists, scammers, paid YouTube influencers and know-it-alls. Often, all truly innovative / world changing solutions end up in the negative light of the 98% garbage. But anyway... this is a topic for another blog.
The success of a cryptocurrency or a blockchain is almost always measured in ''adoption'' by a lot of folks in the ecosystem. ''The more adopted the better the token is'' is the logic of crypto enthusiasts. Totally absurd of course! Anyway, sustainability, token-economics and network-effect is a topic for another time!
Suppose adoption were to be the ultimate goal (debatable). Then it is completely ironic that we still fail to explain blockchain and crypto to the non-tech individuals! You would think adoption is created by more people using a service / product? Right? Than why are we still failing to educate the less tech savvy people so they to will use our solutions? The answer to this fundamental question lies in the following critical issues. Blockchain and crypto are not tangible. For many people, the internet is already too difficult to understand. Then try explain that my ''chain'' of ''blocks'' with some lines of code have ''real life'' value. Of course people won't understand it! Let's google: ''what is blockchain'', you will arrive at the following first result:
‘’A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format.’’ (Click to view source)
Just for fun, you should try to explain this is to your partner, parents or children. Would they understand it? Of course not! And so we have arrived at the core subject of this blog. How on earth do you explain blockchain and crypto to non-crypto people? Well here we go! Hopefully, with this simple explanation, I can guide you through the core principles of the vast majority of the blockchain ecosystem.
Blockchain explained by an analogy
For this analogy to work, I ask you for 2 things. Turn off your ''why?" and hypothesise freely with me in a world where anything is possible!
There is a world with 10 people. Everyone has access to a vast amount of blank books. The books are free and you can acquire them everywhere without permission of anyone. All the books in this world are an exact copy of each other. However, there is a weird twist in this reality, when you write something in one of the books, the text appears in every existing book in the world.
So any person out of the 10 people can write something in the book, which then also appears in every other person's book. All things ever written can thus be read back or verified by anyone. There are only 3 rules embedded in the ‘’original formula’’ of the book that no one can change:
Every new line that is written has to be approved by at least 5 people. If a line is approved, the line stays and everyone moves on to the next line. The approved line cannot be erased from the book ever again. When a line is rejected by the majority, the line is scratched trough. The scratched line is no longer valid in all the books in existence.
There can never be 2 identical lines in existence.
When a line is allowed to be kept in the book, 1 of the 5 checkers gets a reward. This helps to incentivise the 10 people to only add correct lines.
Implications on our hypothetical world
In this world, before the emergence of the books bartering was used for trading. Bob has chickens with eggs, Alice has cows. And with the leather from the cows, she produces clothes. Between each other, the 10 people trade things. Bob needs clothes from Alice and Alice would like to make a nice omelette. Everything seems to be going well but at some point they run into a problem. What if Alice doesn't want to swap anything with Bob because she has everything she needs. But Bob needs clothes nevertheless! A system naturally emerges where Peter keeps track of who owes what to each other in a big list. A credit & debt system based on bartering emerges. All seems to be going smoothly at the moment.
However, there are several things that can go wrong with this system in place. What if Peter's house burns down and thus his list? All the value and things people own each other would suddenly disappear. Or worse, Peter holds huge amounts of power in this system and he could ascribe infinite value to himself on the backs of everyone else!
Alice realises that this system involves too much risk and picks up the magic books that appear. Now when Alice sells clothes to Bob, she writes this on a new line in the book. Anyone of the 10 people can check this new line in their own books and either approve or reject it. In this system, a distributed register is created that records all trade. Everybody can verify what they owe to everyone. No one can add double lines or add anything shady that has not been approved by at least 5 people. By checking the books they get a small reward and a bit of fees from the 2 people making the trade / transaction. This way the checkers are incentivized to control every transaction ever made.
Bad actors in a world with a distributed register
If Peter wants to write false lines in the register as was possible in the old situation, then he must first bribe 51% of the population to achieve this goal. In a world with 10 people, this is hypothetically possible. In a world like ours with 8 billion people, this is almost impossible. Suppose the bad actor does manage to win over 51% of the population. Even then there is a way out. Since everyone knows the ''original formula'' of the books, anyone can issue new blank books with new rules. Nobody wants to keep Peter's register because they are being abused there. Since everyone has the freedom to choose which subset of books they consider legitimate, the vast majority will move over. The value defined in the original register will be declared invalid. So an attack by bribing 51% is immensely expensive to be eventually nullified by the free market.
Applying our new knowledge to bitcoin
You now know the basics of blockchain! A blockchain is a shared register (books in our hypothetical world) of blocks (pages in our hypothetical world) with transactions (lines in our hypothetical world).
Every person in the world can view the history of the blocks produced and every miner (computer that mathematically controls transactions) can control the transactions made. By checking every line you can verify that there will never exist a double transaction. Also called double-spending. This is the true innovation bitcoin solves. You can now trust that it is impossible to inflate the total supply of 21 million bitcoin because it was coded into the original open source code (‘’original formula’’ in our hypothetical world).
Just like in our hypothetical world miners are rewarded with fees and block rewards. In our world though instead of barter trade each bitcoin has a numeric monetary value in USD (or another currency). Therefore you would have to own 51% of all bitcoin in existence to insert a new false transaction. The cost of such a 51% attack would cost 10,3 billion dollars, aka very, very expensive. Even if this would happen, everyone is able to copy the original open source code and create a new blockchain just like in our hypothetical world. Also everyone is free to choose which blockchain they trust. It is highly likely almost everyone would migrate to the new blockchain. Rendering the old blockchain and 10,3 billion dollars spent for the attack useless. The bigger bitcoin gets the more expensive this attack gets.
The value of blockchain can thus be explained as:
· All transactions are verified by everyone.
· You don't need an external party or middleman.
· Borderless transactions and data transfers are fast, cheap and impossible to block
· No-one can add faulty transactions, so you can transact in an trustless manner (you don’t need trust if you can verify every transaction ever made).
· Data and information is decentralized across countless people (no single point of failure)
· Cryptocurrencies or other digital assets can be completely programmed and have many properties that normal money or databases cannot possess.
· After the blockchain is launched and blocks are created the source code is immutable (unchangeable).
· The energy consumption to mine and produce blocks can be seen as a source of base value for bitcoin comparable to goldmining. (this is a controversial point but economically true)
I hope this article has helped you to get a basic understanding of the principles of blockchain. Again this article is intended for people without crypto / blockchain knowledge and serves as a stepping stone to other articles that will slowly but surely go deeper into the ecosystem. Because of this entry level explanation the current article misses critical information such as Hashing etc. Please read more information about bitcoin and other blockchains to get a full grasp of the potential and limitations. In the future, you can expect in-depth articles regarding the latest innovations in blockchain and other technologies. Thanks for your valuable time!