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Monday, August 8, 2016

Imagine a Floating Glass Sphere Filled with Immutable Information Bits

This has never been possible in the history of humanity.

Imagine if you could whisper your secret into a glass sphere in which it was preserved perfectly, completely…When I first encountered Bitcoin, I was incredulous. You can’t just pound together some code on the Internet and expect it to be money. Money has certain features and it has to have a pre-money history. Otherwise it can’t be valued like money and can’t function like money.

And yet by late 2009, Bitcoin was already trading at a positive market value. By 2011, it was used by a community as a means of exchange, and clearly it was functioning as a store of value. By 2013, you could spend Bitcoin on many consumer products. And today, it is an indispensable means of payment in many countries in the world.  

The experience reminds me of the Groucho Marx line: “Who are you going to believe, me or your own eyes?”

Theory and History

What had gone wrong in my initial thinking? I had ported over lessons from history, turned them into theory, and forecasted that theory into the future. This is a mistake. The digital world has shown us that many features of the world we once thought to be unchangeable are merely historical contingencies. Bitcoin was something completely new.

But what is it and why is it so awesome? I was asked to speak on this subject last year at a Texas conference called Voice and Exit. I set aside an entire day just for thinking about how to isolate and explain the seeming magic of Bitcoin without reference to technical code stuff. I wanted to illustrate by means of a metaphor.

Ported Information

Now that the Blockchain has been invented, it cannot be uninvented.The concept I wanted to illustrate was the following. The uniqueness of Bitcoin and the Blockchain consists in their capacity to permit privatized and customized bundles of immutable information to be ported weightlessly, nearly costlessly, and almost instantly through space, tagging any other individual in the world as the new owner of this information. This has never been possible in the history of humanity.

I began my talk by explaining the old children’s game called Telephone. You tell a secret to the person next to you. That person tells the person next him or her. It passes through 10 or 15 people. The last person announces the secret to the group, and the results are compared to the original. The two have little in common, and everyone revels in how poor our capacity for transmitting information is in the physical world. It’s a warning against gossip, and also a heads up to be careful what you believe.

Now imagine if you could whisper your secret into a glass sphere in which it was preserved perfectly, completely, and without the need for any trusted third parties.  You could lift this sphere into the air and it could float at the speed of light and land in the possession of another person, perfectly intact. This information can be anything. The trigger that causes the sphere to move and keeps track of who holds it is called Bitcoin. Would that obtain value, given that this service has never before been made available on the planet earth? Yes. That’s why Bitcoin has obtained monetary value.

Mind-blowing Potential

But its monetary value is only the start of what the Blockchain can do. Anything that can be called information can become commodified and transferred with near-zero expense. That includes all forms of exchange and contracting, including that which is conventionally called “law” within the physical world. And this can happen with zero regard for a great limitation that we have always faced in the social world: geographic contiguity. In other words, with this innovation, it no longer matters where we are or who we are; all that matters is agreement.

If all of this seems a bit outlandish, it should, because it is. That’s how marvelous this technology is. We’ve only begun to experience its potential. And think about this: now that the Blockchain has been invented, it cannot be uninvented. How much more important is that over every political trend, ever candidate for office, every policy of every state? Truly, this innovation rises above it all, and points to a bright future.

Here is my talk on the subject. I hope you find it revealing.