This is an attempt to pull together some of the major themes in several of the readings.
“The Blockchain Economy: A beginner’s guide to institutional cryptoeconomics”:
This piece is about how ledger technology has evolved over the years, and how its evolution has allowed organizations of greater scale to function.
Can the new forms of ledgers in blockchain’s technology allow global organizations to function? This could be realized in a globally used currencies such as Bitcoin. But also, what is the core functional value of ledgers? How do they allow such scale to come about? One view of their function is trust. I could tell you that I have the money to pay you, but you might not trust this to be the case unless you saw evidence that I have the money in a bank’s ledger. Recording transactions, and trusting that they were accurately recorded at time of transaction, lets us trust the results we see later, trust their sums, etc.
What do others think about this view of ledgers as a technology of trust? It lends well to some thoughts on the next pieces…
“Markets Are Eating The World” also reports on the many forms of ledgers, and says “At its core, money is just a ledger.” (This reminds me of our recent lecture that noted one of money’s functions as a “unit of account”). The piece points out that this ledger was traditionally maintained by just one entity at a time, such as a bank. But now, distributed blockchains are revolutionizing ledgers. But I trust banks, and their maintenance of ledgers - so how does this trust in ledgers transfer to distributed ledgers?
The “Trust as a Primitive” reading* has an idea for the answer. “Trust is a new software primitive from which other components can be constructed. The first and most prominent example is digital money, made famous by Bitcoin”. But trust as a “software primitive” is still so abstract - when we talk about trust in ledgers and blockchains, what is the thing we are trusting? Trust in the network? Trust in that the value of bitcoin tomorrow will not be so much less than the value today? Some call these technologies such as bitcoin “trustless”. Maybe what is most novel about blockchains (+ the right mechanism design of incentives) is that they can create trust in a “trustless” system. In a system where peers do not trust each other, trust still emerges from the system itself.
The above readings also point out how trust in money was previously tied to either trust in a resource being constrained (as Gold is a constrained resource in the Gold standard), or trust in the government that operated the fiat currency (I believe in the value of the dollar, because I believe in the stability of the U.S. government). Bitcoin takes these two forms of trust and merges them. We may trust its value as a constrained resource because this constraint is within the protocol definition, and we trust its stability because it is built in code. Does our trust in Bitcoin also come its ledger of activity being transparent and distributed?
*apparently new users like me can only post with 2 links at a time.