Blockchain is a distributed database; a time-stamped record of transactions, publicized, maintained, and validated by a wide network of participating nodes. Blockchain is an ideological project; striving to create censorship resistance through decentralisation. These decentralised participants group batches of transactions into ‘blocks’, each containing the timestamp of the previous block to form long chronological chains. Thus the resulting blockchain constitutes a publicly viewable linear history of every transaction (Brekke and Vickers, 2019).
While the word ‘blockchain’ may conjure images of circuit boards, hackers, and spiderwebs of interconnected nodes, a more accurate depiction would be a noisy warehouse, stocked to the brim with servers. Whirring fans cool machines that have one continuous occupation; to expend vast amounts of computational power to solve complex cryptographic puzzles. These puzzles are part of a consensus protocol designed to ensure that no single participant can gain control of, or change, the record. In exchange for the costly energy consumed in the process, participants are rewarded for each block they ‘mine’. Currently, the Bitcoin blockchain, the most well-known blockchain to the general public, issues 6.25 new bitcoins per block, and a new block of which is mined every 10 minutes (current USD exchange value here: https://bit.ly/3exmanU. An early adopter famously spent 10,000 bitcoins to order two pizzas in 2010, making each pizza worth 45,544,000 USD today (Hankin, 2019)). Originally 50 bitcoins in 2009, the reward continues to be halved every 210,000 blocks to avoid inflation. This process is both how new coins come into circulation, but also what makes each recorded transaction with existing cryptocurrency costly in terms of energy consumption.
The invention of blockchain as a technology for digital money challenges the authority of states as the sole issuers of currency, and banks and other financial intermediaries as the managers of transactional records. In conventional digital payments, the transaction is just a digitised record of accounts, which you ‘trust’ your bank and payment provider to accurately update and maintain (Maurer, 2012). In practice, this centralisation of authority means that you also ‘trust’ them not to deploy transactional censorship; for instance, by denying accounts to people suspected of being sex workers (Survivors Against SESTA, 2018). By removing this central intermediary, blockchains claim to be ‘trustless’. The degree to which this authority is genuinely distributed among the network participants is more questionable, with over 50 per cent of Bitcoin’s mining power being controlled by just 4 nodes (bitcoinera.app, 2020).
In practice, accessing and using cryptocurrency requires skill, knowledge, money, and technological tools. The less you have of this, the more you depend on various willing intermediaries to facilitate access. This ironically undermines the idea of blockchain as a decentralised and trustless technology. David Harvey reminds us to question what he calls “the crude assumption that decentralisation is inherently more democratic” (Harvey, 2014, p. 142). As much as blockchain can be a tool for decentralised organisation, one could argue it also recentralises wealth and power (O’Dwyer, 2015). It enables the more privileged to opt-out of existing societal infrastructures as opposed to addressing systemic inequalities and establishing more equitable alternatives (Scott, 2014).
Author: Sunniva Sandbukt
(Image credit: Tam, 2018)
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