This post discusses blockchain technology and reflects on how sociological ideas can help us understand it. It starts by a presentation of the most relevant technical details behind this technology, which is complex and non-intuitive. The text also covers some analyses about its origins and potentials, and concluded with remarks about the role of Blockchain technology in ARTICONF.
Blockchain technology refers to today’s most developed distributed ledger technology (DLT). In an abstract sense, Blockchain is a data structure, a virtual format for storing, organising and retrieving information. Its origins can be traced to 2008, when an unidentified man (or group) using the name Satoshi Nakamoto sent an email entitled “Bitcoin P2P e-cash paper” in a cryptography mailing list. The email linked to a paper (http://www.bitcoin.org/bitcoin.pdf) detailing an ingenious solution for a theoretical state of distributed computing systems with malfunctions in individual components and imperfect information about their occurrences. This state, known as the Byzantine agreement problem, is important for decentralized information systems. A Byzantine fault presents different symptoms to different observers, whereas a Byzantine fault tolerant system keeps working as long as the majority of its components do not fail. In decentralized databases, such as the transaction ledger used in Bitcoin, there is no central control and versions of stored data can diverge for different reasons (e.g. errors or malicious activity).
Unlike a centralised Bank’s transactions ledger, Nakamoto’s paper described the possibility of distributing a ledger, over a large public network of computers that anyone can join, maintain and use for making direct transactions between two parties. Importantly, this model did not assume that these nodes operate in a trustworthy manner, allowing financial exchange without the need of a trusted institution. The model employs peer-to-peer networks such as TOR, proven to be resilient to the control of nation states. Nakamoto’s solution relies on computing technology (cryptography, distributed systems, computational complexity) and economic principles (game theory, monetary theory), and describes how computers in the Bitcoin network work in parallel to generate a chain of information records using a proof-of-work system. Bitcoin’s proof of work asks miners (i.e. nodes that maintain the network) to solve a computationally intensive cryptographic puzzle. Structurally, we can think of a blockchain as a growing list of blocks of records (e.g. transactions) linked using cryptography, such that each block contains the hash of the previous one. People often compare cryptographic hashes to a fingerprint: hash functions operate on data objects of arbitrary size and deterministically output a fixed-sized string unique to the data, known as hash. This hash, in conjunction with the original data, verifies that the latter indeed was at its origin. Miners maintain the network by collecting unconfirmed transactions into a block. They repeatedly perform a hashing function on the block’s header, while trying different numbers in the header, until the resulting hash satisfies a given constraint. Successful mining receives newly created bitcoin rewards.
Attempts to tamper such a process require costly computation, whereas securing the proper functioning of the network receives rewards. Since each block header also contains the hash of the previous one, it is impossible to tamper a record without changing all the subsequent ones. The solution involved in mining, however, is verifiable at a negligible computational cost and shared to all other computers in the network. Consensus mechanisms and proof-of-work ensure that all nodes in the network contain the same version of the ledger and that no single actor can dominate. A certain number of nodes (over 50% of the network in Bitcoin) reach consensus when they agree that the new block is valid and can be added to the ledger. Thus, the network security mechanisms follow economic rationality principles: tampering is not impossible but is extremely expensive and there are incentives to perform the hard computations that maintain the operational network. This technology, built on top of notions of transparency, enables scrutiny of the algorithms by open source software and scrutiny of transactions visible on the blockchain. Unlike traditional banks and exchanges, Blockchain also allows anonymity as an account or wallet does not require identity verification (such as state issued identifiers).
In the video below, Alexandra Dirksen illustrates the concept of blockchain using a photographic metaphor:
To make sense of the Bitcoin phenomenon, Lana Swartz draws on sociologist and philosopher Georg Simmel (author of The Philosophy of Money in 1900) and other scholars inspired by him. Swartz understands money as patterns and means to coordinate exchange in spatial and temporal terms by condensing and facilitating rhythms of exchange. Money articulates past, present and future practices of value through memory, anticipation and measurement. Swartz traces Bitcoin’s origins back to the cypherpunk and crypto-anarchist subcultures’ pursuit of digital cash (already present in the ‘90s). These subcultures adhered to mixed and multiple ideologies, and acted united in the belief that corporate and government power was a pervasive factor of oppression. As a response to this oppression, discourse and rhetoric around Bitcoin and blockchain orbited two poles that structured imaginaries about the cryptocurrency: infrastructural mutualism and digital metallism. Digital metallism refers to the theory of value behind the mined rather than minted Bitcoin — its value is based on number crunching operations as opposed to state backed currencies. Infrastructural mutualism, on the other hand, points to a cooperativist view of the function of money, liberated from intermediaries who control and survey exchange and society. Swartz concludes that these two ideologies are in tension and that Bitcoin subordinated infrastructural mutualism to digital metallism. She identifies two main factors that contribute to this subordination: the dominance of industrial miners over hobbyists, and the dominance of price speculation over a method of payment.
The previous paragraph outlined the origins of the so-called cryptoeconomics, representing the conflation of technical and economic principles to create digital networks of trustless exchange. There are, however, people who highlight Blockchain’s relevance beyond pure currency concerns and point to its ability to support Decentralized Autonomous Organizations. The most enthusiastic proponents of blockchain claim its possibilities make states, central banks, and other trusted third-parties and governance structures that mediate social relations and exchange obsolete. They shift trust from a particular ethos associated and assessed by relations of knowledge and history to a technological solution. Jaya Klara Brekke argues that cryptoeconomics and blockchain also support experimentation with broader ranges of ideas, beyond monetary theory and a vision of markets as sets of self-interested decentralized information processors. Focusing on the figure of the “hacker-engineer”, Brekke claims that these explorations open up governance experimentations that address collective concerns and share an anti-authoritarian affiliation. Thus, instead of simple adhesion to neoliberal economics, blockchain and cryptoeconomics are efforts towards the engineering of networked behaviours by achieving information security properties. To illustrate her point, she shows how network control and privacy concerns are in opposition to contemporary data-driven capitalist economy.
In ARTICONF, we recognize the importance of providing solutions that allow users to control their data and address their privacy concerns. This has led a group of European universities and companies to partner and develop Blockchain-based networks and services. Using open source to increase transparency, the goal is to facilitate the development of a trustworthy and secure social media architecture, where business, service, content providers, and consumers may come together and engage with each other. Instead of focusing solely on how blockchain facilitates exchange and value creation/storage, the project will focus on how companies can use this technology to establish trust relationships between different businesses and their clients.
To know more about the project, visit www.articonf.eu.
This blog post was written by University of Edinburg team in November 2020.
< Thanks for reading. We are curious to hear from you. Get in touch with us and let us know what you think. >
