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Blockchain Up!

In principle, any physical registration can be adulterated or destroyed. As for digital, the matter was no more encouraging before the emergence of the electronic signature and the emergence of blockchain technology.


I think I spent a couple of years lamenting the loss of the library of the Benedictine abbey in the Italian Alps, with which Umberto Eco framed his disquisitions on the second book of Aristotle's Poetics. (In my opinion, Aristotle is a pivotal thinker of philosophical thought).

I suppose that the awareness of what the loss of a book or of many writings that completed the most widest vision of the thought of an epoch with civilizing implications caused that uneasiness in the face of the irreversible.

Eco's book started from the fictional idea that the manuscript on which he based his story really existed. I read the novel taking this for granted. I will not apologize for my naiveté: I had read a lot. And one of the effects of reading is the widening of the imagination outside of rationality. 

My current reflection is not on Aristotle, nor even on creative dynamics (to which I will devote an entry later) but on the need to preserve knowledge.

In the burning of the Library of Alexandria (by Alexander the Great, Aristotle's distinguished disciple who died of love before conquering India), according to Seneca, about forty thousand works were lost.

Of the Yǒnglè Dàdiǎn, an immense encyclopedia that had compiled all the knowledge generated over millennia by Chinese culture, just sixty of the eleven thousand volumes of which it was originally composed have survived to our days (most of them disappeared, it is believed, during a revolt and the fire of the Forbidden City at the end of the Ming dynasty. The rest, up to the present quantity, due to what the Chinese call the Century of Humiliation because of European interventions and looting). 

The record of authorship on paper-even in clay like the great Library of Ashurbanipal at Nineveh-is as certain as the climate or character of a human group expressing a temporal ideology. To cite a single example with ideological counterparts: the infamous looting of the Baghdad Museum less than ten years ago by occupying troops and simultaneously the no less infamous destruction of Assyrian, Roman and Christian sites by Islamic State militants).

Of course, one could counter-argue that a global internet crash would have even more catastrophic effects in terms of property registration, but although it sounds interesting for a 2012-type apocalyptic tale (I'm referring to the movie), right now it is far more likely that a large library would be lost to fire than a repository on data servers; the technical explanation may be complex but the argument is simple: redundancy. No information on the network has a single server.

In principle, any physical registration can be adulterated or destroyed. As for digital, the matter was no more encouraging before the emergence of the electronic signature and the emergence of blockchain technology. 


We generally associate blockchain with cryptocurrency. From what has happened in the world of cryptos this November 2022, it could easily be deduced that the discussion of its validity and by extension of blockchain can be put to rest. After all, when we talk about cryptocurrency we are still talking about fiat money, i.e. a value exchange system based on trust. And that trust has been shattered like a prick in a soap bubble, right? Not so fast Flash.

Like everything that has to do with cultural changes, cryptocurrency rests on a fundamental technology: that is the blockchain and this, on data encryption. It goes without saying that these, like all technological evolution, are the result of specific needs.

In 1991 Stuart Haber and W. Scott Stornetta with their publication How to Time-Stamp a Digital Document and their follow-up paper Improving the Efficiency and Reliability of Digital Time-Stamping created the basis for a temporally irreversible and therefore incorruptible recording system. The first of this work consisted of the development on a cryptographically protected blockchain so that the timestamps of documents within a dynamically growing set could not be tampered with. 

This is done with a mathematical algorithm that converts any input information, say a document, into something commonly known as a hash. The hash is a set of characters of a fixed length no matter how much input data: whether it is my name or one of my books, a hash of the SHA-1 algorithm will always be forty characters and numbers long.

In 1992, Haber and Stornetta improved the system by incorporating Merkle hash trees (a binary information ordering structure). In simple terms, the creation of parallel hashes that "feed" into a higher level hash allowing for more information). Improved efficiency allowed the collection of more documents in a single block.

Satoshi Nakamoto - the individual or group behind the blockchain technology for value exchange purposes, i.e. as a currency - in the Bitcoin White Paper quotes profusely the Haber and Stornetta works. Nakamoto remains to this day the biggest enigma behind the creation of bitcoin as it is the first time in recent history that it is not known who opened Pandora's Box causing an indeterminate long-term effect. Indeterminate because it is not -as many may believe these days- a bubble.

Nakamoto proposed Bitcoin in 2008, opening a wide range of development possibilities far beyond a means of payment. 


What a cryptocurrency is? It is encrypted software, i.e. it cannot be understood directly except through decryption algorithms to avoid unwanted intrusions. It works in a protected environment - in an encrypted network - with a consensus protocol (in other words, a procedure accepted by the parties). In other words, bitcoin is a cryptocurrency. 

It is also a Digital Asset.

This is important to understand because it has eventually served as a store of value or safe haven value. In a financial environment it means having a backing of other currencies for strategic investments. For example, the refuge value par excellence is gold. This changed after the creation of the petrodollar by Nixon but it is the model that is currently being returned to because of the intrinsic value of gold as a precious metal and because historically it has been maintained as a reference of value in the vaults of the great centers of power.

Cryptocurrency is, simply put, a distributed ledger (distributed in blockchain, blocks of data that function - it is a simile - as box upon box, so that by being placed within a chain, in principle it becomes impossible to modify). It can also be understood as a spreadsheet where, in addition to establishing product categories and their quantity, a value is set and signed. In short, of course. 

This is the closest thing to what they did in myriad cultures throughout history. The Sumerians, for example, started writing out because of a need to make debt records. That is, the clay tablets that have been found in the tens of thousands at Nineveh and other Sumerian cities began as ledgers.

Do cryptocurrencies comply with the principles of physical money?

Before the Bretton Wood agreements in which the dollar became the gold-backed reference value, until the elimination of gold as a reference in 1972 by Nixon, money in gold or silver had to express certain characteristics:


It must be a scarce good that prevents falsifying the effort to obtain or produce something.


It must maintain its integrity and store information over time.


It must be divisible for flexibility of use no matter the type and quantity of the thing.


It must be easily transportable.


It must be recognizable by those who use it.


Each unit must be perfectly fungible.

The cryptocurrency meets all these characteristics. The algorithm with which bitcoin is produced, for example, increases the mathematical difficulty of solving a problem, making the process known as Proof of Work (PoW)-based mining slower and more energetically demanding. Durability is permanent as long as the entire Internet does not disappear.

Even in the case of cryptos that cease to be used, the record will remain in the network for life. Divisibility is as practical as naming a fractional, for example, when bitcoin became as valuable as a rare gem, a fractional called satoshi was created: each bitcoin is divided into one hundred million satoshis, so that even if bitcoin were to reach a value equivalent to one hundred thousand dollars, one satoshi would be the equivalent of 0.001 bitcoins.

This is one of many applications of this technology. It has immeasurable potential and many broad cultural implications. One of the most disturbing and appealing to me, as far as cryptocurrencies are concerned, is their decentralized and publicly verified nature: the wet dream of those of us who think of politics as we know it as a chair whose backrest serves only to cover the controls of the ship.

Image by Gerd Altmann on Pixabay

Author Said Orlando

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