Depending on who you ask, blockchain technology is poised to revolutionize the world, from creating a universal currency to building a free and truly private Internet. Or, the new technology, built with a combination of cryptography and transparency, is a solution looking for a problem.
Reality probably falls somewhere in the middle. As a growing number of startups and researchers are exploring the full potential of the Blockchain, experts warn that a fair amount of skepticism is needed to fully evaluate the technology and its possible place in society.
For many individuals, even if some try to invest, blockchain technologies and their limitations remain poorly understood, leaving vulnerable people to be exploited by bad actors. Researchers from the School of Engineering and Applied Sciences at Princeton University are working to change it through education, awareness and research.
"At the outset we realized that it was a technology that was not well understood, but that many people were interested in," said Ed Felten, professor of computer science and public affairs at Princeton, Robert E. Kahn. "There was no consistent and high quality way of teaching about this technology or explaining it, so we tried to systematize the underlying unsolved knowledge and problems."
In short, a blockchain is a ledger. But unlike an old hotel register that collects dust on a counter, a blockchain book is electronically held in multiple places on the Internet. It is visible to any member of the community participating in that particular blockchain. Each copy of the ledger is held on a computer called a node; when someone makes a transaction using the blockchain, for example using virtual currency to order a pizza, the node operators perform calculations to create a new entry or block in the ledger. Each new block is encrypted using a private key from the person who bought the pizza; the new blocks are also connected to the previous blocks using additional encryption.
The combination of encryption and visibility makes the entries extremely difficult to fake. Because the calculations are performed on multiple nodes and the results are visible to the participants, the variable results would represent an immediate red flag. The distributed nature of the system means that it is difficult to control for a single entity. It also makes transactions extremely difficult to track a user.
The initial use of blockchain technology was in new forms of currency such as Bitcoin. More recently, the ability to track decentralized transactions has attracted other sectors. Companies are exploring its use for contracts, app development and international finance.
"I think this will be a story of gradual integration rather than a history of a revolution," said Arvind Narayanan, an associate professor of computer science at Princeton. "It's an interesting new technology, and many of us are working to make this technical base even stronger."
In 2014, Narayanan began teaching one of the first college courses on the blockchain, which he and Felten soon expanded into a series of online Coursera and a popular textbook. At the same time, with colleagues, former and current students, they have begun to innovate ways to maximize the benefits of blockchain and minimize risks. "There's a lot at stake, and I do not understand much about this technology," said Felten. "As independent academics, the role we are trying to do is to be B.S. spies, interpreters and detectors"
That said, Felten and Narayanan believe that the blockchain has a significant role to play, although, most likely, we still have to imagine what it will be. "In a sense, we are still looking for its main application," said Felten.
Numerous former Princeton students are attempting to bridge the unknown by becoming the first innovators in the field, including a co-founder of the cryptocurrency Ethereum and founders of several high profile companies such as Blockstack (see list below). Where these and other businesses will take depends not only on technical finesse but on imagination.
The decentralized network
The most important use of Blockchain so far has been in the creation of cryptocurrencies, such as Bitcoin and Ethereum, which are not controlled by a central bank. These currencies are not blockchain – they are abstract tokens – but their coins are recorded on blockchain. Because ownership and any transfer of ownership are recorded in the public ledger, Bitcoin system participants do not need to trust any entity. Instead, they put their trust in the technology of the distributed ledger, which is maintained by a large number of participants around the world.
Each cryptocurrency offers a limited number of coins, although new ones are created regularly and distributed as payment to users, called miners, who are the first to solve the difficult computational problems – the difficult puzzles – added to the chain. Miner computers run algorithms that perform the difficult task of creating blockchain records and solving mathematical problems. In return, they receive coins.
While this sounds abstract, Felten points out that the system actually has much in common with traditional currencies. "Most of the money we have exists in numbers on some computer somewhere," he said. "If you go to a sandwich shop, they give you a sandwich in exchange for telling a bank to move the numbers from one account to another." As the paper money continues, cryptocurrencies have a value because their supply is limited and because users can be sure that they can exchange them for goods and services. The cryptocurrencies are now trading against the dollar and their combined market capitalization exceeds $ 100 billion.
Among their major attractions, cryptocurrencies offer a way to transfer money over distances and borders without involving intermediaries that could impose high rates. In other cases, some cryptocurrencies have advanced features, including the possibility of creating smart contracts or self-implementing rules that regulate escrow agreements and other interactions.
Blockchain is still in its infancy, however, it is likely that the true purpose of its usefulness is still revealed.
"It's a kind of analogy with the early days of the Internet, where some people were very excited and made a lot of statements about how it would change human existence forever, and some said it was just a passing fad," he said Felten. "Even if he did not solve all the problems of humanity, it turned out to be quite important."
But for all the interesting current and future uses of the blockchain, he added, there is "an extraordinary amount of snake oil and exaggeration in public rhetoric". Because some cryptocurrency transactions are anonymous, for example, they are particularly attractive to criminal groups, including those seeking to exchange illegal assets. In other cases, less experienced users are exploited through "pump and landfill schemes" in which unscrupulous investors artificially increase the price of hot goods and then sell quickly, causing an accident. "There's a huge number of scams going on," Narayanan warned.
Blockchain is also extremely energivorous, mainly due to mining activities, which require specialized equipment with a high demand for electricity. Bitcoin extraction alone accounts for about 0.1 percent of total world energy consumption: more energy than some countries, including Denmark and Ireland, consume. As Narayanan testified before the Senate Energy and Natural Resources Committee in August, this poses a serious problem for the use of energy and the environment.
Encode the future
Since the early days, Princeton researchers have struggled to mitigate some of these problems and better understand the technology and its potential.
"Bitcoin is portrayed in the media as a leap in the mind of a mysterious person, but I was co-author of an article on the technologies of the components of cryptocurrencies that cited the literature of the early years", " said Narayanan. "Continuing to improve on cryptocurrency and blockchain will require much more computer science research."
BlockSci, for example, is a database that Narayanan and his colleagues have built to analyze hundreds of millions of Bitcoin transactions. BlockSci allows them to investigate trends and answer questions such as the amount of money actually transferred and the actual amount of privacy users.
"There are many interesting scientific and commercial questions we can ask with these data," said Narayanan. A recent survey revealed, for example, that bitcoins are changing hands less often than previously thought – about 1.4 times a month – suggesting that individuals use coins less as money and more as investments.
Princeton students and graduates are also pushing the field forward, creating apps and writing software to improve cryptocurrencies; founding companies based on the blockchain; and finance these initiatives. Joseph Lubin, one of the founders of Ethereum, graduated from Princeton in 1987 with a degree in electronic and computer engineering.
A recent venture, Basis, founded by Princeton computer alumni Nader Al-Naji, Lawrence Diao and Josh Chen, recently raised $ 133 million for the effort to build a cryptocurrency that maintains a more stable price than conventional "currencies" at blockchain base. The Base system creates the virtual equivalent of a central bank, which automatically adjusts the supply of currency, based on demand.
A recent Princeton alumni venture, Blockstack, aims to build a fully decentralized blockchain based Internet. According to co-founders Ryan Shea (2012 BSE in mechanical engineering and aerospace) and Muneeb Ali (PhD in computer science), Blockstack, which is registered as a public utility company, was inspired by important problems that they perceived in the way Internet works, including concerns about personal data and autonomy.
"We saw that the lack of competition and the lack of control for the end-user really hampered freedom, security and privacy around the world," said Shea. "We wanted to create a new system that empowered the individual and allowed each of us to own our data."
Instead of Facebook, by storing and checking all of a person's data on their servers, for example, a Blockstack user could easily migrate his or her digital identity from the app to the app, if desired. Blockstack software for profile management and account protection is already available, as are decentralized messaging applications and document editors. Next year, the company plans to release its tandem blockchain with a Blockstack token and discussions are under way to create a decentralized Twitter.
"We are working with many teams to help them create any apps they want on the platform," says Shea. "The most interesting things are less about the exact details of the underlying infrastructure we provide and more about how we allow developers to create new experiences."
Blockstack is already coming to the starting point, inspiring and allowing other Princeton scholars to create new technologies. At the Keller Center for Innovation program in Engineering Education eLab Summer Accelerator in August, a team of new Princeton graduates launched Afari, a Blockstack-based social media platform aimed at restoring data privacy by returning data to property and privacy, and giving everyone the same chance to be heard and rewarded.
"Social media is so disgusted, in our opinion, that it is necessary to redesign it from scratch," said Avthar Sewrathan, co-founder of Afari and graduate in computer science in 2018. Blockchain, said the team, makes it possible. "When you make a post on Afari," said co-founder Felix Madutsa, "your data is not stored with us, but rather stored on a decentralized system that you, the user, controls and possess."
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