index

Blockchain

Various thoughts on blockchain technology as I currently understand it.

Environmental impact

It seems fairly clear that right now the energy usage of popular blockchain networks like Bitcoin and Ethereum are grossly disproportional to the scale of transactions occurring on them. This alone seems like a large disincentive to using them in good conscience. Alternative blockchains using Proof-of-Stake protocols seem as if they solve this problem, but right now they are relatively niche so it remains to be seen whethere these more efficient networks will be able to take over.

Ethereum is supposedly moving to a Proof-of-Stake model that will reduce its energy consumption, but the proof will be, as they say, in the pudding and as of now there is no pudding to prove anything.

There is also the concept of supplementary services called “Layer 2 Networks” such as Immutable X which aim to aggregate transactions in a centralised manner, and then commit these transactions to the blockchain together so as to reduce the cost and energy usage per transaction. However my impression is that these networks will exists as centralised services which seems somewhat antithetical to the entire decentralised idea of blockchain and the supposed web3 future that its proponents seem to be pushing.

Decentralised finance

If nothing else, the concept of decentralised finance made possible through Bitcoin seems useful insofar as it provides an alternative to the traditional banking model in society which, no doubt, is suited to benefit some demographics more than others. By providing an alternative perhaps it will create opportunities for those underserved by the current model. However, as decentralised finance picks up more steam it may become more heavily regulated by governments at which point some of these benefits may disappear.

Complexity

The sheer complexity of blockchain seems to almost grant it a certain level of legitimacy. If one has spent days reading about a topic just to get a basic understanding of it, it seems to implore one that it must be worthwhile expending more time and energy on, in some kind of sunk-cost fallacy thinking or perhaps even nerd sniping. I wonder how excited people would be about blockchain if the underlying concepts were inherently simple and easy to understand.

Skepticism

Overall, I have various reasons for remaining skeptical to the usefulness of blockchain in our future:

• Environmental concerns as stated above are yet to be fully addressed
• Much of the problems that people argue blockchain solves appear to be social problems rather than technical ones, so I worry that people are missing the point by saying “blockchain solves X” rather than creating societal change
• So far, the only “real” use case made possible by blockchain is simply as a new way to make money
• Much of the money in blockchain appears driven by hype, likely pushed by the people that stand to gain the most from it
• The people that make the most money from blockchain technologies have probably poured quite a bit of money into it to do so, so is this just a case of the rich getting richer?
• I wonder how many people would still be hyped about buying NFTs if Ethereum were viewed as “just another currency” to pay for them with rather than some special crypto-majigger

Regardless, it seems that blockchain networks are here to stay for now, and we will have to wait and see what role they play in our future.