Nick Szabo, often considered to be a digital currency genius, has an understanding of a wide range of issues in and around the technology industry. Better known as a pioneering researcher for his work in the blockchain and cryptography domain, some suggest that it may even have been Nick who used the pseudonym of Satoshi Nakamoto to launch the world’s first decentralized cryptocurrency, bitcoin.
Unraveling the Socio-Economics of Bitcoin
In his blog, Unenumerated, Nick Szabo writes about his views and ideas for blockchain while also highlighting its socio-economic benefits. The following is a selection of his talks.
Since the start of this decade, Greece has found itself in the middle of a debt crisis. The government took bailouts from the International Monetary Fund (IMF) but has subsequently failed to repay any of it.
When the government had nowhere to go for additional funds, it froze out its banks, flushed out capital, and labeled it a haircut.
Because of accounts being frozen in the mediterranean country, people were not able to withdraw their money. As a result, and due to the growing shortage of cash, stores were paying their suppliers in ‘scrips.’
A crucial feature of such a ‘currency’ is that it is closed within the chain. Ironically, the economic isolation offered by scrips is pretty much how the bitcoin economy works currently.
Citizens in Greece could look up to bitcoin as a solution or even a potential replacement to their present day, privately issued, scrips.
Bitcoin, Blockchain and the Future of Europe – Interviewed by Tom Upchurch for WIRED https://t.co/ByzVIvLu3q
— Yanis Varoufakis (@yanisvaroufakis) December 25, 2017
The blockchain is a long chain of transactions and bitcoin is the longest blockchain, simply because of its age. It is secure and till date, there has not been even one report of financial loss due to an overt hack of the main blockchain.
While the Blockchain itself is scalable, but a major secret to bitcoin’s success is social scalability.
The predominant direct benefit of social scalability is trust minimization. A blockchain can increase trust in the network by reducing vulnerabilities and risks associated while transferring money using digitally recognized conditions or contracts.
Nick defines social scalability in the following:
“The ability of an institution-a relationship or shared endeavor, in which multiple people repeatedly participate, and featuring customs, rules, or other features which constrain or motivate participants’ behaviors- to overcome shortcomings in human minds and in the motivating or constraining aspects of said institution that limit who or how many can successfully participate.”
Another massive player in the way of smart contracts, encouraging trust in code, and ultimately the variety of scalability Szabo refers to, is the Ethereum network.
Vitalik Buterin’s creation enables dapps to run using smart contracts. A smart contract is a pre-programmed software defined with its own rules. The code also governs how it will work once it goes live on the ethereum blockchain.
The basic idea behind implementing smart contracts was to reduce human intervention on the blockchain and also cut down costs.
It is the code, at the end of the day, that verifies whether a condition is satisfied or not before releasing funds. From here it becomes clear the importance that sheer science is playing in developing a society in the 21st century.
Looking at Tomorrow’s Revolution
Today, science finds its applications in a multitude of fields. While governments are funding various research projects, it is important that states are not allowed to sponsor or back scientific theories at the expense of other approaches.
Communities must then be democratic in accepting new scientific research without any form of bias: It is essential that we redesign scientific institutions to minimize bias. The source of funding of these bodies must be scrutinized to ascertain if they are being funded to promote a skewed view or not.
Thus, what better way of scrutiny than via open-source coding platforms and distributed ledgers?
Brilliantly explained in the article “How to succeed or fail on a frontier,” Szabo describes how the Chinese regime, at its peak in the fifteenth century, used its large fleet of ships as a show of strength and prosperity while the Portuguese went sailing across the world and drew up trade colonies.
The Portuguese empire would have never been able to match the might of the Chinese, but its efforts reaped rich dividends during trades.
It could be said that NASA has replaced the Chinese empire in the present day in deep space exploration. In the allusion, it isn’t farfetched to assume the crypto-genius is pointing to cryptocurrencies and blockchain technology as the next technological armada.