The Problem

The problem, in a nutshell, is that our money currently depends on trust in a third party for its value. As many inflationary and hyperinflationary episodes during the 20th century demonstrated, this is not an ideal state of affairs. Similarly, private bank note issue, while it had various advantages as well as disadvantages, similarly depended on a trusted third party.

-Nick Szabo unumerated blog, 2008

A Well Known Controvery

You'd be hard pressed to find anyone who hasn't heard of bitcoin, or the term blockchain, but while everyone who isn't hiding under a rock knows about them, very few people actually have a solid understanding of what they are and why the came to be. Even within the blockchain world very few people really get it. Even those touted to be blockchain gurus and developers, many of them have no clue what the actual origin is and what it was really meant for.

What is the Origin & Why it Matters?

Most people believe Satoshi Nakamoto to be the inventor of both bitcoin and blockchain but in actuality that is not entirely true. While it is true that bitcoin was the first realized blockchain, it is not the first to have been written about conceptually. Many years before the bitcoin white paper came out, in 1998 Nick Szabo first wrote about what he called Bit Gold which as Skye Grey once put is clearly, "a direct precursor to bitcoin".

The reason this is huge is because it shines light on what the true purpose behind the controversial new technology is. So, since Satoshi was not the inventor of blockchain but rather, the first to bring Szabo's vision into fruition, it would also make sense that Szabo's other works might help define the intended purpose of the blockchain.

What is Bitcoin?

To put it plainly bitcoin is the very first proof of concept for the new technology known as blockchain.

So what is blockchain?

The easy answer is that blockchain is simply a peer to peer network built on top of a cryptographically secure, distributed (public) ledger that can not be altered once written to. The word "public" is in parenthesis because contrary to popular belief blockchains do not have to be public. Plenty of non-public blockchains exist though they (should be) auditable by those who are using it. Typically though, and for most of the proposed use cases the blockchain ledger is more of a public utility both usable, and auditable by all.

The Purpose of Blockchain

Digital gold is a term that has been thrown around a lot in the blockchain space recently. It seems like every time I look at twitter I end up reading at least one post/article that takes bitcoin and makes the allusion to gold. Another very heated discussion within the blockchain community is about whether bitcoin must be useful for everyday transactions such as paying for a few gallons of gas and/or a candy bar at the gas station.

When it comes own to it, blockchain has multiple intended use cases, but its purpose comes down to one single thing that is commonly referred to as trustlessness. In actuality there is no such thing as true trustlessness, which is why many prefer the term trust-minimization. The sole purpose of blockchain is to provide us with an alternative to the system described in "the problem" quoted by Szabo at the beginning of this article.

To provide us with a new method for carrying out important tasks such as record keeping, transferring value, and executing contracts. One that is more resistant to corruption because the large-scale systems we have in place now just don't seem to be working out very well on that front. Thus the blockchain provides us with an autonomous and mathematically secure system of trust that is verified and can be audited by all participants in the system.