How could the blockchain change transactions?
My name is Trent Fowler, and I’m a data scientist at Elementus. When I’m not helping to build the first universal search engine for the blockchain I co-host the Futurati Podcast, where we interview leading experts in quantum computing, artificial intelligence, spatial computing, and more.
This past week I interviewed our very own Max Galka, CEO and Founder at Elementus. Max joined us to talk about ransomware and privacy, the possibility of storing genetic information on the blockchain, multiple identities in the metaverse, the lightning network, and so much more.
Of these, the topic I want to focus on is Max’s assertion that the blockchain might transform the very nature of transactions, i.e. the exchanging of value. Because transactions are such a basic part of the process of coordination, this idea has especially far-reaching implications.
By way of example, Max drew an analogy to the early internet. He pointed out that detractors of the fledgling technology faulted it for being a slower, less-attractive tool for accomplishing tasks that were already being handled perfectly well. This is true to some degree, but overlooks what can happen when a new medium with new properties is used to solve a problem.
Take the example of reading the news. Skeptics of the day noted—correctly!—that not much was being added to consuming the news that wasn't already achieved by reading the paper. "Why get excited about a news website?" they asked, "when a delivered newspaper saves me the need of going to my computer, typing in a domain name, and waiting five minutes for the information to load?"
Their basic error was conceiving of ‘news on the internet’ as being essentially identical to ‘news in the newspaper’ (except for being read on the computer). What they missed was the ways in which the web would come to change the very nature of news.
Today, web applications go far beyond replicating an existing medium for consuming information--they allow you to check many accounts of a story against each other, hyperlink different conceptual threads into broader chains of content, mix text, audio, and video together, see real-time coverage of events as they unfold, share news on social media, and much more.
Similarly, critics of bitcoin point out that existing credit card processors are pretty good at handling transactions, but they miss the ways in which bitcoin can transform what a transaction is.
Max believes that the blockchain might fundamentally change transactions through at least two mechanisms:
- It could dramatically reduce the friction involved in transactions.
- It could remove the necessity of humans being involved, enabling machine-to-machine transactions.
He laid out a hypothetical scenario in which sensors spaced along a road might give and receive updates on weather and traffic conditions on the basis of minuscule bitcoin transactions.
That is, a network of sensors might offer tiny payments to get information from vehicles traveling on the road, and the vehicles in turn might offer tiny payments to get that information.
A cluster of vehicles and sensors in a given region could therefore build a far more complete and responsive understanding of local weather conditions than can be achieved with existing technologies.
(Why charge bitcoin at all, instead of simply exchanging the information for free? To pay for the upkeep of the sensor network, the road, engineering time to keep the system up and running, and to make spamming the network or attacking it more costly.)
Other possibilities, such as setting a policy for bidding on space in a queue, tipping other drivers for prosocial behavior, or making pulse pricing relatively painless, also spring to mind.
Whether or not any of this comes to pass isn't the point; the point, rather, is to think through how a radically new approach to payments and settlement might change and expand the way transactions work in the same way that the internet changed and expanded the way news worked.
Byline: Trent Fowler is a machine learning engineer, data scientist, and author, with interests in artificial intelligence, cryptocurrencies, and economics.