Yesterday, I listened to an episode of a16z podcast titled: ‘Blockchains, crypto, and web3 connections and analogies’. Sonal Choski hosted it. It featured Chris Dixon, Ali Yahya, and Tim Roughgarden.
The following are my learnings.
On confusing a blockchain with a ledger
A ledger stores transactions. A blockchain can also store and maintain transactions.
But a ledger is half of what a blockchain is. A blockchain has computational powers. It can store information and also compute.
What extra feature does the blockchain have?
Unlike a traditional computer, a blockchain can make commitments. You can write code, and it’ll run as designed forever. This commitment lets you create cryptocurrencies. For example, Bitcoin has made the following commitments:
- There will only be 21 million bitcoins in supply
- There will be no double spend
- Your bitcoin is under your control.
Another feature is, with traditional computers, the software is subordinate to the hardware. Then humans control the hardware. But with the blockchain, the relationship inverts. The software governs the hardware. The code is autonomous.
How does decentralization come in?
A blockchain can make commitments because of decentralization. It is under the control of many independent actors representing the community that own the blockchain. The blockchain can change if they have to; either to fix bugs or upgrade. But the blockchain community controls this change.
The blockchain is like a computer that lives in the sky and operates in public view. It’s open access, permission-less, and has no singular owner. Despite having no owner, it enables ownership of digital data in a way we never had before.
Crypto is the infrastructure, which includes blockchain. Web3 is what makes crypto a platform. It includes programming languages like solidity. Web3 is a whole ecosystem that has made crypto a huge movement.
Difference between crypto and internet or previous computational paradigm
Crypto is a software movement
Everything that needs to fuel innovation is at the software level. We only need to come up with better algorithms and codes. This contrasts with mobile computing, where we must build hardware devices. Or the internet where we need to lay down cables to enhance communication.
Open-source
Crypto has the ethos of building in the open. Open-source is a core piece of crypto’s philosophy. Most of the ideas are public, leading to people collaborating across boundaries and connecting ideas.
Crypto builds incentives into its infrastructure
With crypto, we have protocols that incentivize participants. They allow people to bring their computational power into the protocol and then incentivize them.
Current challenges of the blockchain
Scalability
We need to get blockchains to perform more transactions per second.
Cost
We must reduce the transaction costs (gas) people pay when performing transactions on the blockchain.
Developer experience/Education
We must learn how to build apps on the blockchain that have the desired features and are also secured. We must also understand some necessary trade offs while building on the blockchain.
User experience
We must learn the best practices people use to interact with apps on the blockchain. This will drive adoption.
Interoperability
We need to connect different blockchains.
As we address these challenges, we’ll be able to build more robust, secure applications.
Technology is the means to an end. The end is unlocking human creativity.
Image: https://www.istockphoto.com/
New to trading? Try crypto trading bots or copy trading
Blockchains, Crypto, And Web3 Connections And Analogies was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.