Blockchains

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Abstract

Departing from their original design as cryptocurrencies or alternative payment systems, blockchains are increasingly marketed as a generic technology that can be deployed for a wide range of use cases. Although, from a technical perspective, blockchains are meant to serve as records of transactions, they are often portrayed as platforms or technologies enabling transactions. What started out as a crypto-anarchist dream is now poised to disrupt traditional commerce. More specifically, the decentralized character of blockchain technologies is meant to disintermediate commercial exchanges, lower transaction costs and empower sellers and buyers alike. eBay and Amazon have created efficient online marketplaces supported by complex technical infrastructures and an intricate web of legal agreements regulating their use. Despite their popularity, however, they are often criticized for being centralized, i.e. controlled by a single entity that manages their operation, restricts who can trade on them and prescribes what can be traded. For many, such centralization and intermediation contradict the spirit of the Internet – the latter was supposed to be an open, egalitarian network enabling novel economic structures and direct forms of co-operation. It is claimed that blockchains, enable the creation of more advanced, decentralized transacting platforms. Purportedly, their superior technology enables a total reliance on code, obviating the need for any centralized entity controlling their use and/or operation. Centralized entities, being operated by humans, are prone to error and political as well as commercial bias. In contrast, code is objective and impartial. While one cannot trust centralized entities or commercial intermediaries, one can trust the code. In the popular blockchain narrative the ability to trust code is, somewhat confusingly, referred to as “trustlessness.” From a technical perspective, however, the term denotes the ability to confirm the truth of an event without recourse to a trusted third party in an adversarial environment where no-one can be trusted. Purportedly, once it is possible to trust the code underlying a marketplace, it is no longer necessary to trust centralized operators or, in fact, rely on any traditional institutions. In parallel, a subset of blockchain technologies, so-called “smart contracts” (self-enforcing programs that embody legal obligations) are promoted as methods of eliminating counterparty risk by technologically guaranteeing performance. Claims as to the transformative potential of blockchain technologies are often embellished with ideological undertones that, at times, seem to contradict logical reasoning. “Decentralization” or “trustlessness” are presented as ultimate values that must be strived towards – even if their implementation leads to commercially undesirable results and may hinder the widespread adoption of blockchain technologies.