The announcement that Wiper (the disappearing messaging app) has added Bitcoin, inspired me to think a little deeper about what Bitcoin and the blockchain represent.  For those only interested in whether bitcoin (the currency) can replace its fiat competition, this post is not for you…or maybe it is, because thinking of the blockchain as a political system could greatly expand the use case for digital currencies - a technology with multiple uses could have a greater value.

For the uninitiated (aka those who have not read my book) at the core of Bitcoin and all digital currencies is the blockchain - a set of rules or protocol designed to allow people to vote on a message. The concept of voting on a message is by no means a new, but what is new is the ability for people who have never met to verify that the vote being cast is valid.  Much to the chagrin of some Chicagoans there is no stuffing the ballot box in digital currencies. Before Bitcoin the only solution to voter fraud was funneling all the votes through a trusted third party - this third party would ensure the one person / one vote rule. The Bitcoin protocol does the same thing, just without the need for a human being as the trusted third party. That’s it, that’s the big discovery and mystery that is Bitcoin - the blockchain securely automates voting.

Another way to say this is the blockchain allows a group of people to securely reach consensus on a subject.  Don’t let the simplicity of this description downplay the importance of this set of rules - never before in human history has voting been securely automated.  I am not just talking about voting on political issues, I am talking about voting on any message a group of people decide has value to them.

Heretofore, the focus of the blockchain has been its use as a currency - more specifically its use to fulfill one function of a currency - a medium of exchange. The message voted on by the users of Bitcoin is one of ownership.  Every ten minutes the Bitcoin network takes a vote on a message that reads “Alice transfers value to Bob”.  The ‘value’ is determined by the prices at which bitcoin (the currency) is trading on various exchanges. It is important to note that the Bitcoin network does not vote on value, it only votes on whether Alice possesses the right to transfer ownership to Bob.  The blockchain is silent on value which poses a challenge when trying to determine an intrinsic value for digital currencies - currently price is set by a third party, i.e. an exchange. When Alice and Bob agree to transfer ownership they reference an exchange price that is independent of the blockchain and this price multiplied by ownership units is value.

One might think of the digital currency exchanges as an independent ‘blockchain’ where every trade is a vote on value.  One difference between the exchange ‘blockchain’ and the Bitcoin blockchain is that the exchange requires only two confirmations - buyer and seller - to determine value.  On the other hand, a typical bitcoin transaction can take up to six confirmations to verify and process.  Taking the blockchain analogy one step further, digital currency exchanges are not the only exchanges that can be thought of as a ‘blockchain’. Global financial markets act the same way - every second of the trading day NYSE traders transfer ownership rights and agree on value - in fact every trade on the NYSE can be thought of as a ‘block’ and the ticker represents a real-time chain of blocks.  Of course, the primary difference is that to accomplish its task the NYSE relies on a web of carbon and silicon intermediaries while digital currencies simplify the task with full automation that is accessible to everyone.

Whether you choose to use the NYSE ‘blockchain’ or the Bitcoin blockchain to transfer ownership it is useless without a reference point for value. The NYSE has a built-in mechanism for determining and observing value - every ownership transfer is accompanied with an agreement on price - this price multiplied by ownership units transferred determines value.  Currently digital currencies lack the internal ability to observe and record price and thus they are dependent upon the exchanges for this function.  Moreover, the dual ‘blockchains’ of digital currencies and exchanges only communicate through a human interface.  It should be obvious that the Holy Grail of digital currencies would be a blockchain that also incorporates an exchange.  

So far I have focused a blockchain that contains a message about ownership or value - but what if we changed the message from “Alice transfers value to Bob” to “Alice votes for Bob”.  This linguistic sleight of hand turns Bitcoin into a political system - a system where a community can reach consensus on any subject without the need for a trusted third party.  It may help to think of a vote as a message with a non-monetary value attached. When Alice transfers one digital coin to Bob she is sending a message of support for Bob and we may naively hope that this support has an intangible non-monetary value to both parties.

The message that I am attempting to convey is that thinking of a blockchain as a political system adds multiple uses for the technology.  In fact, one could exponentially expand the capabilities by simply changing the message to “Alice votes for ____”.  In this way the possibilities for the blockchain become only limited by human imagination.

In reality, there are limitations to the use of any technology and I am not suggesting the blockchain is a panacea.   However, it is important to think about the other uses away from financial markets and value transfer.  The intent of this thought exercise was to expand the definition of a blockchain beyond a medium of exchange and in so doing begin perhaps be a spark of innovation.  The addition of Bitcoin by Wiper has the potential to illustrate what a user-friendly interface can add to the existing Bitcoin messaging network.