Why People Get Religious about Bitcoin

The Bitcoin phenomenon isn’t about a bunch of people who all believe the cryptocurrency is a good investment. That’s part of it. But for many, the belief in Bitcoin’s power to transform society runs much deeper: it’s almost an article of faith. Where does this fervor come from? To understand, it’s important to keep in mind that “the blockchain” is not really a thing.

This piece first appeared in our new twice-weekly newsletter, Chain Letter, which covers the world of blockchain and cryptocurrencies. Sign up here – it’s free!

A blockchain is a shared, permanent, encrypted data set, created by a network of computers according to a set of software rules. But there are different ways to set up those rules. The word “blockchain” is like the word “vehicle,” explains Peter Van Valkenburgh, director of research at Coin Center, a blockchain-focused think tank. Saying you are putting something on “the blockchain” is like saying you are going to use “the vehicle” to travel overseas. It makes more sense to talk about “cars, trains, boats, or rocket ships, depending on what it is about the vehicles that we are interested in,” Van Valkenburgh argues.

Bitcoin is one type of vehicle that gets the most attention, and deservedly so. Its blockchain was the first, it’s been running the longest, and its network is the biggest. To many people, Bitcoin’s breakthrough is just as much about social innovation as it is technical. They believe the new model it represents can revolutionize how people share value and do business online.

There’s a good reason for that. Bitcoin has shown that it is possible to use a network of computers, connected via the Internet, to build and maintain a set of valuable shared data—in this case a ledger of account balances that prevents counterfeiting—without the need for a trusted authority. Think about that: from a bunch of anonymous computers that have no reason to trust one another, an ironclad network has emerged that can support a whole currency. Literal money—what could be a more valuable target for hacking or compromise? And yet there it stands, unperturbed amid the chaos of the Internet.

It’s heady stuff. And little wonder, then, that people think the incorruptible math underlying Bitcoin’s blockchain could, if adapted properly, make business processes in a range of industries vastly more efficient. (For more, see “Why Bitcoin Could Be Much More Than a Currency.”)

Still, Bitcoin faces big questions over how it should modify its software to adapt to its growing popularity. Keeping the system running uses vast amounts of energy. And its blockchain, though encrypted, is public, meaning transactions can be traced. Bitcoin’s younger cousin Ethereum generally shares these characteristics. Meanwhile, some industries that stand to benefit most from blockchains—finance and health care, for example—are also highly regulated with respect to data privacy and security. Some say the best course is to pursue different kinds of vehicles, like blockchains that have been modified to require permission to access.

To Bitcoin acolytes, though, that misses the point. Bitcoin’s scaling issues, its energy consumption, and even its privacy challenges can be addressed through research and development, they argue. They say “permissionless” blockchains like Bitcoin and Ethereum, whose networks are open to anyone who wants to use and build on them, can form a new kind of Web in which we won’t have to trust banks, corporations, or governments with our valuable data.

In other words, as author and MIT blockchain researcher Michael Casey argued in a column for CoinDesk last week, open blockchains could “save us from the Internet’s original sin.”