Decrypting the Cryptographic Revolution
Since ancient times, the currency has evolved according to the needs and innovations of mankind. From shells used as exchange currencies to stamped gold coins, to the banknotes we use today, every step of this evolution has been a reflection of the technological and social advances of its time. Today, we are at the dawn of a new monetary revolution: that of blockchain and cryptocurrencies.
And as per Cicero, a prominent Roman philosopher and statesman, “History is the witness of times, the light of truth, the life of memory, the teacher of life, the messenger of antiquity.”
Inspired by this ancient perspective, we seek to decipher the ever-evolving world of cryptocurrencies. To truly grasp the trajectory and impact of blockchain, it is crucial to understand its origins and the challenges it aspires to overcome.
Let us embark on this journey through time, because history often has a surprising way of repeating itself.
Blockchain: a response to monetary needs changes.
Blockchain is much more than just a technology; it embodies a solution to issues deeply rooted in our history. Born from the 2008 financial crisis and the unceasing quest for transparency and security for our digital transactions, the blockchain has been shaped to meet these specific requirements.
To fully appreciate its scope, let us travel back 6000 years, to Mesopotamia, the birth place of the first “currency”. Forget our familiar coins and notes for a moment. This primitive “currency” was actually a system of accounting, a register of entries and exits from a warehouse. This system would not have come about without the advent of writing — a real technological revolution. In this perspective, the currency emerges as one of the first concrete applications of this scriptural technology.
And what is the relevance of this observation? Today, we are at the heart of a transformation comparable to blockchain and cryptocurrencies. Just as writing has facilitated the establishment of a traceability system for exchanges, the blockchain offers a decentralized, transparent, and unalterable registry documenting each cryptographic transaction.
Thus, just as writing was a technological lever for the monetary system in the past, blockchain is now positioning itself as the backbone of the world of cryptocurrencies. It transcends the simple frame work of Bitcoin or Ethereum, just as in the past, writing transcended the simple management of registers in Mesopotamia.
The Beating Heart of Cryptocurrencies:
Behind the term “blockchain” lies an innovative technology that promises to revolutionize the way we exchange values and information. To understand its potential, it is crucial to understand its essential components.
Peer Network (P2P): Communication and exchange of information are made directly between all participants in the network, without a central intermediary. This decentralization ensures the efficiency, resilience and resistance of the network to censorship and attacks.
Messages (Transactions): They reflect user actions, such as cryptocurrency transfers. Without these transactions, the blockchain would be static, unable to record or reflect user activities.
Consensus Rules: These criteria determine how to validate and accept transactions and blocks. They guarantee the consistency and integrity of the blockchain. Without them, disagreements would arise, leading to inconsistencies and potentially fraud.
Machine to State: It validates transactions according to consensus rules, allowing the blockchain to change state securely.
Blockchain: All validated transactions are recorded in a transparent and immutable manner, ensuring traceability and auditable.
Consensus Algorithm: This tool allows participants to agree on the current state of the blockchain. Without a reliable mechanism to validate transactions, confidence in the blockchain would be compromised.
Invitation System: It motivates participants to maintain the integrity of the network. Without appropriate incentives, the network would be vulnerable to attacks and fraud.
Digital Marble
After exploring the fundamentals that make up the blockchain, one question naturally arises: How do these components articulate in the vast world of cryptocurrencies? If blockchain is the underlying technology, what makes it so special when it comes to digital currencies?
The answer lies in the way we perceive and interact with money in the digital age. Having a cryptocurrency does not mean that we have a set of bits stored somewhere. It is actually a little more abstract and yet very concrete. To own a cryptocurrency is to have a right of ownership registered in the blockchain on one or more units of that currency. It’s similar to having a title of ownership for a house. You do not physically hold the house in your hands, but you have a legal document certifying that you own it.
Making a transaction with a cryptocurrency is simply altering the ownership rights in that decentralized register. No currency is physically exchanged. However, this register is not like any other. It is made unique and robust thanks to two fundamental features of the blockchain: immutability and decentralization.
Immutability means that once a transaction is added to the blockchain, it can no longer be modified or deleted. It’s like every transaction was engraved in digital marble. This ensures that no one can cheat, modify or erase a transaction over and over again, offering exceptional transparency and security. Imagine a world where every promise, every exchange, every agreement is immutable and verifiable by all. It is the power of immutability.
Decentralization, on the other hand, eliminates the need for a central entity or intermediary to validate or manage transactions. Instead, the blockchain is managed collectively by all its participants. This decentralization means that the blockchain is not likely to fall under the control of a single party, thus avoiding unique points of failure and reducing the risks of censorship or manipulation.
These features, combined, make blockchain a transformative technology. They help us not only secure our financial transactions, but also rethink how we build trust and manage property in the digital age.
The Essence of Value: Between Collective Trust and Perception
After decrypting the technology behind cryptocurrencies, one question remains, naturally emerging from our understanding: Why, in a digital world, do these bits and bytes called cryptocurrencies really have value? What makes a digital sequence suddenly as valuable, or even more precious, as gold or diamonds?
The answer lies largely in our understanding of ‘value’. What gives value to an object, service or idea? The notion of value is, in itself, both abstract and philosophical.
It is anchored in our beliefs, our needs, and our perception of scarcity or usefulness. Understanding these mechanisms is fundamental to understanding how and why a cryptocurrency can be considered valuable.
In the end, isn’t value, to a large extent, a reflection of our collective confidence in something?
When we approach the notion of value from a more academic perspective, we find that many economists and researchers have long thought about it. Karl Marx referred to value as being intrinsically linked to the labour needed to produce a good. John Locke associated value with the relative rarity of an asset. But the most revolutionary idea for our discussion is that which considers value as a social construction. As Ludwig von Mises pointed out, value is the result of subjective evaluation of individuals, not an inherent property of objects or services.
This social confidence, which establishes value, is based on several pillars. There is collective recognition of the usefulness of an object or service, the scarcity, and crucially, confidence in the institutions and systems that support this value. It is this combination of factors that determines the value we attach to things.
Gold is a fascinating example when it comes to decomposing the notion of value. For millennia, this precious material has been sought, valued and used as a currency of exchange. But what makes gold such a precious asset? Its rarity, durability and inherent beauty make it a symbol of wealth. Moreover, the social construction around gold has solidified its place as a standard of value. Societies have chosen to attach particular importance to it.
First, gold is sustainable. Unlike other metals, it does not oxidize. This longevity assures gold holders that their investment will be preserved. Secondly, the extraction of gold is a complex process, reinforcing its scarcity. Thirdly, gold is distinctive, reducing the risk of fraud. In the end, the value of gold is less a matter of physical characteristics than of collective conviction.
When Atoms Give Place to Bits
After exploring the ephemeral nature of value and how our collective perception shapes the value of an asset, it is essential to look at concrete examples to illustrate this concept. This is where the comparison between traditional values, like gold, and modern innovations, like Bitcoin, becomes revealing. How can these two active, so different in surface, share such fundamentally similar properties?
Hal Finney, the renowned cryptographer and recipient of the first Bitcoin transaction, perfectly encapsulated this notion when he said, ‘Money is not a matter of atoms, it is a question of information, of bits.’ This revolutionary perspective calls into question our traditional understanding of value. It suggests that the value of a currency, or any other asset, does not lie in its physical composition, but in the way it is perceived and used.
At the heart of this perception is the trust that individuals and society give to an asset. If we follow this logic, the value of money is not anchored in the material that constitutes it, be it gold, paper or any other material. Instead, it is the trust that individuals and society place in these materials, based on their properties and usefulness, that determines their value. Gold is precious not because of its atoms as such, but because of the unique properties of these atoms that inspire confidence and desire.
With the advent of digital, cryptocurrencies, albeit intangible, have value. People recognize their intrinsic properties, such as security, decentralization and transparency. Value becomes less a matter of matter and more a question of perception, trust and, ultimately, information.
Gold and Bitcoin, although distinct in essence — one being a precious metal and the other a digital currency — share striking features.
The first is their acquisition strategy. Whether it’s for gold, which requires significant material investments to grow and process or for Bitcoin, where mining is a sophisticated computer process requiring a significant computational power, the difficulty of extraction is intrinsic to their value.
The second is their rarity. The limited supply of gold on earth and the planned ceiling of 21 million Bitcoins guarantee a finite supply for these two assets. Both are also durable, gold being known for its oxidation resistance and Bitcoin for its robust blockchain technology.
Finally, decentralization is a key feature. Gold, as a natural resource, is beyond the control of a central entity, just like Bitcoin, designed to be a decentralized currency.
These similarities reinforce the idea that, although different in form, gold and Bitcoin have been adopted as value reserves due to the trust and properties they embody.
Graved in Stone, Coded in Blockchain
With a renewed understanding of how society perceives and attributes value, it is now time to explore the revolutionary potential of the technology that underpins these new forms of digital assets. Beyond cryptocurrencies, this technology, known as blockchain, has implications that go far beyond the monetary framework.
It is essential to remember that many innovations, even the most disruptive, often find applications far beyond their original intention. Thus, in the same way that writing, although initially developed for record-keeping and accounting, has found uses in literature, communication and documentation, blockchain, despite its notoriety as a technology behind cryptocurrencies, is about to revolutionize many other areas. We are at the dawn of a new era where blockchain could become the fundamental foundation on which many systems are based, transforming operations in a multitude of sectors.
Let us look back at history: in Mesopotamia, every new dawn brought discoveries. The inhabitants, already advanced in their manners, having given birth to one of the earliest systems of writing, were able to formulate laws in a tangible way. At the heart of these codifications, the famous Hammurabi Code stood proudly on a pillar, serving as a guide for every citizen, enlightening the rights and responsibilities that shaped their daily coexistence.
Millennia later, in 2015, an echo of this innovation resounded. Vitalik Buterin, a young programmer, accompanied by his collaborators, introduced Ethereum to the world. More than just a digital currency, Ethereum introduced the idea of smart, autonomous contracts engraved in code rather than stone. These contracts, like the Hammurabi Code, perform predefined tasks in a transparent and immutable way, creating a bridge between the past and the present.
From ancient Mesopotamia to today’s digital age, our perception of law has evolved dramatically. In the past, our legal principles were engraved in stone, embodying what we called the ‘code of law’. Today, in the digital age, we code our contracts and adopt the philosophy that code is law.
It is not a mere metaphor. Today, contracts come to life in the blockchain, executing with automated precision, without bias, instantaneously. If the stone stake was once chosen for its durability, today, the blockchain takes the relay like a digital marble, offering durability that transcends time.
Revolution or Evolution?
It is time to look at the platform that pushed these concepts to their paroxysm. This platform that, while taking inspiration from its predecessors, has chosen to break conventions and forge its own path.
Ethereum was born out of an aspiration to fill the perceived gaps in the world of cryptocurrencies. Although Bitcoin has been revolutionary, its primary application as a currency has left room for a platform offering more flexibility and diverse applications.
Towards the end of 2013, Vitalik Buterin, a young programmer passionate about Bitcoin, explored ways to expand the capabilities of existing cryptocurrencies. He became interested in Mastercoin, one of the first protocols to try to add new features to Bitcoin. In October, he proposed to Mastercoin’s team a vision of a platform offering more flexible and scriptable contracts. His idea, though innovative, went too far from Mastercoin’s initial vision.
Faced with this impasse, Vitalik realized that instead of constantly adjusting existing blockchains, why not develop a universal platform capable of supporting a multitude of applications according to the needs of developers? This innovative thinking was the starting point for Ethereum.
A Revolution for Innovators
While Ethereum is emerging as a pioneer, reshaping our perception of blockchain, it is crucial to explore how this platform shapes the future of cryptocurrencies and decentralization.
Ethereum is not just another blockchain; it’s a revolutionary platform that offers a rich ecosystem for decentralized application development. Unlike its predecessors, such as Bitcoin, which focused primarily on monetary transactions, Ethereum has gone much further, offering unprecedented flexibility to developers. Thanks to its architecture, even a beginner can transform an idea into a functional application, without drowning into technical details.
This platform can be compared to a form of ‘Blockchain as a Service’ (BaaS). Just as the ‘Software as a Service’ (SaaS) model has transformed access to software, Ethereum changes the situation by offering a robust blockchain infrastructure, on which innovators can build without having to deal with the subtleties of the underlying technology.
At the heart of Ethereum is the promise to democratize blockchain technology. Innovators no longer have to reinvent the wheel or build a new blockchain for each idea. Instead, they can capitalize on the existing Ethereum ecosystem, thereby catalyzing an explosion of innovations that have the potential to transform many sectors.
How Ethereum Redefines Blockchain
As we talk about technological advances, Ethereum’s smart contracts are emerging as a truly revolutionary element. These smart contracts, both programmable and self-executable, have transformed the blockchain landscape. They automate a multitude of processes, from financial agreements to decentralized voting systems, ensuring transparent and immutable execution.
The scope of applications is impressive. Whether it’s managing supply chains or designing complex financial solutions, smart contracts have pushed blockchain beyond monetary transactions. They provide developers with a versatile tool to innovate, responding to diverse needs.
Ethereum has not only simplified the entry into the world of blockchain for developers, but has also opened up a universe of opportunities through its innovations, including smart contracts. With Ethereum, developers are not hampered by technical limitations. Instead, they are encouraged to explore and implement their most ambitious visions on a robust and adaptive platform.
This platform is not just an evolution in blockchain technology; it is a renaissance of it. It has transformed our blockchain design, evolving from a transaction mechanism to a platform that drives an ecosystem of decentralized, innovative, and interoperable applications.
The Dawn of a New Age
At the edge of “Web 3.0”, we embark on a journey into a digital space where trust, transparency and decentralization form the pillars of every online experience. Instead of merely being complementary, these principles are the foundations on which each digital interaction is built.
Ethereum embodies this revolutionary vision. In this new landscape, traditional barriers to innovation are virtually non-existent. Through cryptography and blockchain technology, trust is intrinsically established, making traditional intermediaries obsolete.
Every developer, whether beginner or expert, has the opportunity to harness the wealth of Ethereum, transcending the constraints of the centralized systems of the past. The result? A spring of innovation and collaboration, all supported by a technology that values transparency and integrity.
Ethereum has not just followed the footsteps of Bitcoin. It has drawn its own path, broadening the horizon of possibilities, turning blockchain into a foundation for innovative solutions.
However, this raises a fundamental question: how has it been achieved? How did Vitalik and his team materialize this bold vision of Ethereum? To answer these questions, we need to go back to the roots of this innovation, where vision meets technological reality.
Ethereum, the World Computer
When you refer to Ethereum as the “world computer”, you may wonder what it really means. To clarify this notion, it is essential to understand the ethereum rows. It is characterized as a “determinist state machine, virtually unbounded”.
This may seem complex at first sight, so let’s unmystify it together.
The term “determinist state machine” means that Ethereum works predictably: give it a specific input, and it will always generate the same output. It is this predictability that strengthens users’ confidence in the platform. Furthermore, Ethereum’s “practically unlimited” description suggests its almost infinite possibilities.
Imagine Ethereum as a universal database, accessible to everyone and on which everyone can build. It is constantly updated, and every user sees exactly the same thing. This is the essence of a “globally accessible singleton state”, guaranteeing transparency and integrity without fault.
The real driving force of Ethereum is the Ethereums Virtual Machine (EVM). It’s the space where everything comes to life, from smart contracts to the most elaborate transactions. The EVM acts as a universal translator, interpreting and executing a myriad of instructions securely.
Let us go back a little bit into the history of computing. We have gone from computers that occupy whole rooms to smartphones that hold in the palm of our hand. With each evolution, we have seen greater integration and greater efficiency. Today, we are increasingly outsourcing our storage and computing power to the cloud. But Ethereum offers us to look even bigger.
Rather than relying on a centralized data center, Ethereum relies on thousands of nodes scattered around the world. Every transaction, every smart contract is handled in a decentralized manner, ensuring unprecedented security and resilience.
With Ethereum, the idea of outsourcing is not limited to computing power or storage. It is about outsourcing trust, validation and execution. Users do not need to trust a central entity. Trust is intrinsically integrated through the cryptography and decentralized nature of the blockchain.
Ultimately, Ethereum is not just another blockchain or another cryptocurrency. It is a vision, a platform and a revolution. It shapes the future of the Web, paving the way for a world where decentralization, transparency and innovation are at the forefront.
As we explored, Ethereum redefines not only what it means to be a blockchain, but also how we interact with the digital world. As we enter this new era, it’s exciting to see the countless innovations that Ethereum will continue to catalyze.
From Digital Currency to Utility Token
Building a “world computer” like Ethereum poses a significant challenge: ensuring its resilience against disruptive attempts. Imagine the consequences if a user launched an infinite loop, a series of instructions continuously running. This would monopolize computing power, causing slowdowns or blockages for everyone.
Anticipating this scenario, Ethereum has implemented a clever solution. Instead of providing unrestricted access to its resources, it has adopted an economic structure to ration its computing power.
Every action on Ethereum, whether it’s a simple transaction or the execution of a smart contract, requires “gas.” This “gas” is a unit that measures the necessary computing power. To obtain this gas, users exchange ether, Ethereum’s currency. The more resource-intensive an action is, the more gas it requires. An infinite loop would cost an astronomical amount, discouraging any malicious attempts.
However, gas is more than just a measurement. It has initiated the concept of a utility token. Beyond simply paying for transactions, ether represents a “right to use” Ethereum. This has given rise to a new wave of applications where tokens, based on Ethereum, can symbolize goods, services, or concepts, all powered by gas. This approach has transformed our perception of value and exchanges in the digital realm.
Written by Youssef Gharbi
