The single critical output of a blockchain is creating trust where previously impossible. While this feature delivers compelling value for many use cases (bitcoin for money, standards setting and data sharing for permissioned blockchains, audit trails and protection against liability in supply chains), the most novel use case has been something unexpected: the birth of a new type of social structure to provide goods and services. The early examples of this new type of social structure have shown themselves to be incredibly effective at providing those services to their users.
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Many historical developments, whether technological or social, were relatively unappreciated in their early days. Their utility is compared against the existing order of things: steam engines against animal-drawn carriages, paper money against gold, and so on. Eventually, their paradigm-shattering nature becomes evident to all, and a rough transition takes place. Blockchain technology seems like it is on the verge of that same transition.
When Bitcoin was first revealed in 2008, its potential was visible to only a tiny group (Nakamoto, 2009). Over the last ten years, Bitcoin slowly gained ground, and in the process, it birthed generalized Blockchain Technology (BT). What was challenging to see in 2008 is now on the edge of clarity: BT is a dramatic technological step into the future because it enables social coordination that would be otherwise impossible (De Filippi, 2016).
The single critical output of a blockchain is trust, upon which social coordination is built, provided that a specific set of rules have been followed (as determined by the consensus algorithm), you can be confident that information in a blockchain is accurate, and you can audit the entire history of additions and changes to that information (Namasudra et al., 2020; Zheng et al., 2018).
While this feature delivers compelling value for many use cases (Bitcoin for money, data sharing for permissioned blockchains, audit trails, and protection against liability in supply chains), the most novel use case was something unforeseen: the birth of a new type of social structure to provide goods and services (Li, 2019). Automated and decentralized protocols were generated within a network that controls transactions, but the individuals do not even need to know or speak to each other, as their trust in the system is on a token-based incentive scheme (Voshmgir, 2020). These social structures are generally called protocols or Decentralized Autonomous Organizations (DAOs) in the blockchain community, and they have a unique advantage over previous social structures (clans, empires, and corporations) in producing wealth. DAOs are the highest form of a smart contract. They are run by rules created by members through a consensus process, which are then written into a set of contracts run through a computer code, thus, enabling the automated management of a distributed organization (Sims, 2020).