A better description of "blockchain": mechanical clock

When people with a business background ask you, “What is blockchain?”, point to your watch. Blockchain is often compared to the internet — but I think the best way to put it is that blockchain is the next stage in the evolution of mechanical clocks.

Clocks are to time what blockchain is to data! Before we get into that, let’s take a look at what mechanical clocks bring to the economy and how blockchain is pushing mechanical clocks to the next stage.

Fundamentally, a clock is a medium that allows everyone to agree on increments of time. We trust clocks. Imagine what life was like before we could measure time in a reliable way. Before the invention of clocks, the most reliable time markers given to us by nature were the rooster, the highest point of the sun in the day, and the sunset. Each marker changed depending on where people were and where they were looking.

The mechanical clock opened up new ways for us to manage trade, not only breaking away from the influence of geography, production and transportation, but also fundamentally changing the way we do business.

As long as participants share the same clock, they all agree on the same source of information to broadcast changes in time to them, such as the start and end dates of a business contract, or the loading and arrival dates of goods. Ultimately, a shared clock can make global economic cooperation possible. When the clock was first invented, who could have imagined what new markets it would create?

Blockchain is also an intermediary that allows participants who do not trust each other to reach a consensus on data. Before the invention of blockchain, data silos, expensive and untrustworthy interactive interfaces, and asymmetric data organization models together formed the most credible database. However, the content and structure of the information sources that people trust are different, and the "truth" obtained is also different.

Blockchain is expected to open up new ways of doing business and trading, and fundamentally change the market. If participants share the same blockchain, they agree on the same immutable source of data, which can greatly reduce the cost of verification (asset relationship), that is, the cost of verifying who holds the asset or whether a specific contract condition is met. Blockchain provides a digital view of the past that all participants can quickly view at very low cost without asking other participants in the network what "version" they see. Now, everyone is thinking hard about what new markets blockchain can bring.

Mechanical clocks do not store past data, they only represent the present. Blockchains do not represent the present, but aggregate past data. For the state of a piece of data to be recognized by a chain, a consensus process that postpones the writing of data is required (this is like a group of auditors in a conference room reviewing multiple ledgers and then creating a master ledger), but once the data is written, each participant can verify that the past data has not been tampered with through complex mathematical formulas (cryptography). Like a well-functioning blockchain, mechanical clocks are actually highly decentralized (i.e., there are many people providing accurate time; in addition, people also run their own timers).

Another point that may confuse blockchain novices is the difference between public and private chains. The difference between the two lies mainly in the restrictions on network participants, which is also similar to mechanical clocks.

Open (permissionless/public) networks are open to everyone and use cryptocurrency as a reward to incentivize participants who secure the network. Ironically, the less participants trust each other, the more secure the data is, because each participant will work hard to ensure that there are no "bad actors" in the network. With mechanical clocks, trust between participants is easy to establish because the final arbiter of truth is the designer of the master clock that is recognized by all participants. If you have ever been late for an important meeting, you have felt the organizational power generated around the mechanical clock.

Today, closed (permissioned) networks are somewhat awkward and face more challenges in terms of usability. Imagine if you created your own “time” construct and tried to get a group of people to use it. Since it is common practice to use traditional business contracts to “artificially build trust” between participants, these contracts cannot compete with traditional business contracts if they are not written into the right code and put on the network so that all participants can understand the relationship, thus creating friction. Those who try to create more centralized blockchain models often find that blockchains are not that useful due to privacy concerns (for example, in health care) unless they can set up the right incentives. Again, the same is true for mechanical clocks. If you can’t reach consensus on the current time in a low-cost way, it may be cheaper to hire an intermediary to inform everyone of the meeting time (imagine messengers riding fast horses to deliver invitations to balls between kingdoms).

Just as people who wear watches occasionally check the time against a master clock, I believe people will in the future refer to a large, trusted blockchain to increase trust, even if it is just a fingerprint (hash value) of data uploaded periodically by a private chain to a public network (such as Ethereum) (which also helps to increase trust).

So, when you think about how to describe blockchain, try this one: Wear a watch.