status

Cardano solves problems other than what the database is sufficient for

Published 28.4.2023

It is commonly said that Bitcoin is the best possible use for blockchain and that the technology is not suitable for anything else. Let's debunk this myth once and for all. Before Bitcoin was launched, there was another famous distributed network that revolutionized the media industry and started its gradual disruption. Although the exact numbers are not known, this network was used by tens, perhaps hundreds of millions of people around the world, and in its heyday accounted for up to 35% of internet traffic. We are talking about the BitTorrent network. If a distributed network was able to disrupt an industry long ago, why do people believe 20 years later that it can't be done again?

What's the bigger problem? Being cut off from your bank account or having your social network account deleted? Both are a problem. In the West, we have reliable third parties we can trust, but in developing countries the situation is different. Nor do people have access to mainstream banking services such as loans or insurance. People may not always trust third parties and look for an alternative. A distributed network can solve many real problems. I even dare to say that in many places on the planet, people need things other than volatile cryptocurrencies. Their lives will be fundamentally improved if current services can be disrupted, or if services to which they do not have access are made available. Cardano can be as or more successful as BitTorrent was.

TLDR

Blockchain solves a general problem and is suitable wherever an expensive and inefficient intermediary abuses its position. The ability to create digital scarcity and define rules that are protected by decentralization is the biggest innovation that blockchain has brought. In order to use blockchain to solve more problems, it is necessary to continue to increase its efficiency and innovate. Cardano will be an efficient social and financial operating system.

What BitTorrent has done

BitTorrent is a communication protocol for peer-to-peer file sharing, which enables users to distribute data and electronic files over the Internet in a decentralized manner. To send or receive files, users use a BitTorrent client on their computer. Users who download and share files are part of the network and help distribute the data. There is no central server that can be targeted for attack or blocked. The way the network works is that users connect to other users who have a given file and download it from them. This decentralized nature makes it very difficult to impossible to stop BitTorrent as a whole.

Such a network is essentially indestructible because no particular user is the critical point that provides data distribution. If one user were to be disconnected, other users can still communicate and distribute data among themselves.

This protocol allowed people to quickly and easily download music from the Internet for free, resulting in a drop in sales of physical media and digital copies of music sold online. BitTorrent also allowed artists to self-distribute their music, which led to the development of the independent music scene. This can be seen as a positive impact on the industry.

Although BitTorrent itself is not illegal, some people use it to illegally download and share copyright material, which has a negative impact on the industry.

Do you see parallels between BitTorrent and the blockchain industry? Cryptocurrencies are in a grey area and are only partially regulated. You could say it's a technological revolution driven from the bottom up. One part of the population didn't like copyright infringement, but the other felt free to download music from the internet without having to pay the artists. Bitcoiners are excited about the possibility of disrupting fiat currencies, but part of the population doesn't like the idea. Bitcoin fans say the same thing as users of BitTorrent. We can send BTC to each other and no one will stop us. Nobody is going to stop Bitcoin. We are making a revolution.

What happened to BitTorrent? It has been technologically outdated and copyright is less infringed than in the past. Services like Spotify have emerged that have made it possible to stream music. The same could be said about movies. So it was no longer necessary to manually download files to your computer. BitTorrent always was and still is associated with the illegal downloading of files which can be undesirable for many users. The legalization of digital distribution channels has contributed to a reduction in BitTorrent use.

Can the decline in BitTorrent's popularity be considered a failure of the revolution and a win for streaming companies? Did the Peer-to-Peer network lose because it was technologically less efficient and less user-friendly than modern cloud-based services?

You can't say that. BitTorrent is still one of the top 10 most popular Peer-to-Peer networks. It is mainly used in countries where access to digital content is limited. Many people, especially in Western countries, prefer to pay fees to be able to instantly stream any content and appreciate the fact that they do not infringe copyright.

It's worth noting that people don't care about a particular technology, they care about a great user experience. They are even willing to pay if everything is fast, reliable, and user-friendly.

You might think it would end there, but the story continues. Many artists accuse streaming services Spotify, Netflix, and many others of not getting fair compensation. Third parties continue to abuse their powerful position and the network effect they have. The problem of centralization of power is still present. Although some artists appreciate that their work reaches a broad mass of consumers, the issue of fair reward is a recurring one that has not yet been resolved. Try to guess why that is.

The fundamental difference between a database and a blockchain

Do artists need an expensive and inefficient middleman to distribute their work to their fans? Do we need banks so that one person can lend money to another? Can blockchain serve as a digital infrastructure in countries where none exists? Are social networks that don't censor content and can't delete accounts for inconvenient users better? Should all people in the world be connected not only in terms of access to information but also financially and socially?

Distributed networks are technologies that are suited to the revolution because they cannot be stopped and censored by the authorities. They are inherently global and allow for the interconnection of users who may not know each other and yet can interact with each other in a way that is mutually beneficial.

Blockchain is fundamentally different from a database in that it has no center, no one can restrict you from using it, it is available worldwide, and it is unstoppable. It is possible to set rules that no one can change and apply to everyone equally without distinction. No one can cheat, no one can be corrupted, no need to trust third parties. The services may be transparent and non-abusable by a third party. If you understand this, you probably understand how much potential Cardano has.

BitTorrent would never succeed if it were based on a client-server architecture. Cardano is a distributed and decentralized network that allows peer-to-peer communication between users. The disruption of expensive and inefficient intermediaries can continue. People in developing countries may have the same or even better social and financial systems than they have had to date (often they have none).

Some Bitcoiners are trying to push the idea that the blockchain is suited to protect a single rule and that is to ensure the existence of 21M BTC coins. They don't mind that all other financial and social services remain centralized. Other people think it's convenient to be able to define any number of rules or mint any number of tokens and protect them through decentralization.

The only legitimate transfer of value through a blockchain network is BTC. Everything else is useless according to Bitcoiners. Others think it is advantageous to be able to create an application that behaves according to fixed and immutable rules and is able to interact with tokens that can represent basically anything in the world.

Bitcoiners basically claim that all the problems of the world can be solved through the database, i.e. through intermediaries. By this, they are basically saying that they don't believe in the power of Peer-to-Peer communication between users unless they are sending BTC to each other. Thus, users cannot send other valuable things to each other such as music, books, pictures, stocks, stablecoins, debt, and many other things. According to Bitcoiners, it is always better to use a centralized exchange to exchange BTC for USD. It is even more convenient to use a centralized lending platform. DeFi is evil.

The Bitcoiners who keep saying this over and over again apparently don't understand the power of self-custody and don't believe that people can freely communicate with each other without a third party making an inadequate profit or abusing their positions.

Blockchain is not a technology suitable only for creating a fixed monetary policy. The possibilities are much greater. The power of a distributed network lies in the free communication between users without intermediaries unfairly charging, censoring, or exploiting it for their own benefit. Wherever there is a risk of abuse of power by an intermediary, it is possible to think about replacing them through a decentralized application and tokens.

Blockchain can solve a general problem, not just one specific one. A blockchain is a trust machine that ensures fair interaction between users who do not know and trust each other. Furthermore, it can serve as a globally accessible and uncensorable network that can transfer any value and in addition define rules for mutual interaction through smart contracts.

Let's go back to BitTorrent briefly. The problem that BitTorrent was trying to solve has returned. Spotify and Netflix are the current inefficient intermediaries abusing their position of power. They have taken over the business of the former market rulers, but today it is they who are similarly inefficient as their predecessors. Is it possible to use a distributed network, like Cardano, to disrupt streaming services again? Can banks and social networks be similarly disrupted? The main question is, why can't it go through the database?

A database is a tool that will always be under the control of a small group of people who can abuse their position. They can manipulate the data in the database. They can make deals in the background that are not transparent. They often misuse user data for their own benefit and in the context of competition.

There are already direct-to-fan services like Bandcamp, DistroKid, SoundCloud, Patreon, and others. Some use client-server solutions, others try to use blockchain networks. Theoretically, it is possible to build a functional hybrid solution in which the service will use streaming and blockchain protocols.

Most of the artists and YouTubers I know personally try to get around the third party they use to share content and want fans to pay them directly. Some YouTubers put some of their content on YouTube for free and offer exclusive content or other perks through their Patreon accounts. This way they can gain followers who are willing to pay for more or better quality content.

Are Patreon and similar services the ultimate solution? From our point of view, Patreon could be just another Spotify. In the short term, it is better than the existing solution, but eventually, it may abuse its position and will definitely do so when it gains more market share.

The problem is not a specific technological solution, but the existence of a third party and the fact that someone can make a decision that is only beneficial for a small group of people (CEOs, service owners, etc.) and disadvantageous for others (users).

The ultimate solution is not to build a service that is temporarily more efficient than the existing one, but a solution that is automated (or semi-automated) and does not have someone in the background who can abuse their position.

If it is advantageous to have an immutable monetary policy, why would it be less advantageous to build globally available services without CEOs having immutable rules in another industry? If the greatest innovation that blockchain has brought to the world is the ability to create a digital value, a number of tokens that can never be changed, it is surely even more advantageous to have the ability to create a digital rule that no one can change from a position of power. Anyone in the world can create digital value by minting tokens, or define a new rule by writing a smart contract.

Adoption of new technologies requires understanding and time

The ability to create a digital scarcity or rule protected by a decentralized network is a significant innovation. But it will take time for people to understand these possibilities and find a use for them. The teams are still working hard to improve blockchain technology. It can be said that blockchain is not yet a mature technology for mass adoption. We imagine that mass adoption will only be possible in another 5-10 years when there are reliable second layers and it is clear which ones are best suited to solve specific problems.

The database scales well, writes to it are very fast and deployment is relatively cheap. Blockchain does not scale well. Bitcoin writes at most a few MB of data once every 10 minutes and has a higher power consumption than Argentina.

People don't question the potential of blockchain, but they criticize the current low efficiency for real-world use. But this is a solvable problem.

Cardano creates a new block every 20 seconds and has a plan to significantly increase scalability. Ouroboros Leios PoS (input endorsers) will allow the parallel production of 3 types of blocks simultaneously. Literally every second it will be possible to create a new block. The main final block will contain only transaction references, so it can contain literally thousands, maybe tens of thousands of transactions. Cardano is 99% more energy efficient than Bitcoin. Let's not forget about the second Hydra layer, which will also greatly help improve scalability and is also applicable to the execution of smart contracts.

Cardano, but also many other projects, is able to approach the capabilities of databases to enable mass adoption. It is important that teams maintain decentralization as they try to increase the efficiency of blockchain networks.

The fundamental difference between blockchain and database is decentralization. Databases are very efficient because they are centralized. Bitcoiners like to say that the blockchain is just an expensive and inefficient database that is not suitable for anything else. Unfortunately, they overlook the technological advances that are demolishing this false narrative right before our eyes.

It is true that until blockchain becomes more efficient, mass adoption is not possible in principle. But at the same time, once blockchain technology matures, it has the potential to disrupt many industries. Disrupting social networks will be difficult, especially because of the network effect of existing services. It is much easier for blockchain to make its way into the finance sector. There, disruption is already happening. Anyone who has ever tried a DeFi service must know that this is the future regardless of the current state.

If blockchain can disrupt banks, and that is almost certain today, why can't it disrupt other industries? The only thing preventing this at the moment is the huge difference between the efficiency of the database and the blockchain. And as I've already hinted, this is changing rapidly.

A secondary problem is laws and regulations regarding, for example, copyright or the stock market. But is it really a problem? Do you really think that people will not understand the benefits of blockchain and will not amend the laws? They did in the case of the internet and the world has changed for the better because of it. Why shouldn't history repeat itself in the case of blockchain?

Conclusion

The authorities have failed to shut down BitTorrent, despite the insistence of many music companies. This network is still widely used by people. BitTorrent made it possible to distribute media content, but often copyright was violated. Blockchain will allow files to be tokenized and ensure that authors get a fair reward from fans who want to pay for content. This seems like a straightforward solution to us.

People sometimes think that only mass adoption is a success, but even that is a false narrative. If blockchain is useful for a few percent of the population, it will be a success. People in developing countries don't have access to mainstream financial services. Should local authorities ban blockchain, or encourage adoption to improve the quality of life of their people?

People in the West don't need to have a land registry on the blockchain because we trust the authorities, we have ID cards and independent courts. What if none of that still exists in some countries because the state hasn't been able to build the digital infrastructure? What if the blockchain is the only solution to provide people with an identity and to create a proof of the existence of some information somewhere permanently and transparently?

Blockchain networks are already everywhere in the world and are available to anyone with access to the internet. Blockchain will change the world and Cardano's best days are yet to come. Blockchain technology is here to stay forever and will become increasingly efficient. Databases will not disappear from the world either, but wherever expensive and inefficient intermediaries abuse their position we will be able to consider replacing them.

Featured:

Related articles

Did you enjoy this article? Other great articles by the same author