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Three Primary Uses For Blockchain.

Updated: Oct 17, 2022

“You’re using blockchain? Seriously? Why?!”

Remember when everyone was talking about “tokenizing the world?” (That expression always reminds me of one of those old school Wheel of Fortune rooms with a bunch of crap with price tags on it, and that one contestant that always panicked and ended up with matching wire dogs for like $500.) By the end of this year absolutely everyone was going to be up to their elbows in virtual currency, which, according to most people, are basically Pokemon trading cards. But we’d all be rich! rich! rich!, swimming into piles of gold coins like a technological nation of Scrooge McDucks. But the end of the year is on the horizon, and our collective dives into swimming pools of money has yet to happen. What went wrong? Did something go wrong?

There’s a lot of misinformation about blockchain technology. What it does, what it should do, what it shouldn’t do. But what the hell is it, and when do we use it?

What is blockchain?

It’s basically an accounting system that mixes transactions up and stacks them together so you can track the transactions, but it’s really hard to for someone to sneak into the chain of transactions and pretend they’ve been there all along. To access the blockchain, you need a wallet, which also holds your tokens.[1] Wallets are anonymous – they are identified by random letters and numbers. So, unless you name your wallet or otherwise identify your wallet,[2] all of your transactions are public – but the identity of the parties to the transaction stay private.

Okay, public transactions between people (who aren’t identified) that are hard to fake. I can hear your brain spinning, trying to figure out how that results in the giant piles of McDuck money.

Can we use blockchain for everything?

No. Definitely, absolutely no. Most of the time, you’ll want to use federated (old school) internet with its centralized database structure and low-code/ no-code shortcuts. Blockchain is slower, expensive to build, and really, really hard to pivot.[3] Move fast and break things? You can really only do half of that in blockchain – and it’s not the good half. These are based on centralized database structures, which makes building cheaper and faster, and makes using the app or platform cheaper and faster, too.

So what are the use cases, already?!

There are three main use cases:

1. Identity. Blockchain is great for securing identity and creating identity that is both obscured and discoverable. Anonymity is a major tenet of blockchain, which would be far more successful if hackers and scammers didn’t insist on using it as a weapon instead of a shield. Blockchain can keep information confidential, but still make sure people are qualified for access to things, actual humans, and more. For those who don’t trust governments and corporations to keep their identifying information confidential, this is

2. Finance. Blockchain is great for transferring funds across borders (or any distance) cheaply and securely, creating assets that can be collateralized or broken into pieces (fractionalized), and creating applications that use financial tools (like lending and getting interest rate returns). Note that real use of financial tools is not about generating returns from something that doesn’t do anything. That’s a Ponzi scheme. Real financial tools involve a clear method for gaining a return – like you loan someone money for their business and they pay you back with the revenue. If you put your money into a box and it magically is supposed to come back with more money, you either have a living something that looks like money and reproduces, or a scam. One is significantly more likely.

3. Ownership. This one is probably the use case people are most familiar with. The ability to track transactions around one token makes it easy to see who has ownership of the token at any point in time, and you can check the token itself to see what rights it offers. The ability to offer a wide array of rights isn’t done well yet, but is easy enough to fix once someone gets around to caring about this. This includes things like NFTs (asset ownership tokens) that can track provenance of art, ownership of land, intellectual property rights, and even partial or temporary rights, like a lease to a property you own.

Anything outside of these areas has a tough uphill battle to show why it belongs in blockchain. But some applications or transactions may have a portion of that falls into one of these three areas, in which case the transaction will able to split the part that belongs in blockchain in a blockchain back end, while the rest is processed by traditional internet. And that, my friends, is the world of web3!

[1] More or less. We’ll talk more about wallets and what they do in another blog.

[2] If your name is Jack Dolan and you name your wallet “Jack Dolan’s wallet” or something clever, or you call it Taco Tuesdays – which wouldn’t identify it ordinarily, but then you tell everyone “Hey, I named my wallet Taco Tuesdays!” it’s harder to hide. Or you tell everyone you own the Azuki NFT #8233, so when someone looks for the wallet with that NFT, they also see what else you have. So please – don’t do any of these things. They’re stupid.

[3] Ethereum’s merge, which occurred in September 2022, was originally planned in 2017. That’s a 5 year pivot. Aircraft carriers are more agile.

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