What makes a good blockchain? | RP 94

Business, Media & Technology

1 – What makes a good blockchain? (The 7 design principles & why they matter)

Today we’ll be studying blockchain’s 7 design principles, then we’ll apply them to 3 crypto projects from my Twitter feed this week.

But first, why study design principles in the first the first place?

Why study design principles?

Design principles are guidelines that inform how designs are created and evaluated in various fields, such as graphic design, architecture, and design. These principles help designers make informed decisions on how to make designs that are visually appealing, functional, and meaningful.

In the context of technology, design principles outline how a piece of technology is meant to be used. They lay out the problems the innovation is meant to solve… And give us a criteria by which to evaluate the various use cases and applications in the industry.

Blockchain’s design principles outline the ideal scenario for what it’s supposed to accomplish. By understanding them, we can evaluate how well popular projects like Bitcoin, Ethereum, and Solana and newer ones like Polkadot and Avalanche execute on blockchain’s vision. With enough knowledge, we might also suss out early warning signs of potential failures like FTX and LUNA.

For example, we can evaluate which blockchain has the most secure and effective verification and consensus mechanism to decide on data integrity, how well a blockchain allows for a cheap and easy exchange of assets between individuals while only divulging necessary data, and how a blockchain handles anonymity, user identity validation, and data ownership.

The 7 design principles of blockchain

In the book Blockchain Revolution, academic and leading business thinker Dan Tapscott, outlines seven design principles for the blockchain:

1. Networked integrity: How well does the blockchain establish trust between participants and allow them to transact without relying on third parties?

2. Distributed power: How does the blockchain reduce the need for a central authority and distribute power away from a single point of control?

3. Value as incentive: How well does the blockchain align the incentives of the stakeholders in the network?

4. Security: How well does the blockchain’s safety measures discourage malicious actors from tampering or altering the data stored in it?

5. Privacy: How much privacy, ownership, and control over their personal information does this blockchain provide for its users?

6. Rights preserved: How well does the blockchain recognize and enforce ownership and intellectual property rights?

7. Inclusion: How well does the blockchain offer economic opportunities and access to financial services to individuals who are currently excluded from traditional systems?

Practice: Analyzing recent crypto projects

OK. So we learned about blockchain and design principles. We now have a criteria to assess breaking news and cutting edge new projects as they come. Let’s apply what we know so far and do some quick analysis of some news from this week:

• Article: A Crypto Future.

  • Summary: This article lays out the crypto landscape as of 2023, including developments in Defi, stablecoin, and VC funding. It also argues that 2026 is an inflection point for crypto where it will make an impact in energy and science.

  • Analysis:

    • There are still concerns around security (principle #4) and ironically, that protocols are mostly maintained by centralized parties (principle #2). Couple of insights from this:

      1. If crypto wants to hit the mainstream, these issues have to be addressed. (Not to mention, speed and efficiency issues.)

      2. Keep an eye out for companies that are innovating with these two principles in mind. Whoever brings a good-enough solution to the market will have solved a valuable problem.

      3. Public blockchains that are leveraging peer-to-peer networks have gotten a few wins under their belt, vs private blockchains. (#1)

    • Digital asset adoption is picking up outside of North America (#7, yay!). It’s also picking up in industries outside of finance like decentralized science, paving the way for verifiable attribution in scientific breakthroughs (#6). All good things.

• Company: Worldcoin.

  • Summary:

    • Worldcoin is a cryptocurrency project that wants to establish Proof of Personhood as a way to validate people’s identity on the Internet. They do this by scanning users’ irises. The machine then uses their distinctive pattern to create a cryptographically secure World ID. This unique ID allows the user to preserve their online identity. It also helps online services distinguish between bots and humans.

    • In other words, Worldcoin is trying to replace the CAPTCHA. How do you know if a user is a bot or a human? Worldcoin’s approach is to create unique hashes from people’s iris patterns to verify that they are in fact, humans and not bots. It’s trying to help us fulfill principle #5: privacy.

  • Analysis: I’m not going to comment on how Orwellian this sounds. I’m here to critique the merit of the idea. So here we go.

    • Same as the first article, security (#4) and distributed power (#2) continue to challenge Worldcoin, like many new blockchain projects.

    • Proof of Personhood via a uniqe World ID: this method seems less annoying than CAPTCHA — getting CAPTCHAs wrong seriously wounds my pride — but the outcry around this project is mainly around how invasive it seems to scan irises. Isn’t there a less invasive way to do this?

    • Another objection: Sure, the iris scans are destroyed after use and Worldcoin claims to be a protocol, but how well does it distribute authority (#2)?

      • As we learned last week, protocols are preferable than humans because they are more objective. But who maintains that code? And where does that code live? Sounds like centralized power to me. Hmm. (Granted I didn’t dig too deep into Worldcoin. I just went off this one press release.)

    • By requiring an iris (which everyone has) vs a piece of government ID for verification (that not everyone has), Worldcoin can in principle, create a more inclusive Internet (#7) where people own their information (#5).

    • Cool side note: This also means that Worldcoin might be the first crypto project that knows for certain its 2 million users are individual humans (versus let’s say Coinbase where one user can have multiple accounts).

• Project: Cabin’s Network City.

  • Summary:

    • Cabin has launched its network city, composed of 20 coliving neighborhoods for remote workers and creators. Membership is via token holding or subscription. Inclusion in the property directory is also through token holding, staking, and community voting. (You can learn about Cabin in general in my essay.)

  • Analysis: Ah. The organization I worked with last year. I’ll try to be as unbiased as possible (because I do have a soft spot for them).

    • This analysis is a bit more advanced. Cabin is not a crypto organization; it’s a community that uses blockchain technology and applications to further its mission. Putting the strength of Cabin’s mission aside, let’s examine how crypto-native it really is.

      • Cabin has a main working group. It’s First Fellowship is its startup team, made up of 6-10 individuals. They do most of the heavy lifting in terms of imagining and executing its product roadmap. But proposals for new projects and budgets are brought to the greater community. Any tokenholder can vote via quadratic voting, which ensures that people who hold more tokens don’t necessarily get a bigger vote than those who hold less. (#2)

      • Cabin’s Citizenship can be purchased annually for 0.2 ETH. But if an individual has at least 1000 ₡, they automatically receive the pass. (Here’s my Citizenship NFT if you’re curious.)

      • You can’t buy ₡; you can only receive it from other members for contributing to the community. (#1, #3, and #7)

      • Cabin’s City Directory is curated by folks who hold ₡ABIN. New neighborhoods need to hold ₡ABIN to apply and receive approval to join the network. (#1)

    • Cabin continues to be at the cutting edge of applying crypto and blockchain to real world problems. We’ll need to wait and see how it fulfills the other design principles as its thesis plays out in practice… But I’m excited about what the team has built, so far.

So what?

I’m not trying to be an armchair critic of these projects. There are many ways to fulfill the design principles. Each project is trying to figure out which methods are the best. Plus, I don’t know if there ever will be a project that scores a 10/10 on all seven principles. Or whether these principles will remain constant through the years.

But that’s not the point.

My point is this: As consumers, creators, and operators on the Internet, innovation in this space directly affects our personal lives, for better or for worse.

As students of business, understanding blockchain’s design principles allows us to evaluate ideas by them. We can offer truly informed opinions on trends that others either dismiss offhand or hype up blindly.

In other words, the design principles gives us a starting point through which we can think critically about crypto and blockchain.

This way, our lives and livelihoods won’t be beholden to fickle billionaires and a capricious market.

History & the Arts

2 — How did humans form complex societies?

The Agricultural Revolution allowed our hunter-gatherer bands to settle down into towns and cities. The availability of food — farmers produce more food than they consume, thus provide for a population — allowed our tribes of 100-150 individuals to grow into towns, cities, kingdoms, and empires of thousands, of hundreds of thousands, if not millions.

Quick timeline:

• In 8500 BC, Jericho, one of the largest towns in the world, had a few hundred individuals.

• By 4000 — 5000 BC, settlements around the Fertile Crescent had tens of thousands of individuals.

• In 3100 BC, lower Nile Valley swore allegiance to the first Egyptian kingdom.

• By 2250 BC, Sargon the Great’s conquests established the Akkadian empire — the first of a long line of imperialists, like the Assyrian, the Babylonian, Persian, and of course, the British Empire.

But let’s run it back. Dunbar’s Number suggests 150 people as a cognitive limit to the number of people with whom we can maintain stable social relationships.

150 was also the typical size of a hunter-gatherer society. Beyond this, it became difficult to maintain social cohesion and cooperation within the group.

So. Once the Agricultural Revolution was in full swing and the first Baby Booms were sprouting all over the world, how did humans continue to cooperate in their larger groups?

Part of the answer, according to Sapiens author Yuval Noah Harari, is in our shared beliefs.

Harari calls these imagined orders.

Imagined orders

To make sure everyone knew their place, the first imagined orders sought to create hierarchy in society.

Hammurrabi's Code reflected the belief that people were not equal before the law. The Code stratified people into male and female, then into slaves, commoners, and nobles. A commoner's life would have been cheaper, but so were their fines.

Contrast this to our modern belief in equality. The American Declaration of Independence — a foundational document for our modern times — states that, "We hold these truths to be self-evident that all men are created equal".

Here’s the key insight: It’s not about whether Hammurabi's Code or the American Declaration was correct.

The Sumerians’ belief in inequality helped them cooperate and thrive against other would-be conquerors.

Our shared belief in equality allows us to work towards a collective goal as a global society.

The point is that each civilization’s imagined orders offered a solution to the problem they faced.

Each imagined order was a response to that era’s needs.

Why is this important?

Imagined orders are the basis for scaling human cooperation.

Acknowledging their invisible yet potent existence in our lives is like waking up from The Matrix. You can’t unsee it.

This is even more important today because the influence of corporations over our lives — today’s empires — only grows.

Think about it.

Without exaggeration, companies are the modern equivalent of medieval towns, cities, and kingdoms.

Technology companies like Meta, Alphabet, and Amazon have thousands of employees and billions of users. Their impact reaches farther than any ancient civilization.

Companies in general, provide us with our livelihood, our sense of security, our social circles, and in the case of brands, with our identity and self-worth.

So much of how we think and behave is tied up in these companies. That’s why it’s even more important to spot and assess their beliefs and priorities before we accept a job offer, install a new social networking app, or even, buy a new product.

Understanding how societies formed also helps us assess new societal ideas, in general. Like blockchains, decentralized organizations, and network states from the earlier lesson, which claim to herald a new kind of futuristic corporation for the 21st century.

Scary ain’t it?

Complex human societies began forming once bands of hunter-gatherers settled down and could provide food beyond the tribe. But the glue that held these early societies together, what taught them how to divide up food, how to behave, and how to settle disputes, were shared beliefs or imagined orders.

None of these are objective reality.

This is all a bit unnerving. And terrifying.

If you’ve been following along actively, then you’re probably wondering:

Stay tuned next week. 😉