The words bitcoin and blockchain hit the orbit of almost daily visibility for most of us in 2017. Companies that added the word blockchain to their names were increasing their capitalization at the market in a matter of days. Exhibitions of "blockchain art" were held, where artists had to depict unfamiliar to them cryptocurrencies in exchange for a post in Facebook, along with blockchain conferences, forums and summits. The words "revolution", "evolution", and "inevitability" accompanied "blockchain" more often than others in the media. This array of information has madeblockchain in the minds of most of us synonymous to bitcoin, bitcoin has become a new stage of initial capital accumulation (a fraud in the language of ordinary people), and projects at the junction of art and blockchain have acquired a space magnitude somewhere around the Andromeda Nebula and dangerously close to the Black Hole.
Unfortunately, although the leading art publications regularly published news of the technological part of the market, they have always bypassed the questions: does art need a blockchain, why is it needed, and what are its prospects. Even today, four years after the blockchain was recognized by the art community, such materials are most often nothing but a careful reprint of the theses of their predecessors. Like hunters from Bruegel's winter fairy tale: they are simultaneously afraid to wake up a sleeping beast, and to find evidence that the beast actually does not exist.
To begin with, we would like to present a few basic theses to direct the reader's thought in the right way. They will be shown below and in subsequent articles:
1. "Blockchain" and "Bitcoin" are not synonyms or brothers. They were hatched in parallel, but at the time of creation they found each other. Blockchain is a system of decentralized records, i.e. aledger; bitcoin is a decentralized currency system that needed an equally impartial ledger. Can we separate blockchain from cryptocurrency? Yes, but they are able to give a tremendous synergistic effect in alliance. Like Batman and Joker: separately they are novelettes, but together they are a blockbuster.
2. The first mentioning of the use of blockchain in art was back in September, 2016. The Art Newspaper article then remained unnoticed, and the development of blockchain technologies had every chance to join it. The reaction at the release of the book Artists Re: Thinking the Blockchain in January 2017 was not particularly enthusiastic, although it would seem that if the artists who were in the forefront of events had undertaken to rethink something, then it would be worth it. However, the interest in the idea flared up only in June, 2017, when US$111 billion in various digital currencies appeared overnight in the hands of cryptocurrency holders - potential investors to blockchain projects - due to the rise in the value of bitcoin. And the holders of virtual billions, began to hastily invest them somewhere, realizing the precariousness of their assets.
3. 95% of all projects based on the blockchain were veiled by it in 2017, in order to eventually conduct an ICO - a crowdsourcing fundraising (as we may put it – many a little makes a mickle). As time has shown, 50% of the organizers of such projects disappeared immediately, 40% of them were thinking hard what to do with the investments received, and only 10% continued the pre-planned workafter adjusting for the weekly legislative amendments that abounded in 2017.
4. Initially, blockchain startups assumed that art was one of the best banners for successfully attracting investment through the ICO procedure. At the same time, the founders of 3/4 of art blockchain projects have never worked in the field of art before. At that time, there was a widely spread opinion that it was for the better.
5. The first blockchain projects appeared mainly in the USA. With legal restrictions on ICOs, their authors established startups using a venture investment model: round by round, from a smaller investor to a larger one. At the same time, they used cryptocurrencies, limiting themselves to using a "pure" blockchain as a recording system - pure scientific and technological interest in favor of the society, security, and transparency of all entered data. As it may be understood in this country — they were either blissful or subsidized from the top. As a rule, both assumptions were true for the first blockchain enthusiasts at the same time.
We are through with the introductory part. Next in line is a short but necessary overviewexplaining the essence of cryptocurrencies and blockchain.
Everything was simple in the past: a man killed an antelope, the other plucked a ripe bunch of bananas. The exchange took place in proportions suitable for the owners. It was very important that at the moment of the meeting, both market participants saw what they were getting and remembered each other personally. And the most important quality of exchange in kind (as economists would later call it) was that objects changed hands at the same time, activating transparency, excluding intermediaries and debt obligations.
The number of killed antelopes and plucked bananas grew, and the sense of smell told people that both products were perishable. And the one who collected a handful of beautiful pebbles and exchanged them for any product out of necessity felt the best. That was an intermediary in the form of an equivalent between natural products. The shape, size, and variety of the pebbles caused questions and fights, but soon people found an option that suited everyone in the form of gold. Its weight became decisive.
A problem emerged with gold soon. Changing hands, it was physically erased, losing weight. People did not like that, and even more so - the largest owner of gold - the state, which arose in various primary forms. The state proposed a solution: to issue an indelible equivalent of the equivalent, which corresponded to the weight of gold stored in an inaccessible place, and for which it was possible then to carry out trade transactions, i.e. money. And to make the exchange of money for gold back from the state at any moment, if your cellar or cave would seem more reliable. It seemed tohave improved the process - but then the buyer had a crisis of confidence: he/she had to (1) trust the money, risking to get false one (and it appeared instantly), (2) trust the seller setting the exchange rate at his own discretion, and (3) trust the state, which could equally refuse to exchange money for gold or start a war and lose to another gold reserve and other money.
The next 8 thousand years did not make significant changes, except for the fact that private owners of capital (banks) appeared and the market for financial transactions (deposits, loans, and operations at the stock exchange) expanded. And the people themselves settled all over the planet and acquired various states and currencies. With the emerging of computer technologies, real money was replaced by electronic payments, but that only complicated the chain: while paying with a card, the bank had to (1) verify your identity, (2) confirm that you had real money, (3) see if there was money in the bank, (4) calculate the best time for the bank to part with its money, taking into account the exchange rates of international currencies and other banks, (5) do the same with regard to the seller and (6) perform the operation itself. The number of internal transactions within and between banks could amount to dozens.
However, everything, as before, had been based on a virtual guarantee of replacement of any commodity or money with gold from the state reserve and people's trust in the state, until in 2008, an anonymous group of people known by the pseudonym of Satoshi Nakamoto (just like Banksy in art) proposed a "revolutionary" project of a digital money ecosystem called Bitcoin. What was really revolutionary: unlike the "hard" state currencies, the value of bitcoin was confirmed not by the gold reserve, but by other users of the system, who at the time of the payment said: “The first has money, the second has goods. The goods have been sent, the money has been transferred." They did not speak directly, but with a digital signature. In other words, a payment system was established that was based not on trust, but on knowledge.
What is the irony of the “revolutionary spirit”: in fact, we have returned to the natural exchange, where all parties to the transaction know each other and see the moment of the transaction, which excludes forgery. Though this time, numerous witnesses have been added to the deal, whose testimonies are encrypted with a digital code that cannot be changed or falsified. Cross-boundary character has been added: bitcoin potentially provides settlements around the world and becomes a decentralized system - beyond the control of any public or private body (except for the possibility that it has been made by a pro-governmental service of a certain country; so far no one has avowed it, but there are only four options. We may name only Japan, the others can be easily named by the readers themselves).
Why do we call Bitcoin a system when many people know it as a currency? Nakamoto's ingenious plan was for Bitcoin to be both a payment ecosystem and a unit of account at the same time. At the time of launch, the currency played the role of the service currency (used as a transaction fee), but it became independent and accumulated with the development of trust and the number of users, - just like beautiful stones in primitive ages. The procedure for the issue of bitcoins (release of new ones) was scheduled for years ahead, and the users themselves were responsible for it — with the active usage of the protocol, i.e., the number of transactions and transaction confirmations. Naturally, many powers and all financial institutions did not immediately like that: in theory, intermediation in trading operations in the turnover of bitcoin was excluded.
In the continuation of the material, we will talk about the emergence and essence of the blockchain.