In Episode 56 of Hidden Forces, Demetri Kofinas speaks with Hedera Hashgraph President Tom Trowbridge about the latest news from the company that made its splash on the Hidden Forces podcast less than one year ago.
In the Fall of 2008, equity markets were in free fall. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite were all on their way towards making lows not seen since the mid-1990’s. Stock valuations would collapse by more than fifty percent, prominent investment banks filed for bankruptcy while others fled into the rapacious arms of their competitors or under the safe umbrella of Congress and the Federal Reserve.
At the same time as Schumpeter’s ghost was rattling his chains on Wall Street, Satoshi’s white paper was making the rounds on a cryptography mailing list in some obscure corner of the Internet. “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party,” he wrote, directing the several hundred recipients to his paper, "Bitcoin: A Peer-to-Peer Electronic Cash System.” “Merchants must be wary of their customers,” he writes, “a certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.” This last bit was only partly true. It was Satoshi’s paper, after all, that made it untrue. Though few realized it at the time, the Bitcoin whitepaper marked the beginning of the Internet’s second act. In the ten years since its publication, we have seen an explosion of interest, development, and investment in protocols built from Satoshi’s underlying blockchain technology, designed to execute commands across a distributed, trustless network of computers. Ethereum led the way with its pioneering Virtual Machine, able to execute smart contracts across a permissionless network, and since, several competing ledgers have cropped up, each claiming some advancement over prior versions.
But what if, in their bid to create a faster horse, developers and investors alike have missed a crucial turning point in the evolution of the Internet. Satoshi’s white paper, brilliant as it was, never claimed to be the blueprint for a world computer. As the bitcoin network has grown, so too have the costs of its transactions, and this is because adding blocks takes time. Deciding what chain to build on requires the network to agree on which chain is the longest, and when chains are growing too fast, it’s hard to tell the difference. In the last several years we’ve seen an explosion of brainpower devoted towards creating workarounds to the scalability problem, but we’ve also seen a quiet, committed effort at building alternatives that aren’t saddled with blockchain’s limitations.
Perhaps the most interesting of these alternatives is hashgraph, built as a directed acyclic graph, it’s fundamental innovation is not in its architecture, but in its consensus. Even to those who see promise in hashgraph, the technology can often seem like magic. One might describe its consensus protocol as nothing more than a compression algorithm for the casting of votes. What would have once taken an impossible amount of time, can now be accomplished in a matter of seconds. A voting algorithm for a global network. It was Claude Shannon, the father of information theory, who stated it most clearly: “The fundamental problem of communication is that of reproducing at one point either exactly or approximately a message selected at another.”
In its first iteration, the Internet solved the problem of communication across a network without the need for a trusted third party, but making definitive statements about that communication has always required an intermediary. In order to harness the full power of the Internet, we need to do for data processing, computation, and storage what the existing suite of Internet protocols have already done for communication. A revolution for a new generation. The Internet’s second act.
Producer & Host: Demetri Kofinas
Editor & Engineer: Stylianos Nicolaou
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