Finally, Bitcoin breaks down and continues the downward slope towards its fundamental value of zero.
Now, we can begin to talk about a more proper application of blockchain beyond experimental payment solutions.
Since we live in the real world, and we can agree that our money needs to also be real (hence our rejection into cryptos in the first place). If we want a form of digital accounting for the exchange of resources, we can do so using blockchain and resource-backed cryptocurrencies.
So I've drafted up an example: OIL trades. You can use blockchain for other transactions such as user data or stocks, but this example should clear up the understandings of where blockchain should be implemented. (I've warned times before about using Bitcoin and other fake coins as real currencies; in short, you don't want to go there.)
Oil Trading Using Blockchain
For the global computer to log transactions, using a crypto coin called "OIL BARREL" should suffice, being backed fully by 1 barrel of oil. For any individual or corporate entity, if they have an OIL BARREL, it is able to be redeemed or transferred for the real value at numerous oil dispensaries.
We will talk about a more efficient (and in my opinion inevitable way of capturing trading events) below. But let's look now at a sample blockchain ledger with some transactions:
Bob owns 1 barrel of oil, that he wishes to give to Carla to refine and fill up her car. Alice is Bob's employer, who pays him in barrels with his paycheck. We have a factory that extracts the oil out of the ground and seals them into barrels, which is also logged into the database. We finally have that factory giving 25 barrels to another one for burning into other forms of energy.
Anytime any of these individuals can check their asset balances using a crypto-wallet, and redeem their coin for the real asset, in which it would be logged that
Bob#420189 withdrew 1 OIL BARREL.
Problems with Resource-Backed Cryptocurrencies:
Rounding Errors: Suppose that Bob went to deposit some oil into the system:
Bob#420189 deposited 0.499382 OIL BARRELS
While we can safely say that it's an accurate measure, we're operating in a flexible real world. What if there were a few drops off of the rounding, or the oil is only 98.9% pure? Would we require scanners to look at the individual molecular structures?
Suppose Bob drives his car 20 feet, below the threshold of affecting the smallest decimal. This change wouldn't be registered into the database, and Bob could theoretically extract his 0.499382 barrels of oil to give to Alice, though it's not really that much!
Perhaps eventually this could throw off transactions in the machine, and eventually there may be more OIL BARRELS than actual barrels, or vice versa.
Transactions outside of the System:
A blockchain system like this would require either the transaction system exist alongside the real world, or to encapsulate the real world with scanners and chips for all sorts of resources. Let's assume the former, that it exists alongside. What would happen if OIL is extracted from the ground and given directly to Alice? The system would misrepresent however many barrels she actually owns. This would present a problem for tax collectors and accountants.
For the latter, we can basically assume that humans would be chipped too, or something very close to the identity of the person like biometrics.
The Problem of Freedom vs. Efficiency:
Well, with every transaction requiring a biometric scanner, a chip on the oil barrels, and the potential for an AI to track and be able to improve the efficiency for creating and distributing more oil, what could this mean for people that advocate for "freedom of humanity"?
As biological beings, our bodies convert energy in the most efficient ways that it can, using cells with a specific purpose. Can we say that these cells are free and independent? Can they protest the policies that the brain imposes?
Well, they certainly don't have an ego. I'm not sure we can say that they're "free", either, as a White Blood cell cannot act as if it were a Red Blood cell. Neurons capture information but they can't capture food particles. Building a blockchain-based, AI powered machine would certainly turn us into robotic-like creatures, but it would be an immensely efficient machine, one that may even properly reward its subjects that add to the survival of the system.
After all, all of human society seems to be a fight for creating and converting energy in the cleanest way possible. It's why we created language to communicate, morals to make sure that we don't go about killing each other, and laws to have some sort of organized structure. It's why we chase money all of our lives, toiling for food, and why women tend to go for the rich asshole rather than the poor nice guy. It's why the powerful survive and the poor starve.
It's why as kids the world was bright and playful, but now you go to school and go to work and worry about the economy and chase crypto bubbles hoping for some level of freedom later in your life.
So here's a question for you, as I wrap up this post: Were we meant to be free, or is more efficiency the natural evolution? Let's talk about it.
Note: Yes, I said "gold-backed" in the previous post, but I settled on Oil in order to show the process of burning and to use a resource that's not monetary at its base.