This chapter expounds the main principles behind blockchain technology and some of its cutting-edge applications. We first present the core concepts of the blockchain. Secondly, we discuss a definition put forward by Vitalik Buterin; we sketch out the shift toward hybrid solutions, and we sum up the main features of decentralized public ledger platforms. Thirdly, we show why the blockchain is a disruptive and foundational technology, but we expose the potential risks and drawbacks of public distributed ledgers that account for the shift toward hybrid solutions. Finally, we present a non-exhaustive list of important applications, bearing in mind the most recent developments.
We have exposed the core concepts at the heart of blockchain technology as well as some of the most significant features of public decentralized ledger platforms. After showing why the blockchain is a foundational and disruptive technology, with the potential to revolutionize the nature of the interface between economic agents, we have presented a non-exhaustive list of existing applications of blockchain technology. These applications range from Blockstream sidechains and Ethereum to digital identity providers and blockchain-based voting systems, as well as Ripple. And we have highlighted the societal relevance of these wide-ranging technological evolutions, which could effectively contribute to social inclusion in the developing world. Blockchain enthusiasts, surfing on a wave of euphoria set in motion by scores of innovative start-ups (Shubarth, 2015) currently seem to outnumber the sceptics. Blockchain Technology: Principles and Applications However, the present intellectual landscape still covers a wide spectrum of opinions, ranging from utter fervour (Masters, 2015) to ingrained pessimism (Kaminska, 2014).
The fundamental blockchain question is ultimately that of trust. Yet, as Seabright (cited by Harford 2010), “[f]actors which increase trust in society are not necessarily a good thing, because they can increase the bonds between gang members, whose main economic success comes from extorting or coercing other people”. This opinion is corroborated by Kaminska (2014), who thinks that blockchain technology has been mired in paradox from the onset. Without an inbuilt payoff mechanism, the cost of participation is dissuasive, and leaves aside all agents who do not have a direct interest in the projected consensus. Contrariwise, a payoff mechanism favours the most cost-efficient players and concentration of power; token-free blockchains are no exceptions. Finally, incentives to corrupt the system increase with the value of assets contingent on the eventual outcome of the consensus. In spite of these important reservations, we believe that more blockchain applications will emerge in the near future in areas as diverse as art, tourism and sports. While still in their infancy, one should not underestimate the promising socio-economic benefits of these extraordinary technological changes.