This post is based off the talk by Andreas Antonopoulos “The Five Pillars of Open Blockchains”. I have altered my post title to “The Five Pillars of Cryptocurrency” because a true cryptocurrency, in my opinion, would have an open blockchain. Otherwise, it is simply a private encrypted digital token that does not embody the true purpose of cryptocurrency.
One of the main advantages of cryptocurrency is that it allows individuals to be independently sovereign from their government. The only way for that to be possible is for cryptocurrency to be open, borderless, neutral, censorship resistant, and public.
As Andreas Antonopoulos states…
I’m interested in blockchains that are open, public, borderless, neutral, and censorship resistant. Have you heard that expression? … If you’ve watched any of my videos you’ve probably heard me repeat that thing again, and again and again.Andreas Antonopoulos, The Five Pillars of Open Blockchains
So theres the blockchains that are open, public, borderless, neutral, censorship resistant and then theres the other kind which are – bullshit.
Andreas proposes that not everything needs a blockchain. Some things are better suited for private databases without blockchain. However, for blockchain appropriate functions, he makes an exposition on the five pillars (or factors) of open blockchains (or cryptocurrency).
The Five Pillars of Cryptocurrency:
Below is the video of Andreas Antonopoulos explaining the five pillars of open blockchains, or as I call it “real cryptocurrency”.
An open cryptocurrency by definition is accessible to everyone. Anyone can access it, anyone can participate in it. No one needs authorization or verification of IDs/credentials. You just need to download the software.
Anyone can use an open blockchain, without permission. It is simply open. Andreas expands on this, that even non-humans can use blockchains. Meaning, machines and/or programs can use blockchain to transact.
Never before have non-human entities been able to own/spend/earn money. That is how open true cryptocurrencies are.
Purely international, global. Just as the Internet has no borders, neither do true cryptocurrencies. It does not matter where you are geographically, the blockchain exists everywhere.
Andreas brings up an interesting point here. When crossing borders via airports many custody desks demand that you declare if you are transporting greater than $10,000 USD worth of “currency instruments, or convertible instruments.”
He states that he has Bitcoin, but is he transferring or transporting anything? He has private keys, which are just numbers, and they are not the actual Bitcoin, they are more like a PIN. And people transporting credit and debit cards worth greater than $10,000 USD do not need to declare anything, since all they have is a PIN.
Our laws, customs, culture, border rules are designed with the idea that money “is somewhere”, physically in a location, either here or there. Likely a relic from the gold/coinage era that carried into the fiat cash era, that did not change when we started using electronic fiat.
What happens when money is not here or there? What if it’s everywhere? Now we have a new, weird problem. Andreas gives the example of tweeting a Bitcoin transaction… did he transport money? Hard to say. Some would argue yes, some would argue no.
Money has become information that has no physical form, no physical presence and does not exist in any place. It is not a thing of place, but of the mind.
The concept of neutrality in blockchain and cryptocurrency means that a cryptocurrency can be moved/transferred from one account to another without interception or questioning. Neutral means that the cryptocurrency is yours to send or receive from whoever, whenever, wherever.
The blockchain does not care who is sending Bitcoin (or another cryptocurrency) to anyone else, nor why it is being sent or to whom it is being sent. It is agnostic to accounts, people, reasons – it is neutral.
This sounds radical, but it is the way the world worked only a few decades ago, for thousands and thousands of years. People paid with gold and then gold-backed bank notes. Even modern fiat was used with great freedom until a few decades ago.
Censorship Resistant Cryptocurrency
Censorship resistant means that an authority cannot stop the transfer of funds from one account to another (one person to another). Andreas goes on to posit that money is a form of communication, much like speech and that to censor it is a form of oppression.
Who, where, what, when, why and how someone spends their funds is an expression of their interests, political alignment, social groups, etc, and therefore is an expression of communication.
The idea is that money, as an integral part of communication, can be afforded the same sanctity as a human right, to be able to send and receive funds without censorship.
Andreas draws parallels to how religion and state were separated hundreds of years ago, and that now, money and state should also be separated. When the government has control of the monetary supply/policy, then they can exert controls and manipulation that ultimately can destroy the value of the currency. Printing money to finance wars or devaluing the currency to make trade more attractive. When you destroy your economy, you hurt your citizens, the same people that the governments’ sole purpose is to serve, protect, support. Destroying people’s money and thus their ability to provide for themselves is an indirect form of violating human rights.
When finance and the government are intertwined, the banks corrupt the government and the governments corrupt the banks, in a positive feedback loop. You take away this possibility when you separate the government and money/finance, which would imply censorship resistance in money, blockchain/cryptocurrency.
Public is the idea that everything you do is verifiable on the network by anyone else. This suggests that it becomes very difficult to cheat, if anyone can see the movement of funds, then anyone and everyone becomes a social watchdog. An informal, global, social, regulation of sorts.
Public also implicates that anyone can work on the network and extend it. Andreas uses the example of a Korean payment network that requires you have a Korean phone number. You cannot built an app/software that extends that to non-Korean phone numbers, because it is a private network. The same thing for PayPal. You can connect to PayPal, but PayPal handles the transaction. You cannot build an app on top of PayPal to extend their services.
Conversely, with true cryptocurrencies, you can build and extend on the protocols. You can build an app that allows Bitcoin (or Ethereum or XRP) payments for Uber, your local restaurant, various countries etc. You can even write code for applications that allow security token offerings, smart contracts, or your very own cryptocurrency.
Markshire Conclusion on The Five Pillars of Cryptocurrency
The video above is a fascinating exposition of the real potential of open blockchains. I find that Andreas has a knack for asking the hard, open ended questions. He challenges the status quo.
The radicalness of true cryptocurrencies that are open, borderless, neutral, censorship-resistant and public is that not only do you not need permission to participate, but no one can not allow you, you cannot be stopped from accessing it. It’s not just open, it is uncloseable.
Just as he said, cryptocurrencies are like the Internet itself, unstoppable.
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