That was the blockchain as it was then. But to explain what the blockchain has now become is a far more tangled story to tell.

What we know for certain is that powerful interests are keen to leverage the potential of a database system which, like Alpha 60, depends on brute force logic rather than subjective assessment to quantify what value really is. The real question is: for what purpose? And cui bono from experimental blockchain projects such as Ethereum, 21 Inc, or Digital Asset Holdings that celebrate a system which never forgets? To understand this, we, like Lemmy Caution, must account for the relevant and subjective history of finance.

First off, finance is and always has been the story of economic allocation, wealth rationing, and command economics. If markets are a voting machine for the goods and services of society, finance is the thing which determines who gets to vote and why.

Less frequently observed is that finance is also the story of scaling, netting, and trust.

To wit, consider the two classic options diners might encounter at the end of a group meal out. Option one: each participant settles his or her share of the bill with the waitstaff directly—a process which can be lengthy, arduous, and frustratingly acrimonious—or option two, one of the group pays up on everyone’s behalf on the mutual agreement he or she will be paid back at a later time (accounting for any additional offsetting debts incurred in the meantime). You know the score . . . “It’s okay, I’ll get this one, because I owe you from the last time we went out.”

The former amounts to something known in banking circles as a gross settlement system, while the latter illustrates something more akin to a netting process.

Suffice to say, the latter is evidently quicker and more efficient on all fronts. Yet, it’s also more risky to the payer, who might have to wait a long time before being paid back, if at all.

Hence, payment systems depending on netting processes invite credit risk into the system. Those which don’t, boot efficiency (and scaling opportunity) out.

Taking risk on society’s behalf and managing it accordingly, however, is the way financial intermediators justify their existence. When done right, banks downsize these risks by vetting the networks they operate in (knowing their customers, their reputations, and how they are likely to behave) or by diversifying and scaling the ebb and flow of payments to ensure they’re never so one-sided that they are left exposed. When done wrong, they misassess behaviors and invite the sort of systemic imbalances which spur financial crises and panics.

In that respect, banks balance the system’s need—for the purpose of economic planning—to assume that certain behaviors are set in stone against society’s desire to operate in a free system in which anyone can change their mind.

Only when we understand that the right to change our minds, to act irrationally, to behave selfishly, or even to think paradoxically is the risk in the system, do we understand to what extent a financial network that eliminates all risk is also one that annihilates our liberty and our right to make mistakes at all.