Why Blockchains Can Be Counterintuitive

I remember, as a child, leaving a message on my parents’ very first answering machine. It was a little awkward, but I had a basic idea of what was happening: a tape played an outgoing message recorded by my parents, there was a beep, and then another tape recorded what I said until I hung up.

My grandfather, however, did not have such a clear mental model of this new device. I also remember standing there with my parents, listening to Grandpa Jack ramble on uncomfortably for several minutes, desperately waiting for some kind of cue that it was time to stop talking.

Sometimes the smallest bit of understanding can go a long way in adopting and effectively using new technology. I didn’t understand the science of how a phone call was made or how a cassette records sound, but I had a basic intuitive idea of what was going on when I left that message. My grandfather certainly wouldn’t be buying his own answering machine anytime soon.

New Technology, Old Brain

Cryptocurrency and blockchain technology in general face a particularly high hurdle when it comes to people’s developing an intuitive mental model. People are used to thinking about information as being recorded and kept by someone. To understand an immutable distributed database and consensus mechanism among many nodes on a blockchain requires a pretty big shift in thinking.

Michael Munger recently wrote on this site about how our brains evolved at an earlier, very different time than our current networked, technological society: “What I mean is that moral norms that served small bands of humans well 10,000 years ago — share, cooperate, punish anyone who violates the rules — are no longer very good at helping people navigate commercial society.”

The article astutely focused on what this means for people’s moral reactions to free markets. But at the heart of that issue is the fact that humans aren’t very good at thinking about complexity. In our hunter-gatherer days, outcomes were usually under the control of a small number of people, rather than emerging from the interactions of millions. Nowadays we try to shoehorn many outcomes of the latter type into the former.

No better example of this way of thinking exists than Adam Smith’s “invisible hand” metaphor. We’re much more comfortable wrapping our minds around a mystical hand creating order than we are with thinking of that order spontaneously emerging from the decisions of millions of actors.

Blockchain Intuition

Part of the reason people react with suspicion to Bitcoin and other cryptocurrencies is that nobody is in charge. We don’t come equipped with a mental model that gives us intuition for how a bunch of equal actors govern the system without intending to. It feels like a system without a leader of some kind should result in chaos.

The same holds true for other applications of blockchain technology. My guess is that applications aimed at business, where companies have R&D departments paid to challenge their intuition and get them to think about how they can profit from new technology, will take hold before consumer-oriented applications.

My own imperfect attempt at a mental model is that blockchains are many intermediaries, rather than zero, working to agree on the truth. When I introduce the concept to people, I tell them to imagine that instead of one computer at their credit card company verifying they’re under their credit limit, there are three, each forming its own independent conclusion and then voting. Now raise the number from three to a hundred or a thousand.

It’s far from the truth in a technical sense, but at least for me, it’s a quick model with which to think about the technology. While people don’t need enough understanding to program a blockchain, they need enough understanding to use one.

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Max Gulker

Max Gulker is an economist and writer who joined AIER in 2015. His research often focuses on free markets and technology, including blockchain and cryptocurrencies, the sharing economy, and internet commerce. He is a frequent speaker at industry conferences, especially on blockchain technology. Max’s research and writing also touch on other economic topics, including governance, competition, and small businesses.
Max holds a PhD in economics from Stanford University and a BA in economics from the University of Michigan. Prior to AIER, Max spent time in the private sector, consulting with large technology and financial firms on antitrust and other litigation. Follow @maxgAIER.