A Green Guide to Cryptocurrency (Podcast)

Blockchain can be a force for good. Here’s how.

Earlier this week I blogged about the social forces that led vegan billionaire Sam Bankman-Fried down a path to financial ruin. Today, I’m releasing a podcast of someone who’s trying to do crypto a different way – with planet-affirming values literally built into the currency. 

Listen to the conversation I had with Helena Merk on her startup (Spirals Protocol) and how blockchain technology can solve the problem of trust — and heal our planet!

This is a complicated conversation with a lot of jargon. But the central theme is this: crypto, at its highest potential, can solve the problem of distrust. We live in a world where no one knows what to believe. Is climate change real? Was the election stolen? Is that chicken from Costco really free range? Mechanisms that can objectively determine what is true, that cannot be corrupted by some central authority, could answer these questions in a definitive way – and help us solve some of the world’s biggest problems. That is exactly what blockchain technology promises. 

But to understand how, one has to understand some of the basics of crypto. The conversations around crypto are highly technical; things are made worse by acronyms and insider terminology that often seem unnecessary. So I’m breaking down some key terms, to the best of my ability, to help all of you understand why so many people are increasingly excited about crypto – and not to make money but to make the world a better place. 

Blockchain. A technology that uses a decentralized network to validate some statement as true. For example, “Wayne wrote this blog.” It’s not vital for most people to understand the exact technology behind blockchain, though Wikipedia explains it well. The important points for this conversation are that blockchain is a technology to create trust that is decentralized and objective.

It’s decentralized in the sense that it’s driven by a network of nodes, each of which is validating the truth of the proposition. The creator of the network has no control.

It’s objective in the sense that the mechanism for determining truth is coded into the network. No one can bias the results.

Cryptocurrency. Blockchain technology is most famous for its use in validating statements about ownership of a coin, e.g. Bitcoin. Most currencies depend on some central authority for their validity. The US government, for example, can decide in a day’s notice that the penny will no longer be a true currency; indeed, there has been some discussion of exactly this idea. It prints things on the physical currency, to show they are valid, and heavily regulates digital currency, such as the dollars in your bank account, for the same purpose. Disputes about ownership of traditional assets are adjudicated by the government, e.g., when two parties fight over a contract in court.

Cryptocurrency replaces the government with a network of computers. They create digital coins, either through proof of work or proof of stake (see below). These coins, in turn, are transferred from one party to the next through a system of decentralized and objective validation. Imagine a room of 1000 perfectly honest observers witnessing the transfer of a gold nugget from Jim to Bob, each recording the transaction and affirming “Jim passed ownership of the nugget to Bob.” 

While currency is the most famous use of blockchain, the technology need not be limited to propositions about ownership, whether digital coins, or so-called non-fungible tokens (NFTs), such as the famous bored ape. In principle, blockchain can be used to verify other sorts of propositions, e.g., whether an election result is valid or whether Costco’s chicken is truly cage-free.

Bored Ape NFTs have blown up the internet.

Node. A node is simply one of the many computers in a blockchain network that assist with validating a proposition as true. (A node is like one of the 1000 perfectly honest observers witnessing a transaction between Jim and Bob.) Blockchain networks often incentivize the creation of new nodes by giving rewards to the creator, e.g., by giving a digital coin. Node creation happens via “proof of work,” traditionally, but in recent networks, it is done by “proof of stake.” See below fore more on that.

Mining/Proof of Work. Mining is the mechanism through which traditional cryptocurrencies add trusted nodes to their network. Let’s go back to the 1000 people witnessing the transaction between Jim and Bob. Imagine that we’re trying to add people to the witness list. How do we know they are as trustworthy as the first 1000? Well, we put them to work. We have all 1000 of the witnesses get out their pickaxes and start mining for golden nuggets. When a new miner joins the group, and proves that he’s willing to work with the team in mining gold, he gets added to the witness list once he successfully mines a nugget. Voila! We now have 1001 witnesses – and more capacity to prove that statements are true (or not true). In blockchain the work at issue isn’t actual physical mining; it’s solving a mathematical problem that’s difficult to solve but easy to verify. But the result is the same. All the nodes in the blockchain network can see that a new node has solved the problem, when it’s been solved, which proves that the new node is a trustworthy member of the team. 

Proof of stake. The problem with mining, in the digital world, is that we’re not actually mining a resource of value. We’re solving arbitrary math problems. And this requires an enormous amount computing power – and energy. A single cryptocurrency, Bitcoin, uses more energy than the entire nation of Argentina! Proof of stake is a mechanism to add nodes to a network, and validate true statements in the network, that depends on an investment or “stake” by the node. Imagine, in the case of Jim and Bob and the 1000 witnesses, that a new witness showed up and said, “Hey I don’t really want to work. But I’ll put up a $100 to join you all, and you take it away from me if I’m ever wrong as a witness. But if I’m right, give me $1 for every statement I make.” The 1000 witnesses quickly agree, and now they have 1001 witnesses, and each has a reason to be honest because if they are ever dishonest they will lose their stake!

Web 3.0. This has many meanings to many people, but it’s usually used to describe a decentralized internet. The current internet depends on both physical infrastructure, e.g., servers at companies like Amazon, and digital rights management, e.g., ICANN, the organization that regulates the use of website addresses, that is highly centralized. That means they are also susceptible to corruption and bias, e.g., if Amazon decides to stop hosting content that criticizes it for animal cruelty. Web 3.0 aims to solve this problem by making the internet decentralized, through blockchain and other technologies. Imagine a system where, instead of Amazon deciding how much bandwidth you get to host things on the internet, a decentralized network of computers, using an objective algorithm that measures interest in your content, allocates bandwidth to content creators.

There’s a lot more I could say about these concepts. In theory, blockchain technology could be used to completely transform, not just our currency, but the way we interact with each other. Imagine, for example, a system of “currency” that attempted to measure and validate, not economic value, but the total impact of every transaction on the well-being of living beings and the planet. So, if you attempted to engage in a transaction that polluted the air or water, it became impossibly expensive – and this expense was engineered into the very code of the currency! This is the promise of the very early stage green tokens. And the same concepts applied to green tokens could be applied to many other important social causes, including animal rights.

There is also, of course, a dystopian world where crypto goes bad. Helena and I hint at this possibility at the end of the podcast, when she talks about how some things just shouldn’t be turned into a currency, e.g., the value of human connection and community. Trying to measure love in a coin — or code of any sort — may destroy the value of love! She may be right, but what’s indisputable is that this technology is already having an impact – and it behooves all of us who care about the world to understand how we can ensure it’s as positive as possible. 

But, again, while there’s much more that could be discussed, this should give folks a sufficient intro that the conversation with Helena – and my general optimism about crypto – becomes a little more clear. Don’t hesitate to reach out, though, if you have questions or corrections about any of the above!