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Ask the Owl Ep 1: What is Blockchain for?
52 Plays10 days ago
This episode starts at the core. Why should people care about blockchain? Is everything permissionless? From concert tickets to land records, the conversation shows why blockchain matters once you stop reducing it to Bitcoin or price charts.
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Transcript
Introduction to the Policy Layer Podcast
00:00:06
Speaker
Welcome to the Policy Layer, where we talk about the real decisions shaping crypto, tech, and the future of trust. I am Silvia Sanchez, your host from the Avalanche Policy Coalition. We aim to bridge the gap between the builders of Web3 and the people that are shaping the rules. On our podcast, you'll hear from policymakers, developers, academics, and others working at the edge of tech and regulation.
Clarifying Blockchain Concepts
00:00:32
Speaker
We ask the questions that everyone's actually wondering and we keep it easy to follow. This is the Policy Layer.
00:00:43
Speaker
Blockchain gets talked about a lot, but understood clearly and slightly less. Hello, hello and welcome to Ask the Owl, some special episodes where we take questions regarding blockchain, crypto and digital asset regulation here at the Policy Layer. I am Silvia and today I'm here with the master o owl himself, Lee Schneider, our general counselor of AVA Labs.
Revisiting Blockchain Fundamentals
00:01:04
Speaker
And this first episode is all about the basics and whether you're new here or a blockchain pro, I think it's always a good idea to go back to the basics to revisit some of the core things. It's a little like Pilates, the core really matters.
00:01:17
Speaker
um Because just because something is foundational doesn't mean it's simple and it definitely doesn't mean that it should be underestimated. In fact, the basics are doing a lot of the work because if the foundation is weak, well, then everything else gets weird super fast.
Blockchain's Purpose Beyond Cryptocurrencies
00:01:32
Speaker
So today we'll get into what blockchain is, what it's for and why we keep talking about it and why it's way beyond crypto. So hi, Lee. Welcome. It's been a while. Thank you, Sylvia. Yeah, this is great. I'm very much looking forward to our conversation today.
00:01:46
Speaker
Amazing. So let's start with the biggest question of all, and it's not going to be necessarily a definition, but why should anybody care about blockchain? So what component of the essence of the Owl Explains Avalanche Policy Coalition Initiative? Yeah, that's sort of a question of, ah Lee, why have you been spending the last 12 years of your career working on this stuff?
00:02:09
Speaker
um I think the answer is fairly simple. It's just that blockchains are better database software.
Addressing Failure Points with Blockchain
00:02:15
Speaker
um They do a couple of things better than normal databases do. First of all, they ah they address single point of failure problems very, very well.
00:02:25
Speaker
um the The other thing that they do really well is they allow you to create digital representations that are unique.
00:02:36
Speaker
So we're hardwired as human beings to understand physical uniqueness. um But digital uniqueness is something that has been difficult to master ah in in the computer world, in the virtual world, until blockchains came along.
00:02:52
Speaker
And the ability to have digitally unique items and to represent items in a digitally unique format is something that's very special because now it allows us to use computers ah and blockchains and the Internet itself as a database layer.
00:03:11
Speaker
ah It allows us to transfer ownership establish and transfer ownership of those digitally unique items.
Blockchain's Everyday Impact
00:03:20
Speaker
And these are really big breakthroughs in computer science.
00:03:24
Speaker
ah the The other big breakthrough in computer science is is just the idea of getting all of these computers to agree on the same data set. And that's actually ah been a hard question in computer science since the 1960s. There have been a number of different solutions, um but blockchain has introduced newer solutions that allow those databases to scale to the size of the internet.
00:03:52
Speaker
I think that's a really good premise. Also getting into the problems that blockchain was trying to solve in the first place. But for a normal person, where would this show up? This a whole set of establishing and transferring value. What could be some more tangible examples? Yeah, well, hopefully for normal people, ah that whole database layer becomes opaque to them. They don't need to see that, just like they're not looking at the database layer that their bank uses or that Ticketmaster uses.
00:04:25
Speaker
um Ticketmaster is actually a great example for ordinary people. right It's ah having an event ticket When I was growing up, you know we had a paper ticket to get into a baseball game or a concert or something like that.
00:04:41
Speaker
Now everything is digital, but most of that exists on centralized servers that are subject to hacks and fat finger mistakes and things like that.
00:04:52
Speaker
With digitally unique items on blockchains, especially using NFT technology, you can create event tickets, a ticket to the Taylor Swift concert or the Beyonce concert,
00:05:03
Speaker
or pick your favorite artist's concert, or your favorite sports team game. right All of that can now be much more certain. You have protections against fraud.
00:05:16
Speaker
You have protections against um ah worrying about whether or not you're buying a counterfeit ticket. So ah those that that, I think, is a great example of how everyday usage of blockchain can impact people's lives.
00:05:35
Speaker
Definitely. And it's true that we're not really looking into the tech specs of the type of things we're using day to day. We just, we it's like a a surfboard. You just get onto it without necessarily like setting all the dynamics and all the things that go in the background, which is also really
Operational Mechanics of Blockchain
00:05:51
Speaker
cool to understand. But then in practice, I think that it's more about the use cases about okay like what can we do with it but now that we're also getting into this infrastructure layer how is blockchain different from the internet that we're already using well it's it's actually not different the blockchain is a creature of the internet it is part of the internet it is the database layer of the internet that's what i like to call it um and and so
00:06:19
Speaker
As part of the Internet, it allows us to do something new. And that new thing is ownership and transfer of assets. um Right now, you can't have that happen.
00:06:32
Speaker
Previously, before blockchain, you couldn't have that happen as a general matter on the Internet. Now with blockchains, you can have that happen as a general matter on the internet. Before, you needed a central party, an intermediary, to hold the assets for you on their computers and to transfer them for you.
00:06:54
Speaker
Now with blockchains, you don't need that anymore. You can own things directly. And that adds a great deal of flexibility to everybody.
00:07:05
Speaker
So more than a new type of Internet, we could just say that it's like an upgrade, like a glow up that the Internet has when you're building on this database layer in a way, if that can be a way to explain it. No, that's exactly right. And and you know again, using the ticket example, let's say yeah I've got a ticket to the Beyonce concert and you want to go.
00:07:27
Speaker
i can't go anymore. And so I transfer it to you. right i sell it to you. um I can now hold that ticket myself in my own wallet. I don't need Ticketmaster or Beyonce or anybody else to hold that ticket for me. And when I transfer it to you, it's a direct transfer to you. So it leaves my wallet, goes to your wallet. The blockchain shows you that you are the holder of that ticket.
00:07:55
Speaker
And now you get to go to the concert instead of me. And that's an amazing ah way to illustrate it. And I think that now as we're getting into what it is, what it's not, I think that sometimes we can use some clarifying words that end up clouding things up because we often hear that blockchain is immutable or permissionless. But what do those words mean in practice? So immutable, i i mean, I don't know if that, how technically correct that is, but What people mean when they say immutable is they say it can't be changed.
00:08:28
Speaker
So in our ticket example, the Beyonce concert, right, once it leaves my wallet and it's in your wallet, I can't pull it back. And nobody else can pull it out of your wallet without your permission.
00:08:42
Speaker
So that's what people mean by immutability is that it it really establishes ownership very, very well. Yeah. and And again, that's an important piece of ah ah of what blockchains do.
00:08:59
Speaker
um In terms of permissionless, you know, that gets into tougher areas. um Permissionless, the way that I sort of think about it, is ah two layers. One layer is you can join the blockchain and have a wallet on the blockchain and do transactions on the blockchain without asking anybody's permission.
00:09:22
Speaker
So you don't need to go to your bank and open an account on a blockchain. You don't need to go to a broker and open an account on a blockchain.
00:09:33
Speaker
You open it directly for yourself. um and And you don't need anybody's permission to do that. So that's sort of one layer. The other layer is ah the the groups of people who help run the blockchain, right?
00:09:50
Speaker
don't have to get permission from anybody to help with the running of the blockchain. In Bitcoin, they simply download the software and start mining. In Avalanche or Ethereum or Solana, they simply get the number of tokens that they need to stake and download the software, stake the tokens, and start validating.
00:10:12
Speaker
So all of that doesn't require permission.
Trust and Transparency in Blockchain
00:10:17
Speaker
So no permission to participate, and no permission required to help run. And that's a really good way to frame it because I think that they're probably two of the most overused words in the whole blockchain conversation. So again, just the fact that we often hear immutable, it doesn't mean that it's magical or untouchable in every sense, but that records are hard to alter and that the changes would be visible, that everybody is seeing what's happening across the people running or validating transactions on the blockchain.
00:10:50
Speaker
Ask yourself, what's a wallet for? Bank cards, train tickets, spare change, maybe even a picture of your cat Fluffy. But what about a wallet that does more?
00:11:01
Speaker
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00:11:18
Speaker
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00:11:36
Speaker
Pretty awesome. Then there's a whole world of crypto apps and tools to explore direct from your wallet. Get the wallet that does more. Download Core today. I think the next question is, okay, what does blockchain enable beyond money?
Blockchain Beyond Finance
00:11:52
Speaker
What else does it facilitate? Looking at more of the database layer into it. So I'd like to just um dissect this point a little bit more.
00:12:00
Speaker
so a database is just... a listing of information. And so when I say a blockchain is sort of the database layer of the internet, what I mean is it's a listing of information, but that list is maintained on the internet itself rather than on a particular company's computers.
00:12:22
Speaker
ah And the way it's maintained on the internet itself is through the participation of either the miners in proof-of-work based ah consensus mechanisms or the validators in proof-of-stake based consensus mechanisms.
00:12:39
Speaker
ah and And so as a technical matter, the internet doesn't support a database. But what's happening is with through the blockchain technology, lots of different computers all know the same information.
00:12:56
Speaker
They all know Lee used to own the Beyonce ticket. Now Sylvia owns the Beyonce ticket. And that's why it's a database layer for the internet.
00:13:09
Speaker
because it's made up of lots of computers that all know the same information and that are all linked via the internet. And I think that's a really good thing to to clarify in the sense that it comes down to knowing, okay, what is happening in the background, but also how are they able to speak to each other understand as you said, like the beyonce ticket ah the Beyonce concert tickets, knowing, okay, this happened, this was in Lee's wallet, now it's transferred to Sylvia. When did this happen? You can go on the Explorer and verify that, and that adds that trust component, because even though there's no middleman or no institution telling you, oh yeah, you can participate, you can't participate, the fact that people can see that really helps people have that like confidence to interact with the system. And looking at it at a bigger lens, and
00:14:00
Speaker
Why do you think that blockchain is here to stay or is it here to stay in the first place? Like what would you, ah because I think that many people can give you different answers. So just to hear and what you think on that. Yeah, I look, I think it's here to say stay in part because of that immutability, in part because of the certainty that it gives you that you own an asset or that when you buy an asset, the person you buy it from actually owns that asset.
00:14:29
Speaker
ah So it's it's that key feature of blockchains that ah mean that they're here to stay. Now, will all of them be permissionless?
00:14:41
Speaker
I don't think so. I think there's a lot of room for permission to blockchains. So, for example, there's another type of consensus mechanism called proof of authority,
00:14:52
Speaker
where each of the nodes is permissioned, is authorized to participate. And it's through that mechanism that consensus is established, that the database is maintained.
00:15:07
Speaker
um and And I think there's lots of room for those types of implementations as well. um There are people who are purists who say, Blockchain should only be permissionless. And while I have a lot of sympathy for that, and I think that permissionless blockchains are very important, um you know, as with most things in life, it's not just a yes or no choice. There's alternatives and different alternatives will be important to use for different use cases.
00:15:42
Speaker
So we'll have a world with permissionless blockchains side by side with permissioned blockchains. And that's a good way to, um that it's not fully 100% like, oh yeah, this is the only thing. I think you can't be a maximalist and say like either, oh, blockchain is a panacea that's going to cure all the problems of the internet because I think that just as...
00:16:04
Speaker
technology evolves, new challenges come up. So in a way, we are getting solutions to things that for many years computer scientists were grappling with, but on the other hand, we face new challenges. So I think having that that nuanced view, realizing that it's more of a spectrum,
00:16:21
Speaker
can help us approach it with a more objective view. um Because I think that there can be a lot of headlines and hype around it and and trends, but I think the real question is, okay, what survives after the noise? Because perhaps some use cases will disappear, and that's where the infrastructure questions remain. um And getting into this, why should governments and policymakers and companies...
00:16:50
Speaker
pay attention to to blockchain.
Government and Blockchain Efficiency
00:16:52
Speaker
like I know that this is something that we try to to say at our our content over and over, but beyond getting into how to regulate it, because I think that's going to be a whole other conversation, why should these institutions pay attention to blockchain and what's happening in this space?
00:17:11
Speaker
I think there's a whole bunch of reasons. you know First and foremost, there will be some great use cases for blockchains in government. Again, when we have these permissioned blockchains, the government can operate a permissioned blockchain um and do all different kinds of things with it. They can record title to cars on it. They can record title to ah land and and homes on it. um They can use blockchains for the disbursement of government assistance programs and whatnot, whether it's disaster relief or food programs or health care programs.
00:17:52
Speaker
All of those can be implemented using blockchains. So that's first and foremost in my mind. and And I really think that governments should be experimenting with blockchain use cases and seeing if there are ways to streamline existing processes, make things more efficient and more user-friendly.
00:18:15
Speaker
with blockchains um The second reason is the the regulation reason. ah And I'm not saying that everything about blockchains needs to be regulated or that they need to be regulated separately from other technologies that do the same thing.
00:18:32
Speaker
But the ah understanding of what blockchains do understanding about how tokenization works ah is important for regulators to make sure that when something falls within their regulatory purview, they are regulating it appropriately, whether it's on blockchain or something else.
00:18:55
Speaker
you know, the Beyonce ticket that we've been talking about, that's by and large unregulated, right? There's no, you know, concert ticket regulator, like like the SEC is the regulator for securities, or the CFTC is the regulator for futures and swaps.
00:19:16
Speaker
um But When you tokenize securities or you tokenize futures and swaps, then you do need to fall within the SEC's jurisdiction. And so that presents a whole host of other issues.
00:19:31
Speaker
So governments need to understand what those lines are and what is regulated and how. um And so I think that's that's another very important piece of it. Indeed. And i think the fact that serious institutions are still spending time on this tells you that there's something here worth understanding. um And I think another thing to talk about is, do you think, because i because sometimes people hear blockchain and crypto, and even some people might be a bit reticent to like, oh, is it going to be a competition against the banks? Yeah.
00:20:06
Speaker
Even people in the banking industry have sort of changed their approach, and we have seen over the years how this has evolved, but there can still be a little bit of ah um of a needle inside to like still have to unpin. So objectively, would blockchain compete with banks?
Blockchain Integration in Banking
00:20:24
Speaker
Can it work alongside them? There are some partnerships already happening with banks, so um just walk us through what you think the banking layer and the banking sector, whether it would embrace blockchain and how it would work?
00:20:38
Speaker
Well, first and foremost, i I think competition is good, right? So I want to see competition. i want to see banks competing with each other. i want to see banks competing with sort of blockchain or crypto native companies and vice versa. So I think The more competition there is, the better it is for consumers, the better it is for driving product development and and product usefulness and things like that.
00:21:07
Speaker
ah I think banks recognize the utility of blockchain software. ah You know, certainly the New York Stock Exchange does. They announced they're going to do a program to tokenize securities.
00:21:21
Speaker
The Nasdaq Stock Exchange does. They've announced that they're going to do a program to tokenize securities. DTCC recognizes the benefits of blockchain technology. Again, they've announced a program to tokenize assets. So there's a lot of really interesting things that that can go on there.
00:21:41
Speaker
And so um focusing on the technology and on how it can be used by banks and by competitors to banks, I think, is the right place to be. um We shouldn't fear competition. We should embrace it.
00:21:58
Speaker
That's a great way to close us off. And just before we wrap, one last question. and If someone only remembers one thing from this episode, I mean, I hope they remember more, and but what would be like the gold star? What should it be the the main takeaway for this first part of a Ask the Owl understanding blockchain?
Final Thoughts and Engagement Encouragement
00:22:18
Speaker
Yeah, I think the the main takeaway is that blockchain allows you to have a database on the internet. It's a way for lots of different computers to agree on the same data set, which is a database on the Internet. And with that, we we can now build lots of cool things. And so that would be the one takeaway I would hope people would have.
00:22:41
Speaker
Amazing. Well, thank you so much, Lee. I think this was a really useful place to start because, again, we hear blockchain, but it's always good to sit down for a bit and really understand the thing what blockchain What does it do? What does it not do? And what it's for? Because once you separate the technology from the hype, it becomes a much more interesting, productive conversation moving forward. So thank you once again. And that's it for next episode. Thank you of Ask the Owl. And to our listeners, we hope you enjoyed it. Send us your questions on social media. And remember that for more episodes and educational resources, you can head to avalanchepolicy.com and follow us on socials to stay updated. See you next time.
00:23:26
Speaker
We hope you enjoyed this episode of the Policy Layer. If you want to learn more, check out avalanchepolicy.com for free educational resources. And also follow us on social media at avalanchepolicy to stay updated.