Infrastructural Affordances of Blockchain Technologies

Generally, a blockchain is a decentralized ledger to record transactions which are stored and updated across an many hard devices as possible. It's open and transparent, so that anyone can read and add any data to the blockchain. There are different types of blockchain architectures depending on the ends. Drawing on an empirical study of cryptocurrency white papers, Caliskan (2020) proposes an actor-based taxonomy of cryptocurrency blockchains: value exchange blockchains, like Bitcoin, are used for value transfer through bitcoin; contract exchange blockchains, such as Ethereum, enable users to exchange simple computer programs which operate as smart contracts; the third generation blockchains allow for the building of in-chain markets with off-chain data flowing in them. This brings together encounters of supply and demand, as long as the commodity can be represented digitally. Pivoting on the blockchain technology are utopian imaginaries: decentralization, disintermediation, democracy, and privacy ect. which are enabled by its technical affordances. The term "affordance" was first coined by Psychologist Gibson and could be seen as what the environment offers an individual (Ekkelenkamp, 2018:6). In the case of blockchain, the architecture of its environment matters, as the architecture of networked publics is shaped by its affordances (Papacharissi, 2011:39). Given the differences of different blockchain architectures, here we will focus on the main technical affordances shared by most blockchains: cryptocurrency, proof of work, and the block networks.

Cryptocurrency

Tresse (2018:41-54) illuminates the technical aspects of blockchain in detailed simple languages, which is very helpful to unpack the infrastructure affordances of blockchain. Unlike sovereign currencies, cryptocurrencies are inflation free and requires no extra transaction fees even across borders due to the obsolete of middlemen. Each blockchain has a currency, coin, or token to execute transactions on the blockchain, though the cryptocurrency is not necessarily used as a currency in the normal financial sense. For instance, the currency on Ethereum is used for executing smart contracts; on Ripple the currency is used as a mediator to convert different currencies. Cryptocurrencies have various important functions which include imposing a cost to using the blockchain, rewarding those working to maintain the blockchain, and raising resources for new blockchains. Cryptocurrencies are made up of transactions and each transaction worth certain value of that currency. But in essence, cryptocurrency is a chain of digital signatures (Nakamoto, 2008:2). To be able to send and receive cryptocurrency, one need a public key and a private key. Public key is very much like one's address or account which whoever has the right private key can have access to. One's private key along with public key can verify the ownership of an account. However, the private key cannot be stored on the server so that one should remember his private key or lose his cryptocurrencies. To successfully send cryptocurrency, bitcoin for example, three things need to be verified: one has bitcoin on the address, the bitcoins are real, and the bitcoins are not spent somewhere else. The first two can be solved by having transactions to one's account and tracing back to the very creation of the coin. If the first two are verified, the third "double spending" problem is also solved, as an inbound or outbound transaction is registered and then cannot be used. This transaction logic of cryptocurrency not only ensures user's privacy and security, but also makes a third trusted party unnecessary. But to accomplish this, all transactions must be publicly announced and a system for participants consensus regarding the chronological order of transactions is needed (Nakamoto, 2008:2). The system is proof-of-work.

Proof-of-Work, the Consensus Algorithms

As blockchain is an open ledger and everyone can write new transaction to it, one challenge is authenticity of information (Tresse, 2018:43). Thus, the participants need a system to agree on a single history of the transaction order and each transaction needs to be proved by the majority of nodes that it was the first received (Nakamoto, 2008:2). The proposed solution is a time stamp server together with a proof-of-work system. The time stamp server takes a hash of a block of item to be timestamped and widely publishes the hash, so that as many users as possible on the blockchain can be updated. Each timestamp includes the previous timestamp in the hash to form a chain, with each additional timestamp strengthening the previous ones. The proof-of-work system is used to implement a distributed timestamp server on a peer-to-peer basis by creating a nonce until a value is found to give the block's hash the required zero bits. Another challenge is to distinguish between honest information and tampering information, as some nodes may maliciously attack the system (Tresse, 2018:44). Essentially, proof-of-work is one-CPU-one-vote and the majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it because nodes working on the other chains will switch to the longer one (Nakamoto, 2008:2). If a node does not receive a block, it will request it when it receives the next block and realized it missed one. Once the proof-of-work is satisfied, the block cannot be changed unless redoing all the blocks before and after it. However, the proof-of-work system originally proposed by Nakamoto has inherent deficits itself. Thus, some people changed to use proof-of-work's variations such as proof-of-stake or "Practical Byzantine Fault Tolerance" (Tresse, 2018:44).

The Blocks and Mining

All transactions on blockchains are collected and put into blocks. A block is a container data structure that aggregates transaction information for inclusion in the blockchain (Antonopoulos, 2015:159). Each transaction information is encrypted into a hash and further encrypted with other transactions again and again to create a Merkle tree used to summarize all the transaction information in a block (ibid.: 164). At the top of a block is a header which is made up of three sets of data. The first set of data is a reference to previous block hash that connect blocks in the blockchain. The second set of data is the difficulty, timestamp, and nonce which relate to the mining competition. The third piece of data is the merkle tree root. The root of the tree is a hash that is only possible to generate if all the transaction information encrypted with each other contained in it is exactly as it is (Tresse, 2018:44). The timestamp ensures each block is stored in chronological order by including the previous timestamp to form a chain (Nakamoto, 2008:2). The nonce is initially unknown, thus posing a challenge: whoever finds a valid nonce will be rewarded with bitcoin for example. The process of finding a valid nonce is called "mining". The difficulty of mining can be adjusted by adjusting what kind of hash can be accepted (Tresse, 2018:45). If the nonce is accepted, cryptocurrencies or tokens will be released to the finder and the network moves on to verifying the next block of transactions. Since cryptocurrencies such as bitcoin are made up of transactions out of thin air, they can only be "minted" by miners' computational work of finding a valid nonce. The mining process constitutes proof of work, which explains why miners, who compete for bitcoin by verifying information, play an important role to uphold the integrity and validity of the blockchain (Antonopoulos, 2015:27). The computational power is important for minders because the faster the hardware, the greater the chance to be the first to guess at a valid nonce. As increasingly more processing power is dedicated to mining bitcoin, the difficulty of winning bitcoin also increases. This has led to the emergence of mining farms that are filled with servers solely devoting to mining (Tresse, 2018:49). Though there are such problems as power concentration of big mining farms and huge energy consumption, the more mining activities can indeed reinforce the authenticity and security of the blockchains according to the inherent "chaining logic".

References:

Antonopoulos, A. M. (2015). Mastering Bitcoin (First edition). O'Reilly.

boyd, danah (Ed.). (2011). Social network sites as networked publics: Affordances, dynamics, and implications. In A Networked Self: Identity, Community and Culture on Social Network Sites. Routledge.

Caliskan, K. (2020). Data money: The socio-technical infrastructure of cryptocurrency blockchains. Economy and Society, 49(4), 540-561. https://doi.org/10.1080/03085147.2020.1774258

Ekkelenkamp, D. (2018). Technology assessment in the context of responsible research and innovation: Criminal abuse of blockchain. University of Amsterdam.

Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. 

Tresse, J. (2018). Technology through the trough [University of Oslo]. https://www.duo.uio.no/bitstream/handle/10852/66079/1/Thesis_TresseJ.pdf