Blockchain introduces agreement about time into computing. Time creates trust; trust supports social relationships; those relationships raise productivity.
What is time?
Simple questions are often hard to answer. Leaving physics aside, the earliest form of time ordinary people experienced was sunrise, work, sunset, and rest—the cycle through which human life continued. Here, time is order: an irreversible sequence of events.
In physics, time describes change in matter. Physics defines the second through the radiation of cesium-133. An apple offers a simpler illustration. Peel it and, after fifteen minutes of oxidation, a fresh apple becomes brown. “Fresh” and “brown” are two states—or points in time—while browning is a duration. A blockchain account state is essentially a data snapshot and therefore resembles a point in time.
The granularity of time
Humans first marked recurring days and nights, whose lengths varied by season. Ancient Chinese societies divided a day into twelve periods. Mechanical clocks measuring hours appeared in the West around the thirteenth century. Why did we keep dividing time more precisely?
With the clock, time separated from natural phenomena and became objectively measurable. The clock was a key invention behind the modern industrial era. —Lewis Mumford
What value does time have?
Time may be an imagined concept, but value is created by human labor and material change unfolding within it. More precise time enables more efficient cooperation and finer specialization, increasing productivity. If a ferry crosses a river three times a day but nobody knows when, passengers must arrive early and waste hours they could have used productively.
We say time is priceless, yet capital assigns a price to everyone’s time. An American’s average hourly wage may be US$28; how much would a billionaire pay for another year of life? Inequality is vividly expressed through the price of time.
Blockchain is time
Time orders events and gives physical change an irreversible direction. Irreversibility makes exchange credible and helps build trust and markets. Blockchain brings order to the electronic world—an irreversible record of time whose trust supports blockchain-based markets. For a fuller treatment, see Bitcoin Is Time.
How should a block be valued?
If ordinary people and billionaires have differently priced time, blockchains can be considered similarly: how much transactional value can a unit of time contain? Bitcoin is the largest cryptocurrency by market value. Compared with smaller chains, Bitcoin represents a billionaire’s time while an altchain represents ordinary time: people tend to transfer more value on Bitcoin, contributing to the large valuation gap between BTC and access tokens for other chains.
Investing in a chain’s currency means investing in the growth of transactional value per unit of time
As BTC’s price rose over a decade, transactions on its network tended to represent more dollars. For money or another medium of exchange, price appreciation is itself part of the growth in transactional value. Why, then, can BTC, used mainly as money, be worth more than ETH, which enables more functions? One answer is that price is itself part of value: each unit of Bitcoin time can transfer more value, supported by deeper security and consensus.
If ETH represents access to a unit of Ethereum network time, its intrinsic growth comes not only from token appreciation but, more importantly, from the increasing range of activity that unit can contain. Higher throughput, rollups, and oracles that bring real-world information on-chain all enrich transactional value per unit of time. After the internet showed how many industries benefit from “connection,” it is worth asking what “time and order” can change.
Can blockchain create markets with lower friction?
Centralized timekeeping systems already order events with extreme precision. SWIFT can timestamp settlement because centralized institutions maintain ledgers. Their consensus rests on trust in the political and financial institutions behind them and in the equilibrium among those powers. Blockchain consensus instead uses algorithmic mechanisms and randomness. Comparing costs requires identifying the conditions each system needs.
A centralized trust market requires:
- the coercive power of the state;
- government credibility;
- equilibrium among governments;
- central banks, clearing institutions, and their operating costs.
A blockchain trust market requires:
- the traditional world’s social order, electricity, and network infrastructure;
- randomness and a consensus mechanism;
- reliable code execution.
Blockchain markets are not independent of traditional infrastructure. Their advantage is that support is global: when one region withdraws it, nodes can move elsewhere, as Chinese miners did.
Why might blockchain markets have lower friction?
- They use traditional infrastructure while paying relatively little for it.
- Nodes compete in a market and may operate more efficiently than monopolistic bureaucracies.