On Wednesday, the director of the Massachusetts Institute of Technology’s Digital Currency Initiative sat down for a live interview at SXSW to “demystify” the blockchain.
Neha Narula began by telling the story of a Pacific island named Yap. The natives from this Micronesian nation are credited with pretty much inventing the concept that cryptocurrencies are run on, a public ledger.
“They [use] these disks made of rock that are massive,” Narula explained. “They can’t move these disks around because they’re way too heavy, so they keep track of who owns what disk. [People can] own half of that disk over there and I [can] own a quarter of that one over here. They all collectively know who owns what.”
These donut-shaped stones are known as Rai stones. At a fundamental level this currency system functions just like blockchain technology. Instead of dealing with a centralized financial institution, like a bank, the blockchain is essentially a public list of every transaction ever made. With this information at everyone’s fingertips, users don’t need a middleman to run things because everyone knows who owns what and exactly when a certain transaction was made.
The Rai currency system works in almost exactly the same way. Instead of pushing these rocks to the grocery store, Yapese people simply agree that the ownership of a Rai, or part of a Rai, has changed. The only difference is instead of writing this transaction onto the blockchain, they use oral contracts.
“When you think of it that way it’s just like a ledger of who owns what in the community,” said Narala. “That was really powerful for me because it made me realize money isn’t necessarily a tangible thing you hold in your hand, it’s an idea.”
So even though the concept of cryptocurrency might seem scary to some, it’s comforting to know that a civilization has sort of on the blockchain for potentially thousands of years.
Or would you call this the rockchain?