What is blockchain?
Bitcoin. Cryptocurrency. Web3. Decentralization. NFTs. These are things people do with blockchain. Why is it called a blockchain, what are the blocks, and what problem is this technology solving? I invited Roberto Capodieci onto my podcast to explain. By the end of our conversation, I understood that the question to ask is not, “What is blockchain?" it's, Who do we have to trust?
Blockchain Is Not Cryptocurrency
One of the first distinctions Roberto made was that blockchain and cryptocurrency aren't the same.
Cryptocurrency is one application of blockchain.
Blockchain is the underlying technology.
Roberto compared blaming blockchain for cryptocurrency scams to blaming a database for the content of a website. The technology itself doesn't determine what people do with it.
So what problem does blockchain solve?
Roberto started with something that seems almost unrelated: copying.
A physical object has a property we take for granted.
If I own a painting and give it to you, you now have the painting and I don't.
Digital information doesn't work that way. If I send you an MP3, photograph or document, I can still have an identical copy. The copy may be indistinguishable from the original.
Blockchain creates a way to establish that a particular digital asset or record is the recognized one and to transfer control or ownership without creating a copy.
Bitcoin is an example. If I transfer a Bitcoin to you, I can't keep spending the same Bitcoin myself.
Roberto gave me an example I found easier to understand than cryptocurrency:
The title to a car.
Imagine the title to my car exists as a digital record.
I sell you the car and cryptographically transfer that ownership to you.
There is now a verifiable record showing that you own it.
That gets us to what a blockchain is.
Where the Blocks Are
The name blockchain made me picture building blocks.
Roberto explained that transactions or records first have to be validated.
Suppose I'm transferring that car title to you. The network needs to establish things such as:
Did the transfer really come from me?
Am I actually the current owner?
Is the transaction valid?
Valid transactions are collected together into a group.
That's the block.
The block is then cryptographically connected to the previous block using something called a hash—a mathematical fingerprint derived from the information in that block.
Change the information in an earlier block and its fingerprint changes. That breaks its relationship with the blocks that follow it.
The blocks form a chain.
Block + chain = blockchain.
The technical implementation gets more complicated than that, and different blockchains use different mechanisms to reach agreement and secure their records. Bitcoin's proof-of-work system, for example, is responsible for much of the enormous computing and electricity consumption associated with Bitcoin.
I finally understood the basic concept.
Then another question emerged.
Why distribute all of this information among many computers in the first place?
What Does Decentralization Actually Mean?
Consider your car title.
There is a central authority maintaining the authoritative record.
In the United States, that's a state motor-vehicle agency.
When you sell your car, that authority ultimately records the ownership change. If a police officer needs to determine who owns the vehicle, the government database provides the answer.
That is a centralized system. We trust an institution to maintain the record correctly.
That works. It also creates a point of control.
Someone controls the database.
Someone determines who can change it.
Someone decides who can access it.
If the system fails, is compromised, manipulated or abused, everyone relying upon that authority is affected.
A decentralized system tries to change that architecture.
Instead of one authoritative computer or organization maintaining the information, copies or portions of the information can exist across independently operated computers—a peer-to-peer network.
Those computers are called nodes. No single node has to be the computer everyone trusts.
This is where I think the word decentralization can be misunderstood. It doesn't mean, there are lots of servers.
The consequential question is: Where is the authority?
The Internet Didn't Necessarily Become More Decentralized
Roberto used email as an example.
Early email was federated. Different organizations could operate their own mail servers. An email might travel from the sender's organization's server directly to the recipient's organization's server.
Today, enormous amounts of our communication pass through a relatively small number of large providers. The Internet may contain millions of computers while control over particular services becomes increasingly concentrated.
That's an important distinction.
Distributed infrastructure isn't necessarily decentralized authority. A company can operate thousands of servers around the world, and still have centralized control over the system. It can determine the rules, change the software, decide what users see, suspend accounts, determine what information is retained, and decide which features exist tomorrow that didn't exist yesterday.
The physical location of the computers isn't the issue.
Who controls them is.
Web3 Makes More Sense When You Start There
I had never found explanations of Web3 satisfying.
Roberto described the evolution this way.
With Web1, we largely consumed information. You visited a website and read what its owner published.
With Web2, websites became personalized. We created accounts, logged in, contributed information and received individualized experiences.
Our identity became attached to each platform.
My identity on one service is controlled within that service. Another account exists somewhere else. My information is scattered among companies, each maintaining its own version of me.
Roberto's description of Web3 reverses some of that relationship.
Instead of the platform owning the identity and attaching information to its account for you, your digital identity can exist independently of the individual platform.
That creates interesting possibilities.
Imagine having a dental X-ray taken in one country.
Today, that record may effectively belong to the dentist's information system. Travel somewhere else with a toothache and another dentist may have difficulty obtaining it, or take another X-ray.
In the model Roberto described, the X-ray could instead be associated with your digital identity and cryptographically signed by the dentist who created it.
You could authorize another dentist to access it.
The second dentist could verify who produced it, without having to trust some central database shared by every dentist in the world.
That's Web3. It's not virtual reality, it's not monkey NFTs. It's a different architecture for identity, information, ownership and trust.
Decentralization Doesn't Eliminate Trust
This is where it's good to be careful.
It's tempting to describe decentralization as eliminating trust.
It doesn't.
It changes what we trust.
Instead of trusting the DMV database, perhaps we're trusting cryptography, software and the consensus mechanism of a network.
Instead of trusting Facebook to maintain our identity, perhaps we're trusting a private cryptographic key.
Instead of trusting one company's servers to preserve information, perhaps we're trusting a distributed network to continue operating.
That creates different problems. Roberto pointed out one. If I make a mistake in a traditional centralized system, there may be someone I can call. If an incorrect transaction is permanently recorded in a decentralized system, there may be no administrator with a password who can fix it. Removing the middleman may also remove the person who helps us when something goes wrong. Control and responsibility move together.
AI Makes This Question Bigger
Artificial intelligence.
AI systems are increasingly becoming intermediaries between us and information.
We ask them questions.
We ask them to explain subjects we don't understand.
We ask them to write software.
Some ask them for advice about their work and personal lives.
That gives whoever controls an AI system considerable influence over what information it provides, what it refuses to provide, how questions are interpreted, and which perspectives are emphasized.
Roberto has been working on an approach to decentralized AI in which multiple independently operated AI nodes could contribute to an answer rather than one centrally controlled model determining it. Whether that particular architecture ultimately works is a separate question. It exposes the larger issue.
The question isn't:
How intelligent will AI become?
We should be asking:
Who controls the intelligence we're increasingly relying upon?
Decentralization Is Not Automatically Better
Our conversation could easily be interpreted as centralized = bad and decentralized = good. That's not a useful conclusion.
Centralization has advantages. Someone is responsible. Rules can be enforced. Mistakes can be reversed. Systems can be updated. There is someone to call.
Decentralization can make censorship or manipulation by a single authority more difficult— it can also make harmful or illegal activity harder to stop.
It can give individuals more control over their information—It it can also give them more responsibility for protecting it.
It can eliminate a central point of failure— it can also eliminate a central point of accountability.
There are tradeoffs.
The Question I Wasn't Asking
I started the conversation wanting to know what a blockchain was. Now I can picture it.
Information or transactions are validated.
They grouped into blocks.
Those blocks are cryptographically linked.
Copies of the resulting record can be maintained across a network, rather than depending upon one central database.
When we use a technology, we should ask:
Where does control reside?
Who owns the information?
Who can change it?
Who decides what I can access?
Who can prevent me from accessing it?
Who am I required to trust?
What happens if that person, company, government, or piece of software, gets it wrong?
Blockchain is one technological answer to those questions.
Decentralization is the larger idea.
As more of our money, identity, communication, property and thinking becomes digital, understanding who controls the systems we depend upon may matter more than understanding the latest technology buzzword.
Editor's Note
This article is based on my podcast conversation with Roberto Capodieci. The ideas discussed here originated in that conversation, while the structure, emphasis, and commentary are my own. Any errors or interpretations are mine, not Roberto Capodieci's.
Listen or Watch
Apple Podcasts • YouTube • Spotify
Learn more about Roberto Capodieci
Website: https://capodieci.medium.com
Linkedin: https://linkedin.com/in/rc10
Resources
Breaking Banks Europe: European Unicorns, Startups, Founders, Regulators and Leaders innovating the rapidly evolving Fintech scene. The world’s well-known hosts and influencers in fintech.
https://open.spotify.com/show/1IVQyJt4u3yuESxwlxHmjH
UnBlockChain: Talks and interviews about decentralization, blockchain, old and new technologies. https://open.spotify.com/show/2a7RnsXaFEDIBWi68fLY2t
Decentralized Alternatives (per Roberto Capodieci's article)
A list of decentralized alternatives to mainstream social media services. These platforms offer greater privacy, resistance to censorship, and user control over content and data. For the full list see the article, Silencing Dissent: How Censorship and Centralization Threaten Free Expression, click: https://capodieci.medium.com/silencing-dissent-how-censorship-and-centralization-threaten-free-expression-8024ab14776c
Diaspora (Alternative to Facebook)
A decentralized social network where users have control over their data, spread across independently operated servers called “pods.” Privacy-focused, no advertisements, community-driven. https://diasporafoundation.org
PeerTube (Alternative to YouTube)
A decentralized video hosting network based on ActivityPub, allowing communities to host and share videos without central control. No ads, community moderation, federated servers.https://joinpeertube.org
Bluesky (Alternative to Twitter/X)
A decentralized social media platform developed by Twitter’s founder, Jack Dorsey, focusing on user autonomy and protocol-based interaction. Fully decentralized, no single entity control, open standards. https://bsky.app
Beaker Browser (Alternative to Google Chrome)
A peer-to-peer web browser that allows users to create and host websites directly from their devices without needing traditional web servers. Decentralized hosting, user control over content, no central servers. https://beakerbrowser.com
Session (Alternative to WhatsApp/Telegram)
A decentralized messaging app focusing on privacy and anonymity, using onion routing to keep messages secure and untraceable. End-to-end encryption, no phone numbers needed, metadata-resistant.https://getsession.org
About the Author
Daniel Stih (danielstih.com) is an aerospace engineer, software engineer, indoor environmental consultant, and author of 12 books. For more than 30 years, he has investigated complex problems spanning engineering, technology, the built environment, and human decision-making. His work explores how evidence, assumptions, and systems shape the conclusions we draw—and whether we're solving the right problem. Learn more about his approach in Why I Think This Way.