Blockchain: What it is, what it does, and why you probably don’t need one

Abstract

All record-keeping systems (which include monetary systems) must contend with trust issues and methods of organizing historical information. Conventional systems rely on the reputation of central authorities and record-keepers to achieve consensus. Blockchain, which powers Bitcoin, differs from conventional systems by achieving consensus through a community of anonymous (and therefore “trustless”) agents who compete amongst themselves to authenticate transactions. The promise of the blockchain protocol is that it is invulnerable to human foibles. Novel, for sure; but is it worth all the effort? (JEL G23, E50, E59).