Understanding A Common But Powerful Buzzword
The blockchain industry is one that is rife with buzzwords and jargon that don’t always mean anything. You hear the terms “blockchain agnostic”, “blockchain consultants” or “blockchain revolution” more often than you hear clear and simple terminology used to describe what these terms mean and do. But one term that is often misunderstood, yet does a great job of communicating the power and efficacy of blockchain (especially Bitcoin), is “social scalability”. This is a critical feature of Bitcoin (and many other cryptocurrencies) that helps support the long-term view that crypto could take over the world.
What Does Social Scalability Even Mean?
At its core, social scalability is a term for pointing out the main differences between us and chimps. By no stretch of the imagination could you consider anything chimps do as being part of “society”. They don’t organize in any meaningful manner, and operate as small tribes rather than cities or countries.
We have been able to create a larger “organization” that spans worldwide by using a mix of technology and traditions. Society had a limit for a long time (and in a way, still does), but was able to expand by using laws, stronger communication, and numerous other advancements that have occurred in the last several centuries.
On a more granular level, there have been studies showing the maximum size a group can reach before it splinters. Facebook and other social networks changed this so we could keep track of many people at once; even if they weren’t part of our core tribe. This improved coordination is a direct example of what we mean when we talk about social scalability.
Enablers of Scaling
In terms of business and trade, no one wants to do business with someone they can’t trust. It is undesirable and has too much risk for it to make sense in most cases. This is why it became necessary for several different forms of scaling mechanisms to be put in place before global commerce could occur.
First, we needed laws and some form of repercussions to be in place if bad actors were to violate them. Then, we needed groups like the SEC and similar organizations to police industries. Finally, there needed to be traditions and mechanisms that would make it easier for everyone to abide by the law. One example of this is double-entry bookkeeping, which made fraud much easier to detect.
The Trustless Aspect of Blockchain
The term “trustless” doesn’t mean we don’t trust others, it means we don’t have to. When the right systems are in place, we know we don’t have to worry about being defrauded, because it is so statistically unlikely.
The next level of these social scalability mechanisms are sites that allow you to communicate your experiences to others so they don’t have to make the same mistakes as you. For exmaple, AirBnb vets users on both sides of the transaction, news sites inform us about the actions of others, and websites like Yelp prevent us from going to a bad restaurant.
In this global commerce environment, our supply chains have continued to expand. This has made it necessary for an even more powerful way of preventing bad actors from playing the system. Bitcoin solves this problem by bringing in a new level of social scalability where fraud is not possible and the security breaches we have seen in many banks and large companies becomes much less likely.
Traders should realize that scalability is important because it indicates the likelihood of Bitcoin achieving widespread adoption in the future. A move like this would bring and increase in volatility in the short-term, but decrease it over the long-term, since its survival is less certain. Volatility is a key consideration for traders, and part of the reason they got into trading cryptocurrencies in the first place, so this definitely needs to be kept in mind.
Everything you’re learning about social scalability here is important, because it supports a long-term view that Bitcoin has a permanent place in our society. By filling a need that nothing else is currently able to fill, Bitcoin can build a competitive moat around itself. The Internet architecture will always have its risks, but with the advances provided by blockchain technology, they go down significantly.
Featured image courtesy of Shutterstock.