Even for seasoned investors, the world of blockchain can feel like unexplored territory. Yet behind the buzzwords lies a fundamental shift in how humans coordinate and transfer value. This post breaks down the evolution from trust built by institutions to trust enforced by code, and why blockchains are unlocking “programmable” businesses that operate in unprecedented ways. We’ll cover two parts: (1) Why we need blockchain technology – how human cooperation scaled via shared myths and intermediaries, and why the internet couldn’t originally move value, (2) The advent of digital property rights – how Bitcoin and Ethereum solved digital scarcity and heralded a new infrastructure phase.
Why we need blockchain technology
A brief history of human coordination
Human civilization is, at its core, a story of cooperation and trust. Our earliest ancestors lived in small, tight-knit groups where personal relationships governed interactions. Anthropologist Robin Dunbar’s research suggests that humans can maintain stable, trusted relationships with roughly 150 individuals. Beyond that, trust becomes fragile. To scale cooperation, humans invented shared myths: religions, legal systems, money, and nations. As Yuval Noah Harari writes in Sapiens, “money is the most universal and efficient system of mutual trust ever devised.” These belief systems became the glue binding strangers into vast, functional societies.
As trade and complexity expanded, we layered in institutions like banks, courts, corporations, and governments to enforce trust at scale. These intermediaries provided the ledgers, legal frameworks, and stability needed for large-scale economic cooperation. But every intermediary added friction, cost, and barriers.
Why the Internet couldn’t originally move value
Then came the internet in the late 20th century, a revolutionary tool for connecting information. Web1, the early phase, let anyone read digital content, while Web2 allowed users to write and contribute to platforms like social media, blogs, and wikis. This democratized access to knowledge and communication on an unprecedented scale. But while the internet decentralized information, it couldn’t decentralize value.
The core limitation was technological: the protocols underpinning the internet (like TCP/IP) were designed for copying data, not for transferring ownership or scarcity. When you send an email or a digital photo, you’re sending a copy and the original remains with you. This is fine for information but catastrophic for assets. Imagine trying to send a digital dollar if the recipient got a copy and you retained the original: this is the double-spend problem. Digital systems lacked a way to ensure that a digital asset wasn’t duplicated or fraudulently reused.
To solve this, the digital world continued to rely on traditional intermediaries like in the physical world. When you “move money” online through a bank or PayPal, you’re not directly transferring value peer-to-peer. Instead, you’re instructing a trusted institution to update its internal ledger: debiting the sender’s account, crediting the receiver’s. These intermediaries ensured integrity but also maintained their gatekeeping roles, adding cost, delay, and risk of censorship.
In essence, while the first iteration of the Internet let us read, and the second let us write, neither allowed us to own anything. The internet’s architecture made it easy to send a message or share a meme, but nearly impossible to transfer value without intermediaries. Ownership of any digital asset required a central party to guarantee authenticity and prevent duplication.
This was the critical gap that blockchain technology, beginning with Bitcoin, set out to fill: enabling digital scarcity and property rights on a global, permissionless network. It introduced the foundation for an augmented Internet, a layer where digital ownership and trust are enforced by code rather than by central institutions.
Digital scarcity & property rights
Bitcoin
Blockchain technology’s first major unlock was solving the problem of digital scarcity. Before Bitcoin, any digital file (whether an image, document, or video) could be copied infinitely. There was no way to prove ownership or enforce uniqueness. This was acceptable for information but catastrophic for value. You can’t have a digital dollar if both sender and receiver retain a copy.
In 2008, Satoshi Nakamoto introduced Bitcoin, a system combining cryptographic security, a distributed ledger (blockchain), and incentive mechanisms (Proof-of-Work) to create a native digital asset that was both scarce and verifiable. Bitcoin solved the double-spend problem by ensuring that each transaction was broadcast, validated, and immutably recorded by a decentralized network of computers (nodes). This marked the first time digital scarcity was established for an internet-native asset. No bank, clearinghouse, or intermediary was needed. Bitcoin was aptly called “digital gold”: a scarce, permissionless, global currency secured by math rather than institutions. But Bitcoin was purposefully limited to simple value transfer. Its design did not accommodate complex logic or business models.
From digital scarcity to digital property
Enter Ethereum in 2015 which extended the blockchain’s capabilities with smart contracts, self-executing code that automates agreements directly onchain. This generalized digital scarcity into digital property: any asset (currencies, art, real estate) and any logic (loans, governance, workflows) could be programmed and enforced transparently on a public ledger.
Ethereum’s innovation marked the evolution from static scarcity (Bitcoin) to programmable scarcity and digital property rights. Developers could create programmable businesses, unleashing a Cambrian explosion of use cases: from decentralized finance (DeFi) to tokenized real-world assets and digital art. Importantly, ownership was enforced by code and network consensus, not by intermediaries. This was a profound shift from trusting institutions to trusting decentralized protocols, and many other blockchains similar to Ethereum (like Solana) emerged to help accelerate this Cambrian explosion.
It’s useful to compare this with the early days of the internet. In the 1990s, there was an enormous infrastructure build-out for the web: telecom companies laid fiber optic cables and built data centers, companies like Cisco and Juniper supplied the routers and hardware, and standards like HTTP (web) and IMAP (email) were developed. Investors poured capital into this “picks and shovels” layer, much of it speculative. We know how that played out (the dot-com boom and bust) but the infrastructure remained and eventually gave rise to the modern internet economy.
So far, blockchain has been in a similar infrastructure phase. We’ve been building the base layers and protocols for a new era. Just as early internet investors had to imagine the future Google or Facebook that might sit atop the networks they were funding, today’s institutional investors need to envision what businesses look like on these new blockchain rails. And to do that, we should examine how blockchains change the fundamental blueprint of a “business”.
Regulatory clarity, scaling technology, and mass adoption are converging to unlock this new era. The stage is finally set for what we will call “protocol businesses”, or “programmable businesses”. In the next article, we’ll explore how different these protocol businesses are from traditional software businesses.