#5: The Bottleneck for a New Internet

In the last essay, we discussed how blockchains might provide one of the best governance models for the new internet, but a crucial question remains: Can blockchains technically support this vision of the new internet?

Many experts in tech and crypto don’t believe that putting social media applications on the blockchain will ever work. And if we look at foundational blockchains like Bitcoin, Ethereum, and Solana, this skepticism seems valid.

Why is that the case?

The main reason is that these blockchains have primarily been designed for financial applications and not content applications that make up most of the internet we use.

Financial applications require much less data storage than a content application and hence their technical architecture is completely different.

Let’s analyize this point with a sample transaction on the Bitcoin or the Ethereum blockchain.

The Bitcoin blockchain simply stores wallet addresses and the corresponding number of bitcoins held in each. If a transaction occurs between two wallets, the wallet addresses remain the same; only the number of bitcoins they hold changes. But total data size of the blockchain remains the same.

The Bitcoin blockchain can be called a finite state blockchain.

To define this term more precisely, “A Finite State Blockchain is one in which the amount of data required to store the current state of the blockchain doesn’t increase with a transaction.”

Now, let’s look at the smart contract blockchains like Ethereum or Solana.

These blockchains introduce the concept of wallets and ownership but extend beyond holding a single asset like Bitcoin to multiple assets, such as different NFTs. More importantly, they introduce the concept of contracts that two wallets can sign. For example, a contract might be set to transfer 10 ETH and 20 NFTs when the year hits 2024.

The introduction of contracts significantly increases the amount of data stored on the Ethereum blockchain compared to Bitcoin because contracts can be of any length. However, if you compare the state of the blockchain before and after a transaction, the total amount of data remains the same; only the values change.

Thus, despite introducing contracts, Ethereum and Solana are still considered finite state blockchains.

Now, consider a social media application.

In this example, two users have static data such as an account balance and username. However, every time they post, new data is added to the blockchain. The final state of the blockchain contains more data than the initial state.

Thus social media applications are infinite state in nature which means that “the total amount of data required to store the current state of the blockchain increases with a transaction.”

This discrepancy between the design of current major blockchains and the data heavy needs of social media applications is the main reason we haven’t seen decentralized social media platforms take off yet.

However, there is a paradigm shift happening in blockchain design, focusing specifically on data storage to handle these infinite state applications. In the next essay, we will discuss this paradigm shift in more detail.