How Crypto Is Quietly Solving Problems That Go Way Beyond Money

Most people think of crypto as solely part of the  finance world. Buy a Bitcoin, see the price either rise or fall, and sell when it is high. Beneath it all, though, the crypto world has been compelled to solve some truly difficult technical challenges - and solutions are beginning to emerge in areas that do not have anything to do with trading.

Here are a few worth knowing about.

Getting Randomness Right

This one sounds easy. It isn't.

Software cannot be truly random. And it is even harder on a blockchain, as blockchains are predictable. All computers of the network execute the same code and obtain the same outcome. That is what makes them trustworthy. However, it also means it is a headache to create a truly unpredictable number on-chain.

Initial efforts made use of block hashes (as a random seed). The point was that the future block hash cannot be guessed, and therefore it would serve the purpose of randomness. The issue is that in some cases, miners do dispose of blocks which do not provide them with good results. Doing so is tempting when money itself is at stake.

Chainlink has a fix: its Verifiable Random Function, or VRF. A random number is produced, and so is cryptographic evidence that it has been generated correctly. The evidence is verified on-chain, and then nothing is moved. No one can tamper with the number without the proof breaking — not even Chainlink itself.

This was built because some of the applications could not afford to make a mistake, like NFT drops, loot in-game, or prize contests, to name a few. A Bitcoin lottery is one of the better examples: people put money into the lottery, the contract randomly selects a winner via VRF, and the payment occurs automatically. An explanation of how that overall flow works can be seen in walkthroughs from sites like CryptoManiaks, in case you are tired of just pure theory.

The same tooling is also applied to things that have no gambling angle whatsoever - picking validators, fair queuing for limited drops, and reward distribution in DeFi.

Fixing Online Identity

The current functionality of online accounts feels uncomfortable. You give your email and a password to any application you use and hope that their security teams are doing their job, and then discover two years later that your password has been stored in a data leakage database somewhere.

Crypto wallets are not like that. You have only a pair of keys that identify you to the public address, and your private key is known only by you. To prove that you are who you are, you sign a message, and the app verifies the signature. No passwords are stored anywhere, no personal information is exchanged, and no account is created.

It already has a standard known as Sign-In With Ethereum (SIWE). You do not have to play with a Google log in here. All you need to do is hook up your wallet and sign a message to identify ownership. Some Web3 games use this, in which your progress and objects do not follow your account on a given platform but rather your wallet. If the game gets shut down, you do not lose anything since it exists on-chain, not on their server.

It is not mainstream yet, but still, the direction is clear. It is a more appropriate model to allow users to own their identity and not concede it to a company.

What It Means to Own Something Digital

At the moment, digital possession is only symbolic, like a handshake. It doesn't carry much real weight. You do not possess your Steam games, iTunes purchases, or in-app items, but rather you possess a license. The company may amend the terms or close down, or simply decide that you can’t have something anymore. It's happened plenty of times.

That is different when something exists on-chain. A token in your wallet is yours just as a file in your computer is. The company that made the game might be out of business tomorrow, and you would still have the item. Its potential depends on the platforms supporting it, although its ownership does not relate to its continued presence in business.

For gaming, this matters a lot. People are spending a lot of money, but have no real rights to what they are purchasing. On-chain ownership would mean the existence of a functioning resale market, cross-game items, assets that have value, etc. Some developers are building this way, but most are not, in part because this puts players back in charge of economies which developers spent years designing.

The Bigger Picture

What all these have in common is that they were solved quickly because the stakes were real. If a bug is costing a person money, the need to fix the bug becomes urgent. That is more likely to generate better solutions faster than pure research.

Randomness, identity, and ownership of digital things are not only issues of crypto. They are technological issues that ended up being of serious concern in the crypto world first. The fixes will continue to proliferate - usually without the “blockchain” label attached.

That's the part most people miss because they’re too busy arguing about the crypto prices.