The skepticism of blockchain technology is borne out of a lack of specific problems it solves. Which happens to also be the bedrock of the conventional startup wisdom -- value derived from solving a problem or exploiting an opportunity.
So much of the blockchain hype is focused purely on the technology and the valuation of the tokens / coins. Not the problem it solves.
It's distributed trust. That's the problem it solves. It's incredibly cool technology. That solves a specific problem.
The analogy to the early internet is not a good one. The internet solved a huge number of problems -- of distribution, of speed to deliver value to the customer, of freedom of information, of transparency, of fidelity of communication, and more. That's why it's changed society.
I would love to know which societal problems can be reduced to a distributed trust problem. That would convince me that I'm wrong about blockchain technology.
No, those aren't real problems either. Problems are experienced by humans. Humans willing to pay money for solutions.
Actual problems are things like "I want to buy this candy bar," or "I want to fly to New York in August and I need to pay for the ticket." Those are problems Bitcoin, as "a purely peer-to-peer version of electronic cash" [1], was intended to solve. It didn't.
As far as I can tell, the main problems blockchains "solve" are things like, "I would like to run a Ponzi scheme and not go to jail." Or, "I would like to hype something and make a lot of money off people." Or, "I would like my consulting company to bill a lot of hours." Or, "I would like to gamble on price fluctuations, and gold isn't volatile enough for me." But I wouldn't call any of those real problems in the sense of being things where solving them is positive sum for the society as a whole.
I would be happy to be proven wrong, of course. Blockchains are a cool technology. But I've spent nearly a decade asking for actual customer problems that are demonstrably solved better by a blockchain. I haven't found one yet.
How about “I want to buy a house without needing a bank as the middle man” or “I want to transact online without needing a credit card company intermediary taking fees” or “I want to cheaply send money to my family across the globe” or “I want to diversify with an asset that is truly global and not easily printable by some central government” or “my country’s currency is inflating like crazy and there arent enough usd accessible to safely convert”?
So all of these are basically Bitcoin. Bitcoin's been going for a decade with minimal use for any of those things. That suggests none of them are significant user needs for most people. (Or, at least, Bitcoin is a terrible match for any need that does exist.)
Some of those aren't real needs. E.g., "without needing a bank" is not a real problem. The "diversify with an asset that is truly global" is similarly an ideological statement, not a financial one.
The "without taking fees" thing is slightly more plausible, but in practice most people are happy to pay 2-3%, or have merchants pay that, and payment networks aren't free to run, so I'm not sure how plausible it is. Sending money to family can be solved much better with non-blockchain methods, which is why Bitcoin has approximately zero foothold there.
The "inflating like crazy" thing is similarly mostly a fantasy. How many countries are falling apart financially but where rule of law, power service, and internet service are stable enough to run blockchain nodes? How much better would a barely-accessible digital currency be than scarce USD? Why not just buy some directly useful inflation hedge, like medicine or canned goods?
Even if it were good for the "financial collapse" use case, that doesn't mean much in the rest of the world. The US dollar and the Euro are useful in unstable financial environments because they have value elsewhere. But the reverse isn't true; nobody in the US holds USD because it's the black market currency of choice in Caracas. So that use case isn't anything to build a real system on.
Just how in the 90s there was a lot of things that people could do on the internet but didn’t due to the immaturity of the ecosystem so it is with bitcoin today. Back in 1995 you could order most things online but it wasn’t easy or convenient or trustworthy and most people didnt do it despite the availability.
The lightning network is just getting started which (once mainstream) is going to dramatically lower fees and transaction speeds for a ton of bitcoin use cases.
And even if some of the most compelling use cases are niche- (collapsing economies, illegal activities) those alone will keep the currency value afloat and if eventually it matures and offers lower fees than credit card companies and developing nations where many people don’t have bank accounts can leap frog our legacy payment systems then I think the tech will be here to stay.
Yes, this has been the song of the Bitcoin fan for a half-dozen years at least. It doesn't work yet, but in the future it will be amazing. "Jam yesterday and jam tomorrow, but never jam today."
In 1995, the Internet was a vast improvement for things like email and file transfer and online forums and some games. It delivered actual value for 30 million people. Yes, there was more that it could do. But it delivered value on a daily basis for a lot of people. (And that was also true in 1985, albeit for something like 30,000 people.)
Bitcoin will never offer lower fees and greater convenience than existing payment networks. If it actually becomes a threat, those existing payment networks will get their shit together. And they can be far better than blockchain-based alternatives, because blockchains impose unnecessary technical limitations.
Look, for example, at M-Pesa. It's an electronic currency that leapfrogged existing payment systems. It started about the same time as Bitcoin. Except that it's actually useful for normal transactions and has real usage. In 2016, it was averaging 190 transactions per second, about 100x what Bitcoin is doing. Transactions are instant, and its fees are already lower than credit cards.
We could have that today in Western countries, but we don't because incumbents don't want to change and we're mostly fine with that. But if incumbents come under threat, they can do at least that well, and probably better given their much larger tech and research budgets.
You are making sweeping statements like "most people", or "not real" as if those are some sorts of axioms. To me it seems obvious you never really had to send money to let's call it a less-internationally-respected country. The country could be embargoed, or simply 'suspicious', and local regime probably takes exorbitant taxes from foreign remittances, and it's just a beginning of a long list of possible troubles. So, yes, lots of people world-wide, in spite of not being libertarians, or anarchists, or cocaine sellers, or a tech enthusiasts do have a lot of interest in cryptocurrencies. Though, few people really care if it's blockchain, or green cheese, of course.
Also, you seem to believe that high inflation somehow destroys internet access, and everything around it. I suppose it's something from Hollywood movies, sorry. Even in Somalia (which is typically a first example of failed state) internet is a working thing.
I've lived on four continents, so I'm at least hazily familiar with the problem. I agree money transfer could be better. But there's zero reason to think blockchains are a particularly good solution to that except in the narrow case of making transfers that are illegal on one end or the other. That's just not a big market, and it's self-limiting. Significant success will provoke regulatory response. We already see how much Bitcoin-related efforts are having to conform to AML and KYC laws.
I don't think high inflation on its own destroys access. I think a failing economic system definitely harms it, just as it harms every other business activity. Last I heard, if you were going to run your own Bitcoin node, you needed reliable connectivity and power. Try doing that in Venezuela right now, where people are barely getting food, and where the government has cracked down on people getting around its financial controls. (Somalia's a bad example; inflation there is reasonably stable now.)
And if you're not going to run your own Bitcoin node, but instead are using a service, then there's really no point to having a blockchain. At that point, you are just using a bank with a highly volatile currency and an overcomplicated transaction database. You'd be better off using a regular online bank and some stable currency.
>narrow case of making
>transfers that are illegal
Exactly, except I don't see why do you think it's a narrow case? Legal ways are burdensome, expensive for those who can live a week for $10, and sometimes don't work altogether because of political reasons which are unlikely to disappear soon (I don't even sure they have to disappear at all). And economic migration is huge, so it's safe guess to say that number of people who need to send money back to home country is very significant. And now it's already being done via gray, and illegal schemes, in fact. (Please note: "illegal" is used as morally neutral term here because laws could be wrong, or simply inefficient.) In many places around the world you can find a sort of alternative banking in a medieval fashion - as a trusted network of individuals, and families. One may expect regular online bank should beat this system, but it just doesn't happen, because of reasons I mentioned.
Somalia remains politically disintegrated by warring factions which I think is a bigger factor then currency rates and still there's internet, that's what I'm saying. Also, myself lived in a country where price of local currency could substantially change during a day, and it wasn't the end of the world. In those times much fewer people used internet, but it was there, electricity was there, no zombies walking in streets, shops worked, and rule of law (even if bad law, and bad rule) remained in reasonable amount. People just started to ignore that part which prohibits use of foreign currencies. Payments were often technically illegal - you see the pattern. Would I use bitcoin then if internet were as available as it is now? I can't say for sure, but maybe. Depends on circumstances like taxes, enforcement of currency controls, availability of US$ cash, need to make cross-border transfers.
Don't know a lot about Venezuela's current condition, but if electricity has become luxury already, an intermediary can solve this trouble, it could still be more efficient than moving cash in bags.
I'm saying it's a narrow case because most people doing international transfers are not interested in getting on the wrong side of the law. If you have data otherwise, let's see it.
Yes, the international transfer system isn't great. But that doesn't mean that blockchains are the best solution. Or a solution at all.
Is Somalia undergoing economic breakdown? I didn't find much evidence for that, and war doesn't mean that it is. And if it isn't, then it's not the kind of economic-collapse case that is typically used to justify Bitcoin.
If you're using an intermediary, then there's no real point to a blockchain solution. Blockchains create a trustless context. If I'm willing to trust an intermediary, then a blockchain doesn't add value.
> I send money overseas cheaply, easily and instantly all the time. Without Blockchain.
Really? I live in Canada and bill US customers for 6yrs and I've yet to find a solution for this that isnt awful. It's either slow, not practical for large amounts, very expensive, or requires tons of paperwork and special bank accounts not easily attained.
So by all means please share your solution for this. It'd be a massive industry if you found one...
It doesn't exist apparently. No reply to 3 people. He probably Venmo'd $5 to someone and thought it was a solved problem. Not a real solution to real significant cross-border money transfers.
Thanks. That's a plausible hypothetical. Could you name an organization like that? One that you are eager to donate to? How many people would like to donate to it? What's the total payment volume per year?
The only organization I can think of that might be in that category is Wikileaks. But they take both credit cards and Paypal, so they don't qualify. Maybe Hamas or Al Qaeda? Except that those are illegal to donate to, so the market is not going to be large.
Library Genesis/SciHub[1], and its various access portals[2].
Honestly LibGen+SciHub is doing more for humanity than almost any organization I know of. It's the next generation complement (not replacement) of Wikipedia -- truly opening the entirety of Man's knowledge to anyone.
I don't oppose paying content creators, but I suspect the vast majority of people accessing this knowledge wouldn't do so under traditional publishing. This shows copyright is largely outdated, not serving society optimally as it should.
As for Bitcoin and blockchains... my opinion is that they are extremely useful for efforts like those (and other niches like totalitarian states), if not much else. Perhaps paradoxically I also (controversially) think they should be outlawed and/or heavily regulated (outlawed but as a lightweight non-criminal offense). The potential for theft and money laundering is too large otherwise.
In the limit where everyone used perfect secrecy coins, paying taxes would need to be largely voluntary. And I suppose we all know how well that would turn out.
So I think cryptocurrencies are meant to be underground. It will always be possible to acquire some under the censorship conditions they are really useful for. So restricting their usage mainly curbs trivialized laundering.
Thanks! That's a good example. Very niche, so it's probably not enough to sustain a robust financial network. But I agree they could happily piggyback on a more general "light crime" cryptocurrency.
I once backed crowdfunded hardware before crowdfunding services like Kickstarter were really a thing and they couldn't really get their credit card provider to accept the risk, so I had to use an international wire transfer for it. I guess cryptocurrency would be decent for that.
That really just boils down to cryptocurrency being good for business models that are so new that they sound really risky. I'm not really sure that enabling such models is really a net good to society.
"Other people have money and I don't, so I'm going to redefine money as that which I have, and then I will have money and other people won't."
I thought it was ridiculous too when I first heard about it, and then I realized that "other people have money and I don't" is perhaps the strongest motivation in history. The American, French, Russian, and Chinese revolutions all stemmed from that, as did WW2 and the Holocaust, as did the conquest of the Americas, as did the settlement of the American West.
That's mostly wrong, if you take another look at it.
The American revolution was rich aristocrats shaking off the power that the British ones had over them.
The Russian revolution (October 1917) was a military coup that the Bolsheviks pulled off by subverting enough of an army tired of war - the democratic February revolution hadn't taken Russia out of WWI.
The French revolution was a religious one - the encyclopedists had found a revelation, and by gosh they were going to islam the rest of the world with it.
French Revolution was also a way for the "bourgeoisie" (the riches, basically) to get the power that was still held by the aristocracy. So, actually people that had lots of money and thought they deserved to have more power.
The original bitcoin whitepaper is focused on avoiding double-spend of digital cash, facilitating non-reversible transactions in a way that's not vulnerable to collapse or suborning of the central counterparty. It has the following statement in its introduction:
"Completely non-reversible transactions are not really possible, since financial institutions cannot
avoid mediating disputes. The cost of mediation increases transaction costs, limiting the
minimum practical transaction size and cutting off the possibility for small casual transactions,
and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible
services. With the possibility of reversal, the need for trust spreads. Merchants must
be wary of their customers, hassling them for more information than they would otherwise need.
A certain percentage of fraud is accepted as unavoidable."
(No solution is offered for the merchant defrauding the customer, which is the business that ebay was built on solving)
But with non-reversable transactions, you still have the trust issue. Now it's that the customer has to trust the merchant, that they're not going to completely rip them off.
All I see are Long Island Ice Tea Blockchain Corp. and Walmat saying that they're using blockchain to help their supply chain (whatever that means).
The reality is is that Blockchain is no longer new. Compare it to iPhone - they both roughly came out at the same time, yet we're still having the same conversations - "What problem does Blockchain solve" - while the iPhone found its place in the market. The reality is is that if Blockchain had a 'killer app' beyond tech bros speculating, we would have found it by now.
> The reality is is that Blockchain is no longer new. Compare it to iPhone - they both roughly came out at the same time, yet we're still having the same conversations - "What problem does Blockchain solve" - while the iPhone found its place in the market.
I still do not understand what kind of problem the iPhone solves (seriously!), while I can imagine quite well what kind of problem Bitcoin attempted to solve when it came out. If you want to understand it, consider the coinbase parameter in the Genesis block:
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".
This summarizes quite well the situation at that time: People feared that the dollar and euro system was on the brink of collapse; because of the bailouts and money printing, people feared inflation; the central banks became highly distrusted institutions etc.
So at that time, a currency system that
- is not based on a central trusted institution
- has a limit on maximum amount of currency that can exist (so it is free of inflation)
became a very desired one. We know that history turned out somewhat different - most people would argue that the trust in the national currencies has at least partly been reestablished. On the other hand, at least the original bitcoin protocol was eventually not able to abide its promises (e.g. scaling) or properties that people projected into it (anonymity; Bitcoin was never anonymous, only pseudonymous).
So to me it is quite obvious what kind of Bitcoin attempted to solve and why at that time this solution seemed quite attractive. From today's perspective, we can probably say that Bitcoin - as in the original protocol - has mostly failed. On the one hand, people regained trust in the central banks (whether this trust is justified, can of cours be debated for hours), which makes the Bitcoin product now less attractive to the masses. On the other hand, the original protocol had scalability issues.
Bitcoin promoters will argue that the scalability issues are now solved, altcoin promoters will argue that their altcoin offers properties that people loved to project into Bitcoin (anonymity). For most people, with the regained trust in national currencies, the problem that Bitcoin attempts/attempted to solve is - in opposite to the situation 2008/2009 - simply not a burning issue anymore.
My opinion is: Bitcoin was an idea that seemed very attractive at the time when it came out, but history turned out differently (for good or bad).
Smartphones: "I want to search for something on the Internet when I'm not at home." It's a very simple problem statement, it's well solved by a smartphone, and it's a far superior solution than the pre-existing one, which was to find an Internet cafe or free wifi hotspot. This is borne out by smart phone adoption worldwide.
Meanwhile, bitcoin was never better than the existing alternatives of barter and foreign currency for dealing with a failing central currency. It's not got substantial traction as an electronic currency.
Bitcoin does solve one problem: "how can I rake money in from suckers when I'm providing them with nothing in return". It does this well. Tremendous amounts of money are going from "investors" to miners and people at the top of the pyramid. This can only continue so long as there's a growing base of new money coming in - but nothing of value is coming out, just the promise of more coming in later.
My opinion is that Bitcoin was originally a political statement or thought experiment in crypto-anarchy, with a poorly thought out economic model that actively discourages its use as a coin, and history continues to reinforce that opinion.
> While I'm not certain I could state what problem iPhone (or smartphones in general) solves, it's definitely proven market fit.
Being a market fit does not mean that it solves a problem. To me, this is only one important reason (though IMHO a more safe one to bet on) among many, why aroduct is successful in the market.
As I wrote: Bitcoin attempted to solve a problem that seemed (and in my opinion was) very important at the time when it came out (this also IMHO explains the initial hype). The problem simply has become a lot less important and urgent for most people in our days.
I still do not understand what kind of problem the iPhone solves (seriously!)
I went from carrying a phone, an MP3 player and having a GPS and maps in my car to having one device and never having to stop for directions. That's just the most obvious ones.
> "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".
This kind of motivation has arguably always been about people misunderstanding economics. In this particular quote: government bailouts are not a function of the exact mechanisms of the currency, but of whether you elect politicians that want to keep banks in check or not. Even if everybody used Bitcoin, a certain type of politician would still be tempted to do bank bailouts.
> - has a limit on maximum amount of currency that can exist (so it is free of inflation)
And this is actually an anti-feature.
It should be obvious that relative prices need to be able to adjust in order for markets to function well, and if you look at economic history without ideological blinders, it becomes clear that there are many important markets in which absolute prices move up more easily than they move down, notably but not only wages and salaries.[0]
Having a modest amount of inflation means that the absolute price that you as a seller can earn must increase if you want your relative price to be stable - a kind of economic Red Queen hypothesis. This makes it easier for relative prices to adjust downwards, which is good for the functioning of markets.
The economics behind Bitcoin has always been a bad idea.
[0] There are good reasons for this. In order to improve your financial position, you have to reduce your monetary outflows or increase your monetary incomes. The amount of effort you spend is proportional to the number of contracts you negotiate, not to the value of those contracts. So if you have many monetary outflows, but comparatively fewer (but larger) monetary incomes, then you'll rationally focus your efforts on increasing those incomes (or fighting against decreases of those incomes). Almost every household, and many companies, are in the position of having fewer incomes than outflows, so they all have an incentive to fight relatively harder against price decreases on their income. Which has the net effect that absolute prices move upwards more easily than they move downwards.
It provides distributed trust for the class of problems wherein you have multiple competitive parties trying to achieve consensus on a sequence of transactions (or contracts, if you will).
I believe a massive number of social and societal problems are solved by distributed trust models in the same ways free market economies generally lead to more equality and democracy leads to more freedoms.
I gave you a few specific examples earlier in the thread:
- Art transactions: registry of origin and property transfers for any object (with authenticated certificate), currently done by lawyers & auction houses (costly, inefficient, painful, near-impossible in some cases involving war/expropriation because records were destroyed at some point)
- International shipping: INCOTERMS, currently handled through various specialized intermediaries (costly, inefficient, painful)
- Registry of operations over the life of a company (creation/address change/acquisitions/foreclosure), currently done by national commerce courts & accredited local newspapers (costly, inefficient, painful)
- Wills: self-authentication of one's will preventing repudiation attempts by third parties, currently done by lawyers and witnesses (costly, inefficient, painful)
- Escrow accounts for service providers (ex freelancers) through multisig wallets, currently done by intermediary platforms (costly, inefficient)
how would any of those problems be solved with a blockchain? you are taking about real world things and actors that need to be matched to something on a blockchain. don't see how you get around that part and that is the costly, inefficient and painful one. not the ledger.
If you can fix distributed trust you could probably reshape global trade however you see fit. Lack of systemic trust creates mountains of complexity to deal with -- look at how many parties have to be involved just to have a product manufactured in another country
Uh.... oh it is. It's an old one. There are at least a dozen parties and counterparties involved in most trade because of currency, political, legal, and delivery risks.
You, your trade partner, your bank, your bank's correspondence bank, their bank, their bank's correspondence bank, customs at ports of entry, shipping agents, and others, and they're all taking their time and their cut to manage your risks for you.
I don't think blockchain solves anything remotely close to all problems but I think it could have its uses in providing services for escrow and a gigantic, tamper-proof distributed log.
By reducing the coordination of truth between so many parties to an offline, distributed data-structure, in a way that assures integrity mathematically. As alternative to the constellation of approaches (email, IT integrations, filing cabinets full of records, etc) currently in use. With a global peer-distributed database you can change the risks with your truth provider to risks that the data doesn't update. Depending on a lot of factors I think that may be more desireable
That said I don't work anywhere near international trade, just recalling some stuff I learned in an old college class
But you still have to trust the people doing the inspecting and certifying - or whatever. I'd be less worried about them altering information than them altering or substituting actual product.
That will always be the case, but given the ease of tracking all the transactions in the chain, you can find the point at which the product deviates. Of course, if every step on that chain has colluded, and produced false attestations, then there's no defense against that. But then, if all parties are coordinating then they've created their own supply chain independent of the one being tracked.
I'll tell you the problem. The problem is the government. You can't and shouldn't trust the government, but nevertheless the government is forcing everyone to use their government-issued currency.
Yes, I know US Gov is not like Venezuela, they are not printing money like there's no tomorrow, but they still do stupid shit and try to control the economy. Crypto at least gives you money that is not issued by the government. Of course, governments can try to control it, like they do with everything else, at least through taxes etc.
You have to trust someone, at some point. HTTPS/SSL relies on a distributed trust system. Even with crypto, you have to trust the developers that created the protocol and the consortium of groups that operate it.
Actually, no. Plenty of SSL/HTTPS servers run non-open sourced software. Plenty of open source foundations have closed decision making processes. Being open source is neither necessary nor sufficient to being trustworthy.
> Modularity, DRY, SRP, etc. is never a goal, it’s a trait. Don’t let the pursuit of theory get in the way of actual productivity.
> That’s not to say Modularity, DRY, SRP, etc. aren’t great ideas—they are!—but understand that they’re approaches and not achievements.
I know it might sound lame, but these two tweets have stuck by with my as probably the best piece of advice I've ever read. "approaches and not achievements" has found itself useful on so many occasions.
Actually, "Distributed trust", if the distribution is wide enough, enables "Trustless transfer of value and information".
For me that's a clearer way to think about its potential.
Number one problem it solves is obviously money. With an algorithmic stabilization mechanism, you can now have a fair and unmanipulated currency. (Basecoin, MakerDAO, Havven, ...)
From there, you can have programmatic incentivization. This allows you to solve a huge variety of problems that the internet only began to solve.
For instance :
You can now scale privacy networks like Tor that, in its current state, requires benevolent node operators (of which there are too few), and thus take private communications to the mainstream. (Orchid, Mainframe, ...)
In a similar vein, you can make mesh networks like Firebase actually global by incentivizing the node operators. Bye bye ISP monopolies. (Open garden, Rightmesh, ...)
If you add an identity system (say your government supplies its citizens with a blockchain ID), technologies such as zero-knowledge proofs could allow you to vote on various issues from your home, anonymously and un-censorably. Hello Democracy. (Sovrin, ...)
And if you really want to make your imagination run wild, checkout projects like nCent or Fetch.ai, which propose visions that totally redefine how society, as a network of humans, could function.
I think you're doing blockchain and human ingenuity a disservice by framing the question that way. Many corporations haven't revolved around "solving a problem", but instead making existing solutions more efficient.
There were people letting out apartments before AirBnb, and there were taxi cars before Uber - yet we feel that these companies are making our lives easier.
Also your question is very much centered around your own world view. What about the Venezuelans who are mining bitcoin becauause theyir own currency is at an all time high inflation rate? Isn't that example enough to at least partially answer your question about how blockchain addresses societal problems?
Any industry or operations where intermediaries are needed becauses of a lack of trust between first parties can be desintermediated by a distributed trust network:
- Art transactions: registry of origin and property transfers for any object (with authenticated certificate), currently done by lawyers & auction houses (costly, inefficient, painful, near-impossible in some cases)
- International shipping: INCOTERMS, currently handled through various specialized intermediaries (costly, inefficient, painful)
- Registry of operations over the life of a company (creation/address change/acquisitions/foreclosure), currently done by national commerce courts & accredited local newspapers (costly, inefficient, painful)
- Wills: self-authentication of one's will preventing repudiation attempts by third parties, currently done by lawyers and witnesses (costly, inefficient, painful)
- Escrow accounts for service providers (ex freelancers) through multisig wallets (inefficient)
To me blockchain in Art is less useful as a way to prove some ex-nihilo ownership than as an unalterable chain of ownership transfers.
Of course that works as long as noone gets their hands on Musée du Louvre's private keys.
Venezuelans mining bitcoin isn't a good way to solve their inflation issues, because bitcoin has lost its value much faster than the the Venezuelan Bolivar has lost value, at least the bolivar is significantly less volatile than bitcoin. That doesn't mean bitcoin can't be stable though.
Genuine question: how is bitcoin a better inflation hedge than gold, especially in (somewhat) poor countries where making online transactions (and mining bitcoin) is not as easy/affordable as in the most developed countries?
> It's distributed trust. That's the problem it solves.
As someone else has pointed out, trust is still not distributed. You still have to trust whoever created the rules and wrote the code (from maliciousness and errors).
Especially when that distributed trust is paid/earned with CPU cycles. The incentive is not clear besides periodic speculatory bursts.
> You still have to trust whoever created the rules and wrote the code (from maliciousness and errors).
100% agree with you. Seems like a bunch of people are neglecting this factor or misunderstanding what they are buying into.
Blockchain is not 'distributed trust'. In practice, blockchain centralizes trust. You trust your bitcoin wallet to correctly send money to the addresses that you supply, and correctly generate receiving addresses.
There is only one thing to audit/trust now - the bitcoin protocol and its implementation - instead of studying how modern banking and legal systems work. You trust one thing instead of trusting dozens of middlemen. While this sounds like a non-issue to those who live in "first world" countries like USA and only transact internally, it is a big deal for international transactions and some of the less developed economies.
If blockchain (not Bitcoin necessarily) adds "cheaper" to any of its use cases then it's just as legitimate as most Silicon Valley startups.
Uber is cheaper taxis. AirBnB is cheaper hotel rooms. Are these ponzi schemes? Maybe, but they create jobs and benefit the consumer at the expense of entrenched institutional players, which I would say is a good thing.
Payments is a huge one. Bitcoin didn't solve it because it's slow. There's a new generation of chains (mostly PoS, not PoW) that may solve it. Maybe it's gen 4 or 5. Eventually the technology will catch up.
What about PayPal that's trustless? Millions (billions?) of people rely on PayPal to take payments and there are plenty of stories where those people have lost their money without recourse. An on-chain PayPal would be game changing and a lot more fair than the alternatives.
What about voting that can't be tampered with? Yeah, that's not game changing. /s
Blockchain is a promising but immature technology. Like all technologies when they start.
The tech world, despite all of its benefits, is doing a fantastic (in a bad way) job of consolidating power towards the top. Time and time again we see that there are really no benevolent dictators (remember when everyone trusted Google and Facebook?). Blockchain has the potential to balance that out.
What I really like about blockchain is it's going to progress regardless of what you think about. It simply does not care that you don't think it's a good idea. It doesn't care if it threatens banks or governments.
It progresses by everyone acting in their own self interest. But the end result has the potential to deconsolidate power. When has that ever been the case in human history?
Most of the people I encounter who don't like crypto are the ones who are angry that they didn't buy BTC back in the day. Well, guess what? You didn't miss anything. Things are just getting started. Do your research and find something you think may be promising (or enable promising tech) and invest in it.
It is just the next round of the "Uber for X". Little attention is paid specifically to what that technology and business model provide. We end up getting hundreds of startups that use the buzzword to secure funding but quickly flame out when they realize that the advantages don't really matter to their specific market. However that doesn't mean there are not viable "Uber for X" or blockain business ideas out there.
Totally fair point. It's especially great for the investment world -- especially VC, which only needs one billion-dollar exit to make a return. So this makes sense!
Which basically sums up my problem with it. It is sad that the primary angle anyone looks at this from is as an investor or even a VC. That results in lots of wasted time, money, and specifically for most blockchain businesses wasted carbon ouput.
If the only problem is that we've wasted a lot of time, and in the end one company builds one product that changes the world, then maybe it's worth it.
I am not a philosophy student, but I think you have that backwards. My last comment was fundamentally a utilitarian one as it is about maximizing efficiency and minimizing waste. You don't see utilitarians walking around talking about "a sufficient level of good for a sufficiently large group of people".
That's incorrect. In your original comment you referred to "a positive net result", which the utilitarian will always prefer by definition. Perhaps you are confusing utility with efficiency?
>which the utilitarian will always prefer by definition
That is the heart of our confusion here. You are comparing it to a neutral state. Yes, a utilitarian would prefer any positive outcome to that. However, I was implying that there was another path that would have resulted in an even more positive result but through inefficiency we were left with a lesser but still positive result. That waste of resources like time and money is equivalent to a waste of utility that a utilitarian would obviously oppose.
Why is this sad? It's just like the startup boom we had in tech, and while most flamed out, we were left with many that changed the world (for better or worse).
> It's distributed trust. That's the problem it solves
I don't know that to be true exactly. I don't think that distributed trust is a problem really. I also don't think that blockchain itself actually solves for it. From what I can tell, and I may be naive here, with bitcoin for example two people enter into an agreement and a transaction is made and I guess the blockchain agrees to it and commits it to the chain through magic (hashing). But the trust is put in the wrong place I think, should the network have trusted the transaction was correct? I suppose bitcoin has keys that attempt to ensure ownership of the coins, but I don't think that is a blockchain thing precisely. I'm just rambling... I'd like to hear more about why you think blockchains solve for distributed trust.. also why is distributed trust a problem to begin with.
The problems of trust that blockchain aims to solve are currently solved by the banks, the state and legal systems. Our society is built on this enormous system of trust that is backed by hard power (threat to hardship, violence and coercion) and if these systems collapse, then blockchains will suddenly be extremely valuable.
Blockchains in theory are much more efficient and than governments, so this is what people are betting on, without putting it in so many words.
If you think of it, governance is one the biggest monopolies out there and some competition might not be a bad idea for people with large amount of assets.
I'm not sure you've framed the problem and solution correctly, but here is one obvious societal problem solved by Bitcoin:
How does Scihub receive funding to support the service it provides?
If you tried to fund it using Paypal, Visa/Mastercard, etc., it's quite likely that those payment systems would have already blocked the payments from reaching the service providers.
Because it is substantially more difficult to prevent Bitcoin transactions from being added to the blockchain, you can move "payment system" further down the list of "things to attack." Now you've got DNS and some others at the bottom of the list.
Furthermore, Bitcoins can be used to pay directly for things like VPS and other tech. I see over 92 Btc received at the address that pops up on Scihub's website, so this is a pretty big deal. (over half a million $ at today's going rate.)
So whatever the downfall of Scihub will be, it is very unlikely to be due to an attack (even a coordinated one) against the Bitcoin payment system.
That is the most obvious extant application of blockchain technology that provides a benefit to society:
* mostly publicly funded research locked away in proprietary databases
* illicit public database digitally publishing that publicly funded research
* Bitcoin used to pay to run the service that makes the public research available to the public
I don't think that is at all worth all the hype, energy, and money being thrown at blockchain technology. Nevertheless it is a real answer to a real question.
It’s an interesting debate whether facilitating illegal (but society-enabling and productive) projects like sci-hub and the drug parts of silkroad will have been worth facilitating illegal (but society-harming) projects such as ransomware, assassination, money laundering, etc.
People will disagree about what goes in the categories of illegal-good and illegal-bad.
I don't think it's too hard to find potential problems it can solve, but it's not necessarily needed to solve it.
1. Imagine you use FB. Instead of FB having all of your data, it's stored on the blockchain (encrypted). The problem we have now is if a new social network comes along if you create an account you lose all of your previous data (which may or may not be what you want). This would let you easily bring in any old data that you want.
2. I want to transfer funds/ownership or whatever to someone in X number of years. Instead of going through a lawyer, paying money, I make this a smart contract.
3. Right now most payment processors do not work with adult industries and the ones that do charge exorbitant fees. Blockchain can bring those fees down a lot and let performers keep a lot more of their money.
4. We rely on sites like stackoverflow and what not. If those sites were to go down we would lose all of that information (if it wasn't archived). If that was run on the blockchain as long as a few people were still using the site it could stay running.
5. It's also just a solution to the problem of "send money to someone". That was solved by banks and cash, but blockchain can be another solution that doesn't require an insane amount of infrastructure, employees, call centers, etc to run. Ya, it creates its own set of problems (no chargebacks, still may need escrow services, etc) but maybe those can be run more efficiently than our current system.
6. I think voting is something that could happen on the blockchain. Boom, now anyone can verify the results of the election. People can't as easily scream election fraud.
What on earth does storage mean in this context: "Instead of FB having all of your data, it's stored on the blockchain"??
It doesn't mean actually, "store thousands of messages, posts, and photos literally 'on' the blockchain" because that would get ridiculously unwieldy.
So maybe it means, "store pointers to the above-mentioned data within a blockchain," which makes for a plausible organizing principle but doesn't actually do any storage (for which you'd still need technology and a business model to support it).
I'm only a little bit being snarky here: is there a deeper / more robust meaning to the shorthand of "we can store [some kind of rich, lots-of-bits] data 'on the blockchain'" that isn't clear to the dilettante?
Totally fair point. I don't intend to mean that blockchain works right now for storing all of this efficiently, but I know people are working on solutions to this. Steemit uses https://ipfs.io/ which I am not super familiar with. http://swarm-guide.readthedocs.io/en/latest/index.html is another.
Another possible solution is something like Torrent, not everyone needs to have a replication of every single file - it's spread out but decentralised enough.
And then a non blockchain solution to this is: https://tent.io/ which from what I understand is more similar to an email protocol for social networks.
I didn't go into too much depth in any of the points. I am not super invested in this space, nor up to date completely. It's just been an interest of mine since 2012 and i've been also trying to come up with real life use cases that blockchain could solve well.
Filecoin, Bluzelle, Sia, Genaro, Arweave, are projects that try to solve trustless decentralized storage. Most use blockchain as the incentive and accountability layer only, files aren't stored directly on the blockchain. (Of these projects, only Sia is currently live)
Depends on how much censorship protection you want. Journalism of dangerous topics? Store it on a decentralized solution like IPFS, Swarm, Sia. Just want to store ownership records and transactions related to that data? Use AWS and store the pointer.
"3. Right now most payment processors do not work with adult industries and the ones that do charge exorbitant fees. Blockchain can bring those fees down a lot and let performers keep a lot more of their money."
There is literally nothing about blockchain that would inherently do this. that is entirely on the payment processor.
"That was solved by banks and cash, but blockchain can be another solution that doesn't require an insane amount of infrastructure, employees, call centers, etc to run."
This is quite false; bitcoin requires a very large infrastructure with incredible energy costs to run.
"6. I think voting is something that could happen on the blockchain. Boom, now anyone can verify the results of the election. People can't as easily scream election fraud."
But now my boss can verify who I voted for. So can the mafia.
You really haven't explained what "on the blockchain" means and how it helps any of these situations.
"voting ... on the blockchain" This just sounds like the hype that parent was talking about.
Maybe all of this means something in your head, but the way it reads is the same as when companies file patents for "Doing ${THING}, but on the internet", as if that categorically changes the thing.
"Open APIs", backing and sharing data is all possible without Blockchain.
> 2.
The problem with contracts isn't contract itself, but the humans involved. Instead of having a lawyer write a contract, instead you'll have Smart Lawyers write Smart Contracts.
> 3.
Ok, sure. I would like to see what this is in practice though. The reason payment processors don't like dealing with adult industries is due to the higher rate of fraud and/or chargebacks, things like that. Either processors involved would be affected by the same things, or consumers would have to forgo things like fraud prevention and protection.
> 4.
Stackoverflow data is Creative Commons. If those sites go down we wouldn't loose the information. This is not a real problem.
> 5.
You detailed yourself why this isn't actually a problem solved.
> 6.
How? You can't just say "voting, but on the blockchain" and leave it at that. Wouldn't a voting-only blockchain would be susceptible to 51% attacks?
Sure, I suppose it couldn't replace every payment like this from needing to go through a lawyer. I suppose if you wanted to send 10 billion over seas to someone in 20 years, you might want to seek some legal input. But say for the simplest case I just wanna set something up that sends some money to my child on his 18th birthday I could use a smart contract like: https://www.reddit.com/r/ethereum/comments/4ww0sr/need_a_con....
You're placing a heck of a lot of trust in a digital system if you're putting a significant (as in "I would hate to lose this") sum of money into it in the expectation it'll still be there in the future.
Even if we put aside the problem of unstable valuation, forks, and potential total collapse of cryptocurrencies, you're going to face the challenge of keeping a private key secure for however many years you plan to escrow the money.
Compared to creating a trust account, this is insanely risky - you'd have to be convinced that the legal and banking systems were facing imminent catastrophic collapse to think that's better than what we've got.
Again, where is the problem? If you want to send money to your child on their birthday, just send it. Why do you need a contract, 'smart' or otherwise, for that?
Edit: What's funny about that thread is that it's someone asking for help to get a contract written (...like you do when you see a lawyer), and there's supposedly (or not, unsure about the sarcasm) a venerability in the contract itself.
The whole reason Bitcoin uses a hilarious amount of energy is that it barely uses trust (you have to trust the core maintainers and big miners not to screw themselves...).
Distributed trust is the little cash box by a vegetable stand on the side of the road.
Blockchain probabilistically solves Byzantine generals problem. That's pretty awesome result with significant business consequences once people start applying it everywhere where they need to trust somebody in trustless environment. If its devs manage to address scaling issues, it could be one of the backbones of Internet, e-commerce, sharing economy etc. It can be also misused to cement certain societal divisions.
The only one I've seen that might go somewhere is filecoin.
However, I think people are underestimating how the market for ""enterprise private blockchain"" will play out. The same organisations that spent money on X509 PKI non-solutions will pay millions for blockchain. At this level, nobody likes talking about the problem solved. It's solutions all the way, especially enterprise solutions.
I’ve been trying to answer this question for myself for a few months now. Reading the different VC, academic, and tech’s writings, I’ve come up with a longer list than I thought—some more compelling than others.
One of them that I find really interesting is the ability of people to create these autonomous organizations. An entity separate from governments or existing forms of business with programmable incentives that are highly durable. They can exist as long as there’s one node still running somewhere in the world. As for its applications besides being potential investment vehicles, I’ve been curious if they provide the missing implementation piece for grander visions of old alternative economic theories of coordination and ownership like worker coops or some topics in the works of Posner & Weyl (Radical Markets).
1. I can send a letter to anyone, because anyone has an address. Not everyone has an email address. Plus I can add small physical things, and it's more personal with handwriting and a little perfume ;).
2. If I need quick communication, I just call them.
A lot of arguments that are anti-blockchain and anti-cryptocurrency (based on other tech besides blockchain) can be used in the same way with email.
I can give you pretty convincing arguments why email will fail because we already have traditional snail mail (which can do a lot more), and phone (which is faster and more direct).
Fact is that cryptocurrencies, smart contracts and other blockchain applications live 100% on the internet, which means it's faster, cheaper, simpler, global (= not tied to countries and specific companies)
Emails are cheap, quick and asynchronous (contrary to phone), there's a log of the conversation which can be forwarded if need be, and you can attach data to it (document, video etc.).
You can sort your mailbox according to your needs, which gains time and save space compared to, say, hanging folders.
Back in the 90's I tried to attach my VHS tape and Polaroid pictures to email, before sending it over the 2400 baud modem. Didn't work. Also mainly because the other end didn't have any computer or internet.
Everyone had an address, almost everyone had a phone, almost nobody had an email address. Not very useful.
How did you send pictures over email? I know what you are thinking, but no, you didn't take digital pictures. If you wanted to send one of your pictures over email, you needed to have an expensive scanner. And if you did, the pixel quality would be terrible. Not very useful.
Technologies like email need things around it to evolve, both technical and social. And the same is true for blockchain and cryptocurrencies.
I'm not claiming that either of them are guaranteed to be successful, but I'm claiming that a lot of arguments against it don't make much sense. Because those same arguments could just as easily be applied to email.
>> I would love to know which societal problems can be reduced to a distributed trust problem. That would convince me that I'm wrong about blockchain technology.
I feel like Namecoin, the first Bitcoin fork, is ready to replace our current DNS system. The transaction fee for registering domains is comparable to current prices, and it gets us out of this horrible situation where we trust companies and governments not to abuse their power and sign new certificates (this is not just a theoretical issue). The problem of associating signing keys with domains is about as basic as you can get with distributed trust systems.
So what would that transition look like, how would you phase the roll out? Practically how would this work and would the result be worth the effort to each individual involved or would it be a utopian ideal for ‘the greater good’?
Firefox and Chrome extensions that resolve .bit domains already exist, the relevant companies just need to audit them or write their own solutions and then bake them into their browsers. Nowadays, most users don't even know when their browser updates. Once every major browser resolves .bit addresses, the battle over secure DNS will be practically won. Hold-outs are okay, I feel no need to force people to use more secure systems.
The result would allow us to avoid situations arising from incompetent or malicious signing authorities, like DigiCert Sdn Bhd or Diginator. The problems addressed are not delusional dystopian fantasies, but rather the security of the internet. Malicious signing happens, just read the news. All non-malicious entities using https should be overjoyed by the availability of a more secure system. The only problem I see for adoption is network effects.
The problem that blockchain solves is trusted timestamping and in that realm exactly same mechanism was used for a long time before it was called that. Various proof-of-something mechanisms layered on top of that solve the "distributed" part of the problem with varying degrees of trust and efficiency.
I would argue there's value beyond distributed trust: smart contracts (though you could argue that this is merely an application built upon the concept of distributed trust), the tokenization of physical assets (think real estate, oil and gas exploration/drilling/royalties, etc.), and more generally the ability for money to become a "product". These are all domains that blockchain is enabling, though it remains to be seen whether these problems/opportunities are solved via blockchain or not.
Real estate, oil and gas exploration/drilling/royalties are all things that have existed without problem for many decades. Saying "real estate, but with blockchain" doesn't actually say what problem you're solving.
I think I'd have to argue that real estate has existed for much, much longer than a few decades :D
I'm a pretty big sceptic on all of this crypto BS, but the ownership of real estate assets seems like a pretty archaic system of not easily inspected pieces of paper. Having a public, provable system for recording this information (and possibly other related info, e.g. liens) seems like it would be of some use. The system we have works, but it could work better.
> the ownership of real estate assets seems like a pretty archaic system of not easily inspected pieces of paper. Having a public, provable system for recording this information (and possibly other related info, e.g. liens) seems like it would be of some use. The system we have works, but it could work better.
This already exists in many states. It's a political problem (whether or not to use of tax money to pay for the digitization of old records), not a technical one: https://www.uslandrecords.com/uslr/UslrApp/index.jsp
Related information, like liens, is available via those public records as well.
From what I've heard from insiders at the BigCos who are buying many of these 'blockchain solutions', the main advantage of blockchain is that it is a sexy buzzword which convinces management to pay for BigCo to update/solve some unglamorous problem they weren't willing to throw money at beforehand.
'I presided over the digitization of all old records' isn't something an MBA type necessarily wants on their CV, so they won't push for it no matter the value to the company.
However 'I lead a team implementing a solution to digitize and store records on the blockchain' is how the MBA type gets a promotion/new job offer and how the technical guys can get the budget to do important stuff that was otherwise too unglamorous to be prioritized...
I'm not in the states, I'm in Australia. The records here exist but AFAIK cost money to retrieve and are scattered, generally you end up paying a moderate amount (say $1k - $2k) for a conveyancer to look up all the relevant records before purchasing and spot any problems for you.
Arguably you'd want the conveyancer anyway to go through the legal concerns, and clearly "blockchain" solutions are not the only possible solutions - simply digitising them and making them available and sensibly organised would be fine.
Sure, and I'm not saying that it does, but it may also be one possible solution. Not necessarily the best but probably better than what we currently have.
> Real estate, oil and gas exploration/drilling/royalties are all things that have existed without problem for many decades.
Really? I find that unbelievable.
Ever try to procure data on real estate? It's almost impossible unless you're willing to cough up large sums of money. Seems to me that an open platform of real estate data would attract innovation and create value. Maybe something blockchain can solve?
Speaking as a longtime skeptic, A16Z has actually produced the single clearest answer I've seen to that question: blockchains may be good for bootstrapping new network effects by giving early participants in a network (in a Metcalfe's Law sense of network) an incentive to participate. Pure utility tokens can be like call options on the eventual value of the network if it gets off the ground. It's a novel way of solving a collective action problem.
Except the early adopters don't need to actually participate in the network, just acquire and hoard tokens. There's almost no connection between the profits and the actual advocacy, resources and risks required for the network to succed.
So the incentive structure is quite different from, say, the stock market or even a kickstarter. It's more like a tradeable Ponzi with strong incentives to overpromise and overhype in the early phase, and to get out when the valuation approaches the claims without actually delivering anything more than yet another speculative asset.
But organizing “payment” in the form of a cryptocurrency is no different than just depositing money in their bank account.
In some cases it would be: payment that evades government detection, payment that allows network participation to be anonymous, etc.
The trust issue would not be part of it in these cases, from a business perspective.
I guess I mean that predicating some network-effect-needing business on blockchain, for these reasons, still just seems like hype. Unless the business is fundamentally about anonymously being compensated in some way, then other existing financial institutions solve the problem (with just as much trust in 99.99999% of scenarios) in a far simpler way.
Yeah, by over-promising and hyping you could raise the price of your coin, but it doesn't mean your volume will rise as much. You cant just liquidate everything at once and get anything as close as what a simple Q * P calculation would do for you.
So that's why you work on your network, create value in it. Then later on the line, you become obscenely rich as your token's liquidity is good enough to live with forever.
That's what people calling Ponzi/scam are missing. The short-term profits are nothing compared to the LIFECHANGING profits of being the founder of a network protocol.
The best thing I've seen blockchains used for, besides currency, is as an integration platform for a non-centralized supply chain. There's really no money in it, since there aren't any gatekeepers, but that's sort of the point.
The idea is that the farmer picks his carrots, puts them in a box and sends them off to the carrot juice guy. When he does this he puts a upc code on the side of the carrot box and then puts the code into the blockchain as I shipped this thing to the carrot juice guy. Carrot juice guy receives carrot juice, makes carrot juice with carrots in box and then says, I used these carrots to make this juice in these 300 bottles. <Blockchain> Ships it to distributor. Distributor says I received these carrot juice shipments. <Blockchain> I then sold 1-30 to convenience store A <Blockchain>. End consumer bought one at 3:30pm and got sick. You have the record of how it got there and how much time it spent everywhere, etc. The thing here is there is no centralized supply chain company who controls everything, everyone just puts it on the blockchain that NO ONE OWNS. This is a net gain for everybody in the network, but there is no centralized profit there, except for maybe some systems integrators working at the edges.
This is why blockchain will probably be this kind of subtle thing that doesn't make anybody a lot of money, but just seeps into industry over time. It's a bit like containerization in a way. Huge global impact, but not really any one company who made their fortune on the container technology itself, but all the companies around it benefited.
You still need to trust all the people in the production line (Farmer, Juicer, Seller and not to mention that transportation guys) that brought the bottle of juice to market to actually record things correctly into the used block-chain.
The trust required in the data entry "Link/Step" basically results in the use of a block-chain to be pointless, as trust is already a requirement in this particular chain of custody.
This is also why the block-chain only really works in Digital Only assets, as you link the asset it self in the block-chain itself.
You're right, but that isn't the problem being solved. That problem would be present in a centralized solution as well.
This solution allows the same benefit of having a MONOPOLIZED SOLUTION for tracking supply chain, without the negatives of Monopoly taking monopoly profits.
The blockchain makes it extraordinarily difficult to tamper with post facto. As the ledger is distributed with multiple parties and each block is hashed, it’s exponentially difficult to change later. This means that no centralized entity can cook the books if a situation arises.
But that's the point blockchain is missing. You don't need to tamper with the data in the ledger because there is no way to put a carrot in it, how would you prove that the carrot in the juice is the same carrot picked? Technology isn't going to solve for that without some magical way to identity specific carrots (or beef, or whatever) that have been transformed into something else... or even just from another carrot in the next box. Blockchain is interesting but trust is still required in the system, and in many cases it is in fact blind trust.
What? For this system to be truely trustless, the blockchain needs to be owned and maintained by all the people who use it. That means farmer, carrot juice guy, distributor, and retailer need to all have beefy computers with large hard drives to hold the entire blockchain and keep mining it.
Sure, it's great that you don't have to trust Amazon or Wal-Mart to trace the links back, but you could do just as well way more cheaply with a well-maintained independent 3rd-party with an AJAX API on top of a Postgres database. (Well, except for the part where said 3rd-party gets bought out by Twitter...)
>For this system to be truely trustless, the blockchain needs to be owned and maintained by all the people who use it. That means farmer, carrot juice guy, distributor, and retailer need to all have beefy computers with large hard drives to hold the entire blockchain and keep mining it.
Trustless isn't a well defined term so it is hard to disagree directly with what you are saying. However I would argue that most relying parties do not need to have the full state of the system to ensure they aren't cheated. In that they don't need information about other assets to track the assets they care about. For instance the carrot juice guy only needs to validate the chain of custody of the carrots. You could put a merkle proof for each custody change on a QR code on the side of the carrot box. The block headers are 70MB, the chain of custody is probably less than 10KB.
>Sure, it's great that you don't have to trust Amazon or Wal-Mart to trace the links back, but you could do just as well way more cheaply with a well-maintained independent 3rd-party with an AJAX API on top of a Postgres database.
I agree that a running PoW blockchain may be overkill for supply chain tracking. However a BFT distributed database maintained by several trustworthy institutions is probably better a Postgres database. Often blockchain is used as shorthand for "BFT distributed database maintained by several trustworthy institutions".
Indeed. And more to the point blockchain doesn't do a damm thing to improve trust. If someone in step three tosses the carrots out the window and uses a different batch the blockchain isn't going to get that information.
The blockchain in this example doesn't add or reduce trust at all it's just a time stamped database of stuff people said. We have those already.
Bingo. I still don’t follow how blockchain solves current problems. If the problem in your country is a lack of good record keeping, that’s not a technological problem. It’s a political problem. Cheap solutions have existed for centuries. The real question is why haven’t they been adopted? Why would those in power allow blockchain to be adopted but not existing technologies?
In most cases it seems that the existing technologies have been adopted and the people advocating for blockchain-based solutions just aren't aware that it's a solved problem.
I completely agree. It's naiveté. Technically, my local county recorder's office is a blockchain that has existed for centuries. It's cheap, reliable, correctable, enforceable, etc. It has all of the features without the downside.
People lying has always been a problem with grand internet visions. Remember the semantic web? It never went anywhere because people lie in metadata. There would have to be some sort of reputation system for participants, but with that comes an independent adjudication system to determine who is telling the truth. This brings back centralization.
I was talking with some people I know who work on HyperLedger, which is really lightweight blockchain stuff connected to the Linux foundation, and they say the most used blockchain is the one used for tracking where diamonds came from. I guess they are unique enough, or identifiable enough that they can't be easily replaced by diamonds that came from outside the system.
The blockchain solves the problem of trust. Without the blockchain, you need to trust some monopolistic middle-man that became monopolistic because he was the winner in the 'race of acquiring trust' from its consumers.
With a blockchain to track phisical goods, any third-party can consult or print a new transaction into the blockchain, it we wont need to deposit our faith in a company or a government.
We managed to solve the problem of trust, the best way we could, with the tools we had as a society, but if you analize all the paperwork, the bureocracy, the taxes and time taken to make the same system work in the classical way, there's a clear advantage in the new way od doing things.
How do I indelibly serialize my carrots? What stops me from eating the carrots I said I sent to the juice dude, and then just sending him some carrots I picked up from Loblaws?
In this particular case it doesnt solve this problem.
It solves the problem of the tracker.. Before you needed to trust the middleman by using another authority for trust, like your government given permissions and making inspections.
With the blockchain you can transfer that to the peers participating in the activities themselves.
It's the descentralization of trust. Right now we have to trust several databases from different peers, that no one have access to, and make a big effort if we need for instance know the state of something tracked by those systems.
Blockchain is a hype in a lot of situations, but that doesnt mean it doesnt have some problem domains it can be used to solve..
For me is just a algorithmic tool, like a hash, binary tree or a merkle tree. There are some problem domains where you might consider it as something to be used to solve some particular sort of problems.
Maybe for tracking physical goods it might not even be the best tool, according to the circustances, but it is something to be take into consideration, to solve this particular problem domain.
> With the blockchain you can transfer that to the peers participating in the activities themselves.
Assuming you can trust them, which kind of defeats the point. If you trust your supply chain, why do you need a computationally expensive trustless system?
Honestly the bigger problem is that it DESTROYS value for middle men so badly that there are a ton of reasons not to do it. In any consumer product that sells a story or a history the idea of checking ones work has only potential destroy value.
>Blockchains may be good for bootstrapping new network effects by giving early participants in a network (in a Metcalfe's Law sense of network) an incentive to participate.
Unless I'm being extra dense today, this is the un-clearest answer I've read yet.
The 'may' qualifier also does not inspire confidence.
If the tokens provide utility, e.g. this token is 500gb of storage and adoption, network activity, or technology productivity increases, the value of these utility tokens will go up in value on the market.
So it’s basically like a new commodity. Ether is compared to gas on the Ethereum network for distributed compute for instance.
SpankChain - it's porn on the blockchain, check it out - beta.spankchain.com.
If you accept the premise that blockchains are coordination platforms, because they dramatically reduce the cost of making credible commitments to future cooperation, then you should accept that the most disruptive opportunities will require unprecedented levels of coordination - coordination at a scale that most people think is impossible or infeasibly expensive, but that those who have mastered cryptoeconomics know is now feasible.
Imagine the differences in coordination potential of two societies where only one has mastered time, and you start to get a sense of why this technology is so powerful.
The problem with that approach, is it also destroys the network. You can never revoke the bribery once it becomes a core component of how the system functions and what drives it. The hyper contributor actions on the platform, which always make up a very large share of total contribution, ultimately drifts toward maximizing the gain of tokens and away from creating / contributing content solely based on quality.
Simply put, the quality of contribution when monetary consideration isn't the primary, is going to be higher.
For those merely wanting to earn money from blockchain it is an instrument to convert electrical energy into money. All the other attached bells and whistles are a by-product.
> Trust is a new software primitive from which other components can be constructed.
This kind of talk is extremely misleading. At the end of the day, we're still people buying and selling goods and services from other people. The most blockchain can do is remove some types of middle-men (financial or otherwise), but the endpoints will always be human. Trust between humans will always be a requirement to buy and sell goods and services.
Just like chatting with someone over an encrypted channel can't make you trust the person you're chatting with, only the channel itself.
Perhaps blockchain's "killer app" is an automated escrow service. How exciting... :-/
It is not strictly true that endpoints and the locus of trust always have humans in the loop. (Where they do, of course, I agree that blockchain has much more limited "fit" as a solution.)
However, in what I call "network-native resource transactions," namely, where the provision of the thing of value is computational and can be verified on the network (think: storage, compute, bandwidth, namespace resources like DNS), there are a large number of transactions where the performance of the counterparty can be shown with math.
In those cases, of network-native resource transactions, the transaction itself can be the locus of trust, and the payment / settlement becomes the weak link. For this (admittedly somewhat narrow) set of uses, then, blockchain is really really useful because the payment / settlement trust problem can be done away with deterministically provided the resource transaction is verified.
I think "payment/settlement" here is clear, but not the link to network-native resources.
Let's imagine you have an auto-scaling application. You hit a big spike (like several orders of magnitude) and have the (cryptocurrency) resources to keep it running.
Traditional vendors on invoice (or on credit card) would likely be loathe to just approve your monthly spend going from $500 to $500,000. You'd probably hit an interruption in service as the vendors protect themselves and underwrite to a higher credit limit.
Having non-repudiable smart contracts that get the vendors paid automatically once the resources are verifiably transacted would eliminate that friction.
(Plus, chargebacks, interchange, etc.)
On the extreme other end of the scale, if your resource transactions were small and highly distributed, it would get very cumbersome and costly to verify and pay $500,000 in $1 increments. (Plus chargebacks, etc.)
My point here is not the traditional one about credit card fees and frictions, though. It's specifically about the locus of trust.
If you sell me an electric guitar on eBay, there are two big trust gaps: one is about me actually getting the guitar as described, and the other is you getting the money. The fact that the "money" happens to be transacted as bitcoin or whatever doesn't change the need for trust at the ends of the physical transaction.
But if you are transacting network-native resources, smart contracts let you connect the payment settlement to the resource itself. Factor the primes out of this number and you get BTC 1.00. Transit these packets and you get so many ETH. It's because the resources exist on the same network in approximately real-time with the payment ledger that they can be verified automatically.
Doesn't work for most kinds of commerce where verifying that the transaction is settled is a non-computational operation. (Are the goods arrived, merchantable and fit, as described, etc. etc. -- always you will need to be putting your locus of trust out in the physical world with reputational ties, personal trust, escrow agents, brokers / dealers, etc.)
Trust isn't really a feature of blockchains, nor is it a byproduct (or "software primitive") of blockchains. Bitcoin was designed to avoid a need for trust, so it really just steps around the issue of trust in a distributed ledger.
This is a critical misunderstanding that a lot of people are still preaching and perpetuating. You can't really build systems that rely on trust on top of a blockchain, and those who have tried are mostly just moving (human/corruptible) authorities of trust to more obscure places. You can, however, build systems that do not require trust on top of a blockchain, though there are some very serious limitations that confine those systems/applications to digital-only transactions.
In other words, I can be reasonably assured that the Bitcoin you sent me is spendable by me (that it hasn't been double-spent) and that a government can't just issue 21 million more Bitcoin tomorrow, but that tells me absolutely nothing about whether or not I can (currently or in the future) "trust" your address on the blockchain, nor can it be tied to any kind of meaningful identity without reintroducing a real-world authority that requires my trust.
Bitcoin has proven itself to be useful on the payment side of transactions, but I'm unconvinced that blockchain tech will ever be able to facilitate the delivery side of transactions (unless it's a digital asset being delivered) without compromising the fundamental aims of Bitcoin.
Trust is inescapable. You've simply shifted yours from reputational trust to trust in the decentralization of the computing frontier of a specific hashing problem.
But while reputational trust is cheap and a well-solved problem, the trust you're using _requires_ large amounts of computing value to be burned continuously, in the hopes that electricity and computation are decentralized enough in the real world that multiple non-collaborating actors will be burning it.
I agree mostly with the point you're making, but there's an important distinction between "reputational trust" and an assumption that game theory and market forces will continue to provide the necessary levels of decentralization for Bitcoin to operate as intended. I'm not sure it's fair to put those two ideas on equal ground as if all forms of trust should be embraced because it's "inescapable".
Reputational trust (as you call it) often isn't even based on reputation so much as military force (sovereign governments). A lot of people - myself included - would much rather have their finances in the hands of algorithms and theoretically-sound incentives (even without a 100% guarantee of decentralization) than in the hands of central banks controlled by the whims of politicians.
In other words, you think that the blockchain setup is more trust _worthy_ than political accountability. That's fine (if not my cup of tea). My point was that you're still extending the same amount of trust; i.e. you have to accept things without direct proof in an environment that may attempt to manipulate you for its own benefit.
It's worth considering what these things are. What you essentially want is:
- There should be a limited total amount of money
- Iff people want to give money to somebody else in exchange for something, they should be able to do so in a timely fashion
- People should only be able to give away their money
- There should be no possibility of double-spending.
- People should generally be willing to accept money for things you want at a stable rate.
Given that you cannot personally examine every transaction ever made and ask people if they _really_ wanted to do that at the time, and that you also cannot control what people want, where does the abstraction you use start leaking?
> Trust isn't really a feature of blockchains, nor is it a byproduct (or "software primitive") of blockchains. Bitcoin was designed to avoid a need for trust, so it really just steps around the issue of trust in a distributed ledger.
I'm not sure what you're saying here. BTC wasn't designed to avoid the need for trust. It was designed to incentivize the network to act in a way such that you can trust it. That's how it provides trust.
Bitcoin was indeed designed to avoid the need for trust:
"What is needed is an electronic payment system based on cryptographic proof instead of trust,
allowing any two willing parties to transact directly with each other without the need for a trusted
third party." [1]
To your point, in a broad sense the Bitcoin network relies on an inherent kind of "trust" that a certain set of economic assumptions and cryptographic algorithms will continue to function as designed.
If you want to equate that with the trust given to financial institutions and governments that handle most of the world's money, I'm not going to stop you; I just happen to think those are very different things. If someone (or a group of people) is able to pull off a 51% attack on Bitcoin (or if a serious flaw in the cryptographic algorithm gets discovered), there's a very high likelihood that everyone will know about it, and it will be fixed quickly. On the other hand, when the federal reserve decides to print another pile of cash, very few people know about it until they start noticing their grocery bill increasing. And even when you know there's a problem with the way our money is being manipulated, there's really not a lot you or anyone can do about it.
I'm not equating government trust and blockchain trust in the strict sense. I'm saying they're both forms of trust.
You're saying trust isn't a feature of the blockchain, seemingly based on the fact that users no longer have to trust central authorities. But the only reason this is possible is because users can trust the blockchain instead. So how is trust not a feature?
"Blockchain computers are new types of computers where the unique capability is trust between users, developers, and the platform itself."
So yes, maybe blockchains require a certain level of trust in the technology (and decentralization) to be useful, but they certainly don't give rise to trust between users or developers. I know that's not what you were claiming - I'm just pointing out that blockchain tech doesn't magically create trust between strangers (nor is that its intention). Still, it does allow transactions to happen between untrusted parties as long as both of those parties have a basic level of confidence - or trust as you say - in the assumptions built into the blockchain.
> In an era in which the internet is increasingly controlled by a handful of large tech incumbents, it’s more important than ever to create the right economic conditions for developers, creators, and entrepreneurs.
I'm happy to see that people are taking decentralization seriously. Blockchain has its place as a public ledger, but as everyone knows, scaling it has issues.
Recently, MaidSafe released a new whitepaper for a new decentralized consensus mechanism, called PARSEC, which they detailed in their blog post[0]. It does not use a blockchain. I'm surprised it didn't get more attention. I'd like to see some serious peer review on the paper.
I've not read the paper but am impressed by their presentation and the experience and community which they have already created around their 'SafeNet' browser.
I'm inclined to believe their mathematical analysis of their own system is sound. They say its based on a system with proven O(n^2) messages requirement, with an elaboration reducing message requirement to a more scalable O(n log n)
There's some serious kool-aid going on here, which is unfortunate, because they at least wrote that they're focused on non-speculative use cases. Contrary to the announcement's characterization, crypto-powered platforms don't inherently fulfill the promise of equitable decentralization and immutability.
Ethereum has already demonstrated that one is wise to worry if the rules of the game will change later on. And blockchains enable distributed, trustless consensus, but accomplish it with the majority (50%+1) of vested nodes in agreement, which manifests as either a tenuous truce based on human trust to avoid mutually-assured destruction, or as an anything-goes monopoly where the largest cartel wins. Hardly any different from easier, cheaper ways of accomplishing the same thing.
Bitcoin's innovation was incentive in the PoW block reward, Ethereum's was embedding a VM in the client. Everything else has been minor variations on prior art, or speculative bullshit.
Your conclusion is fair, but at the same time, a certain number of these "minor variations" will one day be assembled into something just as revolutionary as Bitcoin and Ethereum were.
If I had to guess I'd say some technology made out of the combination of blockchain, ZK-snarks, and an homomorphic computation enabler such as SGX enclaves, will probably be very disruptive to many many fields.
More and more traditional money will flow into Crypto, not because Crypto is the answer for everything, but people just want to bet on the something that might in some form change everything in the future.
I really get surprised by the boolean arguments whether blockchain is of any use arguments on HN. I mean there's so much activity, money, talent in Crypto since last year. Goldman Sachs CEO said actually in the nicest way that Crypto is not gonna be the future [0]. I wonder why we can't have arguments like this instead of behaving like a know-it-all.
I come from the other side of the argument: since there's so much money poured into cryptocurrencies, so many talents spending their days working on it, huge companies like Goldman Sachs saying that it's the future then what's taking so long?
I'm not even asking for a killer app at this point, just for a compelling argument of what the future of a blockchain-powered world will look like. I don't think I'm a "know-it-all" just for asking for a tangible explanation which doesn't revolve around a bunch of hand-waving or technically, socially and economically ridiculous statements such as "imagine Facebook but it's the blockchain".
Blockchain is not the magic device people make out to be, it's a cool hack but so far its practical use cases are rather limited. And if you think I'm a know-it-all for saying that I'm sure that you'll easily be able to shame me for the fraud that I am by pointing out the multiple problems that can be solved by the Blockchain more efficiently than with good old technology. So far all I have is "buying illegal stuff online" and "selling illegal stuff online". For everything else there's PostgreSQL.
People compare blockchain and cryptocurrencies to the internet or cell phones but I think it's completely disingenuous. While I'm sure you could find plenty of naysayers back then who failed to understand the scope of what the internet would become and how revolutionary it was at the very least easy to see what it brought to the table. You could communicate with anybody around the world, play games, maybe even buy stuff. You can argue about how important and valuable that is, but at least the potential is clear.
When you read these Blockchain pamphlets it feels like they're trying to convert them to their religion or political movement. It's about user experiences and decentralization and building blocks of trust. It's about the power of software and the encoding of human thought. And VR and AR for some reason.
This technology is combining software, hardware, game theory, monetary incentives. It's going to take a long time, and it hasn't even been 10 years.
Picture years from now, and the big buzzword trifecta of blockchain, AI, and IoT are relatively matured.
Can you really not see the potential in combining autonomous organizations making decisions on the output of AI that learns from data sourced through billions of IoT devices around the world?
So have we completely lost the battle for the meaning of the word "crypto"? Because I clicked this link expecting to read about a new kind of cryptography.
Or crypto is just another hype that will burst like the dot com bubble. However, I have to say, compared with the companies of the dot com bubble the blockchain space has very little to offer. The other day I saw an ad for an IoT ML ICO.
The dot com bubble was completely justified in retrospect imo. A lot of stupid money was lost but the opportunity was clearly and obviously there. If you think blockchain has as much potential as the dot com bubble you should put a lot of money into it.
While most of the specific companies in the dot-com bubble ended up going bust, the underlying technology was certainly not a bubble - I mean, you're posting this on the Internet, to people all across the globe who you have never met. That was unthinkable 25 years ago. If you invested in Amazon in 1997, or started working at Google in 2000, or even just learned HTML in 1998 and started a niche e-commerce business, you're probably doing pretty well. A lot better than the folks who just dismissed the Internet as a fad, at least.
This also coincided with the fall of Netscape and its eventual purchase by AOL in November 1998. The dot-com bubble that people actually remember got started when that bust hit its nadir (right around the Netscape purchase), and really kicked into high gear a year later in the fall of 1999. I think that what happened is that Netscape's purchase and the subsequent recovery of Internet stocks is what convinced entrepreneurs & VCs that the Internet was here to stay, which led to a flood of capital in and a frenzy of entrepreneurial activity, and then once all their products started hitting the market 6-12 months later the public took notice and the dot-com bubble really took off.
There will likely be a similar effect with crypto as all the ICOs - the ones that are not scams, at least - actually start releasing their products for people to use. Crypto is bubblier than dot-coms because everything is bubblier now; capital markets are thoroughly globalized, and there's more capital sloshing around.
If you’re an insider, there’s a somewhat big technical mistake in there that kind of undermines their credibility.
> Blockchain computers are new types of computers where the unique capability is trust between users, developers, and the platform itself.
Trusting somebody implies they’re in a position to hurt you, which makes it undesirable in a secure system. Unfortunately, trustless systems tend to be cumbersome and impractical. What makes Bitcoin interesting is precisely that it’s a remarkably practical system built on a trustless base.
1. I trust nobody has >50% of the hashing power.
2. I trust network participants to be economically rational actors
This is both a much smaller, and much more explicit, set of things you need to trust than regular banking.
At any rate, the bigger point is that the a16z post describes trust as a positive, whereas the correct attitude is to treat trust as a negative quality of a system. Cryptocurrencies are not designed to engender trust, they're designed to avoid it wherever possible.
> If there is another “crypto winter,” we’ll keep investing aggressively.
This is how the good investors win. They have real definable thoughts of their own about technology. The truth is that most VCs aren't much more than bad money managers that chase other bad money managers around in circles.
It's not that VCs are stupid. It's that new technology is complex and very few people at all understand it. Even very good technologists can't understand more than a few areas with any level of expertise.
I really believe that decentralization will blow up the entire VC world itself but even this phenomenon will be a huge opportunity for some small number of VCs to profit from. Probably firms doing stuff like this.
The problem w money is that it represents the fruit of human labor but also allows speculation. We have arrived at a point where accumulated wealth through speculation that human labor ( and therefore self worth ) are devalued. That money from financial investments (speculation) can be ploughed back into speculation removes the human effort that generated the money in the first place. To restore human value we need a simple restriction. Capital gains should only be spendable on real stuff - things, services, etc. whereas money from human work should be unrestricted. The block chain is a perfect tool to keep track of monetary transactions and would allow automatic enforcement of this regulation
Blockchain technology itself is not that novel. All the technologies it used have already been there for a while, even the PoW.
But after reading all the arguments and discussions, my opinion is that blockchain simply reflects the human's desire for a more transparent, secure and fair IT systems.
Current IT systems work, just it is not transparent, so people do not know whether it is doing as it claims.
Since there are strong requirements, there will be one revolution. Imagine if the government adopts such transparent and fair system, who cares whether it is centralized or not?
In real world terms...I am currently in the process of closing on a property transaction. And, while it does take some time, I haven't seen anything during the process that was immediately made better by what 'blockchain' proponents purport to be better alternatives.
To be clear, there are certainly inefficiencies I have witnessed. I am just not clear as to how a blockchain solution, however you define it, helps.
It is transparent. If you make a transaction using paypal, you were told the money is transferred. But how do you know it is true? You have no way to verify it.
Similar problem, facebook and google claim that they are only using the customers data for certain actions, but how do we verify?
Blockchain only gives the possibility that the IT system could be transparent and verified by external parties. But Bitcoin blockchain is not the final solution.
This just strikes me as wrong. His chain of logic does not lead to distributed ledgers. Mainframes, PC's, iPhone, distributed ledgers? Before I dive in I must say that the new trend for people to use blockchain as a noun describing the underlying system of Bitcoin and other coins is highly annoying and cringey. None the less, blockchain is not a peice of technology. It's a contract backed up by probablity and the nature of the internet. The contract is a big lumbering thing that has a life of it's own -- for each implementation of this "tech" you are stuck with that beast which, if you are even able to get enough people to feed it, will fluctuate wildly in many capacities before eventually dying. It's not like a new mems accelerometer where once it's out you can now just pump out thousands of units. The nature of Bitcoin (i refuse to use the blockchain noun) lends itself much more to being a global complement to centrally managed monetary systems (or stand on it's own as the world's currency, but I don't think that would be optimal).
I totally agree with A16Z here. Blockchain skepticism is not hard to find on HN and beyond. First, the ecosystem is vast and evolving quickly. If you've "tuned out" by dismissing blockchain, then don't be surprised when your industry gets disrupted in 5-10 years. I think we'll begin to see business logic open-sourced on the blockchain. For example, existing SaaS model incentivizes closed-source, centrally managed repositories. For example, a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol. A CRM built in this way might enable multiple "thin clients" to build and an ecosystem to develop around it. I think we're a ways off, but that sort of thing is just one of the use-cases that excites me about it.
> a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol
Why.. would you need to put those on a blockchain across a bunch of disparate consumers? In theory isn't my business logic fairly, you know, secret sauce?
Blockchain is vaguely "A spreadsheet everyone gets a copy of." There are some cases where that can be useful - usually for verification. There are also some issues with that - there are no takebacksies if somebody say, publishes illegal content.
If I want to prove to everyone in Minecraft that I hold a million minecraft points, a blockchain might be a good answer. If I want to store my secret, frequently updated business rules with tons of private details about my clients... why in the world would I use a blockchain?
Traditionally, yes. But in the same way that Windows OS logic is Microsoft's secret sauce and yet thriving companies build products and services around Linux...so too will business-logic be open sourced and compete directly with existing SaaS players.
Just because you use blockchain to power the engine and business logic of your application, does not mean you also have to use it to store data. Data can be stored anywhere else (IPFS, Sia, or even personal PostgreSQL instance). Blockchains also need not be public. They can be private sidechains that occasionally interact with the main chain.
Why would you? Because it allows communities of smaller open-source contributors to effectively compete with big, established players. Also, through crypto, you could incentivize domain experts to contribute to the business logic rules.
Maybe I'm too stupid, but you sound like a salesman trying to pull a fast one using fancy language... "incentivize domain experts"? Come on!
Let's see, a 3rd party can benefit from SaaS by offering interesting add-ons, for example a web-based photo editor that works with Google's cloud storage of your photos. A domain expert could offer add-ons to enhance your SaaS-hosted business data, but the blockchain needs to be there because... why exactly?
What value does storing the data on such a private blockchain add?
Or since you actually said that using the blockchain "does not mean you also have to use it to store data", what are you using it for in that scenario?
Most of the people on hacker news, myself included, aren’t skeptical of the technologicy of block chain. I grant Block Chain’s central technical premise, no other medium/platform/whatever can create decentralized trust wherein all you have to trust is the network. Where I think most of the criticism comes from is that many of us don’t see why this decentralization is actually all that valuable. Currency seems like the most likely candidate, but even it has proven finicky. What efficiencies are gained from decentralized trust. I’m skeptical that decentralized trust creates that much of an improvement.
Case-in-point:
Block chain for supply chain problems was touted and hyped a few years ago, only to fall flat on its face. Why? For most companies decentralized trust in their supply chain didn’t provide that much of a benefit. I know a bit about supply chains, and from what I have heard from most supply chain experts (yes I know a fair number of supply chain experts) centrally managed trust works fine for them.
That’s the extrapolated crux of the issue. I am open to being proven wrong, but so far no one has ever been able to calmly explain to me what fields would see a 10x improvement from decentralized trust.
We’ve been dealing with centrally authenticated trust and decentralized unauthenticated trust for 100k+ years as a species. Block chain promises decentralized authenticated trust and it delivers, but why should I care? Is it actually going to be beneficial. No one can argue that the jury is still out.
Decentralized trust is a way to "open source" a customer/merchant database. If centralized trust is required the company controlling it can charge people to use it, for example think of listing fees as ebay charging people for access to their seller ratings. Or uber charging people to access its driver ratings.
With decentralized trust we could create a decentralized uber, where drivers get 99% of the money and 1% going to developers and providers of decentralized insurance.
One alternative to decentralized trust would be setting up a nonprofit to control the trust database, but then you are relying on the government to enforce that the nonprofit doesn't gouge the customers, manipulate the ratings, or embezzle the funds. You are basically just pushing the trust onto courts and law enforcement.
I would question the viability of a decentralized uber when non-idealistic consumers need to use it. In a decentralized uber where do consumers go if they feel that they were charged in error, or their driver took too long of a route, or... It's not enough for a lot of people to just give someone bad feedback, they want to know that there's a (hopefully) reasonable human on the other end that they can reach out to in case things go sideways.
"With decentralized trust we could create a decentralized uber, where drivers get 99% of the money and 1% going to developers and providers of decentralized insurance."
Why do we want decentralized Uber? Do we not want some basic vetting of the people who are driving us around? I imagine decentralized Uber isn't going to be too quick to remove drivers who sexually harass riders, if it does so at all.
Have you heard of GDPR? Customer data must be deletable and only shared with third parties based on user consent.
A blockchain is an immutable data structure that unknown third parties can copy. It's literally the exact opposite of what you should be using for customer data. How does this CRM-focused blockchain make any sense at all?
I'm not OP and I shake my head at the "blockchain will be the future of software!" cultists, but I can imagine storing hashes of private operations (just the hashes, not the data themselves) on data in a publicized blockchain, for auditing purposes.
So one can probably suspect that a business whose ledger is totally different to the publicized hashes might be laundering money. And to make sure the publicized hashes aren't faked in the first place, somehow one would need to combine it with the hash of a receipt.
Just thinking out loud: taxman-sanctioned smartphone software that takes as input the time, business ID, and the purchased products, and generates a hash as an output. A shopper can compare the hash to the hash on the receipt she got, and later on she can check if the hash is in the blockchain.
> For example, a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol.
We can already do this with traditional APIs. The only benefit of blockchain code, or smart contracts, is trust. It assures users that the code they think is running is in fact running.
For most existing apps, including CRM, users can trust their provider because incentives are aligned.
I've got this smart friend (hi Shaun!) who over malted beverages made the statement that Blockchain could replace the Big 5 accounting firms, because everyone's books would be out in the open at any time, and gee wiz wouldn't that be a great thing. I see a parallel between what he was saying and what you've written about how great it would be if we had all this open business logic from which we could all benefit.
Except that's not how the world works at all. Having those contacts in one's own Rolodex is exactly how many top salespeople get hired; they have a direct disincentive in sharing. Same for business logic and processes. Accounting? Companies _do not_ want to make it obvious how hard they have to work to make the books look good those last few days of the quarter in order to appease the street, thus there is zero incentive to sharing that data.
I like your ideas. There are a lot of nifty ideas floating around in Blockchain world. But so many go against market incentives, making them non-starters. Likewise, so many of these big ideas are better accomplished technically using other technology than Blockchain. The point of trust pops up a lot but... we have a legal system for that, and the track record of security issues does not give me hope that Blockchain is really the answer.
> A CRM built in this way might enable multiple "thin clients" to build and an ecosystem to develop around it.
Let's parse this.
CRM = customer relationship management, usually in the context of sales. The sales relationship is often hard won and closely guarded, because it makes people money.
You're proposing putting information about this relationship on a public blockchain (because a "private blockchain" here is just an internal database), so not only is this highly guarded customer data now public, but it's also open to other relationship management platforms to manipulate?
What am I missing? Because this seems like a spectacularly bad idea for anyone who has actually done any sales.
I think you owe it to yourself as a blockchain "believer" to play your own devil's advocate and try to first figure out conventional solutions to the problems you believe that the blockchain solves.
I did not say public. Private blockchains are a thing. And it's not just an internal database. They are forkable and potentially run by the customer themselves or in their own AWS private cloud or wherever. But by following the protocol, they could easily switch providers, or integrate several clients that provide different features around the same data. The customer can truly own their data and the side chain can interact with the main chain where it makes sense.
Lots of technical problems there, that's why I say it's a ways off. But it's all doable.
> But by following the protocol, they could easily switch providers, or integrate several clients that provide different features around the same data.
What you're suggesting is solvable by an open data standard and export/import features on software. A blockchain provides none of those by virtue of being a blockchain.
Business logic is not commonly open-sourced for SaaS products. Salesforce, Workday, etc, do they open source their code base? No. Ecosystem, portability and that it's an audited code base will gradually produce benefits that exceed the established SaaS players.
99% of smartphone use is not impactful, as it's mostly a gamified addiction-driven surveillance machine. I'd say that smartphones have generally set us back a few decades. Bitcoin, on the other hand, has already freed more people than any other technology before it, and has shown the path for a better future.
" For example, a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol."
If I'm making a CRM, why do I want this?
"A CRM built in this way might enable multiple "thin clients" to build and an ecosystem to develop around it."
> This trust emerges from the mathematical and game-theoretic properties of the system, without depending on the trustworthiness of individual network participants.
I'm very uncomfortable with the idea of game theory as the base of trust. Mathematics as used in cryptography is a pretty solid base, but game theory feels like something entirely different.
How do I know that there isn't a participant in the game that is willing to just smash the board? The existing blockchains like Bitcoin do have a certain amount of centralization, so this is not about a very large number of individuals where you could find some comfort in statistics. What if a state actor decides to smash the board, they could probably exert enough pressure on the large players?
What if there are more subtle ways to extract short term gains that game theory didn't anticipate?
Protocols don't necessary assume that players are profit-seeking. Ethereum's Casper for example allows that players may wish to smash the board; however, it makes attacks very expensive, limits the damage they can do, and makes it easy for the network to recover.
Subtle ways to get extra gains can be a problem; e.g. people didn't figure out selfish mining attacks until Bitcoin was several years old. Cryptoeconomics is a new field, and it advances as people discover attacks and invent solutions to them.
Do you think that the “smash the board” case isn’t considered? Not that any given game theoretic analysis isn’t flawed, but the “madman attack” is one of the main scenarios that’s been considered in blockchain from the original bitcoin paper onwards.
I'm a bitcoin skeptic turning to bitcoin owner. For me, it's worth to look at bitcoin from gold perspective. You can pose similar questions to gold and try to answer them.
Can I transact with bitcoin/gold?
Is bitcoin/gold a good value storage?
What problem does bitcoin/gold solve?
Is bitcoin/gold solving trust problem?
Any answer for gold can be interpreted for bitcoin. Bitcoin is better than gold in many ways.
Bitcoin, like gold, is real. Crypto technology is real and works. Bitcoin is limited. There's a computer network running to support it. Bitcoin is not tulip.
Gold is still around. I don't think we'd ever ditch it. Why do we value bitcoin? I don't really know for sure. But I feel certain that bitcoin is real. And we need to do more work to understand it.
As we currently stand the tradeoffs for Blockchain based companies make no sense in the business world. The author's conceit is that Blockchain based businesses trade scalability for "trust" and that new business opportunities will be unlocked due to this capability. The problem with this idea is that trust is currently not a limiting factor for most businesses. Centralized services are trustworthy enough for the majority of consumers and are far cheaper to run at scale.
Every single blockchain based business idea I've heard of would be better suited as a centralized service. It is my strong belief that a16z will lose their shirt on this fund.
I hope for all of our sakes that it's more profitable for a16z to invest in real blockchain startups and leverage their experience to uncover exciting, legitimate applications of the technology than it is to just day-trade cypto assets.
> Second, the space is developing extremely rapidly, partly because the code, data, and knowledge is largely open source, and partly because of the increasing inflow of talent.
They seemed to conveniently leave out the biggest driving force behind blockchain technology: greed. I don't see how you can talk about the "rapid development" of blockchains and not mention ICOs and the type of armchair investors who gravitate towards them...
I cannot think of a single a mass-market problem, which a blockchain tries to solve, which can't be implemented more elegantly and efficiently WITHOUT a blockchain!
That seems like it would be very trivial to game, and additionally while facts are hard to confirm, a consensus of users who are biased and relatively uneducated on the topic would do a particularly bad job anyway.
The best similar use case I can imagine is building a system is to evaluate how much of the media is in agreement on a given topic, and use that to combat fake news. If a similar headline isn't found elsewhere, give it a low truth rating.
> a consensus of users who are biased and relatively uneducated on the topic would do a particularly bad job anyway
That's why you build the system with an incentive scheme with the contributors having something at stake, that over time weeds out the incompetent contributors, similarly to a PoS scheme.
I agree. This wouldn't expose hyperbole and bias, but merely be able to advocate for whether the event is being widely reported to protect against completely false news (think celebrity death as an example)
“This can lead people to dismiss them, in the same way people dismissed early smartphones because they traded off computing power and screen size for portability and new sensors.”
More breathless fawning rhetoric and nebulous jargon, but I guess the target audience is blockchain enthusiasts so that makes sense. At the end of the day it's their money, so what I do I care?
I find it frustrating when I hear comparisons of the blockchain to internet and cellphone communication platforms. The potential use cases for the internet and cellphones were immediately obvious (instant remote communication) and available on day one, compared with blockchains which has given us bitcoin and nothing else of unique value. I actually think bitcoin is pretty damn cool and a marvel of software engineering, but it's a fact that it's mostly useless for the vast majority of people and certainly not in any way comparable to the impact of cell phones or THE LITERAL INTERNET; the insinuation is absurd and intellectually lazy based on blockchain's track record.
> We believe that just as the last three megatrends -- mobile, social, and cloud -- intersected and reinforced each other, so will the next three megatrends -- next-gen computing devices, AI, and crypto.
>The potential uses cases for the internet and cellphones were immediately obvious (instant remote communication) and available on day one, compared with blockchains which has given us bitcoin and nothing else of unique value.
Bitcoin has unquestionably provided folks looking to work outside traditional financial systems (and governance) value. You can see it in the black market use and its use in ransoming everything from Game of Thrones to hospital records. It was used this way almost from day one.
Also, the use of smartphones as this "instant remote communication" doesn't begin to describe where the technology led, which was to the smartphone which is some type of multimedia device capable of far more than its initial concept.
It doesn't hurt to be skeptical of rhetoric, but you don't make a stronger point by downplaying the difference in value between when cellphone launched and what cell phone technology offers today.
> Bitcoin has unquestionably provided folks looking to work outside traditional financial systems (and governance) value. You can see it in the black market use and its use in ransoming everything from Game of Thrones to hospital records. It was used this way almost from day one.
Yes, I covered that when I said the blockchain gave us bitcoin, and that's all it's done as far as unique value.
> Also, the use of smartphones as this "instant remote communication" doesn't begin to describe where the technology led, which was to the smartphone which is some type of multimedia device capable of far more than its initial concept.
So what? My point is that "instant remote communication" was a communication revolution that did not need to hunt for use-cases, the technology itself was inherently useful and it developed into something more because its ubiquity (a result of its near universal utility and appeal) created a market for competition between selling this device that literally everyone wanted.
The blockchain is not at all comparable to this. Most people can't even understand what the blockchain is (and that includes many technical people) and those who can at least understand what the blockchain does mostly come to the conclusion that they don't really have a use case for it (including the large majority of enthusiasts who don't do more than shuffle bits around between arbitrarily delimited distributed spreadsheets).
> you don't make a stronger point by downplaying the difference in value between when cellphone launched and what cell phone technology offers today.
You're incorrect. The two have nothing to do with eachother. "Smart devices" like palm-pilots existed for a long time but never took off because most people couldn't justify the purchase (since it really didn't do much for them). Fast forward to a time when everyone is already carrying around portable network computers because... and here it is again... they were clearly useful in their communication capability... it was a clever but natural opportunity to replace these "dumb phones" with computing devices that resemble computer systems that were already validated by the desktop market.
Is there any logic whatsoever in talking about the intersection of AI and crypto (or AI and blockchain)? It seems to me that this intersection is very close to the empty set.
100% wrong. "Instant remote communication" is a clear and concrete use-case.
> We know the applications are "trusted computing"
The blockchain does not facilitate "trusted computing" in the abstract; it can produce some concrete software implementations that incorporate some aspects of "trusted computing" (i.e. cryptocurrencies) but the blockchain has not been demonstrated to be useful in any other "trusted computing" scenario.
a16z is just responding to market demand. Regardless of your personal beliefs in crypto, investors have made a killing, and are convinced that more nuggets must be out there in those hills... If you can raise a $300M fund and charge 2%/yr to maintain it, that's $6M worth of headcount luxuriously plugging away up on Sand Hill Road.
Keep in mind: Venture Capitalists mostly invest other people's money, and charge a great deal to take care of it in the mean time.
Here's what I don't understand: if you're a crypto project, why wouldn't you raise funds through an ICO yourself? What benefit does a16z give you? One of the biggest assets of crypto is the ability to self-fund. Also, since the space is relatively new, I have my doubts about the ability of a16z to provide any useful crypto experience.
You can't pick that username—it's misleading, as shawn pointed out. I've banned this account, but if you want it unbanned you're welcome to email us (hn@ycombinator.com) with a username that's both neutral and available, and we'll change it for you.
It's sort of not cool to choose a16crypto as your username. HN wouldn't work if we didn't have identities, and traditionally the identity of the author is taken by the author.
On the other hand, it's immediately obvious you're unrelated, so maybe it doesn't matter.
To answer your question, as the world stabilizes and the crypto scene becomes less tumultuous, we'll see the rise of traditional models. It's a smart move to start that process sooner rather than later.
In the old days, you won by controlling a "channel" -- whether it's a literal TV channel, or a limited asset, or anything where people had to go through you and you alone.
The internet briefly disrupted that old model. But once again it's true: YC won thanks to HN, for example. It's a channel they control, and it shapes us and the way we think.
Once ICO scams stop working, people will eventually realize that the fundamentals are what matter: solid networks, solid resources, and a vision with a group of people to build it. ICOs rarely get you any of those, let alone all of them.
One good reason is that money doesn’t buy you connections, but an a16z investment does. Another is because ICOs typically turn your currency into a security at least temporarily so you might as well play that game properly. A third one is that, rather than the reputation that comes with an ICO, you’re instead getting the reputational baggage of being a16z alumni.
More seriously, it's cool that keybase solved the identity problem. It's traditionally been a very hard thing to know for a fact that you're speaking with a certain individual, unless they were compromised.
They also have an encrypted github now, which functions very well. And one of the only realtime chat messaging systems where you can open private chats with whoever you want, if you know their name.
Point: I think Keybase might increasingly take over the role that github currently fills. It's hard to imagine now, but people underestimate the effect of 10 years. And keybase seems to suddenly have a lot of assets that are very appealing, especially from a crypto standpoint.
If I were trying to topple governments with code, most of my work would be encrypted on keybase, and my comms (what little there would be) would be via signal. But my identities would be proven via keybase.
One smart move for gitlab might be to create some kind of realtime messaging system for programmers, similar to the niche that slack communities currently fill. Slack never seemed to embrace the community model -- you have to use hacks just to host a slack community, and then you don't get search for more than 10k messages, which vanish quickly. Discord has been eating Slack's lunch from a technical and user count standpoint (though perhaps not profit). Gitlab could compete by rolling out what slack should have been: an open community-oriented comms service with tools programmers love, plus a place to host your code. Discord doesn't have that, and keybase doesn't have very good support for teams yet.
Well, there are certainly some non-cynical reasons. But one obvious one is that if you sell 10 Million of your token to A16z I bet you won't have much trouble selling billions of your token to the masses. I'm sure A16z is perfectly sincere about being long-term focused investors, but they're so perfectly positioned for pump-and-dump style schemes they may wind incurring their ill effects accidentally.
ICOs have become a self-mocking joke, considering how many are outright scams or contain huge technical flaws, or some combination of the two. The latest season of Silicon Valley parodies it pretty well.
Unfortunately ICOs are still a grey area, legally speaking, with regards to the SEC. Some tokens are securities, some are not. Really depends on the structuring of the token and what it represents. At this time, from a risk perspective, I could see going with A16Z being a safer move. Plus, you get access to A16Z resources, which are substantial.
For one, raising money through an ICO is a legal gray area without much legal precedent. So even with a good lawyer, you are taking risk with the related securities laws. You might prefer to avoid this risk by raising money the traditional way.
Beyond the legitimacy of being backed by a well-known venture capital firm, the most obvious is from the article:
"We provide operational support to entrepreneurs. Our crypto investments have access to the same 80+ person a16z operating teams as do our non-crypto investments. Our operating teams have deep expertise in executive and technical recruiting, regulatory affairs, communications and marketing, and general startup management. We are responsible participants in the governance of companies and the governance of networks."
There aren't any regulatory issues with taking investment from the a16z crypto fund, where a public ICO can bring attention from the SEC and other bodies. It lets founders and developers focus on getting their token network off the ground instead of figuring out how to do a legally kosher token sale.
If you have specific concerns you are welcome to email them to hn@ycombinator.com, so we can look into it. But please don't break the site guidelines, which ask you not to post insinuations of astroturfing like this. (Such insinuations poison internet forums and most often turn out to be groundless. I've posted a ton about this if anyone wants to read more: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...).
So much of the blockchain hype is focused purely on the technology and the valuation of the tokens / coins. Not the problem it solves.
It's distributed trust. That's the problem it solves. It's incredibly cool technology. That solves a specific problem.
The analogy to the early internet is not a good one. The internet solved a huge number of problems -- of distribution, of speed to deliver value to the customer, of freedom of information, of transparency, of fidelity of communication, and more. That's why it's changed society.
I would love to know which societal problems can be reduced to a distributed trust problem. That would convince me that I'm wrong about blockchain technology.