
Is Blockchain Really the Killer App? - dlrush
http://www.joecoin.com/2015/02/crypto-20-and-other-misconceptions.html
======
drcode
> I am presently incapable of seeing how any token other than Bitcoin will be
> the one that wins.

In some sense, Bitcoin has already "won" in that it currently has a non-zero
value. Anyone who says "Bitcoin can't possibly exist or hold value" already is
known to be wrong, simply by Bitcoin's existence.

In the same way, I don't understand people like OP who say "No other
cryptocurrency but Bitcoin can have value" because many of them already have a
value and have "won" by some measures- Why do people keep trying to argue that
dogecoin/litecoin/etc/etc don't have value, when people trade them for other
currencies every day on open markets?

Near as I can tell, there will be (and already are) multiple "winners" in the
cryptocurrency competition, filling different niches, just like there are
multiple species on planet earth filling different niches.

~~~
codexon
Just because something is bought for money doesn't mean it actually has value.

Ask anyone that has been in a ponzi scheme or stocks that went to 0.

~~~
drcode
I disagree- The value of something is "what you can get someone to pay for
it." That is the only concrete, objective, and rational way to determine
value.

> Ask anyone that has been in a ponzi scheme/stock that went to 0

Well, given that you're stipulating a value of zero then clearly you are
unable to get someone to pay for it and it's value is zero, by definition.

~~~
codexon
A ponzi scheme has a net value of 0 or less at any point in time.

Just because some people can get out more than they put in doesn't mean a
ponzi scheme has created any value for the economy as a whole.

~~~
prawn
"value for the economy as a whole"

You've shifted the goalposts there from "has value" to "value for the economy
as a whole".

If I have money in a ponzi and can exit at that point in time, my stake has
value. Later it might not, but at that point it does.

~~~
codexon
So you are saying that drcode means cryptocurrency has value as a ponzi
scheme?

~~~
prawn
?!? No.

~~~
codexon
Then how could you possibly think I have "shifted the goalposts there from
"has value" to "value for the economy as a whole""?

------
na85
The common adage seems to be "storage is cheap", meaning "multi-TB blockchains
won't be a problem because you can buy that much storage for a few hundred
dollars".

But I think the stupidly-large size of the blockchain is a major hurdle, given
the concurrent trend of miniaturization. Embedded devices like one might find
in the much-vaunted "internet of things" (eyeball roll) can't really afford to
be toting six SSDs just for storing 3 or 4 different blockchains, or even one
big one.

There comes a point when it's just no longer practical to store the entire
blockchain, but truncating the chain (or only storing some kind of "working
set") isn't feasible either.

Not to mention the gargantuan download that's required for that initial setup
to get up to date with the latest network transactions.

I think it's a great idea in theory but ultimately pretty annoying in
practice.

~~~
wanderingstan
A friend of mine joined chain.com and, as I understand it, their value
proposition is to handle the load of blockchain while providing trusted access
to whatever needs to be known. I'm no expert, but this seems like the right
sort of solution for the problem you pose. Blockchain management is handled in
the cloud, and clients (including embedded devices) talk securely to a trusted
cloud service to get the relevant details.

~~~
na85
That seems self defeating. None of the advantages of a decentralized system
are realized by centralizing the blockchain

~~~
sliverstorm
That's perhaps my favorite part of Bitcoin. For good or bad, it was started by
people rallying against the big centralized banks, and now at every turn we
are hitting reasons why centralization makes a lot of sense. I half suspect
that eventually it will come to resemble the current centralized systems,
whether people want it or not. For example, the number of complete blockchains
is dwindling as more people individually elect to start using partial-
blockchain clients because of space & traffic.

It's especially endearing to me because it's my primary objection to
anarchists (of whom I have several as friends)- that the system they envision
just isn't stable, and we arrived at the system we have now for that reason.

~~~
vidarh
I find this line of thinking unconvincing. There is a vast difference between
voluntary centralisation from which you can withdraw at any time, and forced
centralisation from which there is no practical way to withdraw without huge
sacrifices.

Many socialist and anarchist ideologists are/were perfectly fine with
centralisation of production, as long as _decision making_ is decentralised,
and participation is a result of free choice and can be withdrawn.

The _capability_ of decentralisation in Bitcoin is important because it acts
as a safeguard against forced centralisation and coercion. As long as the
capability remains, whether or not people for practical/efficiency reasons
opts for centralisation ought not cause most anarchists any major concern.

~~~
jarek
> The capability of decentralisation in Bitcoin is important because it acts
> as a safeguard against forced centralisation and coercion. As long as the
> capability remains, whether or not people for practical/efficiency reasons
> opts for centralisation ought not cause most anarchists any major concern.

I'm probably misunderstanding something, but isn't it more that blockchain
technology allows decentralisation, while dominance of any particular
deployment supports centralisation? As I understand it, once Bitcoin is
centralised, the 51% can control it as they wish, and the only alternative is
to set up a wholly separate Bitcoin2 chain, or another altcoin.

(Again resulting in cryptocurrency being a bad store of value.)

~~~
vidarh
There are two "levels" here: Centralisation to more than 51% means you have to
trust the central "authority". The safeguard there is that if the central
authority starts misbehaving, the technology is out there, and everyone can
start using it one a new blockchain as you suggest, while agreeing on a
blacklist.

The lower level is centralisation into a small-ish pool of large services
where no service exceeds 51%. That's what I was mainly thinking about.

We've seen in the past how Bitcoin has adjusted to the threat of 51% with
people withdrawing capacity from large pools etc. in response.

In either case the point is that the existence and open availability of the
technology acts as a deterrence to coercion because the act of trying to take
advantage of a 51% attack will send people running for the hills (and the
existence of altcoins makes that even easier).

We've seen people willingly pull back from potentially even "accidentally"
exceeding 51% of the Bitcoin network in the past for that very reason.

The point is not absolute decentralisation at all cost (though _some_
anarchist tendencies do want to maximise decentralisation), but the ability to
withdraw consent and unilaterally decentralise.

------
CHY872
I kinda get the author's point here - to run a proof of work based system you
need an incentive to actually do the work. Bitcoin has such incentives, and so
it will succeed for any tool that people try to run on it. If you try to
create a new system, you have to convince people to do the work in the first
place.

So it makes much more sense to use bitcoin as your distributed consensus
system, for whatever application you choose to place on top of it.

I'm not sure I agree with the premise, though - which is that people actually
think that - I reckon that Sam Altman's comments might just be a way of saying
'Bitcoin is in the news a lot, I think it's a waste of my time, but I don't
want to write it off just yet.' It's good, it makes him sound profound,
everyone's kinda happy.

The question is: What non-currency applications would actually benefit hugely
from being decentralised in such a way?

~~~
hellbanner
an attempt at answering this:

fact: people working on useful tools benefit us all problem: incentive is only
big-picture, feel good. money is, by design, ridiculously hard to come by for
helpful projects. teachers, farmers, babysitters, soldiers and many other
professions provide valuable service to society yet make only a fraction of
what money-manipulators (bankers who specialize in generating $$ from $) or
cross-cultural entertainment like motion pictures.

Patents, trade secrets, close source & government regulations all contribute
to incidentally de-incentivize many projects built around benefitting a large
chunk of humanity as opposed to localized (individual, corporate or nation-
state) profiteering. << REWRITE

I ran into this recently designing <link CodeSwarm> \- a distributed protocol
where programmers receive escrowed bitcoins for an open-source project
accepting their work, merging it into the master branch of the project. The
payout system sounded promising, but the money had to come from somewhere and
be managed to fund these projects!

So how can we, the people, reward people for doing good things, things we
like?

"FarmerCoin", described below, is a thought experiment where local Farmers can
receive fiat-by-consensus cryptocurrency in exchange for an independent third-
party recording (both videographically and on a chain of signatures) the
farmer's produce.

I propose the formation of semi-independent regulators for specific industries
who accept payment of their choice to regulate a deed done. Regulators film
their investigation and verification of the deed, publish to the protocol
along with a signed message containing a hash of the video and a magnet link
for nodes to torrent.

Once regulators have published a video, end-users known as "verifiers" or
"voters" who have clients monitoring the network receive a notification that
there is a verification to vote on. This would involve torrenting or finding
the video online, verifying its hash, playing the video, then presenting a
vote to the user. This vote would say "This is acceptable" or "This is not
acceptable".

In "FarmerCoin", this plays out by the farmer showing regulators a bin of
vegetables. 10kg of tomatoes, for example. Regulators film the weighing of the
tomatoes then use a software to upload that video, a signature of its hash and
farmer identity information to the network. If the tomatoes were rotten, the
regulators are incentivized not to upload a video because their reputation may
become damaged and farmers will not hire them (see next paragraph for why).

Farmer receives "FarmerCoin" for 10kg of tomatoes as the network approves it.
If the network disapproves the quality of the tomatoes, the farmer receives
nothing.

I admit - there is a flaw in this design. How much "FarmerCoin" is 10kg of
tomatoes "worth"? I'm not sure. I don't know how to answer that. Maybe
"FarmerCoin" should be generated per calendar year. Please discuss because I
think this, at the time of writing, is the only missing link I see in the
system.

Regarding the voters - trusting the internet as a whole to vote on if a farmer
gets paid is ripe for exploitations. Instead, "FarmerCoin" could use votes
_only from public-keys the farmer has explicitly accepted to vote for them_!
Namely these are the farmer's regular customers at the market. This solves the
trust problem on a human level. Trying to make this system "completely
automated" ignores the fact that real-world actions are happening, which
require intelligence. We don't have software to do this process so I think the
best bet is to incentivize voters by _also_ generating "FarmerCoin" for each
vote they cast.

To be clear, _YES_ "FarmerCoin" is generated by _fiat_. It is a more
decentralized kind of fiat. For that reason and the reason that it is in the
voters' \-- who are customers of the farmer -- best interest to see the farmer
receive accurate feedback on their produce so they grow better yields. ((FIRST
REASON???))

YAKSEE As far as how does "FarmerCoin" have value or "Yet Anthoer Crypto
Currency" \- consider this. When people speak of "Bitcoin" as being
"decentralized", they really are only referring to network logs and the
_theoretical_ potential to generate currency. In actuality, those who held
existing fiat resources and hardware manufacturing quickly became juggernauts
in the cryptocurrency world. I mention this because when I talk about the
"fiat" of the above localized consensus I imagine many crypto-currency fans
revolt and insist that no, only computationally generated cryptocurrencies are
valuable because commerce should be "trustless". I feel that on an intuitive
level striving for a trustless society is mal-incentivized. "FarmerCoin"(s)
gives us another kind of cryptocurrency just like LiteCoin's alternative
hashing algorithim co-exists with Bitcoin.

Besides the intrinsic value of whatever a cryptocurrency with a novel
generation mechanism, "FarmerCoin" could be accepted by farmers for discounts
on food that those same voters gave feedback on. I think this completes the
incentive circuit quite nicely.

MANY FARMERCOIN "FarmerCoin" could be Tomato Coin, Apple Coin. It could also
exist for each specific farm, or region. This would be up to the farmers,
regulators and community of voters to work together and decide. Having an
exchange (centralized or not) for these currencies to trade could provide
additional economic incentives to the voters and farmers. Even if "regular"
cryptocurrency is not traded for FarmerCoin, community specific networks could
trade eg plows, immunizations etc.

EXPANSE This concept can be applied to many real world actions. Making a work
of art, patching a pothole, giving someone the finger, giving your cat a ball
of yarn. Only if the community finds vaue in the "FarmerCoin" they are
receiving and the farmer finds it beneficial to receive this subsidized fiat-
by-consensus currency will the currency survive.

~~~
TheDong
'FarmerCoin', as you describe it, sounds utterly pointless.

What farmercoin measures:

1) A farmer takes a picture of good produce (whether or not they sell said
produce)

2) Verifiers / customers claim the produce looks good from only video evidence
(did you know that you pinch the ends of cucumbers to check it? You knock on
watermelons to judge their quality?).

3) The farmer gets a coin that is somehow more useful for trading than USD and
the verifier gets discounts

What you want to measure: "Does the Farmer sell good produce"?

The market forces already gravitate towards the solving this problem. If I go
to a farmer's market and one seller consistently gives me amazing tomatos and
a second consistently gives me one rotten one per bunch, you can bet I'll
"vote with my wallet" so to speak. Similarly, the farmer who sells better
produce will be rewarded by people choosing his produce.

There's no need to try and force "Yet Another Crypto Crap" into something
where it's not solving any problem.

As an added bonus, farmers are possibly one of the _worst markets_ I could
imagine to try and impose some meaningless techno mumbo-jumbo on. Many a
farmer still refuses to use credit cards, preferring only cash, because cards
are too complicated.

Today, we already have online reviews which people give out and consume for
free on many sites, and that _MUCH_ better fits this problem then some crazy
akt-coin meant to proxy reviews.

------
paulsutter
TL/DR: the Blockchain only wins if Bitcoin wins, because miners need an
incentive to mine.

"...the Bitcoin Blockchain cannot win without Bitcoin as a currency winning
too, but if the Bitcoin price languishes, the incentive mechanism backstopping
the Blockchain will be weak and therefore unreliable, ..."

~~~
nrb
Why wouldn't companies who rely on the blockchain step in and incentivize the
miners to ensure the health of the network?

~~~
lmm
But if they did that, what would the mechanism be? The simplest way to
incentivize the miners is to... buy bitcoins.

------
speleding
This argument hinges on the assumption that miners need the incentive of new
coins mined from the blockchain for them to continue mining. However, there
are several other incentives that people can have. There are several actors
inside and outside the US who like to have a currency without government
control for various ideological reasons and do not need an economic incentive
to continue validating the blockchain.

------
amirmc
> _" The moment one becomes centralized, whether due to a flaw in the protocol
> or the concentration of mining power, it is no better (and probably worse in
> fact) than fiat money, e-gold, or any other monetary scheme which is
> vulnerable to capture by a minority, and therefore vulnerable to abusive
> seigniorage and capital controls."_

Hasn't this already happened? I believe I heard something about a '51%' attack
some time ago, which (I think) would mean that attacker could re-write history
(I'd appreciate any corrections or clarifications).

Edit: Here's one story [http://arstechnica.com/security/2014/06/bitcoin-
security-gua...](http://arstechnica.com/security/2014/06/bitcoin-security-
guarantee-shattered-by-anonymous-miner-with-51-network-power/) (not quite
about rewriting history but double-spending becomes possible).

~~~
Smerity
The Bitcoin wiki gives full details[1], but tldr, 51% attack breaks most
elements of the blockchain (reverse attacker's transactions => double
spending, prevent transactions from getting confirmation, prevent valid blocks
originating elsewhere) but doesn't allow the attacker to arbitrarily rewrite
history.

As far as "hasn't this already happened", some of the mining pools in
aggregate have had or presently could combine to get 50+% of the Bitcoin
mining power[2], but to perform the attack requires active coordination from
all pool participants. If an attack like this were launched, it would be
obvious to anyone viewing the blockchain, likely destroy the value of Bitcoin,
and hence their investment, so is economically not a good idea for them.

[1]:
[https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...](https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power)
[2]: [https://blockchain.info/pools](https://blockchain.info/pools)

~~~
amirmc
Thanks for the clarification.

> _"...so is economically not a good idea for them."_

This would imply that the trust model itself would have to undergo a
fundamental shift (and likely has done). There are now entities you have to
trust, rather than the system itself -- at which point the decentralised
aspect is less of a defining feature.

~~~
baddox
Having to trust knowledgeable people to act in their own interest is hardly a
violation of trustlessness.

------
shittyanalogy
In order for bitcoin to "win" it needs to get massively more valuable.
Valuable enough to move the equivalent of trillions of dollars per year and
users need to be able to make million dollar purchases without drastically
changing it's price. Otherwise it will never be truly useful as a currency and
as interest is lost and prices go down parties concerned with verifying the
blockchain will become sparse and the whole system collapses, magical
blockchain and all.

Bitcoin has far from "won" in the sense of a currency and if another crypto-
currency surpasses it's current popularity the faith in any crypto-currency
being stable enough to move trillions of dollars each year is irreparably
harmed.

People raising a few thousand dollars here and there in other crypto
currencies is fun but it's not only paltry and not generally useful but can
easily be attributed to entertainment more than economics. Once the novelty
wears off, where will crypto currency stand. That's the most important
question we need to ask ourselves. All these alt-coins aren't evidence of a
thriving eco-system, they're evidence of the very reason why a cryptography
based currency is inherently valueless.

The blockchain cannot last without bitcoin becoming massively more valuable.
Many people already see bitcoin as being too valuable and alternatives too
easy to create. What needs to be done to scale crypto-currency to the level of
an actual currency? Government backing?

------
nivertech
While in theory Bitcoin can be adapted to "2.0 features" and beyond, in
practice it's impossible.

Bitcoin code, protocol and marshaling formats are a mess. Bitcoin blockchain
and transaction data structures make too many hardcoded assumptions about
underlying application - payments with a single token.

Bitcoin scripting language was designed for transaction validation only, which
makes implementing a smart contracts with it a hack and requires external
Oracles.

TL;DR: Bitcoin is a good PoC which gained a network effect.

~~~
wyager
> Bitcoin code, protocol and marshaling formats are a mess.

Which is why people are working on e.g. Libconsensus.

There are dozens of functional Bitcoin clients based on entirely different
codebases, which indicates that it's entirely possible to start from scratch.

>payments with a single token.

While the Bitcoin transaction format is a bit inflexible, you're wrong about
the assumptions it makes. Even from the beginning, there has been in-protocol
support for more advanced transaction types, like escrow transactions. You can
even use a lot of these transaction types right now! There are still some
transaction script opcodes that haven't been fully enabled yet, but that's
just a matter of tweaking the consensus rules once we're sure that the opcode
was implemented correctly and won't have any bad side effects. This has
happened several times already with no major problems.

~~~
nivertech
You can find a list of Bitcoin script shortcomings in the Ethereum whitepaper
and Ethereum Design Rationale document.

Writing a BIP to add a new opcode for every possible transaction type is not
the answer. And still I don't see how multisig or P2SH can use something else
than BTC tokens (colored coins require external asset registries).

~~~
wyager
>You can find a list of Bitcoin script shortcomings in the Ethereum whitepaper
and Ethereum Design Rationale document.

Ah, Ethereum, the ultimate crypto-currency vaporware. When did vbuterin
announce it, over a year ago now?

There's a reason the Bitcoin script is simple; because it does everything we
want Bitcoin to do (facilitate economic transactions) and it's simple enough
that we can be sure it works properly.

If Ethereum actually releases, I'll take that into consideration for my
judgement of more complex script schemes.

Yes, Bitcoin is "single-token". What's the downside of this? Why do I care if
I need an external registry for non-standard tokens? For tokens to have any
effect in the real world (e.g. economic value), you need some form of
"external asset registry" no matter what. In most cases, this comes in the
form of the seller passing judgement on the value of the token.

------
fryguy
I don't necessarily agree with the conclusion at the end. Supposing that
sidechains can be mined simultaneously with the bitcoin at no additional cost,
and that there is a fixed bitcoin <-> sidecoin conversion ( _not_ market
based) built in to the protocol, bitcoin would never completely lose its
value, because it could be converted to sidecoin at the same rate it would be
before. The market price would be fixed to some small price differential below
the price of the amount of sidecoin it could be converted to.

The thing about bitcoin is there are a lot of things done "wrong" with it,
that are impossible to retrofit into it. However, the network effect means
that it's also impossible to switch to another altcoin without completely
devaluing bitcoin, which would mean that the altcoin would be devalued because
it could happen to the altcoin as well. I agree with that part. However,
something that's pinned to the value of bitcoin like what I've read of the
sidechain proposal would be a way to do that.

~~~
TylerE
> Supposing that sidechains can be mined simultaneously with the bitcoin at no
> additional cost

Which is obviously not true. Extra storage and bandwidth at the very least.

~~~
fryguy
Hash rate is independent from bandwidth/storage. Assuming you can do N
hashes/s, you can still do N hashes/s with merged mining of multiple
sidecoins.

Also, presumably any bandwidth incurred by a sidecoin would have been incurred
by bitcoin if the sidecoin didn't exist, so total bandwidth/storage would be
similar.

------
klochner
Interesting post in that this is the first time I've seen someone from the
bitcoin speculator group challenge the thesis of those in the VC/startup
group.

Both groups are clearly 'talking their book', but this reads like little more
than cheerleading/threatening aimed at himself and fellow speculators. For
example:

    
    
        If Cryptocurrency 2.0 ever replaces Bitcoin and all Bitcoins
        become worthless, confidence in the category of
        cryptocurrencies in general will be, I believe,
        irreparably damaged. If Cryptocurrency 2.0 just replaced
        Bitcoin, there's nothing stopping Cryptocurrency 3.0 from
        replacing Cryptocurrency 2.0 and sending the value of its
        tokens to zero. Ad infinitum.

------
levlandau
I'm pretty sure what people mean by "Blockchain not Bitcoin" is "Bitcoin 2.0"
and not "Bitcoin 1.0" i.e. people think that the killer apps will be complex
programs running on the blockchain that enable things like smart contracts etc
much like search & social apps were more of killer apps than email which is
the analog of bitcoin the currency. The point this article goes into detail to
explain is likely not lost on people as smart as Sam Altman or Fred Wilson who
say this.

------
troymc
One of the central assumptions in the argument is that the miners need an
economic incentive, a (spendable) reward for mining.

How then to explain why people contribute to Wikipedia? Or volunteer at the
local seniors centre? Or donate compute time to SETI@home (and other BOINC
projects)? Or add map data to OpenStreetMap? Or test open source software?
Yes, some of those people get paid, but many do not.

The incentive need not be economic.

~~~
FBT
Say what you like, there _is_ an incentive in the opposite direction in the
case of a blockchain used as a trust-store, which does not exist in the other
cases you described. One could make _a lot_ of money subverting a trusted
blockchain, whereas Wikipedia vandals don't profit a cent.

This means that you will inevitably have massively funded efforts to subvert
such a blockchain. One thing I know for sure is that simple financial self-
interest is one of the most powerful things in the world. Every blockchain has
that fact working against it. The reason they don't collapse is that on the
other hand, they have that same force working _for_ them as well. A volunteer
blockchain like you propose wouldn't stand a whelk's chance in a supernova.
Sorry.

------
sparaker
I think its the decentralized nature that is the big win. However for bitcoin
to really "win" is when people would actually prefer payments in bitcoin than
any other medium. Which is not the case so far, except for illegal market
places.

------
locksley
You mean, Blockchain is the platform and 'currency' is the first killer app?

~~~
Terr_
Yeah, "killer app" means a powerful _application_ of technology, not the
technology itself. The emphasis is that cool-technology is not enough, you
need to get _work_ (or play) out of it.

A warp-drive is just a technology, but "colonizing the galaxy" is the
_application_ which will make people really use it.

~~~
anigbrowl
The thing is, the regular payments system (plastic cards, Dollars, Euros, and
other national currencies) already works very well for the vast majority of
people. If you're a merchant, then you should certainly think about being able
to accept payments in Bitcoin, but as a consumer I'm having difficulty
thinking of an instance where I've _ever_ said to myself 'I need some
Bitcoin...'. If I was into drugs it would be convenient, I guess, but hte size
of the illegal drug market :: regular commerce is pretty small, and I'd
imagine drugs about the largest illegal consumer market by a long way. Other
contraband markets involve much higher risk factors and are correspondingly
smaller.

