
Blockchain and Trust - bb88
https://www.schneier.com/blog/archives/2019/02/blockchain_and_.html
======
lawn
Cryptocurrencies doesn't remove all trust. It's about removing trust in third
parties to send and receive transactions. That's it. And that's a big deal.

> _Honestly, cryptocurrencies are useless._

Honestly, he makes some good points but this is ignorant.

For example:

* Uncensorable donations to wikileaks

* Avoid having PayPal or other payment processors freeze your merchant account for X months, on a whim

* Avoid the risk of charge back fraud for online payments

* Ability for weed shops and porn sites to accept digital payments

* Fleeing Venezuela with your wealth intact

* Send money to and from countries where no banks or western union operate.

* Financial privacy for everyone not just the ultra rich (lookup Monero before commenting)

Cryptocurrencies have some very good features.

There are issues of course, but how can you claim all these are useless?

> _For bitcoin, that 's the cost of the additional bitcoin mined_

No, that's the cost of securing the network to prevent double spends.

~~~
johnwheeler
I can think of counterpoints:

> * Uncensorable donations to wikileaks

Untraceable theft from your wallet

> * Avoid having PayPal or other payment processors freeze your merchant
> account for X months, on a whim

Unregulated merchants who aren't incentivized to play by the rules

> * Avoid the risk of charge back fraud for online payments

No third-party intermediary in the event you get ripped off.

> * Ability for weed shops and porn sites to accept digital payments

Ability for weed shops and porn sites to accept digital payments (This depends
on your stance on these issues. Not everyone feels the same as you).

> * Fleeing Venezuela with your wealth intact

Fair enough

> * Send money to and from countries where no banks or western union operate.

Indeed this is useful, but seems like a small use case relative to the hype
around the tech

> * Financial privacy for everyone not just the ultra rich (lookup Monero
> before commenting)

If you buy something on ebay, ebay and the credit card company have a record
of your purchase. If you buy something from a bitcoin merchant, they will have
a record of your purchase. How is that different?

~~~
sparkie
> Untraceable theft from your wallet

Theft is traceable (by looking at the blockchain). Theft is untraceable in the
fiat system, because you don't have access to the bank's coffers to check
they've not pilfered your money. Turns out they never had the coffers anyway,
your money is just some number on a screen, and there are people who have the
ability to change those number arbitrarily.

If you take the right steps to secure your bitcoin private key, it doesn't
even need to exist in digital form, or physical form, ever. It can be purely
inside your head. It's just a number. One which the probability of somebody
guessing correctly is unimaginably small.

> Unregulated merchants who aren't incentivized to play by the rules

The same is true for fiat money. Scammers exist, and if you get scammed, you
will usually be stuck for months without access to your funds while some third
party performs an "investigation" (In paypal's case, "investigation" means
return money to the buyer).

How about unregulated "customers" who are not incentivized to play by the
rules? Credit card fraud is a huge cost to businesses.

> No third-party intermediary in the event you get ripped off.

The correct term is _choice_ of third-party intermediary (or not). Bitcoin
does not force an escrow on you, but allows you to choose whether or not to
use one, and who to use. This process can be conducted digitally with multisig
transactiton outputs.

> (This depends on your stance with these issues. Not everyone feels the same
> as you).

 _Feels_ are overrated. What are you going to _do_ about it? We've already
seen that action is worse than inaction in drug wars. If you think that paying
for porn is immoral, what about the morality of you declaring unilaterally
that you are cutting off the income of women because you don't like them
getting naked in front of a camera?

~~~
jcranmer
> Theft is traceable (by looking at the blockchain).

So the people who stole the money from Mt. Gox are currently sitting in jail,
right?

This also shows the doublethink you sometimes see with cryptocurrency: it's
totally anonymous, and so you can use it for privacy, except for when it's
not, so you can use the immutable record to figure out who harmed you.

~~~
sparkie
I was referring to the ability to discover that your funds have been stolen,
not necessarily who stole them. (The latter usually doesn't matter, you
probably won't see the money again). The fiat system has no ability to monitor
for theft. Theft can go on for years unnoticed, and by the time it is noticed,
the entitiy involved may be insolvent, having a bigger effect on many people,
or even the larger society if the entities are big enough.

Bitcoin is not totally anonymous. If you trade through AML compliant entities,
your details will be linked to transactions, and people might be able to
discover who you transact with based on the public transaction information.
With coinjoin and similar fungibility enhancements, that process of tracking
is made far more difficult towards impossible. Also, the Lightning Network
enables anonymous payments through an onion routed network, where the only
public information is who you have open channels with. Anonymity will become
the norm in Bitcoin even if it not the case yet.

If you look at it from the perspective of a merchant, rather than from a
"consumer protection" point of view, then a merchant generally does not know
who defrauded them with stolen credit cards. In general, it is rarely worth
investigating and businesses will generally count their losses. Entities like
Paypal are notoriously bad for the seller as they side with the buyer most of
the time - it isn't their money so they don't need to take it seriously.

Bitcoin will benefit merchants, who can take payments which are irreversible,
except by their own decisions for refunding. Consumers will need to take a bit
more responsibility to vet the reputations of the merchants they deal with,
instead of always being bailed out for their poor decisions.

------
davesque
He has a number of good points. He's applied his model of trust in society,
which includes four major incarnations of trust (morals, reputation,
institutions, and security systems), to the topic of blockchain. This is a
useful way of analyzing the utility of blockchain.

However, the article doesn't touch at all on the historical situations in
which people decide to reformulate the different aspects of that model. For
example, why did the French people decide in the late 1700s to rise up and
recast the existing institutions of trust (i.e. the monarchy)? Because they
weren't working. Similarly, the bitcoin whitepaper appeared in many ways as a
response to the 2008 financial crisis. During that period, it was very clearly
demonstrated that existing trust institutions weren't working and that they
also wouldn't be held properly accountable.

Blockchain tech does not eliminate the need for trust. Smart people working
and living in the blockchain space already understand this. In a sense, it's
more appropriate to look at blockchain as a next generation trust institution
(and I mean institution in a broader sense e.g. the "institution of marriage")
which is _more_ autonomous than what has existed previously. Just because the
average modern day human doesn't understand and, therefore, trust blockchain
technology doesn't mean that there aren't people who do both trust and
understand the technology.

------
xorcist
_> Honestly, cryptocurrencies are useless._

It's always strange when people are overly specific.

Is it private money that will never find any use anymore, or is it just that
they can never be digital?

The first is not an unreasonable opinion to have, given modern history and the
relative success of fiscal policy (at least in the latter half of the 20th
century), the second I find harder to justify.

 _> Would you rather trust a human legal system_

The real world is far from that clear cut. Users of other private currencies,
such as eGold, might be tempted to disagree. Hacks (in any and every sense) of
those systems were even more devastating.

If you only ever consider every currency an alternative to the dollar, and
limit yourself to that use case, you might as well ask yourself why any other
currency exist at all.

~~~
creeble
I do think he contradicts that sentence in the following one:

> ...and criminals who want a black-market way to exchange money.

So not "useless" but of questionable value. But I believe bitcoin will
probably never go away for this reason alone.

~~~
extra88
There will probably never be an economy or society that exists without a black
market but that doesn't mean aiding such markets is a feature, not a bug.

~~~
stale2002
Well it depends on the black market.

It might not be a feature in your opinion, but other people disagree, and do
believe it to be a feature.

There are literally billions of people in the world that currently live in
what I'd describe as an authoritarian dictatorship. So yes, I support black
markets in these areas.

------
equalunique
_When that trust turns out to be misplaced, there is no recourse. If your
bitcoin exchange gets hacked, you lose all of your money. If your bitcoin
wallet gets hacked, you lose all of your money. If you forget your login
credentials, you lose all of your money. If there 's a bug in the code of your
smart contract, you lose all of your money. If someone successfully hacks the
blockchain security, you lose all of your money. In many ways, trusting
technology is harder than trusting people. Would you rather trust a human
legal system or the details of some computer code you don't have the expertise
to audit?_

In making the case for human systems over bitcoin, Bruce Schneider echoes the
same arguments that eventually led to FDR stealing every US citizen's gold in
1933 to bail out the federal reserve. To me it seems deplorable for someone to
advocate placating dishonest institutions founded on a legacy of screwing over
people.

~~~
sparkie
Not only 1933, they've been stealing money ever since through a monetary
policy of constant inflation. Deliberate inflation is theft of a small
percentage of the money of all savers.

~~~
hannasanarion
You do realize that non-inflation was one of the main causes of the great
depression, right? Are you telling me that you would spend your money on
consumer products and employing people if you knew that it would be worth more
if you left it sitting in your bank?

~~~
sparkie
Whether you think inflation is justified or not does not negate the argument.
It is still theft. If savers did not have money, economists would not have
anything to inflate. The inflation benefits the money printer, because they
spend it at the market rate at the time of printing, but by the time it works
its way through the economy, the effect is reduced purchasing power for the
saver or consumer.

Yes, inflation is a deterrent on saving, pushing people to instead invest
their money. Whether it is a good thing that people blow all of their money on
junk consumer goods is another question.

What if some people just want to save, and not take risks? Well, it's their
own choice, and now they are able to make such choice because there are no
economists controlling the monetary policy of Bitcoin. What you think was
justified previously, might no longer be possible. If we slip into depression
due to deflation again, we might have to come up with some other solution,
which isn't just kicking the can down the road.

~~~
api
I consider this debate an unresolved issue in economics. We don't know how to
create a genuinely balanced and productive economy.

Option #1: deflationary economy where monetary velocity collapses and with it
employment, investment, and innovation, ending in permanent depression (dark
age) and slavery to a money-hoarding landed rentier class. Board game:
Monopoly.

Option #2: inflationary economy that prioritizes spending and investment over
saving, runs on debt, and ends with slavery to consumerism, bullshit jobs, and
landfills overflowing with junk. Board game: Risk.

Pick your poison.

In the 20th century most nations went for option #2 because those that didn't
tended to be overcome by the financial and military power of those that did.
China is currently performing the most extreme inflationary economics
experiment in history.

This post makes me remember a definition I heard once in school of economics:
"the science of why everything sucks."

~~~
armin_maurice
I mean it is resolved, and your two options kind of show it. The resolution is
very low and slow inflationary economics, to match the growth rate in the
economy. This should prioritize a safe level of saving and investment.

Higher and lower rates of inflation can be enforced (via central banks) to
help fight recession or demand driven inflation (price level increases).
However constantly tweaking inflation rates to get the exact right level for
the current period of countries economic cycle (debt/savings levels, price
levels etc...) is quite difficult. So yes we do know "how" to balance an
economy in a general sense, in the same way we know how to build a web
application in the general sense, but there is always work do be done in the
details.

~~~
api
We've been trying to do that. The problem is that macroeconomic inflation is a
big sausage number that doesn't really say much about the reality on the
street.

Take a look at this:

[http://thesoundingline.com/why-inflation-is-much-worse-
than-...](http://thesoundingline.com/why-inflation-is-much-worse-than-the-
headline-numbers-suggest/)

Price stability has only been achieved for a few categories of things and the
divergence is huge.

------
dragontamer
This is technically a repost from the Wired article.

[https://news.ycombinator.com/item?id=19097613](https://news.ycombinator.com/item?id=19097613)

------
deweller
> Bitcoin might theoretically be based on distributed trust, but in practice,
> that's just not true.

I'll grant that Bitcoin is not perfectly centralized. But I challenge you to
find a more decentralized digital currency on the planet.

A digital currency doesn't need to be 100% decentralized to be very useful as
a digital medium of exchange.

~~~
notahacker
It depends on your definition of "useful". It doesn't need to be 100%
decentralised to allow exchange to take place without a single technical point
of failure existing, but it probably does need to be substantially more
decentralised than it actually is to not actually have bigger trust issues
than traditional currency (at least for people trying to carry out legal
transactions in a developed world financial system).

------
VarFarYonder
> In fact, a system where you can lose your life savings if you forget your
> key or download a piece of malware is not particularly trustworthy. No
> amount of explaining how SHA-256 works to prevent double-spending will fix
> that.

A second-layer solution, built on top of bitcoin, that would allow
transactions to be reversed by a central authority, if a person decided to
place their trust in that authority, could fix that, though.

This is the problem with the article: it doesn't take into account bitcoin's
ability to change. It's like Schneier is saying the internet will never work
because dial-up modems are slow and hog your phone line.

He's assuming no further innovation will occur. And like the early internet,
it's practically impossible to predict what cryptocurrencies will look like in
a few decades.

------
FreeCrypto
Of course trust is still involved. The whitepaper specifically puts "trust" in
the context of trusted third parties ("financial institutions serving as
trusted third parties to process electronic payments"), and proposes a
solution to the double-spend problem when they are not relied upon. It is a
very unique solution that could be useful in solving some very specific use
cases. There are a wide number of risks that could cause bitcoin to crumble -
Core Dev Matt Corralo often says he gives bitcoin a 5% chance of success. The
wide-sweeping conclusion is that blockchain is useless, though I would agree
in almost all cases, it disregards the successful instances where trust
minimization provides substantial benefit.

------
dboreham
>but centralized (as in there's only one)

I think that should be "global", especially since "centralized" means
something significantly different in blockchain circles (and bs goes on to use
it in that sense later in the article).

~~~
Legogris
Logically centralized but physically decentralized would be a specification,
but his statement is correct. "Centralized" does not have a different meaning
in blockchain circles, however it (and especially the inverse "decentralized)
has become a weasel word that people use frivolously.

~~~
bitxbitxbitcoin
I've definitely seen, and been guilty of, using "centralization" as a weasel
word in blockchain circles. Agreed this should change. Usually what's meant is
"potential for corruption or abuse."

------
ForHackernews
If blockchain is so great, where are all the killer apps for this fantastic
new technology? C'mon, we're 10 years into the cryptocurrency revolution, and
we're still arguing about hypothetical use cases.

~~~
Zaskoda
I think ICOs were something of a killer app and they served to move things
forward considerably. I don't think people have fully realized the breadth and
depth of impact ICOs have had yet.

For some relativity:

    
    
      - 1969: ARPANET
      - 1971: Email
      - 1973: TCP/IP
      - 1980: Usenet
      - 1989: Commercial ISP
      - 1994: Netscape 
      - 1999: AJAX / Live Journal
      - 2001: Dot com bubble.
      - 2004: Gmail/Facebook
      - 2006: Twitter
      - 2009: Bitcoin
      - 2011: Twitch
      - 2013: First ICO
      - 2014: Alexa
      - 2015: Ethereum
      - 2017: Cryptokitties, EOS
      - 2018: Tron
      - 2019: Profit?
    

I think the next wave of killer apps will include a lot of creative new games.
I think gaming will be a big force in blockchain adoption in general.

~~~
jMyles
Nice timeline.

But... Tron?!

~~~
Zaskoda
I'm not a Tron fan, I listed it because 1) it was something that happened last
year and 2) a few of the most played dapp games are running on Tron right now
(and EOS)

Now I'm wondering, what else happened last year? I was sleepy.

------
yarrel
The trust Nakamoto refers to is explicitly and obviously the trust demanded by
"trusted third parties" that intrude into transactions.

Removing this intrusion allows _increased_ trust between members of society.

------
KasianFranks
This person is unfamiliar with what it means to run a public trading vehicle
along with the value that comes with that. Public trading vehicles are
designed to exercise capital from the capital markets. This is what enables
public companies to grow. Crypto another form of a public trading vehicle in a
new global capital marketplace and it helps legitimate companies grow.

------
apo
_When that trust turns out to be misplaced, there is no recourse. If your
bitcoin exchange gets hacked, you lose all of your money. If your bitcoin
wallet gets hacked, you lose all of your money. If you forget your login
credentials, you lose all of your money. If there 's a bug in the code of your
smart contract, you lose all of your money. If someone successfully hacks the
blockchain security, you lose all of your money. In many ways, trusting
technology is harder than trusting people. Would you rather trust a human
legal system or the details of some computer code you don't have the expertise
to audit?_

Most of these things have nothing to do with "blockchain" or Bitcoin.
Exchanges are outside the scope - entirely. They are merely one kind of
merchant. "Wallets" are also outside the scope, because the protocol only
knows about scripts. Login credentials play no role whatsoever in Bitcoin -
that's an add-on provided by third parties.

Bugs in contract code are a problem. That's why you don't trust it. You
_verify_ it - just like you read any contract you sign.

"Hacking blockchain security" is another matter. What Schneier is referring to
is the Ethereum Classic majority hash rate attack. That's a well-known
limitation of all block chains. Satoshi's white paper deals with it
extensively and quantitatively. It's not like Schneier has stumbled onto
something novel here.

 _These four elements work together to enable trust. Take banking, for
example. Financial institutions, merchants, and individuals are all concerned
with their reputations, which prevents theft and fraud. The laws and
regulations surrounding every aspect of banking keep everyone in line,
including backstops that limit risks in the case of fraud. And there are lots
of security systems in place, from anti-counterfeiting technologies to
internet-security technologies._

The nativity here beggars belief. Does this man not remember 2008? Does he not
remember HSBC? Does he not know that the individuals responsible for the most
egregious bank fraud have never been punished in a criminal sense? Does he not
remember the vast amounts of sensitive, personal information leaked by these
institutions? Has he never heard of the massive, unconstitutional civil asset
forfeiture problem in the US?

The best you can say about the banking system is that laws/regulations may
inhibit, to some degree, some forms of theft and fraud.

~~~
tim333
The loses as a percentage of funds have been vastly less in conventional
banking and similar than in cryptocurrency.

------
coinward
Regressive author can't understand the Theory of Conservation of Mass. Gives
us the environmental waste straw man and follows it up with an appeal to
power. Fails to understand that the real innovation in trust is the stable
horizontal structure that makes top down governance obsolete. Enjoyed reading
anyway

~~~
antocv
> is the stable horizontal structure that makes top down governance obsolete

lol, how can bitcoiners still believe this? SegWit was introduced top-down,
The DAO was top-down governance.

Everthing about bitcoin, the mining, the software, the majority owners of all
bitcoins ever mined, is ruled and in the hands of less than 12 people.

~~~
lukifer
The counterpoint that those n<12 people are supported by, and theoretically
accountable to, the vast ecosystem of miners, investors, and developers.

...and the counter-counterpoint: for all the shortcomings of modern democracy,
the same is at least somewhat true of the board members of the Federal
Reserve, and the elected congress-critters who occupy the relevant regulatory
committees.

------
arisAlexis
almost all the comments are negative about the article but many people
upvoted. I like the dynamics of HN

~~~
Zaskoda
Increasingly I have noticed that people who can see the future have given up
on engaging those that can not.

------
2019ideas
I like Bitcoin, I don't see a use for any other coin. Decentralized
verification seems to be valuable in Currency only.

Timestamps and voting do not seem to be valuable, this was the craze over alt
coins.

------
legionof7
This article uses the common criticism of there already being existing
institutions and security systems for money transfer. However, this may be
true in well developed countries but it's not true at all in developing
countries. IMO, this is a common oversight by critics.

~~~
ssivark
In what world do people have the technological and social infrastructure for
Bitcoin (end user devices, networks, miners, etc) but bad infrastructure for
money transfer? How do you think they would be buying their phones/devices and
paying to connect to the network?

~~~
legionof7
Venezuela for one.

~~~
XorNot
How? There's always a flavour of the moment failing state inserted as a
reference here. But if you can't transfer Venezuelaean currency out of the
country, how are you buying bitcoins with it? How are you getting the money to
that person?

~~~
legionof7
Check out LocalBitcoins

------
keymone
> It can also be extremely expensive, both in data storage and in the energy
> required to maintain it. Bitcoin has the most expensive consensus algorithm
> the world has ever seen, by far.

When Bruce complains that Bitcoin's consensus is expensive he really
compliments Bitcoin's security and resistance to attacks on immutability.

He's spot on that private blockchains and most public blockchains are nothing
but hype, that opinion is not news though.

