
Blockchains: How They Work and Why They’ll Change the World - rbanffy
https://spectrum.ieee.org/computing/networks/blockchains-how-they-work-and-why-theyll-change-the-world
======
TheReveller
From the article:

 _Can a blockchain find people offering rides, link them up with people who
are trying to go somewhere, and give the two parties a transparent platform
for payment? Can a blockchain act as a repository and a replay platform for TV
shows, movies, and other digital media while keeping track of royalties and
paying content creators? Can a blockchain check the status of airline flights
and pay travelers a previously agreed upon amount if their planes don’t take
off on time?

If so, then blockchain technology could get rid of Uber, Netflix, and every
flight-insurance provider on the market._

Really? All these applications can also be built using 'normal' systems
architectures. If you build them on a blockchain, then you also get:

    
    
       - A very low rate of transactions
       - A very high computational cost to mine new blocks
       - A very high storage cost for each node
       - No way to reverse transactions in the case of error or fraud
    

So somehow the benefit of putting these applications on the blockchain has to
outweigh these costs. The only benefit I can see is transparency. When you
have information that must be publicly available and immune to tampering, then
a blockchain could be a nice way to achieve that.

But for these examples? I don't see any reason to use Ethereum or a blockchain
at all to implement them. Can someone help me out here?

~~~
wildsatchmo
Looking at all these pessimistic comments I can't help but wonder if this is
what the op eds in the newspaper looked like while the internet was being
built. "its too slow, and even with our best compression transferring a movie
would take a month. Not gonna happen. Computers are too expensive for most
households." etc.

If you want to keep middle men in between most things that we could
potentially do programmatically, thats cool. I'm on the hype train.

\- low tx rate? not for long \- high computational cost? Security feature.
Makes fraud/hacks very expensive. If you think energy conservation is more
important, other chains don't have this cost (proof of stake). \- high node
storage cost? mining fees & block reward more than outweigh this. not everyone
needs to run a full node (but anyone can). \- no way to reverse transactions?
feature. you can always add arbitration / escrow. openbazaar does this very
nicely

If you go the traditional route, you will always have a company in the middle,
taking their cut or selling you out behind the scenes.

~~~
zilian
Thank you for your comment. Looking at all the doubt and hate about blockchain
& cryptocurrencies on HN lately, I personally can't help but wonder where have
all innovators gone.

~~~
endymi0n
Confirmation Bias at work. You're invested, so you want it to take off.

Yet none of those blockchain enthusiasts could tell me a _single_ USP that
blockchains had over storage in a normal database on any concrete use case,
with the sole exception of cryptocurrencies.

And the reason is simple: all those applications have none of the properties
and problems the blockchain solves - which is an elegant niche solution tailor
made for mutually mistrusting entities working together on a distributed
ledger. That barely exists in real life.

Centralized systems are what you want in 99% of cases. They're more reliable,
better controlled, have infinitely more throughput and usually, you _want_ to
be able to roll back transactions under certain conditions (fraud, mistakes,
etc.)

Sure, you _could_ store anything in a blockchain. Sure, something yada yada
blockchain could "replace Netflix". It's just that apparently nobody can tell
me _why_.

My only concern right now is that I can't short Blockchain technology because
the relation of hype to actual usefulness and potential is so incredibly large
that it will drag a big chunk of the tech sector down the drain.

In stark contrast to AI which is just as hyped, but isn't just supposed to
"change everything" since years - it's actually starting to do so on a
spectacular timeline.

~~~
sergiosgc
> Yet none of those blockchain enthusiasts could tell me a single USP that
> blockchains had over storage in a normal database on any concrete use case,
> with the sole exception of cryptocurrencies.

> And the reason is simple: all those applications have none of the properties
> and problems the blockchain solves - which is an elegant niche solution
> tailor made for mutually mistrusting entities working together on a
> distributed ledger. That barely exists in real life.

> Centralized systems are what you want in 99% of cases. They're more
> reliable, better controlled, have infinitely more throughput and usually,
> you want to be able to roll back transactions under certain conditions
> (fraud, mistakes, etc.)

While we're high on the hype cycle for blockchains and crypto currencies, it's
easy to find actors that do not understand the limitations of the technology.
It has heavy drawbacks when compared to centralized systems. That is true, I
agree with that part of your comment.

What your position misses, are the huge _unrealized_ upsides of blockchain
tech. It's natural, because they are potential, unrealized and, as such,
difficult to defend. Let me try my hand at it anyway, as high level as
possible so we don't get lost in use case minutiae.

Blockchain allows you to eschew the need for a single central trusted party.
This allows for fluid ecosystems, removing the need for a monopoly/oligopoly
in scenarios that today require one. This removal of a market deficiency is
known to increase innovation, through competition.

If you find it difficult to imagine use scenarios for blockchain, look for
deficient markets caused by the need for centralized trust: monopolies and
oligopolies. In each, you'll find an opportunity to create a more competitive
market through blockchain.

~~~
root_axis
> _If you find it difficult to imagine use scenarios for blockchain, look for
> deficient markets caused by the need for centralized trust: monopolies and
> oligopolies. In each, you 'll find an opportunity to create a more
> competitive market through blockchain._

How? This is just vague handwaving that doesn't actually explain how the
blockchain can solve real problems. As of now, bitcoin is the only
demonstrable use case for a blockchain, and while I don't think anyone could
convincingly argue that bitcoin is _useless_ , it's not going to cause an
economic revolution like the advent of the internet.

~~~
wildsatchmo
> How? By simply eliminating intermediaries. A middle man always takes a cut
> somehow. If you can eliminate him, both parties can enjoy better rates. Here
> are some non vague ways blockchains can help real problems:

\- What if a kind of youtube existed where advertisers paid content creators
directly instead of youtube taking a large percentage? And it was censorship
resistant. \- What if we could build app stores that don't take a 30-50% cut.
\- How about an entire p2p marketplace without fees like ebay? openbazaar.org
\- What about getting paid for things that are impossible right now because of
CC tx fees? This unlocks microtransactions & an entire attention economy (see
yours.org, steemit.com, more incoming) \- How about p2p digital rights
management to allow artists to keep more of their income? Several in the
works. \- How about any service that exists to keep records? I would love to
see the day Pacer was replaced by a blockchain. \- What if a kind of reddit
could exist without centrally moderated channels and armies of fake users? \-
What if p2p rented data storage could be a fraction of the price of dropbox
without selling your data? \- What if you could rent computing power in a p2p
fashion? \- What if network/VPN rules could be tokenized in the hardware and
network access could be metered and charged per minute in crypto? \- What if
you could receive payroll as a minute by minute stream? \- What if the lottery
was provably fair and 1000 times less of a ripoff? \- What if we could replace
obviously flawed political polling with prediction markets?

I could write this list all day. Not vague handwaving, all of these things are
being worked on or already exist.

~~~
root_axis
> _What if a kind of youtube existed where advertisers paid content creators
> directly instead of youtube taking a large percentage? And it was censorship
> resistant._

Youtube taking a large percentage has nothing to do with the nature of the
technology and everything to do with the fact that they have no competition
due to insane network effects and highly optimized research driven UX. Also
hosting, indexing, and reliably streaming hundreds of TB of high quality video
is not a trivial problem. Further, you cannot escape censorship when your
concern is advertising revenue.

> _What if we could build app stores that don 't take a 30-50% cut._

Once again, this is not a technology problem: Google and Apple will never
allow app store competitors on their platform, otherwise someone would have
already done this (and it _was_ done during the early iPhone days with the
Cydia store available only by breaking Apple's security - no blockchain
required)

> _What about getting paid for things that are impossible right now because of
> CC tx fees?_

The same problem exists with bitcoin tx fees such that all the proposed
solutions to this problem involve finding a way to avoid the blockchain at all
costs.

> _This unlocks microtransactions & an entire attention economy (see
> yours.org, steemit.com, more incoming)_

Microtransactions are not practical on the blockchain and _most_
microtransaction concepts are DOA because nobody except crypto-enthusiast
wants to pay 10 cents to upvote memes and cat pictures when they can do that
for free, with a better selection, on sites like reddit. There is probably
some limited potential for microtransactions when it comes to gaming or maybe
publishing content, but once again, the real problem has very little to do
with technology and much more to do with the fact that most content is crap
and people don't want to pay for it.

> _How about p2p digital rights management to allow artists to keep more of
> their income_

Once again, not a tech problem. People would happily pay the artist if the
artist self-published, but most don't do that because publishing through a
platform or another distributor is the only practical option for
discoverability. Once you're discovered, the payment aspect is a non-issue,
e.g. famous artists who already deploy "pay what you want" style stores
(Radiohead, Louis CK, Humble Bundle etc).

> _How about any service that exists to keep records? I would love to see the
> day Pacer was replaced by a blockchain_

Why? What problem does this solve? Storing records is already a solved
problem. There are plenty of non-blockchain techniques for storing, auditing,
and cryptographically verifying and securing records without any of the PoW
drawbacks. Please offer even one practical example.

> _What if a kind of reddit could exist without centrally moderated channels
> and armies of fake users_

First of all, the blockchain does not solve the "fake user" problem, so I'm
not sure what that means, but centralized moderation is not a problem for most
people who just want to browse content and don't really care if someone gets
banned for spamming "nigger" in comments. For those that really care about
totally unbridled free-speech there are already non-blockchain alternatives
like voat.co... what does a blockchain bring to the table?

> _What if p2p rented data storage could be a fraction of the price of dropbox
> without selling your data_

Economics of scale guarantees you'll never be able to beat a centralized
solution like AWS when it comes to this type of thing. You might see some
cheaper options for a time, but once the market catches up to the fact that
AWS is achieving orders of magnitude cheaper storage than a faux meshnet of
consumer harddrives, you'll find that this idea is totally impractical.

> _What if network /VPN rules could be tokenized in the hardware and network
> access could be metered and charged per minute in crypto_

Interesting idea, but nobody wants this.

> _What if you could receive payroll as a minute by minute stream_

Interesting idea, but there's no reason that employers would adopt this.

> _What if the lottery was provably fair and 1000 times less of a ripoff_

Not really a concern for those that operate the lottery.

> _What if we could replace obviously flawed political polling with prediction
> markets_

Vague, impractical and fraught with its own flaws.

> _I could write this list all day._

Yes, but like 99% of blockchain related ideas, the problems that are actually
solved are already solved without the insane drawbacks of PoW.

------
relyio
It's an easy pitch. Not for all industries or markets, but broadly speaking,
removing the need for trusted third-parties is a major leap forward.

And that's how those (trustless) decentralized ledgers should market
themselves. It only needs to come down to that one simple thing: they increase
the surface on which supply and demand can interact. The resulting friction
generates wealth.

Lots of markets remained untapped because of that third-party need. Forgive
the punctual essentialism, but increasing "capitalism"'s reach to those
uncharted territories is good. In fact, it is precisely why I think it will
take-off: the derived utility from an economic point of view is too high to be
ignored.

Sometimes you don't need it to be trust-less or permission-less because some
industries only have a handful players who already trust each other. That's
not the full picture.

Obviously, there's an efficiency trade-off. But, don't make the mistake to
throw the baby with the bath water. No system is perfect. No complex system
behaves like it should. Bitcoin is imperfect. There are lots of bullshit and
koolaid. Nonetheless, I believe the trend since Satoshi, with the long
historical line of research he has built upon, published the Bitcoin paper is
_clearly_ upward. It should continue. Satoshi was the spark. Now (r)evolution
will be incremental.

~~~
camjohnson26
This is the point so many here are missing... blockchain allows free markets
to exist where they didn't before. Look at Sia, there's so many people trying
to make money hosting files that you can get 5 Tb of storage on the network
for $10 a month right now, less than 10% the cost of Azure or S3. Sure that
discount will shrink as more people start using the service, but this is
allowing everyone to participate in the storage economy instead of the
oligopoly of a few key players that we had before. When everyone can
participate in the market the competition will lower costs and raise
efficiency, improving the system for everyone.

------
davidgerard
All the good bits of blockchain, we already had in git: a transaction ledger
with hashes for tamper-proofing. Git came out in 2005, based on work going
back a few decades.

What we're seeing in practice is a lot of "Blockchain(tm)" products that are
just this, and not actually a blockchain. Remember how Estonia has blockchains
in everything and talks them up at every opportunity? Their local "KSI
Blockchain" is just a ledger with hashes.
[https://davidgerard.co.uk/blockchain/2017/09/06/estonias-
sma...](https://davidgerard.co.uk/blockchain/2017/09/06/estonias-smartcard-
security-problem-is-probably-not-blockchain-related-but-what-is-estonias-
blockchain/)

The Bitcoin-style decentralisation etc is not in practice useful for real
things that aren't cryptocurrencies.

Transaction ledgers with hashes are great stuff! So if they get used more,
that'll be the good outcome of "Blockchain(tm)" hype. But this article is just
full of what are literally Bitcoin hyperbolic claims, with the buzzword
changed.

This IEEE Spectrum "blockchain" issue has been consistently glib and lacking
in detail. I'm very disappointed. This is supposed to be a magazine from an
institute for engineers.

~~~
Lon7
> All the good bits of blockchain, we already had in git

This is not true at all and shows a common misunderstanding of why the
blockchain is useful.

The big breakthrough with blockchains and crypto currencies has very little to
do with it it being a ledger with signed hashes. There are two main "good
bits" of the blockchain:

\- it provides a consensus algorithm to agree on a set of updates to the
ledger. Not in git.

\- it provides a mechanism for anyone to take part in this consensus algorithm
while preventing sybil attacks. Also not in git.

~~~
davidgerard
And, as I said, this consistently turns out not to be the useful bit for
applications other than cryptocurrencies. And the stuff that is actually used
- and marketed as "Blockchain" \- is pretty much git.

It's been eight years, "where's the beef" is a reasonable question by now.

------
canoebuilder
_A complex system that works is invariably found to have evolved from a simple
system that worked. A complex system designed from scratch never works and
cannot be patched up to make it work. You have to start over with a working
simple system_

[https://en.wikipedia.org/wiki/John_Gall_(author)#Gall.27s_la...](https://en.wikipedia.org/wiki/John_Gall_\(author\)#Gall.27s_law)

People like analogizing blockchain development to the development of the world
wide web.

Tim Berners-Lee launched the first website in Dec 1990, Google launched in
Sept 1998. And in between there were many companies founded that did things
that lots of people liked. These companies found widespread use and patronage.

Satoshi Nakamoto launched bitcoin/and the blockchain idea in Jan 2009, it's
currently Oct 2017.

What besides trading cryptocurrencies, and endless(half-bakedly) pontificating
on, are people doing with blockchains?

What simple, functional, useful blockchain systems are people actually using
today that have potential to grow into more useful and complex systems later?

~~~
mbrock
Multisignature funds are used by almost all blockchain project organizations
and companies. That's a simple system that's extremely useful.

So blockchains give you the ability to open a secure account of valuable
digital assets and authorize spending via cryptographic signatures and
business logic.

You couldn't do that before blockchains, and it's not hard to imagine
interesting variations on the theme: for example the Colony project that's on
the top of HN right now.

~~~
canoebuilder
Can you break down into the simplest language, what that actually means?

How is it superior to existing systems? For what applications?

~~~
mbrock
It's a checkings account for cryptocurrency with spending conditions of the
type "4 out of 6 members agree and the weekly spending limit is not exceeded."

Since blockchains are open source and programmable, that also means it's a
checkings account that you can script in any way you want.

It's superior in that it doesn't require a bank. It's also an extremely
transparent system, since blockchain transactions are visible to and auditable
by everyone, and it has some strong security properties because of
decentralization.

------
retox
My understanding is that a blockchain is a distributed, immutable database.
There must be some serious dollaroos floating around in consultancy fees for
such a simple idea to be cropping up constantly and as a solution to almost
every problem.

~~~
nadam
I could say: "My understanding is that software is just the code you put on
the Neumann architecture. There must be some serious dollaroos floating around
in consultancy fees for such a simple idea to be cropping up constantly and as
a solution to almost every problem."

The thing is: not every problem is completely trivial to solve even if the
basic idea of the blockchain is well known for some years now. I see progress,
there are innovative ideas and implementation in the industry every year. It
is not about the initial idea, the cryptoindustry is evolving just like the
sowtware industry evolved. There may be more hype than necessary, but this
stuff and its potential impact is real.

------
hobozilla
I had to stop reading at:

"In 2009, an anonymous hacker (or group of hackers) going by the name of
Satoshi Nakamoto unveiled the first entirely digital currency"

In what sense was Satoshi a hacker? Even the modern use of "hacking out code"
is a stretch here.

Also, it clearly was not the first digital cash. e-Gold and many others
predate it.

~~~
iamphilrae
Technically, I believe that has always been the definition of a hacker, even
back in the 80’s. Since then it’s been movies and popular culture that have
got it wrong. I believe that what most people think of a hacker, i.e someone
who digitally breaks into a system, is actually a ‘cracker’.

~~~
arglebarnacle
I think it's time to stop fighting this fight--nobody I know, even among the
security/tech literate, uses the word cracker. We may just have to live with
the fact that "hacker" means two easily conflatable things, at least until
another term actually catches on for one or the other.

------
geraldbauer
FYI: I've put together a collection of blockchains (in JavaScript, Python,
Ruby) and articles at Awesome Blockchains -
[https://github.com/openblockchains/awesome-
blockchains](https://github.com/openblockchains/awesome-blockchains) . The
idea is that to learn about blockchains build one (or two) from scratch. Not a
crypto god? Or a JavaScript ninja/rockstar. No worries. Yes, you can. Happy
blockchaining.

~~~
mmcnl
This is great, however the real strength of blockchain lies in it being a
distributed database. These are all single node examples. Would love to see
some examples of a simple network based blockchain

~~~
geraldbauer
Add your single node example onto git than it's distributed :-). For rolling
your own peer-to-peer network and nodes see the starter articles linked in the
Awesome Blockchains page that include examples in JavaScript, Go, etc. Happy
blockchaining.

~~~
mmcnl
I did in fact roll my own network. You can view it here:
[https://github.com/mcrapts/simple-blockchain-
network](https://github.com/mcrapts/simple-blockchain-network)

It is spiritually based on your single node examples which I encountered
earlier last week, so big thanks for that (was just enough to get me started).

Most of the logic resides in models/blockchain.js. You can interact with the
node using the HTTP endpoints in routes.js.

Disclaimer: I have no idea what I'm doing, but it seems to work. Would love
some feedback.

------
jcun4128
This is an open question, if you were to use blockchain to prove how much
energy someone produced with their solar panel, doesn't this depend on a
trusted configuration? Can't they feed in false data before the block chain
part?

~~~
Isomatik
Yes and yes. This is the big pitfall i see so many ignoring - the real
challenge if you're trying to interface with the outside world is establishing
what the internal token means in the outside world without depending so
heavily on a centralized weak link that the decentralization of the
blockchain's maintenance is pointless. If the actors in a system don't trust
each other enough to make changes to the database unilaterally, why would they
trust that the other actors aren't lying about their on-chain/off-chain
holdings?

~~~
jcun4128
Regarding the solar panel part, could be a hardware requirement validated that
way but I don't know you could probably spoof that.

------
rotten
My understanding is that blockchain truth is determined via a majority vote.
What I'm really not clear on is how someone with a botnet can't simply take
over a blockchain. With such large sums of cash at stake, it seems like a
serious hacker would be much more interested in controlling a blockchain than
doing silly DDOS attacks on some corporate website that slighted them.

~~~
gbersac
For that you need to have more than half of the hash power of the blockchain,
which means, for bitcoin at least, billions of hardware investment. A hacker
can't have such power.

~~~
notahacker
On the other hand someone with significant influence over a small group of
Chinese people still can, and not every blockchain is going to be anywhere
near as distributed as BTC

------
gaetanrickter
They might do even more when you add Machine Learning and AI
[https://medium.com/@alexanderwestin/cryptocurrency-plays-
art...](https://medium.com/@alexanderwestin/cryptocurrency-plays-artificial-
intelligence-data-the-blockchain-a26b3f8bf6a5)

~~~
rounce
What's wrong with writing in _plain english_? Reading that link, I can't help
but get the feeling that either a lot of copy-paste from marketing pages has
happened, or the author thinks marketing-speak is an acceptable way to explain
things.

~~~
acdha
It’s a common tactic for hucksters: make it hard to understand and hope that
people conclude it’s really advanced and get out their wallets.

