
There's No Good Reason to Trust Blockchain Technology (2019) - louwrentius
https://www.wired.com/story/theres-no-good-reason-to-trust-blockchain-technology/
======
lazzlazzlazz
Bruce's take can be summarized like this: with a blockchain, you're choosing
to trust code and cryptography instead of a person. And when immutable code
does the wrong thing, you can't trust them to fix it like you could a person.

This is a good take, and underappreciated - but there's a larger point being
missed.

In high-social-trust situations, there are fewer benefits to blockchains. In
low-social-trust situations, people aren't a good option. Bockchains provide
an entirely new and welcome option for that scenario.

Relatedly, there are different kinds of distrust: mistakes and attacks are
one, but platform risk is another that blockchains can alleviate. Putting it
another way: I trust Twitter/YouTube/PayPal to generally work without issues,
but I don't trust them not to change their offering in an exploitative way or
become rent-seekers.

~~~
arcticbull
> In low-social-trust situations, people aren't a good option. Bockchains
> provide an entirely new and welcome option for that scenario.

We've been handling these set-ups very well for millennia. You find a trusted
intermediary. These days, for better or worse, globalization has created more
and more of them.

~~~
sthnblllII
Iran and Venezuela would disagree, or any country the US government has banned
from the international banking network. The fact that one country can
unilaterally block bank transfers between third parties solidifies the need
for non-politically centralized banking.

~~~
arcticbull
Because allowing the transfers enriched those in power, helping keep the
leadership in place and the people down. For the record this is something you
can vote on and change, because it’s a group decision. Unlike all those poor
scammers who keep getting blacklisted from exchanges and such.

Secondarily, crypto is no panacea here. You can’t solve the initial
distribution problem. How do you decide which individual gets how many coins
to start?

If you ignore that issue, and if you can only trade within the country the
total amount of crypto and the total amount of local currency remains the same
meaning the total net welfare has not improved. If you can trade outside the
country a myriad better options exist.

Crypto doesn’t help here either, it just purports to through magic of the
blockchain. What’s necessary isn’t magic beans that live in computers but for
the locals to rise up and overthrow their local governments and institute
proper monetary and fiscal policy.

Concrete example: why don’t people use bitcoin in Venezuela (separate from the
fact a single transaction costs a few weeks wages)? It’s been 11 years and
were still waiting like skeletons for op to deliver. How did the Petro change
the situation there?

~~~
lifty
People actually use Bitcoin in Venezuela [0], not en mass, but still, it
provides some very useful escape hatches for a part of the population.

0\.
[https://www.bbc.com/news/business-47553048](https://www.bbc.com/news/business-47553048)

~~~
arcticbull
Part of the population solves none of the problem, as I outlined. The monthly
minimum wage is 1 bitcoin transaction fee. It's only the wealthy that can
afford to use it in the first place. It's doing nothing to increase the total
welfare of the system.

I never disputed that a select few couldn't benefit from it, it's not a good
general solution, though.

~~~
zalkota
Then use dai? Much lower fee. When ethereum scales to thousands of
transactions a second, it will be the top solution.

~~~
arcticbull
That does not solve the initial distribution problem.

------
yalogin
So far I haven’t seen a usecase that absolutely needs a blockchain either. I
mean one that can only be addressed by a blockchain and will fall apart
without it. But many people have used it as a general enough hammer to hit
every nail they can find with it. As last it as people make money on it, even
hypothetical money, it’s going to stay popular.

~~~
shalmanese
Buying drugs/murders on the darknet and getting untraceable ransoms from your
cryptolocker malware are at least two solid use cases. One could argue evading
currency controls is a 3rd.

The problem is that there's been no new uses found for blockchain after the
initial uses discovered.

~~~
Judgmentality
Blockchain isn't completely anonymous though. Bitcoin, for instance, can be
and has been deanonymized to catch criminals. The entire concept of a
blockchain is create an extended ledger, which isn't exactly an idea focused
on privacy.

~~~
Acrobatic_Road
That's not an inherit limitation of a blockchain. Monero exists. It actually
delivers on privacy where bitcoin couldn't.

------
louwrentius
This article is from 2019 but I discovered it only recently by accident.

Bruce Schneier makes the case against both cryptocurrencies and Blockchain
technology, as I understand it.

I think it should get some more attention, because it makes a very good case,
centered around the topic of 'trust'.

~~~
louwrentius
I noticed that this article has been discussed on HN a while back:

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

------
wrnr
Store your private key on a paper wallet all you want, but what are you going
to do during a tiger kidnapping? People look at me weird when I bring this up,
but know nothing about real security. I could advice some ISO certified
procedures to keep your money safe but your family is going to be the weak
link. Go read In Cold Blood by Truman Capote to get an idea on what could go
wrong.

------
5986043handy
A large chunk of the arguments tend to assume Proof of Work as the consensus
mechanism which isn't a flaw inherent in blockchain (eg. could have Proof of
Stake, etc.)

~~~
louwrentius
I think the point is more that whatever tech you use, you eventually still
have to trust humans or an organisation.

There are always inherent risks that you just can't reduce with tech.

~~~
scsilver
Yeah but if I can trust them in 10 seconds with very little effort on my part,
I can be much more nimble with my strategy. If i can quickly verify the
validity and source of primary data, I can make decisions on that data without
hesitation. The value is in automating the trust, having a tiny little notary
saying yes this is true, go ahead and make evidenced based decisions. Now of
course we could do this with other tech, but I find the standardization of
this trust mechanism to be the substructure of new business building tools and
services around this quick trust, much faster than they can build them around
trust accumulated by institutions, governments, notable individuals.

------
yarrel
This is a misunderstanding of the concept of "trusted third parties".

Incredibly, yes, you have to rely on the software that you use to perform
tasks to perform them. But this is not the same as placing another person in a
mediating position where they can choose to betray you.

Confusing these two senses of "trust" results in an intuitively appealing but
entirely mistaken family of arguments that aren't the gotchas people think
they are.

The Very Short Introduction book on Trust covers different senses of the
concept of "trust", including the ones I mention here, in a readable and
compact way that I highly recommend.

------
vmception
> Yes, bitcoin eliminates _certain_ trusted intermediaries that are inherent
> in other payment systems like credit cards. But you still have to trust
> bitcoin—and everything about it.

.... which is very tolerable to me.

Right now, it is more expensive to use blockchains do to both the novelty and
specialization of it. As that becomes more ubiquitous it doesn't.

Whether we are talking about FX spreads to and from fiat currencies, or
onchain transaction fees due to congestion, these all get better due to
pressure and competition. A reason to improve. A permissionless ability to
develop the improvements.

Even in things people pretend not to care about (after they lose money) like
token sales, it costs token sale issuers more money to list on a random Asian
exchange, than it costs to list on the Nasdaq. When the permissionless nature
of the technology should mean the opposite is true. More competition and it
fulfills that.

~~~
dgellow
For how long will blockchains be considered a novelty? We are 1 decade after
bitcoin release.

~~~
vmception
Enterprises are just moving away from their private blockchain to public
blockchains, pretty much just this year, following Ernst & Young's Baseline
framework.

Outside of the private sector, the regulatory frameworks specifically for
blockchain technology have only begun to been ratified over the last 18
months, with the key market under the US Federal Government just getting
providing clarity to financial institutions last week, at the Office of the
Comptroller.

The metric you are referring to is a misattributed S-Curve of adoption that
has condensed for a few select technologies over the last century.

Bitcoin is not the primary area of development for industry use of
blockchains. There are various virtual machine technologies proliferating that
bitcoin does not feature.

------
627467
I'm not technical enough to disagree with Bruce. I'm also not an international
law lawyer, fixer, intermediary, etc, to agree or disagree with how we have
been trusting intermediaries for thousand of years and why this is impossible
to replace.

The way I see it is that blockchains and smartcontracts have the potential to
replace treaties, lawyers, corporate intermediaries, etc in an increasingly
multipolar world where treaties would serve as a legal protocol to regulate
transactions.

Maybe it is naive (I'm still trying to workout how this can ever happen if
nation-states actively oppose these desintermediations) but I do think that
privately orgs and people could benefit from technology that helps them
transact with less middlemen.

In a world where China/Russia/etc is trying to avoid exposure to US money/laws
maybe this could serve as alternative?

------
BMSmnqXAE4yfe1
Bitcoin is really about power and control, not about trust. In many aspects
it's a rebellion of coders against the MBAs and lawyers.

------
627467
China has been trying to reduce dependency on USD. They would probably wish
that the world use Reminbi to deal with them but world won't trust China's
money (I also understand that China way of regulating it's currency also
prevents it from propagating out of China) so, how about China adopting some
neutral stablecoin like DAI for certain Dealings?

------
jhh
I think about Bitcoin (and similar systems) primarily as a long term store of
value.

I think they are a pretty fundamental innovation in that space.

What are good alternatives? Gold, cash, or ETFs have substantial drawbacks -
especially in situations where property rights are insecure and inflation runs
wild (or just eats up savings at a somewhat moderate pace, as is the case in
many developing countries).

Of course Bitcoin is also a human system, eventually, but what you are
trusting is an emergent, non-hierarchical order which should be more resilient
than hierarchical systems. The technology facilitates the emergence of such a
system.

I actually think the flawlessness of the technology is not a necessary
condition of Bitcoin's success. If bugs are found then consensus in the social
system can emerge which can minimise damages

All of that being said I think the use case for blockchain is probably quite
narrow.

~~~
louwrentius
> All of that being said I think the use case for blockchain is probably quite
> narrow.

Name one, I dare you.

Name something that really matters. That will offset all the damage they do.

~~~
seibelj
Funding niche software projects by using tokens. For example, Unitrade
launched a token to fund development of a project providing advanced tools for
Uniswap, a decentralized exchange
[https://unitrade.app/](https://unitrade.app/)
[https://uniswap.org/](https://uniswap.org/)

Decentralized autonomous organizations (DAOs) that are new and experimental
forms of company formation. See DXdao
[https://dxdao.eth.link/#/](https://dxdao.eth.link/#/)

Compound, a large player in the Decentralized Finance (DeFi) space that allows
anyone to borrow against their crypto holdings
[https://compound.finance/](https://compound.finance/)

The craziest part of Hacker News is the near universal opposition to
cryptocurrency and blockchain technology. It is not going away, and
governments are finally bending to reality and accepting it, rather than
banning Bitcoin and similar outright.

There is no better way that a developer can earn outsized riches than
blockchain and cryptocurrency. You are solving tough problems in difficult,
constrained environments and are rewarded extremely well for doing so by a
global group of investors involved in this alternative financial system.

But please, if you don't like crypto, just build whatever SaaS bullshit an MBA
is telling you to and take your 0.1% equity for busting your ass. I have spent
years in the extraordinarily interesting world of blockchain and have been
rewarded extremely well in terms of personal growth, education, and financial
rewards.

~~~
ponyfleisch
> There is no better way that a developer can earn outsized riches than
> blockchain and cryptocurrency. You are solving tough problems in difficult,
> constrained environments and are rewarded extremely well for doing so by a
> global group of investors involved in this alternative financial system.

You are not rewarded for "solving tough problems" or anything else related to
creating actual value. It's FOMO driven gambling, scams and enabling organized
crime that gets money into the crypto ecosystem.

~~~
seibelj
> But please, if you don't like crypto, just build whatever SaaS bullshit an
> MBA is telling you to and take your 0.1% equity for busting your ass. I have
> spent years in the extraordinarily interesting world of blockchain and have
> been rewarded extremely well in terms of personal growth, education, and
> financial rewards.

------
cloudking
Are blockchains truly decentralized when a small central group of developers
control their codebase? Sure, you can choose not to use the latest version,
but then you're likely not going to be part of the main network.

~~~
BMSmnqXAE4yfe1
Interesting what would happen if FBI (silently!) takes over the github bitcoin
repository and starts pumping out a version spying on all transactions.

~~~
spiorf
Transactions are already public.

~~~
BMSmnqXAE4yfe1
names, addresses and SSNs of transacting parties are not public

------
altmind
blockchain - the wrong answer to any problem

~~~
louwrentius
Indeed, blockchain: an answer to a question asked by nobody.

------
rizpanjwani
but the USPS just filed a patent for a voting system based on one:
[https://heraldsheets.com/us-postal-service-usps-files-
patent...](https://heraldsheets.com/us-postal-service-usps-files-patent-for-
blockchain-based-voting-system/)

~~~
louwrentius
Well that nullifies all Bruce's arguments, right?

~~~
AtomicPlayboy
Not if the transactions can be deanonymized as it has happened to Bitcoin.

~~~
timbit42
That didn't 'happen' to Bitcoin. Bitcoin was designed that way.

------
doonesbury
I work broadly in financial markets. BC was talked into the ground thankfully
ending 2018. Haven't heard squat since.

I was genuinely interested particularly on aspects of dis-intermediating
custody banks. But it doesn't take long to realize a few things about bonafide
public BC:

\- the random guy adding his/her node to the network will need to catch up on
serious data amounts or just take somebody's snapshot "as word". Can you boot
strap your new node with a snapshot. Should you? Well, what are you going to
do about getting all the back data in?

\- nobody is going to put private financial/trading/whatever details plain
text on a block. so it'll have to be encrypted. so what are we really
verifying? you're verifying what my copy of PGP produces? whatever gibberish I
post to the block? I don't want to disclose from/who/when/amount/shares/bank-
info/exchange/stock symbols .... nothing ... but regulators may need to see
data un-encrypted ... so now what? Send regulators data the old way? While I
do CAPEX the new way? C'mon.

\- The data has to be represented somehow. Since BC brings nothing to that
party ... BC will wrap Swift, FIX, Omego, or by exchange or by regulator
reporting format ... so BC is a crap load of work to fix nothing about the
domain. And even that is a simplification. There's lots of little gotach's in
data reporting between all the counter parties.

\- throughput is an issue on BC

\- just the idea that any joe can add a box to the network and start looking
at financial data ... it's a non-starter ... although we can argue you can get
some visibility from exchange data ... but traders might use BC to help settle
and that may require a heck of a lot more detail that what NASDAQ provides

\- BC isn't a currency. A currency has to do certain things including being
universally accepted in the country, have near constant value day to day.
Whatever that is BC doesn't do it.

\- Another thing I find jaw dropping about the BC mentality is the insistence
the unshakable foundation of the blockchain insofar as its non-deprecation and
on the computers to apply the same logic and/or verification and xfer fees
without human interference or bias. To date BC is pre-pre-pre-neophyte status.
You start bringing in serious economic pressures, 1-offs, crashes, bailouts,
disagreements and I'll bet some or all that code will fail/falter in human
hands leading to code changes leading to forking. Today's money system didn't
start this way. It was beat into today's shapes through problems, mistakes,
and here and there some good ideas. So will BC. I seriously doubt the
immutability of the rules governing blocks.

Now you can back off public, decentralized ... into private block chains with
shared or not shared keys and the like ... or just point-to-point block chains
between trusted and distinguished entities ... but very quickly ... so what
are we really doing here?

BC is used it seems to me for speculation, buying small potato things like
coffee or for the coolness factor or hiding. I'm not seeing serious industrial
use cases.

Now, there are two areas that I might see BC useful for:

\- things like ownership, proof of (say houses) \- maybe voting

-

~~~
earthtolazlo
All that and you still think housing records should be on a public blockchain?
What happens if someone steals my private key? Do they now own my house? If we
rely on public records and the legal system to sort it out then why have a
decentralized and immutable database in the first place?

~~~
rstuart4133
> All that and you still think housing records should be on a public
> blockchain? What happens if someone steals my private key?

Then you lose your house.

Here's the alternative: someone steals your house, and they didn't have to
steal your private key first. It happens every few years. Usually the victims
have been overseas for a while.

------
DonHopkins
And there are many good reasons not to trust Blockchain evangelists.

------
mountainboy
I just lost some respect for Bruce Schneier.

~~~
louwrentius
But do you have any decent counter-arguments against his case?

~~~
scsilver
He does talk about the standardization aspect as a plus to blockchain, the
question is, do we want a bad standard now or a better standard never?

------
jarym
Yea, no. Blockchains are still a technology in their infancy but the need for
them is clear. Rampant money printing is eroding the value of money - we
cannot trust Central Banks to preserve what little wealth we may have.

And then we look at negative interest rates appearing, commercial banks
beginning to show signs of stress like they did in 2007/08 and its clear we
really can't trust them either. If you think you can, then ask the people of
Lebanon what happened when they tried to withdraw their cash. Or Venezuelans.
Or the Greeks a few years ago!

No view on Bitcoin or any particular coin actually, but long term I am a firm
believer that Blockchain today is like the Internet in the 80s - it aint
perfect, but it aint going away either.

~~~
gwbas1c
> Rampant money printing is eroding the value of money - we cannot trust
> Central Banks to preserve what little wealth we may have.

The point of central banks is to ensure a stable value of currency.

Given that we've (in the US, at least,) had very low inflation for the past 20
years; central banks are doing their job well.

~~~
shanusmagnus
Depends on where you look for your inflation. Some people posit that real
estate, education, health care, and (now) the stock market are the sinks for
inflationary money policy.

~~~
jarym
Exactly, all the money that's being printed and every asset class going higher
yet the typical measure of inflation seems to stay low - I would bet the
measure is wrong. In fact, it does not matter if I'm right or wrong about
this, fact remains that if you're an American today and you try to go on
vacation almost anywhere you'll find EVERYTHING feels expensive outside of the
US.

Why is that? Well the value of the dollar is at multi-month lows and heading
lower vs almost any other significant currency.

