
Ray Dillinger: If I'd Known What We Were Starting - tim_sw
https://www.linkedin.com/pulse/id-known-what-we-were-starting-ray-dillinger
======
wyc
What really upsets me is that most of the whitepapers pumped out by ICOs today
are emphatically not the way we best understand how sustainable new companies
come into existence. Many contain big grandiose plans that stretch years and
don’t admit the necessary network effects, new technologies, etc., for even
modest success. An idea, a LaTeX installation, and WordPress landing page are
a very low bar for raising millions of dollars, especially by today’s
standards. With open source software and services like AWS and GCP, we should
expect more.

Startups by definition are organizations in flux seeking their scalable
business models, and claiming to have all the answers upon inception is an
exercise in hubris and/or grandstanding. The late Steve Jobs did say that
customers don’t know what they want, but many of these ICO firms don’t even
seem to take the first steps in talking to early prospects.

1999 is calling, and they want their 18-month growth plans, 50-page business
plans, and million dollar war chests back.

~~~
ColanR
That's probably an optimistic view of the motivations of a lot of the ICOs.
Your comment reminds me of an HN thread from about a month ago
([https://news.ycombinator.com/item?id=15072257](https://news.ycombinator.com/item?id=15072257)).

> How to make money in ethereum, from high to low risk ... 3. Even more
> profitable is kicking off your own ICO. Go through the checklist - fancy
> HTML5 theme that you can buy off of Themeforest and edit the HTML a bit for
> the landing page, create a Slack channel/Twitter account/subreddit, write a
> "whitepaper" that is easy enough for the shmucks you're targeting to
> understand, yet replete with enough pseudo-academic crypto jargon and
> irrelevant/unnecessary mathematical symbols to get the shmucks nodding their
> heads and pretending to understand how this particular algorithm/equation
> based on the "turing-complete ethereum blockchain" will "change the world"
> or "bank the unbanked" or, more importantly to them, appreciate 500x in
> value.

~~~
zghst
This is perfect

------
a_d
"What else ticks me off about this, is that there is absolutely nothing wrong
with issuing stock in your company as tokens on a block chain instead of
through brokers on a standard exchange. Just do it legally, for Pete's sake!
Go to the SEC, or whoever the appropriate regulatory authority in your
jurisdiction is, and get authorization to issue stock! Hire somebody to
implement shareholder voting as block chain transactions. If the law in your
area doesn't allow anonymous stockholders, then you need identified
participants (and, inevitably, a Trusted system to assign or match IDs). It
can work. It has advantages even. But after the meltdown that the scammers are
bringing down on this whole form, it's going to be anathema, or even illegal."

Ironically, the first "ICO" to do it with full compliance, useful tech and
good business model, will be huge. There is demand for it.

The other big opportunity is to come up with a framework that everyone can use
to be compliant (e.g. An Ethereum with "compliance" mechanisms built into it
will be a big "general-purpose" blockchain).

It's hard to understand why ignore compliance, when being compliant is quite
simply going to be much bigger, sustainable and "good business" than all
scammers put together.

~~~
CJefferson
I can't imagine blockchains ever satisfying all legal requirements.

At some point I expect some court to say "X shares were illegally transferred
from person A, give them back". If we don't know where they went, it's
impossible on block-chain to give them back, unless we assume the existence of
someone who has the rights to make arbitrary changes, at which point there is
no point having a blockchain.

~~~
lallysingh
Why can't you require that each wallet be signed by a party that identifies
the person behind it? Then you find where the money went and you force them to
give it back.

But I think really the statement of interest is here: > ... at which point
there is no point having a blockchain.

Lots of people have different reasons for liking block chains. Their reasons
may disagree with yours.

~~~
wyldfire
> Why can't you require that each wallet be signed by a party that identifies
> the person behind it? Then you find where the money went and you force them
> to give it back.

And what if they refuse [despite consequences]?

> Lots of people have different reasons for liking block chains. Their reasons
> may disagree with yours.

I'd say the common/paramount feature is "decentralized, trustless ledger
w/distributed consensus." Dillinger talks at length here about how "...the
Trustless nature of Bitcoin was the main thing that convinced me Satoshi
wasn't scamming." Yes, lots of private things calling themselves a
"blockchain" exist. But those all submit themselves to some sort of
authority/trust system. And it's likely the case that they do that in order to
avoid the problem described.

IMO it's anarchy [good connotation] vs rule-of-law. Crypto-coin/asset systems
can be ruled by distributed consensus but this feature is mutually exclusive
with state-managed systems. When they intersect or when they're forced to
intersect, we end up with an imbalance/mismatch.

~~~
carlisle_
> And what if they refuse [despite consequences]?

I feel like this is a problem that is pretty commonly exercised in our legal
system and incarceration is usually a strong last resort motivator.

~~~
wyldfire
That's why I added "despite consequences". Ok, now they're in jail and they
still refuse. Now what? Ugh, lets go convince the peers contributing to
consensus that we need to fork the chain and delete this transaction (like
Ethereal).

This is just the tip of the iceberg BTW. What if they die or have a brain
injury? Their password securing the wallet is now lost to the world. Now
there's no way to reverse this transaction. We accept this risk with the
trustless system of currency. But real estate, equities, this kinda stuff --
it just doesn't map well at all.

~~~
wakamoleguy
Forking the chain or otherwise building consensus may be necessary to recover
the coins from those particular transactions, but it's not clear that we would
need to do that. As an analogy from traditional currency, consider what
happens if somebody dies while in debt. Their estate can be used to settle the
debt, but if the money isn't there, creditors will go unpaid. There's no
guarantee that all of the transactions that occurred with that money can be
reversed.

One other potential problem is that if an owner of some Bitcoin dies, there
may not be access to their wallet at all. However, if there is considerable
wealth in that wallet, they should have incentive to pass that on to their
heirs, in which case they may have set up a will or otherwise passed on
instructions for how to recover the money. Whoever that money is recovered to
can then be approached for settling the estate or what-have-you.

In the end, though, laws and the consequences for breaking them are (in
principle) set up to incentivize behavior that is good for society. If you
break laws, you face consequences. If you avoid those (e.g. court orders you
to pay and you refuse), you face other/worse consequences (e.g. garnished
wages, contempt of court). If the consequences still aren't strong enough or
enforceable enough to maintain the peace, then society has a problem and new
laws can be passed.

~~~
CJefferson
I agree with blockchains that represent something equivalent to money, which
would include bitcoins.

The problem is using blockchains to represent shares in a company (for
example). Ownership of a company can't be "lost", or "unpaid". Legally,
someone owns each share of a company, and a court can declare ownership is
moved. At that point, your blockchain doesn't represent reality any more (as
declared by a court) and then, what value does it have?

~~~
wakamoleguy
That's definitely an interesting distinction. In that case, I would expect
there to be consensus among shareholders to follow the court's order. That
could be enough to force the transaction if the chain is unique to the company
in question. However, it would pose issues if the shares are riding on a
broader chain outside of their control, like Ethereum. Even if the chain was
unique to the company, you could still have issues if you are using proof of
work instead of proof of stake. Interesting problem.

Can a court actually declare that ownership is moved, or can they only declare
that one is to transfer ownership, implicitly under penalty of something else
if you don't? If you have a car and the court declares that it is my car now,
that doesn't physically transport it to my driveway and you could steps to
prevent that from happening (eg, driving it into a lake).

~~~
CJefferson
You can drive it into a lake, but that counts as theft, the same as if you
stole someone else's car.

When it comes to things like houses, a court certainly can declare ownership
is changed, there is no option for you to refuse, or have to do anything.

------
wmf
_I hate to even imagine how many billions of dollars of scams and failures and
thefts have been perpetrated by abusing people 's faith in and enthusiasm for
that technology by now. And I have no idea how we could possibly have
prevented it._

If Bitcoin had stable value instead of a built-in boom-bust cycle then we
wouldn't have crypto scam mania today. Dillinger praises Satoshi's honesty,
but Bitcoin's monetary policy is "a blatant bribe to early adopters".
[https://www.gwern.net/Bitcoin-is-Worse-is-
Better](https://www.gwern.net/Bitcoin-is-Worse-is-Better)

~~~
zodiac
How would you propose making bitcoin "have stable value"?

~~~
wmf
[https://blog.ethereum.org/2014/11/11/search-stable-
cryptocur...](https://blog.ethereum.org/2014/11/11/search-stable-
cryptocurrency/)

~~~
zodiac
I'm really interested in the stablecoin space but I don't think it's realistic
to expect bitcoin to have started out as such. Firstly bitcoin was already
testing some unknown assumptions (mainly "is our PoW scheme secure and
scalable?") and it would be too confounding to also test "is our chosen
stability mechanism effective?". Secondly none of the solutions Vitalik
mentioned are easy at all; you need decentralized measurement, and all the
solutions he presented have problems. Broadly speaking, if it were really easy
to create a stablecoin - so easy that you think Bitcoin could have started out
as one - a good one should have existed by now, but there's no good one so
far. Thirdly, all of Vitalik's solutions require a volatile coin, which would
presumably have increased in market cap over time and be subject to boom-bust
cycles, all of which you object to. I also think the only approach that would
lead to an effective stablecoin (ie one with a good peg) is one that uses
other cryptocurrencies, external to the stablecoin, as collateral (eg MKR's
approach), and that requires things like bitcoin to exist.

~~~
wmf
It seems like some variant of a bounded estimator would have dramatically
reduced volatility without the complexity of two currencies.

~~~
zodiac
And yet, I'm not aware on any current cryptocurrencies that implement bounded
estimator-based stabilization - not trying to be snarky, but stablecoins will
indeed be pretty useful, if you think bounded estimator-based inflation would
be "good enough" for stabilization, fork bitcoin (or build it on top of
ethereum, idk if it's possible) and you'd have produced something valuable

------
koolba
> Let's think about that for a minute. Would you buy stock in a business whose
> business plan was a giant marketing campaign to promote the value of the
> stock?

This is a beautiful summary of the ICO ecosphere.

~~~
sp527
I think he was alluding to Multi-Level Marketing as well, which seems like an
even more apt comparison.

~~~
wakamoleguy
It's an unfortunate allusion, though, as many people do buy into Multi-Level
Marketing schemes.

------
jancsika
> He wasn't trying to line his own pockets at the expense of others. In fact I
> don't think I've ever encountered someone so completely uninterested in
> personal wealth. You know the old saw about being able to get a lot done if
> you don't care who gets the credit? Satoshi doesn't want the credit. Two
> years later he walked away and left the pseudonym behind. And hard as this
> may be to believe, it looks like he doesn't even want to be paid for it. As
> far as we can tell he mined approximately a million Bitcoins and has never
> sold a single one of them.

That's rank speculation. Satoshi also didn't provably burn those millions of
coins by sending them to a bunk address-- i.e. whatever the Bitcoin address
equivalent is for "IF-I-HAVE-THE-KEY-TO-THIS-ADDRESS-THEN-THIS-HASHING-
ALGORITHM-IS-BROKEN".

Unless Ray is one of the authors of Bitcoin he has no idea whether Satoshi was
interested in personal wealth, or died, or was tracked down by a security
service, or something else entirely.

~~~
rothbardrand
Its true, Satoshi could have burned his coins. There are several legitimate
reasons not to do so-- one of which is that it might have indicated a belief
that bitcoin was a failure, and such a shock in the early days would have been
bad.

If satoshi sometime shows up and starts moving his coins, that's fine by me.
He deserves to be super rich, because what he created is revolutionary.

Notice he said "it looks like he doesn't even want to be paid for it".

But also realize, there's the satoshi coins, but there's no way to know how
many other addresses he mined to, and that its quite possible he has 100k
coins that have been moving since he disappeared and nobody knows they are
his.

Or he could have started mining after he disappeared or started investing cash
to buy them after, and still be very rich.

------
_Codemonkeyism
"I had created what I believe is the first digital-cash protocol ever to use
block chains in any form - though it used them in a way very different than
Bitcoin and its descendants. In that protocol each 'coin' had its own little
chain that grew by one link each time it was transferred from one owner to the
next. Seeing the idea come around again, in a very different form, was
fascinating for me."

No, that is not a blockchain, but I can see what you did there, blockchain
inventor.

------
dahart
> Make sure they have the ... authority to issue stock (yes, that's what the
> coins on the block chain legally are, if they're selling them at launch)

I hadn't thought about a launch of e-coins as stock. This is interesting and
helpful, as someone who's only been lightly following blockchain and e-coin
news. I have some fear of missing out, and Ray's perspective makes me think
I've worried about the wrong things.

~~~
52-6F-62
I don't know if other people have any dramatically different thoughts on the
matter, but if you don't want to miss out but don't want the blatant risk of
dealing in ICO's, it seems somewhat reasonable (nothing is reasonable or save
in cryptocurrencies, _really_ ) way to involve yourself then I'd suggest
having a look at just purchasing some of the larger coins (eg Bitcoin,
Ethereum, Litecoin) and sitting on it for a couple of years. Cost average your
buy in, especially since it's dipped a little recently. Then again, only at an
amount that you could lose and not regret it _too_ much.

I've been following the progression of the tech in general and have friends
who try and play the ICO game, but it's just too fickle for me. I'm not ready
to go full day trader over that stuff. However the long term trend (zooming
out) tends toward:

\---

Minimal attention > growing attention > hype and burst > pop and settle >
stagnation > return to attention, and start over

\---

repeatedly, and all generally on an upwards trend over the past ~6 years from
what I can tell so far. Just speaking to the prices, here. Something different
is happening with the ICOs and the ability to build upon the networks like
Ethereum. It's hard to predict, and it's curious what all the calamity
surrounding those gambles will amount to. I'm sure a few of the companies will
stand out and remain, but most of it just seems so... poorly footed.

------
agrnx
Ray is Cryddit / Bear and posted some cool stuff on the forums-

[https://bitcointalk.org/index.php?topic=946236.msg10388435#m...](https://bitcointalk.org/index.php?topic=946236.msg10388435#msg10388435)

Semi-unrelated by Craig Wright who has (falsely) claimed to be Satoshi also
claims Dillinger is his friend. Wright said Dillinger quit bitcoin due to the
toxic drama. More likely Wright & his friend were early miners and not
involved in the Satoshi persona.

------
Theodores
On a more day to day level, a few years ago a lot of e-commerce pay-by-bitcoin
options existed. You would not put this on the checkout next to PayPal because
nobody was doing bitcoin then.

What I don't understand is why this never took off. People know bitcoin
through the news, it is not new. In this time Apple Pay has come along nicely
but not bitcoin.

Bitcoin has gone off on a tulips tangent. This seems at odds with what I
thought the purpose was, being able to pay securely and without Visa getting
their cut.

~~~
rebelidealist
Due to the limited supply of 24 million BTC, Bitcoin is deflationary meaning
it will go up in value as more people adopt it. Govt print fiat currency out
of thin air to encourage the population to spend on the economy. Bitcoin as
the opposit affect as people use it for a store of value and a hedge against
fiat currencies.

~~~
icebraining
That limit will only be hit in 2140.

~~~
zghst
If it survives that long...

~~~
ojr
thank you for your trade analysis but since you have $0 in bitcoin, I assume,
I would have to take it with a grain of salt

------
fiatjaf
I can't agree more with most of the article, but can't disagree more with the
claim that everything is horrible, but would be fine and awesome if only done
through the SEC.

The whole idea of crypto-anarchy was to avoid the SEC from the beggining. Of
couse there will be scammers, but some people, or some other form of
organization, will appear and do the job that SEC should do (and, frankly,
doesn't) but in a way that fits the new model.

There are a lot of scams in the real world, and the government isn't capable
of preventing them. In fact, the government itself is a giant scam, and you're
not criticizing it.

------
orsenthil
Who is Ray Dillinger? Why should we trust him with this post?

~~~
AceJohnny2
A cursory search reveals guy who was involved in BitCoin from the very start.
For example, here's an exchange he had in 2008 with Satoshi over the design of
Bitcoin:

[http://satoshi.nakamotoinstitute.org/emails/cryptography/5/](http://satoshi.nakamotoinstitute.org/emails/cryptography/5/)

~~~
optimuspaul
Wow, Satoshi was incredibly naive, dishonest, or just didn't have any idea how
quickly it would get out of control.

~~~
bsaul
Are you talking about the linked post regarding inflation ?

because it seems to me satoshi was pretty right, by saying that bitcoins will
get rarer and rarer even if miners mine more and more thanks to powerful
machines. Rarer bitcoins means prices going down ( what costed 1 bitcoin
before probably cost 0.001 bitcoin now), not up ( which is the definition of
inflation).

~~~
sah2ed
> which is the definition of inflation

I think you meant to write _deflation_.

~~~
bsaul
Deflation is prices going down. ( i should have said "which would be the
definition of inflation")

------
bitL
When idealism hits unfettered human nature...

------
fiatjaf
Where can I find information on the per-coin blockchain protocol from 1995
Dillinger comments about in the beggining?

------
hartator
Is Ethereum part of the fishy coins the author is describing?

~~~
SolarNet
I think he is implying they could do better as the founders and stewards of
these systems. But I don't think he is directly calling them out.

