The blockchain paradox: Why DLTs may do little to transform the economy | Hacker News Reader

The blockchain paradox: Why DLTs may do little to transform the economy

oii.ox.ac.uk

211 pointsjboynyc339 comments

I agree with this article.

Proponents of blockchain tech argue its revolutionary quality is its ability to act as a decentralized and trustless database. But I don't ever hear them sort through the issue of how to agree on the schema for this trustless database.

For a group of people to use a decentralized DB, they have to agree as to what to store in it, and how to store it. They need to form consensus about how the system will work, and how the data will flow.

For example I've seen people on here mention applications such as a decentralized stock exchange, and a decentralized hotel rooms marketplace.

For either of these, it's necessary to get all the users of the system in a room and agree what is in scope and what is not, and in general what can be done with the system and how. At this point they already have a consensus, they trust each other, they might as well just set up a centralized database run by a 3rd party that manages the system, keeps it up to date and adds upgrades, instead of building it on the blockchain and hoping there are no major bugs in the cloud code and that it will live off gas.

For the stock exchange, that's exactly what we already have. We have institutions that are dedicated to running exchanges, which act as neutral arbiters. They use regular old centralised databases. When they have bugs in their code or the system makes a mistake they can even roll back trades, which they couldn't do on the blockchain.

Essentially this is the same argument as OP. The 3rd party's act of ironing out issues, deciding what the rules are and how they interact is synonymous with OP's term "governance". We agree that using/running the system is different than defining/implementing the system and the latter can't be done trustlessly.

And also governance gets a lot easier when you also run the system centralized ;)

That's not really true. Systems like Ethereum allow for arbitrary data storage and contract structures. The filter for consensus in a distributed environment will be usage. Lots of contracts will get written, a few will get used. Those few will be the ones people agree on.

Secondly, the consensus as to the schema isn't trustless even in blockchains. Deciding what to do and how to do it is and always will be trustful. What is trustless is the execution of that decision once its been made. That is the important contribution of blockchains.

They all say that they'll never roll back or retroactively make any changes. But inevitably, they always do. I thought Ethereum might have been different, but of course I had to be disappointed.

The problem with blockchains is that they still fundamentally fail to solve the problem of mob rule, though, I suppose you could argue that's one thing you'll never fully get rid while the human element is still involved. Robot overlords or bust?

Ethereum Classic is still a thing: https://ethereumclassic.github.io/

Ethereum Classic is a fork of Ethereum that held blockchain is immutable paradigm and let DAO continue to be drained.

Everybody knows already which fork won. Sure Classic still exists, but if nobody is going to use it, then it really doesn't matter.

> Ethereum Classic is a fork of Ethereum that held blockchain is immutable paradigm

Ethereum Classic did a hardfork last October which removed null accounts created in the DAO attack. Now, while this didn't change account balances, these were legally created accounts and the historical ledger was changed. The hardfork was controversial at the time for this reason.

You can't say that in Classic the blockchain is an immutable paradigm - it changed history just as Ethereum did.

Here is a proposed solution to mob rule:

https://github.com/neyer/dewdrop

With a much simpler version of the same concept here

https://github.com/neyer/respect

I think it's doable.

Filtering out everything but the users you have established relationships with will just push you into a filter bubble echo chamber.

After skimming the "respect" idea, I am convinced that echo chambers are the dominant strategy.

In fact, make a complete subgraph of order 9 or more of people who respect each other. That subgraph has order-N respect that goes to infinity for anyone who has any respect for any of its members, even transitively.

There are mechansims (see 'soundness') which reward people on the edge between filter bubbles for combining those bubbles. Maintaining a soundness core means resolving disputes between bubbles.

My goal is to gradually expand filter bubbles, rather than try to pop them.

Interesting. So reputation would act as a mediator for decision making then? Those with greater reputation would have more influence, and theoretically this should work because reputation would be gained only when other people notice that the person has done something beneficial/helpful in their eyes. Overall that should result in high reputation values being directly correlated to those who are altruistic and good.

It's definitely a cool concept. The main problem being I think is incentive to adopt. Without the weight of reputation having meaning behind it, no one will care and thus the intended effect disappears.

How would such a reputation system defeat the Sybil attack?

There isn't an absolute reputation score. Reputation is computed pairwise. Rep(a,b) means "What is the implied reputation of person b, given the persons a trusts"

So a bunch of fake accounts aren't going to influence a's perception of b,unless a has trusted someone who'se created those fake accounts. IN that case, the mistake a made was trusting someone (directly or indirectly) who'se created a bunch of fake accounts.

Because the input weight of a person decreases with their distance on the graph from a, the only sybil attacks that would screw you up would be ones conducted by people who you've said you trust.

I think concentration of power is a bigger problem than "mob rule". If certain people or groups are able to acquire the majority of the power in the system, then the egalitarian ideals of decentralization are lost. You have just traded one power (e.g. banks) for another (e.g. the big miners).

Definitely true. Both sides of the coin are bad.

Decentralized systems aren't attractive only to decentralized groups. One application for which I've been considering use of a (private) blockchain is user authentication, and logging of authentication attempts.

Why would you want to do that with a blockchain? Is it necessary to store this logging data to thousands of nodes? What about 5 servers, geographically distributed?

Why do you assume a blockchain has to consist of thousands of nodes? A private blockchain works equally well across those 5 geographically distributed nodes.

So why use blockchain? Whats the benefit? The only thing I can think of is proof of authentication attempts, a kind of a irrefutable log of some sort. But whats the benefit its providing, that we are lacking today?

That irrefutable log is highly valuable in environments where there is a need to audit who has requested access to what resources, and when.

I think this is a really good idea. Would it be worthwhile to have a neutral party also maintain a node? Would that give the evidence more weight in court for example?

While I am not allowed to talk too much about it, this is exactly what I'm currently working on for certain high profile companies that wish to share information (query results) between themselves, without ever actually sharing the data itself, in a way that the country-wide regulator can verify and check for anticompetitive behaviour.

I'm currently having fun experimenting with homomorphic encryption, to see if I can't add another layer of "trustlessness"

This argument sums up my recent thoughts on blockchains. Proofs of their trustlessness and eventual consistency rely on explicit assumptions (no cartels with >50% computation power, bounds on network partitions), but the underlying unstated assumption is that there is consensus about the protocol and its rules to begin with. We've seen this assumption break down with the block size debate and the DAO fork.

However, I don't think that this completely rules out their usefulness. Blockchains are more like "consensus abstractions" - if you have the underlying consensus (achieved through a governance model that can engender it), then it allows for uses like smart contracts that can efficiently work on top of it. The "trustless" property is also maintained - for example, even if a cryptocurrency is designed, issued and governed by a central bank, the fact that the network is decentralized and its integrity can be independently verified (even if it is centrally secured) still has some social benefit.

Fwiw, two new blockchains are launching soon that include protocols for protocol changes - DFINITY & Tezos.

https://dfinity.network/

https://tezos.com/

Not endorsing, just pointing out.

With bitcoin, it is agreed upon using byzantine consensus. The only way a bad actor can manipulate the ledger is if they own enough nodes to gain a majority, which is virtually impossible. After just a handful of bit times is economically and mathematically impossible to reverse the contract.

I suggest listening to this Tim Ferris podcast with Nick Szabo: http://tim.blog/2017/06/04/nick-szabo/

The entire idea is that no arbiter is truly neutral, no third party is truly trustworthy. Block chain is the onset of FAT protocols and trustful computing.

If the poor of the world can understand the social mobility that crypto currency affords them, there will be no stopping it, in my opinion.

> The only way a bad actor can manipulate the ledger is if they own enough nodes to gain a majority, which is virtually impossible.

Im not buying that. If there is a way, someone will do it. This actually seems like a huge vulnerability to me. Especially when we are talking about specialized blockchains where the participation isnt every internet connected person in the world. How do you prevent that from happening?

> The only way a bad actor can manipulate the ledger is if they own enough nodes to gain a majority, which is virtually impossible.

At times the leading BTC mining pool has controlled greater than 50% of the nodes. Would this not be enough to alter the ledger?

Yes, you could abuse that power to allow double-spending. For what it's worth, I'd say I'm a bit concerned about this, but it seems many aren't.

https://news.ycombinator.com/item?id=14485430

Notably, 'altering the ledger' here has a very restricted meaning. You can spend money, then reverse the spend back into your wallet. Or you can commit to a piece of information, then delete it.

But you can't alter the core protocol or fundamental network rules. If you do, the other nodes will ignore you.

But this is the fundamental question it's all about... the expectation that the other nodes will ignore you.

Somehow "the other nodes" have reached consensus about what protocols or rules to follow, and this is where we end up back at human governance.

> If the poor of the world can understand the social mobility that crypto currency affords them

Can you expand on how crypto currencies relate to positive social mobility?

Off-handedly it seems to me it would be the opposite, although I'm admittedly fuzzy on this..

In theory crypto currencies reduce rent-seeking from intermediaries; since much financial rent seeking is established as percentages of an exchange (like a credit card transfer), removing those rents will give bigger net advantages to those transferring large amounts than those transferring small ones.

Not saying removing rent seeking is bad (it's awesome!), but I don't see how that does anything but increase the difficulty for someone with low capital to catch up; rather it should be doing the opposite.

> Can you expand on how crypto currencies relate to positive social mobility?

Bringing those who are unbanked into the global financial system is a powerful way to help lift people out of poverty. In many cases, banks are unwilling or unable to serve the poor, so cryptocurrencies could potentially fill the gap. I don't think any current cryptocurrencies will achieve this, but there is some research being done on "stablecoins" which could fit the bill.

Cryptocurrency is already doing this, I don't have the names offhand, butt, (Ill eave the typo, hehe) there are several regions in Africa where bitcoin is a primary currency being traded.

Do you have any sources for that claim? Given the massive existing mobile payment deployment it seems like a very ambitious target.

> I don't have the names offhand

Tether?

OP's argument is that this distributed consensus algorithm works only if there is already consensus about which algorithm to use in the first place! If you and I disagree about which block history is valid (for example, because my history includes blocks with a lower difficulty), then the assumptions are no longer valid and there's a hard fork. Also, note that a 51% attack can only exclude transactions or allow double spending - the ledger still can't be arbitrarily manipulated since transactions are signed by private keys.

Is "byzantine consensus" an appropriate term?

I think it's typically used when there's agreement on the list of nodes participating in the network. (The nodes can agree to change the list of participants, Lamport wrote about it in "Reconfiguring a State Machine".)*

With "blockchain" / proof of work, computing power substitutes for voting power: you pass state transitions by controlling a majority of the compute power rather than a majority of the voting power.

Have you seen "byzantine consensus" used in the second context (with proof of work) also?

(*) When I think of the Byzantine consensus problem, it's when:

- not every node has to vote in each round (so that the system can make progress even if some nodes fail);

- you can authenticate (e.g. with cryptography) that messages come from the appropriate sender (but not whether that sender is acting "honestly");

- the goal is to reach consensus, i.e., if any node concludes that some proposition (i.e. state transition) has passed, no nodes will ever agree on contradictory proposition.

Trustless isn't the only option. https://www.stellar.org/papers/stellar-consensus-protocol.pd...

The reason I believe in our model for consensus is that it more closely resembles trust in the real world. We're more explicit than meatspace, which could be a drawback, but I think it's a better model than trustless.

Disclosure: I work for stellar.org

Didn't read the paper (got crypto burnout after 4 years at Kraken) but it occurs to me that the problem with explicit trust is that it is usually a one size fits all approach or someone has to tediously specify it in specific terms, neither of which work well at scale in the real world.

There's no reason that I can see why we can't automate the tedious bits. I can see someone creating some sort of a digital assistant program that applies trust policies to digital identities on behalf of a user. think for example something that applies a digital encoding of "I trust everyone whom I've paid to advertise their specials to me" or "I trust people who prove they live within 5 miles of my home address to send a neighborhood watch message to me", etc.

I'm not sure the specific formulation needed to be successful, but there is clearly value in something that helps people better manage digital trust. It's a shit show right now.

Right. I had some ideas around this previously when thinking around http://www.ifex-project.org/our-proposals/ifex/2012-04-11-pa...

In short each node would have its own risk management profile. Entering a transaction using any settlement path or asset type (even multi-hop transactions involving multiple paths or assets) is the explicit decision of the actor in question, against that risk profile, available information, and its own priorities (eg. must complete by X date, prefer to avoid Y actor/system/asset, etc.)

Because the properties of each settlement network, asset type or actor are able to be formally defined, cross-system automation is possible and new systems with interesting properties are able to present themselves on a fair and equal footing.

Of course, with such lofty goals, it was never finished (I was keen but asked to direct attentions to urgent areas elsewhere), but recently I have begun to revisit it owing to my study of physical logistics networks and scheduling algorithms for my current startup http://8-food.com/

Thanks for the link! I'll check it out. I agree such a system is quite lofty at this point. I can start to see a feasible system in my mind, but IMO we're still just so far away from it working in reality and in practice.

I'm still on the horse for now... sorry to hear you got burnt out at kraken.

Hehe. Just on crypto specifics not the rest :)

I wonder what a protocol might look like based on more cynical assumptions? Let's call it the House protocol because it assumes that everyone is hostile--lying and trying to cheat you. Sadly, I think this a more realistic assumption for the global digital environment.

What? So you're saying that since Cisco and Juniper both standardize protocols at the IETF, they should just merge their companies because they are already in one room anyway?

We had decentralized ownership of the stock exchanges, but they went public to cash out and make more money with high frequency traders.

I don't find this a wholly satisfying position (and I say this even as someone who's generally a blockchain skeptic).

Concretely, this argument conflates agreeing on a set of rules with agreeing on an arbiter to determine the application of those rules. Those aren't the same thing, because only one of them centralizes power.

> At this point they already have a consensus, they trust each other, they might as well just set up a centralized database run by a 3rd party that manages the system

This is the critical point where I don't think the argument works. Firstly: they don't necessarily trust each other. They trust the system to work within the rules they have established. It simply doesn't follow from that that they should therefore be willing to trust a 3rd party.

For what it's worth, this is why I'm interested to see how the block size situation in Bitcoin resolves itself. If it happens relatively smoothly, it's a strong point for the ability of consensus to respond to pressing needs. If it doesn't... well, I might have to reconsider my position.

Notably, you don't have to agree on how to design a system. Many such systems exist and you just have to pick which one you want to use. If you see the rules as fixed, you can enter the system that most closely matches your needs, and then trust that it's not going to change from under your feet.

Well, the properly decentralized ones let you assume that the rules aren't going to change. Many blockchains though will implement whatever changes their developers desire.

Decentralized trustless databases can also be implemented with Merkle Trees (as it is done with certificate transparency). I dont understand why people choose blockchains instead.

Blockchains are currently implemented with a Merkle tree at each block, and Merkle proofs are used to store the transactions in that block.

If I had a Bitcoin for every skeptic that posts a blog on why it can't work...

This may just be my general observation but I feel like Silicon Valley hegemony has a grudge against crypto currencies and I'm not sure why. For an industry that has constantly tried new things and saw potential where no one else did, I just don't see the love for the potential of smart contracts, DApps, etc. And how this is just the beginning of what is possible and of course it's isn't perfect but it's fascinating to the curious.

I do see a lot of enthusiasm from Eastern Europeans and all across Asia and they seem to be leading the charge on what could be the next major technical revolution.

My working hypothesis right now is Silicon Valley has been getting fat on the virtually unlimited venture capital power structure and sees this as a threat they've missed out on to their power.

Maybe the disrupters are being disrupted?

I think there are a couple of reasons behind a Silicon Valley disillusionment with Bitcoin. First, I think we're probably in a trough in the hype cycle right now. 3-4 years ago there were a lot of very high expectations amongst the Sand Hill Road crew. Bitcoin transaction volumes have been fairly flat (in native BTC terms [1]), whereas the VC crowd expected--required even--exponential growth.

Second I think that people in the US--Silicon Valley included--have the benefit of good corporate governance on many of the centralized authorities that underpin the economy. SWIFT, DTCC, etc. People who live in countries where that is not the case have a lot more to gain from the technology. That may explain some of the relative popularity outside the US.

[1] https://blockchain.info/charts/estimated-transaction-volume?...

Bitcoin is mostly popular in Eastern Europe and Asia for transfer payments, fiat currency conversion, money laundering, and evading capital controls (getting money out of China). In the US if you're doing legitimate business with other US entities then there's really no need for such a thing. I can write a check or send a credit card payment or wire transfer to another US bank with a reasonably high level of trust that I won't be cheated, and that I have legal recourse if something goes wrong.

I agree with this but you might be missing my point. Crypto as a store of value and the ability to transfer funds is nice and all but it's not the big picture. I think focusing on that you rightly see limited practical application in large parts of the world, such as the USA.

The real revolution is in smart contracts and virtual machines that run on a blockchain and the ability to define ownership of a distributed organization to distribute profits accordingly. Blockchains on blockchains that having turing complete contracts that can guarantee there isn't even the ability to cheat the distributed, mainly anonymous organization participants.

We aren't even close to that - it still takes an incredibly suspect ICO to raise money by selling stake for a top level coin in which they will inevitably have to convert partially to fiat and the vast potential for scams there. But the smart contract can be programmatically limited and only release funds over time and only continue to when certain events have taken place, and refund otherwise, etc. I guess I just see the vast potential here. More infrastructure supporting things is required and I'm not sure what that is but someone will discover these pieces.

I see many more Asian and European groups trying to build these types of things today. Maybe it's out of necessity as well since there isn't a vast source of wealth available to fund these crazy, new ideas.

> Maybe it's out of necessity as well since there isn't a vast source of wealth available to fund these crazy, new ideas.

I think it's more out of necessity because of the lack of the comprehensive and (relatively) solid way that you can litigate in the USA and European Union when business dealings go south. Capitalism in the East and the Soviet Bloc countries is improving their lives but it's also shockingly unregulated, arguably similar to the US in the roaring 20's. Back then that meant contracts were enforced at the barrel of a gun, but while the contractual law litigation doesn't work well in those countries, they can handle murderers pretty well so instead they find the cryptocurrencies attractive because it gives them options to protect their assets in a way that is immune to violence or petty theft.

At least that's my 0.02.

Please offer a practical example of how smart contracts are useful.

ICO's are clearly enjoying a use.

Largest crowdfunding in history can't be ignored - whether it ends in tears for most investors is another matter entirely.

I asked for a practical example. Just because a bunch of people decided to spend their money on internet tokens does not mean it is useful. How is it useful?

Groups of actors across the world can make an agreement that is enforced by a smart contract. When an actor fails to live up their obligation they are refused payment. There is no way to take off with something that is not yours. There is no reliable or efficient way to cheat. You don't have to know the other actors you are making an agreement for something with.

Can you do this now without a smart contract? Of course. The usefulness is in that it's universally visible and lowers the barrier to entry and is far less complex.

If it's so uncheatable, why did the original DAO get hacked?

IIRC, It wasn't "hacked". Rather the contract was written incorrectly from the outset, and the "hacker" merely used the withdraw method to ... withdraw.

In the real world, you appoint a judge who decides based on cultural convention (civil law, common law, sharia law, idk) what the contract was supposed to mean.

Sometimes it does come down to punctuation, but all of the time it comes down to what was meant with the contract.

Letting the system only mean what it says is not great for users, either. You get an overhead of always having to check and double check everything you do.

> make an agreement that is enforced by a smart contract

Please give me an example of how an agreement can be enforced by a smart contract.

> When an actor fails to live up their obligation they are refused payment

It works the same way with colored pebbles.

> There is no way to take off with something that is not yours

Why not? I know this is an abstract question in this context which is why I asked for a practical example so we could share a thought experiment regarding how the use of a smart-contract would play out in real life.

> There is no reliable or efficient way to cheat

Cheat what? Once again this is totally abstract. Seems to me like cheating is just as easy if not easier because the role of law-enforcement is questionable at best and nonexistent at worst. To cheat, all I have to do is agree to the terms of the contract then violate it after I have secured the funds or property. Then what?

> You don't have to know the other actors you are making an agreement for something with

I'll grant that this is possible and useful in special cases (e.g. online drug markets), but that is a benefit of blockchain money and smart contracts don't offer any benefit

> far less complex

This is certainly not the case, as victims of the DAO and orphaned eth blockchain can attest to.

Okay, I'll give you a practical example. Here is an excerpt from the book Blockchain Revolution.

"bAIRBNB VERSUS AIRBNB

bAirbnb is a distributed application (DApp), a set of smart contracts that stores data on a home-listings blockchain. The bAirbnb app has an elegant interface: owners can upload information and pictures of their property. The platform maintains reputation scores of both providers and renters to improve everyone’s business decisions.

When you want to rent, the bAirbnb software scans and filters the blockchain for all the listings that meet your criteria (e.g., ten miles from the Eiffel Tower, two bedrooms, four-plus star ratings only). Your user experience is identical to that in Airbnb, except that you communicate peer to peer on the network, through encrypted and cryptographically signed messages not stored in Airbnb’s database. You and the room owner are the only two people who can read these messages. You can swap phone numbers, an exchange that Airbnb blocks to preserve future revenues. On bAirbnb you and the owner could communicate off-chain and complete the transaction entirely off-chain, but you are better off completing the transaction on-chain for a few reasons.

Reputation: Because the network records the transaction on the blockchain, a positive review from each user improves your respective reputations. The risk of a negative review motivates each party to remain honest. Remember, people with good reputations can use the same persona across multiple DApps and benefit from continuity as a good person.

Identity Verification: Because we are not dealing with a centralized system that checks ID on our behalf, each party needs to confirm the other party’s identity. The blockchain calls up a contract from a “VerifyID” application, one of many contracts that bAirbnb, SUber (blockchain Uber), and other DApps use to verify real-world identity.

Privacy Protection: VerifyID doesn’t track and store all transactions in a database. It simply returns a TRUE or FALSE when it receives a request for verification of a public key (persona). Different kinds of DApps can call VerifyID, but VerifyID never knows details of transactions. This separation of identity from activity greatly improves your privacy. Risk Reduction: Home owners currently store customer identities and financial data on their own servers, which can be hacked and leaked, exposing owners to litigation and large liabilities. On the blockchain, you needn’t trust a vendor with your data; there is no central database to hack and leak. There are only individual peer-to-peer pseudonymous transactions.

Insurance: Today Airbnb offers $1 million insurance for owners and compensates them for theft and damage. On bAirbnb, owners can get the bAirbnb insurance DApp. Renters with good reputations like you have lower insurance rates and needn’t subsidize renters who lack caution, scrutiny of prospects, or poor treatment of property. When you submit a booking request, bAirbnb sends your public key (persona) to the insurance contract for a quote. The insurance DApp contacts a list of trusted providers; fake insurers need not apply. Insurers perform their own calculations in real time through autonomous agent software based on the inputs to the contract—such as the market value of the owner’s house, how much the owner wants insured, owner reputation, your reputation as a renter, and rental price. bAirbnb takes the best bid and adds it to the nightly fee the owner wants to charge. The blockchain processes this calculation in the background; owners and renters have a comparable user experience to that of Airbnb but a superior and more equitable value exchange.

Payment Settlement: Of course, on the blockchain, you transfer funds to the owner in seconds, not days as with Airbnb. Owners can manage security deposits more easily with smart contracts. Some parties use escrow accounts to release payments partially (nightly, weekly, hourly, etc.) or in full as the parties agree. In disputes involving smart contracts, parties can call for arbitration.

Property Access Using Smart Locks (IoT device): A smart lock connected to the blockchain knows when you have paid. When you arrive, your near-field communication-enabled smart phone can sign a message with your public key as proof of payment, and the smart lock will open for you. Owners need not drop keys off to you or visit the property unless they want to say hello or address some emergency.

You and the owner have now saved most of the 15 percent Airbnb fee. Settlements are assured and instant. There are no foreign exchange fees for international contracts. You need not worry about stolen identity. Local governments in oppressive regimes cannot subpoena bAirbnb for all its rental history data. This is the real sharing-of-value economy; both customers and service providers are the winners."

Essentially, it can turn any centralized middleman system, which are most companies in the world today, into decentralized ones, where the processing happens not on central servers but in the decentralized network.

Seriously? All that work just to save possibly 15%? And in reality the savings would be much less because someone has to pay to develop and support the app. You're going to have to come up with more realistic and compelling examples.

It also doesn't address compliance with laws on payments and money transfers. Regardless of what the anarchists might want, those rules aren't going away and will be enforced vigorously by many governments.

15% is a lot.

Yeah, and people would rather give Steam a 30% cut than use their own distribution channels. Convenience and stability really, really matter.

Indeed they do! And that's where the value is.

Why can't a blockchain technology in a matter of years offer the same type of convenience and stability with a much lower price due to the decentralized nature of it all?

Right now they can't you're right. But there is no reason to believe with certainty they won't in the future. Of course they might not but I'd bet the other way by virtue of the plain as day benefit they offer motivating iterative improvement over the many coming years.

Does this scale though? It all sounds nice, but with the massive blockchain overhead is this system going to be able to serve the community at all? I heard that each node has to execute the block chain in Ethereum. Sounds like a lot of duplicated computing just to do something that would be much more efficient if centralized.

Right now probably not. However, Etherum has sharding, as well as other features to help scale, as a feature for the future. It isn't like we are stuck with the current implementations.

Is sharding a realistic goal for Ethereum? How would it be implemented?

I am not an Ethereum developer or expert on the codebase or technical capabilities. In fact I've read very little on how this sharding would be implemented. I have a lot of experience in distributed systems so I understand the benefits but I don't know how this would work for blockchain technologies.

However, it is a known issue and there are proposals and I'm sure more to come. Sharding is a leading proposal and it has been described. However, I cannot personally comment on the viability.

But I'm an optimist and believe it will be solved. Maybe not with Ethereum but eventually with something.

The one fallacy to be aware of is a lot of people it appears think that blockchain technologies are static. As if they can't evolve and change and iterate. They can and if history is any indicator they will so long as there is interest and outlandish people see potential.

> Risk Reduction: Home owners currently store customer identities and financial data on their own servers

I wasn't aware this was how Airbnb operated. I was under the impression whoever made the listing on Airbnb never saw details of the renters payment details.

> In disputes involving smart contracts, parties can call for arbitration.

Call who? A lawyer? Their heavies? Who's paying to operate all this infrastructure?

> Local governments in oppressive regimes cannot subpoena bAirbnb for all its rental history data.

So governments will outlaw it and prosecute anyone caught operating a bAirbnb, which should be simple to do because all this listings are publicly visibly. Which should also be true of real Airbnb now, but charging people who renting their houses / units / whatever illegally seems to be fairly low on the police's list of priorities. Oppressive regimes, however, tend to go after people for what should be trivial matters, which is what makes them oppressive.

Governments can also order ISPs to block certain types of network traffic, thereby denying access to these services.

> There is no way to take off with something that is not yours. There is no reliable or efficient way to cheat.

I'm a bit rusty on my crypto-currency knowledge, but I seem to remember that there is the possibility of a 51% attack, wherein if an evil actor managed to control 51% or more of the network, they could basically wreak all sorts of havoc on the network, from denial of service, to double-spending of coins to rewriting of (recent) transaction history.

As for feasibility, some mining groups have already briefly obtained 51% control of the network "by accident", but if you want to go the black hat route though, DDOS a large portion of the network, spin up a few dormant bots and presto, you have your 51%.

So it isn't impossible to cheat, and certainly not impractical.

This is a major problem. Has this problem been addressed at all?

While not a failsafe method, lots of newer cryptocurrencies use proof-of-work that is "ASIC-proof." This means that CPU and GPU mining will remain profitable, theoretically preventing the degree of centralization seen in Bitcoin.

While this doesn't remove all risks (e.g. an incredibly large mining pool), it is certainly harder to disable thousands of independent miners than it is to do so to a single centralized operation.

You did ask for practical. First I'll say this isn't easy to answer in concrete terms. But someone will one day.

One concept would be to raise funds that can allow you arbitrage at a scalable level. Request funds (ICO) and have the smart contract enable a certain subset of those funds for your organization to use to arbitrage other crypto's. Profits are spread across stakeholders based on their investment, represented as the tokens they generated in the ICO.

Enforce this by only allowing a certain part of the funds to become available at certain times based on performance. Stake holders could vote using a contract to determine if more funds should be released.

> First I'll say this isn't easy to answer in concrete terms. But someone will one day.

This is not unreasonable, but you have to admit that it is a far cry from imminent revolution and a key reason why people are skeptical of this technology especially considering the bottomless pit of grandiose hype that accompanies it.

> One concept would be to raise funds that can allow you arbitrage at a scalable level. Request funds (ICO) and have the smart contract enable a certain subset of those funds for your organization to use to arbitrage other crypto's. Profits are spread across stakeholders based on their investment, represented as the tokens they generated in the ICO.

Ok, but all you've really described here is a higher level abstraction for playing the cryptomarkets rather than a useful product or service that is enabled by the technology itself. If you aren't interested in gambling your money on the cryptomarkets then this idea is useless.

I wouldn't say imminent. And I wouldn't even say probable. But possible? For sure.

I find the entire thing interesting and in fact the most boring bit is the instant millionaire greed fueling unfounded hype.

If I had the great idea I wouldn't be hear talking about it. I'm getting a better and better grip I feel but it could all be fallacy too!

But, someone or some group are going to be far more able to see the bigger picture I imagine and unleash something completely new, practical and useful.

Another idea: Etsy.

Makers build things and post it to a Website and price it in some crypto currency.

People buy it by sending money to a smart contract.

A third party "oracle" is used to remit payment when the order is received. For instance the company that ships the product will signal delivery to the contract.

The company that hosted the product takes a percent of the transaction payable after the final payment goes through.

The investors in the ICO for the product get profits distributed threw the contract hosted on the same blockchain.

The host of the site gets paid from the profits based on the contract and their payment address.

Managers, marketing, developers, all staff gets paid from a piece of the profits. This is all defined in the smart contracts.

This is far away from today and simplified and with many scams in-between as well. But smart contracts on a block chain which interact and signal other contracts, etc with a block chain on a blockchain used for proof of work and payment.

A company in this form could outperform and be more efficient than one today. This is what would be useful.

So basically just clone Etsy plus an escrow service. We already have those, so what. Where is the compelling customer benefit?

Not at all.

The customer benefit is that because the business is run more efficiently things can be priced cheaper. This gets passed down to the consumer and producer.

It's far more than escrow. It's a distributed business where many of the functions of the business are automated all enforced on the same blockchain.

Could be crazy - I'm not pitching this! I'm sure many people have better grasps of the potential and imaginations. But you clearly don't see how a company can be run more efficiently (but massive margins) with a distributed, partially anonymous structure where obligations and payments are guaranteed through the shared system.

You must not have any experience on the operational side of a real business?

Everything you've described (i.e., payments) can already be handled by existing automated financial systems like ADP, Peoplesoft, Intuit, etc. Order status is already handled by existing invoicing systems (i.e., Square) and delivery providers (i.e., UPS). And all of these systems can be made to integrate with each other; plenty of businesses do that every year.

And plenty of cuts are taken and taken and taken. There is an inherit inefficiency that exists right now because it is indeed necessary. The people, private systems and other parts that makeup the "trust" of it all that makes it work.

Now imagine we could do this in a public way that can't be cheated easily at all? We create new efficiency, ironically, by centralizing much of this on a globally distributed blockchain with computational rules enforcing the flow of business. Suddenly we don't need these companies because their most valuable asset, trust, has been automated away.

The business that figures out how to do this will claim the market of existing companies.

Software eats the world. Why wouldn't it continue to in a way that eats the existing software centralization?

It doesn't mean it's free but it certainly looks to have the ability to outperform current business models which came to be because they outperformed previous business models.

You literally just described Ebay/Paypal but with smart contracts. Worse, with the additional requirement that everyone has to use smart contracts for it to work at any level. Additionally, your example glosses over all of the real world problems, like seller/buyer fraud, that smart contracts and blockchains do nothing to address.

Smart contracts won't take off for the simple reason that they don't offer anything that existing processes don't already handle better than even the theoretical best case that smart contract proponents have offered.

I'm not saying mine is a great example, especially with the current state of the technology. If I had a fool proof example I'd be building it!

I think the thing they offer is the potential for great efficiency and thus lower cost and also a lower barrier to entry for systems that require trust.

What I'm most optimistic about is the next phase - how can we scale this and then what can we build on top to further practical use? That's a more interesting discussion than dismissing it all together.

Bitcoin introduced the blockchain and some good ideas about how it could be used. Ethereum ran with some of those ideas. There's even more ideas on how this can expanded we'll maybe see in a few years.

For example you could implement a credit system where anyone could be a creditor and vote (with their digital signature) what requests get approved. Then, once the money changes hands, the smart contract would automatically deduce que periodic payments, including the interests, and distribute it to the lenders in the correct proportions. If a payment is missed, a penalization or increased interest could be implemented.

I don't know if this would be currently possible with Ethereum because I haven't looked very deep into its technology, but if not I'm pretty sure some blockchain will allow this kind of interactions.

For more examples, check: https://www.ethereum.org/token

What advantage does that really offer? You still need to deal with the expensive parts (assessing credit worthiness, dealing with fraud or malfeasance) and if you have the infrastructure to do that, how much is a rigid contract-as-code system which you don't control really adding?

Consider what happens if someone takes the loan and never repays it. If you have a government with a functioning court system you can use any commonly accepted contract form, even a signed IOU, so a blockchain adds no value even if you do convince the court it's trustworthy; if you don't have a reliable court system, they can just walk away and you've just spent a lot of money on irrelevant infrastructure. If you have a credit rating system and sufficient proof of identity there might be a consequence but in every case the real value appears to be created by other entities (government IDs and courts; private credit rating services), none of which even need to know what a blockchain is.

>The real revolution is in smart contracts and virtual machines that run on a blockchain and the ability to define ownership of a distributed organization to distribute profits accordingly. Blockchains on blockchains that having turing complete contracts that can guarantee there isn't even the ability to cheat the distributed, mainly anonymous organization participants.

Sounds like something utterly complex even to describe, so imagine how more difficult it is for any average person to identify as a problem they have and care about.

"Turing complete contracts" were a terrible idea, as the DAO debacle and subsequent fork demonstrated. If the people behind the DAO hadn't been the same people as the people behind Etherium, they would have been screwed.

Machine-readable contracts need to be much simpler and much clearer to work. I've suggested decision tables as a format; those are declarative, guaranteed to terminate, and have a simple chart form that's easy to understand. Yes, they're more limited.

You can implement decision tables on top of a turing-complete language.

You can't be sure they're implemented properly. Or what if they run out of "fuel"? Like the DAO's code.

It's not enough that contracts execute. They have to be amenable to audit.

Make it better. Programming with switches was hard. High level languages were built. Managing memory was hard. Higher level languages were built.

There's this amazing lack of vision and inability to see that things can and will be innovated on. Why would it be anywhere near perfect by this iteration? Why would you expect that?

Also in terms of complexity - have you ever read an actual legal contract? Do you think 99.9% of people understand that?

>There's this amazing lack of vision and inability to see that things can and will be innovated on. Why would it be anywhere near perfect by this iteration? Why would you expect that?

Because e.g. computers despite being primitive were still very damn useful the very first time they were built. In fact their utility preceded their being built (e.g. to have them assist war efforts and research calculations), not vice versa.

People can use things without understanding how they work.

> The real revolution is in smart contracts and virtual machines that run on a blockchain and the ability to define ownership of a distributed organization to distribute profits accordingly.

e.g., the $50 million distributed to The DAO hacker.

The DAO was the first famous smart contract, on the first popular smart contract platform. Every objection to smart contracts in the past couple of decades (computer programs model real law badly, immutability means you need to be a perfect programmer, immutability copes badly with changes in circumstances) came true, bang bang bang.

Though I think even blockchain objectors were surprised when Ethereum came up with a new one: your smart contract is IMMUTABLE right up to the moment the big boys are in danger of losing money.

Later of course we were reminded of the programming perfection requirement extending to all layers of the stack, e.g. the Solidity compiler bug that meant that a mathematically-proven-perfect contract could have a 'sploit.

Smart contracts are a terrible and stupid idea, and The DAO should have put the idea firmly in the bin. That it didn't is a testament to human gullibility and the power of wishful thinking rather than the value of smart contracts.

As a freelancer in the US with local and international clients who are often small businesses or individuals, this has not been my experience at all. I have never found a way of accepting fiat payments that isn't some form of scam. Wire transfers are ok in theory (the $20-$45+ fees are unreasonable but tolerable), but falls apart when the client's way of sending an international wire transfer is through some 3rd party service that's capable of holding the payment in limbo indefinitely (and they do). I prefer Bitcoin because it's cheaper and more reliable than money transmitting services, faster than mailing a check, and I can accept payment from anyone without worrying about chargeback scams. For clients who don't want to do that, if the gig is large enough to warrant the overhead of determining whether I can trust them enough to accept a reversible payment, I accept a check in the mail like it's the '80s.

>when the client's way of sending an international wire transfer is through some 3rd party service that's capable of holding the payment in limbo indefinitely (and they do)

In that case your client is essentially messing with you.

Also, irriversible payments without a chargeback mechanism may be a feature to you and many, however more people see it as a bug.

Americans won't realize the benefits of cryptocurrencies until they start to be able to do capital-B Banking with it. Not deposits, withdrawals, and transfers, but the creation of new financial instruments.

Cryptocurrency wants to move people up the banking hierarchy. So it tries to lift Eastern Europeans to the level of New Yorkers, in terms of access to stable currencies and transfers. But it also tries to lift the New Yorkers to the level of Wall Street executives in terms of issuing securities. And it tries to lift the Wall Street executives to nation states in terms of creating self-contained regulatory regimes.

The endgame is that all of these power relations become so commonplace that they lose their power. Like clothing has become.

It won't feel like anything is changing for a while though. Imagine the Titanic slowly sinking... at first the ship is tilting a bit, in a funny way, but nothing unusual. Then you start to notice the floor is on a distinct slope, but things are still in the same place relative to each other, so you think the whole world hasn't changed, just one property of it.

Eventually people start involuntarily sliding in one direction, which is different, but there's still structure there. It's not as if there's no ship anymore. Then, the slope becomes so large that almost everything seems beholden to it. That's the point at which everyone starts to agree that "everything has changed". Finally the ship sinks into the sea.

We're still early in that process.

> creation of new financial instruments

creation of old financial instruments is also fine by me: working capital loans, bridging loans, factoring, repos, commercial paper, bills of lading, letters of credit, etc.... you know, the stuff that businesses will typically need.

The source of the distaste is obvious: breathless hyperbole without much substance to show for it. Posts like yours are a great example of it. In this very comment you write:

> leading the charge on what could be the next major technical revolution

Unsubstantiated hype. Where is the revolution? A common thread among cryptocurrency enthusiasts is that the revolution is coming... except it never does. When you talk about revolution, non-enthusiasts roll their eyes.

> Silicon Valley has been getting fat on the virtually unlimited venture capital power structure and sees this as a threat they've missed out on to their power.

A classic argument from crypto enthusiasts who have to imagine that people are literally afraid of bitcoin. It's laughably condescending and absurd. Bitcoin is not a threat to anyone and most certainly not silicon valley billionaires. Besides, it's not as if SV VCs haven't invested money in bitcoin, it's just that bitcoin is a horrible investment, e.g. 21.co, 120 million in VC dollars flushed down the toilet for a business model that was clearly a failure from the start, but those investors fell vulnerable to the hype and learned a valuable lesson from it.

> Maybe the disrupters are being disrupted

Another sample of breathless hyperbole that causes non-enthusiasts to cringe. Where is the disruption? Bitcoin is a smidgeon of a fraction of the commerce activity happening on the internet, and even with the rising price, bitcoin remains difficult and relatively unsafe to use (for the non-technical masses) and provides zero benefits for most people. Yes, peer to peer transmission of value is cool, I'm not saying bitcoin is useless, but for most people there is no reason to use bitcoin and there never will be. Contrast these facts on the ground with the never-ending blockchain hype and the result is overall disillusionment with blockchains in general.

Watch this video [1] of Bill Gates explaining the value of the Internet to David Letterman, where he's just not getting it at all. Bill's telling him the things it can do relative to David's interests, but he just sees those as problems that don't really exist because they've already been solved.

It took decades before the Internet was useful to "the masses." I don't think there's some conspiracy among VCs, but I do think dismissing cryptocurrencies for the reasons you have is short-sighted.

[1] https://www.youtube.com/watch?v=lskpNmUl8yQ

I tire of the internet comparison. You're drawing a surface-level comparison between the greatest communication and economic innovation in human history and blockchain software, because people were skeptical of both. And? That doesn't prove anything except that people were skeptical of both; nothing in that comparison speaks to the underlying nature of either things being compared. They are not the same.

Well it's in response to your rebuttal.

> Where is the revolution? A common thread among cryptocurrency enthusiasts is that the revolution is coming... except it never does.

A technology doesn't need to have all of its potential realized in the first few years of its existence.

> Where is the disruption? Bitcoin is a smidgeon of a fraction of the commerce activity happening on the internet

The Internet was a fraction of the commerce activity happening relative to Sears / JC Penney / Walmart. Yet clearly only a few decades later all of these are disrupted by the Internet.

> bitcoin remains difficult and relatively unsafe to use (for the non-technical masses) and provides zero benefits for most people.

...as was the Internet for the first few decades.

> Contrast these facts on the ground with the never-ending blockchain hype and the result is overall disillusionment with blockchains in general.

This compares directly to, "Have you ever heard of radio?"

Literally every dismissal of cryptocurrencies you made would have applied exactly to the Internet in the early '90s or prior. There are far more similarities than "people were skeptical of both." It's totally fine to take your position but it's unrealistic to claim these as reasons it can't succeed.

> Literally every dismissal of cryptocurrencies you made would have applied exactly to the Internet in the early '90s or prior.

It seems I'm not getting through to you.

Just because two things have something in common doesn't mean that they're the same thing.

Showing that people were skeptical of the internet and blockchains does not demonstrate that blockchains will be as successful as the internet. There is no connection between the two (besides the fact that blockchains are software that run on the internet, like all things on the internet). They are totally different.

"They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown."

- Carl Sagan

I guess I just feel like your rebuttal would be stronger if its only points weren't the same, yet ultimately irrelevant in the case of a prior technology with many similarities.

Of course they're not the same thing. That doesn't mean it's now totally valid to claim that it won't be successful due to the same roadblocks that the Internet overcame easily.

Do you have any arguments against cryptocurrencies that don't mirror early problems the Internet had, that people warned about, but ended up being very solvable? I think that'd be a lot more convincing.

Other than being a cryptocurrency, everything people are using blockchain based solutions for can be solved in a much more robust, complete, and scalable way using conventional software tools.

This is why it's not the revolutionary thing everyone is saying it is. As a cryptocurrency blockchain is the killer implementation. For anything else it just becomes a ridiculously bloated, clumsy, and slow database that hardly anyone understands and wastes electricity.

The "Internet" is not really a good comparison. The Internet existed for decades before it took off in the late 90s. And blockchain is part of the Internet--just another protocol.

What you're really talking about is the Web. That's the inflection point. Even email, a non-Web-based technology, saw a huge surge in adoption after free webmail services like Hotmail and Yahoo came on the scene.

The big difference between the early Web and early blockchain is the barrier to entry. It was easy to set up websites--still is. That's how you got so many super young people finding huge success out of nowhere.

In comparison, blockchain has an incredibly hard barrier to entry. Not to use it--to build it. If you want to build a robust reliable blockchain, you need very solid cryptography skills. Very few people have that.

The structure of the growth has inverted. In the late 90s you had a lot of people you never heard of, and who were routinely dismissed by industry leaders. But they were building real products that took real business away from old established companies. The Web grew ground-up.

Today, the biggest pushers of blockchain are big established companies. Goldman Sachs. IBM. JP Morgan. The New York Stock Exchange. Big banks, big lawyers, big investors, etc.

To add to this,

I've been meeting with government entities in a country who IBM is heavily influencing with marketing. There are very low hanging fruit kind of technical problems that can be easily solved by mediocre CRUD app developers but due to the money in this region, companies like Oracle and more recently IBM has swooped in and sold them a bunch of things they don't need and have no idea how to integrate to solve the problems they're facing. Don't know how to build REST APIs? Buy our middleware!

Sitting down with people in charge of making these decisions and it's apparent they haven't the slightest clue what they're getting into. Their teams don't have the technical ability to build REST APIs to integrate with each others services, and now they've bought into IBM's message queue without a single developer on their side with the competence or experience to know what it is.

They've sold them solutions without taking into consideration the problem.

Now blockchain is the newest buzzword, spoken about like some magic IT pixie dust that was just invented to solve any technical problem -- "NOW you can go paperless, can make transactions, can store health records, provide government services" as if before it wasn't possible. Somehow people with no technical background are profiting immensely by holding conferences and speaking about things they don't understand. People are literally conversing with each other without having any idea what they're saying.

We got an email recently from an entity that is very interested in our platform stating "we want your product, and all new software must be blockchain enabled," whatever that means.

I recently went to a tech event first person I met was pitching his blockchain company about to launch next month. When questioned, within a few minutes he relented that they were not using blockchain at all.

I see blockchain as an evolutionary step for computing and the internet.

The internet is great because it grants the ability to communicate worldwide at minimal cost, to distribute software at minimal cost, and to replicate information at zero cost.

While copying is great for knowledge, it's problematic for value. Blockchain solves this, now you can share applications and communicate globally with objects of value. That's it.

I don't know if any of the current implementations will survive. I could see blockchain only running a small subset of online activity relating to finance, insurance, and law. I could also see it rendering our current conception of the internet sector as the media/advertising niche, the way cable changed broadcast TV forever.

Mostly I think the tech is really cool. So I'm going to keep messing with it. But I appreciate the skepticism, it means there's work to do.

The Internet opened up a whole new world of applications. Distributed ledgers do not. They are a complex and horribly inefficient solution to a very niche problem that crypto currrencies like Bitcoin have. But outside of that realm, they offer next to no technical advantages that would justify the exploding costs incurred by implementing this technology.

I think we have to wait on that. Maybe both bitcoin and ethereum are still a bit on the wrong track, and better use cases will show up later on.

> bitcoin remains difficult and relatively unsafe to use (for the non-technical masses)

Even assuming it were trivially easy and perfectly safe to use, there are numerous other risks currently associated with it.

Just look at its recent volatility, for example.

People who claim BTC is the next mainstream currency are delusional. Its an investment commodity right now, and its way too volatile, way too little regulated and capped too low to be a serious currency contender. Seriously, the real world does not work that way, and thats not necessarily a bad thing. This goes especially for the whole decentralized and uncontrolled/unregulated part - I see it as bad thing, a lot of the regulations are in place to avoid anarchy and protect the consumers (admittedly there are also regulations that totally screw the consumer in some cases).

Right, and the problem (too much speculation, not enough actual economic liquidity) isn't even just a quirk of human behavior: Deflation is baked into the design.

> Where is the revolution?

To me, the revolution is the realization that certain softwares don't need to be built, merely described and they will bring certain things into being. If Satoshi hadn't built Bitcoin, he had simply released the paper, I think Bitcoin would still exist today. That's interesting. I don't think the same is true, if, for example Mark Zuckerberg had just described Facebook rather than writing it.

The insight is: when a set of incentive structures stable and self-reinforcing, they can become an autonomous agent of their own, existing on top of, but also outside of, human activities.

Very interesting. And I think it is revolutionary. The revolution hasn't happened yet though, perhaps that's what you're pointing out?

The computer revolution hasn't even happened yet though. Still only a tiny number of us can use computers directly. Most people need to use another human (some programmer who makes a static human interface for them) as a proxy. The Big Talk claims of the computer revolution won't happen until we're past this phase. These things take time.

I can almost guarantee you it wouldn't be built. I think you overestimate the value of ideas without concrete implementations.

Without Satoshi actually building it, the barrier for his idea being seen as success would be to build the entire system. Much easier to just mock it and ignore it. With it being built, all someone has to do to test the system is do a little mining or send a transaction.

Widespread mockery and ignoring is fine. It would only take one person who can code and thinks the contract makes sense for it to get implemented.

Its your assertion that no such person would have emerged between 2008 and now, if Satoshi hadn't written the reference implementation in 2009? What is your reason for believing that?

they didn't flush any money down the toilet, 21.co mined a lot more then 120 million in bitcoin, they mined at least 75,000+ BTC

>If I had a Bitcoin for every skeptic that posts a blog on why it can't work...

And if I had a real dollar for everyone raving about some optimistic Bitcoin utopia...

>This may just be my general observation but I feel like Silicon Valley hegemony has a grudge against crypto currencies and I'm not sure why.

Because they're a solution of a problem that doesn't exist? Or rather, whose actual solution is political, not technical.

>Maybe the disrupters are being disrupted?

Or maybe the fad is over and nobody much cared?

Cars were a solution to a problem that didn't exist when considered a certain way.

Texting seemed fine but yet here we are with many billions of market cap for messaging programs.

I agree there's hype on the other side of it too - look at the recent ICO craze. I'm not saying that crypto isn't getting love. But that it isn't getting much love from a very particular place. A place that traditionally has never had a problem embracing a million odd ideas. A place with a culture where 90% failure is expected because that 10% success more than makes up for it.

I just find it conspicuous.

>Cars were a solution to a problem that didn't exist when considered a certain way.

What way? Because people absolutely would have jumped at the chance to go from a place to another faster (and more comfortably) and had myriads of reasons to want to do so at any time in history.

>I'm not saying that crypto isn't getting love. But that it isn't getting much love from a very particular place. A place that traditionally has never had a problem embracing a million odd ideas. A place with a culture where 90% failure is expected because that 10% success more than makes up for it.

Well, is it getting much love from ANY other place though, except a small niche of enthusiasts?

>Because people absolutely would have jumped at the chance to go from a place to another faster (and more comfortably) and had myriads of reasons to want to do so at any time in history.

The first cars were incredibly noisy, smelly, and actually killed a lot of folks. Yet somehow, here we are something like 100 years later, evaluating how many more years we'll have to wait before we can get go place to place without even having to touch a steering wheel.

>The first cars were incredibly noisy, smelly, and actually killed a lot of folks.

And despite that their utility was evident, and adoption very fast.

Even so, bitcoin is not supposed to improve with time. It is an invention that is delivered as is (technology and algorithm wise). At best they can make better exchanges. But there are also very real possibilities of regression to those (stricter regulations imposed, etc).

What do you mean by bitcoin is not supposed to improve over time? There's active development going on, even with bitcoin. It's currently hampered by politics, but if you look at the crypto currency space as a whole, developers are constantly trying out new things and improvements.

Your claim that "the fad is over and nobody much cared" is measurably false.

Coinbase is currently the top bitcoin exchange in the world. Have a look at their traffic: http://www.alexa.com/siteinfo/coinbase.com

Not only are they in the top 1000 websites in the world, but they have set a new traffic record every day of 2017, without exception.

>Not only are they in the top 1000 websites in the world, but they have set a new traffic record every day of 2017, without exception.

For a "revolutionary" "disruptive" technology to have, after 8 years and tons of coverage and touting, its "top exchange" merely hit the top 1000 is not exactly something to write home about. There are sites even in the Top 200 - 500 that are totally irrelevant (the "power law" distribution of visitors falls quickly after the top 10-20 websites).

Now, take away developing world etc safe-keeping and money laundering motives, and add in some heightened regulations from national governments (when/if it gets to a size worthy to regulate properly), and adoption will get close to zero.

"I do see a lot of enthusiasm from Eastern Europeans and all across Asia and they seem to be leading the charge on what could be the next major technical revolution." You may wish to also include hubs in London,UK and Zug,Switzerland

Good point - I've noticed that too. With a certain lack of easily available funds for startups in the UK (compared to Silicon Valley) I can see why they'd embrace that.

Also free state of New Hampshire:

http://freekeene.com/2017/06/07/nh-governor-signs-bill-prote...

> I feel like Silicon Valley hegemony has a grudge against crypto currencies

I have a grudge against crypt-currencies because their proponents think:

+ Implementations don't need specs

+ PL theory is below them (static typing? referential transparency?)

+ Repeated million dollar hacks aren't a problem

+ There's no shame in lying about the core purpose of your product (Etherium: The implementation is the LAW. Except when we don't feel like it.)

The sad thing is there are lots of cool things crypto currencies can do. They're great for moving money between countries (the banking system really needs to get its act together here). They're great for bug bounties. Someday they'll be good for contracts (bug-free code is possible if you take it seriously). Proponents should focus on those things ... but it's hard to take criticism seriously when you just want to pump up the value of your coins.

> because their proponents think:

Come on, you can't generalize things like that on a group such as cryptocurrency users. I think this generalization tells more about you than cryptocurrency proponents.

I can, because I'm trying to explain a mindset, not make an argument. Maybe cryptocurrencies are the future, but there are reasons people are suspicious of them besides being silicon valley hegemons afraid of being disrupted.

What's most off-putting for me is the political ideology that often accompanies bitcoin. It's a sort of Ayn Rand-inspired libertarian anarchy that, among other things, wishes to replace democratic institutions (like central banks or courts) with algorithms.

It's too close to the conspiratorial and/or anti-establishment mindset to be comfortable.

> What's most off-putting for me [...]

... may be most appealing to others.

> It's too close to the conspiratorial and/or anti-establishment mindset to be comfortable.

"counterantidisintermediation"

I could be wrong, buy I didn't read this as an indictment of bitcoin, but rather blockchain as a platform. I'm very pro bitcoin, but I see it as really the only killer app for blockchain at this point. Don't get me wrong, I'd love to see more, just haven't yet.

That's totally fair. I see potential more than killer apps. But I think your attitude is fully defensible.

What I find peculiar is a flat out, almost arrogant, rejection of blockchain (and what I believe is a fundamental misunderstanding) from our technological elite.

It's almost as if they are focusing on the wrong thing which to me is the nearly comical surge in "value" of some crypto currencies and the literal view that they are and can only be a store of value.

There's plenty of scams and stupidity but there's also real potential I believe. I'm very possibly a naive fool too.

> This may just be my general observation but I feel like Silicon Valley hegemony has a grudge against crypto currencies and I'm not sure why. For an industry that has constantly tried new things...

There seems to be a pretty strong trend in Silicon Valley away from decentralization and towards centralized and controlled platforms. You can see this with IoT (e.g. your alarm clock bricks when the company's proprietary server is shut down), Social Networks, and "the Cloud" in general.

My skepticism is not for Bitcoin itself, but blockchain in general. And not blockchain by itself, but actually the marketing hype that blockchain based startups are putting out.

Blockchain is a cool algorithm that can be useful if the situation calls for it. Ethereum is a cool idea that I'm skeptical of, but hey, that's why they're doing it and I'm not. I have my own ongoing bets. But I'm seeing much more of the marketing department using "blockchain" as a catchphrase to turn heads. Specifically the heads that don't actually understand what blockchains are.

You can begin to see the beauty of Bitcoin when you want to accept payments. All you need to do is download a wallet, generate an address and put it online. You don't need anybody's permission, as would be the case with PayPal or the likes. The risk of somebody deciding on a whim to freeze your funds is also greatly diminished (again, very different from PayPal and the likes).

"Governance" and "Accountability" seem to be the antithesis to that. No, Bitcoin doesn't need that and doesn't want that.

Yes, it is a bit scary, it is a system that develops on its own, depending on the way it is being used (network effects and so on). I guess economists freak out because they are unsure about the rules, and they can't have that.

But it is also not true that it would be a huge problem if there were forks. Why would it be? People will simply use what works best for them, controlled by market forces (they need other people to use the same fork).

Who decides how Bitcoin develops? Ultimately the users do, by using it or not. Developers and miners merely provide proposals.

And why does a system need 100% agreement on everything? Such a system may well never exist.

>But it is also not true that it would be a huge problem if there were forks. Why would it be? People will simply use what works best for them, controlled by market forces (they need other people to use the same fork).

It's a problem for any tech that aspires to go mainstream and thus must contend with the already high cognitive loads on the majority of people who don't follow the tech in detail, don't know what a hard fork/chain split entails, what it means for their money, or the economy. Most mainstream users, when confronted with having to understand something like that to safeguard their money, will conclude, rightfully, it's best left in a traditional bank or under the mattress.

Maybe true, but in a way, classical investments are even more complicated. Some of them are even deliberately complicated to obfuscate their risky nature to naive investors.

I don't think the predatory complexities found in some shady securities are a very prudent way of "excusing" the technical complexities and consequences of BTC, or any other cryptocurrency.

"Not as bad as" is broadly fallacious, anyway.

OK then, explain to me: what is money?

I'm probably not the person to ask, because my "succinct to the point of sounding flippant, but offered completely honestly" answer is: a profoundly destructive social fiction whose time is well past. The notion and role of a medium of exchange are things on which I have ... divergent views.

It's a human invention we have collectively chosen to value more than the thing it was presumably created to serve — you know, "humanity". Any tool that becomes more important than the lives and well-being of the folks that tool was invented to benefit (that is: all of us [0]), I'd submit, needs some serious critical re-examination.

I'm not holding my breath on that happening any time soon, though.

Your question is a complete non-sequitur, anyway. It's entirely possible to create systems and stores of value that aren't as abusable, abusive, exploitable, exploited, and just generally bad (or at least less good) for the overwhelming majority of the monkeys involved in its circulation and use, as compared to "money".

[0] If your counter is that it doesn't have to serve all of us, then I'd say it was the wrong tool out the gate.

I just meant to illustrate that money is actually quite complicated, even though we use it daily without giving it much thought.

And my original response merely suggested that using the ethically compromised complexity deliberately introduced into one of the more obscure forms of "money" we have to justify the technical complexities and their attendant consequences in yet another is at best fallacious.

That is: "But CDOs" isn't materially responsive to "BTC is complicated."

If by classical investments you mean vanilla stocks and bonds, those are heavily regulated with strict disclosure and transparency requirements, heavy penalties for cheating (insider trading), and standardized reporting for de-obfuscation as much as possible.

If you're referring to more exotic instruments, those are off limits to mainstream folks, only available (in the US at least) to accredited investors with enough discretionary wealth they won't go homeless if they lose their investment.

In either case, a lot of effort goes into mitigating the cognitive load for mainstream non-expert investors.

What about those things that produced the last financial crisis? Reselling bad credits b mixing it with good credit and so on. Maybe it was only accessible to the pros, but then if they got it wrong, and they probably bundled it up with other things that they were then able to sell to the public.

I think this is the point though - for something like bitcoin, this tension is ok. It's when you start getting into things like blockchains for real estate in developing countries (I think there are a few startups working on this) when it becomes an issue. Someone still fundamentally needs to issue the blockchain deeds, or ok that you, in fact, own the property you are claiming to own. At that point, you have a central authority, and a normal database with some sort of public backup or checkpointing would be as good as a blockchain solution.

So, I'd agree bitcoin doesn't want central governance, and that's a feature not a bug, but for other block chain solutions this article makes a very good point.

Agreed, and it is a reason why I am holding back on Etherium so far. I don't know if they have a proposed solution to that, tbh, but it seems pretty impossible to solve.

Although, to be fair, "classic" contracts also need that someone to enforce them. Maybe Etherium & the likes only replace one aspect of it, not the whole process. If company X publicly announces that they'll adhere to a certain contract in the blockchain, they can be held accountable for it and transactions can be completely transparent.

Haha, my issue with Ethereum has always been that, as a software engineer, I know it's impossible to write bug free code. It's a great idea to have a code driven contract utopia, but our first experiment with that model proved we still need human intervention. If it were that simple, we would just have hyper formalized real world contracts (in an almost mathematical notation) - but that obviously never happened. Frankly, hand written contracts are already incredibly decentralized, it's only enforcement that is centralized.

Slightly pedantic, but you and your parent did this, and people do it all the time.

It's Ethereum, not Etherium.

True, I worry about that, too. And in case of the DAO, that issue hit home big time.

There are efforts under way to create contracts with formal verification, but I remain a bit skeptic. It is difficult to write complex software that way afaik.

On the other hand, a lot of contracts are maybe not very complex. I thought about a bank account recently (receive and send money). That could perhaps be done in 100 lines of code? (I don't know the programming language yet, but their basic token creation example seems to be short, and it is kind of like a bank account). That seems impressive compared to the effort banks probably spend on IT.

You'd only be able to use a blockchain for land ownership of the government agreed to unconditionally honor whatever appeared in the blockchain. And even then, the government found change its mind at any moment.

So really, it would not work well unless your whole government was also properly decentralized.

agreed on land (to an extant, I think a digital contract would be a good legal basis if things go to court), but what about virtual land? Or digital tokens that control access to things like a house, car, logins, etc for that matter? Now must there be M:N escrow keys etc.?

It is not even ok for bitcoin if you want to use it as your primary currency, for both conducting transactions and for storing liquid wealth. It paints a nice picture to say 'the market will work it out', but as an individual, that market can wipe many people out. Sure, it might work out as a whole, but the volatility is too much for something that needs to be as stable as currency.

Your dismissal of the problem with forks is missing a big danger to users. You say that market forces will control it, and people should just use what works best for them.

The problem is that you might guess wrong; you might look at the two forks, make your best guess as to which side is going to win out via the network effect, and put your money there. If you are wrong, and your fork dies out, there goes all your money. The market forces did their thing, and they wiped you out.

Yes, the 'users' are the ones who decide how the system develops, but that doesn't mean you as an individual user have any say; your voice will be overwhelmed by the crowd.

Of course, these risks aren't any different from the risks we face in the rest of the world. You can lose money by making the wrong choices, and your choices often get forced because of the decision of the crowd. However, we don't really face that risk using a stable national currency BECAUSE of the very things bitcoin fans tout as reasons to use bitcoin.

The reason using a currency like the US dollar is so popular is BECAUSE of the fact that the government forces everyone to accept the currency 'for all debts, public and private'. People are FORCED to accept the currency, so you can have confidence that you aren't going to be left with useless money if you accept dollars in payment. You don't have to worry about some other currency winning out as the defacto payment system, and losing all your wealth.

Of course, you have to put faith in the US government to maintain the currency, but it has a pretty strong track record of doing a fairly good job at that. I can't imagine a cryptocurrency every being able to be as stable as the dollar for hundreds of years; I mean, just look at the price volatility for bitcoins.

Ya, I was going to point out there's a lot of faith with normal currency too - I think bitcoin still is a grand experiment. So far, when there have been forks, a winner has emerged very quickly (see Ethereum), but the UASF is going to be an interesting test of this. I think it's in everyone's interest for the decision to happen quickly and stay sticky though, so it's hard to imagine a drawn out fork battle, but could be interesting. Also interesting, I suppose we're incentivized to get in before any forks, wonder if any of the run lately could be attributed to that.

Forks tend not to die out. See ethereum classic. As long as people are using the currency that you use, your currency will have value. Also, if your currency is losing traction, the value will decrease gradually, not evaporate to zero all at once.

Well, highly speculative currencies can tumble dramatically, but as we've seen with Bitcoin, as the legitimate use cases grow, so to does the price stability.

The idea that a currency will never decrease at such a rapid rate is a bit naive. There is nothing so fundamentally different from bitcoin that it is immune to panics and a 'bank run'. If a panic starts, and people are trying to pull their money out, you could have the same effect as a bank run, as the transaction rate becomes higher and higher (the digital equivalent of a line at the bank).

Bitcoin may or may not stay stable, but you can't know that any more than you can know it about any other currency, with the additional caveat that there is no central authority with a track record to base your decision on.

You have to put your faith in something.

I suppose it's not surprising that people with strong affinities for computing systems would rather put their trust in a computing system than a government of people. They understand computing, and so they feel more confident they can understand and mitigate its risks. They might not feel that way about the solvency of the Federal Reserve, or the fiscal health of the U.S. federal government.

It doesn't mean they're right. Blockchains might be objectively riskier than central banking. It's just that we each see the world through the filter of our own experience.

The entire point of the article is that it might FEEL like you are putting faith in a computing system when you use bitcoin, but really you are still putting your faith in a group of people. It doesn't matter how well you understand the mechanics of how bitcoin works, what really matters is the mechanics of how the people involved with bitcoin works, and that is the same as people everywhere.

You just can't escape human social politics.

I agree, and I think the article is essentially right. But again, not everyone is going to see it that way, depending on their inclination.

I agree with Vili Lehdonvirta's analysis about governance and wrote a similar conclusion previously.[1]

Yes, the concept of "money" existed before governments and therefore doesn't require government. That said, today's modern money is very much an instrument of government power. This is why alt-coins will not overthrow fiat currencies like some enthusiasts believe because Bitcoin does not come with its own Bitcoin-police-force and Bitcoin-law-courts.

The distributed block chain may eventually prove useful for other recordkeeping such as real estate property transactions (e.g. no need to pay $300 fee for title searches in the future), or maybe buy/sell internet domain names (e.g. don't need Verisign as middleman to buy dot com domains). Those scenarios are more realistic than Bitcoin/Ethereum replacing government approved fiat currencies. DLTs may still transform the economy -- but not in the ways people expect.

There's definitely some interesting applications of distributed consensus ledger but the idea of bypassing government money is overhyping its potential.

[1] https://news.ycombinator.com/item?id=11934120

> Bitcoin does not come with its own Bitcoin-police-force and Bitcoin-law-courts

My government will enforce a contract even if it is denominated in some foreign currency, will it not? Currency used is independent of jurisdiction.

They may award damages in legal tender, rather than in Bitcoin, but I have to pay taxes in legal tender anyway, so there will always be a market to convert back.

Right now they might be confused by Bitcoin enough that they won't effectively be able to assess damages, but that's not necessarily a permanent state of affairs.

>My government will enforce a contract even if it is denominated in some foreign currency, will it not?

Sure, if usage of that other currency is trivial enough volume that it doesn't threaten the government's currency. That's the sticking point. Bitcoin is allowed to exist at the whim of the government.

Since deflationary Bitcoin in no way, shape, or form threatens central bank currency systems, I don’t think existing at the sufferance of central governments is anywhere on the roadmap of problems crypto currencies have.

> My government will enforce a contract even if it is denominated in some foreign currency, will it not?

Usually, the same as it would for a contract for some non-currency commodity: by converting it to what it considers an equivalent value at the time of injury (not time of award or payment) in the legal tender currency.

Sure. But having to convert to pay taxes and debts is huge pain point for trying to conduct all your business in a foreign currency. It also adds transaction costs.

If you are a business, why would you ever try to run on bitcoin alone? There would have to be a huge advantage. And we see that in many small cottage industries where that is an advantage, like buying drugs online or illegal gambling.

But without the need for pseudo-anonymity why would anyone ever use it? Why would your grocery store use bitcoin over dollars? They wouldn't.

So crypto will probably be a currency in the long run, but it won't overthrow regular fiat.

Plus, if there was a huge benefit to crypto, the Fed could just do a crypto dollar and peg it to the real dollar.

> But without the need for pseudo-anonymity why would anyone ever use it? Why would your grocery store use bitcoin over dollars?

Because the want the money from people which have bitcoins? Because creditcard fees are to high? (just forget about the BTC fees or the nearly fictional double spending problem) Another reason could be that the owner has Bitcoins and wants to support them. There might be more reasons.

> But having to convert to pay taxes and debts is huge pain point for trying to conduct all your business in a foreign currency. It also adds transaction costs.

To some extent yes, but for any more serious business this really isn't a problem at all. I've been running a business that makes income in bitcoin only for 5 years now, and converting for taxes and accounting is quite trivial actually. Hardly any work is spent on those problems. You know, that kind of stuff is very trivial to automatize using those computers, unlike many other problems.

So the point is to use the stateless currency, but continue to rely on the state to settle disputes and redistribute funds as it sees fit?

That seems counter to the ethos of the BitCoin enthusiasts.

I also doubt it will necessarily work for large sums. Governments may enforce contracts related to foreign money (if they find that the contract itself is in their jurisdiction, which isn't always the case) because they have quid pro quo agreements with other states, and it is mutually beneficial to global trade if global contracts can be enforced. (In a way, it similar to foreign mail being carried by local postal services.) But there is no quid pro quo with any friendly BitCoin government, so there is no incentive to enforce contracts.

>That seems counter to the ethos of the BitCoin enthusiasts.

That's because it's a non-realistic ethos.

>today's modern money is very much an instrument of government power

A more accurate statement may be: today's modern money is very much an instrument of power over government

https://www.youtube.com/watch?v=K38khtCrN-4

Let's not forget about Blockstack https://blockstack.org . I'm very excited to develop on this platform and it represents the direction the Internet needs to go in order to ensure its longevity. Check out their YouTube channel as the creator has recently posted a slew of micro-lessons to address common questions and concerns.

"Distributed block chains" have been well understood (if not popular) technology for a long time and have not really been that popular. They've been cost-prohibitive until recently.

I'm not sure they will fundamentally change anything either. You're making the same implicit assumption that there is an appetite in the market for a wide but not-quite-real-time distribution mechanism. I submit to you that outside of medical records and other specialist applications, there isn't.

As for the currencies, when they are backed by the promise of more energy as opposed to backed by the promise of spent energy I'll find that more interesting. I see the big weakness of Bitcoin being that it exists as it does only so long as the majority of computing power within it does not hijack it.

But isn't that power just shifted to an elite who controls the great majority of the currency, and has the power to withdraw/dump coins (basicaly influencing the supply side of the market, and control the value)?

I'm pretty sure there are people/organizations who invested into such positions.

Isn't that a sort of control that may be worst then government power?

> the concept of "money" existed before governments

This is not actually true. The concept of money (quantifiable debt in a standard unit, such as coinage) was created by early states to lock subjects into what anthropologist David Graeber has called the "military–coinage–slave complex". Money cannot be separated from state violence.

https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

This is an excellent reply.

That said, we'd need to agree on definitions of "state" here. Some kinds of money surely existed before anything recognizable as a "state", but then again, such notions of money are likely as meaningless as this kind of unrecognizable state.

>Some kinds of money surely existed before anything recognizable as a "state"

I wouldn't be so sure. As far as I know, current academic consensus is that in primitive societies, where everyone knows everyone, it comes down to a system of favors and everyones natural sense of what's "fair". These are relatively small groups of people, so there's a lot of trust involved. No need for any sort of currency there

>anthropologist David Graeber [...] Money cannot be separated from state violence.

I've read David Graeber's book. I do agree with him that the common (e.g. John Locke) narrative about money arising from direct barter is probably wrong. Money actually comes from credits/debits (aka delayed consumption).

However, I disagree you need government enforced violence for the basic apparatus of money. Perhaps it's a matter of defining "money" in different ways. I'm talking about "money" as a more basic expression of human bookkeeping.

If you have a small community where everybody knows each other, the people can cooperate to keep track of "accounts" of who owes what. They can write the debts/credits on a public church ledger or hypothetically leave it to the reliable memory of a trusted village elder. (E.g. you don't need government for women to spontaneously start trading scrips for future babysitting hours.) What governments enable is scalability. With government standardized money, strangers can transact the units of account across a larger administrative area.

>If you have a small community where everybody knows each other, the people can cooperate to keep track of "accounts" of who owes what.

Well, those people are then the government. In small scale communities it's one and the same -- they can all join together and deal with anybody who doesn't play nice. And these punishments are the analogous of e.g. prison.

So, what you say is true, but not very important in practical use, as we don't live in such small communities, and don't deal strictly in our own community even.

Sure, 2 people also don't need government. They can keep tabs, and if one doesn't repay or cheats, the other can always beat them up or stop dealing with the first. But they're basically acting as a government in themselves (in that they assume the role of government officials like law enforcement, law-making, etc).

"Government is not required" would made actual practical sense if somehow the technical solution used instead of money took care itself of debt repayment and ensured punishment (or make it so that punishment is redundant) of wrongdoers.

>, as we don't live in such small communities,

Right, that's today's situation. My "government not required" is talking about how ancient money can arise spontaneously without a separate entity that we think of today as "government". If we think of "money" at its basic level of keeping track of "promises", "favors", and "trust" ... all those human instincts of coordination can precede old governments like the Roman Empire and Egyptian pharaohs. It just can't do so on a large scale among strangers.

>2 people [...] they're basically acting as a government in themselves

If we go back & forth by then redefining "government" to mean "any humans coordinating" then I suppose we could stretch "governance" all the way back to human invention of fire. If we use this all-encompassing idea of "government", then I suppose it means nothing preceded government.

>If we go back & forth by then redefining "government" to mean "any humans coordinating" then I suppose we could stretch "governance" all the way back to human invention of fire.

And what would be strange about that? I see no reason to constrain government to only mean the modern(-ish) state. Ancient Rome was also a government, Babylonians had kings, jungle tribes had rulers and elders, etc etc.

I'd say any human community had a governance structure way into prehistory.

>If we use this all-encompassing idea of "government", then I suppose it means nothing preceded government.

Yes -- but I don't find that strange. What would precede government? If there was anything, it would more like primate animals living in packs akin to animals, but with no other structure in their "communities". As soon as some structure emerges, they also need ways to decide what they do, assign responsibilities, punish bad behavior, etc.

> prove useful for other recordkeeping such as real estate property transactions (e.g. no need to pay $300 fee for title searches in the future)

That doesn't require a distributed ledger, just a database. In the UK it costs £3 and is searchable online.

If it costs $300 then that is because someone wants it to cost that much.

> In the UK it costs £3 and is searchable online. If it costs $300 then

My short text didn't give enough context. In the USA, that $$$ isn't really for the "search"; it's to pay for the "title insurance". That title company insures that the buyer is getting a "clean title" with no conflicting claims of ownership from others he doesn't know about. The "search" is just one component of labor of what you're paying for. (I looked at my mortgage documents again and my title insurance actually cost $4000.)

With a distributed ledger for property deeds and title transfers, that was used by say -- 1 million people -- that essentially means you have 1 million "witnesses" to the transactions. Therefore "title insurance" becomes superfluous.

I'm not predicting that DLT would be used for property records but proposing that hypothetical scenario as something more realistic than bitcoin replacing the Euro/USD.

If "dirty" titles are an issue (and title insurance costing $300 suggests it is), Why is there no government department (state or federal) holding the title registry?

That would also solve the problem. Once again it seems like this is a social issue not a technical issue.

>Why is there no government department (state or federal) holding the title registry?

The governments (e.g. county courthouses) do store copies of the documents such as deeds and transfers. They stamp them with their seal so in that sense, they do "hold the authoritative title records".

However, there is no computer database with rows for all real estate that has a binary column called "CLEAN_TITLE" with values TRUE/FALSE.

Therefore, the actual state of a "clean title" isn't a flag but a case-by-case determination based on documents analysis. What an employee from a title company will often do is actually drive down to the court house and sit there looking through document archives to trace the chain of sales. This also includes looking at microfiche films[1] if the courthouse hasn't migrated all their images to electronic image databases. If the worker feels confident there are no outstanding claims, the title company can issue "insurance" that the title is clean. (Occasionally, the determination was wrong and the title company has to pay out the insurance because of their mistake.)

If the property gets sold again, another title company worker may do the same redundant "documents analysis". (Because new claims can be recorded against the deed since the last time the property was sold.) Yes, it's a really inefficient process!

Conceivably, a buyer could buy property without title insurance but since most people require loans, a bank won't lend money unless it has assurance the title is clean (because that property is the bank's collateral so it has to have confidence that nobody else has claims that supersedes the bank's.)

Could the governments create a convenient centralized database to solve those issues? Yes. But some people might prefer to have a distributed ledger to bypass the government holding those records. (E.g. the courthouse charges $20 to "record deed documents" or "$1 per page for copies of deeds", etc). The distributed ledger could theoretically not require those fees or make them very small.

[1] https://www.google.com/search?q=microfiche+reader&source=lnm...

The fundamental question is "why is it easier to get everyone to agree to put their real estate transactions in a distributed ledger than in a centralized ledger?"

I tried to explain that in the last paragraph. Some people might want the features of distributed ledger such as less transaction costs and/or convenience of recording property transfers without requiring without filing papers with the government. Or the decentralized ledger assures public immutable records whereas with the central db, you have to trust there won't be a malicious government employee changing database data to fake ownership records.

Sure, in a limited sense... every distributed ledger use case can be replaced with a centralized database. The reason people would choose a distributed solution is to bypass the controls of the centralized authority. Similar reasons that bitcoin proponents prefer it over centralized fiat government currency.

Whether those distributed reasons are cost-effective or sensible remains to be seen. Who knows, maybe distributed ledgers will become so mainstream that it will be the county governments themselves that seed the real estate blockchain so they don't have to bother administering a central db.

(To be clear, I'm not trying to convince anyone of switching to distributed ledgers but laying out possible use cases.)

How is a distributed ledger different from the centralized ledgers that many US states use?

Normally, to verify ownership, each transaction is reviewed to verify that they follow a direct chain back to the property's origin.

Compare that to a blockchain, where an algorithm which all involved parties must agree to, traces ownership through each transaction involving the property back to its origin.

Both have situations that result in conflicts that have to be resolved, whether by algorithm or in a court room.

https://reason.com/blog/2016/04/30/bitfury-desoto-blockchain...

There are plenty of examples where one party or a collation of parties set up the rules for a decentralized system that then goes on to operate successfully with little to no further enforcement. Email or TCP/IP are examples of such decentralized systems.

The fact that someone must make the rules and future actors may attempt to change those rules are problems but they do not invalidate the idea of decentralized systems.

I believe the author is reacting to his colleges misunderstanding of crypto technologies. He has bought in to their argument that what cryptocurrency needs to solve it's current problems is centralized control or governance. This, of course leads to the logical conclusion that if you must have centralized control then why use a blockchain at all.

The fallacy is in accepting that after the initial rules are set, that you must continue to have governance to solve the inevitable disagreements. On the contrary, continued governance is the problem faced by cryptocurrencies and other blockchain technologies. Their stability depends on adherence to the original agreement. Any change to that agreement is an existential threat.

It would however be a mistake to think that this problem completely invalidates such decentralized systems. They can and do continue to provide utility even in the face of attempts at continued governance. It's not about these systems working for eternity. It's about them working for long enough for life to happen.

>Email or TCP/IP are examples of such decentralized systems.

I'm not sure about those analogies. SMTP email and TCPIP require DNS to route packets. DNS root authority is centralized. (Yes, DNS for performance purposes is implemented across distributed computers worldwide but ultimate authority still traces back to the root servers.)

Even without DNS lookup, the numerical IP addresses are assigned by a central authority.

(Yes, if we're only talking about playing with protocols instead of actual global connectivity, one could run private SMTP on an isolated network with no central authority but that's not the analogy we're interested in.)

Maybe your analogies and my disagreement with them is a perfect illustration of what the author is talking about: centralized governance is still there even if we don't notice it.

It's not about eliminating centralization, it's about minimizing the fragility it causes in key areas. We minimize it by locating bottlenecks and finding solutions in these areas, not throwing our hands in the air unless we have 100% decentralization (assuming we even want that).

Sensible proponents of Bitcoin shouldn't argue that centralization is "wrong", but that monetary centralization creates perverse incentives, and that Bitcoin is a potential solution to this.

He misses the point that the developers do not control bitcoin; the miners control bitcoin. The developers suggest improvements which will only be adopted if the miners support those improvements.

The miner's interests are purely profit based, so they will not adopt changes which reduce their chance of profit.

Thank you for pointing out that the users of bitcoin (and other cryptocurrencies) have effectively no say in the design of the system they have to trust. This will ultimately limit the very trust needed to keep it alive IMHO.

I would say that this is exactly why Proof of Stake seems to be in higher regard than Proof of Work for new currencies as well as Ether's eventual transition later this year. Among other reasons, of course.

Is it generally accepted that this is inevitable? Or is it going to be a SegWit/Unlimited sort of situation?

PoS seems to be definitely happening for Ether.

Could you expand on that any? What's your basis for that belief?

Ethereum has a difficulty bomb (mining becomes more difficult with time). This is a form of control from developers over blockchain. If miners refuse to cooperate, they are left with the blockchain which is more difficult to mine with time (and eventually unusable).

https://themerkle.com/what-is-the-ethereum-difficulty-bomb/

Sorry, that was my conclusion from seeing tweets and commends made by Vitalik and his team.

Besides the other response you received, there also seems to be a shift to PoS simply because PoW mining wastes a lot of electricity.

It won't be like SegWit/Unlimited. The politics are very different and the technology is very different.

1. Politics. Ethereum has a leadership team which functions very differently from Bitcoin Core. For one, the creator of Ethereum is well known and outspoken. He and the other members of the Ethereum Foundation made it clear that their intention was always to move to Proof of Stake. Though there are some who may not support this move, the general community bought into the project knowing that this was the plan from the beginning. And there's a lot of trust of Vitalik.

2. Technology. Ethereum adapts much more quickly to mining difficulty than Bitcoin. Bitcoin can't survive with 90% of the hash power on one chain and 10% of the hash power on another chain. The smaller chain would take 10 hours to mine a single block and months to readjust the difficulty. It would be unusable. Ethereum has already shown its resiliency to a split during the DAO hard fork. The smaller chain adjusted quickly and survived. What this might mean is that with the change to PoS, there could be a dissenting faction that remains on PoW, and both chains will survive. This will allow the PoS chain to go ahead and push through with a split easily even without 100% support.

> users of bitcoin (and other cryptocurrencies) have effectively no say in the design of the system they have to trust.

how is that any different to the existing currency system like credit cards and banking?

And users _do_ have a say in bitcoins. Namely, they can vote with their wallet (literally and figuratively).

Banks are regulated by democratic governments.

> how is that any different to the existing currency system

Fiat currency is governed by central banks, which are arms of government, and are accountable to the public in the same way as the issuing government. Obviously, the degree of accountability varies from government to government.

Except for the Eurozone where the ECB doesn't appear to really act as an arm of anyone's government.

Brexit demonstrates an available route to expressing disapproval of the ECB's actions.

The UK wasn't in the Eurozone - and I've been reading Yanis Varoufakis's books about his time as the finance minister of Greece and I've been fairly shocked at how fundamentally undemocratic (not to say unreasonable) a lot of EU institutions and the likes of the IMF are.

And I say that as someone who voted Remain in the Brexit referendum (note that Varoufakis actually campaigned on the Remain side in the UK).

The Eurozone nations have EU exits available to them, too.

ECB is an arm of the EU (a government, but not a nation-state) accountable, as I understand it, through the European Parliament primarily and secondarily through the Council; and it is also accountable to the people of Eurozone countries through the accountability processes of their individual central banks, since the national central bank chiefs are governors of the ECB.

That is a pretty loose definition of accountability. If your bank screws around, are you going fix it by voting for a different candidate in the next election? I would say that my ability to purchase and run mining hardware, at a loss if necessary, gives me more control over my altcoins than my citizenship gives me over my bank.

> I would say that my ability to purchase and run mining hardware, at a loss if necessary, gives me more control over my altcoins than my citizenship gives me over my bank.

It's roughly similar to buying shares in a publicly-traded bank, which you can do as well as electing candidates for public office to whom the central bank, which is the entity making monetary policy decisions, is accountable.

So it gives you more relative power with altcoins only to the extent that those with more wealth are relatively uninterested in the altcoins in question compared to traditional banking; were a digital currency to succeed beyond a small niche, that would change and you would find yourself as drowned out by moneyed interests as you are in traditional banking on that avenue of leverage, and without the other avenues of accountability that exist with the governance of fiat currencies.

> It's roughly similar to buying shares in a publicly-traded bank

i dont believe that even owning a bank could you directly control monetary policy or procedures that the gov't legislates. You'd have to own either the majority of all banks, or own the gov't yourself (i.e., dictatorship), and even then, it's a hardsell.

Depends on how you define 'users'. Miners don't just make money out of thin air; they actually help maintain the ledger and provide value to the 'users'. Nobody is stopping you from start doing it yourself, too.

This is an excessively simplistic first-order explanation of the mining incentive system.

Consider that miners also lose money if the thing they are mining loses value. Therefore, if enough economic actors (besides miners) switch to version B that has some new feature, everyone will want to use version B instead of version A. The miners who are stuck mining version A lose money because the currency they're mining is no longer as valuable.

Realistically, the economics of cryptocurrency features work out quite nicely. You can't just say "oh, the miners make the blocks, so they have absolute control".

>miners control bitcoin

Incorrect, I can sign or construct any type of cryptographic payment I wish. Miners trade their Proof of work to prevent double spends in exchange for coinbase (currency issuance) that the market values. If miners chose to mine on a chain that no one wants, no one will trade for their coinbase.

The game theory nuance is, how do you organize an economy around changes to blockchain consensus? The only guaranteed way to ensure that that happens (from a game theory perspective) is to have miners lead the change. If user wish to lead the change, they still can but they take a risk in that no one will join them on the new consensus chain ("hey you guys said you'd construct payments like this and now no one is!"). There are more improved ways of rolling out these changes.

At worst miners can execute a denial of service for new transactions entering into the UTXO or attempt to double spend funds, or release blocks in a manner that negatively affects the profitability of other miners but they have _no control_ over how users handle their UTXO.

Bitcoin is anti fragile, each time it goes through a market challenger it gets better at handling it, not weaker.

If miners chose to mine on a chain that no-one wants, then everybody has to grudgingly go along with it, or cease to transact.

The longest chain is always the most valuable.

If miners chose to mine on a chain that no-one wants, they'll run into losses. Users will probably move to some other chain. As an example: Bitcoin users might wanna switch to Litecoin. And guess what miners will do then ?

You're also referring to a major weakness in the distributed consensus of bitcoin: the longest-chain-preferred mechanism is almost certainly a vector of attack on the chain.

Wouldn't you need to have a majority of the hash power to fork the chain and generate a longer one anyway? I think it's well understood that anybody managing to go above 50% of the hash capacity effectively "rules" the currency.

This is a common response to this but I don't think it's true in every case. I think if your goal is strictly to disrupt the Bitcoin service you can accomplish that by disrupting and attacking individual nodes in parallel and letting the resulting chaos from these cheaper attacks widen the scope of your disruption, stepwise.

On the contrary, this is the major strength of the system.

If by strength you mean, "A clear methodology from which a sufficiently large ec2 buy can rapidly fragment the Bitcoin consensus" then yes, I suppose that's fantastic.

From the perspective of people transacting on Bitcoin's infrastructure I suspect they'd call it "an attack."

>a sufficiently large ec2 buy can rapidly fragment the Bitcoin consensus

You grossly underestimate the hashing capacity of the bitcoin network. The hashing capacity, at time of posting, is approximately 5,000,000,000 Gigahashes/second[1]. Spot measurement of the hashing capacity of an EC2 instance is 0.4 Gigahashes/second[2]. You would need 12 BILLION EC2 instances to 51% attack the bitcoin network.[3] Using EC2 to attack the network is impractical and inefficient.

[1] https://bitcoinwisdom.com/bitcoin/difficulty

[2] https://www.reddit.com/r/Bitcoin/comments/1btgl1/i_was_curio...

[3] x/(5e18+x)=.51 y=x/.4e8

In the OP, the author says there are "approximately 5,000 computers" in the bitcoin network. I'm curious if you believe this is right too? Those are some powerful computers... (yes, "duh" indeed, I'm still awed).

That could very well be true. All mining for BTC is done via ASICs now, specialized silicon that just hashes crazy fast, but can't even get a TCP connection up and running. For networking, a bunch of ASIC chips is typically connected to some embedded computer, and even that usually isn't a direct peer on the Bitcoin network, but only connected to a mining pool server with hundreds of other such ASIC controllers. And this server then is the first actual part of the Bitcoin p2p network, single-handedly representing a mind-boggling multi-Megawatt hash power infrastructure.

Even most BTC users do not run actual clients anymore but use exchanges or wallet services which bundle huge numbers of users behind few actual Bitcoin network nodes.

Those are interesting facts I never thought about! Thanks for the detailed explanation.

I'm happy to be wrong, but I feel like I don't have to overcome the entire network's hashing, I need to overcome several individual instances. If I could isolate and attack individual members of the cluster quickly, I could begin to leverage their role in the cluster as they join, convinced that a single block must be true.

I don't need to overcome the network, I need to invite the network to have arguments with itself, by finding a way to introduce widespread partitioning of the network.

In this, the preference to longer hash chains seems like a good idea in a unified clock model but a somewhat optimistic decision in a split clock world.

>If I could isolate and attack individual members of the cluster quickly, I could begin to leverage their role in the cluster as they join, convinced that a single block must be true.

To do this you would need to have the equivalent hashing power of the network. Peers expect an nominally equivalent amount of Proof of Work for the difficulty adjustment. You would also need to guarantee that the peer connects to _no other_ peers

Your thinking is good adversarial thinking but it's already covered in the protocol.

>If miners chose to mine on a chain that no-one wants, then everybody has to grudgingly go along with it

No, if the miners mine on a chain that doesn't meet consensus rules, users will not follow it. If miners decide that the coinbase issuance schedule isn't to their liking, and decide to revert it back to 50 bitcoins per block, users will reject those blocks. This is a fundamental governance property of a blockchain.

Kinda sorta.

Yes, users can reject Hard Forks.

But the problem is that soft forks can do basically anything. Yes, even increase the block reward, in a roundabout way, (by using added extension blocks that have special rules, and then requiring all transactions to go through the extension blocks.)

Although from the perspective of a non-conforming Node, this would just look like a DDOS style mining empty blocks attack.

At this point the only thing that users can do is change the Proof of Work algorithm. .... But, if the big players in mining have a bunch of GPUs on standby... well, it is not even guaranteed that this will work.

> The longest chain is always the most valuable.

Only the longest chain that users consider legitimate. If users reach consensus on using rules that have lower transaction costs, it won't matter how long miners mine their higher transaction cost chain.

The big question is: can users achieve such consensus politically, or in practice do the miners lead the users because they need less organization to do so?

> the miners control bitcoin.

Incorrect. Nodes enforce consensus in bitcoin, not miners. It is thus. It has always been thus.

Plain 'nodes' weren't even a thing back in the early days of bitcoin. The original design envisaged all participants to be miners. It was only when mining became out of reach of ordinary computers that people started running nodes. They do very little, just sending and receiving bitcoin transactions, a task which the miners could do just as well by themselves.

Nodes have no say in consensus, the miners can ignore them and decide which transactions they want to include. All a node can do about it is complain to itself.

> Satoshi from the Bitcoin white-paper chapter 12 'Conclusion' : The network is robust in its unstructured simplicity. Nodes work all at once with little coordination. They do not need to be identified, since messages are not routed to any particular place and only need to be delivered on a best effort basis. Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism.

First, you have to understand what 'consensus' actually means :

> https://en.wikipedia.org/wiki/Consensus_%28computer_science%...

> A fundamental problem in distributed computing and multi-agent systems is to achieve overall system reliability in the presence of a number of faulty processes. This often requires processes to agree on some data value that is needed during computation. Examples of applications of consensus include whether to commit a transaction to a database (or, for example, committing blocks to a blockchain), agreeing on the identity of a leader, state machine replication, and atomic broadcasts. The real world applications include clock synchronization, PageRank, opinion formation, smart power grids, state estimation, control of UAVs, load balancing and others.

Nodes are the agents in a multi-agent system enforcing consensus.

Nodes accept incoming transactions and validate them. Miners don't. Nodes replicate transactions to other nodes. Miners don't. Miners take transactions from nodes, and order them in a block, and perform a hashing function on them (the only thing they do). Miners pass the new block to the node. The node validates the transactions in the block. Miners don't. The node validates the block. Miners don't. The node replicates the block to other nodes. Miners don't.

There is only one function that miners do. They take transactions, put them in a block, and hash them. As soon as a miner produces a block that any node determines does not obey consensus rules, it is rejected. It doesn't even matter if another node has already accepted, because consensus is aligned with all nodes. Any node that replicates non-consensus blocks or transactions is itself rejected.

So nodes accept the transactions, validate the transactions, replicate the transactions, maintain the mempools, validate the blocks, replicate the blocks, serve the blockchain, and store the blockchain. Nodes even define the PoW algorithm that miners have to employ.

Nodes maintain the protocol, not miners. It is thus. It has always been thus.

See for yourself. Download it.

https://bitcoin.org/en/download

It's currently at 0.14.2

https://bitcoin.org/en/full-node

> A full node is a program that fully validates transactions and blocks. Almost all full nodes also help the network by accepting transactions and blocks from other full nodes, validating those transactions and blocks, and then relaying them to further full nodes.

You should probably question how such a fundamental misunderstanding of how bitcoin works comes about. Is there a source for your opinion?

>in particular, so-called mining pools, headed by a handful of individuals, are very influential.

He mentioned that.

I don't see how this is a good thing? If what you are describing is true, it ends in those rich enough to buy the majority of nodes in the network, being able to control the entire blockchain. Pay-for-power doesn't seem like a good solution for governance.

One aspect of his argument that seems insufficiently explored is an apparent assumption that governance is primarily a binary state, either present or absent.

It's important to recognize that different approaches to governance have different levels of effectiveness and efficiency, and one of the most important aspects of blockchain is how it presents the first real improvement on the present state of the art in governance, or the first real competition to our current forms of government. It can help consensus to be achieved more quickly and efficiently and can make corrupt government more difficult. There are further improvements to blockchains being made to make amendable blockchains where changes to blockchain protocols and contracts can be tested in sandbox environments, essentially systems in which laws and contracts can be tested to see if they produce the desired results before implementing them. The Tezos blockchain is the most notable emerging example of this.

All of these improvements present much more powerful tools for aiding just governance than our forebears had when they created the constitutional democracies that presently govern the world. Governance is not some Platonic binary that is either absent or present, but it is an ideal towards which we're always striving and taking pragmatic steps to implement. Blockchains afford us new tools with which to achieve better governance. They are not an end in themselves or a replacement for traditional governance so much as a means to implement it more efficiently.

And furthermore that DTLs are a tool for enforcing corporate governance. It's a way of imposing it on organizations that otherwise would not exist.

DLTs are inefficient by design. The energy consumption is unsustainable with the technology as it stands. For example Bitcoin consumed an estimated 40 million KWh in the past 24 hours - 137KWh per transaction. Enough to power ~1.3M American homes. Many of the alt-coins are even worse.

Source: http://digiconomist.net/bitcoin-energy-consumption

I wonder what's the energy consumption of an average credit card transaction (including keeping the infrastructure, charge backs etc.)...

From the article:

VISA Network Statistics

VISA's estimated annual electricity consumption (TWh) 0.54

Number of U.S. households that could be powered by VISA 50,000

Electricity consumed per transaction (KWh) 0.00651

Number of seconds the electricity consumed by 1 VISA transaction could power 1 U.S. household 19

Number of VISA transactions that could be powered with the electricity consumed by 1 Bitcoin transaction 20,983 `

A decentralized network has trade offs associated with it.

The more important point is that VISA is broken by design. Every day hackers steal credit card info and leech millions from the system, which is included in the fee you pay. The only reason it keeps working is because hackers aren't sufficiently sophisticated yet.

The solution, of course, is to store a private key on a hardware device, not have the private key be 16+3 decimal digits and an expiration date.

That is entirely unrelated to a decentralized or centralized design. One could build a centralized CC network where we don't need to transmit credentials to third parties in order to make purchases.

I agree with you, but this is in principle a separate issue. We would like to aim for a system that has both the security of Bitcoin AND the "efficiency" of, in this example, VISA.

That would be great, but what if such a system doesn't exist? Pointing out inefficiencies in Bitcoin isn't very useful when no alternative exists to reach the same level of decentralization.

i think its a fair argument to claim that bleeding edge technology is inefficient during its invention phase.

the very first fusion reactors arent all that efficient, either.

The very latest fusion reactors aren't efficient either, still under unity. Maybe we'll have commercial fusion power in 30 years...

I used present tense for a reason.

Gold is also inefficient by design. But it's been successfully used as a store of value for thousands of years. It causes miners to expend large amounts of energy to extract gold from dirt. "Inefficient by design" misses the point because proof-of-work is the feature, not an inefficiency.

I've written about the similarity between gold and Bitcoin here: https://runeksvendsen.github.io/blog/posts/2017-06-14-bitcoi...

This argument certainly has some validity (see also Ensmenger's project to understand the environmental role of computing in general: http://homes.soic.indiana.edu/nensmeng/enviro-compute/dirtyb...).

However, it only goes so far, since other consensus mechanisms could have lower energy requirements. Proof of stake, e.g., (if it ever gets off the ground) could change the game. Similarly, if the economics of proof of work were re-jigged, it isn't impossible that the energy required for mining could be dramatically lowered.

But, as it stands, Bitcoin, in particular, has a shamefully large environmental footprint.

Here are some things you can do in Bitcoin today:

- Send any amount of money anywhere in the world. Fee is around $1 - Be your own bank. Your money cannot be frozen or seized - Use a service such as put.io or VPN without giving up your identity (pseudonymouysly) - Exchange Bitcoin for cash when traveling in countries such Thailand more cheaply than ATMs - Buy controlled substances, for medicinal or recreational use - Store any amount of money in your head, on a usb stick, or on paper. If price movements worry you, just hedge, a service offered by several companies - Bet on sports regardless of your geographic location

Sounds transformative to me.

I don't understand why "competition" should not work? Switching currencies is easier than switching citizenship. There are plenty of alternative cryptocurrencies with different rules. User can switch to different ones (and Ethereum is quite a challenger at the moment).

The network effects are great, because otherwise everything would explode into a million different currencies.

Currencies need to have systems in place that work to make them stable and preserve value, otherwise they're just tools for transactions.

This might be a better state of affairs if currencies are backed by something exchangeable (e.g., joules of carbon neutral energy, etc...). We don't have many currencies like that in the world, as I understand it. Most are essentially contracts between governments that may or may not end in violence.

SolarCoin is one such effort.

Right now it is true that there are a variety of cryptocurrencies, but I think the authors' point is valid that, due to network effects, in the future competition will be harder as existing players become more entrenched (no matter how flawed they may be).

I was having a similar conversation with a colleague given about 3-rd party enforcement. The news that a Jaxx wallet user had $400,000 in Bitcoin stolen just came out. [1] Who do you turn to reverse that? There's no one really. I'm not sure DLT's are mature enough for serious global investment yet.

https://www.cryptocoinsnews.com/users-report-losing-400000-d...

Interestingly, the way things are right now, when it comes to governance model on a global scale, the Big Bad Banks are more decentralized than Bitcoin or any other crypto currency.

Even if it weren't so, I still don't get why total decentralization is an absolute good thing.

Nature seems to be a symbiosis between centralized and decentralized systems - at every level; extremes (too much or too little centralization) will lead to isolation/extinction or explosion/implosion - think biological systems or stars in galaxies.

I disagree with my crypto anarchist friends who believe that changing the money system will change society (eg. society is a function of money) and I tend to think that the relationship is more symbiotic - society has to change in order for the money to take other roles.

Even so, given human nature, it is not clear if a totally decentralized monetary system is a good thing for society as a whole.

People trust 'authorities' more than they trust math written by a bunch of 'core' devs and that's because the former can easily apply brute force and coerce the latter. Yes, we're still primates and the bigger/stronger argument is still valid.

So I don't think Bitcoin will dramatically change society, but some form of symbiosis between the current banking system and the crypto currencies will emerge eventually - and then we can talk about centralization at a whole different level. Either way, there's no escaping it.

What this article is missing is the word "decouple". Cryptocurrencies decouple the many roles that are involved in maintaining and using a currency. It doesn't "solve" governance issues, it breaks them into smaller issues that can be (and should be) tackled in isolation.

Anyone who doesn't see this and argues "we should just go back to the way we were doing things before" is missing the point.

The economic benefit of mostly automating governance is huge. Large financial institutions push so much through COBOL/DB2 on mainframes. The cost of updates to the contracts is horrid and mostly manual taking months if not years. The biggest loser is IBM and it's largest z/OS clients.

If there's a new argument to be had here (I'm doubtful, it sounds like a re-hashing of governance issues that have played out over the last year), it's this claim:

"This rule-making is what we refer to as governance."

This conception of governance is the premise for the conclusion, what Lehdonvirta calls a "paradox":

"And this leads me to my final point, a provocation: once you address the problem of governance, you no longer need blockchain; you can just as well use conventional technology that assumes a trusted central party to enforce the rules, because you’re already trusting somebody (or some organization/process) to make the rules. I call this blockchain’s ‘governance paradox’: once you master it, you no longer need it."

My own analysis draws on a more expansive definition (from Introna; Saurwein et al.): http://iqdupont.com/assets/documents/DUPONT-2017-Preprint-Al...

This expansiveness is necessary, as Lehdonvirta recognizes. Contracts are not just enforcement, they also encapsulate the processes of making ("rule-making"), or better, negotiating contracts.

So, are we authorized to go from a rule-making notion of governance to the conclusion that once this is addressed blockchain technologies will be redundant? Lehdonvirta doesn't give us any analysis of this move, but I don't think so. Rather, we need to recognize the contested forms, which are the essence of governance, and then create a socio-technical structure around them. Consider: double-entry bookkeeping is just as much a technology for governance as blockchain technology (and, of course, they share a historical lineage). Does double-entry bookkeeping go away because we "address the problem"? Hardly. Rather, we need to recognize the ways that it has developed, and by whom, and for what use. Just like blockchain technologies.

I agree with this in as much as I don't think cryptocurrencies are ever going to replace 'fiat' currency. That doesn't mean that they don't provide economic value or are worthless, however.

Especially in places or by individuals where fiat currencies are seen as corrupt.

The article didn't discuss that issue.

It does if you take USA's "governance of Fed Reserve Notes" and EU "governance of Euro" as examples of the author's "governance of technology" or "governance paradox".

Yeah, I was specifically referring to the crypto ideologues who have a fundamental distrust of fiat currency and think that bitcoin somehow solves governance problems. The eth hard fork to protect the investments of developers and early adopters should have disabused people of that notion.

This article pretty well sums up my overarching opinion that, at this point, bitcoin is the only actual killer app for blockchain. I'm always looking for the next kill app, but haven't seen it yet. With bitcoin, the idea of no governance or centralization is very much a feature, not a bug. When you get to other blockchain solutions (like stocks or real estate), blockchain just becomes a code word for immutable, public history, which is doable with many different technical means (not just a blockchain).

I think it makes a lot of sense to build a DNS system using contacts. Names can be auctioned off and given automatically to the highest bidder. It is also possible to set up a contract where you could trustlessly sell names. "Send $200 to an address and you will get the name". This solves the prisoners dilemma that is mentioned in the video at least for your dns addresses. There is an auction like this in progress already, and you can participate now if you like http://ens.domains

Ya, that's not a bad point, I guess really any completely virtual item that distributes on a first come, first serve basis could work. That's sort of a generalization of bitcoin itself (if you think of the proof of work is a first come claim on the new bitcoins).

You could do even more interesting things than that trustlessly. For example say, you own a valuable domain. You could borrow money and use the domain as collateral. If you do pay back, or stop making monthly payments the domain is automatically and trustlessly transferred to the lender. Or it can be put up for a trustless public auction with the proceeds going to lender to repay the loan and the rest to you, the ex-owner of the domain who failed to pay back his loan.

The cool thing is that it's possible to build all of this today and people are working on it right now.

I always thought of bitcoin as a commodity, not a currency. It seems to solve the same problems and follow the same rules. E.g.: a commodity (such as gold) can not be created, but it is an important feature for a currency. Without inflation it will never be a good choice for currency anyways because it will always be a more interesting to hold on it rather than use it.

If bitcoin achieved (a big if) wide adoption, it would be like keeping all your money in an index fund whenever you're not actively spending it. Its value would follow the growing economy.

Except deflation instead of inflation. Instead of sticky wages you'll be pressured to drop your hourly rates. Borrowing money would increase the cost of the loan, depending on the rate of value increase, you're looking at negative interest rates. Everything about deflation makes zero sense.

You've identified who suffers and who benefits from the reversing of value positions caused by deflation vs inflation.

But you haven't explained why its "worse"? So borrowers are disadvantaged compared to lenders (savers).

And wage earners are in a better position relative to wage payers.. ? That's what I take away from your statement.

But, one's ability to buy things seems to be improved...

Should we want an inflationary economy more college-tuition, healthcare-cost-like... or computing & software-like? Continually falling prices for all things computing related have done wonders for that industry no?

Would consumers be better or worse off having to spend less on food clothing housing energy? Would they have more or less disposable income with flat or falling prices?

Ok now assume increases in those costs... better or worse off? More or less disposable income?

> But, one's ability to buy things seems to be improved...

It's only improved if there is a lot of investment and new / more products coming out. deflationary currency promotes holding on to your money so that it goes up in value, but if everyone does that there will be less products / services and the value of the currency will ultimately go down. If currency has some inflation, then it's used as a transaction currency so that you want goods rather than currency, so the product becomes the important thing. If you have too much inflation however you get way too much money for the amount of products, so you want stable inflation.

Won't interest rates be low if everyone is saving?

Won't there be more investible cash because a lower percentage of one's wages is devoted to commodities, and essentials? As well, there is less of an incentive to stockpile or "get ahead" of future price increases.

So.. more left over to invest?

Does expectation of future flat or lower prices give you confidence to plan a vacation, invest extra money, etc.. or would you prefer to worry about food, gas, and other prices going up in the future? (along with your sticky wages making your real wage go down)

In fact, I 100% agree that savings and investment are key to future growth, technology and the whole enchilada. Which is why I don't support stealth tax of inflation, or of governments debasing the currency and stealing wealth from citizens.

Can you clarify why this is the case? This seems to just describe inflation as if it is a net gain, meaning you wouldn't actually realize gains because the aggregate of goods you buy would increase proportionally.

> it would be like keeping all your money in an index fund whenever you're not actively spending it

But without even the pretense of funding businesses and actually participating in the economy. Your money can grow on hot air and wishes alone! Why don't we give all people some bitcoin, so everyone can grow richer and richer without doing anything.

There's plenty of hot air and wishes behind regular currency as well.

I have a plan to double the US GDP in one year:

    1. I'll pay you $1 million to sing a song for me.
    2. You pay somebody else $1 million to sing a song for you.
    3. Continue doing this for n turns.
    4. The last person pays me $1 million to sing them a song.

The US GDP is around $20 trillion. That means we only need to set n to 20 million and we now have a $40 trillion economy.

Wouldn't somebody somewhere in this kind of transaction have to pay the VAT, thus rendering this impossible?

The premise itself is fiction. The P in GDP doesn't stand for exchange or transaction. It stands for "Product." It measures the net amount of new wealth, not how many times existing wealth is transferred among parties. If I sing you a song and you pay me $1 million dollars and this process continues back and forth, the net amount of value when we stop is still $1 million and the net change to GDP is zero.

People indulge a lot of strange and wrong ideas about economics and, not surprisingly, those bad ideas are typically well aligned with their preferred world views.

Services are also part of GDP. If I pay you to sing, that's part of GDP.

That's true, but it doesn't salvage your argument. Your accounting fiction isn't a 'service' for the purposes of GDP.

Yes it is. It's a pretty common criticism of GDP.

The other comment had it right though - taxes would kill this scheme.

"It's a pretty common criticism of GDP."

...with no more veracity than your hypothetical. You don't understand what GDP measures. You've allowed yourself to believe that the economists involved are naive. You are correct, however, that this sort of bad thinking is common. Very common.

If I find a shiny rock and sell it to you for $100 and you find a fossil and sell it to me for $100, that's $200 added to the GDP. If we trade rather than pay each other, then it's $0 added to GDP. The same goes for services. If I mow your lawn, paint your house, hypnotize you to quit smoking, or sing you a song - all of those things (are included in GDP.

When you pay for entertainment it's 100% included in GDP the same way as when you pay for somebody to inspect your car.

Like it or not: Gold is money. And Bitcoin even works better as money. And of course it is used at some point. It just doesn't need to be invested into the economy to increase value. So theris an alternative to betting in the pyramid of debt.

Gold is a commodity, it can (and was) used as a currency but not as a very good one. For a good useful currency it has to have a stable price (this is why some countries prefer to use other countries money rather their own). It also has to be widely accepted. Gold is not very liquid nowadays, if I come to a car seller and throw a gold bar at them, I will most probably not get a car.

Takeaway conclusion is existence of a sort of upper bound on the economic potential of blockchains:

>Perhaps blockchain technologies can still deliver better technical performance, like better availability and data integrity

The supporting argument is so tight that it never even invokes the repeated failures of Bitcoin at the exchange/storage level: Mt Gox, wallets et al.

A while back I wondered if networks like facebook, electrical grids should have more direct user decision making.

https://news.ycombinator.com/item?id=14293114

I think eventually networks need to figure out distributed decision making.

Here's[0] an interesting take on a possible way forward to achieve that, very much inline with the recent ICO trend.

In general I think the token design space is an extremely interesting one, and seeing how different models lead to different social structures and outcomes will be extremely interesting.

Of course this is not new (currently reading Debt: the first 5000 years), its just radically easier than before, to design, deploy, and use. As a result we'll see an explosion of variety, diversity, and competition, which'll be fascinating to see.

Already the differences in ICO mechanisms are extremely interesting, though they have a long way to go.

[0] https://blog.bigchaindb.com/tokenize-the-enterprise-23d51baf...

I doubt facebook does it you need tokens to buy out existing shares or something. To not get sued. Also, tokens get traded and accumulate.

There needs to be some way to manage competing interests fairly(whatever that means) and efficiently.

This is an excellent analysis: insightful and to the point. I'd love to read a counter-analysis that can objectively argue against what I see as the central point here: "Blockchains still need good governance, but once you have good governance in place, you don't need a blockchain."

Here's a thought: I don't think it's black or white, governance solved or not solved. I think it's varying degrees of decentralization in governance.

Try to come up with a system that has more decentralized governance than Bitcoin.

The core developers in bitcoin don't have all the power. Coinbase doesn't have all the Power. Each user doesn't have all the power. Miners either (if they abuse their power, POW function can be changed)

So basically while bitcoin governance is not perfectly decentralized, its much better than anything else.

You can try to come up with a system where people vote. But the votes have to be collected and analyzed somewhere, centrally. So you still have central governance.

So yes, while 100% solving governance would make bitcoin useless, bitcoin can improve governance (compared to federal Reserve, for example), while providing a lot of value from this decentralization.

Blockchain already transformed economy; it brought fast international payments with small fees.

dollar for dollar, traditional money transfer companies are faster and cheaper. unless the user is trying to conceal the source of funds or is evading capital controls.

You could claim the blockchain will transform the economy some day, but to claim it has is plainly false. It's still a niche system, and Bitcoin's seeing rapidly rising transaction fees (https://bitinfocharts.com/comparison/bitcoin-transactionfees...) because of the block size issue right now.

One of the reasons there are fees for international payments is to comply with the legal requirements set up by governments to monitor and control such transactions.

The cost of transferring FX wholesale is near zero. If a bitcoin based processor implements the controls, the costs will be the same as a regular payment provider.

So bitcoin can only become cheaper than tradition payments if you bypass the legally required controls.

While you're not wrong, the fees for international payments vary wildly depending on how you do it, which service or bank you use, how much you transfer etc. Which makes it hard to sell the "its about governance" line for justifying those fees.

Yes, as long as you don't want to convert your crypto currency into fiat currency at either end.

The article ignores incentives - that the effort in trying to find a new block may be better than the double spend. You'd have to buy a big ticket item, and get really lucky as well so you have a fairly small window to catch up and get head. So bitcoin works partly because the incentives to be an honest member outweigh the potential benefit of attack vs the cost and risk of simply not winning in the window within which you can double spend.

I'd consider some of the other uses of block chain such as permission-based approaches, and the other applications like luxury goods in supply chain to prevent counterfeit goods from entering.

Well, there are some improvements over existing systems (e.g. fiat money):

1. Less costs to switch to a competitor comparing to banks and states which leads to 2. The governance body and all influential members are really in need of public approval of their actions since that is exactly what makes a coin worthy. If they change protocol in a drastic way, the price will immediately plummet leaving them in tatters 3. Same mechanism prevents conflicts within the community

In general I would like to see more about the role of law in economics and possible tech implementations of it (meta-protocols?)

If we're talking about "mass" adoption, which suggests consumer-level adoption?

Point #1 is exactly not what you want. It means your currency can lose value almost instantly. Fiat currencies can do this, but only rarely actually do.

The most disruptive thing cryptocurrencies will do is undermine the legal distinctions between currencies, commodities, and stocks. There's no real difference between any of them, but they are treated legally quite differently. Cryptocurrencies will flood the gaps in between these categories with so many examples that it will DoS the legal system with questions it can't answer, social adoption will outstrip courtroom resolution, and there will have to be a post-hoc reckoning with a new legal framework.

Because bottom line, the only thing it improves is that there is no longer need to move the money around in armored cars, and that is not high impact in the bottomline of the economy

You lose the following: 1 - Ability control monetary policy 2 - Reduction in theft via cost in effort (same thing as with e-voting and rigging elections)

Because of that you have seen that blockchain stuff works on countries where 1 is badly handled. everywhere else nobody really cares except for the hype.

It's also convenient for purchasing illegal stuff instead of having to go trough stuff like western union (if you think BTC fees are huge I have a surprise for you). Surprisingly acquiring bitcoin was the hardest part of acquiring controlled substances (coinbase transaction failed twice with my credit card and had a tedious registration process requiring photo, scan of ID, etc. etc. - ended up buying from localbitcoin using bank transfer but it felt risky and the markup was considerable) - the rest was as simple as using a online shop and it shipping to home address - even got free shipping for a bigger order :)

You are right of course, i would argue though that that use case is a deterrent of mainstream adoption rather than an incentive.

Edit: proper english.

I think for the libertarian crowd (which seems to be a big chunk of the bitcoin enthusiasts out there as far as I can tell) the fact that a government can't easily enforce any kind of monetary policy on bitcoin is a feature, not a bug.

I think that the core value crypocurrencies and blockchains provide is a distributed system of trust. I also think that we people in developed nations have been spoiled by our trustworthy institutions, relatively speaking. I don't know too many people in US/UK/AUS/JP hesitant to put money away in the consumer banks, take out mortgages, or file disputes in the state courts. Those systems work well enough, with acceptable speeds for most use cases.

While crypto technologies are improving, they have some glaring drawbacks:

- The recent BTC confirmation time (transaction processing duration) was in days[1].

- The consumer loses significant protections because transactions are final.

- On a broader note, no centralized controls or responsible entities means no one to point fingers at when something goes wrong.

- There are very steep learning curves for all participating parties.

These are all being worked on through technology improvements and new blockchains, but they're still issues that prevent blockchains from displacing existing systems. I think they could one day change everything in an Innovator's Dilemma fashion, but not anytime soon (5-20 years). There is already staunch opposition to using clearly superior technologies due to cultural factors, for example:

- Americans won't use chip readers partly because the magnetic strip was already widespread[2].

- Developed nations don't use mobile chat operating systems such as WeChat partly because they already had laptops[3].

So in the case of blockchains, not only is there an overwhelming opposing cultural force, but also they happen to make inroads in sensitive industries such as finance/contracts, and the technology is not superior on many levels. This would make adoption very difficult.

Where it will work

However, some people don't have such great institutions. Look at how successful BTC has been in turmoil-ridden South American nations such as Venezuela and Argentina[3]. The inflation is out of control, and consumers don't trust any of the banks or institutions. In this environment, the blockchain is leaps and bounds better than anything else that these consumers have access to, so it's immensely valuable. You'd be willing to wait several days for transaction clearance. You wouldn't care that the transfer is final. You'll do whatever awkward dance it takes to operate and secure a Bitcoin wallet. There's no better alternative, and financial asset security is important.

I think characteristics of an ideal market for blockchain technology today could be:

- Very low trust among participants.

- No trusted central authority.

- Expensive, long, or nonexistent arbitration cycles.

- High transaction costs.

Its most compelling value is the provision of trust where there is none. An example where this might work well is in the specification and mediation of international contracts for small businesses. There is currently little accountability after getting burned in an international transaction with a small entity, as a small entity. If there were a standard trusted registry of company reputation, transaction histories, and contracts, then it could go a long way to building systems of trust that enable more fluid trade afar.

[1] https://blockchain.info/charts/avg-confirmation-time?timespa...

[2] http://www.digitalcheck.com/emv-will-usa-be-ready/

[3] https://techcrunch.com/2016/06/01/it-might-be-time-to-stop-l...

[4] https://reason.com/archives/2016/11/28/the-secret-dangerous-...

and a distributed system of trust means a lot of well paid jobs (accountants, lawyers)will... not be necessary

Please give a single example of how blockchains will make lawyers or accountants necessary.

I said it make then not necessary.

The "Look at the popularity of Bitcoin in [country]" argument always turns out to be made-up rubbish.

I did actually try tracking the Venezuela hype to its source. You have linked the Reason article as a reference, but if you actually read the thing, its title is "The Secret, Dangerous World of Venezuelan Bitcoin Mining: How cryptocurrency is turning socialism against itself" and the article itself is an unhinged libertarian polemic fiercely advocating Bitcoin as a way to avert the SPECTRE of SOCIALISM and REGULATION. One of their interviewees had been arrested for stealing electricity to mine bitcoins, which the author describes as a "government crackdown" on "freedom" because "bitcoin mining is arguably the best possible use of electricity in Venezuela".

A story in The Guardian in the wake of the Reason story appears to be where the rest of the press picked it up. It spoke of some Venezuelans relying on Bitcoin for "basic necessities" - and was based on interviews with a Bitcoin exchange owner, one of his employees and two of his customers. The author had previously written similar stories of Argentina and bitcoin. https://www.theguardian.com/technology/2016/dec/16/venezuela...

These two questionably-founded stories were echoed and elaborated upon by the rest of the press, including - amongst many others - the Washington Post claiming that Bitcoin mining is "big business" in Venezuela (which it in no way is), the New York Times claiming that Bitcoin has "gained prominence" because of Venezuela, and BBC News repeating claims from a Bitcoin boosterism blog - all of this being factoids repeated in a media game of telephone.

The Venezuelan volume on LocalBitcoins at the time was on the order of 300-400 BTC/week, which isn't nothing, but is negligible in the context of a whole country, and tracked fairly closely with LocalBitcoins usage in other countries.

tl;dr no, Venezuela isn't a thing either.

Thank you for your research into this! I found it difficult to locate good sources too, and that fact is worthy of more disclaimer than I gave. I think you're right in giving any claimed causality in new territory a good hard knock.

The rate of usage growth could give more insights than just current volumes:

https://coin.dance/volume/localbitcoins/VEF

It could indeed be just a blip, but would you agree that there exist reasonable incentives for usage of DLTs in unstable economies?

> It could indeed be just a blip, but would you agree that there exist reasonable incentives for usage of DLTs in unstable economies?

tl;dr no. Cryptocurrencies (we're not talking about the general euphemism "DLT", your question is about cryptocurrencies and specifically Bitcoin) don't solve any of the problems people have in that situation. When every story about "Bitcoin in [troubled country]" has turned out to be made-up rubbish, this leads me to consider all such claims wishful thinking on the part of holders.

Further on this: I'll just have a little rant.

I'm writing a book on Bitcoin/blockchain https://davidgerard.co.uk/blockchain/ and have taken to researching Bitcoin/blockchain stories that make it to mainstream media - because this is what ordinary people hear about it - and tracing them to their sources, because far too much of what I'm trying to use as sources just doesn't check out.

In almost all cases they're complete BS started by Bitcoin/blockchain promoters. Every "Bitcoin adoption in xxx" story is rubbish. Most corporate blockchain adoption stories are rehashed press releases, usually from IBM.

Blockchain marketers consistently claim some prominent company "is using" a blockchain when there’s just been a press release that they are "investigating" running a future trial. This is because an "investigation" is cheap, and telling Beleaguered Bob in the office to look into this "blockchain" stuff is worth the PR value in showing you're fully up to date with current buzzwords. "Researching the opportunities" could mean anything, but pretty much always does mean nothing.

If you see a use case that catches your attention, a web search on the company names and the word "blockchain" will often track down the original press release. Check very carefully which details are clearly substantiated in the present tense, and which are (what's a good word) aspirational.

Journalists who bother actually picking up the phone and talking to people, e.g. Izabella Kaminska at FT, get a barrage of personal abuse from Bitcoin advocates, whose social skills really haven't gotten any better in the past several years.

The Bitcoin press is possibly even worse - it pretends to be news coverage, but it's actually advocacy blogs posting any boosterism that crosses their path, because what their readers want is reassurance that this is the future and their holding will go TO THE MOON. The best of them is probably CoinDesk, and even they've never seen an unreleased hype they didn't like and run an enthusiastic article on. The mainstream press keep assuming all this is specialist coverage that's done with journalistic intent (rather than advocacy from holders) and copy'n'pasting it.

Even when the Bitcoin blogs are trying to do real news, they're inexcusably sloppy, and you really do have to check every factual claim individually.

tl;dr Bitcoin journalism is bloody terrible.

Interesting points about enforcement.

But I think the real barrier to adoption is that most people don't mind using centralized systems. If their Visa card works when they swipe it, they don't think beyond that. If it's easier for the end user when systems are centralized, breaking people out of this mindset will be very difficult.

I'm fairly pro privacy, but where it comes to currency, I don't see the benefit.

I certainly don't see the benefit of burning the amount of energy the average bitcoin transaction is now responsible for, when (as you say) I have Visa.

And with Visa I can charge-back if I get ripped off. Bitcoin is, AFAICT an actively worse proposition for me.

There are currencies with governance built in: PIVX and DASH are the two main exampled I know of.

Basically the nodes that have a stake in the system are allowed to vote on the direction the project is going.

My personal impression is that currently this model is still very rudimentary, but in the future I could still an almost autonomous system taking off.

the article is spot on when it comes to Distributed Ledger Technology (DLT) but misses the point of Bitcoin. Many in the community cite the lack of governance as a strength of Bitcoin. It's resilience is a virture because it becomes difficult to corrupt, unlike centralized governance of traditional payment methods.

I think you might have missed the point of the article - bitcoin is still governed by a small group of people, but its governance is informal and chaotic.

It is not governance-free.

not small at all. any substantial change needs buy in from users, miners and developers. not to mention companies.

Practically, mining has become relatively confined to a few parties, individual users have fairly little power and the developers hold quite a lot.

Regardless of relative size of this group, governance is opaque, political and chaotic, not either absent or purely mathematical.

> Many in the community cite the lack of governance as a strength of Bitcoin.

Bitcoin has opaque governance; it does not have a lack of governance.

> It's resilience is a virture because it becomes difficult to corrupt

It is not at all difficult to corrupt. (Arguably, since it's fundamentally based on “them what have they gold, make the rules”, it's foundationally corrupt and takes nothing additional to corrupt. But, in any case, all it takes to corrupt it is will and money.)

opaque? have you seen the bitcoin dev mailing list? or the github issue list?

your second point, what are you basing that on?

I agree with the article yet the article fails to address a large benefit of DLTs, reducing transaction/3rd party fees. A ~2% reduction in costs is still enormous at scale.

Another benefit that is overlooked is adaptation. Once mature, creativity and innovation will happen faster with DLTs.

I do not believe that a deregulated system can catch to massive economic scale because there is a trust involved with currency.

The minute a currency is distributed with no regulation it can be monopolized and its price shifted up and down by the power of the monopoly.

How did blockchains start to pick up the same grammatical quirk that "chiropractic" has? The blockchain, a blockchain, blockchains, blockchain technology, fine. "so many people are so excited about blockchain today"? Bizarre.

Bitcoin and the rest of cryptos need an IETF-style organism issuing standards and guidelines... that could solve many of the governance problems, including forking dramas (SegWit, DAO, etc)

I pose this as a question as much as a statement: Bitcoin does not have to solve the governance problem. It need merely perform some functions better than a fiat currency.

Consider economists' Taylor Rule. It represents an effort to impost constraints on a bureaucratic institution and how people manage the dollar. Cool, we pass a law called the Taylor Rule. Now just don't enforce it. People who want stuff are hard to constrain.

In other words, the Bitcoin community doesn't have to be uncompromising and immutable, like its technology, for the currency to succeed—it just has to do better than its alternative (even in narrow applications).

Thoughts?

Black and grey uses, the financial sector is pretty happy with this tool and cyber-criminals too, I suppose.

this is a really great article, because it highlight a very important dialectic that many blockchain enthusiasts, developers, entrepreneurs, and speculators don't acknoweldge. I would however, suggest that the issue of governance is not an "all-or-nothing" choice. Probably some of the blockchain technologies that try to do things like "link to a central bank", will suffer from a difficulty in establishing product differentiation from traditional currencies and transaction schemes; but the blockchain technologies that live on the more distant side of the spectrum (providing an, if imperfect, implementation of distributed trust) like the original bitcoin, will survive.

So the worry is that you need govt courts and police to enforce rules? That's not a great argument. The number of private police today is far greater than govt employed ones. Most international trade disputes are settled by private arbitration and not the govt courts. What's the real worry?

The problem is that at the point where there is a trusted party to arbitrate disputes why do you need a blockchain? It seems ironic that it seems like we need some trusted governance over a system that is literally built upon the idea of distributed trust.

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