Why “blockchain” is BS in 4 slides

* Distributed consensus schemes are not useful only for monetary applications. When they are used as such, there exist mechanisms to commit to a certain fiat price and minimize market exposure to the point where transactions are almost free, in fiat terms.

* The disbursement of tokens and the distributed consensus rewards do not need to be tied together like in Bitcoin. A premined token like Stellar can offer very strong security guarantees without needing mining pools (but of course, any kind of imaginable database is vulnerable to majority attacks, so that means nothing by itself)

* The limited block capacity is a Bitcoin-specific problem that incidentally motivated interesting results in off-chain transactions (Lightning).

* The sorry state of the distributed financial markets says nothing about the technology and more about human greed and the slow capacity of regulators to adapt; critically, smart contracts and distributed algorithms enable control mechanism and hard guarantees that have no old world equivalent, they can eliminate counterparty risks, guarantee solvency and fair arbitration etc.

That being said, 95% of the times the word "blockcahin" is uttered these days, what follows is most likely bullshit.

Specifically, on governance of blockchains (as in: trustless distributed consensus systems, and not as in: merkle chains), I do tend to agree with the tweets that devs have a huge amount of pull, and that this is both grossly under-estimated and under-discussed.

Correct me if I'm wrong - I'm not an expert in blockchain by any means.

A) This isn't true. They also have predictable monetary policy and anonymity (or pseudonymity, in the case of Bitcoin). These can be useful properties, whether or not you agree with their uses.

B) Even if it were true, so what? Censorship-resistant money seems like a pretty cool technology to me.

> Any volatile cryptocurrency transaction requires two currency conversion steps.

Sure, in the absence of merchants accepting the currency that is true. But that's sort of like decrying the internet as useless when it came out because nothing was on it. And listen, if you want to go ahead and make a case that cryptocurrencies are structurally incapable of becoming commonly accepted - by all means, go for it. That is how you attack the concept. You don't attack a new technology by saying it isn't adopted yet:

"Cars can never work because there are no paved roads"

"Credit cards are stupid because nobody accepts them"

If you want to try to make some intrinsic, fundamental case that there is some structural barrier preventing the adoption of cryptocurrencies, that's a perfectly reasonable line of argument to make. Simply stating the obvious, that they are not yet widely accepted, is not.

> Any lottery-based reward creates mining pools, which means a few entities can and do control things.

While true in a certain sense, an analogy here might be useful: Capitalism is centralized, because people organize into corporations, which end up aggregating capital. This is an accurate description of capitalism. However, capitalism is still distinct from what's commonly known as 'top-down economic planning', e.g. communism. The fundamental difference is that the process is organic, and for the most part, empirically, the organic version of this process leads to better outcomes.

Again, perfectly fine to argue that this particular one doesn't lead to good outcomes for such and such reasons. However, to argue that it is centralized, is kind of missing the point. Yes, powerful entities do form, but their power is not guaranteed. Their power is highly contingent upon their continued performance of their duties, and the collective desire to let them keep their place. This powerfully aligns their incentives with the well-being of the ecosystem.

Now, does this mean that that alignment is perfect? Definitely not. Just like in a capitalist economy, those incentives can and do deviate from each other. However, these things do not exist in a vacuum. All tradeoffs must be considered as alternatives to competing mechanisms. And I think the tradeoff made here by crypto-currencies is a good one, relative to alternative options.

> Limit capacity fee death spirals

This whole slide just ignores the existence of payment channels. The author is sufficiently educated to know he's being disingenuous here, so there's no need to respond to it beyond that.

In summary, and I want to be totally clear on this: There are great reasons to be skeptical of crypto-currencies. There are lots of things they don't do well, and there are lots of very serious tradeoffs that they make that are different than the ones we make with government-backed fiat currencies. They pose real risks to certain pillars of civilization and it's not clear that they are on balance good things. But our criticisms of them should be couched in an understanding of those risks and tradeoffs. They offer real benefits in some dimensions, and they have real costs in others.

If someone is telling you that a politically neutral, censorship-resistant world currency is, a priori, useless, you may want to re-evaluate the source. We may or may not like what something like Bitcoin will do to the world - but the idea that it doesn't have the potential to do anything is really quite silly.

But I did think the same thing about Twitter, especially early on when it was constantly broken. And yet, while it was broken people were still talking about it and it was gaining mommentum.

That's the parallel I see here. Enough of the right people are talking about it that it's going to be a thing for at least the near-term future. The whole eco-system can be flawed, but it has momentum.

And even among those that have been scammed, it's in their best interest to keep pushing the virtues of cryptocurrency as long as they have any left to sell.

Would be nice to have a fifth slide explaining friction cost and why it might be a very bad idea to embed ever increasing friction as your formal verification method.

Signal is great but iMessage?

Also, this guy didn't even discuss blockchain tech. Just cryptocurrency.

They claim digital collectibles is a viable business.

[1]http://fortune.com/2018/03/20/cryptokitties-andreessen-horow...

Let me tell you a little story you might want to remember, so you can tell your grandchildren. This is how you might tell them:

"You think algorithms are hard, little children? You don't want to stay up to date? Well gather round, gather round, let gramps give you a sense of human folly and just how far we have come. Maybe that will let you appreciate how lucky you have it.

"Way back before all these modern doodads, gizmos, and doohickeys, back in aught 9, or "two thousand and nine" as we called it, mathematicians were so clueless about algorithms that they made distributed databases resistant to sybil attacks through proof of work doing random-ass hashes. What that meant is instead of figuring out how to prove nodes weren't colluding, we made them prove they were burning oil - or gas - or coal - or sunlight, or whatever they wanted. But they had to throw their hands up and come up with a random hash, to prove that they were really all working on the problem.

"By 2018, the resulting worldwide bitcoin database used 30.1 terrawatt-hours of power per year to perform the work that a $20 dedicated chip could do in the size of a container of tic-tacs. And that $20 includes 100 gb, a dedicated microcontroller, and 5 years worth of alkeline batteries. The database size borders on nil.

"All because we didn't know any better. That is something like $3,848,100,000 in 2018 money - three billion dollars spent on doing $20 worth of work.

"To put this into perspective, imagine that in 1802, Merriam Webster had purchased fifty thousand tumblers, into which it put printed plates, and then hired fifty thousand workers to open each one every few minutes, and count to see if it had managed to assemble the plates into alphabetical order. (This is called bogosort.)

"Well, if you don't know that there is such a thing as a sorting algorithm, if it's unknown to science, then perhaps bogosort is the best you can do. Such was the state of distributed blockchains in 2018.

"So you need to be thankful for what you have. Oh but it's tough! You have to think it through! Well in my day nobody thought it through. We just shoveled thirty terawatts of coal into furnaces and made little kids cry when they couldn't afford gaming equipment anymore, since all of it was being used to get around the fact that nobody sat down and did the math for a $20 distributed database.

"you kids have it printed in black and white. sit down and learn. we had to take electricity from schools and hospitals, to raise the sealevel to where parts of Hawaii had to be evacuated. This stuff has consequences. Learn your algorithms. Trillions of watts died for them."

This stuff could be the makings of /etc/passwd for the internet.

Somebody hasn't been keeping up with proof-of-stake research.

> spammers who want to occupy space forever!!!

Or Ethereum's storage rent proposals.

1) Two conversion steps - since Intercoin is designed to be used as actual currency and not just a store of value, people can pay each other anytime with zero fees. Given enough adoption, people stop cashing out (think PayPal, Venmo etc.) and just pay each other in that economy. They do this to save fees and time.

2) Entity to convert currency: Actually this entity can be a simple market maker on an exchange. Within its economy, Intercoin has sidechains for each community and deterministic pricing, with no market makers. And you don’t have to worry about eg PayPal or Cyprus banks freezing your money.

3) A “private blockchain” requires far more than that if it is to be used for crypto-currency. The main guarantee is that there are no forks of the log, aka double-spends. Intercoin lets every community run their own distributed ledger, so you don’t need to search the whole world for double-spends. That makes it so efficient you can even do micropayments (Netflix, Basic Attention Token etc.)

4) Proof of Work/Stake/blah. Intercoin letting communities run their own ledger the way Wordpress lets them run a blog, it comes with its own set of challenges as small communities can have very few computers. It has to be secure like your end-to-end encrypted email when you get on someone’s wifi. So we can’t use the traditional stuff. https://intercoin.org/technology.pdf

5) Lottery-based systems create mining pools: yep and in fact any kind of proof of stake creates centralization, while any kind of proof of work creates an arms race that leads to centalization. Intercoin takes inspiration more from XRP consensus protocol and SAFE network design.

6) “Code developers can and do act like central authorities.” If this refers to issuing the Unique Node List like Ripple, or reverting transactions like ETH etc. then that’s not good. If this means putting out a new client of server software and having decentralized adoption then that’s inevitable. Otherwise you get fragmentation like Linux. And even then, there are only a few major Linux distributions. I happen to prefer collaboration on a centralized codebase in this case, but decentralization in everything else. (eg I would be totally OK with WebKit being overseen by the W3C consortium and have new ideas begin as extensions that are finally adopted into the main codebase - think of all the wasted web developer man hours since multiple browsers launched).

7) Protection limited to money wasted - not sure what that means. A person knows their money can’t be stolen. In Intercoin our priorities are A) the overall network must never be corrupted, B) no one can steal your money C) no one can freeze your money permanently, in that order.

8) Transactions vs Capacity. VERY good points here, and all global networks are susceptible to this, as are public facing websites (DDOS etc.) This is why Intercoin is designed to be like the original Internet, with each community able to run its own network and set its own policies. That allows a theoretically UNLIMITED number of transactions per second, not 7 or 1000. Usually each validator includes a free tier for the first X transactions per day, to known members of the network. Networks run their own computers and the consensus algorithm is much cheaper and doesn’t waste half the world’s electricity to work. The validators - being off the shelf computers run by random people — fund themselves through the currency. But they earn money for actually processing transactions, not a lottery.

9) Bad economics - yes this is rampant in cryptocurrency circles (eg people including Satoshi thought Bitcoin being deflationary “sound money” will make people want to spend it, when the opposite is true). Intercoin has among its advisors world-famous economists from diff schools like MMT (Walter Mosler) and Austrian School, Chicago school, precisely for this reason. We want to let communities issue their own currencies and implement UBI on a community level through entirely voluntary means. It brings together people on the left and right.

10) “All ICOs are securities being sold fraudulently” - Intercoin Inc. has raised money through exemptions with the SEC (Regulations D and S) and is now working on registering Intercoin tokens with the SEC as securities ahead of a public offering. Not everyone shirks the law. In fact, we consider tech to be only one of the services we provide for communities. The others are turnkey solutions for regulations (securities, money transmission) and taxes (501c3 for UBI donations, capital losses etc.) so communities can install their currencies as easily as Stripe Atlas lets you open a company.

I hope this addresses it point by point.

If nothing then disregard you.

I disagree with this claim. It depends on whether the token constitutes an investment contract. If the token has utility, was sold as a utility bearing token (rather than an investment opportunity), and if the project possesses an open codebase which token holders can theoretically modify, then I don't believe said token is an unregulated security.

Yet, the vast majority of tokens do in fact function as unregulated securities, which is why these waters are muddled.

Slide 2 & 3: Yes, 1st generation blockchains are slow and have high fees. That's why Bitcoin has just implemented the Lightning Network and there are 3rd generation blockchains like Nano and IOTA that have zero fees and instant transactions. Duh.

Slide 4: False dichotomy. Yes, there are a couple of scams in the crypto sphere, even 5% of the top 100 are scams, e.g. Eos, Verge, Veritaseum. Is 5% 100%? No. Duh + Facepalm.

He says something about distributed trust and then puts 'THIS IS A LIE'. That's not evidence and it isn't an argument.

He states that developers act as a central authority, which as it relates to the rules of creating new units and where they go to, is not true, since those rules are already established for the given chain.

He says there is a fee auction death spiral, which also is demonstrably false. Even bitcoin, with it's ludicrous restriction of throughput by political means, hasn't actually gone through a death spiral from fees which rationally should have made anyone think very hard about its future.

He says almost every exchange is full of fraud. This is debatable, but does not actually have anything to do with crypto-currencies (which is what he is actually talking about instead of "blockchain").

The last slide is basically just venting about stupid things people have done and bought in to, but also has nothing to do with crypto-currencies not working.

It's amazing to me that people seem so certain of themselves while having such hollow arguments.