Systems built on trust, norms, and institutions function better than blockchain

> Venmo is a free service to transfer dollars, and bitcoin transfers are not free

Venmo is not free. There's a cost, it's just hiding.

> Blockchain-based trustworthiness falls apart in practice...

The particular brand of trustworthiness the author is arguing against is indeed a myth, but that doesn't mean blockchain is "crappy technology" or "a bad vision for the future"

Blockchain adds a new thing to the world: digital property that cannot be reproduced for free.

Smart contracts add another new thing to the world: the ability to build immutable software that interacts directly with the financial system.

Both of these ideas are very powerful, and almost all of the interesting blockchain projects are still in the R&D phase.

The hype around blockchain is ridiculous and absurd, but that doesn't mean the technology isn't exciting or potentially transformative.

edit: I actually wrote an article about the "trustlessness" thing: http://cowpig.github.io/bitcoin/ethereum/poker/cryptocurrenc...

Blockchain is actually a technological shadow cast by a sociological proposition, which is then you can trust people to voluntarily deprive themselves of leverage for the sake of the greater good.

Blockchain is essentially a tool for measuring how much leverage different nodes have in a network system. All of the functional premises of blockchain depend on the assumption that the only leverage that exists in a blockchain network is that which can be represented by the various metrics exposed by the protocol. Obviously this is not the case, networks are often stacked with multiple layers, not all of which are visible to instrumentation, and many are deliberately hidden or informally created as the opportunity arises. Cliques form, whether by design or merely as a consequence of some underlying structure or geometric boundary domain, influence builds around them, and sooner or later someone finds the ideal geometric position from which they can become the center of decentralisation.

This is essentially another instance of goodhart's law, which states that the moment any given metric becomes a useful target for optimization, it ceases to be a useful measurement. Or another variation of this same observation, the McNamara fallacy, which can be summed up as the belief that the only factors in a system that count, are those that can be counted.

The problem that proof-of-work blockchain solves is widely misunderstood. It uses proof-of-work to establish consensus over points in time which are universally unique. Prior to the publication of Satoshi's paper we did not have a solution to this problem and for that reason it is a significant advance in technology. I wouldn't call it crappy, it's actually quite brilliant.

For a detailed description see this: https://grisha.org/blog/2018/01/23/explaining-proof-of-work/

In many ways, blockchain tech is the stupidest thing that has ever existed. It is a colossal monument to the inefficiency of human behavior. You are literally throwing energy and immensely valuable computation time out of a window simply because people can't trust each other. It is a massive sink for the destructively self-interested behavior of mankind. The problems that blockchains are trying to solve are not inherent difficulties involved in the tasks that they're being applied towards, they're problems with us. We can design an astronomically more efficient system for accounting, but it would be have to be one that is not being run by stupid, short-sighted apes. The entire overhead of the blockchain is devoted to dealing with a problem that we shouldn't even have, the whole thing is basically made of market failure. If there's any value in it, it's that we can use it to establish objective metrics for just how much value is destroyed by human irrationality and information deficits. We don't need to fix centralized accounting, centralized accounting works fine. We need to fix human beings.

Meanwhile, imagine if every GPU used for mining right now was being used for training neural nets instead. The value in that is nearly unimaginable; we could be making massive leaps in almost every field and industry, because the applications of deep learning to making tasks marginally more efficient are essentially endless.

Gotta love how he begins saying he was bashing the tech in December(when the market was on the rise) just so that no one can tell him "everyone bashes bitcoin when it's going down".

Venmo is centralized. I cannot use it as I live in a third world county with no access to it.

Paypal sucks. It takes 5% from the seller and it has power over your money, they can(AND HAVE IN THE PAST) seize it whenever they want.

I had my salary confiscated once over a mistake in the bank. I telecomute, working for a company overseas, and the fees are stupidly high.

I find your lack of vision disturbing.

"Instead of relying on trust or regulation, in the blockchain world, individuals are on-purpose responsible for their own security precautions. And if the software they use is malicious or buggy, they should have read the software more carefully."

This is also one of the aspects of "the blockchain" that I struggle with. I don't think normal people want this or should be expected to do this effectively. And once you outsource the security (which most everyone will because it's the rational choice, e.g. Coinbase is better at protecting your crypto than you are, John Q Public.) you're no longer in a "trustless" state. The "trustless" pipe-dream (in the consumer use case) all sort of unravels from there for me.

One thing is sure, if you're hanging on to the past you'll always lose in the end.

That's not to say blockchain is the be all and end all, but constantly hunting for arguments why something will never work , is not only terribly boring, but IMO the most counterproductive way to look at anything.

Wow--it's both amazing to me and yet deeply unsurprising that the comments here so far seem to ignore the thrust of the article. Well, whatever--I like how it makes explicit the political theses embedded in current discussion of an "apolitical" technology.

I think the author of this article is making an either/or argument about centralized vs. decentralized trust when this can just as easily be a both/and proposition.

Cryptocurrencies have not yet eliminated and may never eliminate the need for centralized reputation based systems of trust. Centralized trusted systems are more efficient for reasons that may be fundamental and rooted in physics and math, and they can do things that no current generation decentralized system can do. Complex secure computations that are cheap to perform on a server are massively expensive on a block chain or other distributed system.

Yet what cryptocurrencies do offer is a system that levels the playing field between trusted entities and allows a once-trusted but now corrupt entity to be replaced without completely ditching the entire system. That's not true of things like centrally banked fiat currencies. If the current US financial system becomes irredeemably corrupt, this can't really be fixed without risking the destruction of the dollar and all assets and contracts denominated in dollars. A new dark age is a very high price to pay for the replacement of a corrupt or incompetent system.

I think an argument can be made that replacement of institutions will always be necessary at some point. As institutions become large their size insulates them from reality, allowing something like "genetic drift" to occur that gradually erodes their competence. Combine this with the fact that psychopaths gravitate toward positions of power and you have a general tendency of large powerful systems toward decay and corruption over time.

We saw a very concrete example of this in 2008 when banking institutions that had failed badly due to a mixture of incompetence, hubris, and corruption received a blank-check bailout on the backs of taxpayers and the rest of the non-financial economy. It is no coincidence that cryptocurrency went mainstream right after this, since these events demonstrated the need to start thinking about ways to devolve power away from these systems or at least to reduce the cost of doing so.

Side note: I think we've officially entered the cryptocurrency / block chain trough of disillusionment. See: https://en.wikipedia.org/wiki/Hype_cycle

> I would assert that there is no single person in existence who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it

What about Wikileaks? They had all their payments shutdown and then they were able to start accepting payments.

The "use case" for Bitcoin was stated up front. It is to allow censorship resistant transactions. And for Wikileaks in 2010, when their financial transactions were being censored, it worked!

Blockchain is perfect for its original use case, a distributed trustless database. The tradeoffs don't make any sense for a trusted system, i.e. replacing SWIFT or storing titles to property.

This article highlight a really interesting point here:

Trust.

And even if there are the “proof-of-work” people are going to distrust that “it’s a mathematical proof”. Just look at Trumps alt-facts and “fake news”. You don’t need to go even that far to find people putting money under the mattress because they distrust authorities. And even if math is “universal” people are going to mistrust it because they don’t understand it. I don’t think they will ever trust bitcoin. And I think they are in a majority.

>In fact, I would assert that there is no single person in existence who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it, and therefore became a blockchain enthusiast.

I would say that every person running a darkweb drug market would disagree...

I'm seeing more of these "anti-blockchain" criticisms circulating lately. This one makes valid points about problems with the present state of the ecosystem, but the author seems to ignore the fact that these problems are addressable.

His basic criticism of smart contracts is they can have bugs, and they can be costly since they will often involve moving money. Yes, this is a fact. Many potential solutions are out there, but how about these two ideas for starters:

- a crypto-currency where at least accounts for certain transactions can be de-anonymized, so a person can be identified and face consequences when they commit a crime like hacking.

- special transactions with settlement periods in which they can be canceled in the event of a hack, which might be identified by voter consensus.

I honestly thought the author was trolling us (until I read the comments). There are so many holes in his example of ebook transaction. Here's just the two points he made that were the most egregious to me:

>> and that the book — rather than some other file, or nothing at all — will actually arrive

Really? Ever heard of checksums - its used all over the place. And if we weren't able to trust it, I guarantee you that blockchain tech is not the only thing that will break.

>> It’s a complicated way to buy a book! It’s not trustless, you’re trusting in the software (and your ability to defend yourself in a software-driven world), instead of trusting other people

It's like arguing with my grandma about evolution. "But you are trusting the scientists!!". I don't know where to begin.

I read the bitcoin whitepaper about 7 years ago. I find it funny when people talk about blockchain like it's new technology, or like it's a vision for future. It's old tech that has been generally increasing in market value.

Blockchain consensus algorithms are slow and use a lot of power. There may be competing technologies, like Hashgraph, that solve speed and power usage issues in the future. As of now all live implementations of blockchain are underwhelming.

As someone born and lived in a 3rd world country for a better part of my life, I believe Blockchain solves a very real problem. That's equal participation in internet economy irrespective of someone's geographic location. It was thanks to the internet I realized I can also contribute to the world (by creating something people want & writing about something others want to learn). However, when it came to making a living out of that there weren't many options. One of the prime motives for me to move out of Sri Lanka was it will be way easier for me to accept payments online.

PayPal is still not available in Sri Lanka, even after repeated attempts to convince Central Banks and governments [1]. Also, recently Stripe blocked a payment from one of my customers due to high-risk profile. Reason? He used a US issued debit card from Nigeria. I reached out to the person, turns out he was a passionate young entrepreneur who was trying to build a really interesting business. But his geographic location becomes a resistance in a medium it shouldn't.

For me, Blockchain( and Cryptocurrencies) is a reframing of the trust model from heuristics such as geographic location to verifiable algorithms. The Internet protocols enabled us to exchange code, art & virtual goods without geographic boundaries. Then why not money?

[1] https://www.change.org/p/enable-receiving-money-to-sri-lanka...

Blockchains are accounting mechanisms. In their simplest form, blockchains are just a linked list of linked lists that that fulfill the requirements of an easily immutable, distributed and auditable system of accounts.

I'm not sure how the author is attributing so much doom and gloom to cryptographically secured accounting systems, some of which have survived for a decade without a major failure of their primary function (securing digital assets with enforceable contractual conditions and private keys).

> I would assert that there is no single person in existence who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it, and therefore became a blockchain enthusiast.

He hasn't been paying attention to the space long enough: Many traders in contraband meet that description, and used to talk about it at length in r/darknetmarkets, before it was banned. (BTW, does anyone know where they hang out, now?)

A few month ago I clicked through quite a few youtube [0] lectures on "system dynamics," the 1960ies hype technology, and the people who did system dynamics back then are entirely reasonable, well aware of its limitations and the applications are very interesting, but their work got completely drowned in bullshit. Very similar to "the Internet" in the late 90ies, "web 2.0" in the early 2000nds and block chain today.

So block chain is a really cool algorithm, that under ideal conditions can solve the Byzantine Generals problem, but there is at the moment just so incredible much bullshit surrounding blockchains, that it is sometimes hard to separate the wheat from the chaff.

[0] https://www.reddit.com/r/lectures/comments/7jtg5e/dennis_mea...

r/lectures thread, see the videos linked in the comments.

I agree that it'll be hard, if not impossible for bitcoin to work as well as normal systems built on normal trust. However I think we increasingly do need some system of verifiable trust in a world where anonymity is common, since all current forms of trust require it's participants to not be anonymous.

I think he is absolutely right about his dystopian view on smart contracts managing stuff but forgets about that one trusted party we're trying to avoid the most here, that costs us the most money and that we need the least in real life: Banks. That's what we neet the blockchain for.

The TL;DR is:

- blockchain systems still need trust;

- security is not solved;

- blockchains are overhyped and most followers don't want it for the problems serious actors try to use it to solve.

- it has many issues (need for infra, require tech knowhow, etc)

I agree, but I still don't see how it's crapy tech, nor how it's a bad vision of the future.

You have an system that make auditing easier, with one place only for the data to be read and written and yet robust enough because of the duplication.

You have transactions logs tided to identities you can fake organised in a timeline in an open format that is not only very well documented, but being actively tested right now on the field.

You have hundreds of start up engage in a Darwinism race to find out which use case we can make that's worth it on the long run.

And finally, the tech has enough impact to force state actors to create new laws, financial actors to adapt and a huge amount of money to be invested by a lot of people.

So on one hand one very interesting concept. On the other hand, pretty much hate for the sake of hate.

If you love this you should also follow @sarahjeong. Hilariously eviscerates cryptocurrencies for sport.[1] Smart (Cal + Harvard law), unafraid and one of the best up-and-coming tech journalists IMHO.

[1] https://twitter.com/sarahjeong/status/953419544516747264

The blockchain is not currently fit for most "real world problems", because the way it achieves consensus and performance, but there are initiatives like the one below to change that:

https://github.com/Azure/coco-framework

Relevant article. Replying to why decentralization matters

http://muratbuffalo.blogspot.com/2018/03/change-my-mind-abou...

The feature of things like bitcoin that they operate largely outside government control may be useful for things like raising investment in ICOs. While many are rubbish there may be some useful stuff in there.

It’s going to be interesting reading these articles ten years from now.

stopped reading after the intro. this is a guy who is a self-proclaimed luddite and who likes to hear the sound of his own prophetic voice. i love how he emphasized his own words in a “callout”, immediately after the inline text. magazine style. sensible in magazine format. but in a blog? puh-leez.

his opinion is not worth debating, even if there is a kernel of truth there.

Shockingly, technology has multiple uses, some better fits than others.

I think you’re crazy if you buy crypto unless you’re buying drugs, but this man’s lack of imagination wrt a no-trust public record is absolutely boring. Sure, if you’re blind, the world is dark. But we can always close our eyes to pretend—it’s never been difficult to be cynical about technology.

Why is it that whenever this guy says something's wrong with "blockchain", every example he gives is about something other than a blockchain? Like exchanges and smart contracts. Those are not the same thing as Bitcoin and Monero.

HN seems to have a bipolar relationship with decentralization. It's all love until blockchain is mentioned. Then everyone thinks centralization is superior.

Another y-combinator contrarian post of the form "the thing everyone likes is actually crap."

Fortunately for the author I happen to agree with this particular thesis.

I actually like the way this author deconstructs what a blockchain technically is and how it’s sold. And I agree on many points.

However, this is where they go awry:

Instead of relying on trust or regulation, in the blockchain world, individuals are on-purpose responsible for their own security precautions.

THIS is the revolution. And the revolution will not be centralized :)

Blockchains are just one example of it. Kademlia trees and close consensus is another, used by SAFE network. Go look it up.

The whole POINT is, it is very hard not just for someone to tamper with a file, but to cut off access to it. Crypto-currencies also have the added requirement of preventing “double-spending”, which is very hard to do.

EXAMPLE: Why trust the landlord to have keys to open your apartment instead of an electronic lock that lets you set permissions YOURSELF? Use your phone to authenticate yourself instead of facebook controlling it. “Oh what if I lose the phone?” “Then have a backup.” “What if I lose everything?” “Then have M of N friends plus a key derived from a passphrase you know to restore it.” “Ok what about if I get amnesia and lose my phone?” “This is 0.00001% of the population and even Jason Bourne implanted a chip in his own ass.”

This guy doesn’t live in a country where the institutions people rely on have routinely screwed people. The solution is usually “throw more Democracy at it”, which is what can lead to totalitarianism.

Ever read “fuck the cloud”? It’s a good read. Why SHOULD I pay someone I don’t know to store all my files, and delete my local copies?

http://ascii.textfiles.com/archives/1717

Have you all seen just recently what Facebook does? Why would I entrust my data, identity and brand to them?

Have we seen websites censored or DDOSed? Or just broken links to useful stuff?

SAFE network and Freenet etc. are the decentralized future. I agree that Blockchain is only a small part of the future.

Blockchains with one writer are, for example Scuttlebutt. Super resilient.

I also agree that there is no viable medium of exchange that’s fast and cheap for everyday transactions because the way blockchains currently work, they need a global consensus about every friggin transaction. That doesn’t scale. That’s why we launched intercoin.org

If you want to see more about this topic, I just wrote about it: https://qbix.com/blog

No coiners. Its fine, we will listen to them protest for years and years, telling us it cant work, it isn't a real solution, etc, while we invent the future.

This internet thing will never take off, you need a box that screeches, connected to your phone all day long! I can't even get faxes while im 'online'. Pointless.