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If ownership of a house is decided by contracts, written by lawyers, then adding a blockchain will only add issues, since it can get out of sync with reality. And if the blockchain is the source of truth, it means that stealing your house-token will result in you losing your house.

Do you use an intel processor vulnerable to Meltdown/Spectre, or with a vulnerable IME? Do the people you know and love know and understand about these? What if you lose your token? You can't sell your house anymore? Custody of crypto-currencies is a giant headache. It feels like moving away from bank accounts and payment cards and going back to gold coins and bearer bonds. Great for people in the business of selling vaults, sucks for everyone else.

I didn’t say that all the problems have been figured out, but I feel like you are being a little close minded with regards to the idea. Maybe properties would use some form of multi signature transactions so a single person hacking it would not be able to take over ownership. Perhaps there would still be some sort of intermediary.

I am not saying just add a blockchain on top of the existing infrastructure. That does not make much sense. I’m saying replace the existing infrastructure completely.

Ten years ago people didn’t think solving the double spending problem was possible. It’s silly to try to imagine the future of blockchain innovation when thinking about it only how it exists today.

That’s like in 1995 saying that no one would ever want to watch videos on the internet because the download speeds and quality would be so poor.

One end goal of blockchains is indeed that they become the system of record, and that legal agreements are English translations of what the code says rather than the other way around.

That might sound scary, but I'd point out a few things:

1. That future is still a long time away. The legal system is very conservative.

2. These systems don't have to be perfect, just better than what we have today.

Yes, I certainly wouldn't trust ownership of my house to a general purpose laptop or smartphone on which I install lots of other apps and which are optimised for high performance and low cost. I wouldn't trust ownership of my house to any computer today.

But the idea that bank-run paper based systems are 100% secure is not true - they routinely go wrong just through basic mistakes and screwups, let alone actual fraud.

Consider all the cases of ID theft in America. There's a specific kind of ID fraud where someone literally steals your house:

https://www.lifelock.com/education/deed-fraud-losing-your-ho...

Or how about this case where convicted murderers learned how to forge their own release paperwork whilst inside the prison, and then successfully got themselves released:

https://www.cnn.com/2013/11/06/justice/florida-inmates-mista...

Possible because the only thing authenticating prisoner release orders was easily duplicated patterns on a piece of paper.

Blockchains aren't better than what we have today for property.

At least the victim in your deed fraud article was able to recover their property, albeit at significant cost. How are people going recovering funds from the Mt. Gox theft?

Let alone the oracle problem, people keeping a digital asset secure and safe for decades, the chance of the software being 100% bug free first time, the total lack of incentive to run a blockchain node on a registry chain, or the complexity of rolling crypto when the current algorithm becomes too weak in 10-15 years…

Nope. This is yet another problem blockchains are hopelessly ill-suited to tackling.

Just as many blockchains are actually much less private than traditional financial tools, blockchains can actually make theft much more difficult than traditional financial tools.

Banks and paper based systems don't have to be perfect because when they go wrong I have recourse to fix it. The blockchain technologies that everyone talks about have no recourse because they are peer to peer. Because they have no recourse the bar they have to meet is significantly higher than the bar that a bank run paper system has to meet. They effectively have to be perfect. Without that perfection they will have to build in some form of recourse and as soon as you do that you are on the road to duplicating the very things= they claim to eliminate, centralization.

> But the idea that bank-run paper based systems are 100% secure is not true - they routinely go wrong just through basic mistakes and screwups, let alone actual fraud.

Nobody expects bank systems to be 100% secure. Banking -- and in fact the entire free market economy -- would not happen if it was required that the systems be secure. It's just the opposite: it is assumed that bank systems will fail or be abused in all sorts of strange and unexpected ways. This is why market participants will only invest if they have the right to appeal to neutral third party representative of justice.

> One end goal of blockchains is indeed that they become the system of record and that legal agreements are English translations of what the code says rather than the other way around.

It's safe to say that blockchains will never become some sort of indisputable system of record. That is, blockchains will never become sovereign. To be a sovereign and force others to obey your laws you need armies. We have already seen in cases where disputes rise on the blockchains that they get settled in real courts of the real sovereigns. In cases where crimes are committed but the blockchain hides identity you get investigations by, again, real LEOs of real sovereigns.

Blockchain enthusiasts suffer from very fundamental misunderstandings of how economic activity actually happens. This isn't surprising: the vast majority of people have absolutely no idea how the modern global economy actually works. But the blockchain crew are betting real money based off this misunderstanding and, frankly, they're going to pay for it. Nothing costs more than ignorance.

That's not to say that the underlying technology is hopeless. I expect we will see strongly permissioned and heavily regulated blockchains that build upon existing laws and institutions. Corda [1] et al have the right idea. These blockchains don't really replace anything, they're just distributed computing platforms that can greatly lower existing transaction costs. There are enormous inefficiences in global trade because buyers and sellers from different regimes don't trust each other and the cost to establish that trust is very high.

[1] http://corda.net/

I'm glad you like Corda, given I designed a lot of it ;)

These topics have a lot of nuance. I didn't mean the end goal of blockchains is to actually replace governments; as you point out that's impossible because software systems don't have armies. But it's perfectly possible for a digital system to become a system of record and for what's on that system to be enforced by the courts however. Consider that the main way we make payments today is electronic, courts have no problem reasoning about or enforcing such payments.

So we have to distinguish between system of record, and system in which the final judgement rests with humans. You can certainly write a contract-as-code which still can be broken or overridden by judges.

I think it would be much much worse to have a blockchain be the system of record.

If someone sneaks into your house when you leave your computer logged on, and transfers your house to them, do you legally have to move out immediately?

> Remember TCP/IP was developed in the 1970s so it took almost twenty years before HTTP came out, and another 5-10 years before people really started using it.

There were significant barriers to entry – network connections were slow and enormously expensive into the 90s – but TCP already had significant value by the 80s (see e.g. FTP). Within a few years of the web arriving in the 90s, there were businesses using it for revenue-positive activity.

In contrast, blockchains were available to everyone on the Internet very early on and have yet to find a single case where they’re cost effective despite the barriers to entry being orders of magnitude lower.

IMO one of the best use cases is DNS records. Using a p2p blockchain means I don't need to make any external network calls to lookup addresses. It also means, that if I trust my local client hasn't been compromised then all address mappings are valid, as they required hard cryptography to set via a signed transaction that was accepted by the network.

DNS records change rather frequently. Wouldn’t this grow rather quickly, creating the same problems which lead to replacing /etc/hosts with the decentralized DNS model?

As we speed toward the era of deep fakes and extreme forgery of media, I wonder if blockchains might play some crucial social role as sources of truth and proof.

How specifically would you use a blockchain as a source of truth and proof for media, and how exactly would that be superior to digital signatures applied using tamper-resistant hardward embedded in recording devices?

So... uh... why wouldn't someone just fake a photo and not use your blockchain?

>The biggest problem is that blockchains are inherently not scalable.

Blockchains can be made extremely scalable. You can break the problem into transaction volume (how many transactions can be processed on average per sec) and transaction velocity (how fast a particular transaction can be approved).

Transaction volume scalability results almost entirely from checking that the rules of the system have been followed i.e. that each block in the chain is valid. We now have very fast systems for recursively proving the validity of blockchains. For instance coda [0] requires very little space or computation (constant in the number of transactions) for a party to be convinced the blockchain is valid. Under such a system you could increase transaction volume by orders of magnitude.

Layer two protocols, such as the lightning network [1], offer near instant transaction velocity.

We can solve the scalability problems of blockchain. The thing that keeps me up at night is not scalability, it is user adoption beyond the use cases which Bitcoin already successfully fulfills.

[0]: https://codaprotocol.com/ [1]: https://lightning.network/

> We can solve the scalability problems of blockchain. The thing that keeps me up at night is not scalability, it is user adoption beyond the use cases which Bitcoin already successfully fulfills.

Fair point. But none of the biggest chains right now are nearly as scalable as using something like AWS or Azure or Google Cloud. Unless they are able to handle the same amount of traffic, there is no reason for someone to use them for typical applications.

On the development side it will be more cumbersome to develop for, and on the user side it will be slower and/or more costly to use.

>But none of the biggest chains right now are nearly as scalable as using something like AWS or Azure or Google Cloud.

I agree, just because we can scale them doesn't mean we will invest the time and energy to do it. Lots of solvable problems in cryptography but very few people working on them.

User adoption is the toughest nut to crack. Right now the two largest use cases of cryptocurrencies are financial speculation and illegal activity. Both are huge turn-offs for the average prospective user.

What’s the value proposition for an average Joe to use bitcoin over fiat currency?

> The thing that keeps me up at night is not scalability, it is user adoption beyond the use cases which Bitcoin already successfully fulfills.

This felt like the canary in the coal mine that the anarchist crowd has wholesale ignored for years. Joe and Jane LIKE that the dollar is backed by the full faith and credit of USG. From the POV of the average person, crypto is fairy dust next to a currency endorsed by what is perceived to be the most economically stable nation on the planet.

Joe and Jane don't understand nearly enough about economics or technology to really care about crypto or to ever be capable of using it securely independent of a third-party facilitator like Coinbase. They want cheap, fast transactions with guarantees, insured bank accounts, and a human being they can call for support when something goes wrong. Visa and JPM already give them that. Coinbase is a total reinvention of a system with no marginal benefit. Bitcoin doesn't solve a problem Joe and Jane will ever care about. About the only thing is does solve, at least in the short-term, is their FOMO about living analog in a world beset by runaway digital progress.

What do Joe and Jane think about the mountain of debt they’ve had to pile up? What do they think about the bankers who decide what happens to their money, and the politicians who decided to bail them out? Do they really have abs much faith in USG as you say? By the last election, largely seen as a middle finger to governing elites, I’d say probably not.

Yes, they like the convenience of the dollar but they are also suffering from the consequences of fiat money. You might say they’re too stupid to understand that, but there are many Joes and Janes who understand gold and may even want to go back to a gold standard. If they can understand gold, they can understand the value of Bitcoin.

I totally agree with your sentiment, but I will say one thing. If there is some shock in the world economy crypto could be a way out.

Imagine

- A bank run where every bank goes under and it is not possible to easily bail them out

- The government has to increase inflation and we far exceed the 2% target

- The existing financial system gets hacked and records get destroyed

Not saying any of this is likely, but it could happen.

The US dollar has only been backed by nothing since 1971. That is a very short amount of time in the history of the world. You can see that in that same period of time debt has skyrocketed and production output vs. wages have diverged significantly. It would be somewhat presumptuous to assume that the existing system is going to last forever.

That said, it doesn’t mean that crypto currencies are THE answer, but they are a possible answer.

Finally “the most economically stable nation on the planet” is $21 trillion in debt.

I think if something like Bitcoin does end up reaching mass adoption it won’t be because people CHOOSE to use it, it will be because they are FORCED to use it because no one wants to accept dollars anymore.

That's not how economics or the banking system actually work. The Federal Reserve can issue effectively unlimited credit to solvent banks in case of runs. The government has no way to directly "increase inflation". Generally when bank runs occur it's because the bank has a lot of bad loans; when loans go bad it effectively removes money from circulation thus decreasing monetary inflation.

There is no single central "financial system". Individual financial institutions get hacked all the time. It's not a major problem.

Ultimately the US dollar (and other fiat currencies) are backed by something: a government with an effective monopoly on violence over a particular territory including all the people and assets therein. In the real world that's a lot more powerful than any cryptocurrency fantasies.

Those were three separate ideas. A bank run would most likely be a result of deflation, yes, but it is not guaranteed that if that were to occur that the bank would be able to stay solvent.

The inflation example can already be seen in Venezuela, where the people there have been using cryptocurrencies as a way to survive.

> Ultimately the US dollar (and other fiat currencies) are backed by something: a government with an effective monopoly on violence over a particular territory including all the people and assets therein.

Are you suggesting that the US military will use force to ensure that people use the dollar and that is its backing? I am not saying you are wrong, but that is not exactly a friendly thought. Sounds more like a dictatorship than a free market economy.

>Are you suggesting that the US military will use force to ensure that people use the dollar and that is its backing?

Not the OP, but the governments' 'monopoly on violence' usually refers to the fact that they hold position as the sole enforcement authority. Dollar is 'backed' by a reputation/record of US government fulfilling it's debt obligations. As the enforcement authority, they can/will use force to secure an operating revenue via tax collection. The specifics of what people use to transact, is more flexible. So the dollar is backed by US Government's ability to fulfill it's future debts. The method it uses to extract (something of value, payment is currently required in $ format) from it's citizenry to pay them is less important, but a 'monopoly on violence' sure helps with collection efforts ;-)

This is exactly the point: the fed can conjure unlimited credit out of thin air. Cryptocurrencies can't.

The limitation becomes a feature: debt can't be inflated way.

We are one major crisis away from people preferring an asset that can't be inflated, or forcefully converted by executive order, under threat of confiscation.

When that happens, you will be right: by Gresham law, people will prefer paying for stuff (including taxes) in fiat currency.

Of course cryptocurrency debt can be inflated away. Fork the blockchain, or switch to another one entirely. Who's going to force me to pay? It's just bits.

you assume people care about the fork. if people dont and only want the original, or if the smartcontract is not updated to allow the fork at a lesser rate, you're stuck

But nobody ever forces you to pay- the goods and services just stop coming your way, or you lose your collateral.

Inflating the debt is not a problem because of the small consumers, but the government. Seignorage tax affects the small consumers.

There is zero need for blockchains in real estate registries. Real estate property rights are enforced by the government, ultimately through threat of official violence. So the government might as well maintain a centralized real estate registry since we're effectively forced to trust them anyway.

It would be useful in places with corruption. Would make it harder for clerks to retroactively change things. Of course it makes bribes easier also.

nobody wants to censor Uber. Think bigger. Censorship, transparency etc. Uber and Airbnb are wrong examples, they don't need those kind of things. Now think governments

That’s an interesting perspective to be sure, but let’s back up a bit. Has a blockchain proven that it can run a smaller organization yet? What happened to the DAO after all the hype and scandal?

I’m not in the anti-blockchain macro-economics fiat-currency camp or anything, but is it unreasonable to say that this stuff needs a lot more time to develop? There’s no way in hell I’d go along with laws from a blockchain-government backed by SHA256 and ED25519 in 2018, would you?

what do you mean a "blockchain government"? yes I would love all the laws of my country and everything else to be on a transparent unforgeable ledger for sure.

The point is that let's see a "blockchain organization" (like the DAO or something) succeed first before scaling it up, you know?