Sunday, April 8, 2018

Worldview underlying blockchain is wrong

The Bitcoin/blockchain hype continues, impervious to its history of failure.

Kai Stinchcombe rants:
Blockchain is not only crappy technology but a bad vision for the future. Its failure to achieve adoption to date is because systems built on trust, norms, and institutions inherently function better than the type of no-need-for-trusted-parties systems blockchain envisions. That’s permanent: no matter how much blockchain improves it is still headed in the wrong direction. ...

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. ...

So in summary, here’s what blockchain-the-technology is: “Let’s create a very long sequence of small files — each one containing a hash of the previous file, some new data, and the answer to a difficult math problem — and divide up some money every hour among anyone willing to certify and store those files for us on their computers.”

Now, here’s what blockchain-the-metaphor is: “What if everyone keeps their records in a tamper-proof repository not owned by anyone?” ...

The entire worldview underlying blockchain is wrong

You actually see it over and over again. Blockchain systems are supposed to be more trustworthy, but in fact they are the least trustworthy systems in the world. Today, in less than a decade, three successive top bitcoin exchanges have been hacked, another is accused of insider trading, the demonstration-project DAO smart contract got drained, crypto price swings are ten times those of the world’s most mismanaged currencies, and bitcoin, the “killer app” of crypto transparency, is almost certainly artificially propped up by fake transactions involving billions of literally imaginary dollars. ...

Even the most die-hard crypto enthusiasts prefer in practice to rely on trust rather than their own crypto-medieval systems. 93% of bitcoins are mined by managed consortiums, yet none of the consortiums use smart contracts to manage payouts. Instead, they promise things like a “long history of stable and accurate payouts.” Sounds like a trustworthy middleman!
He is right. It is nearly impossible to find a problem for which a blockchain is an appropriate technological solution.

The country of Estonia has a system it used to call hash-linked time-stamping, and now calls it the Estonian blockchain. It is useful, but it is not a blockchain, and it even predates the invention of the Bitcoin blockchain.

The blockchain only makes sense if there is a public ledger, and there are competing players willing to spend unlimited resources to keep up with each other to maintain the integrity of the ledger. Furthermore, you have to have a user base that does not trust any of the players in particular, but does trust their ability and willingness to competitively carry out joint authentication operations, without any player outworking the others.

The Bitcoin blockchain does have some utility in illicit money transfers to the other side of the world. Are there any other examples? You might read of applications like tracking the WalMart supply chain, but such applications don't make any sense.

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