13 ms·

Blockchains are the new Linux, not the new Internet

168 points by gk1 9y ago

lsobral 9y ago
interesting read, still if the author is correct and blockchain becomes the defacto standard for decentralized server structure for banks, etc it is a huge position to take and will open up space for a lot of innovative applications on top of it.
lumberjack 9y ago
I'm not very well versed in the world of banking and finance. What would banks use a blockchain for? All I can think of is a trustless clearing house. That would make sense on one hand, but it would also divulge a lot of possibly sensitive information to the public. Other that that I know there have been a lot of hackathons about Bitcoin organised by banks but I never heard anything coming out of them.
- tehlike 9y ago
  You can have private ledgers.
- cjbprime 9y ago
  Don't underestimate the kind of things that the finance industry is bad at keeping track of :) https://www.bloomberg.com/view/articles/2017-02-17/dole-food-had-too-many-shares https://www.bloomberg.com/view/articles/2017-02-17/dole-food...
- srbl 9y ago
  So I can't provide a strictly bank-oriented response, but blockchain is just a distributed ledger system. I think some disservice is done in not clearly separating out the functions of blockchain from those of cryptocurrencies. You could use blockchain to manage property, contracts, microtransactions, data commerce, file storage, or certification, to name a few things. I think it's mostly a question of what can be fit into the ledger framework. Some people think that various local networks and other functionalities in the Internet of Things could be a testing ground for its broader uses (e.g., managing ownership of smart devices). Blockstack envisions it as kind of a backbone for a new Internet browsing paradigm, leveraging blockchain as a sort of DNS replacement if memory serves correctly. It's unclear if any of these ideas will take off in the near term. Going back to these blockchain applications being separate from cryptocurrencies, to me Ethereum is a step away from the coupling of the two, because it is designed with contracts in mind rather than just money. And a number of folks have signed on to developing systems that leverage Ethereum - take a look at the Enterprise Ethereum Alliance. Still I suspect that given the fact that it's unproven, the actual investment made in personnel and capital by these firms is low. Also, the ironic counterpoint to this view is that Ethereum also has ETH, a cryptocurrency. I'm an investor in ETH, but even so, I am not sure what it is worth at this point, since the value of Ethereum seems to lie not in currency but in other applications of the blockchain.
  - zanny 9y ago
    Except the examples you give demonstrate two widely divergent use cases - public and private. If you are managing an internal database, you don't need proof of work. You need concurrent conflict resolution. Every major database right now has such faculties built in and you don't need to spend megawatts of power to maintain it. In the public dns replacement use case there is promise and potential, but it has the laundry list of problems you would need to solve to make it happen. I look forward to the attempts, of course, because traditional dns is a brittle top down nightmare of exploitable corruption and manipulation. But still, blockchains as they are are only useful when you don't trust participants. And for along large-scale application, making that claim puts you in a political position - either you trust or distrust the governments oversight of whatever you are trying to reach consensus on. While a lot of people will, at inquiry, say they don't trust the government, very few people are willing to put the effort into forging an alternative public trust framework for things like property rights or certification that you mentioned.
    - srbl 9y ago
      I agree with you that the public use case makes more sense than the private one, though really I feel that it's not about "public" or "private" but rather about different sides in some market, whether it is public or private. But I'm not sure I understand, were any of those use cases "private?" When I mentioned "manage property, contracts, microtransactions, data commerce, file storage, or certification, to name a few things", I think pretty much all of those besides file storage (on which I'd defer to Blockstack) represent agreements or exchanges between different sides in a market or platform.
- dismantlethesun 9y ago
  Having a block chain doesn't mean that you have to give access worldwide to anyone and everyone. Banks could provide blockchain access to only computers that cleared their firewall, and are API authorized. Think ach except with a black chain as th back end.
  - runeks 9y ago
    Why would parties that trust each other, and don't let anyone untrusted in, have a need for trustless consensus?
    - monocasa 9y ago
      Because despite the fact that they trust each other more than any random shmuck, they don't completely trust eachother?
    - paulrd 9y ago
      Trust isn't a binary relationship. Computer security is hard. I trust people to try their best to not get hacked or not to get kidnapped and tortured, but alas it sometimes happens. I'm surprised no-one has mentioned that the only reason to use a block chain is to achieve byzantine fault tolerance. Casper is trying to solve much the same thing that has already been solved by Tendermint but with different trade-offs (CAP theorem trade-offs).
    - dismantlethesun 9y ago
      Well banks don't necessarily trust their international partners for example totally. Smaller banks fo instance have a lot of trouble sending unsecured wires. With the block chain it would be possible to have more trust on the amount of funds another bank has available.
- runeks 9y ago
  > I'm not very well versed in the world of banking and finance. What would banks use a blockchain for? Nothing, in my opinion. The value of a blockchain stems from the fact that, combined with proof-of-work, a single history of transactions can be agreed upon without a central party. This is the same feature that prevents alteration of history, because it would require recalculating the proof-of-work. This comes at a very high cost, however, since energy is literally burnt off just to reach this distributed consensus. Therefore, it only makes sense for the utmost valuable applications, like digital money. I mean, right now Bitcoin miners are paid over a million USD per day in order for the network to reach distributed consensus. Please, anyone, let me know which kinds of applications can bear even a tiny fraction of this cost, except digital money. Even at 1% of this cost, a blockchain-based clearing protocol would be both more expensive and orders of magnitudes slower than using a central party -- and the purpose of clearing is to increase efficiency/reduce costs in the first place. Banks are in the business of taking in deposits and lending them out, while taking a cut. Trustless lending makes no sense; you need to trust whoever you lend money to, or you'll be lending a lot of money to gambling addicts, with little chance of repayment.
  - highd 9y ago
    Proof-of-Stake will be released on Ethereum soon and will greatly reduce the mining overhead, FYI.
    - iamphilrae 9y ago
      Actually, if you read one of their blog posts from the last few weeks, they've pretty much abandoned it because it's too hard a problem to solve. Sorry I can't cite, on a mobile and in a rush.
      - djrtwo 9y ago
        I spend a lot of time in the ethereum proof of stake gitter and I can confirm that this is false. It's actively being researched and still in the roadmap. A hybrid PoS/PoW model will likely come out first.
      - 9y ago
- Roritharr 9y ago
  I recently read an Interview with the CEO of one of Germany's biggest travelling agencies, TUI[1]. In it, he described selling the "hotelbeds" database service for 1.19bn€ because in the future information about hotelbed vacancies would be stored in a public blockchain, not in centralised closed data silos. He described this as a democratization of data, a counter model compared to how Facebook and Google currently hoard data without giving anyone else access to it. To me it didn't make sense, because who would participate in such a blockchain? Who is the miner? Why? Where is the trustless concensus feature needed? Maybe someone more knowledgeable can explain what he meant. [1] https://www.welt.de/wirtschaft/article164874973/Die-Internet-Giganten-verlieren-ihre-Datenmonopole.html https://www.welt.de/wirtschaft/article164874973/Die-Internet...
  - terhechte 9y ago
    There's quite a lot of data out there which is shared by multiple companies with easy (or sometimes complicated) sync mechanisms where the actual money is not in the data but in the services that can produce this data. Hotelbeds is one example: - Hotels want to have their information on as many sites as possible - When travel site A blocks / books a room, travel site B and C need to update their databases quickly - The money is not in the database, as those are effectively just data caches of the information that the hotels will happily provide free of charge - The data is already shared between hotel sites, just that every site has their own data silo. - Money is made through individual contracts, upsell, services or better UI to access the shared data Another example of this is, of course flight information. So why would a company move this data onto a blockchain. We can take Ethereum as an example. Note that some of the things I describe here are presently not possible with Ethereum but will be possible within the next couple of software updates (I imagine within the next 1-2 years). Ethereum offers an existing, working, generalized blockchain with existing miners. Sure, a company could try to roll its own blockchain, but, as you observed, who would want to mine that. Also, there's little to gain by taking a private database and making it a semi-private blockchain. Ethereum incentives the miners with Ether to continue to secure the data and keep the consensus. The Hotelbeds database could become a database on top of Ethereum and the access would be regulated via a smart contract. That smart contract could be used to mark an individual room as booked (or reserved) for a certain time range. This means that each booking would cost a small amount of gas to pay for the transaction. Ethereum strives for a sub-second block time, which means that the database transaction could be almost instantaneous (compared to, say, Bitcoin, where currently transactions sometimes need to wait 3-4 hours). In comparison to the booking cost of the room, this small transaction / gas fee would be negligible (I hope). Since all Hotelbed sites would use this same contract / blockchain, there'd be no syncing required, as all changes would be available to all clients the second they happen. Even better, the smart contract could contain basic logic to defend invalid requests without ever alerting the clients (booking invalid dates, etc). A different, but related dataset (say car bookings) could also be hosted on the blockchain and could be queried at the same time to provide additional services ("there's one free car to rent for your hotel in that timeframe"). Alternatively, of course, all hotel sites could just get their data from one database company that sells access to the data and takes care of an internal database of all hotel bookings (i.e. Google). However, then, you're dependent on a different vendor. He may change his prices, he may limit the data, he may start giving certain hotels only to premium clients (see net neutrality). Even worse, at some point he may stop serving the data because it is not economically feasible (see Google Reader, or Facebook Parse). With Ethereum, there's nobody who officially owns the database. It can also never be taken offline again (at least until the last miner stops running his Ethereum node). This doesn't work for data sets where the value lies in the data itself, but for data which is already replicated across multiple databases anyway, this is a great alternative solution to have a truly global, synced, database that is owned by nobody, where nobody gatekeeper, and where the entrance barrier is low. I.e. it wouldn't make sense for Facebook (obviously) or Gmail, but for a truly decentralised Twitter (nee Diaspora) or Weather Information, etc.
- SkyMarshal 9y ago
  This article explains the general thinking behind it: https://gendal.me/2015/04/27/how-to-explain-the-value-of-replicated-shared-ledgers-from-first-principles/ https://gendal.me/2015/04/27/how-to-explain-the-value-of-rep...
- pmorici 9y ago
  Read up on how international banking and specifically correspondent banking works[0]. There is a lot of counter party risk for banks in that process. Bitcoin or something like it would allow a system to be built that eliminated a lot of that counter party risk. [0] https://gendal.me/2013/11/24/a-simple-explanation-of-how-money-moves-around-the-banking-system/ https://gendal.me/2013/11/24/a-simple-explanation-of-how-mon...
- rampage101 9y ago
  The crypto-currency Ripple is meant to replace the SWIFT banking system. Right now, transfers between banks are relatively expensive, think for example about a $25 Wire transfer fee. Ripple would make it so these transactions between banks costs only a few cents, and can be verified easier. That being said, I am not a fan of investing in Ripple because they have no private wallets, and they have stolen from customers because of KYC/AML (Know your customer/Anti-Money Laundering).
- Lazare 9y ago
  A lot of the financial system is built on legacy systems that don't work very well, don't interoperate very well, and don't really have the capacity to handle what's demanded of them. Hence why a lot of very simple things takes days when they should take seconds, or cost several dollars when they should cost fractions of a penny: Stuff like transferring money between accounts, registering a change in ownership of financial assets, etc. Generally speaking the situation is something like "there's a central organisation that everyone trusts, they run a central ledger, but it's slow and limited; we need to upgrade it." However, spending millions and millions of dollars to make a better system for recording payments, or changes in land title, or whatever is a hard sell. It's an extremely boring problem that's been solved ages ago, and now someone needs to actually go and build it, but nobody wants to fund it, and nobody wants to work on it. A blockchain, on the other hand, is cool. People want to talk about them, people want to work on them, and you can get funding. Of course, it's totally unsuited to solving any problems banks actually face, but that's neither here nor there. :)
- ChemicalWarfare 9y ago
  Private inter-bank blockchain can be used instead of the archaic system that the banks use today (this is basically what Ripple is doing). Internally (as in completely private intra-bank blockchain) - for transaction tracking/mining etc.
- spangry 9y ago
  It's not so much banks using blockchain. It's more blockchain being the new 'magic beans' that Deloitte, Accenture and their ilk can sell to clueless (but 'agile'!) executives.
- Temasik 9y ago
  Look at ripple xrp
mootothemax 9y ago
Like Linux, still not ready for the desktop? And... on to the next analogy.
- tehlike 9y ago
  But you dont want it to be the desktop. You said want it to be your serving infrastructure where things run on.
  - tdy721 9y ago
    If I want to drive my kids to school in a tank, I damn well have the right to do it.
    - y_u_no_rust 9y ago
      wut?
apozem 9y ago
I think the author has hit the nail on the head here. Blockchains offer two useful things: * Decentralized authority * A way to make digital goods scarce To my knowledge, no one has created a business that takes maximum advantage of these strengths to provide value to the user. I can't imagine what kind of business could do this. Someone who can will make a lot of money.
- runeks 9y ago
  What offers distributed consensus is proof-of-work, not blockchains themselves. The append-only list of blocks, that is a blockchain, is designed the way it is such that past blocks accumulate work performed on later blocks. And the only "digital good" a blockchain can make scarce is the token which exists on the blockchain itself, which is completely useless unless it's supposed to act as a store of value. And, arguably, if a blockchain token is valuable because it's scarce, it makes little sense to have an unlimited number of blockchains even if each of them only have a limited number of tokens.
  - paulrd 9y ago
    Yes, but block chains are also integral to proof-of-stake or general byzantine fault-tolerant consensus algorithms. Do you mind me asking: Do you have a lot invested in Bitcoin?
    - TD-Linux 9y ago
      I don't know of any working non-proof-of-work cryptocurrencies ("byzantine fault-tolerant" sounds like a federated or centralized system to me, hardly a cryptocurrency IMO).
- dismantlethesun 9y ago
  How dos the block chain make digital goods scarc beyond making the currency itself scarce?
  - problems 9y ago
jcfrei 9y ago
In order for a decentralized and autonomous blockchain to live up to it's name it needs to provide value to those who verify the transactions on it (ie. the miners or those who hold a stake in case of PoS). So the two extreme outcomes are: Truly decentralized and autonomous blockchains will disappear an be replaced by private, regulated versions and the value of most current implementations (ethereum, bitcoin) will go towards zero. Or people really value blockchains which can't be controlled by any government and prices will remain high. Most likely we'll see the emergence of both kinds of blockchains - depending on the use case. So to me this is where the analogy to Linux breaks down. Linux became one of the most important - if not the most important - operating system because it was free, open source and had a non-restrictive licence. Truly autonomous blockchains on the other hand can only prevail if they are exclusive and not free.
thinkloop 9y ago
Consumers don't use the internet any more than they use Linux. They interact with Google, Dropbox, Facebook, etc., not tcp, ip and ssl. Only only engineers use the internet, just like Linux. Maybe I always saw it different than the author, but to me the analogy of Bitcoin being like the internet in 1996, has always been about infrastructure.
jgalt212 9y ago
Now that people are making money in bitcoin again, you'd think folks would relax on these "everything looks like a nail" unnecessary blockchain solutions.
none_to_remain 9y ago
I don't even get how this is supposed to be a criticism? Like this guy considers Linux an also-ran OS overall because it is only a bit player in one niche of "desktop OS"?
- jpatokal 9y ago
  His point is that people are investing in blockchain technology like it's the next Microsoft/Facebook (read: headlock on a monopoly source of thousandfold profits), when it's actually more like Canonical/SuSE/Red Hat (competitive services business with low margins).
shea256 9y ago
> Today there’s a lot of work going into decentralized distributed storage keyed on blockchain indexes; Storj, Sia, Blockstack, et al. This is amazing, groundbreaking work… but why would an ordinary person, one already comfortable with Box or Dropbox, switch over to Storj or Blockstack? The centralized solution works just fine for them, and, because it’s centralized, they know who to call if something goes wrong. Blockstack in particular is more than “just” storage … but what compelling pain point is it solving for the average user? Ryan here from Blockstack. Our goal with storage is to allow users to bring their own storage (e.g. Dropbox, Google Drive, iCloud, etc). We believe in re-using the best infrastructure out there and not reinventing the wheel. The key is that Blockstack delivers a thin layer on top of all of these storage providers with a common interface and end-to-end encryption, reducing them all to dumb drives. This (1) removes the potential for vendor lock-in (2) puts pressure on all the providers to be more competitively priced (3) enables greater data security. Additionally, Blockstack isn't just about storage. It's a full stack for an entirely new kind of internet and a new way of building applications. Developers can work with a new blockchain-based domain name system (BNS), a new user-owned identity system, and a new BYOS storage system. The dream is for developers to be able to create a decentralized twitter by simply publishing a bundle of html, css and JS. The app folder runs as a single page application in your browser and can exist and replicate and live beyond the developer without the need for server or database maintenance. Servers could be relied upon for push notifications and feed aggregation, but they wouldn't be critical for operation and they'd be throwaway. All this represents a pretty massive shift away from the model today. Instead of users revolving around applications, applications will revolve around users.
- yeukhon 9y ago
  Is Blockstack built on your proposed infrastructure and how the fullstack is built? In another words, are you currently dogfooding?
  - devrandomguy 9y ago
    https://github.com/blockstack/blockstack#architecture https://github.com/blockstack/blockstack#architecture
abalone 9y ago
Lots of words, not a lot of concrete use cases. If you scroll way down this is what you get: - "a reserve/settlement currency" - Why?? certainly not for stability. - "replacements for huge swathes of today’s financial industry" - Still not concrete! - "namespaces (such as domain names)" - Also vague what it would improve. - "implementations of distributed storage systems" - To which he adds "the centralized solution works just fine". So... still waiting to hear a concrete, specific, cogent use case.
- dwaltrip 9y ago
  > a reserve/settlement currency" - Why?? certainly not for stability Bitcoin volatility year over year shows a very strong downtrend. I would not be surprised at all if this trend continues. Here's a nice graph: https://www.lombardiletter.com/wp-content/uploads/2017/01/bitcoin-volatility-index.png https://www.lombardiletter.com/wp-content/uploads/2017/01/bi...
  - theseatoms 9y ago
    I never understood the "volatility criticism" of the value of Bitcoin. It'd be remarkable if Bitcoin attained a very high value without short-to-medium term volatility. Realized volatility is not an intrinsic property to the technology or design itself, but rather a reflection of current aspects of the marketplace which can improve over time. (i.e. robust and trusted exchanges, well-capitalized market-makers, more diverse attempts at valuation, less emotional market participants, etc.)
    - sooheon 9y ago
      You are correct, and I think the volatility criticism was not directed to the tech or design, but to lack of trust in exchanges, unclear valuation, and emotional market participation.
- Taek 9y ago
  Blockchains in their original design were special because they could resist contentious changes in the event of political turmoil. Bitcoin protects users against hyperinflation chosen by a ruling elite trying to fund a war, for example. Bitcoin is a money that doesn't grant massive economic power to a controlling authority. The US has massive global influence derived from its status as the global reserve currency. Using bitcoin does not grant that power to anyone, and therefore could be argued as a better base for a global currency. Namespace stuff is exciting for the same reason. Today there are powers and squatters and authorities that can decide if you get the right to a domain. This is inherently political for contentious names and sites. Decentralization isolates you from these risks. Blockchain 2.0 has spoiled this quite a bit by running things like a startup and essentially giving full control to the founding team. I think most people who are newer to the blockchain space completely miss the advantages of a system that is extremely difficult to change.
sengork 9y ago
Few years ago the same argument went for OpenStack which was dubbed "the new Linux".
wcr3 9y ago
blockchains are the new microsoft of itunes if apple googled AI IoT-QL with as do many look like data.
- drdeca 9y ago
  What?
aqsheehy 9y ago
Blockchains are the new south seas, not the new Linux
unlmtd 9y ago
BTC is not money, but a database.
lngnmn 9y ago
Nope. It is a new XML, CORBA, J2EE - the-only-right-thing-to-do kind of shit.
koonsolo 9y ago
Funny how lots of technical people are looking for the "killer app" of blockchain, while cryptocurrency is right under their nose. I'm a firm believer that cryptocurrency (and no other blockchain application) is going to have a huge impact on the world. To me it always sounds like "Wikipedia is nice, but wiki software is going to have a huge application one day, we just don't know yet what". Cryptocurrency has a chance of replacing a (huge part) of fiat money. Which will have a huge impact on the currently existing systems. And there is a pretty straightforward way towards it: - If you have a smartphone, you can accept payments. - Everyone has smartphones these days, including small shop owners in developing countries. - No more currency exchanges when traveling, just pay with bitcoins.

168 points by gk1 9y ago

interesting read, still if the author is correct and blockchain becomes the defacto standard for decentralized server structure for banks, etc it is a huge position to take and will open up space for a lot of innovative applications on top of it.

lumberjack 9y ago

I'm not very well versed in the world of banking and finance. What would banks use a blockchain for? All I can think of is a trustless clearing house. That would make sense on one hand, but it would also divulge a lot of possibly sensitive information to the public. Other that that I know there have been a lot of hackathons about Bitcoin organised by banks but I never heard anything coming out of them.

tehlike 9y ago
You can have private ledgers.
cjbprime 9y ago
Don't underestimate the kind of things that the finance industry is bad at keeping track of :) https://www.bloomberg.com/view/articles/2017-02-17/dole-food-had-too-many-shares https://www.bloomberg.com/view/articles/2017-02-17/dole-food...
srbl 9y ago
So I can't provide a strictly bank-oriented response, but blockchain is just a distributed ledger system. I think some disservice is done in not clearly separating out the functions of blockchain from those of cryptocurrencies. You could use blockchain to manage property, contracts, microtransactions, data commerce, file storage, or certification, to name a few things. I think it's mostly a question of what can be fit into the ledger framework. Some people think that various local networks and other functionalities in the Internet of Things could be a testing ground for its broader uses (e.g., managing ownership of smart devices). Blockstack envisions it as kind of a backbone for a new Internet browsing paradigm, leveraging blockchain as a sort of DNS replacement if memory serves correctly. It's unclear if any of these ideas will take off in the near term. Going back to these blockchain applications being separate from cryptocurrencies, to me Ethereum is a step away from the coupling of the two, because it is designed with contracts in mind rather than just money. And a number of folks have signed on to developing systems that leverage Ethereum - take a look at the Enterprise Ethereum Alliance. Still I suspect that given the fact that it's unproven, the actual investment made in personnel and capital by these firms is low. Also, the ironic counterpoint to this view is that Ethereum also has ETH, a cryptocurrency. I'm an investor in ETH, but even so, I am not sure what it is worth at this point, since the value of Ethereum seems to lie not in currency but in other applications of the blockchain.
- zanny 9y ago
  Except the examples you give demonstrate two widely divergent use cases - public and private. If you are managing an internal database, you don't need proof of work. You need concurrent conflict resolution. Every major database right now has such faculties built in and you don't need to spend megawatts of power to maintain it. In the public dns replacement use case there is promise and potential, but it has the laundry list of problems you would need to solve to make it happen. I look forward to the attempts, of course, because traditional dns is a brittle top down nightmare of exploitable corruption and manipulation. But still, blockchains as they are are only useful when you don't trust participants. And for along large-scale application, making that claim puts you in a political position - either you trust or distrust the governments oversight of whatever you are trying to reach consensus on. While a lot of people will, at inquiry, say they don't trust the government, very few people are willing to put the effort into forging an alternative public trust framework for things like property rights or certification that you mentioned.
  - srbl 9y ago
    I agree with you that the public use case makes more sense than the private one, though really I feel that it's not about "public" or "private" but rather about different sides in some market, whether it is public or private. But I'm not sure I understand, were any of those use cases "private?" When I mentioned "manage property, contracts, microtransactions, data commerce, file storage, or certification, to name a few things", I think pretty much all of those besides file storage (on which I'd defer to Blockstack) represent agreements or exchanges between different sides in a market or platform.
dismantlethesun 9y ago
Having a block chain doesn't mean that you have to give access worldwide to anyone and everyone. Banks could provide blockchain access to only computers that cleared their firewall, and are API authorized. Think ach except with a black chain as th back end.
- runeks 9y ago
  Why would parties that trust each other, and don't let anyone untrusted in, have a need for trustless consensus?
  - monocasa 9y ago
    Because despite the fact that they trust each other more than any random shmuck, they don't completely trust eachother?
  - paulrd 9y ago
    Trust isn't a binary relationship. Computer security is hard. I trust people to try their best to not get hacked or not to get kidnapped and tortured, but alas it sometimes happens. I'm surprised no-one has mentioned that the only reason to use a block chain is to achieve byzantine fault tolerance. Casper is trying to solve much the same thing that has already been solved by Tendermint but with different trade-offs (CAP theorem trade-offs).
  - dismantlethesun 9y ago
    Well banks don't necessarily trust their international partners for example totally. Smaller banks fo instance have a lot of trouble sending unsecured wires. With the block chain it would be possible to have more trust on the amount of funds another bank has available.
runeks 9y ago
> I'm not very well versed in the world of banking and finance. What would banks use a blockchain for? Nothing, in my opinion. The value of a blockchain stems from the fact that, combined with proof-of-work, a single history of transactions can be agreed upon without a central party. This is the same feature that prevents alteration of history, because it would require recalculating the proof-of-work. This comes at a very high cost, however, since energy is literally burnt off just to reach this distributed consensus. Therefore, it only makes sense for the utmost valuable applications, like digital money. I mean, right now Bitcoin miners are paid over a million USD per day in order for the network to reach distributed consensus. Please, anyone, let me know which kinds of applications can bear even a tiny fraction of this cost, except digital money. Even at 1% of this cost, a blockchain-based clearing protocol would be both more expensive and orders of magnitudes slower than using a central party -- and the purpose of clearing is to increase efficiency/reduce costs in the first place. Banks are in the business of taking in deposits and lending them out, while taking a cut. Trustless lending makes no sense; you need to trust whoever you lend money to, or you'll be lending a lot of money to gambling addicts, with little chance of repayment.
- highd 9y ago
  Proof-of-Stake will be released on Ethereum soon and will greatly reduce the mining overhead, FYI.
  - iamphilrae 9y ago
    Actually, if you read one of their blog posts from the last few weeks, they've pretty much abandoned it because it's too hard a problem to solve. Sorry I can't cite, on a mobile and in a rush.
    - djrtwo 9y ago
      I spend a lot of time in the ethereum proof of stake gitter and I can confirm that this is false. It's actively being researched and still in the roadmap. A hybrid PoS/PoW model will likely come out first.
    - 9y ago
Roritharr 9y ago
I recently read an Interview with the CEO of one of Germany's biggest travelling agencies, TUI[1]. In it, he described selling the "hotelbeds" database service for 1.19bn€ because in the future information about hotelbed vacancies would be stored in a public blockchain, not in centralised closed data silos. He described this as a democratization of data, a counter model compared to how Facebook and Google currently hoard data without giving anyone else access to it. To me it didn't make sense, because who would participate in such a blockchain? Who is the miner? Why? Where is the trustless concensus feature needed? Maybe someone more knowledgeable can explain what he meant. [1] https://www.welt.de/wirtschaft/article164874973/Die-Internet-Giganten-verlieren-ihre-Datenmonopole.html https://www.welt.de/wirtschaft/article164874973/Die-Internet...
- terhechte 9y ago
  There's quite a lot of data out there which is shared by multiple companies with easy (or sometimes complicated) sync mechanisms where the actual money is not in the data but in the services that can produce this data. Hotelbeds is one example: - Hotels want to have their information on as many sites as possible - When travel site A blocks / books a room, travel site B and C need to update their databases quickly - The money is not in the database, as those are effectively just data caches of the information that the hotels will happily provide free of charge - The data is already shared between hotel sites, just that every site has their own data silo. - Money is made through individual contracts, upsell, services or better UI to access the shared data Another example of this is, of course flight information. So why would a company move this data onto a blockchain. We can take Ethereum as an example. Note that some of the things I describe here are presently not possible with Ethereum but will be possible within the next couple of software updates (I imagine within the next 1-2 years). Ethereum offers an existing, working, generalized blockchain with existing miners. Sure, a company could try to roll its own blockchain, but, as you observed, who would want to mine that. Also, there's little to gain by taking a private database and making it a semi-private blockchain. Ethereum incentives the miners with Ether to continue to secure the data and keep the consensus. The Hotelbeds database could become a database on top of Ethereum and the access would be regulated via a smart contract. That smart contract could be used to mark an individual room as booked (or reserved) for a certain time range. This means that each booking would cost a small amount of gas to pay for the transaction. Ethereum strives for a sub-second block time, which means that the database transaction could be almost instantaneous (compared to, say, Bitcoin, where currently transactions sometimes need to wait 3-4 hours). In comparison to the booking cost of the room, this small transaction / gas fee would be negligible (I hope). Since all Hotelbed sites would use this same contract / blockchain, there'd be no syncing required, as all changes would be available to all clients the second they happen. Even better, the smart contract could contain basic logic to defend invalid requests without ever alerting the clients (booking invalid dates, etc). A different, but related dataset (say car bookings) could also be hosted on the blockchain and could be queried at the same time to provide additional services ("there's one free car to rent for your hotel in that timeframe"). Alternatively, of course, all hotel sites could just get their data from one database company that sells access to the data and takes care of an internal database of all hotel bookings (i.e. Google). However, then, you're dependent on a different vendor. He may change his prices, he may limit the data, he may start giving certain hotels only to premium clients (see net neutrality). Even worse, at some point he may stop serving the data because it is not economically feasible (see Google Reader, or Facebook Parse). With Ethereum, there's nobody who officially owns the database. It can also never be taken offline again (at least until the last miner stops running his Ethereum node). This doesn't work for data sets where the value lies in the data itself, but for data which is already replicated across multiple databases anyway, this is a great alternative solution to have a truly global, synced, database that is owned by nobody, where nobody gatekeeper, and where the entrance barrier is low. I.e. it wouldn't make sense for Facebook (obviously) or Gmail, but for a truly decentralised Twitter (nee Diaspora) or Weather Information, etc.
SkyMarshal 9y ago
This article explains the general thinking behind it: https://gendal.me/2015/04/27/how-to-explain-the-value-of-replicated-shared-ledgers-from-first-principles/ https://gendal.me/2015/04/27/how-to-explain-the-value-of-rep...
pmorici 9y ago
Read up on how international banking and specifically correspondent banking works[0]. There is a lot of counter party risk for banks in that process. Bitcoin or something like it would allow a system to be built that eliminated a lot of that counter party risk. [0] https://gendal.me/2013/11/24/a-simple-explanation-of-how-money-moves-around-the-banking-system/ https://gendal.me/2013/11/24/a-simple-explanation-of-how-mon...
rampage101 9y ago
The crypto-currency Ripple is meant to replace the SWIFT banking system. Right now, transfers between banks are relatively expensive, think for example about a $25 Wire transfer fee. Ripple would make it so these transactions between banks costs only a few cents, and can be verified easier. That being said, I am not a fan of investing in Ripple because they have no private wallets, and they have stolen from customers because of KYC/AML (Know your customer/Anti-Money Laundering).
Lazare 9y ago
A lot of the financial system is built on legacy systems that don't work very well, don't interoperate very well, and don't really have the capacity to handle what's demanded of them. Hence why a lot of very simple things takes days when they should take seconds, or cost several dollars when they should cost fractions of a penny: Stuff like transferring money between accounts, registering a change in ownership of financial assets, etc. Generally speaking the situation is something like "there's a central organisation that everyone trusts, they run a central ledger, but it's slow and limited; we need to upgrade it." However, spending millions and millions of dollars to make a better system for recording payments, or changes in land title, or whatever is a hard sell. It's an extremely boring problem that's been solved ages ago, and now someone needs to actually go and build it, but nobody wants to fund it, and nobody wants to work on it. A blockchain, on the other hand, is cool. People want to talk about them, people want to work on them, and you can get funding. Of course, it's totally unsuited to solving any problems banks actually face, but that's neither here nor there. :)
ChemicalWarfare 9y ago
Private inter-bank blockchain can be used instead of the archaic system that the banks use today (this is basically what Ripple is doing). Internally (as in completely private intra-bank blockchain) - for transaction tracking/mining etc.
spangry 9y ago
It's not so much banks using blockchain. It's more blockchain being the new 'magic beans' that Deloitte, Accenture and their ilk can sell to clueless (but 'agile'!) executives.
Temasik 9y ago
Look at ripple xrp

mootothemax 9y ago

Like Linux, still not ready for the desktop? And... on to the next analogy.

tehlike 9y ago
But you dont want it to be the desktop. You said want it to be your serving infrastructure where things run on.
- tdy721 9y ago
  If I want to drive my kids to school in a tank, I damn well have the right to do it.
  - y_u_no_rust 9y ago
    wut?

apozem 9y ago

I think the author has hit the nail on the head here. Blockchains offer two useful things: * Decentralized authority * A way to make digital goods scarce To my knowledge, no one has created a business that takes maximum advantage of these strengths to provide value to the user. I can't imagine what kind of business could do this. Someone who can will make a lot of money.

runeks 9y ago
What offers distributed consensus is proof-of-work, not blockchains themselves. The append-only list of blocks, that is a blockchain, is designed the way it is such that past blocks accumulate work performed on later blocks. And the only "digital good" a blockchain can make scarce is the token which exists on the blockchain itself, which is completely useless unless it's supposed to act as a store of value. And, arguably, if a blockchain token is valuable because it's scarce, it makes little sense to have an unlimited number of blockchains even if each of them only have a limited number of tokens.
- paulrd 9y ago
  Yes, but block chains are also integral to proof-of-stake or general byzantine fault-tolerant consensus algorithms. Do you mind me asking: Do you have a lot invested in Bitcoin?
  - TD-Linux 9y ago
    I don't know of any working non-proof-of-work cryptocurrencies ("byzantine fault-tolerant" sounds like a federated or centralized system to me, hardly a cryptocurrency IMO).
dismantlethesun 9y ago
How dos the block chain make digital goods scarc beyond making the currency itself scarce?
- problems 9y ago

jcfrei 9y ago

In order for a decentralized and autonomous blockchain to live up to it's name it needs to provide value to those who verify the transactions on it (ie. the miners or those who hold a stake in case of PoS). So the two extreme outcomes are: Truly decentralized and autonomous blockchains will disappear an be replaced by private, regulated versions and the value of most current implementations (ethereum, bitcoin) will go towards zero. Or people really value blockchains which can't be controlled by any government and prices will remain high. Most likely we'll see the emergence of both kinds of blockchains - depending on the use case. So to me this is where the analogy to Linux breaks down. Linux became one of the most important - if not the most important - operating system because it was free, open source and had a non-restrictive licence. Truly autonomous blockchains on the other hand can only prevail if they are exclusive and not free.

thinkloop 9y ago

Consumers don't use the internet any more than they use Linux. They interact with Google, Dropbox, Facebook, etc., not tcp, ip and ssl. Only only engineers use the internet, just like Linux. Maybe I always saw it different than the author, but to me the analogy of Bitcoin being like the internet in 1996, has always been about infrastructure.

jgalt212 9y ago

Now that people are making money in bitcoin again, you'd think folks would relax on these "everything looks like a nail" unnecessary blockchain solutions.

none_to_remain 9y ago

I don't even get how this is supposed to be a criticism? Like this guy considers Linux an also-ran OS overall because it is only a bit player in one niche of "desktop OS"?

jpatokal 9y ago
His point is that people are investing in blockchain technology like it's the next Microsoft/Facebook (read: headlock on a monopoly source of thousandfold profits), when it's actually more like Canonical/SuSE/Red Hat (competitive services business with low margins).

shea256 9y ago

> Today there’s a lot of work going into decentralized distributed storage keyed on blockchain indexes; Storj, Sia, Blockstack, et al. This is amazing, groundbreaking work… but why would an ordinary person, one already comfortable with Box or Dropbox, switch over to Storj or Blockstack? The centralized solution works just fine for them, and, because it’s centralized, they know who to call if something goes wrong. Blockstack in particular is more than “just” storage … but what compelling pain point is it solving for the average user? Ryan here from Blockstack. Our goal with storage is to allow users to bring their own storage (e.g. Dropbox, Google Drive, iCloud, etc). We believe in re-using the best infrastructure out there and not reinventing the wheel. The key is that Blockstack delivers a thin layer on top of all of these storage providers with a common interface and end-to-end encryption, reducing them all to dumb drives. This (1) removes the potential for vendor lock-in (2) puts pressure on all the providers to be more competitively priced (3) enables greater data security. Additionally, Blockstack isn't just about storage. It's a full stack for an entirely new kind of internet and a new way of building applications. Developers can work with a new blockchain-based domain name system (BNS), a new user-owned identity system, and a new BYOS storage system. The dream is for developers to be able to create a decentralized twitter by simply publishing a bundle of html, css and JS. The app folder runs as a single page application in your browser and can exist and replicate and live beyond the developer without the need for server or database maintenance. Servers could be relied upon for push notifications and feed aggregation, but they wouldn't be critical for operation and they'd be throwaway. All this represents a pretty massive shift away from the model today. Instead of users revolving around applications, applications will revolve around users.

yeukhon 9y ago
Is Blockstack built on your proposed infrastructure and how the fullstack is built? In another words, are you currently dogfooding?
- devrandomguy 9y ago
  https://github.com/blockstack/blockstack#architecture https://github.com/blockstack/blockstack#architecture

abalone 9y ago

Lots of words, not a lot of concrete use cases. If you scroll way down this is what you get: - "a reserve/settlement currency" - Why?? certainly not for stability. - "replacements for huge swathes of today’s financial industry" - Still not concrete! - "namespaces (such as domain names)" - Also vague what it would improve. - "implementations of distributed storage systems" - To which he adds "the centralized solution works just fine". So... still waiting to hear a concrete, specific, cogent use case.

dwaltrip 9y ago
> a reserve/settlement currency" - Why?? certainly not for stability Bitcoin volatility year over year shows a very strong downtrend. I would not be surprised at all if this trend continues. Here's a nice graph: https://www.lombardiletter.com/wp-content/uploads/2017/01/bitcoin-volatility-index.png https://www.lombardiletter.com/wp-content/uploads/2017/01/bi...
- theseatoms 9y ago
  I never understood the "volatility criticism" of the value of Bitcoin. It'd be remarkable if Bitcoin attained a very high value without short-to-medium term volatility. Realized volatility is not an intrinsic property to the technology or design itself, but rather a reflection of current aspects of the marketplace which can improve over time. (i.e. robust and trusted exchanges, well-capitalized market-makers, more diverse attempts at valuation, less emotional market participants, etc.)
  - sooheon 9y ago
    You are correct, and I think the volatility criticism was not directed to the tech or design, but to lack of trust in exchanges, unclear valuation, and emotional market participation.
Taek 9y ago
Blockchains in their original design were special because they could resist contentious changes in the event of political turmoil. Bitcoin protects users against hyperinflation chosen by a ruling elite trying to fund a war, for example. Bitcoin is a money that doesn't grant massive economic power to a controlling authority. The US has massive global influence derived from its status as the global reserve currency. Using bitcoin does not grant that power to anyone, and therefore could be argued as a better base for a global currency. Namespace stuff is exciting for the same reason. Today there are powers and squatters and authorities that can decide if you get the right to a domain. This is inherently political for contentious names and sites. Decentralization isolates you from these risks. Blockchain 2.0 has spoiled this quite a bit by running things like a startup and essentially giving full control to the founding team. I think most people who are newer to the blockchain space completely miss the advantages of a system that is extremely difficult to change.

sengork 9y ago

Few years ago the same argument went for OpenStack which was dubbed "the new Linux".

wcr3 9y ago

blockchains are the new microsoft of itunes if apple googled AI IoT-QL with as do many look like data.

drdeca 9y ago
What?

aqsheehy 9y ago

Blockchains are the new south seas, not the new Linux

unlmtd 9y ago

BTC is not money, but a database.

lngnmn 9y ago

Nope. It is a new XML, CORBA, J2EE - the-only-right-thing-to-do kind of shit.

koonsolo 9y ago

Funny how lots of technical people are looking for the "killer app" of blockchain, while cryptocurrency is right under their nose. I'm a firm believer that cryptocurrency (and no other blockchain application) is going to have a huge impact on the world. To me it always sounds like "Wikipedia is nice, but wiki software is going to have a huge application one day, we just don't know yet what". Cryptocurrency has a chance of replacing a (huge part) of fiat money. Which will have a huge impact on the currently existing systems. And there is a pretty straightforward way towards it: - If you have a smartphone, you can accept payments. - Everyone has smartphones these days, including small shop owners in developing countries. - No more currency exchanges when traveling, just pay with bitcoins.