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I think the problems you're alluding to are problems with the blockchain ecosystem in general, and I don't purport to have a silver bullet to solve the inherent

I think the problems you're alluding to are problems with the blockchain ecosystem in general, and I don't purport to have a silver bullet to solve the inherent issues with immutable software deployments, particularly in financial applications. But, after all, a dark horse 20 year old college dropout spearheaded the development of Ethereum, and the technology now secures nearly 20B worth of value. Maybe it's impossible to truly build processes for secure software deployment auditing in this space -- in which case, it's unlikely blockchain tech will succeed as a technology in general -- but I hold an optimistic view that, as formal verification techniques for smart contracts get fleshed out and easier to use, best practices will emerge and it will become easier to build secure contracts on blockchains. Hopefully, until that point in time, Dharma won't get caught on the wrong side of history. Forgive my youth and naïveté :)

ThePhysicist 9y ago
Cool project, congrats! As you speak of the "20B worth of value" I have a question: I always ask myself what the total monetary value stored in ETH actually is, as the 20B $ is the market capitalization (as far as I understand), which in my opinion is NOT the value. Drawing on my Economics classes (from a long time ago), my thinking goes like this: Let's assume I create 100 million items of a new cryptocurrency. At first, my coins have no value whatsoever. Now, you offer to buy 1 cryptocoin for 200 $ from me. This would instantly give my currency a market capitalization of 200 $ * 100 MN = 20 BN $! But is my currency now worth 20 BN $? I would say no, as there is probably no way for me to sell the remaining 99.999.999 coins for the same price for which I sold the first coin. And even after distributing a large amount of coins (say 50 % of the total), I would probably not be able to sell my remaining coins for their market value, as my offer volume would rapidly drive down the price of the coins by creating an oversupply (depending on the transaction volume of the currency of course). Following this logic I always thought that speaking of 20 BN $ of value stored in ETH as misleading, as the real monetary value of the currency (as determined by how much value you could actually extract when liquidating it entirely) is probably much less than that. And given that most people invest in ETH purely for speculation, I would even wager that a single seller who puts a large number of ETH on the market (as compared to the average daily volume) could cause a massive price drop, since there is no "fundamental" value in ETH (contrary to an asset-backed currency or a company stock).
- ruok0101 9y ago
  How is this different than securities sold on public stock markets? If you hold a large position in a nasdaq 100 stock and drop a large sell order on the ECN's, you are surely going to see a similar (albeit not as dramatic) phenomenon. Does that mean the market cap of stocks shouldn't be used to assess value?
  - ThePhysicist 9y ago
    The public stock market is highly regulated, which makes price manipulation and insider trading more difficult as it is illegal and suspicious trades will be investigated. The ETH market is completely unregulated, hence the risk of manipulation is much higher. Also, NASDAQ stocks represent the underlying value (as well as future revenue expectations) of a real-world company, hence short-selling your stock to manipulate the price (usually) doesn't make much sense if the fundamentals of the underlying company are good, as investors that are optimistic about the future of the company will happily buy the stock that you sell. Of course there are situations where large funds speculate against companies or even governments, but this is (usually) only possible if there is a fundamental issue in the underlying asset such as a nation in a deep recession or debt crisis. For ETH there is currently no underlying asset that would have a value in the real world and which could serve as an "anchor of trust" for an investor. It should therefore be much easier to manipulate and speculate against ETH as there is little external information beyond the exchange rate that other investors have as a basis for their valuation. Also, as of now there is no large economic process that depends on the existence and functioning of ETH, hence there would be very little external pressure to keep the currency alive if people started speculating against it. For most cryptocurrencies, the initial developers / creators are similar to the founders of a publicly traded company in the sense that they possess a large fraction of the shares of the company / number of coins. What's different is that there is little for the "crypto-shareholders" to hold on to their coins in case of a sharp price drop, as there is no underlying asset that their coins represent. Economically, they are highly incentivized to "cash out" as soon as they think that the price has reached its maximum value (and this is what I expect will happen with many crypto-currencies as soon as the market cools down). With shares this is different as ownership of the share allows you to continuously extract value from the underlying company in the form of dividends, hence the incentive for selling your shares is much smaller even if you think that the share price has reached its maximum. I would therefore be very cautious about long-term investments in ETH, as there is no safety net and no guarantor behind the value. And while this is great for gambling, it does not provide a viable platform to build real world applications on top of (in my opinion).
buckie 9y ago
No need to forgive. You're not wrong nor naive. I'd pin the difference as one of personal risk tolerances. I have much less than you, that's all. Right now Solidity is the only choice of public smart contracts. All I meant before was that this is an impressive project and to be careful. > But, after all, a dark horse 20 year old college dropout spearheaded the development of Ethereum, and the technology now secures nearly 20B worth of value. This is a really common trope in finance -- the trader/quant/manager/pm who thinks that he's god's gift to earth because he made so much money (and a system that made even more). I'm not saying that's what's going on in Ethereum, far from it, just that people who make a lot of money tend to think they are worth that amount of money (usually they are just fortunate) and that using monetary value as the sole justification for one's actions is (generally) wrong. While I disagree that Eth is actually valued at $20B -- if you can't get even a fraction of the $20B out of the market then it's not worth $20B in value... I bet the buy side of the Eth market supports around $100M-$300M max -- that's neither here nor there. The Ethereum ecosystem is, invariant on the value it represents, truly impressive and Vitalik's work is amazing especially given his experience level prior to it. I wouldn't say that the EVM is well designed in the slightest but the rest of the system is. It's closer to a 80's era CPU than a modern VM. I get why it looks like it does -- taking the bitcoin bytecode and extending it as little as needed -- but I disagree with the approach at a technical level. VM's are supposed to do more (e.g. handle dispatch and library loading) and to not support that means one must implement it in the language (like an ASM compiler does) which in a blockchain context consumes the limited gas you have. > I hold an optimistic view that, as formal verification techniques for smart contracts get fleshed out and easier to use 100% Agreed, though I don't think Solidity will have it anytime soon (3-5 year min for whole program verification that experts can use, I know some of the people working on it). The path the solidity FV people are following is a long, hard research path (close to what they did for the seL4 microkernel). Moreover, I know a ton about this because I built the first whole program formal verification system (compiler + DSL) for any smart contract language[1]. I built it for Pact, the language we[2] built to address the problems we saw with Ethereum's approach in enterprise contexts, that's FOSS but currently only available for on-chain use on our private platform. It wholly fixes the "immutable code" problem[3] via cryptocharters -- think of them as a module (smart contract) that have native support for both decentralized and centralized governance mechanisms for updating contracts and migrating the data they store. There's a bunch more stuff that Pact gets right, but that's what the papers are for describing. Keep in mind that formal verification isn't the "end all be all" for program safety. While it massively advances the state of the art in that regard you need more than just FV because FV still requires human effort (just vastly less/safer than regular/auditing testing). It's just that FV is SO damn rare that most people, including myself until last year, (a) have no idea what it looks like and (b) have no idea what to use it for. People seem to think that an FV-capable language will solve all of their problems. No, it won't. How many people going to become experts in SMT/Coq/Isabell just to write a safe smart contract? They, but Coq especially, make Haskell (which already scares people off) look like a cuddly puppy. What we'll need is a smart contract language that was designed to empower people to write safe code from the start + an FV system + a FV DSL that regular devs can use to leverage FV's power without having to become an expert in it. This is, unsurprisingly, exactly the feature set we have built for Pact. If you think I missed/should add a feature for empowering safe contracts I'm all ears (seriously, criticism/ideas are always welcome). Wait a couple weeks and we'll have the public chain whitepaper(s) out (we're still refining the wording). [1]: https://youtu.be/Nw1glriQYP8?t=1072 https://youtu.be/Nw1glriQYP8?t=1072 -- my co-founder is presenting it [2]: http://kadena.io http://kadena.io [3]: "immutable code" gets you laughed out of the room in industry Edit: this came out when I was writing the response... are you planning to sell tokens in the system? If so, again, be careful. "SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities" https://www.sec.gov/news/press-release/2017-131 https://www.sec.gov/news/press-release/2017-131

ThePhysicist 9y ago

Cool project, congrats! As you speak of the "20B worth of value" I have a question: I always ask myself what the total monetary value stored in ETH actually is, as the 20B $ is the market capitalization (as far as I understand), which in my opinion is NOT the value. Drawing on my Economics classes (from a long time ago), my thinking goes like this: Let's assume I create 100 million items of a new cryptocurrency. At first, my coins have no value whatsoever. Now, you offer to buy 1 cryptocoin for 200 $ from me. This would instantly give my currency a market capitalization of 200 $ * 100 MN = 20 BN $! But is my currency now worth 20 BN $? I would say no, as there is probably no way for me to sell the remaining 99.999.999 coins for the same price for which I sold the first coin. And even after distributing a large amount of coins (say 50 % of the total), I would probably not be able to sell my remaining coins for their market value, as my offer volume would rapidly drive down the price of the coins by creating an oversupply (depending on the transaction volume of the currency of course). Following this logic I always thought that speaking of 20 BN $ of value stored in ETH as misleading, as the real monetary value of the currency (as determined by how much value you could actually extract when liquidating it entirely) is probably much less than that. And given that most people invest in ETH purely for speculation, I would even wager that a single seller who puts a large number of ETH on the market (as compared to the average daily volume) could cause a massive price drop, since there is no "fundamental" value in ETH (contrary to an asset-backed currency or a company stock).

ruok0101 9y ago
How is this different than securities sold on public stock markets? If you hold a large position in a nasdaq 100 stock and drop a large sell order on the ECN's, you are surely going to see a similar (albeit not as dramatic) phenomenon. Does that mean the market cap of stocks shouldn't be used to assess value?
- ThePhysicist 9y ago
  The public stock market is highly regulated, which makes price manipulation and insider trading more difficult as it is illegal and suspicious trades will be investigated. The ETH market is completely unregulated, hence the risk of manipulation is much higher. Also, NASDAQ stocks represent the underlying value (as well as future revenue expectations) of a real-world company, hence short-selling your stock to manipulate the price (usually) doesn't make much sense if the fundamentals of the underlying company are good, as investors that are optimistic about the future of the company will happily buy the stock that you sell. Of course there are situations where large funds speculate against companies or even governments, but this is (usually) only possible if there is a fundamental issue in the underlying asset such as a nation in a deep recession or debt crisis. For ETH there is currently no underlying asset that would have a value in the real world and which could serve as an "anchor of trust" for an investor. It should therefore be much easier to manipulate and speculate against ETH as there is little external information beyond the exchange rate that other investors have as a basis for their valuation. Also, as of now there is no large economic process that depends on the existence and functioning of ETH, hence there would be very little external pressure to keep the currency alive if people started speculating against it. For most cryptocurrencies, the initial developers / creators are similar to the founders of a publicly traded company in the sense that they possess a large fraction of the shares of the company / number of coins. What's different is that there is little for the "crypto-shareholders" to hold on to their coins in case of a sharp price drop, as there is no underlying asset that their coins represent. Economically, they are highly incentivized to "cash out" as soon as they think that the price has reached its maximum value (and this is what I expect will happen with many crypto-currencies as soon as the market cools down). With shares this is different as ownership of the share allows you to continuously extract value from the underlying company in the form of dividends, hence the incentive for selling your shares is much smaller even if you think that the share price has reached its maximum. I would therefore be very cautious about long-term investments in ETH, as there is no safety net and no guarantor behind the value. And while this is great for gambling, it does not provide a viable platform to build real world applications on top of (in my opinion).

buckie 9y ago

No need to forgive. You're not wrong nor naive. I'd pin the difference as one of personal risk tolerances. I have much less than you, that's all. Right now Solidity is the only choice of public smart contracts. All I meant before was that this is an impressive project and to be careful. > But, after all, a dark horse 20 year old college dropout spearheaded the development of Ethereum, and the technology now secures nearly 20B worth of value. This is a really common trope in finance -- the trader/quant/manager/pm who thinks that he's god's gift to earth because he made so much money (and a system that made even more). I'm not saying that's what's going on in Ethereum, far from it, just that people who make a lot of money tend to think they are worth that amount of money (usually they are just fortunate) and that using monetary value as the sole justification for one's actions is (generally) wrong. While I disagree that Eth is actually valued at $20B -- if you can't get even a fraction of the $20B out of the market then it's not worth $20B in value... I bet the buy side of the Eth market supports around $100M-$300M max -- that's neither here nor there. The Ethereum ecosystem is, invariant on the value it represents, truly impressive and Vitalik's work is amazing especially given his experience level prior to it. I wouldn't say that the EVM is well designed in the slightest but the rest of the system is. It's closer to a 80's era CPU than a modern VM. I get why it looks like it does -- taking the bitcoin bytecode and extending it as little as needed -- but I disagree with the approach at a technical level. VM's are supposed to do more (e.g. handle dispatch and library loading) and to not support that means one must implement it in the language (like an ASM compiler does) which in a blockchain context consumes the limited gas you have. > I hold an optimistic view that, as formal verification techniques for smart contracts get fleshed out and easier to use 100% Agreed, though I don't think Solidity will have it anytime soon (3-5 year min for whole program verification that experts can use, I know some of the people working on it). The path the solidity FV people are following is a long, hard research path (close to what they did for the seL4 microkernel). Moreover, I know a ton about this because I built the first whole program formal verification system (compiler + DSL) for any smart contract language[1]. I built it for Pact, the language we[2] built to address the problems we saw with Ethereum's approach in enterprise contexts, that's FOSS but currently only available for on-chain use on our private platform. It wholly fixes the "immutable code" problem[3] via cryptocharters -- think of them as a module (smart contract) that have native support for both decentralized and centralized governance mechanisms for updating contracts and migrating the data they store. There's a bunch more stuff that Pact gets right, but that's what the papers are for describing. Keep in mind that formal verification isn't the "end all be all" for program safety. While it massively advances the state of the art in that regard you need more than just FV because FV still requires human effort (just vastly less/safer than regular/auditing testing). It's just that FV is SO damn rare that most people, including myself until last year, (a) have no idea what it looks like and (b) have no idea what to use it for. People seem to think that an FV-capable language will solve all of their problems. No, it won't. How many people going to become experts in SMT/Coq/Isabell just to write a safe smart contract? They, but Coq especially, make Haskell (which already scares people off) look like a cuddly puppy. What we'll need is a smart contract language that was designed to empower people to write safe code from the start + an FV system + a FV DSL that regular devs can use to leverage FV's power without having to become an expert in it. This is, unsurprisingly, exactly the feature set we have built for Pact. If you think I missed/should add a feature for empowering safe contracts I'm all ears (seriously, criticism/ideas are always welcome). Wait a couple weeks and we'll have the public chain whitepaper(s) out (we're still refining the wording). [1]: https://youtu.be/Nw1glriQYP8?t=1072 https://youtu.be/Nw1glriQYP8?t=1072 -- my co-founder is presenting it [2]: http://kadena.io http://kadena.io [3]: "immutable code" gets you laughed out of the room in industry Edit: this came out when I was writing the response... are you planning to sell tokens in the system? If so, again, be careful. "SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities" https://www.sec.gov/news/press-release/2017-131 https://www.sec.gov/news/press-release/2017-131