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My professional opinion as a blockchain researcher: I don’t see the point (yet)

• xiphias 9y ago
  ,,Unfortunately for this central value proposition of blockchain, there is no lack of trusted enough intermediaries in the financial/accounting sector.'' Writes a person living in Finland, the 3rd least corrupt country in the world. He should probably move to a country somewhere down in the list (like North Korea, Afghanistan or Lybia, Venezuela) for a year.
• patatino 9y ago
  "As it stands, public blockchain is very much a kludgy solution looking for non-existent problem, namely lack of trusted intermediaries in finance and accounting." Had to stop here.. The reason of blockchain is to remove intermediaries AND still have trusted transactions.
  • tylerhou 9y ago
    You're right, but the statement you quoted does not contradict your assertion either.
  • dtech 9y ago
    The author asserts that removing intermediaries (with blockchain) is a solution to a non-existent problem, as there are a lot of trusted intermediaries.
    • thieving_magpie 9y ago
      I'm not knowledgeable in this area but isn't the problem "trust"? Trust is a risk. Probably a safe one but a risk nonetheless. If you have the ability to remove trust from the equation, why not pursue it?
      • NathanKP 9y ago
        I think the point is that its a cost/benefit analysis. The cost of removing trust from the equation is much higher than the cost of just trusting a intermediary. In simple terms even if my bank was evil and occasionally abused my trust to steal my money it would still be cheaper to me than trying to use Bitcoin as money and paying the high transaction fees and suffering the long transaction wait times. Sure perhaps if there was no one I could trust as an intermediary and everyone was evil and would steal large amounts of money from me then a decentralized blockchain based monetary system would be worth using. But as it is the potential risk of an intermediary abusing my trust is minimal to nonexistent compared to the very real expense and wastefulness of the blockchain based systems. The same thing applies to almost all usage of blockchain. Sure it works, but trusting an intermediary just works better, and cheaper.
      • SideburnsOfDoom 9y ago
        > If you have the ability to remove trust from the equation, why not pursue it? Effort vs reward. Maybe the reward is low, and the cost (e.g. in electricity to do the proof of work) is getting out of hand.
      • NickM 9y ago
        We have the ability to remove it, yes, but not for free. Decentralized systems based on proof-of-work are inherently less efficient than centralized, trust-based systems. The question is, do the costs and downsides of cryptocurrencies outweigh the benefits of not having to trust a third-party intermediary? The author is arguing no, and for the overwhelming majority of real-world cases, I would tend to agree.
        • thieving_magpie 9y ago
          I understand the trade off a little better now. Thanks. It leads me to a follow up question - is this universally true of all blockchain implementations or is it due to the structure of cryptocurrency (mining, etc.)?
          • icebraining 9y ago
    • viggity 9y ago
      Yes, there are a lot of trusted intermediaries if you live in the US, Europe, or otherwise sufficiently developed countries. However, there are few if any truly trusted intermediaries in the developing world (and countries that have regressed significantly), including India, Venezuela, Zimbabwe. Perhaps blockchain is superior to a trusted intermediary, perhaps not. But it isn't gonna take off in the developed world until it proves its utility in the undeveloped world.
    • xwvvvvwx 9y ago
      We've been automating middlemen away for years, don't see whats different here? Blockchain lets us do some stuff now that was impossible before (single ownership of digital assets jumps out), but a big chunk of the economic benefit is going to come from reduced transaction costs.
      • conanbatt 9y ago
        The author makes the point that the proof-of-work is expensive enough to have the transaction costs still too high to compete with the current financial environment. I do not send money to my wife on bitcoin, I use venmo or bank accounts and it is free and immediate.
      • dtech 9y ago
        Bitcoin, the only "proven" crypto coin thus far, totally failed as a usable currency because of the high transaction costs. Other cryptocoins including BTC, Ethereum, Litecoin or whatever do not have lower transaction cost than traditional currency. In fact I would argue that since public blockchain require mining transaction costs can never be that much lower than traditional currency.
      • Asdfbla 9y ago
        And blockchains achieve that at an immense cost, which is the point of the discussion. Decentralised systems are less efficient (orders of magnitude less for proof of work) and it's debatable whether that is necessary in the real world, where trust exists for the majority of applications.
      • IkmoIkmo 9y ago
        We've been reducing middlemen to few, not to zero. e.g. Amazon, Whatsapp, Facebook, Airbnb etc. Hell, even peer-to-peer systems have some kind of middlemen. If that middleman is in a big enough market with low barriers to entry and lots of competition, and is able to drive cost down with smart tech, it doesn't really matter to most users whether he exists or not. Decentralised systems never promised low transaction costs. A private party running a database can do it cheaper and faster than a set of decentralised actors working for some incentive to establish the same database. That seems pretty much inevitable. They did promise something else. Trustless-systems. But it hasn't been shown yet that consumers value this. (e.g. see our most valued companies like Facebook to which we routinely trust data (from secrets to nudes) we'd never, ever share with anyone else) Blockchain's value proposition, as I've always interpreted it, isn't 'material' in the sense that transaction costs or speed are, but more based on the culture and the relationships of the 'value network'. i.e., the relationships aren't based on trust+laws, but on code+math. And it doesn't appear to me that the market values these relationships/culture, but it seems that the market does value the material aspects. hence there being no real blockchain users of blockchain applications. (except for the whole store of value thing, which drives basically all the price changes, but nobody envisioned the blockchain to solely be digital gold and nothing else).
    • xutopia 9y ago
      If I told you that Equifax is one of those "trusted intermediaries"...
  • SideburnsOfDoom 9y ago
    > to remove intermediaries And the miners who do the proof of work are not intermediaries in any sense? Do you trust them? At least in the traditional banking system you know who the middlemen are. For reference: https://www.extremetech.com/extreme/184427-one-bitcoin-group-now-controls-51-of-total-mining-power-threatening-entire-currencys-safety https://www.extremetech.com/extreme/184427-one-bitcoin-group...
    • patatino 9y ago
      It is a problem, I share Andreas Antonopoulos view on this: https://www.youtube.com/watch?v=ncPyMUfNyVM https://www.youtube.com/watch?v=ncPyMUfNyVM Edit: read the response wrong
  • Tyrek 9y ago
    A reason in search of a problem. Intermediaries in finance exist the same way that lawyers exist - to translate technical gibberish for you, and to bear some burden of the risk if they do so negligently. As pointed out in the main text, the blockchain doesn't truly remove the intermediary, it just switches it from the previous intermediary to the underlying blockchain code + governance structure, which is subjectively a higher risk intermediary, at least right now.
    • slivym 9y ago
      Not to mention that since people aren't actually conducting business exclusively in bitcoin they are forced to transfer back to fiat currency constantly which is a transaction that has all the same risks.
      • sparkie 9y ago
        It's possible to exchange between cryptocurrencies without trust by utilizing time-bound multi-signature transactions. You can't do that when there's a non-cryptocurrency involved. The fact that the latter is riskier says a lot more about non-cryptocurrencies than it does about cryptocurrencies.
  • maxerickson 9y ago
    Reliable is probably a better word for the goal than trusted transactions. You aren't supposed to have to trust blockchain, it's verifiable all the way down.
    • patatino 9y ago
      Agreed, I just took the word from the quote.
  • leereeves 9y ago
    I wonder what percentage of people only hold Bitcoin through an exchange. Bitcoin seems to have proven that people want intermediaries.
    • michaelbuckbee 9y ago
      Another way to thinking about this is that the intermediaries exist for an economically efficient reason and aren't just a "tax" on transactions to be routed around. In traditional institutions these are things like fraud prevention / detection, convenience in matching both sides of a transaction, etc.
  • bunderbunder 9y ago
    You're maybe taking an overly simplistic view of the needs of financial institutions. In finance, the trustworthiness of the transactions themselves is pretty much a non-issue. The real issues are much more subtle. What's the likelihood that a counterparty actually has or can acquire the goods they're selling me? If I'm selling them a futures contract, what's the likelihood that they will have enough cash to make good on that deal at a future date? Does my bank have a healthy enough balance sheet that I will be able to get at my money when I need it? These are all problems that the financial industry has solutions for. They are admittedly imperfect and of varying quality. But what's there is a far sight better than what blockchain has been able to offer, which is approximately nothing. Hopefully I shouldn't have to do more than mention the names MtGox and Tether to drive this point home.
  • hashkb 9y ago
    If you'd kept reading, he'd have addressed your point.
  • saas_co_de 9y ago
    > The reason of blockchain is to remove intermediaries Not correct. Blockchain has intermediaries. They are just semi-anonymous and unaccountable. The paradox of this is that if you don't trust any particular intermediary (evil corp, gov, boogeyman, etc) then how do you know they are not the anonymous party running your anonymous unaccountable blockchain? You can't and so the whole thing is foolish to the core.
• jatinshah 9y ago
  Is this personal really a blockchain professional. That is, does the person get paid by someone to be a blockchain researcher? I am curious who that someone might be.
  • pavlov 9y ago
    There's an "About" page on his blog.
  • deleted 9y ago
    [deleted]
  • thedonkeycometh 9y ago
    Yeah, I would say he's not. It seems that he's got an interest, but it doesn't look like he's actively doing anything in terms of actual research. The big give away is the vagueness of his argument; heavy in fallacy and opinion on cryptocurrencies but light in actual content on blockchain.
  • dsacco 9y ago
    That really depends on how you define "blockchain researcher" and, in particular, how close the research must be to hard science (as opposed to engineering implementation) to satisfy your definition. The researchers I personally know working on blockchain technology are all scientists in either cryptography or distributed systems. The author's background is economics, which provides a plausible reason for interest in blockchain technology, but not nearly enough of an academic grounding in the subject on its own for research purposes. I also don't see any actual publications or experience on his public CV that indicates particular expertise in the subject. That said, he certainly could have an out of date CV and brought himself up to speed in the subject on his own, which wouldn't surprise me since he's a PhD student. More to the point, what he wrote in the article should probably be considered on its own weight since its content isn't so specialized and complex that we have to defer to academic expertise for confirmation. He probably shouldn't have made such an easy target of his title, but the salient points of his post can be reviewed independent of the title's merit.
• emveeoh 9y ago
  Immutable, append-only ledgers between parties that don't need to trust each other.
• newyankee 9y ago
  This does not seem like an unbiased take and i may be biased
  • deleted 9y ago
    [deleted]
  • lev99 9y ago
    It also does not seem to have any unique insight. I feel like I've read this set of opinions every time bitcoin values changes rapidly.
• JumpCrisscross 9y ago
  When I first read Satoshi's paper [1], I read it as a solution to the Two Generals' Problem [2]. The problem concerns itself with multiple parties coördinating and communicating over an untrusted channel. The blockchain got distracted by finance. Modern settlement and clearing is efficient. It's perhaps the most efficient part of the financial system; it is certainly the easiest to upgrade. The difficult stuff, the messy institutional knowledge, customs and tendencies, are unaffected by protocol choice. That's why the same behaviors which plagued the unregulated banking system plague cryptocurrency markets today. People are still people. There are many systems which require a trusted group of people to reach a consensus in public. (Libor is an example [1]. Notaries appear, prima facie, to be in a similar category.) Immutability is of dubious benefit. But a simple, public consensus mechanism beats checking sundry private APIs and blog posts (how a lot of this is done today). Unfortunately, this class of use cases is negated by a "currency-like" token value. [1] https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf [2] https://en.wikipedia.org/wiki/Two_Generals%27_Problem https://en.wikipedia.org/wiki/Two_Generals%27_Problem [3] https://www.investopedia.com/terms/l/libor.asp https://www.investopedia.com/terms/l/libor.asp
  • brazzy 9y ago
    > The blockchain got distracted by finance. No, it was about finance right from the start, says so right there in the title of the paper ("cash"). It got distracted by politics and greed. What I mean with greed is obvious, and I guess it was kinda inevitable. Politics is a more interesting angle: many blockchain/bitcoin afficionados seem to be of the Libertarian persuasion who think the main point is to prevent government interference, especially inflation. And they seem to thik this was Satoshi's primary goal as well. And here I'm a bit baffled: I can't find that in the original paper. Did Satoshi state any political goals in other communications? I gather that he was actively involved in the early Bitcoin community for some time.
    • colanderman 9y ago
      Intended or not, Satoshi ensured, by artificially capping Bitcoin's supply, that Bitcoin would be deflationary.
• rasengan 9y ago
  The finite property of Bitcoin and the fact that you can trust said property and the fact that control of that property is decentralized is reason enough for blockchain my friend. Gold will never be as measurably scarce.
  • bringtheaction 9y ago
    > Gold will never be as measurably scarce. Even with Bitcoin we don't know the exact scarcity because private keys get lost. A wallet to which the private key has been lost is indistinguishable from the wallet of someone who is holding their funds because they want to save them for the future.
    • rasengan 9y ago
      Excellent point. Still, we know that there is not more than a certain number; versus with gold there could be more or less than any estimate.
  • ifdefdebug 9y ago
    But is this really true? Honest question: the recent BTC/BCH split effectively doubled the supply in one single instant. Can't this happen again and again whenever the pressure of demand grows too high? Can't do that with gold.
    • rasengan 9y ago
      But that’s the equivalent of then going to silver or using an entirely different element isn’t it?
      • tome 9y ago
        How many such "entirely different elements" are there?
  • fwdpropaganda 9y ago
    There's now 2000 cryptocurrencies. Where's the finite property?
• epistasis 9y ago
  I totally, 100% agree with his central point: I don't see the need for untrusted intermediaries, with the essential caveat of "yet." One place where blockchain clearly makes sense is Bitcoin. Or Bitcoin did make sense to me until the developers kneecapped future development and transactions fees soared and there are too few transactions allowed for it to become a useful ledger for everyday use of a large number of people. Other cryptocurrencies solve that weakness. But the spate of blockchain startups don't make much sense to me. In particular, in energy, I see it as a bunch of clear snakeoil. The startups that are most honest about this use less-competent executives' FOMO on blockchain to get their foot in the door, then say more honest things like "Ethereum doesn't make much sense for energy trading with your neighbor." Because with energy, like with most things, there is already a trusted intermediary, and trying to cut them out of the deal doesn't actually mean you trust them any less. They still have control, and power, and you still are giving them your trust. Blockchain may be useful in other situations, but it really remains to be seen. It's very interesting tech that seems like it could have applications all over the economy beyond currencies, but I think we may just be at the peak of the hype cycle and all these will come crashing down in a big dose of reality soon.
• diego_moita 9y ago
  > there is no lack of trusted enough intermediaries in the financial/accounting sector. Define "trusted enough". Now imagine you are a Chinese millionaire willing to take your money to a safe port, a Venezuelan/Somali that doesn't trust anything government, a Russian/Brazilian/Italian middle class practicing the so much loved national game of tax evasion... "Trusted" can mean a lot of different things all around the world.
• deleted 9y ago
  [deleted]
• rbreve 9y ago
  Any type of payment/reward system will use the blockchain, ICO's are right now the killer ethereum app, a good way to raise funds and do crowdsales.
  • perlgeek 9y ago
    ... and a good way to scam people. Do we have a list of successful, not-scam-y ICOs, where the investors/crowd funders actually got what they wanted in the end? (And I don't mean the tokens, but rather the thing that was crowdfunded).
    • francescopnpn 9y ago
      I invite you to try to raise money for your company with VCs and then try with an ICO. Then choose which one was better for both your company and the society as a whole. Just as the NYSE exists along with penny stocks, so will the blockchain-based assets. With the time, there will be less scams, but never zero, just like non-blockchain-based assets.
• Retr0spectrum 9y ago
  > Private blockchains are a different matter, and they will have applications in e.g. automating many transactions. Where could I read more about this? I assumed most of the benefits of blockchain came from the distributed aspect.
  • JumpCrisscross 9y ago
    > Where could I read more about this? "If no data needs to be stored, no database is required at all, i.e. a blockchain, as a form of database, is of no use. Similarly, if only one writer exists, a blockchain does not provide additional guarantees and a regular database is better suited, because it provides better performance in terms of throughput and latency. If a trusted third party (TTP) is available, there are two options. First, if the TTP is always online, write operations can be delegated to it and it can function as verifier for state transitions. Second, if the TTP is usually offline, it can function as a certificate authority in the setting of a permissioned blockchain, i.e. where all writers of the system are known. If the writers all mutually trust each other, i.e. they assume that no participant is malicious, a database with shared write access is likely the best solution. If they do not trust each other, using a permissioned blockchain makes sense. Depending on whether public verifiability is required, anyone can be allowed to read the state (public permissioned blockchain) or the set of readers may also be restricted (private permissioned blockchain). If the set of writers is not fixed and known to the participants, as is the case for many cryptocurrencies such as Bitcoin, an [sic] permissionless blockchain is a suitable solution." https://eprint.iacr.org/2017/375.pdf https://eprint.iacr.org/2017/375.pdf
• wyldfire 9y ago
  > Private blockchains are a different matter, and they will have applications in e.g. automating many transactions. Interesting, I think that private blockchains are very nearly useless! > Feel free to call me a luddite or whatever. Yes, you are a luddite.
• peterwwillis 9y ago
  Isn't public blockchain good for money laundering and ransomware? I don't know of any better methods to collect illicit funds that aren't more problematic than current methods to identify the parties in bitcoin transactions Also, cryptocurrency has seen a surge of use in Venezuela, where the currency is thousands of times less valuable than the paper it's printed on. Credit cards and cryptocurrencies are used wherever people have access to them (which is a very small subset, admittedly). Basically, cryptocurrencies are useful wherever normal currencies are unavailable, unlawful, or in order to subvert their regulatory practices.
  • ashelmire 9y ago
    That's a good point. Crypto could definitely serve a purpose in areas where there is runaway inflation or instability, if they are easier to get ahold of than another currency.
• olouv 9y ago
  I find the article a bit too focused on the financial aspect of blockchain technologies. Yes, Bitcoin is a payment system but the underlying technology goes way beyond the financial sector. I would not say that having a safe ledger that we all can trust without question for our democracies around the world a solution to a "non existant problem", just look at recent elections. Scalability/Performance issues should not be taken too much into account today, as we're still in the infancy of these technologies and can be pretty sure that they will radically improve over time.
• deleted 9y ago
  [deleted]
• notjtrig 9y ago
  Has anyone made a blockchain for sharing text, like a decentralized WikiLeaks, BitBin anybody?
  • NoGravitas 9y ago
    You are looking for IPFS, or possibly Dat.
• eksemplar 9y ago
  I see a point in trustless records of ownership. There is already a market for it in things like shipping, where transporting container ownership claims (a few pieces of paper) is more expensive than transporting the containers themselves. There is also a huge potential in corruption rich governments, where proof of ownership can suddenly disappear. Though implementation may be hard. :) Even in non (or ver little) corrupt countries like my own I see a point. Not so much because we need it right now, but because we might need it in the future. Why wouldn’t you build your anti-corruption government tech while you have the chance because your political leadership and the bureaucrats aren’t yet going to have a vested interest in stopping it? Maybe that’s a little pessimistic, and it’s certainly not how you should sell it, but it’s not like our current record keeping tech couldn’t need an overhaul anyway because it’s really, really, awful. Adding Blockchain tech to make it trustless wouldn’t be cost-inefficient if you’re down under the hood anyway.
• kernelPan1c 9y ago
  > So we will inevitably end up with some variation of Proof of Stake protocol – where we will simply have to trust some users more than others Doesn't this defeat the point? I can't imagine a scenario in which a proof of stake system does not become centralized. The average person will want to stake the extra money they have but won't want to maintain a dedicated machine with adequate storage and zero downtime. They will entrust a third party to earn money by staking on their behalf. Thus, you have created a centralized system with a whole bunch of extra complication.
• LeonM 9y ago
  I studied the source of the bitcoin blockchain a couple of years ago when the whole "blockchain will change the world" movement began. Although I really liked the elegance of the blockchain, I never understood what the blockchain would solve in a real-world application. How I see it: blockchaining is an arms race in computing power. In order to sufficiently 'secure' your chain you need to spend more value (electricity) than an attacker is willing (or capable) of spending. This makes blockchains very expensive, slow and an environmental disaster. Unless a blockchain has tremendous value (like cryptocurrencies currenly have) there is no way to sustain them.
  • icebraining 9y ago
    In theory, the value of the blockchain is proportional to the value of attacking it; if a particular chain is not very valuable, it doesn't need to have much power securing it.
  • jacquesm 9y ago
    > blockchaining is an arms race in computing power. Distributed blockchains.
    • LeonM 9y ago
      That is correct, but a non-distributed blockchain (i.e. something you use locally) sounds like a something that can also be solved by using a database or even your filesystem. I'm not saying blockchains are bad technology, non-distributed blockchains can be a very good solution to certain problems, but it's not the "world changing" revolution many claim it to be.
      • chillee 9y ago
        What? What would be the point of a non-distributed blockchain? Fundamentally, blockchains are a solution to the distributed consensus problem, where you're not guaranteed anything on the length of time it takes to communicate between two nodes. Also known as asynchronous consensus. If you're local (or within a small network with bounded, you don't really need asynchronous consensus. Dolev-Strong or any number of other synchronous/semi-synchronous protocols would work fine.
• smuemd 9y ago
  This. Replacing the term "intermediary" with the term "institution" is an exercise worthwhile. For one will realize that institutions serve various important social functions that go far beyond middleman style profit and rent skimming. Proponents of blockchain revolutions need to come to terms with existing institutions, working with them rather than against.
  • CryptoPunk 9y ago
    >>For one will realize that institutions serve various important social functions that go far beyond middleman style profit and rent skimming. Monitoring transactions? Preventing people from transacting? I think people should be able to do peer-to-peer electronic transactions the same way they can do peer-to-peer physical transactions with cash. It would empower individuals and serve as a guard against encroachments of their liberty. If cryptocurrency were never invented, people would have had no way to donate to Wikileaks when the financial blockade was imposed on it by major payment intermediaries. And that's in the West. Imagine what the situation is like in countries like China. Organisations on the fringes like Wikileaks are important guarantors against centralized tyranny. Without a payment system outside the control of centralized authorities they can be more easily snuffed out. In other words, cash is an institution as well, and is important.
• francescopnpn 9y ago
  Empirically speaking there's already four verticals where blockchain is dominating (in terms of market share growth YoY): 1- Illegal goods [The deep web] 2- Fundraising (both good for individuals who previously could not act as angel investors and rip the xx,xxx% returns because of wealthy discrepancies and good for companies who do not need to drink 75 coffees with VCs) [Companies: Ethereum] 3- From fundraising thru blockchain-based assets came out a new speculative open 24/7 international market [Companies: Exchanges] 4- As an additional form to store of value (Like 1-digit % of your belongings). A blockchain-based asset it's divisible, easily transportable, encrypted and finite. Possibly it also serves an use like gold in the aerospace and electronic industry. There's also one more vertical that will eventually be dominated by the blockchain: Micro Transactions. If a transaction costs 0.00001 cent, then you can easily buy data for 1 cent a piece. Something akin to IOTA (or a working version of IOTA itself) will inevitably be built with a trillion devices connected to the internet. Banks wont ever be able to process 0.00001 transactions.
  • tscs37 9y ago
    >Banks wont ever be able to process 0.00001 transactions. My bank is processing 0 cent transactions and IIRC in Q3 they're going to support SCT Instant, meaning the bank transfers will take under a minute within the SEPA area while still being 0 cent cost.
    • francescopnpn 9y ago
      Well, that's interesting. I wasn't aware of that. I'll look into it. With that said, my theory is that unless most banks of the world adopt a similar technology within a reasonable timeframe (which is unlikely), a blockchain-solution will likely dominate.
  • JumpCrisscross 9y ago
    > Banks wont ever be able to process 0.00001 transactions Why not? Nobody processes at that quantum because no demand has been shown for the service. Blockchains are inherently less efficient than the databases modern financial systems run on. That tradeoff is core to the technology.
• rrggrr 9y ago
  Many investment opportunities are closed off to willing participants by government regulation, investment minimums, transaction costs and other factors. Looking at most (not all) of the non-currency alt coins, there is clearly demand for cheap access to new investment opportunities. Yes, a lot of people are going to lose to scams, some have already. At the same time distributed ledgers do solve a very real "access" problem. Similarly, contracts and banking have not integrated well with the technologies most business uses. Yes, Stripe has reduced payments friction beautifully, and Paypal has brought credit applications and approvals to the checkout process. But big dollar transactions that use Letters of Credit, structured loans, milestone payments, etc... these areas have few programmatic solutions. Smart contracts are a fast approaching solution to this need, they have no analog in the conventional commercial world, and yes - they will be a game changer. If my customers can issue an irrevocable L/C, denominated in Etherium for example, that is self executing based on terms mutually agreed in advance, then my business will chose that route over lengthy and expensive bank L/C's. It also means we'd probably choose Quantstamp for contract security, and perhaps SALT Lending to fund the Ether, and possibly expend BNB to covert the currency into Litecoin for storage until such time as we convert to fiat. That is the promised ecosystem. It is no more expensive or complex than the universe that surrounded EDI, or that describes most business process integrations in common use today. Its just difficult to look at all this from both a business and programmatic point-of-view simultaneously.
• apo 9y ago
  Professional blockchain researcher. Huh? From the witer's bio: I’m a PhD student at Aalto School of Economics in Helsinki, Finland. In general, I’m interested in evolution – specifically, how complex entities evolve over time. FWIW, those who are shut out of centrally managed payment systems most definitely understand the point of Bitcoin. For example, see this recent article on Sci-Hub: https://www.theverge.com/2018/2/8/16985666/alexandra-elbakyan-sci-hub-open-access-science-papers-lawsuit https://www.theverge.com/2018/2/8/16985666/alexandra-elbakya...
  • ChrisLomont 9y ago
    Ad hominem? He finished his PhD thesis last year, and it's not unreasonable for him to have spent the past 15 months doing research on blockchain technologies, give the areas he works in.
    • apo 9y ago
      I'm not sure how you conclude that the PhD has been earned. The about page uses the future tense, there has been a lot of time to update it, and there's this: With luck, my thesis will be complete in late 2017 – only three years later than I planned! The extra years have been well spent in researching and writing about environmental issues, particularly energy/environment nexus. This has resulted to two books in collaboration with Rauli Partanen: Climate Gamble and Musta hevonen. When an author puts credentials in the title of an article, then credentials are on the table as a point of discussion.
      • ChrisLomont 9y ago
        >I'm not sure how you conclude that the PhD has been earned. I didn't say it was. I stated the thesis was finished. These are distinct. The latter requires a defense of the thesis before a committee, and in pretty much every decent PhD program, is merely a formality since the advisor should not let the student defend until he/she is ready. I had my thesis finished long before I did my defense, and I passed that months before the PhD was conferred, which happens at graduation. Here's [1] a speech given before his thesis defense, so I suspect he has passed his thesis defense. So either he got his actual PhD at the end of the term or is waiting to get it at the next term end. >When an author puts credentials in the title of an article, then credentials are on the table as a point of discussion. Neither PhD nor Doctor appear in the title or in the article. You brought up the PhD silliness. A PhD is neither required nor implied in this post. You're still stuck on ad hominem. If you want to criticize, do so on the merits of the article, not strawmen you dig up. [1] https://jmkorhonen.net/2017/12/15/necessity-is-the-mother-of-inventors-my-phd-lecture/ https://jmkorhonen.net/2017/12/15/necessity-is-the-mother-of...
• player2121 9y ago
  > Unfortunately for this central value proposition of blockchain, there is no lack of trusted enough intermediaries in the financial/accounting sector. I am not sure if _lack_ of trusted intermediaries is the issue here. The problem is with their current form and shape, not with the lack of trust. Blockchain is trying to reshape how the trust _works_ not its lack or abundance.
• ThomPete 9y ago
  The point about the blockchain is to create physical properties (scarcity) in an otherwise abundant digital space. Think TCP/IP + History (blockchain) that's the value.
• cs702 9y ago
  > To me, it all seems another gold craze, stoked not only by the usual crowd of techno-babblers keen on latching on the latest buzzword, but also by certified wingnuts from the long-discredited hyper-libertarian Austrian school of economics, kept buoyant by half-baked comparisons to "unreliable" "paper money" (which is nevertheless very effectively backed by the government's universal tendency to require said paper money for taxes, not to mention the inconvenient fact that if societal trust erodes sufficiently for paper money to lose its value, it’s highly unlikely an arbitrary string of ones and zeros in an arbitrary hard disk somewhere would fare much better), spotty comparisons of current economic system to few exceptions where hyperinflation was allowed to run rampant, and perhaps most of all, by simple wishes that the persons currently propping up the belief in blockchains will not be the last ones who are blinded by the latest buzzword and get-rich-quick scheme. There are also people like me: * I agree with the OP that there are a lot of techno-babblers keen on latching on the latest buzzword. * I agree with the OP that there are many certified wingnuts who belong to the discredited Austrian school of economics. * I agree with the OP that comparisons to "unreliable paper money" are half-baked at best. Yet, I also see the point of Bitcoin. I view Bitcoin partly as a supranational store-of-value, transaction platform, and distributed social network: its survival and usage do not depend on any particular country. The only other "money-like" asset I know which is commonly viewed as supranational is gold, which has been used to store value and conduct transactions for at least 6,000 years.[a] These uses of Gold have lasted 25x longer than the age of the US, 12x longer than the life of the Roman empire, and 2x longer than the combined age of China and all its predecessors. Gold has outlasted all monetary systems devised by humankind so far. It's a barbarous relic, yes, but one that has survived "everything humankind has thrown at it" so far. The Bitcoin network seems to have that same "survives everything humankind can throw at it" quality. [a] https://www.ft.com/content/5604c5cc-d1b3-11e1-badb-00144feabdc0 https://www.ft.com/content/5604c5cc-d1b3-11e1-badb-00144feab...
  • sotdan 9y ago
    So it solves a use-case that's already solved by gold?
    • jsutton 9y ago
• paulsutter 9y ago
  > there is no lack of trusted enough intermediaries... Equifax? Wells Fargo? Happy that your payment card provider sells your purchase history? Or that we spent trillions to bail out bankers mistakes? What about trust in nonfinancial matters: Voting machines? Google? Facebook? The NSA? The 30 obscure random companies tracking any given web page? Maybe we trust too readily.
  • hyperbovine 9y ago
    > Are you happy that your payment card provider is selling your purchase history? Yes, I'd much prefer it to be freely available for all to see.
    • deleted 9y ago
      [deleted]
    • jraines 9y ago
      Except it's linked to one or many pseudonymous wallet addresses, so only linkable to your real name under certain circumstances and/or by TLAs. And that's before anonymizing protocols (available now as separate coins, coming soon-ish to ETH, and probably at some point to BTC)
      • 45h34jh53k4j 9y ago
        Or its hidden by RingCT -- confidential transactions (cannot see amounts transacted), and signed with a ring signature so you cannot determine the 'true' inputs and outputs. No reason that cryptocurrency needs to use transparent arithmetic. The next gen of this is mimblewimble, in which you cannot even determine an individual transaction! The block tx's are simply an aggregate of transaction and balance states!
      • jayd16 9y ago
        You're worried about being tracked yet you don't think someone who would track you wouldn't go through the hoops of digging through the chain to do it?
• johnlbevan2 9y ago
  My understanding was that Satoshi Nakamoto is an alias / the true author(s) of that paper remains anonymous. For me that's where the scary bit of blockchain lies. i.e. It's very tempting to go the government conspiracy theory route of who's benefiting from making this public / is it possible that it's been crafted to look secure whilst having some fatal flaw which is not immediately obvious. I don't really believe that; but equally can't discount the possibility.
• deleted 9y ago
  [deleted]
• duckqlz 9y ago
  Seems like everyone is looking at this from a 1st world perspective where our trust in money and the financial system has worked in our favor (generally). In places like Vietnam where their currency has crashed to 0 in memoriable history a decentralized currency seems like a great idea. Furthermore there is over 500B USD (more than global foriegn investment) sent from migrant workers back to the thrid world every year. Each transaction can cost anywhere from 5 - 15% depending on the country. Than the reciepient incurs more fees for exchanging to their local currency. This results in an enormous amount of economic waste and can be completely avoided with a decentralized and trusted block chain currency. All of this causes incentive for the technology to persist and keep expanding. In this sense I feel the author and many commentors have missed the point. A decentralized currency is not for places where trust already exists (yet) but it already has applications where it does not. IMO this is what has "futurists" up in arms. Just like how the internet had the potential to allow the flow of information to pass between boarders freely from the beginning but was seen as a novelty. This is becuase it was looked at under a 1st world lens where public libraries and free education were already norms. It was only when information got into the hands of those who previously could not get it did we see an explosion of ideas and progress. What if the same thing happens with money?
  • sotdan 9y ago
    Then I assume there must be evidence that the Vietnamese and migrant workers in the US are rushing to adopt decentralized currencies. Is there?
    • duckqlz 9y ago
      There is a lot of evidence of the potential bitcoin has for remittance. This doesn't mean that it has been adopted by ALL the migrant workers in the US but if the transaction cost is 0 and the competitor charges 15% its only a matter of time before it is adopted by everyone. The links below only scratch the surface. Aside from the references below most of my previous post comes from on the ground experience in developing nations. I sincerely doubt there is a formal study showing the exact numbers since there is no incentive for migrant workers (who may be undocumented) to expose themselves for capital flight. My overall point though is that while you, as an American, may have complete faith in the current financial system there are certainly places in the world where this is not the case. The financial system is global and the US is no longer the biggest player. [1] Krygyzstan https://www.theguardian.com/world/2014/jul/08/kyrgyzstan-bitcoin-experiment-migrant-savings https://www.theguardian.com/world/2014/jul/08/kyrgyzstan-bit... [2] Africa http://www.independent.co.uk/news/business/news/bitcoin-is-being-used-by-african-migrant-workers-to-send-money-home-10098169.html http://www.independent.co.uk/news/business/news/bitcoin-is-b... [3] Tajikistan https://eurasianet.org/node/68272 https://eurasianet.org/node/68272 [4] General https://riskmagazine.nl/article/2017-09-15-bitcoin-the-perfect-solution-for-remittance https://riskmagazine.nl/article/2017-09-15-bitcoin-the-perfe... [5] South east asia http://inc-asean.com/editor-picks/bitcoin-disrupting-southeast-asias-remittance-industry/ http://inc-asean.com/editor-picks/bitcoin-disrupting-southea... https://imgur.com/a/RySeB https://imgur.com/a/RySeB
• phoneboy 9y ago
  So many people think they are experts on blockchain tech nowadays after reading a few ICO whitepapers. The point of public chains is to automate tasks, whatever that task may be. Stop thinking of blockchains as this limited thing we see in the ICOs today and learn to see it as decentralized autonomous organisations. These organisations are focused on transactions and can be implemented as any market.
• zeveb 9y ago
  > To me, it all seems another gold craze, stoked not only by the usual crowd of techno-babblers keen on latching on the latest buzzword, but also by certified wingnuts from the long-discredited hyper-libertarian Austrian school of economics That's a bit question-begging, there. Austrian economics seems quite reputable to me, anyway. > the inconvenient fact that if societal trust erodes sufficiently for paper money to lose its value, it’s highly unlikely an arbitrary string of ones and zeros in an arbitrary hard disk somewhere would fare much better In a world of rubles, rands & lira (all highly volatile, although probably not as much as Bitcoin currently), a world in which governments (not all democratic!) attempt to control the movement of capital, I think that ones & zeros might not be a terrible addition. Upvoted anyway, because his fundamental point is probably correct: cryptocurrency is in its infancy.
• CryptoPunk 9y ago
  In my opinion, there's no justification to describe his opinion as a "professional opinion" and himself as something as official as a "blockchain researcher". It's just an appeal to authority when there are no clear standards for what an authority is in this field. >>Unfortunately for this central value proposition of blockchain, there is no lack of trusted enough intermediaries in the financial/accounting sector. Has this individual ever tried integrating a payment system into an online business? Payments on the internet are rife with inefficiencies and problems. The lack of electronic cash is a serious impediment to frictionless commerce. Without cryptocurrency, the road ahead seems to fork between a future with a hodge podge of non-compatible processors, or one with a single payment processor holding a virtual monopoly over the market. >>Very few people outside so-called crypto-anarchist community are opposed to trusted intermediaries as a matter of principle, and outside this (admittedly vocal) minority and those who for their own personal reasons want to believe in this scheme It's not just "crypto-anarchists" who care about removing trusted intermediaries. Anyone who doesn't want to be a captive consumer of a trusted third party that runs a platform they are locked into by virtue of its network effect, will be interested in immutable protocols replacing platforms run by trusted intermediaries. >>also by certified wingnuts from the long-discredited hyper-libertarian Austrian school of economics, Ad hominem nonsense like this really discredits the article. >>the bog standard public blockchain with its Proof of Work scheme (e.g. how Bitcoin burns electricity) is certainly not going to cut transaction costs enough, as throughput rates are simply not even within two orders of magnitude from what is needed. Case in point: a Bitcoin developer conference just announced it won’t be accepting Bitcoin as a means of payment, because it’s too slow and the transaction fees are too high. As a self-avowed blockchain researcher, it's odd that he's not aware of Bitcoin Cash, and is using Bitcoin Core's self-imposed 1 MB per 10 minute throughput cap as the technical limits of what Proof of Work could scale to. The article is a disingenuous hit piece.
• niftich 9y ago
  Let's work backwards: what problem does Bitcoin actually solve? It successfully incentivizes continued upkeep of its blockchain, making it a useful, global, trustless, pseudonymous, immutable, long-lived database. You don't need a tinfoil hat to appreciate the utility of a datastore whose continued operation and upkeep is ensured by the promise of vesting, and successfully leverages market forces and emergent market behavior to ensure its own longevity. And, it provides a market-based incentive for the community to be on the lookout for sybil attacks. Later chains have been targeted for more specific applications more explicitly. Some focus on exchange of value, some focus on store of value, some focus on the continuity of records. These are useful properties, and those who dismiss blockchains clearly do so within the context of extreme hype about their potential applicability to other aspects of life. That's what this article is -- like hundreds of others: an attempt to bring the hype back down to earth and promote a more measured conversation.
• bittcto 9y ago
  This is a very common rehash of the "blockchain not bitcoin" perspective, and this indicates a lack of understanding of the purpose of bitcoin. Bitcoin/satoshi aren't being coy, though. The Genesis block contains the headline "Chancellor on the brink of second bailout for banks." Bitcoin was created as a democratized money that is outside of central control. The author thinks that centralized control is not a problem because "there is no lack of trusted enough intermediaries in the financial/accounting sector". This is something that bitcoiners strongly disagree with, with almost daily news of financial censorship going on, and irresponsible financial institutions continuing to be funded by quantitative easing[1] to engage in carry trade and other gambling (which is somehow considered less risky than a revolutionary new form of hard digital money). The thing that I think a lot of people miss is that bitcoin is not a technology, it is a combination of technological innovations with economic innovations. Its the incentives in bitcoin that are critical to the system... this is why "private blockchains" are silly. You might as well use Oracle with version tracking on changes. Public blockchains, namely bitcoin, have the potential of being genuinely trustworthy in themselves, not based on hoping you don't have counterparty risk. In 2009, it was the counterpary risks that really amplified the disaster-- all of those CDOs were written assuming there was no possibility of default. The rest of the financial sector operates at the risk of financial censorship, but financial censorship is not unusual-- everything from banning people from doing business with each other to the elimination of ownership rights for corporate bonds in the GM case. It's not that uncommon. With bitcoin there is no possibility of default, and very high resistance to financial censorship. [1] Not to mention that arbitrary issuance of currency basically removes individuals ability to trust that currency in the first place.
  • dnautics 9y ago
    > With bitcoin there is no possibility of default Nobody is stopping you from writing an off-chain loan that defaults, by trampolining back to meatspace trust models for the debt obligation. Sure the effects are likely to be much more contained, but to say there is no possibility of default is not accurate.
    • jayd16 9y ago
• wslh 9y ago
  Sadly, the author cannot see beyond his zone of comfort which most people in the world din't share. Also, there are simple political problems with the status-quo that are good to point at: governments love a cashless society to be taxed (and controlled through use of private information) while they defend oligopolies like Visa and Mastercard.
• atomical 9y ago
  Isn't blockchain useful for tokenizing VC investments that would normally be illiquid? I've read that there are a few companies that are doing this with "security tokens."
• lowbloodsugar 9y ago
  The article immediately has to caveat the difference between "public" and "private" blockchain. This seems to be the #1 question in any blockchain discussion. What exactly is "blockchain"? Merkle trees, super useful (e.g. git). Distributed ledger, super useful (e.g. developers' local copies of kernel source). Proof of work using GTX 1080s plugged into hydroelectric power-plants, waste of resources. If "blockchain" means only "public, distributed ledger powered by proof-of-work" then I don't think "blockchain" has a future. But if "blockchain" means any of the above without proof-of-work, then blockchain is already the #1 mechanism for software development, has a myriad of uses and is a total no-brainer.
• jmkorhonen 9y ago
  Thanks everyone for your comments - I had no idea this had generated such interest. I've forgotten to update my bio, but these days I'm in fact a PhD. Studying the impacts of blockchain and other distributed trust technologies has been my day job since September 2016. I freely admit that these are just my interpretations and I may be wrong; that's the point of writing articles like this. That said, I do stand by my analysis and believe blockchain technologies are greatly overhyped relative to what actual value they do add to existing systems. The great majority of users are fairly happy or at least indifferent with the #1 bugbear of most crypto enthusiasts - trusted third parties - and it is far from clear that simply getting rid of them (and substituting hazy, informal, unaccountable governance structures instead) is ever going to be the killer app some people seem to think. However, there will also be many use cases where blockchains and e.g. DAGs can and will be used to create real value very effectively. Just today talked to a company that's doing interesting things to help car rental companies streamline their processes - that's one example of what shared ledgers and smart contracts can do to really decrease transaction costs. However, I do predict that the majority of sustainable use cases will gravitate to more or less private blockchains, sooner or later. This company had chosen that route from the beginning. One thing I would add today to the text is a caution against thinking that existing incumbents can be toppled simply by duplicating the functions of their databases. Databases are ultimately the most valuable asset of many trusted third parties, but their value proposition includes MUCH more than just having a reliable database. One thing coders generally are poor at grokking is that things like user experience do matter, and generally blockchain systems are far from being designed from user experience in mind. Another, probably even more thing entirely, is customer service and error handling when things will inevitably go wrong. Immutable ledgers are by definition poor at handling such things, yet there is considerable evidence that people tend to be very wary of adopting a system if they fear that they can make a mistake that has serious results. Existing third parties have understood this, and offer a lot of services and design features aimed at assuring customers that if something goes wrong, they will not suffer. These are interesting technologies and a lot of people are partying like it's 1999 again. But I do suspect there is going to be a through of disillusionment in our future as well.
• lisper 9y ago
  The fundamental problem with blockchains is that they are expensive by design. They have to be. The cost of mining is fundamental to the security model. The more traction a blockchain gets, the more it is likely to be subject to attack, and the more expensive mining needs to get in order to thwart such attacks. The solution IMHO is to go back to using TTPs (Trusted Third Parties) but using a protocol that makes them auditable so that if a TTP cheats it will be immediately evident. Then let the free market set the price of clearing. Competition should drive the price down to the marginal cost of basic record-keeping, which is very low.
• freech 9y ago
  "Private blockchains are a different matter, and they will have applications in e.g. automating many transactions." A private blockchain is just an inefficient databse. "which is nevertheless very effectively backed by the government’s universal tendency to require said paper money for taxes, not to mention the inconvenient fact that if societal trust erodes sufficiently for paper money to lose its value, it’s highly unlikely an arbitrary string of ones and zeros in an arbitrary hard disk somewhere would fare much better" I've never seen the argument made that paper money is going to lose it's value because societal trust erodes, it is losing it's value because people keep printing more of it. So yeah, I think Bitcoin already does fare better.
• redspectre 9y ago
  In my opinion, the reason it hasn't taken off yet is because smart contracts are limited to tokenization. Smartcontracts are an amazing idea, but unfortunately they are limited to centralized oracles or interacting with on-chain data only (such as creating ERC20 tokens). There's a few projects, such as ChainLink (which has done a PoC with SWIFT to handle bond-interest payments from blockchain->swift message), that can pass data to the blockchain in a decentralized and trusted way. It's not quite ready for primetime yet, but the PoC worked. I believe that once smartcontracts can access off-chain data in a trusted way, we will see an explosion of usecases we cannot even imagine right now. Think a smartcontract that automatically portscans your infrastructure using multiple oracles in a decentralized way. If a majority of oracles ever detect a port other than 80 and 443 open, the smartcontract can notify an insurance company insuring your business and revoke your policy. The benefit is, you can pay way cheaper rates assuming you never deploy a machine with an administrative port open. This whole process can happen in a decentralized and trustless manner that neither party can tamper with. Truly exciting stuff. The whole "replacing cash" is to me, the least interesting aspect of cryptocurrencies, but is the one most people seem to focus on!
• colecut 9y ago
  "Unfortunately for this central value proposition of blockchain, there is no lack of trusted enough intermediaries in the financial/accounting sector." I've read that over 3 billion people don't currently have access to banks. Is that not true?
  • dragonwriter 9y ago
    > I've read that over 3 billion people don't currently have access to banks. Is that not true? I suspect that 3 billion overlaps significantly with the 4.4 billion that lack internet access. I'm not convinced that blockchain is a particularly helpful solution for them.
    • arbol 9y ago
      M-Pesa has demonstrated that payments via SMS are a viable solution for those that lack internet access. GeoPay and others are attempting the same but utilising blockchain. http://bitcoinafrica.io/2017/08/02/africas-blockchain-startups-geopay/ http://bitcoinafrica.io/2017/08/02/africas-blockchain-startu... https://btcmanager.com/samourais-new-feature-send-bitcoin-via-sms-text-message/ https://btcmanager.com/samourais-new-feature-send-bitcoin-vi...
    • lnino 9y ago
      The problem is not just not having access to banks. Try to send money across the world living in the third-world. There's stuff like Western Union in may places, but depending on where you are there are extreme levels of red tape and very low limits on how much and how often you can do it. Also whenever there is unusual volatility in the market, that kind of service will stop servicing. And good luck setting up a US (or EU) bank account remotely from 80% of the world that's not developed.
    • colecut 9y ago
      How difficult would it be to get cell phones to the people who currently don't have them? Cell phones are exploding in the developing world. Probably quicker than setting up banks?
• arisAlexis 9y ago
  you are not expressing a "professional opinion" if you did research for yourself without anyone paying you. The pompus title is biased towards what you wanted your result to be.
• mrhappyunhappy 9y ago
  Very short sighted researcher. I must question his intelligence if the point of money with no central control doesn't make sense to him.
• dreit1 9y ago
  I'll give a very simple example that shows the power of blockchains. I needed to receive a very large sum of money from a foreign country. Half was paid in cryptocurrency, and half was paid in cash via the traditional banking system. It took 3+ weeks for the money to make it through the banking system. It took 15 minutes for the cryptocurrency to arrive. I don't get how anyone can not see the obvious merit to this system
  • hyder_m29 9y ago
    And how long to convert the cryptocurrency into a usable currency? As long as cryptocurrencies are not widely accepted, it isn't much useful. Also, there's a good reason for the checks and balances that take time in traditional banking.
• SZJX 9y ago
  I think a large part of nowadays' use case of blockchain-based technology is to skirt regulations and conduct transactions that would have been illegal/attracted scrutiny if done with the traditional, "trusted" channel. Those people have to go with a non-legal channel, where trust becomes a very tricky and important thing. In that context, blockchain becomes a really good solution. i.e. it's not that traditional banking is not trustworthy. It's just that many people want to avoid legal channels. That's when blockchain comes into play. The increased regulation efforts by multiple governments might change the landscape, or not. We'll have to see.
• tim333 9y ago
  If you look at what public blockchains have been used for since the bitcoin 2008 paper, it's been mostly for making financial transactions outside of government control. This has of course been used for somewhat questionable activities such as drug dealing, extortion, speculation and tax avoidance but there may be an opportunity to do reputable things like worthwhile investment and money transfers with less red tape and national barriers than are involved with government regulation.