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There's No Good Reason to Trust Blockchain Technology (2019)
- louwrentius 6y agoThis article is from 2019 but I discovered it only recently by accident. Bruce Schneier makes the case against both cryptocurrencies and Blockchain technology, as I understand it. I think it should get some more attention, because it makes a very good case, centered around the topic of 'trust'.
- louwrentius 6y agoI noticed that this article has been discussed on HN a while back: https://news.ycombinator.com/item?id=19097613 https://news.ycombinator.com/item?id=19097613
- niyazpk 6y agoAh, I did not notice that the article was written by Bruce Schneier. I need re-read the article now. Weird how trust works.
- DonHopkins 6y agoAnd there are many good reasons not to trust Blockchain evangelists.
- yalogin 6y agoSo far I haven’t seen a usecase that absolutely needs a blockchain either. I mean one that can only be addressed by a blockchain and will fall apart without it. But many people have used it as a general enough hammer to hit every nail they can find with it. As last it as people make money on it, even hypothetical money, it’s going to stay popular.
- louwrentius 6y agoI think that making money part is due to a game of musical chairs. No actual value is generated.
- smt88 6y ago> No actual value is generated. I actually (unfortunately) don't think this is true in a financial sense. The only people with an incentive to use a semi-anonymous "currency" with extremely high transactions fees are criminals. You can argue that not all crimes are harmful or immoral, and you'd be right, but that's outside the scope of my comment. The more crypto is used as a payment for crime, the more value it has. It becomes an investment vehicle for crime. If you think global crime will increase (and increasingly use crypto), then you can invest in it using Monero or whatever people think offers the best combination of liquidity and privacy these days.
- louwrentius 6y agoI think you are right in a narrow sense. But from the perspective of a society, it seems to create 'negative' value. I have a few words to say on that. https://louwrentius.com/cryptocurrencies-are-detrimental-to-society.html https://louwrentius.com/cryptocurrencies-are-detrimental-to-...
- rbecker 6y agoFacilitating transactions is a valuable service.
- louwrentius 6y agoThat tech already exists with a fraction of the transactional cost, in the far majority of situations.
- bawolff 6y agoThat's a different claim than you started out with. Additionally, remittence gets a lot harder internationally. Some of those services charge very hefty fees. Being the best at something is different than not doing something at all. You don't have to be the very best at something to generate value doing it.
- buhrmi 6y ago
- shalmanese 6y agoBuying drugs/murders on the darknet and getting untraceable ransoms from your cryptolocker malware are at least two solid use cases. One could argue evading currency controls is a 3rd. The problem is that there's been no new uses found for blockchain after the initial uses discovered.
- Judgmentality 6y agoBlockchain isn't completely anonymous though. Bitcoin, for instance, can be and has been deanonymized to catch criminals. The entire concept of a blockchain is create an extended ledger, which isn't exactly an idea focused on privacy.
- BlueScreenDeath 6y agoHow can people that are able to user the internet and apparently can read still be so incredibly ignorant?
- louwrentius 6y agoIt's an idea focussed on.... what exactly? It seems like a solution in search for an actual problem.
- Acrobatic_Road 6y agoThat's not an inherit limitation of a blockchain. Monero exists. It actually delivers on privacy where bitcoin couldn't.
- ajkdhcb2 6y agoMonero is private and has taken over as the far better option for the few real use-cases
- louwrentius 6y agoIn that vein, I really like this book: http://www.americankingpin.com/ http://www.americankingpin.com/ About the rise and fall of The Silk Road
- 6y ago
- pa7x1 6y agoA blockchain decentralizes trust, you can always solve the same problem a blockchain tackles by introducing a central point of trust. The question is if this choice is acceptable, more resilient, cheaper...
- louwrentius 6y agoI think the case is made by Bruce that the whole concept of decentralised trust is an oxymoron. In the end you do trust the code, a computer running the code or some currency exchange.
- menzoic 6y agoYou trust a decentralized network of computers running code, not just a single one, that's the main point. There's both centralized and decentralized exchanges available.
- asjw 6y agoA bank is not a single entity, it's made of people converging after reaching consensus There are a lot of banks, with different interests that usually compete with each other and work under regulations that have been discussed and approved after reaching consensus There are several different central banks, that work together under regulations discussed and approved because they reached consensus The "decentralised" exchange already exists
- deleted 6y ago[deleted]
- Lammy 6y agoSo far I haven’t seen a usecase that absolutely needs an Array either. I mean one that can only be addressed by an Array and will fall apart without it. But many people have used it as a general enough hammer to hit every nail they can find with it. As last it as people make money on it, even hypothetical money, it’s going to stay popular.
- splintercell 6y agoHere's a usecase: Blockchain can be used to issue something like Apple stocks in a decentralized manner which achieves million times more scale and lower cost than what's possible now. Obviously a centralized entity like New York Stock Exchange could also copy the technology of using Merkle hashes and possibly achieve much bigger scale, at the end of the day it would still be the coordination issue for a single organization. At the end of the day blockchain solves the coordination problem in a low trust environment in a definitive manner. As it turns out that the cost required to solve this coordination problem is really high when you compare it to the high trust, but low scale environment. but blockchain manages to achieve planetary scale throughput (obviously not right now because this is the foundation layer, things need to be built up). It's like cash versus Visa. Cash is possibly billion times more scalable than Visa because Visa needs to reconcile a single database but cash transactions do not, as long as the recipients locally verify that they're receiving a real bill.
- rizpanjwani 6y agobut the USPS just filed a patent for a voting system based on one: https://heraldsheets.com/us-postal-service-usps-files-patent-for-blockchain-based-voting-system/ https://heraldsheets.com/us-postal-service-usps-files-patent...
- louwrentius 6y agoWell that nullifies all Bruce's arguments, right?
- AtomicPlayboy 6y agoNot if the transactions can be deanonymized as it has happened to Bitcoin.
- timbit42 6y agoThat didn't 'happen' to Bitcoin. Bitcoin was designed that way.
- rizpanjwani 6y agoSorry if I gave that impression (enough to warrant negative votes), but that was not the point I was trying to make. Just offering a contrasting link.
- 5986043handy 6y agoA large chunk of the arguments tend to assume Proof of Work as the consensus mechanism which isn't a flaw inherent in blockchain (eg. could have Proof of Stake, etc.)
- louwrentius 6y agoI think the point is more that whatever tech you use, you eventually still have to trust humans or an organisation. There are always inherent risks that you just can't reduce with tech.
- scsilver 6y agoYeah but if I can trust them in 10 seconds with very little effort on my part, I can be much more nimble with my strategy. If i can quickly verify the validity and source of primary data, I can make decisions on that data without hesitation. The value is in automating the trust, having a tiny little notary saying yes this is true, go ahead and make evidenced based decisions. Now of course we could do this with other tech, but I find the standardization of this trust mechanism to be the substructure of new business building tools and services around this quick trust, much faster than they can build them around trust accumulated by institutions, governments, notable individuals.
- api 6y agoAre there any good examples of working PoS?
- pascoej 6y agoTezos
- zucker42 6y agoI've not seen any satisfactory explanation for how a working PoS system would operate. Granted I'm not an expert, but anytime I delve into whitepapers, they are written confusingly and without crucial details, which makes me wonder if some of these alternate chains are just vaporware or at the very least a lot less than they promise.
- mountainboy 6y agoI just lost some respect for Bruce Schneier.
- phoe-krk 6y agoWhy? Could you elaborate further?
- louwrentius 6y agoBut do you have any decent counter-arguments against his case?
- scsilver 6y agoHe does talk about the standardization aspect as a plus to blockchain, the question is, do we want a bad standard now or a better standard never?
- DonHopkins 6y agoBut do you trust him?
- louwrentius 6y agoSlow clap.
- coldtea 6y agoYeah, it's called confirmation bias. Many people heavily invested in fads exhibit it.
- Marsymars 6y agoSee also choice-supportive bias.
- wrnr 6y agoStore your private key on a paper wallet all you want, but what are you going to do during a tiger kidnapping? People look at me weird when I bring this up, but know nothing about real security. I could advice some ISO certified procedures to keep your money safe but your family is going to be the weak link. Go read In Cold Blood by Truman Capote to get an idea on what could go wrong.
- BlueScreenDeath 6y agoWow, insane much? Just memorize the seed or split it up. Not complicated.
- lazzlazzlazz 6y agoBruce's take can be summarized like this: with a blockchain, you're choosing to trust code and cryptography instead of a person. And when immutable code does the wrong thing, you can't trust them to fix it like you could a person. This is a good take, and underappreciated - but there's a larger point being missed. In high-social-trust situations, there are fewer benefits to blockchains. In low-social-trust situations, people aren't a good option. Bockchains provide an entirely new and welcome option for that scenario. Relatedly, there are different kinds of distrust: mistakes and attacks are one, but platform risk is another that blockchains can alleviate. Putting it another way: I trust Twitter/YouTube/PayPal to generally work without issues, but I don't trust them not to change their offering in an exploitative way or become rent-seekers.
- louwrentius 6y ago> In high-social-trust situations, there are fewer benefits to blockchains. In low-social-trust situations, people aren't a good option. Bockchains provide an entirely new and welcome option for that scenario. How does this actually work in practice? I've never seen an actual non-convoluted / non-far-fetched case where this would apply.
- meowface 6y agoFor one: irreversible payment. Dealing with lots of scammers as a seller? They can PayPal dispute. They can chargeback. But if they send you cryptocurrency, the money is guaranteed. This doesn't prevent scams in the other direction, but it's something. This is a common problem many independent sellers face when doing legal and legit business.
- louwrentius 6y ago> This doesn't prevent scams in the other direction Which is probably the majority of the actual scam cases. Sellers scamming buyers. So I don't think this is a good case at all.
- 6y ago
- jhh 6y agoI think about Bitcoin (and similar systems) primarily as a long term store of value. I think they are a pretty fundamental innovation in that space. What are good alternatives? Gold, cash, or ETFs have substantial drawbacks - especially in situations where property rights are insecure and inflation runs wild (or just eats up savings at a somewhat moderate pace, as is the case in many developing countries). Of course Bitcoin is also a human system, eventually, but what you are trusting is an emergent, non-hierarchical order which should be more resilient than hierarchical systems. The technology facilitates the emergence of such a system. I actually think the flawlessness of the technology is not a necessary condition of Bitcoin's success. If bugs are found then consensus in the social system can emerge which can minimise damages All of that being said I think the use case for blockchain is probably quite narrow.
- louwrentius 6y ago> All of that being said I think the use case for blockchain is probably quite narrow. Name one, I dare you. Name something that really matters. That will offset all the damage they do.
- jhh 6y agoThe use case I mention in the first sentence of my comment: Long term store of value.
- SwimSwimHungry 6y agoIf that's the case, then it does a terrible job at it. Cryptocurrencies, by and large, are absolutely horrible for a reliable store of value. The swings in value are too great and numerous to count, based on the whims of whatever people feel like they are, often on a daily basis. I'll take US Treasury notes any day for "long term store of value". If the United States gets to the point where they can't honor Treasury notes, we will have much bigger problems on our hands anyway.
- shanusmagnus 6y ago
- altmind 6y agoblockchain - the wrong answer to any problem
- louwrentius 6y agoIndeed, blockchain: an answer to a question asked by nobody.
- jarym 6y agoYea, no. Blockchains are still a technology in their infancy but the need for them is clear. Rampant money printing is eroding the value of money - we cannot trust Central Banks to preserve what little wealth we may have. And then we look at negative interest rates appearing, commercial banks beginning to show signs of stress like they did in 2007/08 and its clear we really can't trust them either. If you think you can, then ask the people of Lebanon what happened when they tried to withdraw their cash. Or Venezuelans. Or the Greeks a few years ago! No view on Bitcoin or any particular coin actually, but long term I am a firm believer that Blockchain today is like the Internet in the 80s - it aint perfect, but it aint going away either.
- jarym 6y agoTo be honest, I'm surprised Bruce Schneier of all people would hold such a view - I mean, there was almost no need for internet security not THAT long ago and yet technologies like SSL/TLS, VPNs, etc. are indispensible to us today.
- gwbas1c 6y ago> Rampant money printing is eroding the value of money - we cannot trust Central Banks to preserve what little wealth we may have. The point of central banks is to ensure a stable value of currency. Given that we've (in the US, at least,) had very low inflation for the past 20 years; central banks are doing their job well.
- jarym 6y agoThe reasons for the low inflation are quite specific to the US. One thing you can't escape is just how much money supply has increased - look at the M2 chart here: https://www.tradingview.com/chart/?symbol=FRED%3AM2 https://www.tradingview.com/chart/?symbol=FRED%3AM2 And if that does not convince you, try SPX/M2 on a monthly - and then think again if you think they're keeping the currency stable. And if that does not convince you, try explaining why Gold is at all-time-highs. The market is not stupid, Gold is signalling what is happening very clearly.
- 6y ago
- yarrel 6y agoThis is a misunderstanding of the concept of "trusted third parties". Incredibly, yes, you have to rely on the software that you use to perform tasks to perform them. But this is not the same as placing another person in a mediating position where they can choose to betray you. Confusing these two senses of "trust" results in an intuitively appealing but entirely mistaken family of arguments that aren't the gotchas people think they are. The Very Short Introduction book on Trust covers different senses of the concept of "trust", including the ones I mention here, in a readable and compact way that I highly recommend.
- 627467 6y agoI'm not technical enough to disagree with Bruce. I'm also not an international law lawyer, fixer, intermediary, etc, to agree or disagree with how we have been trusting intermediaries for thousand of years and why this is impossible to replace. The way I see it is that blockchains and smartcontracts have the potential to replace treaties, lawyers, corporate intermediaries, etc in an increasingly multipolar world where treaties would serve as a legal protocol to regulate transactions. Maybe it is naive (I'm still trying to workout how this can ever happen if nation-states actively oppose these desintermediations) but I do think that privately orgs and people could benefit from technology that helps them transact with less middlemen. In a world where China/Russia/etc is trying to avoid exposure to US money/laws maybe this could serve as alternative?
- vmception 6y ago> Yes, bitcoin eliminates certain trusted intermediaries that are inherent in other payment systems like credit cards. But you still have to trust bitcoin—and everything about it. .... which is very tolerable to me. Right now, it is more expensive to use blockchains do to both the novelty and specialization of it. As that becomes more ubiquitous it doesn't. Whether we are talking about FX spreads to and from fiat currencies, or onchain transaction fees due to congestion, these all get better due to pressure and competition. A reason to improve. A permissionless ability to develop the improvements. Even in things people pretend not to care about (after they lose money) like token sales, it costs token sale issuers more money to list on a random Asian exchange, than it costs to list on the Nasdaq. When the permissionless nature of the technology should mean the opposite is true. More competition and it fulfills that.
- dgellow 6y agoFor how long will blockchains be considered a novelty? We are 1 decade after bitcoin release.
- vmception 6y agoEnterprises are just moving away from their private blockchain to public blockchains, pretty much just this year, following Ernst & Young's Baseline framework. Outside of the private sector, the regulatory frameworks specifically for blockchain technology have only begun to been ratified over the last 18 months, with the key market under the US Federal Government just getting providing clarity to financial institutions last week, at the Office of the Comptroller. The metric you are referring to is a misattributed S-Curve of adoption that has condensed for a few select technologies over the last century. Bitcoin is not the primary area of development for industry use of blockchains. There are various virtual machine technologies proliferating that bitcoin does not feature.
- 627467 6y agoChina has been trying to reduce dependency on USD. They would probably wish that the world use Reminbi to deal with them but world won't trust China's money (I also understand that China way of regulating it's currency also prevents it from propagating out of China) so, how about China adopting some neutral stablecoin like DAI for certain Dealings?
- deleted 6y ago[deleted]
- cloudking 6y agoAre blockchains truly decentralized when a small central group of developers control their codebase? Sure, you can choose not to use the latest version, but then you're likely not going to be part of the main network.
- BMSmnqXAE4yfe1 6y agoInteresting what would happen if FBI (silently!) takes over the github bitcoin repository and starts pumping out a version spying on all transactions.
- spiorf 6y agoTransactions are already public.
- BMSmnqXAE4yfe1 6y agonames, addresses and SSNs of transacting parties are not public
- spiorf 6y agoYou will not be on the main chain if the modified version changes some consensus rule. That's called hard-fork. Look at the segwit2x debate to see how this worked in real world. If a modified version doesn't follow the same rules, it will never finish the initial sync. And you can still sync with very old clients. Most of the work on the bitcoin client is optimizing validation. Consensus rules are rarely touched.
- doonesbury 6y agoI work broadly in financial markets. BC was talked into the ground thankfully ending 2018. Haven't heard squat since. I was genuinely interested particularly on aspects of dis-intermediating custody banks. But it doesn't take long to realize a few things about bonafide public BC: - the random guy adding his/her node to the network will need to catch up on serious data amounts or just take somebody's snapshot "as word". Can you boot strap your new node with a snapshot. Should you? Well, what are you going to do about getting all the back data in? - nobody is going to put private financial/trading/whatever details plain text on a block. so it'll have to be encrypted. so what are we really verifying? you're verifying what my copy of PGP produces? whatever gibberish I post to the block? I don't want to disclose from/who/when/amount/shares/bank-info/exchange/stock symbols .... nothing ... but regulators may need to see data un-encrypted ... so now what? Send regulators data the old way? While I do CAPEX the new way? C'mon. - The data has to be represented somehow. Since BC brings nothing to that party ... BC will wrap Swift, FIX, Omego, or by exchange or by regulator reporting format ... so BC is a crap load of work to fix nothing about the domain. And even that is a simplification. There's lots of little gotach's in data reporting between all the counter parties. - throughput is an issue on BC - just the idea that any joe can add a box to the network and start looking at financial data ... it's a non-starter ... although we can argue you can get some visibility from exchange data ... but traders might use BC to help settle and that may require a heck of a lot more detail that what NASDAQ provides - BC isn't a currency. A currency has to do certain things including being universally accepted in the country, have near constant value day to day. Whatever that is BC doesn't do it. - Another thing I find jaw dropping about the BC mentality is the insistence the unshakable foundation of the blockchain insofar as its non-deprecation and on the computers to apply the same logic and/or verification and xfer fees without human interference or bias. To date BC is pre-pre-pre-neophyte status. You start bringing in serious economic pressures, 1-offs, crashes, bailouts, disagreements and I'll bet some or all that code will fail/falter in human hands leading to code changes leading to forking. Today's money system didn't start this way. It was beat into today's shapes through problems, mistakes, and here and there some good ideas. So will BC. I seriously doubt the immutability of the rules governing blocks. Now you can back off public, decentralized ... into private block chains with shared or not shared keys and the like ... or just point-to-point block chains between trusted and distinguished entities ... but very quickly ... so what are we really doing here? BC is used it seems to me for speculation, buying small potato things like coffee or for the coolness factor or hiding. I'm not seeing serious industrial use cases. Now, there are two areas that I might see BC useful for: - things like ownership, proof of (say houses) - maybe voting -
- BMSmnqXAE4yfe1 6y agoBitcoin is really about power and control, not about trust. In many aspects it's a rebellion of coders against the MBAs and lawyers.