Bitcoin Bits: 21 August, 2016

Some of the more interesting (and entertaining!) articles on the blockchain and cryptocurrency space from the past few days…

— x —

The Subtle Tyranny of Blockchain – by Stefan Thomas, via Medium

So it’s not all as rosy and world-changing as we thought… Stefan Thomas, one of the early bitcoin developers and currently a developer on Ripple and Interledger, lifts the hood on the myth of consensus and how blockchains will cure all centralization ills:

“Instead of blindly replacing centralized functions with blockchains, we should be thinking about ways to avoid having those functions be centralized to begin with.”

Sharing a global state in the name of consensus limits flexibility and customization, which in the end is what businesses want.

“Shared state adds tremendous complexity and that has a big impact on developers: Blockchains are a pain to work with. Everyone who has done it knows what I’m talking about. The fact that blockchain has been largely ignored by major tech companies and embraced by the financial industry is partly because that industry has a relatively high tolerance for arcane and complex systems.”

And while Bitcoin is “arguably a great idea”, its limitations in the end will hamper adoption.

— x —

Definitely one of the weirdest videos I have ever seen, and that’s saying something. In the spirit of summer and silliness, and delighted disbelief, I share it with you:

— x —

The Mystic Blockchain – by Dave Birch, via Medium

An entertaining take and a jug of cold water on the blockchain hype.

“In a short space of time the blockchain has gone being a particularly interesting implementation of one particular kind of shared ledger to being a mystical utopia. “The blockchain now is just like the internet was in the early 1990s”, is the cry. Well, yes. In the early 1990s the internet was the focus of naive and misplaced utopianism, a very similar to the European utopianism focused on the New World in previous generations. A new space, a tabula rasa ready for a redesigned society. The internet turned into something huge, but it didn’t bring about world peace or end poverty (frankly, mobile phones have done more in that respect and no-one saw that coming) and neither will the blockchain.”

— x —

Stop calling Bitcoin hacks, “Bitcoin hacks” – by Elaine Ou

Well put. And funny.

“They’re exchange hacks, they’re wallet hacks, they’re service-provider hacks. It just so happens that bitcoin was stolen. To call these breaches “Bitcoin hacks” is like calling the SWIFT hack a “US dollar hack.” Obviously the USD did not get hacked; only the central bank does that.”

— x —

An excellent slide show from the first Ethereum Classic meetup, held in London this past week:


etc meetup

The slides give a concise overview of Classic’s origin and ethos, and set out what seems to be a clear development path and community creation plan.

etc meetup 2

And with a growing number of developers, services and supporters, ETC doesn’t look like it’s going to fizzle out any time soon.

eth classic 3

— x —

Who Controls Ethereum?  – by Daniel Krawisz, for Satoshi Nakamoto Institute

One of the best longform articles I’ve seen on the Ethereum fork. It encompasses tactics, philosophy, history and modern culture, to arrive at the conclusion that, seriously guys, what were you thinking???

“I want to draw an analogy to F. A. Hayek’s concept of liberty which he explains in The Constitution of Liberty and Law, Legislation, and Liberty. Hayek said that people had liberty when their laws are written as abstract rules rather than as responses to specific situations.”

The decision to hard fork in response to an undesired consequence of a piece of sloppy coding in which investors knowingly took a risk and then a hit, was contentious mainly because of the motive behind it. The fork wasn’t in response to a bug in the program (although a design flaw in the Ethereum code did make a bug of this type more likely). It was mainly for economic reasons, to recover the stolen funds and to avoid damage to Ethereum’s reputation and market position. Ethereum Classic is both an attempt to maintain the original goals of immutability and censorship resistance, and a reaction to what many see as the violation of the “social contract” in which those goals were held to be above self-interest.

“Those who have chosen ETC have chosen abstract rules over arbitrary interventions. They have said that the developers will be designers, not rulers. This is a choice that I respect. Furthermore, if ETC succeeds, the initial investors in it today will become disproportionately influential over it as it grows. Therefore, the intelligence which characterized its inception will continue to influence its evolution in the future. I would then have to consider it the strongest Bitcoin competitor yet.”

Born of ideology, the ETC chain looks set to become a viable alternative to bitcoin, more so than ETH. It is arousing the same passions, and attracting a growing community of developers, miners, businesses and idealists who want to see it become the dominant Ethereum chain. I do not hold either ETH or ETC, but support Classic’s stand and intention. The Foundation was under time pressure, and working in new territory: no decision was going to be controversy-free, whatever they did. But their actions set a worrying precedent, however much supporters may deny it. The trust factor has been damaged (ironic, for a system that supposedly does not need trust). And blockchain competition is increasing, from both within and without. More than a strong network effect (= plenty of other users) will be needed to protect it from a potentially increasing ETC market share, and from upcoming innovations on the bitcoin and other blockchains.

“Ethereum was billed as a distributed system and the DAO as a legally binding contract1 written in code, and this is what the investors wanted when they bought into it. The idea that the Ethereum developers can just rewrite history whenever they please completely negates this purpose and clearly demonstrates Ethereum to be a sham. However, investors don’t have to let Ethereum be a sham because they are ultimately the ones in control. All they have to do is take a little risk and sell some ETH for ETC. If enough of them do this, then ETC will become the established chain.”

While it seems unlikely at this stage that ETC will replace ETH, mainly because there is much more development money and mining investment behind the latter (for now, anyway), it does seem likely that the two will have to co-exist. They may end up diverging even more, as more systemic forks loom on Ethereum’s horizon. And they may end up serving very different communities. Confusion does tend to sort itself out with time, either because things become clearer or because alternatives dwindle to insignificance. So it’s almost certain that the current uncertainty will end up coalescing into preferences for one chain over the other. With an increased offering on the ETC market and a more pronounced difference from its Ethereum competitor, I expect it to increase in market cap at the expense of the ETH chain, without actually taking over. This sounds like an opportunity to me.

— x —

Have a great week! I’m escaping to the Picos de Europa mountains in the north of Spain for a few days, so there won’t be any posts from me until the weekend. I’ll probably post some photos on Instagram (@NoelleInMadrid) if you feel like some peaceful and inspiring images, or perhaps some subliminal symbolism from the peaks and the valleys.

Leave a Reply

Your email address will not be published. Required fields are marked *