Blockchain

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A blockchain is a distributed record of information — transactions, contracts, whatever — stored across a network. Each “block” of information gets its own cryptographic code which is posted to every node on the network. Thus, you can’t futz with any information on the blockchain unless you can futz with the whole network, which is like boiling the ocean. Once written, the blocks are, therefore, effectively permanent.

Blockchain allows parties who don’t trust each other to transact in confidence. What’s done is done — what’s on the blockchain cannot be reversed. There’s a permanent record. No one controls it: it’s truly anarchic, like: no government. No mendacious middlemen like banks. just pure, untrammelled laissez-faire.

Thus, bitcoin — a currency without the backing of anyone. It just bootstraps itself into existence like a skyhook. This makes loads of sense to a tech guy. It makes none to a banker. (But you would say that, banker dude).

So how — ?

Because some folks got a bit giddy—and some techno-Unabomber types, but they were kind of giddy in the first place. Blythe Masters — she who invented the credit default swap — thought it was so profound that she joined a startup in 2015. And folks listen to Blythe — why wouldn’t you?

The FT reports that as long ago as 2016 Gartner put blockchain near the top of its “peak inflated expectations” curve.

Uniqueness and the promise of non-fungible tokens

The Blockchain's unique selling point is uniqueness: a single entry on the ledger is there, it is fixed, it is unique for all time and uneditable. Any facsimile of it is non-fungible. By contrast, the regular internet not only allows lossless copying, but encourages it and, in fact, is predicated on it. That’s at the heart of its packet switching, end-to-end architecture.

In this regard blockchain and the regular internet are completely incommensurable. This is the price you pay for entering the distributed ledger: you get your uniqueness, but in return you must leave the flawed peer to peer world, and anything on it, behind. You can recreate the regular internet on the blockchain, but it is — well, different.

Now bitcoin — say what you like about it, and we have plenty to say elsewhere — is “blockchain native” — it exists in, of and only within the blockchain. Bitcoins are therefore intrinsically, certifiably, unique. That is about their one true advantage.

Now if you create your artwork *on* the blockchain, you get that same native uniqueness: any facsimiles of the artwork that exists off the blockchain — copies floating around on the internet and so on — are, certifiably, ontologically inferior to the one on the ledger.

But — and maybe walled gardens on the internet structured as DAOs are different, we don’t yet really understand them — mostly, a blockchain is a really crappy place to create art. Really limiting. Look, it’s one thing for David Hockney to do all his painting on an iPad: quite another to do it all in an electronic cashbook.

But for everyone who is still making art with paint and paper, inverting urinals, or even more so writing music or literature — such that your artwork “natively” lives outside a distributed ledger, or its value does not subsist in its substrate, but in the abstract information the substrate carries (such as a book or a score) — for you guys, having your artwork encoded on a blockchain in a unique substrate doesn’t really help you.

If you import a "canonical" “real world” artwork, then it is the blockchain representation that is certifiably, ontologically inferior: it is uniquely, definitively *not* the original work. Ironically, putting a real artwork on blockchain makes your copy *worse* than a straight digital copy.

Is uniqueness really, er, special?

The rampant copy-ability of everything in this day and age no doubt prompted this rush to non-fungibility. Authenticity is in deep demand. No-one trusts experts anymore. Everything is ripped off. Everything is fake. Indubitability — certainty — is some kind of holy grail. But is uniqueness, in the abstract, of any value, in and of itself?

We would say, “no,” all the above notwithstanding.

The JC has a small commonplace book of poems he composed, as a moleish adolescent. There exists a single copy in fountain pen ink rendered in his youthful, spidery left-handed scrawl. They are some of the worst poems composed in the history of civilisation. Not one of these poems has been committed to any other format and nor, if the JC has any say in the matter, will they ever be. They are, thus, utterly unique.

Do they have an iota of value? Outside their extortion potential, they do not. Does their uniqueness change this? It does not.

Why does he keep them? It is impossible to say.

Is it — you know ...?

Snake oil? In a nutshell, yes.

You’ll see a lot of hyperbolic nonsense about blockchain, and this Medium article by Kai Stinchcombe is a pretty good antidote. In short – the benefits of blockchain are mainly predicated on idealistic values and dystopian paranoias:

• That you can’t trust anyone
• That all intermediaries do is rip everyone off and gum up the system (and you can’t trust them either)

Blockchain solves those problems but, by design, creates a wodge of other ones:

• It’s expensive, it’s slow and it consumes a ton of energy;
• Transactions are permanent and irrevocable
• There’s no mechanism to correct errors
• There’s no — ahem — trusted intermediary who can dab the breaks, nudge the steering wheel, pursue fraudsters or help enforce contracts (purist blockchain ideology assumes contracts can be and users will want them to be enforced “by code”). The bank of Canada put it succinctly: at “its heart, there exists a fundamental inconsistency or tension between a centralised wholesale interbank payment system, as we have now, and the decentralisation inherent in the DLT”
• There’s no value that a trusted intermediary can add to the system: it’s caveat emptor, user pays, entirely at owner’s risk. A uber-libertarian's wet dream, in other words. Great if you're holed up in a cabin in the woods with ammo and canned spam, but a fairly Spartan outlook for those of us who are prepared to live with a bit of benign intrusion so our GPS works okay. In other words, pure blockchain demands a trade-off most pragmatic people aren’t prepared to make.

Now if you adulterate blockchain to correct for its nasty, brutish shortness — if, in other words, you overlay trusted intermediaries, fail-safes, benign enforcement and monitoring — then:

• you’ve imported back in all the problems you thought you were trying to solve; and
• existing systems already do all of this stuff more quickly, reliably, cheaply and at greater volume than a blockchain could reasonably handle.

The most fun and, frankly, brazen attempt to correct these shortcomings by undermining the whole idea completely is surely blockchain as a service. No, I'm not making that up.

So — again, whither the use case, dudes?

STOP PRESS + + + STOP PRESS + + + STOP PRESS + + +

We have a new report of a valid usecase, by that super-innovative futurologist Lex Luthor at Luthor Capital [it’s Greensill isn’t it? — Ed]:

[Editor’s note: unfortunately Oracle has pulled its video “the future of working capital management?”, by that working capital supremo Lex Greensill off their site for some reason.]

The sovereign individual

It's not all bad: the underlying model, like the internet - provides for a radical new way of organising affairs where data is not centralised, but kept at the edges and in the hands of the users. If the user has her own digital wallet with credentialised data, this can be passed, encrypted, only where and when required, to intemediaries. The intermediaries wouldn't be able to keep it, or harvest it, or sell it, and it would be less susceptible to being hacked (instead of hacking VISA's website and getting personal data of 400 million people in one go, you'd need to hack 400m people's individual wallets. Not impossible to hack a wallet but, but the value is in the aggregated data, not individual files, so the incentives are wildly out of whack.

It also passes the reponsibility for keeping that data up-to-date to its owner, and it only has to be done once.

Obstacles:

• Firstly, intermediaries who buy and sell your data will HATE this, since them collecting your data is extremely valuable to them. Don't expect to see Google or Amazon or Facebook promoting digital wallets any time soon. BUT for the person who does, and makes the case, a monopoly busting disruptive business model awaits.
• Secondly, which digital wallet? What if there is more than one? what if you lose your key? What will the poor meatsack do then? Does anyone even care about the meatsack any more?
• Thirdly, and what does this say about the distrinction between our online persona and our fleshly existence? Is this first step to synthesising our mortal frames into a virtual existence? Is this the trick we're missing? The robots are not going to turn into us, but we are going to turn into the machines?

Oh the irony.

Is it the same as distributed ledger technology?

Because DLT is okay, right?

Maybe. According to the excellent Deloittes report, think of DLT as the generic problem to be solved; a blockchain is a way of solving it; the blockchain is the particular blockchain underpinning bitcoin.

And bitcoin? Bitcoin is catnip for stupids.

Further reading

If you want the case for blockchain, just google blockchain or even talk to any poseur or charlatan in any industry who is trying to sell you something. They’ll talk your ear off.

If you want to hear the case against, there's a bit more work to do. So the jolly contrarian is gathering some links for you.

• The daddy: Kai Stinchcombe's Medium takedown.
• Deloitte’s report: Bitcoin, Blockchain, and Distributed Ledgers
• The atlantic: Derek Thompson in the Atlantic - Blockchain silly season: “Bitcoin might be where Pets.com was in 2000—a technological curiosity in search of an enduring business need. But blockchain is not where the internet was in 2000. Even blockchain’s biggest defenders can’t say what the technology’s most obvious consumer use-cases are going to be, because they plainly don’t exist yet. It is possible they never will.”
• Cointelegraph: Cointelegraph on how 92% of the blockchain-related projects on GitHub are now dead.
• Izzy Kaminska in the Pink ’Un: Everyone's getting skeptical about the blockchain hype.
• Stephen Norman: The emperor has no clothes.
• The Germans: Aaaaaand here's Jens Weiderman of the Bundesbank