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{{a|tech|}}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. | {{a|tech|}}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. | 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). | 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). | ||
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David Rosenthal’s blog<ref>https://blog.dshr.org/2022/02/ee380-talk.html</ref> has a wealth of learning on limitations of blockchain architecture. | David Rosenthal’s blog<ref>https://blog.dshr.org/2022/02/ee380-talk.html</ref> has a wealth of learning on limitations of blockchain architecture. | ||
Generally software is designed to go as fast as fast as possible. But, problem: if such software is hacked, it performs maliciously as fast as possible, too. The Bitcoin protocol avoids this problem, ensuring | Generally software is designed to go as fast as fast as possible. But, problem: if such software is hacked, it performs maliciously as fast as possible, too. The Bitcoin protocol avoids this problem, ensuring resilience through decentralised consensus and [[proof-of-work]] which makes it ''mathematically too much work'' to subvert the network. | ||
Decentralisation (theoretical ''and'' practical — in that the network must not only be architected to be able to have many participants, but it must actually have many participants) is necessary but not sufficient for that resilience. | ==== Decentralisation as a design feature ==== | ||
Decentralisation (theoretical ''and'' practical — in that the network must not only be architected to be able to have many participants, but it must actually have many participants) is a necessary but not sufficient condition for that resilience. Bitcoin is not ''practically'' decentralised. There are only a handful of significant miners. | |||
Permission''ed'' blockchains have a central authority controlling which how blocks can be added to the chain. Because they don't require period is work they have a much lower carbon footprint & are much more efficient. But they are thus centralised and require confidence in the central authority. If it is hacked, you're in trouble. | Permission''ed'' blockchains have a central authority controlling which how blocks can be added to the chain. Because they don't require period is work they have a much lower carbon footprint & are much more efficient. But they are thus centralised and require confidence in the central authority. If it is hacked, you're in trouble. | ||
Permission''less'' | [[Permissionless blockchain|Permission''less'' blockchain]]<nowiki/>s (like [[Bitcoin]]’s and Ether’s) do not have a central authority, but just still defend against “Sybil” attacks, where an attacker gains controls of a majority of ostensibly independent participants. Hence the practical need for many participants: the more you have, the harder it is to gain that majority. Permission''less'' blockchains achieve this defence by making the reward for a successful attack uneconomical: it costs more to mount a Sybil attack than one stands to gain by making it. | ||
Therefore: participating in a permissionless blockchain ''has to be expensive''. Inefficiency and slowness is a design principle. | Therefore: participating in a permissionless blockchain ''has to be expensive''. Inefficiency and slowness is a design principle. | ||
To | ==== Reward for proof-of-work ==== | ||
To incentivise miners to carry out the work required [[proof-of-work]], you must reward them. Since, [[Q.E.D.]], there is no central authority to tax users and distribute proceeds to miners, a [[blockchain]] must generate its ''own'' transferable tokens of value, on the blockchain. This is a [[cryptocurrency]]. | |||
Axiom, therefore: ''a permissionless blockchain must generate its own cryptocurrency''. | |||
For it to be worth the miners’ while to do the proof-of-work, the cryptocurrency must have some ''extrinsic'' value. Miners will want to convert their new cryptocurrency into fiat currency: cold, hard, folding green stuff. | |||
But, problem: at creation, a cryptocurrency has no ''intrinsic'' value. It is just an artefact of computer code. Like anything else in the world, a cryptocurrency can only acquire extrinsic value ''by people attaching value to it''. But that means blockchain miners must find someone to buy a cryptocurrency ''even though it has no intrinsic value''. | |||
Circular, non? | |||
==== Calling: bullish speculators ==== | |||
To convert crypto to fiat, someone must be prepared to buy the crypto. ''Only those who believe the crypto currency will hold/increase value vs fiat over time will do that.'' | |||
This is true of faith, and politics and is increasingly true of modern morality. It is definitely true in markets: market | Therefore a permissionless blockchain ''needs'' bullish speculators to work. It needs people with an unshakeable confidence in an invented currency. This is not a curious and inexplicable phenomenon: it is fundamental to the very architecture of blockchain. | ||
Axiom: ''Cryptomania is a design principle of permissionless blockchain''. | |||
==== Is this how [[Power structure|power structures]] work? ==== | |||
Now you could make an argument this same principle — the punters must believe, the promoters need not — is true of any [[paradigm]] or [[power structure]]. All depend on “the punters” earnestly believing; while those in authority or operating infrastructure or institutions of the paradigm cannot do anything to destroy the illusion, they needn’t (and often don’t) literally believe it themselves. They ''may'' do, but they don’t ''need'' to. | |||
This is true of faith, and politics and is increasingly true of modern morality. It is definitely true in markets: [[market-maker]]<nowiki/>s don't care whether things are going up or down, as long as market users have these views. There a number of traditional firms who have piled into crypto ''because'' it is opaque, unregulated, full of suckers, and opportunities for free arbitrage are (therefore) immense. They don’t need to believe in crypto at all, ''as long as someone else does''. | |||
===Pace layering=== | ===Pace layering=== | ||
Now given crypto emerged as an ultra-libertarian solution for operating in Hobbesian environments of zero trust, its need for the marks to have a cargo-cult faith in its value in order to work is kind of ''ironic'' can we say? | Now given crypto emerged as an ultra-libertarian solution for operating in Hobbesian environments of zero trust, its need for the punters and marks to have a cargo-cult faith in its value in order to work is kind of ''ironic,'' can we say? | ||
But there is trust and there is trust. | But there is trust and there is trust. Literally, and they operate at different layers in {{Author|Stewart Brand}}’s [[pace layering]] schema. The layering point is important to understand the level at which the argument works. | ||
The “trustless society” bit is a gimmick | The “trustless society” bit is a gimmick — a fad — playing to the present libertarian ultra-dystopian fashion of not trusting [[intermediaries]], experts or institutions, even though through history our the institutions have proven imperfect, but largely trustworthy (in that they’ve got us this far) and better than any of their utopian alternatives.<ref>You know, communism, fascism etc.</ref> The requirement for “punter faith” in the value of cryptocurrency is ''much'' deeper, as it is part of the engineering, being the only way to incentivise miners to do [[proof-of-work]]. | ||
===So how — ?=== | ===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]]<ref>I know what you’re thinking. The Midas touch!</ref> — thought it was so profound that she joined a startup in 2015. And folks listen to Blythe — why wouldn’t you?<ref>Update: in December 2018 Masters stepped down from Digital Asset Platform to spend more time with her giraffes, or whatever Masters of the Universe do, I guess. “Blythe Masters is stepping down as chief executive of Digital Asset Holdings due to personal reasons, the company said. Masters was not available for further comment.”</ref> | 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]]<ref>I know what you’re thinking. The Midas touch!</ref> — thought it was so profound that she joined a startup in 2015. And folks listen to Blythe — why wouldn’t you?<ref>Update: in December 2018 Masters stepped down from Digital Asset Platform to spend more time with her giraffes, or whatever Masters of the Universe do, I guess. “Blythe Masters is stepping down as chief executive of Digital Asset Holdings due to personal reasons, the company said. Masters was not available for further comment.”</ref> | ||
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*'''Stephen Norman''': [https://www.linkedin.com/pulse/blockchain-emperor-has-clothes-dr-stephen-norman/ The emperor has no clothes]. | *'''Stephen Norman''': [https://www.linkedin.com/pulse/blockchain-emperor-has-clothes-dr-stephen-norman/ The emperor has no clothes]. | ||
*'''The Germans''': Aaaaaand here's [https://www.bloomberg.com/news/articles/2019-05-29/blockchain-settlement-was-slow-costly-in-trial-weidmann-says? Jens Weiderman of the Bundesbank] | *'''The Germans''': Aaaaaand here's [https://www.bloomberg.com/news/articles/2019-05-29/blockchain-settlement-was-slow-costly-in-trial-weidmann-says? Jens Weiderman of the Bundesbank] | ||
*'''[https://blog.dshr.org/2022/02/ee380-talk.html David Rosenthal’s blog] on the limitations of blockchain | |||
{{sa}} | {{sa}} | ||
*[[Uniqueness]] | *[[Uniqueness]] | ||
*[[Lindy effect]] | |||
{{ref}} | {{ref}} | ||
{{c|Technology}} | {{c|Technology}} | ||