Outside the boring blockchain bubble

The season of idiots continues. Speculators are felled in the region of cryptocurrency shaft, hoping to quickly get money. As I write these lines, the cost of Ethereum has fallen twice since June [article of August 6 - approx. transl.]


Coinmarketcap.com exceeded the popularity of the Wall Street Journal
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But if you want to engage in speculation, and the casino option does not suit you or seems too calm [or you don’t have them in the region - approx. transl.], then, of course, welcome. But if you are interested in technology, not money - if you think the blockchain is interesting because, unlike most modern technologies, it decentralizes power - then this year turned out to be rather dull.

It was the year of the ICO [initial placement of coins], in which a surprising amount of money was raised by issuing new forms of cryptocurrency in exchange for existing ones, the cost of which was inevitably measured, which is typical, in US dollars. Tezos, which became “more flexible Ethereum” (as Ethereum was “more flexible Bitcoin”) collected $ 230 million. Bancor, “allowing everyone to create a new type of cryptocurrency” collected $ 150 million. Status, “a messaging platform and a mobile browser for working with decentralized applications working in the open source Ethereum Network "collected $ 95 million. TenX," creating an opportunity to spend cryptocurrency anywhere and anytime "collected $ 80 million.

Have you noticed what all these projects have in common with volume investments? Yes - these are projects that promote cryptocurrencies, hoping to replace or manipulate other cryptocurrencies. Most of the ICO this year was conducted in connection with projects that refer to themselves (such as Crypto Start ). All of them are based on the assumption that decentralized blockchain applications will become widespread and extremely valuable, and therefore, these will be the tools for working with the blockchain and the entire infrastructure.

This implied assumption sounds good; and even plausible, if we treat him condescendingly, accepting several other uncomfortable assumptions; but what are the tools and infrastructure for what? Bitcoin made its way into a valuable and important niche , and became widely known, widely used decentralized currency and an alternative to gold, and this is amazing. Although, as Adam Beck , Blockstream's general, a pioneer of cryptography and a rather clever guy, said, the rise of other cryptocurrencies can become a threat to the very concept of the blockchain as currency:


The future, in which the clone-coin will win Bitcoin, is not good, because then you lose confidence in it, as a means of savings and faith in its digital deficit

Apart from Bitcoin and more specialized currencies like ZCash and Monero, what exactly are blockchains used for? Where is this incredible value hinted at by these amazing ICO scores for blockchain tools and infrastructure?


To summarize, cryptocurrency value is zero if decentralized applications are not needed by people

Y-yes. Well, so about that.

As we will see, most of these projects are unlikely to be useful. And those that have a chance to become useful, do not seem to need sold coins, and do not have a clear program to create value for coin owners, or will be forked into less mercantile options.

This is from the pessimistic but in-depth analysis made by Lyle Cantor back in early July. Now it does not look less accurate. Explore the future ICO for Filecoin; then study "an analysis that Filecoin does not want to show you ." Does this market still seem healthy to you?

And I will not even spread about the millions of dollars stolen or lost in the form of cryptocurrency due to errors or unsafe code. In the long run, I do not care much about it. Every new technology at an early stage has security flaws. Imagine that cryptocurrency is a technology with huge rewards for hunting for mistakes.

Today, most blockchain applications that are not concentrated directly in the cryptocurrency space work with a small set of the same areas: namespaces, authenticity management , decentralized storage, decentralized cloud computing, and prediction markets. I’m worried that it’s not at all clear whether the decentralized solution for any of the listed areas is better than the centralized one for any significant number of users. As I said before: in the case of consumer applications, blockchains are the new Linux, not the new Internet .

There are continuing calls for a brighter future with tokens and protocols. I want to believe. But when it comes to business, and assessments of concrete examples begin, for some reason all these options of a brighter future disappear. Everyone talks about how value will be distributed among network users, rather than accumulating in one company, but at the same time they keep silent about the fact that such a network will be slower, more difficult, more difficult to use - and all this in exchange for very little value for the end user. .

Take Facebook. Imagine that Facebook has become a decentralized social network that returns half of its revenues (not profits, but revenues) to users. This means that the average Facebook user would receive a full dollar a month. This is not enough for people to want to use the uncomfortable, slow version of Facebook, which innovates much more slowly. Decentralized networks are not enough to be more fair. They need to be better. Or they should be able to do what centralized networks do not.

So far, I have been talking about public decentralized blockchains that do not require permissions. “Private” blockchains are a separate topic. Their obvious field of application is to replace the set of systems included in financial transactions of all types with a single distributed blockchain. For example, any transaction with a bank card requires the coordination of five different participants, as it is explained in entertainment form in detail in the following video by a prominent figure in cryptocurrency, Addresssen Horowitz.



It would be simpler, more efficient, and, more likely, cheaper for everyone to use shared distributed storage system - yes, yes, you guessed it, blockchain.

But as for the new ways of applying this technology ... In fact, fortunately, several of these, independent of the ICO bubble, still appeared. For example, there is Brave's Basic Attention Token , a whole new online advertising business model. There is Grid + , which controls the Ethereum blockchain in such a way as to give users direct access to wholesale energy markets; it is still at an early stage, but the interesting thing about it is that the energy market, given the growth of home solar panels, also does not require permits and is decentralized; as a result, it looks natural.

More interestingly, several projects try to give “smart contracts” in Ethereum real legal force (a code that, depending on certain conditions, performs or does not execute a transaction). This is Consensys OpenLaw. This is the Accord Project . And Mattereum, from the issuing coordinator of Ethereum, Vinaya Gupta, and cryptographic accounting philosopher Jan Grigg. This project:

is the first infrastructure project of the “Internet of Agreements”, makes legally recognized smart contracts possible, allows the sale, lease and transfer of physical property and legal rights. All this is achieved by using contracts in natural language that directly transfer legal rights to two external systems: smart contracts in the blockchain, and an arbitration association handling disputes.

Those fans of the blockchain that make me roll my eyes like to say things like “code is the law” - well, good luck to them to prove it to the judge. But explicitly including code in a set of laws is a more interesting and productive approach, opening the way to a huge variety of applications and capabilities. And this should be the ultimate goal of any new technology.

So, speculate on health, but do not pay special attention to the bubbles, the cost of cryptocurrency or ICO. Conversely, do not let recent events push you away from the blockchain, and make you believe that this is just another snake oil and krugerrends . After waiting for the current wave of ordinary greed, you will find a lot of interesting things. I promise.