Control as Liability

Generally, unintended consequences of laws, discouraging entire categories of activity when one wanted to only surgically forbid a few specific things, are considered to be a bad thing. Here though, I would argue that the forced shift in developers’ mindsets, from “I want to control more things just in case” to “I want to control fewer things just in case”, also has many positive consequences. Voluntarily giving up control, and voluntarily taking steps to deprive oneself of the ability to do mischief, does not come naturally to many people, and while ideologically-driven decentralization-maximizing projects exist today, it’s not at all obvious at first glance that such services will continue to dominate as the industry mainstreams. What this trend in regulation does, however, is that it gives a big nudge in favor of those applications that are willing to take the centralization-minimizing, user-sovereignty-maximizing “can’t be evil” route.Hence, even though these regulatory changes are arguably not pro-freedom, at least if one is concerned with the freedom of application developers, and the transformation of the internet into a subject of political focus is bound to have many negative knock-on effects, the particular trend of control becoming a liability is in a strange way even more pro-cypherpunk (even if not intentionally!) than policies of maximizing total freedom for application developers would have been. Though the present-day regulatory landscape is very far from an optimal one from the point of view of almost anyone’s preferences, it has unintentionally dealt the movement for minimizing unneeded centralization and maximizing users’ control of their own assets, private keys and data a surprisingly strong hand to execute on its vision. And it would be highly beneficial to the movement to take advantage of it.

Source: Control as Liability

The libertarian fantasies of cryptocurrencies | Financial Times

Replacing cash with digital tokens of some kind would be relatively simple. It would mainly raise questions about the degree of anonymity of such replacements. Far more potentially revolutionary and destabilising possibilities would arise if the public at large were able to switch from deposits at commercial banks to absolutely safe accounts at the central bank. This radical idea has obvious attractions since it would remove the privileged access of one class of businesses, banks, to the monetary services of the state’s bank. But it would also transform (and surely destabilise) today’s monetary system, in which the state seeks to guarantee and regulate a money supply largely created by private banks and backed by private debts. Yet the revolutionary fact is that it would now be easy for everybody to hold an account at the central bank. Technology is eliminating the historic difficulties over such access.As everywhere else, innovation is transforming monetary possibilities. But not all changes are for the better. Some seem clearly for the worse. The right way forward is to reject libertarian fantasy, but not change itself: our monetary system is far too defective for that. We should adapt. But, history reminds us, we must do so carefully.

Source: The libertarian fantasies of cryptocurrencies | Financial Times

There’s No Good Reason to Trust Blockchain Technology | WIRED

What blockchain does is shift some of the trust in people and institutions to trust in technology. You need to trust the cryptography, the protocols, the software, the computers and the network. And you need to trust them absolutely, because they’re often single points of failure.When that trust turns out to be misplaced, there is no recourse. If your bitcoin exchange gets hacked, you lose all of your money. If your bitcoin wallet gets hacked, you lose all of your money. If you forget your login credentials, you lose all of your money. If there’s a bug in the code of your smart contract, you lose all of your money. If someone successfully hacks the blockchain security, you lose all of your money. In many ways, trusting technology is harder than trusting people. Would you rather trust a human legal system or the details of some computer code you don’t have the expertise to audit?Blockchain enthusiasts point to more traditional forms of trust—bank processing fees, for example—as expensive. But blockchain trust is also costly; the cost is just hidden. For bitcoin, that’s the cost of the additional bitcoin mined, the transaction fees, and the enormous environmental waste.Blockchain doesn’t eliminate the need to trust human institutions. There will always be a big gap that can’t be addressed by technology alone. People still need to be in charge, and there is always a need for governance outside the system. This is obvious in the ongoing debate about changing the bitcoin block size, or in fixing the DAO attack against Etherium. There’s always a need to override the rules, and there’s always a need for the ability to make permanent rules changes. As long as hard forks are a possibility—that’s when the people in charge of a blockchain step outside the system to change it—people will need to be in charge.

Source: There’s No Good Reason to Trust Blockchain Technology | WIRED

NYTimes: Alas, the Blockchain Won’t Save Journalism After All

Still, a problem remains: People don’t buy into blockchain applications unless they can make money. There is no evidence that people want to use it to “fix” journalism. There is also no evidence that anyone really understands how that would even work.
For now, Civil is essentially just another media operation with venture capital funding. The money underwriting it, from ConsenSys, remains, you know, regular money. The company uses some blockchain technology underneath the hood, including a plugin for its publishing software. But the technology remains difficult to comprehend, and, for any news consumer’s purpose, irrelevant.

hearing | Hearings | United States Committee on Banking, Housing, and Urban Affairs

THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS will meet in OPEN SESSION to conduct a hearing on “Exploring the Cryptocurrency and Blockchain Ecosystem.”  The witnesses will be Dr. Nouriel Roubini, Professor of Economics and International Business, New York University Stern School of Business; and Mr. Peter Van Valkenburgh, Director of Research, Coin Center.All hearings are webcast live and will not be available until the hearing starts. Individuals with disabilities who require an auxiliary aid or service, including closed captioning service for webcast hearings, should contact the committee clerk at 202-224-7391 at least three business days in advance of the hearing date.

Source: hearing | Hearings | United States Committee on Banking, Housing, and Urban Affairs

Decentralisation: the next big step for the world wide web | Technology | The Guardian

It is supposed to be like the web you know but without relying on centralised operators. In the early days of the world wide web, which came into existence in 1989, you connected directly with your friends through desktop computers that talked to each other. But from the early 2000s, with the advent of Web 2.0, we began to communicate with each other and share information through centralised services provided by big companies such as Google, Facebook, Microsoft and Amazon. It is now on Facebook’s platform, in its so called “walled garden”, that you talk to your friends. “Our laptops have become just screens. They cannot do anything useful without the cloud,” says Muneeb Ali, co-founder of Blockstack, a platform for building decentralised apps. The DWeb is about re-decentralising things – so we aren’t reliant on these intermediaries to connect us. Instead users keep control of their data and connect and interact and exchange messages directly with others in their network.

Source: Decentralisation: the next big step for the world wide web | Technology | The Guardian

Cryptocurrency Markets Lost $18 Billion Overnight – Slashdot

Blockchain exists for ~10 years and still there are no mainstream use cases where it replaced the incumbent tech, other than illegal activity. There is a fundamental reason for that.BCh offers a single unique feature: distributed trusted transaction (DTT). DTT competes with a centralized transaction == transaction with a trusted third party (T3P). DTT is by definition distributed and as such is *always* more expensive than a T3P all other things being equal: reaching consensus with multiple parties is harder than with a single party. In order for DTT to be competitive with the old tech T3P, the distributed nature of DTT must offer some advantage for people to be willing to pay the required premium. So far the only use case where people or willing to pay this premium is circumvention of regulation, when the trusted third party does not exist. This brings us to this list of use cases:1. Circumvention of regulation.This is the only meaningful use of DTT.China has capital flow controls which effectively bar companies and individuals from moving money out of China. To get around these regulations people buy video cards and electricity in China for CNY, mine cryptocoins, sell them in the States for USD. That’s the largest market right now, much bigger than buying drugs on the likes of Silk Road. This use case also includes ICOs and other pump and dump schemes.2. Selling picks and shovels.Derivative of (1). If 1 goes away, 2 will go away too.https://finance.yahoo.com/quot… [yahoo.com]3. Marketing & FMOAdd blockchain to the company name and see your valuation pop.”We must work on blockchain because it’s the future”.All kinds of blockchain projects in banks, etc which are going mainstream “any time now”. All of them can be done easier/cheaper/more reliably with a T3P, no exceptions.Reply to This Share

Source: Cryptocurrency Markets Lost $18 Billion Overnight – Slashdot

Crypto Tokens: A Breakthrough in Open Network Design

The cryptocurrency movement is the spiritual heir to previous open computing movements, including the open source software movement led most visibly by Linux, and the open information movement led most visibly by Wikipedia.1991: Linus Torvalds’ forum post announcing Linux; 2001: the first Wikipedia pageBoth of these movements were once niche and controversial. Today Linux is the dominant worldwide operating system, and Wikipedia is the most popular informational website in the world.Crypto tokens are currently niche and controversial. If present trends continue, they will soon be seen as a breakthrough in the design and development of open networks, combining the societal benefits of open protocols with the financial and architectural benefits of proprietary networks. They are also an extremely promising development for those hoping to keep the internet accessible to entrepreneurs, developers, and other independent creators.

Source: Crypto Tokens: A Breakthrough in Open Network Design

Fat Protocols | Union Square Ventures

This relationship between protocols and applications is reversed in the blockchain application stack. Value concentrates at the shared protocol layer and only a fraction of that value is distributed along at the applications layer. It’s a stack with “fat” protocols and “thin” applications.We see this very clearly in the two dominant blockchain networks, Bitcoin and Ethereum. The Bitcoin network has a $10B market cap yet the largest companies built on top are worth a few hundred million at best, and most are probably overvalued by “business fundamentals” standards. Similarly, Ethereum has a $1B market cap even before the emergence of a real breakout application on top and only a year after its public release.

Source: Fat Protocols | Union Square Ventures