Sometimes I should have more courage in my convictions.
A bit over a year ago, I had some energetic discussions with a lawyer who is a top pro in her area of expertise but sometimes overestimates her knowledge of related areas. She’d just been at a conference where she had run into someone at one of the TBTFs who was in charge of blockchain, specifically, of bringing it to that bank’s phone banking app.
I proceeded to describe why that didn’t make any sense, and without going into details, Clive confirmed my reflexes and added some reasons of his own. My friend was very insistent, despite my explaining the frequency of banks setting up serious-looking little or even not so little initiatives that are sure to go nowhere in response to some fad or consultant hype. This phenomenon was so well known that at one bank, they called it “The Hall of Hollow Mandates.”
Expectations for the use of blockchain in banking are finally starting to deflate to more realistic levels. From a new story in Reuters, Wall Street rethinks blockchain projects as euphoria meets reality:
Reuters has found several blockchain projects launched by major financial institutions that have been shelved, as development of the technology enters a hype-meets-reality phase.
The casualties include projects by the Depository Trust & Clearing Corporation, BNP Paribas SA (BNPP.PA) and SIX Group, Reuters has found.
These were among the wave of blockchain tests touted by the financial industry over the past few years, as firms bet the new technology would displace much of the sector’s infrastructure, cutting out middlemen, speeding transactions and reducing costs for things like securities and payments processing…
DTCC, known as Wall Street’s bookkeeper, recently put the brakes on a blockchain system for the clearing and settlement of repurchase, or repo, agreement transactions, said Murray Pozmanter, head of clearing agency services at the DTCC.
The project, which had successfully tested with startup Digital Asset Holdings (DA), was shelved because banks and other potential users believed the same results could be achieved more cheaply using current technology, he said.
“Basically, it became a solution in search of a problem,” he said.
The article fails to give an adequate explanation as to why blockchain is coming up short, resorting to the handwave, “It’s still new”. No, it isn’t. It’s been around for over a decade.
We have to turn to a 2016 article from Constellation Research to understand why the promise of blockchain is limited at best:
The blockchain only does one thing (and it doesn’t even do that very well). It provides a way to verify the order in which entries are made to a ledger, without any centralized authority. In so doing, blockchain solves what security experts thought was an unsolvable problem – preventing the double spend of electronic cash without a central monetary authority. It’s an extraordinary solution, and it comes at an extraordinary price. A large proportion of the entire world’s computing resource has been put to work contributing to the consensus algorithm that continuously watches the state of the ledger. And it has to be so, in order to ward off brute force criminal attack.
How did an extravagant and very technical solution to a very specific problem capture the imagination of so many?…
From a design perspective, the most troubling aspect of most non-payments proposals for the blockchain is the failure to explain why it’s better than a regular database. Blockchain does offer enormous redundancy and tamper resistance, thanks to a copy of the ledger staying up-to-date on thousands of computers all around the world, but why is that so much better than a digitally signed database with a good backup?
Remember what blockchain was specifically designed to do: resolve the order of entries in the ledger, in a peer-to-peer mode, without an administrator. When it comes to all-round security, blockchain falls short. It’s neither necessary nor sufficient for any enterprise security application I’ve yet seen. For instance, there is no native encryption for confidentiality; neither is there any access control for reading transactions, or writing new ones. The security qualities of confidentiality, authentication and, above all, authorization, all need to be layered on top of the basic architecture. ‘So what’ you might think; aren’t all security systems layered? Well yes, but the important missing layers undo some of the core assumptions blockchain is founded on, and that’s bad for the security architecture. In particular, as mentioned, blockchain needs massive scale, but access control, “permissioned” chains, and the hybrid private chains and side chains (put forward to meld the freedom of blockchain to the structures of business) all compromise the system’s integrity and fraud resistance.
And then there’s the slippery notion of trust. By “trust”, cryptographers mean “out of band” or manual mechanisms, over and above the pure math and software, that deliver a security promise. Blockchain needs none of that – so long as you confine yourself to Bitcoin. Many carefree commentators like to say blockchain and Bitcoin are different things, yet the connection runs deeper than they know. Bitcoins are the only things that are actually “on” the blockchain. When people refer to putting land titles or diamonds “on the blockchain”, they’re using a short hand that belies blockchain’s limitations. To represent any physical thing in the ledger requires firstly a schema – a formal agreement about which symbols in the data structure correspond to what property in the real world – and secondly a process to bind the owner of that property to the special private key (known in the trade as a Bitcoin wallet) used to sign each ledger entry. Who does that binding? How exactly do diamond traders, land dealers, doctors and lawyers get their blockchain keys in the first place? How does the world know who’s who? These questions bring us back to the sorts of hierarchical authorities that blockchain was supposed to get rid of.
And before you start hyping the virtues of “smart contracts,” first, it was already effectively addressed above. Go read the extract again if you managed not to grasp that point. Moreover, Clive shellacked that nearly two years ago, in Ethereum and Smart Contract Unicorn Woo-Woo – There Should Be a Law Against It. Warning: I will come down hard on anyone who brings up that topic in comments and makes clear that they have not read Clive’s post in full.
And as we’ve also been discussing at some length, Bitcoin and its kin aren’t very useful for their supposed original purpose of payments. They are trading sardines whose value needed to be translated back into real world currencies, with the result being huge volatility, a very unattractive attribute in something you billed as a store of value. Transaction costs are high. You need to keep track of your profits and report them to the IRS and pay taxes on them. Transactions are irrevocable, which is generally a bad feature in the world of commerce. And cryptocurrencies are less secret than cash, since the blockchain records the wallet, and more and more authorities are pushing to get access to who the wallet owner is (see the recent Coinbase case).
So this sort of comment from insiders, which Lambert featured in Water Cooler, should come as no surprise:
1/ Suffering from disorientation and cognitive dissonance around blockchain and Bitcoin. It’s time to stop the craziness.
— Tim Bray (@timbray) February 12, 2018
8/ So, if it’s actually generally useful, someone somewhere should be getting dramatically good return on these investments, seeing hockey-stick revenue ramps. Where? *crickets*.
— Tim Bray (@timbray) February 12, 2018
10/ I believe there may well be some good blockchain apps out there. But if it were an ubiquitous wave-of-the-future thing, that wave would have started to come ashore.
— Tim Bray (@timbray) February 12, 2018
Without belaboring the topic further, what amounts to a newfangled way to do a database does not solve the problem of data integrity. In fact, that is almost certainly more easily addressed (as in cleaned up over time) with traditional databases. Yet many of the hoped-for solutions, like in trade, act as if blockchain can solve the data accuracy problem, which exists independent of tampering risk. The reason parties use documentary letters of credit is to assure the buyer that when he releases the funds, the cargo is what it is supposed to be. They also serve to make it hard for buyers to reject cargo shipped around the world just because they had a change of heart. Blockchain won’t solve the problem of “how do I know what is really in the container?”
So again, that does not mean there won’t be some solid commercial uses for blockchain. But they aren’t going to be a game-changers.
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I’ll be glad when this bitcoin-blockchain madness goes away. The bitcoin miners have vacuumed up all the high end graphics cards.
Meh, above a bar frame rates are not visible to the human eye anymore, not to mention all the other stuff one needs to facilitate the rendering. Too a degree FR are more about high end graphic editing and game action latency.
Blockchain just seems to be another attempt by those wacky ideologues that think sanctity of contract can be imbued into a thing all whilst the actual reality is wild wild west, something about freedom.
>Meh, above a bar frame rates are not visible to the human eye anymore,
Right, but while no one really cares about pushing the frame rates of games much beyond 30 fps (because of heavily diminishing returns as far as the human “eye” is concerned as you pointed out) there is an ever growing push about how many objects and how detailed they are every frame. That does require ever increasing power even with a stagnant fps count because each frame requires more work. For example:
Thief 1 (1997) :
Characters : 700-800 polygons
Thief 2 (1998) :
Characters: 1,000 polygons
Objects: 200-500 polygons (objects on screen 256)
Terrain : 1024 polygons in view
…
Lost planet, X360/PC, 2007
Wayne – 12392 polygons (but finally 17765 polygons for compatibility with motion blur effect)
VS robot – 30-40,000 polygons
Background – ~500,000 polygons
Peak number of polygons per frame – ~ 3 million
…
average game from 2017:
roughly 150,000 polys per character
up to 11 million polys per frame
However more processing power is now spent on complex lighting effects then even the growing poly-count so the poly numbers don’t even tell you about the majority of the work anymore.
All the above was intended at ≈30 fps for their respective eras. FPS is thus a stagnant and meaningless measure for the needs of GPUs on graphics.
Actually, there is quite a high desire for FPS above 30, and even above 60, especially in PC gaming. I’m not a freak about it myself, but as a person who’s worked in videogames for 25 years I can attest that players and devs alike really care about those high frame rates.
30 FPS, other issues nothwithstanding, was a mid 90’s borne myth, it came about at a time when games were much slower (the keyboard controls didn’t allow for very fast camera moves) the hardware capabilities so modest that some considered 3D to be a miracle to work in the first place and PC’s were stili crappy business-first workstations that couldn’t compete well with what the Amiga offered in 1990.
Later, when 3D gaming was a much faster keyboard+mouse controlled experience, 30 FPS would be a migrane inducing nightmare, to be avoided at all costs.
Regarding the capability to see images; human eyes do not have a digital connection that would activate once per every 40ms (25FPS), they see all of the time, the minimum time window required for us to pick up a fleeting image is below 10ms (100FPS+) according to US airforce research (sorry, it’s been years, I have no links).
Personally, I can confirm seeing a clear difference between 30, 40 and 60 FPS.
If the nowinstock web site is any indication it looks like the madness has broken as availability in the past 2 weeks has started to return to normal. Prices are still elevated and may take a while longer to fall back towards where they were a year ago.
ASIC’s are the way to go for Bitcoin. Ethereum is (or was) GPUs but now someone seems to have created and ASIC for mining it.
Isn’t this blockchain over hype (it will solve all problems) typical? Eventually it will settle down as most of these things do? As only Facebook has taken over the world :)
I don’t think this is correct:
“large proportion of the entire world’s computing resource has been put to work contributing to the consensus algorithm that continuously watches the state of the ledger.”
Most of the computing resource used in Bitcoin (as an example) is not to watch the ledger. A little bit of hype there too.
“The bitcoin miners have vacuumed up all the high end graphics cards.”
The’ve also been sucking up most of the RAM, and prices have risen accordingly: https://pcpartpicker.com/trends/price/memory/.
Thankfully, it looks like prices hit a peak back in late January, and they’re finally coming back down. I too will be happy when the crypto-currency mining madness goes away. We’ve dedicated far too many computation resources (and energy resources to run them) to this giant exercise in financial speculation.
Blockchain would be good for limited point-to-to-point transfer of information, where you have to keep complete integrity of the transfer and its history. Think hash encryption taken to the n-th degree. But not for regular sales or databases. The tail end of the blockchain gets longer and longer as transfers are made to the original piece of information. Imagine if you had to carry around not just your debit card, but a complete paper trail listing every receipt of every purchase ever made to your account. The effect is cumulative, and becomes burdensome for large blocks of information or a large number of transactions. So you have to keep the information blocks small, and the number of transactions smaller, or it will become exponentially expensive in computer resources. So like any other bubble situation, it is only feasible if you have a free lunch.
> So like any other bubble situation, it is only feasible if you have a free lunch.
I don’t know enough about blockchain to say if this is a good comment, but I like your framing.
If your private blockchain system (lets say for contracts between cooperating corporations) has a non-value change characteristic, then there is no speculating in the market value of those contracts. It simply keeps parties honest (but there are other ways to do that anyway).
What is happening, is all sorts of spare computer capacity, and spare electrical capacity (the free lunch) are being used to mine value in blockchains that are value-variable. The biggest location for this is the ghost city of Ordos in China. If people had to pay market rates for that capacity, then there would be a lot less speculation in the variable values. Having to pay for something, reduces the tendency to gamble. China being a command economy (in spite of appearances), the Emperor there can simply order the free lunch to continue (at hidden cost to his regime).
When the discussion about blockchain technology flared at NC a couple of years ago, I suggested that bitcoins, touted as the new “electronic cash”, looked like banknotes that had to be explicitly endorsed every time they are transferred.
Correct. Ka-ching for you in Monopoly money! But since they are private … think of checks that are endlessly kited.
My comment would be relevant even in a “no value” change blockchain system.
As far as I am concerned, blockchain was a solution looking for a problem for a long time. I believe the problem it solves best now is to part the naïve and gullible from their money (otherwise we’d have to rely on old tried and tested Ponzi schemes, nigerian scams etc. etc.)
Don’t even get me started on “smart contracts”. Assuming you think the idea of immutable contract is a good thing in the first place, even then you’d think twice of the quality of idea of immutable buggy and ambiguous contract.
So if you want to even think of workability of smart contracts they MUST BE Turing incomplete (because otherwise you cannot guarantee any sort of it doing only what you really intend and nothing else, i.e. not being buggy and ambiguous), which limits the usability severely. If, like in Ethereum, you introduce bug-prone Turing complete language (based on Javascript FFS!), you’re not so much asking for trouble as being tied to rails in front of an incoming freight train.
vlade, surely a Turing-complete language could not handle the complex interactions required? Completeness in the Goedel sense, which is virtually identical to the Turing sense, is only true of arithmetic up to addition, if I remember rightly. Add multiplication and the language becomes Goedel-incomplete. And this is true of any language that includes standard set theory which is virtually all of mathematics. I am not familiar with Javascript, but if it is Turing-complete, I would say that you are ‘on the money’ (sorry) about the train wreck. Blockchain and its cousin Bitcoin are neoliberal dreams, aren’t they?
I saw a presentation by a software company having products and current revenues which had issued it’s own cryptos in an ICO, using the iota software. This was essentially a capital raise for the software company, which promised to accept its own cryptos at any time in payment for its software products. Since the value of the cryptos could vary greatly, the company promised to adjust the price of its software in cryptos, if necessary. Basically the company sold gift cards in the ICO.
Considering the main intent of the blockchain tech is to remove the banks out of the picture, is it possible to adapt existing peer-to-peer technology to accomplish the same functions? Torrents seems to be a mature technology and were highly effective at disrupting the media industries.
What when Peer to Peer suffers even more unethical dramas.
Like?
US peer-to-peer lending model has parallels with subprime crisis
https://www.ft.com/content/84f696ec-2436-11e6-9d4d-c11776a5124d
I’ll just keep it simple and say the data on the free banking during the 1800s has yet to be refuted, now if some have dramas with the currant ideological paradise one needs to reconcile the ideology first and foremost.
The notion that banking, in even a generalized sense, can be replaced by something as simplistic, slow, heavy and uni-dimensional as block-chain is ludicrous. I suspect your knowledge of banking is limited to the occasional trip to an ATM.
Block-chain is nothing more than an distributed storage mechanism for encrypted data. Several extant technologies can perform the same task, and more, far more efficiently.
More? Like what? Ever try mining a block-chain for meaningful transaction data? Buys, sells, ticks, times, quantities, derivatives?
Forget about it. Ain’t happening. Ever.
Torrents seems to be a mature technology and were highly effective at disrupting the media industries.
Disruptive how? Have the pirates created an alternative model of selling (thereby financing) content? Have they created an alternative support platform akin to Hollywood et al? No? Is it still all based on going to the store (you know, the old model) then distributing further for free (ignoring costs of electricity, etc, paid by the parents, probably) in the hopes others would distribute their wares back to you?
How does this work for the actual content creators? How would it work, if piracy wouldn’t be at 90% globaly, but at an exactly 100%?
Gov., corp., and church sponsored content only?
We re there already, to a large extent, I’m aware of that; but if you simply accept the outcome, you might as well call for full and complete legalisation of piracy and demand that public libraries host downloads of all content*.
Suddenly, everyone would realise how ridiculous the silly peer-to-peer model really is (not just torrents, the whole idea).
*(Nasty caveats are hiding there, however.)
Not quite so sure now that Microsoft has made its blockchain as service available and improved its transaction speed. https://www.youtube.com/watch?v=N7N5pqBMbwc
You’d have thunk it. But as usual, you have to wade through to almost the end of Microsoft’s White Paper, whereupon you encounter the wriggle room (emphasis mine):
Which is akin to me saying I could pass for being 20-something. So long as you factor out my bald spot, laugh lines and incurable cynicism.
Microsoft are well known for coming up with some me-too technology that is invariably delivered deliciously late in the hype-cycle.
Never was into bitcoin but the associated technology of blockchain sounded interesting. That is, until I found out about the totally unsustainable use of energy that this technology would require, not to mention the huge amounts of processing time. If push came to shove, I would rather go back to ink and paper ledgers than see this become widespread.
Just to be narky about it, I am swinging around to the viewpoint that the bitcoin/blockchain surge was the technological equivalent of the shale oil industry over the past decade with the blockchain acting as fracking and both industries underpinned by dodgy financials. Be interesting to see a Venn diagram of investors in bitcoin/blockchain and the fracking industry to see if there was any overlap.
Bravo to Yves and Clive for their skepticism about this.
Any of these whiz-bang solutions, from autonomous vehicles to drones, needs a nice dose of salt with them.
It is interesting that the Libertarians (who appear to worship block-chains and the end of oppressive government) do not appear to understand “Rile of Law,” or “The King’s Peace,” and believe that people will behave properly, that is not cheat, absent the rule of law.
When referred to the Dark Ages in Europe, or the Warlords in China, they try to change the subject.
The US an Scotland have practical experience with Libertarian Governance. The Hatfields and McCoys in the US; and the McDonalds and Campbell’s in Scotland, which continues, somewhat muted, to this day.
I’m waiting enthusiastically for the moment when the cost of mining exceeds the return available.
I.e. Operating costs > Btc price
(2400 vs 7200 at present but converging rapidly)
Does the entire ecosystem collapse when no one has any incentive to run it?
Y2K mk2
I set up a testing environment last year to gain some insight into block-chain and specifically etherium. Sync times are now so excessive I don’t even bother to sync to the network.
The answer to your question is the network will collapse, and is already collapsing.
This kinda gets to the crux of the problem:
Besides the political and social matters of hierarchy and authority, doing all that “costs” something, whether it is the energy expended by workers in a cubicle (without blockchain) or Gigawatt-hours of computational power used up in servers in West Oregon to maintain the ledger (with blockchain). The technology may have its place, it is just not every place.
As with most tools my issue is with the people plying them and not the tool itself. For the money hoarders and capitalists, I don’t really hold out much hope for an “innovation” that is slated to consume all of the world’s electrical resources if we were to implement an omni-ledger for every economic transaction. Also, I have a problem with the “informal” (inherently communistic) elements of economy being removed so long as we are sticking with a capitalist system. At the end of the day, this technology gets dangerously close to being a gate-way for everything to be part of some analytical economic exchange (maybe why the libertarians push it so hard). I’d like to stick with that headache only being about 25% of my daily experience.
Indeed. I will be quoting you.
At the risk of promoting ‘the next best thing’, I am going to offer the following article and comment ….. cheers
Flaws of Blockchains and Perspectives on Cryptocurrencies – Arthur Brock
https://goo.gl/U5i2aR
#holo and #holochain address many of the flaws described in the article above and offer a lot of new benefits btw #holochain is not a computing or energy intensive distributed computing architecture. In fact #holo gets faster with increasing numbers of users. Also #holochain can be used to design complementary currencies based on mutual credit (aka old fashioned double entry accounting). And #holo is asset backed, not a speculative token, as is the case of bitcoin.
Umm…
“Fractal Process” Means what? Subroutines?
“Fractally assembled parts” Means what?
I’m not sure “fractally” is even a word.
He misspelled “hollow…”
Not really
I did have my tongue in my cheek somewhat when I wrote that. Trying to legislate against flim-flam and phoney marketing of the latest supposedly up and coming gewgaws to the easily fooled is too much of a stretch.
That said, the depths to which we as a culture have sunk where people can be allowed to operate such brazen hucksterism without any moral or ethical censure being imposed is astonishing. The normalisation of deceit is corrosive.
Bubbles burst when the ever increasing amount of new entrants required to keep them inflated are no longer available in the required numbers, at present the blockchain world requires the Electrical generating capacity of New Zealand to keep it running, and those bills need to be paid in cash and funded by new cash paying entrants to the ponzi, I think we passed the point already where the hype is failing to bring new punters in fast enough to keep psying those electricity bills, it wont be long before we drop below the marginal cost of running all the mining machines and the whole system falls apart leaving a nice big hangover ….
LOL! How short sighted you are! Yes, blockchain provides a solution to the byzantine general’s problem but what it does even better is disintermediation. What your article highlights is that most traditional businesses are not enthusiastic about blockchain but why would they be. They don’t want to be disintermediated into oblivion and for the people who work in those businesses, they have no incentive to use their creative energies to think of ways to challenge their own businesses. It is open public blockchains and not the private blockchains that will succeed. Yes, privacy will be layered on top as well as increased speed of transaction but that is still consistent with allowing people to disintermediate at a minimum the two key things that affects everybody. One is money and its use as a system of control, and the second is how we are governed and the idea of direct democracy. Many are already aware of the first, but most people are still asleep on the second, thinking that our present form of government (or even more distorted in people’s minds, the EU) are somehow representative of what democracy should be rather than something where the power rests with the public who are able to call binding referendums and vote via direct democracy. These are two key things that blockchain enables. Too bad you don’t see it.