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Book review: The Truth Machine

A good friend of mine despatched me a replica of The Truth Machine which was revealed in February 2018.  Its co-authors are Michael Casey and Paul Vigna, who additionally previously co-wrote The Age of Cryptocurrency a number of years ago.

I had an opportunity to read it and like my different critiques, underlined a lot of passages that could possibly be enhanced, modified, or even eliminated in future editions.

General: I do not advocate the first edition. For comparison, listed here are a number of different evaluations.

This ebook seemed overly political with an Occupy Wall Road tone that doesn’t mesh nicely with what at occasions is a highly technical matter.

I feel a elementary problem for anyone making an attempt to put in writing book-length content material on this matter is that as of 2018, there really aren’t many measurable ‘success’ stories – except for hypothesis and illicit activities – so you find yourself having to fill a couple hundred pages based mostly on hypotheticals that you simply (as an writer) in all probability don’t have one of the best optics in.

Additionally, I am a villain within the ebook. Can’t wait?  Scroll right down to Chapter 6 and in addition view these specific tweets for what meaning.

Observe: all transcription errors are my very own. See my different ebook evaluations on this matter.


on p. x they write:

The second influence is the guide you’re studying. In The Age of Cryptocurrency, we targeted totally on a single software of Bitcoin’s core know-how, on its potential to upend foreign money and payments.

Would encourage readers to peruse my earlier evaluation of their previous ebook. I don’t assume they made the case, empirically, that Bitcoin will upend both foreign money or payments. Bitcoin itself will doubtless exist in some type or style, however “upending” looks like a stretch right now.

On p. xi they write in a footnote:

We principally keep away from the assemble of “blockchain” as a non-countable noun.

This is good. They usually have been constant all through the guide too.


They spent several pages discussing methods to use a blockchain for humanitarian functions (and later have an entire chapter on it), nevertheless, it is unclear why a blockchain alone is the solution when there are possible different further methods to help refugees.

As an example, on p. 3 they write:

Just as the blockchain-distributed ledger is used to assure bitcoin users that others aren’t “double-spending” their foreign money holdings – in different words, to stop what would otherwise be rampant digital counterfeiting – the Azraq blockchain pilot ensures that folks aren’t double-spending their food entitlements.

But why can’t these food entitlements be digitized and use one thing like SNAP playing cards? Positive you’ll be able to technically use a blockchain to trace this type of factor, but you possibly can also use present on-premise or cloud options too, right?  Can centralized or non-blockchain solutions basically not provide an satisfactory answer?

On p. 4 they write:

Underneath this new pilot, all that’s needed to institute a cost with a meals service provider is a scan of a refugee’s iris. In effect, the eye becomes a type of digital pockets, obviating the need for cash, vouchers, debit playing cards, or smartphones, which reduces the danger of theft (You could have some privateness considerations related to that iris scan – we’ll get to that under.) For the WFP, making these transfers digital leads to hundreds of thousands of dollars in saved fees as they reduce out middlemen similar to cash transmitter and the bankers that previously processed the general funds system.

Get used to the “bankers” feedback as a result of this e-book is crammed with a dozen of them. Intermediaries comparable to MSBs and banks do take cuts, nevertheless they don’t really dive into the charge structure. That is essential as a result of numerous “cryptocurrency”-focused startups have tried to use cryptocurrencies to supposedly disrupt remittances and most principally failed as a result of there are plenty of unseen costs that aren’t taken under consideration for.

Another unseen value that this e-book actually didn’t dive into was: the payment to miners that users must pay to get included right into a block.  They point out it in passing however sometimes hand-waved it saying something like Lightning would lower these prices.  That’s not likely a very good line of reasoning at this stage in improvement, however we’ll take a look at it once more later.

On p. 6 they write:

That’s an especially interesting concept for a lot of underdeveloped nations as it might enable their economies to perform more like these of developed nations – low-income householders might get mortgages, for example; road vendors might get insurance coverage. It might give billions of individuals their first opening into the economic alternatives that the rest of us take without any consideration.

That sounds superb, who wouldn’t want that?  Unfortunately this can be a pretty superficial little bit of speculation.  For instance, how do road distributors get insurance just because of the invention of a blockchain?  That’s by no means answered in the ebook.

On p. 7 they write:

The drawback is that these fee-charging institutions, which act as gatekeepers, dictating who can and can’t interact in business interactions, add value and friction to our financial actions.

Positive, that is true and there are efforts to scale back and take away this intermediation. The guide also ignores that each cryptocurrency proper now additionally costs some sort of charge to miners and/or stakers. And with almost all coins, with a purpose to acquire it, a consumer sometimes must buy it by way of a trusted third celebration (an trade) who may also cost a markup payment… typically concurrently requiring you to undergo some sort of KYC / AML course of (or a minimum of hook up with a financial institution that does).

Thus if fee-charging gatekeepers are thought-about an issue in the conventional world, perhaps this may be modified within the subsequent edition because these sort of gatekeepers exist throughout the coin world too.

On p. 8 they record a bunch of use-cases, a few of which they go into further detail later within the e-book. But even then the small print are pretty obscure and superficial, advocate updating this within the next version with more concrete examples.

On p. 9 they write:

Silicon Valley’s anti-establishment coders hadn’t reckoned with the challenge of trust and the way society traditionally turns to centralized institutions to cope with that.

There might have been a time by which nearly all of coders in the Bay area have been “anti-establishment” but from the almost 5 years of dwelling out right here, I don’t assume that’s essentially the case throughout the board. Advocate offering a citation for that in the future.

On p. 10 they write:

R3 CEV, a New York-based know-how developer, for one, raised $107 million from greater than 100 of the world’s largest financial establishments and tech corporations to develop a proprietary distributed ledger know-how. Impressed by blockchains however eschewing that lable, R3’s Corda platform is built to comply with banks’ enterprise and regulatory models while streamlining trillions of dollars in day by day interbank securities transfers.

This entire paragraph ought to be up to date (later in Chapter 6 as properly):

  • The Collection A funding included over 40 buyers, not 100+.
  • The ‘community’ model of Corda is open sourced and obtainable on github, so anyone can obtain, use, and modify it. There’s additionally a Corda Enterprise version that requires a license and is proprietary.
  • Whereas initially eschewing the time period “blockchain,” Corda is now actively marketed as a “blockchain” and even uses the handle @cordablockchain on Twitter, on podcast ads, and in public shows.
  • I’m unaware of any current publicly announced undertaking that includes streamlining trillions of dollars in day by day interbank securities transfers. Citation?

On p. 10 they briefly mention the Hyperledger Challenge.  Advocate tweaking it because of its personal evolution through the years.

For example, right here is my early contribution: what is the distinction between Hyperledger and Hyperledger.

On p. 11 they write:

While it’s quite attainable that many ICOs will fall afoul of securities laws and that a bursting of this bubble will burn harmless buyers, there’s one thing refreshingly democratic about this growth. Hordes of retail buyers are getting into into early stage funding rounds sometimes reserved for enterprise capitalists and other skilled.

This paragraph aged horribly because the ebook was revealed in February.

All the indicators have been there: we knew even last yr that many, if not all, ICOs concerned overpromising options and not disclosing much of something to buyers. Consequently, nearly every week and month in 2018 we’ve got discovered just how a lot fraud and outright scams passed off underneath the guise and pretext of the “democratization of fund raising.”

For example, one research revealed this summer time found that about 80% of the ICOs in 2017 have been “identified scams.” One other research from EY discovered that about 1/3 of all ICOs in 2017 have misplaced “substantially all value” and most commerce under their itemizing worth.

Future variations of this ebook should remove this paragraph and in addition look into the place all of that money went, especially since there wasn’t – arguably – a single cryptocurrency software with a real consumer base that arose from that funding technique (but).

On p. 11 they write:

Not to be outdone, Bitcoin, the grandaddy of the cryptocurrency world, has continued to disclose strengths — and this has been mirrored in its worth.

That is an asinine metric. How exactly does worth mirror power? They by no means really explain that yet repeat roughly the identical sort of rationalization somewhere else on this ebook.

Apparently, both bitcoin’s worth and on-chain transaction volume have dramatically fallen since this e-book was first revealed. Does that mean that Bitcoin weakened one way or the other?

On p. 12 they write:

Such results give credence to crypto-asset analysts Chris Burniske and Jack Tatar’s description of bitcoin as “the most exciting alternative investment of the 21st century.”

Firstly, the Burniske and Tatar guide was poorly written and fallacious in many locations: see my evaluate

Secondly, bitcoin is a risky investment that is arguably driven by a Keynesian magnificence contest, not for the explanations that either guide describes (e.g., not because of remittance activity).

On p. 12 they write:

The blockchain achieves this with a special algorithm embedded into a standard piece of software run by all of the computer systems in the network.

To be clear: neither PoW nor PoS are consensus protocols which is implied elsewhere on page 12.

On p. 12 they write:

As soon as new ledger entries are launched, special cryptographic protections make it nearly unattainable to return and alter them.

This isn’t really true. For coins like Bitcoin, it’s proof-of-work that makes it resource intensive to do a block reorganization. Given enough hashrate, members can and do fork the network. We have now seen it happen many occasions this yr alone. There isn’t any cryptography in Bitcoin or Ethereum that forestalls this reorg from occurring as a result of PoW is separate from block validation.

On p. 13 they write:

Primarily, it should let individuals share more. And with the constructive, multiplier effects that this type of open sharing has on networks of economic activity, more engagement ought to in turn create extra enterprise opportunities.

These assertion must be backed up with supporting evidence in the subsequent version because because it stands right now, this sounds extra like a long-term objective or imaginative and prescient assertion than one thing that at present exists immediately within the cryptocurrency world.

On p. 13 they mention “disintermediation” however all through the e-book, most of the cryptocurrency-related corporations they explore are new intermediaries. This isn’t a constant narrative.

On p. 14 they write:

If I can belief one other individual’s claims – about their instructional credentials, for example, or their belongings, or their professional popularity – as a result of they’ve been objectively verified by a decentralized system, then I can go into direct enterprise with them.

This can be a non sequitur. Rubbish in, rubbish out (GIGO) — in truth, the authors make that point afterward within the e-book in Chapter 7.

On p. 15 they write:

Blockchains are a social know-how, a new blueprint for how you can govern communities, whether or not we’re talking about frightened refugees in a desolate Jordanian output or an interbank market during which the world’s largest monetary establishments change trillions of dollars day by day.

This is obscure and lacks nuance as a result of there isn’t any consensus on what a blockchain is in the present day. Many various organizations and corporations define it in another way (see the Corda instance above).

Either method, what does it imply to call a blockchain “social technology”? Databases are also being used by refugee camp organizers and monetary infrastructure providers… are databases “social technology” too?

Chapter 1

On p. 17 they write:

Its blockchain promised a new method around processes that had develop into at greatest managed by middlemen who insisted on taking their reduce of every transaction, and at worst the reason for some man-made financial disasters.

That is true and problematic and sadly Bitcoin itself doesn’t remedy that as a result of it additionally has middlemen that take a reduce of every transaction within the form of a payment to miners. Future editions ought to add more nuance such as the “moral hazard” of bailing out SIFIs and TBTF and separate that from cost processors… which technically speaking is what most cryptocurrencies attempt to be (a network to pay unidentified members).

On p. 18 they write:

Problems come up when communities view them with absolute faith, particularly when the ledger is underneath management of self-interested actors who can manipulate them. This is what happened in 2008 when inadequate scrutiny of Lehman Brother’s and different’s actions left society uncovered and contributed to the financial crisis.

This appears to be a bit revisionist historical past. This seems to conflate two separate issues: the kind of belongings that Lehman owned and said on its books… and the integrity of the ledgers themselves. Are the authors claiming that Lehman Brother’s ledgers have been being maliciously modified and manipulated? In that case, what citation do they have?

Also a couple pages ago, the authors wrote that blockchains have been social know-how… but we know that from that they will die and anything counting on them may be impacted.

Both approach, on this chapter the authors don’t actually explain how one thing Bitcoin itself would have prevented Lehman’s collapse. See also my new article on this matter.

On p. 19 they write:

A decentralized network of computer systems, one which no single entity managed, would thus supplant the banks and other centralized ledger-keepers that Nakamoto recognized as “trusted third parties.”

Enjoyable reality: the phrase “ledger” doesn’t seem within the Bitcoin white paper or other initial emails or posts by Nakamoto.

Secondly, maybe an industry broad or generally used blockchain of some sort does ultimately displace and take away the position some banks have in sustaining certain ledgers, but their assertion, as it’s presently worded, seems so much like of speculation (projection?).

We all know this as a result of throughout the ebook it’s pretty clear they don’t like banks, and that is wonderful, but future editions have to again up a majority of these opinions with evidence that banks are not maintaining a selected ledger due to a blockchain.

On p. 20 they write:

With Bitcoin’s community of unbiased computers verifying every thing collectively, transactions might now be instituted peer to see, that is, from individual to individual. That’s an enormous change from our convoluted credit score and debit card cost methods, for example, which routes transactions by means of an extended sequence of intermediaries – at the very least two banks, one or two cost processors, a card community supervisor (reminiscent of Visa or Mastercard), and quite a lot of other establishments, depending on where the transaction take place.

If we glance back too 2009, this is factually right of Bitcoin at a high degree. The nuance that is lacking is that at present in 2018, nearly all of bitcoin transactions route by means of a 3rd get together, some sort of intermediary like a deposit-taking change or custodial wallet. There are still people preferring to make use of Bitcoin as a P2P network, but in response to Chainalysis, last yr more than 80% of transactions went by way of a third get together.

On p. 20 they write:

Whereas you may assume that money is being immediately transferred once you swipe your card at a clothing retailer, in actuality the entire process takes a number of days for the funds to make all these hops and eventually settle within the storeowner’s account, a delay that create dangers and prices. With Bitcoin, the thought is that your transaction ought to take solely ten to sixty minutes to completely clear (not withstanding some current capability bottlenecks that Bitcoin builders are working tor resolve). You don’t need to rely on all those separate, trusted third events to process it on your behalf.

That is principally incorrect and there’s also a false comparison.

In the first sentence they gloss over how bank card cost techniques affirm and approve transactions in a matter of seconds. As an alternative they give attention to settlement finality: when the actual cash is delivered to the merchant… which may take as much as 30+ days depending on the system and jurisdiction.

The second half they glowingly say how a lot quicker bitcoin is… but all they do is describe the “seen” exercise with a cryptocurrency: the “six block” confirmations everybody is advised to wait earlier than transferring coins again. This part does not mention that there isn’t a settlement finality in Bitcoin, at most you get probabilistic finality (as a result of there’s all the time probability there could also be a fork / reorg).

In addition, with cryptocurrencies like Bitcoin you’re solely transferring the coins. The money leg on either aspect of the transaction nonetheless should switch by means of the identical intermediated system they describe above. We’ll talk about this further under when discussing remittances.

On p. 20 they write:

It does so in a method that makes it nearly inconceivable for anybody to vary the historic document once it has been accepted.

For proof-of-work chains that is unfaithful in principle and empirically. In the next edition this ought to be modified to “resource intensive” or “economically expensive.”

On p. 20 they write:

The result’s something exceptional: a record-keeping technique that brings us to a commonly accepted model of the truth that’s extra dependable than any fact we’ve ever seen. We’re calling the blockchain a Truth Machine, and its purposes go far past simply cash.

It isn’t a “truth machine” as a result of rubbish in, rubbish out.

In addition, whereas they do talk about some historical stone tablets, they don’t actually provide a metric for a way quantitatively more (or less) precise a blockchain is versus other strategies of recording and witnessing info. Is perhaps value adding a comparison desk within the subsequent edition.

On p. 21 they write:

A lion of Wall Road, the firm was revealed to be little more than a debt-ravaged shell stored alive solely by shady accounting – in different phrases, the bank was manipulating its ledgers. Typically, that manipulation involved shifting debt off the books come reporting season. Different occasions, it involved assigning arbitrarily high values to “hard-to-value” belongings – when the good selloff came, the surprising reality hit house: the belongings had no value.

The crash of 2008 revealed most of what we find out about Wall Road’s confidence recreation at the moment. It entailed an enormous manipulation of ledgers.

This was going nicely until that last sentence. Blockchains do not remedy the rubbish in, rubbish out drawback. If the CFO or accountant or e-book keeper or inner counsel places numbers into blocks that do not accurately mirror or characterize what the “real value” truly is, blockchains do not repair that. Bitcoin doesn’t repair that.

Inappropriate oversight, rubber stamp valuations, inaccurate danger models… these are off-chain points that troubled Lehman and other banks. Observe: they proceed making this connection on pages 24, 28, and elsewhere but once more, they don’t element how a blockchain of some type would have explicitly prevented the collapse of Lehman other different investment banks.

See also: Systemically necessary cryptocurrency networks

On p. 22 they write:

The real drawback was never really about liquidity, or a breakdown of the market. It was a failure of trust. When that belief was broken, the influence on society – together with on our political culture – was devastating.

How about all the above? Pinning it on only one factor appears just a little dismissive of the multitude of different interconnecting problems / culprits.

On p. 22 they write:

By numerous measures, the U.S. financial system has recovered – on the time of writing, unemployment was close to report lows and the Dow Jones Industrial Common was at report highs. However those positive factors aren’t evenly distributed; wage progress at the prime is six occasions what it’s for these in the center, and even more compared to those at the bottom.

If the objective of the authors is to rectify wealth inequalities then there are in all probability better comparisons than utilizing cryptocurrencies.

Why? Because – whereas it is arduous to full quantify, it seems that on cursory examination most (if not all) cryptocurrencies including Bitcoin have Gini coefficients that tendencies in the direction of 1 (perfectly unequal).

On p. 23 they write about disinformation within the US and elsewhere.  And talk about how belief is a “vital social resource” and then mention hyperinflation in Venezuela. These are all worthy subjects to discuss, but it isn’t really clear how any of these actual or perceived problems are by some means solved because of a blockchain, especially when Venezuela is used as the example. The next edition ought to make this more clear.

On p. 29 they write:

On October 31, 2008, whil the world was drowning within the financial disaster, a little-noticed “white paper” was launched by any person utilizing the pen identify “Satoshi Nakamoto,” and describing something referred to as “Bitcoin,” an digital version of cash that didn’t want state backing. At the coronary heart of Nakamoto’s digital cash was a public ledger that might be seen by anyone however was nearly unattainable to change.

One pedantic observe: it wasn’t broadly marketed beyond a niche mailing record on function… a future edition may need to change ” a little-noticed” as a result of it doesn’t look like the aim by Nakamoto was to get Techcrunch or Slashdot to cowl it (although ultimately they both did).

Additionally, it isn’t nearly unimaginable to alter. As proven by links above, proof-of-work networks can and do get forked which may embrace a block reorganization. There’s nothing that technically prevents this from occurring.

See also: Interview with Ray Dillinger

On p. 31 they write:

Szabo, Grigg, and others pioneered an strategy with the potential to create a document of historical past that can’t be modified – a document that somebody like Madoff, or Lehman’s bankers, couldn’t have meddled with.

I still assume that the authors are being a bit too liberal with what a blockchain can do. What Madoff did and Lehman did have been totally different from one another too.

Either method, a blockchain wouldn’t have prevented knowledge – representing fraudulent claims – from being inserted into blocks. Theoretically a blockchain might have allowed auditors to detect tampering of blocks, but when the knowledge in the blocks are “garbage” then it is type of apart from the purpose.

On p. 32 they write:

Think about that Bitcoin is now probably the most highly effective computing network on the earth, one whose combined “hashing” price as of August 2017 enabled all its computers to collectively pore via 7 million trillion totally different number guesses per second.


Let the report present that time period is 36,264 trillion trillion occasions longer than the present best-estimate age of the universe. Bitcoin’s cryptography is fairly secure.

This must be scrapped for a number of causes.

The authors conflate the cryptography used by digital signatures with generating proofs-of-work. There will not be the identical thing. Digital signatures are thought-about “immutable” for the explanations they describe within the second part, not due to the hashes which are generated in the first.

One other drawback is that the exercise within the first half — the hash era course of — isn’t an apples-to-apples comparison with different basic computing efforts. Bitcoin mining is a narrowly specific exercise and consequently ASICs have been constructed and deployed to generate these hashes. The single-use machines used to generate these hashes can’t even verify transactions or assemble blocks. In contrast, CPUs and GPUs can process a a lot wider choice of basic objective purposes… together with serialize transactions and produce blocks.

For instance: it might be like evaluating a Falcon 9 rocket launch car with a Toyota Prius. Positive they’re nominally each “modes of transportation” but built for totally totally different functions and makes use of.

A further level is that again, proof-of-work chains can and have been forked through the years. Bitcoin shouldn’t be special or distinctive or impervious to forks either (right here’s a history of the occasions Bitcoin has forked). And there are other ways to create forks, beyond the singular Maginot Line attack that the authors describe on this web page.

On p. 33 they write:

Whether the solution requires these excessive privacy measures or not, the broad mannequin of a new ledger system that we laid out above – distributed, cryptographically safe, public but personal – could also be simply what’s needed to restore individuals’s confidence in society’s record-keeping techniques. And to encourage individuals to re-engage in financial change and risk-taking.

This comes throughout as speculation and projecting. We’ll see later that the authors have a dim view of anything that isn’t a public blockchain. Why is that this specific format the perfect?

Both means, future versions ought to embrace a citation for a way individuals’s confidence degree improve due to using some sort of blockchain. Right now, I’m unaware of any such survey.

On p. 34 they quote Tomicah Tilleman from the International Blockchain Business Council, a lobbying group:

Blockchain has the potential to push again towards that erosion and it has the potential to create a brand new dynamic by which everyone can come to agree on a core set of details but in addition make sure the privacy of information that should not be within the public area.

This looks like a non sequitur. How does a blockchain itself push back on anything immediately? Simply exchange the phrase “blockchain” with “database” and see if it is sensible.

Furthermore, as we’ve got empirically observed, there are fractures and special interest groups within every of these little coin ecosystems. Each has their own desired roadmap and in some instances, they can’t agree with each other about information such because the influence larger block sizes might have on node operators.

On p. 35 they write:

If it may well foster consensus in the best way it has been shown to with Bitcon, it’s greatest understood as a Truth Machine.

This can be a non sequitur. Simply because Nakamoto consensus exists doesn’t imply it that blockchains are machines of fact. They will replicate falsehoods if the blocks are crammed with the wrong info.

Chapter 2

On p. 38 they write:

Think about how Facebook’s secret algorithm select the information to suit your ideological bent, creating echo chambers of like-minded indignant or delighted readers who are ripe to eat and share doubtful info that confirms their pre-existing political biases.

There are some really valid factors in this first a part of the chapter. As it relates to cryptocurrencies, a second edition also needs to embrace the astroturfing and censoring of other views that take place on cryptocurency-related subreddits which in turn forestall individuals from learning about various implementations.

We noticed this front-and-center in 2015 with the block measurement debate through which moderators of /r/bitcoin (specifically, theymos and BashCo) banned any discussion from one camp, people who needed to debate methods of increasing the block measurement by way of a hardfork (e.g., Bitcoin XT, Bitcoin Basic).

This wasn’t the primary or final time that cryptocurrency-related subjects on social media have resulted in the creation of echo chambers.

On p. 43 they write:

The potential power of this idea begins with the example of Bitcoin. Despite the fact that that specific blockchain might not provide the last word answer in this use case, it’s value recalling that without any of the basic, centrally deployed cybersecurity instruments corresponding to firewalls, and with a tempting “bounty” of greater than $160 billion in market cap worth on the time we went to print, Bitcoin’s core ledger has to date confirmed to be unhackable.

There is a lot to unpack right here but I feel a future version ought to explain in additional element how Bitcoin is a kind of cybersecurity software. Do they mean that because the knowledge is replicated to hundreds of nodes around the globe, it is more resilient or redundant?

Either approach, saying that “Bitcoin’s core ledger” is “unhackable” is a trope that must be removed from the subsequent edition as nicely.

Why? Because when speaking about BTC or BCH or any variant of Bitcoin, there is only one “ledger” per chain… the phrase ‘core’ is superfluous. And as described above, the phrase “unhackable” ought to be changed to “resource intensive to fork” or something along those strains. “Unhackable” is anarchronistic as a result of what the authors are in all probability making an attempt to describe is malicious network partitions… and never something from a ’90s movie like The Internet.

Continuing on p. 43 they write:

Based mostly on the ledger’s own standards for integrity, Bitcoin’s nine-year expertise of survival offers pretty strong proof of the resiliency of its core mechanism for providing decentralized trust between customers. It recommend that probably the most necessary non-currency purposes of Bitcoin’s blockchain might be safety itself.

This last sentence is senseless and they don’t increase on it in the guide. What’s the safety they are speaking about? And the way is that notably useful to “non-currency applications of Bitcoin’s blockchain”? Do they mean piggy-backing like colored coins attempt to do?

On p. 44 they write:

The public ledger accommodates no figuring out information about the system’s users. Much more necessary, nobody owns or controls that ledger.

Properly technically talking, miners by way of mining pools management the chain. They will and do improve / downgrade / sidegrade the software. They usually can (and do) fork and reorg a sequence. Is that outlined as “control”? Unclear however we’ll in all probability see some courtroom instances if real giant loses take place as a result of forks.

On p. 44 they write:

As such there isn’t any central vector of assault.

In principle, yes. In follow though, many chains are highly centralized: each when it comes to block creation and when it comes to improvement. Thus in principle it is potential to compromise and successfully “attack” a blockchain underneath the proper circumstances. Could possibly be value rephrasing this within the subsequent edition.

On p. 44 they write:

As we’ll talk about additional within the ebook, there are varying degrees of security in several blockchain designs, together with those often known as “private” or “permissioned” blockchains, which rely on central authorities to approve individuals. In contrast, Bitcoin is predicated on a decentralized model that eschews approvals and as an alternative banks on the members caring enough about their cash within the system to guard it.

This can be a little bit of a strawman because there are several types of “permissioned” blockchains designed for different purposes… they’re not all alike. Generally, the primary commonality is that the validators are recognized by way of a legal id. How these networks are setup or run doesn’t necessarily have to depend on a centralized authority, that might be a single level of belief (and failure). But we’ll talk about this later under.

On p. 44 they write:

On stage at the time, Adam Ludwin, the CEO of blockchain / distributed ledger providers firm Chain Inc., took advantage of the results to call out Wall Road companies for failing to see how this know-how provides a special paradigm. Ludwin, whose shoppers embrace family names like Visa and Nasdaq, stated he might perceive why individuals noticed a continued marketplace for cybersecurity providers, since his audience was full of people paid to fret about knowledge breaches continuously. However their answers prompt they didn’t perceive that the blockchain provided a solution. In contrast to other system-design software, for which cybersecurity is an add-on, this know-how “incorporates security by design,” he stated.

It’s unclear from the feedback above exactly how a blockchain solves problems on the planet of cybersecurity. Perhaps it does. In that case, then it must be explored in more element than what is offered in this area of the guide.

As an apart, I’m unsure how credible Ludwin’s feedback on this matter are because of the multiple pivots that his corporations have completed over the past 5 years.

On p. 45 they write:

A more radical answer is to embrace open, “permissionless” blockchains like Bitcoin and Ethereum, where there’s no central authority maintaining monitor of who’s using the community.

This is very a lot a prescriptive pitch and never a descriptive evaluation. Advocate altering a few of the language in the next version. Additionally, they should outline what “open” means as a result of there principally every mining pool doxxes themselves.

Moreover, some exchanges that try and implement their terms-of-service around KYC / AML / CTF do attempt to maintain monitor of who’s doing what on the community by way of tools from Chainalysis, Blockseer, Elliptic and others. Violating the ToS might end in account closures. Thus, mockingly, the most important “permissioned” platforms are actually these on the sides of all cryptocurrencies.

See: What is Permissioned-on-Permissionless

On p. 45 they write:

It’s not about building a firewall up around a centralized pool of helpful knowledge controlled by a trusted third social gathering; fairly the main target is on pushing management over info out to the sides of the community, to the individuals themselves, and on limiting the quantity of identifying info that’s communicated publicly. Importantly, it’s additionally about making it prohibitively expensive for someone to try to steal helpful info.

This sounds all properly and good, undoubtedly noble objectives. Nevertheless in the cryptocurrency world, many exchanges and custodial wallets have been compromised and the victims have had little or no recourse. Even if everyone is regularly advised to not retailer their personal keys (cash) with an middleman, Chainalysis found that in 2017 more than 80% of all transactions involved a third-party service.

On p. 45 they write:

Bitcoin’s core ledger has by no means been successfully attacked.

They should outline what they imply by “attacked” because it has forked a variety of occasions in its historical past. And an enormous civil warfare passed off resulting in a number of teams waging off-chain social media campaigns to advertise their positions, resulting in one discrete group divorcing and one other discrete group making an attempt to stop them from divorcing. Since there’s only de facto and not de jure governance, who attacked who? Who have been the victims?

On p. 45 they write:

Now, it’s going to undoubtedly be a serious challenge to get the establishments that till now have been entrusted with securing our knowledge techniques to let go and defer security to some decentralized community through which there isn’t any identifiable authority to sue if one thing goes incorrect. However doing so may simply be crucial step they will take to enhance knowledge safety. It should require them to consider security not as a perform of superior encryption and other exterior protections, but when it comes to economics, of creating attacks so expensive that they’re not well worth the effort.

This seems a bit repetitive with the previous few page, advocate slimming this down in the next version. Also, there are several class motion lawsuits underway (e.g., Ripple, Tezos) which do actually try and determine specific individuals and firms as being “authorities.” The Nano lawsuit additionally tried to sue “core developers.”

On p. 46 they write:

A hacker might go after every system, attempt to steal the personal key that’s used to provoke transactions on the decentralized network, and, in the event that they’re fortunate, get away with a couple of thousand dollars in bitcoin. Nevertheless it’s far less profitable and much more time-consuming than going after the wealthy target of a central server.

The ironic a part of this is that usually talking, the personal keys controlling hundreds of thousands of bitcoins are being housed in trusted third parties / intermediaries right now. In some instances these are saved on a centralized server. In different instances, the chilly pockets managed by hosting providers corresponding to Xapo (which is rumored to safe $10 billion of bitcoin) does geographically cut up the keys apart into bunkers. But sooner or later those dealing with the mutli-sig do come collectively in an effort to move the coins to a scorching wallet.

On p. 47 they write:

It appears clear to us that the digital financial system would benefit drastically from embracing the distributed belief structure allowed by blockchains – whether or not it’s simply the info backups that a distributed system gives, or the more radical of an open system that’s protected by a high cost-to-payout ratio.

What does this mean? Are they saying so as to add proof-of-work to all forms of distributed methods? It is just helpful within the Bitcoin context in an effort to make it costly to Sybil assault the community… as a result of members have been originally unknown. Does that very same drawback exist in other environments that they are considering of? More clarity ought to be added within the subsequent version.

On p. 48 they write:

The concept, one which’s additionally being pursued in several types by startups corresponding to Gem of Los Angeles and Blockchain Health of San Francisco, is that the affected person has management over who sees their data.

This is among the difficulties in writing a long-form e-book on this common matter right now: tasks and corporations often pivot.

For example, a pair months after the e-book was revealed, Gem announced its “Universal Token Wallet,” a product which at present dominates its entrance web page and social media accounts of the company. There have been no well being care-related bulletins from the corporate in over a yr.

Equally, Blockchain Well being not exists. Its CEO left and joined Chia as a co-founder and the COO has joined the Neighborly group.

On p. 50 they write:

It was a jury-rigged answer that meant that the banking system, the centralized ledger-keeping answer with which society had solved the double-spend drawback for five hundred years, can be awkwardly bolted onto the ostensibly decentralized Internet as its core belief infrastructure.

I feel there are some official complaints to made in the direction of how on-line commerce advanced and presently exists but this appears a tad petty. As backwards as monetary establishments are (rightly and wrongly) portrayed, it’s not like their determination makers sat around in the early ’90s making an attempt to figure out easy methods to make integrating the Net a clumsy process.

On p. 50 they write:

Underneath this model, the banks charged merchants an interchange payment of round 3 % to cover their anti-fraud prices, including a hidden tax to the digital financial system all of us pay in the type of larger costs.

Once more, like their assertion above: there are some very respectable gripes available relating to the prevailing oligopolistic cost methods, but this specific gripe is type of petty.

Fraud exists and in consequence someone has to pay for it. In the cryptocurrency world, there isn’t any recourse as a result of it is caveat emptor. On the earth of courts and authorized recourse, charges are levied to cowl customer service including fraud and insurance coverage. It might be attainable to build a cost system in which there’s legal recourse and simultaneously no oligopolistic lease in search of however this is not explored within the guide. Additionally, for some cause the payment to miners isn’t introduced up in this part, yet it’s a actual payment customers should pay… yet they don’t obtain customer service as a part of it.

Lastly, the Federal Reserve (and different central banks) monitor historic interchange charges. Not all customers are charged the ~Three% as talked about within the ebook.

As an example (see under): Common Debit Card Interchange Payment by Cost Card Network

Source: Statista

On pages 52 and 53 they write uncritically about Marc Andresseen and VCs who’ve invested in Bitcoin and cryptocurrencies.

a16z, the enterprise firm co-founded by Andresseen, arguably has a number of areas that could be conflicts-of-interest with the varied coin-related tasks it has invested in and/or promoted the previous a number of years (e.g., investing in cash that are listed on an trade additionally they are an investor and board member of comparable to 0x). These ties will not be scrutinized in a chapter that makes an attempt to create a black and white narrative: that the legacy gamers are centralized rent-seekers and the VCs are usually not. Once we know empirically that some VCs, including a16z, have invested in what they consider will develop into monopolies of some variety.

On web page 54 and 55 they write about “Code is not law,” a subject that I have likewise publicly introduced on.

Specifically they state:

One danger is that regulators, confused by all these outside-the-box ideas, will overreact to some dangerous news – probably triggered by large-scale buyers losses if and when the ICO bubble bursts and exposes a number of scams. The worry is that a new set of draconian catchall measures would suck the life out of innovation in this area or drive it offshore or underground. To make certain, institutions just like the Washington-based Coin Middle and the Digital Chamber of Commerce are doing their greatest to maintain officers conscious of the significance of protecting their respective jurisdictions competitive in what’s now a worldwide race to steer the world in monetary know-how.

That is word for phrase what coin lobbyists have been pitching to policy makers all over the world for years. Each Coin Middle and Digital Chamber of Commerce lobby on behalf of their sponsors and donors to stop sure oversight on the cryptocurrency market. A whole guide might in all probability be written about how specific individuals inside coin lobbying organizations have tried to white wash and spin the narrative round illicit utilization, utilizing rigorously worded talking factors. They usually have been effective as a result of these authors don’t query the motivations and agenda these special curiosity teams have.

Both method, Bitcoin and lots of other cryptocurrencies have been born within the “underground” and even “offshore.” It’s unclear what the authors try to excuse because if anything, regulators and regulation enforcement have arguably been very mild handed in the US and most regions overseas.

If anything, as soon as a overseas registered ICO or coin is created, typically the father or mother firm and/or basis opens an office to recruit developers in San Francisco, New York, and other US cities. I do know this because all of the multiple “blockchain” occasions I’ve attended overseas the previous two years by which organizers explain their technique. The next version of this guide might discover this phenomenon.

On p. 57 they write:

By The DAO founders’ own phrases, the attacker had completed nothing incorrect, in different phrases. He or she had merely exploited one in every of its options.

Wonderful level that ought to be explored in additional detail within the next version. For example, in Bitcoin there have been multiple CVEs which if exploited (no less than one was) might have resulted in modifications within the money provide. Is that a function or a bug?

And the newest one, found in pre-0.16.Three, was partially downplayed and hidden to stop others from figuring out the extent of potential injury that would have been achieved.

On p. 59 they write:

The dependence on a trusted intermediary, some cryptocurrency purists would argue, overly compromises a blockchain’s safety perform, rending it unreliable. For that purpose, some of them say, a blockchain is inappropriate for a lot of non-currency purposes. We, nevertheless, view it as a trade-off and consider there’s nonetheless plenty of worth in recording ownership rights and transfers to digitally represented real-world belongings in blockchains.

I feel this entire section must be reworded to explain:

  1. what forms of blockchains that they had in thoughts?
  2. how the legal hooks into certain blockchains behave versus anarchic chains?
  3. being extra precise with the term purist… do they mean maximalists or do they mean somebody who points out that the majority proposed use-cases are chainwashing?

On pages 59 and 60 they write:

Permissioned blockchains – these which require some approved entity to approve the computer systems that validate the blockchain – by definition extra susceptible to gatekeeping controls, and subsequently to the emergence monopoly or oligopoly powers, than the persmissionless splendid that Bitcoin represents. (We are saying “ideal” as a result of, as we’ll talk about within the next chapter, there are additionally considerations that points of Bitcoin’s software program program have inspired an unwelcome focus of possession – flaws that builders are working to beat.)

It will be useful within the next edition to no less than stroll via two totally different “permissioned blockchains” so the reader can get an concept of how validators turn into validators in these chains. By not together with them, each platform is painted in the identical mild.

And because they’re still evaluating it with Bitcoin (which was designed for a totally totally different sort of use-case than ‘permissioned chains’ are), take into account that the best way mining (block making) is completed in 2018 could be very totally different than when it was first proposed within the 2008 paper. Back then, mining included a machine that did two issues: validated blocks and in addition generate proofs-of-work. In the present day, these two features are utterly separate and due to the comparatively fierce competition at producing hashes, there are real exit and entry prices to the market.

In lots of instances, because of this both the mining pool operators and hash turbines find yourself connecting their actual world government-issued identities with their on-chain exercise (e.g., block validation). It might be a stretch to say that there’s an outright monopoly in mining at present, but there is a particular development in the direction of oligopoly in manufacturing, block producing, and hash era the past a number of years. This isn’t explored past a superficial degree within the ebook.

On p. 60 they write:

Till regulation modifications, banks would face insurmountable legal and regulatory opposition, for example, to utilizing a system like Bitcoin that relies on an algorithm randomly assigning duty at totally different levels of the bookkeeping process to totally different, unidentifiable computer systems all over the world.

This is one other asinine remark as a result of they don’t explicitly say which legal guidelines they want changed. The authors make it sound like the PFMIs are holding the world back when the other is completely true. These principals and greatest practices arose over time because of the systemic influence necessary financial market infrastructures might have on society as an entire.

Proof-of-work chains, those which are regularly promoted in this guide, haven’t any capability to stop forks, by design. Anarchic chains like Bitcoin and Ethereum can only present probabilistic finality. But business greatest practices and courts all over the world calls for definitive settlement finality. Why ought to commerce be captured by pseudonymous, unaccountable validators maintained in jurisdictions during which authorized recourse is troublesome if not inconceivable?

On p. 60 they proceed:

However that doesn’t mean that other corporations don’t have a transparent interest in reviewing how these permissioned networks are arrange. Would a distributed ledger system that’s controlled by a consortium of the world’s largest banking institutions be incentivized to behave in the curiosity of most of the people it serves? One can imagine the risks of a “too-big-to-fail blockchain” large institutions might once once more maintain us hostage to bailouts due to failures within the combined accounting system.

This has been considered one of Michael Casey’s speaking factors for the past three years. I was even on a panel with him in January 2016 by which he referred to as R3 a “cartelchain,” months before Corda even existed. His justified disdain in the direction of conventional financial institutions — and those concerned with know-how being developed in the “permissioned” world — pops up throughout this guide. I do assume there are some valid critiques of consortia and permissioned chains and even Corda, but these aren’t introduced on this edition of the e-book.

He does make two legitimate observations here as nicely: regulated commerce should have oversight. That is likely one of the the reason why most of the organizations creating “permissioned blockchains” have plans to or already have created separate authorized entities to be regulated as some sort of FMI.

The different level is that we should always attempt to maneuver away from recreating TBTF and SIFI situations. Sadly in some instances, “permissioned chains” are being pitched as re-enabler of that very state of affairs. In distinction, dFMI is a mannequin that makes an attempt to maneuver away from these highly intermediated infrastructures. See additionally my new article on SICNs.

On p. 60 they write:

Both means, it’s incumbent upon us to make sure that the management over the blockchains of the longer term is sufficiently representative of broad-based pursuits and wishes so that they don’t simply grow to be automobiles for collusion and oligpolistic energy by the previous guard of finance.

The ironic part of this statement is — while well-intended — because of economies of scale there’s an oligopoly and even monopoly in most PoW-mined cash. It is unclear how or why that may change in the future. As well as, with the entrance of Bakkt, ErisX, Fidelity and other giant traditional financial organizations (e.g., the previous guard) into the cryptocurrency world, it’s onerous to see how “permissionless ecosystems” can forestall them from collaborating.

On p. 61 they write:

As we said in The Age of Cryptocurrency, Bitcoin was merely the primary crack at utilizing a distributed computing and decentralized ledger-keeping system to resolve the age-old drawback of trust and obtain this open, low-cost architecture for intermediary-free international transactions.

But because the authors have said elsewhere: proof-of-work chains are inherently pricey. If they have been low cost to take care of then they might be low cost to fork and reorg. You can’t concurrently have an affordable (“efficient”) and secure PoW community… that’s a contradiction.


Chapter 3

On pages 64 and 65 they provide a definition of a blockchain. I feel this might be extra helpful more earlier on in the e-book for newer audiences.

A couple of different citations readers may be interested by:

On p. 66 they write:

That method, no authorizing entity might block, retract, or determine what gest entered into the ledger, making it censorship resistant.

Might be value referencing Eligius, a pool run by Luke-Jr. that might not permit Satoshi Cube transactions as a result of its house owners spiritual views.

On p. 67 they write:

These computers are often known as “miners,” as a result of in looking for to win the ten-minute payout, they interact in a sort of computational treasure hunt for digital gold.

I understand the need to make simple analogies however the digital gold one isn’t quite right as a result of gold does not have an inflexible supply whereas bitcoin does. I’ve pointed this out in different guide critiques and it bears repeating due to how the narrative of e-cash to HODLing has changed over the previous few years.

Readers may be of some real life examples of perfectly inelastic supplies.

On p. 67 they write:

Proof of work is dear, as a result of it chews up both electricity and processing power. That signifies that if a miner needs to seize majority control of the consensus system by including extra computing power, they must spend a lot of money doing so.

This is right. But six pages earlier they say it is a “low-cost” infrastructure. Needs to be a bit more constant on this e-book. Either PoW is useful resource intensive or it isn’t, it can’t be each.

On p. 68 they write:

Over time, bitcoin mining has advanced into an industrial enterprise, with gigantic mining “farms” now dominating the community. May those massive gamers collude and undermine the ledger by combining assets? Maybe, however there are also overwhelming disincentives for doing so. Amongst other issues, a successful assault would considerably undermine the value of all the bitcoins the attacking miner owns. Both method, nobody has managed to assault Bitcoin’s ledger in 9 years. That unbroken report continues to strengthen perception in Bitcoin’s cost-and-incentive safety system.

It’s value mentioning that there are ways to fork Bitcoin past the singular Maginot Line assault. As mentioned above, Bitcoin and lots of other cash have forked; see this history. A whole lot of coins have died as a consequence of lack of curiosity by miners and builders.

It may be argued that between 2015-2017, Bitcoin underwent a social, off-chain attack by a number of totally different teams trying to exert their very own influence and beliefs onto the ecosystem. The finish outcome was a everlasting fracture, a divorce which the principal individuals nonetheless lob social media bombs at each other. There isn’t enough room to discuss it here, however the astroturfing actions by particular individuals and corporations to be able to affect others is value wanting into as nicely. And it labored.

On p. 71 they write:

The caveat, in fact, is that if dangerous actors do management more than 50 % of the computing power they will produce the longest chain and so incorporate fraudulent transactions, which other miners will unwittingly treat as authentic. Nonetheless, as we’ve defined, attaining that degree of computing energy is prohibitively expensive. It’s this mix of math and cash that retains Bitcoin safe.

I in all probability would change a number of the wording as a result of with proof-of-work chains (and principally any cryptocurrency), there are not any phrases of service or finish consumer license settlement or SLA. At most there’s solely de facto governance and positively not de jure.

What does that imply? It signifies that we really can’t say who the “bad actors” are since there isn’t any service settlement. Barring an administrator, who’s the official authority in the anarchic world of cryptocurrencies? The unique pitch was: if miners need to choose to build on one other tree or fork, it’s their determination to take action… they don’t want anybody’s permission to validate blocks and try and update the chain as they need to. The next version ought to explicitly say who or what’s an attacker or what a fraudulent transaction is… these are points I’ve raised in other posts and guide evaluations.

Also, the authors point out that computational assets involved in PoW are “prohibitively expensive” right here. So again, to be consistent they doubtless ought to remove “low-cost” elsewhere.

On p. 71 and 72 they write:

In fixing the double-spend drawback, Bitcoin did something else essential: it magically created the idea of a “digital asset.” Beforehand, anything digital was too simply replicated to be considered a definite piece of property, which is why digital products reminiscent of music and films are sometimes bought with licensing and access rights slightly than possession. By making it inconceivable to duplicate one thing of value – on this case bitcoins – Bitcoin broke this typical wisdom. It created digital scarcity.

No it didn’t. This entire passage is improper. As we have now seen with forks and clones, there really is not any such factor as this DRM-for-money narrative. This ought to be eliminated within the subsequent version.

Shortage effectively means rivalrous, but anyone can copy and clone any of those anarchic chains. PoW may make it relatively costly to do a block reorg on one specific chain, nevertheless it does not likely forestall someone from doing what they need with an identically cloned chain.

As an example, here is a listing of 44 Bitcoin forked tokens that arose between August 2017 and Might 2018. In mild of the Bitcoin and Bitcoin Money divorce, lobbying exchanges to acknowledge ticker symbols can also be value wanting into in a future edition.

On p. 73 they write:

Many startups that have been making an attempt to build a enterprise on prime of Bitcoin, resembling wallet providers and exchanges, have been annoyed by an lack of ability to process their clients’ transactions in a timely method. “I’ve become a trusted third party,” complained Wences Casares, CEO of bitcoin pockets and custodial service Xapo. Casares was referring to the fact that too lots of his companies’ transactions with its clients had to be processed “off-chain” on faith that Xapo would later settle the transaction on the Bitcoin blockchain.

This is likely one of the most trustworthy statements in the e-book. The whole cryptocurrency ecosystem is now dominated by intermediaries.

Apparently, Xapo moved its primary workplace from Palo Alto to Switzerland days after Ripple was fined by FinCEN for violating the BSA. Was this just a coincidence?

On p. 73 they wrote:

Making blocks greater would require more reminiscence, which would make it much more expensive to function a miner, critics pointed out. That would drive other prospective miners away, and depart Bitcoin mining much more concentrated amongst a couple of centralized gamers, elevating the existential menace of collusion to undermine the ledger.

This wasn’t actually the argument being made by the “small blockers.” Somewhat, it was disk area (not reminiscence) that was — on the time — perceived as a limitation for retail (house) users in the long term. Yet it has been a moot level for each Bitcoin and Bitcoin Money as the worth per gigabyte for a tough drive continues to say no over time… and since up to now yr, on-chain transactions on each chains have fallen from their peak in December 2017.

In apply, the “miners” that that authors confer with are the roughly 15 to 20 or so mining swimming pools that in a given day, create the blocks that others construct on. Almost all of them keep these nodes at a cloud supplier. So there’s already loads of trust that takes place (e.g., AWS and Alibaba are trusted third events). Because of economies of scale, spinning up a node (pc) in AWS is comparatively cheap.

It really isn’t mentioned much within the ebook, but the primary argument throughout the 2nd half of 2017 was about UASF — a populist message which principally stated miners (mining swimming pools) didn’t really matter. Followers of this philosophy emphasised the need to run a node at house. As an example, if a UASF supporter based mostly in rural Florida is trying to run a node from his residence, there might be a stark distinction between the uptime and bandwidth capability he has at house versus what AWS supplies.

On p. 74 they write:

With no tally of who’s who and who owns what, there was no solution to gauge what nearly all of the Bitcoin group, composed of customers, businesses, buyers, builders, and miners, needed. And so, it all devolved into shouting matches on social media.

I wrote about this phenomenon in Appendix A in a paper revealed in November 2015. And what ultimately happened was a collection of off-chain Sybil assaults by a number of totally different tribes, but especially by promoters of UASF who spun up tons of — hundreds of nodes — and acted as if these mattered.

Future editions also needs to embrace a dialogue on what happened at the Hong Kong roundtable, New York settlement, and different multilateral governance-related talks prior to the Bitcoin Cash fork.

On p. 74 they write:

A hard-fork-based software change thus poses a do-or-die determination for users on whether or not to improve or not. That’s dangerous enough for, say, phrase processing software, but for a foreign money it’s downright problematic. A bitcoin based mostly on the previous model could not be transferred to someone operating software that help the brand new version. Two Bitcoins. Two variations of the reality.

The authors truly by accident proved my earlier point: that public chains, specifically, proof-of-work chains, can’t forestall duplication or forks. Proof-of-work only makes it useful resource intensive to do double-spend on one specific chain.

This is likely one of the explanation why regulated monetary organizations possible will continue to not concern long lifecycle instruments immediately onto an anarchic chain like Bitcoin: as a result of by design, PoW chains are forkable.

Additionally, future editions might need to modify this language because there are some counterarguments from people like Vitalik Buterin that state: because onerous forks are opt-in and thus lead to cleaner long-term outcomes (e.g., much less technical debt).

On p. 75 they write lots about Lightning Network, stating:

So, there are not any miners’ fees to pay and no limit on what number of transaction might be finished at any time. The sensible contracts forestall customers from defrauding each other while the Bitcoin blockchain is used solely as a settlement layer, recording new stability transactions every time a channel is opened or closed. It persists as the last word source of proof, a assure that each one the “off-chain” Lightning transactions are reputable.

What is just not mentioned in this version is that:

  1. Lightning has been massively hyped with nonetheless comparatively subdued traction
  2. Lightning is a separate community – it isn’t Bitcoin – and thus have to be protected and secured by means of other non-mining means
  3. Lightning arguably distorts the potential transition to a fee-based Bitcoin network in much the same method that intermediaries like Coinbase do. That is to say, users are paying intermediaries the charges as an alternative of miners thus prolonging the time that miners depend on block rewards (as a subsidy) as an alternative of consumer fees.

Also, it bears mentioning that Bitcoin can’t in its current type act as a authorized “settlement layer” because it can’t present definitive settlement finality as outlined in the PFMIs (principle #8).

On p. 75 they write:

The SegWit/Lightning mixture was in their minds the responsible option to make modifications. That they had a duty, they believed, to avoid huge, disruptive codebase alterations and as an alternative needed to encourage innovators to develop purposes that may augment the powers of the restricted foundational code. It’s a basic, security-minded strategy to protocol improvement: maintain the core system at the bottom layer of the system easy, strong, and exhausting to vary – a few of the phrases “deliberately dumb” – and thus pressure innovation “up the stack” to the “application layer.” When it really works you get the perfect of both worlds: security and innovation.

The authors should revise this because this is just repeating the talking points of specific Core developers, particularly the last line.

Empirically it’s attainable to create a secure and “innovative” platform… and achieve this with a number of implementations of a specification. We see that in different cryptocurrencies and blockchain-related improvement efforts including Ethereum. The Bitcoin Core individuals would not have a monopoly on what is or shouldn’t be “security minded” and a number of other of them are vocally against supporting multiple implementations, partially, because of the politics around who controls the BIP course of.

Actually, it could possibly be argued that by insisting on the SegWit/Lightning strategy, they induced a disruption as a result of in reality, the quantity of code that needed to be changed to increase the block measurement is arguably less than what was wanted to construct, verify, and release SegWit.

It’s not value wading deep into these waters in this evaluate, however the next edition of this ebook must be more even handed in the direction of this schism.

On p. 76 they write:

However a gaggle of miners with real clout was having none of it. Led by a Chinese language firm that both mined bitcoin and produced a few of the most widely used mining gear, this group was adamantly against SegWit and Lightning. It’s not totally clear what upset Jihan Wu, CEO of Bitmain, but after lining up with early Bitcoin investor and outstanding libertarian Roger Ver, he launched a collection of lobbying efforts to advertise greater blocks. One concept was that Bitmain nervous that an “off-chain” Lightning answer would siphon away transaction charges that ought to be rightly going to miners; one other was that because such cost channel transactions weren’t traceable as on-chain transactions, Chinese language miners have been frightened that their government may shut them down. Bitmain’s fame suffered a blow when revelations emerged that its common Ant-miner mining rigs have been being shipped to third-party miners with a “backdoor” that allowed the manufacturer-cum-miner to close its opponents’ gear down. Conspiracy theories abounded: Bitmain was planning to subvert SegWit. The firm denied this and vowed to disable the function. But trust was destroyed.

There’s a variety of revisionism right here.

However to start out with, in the means of scripting this evaluate I reached out and contacted each Roger Ver and separately an advisor at Bitmain. Both informed me that neither of the authors of this ebook had reached out to them for any comment. Why would the authors freely quote Bitcoin Core / SegWit builders to get their aspect of this debate however not attain out to talk with two outstanding people from the opposite aspect to get their particular views? The subsequent version should either embrace these views and/or heavily revise this part of the e-book.

There are a number of different problems with this passage.

Multiple totally different teams have been actively lobbying and petitioning numerous influential figures (akin to change operators) throughout this time period, not simply Jihan and Roger. As an example, as talked about above, the Hong Kong roundtable and New York settlement have been two such examples. Conversely, SegWit and UASF was heavily promoted and lobbied by executives and associates at Blockstream and a handful of different organizations.

Relating to this “backdoor,” let’s rewind the clock and take a look at the overt / covert tempest in a teapot.

Last April Bitmain was alleged by Greg Maxwell (and the Antbleed campaign) of having perhaps kinda sorta engaged in one thing referred to as covert mining by way of Asicboost. Jimmy Music and others appeared into it and stated that there was no proof covert was occurring. On the time, a few of the vocal self-identified “small block” supporters backing UASF, used this as evidence that Bitmain was a malicious Byzantine actor that have to be purged from Bitcoinland. On the time, Greg proposed changing the PoW perform in Bitcoin in an effort to forestall covert Asicboost from working.

In its defense, Bitmain said that while Asicboost had been built-in into the mining gear, it was never activated… partly because of the unsure international IP / patent claims surrounding Asicboost. Just lately, they introduced a firmware improve that miners might activate overt Asicboost… a number of days after one other group did (referred to as “braiins”).

So why revisit this?

Two months ago Sia launched code which specifically blocked mining gear from Bitmain and Innosilicon. How and why this action is perceived as being truthful or non-political could be very confusing… they’re undoubtedly choosing favorites (their very own hardware). Definitely can’t claim to be sufficiently decentralized, right?

But in this part of the ebook, they don’t actually contact on how key members inside the tribes and factions, represented at the time. Peruse each lists and take a look at all the individuals at the roundtable that claim to symbolize “Bitcoin Core” in the governance process versus (the non-existent) reps from different implementations.

Despite the fact that the divorce is considered over, the tribes still fling mud at one another.

For example, one of the signatories of the HK roundtable, Adam Again, continues to be heckling Bitmain for supposedly not being concerned in the BIP course of. Wasn’t participation imagined to be “voluntary” and “permissionless”? Adam can also be now effective with “overt” Asicboost at this time but wasn’t okay with it 18 months ago. What modified? Why was it supposedly dangerous for Bitmain to probably use it again then but now it’s kosher because “braiins” (Slush) is doing it? That looks like favoritism.

Both approach, the e-book passage above needs to be rewritten to incorporate views from other camps and in addition to take away the nonetheless unproven conspiracy theories.

On p. 76 they write:

Meanwhile, unique bitcoin went on a tear, rallying by more than 50 % to a brand new high above $4,400 over a two-week interval. The comparative efficiency of the pair prompt that small-block BTC and the SegWit reformers had gained.

The subsequent version should change the wording because this comes throughout one-sided.

Whereas an imperfect comparability, a extra probably rationalization is that of a Keynesian magnificence contest. Most unsophisticated retail buyers had heard of Bitcoin and hadn’t heard of Bitcoin Money. Bitcoin (BTC) has brand recognition whereas Bitcoin Cash and the dozens of different Bitcoin-named forks and clones, didn’t.

Based mostly on anecdotes, most coin speculators do not seem to care concerning the technical specs of the coins they buy and sometimes hold the cash saved on an middleman (akin to an trade) with the view that they will promote the coins later to someone else (e.g., “a higher fool“).

On p. 77 they write:

Bitcoin had gone by means of a ridiculous circus, one that many outsiders naturally assumed would harm its popularity and undermine its help. Who needs such an ungovernable foreign money? Yet here was the unique bitcoin surging to new heights and registering a staggering 650 % achieve in less than twelve months.

The drawback with cherry choosing worth action dates is that, as seen within the passage above, it might not age properly.

For instance, in the course of the write-up of this evaluate, the worth of bitcoin declined from the place it was a yr ago (from over $10,000 then right down to round $4,000). What does that mean? We will all guess what happened throughout this most up-to-date bubble, but to behave like non-tech savvy retail consumers bought bitcoin (BTC) because of SegWit is a non sequitur. Nobody but the tribalists within the civil warfare actually cared.

On p. 77 they write:

Why? Nicely, for one, Bitcoin had proven itself resilient. Regardless of its civil conflict, its blockchain ledger remained intact. And, while it’s onerous to see how the acrimony and bitterness was an advantage, the fact that it had confirmed so troublesome to alter the code, to introduce a change to its financial system, was seen by many as an essential check of Bitcoin’s immutability.

There are a couple of issues right here.

What do the authors imply by the “blockchain ledger remained intact”? I don’t assume it was ever a question over whether or not or not copies of the Bitcoin blockchain (and/or forks thereof) would one way or the other be deleted. May need to reword this sooner or later.

Segwit2x / Bitcoin Money proponents were not making an attempt to introduce a change to Bitcoin’s financial system. The provide schedule of bitcoins would have stayed the same. The foremost problem was: a everlasting block measurement improve from 1 MB to no less than 2 MB. That proposal, if enacted, wouldn’t have modified the money provide.

What do the authors imply by “Bitcoin’s immutability”? The digital signatures are usually not being reversed or changed and that’s what supplies transactions the characteristic of “immutability.”

It’s doubtless that the authors consider that a “hard fork” signifies that Bitcoin is just not immutable. That appears to conflate “immutability” of a digital signature with finality (which means irreversibility). By design, no proof-of-work coin can guarantee finality or irreversibility.

Additionally, Bitcoin had greater than a dozen forks prior to the block measurement civil warfare.

On p. 77 and 78 they write:

Strong censorship resistance was, in any case, a defining promoting level for Bitcoin, the rationale why some see the digital foreign money turning into a world reserve asset to switch the outdated, mutable, fiat-currency techniques that still run the world. The truth is, it could possibly be argued that this failure to compromise and transfer forward, seen by outsiders as Bitcoin’s largest flaw, may truly be its largest function. Like the straightforward, unchanging codebase of TCP/IP, the gridlocked politics of the Bitcoin protocol have been imposing secure rigidity on the system and forcing innovation up the stack.

This is not what “censorship resistance” means within the context of Bitcoin. Censorship resistance is slender and particular to what operators of miners might do. Specifically, the game concept behind Nakamoto Consensus is that it will be pricey (resource intensive) for a malicious (Byzantine) actor to attempt to try and permanently censor transactions because of the amount of hashrate (proof-of-work) a Byzantine actor would wish to regulate (e.g., greater than 50%).

In contrast, what the authors described on this ebook was off-chain censorship, corresponding to lobbying by numerous particular curiosity teams at occasions, flamewars on Twitter, eradicating various views and voices on reddit, and by way of a number of other types.

The “world reserve asset” is a loaded phrase that ought to be clarified in the subsequent edition as a result of the passage above comes across a bit like an Occupy Wall Road speech. It needs more of an evidence beyond the colorful one sentence it was given. Moreover, as I predicted final yr, cryptocurrencies proceed to depend on the unit-of-account of “fiat systems” and exhibits no signs of letting up on this new period of “stablecoins.”

The authors undoubtedly have to take away the half that says “unchanging codebase of TCP/IP” as a result of this is not true. TCP/IP is a set of protocol standards and its constituent implementations proceed to evolve over time. There isn’t a single monolithic codebase that lies unchanged since 1974 which is principally the takeaway from the passage above.

Actually, several governing our bodies corresponding to IFTF and IAB continue to problem RFCs with a view to assist enhance the quality-of-service of what we name the internet. Additionally it is value stating that their analogy is flawed for different causes discussed in: Intranets and the Internet. In addition, the subsequent model of HTTP gained’t be using TCP.

So far as whether or not innovation will move “up the stack” stays to be seen but this seems to be an argument that the ends justify the means. If that is the case, that seems to open up a can of worms past the area for this evaluation.

On p. 78 there’s a typo: “BTH” as an alternative of “BCH”

On p. 78 they write:

That’s what BTC, the unique Bitcoin, promises with its depth of expertise at Core and elsewhere. BTH can’t entry such wealthy inventiveness as a result of the group of money-focused bitcoin miners can’t appeal to the identical sorts of passionate builders.

Strongly advocate eradicating this passage as a result of it comes throughout as a one-sided advertising message somewhat than a balanced or impartial rationalization utilizing metrics. As an example, how lively are the varied code repositories for Bitcoin Core, Limitless, and others? The subsequent version should try and measure the best way to measure “depth.”

For example, Bitmain has invested $50 million into a new fund targeted on Bitcoin Cash referred to as “Permissionless Ventures.” 2-3 years from now, what are the outcomes of that portfolio?

On p. 78 they write about permissioned blockchains:

Underneath these arrangements, some authority, resembling a consortium of banks, select which entities get to take part within the validation process. It is, in lots of respects, a step backward from Nakamoto’s achievement, since it makes the customers of that permissioned system dependent as soon as again, on the say-so of some trusted third celebration.

This can be a widespread chorus all through the e-book: that the true innovation was Bitcoin.

However it’s an apples-to-oranges comparison. Both worlds can and will co-exist as a result of they have been designed for different working environments. Bitcoin can’t provide the identical finality guarantees that “permissioned chains” try and do… as a result of it was designed to be forkable. That’s not essentially a flaw as a result of Satoshi wasn’t making an attempt to create a solution to an issue banks had. It’s okay to be totally different.

On p. 79 they write:

Most importantly, permissioned blockchains are extra scalable than Bitcoin’s, at the very least for now, since their governance doesn’t rely upon the settlement of hundreds of unidentified actors around the globe; their members can merely agree to extend computing power each time processing wants rise.

This doesn’t make sense at all. “Permissioned chains” in the broadest sense, don’t use proof-of-work. Consequently, there isn’t any computational arms race. Not as soon as have I been in a governance-related assembly involving banks during which they thought the answer to a governance-related problem was growing or reducing computational energy. It is a non sequitur and ought to be eliminated within the next version.

Also, there are many governance issues involving “permissioned chains” — but those are sometimes tangential to the technical challenges and limitations round scaling a blockchain.

On p. 79 they write:

To us, permissionless methods pose the best alternative. Whereas there might be great value in creating permissioned blockchains as an interim step towards a extra open system, we consider permissionlessness and open entry are ideals that we should always attempt for – however the challenges uncovered by Bitcoin’s “civil war.”

The authors repeat this statement in a pair different areas within the ebook and it doesn’t really make sense. Why? Because it’s attainable for each working environments to co-exist. It doesn’t should be us versus them. This can be a false dichotomy.

Additionally, if any of those “permissioned chains” are literally put into manufacturing, it might be the case that finish users might have “open access” to the platform, excluding collaborating in the validation of blocks. That’s pretty much how most coin customers expertise a cryptocurrency community in the present day (e.g., by way of permissioned endpoints on Coinbase).

On p. 80 they write:

The drawback was that Bitcoin’s single-purpose foreign money design wasn’t ideally fitted to these non-currency purposes.

A aspect observe perhaps value mentioning in a footnote is that Satoshi did try and construct a market early on but gave up.

On p. 81 they point out Nick Szabo with respect to sensible contracts. Could possibly be value exploring the work of Martín Abadi which predates Szabo (the thought of distributed packages that perform authorizations predates Szabo’s “smart contracts”).  Mark S Miller has also finished work in this area.

On p. 82 they write about Ethereum:

“Android for decentralized apps.” It might be an open platform very similar to Google’s smartphone working system, on which individuals might design any new software they needed and run it, not on a single company-owned server however in a decentralized method throughout Ethereum’s ownerless community of computers.

This is in all probability not the perfect analogy as a result of there is a difference between Google Android and Android Open Supply Challenge. Considered one of them consists of proprietary tech. Also, Google can and does add and take away purposes from the Play store regularly based mostly on its phrases and circumstances.

Lastly, somebody does actually personal each of the computers that constitute the Ethereum blockchain… mining farms are owned by someone, mining swimming pools are owned by somebody, validating nodes are owned by someone. And so forth.

On p. 82 they write about Vitalik Buterin:

Now he was constructing a universally accessible, decentralized international supercomputer.

The subsequent edition should drop the “supercomputer” verbiage as a result of the Ethereum chain is just as powerful because the least powerful mining pool node… which in follow is usually a standard pc situated in a cloud provider akin to AWS. This isn’t something like Summit over at Oak Ridge.

On p. 82 they write:

Now, with greater than 600 decentralized purposes, or Dapps, operating on Ethereum, he is wanting vindicated. In just the first eleven months of 2017, the system’s inner foreign money, ether, rose from just over $8 to greater than $400. By then all the market cap for ether stood at $39 billion, 1 / 4 that of Bitcoin’s. The success has made the wunderkind Buterin an prompt multi-millionaire and turned him right into a cultlike determine for the holders of ether and related tokens who’ve turn into rich.

The next model of the e-book ought to explicitly spell out what are the metrics for fulfillment. Whether it is solely worth of a coin going up, what occurs when the worth of the coins goes down like it has up to now yr?

For example, ether (ETH), peaked in mid-January at round $1,400 and has been hovering close to $100 the previous several weeks. Does that mean Vitalik is not vindicated? Also, what is he vindicated from?

Lastly, it might be value exploring in the subsequent version what Dapps are presently getting used regularly. As of this writing, the preferred Dapps are gambling apps (like proof-of-weak-hands / FOMO3D) and some “decentralized exchanges” (DEX).

On p. 82 they write:

Ethereum co-founder Joseph Lubin only added to the complexity when he setup ConsenSys, a Brooklyn-based assume tank-like business improvement unit tasked with creating new use instances and purposes of the know-how.

ConsenSys markets itself as a “venture studio” — a bit like YCombinator which incubates tasks and offers some seed financing to get it off the ground. These tasks are sometimes referred to as “spokes” (like a hub-and-spoke mannequin).  As of this writing there are over 1,100 staff spread throughout a number of dozen spokes.  There’s more to it than that and it will be fascinating to see it explored within the subsequent version.

On p. 83 they write:

For example, the Parity Pockets, which was designed by Ethereum co-founder and lead architect Gavin Wooden as a approach to seamlessly interact, by way of a browser, with Ethereum sensible contracts, lost $30 million in a hack.

Truly, Parity had a couple issues in 2017 and it is doubtless that the ebook might have been sent to publication across the similar time the larger drawback occurred on November 13, 2017. The second one involved a Parity-developed multisig wallet… and $150 million in ether that is now locked away and cannot be accessed (barring a hardfork). Most builders — together with these at Parity — characterize this instance as a “bug” that was by chance exploited by a developer.

On p. 84 they write:

These sorts of dynamics, with giant quantities of money at stake, can foster considerations that founders’ pursuits are misaligned with other customers. Ethereum’s reply was the not-for-profit Ethereum Basis, which was tasked with managing the pool of ether and different belongings from the pre-mine and pre-sale- a mannequin since used by most of the ICO token sales.

It might be fascinating to explore how this basis was created and the way it advanced and who manages it at this time. As an example, at one level in 2014 there were conversations round creating a business, for-profit entity led partially by Charles Hoskinson who later left and based Cardano.

On p. 85 they write about The DAO:

After a number of modest coding modifications failed, they settled on a drastic fix: Ethereum’s core developers “hard-forked” the Ethereum blockchain, implementing a backward-incompatible software program replace that invalidated all the attacker’s transactions from a sure date forward. It was a radical move. To many in the cryptocurrency group, it threw into question Ethereum’s all-important claim to immutability. If a gaggle of builders can drive a change in the ledger to override the actions of a consumer, nevertheless unsavory those actions are, how are you going to belief that ledger gained’t be tampered with or manipulated once more in the curiosity of 1 group over one other? Does that not destroy the entire value proposition?

This passage ought to in all probability be revised due to the utilization of the phrase immutable.

Also, it could possibly be argued that Bitcoin Core and other “core” teams act as gate keepers to the BIP process (or its equal) might lobby on behalf of particular curiosity teams to push specific code modifications and/or favor certain outcomes on behalf of specific stakeholders.

In either case, it is the miners that finally set up and use the code. Whereas some developers (like Bitcoin Core) are extremely influential, without miners putting in and operating software, the principles on the network cannot be changed.

See Sufficiently Decentralized Howeycoins.

On p. 85 they write:

Properly, in many respects, the Ethereum staff operated as policymakers do during real-world crises. They made onerous selections that harm some but have been finally taken within the interests of the higher good — determined, hopefully, by way of as democratic a course of as potential. The organizers went to nice lengths to elucidate and achieve help for the arduous fork.

The subsequent version ought to attempt to be more particular right here: what exactly made the choice making around the exhausting fork democratic. Who participated, who didn’t take part. And so forth.

Persevering with on p. 85:

And, very similar to the Segwit2x and other Bitcoin reform pro-miners didn’t accept it. For all intents and purposes, the repair was democratic – arguably, far more so than non-participatory democratic models by way of which disaster policymaking is enacted by nationwide governments. And since Ethereum is extra of a group of software program engineers than of cryptocurrency buyers, it was much less contentious than Bitcoin’s wrestle over hard-fork proposals.

This makes very little sense as it’s written because the authors don’t define or specify what exactly made any of the decision making democratic. Who was enfranchised? Who received to vote and make determination? Also, how do the authors know that Ethereum is “more of a community of software engineers than of cryptocurrency investors.” Is there any arduous numbers to again that assertion up?

And lastly how can we measure the extent of contentiousness? Is there an objective measure out there?

On p. 85 they write about Ethereum Basic:

This created a lot confusion and some fascinating arbitrage alternatives – in addition to some classes for bitcoin traders when their very own foreign money cut up two years later – however it may also be seen because the actions of a dissenting group non-violently exercising their right to secede. More than a yr later, Ethereum Basic continues to be around, although it trades at a small fraction of Ethereum’s worth, which suggests The DAO attacker’s funds – whose movements on the general public Ethereum blockchain have been intently watched – are of lower worth than if they’d been preserved in ETH.

I don’t assume we will really say for positive how a lot the The DAO fund (and youngster DAO fundss) can be value since that’s an alternate timeline.

Also, there are some vocal maximalists which have created numerous Ethereum-branded tribes which are okay with The DAO attacker accessing these funds. Shall be fascinating to see if there are any sociological research to reference in a new edition.

On p. 86 they write:

These hacks, and the scrambles to repair them, appear nuts, proper? However let’s put them in perspective. First, is this monetary chaos something less unsettling than the monetary disaster of 2008? Or the audacity of the next Wall Road buying and selling scandals?

This can be a whataboutism. Also, unusually the authors are saying the bar for judgement is as little as the financial engineering and socialized loses of the GFC. Isn’t the narrative that cryptocurrencies are alleged to be held to a better normal because the coin creators seek to architect a world that doesn’t have arbitrary determination making?

On p. 87 and 88 they write:

When the FBI auctioned the 144,000 bitcoins (value $1.Four billion as of late November 2017) that it seized from Ross Ulbricht, the convicted mastermind of the Silk Street illicit items marketplace, these cash fetched a significantly larger worth than others out there. The notion was that hey had now been “whitewashed” by the U.S. government. As compared, different bitcoins with a probably shady past ought to be value less due to the danger of future seizure. That’s hardly truthful: think about if the dollar notes in your pockets have been hit with a 10 % tax because the service provider knew that five years in the past, unbeknownst to you, that they had been handled by a drug vendor. To keep away from these distortions and create a cryptocurrency that works more like fungible money, Wilcox’s Zcash uses refined “zero-knowledge proofs” to permit miners to prove that holders of the foreign money aren’t’ double-spending without with the ability to trace the addresses.

What the authors possible imply by “whitewashed” is probably “cleansed.” Within the US there have been discussions on how this could take place by way of the prevailing Uniform Business Code (see Part Three.3). So far, there hasn’t been a selected update to the UCC relating to this problem (but) however it has been mentioned in multiple locations corresponding to Bitcoin’s lien drawback.

As far as the “fairness” claim goes, it might be value revising the passage to include a dialogue around nemo dat quod non habet and bona fide purchasers. Legal tender is explicitly exempt because of the very state of affairs the authors describe. However cryptocurrencies aren’t legal tender, so that exemption doesn’t exist (but).

Lastly, solely “shielded” transactions in Zcash present the functionality described within the passage above… not all transactions on Zcash utilize and opt-in to this mode.

On p. 89 they describe EOS. Value updating this part as a result of to-date, they haven’t achieved the 50,000 transactions per second on mainnet that’s said within the ebook. There has additionally been a little bit of churn within the organizations as Ian Grigg (named within the guide) is not on the group, nor are staff 2 by way of 5.

On p. 90 they write about proof-of-stake:

One criticism of the model has been that without the electricity consumption prices of proof of labor, attackers in a proof-of-stake system would simply mine a number of blocks to boost their probabilities of inserting a fraudulent one into the ledger.

This “nothing at stake” state of affairs is a legitimate criticism of some early attempts at building a proof-of-stake mechanism but isn’t legitimate for some other proposals (comparable to, theoretically, “Slasher“).

Chapter Four

On p. 91 they write:

It was clear that buyers bought into Brave’s promise of a token that would basically change the damaged internet advertising industry.

How do we know this was clear to buyers? Anecdotally it appears that a minimum of some buyers participated as speculators, with the view that the token worth would improve. A future version ought to in all probability change the wording until there is a reference that breaks down the motivation of the buyers.

What about Civil?

On p. 96 they write about StorJ

Different models embrace that of the decentralized pc storage platform Storj, which allows hard-drive-starved users to access other’s extra area in trade for storj tokens.

Might be value stating that Storj had two public ICOs and it is still unclear if that may end in legal or regulatory issues. Placing that aside, at present Storj has slightly below Three,000 users. This stat is value taking a look at once more in future versions, particularly in mild of less-than-favorable critiques.

On p. 98 they speak about BAT:

The point is that it’s all on the group – the society of BATs users – not on exterior buyers, to bear the danger of that taking place


As soon as the 1 billion tokens had bought out in twenty-four seconds, it was revelead that only 130 accounts obtained them and that the most important twenty holdings coated greater than two-thirds of the whole. Those distortions left many buyers indignant.

There’s presently a debate round whether most of these ICOs in 2017 (and earlier) have been investment contracts (e.g., securities). In the US, this has led to greater than 100 subpoenas with some quiet (and not so quiet) enforcement action.

The language used on this chapter (and elsewhere in the guide) suggests that the individuals concerned within the ICO have been investing with the expectation of profit in a standard enterprise managed by the Brave group. Value revisiting in a future version.

On p. 102 they write about ERC20 tokens:

But due to the ERC-20 answer, they didn’t have to develop their very own blockchain with all of the unbiased computing power that might require. As an alternative, Ethereum’s present computing network would do the validation for them.

This piggybacking may be initially helpful to token issuers however:

  1. it’s a type of centralization which might have legal and regulatory consequences with respect to being seen as not sufficiently decentralized
  2. in the long term this could create a top-heavy difficulty as miners will not be being compensated in proportion to the amount of value they are making an attempt to secure (see Part 2.1)

On p. 102 they write:

This low-cost answer to the double-spending challenge launched a manufacturing unit of ICOs as issuers found a simple solution to tap a worldwide investing group. No painful negotiations with venture capitalists over dilution and control of the board. No wining and dining of Wall Road investment banks to get them to put their shoppers on the order guide. No anticipate SEC approval. Simply straight to most of the people: listed here are extra tokens; they’re cool, buy them. It was a simple, low-cost formulation and it lowered the barrier to entry for some sensible innovators to deliver probably world-changing ideas to market. Sadly, it was also a magnet for scammers.

Could possibly be value updating this part to include more details on the scams and fraud that passed off throughout 2017. Most of the tokens that raised capital from outdoors buyers during this time not solely have not delivered a working product, however typically, the token underperformed both ether and bitcoin.

Additionally bears mentioning that starting in late 2017 by means of the time of this writing, there was a clear divergence between public sale ICOs and personal sale of tokens… the latter of which principally includes a personal placement to accredited buyers, together with the identical sort of funds that the passage above eschewed.

On p. 104 they write about Gnosis:

With the other 95 % managed by the founders, those costs meant that the implied valuation of all the enterprise stood at $300 million – a figure that soon rose above $1 billion as the Gnosis token promptly quadrupled in worth in the secondary market. By Silicon Valley standards, it meant we had the first ICO “unicorn.”

Truly, Ethereum did an ICO back in 2014 — and as the worth of ether (measured in USD) increased, it’s possible that ETH could possibly be seen as the first ICO “unicorn.” But that’s not likely an apples-to-apples comparability though because ETH (or Gnosis) holders shouldn’t have say, voting rights, which fairness holders of a standard company would.  Plus, “marketcap” is a poorly outlined metric in the coin world (see Part 6).

On p. 104 and 105 they write:

At some point, Paul acquired a call from a businessman who’d read one among his stories in The Wall Road Journal and needed extra information about how you can get started and where to get authorized advice. The man stated he’d tried to succeed in the lawyer Marco Santori, a associate on the regulation agency Cooley who’d been quoted within the story, but couldn’t get via. Santori later informed us that he was getting so many calls about ICOs, he simply couldn’t answer all of them.

In January 2018, the SEC Chairman gave a public speech through which he singled out the “gatekeepers” (legal professionals) relating to the advice they gave shoppers. Might be value revisiting who the primary ICO-focused legal professionals and lawfirms have been throughout this time interval and the place they are now and if there were any enforcement actions undertaken.

On p. 105 they write:

“Most of these will fail,” stated Olaf Carlson-Wee, the CEO of Polychain Capital, citing poorly conceived ideas and a scarcity of coding improvement. “Most of these are bad ideas from the beginning.” That stated, Polychain is an investment firm that Carlson-Wee based expressly to spend money on these new tasks. In truth, most people investing appeared to be taking a really VC-like strategy to it. They understood that a lot of the tasks would fail. They only hoped to have a couple of chips down on the one winner.

Carlson-Wee’s comments seem accurate insofar as the lack of many tasks to execute and deliver based mostly on the narratives each pitched buyers. Nevertheless, it could possibly be value digging into Polychain itself, which amongst different drama, might have “flipped” tokens because of a scarcity of lock-up durations.

On p. 108 and 109 they examine Blue Apron and (EOS). Regardless that it’s not an apples-to-apples comparability could possibly be value revisiting this sooner or later because of the churn and drama with each organizations.

Pages 110 and 111 aged shortly as a lot of the ICO score websites and newsletters have fallen to the wayside because of payola scandals and lack of ability to trust the motivations behind the scores.

Equally, the authors describe accredited buyers and SAFTs. There is a typo right here as the authors probably imply that an individual needs to have an revenue of $200,000 not $200 million. The SAFT mannequin has fallen out of favor for several reasons that could possibly be explored in a future model.

On p. 112 they write about ASICs:

But developers of Vertcoin have proven that it’s also attainable to create a everlasting commitment to ASIC-resistance by introducing one thing from the actual, non-digital world of social organizations: a pact. If the platform’s governing rules embrace a re-existing dedication from all users of the coin to simply accept a fork – a change to the code – that might add new, ASIC-resistant parts as soon as somebody develops such a chip, the coin’s group can shield the distributed, democratic structure of a GPU-led mining community.

Putting apart the fanciful ASIC-resistance utopia that is peddled by some coin issuers, the passage above raises a couple flags.

Who will get to determine what the governing rules are? Do these rules get to vary additional time? If the answer is sure to both, who are those determination makers and the way are they chosen? Thus far, there has not likely been any “democratic” means of collaborating in that decision making course of for any cryptocurrency. How can that change sooner or later?

Why is a GPU-led mining network thought-about more democratic? In follow, most of these farms are situated in principally the identical sort of structure and geography as ASIC-based gear… in some instances they are swapped out over time. In mild of the Sia coin fork… which clearly exhibits favoritism at play, a future version of the e-book might embrace a chart or spectrum explaining how the mining of one coin kind of democratic versus one other.

On p. 113 there’s more discussion of ICOs and token sales because it relates to “open protocols” but in follow it has largely been reinventing the identical intermediated system we’ve to do, however with fewer verify and balances and even recourse for retail buyers.

On p. 114 they speculate that:

This speaks to our broader notion that tokens, by incentivizing the preservation of public goods, may help humanity remedy the Tragedy of the Commons, a centuries-in-the-making shift in economic actuality.

That’s an enormous claim that requires evidence to again it. Let’s revisit subsequent time.

On p. 115 they write:

Very similar to Wall Road bond traders, these will “make markets” to convey financial liquidity to each countervailing pair of tokens – buying some right here and promoting other there – so that if anybody needs to commerce 100 BATs for a 3rd of a Jackson Pollock, they can be assured of an inexpensive market worth.

But how does a blockchain truly do this? They point out Lykke as an startup that would assist match tokens at a good worth… however to-date there’s nothing listed on Lykke that basically stands out as totally different than what you may wonderful at different cryptocurrency exchanges. Maybe a future version of the e-book might walk the reader step-by-step via how a blockchain can allow this sort of “fairness” whereas previous know-how couldn’t.

On p. 116 they talk about several tasks they label as “interoperability” initiatives including Interledger, Cosmos, sidechains, and Lightning. It might be helpful for the reader to see a definition for what “interoperability” means because every of those tasks — and its supporters — may be utilizing the term another way. Perhaps a comparison chart displaying the similarities and differences?

On p. 117 they write:

In an age the place U.S. presidents peddle “alternative facts” and pundits speak brazenly about our “post-truth society,” using the reality machine to put a worth on honesty sounds appealing.

On the face of it, that end aim looks like greater than a stretch because it’s unclear how a blockchain (immediately) controls off-chain conduct. The instance they go on to use is Augur. However Augur is a futures market and there are various of these already in existence. How would Augur or a futures market “with a blockchain” forestall politicians from mendacity? Walking by means of this course of could possibly be helpful to the reader.

On p. 118 they point out Erick Miller’s investment fund referred to as CoinCircle… and a few “special value tokens” referred to as Ocean Well being Coin and Climate Coin.

Perhaps value following up within the next edition as a result of neither has launched and each of the pitches sounds very handwavy, missing in substance. Also, one of many ICOs CoinCircle advised – Unikrn – is a part of a class motion lawsuit.

Most of p. 119 and 120 come across as extra political discourse, which is ok… however unclear how a blockchain in some type or style might instantly influence the varied points raised. Maybe the subsequent edition might embrace a chart with a roadmap in how they see numerous tasks attaining totally different milestones?

Chapter 5

If the reader is unfamiliar with IoT then the first 1/Three of chapter five is fairly helpful and informative.

Then there are some speedbumps.

On p. 130 they write about authenticating and verifying transactions involving self-driving automobiles:

The question, though, is: would this transaction be easily processed if it have been based mostly on a personal blockchain? What are the probabilities, in a country of more than 230 million automobiles, that both automobiles would belong to the same closed network run by a gaggle of permissioned validating computer systems? If they weren’t a part of the identical network, the cost couldn’t go through as the respective software program would not be interoperable.

This can be a pink herring. Each “permissioned” and “permissionless” blockchains have comparable (though not equivalent) scaling challenges. And interoperability is a separate situation which has been a recognized hurdle for years.

In reality, lately the Hyperledger Material staff introduced that it now supports the EVM. This comes a pair weeks after Hyperledger joined EEA as a member and vice-versa. Perhaps none of these fast efforts and experiments quantity to many tangible outputs in the short-run however it does show that several ecosystems are trying to be much less tribal and more collaborative.

Additionally, the difficulty of payments can also be separate from a blockchain-related infrastructure. Funds is a broad time period and may embrace, for example, a proposed central financial institution digital foreign money (e.g., “cash on ledger”)… or it might contain plugging into present exterior cost methods (like Visa or ACH). It might be helpful if the subsequent edition was extra particular.

Persevering with on p. 130 they write:

Different automotive manufacturers won’t need to use a permissioned verification system for which, say GM, or Ford, is the gatekeeper. And if they as an alternative shaped a consortium of carmakers to run the system, would their collective control over this all-important knowledge network create a barrier to entry for newer, startup carmakers? Wouldn’t it successfully turn into a competition-killing oligopoly?

These are potential situations and good questions however this is type of an unfair characterization of consortia. Let’s flip it around: why shouldn’t carmakers be allowed to construct their very own blockchains or collaborate with others who do? Do they need someones permission to do so? Depending on native laws, perhaps they do want permission or oversight in a selected jurisdiction. That could possibly be value exploring in one other model.

On this matter they conclude that:

A very decentralized, permissionless system could possibly be a approach around this “walled-garden” drawback of siloed know-how. A decentralized, permissionless system means any system can take part in the community but still give everybody confidence in the integrity of the info, of the units, and of the value being transacted. A permissionless system would create a much more fluid, expansive Web of Issues that’s not beholden to the say-so and costs of powerful gatekeepers.

That sounds nicely and good and a bit repetitive from earlier passages which stated one thing comparable. The passage aboves seems to be redefining what make something “permissioned” and “permissionless.” What does it mean for every gadget participate on a ‘decentralized, permissionless system’? Does that mean that every gadget is capable of constructing and/or creating a new block? In that case, how do they choose which chain to construct on?

And why is it so onerous to imagine a world by which open-sourced platforms are also permissioned (e.g., validation is run by recognized, identifiable individuals)… and these platforms are interoperable. Might be value exploring because that state of affairs may be just as possible as those introduced on this chapter.

Lastly, how does a “permissionless system” create a extra fluid IoT world? These claims ought to be explored in additional detail subsequent time.

On p. 131 and 132 they write about IOTA, a selected undertaking that markets itself as a purpose-built blockchain for IoT units. But that undertaking is beset by all types of drama that is beyond the scope of this evaluation. Suffice to say that the February software construct of IOTA cannot be run on most useful resource constrained IoT units.

On p. 138 they point out in passing:

Exergy is an important idea for measuring power efficiency and containing wasteful practices; it doesn’t just measure the quantity of power generated but in addition the amount of helpful work produced per every given amount of power produced.

Enjoyable reality: again in Might 2014 I wrote an in-depth paper on Bitcoin mining that utilized the idea of “exergy.”

On pages 139-145 they speak about a variety of distributors, use-cases, and platforms sometimes centered across the provide chain management world. Can be fascinating to see which of these gained traction.

On p. 147 they write:

Blockchain-proven digital tokens level to what blockchain advisor and entrepreneurs Pindar Wong calls the “packetization of risk.” This radical concept introduces a negotiable construction to totally different phases of the chain. Intermediate items that might in any other case be encumbered by a pre-established chain of unsettled commitments can as an alternative be put out to bid to see if other consumers need to tackle the rights and obligations related to them.

It will be helpful on this rationalization to have a diagram or two to elucidate what Pindar proposes because it is a bit exhausting to comply with.

On p. 147 they write:

For this reason many people consider that the idea of a “circular economy” – where there’s as much recycling as potential of the power sources and supplies in manufacturing – will hinge on the transparency and knowledge flows that blockchain methods permit.

Does this mean that other “non-blockchain” techniques don’t permit transparency and knowledge flows?

On p. 147 they write:

The principal challenge stays scaling. Open-to-all, permissionless blockcahins similar to Bitcoin’s and Ethereum’s simply aren’t ready for the prime time of worldwide trade. If all the world’s supply chains have been to move their transactions by means of a permissionless blockchain, there would must be a gargantuan improve in scalability, both off-chain or on-chain. Solutions might come from innovations such because the Lightning Network, discussed in chapter three, however they’re far from prepared at this stage.

Can we suggest a moratorium on further usages of “Lightning” within the subsequent version until there’s vital adoption and usage of it? Also, it’s unclear why the worlds supply chains ought to for some cause be related onto an anarchic chain: what is the advantage of putting this info onto a sequence whose operators are unaccountable if a fork occurs?

On p. 148 they write:

As an alternative, corporations are taking a look at permissioned blockchains, which we’ll talk about in additional detail in chapter six. That is sensible as a result of many massive manufacturers think of their provide chains as static concepts, with defined members who have been certified to provide this or that element to a finished product. However within the rapidly changing world of the Fourth Industrial Revolution, this won’t be probably the most competitive choice. Emerging applied sciences corresponding to additive manufacturing, the place production might be referred to as up anyplace and delivered by anyone with access to the best software information and a sufficiently configured 3D printer, are pointing to a much more fluid, dynamic supply-chain world, the place suppliers come and go extra easily. In that surroundings, a permissionless system would appear vital. Once scaling challenges are resolved, and with strong encryption and reliable monitoring techniques for proving the quality of suppliers work, permissionless blockchain-based provide chains might end up being an enormous leveler of the enjoying subject for international manufacturing.

There are approach too many assumptions in this paragraph to not have somewhere written that there are numerous assumptions.

Is a blockchain really wanted in this surroundings? In that case, a future edition should explain how a 3D printer can be extra useful related to a blockchain than some other community. Additionally, this seems to be a misuse of the time period “permissionless” — why does the network have to be anarchic? How would the availability chain profit from validators who’re unknown?

On p. 148 they write:

It is going to be troublesome to marry that old-world body of regulation, and the human-led institutions that manage it, with the digital, dematerailized, automated, and de-nationalized nature of blockchains and sensible contracts.

How are blockchains “de-nationalized”? As of this writing there are in all probability a pair dozen publicly announced state-sponsored blockchain platforms of some sort (together with numerous cryptocurrency-related initiatives). This phrase ought to in all probability be eliminated.

On p. 150 they write concerning the Belt and Street Blockchain Consortium:

Therefore the opportunity for blockchain technologies to perform as a world governance system. Hong Kong’s position might be necessary: the territory’s British authorized traditions and status for respecting property rights have made it a revered safehouse for managing mental property and other contractual obligations inside international trade. If the blockchain is to be inserted into international commerce flows, the region’s bridging perform might supply the fastest and most impactful route. For Hong Kong residents who need the territory to retain its British legal traditions, that position could possibly be an important safety towards Beijing undermining them.

From publicly out there info it’s unclear if the Belt and Street Blockchain Consortium has seen much traction. In contrast, the Ping An-led HKMA commerce finance group has turned on its “blockchain” platform.

Chapter 6

On p. 151 they wrote a few public event held on August 5, 2015:

As far as bankers have been concerned, Bitcoin had no position to play in the present financial system. Banking institutions thrive on a system of opacity through which our incapability to belief one another leaves us depending on their intermediation of our transactions. Bankers may give lip service to reforming the internal workings of their system, but the considered turning it over to one thing as uncontrollable as Bitcoin was beyond heresy. It wasn’t even conceivable.

This can be a bit of a purple herring. I’ve been in dozens of meetings with banks and monetary establishments over the past 4 years and basically there’s consensus that Bitcoin – the network – shouldn’t be fit for objective as monetary market infrastructure to deal with regulated financial instruments. Why should banks process, say funds, on a network by which the validators are neither accountable if a problem occurs nor instantly reachable in case customers need to change or improve the software program? Satoshi wasn’t making an attempt to unravel interbank-related points between recognized members so this description shouldn’t be seen as a slight towards Bitcoin.

Now, bitcoin, the coin, might turn out to be extra widespread in its utilization and/or possession at banks. The truth is, as of this writing, almost every giant business bank owns no less than a handful of cryptocurrencies in an effort to pay off ransomware issues. But the passage above appears to conflate the two.

See also: Systemically necessary cryptocurrency networks

On p. 151 they write:

At the similar time, committed Bitcoin followers weren’t much excited about Wall Road, either. Bitcoin, in any case, was designed as an alternative choice to the prevailing banking system. An enchancment.

This can be a bit revisionist. As an example, the unique whitepaper uses the time period “payment” twelve occasions. It doesn’t talk about banking or particular product strains at banks. Banks do a lot more than just deal with payments too. Satoshi attempted to create an alternate cost system… the “be your own bank” narrative is something that other Bitcoin promoters later added.

On p. 152 they talk about the August 2015 event:

In essence, Symbiont was promising “blockchain without bitcoin” – it might keep the fast, secure, and low cost distributed network model, and a fact machine at its middle that validated transactions, nevertheless it was not leaderless, permissionless, and open to all. It was a blockchain that Wall Road might management.

This has some hyperbole in it (does “Wall Street” actually management it?) however there’s a kernel that the authors might increase on within the next model: vendor-dependence and implementation monopoly. In the instance above, the authors might have identified that the same market construction still exists, so what profit does a blockchain present that couldn’t already be used? Along with, what do the authors mean by “cheap distributed network model” once they have (rightly) mentioned that proof-of-work is resource intensive? As of this writing, Symbiont makes use of BFT-SMaRt and doesn’t use PoW.

Also, the authors seem to conflate “open to all” with blockchains that they like. Yet almost all the blockchains they seem to favor (like Bitcoin) contain comparatively centralized gatekeeping (BIP process) and permissioned edges by way of exchanges.

Once more, once I wrote the paper that created this distinction in 2015, the “permissionless’ness” is solely an attribute of mining not on sending or receiving coins.

On p. 153 they write:

However these permissioned techniques are much less open to experiments by pc engineers, and entry rights to the info and software program are topic to the whim of the official gatekeeper. That inherently constrains innovation. A personal blockchain, some say, is an oxymoron. The entire point of this know-how is to build a system that’s open, accessible, and public. Many describe them with the generic phrase “distributed ledger technology” as an alternative of “blockchain.”

This is the reason it might be essential for the authors to explicitly point out what “blockchain” they are referring to. In lots of instances their point is valid: what is the point of using a blockchain if a single entity runs the community and/or monopolizes the implementation?

But their argument is diminished by insisting on utilizing loaded phrases like “open” and “public.” What does it imply to be open or public right here? For example, to be able to use Bitcoin as we speak, it is advisable purchase it or mine it. There could be substantial entry and exit costs to mining so most individuals sometimes purchase bitcoins by way of a trusted, permissioned gateway (an trade). How is that open?

Lastly, the euphemism of using the term “blockchain” as an alternative of using the time period “bitcoin” dates back to late 2015 with buyers like Adam Draper explicitly stating that was his agenda. See: The nice pivot?

On p. 156 they write:

Although Bitcoin fans frowned upon permissioned blockchains, Wall Road continued to build them. These tweaked versions of Bitcoin shared numerous parts of the cryptocurrency’s highly effective cryptography and community rules. Nevertheless, as an alternative of its electricity-hungry “proof-of-work” consensus mannequin, they drew upon older, pre-Bitcoin protocols that have been extra efficient but which couldn’t obtain the same degree of safety without putting a centralized entity in command of identifying and authorizing members.

There’s a few issues with this:

  1. Which Bitcoin fans are the authors referring to, the maximalists?
  2. Proof-of-work isn’t an precise consensus model
  3. There are newer Byzantine fault tolerant protocols akin to HoneybadgerBFT that are additionally being utilized by totally different platforms

Their final sentence makes use of a false dichotomy because there are totally different security assumptions based mostly on the focused operating surroundings that end in tradeoffs. To say that Bitcoin is kind of safe versus say, an instance of Material is a bit meaningless because the users have totally different expectations that the system is built round.

On p. 157 they write about R3:

The largest winner on this hiring spree was the research and improvement firm R3 CEV, which targeted on the financial industry. It sought to build a distributed ledger that would, on the one hand, reap the benefits of real-time securities settlement and cross-industry harmonization but, on the other, would adjust to an enormous array of banking laws and meet its members’ proprietary curiosity in holding their books personal.

This looks like a dated pitch from a pair use instances from mid-2015 as a result of by the point I departed in September 2017, real-time securities settlement wasn’t the first use (for Corda) being discussed externally.

Also, the “CEV” was formally removed from the identify about two years in the past. See: A quick history of R3 – the Distributed Ledger Group

By the spring of 2017, R3 CEV had grown its membership to multiple hundred. Each member agency paid annual dues of $250,000 in return for access to the insights being developed inside the R3 lab. Its founders additionally raised $107 million in enterprise funding in 2017, principally from monetary establishments.

I don’t assume the complete details are public however the description of the funding – and what was exchanged for it – just isn’t fairly right. The unique DLG members obtained equity stakes as a part of their initial funding. Also, as far as the Collection A that was announced in Might 2017, all however one of many buyers was a financial establishment of some type.

On p. 157 they write:

A few of that cash went to hire individuals like Mike Hearn, a as soon as outstanding Bitcoin developer who dramatically turned his back on the cryptocurrency group with an “I quit” weblog publish complaining concerning the bitter in preventing. R3 also employed Ian Grigg – who later left to hitch EOS – another outstanding onetime rebel from the cryptocurrency area.

To be clear on the timing: Mike Hearn began working at R3 in October 2015 (along with James Carlyle). A number of months later he revealed a extensively mentioned publish about Bitcoin itself. Based mostly on his public talks since January 2016, he still appears to have some passing curiosity in cryptocurrencies; he did a reddit AMA on /r/btc this past spring.

Also, Ian Grigg has since left EOS and launched a new startup, Chamapesa.

On p. 157 they write about me:

Earlier than their arrival, R3 had additionally signed on Tim Swanson as analysis director. Swanson was a distributed ledger/blockchain analyst who was briefly enthused by Bitcoin but who later turned disillusioned with the cryptocurrency’s ideologues. He turned a vocal, anti-Bitcoin gadfly who seemed to please in mocking its travails.

This is also revisionist historical past.

To not dive too much into the weeds right here – and ignoring every thing pre-2014 – a quick chronology that might be added if the authors wish to be balanced is the following:

Over the course of beneath four months, after doing market analysis masking a couple of dozen tasks, I revealed Great Chain of Numbers in March 2014… which was a quick report that shortly turned outdated.

A number of the feedback I acquired – together with from Bob, an skilled at a knowledge analytics startup – was that I was too charitable in the direction of the claims of cryptocurrency promoters at cost processors and exchanges. That is to say, Bob thought that based mostly on analytics, the precise usage of a cost processor was lots lower than what the executives from that processor advised me. On reflection, Bob was absolutely right.

A pair months later I ended up – accidentally – doing an interview on Let’s Speak Bitcoin. The unique visitor did not show up and while we (the co-hosts) have been waiting, I ended up getting right into a small debate with one other co-host concerning the adoption and utilization of cryptocurrencies like Bitcoin. You possibly can take heed to it right here and skim the corresponding long-read that provides more citations and supporting hyperlinks to again up the feedback I made in the podcast.

From this second forward (June 2014) – because I fact-checked the claims and did not blindly promote cryptocurrencies – I shortly turned labeled as a pariah by a number of of the vocal cryptotwitter personalities. Or because the authors of this ebook unfairly label me: “anti-Bitcoin gadfly.” To call this order of occasions “disillusionment” can also be unfair.

Lastly, a fast fix to the passage within the guide: I technically turned a proper advisor to R3 at the end of 2014 (after their second roundtable in Palo Alto)… after which later in August 2015 got here on full-time as director of market research (though I subsequently wore several totally different hats).

On p. 158 they write:

Of an identical breed was Preston Byrne, the overall counsel of Eris Ltd., later referred to as Monax which designed personal blockchains for banks and quite a lot of different corporations. When Byrne’s Twitter feed wasn’t conveying his eclectic mixture of political positions – pro-Trump, anti-Brexit, pro-Second Modification, pro-encryption, anti-software utopianism – or constant references to marmots (the Eris brand’s mascot), it poured scorn on Bitcoin’s fanatic followers. For guys like Swanson and Byrne, Bitcoin’s dysfunctional governance was a godsend.

Again, chronologically I met Preston online in early 2014. He helped edit and contributed to Great Chain of Numbers. Word: he left Eris final yr and lately joined a US regulation firm.

That is an unfair description: “For guys like Swanson and Byrne, Bitcoin’s dysfunctional governance was a godsend.”

That is unfair for a number of causes:

  • We have been hardly the first individuals to spend time writing concerning the governance issues and frictions involved in cryptocurrencies. For example this consists of: Ray Dillinger, Ben Laurie, and certain dozens of others. Nor have been we the one ones discussing it in 2014 and 2015.
  • Preston and I have additionally – separately – written and mentioned points with different cryptocurrencies and blockchains during that time-frame… not just Bitcoin.

Thus to single us out and concurrently not point out others who had comparable views, paints us as some sort of cartoonish villains on this narrative. Plus, the authors might have reached out to us for remark. Both approach, the subsequent model should attempt to repair the phrase decisions and chronology.

I reached out to Preston Byrne and he offered a response that he requested to have included in a footnote.

On p. 159 they write more about R3:

On the one hand, regulators have been snug with the familiar membership of R3’s consortium: they have been more accustomed to working with bankers than with T-shirt-and-jeans-wearing crypto-investors. But on the other, the thought of a consortium of the world’s largest banks having say-so over who and what gets included inside the financial system’s single and solely distributed ledger conjured up fears of extreme banking power and of the politically unpopular bailouts that happened after the disaster. May Wall Road be building a “too-big-to-fail” blockchain?

This is some unusual criticism as a result of most of the builders of Corda (and different items of software) wore informal and enterprise casual attire whereas working within the workplaces.

Corda isn’t the “single and only distributed ledger” being utilized by enterprises. Almost all the banks that invested in R3 also invested in other competing entities and organizations including Axoni and Digital Asset. Thus the assertion within the center ought to be updated to mirror that R3 doesn’t have some type of exclusivity over banking or enterprise relationships.

Michael Casey has stated a number of occasions in public (even previous to the existence of Corda) that R3 was a “cartel coin” or “cartel chain” — including on no less than one panel I was on with him in January 2016.  This is throughout a time through which R3 did not have or sell any sort of product, it was strictly a services-focused firm.  Perhaps the group evolves sooner or later – there might even be some legitimate criticism of a mono-implementation or a centrally run notary – but whilst of this writing there isn’t any Corda Enterprise community up and operating.

Lastly, all of these banks are members of many several types of consortia and multilateral our bodies. Simply belonging to or collaborating in organizations akin to IOSCO does not mean one thing nefarious is afoot.

On p. 160 they write:

The settlement time can also be a think about a financial crisis, and it contributed to the global panic of 2008.

This can be a good level and it might be nice to go into additional particulars and examples within the next edition.

On p. 160 they write:

This systemic danger drawback is what drew Blythe Masters, one of many key figures behind blockchain innovation on Wall Road, into digital ledger know-how; she joined Digital Asset Holdings, a blockchain service provider for the monetary system’s back-office processing tasks, as CEO in 2014.

Two small quibbles:

  1. Fairly positive the authors meant to say “distributed” not “digital”
  2. Blythe Masters joined as CEO in March 2015, not in 2014

On p. 162 they write:

It’s just that to deal with such breakdowns, this new wave of distributed ledger system designers have cherry-picked the features of Nakamoto’s invention which might be least threatening to the gamers in the banking system, akin to its cryptographic integrity, and left aside its extra radical, and arguably more powerful, features, especially the decentralized, permissionless consensus system.

That is revisionist historical past. Satoshi bundled together present ideas and libraries to create a blockchain. He or she did not invent cryptography from the bottom up. For more particulars, readers are encouraged to read “Bitcoin is worse is better” from Gwern Branwen. IT techniques at financial institutions have been (and are) already using numerous bits of cryptography, encryption, permissioning, knowledge lakes, and distributed storage strategies.

Moreover, as a result of the members in the monetary system are recognized, there isn’t any cause to make use of proof-of-work, which is utilized in Bitcoin because the individuals (miners) are unknown.

Lastly, the authors touch on it and do have a legitimate point about market structure being changed (or unchanged) and will try to broaden that in the next version.

On p. 162 they write:

The DTCC, which settles and clears the overwhelming majority of US stock and bond trades, handles 10,000 transactions per second; Bitcoin, at the time of this writing, might course of just seven. And as robust as Bitcoin’s value – and incentive-based safety mannequin has proven to be, it’s under no circumstances clear that a couple of hundred million dollars in bitcoin mining prices would deter rogue traders in New York or London when government bond markets supply billion greenback fraud opportunities.

Firstly, at the time of this writing, on-chain capacity for Bitcoin (even with Segwit activated) continues to be lower than seven transaction per second.

Second, it isn’t clear how “rogue traders” in New York or London would be capable of instantly subvert the mining strategy of Bitcoin. Are the authors enthusiastic about the potential safety delta brought on by watermarked tokens and coloured coins?

On p. 162 they write:

Either method, for the companies that R3 and Digital Asset serve – managers of the world’s retirement funds, company payrolls, authorities bond issuances, and so forth -these usually are not safety dangers they will afford. For now – a minimum of until options as Lightning provide large-scale transaction talents – Bitcoin isn’t anyplace close to able to service Wall Road’s back-office needs.

But Bitcoin just isn’t fit for function for regulated financial establishments. Satoshi wasn’t making an attempt to unravel back-office issues that enterprises had, why are the authors intent on fitting a round peg in a square hole?

Also, Lightning isn’t being designed with establishments in mind either. Even when a number of of its implementations becomes extensively adopted and used by Bitcoin customers, it nonetheless doesn’t (presently) meet the useful and non-functional necessities that regulated establishments have. Why promote it as if it does?

On p. 162 they write:

There are also legal considerations. R3’s Swanson has argued that the mere risk of a 51 % assault – that state of affairs during which a minder positive factors majority management of a cryptocurrency community’s computing power and fraudulently modifications transactions – signifies that there can by no means be “settlement finality” in a cryptocurrency transaction. That of perpetual limbo is a state of affairs that Wall Road legal professionals can’t stay with, he stated. We’d retort that the bailouts and numerous other offers which banks reversed their losses through the crisis make a mockery of “finality,” and that Bitcoin’s monitor report of irreversibility is many magnitudes better than Wall Road’s. Nonetheless, Swanson’s catchy critique caught on among bankers. In any case, he was preaching to the choir.

So there are a couple of points with this statement.

I didn’t invent the concept of “settlement finality” nor did ‘Wall Street lawyers.’  The term dates back many years if not centuries and in its most up-to-date incarnation is the product of worldwide regulatory bodies comparable to BIS and IOSCO. Regulated financial institutions – starting with monetary market infrastructures – are tasked with decreasing danger by making sure the cost methods, as an example, are irreversible. Readers ought to peruse the PFMIs revealed in 2012.

The subsequent challenge is, they make it sound like I lobbied banks utilizing some ‘gotcha’ loophole to scare banks from using Bitcoin. Nowhere in my shows or speeches have I justified or handwaved away the (criminally?) negligent conduct of individuals at banks which will have benefited from bailouts. That is another unfair characterization that they’ve painted me as.

To that point, they have to be extra specific about what banks acquired particular transactions reversed. Identify and disgrace the organizations and explain how it might not be potential in a blockchain-based world. Evaluating Bitcoin with ‘Wall Street’ doesn’t make much sense as a result of Bitcoin just handles transfers of bitcoin, nothing else. ‘Wall Street’ encompasses many various product strains and processes many different forms of transactions beyond funds.

All in all, painting me as a villain is weak criticism and they should remove it of their subsequent edition.

On p. 163 they write about permissioned ledgers:

They’re not racing each other to win foreign money rewards, which additionally means they’re not always constructing a wasteful computing infrastructure a la Bitcoin.

They are saying that as if it’s a good factor. Encourage readers to look by means of the power costs of maintaining several totally different proof-of-work networks that deal with virtually no commerce.

On p. 163 they write:

That’s why we argue that people, companies, and governments actually need to help the varied hard-core technical options that developers are pursuing to assist permissionless ledgers like Bitcoin and Ethereum overcome their scaling, security, and political challenges.

This agenda has been pretty clear all through the guide, though it might be extra transparent to the reader if it comes earlier in chapter 1 or 2.

From a historical perspective this argument doesn’t make much sense. If Karl Benz had stated the same factor within the 19th century about getting engineers to construct around his automotive and never others. Or the Wright Brothers had been ‘more successful’ at suing aerospace rivals. Why not let the market – and its members – chose to work on platforms they discover of curiosity?

On p. 165 they write concerning the MIT Digital Foreign money Inititative but don’t disclose that they solicit financial help from organizations reminiscent of central banks, some of whom pay up to $1 million a yr to collaborate on analysis tasks. Paradoxically, the small print of this program aren’t public.

On p. 167 they write:

A broad company consortium dedicated to a principally open-source collaborative strategy, Hyperledger is in search of to develop nothing less than a standard blockchain / distributed ledger infrastructure for the global financial system, one that’s targeted not only at finance and banking but in addition on the Web of Things, provide chains, and manufacturing.

The next version should replace that passage. All the tasks incubated by the Hyperledger Challenge are open sourced, there isn’t a “mostly.” And never all of these tasks contain a blockchain, some involve identity-related efforts.

On p. 169 and again on p. 172 the authors quote Joi Ito who compares TCP/IP with “walled gardens” akin to AOL and Prodigy.

That is evaluating apples-and-oranges. TCP/IP is a set of protocols, not a enterprise. AOL and Prodigy are businesses, not protocols. AOL used a proprietary protocol and you would use TCP/IP by way of a gateway. In the present day, there are literally thousands of ‘walled gardens’ referred to as ISPs that permit packets to jump throughout boundaries by way of handshake agreements. There isn’t any singular ‘Internet’ but as an alternative there are literally thousands of intranets tied together using widespread standards.

Readers may be focused on: Intranets and the Web

On p. 173 they write:

Permissionless techniques like those of Bitcoin and Ethereum inherently facilitate more creativity and innovation, because it’s just understood that no authorizing company or group of corporations can ever say this or that thing cannot be constructed.

How are they measuring this? Also, whereas every platform has its personal phrases of service, it can’t be stated that you simply want specific permission to build an software on prime of a selected permissioned platform. The permissioning has to do with how validation is handled.

On p. 173 they write:

It’s the assure of open access that fosters enthusiasm and keenness for “permissionlessness” networks That’s already evident in the caliber and speedy enlargement within the number of builders engaged on public blockchain purposes. Permissioned methods may have their place, if nothing else because they can be more simply programmed at this early stage of the know-how’s life to deal with heavier transaction masses. However the overarching objective for all of us must be to encourage the evolution of an open, interoperable permissionless network.

This is just word salad that lacks supporting proof. For the subsequent edition the authors ought to tabulate or provide a source for how many builders are working on public blockchain purposes.

The passage above additionally continues to repeat a false dichotomy of “us versus them.” Why can’t each of a majority of these ‘platforms’ reside in co-existence? Why does it need to be only one since neither platform can fulfill the requirements of the opposite?

It’s like saying solely helicopters provide the liberty to navigate and that people working on airplanes are only doing so because they’re less restricted with distances. Specialization is a real.

On p. 173 they conclude with:

There’s a purpose we would like a world of open, public blockchains and distributed trust fashions that provides everyone a seat on the table. Let’s maintain our eyes on that ball.

This entire chapter and this specific assertion alone comes throughout as preachy and a bit paternalistic. If the message is ‘permissionlessness’ then we ought to be allowed to pursue our own objectives and paths on this matter.

Additionally, there are real entry and exit costs to be a miner on these public chains so from an infrastructure viewpoint, it isn’t actually accurate to say everyone gets a seat at the table.

Chapter 7

That is in all probability their strongest chapter. They do an excellent job story telling here. Although there have been few areas that weren’t clear.

On p. 179 they write:

However as Bitcoin and the blockchain have proven, the peer-to-peer system of digital trade, which avoids the cumbersome, costly, and inherently exclusionary banking system, might supply a greater approach.

The authors have stated 5-6 occasions already that proof-of-work networks like Bitcoin may be very pricey and wasteful to take care of. It might be useful to the reader for the authors to increase on what areas the banking system is dear.

And if a bank or group of banks used a permissioned blockchain, would that scale back their expenses?

On p. 181 they write about time stamps:

The stamp, although, is incredibly powerful. And that, primarily, is the service that blockchains provide to individuals. This public, recognizable open ledger, which could be checked by any time by anybody, acts in much the identical means because the notary stamp: it codified that sure motion befell at a sure time, with certain particulars hooked up to it, and it does this in a means that the document of that transaction cannot be altered by personal events, whether they be individuals or governments.

Within the next version the authors should differentiate time stamps and all of the features a notary does. Time stamps might empower notaries but simply stamping something doesn’t necessarily make it notarized. We see this with digital signatures from Good day Signal and Docusign.

Also, these blockchains should be funded or sponsored in some method otherwise they might be a part of the graveyard of a whole lot of lifeless coins.

On p. 181 they write about Factom and Stampery. It will be good to get an update on a majority of these corporations because the founder of Stampery who they single out – Luis Ivan Cuende – has moved on to hitch and located Aragon.

On p. 183 they talk about knowledge anchoring: taking a hash of knowledge (hash of a document) and putting that right into a blockchain so that it may be witnessed. This goes again to the proof-of-existence dialogue earlier on. Its perform has in all probability been overstated and is mentioned in Anchor’s Aweigh.

On p. 184 they talk about Chromaway. This part ought to be updated as a result of they have come out with their own personal blockchain, Chromapolis funded by way of a SAFT.

On p. 185 they write:

The simpler factor to do, then, for a reform-minded government, is to hire a startup that’s prepared to go through the method of changing all of an present registry, if one exists, into a digital format that can be recorded in a blockchain.

Why? Why does this info should be put onto a blockchain? And why is a startup the suitable entity to do this?

On p. 186 they mention a number of corporations comparable to Bitfury, BitLand, and Ubiquity. It will be good to replace these in the next version to see if any traction occurred.

On p. 187 they write:

They key cause for that is the “garbage-in/garbage-out” conundrum: when starting data are unreliable, there’s a danger of creating an indeniable permanence to info that enshrines some abuse of a person’s property rights.

This GIGO conundrum doesn’t stop and isn’t restricted to just the start of document protecting. It’s an ongoing problem, probably in each country.

On p. 188-192 they describe several other use instances and tasks but it’s unclear why they will’t simply use a database.

On p. 193 they write:

A part of the issue is that cryptocurrencies proceed to sustain a reptutation among the many common public for criminality. This was intensified by the huge “WannaCry” ransomware assaults of 2017 during which attackers broke into hospitals’ and different institutions’ databases, encrypted their very important information and then extorted funds in bitcoin to have the info decrypted. (In response to the calls to ban bitcoin that inevitably arose in the wake of this episode, we wish to point that much more criminality and cash laundering occurs in dollar notes, that are much more durable to hint than bitcoin transactions. Still, with regards to perception, that’s irrelevant – none of those incidents help Bitcoin’s fame.)

This can be a whataboutism. Each actions may be unethical and legal, there isn’t a have to downplay one versus the other. And the rationale why bitcoin and different cryptocurrencies are utilized by ransomware authors is because they’re genuinely useful of their working setting. Knowledge kidnapping is an effective use case for anarchic networks… and cryptocurrencies, by design, proceed to enable this activity. The authors can try and downplay the legal factor, nevertheless it hasn’t gone away and actually, has been aided by further liquidity to coins that present further privateness and confidentiality (like Monero).

On p. 193 they write about volatility:

This can be a large barrier to Bitcoin attaining its nice promise as a software to realize monetary inclusion. A Jamaican immigrant in Miami may discover the near-zero charges on a bitcoin transaction extra interesting than the 9 % it costs to make use of a Western Union agent to send money house to his mother.

This monetary inclusion narrative is one thing that Bitcoin promoters created after Satoshi disappeared. The objective of Bitcoin — in response to the whitepaper and announcement threads – wasn’t to be a brand new rail for remittance corridors. Perhaps it turns into used that means, but the wording in the passage above as a “great promise” is misleading.

Also, the remittance costs above ought to be fact-checked on the very useful Save On Send website.

On p. 194 they write about BitPesa. Till we see actual numbers in Corporations Home filings, it means their revenue is tiny. Yet the authors make it sound like they have “succeeded”:

The strategy is paying dividends as evident within the current success of BitPesa, which was established in 2013 and was profiled in The Age of Cryptocurrency. The company, which gives cross-border payments and foreign-exchange transactions out and in of Kenya, Nigeria, Tanzania, and Uganda, reported 25 % month-on-month progress, taking its transaction quantity halfway by means of 2017, up from $1 million in 2016.

Additionally they cited some remittance figures from South Korea to the Philippines which have been never independently verified and are previous.

On p. 194 they dive into Abra an organization they described as a remittance company but earlier this yr they pivoted into the investment app class as a Robinhood-wannabe, with a coin index.

On p. 196 they talk about the “Somalia dilemma” by which your complete country is effectively unable to entry exterior financial methods and one way or the other a blockhain would clear up their KYC woes. The authors then describe young corporations reminiscent of Chainalysis and Elliptic which work with regulation enforcement to determine suspicious transactions. But they don’t close the loop on the narrative as to how the businesses would help the typical individual in Somalia.

On p. 198 they talk about a startup referred to as WeTrust and mention that one of many authors – Michael – is an advisor. However don’t disclose if he acquired any compensation for being an advisor. WeTrust did an ICO final yr. That is necessary as a result of the SEC just introduced it has fined and settled with Floyd Mayweather and DJ Khaled for violating anti-touting laws.

Chapter eight

Chapter eight dives into self-sovereign id which is genuinely an fascinating matter. It is in all probability the shortest chapter and maybe in the subsequent edition might be updated to mirror any adoption that passed off.

On p. 209 they write about bodily identification cards:

Already, in the age of highly effective massive knowledge and community analytics – now enhanced with blockchain-based distributed trust methods to assure knowledge integrity – our digital data are extra dependable indicators of the conduct that defines who we are than are the error-prone attestations that go into simply cast passports and laminated cards.

How widespread and how simply cast are passports? Can be fascinating to see that reference and particularly how a blockchain would truly stop that from occurring.

On p. 212 they write about single-sign ons:

A gaggle of banks together with BBVA, CIBC, ING, Societe Generale, and UBS has already developed such a proof of idea together with blockchain research outfit R3 CEV.

Earlier they described R3 in a different way. Can be good to see extra consistency and in addition an replace on this undertaking (did it go anyplace?).

On p. 213 they describe ConsenSys as a “think tank” but it is truly a ‘venture studio’ just like an incubator (like 500 Startups). Afterward p. 233 they describe ConsenSys as an “Ethereum-based lab”.

On p. 216 they write about Andreas Antonopoulos:

What we must be doing, as an alternative of appearing as decide and executioner and making assumptions “that past behavior will give me some insight into future behavior,” Antonpolous argues, is constructing methods that better manage default danger inside lenders’ portfolios. Bitcoin, he sustains, has the tolls to do so. There’s loads of energy on this know-how to protect towards danger: sensible contracts, multi-signature controls that make sure that neither of the two events can run off with the funds without the other additionally signing a transaction, automated escrow arrangements, and more broadly, the superior transparency and granularity of data on the general public ledger.

There are a minimum of two points with this:

Nowhere on this part do the authors – or Antonopolous – present particular details for a way someone might construct a system that manages default danger on prime of Bitcoin. It will be helpful if this was added in the subsequent edition.
And just lately, Antonopoulos claims to have been simply educating individuals about “blockchain technology” and never promoting monetary products.

When you have adopted his affinity advertising over the past Four-5 years he has clearly promoted Bitcoin utilization as a kind of ‘self-sovereign bank‘ — and you can’t use Bitcoin without bitcoins. He seems to be making an attempt to have his cake and eat it too and in consequence received referred to as out by each Nouriel and Buttcoin.

On p. 219 they write:

If an attestation of figuring out info is locked into an immutable blockchain surroundings, it may well’t be revoked, not without both events agreeing ot the reversal of the transaction. That’s how we get to self-sovereignty. It’s why, for example, the parents at Learning Machine are creating a product to prove individuals’s instructional bona fides on Blockcerts, an MIT Media Lab-initiated open-source code for notarizing university transcripts that hashes these paperwork to the bitcoin blockchain. Observe the deliberate selection of probably the most safe, permissionless blockchain, Bitcoin’s. A permissioned blockchain would fall in need of the perfect as a result of there, too, the central authority controlling the community might all the time override the personal keys of the person and could revoke their instructional certificates. A permissionless blockchain is the only strategy to give actual control/ownership of the document to the graduate, in order that he/she will disclose this notably essential attribute at will to anyone who demands it.

This disdain for ‘permissioned blockchains’ is a pink herring and one other example of the “us versus them” language that is used throughout the e-book. If a blockchain has a government that may do what the authors describe, it might be rightly described as a single level of failure and belief. And for this reason it is very important ask what ‘permissioned’ chain that they had in thoughts, because they don’t seem to be all the same.

Additionally they need to elucidate how they measure ‘most secure’ because Bitcoin – as described all through this evaluate – has a number of areas of centralization embrace mining and people who management the BIP process.

On p. 219 they quote Chris Allen. Could possibly be value updating this as a result of he left Blockstream last yr.

Chapter 9

This chapter appeared mild on particulars and a bit polemical.

As an example, on p. 223 they write:

Lots of our legislators seem to have no ideas that is coming. In america, Donald Trump pushes a “Buy America First” campaign (complete with that slogan’s echoes of past fascism), backed by threats to boost tariffs, tear up trade deals, boot undocumented immigrants overseas, and “do good deals for America.” None of this addresses the looming juggernaut of decentralized software techniques. IoT methods and 3D printing, all related by way of blockchains and smart-contract-triggered, on-demand service agreements, will render each presidential try and strong-arm an organization into retaining a number of hundred jobs in this or that manufacturing unit city even more meaningless.

Placing the politics apart for a moment, this guide doesn’t provide a detailed blue print for a way any of the know-how listed will forestall a US president from strong-arming a company to do any particular activity. How does a 3D printer related to a blockchain forestall a president from executing on their agenda?

On p. 224 they write about common primary revenue:

This idea, first floated by Thomas Paine within the eighteenth century, has enjoyed a resurgence on the left as individuals have contemplated how robotics, synthetic intelligence, and other applied sciences would hit working-class jobs comparable to truck driving. But it might achieve wider traction as decentralizing drive based mostly on blockchain fashions start destroying middle-class jobs.

This hypothesis looks like a non sequitur. Nowhere within the chapter do they element how a “blockchain-based model” will destroy center class jobs. What’s an example?

On p. 227 they write:

In case you’re somewhat snobbish about such lowbrow art, we also needs to point out that a comparable mind-set of collaborative creation now drives the world of science and innovation. Most prominently, this occurs inside the world of open-source software program improvement; Bitcoin and Ethereum are an important examples of that.

If readers have been unfamiliar with the long history of the free open supply software movement, they could consider that. But this ignores the contributions of BSD, Linux, Apache, and lots of other tasks which are frequently used each day by enterprises of all sizes and shapes.

Additionally, in the course of the writing of this evaluate, an open supply library was compromised — probably impacting the Copay pockets from Bitpay — and nobody observed (at first). Eric Diehl, a safety skilled at Sony, has a succinct submit up on the topic:

In other phrases, this is an instance of a software supply chain assault. One aspect in the supply chain (right here a library) has been compromised. Such an assault just isn’t a shock. However, it raises a question concerning the security of open supply elements.

A few years in the past, the motto was “Open source is more secure than proprietary solutions.” The main rationale was that many eyes reviewed the code and everyone knows that code assessment is vital for safe software program. In the early days of open supply, this motto might have been principally true, beneath some specific belief models ( see, Chapter 12 of Securing Digital Video…). Is it nonetheless true in our days?

How typically do a lot of these compromises take place in open-source software?

On p. 232 they write:

Undaunted, an unofficial alliance of technologists, entrepreneurs, artists, musicians, legal professionals, and disruption-wary music executives is now exploring a blockchain-led strategy to all the enterprise of human expression.

What does that even mean?

On p. 232 they write about taking a hash of their first e-book and inserting it into a block on the Bitcoin blockchain. They then quote Dan Ardle from the Digital Foreign money Council who says:

“This hash is unique to the book, and therefore could not have been generated before the book existed. By embedding this hash in a bitcoin transaction, the existence of the book on that transaction date is logged in the most secure and irrefutable recordkeeping system humanity has ever devised.”

These plattitudes are all over the place in the ebook and must be toned down in the subsequent version especially since Ardle – at the least within the quote – doesn’t explain how he measures secure or irrefutable. Especially in mild of lots of of lifeless coins that were not sustainable.

On p. 233 they write:

The hope now’s that blockchains might fulfill the identical perform that photographers carry out once they put a limited number of tags and signatures on reproduced photograph prints: it turns an otherwise replicable piece of content into a singular asset, on this case a digital asset.

This seems to be solutionism as a result of blockchains usually are not some new type of DRM.

Persevering with on this matter, they write:

Copying a digital file of text, music, or vidoe has all the time been trivial. Now, with blockchain-based fashions, Koonce says, “we are seeing systems develop that can unequivocally ensure that a particular digital ‘edition’ of a creative work is the only one that can be legitimately transferred or sold.” Recall that the blockchain, as we explained in chapter three, made the idea of a digital asset potential for the first time.

This is empirically unfaithful. It’s nonetheless trivially potential to obtain and clone a blockchain, nothing presently prevents that from occurring. It’s why there are more than 2,000 cryptocurrencies at the time of this writing and why there are dozens of forks of Bitcoin: blockchains didn’t make the idea of a digital asset potential. Digital belongings existed previous to the creation of Bitcoin and trying to construct a DRM system to stop unauthorized copies does not essentially require a blockchain to do.

On p. 238 they write:

Yet, given the amssive, multitudinous, and hetergeneous state of the world’s content material, with a whole lot of tens of millions of would-be creators unfold everywhere in the world and no option to arrange themselves as a standard interest, there’s probably a need for a permissionless, decentralized system by which the info can’t be restricted and manipulated by a centralized institution reminiscent of a recording studio.

Perhaps, but who maintains the decentralized system? They don’t run themselves and are often fairly expensive (as even the authors have mentioned a number of occasions). How does a decentralized system repair this concern? And don’t some artists already coordinate by way of totally different curiosity teams like the RIAA and MPAA?

On p. 240 they talk about Mediachain’s acquisition by Spotify:

Then again, this could end in a personal firm taking a know-how that would have been used publicly, broadly for the overall good, and hiding it, together with its progressive concepts for tokens and different options, behind a for-profit wall. Let’s hope it’s not the latter.

This chapter would have been a bit extra fascinating if the authors weren’t as heavy handed and opinionated about how financial actions (like M&A) should or shouldn’t happen. To enhance their argument, they might embrace links or citations for why this kind of acquisition has traditionally harmed most of the people.

Chapter 10

On p. 243 they write:

Bitcoin, with its new mannequin of decentralized governance for the digital financial system, didn’t spring out of nowhere, both. A number of the parts – cryptography, as an example – are hundreds of years previous. Others, like the thought of digital money, are many years previous. And, as ought to be evident in Bitcoin’s block-size debate, Bitcoin continues to be very much a work in progress.

This statement is strange because it is inconsistent with what they wrote on p. 162 relating to permissioned chains: “… cherry-picked the features of Nakamoto’s invention that are least threatening to the players in the banking system, such as its cryptographic integrity…”

On this part they are saying that the concepts are previous, but within the passage above in chapter 6, they make it sound like it was all from Nakamoto. The authors should edit it to be somehow.

Additionally, Bitcoin’s governance now principally consists of off-chain shouting matches on social media. Large influence and lobbying campaigns on reddit and Twitter is successfully how the united states / no2x movement took management of the path of the BIP course of last yr.

On p. 245 they write:

That can be discovered in the particular person freedom rules that guide one of the best parts of Europe’s new Basic Knowledge Protection Regulation, or GDPR.

All blockchains that involve cross-jurisdictional movement of knowledge will possible face challenges relating to compliance with knowledge privateness legal guidelines similar to GDPR. Michele Finck revealed a relevant paper on this matter a yr ago.

See additionally: Clouds and Chains

On p. 247 they write about if you could use a blockchain:

Since a group should spend vital assets to show transactions on a blockchain, that sort of record-keeping system is most beneficial when a excessive diploma of mutual mistrust signifies that managing agreements comes at a prohibitively excessive worth. (That worth may be measured in numerous methods: in fees paid to middlemen, for example, in the time it takes to reconcile and settle transactions, or in the fact that it’s inconceivable to conduct certain enterprise processes, comparable to sharing info across a provide chain.) When a bank gained’t concern a mortgage to a wonderfully official and creditworthy home-owner, besides at some usurious fee, as a result of it doesn’t trust the registry of deeds and liens, we will argue that the worth of trust is just too high and that a blockchain is perhaps a great answer.

Not all blockchains utilize proof-of-work as an anti-Sybil attack mechanism, so it cannot be stated that “a community must spend significant resources”.

In the next edition it will be fascinating to see a price / profit analysis for when someone should use a blockchain because it relates the mortgage use case they describe above.

On p. 248 they speak about voting:

Every centralized system must be open for evaluation – even these of presidency and the political process. Already, startups similar to Procivis are engaged on e-voting methods that may hand the business of vote-counting to a blockchain-based backend. And a few adventurous governments are open to the thought. By piloting a shareholder voting program on prime of Nasdaq’s Linq blockchain service, Estonia is main the best way. The concept is that the blockchain, by making certain that no vote could be double-counted – just as no bitcoin may be double-spent – might for the primary time enable reliable cellular voting by way of smartphones. Arguably it will each scale back discrimination towards those that can’t make it to the poll box on time and create a more clear, accountable electoral system that may be independently audited and which engenders the general public’s belief.

A month in the past Alex Tapscott made an analogous argument.

He managed to briefly unite a number of the warring blockchain tribes as a result of he penned a NYT op-ed about how the longer term is on-line voting… powered by blockchains. Under is a brief choice of some Twitter threads:

  • Arvind Narayanan, a CS professor at Princeton stated this can be a dangerous concept
  • Angela Walch, a regulation professor at St. Mary’s stated this can be a dangerous concept
  • Philip Daian, a grad scholar at Cornell stated this can be a dangerous concept.
  • Luis Saiz, a safety researcher at BBVA stated this can be a dangerous concept
  • Joseph Hall, the Chief Technologist at the Middle for Democracy & Know-how stated this a nasty concept
  • Preston Byrne, a transatlantic lawyer and father of marmotology stated this can be a dangerous concept
  • Matt Blaze, a CS professor at UPenn, stated this can be a dangerous concept

NBC Information coated the response to Tapscott’s op-ed.  Suffice to say, the subsequent version ought to either remove this proposal or present more citations and references detailing why this can be a good concept.

Throughout this chapter tasks like BitNation and the Financial Area Company are used as examples of tasks which are “doing something” — but none of those have gotten much traction doubtless because it’s doing-something-theater.

On p. 252 – 255 they uncritically point out numerous particular curiosity groups which might be trying to influence determination makers by way of lobbying. It will be good to see some stability added to this part because most of the vocal promoters at lobbying organizations don’t disclose their vested pursuits (e.g., coin positions).

On p. 255 they speak about “Crypto Valley” in Switzerland:

One purpose they’ve completed so is as a result of Swiss regulation makes it easier to set up the foundations needed to launch coin choices and problem digital tokens.

MME – the Swiss regulation firm that arguably popularized the strategy described on this section – set up more than a dozen of those foundations (Stiftung) earlier than stopping. And its creator, Luke Mueller, now says that:

“The Swiss foundation actually is a very old, inflexible, stupid model,” he stated. “The foundation is not designed for operations.”

Could possibly be value updating this section to mirror what happened over the previous yr with lawsuits as properly.

On p. 255 they write:

The subsequent question is: what is going to it take for U.S. policymakers to worry that America’s monetary and IT hubs are dropping out to these overseas rivals in this very important new subject.

That is FOMO. The authors ought to tabulate all the corporations which have left the US – or declare to go away – and take a look at how many jobs they really arrange abroad due to these laws. Based mostly on many anecdotes it appears what occurs in apply is that an organization will register or maintain an ICO abroad in say, Singapore or Panama, but then open up a improvement arm in San Francisco and New York. They successfully apply regulatory arbitrage whereby they bypass securities laws in a single nation (e.g., the US) and then turn around and remit the proceeds to the identical country (the US).

On p. 263 they conclude the chapter with:

No state or corporation can put bricks around the Bitcoin blockchain or whitewash its report. They will’t shut down the truth machine, which is strictly why it’s a helpful place to document the voices of human expertise, whether or not it’s our love poems or our cries for assist. This, at its core, is why the blockchain issues.

Their description principally anthropromorphizes a knowledge structure. It also comes throughout as polemical in addition to favoritism in the direction of one particular chain, Bitcoin. Furthermore, as discussed throughout this assessment, there are clear special interest teams – including VC-backed Bitcoin corporations — that have successfully pushes Bitcoin and different cyrptocurrencies – into roadmaps that benefit their organizations.


Like their previous ebook (AoC), The Truth Machine touches on many subjects however solely superficially.  It makes plenty of broad sweeping claims but curious readers – even after wanting at the references – are left wanting specifics: find out how to get from level A to point B.

There additionally seems to be an anti-private enterprise streak inside the e-book whereby the authors condescendingly speak down efforts to construct chains that aren’t anarchic. That turns into tiring because – as discussed on this blog many occasions – it isn’t a “us versus them” proposition.  Each varieties of blockchains can and do exist because they are constructed around totally different expectations, requirements, and operating environments.

When it comes to one-sided narratives: additionally they did not attain out to a number of of the individuals they villify, resembling both myself and Preston Byrne as well as coin proponents akin to Roger Ver and Jihan Wu.  The next edition ought to rectify this by both dropping the passages cited above, or through which the authors attain out to get an on-the-record comment from.

Lastly, while some churn is anticipate, most of the phrases throughout the ebook did not age nicely as a result of it relied on worth bubbles and legal interpretations that went a unique course (e.g., SAFTs are not well-liked).  In case you are still in search of other books to learn on the topic, listed here are several different critiques.