David Gerard is the author of the book “Attack of the 50 Foot Blockchain” (Amazon US, Amazon UK), editor of the news blog of the same name and a contributor to crypto parody forum r/buttcoin.
The following article is an exclusive contribution to CoinDesk’s 2017 in Review.
The bitcoin world is relentlessly optimistic, in the face of all news, positive or … differently positive.
It’s no surprise then that in 2017 anything called a blockchain was quickly used as evidence of the impending world domination of bitcoin. “Could” becomes “will” becomes “is” … even though “could” is a word that often means “doesn’t” and tends to end up meaning “won’t.”
This is how we get to a state of affairs where the only Reddit subforum where you have any chance of talking sensibly about cryptos ends up being the one with “butt” in the name.
New to crypto? Don’t worry, you too can learn the tools to deflect relentless advocates and company interests. Just ask yourself, “Wait, what’s the evidence this is even a thing?”
The results may surprise you…
Business Blockchain™
The first thing to know is it’s not just bitcoiners who were being creative and aspirational.
Blockchain was great again in 2017, or Blockchain™ at least, where consultants did their best to convince people that a transaction ledger in a Merkle tree was a fantastic new innovation in business data processing, and not a structure we’d had since 1979 or software (Git) we’d had since 2005.
(Git users: “Why yes, we’ve been using, uh, blockchain-related technologies since 2005, and …”)
But, Blockchain™ did offer one key innovation. The trouble with “the cloud” or “NoSQL” is that these are specific technologies with measurable effects. Blockchain™ doesn’t suffer this limitation!
A Blockchain™ doesn’t even have to be a blockchain (e.g. Estonia’s much-touted KSI Blockchain™) and you can even claim a Blockchain™ when you’re running it as a database cluster with you as the only user (e.g. the World Food Programme’s Building Blocks).
You see, we learned that distributed trustless immutable ledgers are vastly more efficient and easier to implement if you don’t distribute them very far and aren’t too strict on the trustless bit. Immutability turns out not to have a huge market in practice either!
In Distributed Ledger Technology™ will be a new and disruptive paradigm in which transactions are recorded on a single node at the hub of the network, with controlled access to this node to ensure security and privacy.
Distributed Ledger Technology™ is powered by smart contracts, which came along for the hype ride, even if adding immutable scripts so you couldn’t fix bugs in your simplified version of Git is obviously stupid.
Paper gains
How about the markets though? Those have to be good. The price is through the roof!
Oh dear, dear. This isn’t normal securities trading! Think you can assume your crypto exchange is basically competent and its systems well maintained? Think again. “I know PHP – how hard could running an exchange be?” isn’t the best starting point.
You also can’t assume a crypto exchange isn’t going to mess you around. All manner of shenanigans that are completely illegal in proper security trading – bots painting the tape, wash trades, spoof orders, just front-running your customers – are completely normal in crypto. Your threat model is not just the other traders, it’s literally the platform you are putting your money and coins into.
That is if you’re even lucky enough to use real money… That’s right, some of the world’s largest exchanges don’t anymore offer that luxury.
Take Tether, an increasingly famous as the Eurodollar-like USD substitute token for crypto exchanges. There are just under a billion of those, and they’re being put to good and productive economic use for margin lending to bitcoin buyers. You can rest assured that every one of those Tethers is backed by an actual dollar. Definitely™.
What’s that? You got in early? I’m genuinely happy for you.
Ignore bitter naysayers like me pointing out that your paper gains don’t exist until you’ve not only cashed out but finally succeeded in getting your actual money from the exchange, through the delays and withdrawal limits.
Hopefully, you’ll still have a bank account by the end of it.
Just be sure that you’ve actually made money, though, and remember two-thirds of holders haven’t locked in a penny of tangible profit. This means I have personally realized more actual money from bitcoin than a supermajority of bagholders, without touching one.
The most difficult part of crypto trading is maintaining clear, evidence-based thinking when that would imply your paper balance is worth a fraction of what you’ve told yourself for months or years.
But, nevermind, your exchange will be just fine. It’s backed by venture capitalists you can Google!
Good luck, sir. I just hope it doesn’t go consistently down for maintenance whenever the price is crashing! Oh wait… How does this keep happening? Never mind, I’m sure it will be fine.
What’s for dinner
But David, it’s not about what’s here today. It’s about the principles, the ideology!
In crypto, you can’t just issue money like a government! Because if a government issues money carelessly, competent people tell them to slow down, because in the real world this is a widely-understood problem.
Crypto has no such barriers to issuance, as we discovered with the first altcoin. More recently, there was the arrival of bitcoin cash, which boldly eschewed professional graphic designers who could make an official logo that was robustly reusable (they tend to want payment in legacy fiat). So, if you reuse it on a white background, it appears to say “B Cash.”
Just like that, 21 million more bitcoin cash(es). But don’t worry, we’re sure that everyone will resist the urge to create free money, especially businesses.
We have Silicon Valley, after all, to vet the latest and greatest. There’s no way they’ll get disrupted?!
ME: Why am I doing this book rubbish, I could just set up an ICO and…
WIFE: No.
ME: But it could be…
WIFE: No.
Times are changing
Oh, you’re just focusing on the negative, you might say.
What about all the positive change! The money dedicated to science! The discussion of World-Changing™ concepts! (Cut to pictures of Zimbabwe…)
You’re right, there were smashing successes… The National Health Service in the U.K. took its first foray into the healthcare blockchain in May, when the WannaCry ransomware shut down emergency rooms across the country and introduced the British public to bitcoin.
Bitcoin also had huge success killing off the last scraps of its legitimate merchant interest. Fortunately, sidechains and the Lightning Network will definitely solve bitcoin’s scaling problems in 2014, 2015, 2016, 2017, 2018.
Then my personal favorite, the New Inquiry’s Bail Bloc initiative actually asked people to mine monero for a bail bond charity, eventually posting an FAQ where they directly suggested you mooch electricity from your employer or school to mine.
The logic here was truly innovative: Potentially commit a crime to … pay bail for people accused of committing crimes. The upside? If the way the industry is going is any indication… it may have a burgeoning market!
But always remember: all of the above is actually good news for bitcoin, the one true, digital, comedy gold.
Disagree? CoinDesk is looking for submissions to its 2017 in Review series. Email news@coindesk.com to pitch your idea and make your views heard.
Artist’s impression of the ethereum ecosystem on Nov. 7, 2017. Picture: LukeBam06, Creative Commons Share Alike license.