Like any good cryptocurrency adherent, in my romping around social media I was unsurprised to find yet-another-grossly-misrepresented-hit-piece on bitcoin. But this one sure was fancy. Op-ed in the NYTimes, you say? Group chief executive (?) for financial services from a major consulting firm? Wow. Must be a hard-hitting, well-researched, incisive look at the downsides of cryptocurrency. I clicked the link.
And then I read the goddamn title.
Downside of Bitcoin: A Ledger That Can’t Be Corrected
Sigh. You’d think the author would have relented after writing The Downside of Transistors: Miniaturization or The Downside of the Internet: Worldwide Two-Way Connectivity, but I guess you can’t fault the symmetry. (Note: he didn’t actually write those, but is it really such a stretch?)
Because guess what the upsides of bitcoin are? The fact that it can’t be corrected; that it’s immutable. And that you don’t need anyone’s permission to use it.
For posterity’s sake – and because I haven’t written anything quite this biting in a while and I miss it – I’ve cherry-picked a few passages where I felt a deep need to Accensure.
The elephant in the room
Let’s start with the first paragraph:
“We have heard waves of inspired commentary on how the technology, with its ability to share information and record transactions, will be as revolutionary as the internet itself. … [W]e agree about these huge possibilities, but there is an elephant in the room that will need to be confronted.”
Nothing to really argue about here, but spoiler alert: the elephant is willful ignorance, doubly ironic given the relative intelligence of elephants in the animal kingdom.
“One of the accepted virtues of blockchain is that it creates a permanent, immutable ledger of transactions. For example, each of the roughly 160 million Bitcoin transactions that have occurred since the cryptocurrency began in 2009 will stay on that ledger as long as Bitcoin exists.”
This is – remarkably – correct. Maybe we were wrong, dear reader! Let’s just keep reading and…
“That permanence … could severely limit blockchain’s usefulness in other areas of financial services relied on by billions of people. By clashing with new privacy laws like the “right to be forgotten” and by making it nearly impossible to resolve human error and mischief efficiently, the blockchain’s immutability could end up being its own worst enemy.”
Ah, there we are! There’s the piping-hot absurdity, fresh out of a convection oven powered by the hot air of blockchain hype.
A new way of thinking
Let’s consider what “clash[es] with new privacy laws like the right to be forgotten”.
I’m not sure how the hell a pseudonymous system of transferring value has anything to do with the “right to be forgotten”, especially when one considers privacy-enabling technologies like Zcash and MimbleWimble (amongst others) that would make it practically impossible to associate real-world identity with cryptocurrency movement.
But let’s assume, for a beautiful moment of dissociative cognition, that somehow, for reasons only top consultants can divine, having an immutable record of pseudonymous money transfers violates these laws.
Maybe these laws aren’t a good idea in the first place, since they can have a chilling effect on free speech and enable the whitewashing of history.
Instead should we endeavor to create a more privacy-protecting Internet from the ground up? Where citizens can confidently share information with cryptographic assurances that it only reaches the intended parties, or investing in homomorphic encryption to enable cloud services where providers have zero access to the information you provide to them for computation? Surely you can still make money off consulting those services, Accenture?
“The financial services industry needs to face the question of how to balance the appeal of pristine accounting with the demands of the real world, where some things simply need to be struck from the records.”
The last company to value “simply striking things from the record” over “pristine accounting” was Enron.
What makes a blockchain special
The article makes an oblique critique of bitcoin’s technology, assuming an old worldview. One where providers will know what their customers are putting into blockchains.
That’s – surprise surprise – silly and pointless. When you interact with bitcoin, you don’t sign up for an account while your personal credit history is checked and uploaded into a “central Bitcoin KYC repository.”
Remember that a key tenet of what makes a blockchain special is its permissionless usage. You know how you can accept money on bitcoin? You generate a private-public key pair. Could do the process completely offline if you’d like.
So repeat after me: I will not put sensitive, non-cryptographically-sealed information into a public blockchain. You don’t embed your social security number into a bitcoin OP_RETURN and then say, “Oops, please delete that.” You don’t embed sensitive customer data into a public blockchain like a private database, because it’s not a private database.
“We need the means to solve this challenge, while maintaining blockchain’s vast strengths. At Accenture, we’re working with leading academics on a prototype that would enable blockchains to be amended or redacted where necessary — under responsible governance models potentially developed in cooperation with regulators.”
Whoops, I guess a blockchain is a private database – if you can amend or redact it, by writ of some authority. Let me rewrite this paragraph:
We need the means to solve this challenge, while neutering what makes a blockchain special. At Accenture, we’re working with leading academics on a database that can be amended or redacted where necessary — under responsible governance models potentially developed in cooperation with regulators. It’s a database, but spelled b-l-o-c-k-c-h-a-i-n.
And finally:
“But if blockchain is to move beyond cryptocurrency and lab experiments to real and profitable deployments, we need to challenge conventional orthodoxy and rethink the role of absolute immutability.”
Who wants to move beyond cryptocurrency? The outstanding value of all bitcoin has reached close to ~$10bn as of this writing, with ether at a close ~$1bn. Public blockchains are already profitable deployments.
Fundamentally, I believe the author is dreadfully confused, or – perhaps more likely – was running an A-B test with his paid NYTimes Op-Ed advert and I was unlucky enough to catch the B-side. In the corrected version, I hope he reminds readers that “conventional orthodoxy” is relying on a mutable database and trusted parties for financial transactions. Challenging it is bitcoin.
This article was originally published on the author’s Medium blog and has been reproduced here with permission. Some edits have been made for style and brevity.
Elephant in the room image via Shutterstock