Cryptocurrency Communities Struggle with Fundamental Issues

Among all the prosecutions and funding announcements,  and an exciting “flash crash”, there are some interesting stories emerging from the cryptocurrency communities.

Rizzo on “Why Bitcoin?”

This week Pete Rizzo of Coindesk ponders Bitcoin’s biggest question, “Why use it?”


He elaborates on an analogy between Bitcoin (“it’s better than money!”) and Segway scooters (“better than walking”). Just as most people don’t consider “walking” to be too hard or “broken”, most normal people aren’t really looking to “fix” money (we just need to get enough of it to get by).

Rizzo elaborates on this point, commenting that today getting access to Bitcoin requires access to conventional financial services, which “doesn’t fit easily into a business model.” Nor, I would say, does “bank account + Bitcoin” give you very much beyond just “bank account”.

Rizzo expresses the hope that “whatever it is, bitcoin works today and it’s useful, just maybe not for the kinds of things we’re accustomed to doing already.”

Actually, this isn’t quite true, since Bitcoin is widely adopted in extralegal trade, gambling, and crime. These are things some people are “accustomed to doing”, but many of us wish they wouldn’t.

I would add to these points by commenting that the central narrative of Bitcoin (“We will disrupt and reinvent money!”) is definitely swimming upstream historically and culturally. Money being money, it is extremely well developed: if any technology has a deep “penetration” into the economy, society, and culture, then it has to “money”. You may as well try to “reinvent” Oxygen!

Technological Schism: Bitcoin “Forks”

Meanwhile, Gavin Andresen has left the “Bitcoin Core” development, and started his own “fork”, as well as his own open source process. I freely admit that I don’t understand the technical issues driving this split (see, perhaps, Morgan Peck for IEEE Spectrum), but I definitely understand the implications of multiple source bases. Basically, there soon will be more than one Bitcoin network, and probably various hacks and patches to bridge between them.

Uh oh!

This is a headache familiar to most programmers, and an invitation to catastrophe.

In a sense, this is the natural outcome of the vaunted “decentralized” governance model that Bitcoin is supposed to represent. Grace Caffyn reports in Coindesk that one impetus for this schism was a paralysis created by the “consensus” model of the original Bitcoin foundation/ core development. Change requires the agreement of everybody, even people with minimal or marginal stake in the software.

I understand the frustration, and I understand why the programmers would want to move to a more conventional open source model, one that is open but not infinitely open. But experience teaches us that “forking” is really, really bad for software, especially APIs and infrastructure. It creates all kinds of friction and whole new classes of bugs: there will now be bugs due to, and arguments about, the compatibility of the forks.

Old proverb: There is a fortunate man, who only has one clock. He always knows what time it is.

New proverb: There is a fortunate programmer, who only has one fork. He always knows which software contains the bugs.

Of course, Bitcoin being Bitcoin, both the old and new branches claim to represent the one true spirit of the great God Nakamoto.  Cade Metz quotes Mike Hearn in, saying the new fork is the true way, because “Satoshi was very clear about what he wanted. My article quotes him to prove this.”  In response, a faux “Satoshi” countered that “The developers of this pretender-Bitcoin claim to be following my original vision, but nothing could be further from the truth.”

Obviously, there is much more than a technical or even personal disagreement here.  This is about The Truth.

Caffyn On Blockchain Surveillance

If the relatively calm and apolitical software developers are schismatic, how can we expect the rest of the community to hang together?

Grace Caffyn comments on along with other similar companies who offer “blockchain reconnaissance”. It’s far from obvious exactly what Sabr actually does, their web page says their service “integrates data from multiple Blockchains, as well as other public and proprietary sources” along with “unique position and partnerships within the network underlying the decentralized digital currency ecosystem”. No idea what that actually means.

In general, analytics use the public—and I emphasize that word—blockchain to construct datasets and analyses that document the traffic patterns. This is hardly unprecedented, but better ready-to-use tools can make it easy for anyone, including Your Local Constable, to figure out what’s going on.

However, some techniques can involve more than passive analysis, such as running nodes for the purpose of monitoring traffic patterns to identify the location and identity of parties. This is at least irritating, and potentially can interfere with the smooth operation of real users.

Caffyn notes that these activities are controversial for at least two reasons. Some do not welcome any effort to help law enforcement “unmask” Bitcoin transactions, desiring unregulated commerce. Others are concerned about covert exploitation of the public commons, which may ‘poison the well’ for everyone.

The decentralized design means that no one really controls how the protocol and blockchain are used, so it is difficult to stop people from using or even abusing the blockchain and protocols   If nothing else, these developments indicate an unfortunate (if inevitable) “arms race” is underway, as a cryptocurrency spy-vs-spy narrative unrolls.

Clearly, there are inherent logical conflicts among the interests in having a transparent, public infrastructure, and having private or anonymous transactions. Is Bitcoin “private”? Or is it “transparent”? Is the blockchain “open to all”? Or should it only be open for “acceptable use”?  The technology can’t answer these questions. Indeed, I don’t think there can be answers.


Cryptocurrency Thursday

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