Blockchain Mania: Get Your Decentralized Tulips Here

Run for the hills! “Blockchain” exuberance dial is reading ‘irrational’!

Everywhere I look, people are talking about Blockchian Technology, usually is glowing, if unknowing, terms. When the Whitehouse, internet pirates and off-the-grid do gooders are excited about the same thing, you know it’s going to crash soon.

Indeed, the unrestrained thinkers of the Singularity University think that Blockchain has gone “exponential”.  I’m not sure there is enough fuel and oxygen to sustain this burn, but there certainly is a big flash happening.  (I note that exponential growth is generally a very bad thing for engineered systems–it’s call “an explosion”, and it is a hazard to people and systems.)

At the same time, the exponentially grown Decentralized Autonomous Organization, TheDAO continues to garner headlines for both a flood of money flowing in and the inscrutability of its prospects.

Michael del Castillo writes in Coindesk to ask, “Will The DAO Become Ethereum’s Mt Gox?” Uh, oh!

His point is that TheDAO is outsized and extremely visible, and is the first big try at a DAO. Heck, they even appropriated the generic term ‘DAO’ for their company, which is presumptuous and may be lethal to the whole idea of DAOs.

The whole world is watching, and what we see isn’t terribly encouraging.

Having attracted absurd amounts of capital (reportedly $150M worth of “Ether”), the main product so far has been arguments about fundamental structure and decision-making processes, with relatively little attention to investments, let along juicy results to justify the funding. No law suits or criminal cases, but those will come, never fear.

The cynic in me says, “The ‘organization’ has no boss, and it spins out in endless arguments about how things should work? Who could have predicted that?”

Del Castillo and others are concerned because a visible belly flop by TheDAO would tarnish the image of all DAO and blockchain projects, fairly or not. It might also sink Ethereum, despite other unrelated and sensible projects.  I think his fears are justified.

The signs are there:  enthusiastic declarations of “exponential” growth, coupled with gigantic amounts of money poured into untried and, I would say, poorly thought through technology and business plans.

Next stop: a big crash.

If I had to guess, I’d say that TheDAO will break up and/or shutdown before the end of this year.

Update 6/18/2016: This post was originally written on June 14, 2016.  By the time it appeared here on June 16 TheDAO had been hacked, with a loss of tens of millions of dollars.  The “big crash” is happening now, just as I predicted.

Cryptocurrency Thursday

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