In my continuing effort to follow developments in cryptocurrency and blockchains, I posted some three dozen items to this blog on the topics of cryptocurrency, blockchain technology, “smart contracts”, and the sociotechnical communities around these technologies. (Click on the tags above to retrieve posts on these topics.)
This year featured some dramatic illustrations of the inherent weaknesses of the “distributed consensus” mechanism for governing real world systems where money may be on the line.
As I wrote in July, it has been a master class in how things can go awry.
The Ur-cryptocurrency, Bitcoin, remains paralyzed by the inability of the “consensus” mechanism to move forward on perfectly ordinary engineering problems. The “one-cycle-one-vote” approach has proved n practice to concentrate wealth and power, in a way that can block changes that would benefit the network and community as a whole. (However “innovative” this technology aims to be, it has not “disrupted” this familiar pattern.)
At the same time, Ethereum acted out a different malfunction. Despite authoritative warnings, the distributed autonomous organization called (confusingly) “The DAO”, rushed into service. I wrote a post predicting disaster and queued it to be published the next day. Before my post appeared, the DAO was fatally hacked, as predicted. The DAO crashed and took Ethereum with it.
While Bitcoin has been paralyzed by “consensus”, Ethereum went another way and a small group responded to the catastrophe with a series of dramatic fixes. The changes had the effect of rewriting history to undo the “bad” transactions, which completely undoes the fundamental principle of the blockchain.
These actions were controversial, and the “consensus” mechanism led to a split into old and new, patched and unpatched versions of Ethereum. Sigh. Once over the Rubicon, Ethereum has done a patch a month, each one basically rewriting history or changing the rules to fight off attackers.
With these vivid examples of how blockchain and cryptocureny technology can go off the tracks, it is scarcely surprising that many of the serious players are examining “private” blockchain systems which are technically similar but may feature different governance processes. Serious development is occuring in Fintech and Supply chains and so on. Grown up stuff, for sure.
All this makes the headlines about Bitcoin’s “price” (i.e., exchange rate against the US dollar) seem silly—which it basically is.
Cryptocurency and blockchain technology is growing up, and I think we will continue to see more developments of blockchain technology (and related “smart contracts”), but most likely in the context of “permissioned” or private blockchains, run by coalitions of organizations with governance based on establishing trust and authenticity. This is not your father’s blockchain, and that is a good thing.