Tag Archives: Alyssa Hertig

Yet Another “Blockchain for Provenance” System

In the short decade since the Nakamoto paper [5] cryptocurrency enthusiasts have put forward a variety of use cases for blockchains and cryptocurrencies.  It is notable that most of the exciting use cases aren’t actually in the canonical paper itself, and most of them have yet to prove out in the real world. (And the most successful use cases are the ones not put forward as good examples–extortion, dark commerce, money laundering, etc.)

One of the perennial favorite use cases is Provenance:  tracing goods from source to consumer.  For companies, this is “logistics” or “supply chain”, for ordinary consumer this is about quality control.  This the same problem that scientists (and anyone) faces with data quality—where did this data come from, and what has been done to it?  In the latter form, this is called “provenance” and we were struggling with solutions a long time ago (before Nakamoto, Ante Bitcoin) [3].

This month yet another company touted this use case at the Ethereal Summit in NYC [1] .  The presentation by Viant traced a Tuna from Fiji all the way to the conference sushi plates.  Tagged with RFID, records of the sales and transportation of the fish are on the Ethereum blockchain, so everyone can check that the fish they are eating is “moral”. (How it can be “moral” to harvest increasingly rare wild animals and fly them half way around the world beats me.)

This is the yuppie version of Provenance (making sure that my luxury goods are authentic and “moral”), but the technology is the same as any supply chain.

Looking at Viant’s web site, they seem to have a reasonable grasp on the problem.  They have a logical model of provenance that includes “four pivotal aspects of an asset: Who, What, When, and Where”.  The model includes “Actors” and actions, and “Roles” that define permissions.  IMO, this is the right stuff (See [3]) .

They also have RFIDs to tag and geo track, and apps to implement operations (e.g., sales to distributors).  These are certainly the right technology, and they are lucky to have ubiquitous mobile devices and “the cloud” to implement these concepts we pioneered in the late twentieth [4].

So what does blockchain technology bring to the table?

First of all, it is used as a shared database, essentially a bulletin board.  The cryptocraphically signed and immutable records provide an unfudgeable trace of the object’s life.  And the blockchain is available to anyone, so ordinary consumers can get the authenticated traces of the object. (More likely, any third party can create apps that deliver the information to consumers – no normal person monkeys around with the blockchain itself.)

The second feature is the use of Ethereum “smart contracts” to process the transactions. This technology lets the company post standard scripts for, say, transfer of an asset. The script is available anywhere, and executes the same way for everyone.

These features are, of course, available from conventional databases and file systems as well.  But the Ethereum blockchain is available to everyone, and is maintained by the Ethereum network rather than dedicated servers.  This is the third advantage of the blockchain—deployment (no need for server farms), availability (no server access required) and maybe cost (TBD).

It is interesting to point out one feature of Nakamotoan blockchains that is not really used here:  trustlessness.  While the system boasts that it is decentralized and therefore “trustless”, this is misleading.

Provenance is literally all about trust. The point of tracing the object is to assure that it is what it is supposed to be, and that requires knowing who did what, etc.  Furthermore, it needs to establish a trusted trace, with each actor and action attested by a trusted source.

Using a blockchain, or, indeed, any digital system, is not sufficient to achieve this.  The company will tell you this.  The RFID can be removed or destroyed.  Actors can make mistakes or be suborned.  On the blockchain, false records look the same as correct records (and can never be removed).  Trust involve real world protocols, including authentication of identities.

In this area, the blockchain may actually be a liability. The “trustless” data cannot be trusted.  Part of what the company is doing with the “smart contracts” is overlaying a network of trusted records on the trustless blockchain.

There are other potential draw backs of using a blockchain in this use case.

Let’s talk about privacy.  Think about it. It’s not clear just how “moral” it is for anyone in the world to know where every bit of sushi came from and ended up.  Individual fishing captains don’t necessarily want any kid on the Internet snooping on their business, not to mention rival captains and possible criminal gangs.  And the caterer doesn’t necessarily want random people, competitors, or criminals tracking their business. And so on.

Second, there is no way to correct mistakes. Even if the software is always correct (which is unlikely), people make mistakes and are dishonest. If bad information gets onto the blockchain, it can’t be removed or corrected.

So, imagine that a bad actor somehow gets a bunch of bad fish entered as OK fish.  The blockchain shows that this is “moral tuna”, even though it isn’t.  Even if we find out about the fraud, the blockchain could still have the evil records forever.

One last point.  Viant is one of I don’t know how many companies trying to implement this kind of Provenance.  With all these variations out there, it will be extremely important to have interoperability standards, so you can combine tracking from a number of sources.  (See the W3C PROV working group.)

Using standards would seem to be both obvious and compatible with the philosophy of decentralization.  After all, if the only way to do tracking is to use Viant’s proprietary data model and software, then a key advantage of the decentralized blockchain is out the window.

Overall, Viant and others are doing the right thing.  It remains to be see whether using a blockchain will be a net win or not.  And all of them should implement the standards we started developing back at the turn of the century.

  1. Alyssa Hertig (2018) Moral Food: A Fish’s Trek From ‘Bait to Plate’ on the Ethereum Blockchain. Coindesk, https://www.coindesk.com/moral-food-a-fishs-trek-from-bait-to-plate-on-the-ethereum-blockchain/
  2. Robert E. McGrath, Semantic Infrastructure for a Ubiquitous Computing Environment, in Computer Science. 2005, University of Illinois, Urbana-Champaign: Urbana. http://hdl.handle.net/2142/11057
  3. Robert E. McGrath and Joe Futrelle, Reasoning about Provenance with OWL and SWRL, in AAAI 2008 Spring Symposium “AI Meets Business Rules and Process Management”. 2008: Palo Alto.
  4. Robert E. McGrath, Anand Ranganathan, Roy H. Campbell, and M. Dennis Mickunas. Incorporating “Semantic Discovery” into Ubiquitous Computing Environments. In Ubisys 2003, 2003.
  5. Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System. 2009. http://bitcoin.org/bitcoin.pdf


Cryptocurrency Thursday

Yet More Academic Warnings About Blockchains

One of the most important features of Nakamotoan blockchains is that they are “decentralized”[3] .  Blockchains and consensus protocols are grievously inefficient, but the price is considered worth paying in order to eliminate the potential for a few privileged actors to control the network.

Nakamoto-style blockchains are theoretically decentralized. This means that the system is capable of, and intended to be, run by a non-hierarchical group of peers.  But real networks are never perfectly decentralized in practice. There are also many possible dimensions of “decentralization”.

One important, if not preeminent dimension is decision making: just how are decisions actually made, and by whom?

Researchers from University College London report this spring that in fact the decision making is concerned Bitcoin and Ethereum are highly centralized [1].  This finding confirms the intuition of anyone who has dealt with these communities.  Regardless of philosophical intentions, there are a relative handful of people and organizations that have out-sized influence on these cryptocurrencies.

The study examined the public discussion and code repositories, where the design and implementation of the software infrastructure is recorded. This infrastructure embodies many technical decisions that affect the behavior of the system, the outcomes of users, the security and trustworthiness of the information, and even how decisions are made.

The decision-making process is modelled after the Internet and open source software. Ideas are formulated as public proposals, which are posted for global discussion. Implementations are published in open repositories, and also subject to evaluation and discussion.  The principle is that anyone on the Internet can propose features or changes, and that implementations will have widespread understanding and support by the time they are deployed.

The study examines the number of individuals who contribute to comments and code for different cryptocurrencies, as well as comparison to other open source code projects.

The results are pretty simple.

While “anyone on the Internet” is theoretically able to contribute, only a relatively small number of people actually write the code. And most files have only a handful of authors.  (Programmers will not be surprised at this: coding is hard work, and collaborative coding is even harder.)

Similarly, the open-to-anyone comment process is, in practice, dominated by a handful of individuals, who are de facto “experts”. This distribution parallels the pattern of actual coding, though whether “coders are experts” or “experts are coders” or there are two separate populations is not clear.

This study confirms what we have seen in practice: cryptocurrency communities are complicated, with many individuals, organizations, and interest blocs that exercise outsized influence. Their comparison to other code projects indicates that these are a natural pattern for “distributed” software projects.  The paper also include references to other studies that show just how “centralized” cryptocurrencies are.

The study did not, and could not, compare to non-decentralized projects, such as proprietary or sponsored systems.  My own experience is that such projects have similar patterns of concentration in decision making (a relative few highly influential designers and coders), though this case there is also a formal proprietor with decision-making authority which may override the contributors.

In other words, the pattern seen in this study is perfectly normal for software development.  The major difference is that there is no one “in charge”, so the de facto mavens rule.

It is important to note that, as the researchers discuss, there is a large ecosystem beyond the core software examined here.  These other projects, including exchanges, wallets, and services are organized in a variety of ways, some “decentralized”, and some very centralized (and opaque).  This means that the overall, end-to-end system is “patchy” and likely includes many islands of code, created and managed by different people.  It isn’t really reasonable to describe a cryptocurrency as purely “decentralized”.

This and many other studies show that the broad and often poorly defined notion that cryptocurrencies are “decentralized” is not realized in the actual, real-world implementation. Clearly, the Nakamotoan dream of a truly decentralized system has yet to be realized in practice.

This conclusion is important because this “decentralization” property underlies other important claims for the ultimate fairness and usefulness of the system.  For many people, the point of paying the high technical cost for decentralization is to achieve a system that is not, and cannot be, controlled by a powerful few.  If this goal is not really being accomplished, then the case for Nakamotoan blockchains is much weaker.

  1. Sarah Azouvi, Mary Maller, and Sarah Meiklejohn, Egalitarian Society or Benevolent Dictatorship: The State of Cryptocurrency Governance. 2018. https://fc18.ifca.ai/bitcoin/papers/bitcoin18-final13.pdf
  2. Alyssa Hertig (2018) Major Blockchains Are Pretty Much Still Centralized, Research Finds. Coindesk, https://www.coindesk.com/major-blockchains-pretty-much-still-centralized-research-finds/
  3. Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System. 2009. http://bitcoin.org/bitcoin.pdf


Cryptocurrency Thursday


Dahlia Malkhi on Ethereum Casper Protocol

In addition to its jolly governance problems, Ethereum has been slouching towards doing something about scaling.  Specifically, Ethereum has been discussing a new consensus mechanism, based on ‘proof-of-stake’ (codename Casper).

Classical Nakamotoan consensus is based on proof-of-work, the crude, brute force requirement of expending real world resources to preclude cheating.  Proof-of-Stake substitutes a different ‘hard problem’, basically placing a bet on the ultimate consensus.  This approach is vastly more efficient than POW, running faster and using less computing resources.

Great, huh?

The question has to be, is this really a secure protocol?

This is not a question that can be solved by intuition or happy-talk.  It’s really, really hard to analyze this kind of protocol, and it would be wise to have some adult supervision before committing millions of dollars to a possibly flawed idea.

This winter Dahlia Malkhi (a very smart grown up) sloshed some icy water on the Casper protocol.  Alyssa Hertig reports that Malkhi was pretty clear that “proof-of-stake is fundamentally vulnerable” [1].  Speaking from decades of experience, she says there are trivial scenarios that break Casper.

The Coindesk report suggests that Casper’s advocate, Sensei Zamfir, replies to this criticism that the protocol is still useful, if it is ‘mostly’ OK.

All together now:    No, it isn’t.

I’m not enough of an expert to analyze this protocol in detail.  But I am smart enough to pay attention when Sensei Malkhi tells me it’s not secure.  She’s almost certainly correct.

The most troubling thing about this exchange is that Ethereum has a history of pushing on even in the face of expert warnings about security.  The DAO disaster was no surprise.  It was predicted by Cornell researchers days before the catastrophic loss and resulting hard forks.

Ethereum has been warned about Casper. It is another self-inflicted disaster waiting to happen.

This will be a test.  How many times will Ethereum walk off the cliff while we are yelling ‘stop!’

  1. Alyssa Hertig (2018) Vulnerable? Ethereum’s Casper Tech Takes Criticism at Curacao Event. Coindesk, https://www.coindesk.com/fundamentally-vulnerable-ethereums-casper-tech-takes-criticism-curacao/


Cryptocurrency Thursday

Ethereum CryptoPets Are Proliferating

As I predicted earlier, CryptoKitties has led to copycats (!), including puppies and multispecies.

Obviously, one has to doubt that there is an infinite appetite for these utterly useless digital “collectables”, so we’ll have to see just how many such games succeed. Of course, I would never have predicted the phenomenal success of Pokeman or Minecraft, so I wouldn’t care to bet one way or another.

Alyssa Hertig reports in Coindesk that CryptoKitties is actually notable as the first implementation of “ERC721”, a standard for “Non-fungible Tokens”. Most Ethereum projects have been using fungible tokens (which, I learn, is supported by the “ERC20” standard), but CryptoKittese are, by design unique and not interchangeable—i.e., non-fungible.

As Hertig says, this technical accomplishment is interesting because it opens the way not only for clones of the Kittie game, but possibly other applications that track ownership of uniquely identifiable objects.  This might include tracking ownership of real world objects, as has been discussed for a long time.

It remains to be seen if Ethereum executable contracts are a good technology for these apps.  After all, there are already (several) provenance tracking systems, and even digital asset licensing.  These earlier systems use cryptographic signatures and publish records on a blockchain, but do not rely on Ethereum-style executable contracts.

At a very abstract level, the principle technical difference between CryptoKitties and say, Ascribe, is that CK has pushed some of the transaction logic out into the Internet. But only some of the logic.  Key parts of the system run on conventional servers.

More important, both CryptoKitties and Ascribe require users to trust the company, and both organizations take steps to earn and keep that trust.

Using the “trustless” blockchain is supposed to make the system “more trusted” by eliminating the “centralized” services that are a point of failure.  In these hybrid architectures, that certainly is not 100% true.  Or even close to 100% true.  (I have yet to see any non-trivial system that is completely decentralized and also works.)

What, then, is the advantage to using the slow, balky blockchain?

I dunno.

Perhaps we shall see.

  1. Alyssa Hertig, Crypto Collectables? Ethereum’s Next Killer App Is on Its Way. Coindesk.December 15 2017, https://www.coindesk.com/crypto-collectables-ethereums-next-killer-app-is-on-its-way/
  2. Shirley, Deter, ERC: Non-fungible Token Standard #721. Ethereum Foundation, 2017. https://github.com/ethereum/EIPs/issues/721


Cryptocurrency Thursday

Cryptocurrency Spins Out Into The Woods?

Is cryptocurrency technology heading down a path to disaster?

This summer Bitcoin is dominated by the ongoing crisis of “governance”, which is leading to fork after fork. It is increasingly evident that Nakamotoan “decentralized” and “consensus” based decision making is less than optimal for something serious like digital money.

The Bitcoin “community” (and we must use the term loosely) is, as Alyssa Hertig trenchantly says, a “Culture of Infighting”.


This has also been a year of multiplying “Initial Coin Offerings”, ICOs. Aided by an ever more automated process, practically anyone can whip up their own tokens, have a quick online auction, and pick up a quick mill or more. Cool!

(And I do mean “quick”. ICOs are infamous for their opaque online auctions that last a few minutes and are sucked up by big players.)

If this sounds like selling unregistered securities (on unregulated markets), the US Securities and Exchange Commission agrees. The SEC Guidance is pretty simple: if it looks like a security, then it is covered by US laws. Period.

Has this dampened enthusiasm? Not much, though it has been a boon for lawyers as people try to thread the needle to avoid regulation, yet still cash in.

As Avtar Sehra comments, the world of ICOs is now exploring various “workarounds” that resemble the “creative” business models of Pachinko parlors. These efforts basically try “to execute undercover securities issuances”.

It’s questionable how well this will work. The SEC tends to be pretty unforgiving of such shenanigans.

And Sehra makes the important point that pouring effort into this penny ante quick money stuff is neglecting the real opportunities that may exist to use this technology within the legal framework.

These workarounds “may be limiting the vision and creativity required to see the true scale of what ICOs and digital tokens could represent; blinding many in the industry to possible risks if they take the wrong path.”

Honestly, it seems to me that cryptocurrency technology is charging down the wrong path, ignoring warning signs and shoving aside the grown ups.

  1. Alyssa Hertig, Bitcoin’s Battle Over Segwit2x Has Begun Coindesk.August 30 2017, https://www.coindesk.com/bitcoins-battle-segwit2x-begun/
  2. Avtar Sehra, The New Pachinko? Exploring the Economics of Initial Coin Offerings Coindesk.August 20 2017, https://www.coindesk.com/the-new-pachinko-exploring-the-economics-of-initial-coin-offerings/
  3. US Securities and Exchange Commission, SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities. 2017: Washington, DC. https://www.sec.gov/news/press-release/2017-131



Cryptocurrency Thursday

Up, Up, and Away! Cryptocurrency Optimism Files High

Shaking off an endless stream of frauds, thefts, arrests, and convictions; ignoring warnings and regulatory stop signs; and even blowing through the minor glitch of a catastrophic and fatal fatal fork of Bitcoin; the cryptocurrenty community cruises to new heights of techno-optimism.

Even supposedly rational capitalists seem to be carried away.

For examplet, NVIDIA corporation is have another good year, driven by the sales of GPUs. (All alums of Illinois are proud to see how important these descendants of the much laughed at Illiac IV have become.)

Jen-Hsun Huang, the CEO of NVIDIA, recently expressed glowing optimism that GPUs will continue to grow not only for graphics but also for cryptography and cryptocurrency mining.

It’s hard to say what fraction of the $1.9 billion income is attributed to cryptocurrency, though the total amount of Bitcoin mined in a year is less than $200 million. No matter how you slice it, cryptocurrency alone cannot really support a billion dollar hardware industry.

Nevertheless, these results do show that, while cryptocurrency may not be benefitting the world or disrupting money quite yet, it certainly is sucking down computing resources and the requisite electricity to run them.

Overall, the huge GPU industry is sustained by completely imaginary and economically inexplicable activities—such as video games, digital television (including porn), and, evidently, the scratch-off lottery of cryptocurrency mining.

NVIDIA’s Jen-Hsun Huang believes that cryptocurrency and blockchain are “here to stay” and will continue to be an important market for GPUs.  I have to wonder about this prediction. It’s far from clear that the current exuberance is rational, and with the catastrophic forking and reforking of Bitcoin, one wonders when the bottom will drop out.

We also should note that much of the market for cryptocurrency equipment is driven by and dark markets. These folks may remain a robust consumer base for NVIDIA, but it’s hard to see that as a great thing for the world.

Even more important, as quantum computing comes online in the next decade, GPUs will no longer be the top of the line. QC will be overwhelmingly faster, and GPUs will be next to useless for cryptography or cryptocurrency. That means that even if cryptography and cryptocurrency continue to grow, they will no longer be using GPUs, and certainly will not pay premium prices for them.

On another front, the Blockstream company has literally left the planet, with the launch of the first of many satellites designed to make Bitcoin available everywhere. The stated use case is Africa and other places with poor Internet access. In particular, you can’t run a full node (let along a mining operation) without significant network bandwidth, so Bitcoin isn’t fully available in many places.

I think the idea of this scheme is to provide a dedicated satellite network that connects Bitcoin nodes into the global net with relatively low cost ground equipment. This base station would be pretty much dedicated to Bitcoin, and connected to nothing except other Bitcoin nodes.

I have to wonder what use such a node would be to anyone, especially if the ‘last kilometer’ is marginal. I also have to wonder how this could possibly be financially viable. Space programs are obscenely expensive, so this doesn’t seem like the path to low cost connectivity on its face. We’ll see.

I will note that the general scenario would be that with this inexpensive ground station, “you could be transacting globally with bitcoin”. “Transaction globally” means “moving money offshore”, which is probably of interest to some people in Africa, but may or may not be a positive for the local economy and society. Again, we’ll see.

  1. Alyssa Hertig, Blockstream Is Using Satellites to Beam Bitcoin Down to Earth Coindesk.August 15 2017, https://www.coindesk.com/blockstream-using-satellites-beam-bitcoin-earth/
  2. Stan Higgins, Nvidia CEO: Cryptocurrencies Are ‘Here to Stay’ Coindesk.August 11 2017, https://www.coindesk.com/nvidia-ceo-cryptocurrencies-stay/


Cryptocurrenty Thursday

Coindesk’s Crypto “Consensus 2017”: Lot’s Of Talk, Not Much Consensus

Last month saw Coindesk’s “Consensus 2017”, one of, if not the biggest Cryptocurrency and blockchain conferences. Everyone who is anyone was there (well—not me). It’s all too much, I can’t even work through the Coindesk reports, let alone all the presentations, panels, and demos. (Coindesk’s summary recap is here.)

There was a lot of excitement, although I haven’t seen much new technology or actual businesses. The promised land is still just over the horizon, as it has been for several years.

Even the generally enthusiastic Coindesk recognized some of the excess, with headlines like . “Consensus 2017: Even Academics Can’t Keep Pace With Blockchain Change”. A report on the separate Ethereum-centric Ethereal Summit has the memorable headline, “’Spiritual Experience’: Hot, Wild Ethereum Summit is Sign of the Times” <<link>> Castor comments,

If there were a sign that blockchain may be overhyped, or that the industry is in the midst of a massive bubble, the Ethereal Summit may well have been it.


The most significant news from the Consensus meeting itself was a somewhat opaque diplomatic communiqué from the Digital Currency Group, announcing a Bitcoin Scaling Agreement.

This is the latest step in the two plus year-long process that is attempting to deal with the perfectly routine engineering issue of adjusting a data structure to keep up with traffic. This issue has demonstrated the dysfunction of the so-called “consensus” governance of Bitcoin, and has nearly broken Bitcoin into multiple competing currencies.

So, “agreement” would be welcome.

Unfortunately, this grand announcement in fact announced that the same steps agreed to February 2016, which were never executed. This group has endorsed a plan that has been languishing for more than a year. (And there is no implementation in sight.)

As Coindesk reports, the underlying technical, business and political issues remain. The technical issue is pretty straightforward, but there are many people and companies using the protocol and network, and their interests conflict.

The decentralized decision-making process has been unable to find sufficient common ground to date, and has exposed deep divides in the “community”. The standard “consensus” process in such a case is for dissident factions to “fork” and do their own thing. That would mean two or more incompatible versions of Bitcoin, multiple protocols and virtual networks. This kind of fork works (sort of) for software, but isn’t a great model for what is supposed to be a universal shared resource.

So, things are not only “hot and wild”, but also on fire and adrift. (And QC will cause it all to fall down with a big thud within a couple of years.)

“It’s doomed, I tell you. Doomed!” 🙂

  1. Amy Castor,  Spiritual Experience’: Hot, Wild Ethereum Summit is Sign of the Times Coindesk.May 20 2017, http://www.coindesk.com/spiritual-experience-hot-wild-ethereum-summit-sign-times/
  2. Digital Currency Group. Bitcoin Scaling Agreement at Consensus 2017. 2017, https://medium.com/@DCGco/bitcoin-scaling-agreement-at-consensus-2017-133521fe9a77.
  3. Pete Rizzo and Alyssa Hertig Bitcoin’s New Scaling ‘Agreement’: The Reaction Coindesk.May 24 2017, http://www.coindesk.com/bitcoins-new-scaling-agreement-reaction/


Cryptocurrency Thursday