Tag Archives: Pete Rizzo

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.

Quite.

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

Digital Postage? I Wish It Were

This week I saw a headline from Pete Rizzo, “21 Inc Opens Bitcoin Email Service to General Public”.

“Wow!”, I thought, “Finally! The ultimate spam control!”

But, like many things to do with the company called ‘21’, it ain’t what they say it is. (See thisthis, or this.)

What I was thinking of, of course, is a digital postage stamp. Your email will not be delivered to me without “postage” attached. It could be a tiny, tiny amount, and it could potentially be transferrable or reusable (i.e., I might be able to spend it). The point is that any amount f postage above ‘zero’ would kill spam dead.

And, by the way, postage could fund the email service without selling personal information.

Win, win.

Cryptocurrency is a perfect technology for this concept. Cryptocoins are purely digital and can be denominated in tiny fractions. Basically, you would use an email server that requires a tiny amount of Bitcoin or whatever attached to each message, or else it won’t accept the item for delivery.

Ta da! No more spam.

I thought the headline was about something like this.

Sadly, this is actually the reverse of the postage stamp idea. It is a version of “fill out this survey and win a coupon”. Scarcely a new idea, and basically a way to make spam more precise. Sigh.

I grant you, 21’s service does make spammers pay, but only if you actually respond. Postage has to be paid for every message, not just the accepted ones, so it is a much, much more potent brake.

Thr marketing pitch tells us that part of the game is that they have a select mail list (initially with a lot of “famous people” such as Marc Andreessen). They offer this as a way to “Get in touch with busy people”,  paying them to click on your survey or reply to your plea for funding.  Why I would want to send anyone such a survey or query, let alone these jokers, is beyond me.

I notice that you or me will be offered pennies for our opinion, while the VIPs charge a bit more. “Get replies from 50+ angel investors for $20 per reply”, and so on. What a racket!

And what a waste. I would actually be interested in a “postage stamp” service, even from bozos like 21.

But “microconsulting”, AKA, responding to commercial “surveys”, has no appeal to me at all.


  1. Pete Rizzo, 21 Inc Opens Bitcoin Email Service to General Public.May 1 2017, http://www.coindesk.com/21-inc-opens-bitcoin-email-service-to-general-public/

 

Cryptocurrency Thursday

Cryptocurrencies: A Favorite Technology Of Criminals

Cryptocurrencies in the Nakamotoan vein have always be attractive for extralegal transactions, for tax evasion, sale of contraband, digital extortion or other purposes. Economically, it is the equivalent of a “bag of twenties out in the alley”, and seems deliberately designed as an economic weapon.

Many apologists have tried to claim that the legitimate (for certain values of “legitimate”) use cases are increasing, and that it is unfair to focus so much on a few bad apples. “‘Sin’ Activities No Longer Drive Bitcoin Economy, Researchers Find“, reports Pete Rizzo.

Unfortunately, the picture is not really so rosy, because cryptocurrency continues to be primarily used for extralegal purposes, as age old rackets exploit the speed and efficiency of twenty first century technology. This is readily seen in any sample of headlines.

Bitcoin Has a New Top Dark Market” reports Michael del Castillo. Years after the demise of Silk Road, dozens of dark markets have sprung up to serve your need for drugs, guns, murder for hire, and services. Bitcoin itself has become the bridge between hidden transactions and the legitimate commercial world, i.e., as the laundry. (This function is the basis for some of the claims to increased “legitimacy”: these transactions are classified as “clean”.)

Demand for Zcash Mining Grows as Blockchain Launch Approaches” says Jacob Donnelly. The original Bitcoin concept prominently promised “transparency” as a crucial feature. This has turned out to be a drawback for the many dark transactions on the Internet, so new protocols such as zcash are coming out which are designed to be entirely opaque.   Let’s be very clear here:  these systems have little purpose other than cloaking transactions, mainly to avoid surveillance by authorities. Nothing good can come from this technology.

Cryptocurrency has found favor in some ancient criminal artforms, bringing them up to the minute. Bitcoin has become a favorite tool of for digital extortionists, allowing them to fully automate their racket. “Bitcoin is Not the Root Cause of Ransomware” reports Peter Van Valkenburgh, but it does fit perfectly into the MO that it might have been deisnged for this purpose.

As a computer scientists I am more than a little embarrassed by how automation has made it so easy for anyone to execute what is basically a mindless racket, over and over, whisking away the proceeds via the internet.  Sigh. Beautiful engineering, for such a low purpose.

Cryptocurrency technology can also be employed in pyramid schemes and similar scams. Some cryptocurrencies are widely believed to be essentially nothing other than pyramid sales schemes, dressed up in fancy terminology.

London Police Investigate OneCoin Cryptocurrency Scheme” reports Stan Higgins.  In this case, the scam, if any, would be in the story surrounding the technology, and the associated sales programs. The Onecoin scheme is no different from any of hundreds of other multilevel marketing schemes, except they use cryptocurrency as a sort of window dressing, and, of course, to efficiently whisk away the profits. Sigh.

Having reinvented the universally abandoned Gold Standard, and made the world safe for money launderers, cryptocurrency is now invigorating age old crimes and scams with new, highly efficient technology.

This is certainly “disruptive”, though no points are awarded for “innovation”.

How is this a good thing?

 

Cryptocurrency Thursday

Formal Verification for “Smart Contracts”?

Speaking of formal verification of software, I note that in the blockchain community, “smart contract” enthusiasts are now discovering that they might need some serious rigor in their executable contracts. A few slight problems, such as the complete collapse of The DAO, due to, well, logical bugs in the “smart” contracts.

The goal of “smart” contracts seems to be to eliminate those faulty and dishonest carbon based units, in favor of the cold, clean, logic of machine code. In their naïve enthusiasm, many people seemed to think that a Turing complete language is a good thing for these contracts, apparently knowing little about formal logic or languages.

Anyway, most people now realize that writing executable contracts is difficult, and, no matter how smart you think you are, you probably can’t write perfect code, at least not without assistance. So, let’s use formal verification to, as Pete Rizzo puts it seek “smart contract certainty”.

Rizzo is reporting on the Ethereum developers summit , which was said to be a lot more sober this year, after their catastrophic spring. Rizzo indicates that multiple speakers discussed formal verification, “as a way to inspire confidence” in the software and protocols.

They are certainly correct that formal logic must play an important role in this technology, and I suppose that it might be a valuable sandbox for formal tools. (Of course,  this is hardly news to Wall Street.  Financial wizards already employ clever logicians, who don’t really talk about what they do to earn their millions.)

My own view is that formal logic may help reduce stupid bugs, though it will generally make the systems opaque beyond human comprehension. This is a really bad thing for the overall goal of assuring that the contracts do what the people want them to, and any confidence in such systems may well be misplaced. If you can’t understand it, how can you trust it?

As the joke goes, “Let me make you an offer you can’t understand”.

In any case, these contracts must exist in the real world, which is neither on-line nor formally verified. I think that the big problem with many financial systems isn’t that the contracts aren’t executed accurately, but that the contracts are rigged by the rich to rob the poor. Automating the process is scarcely a solution to that problem, at least not for us poor people.

It will be interesting to see what can be done in this area. Can you actually create “provably correct” executable contracts that (a) are believable and (b) do something nontrivial.

 

Cryptocurrency Thursday

Apple Offers Lesson In End-to-end Thinking About Cryptocurrencies

I have consistently pointed out the need for End-to-end thinking about cryptocurrencies. You cannot focus exclusively on the blockchain, the network protocols, APIs, or “consensus” processes. You have to engineer and design the whole picture from user to service and to other users.

This is particularly important in (often overheated) discussions of “decentralization”, which describe the great virtues of blockchain based protocols and digital signature based transactions. But the real world systems still employ many “centralized” services, including exchanges (which are routinely attacked) and other software (such as PayPal and Amazon, which have their own agendas).

This month saw another illustration of this point, thanks to Apple.

As anyone who has tried to develop software for iOS devices knows, the only way to publish your app is via the Apple Store, and they (Apple) have final say on whether or not you can do so.

Regardless of how well you researched your market and developed your app, Apple reserves the right to tell you that it can’t be sold or even given away to users of iPhones and iPads. This review process is more than a little opaque, as Apple appears to apply a mix of corporate goals, some semi-subjective design objectives, and some legal criteria.

In the realm of cryptocurrencies, this process has played out in typically mysterious ways.

First of all, we should note that Apple has it’s own products in the digital payment world, and would like nothing else than to have you pay with “iMoney” or whatever (and probably get loans from the “iBank”). So cryptocurrencies not controlled by Apple do not fit their strategic plan at all.

Therefore, it was not very surprising that until 2014 Apple basically blocked key software that use any cryptocurrency. Given that these directly compete with Apple Pay, it is easy to see the logic of this position.

So, no matter how “decentralized” Bitcoin might be, and how “uncensorable” the Internet might be, the most popular mobile devices are controlled by a single, aggressively monopolistic, company. And Apple can, and has at times, “censored” access to Bitcoin on its devices.

In 2014 this policy moderated, with a new guideline”

Apps may facilitate transmission of approved virtual currencies provided that they do so in compliance with all state and federal laws for the territories in which the app functions.

Since that time, Apple has “approved” Bitcoin, Litecoin, and Ethereum (all with substantial legitimate corporate power), but not others, such as darkcoin/dash (favored by black markets) and, interestingly, Ethereum “classic” (the rump branch of the Ethereum fork). Also, Apple reflects local laws, blocking some apps due to legal restrictions in some jurisdictions (e.g., China).

Overall, it is a hazy and unpredictable situation. This is, as I said, pretty much the norm for the Apple Store. The “look and feel” of iOS publishing, if you will.

As far as cryptocurrencies are concerned, the Apple Store is a reminder that all the decentralization in the world does not help when there is a “centralized” gatekeeper, including one run by an opaque powerful multinational corporation. And, I would note, that Apple has no interest at all in “disruption”, except by Apple.

Of course, there is no shortage of other ways to access cryptocurrencies, even if you can’t use your iPhone for what you want to do.

I would say that the main harm is that for all the trendy people who love their iPhone because it looks cool will have a harder time using cryptocurrencies in everyday life. Anyone whose iPhone is all they know about the Internet will have a distorted view of cryptocurrencies (and everything else). If nothing else, cryptocurrencies aren’t “cool” in the Apple world, which matters more than it should to people who ought to know better.

But honestly, Apple’s filtering is a general problem.  As a developer of free software for academic and scientific use, with very limited funding, I found the iOS approval process almost impossible to deal with. Every release of every app has to go through a labor intensive, 30+ day, crap shoot?  For something we are giving away?  That’s just not feasible.

Now that’s something I’d like to see “disrupted”.

 

Cryptocurrency Thursday

Cryptocurrency Governance Processes: A Master Class

This summer has seen a master class in the difficulties of “decentralized” governance, at least as practiced by Nakamotoist cryptocurrencies, which are “a tool that we put outside of our jurisdiction in order to have it govern us.” (as Vlad Zamfir put it).

Bitcoin is now in its second year of flailing at the problem of blocksize capacity. A perfectly pedestrian engineering problem, with multiple solutions (each with plusses and minuses) has so far defeated the Bitcoin community’s ability to make decisions.

Despite the existential threat to the whole enterprise, the supposedly democratic process has been revealed to be a democracy of a few large companies, with huge economic interest in doing nothing. So much for “nobody can censor” Bitcoin.

At the same time, Ethereum is walking us through a multi-phase catastrophe that was “TheDAO”. The entire concept of Nakamoto-style cryptocurrency and “Distributed Autonomous Organizatoins” is to eliminate untrustworthy humans, in favor of a laissez faire voting and coded “smart contracts”.

After attracting absurd amounts of investments in advance of any meaningful economic activity, TheDAO was swiftly “hacked”, via a logical loophole it the “smart” contracts. Gosh, who could have predicted that?

The perpetrator takes the position that the autonomous system is, by definition, correct, so the fund transfers must stand. This is certainly the fundamental philosophy of cryptocurrencies and DAO’s.

For some reason, the investors who lost millions of (“fiat”) dollars are less happy with this, and want their stuff back. The Nakamoto style blockchain is highly resistant to either finding the perp or undoing the damage. That’s the whole point.

Furthermore, by definition and design, there is no one in charge to complain to or fix it. Again, that’s the whole point, to remove those pesky “authorities” who might undo a done deal.

Except….

The DAO and Ethereeum do have programmers involved, programmers who have a whole lot at stake personally. These developers have, in fact, stepped in to block the removal of the disputed funds for a time.

But how can this “crime” be undone?

Within the rules of TheDAO, it can’t. Within the rules of Ethereum there is only one way to do it: rewrite history, and have a majority of the users accept the alternate history.

That’s right, the very thing that cryptocurrencies are designed to prevent.

This, in fact, appears to be what is going to happen to Ethereum. A new, hacked up version of the code started Wednesday  (AKA, the “hard fork”), which  basically undoes the disputed transactions by creating a new history out of thin air. If 51% of the computing power of the Ethereum network accepts this new software, it will go into effect, and the old transactions disappear.

How was this decided? The developers have had quiet, behind the scenes discussions with the largest companies (i.e., the largest interest groups), and have decided that this is the best course.

This is so much better than governments and bankers talking quietly behind the scenes to decide important economic policies, no?

Fascinating.

These episodes show us that the Cryptocurrency Emperor has no clothes, and the Great God Nakamoto has feet of clay. These innovative disruptions turn out to, well, not really work at all, let alone as advertised.

And, by the way, the not particularly new, and certainly not “autonomous”, Pokemon.go has been far, far more successful than cryptocurrency in just a few days.

 

Cryptocurrency Thursday

A DAO to Save Whales?

If “The Blockchain” is the flavor of the month this year, then Distributed Autonomous Organizations (DAOs) are not far behind. If the use cases for a blockchain are mostly imaginary, then DAOs are basically still science fiction.

Not that I don’t appreciate science fiction!

Pete Rizzo reported in Coindesk about a particularly imaginative concept for a DAO, which appears to be pretty much a thought experiment that might be made into a demo.  As Rizzo puts it, an “early-stage effort”!

The idea is to create a DAO that would (somehow) “”autonomously care” for a pod of Orca whales in the Pacific Northwest.”   The researchers are exploring possible legal models for such organizations and use cases, which will require the legal system to adopt the principle that non-human entities can have legal rights. In this case, they imagine that the DAO “would enable animals a way to exercise legal rights for the first time.” Really?

I think these people are serious about experimenting with this concept, though I wonder if they really know what they are doing. I’m not sure I understand the problems they aim to solve, or why a DAO would help solve them. And I certainly don’t understand how “the whales” themselves would be empowered in any way.

Indeed, the most intriguing question is whether this DAO serves the wishes of humans who want to “save the whales”, or of the whales themselves who want to, well, who really knows what they want?

I give them full points for imagination, and I bet you could boot up something DAO-ish. Whether this will work at all, let along help or “empower” whales is hard to say at this point.

 

Cryptocurrency Thursday