Tag Archives: Wolfie Zhao

Dorsey Has Yet Another Wrong Idea

Twitter cofounder Jack Dorsey pontificated recently about Bitcoin in The Times (London), stating that it will become the world’s single currency within the next ten years [2].  (This comes as his current company, Square, is rolling out Bitcoin services—so take that for what it is worth.)

“The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin,” he told The Times. This would happen “probably over ten years, but it could go faster”. (from  [2])

Recall that Dorsey is one of the crew of the “clown car that fell into a gold mine”,  (per Mark Zuckerberg quoted in [1]). He is famous for helping boot up Twitter, which has gazillions of users but has lost bazillions of dollars. Twitter is a solution to a problem that never existed, and has created massive problems of its own. So Dorsey is not exactly the most credible oracle in my eyes.

Anyway, in this case, Dorsey’s prediction about Bitcoin is almost certainly wrong.

For one thing, the entire concept of “single global currency” is murky and undefined. Even the more limited version, “single currency of the internet” is pretty much undefined. I suspect that Dorsey is saying that digital systems like Square will use Bitcoin or something like it, at least behind the scenes.  But that isn’t even close to what a “global currency” would be.

He acknowledges that Bitcoin today sucks and isn’t even remotely close to the scale needed for such a role.  He is reported as saying that these scaling problems will be solved Real Soon Now.

“It’s slow and it’s costly, but as more and more people have it, those things go away. There are newer technologies that build off of blockchain and make it more approachable,” (from  [2])

Of course, there is no such technical solution on the horizon, and the governance process of cryptocurrencies has proved to be fatally unworkable.  How anyone can be confident about Bitcoin’s technical future is beyond me.

In addition, many of the technical improvements that might make Bitcoin actually scale up actually involve major changes to the design.  Just what Dorsey might be thinking of, we don’t know, but it is arguably not “Bitcoin” as we know it now.

It seems clear that one thing Dorsey is thinking of is using something like Square to make payments in Bitcoin. Maybe that will work, though it hasn’t happened yet, because, well, Bitcoin sucks in this use case.  But it is important to note that if Square does make this work, it will involve a ton of infrastructure beyond Bitcoin itself. And users will barely know they are using Bitcoin, if they know at all.

And, of course, Square isn’t decentralized, nor is it anonymous.  So it’s not clear what the advantage of paying via Bitcoin versus some other currency would be.

Essentially, Dorsey is predicting that something might become a global currency, and maybe it will have the same name as Bitcoin.  And he’s really thinking about it within the context of something like Square, which is only about 1% Bitcoin, and 99% other technology.

Dorsey also ignores lethal threats that could bring all cryptocurrencies crashing down.

There are many, many real world legal challenges that would have to be overcome. Regardless of supposed global extend of Bitcoin, local regulations and laws apply everywhere.  (He knows this very well, I’m sure.)

There are many vulnerabilities to Bitcoin’s technology, including physical threat and financial shenanigans, and also volatile exchange rates.  Also, the Nakamotoan model for decentralized governance is proving unworkable, and certainly not something that you’d want to base the world’s economy on.

For that matter, it seems very possible that Quantum Cryptography will kill Bitcoin within the next decade.  It could also kill Square and most of the internet.  Yes, there may be ways to make BTC “quantum safe”, but they will change BTC beyond recognition.  Worse, Quantum Cryptography might very well mean that the entire “legacy” blockchain can be deanonomized with who knows what impact.

In short, Dorsey’s prediction is shallow and wrong.  It is also self-serving.

  1. Nick Bilton, Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal, New York, Penguin, 2013.
  2. Alexandra Frean, Bitcoin will become the world’s single currency, tech chief says, in The Times (London). p. 48, March 21, 2018: London.

Wolfie Zhao (2018) Bitcoin Will Be World’s ‘Single Currency’ Says Twitter CEO. Coindesk, https://www.coindesk.com/twitter-ceo-jack-dorsey-bitcoin-will-be-the-worlds-single-currency/


Cryptocurrency Thursday


Blockchain Use Case of the Week: Air Ticket Agents

As Bitcoin, the patriarch of the cryptocurrency family edges toward disaster [1], we continue to sift through the long list of use cases for blockchain technology continues. Several suggested use cases seem to not be coming to fruit. Others seem to be coming to be.

This week Coindesk reports on yet another use case, payment settlements [2]. A Russian airline has deployed a blockchain with smart contracts to implement payments between ticket agents and the airline.

the platform is designed to reduce settlement times between between the airline and the agent, which today take around two weeks.”

As Wolfie Zhao reports, it’s not clear if this is a public or a private blockchain. It would work either way, and it’s hard to say if there is an advantage either way. We also don’t know exactly how it works. They are working with a bank, so this may be a harbinger of the long expected blockchain-ification of financial back offices.

It is important to note that, as far as I can tell, the customers neither know nor care about this innovation. This is just between the businesses.  This is a common feature of many of the more promising uses of blockchain: they are strictly B2B cases, which customers will not see, and generally don’t care about.

  1. Pete Rizzo, What’s Left Before SegWit Goes Live? Bitcoin’s Path to More Capacity. Coindesk.July 25 2017, https://www.coindesk.com/whats-left-before-segwit-goes-live-bitcoins-path-more-capacity/
  2. Wolfie Zhao, A Russian Airline Is Now Using Blockchain to Issue Tickets Coindesk.July 25 2017, https://www.coindesk.com/russian-airline-using-blockchain-for-tickets/

Wolfie Zhao, A Russian Airline Is Now Using Blockchain to Issue Tickets

Cryptocurrency Thursday

Blockchain for Local Identity?

As soon as I declare that blockchain technology is unsuited for two use cases, Identity and local currency , Wolfie Zhao reports in Coindesk that the Swiss city of Zug is going to have a local ID service using a blockchain.

Oops. These use cases are still open, or at least not as dead as I said.

Of course, there is a difference between a local currency and a local ID service. The former needs to interact with conventional financial systems, the latter needs to interact with conventional ID systems. The press release indicates that digital IDs are not well developed in Switzerland, though I’m sure that digital banking works great.

Similarly, there is a difference between a global ID system, with secure digital passports for everyone including refugees and repressed populations, and a digital ID issued by a city. For that matter, the city is Swiss, which means it already has a well developed national ID system to build on.

So this isn’t quite the use cases I considered earlier.

What it is, is an intersection of them, a simpler problem and a well organized local government. Perhaps this is a favorable “corner” of the use cases, where blockchain will work well.

So far as I can tell, the rationale for this system is that Switzerland has a personal ID system (which I’m sure is quite rigorous and efficient), but digital versions of the IDs have not been successful. Blockchain technology is a way to securely associate a cryptokey with a particular ID. The blockchain is intended to make it possible for digital apps to quickly and cheaply confirm IDs.

Sure. This can work.

We’ll see how well it works. Is there enough need for this sort of crypto ID, and does it work well enough to be useful?   I don’t know, we’ll find out.

I note that blockchain is being used for a tiny part of the problem. As the press release makes clear, citizens must go to a city office to prove their identity and then are issues a digital key. This process is the hard part, and blockchain does nothing to support this service.

We want a single electronic identity – a kind of digital passport – for all possible applications. And we do not want this digital ID to be centralized at the city, but on the blockchain.” (Dolfi Müller, quoted in [2])

It is ironic to see the proponents of this system talk about how this is a “decentralized” solution. What they mean by that is that the part of the process where digital IDs are looked up is “decentralized”, particularly compared to previous systems that have attempted to implement the service with a database.

Essentially, the city doesn’t want to run a database with a secure public interface. Fair enough.

To a certain extent, they are also boasting about the local city’s initiative, too, though IDs issued by one city may have limited use elsewhere. Ethereum runs everywhere, but Zug IDs may not be trusted anywhere outside Zug.

I suspect, though, that Zug is issuing IDs based on Swiss national credentials. In that case, IDs issued in Zug are great throughout Switzerland. These are, of course, centralized IDs in that case.

Looking up IDs is a decentralized problem, but issuing IDs demands trust, and a web of trust between authorities. If every city in Switzerland issues its own crypto IDs, even using the same Federal ID, it will be chaos.

Finally, I have to say, “Ethereum? Really?”

I’m rather surprised that anyone would try to build a trusted system using the catastrophically messed up Ethereum technology. But they probably use Microsoft Windows, too. Massively clever cryptography running on wobbly, hackable software infrastructure.

Anyway, we’ll see how this works out.

  1. Stadtverwaltung Zug. Blockchain-Identität für alle Einwohner. 2017, http://www.stadtzug.ch/de/ueberzug/ueberzugrubrik/aktuelles/aktuellesinformationen/?action=showinfo&info_id=383355.
  2. Wolfie Zhao, Swiss City Announces Plan to Verify IDs Using Ethereum Coindesk.July 7 2017, http://www.coindesk.com/swiss-city-verify-id-ethereum/


Cryptocurrency Thursday