Video Of The Week: Blockchains: A Shift (Back)Toward Decentralization
Last week I posted a video that the folks at Upfront Ventures did on the current investor mindset in crypto. There are few more videos in this Upfront series and today I am posting one about the shift towards decentralization that the blockchain represents.
Comments (Archived):
Chris Dixon makes what may well be the most important point about blockchain (which technology enables a decentralized platform) I.e. a developer can invest in building value on top of the platform without being subject to the whim or strategic dictates of a platform owner.
but will the value reside in the developer’s work, or the platform (the fat protocol idea)? it could become a rent extraction process. Too many networks have their token held in high concentration by a few holders. Feels like land and the aristocracy. I don’t trust networks (and it isn’t a trustless environment) when so many tokens are held back by founders and foundations.
It is a valid question. There are certainly presently dangerously powerful miner cartels.I think we can look at the economic and power dynamics of earlier centralised vs decentralized platforms to better understand this. The key is one of ownership.DOS->Windows/Wintel was an enormously powerful platform that dominated the desktop. Owned by MS.Facebook is a private platform to that dominated the social bus. Owned by FB.If we observe the market behavior of these networks they were master slave relationships with the master able to set terms. MS did bully OEMs. Facebook did unilaterally change its terms of trade thereby disrupting the business models of, for example, social gaming companies (notably customer acquisition cost). Such disadvantaged companies had little recourse.UNIX->Linux was and remains an open platform. This is not to suggest that there are not important players with major market power. But companies who don’t like terms of trade are free to act. E.g. design and build their own servers. The investments they make on top of the open source platforms are relatively secure.The miner cabals don’t literally own the network. In fact they own nothing other than their own rapidly obseleting special purpose hardware. Major actors can break the power of such cabals if it becomes strategically important to do so. And for ownership of coins/tokens is not ownership of the network. It is perhaps best seen as a tax on the establishment of the network.
…and Twitter. Developers were very unhappy when Twitter slammed the door in their faces a few years ago.”major actors” – a substitution of one form of dominance for another?
Wrt Twitter exactly.Wrt actors – when major resources are required to maintain a platform there will be a need for major actors and that does indeed potentially skew the distribution of effective control. But because they don’t own it, such control is always subject to revolution.Even the many open source projects often have major players contributing a large percentage of updates and additions. The may be unexpected. Eg Facebook on Linux
Bang on. If we own our own data (ok, nothing new I know….) in a collective, then we’d have a commons worth protecting. (Think Enclosures).
That relates to a value of blockchain, however not Ponzi-Pyramid scheme incentivized blockchain.
That is true.
Fred, loved the “finish the job” comment. Maybe that should be broader mantra of this movement.
These appear to be a set of financial people. I hear all they are saying and it all makes sense. They seem to have a decent grasp of what is happening technically. But that’s not the whole story. You have to think about software from the point of view of the humans that use it. Fully distributed systems have been around for a long time. They have very rarely been successful commercially (Skype is the only one I can think of right off the top of my head and it has since been centralized to a great extent.)The problem is trust. The users need to trust the system to rely on it. Distributed systems may get rid of that central point of failure (if that’s how you want to characterize centralized systems) but they also get rid of that central point of trust (which is how I characterize centralized systems). The most obvious manifestation of this is the theft. I read stories nearly everyday about how coins are being stolen. There’s noone to go to, no Wells Fargo to credit your account if there is fraud. And there can’t be! Its inherent in the design of the fully distributed algorithms, that thing that you are so enamored with.So while this blockchain movement may result in the ability for non-technical people to spin up new “apps” , the real question is, will they be accepted by a mainstream of users? If history is any guide, I would say probably not.
if you lose (or have it pick pocketed in a crowd) your traditional leather wallet containing cash who do you go to? not your bank.
.You cancel your credit/debit cards and your trusted central authority card issuer protects you from loss?Meanwhile, they overnite you a new card. If you use USAA, they have one hand delivered in 6 hours.Why are you carrying money in a liquid form anyway?Full disclosure: I am long cash.JLMwww.themusingsofthebigredca…
cash is king, and possession is nine tenths of that law.
Around a third of leading-edge Prosumers and a quarter of mainstream consumers believe Bitcoin and/or other virtual currencies will completely replace cash: http://mag.havas.com/prosum… <not that=”” i’m=”” advocating=”” for=”” cash=”” or=”” against=”” it.=”” just=”” saying.=””>
Wish i had been this week.
Exactly. For me I keep cash in a few places:a) Wallet – small amountb) Each car I own and drive – small amountc) Various locations – larger amounts (in case some kind of power outage or event causes credit cards to be non-functioning). d) As a honey pot – strategically distributed near other less valuable ‘items’ so anyone who breaks in doesn’t take those things and goes away somewhat satisfied and not pissed off.As an example of ‘d’ (but not what I do now) back in the day with a cash register you left it open with some cash in it so the thief didn’t trash your store. Of course this isn’t practical in all situations but I am using it to illustrate what to some might be a non-obvious point.
I have seen closed systems, but distributed systems, of trust work really well and create all kinds of economic opportunity. Experienced it. Scaling it is a different problem but one that blockchain should be able to solve.I liked the comment about the intersection of finance, game theory, computer science etc and also one that you have to take the long view-which really means very long view. 30 years from now, blockchain will be heavily implemented into our daily lives and we won’t even realize it.
Except that there’s also this parallel development in AI and it’s clear that game theory hits a wall wrt to teaching the machines about human values, cultures and language understanding.
Exactly. It all boils down to proof of work. I’m never gonna have a fucking machine get me to prove that my work was good, never mind actually work.We need to agree what work looks like in this day and age, and how we validate it as such.Then we can issue as much currency as the work we want to see done.And no more.
Centralized payment systems have insurance and processes in place to handle theft, crypto currencies have not. I have this idea about that there is a myth in the market, fueled more by the advocates than by the developers, that expects that the security provided by the underlying blockchain will somewhat magically permeate to the upper layers. So there you have lousy exchanges, or non transactional or insecure frameworks and languages built on top of blockchains.The technical and governance infrastructure will get better as the market and the teams mature and get more experience. One can expect that each ‘accident’ is treated as an opportunity to improve, and go through proper postmortem processes. But for this you have to have the processes and procedures in place, be by self organization or by regulation.
Well said that man.
between 1:03 – 1:07 reminds me of Kooyanisqatsi and the trilogy of films, and they remind me still further of Carlota Perez and her thesis. As i said at another drinking establishment yesterday, words alone can be a little bit dry. Movement, colour, music, et.c. can access the brain in other ways to tell the same story.
Pace of innovation or group think is tremendous .4 years ago people couldn’t even spell blockchain now they can deconstruct and wax lyrical about it ad infinitum.Not sure if that makes me bullish or bearish on the entire endeavour .
.Still looking for the killer app?JLMwww.themusingsofthebigredca…
Fair comment.
It’s really really good at supporting a decentralized global Ponzi-Pyramid schemes.. some “honest” folk actually package/market their blockchain as such!
For decentralized apps to work better, ask which of the following 3 are true:1) Can the customer execute her “job to be done” better on the network relative to centralized options? How can you tell?2) Do the people who do the work in a distributed mode actually make money? Are they seeing significant ROI from their participation on the network?3) Can the core sellers on the network (if you don’t know who they are, ask who is predominantly buying the network token for utility or work using USD, BTC, or ETH) execute their “job to be done” better? Are they getting significant returns from their investments? How can you tell?If a blockchain company cannot provide convincing answers to 1,2, and 3 – at least in terms of what they are shooting for, where they are today, and the roadmap to get there – it is a big red flag.
Amen!
For Decentralization to succeed, it needs to be better than the alternative.
Yep, 200 years ago David Ricardo showed us the power of comparative advantage. Until decentralization can do better, it’s is plagued with inefficiencies.
Once you’ve built a business on someone else’s platform, succeeded and subsequently gotten cut off, it becomes obvious there’s a better way and it’s here today.
I mean, specifically.Of course, Decentralization as a trend has lots of promise, but each implementation case will be different.
Exactly. It needs to be mainstream.
With more than 50% if the bitcoin blockchain nodes eminating in a communist country, what could go wrong ?? Does anyone really think (particularly after this week movement of the $VXI ), that a tail event of vulnerability in the blockchain won’t happen?
I think I know understand why Fred’s position on net neutrality is so set. The blockchains length – at scale – and the amount of bandwidth it would consume would make it a prime candidate for the ISP.
Decentralization will be better suited to a central platform managing it for edge cases — that will exist — which then leads to not necessarily needing a blockchain to be used as the database.The reality is you need the governance and enforcement layers – you need elected government who the people trust and support, and you need authority to make sure people are playing by the rules set forth.Albert in a video he posted to Continuations awhile ago, a talk of his, he mentions that there are 2 ways that lead to collaboration:1) Incentivized – a.k.a. blockchain structured to transfer wealth weighted towards earliest adopters, or2) Government/State-mandated use/collaboration.I can see how the hyperbole, shallow thinking, and straw man arguments have lead to these crypto-assets with a Ponzi-Pyramid structure exploding how they did – and I can understand that the dream of global collaboration is a strong motivator, especially against corrupted governments – however greed is clearly what has lead to these schemes taking off.It might take awhile, as real work is required – and not a fix as simple as getting people to spend money gambling – however once the proper structures and frameworks are in place then the value of Bitcoin, Ethereum’s Ether et al will collapse; allowing blockchains to be used as currencies, where it’s allowed for deflation to occur simply on demand (or whatever holders gaming the system want to increase the value by), is something that governments should not allow anyway – regardless of if there is supposed or proposed value on top of that Ponzi-Pyramid scheme layer.Obviously blockchain has value because of the immutable ledger for lawyers and such situations, it likely will increase efficiency, doubtful it will reduce lawyer fees of course..I recently listened a good investment-related interview with Preston Byrne – http://investorfieldguide.c… – I’d say worth listening to.
Thanks Fred for this post on the future of Blockchain technologies, decentralization, and cryptocurrency. I found the ideas on tokens, infrastructure, and rewards systems very intriguing.
I do think it’s possible to have a centralised currency with rules around the issuance, which is decentralised and democratic.We can mint our own money, if the rules are right and the trust is there.Which it is in place-based communities.
It’s apparent that anyone espousing decentralized systems has little understanding of universal service and how to build generative and sustainable internetworked digital ecosystems. The answer lies in settlements between actors and how those settlements are structured. Nowhere in nature are networks fully distributed or fully centralized. Rather they have incentive structures and protocol stacks that follow immutable laws around network effects.