Blockchain, or more precisely the technologies behind the Bitcoin system, are here to stay, because the underlying principles are far too solid. It is not a Ponzi scheme, nor is it a bubble full of hot air. Granted, there are a bunch of over-hyped projects, but that doesn’t mean ALL of them are nonsense.
By the way, either you are totally missing the point. Or this is quite an intelligently written article and an excellent example of how some people use facts selectively, deliberately hype the negatives and “fake the news”.
Let me try to answer some of the concerns that you have raised.
Ten years in, nobody has come up with a use for blockchain
The Bitcoin paper was released on Oct 31, 2008, a little over 9 years ago. However, it has garnered attention from a wider audience only in the last 4 years. I would argue there is a lot of work to do on taking this technology mainstream, even within the developer community. Right now, you have many talented, genius developers working on it, but for example, you don’t have enough user experience and design folks working on the interfaces. This will happen, and you will see a lot of smart applications being developed as we go forward.
Plus, it’s not actually that good a payment system — Visa can handle sixty thousand transactions per second, while Bitcoin historically taps out at seven.
The transactions per second argument when discussing about Bitcoin vs Visa (or other existing systems) is an easy trap to get into if you think of it. Bitcoin, as detailed in the original paper, prioritizes the smooth execution of a system (which does payments) without a centralized authority, over the efficiency of the system. To compare Bitcoin to Visa is to miss the point altogether. Can the Visa system work without an organization running it? The Bitcoin system does. Is that a quality which you would want? Probably it won’t make sense to you if you live in a developed country, but think about a Greek elderly man who may have lost his entire savings when the fiat currency got devalued.
Having said that, there are several scaling initiatives being developed by the community. Give it a while, and you may not be able to raise this factor in the near future.
And who says, Visa has to lose for Bitcoin to win? Bitcoin (and other decentralized currencies) will co-exist with fiat currencies. Although, I would certainly vote for the system, which gives me privacy, decentralized trust, lower fees in the long run.
It would take 5,000 nuclear reactors to run Visa on the blockchain.
I am really curious as to how you arrived at this figure — probably a copy and paste job from somewhere. I am guessing you are taking Bitcoin’s estimated energy burn rate and multiplying it with the 60,000 VISA tps divided by the 7 Bitcoin tps, which is a very lazy and irresponsible way of looking at this. Well, the point is you can’t take the Proof-of-Work algorithm as run by Bitcoin and scale it beyond 7 tps using more power — in the Bitcoin implementation, you can only mine 1 block roughly every 10 minutes — no amount of nuclear reactor power addition is going to change that. How you will scale is with alternative methods like state channels, sharding, plasma, etc. I am not getting into the technicals on this, but your statement is blatantly incorrect and terribly misleading.
Also, other decentralized currencies are experimenting or developing their consensus algorithms on alternative techniques such as Proof-of-Stake, which do not share the computation-intensive nature of Proof-of-Work. Ethereum is going to release their Casper update and switch to Proof-of-Stake probably this year.
Bitcoin is what banking looked like in the middle ages — “here’s your libertarian paradise, have a nice day.”
I am sorry but I need to call out the incorrect assumptions and statements that you are making in this entire section. It also betrays your deep-seated bias towards the centralized way of working and your utter inability to consider alternative systems. It is important to take an unbiased view on this new technology.
You say there is a government-backed banking system providing guarantees and such. Sure, there is. Unless you live in a country like Greece or Zimbabwe or Venezuela and that system fails. I also think there is a very US-centric (or developed country) bias in your analysis of this technology too, which I am not going to get into.
You say there was a hack in which various bitcoin exchanges lost huge amounts of money. You may well do yourself a favor and look up the stats on how much money was lost in the 2008 subprime mortgage crisis, or how much money was lost in the LIBOR fixing scandal, and the various effects it has had on the economy — all terrible problems with the current banking system.
You imply that Bitcoin obfuscates the use of the network in terrorist financing, organized crime and child pornography. I really do admire your technique of using these use cases to paint the entire Bitcoin idea as unsuitable. Are you also implying that such transactions do not take place under the current centralized system of currency? No, sir — they very well happen. So please do not try to corelate the two and paint Bitcoin as a haven for criminals only.
Yet the infrastructure to do this — for example, advance authorization with the source of funds so you don’t have to wait eight minutes to read the article you just clicked — actually eliminates the need for bitcoin at all.
Comparing Bitcoin in it’s current state without the scaling innovations which will come in time, to the current payment network which has been in development for >30 years is not fair. Same thing for inter-bank transfer. Enough said.
Even the most die-hard blockchain enthusiasts actually want a bunch of humans arguing about the underlying intention behind a contract, rather than letting the software self-execute.
A smart contract is not actually that smart. It’s just a bunch of code running on a distributed network. This is the same misconception that non-technical folks have of Artificial Intelligence. AI is not an all-powerful system that works better than a human. It is clever code, looking at enough data, making decisions that are an output of the code that humans write.
Now granted that a lot of folks make outlandish arguments on all the fancy use cases that smart contracts can help implement. But to imply that smart contracts are utter garbage is nonsense. Smart contracts are pieces of code that are variants of the same ones you refer to, but that work in distributed, decentralized systems. What will they be used for? Let’s see how this space pans out. But I am not sure how trashing the entire concept and ruling out any eventualities of smart contracts being of some use, makes for a credible argument.
Another implausible idea is using the blockchain as a distributed storage mechanism.
You have taken your incorrect assumptions and applied it all over this section.
First, you’re relying on single-point encryption — your own private keys — rather than a more sophisticated system that might involve two-factor authorization, intrusion detection, volume limits, firewalls, remote IP tracking, and the ability to disconnect the system in an emergency.
Are you implying the same techniques cannot / will not be a part of such a decentralized, distributed system? If so, why not? 2FA doesn’t work on protecting private keys in your wallet, is it?
Second, price tradeoffs are entirely implausible — the bitcoin blockchain has consumed almost a billion dollars worth of electricity
Refer to Proof-of-Stake for consensus.
Fourth, systematically choosing where and how much to replicate data is an advantage in the long run — the blockchain’s defaults on data replication just aren’t that smart.
This should actually be third. By the way, how did you arrive at this conclusion?
And finally, Dropbox and Box.com and Google and Microsoft and Apple and Amazon and everyone else provide a set of valuable other features that you don’t actually want to go develop on your own.
Why would a user go develop this? There are companies who will and are doing this.
As people who trade in unlisted stocks will tell you, that’s a recipe for getting your money stolen.
New companies have also begun creating blockchain-based “coins” convertible into company stock, and selling them to the public in Initial Coin Offerings, or ICOs
Granted there are a lot of people coming up with hare-brained ICOs. The current centralized system equivalents are called “penny stocks” on NASDAQ and NYSE and others, which by the way are listed too. You are supposed to do your homework before investing — it’s called due diligence.
You sir, do have an unwavering faith in the system as it works now — that’s pretty clear. Pray allow for other schools of thought as well. Hail centralized ledgers, if that’s what you want to hear!
For voting, the status quo is recording the total number of ballots cast, with the voter dropping a visible paper ballot in a box
I live in India, and we have EVMs (Electronic Voting Machines) — it works tremendously well. We are the second-most populous country in the world for reference. Lot of voters using a non-paper based method of voting.
Which leaves us where we started — currency speculation and illegal transactions
Please do continue your tirade. And keep your article URL handy for the future. It should have tremendous comedic value.
From your response to a comment…
The most illustrative thing I found was that if you type IBM supply chain into Google, the top five results mention blockchain only once — in a headline for a news section about new trends in supply chain.
So a Google search related to IBM should be taken as an indicator of cutting-edge technology innovations in blockchain software for the supply chain. Hmm…
In conversations with bitcoin entrepreneurs and investors and consultants, there was often a lack of knowledge or even interest in how the jobs were being done today or what the value to the end user was.
I am just too tired now to argue with this. Along with new technology, there will be dreamers, futurists, crazy theorists, and all sorts of people. You need this phase of excitement to get the technology kick-started. And so you will see all sorts of experiments, most of which will fail. But I guarantee you that the real people will still be standing after the dust settles after all the crazy hype dies down. The first version of Google was not what you would compare to what is available now. The first version of Windows was not what you get now. The first version of the smartphone was not what you get now…