A Letter to Jamie Dimon

A number of my friends, along with commenters on this blog, note this as a great post on crypto currencies (or rather, crypto assets). It’s a well thought-out and well executed piece, but it’s important to note the source and the possible biases implicit in the arguments. AFAICT, Chain provides blockchain technology for use in private, closed applications, aka “Blockchain not Bitcoin”. The article may have been targeted at calming potential customers (i.e banks) who link blockchain technology with the thing called Bitcoin that is now compulsively derided by Jamie Dimon. As a piece of corporate marketing I think it’s absolutely wonderful. I also think it reflects a point of view that may, well, miss the point.

The “Blockchain not Bitcoin” argument is analogous to a similar argument from the early days of the Internet that ran as follows: “Hey, big enterprises, you’ve heard about the Internet and the underlying technology, the Internet Protocol (IP) that powers it. You’ve heard that IP is powerful, but do you really want to connect to the public Internet, full of criminals and porn and security risks? No worries! We’ll sell you a “private version” of IP so you can have an “Intranet” using the IP protocol within your company, and if you want you can link up with your preferred buddies into an “Extranet”, like a private club. You get all the benefits of IP technology without the nasty bits — how awesome is THAT!”

Enabling private blockchains may turn out to be an awesome business model, for a period of time anyway. But if past is prologue, companies will connect their “blockchain extranets” to public blockchains — like Bitcoin — or they’ll go away. Will the companies that embrace open blockchains rather than fight or avoid them have an advantage over laggards? Who knows — but it seems like those who waited out the Internet are the those who are being, as they say, disrupted.

A few other comments FWIW:

-The value of “crypto assets” can be viewed as reflecting value of the information they vouch for. In the case of Bitcoin, the information is transactions. In the case of Etherium, the information is contracts. What people ultimately pay for is an unalterable, irrefutable database of information that no single entity controls. The value of the information secured will ultimately determine the value of the associated crypto asset. Over the long term, if the information secured by the asset retains intrinsic value, and the size of the database grows, the value of the associated assets will grow too.

-The notion of decentralized apps being best for those who are “off the grid” or seek to be so is rather pejorative (though it probably plays well to Chain customers). There’s another perspective: We live in a world of diminishing trust. We can’t trust our governments, or the media, or banks, or Google or Uber or many others, and for good reasons. People are increasingly fed up with organizations that lie to us in the interest of monetizing and controlling us. Public crypto assets — like Bitcoin and Etherium and things built on top of them — have, if nothing else, demonstrated the ability to create trusted systems outside the control of the institutions that currently command, but do not earn, our trust. You can tell on any given day exactly how much trust has been earned by public crypto assets — just look at any of the indices tracking their value. You can view the rise of public crypto asset values as a direct measure of the amount of trust flowing out of conventional institutions. Sure, a lot of the current value represents ill-gotten gains — though probably as much from corrupt politicians across the globe as from hackers flogging ransomware — as well as rampant speculation by investors who have no idea what they’re getting into. But the run-up in asset values can be viewed as a powerful message, more significant than the oft-quoted tulip bubble (which is also misunderstood by most and disputed by scholars). Today’s crypto “asset” bubble is indeed irrational, and it will burst at some point. But crypto assets, unlike tulips or Beanie Babies, just may enable systems and services that can be trusted — and those are in high demand and short supply. So even after the inevitable “crash”, the party will just be starting. Unless governments and companies start representing interests of the people they’re supposed to serve in a big, big way, decentralized apps — those not under the control of a single entity or private club acting in their own interest — are likely to grow unstoppably, culled by the occasional forest fires.

-Last point: The post notes the relative dearth of killer apps on public blockchains and draws parallels to the “first year of the Internet”. The start of the Web is commonly dated as 1990. That was 27 years ago. Well before that — beginning in the 1960s — ARPANET technology was funded by the DoD and later by the NSF — a long long time before cat videos. Bitcoin and blockchain technology was started with a whitepaper, supported by nobody, issued less than 10 years ago. Not exactly a fair comparison. Fortunately, in an open system we can moot our views and come to an agreement on what’s fair and worthy of our trust, and our money.