(disclosure — I am developing an automated trading system for crypto-currencies, foreign exchange, metals, commodities, indexes at arstech.biz)
This is the initial article in a series of articles — attempting to foresee a future where alternatives to the blockchain design are realized, existing, and operating.
I realize that the title and the article itself is going to provoke very strong reactions. The whole area of crypto-economics invites strong opinions and a sharp division between the camps of crypto believers and non-believers.
Most blockchain designs operate either based on speculation — where the computing resources spent are used to justify the token valuation/pricing, and/or on ‘rent seeking’ model — where the user pays either for operations run on the specific blockchain or for upcoming future utility/benefits.
2. What’s wrong with blockchains?
For starters, enormous amounts of electric energy and processing power are used for random computing, hashing over and over again, non-stop synchronizing.
Blockchains, through the process of mining, invite an ‘arms race’ to get and use more and more powerful and sophisticated computing hardware — GPUs & ASICs.
With few exceptions blockchains and coins residing on blockchains have no real physical or virtual assets. The processing power used for producing blocks on blockchains is used as a justification for the valuation. The pricing of a coin is determined through speculative trading on crypto-exchanges.
Access to the blockchain is only possible through running of a node, which needs to synchronize non-stop with the current state of the blockchain — downloading up to hundreds of megabytes a day.
The supposed widely trumpeted decentralization of blockchains becomes centralization as a specific blockchain becomes more and more popular — as fewer and fewer users are able to maintain a running node.
So called ‘smart contracts’ are actually collection of functions residing on a blockchain. A user of a ‘smart contract’ has to pay for each operation run on the blockchain from the ‘smart contact’.
‘Smart contracts’ are using functions of specific programming languages, and are designed by programmers. The end user, usually not a programmer, has to use a decenralized app / Dapp, designed also by programmers to call the smart contact through user friendly interface.
So far the most successful use of coins/tokens residing on a blockchain is in trading on crypto-exchanges. Very few people foresee it yet that this type of trading paves the way towards tokenizing of companies/businesses which actually have read physical or non-physical assets.
This scenario, if successful for companies/businesses, will lead to extinction for most no-asset blockchains.
3. Useful elements
While the previous chapter did list so many wrong and negative things about blockchains, there are some useful elements which can be taken from and incorporated in post-blockchain future designs.
The blockchain can be stripped form the useless re-hashing and transformed into an ongoing and growing storage of records. Only few copies or even a single copy of this storage will be sufficient for worldwide access and use.
Decentralization — expressed through multiple nodes in blockchain designs can be taken further. A true decentralization is achieved by direct communication from one entity (be it a user or a ‘smart contact’) to another.
In such case the entities are using their own computing resources without the need to rent and pay for it from a blockchain. An entity may choose to pay to place and store in public its logs and records of interactions on the successor of the blockchain — the storage or records, or not store anything in public.
The element of a ‘smart contract’ can be re-designed where both the contract user and contract creator are non-programmers and the contact is designed in ordinary language, although through use of specific frames and templates.
4. Not really an epilogue
I stress that this is the the first article under the ‘let’s get rid of the blockchain’ umbrella. As it is to ignite a discussion, share ideas and a variety of visions of the — post-blockchain future.