Blockchain is not the future
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It’s hard not to pay attention to all that fuss. Blockchain-based technologies are taking over the world. Blockchain positive people claim that decentralised ledgers are the future.
I don’t believe in it.
There is the problem with the hype. Most of the people do not understand the Blockchain technology. Do not understand Bitcoin or Ethereum or any other cryptocurrencies.
If Bitcoin (or any other crypto) is a car, Blockchain is an engine.
Without any further ado, I will review essential parts in non-technical manner. Hoping that it will help others.
Investment opportunity
Bitcoin has paid attention of many people as an investment opportunity. A lot of money was invested rather than raise the liquidity and do the necessary activity from necessity. Yep, #Hodl’ers. The capitalisation of the Bitcoin has grown exponentially. In other words - skyrocketed.
Ask any cryptocurrency buyer, what was the main reason behind purchasing any of the cryptocurrency? I would be deeply surprised if the answer is not “investment opportunity”. I don’t know anyone whose reason was other than that. Do you?
Even people in Wall Street leave their jobs so that they could apply their professional tactics to take away your money by manipulating the market [1]. You just have no idea.
Incentivisation scheme
Bitcoin and Ethereum use Proof of Work (PoW) incentivization scheme. It is analogous to this example:
Imagine that 10 people are writing to their ledger who sends money to whom. They write down these transactions and each paper is signed by all the rest of the people. For everyone in their ledgers. Each paper has previous and next page number of the paper signed also by all of them. Very little chance of deceit, all have seen it - all of them compared with their own and put down their signatures if it matches. So far so good.
There are miners. They “mine” the paper on which to write those transactions. What do they mine? It’s practically having consensus at the time at what accuracy it is needed to rip the paper with their toes. Literally.
Ten people sitting next to each other, with toes ripping hard the paper filled with transactions. Lots of failures, mountains of paper garbage and efforts to rewrite all transactions for another toe paper ripping attempt again. The first one that successfully matches the accuracy happily announces his achievement (such a hard work) the rest of them measures it and signs it if accuracy was reached and transactions history match, then puts to their ledger. Achiever is then awarded. Then they start again. And again.
The more people join the “miner” crowd the more distance of required accuracy is increased. It then becomes harder to “mine” or in other words — rip longer distance of the paper with that accuracy.
There is an attribute that majority has to agree rather than everyone. If more than 50% agree on correctness, it’s a majority talking and hence it’s supposed to accept the records to their ledgers.
Would you invest in slices of papers? Would you invest that someone was ripping the papers all day long, all week, month and years? Would you invest in the garbage of sliced papers? Is there a value in a verified ledger itself?
I though of another analogies, imagine that:
- miners have to score in basketball from half of the court. The one that scores first, other agree and the reward is paid. The more scorers (miners) join, the further they have to score — distance is increased. Imagine all those attempts in vein. Attempt of ones that did not score is majority. Was that time spent well? Is there any investment value? Your family, relatives, half of the city throwing a ball all day long trying to score. Empty streets in the city, full of people basketball courts in the yards, halls and other places..
- people have to enter the reception at 14:00:00.000.000.000.000 o’clock. Yes, the time measurement accuracy is in picoseconds (ps). Now it is agreed, that the one that enters the place within range ±10 ps, guy creates a block and gets reward. Now, imagine all those million of people trying to enter the place within that range. It’s very hard, I agree, but what’s the use of all these attempts? Now that the more miners join, the measurement is increased to femtoseconds. Picosecond has 12 zeros after second, femtosecond is 15 zeros after second. Range becomes ±10 fs. It’s even harder. Where is the value in that? All that time spent..
Now imagine that for all those examples and analogies, we have technology that slices the papers, scores ball and enters the reception in the first attempt. Always. Always from the first try. Would you justify such technology and artificial complexity (incentivisation scheme) if you can do it in the first attempt?
Reason why it’s not the future
At least not the way it is now.
- The existence of many coins
There are too many crypto coins. How much of fiat currency do people own usually? I doubt there are many who would say more than two on daily basis. You say there might exist a coin for other things than currency. That’s the problem, there is a coin for every damn thing. There is Shitcoin. And that’s not even funny. - Control by algorithm/lack of human intervention
Let’s say a mistake happened. There would be no one to ask to correct the mistake. It’s just done. Whether that’s currency or any other proof of something. Do you want a world where algorithms define what is what? Do we all agree on such control by an algorithm? Programmers solve and resolve most of the problems. But new ones that were never thought about are coming in constantly and fixes are required. And it’s well known, that fixing Blockchain is complicated. - Mining
Who said mining has to exist in the first place? It is such a nonsense. The whole idea of mining is entirely flawed with no advantages but just a waste. Mining is physical world phenomenon, but not virtual. There is no need for incentivization. Period. - Low transaction throughput
Due to the mining complexity it is another issue. Because someone has to mine “correct” block, it takes time. And that time has to pass just to process the transactions. - Insane ICOs
Most of the ICO startups wouldn’t get even 0.0001%, some 0.001% funding if it were a Venture Capital, Angel Investor or another type of investor. Where is that money coming from? Have they been legally acquired money? Most of them are scams, having no MVP, and written a fantasy paper called Whitepaper.
Going forward
Please, no such thing as mining. Bitcoin and Ethereum mining scheme called Proof of Work (PoW) is 💩 because there is a demand of complexity. There is no need for complexity, just do the hash and reach consensus with entities and be done with that. Fast, almost at no cost and no pain. No mining farms. Mining farms is a waste for nothing.
If there were no hash calculation complexity, it would become the best algorithm. Just calculate the hash, reach consensus between the parties and be done with it. It’s easy, there would be no need for whole mining farms wasting resources.
Therefore it should be renamed to Proof of Correctness (PoC) if it drops incentivisation.
Blockchain-based technologies are making the world more complicated. Again. It’s complicated intentionally whereas it shouldn’t be. It’s a simple technology. Leave it that way.
Bitcoin was started to support the notorious market “Silk Road” where drugs, guns, and people were traded. All illegal stuff that could be imagined. How? Well, it’s direct and completely anonymized unless the owner is intentionally disclosed. There are no middle-tier institutions to make sure the money is clean.
I’m amazed how people fall on to this technology where no one has control of the process. Coins and wallets get lost, stolen, scammed and hacked so easily.
The Blockchain is a simple data structure. Essentially, there is more value in synchronisation algorithm over the network rather than a Blockchain itself.
Nonetheless, capital movement is getting much easier in the world every day. Banks opened their APIs for other financial companies to consume them and provide custom services. FinTech is doing just fine as it gives all the capital movement benefits world needs. There is nothing in cryptocurrency for us.
Future
The future is transparency based on the Blockchain technology. And without incentivization.
Existing technologies could reap the benefits of the Blockchain. It could live side by side and work simultaneously with any technology ensuring the so needed integrity.
Just a public store where records can be checked, every transaction tracked down and verified within Blockchain from the beginning of time (Blockchain’s time).
The incentivization process is an evil in this technology that wastes a lot of resources for nothing. Mining farms emerged as a sustainable business taking advantage of Blockchain based technology believers. Without incentivization there is no money left on the table for mining farms.
Mining is created artificially instead of being something of value in itself.
It is impossible to replicate the physical world mining in the virtual world without inventing obstacles — mining complexity.
Blockchain technologies without incentivization is the future.
Have a good day.
P.S.
Conspiracy Theory: I bet Bitcoin and Ethereum is going to be the culprit of the next financial crisis. And I am inclined to believe that it was created for such purpose.
