The future of the internet and crypto: Lessons from Bittorrent
Bittorrent was arguably the most disruptive internet technology of the 00s, and Bitcoin (or, more generally, blockchain-based cryptocurrencies) os arguably the most disruptive internet technology of the 10s. It turns out that the former has valuable lessons for the latter.
Former Bittorrent Inc. executive Simon Morris published a series of posts titled “Bittorrent lessons for crypto.” The posts have been enthusiastically praised by TorrentFreak. I wish to add my own praise: Morris’ posts are really worth reading.
It is important to distinguish between Bittorrent the technology, and Bittorrent Inc. the company. The former had a revolutionary impact, but the latter never amounted to much in the business world. This plays an important role in Morris’ considerations.
Morris worked at Bittorrent Inc. for almost 10 years working at various times in product, data science, strategy and general management. “In that time the company pioneered many R&D projects to deploy decentralized technologies,” he says. “In the Fall of 2017 the company started work on a project to develop a cryptocurrency integrated into the heart of the protocol — work which led, somewhat unexpectedly, to [the company’s acquisition].”
Bittorrent mattered because “the open and decentralized architecture of both the technology and the community meant that it was essentially impossible to shut down Bittorrent file-sharing,” says Morris. “Bittorrent has proven to be unbelievably robust.”
“Perhaps [Bram Cohen]’s crowning achievement with Bittorrent was therefore to be the proof of concept of precisely the sort of global decentralized utterly censor-proof network that Satoshi Nakamoto had in mind when he conceived of Bitcoin.”
Decentralization is “intoxicating and exciting,” Morris says, for its ability to break the rules.
“The type of decentralization that was achieved by Bittorrent (and by Bitcoin for that matter) has enabled routing around rules… Decentralization in this sense means creating an uncensorable system that enables the unfettered breaking of rules.”
Therefore, according to Morris, there has really only been one seriously exciting application of blockchain technology so far: The Initial Coin Offerings (ICOs) boom, which “happened in an ungoverned way and was (albeit briefly) wildly successful in raising billions of dollars to fund a broad range of projects.” Unfortunately, “ICOs have now almost completely stalled” as a result of regulatory pressure.
Morris suggests that public blockchains out might best be understood as platforms for rule-breaking apps. If Morris were an investor, the first question he would ask to blockchain entrepreneurs is “what rules are you breaking?”.
However, “the legal system has very little patience for defendants who set out to break laws,” notes Morris. Therefore, disruptive decentralized technology and application developers should be able to plausibly deny that their original intent was breaking the law.
This is the case of Bittorrent’s developer Bram Cohen, and arguably Ethereum’s developers (programmable money came before anonymous transactions in their stated intent).
On the contrary, Satoshi’s Bitcoin whitepaper was pretty explicit in its intent to break rules, but “the anonymity of its authorship has prevented the possibility to hold a person or entity accountable for any rules that could have been broken.” Non-anonymous developers shouldn’t talk about the rule-breaking potential of their projects, but let the users discover it. See also TorrentFreak’s commentary.
Another problem is that, in early development phases, decentralized systems are de-facto centralized and easy to govern, but governance becomes a challenge for the projects that really achieve decentralization. Morris says:
“I expect that governance of rule-breaking decentralized systems will present [a great] challenge as a result of the perceived liability even of participation, and certainly of leadership.”
The unleashed mobs and the incumbents
Bittorrent technology was very successful, but Bittorrent Inc. and other businesses based on the technology were not financially successful. The main impact of Bittorrent was that it forced the media industry to think harder, says Morris, which resulted in “the rebirth of old media in a new and better form (e.g. Spotify and Netflix) and the emergence of new media (e.g. YouTube and Instagram).”
Decentralization can “unleash mobs” and disrupt legacy industries, but winning the post-disruption race is a very different thing. Morris’ grim conclusion is that, at the end of the day, disruption is partly reabsorbed and the winners are those who “build the thing to save incumbents from the unleashed mobs.”
“As I look at the rule-breakers, I’m especially interested in what the reaction might be… for it is here that the biggest winners may emerge.”
It strikes me that Morris’ considerations are applicable to the internet as a whole. The early internet was open and decentralized. But looking at today’s internet and today’s world, it’s difficult to escape the conclusion that the incumbents (Big Government and Big Business) are still in control, and the winners of the internet race have been those who helped the incumbents regain control.
Following the same logic, we should expect cryptocurrencies to be replaced by fake, sanitized, emasculated, centrally controlled digital gold and digital cash, and disruptive ICOs to be replaced by regulated Security Token Offerings (STOs).
Netflix is great — it offers more good films and shows than you can watch, for a very reasonable monthly fee. Since I started using Netflix, I have been downloading pirated films and shows from torrent sites much less than before. A world with Netflix is much better than a world without Netflix.
But Bittorrent is still here, and being able to download content that is not available from Netflix is also good. Therefore, Bittorrent is here to stay.
Since an efficient digital economy is better than a broken non-digital economy, fake-crypto has a future in the mainstream economy, and some fake-crypto players will make billions.
But we-the-people will continue to require privacy, autonomy, and options to work around regulations. Therefore real crypto is here to stay.
Picture from Cory Doctorow/Flickr.