Answering Vitalik’s 7 Hard Questions for the Blockchain Community

Recently, Vitalik asked the crypto/blockchain community 7 hard questions. These questions challenge us to see where blockchain still has limitations as well as where it holds promise. As members of the blockchain community, we at MIMIR wanted to provide a response.

Question 1: “Bitmain and affiliated pools now have ~53% of all bitcoin hashpower. Isn’t this a really big problem?”

As with proof-of-stake examples, when you are heavily invested into a system, you make it against your best interests to conduct malicious activity. Because Bitmain is so heavily invested in Bitcoin, you could assume that it is in their best interest to always play by the rules. In theory, malicious activity would greatly devalue their already substantial investment. Centralized pools are still not an ideal situation.

Additionally, just because the mining pools are centralized, this does not allow them to modify the rules of the system. Yes, there is some level of reordering of recent history and censorship that is possible. This could allow for centralized pools to reduce the certainty of the system but does not necessarily give them authoritarian control. While the reordering and censoring undermines the blockchain’s ability to be a functioning member of a marketplace, malicious parties can’t make invalid transactions.

That being said, we know centralized mining is not ideal. Decentralized mining pools have been shown to be technologically possible. A world with effective decentralized mining pools would certainly be preferable, and it is quite possible that we will get there one day.

Question 2: “Why aren’t there any useful large-scale applications yet?”

While there aren’t many, there are some. Brave browser just surpassed 3 million active monthly users. Bitpay, founded in 2011, has allowed a growing list of individuals and corporations to save grand sums on transaction costs. Augur was just released and is catching serious momentum. To name a few.

But it’s important to note that this technology is in its infancy. Just as social media (the biggest web application in the world) was a late adaptation of the internet, some of the best ideas may take time. There is however, no way to predict the future with any certainty.

Blockchain is also better understood as a security infrastructure that will continue to make existing systems better. For instance, we already have several examples in the world of supply chain and asset tracking both being greatly improved by using blockchain.

Question 3: “Why are there not yet good solutions to account security? When will the problem of account hacks and thefts be solved?”

We would like to note that ECC is not broken. The technology works exactly how we would expect it to: lose your private key and all hell breaks loose.If you take care of your private key, all will be fine (at least until large quantum computers become economically viable). Traditional bank accounts still get compromised on the internet at an alarming level. Basically, some level of malice is inevitable.

That being said, the best security feature is to have many revocable keys. This comes with a trade-off, however. Allowing multiple keys that you can “turn on or off” could help prevent a stolen key from causing harm. But anytime you add complexity to a system, you allow more potential ways for the system to “mess up” or be exploited. More complexity makes everything less predictable. While the current, simplistic “one private key” method allows for a single point of failure, it is a predictably safe system. And it’s not just about having multiple keys. Implementing rate-limiting, revocation, locking, and other safety mechanisms adds complexity, and as such, these systems have shown to be more prone to software bugs.

Question 4: “How can decentralized apps work well even with 5–10 second blockchain latency?”

No matter how fast block times become, blockchains will always be on the extreme end of the security/speed trade-off in comparison to traditional systems. There is little utility in using a blockchain to house anything but the most mission-critical components of application state.

This isn’t to say that we don’t need speed/capacity improvements. We really do. But if the blockchain is currently too slow for your prototype to work for a small number of users, you may need to reconsider your model. You shouldn’t be putting information on the blockchain that needs to be updated regularly. Also, keep in mind that dial-up was not so long ago.

Latency may be more of a challenge in terms of adoption today because we are spoiled by the fast speeds of modern internet technology. What’s clear is that blockchain allows us to do things that we couldn’t do otherwise. Period.

Question 5: “PoW is burning billions of dollars per year, even more than all scams and thefts combined. Isn’t this a big tragedy?”

Yes. PoW’s resource-consumption is terrible. We should be thankful that it got us this far, but it’s time for us to move on to PoS.

Question 6: “What are the centralization risks in proof of stake?”

Those with more resources get a bigger say. This is how PoW works now. PoS is just more honest about it.

Question 7: “Given how EOS governance has turned into an epic fail, doesn’t this mean that all on-chain governance including DAOs is fundamentally flawed? How can any DAO deal with bribe attacks, plutocrats and other risks?”

EOS tried to replicate the structures of analog governance in a digital space. The structures don’t map. Blockchain systems vote based on stake and hashing power all the time. How far we can push the analogy is another question.

The biggest problem with DAOs isn’t the technology, it’s the people. Any system that requires using people will eventually fall victim to at least some bribery and corruption. However, the goal of DAO’s is to take as much power away from individuals as possible. As these systems continue to improve, they will aim to reduce the influence any one individual can have. As these systems grow to rely less on humans and focus more on active and benevolent users, they will likely improve.

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Have a different answer? Disagree with what we said? Vitalik intended to provoke a dialogue within the Ethereum community, so please share what you agree or disagree with below!

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