Uncrypt Mondays 4.28.18
Medium.com contributor Kai Stinchcombe goes on a diatribe about Blockchain in this ambitious post about the horrors of a decentralized future. Unfortunately, the self described “whatever the opposite of a futurist is,” hits send on an article without really understanding what a blockchain is and what he’s talking about. In particular, he makes a mistake that many novices accidentally step into about the technology before learning more: Blockchains and cryptocurrencies, while oftentimes tied together, are different things entirely and blockchains more often than not operate without a cryptocurrency attached to it.
Maybe the author isn’t aware of that point, or is but intentionally omits that for some reason is unclear (he claims to have held some crypto in 2017 so you’d think he’d do some research), but the article says what it says so why not go into point by point. After all, the post has been largely circulated so it’s a shame to see poorly researched misinformation spread on the internet (yes, I know how ridiculous that sentence sounds when said aloud). Here is the original article for reference.
#1: “Lets start with this: Venmo is a free service to transfer dollars, and Bitcoin transfers are not free” Yes, let’s start with the fact that this is an empty analogy. Even though both concepts can fall under the same broad scope of “financial services” they are several worlds apart in terms of what they are. Venmo is an application layer built to integrate with traditional checking accounts in order to send cash and handle small scale transactions for convenience. The Bitcoin blockchain replaces the need for a checking account at the foundation level, and provides a 100% secure way to transmit value at any amount over the internet, with each transaction recorded on an immutable ledger. Somehow Stinchcombe has decided this qualifies for a 1:1 comparison. Let’s pretend to give him the benefit of the doubt and assume he meant “traditional cash transfer app vs. blockchain solution for money transfers.” Not all blockchains require a proof of work mining algorithm that takes a fee, several blockchains that do use a proof of work system use scaling solutions to make transfers fast and cheap, and there are plenty of reliable crypto alternatives to Bitcoin if fast and free exchange of small-scale transactions is the goal. Or we can not give him the benefit of the doubt, and call this analogy poorly researched. If you want to make a Venmo analogy in the crypto space, at least use a similar product, like Metal. Metal is the cryptocurrency worlds answer to Venmo, and offers the same things Venmo does, only it allows a quick on and off ramp between crypto and fiat, and would allow merchants to accept crypto but get paid out in fiat. It’s too bad for Stinchcombe that actual, existing, crypto competition for Venmo is conspicuously absent from his post.
#2: “In fact, I would assert that there is no single person in existence who had a problem they wanted to solve, discovered that an available blockchain solution was the best way to solve it, and therefore became a blockchain enthusiast.”
I’ll actually speak from personal experience on this one. Here is the first ever real estate transaction that was fully executed using blockchain and cryptocurrency (please note that these are different things and specified as such Kai Stinchcombe). The apartment was paid for in Ether, and a smart contract was executed using the Ethereum blockchain that verified all conditions of the sale were met (funds, identities, and reporting to Ukrainian officials) and title change was logged onto a private blockchain being piloted by the Ukrainian government. So, I just checked in with the seller of the property (let’s just say we have a pretty good rapport), he let me know that in 20 years of being a real estate developer in Ukraine, he has never been paid so quickly, efficiently and without the delays associated with bringing in hard copies proving property title to a notary (this is previously confirmed and verification of such is built into the smart contract), and having to give that notary a little cash on the side to speed up the intentionally long processing times to make such “miscellaneous costs” part of the status quo. He also reminded me to call grandma and grandpa once in a while. Will do, dad. Take the family word on this one Kai, we were greatly benefited by an existing blockchain solution, and pops has become quite the blockchain enthusiast.
#3: “…it’s biggest corporate boosters like IBM, NASDAQ, Fidelity, Swift and Walmart have gone long on press but short on actual rollout.” The writer names 5 massive companies, who with any technology will take a long time to test and roll out a product. The IBM mention is confusing, since there’s nothing short about their rollout of permissioned blockchain development for MNC’s. Also, he fails to mention that Deloitte and Ernst & Young are three more corporate boosters who are doing real work on blockchain projects every day, and client lists are rapidly expanding to a point that they are expanding their blockchain focused staff. Goldman Sachs is an investor in a large-scale OTC marketmaker for cryptocurrency. I know that GE has tested the use of permissioned blockchain tech for internal payments, and this blogpost from GE certainly looks like they are going long on adopting private blockchains: “The team has big hopes for blockchain. It believes that the current vagaries of bitcoin are not indicative of blockchain’s future, because cryptocurrency is just the technology’s first application. It will be one of those things where you look back and reflect on the way you used to do it,” Beckmann says. “Everybody used to have a landline telephone, but you probably can’t put a date on when you stopped using it. It just happened. Blockchain is this type of technology that comes in waves. It will happen, absolutely, whether we are there to take advantage of it or not.” Doesn’t seem to me like GE finds blockchain technology “crappy” Kai Stinchcombe.
#4: “Even the most prominent blockchain company, Ripple, doesn’t use blockchain in its product. You read that right: the company Ripple decided the best way to move money across international borders was to not use Ripples.” Gotta love this point. Not only is it the most illustrative example that Kai Stinchcombe doesn’t understand that a blockchain is not necessarily tied to a cryptocurrency, but he asserts that Ripple doesn’t use blockchain in it’s product (because you don’t need to use the Ripple token, XRP, to use Ripple’s blockchain technology) while linking to an article that explains that you can use Ripple’s blockchain without using Ripple’s token. You have to be really lazy to not even read your own source material. My (and everyone else’s) discomfort with Ripple has to do with this fact by the way. If you don’t need to use XRP to use the Ripple protocol, why even have an XRP token to begin with? Again, it seems Kai Stinchcombe has confused questionable cryptocurrency practices as a justification to write about dumping blockchain in general. The point is, not using “Ripples” doesn’t mean you (or in this case, banks and financial institutions) aren’t using Ripples permissioned blockchain services. Don’t worry Kai, Michael Arrington founder of startup hedge ArringtonXRP Capital cleared it up for you back in January at WCEF when answering questions about the very same concerns about Ripple’s token and separate blockchain “an investor was able to transfer millions of dollars into the fund in 3 seconds, and it cost 30 cents. Sometimes in the financial world, you need to send large quantities of money that quickly and that cheaply.” Let’s just go ahead and add Michael Arrington to the list of people who found an available blockchain solution was the best way to solve a problem.
#5. The whole discussion on smart contracts: Well the author doesn’t even understand how a smart contract works, or how it would be deployed in a real world situation. He’s making up hypothetical use-cases to argue against. A smart contract functions as an executor of a transaction, provided that certain conditions are met, in real time (I’m sorry, if you don’t understand the power of real time payments, particularly in content licensing, I can’t help you). It’s an automated escrow agent; a transaction is executed once a series of conditions, governed by “if” and “then” scenarios. Kai Stinchcombe makes up a hypothetical use-case of smart contracts in e-commerce to argue against, and then comes up with the worst possible deployment of a smart contract in e-commerce.
Consider the e-book example he gives (it’s rubbish), he misses the point of who the smart contract has the potential to work for, and where blockchain can be truly disruptive: It’s the author. “If” there is a verified transaction of purchase from retailer, “then” the author has earned his royalty for that sale. The terms of the royalties agreement with the publisher can be embedded in the smart contract, so that merchant, publisher and author can be paid in real time from the transaction, with all payments being completely audible to make sure the agreements are being followed. Status quo puts a lot of trust into each party to honestly report to one another after tallying up the sales in intervals. The author in this case gets paid his royalty at predetermined checkpoints throughout the year, and I hope you’re sitting down for this, have been known to get screwed because of their limited auditing options. Gasp! I think every content creator that relies on royalties for their livelihood would prefer to be paid in real time, donchyathink? The implications are huge in e-commerce, but what about music/tv/film streaming services? How many artist/publisher lawsuits would we avoid? Why should publishers be exempt from dealing with potentially disruptive technology?
#6: Writer is evaluating blockchain technology and its use cases as though the product itself is finished and fully deployed. Ridiculous, it’s an emerging technology. This would be like writing about the internet in 1997 and complaining that the dialup method is slow and the internet can never gain mass adoption because it occupies one of your home phone lines — while cable internet is being developed on one end and mass adoption of the cell phone is taking place. The author is either intentionally being obtuse to the multilayer process of technology evolution to make his awful point, or simply treating the technology like its a finished product. But I thought the point of his article is that the blockchain future is a bad thing…? Honestly, I don’t know anymore, his whole post is a mess.
#7: “…it was the reputation scores that allowed people to trust criminals. And the reputation scores weren’t tracked on a tamper-proof blockchain, they were tracked by a trusted middleman!” What? Why are we assuming that reputation scores should be logged on a blockchain? Again, writer is making up a hypothetical use case for blockchain, where there may be none, and then judging blockchain based on his own bad idea.
#8: Writer offers his own suggestion for how to improve the banking system that basically boils down to keep using it..but vote in elections. Writer fails to understand the emergence of this new technology is a direct response to the fact that “keep using it..but vote in elections” isn’t working, hasn’t worked and is an outright joke in many developing nations.
Sorry, but advocating for keeping status quo and hoping it works better doesn’t make you an interesting contrarian, it makes you complicit in the problem. Nobody, not even long standing financial institutions at the state or private level, should be exempt from technologies that can either challenge them or at least raise serious discussions about their flaws.
I guess Kai Stinchcombe’s article could have been an honest discussion on challenges facing blockchain today, and a discussion on existing use cases. But it is flatly incorrect on a lot of basic points, poorly researched in others, and he makes up hypothetical use cases to argue against. Yet somehow it gets 31 thousand claps? Do better Kai. Or I don’t know, read a book on it or something.
In other news:
After months of waiting, it looks like the Proof of Stake update to Ethereum protocol is imminent. Read up, because we’ll be talking to some Ethereum miners on Sunset Crypto this week.
This is really interesting and probably deserves a post of it’s own in the coming days. Amazon files, and is granted, a patent for a data marketplace that would allow them to collect data on Bitcoin transactions and sell it as user data (in this case the BTC address would be the “user”). Given the transparent nature of transactions on the BTC Blockchains (for wallets anyway), a wallet can be tracked for in and outflows of funds, and other wallets it sends/receives money from (for example, if an address is publicly shown as a payment option for a merchant). I’m not necessarily taking a possession of whether this is a good thing or a bad thing. After all, transactions on the Bitcoin ledger are public by design. Could it be that businesses are finally starting to key in on the fact that Bitcoin isn’t a way to stay anonymous on the internet, but actually that transactions are fully transparent (its the owners of the wallet that aren’t always so). But if you have technology that can flag patterns of wallet behavior, a lot of valuable data can be gleaned from publicly distributed ledgers.
