October 15, 2016

Skeletons in the Blockchain Closet

In any struggle, whether social, historical, or familial, there are always obstacles to tackle or fight. “Winning” is often less about brute force and more about strategy. Identify the enemy, prioritizing targets, at what time, under what circumstances, when to yield, when you strike, etc. With this in mind, let us discuss some relict attitudes from the bitcoin and blockchain communities.

Image by Matthew Franklin

In any struggle, whether social, historical, or familial, there are always obstacles to tackle or fight. “Winning” is often less about brute force and more about strategy. Identify the enemy, prioritizing targets, at what time, under what circumstances, when to yield, when you strike, etc. With this in mind, let us discuss some relict attitudes from the bitcoin and blockchain communities.

Blockchainers: Disregard for Natural Payment Models and User Experience

It has been quite some time since anonymity, one-layer p2p, or even immutability were considered the most important attributes of an innovative payment system. For example, most blockchainers have already given-up any feelings of remorse regarding abandoning what Satoshi said in his white paper’s first 19 words. We now have plenty of blockchains and second layer protocols on top of Bitcoin offering various payment models to choose from. They differ in creativity but not a single one exploits the natural attractiveness of the basic must-have attributes of a payment, namely:

1) Reasonable Respect

To large extent, most payments are given to someone you know or someone you’re interacting with in some way. A plumber fixes your toilet, you pay him; the grocery owner sells you food, you pay her. There’s no strict anonymity here but you do know names and a payment to them should not require knowing anything else. It is not “natural” to know someone’s wire transfer details or even PayPal-connected E-mail address. It is not natural or necessary to know where your receiver has any accounts at all. That’s none of your business. Knowing their name, as they tell you, should be enough to pay them for services rendered.

2) Reasonable Decentralization

When you pay someone, there shouldn’t be any obvious or hidden demands or incentives “to join the network”. To receive a payment from you, your receiver should not depend on whether he opens an account somewhere or takes a risk of owning — even temporarily — a strange asset like crypto coin. You’re going to pay someone some of your wealth for the job done or goods traded, so share that wealth. Don’t make a person invest some additional efforts into anything else beyond the terms of the deal. “This for that” are the terms but often there is a hidden asterisk which mentions, “Just join this site with your full name, birthday, location, and email. Then, enter your KYC to receive payment”. This is ludicrous.

3) Reasonable Prices

So far, we have described some basic but forgotten requirements. The once astounding but now forgotten paper cheques have those properties. In a world where people truly respect those with whom they do business a payment sum and the recipient’s name should suffice for transacting. A true innovation should reduce the cost of transacting without compromising the basic requirements of respect and decentralization.

The cost doesn’t have to be zero, but it should be inoffensive and reasonable. Since Blockchain idea has failed to provide a truly p2p model free of intermediaries, it’s difficult to claim here that payments shouldn’t remain a paid service. The problem is that — in most parts of the world — its price remains too high. Credit cards in the US, for example, consume up to 3% in GDP in the friction they create. That is not acceptable, the price has to be drastically reduced. We can’t spend on something that we can’t even see more than we spend on police.

So, this is where a blockchain payment model can step in and remove the oligopolies such as VISA or PayPal that cause such high prices. But it should preserve the good things that we had before these oligarchs have emerged. They sold us “the technical improvements” and removed the decentralization and respect we used to have with cheques. Everyone used their local banks and based transacting on a reasonable amount of trust between each other. The nation-wide, global networks have spoiled the essence of the payment model. They took the feeling of respect off it, imposed censorship, and raised prices. We do not need these oligarchs and we do not need their baggage either.

Bitcoiners: Inability to Systematize and Rank Threats

Bitcoiners are economically interdependent and are all affected by the BTC exchange rate and business ties. Bitcoiners are clever. They understand that the personal wealth of an individual depends on what others do because it is yet a small and encapsulated community. However, a healthy community should take proactive step to identify its threats and unite in the face of the enemy for the preservation of the whole.

The disparate “revelations” uncovered about the small-block factions demonstrate a naive inability to withstand “conspiracy mind-virus”. Of course, Western Union must invest in the potential killer of its business model. Of course Wall St is going to invest in the blockchain — how else would they be able to influence this giant threat to their racket. Staunch bitcoiners fail to comprehend the simple fact that no one can know which scaling path is better — it’s the type of questions where science has no clear application. Furthermore, while this civil war rages the external threat of altcoins and fiat surrogates being transported over Bitcoin blockchain is left unchecked. The entire Bitcoin economy is smaller than a given third-world nation’s gambling industry. Should one single fiat-over-blockchain project succeed on a national scale for small country then the network will become bloated — littered with small, useless-for-bitcoin, transactions. So, while small-blockers might be shills in disguise for lizard-globalist banking agendas it is important for bitcoiners to prioritize the threats to their ecosystem in terms of actionable defense. Small-blockers will not be defeated without a hard fork. A hard fork could very well lead to disastrous results (to be fair, it may lead to a new age of bitcoin prosperity also) and so perhaps the chain-external threats are more pressing and worthy of attention.

Keep the Best, Filter the Worst

On the bleeding-edge of finTech is where we find ourselves. It’s important that each of the various factions continue to develop and fight for what they believe in. But, let us not lose sight of the commonalities we all share as technological innovators, e.g. the desire to improve upon the status quo and appreciation of Nakamoto’s guiding principle that payments are possible in the internet age without centralized third parties.

Technology Approach:

PRACTICAL

This is not a call for a truce or to “join together” it’s more of a reminder that campaigns need plans and that victory and improvisation are seldom found together.