Blockchains from a Different Perspective

A blockchain isn’t an ethereal thing out there in the universe that you can “put” things into, it’s a specific data structure: a linear transaction log, typically replicated by computers whose owners (called miners) are rewarded for logging new transactions.

There are two things that are cool about blockchain’s particular data structure. One is that a change in any block invalidates every block after it, which means that you can’t tamper with historical transactions. The second is that you only get rewarded if you’re working on the same chain as everyone else, so each participant has an incentive to go with the consensus.

The end result is a shared definitive historical record. And, what’s more, because consensus is formed by each person acting in their own interest, adding a false transaction or working from a different history just means you’re not getting paid and everyone else is. Following the rules is mathematically enforced—no government or police force need come in and tell you the transaction you’ve logged is false (or extort bribes or bully the participants). It’s a powerful idea.

So in summary, here’s what blockchain-the-technology is: “Let’s create a very long sequence of small files — each one containing a hash of the previous file, some new data, and the answer to a difficult math problem — and divide up some money every hour among anyone willing to certify and store those files for us on their computers.”

It’s true that tampering with data stored on a blockchain is hard, but it’s false that blockchain is a good way to create data that has integrity.

The most-heavily scrutinized smart contract in history had a small bug that nobody noticed — that is, until someone did notice it, and used it to steal fifty million dollars. If cryptocurrency enthusiasts putting together a $150m investment fund can’t properly audit the software, how confident are you in your e-book audit? Perhaps you would rather write your own counteroffer software contract, in case this e-book author has hidden a recursion bug in their version to drain your ethereum wallet of all your life savings?

The entire worldview underlying blockchain is wrong

    You actually see it over and over again. Blockchain systems are supposed to be more trustworthy, but in fact they are the least trustworthy systems in the world. Today, in less than a decade, three successive top bitcoin exchanges have been hacked, another is accused of insider trading, the demonstration-project DAO smart contract got drained, crypto price swings are ten times those of the world’s most mismanaged currencies, and bitcoin, the “killer app” of crypto transparency, is almost certainly artificially propped up by faketransactions involving billions of literally imaginary dollars.

    Blockchain systems do not magically make the data in them accurate or the people entering the data trustworthy, they merely enable you to audit whether it has been tampered with. A person who sprayed pesticides on a mango can still enter onto a blockchain system that the mangoes were organic. A corrupt government can create a blockchain system to count the votes and just allocate an extra million addresses to their cronies. An investment fund whose charter is written in software can still misallocate funds.

    Today the most valuable tech companies collect data on us all, and this data is worth a ton of money. We also have almost $200 billion dollars in digital assets which didn’t exist even 10 years ago. In a world where our assets are becoming increasingly digitized, it will become much more profitable to try to attack and steal those digital assets.

    But today the best hacker can steal your data, your identity, and your digital currencies, and do it from the comfort of their home. They are experts at stealing digital assets. And the digitization of assets will only continue to trend in this direction for the time being. If you want to have more control, it’s best to learn the ways to accumulate and protect whatever form of assets our society decides will be of most value.
    Today a lone hacker can steal the data of a large corporation and receive millions of individual’s credit card information or personal identity information. Never has one individual had so much power to seize assets.

    In the case of buying a real estate property, even if you’re buying it with a smart contract, instead of auditing the software you’ll rely on one of four things, each of them characteristics of the “old way”: either the author of the smart contract is someone you know of and trust, the seller of the real estate property has a reputation to uphold, you or friends of yours have bought real estate property from this seller in the past successfully, or you’re just willing to hope that this person will deal fairly. In each case, even if the transaction is effectuated via a smart contract, in practice you’re relying on trust of a counterparty or middleman, not your self-protective right to audit the software, each man an island unto himself. The contract still works, but the fact that the promise is written in auditable software rather than government-enforced English makes it less transparent, not more transparent.

    Source: Medium.com, Inc.com

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