One of the great benefits of the internet, of course, is its ability to give you a smug sense of satisfaction when you find others who agree with your point of view. This can be further enhanced after a short period if you feel that historical events have actually proved you were right all along.
So powerful is this effect that I’ve just been to check whether the domain IToldYouSo.com was still available. But it wasn’t. “Well”, you’re probably saying, “I could have told you that…”
I can’t help wondering whether, if you added it up on a global scale, the tears shed in recent days over the collapse of the FTX crypto exchange have been balanced by all the small self-affirming boosts for those of us who always felt this cryptocurrency stuff was too good to be true, and are now experiencing emotions somewhere between Schadenfreude and “There but for the grace of God…”!
The key technology behind most cryptocurrencies is, of course, the blockchain: a distributed ledger consisting of entries that are like the laws of the Medes and Persians; once written, they cannot be changed. What’s more, this system doesn’t require you to trust Medes, Persians or anyone else to maintain it because this ledger is distributed over many tens of thousands of independent machines. It’s often described as a zero-trust system.
It’s particularly appealing to conspiracy theorists who distrust all big corporations and governments, and also to those who live in regimes that are genuinely untrustworthy, or where the rule of law is not well-established. Once your purchase, contract, will, marriage certificate, patent application or whatever is recorded on a blockchain, there’s theoretically nothing anybody can do to get rid of that record. I’m reading Nineteen Eighty-Four again at the moment, and one of the keys to The Party’s absolute power in that book is their ability to rewrite history at any time, and erase all evidence of having done so. Not so with blockchains!
Sounds wonderful, doesn’t it? Especially if you ignore for now the fact that most implementations turned out to be phenomenally power-hungry to run. It is a clever technology, and quite apart from the ridiculous amounts of cash that have been converted to and from cryptocurrencies and similar gambles like NFTs, huge amounts have also been invested in startups that are building things using blockchain technologies.
But there’s a problem.
In its first 14 years, at least, despite vast amounts of interest and investment, it’s been very hard to identify more than a small handful of real use cases of the blockchain. (The Cambridge Centre for Carbon Credits is run by very smart friends of mine, and may well prove to be an example of a great application.)
But in general, yes, there are lots of things you can build using Distributed Ledger Technologies (to give the more formal generic term), and there are many systems that would probably be better if they were built that way, but it almost always turns out to be much easier just to use a database and trust somebody! If you don’t want to trust any individual organisation, then you can create an industry-wide standards body or something similar to run your database.
Sometimes you might use an irreversible ledger, but again, if you can just trust somebody to look after it, you can avoid all that nasty messing about with the complexity and environmental impact of the proof-of-work algorithm: the normal way of avoiding the need for trust.
All of the above is a very long introduction to Tim Bray’s interesting article about how Amazon’s AWS team, providers of the largest computing facilities in the world, basically came to the same conclusion about blockchains as I did, which made me feel smug.
History, of course, may tell a different story, but I’ll have edited this blog post by then, because it’s in a database.
Thanks to John Naughton and Charles Arthur, both of whom linked to Tim’s article.
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I think Bitcoin is unfit for use because of the power consumption. It will have a significant impact on the climate, but the computations don’t actually accomplish anything useful. For that reason I’m pleased to see the price falling. I am interested in proof-of-stake systems, but creating a robust protocol seems very difficult. I’ve tried myself to think how it could work, and everything I’ve come up with has had some kind of vulnerability. Do you know if anyone has come up with a working system? (I suppose another option would be proof-of-work, but where the work is something useful, like medical research. That seems even harder than proof-of-stake, though.)
I’ve also wondered if blockchain could be an alternative to protocols like Raft in distributed systems. In this case, you would have to deal with failed participants but not malicious ones, which makes it simpler. At the moment it seems like an interesting idea, but I can’t think of any actual advantages, so it’s just something I’ve filed on an unused brain cell. It’s rather different to Raft, so perhaps in the future there will be a case where it works better, I don’t know.
Hi Pete –
Yes, remarkably, Ethereum switched over to proof-of-stake recently and saved a huge amount of electricity by doing so. I haven’t looked closely at how it works in their case; I think the usual problem with it is that a small number of stakeholders can then wield great power over the valuation – I wonder if they’ve found a way around that.
Will ponder the Raft-style idea…
Q
That’s interesting about Ethereum. I heard they were experimenting with proof-of-stake; it’s great that they’ve gone ahead with it. Presumably a lot of expensive hardware became valueless overnight.
Thinking about Bitcoin and Ethereum, I wonder which one manages to distribute control best. I think the number of active Bitcoin miners has fallen quite a lot. In the early days you could do it on your own computer, but now it’s quite sophisticated and needs you to set up in a location that has cheap electricity. At the same time, as you said, no doubt Ethereum blocks tend to be generated by a small group of people with large holdings.
A problem I had trying to come up with my own protocol for proof-of-stake was stopping a “cabal” taking control. What would happen is that one of the cabal members would get the right to mint a block, and they could then contrive it so that another cabal member would have the right to do the next one.