By Reuben Godfrey. What are the implications for blockchain of a BTC collapse and, conversely, what does the interest in Blockchain mean for the future of BTC? I spoke to Dr. Paul J Ennis from UCD CITO – coding value project. @paulohaonghusa. Featured previously in Irish Tech News here.
In the past few months, discussion and speculation about the future of Bitcoin has reached fever-pitch. The ‘walk out’ of Mike Hearn as a core developer was the canary-in-the-mine for many spectators used to commercial entities with more traditional machinations. However, unlike other high-profile tech walk-outs, there is, of course, no steel and glass ‘Bitcoin HQ’ out of which to dramatically storm. Hearn merely left a team of developers who had dedicated themselves to the creation and proliferation of Bitcoin so why was his departure significant and why is there still an ideological civil war being waged in the developer community around the issue of block-size? See MH’s departure post here
During the same period the distributed public ledger for Bitcoin transactions ‘Blockchain’ has been garnering high-profile interest and investment from banks, investors and governments, fearful, perhaps, of missing out on the applications springing-up from it’s many varied unique attributes.
Can you explain why there is a divide in the Bitcoin community around block-size?
It’s a pretty complicated debate and even venturing into it in any kind of public capacity makes me fear this would be picked up and brought into it. In broad strokes on side there are those who are urging caution about making a drastic change to Bitcoin, a “hard fork,” relating to the volume of transactions. There are technical fears here, specifically about something going wrong during the consensus phase that will badly damage the network (and Bitcoin’s reputation), and furthermore that a temporary raising of the block size, with all the risk that entails, does not solve the problem long-term. The problem being, really, how to deal with the sheer volume of transactions that Bitcoin is starting to take on board and what happens when there are so many that confirmation times become exceptionally slow and only those willing to pay large fees can move anything. Hence the idea is to find a solution, but not jump the gun right now when we’re not sure how it’ll play out. Those arguing to raise the block size are basically arguing that something needs to be done now to speed up transactions, so they will tend to be those interested in the “consumer” side of Bitcoin, lest people find Bitcoin practically unusable. In many ways they think it better to get a temporary solution out of the way and then work to fix new problems as they emerge.
That is not entirely radical, Bitcoin has operated like this before, but the debates needs to be understood in the context of consensus. Traditionally the developers would make their case and implement changes and the miners would jump on board and all would be fine. We’ve rarely seen such division over an issue in the Bitcoin community where that consensus cannot be assured. Since there are further issues around centralised mining power (especially in China) a fundamental tenet of Bitcoin is being tested: the “centrality” of decentralisation.
Bitcoin aside, the blockchain isn’t going anywhere, right? What are your thoughts on ‘private’ blockchains? Is there such a thing and what are the potential applications?
Here I often get a bit semantic. Companies tend to say blockchain, quietly dropping the “the,” and it speaks to their desire not to recognise “the” blockchain which is, for many, always going to be Bitcoin’s. There are other versions, of course, but Bitcoin remains our longest-living blockchain and I think it will always be kept alive even if it ceases to be valuable. It began as an experiment bootstrapped by enthusiasts and it may return to them in the end. Other coins I take a wait and see approach to. Ethereum could be special, but it depends on uptake and it is still in an early phase of development. Once you move past Litecoin or DASH you are entering the territory of zombie-blockchains beloved only by devotees.
Blockchain technology is a difficult matter because although there is a lot of interest in it among various industries it is not entirely clear what these blockchains are doing. It is precisely the problem of the private blockchain. If a company finds it easier to use a blockchain for internal house-keeping I think that’s fine, but I find it difficult to understand how a centralised blockchain is any different than a traditional ledger. It has no decentralised incentive structure to discourage tampering and so, in many ways, I am not sure how they are blockchains in the sense Satoshi intended. They may take on the elegant format, perhaps even deploy cryptography for authentication and so on, and here I can see these blockchains taking on the work of various broken security or privacy protocols. I expect to see companies utilising the blockchain to build a digital identity one can use over social media. We’ve seen small-scale attempts at this in the Bitcoin and altcoin community, but it will likely only scale up once implemented by a large company (and most people will not even notice the blockchain as it will be “sunk” into the background).
Every day I read about more banks, investment houses and consultancies investing resources to exploring the potential applications of the blockchain.. it seems like there is little for ‘the little guy’ with this.. is that the case?
One way the little guy can get in the action now might be to find an entry-level position in the industry and try to get on one of the blockchain teams. The more open-source, scrappy side of blockchain innovation is already mostly covered by a few early hustlers that have secured impressive amounts of funding for things like blockchain analysis and so on. The little guy is always going to be a little behind the guy who knows how to move into a new area fast and lock down funds before anyone even notices. However, whilst we may miss what is big now at some point it was not. Meaning there is always the next phase, but it requires a lot of attention. But broadly speaking nobody is going to get mega-rich off Bitcoin these days, but they might do well for themselves by paying close to attention to the dynamics that made Bitcoin a source of innovation in the first place – and to look for reflective patterns on the horizon.
Will there be a make or break moment for blockchain/do you see a tipping-point toward mass adoption?
Yes, I think that the tipping point will occur as soon as one of the major technological players utilises it. That broad term “technological” is used because I don’t know if it will be its use by a payment service that “hides” the technical details, as the Winklevoss twins suggest needs to happen, or a social media platform that discovers some way to turn the blockchain into a universal identifier, an internet I.D. I’m a massive believer in Bitcoin – and content to stick with the original – and I’m excited about blockchain applications. However, I am no evangelist because I have been around Bitcoin long enough to not wish to overexcite newcomers (specifically those looking to make a buck). When Satoshi heard about the Wikileaks donations, one of his last posts, he cautioned about the effect it would have on the technology, fearing it was still too young to scale up. I think we often forget how new Bitcoin really is. However, I would also stress that nothing, and I mean nothing, has ever scanned to me as downright brilliant as Bitcoin. It is an outright case of technical genius coupled with theoretical brilliance.
Satoshi foresaw so many of the problems that could emerge with a cryptocurrency and built in all kinds of mechanisms to keep his ticking along. The baked-in deflationary model coupled with the transition toward transaction fees as incentives is also a stunning case of predicting how a community will behave at a very, very long scale (in the sense that this is obviously a long way off, but makes perfect sense). Bitcoin solves so many problems it amazes me that people either won’t use it because it is associated with a group they dislike (as if they owned it) or try to make a better version despite the fact that it already works. It already works, I don’t know how many times I’ve had to say this to people. So mass adoption, I don’t know if the window has passed for a true cypherpunk pure cryptocurrency, but I’m certain blockchains will be everywhere at some point, only they’ll be proprietary.