A response to Daniel Tung on “Blockchain is the ultimate April Fool’s joke”

Let me start with an “ad hominem” argument first (it is not really one): Daniel is the founder of a blockchain startup, so obviously very vested and interested in the success of the blockchain hype. Failure of the blockchain hype would mean business failure for him.

This means that he is serious about this arguments, so that makes it interesting to reflect on them.

The argument that blockchain gets rid of middlemen is funny. If there are no middlemen, who are the miners? Who are the other actors building trust in the system? Or providing hardware wallets for people to store their tokens on? Just because you might rid of the current middlemen does not mean that you are not replacing them by new ones, which are not necessarily better.

However, the new ones are less regulated and more implicit than the ones we currently have. Does that create more transparency? Not really, and it dilutes accountability much more than before. You better not get scammed out of your BitCoins because there won’t be a good legal framework to help you at the moment.

Also: “Blockchain is the first decentralized network for any kinds of value transfer” does not really mean anything. In loose terms, SWIFT was first, and SWIFT was not centralized either and can actually execute quite a few more transactions per second than BitCoin. This brings us to the next argument.

Blockchain itself does not reduce transaction costs for people. Except if you are into money laundering. Then, it is really great and allows you to keep more of the cut.

Implicit trust in institutions is always going to be cheaper than explicit trust generated by mining and data distribution. Just because you capitalize mathematics doesn’t make the statement true.

Have a look at TransferWise if you want to have a solution that is good at reducing transaction costs for money transfers. They don’t need blockchain for what they do. No one needs blockchain for what you are saying it is required for.

Regarding Big Tech companies: the major players don’t define the rules of the game. They at most operate too freely when there is a vacuum. Regulators still define the rules.

We are currently in a world where governments and lobbyists try to shift responsibility onto companies because they don’t have solutions yet themselves: for example, when implementing the right to be forgotten. That is not what should happen, though.

Obviously, tech companies have responsibility for any data scandal, but we also have a responsibility to improve the laws to protect ourselves better in the future.

So, how exactly is blockchain better for your data? You won’t really control who has copies of your data anymore. With BitCoin, all the miners need a copy.

With decentralized systems, many other participants will need to store parts or all of your data. This is not better for your data. It makes it much harder to control where your data actually ends up.

The internet started out as fully decentralized system with algorithmic routing of data, but that got quickly superseded by manual routing tables on the highest level because there were concrete political concerns about automated routing of, for example, US data through China or Russia. You will not get rid of this with algorithms.

Saying that there is an algorithmic solution that is simpler than the real world is denying the complexities of the real world.

(Moreover, “internet networks” is not a real term by the way. It’s marginally better than calling it “internet tubes”, but not much.)

You don’t need the blockchain to keep your data private. Messaging services like WhatsApp, Signal and Wire implement end-to-end encryption successfully without blockchain.

My original article has dug into the issues that would originate from decentralized versions of Google, YouTube and Facebook in depth. Saying that there would be no such entities because everything would be decentralized is exactly the problem.

If we end up with a “blockchain-based” decentralized version of all these platforms and no company being accountable for any that, who is accountable and liable and can be pressed for changes? If regulation is already difficult, how much more difficult would it become? Daniel has been avoiding those points in his response.

Also, even if I repeat myself, one of the great things we can learn from the “blockchain” is that you always have emerging centralization and consolidation — even when you start out with a decentralized system.

Mining pools have become very centralized, as have ownership and control over the source code. Again, have a look at https://arewedecentralizedyet.com.

Why should we spend so many resources trying to setup decentralized systems and their rules to just end up with something centralized again?

Whatever the next big thing will be, it will not be “blockchain” as people understand it now.

read original article here