Michael J. Casey is the chairman of CoinDesk's advisory board and a senior advisor of blockchain research at MIT's Digital Currency Initiative.
The inaugural 2015 event’s 500 attendees were dominated by true believers in bitcoin, along with its subversive goal of replacing fiat currency and traditional banking – though, with Citibank as a sponsor and many bankers present, the conference was also a modest blockchain baptism for the financial establishment.
By contrast, last week’s fourth installment boasted 7,500 attendees, from 104 different countries and captures a full cross-section of the economy that includes everyone from automobile makers and insurance companies to government agencies and even a fast food chain.
Expansion has come at the cost of cohesiveness. This big-tent community is gripped with internal divisions that are both baffling and off-putting to outsiders.
“Permissionless” cryptocurrency purists accuse established enterprises of co-opting the technology to produce watered down blockchain models that protect their incumbency. For their part, the enterprises critique the early adopters as naïve idealists whose complex solutions are impractical in the real world.
Further, within the purist crypto sub-community itself, there are internecine battles among proponents of different visions of bitcoin while fierce competition rages between so-called “altcoins,” whether ethereum, XRP, EOS or hundreds more.
Accusations of scams and personal attacks against different developers are rife on “crypto Twitter,” a social media setting that’s now synonymous with derision, bitterness and ad hominem attacks.
This conflict is unavoidable. It’s even helpful, to the extent that it compels developers to improve their projects’ code.
But with the Securities and Exchange Commission and other regulators considering a more draconian stance against cryptocurrency and blockchain projects, a more united front among all who believe in this technology’s sweeping potential could help ensure a more constructive legal environment for its development.
Not everyone will want in on this. Purists who were prominent in bitcoin’s early development rightly point out that cryptocurrency’s DNA is geared toward resisting regulation. “Bring it on,” they say, viewing bitcoin, monero and other cryptocurrencies primarily as safe havens for their wealth and less as societal tools for building a disintermediated, frictionless economy.
But they are now in a minority. Those who’ve swelled the ranks of the community tend to focus on the great potential for humanity generally across multiple use cases and believe that achieving it requires accommodation with policymakers, regulators, and a wary general public.
There’s quite a chasm between those views, one that comes down to how each approaches the question of trust.
Libertarian crypto hardliners strive for a “trustless” ideal, the notion that managing one’s own assets and exchanging value with others should not require trusting any third-party person, institution, machine or software program.
By contrast, most others, including many of the community’s newcomers, see this technology as a way to enhance trust, not replace it. Their idea is that if an immutable blockchain ledger can overcome mistrust in the record of money and data transactions, people will have a more reliable foundation, a shared record of the truth, upon which to forge the human bonds needed to write the necessary “off-chain” business contracts that put those transactions in motion.
‘Trustless’ is impossible
Although I strongly believe in the disintermediating power of bitcoin and in the ideal of decentralization, I see total trustlessness as an unattainable ideal, at least not for the world I want to live in. I don’t want the only sense of security for my private property to be a gun that I’d never want to use.
Crypto hardliners will call this position naïve. Many have embraced the mantra “Don’t trust, verify,” but I prefer Ronald Reagan’s original formulation: “Trust, but verify.”
Trust is unavoidable if we are to thrive. The more willing and open people are to exchanges of value, the better off we are. Economics is not a zero-sum game. Wealth is created, it is not taken – now, more than ever, in a digital economy in which collaboration and network effects are fostering exponential growth for organizations that can master them. For people to form those networks and enter into an exchange with each other requires trust.
If the many non-cryptocurrency use cases for blockchains, such as supply chain and Internet of Things applications, are to succeed, we’re going to have to devise workable, off-chain trust arrangements by which people and machines input data. Purists will argue that most of them are impossible because of this “last mile” problem. But that problem exists with or without a blockchain.
Surely by improving the record-keeping layer, removing the prospect of double-spent transactions and creating an immutable chain of provenance for each piece of input data, we are taking a step forward from the current scenario when neither layer is fully reliable.
Code is not law
The critics’ counterpoint is that the immutability and append-only nature of blockchains create a “garbage in/garbage out” problem that doesn’t exist with traditional, editable databases, which can be reversed if an error is found.
But if the parties to a transaction either voluntarily agree or are compelled to reverse a prior transaction, a blockchain’s “garbage” can, in effect, be removed. This points to the need to properly install that most important of human trust systems: the web of laws and self-regulating rules that bind contracting parties to their commitments.
It’s vital that standards, governance models and, most importantly, supportive legal frameworks are allowed to develop for blockchain technology. (This does not necessarily mean changing laws. Often it will be better to seek clear, unambiguous interpretations of how existing laws apply to blockchain models and in ways that don’t make them unworkable.)
Investors in The DAO learned the hard way that there is no escape from relying on the law. That notorious, ethereum-based investment fund’s fatal flaw was not so much that the code underpinning its smart contract inevitably contained a bug but that the terms and conditions held out that the functioning of the code could not be superseded by any law.
The attacker or attackers who drained $50 million from the fund could, under those conditions, argue they had acted entirely legally, that they were exploiting a feature of the software, not a bug. The DAO’s rigid “code is law” position was not tenable when investors began demanding retribution and persuaded the ethereum core developers to institute a contentious fork to recover those funds.
The technology needs more than technical development for it to achieve broad global impact; there’s also a crying need for social infrastructure that establishes a formal and informal system of governance within which it can operate.
It’s exactly the kind of thing that the wide group of people who attended this week’s Consensus conference should be setting their minds to.
Chess pieces image via Shutterstock.
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