A week ago, Let’s Talk Bitcoin sat down with three developers Charles Hoskinson (Ethereum), David Johnston (Mastercoin) and Daniel Larimer (Invictus/Bitshares). Well worth your time as it covers all the hot topics in this space today: smart contract, smart property, DAX (decentralized autonomous corporation/organization/application/etc.). Lot’s of great quotes, insights and vision.
Send to KindleEarlier today I was interviewed by Donald McIntyre at Newfination. We discussed a number of topics related to cryptocurrencies and trustless asset management including smart contracts and how they can be applied in China (see video below).
My current motivation and interest stems from the lack of clear property rights and contracts in China. While some jurisdictions are better than others (like Shanghai), no one actually owns property for more than 70 years whereupon it is automatically reverted back to the state.1 In many cases, the actual property may only have a 40 or 50 year lease left because of the different staggered stages of post-Mao liberalization.
Furthermore, at any given time these titles can be revoked or modified by a 3rd party without recourse. As a consequence, land confiscation is very common and is actually the leading cause for social unrest. For example, each year approximately 4 million rural Chinese are evicted from their land.2 Why? Because, according to an HSBC report, local governments generate 70% of their income from land sales much of which are ill-gotten gains for one ore more party (e.g., state owned firms have local leaders evict farmers from land).3 And there is no property tax, not because China is some hyper libertarian utopia but because corrupt officials — some of the same ones that confiscated the land — do not want to reveal their property holdings.
Crypto solutions
In 2004 a report from the OECD found that roughly half of all urban Chinese workers, primarily migrant workers from the provinces participated in the informal sector (this is between 120-150 million people).4 They would benefit if their payroll and compensation was managed by a Decentralized Autonomous Corporation rather than a human laoban (boss) who could change their mind or otherwise abuse the relationship (e.g., change the contract ex post). For instance, without an urban hukou (household registration) most of these migrant workers are left without any legal recourse in the event that their contracts are tampered or ignored.
Trustless asset management tools built on top of a cryptoledger such as Bitcoin or Ethereum (which are tamper-proof) would empower not just those in the developed world, but also those in the developing world who are more easily marginalized without political guanxi. Even if trustless asset management networks are not deemed legitimate or valid by the government or a Party apparatus, a decentralized smart contract based system would level the playing field and allow individuals from all walks of life to actually codify and manage scarce goods that they currently own.
While books and volumes could be written on this topic, even if there are stricter capital controls and regulations on cryptocurrencies in China (or elsewhere), that by using a couple different ‘colored’ coin chains (or Ethereum contracts, etc.) Bob from Beijing could still transfer assets worth X amount of money to Anhui Alice instead of X amount of money itself. This would create a sort of advanced barter system which may not be as efficient in terms of actually using a cryptocurrency as a medium of exchange but it could help those in an informal economy qualify and quantify asset value and clear up some of the confusion around contracts and property ownership.
See also: Chinese property law and Forced evictions in China
Send to KindleThere have been several Reddit threads and bitcointalk forum posts the past couple days regarding integrating a Turing-complete programming language with a cryptoledger. Bitcoin currently uses a limited, non-TC language called Script. The comments, feedback and insights revolve largely around the security risks and vulnerabilities that such a language could do.
If you are interested, I highly recommend reading through these threads right now, the first two include comments from Adam Back, creator of Hashcash which is the proof-of-work used in Bitcoin.
– Turing complete language vs non-Turing complete (Ethereum vs Bitcoin)
– letstalkbitcoin on committed tx, homomorphic value, fungibility, privacy
– Will turing compleastness allow contracts to contain viruses and malware that could affect the network in unforeseen ways?
– Adam Back about Ethereum and security risks
Send to KindleDecentralized autonomous organizations (DAO), sometimes called decentralized autonomous corporations or autonomous agents have become a hot new topic both in social media and in software engineering, especially as they are interrelated with advances in cryptoledgers/cryptocurrencies.
Vitalik Buterin has written a three-part series (1 2 3) about software-based DAOs over at the Ethereum blog that gives a pretty good overview and capability of what a DAO is able to do. While many more volumes will be written on this topic, last Mike Hearn gave a brief overview of what hardware applications may look like:
See also: Mike Hearn’s 2012 presentation in London (video) as well as his interview last fall with Newfination (video).
Send to KindleIf you haven’t done so yet, I highly recommend reading Vitalik Buterin’s overview of Ethereum published earlier today. It is very lofty, seemingly feasible and I don’t detect much hyperbole. He is clearly aware of the short-comings of all the different 1.0/2.0 projects and is pretty much trying to make this stand out by otherwise fulfilling Newton’s, “standing on the shoulders of giants.” I’d be interested to see what other project leaders from 2.0 initiatives have to say.
A few technical concerns I haven’t really seen addressed but I’m sure are being discussed somewhere:
1) Botnets. While ASICs do create potential long term centralization problems, Botnets will jump all over the ability to use CPUs again to mine. How can this be prevented/mitigated? Can it? Is there a way for Ethereum the org to prevent miners from participating (if so, can it be abused?)? [Note: I have discussed mining previously in the Litecoin category.]
2) Even though the money supply is mathematically known, I’m not entirely sure the linear money supply will necessarily have the zeroing effect apriori. It could, and probably will but obviously this is aposteriori. For perspective, the token supply in LTC and BTC are significantly higher the first decade than Ether is.
3) While Script is not Turing-complete this also prevents viruses from being created and wreaking havoc on the blockchain. CLL sounds great on paper in terms of robustness and utility, but how do you fight HNWI hackers who want to cause mischief?
Two other points of interest regarding the business side of this project:
1) I do think that eventually someone, somewhere will create a distributed, encrypted dropbox for global use. How that is incentivized, or rather, how individuals pay for the resources (bandwidth & space) obviously will be another matter altogether. Bitcloud is one project that is trying to tackle that (through proof-of-bandwidth). Perhaps, as part of what Mike Hearn described 2 years ago, users will eventually be able to use microtransactions (e.g., 0.01 BTC) to pay random WiFi hotspots to create adhoc mesh networks — distributed encrypted dropboxes could just as easily follow similar paths in terms of payment/compensation. Shades of Snow Crash and The Diamond Age…
2) Even though I am pretty pro-alt coin/chain/ledger/etc. I do think parts of the Humint project are probably not going to work as initially planned in their press releases this week. Assuming that Cocacolacoin is not part of the Ethereum blockchain but rather uses its own independent blockchain, it’s hard to imagine how to incentivize network hashrate (which creates network security which prevents a 51% attack). I’m not saying it won’t work apriori, but from a business model it is difficult to believe that Bob the Miner will want to exchange hashrate for Coca-cola swag. Obviously stranger things have happened, like the recent “success” of meme-related Dogecoin (wow! so cool! much awesome!); I do think not using the term “coin” will be a better marketing strategy as it is too loaded at this point (I prefer token or ducat). Other obvious uses within the Ethereum blockchain are Frequentfliercoins from Alice Airlines, could probably help prevent and mitigate the risks involved in travel hacking (FYI: United Airlines frequent flier miles were downgraded effective February 1, 2014 due to rampant inflation).
For example, I think Alice Airlines could utilize the “contract” system by using some amount of Ether (0.01), creating a “contract” which defines a set amount of Mileage (which itself will likely have some predefined expatriation dates). Assuming this is in the future and flyers are using Ether wallets (oh the 19th century irony) and provide the airline with their wallet address, the user will be able to receive the Mileage amount in their wallet (more than likely it will be an embedded URL that sends you to a screen on Airline Alice with the actual amounts + Terms of Service). This is what colored coins are, but Ethereum seems to be both more elegant as this is native built-in functionality and in terms of transfer speed (3-30 seconds is the stated goal versus 10 minutes for 1 BTC confirmation). This is subject to change, but just one potential use of the platform.
It will also be interesting to see how Dark Wallet and Zero Coin projects will react to this announcement (Ethereum is currently stating it is not an anonymous solution though through the “contracts” system this can be obfuscated).
Other resources to peruse:
– Ursium has a live update of publicly known tidbits.
– The Ethereum blog has some interesting info, especially about DAOs
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