Cryptoeconomics for beginners and experts alike

This past week Koinify and the Cryptocurrency Research Group (CCRG), a new academic organization, held a 3-day event — the first of its kind called Cryptoeconomicon, an interdisciplinary private event that included a cross section of developers, entrepreneurs, academics and a few investors.  It was purposefully scheduled to coincide with O’Reilly Media’s own “Bitcoin and the Blockchain” conference which took place in the middle of it.

I attended what amounted to four days of seminars, brainstorming and networking sessions.  Below are my summarized thoughts.  Note: these are my opinions alone and do not reflect those of other participants or the companies I work with.  You can view pictures/info of the event: #cryptoecon and @cryptoecon

Rather than going through each session, I will just highlight a few areas that stood out to me and include outside relevant content.

What is cryptoeconomics?

According to Vlad Zamfir, of the Ethereum project, cryptoeconomics as a field might be defined as:

A formal discipline that studies protocols that govern the production, distribution and consumption of goods and services in a decentralized digital economy.  Cryptoeconomics is a practical science that focuses on the design and characterization of these protocols.

Zamfir discussed this at length (slides) (video) and rather than going too in-depth with what he said I wanted to reiterate his main points he gave:

Cryptoeconomic security as information security

  • Mechanisms are really programs
  • They can distribute payoffs
  • The programs have a certain behaviour in the Nash equilibrium case
  • The NE has a cryptoeconomic security
  • We can be assured that a program will run a particular way

He also argues that “cryptoeconomics” should be see as more economics for cryptography rather than cryptography for economics:

  • Economic mechanisms can give guarantees that a program will run in a particular way that cryptography alone can’t provide.
  • Incentives are forward facing, cryptography is a function of already-existing information
  • How do we provide custom cryptoeconomic guarantees?

The last part in relation to his talk that really stuck out to me was on the final day.  In his view (slides) the technical term that should be applied is, “distributed cryptoeconomic consensus” which would assuage concerns from the academic “distributed consensus” community that uses different terminology.  Under this definition, this means:

  • A cryptoeconomic mechanism with the Nash equilibrium of assuring distributed byzantine fault tolerant consensus
  • We should be able to assert and prove the cryptoeconomic assurances of any consensus mechanism
  • Distributed consensus mechanisms can create a pure cryptoeconomy. Even the execution of the mechanisms is has a measurable assurance.

Most interesting comment of the event

I think the most apt comment from the economics discussion came from Steve Waldman, a software developer and trader over at Interfluidity on the first day of the event.

While there will likely be a recording posted on Youtube (video), in essence what he said was that in the blockchain space — and specifically the developers in the room — they are creating an enormous amount of supply without looking to see what the corresponding demand is.  That is to say, there is effectively a supply glut of “blockchain tech” in part because few people are asking whether or not this tech actually has any practical consumer demand.  Where are the on-the-ground consumer behavior surveys and reports?

Again, if Bitcoin (the overall concept) is viewed as an economy, country or even a startup, it is imperative that the first question is resolved: what is the market need?  Who are the intended consumers?  So far, despite lots of attention and interest, there has been very little adoption related to blockchains in general.  Perhaps this will change, maybe it is only a temporary mismatch.  Maybe it these are the chicken-egg equivalent to computing languages like Ruby or PHP and eventually supply somehow creates the demand?  Or maybe it suffers from the Kevin Costner platform trap (e.g,. if you build it, will they come?).

To illustrate this contrarian view:

why startups fail

Source: David Norris https://twitter.com/norrisnode/status/561262588466839553

Maybe there is no real market need for these first generation concepts?  Perhaps the network will run out of block rewards (cash incentives) to the miners before these blockchains can gain mainstream traction?  Maybe the current developers are not quite right for the job?

Or maybe, blockchains such as Bitcoin simply get outcompeted in the overall marketplace.  For instance, there are currently 1,586 Payment startups listed on AngelList and 106 P2P Money Transfer startups listed on AngelList.  Most of these will likely burn out of capital and cease to exist, but there are probably at least a dozen or so of each that will (and have) gained traction and are direct competitors to these first generation blockchains.

Perhaps this will change, but then again, maybe the market is more interested in what William Mougayar (who unfortunately was not part of the event) pointed out a few days ago.  Simply put, maybe there is more room to grow in the “Blockchain Neutral Smart Services” and “Non-Blockchain Consensus” quadrants:

Crypto_Tech

We cannot know for certain a priori what market participants will decide.  Perhaps Bitcoin is good enough to do everything its enthusiastic supporter claim it can.

Or maybe, as Patrick Collison, CEO of Stripe, wittily stated in Technology Review:

“Bitcoin is kind of a financial Rorschach test; everyone projects their desired monetary future onto it.”

Now, to be fair, Collison (who was not part of the event) has a horse in the race with Stellar.  Fortunately there was not much emphasis on token prices going to the moon at the Cryptoecon event.  When incentives did come up, it was largely related to how a consensus mechanism can be secure through a self-reinforcing Nash equilibrium.

Perhaps a future event could discuss what Meher Roy (who unfortunately was not in attendance either) adroitly summarized and modeled in relation to how actors are betting on crypto-finance platforms:

meher roy table

Source: https://medium.com/@Meher/a-model-to-makes-sense-of-beliefs-and-associated-crypto-finance-platforms-f761a7d782cb

Back to the show

There were a number of startups at the event, probably around a dozen or so.  In my view, the most concise overview was from Sergey Nazarov co-founder of SmartContract.  The interface was clean, the message was clear and “issuance” can be done today.  I’m not necessarily endorsing the stack he’s using, but I think he has clearly talked to end-users for ease of use feedback (note: be sure to consult a lawyer before using any ‘smart contracting’ system, perhaps they are not recognized as actual “contracts” in your jurisdiction).  Also, drones.

It would have been nice to see a little longer debate between StorJ, Maidsafe and Filecoin groups.  I think there was probably a little too much “it just works” handwaving but thought that Juan Binet-Betez from IPFS/Filecoin gave the most thorough blueprint of how his system worked (he also showed a small working demo).

It was not recorded but I think messaging for Augur (a variation of Truthcoin) was pretty poor.  Again, just my opinion but I was vocal about the particular use-case (gambling) proposed as it would simply bring more negative PR to a space smashed with bad PR.  The following day other members of the team discussed other uses including prediction markets for political events (similar to what Intrade did).  I am skeptical that in its current form it will become widely adopted because futures markets, like the CME, already do a relatively competitive job at providing this service for many industries and these decentralized markets could likely just attract marginal, illicit activities as has been the trend so far.  I could be wrong and perhaps they will flourish in emerging markets for those without access to the CME-like institutions.

Things that look less skeptical

  • There were about 10-12 people affiliated with Ethereum at the event, all of them were developers and none of them seemed to push their product as “the one chain to rule them all” (in fact, there was a healthy debate about proof-of-stake / proof-of-work within their contingent).  I’ve been fairly skeptical since last summer when their team looked gigantically bloated (too many cooks in the kitchen) but they seem to have since slimmed down, removing some of the pumpers and focusing on the core tech.  This is not to say they will succeed, but I am slightly less skeptical than I was 3-4 months ago.
  • I also had a chance to sit down with a couple members of the IBM ADEPT ‘Internet of Things’ team.  They held a ~3 hour workshop which was attended by around 20 people.  The session was led by Henning Diedrich (IBM), David Kravitz (IBM) and Patrick Deegan (Open Mustard Seed Project).  Again, even though I’ve paged through the ADEPT whitepaper, I was hesitant to believe that this was little more than marketing on the part of IBM.  But by the time the session was over, I was a little less skeptical.  Perhaps in the future, when more appliances and devices have secure proplets, they could use a method — such as a blockchain/cryptoledger — to securely bid/ask on resources like electricity.  B2B and machine-to-machine ideas were discussed and piggybacked on.  Obviously there are all sorts of funny and sad ways this could end but that is up for Michael Bay to visualize next year.
  • This also intersects with another good comment from Stefan Thomas (CTO of Ripple Labs).  In a nutshell, on a panel during the first day, he thinks there is some confusion and conflation of the terms “automation,” “decentralization,” “smart contracts” and “blockchains.”  That is to say, while blockchains are automated, that is not to mean that it is the only means to achieve automation.  Nor is decentralization necessary for automation to be achieved in every use-case.  Nor are smart contracts the only way to control automated devices.  When the video is posted I’ll be sure to link it (video).
  • Ethan Buchman, lead dev for Eris, was both witty and on top of his form, noting that in practice users don’t need a new browser every time they go to a new site, so they shouldn’t need a new client to view a different blockchain.  Let’s keep our eye on Decerver to see how this germinates.
  • Lastly, the two investors that attended the VC panel on Wednesday included Shahin Farshchi from Lux Capital and Pearl Chan of Omidyar Network.  What I liked about them is they weren’t pushing a certain binary viewpoint.  They were both upfront and honest: neither had invested in this space, not because they hated it, but because they were taking their time to see what opportunities actually fit within their mandate.  Perhaps they will at some point.  One joke that Farshchi mentioned was that back when cellular telephony was growing, “everyone and their mom” was selling base station equipment and chips.  Similarly there were over 300 companies creating thin film solar cells before bankruptcies and mergers.  So the type of euphoria we see in the Bitcoin-space is not necessarily unique.

Room for improvement

Perhaps if there is a next event it could include representatives from Blockstream, Bitfury and other Bitcoin-centered projects.  It would be nice to have some perspective from those deeply concerned about with maintaining secure consensus and the Blockstream team has some of the most experienced engineers in this space.  Hearing their views next to what Peter Todd (who attended and had some interesting calculations for the estimated costs to attack a network), could help developers build better tools.  Similarly, developers from Peernova, Square, Stripe, M-Pesa and Western Union would also likely be good resources to provide empirical feedback.

Additional clarity for what a decentralized autonomous organization (DAO) actually is and is not could be spelled out as well.  And how do these intersect with existing legal jurisprudence (can they? as Brett Scott might ask).   For anyone who has read “The Cookie Monster” by Vernor Vinge, both Matt Liston and Vitalik Buterin made some not-entirely-unreasonable points about machine-rights and whether or not machines should trust humans (e.g., humans expect bots to provide truthful information, but can the reverse be expected?  And what happens if a bot, like a DAO, is deemed too successful or broke a law in some jurisdiction — does it get “carted” away in a truck?).

Lastly, I think by the time there is another event, there will hopefully be more clarity for what a “smart contract” is.  One panel I moderated, I tried to get the participants to use the word “banana” instead because the term “banana” is overused and often conflated to mean many things it is legally not.  Primavera De Filippi from the Cryptolaw panel made some good comments too about whether or not “bananas” are actual legally binding contracts; she previously did a workshop with Aaron Wright (also in attendance) at the recent Distributed Networks and the Law event held at Harvard/MIT.  Steve Omohundro also spoke realistically about these scenarios on the final day, where does liability start and stop for developers of DAOs?

[Note: I would like to thank Kieren James-Lubin, Vitalik Buterin, Tom Ding, Sri Sriram for organizing the event, Robert Schwentker for acting as emcee/photographer, and CFLD and Omidyar Network for sponsoring the event including the delicious food.]

Send to Kindle

Eris launches an actual smart contract / decentralized application platform

[Note: this is not an endorsement nor was I compensated for posting the following information]

Preston Byrne (who helped provide feedback and content for GCON) left Norton Rose Fulbright a couple months ago and just announced the launch of Eris Industries.  While details are still forthcoming, it looks like they have managed to beat to market other proposed systems and it uses agnostic tech (not necessarily Bitcoin “rails”), to settle/move contracts on a blockchain.

In an email exchange Byrne explains the Eris system in a nutshell:

I think the key takeaway point – if there is one – is this. It’s sort of like Nick Szabo’s blockchain computer (albeit an Apple 1 version of it). There are no mystical powers to a blockchain – it is a data structure. But you can parameterise the data structure to address pain points where you currently rely on multiple-redundant (hardware and labour) systems to achieve that verification.

Where those pain points are will differ from case-to-case and application-to-application. It’s something that you can’t know in advance – businesses need to do the analysis and come up with proposed deployments, and it’s best for them to do so, as they are far and away in the best position to know how their business is structured and where the humans and hardware need to come out (and then, how to design a system of smart contracts tailored to address it).

That’s why Thelonious is a smart contract-enabled blockchain design, a template to create blockchains, instead of a single one – because developers, not us, are in a way better position to establish what those pain points are and how to address them.

Thus they set the parameters, and we don’t. We just give them the enterprise-compatible, open-ended, smart contract-enabled, and smart contract-controlled framework over which they can drape their particular problem, define it, code it, test it, solve it, and (while still benefiting from the security of public-key cryptography) improve it later thanks to the GenDoug kernel, and without needing to fork the chain.

Our job over the next couple of years is to make sure we keep building the tools that help them achieve that as easily and safely as possible.

Some of their blog posts explaining what the platform and goals are:

Send to Kindle

Does Smart Contracts == Trustless Multiparty Monetary Computation?

My friend, Zaki Manian, who is working on a very interesting project called SKUChain (discussed in chapter 16), thinks we should reframe how we perceive or rather how we should define ‘smart contracts.’

In his view:

Here is my proposal.

We stop calling the idea ” smart contracts” and we start calling the idea “Trustless Multiparty Monetary Computation”. That should also tell the lawyers that we don’t really need them here at the moment….

Programming Language researchers use the term “contracts” as a way of formally reasoning about multi-part or distributed computation. But PL researchers also understand that this is idea has deep formal connections with reasoning about the relationship between people and organizations.

Here is the relevant prior art.
https://en.wikipedia.org/wiki/Secure_multi-party_computation
The SPJ paper from 2000
http://www.lexifi.com/files/resources/MLFiPaper.pdf

Some implementation of the SPJ’s ideas
http://www.itu.dk/people/sestoft/papers/amlp.pdf
https://rucore.libraries.rutgers.edu/rutgers-lib/23837/

This was in response to the panel discussion last weekend and was brought up by Adam Krellenstein from Counterparty.

If anyone is interested in discussing this further, let me know and I’ll put you in touch with Zaki or others.

Send to Kindle

A panel on smart contracts with industry developers and educators

Earlier today I participated in a virtual panel covering smart contracts called, “Let’s Talk Smart Contracts.”

The panel included: Adam Krellenstein (Counterparty), Oleg Andreev (CoreBitcoin), Pamela Morgan (Empowered Law), Stefan Thomas (Codius, Ripple Labs), Stephan Tual (Ethereum), Tim Swanson (Of Numbers), Yurii Rashkovskii (Trustatom) and it was moderated by Roman Snitko with Straight.

Below are some transcribed notes of my own statements.

Introduction starting at 09:06:

Hey guys, great to be here.  Thanks for the invite, thanks for organizing this.  So I’m here because you guys needed another white guy from Europe or something like that (that’s a joke).  So the definition I have of smart contracts, I have written a couple books in this space, and the definition I use is a smart contract is “a proposed tool to automate human interactions: it is a computer protocol – an algorithm – that can self-execute, self-enforce, self-verify, and self-constrain the performance of a contract.”  I think I got most of that definition from Nick Szabo’s work.  For those of you who are familiar with him, look up some of his past writings.  I think that the primary work he is known for is the paper, “Formalizing and Securing Relationships on Public Networks.”  And he is basically considered the [intellectual] grandfather of this space.  I’m here basically to provide education and maybe some trolling.

From 22:02 -> 24:15

I think I see eye-to-eye with Adam here.  Basically the idea of how we have a system that is open to interpretation, you do have reversibility, you do have nebulousness.   These are things that Nick Szabo actually discussed in an article of his called “Wet code and dry” back in 2008.  If you look back at some of the earlier works of these “cypherpunks” back in the ’90s, they talked about some of these core issues that Oleg talked about in terms of being able to mitigate these trusted parties.  In fact, if you look at the Bitcoin whitepaper alone, the first section has the word “reverse” or “reversibility” around 5 times and the word “trust” or “trusted” appears 11 times in the body of the work.  This was something that whoever created Bitcoin was really interested in trying to mitigate the need for any kind of centralized or third party involved in the process of transactions to reduce the mediation costs and so forth.

But I suppose my biggest criticism in this space, it is not pointed to anyone here in particular, is how we have a lot of “cryptocurrency cosplay.”  Like Mary Sue Bitcoin.  I’m not sure if you guys are familiar with who Mary Sue is: she is this archetype who is this kind of idealized type of super hero in a sense.  So what happens with Bitcoin and smart contracts is that you have this “Golden Age” [of Comics] where you had the limited ideas of what it could do.  Like Superman for example, when he first came out he could only jump over a building and later he was pushed to be able to fly because it looks better in a cartoon.  You have only a limited amount of space [time] and it takes too long to jump across the map.  So that’s kind of what I see with Bitcoin and smart contracts.  We can talk about that a little bit later, just how they have evolved to encompass these attributes that they’re probably not particularly good at.  Not because of lack of trying but just because of the mechanisms of how they work in terms of incentives for running mining equipment and so on.  So, again we can talk about that later but I think Adam and Oleg have already mentioned the things that are pretty important at this point.

40:18 -> 41:43

I’m the token cynic, huh?  So actually before I say anything, I would like to mention to the audience other projects that you might be interested in looking at: BitHalo; NotaryChains is a new project that encompasses some of these ideas of Proof of Existence created by Manuel Araoz, he is the one who did POE.  NotaryChains is a new project I think that sits on top of Mastercoin.  The issue that people should consider is that proof of existence/proof of signature: these are just really hi-tech forms of certification.  Whether or not they’re smart contracts I guess is a matter of debate.

There is another project: Pebble, Hyperledger, Tezos, Tendermint, Nimblecoin.  With Dogethereum their project is called Eris which apparently is the first DAO ever.  A DAO for the audience is a decentralized autonomous organization, it’s a thing apparently. SKUChain is a start-up in Palo Alto, I talk about them in chapter 16.  They have this interesting idea of what they call a PurchaseChain which is a real use-case for kind of updating the process from getting a Letter of Credit to a Bill of Lading and trying to cut out time and mediation costs in that process.  There are a few others in stealth mode.  So I really don’t have a whole lot to add with cynicism at this point, we can go on and come back to me in a little bit.

59:41 -> 1:02:35

The go to deficiency guy, huh?  They’re not really saying anything particularly controversial, these things are fundamentally — at least from an engineering perspective — could be done.  The problem though I think runs into is what Richard Boase discussed in — if listeners are interested — he went to Kenya and he did a podcast a few weeks ago on Let’s Talk Bitcoin #133.  I really recommend people listen to it.  In it he basically talks about all of these real world issues that run into this idealized system that the developers are building.  And as a result, he ended up seeing all of these adoption hurdles, whether it was education or for example tablets: people were taking these tablets with bitcoin, and they could just simply resell it on a market, the tablet itself was worth more than they make in a year basically; significant more money.  He talked about a few issues like P2P giving, lending and charity and how that doesn’t probably work like we think it does.

I guess the biggest issue that is facing this space, if you want issues, is just the cost benefit analysis of running these systems.  There is a cost somewhere to run this stuff on many different servers, there is different ways to come up with consensus for this: for example, Ripple, Stellar, Hyperledger, they’re all using consensus ledgers which require a lot less capital expenditures.  But when you end up building something that requires some kind of mining process itself, that costs money.  So I think fundamentally in the long-run it won’t be so much what it can do but what can it economically do.

So when you hear this mantra of let’s decentralize everything, sure that’s fine and dandy but that’s kind of like Solutionism: a solution looking for a problem.  Let’s decentralize my hair — proof of follicle — there is a certain reductio ad absurdum which you come to with this decentralization.  Do you want to actually make something that people are actually going to use in a way that is cheaper than an existing system or we just going to make it and throw it out there and think they’re going to use it because we designed [wanted] it that way.  So I think education is going to be an issue and there are some people doing that right now: Primavera De Fiillipi, she’s over at Harvard’s Berkman Center — she’s got something called the Common Accord program.  And also Mike Hearn; listeners if you’re interested he’s made about 7 or 8 use-cases using the existing Bitcoin blockchain including assurance contracts — not insurance contracts — assurance contracts.  And he’s got a program called Lighthouse which hopes to build this onto the actual chain itself.  So there are things to keep in mind, I’m sure I’ll get yelled at in a minute here.

1:23:58 -> 1:28:10

Anyone listening to this wanting to get involved with smart contracts: hire a lawyer, that’s my immediate advice.  I will preface by saying I don’t necessarily agree with policies that exist and so on; I don’t personally like the status quo but there is no reason to be a martyr for some crusade led by guys in IRC, in their little caves and stuff like that.  That’s not towards anyone here in this particular chat but you see this a lot with “we’re going to destroy The Fed” or “destroy the state” and the reality is that’s probably not going to happen.  But not because of lack of trying but because that’s not how reality works.

Cases right now are for example: DPR, Shavers with the SEC, Shrem now with the federal government, Karpeles [Mt. Gox] went bankrupt.  What’s ended up happening is in 2009, with Bitcoin for example, you started with a system that obviated the need of having trusted third parties but as users started adopting it you ended up having scams, stolen coins, people losing coins so you ended up having an organic growth of people wanting to have insurance or some way to mediate these transactions or some way to make these things more efficient.  And I think that it will probably happen — since we’re guessing, this is speculative — I think that this will kind of happen with smart contracts too.  That’s not to say smart contracts will fail or anything like that.  I’m just saying that there will probably just be a few niche cases initially especially since we don’t have much today, aside I guess from Bitcoin — if you want to call it a smart contract.

What has ironically happened, is that we have created — in order to get rid of the middlemen it looks like you’ve got to reintroduce middlemen.  I’m not saying it will always be the case.  In empirical counter-factual it looks like that’s where things are heading and again obviously not everyone will agree with me on that and they’ll call me a shill and so on.  But that’s kind of where I see things heading.

I have a whole chapter in a book, chapter 17.  I interviewed 4 or 5 lawyers including Pamela [Morgan] of different reasons why this could take place.  For example, accredited investor — for those who are unfamiliar just look up ‘accredited investor.’  If you’re in the US, in order to buy certain securities that are public, you need to have gone through certain procedure to be considered a ‘sophisticated investor.’  This is one of the reasons why people do crowdsales outside of the US — Ethereum — because you don’t want to have to interact with the current legal system in the US.  The reason I mention that is because you end up opening yourselves to lawsuit because chains — like SWARM — cannot necessarily indemnify users.  That’s legal terminology for being able to protect your users from lawsuits from third parties; they just do not have the money, the revenue to support that kind of legal defense.  Unlicensed practice of law (UPL) is another issue.  If you end up putting up contracts on a network one of the issues could be, at least in the US, are bar associations.  Bar associations want to protect their monopoly so they go after people who practice law without a license.  I’m not saying it will happen but it could happen.

My point with this is, users, anyone listening to this should definitely do your due diligence, do your education.  If you plan to get involved with this space either as an investor or developer or so on, definitely at least talk to a lawyer that has some inkling of of an idea [on this].  The ones I recommend, in addition to Pamela here are: Ryan Straus, he is a Seattle-based attorney with Riddell Williams; Austin Brister and James Duchenne they’re with a program called Satoshi Legal; and then Preston Byrne, who’s out in London and he’s with Norton Rose Fulbright.

1:52:20 -> 1:54:43

Guys look, I understand that sounds cool in theory and it’s great to have everything in the background, but the reason you have to see these “shrink wrapped” EULAs [end user license agreements] and TOSs [terms of service] is because people were hiding stuff inside those agreements.  So if you hide what’s actually taking place in the contract you end up making someone liable for something they might not actually agree to.  So I’m not sure, I think it’s completely debatable at this point.  If we’re trying to be transparent, then you’re going to have to be transparent with the terms of agreement.

I should point out by the way, check out Mintchalk.com, it’s run by guys named James and Aaron in Palo Alto, they’re doing contract building.  ACTUS is a program from the Stevens Institute, they’re trying to come with codified language for contracts.  Mark S. Miller, he’s got a program over at Google, he does something with e-rights.

I mention all of this because, we already have a form of “polycentric law” if you will in terms of internationally with 200 different jurisdictions vying for basically jurisdiction arbitrage.  Ireland and the Netherlands have a tax agreement that Facebook, Google, Pfizer they take advantage of.  It’s this Double Irish With a Dutch Sandwich.  In fact my own corporation is incorporated in Delaware because of the legal arbitrage [opportunities].  Obviously smart contracts might add some sort of new wrinkle to that, but people who are listening to this, don’t expect to be living in some Galt’s Gulch tomorrow or something like that.

For example, when you have something that is stolen, there is something called Coinprism which is a colored coin project.  They can issue dividends on stock.  The cool thing with that is, “hey, you get to decentralize that.”  The double-edged side of that is if that when that get’s stolen: people steal stuff like bitcoins and so forth, what happens to the performance of that dividend?  If the company continues paying that dividend in knowing that the person had been stolen from: if somebody stole from me and I tell the company, “hey, it was stolen” and they continue paying, then I can sue them for continuing to pay a thief.  If they stop paying then it defeats the purpose of decentralization because anonymity is given up, identity has taken place.  Obviously this moves into another area called “nemo dat” it’s another legal term talking about what can be returned to the rightful owner, that’s where the term “bona fide” comes from.  Anyways, I wanted to get that out there.  Be wary of disappearing EULAs, those have a purpose because people were being sued for hiding stuff in there.

2:10:05 -> 2:12:23

So I think everybody and all these projects are well-intentioned and have noble goals but they’re probably over-hyped in the short-run, just like the Segway was.  It eventually leads to some kind of burnout, or over-promise and under-delivering.  I’m not saying this will happen, I’m just saying it could happen.  I actually think the immediate future will be relatively mundane, such as wills and trusts kind of like Pamela was talking about.

One particular program is in Kenya there is something called Wagenitech which is run by Robin Nyaosi and he is wanting to help farmers move, manage and track produce to market to bypass the middleman.  That doesn’t seem like something really “sexy,” that doesn’t seem like the “Singularity” kind of thing that everyone likes to talk about.  But that is needed for maybe that particular area and I think we might see more of that along with PurchaseChain, NotaryChains, some of these things that we already do with a lot of the paperwork.

Again, blockchains and distributed ledgers are pretty good at certain things, but not everything.  It has real limitations that vocal adopters on the subreddit of Bitcoin like to project their own philosophical views onto it and I think that it does it a very big disservice to this technology long-term.  For example, LEGO’s can be used to make a car but you wouldn’t want to go driving around in one.  A laptop could be used as a paper weight but it’s not particularly cost effective to do that.  And so what I think we’ll end up running into a tautology with smart contracts, it’s going to be used by people who need to use them.  Just like bitcoin is.  So what we’re going to have is a divergence between what can happen, this “Superman” version of Bitcoin and smart contracts, versus the actual reality.

So for example, people say it’s [Bitcoin] going to end war.  You had the War of Spanish Succession, there was a Battle of Denain, a quarter million people fought that in 1712 and it was gold-based [financed by specie].  Everyone that says bitcoin is going to destroy fiat, if the state exists as it does today there’s always going to be these institutions and types of aggression.  I do think smart contracts do add collateral and arbitration competition and it does take away the problem of having trust in the system itself, but the edges are the kryptonite.  And always will be.  So we need to focus on education and creating solutions to real actual problems today with the actual technology and not just some hypothetical “Type 2” civilization where we are using [harvesting] the Sun for all of our energy.

Send to Kindle

Presentation covering Smart Contracts, Smart Property and Trustless Asset Management

Earlier tonight I gave a presentation at Hacker Dojo with the Ethereum project.  I would like to thank Chris Peel and Joel Dietz for organizing it.  Below is a video and accompanying slide deck.  In addition to the footnotes in the PPT, I recommend looking at the wiki on smart contracts and Nick Szabo’s writings (1 2 3).

Also, some quotes regarding synthetic assets in Szabos’ work:

Citation 1:  “Another area that might be considered in smart contract terms is synthetic assets[5]. These new securities are formed by combining securities (such as bonds) and derivatives (options and futures) in a wide variety of ways.”

Citation 2: “Creating synthetic assets or combinations that mimic the financial functionality of some other contract while avoiding its legal limitations”

Citation 3: “Reference to Perry H. Beaumont, Fixed Income Synthetic Assets”

Send to Kindle

Casual conversation with Mastercoin, Ethereum and Invictus (Bitshares/Protoshares)

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 Kindle

Interview covering China, smart contracts and trustless asset management

Earlier 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

  1. See China’s Real Estate Riddle from Patrick Chovanec, You May Own your Apartment, but who Owns the Land Underneath Your Feet? by Thomas Rippel and If Beijing is your landlord, what happens when the lease is up? from China Economic Review []
  2. See China’s Land Grab Epidemic Is Causing More Wukan-Style Protests from The Atlantic and China Tackles Land Grabs, Key Source of Rural Anger from The Wall Street Journal []
  3. See China land price fall threatens local finances from Financial Times and China’s land-seizure problem from Chicago Tribune []
  4. Internal Migration in China and the Effects on Sending Regions from OECD []
Send to Kindle

Mike Hearn discusses autonomous agents at Turing Festival 2013

Decentralized 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 Kindle

Interview with Mark DeWeaver, co-founder of Quantrarian Capital Management

Earlier today I had the opportunity to interview a friend, Mark DeWeaver.  Mark is the author of Animal Spirits with Chinese Characteristics and wrote a very kind foreword for my own book.  He worked in China for 9 years and later co-founded Quantrarian Capital Management which is fully invested in the Iraqi Stock Market.

We discussed a number of topics including the “rebalancing” of China’s economic model, the Soviet tech industry during Gorbachev1 , technological innovations with regards to the Great Firewall (GFW) and spent the last 15 minutes discussing cryptocurrencies, smart property, trustless asset management and specifically an article written by Mr. Sheng from the PBOC.2

Other stories mentioned:

  1. See “The Soviet Machine-Building Complex: Perestroyka’s Sputtering Engine” from the Office of Soviet Analysis published by the Directorate of Intelligence []
  2. Mr. Sheng’s article on Bitcoin and cryptocurrencies is “虚拟货币本质上不是货币” []
Send to Kindle

Q&A with Meni Rosefeld of Colored Coins

I had an email exchange with Meni Rosefeld who is on the core dev team for Colored Coins.  Below are his answers to my questions (published with his permission):

Q: What advantages does CC provide to the current global asset management industry?

A: The greatest advantage is the removal of barriers of entry. Currently, new businesses wishing to raise capital use cumbersome and inefficient private deals; and those aspiring to be listed in order to allow for the market to valuate them with an efficient mechanism, can only do so with a great expenditure. With colored coins, anyone can easily raise funds in exchange for equity, removing barriers of entry, encouraging innovation and allowing society as a whole to better allocate its resources between ventures.

Q: One criticism of CC is that it still requires centralized servers to issue and track tokens.  If this is the case, would it not be easier to simply do all trade privately at the centralized exchange where it will be more scalable and private?

A: No centralized servers are needed for tracking – this is done in the decentralized network of the host currency (such as Bitcoin). There does need to be an entity issuing each particular colored coin – however, an entity raising funds for a generic purpose is not usually in the business of running an exchange. Without colored coins, they would have to resort to a large 3rd party exchange with all the usual problems of barrier of entry (for both issuers and exchanges) and vendor lock-in. With colored coins, they can outsource the tracking and exchange to the efficient decentralized network. The issuer is only involved when issuing or recalling the coins; investors can then trade the coins between themselves without involving any 3rd party, which has implications for privacy, efficiency, and the kind of advanced transactions one can do.

Q: How does CC able to differentiate itself from other endeavors such as Ripple and Open Transactions?

A: The distinctive feature of colored coins is that it’s integrated into a host blockchain such as Bitcoin. OT and Ripple work very differently from Bitcoin and thus have an adoption curve in both people’s ability to understand the system and the existing hardware, software and business infrastructure. With colored coins built on top of the established currency Bitcoin, it enjoys all of Bitcoin’s known advantages, and will be more easily adopted by users of Bitcoin (who are anyway the ever-growing target market).

Send to Kindle

Ethereum’s potential: a cursory look

If 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

Send to Kindle

Ethereum: An all-in-one cryptoledger smart property turnkey solution

CoinDesk published a new story about a start-up called Ethereum which is launching in a week.  This project will include a distributed mining network + software development platform.  Here is the technical whitepaper.

Not to oversimplify it but they want to use a different, more ASIC-resistant proof-of-work along the lines of Scrypt (which is used in Dogecoin and Litecoin) and maybe also integrate proof-of-stake as an alternative.  While there may be some merit to PoS, there are not many devs that are fans of it (see a small counter-explanation here) notably Warren Togami (lead dev of Litecoin).

The software development side is quite interesting.  Basically one of the limitations with the current Bitcoin protocol (that will be somewhat rectified in version 0.9) is the lack of native support for “colors.”  That is to say, the token system since the first release four years ago, can represent just one particular asset class — which thus far has been fiat value (perhaps there could potentially be hundreds of different blockchains to represent different colors, but then you would need to build hashrate infrastructure to support the transaction, security, etc.  Possible maybe.).

With a colored token system (e.g., “coloring” a specific amount of a token green or blue to represent a specific asset), anyone can add, trade and track assets through one blockchain (obviously if that blockchain has problems it can be ported and used on another cryptoledger).  Mastercoin and the Colored Coin project are attempting to do something similar (as are Nxt, BitShares, Counterparty and Open Transaction).

It will be cool to see how the community reacts to the crowdfunding effort starting next weekend.  Note: for contrast in approach, here is the Colored Coin overview paper.

Send to Kindle

What are smart property and smart contracts?

I have received a number of calls and emails regarding the concept behind smart property and smart contracts which have been in the news this week.  While this topic will eventually fill volumes, if you have some time I recommend reading through these links, all written by Nick Szabo:

Speaking of which, I had a short email exchange with Mr. Szabo today (who to the chagrin of redditors, insists he is not Satoshi) and he is familiar with what is going on in the ecosystem (including projects like Mastercoin and Ethereum and people like Mike Hearn).  So if you have been following his academic output, it is pretty neat to see how his ideas (like “the god protocol“) are coming into fruition through the advent of cryptoledgers and cryptocurrencies.

I also highly recommend his piece: Shelling Out – The Origins of Money

Send to Kindle

Building Smart Property Applications: Colored Coins and Mastercoin

[Note: below is my recent article published on CoinDesk.]

Cryptoledgers such as those utilized in cryptocurrencies like Bitcoin and Litecoin have the ability to be employed in other capacities.  They are not merely one-dimensional, one-trick ponies relegated to simple fiat-only exchanges.

For example, last week Kyle Torpey published an overview of several upcoming projects that utilize the Bitcoin blockchain to provide new features and financial instruments for users globally.  While it is uncertain that any or all will be successful in accomplishing their goals, these new innovations, like Namecoin before it, show that cryptoledgers can be integrated to provide rich functionality beyond the current token system.

For those unfamiliar with Namecoin, it currently acts as a decentralized DNS system that makes domain name censorship difficult, if not impossible.  It was created in 2010 as a modified version of Bitcoin and in 2011 the mining of Namecoins (after block 19200) was effectively merged with Bitcoin through a software update (e.g. pools had to use a new software release).  While Namecoin provides DNS functionality it can also be utilized to be used as a messaging system, torrent tracker and even as a notary (which other cryptocurrencies can do as well).

The next release of Bitcoin currently being developed, version 0.9, will include a number of changes.  In the words of lead developer Gavin Andresen it includes the ability for “developers [to] associate up to 80 bytes of arbitrary data with their transactions by adding an extra “immediately prune-able” zero-valued output.”

What this allows for is a little more space in the output section to provide users the ability to add some new data (such as a distributed contract) to be included via a hash.

Why is this important?

In 2012, Mike Hearn (a Bitcoin developer now on the board of Circle) gave a presentation in London in which he describes other financial instruments and practical business uses that a cryptoledger can provide through the use of “timelock” (technically referred to as nLockTime).  This makes it possible to build ‘smart property’ or contracts that in turn create a distributed digital verification system that bypasses the need for a central repository.   A couple examples Mike gives are the transfer of goods (such as a car) and the execution of a trust fund (through a will), both of which can be conducted without many additional intermediaries.  For example, if a car ignition system is reengineered to connect with a cryptoledger protocol, it could enable car owners to buy and sell vehicles remotely via trusted timestamping.  The execution of a will (e.g. disbursement of a trust fund) is also possible, albeit slightly more complicated in that someone would need to build a system that can scan obituaries for deaths and notify the blockchain of any changes.  In actuality the potential applications can be expanded to anything that involves rights verification such as stocks, titles to houses, digital media as well as the keys to houses and cars.  In fact, this past fall Mike gave another interview describing these potential applications in more detail.

Coloring within the lines

Another potential way to utilize a crypto blockchain to verify wares is through a process being developed called Colored Coins.  In a nutshell this endeavor allows users to “color” a token to represent a specific asset such as a car, home, boat, commodity, shares, bonds – virtually any type of asset (e.g., 0.5 BTC colored green to represent your home).  These tokens can then be exchanged, just like bitcoin tokens, by anyone anywhere.  This enables a decentralized, trustless form of asset management that uses a blockchain as both a ledger and transportation mechanism.

I spoke with Alex Mizrahi, who is leading the development of the Chroma Wallet used by the Colored Coin project.   According to him, “It is going to be very easy for the asset management industry as a whole to use Colored Coins.  For example, some of the first places we are going to have adoption will likely be real-estate and portfolio management.  In fact, for any type of asset management it’s going to be simple to issue his own color that represents his goods.  A portfolio manager can issue one color that represents a portfolio of stocks backed by the real holding and sell it globally.  If he is savvy and his products are good, his colors are going to have demand.  So transferring ownership is very easy, quick and safe — just like bitcoins.  In the real estate industry someone can issue their apartments using colored coins and have them float on the blockchain, or manage time-sharing based on color.”

I also spoke with Amos Meiri, head of dealing at eToro and also a member of the development team for the Colored Coin project.  I specifically asked him if it would be easier to simply conduct all trade privately at the centralized exchange where it will be more scalable and private.  In his view, “Centralized exchanges definitely have their advantages, but colored coins can be useful for following reasons.  First, users do not need to trust their bitcoins to a centralized exchange.  Companies cannot manipulate ownership records (to commit fraud, for example).  So basically, if somebody gives you an IOU, it isn’t a good idea to leave it with the person who issued it or to affiliated parties.  Another reason is that companies cannot control how its shares are being traded, thus it cannot block trade.   And lastly, there is no need to maintain servers or manage security due to its integration with the blockchain.”

While this is obviously easier said than done, as noted above, this idea of using cryptoledgers to manage smart property has inspired and motivated numerous other groups to work on similar efforts.  For example, Counterparty.co was recently launched this month.  Its mysterious, relatively anonymous development team has released similar open-source applications, documents, binaries and tools that allow users and entrepreneurs to build smart property functionality such as derivatives and dividends in a decentralized manner.  And three days ago, Jon Southurst discussed several other groups including Reality Keys which can utilize a crypto protocol to build a predictions market or a way to hedge against currency fluctuations.

Masters of the cryptoverse

This past week I spoke with Taariq Lewis, the founder and CEO of BitcoinBusiness, a Bitcoin Advisory firm and he is also the Smart Property and Business Development Lead of the Mastercoin Project.  Mastercoin is a crowdfunded, non-profit endeavor to create an open-source  distributed exchange protocol for Bitcoin.  The MC project has received more than $3 million in crowdfunding which has been used to pay for bounties, build tools and write documentation all of which is ultimately released open-source.

According to Taariq, “We are on the tip of the iceberg of the democratization of upper level finance and investment management.  One apt analogy is that the current system involves a highly siloed, highly centralized organization reminiscent to the music industry prior to P2P innovations.  We are now approaching the first wave of people being able to distribute financial products to each other on a peer-to-peer basis.  While this obviously has regulatory repercussions such as the SEC and CFTC oversight in the US, there is no ‘Wolf of Wall Street’ in crypto.  In fact, projects like Colored Coin, Counterparty and Mastercoin will create applications that will decentralize stock and bond exchanges allowing individuals and entrepreneurs to build dividend products and distribute the assets without middlemen.”

I also spoke with David Johnston, managing director of BitAngels and a board member at Mastercoin.  In his view, “Cryptocurrencies are more than a payment network, it is more than a new type currency or store of wealth.  It is a whole new platform and is a way for people to now make programmable money and that gives rise to smart contracts.  Now that this money is programmable I can put it into applications, I can create other digital tokens.  That’s what really gets me excited where anyone can build anything.”

The Mastercoin platform is still a work in progress and has gone through several iterations based on community feedback.  It also faces market competition from several others in this space such as Open-Transactions, Invictus (formerly BitShares) and potentially many others that learn of the potential business opportunities.   And as a consequence, it looks like a promising area for Christensen-style innovation.

Outside the dev world

For perspective I had an email exchange with Ryan Orr who is a professor at Stanford University (teaching Global Project Finance and Infrastructure Investment) and chairman at Zanbato.   He noted that, “with the recent wave of regulatory actions, I am personally feeling quite excited about how the “smart property” projects evolve in 2014.   It is starting to feel like smart property could be a much lower path of resistance for the bitcoin protocol as it establishes a “non-monetary” form of use that fulfills a valuable social purpose.  And thus it should not be viewed as a direct threat by regulators who are afraid of losing monopoly control of money. It is the “duality” of purpose of gold, where people can hold it under the auspices of non-monetary purposes, but also hold it for monetary purposes (eg. a hedge against inflation), that makes it so difficult for the governments to totally eliminate it as a form of money (even though the US government did try to do so in 20th Century).  If bitcoin can develop a similar duality, where the ‘smart property’ use makes it legitimate, and then people also can secretly hold it as an uncorrelated hedge against government dysfunction, then that could be pretty interesting.  In sum, it feels like the ‘smart property’ could become the ‘formal, legal, legitimate’ face to the project that can develop independent of how the regulators rule on the use of Bitcoin for monetary purposes.”

In addition, I also spoke with Ben Davenport, an angel investor and a member of the monetization team at Instagram.  While he does not necessarily endorse one specific project, in his view, “colored coin technology allows such centralized assets to be traded in a completely decentralized way.  Every single equity in the world has a central issuer — the company itself. But imagine the power of being able to make a trustless trade of stock for bitcoin with a stranger, at a distance, with no third party involved. With colored coins, I can construct a single atomic transaction which encodes such an exchange. That, to me, is the most important basic thing that colored coins can enable.”

The disruptive potential of smart property for the entire financial industry, not just fiat credit facilities, is enormous.  Charles Stross, the British Scifi author, recently criticized Bitcoin and the cryptocurrency endeavor, wishing that it die a quick death (in fire no less).  While his contentions were fallacious on a number of counts (especially regarding the environmental impact), ironically, he previously predicted seven years ago that near-future scifi authors are still probably missing something disruptively as large as the Internet 20 years ago or the smartphone was this past decade.

In other words, just as rewatching older scifi films that failed to foresee drones and self-driving automobiles seems dated, the portrayal of centrally managed financial products may one day be viewed as an anachronism of our not-so-quaint analog past.  Thus, Stross’ prediction of another unforeseen invention could very well be these smart property applications and digital financial instruments that are managed and transported by the very same cryptoledgers he dreamt of burning.

Send to Kindle

Smart Property in the news: Counterparty.co

A new project that utilizes a cryptoledger to create decentralized, distributed trustless asset management has been making the rounds: Counterparty.co

It’s legitimate in terms of the codebase and functionality.  Thus it will be very cool to see how other similar projects (Colored Coins, Mastercoin, etc.) germinate as well.  The disruptive potential of these innovations are enormous.

Send to Kindle

Colored Coins and other ‘smart property’ extensions

I am not necessarily endorsing the use of this specific project but Colored Coins (Chrome Wallet) illustrates some of the cool potential features that a crypto protocol like that of Bitcoin (or Litecoin) can be used for.


Kyle Torpey has also written an excellent summary of the major known projects in this piece: Bitcoin 2.0 Explained: Colored Coins Vs Mastercoin Vs Open Transactions Vs Protoshares

Send to Kindle