231. 28/10/2018 23:16
Bitcoin's White Paper Was a Model T for Payments

David Schwartz is CTO at Ripple.

This exclusive opinion piece is part of CoinDesk's "Bitcoin at 10: The Satoshi White Paper" series.

In 1991, my patent for a multi-level distributed computer network was granted. I was working on graphics rendering problems requiring significant amounts of CPU power and wanted to distribute computing-intensive tasks to a network of devices.

The goal was to have a number of computers performing simple tasks to contribute to a single result. Creating this system, though, was a complicated task.



After the publication of Satoshi's white paper, that's no longer the case. Outlined in the paper was a peer-to-peer payment system poised to disrupt the financial industry, one that gave people the power to conduct transactions across a distributed network without the need for trusted middlemen.

As a cryptography geek, I was enamored.

Seeing the concept from my patent re-emerge nearly 20 years later, I was excited to see that now was finally the right time for this idea to succeed.

At the core of this white paper was the chance to democratize value exchange. It has the ability to protect consumers should another financial crisis hit by allowing them to continue exchanging money without high interest rates and inflation. Using cryptocurrency also prevents expensive transaction fees and promotes financial inclusion, especially in developing countries.

The exchange of digital assets provides the underbanked and unbanked population access to global markets that they wouldn't have otherwise and offers a massive business opportunity for providers.

A Model T for payments

The most important aspects of Satoshi's decentralized network that aided in this democratization – transparency and consensus – are what make this such a revolutionary concept.

When you pay your friend through Venmo or send a check to your landlord, you have no view into the transaction process. Satoshi wanted to provide users with the ability to know where their money was every step of the way. In that same vein, when you send your payment into the abyss, you are trusting a third party (AKA your bank of choice) to transfer your funds correctly and lawfully.

The consensus protocol for bitcoin transactions requires every participant to enforce the rules, this way no one party can control what makes a transaction valid.

I often compare this disruption to that of the Model T. Before it was created in 1908, cars were seen as a luxury item that most could not afford. The Model T was a practical and affordable option, democratizing the car industry. Soon after, others followed suit and started to create different types of affordable – and sometimes better – cars.

Likewise, bitcoin was a catalyst for the industry, and thousands of others have since been inspired by it and iterated on blockchain technology.

Maybe bitcoin won't survive (just like the Oldsmobile), or maybe it becomes the ultimate store of value. No one knows for sure. What is clear is that there won't be only one winner.

There are, and will continue to be, different use cases for cryptocurrencies, including payments, stores of value and smart contracts – think of these as race cars, trucks and minivans, all serving a different purpose but derived from the same invention.

A coming change

And that's the key – our world adjusted to the democratization of cars by building roads, highways, race tracks, and despite the hesitancy from regulators and institutions. We'll see the same with blockchain.

Without Satoshi and bitcoin, this industry wouldn't be what it is today. But make no mistake, we are still in the very early days and will continue to see new ways to apply blockchain.

It's been over 100 years since the Model T's creation, and the industry is still coming out with new concepts such as the driverless car and all-electric vehicles.

It's always hard to imagine what applications the future holds for new technologies, but there is a clear pattern emerging in cases where technology has drastically increased the speed of something while simultaneously decreasing its cost.

The Internet did this for data exchange. We share massive amounts of data across the globe instantly and the technology is invisible. It doesn't matter where in the world you are or how much you want to share – it is just something we can do now.

Blockchain is doing this for payments. If the pattern holds, the next decade will bring an explosion of low-cost, high-speed payments that will transform value exchange the way the Internet transformed information exchange. Payments will just be something we can do now.

232. 28/10/2018 16:36
Defending Decentralization, Like a Twice in a Millennium Chance

"We haven't had an opportunity like this in the past 500 years."

That's Amir Taaki speaking on a closing panel at the Web3 Summit in Berlin Wednesday, and his statement was greeted with breathless applause by the audience. An early bitcoin developer, Taaki addressed a crowd of more than a thousand coders that had gathered to discuss "Web 3.0" – or the restructuring of internet infrastructures with an emphasis on decentralization.

"Maybe the technological proposals that people are talking about are not very well grounded, but I do see a huge amount of young, idealistic people with a lot of capital," Taaki said, adding:

"If we can form a vision and direct that energy, it could be an extremely powerful force."



A concept which originated from ethereum co-founder and Parity Technologies founder Gavin Wood, Web 3.0 has evolved into a tech base that encompasses a wide range of decentralized technologies, ethereum and beyond.

Web 3.0 is intended to replace the existing online infrastructure with software that is decentralized from the start. To this end, much of the discussion over the three-day conference echoed Taaki's sentiment – that with the right combination of technology and vision, Web 3.0 can usher in a new era of digital emancipation.

And while that may sound idealistic – several attendees remarked that the event seemed to tip into naïveté at times – it was met with a wave of technological advances that reinforced this positivity.

"It's different this time around, and we have a chance to use these tools in a way that empowers and protects people," Patrick Nielsen, CTO of Web 3.0 startup Clovyr, said. "But it won't build itself, and just because the tools exist does not mean it's going to get used."

Ethereum developer Lane Rettig echoed this point in an interview with CoinDesk.

According to him, the Web 3.0 community is at a crucial turning point. Either it succumbs to the classic "rich get richer" dynamics or the community takes "the uncharted path" of permissionless innovation.

"But it's not something we get for free, and it is not something we get by default," Rettig contended.

What's more, such a vision requires careful coordination and an awareness of history, such as the failure of former technological movements that got co-opted by corporates. To this end, several moments during the conference reflected this idea in more cautionary terms.

For instance, ethereum developer Vlad Zamfir took the stage on Monday, saying: "Expect every layer to be captured. Defend every layer."

The 'protocol commons'

During the event on Monday, Harry Halpin, an academic and a former chairperson of the World Wide Web Consortium (W3C), gave some concrete examples of the risks currently facing the nascent industry.

According to Haplin, decentralized, open-source technologies have a historical tendency to fall prey to capture by corporations that implement the tech – thus further centralizing the Web.

Clovyr's Nielson seconded that, explaining that strategies – such as the so-called "embrace and extinguish" method – exist within corporations to allow them to take open-source software and reimplement it within their own systems (without so much as a thank you). And the tech, at that juncture, has been abstracted from its guiding principles and even be used for malignant ends, he said.

Zamfir specifically directed his warning about this process toward blockchain governance – where an economic elite can buy up crypto token ownership and divert the outcomes of a project.

According to Halpin, Web 2.0 technology underwent a corporate capture of its own, and the leaders of the projects "lacked the backbone to push back and fight for users rights." For example, Halpin drew attention to digital rights management (DRM) – a heavily criticized copyright-enforcing technology that led him to quit the W3C following its implementation as a Web standard.

To protect against such eventualities, Halpin proposed the notion of a "protocol commons," an overarching blockchain governance body for "certain things which are in everyone's best interest."

This could include the development of Web 3.0 standards, as well as protection against software patents, Halpin said, adding that such governing bodies should avoid deifying specific people, a process that can create single points of failure for blockchain projects.

As Halpin argued:

"We need to remove charismatic leaders, they are good at the beginning but they will become corrupt, or they will just go crazy, and either way it has the same impact."

A surveillance machine

Privacy was another significant theme discussed during the summit. While much in the way of privacy tooling is in development within the cryptocurrency community, there are still plenty of unanswered questions.

Halpin called privacy protection "the largest technological task facing the Web 3.0 community."

He continued: "Peer-to-peer and blockchain technologies are by design very hostile to privacy. There needs to be a lot of work."

It was a notable trend at the summit, with many, like Halpin, warning that the use of peer-to-peer and blockchain technologies could result in a new surveillance machine – one that is even more threatening than the current Web as it exists today.

And that's because not only do technologies like ethereum reveal transactional data, but they also expose subtler computational activity which can be a concern, especially as it relates to smart contracts that deal with sensitive tasks like voting, location data, social media and identity.

As Zamfir explained:

"Blockchain is a surveillance wet dream."

Still, several talks touched on the privacy question, sparking a sense of renewed interest in developing the tools necessary to protect users and even developer information.

Advancements in zero-knowledge cryptography, ring signatures, mixnets, privacy-enforcing contracts and messaging were discussed, and even lower level cryptography that enforces privacy as a default, instead of needing end users to adopt.

One such project is Centrifuge, a financial supply chain startup that performs transactions apart from the ethereum blockchain in order to preserve their privacy, while still communicating with the blockchain by way of non-fungible tokens (NFTs).

"From a technical point of view, there's a huge improvement in terms of the technologies we can use to preserve privacy," CTO of Centrifuge Lucas Vogelsang said.

He added that the implementations of such technologies are "just a matter of time."

All about freedom

Still, the mood at the conference was generally optimistic. For example, several participants pointed to innovations particular to the blockchain ecosystem that could help overcome dystopian outcomes.

Zamfir, for instance, said that stable blockchain governance can be achieved using systems that enforce distributed control, incentive mechanisms and general fault tolerance.

Halpin echoed this point by stating that Web 3.0's main protection against the failures of former software movements is the novel economic models underpinning much of the industry.

"Blockchain technologies have a fighting chance because they have an economic model built into how you use and work on the technology," he stated.

These economic models can help avoid outcomes like the onslaught of corporations that occurred in Web 2.0 and protect against the economic model underlying most of the internet – one that relies on user data and tracking as a primary business model.

Haplin continued:

"You can see a new route of innovation on the Web that is not based on mass surveillance, that is based on decentralization, the respect for human life and new economic models based on payments."

Speaking on the panel, Taaki reminded the audience of the importance of having a fixed ideological position to guide the Web 3.0 movement.

And while there are subtle disagreements about what the term "Web 3.0" actually means, Zamfir said in an interview that ideology can be boiled down to "emancipation."

"It's not clear that it is going to be good for people's privacy, it's not clear that it gives people control, but it certainly gives people a lot of freedom," Zamfir told CoinDesk.

In a similar vein, according to Halpin, while we won't know for years as the technology and the industry around it unfolds, but it's worth the risk, given the underlying promise – freedom from corporate control – the technology stands for.