Ethereum made crypto-history this week by being the first PoW blockchain to execute a hard fork. They claimed it was done after getting unanimous consensus from the community through stake voting which many have criticised as being nothing more than a farce, as less that a total of 13% of the coin population bothered to turn up to vote, and some sources say it was even possibly less than 2%. Nevertheless, the hard fork was devised and coded, hastily tested, and released, and when the fateful day arrived when it was pre-programmed to activate, July 21st 2016, the network indeed split into two. Quietly, smoothly, without much fanfare.
A week before a group of developers and supporters who opposed the hard fork on ethical principles formed a movement called Ethereum Classic, and pledged to reject the new fork which would see the seizure and confiscation of the ETH that the DAO attacker had acquired during his raid. This movement also saw the defection of about 5% of the mining power in the ethereum network.
What happened after the fork block made history. Contrary to what the ETH developers said, the fork did not remerge and the minority chain persisted. At first the block rate was a fraction of the majority chain. But now after 2 days the block rate has stabilized and the minor chain is mining blocks at about the same rate as before the fork. In addition, the difficulty of the mining is only 1% of the majority chain, which adds an economic incentive for miners to mine on the minor chain in order to make more rewards. This second chain represents the split-fork scenario that many Bitcoin core devs have been warning the community that would cause chaos and destroy both systems. Only, it didn’t. At least not yet.
Many people will talk about ponzi schemes without actually thinking about what that actually means. They say that Ethereum will fail because it was founded on and funded by lies. But when it comes down to it, how are these different from that of the current central banking debt based fiat money system?
Fund first, ask questions later
Ethereum was a project funded with 18m USD of value mostly in BTC. After writing a whitepaper and creating a proof of concept prototype, they hired developers to write it. Most of them were loaned money and worked for free but were promised exorbitant 20% bonuses after the crowd-sale. They made a windfall after selling ETH before the blockchain was even in operation in what is called an initial coin offering or ICO to the public. Once the money was raised they patted themselves on the back, and all the developers who were promised pay in stock options (ETH) simultaneously breathed a sigh of relief and cheered.
Every so often in crypto, another data point emerges in the wild that supports or disproves a previous theory or fundamental school of thought. The recent fiasco with Ethereum and its crown jewel proof of concept project, The DAO, was such a data point that made me want to revisit some past debates about decentralization and its misconceptions. The fact that Ethereum was supposed to be decentralized (some argue more than Bitcoin by measures of node operation cost), yet, how the community could be considering supporting a hard fork to break the coin fungibility of its system, in the name of ‘justice’ and making victims whole, stands in the face of everything a good monetary system should be.
Big news for ETH supporters as the DAO finally launched and have their token traded for the first time. After a day of trading, it seems the DAO tokens closed trading under par. (ETH value). What went wrong?
If you ask me, the DAO is an ambitious project. It makes Macbeth look like Ben Carson by comparison. In order to understand it to any degree, first you will need to gather some things:
Lock yourself into that dark place, and let nature take its course. If you need to, use the towel. After the elapsed time, you may emerge understanding DAO well enough to maybe want to put some money into it, or pray to it. At which point you really should stop what you are doing, and go to sleep (because let’s be frank here, you are probably drunk and hallucinating) and pick up again in a couple days time.
Easter weekend. Family reunions, liturgical services, fasting for some, feasting for others, a time for renewal, time to dispel some crypto myths!
Everyone talks about “going to the moon” in crypto but few if any really knows what that means. Cypherpunks care about privacy and censorship resistance, libertarians care about political ideology and businesses care about making money. But how many of them actually think through how to get there?
I don’t mean in a metaphoric sense, I mean pragmatically. What is the adoption roadmap? What do we mean by ‘moon’? Price? Resistance to government usurpation? Censorship resistance? Self sustaining system without any oversight?
True, most people who say “To the moon!” are just pumpers or speculators trying to incite a windfall profit from the penny stock altcoin that they purchased for the express purpose of dumping it for a profit on unsuspecting suckers. But let’s consider a moment the goal of Bitcoin –becoming a widely accepted alternate money to fiat currencies– how does Bitcoin get to there from where it is today? What challenges and obstacles must it overcome? What different stages of development and growth must it evolve through?
As the ongoing debate in Bitcoin between the Core and the Classic camp rages on, early signs of tentative order emerging spontaneously from the un-orchestrated chaos can be seen. For one, most of the intelligent proponents on either side finally seem to have recognized the fundamental irreconcilable differences of opinion on either side of the divide, having spent the last 3 months weeding through the army of trolls and sycophants which always seem to amass around idealogical movements.
The industry has started to look upon itself in a satirical way, from high profile jokers like Samson Mow, to the absurd display at the Miami Satoshi RoundTable, organized by Bitcoin Foundation Bruce Fenton, which sported such medieval artifacts as an actual suit of armour and a Bitcoin Magna Carta which would make 45 year old AD&D live roleplaying nerds giddy. The industry has certainly reached its apogee of insanity, absurdity and self flagellation, and it can’t possibly get any worse, and thus, we should expect to see things starting to come back to reality very soon.
Several promising things have been happening recently that give me cause to be hopeful that we may yet see the end of this “Rite of Passage” in the life of Bitcoin:
Core has started to consider a hard fork proposal themselves.
Interest in Bitcoin has been re-kindled in the form of 2000+ (as of writing) new nodes added to the network.
Mining pools have started to implement miner voting systems within their constituents.
New consensus tools have emerged which help bring visibility to and encourage people get involved in, the decentralized crypto-governance process.
A total of 4 past attempts at securing industry participants into binding agreements have all failed to produce consensus.
I have often observed that disagreements between smart people inevitably devolve into a difference of opinions based on assumptions which are either ignored by one or both sides or insufficiently proven, which leads to the construction of a belief system built on top of nothing more than reasonable guesses. Because of this, it takes a long time before one can peel away the layers of conditional truths before you reach the core assumptions over which the principle disagreement is erected upon. (one needs to look no further than the renewed flat earth movement to see how you can rewrite your entire belief system to support your theory). Over the last month as I have debated with the decentralists on the foundations of their “decentralization is the most important thing about Bitcoin”* argument, I believe I have finally discovered the crux of the dispute, the mistaken assumption, upon which all other conclusions are derived upon, the genesis block of the debate, if you will.
The problem comes from the fact that the term decentralization has been overloaded to mean so many different things. From topological point of view the old graphic from Paul Baran (1964) (inset right) may seem to provide a good enough definition but only from the perspective of a network topology which is certainly not the common usage of the term today. More recently some folks have improved upon the definition to more clearly indicate that it is the notion of control (the little puppet master hands in the diagram) of the network nodes that make them more or less decentralized.
The disagreements between the ‘big blockers’ and the ‘small blockers’ in Bitcoin are heating up. Bitcoin Classic is poised to release its first client to compete with Bitcoin Core, and Bitcoin Unlimited has had its first vote on its new feature set. It is a time of peril in the galaxy…
Now as the credits fade into the star field background picture a big wedge shaped Star Destroyer with the banner reading “Decentralization” filling the screen. This word is really the Battle Cry of most crypto-currencies, and as I have written in the past, it is so poorly understood.
Everyone wants it, but few know what it is
It is a repurposed term, that simply describes a quality of network topology, transformed into a rallying call of rebellion. The problem is that almost everyone that I read or encounter in the industry uses this term as a panacea for all the problems that they see in the world today, without actually knowing what it truly means. They believe it because of faith from authority, and through basic reasoning, that it is good and thus must be fought for without actually knowing why. This is dangerous, as this is how cults start. The Cult of Decentralization.