Let me begin by saying that I have great respect to Oleg, and that he undoubtedly knows vastly more about the technical details of Bitcoin and software development than I do. So, I don't take challenging his views on Bitcoin lightly.
At the same time, I think that I understand network effects, the history of disruptive technologies and human nature well enough to question the logic and conclusion of his recent post on Bitcoin Maximalism (http://blog.oleganza.com/post/140634349543/bitcoin-maximalism
). While I actually hope that Oleg is right in his conclusion that Bitcoin is indomitable, I'm concerned that he and other long-time Bitcoin maximalists are presently engaging in the all-too-natural human tendency of "whistling through the graveyard" rather than acting nimbly to scale Bitcoin as soon as possible.
Oleg's case for Bitcoin maximalism hinges upon three key assumptions: (1) that the dominate blockchain will always be the most secure one, (2) that Bitcoin can and will adapt quickly enough to avoid being overtaken by any initially-less-secure-but-more-agile competitor, and (3) that Bitcoin's failure to dominate would so undermine trust in consensus blockchains in general that none could successfully supersede it.
Unfortunately, none of these assumptions are likely valid for reasons I will explain.
While I agree that the dominant blockchain will likely be the most secure at scale, nothing permits me to believe that it will start as such, and the history of disruptive technologies suggests strongly otherwise.
Successfully disruptive technologies have several well-documented characteristics (see, e.g., the books "Zero to One" by Peter Theil or "Exponential Organizations" by Salim Ismail, or this article in Harvard Business Review: https://hbr.org/2015/12/what-is-disruptive-innovation
). Disruptive technologies, by definition, do not succeed by attacking establishment business models directly and from the outset. Rather, they establish beachheads in new, unassuming and initially nonthreatening markets. As they experience growth in these areas, the technology gets refined, quality improves, and even more novel use cases become apparent. A virtuous cycle ensues.
These improvements in quality (or in the case of blockchains, security) are deceptively immaterial at first but proceed exponentially nonetheless. With disruptive technologies, quality eventually becomes "good enough" that it begins taking market share from entrenched interests in mature markets due to its lower cost, even though such markets were not its original target and even though it's is still qualitatively inferior. And then, eventually, a tipping point occurs: The quality produced by the new technology comes to match or exceed that offered by the old, but still at a lower cost. Total disruption ensues.
Despite that nearly everyone recognizes Bitcoin's extremely disruptive potential, it has failed to follow this well-known disruptive trajectory. Seven years in, Bitcoin still lacks even its first "killer application". How can this be?
The answer seems clear: While potentially disruptive by nature, Bitcoin has not been deployed in a disruptive manner. Rather than first targeting undeveloped markets and novel use cases for blockchain technology, Bitcoin Bitcoin aims at the very heart of the establishment by seeking to disrupt money itself, even to the exclusion of initially more modest and unassuming opportunities. Attacking the establishment at its core is undoubtedly a ballsy approach, but it is not a disruptive one.
In fact, money myopia limits Bitcoin's disruptive potential in several important ways.
First, money myopia makes many Bitcoiners hostile to non-monetary uses of the Bitcoin blockchain, with many of them deriding most all non-monetary uses as "spam". And yet, it's exactly these novel, unassuming, non-monetary use cases where we would expect any truly disruptive blockchain technology to first establish itself, and where blockchains will almost certainly find their first "killer app". Bitcoin has no killer app to date because it has neglected, indeed derided, these novel uses in favor of preparing for direct battle with the establishment in its most fortified citadel--money.
Second, money myopia causes even those Bitcoiners who value non-monetary use cases to overweight the importance of security (quality) and underweight the importance of adaptability (usefulness) and low cost. By definition, truly disruptive technologies are always built on the latter two attributes (high adaptability/usefulness and low cost) and never the former (high initial quality).
Confidence in Bitcoin's ability to strike directly at the core of the establishment, at money, rather than evolving in a truly disruptive way by supporting more unassuming use cases, is anchored in a nearly-religious conviction by many Bitcoiners that, in free markets, "good money always drives out the bad", and that bitcoin is the best money ever invented. Many Bitcoiners actively anticipate an imminent fiat apocalypse, which will be quickly followed by the Second Coming of commodity money in the form of bitcoin.
However, even if true, the final fall of fiat could take decades during which a more useful and adaptable (though initially less secure) competitor to Bitcoin becomes the universal public blockchain (thanks to insurmountable network effects fueled by novel use cases). Such a competitor won't challenge the establishment directly, and therefore won't initially share Bitcoin's aspirations as money. Rather, like most disruptive technologies, it will gain a foothold in less threatening ways--for instance by establishing itself as the backbone of the Internet of Things; by better and more cheaply facilitating registration, identity, escrow, or clearing services; by making smart contracting easy and seamless; by hosting numerous important and influential Distributed Autonomous Organizations; by being the most accessible and useful blockchain platform for developers, etc.
While initially lagging Bitcoin at first, the quality (security) of this competitor will improve consistently and exponentially over time. As it does so, even more use cases will become apparent. Eventually, and likely far sooner than any anticipated fiat apocalypse, the security of this competitor will become good enough that it begins taking market share from entrenched interests in mature markets (including Bitcoin's market) as a consequence of its lower cost and "good enough security", even though such markets were never its original target. And then, eventually, a tipping point will occur: The quality/security of the competitor will match or exceed that offered not just by Bitcoin, but by the old fiat currencies as well, but still at a lower cost. At that a point, total disruption is nigh and a new money is potentially born.
Oleg insists that we needn't worry about alternative cryptocurrencies proceeding via this disruptive trajectory to gain an insurmountable advantage over Bitcoin because the competitive advantages of any such competitors will, "with full support from all major [bitcoin] holders", quickly be subsumed into Bitcoin via defensive hard or soft forks.
Perhaps. But given recent history, why should we have any confidence in Bitcoin's ability to agilely implement defensive forks in a timely manner? After all, humans have an uncanny ability to rationalize away threats until those threats are too great to overcome. This is, after all, the secret to every disruptive technology's success. This rationalizing tendency is troubling enough when just a small group of knowledgable decision makers must be persuaded to act to defensively, but the challenge is exponentially greater when "75%", or even "overwhelming consensus", is required (as is currently the case with most all proposed Bitcoin hard forks).
I submit that it's only a matter of time before remaining competitive in the blockchain space will require repeated nimble hard forks and not merely soft ones. And yet, given that humans rarely act with "overwhelming consensus" except in matters so trivial as to be inconsequential or of such grave importance as to constitute a clear and present existential threat, I'm doubtful of Bitcoin's ability to defensively outmaneuver an approaching threat. When existential threats approach exponentially, as they do in network-effect driven technologies like blockchains, the danger may not be "clear and present" enough to forge hard-fork consensus until it's already too late.
Oleg then extends his arguments in defense of Bitcoin maximalism by taking some shots at the only visible threat to Bitcoin maximalism currently, Ethereum. Some of his criticisms of Ethereum are accurate and some are not. But, they are mostly irrelevant regardless.
For instance, even if true, none of his criticisms prevent Ethereum from gaining a beachhead in unassuming niches only to later disrupt Bitcoin as the dominant form of crypto money (assuming sufficient improvements in quality/security over time). For instance, should Ethereum's market cap and fabulous PR continue during a time when Bitcoin's price takes a precipitous fall--perhaps due to the latter's real or perceived intractability--resulting bandwagon and network effects may be too much for Bitcoin to overcome.
Given that the social and economic influence of current Bitcoin stakeholders is trivial compared to the overall size of the blockchain marketplace opportunity, especially when non-monetary use cases are considered, the winner of the Blockchain race will be determined not by existing Bitcoin stakeholders, as Oleg suggests, by the coming tidal wave of new blockchain adopters (both corporate and individual). If history is any guide (consider how Web 2.0 developed, for example), these new adopters are likely to be swayed more by irrational factors like branding, reputation, peer pressure, usefulness and familiarity than by reasoned judgement or a critical analysis of the security features of each platform. Since most new users won't be looking to use blockchains as money initially, they will not share Core's security-at-all-costs biases and will instead favor the most accessible, useful and popular platforms.
Given how Bitcoin stakeholders are currently managing the platform, Bitcoin will almost certainly not be the most accessible, useful, and popular blockchain, at least when nonmonetary uses are considered. Bitcoin's insistence on extreme security limits its usefulness for all the many potential non-monetary uses noted above, making less expensive and more nimble options more appealing in these important use cases.
Consequently, Bitcoin's ultimate success as money hinges almost entirely upon the technical impossibility of any more nimble blockchain ever achieving Bitcoin's level of quality and security, or else upon the quasi-religious conviction of Bitcoiners that good money drives out not only the bad, but also the "good enough" version that any successful blockchain is likely to offer.
In a last ditch defense of Bitcoin maximalism, Oleg finally argues that markets abandoning Bitcoin for something else like Ethereum would be "eternal proof that [blockchain] consensus [mechanisms are] not safe long-term and can be sabotaged infinite number of times to satisfy politics du jour", rendering them all useless. Essentially, he argues that if Bitcoin can't be the main universal blockchain forever and always by insulating itself from social whims, then the loss of confidence in blockchain consensus algorithms in general will be such that none other could supersede it.
This fixation with making Bitocoin immune from social whims and preferences is troubling. Contrary to common wisdom, blockchains are not secured by hashing but rather by economics. Without a market for mined coins, mining doesn't happen in sufficient quantity to secure the network. Over any reasonable time frame, the security of the Bitcoin network is therefore a direct function of the market value of the coins mined. This recognition that blockchains are ultimately secured by the economic value of their tokens and not by hashing is one reason why a well-conceived and implemented Proof of Stake algorithm stands at least a fighting chance of superseding more resource-intensive Proof of Work methodologies.
Regardless, the key insight is that markets don't exist separate and apart from humans. Markets are complexly socially-determined, and therefore subject to all the extremes of human emotions (bubbles and crashes, for example.)
Consequently, Oleg's contention that that the one true blockchain will be the most immune from social influences, or else that all blockchains will be proven worthless for failing to sufficiently resist them, contains an inherent logical contradiction: Only a blockchain immune from market influence, and therefore lacking sufficient market value, can be mostly free of social influences. By definition, any such blockchain will be highly insecure.
It is unlikely therefore that the universal public blockchain will be the most removed and insulated from societal influences. Rather, it will thrive upon social factors, becoming a creature of it. Such a blockchain will be "secure enough" to resist censorship by empowered minorities (even nation states) while also proving adaptable to the whims of the worldwide economic majority. The latter (social adaptability and usefulness) gives the blockchain token economic value while the former (censorship resistance) serves to preserve said value indefinitely, preventing those in power from co-opting or skimming it.
Oleg's idea that the markets must find the right balance between adaptability, low cost and security on the first attempt or not at all is unsupported by history or logic. As always, markets will proceed via trial-and-error, via "discovery", until the proper balance is achieved. As with any discovery process, there will likely be spectacular failures along the way, but these failures won't permanently tarnish the reputation and usability of blockchains anymore than early plane crashes permanently tarnished the reputation and usability of airplanes.
In the end, the question we should all be asking ourselves is simply this: Which implementation of blockchain technology is most likely to first strike the socially-useful balance between "good enough" security, high adaptability/usefulness and low cost? Will it be the most secure but least adaptable and more expensive implementation, or will it be a more adaptable but inexpensive and reasonably secure one that improves over time?
If the history of disruptive technology is any guide, the answer is obvious: The winning platform is almost certain to be the one that costs less and iterates the fastest. Anytime finding the right answer to question depends upon rolling dice (discovery), the person (or implementation) rolling the fastest usually wins. Free markets invariably outperform command-and-control ones simply because the former sees vastly more rolls of the dice in a given amount of time.
In conclusion, quality/security, adaptability/usefulness and low cost are competing objectives in the blockchain space. Because finding the right balance between them will almost certainly be a result of trial and error, of discovery, the winner of the blockchain battle isn't likely to gain scale as the most secure, expensive and intractable option, but rather as the cheapest and most adaptable while being "secure enough" initially for niche uses.
Then, like with all disruptive technologies, quality (security) will improve over time, resulting in even more use cases, more social acceptance, more economic value, and therefore more security. Eventually, it's security will rival Bitcoin's and then even that of fiat currencies, at which point it will have the social acceptance, economic might, and network effect advantages to serve as a funding currency for speculative attacks on fiat. If those attacks are sufficiently successful, it may well inherit Bitcoin's dream of becoming the new stateless currency.
Bitcoin's fate is not yet sealed. It still has huge network effect advantages that can be exploited. But, those advantages won't long persist if Bitcoin doesn't make itself more usable for non-monetary purposes, even at the cost of a little less security in the short-term.
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