Comments 28

La ilusoria fiebre del blockchain

Mar 5, 2018 Nouriel Roubini , Preston Byrne

NUEVA YORK – Cada vez que se predice el fracaso del bitcoin y otras criptomonedas, suele generarse en respuesta una defensa más amplia de la tecnología subyacente: la “cadena de bloques” o blockchain. Es verdad (dice el argumento) que más de la mitad de las “ofertas iniciales de monedas” hasta la fecha fracasaron, y que lo mismo sucederá con la mayoría de las más de 1500 criptomonedas que hay, pero aun así, el blockchain revolucionará las finanzas y las interacciones humanas en general.

En realidad, el blockchain es una de las tecnologías más infladas de la historia. Para empezar, es menos eficiente que la tecnología anterior de base de datos. Cuando se dice que una aplicación se ejecuta “sobre blockchain”, esto en general significa que la aplicación está distribuida entre una multitud de dispositivos.

La necesidad de espacio de almacenamiento y poder de cómputo, así como la latencia, son considerablemente mayores que en el caso de una aplicación centralizada. Los blockchains que incorporan tecnologías de “prueba de participación” o “no divulgación de conocimiento” (conocimiento cero) demandan verificar criptográficamente todas las transacciones, lo que las hace más lentas. Los que usan “prueba de trabajo”, como muchas criptomonedas muy difundidas, generan otro problema: su verificación demanda una inmensa cantidad de energía. Por eso las actividades de “minería” de bitcoins en Islandia van camino de consumir más energía este año que todos los hogares islandeses combinados.

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Oct 15, 2018 Nouriel Roubini

Nouriel Roubini

Writing for PS since 2007
122 Commentaries

Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House's Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.

Preston Byrne

1 Commentary

Preston Byrne is a Fellow of the Adam Smith Institute and Sole Member at Tomram Consulting.

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0 Comments on this paragraph, 28 in all 28 Comments on this article

clickitback @gmail.com Sep 17, 2018

Are you aware of Lightning Network?

If yes, why do you say scalability is unsolved?

If no, LN is a scaling solution for Bitcoin that is already operational. Adoption is the rate limiting factor.

https://lightning.network
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Angel Gavieiro Mar 17, 2018

With due respect to the authors, but I believe they would benefit from watching this tutorial:
- Angel Gavieiro Mar 17, 2018
  
  https://hbr.org/video/5582134272
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morten tor Mar 13, 2018

Diamonds (for jewelry) are of very little utility, require enormous amounts of work to find and process, and they're still being traded at exorbitant prices.

Mr. Roubini and Mr. Byrne could be arguing that the value of diamonds should fall to 0 as well.

I believe the original purpose of the bitcoin concept was to provide an alternative to the state/bank complex. It was born in a time where demonstrably criminal banks were basically rescued with bailouts and impunity by the state, while regular people were thrown out of their homes.

A trustworthy ledger, that bypasses banks and corrupt states seems to be a good idea, and I think it will have support by a lot of people, until such time that the state proves trustworthy and the balance of power tips back to the people.

Naturally, the same frauds that hide billions in art and Manhattan apartments are also hiding their loot in bitcoin, and I suspect that these people will make damn sure that bitcoin does not drop to 0.
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Kenneth Yeung Mar 12, 2018

Block Chain and Cryptocurrencies are not synonymous.
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TS Low Mar 12, 2018

Crypto will die when a order forces an end to anonymity. As any student of the law knows, it’s of the transaction itself that is lawfully consecrated and recognized. It is the text agreements identifying all parties. If crypto becomes legally unenforceable and therefore not recognized, the state (like China) will effectively ban the activity.
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Enrique Woll Battistini Mar 11, 2018

The readily available information, to me, about Bitcoin or other cryptocurrencies, including that provided by financial notables on media such as CNN, has not allowed me to comprehend them in any real sense. So I am left with my own speculative powers to try to arrive at what they might possibly be and their possible consequences. Firstly, in my opinion, for them to have value in the financial markets -even in the fields of art or intellectual property- they must be a scarce resource. Secondly, this means that the rate at which they could be "manufactured" or "mined," as the case may be, given that they have been loosely defined in the televised media, at least, as numerical solutions to complex mathematical problems, presumably defined by equations, must be naturally or effectively legally constrained to such a degree that their value in the secondary market not decrease, at least not monotonically, lest this failure lead to their crash with potentially devastating consequences on the larger economy, national or even global, depending on the capitalization levels reached at such times. Thirdly, they, each instance or coin, must be unique and thus distinguishable from every other, and their respective ownership distinctly attributable to a specific owner or group, and registered as such, for any real possibility of fraud or theft to be precluded in their design. Fourthly, they must not be allowed to be used in money laundering or drug trafficking or any illegal or proscribed activity, if they are not to eventually present a threat to global political, social, or economic stability or world order and development. This, for starters.
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Chris Chris Mar 11, 2018

Using the Visa TPS claim shows that neither of you can even define what a 'transaction' is. Do you know what percentage of VISA transactions are actually settled and cleared in real-time? In most cases VISA/Mastercard will steps in and authorize the transaction on behalf of the issuer (up to agreed limits, per issuer, per card). From the consumer's point of view they may walk out the door with the goods in real-time, but from the issuer and merchant banks perspective the transaction isn't completed for hours perhaps days in the case of cross border purchases. You also don't address the cost of these services and the fraud they're subject to, to the global economy. I laughed loudly when you started talking about protocols, and with respect to SWIFT you failed to recognize that they have just completed their own DLT trials in a clear effort to catch up and maintain market share they're losing and could continue to loose to Ripple.
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Rich Downing Mar 11, 2018

I'm now posting a third comment, this time from my laptop computer, having twice attempted to post from my phone. It's an iPhone, and the mobile UI (user interface) made it impossible for me to see what I was typing as I typed in the comment box. I'm also unable to delete my own posts from Project Syndicate's comment section, so let me state for the record that the previous two posts were streams of consciousness, typed in the dark (unable to see what was being typed), and would be deleted if such an action was possible. This is a very poorly designed mobile interface, which is consistent with PS's general lack of aptitude with respect to all things digital.

Articles like these - and the associated comments - just wreak of arrogant myopia, which of course comes from a place of deep insecurity about their understanding of the very real and overwhelmingly positive blockchain phenomenon. For the credibility of PS, I would urge you to stop granting non-technologists the privilege of condemning any new technology on your platform, unless they demonstrate a verifiable understanding of it. You may need to engage third parties - engineers - to help you with this.

Here is a video of a lecture that addresses every single point these author's are trying to make, by Andreas Antonopoulos at MIT three years ago: https://www.youtube.com/watch?v=J8y_GypCWf4

Here's another great one from Andreas Antonopoulos:
https://www.youtube.com/watch?v=knkZptPZLzI&index=7&list=PL4pSAnIxgynxK2iv9WRHmvnpnZ-0aE7tx

Project Syndicate is wonderful in most regards. But the blockchain coverage needs a lot of work.
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john mesrobian Mar 11, 2018

Blockchain and Crypto's are so over hyped, its a Mani larger than the Tulip Bubble, Internet Bubble, Emerging MKTS Bubbles and etc. In the end, as a bubble/Mania they end all badly return to where they started near or at Zero. But, you can't tell the public for they don't like people popping their dreams or taking the punch bowl away from a bunch of drunks
- Rich Downing Mar 11, 2018
  
  What's your experience with blockchain? How much crypto do you own? I imagine you've at least been through one crypto purchasing experience if you're leaving such a comment? Which coin projects have you analyzed and what specific drawbacks have you identified?
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David Donald Mar 11, 2018

This sober take on blockchain is very welcome. It is troubling that blockchain is nearly always celebrated without reference to latency and it's decentralizing aspects are emphasized without reference to capacity. A medium-sized securities exchange will have about 1,000 products being traded and its trade matching engine will have a capacity of of 50,000 to 100,000 transactions per second. Currently, this could not be replicated even if each participant holding a ledger maintained a server farm. While the hype around blockchain is dangerous for investors, there is the merit that the wash of money should allow the technology to develop faster than it otherwise would, like many internet concepts and broadband connections did during the dot.com bubble.
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Ledger Insights Mar 7, 2018

Parts of the article are widely acknowledged - hype, failed ICOs, energy inefficiency, slow Bitcoin. Undoubtedly some are using blockchain where they could just as easily use a database + an API.

One or two important arguments were missed. eg. the fact that neither Bitcoin nor Ethereum are sufficiently decentralized. In both cases three or four Chinese mining pools control more than 50% of the hashing power.

Many of the arguments only apply to public blockchains, not the permission blockchains used in business.

While certainly there's too much hype, some industries WILL be profoundly affected by blockchain. Insurance and Supply Chain are good examples.

The hype is unjustified in many instances, and sometimes is borderline fraudulent. But in a few narrow cases there is a reason for the hype: where blockchain or DLT is a good match, the inherent network effect of blockchains could see adoption at breathtaking speeds. But we haven't seen that so far. Yet.
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Conor O'Leary Mar 7, 2018

This article is set amidst a context of a highly speculative Bitcoin (and other Crypto Currency bubbles). I understand the strong tendency to dismiss the Currency and the underlying Blockchain technology together. However, lets not get rid of the baby with the bathwater here. Lots of companies are already developing applications to do simple things like track assets in the real world. (Diamonds, Ships, shipping containers ). They are simple things -ostensibily but are hugely admin intensive because of the steps involved and number of parties. Secure permissioned blockchains do this job very very well. As for speed, permissioned chains running on mainframes on secure partitions can be blindingly fast and low latency. You will see more of deployments of this in the coming year I think. Finally, the comment about US railways is apposite. remember many rail barons made huge fortunes, many went bankrupt, but they left behind a railway infrastructure that's still in use today. Similarly after the dotcom boom of early 2000s we had the same pattern and we still enjoy the innovation and infrastructure developed in that era.
- Krzysztof Worytkiewicz Mar 10, 2018
  
  Blockchain technology was all but known in the 70's, yet it only recently became deployable du to progress in hardware. What makes it extremely inefficient in the context of Bitcoin (and other "cryptocurrencies") is the childish proof-of work protocol simulating the gold standard. On the other hand, the argument stating that techno bubbles leave after-bust viable infrastructure behind may be correct, yet it only confirms that capitalism inherently produces sub-optimal solutions.
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Paul Harwood Mar 7, 2018

This is possibly the worst constructed argument against censorship resistant distributed ledger technologies that I have ever read. It even compares DLT to spreadsheets.

The use of historical bubble correlations like the railway / tulip / etc is not only naive but also historically inaccurate, with the same correlation, the internet is itself a bubble.

If his arguments were actually true nobody would have adopted Bitcoin. Here's an analogy, much more recent: The same arguments were given about video on the internet in 1999, luckily YouTube and hundreds of other video based startups ignored those naysayers and the rest is history.
- John Ellis Mar 11, 2018
  
  Apart from saying it's nonsense and making a rather ridiculous comparison with video on the net you didn't controvert a single one of the substantive points raised in this piece. And no one has adopted Bitcoin really outside of speculators and those engaged in dubious transactions.
  - Rich Downing Mar 11, 2018
    
    Here. Watch this before ever commenting on blockchain again:
    https://www.youtube.com/watch?v=J8y_GypCWf4
    
    Engineers from MIT and all of the best engineering programs around the world have been working on this stuff for years. Bitcoin has been around for ten years. This is nothing like the internet.
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george sos Mar 7, 2018

wait ,what?
"Bitcoin is a slow, energy-inefficient dinosaur that will never be able to process transactions as quickly or inexpensively as an Excel spreadsheet"

I dont know about inexpensive,but for sure it not quick the excel spreadsheet..We all have gone for coffee while excel was loading after mistakenly clicking on the shortcut..What quick?..:):)
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cbas Junk Mar 7, 2018

"And Ripple’s technology for cross-border interbank financial transfers will soon be left in the dust by SWIFT, a non-blockchain consortium that all of the world’s major financial institutions already use."

This comment will not age well.

I don't think you've done your research on Ripple and XRP. SWIFT's gpi doesn't solve the Nostro/Vostro problem. It's a slower version of Ripple's xCurrent, the foundation for xRapid, which does solve the Nostro/Vostro problem.

SWIFT's gpi proudly claims that 50% of their transactions settle in under 30 minutes. Well, 100% of xCurrent and xRapid transactions settle in under 30 seconds.

SWIFT's gpi is being used by only 10% of their clients, some 150 banks. Ripple's faster and more efficient software will be fully implemented by 150+ banks by the end of the year. SWIFT has been around since the 70's. Ripple has been around for 6 years and is already taking market share from SWIFT. It's no wonder many of SWIFT's upper management have moved to Ripple.

Once again, your comment on Ripple will age very poorly. You probably talked to a contact you have at SWIFT and they told you they're not worried about Ripple (they are worried shitless) because they have a new system (gpi). You guys left it at that and never followed up on what Ripple really is. Tisk tisk.
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Ros Bof Mar 5, 2018

It seems the main argument in this post is that blockchains are slow and can't scale. But that's glossing over the tremendous amount of research going into sharding mechanisms and side chain technology, which are being developed and tested right now. Also, brushing aside proof of stake as insecure without acknowledging the very serious fundamental research going into protocols like Casper and Ouroboros is not credible. Actually, it's at best incompetent and at worst dishonest. I wish you'd brought up arguments about flawed scripting languages so I could point you to Rholang and Haskell too. Your main argument, that most coins will fail and that speculation is driving prices right now is correct, in my view. But you let yourself down with a clickbait title and basic analysis. You naysayers feed off the frenzy like everyone else.
- Luis A. Guerra Mar 11, 2018
  
  Oh... by the way... just so Nouriel doesn't loose sleep over the block chain conundrum... believe me when I say that technology will take care of solving all his technological and energy concerns... that "bet" you can place with absolute confidence!
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- Luis A. Guerra Mar 11, 2018
  
  But "FAIL" is a indispensable characteristic of "all" markets because, guess what?, they are ALL speculative and manipulated! (Stock market, OTC market, Derivatives market, Gold market and on and on). This, because real profits are not made in stable markets... they are made in "Boom and Bust" markets and hence every player in the market works hard to create the conditions for this to happen. Crypto currencies are basically playing the same game and there is no reason to believe that the players will not continue to do so for a long time... as a matter of fact, this is what makes crypto currencies so attractive and it would seem to me that sooner or later traditional market players will be eager to join the crypto currency market because they will be able to play anonymously without hurting the real economy... as they have for so long!... eventually the crypto market may very well become a big dogs playing ground!... and that is all I have to say about this!
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Ariel Tejera Mar 5, 2018

I was unable to follow the the arguments in this article. There really shouldn't be much fuss around: the point of a blockchain ledger is merely to keep it trusted. And nothing more. The means to achieve that is where the innovation lies: blockchain ledgers don't need a central authority to certify them (or chain of authorities). Instead, their cryptographic distributed protocol does that for you. That's it.

Their impact, in the long run, is that a trusted blockchain ledger may survive any National or International "institutional" authority. I guess that is the reason why they are said to be meant to 'destroy' those institutions.
- alinewton @aol.com Mar 7, 2018
  
  Except that the complexity of the transactions required to update a distributed data-base expands exponentially with the size of that database. If nothing else the fight against global warming will limit the widespread application of Blockchain technology to general commerce.
  - Ariel Tejera Mar 8, 2018
    
    I wonder, also, if quantum computing will make today's cryptographic schemes useless. And, in general, compute capacity may grow exponentially, too.
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