Jan 21, 2022 - 3 minute read - crypto ethereum bitcoin

On Blockchain, Crypto, stablecoins, NFTs, etc.

I get asked about blockchain, crypto, NFTs, and such every once in a while, and rather than counting on my memory to remember the whole thing, I decided to just do a quick write up.

My general thesis is this: the only things that really work for decentralization AND blockchain are things that themselves emanate from that blockchain. For example, bitcoins emanating from the bitcoin blockchain. Anything that the blockchain manages that doesn’t itself emanate from the blockchain requires some form of trust, auditing, and/or lawyers and strong contract law, otherwise it’s just garbage in/garbage out. If you need trust, auditing, lawyers, etc. there are simpler and cheaper ways than blockchain to manage the data.

In the case of NFTs, only the URL of the image gets put into the blockchain. It doesn’t prevent anyone from doing a “save image” in their browser. It doesn’t guarantee that the website hosting it will still be there at any arbitrary point in the future. It doesn’t even guarantee that the minter of the NFT even had any rights to the image to being with.

In the case of stablecoins, you’re trusting that the organization that runs things like tether aka USDT actually has the assets to back up the coins on the change. While regulators have gotten involved before, the normal thoughts around trustless transactions on the blockchain here are bollocks. You’re not in a trustless environment, but one involving legislators and regulators.

And in all of this, while blockchain is supposed to usher in web3 with decentralization, it doesn’t even do this. Rare is the person who runs their own blockchain nodes who isn’t mining coins. Instead, people go through exchanges like Coinbase and OpenSea. Twitter, with its recent foray into NFTs doesn’t even run its own nodes. Twitter is using OpenSea’s API as evidenced when OpenSea had issues and so NFTs weren’t visible on Twitter.

If you want distributed consensus, and you have contracts involved, there are plenty of other means to accomplish it that don’t require turning nation-state level consumption of electricity into heat. For example, the Paxos consensus algorithm has been around since 1989, Raft since at least 2014. If you want a merkle tree (invented in 1982) so that you know that earlier items in the log of transactions haven’t been compromised, there are plenty of other merkle tree implementations. If you want signed and authenticated transactions, X.509 certificates have been around since 1988 and Diffie Hellman or RSA have been around and generally available since at least 2000 when the Department of Commerce simplified the rules around encryption products and export. So there’s abundant prior art, and good implementations of all of these things easily accessible.

So if you want a crypto currency, sure. If you want smart contracts, if all the data signalling to that contract is via coins on the chain, ok – but millions of dollars have vanished by misprogrammed contracts, security bugs in contracts, or by using them wrong, so I wouldn’t venture any coins in one I couldn’t afford to lose. But overall, my BS-radar goes up any time I hear anything about blockchain that isn’t coin trading. But anything else crypto is either crap or stupid money that hasn’t figured out it’s stupid yet. Not to say that stupid money can’t make money as it takes a while for the market to stop being irrational. So if you see some effort with “blockchain” prominently in its description, if it’s not a coin exchange, unless they somehow manage to make something that’s not covered above, it’s almost assuredly crap.