Bitcoin Rules

I have recently discovered yet another superstar Bitcoin maximalist. His name is Richard Heart. He reminds me of another brilliant guy I know and have worked with for many years. As a result of watching him speak for several hours on his YouTube channel, I have come to several conclusions and consequently taken several actions.

Double Down on Bitcoin
I have moved all of my cryptocurrency investments, or about 90+% of them into Bitcoin. I have learned that there are about 300–500k private off-exchange wallets which severely changes my estimation of the widespread adoption of Bitcoin. I was shocked. I’m an earlier adopter than I thought. And although I’m on the mountain, I’m a long way from base camp on this journey. I expect that as an investing phenomenon, Bitcoin is a great deal further forward in quality and adoption than any other coin or blockchain tech. I have renewed confidence in the engineers working at Bitcoin Core, specifically Greg Maxwell.

Somehow I had gotten it into my head that Bitcoin development was mostly done and work was only being done to solve particularly difficult fundamental problems but that those problems were better addressed in Ethereum and newer coins. Now I am convinced that the single purpose and mission of Bitcoin is focusing their developers on actually more serious capabilities that are not very well addressed in the other crytpos. Now I am convinced that Bitcoin will improve, and that it is more resistant to external manipulation than any other cryptocurrency. It retains the most serious brains.

Adam Back is a hero. I haven’t heard such glowing praise of a hardcore developer since the early Silicon Valley days and that honeypot exploit that I think was called the ‘Takedown’. I’d have to go find my book by Cliff Stoll where he mentions it. Speaking of Cliff Stoll, does anybody remember Guy Kawasaki?

The Oracle Problem
I haven’t heard this phrase before this weekend, although it made perfect sense to me when I started thinking about ‘smart contracts’. That problem is simply how do you trust that software contracts written in stone are responsive to things that are reported to it? In other words if I rely on human reporting to a system, what’s the point of the system? There are some areas of human affairs that are best left in decisions made in human minds. That will never change. Smart contracts will always have that weakness. Who tells the State Farm insurance smart contract that your motorcycle has indeed been totalled? Who tells the flood insurance smart contract that Irma did actually flood your living room? I think right now that a ledger is a better application than a contract.

EOS and Transactions
So Ethereum uses the EVM to process a certain amount of transactions using a certain amount of gas. But it’s not scaled globally to process a zillion. It doesn’t matter how big a zillion is, but sooner or later the zillion will come. If you are not designed to handle the zillion in your original design, then you have a built in Y2K bug. EOS was engineered for the zillion. In other words it’s architected to scale to handle billions of people around the world doing hundreds of transactions a day. Like credit card numbers, it understands its domain so that it will never run out. EOS is brand new.

Solidity vs …
What if the conditional logic processing of Solidity is inferior to Java or Python? I don’t know. I’m not sure why smart contracts ought to be processed in Solidity. It may be optimized in a certain way, but that is something less than perfectly clear to me. Is it a proper functional programming language? Is it buggy? These are not questions I’m hearing answers to yet. We shall see.

Customers Before DApps.
This follows the Rule of Doc. Don’t tell people what you’re going to do, do something and then tell them what you did. Don’t tell people you’re going to solve their problems with your magic dust before you know what their problems are. Solve their problems first and then prove your magic dust does the same job only better, cheaper or faster. Believe me, I came from Xerox. You don’t have to tell me this twice. I will prototype. Repeat after me. I will prototype my solutions in response to what paying customers demand. I’m not a booth babe.

The End of ETH coining.
This might happen. I’ve heard an explanation of why it is expected to happen. IIRC it’s ‘Proof of Stake’ vs ‘Proof of Work’. If that happens, ETH shouldn’t become a store of value. There’s something wonky about the idea that if you want and need Ethereum transactions to take place, that the price of gas should not be counted as a coin. What protects the whole economy of transactions if the cost of transactions inflates? I don’t want it to. That’s at cross purposes to the impetus of turning paper contracts into code contracts. I don’t want AI lawyers to cost more than human lawyers. If and when I come to understand Proof of Stake and its downsides, I’ll get a better idea about this, but right now it makes me lean away from the rule-based logic of distributed databases of limited transactional capacity and back towards the rule based logic of centralized database that I understand very well. A more efficient transaction engine is always better. The price of gas is a wildcard for capacity planning.

China Isn’t Fooling Anyone
Bitcoin is actually in an important way, to big to fail. But big is not the appropriate word. Call it “확고부동 한”, which is Korean for ‘entrenched’, as in the coterie of nuclear engineers that you would literally have to hunt down and assassinate if you wanted to cripple the DPRK’s nuclear ambitions. Except that there are way more Bitcoin devs than Nork nuke scientists, and the devs are already open sourced. So China may want to legislate against ICOs, but like everywhere else, they either are or are not going to put their regulations in writing. Regulations that are anti-freedom will be routed around. China is a large and important actor, but they are not in as much control of Bitcoin as they are of their own ‘Internet’. This currency will not be manipulated.

Filecoin What?
I browsed the white paper. I had my doubts about why anyone would go for this. Yes there are people who serve storage in the form of Torrents. So I’ll think of Filecoin as getting paid for serving torrents. But really how much am I going to get for my 3 TB of spare space across my installation? And what kind of software do I have to put on top of all that. Something like Backblaze I imagine. But the more I think about it, the more I tend to agree with Richard Heart. There’s no way for me to compete with Backblaze themselves, or Amazon. So how long would I have to wait for my crappy fractions of Filecoin to appreciate? Doesn’t look like a good revenue stream to me. It has inefficiency built in. Who is going to pay for the new regime’s slow storage?

Which goes to my final point, that makes perfect sense as explained by the acerbic Heart. If it’s not better, why try to sell it as new? He has gone the distance and lies on the other side of the Dosh Point. I appreciate the economic thinking of such individuals, and from what I’ve gathered of his principles he’s on the right track. Dude has an ethical mean streak. He doesn’t like liars or cheaters or scammers and he doesn’t suffer fools. He’s got a streak of Taleb in him, and since he speaks well of Tim Ferriss, he might actually be consciously aware of Taleb. But I’ve clearly heard his Chestertonian logic and he sounds Hayekian to me as well. Even speaking ill of Jamie Dimon he doesn’t completely lose his shit. Bottom line is he appreciates difficult problems and is willing to put skin in the game while lambasting others who do the charlatan thing. Righteous.

So where am I on ICOs? I’m going to have to learn how to play Shark Tank. It will help me to listen in that particular way. I’m too old to be impressed with technology. Show me the solution before and after tech.

Originally published at www.cubegeek.com on September 18, 2017.