The Upside of the Internet: Defending Bitcoin's 'Downside'

 Josh Cincinnati (@acityinohio) | Published on September 17, 2016 at 14:45 BST 

Josh Cincinnati is an entrepreneur with experience in  creating and funding early stage startups. He is currently also  BlockCypher's developer advocate and editor of the firm's blog. In this opinion piece, Cincinnati critiques a recent NYTimes article that suggested bitcoin's immutable ledger of transactions is its weakness. 

The elephant in the room

Let’s start with the first paragraph: 

"We have heard waves of inspired commentary on how  the technology, with its ability to share information and record  transactions, will be as revolutionary as the internet itself. ... [W]e  agree about these huge possibilities, but there is an elephant in the  room that will need to be confronted."

Nothing to really argue about here, but spoiler alert: the elephant is willful ignorance, doubly ironic given the relative intelligence of elephants in the animal kingdom. 

"One of the accepted virtues of blockchain is that it  creates a permanent, immutable ledger of transactions. For example,  each of the roughly 160 million Bitcoin transactions that have occurred  since the cryptocurrency began in 2009 will stay on that ledger as long  as Bitcoin exists."

This is –  remarkably  –  correct. Maybe we were wrong, dear reader! Let’s just keep reading and… 

"That permanence ... could severely limit  blockchain’s usefulness in other areas of financial services relied on  by billions of people. By clashing with new privacy laws like the “right  to be forgotten” and by making it nearly impossible to resolve human  error and mischief efficiently, the blockchain’s immutability could end  up being its own worst enemy."

Ah, there we are! There’s the piping-hot absurdity, fresh out of a convection oven powered by the hot air of blockchain hype. 

A new way of thinking

Let’s consider what “clash[es] with new privacy laws like the right to be forgotten”. I’m not sure how the hell a pseudonymous system of transferring value  has anything to do with the “right to be forgotten”, especially when  one considers privacy-enabling technologies like Zcash and MimbleWimble  (amongst others) that would make it practically impossible to associate  real-world identity with cryptocurrency movement. But let’s assume, for a beautiful moment of dissociative cognition,  that somehow, for reasons only top consultants can divine, having an  immutable record of pseudonymous money transfers violates these laws. Maybe these laws aren’t a good idea in the first place, since they  can have a chilling effect on free speech and enable the whitewashing of  history. Instead should we endeavor to create a more privacy-protecting  Internet from the ground up? Where citizens can confidently share  information with cryptographic assurances that it only reaches the  intended parties, or investing in homomorphic encryption to enable cloud  services where providers have zero access to the information you  provide to them for computation? Surely you can still make money off  consulting those services, Accenture? 

"The financial services industry needs to face the  question of how to balance the appeal of pristine accounting with the  demands of the real world, where some things simply need to be struck  from the records."

The last company to value “simply striking things from the record” over “pristine accounting” was Enron. 

What makes a blockchain special

The article makes an oblique critique of bitcoin's technology,  assuming an old worldview. One where providers will know what their  customers are putting into blockchains. That’s –  surprise surprise –  silly and pointless. When you interact  with bitcoin, you don’t sign up for an account while your personal  credit history is checked and uploaded into a “central Bitcoin KYC  repository.” Remember that a key tenet of what makes a blockchain special is its  permissionless usage. You know how you can accept money on bitcoin? You  generate a private-public key pair. Could do the process completely  offline if you’d like. So repeat after me: I will not put sensitive, non-cryptographically-sealed information into a public blockchain.  You don’t embed your social security number into a bitcoin OP_RETURN  and then say, “Oops, please delete that.” You don’t embed sensitive  customer data into a public blockchain like a private database, because  it’s not a private database. 

"We need the means to solve this challenge, while  maintaining blockchain’s vast strengths. At Accenture, we’re working  with leading academics on a prototype that would enable blockchains to  be amended or redacted where necessary — under responsible governance  models potentially developed in cooperation with regulators."

Whoops, I guess a blockchain is a private database – if you can amend  or redact it, by writ of some authority. Let me rewrite this paragraph: We need the means to solve this challenge, while neutering what  makes a blockchain special. At Accenture, we’re working with leading  academics on a database that can be amended or redacted where  necessary — under responsible governance models potentially developed in  cooperation with regulators. It’s a database, but spelled  b-l-o-c-k-c-h-a-i-n. And finally: 

"But if blockchain is to move beyond cryptocurrency  and lab experiments to real and profitable deployments, we need to  challenge conventional orthodoxy and rethink the role of absolute  immutability."

Who wants to move beyond cryptocurrency? The outstanding value of all  bitcoin has reached close to ~$10bn as of this writing, with ether at a  close ~$1bn. Public blockchains are already profitable deployments. Fundamentally, I believe the author is dreadfully confused, or  – perhaps more likely  –  was running an A-B test with his paid NYTimes  Op-Ed advert and I was unlucky enough to catch the B-side. In the  corrected version, I hope he reminds readers that “conventional  orthodoxy” is relying on a mutable database and trusted parties for  financial transactions. Challenging it is bitcoin. This article was originally published on the author's Medium blog and has been reproduced here with permission. Some edits have been made for style and brevity. Elephant in the room image via Shutterstock  Disclaimer: The views expressed in this  article are those of the author and do not necessarily represent the  views of, and should not be attributed to, CoinDesk.  

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