[Cryptography] What has Bitcoin achieved?

Bear bear at sonic.net
Tue Jun 3 12:55:51 EDT 2014


One issue that is driving Bitcoin is the excruciatingly slow 
uptake of new technology into legitimate financial mechanisms. 

Finance in general is littered with obsolete crap that doesn't 
work all that well, supported by entire ecologies of rent-seekers
and fee-eaters luxuriating in a protected-species status thanks 
to very well-intentioned conservative laws intended to minimize 
fraud and theft which have the effect of making any way other 
than the ways now known to be obsolete and inefficient compared 
to new technology, illegal.  

The experience of technologists is that more effective ways of 
solving financial problems, often with solutions that close 
significant security problems, are usually not permitted to 
succeed.  Any improvement requires the approval of legions of 
people whose job security would be threatened by the improvement. 
Even if the approval can be gained, it then requires literally 
hundreds of millions of dollars in licensing and permissions and 
infrastructure to conform with many of the regulatory processes, 
so startups are frozen-out.  

Bitcoin, unlike most other fintech offerings, is financial 
technology that can exist independently of that regulatory 
structure.  You don't need anyone's permission to start using 
Bitcoin, and nobody else has to get regulatory approval to open 
a bank or become a credit card issuer etc before you can.  
Entire legions of rent-seekers and fee-eaters are cut from the 
process by using cryptographic/mathematical/physics-based 
rather than institutional/legal/trust-based security. 

And if the failure of financial institutions to take up new 
technology has been driving bitcoin's adoption, the major factor
holding it back has been the appalling failure of institutional 
security wherever people dealing in bitcoins have been allowed 
or required to do so in ways that do not take advantage of 
the cryptographic security features of bitcoin. 

The major pain points have all occurred at the interfaces, 
such as brokerages and exchanges, where mathematical security 
and institutional security ought to be working together and 
are not.  What this says to me is that the more business we 
can find a way to do cryptographically, without ever touching 
those interfaces, the better off we will be.  


On Mon, 2014-06-02 at 18:10 +0100, ianG wrote:

> 2.  We can definitely achieve the same *tech result* without the waste.
>  I've been doing it all along, and so have a few others here (James for
> one).  But again, notice how the waste was cunningly turned into rewards
> that are paid by new adoptors (see 1).  This is a neat trick.  I always
> valued clear and honest transactions;  I never would have credited the
> mining rewards and bubble mechanics as a credible proposal;  but the
> market speaks.  FWIW, new designs are tending towards "proof of stake"
> because there is begrudging recognition of the waste, but only Ripple
> has really reduced it down to the levels that we technologists would say
> are reasonable.

How do you achieve the tech result, where the threat model 
includes Eve, Sybil, and Trent working together?  Heck, I'll 
give you a freebie and say we don't need to worry about Eve 
because we're not going to get financial privacy anyway.  But 
you still have to deal with Sybil and Trent.  If you can deal 
with Eve too, that's pure win.  

All the good solutions to byzantine-generals I've seen 
require communication that scales with the square of the 
number of participants.  I've been trying to think of a way
to leverage that into something practical using overlapping 
cells, but I haven't found one yet.

Bear




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