[Cryptography] Btcoin -- bubble or investment opportunity?

ianG iang at iang.org
Sat Mar 1 10:28:24 EST 2014

On 17/02/2014 02:40 am, Lucky Green wrote:
> On 2014-02-16 14:41, ianG wrote:
> [...]
>> But lack of transactional integrity is a far greater sin.
> Those of us that were around in the days of yore may remember how Mondex
> failed to implement the simple concept of a two-phase commit. Why would
> they incur the overhead hit on transaction times?
> No reason to unless your database is actively working to defraud you.
> And why would your DB do such a thing? (Especially if you aren't the one
> operating the DB?)
> I know IanG has been around for long enough to remember the chip card
> payment systems that would first credit the payee and only afterwards
> debit the payor. The latter part being preventable if you cut the power
> to the card before the write. Which was real easy, since a write takes
> far more mA than a read.

The alternate direction -- debit then credit -- also had its element of
perversity.  At a smartcard builder that you will recall presenting to,
various managers who were not actually techies would delight in trying
to pull the smarcard out at the point between debit and credit, and then
chase up their allegedly lost funds.

This process of chasing lost funds was one of the reasons for the help
desk in what was claimed to be a perfect process.  Out of this came a
need to figure out whether lost funds could actually be traced and
proven given that the cards were out in the field, and the user was on
the phone, not in the office.

So, it transpired that the help desk were given access to the
transaction database that held and tracked all transactions.  Using
this, they could easily see if the transactions had broken in between,
and then refund the money.

But wait, I hear you say, as I said at the time, weren't digital money
products meant to be privacy protecting and anonymous and card-to-card?

Yes, they were claimed to be that way.  So where did this database come
from?  Therein lies another story...

It turns out that the central bank imposed the full tracking on the
company within some discussion with hand-wavy meltdown / governance / ML
/ etc arguments.  Because the money was supposed to be private, it was
agreed to keep the database totally secret, and only two people in the
company could access it under strict controls.  And of course the
central bank under agreed and legitimate needs.

Then, step by baby step, this database enlarged its purposes slowly
until the clear and compelling case was made that the support desk also
had to be able to access it.

In effect, step by baby step, the product was molded until the original
requirements were totally trashed and lost.

> Often, I think of some of the mid 1990's payment system innovators as
> incompetent. Which they were. Yet they were rocket scientists eligible
> for Nobel Price compared to some of the Bitcoin outfits that I have met
> over the last two years.
> Never will I forget sitting down (as a favor to a friend) with a Bitcoin
> online wallet outfit crew that is holding an absurd percentage of
> Bitcoin bits, who took offense at the very notion that there might be
> something to be learned from several millenniums of financial services
> best practices.
> I say, let them and all of Bitcoin burn to dust.

They are, MtGox is failed, and others are wobbling.  Here's my take on
it:  http://financialcryptography.com/mt/archives/001482.html  It is a
failure of governance, no more no less.

There's a frustration here, a tension.  On the one hand we see multiple
millions, possibly as much as a billion dollars, being thrown at these
bitcoin ventures often on no more substance than the word 'bitcoin'.

And then, we see those bitcoins and millions flow like sand into the
hands of others, with nothing to show.  In each case, it is because
lessons that were learnt by prior generations are not researched,
listened to or re-learnt quickly enough.

Yet, the investors seem to be swayed by the confidence and miracle of
the new generation.  It is the investors decisions more than anything
that contribute to the conclusion that Bitcoin is a bubble.

If one was to look for a good bitcoin investment, what would it be?  I
think something like this:

* they have a regulatory model.  It doesn't need to be right or
sustainable, they just need to understand the word, because whether they
know it or not, the word is coming for them one day.

* they have a governance model.  Ditto.

* they have a Sean Parker.  By this, I mean the person with actual
experience of business, who's there at the critical juncture to go from
2 kids and a fridge full of beer to a business.  See the Facebook movie
if this doesn't make any sense.

* Finally, they have a business model that is agile to the complete
collapse or departure of bitcoin itself.  The point here is not that it
will or won't, but the future is so traumatically unpredictable that it
will consume more naive blockchain believers than we can possibly count.


More information about the cryptography mailing list