22 y.o. Russian Canadian (ex hacker and now) famous digital-entrepreneur Vitalik Buterin aka “Digital Lenin” will be in Singapore on 2nd and 3rd of June. Here you can find everything you should know about him, Etherium, The DAO and “smart contracts” – this post is based on materials by Forbes, Wired, FastCompany, TechCrunch, BitcoinMagazine and the Economist.
Vitalik Buterin on His Long-Term Goals for Ethereum
BicoinMagazin \ Babbage \ The Economist (04\05\16): Ethereum creator Vitalik Buterin was recently interviewed by The Economist. He shared his long-term goals for Ethereum, which is a public blockchain that allows developers to easily deploy decentralized applications.
When asked what inspired him to create Ethereum, Buterin first talked about how Bitcoin originally sparked his interest in blockchain technology. The open, permissionless nature of public blockchains is a key feature that attracted Buterin to the ecosystem. He noted, “I like the idea of 12-year-olds potentially being able to build the next financial system and so forth. That’s a large part of what attracted me [to] blockchain technology.”
With Ethereum, Buterin intends to allow those programmers (young or old) to build much more than the financial applications of the future. The Ethereum blockchain is Turing complete, which differs from how things have worked in Bitcoin up to this point ‒ Satoshi Nakamoto (Bitcoin’s creator) purposely limited Bitcoin’s scripting system for security reasons.
Buterin explained: “I thought [those in the Bitcoin community] weren’t approaching the problem in the right way. I thought they were going after individual applications; they were trying to kind of explicitly support each [use case] in a sort of Swiss Army knife protocol.”
With a Turing complete programming language, the potential applications of the Ethereum blockchain are limited only by a developer’s creativity. Buterin used an analogy to explain how this compares with Bitcoin: “Instead of creating a device that just does a specific number of things, you have a device that understands and supports this programming language and whatever people want to do [can potentially be implemented].”
Buterin mentioned shipment tracking and digital identity systems as two potential applications that could be built (or are being built) on top of Ethereum.
Although some claim Ethereum is not a direct competitor with Bitcoin and the two blockchain platforms could work well together, Babbage host Tom Standage asked Buterin if Bitcoin could be the Napster of cryptocurrencies (meaning that it would eventually be replaced by something better).
Buterin noted that a pure Bitcoin person (sometimes referred to as a Bitcoin maximalist) would say that other, centralized forms of digital currency from the past, such as David Chaum’s ecash, would be a better fit for the Napster analogy. However, Buterin continued:
“In practice, it’s not nearly so simple because ‒ I don’t think Bitcoin is going to fail, I don’t think it’s going to disappear, but at the same time, it’s very clearly not going to be the backbone for the entire world with absolutely everything decentralized running on top of it in some shape or form.”
Sidechains, a concept created and mainly developed by Blockstream, is an attempt to bring increased functionality to the Bitcoin network and add greater utility to the Bitcoin token. One sidechain project, Rootstock, is a smart contracts platform quite similar to Ethereum. At this year’s MIT Bitcoin Expo, RSK Labs cofounder and chief scientist Sergio Lerner claimed the project was partially put together by mashing together the Bitcoinj andEthereumj clients.
When asked about his long-term goals for Ethereum, the creator of this particular blockchain-based platform remained practical. In regard to whether Ethereum will become the one blockchain to rule them all, Buterin stated, “That could happen, but at the same time, we’re completely prepared for more realistic scenarios.”
In terms of developers creating a new blockchain for each use case of this new technology, Buterin said: “There might be some applications that might get their own ledger, [but] there’s just so much different stuff that people are doing with blockchains ‒ you’re not going to create a specialized platform for each one.”
Buterin added, “That’s what people were doing in 2013, and they failed.” Buterin said he would still be happy if Ethereum was simply used for all of thelong tail use cases of blockchains that don’t have another specialized system to turn to.
Related story: Chris Skinner and Life.SREDA created The BB (banking on blockchain) Fund
Can A Company Be Run Without Leadership, Management Or Employees? $150m Invested In The DAO Says Yes
Forbes (20\05\16): 30 years ago, the concept of being able to communicate instantly over video with anyone around the world was unimaginable. Today, the same can be said about fully autonomous corporations, without any leadership, management or employees, being able to drive a return on investment for their stakeholders. The funny thing is that it is not artificial intelligence that is making this change possible. In fact, it is all being made possible from the ideas that have been inspired from the most popular digital currency, bitcoin.
The DAO, short for The Distributed Autonomous Organization, is an entirely new way of organizing investment. It has raised over $150m in crowdfunding dollars by over 20,000 individuals since April 30th, making it is the largest crowdfunded effort in history. The DAO’s features depend on a new Bitcoin-inspired blockchain called Ethereum.
Ethereum is a blockchain implementation created in 2014 by Vitalik Buterin, who was just nineteen at the time. Bitcoin was five years old then and Buterin carefully studied its strengths and weaknesses. Vitalik recognized that while Bitcoin could function well for companies looking to use it as a way to send money faster and cheaper across borders, it lacked the flexibility to achieve the promise of a fully programable currency. As a result, he built the Ethereum blockchain such that every node involved in Ethereum has a fully functional virtual computer inside built specifically to run programs known as smart contracts.
The DAO is a set of smart contracts that define a venture capital fund, which is directed by DAO Token Holders. This is similar to holding shares in a public company, but the fund itself is stateless, existing in all computers running Ethereum, having neither a physical address nor a board of directors.
Slock.it, a smart devices rental company that is creating a system like Airbnb, played a key role in the creation of The DAO by writing the generic code base which was later deployed by the current DAO community. The Slock.it COO and a veteran of Ethereum itself, Stephan Tual, offers this concise definition of distributed autonomous organizations.
There are three classes of individuals involved in The DAO; project proposal users, investors, and curators.
Project proposal users offer various projects to the DAO in hopes that they will receive funding. The proposals can be for any kind of investments, research grants, seed funding for startups, or non-profit fundraisers just to name a few. The proposal will include a business plan, an ask for funds, and it offers a reward to The DAO. The ask for funds to be paid out in exchange for meeting certain milestones and the rewards to be provided to the DAO are all programmed into smart contracts, meaning no human interaction is needed for releasing funds. Profit driven proposals will reward The DAO by paying back the principal plus interest or providing an ongoing percentage of the revenue. R&D in the form of source code or studies, as well as charitable activities, would only meet milestones, proving to donors that they are completing the work they offered to do.
The investors, or DAO’s Token Holders are the people who contribute to the ever increasing$150m fund and they have one vote per each Token they hold. They can approve proposals, they can specify what happens to the proceeds from a given proposal, and they appoint curators, which can be thought of as The DAO’s internal audit function.
The curators are essentially a failsafe mechanism to prevent the system from getting defrauded. They serve two main functions, verifying the identity of individuals who want to be project proposal users, and to make sure that the proposals they are pitching to The DAO have been correctly rendered into smart contracts.
What are the benefits of The DAO model versus traditional venture capital?
The proposal users and investors interact directly, so there is no middle man taking a cut. Even crowdfunding providers like Kickstarter get 5% to 10% of every successful proposal. The DAO gets just the small percentage needed to offset the cost of running the Ethereum computers in the network.
The proposal users gain access to a large, diverse community of investors. Some high net worth individuals were clearly involved given the $150m raised, but among those 20,000 investors there are plenty of people who bought a single Token so they can participate in decision making. No matter how niche a given charitable proposal might be, there will be some investors who are aware of the problem it seeks to address.
A proposal requires a 20% approval rating before it can be funded. That isn’t just money, it’s 4,000 first customers as well as 4,000 Tweets when the proposal is funded. If a group of Twitter TWTR +1.98% users that size get excited about something they are capable of pushing their discussion on to Twitter’s trending list. This sort of social promotion puts a disruptive startup on a level playing field with industry incumbents, and that is not a service that a traditional venture fund can provide.
It is important to note that as The DAO is today, there are a number of potential issues that could arise.
What happens if the 20% quorum isn’t reached? What if a DAO’s investors are so disengaged it can’t even change the rules to lower the quorum percentage? There aren’t any good answers for this one.
What happens if a proposal receives funding, is successful, but decides to stiff the initial investors? The funds come from a transnational class of investors and the amount might be small, making a class action suit very unlikely.
How do DAO investors communicate regarding proposals and operations issues? While some are going the DAOhub forum, others are communicating via the DAO slack channel. Slack and forums work well to consolidate what used to happen in a mix of email and chat sessions, but there are no formal consensus mechanisms for tallying votes. The DAO needs some human-centric software as a companion to the Ethereum blockchain. Maybe we’ll see some efforts to fund a system like this among the first proposals.
The future is uncertain, but in the positive, beset by opportunity sort of way, Tual remains philosophical on this.
“Everyone thinks that now that the DAO has raised the $150m, that this is it, we’re at the end. In fact, we are just in the beginning. There is still a lot more to build and figure out. It’s true, 9/10 startups in the real word fail, maybe 9.9/10 in the crypto world will fail, but a company like The DAO with such potential and vision is worth the moon shot.”
What does all this mean for my company, Bitwage, which processes payroll using Bitcoin? Ethereum has a blockchain, so the programming changes required to add the protocol would require some simple modifications. The DAO looks promising, but the Ethereum market cap is just an eighth of Bitcoin’s and the liquidity prior to The DAO going public was not sufficient. We’re still in watch and wait mode on this one.
Ethereum: Towards A New BitSociety
Forbes (03\4\16): We have been thinking of Bitcoin as a new currency and/or a new class of asset, and its underpinning technology – the blockchain – as a shiny new type of payments system that will eventually eliminate the need for intermediaries such as central banks. But the technology potentially takes us much, much further than that. Recent developments take us towards new forms of law, new types of democracy, even – perhaps – the redefinition of what we mean by a “nation”. It may sound extreme to say this, but some blockchain aficionados are even talking about complete reordering of society. Welcome to the Brave New BitWorld.
Or rather, the EtherWorld. For in this piece, I am not talking about Bitcoin, but its rival Ethereum.
The opening paragraph of Vitalik Buterin’s White Paper about Ethereum says this (my emphasis): “There has been a great amount of interest into the area of using Bitcoin-like blockchains, the mechanism that allows for the entire world to agree on the state of a public ownership database, for more than just money. Commonly cited applications include “colored coins”, the idea of using on-blockchain digital assets to represent custom currencies and financial instruments, “smart property”, physical objects such as cars which track a colored coin on a blockchain to determine their present legitimate owner, as well as more advanced applications such as decentralized exchange, financial derivatives, peer-to-peer gambling and on-blockchain identity and reputation systems. Perhaps the most ambitious of all is the concept of “autonomous agents” or “decentralized autonomous corporations” – autonomous entities that operate on the blockchain without any central control whatsoever, eschewing all dependence on legal contracts and organizational bylaws in favor of having resources and funds autonomously managed by a self-enforcing smart contract on a cryptographic blockchain.”
Buterin announces the death of lawyers. Who needs lawyers when the terms of your contract, or the evidence of your ownership of an asset, or even your own identity, are securely encoded within the blockchain and verified by the entire network?
This may come as considerable relief. Lawyers earn a huge amount of money exploiting the idiosyncrasies and inadequacies of legislation. If law can be encoded so it is unambiguous and automatically executed, much time, money and aggravation could be saved.
The range of potential applications for Ethereum’s smart contracts is staggering: “The first category is financial applications, providing users with more powerful ways of managing and entering into contracts using their money. This includes sub-currencies, financial derivatives, hedging contracts, savings wallets, wills, and ultimately even some classes of full-scale employment contracts. The second category is semi-financial applications, where money is involved but there is also a heavy non-monetary side to what is being done; a perfect example is self-enforcing bounties for solutions to computational problems. Finally, there are applications such as online voting and decentralized governance that are not financial at all.”
Now, the first of these immediately interests me. As we have painfully discovered in recent years, financial derivatives, hedging contracts and savings schemes are all notorious vehicles for fraud, sometimes on a massive scale. Financial fraud exploits power and information asymmetries between seller and buyer, lender and borrower, investor and asset manager.
It was not immediately clear to me how Ethereum’s smart contract facility would deal with this, so I had a good look through all the literature. And I am still none the wiser. It seems to rest on the assumption that everyone entering into a smart contract would be a) fully informed b) have the purest of motives. I don’t believe either of these.
Smart contracts are fine as long as they represent the truth, the whole truth and nothing but the truth. Where they represent only a partial truth, they are corrupt even though the coding itself is secure and fairly executed. Technology is only as good as the motives of the people who use it, and even blockchain cannot compensate for all malicious intent. Power and information asymmetries inevitably remain in situations such as these, to the detriment of those who are weaker and less knowledgeable. Perpetuating this in a virtual environment does not strike me as progress.
Sounds absolutely wonderful. Wills are such contentious things: if the distribution of assets to beneficiaries is securely coded and automatically executed on proof of death, how can it be challenged?
It not only can be challenged, but it inevitably would be. The principal challenges to wills come from people who think they have been unfairly bypassed, usually close relatives. They appeal to national inheritance laws to override the specific terms of the will. Securely coding specific terms of a will would not necessarily eliminate such challenge, especially since the person excluded would be unlikely to know about the smart contract. The problem is that since the will would be automatically executed, challenge could come too late. It is much harder to recover assets once distributed than to prevent their distribution in the first place.
And there is a further problem. Under which national system of law would such a “smart will” be challenged? If “smart wills” are disconnected from national law, then it creates the possibility for some people to be unfairly disinherited without recourse. It also creates wonderful opportunities for tax avoidance. If my assets are in a virtual escrow account, they aren’t subject to tax in any jurisdiction, are they?
This is just one example. I could go on, and on. Internet law is already a minefield, precisely because it is not clear which jurisdiction’s legislation applies to – for example – intellectual property distributed on Twitter. Smart contracts could make matters much worse. It could even create an underclass of people who are effectively denied the protection of the law.
Currently, national (and to some extent international) law protects people’s property rights, and ensures that people contribute through taxation to the society in which they choose to live. But Ethereum’s smart contracts create the possibility that these legal systems could be completely bypassed. What would replace them?
Ethereum has the answer. A new, global, virtual legal system. In fact a new, global, virtual country. Welcome to the Decentralized Voluntary Borderless Nation!
Here is what BitNation says about itself: “BITNATION provides the same services traditional governments provides, from dispute resolution and insurance to security and much more – but in a geographically unbound, decentralized, and voluntary way. BITNATION is powered by Bitcoin 2.0 blockchain technology – a cryptographically secured public ledger distributed amongst all of its users. As we like to say – BITNATION: Blockchains, Not Borders.”
And it offers many of the same services as government, even including insurance-based healthcare, pensions, education and basic income. It’s Galt’s Gulch.
Except that it isn’t. Galt’s Gulch at least had a physical location, and its members did productive physical work to earn their gold dollars. BitNation is entirely virtual. It is perhaps more like Jonathan Swift’s island of Laputa, completely disconnected from the real world but extracting resources from it.
But its members are not disconnected. They have to live somewhere. Do they abide by the laws and customs of the country in which they choose to live? Do they “render taxes unto Caesar”? Or do they see themselves as being bound only by the laws and customs of their chosen DBVN?
Throughout history, there have always been “virtual nations”. This is what religions are, especially in their most extreme “cult” forms. At times, they come into conflict with physical (“temporal”) nations. Ethereum is not a religion, but BitNation, in trying to create an alternative society with no physical reality, shares some characteristics of an idealised “heaven on earth”. Is faith in blockchain really an improvement on faith in God?
To be sure, such an extreme application of blockchain technology may remain the province of the weird fringe. And smart contracting no doubt will have many uses in mainstream business and finance. But blockchain is a rule-based system, and rules have their limitations. Automatic application of rules may be just, but it is not necessarily fair, and it leaves no room for the human traits of compassion and mercy. In my native UK, applying the contractual terms of mortgages strictly in the 2008 financial crisis would have led to thousands more people losing their homes than actually did so. Do we really wish to have so little control over contractual obligations that we cannot choose to forbear or renegotiate?
I do not wish to derail the creation and adoption of new technologies. But just as in medical science, technological advances can outpace ethical considerations regarding their use, so they can in finance, economics and law. Blockchain has great potential: but we should not be blind to its dangers, nor casual about its implications for human social organisation in the future.
The Humans Who Dream Of Companies That Won’t Need Us
FastCompany (19\06\15): Like other serious crypto-anarchist visionaries, the 21-year-old Russian Canadian entrepreneur Vitalik Buterin sees the blockchain—the public ledger underlying bitcoin—as a way to liberate us all from inefficiency, cut out the middleman, and make big government and business bow at the free market’s feet. What makes his vision different is its scope. Where bitcoin aims to disrupt banks, Buterin’s Switzerland-based company, Ethereum, aims to become what he calls “the foundational platform for everything.”
At the heart of this open-source software platform is a currency, Ether, named after the pre-relativity hypothesis to explain the propagation of light waves. Though it has yet to make a public release, Ethereum has already recruited a strong roster of programmers and last year raised $18.4 million, in the third most well-funded crowdfunding effort in history.
Bitcoin’s blockchain model has been proposed as the backbone for a wide range of applications, from asset trading to real estate transactions, from escrow services to even a “national income distribution” system. What Ethereum proposes, in effect, is a global computer that could not only handle those transactions but also eventually emulate many of the functions of companies like Uber, Airbnb, Dropbox, Amazon, and Kickstarter—but without the “inefficient” bureaucracies and the other intermediaries who take a slice of the pie. That is to say, companies that, once started, can run themselves.
Imagine your favorite Internet business—but without the “inefficient” intermediaries who take a slice of the pie. That is to say: humans.
If the blockchain is a giant ledger, Buterin’s goal—first articulated in a January 2014 article in Bitcoin Magazine, which he cofounded—is to build the army of robot accountants working on top—what are sometimes known as “smart contracts.” Nick Szabo, the cryptographer who is credited with coining that term and is speculated to have been involved in bitcoin’s creation, described blockchain-based autonomous organizations last December on his blog as armies of accountant robots:
Instead of the cashier and ticket-ripper of the movie theater, the block chain consists of thousands of computers that can process digital tickets, money, and many other fiduciary objects in digital form. Think of thousands of robots wearing green eye shades, all checking each other’s accounting. Individually the robots (or their owners) are not very trustworthy, but collectively, coordinated by mathematics, they produce results of high reliability and security.
Bitcoin as a whole is a step in that direction, but it’s only one application. Ethereum, on the other hand, is “Turing complete,” a system in which a program can be written to find an answer—or to execute a smart contract that can buy something, sell something, or do something. In aggregate, a group of smart contracts could run what is known in Ethereum-speak as a “decentralized autonomous organization” (DAO) or a “distributed autonomous corporation” (DAC)—in other words, a corporation distilled to its most basic tasks, and operated by little more than code and the logic of if this, then that
An overview of how the three components of the full Ethereum system work together. Alongside the blockchain, two additional protocols are being developed by the company: Swarm, to manage distributed file sharing, and Whisper, for messaging.
For all of his bluster and dedication, however, Buterin—one of three co-founders of the project, and its most prominent spokesman—doesn’t project a Jobsian ego. Sometimes, he seems like the inverse of the Apple founder: Quiet, nerdy, and unequivocal in his belief that that ownership of large systems should be distributed across the web rather than consolidated under governments or corporations. While it overlaps with the popular libertarian philosophy of Silicon Valley, this decentralized ethos is also in some ways the diametric opposite of another Silicon Valley model: the startup economy, which must ultimately enrich its developers and investors more than its end users.
Buterin’s crypto-utopia of cloud companies distributed across the global network is also a counterpoint to Washington, with its ossified bureaucracy, red tape, and taxes. A DAO or DAC, operated by servers around the world, would exist within no borders and, in theory, be very difficult to shut down. While some critics of Facebook and Uber have suggested they should be regulated more like public utilities, an Ethereum-based ride-sharing service or social network offers a parallel path, say its proponents—in theory, functioning more equitably than a standard corporation, taking in the fees necessary to maintain the network.
Gavin Wood, an Ethereum co-founder and its chief technology officer, believes that the new digital bazaar could battle and eventually triumph over Silicon Valley’s old cathedral. As he wrote on the company’s blog in April.
The idea of a rigid organisation or corporation will evaporate and left will be the true essence of human interaction patterns, policed only by openness and information-theoretic mathematics.. strict legality of the emergent behaviour will become increasingly less relevant as it becomes drastically pluralistic and unpoliceable with no entity, legal or otherwise, coordinating it or profiting from it.
And if Ethereum fails, they insist, some future blockchain layer will accomplish the task.
Working in parallel to Ethereum, but at a much more modest scale, has been the New Economy Movement (NEM). Like Ethereum, the Nemcoin developers don’t see it as a cryptocurrency but a vibrant decentralized ecosystem upon which any number of services and apps can be built. Elsewhere, Nxt and Mastercoin are attempting to map out some of the same decentralized app building and smart contract services as Ethereum is.
I know this answer sounds rather dismissive, but it’s like asking if, during the development of the aeroplane, there was something else similar.
But Ethereum’s supporters say that no other project has innovated on the blockchain the way that it has. “There is only Ethereum and projects that have forked Ethereum,” Aeron Buchanan, an Ethereum developer, told me in an email. “Ethereum is the trailblazer. That’s why it’s exciting. Bitcoin introduced the blockchain, which was a huge step forward technologically, but the functionality of bitcoin is almost as basic as it could be on the landscape of possibilities: zero-sum account balances. Ethereum opens up the blockchain to endless possible functionality.”
“I know this answer sounds rather dismissive,” he added, “but it’s like asking if, during the development of the aeroplane, there was something else similar. Well, Otto Lilienthal’s gliders were an inspirational basis for the Wright brothers’ powered flying machines, but does it help to say that Lawrence Hargrave was flying kites at around the same time?”
What, exactly, would you need to build a blockchain-based Uber or Lyft? I asked Buterin to join my thought experiment. According to him, a ride-service app must satisfy four basic functions. First, it must allow passengers to publish ride requests. Then it must feature a driver mechanism that filters these requests for those nearest them or along their route. Finally, it must feature payment and rating systems.
When someone in Chicago makes a better matching engine, decentralized Uber switches over and doesn’t miss a beat.
An Ethereum-based transportation company would not perform all of these tasks. One developer might create the interface, another the payment system, while another designs the GPS system. Through smart contracts between user and developers, each of these programs would be building toward a whole that could be far cheaper than existing “ride-sharing” services.
“Long-term, there’s no reason all of these tasks need to be carried out by one company,” says Ben Doernberg, a bitcoin expert and research assistant at Harvard University’s Berkman Center for Internet & Society. “A designer in Brazil can build a lovely mobile app that sends your ride request to a matching engine based in San Francisco that pulls trust ratings from a blockchain-based decentralized identity system. When someone in Chicago makes a better matching engine, decentralized Uber switches over and doesn’t miss a beat.”
When a driver is looking for a passenger, the driver’s client software could propose a cost function, like “prefer rides that start closest to me,” which in Buterin’s eyes would be an “efficiently computable math formula.” At that point, “the driver publishes a smart contract onto the blockchain which can automatically evaluate ride requests submitted to it, and after N seconds automatically pays a bounty of $0.10 to whoever provides the most favorable ride or set of rides,” says Buterin.
Once the driver’s contract receives the most favorable set of rides and the bounty is paid, the contract deletes itself, and the information is passed along to the driver. Any or all of this computation could be outsourced for efficiency. In the decentralized Uber example, he said, there would exist a “completely open-access industry” composed of “specialized decentralized Uber cloud computing nodes.” Their sole purpose would be to look for contracts with search algorithms that determine which rides maximize the score with each other, and submit them. And Buterin says that in this system anyone could immediately start participating.
The payment system could be bitcoin, Ethereum, or any other cryptocurrency. “The rating system would probably be best done as a decentralized publishing platform like Whisper,” Buterin said, referring to Ethereum’s distributed messaging protocol. “[B]ut maybe with a few nodes trusted by default, where those nodes provide functions like criminal background checks, etc. From there, the whole process is basically just as it was before, but without the middlemen.” (As for the rides themselves, Uber is already taking care of that, according to reports: The company has opened a robotics lab in Pittsburgh, reportedly with the aim of building self-driving vehicles.)
In this “partial” example of a DAO, said Buterin, Ethereum basically provides the software and an IT department in a decentralized fashion. Drivers directly pay for the results, allowing individual end users or groups of people to come together as a community to satisfy “the mechanism’s needs.”
As fantastical as it sounds, something like this already exists. La’Zooz, a startup based in Israel, has built what it says is the first decentralized ride-sharing application atop Bitcoin’s blockchain. Similar to Buterin’s vision for an Ethereum competitor to Uber, the end users own it. They can also earn Zooz cryptocurrency by contributing to improve La’Zooz’s ecosystem. The difference between La’Zooz’s blockchain app, and a theoretical Ethereum-based one is that the former is run by three cofounders, while the latter wouldn’t need any humans at all.
In theory, at least. For a customer or developer to transact in an Uber or Airbnb killer, a transaction on Ethereum would have to run through all of the ecosystem’s nodes. Another way of putting it is that the transaction will have to be processed by all of Ethereum’s users, adding up to a very slow computer, one that’s only as fast as its slowest node. The slowness and inefficiency of the blockchain will be a primary challenge for Ethereum’s app developers, says Doernberg.
Ethereum isn’t the only company to be thinking about turning the blockchain into a powerful, valuable platform for building global computers. Tech investor Marc Andressen has described the blockchain as an ideal medium of exchange for machines that need to talk to each other, and his firm, Andreessen Horowitz, has announced plans to invest “hundreds of millions” of dollars in bitcoin-related startups. Last year, Nick Szabo worked for Mirror, a bitcoin startup based in Palo Alto, and helped orient the company toward exploiting the blockchain for self-executing financial transactions.
There is a whiff of sci-fi dystopia to all of this. Could a robotic or algorithmic corporation, completely decentralized, become a real-life capitalist Skynet? Should, someday, a network of computers come to control 51% of the Ethereum blockchain, could it override the human element in the network, and wreak havoc on securities, financial markets, home appliances, and infrastructure? Probably not, given the inherent slowness of blockchain technology, and the fact that a DAO still requires humans to develop its various Voltron-esque parts. And, after all, DAOs are not sentient but narrow-AI autonomous agents executing very specific tasks.
Emin Gün Sirer, a Cornell professor and systems builder highly active in the cryptocurrency community, has more practical concerns. He said that while blockchain enthusiasts are eager to see a Uber and Airbnb middlemen cut out, he’s not so sure there is demand for it. For him, there is no technological reason why an Uber or Airbnb would benefit from being built on an Ethereum-like blockhain. He also believes the highly rational, deregulated approach wouldn’t necessarily be good for users.
“It turns out you can build some portion of these applications peer-to-peer, but often people misunderstand what these centralized services [Uber, Airbnb] really do behind the scenes,” Sirer says. “To a naive observer it looks like Uber and Airbnb are just about matching people; [but] they’re all about doing that security check, that incredible vetting [of drivers and sublessors or landlords], and it’s all about having that presence and identity.”
I find these arguments that Ethereum and its descendants will somehow solve this just incredibly naive.
“Vitalik and others will say, ‘Oh, there will be these services that vet drivers for you and they will compete for legitimacy, and we will pay these third-party services, and if there is a third-party service that isn’t doing its job, well, the invisible hand will correct them,” Sirer says. “But, if you think about it, no, that is not how things work in the real world, because what we’re talking about here is life and death and rape. This is not something I want to trust to market forces.”
“I find these arguments that Ethereum and its descendants will somehow solve this just incredibly naive,” he added.
Still, Sirer believes that more simpler smart contracts are the prime candidate for an Ethereum-type application—cryptographic clearinghouses for private transactions in which people decide to follow a set of defined rules.
“Computer games would be a catchy, cool, and killer application. Financial derivatives would be a fine thing to do [on Ethereum], too. Also, future contracts where a farmer wants to hedge against a harsh winter that might effect crops. Those kinds of contracts I understand.”
At CES in January, IBM and Samsung announced another practical purpose for Ethereum: simpler, crude, repetitive tasks in the so-called Internet of things, like monitoring the temperature or turning lightbulbs on and off. Under a project called ADEPT, or Autonomous Decentralized Peer-to-Peer Telemetry, Ethereum wouldn’t just serve as a global computer: with connected devices around the world contributing to the global network—and mining Ether in the process—they’d be generating money, and “revenue-generating opportunities in their own right,” IBM researcher Veena Pureswaran told Fast Company last month.
Under an Ether-backed Internet of things, perhaps, home appliances wouldn’t be sold but freely leased to consumers, subsidized partly by the minting of Ether. “The reason that they need this stuff is that they don’t want to pay,” Stephan Tual, Ethereum’s chief communications officer, said about the IBM-Samsung project. “It’s not altruism. They don’t want to pay for its maintenance.”
Rick Dudley, an IT consultant who is trying to develop games for blockchains and has been digging into the Ethereum source code, believes it will make sense to launch blockchain-based competitors to platforms like Uber and Airbnb, but is measured in his expectations about the time frame.
“I think the Ethereum community, which as far as I can tell is by far the furthest along [among various virtual currency projects] has a long way to go before they will provide an obvious benefit to existing organizations in those spaces,” he said. While Dudley says he sees “huge demand” for Ethereum-like services in industries like online gaming, he sees less of a need for the blockchain in other realms, like providing Internet service. “I am more skeptical of its value in the case of more physical things.”
Before we can see Uber or Lyft competitors, Dudley said users will have to wait for more of the OS-level surface to be exposed. This won’t happen overnight. “It will take a lot of work to get to that point from where we are today or what is even being discussed in depth. $15 million is nowhere near enough.”
Next, Dudley hopes “userland tools” will emerge that allow for development and deployment by anyone experienced with contemporary web development. In Ethereum’s ecosystem, the currency is Ether, and one’s Ether wallet is also a browser, which will function as one of many web interfaces, or portals, into Ethereum.
“That being said, no new discoveries will need to be made, all the theoretical heavy lifting has been done, arguably before bitcoin was invented,” Buterin added. “The technical side of Ethereum’s efficacy is 100% an engineering exercise.”
In Doernberg’s opinion, the future of decentralized robot companies all comes down to this: Are services like Uber more than the sum of their parts? And, if so, by how much? He believes that eventually Ethereum and its successors will answer these questions for “every service in the world.” The catch, though, is that it will “take years to build enough technical and social infrastructure for this to be a viable alternative.”
“Ethereum and decentralized applications are a perfect example of Amara’s Law,” Doernberg says. “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. I don’t know how happy Ethereum investors will be in 18 months, but I think Vitalik will feel very at home in 2025.”
Teenage hacker creates next-gen crypto-platform
Wired (28\01\14): Most people think of bitcoin as a form of money, if they think of bitcoin at all. But 19-year-old hacker Vitalik Buterin sees it as something more — much more. He sees it as a new way of building just about any internet application.
The bitcoin digital currency is driven by open source software that runs across thousands of machines around the globe. Borrowing code from this rather clever piece of software, independent hackers have already built applications such as the Twitter-style social network Twister, the encrypted e-mail alternative Bitmessage, and the unseizable domain name system Namecoin. But Buterin believes that many other applications can benefit from the genius of the bitcoin software, and that’s why he’s joining forces with several other hackers to create something called Ethereum.
He envisions Ethereum as an online service that lets you build practically anything in the image of bitcoin and run it across a worldwide network of machines. At its core, bitcoin is a way of reliably storing and moving digital objects or pieces of information. Today, it stores and moves money, but Buterin believes the same basic system could give rise to a new breed of social networks, data storage systems and securities markets — all operated without the help of a central authority.
Born in Russia and raised in Canada, Buterin was interested in mathematics and computer science from an early age. But when he first stumbled on to bitcoin in 2011, it didn’t grab him. “I ignored it,” he says. “I thought it had no intrinsic value, so it had to fail.”
But, over the next few weeks, he grew curious about this unusual creation. He received his first bitcoins as payment for articles written for a site called Bitcoin Weekly, where he was paid five bitcoins per article, the equivalent of $3.75 (£2.26) at the time. “It was my first ever real job, and it paid around $1.30 (78p) per hour,” he says. He kept writing about the digital currency in the pages of Bitcoin Magazine and other pubs. Then, in 2013, just as he was about to lose interest in the thing, the price of bitcoin skyrocketed.
Deciding that bitcoin was going to be a much bigger deal than most people realised, he dropped out of university and started traveling the world, jumping from bitcoin meetup to bitcoin meetup and contributing to various open source projects. Ethereum is the result of all those conversations and software experiments.
Ethereum won’t use the peer-to-peer network that bitcoin runs on, nor will it use the same software. Instead, Buterin and his team are building a completely new system that will run atop its own network. But the project borrows heavily from the ideas behind the bitcoin software.
All bitcoin transactions, for instance, are stored in a massive public ledger called the “blockchain.” This is a type of encrypted database, and you can use it to power other applications — as we’ve seen with Twister and BitMessage. Ethereum will feed still more applications through something similar to the blockchain, and it will offer a stripped-down version of the Python programming language — known as Ethereum Script — that’s specifically designed for building these blockchain-based applications.
As with bitcoin, the network that underpins Ethereum will be powered by machines donated by the people of the world, and to encourage donations, the system will allow these machines to collect fees from developers who build and run an applications atop the network. In similar fashion, bitcoin shares its money with those who run the machines driving its network.
The system could potentially drive everything from Dropbox-style storage systems to custom digital currencies. According to Buterin, it will be particularly well suited to something called “smart contracts.” A simple example is a betting system. Two people could place bets on, say, the outcome of the Super Bowl, entrusting a certain amount of digital currency to system. The system would then check the final score of the game via the web and distribute the funds appropriately. No bookie needed.
But Buterin also envisions far more complex smart contracts, including joint savings accounts, financial exchange markets, or even trust funds. Theoretically, these contracts would be more trustworthy because — if the software is properly designed — no one could cheat. Many bitcoin geeks even believe that smart contracts could lead to the creation “autonomous corporations” — entire companies run by bots instead of humans.
The Ethereum team plans to have a test network up and running soon, and on 1 February, it will launch a crowdfunding campaign to finance its further development. The code will be open source, another reflection of the bitcoin way.
Ethereum isn’t alone in its lofty ambitions. There are several projects trying to add smart contracts and other new tools to bitcoin. Some, like QixCoin and Bitcloud, are building their own networks. Others, like Colored Coins and Mastercoin, are piggybacking on the existing bitcoin network. Buterin has contributed to both Coloured Coins and Mastercoin, but ultimately, he decided that it would make more sense to create an entirely new system.
“I saw really smart people whacking their heads against the wall at Coloured Coins, and eventually, I realised people are having such a hard time not because the problem is hard,” he says. “The problem is easy. People are having a hard time because bitcoin is a bad protocol to build this stuff onto.”
Although applications that run on the bitcoin network have the advantage of using existing infrastructure — and they benefit from the scrutiny that security experts give the system — they’re limited by the design of the host software. For example, although bitcoin offers its own scripting language, the language is deliberately limited to ensure security. The Ethereum team believe these limitations made sense in the early days of bitcoin, when the ideas surrounding the currency were new and unproven. But they say that since bitcoin now seems reasonably stable and secure, it’s time to experiment with ways of making it more flexible.
But, certainly, Ethereum faces several challenges. Many are worried that the Ethereum blockchain will quickly grow to an unwieldy size if it gains widespread use. Buterin thinks the team can tackle this problem, but we won’t know for sure until the network is in action. Security is another big concern. These are just two reasons why the team is launching a test network before rolling out the real thing. “It won’t be the official network and transactions won’t carry over, and it will likely be quite buggy and fail a lot at first,” Buterin says.
In other words, it’s very early days for this new-age software system. But Ethereum and other next-gen crypto-platforms paint a very attractive picture of our online future, one where users are in control, not governments or big companies. Building this future is an enormous task, but Vitalik Buterin wouldn’t have it any other way.