Way, way back in October 2015 (and that’s a million in blockchain years) I read a piece by Pascal Bouvier. It contained an interesting term.
Robert Sams inspired this post. As we were discussing stacks (software, IT) and the draw backs of the bitcoin blockchain architecture recently in London, we slowly gravitated towards a new term… Consensus Computer (CC).
Having finished working on our four layer shared ledger model with my colleagues Steve Pannifer and Salome Parulava at CHYP and having used that model with clients in a few different countries to help management begin to formulate strategies around shared ledgers, and the blockchain, I thought it might be interesting to add this (i.e., Robert/Pascal’s formation) to our model to see if helped us to think more clearly and have more effective communications.
So here’s the new version of Birch-Brown-Parulava four layer shared ledger model with the Bouvier-Sams boundary (as I now call it) in place.
I’ve now used this with a few groups to help them to think about the potential for “smart contracts” in a variety of real-world applications and it’s proved rather useful so I think we’re going to stick with it for a while. By encouraging people to see smart contracts as applications, I think it sets up a different context for conversation. Smart contracts are not really contracts (or smart). Indeed, as my good friend Gideon Greenspan pointed out yesterday, you wouldn’t necessarily store contracts on a blockchain anyway.
As mentioned earlier, R3CEV’s Corda product has adopted this third approach, storing hashes on a blockchain to notarize contracts between counterparties, without revealing their contents. This method can be used both for computer-readable contract descriptions, as well as PDF files containing paper documentation.
When you think about smart contracts as a new class of application, however, you begin to see what the new architecture can bring to the party. The ability to execute general purpose code on the consensus computer means that, just as the ability to executer general purpose code on conventional computers did, people will create some amazing things that we can’t imagine right now. I’m looking forward to that, and I’ll be talking about this sort of thing on the Distributed Ledger Technology panel this afternoon Cards & Payments Australia, hope you can join us.
(Updated 6th May with reference to post by Dr. Craig Wright.)
As I am sure you know, the security of the bitcoin blockchain rests on a consensus protocol that includes a proof-of-work algorithm, and executing this algorithm (which is computationally very intensive) has become known as “mining” by analogy to gold mining (because of the bitcoin reward for the activity). Hence the idea of bitcoin miners.
On the edge of a tiny Chinese town is a strange building where you can get an insight into the future – and only a handful of people know what is happening inside.
By complete coincidence, on the very day that this story about a secret Chinese bitcoin mine was published on the BBC, I ran into the secret Chinese bitcoin miner himself at a not-at-all secret hotel in New York.
Yes, it was Chandler Guo! As you may recall, Chandler won the coveted Toast D’Or at last year’s Money 2020 in Las Vegas (you can read the full story about it here) because he asked the best question from the floor.
Anyway, he told me not to mention where the secret mine is, so I won’t, but it was interesting hearing him talk (as it always is) about how mining is going and the dynamics in the sector. Chandler mentions in passing in the BBC article that about three-quarters of the world’s bitcoin mining equipment is in China and that he is currently building a bitcoin mine that will produce about a third of all the bitcoins. What will happen to these bitcoins is anyone’s guess.
“The total addressable market of people who want to buy bitcoin is very, very thin,”
Indeed. And most of them aren’t in America or any other developed market. But what if it turns out that bitcoins aren’t useful as money at all, but as “anchors” for a variety of new and innovative cryptography-based services (one of which may be payments). The bitcoins will be useful because of the sheer volume of mining going on (since the security of the system rests of mining), not because they are coins representing any actual value.
Wait, what? Bitcoins might be valuable because they are not money? Well, yes.
I’ve said before, in my usual soundbite twitter-centric superficial and aphoristic way, that the future of money isn’t bitcoin and the future of bitcoin isn’t money. We don’t need to go into why I think this, although I will say that I think my early analysis of the technology for out clients has stood up pretty well over time. I touched on the topic again last month in a blog post “Is Bitcoin Money?” where I again said “will money as we know it be replaced by bitcoin? I sincerely doubt it” after a discussion about the functions of money. I started thinking about this again during a couple of the discussions at Consensus 2016 and then some pointed me towards a discussion thread about whether bitcoin is money or not. To be honest, I wasn’t that interested in reading it, but as I was bored on a plane I started to scroll down. It became mildly more interesting when someone mentioned John Lanchester’s piece in the London Review of Books. You remember, the one where he says “David Birch is the author of a fresh, original and fascinatingly wide-ranging short book about developments in the field, Identity Is the New Money. His is the best book on general issues around new forms of money, and new possibilities generated by blockchain technology”. (Which reminds me, I must write a blog post on John’s excellent piece…)
Anyway, while I skimmed some of the arguments, the core of the discussion was that an economic adviser to Jeremy Corbyn, the current leader of the UK Labour Party, said that money is credit and bitcoin isn’t credit so it isn’t money. I’m pretty sure he’s wrong about this (since it is easy to envisage non-credit monies), but that’s not my point. He also makes a point about trust, which is a good one and similar to a point made in a Forbes piece that I read a while back.
Why should anyone have more trust in a digital currency created by an anonymous group of coders accountable to no-one than in a democratically-elected government accountable to everyone? Why is an essentially feudal governance model “safer” than a democratic one?
So far so familiar to people I bore senseless about this stuff at parties. Then it got a lot more interesting when my old chum Izabella Kaminska from the FT stepped into the fray, pointing to something that Craig Wright (the man who may or may not be Satoshi Nakamoto) wrote on the topic.
It’s the first time anyone in the bitcoin world has actually made a compelling argument, with historical references. First, he describes bitcoin not as a currency or a commodity but as a security service.
I had not read the Wright piece before, so I had a very quick glance and then bookmarked it to read later. Unfortunately, there was no later as Mr. Wright has now canned his blog, but a correspondent found it using the wayback machine. Dr. Wright says “The mining of bitcoin is a security service that alone creates no wealth”. So to return to the point above, the sheer volume of mining going on (provided it does not become concentrated) means that there is a very, very secure piece of infrastructure out there. This infrastructure may be used to “anchor” all sorts of new services that need security as I said above. Some of them may be payments (as the Lightning folks hope) but most of them will not be. Now, while I think it unlikely that the bitcoin blockchain will be the final form of this infrastructure, that’s no reason not to experiment with it, in which case bitcoins will continue to have value even if no-one is using them to buy mundane goods or services.