RT @stevedekorte: Bruce makes many good points but comes to his conclusions via the half truth fallacy. He fails to mention/consider costs and risks of fiat and fractional reserve banking. https://t.co/xrHSKnZV8a
RT @nathanielpopper: This is the most concise, comprehensive and clearheaded critique of blockchain and cryptocurrencies that I’ve seen. Most of it isn’t new, but it puts it all in one place, in plain English and comes from someone who is an authority on all of this.
“A blockchain probably doesn’t solve the security problems you think it solves. The security problems it solves are probably not the ones you have.” https://t.co/pUotVIefD7. Not my words, Bruce Schneier's. And by the way, he knows A LOT about security
RT @Gareth17939663: read this for yourself and form your own opinion - i think this article is fundamentally speculative and carries no scientific basis for the strong position proposed by the author.
I for one am still investing in BTC while the price is still affordable.
RT @ConnectExecs: Great to see @schneierblog chiming in with very sober perspectives and lots of truth-telling. A useful piece for those confused about blockchain or those who believe it will revolutionize much. #KeepingItReal https://t.co/Zr8ivr6RHP
RT @nathanielpopper: Blockchain folks like to say the tech eliminates single points of failure. Bruce Schneier points out that blockchains have just introduced several new single points of failure: "the cryptography, the protocols, the software, the computers and the network" https://t.co/8dEJBTa9OJ
Blockchain folks like to say the tech eliminates single points of failure. Bruce Schneier points out that blockchains have just introduced several new single points of failure: "the cryptography, the protocols, the software, the computers and the network" https://t.co/8dEJBTa9OJ
Honestly, cryptocurrencies are useless. They're only used by speculators looking for quick riches, people who don't like government-backed currencies, and criminals who want a black-market way to exchange money.
Wow, I'm really disappointed in this guy, he used to be intelligent security analyst. Now he's a Roubini mouthpiece.
THANK YOU. Better for this child to be strangled in its crib as a true weapon for crypto-anarchists than for it to be wielded by toxic individuals who distort the technology and surrender it to government and corporate powers.
Cryptocurrencies are not useless. Just look at what VET is doing for a lot of organizations. There's many uses in crypto and will be many more, that is without a doubt.
Did this article actually give any reason to not trust Bitcoins blockchain? or are they generalizing blockchain? I thought there is no centralization in Bitcoin, meaning there isn't just one ledger, literally anyone with a big enough computer can download the ledger and run there own Bitcoin node and verify every single transacation for themselves. Is that a misunderstanding?
"What is it good for, absolutely nothing; you all". Buttcoin and fictchain is the biggest scam to date. Believe in these techs, yes. Are they after fruitation, they seem to be; or Is it a huge scam? I vote for the later. 10 years after buttcoin, and then litcon, buttcoin 2, buttcoin5, pimple..... just a lot of nonsense. Value added, no. Good white paper, plausible. Value, none at all.
It seems to me that there is one simple reason cryptocurrencies are not working.
People are not using it as actual money. For the most part, the emphasis seems to be on hoarding it. Yeah there's some trading going on, but not nearly enough and it seems more like most people are hoarding it in the hope of some currency fluctuation to get some kind of payday.
You can't hoard cash, it doesn't work as a payment medium if everyone does it. Yes I get that savings exist with traditional cash, but even people who save money have to spend some of it still to some degree.
He's right, of course. It's Bruce Schneier. Anyone care to address his questions?
To answer the question of whether the blockchain is needed, ask yourself: Does the blockchain change the system of trust in any meaningful way, or just shift it around? Does it just try to replace trust with verification? Does it strengthen existing trust relationships, or try to go against them? How can trust be abused in the new system, and is this better or worse than the potential abuses in the old system? And lastly: What would your system look like if you didn’t use blockchain at all?
> Does Bitcoin change the system of trust in a meaningful way?
Yes. If BCH is really used as world money, the petrodollar is effected, US foreign policy is effected, and international commerce becomes more open.
> Does Bitcoin just try to replace trust with verification?
> Does it strengthen existing trust relationships, or try to go against them?
It goes against them. Instead of using banks for international wires, we can use Bitcoin. International businesses can more easily make payments without a middle man.
> How can trust be abused in the new system, and is this better or worse than the potential abuses in the old system?
There are a few major abuses possible in any monetary system. As he said in the article, Bitcoin is worse if you are scammed, there is no recourse. However, the abuses possible under a "Federal" Reserve system are much more dangerous. Additionally, Fractional Reserve is less easy to audit under a fiat system than on Bitcoin. With Bitcoin, the public is able to monitor the transactions and holdings of institutions.
> What would your system look like if you didn’t use blockchain at all?
Bitcoin would not function at all without blockchain. The closest way to implement something similar would be with gold.
>Does Bitcoin change the system of trust in a meaningful way?
Bitcoin creates a new trust *paradigm*. And the billions of dollars invested in it show that it has a network effect. Every day that miners mine, nodes sync, and people transact, the system gets stronger.
I usually agree with Schneier, but he's wrong about this. Here's where he lost the thread:
*Financial institutions, merchants, and individuals are all concerned with their reputations, which prevents theft and fraud. The laws and regulations surrounding every aspect of banking keep everyone in line, including backstops that limit risks in the case of fraud. And there are lots of security systems in place, from anti-counterfeiting technologies to internet-security technologies.*
This is incorrect, and he's also inadvertently highlighting precisely the imperfect nature of the financial system's security and fraud prevention. Also he misses the elephant in the room: the financial system *perpetrates systemic fraud* such as runaway money printing, regulatory capture, trading systems with asymmetric information advantages, and predatory lending and fees. The financial system is also *debt-based*, which historically has shown to always fail catastrophically.
Bitcoin solves all of those problems.
This statement in the article cannot be understated: “In many ways, trusting technology is harder than trusting people. Would you rather trust a human legal system or the details of some computer code you don’t have the expertise to audit?”
Very very few people truly understand how blockchain works sufficiently enough to be able to reliably audit and assess a blockchain system for flaws and insecurities.
lots of good points and Schneier is someone i actually follow with attention in the world.of security. Yet, I think this is excessive. There are good cases for blockchains but I also agree some 99% of all projects out there are either hype or miss the point.
That's kind of silly, since you know lots of websites don't replace physical locations. Such as reddit. So maybe you mean to say that cryptocurrencies aren't meant to be used instead of regular currencies? If so, your comment could stand to elaborate on that rather than assuming people know what you think cryptocurrencies *are* for.
While I don't see it as being silly at all. I think should have said, "physical services" now that I read that back as opposed to physical locations. My point was, many people also thought the internet and subsequent .com explosion was pointless and ineffective in truly disrupting systems and services in the early days. This was due to the fact it was so new and buggy, slow and clunky in its execution. Look at it now 30 years later... Cryptocurrencies and other blockchain based tokenization of systems and services are now where the Internet was in its early days. Still way too early to make a statement that they are useless. In fact Bitcoin already proved that they are not useless. It has been functioning without failure for the last 10 years as a censorship resistant P2P transfer of value and store of value. I believe the next 10 years will show major growth in use of cyptocurrencies, blockchain based tokens and surrounding ecosystems. It just needs time to grow and advance like any other new disruptive technology would.
Honestly, cryptocurrencies are useless. They're only used by speculators looking for quick riches, people who don't like government backed currencies, and criminals who want a black-market way to exchange money.
They're useless.....except for their utility in these 3 huge markets:
Degenerate Gamblers -> Pay $500B+ every year to traditional casinos
Gold bugs who don't like government backed currencies -> Pay $30B+ every year to gold miners
i trust fixed emission promise of bitcoin. at least i trust it more than i trust people who manage central banks and forcing everyone to play the pick your stock portfolio casino. and yes i can review code and run it on offline machine. just my opinion.
I think the title of the post isn't nearly as good as the title of the article itself.
About the only things I agree with in the article itself are that a) private blockchains don't make sense b) many blockchain companies don't actually need blockchains and just use them for the hype, and c) you still need to trust your wallet software
But pretty much everything else in here seems to either target the ecosystem around the blockchain rather than the blockchain itself (losing money when an online exchange is hacked) or have some strange definition of "trust". Yes, I trust a system where I lose all my money if I lose my private key or my computer is hacked. I trust it because I KNOW that's what's going to happen. Cash really isn't any different, I don't trust cash any less just because I would lose my money if my wallet was lost or stolen.
if you lose your 'keys' , eg credit card, you can walk into your bank and show your face and other ID and they will replace them. there is no such safety valve in a bankless system .
putting your identity trust in an organisation that is not as tightly regulated as a bank will always be a weakness
The thing to understand here is that your keys are not like your credit card, they're not even like your debit card. Your keys hold your equivalent of cash. If you lose your cash, you cannot walk into anywhere and have someone replace it, it's just gone.
> if you lose your cash .. it's just gone.
exactly my point. maybe easier to understand if i replaced 'credit card' with 'debit card'
the latter is cash, but it is protected by a form of 'key' - the card, plus the fact that you can tell the bank to wipe the key and reissue. and the bank also has some extra safety built in to prevent excessive or suspicious withdrawals
that's a more secure key than crypto keys.
and i am sure there are organizations that emulate that level of safety in the crypto world .. the difference being one is a bank, and the other is likely no more than a one-man show operating out of his parent's garage.
At a very high level, I think that makes sense.
But in practice there are a lot of actors and factors at play.
* There are banks
* You assume the bank is in a stable country that ensures it's integrity
* There are card networks
* You can't pay your peers (only merchants)
* You assume business is good enough that those merchants are willing to eat the credit card processing fees AND repay fraudulent transactions
That's a whole economy at play. Crypto currency is a much simpler thing, closer to cash. But there's no reason an economy can't grow around it, and that one man show in the basement can't grow into a financial institution.
Why should one be "forced" to do that? Risk transfer is common and perfectly acceptable. In the case of banking, this risk is even insured by the government (up to 250K in the US IIRC), which make this even better for 99% of the population.
It's a common security mind set everyone should have. It's easy to get comfortable but that's how centralized companies take advantage. Banks are for sure tied to the governments but that's also not necessarily a good thing. This video is an example of more of the 'behind the scenes'. https://www.youtube.com/watch?v=iFDe5kUUyT0 title is a bit excessive but getting through it may suggest otherwise. I'd be genuinely curious to know if it has any impact on the way you see it. It seems to be all factual to me
>It's a common security mind set everyone should have.
>It's easy to get comfortable but that's how centralized companies take advantage.
But this is true for everything. I trust a third party to fix my car, give me the right medicine, build bridges. Risk transfer is super, super common.
>Banks are for sure tied to the governments but that's also not necessarily a good thing.
Well, given how regulated they are (in fact, probably not enough) and how important this regulation is, I would say it's certainly not a *bad* thing. Look at all the cryptocurrencies exchanges and their lack or regulation.
I can't watch youtube videos, sorry. What does it says?
Yeah which is pretty ironic. You have the fullest protection you can possibly have but as soon as you buy that service you lose all of it. It's very easy to store a private key. You can lose your wallets but can always recover them with the private key.
>It's very easy to store a private key. You can lose your wallets but can always recover them with the private key.
If you lose your private key, you are absolutely screwed with nothing to fix your situation *even in theory*. Managing your private key is a bad idea.
> Cash really isn't any different, I don't trust cash any less just because I would lose my money if my wallet was lost or stolen.
FDIC, NCUA, and the full faith and credit of the United States Government. If the Founder of Vanguard dies, the money I kept at Fidelity does not die with him.
OK, you're doing the same thing though.
None of those things are going to give me my money back if I get robbed or lose my wallet.
And that one time an exchange founder died while holding the only keys to the exchange was an extraordinarily bad operational practice of a business, but does not in any way imply an issue with every online wallet and exchange, or with blockchain technology.
> Cash really isn't any different, I don't trust cash any less just because I would lose my money if my wallet was lost or stolen.
... which is why most people who have money limit how much physical cash they hold at any one time, to a very small amount. That's specifically because we don't trust cash in that way, as much as we trust money in the bank. Cryptocurrencies have that same problem, as you seem to acknowledge, yet people who like cryptocurrencies seem to keep trying to pretend that's not the case, or present it without acknowledging that problem (and many others). That's actually one of the huge weaknesses of cryptocurrency - while some of the flaws it has are shared with other systems, those others are more straightforward and well understood, while cryptocurrencies confuse people and cause them to make much worse decisions. Like the equivalent of walking around with much more cash than you'd feel comfortable with.
I what I'm trying to get at is that it's a bit apples to oranges. Saying that
> There's No Good Reason to Trust Blockchain Technology
based on the argument that some of the companies and ecosystem around the technology are not deserving of trust is like saying you can't trust cash because the banks can collapse.
Now I think the interesting thing with that analogy is that cryptocurrency as a currency is arguably MORE trustworthy than cash. Cash can be forged relatively easily, is easier to steal or lose, and harder to store and transport. So we turn to other systems like banks and credit cards (I reject the assertion that those are straightforward and well understood btw) to solve those issues (but also to make more money on interest and credit card incentives).
Cryptocurrencies on the other hand are extremely hard to forge and extremely easy to store and transport, and if external systems have issues today, that doesn't mean they can't grow to be just as mature as systems built around cash.
I'm not saying blockchain/bitcoin is perfect, but even Bruce talks about his four different "trust architectures" and gives an example how they apply to bank/financial systems. But he lumps blockchains and exchanges into one big singe point of trust system, and ignores the possibility that an ecosystem involving bitcoin could emerge where those architectures are all present.
I would argue that if you took any single component of a classic system, you could make at least as strong of an argument that it isn't as deserving of your trust as a blockchain is.
Submission statement: A long, clearly written argument from security expert Bruce Schneier that blockchain doesn't eliminate the need for trust. It just shifts where we have to put trust. And given the problems we've seen with the technology, and the waste create with mining, right now there are few situations where they are beneficial.
Bitcoin is important because nobody can take it away from you and nobody can make any more of it.
Please compare and contrast with all previous forms of money.
But here we are being told that bitcoin is useless.
>Bitcoin is important because nobody can take it away from you
People lose cryptocurrencies all the time, because they got hacked, lost their hardware wallets, or plenty of other reasons. So the statement is false.
>and nobody can make any more of it.
Which is only a good thing for people with poor economic education or libertarians.
A court order can't seize your bitcoin. You obviously know enough about bitcoin to understand that, so let's not get sidetracked by the obvious fact that you can still lose it through negligence or coercion. Not the point.
We all understand that economic orthodoxy puts the ideal inflation rate at 1 or 2 percentage. Whether or not that is a good idea is not important to this discussion. What I have a problem with is central banks and governments intentionally running inflation at extraordinary levels.
>A court order can't seize your bitcoin. You obviously know enough about bitcoin to understand that,
Indeed, which is quite bad. I want court orders to seize wealth, this is a good feature.
>so let's not get sidetracked by the obvious fact that you can still lose it through negligence or coercion. Not the point.
Why? Losing your money is losing your money. If you handle your crytocurrencies by yourself, without going through a third party, you face a huge, catastrophic risk that you wouldn't face with a traditionnal bank. Something as banal and common as a hardware failure could mean you losing all your wealth, with no chance of getting anything back *even in theory*. This is quite significant.
>We all understand that economic orthodoxy puts the ideal inflation rate at 1 or 2 percentage. Whether or not that is a good idea is not important to this discussion.
Wether bitcoins implement economic orthodoxy or not is not important for a discussion on bitcoin? I would say that it is of upmost importance. Would you trust a plane designed around weird aerodynamic ideas outside engineering orthodoxy?
>What I have a problem with is central banks and governments intentionally running inflation at extraordinary levels.
Economists have a problem with this too. So welcome to the club.
Apologies for only being able to respond to one part of your post. I'm running out of time.
> Wether bitcoins implement economic orthodoxy or not is not important for a discussion on bitcoin?
With this rhetorical question, I'm not sure you understand what bitcoin is. Bitcoin was created in the search for a decentralized method of value transfer. The monetary unit, being necessary to the design of bitcoin, came second. You can't simply add a 1% inflation rate to a decentralized money. How on Earth would that work? I suppose you could give miners the right to inflate the money supply by one percent forever, but that does nothing to take into account the price levels of goods and services
Are you blaming satoshi for not discovering a decentralized CPI while simultaneously inventing the world's first decentralized money?
Seriously, if you have any ideas about how for to achieve this, there will great riches and accolades awaiting you.
> Bitcoin was created in the search for a decentralized method of value transfer. The monetary unit, being necessary to the design of bitcoin, came second. You can't simply add a 1% inflation rate to a decentralized money. How on Earth would that work? I suppose you could give miners the right to inflate the money supply by one percent forever, but that does nothing to take into account the price levels of goods and services
I don't know how it could be implemented. But then, I'm not the one claiming that bitcoin is an interesting alternative to fiat.
I was just laughing at a Bitcoin proponent declaring that someone else doesn't understand money. This follow-up comment is so on-the-nose in that regard it's almost self-parody.
There's a reason they're mocked as Dunning-Krugerrands.
Yes we all know from econ 101 that the most important properties of money are that it can be taken from you straight out of your bank account and it's value is determined by a small board of technocrats. /s
>Yes we all know from econ 101 that the most important properties of money are that it can be taken from you straight out of your bank account
It's not "the most import property” but it’s a damn nice one. The ability for governments to impose taxation efficiently and easily is quite important.
>and it's value is determined by a small board of technocrats.
Central banks don’t determine currency value, they manage interest rates which influence the currency supply, which will then have an impact on its value.
I've been called a self-parody in this thread, but what should I make of this. Ease of confiscation is not a desirable property of money for anyone who has ever possessed money.
You're right. A central bank does not determine the value of a currency because there is a limit to how valuable they can make it. They are, however, able to make it as worthless as they want.
You are describing only one tool that central banks can use to attempt to control their currency's value. The mechanisms they use are only a matter of law and tradition and depend on which central bank you are talking about.
> I've been called a self-parody in this thread, but what should I make of this. Ease of confiscation is not a desirable property of money for anyone who has ever possessed money.
Oh boy. If you have a very narrow view of the problem I guess this would make sense. But it would be impossible for modern states to finance themselves without an ability to raise and enforce taxes. Soooo…
By far, the people who would benefit the most from government not being to do this anymore would be the rich. Why would we pursue economic model or technology favoring the rich again?
> You're right. A central bank does not determine the value of a currency because there is a limit to how valuable they can make it. They are, however, able to make it as worthless as they want.
Still better than fixed, uncontrolled money supply.
> You are describing only one tool that central banks can use to attempt to control their currency's value. The mechanisms they use are only a matter of law and tradition and depend on which central bank you are talking about.
> Still better than fixed, uncontrolled money supply.
The misery experienced by a single nation undergoing hyperinflation would outweigh, I would think, any of the slightly suboptimal effects of having a fixed money supply.
> Honestly, cryptocurrencies are useless. They're only used by speculators looking for quick riches, people who don't like government-backed currencies, and criminals who want a black-market way to exchange money
He says it's useless and then goes on to give three good uses.
He has an expert understanding of blockchain tech but apparently no understanding of the implications of what a new monetary regime outside the control of any government could mean.
Cryptocurrencies "new monetary regime" is just a rehash of long discredited libertarians ideas rediscovered today by a new generation, but made more palpable because of the technology twists. Schneier isn't an economist, he is a information security expert, and a very well known one. He doesn't give a shit about libertarian ideas. His analysis is technical in nature. Compared to the wide claims the blockchain industry have made in the last few years, I would say that yea, the "technology" is pretty useless aside from some edge cases that aren't that interesting.
I just went back to re-read the article and found a glaring clue into his misunderstanding of Bitcoin in the first paragraph:
> Yes, bitcoin eliminates certain trusted intermediaries that are inherent in other payment systems like credit cards.
He should be thinking less about credit card companies and more about central banks and totalitarian governments.
Edit: he even uses the term "payment system", completely ignoring the fact that bitcoin has the properties that make it resemble money. Imagine getting paid "ten visas" or "twenty PayPals".
Schneier use the information system definition of "trust" and "trust relationship". It is a different concept from the colloquial use of the term in real life. When people say that "they don't trust banks" and "they don't trust governments", they refer to the fact that banks and governments are accused of doing bad things in the world, most of the time on the macro level. This has little to do with information systems. In practice, billions trusts banking all the time, every day, every time a transaction is done. Very very few people will stop using their banking application because "bankers are responsible for the 2008 crash". Bitcoins creators mixed these two concepts when promoting their technology, either because they knew it would make the "technology" inherently attractive for techies, but more probably because they simply didn't know better.
I got lost there, sorry.
Bitcoin was invented as a way for to send value over the internet without having a third party intermediate the transaction.
In the process, it created a new form of money whose supply cannot be manipulated for better or worse. It's not a question of whether inflationary money is better than deflationary money. It's a question of whether a decentralized, uncontrollable money can compete with a money that can be issued at will and at zero cost by a small group of powerful people.
Economists might say that the controllable money is better, but what happens if people actually holding the money decide they would rather have bitcoin instead? Even if bitcoin is "worse" according to some metrics or theories, that would not be much comfort to people holding their rapidly inflating national currency.
>Bitcoin was invented as a way for to send value over the internet without having a third party intermediate the transaction.
Which is interesting only if all other common characteristics people associate with money remain the same. Which is not the case. So it's not interesting. Most people are better to use a traditional way of transmitting money using a third party, for a variety of reasons.
>In the process, it created a new form of money whose supply cannot be manipulated for better or worse. It's not a question of whether inflationary money is better than deflationary money. It's a question of whether a decentralized, uncontrollable money can compete with a money that can be issued at will and at zero cost by a small group of powerful people.
Decades/centuries of economic theory and development have shown that "uncontrolled money supply" are a bad things.
>Economists might say that the controllable money is better, but what happens if people actually holding the money decide they would rather have bitcoin instead?
They can do whatever they want. People may want to exchange peanuts for all I care.
>Even if bitcoin is "worse" according to some metrics or theories, that would not be much comfort to people holding their rapidly inflating national currency.
Nobody holds national currency, or at least should. Currencies are deflating by design, because this encourage investment. So this is a false problem. Deflating currencies benefit the loaners at the expense of the borrowers (i.e. it benefits the rich at the expense of the poor), which is exactly the opposite of what we want.
I disagree that bitcoin as money is a rehash of old ideas ( I suppose you are talking about the gold standard?). It is totally new, radically different, and deserves more than being lumped in with all the half-baked blockchain hokum.
This article spends a lot of words to justifiably take down "blockchain tech", but then glibly dismisses bitcoin without even making an argument.
>I disagree that bitcoin as money is a rehash of old ideas ( I suppose you are talking about the gold standard?). It is totally new, radically different, and deserves more than being lumped in with all the half-baked blockchain hokum.
Bitcoin creators believed (among other things) that money should be deflationary, and that their invention would somehow fight the banking systems and the money creation from fractional reserve banking. Bitcoins make sense only if these assumptions make sense. Unfortunately they don't. Deflationary money sucks, and nothing would stop banks from lending bitcoins just like they lend money today. Unfortunately, many bitcoins users don't understand the flimsy ground on which the "new monetary regime" is build.
Bitcoins is an invention made by economically-uneducated techies that became popular because people confuse technology and complexity with credibility, and will believe anything that sounds "anti-bank". The emperor has been naked for a decade, and now only the last true believers are left to hold the bag.