More or less decentralized? For Jimmy Song, there’s no in between.
An author and partner at venture firm Blockchain Capital, Song made that point repeatedly in a debatewith IBM engineer and Hyperledger Fabric co-lead Chris Ferris at SXSW Thursday, where he told the crowd at the Hilton Austin in no uncertain terms: “You either have control over your stuff or you don’t. It’s a zero or a one.”
The debate pitted permissioned blockchains – the private networks being pitched to big business – against permissionless blockchains – the technology undergirding bitcoin and other open-source networks. Billed as a “deathmatch” on the festival agenda, Song was determined to give the audience what they came for.
“Why do you need permission if it’s supposed to be decentralized?” he asked. “There has to be an entity that’s giving you permission, and that’s by definition centralized.”
While Song took the binary view of decentralization, Ferris argued that blockchains can exist on a spectrum. Sure, permissioned blockchains are less decentralized, Ferris said, but their added trust mechanisms mitigate perceived risk.
“Permissionless blockchains do not necessarily solve the problem of trust,” he added.
Song wasn’t having it. To illustrate the degree to which he was willing to extend his point, Song used the example of the ethereum fork following the infamous hack of The DAO, when the project’s developers and users agreed to introduce a code update aimed at rolling back the stolen funds.
“I think Ethereum is a permissioned blockchain,” Song said, adding:
“When Vitalik says, ‘These particular transactions aren’t particularly good for the ecosystem so we’re going to roll them back,’ that, to me, is a permissioned blockchain.”
On stage and in conversation with CoinDesk beforehand, Song argued that every application of blockchain to anything but bitcoin is a waste. “Blockchain is really useful for bitcoin,” he said during the debate. “Everything else has a central point of failure.”
Prior to the debate, Ferris told CoinDesk that he hoped he could make the point that there’s just different use cases for different kinds of blockchains, and those use cases should determine what level of decentralization should be called for.
“Certainly part of the conversation will be that bitcoin doesn’t solve the same problems we are trying to solve in an enterprise context,” Ferris told CoinDesk.
IBM, he explained, is primarily building products that allow large enterprise partners to share information rather than exchange money. For example, today Big Blue announced a deal to record information about businesses’ legal status across France. Trying to find some common ground, Ferris argued there’s space for the approaches of both sides.
“I think there are a ton of use cases where permissioned blockchains make a ton of sense,” Ferris said. “I also think there’s a ton of use cases where a permissioned blockchain doesn’t make any sense.”
But Song didn’t come to accept concessions. He said all the blockchains besides bitcoin’s might as well just run on a faster, cheaper centralized database.
“A permissioned blockchain is an oxymoron because it’s a centralized database that’s masquerading as something decentralized,” Song said.
The exchange case
The QuadrigaCX exchange debacle captured the difference between the two positions better than any other part of the debate.
The Canadian exchange’s owner died and lost $190 million worth of cryptocurrency when it turned out he was the only person with access to the system’s private keys. Both Song and Ferris saw a disaster and yet came to very different conclusions about it.
Ferris brought up Quadriga late in the debate by first saying, “The whole point of permissioned blockchain, enterprise blockchain, is reducing risk,” he said.
It’s a system where every major user of the protocol knows everyone else. “We can put a governance model over that and legal framework around that says: ‘If you do something to disrupt the system, we’ll sue the pants off you and you’ll regret that,’” Ferris said.
Song saw that as precisely the problem. If it’s possible for a governing body to step in and punish the operators of a platform, then to Song that defeats the fundamental point of decentralization.
Ferris saw Quadriga as an illustration of the fundamental user experience problem of permissionless systems because it illuminates dramatically how bitcoin doesn’t have a fallback if private keys are lost.
But Song saw that as its virtue:
“You are either self-sovereign or you or are not.”
Bitcoin does have its powerful authorities, though, a point that was argued by the debate’s mediating presence, Angela Walch, a professor at St. Mary’s University School of Law.
“I am struggling with how bitcoin doesn’t have similar centralization of power with the core developers,” she said.
Walch used the example of the inflation bug disclosed in September 2018, in which developers originally minimized its true implications prior to pushing the fix.
“They list a total of 11 people who knew about this. Those people made a decision about how they were going to fix this,” Walch said. “They told a few select miners at the beginning. That miner was given privileged knowledge.”
She used the point to argue that bitcoin’s core developers have outsize power in the network. Users had to trust, for example, that none of those leaders who knew wouldn’t short bitcoin in advance of the ultimate disclosure. “I’m arguing those people were exercising centralized power,” she said.
Song countered by saying that Bitcoin Core is not the only bitcoin software and it’s open source, run under an MIT license that warns everyone to use it at their own risk. If something is wrong with the bitcoin software, users should be able to find that and report it.
“If the goal is to get mass adoption, for hyper-bitcoinization,” Walch said, “Ninety percent of the people are not going to understand how the code works, so just saying it’s open source is not an out.”
Ferris took this point further and pointed out that there is a very small number of people who are maintainers of bitcoin code, alleging that if something happened to all of them it would yield chaos.
Ultimately, the debate circled back at that point to another round on sovereignty. Should users be made collectively responsible for making sure core maintainers aren’t malicious or should they use the state as a fallback?
“You are speaking about regulation and governance frameworks as if it’s a bad thing,” Ferris began.
Song cut him off, saying, “A lot of the time it is.”
Waves Founder Sells Blockchain Startup to Russian Financial Consultant
A startup founded by the Waves platform team, Vostok, has been sold to one of the project’s earliest investors.
According to a report by Gazeta.ru, Waves CEO Alexander Ivanov “sold his stake” in the data management and smart city oriented project to Mark Garber of the financial consultancy GHP Group.
The Waves platform has developed blockchain solutions through partnering with some of Russia’s largest private and state-owned enterprises, as well as global firms, for institutional, industrial, and military use.
Vostok, in particular, aligned with the Russian state-owned conglomerate Rostec in 2018 to securely manage data for the firm’s 700 industrial entities. Additionally, the startup was instrumental in roadmapping the “digital economy” as part of the “Strategic Development Objectives of the Russian Federation up to 2024,” announced by President Vladimir Putin.
Ivanov told Gazeta:
“I would like to focus on the international development of the Waves Platform. The tasks of building a decentralized Internet of the new generation based on the blockchain (the so-called Web3), which we implement in Waves, require my one hundred percent concentration.”
Though details of the deal have not been disclosed, Garber plans to integrate Vostok’s digitalization solutions in GHP’s mining, production, and logistics projects.
Gazeta also reports that Garber holds a stake in the container transporting company Fesco and serves on the board of another trade logistics company, called TransContainer.
Vostok was formed in 2018. Its”Gorod N” project saw a partnership with Nizhny Novgorod region administrators to develop a civic voting and public budgeting solution, which reportedly enables citizens to vote on where tax dollars are spent.
Garber intends to keep the startup’s development team aboard, but will elect a new supervisory board. As part of their initiative to strike larger international deals, Waves will open a Berlin office.
Tether Stablecoin to Launch on 5th Blockchain
The popular and sometimes controversial stablecoin tether (USDT) is to launch on a fifth blockchain.
Announced by the (mostly) U.S. dollar-backed token’s issuer on its website, the news means traders will have a USD stablecoin option on omni, ethereum, tron, EOS and, soon, algorand.
“Extending Tether into the Algorand ecosystem is a fantastic opportunity for us to further contribute to blockchain interoperability and collaboration. … We are very excited about the potential this enables for other projects in the decentralised ecosystem and we eagerly await working closely with many of them in the future,” said Tether CTO Paolo Ardoino.
Tether is widely used by traders to move money in and out of cryptocurrencies like bitcoin without needing to exchange back into dollars with each trade. Crypto exchanges also use the token to transfer funds between each other to avoid having to move lots of bucks through not always cooperative banks.
Despite its widespread use in the crypto markets, the stablecoin has had its issues – including accidentally minting $5 billion USDT during a chain swap process last weekend.
Long a concern to users and regulators, Tether has never released a full accounting audit to prove its coin is backed by USD, as it claimed for years. Its lawyer recently acknowledged that, in fact, USDT was only about 74 percent backed by fiat equivalents as of April 30.
Tether’s relationship with its sister firm, crypto exchange Bitfinex, has also come under the spotlight, with claims the token has been used to prop up the price of bitcoin.
New York’s Attorney General’s office has further alleged that Bitfinex lost $850 million and subsequently used funds from Tether to secretly cover the shortfall, and said that Bitfinex had operated in the state without a license.
40-Strong Blockchain Insurance Group B3i Appoints CEO
Insurance industry blockchain group B3i, which is now building DLT solutions for some 40 member firms, has appointed John Carolin as chief executive officer.
Carolin, who joined B3i as chief financial officer in March 2018, had served as interim CEO since March of this year.
B3i began life back in October 2016 as a blockchain consortium and later became an independent company owned by 17 insurance and reinsurance industry big hitters like Allianz, Munich Re, Swiss Re, Tokio Marine, XL Catlin and Zurich.
The company added $16 million to its coffers back in March 2019, after suggestions it was trying to raise as much as $200 million, according to some reports.
Last month B3i, which aims to use distributed ledgers to streamline back-office processes and claims handling, held a hackathon to let industry members test its platform.
Speaking about the B3i hackathon, Carolin said:
“Our team of subject matter experts is highly motivated, especially following the very positive feedback received last month at our Hackathon to test the initial product.”
Last year, B3i decided to switch from Hyperledger Fabric to R3’s Corda platform. The move was followed soon after by another blockchain insurance consortium, RiskBlock, also moving to Corda.
“I look forward to leading the B3i team as we execute on a bold vision to enable better insurance through frictionless risk transfer,” Carolin added.