Not blockchain
Just over 10 years ago, on January 3, 2009, the genesis block of Bitcoin was created. Thus began the blockchain story, promising to turn the world around, create a new economy, make existing banks relics of the past.
10 years is a long enough period to sum up, talk about why nothing like this has happened and most likely will not happen.
If we abstract a little from technology, then blockchain is a distributed register of records (ledger), something like a ledger, which is led not by one person, but by a multitude. Many independent agents have agreed on common rules for record keeping: each one maintains his own records, the records are compared, and the agents somehow determine which particular sequence of records to consider to be correct.
Obviously, if many agents can agree on record keeping, then exactly the same record can be kept by one agent, centrally, without any agreement. Before the creation of the blockchain, everyone kept the registries centrally.
It is easy to show that the centralized registry is easier to maintain. If the price of a centralized transaction is one, then the same transaction will cost
It follows that a distributed transaction is always, without exception, more expensive than a centralized one:
This is the fundamental reason that the blockchain has not found wide application.
Today there are three categories of use of the blockchain:
The contract is needed in order in case of problems to force the parties to the transaction to fulfill their obligations. Ordinary contracts are protected by law: the parties may be forced by the entire force of the state. In other words, if someone refuses to fulfill the conditions, he risks that people knock on his door with weapons and physical force will deprive the violator of property, freedom or life.
Smart contracts provide additional opportunities only if the parties exchange values that are fully represented in the blockchain, and even in this case it is only very limited. As soon as the value is derived from the blockchain, the smart contract loses the ability to force the party to fulfill its obligations. Moreover, even if the values remain on the blockchain, the possibility of rollback of transactions as a measure of coercion can lead to a catastrophic cascade of kickbacks.
For example, Vasya signed a smart contract with Kolya, under which Vasya loaned Kolya 1 ETH for a month at 10%. At the end of the month, the smart contract must be written off from Kolina wallet in Vasin 1.1 ETH. But bad luck, at the end of the month Colin's wallet did not have 1.1 ETH. There was nothing at all there, since Kolya had spent all the money on a cool space station in Eve Online and had already ruined it. What will Vasya do with his smart contract?
In practice, smart contracts are only applicable when selling tokens during an ICO. Tokens are worthless for the selling party (their incremental price is exactly zero). The seller does not bear any risk on the transaction, even in the case of its rollback because he exchanges the goods with zero value for goods with non-zero. The obligations of the seller are met at the time of delivery of tokens that have no value. Thus, the risk of non-delivery of tokens is extremely low and it is only for this reason that contracts work there.
And no. Fiduciary money (fiat money or paper money) has one fundamental difference from cryptocurrency: they have end users. Each state issuing its money collects taxes from citizens. Taxes are almost everywhere denominated in the state currency. Even if the country uses foreign currency for transactions on a large scale, taxes are still nominated in their own currency, which means that it should be bought at least to pay taxes. This creates the final demand for state currency, which means that its value cannot fall to zero while the state collects taxes, even if otherwise it is completely excluded from circulation.
As for dollars, in the USA about a quarter of GDP is collected as taxes. A quarter of the working time of every American is forcibly spent on state and dollar support. None of these have any cryptocurrencies.
The number of fiduciary currencies is limited by the number of states on Earth. The number of cryptocurrencies is not limited to anything. Each inhabitant of the earth can have his own personal cryptocurrency. Each bacterium that lives in the intestines of every inhabitant of the Earth can have its own cryptocurrency. Every atom that makes up the Earth can have its own cryptocurrency. The supply of currencies is not limited in principle. And demand is limited by the volume of economic activity performed using cryptocurrencies, which, in the long term, comes down to category 1 - illegal transactions. Unlimited supply - limited demand.
Forgot your PIN from your bank client? Do not worry, they called or went to the bank, changed the pincode. Forgot your key to your crypto wallet? No problem. They called ... They didn't call anywhere. The money is gone.
Signed a contract, writing on a piece of paper: “Kolya owes Vasya 100 thousand rubles”. Kohl did not return, Vasya went to the court and won, received a writ of execution and took away his car from Kolya. Vasya and Kolya have signed a smart contract for 1 ETH, and then look above. Vasiny money is gone.
“How much will it cost you to transfer 2 million rubles from Russia to Uganda? But if you translate in bitcoins, then it will cost only $ 10 (or so) ”. But no. You will pay $ 10 for transferring 10 BTC from one purse to another, but if you want to spend it, you will need to convert BTC to normal money, and then you will pay heavily more than a money transfer from country to country, even through WU.
“ Lightning network solves all problems.” Yes, it will solve some problems, but you will not like the solution. Remember the formula
In the future, the cryptocurrency will remain, but will be used almost exclusively for making illegal transactions, that is, category 1. Bitcoin will most likely not fall in price to zero, but the number of transactions will gradually decrease, especially if China starts to have economic problems and the demand for capital outflow falls.
Perhaps someone will find a truly distributed use of the blockchain. For example, the cryptocurrency TRON Foundation, which recently acquired the company BitTorrent Inc (actually called Rainberry, Inc.), hopes to cross cryptocurrency transactions with the Bittorrent protocol. Both that, and another is distributed, accordingly, maybe something interesting from this will turn out. However, it is more likely that everything will degenerate into a cryptocurrency fee for pirated content, i.e. category 1 again.
10 years is a long enough period to sum up, talk about why nothing like this has happened and most likely will not happen.
If we abstract a little from technology, then blockchain is a distributed register of records (ledger), something like a ledger, which is led not by one person, but by a multitude. Many independent agents have agreed on common rules for record keeping: each one maintains his own records, the records are compared, and the agents somehow determine which particular sequence of records to consider to be correct.
Obviously, if many agents can agree on record keeping, then exactly the same record can be kept by one agent, centrally, without any agreement. Before the creation of the blockchain, everyone kept the registries centrally.
It is easy to show that the centralized registry is easier to maintain. If the price of a centralized transaction is one, then the same transaction will cost
N + X(N)if it is ledNagents: each agent repeats a transaction at the cost of one = N, plus agents need to agree among themselves =some positive function X()from N. It follows that a distributed transaction is always, without exception, more expensive than a centralized one:
N + X(N) > 1This is the fundamental reason that the blockchain has not found wide application.
For what?
Today there are three categories of use of the blockchain:
- Making illegal transactions.
If someone needs to make an illegal transaction, then by definition, the law does not protect it. Moreover, there is a high probability that the law will pursue the parties to the transaction. Making illegal transactions with a centralized intermediary is very dangerous and expensive, since the intermediary is subject to significant risk and requires a considerable fee. Making such transactions with the help of cryptocurrency conveniently solves the problem of too expensive / impossible intermediary. Despite the fact that a distributed transaction, other things being equal, is more expensive than a centralized one, it is still better than the risk of going to prison.
All sorts of Silk Roads, money laundering, circumvention of currency regulation fall into this category. In particular, in this category is the most extensive use of cryptocurrency today: withdrawing money from China. The Chinese authorities have imposed very strict restrictions on the withdrawal of capital from the country. In order to circumvent these restrictions, the Chinese buy mining systems and electricity in the country for yuan, mine cryptocurrency, sell it abroad for dollars. - Legal transactions are an inefficient / illegal business.
Blockchain is more expensive than a centralized transaction. And, nevertheless, they often try to use it, despite its inefficiency. This is because the inefficiency is compensated in a different way.
For example, ICO . The business model promoted by ICO companies is generally not viable. Even in those rare cases when it works, exactly the same can be done more efficiently without a blockchain. However, if, instead of I C O, the company would try to reach the traditional I P O, The IPO would either fail altogether, or could get a dozen times less capital in exchange for a significant portion of the company's shares. That is, unlike IPO, ICO brought much more money and the owners did not lose control over the company. Why is that? Firstly, the crowd effect, because “blockchain is the future, it will turn everything around.” Secondly, the requirements of the securities market regulator are bypassed: the demand is increasing due to unqualified investors. Thirdly, criminal money is easily attracted for their laundering.
And yes, your favorite ICO is in this category, personally substitute its name here. The vast majority of ICOs differ little from financial pyramids.
Attempts by companies like IBM, Maersk, Sberbank, etc. are in this category. work on the blockchain. “Blockchain is the future. We have to be at the forefront of its development. ” In English, this behavior is called “fear of missing out” or FMO - fear of lagging behind. There is no benefit from these developments at all. Anything that can be done with a blockchain can be done more efficiently without it. “But how,” you ask. “These are big respected companies, probably they understand where they spend their money?” But no. In a large company, there is a big distance between decision makers and people who understand what is happening. The former do not necessarily listen to the latter. In addition, performers may be happy to receive money and do what they are told, even if they understand that they are engaged in nonsense. The management can understand that the blockchain is not needed,Pascal's Bet ). - Sell picks and shovels
In English selling picks and shovels. During the California gold rush, the greatest money was earned not by the miners, but by the shovel salesmen. The story was repeated in the days of the blockchain - cryptocurrency exchanges earn money (including “we were robbed by us, we are not guilty”), NVidia, vendors of mining equipment, etc. The business is quite healthy, except in cases of overt fraud, but derived from categories 1 and 2.
But what about smart contracts?
The contract is needed in order in case of problems to force the parties to the transaction to fulfill their obligations. Ordinary contracts are protected by law: the parties may be forced by the entire force of the state. In other words, if someone refuses to fulfill the conditions, he risks that people knock on his door with weapons and physical force will deprive the violator of property, freedom or life.
Smart contracts provide additional opportunities only if the parties exchange values that are fully represented in the blockchain, and even in this case it is only very limited. As soon as the value is derived from the blockchain, the smart contract loses the ability to force the party to fulfill its obligations. Moreover, even if the values remain on the blockchain, the possibility of rollback of transactions as a measure of coercion can lead to a catastrophic cascade of kickbacks.
For example, Vasya signed a smart contract with Kolya, under which Vasya loaned Kolya 1 ETH for a month at 10%. At the end of the month, the smart contract must be written off from Kolina wallet in Vasin 1.1 ETH. But bad luck, at the end of the month Colin's wallet did not have 1.1 ETH. There was nothing at all there, since Kolya had spent all the money on a cool space station in Eve Online and had already ruined it. What will Vasya do with his smart contract?
- He can go to a regular non-smart court, but then why a smart contract?
- It was possible, of course, to put money in an escrow, but why then would Kolya have a loan from Vasya if he cannot use the money?
- Undo a deal if to return Vasya his 1.1 ETH? Why should the space station seller return the money if he fulfilled his obligations in full?
- Suppose even that Kohl spent 1 ETH completely inside the blockchain, but the recipients of kolyn money also made transactions. Vasin 1 ETH participated in 1 million transactions per month. Do you offer to roll them all away?
In practice, smart contracts are only applicable when selling tokens during an ICO. Tokens are worthless for the selling party (their incremental price is exactly zero). The seller does not bear any risk on the transaction, even in the case of its rollback because he exchanges the goods with zero value for goods with non-zero. The obligations of the seller are met at the time of delivery of tokens that have no value. Thus, the risk of non-delivery of tokens is extremely low and it is only for this reason that contracts work there.
What are your dollars? Papers!
And no. Fiduciary money (fiat money or paper money) has one fundamental difference from cryptocurrency: they have end users. Each state issuing its money collects taxes from citizens. Taxes are almost everywhere denominated in the state currency. Even if the country uses foreign currency for transactions on a large scale, taxes are still nominated in their own currency, which means that it should be bought at least to pay taxes. This creates the final demand for state currency, which means that its value cannot fall to zero while the state collects taxes, even if otherwise it is completely excluded from circulation.
As for dollars, in the USA about a quarter of GDP is collected as taxes. A quarter of the working time of every American is forcibly spent on state and dollar support. None of these have any cryptocurrencies.
The number of fiduciary currencies is limited by the number of states on Earth. The number of cryptocurrencies is not limited to anything. Each inhabitant of the earth can have his own personal cryptocurrency. Each bacterium that lives in the intestines of every inhabitant of the Earth can have its own cryptocurrency. Every atom that makes up the Earth can have its own cryptocurrency. The supply of currencies is not limited in principle. And demand is limited by the volume of economic activity performed using cryptocurrencies, which, in the long term, comes down to category 1 - illegal transactions. Unlimited supply - limited demand.
Other stuff
Forgot your PIN from your bank client? Do not worry, they called or went to the bank, changed the pincode. Forgot your key to your crypto wallet? No problem. They called ... They didn't call anywhere. The money is gone.
Signed a contract, writing on a piece of paper: “Kolya owes Vasya 100 thousand rubles”. Kohl did not return, Vasya went to the court and won, received a writ of execution and took away his car from Kolya. Vasya and Kolya have signed a smart contract for 1 ETH, and then look above. Vasiny money is gone.
“How much will it cost you to transfer 2 million rubles from Russia to Uganda? But if you translate in bitcoins, then it will cost only $ 10 (or so) ”. But no. You will pay $ 10 for transferring 10 BTC from one purse to another, but if you want to spend it, you will need to convert BTC to normal money, and then you will pay heavily more than a money transfer from country to country, even through WU.
“ Lightning network solves all problems.” Yes, it will solve some problems, but you will not like the solution. Remember the formula
N + X(N) > 1? So Lightning Network solves problems by reducingN. That is, it reduces the transaction price by reducing the number of agents, making the system less distributed. Then it may be worthwhile to act radically and reduce them to the minimum possible value - one?Что ждать от блокчейна в будущем?
In the future, the cryptocurrency will remain, but will be used almost exclusively for making illegal transactions, that is, category 1. Bitcoin will most likely not fall in price to zero, but the number of transactions will gradually decrease, especially if China starts to have economic problems and the demand for capital outflow falls.
Perhaps someone will find a truly distributed use of the blockchain. For example, the cryptocurrency TRON Foundation, which recently acquired the company BitTorrent Inc (actually called Rainberry, Inc.), hopes to cross cryptocurrency transactions with the Bittorrent protocol. Both that, and another is distributed, accordingly, maybe something interesting from this will turn out. However, it is more likely that everything will degenerate into a cryptocurrency fee for pirated content, i.e. category 1 again.