Although the crypto industry is showing strong adoption and development as we start 2019, there’s Four Horsemen of the Cryptocalypse who would rather watch blockchain bend the knee, or bend it to their will.
Apocalypse is a word which most crypto investors who have lived (or survived) through 2018 are familiar with. It isn’t a feeling as such, but if it were, it’s the one you might get when you look at your annual portfolio performance in Blockfolio.
In a year where we heard one of the worlds richest men, Warren Buffett, describe Bitcoin as “probably rat poison squared”, it’s safe to say there’s been more than a few detractors who believe cryptocurrencies are trading well above their true valuations.
Of course, blockchain technology is more than just cryptocurrency. That’s price talk, and we’re over that, right? Because we blessed blockchain believers have read from the good book, an immutable vision handed down in 2008 like commandments from an anonymous and omnipotent creator — set in code rather than stone. And if blockchain evangelists know one thing, it’s that code is law. It’s the foundation for the new paradigm of decentralized computing, finance, commerce and, well — allegedly almost everything.
I concede, unbounded optimism aside, that blockchain adoption is going to take some time. New ideas always have their critics. The Roman Empire, for example, took three centuries to stop feeding Christians to lions — so with a some luck we’re not going to have to wait that long (or get forced into an amphitheater to die for our blockchain evangelism for that matter).
But while we’re on the biblical, there’s some who are either eyeing blockchain as a close competitor, approaching it with caution, corrupting its core values, or whose disdain for blockchain is simply Goliath in scope. These Four Horsemen of the Cryptocalypse, if left unabated, could shape the future of the blockchain industry, and some of these riders would see blockchain left behind as an ancient relic, or simply torn down like the fabled Tower of Babel.
1. The White Horse of Conquest
“I looked, and there before me was a white horse! Its rider held a bow, and he was given a crown, and he rode out as a conqueror bent on conquest.”
This horseman isn’t concerned with death, famine, or waging a lengthy war against blockchain — just a quick conquest through healthy and fair competition. It’s not a person, either. It’s Hedera Hashgraph. Although sharing the same tenets as blockchain, at it’s core, Hashgraph is a fundamentally different approach to distributed ledger technology.
Hashgraph doesn’t use traditional methods to reach network consensus. Instead, Hashgraph uses a patented technology termed ‘Gossip about Gossip (GaG)’, and virtual voting. In simple terms, GaG is the communication between nodes on a distributed ledger. The nodes with the latest transaction information share their ‘gossip’ — everything the recipient nodes don’t already know — alongside two hashes which contain the last two nodes ‘talked to’. Instead of blocks, Hashgraph has ‘events’, a container for transactions, which are created in vast amounts and typically contain less transaction hashes than your average blockchain block, which results in faster time to reach consensus.
But Hashgraph aren’t disparaging about blockchain at all, quite the opposite in fact. Describing blockchain technology as a ‘capable older brother’ who brought distributed ledger technology to the public sphere, Hashgraph don’t pitch themselves against blockchain directly, describing those who do so unbeknownst to them as appealing to sensationalist media.
Nevertheless, they’ve made some pretty bold claims, some of which have come as a bitter blow to their blockchain brothers. Perhaps the main selling point of Hashgraph is it’s purported transaction speed, with the Hashgraph website claiming that the network can process hundreds of thousands of transactions per second (TPS). Secondly, Hashgraph claims a greater level of fairness than blockchain based ledgers, with free voting available to any participant of the network.
Of course, as you might have guessed from the choice of language above — these claims are as of yet unsubstantiated. Hedera Hashgraph is patented technology, meaning it’s code base isn’t open source, and it’s not currently undergone any significant independent audits.
For now, it seems Conquest has a long ride ahead of it.
2. The Red Horse of War
“Then another horse came out, a fiery red one. Its rider was given power to take peace from the earth and to make men slay each other. To him was given a large sword.”
Our next rider is less forgiving. Carnage and wanton destruction is all this harbinger of doom has to offer the blockchain industry. Aptly named Nouriel ‘Dr. Doom’ Roubini sits atop our red horse of war. Unlike Hashgraph, blockchain isn’t his big brother, just a big bother.
Staunch in his anti-blockchain conviction, Nouriel Roubini is the American economist most famous for predicting the 2008 financial crisis. Graduating from Harvard with a doctorate of international economics in 1988, Roubini has devoted much of his career to the study of emerging markets, as well as serving as an economic advisor to the White House under the Clinton administration.
In addition to calling out cryptocurrency as the “Mother and father of all scams and bubbles.”, Nouriel also has strong opinions on the usefulness of the underlying blockchain technology. Whilst Roubini’s most scathing criticism came during the 2018 boom n’ bust market, in 2019 Nouriel has leveled his sword at blockchain once more, calling the technology “no better than an Excel spreadsheet” during an expert panel in January.
In what was perhaps one of his most famous strikes at the heart of blockchain, Roubini gave expert testimony at a US Senate Committee, entitled “ Exploring the Cryptocurrency and Blockchain Ecosystem”. However_,_ Roubini offered less in the way of exploration, and more in the way of decimation, systematically picking apart blockchain technology. Describing how the crypto ‘bloodbath’ had been exposed during the latter half of 2018, Roubini went on to say that “blockchain is the most over-hyped — and least useful — technology in human history”. Ouch.
However, other ‘crypto-fanatics’, as Nouriel has taken to calling blockchain adherents, have taken a swipe at Roubini’s crypto-credentials. Vitalik Buterin, founder of Ethereum, tweeted that he predicts “a financial crisis sometime between now and 2021.”, in the hopes of becoming a ‘guru’ with financial powers of prediction. This was a skillfully aimed shot at Roubini, implying that his ability to identify bubbles is more crystal-ball, as opposed to on-the-ball.
I, for one, have at least one thing to thank Roubini for. It was he, in his address to the US Senate Committee, who coined the term ‘Crypto-Apocalypse’. But personally, I think Cryptocalypse rolls off the tongue much better.
3. The Black Horse of Famine
“I looked, and there before me was a black horse! Its rider was holding a pair of scales in his hand.”
Though the black horse and rider symbolizes famine, it’s often portrayed with scales of justice in hand — the balance between hunger and plenty, prosperity and plight. This horseman hands out a similar fate to blockchain and cryptocurreny, deciding who lives and thrives, and who starves and dies. The US Securities and Exchange Commission (SEC), is our black horse of famine. Whilst the SEC aren’t law makers, their opinion and guidance is a large determining factor for those who do.
It’s not the SEC’s rulings or restrictions which are starving the blockchain industry — it’s their lack of. Whilst there’s been no blanket ban on blockchain, or even on initial coin offerings (ICOs) as a result of SEC guidance, and although some members of the SEC have voiced their support for digital assets and cryptocurrencies; there hasn’t been any widespread approval or green light for them either.
There’s some key areas which the SEC are deliberating on. Chief among these are whether individual blockchain projects are sufficiently decentralized, the makings of security tokens, and crypto exchange-traded funds (ETFs).
Exchange traded funds, for crypto, are an investment vehicle in which Bitcoin or other cryptocurrencies are the underlying asset. Bitcoin ETFs have been described as the ‘Holy Grail’ of crypto adoption for institutional investors. However, despite some big names in finance wishing to establish a Bitcoin ETF, such as Fidelity, VanEck, Bitwise and the Winklevoss twins, the SEC has been slow to approve any applications— primarily due to custody concerns.
Another issue for blockchain based businesses is the regulatory uncertainty around ICOs. Some token offerings may be seen as representing an underlying asset rather than a utility token, which in turn means they are liable to the same laws and regulation which govern traditional securities. This inertia in regulation has caused some companies to postpone their ICO or look to other methods of funding, as they navigate through legal limbo.
However, the good news is that the SEC are listening to these concerns. In response, they have launched the Strategic Hub for Innovation and Financial Technology (FinHub), which throughout 2019 and beyond will feature a public forum dedicated to fintech and blockchain.
However, it remains to be seen whether regulatory hurdles will cause a blockchain famine, or pave the way for a for a prosperous decentralized future.
4. The Pale Horse of Death
“I looked and there before me was a pale horse! Its rider was named Death, and Hades was following close behind him. ”
The mythological figure of Death requires no introductions. But our pale rider does, because it’s fairly new, and it’s recently manifested in it’s first form — US bank-backed digital currencies. Ok, so it’s not a person, or even a single group for that matter. But that hasn’t stopped several news outlets and economists touting bank backed digital currencies as a game changer for the cryptocurrency and blockchain space.
Perhaps unsurprisingly, riding forth to support bank backed digital currencies, is our very own rider of war. Roubini believes that a currency issued by a central bank has the power to “destroy cryptocurrencies” and “close the door on crypto-scammers”; with central banked backed digital currencies displacing cryptocurrencies, as a more scalable, secure and cheap method of transacting — all without the need for blockchain whatsoever.
US investment banking giant, JP Morgan, have just announced this week that they will be launching their own cryptocurrency, the ‘JPM Coin’, to process payments between its institutional clients faster than ever before. Whilst this is, in one way, a fairly major use case for blockchain technology, it also flies in the face of everything the decentralized community stands for.
Though apparently, Roubini isn’t so hot on is JP Morgans new offering. A recent tweet by Dr. Doom remarked that “It is private not public, permissioned not permissionless, based on trusted authorities verifying transaction not trustless, centralized not decentralized. Calling it crypto is a joke.” That’s something we can both agree on. It seems the new JPM coin is an attempt for JP Morgan to break into the blockchain space, without observing, or disregarding, the key founding principles of blockchain.
Of course, adoption of central bank backed digital currencies is predicated on the notion that everyone is happy to transact through central banks, third-parties, or financial gatekeepers, which, as the entire past decade of the quest for decentralized finance has proven unequivocally — they’re not, and blockchain may cheat death for a while yet.
Judgement Day
This isn’t supposed to be a doom and gloom list of barriers to blockchain adoption. It’s important to remember, that the Four Horsemen of the Apocalypse were there to purge away the unworthy. Whatever blockchain evangelists might think about the detractors, competitors or regulatory bodies of crypto, these Horsemen of the Cryptocalypse are driving bad actors and projects founded in poor fundamentals away from the space; whilst also reiterating the basis of decentralized ledger technology.
For example, Hedera Hashgraph’s answer to distributed ledger technology encourages blockchain companies to make better blockchain based solutions. Detractors like Dr. Nouriel Roubini help the thought leaders of the blockchain space formulate persuasive arguments and use cases for our industry, and whether blockchain followers care to admit it or not, the questions he asks are ones which we should be able to answer — hence why he’s on CoinDesk’s “Most Influential 2018” list.
Likewise, The SEC might seem to be deliberating at length about blockchain, but they are helping to remove bad actors which are detrimental to the entire reputation of the blockchain industry. As for bank backed cryptocurrencies like JPM coin, they make everyone involved in the blockchain space stop and consider the core fundamentals at the heart of blockchain, and ask what truly makes a cryptocurrency.
So, no matter their motives, our horsemen, like their biblical counterparts, may vindicate those blockchain developers and leaders who are working for the good of the industry as a whole.
It could be a while yet before blockchain is released from it’s public persecution and granted it’s own Edict of Milan. But as blockchain adoption continues, it seems in spirit like we’ve got increasingly more in common with the plight of those ancient Christians than we might think.
Roman Emperor Galerius wrote with frustration of these early Christian pioneers that despite his best efforts, “they would not obey the institutes of antiquity” — and for blockchain believers, that much holds true.