Ouriel Ohayon


Ten years in blockchains, and the world has already changed so much

I have been pointed to this article by many of my friends as a thoughtful piece about the current uselessness of Blockchain, ten years later. This article has been much acclaimed and applauded (by medium standards). But, with all due respect, it lacks vision and critical understanding of what is really going on. This, is a kind of official answer to the author.

Kai, the author, seems to be a very articulate and smart person, but i have had a serious problem with the thesis and observations of this article. Starting with the catchy title below.

is it?

His whole point is that 10 years later, there is no real case (no market fit some would say) for the blockchain. And i beg to differ (and let me be clear, yes, we’re far from mainstream adoption and i am not either a blind Blockchain advocate). I do believe Blockchains have achieved already some outstanding milestones.

The roads, the first cars deserved

About the title: ten years in,…

Well any great article, needs a catchy title. Right? there is a lot of people out there (including very smart and successful ones) starving for anti Blockchain material to feed their world view. But there are here a few problems, First things first, although the concept of blockchain is 10 years old, Bitcoin, the first large scale blockchain is 9 years old. And assuming years later, there is a only a monolithical mystical “Blockchain” is ignoring (and disrespecting) the efforts of hundreds of developers who have created (or forked) tens of BlockchainS with a large S, meaning different distributed ledger protocols serving different purposes: Bitcoin for e-cash, Zcash for private transactions, Ethereum for decentralized apps and so on. Readers deserve accuracy starting with the title. There is no ONE blockchain. This is a myth.

With permission of the author: “9 years in, nobody, i know of, has come with a use for blockchainS”

Now that i start to feel better, we can move on.

The wrong assumption

In apparence, Blockchains are trying to reinvent the financial systems to be safer, better and more efficient. But more importantly they are bringing a new trust system (“consensus protocol”) to our much broken economies. Assuming 10 years is that it takes to change industries worth the hundreds of trillions of dollars cannot be taken seriously.

Yes, I know, the last 2 decades have gotten us used to faster changes in paradigms: the vertical migration from desktop to mobile, The social-network-ization of the world…And we want everything faster and now.

But Blockchains are not a new technological paradigm which takes a few years to get adopted. Blockchains are a fundamental change to the way we think societies, trust, networks. It happens through technologies, but this is not about technologies.

An Industrial revolution, Not a paradigm change

Industrial revolutions that had deep impact on our societies took decades in the making before they get to any sort of serious breakout and adoption. The problem is not the technology itself but the human resistance to change. Electricity for example started to be seriously studied by William Gilbert in 1600 and 200 years later by Benjamin Franklin, Edison and Tesla. I am sure at that point, there was already people blaming them for spending there time uselessly, asking for proofs immediate improvement in their daily life.

Well, it tooks decades to get electricity deployed in any country and later for appliances and industries to be powered by it and with that massive new economies being built.

When cars were first invented, they did not replace immediately horses and trains or reshaped cities as we know them today. It took decades to find ways to build them at scale and acceptable price, while the world was deploying the technologies to dig oil in quantities, gas stations and building routes and new cities. Computers took the same path when the first silicon was invented. The first computers were useless to the world. Who would have guessed that decades later we would walk with a computer in our pockets.

We’re facing 10 years in, the same type of opportunity at a much larger scale, a type of change very few have a chance to witness in their lifetime: we’re in front of a technology powered revolution that will enable us to build new forms of societies, Financial systems, Value exchanges services, and maybe even political systems (“governance”).

The first 10 years of Blockchains, under the impulsion of the cypher punk movements and geniuses like Nick Zsabo and Vitalik Butterin, were years of R&D, years of inceptions, trial mistakes and errors, of experiments and initial adoption. We’re just in Phase 1 of a multi-step process. Only a few tens of millions of people are currently exposed actively to those technologies, with an average 100/300k new users joining per day. And probably only an estimate 10k developers are working on blockchain technologies. This is nothing in comparison to what it will take to get things done.

Asking blockchains, like the author does, why no significant change has not come yet to the payment industry, the way computer ressources will be distributed and used, the way interbank settlements or legal systems operate and so on, is an indication of the lack of depth of perspective required to understand where we stand in the history of this revolution.

Phase 1: the infrastructure layers

Don’t get fooled by the plethora of ICOs and Apps, helped by media amplification, trying to apply blockchain technologies to various vertical and services. The noise would make you think we’re already there.

We’re still in the infancy of the infrastructure phase and the birth of protocols. We’re in the era of http, ftp and smtp, not in the era of the Yahoo, Google or even less Youtube Paypal or Dropbox. It does not mean it’s not being tried or should not be tried. But at this stage current protocols are still being invented and forked towards a better efficiency.

Apps at scale are not ready for prime time. It is surprising though that the author did not mention the important efforts that the community of developers are deploying to improve scalability, speed and electricity consumption. For example no mention of the Lightning network (already applied in Litecoin and tested in Bitcoin), or Proof of Stake protocol (which is a vast power improvement compared to proof of work).

Yes Bitcoin is slow, expensive and consumes lots of power. But let’s remember in the early days of internet, we needed a power hog computer, non environmental friendly dial-up modem (with wasted hundreds of millions of AOL CDs) and had to wait 3 min to get a 24kbps connection.

Ethereum should be able to provide Visa scale tps (transactions per second) within a year thanks to Casper. This is a remarkable achievement for a protocol only 4 years old.

The author is not doing a favor to the readers by not putting things in their context and playing the megaphone game where focusing on the current problems and not the solutions being worked out are the highlight.

More importantly, it is critical to understand that Ten years in, is only the first phase of an infrastructure phase.

The market (investors and entrepreneurs included) is surely getting excited more than it should. Probably too much. But if what it takes to change broken industries and economies worth hundreds of trillions of dollars is a couple of digit trillion dollars worth of Speculations (mixed with unfortunately, some illegal transactions), then so be it. The outcome is so worth it.

So when is Phase 2, the phase where apps and Dapps become more prominent? I would say 5 to 10 years from now. We will look back at phase 1 and ask ourselves “how could they ever use blockchain this way?”

The remarkable achievements to date, yet

But let’s look further. Was there really any use for blockchains ten years in? I do see a few.

Bitcoin: The first unstoppable app

Before bitcoin, no one had managed to create a financial protocol that can’t be hacked. Banks have been hacked multiple times, Payments systems have been hacked. In ten years, never bitcoin has been managed to be taken off rails. No security breach. No 51% attack. Even with all its imperfections, this is a remarkable achievement. One that drives governments nuts (even China could not kill Bitcoin by banning ico exchanges and now mining). This is the first feature that make bitcoin so important.

Is it of no use at all? Well ask people in Venezuela or Zimbabwe today. Bitcoin has become a de facto payment system there, because they don’t have the choice. Sure, in most economies of the western world, we don’t see any immediate use for it. But millions of people have some of their life back thanks to Bitcoin.

Having an unbreakable decentralized, owned by no one, network of computers running billions worth of digital asset is just mind blowing. I know, it is not as sexy as having the ability to pay your coffee with bitcoins. But boy! this is one incredible thing.

And a propos those illegal transactions: this is right. They happen. Trains when they first came out, had hackers and robbers. Trains should not be criticized for this. Humans should. The internet when it first started had its lot of criminals who used the network for all sorts of bad things (until today). Should the internet be criticized for it?

Owning crypto is the first major use case

So, yes it is painful to pay with bitcoin. Even if you live in Japan where tens of thousands of point of sales accept Bitcoins, wallets are still painful to use, far from risk-free, and crypto-visa cards are not a stable means of payment either. We’re not in the “currency” phase yet. We have to recognize that. Put in the timeline of an industrial revolution that makes perfect sense.

But for the first time in the history of mankind the ability to build or own a store of value is at the hand of virtually anyone equipped with a mobile phone. 2 taps away you can own something worth trade-able value anywhere in the world. Owning bitcoin is the first use case of Bitcoin.

Personal ownership and uncensored control of digital assets (identities, collectibles, ..) is a major use case. Ten years in, millions of consumers are learning to do that with something called Bitcoin.

Fintech is, finally, sexy again

1st time ever a fintech app #1 in the app store

Never in the history of apps, fintech has been sexy, not even you Paypal and Venmo. Never in the history of the App store a fintech service has reached the top spot of the App Store. Never in decades of innovations, my own mother asked me about technology (that in itself is an achievement). Until Bitcoin and blockchains.

Blockchains have managed to get people interested in money fundamentals (and not just money for greed). They talk about it, aware of what economies are and how broken they are. Blockchains have managed to get people who never traded stocks before to trade digital assets. Actually cryptos is the largest ever type of assets ever traded by retail money. This is unprecedented. Some call it speculation. I call that education process.

Never has the history of venture funding seen so many entrepreneurs willing to risk their time to build a new company in the fintech sector. If the first ten years of Blockchains were helpful in something i would first point here.

It took ten years to bring so much energy and capital together to get things really moving forward. This is an extraordinary achievement. Because no revolution can happen without an outstanding level of creative energy to break the natural level human resistance to change. And this is without mentioning, with all their imperfections, ICOs, the new mechanism to gather capital and bootstrap networks, which i would consider the second best use case of Blockchains to date. Crypto-economics and decentralization protocols, this is what it took to be able, ten years later, to get the energy required to change the world as we know it. We may have a Bubble. But Bubbles are good.

What we still lack a stable regulation system that make it possible to cut the middle man and still be in a trusted environment. But accidents have to happen to first. Hacks, like that of the DAO, had to happen first, before this is even possible, before the necessary attention of the regulator gets in the way and before the governance systems of those new protocols get oiled well enough to be trusted.

Next up: make Phase 2 happen.

Something’s broken, but it does not matter.

The author is very sophisticated, his article points to real issues and is written with lot of thoughts. He knows how the world seems to work today (much better than i do i would say), but it is disappointing to see him not take the extra step and zoom out to realize those things take time. It looks like an “erreur de jeunesse”.

Don’t criticize Blockchains like some did with electricity, cars or computers in their early days for their apparent uselessness. Or recently some did with the iPhone when it first came out.

We need better infrastructures, more energy friendly mining protocols and hardware, more efficient ways to produce electricity too, better custody solutions. But we need also the necessary time for our current societies to digest and adopt this change. It is adopted “by force of circumstances” in the under banked countries and fragile economies. But make no mistake. It will come to us too. We all know it without realizing it.

So Kai, patience. Please.

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