On May 8th, venture capitalist Tim Draper, Bitcoin software developer Jimmy Song and crypto hedge fund manager Kyle Samani engaged in a tense debate about the viability of enterprise blockchains and supposed utility of “crypto asset” ICOs (Initial Coin Offerings).
Draper began by invoking the “The Ayn Rand defection threat” by stating that the SEC will be obligated to use “the lightest touch” when regulating private firms issuing cryptocurrencies and tokens. Otherwise, the regulators risk pushing industry and talent to other jurisdictions:
“The SEC will be better off if they use a light touch and let these technologies run…and if they do(n’t), I think we’ll all just move to Japan…They should recognize that they’re in competition with the other SEC’s around the world, and the ones with the lightest touch are gonna win us over.”
Kyle Samani, who manages portfolios of various ICOs, started out by saying that 2018 will see “the emergence of Ethereum competitors” and “a war between smart contracts” similar to the OS (operating system) wars of the 80’s.
“It’s gonna be one for the ages,” said Samani.
Draper is convinced that blockchains will bring Bitcoin-style disintermediation, automation and immutability to the furthest corners of industry:
“The biggest industries in the world are gonna be transformed…You can use this tech to replace a bureaucrat…to change real estate…Electricity is gonna somehow be…tied to Bitcoin or some other currency…”
Draper also predicts a growing demand for Bitcoin:
“In four years who’s gonna wanna use fiat currency…that’s tied to the political whims of some government official or other…when you can have a currency you can take with you wherever you go?”
Jimmy Song, who has tried and failed to engineer successful enterprise blockchains and has called out enterprise blockchains as “scams,” savaged Draper’s industrial panacea arguments:
“I agree with Tim that sound money, or the ability to transfer value without needing to physically be there or without a central party that’s controlling it- that is valuable. All the other stuff -the ICOs, the crowdfunding, “blockchain technology”- all that stuff I don’t find valuable at all and I’ve studied this technology, I’ve tried to make it work, and the vunerabilites are insane.
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You could try to have real estate on the blockchain, but the fact of the matter is as soon as you put some sort of tokenized version of some piece of land on the blockchain, you have to have some authority that recognizes that those two (things) are the same thing, and that’s a centralized party, so you’re still going to need a bureaucrat…
If the bureaucrat doesn’t think that you actually have the right to that land, they can go and roll it back, or say that the blockchain that has it…isn’t the matter of record.
The only thing you can actually use the blockchain for is something that’s a digital bearer instrument. And most…of these applications of blockchain that people try to come up with, they all have a central party. And if you already have a central party, then why the hell are you using a blockchain? A blockchain in that case is a very slow and expensive database.”
The Bitcoin-style blockchain, says Song, is not understood socially. People want the encrypted data, they want the permanent record, but they want the system overseen by an administrator who is part of a top down chain of command. Such a party would have the power to reinterpret or ignore data on a chain. Because Bitcoin software was passed from computer to computer across the world voluntarily, Bitcoin has no such overseer:
“So to me the entire idea that blockchain will change everything and transform all these industries, I just don’t see it. And I say that as a developer, as a technologist, as somebody that’s looked into this and tried to make it work. You always have a centralized party, like a lot of these ICOs clearly are…it doesn’t seem that there’s any innovation in that aspect. The real innovation is in sound money, it’s in Bitcoin, it’s in… like Tim was saying, to be able to transact without the government being able to sort of inflate away that value.”
Draper argued that Song was being shortsighted:
“If you project out, this is gonna be a much faster database. Moore’s Law continues on…And, if a government official sees over and over that their view of a piece of real estate is less accurate than the one that’s coming off blockchain, I think they’re gonna eventually say, “OK, let’s just use the blockchain…I’ve lived a long life…amazing transformations…happen faster than anybody imagines…because every new invention…is a new platform from which we excel….Word spreads faster that ever before.”
Draper seemed to conflate Song’s critique of private, centralized blockchains and Bitcoin:
“And it is more secure. Your saying it’s insecure. The banks are insecure. We’re so lucky to have Bitcoin…The banks are playing whackamole trying to beat back the hackers…My fiat is less secure than my bitcoin is…Honestly, Jimmy’s right if we’re looking at the world as it is today, but I’m looking at the world as it can be…”
Song insisted:
“I am looking at the world as it can be. If you do have a government official that decides that this token is on the blockchain represents this particular piece of land, they’re the centralized party, they are the ultimately the authority. If they say, “OK, well, that piece of land was bought with drug money; therefore, we’re not gonna allow this transaction…”
They have the right to do that because they are ultimately the ones in authority.
So unless you have a digital bearer instrument, none of the benefits of blockchain actually accrue to that item…People fall in love with the concepts without actually looking into the tech.
Samani goes on to cite examples of how blockchain has improved fairness in online gambling and so on.
You can watch the rest of the detailed debate here.