Vitalik Buterin, Chief Scientist at the Ethereum Foundation, has stated public blockchains will become thousands of times more efficient than now.
In a public statement to his 800,000 Twitter followers, Buterin stated that non-financial applications of blockchains will become a bigger and bigger part of the story as blockchain scalability gets better and better, and UX improves and fees drop as a result.
He cited record keeping as an example, like university degrees, before stating: “There are also many categories of use cases where different applications need to be on a common database, and it’s just more convenient (or less risk of capture) if it’s a credibly neutral platform. Supply chain tracing stuff theoretically falls here.
Public blockchains have a genuine competitive advantage over both centralized servers and consortium chains in credibly signaling neutrality. Right now it seems like benefits like this might not be worth the costs of public chains, but that’s just the public chains of today…
Blockchains of the future with proof of stake and sharding will be thousands of times more efficient, and so the efficiency sacrifices of putting things on a chain will become more and more acceptable.”
He went so far as to say “I literally foresee things like receipts of everyday purchases being published to blockchains.”
Suggesting basically that he thinks we can put everything on the blockchain, even receipts (although maybe that was hyperbolically making a point depending of what he means by receipts), which sounds a bit ambitious, but perhaps only based on the current blockchain design.
A number of changes are planned, including storage rent and history pruning to keep a bound on the ever growing history of transactions and/or data.
Both proposals, however, are at a very preliminary stage and have some difficult problems to solve. Take pruning. The idea here is that nodes keep up to say three years of data, with the rest sent to an archive.
That’s, in a way, sending the matter one turtle down. If we have all these receipts, the archive will become… well history will have to be deleted at some point.
Now this is a somewhat subjective matter because you have to take a long enough view on limited information. You can say, for example, in the long run we’re all dead, as Keynes said, or you can say in the long run the sun will run out, or you can say who knows what some genius might come up with in the year 2,100 to solve the problem.
On the other hand you can say that’s all rubbish. It’s a simple equation. If history grows and grows at some point it has to be deleted, so let’s grow it slowly to delay that point.
If you are an ordinary cryptonian you might say who cares, but, bitcoiners did not want coffee purchases on the blockchain, let alone their receipts.
So in this question of history, maybe there needs to be a more sophisticated method of thinking about it which is a bit more subjective, but perhaps not that subjective.
Coffee receipts, for example, are a very temporary thing. Not needed at all in most cases, but if it is say an Apple computer purchase, maybe you want it for a year or two or whatever is the warranty, then the smart contract can have a self destruct. While if it is say property “receipts” or land titles, maybe you do want to trace that for a century or more.
So then this becomes a collective global database where information does eventually disappear as far as the blockchain nodes are concerned with a fairly important decision on the way on whether to prioritize the present or the past if indeed we’re going to have great great grandpa’s coffee receipt on our computers.
A decision that will probably be solved in the usual modern way of creating two different universes with people free to choose, but we’d probably end up at the established practice of obviously not preserving all history, while obviously preserving say books. Because the ability to forget and remove clutter does have uses, as does memory. Buterin further said:
“Blockchains are NOT about cutting computational costs (at least relative to centralized servers). Blockchains are about incurring a sacrifice in the form of INCREASED computational costs to achieve a *decrease* in *social costs*.
Computers have become 1 trillion times cheaper, per unit computation, in the last 70 years. Human labor has gotten 2-10x more expensive. So incurring high technical costs to achieve reductions in social costs is at least sometimes a very good bargain.”
That’s basically saying blockchain automates men and women in some instances. It’s kind of what Nakamoto said long ago when criticized the design was inefficient.
New inventions tend to be seen in isolation, with a rightly skeptic newcomer usually looking at what is wrong with the new invention or what can go wrong without considering what is wrong with current practices and how they compare.
If you look at the current way analogue money moves, you kind of have basic accounting and reconciling where someone looks at who owes what to whom and then stamps it. They can be cheating of course, so then you have someone look at the stamps and sort of turtles all the way up, but it generally kind of works.
Very inefficiently, however. What Nakamoto did was to basically turn all that into some lines of code that does all the checking and whatever, all the turtles, that does everything automatically. So the cost of a man or woman is basically replaced by the cost of storing and moving data which is of course far cheaper because data doesn’t have kids to feed. Buterin further said:
“Another interesting thing that blockchains give is the value of permanence. For example, an ERC721 collectible that you hold in your ethereum wallet is “yours” in a very real cryptographic sense that would not be the case if it was just stored in a centralized server.
Centralized servers can decide to change the rules later, they can get hacked, or they can just shut down if the company disappears. A blockchain Merkle receipt, on the other hand, is forever.”
Here we’re talking about digital gatos. What is yours isn’t the cat, but a digital ID that says these graphics belong to this number. They can’t change the ID, that is yours, but they can make the yellow cat that belongs to that ID look blue. They might even take the cat down completely and you’re just left with that number.
Moreover, the way most smart contracts are currently designed is by a person or a few people effectively having full control over your ID.
Backdoored smart contracts they can be called if we wanted to raise your emotions, a hybrid centralized-decentralized version if we wanted to slightly mislead, or a public database if… well you can decide yourself what that is.
So obviously centralized servers can be hacked, but so can smart contracts, which is why they use that centralized key, which itself can be hacked no different than a centralized database.
But there are differences. You can effectively destroy that centralized key in a way that everyone can be as sure as humans can be that there is now no longer a backdoor. You can also say there will be this safeguard for x time and then there won’t be, bugs and all.
We can also see whether there is this backdoor or not, rather than relying on a database admin’s “trust us” and, among other things, if there is no backdoor to begin with, you can’t put one later while in a db obviously you can do what you want. Buterin also said:
“Non-financial applications have a leg up over financial ones in one important sense: there is less at stake if they break, so fewer reasons to fear deploying them fairly quickly. So they could be the first applications deployed widely, especially in institutional contexts.”
That’s a fair, but limited, statement if we are to holistically look at financial and non financial use cases. Buterin for example used this as a poster boy of sorts for non-financial applications of blockchain tech:
“A degree is certified with just a digital signature, but *revocations* are put on chain. With cryptography alone you can’t check that a revocation was *not* signed; but with a blockchain…
To check that a degree was not yet revoked, you simply scan the chain and check all of the logs of the revocation contract. If a given degree was signed, and the revocation is not found on chain, then that means it’s still valid.”
The instances where a degree has been revoked are maybe 1 in 100,000. Looking at those odds, it may not be worth the bother for a busy prospective employer to spend a second even to click a button.
They have a lot of other things to look at, including whether the certificate has actually been issued. If it has, the chances it has been revoked are close to zero.
But maybe you can incorporate that on the backend, why not, a little plus. Except that you kind of have to restructure everything for this tiny little plus.
Buterin was asked why bother with the blockchain in this case, you can have a normal db where they say x has x degree and if it has been revoked it says it has been revoked and even gives the reasons for the revocation.
Bringing us to an important point in this unusual critique of Buterin, but maybe he should know better or maybe we shouldn’t be so courageous.
Blockchain automates man, but only in some cases. There are plenty of aspects where man can’t nor should be automated at this stage of evolution. One of them is the trusted instructor who says yes twastnodes has passed solidity school or they did attend solidity school, but they were a very naughty boy.
The instructor can say the same on the blockchain, but it makes no difference. There is no automation. There is no higher truth just because he entered the same input on the blockchain. He can still be lying. There is no outside or no code based verification.
That doesn’t mean there can’t be some gain, but it is pretty limited, necessarily because the blockchain isn’t some sort of… well it is magic in some ways, but not all encompassing.
Here’s a very simple use case for example where it comes to authenticity. Buterin was recently given an honorary degree. Take a look at the paper, and we don’t mean the size or the signature:
We could print that in seconds and make it even more believable. Perhaps, and nothing is being implied, a more imposing coat of arms somewhere or whatever.
What if that had a QR code somewhere that gives this paper a private key of sorts with the app showing us the public key that tells us: yes, this is authentic.
That would have to be a sort of centralized system for convenience and we still have to trust the university admin and that she is not corrupt or hacked, but that applies as it stands in any event. There would be no improvement here where it comes to trusting the input, the improvement would be where it comes to authenticating or verifying that input.
If the input is fake, or in the above picture if all those dignitaries were fake honoring, then they are, you can’t do much about that. But usually that’s not the problem – although of course it can be a problem – but the main problem is telling what is fake and what isn’t rather than telling what is a fake input and what isn’t.
For the latter, there are all those turtles and they do a reasonably good job because there is the incentive of employment and so on and perhaps more importantly because there are very few people who can produce fake inputs. While to produce a fake version of the above certificate, well gatto can do it.
Gatto, however, can’t reproduce a fake private key. You can use a stamp or whatever, but that can be faked in a fairly indistinguishable manner. You can’t fake the private key.
Well, you can. Let us suppose the above certificate has a qr code. Let us suppose a rascal now copy pastes that qr code to a new certificate with the name twastnodes. The solution to that might be to have an identifiable, perhaps the name buterin. So if twastnodes (neva) says we doctors, they scan and know instantly Buterin is the doctor, or as commentators wanted to point out, an honorary doctor. PhDs do deserve their prestige.
In this scenario it would then merely become a question of whether others would bother to check the certificate for veracity. The threat, and ease, of it may be sufficient for them not to bother. So that itself may reduce fraud, but all of this isn’t and can’t be automated for now so there will probably still be fraud where this use case is concerned.
Now fraud is a bit of an abstract thing. Obviously there is incentive to reduce it, but if we go back to financial and non-financial use cases, fraud is more… it would be nice, while finance is more… wow there’s money to be made or saved.
At the end of the day, something like ethereum is upgrading finance. It may have use cases elsewhere, but, fundamentally it is digital, programmable, money.
It uses automated record keeping for it, so some aspects of it can be useful for other things, but, it’s best uses may well be where money is involved.
And money, of course, is involved in almost everything, but not in a wholistic way. Only in a very limited way. You can automate those limited ways however. Lending, insurance, payments, trading, sophisticated tools like margins or options, trusted tools like stocks which no longer require trust in a token.
The latter does however require trust in the company and whether they will honor the stock token. That obviously applies even now. Say someone wants to give a piece of paper on the promise of a barrel of whisky, you have to trust he/she will actually give you the whisky if you give them the paper.
The paper is now a token, which can’t be faked and can’t be forged and can’t be erased and can’t be printed out of thin air save for what the smart contract says and so on. But it is still an abstraction that requires trust, in this specific instance, of it being turned into an actual physical representation.
Meaning there are some real benefits and some real use cases of a public blockchain like ethereum, but they are limited rather than holistic, and they are an incremental improvement rather than the solution to all of the world’s problems.
That doesn’t mean the problems it does solve aren’t valuable. They are on many levels and it might be at the scale of trillions. But to solve them we do have to see what are the capabilities, what are the limits, where it does add value, where it wastes value, and where it can actually be used in a profitable manner whether money wise or more abstractly feels, trust matters, fairness, and so on.
Under that perspective, the most promising applications are probably financial because there and in insurance it can in some contexts reduce skyscrapers to mere code and do so in an automated manner, in addition to there being the plain incentives where finance is concerned.
For non financial applications there are added benefits, but this does work best when code is talking to code. Where there is human involvement, then the blockchain aspect is more just a component or tool that has to be integrated with other aspects like analogue verification of inputs and so on.
Meaning the benefits, in both cases, are incremental rather than wholistic, but all those small improvements and efficiency gains add up to a pretty big upgrade of the worldwide ecosystem which becomes better, but, obviously doesn’t solve all problems.
A simple illustration here would be email v snailmail. In the case of the former, it is instant and pretty much free, but there are problems in that you can get spam or you click a link that effectively hacks you. On the other hand, paper mail is slow, expensive, boring and now looks arcane, but still has its uses.
You can also use things like youtube or social media as an illustration, which frees you to express yourself and so on, but there can also be too much noise, so you need curated media. On the other hand, mainstream media can be brainwashing and a monotonous box that hides information from you and even tries to cheat you intentionally or otherwise.
Still, despite whatever problems it may have, there is probably no office in the western world that doesn’t have a computer. It doesn’t solve all problems, but we can’t imagine going back to a paper age.
Likewise with this automated collective blockchain code. It doesn’t make the stock issuer actually give you a physical or even revenue/profits piece of his company, but it does bind him to x stocks in a verifiable way without needing an army of manpower.
It might not guarantee you the kitty’s graphics, but it does let you take the kitty wherever you want and it does let others put a mouse or a dog in front of the kitty and so on.
It won’t give us salvation, but it most probably will give us a step towards it in solving certain problems which will then give us the resources to solve other problems in that endless march towards better, faster, stronger and higher so that we can beat entropy.