Thoughts on Blockchain

1) Blockchain is still really very early. It feels like IP/Internet protocols did in the mid-90s. Gopher, Telnet, Usenet and the WWW were all the rage with no clear winners. The most interesting tech was still to come like Javascript, web-MVC and P2P didn't exist.

This list is what made me think of that parallel:

2) Like Internet 1.0, there's lots of glomming on of the world we know know onto this tech. In the mid-90s, newspapers decided just to put giant jpegs of their front pages on the web. Today feels much the same. The world that blockchain will impact hasn't become yet.

DAOs are a great example of a construct that the world just isn't ready to adopt:

The idea of the first DAO (The DAO) was to build a VC on top of Ethereum (ETH). It collapsed when security flaws were exploited in the ETH protocols.

3) I'll be shocked if there are not lots more hacks of people stealing from these new techs. I expect a wave of hacks like we saw in internet 1.0. The ethereum hard fork as a response to the DAO hack shows how it'll still going to be a problem in the future that'll require solid leadership to keep it being a mess:

4) Ethereum is strong because they seem to have very strong leadership. Smells like what Linus Torvalds is giving Linux. To illustrate their professionalism, this is the agenda for the regular Eth leadership team:

ETH is adopting a professional approach from my external viewpoint.

5) Smart money seems to be betting that there'll be tons of blockchain protocols eventually. I think this really makes sense. As we saw in Bitcoin (mostly a value store) vs Ethereum (programmable), there should be an explosion of specialized protocols.

Here is the founder of Coinbase. Notice what he's working on now:

He seems to agree with that opinion.

5a) By the way, blockchain wealth is still very highly concentrated. I couldn't find any more recent data than this but here's an exploration of Bitcoin valuation by wallet address:

Given Bitcoin (aka BTC) is designed to be deflationary, this is worrisome. People have incentives to sit on their BTC whereas a small, background inflation is good because it incentivizes people to put their money to work.

6) Given patterns, I'm not certain Ethereum (aka ETH) will be the end-state for blockchain. Yes, there are other apps and cryptocurrencies being built on it. But, what happens we we discover the world has changed and ETH isn't doing enough for us? There's certainly other people who think that, too. Check out Shift as an example which contends ETH is inherently flawed:

We won't really know until devs try to build stuff on the current state as to where the gaps are in the protocols.

7) ICOs suffer from the same problem as crowdfunding: great investments are rare and don't need dumb money. They've taken off because of classic mania behaviors combined with the lack of places for equity in ETH to go:

They're also mostly terribad ideas. This thread from HN details some of them:

And this guy picked apart Patientory's ICO business plan (lulz!):

What's interesting about those applications on ETH is they're mostly attacking problems that are really hard to fix. Disrupt residential MLS or medical EMRs? Good luck on that.

I think this is consistent with my thesis that the world isn't ready for blockchain yet. Many are also societal problems and not actual customer problems.

8) ICOs/Tokens represent another case where people's immediate reaction is to glom the existing models onto that tech. People are doing these mini-IPOs using ICOs to raise money. Bajali (CEO of 21) thinks they're the future:

I really don't have my head around that yet. I can see them being deployed towards open source development but the next Google. Well, I just can't see that (yet).

9) It's interesting that the experts at prognosticating aren't too sure either and are spreading their bets wide. USV even invested in a couple of token hedge funds in April:

They do believe the protocol is where the money will be made. I tend to disagree with that as history has shown winning protocols are often free and applied tech is a great generator of wealth. This especially happens when a business enables people to do new things they couldn't before.

10) Where it will get interesting is in applications of blockchain that create new possibilities. Like Twitter has made everyone a journalist and publisher. Or, Square made every person a full-service retailer.

That's compared to fixing existing world problems that are a byproduct of existing systems or using blockchain just to reduce some costs in a system. Instead, the interesting opportunities are things that were just plain impossible prior to blockchain.

11) We may be getting close. There is a case that dApps (distributed apps for the blockchain) are just now reaching a tipping point that the entire ecosystem for making them is coming very soon:

I'm excited to see them come. I'm also looking forward to seeing today's primitive blockchain efforts a decade or two from now. Now if we can just figure out who will be the sock puppet of Blockchain...

Comments and arguments welcomed below.

Michael Girdley