David Gerard on Blockchain and Cryptocurrency: “You Can Get a Long Way on Just Buzzwords and Big Claims”

Blockchain, FinTech, Innovation | May 9, 2017 By:

Blogger and soon-to-be author David Gerard doesn’t take the conventional view. His recent analysis of the Spotify acquisition of blockchain firm Mediachain was typically cutting, but won widespread praise and attention for its insight that went beyond the surface details of the deal.

It’s not the first time Gerard has riled the masses. His biting commentary on his Rocknerd blog covers all kinds of issues in music and technology in a way you won’t find anywhere else. A passionate rock critic, Gerard brings that sensibility to his take-no-prisoners takes on bitcoin and blockchain.

A typical volley:  “There are a number of problems with this idea, most of them being Bitcoin, which has been addressed at length on Rocknerd previously: it’s awful garbage you should stay away from if you value your bank account. (And I’m currently writing a book on how relentlessly terrible absolutely everything to do with Bitcoin and blockchains is.)”

Based in the UK, Gerard communicated with BlockTribune about his worldview and his forthcoming book.

BLOCK TRIBUNE:  How would you describe yourself – Punk anarchist?  Rational counterbalance to overhyped claims?  Debunker of accepted wisdom?  You seem to be a lone voice of reason in the forest in several areas.

DAVID GERARD:  Ha! Very dull suburban dad by day, with a day job as a Unix system
administrator, and I’m a skeptic as a sort of hobby. I heard of
Bitcoin in geeky circles in around 2011 and thought it sounded
interesting, but wondered about the claims that were pretty much get
rich for free. ‘Cos there’s no free lunch and no make money fast, but
lots of scammers who make money promising there are, and they’re
material for skeptics. Bitcoin attracted scammers straight away.
They’re actually more important than the technology, I think.

I wrote the first version of the RationalWiki bitcoin article, which I
think is still a pretty good article on the subject. I think basic
skeptical thinking tools, that’ll get people a long way. You don’t
have to be a techie; you just have to spot things that are a bit too
good to be true, then work out why.

I don’t think I’m saying much that other people haven’t said, except
maybe in personal specialist areas like the music industry.

BLOCK TRIBUNE:  Who are your critics?  Are they vested interests?

DAVID GERARD:  Critics of the critic? I mean, it’s mostly on Reddit, which is for
arguing. Advocates just get really upset when someone treads on their
personal toe. In cryptos, the advocates are usually either holders, or
more tragically, they’re someone who’s been burnt by crypto scams
repeatedly but desperately holding on to the idea, thinking it’ll
definitely work *this* time for sure. Some of the most strident
cryptocurrency pushers on /r/buttcoin are people who’ve actually been
burnt repeatedly.

I don’t get the really angry opposition from the actual companies in
bitcoin and blockchains. They’re usually fine. The bitcoin developers
are vastly more reasonable than the fans, for instance. It’s
disagreement, not shouting.

BLOCK TRIBUNE:  You were critical of the Spotify/Mediachain deal and pointed
out that its problems extend to other blockchain businesses:

You wrote:  “It’s not just music — across many industries, the main Blockchain promise is magic after full availability of properly cleaned-up data. The actual problem in every case is cleaning up the data at all. The proponents’ business goal is to become the organisation controlling the newly cleaned-up data, with a monopoly maintained by network effect. The barrier that such efforts founder on, over and over, is that no industry’s players want to create a new central octopus.”

Given this, is the future of any blockchain venture going to be
individual consortiums of companies with their own solutions, unless
and until they reach some sort of consensus on a single blockchain?

DAVID GERARD:  I think the future of any blockchain venture is pivoting to something
that isn’t really a blockchain, ‘cos I’ve been looking hard, and I
have found literally zero use cases where a blockchain is the right
tool that aren’t cryptocurrencies. Decentralization costs a lot and
doesn’t really get you anything.

I think a lot of these are going to go to selling transaction records
in Merkle trees, and call those “blockchain.” Because those are a
really good idea – ask a programmer who saves their code in Git, which
is literally for storing transactions in Merkle trees. You can specify
a whole code tree with one world-unique hash; you can make copies and
send them around the world and tell straight away if they’re good
copies or not, and all without proof of work and using the electric
output of Ireland.

I laughed when I read R3 proudly declare that their blockchain product
doesn’t actually have a blockchain in it.

I’ve found lots of cases, across lots of industries, where people are
touting a blockchain as the solution, when the actual problem is
cleaning up the data. It really is the standard pitch. Blockchain will
clean up your data! Matt Levine from Bloomberg thinks the “blockchain”
buzzword might motivate bothering with the boring cleanup and data
standardizing. It’d be nice, but I think he’s a bit optimistic.

You want data standards that people see and want to adopt. If you have
a database, make it centralized and regulate the controlling entity.

I don’t know what Spotify is planning with Mediachain, but I’m pretty
sure it’s not any of their blockchain stuff as such. I could be wrong.

BLOCK TRIBUNE:  How soon will investors realize the fault lines in blockchain
that you’ve pointed out?

DAVID GERARD:  I’d have thought they would have already, given the venture capital
record on bitcoin and blockchain so far is one-and-a-half-billion
dollars in, nothing out. Power of buzzwords, I guess. Also, there’s
way too much venture capital sloshing around at the moment without
places to go to, so weird stuff’s getting a lot more play than it
deserves.

BLOCK TRIBUNE:  Beyond the Spotify deal, are there any ventures in blockchain or
cryptocurrency that you thought were absurd on their face?  Any that
you like or feel have a shot?

DAVID GERARD:  I’ve seen nothing that’s sensible. Nowadays, I think if it’s got the
word “blockchain” or “cryptocurrency” in, it’s probably bad and the
question’s just how. Or it isn’t actually about the blockchain bit,
like I think Spotify isn’t.

Most of the silliest ones repeat the weirder claims about bitcoin and
just change the buzzword to “blockchain.” You can get a long way on
just buzzwords and big claims.

BLOCK TRIBUNE:  You’ve been critical of bitcoin and ethereum. Are there any
cryptocurrencies that you feel have a chance at greater acceptance?

DAVID GERARD:  Nuh. They’re all bad, for much the same reasons. The technology isn’t
very robust, but the really huge problem is they’re like catnip for
scams and scammers.

All the people who see ethereum and *immediately* started writing
automatic Ponzi schemes … it’s like the userbase self-selected for
gullibility. And The DAO! They ignored every objection and it blew up
and every objection came true. I’m frankly amazed anyone still dares
say the words “smart contract” in public after that.

The big thing for ethereum is AlphaBay’s just announced you can buy
drugs with it. The most successful bitcoin use case. Now all they need
is ethereum ransomware.

BLOCK TRIBUNE:  Tell us about your forthcoming book. When will we see the full version?

DAVID GERARD:  December, 2016 for sure! I’m discovering that writing a book that’s
good all the way through is *hard*. Six weeks for a first draft, and
months of editing. Particularly when you have a day job and a busy
life and stuff. The trouble with writing is that it’s literally always
easier to lie on the floor making seal noises instead.

Basically, I started this in October, 2016 chatting to my friend Phil
Sandifer, who said I should write a quick Kindle short “Why Bitcoin Is
Stupid or something.” A 15,000-word outburst before lunch sort of
thing. So, of course, I turned it into the Sistine Chapel. Hoping for
June this year. Guess I better get back to editing, eh?

Phil’s done self-published books a few times before so he’s always
good with helpful advice, like, “if you’re expecting a sense of
accomplishment when you finish, you’ll want to stop that.” Thanks,
Phil. I provoked him to write his book, “Neoreaction a Basilisk,” a
thing on the philosophy behind the alt-right, so serves me right.

BLOCK TRIBUNE:  Most journalists don’t have your background in computer
science. What are some questions that should always be asked when new
companies touting blockchain and/or cryptocurrency debut?

DAVID GERARD:  “Why are you using a blockchain?” is the quick, skeptical question. I
have a list of standard questions people should ask blockchain
salespeople:

* Are they confusing “might” and “is?” Never mind the *possibilities*
– do they have present-day working blockchains that do every one of
the things they’re claiming? If not, which ones are missing?
* Will they scale to the size of your data? Get solid numbers.
* How do they fix human error in their immutable blockchain or smart contracts?
* If this is for working with people you trust less than the people
you work with now, how are they keeping the chain secure – what’s
their security threat model? Get your sysadmin along to ask pointed
questions.
* If it’s for working with people you already trust as much as the
ones you work with now, why are you bothering with a blockchain?
* What does this get you that a centralized database can’t?

A lot of this is basically get your sysadmin along to ask pointed
questions, but I would say that being one.

With cryptocurrencies, the question is whether they’re idealists or
scammers. Though either way you should stay away.

BLOCK TRIBUNE:  Has your rock critic background helped in your analysis of
blockchain and the music industry?  Are you a musician as well?  If
so, any good/bad experiences

DAVID GERARD:  It helps in that I’ve been thinking about the music industry and how
it works and how it doesn’t work for a few decades now, so it was the
ideal case study. It’s an industry that’s always run on selling
subjective feelings for money, which is prime ground for delusional
rubbish sold by fast-talking con men. Consensys sold Imogen Heap on
musical blockchains, and nobody ever talks about how she actually
managed total sales of a hundred and thirty three dollars. And twenty
cents.

At the moment, the record industry’s still reeling from the Internet –
they still think the CD boom of the 1990s is the natural state of
things, not an unusual boom-time. So they’re desperate people with
money, which is prime target for scammers.

Most of the reason it really just can’t work is that blockchains scale
really badly, and nobody pushing this stuff understands just how
*huge* the data is. A billion streams a day just on Spotify. Then run
smart contracts on every single transaction. Possibly you could do it
with multiple local streams going to a bigger central stream, but this
still has the problem that it’d be obviously better just using a
database instead of a blockchain. Decentralization really doesn’t get
you anything.

The other reason is that nobody wants to tell the whole world all
their deals, and they really don’t want to tell their competitors.

I strongly recommend Jeremy Silver’s musical blockchain white paper,
“Blockchain or the Chaingang?” It’s not perfect technically, but it’s
still *the* best white paper on blockchain I’ve seen for *any*
industry. And I’ve read some bloody awful ones. He’s pretty level-
headed and cynical about it. The main problem he sees is that it can’t
possibly scale.

Probably the worst business blockchain paper I’ve seen writing this
book was the official UK government blockchain white paper. It reads
like an end-of-term assignment they wrote in a desperate overnight
caffeinated tour de’ force. I really hope it was written to be quietly
buried.