First, a little history…
Bitcoin Satoshi´s original paper never used the term “Blockchain”. Still, we call all the storm that hit the market as “blockchain revolution”. And as the Matrix´s Merovingian (1), without knowing it´s motivations, we can´t understand how we end up on this mess. The real thing the great revolution wasn´t about a “internet of trust”, a or whatever, it started with the simple purpose of building a new monetary system without government, central part or intermediaries (2). And even this concept has so many influences, you must watch a huge movie to understand all the ramifications.
The verb became a noun.
The chain of blocks came from an old cryptographic operational mode, was a verb and it was used back and forth the several threads and emails that made the Bitcoin protocol alive. Marc Andresen doesn´t help by using the verb as a noun in his famous call to action, just in the beginning of the bitcoin experiment.
The transactions became autonomous organizations
A young man full of bright ideas started another storm, stating that even with all the security the original bitcoin model had, it was only a single calculator with steroids.
A VC selling herself to all other VCs.
In our extremely liquid society and economy, one key economic driver and one that holds and fuel volatility is FOMO. Blythe Masters had the perfect timing to cope with this force and launch the last tsunami, making a “saint crusade” against back office costs she knows like very few on the financial industry.
A reality check.
As Bloomberg magazine told us this January, after millions of dollars of investment, it came the moment of truth, because apart the brilliant team of ING Bank, that was delivering projects and results, no one is showing courage and specially more money in the game.
Last, but not least, why not a little bit more confusion? Here cames DLTs, PLTs, MDLs, and so.
When you think we have it all, someone acknowledged that “blockchain” term could be extremely tight with the original cryptocurrencies concepts and start trying to create another category: Distributed Ledger Technologies. And MDLs!! And yes, of course, we can have PROGRAMABLE ledger technologies if someone wants to differentiate from opensourced smartcontracts like Ethereum.
And just one more thing: The consortiums!
Ant to put even more ideas on this kaleidoscopic novel, now we have around 60 consortia building lots of disparate solutions and calling all of them “blockchain”.
All parts united still are not a whole thing. Not even if we call it “The Blockchain”.
And here came my conundrum: When all we have is a box of lego pieces, creativity may end creating new and interesting solutions, but we still don´t have a disruptive technological platform. How to move and make it happen in 2017?
In my previous article, I guess I´ve bothered some marketers and some people that lived on hype-waves, but I think I was misunderstood also. I don´t want to say “blockchain” isn´t a revolution, just that it isn´t (yet, and it can change in a very fast way, meaning this year) a technology itself, it´s just a term coined to call several technologies and services that are (in some cases) separated. So, let´s clarify how I see all the parts.
A name: ATA.
Why? Purpose. Autonomous Trust Architecture resumes all the “waves of new desired potential solutions” that came after Satoshi´s original plan. In all formats, the so-called blockchains, DLTs and so, all of that, looks for providing a service for trust, enabling it without a central controller part (with clearing, settlement and conflicts being managed by the final system). But, it´s too late and by the fate of our post-truth and hype-driven news world, everyone will refer this architecture as… BLOCKCHAIN. So, let it be J
In order to simplify some things, I´ve made some group of concepts, and they are:
Group 1: the players in the ecosystem
- The users of the system, meaning the you and me that consumes any kind of ATA service.
- The “Cripto Nodes”, meaning the elements in the network that will do all the hard crypto hash work. In actual slang, they are the Miners.
- Around the individual and original criptonodes, specifically to fulfil the huge demand Bitcoin generated, a new figure emerged: the pools (or mining pools)
- The hardware providers (and all the system integrators along) that provides specific ASIC tools or powerful supercomputers for the criptonodes functioning. Those days, we have a huge market on the ASICS for bitcoin (3).
- Even not present in any part of any paper, the developers are a fundamental part of the ecosystem.
- Oracles, with the role of information providers, are the data feeders. Again, a huge volume of data today is around the cryptocurrencies, but new models are emerging, since for contracts they are essential. Some special players are not only oracles for the blockchain environment, but also, information providers that enables several technologies to provide a more secure stream of events.
- The so called “exchanges”, that are in fact brokers, since none of them guarantee the transactions (this is part of each protocol, so, bitcoin protocol does it in one way, ethereum in another and so on…).
- Special to mention that Wallets, one part never thought by original Satoshi, are now one critical part of the interface, especially for cryptocurrencies and it´s a great point of failure.
- Energy providers, since until the present date crypto-servers are the most energy-consuming tech form we have.
- VCs, investors and alike, since they are the enablers of all this innovation cycle.
- Fund managers, that soon will be able to manage funds using ETFs based on cryptocurrencies (if approved by our next players, of couser)
- The digital service providers, that produces new services or old ones boosted by several disruptive technologies.
- Government regulatory agencies or “the law makers”, since several services will have law enforcement roles in the future.
Group 2: Cryptographic aspects and technologies.
As a friend used to say, if I want to trust an autonomous system that provides, hum, trust, I must dig and understand it´s most complex pieces of security. So, here we go.
- Of course, everything starts with a common PKI set of keys. But there was a huge discussion (20 years and counting) about how this can be implemented. This thread is a good reference on it.
- After that, the first interesting tool are the digital signatures. But not the simple ones, the kind of NSA ones, like ECDSA. The key element is an strange thing called Elliptic Curve and this is a religious fight among security experts.
- The hashcash mechanism, as proposed by Adam Back, is one of the techniques used to build some consensus.
- KDFs or key derivation functions are another exotic piece, used to mask information
- The whole world of cryptographic hash functions and its elliptical curves, that are topic of another Klingon word, are old tools and some of the most mathematically complex ones.
- The meaning of all pieces above is to provide a high level of cryptographic security to the system, which also is not so simple to explain. I´ve heard some people talking about blockcyper algos, but I don’t know any protocol that use it.
- A little deeper, the Merkle constructions are the part that build resistance to attacks.
- And the Merkle trees are the ones that start to help building a block of hashes, chained and directionally linked (hit, this is part of the complex lingo that became the blockchain brand).
- All hashes can be summarized in several classes, and they are a direct function of computing power available. Actually, we use a tool called SHA-256, but it will evolve with new computing power (may be the so called quant enabled cryptography)
- Putting all this and some more stuff and we have the consensus protocol. The alma matter of ANY blockchain is the consensus protocol. So critical, I will let an entire group later, but just to explain the technical cyper part, the so famous Proof of Work is just a hashcash mechanism.
Group 3: The Consensus protocol.
A great start and summary for the most famous protocols is here. In general, “the consensus problem requires agreement among a number of processes (or agents) for a single data value. Some of the processes (agents) may fail or be unreliable in other ways, so consensus protocols must be fault tolerant or resilient. The processes must somehow put forth their candidate values, communicate with one another, and agree on a single consensus value”, according Wikipedia. Melanie Swam has made a compilation of principal ones in this presentation, and it is one of the best so far. What makes the blockchain consensus protocols so unique is that in conjunction with all the other tools and parts, it provides a computational platform for…. Autonomous Trust Systems. Today, the debate appears to be in some main roads:
- With monetary incentives, where Proof-of-work reigns;
- With a more random and open system, no direct monetary incentives (minting, or mining, where Proof of Stake is the exponent. You will hear CASPER as codename.
- New things, like Zero Knowledge Proof (the zCash protocol) are being created in such profusion, it´s another complex part of this equation.
- And to make even worst, they are talking about merging things. This video from Zooko Wilcox, explain in details. https://www.youtube.com/watch?v=PCW2EaBjVPs
- Outside of this main trends, we do have the proprietary ones (Dash, private blockchains and so).
- And finally, there´s a strange class of new protocols being developed using old hardware solutions called TPM.
Group 4: The assets
- Unique users, meaning that each user is a an asset. Hard to quantify to all blockchains and tokens know, but this bitcoin chart is a good example.
- CriptoCoins, since the original one, the sidecoins and the altercoins and the new new tokens.
- CriptoAssets, thar represents unique things in the physical world, like real state, car and even diamonds.
- Transactions, and this holds another interesting concept, the single ones can be handled naturally, but even the scroll accounts system can be handled by simple providers.
Group 5: Blockchain (or Distributed Ledger).
As simple as it can be, it´s only the database. Encrypted where it is needed, open where it´s needed. But, each protocol has its own format and RULES to keep it with full integrity.
- At the bitcoin protocol, since each coin is unique (no double spending), the rules were made to guarantee no one will violate the ownership.
- At the ethereum protocol, there´s a whole new word, the smart contracts, and it’s a so powerful metaphor it was even called the Skynet.
- And, of course, we have all the 1283109381313 new kinds of protocols, each one with its own version of database and rules.
Blockchain main node servers are complex environments, just like any enterprise application. Don´t make confusion on the blockchain data file and all the databases that are used to run a full node (or even worst, a mining pool).
Group 5: The Tech providers
The first subgroup in this one are the tech providers for the blockchain architecture itself.
- Off chain accelerators, like Raiden and similar companies;
- Frameweorks like BitCore and Zeppelin (among zillions of others).
- Dbs and other tools;
Of course, due our entire startup fever, those guys are very useful to the those in search of building new things, due the extreme and complex task that was to build apps, POCs and cases in the actual stage of maturity.
The second one is our former it players, trying to embrace and extend those platforms.
- Middleware companies, like Tibco, providing integration and APIs to their internal messaging system.
- The supporters of our called consortia, each one with its own FABRIC version.
- The development platforms (on each protocol-centric implementations)
- Cloud implementations (BaaS) like Microsoft and IBM.
The whole thing: The PURPOSE platforms.
Understanding the history of blockchains is a good start (sorry, link in Portuguese), but we still have another division to worry about. After all that was proposed, we have two main groups.
The open platforms (literally, distributed and autonomous), AKA the “public” ones:
- First, the only real protocol tested to death (and for almost 10 years now) is the Bitcoin protocol (BTC). It was imagined to be so armagedon-proof, for so long, and it´s so elegant, that´s hard to no refer to it when we want to describe the whole thing.
- The first of the still fresh kids in the block, is Ethereum. Not only the oldest one, but with all the attention they´ve got with the new “Ethereum Enterprise Alliance” , they are the closest one in both words (public and private).
- My second favourite is Dash, because of its structure on x11 and its fungibility. Besides that, by a strange coincidence, dash is working as the real DAO case. (4)
- zCash is the next interesting thing, and looks like it´s going to follow the steps of Bitcoin, creating sub-coins and other apps (5)
- RSK is my all-in bet this year, those guys are really geniuses, and (6)
The closed, more industry specific, consortia enabled platforms (literally, closed and with all participants authorized), AKA the “private” ones:
- Thought choice to pick but Hyperledger consortia is a huge project with support of several industry tycoons, specially IBM. With more cases, more funding and more players in all sides (enterprises, vendors and an open source community), is a leading promise.
- Second and only because is a single industry focused group, is R3 CORDA, a platform that has almost all the financial services players behind it.
- And them, we have a plethora of consortia building lots of stuff. Hard to see something out of this herd.
The secret sauce: The externalities players or Digital Services Players.
DAPs, or Decentralized Applications, is the tough concept to grasp. Once we understand that without a central hub (not even a platform business) value can be created and captured by a player, in an open ecosystem, it became clear. Until there, we have the traditional ones leveraging all the technologies above and finding funding and market space:
- Emphasis on the Ripple case, not only they´ve being under the radar building a real DAP, but also with all hands in a proprietary protocol, finally serving a very profitable market (inter-banking transactions);
- Next, we had the so famous remittances case. That had some companies, but was not stellar. A reflection about something meant to be open and disruptive interfacing with something extremely closed and controlled (FX markets and fiat money)
What else is the big question.
If you want a fat link, this review of 2016 is perfect. Read all of them.
If not, my friend Paul Sztorc had it in one phrase: “The synthesis of everything that I’ve written so far is that Bitcoin is a specific solution to a specific problem. Attempts to generalize Bitcoin’s “blockchain” to new areas will, in general, end in failure.”
And to close with a question, William Mougayar has lot´s of them for 2017.
Next article, let´s try to put some order in so much information!
Courtnay “CognoChain” Guimarães Jr. is a Digital Business Transformation Architect, futurist, writer and seasoned executive on the financial services market. Those days, he is a proud and beloved father of 3 shining human beings, love to surf technology innovation waves.
At the time of this writing, he´s paddling on the gig economy (no big brand behind the ideas)
(1) “Choice is an illusion, created between those with power, and those without. Look there, at that woman. My God, just look at her. Affecting everyone around her, so obvious, so bourgeois, so boring. But wait… Watch – you see, I have sent her dessert, a very special dessert. I wrote it myself. It starts so simply, each line of the program creating a new effect, just like poetry. First, a rush… heat… her heart flutters. You can see it, Neo, yes? She does not understand why – is it the wine? No. What is it then, what is the reason? And soon it does not matter, soon the why and the reason are gone, and all that matters is the feeling itself. This is the nature of the universe. We struggle against it, we fight to deny it, but it is of course pretense, it is a lie. Beneath our poised appearance, the truth is we are completely out of control. Causality. There is no escape from it, we are forever slaves to it. Our only hope, our only peace is to understand it, to understand the `why.’ `Why’ is what separates us from them, you from me. `Why’ is the only real social power, without it you are powerless. And this is how you come to me, without `why,’ without power. Another link in the Chain.”
(2) “It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy. Once it gets bootstrapped, there are so many applications if you could effortlessly pay a few cents to a website as easily as dropping coins in a vending machine.
(3) I do invest in a fund that invest in mining companies and in some ASIC players.
(4) Besides knowing Evan Duffield personally, I hold positions in Dash.
(5) Besides knowing Zuko Wilcox personally, I hold positions in zCash.
(6) Besides knowing the RSK partners personally, I´m a development ambassador of them in Brazil.