“Man looks in the abyss, there's nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss."
-Hal Holbrook in Wall Street
“Everybody has a plan until they get punched in the face.”
I am starting to get a little worried and quite bored by the whole entire bitcoin/blockchain conversation and the direction it is taking. Daniel Kahneman warns of the dangers of overconfidence. The overconfidence effect is a well-established bias in which a person's subjective confidence in his or her judgement's is reliably greater than the objective accuracy of those judgements, especially when confidence is relatively high. Throughout the literature overconfidence has been defined in three distinct ways: 1) overestimation of one's actual performance, 2) overplacement of one's performance relative to others, 3) the excessive certainty regarding one's beliefs- called overprecision.
The amount of hubris in this space is breathtaking, let’s all take a step back and admit that we don’t know the future, let’s also take another step back and admit that the banks aren’t going anywhere. In fact if blockchain succeeds in its core mission it will empower the banks like no time in recent history.
In order to move the conversation forward (at least in my own mind) I have started asking questions. Some I think I have answers to and most I do not. The intention here is to list these questions on a high level as a thought provoking process.
- Can decentralization work in finance where trusted third parties and governments and super stringent regulation aren't going anywhere?
- Private blockchains don't eliminate this problem as one of the nodes will surely be a regulatory body or they will surely be involved in some way and how will clearing and settlement work?
- Bitcoin's scaling problems and decentralized nature (censorship resistance) make it a non-starter for banks and financial institutions so why even target them?
- How do you come to agreement in a consortium model?
- Do some players have more power?
- Who does and doesn't have read write functions?
- Will private chains be any different than current banking infrastructure which has left a ton of legacy software built on top of many different architectures. Will we have legacy chains?
- How will all of these chains interact within a bank and between banks?
- How do they integrate?
- The same can be said of the consortium model and how it interactions. If you are not part of the consortium does this mean you are like the kid who didn’t get picked to play football?
- How does that even make sense when financial institutions interact with thousands of different parties?
- Is building from scratch too risky?
- What happens to all the information that is still on legacy systems?
- How does this migrate over?
- The financial world is a complex system, how is risk modeling being calculated into this equation particularly for payments, clearing and settlements functionality as we get to real time settlement?
- The same can be said of regulatory and compliance risk?
- Will people be given one identity or multiple identities depending on what chain they are using with whom? If the answer is no, than the world is flat?
- Is reddit the best communication platform for having these discussions? I think not.
- Does a new one need to be created? I hope so.
- Is Bitcoin trying to be too much?
- Is money and payments the the best use case for the bitcoin technology?
- Is it straying too far from its original vision?
- Does it make sense using POW to put assets of large value on a it especially if it makes the likelihood of 51% attacks frequent?
- Clearly the mining oligopoly is a problem and will continue being a problem as long as hashing power is concentrated in a few hands. How does is bitcoin able to maintain being a decentralized entity while this continues being the case?
- What will the incentive structure look like after the the 2016 halving?
- Will miners continue to be incentivized?
- Sidechains and the lightning network need to go offchain with assets how secure is this?
- Should a small cadre of developers and companies and miners and VCs actually control the direction of the greatest decentralization project in our lifetimes?
- “Does Bitcoin need to go back to being Bitcoin, since as per Satoshi's original vision it seems to have lost its way? Has regulation killed the giant experiment? Irrational expectations? Greed? Something else?”
- Which leads to a more philosophical question and a really important one can regulation and decentralization co exist? Can they even be in the same room together?
- Is focusing on banks needs instead if the peoples needs the right approach for bitcoin? The word bank is mentioned twice in the whitepaper and finance is not mentioned once.
- Are the very offramps that people so desperately want, killing the Bitcoin Experiment?
- Bitcoin is a technology solution to global fiat problems not a solution that is in the interest of the powers that be.
- How transformative will shared ledgers actually be? Is this just an evolutionary step?
- Where is the real value proposition? Is it the shared ledger/blockchain itself or the tools and apps that will be built on top of it? If so how do those building the bridges monetize?
- Where are the recurring revenue streams going to come from from the companies building these chains? Will it be a consulting based model? Are they doomed to be the fintech versions of Razorfish?
- Can chains be built melding pieces of bitcoin and shared ledger technology. Does this make sense? Can it even work?
- Can the adults in the room please stand up on both sides and engage in intelligent dialogue? I think there is the a lot to be learned here.
Remember this whole thought experiment would not exist without Bitcoin and its underlying technology.
At this point there are more questions than answers. So everyone needs to stop pretending they know the outcome, start a truly open and intelligent dialogue and just build.