August 11, 2020

Bittorrent lessons for the crypto industry: “What rules are you breaking?” - Part 2

After the first material on the importance of Bittorrent - Just think a little about the popular topic of decentralization. What does decentralization really mean, on a concrete example of a blockchain, and what is it useful for? What's the point?

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Decentralization, at least as it is arranged in Bittorrent, comprises a combination of two qualities - technical and organizational decentralization.

Technical decentralization means that in the application or on the network there is no single point of failure that can be attacked, which will lead to hacking or shutdown of the entire system.

Organizational decentralization means that there is not a single person or organization that can be forced to compromise or disconnect the network.

In the case of the Bittorrent ecosystem, that's it.certainly there was a place to be. Bittorrent's distributed architecture with respect to client software, multiple torrent sites and tracking sites meant that as soon as a critical mass of people started using this technology, a single point of failure that could compromise or disconnect the network was excluded.

In addition, thanks to the development of technology onIn the early stages, a number of companies and individuals managed to develop all the necessary components to ensure the operation of Bittorrent. There was no vulnerable technical aspect that could be used, and there was not a single person or organization that could be forced to disconnect the network. It was indeed very difficult to censor the system, at least within the framework of democratic norms, which, of course, guided the most influential statesmen in the era of the early Internet.

All of this has spawned a critically important thirdcomponent - the ability to break the rules, which made this type of decentralization so intoxicating and exciting. While a simple decentralized architecture can be effective in circumventing many different network failures, the particular type of decentralization that was achieved in Bittorrent and Bitcoin has enabled rule bypass mode.

"Do not walk on the lawn"

In Bittorrent, this happened by accident. Bittorrent’s initial goals, unlike Bitcoin’s stated goals, were not explicitly intended to violate the rules. However, the violation of the rules occurred on an epic scale, in the form of a very wide distribution of copyrighted files. And this phenomenon has existed for a very long time, despite the fierce and well-funded opposition from copyright owners.

This view is widely applicable to Bitcoin andmany projects that are supposed to use blockchain. It is pointless to argue about what decentralization is or how decentralized various projects are and, in general, why it matters, not to mention what this decentralization does.

Decentralization in the sense in which it is applicable to the blockchain, in fact, is not connected with a multi-level infrastructure, separation or sharing of databases.

Decentralization in this sense means creating an impregnable system that allows you to freely break the rules.

That's why the blockchain embodied in Bitcoin or Ethereum is the most significant destruction technology. Once launched, it cannot be stopped, no matter what happens.

Without this kind of violation of the rules (whetherby chance or by design) it is quite difficult to imagine why decentralization in the blockchain in general matters. And, in fact, it is always a distributed data warehouse with a complex and slow update mechanism.

Therefore, despite the fact that architectureSome blockchains are useful, except for the lack of complete decentralization - they do not justify the wild excitement around the "biggest thing on the Internet." Indeed, the only valuable proposal that everyone seems to agree on with respect to the blockchain is that it is "censored". And this is important only if you have something that someone wants to censor.

In my opinion, the most interesting blockchain projects are those that allow you to break the rules.

So far, there has been only one serious use of blockchain technology - capital formation, mainly through the use of primary coin offerings (ICOs).

There is no particular desire to protect all that is bad that happened as a result of the ICO boom. But, two things stand out clearly:

  1. The ICO boom occurred in an unmanageable way, and even if only briefly, but was extremely successful in attracting billions of dollars to finance a wide range of projects;
  2. Currently, ICOs have almost completely stopped as a result of pressure from the SEC and other regulatory bodies around the world.

In more detail about methods of protection against malicious ICOs in the article:

Step-by-step instruction: determine the scam among ICOs and cryptocurrencies

Besides this example, there are othersplanned projects, but, in fact, there are very few violations of the rules. After all, it seems reasonable that if the rules are violated, then somewhere this should concern someone. At the same time, there is little evidence that anyone directly “felt the intensity” of the rule violation by decentralized blockchain systems, just like the leaders of the media industry once felt the heat of rule violation occurring in the Bittorrent ecosystem.

Not that every blockchain project shouldbreak the rules - there are many important projects that exist to create the foundation for this industry. But, one can quite confidently state that the gold in this gold rush is the ability to create systems without centralized control, which allows participants to violate the rules with impunity. When observers condemn the lack of acceptance, the reason this adoption is absent is that there are very few projects that really allow you to circumvent the rules that many people would like to break. In general, the rationale for the usefulness of ongoing projects is clearly absent.

After the advent of Bittorrent - millions of peoplethey just downloaded the latest movie for free from The Pirate Bay without any DRM shell spoiling their pleasure, without that annoying page “you will go to jail if you violate copyright”, which every legal viewer saw, but it was removed from all pirated copies. For some time, the Bittorrent experience was qualitatively better than any other online experience. And, most importantly, it was free.

Closest to this is now the ecosystemblockchains. This is a legion of “investors” hoping to get rich expecting some kind of killer app. But, the result of the expectation depends on some utility that arises elsewhere. Until such a utility arises, the ecosystem will remain vulnerable to accusations that it is simply a Ponzi scheme, and could be completely destroyed.

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Public blockchains best understand howplatforms for breaking the rules. After all, if the rules are not violated, there is a temptation to ask why is a decentralized architecture the best option for this project?

As an investor, you should ask any application or dApps on top of these platforms - "What rules are you breaking?"

The third material will be devoted to the problems of goals, complexity costs and management paradox.

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