Here Comes Ethereum, an Information Technology Dreamed Up By a Wunderkind 19-Year-Old That Could One Day Transform Law, Finance, and Civil Society

Can Ethereum help eliminate corruption and bureaucracy in the developing world?

Jim Epstein

Ethereum, the brainchild of wunderkind software developer Vitalik Buterin, who was just 19 when he came up with the idea, is the most buzzed-about project right now in the cryptocurrency community. It has attracted an all-star team of computer scientists and raised $18.4 million in a crowdfunding campaign—the third most successful of all time. And now, according to the official Ethereum blog, it's on the verge of being rolled out to the public.

Ethereum's developers use a rolling ticker tape of bold tag lines to describe what they're creating, including a "Social Operating System for Planet Earth," and "the Upcoming Decentralization Singularity."

So what is it?

Ethereum is a programming language the lives on top of a "blockchain"—a concept invented six years ago with the launch of Bitcoin. A blockchain is essentially a database that's jointly maintained on the personal hard drives of its users—sort of like a shared Microsoft Excel spreadsheet. But transactions recorded to a blockchain are time stamped, fully transparent, and protected from tampering by hackers and thieves through an ingenious system that utilizes cryptography and community consensus. Blockchains make it possible, for the first time in history, to participate in a complex marketplace without the need for a mediating third party. The blockchain is what allowed Bitcoin to become the first form of virtual money that can be exchanged without a bank serving as an intermediary. (Read Ron Bailey's recent piece on the blockchain's transformative potential.)

Ethereum is an effort to apply the blockchain to a broad range of uses, though it's not the first such attempt. Projects like Counterparty and Colored Coins have come up with clever methods of tailoring Bitcoin to facilitiate projects like a blockchain-based stock market. But Bitcoin's blockchain was designed to handle the exchange of money, and retrofitting it to other uses requires some programming jujitsu and has inherent technical limitations.

Ethereum tries to solve this problem by layering a powerful programming language on top of a blockchain, giving it all the versatility that Bitcoin lacks.

"If you think of Bitcoin as a decentralized version of Microsoft Excel, then Ethereum is a decentralized Excel where we've made the visual basic macros functional," says Vinay Gupta, the project's release coordinator. To expand on Gupta's analogy: With the Bitcoin blockchain, each cell on this hypothetical Excel table holds just a number; on the Ethereum blockchain, each cell is home to an entire computer program.

So what's the advantage of hosting computer programs on a blockchain? They become much cheaper to operate because no third-parties are required to oversee their operation, and they become essentially incorruptible because their functioning is fully transparent.

Ethereum's developers believe their project will lead to the proliferation of programs they call "smart contracts," in which the terms of an agreement are written in code and enforced by software. These smart contracts could carry out the instructions of a complex algorithm based on data feed—such as a stock ticker. They could facilitate practically any financial transaction, such as holding money in escrow or dispersing micropayments among autonomous machines. They could be used to create a peer-to-peer gambling network, a peer-to-peer stock trading platform, a peer-to-peer social network, a prenuptial agreement, a will, a standard agreement to split a dinner check, or a public registry for keeping track of who owns what land in a city.

Gupta predicts that these smart contracts will be so cheap and versatile that they'll do "a lot of things that today we do informally," and take on a lot of the "donkey work of running a society."

There won't be any big changes on the day—or year—after Ethereum is released, in part because many smart contracts will work best when the people using them keep their money in Bitcoin or other forms of programmable money. That's because the fiat money world still depends on trusted third parties. For example, a will written as a smart contract can't be fully automated if the money to be dispersed is entirely in U.S. dollars; a banker would need to cooperate. But Gupta predicts that fairly soon we'll move to a world in which a critical mass of people maintain a wallet with at least a few hundred dollars worth of cryptocurrency, facilitating Ethereum's rapid integration into the real economy.

Ethereum-based public databases, which don't depend on widespread use of cryptocurrency, could have a more immediate impact, particularly in the developing world. Take land ownership. U.S. cities maintain software databases of who owns what land, and since our public institutions are relatively functional, these systems work well enough that there isn't a pressing need for them to live on a blockchain.

But in the developing world, government's basic functions are often hobbled by corruption and bureaucracy. So a public land database on a fully transparent and community-operated blockchain could make the real estate market functional in these cities. As with Bitcoin, the big challenge ahead for Ethereum is getting people to use it.

Comments

[Pro Libertate]

Perhaps the U.S. government could use this. Nah.

[Sevo]

Please NO!
Obo will turn it over to the FCC, 'cause commercial clause and we'll have to live with the result.

[mad.casual]

Agreed. I'm beginning to loathe how the cryptocurrency and similar concepts say "without a third party" when they really mean "with a *massive*ly decentralized third party".

It really is very "out of sight, out of mind." abstracting human behavior away with technical engineering.

[Loernvaskoncna]

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do,

http://www.work-cash.com

[Loernvaskoncna]

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do,

http://www.work-cash.com

[tretrusuna]

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Try it, you won t regret it!.

http://www.jobs900.com

[The Laconic Esq]

Welp, I'm lost. So we must be getting pretty close to the Singularity then.

[Sevo]

I sure can't say I've got a handle on it, but I'm betting it'll become more clear with other explanations and applications.

[Dweebston]

What we need... are more metaphors.

I especially liked describing it as a shared spreadsheet with VB macros! Er, come again?

[UnCivilServant]

Especially since VB Macros are disabled as a security feature due to their past as malware vectors.

[UnCivilServant]

I don't trust it.

[John]

But in the developing world, government's basic functions are often hobbled by corruption and bureaucracy. So a public land database on a fully transparent and community-operated blockchain could make the real estate market functional in these cities.

I am sure it could, IF the government would actually enforce whatever it said such that people had clear title to land. Of course if the government were willing to do that, they likely wouldn't need the system in the first place and would be doing it the old fashioned way. These county's don't have horrible system of land titles because the poor brown people are just too poor and incompetent to run a country clerk's office. They have horrible system because the government and elites like it that way. No fucking hipster with a clever bit of code and some bitcoins is going to change that.

Really reason? Really? He is a millennial, he writes code, there is bitcoin involved, it might solve all of the world's problems!!!

[The Laconic Esq]

I'm detecting an undercurrent of skepticism here.

[Dweebston]

I tried to parse his statements, but he didn't use nearly enough examples vaguely analogizing one technology in terms of another. How am I supposed to understand content unless it compares electronic keypads to coffee makers, but with, like, USB ports on the side?

[Rasilio]

Yeah, the idea that running a land ownership registry from this doesn't require a trusted 3rd party is kinda funny because unless the police and courts are willing to back up your claim all the deeds and registries in the world won't help you maintain ownership of that property

[bassjoe]

Yeah, this point has actually been presented to the company and the response i s "eh, we're trying to totally change the world". Okay.

[Sevo]

Rasilio|3.19.15 @ 12:32PM|#
..."because unless the police and courts are willing to back up your claim all the deeds and registries in the world won't help you maintain ownership of that property"

How about if that d/b is well enough distributed that nearly everyone would know if someone was stealing the land?
If might have the capability of enforcement through public knowledge. Maybe.

[John]

How about if that d/b is well enough distributed that nearly everyone would know if someone was stealing the land?

They know that anyway. And it doesn't matter. Moreover, to even get to that point, you would have to have agreement on who owns the land in the first place. And these country's don't have that and that is the whole point. I don't care what kind of system you set up, it won't do you any good if you can't figure out who owns the land now. So I give you the land under this system. Okay, you own it clearly. Big fucking deal. Who says I ever owned it in the first place when I gave it to you? Your claim and ultimately the system's claim is only as good as my claim. And I don't have one because the system is set up such that I can't have one.

[Sevo]

You got a problem John.
That condition existed at the start of any land-ownerhip system everywhere in the world, and it's managed to sort itself out.
I don't know the answer, but I know it has.

[John]

Sure it did. And it sorted itself out mostly by declaring one party the owner and not worrying about who it was screwing.

We don't recognize Spanish land grants anymore or worry if the owners of them got fucked out of their land after the Mexican American war. That is how you do it of course. That however is not going to happen in these countries.

[Apatheist ?_??]

Actually, although it is complicated, Spanish and Mexican land grants were recognized and adjudicated here in Texas. Partially because the American settlers were also there on Mexican land grants before the revolution.

[SKR]

And more to the point, if you have a claim on the land and I have a claim on the land and my cousin is the governor of the province guess who wins?

[Heroic Mulatto]

I don't know. Poor Peruvians did a pretty good job with an informal system of land registry that operated outside the stifling bureaucracy of their government.

[KDN]

That sounds like an interesting concept. I wish I could read more about it.

[Heroic Mulatto]

I'm lactose intolerant, so call me DairyFree.

[Swiss Servator... Switzy!]

SF'd...

[John]

You messed the link up. I don't doubt they did. It is not hard to set up a land registry. We have been doing it for centuries. You don't need any smart bits of code. You just need people willing to do it and a government willing to enforce it.

Your article, assuming it says what it appears, makes my point. The problem isn't that people in these countries are just too stupid to set up a land registry system and need smart, enlightened young millennial white people to show them. The problem is the governments in most of these places won't allow it. Get the government out of the way or better yet get it to help by adjudicating and enforcing clear title, and as your link shows, they will do it.

[Heroic Mulatto]

or better yet get it to help by adjudicating and enforcing clear title, and as your link shows, they will do it.

Right, and that's exactly what De Soto did, he got the government to recognize the informal land claims, which in turn spurred development of the property as the owners didn't have to fear official sanction if they wished to expand in a conspicuous way.

[Free Society]

The problem is the governments in most of these places won't allow it. Get the government out of the way or better yet get it to help by adjudicating and enforcing clear title, and as your link shows, they will do it.

That's right John. And once we get monopolist property expropriators out of the property guarantor business, what use is there for government?

[John]

To keep them from coming back I suppose. You guys are so naive it is almost cute.

[Free Society]

You're right John! The best humanity can do to guarantee property titles is hand a monopoly of that economic service to an institution that has a monopoly of legal property expropriation. Nothing naive about taking that for granted.

[jay_dubya]

Might makes right, so why bother? Lets just shut down the website and go home guys. John called our bluff.

[Free Society]

is kinda funny because unless the police and courts are willing to back up your claim

solved easy enough when property claims exist in a nearly indisputable database like a blockchain and enforced by non-monopolized courts and enforcement agencies.

[John]

Stop writing stuff like that Free society. I can't spit anymore coffee on my computer. Let me put it in simple terms for you. I claim this land. If you or any of your little code writing friends come on it, I am going to blow your fucking head off. Now get off it and don't come back.

Have fun taking all of my bit coins and telling everyone not to do business with me. Meanwhile, I will be taking the land and everything on it.

[Free Society]

If you or any of your little code writing friends come on it, I am going to blow your fucking head off. Now get off it and don't come back.

Right, because in the absence of a government monopoly, there would be no one providing such a service at all. I love that all of your objections are preloaded with your favorite assumptions about the argument you're distorting.

[John]

Right, because in the absence of a government monopoly, there would be no one providing such a service at all

Of course there would be. And that would be great until you realized I am the guy who provides the services. You are so sure governments are going to be corrupt, yet can't seem to understand these services won't be the same way.

[Free Society]

I already know that you don't understand the difference between theft and voluntary transactions. You really don't have to keep driving home the point, I get it.

[John]

No Free Society, I do understand the difference between theft and commerce. You can't seem to understand the possibility of theft existing and what that possibility means.

[Cytotoxic]

Anarchism can't work, end of story.

[Pope Jimbo]

So John is secretly Dogbert?

http://dilbert.com/strip/1989-10-20

[fish]

There are worse comic book character alter egos!

[John]

Non monopolized enforcement agencies. Yeah, I believe it is called the Gambino family. What the fuck universe is it where such agencies would not just degenerate into corrupt protection rackets as bad as the worst government?

Live on rainbow puppy island must be so sweet.

[Free Society]

What the fuck universe is it where such agencies would not just degenerate into corrupt protection rackets as bad as the worst government?

The market.

[John]

Really? Last I looked there was one hell of a market for contraband drugs. And yet, that is exactly what happened. When you can't call the cops, you have to call someone. That someone is whomever has the guns and the will to protect you. That is all mafias are, protection for people who can't get protection from the cops because what they are doing is illegal. Get rid of the cops and no one can call the cops. Then, we are all calling the Gambino family or some equivalent to keep from getting robbed.

[Free Society]

Really? Last I looked there was one hell of a market for contraband drugs. And yet, that is exactly what happened. When you can't call the cops, you have to call someone.

Ahhhh. So the market doesn't work when left to it's own devicess and for evidence you offer a market that was not left to it's own devices. No market is more regulated than an illegal market. Arguably no market in human history has been more regulated than the illegal drug trade in the US and elsewhere. Great analogy though, John. I hope you have lots more.

[John]

The market works great for drugs. Who said the market doesn't work?

No market is more regulated than an illegal market.

No. It is completely unregulated. I am already breaking the law by even being a part of it. Therefore, the normal contraints of behavior no longer apply. If I am buying a legal product, I can't just rob you because you will call the cops. If I am buying an illegal product like drugs, I very well may rob you if I think I am bad enough to do it because you can't call the cops. What are you going to do when I rob you? Call the cobs and ask them to get your drugs back? Hardly. So in order to do business, you have to have some way to deter me from robbing you. You can do some of that by arming yourself. But since you can't be on guard all of the time, you need more. And that more is a larger organization that will deter me from robbing you by promising to hunt me down and kill me if I rob you. And in return for that protection, you give the larger organization a tax. And this is how organized crime works. It is nothing but a shadow government for people who operate outside of government protection.

[Free Society]

No. It is completely unregulated. I am already breaking the law by even being a part of it.

Ergo, it's regulated by law.

What are you going to do when I rob you? Call the cobs and ask them to get your drugs back? Hardly.

Correct that's not an option because the monopoly enforcer of property rights has a policy of not protecting certain property rights. In fact it's sets up strenuous penalties for owners and distributors of such property. You can't call that unregulated. They call them 'controlled substances' for a reason.

You really don't need a paragraph of text to repeatedly state how you don't understand basic economic and logical concepts. The first few sentences conveyed that information perfectly well.

[Free Society]

statutory law to be precise.

[John]

Ergo, it's regulated by law.

No. It is outlawed. Regulated things are legal things that are controlled. Drugs are not that. They are outlawed and to the extent they exist, they exist outside of the law and any regulation or government control. The FDA doesn't control how pure the heroin you buy on the street is the way it does legal pharmaceutical drugs.

Correct that's not an option because the monopoly enforcer of property rights has a policy of not protecting certain property rights. In fact it's sets up strenuous penalties for owners and distributors of such property. You can't call that unregulated. T

So? I can't get the government to help me protect my property, so I pay a gang to do it. If the government didn't exist at all, I would be paying a gang to protect any property I have.

And I understand economics perfectly. I just apparently can't seem to be able to explain it to you.

[Free Society]

No. It is outlawed. Regulated things are legal things that are controlled. Drugs are not that. They are outlawed and to the extent they exist, they exist outside of the law and any regulation or government control.

The absolutely do not exist outside of government control. As evidenced by the thousands upon thousands upon thousands of prosecutions for participants and consumers of that industry.

And I understand economics perfectly.

Okay then.

[Grand Moff Serious Man]

I think you are being a bit too harsh on Reason and the kid.

You are correct that governments still need to honor the law and the contracts but how many governments out there are really brazen enough to, when confronted with ironclad proof that the land belongs to so-and-so, tell them to fuck off? That's a great way to foment a revolution.

Kleptocracies very much need the pretense of being legitimate. If they didn't, why would so many bother to rig elections?

[Dweebston]

Brazen land grabs take place with some regularity, but it's stressed up as a taking or forfeiture. John is absolutely correct in that respect.

[John]

Geoff,

That is rediculous. You argument assumes that the public will wake up one day with a commitment to property rights such that they will revolt over them not being honored. If that were the case, there wouldn't be a problem in the first place.

You think the guy who claims ownership of land under this has a right to keep it. That is nice. The guy who is trying to steal it or is being paid off by the person who wants to steal it, won't see it that way.

This system is good right up until it runs afoul with the government or local thugs' interests. Then it is as useless as any other piece of paper. Anyone who thinks this system can combat the property ownership problem in the third world doesn't understand the nature of that problem or what is driving it.

[mad.casual]

This system is good right up until it runs afoul with the government or local thugs' interests. Then it is as useless as any other piece of paper.

But it's all electronic, so it saves paper!

[Rasilio]

Most of them actually.

Sure contracts like that are pretty secure in the OECD countries but they only account for around 1/4th of the world, in the other 3/4ths of the countries the validity of your deeds is basically tied to how strongly you support the ruling party.

[John]

Exactly that. These governments don't want clear ownership and contract rights because unclear ones open up the opportunity for corruption.

[Free Society]

And despite this I'm assuming you still say tax funded institutions of security and law are the best we can do.

[John]

If you can get good ones like we have largely had, yes they are. Sometimes there are no perfect options. Life is like that.

[Free Society]

You are correct that governments still need to honor the law and the contracts but how many governments out there are really brazen enough to, when confronted with ironclad proof that the land belongs to so-and-so, tell them to fuck off?

Yes the potential of this software isn't that it will suddenly invent property titles that already exist. It's that it will add transparency to the system that force our territorial monopolies of property expropriation (governemnts) to be better at serving consumers. Better yet, it could help to whither the government's monopoly in property recognition altogether.

[kilroy]

No fucking hipster

Why is this guy a Hipster?

[Dweebston]

It's John. Any millennial with millennialist aspirations is a hipster.

[Citizen Nothing]

And those fucking kids should get the fuck off his lawn.

[Almanian!]

Fuckin' A right!

/fellow grandfather

[Harun]

I wonder if a country like Ecuador would adopt bitcoin rather than the dollar.

Would it ever happen? Maybe. I suspect if we had more micro-polities, they might be open to trying something like this.

[lap83]

You know who else thought wunderkinds could transform civil society?

[UnCivilServant]

JFK?

[Xeones]

Nicholas of Cologne?

[sarcasmic]

Hanna-Barbera?

[PapayaSF]

The Young Turks?

[Almanian!]

Ford Motor Company when Hank the Deuce took over after Henry almost ruined the joint?

[Sevo]

Parker and Stone, that's who!

[Swiss Servator... Switzy!]

The Junior Justice League?

[sarcasmic]

Isn't that a Matt Damon movie?

[Hugh Akston]

You're thinking of the Talented Mr. Ripley.

[Almanian!]

MATT DAMON!

[bassjoe]

Yeah, I've been following this for a while and they're over promising, I think. Their grandiose rhetoric is also quite annoying which might be coloring my opinion. It's like the company is run by entitled Millenials...

[jay_dubya]

The impprtant part of this is not land titles but cash transfers on top of a preagreed action. Its a secured transaction system and repository. Removing that from the government is incredibly valuable as it allows systems of trust to be built outside of govt and large commercial entities captured by govt interests like banks, credit companies, etc.

For all of Johns bloviating about how this wont keep a Somalian warlord from stealing someones farm, it would be immensely valuable to a wikileaks, or pornographer, or literally ANYONE THAT THE STATE HAS EXTRALEGALLY PUT THE SPURS TO BY REMOVING THEM FROM MARKETS.

[Harun]

So, its closer to a algorithmic letter of credit?

Letters of credit facilitate trade, but are now too expensive.

That would be a good first use.

[Brett L]

Does blockchain still assign official blockchain by strict democratic consensus? Or did they fix it to create some minimum but high level of consensus necessary to continue processing?

[Dweebston]

I'm a total ignoramus on this subject. Why does it need any democratic influence? It makes a certain amount of sense if you're allowing neophytes to move into your commune, but when your commune is nigh-infinite...

[John]

Maybe I am misunderstanding this but doesn't So a public land database on a fully transparent and community-operated blockchain could make the real estate market functional in these cities. effectively mean that we will settle property disputes by community vote?

[Almanian!]

we will settle property disputes by community vote

*furiously UPTWINKLES*

[John]

Yeah, that will work out well.

[Fizban]

+1
That made pizza launch from mouth toward monitor.

[Brett L]

No. Not really. There are lots of reasons for the blockchain on my computer not to agree with yours. Maybe I was offline for several hours and I read a packet wrong. But there are rules for resolving honest differences. The one most dangerously available would be a pervasive attack that inserted a false blockchain onto enough systems to create a new consensus. One that changed the historical record for what happened. For instance, assigning bitcoins to someone else than the person to whom they should be issued. Low probability of success, but a glaring problem of consensus.

[John]

The problem is that we are not talking about bitcoins. We are talking about actual physical things. Someone has to own the land and have the right to occupy it. We can't agree to disagree and just split it and create a new virtual piece of land that you can own too. We either have to agree who owns it, or someone has to force the other, using a gun and the threat of death if necessary, to live with with losing.

[Brett L]

I agree. That's a whole separate problem. I'm talking about whether your notarized document will even be considered valid. What if you could create a whole chain of valid titles and invalidate all the valid ones.

[jay_dubya]

thats what you are talking about. a land TITLE is not a physical object. note how in any system of ownership a title can transfer while nothing happens to the physical object? youre complaining that if a transparent and near corruptionless sytem exists for transfering title it would not prevent violence and theft. cheers. this is a computer program, not a private police or military.

regardless, stop it with the land titles if you are having such an issue comprehending them. this provides am automated payment mechanism for ANY transaction that can be programmed. Do you have any idea how pwerful visa, paypal et al are? somwthing like this has the ability to make them utterly pointless. Ebay for example could be programmed to sit on top of this to release funds when it receives a shipping confirmation. Think of all the ways money changes hands on the entire fucking internet on an automated basis - this technology has the capacity to disrupt all of that.

governments wield vast, extralegal pressure by putting pressure on payment processors. they control the flow of billions of dollars. applications relying on this mechanism could be subject to no such pressure.

if your "property" is entirely fungible on the internet and your "money" is stored in a decentralized network of computers all of the complaints you have re: land titles find no purchase.

[ksk]

What about the AND in this statement

"...and protected from tampering by hackers and thieves through an ingenious system that utilizes cryptography and community consensus."

[Brett L]

Sorry, by "strict democratic" I mean that the "official" blockchain is the one that 50%+1 agree on. This is a smaller problem as your sample size scales up, but it still is a very low bar for basing society's function on. Something like 90% would be better, but then you need far more complex rules for unwinding what would happen if it fell below that number, which could happen if a large bloc of new users joined quickly. Its a hard problem, but probably worth solving a little more carefully.

[Dweebston]

Still confused. What is being voted on? Or are you just describing the procedure of communally deciding tweaks to whatever function the blockchain serves?

[Brett L]

The latter, but I am on the understanding that there is no "master" blockchain. So people keep talking about tweaks to the blockchain going forward, but there could be an entirely different solution to the blockchain that changes, for example, whether a time- stamped transaction would be validated.

[np]

Just to be clear Ethereum uses its own blockchain, not bitcoin's.

But yes, bitcoin still operates by a consensus of miners. However, it's always possible to fork blockchains and there are soft forks and hard forks. If there's ever a large enough group that disagrees with something in the protocol, a hard fork could be done and transactions of the old blockchain would continue onto its own seperate one.

[Brett L]

Understood, but blockchain logic is blockchain logic. It doesn't matter which one you use.

[np]

There's no universal blockchain logic though, other than being distributed and using cryptography. It doesn't necessarily have to be consensus driven, it's just that most are. There are more complex schemes like with Darkcoin's that has auxillary nodes other than the mining/processing nodes of the blockchain that form "masternodes" for example

[Brett L]

Okay. That's what I was asking. So there are multiple consensus logics across different blockchains, even though they all are distributed and consensual. Thanks.

[rocks]

"There's no universal blockchain logic though"

That is correct and that is why we have tons of altcoin copies.

But once you or a group decide and agree on a specific blockchain for a specific activities, then the blockchain becomes a very secure and autonomous mechanism for a large world of transactions.

For example a corporate could issue stock on blockchain A and pay dividends to owners through that. Now anyone could possess and transfer "ownership" of that corporation and it's profits through the blockchain.

Same for land, a given nation, state, city or community could decide that blockchain B represents land ownership for a specific area. Now anyone could possess and transfer ownership of that land through the blockchain.

The list goes on and on.

Essentially what we are moving towards are Decentralized Autonomous Corporations that fully replace roles typically filled by governments, with automatic rules based systems.

This will be the greatest weapon we've had against the state in generations.

[John]

Sure and those new organizations won't be just as bad or worse than governments. I swear to God I could lock some of you people in Gulags and you would think it was fucking great as long as my organization was incorporated.

[Automata]

You're missing the Decentralized part, John. Quite vigorously.

[psCargile]

You can decentralize all you want, but cabals and cartels are going to form eventually because there are always going to be people that seek power and desire to steal the value of others insteading of generating their own.

[ksk]

Would Net Neutrality and the FCC have anything to say about this?

[Ichabod]

It's not like 51% is anything special (except for purposes of malicious miners being statistically likely to prevail in the long run). A consensus of anything less than a very high number of nodes, miners, and businesses would likely crush the value of BTC and destroy potential faith in its future success (as a discretionary commodity currency, it can only be based on subjective value/faith of users).

My understanding is that if 60% of nodes/miners wanted to fork to a new protocol, the 40% would be free to remain in the previous protocol. The fracturing of the economy would cause a substantial market crash (unless, one of the forks was implementing a very well-trusted change, like fixing a fatal vulnerability).

[Almanian!]

Can Ethereum help eliminate corruption and bureaucracy in the developing world?

No.

I mean, FUCK no.

That is all.

[John]

Yeah, Fuck no. These people are such children. They really have no idea how the world works, what it is like or how it got that way.

[Swiss Servator... Switzy!]

Oh come now, the rapacious Afghan politicians and warlords I met - they would be no match for ...*snort*... HAHAHAHAHAHAHAHAHAHA.

Dang. Almost finished that one with a straight face.

[Ghetto Slovak Goatherder]

The only thing I got from this is that people are incredibly inventive individually, and that governments could never, ever, ever, do something this creative.

[Swiss Servator... Switzy!]

Nor would they want to ...

/Most Transparent Evah

[John]

Or in other words, they are smart people who have no idea how the real world actually works.

[Ptah-Hotep]

Or in other words, they are smart people who have no idea how the real world actually works.

Sounds about right. But I will give them props for thinking about it.

[ChrisO]

In theory, I like the idea of the "smart contract" they're talking about. Problem is, here in the real world of contract law, the issues in contract disputes are usually about dueling interpretations and ambiguity. A poorly written contract does not magically lose its ambiguity because it's created and enforced on a peer-to-peer network.

The only thing Ethereum would theoretically solve is the expense and difficulty of enforcing a contract against a lawyered-up defendant who refuses to perform on their obligations.

[John]

Exactly ChrisIO. And it would only do that if the dispute was over something virtual. This system isn't going getting your hard currency back or making him perform or give you some other tangible property back.

[ChrisO]

Not necessarily, John. If both parties agree to the use of virtual currency (and that seems almost a prerequisite), then enforcement would be automatic and instantaneous. Conversion of virtual currency into hard money follows naturally from that.

Such a contract would have to have liquidated damages provisions to ensure performance of non-monetary obligations. This starts to edge into conflict with real-world laws that restrict liquidated damages, of course.

[John]

Yes,

If we use virtual currency, you can take it. But that would make the dispute over something virtual. Unfortunately most contracts concern more than just virtual currency. And to the extent that you can use virtual currency as a bond or surety against my defaulting, big deal. We can do that already with real currency. You telling me that there is this new cool thing called "putting a hold on my credit card".

[Free Society]

At it's most basic level, it's a contract protocol. The beauty of it is that you can put the virtual money into a virtual escrow that isn't disbursed until the terms of the contract are met. Of course it doesn't wholly eliminate the potential for dishonesty in commerce, that's not what makes it special. What makes it special is the automation and transparency of the process, which of course leads to more honesty and a streamlining of contract enforcability. Clearly evident rule breakers become pariah quickly and automatically.

No one is claiming that virtual currency is the first money to ever exist. It's just better money, unquestionably better than banking cartel fiat money.

[John]

It's just better money, unquestionably better than banking cartel fiat money.

So made up money on a server run by the people who made it up is better than made up money backed by people with guns and the ability to use them?

Come on free Society, you are better than that.

[Free Society]

So made up money on a server run by the people who made it up is better than made up money backed by people with guns and the ability to use them?

Yes money brought into existence by the free market is better than money brought into existence by a massive amount of extortion and theft by political institutions. For a brief minute there I really did think you were better than that.

[John]

You live in a fantasy world. Extortion and theft is a great way to make a living. If it wasn't, so many people wouldn't be doing it. And there is nothing sacred or pure about the "free market". In fact there is no such thing as the "free market". The term means a set of laws that describe how people behave. Saying something is created by the "free market" is like saying "Newtonian Laws of gravity" created something. it sounds nice but it doesn't really use the term properly.

There is nothing that says bitcoin can't be debased and manipulated for a few people's benefit than any other currency. There is nothing magic about something being done outside of government. It might be good but it might be bad too.

[Free Society]

You live in a fantasy world. Extortion and theft is a great way to make a living. If it wasn't, so many people wouldn't be doing it

And people like you wouldn't be doing mental gymnastics to justify it, I know.

And there is nothing sacred or pure about the "free market".

There is actually something sacred about voluntary human interaction, it's "freedom". There is however nothing sacred about a system of legitimized aggression.

In fact there is no such thing as the "free market".

Derp.

Saying something is created by the "free market" is like saying "Newtonian Laws of gravity" created something. it sounds nice but it doesn't really use the term properly.

Oh I see. The bitcoin platform was developed and used under the auspices of the government and not a system of uninhibited producers and consumers. Good to know, you're analysis has proven to be valuable... as memorial to unthinking cretinism.

[John]

I am not justifying extortion. I am just pointing out that it often works. And there isn't any such thing as the market in the way you use it. The market doesn't create shit. People create things. All the term "market" is is a term used to describe how people's interactions work.

And I have no idea what your last paragraph is even saying. And just because bitcoin is a decentralized system doesn't make it immune from fraud or collapse.

[Free Society]

am not justifying extortion. I am just pointing out that it often works. And there isn't any such thing as the market in the way you use it. The market doesn't create shit.

Good lord. "The market" is shorthand for a decentralized system of producers and consumers working in a decentralized sync to produce value. I'm using it perfectly fine. If you want to play semantic games I'll join you and start wasting both of our time lecturing you about how "countries don't back shit, people back things". Or you could grow up, put on your big boy pants and actually address the point instead of deflecting.

[Free Society]

This here is a real gem that display how little you understand that which you so vehemently oppose

There is nothing that says bitcoin can't be debased and manipulated for a few people's benefit than any other currency.

Yes there is actually. There is a maximum number of bitcoins that can possibly exist. That's only the cornerstone of the thing, not that I would expect you to know that!

And another one I should've highlighted earlier

So made up money on a server run by the people who made it up is better than made up money backed by people with guns and the ability to use them?

It's not actually run by "the people who made it". The other cornerstone is it's decentralized nature. Again John, we can't expect you to know that before offering your expert opinion.

[John]

Yes there is actually. There is a maximum number of bitcoins that can possibly exist. That's only the cornerstone of the thing, not that I would expect you to know that!

And that is true right up until the moment it isn't. All you are saying is "bitcoin can't be manipulated because the people involved say it can't". Any system can be hacked or corrupted.

It's not actually run by "the people who made it". The other cornerstone is it's decentralized nature. Again John, we can't expect you to know that before offering your expert opinion.

For the fifth time, decentralization is no guarantee of security. Further, you don't even know that it is actually decentralized. You just think it is because you believe the assurances that it is. And you will have no idea that isn't true right up until the moment you realize its not and you have been ripped off.

[Free Society]

And that is true right up until the moment it isn't. All you are saying is "bitcoin can't be manipulated because the people involved say it can't". Any system can be hacked or corrupted.

So you must know something about the algorithm that everyone else doesn't. Enlighten us.

For the fifth time, decentralization is no guarantee of security. Further, you don't even know that it is actually decentralized.

Uhhh yeah, I do. It's the premise of the whole system. And I never said that it's secure because it's decentralized, I was responding to your rather ignorant assertion that the "people who made it" are in control of it. An assertion you made so you can draw parallels between it and central banking. Nice obfuscation though, "for the fifth time".

[John]

I do. It's the premise of the whole system

You don't know that. And further, even if it was it could no longer be true and you have no way of knowing it.

You are no different the Shreek on here assuring all of us that the Fed would never debase the currency. There is a law that says the can't and they assure us the won't afterall.

You just don't get it.

[Free Society]

How will bitcoin be debased? Give some fucking examples or maybe you could just follow up your sage "call him Shreek" tactic with a "call him Tony" move, that'll do it.

[Free Society]

What a waste of time you are. Get back to me when you've bothered to learn a thing or two so your objections might actually have some merit. That is if you're not too busy yelling at those damn kids to get off your lawn.

[np]

A poorly written contract does not magically lose its ambiguity because it's created and enforced on a peer-to-peer network.

A poorly written contract could not be programmed in the first place, so there would be no ambiguity. Now, it's possible things may be not what you'd expect, but that's where understand the code that forms your contract comes in.

[np]

From what I understand of Ethereum use: you write a program in Ethereum's scripting language. That program defines your contract with another party, or the rules of a DAO / DAC (distributed autonomous corporation). So for example, it allows for automated escrows, and more trustless systems. The blockchain is its own and has nothing to do with bitcoin's other than sharing the concept, and is part of its implementation to decentralize your automated contracts.

It's also possible to interface it with physical systems. For example locks:

http://bitcoinmagazine.com/125.....avin-wood/

An example would be an Internet and Ethereum-enabled door-lock with a barcode reader. A contract could accept payment in order to allow the individual's private key (provided through a barcode) to unlock it.

See pic of this prototype:
http://twitter.com/stephantual.....8573283328

#ethereum on a Raspberry Pi, opening physical doors. Madness!

[John]

That is pretty slick. Ultimately though it is still dependent on my willingness to honor it and your ability to in some way force me to in the real world. Your lock system is great until I just break in and throw the damn things away. What then? Unless you can go get the sheriff to throw me out, you are fucked.

[np]

This gets into some things that has come up but people are reluctant to talk about, like drones.

Personally, I see a lot of wonderful counter-economic uses for system like Ethereum, after it gets some privacy enhancements. It would allow for plausible-deniability as well as automated private defense systems.

Let's say you have a safe that is mutually agreed upon some condition of opening by two parties. Now the Ethereum script--your contract--is running and the safe's system is activated.

Now you can get creative in what happens when the safe's condition for being opened is not met. It could be armed with explosives. Or if it's moved from its location, a drone could be dispatched to follow it. Or it could be tracked via GPS, then followed. And it wouldn't matter if it's the government who's confiscating it.

[John]

It also wouldn't matter if the government won't punish me for just taking it. Sorry, but you can't rig it with explosives without facing prison. Regardless, without the threat of government sanction, it is just a question of which one of us is big enough and bad enough to take it if we want to.

[np]

Of course it would be illegal, but that's sort of the point.

As to someone daring enough to risk his life taking the safe, then you wouldn't be able to rely on government police to prevent such a person from any aggression either.

[ChrisO]

John, the first article linked to by np addresses that. One of the Ethereum developers concedes that "Ethereum law" has to connect with "real world law" in order to work, at least at some level.

Ethereum's idea of "trustless" transactions could help facilitate e-commerce, particularly for international transactions, by removing the problem of wire fraud and incompatible bankings systems/regulations.

However, there are still limits to "trustless" transactions as long as the commerce in question involves real-world goods and services. For example, I buy and sell guitars on eBay frequently (too often, my wife would probably say...). I'm willing to sell small components and parts internationally, because the dollar amounts and risk of loss are small. But guitars are fragile and expensive.

The eBay/PayPal combo ensures I get paid if I sell/ship a guitar to, say, Italy. However, the risk is that the buyer fraudulently claims the guitar is broken on arrival and does a credit-card chargeback. The buyer is supposed to return the damaged guitar back to me, but there is nothing to stop him from shipping back a box of rocks and no practical recourse on my end if he does...unless I want to travel to Italy to file a lawsuit.

The existing e-commerce framework handles a legitimate transaction of this sort just fine, and nothing about using Ethereum would solve the problem with international fraud.

[ChrisO]

My second paragraph should specify "international transactions of virtual goods/services" as being good for trustless transactions.

[John]

No it wouldn't. And that is the point. If it can't solve for fraud, it can't replace the need for government. The whole thing is nothing but a clever way to do commercial transactions. That is great and all but it will never solve the problems that prevent such transactions from happening in the first place like lack of legal title or inability to enforce a judgement.

[Harun]

Yes, but it costs hundreds of dollars to open a letter of credit, for example, and there are fees everywhere. Thus, no one does them anymore.

These guys would kill the fees and you could do it without a bank.

[np]

Yeah if you need human verification of items then there is no avoiding that, but there are ways to reduce risk by having third party verifiers.

In your example, just brainstorming on the fly.. as an alternative or in addition to third parties, you could attach a beacon to the guitar. Your ethereum script/code establishes an escrow to hold money between you and buyer. The escrow code gives a certain time limit for a refund after which it will complete the transaction and transfer funds to you and deactiviate the beacon.

But in the meantime, if the buyer wants a refund, it will track the beacon's location between where buyer and seller. If beacon arrives and buyer's location, then the conditions are met to refund from escrow back to buyer. Otherwise if it's at the buyer's location, after the time limit the funds go to the seller if buyer does not dispute.

To disincentivize fraud from both parties and in the case of unresolved conflicts e.g. the beacon is at buyer, but there's a dispute, then the money will be held indefinitely--is one programming route you could take in forming the contract.

[np]

The beacon itself could also be tied to unlock other features by the escrow code, so that the money is held and the guitar is useless until there is consensus reached for the dispute.

[ChrisO]

That's not practical based on the nature of guitars, but the beacon-as-fraud-prevention idea overall is intriguing.

[ksk]

Except that the eBay community would see the rankings of both the buyer and the seller. Multiple fraudulent transactions by any one of them would be transparent, and they would suffer through the market.

[Free Society]

Unless you can go get the sheriff to throw me out, you are fucked.

There's more than one way to skin a cat. If you were a prolific contract breaker, whose going to keep signing contracts with you? Eventually you have to eat and if you can't do so because of you're own reputation for dishonesty, that's your problem.

[Harun]

International trade used to run on letters of credit.

Payment would only be made once goods were shipped.

This worked very well for a long time, until it simply became too expensive to open them, do the documentary checking for spelling errors, etc. Banks would charge $65 to amend the L/C of a spelling mistake on an address.

So, these guys could create a virtual L/C program, that you could input a few fields, and send to your vendor...sounds pretty good.

[Harun]

There are also other versions: documents against papers, documents againt acceptance (D/P and D/A)

Again...my company uses these all the time for large transactions. If we could do it without a bank and save those fees, we might do it.

[Enough About Palin]

"Colored Coins"

Ahem, Coins of Color.

[Beautiful Bean Footage]

African-American coins, you rayciss!

[TheZeitgeist]

Blockchain schemas are nifty and all, but nobody ever mentions the data-growth problem intrinsic to them. The more people use a given distributed chain the more data gets written to it and larger it becomes.

This is a technical problem for mass-adoption of something like Bitcoin; if the transaction volume on Bitcoin's blockchain was even a small plurality of transactions made in dollars, the blockchain would be an untenable mess with a data-center sized footprint in a couple months.

In its current state as a cottage industry, Bitcoin's chain is gigabytes in size, and grows by gigabytes every month already. Users do not need local copy of blockchain to settle transactions, however less of the chain you have longer it takes transaction to settle between users, owing to transaction bouncing around P2P Bitcoin world. Such transaction times with partial chains would grow to hours if Bitcoin had 'real' volume anything like a major fiat.

This is a potential problem with blockchain-anything nobody ever seems to mention.

[Free Society]

Yeah we're going to run out of collective storage space. It's not growing exponentially or anything.

[TheZeitgeist]

With enough writes to a blockchain, its footprint will outrace innovation and deployment of 'collective storage space' as you call it.

A high-transaction currency like USD (think of number of dollar transactions every day at Wal-Mart or NASDAQ alone) will be enough writes to create that problem in Bitcoin-land.

[Raston Bot]

since we're old-man-bitching about tech: I'm still pissed they phased out Firewire IEEE 1394!!

[John]

I am not bitching about Tech. I like tech. I am bitching about morons who think tech can somehow solve for human nature or make dishonest societies honest.

[Free Society]

You're bitching precisely because of your fundamental misunderstandings about human nature and about devices that better conform to human nature. I mean for fuck's sake you're saying the federal reserve system is preferable to private money "because human nature". It doesn't don't get much more old-man-bitchy than that.

[John]

I am saying the federal reserve system is preferable or at least no worse because it is backed by a country that has the ability to back it up with force. Bitcoin is only as good until whatever country you are living in declares it illegal. Then your bitcoins are worthless.

[Free Society]

I am saying the federal reserve system is preferable or at least no worse because it is backed by a country that has the ability to back it up with force.

"Backed up by a country"? Maybe I should make some inane reference to Newtonian physics to show how your view of an abstract concept is ultimately warped. How exactly does fiat currency "being backed up by force" help consumers? All monopolies are backed up by force, this doesn't convey a benefit to consumers.

Bitcoin is only as good until whatever country you are living in declares it illegal. Then your bitcoins are worthless.

Even if that were the case, and it's not, the genie is out of the bottle. Governments aren't omnipotent and can't fight every digital protocol that should happen to arise in the market at the behest of consumer demand. But if you want to see what happens when bitcoins are declared illegal, look at countries where bitcoins are actually illegal to use. They aren't worthless and people are still buying them and parking their fiat money in it's value. They just aren't openly exchanging with it.

[John]

Even if that were the case, and it's not, the genie is out of the bottle. Governments aren't omnipotent and can't fight every digital protocol that should happen to arise in the market at the behest of consumer demand.

Of course they can't. But they can throw enough people in prison for doing it to make doing it really suck for most people and the value of bitcoins near zero. If you have to risk prison to use your bitcoins, they won't be worth using anymore.

[Free Society]

Of course they can't. But they can throw enough people in prison for doing it to make doing it really suck for most people and the value of bitcoins near zero. If you have to risk prison to use your bitcoins, they won't be worth using anymore.

0 value bitcoins hasn't happened anywhere they've been banned because bitcoins don't get parked in national banks. They get parked in encrpyted digital wallets to which a key is needed to access, from anywhere.

Far be it from someone to say that gold back currency is better than fiat because historically governments have made possession of gold illegal.

[John]

The value of them was zero to the people who were no longer brave enough to use them. I have a million bit coins and tomorrow they get banned. Those coins are only valuable if I am willing to risk prison to use them.

And such a system is better than using dollars? You are delusional. You just are. On the one hand you admit the malevolent power of government and then on the other deny its ability to crush systems that exist outside of it.

[Free Society]

The value of them was zero to the people who were no longer brave enough to use them. I have a million bit coins and tomorrow they get banned. Those coins are only valuable if I am willing to risk prison to use them.

A non-retard might cross a border, access them and sell them.

And such a system is better than using dollars? You are delusional.

Don't be dense. By your logic a coal powered locomotive is superior to a diesel train because of the possibility diesel could be deemed illegal. When someone says "diesel is better than coal powered engines" they need not consider a host of hypothetical caveats like "but if diesel were outlawed... then coal would be better". That's some premium derp you got there.

You're trying to debate a non-factual which is a game I'm not going to play.

[Free Society]

Of course they can't. But they can throw enough people in prison for doing it to make doing it really suck for most people and the value of bitcoins near zero. If you have to risk prison to use your bitcoins, they won't be worth using anymore.

0 value bitcoins hasn't happened anywhere they've been banned because bitcoins don't get parked in national banks. They get parked in encrpyted digital wallets to which a key is needed to access, from anywhere.

Far be it from someone to say that gold back currency is better than fiat because historically governments have made possession of gold illegal.

[mad.casual]

They get parked in encrpyted digital wallets to which a key is needed to access, from anywhere.

Anywhere with sufficient electrical infrastructure and computing power.

Last I checked, some 20-30 million *Americans* didn't have internet access while only some 10 million didn't have bank accounts. It's still easier to *walk* to a bank with a hunk of gold and do business than it is to use bitcoins. Considering large swaths of the world still does business with livestock, I won't hold my breath about the impending mass liberation of the proletariat.

At best, in a decade, we'll (still) have women in India who have to walk 5 miles to get potable water, but can use their cellphone to make bitcoin transactions to buy T-shirts made in Bangladesh.

[mad.casual]

My mistake; *American Households*

[lap83]

John, have you seen the HBO show Silicon Valley? It's a satire that partly makes fun of the bombastic "change the world" mentality of tech start-ups.

One of the lines from it, ""Hooli isn't just about software. Hooli... Hooli is about people. Hooli is about innovative technology that makes a difference, transforming the world as we know it, making the world a better place through minimal message-oriented transport layers. I firmly believe we can only achieve greatness if first we achieve goodness."

There's another line that's in a commercial for a compression program (the development of which is a main plot point) where the guy suggests something like "if we can make files smaller, maybe we can make AIDS smaller" It's hilarious.

[John]

No I haven't. But that sounds awesome.

[ChrisO]

Isn't Thunderbolt supposed to be better than Firewire?

[Paul.]

So when's the TED talk with the creepy sound bites coming?

[mfckr]

"Automated escrows" is more or less what I concised this article down to.

[bodenlosen Schweinerei]

So the most pressing problems in poor nations with low literacy and serious issues even providing the basics of life are going to be solved by a programming language? Sounds like an idea that will pull the Kickstarter caish but crash like Skylab in face of what happens in the real world.

There's an quite a long-winded argument here about property rights, but it seems like one of the key points in the article went unnoticed:

That's because the fiat money world still depends on trusted third parties. For example, a will written as a smart contract can't be fully automated if the money to be dispersed is entirely in U.S. dollars; a banker would need to cooperate. But Gupta predicts that fairly soon we'll move to a world in which a critical mass of people maintain a wallet with at least a few hundred dollars worth of cryptocurrency, facilitating Ethereum's rapid integration into the real economy.

I.e., it only really works if all the property in dispute is also on the blockchain in some way. In other words, it only works in technologically advanced places and/or ones with a well-established rule of law (if you're reactionary enough to stick with "barbarous relics" like real estate). That's pretty much the entire developing world schnockered, then.

[mad.casual]

I.e., it only really works if all the property in dispute is also on the blockchain in some way. In other words, it only works in technologically advanced places and/or ones with a well-established rule of law (if you're reactionary enough to stick with "barbarous relics" like real estate). That's pretty much the entire developing world schnockered, then.

Not to mention even the technologically 'liberated' get to daily experience the freedom of;

*My* blockchain or GTFO!
or
Your transaction can't be found in the blockchain, ergo, FU.

I mean, just imagine; Ukraine v. Russia v. Crimea has been just a blockchain away from being completely resolved the whole time! Palestine v. Israel v. the rest of the M.E.? Blockchain! Thin crust v. deep dish... blockchain!

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[emiliedeleon54]

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[Cytotoxic]

Etheruem is interesting but they over-promise. More interested in |Maidsafe.