A System of All Yes-s
The systems in place for blockchain only go forward. The decentralized nature of the storage reinforces this, because even with a write-only ledger, you can still re-write the parts you want, get to the part you don’t want, skip that, and continue forward. It’s still not easy – you’re going to have to re-do every transaction that involved the flaw – but it’s possible if there’s only one or two places this ledger exists. Meanwhile, with decentralized storage, you just sort of… can’t. Trying to do so on a big cryptocurrency is nearly impossible. If everyone needs to be updated on what actually happened, then you’re in hell.
Even that might not be the worst if the security was better and there wasn’t a need to re-do or undo transactions – however, humans being involved means there definitely is.
The systems aren’t designed with human failure in mind. It’s very human to fall for scams or to simply misclick, for example. Almost all blockchain based cryptocurrencies have this problem. Every transaction is ‘legal’ because the system says it is, there’s just no way to undo something once it’s done – if something is transferred out, it has to be transferred back, it can’t be untransferred. While that seems like a small distinction, it’s really not! Picture cancelling an Amazon order vs. requesting a refund. Now apply it to a system where there is no centralized authority to make Amazon give you your money back in the case of services not properly rendered, like the bank could. Illegitimate transactions are not recognized as different from legitimate ones, and you can’t just yoink your coin back when somebody fails to deliver their research chemicals.
Forking Hell
When Bitcoin was small and verification was a limited resource, it was possible for forks to occur because the verifiers weren’t keeping up with demand for trades – essentially, someone spends a coin twice (maliciously or mistakenly) and one set of transactions goes on as though spend 1 was legit, and another as if spend 2 was. If these happened at the same time, getting both forks to realign is a nightmare because again, blockchain technology does not like to go backwards. Decentralization hurts here as well for the same reasons it does above – which tine of the fork is the more legitimate one, and what happens to the other one in assimilation?
The answer is complicated! The answer from crypto makers is ‘that doesn’t happen because we engineered this so good!’, but the answer from anyone else is ‘every time it happens, there’s a unique solution to the problem’, and that’s not a good thing.
Forking also refers to updates or splits in the system itself – new species of cryptocurrencies with different rules can’t still be called Bitcoin, for example, so they get to give themselves a new name. People can choose to switch over to this new stuff voluntarily, but doing so comes with a lot of risk – Bitcoin has forked in this way a little over a hundred times, and while many of those forks are successful… they aren’t as successful as the main lineage of Bitcoin.
As a side note, the US actually used to have this problem too: each colony had it’s own dollar. Trading sucked because the people trading couldn’t readily define how well a Virginia dollar was doing compared to a Rhode Island dollar when it came time to buy stuff from the market. Digital currency with a visible market price eliminates that issue to an extent, but not completely – without fiat behind them, anybody can make a currency, and all of those currencies without fiat have no guarantee of stability. See any number of pump-n-dump schemes. Could a good, stable currency fork outside of the blockchain conversation? The answer is as of yet unclear. All of this stuff is incredibly new, and it’s disingenuous to pretend it’s not new, and that it is for certain stable.
The Wallet Number
Banks give you an account number and a routing number. To route money to or from your account outside of your login or physical presence at the bank, you’d need both of those items. Notice that people can’t give you money without your permission. With OpenSeas, a popular NFT platform, if somebody knows your wallet information, they can just send you stuff. That doesn’t sound like a serious problem – it wasn’t one when this tech was brand new. It turned into a problem when people realized they could just plant NFTs with viruses associated to them via smart contracts into someone’s wallet, rendering that NFT a landmine. If BitCoin or any other major blockchain cryptocurrency system had been made with the same care debit cards have been given, this wouldn’t be happening to NFTs, the offshoot of those blockchain cryptocurrencies.
Blind Spots
There’s a story about a professor trying to make a code that is nearly unbreakable even with the key, and he does so by using phone numbers in the phone book. Each phone number represents the first letter of the phone number owner’s last name. He says this code would take forever to solve, and it seems like it would – ten seemingly random digits for every single letter? Even a computer would struggle with that. Depending on how short the message is, it’s entirely possible to have a unique ten-digit code for every character. And then, a student raises their hand and asks – ‘what if we just called them and asked them what their name was?’ The professor, who’d come at this at an oblique angle, didn’t think about calling the numbers. Suddenly the code is very solvable by hand.
The problem with many of these NFT and Blockchain sites is that even when they’re working to make a legitimate product, they’re coming at it from the angle of someone who already has the supercomputer, somebody who already has the money to dump into the coins and then lose it. They want to make the wheel.
Not reinvent it – they want to make the wheel.
They want to make the wheel out of different materials.
They want to make a wheel out of glass.
They’re often the types of people to show up on Shark Tank with products like the Juicero – they’re recreating something with more complicated tech, not because it improves the product, but because the tech is available and obscure and sounds fancy. Security and privacy are going to be huge issues within the blockchain, which is ironic because Bitcoin took off when it made illegal buying and selling of drugs online easier.
Focus on security and an ‘undo’ button next – please.
Sources:
https://www.investopedia.com/tech/history-bitcoin-hard-forks/