A prominent critique that numerous individuals have voiced concerning the present trajectory of the cryptocurrency realm is the escalating amount of fragmentation that we are witnessing. What was previously a more cohesive community focused on constructing the shared infrastructure of Bitcoin is now increasingly a collection of “silos,” distinct projects pursuing their own individual objectives. There exists a variety of developers and researchers who are either employed by Ethereum or actively working on concepts as volunteers and spend considerable time engaging with the Ethereum community, and this group has unified into a collective committed to advancing our specific vision. Another semi-decentralized organization, Bitshares, is invested in their unique vision, merging their particular mix of DPOS, market-pegged assets, and the outlook of blockchain as a decentralized autonomous corporation as a method to achieve their political aspirations of free-market libertarianism and a contract-free society. Blockstream, the organization behind “sidechains,” has also attracted its own assemblage of individuals and distinct sets of visions and agendas – as has Truthcoin, Maidsafe, NXT, and numerous others.
A frequent argument brought forth by Bitcoin maximalists and sidechains advocates is that this fragmentation negatively impacts the cryptocurrency ecosystem – rather than each pursuing our individual paths and vying for users, we ought to collaborate and collaborate under Bitcoin’s unified banner. As Fabian Brian Crane summarizes:
One recent occurrence that has further intensified the debate is the release of the sidechains proposal. The concept of sidechains is designed to foster trustless innovation of altcoins while providing them with the same monetary foundation, liquidity, and mining capacity of the Bitcoin network.
For its supporters, this signifies a vital attempt to unite the cryptocurrency ecosystem behind its most triumphant project and to enhance the already established infrastructure and ecosystem, rather than scattering efforts in myriad directions.
To those who oppose Bitcoin maximalism, this appears to be a fairly logical argument, and even if the cryptocurrency community should not unite entirely under the “Bitcoin” banner, one could contend that we need to find a way to join forces, striving to create a more cohesive ecosystem. If Bitcoin isn’t robust enough to serve as a dependable backbone for society, the crypto landscape, and everything therein, then why not construct a superior and more scalable decentralized computer and create everything atop that? Hypercubes certainly appear powerful enough to warrant maximalist support, especially if you resonate with one-X-to-rule-them-all proposals, and the participants of Bitshares, Blockstream, and other “silos” are frequently quite enthusiastic about the same notion regarding their specific solutions, whether they involve merged-mining, DPOS combined with BitAssets, or other methods.
So why not? If there genuinely is one consensus mechanism that stands superior, why shouldn’t we facilitate a significant merger between the various projects, develop the optimal type of decentralized computer as a foundation for the crypto-economy, and progress collectively within a singular cohesive system? In several respects, this notion appears noble; “fragmentation” certainly possesses undesirable qualities, and it is instinctive to perceive “collaboration” as a positive pursuit. However, in practice, while increased cooperation is undoubtedly beneficial, and this blog post will subsequently elucidate how and why, aspirations for extreme unification or winner-takes-all tend to be largely precisely erroneous – fragmentation is not inherently detrimental, but rather unavoidable, and arguably, it is the sole pathway for this domain to reasonably flourish.
Agree to Disagree
What has led to fragmentation, and why ought we to allow it to persist? In response to both inquiries, the explanation is straightforward: we fragment because we disagree. In particular, consider some of the following assertions, all of which I hold true, but which drastically diverge from the beliefs of many other individuals and initiatives:
- I do not perceive that weak subjectivity is particularly much of an issue. Nonetheless, significantly higher levels of subjectivity and intrinsic dependence on extra-protocol social consensus still unsettle me.
- I regard Bitcoin’s $600 million/year squandered energy on proof of work as an absolute ecological and fiscal disaster.
- I believe ASICs constitute a significant concern, which has rendered Bitcoin considerably less secure qualitatively in the past two years.
- I find Bitcoin (or any other fixed-supply currency) to be too persistently volatile to ever qualify as a stable unit of account, and I contend that the best approach to cryptocurrency price stability is through experimenting with intelligently crafted flexible monetary policies (i.e., NOT “the market” or “the Bitcoin central bank“). Nonetheless, I am not inclined to impose any form of centralized control over cryptocurrency monetary policy.
- I possess a considerably more anti-institutional/libertarian/anarchistic viewpoint than some individuals, but considerably less so compared to alternative views (and I am incidentally not an economist from the Austrian school). Generally, I hold the view that both perspectives have merit, and I strongly advocate for diplomacy and collaboration to improve our world.
- I am against the notion of there being a single-currency supremacy, within the crypto-economy or elsewhere.
- I perceive token sales as an exceptional method for monetizing decentralized protocols, and contend that those who vehemently oppose the concept are doing a disservice to society by jeopardizing a remarkable opportunity. Nonetheless, I concur that the model implemented by us and others thus far has its drawbacks and we should be proactively exploring various models that strive to improve alignment of incentives
- I am convinced that futarchy holds enough promise to warrant experimentation, particularly concerning blockchain governance.
- I regard economics and game theory as crucial components in the analysis of cryptoeconomic protocols, and observe that the primary academic shortcoming of the cryptocurrency community lies not in a lack of advanced computer science knowledge, but rather in economics and philosophy. We ought to connect with http://lesswrong.com/ more frequently.
- I identify one of the main motivations for individuals to embrace decentralized technologies (blockchains, whisper, DHTs) as simply the fact that software developers tend to be rather unmotivated to grapple with the intricacies of maintaining a centralized website.
- I perceive the blockchain-as-decentralized-autonomous-company analogy as useful, though limited. Specifically, I believe we, as cryptocurrency developers, should capitalize on this possibly fleeting moment where cryptocurrency remains an industry controlled by idealists to establish institutions that prioritize maximizing utilitarian social welfare metrics rather than profit (no, they are not synonymous, primarily due to these reasons).
There are likely very few individuals who align with me on each and every one of the aforementioned points. Moreover, it is not solely I who possess unique viewpoints. For example, consider the CTO of OpenTransactions, Chris Odom, who expresses opinions like this:
What is required is the replacement of trusted entities with cryptographic proof systems. Any entity within the Bitcoin community that necessitates trust will eventually vanish; it will cease to exist… Satoshi’s vision was to completely eliminate [trusted] entities, either by fully mitigating the risk or redistributing it in such a way that it is practically negated.
Meanwhile, certain others feel compelled to articulate thoughts such as:
In other words, commercially sustainable reduced-trust networks do not need to shield the world from platform operators. They will need to safeguard platform operators from the world for the advantage of the platform’s users.
Naturally, if one perceives the primary advantage of cryptocurrency as a means of evading regulations then that second statement also holds relevance, albeit in a manner entirely different from its original author’s intention – but this once again illustrates the vast differences in thought processes among individuals. Some perceive cryptocurrency as a capitalist uprising, others view it as an egalitarian movement, and many see a spectrum of interpretations in between. Some regard human consensus as a fragile and corruptible concept, while viewing cryptocurrency as a guiding light that can replace it with rigorous mathematics; others view cryptocurrency consensus merely as an extension of human consensus, made more efficient through technology. Certain individuals believe the optimal path to achieve cryptoassets with dollar parity is through dual-coin financial derivative frameworks; others contend a more straightforward approach would be to utilize blockchains to symbolize claims on real-world assets instead (and still others assert that Bitcoin will ultimately prove more stable than the dollar independently). Some believe that scalability is best achieved through “scaling upwards“; others maintain the superior option is “scaling outwards“.
Of course, many of these matters are fundamentally political, and some involve public goods; in such instances, live and let live is not always a feasible resolution. If a specific platform fosters negative externalities or endangers society’s movement towards a suboptimal equilibrium, then one cannot simply “opt out” by choosing to utilize that platform instead. In those cases, some form of network-effect-driven or, in extreme instances, 51%-attack-driven censure may become essential. In certain instances, the discrepancies pertain to private goods and are chiefly a matter of empirical beliefs. Should I believe that SchellingDollar is considered the optimal strategy for price resilience, while others may favor Seignorage Shares or NuBits. Ultimately, after a period of years or decades, one of these models will demonstrate superior effectiveness, outpacing its rivals, and that will conclude the discussion.
In contrast, certain situations may resolve differing cases through alternative means: it may be revealed that the characteristics of specific systems are more appropriate for certain uses, while other frameworks are more fitting for different purposes, leading to natural specialization into those applications where they excel. As numerous analysts have highlighted, for decentralized consensus mechanisms in the conventional financial sphere, banks are unlikely to trust a network governed by anonymous nodes; thus, solutions like Ripple would be more advantageous. Conversely, for Silk Road 4.0, a completely opposite strategy is the only viable path – and for everything in between, it boils down to a cost-efficiency evaluation. Should users seek networks adept at executing particular functions with high efficiency, such networks will emerge, and should they desire a multifaceted network boasting substantial network effects among on-chain applications, such a network will manifest as well. As David Johnston emphasizes, blockchains resemble programming languages: each possesses unique characteristics, and few developers strictly commit to a single language alone – instead, we utilize each one in the specific scenarios where it proves most effective.
Room for Cooperation
Nevertheless, as previously noted, this does not imply that we should merely pursue our individual paths and attempt to dismiss – or worse, deliberately undermine, one another. Even if all our endeavors are inherently specializing towards distinct objectives, there remains a significant opportunity for far less redundancy in efforts, and greater collaboration. This holds true on various levels. First, let’s examine a model of the cryptocurrency ecosystem – or, rather, a projection of what it might resemble in the next 1-5 years:
Ethereum has established its presence on nearly every front:
- Consensus: Ethereum blockchain, data-availability Schelling-vote (possibly for Ethereum 2.0)
- Economics: ether, an autonomous token, along with research into stablecoin proposals
- Blockchain services: name registry
- Off-chain services: Whisper (messaging), web of trust (in progress)
- Interop: BTC-to-ether bridge (in development)
- Browsers: Mist
Now, let us contemplate a few additional projects striving to construct comprehensive ecosystems of some sort. Bitshares at the very least has:
- Consensus: DPOS
- Economics: BTSX and BitAssets
- Blockchain services: BTS decentralized exchange
- Browsers: Bitshares client (though not exactly a browser in the traditional sense)
Maidsafe has:
- Consensus: SAFE network
- Economics: Safecoin
- Off-chain services: Distributed hash table, Maidsafe Drive
BitTorrent has unveiled their intentions for Maelstrom, a venture designed to perform a function somewhat analogous to Mist, albeit exhibiting their own (non-blockchain) technologies. Cryptocurrency initiatives typically generate a blockchain, a currency, and their proprietary client, though forking an existing client commonly occurs in the less creative scenarios. Name registration and identity management systems are now a dime a dozen. And, certainly, nearly every project recognizes its need for some form of reputation and web of trust.
Let us now envision an alternative scenario. Instead of assembling a set of neatly separated vertically integrated ecosystems, each creating its own components for all necessities, consider a reality where Mist could be utilized to access Ethereum, Bitshares, Maidsafe, or any other significant decentralized infrastructure network, with new decentralized networks being installable much like plugins for Flash and Java within Chrome and Firefox. Picture the reputation data in the web of trust for Ethereum being applicable to other initiatives as well. Imagine StorJ operating within Maelstrom as a dapp, utilizing Maidsafe for backend file storage, and employing the Ethereum blockchain to uphold the contracts that motivate ongoing storage and downloading. Visualize identities being effortlessly transferable across any crypto-networks, provided they utilize the same foundational cryptographic methods (e.g., ECDSA + SHA3).
The essential realization here is this: despite the fact that certain layers within the ecosystem are inherently interconnected – for instance, a solitary dapp often correlates to a single specific service on the Ethereum blockchain – in many situations, the layers can be constructed to be more modular, enabling each product at each layer to compete independently based on its own merits. Browsers are perhaps the most distinct component; most reasonably comprehensive lower-level blockchain service sets share similar requirements in terms of applications that can operate on them, hence it makes sense for each browser to accommodate each platform. Off-chain services also present a target for abstraction; any decentralized application, irrespective of the blockchain technology employed, should freely utilize Whisper, Swarm, IPFS, or any other service crafted by developers. On-chain services, such as data provision, can theoretically be established to interact with multiple chains.
Moreover,there are numerous prospects to partner on essential research and advancement. Conversations surrounding proof of work, proof of stake, stable currency frameworks and scalability, alongside other challenging issues in cryptoeconomics could easily become significantly more transparent, enabling various projects to benefit from and stay informed about each other’s progress. Fundamental algorithms and optimal practices associated with networking layers, cryptographic algorithm executions, and other foundational elements can, and should, be disseminated. Interoperability solutions ought to be crafted to ease exchange and interaction between services and decentralized entities across different platforms. The Cryptocurrency Research Group is one initiative that we intend to initially back, with aspirations for it to thrive independently, aiming to encourage this type of collaboration. Other formal and informal organizations can undoubtedly assist in furthering this process.
In the future, we hope to observe a multitude of projects operating in a significantly more modular manner, existing on just one or two tiers of the cryptocurrency ecosystem and offering a shared interface that allows any mechanism on other tiers to engage with them. Should the cryptocurrency domain advance sufficiently, it is possible that even Firefox and Chrome may adapt to handle decentralized application protocols as well. The journey toward such an ecosystem does not need to be hurried; currently, we have a limited understanding of what types of blockchain-driven services users will ultimately engage with, making it difficult to identify what specific interoperability would be genuinely advantageous. Nevertheless, progress is steadily taking its initial steps toward that goal; Eris’s Decerver, their own “browser” for the decentralized realm, facilitates access to Bitcoin, Ethereum, their own Thelonious blockchains as well as a content hosting network via IPFS.
There is significant potential for many projects currently within the crypto 2.0 landscape to thrive, and thus adopting a winner-takes-all mindset at this juncture is entirely unwarranted and detrimental. What we need to do right now to embark on a better path is to embrace the idea that we are all constructing our own platforms, tailored to our specific preferences and parameters. Ultimately, a diversity of networks will prevail, and we must prepare for that eventuality now.
Wishing you a joyous new year, and anticipating an exhilarating 2015 007 Anno Satoshii.
