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Bitcoin Databases The Almighty Buck

The Promise of Blockchain Is a World Without Middlemen (hbr.org) 73

dryriver writes: The Harvard Business Review has an interesting article about how Blockchain technology may bring down the cost of business transactions and enable new ways of doing things: "Consider the problem that small manufacturers have dealing with giants like Wal-Mart. To keep transaction costs and the costs of carrying each product line down, large companies generally only buy from companies that can service a substantial percentage of their customers. But if the cost of carrying a new product was tiny, a much larger number of small manufacturers might be included in the value network. Amazon carries this approach a long way, with enormous numbers of small vendors selling through the same platform, but the idea carried to its limit is eBay and Craigslist, which bring business right down to the individual level. While it's hard to imagine a Wal-Mart with the diversity of products offered by Amazon or even eBay, that is the kind of future we are moving into." "Decentralization" is the idea that a database works like a network "that's shared with everybody in the world, where anyone and anything can connect to it," writes Vinay Gupta for Harvard Business Review. "Decentralization offers the promise of nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men." The proposition ultimately makes things "more efficient in unexpected ways." For example, "a 1% transaction fee may not seem like much, but down a 15-step supply chain, it adds up. [...] The decentralization that blockchain provides would change that, which could have huge possible impacts for economies in the developing world," writes Gupta.
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The Promise of Blockchain Is a World Without Middlemen

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  • I call bullshit (Score:4, Insightful)

    by Anonymous Coward on Thursday March 09, 2017 @08:09PM (#54010013)

    "Decentralization" is the idea that a database works like a network "that's shared with everybody in the world, where anyone and anything can connect to it," writes Vinay Gupta for Harvard Business Review. "Decentralization offers the promise of nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men."

    And this wonderful decentralization, where anyone and anything can connect to "the database," is why Bitcoin transactions take hours to confirm, the network is only capable of supporting a handful of transactions per second, etc. Don't even get me started on the laughs involved if "everybody in the world, anyone and anything" is keeping local copies of "the database," or enough of it to verify transactional integrity to a level necessary for shit like inventory management at Wal-Mart scale.

    • Re:I call bullshit (Score:5, Informative)

      by madumas ( 186398 ) on Thursday March 09, 2017 @09:22PM (#54010337)

      Yup that's the biggest hurdle right now but multiple ideas are being explored. The one that I personally find the most promising is "sharding", an idea developed to allow the Ethereum blockchain to scale massively. In a nutshell, they will split the blockchain in multiple shards and allow transactions between them.

      More details here: https://github.com/ethereum/wi... [github.com]

    • by MrL0G1C ( 867445 )

      Blockchain size:
      https://blockchain.info/charts... [blockchain.info]

      Bitcoin isn't popular yet and the blockchain size has already exponentially mushroomed to over 100GB.

      Fanboys like to point out that not everyone needs to have a copy of the block-chain, but that completely negates the 'decentralised' part. IE back to square one with banks running it.

      Have you got a few peta-bytes of storage handy for when Bitcoin becomes popular?

      • Fanboys like to point out that not everyone needs to have a copy of the block-chain, but that completely negates the 'decentralised' part.

        You don't need an entire copy of the blockchain unless you want to audit the entire history. To validate the most recent entry, you need to scan the block chain once, but that's a matter of streaming that 100GB, not having to store it. Still more than you'd like to do on a mobile device, but quite plausible. You can also have well-known entities publicly attest to the state at specific intervals, so that you only need to validate the last few records. Unlike a centralised banking system, anyone can atte

        • by MrL0G1C ( 867445 )

          And that doesn't negate what I said at all. And no, "anyone can attest" is not true when the blockchain has increased to tens of terabytes or more, which will happen.

          Most of all, I'm an environmentalist and bitcoin sucks bad from an energy use point of view. More mining has to be done for every transaction.

        • But even streaming it becomes a problem when the blockchain gets big enough. Bitcoin is vanishingly small compared to something like a visa, master card, paypal, or even m-pesa. If you needed to stream terabytes of transactions just to begin verifying transactions, it's a complete non-starter for most of the world's population. If only a few key players have the resources to verify the block chain, then it is open to collusion between those parties.

    • by Shoten ( 260439 )

      "Decentralization" is the idea that a database works like a network "that's shared with everybody in the world, where anyone and anything can connect to it," writes Vinay Gupta for Harvard Business Review. "Decentralization offers the promise of nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men."

      And this wonderful decentralization, where anyone and anything can connect to "the database," is why Bitcoin transactions take hours to confirm, the network is only capable of supporting a handful of transactions per second, etc. Don't even get me started on the laughs involved if "everybody in the world, anyone and anything" is keeping local copies of "the database," or enough of it to verify transactional integrity to a level necessary for shit like inventory management at Wal-Mart scale.

      I can see it...it's happened before, on a smaller level and with the removal of a different choke point that required centralization of a different kind.

      Anyone here remember "The Sharper Image"? They were stores...and a catalog...of incredibly cool stuff. This was before there was public access to the Internet or such a thing as a .com TLD; back then, you had to go to stores or catalogs to find things. As a result, for lack of a better way to put it, it was "harder to find stuff."

      Today, if I wanted to bu

  • by Anonymous Coward on Thursday March 09, 2017 @08:14PM (#54010057)

    "Decentralization offers the promise of nearly friction-free cooperation between members of complex networks that can add value to each other by enabling collaboration without central authorities and middle men."

    Let's look at the numerous examples of decentralized systems that are already out there, like git, BitTorrent, and even Bitcoin.

    What do we notice about them? Despite all of the hype about how decentralization is important, a large degree of centralization ends up happening again just to make those systems practical. With git it's GitHub. With BitTorrent it's the major tracker sites. With Bitcoin it's the major exchanges.

    Of course, doing this ends up eliminating the benefits of decentralization. Like when GitHub goes down, and now all of these git users are shit out of luck (they'll always point out they could push to or pull from each others repos, yet this is a real pain in the ass in practice and they never actually do it). Or like when a tracker is taken offline and finding content to download becomes difficult. Or like when a Bitcoin exchange gets hacked and all of the bitcoins get stolen.

    Anyone who isn't trapped in an ivory tower can see that decentralization is a fantasy at best. In the real world, decentralized systems end up centralizing again in order to become useful.

    • yeah, they used to trade stocks on the grass in downtown manhattan in the 1700's and 1800's until things grew and they needed a central exchange. same with banks before clearance houses

      • by slew ( 2918 )

        yeah, they used to trade stocks on the grass in downtown manhattan in the 1700's and 1800's until things grew and they needed a central exchange. same with banks before clearance houses

        However, end users still by stocks through brokers (often the same ones from the 1800's), and end users still clear checks through banks (ditto).
        The advanced technology is often simply to allow the middlemen to be disrupted by smaller nimbler middle men (e.g., discount stock brokers like e-trade and savings and loan banks, remember them?), but generally do not democratize the field down to the end user... In a way these types of new technology simply allows us to meet our new masters, often same as the old

    • >Or like when a Bitcoin exchange gets hacked and all of the bitcoins get stolen.

      That would seem to me an example of exactly why centralization is *bad*. After all, bitcoin exchanges are pretty much entirely superfluous to the functionality - they pretty much exist only to provide money laundering and bilk their (presumably criminal) clients out of their money whenever they "get hacked"

    • by madumas ( 186398 )

      Actually, it is quite the opposite. Blockchain platforms, like Ethereum, are being built to address the re-centralization problems that you describe.

      Ethereum aims to build a centralized "world-computer" with 3 main components:
      - ethereum blockchain: decentralized turing-complete VM, with built-in ability to create cryptocurrencies
      - swarm: decentralized storage, similar to IPFS
      - whisper: decentralized messaging

      The project is still in its infancy, but it's already usable. Still not 100% decentralized as it sti

      • by mbkennel ( 97636 )
        - ethereum blockchain: decentralized turing-complete VM

        Aaah, no, no no no no no no! What Could Possibly Go Wrong?

        Just to give you an idea of what this platforms makes possible:
        - Permanently self-mutating, globally replicating, unkillable viruses and parasites
        • by madumas ( 186398 )

          It's a VM, but it's not free. You need to pay the cost of CPU processing, so to be able to be 'unkillable', a virus will need to be able to generate revenues on its own, to be able to support its "life-style".

          But yeah, being turing-complete is a major challenge. Ethereum sustained a major DOS attack a few months ago because some opcodes were mispriced. An attacker was able to bog down the network with a relatively small investment.

    • In case of BitCoin the reason for centralization is not technical but cultural. For such a long time people used to have their money kept in a bank or a fund of some sort it is difficult for them to realise that with BitCoin there is no reason to do that.

      Also there are some ideas for ETFs floating around in BitCoin space and this is truly stupid. With something like gold ETF it makes sense to have a traded fund because gold delivery actually *costs money*, but with BitCoin the cost of delivery is negligib

    • by l20502 ( 4813775 )
      Don't complain because people get spoiled by easier/faster ways to do things.

      You've never used github if you haven't seen people pushing repos taken down to other git hosts.
      Bittorrent was only designed to be fast, and that's why it overtaken p2p clients that tried to actually tackle those other problems.
      Both the users not using local wallets and incompetent owners attracted by free internet moneys are to blame.
    • Like when GitHub goes down, and now all of these git users are shit out of luck (they'll always point out they could push to or pull from each others repos, yet this is a real pain in the ass in practice and they never actually do it).

      Hey, let's pull the curtains off the rest of the matrix.

      With git you really are barely three square meals away from anarchy, and GitHub knows this.

      Hence the outages tend to be brief, by all the earthly powers of mice and men and backup diesel generators.

  • Harvard (Score:4, Insightful)

    by Hognoxious ( 631665 ) on Thursday March 09, 2017 @08:15PM (#54010061) Homepage Journal

    Weren't they good once?

  • by fiannaFailMan ( 702447 ) on Thursday March 09, 2017 @08:19PM (#54010079) Journal

    The Economist also wrote about this [economist.com] in 2015.

  • by Vairon ( 17314 ) on Thursday March 09, 2017 @08:20PM (#54010083)

    Most of these blockchain articles fail to mention the important technical details about how a blockchain would be used. The questions I'd like to see answered are:
    What is the "proof of work" used by the blockchain to decide which node gets to commit to the permanent blockchain record?
    How will the blockchain handle if a pool of nodes consisting of > 50% of the computing power for proof of work decides to "double spend" or alter a blockchain record?
    How decentralized will access to the blockchain be?
    Will it only be companies or individuals with access?
    Who decides who gets access?
    What is the minimum amount of time you will need to wait for a blockchain record to be permanent and unable to be altered?
    How big will blockchain be on disk?
    Will each node need a full copy of the blockchain?

    • by Anonymous Coward

      all these question can easily be answered by a centralized exchange for managing ... o wait

      • Actually, that could be the beginnings of a good idea - a central *oversight* committee in charge of managing the various potential problems before they manifest can be in everyone's best interest. And since they don't have to actually participate in any of the transactions, there's very minimal overhead involved.

    • by bws111 ( 1216812 )

      Blockchain is not bitcoin or other cryptocurrency. There is no 'proof of work'. These things are called permissioned blockchains, who gets to see and update what is controlled by cryptography.

      If you are actually interested in those questions, look up open ledger and hyperledger. There is loads of information and places where you can see how it works and try it for yourself.

    • by madumas ( 186398 )

      Woah that's a lot of questions. Let me try to answer the first two:

      What is the "proof of work" used by the blockchain to decide which node gets to commit to the permanent blockchain record?
      A complex mathematical question that takes a long time to answer. Complexity of the question is adjusted dynamically to aim for a regular block "commit" like you say. There are alternatives to PoW, like Proof Of Stake (PoS) where you "stake" an amount of money that you will lose if you cheat.

      How will the blockchain handle

      • by Vairon ( 17314 )

        Sorry if I was not clear. I understand what a proof of work is. I was just wondering what the specific proof of work was going to be for the blockchain alluded to in the article. If it's a distributed network ledger based on a Byzantine fault tolerant consensus algorithm then it seems like it would be susceptible to attack if > 1/3 of the nodes on the network were traitors to the purpose of the network. What prevents a large numbers of traitorous nodes from joining the network to serve the purpose of a s

        • by madumas ( 186398 )

          Sorry for misreading your questions. The article talks about blockchains in general, it does not refer to one in particular, so it is not possible to give specific answers to your questions.

          When people talk about "general purpose" blockchains, usually they have in mind Ethereum (which uses cpu-resistant POW, to make sure ASICs are not economical. Planning to transition to POS) and Hyperledger which uses PBFT. My understanding of Hyperledger is that is assumes that most nodes are acting in good faith, but I

    • Most of these blockchain articles fail to mention the important technical details about how a blockchain would be used.

      For every reason you mentioned, and an additional infinite reasons, using Blockchain to eliminate middlemen is a pipe dream even in a make believe world. It will do exactly the opposite. There will be a few (at most, and eventually merging into one) extremely large middlemen guarding all the doors and holding all the keys. It is not even a remotely viable replacement for our current economic system.

      • by r0kk3rz ( 825106 )

        Most of these blockchain articles fail to mention the important technical details about how a blockchain would be used.

        For every reason you mentioned, and an additional infinite reasons, using Blockchain to eliminate middlemen is a pipe dream even in a make believe world. It will do exactly the opposite. There will be a few (at most, and eventually merging into one) extremely large middlemen guarding all the doors and holding all the keys. It is not even a remotely viable replacement for our current economic system.

        A centralised 'blockchain' is just a database, and we have those already so why bother? The whole value proposition of a blockchain is cooperation between entities that don't really trust each other but the greater value is in working together, so like a multi-player prisoners dilemma.

  • by rsilvergun ( 571051 ) on Thursday March 09, 2017 @10:05PM (#54010499)
    super efficient world. Waste employees a _lot_ of people. And as those folks lose more and more jobs to efficiency they'll be more and more competition for the few jobs left. We'll work harder and harder to please the owner class that calls the shots and makes the rules.

    And somehow I don't see us transitioning to Star Trek utopia. That means taking money from that owner class and giving it to everybody else. People call that stealing, and while I could write a book about how that's hokey and hogwash it wouldn't make anyone feel better about it. I've yet to hear a good, one sentence answer to the question: "You just gonna steal my money and give it to the poor?"
    • rsilvergun I fear you are right. Most people with huge sums of money are not empathetic towards the lesser. One exceptional example is Elon Musk. But this world doesn't have an abundant amount of rich people with heart, and humanitarianism like Elon Musk. Just think of the thought of freeing up society to make great things greater, improving things to even a higher degree, make new things that were never ever seen before for people to enjoy, create wonderful breathtaking artwork, improving man and planet t
    • >> I've yet to hear a good, one sentence answer to the question: "You just gonna steal my money and give it to the poor?"

      How about "How much is the safety and well being of you and you family worth? (Did you skip ALL the history classes?)"
      Or maybe "You don't quite understand how money works. (Here's let me explain...)"
      Or "That's right, because you and people like you are what made them poor in the first place."

      People who benefit the most from a great education and the structure of a well orchestrated

      • Sorry, I got carried away there. I see I missed your point about efficiency and automation taking away all the jobs. It's been said before -- automation and machinery took away about 90% of the jobs we had 100 years ago, but today we're all better off for it. We'll invent new jobs and new industries. People can solve complex scientific problems through distributed gamification of them (like the protein folding game, for example). Imagine being a professional video game player, but one that makes a real cont

  • by nikkipolya ( 718326 ) on Friday March 10, 2017 @01:41AM (#54011007)

    Yet another shallow article on HBR. I can safely skip these HBR articles. These are more baits for unsuspecting businesses than anything else.

  • So, just reading the excerpt in the summary is enough to make me facepalm: Blockchain technology encourages disintermediation, and as examples they put up some of the biggest intermediates on the web.

    Mart

  • Get serious. The total number of card-payed consumer purchases has peak hours of approx 500 transactions per second in my country alone. Nobody is going to have their mobile phone mine blocks at that rate all day long. It is going to be offloaded to a provider that will sort out all the transactions and keep track of your assets. If that isn't a bank, then what is?
  • I had a quick look at what wikipedia says - so blockchain is a kind of database that is highly resistant to modification, it seems, which makes sense if we are talking about currency, but it isn't enough on its own. Money is basically a kind of IOU, backed by a powerful institution, that guarantees the "value" (whatever that means) of it; in principle, at least, you can go to that instution and exchange each unit of currency for a certain quantity of "value". In pratice this doesn't happen, but as a kind of

    • - oops, shouldn't reply to myself, but one more thing: I'm not saying that blockchain or anonymous, electronic money isn't possible, or that it isn't possible to avoid middlemen, only that I think some sort of centralised backer is necessary, in my view.

  • by Paul Carver ( 4555 ) on Friday March 10, 2017 @07:55AM (#54011633)

    WASH
    (sotto voce)
    Could've made more.

    MAL
    That wasn't a bad idea, Wash, but
    eliminating the middle man is never
    simple as it sounds.

    WASH
    (surprised)
    You heard about...?

    MAL
    About fifty percent of the human race
    is middle men and they don't take kindly
    to being eliminated. This quadrant,
    we play nice. We got enemies enough
    as it is.

    From: http://firefly.shriftweb.org/s... [shriftweb.org]

  • How is a blockchain going to reduce inventory management costs ? The reason low-cost retailers have a small product line has nothing to do with transaction costs, which are negligible by comparison.

  • Don't want to sound completely negative, but this piece by Vinay Gupta is living in denial of reality.

    For example, as an illustration of how blockchain could "revolutionize" people's lives, he suggests that in the future it would enable an AirBnB renter could select a property with one transaction, but then furnish it with short-term-let furniture sourced via a second transaction...

    Gupta concentrates solely on the idea that somehow Blockchain is going to solve the thorny problems of micro-transactions
  • There's a few other things which are worth taking a look at on the topic at http://internetofagreements.co... [internetofagreements.com] - the HBR piece is short, and this is not a topic that is particularly easy to compress.

    There are two things in particular that didn't come across well. Firstly, we expect this to be a five to ten year process. We're well aware how much there is to do, and how far this all has to come. We don't dream you can just digitize a body of law through natural language processing and then have an AI make leg

  • Bullshit.

    Good middlemen can learn how to middleman ANYTHING.

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