Attack of the 50 Foot Blockchain

Gerard, a technology writer and system administrator, wrote a short sceptical account of bitcoin, blockchain and the related industry as it stood in 2017.

The technical argument is that a blockchain solves a narrow problem, namely reaching agreement on a ledger among parties who do not trust each other and have no external authority, at enormous cost in energy and throughput, and that almost no real application has that requirement. Where a trusted party exists or can be created, a conventional database performs better in every respect. He argues that private or permissioned blockchains, which several banks were then building, are databases with extra steps, since if the participants trust each other enough to be permissioned they do not need the consensus mechanism.

The industry chapters cover bitcoin's history including the Mt Gox failure and the exchange collapses, the role of Tether and the questions about its reserves, the initial coin offering wave and the pattern of projects raising money with no product, the Ethereum DAO exploit and the fork that reversed it, and the environmental cost of proof of work.

Gerard's arguments about smart contracts are among the sharpest: a contract that executes automatically cannot be corrected when it does the wrong thing, code contains bugs, and the DAO demonstrated both.

The book is polemical and does not engage seriously with the arguments for permissionless settlement or with the use of stablecoins in countries with capital controls or unstable currencies. It is also from 2017, so it predates the subsequent cycles. Many of its specific predictions about failures, particularly on initial coin offerings and on Tether, were subsequently borne out.