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Today in Dunning-Krugerrand News

Blockchain's Two-Flavored Appeal

A recent story in Medium describes yet again quite well why blockchains don't solve any real problems: Blockchain is not only crappy technology but a bad vision for the future.

So what is their irresistible appeal?

Bitcoins remind me of a story from the late chair of the Princeton University astronomy department. In 1950 Immanuel Velikovsky published Worlds in Collision, a controversial best-selling book that claimed that 3500 years ago Venus and Mars swooped near the earth, causing catastrophes that were passed down in religions and mythologies.

The astronomer was talking to an anthropologist at a party, and the book came up.

"The astronomy is nonsense," said the astronomer, "but the anthropology is really interesting."

"Funny," replied the anthropologist, "I was going to say almost the same thing."

Bitcoin and blockchains lash together an unusual distributed database with a libertarian economic model.

People who understand databases realize that blockchains only work as long as there are incentives to keep a sufficient number of non-colluding miners active, preventing collusion is probably impossible, and that scaling blockchains up to handle an interesting transaction rate is very hard, but that no-government money is really interesting.

People who understand economics and particularly economic history understand why central banks manage their currencies, thin markets like the ones for cryptocurrencies are easy to corrupt, and a payment system needs a way to undo bogus payments, but that free permanent database ledger is really interesting.

Not surprisingly, the most enthusiastic bitcoin and blockchain proponents are the ones who understand neither databases nor economics.

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