Tuesday, January 17, 2017

"The Financial Sector's Enthusiasm for Blockchain Technology Might be Misplaced, According to a Pair of Australian Distributed Computing Experts"

I thought we'd already covered this, at least in part. In fact I'm sure we did, links* below.
From The Register:

Balancing miners borks blockchains, say boffins
Blockchain consortia are like the early internet: everyone knows and trusts each other. But when you try to scale ...
The financial sector's enthusiasm for blockchain technology might be misplaced, according to a pair of Australian distributed computing experts.

The problem: if everyone in a consortium trusts each other, they don't need blockchains to protect themselves; if they don't, current blockchain protocols have a flaw that allows a bad actor to game the system.

The warning comes from CSIRO/Data61 researcher Vincent Gramoli, lead author of an arXiv paper describing what he and colleague Christopher Natoli call “The Balance Attack” (the name comes from one aspect of their attack, that it's deployed against subgroups of nodes with balanced mining power).

In the finance/banking context, Gramoli says the problem is that blockchains are probabilistic, but for something like an inter-bank transfer, you need determinism. If the system enters a state in which it can't guarantee all transactions, downtime is the best solution.

Gramoli told The Reg “if the assumptions are not met, users should get a message that 'the system is not available, please try again later'”.

The consensus problem
When The Register spoke to Gramoli about the attack, he explained that like other distributed computing problems, blockchains have to solve the 30-year-old consensus problem.
The ledger is only accurate if all copies of it are the same; if an attacker can break that consensus, they can double-spend their currency....MUCH MORE
Also at The Register:
Flight 666 lands safely in HEL on Friday the 13th
*Yes, here we go. First a bit of snark from September last year:

"Is an Editable Blockchain the Future of Finance?"
So the lady asked, "Inquiring minds want to know: can blockchain reconcile 200% institutional ETF ownership?".
Sure, why not.
Of course this is no longer blockchain, it's some sort of database combined with an eraser head. We'll call it 'blockhead'....MORE

In November's "Why the FT's Izabella Kaminska Won't Be Invited to the Andreessen-Horowitz Christmas Party, Redux" we not only learned that Naked Capitalism was a Russian dezinformatsiya outlet but that I may have been a purveyor of fāke news by (inadvertently) not attributing the source of:
Bitcoin and blockchain seem more and more like solutions looking for a problem...

Finally, getting down to business, as was pointed out in Nov. 26's:

The FT's Izabella Kaminska Gives An Overview Of The State Of Blockchain And Reveals A Troubling Personal Detail
...2. Do you actually need blockchain? ‘If it ain’t broke, don’t fix it,’ for a blockchain to be relevant you must: (1) require a database, (2) need shared write access, (3) have unknown writers whose interests are not unified, and (4) not trust a third party to maintain the integrity of the data....MUCH MORE

Do follow the link. Each paragraph is worth study, the reward being an amazing amount of information conveyed.

By-the-bye I first saw Credit Suisse's point 2 done up decision tree style back in December in an article entitled "Why Blockchain must die in 2016":

The tree was based on an article at MultiChain's blog, "Avoiding the pointless blockchain project" which included the sentence: "If your requirements are fulfilled by today’s relational databases, you’d be insane to use a blockchain."
Sounds good to me.

Reading the entirety of the first post in combination with "How global money transfers will work in the future" (along with its handy translations) and most readers should be able to speak knowledgeably for at least a minute or two, which is really all you need.
See the Harvard Business Review post: "News You Can Use: 'How to Know If You Talk Too Much'"....