AWS and Blockchain

I worked for several years on an 'enterprise blockchain' system. We often called it distributed ledger technology because our platform didn't actually use chains of blocks or proof of work, and it didn't have a token or anything like that. It was essentially a type of database but it had a lot of ideas from Bitcoin in it and was blockchainy enough that customers accepted it as such.

I have to admit, at the very start I was skeptical about why so many large companies seemed to want this stuff. Like Tim, I also spent a lot of time talking to staff at these large institutions to understand where they were coming from. Unlike him I didn't work for AWS which is pretty much the exemplar of centralised infrastructure, so maybe it was easier to pick up on some of the more subtle issues involved.

There are a few things to understand about businesses that decided they wanted blockchain:

1. They have complicated inter-firm communication and synchronization needs.

2. They solve those needs today via creating centralized trusted intermediaries (like CLS). This comes with a world of pain and problems like the obvious "too big to fail" issue that was exposed in 2008, but there's also a lot of less obvious problems, like these institutions immediately becoming stagnant rent seekers who don't innovate.

3. They exist in markets that lack obviously dominant players who can push things forward. Many people in the tech world don't understand this because we rely so heavily on a handful of ultra-profitable, ultra-huge tech firms that spend lots of treasure on giving out freebies and standards setting, but that's abnormal.

So they heard about how Bitcoin can synchronize different companies view of a real financial object like a ledger without a SWIFT-like organization sitting in the middle, and thought "yes that sounds like what we need". And they're kind of right, as long as you think in terms of business problems rather than technology!

"Blockchain" is a concept that works for them speaking in the purely abstract social sense because it acts as a neutral rallying point. If one company in a market observes that maybe having a giant specialized too-big-to-fail clearing house like CLS isn't the ideal way to solve atomic transactions, and they go to their partners saying "hey let's use this cool thing we designed" the answer will always be no because their partners will say, why should we empower our competitor? Blockchain as a concept is owned by nobody, and the core idea is that it empowers nobody, so it acted as an enabler for conversations that would otherwise never have happened. Whether the final result actually uses proof of work or even has blocks at all actually isn't so relevant except in the sense that business owners don't want to get ripped off by people lying to them about what they built.

Tim Bray should really understand this dynamic better than most people because he created XML, which crops up in the enterprise space all over the place, often in ways that aren't really appropriate. Something like protobufs would have been a far better fit but they use XML. Why is that? Well, XML went through a massive hype wave ~20 years ago thanks to the W3C relentlessly pushing this vapourware "semantic web" concept, so for a brief period XML was the future of everything. Again, this created a socially acceptable rallying point at which complex inter-firm business problems could be solved in a relatively decentralized way. The tech got used regardless of merit simply because it was something everyone could agree on and unlike ASN.1 the protocols/tooling was free.

Back to blockchain. The platform I designed for this use case (Corda) was a competitor of the DA platform used in ASX and has done relatively well in the market - it reached number 1 by number of projects using it and unlike the ASX case actually has real deployments that are actually decentralized. Over 90% of Italian banks are using it for inter-bank reconciliation! [1] There are other projects that use it too which seem to be working (I'm not involved in any of them directly and haven't worked on Corda for several years now). You never hear about them on HN because they're too Starship Enterprise to be interesting to the crowd here, but the idea that there are no working blockchain projects isn't actually true.

We managed this partly by walking the tightrope between what people said they wanted (blockchain!) and what they were telling us they actually wanted in customer interviews (what we came to call distributed ledger technology). There was definitely a fair bit of overlap but not enough to just throw Ethereum at a problem and call it solved. What they really needed was a combination of better inter-firm messaging, signing/cryptography, atomic financial transactions without a CLS-style intermediary that actually takes custody of the assets, a robust identity framework, good developer support and training materials etc. Some of this can be found in blockchain related research like BFT algos, others were somewhat solved already, but blending them together into a coherent platform was hard.

There's lots more that can be said about this - some customer projects failed, but the reasons ran the gamut from tech to social/political/business reasons. It wasn't as simple as "blockchain is a scam", which is what Bray seems trying to imply here. There actually is a there, there. It's just really, really hard to solve these problems without a hype wave to coordinate and synchronize intent.

[1] https://www.r3.com/case-studies/spunta/

But yes, finance is a walled garden, especially where retail is involved, and I think it should continue to be one. It's not just that money is too important, it's that we know it attracts people who will do anything to part joe public from his dollar, and we know that without sufficient regulation, said people can and do concoct all sorts of shonky, magical schemes to do it. We can see it happening in the cryptocurrency space at the moment. These schemes not only rip off their own marks but can, without oversight, create systemic risks on entire economies.

So there should be oversight, licensing, monitoring and democratically accountable authorities that can correct and direct actions. As such I don't think any improvement here resembles a blockchain at all, because blockchain systems are designed specifically for (and really only provide benefit in) situations where these are not present.

And the alternative is a world in which people are having to constantly be on guard over every little thing. I don't want to have to do due diligence on how I store my money, or whether somewhere I choose to deposit it might evaporate next week despite being assured by 'the community' that it's legit and 100% SAFU. Just like I don't want to have to be my own food standards inspector at a restaurant...

This isn't a good example because there are whole infrastructures to verify that buildings are being made "to code" and quality of materials is a part of that. E.g. this lab that tests steel: https://www.leica-microsystems.com/science-lab/steel-the-all...

Now what you're getting at is, OK, now you have to trust the lab. But that's OK because the incentives are better aligned. Trust is a thing with complex shapes. Maybe you develop trust in a single lab because being trusted is their whole business, and now you can easily switch between steel suppliers depending on who can sell the cheapest with peace of mind, so you've moved the trust problem around and reshaped it.

A lot of trust problems in the business world are like this. You can't eliminate it entirely everywhere, but reducing the amount you need and reshaping it/moving it around is still useful.

Re open standards and “software that lets you export”: we’ve had this for the past 30 years and see how it turned out.

Re lock in: no, in a decentralized database, the data schema is public which means it’s trivial to write an app that works with another app’s data.

It's an amazing data structure, but putting money in it is no different than putting money into hash maps (which is another great data structure): it doesn't make sense in itself.

What some companies and VCs really want to do (and are doing) is reputation laundering: invest a bit of money in some crypto tokens, and sell them to retail investors for much higher price.

Of course after FTX collapsed they have to wait a few years to do it again.