Taken from (probably) the first blockchain critical review in Russian scientific journal. Reference: NIKOLAEV V.A., SELEZNEV V.M. Blockchain and the digital future. Promises of new technology against reality // AUDIT (ISSN 2227-9288), auditrf.ru, #2 2019

1. Blockchain and the digital future. Promises of
new technology against reality
Taken from (probably) the first blockchain critical review in Russian scientific journal.
Reference: NIKOLAEV V.A., SELEZNEV V.M. Blockchain and the digital future. Promises of new technology against reality // AUDIT
(ISSN 2227-9288), auditrf.ru, #2 2019.

2. 10 years of blockchain
● Still no killer app with exception of cryptocurrency
● Cryptocurencey – officially worst investment
● Interest if falling
Google trends graph
Right time for a check:
Prophecy against reality

3. From digital to blockchain
Don Tapscott – VisionaryDon Tapscott – Visionary
«one of the world's leading authorities on innovation, media, and the
economic and social impact of technology and advises business and
government»
The Digital Economy: Promise and Peril in the Age
of Networked Intelligence – 1995 – really influential
book. Digital economy “invention”
Wikinomics: How Mass Collaboration Changes Everything – 2006 – less influential book.
More like manifesto that collective collaboration culture will be the basis of digital
economy
The Blockchain RevolutionThe Blockchain Revolution – 2016– 2016 – influence? Main point – Blockchain is the technology for
Wikinomics

4. Vision of blockchain future
● P2P sharing economy
● Faster, inclusive, 0 overhead financial system
● Protection of economic rights for creators
● Eradication of bureaucracy and corruption
● Authors protection and direct payments
● New corporations and new capitalism
● Live internet-of-things
● True P2P democracy
BUILD ONBUILD ON
BLOCKCHAINBLOCKCHAIN

5. Why so? (Claims)
● “Internet” of the future
● Built-in trust;
● Peer-2-peer network with equal elements;
● 100% secure;
● Any attacks on it are not economically viable;
● Anonymous;
● Eternal unchanged data storage;
● Technology is open and free;

6. Miracle technology!
● Supported by strategy leaders (Deloitte, PwC, EY, KPMG ...)
● Supported by technology leaders (IBM, Oracle, Intel, DELL …)
● 1 bn investments in 2018
● 4 bn investments since 2012
● Investments are equal to quantum computing investments
● Still no wide adoption…
WHY?WHY? May be because blockchain is...

7. Blockchain is foundational
● Like steam engine
● Foundational like TCP/IP in 1972 with one app – e-mail
● E-mail → private e-mails → breakthrough → Internet
● Blockchain in 2009 → one app – bitcoin
● Bitcoin → private blockchain → breakthrough → finance, smart
contracts etc…
● We just need more investments and wait a little

8. Oversimplification
● TCP/IP: many apps from the beginning! FTP, Telnet – still widely used! Usenet since 1980
had more influence than e-mail – Internet (www) was declared in Usenet!
● TCP/IP actually not a «technology» it is a protocol! May be HTTP is more foundationl?
Actually HTTP could be above other protocols, TCP/IP is not a necessity. In historical
perspective X.25 stack was more promising
● Packet switching is a foundational technology not TCP/IP
● Dates and timelines questionable. Where is the beginning of blockchain? Nothing new in
2009. Consensus algorithms since 1989 at least (Paxos). HashCash invented in 1997. On the
other hands practical smart contracts implemented only with Ethereum in 2015… So where is
the beginning? Either adaptions in too slow, or we are at the earliest stage
● Foundational tech is founded on breakthrough inventions in physics (electricity, nuclear, etc),
mathematics (information theory, cybernetics etc) and there is no any “breakthrough” behind
blockchain

9. Technology adoption
* there are many of technology adoption infographics, we put here the coolest, with respect to copyright owners

10. Innovation curve
2,5% 13,5% 34,5% 34,5% 16%
Innovators Early Early Late Laggards
adopters majority majority
● What we see? Technology adoption is speeding up! Internet in 10 years 50%
consumers, smartphones in 8 years 90% consumers!
● Contrary – blockchain – in 10 years 5% (optimistic) in US and 0,5% world
● This achieved with investments at the level of “Early majority”
Investments
Adoption

11. ...
● Blockchain is a new technology
● Blockchain is new Internet

12. What is it, anyway?
● By definition: Decentralized public ledger with
cryptocurrency tokens as a reward for maintaining?
Unfortunately not always. We have blockhains:
● Centralized, private and without cryptocurrency
So, a buzzword?
How we achieve visionary goals with centralized private
blockchains?

13. Complex technology
● Blockchain is complex tech, difficult to understand
YES! (But not too complex for understanding)
● Many detailed descriptions how Bitcoin blockchain works, some
Ethereium descriptions, not much info about other…
● Anyway, the central part of any distributed system is some
Consensus algorithm solving a consensus problem which is
fundamental computer science problem related to many
applications like distributed computing, multi-agent systems,
load balancing etc.

14. Byzantine problem
State of science:
● Consensus is possible to achieve with finite participants, synchronous protocol and
less then 1/3 of participants behave hostile
● In asynchronous system no algorithm can always reach consensus in bounded
time (FLP impossibility)
● Quantum Byzantine agreement is achievable in constant time
● There are practical consensus algorithms for different applications including Paxos,
Lockstep, WMSR with advantages and disadvantages to achieve different goals
● But...

15. Proof of…
In their consensus part blockchains (at least most of
them) are not based on any scientific achievements!
They are based on social assumptions! Like Proof-of-
work assumption that honest people will always have
more collective calculation power than any of dishonest
and honesty is guaranteed by “selfish greed”. So 55% of
non-greedy people will never agree on attack. And
assumption that there will be thousands of anonymous
miners having anonymity as a core value.

16. Not a proof
● double-spending attack is possible and economically profitable
● anonymity is not a core value (most of miners are known)
● most of mining done by 6 companies from one country
● Ethereum switching to Proof-of-Stake, based on… assumption that rich people are
better :)
● Other Proof-of-… – Delegated Proof-of-Stake, Proof of Elapsed Time, Proof of
Capacity – all have severe flaws, and just a try to «hack» in some practical way
fundamental problem

17. Bitcoin
Why bitcoin was designed that way?
● Never intended to be universal
● Solution for a local ideological problem of cryptoanarchy
– possibility of decentralized anonymous payment
system
● Humanity have no problems with payment
system since VII BC when cash was invented

18. Not a database
● Does not directly record the current state of the system, such as
account balances or land ownership. It is an historical log of all
events that changed that status. By definition, append-only! Not an
active DB.
● Do not ensure data availability. (Ripple blockchain is missing
approximately 32 thousand blocks at its beginning — because no
one felt necessary to save them at the time)
● Data in a blockchain is not immutable. (Especially in permissioned
blockchains. Even Bitcoin has rewind-rewrite events three times)

19. …
● Any attacks on it are not economically viable
● Eternal unchanged data storage
● Network with equal elements

20. Blockchain needs education
● Everyone should be educated with blockchain and
smart-contracts!
● Is everyone a programmer or advocate?
● DAO – professionals and practically inventors of smart
contracts lost 60 M to the code ambiguity!

21. Purposeful ineffectiveness
● In 2017 – 22 Tw/h power consumption, in 2018 – 47
Tw/h power consumption by Bitcoin alone
● 7 transactions/sec and 55 min average wait time
(comparison to Visa 24K tr/sec and 3 sec wait time)
It is the cost of openness and decentralization! It is
intentional and PoW design is built on it!

22. Trust
● Blockchain requires more trust
Seems ironic. Trust is «build-in» in blockchain. Or not?
Well…
Consensus is not about trust, by the way. A consensus
opinion may well be both erroneous and unfair.

23. Blockchain genesis
● Developed by revolutionary anarchists as a vital part of a
plan with a declared goal to bring death to modern
capitalism
The question:
To what extent can a corporate system trust technology
designed to destroy the modern political world?

24. …
● Effective
● Build-in trust

25. Anonymous and free
● Most blockchains are pseudo-anonymous. As we know certain
services are able to easily find even cautious users (with public
cryptography and Tor), and their wallet is always a prosecution
witness
● Blockchain is the most patented technology – more than 1000
patents filed recently. We also have corporate wars on
technological context of solutions (Intel vs IBM on Hyperledger)

26. …
● Free
● Anonymous

27. Technology VS vision
Vision is good (may be), but blockchain is wrong technology.
Just everything has better digital implementation without it!
(Even Ripple do not use its «coin» in real settlements)
Traditional institutions have more trust.
How can blockchain solve problem of junk input?
(And other digital transformation problems)

28. Hype
● How did blockchain mania embrace the business community?
Availability cascade? Group thinking?
Disadvantage to one – advantage to other!
● Ineffectiveness → more hi-tech equipment to sell! → supported by
technology companies
● Transaction transparency, all costs on participants and requirement for
trusted third party → 0 costs for infrastructure and total control by
trusted party → supported by government agencies

29. Hypothesis
● Low trust to mass media → trust for social and bloggers
● Social and “bloggers” not an institution so have even
lower ethical standards
● Probably all blockchain apologists are blockchain
investors

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