Distributed Ledger Technology (DLT) is the innovation underpinning most blockchain projects, including Bitcoin and Ethereum. DLT allows distributed groups to vote and reach consensus in provably secure ways, leading to systems for decentralized stores of value, smart contracts, and much more.
We're now 12 years past the advent of the renowned bitcoin whitepaper, and despite excitement and curiosity, the global financial system is still inaccessible to most. Identities are stolen in widespread data breaches almost every day, and the speed and efficiency promises from technical innovation still have a long way to go before they're realized cost savings.
In this essay, I'll outline some of the arguments against DLT and share my view as to why I think the story is yet to be written.
The critiques are all too common:
If DLT was really the next big thing, we would have seen innovation by now, right?
Ten years later, there's so little to show for so much investment.
If blockchain is so important, why hasn't anyone made the killer app yet?
Let's go a layer deeper and ask the underlying question: if DLT is such a big deal, why hasn't it proliferated the financial system? Why isn't anyone using it yet?
When a new technology doesn't rapidly develop like people expect it will, our natural assumption is that it's due to structural defects. Common critiques: it's too expensive. It's more of the same. It doesn't scale. It's only used for fraud.
In The Art of Doing Science and Engineering, Richard Hamming reminds us of similar critiques people had as computers became more commonplace:
I was told repeatedly, until I was sick of hearing it, that computers were nothing more than large, fast desk calculators.
Those who claimed there was no essential difference never made any significant contributions to the development of computers. ... Those who did make significant contributions viewed computers as something new, to be studied on their own merits, and not merely more of the same old desk calculators, perhaps souped up a bit.
This all sounds similar. Here's why I think we're stuck in this uncanny valley of mismanaged expectations:
People assume that there's something structurally wrong with DLT, when in actuality, we're still dealing with a lot of the small boring details you have to get right when building and integrating a new technology.
I can speak to this from personal experience. Having worked at Coinbase for the past two years, I can assure you that many of the problems holding back DLT are far more prosaic than you think they are. Storing really big numbers is actually pretty hard, and you'd be surprised at how much time companies spend on solving problems like this. Coordinating a meeting with five decision makers actually takes quite a bit of time. Security reviews are necessary but long and arduous. Naming things is pretty hard, too. 1:1s, finding and fixing bugs, and thinking about how to represent transactions. The right stuff is often 10% technical brilliance and 90% streamlining process.
When given two narratives, we'll pick the more interesting one: that DLT is doomed to fail because of structural shortcomings. It's just more interesting that way. After all, imagine how boring a Star Trek episode would have been if the plot was “there was nothing wrong with the Enterprise after all, we just had to restart the computer.”
Second, technical progress is very hard to measure. We make sense of stories through the lens of the Seven Plots, and at this pace, it's unclear if/when we'll have the Rocky training montage scene where DLT goes from being a niche technology to something that's widely adopted.
But that's the nature of technology, and also why technology investing is so hard: there's no such thing as a near miss: you're either entirely right or entirely wrong. So, while many feel discouraged by the lack of visible improvements, trust that there are many working behind the scenes on fixing the prosaic problems that one actually needs to solve to integrate DLT with our existing financial system.
For example, we recently released Rosetta, a framework that we think will accelerate the pace of DLT development and iteration. This will help accelerate innovation precisely because of the reason it's not newsworthy to the general public: it solves the prosaic problems that get in the way: transaction design, naming things, handling numbers (unfortunately, it doesn't help coordinate meetings). Through this line of reasoning, when DLT and crypto do take off even more, there probably won't be a press release.
Finally, DLT is something new, and new things are uncertain. Quoting Hamming again: "This is a common, endlessly made mistake; people always want to think that something new is just like the past - they like to be comfortable in their minds as well as their bodies. … Not everything which is said to be new really is new, and it is hard to decide in some cases when something is new, yet the all too common reaction of "it's nothing new" is stupid."
It's comforting to say it's nothing new, especially when your livelihood depends on perpetuating systems that work just fine. At the end of the day, we'll keep innovating and exploring ways to make DLT work for everybody. Saying something will never happen is like taking a perpetual short position against human creativity.
This play still has a long way to go and the story won't be written by the naysayers - it's up to those who are putting in the work: people creating things, people building frameworks, and people exploring, starting, and contributing to open source projects.
The denouement is yet to be written. Until it is, I'm going to side with the builders. They're the ones writing the story.