Recently I've been reading up on BitCoin, Ethereum, blockchain, and the assorted crypto-currencies than now bloom across the techscape.
These are exciting times, but not clear times. Consensus ledgers and public cryptographically signed audit trails are an interesting thing, and they'll find some powerful applications. But it's notable that we've all been perfectly happy to use money systems without that -- witness banks, Visa/Mastercard, PayPal, or the numerous companies who use direct-debits to tap your wealth according to their own notion of credit/debt.
Money systems are essentially about trust (that the the token you hold can be exchanged for goods & services). Money has to be backed by something we trust, such as the nation state & it's economy, or the bank's solvency and integrity at the book-keeping level, or for IOUs, in the individual. BitCoin is the first system where trust is grounded in an algorithm.
That alone doesn't change how money is used. Perhaps BitCoin's biggest achievement is to get enough momentum to puncture the Visa/Mastercard monopoly (alongside PayPal, and now Android and Apple payment systems). These are (welcome) variations on an existing theme. We're still waiting to see a digital currency that really shakes up how commerce works.
People talk of low transaction costs -- in fact BitCoin transactions are computationally very expensive! This is by design: BitCoin uses computational cost to defend against attack by a swarm of bots. As I write this, a BitCoin transaction costs about $0.50 and takes about 20 minutes, but these numbers vary.* That BitCoin is cheaper than debit card or bank transfers is not due to technological breakthroughs. It is because the existing system is massively over-priced.
Reading the many earnest thought-pieces on how blockchain will change everything -- it seems people sometimes project their thoughts about the wider potential of digital currency onto the specific technology of blockchain and BitCoin. These thoughts then get repeated by others (and ratified by repetition), until it can become hard for everyone to see what's going on.
I've seen a similar concept-creep happen in AI. Specific techniques get described by analogy, and those analogies are extended, until people see The Terminator in every AI project. Your future toaster might have senses (to see when the toast is cooked), and voice recognition and machine-learning to learn your preferences. And probably some spare intelligence, because it's cheaper to put in generic over-powered components than to custom make simpler ones. But no amount of feature-creep will turn it into The Terminator. Although it will get hacked by some internet d-bag, inscribe rude messages into your toast, then burn your house down. If you want a picture of AI over the next 5 years, imagine everything as smart toasters.
*BitCoin transactions offer a fee to encourage BitCoin miners to process them, and to do so ahead of other transactions (there is a queue). There are plans to alter BitCoin to allow for cheaper transactions, though this requires a reduction in security, and changing a currency on the fly is not easy.
Images: (cc) FamZoo Staff, famzoo on Flickr, and the Talkie Toaster from Red Dwarf.
