10 thoughts on “No such thing as a free ledger”

1. One thing I’ve always wondered about Bitcoin. On the one hand, it’s generally assumed that transaction fees will be needed to keep the system working once all of the Bitcoins have been found and ledger-calculating no longer pays in new Bitcoin (“mining”). Given the amount of electricity Bitcoin uses, those fees would not be small.

   On the other hand, any given ledger-calculator has to include the same transactions as everyone else, or his version of the blockchain forks from the consensus and becomes useless.

   So what leverage does a ledger-calculator have over someone who won’t pay the fees? Why would anyone pay the fees? And if nobody pays the fees, who will update the ledger?

2. “A centralized ledger writer extracts rents due to its monopoly on the ledger. ”

   Why does a centralized ledger writer have to be a monopoly? It is simply the distillation of what we do now with commercial banking services. There is no reason why we can’t have a number centralized ledger writers competing for business just like banks do.

   A centralized ledger can be incredibly efficient. There is no reason why such a ledger cannot issue transaction keys or validate a public key at costs several hundreds or thousands of times cheaper than a blockchain could. The registration or validation of a transaction can be done for a fraction of a penny and still be a profitable service.

3. Central banking has scale problems also, as indicated by its measurable failures.
   The accelerator for ledger tech is a pre-qualified set of money users such that checks can ‘float’ during ledger congestion, and transaction risk transferred before entering ledger. Pre-qualified users become their own validater over short periods, eases ledger congestion. It works, as the authors say, because there is a a boundary where chasing scofflaws is a relatively cheaper process than waiting in line. Pre-qualed systems can measure the scofflaw costs.

   • I can break down the ledger costs with the local store clerk.
     The clerk faces a card tansaction fee, of some sort, the custome faces an ATN fee of some sort. The two keep a book, on paper. Technically, the book is a finite block chain with inky check summing. The pages in the notebook are always filled, 1 to N, each page filled sequentially, in ink. Each payoff scratched out in ink, like really blackened to unreadable. Both customer and store clerk verify book entries. Tihs method saves banking fees to both parties.

     My store clerk also rounds. He typically rounds prices to the nearest quarter wit the pre-qualed, the customers who keep an unbiased estimate of round off error. That saves the transaction costs of nickels and dimes.

     It works because the store clerk polices the scofflaws, and the scofflaw cost spread in price of goods, the queue in front of him ells him when he is stable, there should generally be one or two people in that queue.

     What is the store clerk doing here? He is subtly forcing assets toward liabilities at the currency issuer, distributing currency risk and currency transaction costs as they are incurred. The entire natural mechanism of everything boils down to stable waits in line, almost everywhere.

4. Let me summarize the issue on ledger costs, since I am pretty much of a pro on this.

   The cheapest overall ledger system is a contracts manager, in your ATM card, and your ATM card is a difficult counterfeit and uses built in thumb print. That card can be adapted o use a finite, bu large set of ledger systems, from my store clerk credit to point to point yard sales, to cash in advanced lending to automatic portfolio management. That card knows how to manage a measurably safe move from a block chain to a bank to a stock market broker, and can keep bearer digits safe, operate without any ledger system except a like designed card.

   This is today’s Moore’s Law, but it requires a huge leap of faith. This card has to create and hold a secret key, that no other participant can see, neither you, not me not any other processor. That is a huge transfer of power of attorney, guaranteed to be cancelled upon thumb print, but in operation, it is legal power of attorney for the card holder.

5. “There ain’t no such thing as a free ledger.”

   Sure. But if you want a way to transact without having to depend on centralized intermediaries who can’t be trusted to act as perfectly neutral and non-discriminatory “common carriers” and not to interfere with your business, then it’s a service worth paying a premium for.

   • The only way to avoid depending on centralized intermediaries is when the parties involved in a transaction fulfill their promises directly. A ledger is a third party record for dispute purposes. You can’t resolve a dispute between two parties without centralized intermediaries.

     Anyone who has actually collected accounts receivables knows some parties just don’t pay. You may think a blockchain or some other mechanism is a form of proof. Fine. Does that get you your money?

     Will states somehow create frictionless courts, where decentralized blockchain claims are validated and ruled upon instantly at no charge? Where they will suddenly activate authorization to seize assets? Right now, chasing bad debt is often a fruitless pursuit, despite the existence of rock solid proof, i.e: an issued purchase order, and proof of delivery.

     In the end, proving the existence of a valid transaction doesn’t get you very far unless the state learns to process and support that finding much more quickly. Tech is overselling this piece as some form of utopian ideal, and it isn’t.

     • The only way to avoid depending on centralized intermediaries is when the parties involved in a transaction fulfill their promises directly. A ledger is a third party record for dispute purposes.

       It’s different when the electronic ledger is the property. That is, it’s not just some record of the chain of title for some other, off-ledger property. It is the sum of transactions for identified parts of itself.

       Once upon a time checks and other paper instruments used to circulate like money and be endorsed with the signatures of new owners many times before being deposited at a bank. The ‘ledger’ of the list of endorsements was part of the instrument itself, which was once a generally accepted alternative medium of exchange.

       You know how some trophies are their own nameplate plaques with spaces to engrave the names of past and current holders? That makes them their own ‘ledgers’. Only the latest name on the ‘trophy’ has the right (and technical ability) to transfer it. And once your name is written on the ledger, that is not a promise but a completed execution, there is no waiting for some later process, fulfillment, or ‘delivery’.

       • Well, we can talk about that too, but that isn’t just a block-chain ledger, that’s a crypto-currency. That particular idea isn’t going prime time anytime soon.

6. “The ideal qualities of any record-keeping system are (i) correctness, (ii) decentralization, and (iii) cost efficiency. We point out a Blockchain Trilemma
   : no ledger can satisfy all three properties simultaneously. A centralized ledger writer extracts rents due to its monopoly on the ledger …”

   Uhhh…. I guess I’m neurotic. I don’t understand why “decentralization” is an ideal quality of a record keeping system. I mean, yes it’s desirable that “system” data records should be observable by all persons affected by or referenced by such a system, and we can demand that all persons using the system access the same data.

   But this isn’t decentralization. I mean …. would you sit in a witness box in front of a jury, get yourself sworn in, and tell 12 men (or ladies) good and true that, from your vantage as a scientist, decentralization was such a virtue that the US government absolutely had to duplicate the holdings of the Library of Congress as quickly as possible in every single state? Or in every major city in every state? In every library building in every city? In every iPhone? Because there’s no cost to this?

   Alas, I can guess that keeping duplicate registers “in fidelity” has some costs. That convincing widespread users of the essential identity of distributed registries has some costs.

   Please, please, please. I want to be cured so I’m like the rest of you guys and a true believer in block chains. Please fix my mental illness.!

Comments are closed.