Op-Ed

Misunderstanding Cryptocurrency

Op-Ed:

There are two terms that are really vital to the understanding of how cryptocurrency systems work: decentralization is one; the other is deregulation. They aren’t the same. Many people believe that decentralization means that something is no longer regulated; but really, it just means that there isn’t a singular authority. Decentralization merely means that it is no longer in the hands of a ruling elite.

Take for example the original concept of the US Congress. This was (for its time) a move to decentralized authority. Consensus was a new idea, and over the following two centuries the idea of having a monarchy waned in its appeal, with the biggest monarchy of all (England) giving its traditional power to the Parliament (thanks, Queen Victoria!). Today’s monarchs tend to be figureheads for the people to see and to represent the interests of the country in a diplomatic capacity, but most monarchies in 2016 are no longer the leading authority of the country.

Decentralization doesn’t mean that anything runs completely in the wild; it means that the power to change is led by consensus, rather than dictated. With the fork after the DAO exploit earlier this year, a lot of the arguments seemed to confuse the idea of deregulation with that of decentralization. A strongly-centralized blockchain is susceptible to corruption. A blockchain led by consensus is far less so. But a completely-unregulated blockchain (one which is only regulated by the originating code) is by its nature corrupt to begin with. Code can’t change itself to correct issues.

So when there was the argument, what surfaced was not in fact a decision to un-decentralize the DAO. The decision was in fact to prevent theft. The moment that the Ethereum tokens stolen would be converted to fiat is the moment that the theft would actually occur. So the viewpoint that no theft took place is technically correct. But if Slock.it and the Ethereum Foundation took no action—if the curators of the blockchain just let it go wild—then theft would in fact happen and it would be on their watch.

So the issue here is one of comprehension. The tokens were siphoned into a child DAO. Those funds are now locked. This doesn’t break decentralization. It merely shows conscientious regulation by consensus. Regulation means that errors that violate the intent of the system must be dealt with. And that scale of error means that complete deregulation is unwise—at least, until we can actually program an AI capable of regulating the code itself—but then it would no longer be decentralized, as the AI would become the central authority.

A Decentralized Autonomous Organization (DAO) is not deregulated. It is in fact heavily regulated. So if there is a problem known, and the community fails to fix it, should the losses be chalked up to “finders keepers”? That is really a good question, too. The problem is that laws are in place to guarantee that certain definitions are kept in place, regardless of what the code says. The removal of tokens from their intended holders by a systemic flaw is still considered theft, because the law allows that anything on which value is placed (electronic or not) is “owned” by one person. Removal from their possession without consent not only violates the law and invokes the definition of theft, it also violates the basic principle of consensus on which technologies like the blockchain were invented.

Thus, the issue here isn’t simple whether or not the “hack” (exploitation) was theft—clearly, the law says it is—but in the intimidation of the curators of the blockchain into holding the stolen tokens where they are—which is also theft. These illegitimately-gained tokens (illegitimate because of their removal without the consent of those who owned them to begin with) should be returned.

And that is the sum of my own opinion on the matter. I have good reasons to have that opinion, but as I am neither a curator of the blockchain nor any kind of authority in any capacity whatsoever, this is merely an attempt to convince the curators that the concepts on which their model was founded should reign supreme, and not the opinions of those who do not operate any portion of the blockchain.

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5 Comments

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