The Problems with Blockchains

I discovered Bitcoin in 2009 on HackerNews and became quickly fascinated by it through my interests in peer to peer technologies and finance, and started trading Bitcoins in 2010 and implemented my own Bitcoin client not much later to understand the protocol in detail.

Since then, I have been following it for more than ten years through three distinct periods I would call “Ealy stages (2009–2013)”, “Becoming Mainstream (2014–2017)”, and “Altcoin Explosion (2018 -2020)”.

Although the price of Bitcoin and other Cryptos have increased, they did not become as successful as I thought they could.

The technology behind Bitcoin, Blockchain, is a great innovation but has some significant issues. I’d like to provide my analysis of it.

Security

The lack of security in Blockchains is almost there by design: a hack, a password loss, or hard disk crash is permanent, and the transaction cannot be reversed. You need to make backups, but not too many and you can never trust a third party with them.

Despite being an expert Software & Security Engineer, I would not trust myself enough to correctly manage private keys, and I would never recommend it to beginners.

Even with hardware wallets, which are already inconvenient to use, you also need to keep the recovery seed somewhere safe and ensure you don’t forget it. And I need to trust the manufacturer not to have made any mistake.

Governance

The great Bitcoin “Block Size Debate” has divided the community since the beginning. I first heard about it in 2011 at the Prague Bitcoin Conference.

There are only two methods to make a decision with the existing protocol: Node Count and Hash Rate.

Starting 2015, as you can see in this graph, protocol changes were suggested by running alternative node implementation, but as anyone could pay to run many nodes in the cloud, it was criticized for not being legitimate.

Bitcoin Node Count (https://coin.dance/nodes/all)

Hash rate was considered as a better alternative. However, as the Hash rate was controlled by a few large mining pools, decisions could also be criticized and dismissed.

Bitcoin Hash Rate 2020 (https://coin.dance/nodes/all)

None of these models ended up fully accepted, and thus there is still no accepted governance model to modify the protocol.

Scalability

The current transaction limit and related fees are insufficient for usability and limit it from being what it could be: a replacement for every payment on the internet and even multiply their number by 10 or 100, making microtransactions possible.

Lessons

I now believe that new Blockchains need to include governance rules from the start. Ideally, for the decisions to be binding, decisions must be able to change the software automatically.

“Proof-of-Work” is not a good model, as it is both resource-intensive and has a disconnect between the users and the decision-makers. Better governance models are “Proof-of-Stake” (like a Company with Shareholder) or “Proof-of-Authority” (like an Association with Members).

Associate.com

These problems brought me to sketch and develop what has become Associate.com: a platform for governance of decentralized organizations. It solves the problem of giving indirect control over resources to members of a project. Resources are things like funds (EUR/USD), domain names, IT servers, code repositories (Github), file repositories (Dropbox).

It is the equivalent of “articles of incorporation” in the form of a smart contract without blockchain. Not using a blockchain allows much more flexibility and enables Associate.com to easily integrate with external platforms.

Of course, you still need to trust Associate, but we hope that will be earned with time and with our use of auditors and community auditors.

Our primary interest is to grow the quality and the number of projects on our platform, but never to interfere with their governance.

New style Cryptocurrencies (Semi-Decentralized)

I also believe that Associate can fuel the currencies of the future. The properties of such a coin would be a lot better than any cryptocurrency. For example, by providing:

  • Legitimate Governance

It is for these types of projects and to solve these problems that I developed Associate.com.

On November 11, 2020, we officially launched the platform in alpha test mode, and we are now calling for people to create new projects with us and be amongst the first adopters of what promises to be a great platform.

We invite you to participate in our alpha launch and start your initiative. Sign up and find more information on our website at Associate.com.

We are also seeking to create a community to help us build Associate.com. If you are interested, please join our Founders Association.

Thanks for reading,

Christian Bodt, CEO, Associate.com

christian.bodt@associate.com

Enter a new world of Decentralized Associations

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