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Recently, Blockchain Ponzis have received a lot of attention. What do they teach us about society’s responsibility? Are they another harmful application that will eventually kill Blockchains or just natural technological progression?
Fomo3D, which launched around three weeks ago, is a lottery with a counter where gamers buy into a pool and the last person to purchase a ticket before the counter expires receives the whole pot. The current pot holds around $10Mio. Two weeks ago, it was at around $488k. And based on Researchly’s Industry Sentiment Tool, the media picked up these Ponzis as a topic of discussion last week (see the category “Use cases/products/product launches” in the Industry Sentiment Tool).
Realism and natural technological progression
Assuming that such Ponzis are harmful (because of the financial loss one can incur), they have one upside; they bring realism to the blockchain/crypto space. In Why Coinbase and not Bitcoin will replace Mastercard I have touched upon the outage Mastercard had two weeks ago. Following a payment outage at Visa, around 5m Mastercard debit and credit card payments failed to process. Contrasting Ponzis to these inefficiencies in the financial system reveals an ironic situation; the technology that was supposed to prevent such issues hasn’t done so but instead lead to new troubles.
Blockchains are often seen as the cure for everything but people rarely acknowledge its downsides (aside from technological ones). However, each technology has its downsides. For instance, in the Automotive Industry, the car lead to traffic accidents, pollution, and traffic jams. It was only with the emergence of regulations, education, and freely organized communities that driving became safe (see Murder Machines: Why Cars Will Kill 30,000 Americans This Year). As such, it should not come as a surprise that Blockchains have their downsides as in this case with Ponzis. As a side note, one of the first things Satoshi was working on was a poker lobby.
Acknowledging that Blockchain technology has its dark sides is essential because only so they can be managed. The question is how to manage them. Such Ponzis are usually managed (i.e. regulated) by governments through shutdowns. But with Blockchain-based Ponzis this is far more difficult – if not impossible. And I think it is here that we very clearly see how strongly technology and society are intervened. Technology does not evolve in a vacuum or run on its own, humans operate them (even if we are talking about self-executing smart contracts, humans maintain them). As such, it is society’s responsibility to decide upon the faith of a technology. And Blockchains are no different. Society must decide whether Blockchains are useful or useless based on how they use them.
Declare Blockchains as inherently flawed?
The contrasting point is to declare Blockchains as inherently flawed because they enable such harmful applications in the first place. Blockchains have hardly yet brought any life-changing use cases (asides maybe from bounty hunting to some extent). In contrast, Blockchains have brought out an array of naughty applications; the here mentioned Ponzis, the recently emerged assassination markets on Augur, child porn, a range of scams… the list goes on.
However, I think it is too early to declare the technology as a failure. For now, I like to see these harmful applications as a natural technological progression that happens with every new technology. Nevertheless, I like to think that such harmful use cases could change the meaning of the technology; Blockchains started out as fully free without any censorship. However, if these Ponzis, scams, and Co. keep piling up, maybe some sort of censorship (think permissioned blockchains) will be needed. Maybe also because of such uses, interest in the technology will die down for a couple of years (think a Blockchain-winter in analogy to an AI winter) or die down forever.
A social experiment, after all, isn’t it?