Ethereum: "The Phoenix Project" of the Cryptocurrency Community

Many family and colleagues of mine recommended The Phoenix Project a while back and watching the Ethereum community "resolve" its current dilemma has been like reading the book all over again. We like to quote the idiom, "Haste makes waste," but how many of us actually follow its message? For the time being, my enthusiasm toward Ethereum has ended, outside of speculation. In this post, I reflect over bitcoin and what I'd like to see in the future for smart contracts, as far as the system.

Respect For Satoshi

Hero worship should concern us all because we're all imperfect and to quote Keith Jackson, "We sing his praises and then he damns us." Satoshi early in the start of bitcoin warned the community about over-selling bitcoin because many of bitcoin's bugs and kinks had not been resolved. Stop and think about that for a second; here was a great idea from someone and yet this person tried to reduce the enthusiasm and passion in the community by reminding everyone that we all needed to make a better product. How often do we see that in tech?

Almost never.

In fact, this is the polar opposite of many American businesses: American businesses usually sell first and build later, as if their customer doesn't matter. Before you criticize me for hating on the American business leaders, the government is no different, as Jim Rickards highlights. Notice "Kittie's" reply to Jim, Would you have been honest? Or would you have told them whatever they would most likely agree on? Translation: it's okay to lie as long as you get what you want. Does anyone wonder why people are losing trust in businesses and governments? This is their attitude and its complete fraud at its core.

Now find an example of a company (or government) that focuses on the vision of building something with high quality and not selling the product until its ready. Outside of bitcoin, I can't think of one example of this recently.

Let's Remember What Capitalism Is

We hear critiques about capitalism all the time, but outside of the bitcoin community, most people - in their critiques - demonstrate they don't know what capitalism is. At its very least, capitalism requires:

• Private property
• Failure
• Competition
• Liberty

The fact that big banks could steal your tax dollars through inflation (TARP/bailouts) is proof that your property is not yours when the chips are down. In addition, even though the banks failed, they didn't fail; they were bailed out by you and me. Finally, even though many of us didn't support this, we were forced by the government.

Exactly, how is this a capitalist system? Now, let's consider Ethereum.

Ethereum Needs Competition

I've asked people in the cryptocurrency community who is Ethereum's competition, as I have two smart contract ideas that I want to develop, but this whole bailout has moved me away from using Ethereum for these contracts. So far, I haven't heard of any competition to Ethereum and it desperately needs a competitor. Competitors keep companies, governments and systems honest; the solution to corruption is often a competitor.

A simple example of this is when I was living in Austin and experienced car issues, several mechanics preyed on my ignorance of cars to make a lot of money that didn't help with my problems. When we stop and think about this, it makes sense - I know nothing about cars, so why not exploit my ignorance? In game theory, this is referred to as the alpha strategy, and it's good strategy for a short term gain. But what happens in the long run is it builds distrust, especially as friends told me, "Wait, that's not needed. They don't sound very honest." So, I asked my friends (the ultimate peer-to-peer currency) who they used and they all recommended Juke's Automotive. I took their advice and they were all right; Juke's did the right thing and earned a permanent customer. Competition gave me options to easily switch my business. Anytime someone asks where to go, I say Juke's Automotive.

Competition keeps us honest; we should all want it because only a dishonest person would fear a competitor.

Let's also remember that there were concerns about The DAO that went ignored and once it failed (and I was part of this failure and want to take the loss), many of us with integrity said, "We have to eat this loss." That's not what the insiders wanted though and they started coming up with excuses about why failure couldn't happen! No one needs to be a genius to see the parallels to the mainstream financial crisis.

Smart contracts are inevitable; Ethereum is wise for moving in this direction, but they're bailout of the DAO is obvious to people who are disgusted with mainstream financial corruption (and how is it any different?). I suspect that other programmers, like myself, will prefer an alternative smart contract system that is honest in the long run. A suggestion: no founder or board member should be a major shareholder of any idea, as that increases the likelihood of these events.

Sure, Ethereum is good for speculation at certain prices and there are some companies on Ethereum that, for the time, seem honest and have done their due diligence (DigixDAO hasn't had problems yet). But I don't want my contracts in a system that Henry Paulson, Goldman Sachs, and other mainstream financial powers would be proud of and Ethereum is something I think they'd all love to join.

A Technical and Financial Demographic Reminder

Let's remember that the cryptocurrency community started when the corruption of the mainstream financial system became obvious. Again, read what Jim Rickards says because 2008-2009 is exactly when the idea of bitcoin floated and started. We're a community of people disgusted by this corruption. If you build a system, make a mistake, and then try to "undo" your mistake, you don't understand this community. That's exactly what they did - how are you any different?

Oh look, another bank bailout coming in the mainstream financial system!

Bitcoin is a technical and financial solution to the problems of the mainstream financial system (as a note, I agree with Jim that gold is also a solution because it enforces integrity - bitcoinaires like gold and bitcoin). It unites both engineers who see how the problem can easily occur, as well as the people who grasp game theory and how its being played against the public (the insiders aren't cooperating and have no interest in cooperative plays).

We all remember the pain of MtGox. It hurt to fail and lose, yet look at what we all learned. We learned that keeping bitcoins on exchanges is risky, we learned how to assess the risk of exchanges, and many of us learned the value of paper and cold wallets. I think that technologies, like Trezor, have become popular because we all remember that failure - it hurt. And finally, some of the ideas around multi-sig and security get the attention they deserve because of failures that our community hears from others and discovers, making our community stronger and stronger.

When we fall off our bike because of reckless biking and hurt ourselves, we avoid reckless biking in the future. Consequences teach us what not to do as well as what to do. We only grow stronger when we fail, both financially and technically.

The Future Is Bright

The mistakes in Ethereum don't surprise me - even bitcoin has had failure. The response to the failure did. Still, there will be competition and many of us who despise corruption will build contracts in a system that allows failure. In fact, our contracts may fail too - and many of us have considered already the consequences of how we imagined them (aim small, miss small). My point here is be excited about the future of smart contracts because it will be awesome, even when it's under a different cryptocurrency and community.