Monday, 15 July 2019 10:45

Blockchain mostly useless, says bitcoin investment firm owner

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Aleksandar Svetski: "Blockchain is largely useless and overkill for any application outside of something that needs state-level censorship resistance." Aleksandar Svetski: "Blockchain is largely useless and overkill for any application outside of something that needs state-level censorship resistance." Supplied

The head of a company that helps people to invest small amounts in bitcoin on a regular basis has described blockchain as merely a glorified database and ridiculed those who use it for pushing their products, by saying that such efforts are merely "classic PR announcements" by "large, boring corporates" who want to show that they are still innovative.

Aleksandar Svetski, the chief executive and founder of Amber, which is described as "Australia’s first all-in-one digital currency exchange, wallet and micro-investment app", said in an interview that the technology used by his firm had nothing to do with blockchain.

"We are currently more interested in bitcoin as an asset, rather than as a technology," he said. "Thus we’re building a business around the market’s desire to acquire bitcoin as a future investment opportunity."

He was dismissive of blockchain, saying that if it was described as a distributed database, "it’s largely useless and overkill for any application outside of something that needs state-level censorship resistance".

"If described as a segmented, time-stamped database, then it’s nothing new - we’ve had that for 20 years," Svetski added. "As a result, blockchain is nothing special.

"Bitcoin, on the other hand, is a network that achieves autonomous consensus amongst network participants who do not know each other. This is unprecedented and its application to a non-sovereign form of monetary unit is the killer app."

Asked why blockchain had been associated with bitcoin, Svetski said it had been popularised in 2013 and 2014 by a banking consortium, "who we all know are threatened by the disintermediation that bitcoin presents".

"Blockchain (if that’s how we’re going to describe the database infrastructure) is one small element of what bitcoin is."

Asked about the recent announcement by three banks, the Scentre Group and IBM that they would be using blockchain to manage bank guarantees that are often needed to lease retail properties, Svetski said: "It’s a classic PR announcement by large, boring corporates who are desperately trying to show that they’re still somehow 'innovative'.

"[It's] similar to how they use (and exaggerate) the words 'cloud', or 'AI', or 'big data'. Their applications are nothing but glorified distributed databases. Very, very, very little innovation there."

Asked why his firm had chosen bitcoin and not one of the other cryptocurrencies, Svetski said: "Bitcoin’s immaculate conception cannot be replicated. Its organic introduction into the market, its initial broad-based adoption for strong, libertarian reasons and the timely disappearance of the founder, leaving no 'head of the snake' to cut off make it impossible to replicate.

"Digital scarcity, which is the innovation that bitcoin brought us, is by definition, a one-time event. Every other currency, optimising for stupidity such as smart contacts, or payment speeds are irrelevant and short-term noise. Bitcoin’s focus on being a censorship-resistant public network, owned by the participants, that’s broadly decentralised and organically priced by the market, is something unique."

He said Facebook's proposed cryptocurrency, Libra, reinforced all these points, "by making all other cryptocurrencies obsolete, and giving us a strong contrast to what bitcoin represents for the world, ie; A money of and for the people, that cannot be shut down, censored, confiscated or inflated".

Svetski added: "This was a once-off opportunity. The smart money knows this and bitcoin will only continue to suck up all the capital and liquidity while all the other noise (crypto) will continue to trend toward $0 against Bitcoin in both dollar terms and relevance."

He said the fact that bitcoin was not under the control of any governments meant it had a much stronger future. "In 1000 years, the concept of money will very much still exist - because it’s the foundational element required for any society to function.

"Much like the Internet, bitcoin is a public good - owned by the people - and by taking the only two finite resources that we know of (time & energy), bitcoin is able to give the world a superior monetary network and unit that we can use to better collaborate and function as an open society."

Svetski said the alternative was potentially 1984-stye draconian government currencies like China’s social credit system, or the potential for non-state currencies being launched and potentially having disproportionate influence, like what Facebook planned to do with Libra.

He claimed that Libra inherently validated bitcoin. "It opens people’s minds to the idea of a floating, global currency that is not managed or issued by a state of government."

"Libra is in direct competition with government-based fiat currencies, and they know it," Svetski added. "In fact, when one considers what a population in a jurisdiction with a weaker national currency would do if LIbra launched there, you’d quickly come to the realisation that there would be a 'bank run' on the national currency, with all the capital flowing onto Libra.

"The result would be catastrophic for the government in power, as it’s economic level is the basis of it’s control of the population. Governments are scared - and rightly so. Facebook is arguably the largest “country” in the world. Their currency would be more useful than a fiat one."

However, he said, he still argued that bitcoin was the real answer and the anti-thesis to something like Libra, "which to me sounds like the world should merely jump from the frying pan into the fire by moving from a US dollar reserve to a Libra reserve".

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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