Bitcoin has seemingly stalled, with valuation and adoption moving sideways. So, where do we go from now? Cloudbet blog, always eager to understand the possibilities, reached out to Eric Voskuil, a leading voice in the space, to get his take.
Even by the high standards set by some of crypto’s leading exponents, Eric Voskuil’s resume certainly stands out from the crowd. Not only because he personifies, over and again, the ultimate combination of a great many people’s definition of success: Among his accolades, he can count being a serial entrepreneur, angel investor, varsity athlete in you-name-the-sport, multi-martial arts master, world traveler (nearly 80 countries), successful military fighter pilot and tactics instructor trained at the Navy Fighter Weapons School. Or, as known to us mortals, Top freaking Gun.
But no, that is just one side. All of the above would already command Liam Neeson to play Voskuil on the big screen, but of course that would not be enough. Because another particular set of skills he does have, skills acquired over a very long career, place him at the top tier of today’s crypto universe both as a developer and as part of the intelligentsia that is trying to push Bitcoin to grow beyond the speculative hype-cycle borne by the latest financial frenzy.
Bitcoin exists to separate the state from the money - Eric Voskuil
Apart from his invaluable contribution to Bitcoin as a thinker and developer, Eric maintains Libbitcoin, an open-source project focused on providing a high performance development toolkit while creating an independent body of experts. In the debates arena, Eric’s sober and consistent stance - which he candidly shares on Twitter and on Libbitcoin’s GitHub wiki - is one of a few voices trying to steer the heated clashes around the ethos of crypto away from ideology and towards actual ideas . He has condensed his theoretical framework into what he now calls “Principles of Cryptodynamics”, which he will present at the 2018 edition of Scaling Bitcoin in Tokyo, in early October 2018.
So, when a guy like Voskuil speaks, you might want to listen - even if you disagree, chances are you will still learn a hell of a lot more than by doing your “research”, which admit it, consists essentially of you browsing through shady tweets and “investment” Telegram channels on a quest for the next shitcoin to reach the moon.
After more than a decade in the US Navy, including 20 combat missions and a couple years as a Top Gun trained tactics instructor, most people would have happily hung up their boots, having collected more than enough stories to tell their grandkids. But Eric is not most people and playing life on hard mode is too easy for him. So he went on to build three start-ups from scratch, selling two of them for a profit (including one to Microsoft, which is no mean feat), just because why not?
And after entrepreneuring the hell out of life, he started to hear things about this new magic Internet money some geeks were using while, of course, telling everyone else on the internets.
Since the 1990s, he had been interested in some of the same topics that would ultimately become the building blocks for Satoshi’s breakthrough currency, such as public-key cryptography and David Chaum’s ecash. However, it wasn’t until 2014, after a Forbes article on the dark web’s Silk Road market that he really understood the potential behind the new technology. That’s when he set his sights on Bitcoin.
Since then, he joined forces with hacker and rebellious former core Bitcoin developer Amir Taaki in expanding Libbitcoin, a set of libraries Amir created for building Bitcoin applications.
In an interview with Bitcoin Magazine in 2016, he explained that Libbitcoin was created to diversify Bitcoin’s development ecosystem, as “Bitcoin requires decentralization for survival, [and] if there is only one team of experts maintaining the only implementation, the whole ecosystem is extremely weak.” Ever since Amir left the project (to fight with the Kurds against freaking ISIS in Syria, just in case you were about to pass a 140-character judgement here), he has taken over as project lead.
Besides his share of code and corresponding documentation, Eric went on to lay the theoretical framework behind Libbitcoin in a collection of short articles in wiki form, hosted alongside its libraries on GitHub. After seven years, Libbitcoin has become a reference for Bitcoin development and many projects have used it in their development, including Darkwallet, a privacy-oriented Bitcoin wallet; Airbitz (rebranded as “Edge”), one of the most popular mobile wallets; and OpenBazaar, an attempt at a censorship-resistant online marketplace (based on Amir’s Darkmarket prototype).
A self-described anarcho-capitalist and crypto-anarchist cypherpunk, Voskuil holds clear political views on the role of the state in the economy, and the very nature of power within societies. His poignant and concise critique of the Bitcoin ecosystem is a beacon of reason in a field still notoriously driven by emotions, helping delineate the very concept of Cryptoeconomics.
That is not to say he is just passively contributing towards that shaping. Sitting right at the top of what seems almost like a manifesto over at Libbitcoin’s GitHub page lies his treatise on what he believes Cryptoeconomics should mean. As with most of his public writing, it’s a pragmatic and logically sound approach to defining how he believes Bitcoin actually functions.
The very presence of such a body of theoretical work right next to its technical aspects - Libbitcoin’s code - speaks loudly to Voskuil’s worldview, a view to which technology should not be an end in itself but understood from, and fitted into, the larger picture of human endeavours, such as politics and economics; and where all stakeholders should incorporate an understanding of security fundamentals, since to him “humans are the root of all security. Failure of technologists to incorporate economics and security and economists to incorporate security and technology leads to fatally-flawed theories from both groups.”
Piece de resistance vs. Mainstream adoption
Eric Voskuil’s vision for Bitcoin stems from it being a tool for resisting state control. He explicitly states that “Bitcoin exists to separate the state from the money” in a talk he gave in 2018. And right at the top of his Cryptoeconomics he asserts that “[t]he value of Bitcoin over its alternatives derives directly from removing the state from control over both monetary supply and transaction censorship”, pinning the very existence of Bitcoin to this principle, which he dubs the Axiom of Resistance.
The importance of this principle is such that he goes on to conclude that “[o]ne who does not accept the axiom of resistance is contemplating an entirely different system than Bitcoin.” Even if these assertions may sound a bit too heavy-handed, one would be hard pressed to find any flaws to Voskuil’s logic, given Bitcoin’s short-but-eventful history of doing just that.
And that’s where the conundrum lies: how can Bitcoin, whose value proposition depends on resisting state control, ever reconcile with the mass adoption its most vocal proponents (and investors) are trying for? Since wide adoption relies at least to a degree on its users not being constantly afraid of prosecution for using it, will Bitcoin ever go mainstream?
To this, Eric usually replies with a cautious no, “it will not become a dominant force in ‘mainstream economics’ because that implies white market operation and therefore the lack of desire by the state to tax through currency. Possible, but unlikely.”
This opinion tends to not sit well with the most fervorous evangelists, as it denies them a cherished worldview of the future. To Eric, that is just a consequence of the premises he identifies as being Bitcoin’s foundational principles.
Holding such a position might not seem to suit your regular Bitcoin advocate, but to Eric, it’s all about being consistent to his logic. In fact, his consistency amidst all the noise in crypto is perhaps one of the biggest reasons his opinions have earned respect from across the board:
"The most surprising response to my talks has been appreciation for providing consistency and clarity on fundamental questions. I get this from all levels, even core developers. If it wasn’t for this I wouldn’t spend so much time on speaking and writing. I didn’t really expect it. The writings which became Cryptoeconomics were primarily for my own clarity."
However, unpleasant as it may sound to many a HODLer, so far Voskuil’s position is consistent with the available evidence, and if one’s worldview can’t be supported by evidence then perhaps one should consider rethinking it.
As far as predictions go, though, nothing is set in stone. Bitcoin seems to have been drifting sideways for a while, both in terms of market valuation and adoption. At the same time, it carries on successfully resisting censorship from multiple adversaries; but all that could change at a moment’s notice, proving either side wrong. So the jury is still out on this one - and will likely remain so for the foreseeable future.
If Bitcoin is to thrive, it needs to constantly adapt to fit the wants and needs of its users while remaining secure. However, what to do when these seem so disparate, and frankly at times contradictory? Is there anything that can be done to secure it from slowly withering away into the dustbin of history?
Decentralisation and consensus mechanisms
Let’s take a look at the current debate. Beneath all the speculation and guessing-games, the discussion around Bitcoin’s (and crypto in general) challenges tends to be broken down into smaller arguments, which are in turn broken into even smaller components, ad nauseam. That’s perfectly healthy, but sometimes all this breaking down leads to one losing sight of the overarching trend.
One can order these arguments according to their own preferences or biases, but a few of them consistently make the top of most lists. Two examples we can use to draw a picture of today’s top concerns are the problem of decentralisation, and the quest for the “perfect” consensus mechanism.
The first one is more abstract, revolving around centralisation vs. decentralisation, and is among the most heated ones raging in the space. While “purists” posit that Bitcoin should remain true to what they perceive to be the currency’s original decentralised ideals, pragmatists argue that centralisation is desirable to incentivise adoption. Since this battle pertains to the realm of network governance, with no clear rights or wrongs, it’s hardly surprising that sometimes logic is the biggest casualty as opponents drift farther to the fringes.
Eric dismisses these extremes. Regarding the purist view of decentralisation-first, he argues “[...] they are making an assumption that is incorrect. Elimination of centralization generally is neither the objective nor a requirement of Bitcoin.” On the other hand, he hypothesizes that “[d]ecentralizability of mining and merchanting is necessary to facilitate successful covert operations when they are banned.” To his view of Bitcoin as a tool for resisting the state, there is wiggle room for both.
The second example has more technical hues to it, although still heavily philosophical in nature. After Bitcoin introduced Proof-of-Work (PoW) as a requirement for reaching consensus as to the state of the network, many other mechanisms have sprouted to try and “fix” its supposed inefficiency and energy waste. The main contender, Proof-of-Stake (PoS), has been gaining ground on the debate.
While PoW requires massive energy and highly specialised devices called ASICs to be competitive, PoS supposedly prescinds this by requiring nothing more than a stake in tokens. The more one stakes, the bigger their chance of successfully confirming a block. The tokens are lost in case the network detects dishonest behaviour, aligning the incentives so that cheating becomes too expensive, without the need for PoW’s massive energy consumption - which some claim is unsustainable.
Voskuil, however, is adamant as to whether Bitcoin should change its fundamentals and embrace PoS:
"PoW is neither unfair, unsustainable, nor unviable, [it] is a necessary aspect of securing any Bitcoin design. Internal systems (i.e. Proof of Stake) cannot be censorship resistant. Once the censor has controlling stake (which cannot be prevented) there is no way to unseat it.
"All proof systems that introduce external activity for control of transaction ordering reduce to PoW, as energy is the irreducible component of all activity. So for example, Chia is actually a PoW system - proof that the work to produce a new memory device was expended. The manufacturing and shipping costs can be reduced to energy, but the energy cost cannot be reduced or shared."
Ok, so that may be the case for Bitcoin, but how about crypto in general, and its other use cases? Aren’t we witnessing the rise of Tokenomics, as argued by other leading minds in crypto, such as William Mougayar? And isn’t it a step forward in expanding Cryptoeconomics to all corners of economic activity?
Eric dismisses this idea. He sees “no evidence that there is a meaningful scenario other than money. Bitcoin as a useful innovation is money. There is nothing interesting in tokenization, it’s a shockingly naive idea. Money is important enough.”
Moreover, he believes there is “no ‘crypto in general’ - just implementations of Bitcoin, and other stuff without a value proposition.” That may sound harsh, and many would outright disagree. But with so much still on paper and useless shitcoins sprouting like herpes in winter, one thing is certain: the burden lies with the newcomers to prove him wrong.
The insight one can draw from these examples is extremely useful, though: given the same set of tools, each individual will, according to their interpretation, paint a completely different picture of the currency’s purposes, premises and goals.
So what, if anything, could steer the crypto ship towards less turbulent waters?
The appeal behind cryptocurrencies is that it offers us a toolset that allow us to directly control our economic lives without interference or censorship from third parties. This choice, however, comes with a caveat: as we embrace freedom, we also need to bear the responsibility that comes along with it. And that implies the willingness to take responsibility for our own security.
Securing crypto can sound like a pleonasm, but cryptography alone is far from enough to secure Bitcoin from a powerful, determined and resourceful adversary such as a nation state - let alone multiple ones. Security is by no means a static concept - there’s no magic finish line to end all threats here.
Plus, we humans are not nearly as good at assessing risk as we would like to think, a fact Eric is quick to point out: “My SFTI [Strike Fighter Tactics Instructor] tour gave me a lot of exposure to the human capacity for underestimating a determined adversary. The threat is human, intelligent, adaptive, relentless and unconstrained.”
"We can vouch for that." -- Love, the Luftwaffe
So what can we do?
Securing the future
For Eric it is people, and not technology, that are at the root of Bitcoin’s security. In a candid and no-nonsense article, he condenses what arguably considers the most important factor behind Bitcoin’s security in his Risk Sharing Principle:
"Bitcoin is not secured by blockchains, hash power, validation, decentralization, cryptography, open source or game theory; it is secured by people. Technology is never the root of system security. Technology is a tool to help people secure what they value. Security requires people to act. [...]
"Bitcoin [...] is secured by people who place themselves at personal risk. Sharing this risk with other people is the purpose of decentralization. A centralized system requires one person to shoulder all of its risk. A decentralized system divides risk among individuals who comprise system security."
Money is a social convention, it can only be secured socially - Eric Voskuil
Like all technologies, Bitcoin is a tool upon which we embed our own values and beliefs. As with the power of atoms, it may give us either power plants or nuclear bombs - and we are yet to see which vision will prevail. Will Eric Voskuil be proved right? Only time will tell, but so far his ideas seem to be holding pretty well.
And time is precisely what Bitcoin needs, according to Eric, to be able to secure its place. For now, it’s too soon to tell. The ecosystem still needs to mature and the powers that be are still circling around, waiting to make their move.
That’s the battle Eric believes will shape the future of Bitcoin: the ultimate face-off with the state. Out of this, he sees only two possible outcomes: either Bitcoin will resist to become a useful black market money, or it won’t be useful at all. The way he sees it, “it cannot be a useful white market money as its value derives from resisting taxation through money.” Again, there is definitely logic to it, even if most of us would really like to believe otherwise. So let’s put a pin on that.
But that is not the only battlefront facing Bitcoin. Apart from power-clinging national governments, a plethora of competitors are popping up all the time, promising to be faster, cheaper and more secure. First mover advantage may have given Bitcoin an edge, but history has shown that no form of money is ever secure. Even if it succeeds in becoming universally accepted, Eric believes there’s no endgame here, and “a better money that hasn't been imagined yet” may just as well be what it takes to kill Bitcoin. The currency graveyard up until crypto is full of obsolete players. Remember, people once used giant doughnut-shaped rocks as money, which presumably didn't make for good pocket change.
And even if Bitcoin takes a turn away from his vision, that doesn’t mean he is wrong. For all his work, Eric has contributed more than most towards a fairer, censorship-resistant economy, and his ideas are sure to remain influential among developers and thinkers alike.
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