The Reigning Prophet of the Next Phase of the Cryptocosm
Giuseppe Gori is an internet legend.
Working for IBM in Italy in the 1970s, he created PISANET, a precursor of the internet. Later he became a pioneer of unlicensed WiFi networks.
In other words, he is one of the original authors of the global network that all at once addicts and enrages us today, that reduces us to dependency, exposes us to exploitation, hides us in anonymity behind IP (internet protocol) addresses and then strips us bare in data centers that cannot quite read our minds.
We end up stranded in an uncanny valley where we have neither privacy nor true identity, but where our personal data is constantly leaked and hacked. As Nick Tredennick, another technology legend, observes, echoing Gori:
“Giving a device an Internet Protocol (IP) address is like handing out a public key without an associated unique private key. You cannot build secure transactions on such a foundation.”
In the end, we become fodder for advertisers who have only a maddeningly crude and artificial idea of who we are and what we want, but who presume to barge into our lives pretty much at will. The net becomes a porous pyramid where all the data and money and power rise to the top — to Google, Facebook, etc.
A new generation of engineers and coders has risen to save us.
Their solution is the bitcoin blockchain, available as open-source software and adaptable for thousands of applications and uses.
Understanding the Blockchain: Ethereum vs Bitcoin
As I explained in a prophecy a few days ago, bitcoin — for all its ingenuity and valuable uses — suffers from serious flaws in its design. It is a vessel for speculation that cannot finally serve Satoshi’s goals as a currency akin to digital gold.
Bitcoin’s genetic flaw as money is that it has a fixed cap rather than a fixed price. It has a ceiling rather than a floor. Its limit of 21 million units (with nearly 18 million already issued) makes it a tempting trade and speculation based on its rigid restriction on total units but its ceiling prevents it from becoming a metric of value: a fixed unit of account that like gold-standard money of yore can accommodate any needed money supply through fractional reserve banking. Many bitcoin advocates, including Satoshi himself, actually regard fractional reserve banking as a fundamental flaw of current monies rather than their enabling virtue.
Rather than expanding with economic activity, bitcoin ultimately chokes it off. Rather than providing un-hackable identities, it seeks a self-defeating anonymity for users. It is a volatile vehicle for traders and a dream of untold wealth for HODLers (bitcoin holders). But it cannot be a stable measuring stick of value and guide for entrepreneurs.
Bitcoin has become a niche play, useful in extremities such as the Venezuelan socialist catastrophe. But in its present form, it can serve neither as a global money nor as a new Internet security architecture —the ultimate twofold promise of the blockchain invention.
You see, bitcoin’s chief rival and complement is Ethereum. The brilliant creation of Vitalik Buterin, lured from Waterloo University by Peter Thiel’s $100 thousand entrepreneurial fellowship, Ethereum simultaneously launched five key innovations: a new blockchain, a new native currency, Ether, a new source of value, the “gas” or energy it uses, and a new platform for smart contracts, programmed in a new language, Solidity.
Ethereum proved Buterin’s genius by supplying a robust architecture for thousands of Initial Coin Offerings (called ERC-20 tokens), raising some $20 billion for startups at a time of IPO dearth.
But as Giuseppe Gori explains in his definitive book, Reinventing the Blockchain, Ethereum is ultimately modeled on the bitcoin blockchain and exhibits many of the genetic flaws of bitcoin. Like bitcoin, it seeks user anonymity. This choice necessitates a burdensome mining system to remedy the resulting lack of trust.
Ethereum’s smart contract model requires its software to run on all nodes, with results verifiable and storable on the blockchain and identifiable by a hash (or mathematical fingerprint) of the blockchain’s content.
In theory, Gori explains, such a smart contract model, using independent addressable objects (the contracts), linked through asynchronous messages could form the primitives for any applications. But because of the resource limits of a blockchain in which every program has to run on every node, the smart contracts become bottlenecks.
The smart contracts, Gori declares, are ultimately “costly, slow, unscalable, and vulnerable.” Thus, they render Ethereum, like bitcoin, a niche system, good for ICOs raising millions of dollars but not a new Internet architecture or new money.
With persuasive detail and resonant authority, Gori presents a superior alternative. It begins by replacing anonymity with identifiable unique users. Anonymity was always a mistake. Reflecting the privacy paranoia prevalent among cryptographers, it cripples any system that adopts it. It cannot even readily comply with Know Your Customer (KYC) requirements of financial regulators.
Gori is the tribune of a new generation of blockchain inventors and their companies. From his own Gorbyte, to my friend Steven Sprague’s Rivetz, to Nick Tredennick’s Jonetix, to Alexander Filatov’s Telegram Online Network, to S. Baird’s Hashgraph-Hedera, among many others, these new systems adopt key insights of Gori’s COSM architecture: public keys as addresses (replacing IP addresses), private keys as transactors, trusted platform module (TPM) vault chips for safe storage and processing of private keys, biometrics such as face recognition which are tying users to devices that in turn are anchored in the immutable time-stamped blockchain.
Gori’s book goes on to show how this approach enables reliable reputation systems without unnecessary privacy infringement, and even to “super communicators” that use ubiquitous unlicensed WiFi to announce our presence whenever we want to be recognized — as holders of tickets, bank deposits, reservations, memberships, titles, licenses, pre-check rights, and countless other attributes.
With Reinventing the Blockchain Gori becomes the reigning prophet of the next phase of the Cryptocosm, and Cryptocosmic investment. My Daily Prophecies will follow him closely.
Editor, Gilder’s Daily Prophecy