Constant Attacks and Hacks on the Internet and Monetary Systems

In my most recent prophecy, I asked: “Can blockchain and cryptocurrencies provide an answer to the coupled scandals of money and internet security?”

Later this week, I will be speaking at a virtual conference for Blockstack.

The world needs a remedy for an internet that functions as a cosmic copying machine, whether for money or media. Endless copying means almost nothing can be trusted from TikTok images, to government health edicts, from Huawei routers, to Federal Reserve notes.

Can the Cryptocosm create a blockstack layer of data unreachable and unmanipulable by bureaucrats, plagiarists, thieves and spies?

Blockstack breaks down the system into monolith and metaverse.

The monolith is the immutable blockchain layer. It is designed to be unbreakable. The metaverse comprises all the applications that can be built on top of the monolith. The metaverse becomes trustworthy because it relies on the monolith for its ground state.

Residing in the monolith is the control plane consisting of the blockchain and a new virtual chain generated by it. On this foundation can be launched a data plane comprising router and data storage layers.

To explain the new security model, we begin with the critical path of internet security on which blockchains and blockstacks will rely.

The key rule is that on the net, the attack potential equals the attack surface times the attack vectors. This potential vulnerability grows with the increase in the number of users geometrically in accord with Metcalfe’s Law.

The Reality of a Centralized System

Conceived by Ethernet inventor Bob Metcalfe, this law ordains that the value of networks increases by the square of the number of nodes.

The cryptocosmic Metcalfe’s law inverts this proposition and states that the vulnerability of networks increases by the square of the size of the attack surface (or number of nodes).

For example, an additional user of a centralized system such as Visa or Mastercard, Google or Facebook, reduces security by bringing an additional vector of possible attack. Each incremental user is an additional possible hacker or hackee.

By contrast, an additional user of bitcoin or other blockchain increases security by expanding the reach and robustness of its consensus. Blockchain security scales with the increase of users while centralized security fails as access expands.

As Army crypto expert David Kruger points out, the effectiveness of existing “layered point defense” software grows only additively. Stopping one attack vector at a time while attack vectors expand exponentially is a fools errand or a fraudulent one.

The result: the more we spend on internet security and the more we expand the network the more vulnerable it grows. The Internet leviathans purport to supply security but in fact they merely distract their customers and gratify their lawyers with a combinatorial explosion of new busywork security tasks.

The answer is a blockchain to transform the tempestuous flood of amorphous data into a coherent unchangeable narrative of sequential events. The blockchain as a sequential ledger, updated on average every ten minutes in the case of bitcoin. It intrinsically mimics the scarcity of time and its 24 hours a day.

Blockchain also enforces regular packet sizes and transactions that obviate the chaos of separate processing and verification of every microevent. Blockchain enables a foundation of time-stamped and immutable facts on the Internet.

Among these facts must be the unique identity of the user. Your identity must be coupled biometrically to a device with an electronically sequestered private key.

The first generation of crypto suffered from nerd paranoia, expressed in an unwillingness to trust anyone even to know your name or recognize your face.

As internet pioneer Giuseppe Gori points out, anonymity is the original sin of the genesis blocks of crypto. To make up for the absence of unique identity, the early iterations of crypto became gigantic kludges where the same software and data had to run on all the nodes.

Ethereum pushed all operations to “smart contracts” on a congested blockchain, which now is running out of “gas:” costly, slow, vulnerable, and unscalable.

The repeatedly delayed remedy is to break the chain into thousands of randomized “shards,” each with the same essential flaw and a communications hairball. The brilliant Ethereum chief Vitalik Buterin may calls it “serenity,” but where is the “serenity” in that?

Verifying bitcoin transactions, miners jump through peta-hoops of processing just to prove that they can. Proof of work, proof of stake, and proof of space and memory all seem to prove equally centripetal.

Everything migrates to the “Middle Kingdom,” China where Xi Jinping has adopted blockchain as a “core technology” for the communist party. I celebrate this move in China. But it seems unlikely that other governments will soon accept a blockchain or digital currency controlled by the CCP.

The model of anonymous users and smart contract mazes failed to scale. The only projects that could incur its costs and pay for its waste were initial coin offerings (ICO), collectively raising some $25 billion.

Today’s Prophecy

If you are raising billions, you don’t have to worry about processing costs and mining fees, and you want everybody to know who you are.

Bitcoin and Ethereum and their ilk chiefly work where fiat moneys collapse, as in Venezuela or Zimbabwe or Silicon Valley IPOs.

The chief hope for such a Cryptocosm is a total financial blowup resulting from a $300 trillion overhang of global debt.

For those who don’t want to wait for a doomsday cryptocalypse, a better solution is a blockstack.

Blockstack is addressing the two paramount crises of the world economy — constant attacks and hacks on the internet, and constant attacks and hacks of monetary systems.

Such attacks are manifest today in the egregious multi-trillion-dollar raids on the future by governments around the world. They are claiming emergency powers galore on the basis of a relatively routine COVID-19 virus threat.

While trade wars and security scams proliferate, currency trading has become the world’s largest industry. At some $6.7 trillion dollars a day, up some 30% over the last three years and some 25 times world GDP, this banker’s videogame is clogging the world economy. It is stultifying the price signals that guide all productive enterprise.

More on this tomorrow…

Regards,

George Gilder
Editor, Gilder’s Daily Prophecy

You May Also Be Interested In:

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology — and its impact on our lives.

He’s an established investor, writer, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

And he’s certainly no stranger to the financial newsletter...

View More By George Gilder