This summer, the now infamous DAO hit the headlines when an attacker, siphoned off millions of dollars worth of of other people's money.
The controversy was of that surrounding the code; many people debated about whether the code is law. The community agonised over whether to hardfork the chain; a process whereby the code of the DAO tokens would be changed, rendering the attacker's stolen funds worthless.
In all the fuss the main issues that were focused on were, the code, the law, the morals and even the integrity of the founders of the DAO.
However one thing that seemed to escape the unyielding scrutiny of public opinion, was the fact that the whole notion of a decentralised venture capital company is a terrible business idea that should never have had a penny in investment in the first place.
The DAO's New Clothes
When I was a young boy, I remember being enthralled with the story of; The Emperor's New Clothes. In this delightful fairy tale, a gullible Emperor along with the subjects of his empire, are duped by a couple of sharp fellows pretending to be tailors.
In the story, they convince the Emperor that they are in possession of the finest threads known to man; and in fact the material they have woven is so fine and sophisticated, that only really clever people can see the cloth, whilst poor simpletons cannot.
Of course the Emperor, who was meant to be the wisest in the land, pretended that he could see the clothes they "made" for him. Equally obvious, none of his court or anyone who was asked, wanted to admit that they saw nothing, for fear of being thought simple.
The story ends with a little boy pointing out the Emperor's nakedness, as he paraded his New Clothes, through the streets.
When I was first told of the DAO, it was pitched to me as a decentralised venture capital company, kind of like the popular crowdfunding site; Kickstarter.
My first thoughts were, that's a terrible idea, I was having a conversation with @bleepcoin at the time, and I believe my negativity towards the idea, led to him eventually pulling out and selling his ETH before the launch; thus saving him a ton of money.
The problem to me was obvious; even without the subsequent hacking, the idea was not good, and was fraught with logistical and legal spiderwebs that would have entangled all involved.
This is a direct copy from the Kickstarter FAQs:
What do backers get in return?
Backers that support a project on Kickstarter get an inside look at
the creative process, and help that project come to life. They also
get to choose from a variety of unique rewards offered by the project
creator. Rewards vary from project to project, but often include a
copy of what is being produced (CD, DVD, book, etc.) or an experience
unique to the project.Project creators keep 100% ownership of their work, and Kickstarter
cannot be used to offer equity, financial returns, or to solicit
loans.
Notice the last paragraph talking about ownership and equity, financial returns and loans. The reason for this paragraph, is that selling equity of a company will be under the rules and jurisdictions of the country of origin of said company.
Never mind the legal ramifications of selling equity of a real world company via a blockchain based DAO, there is the fact to consider that important financial decisions would eventually have to be made by humans. Lots and lots of humans; a recipe for the disaster.
The DAO as @dantheman was always going to be D.O.A, they were New Clothes that nobody could quite see, but were too ashamed to admit it.
The ICO Dotcom Continuum
Back in the wild west days of the Dotcom Bubble, a company could post losses of $6.8 million in just 3 months, yet raise $112 million at it's IPO on the NASDAQ, just because it had the suffix; .com.
We are seeing a similar thing today, whereby all a company has to do is put the words decentralised or blockchain into their business plan, and hordes of investors are clambering over themselves to throw their Bitcoin at the project.
Some of the projects do carry some credibility, mainly because they have a product that may actually work in the real world. However a lot of them don't, some are simply promises that may never, in fact, probably will never come to fruition.
These projects are the New Clothes of the cryptocurrency world, they have no substance, and are merely bolting on words, phrases, concepts, and half ideas onto the idea of blockchain-based, decentralisation.
There are many examples too numerous to point out, however one that stands out for me, is the idea of a decentralised Netflix.
This is a classic example of somebody taking an already successful model and putting the word decentralised in front of it. If you actually examine those words, and try and imagine them as a business concept, you will realise that it is flawed in the extreme.
To be fair to DTV, the idea of content creators uploading their content and monetising it, isn't too far away from Steemit; however I don't see any Hollywood bigwigs rushing out to put their content on such a platform anytime in the near future, not least because of the huge amounts of money it takes to produce those kind of films.
When Smart Really Means Smart
Unfortunately for the supporters of decentralisation, and Decentralized Autonomous Organisations, the smart contracts that so much trust has been placed, are not smart enough for the majority of the ICO ideas to work.
Artificial intelligence is not enough; we can program these contracts to the best of our ability, but the fact that they need coding in the first place, perhaps indicates where the flaw might lay.
The Target algorithm, that worked out a 15 year old girl was pregnant, before her father did the same, is artificially intelligent. That is to say, it is a seemingly intelligent response to a scenario, brought about in an artificial way.
However expecting the kind of heuristic algorithms that we create today, to be able to cover all legal eventualities is a step too far.
This isn't to say that one day when artificial intelligence, makes the leap to artificial sentience, that we won't be able to leave everything to Skynet.
Until then, we have to beware ICOs bearing invisible gifts.
dotcom source
Cryptogee
Steem has smart contracts but they are very simple. Voting, Steem dollars and Steem power. Using this kind of simple smart contract to augment humans is the way forward. AI will not be trustworthy for a long time yet... I remember bugs from windows 95 that were still in windows xp... AI is very complex and debugging it will take a long, long time, even if there is already many useful things come from the research.
We can't yet trust our money to it, and we can't trust governments either. Automated, distributed real-time voting is now possible and reliable. Soon it will be plain that either the State confesses it's democracy is a sham, or we do away with it and have holocracy, real-time block chain legislation, no representatives and elected judges who can be ousted in minutes after a bad decision...
Exactly, Steem smart contracts are simple; however if you are involved in a decentralised venture capital company that is trying to decide on complex financing and refinancing deals, you need humans; otherwise prepare to lose a lot of money :-)
Cg
Why do you think banks are still using Cobol?
Banking math is trivially easy, but a mistake is extremely costly.
I will say that I will trust a smart contract over a contract. A smart contract, even if it doesn't quite do what it says it does on the package, does exactly what it does. A contract is soooo open for interpretation. Basically when the derivatives market goes boom, it will be years before anyone knows what the fallout will actually be (because of how entangled all the contracts are.)
Good points; I just think smart contracts can't handle decision making; which is more the point I was trying to make.
Cg
I feel that computers will never be able to handle decision making.
Like, do you want a red car or a blue car?
After we figure out how many of what color (5 blue, and 3 red) the computer can optimize the process of painting the cars in order to use the least time and materials.
I feel that what is really missing from smart contracts is actually language.
We have so messed up english, that a person from a hundred years ago would have a hard time, because many of the words meant the opposite of what we use now.
So, the language ; bought, shipped, delivered, paid will all need to be worked out in specific. And many of them will have subtle differences that will be codified. shipped.ups, shipped.ground...
And then the action verbs will be where things get tricky, but I feel that a whole set of made-up sounding words will become the vogue. Like uponShipping, manufacturizing...
Each of these words will correlate with specific verifiable points in process, and thus be useable in a programmatic algorithm. Then it will be as simple as A + B + C = payment.
Yes
Excellent work my friend @cryptogee appreciate the information and their point of view. congratulations on another brilliant post thank you for doing public
Good post! Not sure if you followed the madness of Zcash, but the last line of your article summarizes it perfectly. A crypto currency bearing absolutely zero real world value was above the price of BTC and is now in complete freefall. At the time of this post, there is Zclassic that is trying to get traction yet it provides zero value again.
haha, no I didn't hear about zcash! :-)
Cg
😎 cool))