# Blockchain critics are right! (But also missing the point) By [G360DAO](https://paragraph.com/@g360dao) ยท 2022-10-06 --- Author: Jan Martijn Broekhof, published originally in Dutch on [LinkedIn](https://www.linkedin.com/pulse/blockchain-critici-hebben-gelijk-maar-ze-missen-het-broekhof-mba). * * * While figuring out [G360DAO](https://g360dao.io) and writing the white paper, I ran into a lot of blockchain critics. In person, but also on Twitter, many people are critical of blockchain technology, especially within the information security sector. In many cases, I can only agree with them. And that's a challenge, because G360DAO wants to use blockchain technology to allow information security specialists worldwide to collaborate and make money. Not because we think of blockchain as the holy grail and we necessarily want to deploy blockchain technology. But simply because we believe that we can only achieve new ways of collaboration and develop real solutions by using blockchain technology as a tool. So why am I still convinced that we need to embrace blockchain technology? In this blog I address the most commonly heard counterarguments. Blockchain is a solution in search of a problem ----------------------------------------------- Many blockchain projects are indeed opportunistic in nature and could be completed with an ordinary relational database, or in some cases even a spreadsheet. There are examples of distributed database systems, which means that the data is not stored on one single node and so data is not just in one place. The fact that so many blockchain "solutions" are being introduced does not have much to do with blockchain itself. How many smartphone apps have been developed over the past few years that don't actually add any value either? How many things do you buy through Aliexpress that you don't actually need ? Unfortunately, within the blockchain scene we also have to deal with opportunists, as in any industry. Still, there are certainly use cases to consider, think of situations where there is no trusted intermediary, or an intermediary cannot easily be found and verified. Also, situations where transaction costs are high, such as international money transfers, are a perfect example to use blockchain technology. People who argue that governments, accountants and notaries can be trusted: usually this is correct. However, (recent) history proves that this is not always the case. Consider, for example, the surcharges affair in the Netherlands. For G360DAO, we want to use blockchain technology to: * Allow people to work together internationally without an employment contract or manager * Allow people to become co-owners of the organisation and the IP they add * Allow people to vote on proposals that can be contributed by any participant. For this to happen transparently, without instating a central authority, we believe blockchain technology is the only way to achieve this. Blockchain is the wild west --------------------------- There is plenty of speculation on coins like bitcoin and all kinds of alternative tokens. This is driven primarily by people who want to get rich quick, people who take advantage of that and the immaturity of blockchain technology. As with any new development where people think they can make money quickly, opportunists stand up and abuse it. Tokens are thin air and therefore volatile ------------------------------------------ Because there is no underlying value, many critics believe that crypto tokens are hot air and price fluctuates because of this. The same could be the case for the dollar and euro, since for decades banks have been lending out more money, than they actually have in their vaults. By simply printing additional money, holes are filled and economies continue to grow. That monetary system is unsustainable in the long run, especially when you consider that money is mainly created by commercial banks and it is only founded in our belief that the euro or dollar is actually worth something.... With a coin like bitcoin, there is a maximum number of coins that will come into circulation. Even that system is not perfect, there are alternative coins that do allow tokens to continue to be minted while there are also tokens where depreciation is applied. There are a lot of people busy experimenting with other types of tokens. As the maturity of the crypto industry increases, confidence in coins and tokens will also increase and fluctuation will decrease. Crypto currencies are mostly used by criminals ---------------------------------------------- It is true that criminals use crypto currencies to move money that they obtained illegally. However, research shows that criminal money laundering represents less than 1% of all transactions. You also have to keep in mind that banks alone are estimated to be involved in the laundering of billions of dollars of criminal money every year. There are many scams with coins and NFTs ---------------------------------------- This is unfortunately true. Especially during the period when there were many initial coin offerings (ICO), there were many "get rich quick" projects. Devious people capitalised on the FOMO feeling of investors who didn't want to miss the opportunity to get rich quickly. As a result, there were many projects with million-dollar valuations even though they only had a whitepaper and GitHub account. In some of these projects, those who set it up left with all the money, leaving the investors disillusioned. The same goes for NFTs, especially when they are linked to physical goods. Because nobody guarantees that the issuer of the NFT is actually capable to bound the physical asset to the NFT of the holder? And it is very easy to link multiple NFTs to a physical asset, especially if you use multiple blockchains. Then again, isn't that the same with property certificates on paper? True decentralization does not exist ------------------------------------ One of the pillars of blockchain is that there is no centralisation because the underlying network is spread across computers worldwide, with no single person or organisation having sole control. In recent years, various scenarios have been explored in which that will be possible after all. E.G. think of getting 51% ownership of all nodes. That is very difficult to achieve, but not impossible. In addition, there are a number of organizations setting up private blockchains, where all the nodes are managed by one party. Those solutions are far from decentralised. Within a DAO, decentralisation is also an important pillar. At the same time, it is also very difficult to achieve. Because a DAO is started by a group of people who know each other well. On the one hand, several people are involved, so it is decentralised. On the other hand, you can also argue that the founding group has one and the same vision and the DAO is therefore centrally managed. On top of that, G360DAO is also going to be dealing with money, which means that under current legislation all sorts of things have to be arranged for legal and tax authorities. This makes it inevitable to create a legal entity with a board. So, true decentralisation is therefore not impossible, but difficult to achieve. I do foresee more space for true decentralisation in the future from a legal and tax perspective. For example, digital nomads have long been earning money and paying taxes in a country where they do not physically reside; tax collection will also have to be looked at differently in the future due to this type of development. Blockchain is slow ------------------ Blockchain networks can generally handle far fewer transactions than "normal" networks and databases. This does depend greatly on the nature and purpose of the blockchain. In addition, programmers worldwide are working to make the various blockchains faster. It seems that here, too, "commodatising" developments are making things faster and cheaper. For G360DAO, we have now chosen the Gnosis blockchain, partly because the transaction speed of this chain is now adequate to our purpose. Blockchains use a lot of energy ------------------------------- Every now and then this topic appears in mainstream media. It is correct that proof-of-work chains use a relatively large amount of energy. In this period of energy scarcity and increase in activities to reduce energy consumption, this is definitely a concern. Many miners use green energy or residual energy, so consumption is not equal to polluting, but less energy consumption is obviously better. Fortunately, this is also recognised by several developers. Ethereum, for example, has recently transformed to the less energy-consuming "proof of stake" principle, reducing energy consumption by 99%. Just as data centers and manufacturers of servers and networking equipment have done their best in recent years to consume less energy for hosting Web applications, the crypto industry will continue to evolve in this regard. Opponents of blockchains often feel that bitcoin is a pure waste of energy. But who decides what is a waste of energy? Every year, Christmas lights around the world also consume a lot of electricity. So can we still allow that? Then maybe we should also stop traveling on airplanes? Or air conditioning, should we ban that too? Progress simply goes hand in hand with increased energy consumption. Just think of the annual consumption of electric bicycles. Should we all go back to riding regular bikes? And what about washing machines and dryers? Why is that electricity consumption accepted? We could just as easily do laundry in a tub and let it dry on a drying rack, couldn't we? The point is that everyone makes personal choices about what they want to use electricity or energy for. And as a society, we have totally accepted using air conditioning, washing machines, dryers and electric bikes. Those who look at blockchain as a store of value or a hedge against inflation do not find electricity consumption problematic at all. This makes me wonder what amount of energy the international banking sector consumes for all its offices, server farms, cars and such. It would be nice if figures were available on the number of euros/dollars spend on energy consumption by banks compared to the spend on energy by blockchains to have a fair comparison. Gas fees are high, blockchains are not scalable ----------------------------------------------- Especially on the Ethereum blockchain, gas fees have risen significantly in recent years. This is simply a result of market dynamics: there is much more demand for processing transactions than there are validators to process them. The one who pays the most to process his or her transaction is given priority in the process, causing the price to rise. High transaction speeds have received relatively little attention in the design of blockchains relative to stability and making a trusted intermediary unnecessary. But there are developments going on there too, bitcoin has launched the lightning network and Proof of stake is also going to help drive scalability up and fees down. Techniques such as sharding, where the entire network does not have to validate all transactions, are also being worked on. Blockchain is complicated ------------------------- With exchanges that allow you to easily pay with, for example, your credit card, buying tokens has become easier. However, if you want to own these tokens, you have to get started with a wallet. And although these have become a lot more user-friendly in recent years, for many people setting up a seed phrase and keeping their keys safe is a though challenge. Many tools are now available for setting up a DAO, E.G. DAOhaus, Coloni and Aragorn. But while these platforms offer some useful tool, in some ways you are still tied to their implementation and their services. If you want to set up your own DAO from scratch, you need solidity developers and solid knowledge of the blockchain you are developing on. If everything is transparent there is no privacy ------------------------------------------------ Many people think that on a blockchain, people can hide behind a wallet address and thus trade completely anonymously. However, the opposite is true: on a public blockchain, all transactions and all tokens in each wallet are visible to everyone. By collecting and combining all data, it is relatively easy to link all transactions and tokens to a wallet. Only people who are very disciplined about hiding their identity will remain anonymous for long, but for many wallet holders, their real identity can quickly be determined. And as the KYC principle is increasingly enforced, it will become easier to find out which person owns a wallet. And thus how many tokens this person owns, but also which transactions this person performs. In the Web2 world, this information is mostly owned by commercial banks and tech companies, which keep the data to themselves. So, taking data outside their silos is good progress as far as I'm concerned. Fortunately, solutions are currently being worked on that "detach" identities from wallets, improving privacy. Security is not payed attention to ---------------------------------- This is the case within blockchain technology, but isn't it everywhere? Because even within the Web2 world, programmers and product designers focus primarily on functionality and not information security. Unfortunately, the same goes for blockchain technology. It is unfortunate that some of the lessons of the past decades have not been taken to heart when developing blockchains, so there are vulnerabilities here as well. Anyway, hopefully with G360DAO we will someday get to the point where we can also contribute to improving the security of blockchain infrastructure! Being right and yet missing the point ------------------------------------- As I described in my introduction, critics are right. There are quite a few problems to solve, charlatans looking for victims and the purpose of blockchain technology is not always clear. However, if you focus on those negative aspects, you miss the point. Blockchain technology has the potential to make people own their data again, holds the promise of making the Internet truly everyone's, and blockchain-based organizations like G360DAO will increasingly become a dominant way of working, owning, participating and earning. For G360DAO, the use of blockchain technology is essential to ensure that people all over the world can work together transparently, without central authority. Because control and ownership is stored on a blockchain, it is always clear to everyone how a decision was made and who owns certain tokens. And of course: The G360DAO community will have a lot to learn, will make mistakes, but eventually G360DAO will deliver real information security solutions that will compete with renown vendors. Want to discuss, build and participate? Then check out [g360dao.io](http://g360dao.io)! Sources: * [https://blog.cryptographyengineering.com/2022/06/09/in-defense-of-cryptocurrency/](https://blog.cryptographyengineering.com/2022/06/09/in-defense-of-cryptocurrency/) * [https://blog.coinbase.com/fact-check-crypto-is-increasingly-being-used-for-criminal-activity-and-is-a-haven-for-illicit-856a71dfb399](https://blog.coinbase.com/fact-check-crypto-is-increasingly-being-used-for-criminal-activity-and-is-a-haven-for-illicit-856a71dfb399) * [https://www.elliptic.co/resources/typologies-concise-guide-crypto-leaders](https://www.elliptic.co/resources/typologies-concise-guide-crypto-leaders) * [https://corporatefinanceinstitute.com/resources/knowledge/finance/money-laundering/](https://corporatefinanceinstitute.com/resources/knowledge/finance/money-laundering/) * [https://www.botuitgevers.nl/product/van-wie-wordt-ons-geld/](https://www.botuitgevers.nl/product/van-wie-wordt-ons-geld/) (Dutch) * [https://www.frankwatching.com/archive/2022/08/09/blockchain-ontwikkelingen/](https://www.frankwatching.com/archive/2022/08/09/blockchain-ontwikkelingen/) (Dutch) * [https://www.beleggenonline.info/nieuws/333/het-energieverbruik-van-bitcoin-toegelicht](https://www.beleggenonline.info/nieuws/333/het-energieverbruik-van-bitcoin-toegelicht) (Dutch) * [https://www.nrc.nl/nieuws/2022/09/29/het-mijnen-naar-bitcoin-leidt-tot-steeds-meer-klimaatschade-a4143640](https://www.nrc.nl/nieuws/2022/09/29/het-mijnen-naar-bitcoin-leidt-tot-steeds-meer-klimaatschade-a4143640) (Dutch) --- *Originally published on [G360DAO](https://paragraph.com/@g360dao/blockchain-critics-are-right-but-also-missing-the-point)*