Ritchie and the blockchain

BC says:
August 25 2016 at 6:56 am
I’m interested. Why will these file servers be located in tax havens?

Reply
Richard Murphy says:
August 25 2016 at 7:37 am
To claim the system us tax free

Reply
BC says:
August 25 2016 at 8:28 am
I think your answer highlights your ignorance on the subject.

There are no servers for blockchain systems. That’s the whole point. It is a distributed database with no central ledger. No servers.

Richard Murphy says:
August 25 2016 at 8:34 am
Shall we stop being silly here?

You are saying that this will be run without a central management operation and a mechanism to maintain it?

He really, really, doesn’t get it, does he?

52 thoughts on “Ritchie and the blockchain”

  1. Played for and got.

    The man truly is an imbecile.

    I emailed this through to my staff with the heading “our blockchain server is missing!”

  2. It is surely axiomatic that nothing can possibly function without someone like Ritchie in an expensive office In Charge /sarc…

  3. That is remarkable, for a subject over which someone is clearly pretending to declare some knowledge and expertise.

    There are no servers for blockchain systems. That’s the whole point. It is a distributed database with no central ledger. No servers.

    I’m not an IT specialist, but that was one of the first things I picked up about the blockchain, ie, that the real threat to (centralised) governments came from it essentially being decentralised in concept; no one person/persons being able to control the data (as with centralised servers), ie less “government/state” control.

    Hence, his comments about (centralised) “offshore servers” (for tax avoidance) illustrate that he doesn’t even understand the most basic concepts over which he pretends to declare an expertise.

    Par for the course with Richard!

  4. He banned the guy for trying to explain what he meant by “no servers”? What an arsehole.

    The thing is I’m not really sure what banks mean when they say they are going to “use the blockchain”. I’m not sure the banks, or the people writing buzz-word-y press releases for them, understand it.

    I’m not really sure how you have a useful blockchain without Bitcoin. You need miners to keep it decentralised. If I can’t go and download the software myself and start mining, then it’s a closed system only available to certain parties (banks and other institutions) then they will indeed be running servers to do the mining, and those servers will indeed be somewhere, though there may be many in many different places.

    There may also be servers running user interfaces for the traders where the trade may be said to be taking place.

    But Murphy didn’t say any of that. He just banned the guy.

  5. Rob FisherI’m not really sure how you have a useful blockchain without Bitcoin. You need miners to keep it decentralised.

    Mining is not inherent to blockchain – from the wiki definition:

    A blockchain consists of blocks that hold timestamped batches of valid transactions. Each block includes the hash of the prior block in the blockchain, linking the two. The linked blocks form a chain, with only one (successor) block allowed to link to one other (predecessor) block, thus giving the database type its name

    In a banking context, the whole point is to get rid of the time and cost overheads a central clearinghouse (or server) entails. It can be centralised across a dozen, or a hunred banks. For more details, try http://blogs.wsj.com/cio/2016/02/02/cio-explainer-what-is-blockchain/

  6. @ Rob Fisher

    Bitcoin is a special case really. Bitcoin/blockchain does require processor time to solve, and you have to incentivise/pay people to do that. Make it too easy to solve and you get runaway hyperinflation and bitcoin quickly becomes useless.

    In simple terms they add a layer of complexity or “difficulty” into solving the blockchain, which limits the total amount of bitcoins in circulation and means it takes longer to earn bitcoins through mining.

    In a non-bitcoin environment there is an external control of the money supply as a UCS is 1:1 with the underlying currency, so you don’t need the added complexity bitcoin introduces. So whilst you still need “miners” as such, the processor time needed for it is greatly reduced and doesn’t really increase over time as a bitcoin blockchain does. Within reason any decent PC with a decent maths co-processor would do the trick – and a specially built unit full of GPUs will make short work of anything a bank has to throw at it. And the banks can easily afford such machines – which aren’t that crazy expensive to start with.

  7. @ Rob Fisher

    ….to add: and remember, you don’t need to process the whole string from the blockchain. Only the last node or two depending on the application. The rest of it is essentially junk DNA unless you really need to know the history of where some sucrity has been.

  8. Ok, so more precisely, mining is how Bitcoin keeps the blockchain decentralised. It’s the mechanism through with many people compete to validate transactions.

    Without the competitive mining, though, what’s the point of saying “blockchain”? It’s just a database that happens to be duplicated at a bunch of different banks.

    I’d really be interested to cut through the marketing and find out what they are really doing. (I posted a link to what they say they are doing but I think it needs to be moderated.)

  9. BC: The difficulty is adjusted so that given all the people trying, only one is successful every 10 minutes. The reason we want one block every 10 minutes is not to prevent inflation. Inflation is just block rate * block reward and that’s fixed into the software.

    The point of mining is so that a different person wins each block, to keep it decentralised.

  10. I knew nothing of Blockchains until this morning. Now, having done a little reading, I know a bare minimum… enough to know that Mr Murphy is wrong.

  11. Rob Fisher, of course BC got banned. He pointed out that the LHTD was wrong – it is implicit in every exchange with him. Disagree or demonstrate that he is a complete fuckwit and you’re out.

    He only revels in the verbal fellatio he receives from his acolytes and sycophants.

  12. Completely off topic, but what has happened to SMFS?

    Given that it’s August, with a bank holiday coming up, I’d hope that he’s on holiday somewhere and has more interesting things to do than read the news. (I’m on holiday too, but taking refuge from the heatwave outside.)

  13. Ritchie’s been getting lucky with his pronouncements a fair bit lately, and this is another one. Bitcoin is _not_ decentralised, that’s just the myth its proponents have spread. Ritchie may well be right – although accidentally, and as a result of totally misunderstanding the issue.

  14. John Square: a startlingly pungnent image

    an interesting and appropriate marriage between pungent and repugnant.

  15. There’s a lot of focus about where Richie is wrong about blockchain, but we shouldn’t be distracted from the fact that he’s wrong about the tax too. Especially as he’s supposed to be the expert on that.

    He’s saying that because this is a “new currency”, it’s possible to hide all the trades from tax just by shoving them onto a server overseas. Plainly bollocks – for example, lots of UK banks trade in US Dollars. Guess what? They are still taxable in the UK, not the US. If his idea did work, banks would label everything in Cayman Island Dollars and run everything off a server located in Grand Cayman – they don’t do that, so the idea doesn’t work. QED.

    He’s actually on a bit of a role today, asking whether a paper from the US Treasury on EU State Aid represents the US declaring tax war on the EU (it doesn’t – it says the US is rightly annoyed that at a time where democratically elected leaders are going through a lengthy process to agree how the international tax system should work through the OECD, the unelected EU Commission has effectively decided to overrule everybody else).

    And then he wants to ban Scottish partnerships, on the basis that its hard for somebody in the UK to find out who owns them (even though you’ll force them to use foreign partnership, making it even harder to trace the owners).

  16. He needs more cowbell, ringing so people know the village idiot is coming.

    Or is he the everywhere idiot who doesn’t need a village?

  17. Philip Scott Thomas

    I’ve never quite got my head round the blockchain idea.

    If it’s decentralised does that mean everyone who uses it has a copy of the same blockchain? If so, how are the individual copies kept in sync? As the number of transactions grows, does the size of the blockchain grow? Does the whole chain get transmitted or only the new transactions?

  18. You are saying that this will be run without a central management operation and a mechanism to maintain it?

    Yes.

    1. Because updates and fixes will be open source and not centrally mandated and pushed. The apps that use the blockchain themselves will be 3rd party developed.

    2. This provides less vulnerability and more trust than a central management as there are multiple copies of the ledger lying around. If yours doesn’t agree or shows signs of editing then people will simply cut you out.

    3. Even if there were a central management and mechanism to maintain it – that still wouldn’t neccessitate a server/client architecture. Everyone is a server and everyone is a client. Like P2P is intended to work.

  19. Philip Scott Thomas
    August 25, 2016 at 3:06 pm

    If it’s decentralised does that mean everyone who uses it has a copy of the same blockchain? If so, how are the individual copies kept in sync? As the number of transactions grows, does the size of the blockchain grow? Does the whole chain get transmitted or only the new transactions?

    Sort of. Each transaction ID is formed partially from the ID of the individuals involved and contains a list of all the previous transactions. These changes are then propagated through the system.

    If you drop in to do a transaction and your ledger doesn’t match the propagated master, you’ll get flagged at best and even kicked.

    The master is updated every 10 minutes or so in the case of Bitcoin. So that’s the window of vulnerability that you have to work in if you’re trying to exploit the dissemination system.

    And that doesn’t mean that once the verification comes through that already completed transactions might be retroactively canceled if an exploit is detected.

    Not 100% safe, but so far pretty damn safe. Given the safety of trying to steal bitcoin (its not like stealing from a bank which can easily mobilize the law enforcement apparatus) and the amount of money involved – there’s been precious little in the way of successful thefts. Its actually probably safer, mechanically (as distinct from there being 7 billion people and only few million Russian hackers) than using a credit card.

  20. @Agammamon

    I don’t work directly with bitcoin but AFAIK stealing people’s bitcoin wallets or private key is the main security flaw, not so much in the blockchain itself.

    I sometimes try and explain blockchain by likening it to the serial number on a banknote, albeit with that serial number containing a history of everyone who has owned it and when. Not 100% accurate but for the want of a better description….

  21. Not everyone has internalized what P2P means.

    There’s a game I play occasionally (Warframe) that is hosted P2P – its explicitly P2P to keep down development costs and marketed as such – and people still complain that ‘the servers are laggy and need to be upgraded.

    An they’re not middle-aged accountants who like to shout out opinions about things they can’t be bothered to fully comprehend.

    Its kind of sad really. We’re not talking about some arcane bit of economics that a layperson can misunderstand because they don’t have an in-depth background in the subject. We’re looking at spending 5 minutes reading the synopsis on Wikipedia to understand that your basic premise is faulty.

  22. Every response from Murphy just exposes more of his ignorance – it is like watching bullfight, except that Murph doesn’t have sharp horns even though he must weigh as much as a fighting bull.

  23. BC.

    Indeed. As I’m sure you know, almost all the big Bitcoin thefts have been down to stealing/losing wallets.

    In fact it’s even worse than that. Most of the losses have been from people giving larger organisations their wallets and keys to ‘look after’. Astonishing really. Satoshi invents a decentralised system that (unlike banks) is literally unbreakable. So instead stupid people give their keys to a central authority (Mt Gox et al) where they can be stolen or lost.

    Doh!

  24. “We’re looking at spending 5 minutes reading the synopsis on Wikipedia to understand that your basic premise is faulty.”

    That covers a vast array of stupendous errors though doesn’t it? If people spent five minutes to understand the implications of distributed knowledge and unintended consequences, then perhaps we wouldn’t have half the bullshit we have to put up with now.

  25. He doesn’t understand bitcoin, but that’s not his subject.

    But tax is supposed to be his subject, and he doesn’t seem to understand that either.

    Just putting the payment mechanism offshore doesn’t make the underlying transaction tax-free. If it did, tax avoidance would be much easier and tax lawyers wouldn’t get paid anything like as much.

  26. Yes, I’d been wondering about SMFS, too. And I hope he’s all right. Possibly, the joy of Brexit caused him to blow a fuse or something.

  27. Kenneth Halton says:
    Your comment is awaiting moderation.

    August 25 2016 at 5:56 pm

    Do you ever do any research into matters before offering your opinion? There is plenty of information about blockchains on Wikipedia. Your ignorance simply makes you look foolish and arrogant.

    10, 9, 8, 7….

  28. S-R: I think people use those repositories because they are also exchanges into real money. Unless you do all your transactions in bitcoin – buying and selling – then at some point you want some real greenbacks. Of course, the savvy would keep their wallet locally & just transfer e.g. $500 worth at the time of exchange.

  29. He strays further into of even wrong territory by saying audit is impossible when the whole point of the technology is an immutable audit chain…

  30. The guy who went to Dachau and enjoyed it thinks he is receiving abuse for challenging blockchain. He simply doesn’t understand that people who know about the topic do not like to be patronised by a know-nothing clown.

  31. I don’t suppose this will make it past moderation

    Harry Pollitt says:
    Your comment is awaiting moderation.
    August 25 2016 at 7:48 pm
    “Because a cult is what it is

    Which explains the abuse one gets if one dares to challenge it”

    Change one letter of “cult” and a couple of pronouns, and you have a pretty good description of yourself and this website, Mr Murphy.

  32. Stuck-Record

    The big thefts of Bitcoins have been from Exchanges, you transfer your Bitcoins from your wallet to theirs, they sell your Bitcoins for USD (or whatever) and transfer the USD to your bank account (less fees).
    Whilst your Bitcoins/USD are in their care they are vulnerable.

    This type of theft is not unique to Bitcoin.
    http://www.telegraph.co.uk/finance/personalfinance/11589632/Crown-Currency-Exchange-four-convicted-but-leading-defendant-commits-suicide.html

    Bitcoin and Blockchains are not the same thing.
    Bitcoin is an application that uses a Blockchain in the same way that the WWW runs on the Internet.

    A Blockchain is a secure and independently verifiable record of transactions (and that’s it).

    There is however a fundamental flaw in the system* that has yet to be raised (let alone addressed), banks/businesses are contemplating spending huge sums of money on this technology I hope they at least are thinking about it.

    *this flaw is not unique to the Blockchain, it manifests itself in lots of systems but those have been papered over, given some of the apps being mooted this thing could bite them severely.

  33. Bobrocket, at least have the grace to give us the link to the website with a guaranteed solution to this fundamental problem

  34. Diogenes, historically there is no (one) solution only fudge and burial, bit more difficult with a public record.

  35. If only a member of the accredited intelligentsia had the balls to say that Murph is a fucktard. The Labour Party might still regret boosting this moron.

  36. Given the Labour Party sent both parts of the 2 factor authentication in the same email to members maybe Murphy is advising them on encryption and security

  37. There seems to be a lot of claiming Murphy is wrong because “the blockchain” is decentralised, etc.

    If a set of banks elect to use a blockchain as a ledger then that certainly isn’t going to be decentralised in any significant way. There will be no economic incentive to mine in the same way bitcoin has – it’ll be part of the contract.

    Also people claiming the blockchain is useless without Bitcoin. Entirely missing the point.

    People seem to forget the “blockchain” does not equal “bitcoin”

  38. There’s decentralised and there’s decentralised.

    1. No, it’s not massively decentralised and spread across 10^x for 4<x<8 independent machines across the world.

    2. Yes, it is decentralised to the extent of not having a central controlling machine. The incentive for banks to roll such a system out comes from time and efficiency (and, I assume, resilience) gains as per my link upthread.

    Unfortunately Mr Murphy doesn't seem to understand point 2. I doubt he really understands point 1…

  39. Darren

    I guess the point is, who will “own” the blockchains”? I suspect that there will be no single owner and therefore each entity that subscribes to the process will run their own set of processes to keep the chain up to date.

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