CEO explains why ledger technology is flawed and what system will be the ultimate winner
The blockchain revolution is a bubble driven by “hype and horseshit” but will pave the way for 3rd generation Distributed Ledger Technology (DLT) technology that will change the world over the next 10 years.
That’s the view of Terry Shane, CEO of Refined Data Solutions, whose presentation at this week’s 2nd Annual Blockchain Conference in Toronto addressed why, in his view, there are "100 billion reasons" blockchain is not the technology to bet your corporate future on.
He believes investors are being deluded by the speculative allure of Bitcoin, Ethereum – both of which he heavily invested in over the years - and many of the so-called alt-coins, but which like early internet tech will be made obsolete by newer innovations that evolve on top of the groundbreaking ideas incorporated in Bitcoin.
Shane is throwing his weight, and personal money, behind IOTA and its use of a mathematical construct called a Directed Acyclic Graph and its peer-to-peer network, which eliminates the blocks, chains, miners and fees from the current "blockchain" model while retaining its original intent.
Shane said that the current blockchain mining is unsustainable both environmentally, because of its outrageous energy consumption, and economically, because of high transaction fees that make anything other than bigger-ticket transactions prohibitive. He also believes the underlying model means miners and users have diametrically opposing self-interests.
He said: "Blockchain is based on a model that is flawed and will be unable to scale to cope with the demand of the 75-100 billion 'Internet of Things' devices that will exist within 5-7 seven years."
He believes that these connected devices will need a distributed ledger protocol to facilitate the massive flows of micro-data and micro-value in what he describes "The Econnomy of Things".
This protocol, he said, will be IOTA, which makes every user a miner in the sense that to have you own transaction validated on the network, there's a virtuous cycle requirement to perform the Proof of Work for two other, unrelated and randomly selected transactions in what he describes as the crypto-equivalent of Paying it Forward. He said this eliminates fees entirely but unlike blockchain models that have an inherent bottleneck, the IOTA Tangle only gets faster as more users and devices use it to the point that it becomes, theoretically at least, almost instantaneous.
He said: “The problem with the blockchain space right now is there are too many people with too many vested interests. There are folks who have invested millions of dollars into mining rigs and the like, and hundreds of startups and ICOs with little more than a whitepaper and a cool idea who have taken the millions of dollars from their ERC-20-based token raise, to build solutions that will never be able to scale to meet real-world use cases.
“These are the last people who are going to tell you that the blockchain is flawed, even if they increasingly have the sneaking suspicion that the tech might not be able to deliver on its promises.”
Shane, who was involved in the early days of the internet and whose first website was ranked "9th Most Useful Place on the Net" by Yahoo back in 1997, calls the current situation “a wild west”, full of misinformation but said that it’s simply natural selection at work.
While long-term investments in crypto-currency are still generating phenomenal returns year-on-year even with the recent pullback, he believes there will be a tipping point that clears the way for IOTA to become one of the few remaining DLTs of choice. He does not claim that Bitcoin, Ethereum, Ripple and the others are all doomed; indeed he can foresee a time in the not-too-distant future in which there are multiple winners and an Ethereum Smart Contract might execute and trigger an exchange of value and/or data on the IOTA network as just one example of interoperability. But he believes that there will be a lot of contenders who don't survive.
He said: “The smart money will be where the real scalable business solutions lie not with the rumour and the innuendo fuelling the FOMO buying we saw this past December.
“Like the dotcom boom and bust, in which companies with no solid foundation vanished, that didn’t mean the internet didn’t ultimately transform our lives. I expect to see similar major shakeouts in the crypto world.”
He added: “The retail investor will buy into whatever is being promoted as the latest shiny thing on CNN or MSNBC, because they don’t have the knowledge, or willingness, to do the research to differentiate between the smoke, the mirrors and the real thing. I believe that IOTA is the real thing ... but that’s a personal opinion, not investment advice.”
A member of the IOTA Evangelist Network, Shane is working closely, and on a purely voluntarily basis, with the non-profit IOTA Foundation in Berlin, although he is not a formal member. He is launching the bIOTAsphere, a not-for-profit IOTA Commercialization Lab facility, in Toronto, Canada this May
Shane is investing his own funds in the initiative because he believes this technology will not only transform the world but make it a “better place for my children and grandchildren”.
He said: “IOTA did not set out to be a speculative crypto-currency as its raison d'etre and the IOTA Foundation believes that the price of the coin is often a distraction from the more important work they are trying to do. Their primary vision is to be a protocol layer upon which future solutions can be built, and they are not alone in that view.
“Major corporations like Bosch, Fujitsu, VW and others are making their own big investments, and betting on the technology and the solutions that they are embedding in their future product and service offerings. Governments too, like the Municipality of Taipei, Taiwan (population about 3 million) are taking note and betting on IOTA for their Smart City initiatives.
Shane said: "We're rapidly approaching the time when data and value will merge in the coming Economy of Things, and if you invest in the protocol, it won't matter what specific solutions people build on top of it. I want to be involved in contributing to the solutions that sit above that protocol layer and I hope to make money doing that – when the system wins, everybody who is invested in it wins.”