This blog's name is a nod to “[HS 91]” being the abbreviated citation for the original Haber–Stornetta paper, which laid the foundation for the distributed trust of the blockchain. This blog provides historical perspective and ongoing commentary about the blockchain space.
While blockchain now is associated with a wide variety of applications from cryptocurrency to supply chain management to smart contracts, Stuart Haber and W. Scott Stornetta, the system's two inventors, said its original purpose was to find a way to timestamp documents.
Earlier this month, the Iowa Democratic caucus was thrown into chaos by a series of technical and bureaucratic mishaps. First, the privately-developed IowaRecorder app reported only partial results. (Subsequent testing of the app found security vulnerabilities in addition to these functional flaws, though no evidence that any vulnerabilities were ever exploited.) Second, some of the worksheets used for hard-copy recording and tabulation were found to have arithmetical inconsistencies that invalidate their results. Third, the Iowa Democratic Party has insisted that “those worksheets are considered legal documents and tampering with them would amount to a crime”.
These events have renewed public attention to the reliability and security of our elections. As a high-stakes venue where errors have catastrophic consequences, the ballot box is no place for novel or untested technology. However, as Yugen Partners Chief Scientist Scott Stornetta told the Government Blockchain Association at the Congressional Auditorium on Capitol Hill on January 31, whether we cast our ballots on our smartphones or on paper, our democracy ought to employ every technology at our disposal to help secure and verify our votes. Used judiciously and responsibly, blockchain can be one of these technologies—as this post discusses.
Stuart Haber and I recently recorded a series of lecture segments as part of Columbia Business School’s executive-education course “Blockchain in Business: Beyond the Hype”. Here’s a teaser from one of the lectures. To find out how to view the course, click on the link above.
Cryptographer colleagues W. Scott Stornetta and Stuart Haber’s paper “How to Time-Stamp a Digital Document,” published in 1991, is what many consider to be the first incarnation of blockchain technology. Stornetta and Haber set out to create an immutable ledger, and in doing so, they came across what they deemed “a naïve solution.” That solution relied on a central authority, a “digital safety-deposit box” that could record the date and time a certain document was created and also store a copy of it. The main problem with this method came down to trust. “Nothing in this scheme prevents the time-stamping service from colluding with a client,” Stornetta and Haber wrote.
They’d hit a dead end—or so they thought. Since their original mission seemed undoable, they attempted instead to disprove the possibility of creating an immutable ledger. In doing so, they came up with one that wouldn’t require a trusted central authority. In other words, they ended up creating a distributed immutable ledger.
At the time, the two men were working at Bellcore, a telecom research company. Three years after releasing their time-stamping paper, they went on to found Surety, the main focus of which was to offer time-stamping services using the first-ever blockchain. Instead of a purely digital ledger, however, Surety posted customer hashes in a different sort of immutable public record. It printed them in the “Notices & Lost and Found” section of the New York Times.
Today, Stornetta is the chief scientist at Yugen Partners, a private equity firm that invests in companies using blockchain technology. We recently met up with Stornetta outside of Columbia University’s business school, where he will contribute to a blockchain course for executives, to talk about Satoshi Nakamoto, cypherpunks, LUMAscapes, dairy cows, sizzle, and FOMO—not to mention what he believes is the biggest mistake blockchain project architects keep making.
Let’s admit it. This year was a bit chaotic for blockchain efforts. Cryptocurrencies crashed. The SEC rained on the ICO parade. Many corporate projects, announced with elaborate fanfare, seemed to progress at a snail’s pace.
On top of it all, someone claiming to be Satoshi threatened to take the price of bitcoin down to $1,000, while a related faction threatened what amounted to a DDoS attack on a rival fork by planning to mine worthless blocks. (With blockchain friends like these last two, who needs a six-fingered man for an enemy?) And on a more somber note, we lost Tim May, who provided early inspiration for me and many others with crypto-libertarian aspirations.
So why am I smiling? It would be presumptuous to say that I know something that informed readers do not. But perhaps I have a longer-term perspective. For while as a community we celebrated the 10th anniversary of Satoshi’s white paper, next year is another anniversary for me. Namely, 2019 will mark 30 years since Stuart Haber and I began working on a contributing thread to what has become the blockchain.*
From that perspective, the disturbances of this past year are transitory issues that distract from value creation fundamentals. From financial services to social media, from crypto-based banking services to making real assets liquid, opportunities abound. And as Chief Scientist at a blockchain venture capital firm, I am prepared to recommend how to invest tens of millions of dollars in blockchain efforts this coming year.
The movie Jerry Maguire made famous the line “show me the money.” Let me suggest four “show me”s.
Follow these in 2019 and perhaps I can show you the investment money.
In the latest Stigler Center working paper, Chicago Booth’s Eric Budish argues that game-theoretic constraints imply there are “intrinsic economic limits to how economically important [Bitcoin] can become.” In this review essay, W. Scott Stornetta—a co-inventor of the early blockchain—highlights the paper’s contributions while raising some exceptions with its broader generalizations.
Seventeen years before there was Bitcoin, my colleague Stuart Haber and I developed the basic elements of the blockchain, as described in the Journal of Cryptology, January 1991. Namely, using cryptography, we found a way to create an immutable, shared ledger. Its integrity was based, not on some trusted third party, but on the democratisation of trust across all participants in the ledger. This is the blockchain: an immutable record, witnessed and vouchsafed by all mankind.
And so while I find little to quibble with in recent blockchain-related Cuffelinks articles by Joe Davis of Vanguard and Carlos Gill of Microequities, I can nevertheless bring an historical perspective to the subject.