Among policy makers and regulators there’s often an implicit perspective on crypto assets and technology known that I like to call the “Gates” perspective, simply because Bill was the first large figure in the software industry to come out publicly with a position that attempts to equivocate a balance between the technology and financial mania. To grossly summarize the position he espoused in several interviews is something like the following

Cryptocurrencies are a ‘greater fool theory’ investment, but the underlying blockchain technology has applications beyond just creating asset bubbles.

Beyond just Gates, this perspective seems to be almost universal amongst a great number of both journalists and politicians who talk about this topic even today. The implicit assumption is that there is too much smoke for there not to be fire somewhere, that the underlying ideas around these distributed databases simply must have an application somewhere, we just haven’t found it yet. And that there simply must exist a paradigm-shifting solution for distributed ledgers applied to some use case that isn’t just creating a bubble bath of artificially scarce dog meme coins.

It may surprise people, but years ago I used to also hold an ambivalent position on blockchain quite close to Gates, along with a great many other technologists who thought the idea of building a new generation of distributed databases to manage customer data might not be that terrible of an idea. From pure first principles reasoning it’s a technically seductive idea to combine auditability, tamper-resistance, and process automation logic into one database solution that can automate many straight-through processing tasks we find in industry. It’s an idea that has a sort of internal logic to it that almost might work.

However first principles reasoning only takes you so far in the real world, while in principle this idea almost makes sense it hits up against some very hard realities of the economics of software market and base technical reality that the same ends could probably be achieved in a simpler way at a lower cost. While I don’t personally hold the “Gates” position on distributed ledgers anymore, I’m at least open to the falsifiability of the negative position, that if someone truly did build some killer solution for straight-through processing or built a more efficient real time gross settlement system on top of these technologies, that would falsify the negative position and then there would be an actual use case for blockchains. So far, I haven’t seen that yet but maybe something like this is sitting in some back office just silently working and the public isn’t even aware.

At this point there’s a large number of clever programmers and research groups at most of the largest tech companies that have looked into this problem space and have more or less failed. However the arc of history seems to be slowly bending towards the collective answer that this is all probably a technical dead end in the evolutionary tree of technology. A technical nothing burger whose lack of fitness probably should relegate it to the extinct species list of technologies alongside Betamax and XSLT.

Yet when we talk about the moral hazards of crypto assets, it’s terribly important to criticize the destructive parts of the technology that actually put the public in harm’s way. Household ammonia and chlorine bleach are both legal and useful everyday cleaning products by themselves, but put them together you can produce chlorine gas, a truly horrific chemical weapon that was rightly banned by the Geneva Protocol. The same (albeit less drastic) logic applies to mixing blockchains with social media and FOMO to produce empty speculative asset bubbles to arbitrage securities regulation. The combination of the two is what we should be concerned about from a public risk perspective, not Merkle trees or hash functions applied to everyday data management problems.

Time will tell whether blockchains have any applications beyond spawning crypto asset bubbles. There’s an abundance of reasons to be highly skeptical from a technical perspective about claims to the contrary, but it’s not entirely outside the realm of possibility. Effective crypto policy should concern itself with the unregulated securities side of this bubble, not the underlying technology itself. Slow distributed databases and digital signature schemes are not the origin of harm in any of this, and it’s important to disentangle the two from our conversations.