Bittorent Lessons for crypto (4 part series)


Why BitTorrent Mattered — Bittorrent Lessons for Crypto (1 of 4)

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Dec 24, 2018

The End of an Era

When BitTorrent Inc was sold earlier this year to Chinese cryptocurrency organization TRON (or, more precisely, to Justin Yuchen Sun, TRON’s founder) it was truly the end of an era. BitTorrent Inc was wrapped into the TRON organization. Thus vanished the company most closely associated for almost 15 years with the Bittorrent ecosystem. Remaining employees are all now ‘TRON employees’ and the mission is now identical to TRON’s.

All told I worked at BitTorrent Inc. for almost 10 years working at various times in product, data science, strategy and general management. In that time the company pioneered many R&D projects to deploy decentralized technologies for use cases such as content delivery networks, folder synch, file sending, p2p communications, web publishing and live streaming. In the Fall of 2017 the company started work on a project to develop a cryptocurrency integrated into the heart of the protocol — work which led, somewhat unexpectedly, to the company’s acquisition.

Having spent so much time close to what was perhaps the most broadly deployed decentralized technology yet, I’d like to share some thoughts on how the world of Bittorrent played out and what the lessons may be for the world of Bitcoin and the wider ‘crypto’ or ‘blockchain’ industry.

It’s worth starting with a little background on Bittorrent. Over the years many people have heard of Bittorrent, and most who have think it has something to do with illegal online file-sharing. But many people are surprised to learn that there is a company called BitTorrent Inc.

In describing Bittorrent I have always tried to differentiate between three different things: Bittorrent technology — an ingenious p2p file transfer protocol invented by Bram Cohen in 2001, BitTorrent Inc — a company co-founded by Bram Cohen and Ashwin Navin in 2004 to pursue commercial applications of Bram’s invention, and the Bittorrent ecosystem — a huge and leaderless community of users and entities which coalesced around the largely illicit sharing of popular files online which were often media files protected by various copyright laws.

Bittorrent technology

At its heart Bittorrent technology is a file distribution protocol. It was designed to enable the distribution of large and popular files across the internet without the need for provisioning very large servers with huge available bandwidth. Unlike cryptocurrencies, there is no ‘token’ involved — instead the economics behind the system rely on transient barter relationships where peers choose to share more with counter-parties which have already shared with them. Further specifics of how it works don’t matter here, but its worth mentioning that the very technical design objectives were important later in protecting the founders and the company from direct attack. Bram’s objective was never to enable copyright infringement or make obsolete a decades-old multi-billion dollar industry around selling copies of media files. And yet his invention led in a fairly straight line to that destination.

As a result of its innocent objectives, even though Bittorrent technology found such spectacular popularity in illicit sharing of media files that at times it risked swamping available ISP bandwidth, the step that ISPs might have taken to eliminate it never actually arrived. There were plenty of ominous signals as well as a spirited defense coalescing around the broader net neutrality movement. But the lack of any illegal intent and the presence of what lawyers termed ‘substantial non-infringing use-cases’ ultimately helped insulate Bittorrent technology from serious ISP-level or state-level intervention.

Certainly there were plenty of ISP attempts to interfere with what was considered excessive Bittorrent traffic, but a concerted and state-sanctioned attempt to kill it never materialized. In large part this is because no-one wanted to set a legal precedent of censoring general purpose technology simply because of one set of legally problematic uses.

(Unsurprisingly the full story here is more complicated and includes lobbying on both sides, many attempts to damage Bittorrent traffic and a major initiative by BitTorrent Inc to adapt the protocol to make it less aggressive in the wild. The broader backdrop was the rapid build-out of internet bandwidth and the emergence of new applications which were even more bandwidth hungry than Bittorrent. In time Bittorrent traffic simply stopped being the top priority for ISPs that it once was and as a result they started focusing their energy elsewhere.)

BitTorrent Inc

BitTorrent Inc has spent its entire life living with, by turns profiting from and more often apologizing for the notoriety of many of the other actors across the Bittorrent ecosystem. It still distributes two of the most widely used Bittorrent clients — ‘Bittorrent’ and ‘uTorrent’¹; it acts as an evangelist for the best uses of Bittorrent technology; and it makes money by advertising to millions of users of its technology. It has a culture that has kept it far afield of any copyright infringement activities or encouragement, but it has continued to update and secure the technology on which a significant proportion of the Bittorrent ecosystem runs.

The Bittorrent ecosystem

The Bittorrent ecosystem is made up of the people who use the technology. Just like with Bitcoin and other blockchain projects there are a number of important roles, but each role is fulfilled by a large number of participants.

The bulk of the Bittorrent ecosystem comprises:

  • developers and distributors of client software that communicates using the open Bittorrent protocol as documented on
  • operators of thousands of public and private torrent sites which provide catalogs of torrent files and community curation mechanisms to help users find files to download
  • the ‘warez scene’ — an underground community of people who collect, unprotect and release high quality versions of movies and other media onto torrent sites
  • operators of tracker nodes which help peers efficiently find each other (formerly required infrastructure that is now optional)
  • a few hundred million consumers in literally every country on earth who use torrent software to download files

Many of the roles within the Bittorrent ecosystem are both emergent in that there was no original design and self-organizing in that there is no leader and very few institutions that govern who does what or when. The roles of both BitTorrent Inc and Bram Cohen in the Bittorrent ecosystem have for a long time been quite remote. Bram as the respected but restrained progenitor of the technology, and BitTorrent Inc as the increasingly disliked ‘sellout’ which saddled everyone’s favorite software with ads and serially failed to develop the features the community most called for (mostly around anonymity and content discovery).

Why Bittorrent Mattered

The first thing to note here is Bittorrent mattered, past tense. I don’t think it matters much any more and it hasn’t really mattered for some years now. True, it still has a large user base, but it no longer has anything like the relevance it once did. The reason is that the media industry has long since moved on and Bittorrent no longer represents the existential threat it once did. (I’ll talk more about this in the fourth of this series of posts on Who wins in the face of decentralized disruption).

Of course I really mean that the Bittorrent ecosystem mattered. (BitTorrent Inc — the company — played an important role at times but rarely had definitive influence, and more often acted to avoid taking on a leadership role.) The Bittorrent ecosystem mattered fundamentally for two reasons:

First , Bittorrent for the first time made the sharing of very large files possible for anyone with an internet connection without the need for any special infrastructure. This led to explosive growth in the popularity of Bittorrent for sharing large digitized media objects. It wasn’t the first or the most recent technology here, but almost certainly operated on the largest scale. Where Bittorrent technology and BitTorrent Inc left off, the broader community filled in the gaps using off-the-shelf web technologies to deliver curated directories and search indexes, hosted public and private sharing communities, crowd-sourced ratings and reputation scores, de-facto standards for naming and encoding of files and countless other ‘features’ that made a raw technology into a thriving and usable ecosystem. The popularity was such that Bittorrent traffic was variously reported as consuming 10’s of % and sometimes over 50% of all internet traffic!

To make any files trivially shareable was a fundamental challenge to the media industry which started out treating the internet as just another sales channel into which a new ‘format’ of file could be distributed — vinyl/cassette/CD gave way to the MP3 file and VHS/DVD to the MP4. But this was not to be, as delivering a copy of a file to a single consumer on the internet meant that it was extremely difficult to prevent that file from being passed around every other consumer on the internet. Bittorrent was the last in a long line of technologies that obsoleted once and for all a file-oriented approach to building a mass media business model.

Second , the open and decentralized architecture of both the technology and the community meant that it was essentially impossible to shut down Bittorrent file-sharing. Other file-sharing systems came and went, always crippled by some centralized Achilles-heal, but Bittorrent persisted. While there have been endless legal, regulatory and technical attacks on different parts of the Bittorrent ecosystem, the ecosystem has remained impervious and still operates today much as it did over a decade ago. The fact that BitTorrent Inc also survived through to an acquisition is partly due to an abundance of caution and proactive attempts to find the good in file-sharing, but mostly to the fact that it was clear that shutting down such a company would not make much of a dent in the Bittorrent ecosystem. It would simply eliminate a moderately constructive partner at the cost of alienating a colossal number of consumers. Bittorrent users would just find other torrent software to use and the ecosystem would continue unabated.

Bittorrent fundamentally mattered because of its remarkable resilience — in spite of its incredibly disruptive influence on the media industry and the flood of illegal activity that it seems to have enabled, Bittorrent has proven to be unbelievably robust. Perhaps Bram’s crowning achievement with Bittorrent was therefore to be the proof of concept of precisely the sort of global decentralized utterly censor-proof network that Satoshi Nakamoto had in mind when he conceived of Bitcoin.

TRON’s blockchain cannot handle the tokenization of BitTorrent, claims former exec

If you’re not Breaking Rules you’re Doing it Wrong — Bittorrent Lessons for Crypto (2 of 4)

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Dec 28, 2018

Following my first post on Why Bittorrent Mattered, it is worth reflecting a little on the popular theme of decentralization — what it actually means (in the particular context of blockchains) and what its useful for.

Whats the point of decentralization anyway?

Decentralization, at least the way it happened in Bittorrent, really means the combination of two qualities — technical decentralization and organizational decentralization .

Technical decentralization means that there is no single choke point in an application or on the network that can be attacked which will lead to the system being compromised or switched off.

Organizational decentralization means there is no single person or entity that can be compelled to compromise or switch off the network.

In the case of the Bittorrent ecosystem this was certainly the case. The distribution of the architecture of Bittorrent across client software and any number of torrent sites and tracker nodes meant that once a critical mass of people was using the technology there was really no single place to attack that would have compromised or shut down the network. Furthermore, with the technology being opened up so early, there were a range of companies and individuals who developed all of the components that made Bittorrent work. There was no technical place which could be used, and no person or organization which could be compelled to switch off the network. It was very hard indeed to censor, at least within the democratic norms that governed the most influential state actors on the early internet.

This level of decentralization gave rise to the critical third component that makes this type of decentralization so intoxicating and exciting — an ability to break the rules . While a decentralized architecture can be effective at routing around a variety of different failures in a network, the type of decentralization that was achieved by Bittorrent (and by Bitcoin for that matter) has enabled routing around rules.

In Bittorrent this happened quite by accident. The original objectives of Bittorrent (unlike the stated aims of Bitcoin) were not explicitly to enable the type of rule-breaking that ensued. Nevertheless rule-breaking did ensue on an epic scale in the form of very widespread sharing of copyrighted files. And it has persisted for a very long time, in the face of fierce and well-funded opposition from those who own copyrights.

This point is broadly applicable to Bitcoin and many of the projects that are setting out to leverage blockchain technologies. It’s pointless to argue about what decentralization is or how decentralized various projects are and why that even matters without first talking about what decentralization does . Decentralization in the sense it is applied to blockchain technologies isn’t really about the multi-homing of infrastructure or the sharding or sharing of databases. Decentralization in this sense means creating an uncensorable system that enables the unfettered breaking of rules. This is why the promise of blockchain is so disruptive — the blockchain as embodied by Bitcoin and further enumerated by Ethereum is the quintessential technology of disruption . Once launched it cannot be stopped, come what may.

Without this sort of rule-breaking (whether by accident or design) it’s quite hard to imagine why decentralized blockchain technology even matters. It’s a distributed data store with a complicated and slow update mechanism. While there are some qualities of blockchain architectures that are useful short of full decentralization, they hardly justify for the wilder “biggest-thing-since-the-internet” excitement. The one value proposition that everyone seems to agree on for blockchain technologies is that they are ‘censor-proof’. And this matters only if you have something that someone wants to censor. To my mind the most interesting blockchain projects out there are the ones that enable the breaking of rules.

Through this lens there has really only been one seriously exciting application of blockchain technology so far — that is its application in capital formation mainly through the use of Initial Coin Offerings (ICOs). The rules around capital formation in the US and the updates with the 2012 Jobs Act are complex and well intentioned and I don’t mean to debate them here. I certainly don’t want to defend the bad behavior that happened as a result of the ICO boom. But two things stick out clearly:

  1. The ICO boom happened in an ungoverned way and was (albeit briefly) wildly successful in raising billions of dollars to fund a broad range of projects;
  2. ICO’s have now almost completely stalled as a result of pressure from the SEC and other regulatory bodies around the world.

Other than this example, there are a few planned projects but very little actual rule-breaking going on. It seems reasonable to assume that if rules are being broken then someone somewhere is going to care. And yet there’s little evidence of anyone directly ‘feeling the heat’ of rule-breaking behavior enabled by decentralized blockchain systems in the same way that media industry execs once felt the heat of the rule-breaking taking place in the Bittorrent ecosystem.

Not that every blockchain project needs to be breaking rules. There are many important projects that exist to build the fabric of this industry. But I’m pretty sure that the gold in this particular gold rush is the ability to architect systems without central controls which enable participants to break rules with impunity. When observers decry the lack of adoption, the reason why adoption is missing is that there are worryingly few projects that are breaking rules that large numbers of people actively want to be broken. A groundswell of utility being realized is clearly missing.

In the early days of Bittorrent this meant millions of people simply downloading the latest movie for free from The Pirate Bay without any DRM wrapper spoiling their enjoyment, without that annoying “you’ll go to jail if you violate copyrights” page that was inflicted upon every legal viewer but conveniently stripped out of all the bootleg copies. For a while the experience of Bittorrent was strictly better than any other online experience. And it was free. The closest to this we have come in the blockchain ecosystem is a legion of ‘investors’ hoping to get rich on the expectation of some killer app coming along. But the expectation itself relies on some utility emerging somewhere else. Unless and until this sort of utility does emerge then the ecosystem remains vulnerable to accusations of being just a Ponzi scheme, and may yet collapse entirely.

The general purpose public blockchains out there might best be understood as platforms for rule-breaking apps . (For if there are no rules being broken it becomes tempting to ask why a decentralized architecture is the best tool for the job.) If I were an investor I’d be asking any apps (or dApps) on top of these platforms the question “what rules are you breaking?” .


Intent, Complexity and the Governance Paradox — Bittorrent Lessons for Crypto (3 of 4)

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Jan 5

Following on from my posts about Why Bittorrent Mattered and What Decentralization is Good For, I want to discuss three themes related to decentralized ecosystems which were all relevant to Bittorrent and are all relevant to many crypto projects.

The Problem of Intent

At the end of my post on what decentralization is good for I argued the main justification for a decentralized architecture was its resistance to various forms of censorship, or put a different way an ability the break the rules without anyone being able to stop you. There may be useful projects that have nothing to do with rule-breaking, but if the gold in the gold-rush is indeed rule-breaking, then without any rule-breaking it won’t much matter what sort of picks and shovels you are trying to sell.

While it’s tempting to focus on the actual rules being broken, we shouldn’t forget about the person or company breaking the rules. And this introduces the thorny problem of ‘intent’.

The uncomfortable thing about ‘intent’ is that in the final analysis, the legal system has very little patience for defendants who set out to break laws. When looked at holistically, if an ecosystem enables wholesale law-breaking and is built on technology explicitly designed to break those laws — at some point the enforcers are going to come looking for the authors to hold them accountable.

By and large Bittorrent Inc. and Bittorrent’s inventor Bram Cohen were able to skirt around the intent problem as it was clearly never Bram’s intent to engineer a system to broker the type of rule-breaking that occurred. In fact the popularity of Bittorrent was wholly accidental.
On a parallel path, although Satoshi’s Bitcoin whitepaper was pretty explicit in its intent to break rules, the anonymity of its authorship has prevented the possibility to hold a person or entity accountable for any rules that could have been broken.

The approach of Ethereum is presumably more similar to that of Bittorrent — do nothing to try to adapt it as a better way to break any specific set of rules, and encourage good use cases as publicly as possible.

Contrast this with the start-ups who are on the public record aiming to break rules with their un-censorable system once it is launched. For example a certain well funded project which commendably wants to break the terrible music copyright and royalty rules that make the DJ art-form prohibitively expensive to publish online. But given they are on the record with this objective, its hard now to see enforcement authorities looking kindly on them (or their VC investors) in the event that they succeed.

So does this mean that you should simply not promote what you’re doing? Or do so with a veil of anonymity so no-one can join the dots? Or just get lucky and succeed by accident like Bittorrent did? And what will we discover of the future legal liability of those who flagrantly break rules (even very unpopular ones), or those who have leading roles in a blockchain system that makes it possible?

The Cost of Complexity

A second important theme for decentralized systems is a common lack of appreciation for just how complex these systems are and how finely balanced they need to be to operate correctly.

I originally joined Bittorrent in 2007 to work on a decentralized CDN which aimed to do something like “tie together all the unused storage and bandwidth on people’s PCs into a content delivery network which had zero operating costs (for us)”.

In time it proved there were a number of things wrong with this ambition (most of which I won’t touch on here), although perhaps the most important one which we discovered the hard way was the cost of complexity.

It was technically possible to cobble together some sort of CDN from under-utilized PCs, but we were flat wrong that this represented a free resource that could be easily aggregated and sold. On one side consumers had a strong perception that the bandwidth was theirs and not ours to re-sell, so to try to do so was costly in the form of goodwill with consumers. Even more damagingly we discovered that our CDN needed to integrate well with a fast growing and fast evolving tech stack designed to manage and deliver media online. The advantages we offered in terms of cheaper prices for delivering bits were vastly overshadowed by the sort of concessions our prospective customers would have to make in rearchitecting their content management systems. A value proposition of “a bit cheaper but much more complex and much less flexible” was ultimately not very appealing. We thought it was a strictly cheaper solution, but when framed holistically it was anything but.

And this was for a decentralized system that in truth was entirely centrally controlled and managed. For a system that must support independent developers writing software which speaks the same protocol the complexity is still bigger. The truth is that large scale decentralized systems, even when there is only one developer, are fiendishly difficult to get working right, and this ultimately must add into the cost.

Overall its hardly surprising at this point that the timelines for projects seem to keep getting pushed out as engineers are facing down the sheer difficulty of challenges they are faced by — many of which may not actually be solvable no much how much money you throw at them. On one side they must accommodate a fluid future and integrate with the predominant internet technology paradigm of “launch MVP quickly and iterate”, and on the other they must get it absolutely positively right the very first time, because of the third and final theme I’d like to discuss:

The Governance Paradox — Each New Decision is Harder than the Last

Governance in this case means the ability to make decisions efficiently and implement them quickly and effectively. Decision-making in a rule-breaking decentralized system is very hard. In fact it’s worse than that — decentralized governance is perhaps something close to an oxymoron. In a decentralized system which can’t be controlled, it is very hard to, errrm, control it. That’s the point. You can’t have it both ways. It turns out, viz. Bittorrent, that you can indeed build and release a system such that when ‘the man’ comes over to compel you to stop whatever it is that you’ve done that annoys him, you can actually say “no, sorry, it can’t be done” . But you cannot then turn around and easily make changes and updates to that system. Coordination costs are high and the timeframe to get things done is extremely long. This at least is the experience of BitTorrent Inc. and the Bittorrent ecosystem.

Getting things done in a rule-breaking decentralized system is hard for at least three reasons:

  1. the status quo is a safe place — there are multiple stakeholders with often conflicting interests — the fact that a stable equilibrium between such groups has been found in the first place is perhaps extraordinary, but it is also something that all groups will tend to cling to.
  2. coordination is hard and costly especially with many paranoid participants whose interests are not necessarily obvious to you — in the world of Bittorrent this meant that changes to different parts of the Bittorrent protocol to introduce obvious win:win optimizations or attack mitigations took many months and sometimes were shelved completely.
  3. major players are exposed — even if you want to do something that you believe you can do and that will be popular with all stakeholders, you must consider an important additional stakeholder — the enforcer of the rules that have been broken. Considering the enforcer of the rules always has a chilling effect on all stakeholders. For many years BitTorrent Inc constantly audited its own internal thought processes based on second-guessing how various enforcement authorities might react. While the Bittorrent ecosystem was decentralized and extremely hard to censor, BitTorrent Inc — one of the few participants with real potential influence — was highly visible and felt exposed to legal repercussions of any of its actions. For these reasons it was frequently reluctant to even try to actively lead.

These exact same themes are clearly playing out in the world of crypto-currencies. Pre-launch these projects are completely centralized so they are blissfully immune to this issue and are able to make progress at speed. But post-launch, to the extent that projects are truly decentralized (clearly many only pretend to be) they are incredibly hard to govern. The difficulty of deciding what should happen next has caused progress to slow to a crawl and led to contentious stand-offs and projects splintering.

There are a number of crypto-projects which are trying to address the governance issue with various approaches to enabling decision-making that is ‘fair’ and ‘effective’ (for some definition of those terms). But in practice the only way to make any large-scale governance viable is to re-centralize power in a smaller number of deciders with some number of rules around how you can become and remain a decider. This role of ‘decider’ becomes more and more problematic the more successful an ecosystem gets at breaking rules, and the less willing the ‘deciders’ are to be held individually responsible. Established decentralized governance in the form of bodies like ICANN, the IETF and W3C have long been slow, contentious and prone to the undue influence of major participants. But I expect that governance of rule-breaking decentralized systems will present an even greater challenge as a result of the perceived liability even of participation, and certainly of leadership.

I’m always curious to look at crypto projects to see how they handle the problem of intent (do they talk about the rules they are trying to break), how well they understand the cost of complexity that their plans entail, and how they are addressing the governance paradox where every decision is going to be harder than the last.


Decentralized Disruption — Who Dares Wins? — Bittorrent Lessons for Crypto (4 of 4)

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Jan 10

This is the last part of a series of four posts — the previous ones are here:

1 — Why BitTorrent Mattered

2 — If Your Not Breaking Rules You’re Doing it Wrong

3 — Intent, Complexity and the Governance Paradox

The Bittorrent ecosystem grew into a decentralized, slow-moving, almost ungovernable network. Yet it has remained strongly censor-resistant as hundreds of millions of users continue to share all types of media files online. BitTorrent Inc built a modest-sized business distributing two of the most popular Bittorrent clients (uTorrent and Bittorrent) and putting ads in front of their users. There were a number of other VC-backed companies which became involved in different parts of the ecosystem, all hoping to find a way to capture some of the copious amounts of value that had clearly been created for consumers. But if the objective of the game was to secure billion dollar exits and huge returns on capital invested, then every one of them failed. With the wonderful benefit of hindsight, here is what actually happened:

Revolution and Reaction

Bittorrent was surely successful in this: it forced the media industry to think harder. In the light of the Bittorrent ecosystem, it simply wasn’t going to be possible to charge users to re-purchase all their music in MP3 format the same way they taxed users who wanted to transfer from vinyl to cassette to CD. In spite of ever more sophisticated copy protection technologies, ‘revenue protection’ service offerings and showcase trials and punishments, what actually happened as a result of this grand showdown between entrenched interests and technology wielded by the masses was not the victory of one side or the other, but the emergence of something totally different and radically better. In short, the whole concept of “the file” disappeared from sight and we watched the rebirth of old media in a new and better form (e.g. Spotify and Netflix) and the emergence of new media (e.g. YouTube and Instagram) all with experience-oriented value propositions and business models.

Media everywhere stopped being about the file and started being about the experience. Consumers stopped fretting over ‘ownership’ of music or movies, and are now concerned entirely with access — the experience of just listening to what you want whenever you want, and watching great engaging shows and channels on-demand. Consumers don’t want to worry about where the digital file is, how long it will take to get, whether their device can play the file, or how often they can listen or watch. All these concerns are satisfied and the experience becomes a simple discovery mechanism and a play button. A similar story played out in software as all types of software (games and apps) have become increasingly experience-oriented rather than file-oriented. Almost everywhere now you pay to subscribe to the experience rather than paying a fee for a copy of the file.

The Bittorrent ecosystem was obviously not the only force at work. The relentless upgrade of internet bandwidth by ISPs, the proliferation of screens with powerful computers in every part of our lives and the emergence of rich new ways of interacting digitally, largely funded by ads from the emerging ‘data industrial complex’. What’s clear is that today the whole concept of ‘files’ is increasingly anachronistic. Files have been abstracted away almost everywhere and replaced with experiences. And I’m guessing the vast majority of us would agree that this is a great thing for just about everyone.

Who Dares Wins?

In spite of the scale and impact of the Bittorrent ecosystem, BitTorrent Inc never succeeded in capturing any meaningful part of the upside from all the disruption. Perhaps a better (or luckier?) team could have found more success?

There were many home-grown ideas but we were always held back from addressing the biggest problems in the Bittorrent ecosystem (like the horrible discovery experience) as well as the most voted-for user request (anonymity) by legal concerns which might have exposed the company to vast liabilities (up to $150k for every file copied — we’re talking $50 trillion of potential liabilities every month!)

Pushing the rule-breaking theme harder than BitTorrent Inc was prepared to led to nothing durable — for example there was but a short-lived explosion of popularity for Popcorn Time — a sort of combination of both torrent site and Bittorrent client into a Netflix-like experience for pirated movies. The Argentine development team was ‘leant on’ and the project abruptly disappeared as developers decided that an actual career in tech was more interesting than a lonely and one-sided battle against copyright lawyers.

So if the revolution was led by the Bittorrent ecosystem, there were no clear winners who emerged directly from that ecosystem. Although BitTorrent Inc was one of the key protagonists, its clear that neither BitTorrent Inc nor any other Bittorrent ecosystem participant succeeded in achieving a meaningful reward from its position. Perhaps one of the most far-sighted winners here was Daniel Ek — CEO and Founder of Spotify — who preceded his Spotify success with the sale of the uTorrent client to BitTorrent Inc. Although early versions of Spotify used a Bittorrent-like P2P protocol to try to save money on bandwidth, they quickly realized that the main point of Bittorrent had little to do with saving money, and decentralization of their architecture was actually counter-productive to their aim. Perhaps it was apparent to them way back then that leading a revolution is exciting, but it’s far better to build the thing to save incumbents from the unleashed mob.

And this is the main conclusion — decentralization may be great for disruption, but if the experience of Bittorrent is anything to go by it is not at all clear that it has a role in whatever comes next. Blockchain architectures are great for unleashing unstoppable rule-breaking mobs, but we shouldn’t mistake the rule-breakers for the winners. A prominent political scientist once observed that political revolutions are great at ‘state breaking’, but not so great at ‘state making’ or replacing them with something better. The same might be true for the type of rule-breaking disruption that is unleashed by decentralized architectures. As I look at the rule-breakers, I’m especially interested in what the reaction might be — what paradigm might change (like the abstracting away of files in the media industry) leading to a whole new way of doing things — for it is here that the biggest winners may emerge.

Recap — Lessons From Bittorrent For the Blockchain

Insummary, I realize that Bitcoin and Bittorrent are wildly different in so many ways, yet I’m struck by a number of similarities. In hopes of helping people avoid a repeat of history, I’d suggest that the following lessons from the experience of Bittorrent are relevant to new participants in the blockchain revolution:

  1. Don’t worry about what decentralization is, worry about what it does. In particular worry about whether it enables rules to be broken that unlock new ways of doing things or new opportunities that were previously prohibited directly or indirectly by rules. Bluntly, if you’re not breaking rules, you’re doing it wrong.
  2. If you are breaking rules, watch out! Rules of various types have many defenders, guardians and enforcers. A good way to tell if you’re breaking the rules are if there’s anyone out there that actually cares and wants you to cut it out. There are many examples of rules that have outlived their usefulness, and rule-making is often slow and can be helped along by a good dose of well-intentioned rule-breaking.
  3. Intent is an extremely dangerous signal to send , and yet for companies trying to get established and funded it is hard to see how they can be silent about their intent. Bittorrent succeeded by chance. Bitcoin disclosed its intent but protected itself with anonymity. I’m not sure what to recommend for newly starting companies in this space except to remember that your stated intent will likely follow you forever.
  4. Truly decentralized projects are extremely complex and complexity is costly . Those costs may be differently allocated in a decentralized system, but we should be very cautious of projects that are either overly optimistic about how quickly they can get things done, and especially of those who promise decentralization as a way to make things cheaper.
  5. Governance of a decentralized system is extremely hard . If you have good decentralization then the coordination costs are going to be very high and the process will be very slow and often ineffective. (Bitcoin? Ethereum??) But if you have strong coordination and an ability to execute a plan with tight discipline, you may not have a very decentralized system and are quite likely exposed to the long arm of rule-enforcement.
  6. The ICO boom is the best example yet of successful rule-breaking. Capital formation via the boom around ICOs was the first and maybe only strong example of rule-breaking that has taken place in the blockchain space so far. It has also seems to have been effectively stopped by the rule enforcers, somewhat calling into question how well designed the entire decentralized system was to support this use case.
  7. Rule-breaking is not sustainable without bounds. States (and even ISPs) have enormous power. The stated intent of Bitcoin to undermine rules around government control of sovereign currencies sets an interesting challenge to governments in the case that it ever looks like it might succeed. China and North Korea have both demonstrated pretty clearly that if you control the pipes of the internet then you control the internet. Bittorrent could have been eradicated by state intervention, but most states chose a lighter touch approach. The same is mostly true so far for crypto-currencies, but the scope is so much greater and time will tell at what point a state actor will feel compelled to intervene. (For example if you invent a way for no-one to have to bother paying taxes any more… well good luck with that…)
  8. The ‘winners’ created in the wake of Bittorrent disruption (Spotify and Netflix) shed any semblance of decentralization — it simply wasn’t necessary any more, and actually made things harder. But their success was the result of a paradigm shift where files were abstracted away. In the wake of disruption brought by Bitcoin or other cryptocurrency systems, what will be abstracted away? What will be the paradigm shift? And will a decentralized architecture become irrelevant once the ‘new’ way is identified?

This is the whole series of posts on Bittorrent Lessons for Crypto:
Why BitTorrent Mattered (1 of 4)
If you’re not Breaking Rules you’re Doing it Wrong (2 of 4)
Intent, Complexity and the Governance Paradox (3 of 4)
Decentralized Disruption — Who Dares Wins? (4 of 4)

Post Script:

I’ve had some interesting discussions in the course of sharing this series — one regarded the most compelling promise of crypto being the possibility of digital money without trusted third parties; another is a range of questions about my thoughts about the recently announced BitTorrent Token (BTT). I may write a little more on these subjects in the near future…


Kind of a shame that this guy thinks ICOs are the best application of Bitcoin…

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