
The Decentralized Future - rrecuero
https://blog.ycombinator.com/the-decentralized-future-series
======
Buetol
Or it's like all the other services we have, it evolves from decentralized to
centralized: email, search, forums,...The case could be made even for
governments. The only limit was technical, now you can control the cabs in all
the cities from one place. The future is definitely more and more centralized,
just look at the money distribution.

My guess is that we're having our geeky dreams without thinking what's the
reality happening around us. It's very comfortable to be utopist when thinking
of bitcoin, instead of seeing that it's still the same winner-takes-it-all
scheme.

~~~
slovette
This is just an example of technical change aligning itself with real world
human want.

People will ALWAYS put convenience first. Even those that say they won’t, it’s
typically an isolated action (like, email is harder when not using google
apps, but it’s worth not being spied on. Walk in their house, Echos and smart
devices everywhere).

The hope for Blockchain is we can now, finally, begin building true
decentralized things without sacrificing this innate human want for
convenience. It’s technology advancing towards multiple mutual goals (a
technical one and a human one).

~~~
Rhapso
Lightning networks to handle scaling limitations are the first step on the
slow re-centralization of bitcoin. Eventually an overwhelming majority mining
will be controlled by a centralized/federated oligopoly.

Be prepared to rebel and re-re-decentralize in 20 years.

~~~
fartnuggs
Personally I'm much more bullish on Bitcoin Cash. It's following the same path
that got us to this point today, and they're not opposed to Layer 2. But they
have a clear understanding that a currency is only as good as it's utility. If
they can maintain that balance of decentralization, utility, and security,
while picking up the pieces that Bitcoin Core dropped it's likely we'll see a
flippening in the coming year.

~~~
andirk
But isn't Lightning and segwit supposed to make btc faster and cheaper?

------
skywhopper
I don’t see any actual practical use cases described here that make mainstream
adoption of blockchain tech make any sense. Or any concrete arguments about
how it improves current systems. And the weaknesses of blockchain are glossed
over or ignored. And “it’s never been hacked” is the frankly pretty toothless
argument in favor of its security. Basically this is a weak article for Y
Combinator to be publishing. If this is the best they can come up with, then
blockchain has worse prospects than I thought.

~~~
EGreg
Blockchains boil down to one thing:

Where before you had to trust one server, now you can have many. Multiple
writers, multiple readers. That's all.

They are a drop-in replacement for having to trust admins.

On the other hand, backups and replicas could prevent other things, such as:
[https://www.youtube.com/watch?v=E1d5VvCa8Fo](https://www.youtube.com/watch?v=E1d5VvCa8Fo)

~~~
mrep
> Where before you had to trust one server, now you can have many. Multiple
> writers, multiple readers. That's all.

Those multiple writers, multiple readers are not free. They waste billions in
server/electricity costs over traditional architecture designs. The most
prominent blockchain bitcoin costs 2.5 billion dollars a year [0] to process a
miniscule fraction of what Visa can handle.

[0]: [https://digiconomist.net/bitcoin-energy-
consumption](https://digiconomist.net/bitcoin-energy-consumption)

~~~
hobofan
YES, we know! If there truly isn't an alternative to PoW, yes then we are
pretty much fucked. Quite a few more efficient alternatives are currently
being tested (and I guess a lot more are to come), and it looks very
promising.

~~~
tim333
Of the top 8 coins on coinmarketcap I think four don't use proof of work -
ripple, cardano, stellar and neo. So there seem to be alternatives.

------
a_d
PG/YC started a revolution: They suggested a way through which programmers
came into money.

Now, with Bitcoin and Cryptocurrencies: Programmers are creating money itself.

This article makes a bull-case very articulately, with sprinklings of realism.
I am looking forward to this series. Being a blockchain cynic is the norm
these days, and I appreciate when someone takes the trouble to lay down a
well-reasoned and well-researched argument - great job rrecuero.

Clearly, there is irrational optimism/scams abound, but we can often forget
that the mass-irrationality can be decoupled with the 'actual' promise of the
idea. And the fundamental promise of the idea (Bitcoin, Cryptocurrencies,
Blockchain etc) is for us to rethink 'how things work the way they work and
why' and attempt to improve it. The Bitcoin paper should atleast get us to
think about what _is_ money. It matters less whether these "blockchain things"
ultimately succeed or fail -- the fact that something NEW is being attempted,
has to be applauded (Ofcourse, it would be great to figure out a way to do
this without harming people using their credit cards to buy shit coins).

I love reading about blockchain ideas/projects. Like many, I too am jaded by
the scams - but I think it is worth maintaining some optimism through this.

This article doesn't even touch upon some very important use-cases like:
moving money across borders and money being seizure resistant etc. I think
there is was, and has always been a market for a product that allows us to
store value in a way that is cross-border, govt resistant and anonymous
(whether it is a $500B market or $5B market is less interesting than
appreciating that a product was invented to fulfil this use case). There are
plenty of interesting use-cases to explore here.

In the section on Tokens, the article says: "contributors can transfer their
assets instantly and easily to other people (pending regulation)" while
referring to securities. IF this becomes a reality, it would be huge.

I see a lot of upside if even a fraction of the promise of this tech is
realized.

~~~
rrecuero
Thank you for your kind words. My goal was exactly that; to show that there is
something beyond the irrational optimism, extreme cynicism, scams and bubble
talks that dominate conversations.

As you mentioned, asset tokenization (securitization) is one of the biggest
markets. If companies like Harbor achieve their vision, it would be huge.

~~~
a_d
Harbor is promising. Their paper and code is still light on the details, but I
am rooting for them. There are some open questions around compliant secondary
trading, real world enforcement etc - but very promising direction. Do you
know other projects that are attempting real asset security tokens?

~~~
rrecuero
There are others like Polymath but Harbor is the most promising right now imo

------
te_chris
I’ve reacently read the Burnskie book about crypto assets in the hope that I
might come away more enlightened about the market and how to assess it. The
opposite was the case. After reading the book and looking into it more, it’s
very hard to see these things as assets at the moment, or to see much utility
in the technology. Don’t get me wrong, there certainly is some and it is
certainly ‘cool’, but right now blockhain feels like a solution looking for a
problem.

~~~
rokhayakebe
Money transfer is still very difficult. As in right now, short of paypal, I
cannot send you money easily without leaving my chair in under 1 minute
regardless of where you are in the world. Send me your bitcoin address and the
problem is solved.

The biggest problems with Bitcoin (specifically) are: 1) it is not necessarily
a store of value and 2) it fluctuates too much.

If someone can solve these two problems then we will have an extremely
powerful cryptocurrency.

~~~
JumpCrisscross
> _As in right now, short of paypal, I cannot send you money easily without
> leaving my chair in under 1 minute regardless of where you are in the world_

Venmo. Zelle. During banking hours: e-mail my banker, wire transferred within
minutes.

~~~
detaro
> _Venmo. Zelle._

If you accept the limitation that the receiver can be anywhere in the world,
but must be from the US or have an US bank account...

------
erikb
The nature of single things is decentralized. Therefore every new era starts
with decentralization. The internet started off quite decentralized, for
instance.

But do we really have a new era here? I'm not sure if with 32 years of age I'm
already too old to recognize the New and grog it. I don't feel it. I feel
there's a lot of buzz around blockchain, sure. But it looks like it would be
all. Bitcoin is just as centralized as banks are, for instance.

And here is where the other stuff starts. When single things start systems
these systems tend to be quite centralized. That is the natural order of
systems. E.g., people could manage their own bitcoins on their laptop, but
they choose to have an Exchange take that effort of their hands.

Seeing centralization take a foothold and not seeing anything real besides
buzz, I'd argue the bet is still against.

On the other hand I'm seeing Amazong completely automating logistics in more
and more areas of life. Shouldn't that be something to look into?

~~~
darawk
> Bitcoin is just as centralized as banks are, for instance.

That's a rather odd statement. Can you justify that?

~~~
hoosieree
[https://www.bloomberg.com/news/articles/2017-12-08/the-
bitco...](https://www.bloomberg.com/news/articles/2017-12-08/the-bitcoin-
whales-1-000-people-who-own-40-percent-of-the-market)

A handful of actors with a controlling stake isn't exactly the same thing as
"centralized" but it's close.

~~~
lambdadmitry
It's also inherently "centralised throughout liquidity". Because it's both
deflationary and risky, the amount of liquidity available at any given moment
is small, so a willing actor with some money at hand can affect the market
disproportionately. Look at the way Tether manipulated the price.

------
staunch
The phenomenon of decentralization won't slow until the wildly inefficient
businesses of Washington, Hollywood, New York, and Silicon Valley have been
broken into thousands of pieces.

Bitcoin and the rest are coming for New York/Silicon Valley money managers,
which only exist for gatekeeping and rent seeking. The finance industry will
be eliminated by new exchanges and equity crowdfunding.

------
Felz
I feel like proof of work blockchains don't actually solve the problem of "who
to trust". Nodes just automatically assign trust to whoever mined the best
hash that they know of, which turns out to be whoever holds the most mining
power.

But not even that: If you're in China and the original blockchain is censored
and all your node will ever see is the StateChain, you have misplaced your
trust.

~~~
phlip9
In a proof-of-work chain, the fundamental trust assumption is that no
malicious mining collusion holds more than 50% of the hash power. If you can
make this assumption, your security holds as long as you manage to obtain the
most recent block with some frequency (usually at least every 6 blocks ~ 1
hour). Of course, if someone manages to MITM attack you, they can mine blocks
and feed them to you in order to double spend on you, for example. One way to
accomplish this would be to engineer an Eclipse attack [1].

However, as long as you have any source for the most recent block that the
MITM does not control, they cannot trick you into following a shorter chain.
In other words, as long as any side-channel (malicious or otherwise) posts
blocks, you can always follow the longest chain. The Blockstream Satellite [2]
was created for this reason -- so that nodes always have a reliable side-
channel separate from the bitcoin protocol to verify blocks coming from the
bitcoin network. Alternatively, some nodes check Tor mirrors, which should be
difficult for adversaries to control.

[1]
[https://eprint.iacr.org/2015/263.pdf](https://eprint.iacr.org/2015/263.pdf)
[2] [https://blockstream.com/satellite/](https://blockstream.com/satellite/)

------
marknadal
> However, right now you need to install browser extensions like Metamask to
> interact with websites that enable “crypto functionality”. They are still
> really clunky and the average user does not know they even exist.

This is not true, you can already build (and people are) dApps that run in the
browser (no extension) using the latest native Web Crypto API that we've made
easy to use:

[https://hackernoon.com/so-you-want-to-build-a-p2p-twitter-
wi...](https://hackernoon.com/so-you-want-to-build-a-p2p-twitter-
with-e2e-encryption-f90505b2ff8)

Dominic Tarr and the Beaker Browser guys with SSB also have even webasembly-
ified libsodium which is highly rated ( #4 ranked on GitHub
[https://github.com/topics/cryptography](https://github.com/topics/cryptography)
).

It is just that a lot of investors are caught up in hyped-up vaporware scams,
rather than real technology that already exists and works and is available for
developers to use today.

~~~
glitch003
By "crypto functionality" the author means talking to a blockchain, not doing
cryptographic operations. Metamask, the example given, is a browser extension
that provides access to the Ethereum blockchain by injecting a JS object into
the web page. It provides a wallet and transaction signing and broadcasting.
Web crypto API's are quite different.

~~~
marknadal
Both are possible, if you read through more.

------
jedberg
> traditional banking that takes days and charges high fees

Only in the USA. And that is hopefully changing in the next month or two with
the upgrade in the ACH system.

~~~
tim333
I just checked transferwise for £1000 to about us$1400. The cost compared with
google's estimate of the interbank rate was $6 and they said it would take one
day. I've also recently done £ to Thai baht and most currencies are there.
It's quite quick and cheap such that it would be hard for crypto transfers to
compete for most stuff.

~~~
zodiac
> It's quite quick

Really? I use it often and it always takes a few days end-to-end

------
EGreg
Wow. This blog post literally parallels what my colleagues and I have been
writing and working on for the past 6 months at Intercoin.

I mean, look at the video right here:
[https://intercoin.org/](https://intercoin.org/)

It even uses the same terms, such as "Power to the People".
[https://qbix.com/blog/index.php/2017/12/power-to-the-
people/](https://qbix.com/blog/index.php/2017/12/power-to-the-people/)

I am glad that these challenges in crypto are finally being recognized and
publicly written about at YC. Perhaps we should apply!

------
tardygrad
> Chris Burniske and Jack Tatar suggest that crypto assets have low/negative
> correlation with traditional asset classes

The DJIA and Bitcoin charts seem well correlated, at least over the past
month: DJIA:
[https://www.marketwatch.com/investing/index/djia](https://www.marketwatch.com/investing/index/djia)
Bitcoin:[https://bitcoincharts.com/charts/bitstampUSD#rg30ztgCzm1g10z...](https://bitcoincharts.com/charts/bitstampUSD#rg30ztgCzm1g10zm2g25zvzcv)

In my opinion people treat it as they would any speculative asset.

~~~
freejulian
Huh? You can’t cherry pick your data and claim something is “well correlated”.
Well researched data shows bitcoin has no correlation to any exising asset
class which is why it’s a great risk reducer to add to a portfolio.

~~~
acjohnson55
Your retort would be more convincing if you linked to some sources.

~~~
freejulian
[https://www.signalplot.com/what-is-bitcoins-correlation-
with...](https://www.signalplot.com/what-is-bitcoins-correlation-with-other-
financial-assets/)

------
grizzles
It's not a new asset class. Most cryptocurrencies are junk bonds. Those have
been around for ages.

If the coiners (what do you call this tribe?) accomplish "Permissionless
Innovation" though, they will have did something great.

~~~
tim333
It's sort of an new asset class - there wasn't anyone transferring crypto in
Shakespeare's day. They don't have an iffy promise to pay you money like junk
bonds. In traditional terms they are a bit more like assets that can cost
something to mine. Whether they end up valued like gold or like sea water we
shall see.

------
rrecuero
Happy to answer any follow-up questions here

~~~
ilaksh
It's not quite a complete discussion without mentioning the transaction
rate/scaling limitations and also Ethereum's sharding approach to this.

~~~
elmar
sharding is in the same boat as proof-of-stake, nobody knows if a system can
be built that preserves the level of security of current monolithic and proof-
of-work systems, it is being studied on an academic an implementation level by
several teams including Cardano, ethereum and ethereum classic.

On the scalability issue if you sacrifice the decentralization is
theoretically possible for Bitcoin to process on-chain, Visa level of
transactions and with current energy consumption levels or even less.

You would probably get 3 to 6 physical data center locations probably on the
same continent connected with high-speed links with 1 Terabyte 10min blocks.

~~~
rrdharan
Proof of steak sounds delicious and would be enough to tempt me off the
sidelines into investing.

~~~
elmar
>Proof of steak sounds delicious and would be enough to tempt me off the
sidelines into investing.

LOL Proof of steak
[https://youtu.be/U3OEk2dNYcU?t=44](https://youtu.be/U3OEk2dNYcU?t=44)

------
jokoon
Blockchain is a real innovation, sure, but I don't think it will bring
evolution to how money is used. There are many other uses.

Not surprising that an investor is seeing it as the future. Investing is
regulated and libertarians often see bitcoin as a good thing.

The reality is that bitcoin is volatile, and nobody wants an economy that is
built on instability.

------
pavlov
_> I think the same is true with Bitcoin: traditional banking that takes days
and charges high fees can be easily implemented on Bitcoin, but the opposite
is not true._

"Easily" here seems like major exaggeration. If that were true, projects like
Lightning wouldn't exist.

~~~
rrecuero
This was true at different moments in time. Now, as you mentioned you would
need to use lightning. You could do it with LTC right now

~~~
xkarga00
Once LN is established, I expect that this is going to be opaque for an end
user. Example: Today, you don't need to specify [http://](http://) in order to
use it in a browser.

------
get
"nobody can destroy or seize your coins"

"keeping your investment safe is not simple"

Hmm...

~~~
tim333
Compare with the Business Insider headline

"People are making a fortune buying government-seized bitcoins"
[http://www.businessinsider.com/bitcoin-price-government-
auct...](http://www.businessinsider.com/bitcoin-price-government-auction-
winners-2017-5)

~~~
rrecuero
A government or entity can only seize your coins if they have or find the
private keys

------
intended
As others have commented, this sounds like _more_ power to central
authorities, with higher levels of fidelity than ever before.

The first and second point are inherently at odds with each other.

The first point concludes that we need simpler gatekeepers/service providers
to make it easier for normal people to use the Asset class

The second point concludes that bitcoin makes it easier to be decentralized.

But I think these sections are the light weight part of the article. I think
the other points raised are more material and impactful.

------
iMuzz
Source 5 is a broken link. It should be:

[https://www.barrons.com/articles/the-bitcoin-consensus-
yes-i...](https://www.barrons.com/articles/the-bitcoin-consensus-yes-its-a-
bubble-buy-it-anyway-1511909599)

~~~
rrecuero
Thanks. Fixed

------
skybrian
re: "The question is not whether [databases] are going to be hacked or not,
the question is when. These are natural honeypots for hackers."

This is not a good argument for cryptocurrency.

Just like a regular wallet attracts pickpockets, a Bitcoin wallet is a natural
honeypot for hackers.

Just like a bank attracts bank robbers, a crypto exchange is a natural
honeypot for hackers.

Really, the issue here is money. Money attracts thieves. The money is the
honey, and the computer is the pot.

So far there's no evidence that cryptocurrency reduces theft, and quite a lot
of evidence that it encourages theft.

~~~
freech
The difference here is that if I fail to secure my wallet only I loose my
money, but if the bank fails to secure their database, all its customers loose
their money.

~~~
skybrian
Do you know an example of a bank that lost its customers' money due to being
hacked?

On the other hand, plenty of crypto exchanges have been hacked.

~~~
rrecuero
A centralized crypto exchange is as centralized as a bank. Both have the same
security risks. What cannot get hacked in the same way are decentralized
exchanges like RadarRelay

~~~
skybrian
I guess, but looking at RadarRelay, apparently you can't trade anything except
Ethereum-based tokens, so that's barely an exchange.

~~~
CryptoPunk
92 of the top 100 tokens and something like 40 of the top 100 crypto assets
(tokens and coins), by market capitalization, are Ethereum-based tokens, so
that is a substantial potential market.

~~~
skybrian
That's okay as far as it goes but it's very limiting. Everything that really
matters in life and nearly all possible investments are not on any blockchain.
Even for crypto coins, the most important trades are for things not on a
blockchain.

------
zapita
> _When Satoshi Nakamoto released the Bitcoin Whitepaper he defined it as a
> peer to peer electronic cash system._

How do we know Satoshi is a _he_?

~~~
nokcha
Of course we don't know for sure whether Satoshi is really a man, a woman, or
a group of people. But for ease of conversation, people use the gender and
number of the pseudonym (masculine, singular).

~~~
zapita
That is an embarrassingly obvious answer, thank you. Someone had told me
Satoshi was a made-up name without a clear gender, and I had never bothered to
check that fact.

