
Harry Potter and the Cryptocurrency of Stars - pc
http://www.kalzumeus.com/2014/08/05/harry-potter-and-the-cryptocurrency-of-stars?
======
phillmv
This compares nicely against Yudkowsky's Harry Potter fanfic, in that it's not
nearly as strident and self-satisfied and arrogant.

That said, I have an vague high level technical understanding of btc, but none
of Stellar, and I'm still left not really understanding either what Stellar
seeks to achieve, or why patio11 hates btc.

I'm actually inclined to dislike btc, and thus felt that the Defense Against
The Dark Arts Professor is not an inapt caricature. But, the TLDR I got was:
Stellar is some kind of sweet currency/asset agnostic market exchange.

Also, btc boosters mix their metaphors/have incomplete pictures of the
economy, warped by libertarianism.

So far, so good. But Stellar still seems… awfully opaque.

~~~
eridius
Bitcoin tries to do too many things. One of the things that it claims to do is
be a medium of exchange of value, i.e. a currency. But its really kind of
fails as a currency; nearly everyone actually using it to exchange value is
really just using it as a just-in-time proxy for some other currency, i.e.
businesses accepting BTC nearly always actually accept whatever the BTC
equivalent of a USD (or other fiat) price is at the given moment and instantly
convert it back into their fiat currency of choice when the transaction is
completed. This is in fact the primary service Coinbase offers (at least, for
merchants).

And of course bitcoin has some flaws that make it hard to use as a currency in
this fashion; as mentioned in the fanfic, it takes a decent amount of time
before you can be confident that the transaction has actually gone through.
Delays like that are acceptable in some transactions, but not in all.

Furthermore, this use of bitcoin as an exchange of value is also obscured by
the fact that people try and use bitcoin as an investment vehicle, try to use
the blockchain for other purposes (e.g. as a digital notary), etc.

All these reasons are why I too have been very skeptical of bitcoin. As far as
I'm concerned, most of the "value" of bitcoin is driven by people treating it
as an investment vehicle, and this leads to a lot of instability in the value.
Without a long-term stable value (or predictable trend), it's hard to actually
use it as a currency in its own right; anyone not using it as an investment
vehicle is encouraged to hold a bitcoin position for as short a time as
possible to minimize their risk.

\---

Stellar is a lot more focused. It's strictly acting as a medium of exchange,
and in fact encourages you to not even use STR as a currency but instead to
just use currency as a currency. STR will have some intrinsic value, but that
value will likely be very stable, based on some particular fiat currency (I'm
assuming USD but it doesn't really matter which one). It will largely just be
used to facilitate exchanges between other currencies, like USD and EUR.
Instead, people will trust various gateways to issue _credit_ in the currency
of their choice, and trade that credit.

Not only does this insulate all parties from any market instability (as the
value of 1 USD is always 1 USD), but the whole mining infrastructure is also
gone, replaced by a consensus algorithm, which means transactions happen
nearly instantly. On that note, bitcoin fans probably think dropping mining is
a huge mistake, but Stellar transactions are already based on trust (you have
to trust the issuer of any credit you're accepting), so extending trust to the
network itself seems reasonable; you trust that the stellar service provider
(stellard) you're connecting to has chosen a set of other peers that will not
collude, which prevents you from being defrauded.

These changes obviously mean the investment vehicle angle is gone (well, you
can invest in STR, but the price is likely to be stable long-term, stellar has
inflation too which encourages spending instead of hoarding), as is any of the
other messing about with the block chain. All that's left is the currency
angle, and Stellar's approach makes a hell of a lot more sense than bitcoin.

It remains to be seen whether Stellar will get the widespread adoption
necessary to actually succeed. But I hope it does, because it looks like it
might actually work. Perhaps someday banks will start acting as stellar
gateways, enabling nearly-instant transfer between any two people with
accounts at participating banks. Basically, Stellar seems like it could do
what Dwolla has been trying to do, except without even the 25 cent fee.

~~~
shazow
Bitcoin does precisely one thing (a big ledger), on top of which people are
trying to bootstrap many things (currency, asset exchange, smart contracts,
notary, other things).

Bitcoin is a distributed trustless ledger tracking inputs and outputs of
transactions. It stores it in a blockchain, and determines transaction values
using a script that takes some inputs and produces some outputs.

\---

As far as I can tell,

Stellar does many things (gateways, trust/debt graph, asset mapping, quality
conversion between assets, stellar currency), on top of which people are
trying to bootstrap one thing (a big exchange).

Stellar is a centralized trust-based debt graph of arbitrarily-defined assets
hopefully backed by trusted gateways. It uses consumer-defined trust and
quality (exchange rate) values per asset to other nodes which creates a debit
cap for the peer.

The roles between the technology vs ecosystem of Bitcoin vs Stellar are
inverted. Clearly Stellar's approach has some benefits (fast transactions,
regulation-compatible gateway infrastructure) at some costs
(trusted/centralized, bootstrapping risks).

This is about as good of an oversimplification as I can come up with right
now.

~~~
eridius
Reasonable simplification, though you're describing this from the point of
view of the technology. Yes, technically, bitcoin is a big ledger. But in
terms of how people _use_ it, bitcoin is a whole mess of different things that
actually conflict with each other (bitcoin as an investment vehicle vs bitcoin
as a currency have incompatible goals).

Stellar, technically, is a bunch of things; gateways, trust graph, etc. But in
terms of how people use it, it's a single thing: a mechanism for sending real-
world money over the internet. And it _is_ real-world money. It's represented
by credit, but most people are _already_ operating on credit; they keep all
their money in a bank, and the bank tells them how much credit they have, and
when they pay for something the vendor accepts their credit and redeems it
from the bank (typically by accepting credit from their own bank, rather than
physically receiving paper money).

------
gwillen
If you are familiar with Ripple, it seems like a curious omission from your
story.

If you are _not_ familiar with Ripple, you should learn about it before you
get on board with Stellar. (Stellar is a clone of Ripple, so familiarize
yourself with the controversy about Ripple in order to learn what the
controversy about Stellar is going to be in short order.)

I am a fan of both the Bitcoin and Stellar concepts; I hold a bunch of
Bitcoins as well as some Stellars. I used to hold some Ripples; I may yet buy
some more.

~~~
eridius
Why is Ripple's controversy relevant to Stellar? As I understand it (and I may
be wrong, I was not aware of Ripple until Stellar), the big issue was that the
founders of Ripple Labs allocated 20% of all XPR to themselves.

Stellar, on the other hand, is only holding 5% of STR in reserve, which is
used to fund the nonprofit, and already sold off 2% of that to Stripe (who in
turn is going to be auctioning off 50% of that). Ripple's approach looked like
a pre-mined altcoin thing, but Stellar has a significantly smaller reserve
that's very publicly being used to fund the operations of a nonprofit, rather
than being used to enrich 3 individuals.

Basically the only odd thing here is that using STR as a source of funding
means that they care about the market value of STR, whereas most uses of
Stellar don't care at all about the market value of STR but only use it as a
medium of exchange. That said, all the Stellar Foundation really wants is for
STR to remain relatively stable (which it should), whereas with Ripple's
approach there's a genuine conflict of interest as the founders would get
personally rich if they could boost the value of XRP (conflict of interest
because it's in the network's best interest for XRP to remain stable, just as
STR is expected to remain largely stable).

~~~
maaku
Ripple (and therefore Stellar, the hostile fork) is not decentralized, at all.
The underlying protocol does not work in an adversarial, decentralized
context.

~~~
mmazi
I used to be afraid that this is so since it seemed for a long time that only
one server exits. But now there are many gateways so there are many node in
the p2p network. So how is this not decentralized? And, since there is money
involved, there seems to be high incentive for adversaries. So it seems Ripple
does work in an adversarial, decentralized context. What am I missing?

I am honestly interested in this. I have trouble finding any reliable
information about the viability of the Ripple consensus mechanism.

------
JasonCEC
This is (wonderfully) reminiscent of Harry Potter and the Methods of
Rationality[1].

Both are well worth the read.

[1][http://hpmor.com/](http://hpmor.com/)

~~~
sirsar
P.S. If you don't like Chapter 1 of HPMOR, skip to Chapter 17. The writing
style is toned down a little from that point, and there's an interesting use
of magic in that chapter. If you don't like Chapter 17, give up.

(If you like either, good for you! It's a polarizing piece of fiction.)

~~~
listic
I liked it the most from the beginning, though, and would welcome the return
to that style.

------
toasted
Bitcoin (& litecoin) are the sole currencies of dark net drug trade, which is
a large, exponentially growing business. Bitcoin is working very effectively
in the wild, and all the dorky conjecture doesn't change that.

I only vaguely understand stellar (and ripple), but one thing i do know is
that for all the hype over the last few years noone ever used ripple for
anything other than speculation. Stellar is also shaping up in a similar way.

~~~
wyager
Stellar doesn't deserve the title of "cryptocurrency". It is centralized. It's
basically just a fork of Ripple; it was never used because it wasn't really an
improvement over fiat systems in any way. A small number of nodes have all the
power. If they want, they can freeze your funds or steal from you via
arbitrary inflation. Stellar is just as bad.

~~~
dobbsbob
CIS/Russian org crime groups can soon buy a bunch of Stellers with fraudulent
cards through Stripe, cash them out through p2p methods. Why bother carding
and fencing iphones and laptops when you can just buy Stellers and convert
them to bitcoins or wire transfers directly.

~~~
wmf
For this exact reason, one may predict that Stripe will _not_ allow people to
buy stellars with credit cards. Stripe may issue (revocable) USD credit over
Stellar, though.

------
rubiquity
Fantastic. I feel like I could send this to my family who are clueless about
cryptos but fans of Harry Potter. Now all we need is for someone to explain
monads by way of a conversation with Harry Potter.

~~~
TrainedMonkey
Harry: So how do monads work?

Hermione: Magic.

~~~
eridius
Stellar is like a burrito.

~~~
eridius
Apparently people here don't get monad references?

------
JoshTriplett
Interesting analogy, and certainly an effective explanation. However, the dig
at Bitcoin's distributed consensus seems out of place, given the lack of a
corresponding observation of the advantage of that consensus. Stellar
transactions do not work in the absence of a trust path; Bitcoin does. You can
use Bitcoin to complete a transation using a similar process, and in
particular several companies have created convenient currency "gateways", if
you prefer to transact in your primary currency rather than in Bitcoin.

Effectively, Stellar is federated among entities that (indirectly) trust each
other, but does not work between entities who establish no trust relationships
other than direct ones with currency exchanges.

~~~
natrius
Imagine if MtGox were a Stellar gateway. I want to pay you $10, but all I have
is 100 BTC in MtGox, and you trust neither MtGox nor Bitcoin. Our transaction
will succeed through the Stellar network as long as someone on the network
values a 100 BTC MtGox credit as much as $10, modulo any bid/ask spread
between those currencies and Stellar's native currency. You trusted no one but
your USD bank, which you presumably trust more than cryptocurrency exchanges.

If you're exchanging your own funds between currencies, you need to trust two
entities: a USD gateway and a BTC gateway. These gateways can be the same
entity; Bitstamp, for instance, is a Ripple gateway for several currencies.
There isn't any extra trust involved in Ripple/Stellar unless you want it.

~~~
tinco
The same thing would still happen though. When it turns out that the MtGox
stellar gateway can't actually make good on any of its IOU's, the MtGox!USD
and MtGox!BTC will immediately become worthless and any one who hoarded them
will feel the pain.

The biggest problem with MtGox was that an untrustworthy entity was trusted
with too many (much?) assets. We had a hunch about the amount of assets, but
no one an exact amount, that's the first thing Stellar would solve, if I
understand correctly Stellar would reveal MtGox's total outstanding assets. A
bank would always have a large outstanding total though, it's their main
value.

Perhaps Stellar would make visualising and understanding debt of banks easier
so it would also be easier for authorities to check on them. Who knows,
perhaps there's banks today with much less credit than they debit. With all
the digital transactions going on, we're trusting banks with way too much.

~~~
natrius
I wasn't suggesting that Stellar would've made MtGox unwind any differently. I
was pointing out that transmitting money doesn't require you to trust anyone
but the place that's storing your money. The $10 still gets sent (with a very
low price per MtGox!BTC). This nitpick about trust isn't why you should care
about Stellar.

Stellar makes your bank deposits transferable around the globe instantly with
low fees. It makes your plain old dollars function as cryptocurrency.

------
hempz
TLDR on behalf of patio11;

> Have I mentioned that I don’t like Bitcoin? I don’t like Bitcoin.

~~~
sp332
This article is about Stellar, not bitcoin. Edit: although I have to admit it
spends a lot of time complaining about drawbacks of bitcoin as well.

~~~
itsnotlupus
Speaking of what the article was and was not about, is it weird that it had
exactly 0 mentions of Ripple, given that Stellar is a very recent fork of
Ripple, which has itself been around for a few years?

------
djloche
For those looking for additional reading: Nemo's series on BitCoin and
Cryptography is a very balanced read. [https://self-
evident.org/?cat=12](https://self-evident.org/?cat=12)

------
the_decider
The number one currency of the drug-blackmarket/underworld isn't Bitcoin. It
is cold, hard cash. I personally believe that if people are unwilling to
bleed, cheat and steal for currency X, then currency X is worthless. Bitcoin's
role in the drug-trade is not its downside; rather, it's a mark of its value.
If dealers did not use Bitcoin, then it would be implicitly worthless.

------
Siecje
The stellar test server seems to be down, even through the tutorial.

One thing I don't understand is why do the rich people have more say than
someone with less Stellars?

[https://www.stellar.org/about/mandate/#Stellar_creation](https://www.stellar.org/about/mandate/#Stellar_creation)

------
jnbiche
One of the most gratifying things about pondering the future is that I can
easily foresee the day -- say 15-20 years down the road -- when utilities stop
accepting local currency, and patio11 is forced to pay his electricity bill in
Bitcoin.

It's a long time, but I won't mind waiting for it.

~~~
krapp
Why would someone be _forced_ to pay for a service in anything other than the
legal tender of the country they're in?

For that matter, why would any business necessarily refuse to accept it?

That said - if Bitcoin or something like it makes it less expensive for me to
take on international clients then i'm all for it. But nobody's going to just
ignore fiat like it isn't there.

~~~
tinco
You do realise that what is legal tender in a country can change right? He's
dreaming about the day the United States, or whatever country patio lives in,
changes its legal tender to be bitcoin.

(btw: More logical than changing the tender of dollars to bitcoin would be to
tie the value of the dollar to a fixed amount of bitcoin. Which would be the
same thing but without losing the word 'dollar'.)

~~~
krapp
Fair enough. But 'legal tender' still implies the force of fiat. Switching to
Bitcoin wouldn't be the same as switching to Euros, to me it would mean a
government admitting to the rest of the world that it no longer has the means
or the will to regulate its own economy.

~~~
true_religion
Some countries already do that by pegging their currency to a foreign one, or
by allowing foreign currency to be freely transacted within their nation.

------
jchrisa
Thanks for this! I'm half way through a quick read, and will have to read it
again more slowly. I like the style of using user-stories to explain crypto.
I've done something similar with a speculative web-of-trust crypto currency
design here:
[https://docs.google.com/document/d/1-0D75T4_xjMNDdMdgaeRPtNv...](https://docs.google.com/document/d/1-0D75T4_xjMNDdMdgaeRPtNvU-
ggBJ_Z-FNg0DZIA_c/edit)

~~~
jchrisa
Thanks for the downvote...

patio11 if you are reading I mostly linked to the above to get your take on
the idea that we can get even more subjective than transitive exchange rate
finding. Maybe the Wired article is shorter:
[http://www.wired.com/2014/07/document-
coin/](http://www.wired.com/2014/07/document-coin/)

~~~
patio11
Since you asked: That feels like Klout meets blockchain meets Silicon Valley
filter bubble. I'm not the world's biggest fan of any of these three things in
isolation. Combining them does not obviously make the combination more useful
than the sum of the parts.

~~~
jchrisa
Thanks for the feedback. I'm really just driven to explore the implications of
a radically simple data structure. So hopefully it's possible to build
something that's more useful than bubble.

The short term goal is just to get people to think more broadly about what
cryptocurrency can mean. Your essay does that brilliantly, thanks!

------
vomitcuddle
Sorry. Not a dorky paranoid liberal type here. Me, i don't see any use for
cryptocurrencies outside of darknet contraband trade/money laundering. Any
politician excited about cryptocurrencies would probably use them to receive
untraceable bribes. The idea that a public company (i'm talking about Mt. Gox)
can hold an asset that can magically disappear without a trace and still
receive bankruptcy protection from the government (without the ceo being
arrested for theft) is a joke.

i admit it's nice from an engineering standpoint and maybe if this imaginary
liberal (does that word even mean anything concrete anymore?) utopia some
people seem to be living in was true, it would actually be useful to people
who don't want to wait 45 minutes at the supermarket checkout for their
crypto-monopoly-money transaction to confirm.

