
Crypto Tokens: A Breakthrough in Open Network Design - muneeb
https://medium.com/@cdixon/crypto-tokens-a-breakthrough-in-open-network-design-e600975be2ef
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gz5
Large networks "create" value and cryto tokens are an excellent way to
overcome some of the key barriers of network building, and potentially to
allocate value to members (users, developers, infrastructure providers) in a
better way than traditional centralized networks. Very exciting from all those
perspectives; not to mention the innovation that will be unshackled by
lowering the cost of entry.

That said, I am trying to understand if there is enough value to go around
when the network is smaller than (n) nodes? What if the application is not one
that will benefit greatly from network effect, doesn't have need for the
security/auth model and doesn't need massive compute/resources? What if it
will never grow beyond a certain number of nodes (for whatever reason)? Note:
those are NOT my opinions expressed in question form...they are pure questions
that I want to brainstorm and hope that the responses are along the lines of
"here's how those types of apps can benefit".

Also, at mass adoption levels (while understanding we are nowhere near that,
but for the sake of the thought experiment), do we end up with millions of
micro-networks, rather than the relatively small number of networks we have
today? If so, does the crypto token model still hold up? My gut is it would
for the infrastructure providers because they can support (n) networks. I am
not sure about the rest of the ecosystem or what constructs need to be
built/added if that model is to thrive?

~~~
dangero
You raise a very valid point. If you break down a public blockchain by
resources used you find those transacting on the network are getting a
phenominal deal on storage and compute resources. In the case of bitcoin your
data is being backed up and verified on thousands of machines forever for just
a few cents. The economics of this are not sustainable which can be verified
by a simple comparison to any other storage cost such as s3 or even just the
raw spinning disk cost.

We at present are seeing the Bitcoin network saturate and the average cost per
transaction has climbed as it should continue to if it is moving towards
optimal economics. Ethereum's scaling problem is even more conplex than
Bitcoin's considering the state information held in the chain and scripting
capabilities.

There are a few approaches being built to handle these issues. One is payment
channels like lightning where the public chain is only used for settlement.
Another is private blockchains like consortiums which would allow limited
access and abuse of the ledger. Yet another factor is sidechains that could
create a way to keep information off of the main public chain.

~~~
Jabanga
If you break down the necessary costs (storage, bandwidth, CPU cycles for
verification), it's actually very low, at about $0.001 (a tenth of a cent) a
transaction:

[https://bitcointalk.org/index.php?topic=3332.0](https://bitcointalk.org/index.php?topic=3332.0)

The only reason Bitcoin transactions cost so much is artificial scarcity of
block space, which increases the proof of work generated per transaction. The
absence of a static limit in Ethereum is one of its major advantages over
Bitcoin.

~~~
Taek
That kind of napkin math is both dangerous and misleading. The block size
limit is a security parameter, and the math above assumed that nobody was
trying to attack the network. In attack situations, a larger block size is
more expensive and more dangerous.

Also, the resource requirements for running a node are a lot higher than most
people are willing to tolerate even at 1mb blocks. Huge portions of the
incentives, security, and decentralization of the network depend on people
running full validating nodes. A big misconception in cryptocurrency is that
miners can set the rules of the network. That's only true if you aren't
running a full node.

The dynamic block size in ethereum is an easy attack vector that can be
exploited by a large miner. The miner simply increases the blocksize as much
as possible, and fills blocks with autogenerated transactions to make
verification more expensive for small nodes. Once you get it high enough, your
competition will start dropping off the network. If home users stop running
full nodes too, now it's a lot easier to change the rules of the network -
instead of convincing everyone, you only need to convince everyone willing to
pay for a full node. And if that's tens of thousands per month, it's not going
to be many people.

~~~
Jabanga
>That kind of napkin math is both dangerous and misleading. The block size
limit is a security parameter, and the math above assumed that nobody was
trying to attack the network. In attack situations, a larger block size is
more expensive and more dangerous.

The costs under an attack scenario were not what the parent comment was making
a claim about. The defence costs per transaction actually decrease with each
marginal increase in the number of transactions, because the number of parties
worldwide with the resources capable of attacking a blockchain diminishes as
the cost of a successful attack increases.

>Also, the resource requirements for running a node are a lot higher than most
people are willing to tolerate even at 1mb blocks.

Again, not relevant to the issue at hand, which is the cost of the computing
resources used per transaction in a distributed network.

>The dynamic block size in ethereum is an easy attack vector that can be
exploited by a large miner.

Ridiculous scaremongering.

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andy_ppp
I think even if Etherium/Crypto Tokens or likewise are the best idea since the
typewriter, humans have a staggering way of choosing the worst solutions to
problems.

I have a bet on for £1000 with a futurist friend that he say with 10 years
half of humanity will have made a transaction on a blockchain and I say not.

My only regret at this stage is that I didn't make the bet in Bitcoin...

~~~
naasking
How would you even measure that to tell who won the bet?

These tokens might have great potential in third world countries where
confidence in central government and justice is low, so your friend has a
chance.

~~~
fastball
I mean, it can't be _too_ difficult to roughly guesstimate the number of
individuals using blockchain tech, and if that is greater than half the
population your bet is sorted.

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fragsworth
The only thing that makes blockchains better than privately owned databases is
that you don't have to trust a private party. They are otherwise hugely
inefficient. For the life of me, the only "application" I can think of that
they are clearly better at is if you use them to replace the investment and
trading of precious metals.

That's a huge thing, but in the long run, I think that will be the only thing.

~~~
SomeStupidPoint
The top dozen or so players (I think it was 13, last I checked) own over 75%
of the hashrate.

There are 6 large banks in the US, with at least another 2 dozen managing
upwards of $100 billion in assets.

No one has really explained to me why I'm better off trusting a cartel of
unregulated miners to a cartel of regulated banks, especially when there's
several dozen banks who have assets equal to the total value of
cryptocurrencies just in the US.

~~~
solotronics
You don't have to trust the miners if they don't follow the rules their blocks
are automatically discarded. The interesting thing with Bitcoin is you don't
have to trust anyone else. It's also a push model vs the pull model of
traditional banking.

~~~
SomeStupidPoint
You have to trust those miners in aggregate -- they have the power to change
the rules, effectively, since the vast majority of network users will follow
the majority of hashing power.

Similarly, if any one bank doesn't follow the rules, they get kicked out of
the financial network, to similar effect. You don't have to trust _a_ bank,
you trust the banking (and legal) system.

~~~
um_ya
If these malicious miners you speak of "change the rules", it creates a fork
in the blockchain. Even if they have a majority hash rate, if the economy does
not support their decision, the market value of that forked chain will be low
while the unchanged fork will keep the market. A group of malicious miners can
do very little to destroy bitcoin.

~~~
SomeStupidPoint
In what way does the same logic not apply to banks?

~~~
bluesteel44
Banks can position themselves to benefit from a depreciation of any given
currency, miners are tied to the success of the one they've chosen.

~~~
SomeStupidPoint
Can a miner not distribute their effort and holdings?

~~~
Obi_Juan_Kenobi
Miner hardware is tied to the specific proof-of-work algorithm used in the
cryptocurrency they mine. They make extensive capital investments that are, at
least in the case of Bitcoin, useless for any other purpose.

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kem
Blockchain-based contracts seem like a useful thing in the abstract, but I've
always had two questions that no one has really been able to satisfactorily
answer. These might have been answered, though, because it's been awhile since
I looked into it:

1\. What about blockchain length? The article kind of alludes to this, but
there seems to be this "we'll deal with that problem later" idea, even though
it seems critical. The answer I always got that chains would fork or be stored
distributively but then that suggested the primary use would be in small
networks, or that there would be critical problems to solve sooner rather than
later.

2\. Isn't a guaranteed decrease in monetary supply a problem? I was kind of
under the impression that ideally a currency experiences a small amount of
increase monetary supply, to avoid things becoming prohibitively expensive.
The process of generating coin seems kind of backward to me in many ways,
although I'm not an expert in the area.

~~~
QML
1\. Not sure what your question with. I'm assuming you're thinking the
blockchain length could get long enough that it's hard to store or verify
completely? The size of Bitcoin's blockchain is currently around 115 GBs.
Unless you're a miner or working with a sensitive transaction, you don't need
the whole blockchain to operate. If I remember correctly, you could just 'ask'
several reliable parties of whether or not your partial copy of the ledger is
legitimate [1].

2\. No, as the cost of the token or cryptocurrency goes up, the nominal price
of service goes down. For example, Siacoin is currently around $0.015; let's
assume it costs a dollar a month to store 1 TB. You would pay around 67
siacoin. However, as the value of siacoin goes up to $.02, you would only need
to pay 50 siacoins instead (assuming the cost of storage is constant).

[1] [https://www.stellar.org/stories/adventures-in-galactic-
conse...](https://www.stellar.org/stories/adventures-in-galactic-consensus-
chapter-1/)

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throwaway5645
Can someone please explain this to me like I'm 5? I get what tokens are but I
still don't understand it.

Traditionally say I have a php/mysql site, that's on a server, say Digital
Ocean and files are uploaded to Amazon storage.

How does that translate to Etheruem? What about private messages? If
everything is public on the block chain, isn't that an issue? Does Etheruem
run code?

Can anyone point me to some reading on this? And how to create a
'decentralized' social network?

This is the future and I'd like to get a handle on it, thanks!

~~~
tudorconstantin
I write this from my phone, so I can't find the links to docs in an easy
manner. I'll try to explain this as easy as possible: blockchains are
distributed ledgers that can store information that can't be altered. They're
mostly used now to store transactions info, but they can store anything. In a
distributed app the blockchain would be the db. In order to store info on the
blockchain one has to pay a transaction fee to the network. This transaction
fee goes to the miners that validate the transaction. The ethereum network
(and some others) can execute smart contracts: each node is able to execute
such a contract. On the ethereum network, smart contracts are written in a
language called solidity, which is similar to js. Having a smart contract
executed also require a small amount to be paid. Smart contracts can interact
with the blockchain: store and retrieve info from it, so the smart contract
would be your PHP equivalent. The front end part is done on ethereum using
their own, open source client, called mist. Mist is basically an electron app
which can interact with an ethereum node. In order to use a distributed app,
one has to use a smart contract, which resides at an address in the
blockchain, using mist.

Of course, having all the dbs of all the apps replicated in every node is not
really optimal and that will be solved using sidechains.

~~~
johnnydoebk
The part about the private messages and huge media files is not clear. If I
want to share some message with my friends only should I encrypt the message
using their public keys and publish the result on blockchain? Would those be
$number_of_friends messages or is there a way to publish it just once? How
expensive that would be? Should I use IPFS for media files? Has anybody ever
implemented these parts in practice?

How can I convince people to use my Facebook killer app instead of Facebook if
they have to pay for every action (update profile, send message, post
something, etc.), the price is not clear in advance (who knows how much "gas"
every action would cost), and the process of publishing is not instant (IIRC
Facebook has 2 billions of active users, can Ethereum handle that scale? It's
supposed to be used by thousands of different projects, right?).

What's sidechain? Is it something I have to develop myself (i.e. something
Ethereum does not provide out of the box)? If that's the case why do I need
Ethereum at all?

~~~
bpeters
Ethereum is building out a p2p messaging system called Whisper:
[https://github.com/ethereum/wiki/wiki/Whisper](https://github.com/ethereum/wiki/wiki/Whisper)

This doesn't use the ether gas as payment, but a PoW to encrypt the message
locally then sent.

Ethereum's data store will come from Swarm:
[https://github.com/ethersphere/swarm](https://github.com/ethersphere/swarm)

With these two additional pieces it is trivial to build and conduct a social
network on ethereum's blockchain.

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jwildeboer
Whenever it says "breakthrough" I get very, very cautious. Hype? Or really
innovative? I'll stick to hype for the moment.

~~~
Obi_Juan_Kenobi
Ethereum is definitely in a strong hype-cycle right now. It _is_ an
interesting crypto, but much remains to be seen about how it will actually be
used. I'd take a look at e.g. Augur to see the direction it might take, but
realize that the applications it promises aren't yet in wide use.

------
rrggrr
Etherium has serious potential as a distributed network, and as a networked
means of greatly enhancing transaction and contract efficiency. I think we are
seeing just the tip of the tip of its iceberg.

Bitcoin concerns me. If/when BTC is makes its appearance in the every day
lives of ordinary people, its anonymity value will have eroded significantly.
Traditional currencies have not yet started to compete with BTC, but they can
and they will if necessary. Try getting a mortgage, car loan, business loan
with BTC as collateral as one example of where my concerns rest. Look at the
grossly inverted price of BTC and gold prices (artificially assuming 1BTC =
1Oz).

Before BTC there was growing dissatisfaction with money center currencies that
persists today. BTC 'took the edge off' for many in those circles and may have
relieved pressure on gold prices.

I don't necessarily believe this, but I've read in economic revisionist
circles that BTC would be means for certain central banks to redirect some
demand and attention for precious metals away from their vaults and toward an
asset class they, better than anyone, are capable of mining with their
existing computing infrastructure. So, by invention or acquiescence, BTC
serves money center interests, for now, but not indefinitely.

BTC remains a highly speculative and risky asset/network in my mind.

~~~
um_ya
Ethereum's biggest failure is its name. It sounds like a kid came up with it
for a syfy video game. How can an investor or new user take it seriously?
"Send me some Ethereum honey, I'm going to the grocery store". Nope.

~~~
wonderwonder
Ethereum is the network and technology, the actual currency is called Ether.

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isubkhankulov
lets assume for the sake of argument some of these platforms aren't
scams/bullshit hype and actually add value in some way. like the prediction
platforms augur or gnosis.

the main problem, i then see is that if these tokens are required to use the
platform, wouldnt their cost be prohibitive? and the platform wont be useful?

these tokens are going up in value just like bitcoin which always had actual
use (mostly on blackmarket) so their incentives are aligned with the token
being used as a currency, but not as an app token that is required for the
product.

so in effect, these are just over hyped quasi securities offerings and
trading.

~~~
joosters
Even Augur and Gnosis are overhyped IMO, their proponents don't seem to
realise that these prediction markets already exist outside of the US. Their
only differentiator is that they sidestep existing regulations.

~~~
bluesteel44
Eh, it's like saying bitcoin has no value because electronic payment systems
exist. And while I understand some would indeed argue that's​ the case, to me
_trustless_ prediction markets have great value, enabling eg autonomous AI
enterprises, self settling smart contracts linked to the "off chain" world.

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soup10
I think that token networks in general have potential. While its impressive
that cryptotokens have proven to be a store of value, as they exist now don't
offer any significant advantages to cash, except for black market
transactions.

What i'm interested in is the ability of token networks to be useful for
legitimate transactions between entities. I think in particular there's
potential for token networks to increase the trust and liquidity of virtual
goods. Right now cryptocoins are basically only useful for traditional
transactions that cash is already very efficient at. What I want to see more
of is using the logging and trust ideas of token network to develop
transactions between virtual goods, that normally exist in siloed ecosystems.

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KirinDave
There is a lot of talking and linking here that doesn't lead to technical
resources.

Does anyone have a more formal explanation of how blockchain is being used
here?

