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Coinbase Co-founder: Ethereum Is the Forefront of Digital Currency (medium.com)
340 points by sethbannon on May 24, 2016 | hide | past | web | favorite | 195 comments



I agree with mostly everything he said, to be honest. I've stuck with Bitcoin now for the last 3+ years and interestingly, that was only -because- Bitcoin made it so hard to do anything useful. I would need to learn how all kinds of niche areas of cryptography worked and the fun of hopelessly trying to outsmart Bitcoin's god-awful restrictions is what kept things fresh to me.

Sure, it did teach me a lot of obscure things about crypto + game theory, and some of those things actually turned out to be quite useful. But I also can't deny how much longer it takes to do the most basic things in Bitcoin and I think that now we're progressing towards using blockchains to solve problems outside of Bitcoin -- Ethereum seems more up to the task than Bitcoin.

That's not to put Bitcoin down though. There has definitely been some tremendous innovations there recently: segregated witnesses and sidechains are pretty cool. But I've also seen the community change significantly since I first got involved and I'd argue most of those changes have been bad. For example: /r/Bitcoin seems to have become a toxic echo chamber for irrational hatred against former high contributing core members and almost any kind of counter-views are censored which is honestly quite disturbing. Most of Bitcoin's current media is also controlled by only a handful of individuals so its very easy to manipulate the crowd into "consensus" but I won't even go there.

I'll personally always love Bitcoin but I can't see that these problems can be fixed at this point. The Bitcoin project was largely hijacked as far as I can tell and since the crowd has been won there's no going back now.


> /r/Bitcoin seems to have become a toxic echo chamber for irrational hatred against former high contributing core members and almost any kind of counter-views are censored which is honestly quite disturbing.

You should go to /r/btc instead. It has a much better culture, and no censorship.


Have you been to /r/btc recently? It's mostly a bash-the-other-subreddit thing now.


many subs are irrational towards objects of any sort. I'm quite proud of my shadowban on /r/physics for poking on obvious wrong assumptions :)


What stops the Ethereum community from disintegrating for the same reasons after the promised rapture is not forthcoming?


Mainly because it has a benevolent dictator, which creates very different dynamics (for good or ill)


Blockstream / Greg Maxwell is Bitcoin's dictator. If you ask whether I'd rather follow Vitalik Buterin or Greg Maxwell, the choice is Vitalik all the way.


They only have enough power though to enforce default behavior (i.e. "do nothing") whereas vitalik probably has enough power to enforce active behavior.


Ah, decentralisation! :)


> /r/Bitcoin seems to have become a toxic echo chamber for irrational hatred against former high contributing core members and almost any kind of counter-views are censored which is honestly quite disturbing.

This is the main reason why I can't ever take bitcoin seriously - their community just seems to have so much unconstructive hatred towards anyone who ever says anything negative about bitcoin.


> their community just seems to have so much unconstructive hatred towards anyone who ever says anything negative about bitcoin

As the parent stated, they have intense hatred for anyone with a different opinion, even the very people who developed bitcoin.

A dysfunctional community indeed, and this extends to the leadership. This is my main reason for having divested a lot of money out of bitcoin. I still believe it will succeed in becoming an important part of the international payments infrastructure, but it will be in spite of its own community and it will likely take a lot longer because of it.

I do believe that for cryptocurrencies, it is bitcoin or bust, though. If bitcoin burns you won't be able to sell the world on another one. Also, I don't believe that the thing other cryptocurrencies are 'fixing' are improvements, but rather detriments. Bitcoin is attractive because of the fixed supply and the decentralized structure, Satoshi brilliantly got those right, even though they are at the same time some of the hurdles to its success.


> they have intense hatred for anyone with a different opinion, even the very people who developed bitcoin.

Hal Finney, the very first recipient of a Bitcoin transaction claimed, quote:

"Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient." [1]

And Satoshi Nakamoto stated:

"Piling every proof-of-work quorum system in the world into one dataset doesn't scale." [...] "Bitcoin users might get increasingly tyrannical about limiting the size of the chain so it's easy for lots of users and small devices." [2]

Did you have anyone else in mind? Perhaps Mike Hearn and Gavin Andresen? It's a matter of historical record that these two believe gigablocks will assuredly cause Bitcoin P2P nodes to become confined to datacenters. Their gigablocker quotes follow:

Gavin Andresen: "there will be big companies spending lots of engineering dollars on their own highly optimized versions of bitcoin. I bet there will be alternative, secure-and-trusted, very-high-speed network connections between major bitcoin transaction processors. Maybe it will just be bitcoin transactions flying across the existing Visa/MasterCard/etc networks" [3]

Mike Hearn: "probably 2 or 3 racks of machines" [4]

Gavin Andresen: "No, it's completely distributed at the moment. That will begin to change as we scale up. I don't want to oversell BitCoin. As we scale up there will be bumps along the way. I'm confident of it. Why? For example, as the volume of transactions come up--right now, I can run BitCoin on my personal computer and communicate over my DSL line; and I get every single transaction that's happening everywhere in the world. As we scale up, that won't be possible any more. If there are millions of bitcoin transactions happening every second, that will be a great problem for BitCoin to have--means it is very popular, very trusted--but obviously I won't be able to run it on my own personal computer. It will take dedicated fleets of computers with high-speed network interfaces, and that kind of big iron to actually do all that transaction processing. I'm confident that will happen and that will evolve. But right now all the people trying to generate bitcoins on their own computers and who like the fact that they can be a self-contained unit, I think they may not be so happy if BitCoin gets really big and they can no longer do that."

Amir Taaki, author of libbitcoin and one of the most ardent early adopters of Bitcoin is further in strong disagreement with Gavin and Mike, and always has been! So this notion that the "original people" are being hated on, is just false. Read the libbitcoin manifesto [5], or the "Political Neutrality is a Myth" interview [6].

After Gavin and Mike's push for radically reshaping Bitcoin from a P2P currency into a DatacenterCoin failed (multiple times), this whole issue culminated in Gavin exclaiming that Craig Wright must be Satoshi Nakamoto, "beyond a reasonable doubt"! Which may have had at least something to do with the fact that Craig claimed to be running Bitcoin with 340GB blocks on his (also confirmed fake) "supercomputer". But of course the Craig and Gavin show had been meticulously timed to coincide with a major industry conference. Had it not been for astute cybersleuths cracking the case within minutes of it making the media rounds, we could've seen Gavin reclaim the throne with the help of an utter conman.

Yes, some people are ticked at these guys, as they should be. It's a remarkably (!!!) hostile environment that we've been dealing with for over 18 months, as the current lead developer Wlad so aptly puts it:

"Day in, day out, there is trolling, targeted attacks, shilling on social media targeted toward us. I don’t know of any other project like this. I’ve seen developer teams in MMOs under similar pressure from users; but possibly this is even worse. There, there are avid disagreements about how the game rules should be changed, here people get worked up about changes affecting a whole economic system. And the people attacking are, in many cases, not even users of the software." [7]

[1] https://bitcointalk.org/index.php?topic=2500.msg34211#msg342...

[2] https://bitcointalk.org/index.php?topic=1790.msg28917#msg289...

[3] https://bitcointalk.org/?topic=3118.0

[4] https://en.bitcoin.it/w/index.php?title=Scalability&oldid=35...

[5] http://nakamotoinstitute.org/libbitcoin-manifesto/

[6] http://cointelegraph.com/news/bitcoins-political-neutrality-...

[7] https://laanwj.github.io/2016/05/06/hostility-scams-and-movi...


Most of that is a strawman: wanting to grow the main chain is not the same as wanting every transaction in world on it. Pushing the spam limit back so far that it acts only as a spam limit again gives breathing room for various layer 2 technologies to develop, and relinquishes a tool used for central control of the economic activity.

> cause Bitcoin P2P nodes to become confined to datacenters.

Someone paid a Russian hacker to DDOS the Bitcoin Classic nodes, and what we learned from that was that the nodes in datacenters are the only ones which can't be trivially knocked off the internet. If you want resiliance, get nodes in as many datacenters of different sovereign jurisdictions as possible. The nodes running on home connections are an illusion.

(at least until home internet connections come with DDOS mitigation tools)


What part of "they have intense hatred for anyone with a different opinion, even the very people who developed bitcoin" didn't you understand? What kind of person lambasts another for giving primary sourced, direct quotes to counter a misconception?

BTW, this too is a misconception: "and what we learned from that was that the nodes in datacenters are the only ones which can't be trivially knocked off the internet"

Right, because you didn't learn to run Tor hidden service nodes. You also didn't learn to proxy your connection over SSH. No, that would make too much sense. What you learned was that you had to physically relocate your node to a datacenter. Golf clap.

> If you want resiliance, get nodes in as many datacenters of different sovereign jurisdictions as possible. The nodes running on home connections are an illusion.

Welcome to 2013?

> Your suggestions don't stop the address published to the p2p network from being flooded.

    bitcoind -?

    -externalip=<ip>
          Specify your own public address
    -onion=<ip:port>
          Use separate SOCKS5 proxy to reach peers via Tor hidden services
          (default: -proxy)
    -onlynet=<net>
          Only connect to nodes in network <net> (ipv4, ipv6 or onion)


Wow, you post the same junk here as you do on /r/bitcoin!


I can't take Bitcoin seriously because its community, at the same time, holds strong anarcho-capitalist ideals, and supports various companies which are trying to monopolise various forms of Bitcoin transaction.

For example, a physical "Bitcoin payment card" which can only be used with terminals sold by one vendor with bitcoins stored on the same vendor's servers. If that had taken off, it would quickly become nearly impossible to replace - and yet Bitcoiners thought this was the best thing ever, instead of applying critical thinking and realising it'd be possible to create a similar system but open to any vendor you'd like. As long as it's not the Government restricting your choice, it's not bad, right?


Almost every company in the Bitcoin space at the moment is doing something that's diametrically opposed to the core innovations behind Bitcoin. A good follow-up to your payment card example: its long since been possible to do peer-to-peer, decentralized cryptocurrency exchange without a third-party with more than one kind of smart contract to allow this, yet because centralized exchanges are easier to build and more profitable to run – they have become the norm -- and the exchange just ends up "iterating" on security ;)

The Bitcoin eco-system is full of double-speak and immense cognitive dissonance. It's a weird community where people purport to be about decentralization, freedom, and security, when in reality the people support almost the exact opposite by preferring centralized services with almost no individual control or security. Most people don't even seem to notice that the FinTech services that are run in the Bitcoin space have essentially become as bad as the banks that Bitcoin sought to replace, and I don't mean bank as in "your own bank, Bitcoin (tm)" – more the kind that opportunistically exploits you for a profit because you have no better options.

Worst still: at least actual banks tend to have some amount of oversight in how they're run, with some level of recoverability if something goes wrong. With centralized, cryptocurrency FinTech the operator is essentially saying to a crowd of hackers how much semi-untraceable, pseudo-anonymous assets they have to irrevocably steal and since anyone can start a FinTech company based on blockchains -- we've even had some companies that were run by people barely out of high school. Truly, the fact that no one even questions this as a security model for FinTech in the Bitcoin space is absurd. But they don't: which is why its easy for me to predict at least 5 major FinTech hacks in the Bitcoin space for 2017. I'll update this post when they happen.


That a decentralized currency is a good idea does not necessarily imply that a decentralized market of any kind is also a good idea.

Also, there are sane people in Bitcoin. Check out the bitcoin category of Trilema.


I can't take Bitcoin seriously because its community, at the same time, holds strong anarcho-capitalist ideals, and supports various companies which are trying to monopolise various forms of Bitcoin transaction.

The community isn't one person.


It's in the community's best interest to defend and glorify bitcoin - they're the ones that invested in it and want its price to go up, so they can go and sell it for real money again.


You're definitely right about the consolidation of influence... as someone who was a mod on bitcointalk.org and /r/bitcoin for years I hate it and it drove me to leave both of those behind.


What was your experience with game theory and bitcoin? Do you recommend any readings or links?


I am probably in the minority here on HN but I don't completely grok bitcoin (granted I have not put in much effort to understand it). I have asked many of my techie friends and none of them understand it either - I follow the Einstein (?) principle. If you cannot explain it, you probably don't understand it.

On top of this, there is now Ethereum and DAO which are also completely incomprehensible to me. But the reason for this comment is that I totally blown away that there are people out there who understand it and are willing to fund this to record levels.

The context for this comment is that I ask myself this question about products and startups all the time. Who uses them? Why are they gaining traction and nobody I know even knows about them let alone use them... To conclude, I find all this bitcoin talk very motivational - not everybody needs to understand what you are building. You just need a passionate following of people who do.


They're both like databases replicated onto thousands of nodes. All the fancy crypto and mining is just a way of making the replication secure, so every node has the exact same data even though it's on a public network and nobody knows who's running the nodes.

On Bitcoin, there's one table with two columns: username and balance. You have read access to this table and you can call a stored procedure that transfers some of your balance to another user.

On Ethereum, you have developer rights. It has the same username/balance table as Bitcoin, but you can also create your own tables and write your own stored procedures, which can be called by other users.

Of course this is a drastic simplification of both systems, and misleading in some ways, but it's the best quick explanation I've come up with.

I'm getting obsessed with Ethereum because it's amazing to me that, for example, I can write two pages of backend code plus an html/javascript front end, and I've got a crowdfunding system which I can deploy for free, run indefinitely with zero downtime, and have it moving money around without getting anyone's permission at all. (Or it could be an auction, casino, currency or derivatives exchange, vault, etc.)


> deploy for free, run indefinitely with zero downtime

So who actually pays for the runtime - is it the work the miners do? If not, what is the mining work used for exactly?


The mining work is used to prove that a certain amount of computational 'work' was done. This work takes a predictable amount of time (in aggregate), and because of that, it can be used as a way to timestamp transactions in a globally serializable way, even in the face of malicious adversaries.

Consider a block chaining system without proof of work: I want to send some bitcoin so I broadcast a signed message to the network saying "send 10 bitcoin to dandare". But let's say I also send another message to the network saying "send 10 bitcoin to <my other address>" at the exact same time.

Now what happens is the chain forks. Some people consider transaction #1 canonical and some people consider transaction #2 canonical, but they can't both go in the same chain because they conflict. So now your blockchain has a split at the end of it, how do you decide which one is the real one?

Well, everyone in the network is incentivized to add their transactions to the 'real' chain, because obviously everyone wants their own transactions to be real. So if either chain gets a small edge in 'realness' everyone will pile into that one, looking out for their own self-interest.

In the absence of proof of work, no chain ever becomes any more 'real' than any other, because there is no effort in adding to the chain. Me with just my laptop can keep extending the one that I want to win indefinitely, and roughly 50% of the time it'll come out how I want.

Proof of work solves this, by making the network 'invest' computational effort to extend a chain. Because it takes enormous computational resources, no single actor can significantly or reliably influence which chain is going to win. And as each additional block is chained on after the one containing a given transaction, it becomes exponentially more difficult for another 'side chain' to catch up.

This means that if you wait until about 3 blocks after the transaction I sent you, you can have a very high degree of confidence that the chain you are looking at is and always will be the canonical bitcoin blockchain. In order for that to become untrue, someone would have to find two consecutive solutions to the proof of work problem in the same time it takes the entire bitcoin network to find 1.


The miners do two things: run your code, and come to a consensus on what transactions happen on the database, in what order.

The consensus work is expensive, and we pay them for it mainly by minting new coins. In effect we're taxing all the coin holders by inflating the currency.

To run a specific transaction, you pay a transaction fee, which also goes to the miners. They could just ignore our transaction, so we pay them a little to run it.

So basically it's the users who pay the running costs of an application. Every time they call a method in a script, they have to include a small payment to the miners.

Generally these payments are pretty small but as computers go, Ethereum is a very expensive one, since every operation or stored byte is replicated on thousands of computers. You're not going to be doing a lot of computation or storing bulk data. But simple business rules are easily affordable.


That's how I always understood it. Miners machines do all the operations and for this they are rewarded with bitcoins.


good explanation! can you provide an example of your crowd funding app?



> I am probably in the minority here on HN

No, HN is generally bad for discussion of bitcoin.

> I have asked many of my techie friends

An introductory whitepaper [1] was written by bitcoin's creator in 2008. That's probably still the best place to start.

[1] https://bitcoin.org/en/bitcoin-paper


A lot of people quote this as the best place to start, but I'd like to respectfully disagree. I don't have a concise alternative, but I found that paper pretty much incomprehensible, and even now with a decent handle on bitcoin it's still pretty opaque.


"there are people out there who understand it and are willing to fund"

These groups may only slightly overlap.


'To understand' something can mean all kinds of different things. You don't really need to understand how smtp/pop work to use email or how https works to be [reasonably] sure your credit card number you're sending over the wire to an online vendor won't be stolen in flight.

Same with Bitcoin. You acquire it, you use a piece of software called 'the wallet' to store it and you either share your 'Bitcoin address' with someone to send Bitcoin your way or they give you their address for you to send the btc to.

That's really it in a nutshell :)


I took some time and read this blog post [1]. It allowed me to explain everything to my friends who asked.

[1]: http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-a...


At the highest level, Bitcoin is relatively easy to understand. There's a lot of additional detail in the communications algorithm and the programmable extensibility embedded in transactions (for instance, how multi-party/escrow/conditional transactions work). But the concept of a proof-of-work-based blockchain can be explained rather briefly.

As a miner, you have access to a pile of transactions that people want to resolve. Take enough of those transactions to fill up a block, based on some rules you want to follow (e.g. prioritize transactions that pay a transaction fee, which you claim; prioritize transactions that have been waiting longer). Add a transaction that gives you the current consensus mining fee out of "thin air"; that's the only place new coins get injected into the system. Include a hash of the previous block; that's what makes it a block chain. Then, via brute force computation, come up with some additional data appended to the transactions such that the double-sha256 hash of the data block (the sha256 of a sha256 hash of the block) is smaller than a certain upper bound (determined by the current consensus "difficulty"). Since you can assume the hash is evenly distributed across all possible values, to compute a hash smaller than a certain value requires brute-forcing enough hashes for one to land in that range. This is equivalent to "find a hash that starts with a certain number of 0 bits", but "less than a certain value" allows increasing the difficulty without doubling it.

Once you have a new block, tell other miners about it. Assuming you've followed the "consensus" rules for difficulty, mining fee, transaction fees, and similar, then the other miners will accept your block, and immediately start trying to mine a new block starting from yours rather than starting from the previous block. So, at that point, the consensus block chain includes your block, which means all the transactions you included took place.

The rest of the complexity comes in with questions like "how do you advertise a transaction you want to the miners", "how do miners communicate with each other", "how does the consensus change over time", and "how can existing clients handle new kinds of transactions that they don't natively understand".


Do you think this 'simple' explanation would be adequate for someone without a CS related background strong enough to understand hashing or the difficulty of reversing crypto hashing? What about explaining why people can't fake transactions?


Does it need to be? Most people don't know anything about the underpinnings of the bank and credit card systems. I talk about btc as pseudonymous digital cash first (and the tradeoffs of consumer/producer benefits that entails), mention its capability for more (escrow, 'programmable money', store of value, signatures...) next, and give my best go at explaining what I know of the more complicated details of the implementation only to people really interested. It's fun to try metaphors (and there are a lot, even just around asymmetric encryption) for those without the tech background but I don't think it's very fruitful.


I mean no offense by this, but I'm in a similar boat to OP in terms of not fully "getting" the tech of Bitcoin (despite being a very technical person) and this explanation did not clear up anything for me. The density of technologies and keywords and buzzwords every time someone tries to "simply" explain Bitcoin is mind boggling.


People want to send money to others, so they go to their nearest accountant and ask the latter to write their transaction down, so it's formalized. All these accountants are in the same room and each one has a bunch of transactions to write down, but they need to figure out how to write them down a specific way.

When an accountant figures out how to write down the transactions he has at the moment, he yells "HA! I got it!" and the transactions to everyone else in the room, who goes "ugh, damnit", the accountant collects the fee from the people whose transactions he wrote down, and the cycle begins anew.


By sending BTC to other addresses,including a small fee, you broadcast transactions across the Bitcoin network, nodes collect these transactions in their mempool.

Every 10 minutes a miner finds the answer to a problem, and collects as many high fee paying transactions that will fit into a block of 1mb, awards himself 25btc and collects the fees. Miner broadcasts this block. Other nodes receive it,verify its validity and relay it.

Work then begins on finding the next block by miners.


To be fair, you covered only the blockchain construction part of Bitcoin. There's also the transaction part - keys, addresses, scripts, etc. Of course these also have an equally simple high-level explanation.


Given that the article was about a competing blockchain technology, the blockchain itself seemed like the main foundation to start with.


>there are people out there who understand it

Not to mention that the creator of Ethereum is 22 years old.


What has his age got to do with it?


He proposed it in late 2013 so around 19-20 years old.


Yes, and he's also a genius. So what?


22? when was his birthday?


31 January 1994


My explanation that doesn't cover all the use cases: How do you authorize/prove ownership in a digital domain: Public-key Cryptography. How do you order entries in a public, permissionless database: By forcing computers to expend an unforgeable amount of work to timestamps entries.


Bitcoin is a distributed p2p database where nodes can agree over the updates, which is incidentally used as a ledger for a digital currency.

Bitcoin is nice, but the real geniality of it is the blockchain.


> but the real geniality of it is the blockchain

and the blockchain only works because nodes only agree over the updates as they rewarded in bitcoin for doing so. if they cease agreeing then they cease getting useable bitcoin.

hodor

there really aren't two sides to the blockchain without bitcoin debate. nobody in the history of computational science has ever found a way to get computers to verifiably agree. an incentivized network is the only solution right now. its great that people want to attempt this without the fungible digital currency reward, but no other consensus method has been found since the beginning of time


The basic technology is not that hard to understand. The implications are less obvious.


> If you cannot explain it, you probably don't understand it.

Right, as you and your friends have demonstrated.

There are people that understand it. 7 years in and you have decided not to. That's all it comes down to.


Bitcoin doesn't seem that indecipherable to me, just a dumb idea. It's a network that uses proof-of-work to transfer value. (I say it's dumb because decentralized currency is a bad idea, viz. all the dumb things you read about happening in bitcoin-world)


Just curious, what is dumb about it? The transfers work very well.

What dumb things do you hear about happening in the bitcoin world, 900 billion dollar bank heists? wait that was distinctly not on bitcoin's network

Just wondering what you were referring to, since the value transfer works without anyone caring about the drama


If you mean that big heist last month or so, almost all the money (90%) was recovered 81M lost out of 951M. That'd simply not happen with BTC. And there's been plenty of cases of BTC getting stolen and putting exchangers out of business.


The money wasn't recovered, it never left in the first place, they tried to transfer 951M but only 81M went through.


The amount of resources to process a whopping, what is it, 2 transactions a second? (And don't say "but lightning network!". Come back to me when something ACTUALLY happens.


Are you referring to the high hashrate? that isn't a requirement for the "2 transactions per second". It is basically unrelated.

It would work if everyone turned off their computers and the hashrate dropped to one

except then I would turn on my computers and earn all the bitcoin instead, which nobody else wants to happen when they can be earning more bitcoin than I

I think it is pretty clever and the network works very well. Your criticism is about its future scalability?

Transferring bitcoin right now, has worked just as well as it worked back in 2012. You send it from one address, to another address, and it gets there in the same time period.

You could ignore all the drama for the last four years and your transaction would still work. Just as much as you ignore all the board meetings that VISA has, that SWIFT has, that the engineers at FEDwire have.

The scaling issue is a fun thought experiment, but it really doesn't matter for you actually using bitcoin. Which promise are you criticising? How bitcoin is supposed to compete against the US dollar?

I've got the cast and crew of the Panama Papers over in cryptocurrency now, and it works really well, while people are still questioning what bitcoin even does. 2012 is over, shit still works.


Typical handwaving. You make it sound like everything has fine, but there have been many many occurrences of full blocks and delayed transactions over the last year.


My last fees were .00013 and .00005 respectively. If I was just reading headlines and not actually using bitcoin, I would think there was a problem too.

If you are worried about the network scaling, there are criticisms to be had. The network works very well for me, I don't consider that handwaving. I consider Blockstream to be delusional people, it has nothing to do with the network, it works really well if you've tried to use it, even during one of those "stress tests".


As long as it's just a few hackers playing with their toy, yes, it works fine. It fails horribly at any sort of non-toy use case. It couldn't even support the transaction volume of a small city, much less an entire country, or the whole world.


"It's so crowded, no one goes there!"


We are at 2 TX/sec because, well, people simply don't transact more than that.

Bitcoin CAN support a much higher transaction rate with ZERO increase in mining resources. All we need is (1) more transactions and (2) a block size increase. Let it be clear: the only "dumb" thing is not the system itself, but Bitcoin developers who have not yet agreed on increasing the block size.

Secondly, seeing the mining resources as spent only validating transactions is failing to see the whole picture. Miners sustain a system that is already a net benefit to the economy. Venture capitalists invested more than $1 billion into at least 729 Bitcoin companies which created thousands of jobs. Is all this worth the 150+ megawatt of (practically all) clean energy used by miners? Hell yes! This argument (and others) is explained in detail in:

http://blog.zorinaq.com/?e=82


>> a block size increase

Which is not forthcoming because of idealogical arguments and entrenched interests.


I agree that the throughput capabilities of Bitcoin are absurd, and that Lightning network is not a substitute for onchain transactions.

However, did you know that the hashrate and transaction throughput are almost entirely unrelated? Hashrate is correlated to the value of the coin that can be kept secure, not to the number of transactions per second that can be processed.


I dont' buy this "value of the coins" argument at all, it doesn't even make sense.

And the data agrees with me: http://imgur.com/a/7Qjpa


He didn't say that the market cap of btc was tied to the hashrate (which is of course bullshit).

He said that the hashrate relates to how much BTC you can keep safe, which is provably true.

Let's say you control 10% of all hash power. Satoshi's paper helpfully maps out that the likelihood of you being able to pull off a double spend if I wait for 5 confirmations is 0.1%. If you were to mine honestly over 5 blocks, your expected reward is 12.5 BTC from block rewards (plus some more from fees). If you attempt to attack me, the total reward is my transaction value plus 5 blocks' worth of block rewards, so 125 BTC. At 0.1% chance of success, you need to win 12500 BTC from your double spend attack, so if you sent me less than 12375 BTC, I know that after five blocks you have no economic incentive to try to double spend.

For a fixed block count before accepting the transaction (5 blocks in this example), the higher the hash power you control, the higher the probability of success for your attack, and the less money you need to double spend for the attack to be economically rational. Inversely, and precisely the GP's point, the higher the hash power, the more money you can safely transact.


> The transfers work very well.

Sometimes it takes days for a transfer to enter the blockchain proper. I'd say that isn't working very well.


If your fee is too low.


> Why are they gaining traction and nobody I know even knows about them...

This reminds me of the old "How did X get elected? I don't even know one person who would vote for X!" It speaks much more about the individual than the public. I feel the same way when I hear about the latest SaaS/Social-whatever.



The innovative is that bitcoin is an autonomous computer network. It uses game theory and cryptography to ensure that no one entity can control and network and that the network always performs its operations independently and neutrally. This is an incredible innovation. Etherium is not this and just empty hype. There is a lot of misinformation out there. Bitcoin is not just a data structure.


    Etherium is not this
That claim needs backing up. From what I can tell Ethereum also uses game theory and cryptography to ensure that no one entity can control the network.


I have been and remain intrigued by Ethereum, but there's one element that always struck me as impractical.

All its advocates get very excited about all the complex automated things it can do, which is admittedly very cool. But for the real world, I'm skeptical that anything more complicated than a basic escrow could work. Once you're talking about real, complex applications (like a DAO), what if there's a bug? Even if bugs are rare, the potential implications when they do happen are so severe that it still diminishes the value of the platform.

And the ability of members to "vote in" new code is no solution. Nobody in their right mind is going to do that without a thorough code audit, which is a pretty high friction interface to what is supposed to be a financial or business instrument. It would inevitably devolve to trusting a relatively small group of "experts", which rather defeats the point of the whole enterprise.

Even worse, voting on updates is broken by design... a majority of participants could collectively decide to screw over a minority and simply steal their assets by voting in a code update.


It amazes me that an alpha product (The DAO) is control of ~$150,000,000.

Plus the way that "The DAO" operates is going to be crazy. Basically people submit proposals of things they want the DAO to build, then "The DAO" "hires" contractors to build it (A roundabout way of investment). So Slock.it would be a contractor of "The DAO", but could theoretically be replaced.

But Slock.it is a DAO itself. So basically the chain would look at minimum something like this.

"The DAO" <-> "Proposal" <-> "Contractor Agreement" <-> Slock.it

Bear in mind that "The DAO" and Slock.it are managed by distributed consensus. And what if a company was a contractor to >1 DAO?

Add in all of smart contracts contained in each DAO, the amount of interconnected unmodifiable software that will run these organizations will become staggering. Attempting to design something to be fault free in a normal network is insane, but then you add possibilities for social faults in voting and consensus.

I am sure something like Ethereum will be the future. But the current state is extremely alpha to be handling that sort of financial power.

EDIT:

To prevent a takeover many ethereum contracts will implement an exit strategy, like splitting the minority into a new contract.


You're mostly right, but for the sake of clarity, Slock.it is not a DAO, but a physical corporation in Germany. The actual chain looks something like

"The DAO" <-> "Proposal" <-> Slock.it

The idea is that the DAO 'hires' a contractor, which is Slock.it in this case, which can have all sorts of legal rights/protections/etc. and is a corporation in the physical sense. It gets hired by this nebulous entity, so instead of working for another corporation or individual, it gets hired by the DAO.


And the DAO is also backed by a physical corporation for the purpose of contract signing, I think it's based in Switzerland.


> Even worse, voting on updates is broken by design... a majority of participants could collectively decide to screw over a minority and simply steal their assets by voting in a code update.

Such is life though. It is not just ethereum. Bitcoin cannot survive a majority attack. In the long run, I can't see how even a government can survive a majority attack. One obvious solution to the problem is to try to prevent any one bloc from gaining majority status. I'm sure there are more elaborate solutions though and if any of them is elegant, I'd like to learn about it.


Governments might not be immune from a sustained majority attack, but that's the point... governments are large entities that (hopefully) operate at large timescales and have some degree of inertia and stability.

In turn, governments provide recourse and security for smaller, constituent systems (companies and individuals.) As long as the government remains intact (or intact enough), it can be a an arbiter and enforcer between the smaller entities (i.e, the entire legal system).

With Ethereum, there is no arbiter. There is only the exact code of the contract. It is entirely possible that the code is flawed in a way that is disadvantageous to all parties, such that they cannot change it, or that a mistake was made that allows one or more parties to act in violation of the "spirit" of the agreement.

Of course, some of these situations can be foreseen and accounted for (exit clauses, consensus code updates, etc.) But not everything can be foreseen, and the irony is that the more situations are explicitly accommodated for, the more surface area there will be for difficult-to-detect edge cases.

The legal system has built in resiliency, due to multiple fallback layers of (hopefully) impartial arbiters to add a layer of empathy and judgement on top of the strict letter of the law. It's not perfect, but it works.

Unless Ethereum can find some equivalent, I cannot see it taking over anything but certain types of very well-understood transactions. Don't get me wrong, that still has value... automated escrow, options & futures trading (etc.) is huge. But until this problem is solved, effective DAOs are a pipe dream.


Computer programming is so error prone, it's hard to see how it could ever be used for critical applications.


Can't tell if this is sarcasm or not


Not


>Bitcoin cannot survive a majority attack.

This is true bitcoin cannot survive a majority attack. But the amount of resources needed to form a majority attack would be better used to just mine bitcoin.

Attacking the network for the sake of attacking it would be very expensive and would basically devalue BTC, which I'm assuming would remove any initial incentive.


In theory. Who said an attack would happen by allocating computing resources? That strikes me as https://xkcd.com/538/. Suppose that the majority of the miners are allied with a small number of organizations. People/organizations with sufficient influence can strike deals with those organizations to orchestrate a majority attack.


> Who said an attack would happen by allocating computing resources?

> Suppose that the majority of miners

Doesn't the "majority of miners" being in on it mean the same thing as "allocating computing resources"?


I suppose that's a matter of definition. I read "allocating computing resources" as "building/buying more hardware". That should indeed be unfeasible. But using social means to gather support from other people who have already allocated computing resources should be a lot more feasible.


Yeah, a lot more feasible but not less suicidal. The idea is that if miners were to band together to abuse their power and rig the system, the larger population would lose faith in Bitcoin's ability to accurately serve as an accounting mechanism, no longer value it, and Bitcoins would be worthless. Now the money the miners stole is worthless and their equipment is worthless. So it's suicidal for them to try to rig the system. They can't gain from it.


> I can't see how even a government can survive a majority attack.

https://en.wikipedia.org/wiki/Gerrymandering_in_the_United_S...


Bitcoin cannot survive a majority attack.

Proof of work is a different kind of majority though.


One solution would be to have "curators" with an expanded role. These curators would have dictatorial powers (via a supermajority vote of the curators) to nullify and replace the entire contract. However, they would promise to do this only in case of a genuine software bug, or if ordered to do so by a court with jurisdiction over them, not for any other reason. There would be many curators. Many of them would be professional curators, similar to professional accountants or trust executors, who work for huge firms which, like Big Four accounting firms, have a lot to lose if any of their members are caught misusing their power.


Yes, the Turing completeness of Ethereum means it suffers from the unsolvable halting problem. There is no way to prove that a given Ethereum program does not have a bug that will cause it to halt at some point in the future. Thus it is dangerous to rely on an Ethereum contract as the sole means of releasing funds.

The voting problem is a more obvious flaw. There seems to be a naive optimism on the part of certain developers that simple voting rules will surface the best quality viewpoints. This is fine in hackernews, but is not OK for open source software development.


All Ethereum contracts halt. Performing operations requires spending ether (which is paid to miners) and there's a maximum amount of ether which can be spent per transaction. The more operations your contract performs, the more you have to pay. If you try to perform too many operations, the miner will bail.


OK, but that is not "halting" in the sense of the halting problem. That is a design feature of ETH.


But wasn't your argument that "Ethereum ... suffers from the unsolvable halting problem" and that "there is no way to prove that a given Ethereum program does not have a bug that will cause it to halt at some point in the future"?

All Ethereum transactions can be proven to halt.

That does of course mean Ethereum isn't really Turing complete, just an approximation.


Any program running on a Turing machine is subject to the halting problem. You may very well find a bug or feature that causes such a program to stop running or halt. This discovery still does not disprove the statement, that it is impossible to prove a program will not halt. Thus your observation does not flow logically.


As pointed out, Ethereum is not infinite, thus not a Turing machine, and therefore does not exhibit a "halting problem".

There's a limit to the number of "cycles" spent on each program in proportion to how much funding they have. It's like a smaller version of the halting problem where you only have to say if a program will halt in five seconds or not.

Turing machines are a theoretical construct, be careful when trying to reason about the real world based on them.


I'm convinced that Ethereum is going to suffer the same fate as Bitcoin. Here's the cycle that will eventually play out:

(1) Relatively interesting technological breakthrough comes along. Promising but questionable applicability to real-world problems.

(2) It attracts early, idealistic developers, some of whom are genuinely talented. Rational debate is still possible at this point.

(3) The hype builds up and in turn attracts various groups: raging anarcho-capitalists, developers of a mildly libertarian bent, get-rich-quick enthusiasts and teenagers. The price continually bubbles and spikes as fresh money comes in from speculators betting on the hype.

(4) The spiking price is misinterpreted as a signal that the technology is going mainstream and is ready to be applied to real-world problems. Lots of half-baked apps and companies are built. No actual traction is found (with the notable exception of the dark web).

(5) Repeat (3) and (4) until the press and wider community no longer believe the hype. Possibly rebrand to 'blockchains' or some other less toxic noun.


You've made a few jumps of imagination in there.

I'm actually convinced that Ethereum has something unique to offer specifically to developers. Ethereum will be a common ground for a lot of high value code and data between organizations, people, etc. A lot is possible in a few lines of solidity, I've seen devs create working decentralized exchanges in a few weeks. As you can see, the use of Ether here is just to ensure that the code a user wants to execute on the EVM gets executed. Users need not have to use it as a currency.

Ether's primary purpose is to secure the Ethereum network, not to be used as a "currency" like Bitcoin. If someone gave me an ether every time the Ethereum devs keep emphasizing this, I'd be very rich by now. If Bitcoin did a great job at transferring value in the network without being slow and full all the time, all the ancaps would have stuck to Bitcoin and would have left us in peace.

The Bitcoin challenger is not Ethereum itself, it will be services like Maker that are currently being built on top of Ethereum. Ether purpose is to secure Ethereum so that services like Maker don't have to worry about the security and scalability of the underlying blockchain and can focus on the EVM abstraction and above.


It's too late. Ether was already hijacked to become a trading instrument.


Only in the short term, It is well within the realm of possibility for a purpose built token without counterparty risk like Ether to emerge on the Ethereum network.


Yes, other than your second premise in (1), you nailed Bitcoin's trajectory to a 'T'. As someone who entered the developers in (2) back in early 2011, I watched this painful transition to 3 and 4 repeat itself until 2014, at which point I basically left due to the toxic composition of the community (it was the get-rich-quick types and scammers, often overlapping, that truly devastated the community). It makes me incredibly sad that such a promising technology has suffered this fate. Ah well, being money, I suppose that becoming corrupted was its destiny from the beginning.

I do disagree with your assertion in (1), which is that Bitcoin's applicability to real-world problems was questionable. From the beginning, it was clear to me that at least the technology behind Bitcoin could easily become Money 2.0. Unfortunately, I failed to take into account the social/governmental/financial factors.


Hopefully bitcoin will keep being the wild west of speculation and endless arguments. Ethereum seems to downplay its value storage capability. It needs 1-2 killer apps to become popular, but imho it should never market itself as a value store.


Agreed. Ethereum seems like a pretty cool iteration on what bitcoin was able to achieve, but just like with bitcoin we're left with a gigantic deficit when we subtract real-world-applicability from the incredible levels of hype.

Running arbitrary decentralized code on a shared public ledger... I have to admit that this is pretty damn cool and I feel confident that there will be some useful projects or developments that will eventually emerge from this technology, but at the moment there aren't any obvious problems that this technology solves better than the existing centralized solutions. I saw a lot of talk about "autonomous corporations" in previous Ethereum threads, but it seems pretty clear that these entities are not capable of much autonomy beyond shuffling around eth between other Ethereum wallets/entities.


I agree. I think another fundamental flaw with (current) cryptocurrencies is that they are all too computationally expensive to replace a simple, trust-based system. If you look at it from an economic perspective, the incurred losses from a trust based system (caused by it's inevitable and sporadic abuse) are probably still smaller than the costs caused by a (theoretically) abuse free system like ethereum. That being said, there might be corner cases where these additional costs are sufficiently small to make a blockchain-like solution viable - for example for very low volume but very high value transactions, like a settlement of financial contracts (bonds, etc.), ie. for any transaction, where an abuse of the system is extremely costly.


A cryptocurrency needs to happen. Today or in the future economic incentives will drive politics out of money.


For anyone interested in getting started with Solidity in 20-30 mins, one of the languages that Ethereum contracts can be coded in (some analogize this language to JS, the other language is Serpent which is compared to Python), you can see a quick primer I put together:

https://learnxinyminutes.com/docs/solidity/

You can test your code here:

https://ethereum.github.io/browser-solidity/#version=soljson...


thanks for putting this together, I came here looking for exactly this.


A few common misconceptions that I'd like to correct,

Ether is not in the currency business. It was emphasized multiple times by the devs themselves. It so happens that Bitcoin is so slow and full that users are flocking to use Ether as a currency even when Ether's inflation is uncertain. This is an open network, we cant stop people from using it the way they want it to.

Ethereum is not being built for financial apps only. It provides a VM that can run code and store data. This can be used for any purpose that requires code to be executed and data fields to be changed atomically in a secure way, the users need to pay a fraction of a cent worth of Ether to run this code. That means they dont have to be invested in Ether to be able to derive value from the Ethereum network. You have to be invested heavily in Bitcoin to get value from the Bitcoin network, especially after Bitcoin payments are such a dud. Please dont rush to type that Steam started accepting Bitcoin recently.

Ether is not competition to Bitcoin. Bitcoin killer will be a new token on the Ethereum network. There could also be a AirBnb killer and a Uber killer built on the network too. These are companies that pride on being leaders in sectors by writing only code. What if this code and data can exist as commons in the Ethereum network that is global and has 100% uptime. Users pay a fraction of cent worth of Ether to run transactions instead of a percentage cut. And these users will transfer money between themselves for these transactions with the token that killed Bitcoin, not Ether. It will take a while to kickstart a reputation layer on Ethereum network but these usecases are a real possibility.

There is a very good chance that these new tokens created on the Ethereum network will surpass the total market cap of Ether very soon :O


Ether's long-term inflation is uncertain, but its maximum inflation is known. It's 26% of the crowdsale amount per year, or about 22% of the initial supply (so as the supply increases, the rate decreases). The devs have reserved the right to lower the inflation rate when they transition to proof of stake, but they've guaranteed not to increase it. That guarantee is enforced by the community just like it is on Bitcoin, plus it's actually written in the legal documents for the crowdsale.

Right now the ether inflation rate is under 20%. Bitcoin's inflation when it had a $1 billion market cap was 33%.

As a currency, ether works just as well as bitcoin, but with higher throughput and much less latency.


I agree with the overall sentiment of the piece. The one thing I disagree on is the perception that there should be "killer apps" for bitcoin. I think this perspective views Bitcoin as the the technological breakthrough, looking for apps to be built on top of it. But really the technology is the Blockchain, and Bitcoin (decentralized currency) is the "killer app".

Ethereum is different because in addition to being a currency, it is also a platform. It needs "killer apps" to differentiate itself, otherwise it's just a currency, and can be discarded like litecoin and doge. I think Fred has given us reason to believe it will succeed in providing the ability for killer apps to be built on top of it, but we still have to see. None exist yet. The DAO has yet to do anything real.

Maybe just a detail, but it seemed like an important one to me.


Ether is not a currency like Bitcoin. Ethereum is a pure platform play that enables multiple Bitcoin competitors to rapidly experiment and find the product-market fit of crypto-currencies in the real world.

I believe there can be a crypto-currency with better properties than Bitcoin.

Once one of these Ethereum apps finds their hockey stick, Ether will continue to play its role in securing the Ethereum network for this killer app which removes the need for both Ether and Bitcoin to play the role of crypto-currencies.

While you are distracted by one DAO, there are many other DAOs successfully in operation on the Ethereum network. There is only one that made a lot of noise because it had to, the others are silently building their products after raising money from a passionate set of users.


What other DAOs are there and how much have they raised?

The thing with tokens is that because Ethereum is so young, the companies being built on top of it are by default super early stage, with no real traction or product market fit to show. So anyone buying tokens at this stage because they want a shared revenue stream of the companies profits, is making very risky bets which have a high likelihood of failure (on average).

I think it's the lure of secondary markets for DAOs that is behind a lot of the interest in, at least, The DAO - people buy the tokens early because there is anticipation of the token prices going up relatively soon after the crowdsale, fear of missing out etc.

I think a lot of it is driven by speculative motives rather than long term investment in Ethereum companies themselves.


The other major DAO was Digix, which set a target of $5.5 million and raised it in 14 hours.

They've got a more definite revenue plan: DAO token holders get transaction fees from transfers of the gold-backed tokens Digix plans to issue. For various reasons I don't think this is going to work out very well for Digix DAO holders in the long term, but it's an interesting experiment.


Yes, the bets are risky. It is an opportunity to rethink your portfolio like a VC where few investments could return 10x easily and a lot will lose the capital allocated to them.

I think this is better than buying IPO stock in public markets which are so bad these days that only zombie companies are being listed and investors are being screwed very regularly.


Except you don't own equity - just a share of potential revenue. Most VC returns come from exits - here you get none if the company is later sold


You can create whatever structure you want. There's no reason (other than that it doesn't make good financial sense) that you couldn't sell special preferred tokens, etc.


> Ethereum may attempt to move to proof of stake. [...] I believe this risk is manageable because there would be extensive testing beforehand.

This is a really big cop-out. I follow Ethereum pretty closely and I believe that the biggest threat to Ethereum's future is an attempt to move to proof-of-stake.

If you spend a bit of time in the ethereum community you'll find that everyone is very excited to reap the benefits for getting-in-early on ethereum, and they're very excited for the eventual switch to proof-of-stake so that they can collect money. Everyone who is invested in Ethereum is doing so in order to stake. This is terrible for the community, because who is ever going to get excited to invest in meme-powered internet money that they already missed the boat on?

What kind of testing is able to account for that kind of social effect? (Or maybe I'm just a stupid mathless Austrian.) Anyhow, that's just to talk about the social effects, and I think there are many technical problems with proof-of-stake beyond that... Let's not forget that there hasn't been a single successful PoS cryptosystem yet.

I also think that there are big problems looming within the EVM, and to give the article credit, that's mentioned and represented fairly in the article. (forward search for 'Bit-thereum' in OP)

I'm prepared to be wrong about Ethereum, even excited at the prospect. but if I was invested in a cryptocurrency it would be Bitcoin. I think that there are currency wars looming and I think Bitcoin stands to gain a lot from that. Bitcoin's big problems are overstated and will be solved in due time. It just needs to live past the death of Moore's law.


Bitcoin's competition is not Ether, it will be another token built on Ethereum. There is a very high chance that a lot of Ethereum tokens individually will exceed the Ether market cap. Ether's main purpose is securing the Ethereum network and it will be used for staking in PoS and its own valuation will depend on the number of transactions in the network.


Have the problems with proof of stake been solved? As I recall, there was an argument that proof of stake didn't prevent forks very well, since people could hedge their bets and stake for both ends of the fork, and there would be no downside to doing so.


That's the "nothing at stake" problem. The Ethereum team claims to have solved it.

I'm no expert but the basic idea is that stakers bet on which block will become part of the chain, and the block that does is the one that gets the most bets. Stakers start with small bets and progress to larger ones as the bets converge. If you make a large bet on a block that doesn't get included, you can lose substantial stake.

What makes this possible is GHOST, which makes the blockchain aware of forks instead of just the final linear chain. (That's already part of Ethereum, and is what enables the 15 second block times.)

There's more information at blog.ethereum.org.


I don't see how Moore's law has anything to do with Bitcoin. Their biggest problem is the huge company owned miners that could easily collude to control the network.


When the advantage provided by doing an in-house ASIC goes away, the limiting factor becomes cheap electricity, and the amount of people who are able to compete grows.

Right now, a couple groups of people are trying to make the fastest ASIC so that they can convert electricity into money, using their proprietary efficient converter.

But if everyone can get the same efficient converter, suddenly it's viable for anyone that can produce cheap electricity with a stable internet connection. And there are far more people/countries who are able to compete on the cost of electricity than there are people/companies who are able to compete on making the best SHA-256 ASIC. This tends towards decentralization.


Interesting, but you are talking about the end of the exponential growth dictated Moore's law to quickly become nearly a flat line.

You sound like that guy back in the 1800's who predicted that everything that can be invented has been invented.

It's possible for that to happen, but why do you think it will happen now?


The argument is made best by this blog post by bunnie, backed up with real data and realistic projections.

http://www.bunniestudios.com/blog/?page_id=1927


Here are some general thoughts for those interested more in this topic:

- Ethereum and Bitcoin both let you lock up the cryptocurrency and provide a series of rules that are required before the money can be unlocked; this has a lot of power, because unlocking can be done by a single party (a standard payment use case), but also by a series of other people/groups or external events (currency price, weather, etc)

- The rules for unlocking cover a wide gamut from requiring several users to agree (e.g., multisig like a multi key safe deposit box to voting for a dividend), to requiring an external action to happen (e.g., unlocking if the temp is below a certain amount on a given day for weather based insurance contract); these actions replicate many current real world interactions like an insurance contract, a voting mechanism for corporate governance, and escrow (just to name a few); the OP has also written about Distributed Autonomous Orgs (DAOs) on TechCrunch

- A key benefit for letting these be programmatic is that they can cut out a middle party (or at least reduce the dependence on this middle party with a network of oracles) - cutting costs and reducing dependence on this third party

- Some key value props where this could help in the early days:

1) cross-country transactions, as the contract language is international (legal systems can be hard to enforce across geographies)

2) Small amount transactions (as fixed costs may be high in a real world contract today for each party)

3) contracts where middlemen have monopoly-based pricing

4) contracts where the middle parties have a low degree of trust (more likely today, certain markets don't exist due to this reason)

5) Contracts in a country where legal systems are weak/expensive

- For Bitcoin vs. Ethereum, many Bitcoin enthusiasts will argue that Bitcoin provides a similar functionality, but Ethereum's high level languages are generally much easier to write (I'll likely get some push back by partisans, but Ethereum's Serpent and Solidity might be closer to JS/Python/C, while Bitcoin's Forth-inspired/stack-based language is closer to a higher-level assembly); there are also some specific differences like Bitcoin requires all or nothing unlocking, is not turing complete, has restrictions on the transaction byte size, and has some miners enforce transactions that only have a few of the contract op codes, not all; still, some Bitcoin devs (like Gavin) note that the surface area for security holes is significantly larger with Ethereum

(See my other post for an introduction to the language)


One key difference is Ethereum is not being built only for writing code for monetary transactions using Ether.

Ethereum is being built to store and run code in the EVM. Ether main use is only to pay for gas so that any user of the network can execute the code. Although in Bitcoin there is no point in writing code other than encode conditions upon which monetary transfers can be done, this isn't Etheruem's main goal.

An example of a non-monetary use case is - A concert ticket issuer could issue tickets on the Ethereum network. When users want to resell, they need not rely on a re-seller and instead can do a direct exchange on a decentralized exchange. They will pay a few cents worth of Ether as fees to run code that triggers this exchange to get the guarantee that the tickets are not counterfeit. After a quick confirmation the ownership of the tickets is updated on the blockchain. The exchange of money between these users can be in USD itself directly without any conversions to Ether.

It is non-monetary consumer use cases like these that drives the Ethereum team to bring the transaction confirmation times to the current 15 seconds and even lower in the near future.


You're absolutely right - I should have called that out more.

Ethereum can be used to represent the ownership of any item (property title, ticket, claim for fiat currency). Some will inject a third-party you need to trust (a custodian who holds dollars), while others may not (the digital ticket as @daoland highlights). You can also define ownership broadly, where it might be as simple as the "ownership" (right) to vote (e.g., corporate governance decision, poll, etc). While it's not the primary use today, I could see tradeable tokens to represent various real world rights (to land, to tickets, to voting) being an area for much further experimentation.

I do think there's a question if confirmation times need to be low on the blockchain itself (with its attendant risks) - as Lightning in Bitcoin shows an example where this is injected on top. This really is a broader debate about what should live at the lowest layers of a blockchain stack and what should be higher up (disclosure, I specialized in networking, and so see some parallels to the debates in the early years of the networking stack). Another interesting area for exploration is what should live on the blockchain, and what should live off, given the cost of blockchain storage.


In practice I wouldn't say that's ether's main use. If you add up the total gas fees so far, it'll probably amount to less than the $150 million in ether raised for TheDAO, the $5.5 million raised for Digix, etc. And if you look at the code samples on ethereum.org, one is for a crowdfunding app that raises funds in ether.

And of course, if you're paying miners with ether, then ether better be a functioning currency or it's a worthless payment.

You're certainly right that Ethereum has lots of uses beyond simple value transfer, but if you want to transfer USD instead of ether, you need to trust someone to back tokens with USD, and trust governments not to shut them down over KYC issues.


The devs are so badass, they constantly mention that they will allow miners to accept any currency for gas fees if it is feasible. Most of us who have some Ether are comfortable with this move too, ironically our hedge for this scenario is to hold some Bitcoin.

Because, Ethereum will prosper not when Ether has a high market cap, only if it can become robust enough to provide a decentralized platform to run code for a variety of apps and services.


True but they're not planning for currency-agnostic fees before they move to proof of stake, which will require ether for staking.

It might not be a done deal, either. A few weeks ago Vlad Zamfir, the lead researcher for PoS, tweeted that he thought agnostic fees were a dumb idea, because they'd be too much trouble for miners.

A lot of contracts are easier to write if you assume a single currency. If you're doing that you have to pick one, and ether seems like the obvious choice.

I mostly agree with your last sentence but a high market cap doesn't reduce Ethereum's robustness either; in fact it makes it more secure.


Ethereum is an cryptocurrency retailer and exchange platform. Coinbase should support cryptocurrencies where there is customer demand and backed by credible technical teams. Bitcoin and Ethereum both meet that criteria.

I wish Coinbase had a stronger set of technical advisors. Fred and Brian seem to rarely meet with the engineering and research community. Charlie Lee is pretty strongly on crytocurrency technology but just one person.


This article is FUD, but then so is this post. People on both sides have huge incentives. And don't be deluded into thinking there aren't sides. The wealth at stake and the ability to dodge banks makes it impossible to be deeply invested in this and not have an agenda.

Here are the paragraphs where I thought the FUD was most obvious. Worth looking over.

Developer mindshare is the most important thing to have in digital currency. The only reason these networks (Bitcoin, Ethereum) and their tokens (bitcoin, ether) have value is because there is a future expectation that people will want to acquire those tokens to use the network. And developers create the applications which drive that demand. Without a reason to use the network, both the network and its currency are worth nothing.

In contrast, Bitcoin has had a leadership vacuum since Gavin Andresen stepped aside after other core developers did not get on board with his (in my opinion rational and convincing) arguments to increase the block size. “Core developers” as they now stand are also relatively fragmented.

Beyond a leadership vacuum, Bitcoin’s “leadership” is less clear and toxic. Greg Maxwell, technical leader of Blockstream which employs a solid chunk of core developers, recently referred to other core developers who were working with miners on a block size compromise as “well meaning dipss.” A second discussion board needed to form on reddit, /r/btc, because of censorship on the original /r/bitcoin. The content on the Bitcoin discussion boards feels like squabbling while Ethereum’s is talking about relevant issues and new ideas. In summary, Ethereum leadership (and as a result its community) is moving forward while things need to get worse before they can get better in Bitcoin.*

What is very real, though, is the possibility that Ethereum blows past Bitcoin entirely. There is nothing that Bitcoin can do which Ethereum can’t. While Ethereum is less battle tested, it is moving faster, has better leadership, and has more developer mindshare. Developers → apps → users → network success. First mover advantage is challenging to overcome, but at current pace, it’s conceivable.

Also, I still don't understand why I'd want a programming language in my currency.


See my other comment for your question why you might want a programming language in your currency. An example of a real world "programming" language in your currency is a legal contract (e.g., insurance contract, escrow contract, corporate bylaws with dividend rules).


Contracts don't exist within currencies; contracts exist on top of currencies. Sticking a turing complete language into the currency doesn't remove the problem of third party management; it forces the currency to absorb some of the complexity. Is there any reason why this can't just be layered over an existing crypto currency instead of needing to be built in?


Blockchains aren't about currencies. They're about providing a single immutable scroll for a society to write entries on. You can use a scroll to record transactions for a currency, but you could also use it for any interaction between people.


Associative arrays aren't about phone books. They're about providing key value storage. You can use an associative array to record phone numbers, but you could also use it for any key value pairing.

Why the same hash table for two different things? Why the same block chain for two different things?


Blockchains aren't plain old data structures. Their value comes from consensus, and it's way easier to use an existing consensus than to establish a new one.


Is Ethereum not on its own blockchain?


It is. Establishing a new blockchain is a hard thing to do. Ethereum also benefits from network effects between contracts: any contract can call another one to use its functionality.


What does "establishing" mean? There are lots of block chains.


> Also, I still don't understand why I'd want a programming language in my currency.

Actually, I think you're looking at it wrong. It's not a programming language in your currency. It's a currency in your programming language.


Okay. Why would I want a currency in my programming language? This obviously isn't the same as having a library for using a currency.


You might disagree with his viewpoint but that isn't FUD. This is a very even handed description of what is going on.


Agreed. This article projects no actual Fear, Uncertainty, Doubt, so it's not FUD.


Fear of being left behind. Uncertainty about the future of Bitcoin. Doubt in the community.


I don't disagree with his viewpoint; his arguments are irrelevant. A good way to understand the purpose of a piece of writing is to summarize the purpose of each passage into a single sentence.

Here is my attempt; feel free to skip it.

Bitcoin apps aren't innovative.

The Bitcoin scripting language is restrictive. Ethereum has been successful.

Nothing. (It may or may not be so.)

The restrictiveness of Bitcoin's scripting language is a legacy issue, and the scripting language is very important.

Bitcoin is amazing to some, but not all.

Bitcoin hasn't innovated for seven years, but Ethereum is innovating right now.

Ethereum is the future of digital currency.

Bitcoin's scripting language is restrictive and hard to use.

Ethereum is easy for developers to use.

Ethereum looks more familiar.

Ethereum can do things bitcoin can't.

Ethereum has everything in the same protocol, which is better than layers.

Ethereum has better developer resources.

Bitcoin applications aren't innovative.

Ethereum has lots of new innovative applications and more to come.

A digital currency is only as good as its applications. The creator of Ethereum is a good leader and a nice person.

The leader of Bitcoin left and the remaining people don't work together.

Bitcoin developers and figureheads are mean and petty.

Bitcoin isn't growing and that's bad.

The Ethereum developers are innovative.

Bitcoin isn't changing quickly and that's bad.

Ethereum is faster and provides money to more miners.

Nothing (It may or may not be so.)

Ethereum hasn't had any large schisms or internal conflict.

Ethereum allows you to do more than you currently can in Bitcoin.

There are security risks, but it isn't Ethereum's fault.

Proof of stake is awesome.

Nothing. (It may or may not be so.)

Nothing. (It may or may not be so.)

In summary, Ethereium may replace Bitcoin because it is innovating faster, has a nicer community, and has a better developer community. (This is the thesis!)

I am neutral

Digital currencies are rapidly changing.

Technology is great.

And now we've located the thesis! What is very real, though, is the possibility that Ethereum blows past Bitcoin entirely. There is nothing that Bitcoin can do which Ethereum can’t. While Ethereum is less battle tested, it is moving faster, has better leadership, and has more developer mindshare. First mover advantage is challenging to overcome, but at current pace, it’s conceivable.

In summary, Bitcoin is restrictive, inferior, stagnant, and has a community that is fragmented, lacking innovative developers, filled with mean people, and has no leader. That's the message this blog post deliberately sends. However, none of these arguments are valid. Being restrictive is not a bad thing in itself. Being simple isn't a bad thing. Being stable isn't a bad thing. Calling a community fragmented does not make it so. Developers don't matter; digital currency is valuable because it's a way of storing and exchanging value, not because of related software. How much someone in the community cusses doesn't mater. That Gavin is gone doesn't matter. Calling a community leaderless does not make it so. The people who have bitcoin matter, because the point of a digital currency is to store and exchange value.


Everyone is 100% allowed to and encouraged to change their mind, but it's no surprise that this is penned by Fred not Brian given Brian's quite firm stance on non-btc digital currencies ~ a year ago. I felt it was out of line at the time, although his comment (which mostly mentioned Ripple and altcoins) has turned out technically to be true, the idea that innovation in digital currencies was "done" and Bitcoin needed to be the focus was pretty crazy.

Ethereum is exciting - my dad, a lawyer who doesn't know you can use the internet at our house, is excited about it. It makes sense how you would use it. I hope it continues up and to the right!


I think people get excited because they see the word contract and they know what that word means. In the case of Ethereum it probably doesn't mean what they think since smart contracts in Ethereum are a programming language.


A non-smart contract is just written in a more ambiguous programming language that needs to be interpreted by $500/hour lawyers instead of CPUs.


Might Fred Ehrsam have some personal interest in Etherium, being a former Goldman Sachs trader (Etherium having been co-founded by Goldman Sachs alum Joseph Lubin)?


More likely Coinbase just started accepting ethereum trades because bitcoin is stalling and 2-3 other strong platforms(aka competitors) already offer it.

His basic point was related to bitcoin being not great "beyond store of value and speculation.", and how etherium is magically going to avoid that with killer apps.... sure...that is bubble speak for solving problems that don't actually exist.


I think you hit the nail on the head: he has a vested interest and ethereum presents a runway for coinbase.

IMO Bitcoin's problem, as depicted by this thread, is complexity, which ethereum adds more of instead of less. Make money work first, then create specialized verticals after.


So... honestly asking here, but why isn't the blockchain length a problem in the long run? Whenever I've read about this there's a bunch of handwaving and change of subject, but I admit I've not read that much.


Nothing about the merkle tree that blockchains are built on prevents you from truncating the chain in certain circumstances. The truncated piece can still be verified against an un-truncated chain for auditing purposes. So it would be possible for a smaller section of the network to keep the full chain while a larger segment of the network can keep truncated chains of a smaller size.

You can configure the allowable size as well so any particular node on the network can decide how much of the chain they prefer to keep around.


Ethereum's designed to allow very effective pruning of old transactions. Details here: https://blog.ethereum.org/2015/06/26/state-tree-pruning/

It's already implemented in one of the independent clients (written in Rust), and they plan to add it to the official client before the storage size gets too unwieldy.

In the long term they also have plans for sharding, so any given node doesn't even have to store the entire current state. That's more of a research problem but they seem to be making progress on it.


Well two main reasons.

One is because a lot of data is redundant, more on that later.

And two because storage becomes abundant. i.e. in 1995 1mb of daily storage would be a big deal, it'd cost a few thousand dollars to store a year's worth of data. Today 365mb of storage hardware costs about 1 penny. Today the blockchain adds at most 50gb of annual data, which costs about $1.5 of retail harddrive hardware per year, in a few years that'll drop down dramatically, too. So abundance of storage, if it outpaces blockchain growth, isn't that big of a problem.

The exact numbers are a bit hand-wavey, I agree, because a lot of this is new stuff and dependent on a lot of uncertainties. e.g. the growth of storage abundance is relatively known (although far from certain), but it must be compared to the rate of adoption and the rate of block size increases, both of which are relatively unknown, to know whether storage tech outpaces storage needs.

But data redundancy is the main argument, not abundance of storage.

i.e. if I have a list of transactions, where I send you $1 and you send me back $1 a trillion times, we could either store a trillion transactions in a trillion days, one per day, which would be a massive file... or we could store the last 10 years of transactions (just 3650 transactions) and have a for all intents and purposes 100% safe and accurate idea about our balances. Most of that data just isn't necessary to store.

At some point you can say, 1 year ago there was a certain balance on the blockchain, this balance is correct, hasn't been contested, and would need billions of dollars spent on energy to 'correct' by double spending the transaction and then mining 1 year of blocks while keeping up with new blocks, i.e. a virtual impossibility, so we can trust that 'snapshot' of the blockchain. Then we can throw away all the data before that, use that snapshot as a sort of 'balance', and then build a new chain from there. This means that for practical purposes, you can keep the blockchain limited to say a year's worth of data, or say X transactions back in time, if you wanted to.

So what'd happen is that a few parties, e.g. large businesses and universities, would store all data for posterity, research etc... while most participants would only store a small chunk of data.

It's more complex that that but that's the basic gist of the story.


Glad to see Coinbase moving in this direction. I'm hoping they'll become a consumer friendly portal for the (hopefully many) assets that will trade on Ethereum.


Ethereum is definitely cool, but I stand by Bitcoin as the best solution for a "public sector" crypto


I'm new to Bitcoin development and cryptocurrencies in general. Can anyone give a quick intro to Ethereum's scripting system and why it's such a big deal?


I'm not an expert on Bitcoin's scripting language, but here's a few main takeaways

* Ethereum allows shared state between transactions, Bitcoin doesn't. That means one application can state "The price of Eth is $10USD" and a totally unrelated application can reference that value. The result is that each application provides an API that all other applications can call.

* Both Bitcoin and Ethereum have a stack based scripting language. However Ethereum also has a higher level language that compiles to the stack based language. That means you can right reasonably readable code without OP codes. Functional program is so much mentally easier than writing a stack

* Ethereum (unlike Bitcoin) is Turing complete. It can have code that loops and recurses based on the state of the chain


> Ethereum (unlike Bitcoin) is Turing complete. It can have code that loops and recurses based on the state of the chain

Yikes. Turing-completeness is the last thing I want in a contract language. These things should be _provable_ and _total_. Allowing arbitrary computation opens up a whole new can of worms.


This was my first reaction. Why does a contract language need to be Turing Complete? Trustless contracts + Turing tarpits seems like a big turn off to me.


People are working on formal verification of solidity code: https://forum.ethereum.org/discussion/3779/formal-verificati...


I'll give you this simplistic example.

Proof of Burn in the Bitcoin world means making up an address (such as "1CounterpartyXXXXXXXXXXXXXXX...") which is essentially impossible to ever be associated with an actual key so there's no chance of recovering the funds sent there.

Proof of Burn in the Ethereum world means writing a contract and publishing the source code such that it can be verified to match the contract address living on the chain. A minimal proof of burn would be this "contract Burn {}" an empty contract that does nothing but receive funds, can never be destroyed, is controlled by nobody and all of this can be verified publicly.

The difference is subtle but important.

edit- btw, yes you can also send funds to address 0x0 but this still leaves open the possibility of a hard fork giving new meaning to that address in the future. my example is meant to be a demo of the difference mostly.


See my two comments, and feel free to reach out if you want to learn more


Great overview, thanks. I'll have to do some more reading and perhaps try it out myself.


Has DAO really raised $150M, or is that just the market cap of a pre-mined cryptocurrency after some limited buy-in?


The DAO had $150m worth of ETH exchanged for DAO tokens "invested" in it.

I say "invested" because there is no actual investment with "The DAO". "Investors" are free to withdraw their funding back at any point before a proposal voting takes place. This is basically a risk-free proposition - "invest" your funding now to join on the buzz train, and take your money back at any point if you don't like the proposals being proposed. A majority vote within "The DAO" cannot actually vote for an investment with the entire funding available for "The DAO".

Technically speaking, until after some proposal wins a majority vote, no money actually changes hands... the investors are still in full control of their money and should still be considered the owners of it - not "The DAO".

For this reason, I think that calling this "the biggest crowd-funding ever" is incredibly misleading. There is no commitment and no risk, unlike how crowdfunding usually works.


Risk free, assuming the DAO doesn't have a bug that allows an attacker to steal all the money.

Somewhat related: "Ethereum Contracts Are Going to Be Candy for Hackers" http://vessenes.com/ethereum-contracts-are-going-to-be-candy... HN discussion: https://news.ycombinator.com/item?id=11725624 (192 points, 6 days ago, 83 comments)


Risk free, assuming you're OK with having your currency locked up in the interim- I'm predicting an ether price spike before the DAO is able to split, allowing ether holders to capture gains unavailable to DAO holders.


It's not as simple as you make out. In order to get their ether out they need to go through a complex process that takes 48 days:

https://daowiki.atlassian.net/wiki/display/DAO/Step-by-Step%...

I think a large portion of the investors would be unwilling to do this and simply sell their The DAO tokens on an exchange, thereby keeping their ethereum locked up in The DAO


I was unaware of the 48 days delay. Thanks for the link.

So, there is some risk in terms of temporarily lost liquidity, but I would still stay that comparing this to a traditional crowdfunding where investors actually lose control over their funds is nonsensical.


so...are DAO shares actually worth anything if you do not want to vote? I am confused on why people would invest


That value is pegged to the value of Ethereum, whose market cap right now is $1B. If $150M worth of Ether were dumped on the market, the price would likely plummet.


Arcade City[0] created an Uber-killer in Ethereum, and shut it down, because the rocket ship took off too fast.

Ethereum enables the killing of giant-killers.

0. http://arcade.city


I really don't see Ethereum killing Uber or AirBnB, but I'd be happy to be proven wrong.

The reason people use Uber or AirBnB is because of

1) trust

2) network effects (you need a LOT of users for these things to be useful)

3) great, fast, simple UX

None of which Ethereum or Ethereum companies have yet, and even if Ethereum becomes popular, Uber clones on ETH face the same uphill battle as any other company trying to take on Uber.

It doesn't really matter for the average user what the underlying tech is, if it's powered by a decentralised cryptocurrency or not.


Never going to work. Who is going to invest millions in user acquisition in a decentralised system with low fees?

What about customer service? Who mediates when there's a problem with the driver or rider? Who vets and background checks the drivers?


I got excited and installed an etherum wallet. I transferred two BTC to it but now my etherum Wallet says my balance is two ether!

That sucks I'm out 900$ on this thing. :-(. Any ideas?


Are you serious? I hope not.

Bitcoin and Ethereum are not stored on the same blockchain and are not compatible or directly convertible.

Your only chance of getting the bitcoins back is to try to create the same wallet address on the bitcoin network (I'm not sure if the backup seed strings are compatible, may not be possible)


I really don't understand how it happened. I used shapeshift.io. I put a ticket in with them at least. Waiting to hear back.


Ah it sounded like you just tried to transfer bitcoin straight to the ether account.

Hope their support sorts it out for you


I don't think it would have gone to a bitcoin address since I did get the two ether from somewhere.


Update. Shapeshift refunded my overpayment. Apparently I read the instructions wrong. All good now.


Is Ethereum a "dangerous" technology to play with? With regards to contracts that might be deemed illegal.


i re-read http://techcrunch.com/2016/05/16/the-tao-of-the-dao-or-how-t... to brush up on DAO before reading this one.


What a coincidence, I just bought ETH today with BTC from my Coinbase account.

Does this mean I can hold ETH in a Coinbase wallet soon?


You can hold ETH in a Coinbase exchange account today. Support in their consumer wallet is coming in the next few months.


Bitcoin-Scammers need a new playing field; that's how I read everything related to crypto currencies now.


Are there any exchanges right now that allow purchasing of Ethereum?


gemini, coinbase exchange (gdax), kraken, poloniex, etc

First 3 allow direct purschas with USD


Kraken also carries ETH/EUR, with low SEPA fees. Quite handy.


I respect Ethereum project and people behind it, but am not convinced.

For loops: I am tired of seeing Turing complete, to mean just for loops, I thought, HN crowd busts jargon, so I am just going to say for loops. I think Bitcoin makes minimal use of the resources on the Blockchain, hence the minimalistic script, which can be used for multi-sig as a condition to move coins. Which the creators felt is sufficient, and the actual contract could live (run) outside. Now imagine if there are 1000 Dapps (distributed apps in Ethereum world) running and all of them have for loops. Now for every block which is written, it will have the overhead to run all these for loops. And each of these for loops are going to run on each of the full nodes. That is the ones which are trying to mine a block. I think, this is a huge overhead. As if PoW based mining is not a computing burden already.

I know they are exploring PoS for mining. But I think PoS is better for closed Blockchains, with limited stake holders. Example the settlement layer which the Big Banks are exploring using a closed Blockchain, obviously can do with PoS as all blocks can be signed by all stake holders.

Dapp: I don't clearly understand why Dapps need to live on the Blockchain. As there core logic is bound to be bloated, and should live outside the Blockchain, to conserve resources. Bitcoin being a single app on the Blockchain i.e a crypto currency app, is facing scaling issues. Imagine a diverse range of Dapps all living on the Blockchain!

Scaling: Admittedly there is a dispute going on in Bitcoin land over scaling. And I have been gobbling up points on all sides for months now. And IMHO the issue is very complicated. When I started out, I shared the view point that they should increase the block size. But, I don't know, recently, I am beginning to see the point of the core developers. I see merits in the argument of decentralized nature being preserved. Also attempts like Seg-Wit (again note they are pushing things outside the block, again making it as minimal as possible, contrary to the Dapp philosophy).

Look at it this way, if Ethereum had come first, Bitcoin would be a single Dapp on it. And with all its problems. Ethereum is just out, and most likely it will evolve in the direction of the first successful Dapp. As of now, IMHO, its an idealistic platform in search of a real (d)App. No disrespect. I trust Butarin & co are a sincere bunch of guys, but they have a long road ahead compared to Bitcoin.

Not a ponzi scheme: Lastly, I really hate to see a lot of folks casually dismissing Bitcoin as a ponzi scheme. Kindly note that its creator has not moved a single coin. The second guy who joined him has passed away. And I think, Bitcoin has inherited the philosophy and spirit of its founder(s?) and early devs, who had no idea what they are getting into. And were mainly doing it to finally have a successful crypto currency, after many failed attempts.

So overall, I don't buy the points of the Coinbase co-founder. He definitely makes some good points. But IMHO he gets a lot of it wrong, and based on presumptions (e.g. the world needs Dapps running on Blockchains), only some of which I have explained above.

Edit: Typos & minor rephrase


This is good for bitcoin.




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