The Raiden project is the closest thing to Lightning, was recently deployed to the main chain, and explicitly supports any ERC20 token.
The article says Plasma is dead because...Peter Todd, a Bitcoin dev, claims they had a similar idea and rejected it? Meanwhile, on Ethereum a bunch of teams are actively working on it and the Loom project has a version up and running.
The article asks why if proof of stake is so great, didn't Ethereum just start with that? Because proof of stake had widely-recognized security flaws (like "nothing-at-stake"), and it took years of research to fix them all.
The entire article is of similar quality.
I agree that it is still in need of mainstream use cases, if that is your metric then you can justifiably argue no cryptocurrency is "successful".
It's very typical that spruikers of tech hype cycles focus on the amount of press coverage, the number of projects rushing into the space, the amount of developer interest, or highly extrapolated market numbers. It doesn't prove anything about whether the thing has any real value or will be around in 10 years.
Given the allegedgedly vast scale of cryptocurrency deployments, there ought to now be some real uses and I don't see any, other than black markets, money laundering, speculation, and ransomware. Those are always going to exist and may be a stable base but probably aren't enough to justify the hype.
However, as someone now deeply involved in the tech, I'm pretty confident that the use cases are coming and are delayed solely because of peculiar obstacles that will likely get resolved in the near future.
A brute force exhaustive search of all possible technologies is not smart engineering.
NUMBER OF TOKENS USED FOR ACTUAL EVERYDAY PAYMENT IN AN ECOSYSTEM ON THE MAIN NET and not just pre-buying for speculative purposes.
Has there been a single one? Cryptokitties is the only one I can think of and that has nearly brought the whole “world computer” to a halt.
Projects like Kik Messenger which raised hundreds of millions even say in their whitepaper that they will get off ETH as soon as they can, because it can’t handle the volume of transactions they have.
it's at most a hacker toy platform.
MakerDAO is awesome, and would encourage you all to take a look.
You cherry-picked some points and rebuffed them, then proceeded to generalize and dismiss all of them.
The reality is that any SQL database would be superior to every blockchain unless your motives are criminal nature.
I sold all of my cryptos in Q1 2018, after buying my first bitcoin in the summer of 2013 and loosing a (luckily) small chunk of it in the infamous MtGox hack.
What if you're a person in China in the future, your social credit is crap, and the only way you can buy bread is over a government approved payment app?
If you hate blockchains in general, fine, but that's a different viewpoint than what the article espouses.
People in Venezuela and other political or economically opressed people around the world don't agree .
It seems you are wrongly extrapolating the context where you live.
One man's terrorist &c.
1. Assume we have some set of "validators" who control the global consensus process. They come to consensus on the current global state of the system. These validators are vaguely analogous to miners in Proof-of-Work consensus.
2. These validators have coins bonded as collateral in exchange for more voting power in the consensus process.
One key idea necessary for Proof-of-Stake is to punish Byzantine validators, i.e., those who deviate from the consensus protocol, by destroying their bonded stake. If you misbehave, then you lose some proportion of your collateral. Thus, validators have incentive for participation (from rewards and fees) and a _disincentive_ for malicious behavior.
This is in contrast to Proof-of-Work consensus, where there is no way to punish a specific miner that misbehaves--we cannot programmatically take away physical mining ASICs. Changing the Proof-of-Work function is only an absolute last resort as it unfairly punishes the other honest miners.
So what constitutes misbehavior? When can we confidently punish another validator? An example is when a validator publishes signed attestations for conflicting forks--an example of equivocation. When presented with signed evidence of equivocation, the honest majority of validators can agree to punish the equivocator. This punishment system solves the original "nothing-at-stake" problem where a validator has no disincentive not to contribute to both sides of a fork.
On another note, the OP seems to misunderstand the fundamental consistency vs availability (in the event of a partition) trade-off that consensus algorithms must to make. Bitcoin's Proof-of-Work is more AP with probabilistic eventual consistency. In the event of a partition, the side with less mining power will make transactions unaware of the partition. When the partition heals, all transactions on the weaker side will revert, effectively double spending all transaction recipients on that side.
In contrast, many Proof-of-Stake protocols use a more traditional PBFT-style consensus process which favors consistency over availability. In the case of a partition, the weaker side will simply become unavailable (if it contains less than 1/3 of the voting power). In the event that no partition has >2/3+ of the voting power, the entire system will become unavailable. Also in contrast to PoW's eventual consistency, PBFT-style Proof-of-Stake allows for finality as soon as the validators come to consensus on the next block.
This setup assumes there’s already consensus on a certain set of validators, but the challenge is arriving at this consensus in the first place.
This is the general problem of proof-of-stake: it assumes the presence of consensus in order to arrive at consensus. This is because consensus is reached by utilizing the scarce resource that is the chain’s token, but without consensus in the first place this token isn’t scarce at all.
Proof-of-work uses something external to its chain as the scarce resource that determines consensus (energy), while proof-of-stake uses something internal to its chain (the chain’s token). This means that when a PoW chain forks, the two chains have to share the external resource, while the resource is copied for PoS chain forks.
The validator set changes as people bond or unbond coins in exchange for stake. Running a fair and secure initial distribution is a somewhat orthogonal problem; perhaps you can run an open auction. Any Proof-of-Work or Proof-of-Stake systems has issues with low security in the beginning. Consider that until late ~2012 the total hashrate of the Bitcoin network was less than the hashrate of a single Antminer S9.
> This is the general problem of proof-of-stake: it assumes the presence of consensus in order to arrive at consensus. This is because consensus is reached by utilizing the scarce resource that is the chain’s token, but without consensus in the first place this token isn’t scarce at all.
Consensus and scarcity are tightly related. The consensus process and protocol spec are what make the token scarce, since by definition the majority agree on the token's inflation rate, supply, block reward, etc.... What happens when validators try to fork and change these parameters? They are directly incentivized to do so, yet similarly, what happens when Bitcoin miners try to change the block reward? Of course, they don't hold all the power; with sufficient cause and collaboration, users can signal a user-activated soft fork, or simply choose to follow the original unmodified fork.
> Proof-of-work uses something external to its chain as the scarce resource that determines consensus (energy), while proof-of-stake uses something internal to its chain (the chain’s token). This means that when a PoW chain forks, the two chains have to share the external resource, while the resource is copied for PoS chain forks.
Yes, this is called the "nothing-at-stake" problem, and it is solved by punishing validators who equivocate. This enforces scarcity of voting power across forks. The point is they can't exercise their voting power on both chains. As soon as they vote on one fork, they are committed. The validators on the other fork are incentivized to delete their stake if they vote on the other fork simultaneously.
With PoW I can choose the 'longest' chain (chain with the most total work).
Or you could not do that. You could instead pick a different one. There is nothing stopping you.
If there are multiple networks, it would be obvious, and you can merely make up your own mind about which to follow.
Interestingly enough, this also applies to POW chains. There is nothing stopping you from picking a shorter chain. But if I had to guess, I would say that almost nobody would be following the shorter one.
This applies to POS coins as well. There would likely be 1 chain, that everyone is following. And this one chain would be obvious.
Is there a subtlety that makes that unworkable?
The reason this can’t work is because it has no cost to create a new chain from scratch. I can create a thousand valid PoS chains in virtually no time, and there’s no decentralized way for you to choose the one everyone else chooses.
The only way to solve this is to give special rights to some set of stakers.
I mean it’s been known about PoS systems since inception, it’s just funny how it’s supporters never like to admit it.
Proof of work committed to the chain that is valid according to consensus rules you know is universal and objective measure that everyone will observe equally.
That’s where bitcoin’s security comes from and that’s how you can avoid to rely on trusting third parties.
Hint: They don't exist. That's because the specification of the consensus rules are in the reference implementation of Bitcoin and every other implementation has to implement the same behavior as the C++ client, including any possible programming mistakes.
So you only know if your re-implementation works "correctly" if you download and run it against an opaque binary from an untrusted(?) source.
Whatever you do, you need to anchor your trust somewhere. You should always be aware where you anchor it and what trade-offs there are.
knowing consensus rules is the easy bit - code is open source, there are multiple implementations, there is community, there are users, merchants, exchanges - they all agree what consensus rules are. but what's most important - I CAN VALIDATE FULL BITCOIN BLOCKCHAIN IN REASONABLE AMOUNT OF TIME AND VERIFY THAT I FOLLOW THE CORRECT CHAIN.
you seem to have forgotten what this thread is about. it's a short one - i'm sure you can track back and read it again, carefully.
If you have multiple implementations that disagree how do you decide which one is the right one if there are also 2 competing blockchains available?
You said "You only need to know consensus rules. You can use any software, you can build it yourself, you can order an audit, you can write software yourself." and that's plain wrong.
You need to ensure you got the right consensus rules. This is not as easy as you put it.
Simply by understanding the hash function and difficulty, you can calculate the total work of any PoW blockchain. This provides some amount of trust that is very difficult to subvert. You only need to know the consensus rules if you want to be a miner on the chain.
VALIDATE THE FUCKING BLOCKCHAIN
what is so hard to grasp about this?
With Proof of Stake, you're trusting someone on the internet to tell you the hash for the most recent valid block.
And in practice the difference is even less significant. In reality, very close to every new user of a PoW blockchain just trusts the software distributor to be providing them with a client that works with the protocol commonly known as (Bitcoin-Cash, Ethereum, etc).
Knowing consensus rules I can verify the chain and if I notice something fishy - I go back to figuring out if I’m being attacked.
If instead I simply accept what chain I should follow - I have no guarantees I wasn’t attacked.
With PoS it’s even worse - I can generate million different chains for zero cost and you have no objective measure to tell which one of them is more genuine and more secure. That’s exactly the issue PoW solves - gives you such objective measure to compare chains.
The risk that the party you trust is defrauding you is infinitesimal in both cases, given you can poll the community widely until you settle a highly credible source of truth, or several credible sources that all agree on the same version of events.
>>That’s exactly the issue PoW solves - gives you such objective measure to compare chains.
That's true, with PoW you can measure the work in each chain. With PoS, you do you have a somewhat similar option: you can measure the market value of the coins of each chain.
no, nothing in PoS requires that. just a sad state of affairs with most centralized insecure PoS coins these days.
> With PoW, you only get the consensus rules.
no, you can opt to get hash of the most recent block if you want to compromise your security.
> Either way, you're relying on a trusted third party for bootstrapping.
no, you don't have to rely on trusted party for PoW bootstrapping. if you're scared somebody has communicated consensus rules to you incorrectly or maliciously - you just get those rules from multiple sources and VERIFY THE CHAIN FOR YOURSELF. with PoW you get objective measure to compare those chains, with PoS you get nothing.
> With PoS, you do you have a somewhat similar option: you can measure the market value of the coins of each chain.
no, you completely misunderstand the problem at hand. given coin X and multiple chains of coin X - how do you compare those chains?
market price of coin X tells you nothing how to distinguish between competing chains. market price is completely detached from actual verification work happening on chain.
It's necessary for bootstrapping. What alternative is there for bootstrapping using PoS?
>>just a sad state of affairs with most centralized insecure PoS coins these days.
I have no idea what superior alternative for PoS you're referring to. What bootstrapping alternative does any PoS blockchain have to getting the recent state and consensus rules from a trusted third party?
Right now your argument makes absolutely no sense to me as you suddenly seem to be implying that there is a superior PoS mechanism that existing PoS chains don't use, which is an entirely new argument you haven't touched on before and an have not detailed right now, so please elaborate on this with a mind to explain its connection to the argument thread that preceded it.
your claim was consensus rules AND hash of most recent block are necessary. this is false, hash of most recent block is not necessary for bootstrapping.
> your argument makes absolutely no sense to me so please elaborate
you have to be more specific. i've responded to every point of your message. if you don't understand something in my response - point that out.
A hash of A block from a trusted third party is needed for a node to bootstrap into a PoS network. Regardless of which block that is, the same amount of trust is required. And getting a more recent one reduces the number of blocks the node needs to download.
Anyway, the point is, the difference in bootrapping between PoW and PoS is in PoS, a hash of a block is also needed from a trusted third party. In both cases, a trusted third party is needed, and if the TTP is malicious, they can totally defraud the user.
so far so good...
> In both cases, a trusted third party is needed
wait, what? when did that thing sneak into your argument? why do i need trusted party for PoW?
But you don't know the consensus rules. How do you know that sha256 is the "real" bitcoin proof of work algorithm? Maybe the real POW algorithm is sha512?
You can't get around this bootstrapping problem.
the point is that when you choose consensus rules bootstrapping doesn't rely on third parties in bitcoin. it does in many other coins including ethereum.
There are no first principles where you derive everything from.
A person simply picks a chain to follow, it is their choice and their responsibility, in the same exact way that one chooses for consensus rules.
the two are not the same. consensus rules dictate how to validate the chain. following the chain without knowing the rules and validating it is meaningless. might as well trust any existing fiat system.
> There are no first principles where you derive everything from.
no, but there is an objective measure of security contributed to every chain - proof of work. by validating competing chains and measuring how much work they contain you can make informed decision. PoS has none of that, trusting chainstate from third party has none of that, only validating for yourself.
From the Cardano paper  p. 47,
> Even if the attacker could find a strategy to generate an alternative chain with valid leader selection data, presenting this chain and its blocks generated at slots that are far ahead
of time would not result in a successful attack since those blocks far ahead of time would be rejected by the honest stakeholders and the final alternative chain would be shorter than the main chain.
At first glance, the attacker then needs to gain the keys for almost all of the bonded stake at some point in the past. This is obviously a stricter requirement than holding keys for 2/3+ of the stake at some point in the past, but still seems remotely plausible when targeting the small set of validators in the early bootstrapping period. Remember also that these early validators could be totally cashed out of the system and thus have actually have no disincentive not to sell their keys.
Actually, even controlling only 2/3+ of some past stake, the attacker can likely grind on the randomness beacon outputs (since they control all the shares) to ensure his controlled keys have near 100% of the slots in the next epoch. Then the long range fork would be of a similar or possibly even greater length than the honest fork.
This is an important yet under-appreciated point. It's now extremely difficult to sync an Ethereum node from scratch. If the processes ever completes on commodity hardware, it takes weeks. And that difficulty will only climb as more and more stuff gets dropped onto the Turing-Complete "world computer."
This situation drives users in ever greater numbers to services that tell them which transactions are valid or not. Verification with a full node, the bedrock of censorship resistance, dies a death of 1,000 cuts as a result.
Philosophy aside, it's really painless and takes less than a day to get a Ethereum node up and running and chugging away, hard stop.
In Ethereum, the closet to a Bitcoin full node would be an 'full archive' node, those are keeping all the transactions, down to the stack traces and events, without pruning. These are usually run by block explorers, but you certainly don't need to store that much detail if you just want to interact with a dapps.
There is no difference between BTC’s UTXO model and Ethereum’s account model in this sense - both are aggregate structures and to have full certainty the aggregate you’re looking at is correct you have to run through all the transactions.
To speedup sync in BTC it is assumed that blocks older than some amount of YEARS are valid but you still have to go through their transactions to build up the aggregate UTXO set.
In ETH instead it is common to just download the result and trust it’s valid. And since it’s now impossible to sync from origin you can never tell if some account doesn’t have ether created from nothing.
The information is in the block headers.
> In ETH instead it is common to just download the result and trust it’s valid
Nope. You still have to download all the block headers from block 0 and check if they are valid, including the PoW and other hashes.. The blocks are basically tamper proof as in Bitcoin (but can also be vulnerable to a 51% attack)
Then that's where it all diverges from Bitcoin: in Ethereum, there are three merkle trees: one for the state, one for transactions and one for the transaction results (receipts). The roots of these trees are in the blocks, once you have these, you can verify a particular value of, say, a state value, without the need to verify each and every other value, by walking through the tree and doing a merkle proof. There's plenty of info on the web explaining how it works if you look it up, eg. Search for "ethereum state trie"
As for syncing, recently it improved a lot. I did it a few times last month with Geth on an old machine just to test it out. Synced within 2 days, a big improvement over the previous versions of Geth. And yes, it got all the blocks from 0 to current. Blocks by themselves are very light.
> You still have to download all the block headers from block 0 and check if they are valid, including the PoW and other hashes..
and unless you validate those blocks you don't know if the chain you're looking at is valid. headers don't help with that.
> The blocks are basically tamper proof as in Bitcoin (but can also be vulnerable to a 51% attack)
vulnerability to 51% attack depends on cost of such attack. if it is "normal" in ethereum to trust third parties with state of just couple hundred blocks old - the attack becomes very cheap. and if i understand correctly that's the case with majority of ethereum nodes as they aren't fully validating and are in fast sync or light mode.
in BTC `--assumevalid` points to a block that is more than year and a half old.
> The roots of these trees are in the blocks, once you have these, you can verify a particular value of, say, a state value, without the need to verify each and every other value, by walking through the tree and doing a merkle proof.
except when the state you downloaded from third parties and assumed was valid, was actually forged. since you're not executing transactions you can't know what transaction receipts would have been created.
> And yes, it got all the blocks from 0 to current. Blocks by themselves are very light.
An archival node in Ethereum goes beyond a full node, and stores data not needed to do full validation.
A full node in Ethereum needs to download about 80 GB I believe, which is a tenth of what an archival node needs to download and store.
There's a lot of misinformation, some originating due to genuine problems (trying to use a hdd or geth with barely working garbage collector) and misunderstandings, some from intentional lies (especially two r/bitcoin moderators - thieflar and stopanddecrypt).
The SSD vs. hard disk distinction is key. I ran into the "it will literally never complete" issue trying to sync to an external HD on my home MBP - I ran it for about a week and it didn't work. Tried parity as well, same result. Once I decided I'd just rent a big SSD from Amazon I had no problem.
Here's an example:
,,Seems like it does indeed proceed but very slowly. After 12 days on the 96gig ram machine I am finally at block 4732597... I will report back how long it takes to finish.''
You can run a full node that verifies everything on an ongoing basis without doing a full sync from the genesis block - just start it in fast sync, let the chain catch up, and then run it again in full mode. Unless you believe the Ethereum blockchain has already been compromised, there's no reason why your personal node has to verify everything from the genesis block.
Geth CLI options:
Understand the differences between syncing, validating, and pruning, then it becomes simpler...
This is simply untrue. I recently synced an Ethereum node on a 2 year old desktop computer. Took ~1 day.
The biggest problem with the fast sync is that sometimes when Ethereum node gets stuck, the devs just suggest to do a new fast sync, which - in my opinion - requires enourmous amount of trust in the developers. Hard forks also require a lot of trust, as old software can't be run side-by-side with new software to validate the blockchain.
Yeah, let’s “just” trust random strangers’ computers to tell us the state of financial system. What could possibly go wrong.
If you don’t understand importance of “don’t trust, verify” than you shouldn’t have anything to do with cryptocurrencies (or cryptography for that matter).
A merkle tree is a recursive structure. If you trust a substructure of it, then you don't need to repeatedly re-evaluate that substructure. What that means in practical terms is if the merkle-tree entry summarising the state of the chain as it was a year ago is assumed correct, then you don't need to keep any of the transaction data from before that point.
But this can only work if you don't have to look back. In Bitcoin, every transaction references an arbitrary previous transaction to prove that it has sufficient funds. You would therefore need "checkpoint" transactions that say "This is the amount of money everybody's got now; we can now forget the past".
checkpointing ethereum state or checkpointing bitcoin utxo set is a way to trade away security, decentralization and trustlessness for faster bootstrap. and ethereum folk have become way to relaxed about that fact.
There are a couple reasons I think Ethereum might prevail over bitcoin:
* Vitalik is young and "all in", god willing he will have many decades to refine and improve Ethereum. Think Linus and Linux versus the cabal of Bitcoin and BSD core leadership.
* Most of the criticism in this article are things that have slipped committed or expected dates. The community is aware of the problems and is looking forward to fixing them despite it taking longer than expected. It's ok to be wrong and off on dates if you get it right "just in time" which is only obvious after the fact.
All in all, Bitcoin might be BSD and Ethereum might be Linux. BSD was technically better for a decade, but Linux had the central leadership of a young Linus and scaled better in adding new developers and corporate users into the mix at the right time. That seemed to matter more than quality, stability, and longevity of governance at least up until now.
It's perfectly valid to point out the technical flaws and remind people they missed their commitments. But I'd caution against making financial decisions with too much weight on that alone, which would be about as effective as making them on the expected good will of the community of a cryptocoin :)
Ethereum is way ahead in the ecosystem race. There are lots more developers using eth and tooling available compared to other chains, and 2019 is poised to accelerate the ecosystem.
The technology still needs work in certain areas (by the way, so does btc). Talented and experienced people are working on it, despite what this tweetstorm says
No one sane would get Bitcoin staffed with complicated features beyond its simple purpose of keeping a decentralized ledger.
Nothing else would go forward if it isn't for Bitcoin running in a stable way.
Bitcoin would be positioned as TCP whereas Ethereum would be regarded as HTTP protocol ready to run apps on top.
BSD's position is more like Bitcoin Cash (or SV). Similar purpose, different philosophy.
Now replace spent matches with spent compute.
Now i'm not expecting nor wanting to get into a debate about the theory of value. I do not expect to be able to win, nor do I want to, but I do hope some doubt is cast into the proposition:
> Matches have a value, you light them and they produce a certain amount of energy
Matches have a _utility_, not necessarily a value. Additionally, compute is _also_ just "burning resources", only its electricity instead of potassium chlorate. Arguably a more fungible form.
> regardless of the fact that it has no debt instruments, lacks liquidity and is completely unregulated and prone to theft.
Only one of the four accusations stands up to any critical thought - which is that it is "completely unregulated". If that is the core of your argument against distributed, trustless currency, then that argument applies equally to all pre Federal Reserve transactions the world over, and I'm not sure what the implied problem is.
The best quote from the first and most approachable of the links above:
> All new mediums of exchange spawn skepticism, and should. For much of the 19th century, paper money was held in ill repute because it seemed so ephemeral and detached from value that could be easily recognized: land, gold, size of armies.
At the end of the day, something has value because two people agree it does. One painting is worth $100million and another $100 because two people agree that’s what it’s worth. Why two people agree something has value is the matter of endless debate. But I assure everyone reading that the commenter I am responding to is not certain to the answer, and actually no one really knows. This is philosophy, we can all have opinions.
When a transaction happens the two people very probably don't agree on the value. Rather, the seller values the painting at "less or equal" of the strike price and the buyer values it at "equal or more". The transaction happens if those two regions overlap somewhat.
But moving on, Bitcoin is not just a store of value. It's electronically transmittable without middle men. You can think of it as gold you can teleport across the globe. Lots of people would find this to be "intrinsic value."
Because it has value to me, and to many other humans who I know and trust, which gives it _extrinsic_ or subjective value. To be snarky: Maybe you should learn to think through others ideas, or read their suggested reading, before accusing them of ignorance.
Labour is how time gets saved -- one person spends their time doing something so that another person doesn't need to spend their time on it, and thus the person spending the time gets some money as a token for the time they spent.
(But I agree with your point.)
Time is the sacrifice. If everybody could have a high standard of living and not work, most would chose not to work and spend that time with their families instead. Obviously, there are some who find meaning or purpose in a lifestyle of work, and chose to do so even if they don't need the compensation which comes out of it. Each to his own.
The key distinction between the currency and Bitcoin is the government's use of force to mandate that people accept the currency as a unit of payment for services (and use it to pay taxes). There is no intrinsic value. After all, it is merely paper or digital numbers.
It's amusing that anti-bitcoiners will use the government force argument to try and push people away from bitcoin. "Bitcoin is no good because it is not backed by government force."
When people hear that, they say. "Oh my god, really? How can I get some?"
Because no one can be compelled to accept Bitcoin to extinguish my debts to them (i.e. by the courts) and I can't pay my taxes in Bitcoin to my local government (no, "just-in-time currency exchange doesn't count).
So given these problems, what is the exchange rate of Bitcoin into anything else supposed to be? Given, again, that eventually, everyone transacting in Bitcoin needs to transact out of Bitcoin in order to meet local obligations like taxes, or just to acquire goods someone actually wants to accept payment in.
Bitcoin is a lot like gold, in that people might find some cosmetic and novelty value in it which gives it more then 0 value. But unlike gold, it consumes a lot of real world resources (electricity, structured silicon) in order to continue existing.
> Because no one can be compelled to accept Bitcoin to extinguish my debts to them (i.e. by the courts) and I can't pay my taxes in Bitcoin to my local government (no, "just-in-time currency exchange doesn't count).
Imagine that! People are willing to accept my bitcoin as a payment for their services voluntarily, and not because they are forced to?
Turns out that there are quite a large number of people who like the idea of economic freedom and dislike the idea of this big cartel telling them what they can or can't do, who they can or can't trade with. They might dislike it so much that they're willing to make the hurdles, and take risks, in order to exchange between currencies to meet their obligations under such repressive systems and achieve some level of financial sovereignty outside it.
People want the choice. They want the choice because the government who holds a monopoly over many businesses in the geographical region they reside often does a bloody awful job, and their prices are too high (a giant chunk of ones earnings, then another chunk of everything they buy). Private enterprises could offer far better service at lower costs and have them delivered on time. If they under-perform, people could pull out their money and pay someone else for the services.
The main obstacle for this kind of voluntary trade is the men with guns saying "That kind of business can't operate here because this is our turf."
In fact it's worse then that - since the value of early Bitcoins is less then the value of later Bitcoins, but all Bitcoins are going up in buying power, the electricity company is eventually the richest entity in Bitcoin without even having to be malevolent.
Of course, this doesn't happen because none of them can pay their taxes (or their suppliers taxes) in Bitcoin. In fact no one using Bitcoin can - everyone eventually has to sell all their Bitcoins to someone to recover the currency they need to do that. But who's buying it then? There's a finite amount - if it stays in use it's worth more then you sold it for when you try to get it back - or, since everyone eventually has to sell it, it's worth less - and less again.
Your assumptions are all resting on the idea that Bitcoin can't be used to pay taxes. This is already pretty flawed in a few places where it is possible. It will be flawed in many places fairly soon, because governments don't want to miss the boat either.
But Bitcoin maximalists don't actually care about this government thing. They would rather it collapse in on itself so that they can instead spend their money with businesses which make much better use of it than politicians.
For that reason, there is a demand for Bitcoin, and while the demand exists, people are willing to pay more to acquire it. At this point, they have to pay more because they're buying from a market with reduced liquidity, largely because existing hodlers would rather keep hold of it because they're pretty confident it will continue to appreciate in value over time.
And in the current world, where the government sanctioned financial services (paypal, mastercard etc) are actively unpersoning people for having unorthodox political views, there is clearly a growing market for an alternative financial instrument which this cartel does not control.
There is a finite amount of Bitcoin total by nature of the protocol. The electricity company is vital to Bitcoin being usable since it's a digital currency. The miners might be necessary too, but they need huge amounts of electricity - which if they had to pay in Bitcoin, means they are paying some portion of the dwindling number of Bitcoins to the electricity company. As is every Bitcoin user. And every bit of Bitcoin they get is worth slightly more after they get it then it was when it was paid, so their purchasing power is going up and up and up. You can't even found a new electricity company and try to compete on price, because beyond some point the original buyer can buy your new cheaper electricity without measurably reducing their spending power, and to capture the market they need to somehow not enrich you too much while doing it. And then of course, best case you just have 2 big electricity companies controlling all the wealth forever. Deflationary currencies are bad.
> Your assumptions are all resting on the idea that Bitcoin can't be used to pay taxes. This is already pretty flawed in a few places where it is possible.
"Just in time" Bitcoin -> currency conversions do not count. They don't count because they depend on an exchange rate (and are provided by a private company in all examples). The government's tax office is not accepting Bitcoin - it's letting someone act as a payment provider but the payment provider is still paying them in the local currency (and taxes are being assessed in local currency, not Bitcoin).
If the price of Bitcoin collapses, you'll owe more Bitcoins. If my local currency collapses, I'm still only taxed on the portion of my earnings in that currency.
> But Bitcoin maximalists don't actually care about this government thing.
However governments care a lot if you don't pay your taxes. And the utilities care a lot if you don't pay them.
So you are saying that bitcoin would only ever become more and more valuable?
How can you similtaneously believe this statement, and that bitcoin is worthless?
They can't both be true. Either bitcoin is deflationary, IE, it goes up and up in value, and becomes more and more valuable, or it isn't.
Which is it? Is bitcoin worthless, or it is so extremely valuable and amazing, that it is going to take over the entire world with how deflationary it is?
Personally, I'd want to support something that you apparently believe is so useful that it is going to take over the world.
The reality is, with nothing backing it (i.e. no government accepting it for taxes), it's not actually worth anything in the long run because eventually everyone has to cash out.
Which isn't to say it's not worth anything now - but the market is exploitative. The goal is to convince everyone to buy in, so those who are in can get out, hopefully taking a profit (not in Bitcoin) along the way.
My point, is that anyone looking at Bitcoin and wondering if they should enter it should absolutely not. Deflationary crypto is a rigged game in favor of those who got in first, and you can never catch up (barring their irrationality). Bitcoin's highs are not going to be repeated, and anyone asking you to buy in wants you to do so so they can get out.
But this is already happening. There are multiple places around the world that accept bitcoin to pay for their taxes.
> it's not actually worth anything in the long run because eventually everyone has to cash out.
Is gold worth nothing, because eventually people have to cash out? Gold is also deflationary.
What people need to understand is that deflationary currencies have existed for centuries. The idea of a federal reserve, constantly controlling inflation rates, is a new phenomenon.
People 200 years ago somehow survived with deflationary currencies.
I am in favor of free choice. And I see no reason why people shouldn't have the choice to own a deflationary currency. If you don't like deflationary currencies, all you have to do is simply not use it, and leave the rest of us who disagree alone.
> Is gold worth nothing, because eventually people have to cash out? Gold is also deflationary.
Gold is not used as a currency today. Neither is Bitcoin. The argument over deflationary currency presumes a world in which Bitcoin fulfills the stated objective of it's adherents as a currency.
Bitcoin and gold are both commodities today. As a commodity Bitcoin has very little to recommend it. Strictly speaking this is true of gold as well, but gold is historically very complicated, and has the benefit of being a physical resource which displays some physical scarcity (of note: gold as a currency isn't strictly deflationary, your inflation rate it just pegged to the rate of mining and discovery).
On gold as a currency - Middle Ages economies routinely bankrupted themselves by making huge windfalls in gold, and failing to recognize that all they'd done was drive a lot of inflation (i.e. the Spanish after they found the Americas - they didn't raise taxes, so the royal treasury found itself in debt even though by simple thinking they should've been very wealthy). Bitcoin has all these problems, but unlike gold also consumes resources to retain it's value. A block of gold after 10 years is still just a block of gold.
> I am in favor of free choice.
And I'm not arguing anything should be illegal. I am arguing rational people should recognize what Bitcoin is, and think carefully about how they value it. It is not what it's advocates say, and it is mostly powered by the reality that your average person does not think carefully about the nature of money very often.
If electricity providing is such a lucrative business, then there will be an extremely competitive market for providing that service, and no one company is going to be able to charge silly fees because they will make themselves obsolete. It is only through a government granted monopoly that such companies are able to exist.
Governments care that you pay your tax, but their ability to enforce their tax collection relies on violence, and ability to prove the taxes need paying. Bitcoin creates an economy where the latter is more difficult, perhaps impractical with more private technologies.
It might turn out that governments have to move to being more voluntary models of trade, else they might not be able to acquire enough taxes to fund their operations.
Definition of debit (Entry 2 of 2)
1a : a record of an indebtedness
specifically : an entry on the left-hand side of an account constituting an addition to an expense or asset account or a deduction from a revenue, net worth, or liability account
I would say yes all transactions involved debt.
In the edge cases of (almost) immediately resolved debt, this is a non-problem, given that we can simply agree not to complete a transaction in case one of the parties involved doesn't want to accept Bitcoin. Hence, the fact that you cannot be compelled to accept Bitcoin is irrelevant in this situation.
Unlike other news aggregation sites, people try fairly hard here to let the sort of accusational, off-topic screed you're replying to either a) get a thoughtful reply or b) fade away into oblivion, instead of boiling over.
There’s nothing particularly special about AirBnB in terms of software. It’s barely more complex than Bitcoin.
But implementing games so that cheating is prohibitively expensive is very hard. That’s why we only have pretty simple games so far, like “ledger” and “compute”.
But we will some day have the entire set of Games Whose Cheats Can, With Some Effort, Be Made Prohibitively Expensive available to us as cryptocurrencies.
Tokens in those systems will all have intrinsic value proportionate to the value those games have in society.
If you want to improve the metaphor find a way to make it so that as a holder of matches I can have very high confidence that there is an upper limit of N matches that can exist at any given time extending far into the future.
Also add some way for me to transfer my matches to another match holder in ten minutes (or an hour, or whatever reasonable interval) regardless of the physical distance between us.
Anything could technically be used as currency. Historically people have always used something that is difficult to forge, because forgery results in inflation, meaning the currency which they hold loses its purchasing power over short times. It ends up not worth the labor they put in to earn it. If that were known at the time they done the labor, they would've asked for payment in something else.
Bitcoin is the best currency that has existed, because it is the first which is absolutely infeasible to forge, and it is simultaneously easy to verify its authenticity.
It's estimated that $70 million dollars in counterfeit money is in circulation in the US. At an estimate of $0.12 per kWh of electrical use Bitcoin uses approximately 70 tWh of power a year. Lets see that comes out to about $120m. At what point is the cure worse than the disease? Again this is just for Bitcoin in its current state as a semi-novelty currency/commodity. How much would it cost to operate the grid for bitcoin if it was the worlds primary reserve currency?
Before your government can create its next spending budget, it needs to pay off its debts with interest. A big chunk of every dollar of tax you pay is taken before the government can even think about what it is going to spend the rest on. This is a viscous cycle because the government can't meet public demand with the remaining money it has and needs to borrow more again!
Each time they print, it devalues the dollar in your pocket by a few cents. This means when the government needs to pay back its debt with the interest, the money it is using to pay back is not worth as much as when they borrowed it. Ooops.
The cost to operate the Bitcoin grid is unimportant, because it is voluntary, and not taken from the public purse. You can chose not to participate directly if you don't want to put in resources, and rely on some other industry much in the same way you seem keen to rely on a government to do things for you.
Deflation causes spending to stop because people hoard money, as spending stops, economies dry up, and voila... economic stagnation at best. But no one without a formal education is Economics is likely to even be remotely aware of that.
Inflation, and Keynesian economics, have empirically served the world quite well. The government's and social policies that go with them not so consistent BUT and this is the important part-- Economics doesn't give a fuck. Inflation is a tool to allow an economy to grow, deflation is a tool to shrink an economy.
Economics is the science of resource management, it's not an opinion. Your opinion is as depressing to me as it is empirically wrong.
Here's an example of deflation: Moore's Law. If computing power is going to double in 18 months, then a computer I buy now will be worth much less in 18 months. If that's the case, best not buy that computer and wait 18 months right?
Another example is a car. It loses 20% of its value on purchase and continues to lose value year on year and is eventually worth nothing.
But nobody would buy a car if that were the case!
Economic theorists are mostly employees or funded by the banks, the central banks and the governments. There's a "consensus" among them that inflation = good because it benefits the industries they work for.
Anyway, it does not matter, because Bitcoin cannot be inflated, and if people now have the choice to hold a deflationary currency or an inflationary one, let them pick! We'll see if those economists were right after all when people actually have a choice.
"No investment" being the core point - the rich may get richer currently, but they have to buy stocks, bonds, start companies in order to do so - take risks and temporarily at least hand their money to people with less.
Under a deflationary model, they don't - the incentive is to avoid spending and investment, since the 100% safe investment is holding your money. The rich get richer - the poor are forced to part with any currency they have and can never join. Of course the system collapses if you don't have to buy in (i.e. no taxes) because why should anyone join such a regressive system?
Which, incidentally, is very much the reason no one should be getting into Bitcoin - all the coins were mined by early adopters, and you getting into Bitcoin is just allowing everyone who has cheap coins to cash out.
EDIT: And Moore's law is an ideal example of this problem really - at every point you shouldn't buy a new computer unless the present value you'll gain from one is outweighed by the depreciation in the future. Turns out computers are pretty amazing so this is a lot less of a problem - but computers actually do things. Bitcoins don't.
If you use the same argument in reverse for an inflationary economy it doesn't add up. The argument would be that everyone would avoid saving. This is only true if you have hyperinflation. Small amounts of inflation are manageable. The same is true for deflation. If deflation is low, the effects it has are manageable. If we have hyperdeflation, then sure, people will avoid spending as much as possible.
If deflation is low, the amount which could be gained by holding the currency is tiny compared to the amount which could be gained by investing it in productive enterprises. The same is true in the inflationary model, because lenders must pay interest on borrowed money, their productive enterprises must earn at least the the amount lent plus the interest and the difference due to inflation, or they'd be making losses.
> Of course the system collapses if you don't have to buy in (i.e. no taxes) because why should anyone join such a regressive system?
This is why socialist types repeat the same mistakes over and fail to recognize them, or the value of free markets. The reason people would join such a system is because they want to get wealthy too!. People desire wealth. If they desire it enough, they will be productive and climb the ladder to get into the club. If they are unproductive, they will probably whine and complain that they should be entitled to other people's wealth. Socialism is a utopian ideal because it ignores human nature.
Bitcoin is extremely risky at this point, and was even more so 9 years ago. The people who invested then took massive risks in doing so. People investing now are taking huge risks. It will be a risky investment until it becomes pervasive. There will probably many more cycles of inflation and deflation because adoption does not match the supply rate. If people earn money from taking this risk, good on them. If people don't take the risk, they're not going to be part of the club. You've got to be in it to win it. Bitcoin is not like land rights which are exclusively granted by rulers or taken by force. There is no restriction and anybody can be an equal party.
The early adopters who have mined coins need to pay their electricity bills. It's not free money. They've had to sell the coins into a market. The distribution of coins is much more widespread than the mining process because of this. People hodl bitcoin even during inflationary periods because they believe it has a strong selling point which will give it leverage in the longer term. (They're low time preference people. Not necessarily the already wealthy.)
> And Moore's law is an ideal example of this problem really - at every point you shouldn't buy a new computer unless the present value you'll gain from one is outweighed by the depreciation in the future. Turns out computers are pretty amazing so this is a lot less of a problem - but computers actually do things. Bitcoins don't.
This is precisely my point. People still buy computers. The thing they spend their money on is more useful than the money itself. This is true of anything really. People need things to live, they need leisure and entertainment, and they're willing to spend a bit of money on it now, even though it will be cheaper later. It applies to most commodities: they lose value over time faster than the currency does. This is what makes the currency desirable to hold over those other commodities when people don't need to spend.
Inflation has the perverse incentive that it encourages people to spend when they don't need to spend. People are trained to have high time preference lifestyles, which are extremely hard to escape from if you're a low earner. You see the behaviours of low earners often do not help their situations at all, which is why they often get stuck in their economic position. The argument that economies should encourage spending (particularly among low earners) obviously doesn't help them either. They should be encouraged to save. The idea of intentionally building things to only last a few years, so that they need to buy a new one every few years doesn't help them (or landfills) either, but is supposedly "good for the economy."
Only in the presence of a Reserve Bank, which Bitcoin doesn't have. There's no ability for any authority to increase the number of Bitcoins possible, which means it's permanently deflationary.
Inflationary currencies pay interest via Reserve Bank policies in order to be managed. Bitcoin has no such mechanisms, nor can any be implemented.
> The reason people would join such a system is because they want to get wealthy too!
Which is why ICOs are so popular. Why pay tribute to the original Bitcoin miners when you can just become you're own, recognizing that the only thing holding up the value is irrational in the first place (doesn't mean it's not a real way to get people to part with their money).
> The thing they spend their money on is more useful than the money itself.
Computers are one good in many-faceted economy. Deflationary currency means the currency is worth more against everything in the economy with each passing day. So not only will I not buy a computer with it, I will also not put it in a bank (why risk it?), not buy stocks, bonds, or even really loan it to anyone. In fact the right thing to do (if there was anything pinning it's value) would be to first spend all my non-Bitcoin money on necessities, and acquire and sit on, in offline wallets, as much Bitcoin as possible. But Bitcoin is a currency - to even be useful people have to actually use it.
So why don't people do this? For the aforementioned reasons - no one can actually require me to hold Bitcoin to pay taxes or extinguish debts. So just sitting on it is foolish since there's no real way to predict when the irrational market will end - except over the long term, I do know the price must crash since every Bitcoin market participant must eventually cash-out to pay taxes and electricity bills and what have you. So in fact there's nothing holding it up. The only actual reason anyone has to hold Bitcoins is when they get ramsomware'd.
Thank god there is no reserve bank. Markets do a far better job than individual people nearly every time.
Eventually, deflation in bitcoin will be very low and will be only down to people losing their private keys. In practice, I think this will become less common as people realize the importance of having redundant and secure storage of keys, perhaps involving several distinct parties.
If the human population begins to shrink, which is expected after a while based on observations from developed economies of reduced birth rates, then eventually bitcoin may have less demand and therefore lose purchasing power. Before then, we will see demand which far outpaces the rate of supply.
> Which is why ICOs are so popular. Why pay tribute to the original Bitcoin miners when you can just become you're own, recognizing that the only thing holding up the value is irrational in the first place (doesn't mean it's not a real way to get people to part with their money).
Yes, people want to get rich, and ICOs will continue to be a think for as long as people get away with it. I think many people have begun to realize the nature of them though, because they've had their gambles and been left holding useless bags. Some get rich, some lose money. You can't prevent greed, nor stupidity. Some people don't learn after repeated failure, as we see with gambling addicts all over. Those are fine, because they're throwing away their money at government sanctioned businesses. (Unlicensed gambling not OK of course!)
The desire to get rich is not the only usecase for bitcoin though - it is just a particularly prevalent attitude towards the currency because most people do not understand austrian economics and its practical use as a medium to enable free trade in a way that existing currencies do not.
Bitcoin also enables an economy of microtransactions which were previously not possible. People will be able to pay per article they read, per video they watch, in real time.
> Deflationary currency means the currency is worth more against everything in the economy with each passing day. So not only will I not buy a computer with it, I will also not put it in a bank (why risk it?), not buy stocks, bonds, or even really loan it to anyone. In fact the right thing to do (if there was anything pinning it's value) would be to first spend all my non-Bitcoin money on necessities, and acquire and sit on, in offline wallets, as much Bitcoin as possible. But Bitcoin is a currency - to even be useful people have to actually use it.
People will use Bitcoin when they want goods or services from people who accept it. They'll also hodl it, because most of them have a low time preference. Also, given they hold both bitcoin and fiat, they will typically spend the fiat before digging into their Bitcoin. This is Gresham's Law - bitcoin is the better money.
As I've mentioned. People will still pay for goods and services which are useful and valuable to them. They will be more reluctant to spend if deflation is high. If deflation is low, they will probably not pay much attention similar to how people generally pay little attention to low inflation.
Bitcoin is currently volatile and moving between inflation and deflation. It is inflationary when demand is not meeting the supply, which is still increasing. It is deflationary when demand exceeds the rate of supply, as was the case throughout 2017. We will see many more such cycles, because the demand for economic freedom exists, and other currencies are not able to provide a solution to it.
> So why don't people do this? For the aforementioned reasons - no one can actually require me to hold Bitcoin to pay taxes or extinguish debts. So just sitting on it is foolish since there's no real way to predict when the irrational market will end - except over the long term, I do know the price must crash since every Bitcoin market participant must eventually cash-out to pay taxes and electricity bills and what have you. So in fact there's nothing holding it up. The only actual reason anyone has to hold Bitcoins is when they get ramsomware'd.
It is that nobody is requiring you to hold bitcoin which is its main selling point. It is voluntary. There is a high demand for voluntary trade, and it is not being provided by governments. This might be mainly black markets or grey markets right now, but those terms are whatever the government wants to label them, which changes all the time. This can be seen for example in Toronto, where not long ago, the narrative was "drugs are bad." Now it's "cannabis good!" (As long as you buy it from a licensed seller so we can collect some of the money, and if you dare try to sell it without a license, we'll send in the guns).
People are fed up of being told what they can and can't do. If they want drugs, they'll get drugs, and they'll acquire the currency the drug sellers take if they have to. The same thing applies to many markets which the government does not allow because of stupid laws, or because they hold the monopoly which they can only maintain with the use of force.
This is not how deflation works. There's plenty of online material on this subject, you would do well to get familiar with it: https://en.wikipedia.org/wiki/Deflation
>the choice to hold a deflationary currency or an inflationary one, let them pick! We'll see if those economists were right after all when people actually have a choice.
We have them already. They just aren’t called currencies because their price instability makes them somewhat useless as currencies. See: gold.
Right. The deflationary argument is that people won't spend money because the money appreciates in value over time versus the things they would spend it on. Those examples, and there are many others tell a different story. People will buy things which have utility, even if they lose value relative to the currency over time.
>We have them already. They just aren’t called currencies because their price instability makes them somewhat useless as currencies. See: gold.
You say the price of gold is unstable, because you're taking a dollar as your reference point. Dollars are actually far more volatile than gold because they can be printed arbitrarily, where gold is only found in limited amounts. If you measure the value of the dollar in terms of gold, over time, you'll see which is really the useless one!
The reason gold is not used much any more is largely due to the historical practices of confiscation and outlawing of possession. Admittedly, it is not the best commodity to use as currency due to its weight and difficulty to verify the authenticity of.
Thankfully, Bitcoin can solve all of those problems. It can't necessarily be confiscated if you manage your keys correctly. Possession can be plausibly deniable. It doesn't have the problems of transport, and it is trivial to verify the authenticity of. As a bonus, it is well suited to our digital age where much of commerce is conducted remotely.
Kenysian and austrian concepts are not mutually exclusive
The normal funding cycle is this: government issues bond in exchange for cash now. These are treasury auctions and they happen constantly.
There is no injection of money in this process. If you don’t believe that, ask yourself this. Why did the exact same process work when the US dollar was backed by gold?
I find many other issues with your framing of bitcoin, but the above is the most glaring, to me.
Bitcoin mining depends on finding a hash that starts with a whole bunch of zeros, which is more or less equivalent to being just close enough to a jesus that you can sell it for money.
Joining a mining pool gets you a relatively fixed payout, counteracting the lottery nature. You'd only have to burn one box of matches to get a guaranteed payout of 300/730000 of a jesus match.
Yes it's still a waste of power.
The cycles are not wasted - they secure a digital currency.
Banks and governments use immense resources to secure fiat currency.
If I use a car that gets 1 mile per gallon to visit my grandma, I'm wasting basically all the gas I buy, despite it getting me to my destination.
Proof of work is waste.
But why though? Is the USD that insecure? Is fraud so prevalent that its debasing the value of currency? Do we literally need to spend 70TWh per year, and that's just in its current state as a semi novelty currency/commodity, to secure the concept of money? Can you imagine how much it would cost to run bitcoin if it was the primary reserve currency of the world?
> Be civil. Don't say things you wouldn't say face-to-face. Don't be snarky. Comments should get more civil and substantive, not less, as a topic gets more divisive.
We're discussing ideas here, there is no reason presuppose others ideas or behave snarkily.
He's responding to people saying "hey, why are you criticising ETH, don't you like this stuff?" And he's saying that even the "blue chip" cryptocurrency projects are still very experimental phases and he takes them seriously enough to criticize them.
Depending on whether you want something cool to experiment with, or something to actually use, one is far better than the other.
You don't see the instability, it's just people can't use it much more with the current implementation. Unstable future perhaps the parent meant.
that's a pretty stable thing you're describing. and lightning is actually in beta now and has grown quite a bit.
> Unstable future perhaps the parent meant
the only stable thing about future is heat death of the universe. and even that is possibly up for debate.
shifting goalposts much?
But that article doesn't mention that the limit is artificially imposed so that people aren't risking too much money on unproven code.
As the system is shown to be stable, that limit will be raised and eventually removed, and the issue here will no longer exist.
Plus, failure in this case means "using the blockchain", and for larger amounts of money the fees are generally a fraction of the amount transferred, even during times of high mempool.
That's rather misleading. The critique was about Casper CBC, which is very different from Casper FFG. Casper FFG is the basis of the Ethereum 2.0 design, and it's not very controversial. Casper CBC may be more controversial, but nobody is suggesting that it be deployed any time soon. It's Vlad's ongoing research project.
* It's not an investment as it does not convey ownership interest.
Past tense? this guy isn't very thorough.
My humble 0.02 is that what's current is immature and unstable, but there's a decent chance that Ethereum, or Bitcoin, or both, will at some point in the future provide some interesting technical solutions/services.
The fact that Ethereum is not there yet is not a good enough argument for me.
Crypto Currencies are an emerging technology that have value far beyond currencies. IPFS for example, d.tube etc.
My problem is that these projects are simultaneously treated as humble little experiments and the perfect future of the global financial system, deserving of hundreds of millions of dollars of investment and endless public attention. If they would pick one or the other, I'd be fine with it. But I've dealt with years of a radical, quasi-mystical pro-crypto contingent who believe they deserve all of the upside with none of the accountability. I am 100% over it.
In short, the crypto hate is a reaction to the crypto hype. I have very little sympathy for people who profited from the hype, delivered approximately nothing of use to the rest of the world, and now have a sad that there are consequences.
Actually, as someone who was very interested in Bitcoin in the early days of 2011-2012, I disagree. If anything, the hate on HN was even greater back then, way before Bitcoin became hyped. So many people were convinced it was a pyramid scheme. It was clear to anyone familiar with the Bitcoin community back then that there were a lot of highly technical, talented people, and very few scammers. But most of HN reflexively despised Bitcoin.
In fact, Bitcoin on HN is actually a lot less hated now, which tells me it has little to do with the hype, and that something else was going on.
Bear in mind that I disassociated myself from Bitcoin once the scammers, con-men, and get-rich-quick types infiltrated the community around 2013 and 2014. But even back in 2011, there was a very high number of HNers who seemed personally affronted by the very idea that money was a social agreement. They seemed to believe that money was some kind of official, government activity, end of story. And that anyone who believed otherwise was an evil heretic, to be ridiculed.
> I have very little sympathy for people who profited from the hype, delivered approximately nothing of use to the rest of the world, and now have a sad that there are consequences.
This I agree with 100%.
That said, the 2011-12 critique that Bitcoin was a pyramid scheme turned out to be approximately correct. Much like Herbalife, the actual product was never good for much, and its actual utility was basically irrelevant to its rise. And as with many pyramid schemes, a collapse came when the supply of new entrants became insufficient. There are differences, of course. Pyramid schemes have a central authority, while Bitcoin doesn't.
I definitely agree that this is a perennial HN problem, though: "And that anyone who believed otherwise was an evil heretic, to be ridiculed." The field necessarily attracts idealists; so much of making software is continuing to insist on an idea until the computer eventually agrees. But it's regrettably easy to go overboard.
This x10. If I were to anthropomorphise HN it would be a middle aged white collar worker, pretty smart, making fairly keen observations about the evolution of a company's product and social structure, but in the dark about executive-level play. Financially conservative, thinks of money as a necessary evil. Stashes money in the bank and is highly suspicious of financial risk.
To this character Bitcoin is a threat because it mixes that which they care strongly about (open source, distributed systems, impact) with that which they've largely ignored and of which they are suspicious (money).
I never found Bitcoin threatening though. When I finally read Satoshi's paper, it struck me as beautifully elegant, and a great experiment in practical economics.
But let's also remember, that middle-aged character has seen the hype cycles many times before in previous decades, and recognizes the scam. The sky-high and unstable valuations, the co-dependent press coverage, the hand-waving distraction from the absence of realistic uses, the flurry of me-too startups, the enthusiasm of lay investors.
Hype usually indicates pure bullshit, but sometimes something useful emerges out of it. Most often the original projects are decimated.
HN is a crypto “safe space”. Just don’t talk about it here.
I think as entropy becomes very inefficient to produce (difficulty multipliers increasing on crypto as the network expands...) it will become more clear that the expensive part about sending money internationally is trusting all parties involved.
You pay VISA/MASTERCARD a 3% fee because you trust them to protect your account in the case of fraud. Moneygram takes 2% of all transcations over $900 because you trust them to move money from your account to the recipients account without losing it.
Even in computer security, you have to put your trust in something. Somebody picked cryptography and high numbers of CPU cycles.
Anyway, you asked what problems crypto could solve, and I guess my answer is, maybe it will cost less to send money around the world. As it turns out, there's not necessarily a way to make it free.
While that may be technically correct, it's ignorant of the fact that costs are always passed down the line in any economic relationship like you're describing.
That fraud protection costs the card issuers, which is the basis for that merchant fee, and the merchant passes the cost on in the form of higher prices. (Merchant accounts with higher fraud rates will pay higher fees!)
So from another perspective, you actually are paying the bill for those unknown percentage of frauds, which you wouldn't be as much on the hook for so directly if only everyone was responsible for their own individual security.
So, credit card or not, the cost is there, even if I pay with bitcoin or ether. Except of course for the benefits of the credit card.
If people start charging less when paid via methods that have less chargeback risk will you reassess?
Only if the vendor of the TV is abiding by the rules of the credit card provider not to offer discounts for cash transactions.
In effect, the customers buying TV's with cash, paying the same, are paying a "credit card tax" to support the credit card users.
Also, they pay the same, but don't earn any of the incentivizing kickbacks (points, cash back, ...).
You're transacting with the merchant, and a third-party, the credit card company, helps itself to a piece of the action.
Whether that is coming from you or the merchant is the wrong view.
The transaction between the two of you pays it.
It's highly unlikely that the free market somehow sorts this out in the future, considering that it's the free market that gave rise to these power law distributions to begin with.
There will always be some limiting factor or theoretical vulnerability. If it's not ISPs/Internet infrastructure, then its the exchanges and fiat on ramps. But yet, its been pretty hard to kill illegal filesharing, VPNs, etc.
It's even harder to stop those things when the population doesn't believe in legislating against it, at least in a democracy.
I’ll let other people prognosticate as to what, if anything, that means for their future.
As with most things, this can be sort of solved with heavy regulatory structures and enforcement, but I would argue that it's not better solved, especially once proof of stake eliminates the problem of burning energy.
Programs that don't require brute-force commonly use many times less energy than programs that do rely on brute force.
This extra cost is often seen as wasteful.
Can you give an example of a program that gives similar results?
By the way, not much mentioned in the discussion but I'm for Ethereum and kind of anti Bitcoin because of the awful environmental impact of proof or work which the Ethereum folk are at least trying to find a solution to.
compared to what? you can't have free cheese and environmental (and social) impact of existing fiat systems is far worse.
> Ethereum folk are at least trying to find a solution to
PoS was known long before PoW. PoS is not and cannot be a solution because it doesn't provide objective measure by which competing chains can be compared. only trust in third parties that can be hacked, coerced, etc. oh and ofc "the rich get richer" - so much for fixing awful impact from fiat systems.
How do people see the forks, the ‘closed’ meetings, the pivots, the obvious influence that a couple devs have over the entire system - and still walk away with any notion there is decentralization?
Miner decentralization is important is the whole security model relies on nobody controlling >50% of hashrate.
Developer centralization is another important point. BTC arguably fails at this when a small group, combined with extensive propaganda campaigns, artificially constrains Bitcoin's throughput. There are no valid arguments against raising the blocksize to 2MB for example.
Then there's node centralization, wealth distribution and maybe other types I'm missing.
If a handful of people could effectively destroy a “currency” at any point... it’s not decentralized in any sense of the word that is important for trustworthyness or longevity.
A government could crash its own money, but there is a strong incentive to not do that. Bitcoin or Eth has nothing tied to it, it’s entitely at the whim of some programmers who as I understand it, aren’t economics experts.
That’s the point I made above. You want to say the blockchain and hashing is decentralized, great. But when people use that word, they’re talking about (imo) how it’s “safe” to put money into because “no one owns the crypto coin” and if anyone still believes that latter part, well, they probably aren’t paying attention.
They didn't do it by themselves either. They got miners and exchanges on board as well.
Also if you disagree and you think there's a better way to develop it you can by creating a fork or sell your coins. There is nothing stopping you.
> they’re talking about (imo) how it’s “safe” to put money into because “no one owns the crypto coin” and if anyone still believes that latter part, well, they probably aren’t paying attention.
There's a difference between believing nobody has significant sway over how the cryptocurrency should be developed and you personally having full control over your own coins.
If Ethereum were as centralized as claimed ("cult of Vitalik", etc.), the survival of ETC wouldn't have been possible.
It's about not being able to run a full node yourself, which consequently means everyone is using third-party services such as Infura.
I know it is not fair to just count code lines to compare the complexity. But the Ethereum python code base has only 30K-40K lines code including test while Linux kernel has 15M lines.
Btw, there is also a RUST implementation from Gavin Wood, which is much faster than Geth.