Again: A ledger that is not decentralized is a bank database, not a cryptocurrency.
As near as I can tell, Zuckbucks are nothing more than the JPMorganCryptocurrency but with a bigger consortium. The only difference seems to be who is given write privileges to the database.
Libra coin is backed by Visa. The whole point of cryptocurrency to avoid having to go through middlemen like Visa or even require banks.
This is a way for the intermediaries to cash in on the cryptocurrency hype and squash it before cryptocurrency payments become mainstream. They want to insert their own thing that looks like a cryptocurrency but will allow them to continue to profit from and control the exchange of money.
It will become a central point of control by providing many governments a convenient one-stop shop for their spying and interference over people's business.
> The whole point of cryptocurrency to avoid having to go through middlemen like Visa or even require banks.
"Whole point" is speaking for a whole lot of people who may not share your views. Certainly circumventing banks was an important founding concept, but circumventing _central_ banks is arguably much closer to the goal.
There's no reason why credit cards shouldn't exist denominated in Bitcoin -- they provide easy access for consumers to obtain unsecured credit. There's no reason why banks (even fractional reserve banks) shouldn't have accounts denominated in Bitcoin -- they provide an easy path for consumers to issue credit.
Opinions may vary on this, but if Bitcoin (or another decentralized cryptocurrency) succeeds the way that people want, I don't see any way to _stop_ these things from happening. People are willing to pay interest on loans; other people want to earn low-risk interest on capital.
The thing that will change is that hopefully without central banks consumers will have to realize that depositing money in banks is not risk-free. And hopefully society will learn this as well and we'll move out of the cronyism/free-money regime that we've been stuck in for the last hundred years or so.
Presumably people wouldn't want a cryptocurrency as plutocratic and centralized as Bitcoin has become. Some lessons were learned with BTC as an experiment, and as we can see there's evolution taking place and plenty of more advanced alternatives are making prior software like bitcoin obsolete.
It's especially troubling how centralized the minting and mining has become. And it's easy to forget there's the problem with energy consumption related to the PoW algorithm eating almost 1% of the entire world's energy simply for an accounting database.
The major reason you don't see payment processors dealing with cryptocurrencies is because the major usecase for most cryptocurrencies like Bitcoin, Monereo, and Ethereum is money laundering.
One important point: if we actually include all 7 billion
people on the earth, most of whom have zero BTC or
Ethereum, the Gini coefficient is essentially 0.99+. And
if we just include all balances, we include many dust
balances which would again put the Gini coefficient at
0.99+. Thus, we need some kind of threshold here. The
imperfect threshold we picked was the Gini coefficient
among accounts with ≥185 BTC per address, and ≥2477 ETH
per address. So this is the distribution of ownership
among the Bitcoin and Ethereum rich with $500k as of July
2017.
In what kind of situation would a thresholded metric like
this be interesting? Perhaps in a scenario similar to the
ongoing IRS Coinbase issue, where the IRS is seeking
information on all holders with balances >$20,000.
Conceptualized in terms of an attack, a high Gini
coefficient would mean that a government would only need
to round up a few large holders in order to acquire a
large percentage of outstanding cryptocurrency — and with
it the ability to tank the price.
With that said, two points. First, while one would not
want a Gini coefficient of exactly 1.0 for BTC or ETH (as
then only one person would have all of the digital
currency, and no one would have an incentive to help boost
the network), in practice it appears that a very high
level of wealth centralization is still compatible with
the operation of a decentralized protocol. Second, as we
show below, we think the Nakamoto coefficient is a better
metric than the Gini coefficient for measuring holder
concentration in particular as it obviates the issue of
arbitrarily choosing a threshold.
...However, the maximum Gini coefficient has one obvious
issue: while a high value tracks with our intuitive notion
of a “more centralized” system, the fact that each Gini
coefficient is restricted to a 0–1 scale means that it
does not directly measure the number of individuals or
entities required to compromise a system.
Specifically, for a given blockchain suppose you have a
subsystem of exchanges with 1000 actors with a Gini
coefficient of 0.8, and another subsystem of 10 miners
with a Gini coefficient of 0.7. It may turn out that
compromising only 3 miners rather than 57 exchanges may be
sufficient to compromise this system, which would mean the
maximum Gini coefficient would have pointed to exchanges
rather than miners as the decentralization bottleneck.
Conversely, if one considers “number of distinct countries
with substantial mining capacity” an essential subsystem,
then the minimum Nakamoto coefficient for Bitcoin would
again be 1, as the compromise of China (in the sense of a
Chinese government crackdown on mining) would result in
>51% of mining being compromised.
- Balaji S. Srinivasan (the CTO of Coinbase)
I'm not defending Bitcoin as the ultimate cryptocurrency; I think it's inarguable that it remains the most empirically successful so far. Whether that's first-mover advantage, network effects, a hardware-capable PoW function, or that it struck closer to the right balance of concerns, who knows?
I don't agree that the energy consumption is a real concern because we don't have a comparison here for what other currencies cost. The cost seems like it should be fairly efficient because there are competing uses for energy.
I'm not sure exactly what the quoted text is trying to say or how it is relevant. I guess towards the notion of "decentralization"? What I would say here is that the reality is that we don't know the gini coefficient of a single thing in the universe except goods that are extraordinarily scarce (like "Mona Lisa paintings"). The estimates for these things for real-world currencies are laughably bad; they are based on self-reported statistics and upsampling, and they rarely reflect the actual scarce good -- effectively M0 of a single currency, which is a number we don't even have for Bitcoin because exchanges represent aggregated possession rather than actual ownership. So my point here is that yes, maybe that Gini coefficient looks bad, but it's the first time that we've even had a moderately realistic look at what a Gini coefficient looks like. Maybe they all look like this -- maybe gold is .99+, maybe Dollars are .99+, maybe Euros are .99+, maybe cigarettes in prison are .99+? Nakomoto coefficient is even more immeasurable for anything but cryptocurrencies, and also disregards aggregated records of deposits.
Bitcoin is not inarguably the most successful cryptocurrency. It has completely failed at its stated aim of facilitating payments, and cannot coordinate the necessary technical changes for that to be realistic. It has also failed as a platform for programmable money, since its programming language is almost impossible to work with, and once again, it has been unable to coordinate the necessary changes to implement a working language.
What is “the most successful cryptocurrency”? I don’t know, but I would vote for one of those that set out as a development platform, and have successfully ignited a huge amount of experimentation on novel financial and organizational instruments (although their value may be unfounded).
This confuses me. I make multiple payments every month in bitcoin to fund various web services (i.e. tarsnap, gandi). In fact, I've never had an issue with a bitcoin payment going through. Ultimately, I find the process of paying with Bitcoin to be a joy. I hold my smartphone's camera up to a QR code on my screen, and BAM - payment complete.
Yes, most other cryptocurrencies provide the same thing. But Bitcoin provided it first.
This confuses me. I have used Bitcoin as a method of purchasing goods and services and it's quite easy, and indeed fun. Buy some BTC or some Koinye or some other space cash and have your funs.
If Libra ends up with 10x more users than all other cryptocurrencies combined, who are you to say what the point is? The existing cryptocurrency space has spent a decade building something that a relatively small number of people are really passionate about but it's the opposite of what the masses want.
In my opinion, the main thing holding back cryptocurrency is scalability. They are working on that. The other thing is just social momentum.
Popularity and merit are two completely different things. It waxes and wanes. The masses will adopt anything that is convenient and popular (regardless of whether its really great or not).
Look at the #1 Billboard song right now. "Old Town Road". This is the most popular song. Its "what the masses want". What's it about? "Can't nobody tell me nothin'" "Cheated on my baby" "Cowboy hat from Gucci".. Its teenage defiance, materialism, and "macho" unfaithfulness. What happens to be popular right now might mean something important, but it also might just be garbage as usual. (By the way, at the moment, it is popular for humans to create literal mountains of actual garbage.)
The people who created cryptocurrency said what the point was. Its to give us control over our digital money and remove the intermediaries.
People who know better should strive to make things that are worthwhile more popular.
That was one example. Look at popular music in general. Or popular movies versus good movies.
Look at the example of social researchers creating a line of actors in downtown Las Vegas. The line went to nowhere. But simply by virtue of having several people in it, it seemed popular. So it grew in popularity to become a very long line. That went nowhere. The thing that was popular had no merit because it did not exist.
Or look at Juicero. Very popular with investors to the tune of $120 million.
I don't really believe that what's popular in music is simply a reflection of what people want. It's more like what someone's marginally accurate model of the public wants. Same with movies. Studios experiment and when they find something that is commercially successful, they make more of it. A lot of good stuff doesn't get made or promoted because they think it wouldn't have the broad appeal to be commercially successful. A lot of what's popular just got that way through promotion, not because of its overwhelming merit.
Scalability is a big problem, but it's not the only problem. Money accomplishes 3 things:
1) Store of value
2) Unit of account
3) Medium of exchange
It's not really very good at any these 3 things. The scalability significantly hurts #3, but even if you fix it it's super volatile, which are bad for 1 and 2. Not only that, but it's inherently deflationary, which is quite bad in the long term, but I guess that's really a secondary concern.
I agree with your point. I think Libra is likely to have more users than Bitcoin not long after it goes live. Libra will be easier to use than a credit card, let alone Bitcoin.
I can't find the citation, but I think Paul Graham said, make it easier to use and cheaper than the incumbents and you'll have a good chance of succeeding.
>The whole point of cryptocurrency to avoid having to go through middlemen like Visa or even require banks.
This is actually a big problem with cryptocurrencies - you're removing middlemen who are legally obligated to enforce anti-money-laundering laws on behalf of governments. In general, cryptocurrencies will either live under existential threat from government law enforcement agencies, or their use cases will be restricted to interactions with centralized AML/KYC-compliant parties that might as well be using a database.
This is why I doubt any major cryptocurrency advances will come from an established company. The risk of noncompliance for them is too great, but to have an effective cryptocurrency you have to build it resistant to outside control. It’s a catch-22 for the companies.
Why does a cryptocurrency have to be resistant to outside control? Because otherwise there’s no reason to use it, since the existing networks run by Visa or the US dollar are more efficient and scalable. The value of bitcoin is in its equalization, no one person on the network’s voice matters more than another.
Yeah, in my book this is more of an attempt by a consortium of powerful companies to get a favorable regulatory regime for money transmitting. "Crypto" is only there to confuse regulators into making an exception.
My first impression when I saw this news was that this would be about as 'decentralised' as Tor is. Facebook (and pals) will always maintain significant enough control over the nodes in the network to both maintain consensus in the blockchain, and also to subvert whatever consumer-friendly guarantees they'll claim to make. No different to Tor and US spy agencies controlling enough exit nodes to defeat the purpose of Tor.
Facebook and privacy are fundamentally opposed, so based on known behaviour the currency itself is most likely a hook into more of its users' lives.
The thing that separates this from a bank database is a small thing, but important, and that's that even the bank cannot reduce your balance in secret without your authorization, since transactions are signed and the ledger is public. That's because of the cryptographic primitives used.
I think in the end we have to accept that taxonomies are going to have rough edges because the map is not the territory. With Bitcoin as the canonical cryptocurrency there have been a number of experiments that have removed or added guarantees. A distributed, verifiable, immutable chain of history is basically git with a couple of extra features, so the lines are necessarily blurry.
Rather than arguing semantics, the main questions are to what degree it is censorship-proof, permissionless, and scarce. The third one is the one that is least clear from the description and whitepaper. It sounds like they're trying to get the first two as well, but the designation of initial stakeholders might make that tricky until they can transition to proof-of-stake.
>the bank cannot reduce your balance in secret without your authorization, since transactions are signed and the ledger is public
This capability is pretty pointless when the bank can indefinitely suspend your ability to make transactions. The ability to block transactions is an essential part of compliance with anti-money-laundering and other banking regulations.
> This capability is pretty pointless when the bank can indefinitely suspend your ability to make transactions.
You beat me to it: Having cryptographically signed transactions simply does not matter when you have to submit the transaction to what Zuck calls a "validator". The validator will just refuse to validate if your address is on a blacklist.
The net effect is that the coins are frozen. And since this is a backed currency, the backing will then be reduced by the amount corresponding to the frozen coins. This has the exact effect of lessening a user's balance.
Naming it "Byzantine Consensus" in their white paper turns out to be surprisingly apropos.
Maybe we need to question whether the government should have the power to unilaterally block a transaction. Just because they’ve been able to in the past doesn’t mean we have to artificially limit technology to let them keep that power.
In the same way they used to be able to tap your phone, but now we can encrypt our calls and make that much more difficult. That doesn’t mean encryption should be illegal.
> Maybe we need to question whether the government should have the power to unilaterally block a transaction. Just because they’ve been able to in the past doesn’t mean we have to artificially limit technology to let them keep that power.
> In the same way they used to be able to tap your phone, but now we can encrypt our calls and make that much more difficult. That doesn’t mean encryption should be illegal.
The government has the power to unilaterally block any transaction in any domain, so long as they deem the transaction to have occurred in or whose parties are under their jurisdiction. I think that, generally speaking, it is rare for the government to cede jurisdiction over a domain once acquired.
> The government has the power to unilaterally block any transaction in any domain, so long as they deem the transaction to have occurred in or whose parties are under their jurisdiction.
The government cannot block cash or barter transactions. Instead, they can declare certain kinds of transaction illegal and then use the courts to punish anyone who engaged in an illegal transaction.
It’s a subtle but important distinction— to do anything against you, the government needs to present some sort of a case to judge and jury, and you have an opportunity to argue your side.
The government can freeze access to your assets unilaterally without your input if they deem it necessary. They can even take your cash and charge it with crimes! That's not even including things like the US government OFAC list which you could end up on without due process.
But to your point, thankfully we (mostly) have due process with our government (in US at least); the same cannot be said of dealing with corporations. I certainly see your point. One large fear I have around money being a number in a database is that your access to the monetary system is more easily revoked, whomever the controlling authority may be.
I think that AML[1] laws were just an example. The point is that the validators have the power to block transactions. This could be due a government request, or because you posted something that Facebook (or one of the other affiliated companies) doesn't like. The actual reason is immaterial; the important thing is that currency is worthless without the ability to spend it.
No, we really don’t need to question that. Financial laws exist for a good reason. Nor should some private company have more power than a sovereign nation just because.
The main reason we do need to ask the question is that Bitcoin is currently effective at preventing governments from blocking Bitcoin transactions. Even if financial laws exist for a good reason, they don't supercede the "natural laws" of cryptography that determine which actions are possible. So the question isn't whether Facebook should have the power to do X. The question is whether Facebook should be allowed to do X, given that Bitcoin is already permitted to do so.
Nope, I feel that my opinion reflects both the conventional wisdom and the expert consensus, which would be a waste of my time to reiterate. It’s the people arguing a multinational corporation ought to be able to circumvent the laws of sovereign democracies that have ‘splainin to do
Isn't AML just a bandage applied on top of a larger issue? What are the use cases for AML? How effective is AML in preventing and or solving for those use cases?
I just mean that your funds at the bank can be seized without your assent for numerous reasons - civil judgements, asset forfeiture, etc., and given to someone else.
The reasons you list are the bank complying with the law. Civil judgements and asset forfeiture are legal matters where the court has decided that your assets are declared forfeit in order to make reparation for some legal matter. Presenting this as proof of your money's insecurity in a traditional banking institution is incredibly disingenuous. The fact that your bank complies with the laws of your country is just more proof of why traditional financial institutions would be more trustworthy than a consortium of tech giants.
What can also happen with banks is that they forbid you from withdrawing more than a certain amount, or take x% from the top of every account because of economic issues.
I've never heard of the latter occurring, can you point me to an example of where this has happened and which countries it has happened in? I can imagine that anything could happen in Zimbabwe, but if this happened in the western world I'd expect widespread outrage.
The former isn't particularly common in modern times. In the US deposits are insured by the FDIC, which has pretty much brought bank runs to a halt. It's happened in Greece recently if I recall, but even then it's still pretty rare.
I don't consider either of these good reasons why an international consortium of tech giants is any more trustworthy than domestic financial institutions that, while greedy and wicked as they may be, are tied up in regulations.
Well Greece is the example I was going to name. It doesn't happen that often, but it's quite possible.
As for the FDIC, there's a similar deal in most countries up to a specific amount(FDIC is $150K, other countries sometimes have less), but I don't think the FDIC has enough money for a more massive bank run.
I agree with you that Facebook & co. aren't that much more trustworthy at all, my comment was aiming more towards pointing out some benefits of things like Bitcoin.
Ultimately you’re still beholden to private corps to transact at all, and transactions will be tied to your id, so I don’t see this having any benefit over bank-sourced transactions at all.
> any benefit over bank-sourced transactions at all
I see a few benefits, but nothing on the order of the full potential of crypto.
1. Your FacebookCoin value is a collection of the world's currency value and not tied to a single goverment currency. It's more likely that {Single Fiat Currency} experiences hyperinflation than {Collection of Fiat Currencies} thus some of your risk is mitigated. Most individuals hold the majority of their wealth in a single currency, or in assets that are sold for a single currency (NYSE transactions are completed in USD, same with US based real-estate.)
2. Transaction fees can potentially be lower than incumbents. This is probably going to be especially true with person-to-person international transfers and could big a huge win for third world startups dealing in digital services.
3. The barrier to entry will, in all likelihood, be significantly lower than traditional banks. I've known people with a credit score so low they couldn't open a bank account. I've meet people with anxiety of using a debt card because of over withdrawal fees.
If it's centralized the bank/consortium can do whatever they want. Your transaction might just disappear if the consortium decides that today is a good day to do so.
Unfortunately the "decentralization is a spectrum" crowd has already furnished the fintech narrative with the arguments necessary to justify calling this "decentralized."
The "decentralization" quality should not be used to describe any system that doesn't exhibit a permanent, irreversible systemic trend towards greater decentralization of all the levers, concentrations and bottlenecks of power within itself over time.
For this to happen, the natural tendency toward concentration of leverage would need to introduce a proportional net cost increase to the system, rather than (as it normally would) be the mechanism by which economies of scale accrue to it.
Bitcoin doesn’t fulfil these criteria either - the devs and miners have not become more decentralised over time, if anything more centralised. Of course it is far more decentralised than this ersatz cryptocurrency from Facebook in both spirit and actions.
However the number of people who want a decentralised currency (with the many, many compromises it requires) is globally very close to 0%, so despite wailing on HN about the true meaning of cryptocurrency, this is not a reason to oppose this Facebook coin.
There are much more pressing ones to oppose it IMO - handing control of your transactions and/or finances to an org as amoral and duplicitous as Facebook, or indeed to any global corporation or cabal thereof, is a very scary idea.
I sincerely hope this dystopian effort to impose a global corporate currency fails.
Mastodon. You can set your own server up and benefit from all othe other existing servers. Mastodon provides a decentralised service running on decentralised infrastructure. You can run your server as you see fit, because access to the wider network is federated.
Zuckbucks provide a centralised service running on decentralised infrastructure. Try add your own server to help run Zuck's blockchain...
Git comes to mind as well, I can go to Bitbucket or Gitlab and upload my repository with its full history in seconds. Or my own self-hosted repository if I wanted.
I don't agree with grandparent for what it's worth, just thought this might work as a reply to your question.
Other than universal entropy, probably nothing. Though math is also decentralized, maybe even moreso, being independent of time. So maybe "nothing that is relevant on a human timescale" is closer.
I strongly suspect that what we have developed a habit of calling decentralization, as if this referred to a final state of a proposed coordination solution, is in fact just a temporary, transitional phase between centralized regimes.
Need to start your system with requirements about asking permissions? Not decentralized.
At some point, we need to recognize that playing games with the system so that Marketing can use the word "decentralized" does not change the meaning of the word.
In other contexts "split up between a group of folks" (that may be open to newcomers or not) is sometimes called "federated", while "everybody has (theoretically) a voice in the outcome" would be "decentralized".
In bitcoin, everybody has a chance to voice their opinion on what the ledger should look like (nevermind how miniscule it is these days given warehouses full of ASIC miners). Libra has 27 designated peers, and somebody in that group gets to decide about number 28 (and, potentially, about the other 26).
And those ASIC miners serve a purpose, it becomes much harder for a state sponsored actor to develop more efficient mining technology to attack the network. And the miners who run the ASICS are the ones with the highest incentive to keep the network running strong.
Libra is a attempt to cut out issuer banks, as in credit cars issuance, out of the equation. That is why Visa/PayPal/Mastercard are on the board. It is less fees for the consumers, definitely better UX, and in a sense relief from the legacy banking woes.
And more importantly for them Visa/Pay Pal/Mastercard aren't outflanked by their own competitors. There's little noble to this endeavor by these characters.
The key here is the ability to exchange it for other coins. If Libra partners can block exchanges, they will use that power as soon as they are requested to by regulators.
I think your point would be better made by not focusing on the terminology.
The way I would define the term "cryptocurrency", Libra Coin would qualify since it uses a blockchain and cryptography. And transactions must be validated by multiple different parties (validators).
Your objection seems to be related to something like openness, i.e. who is allowed to become a validator. In other words, within cryptocurrencies, there are two categories. They could be called, say, open and invite-only.
Libra is invite-only, which you don't think is a good setup. That's the real objection, not that it isn't distributed and not that it isn't a cryptocurrency.
True, but the significant difference is that banks are not allowed to print dollar bills without control(they do print bills effectively but with controls). Similarly they aren’t allowed to just start putting credits on people’s credit cards while keeping a separate database to track real vs their issues credits.
But if that separate database is a distributed blockchain based database suddenly they are allowed to do this...
It is kind of decentralized in the sense that no single company can manipulate the ledger but it's definitely not decentralized in terms of wealth ownership.
As near as I can tell, Zuckbucks are nothing more than the JPMorganCryptocurrency but with a bigger consortium. The only difference seems to be who is given write privileges to the database.