"transaction reversibility is not about the ledger, but rather about the transaction rules that a currency uses. A reversible currency requires that someone anoint this trusted party (or trusted parties) and that they use their powers to freeze/burn/transact currency in ways that are at odds with the recorded owners’ intentions. And indeed, this is a capability that many tokens now possess"
I think this is arguing that reversibility is not antithetical to permissionless blockchains, because reversibility can be implemented on top of permissionless blockchains.
But that doesn't answer the critique -- the critique is that most real world systems do need trusted parties, and if you build a system of trusted parties on top of a permissionless blockchain, then you could have saved a lot of complexity, risk, and proof-of-economic-waste burn by building on top of a permissioned distributed ledger instead. Reversibility is one example of a design requirement that undoes the claimed advantages of permissionless blockchains that are meant to justify their inherent downsides.
Transaction irreversability is the whole point of the "peer to peer electronic cash system": "Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments... cutting off the possibility for small casual transactions ... What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud" from the opening lines of the Bitcoin white paper.
So Bitcoin was designed for micropayments, and irreversability is a feature to reduce the friction. That is fine because it was intended for "small casual transactions" which very few people are going to invest the time and effort into disputing. It even looked like it might be successful as a micropayment system at first, given small Bitcoin transactions were initially processed without any transaction fees.
The problem is that it has clearly failed as a "peer to peer electronic cash system". It is now used primarily for large transactions, which you absolutely do need consumer protections for if you are a legitimate user (indeed the fact that there aren't consumer protections has made the space so popular with fraudsters, scammers etc.). And as others have commented, the newer cryptocurrencies which attempt to offer such protections end up being worse in every conceivable way from the traditional solutions. Leading back to the original article - is there any legitimate point to cryptocurrencies nowadays?
> It's now used primarily as a vehicle for speculation
Gambling. It’s gambling. A significant fraction of the American economy continues to gear towards gambling. Whether it be short-term dopamine hits from ad-fuelled social media or trading crypto, it’s a similar pattern of decay across a common although growing demographic stripe.
You probably should look at different numbers than just the dollar price.
Number of nodes is rising,
number of wallets is rising, number of hash-power is rising.
Also, please look into the "Lightning Network". It's the second layer on top of Bitcoin and that's where the whole ecosystem scales (in terms of numbers of transactions per second). Cheap, scalable and fast transactions.
Nodes rise because businesses that want to build on the chains require them unless they want to a pay far too much for a wrapper API. The number of wallets is literally unbounded, and it’s impossible to know precisely how many entities are attached to those wallets. I am one person. My tens of wallets are only for one person. I make a new wallet every time I try new wallet apps. I make new wallets to try new things. “Number of wallets” and “number of nodes” is a bad metric.
I would be highly interested in finding a serious shop/commerce/ecommerc operation where Lighting Network is actually used.
I check LN every 6 months or so and situation is not looking so great.
As it was with Bitcoin itself in early 2010s the shops advertising crypto acceptance are doing it mostly for publicity/ideological reasons or actually have stopped existing.
* http://www.room77.de/ - SMTP-packets to port 25 (info[at]room77.de) may very likely get a response just as much as electrons sent to our telephoney landline-device (+49.30.31102260). Single static page.
Lightning network pulls transactions off-chain, thus relying on trusting someone (either the person you transact with or some third party acting as escrow for the funds). By adding in trust, you can mitigate the primary bottleneck caused by proof-of-work consensus methods. But if you have people you can trust to transact with, there's no point in interfacing with Bitcoin at all, just make a micro-payment network without the bitcoin connectivity, like Venmo. This is why we don't see adoption of Lightning Network, it just moves us off of Bitcoin, which lets us get most of the "benefits" for none of the costs.
That's not how lightning works. While it's true that the transactions are off-chain there is no trust element involved.
A channel between 2 entities is backed by real bitcoin and a scheme to manage the ledger based on bitcoin primitives (multisignature).
Lightning is just a series of channels + routing, so in effect it's a path of channels between you and the party you are transacting with + ledgers of those channels updating with the value that is being moved. At any point in time you can close any channel and materialize however bitcoin you have on your side.
> allowing any two willing parties to transact directly
And what happens if one of the parties is not willing? If someone's e-wallet gets broken into and funds are transferred? How does any current system handle that situation?
A lot of folks consider irreversibility a feature, when there's a strong case to be made that it is a bug.
The system does not handle it. If that is a problem for you, then cryptocurrencies are not for you. In a way it's like cash. If your wallet is stolen, there is no easy way to get your money back.
What this means to me is that cryptocurrencies are not for anybody. We don't have to create digital systems with the limitations of cash. We haven't had to do that for decades. Now there's a push to go back to the time before that, for (in general) no discernible reason besides people gambling on the price.
> In reality, a crypto wallet is better compared to a bank account, though. Most people don't carry their life savings (or comparable amounts) in cash.
I would think it was the exact opposite.
A 'regular' bank account has reversibility, and so if there are some shenanigans you can (potentially) get your money back. With a cryptocurrency 'bank account' (wallet), if anything bad happens you're SOL.
> Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments... cutting off the possibility for small casual transactions ...
Very small transactions happen on the internet all the time. Services like venmo allow for very small casual transactions all the time. And there is no cost for the transaction.
Sure venmo is trusted third party and the transaction is reversible, but it's still significantly easier and cheaper than bitcoin. Or any other other coin for that matter.
Many real world systems are "nearly trustless". Of course you still need some sort of court system if someone decides to break bad. But in the 99%+ of times you're in the happy path, economic transactions occur based on autonomous rules encoded in software.
The analogy I like to use is what's harder to buy a $1 million house or $1 million of Microsoft stock? The former process takes weeks, and dozens of man hours from lawyers, realtors, escrow agents, bankers, county property registrars, etc. Whereas a buy order to execute Microsoft shares happens in microseconds. That's because we've built a highly streamlined autonomous system for executing stock transactions. Yes of course, there's a trusted layer built on courts and fiat law at the bottom. And occasionally for a corner case, real lawyers have to get involved. But the vast majority of the time, this layer is completely abstracted away and trading stocks are just bits flipped on a computer.
When somebody says something like "let's put houses on the blockchain", the idea isn't to get rid of the fiat law system completely. At the end of the day, you still need courts and sheriffs to enforce property rights. But the idea is that we can wrap the house in an LLC, whose bylaws state that it's governed by on-chain contracts. (Which Delaware Chancery courts will absolutely recognize and enforce.)
Now instead of directly transacting at the very low-tech county property registrar we can transact using an on-chain NFT that grants the equivalent of ownership rights to the house. (This is very analogous to how Cede & Co technically owns almost all the stock shares in America, and holds them under your name for you.)
That NFT is way more powerful and efficient to transact with than the county property record. It lives on a credibly neutral level that already has billions in native capital and liquidity and exposes a fully Turing complete smart contract system. You can sell your house atomically and instantly to anyone in the world with no lawyers or escrow agents. You can pledge it as collateral and borrow against it. You can fractionalize it and sell a portion. Or roll it into a larger portfolio and slice into tranches. All with no more than few dozen lines of code. Without blockchains all of those operations would take hundreds of pages of legal documents and weeks of back and forth.
>>The analogy I like to use is what's harder to buy a $1 million house or $1 million of Microsoft stock
It's interesting, both have registries, so why is one harder? Is it because the registry is better? No, it's because real property transactions are more complex:
- What condition will the property be delivered in and when?
- What happens if the condition is not as specified?
- what personal property is included in the transaction? What condition is it in?
- Are there disputes over the property lines?
- Are there easements? How do they work?
- Are there third party consents needed? How do those work?
- Will the seller vacate immediately, or will they rent back?
- How will you pay for the property and when?
- What happens if you don't pay? How much is the deposit and what are the terms of the deposit?
The complexity of the transaction derives from the complexity of the subject matter. Sure, if you could standardize those items, you could make property more like stocks, and people are trying to do that, which so far limited success. But for the average person, this is a huge investment, and they will want to spend time and create a transaction that works for them.
Almost none of the complexities related to the transfer of real property relate to issues with the county registry. Sure registries could improve, but very little would change.
One of the expenses is paying for title insurance. Sure in some sense a perfect ledger would obviate the need for that insurance. But given there seems to be more fraud in blockchain than in normal US real estate transactions, not sure the insurance price goes down, rather than up...
Let's also not forget the whole deal with financing.
When you buy a house, for $1 million or $50,000, the normal case being described in yours and the parent post is that you are buying a house on margin while using the house itself as collateral for the loan.
If you show up at a house that is for sale and ready to be sold with a million dollars in cash -- well, a million dollars in easily-authenticated cash equivalent -- and ask to buy the house as-is, no conditions or concerns on your part, you can make a deal happen markedly faster. Not microsecond fast, because why, and the sellers might balk at such a weird transaction or shop around to see if they can get another seller at a higher price, but once you take financing and any sort of buyer-protection out of the equation it basically comes down to registering the sale with the local registry.
And having a lawyer or notary go over every line of the sale contract to ensure that you understand it. Real property comes with real responsibility, far beyond that of the financial realm.
> the sellers might balk at such a weird transaction
Over there, buying a house without taking out a mortgage does not count as "weird": it's not terribly common, but happens often enough to not be considered weird. After all, if you have 100% of the house price on hands, there is not much reason to take a mortgage with 20% down payment and then immediately closing the rest of 80%, is there?
Buying a house without financing isn't weird (even if it is uncommon). Trying to buy a house as quickly as possible with as little due diligence or negotiation as possible, is.
Yeah, but you'd accomplish nothing. Because the only way a registry could be meaningful in determining ownership, is if the government that protects your property rights considers the registration valid. And in that case, you have to trust the government which means a trust-based registry is far more simple and efficient. Could still be blockchain based though, with proof-of-authority. Could be nice to see a ledger seeing exactly who signed (with cryptographic signatures) the transfer of the property etc. Okay, that' be a kind of NFT-system, but not in the sense that most people think of NFTs (trustless)
For houses this is easy to prove. But this goes for nearly every other suggested NFT application, including tickets.
The trust calculus is different though. You still need to trust the legal framework in your jurisdiction honours the blockchain's authority over ownership.
But you can at least not need to trust the registry's "database" of who owns what.
I'm honestly not sure if you are joking or not. In case you are not, the problem with house buying is not to find out who owns it, but trying to address the value and condition etc. And that you have to spend that 1 million in one go instead of Microsoft stock that you can buy $10 at the time.
> could use an NFT to represent digital ownership of the underlying physical asset
So, you arrive at "your" property with a 20x20 pixel jpeg that you call your ownership rights (even such a jpeg would be prohibitively expensive to store on blockchain, but whatever).
So, you arrive, and there's someone else living there. They don't want to move out, no matter how much you wave your jpeg around. What does your NFT give you in this case?
you could but things like easements would make that much more complicated There are a lot of things that come / don't come with a piece of property (mineral rights, water rights, homeowner associations) that make it a complicated thing to own.
But that doesn't mean anyone will buy a house by browsing some site and buying an NFT, even if this were prefectului legally worked out.
And that is because a house and piece of land are complex real world objects that don't live on-chain, and can be arbitrarily different from when the NFT was minted. Perhaps there was flooding and the house is now damaged. Perhaps there is some insect infestation. Perhaps the land is in the process of being expropriate for highway construction. Perhaps a nearby high-rise is obscuring all the sunlight and the house is to dark for your tastes.
The complexity in real-estate transactions comes from appraising all of these sorts of things, not from the need of keeping the lands registry up to date. To buy a house, you need to have an expert appraise it's status. You also need a contract that gives you some protection from hudden huge issues that your expert may have missed. These things take the majority of the time and effprt, and NFTs do nothing to help with them.
Tell me you’ve never bought a house without telling me you’ve never bought a house.
Buying houses are expensive because:
- Realtors are a state-sanctioned monopoly for real estate transactions and suck up a % of the costs. They also provide the necessary service of aggregating information about the market and negotiating on your behalf
- Due diligence on the state of the property. This means inspecting that there’s no mold growing everywhere, checking that proper maintenance has been carried out, etc
- Property law developed over literal centuries to provide the legal framework that we have now, if you damage something as you move out I can sue you to recover costs involved, we have statements about property state before closing, if the building doesn’t meet code we negotiate about who pays the costs
- Property registries matter because legally speaking that’s a part of how you prove ownership. The county knows who to send the tax bill, if you default creditors can impose a lien, these are legal technologies that developed over time
This is why you can’t just pledge your house as collateral and borrow against it in a HELOC like you can borrow against your stock portfolio. The bank needs to verify that nobody else has a claim on your property and that the property actually exists and is worth as much as you say it is.
A house NFT has none of the legal protections of a SPA and all of the risks. If it’s not up to code you’re fucked, if the county has a tax lien there’s nothing you can do, etc. Us engineers like to think that everything is an engineering problem, and that’s often true, but law seldom works that way.
I have bought two properties in two different first-world countries and also bought NFTs with Ethereum.
The idea of houses on a blockchain are pretty much a pipe dream. But there are a lot of systems in traditional house buying that could be made easier with crypto-like ideas. Saying “real estate should be on-chain” should be read as asking for more NFT-like features in how real estate is transacted.
- as a cash bidder you need to provide proof of funds to the estate agent, which might just be a screenshot of your entire bank account balance. privacy with a zk-proof could be used in theory here to hide your balance while still giving the agent confidence you can meet the bid
- blind bidding process is usually opaque and broken, subject to discrimination and some winks and handshakes behind closed doors between friendly parties. a blockchain would give transparency and treat transactions equally regardless of race, sexuality, and friend or family ties.
- settlement times are extremely long in the order of months, not seconds. this is sometimes just because some party including the agents are on holidays, or slow to respond to emails, or forget to sign some paper, or whatever.
- escrow and exchange of funds in some cases could in theory happen with smart contracts where both parties sign a message to perform the exchange, which would reduce the significant commissions and fees.
- the process feels archaic compared to buying most other types of property.
I live in the UK (scotland specifically, where the process is different here). The house buying process here _is_ essentially decentralized but it's not trusting potential adversories by default. I don't think that many of your suggestions of crypto like improvements will help though.
> as a cash bidder you need to provide proof of funds to the estate agent,
Here, you don't provide them to the seller, you provide them to the solicitor acting on your behalf. Even if we removed that person from the chain, they are required to perform KYC on these transactions, so for regulatory reasons I still need to provide proof of those funds.
> blind bidding process is usually opaque and broken,
As much as I hate this, that's a (design) feature not a bug. Blind bidding doesn't exist in a vacuum, a seller is perfectly able to accept a bid from a party. Blind bidding is what a seller would use in a competitive market to extract the highest possible bid. If they wanted to accept a lower bid they could, by e.g. accepting their favourite bid at the second highest offered price.
> settlement times are extremely long in the order of months, not seconds.
This isn't because of transactions though, this is because mortgages take _weeks_ to come through, solicitors and agents take time to communicate/juggle multiple accounts/offers, and frankly they're still working with paper documents and off of the "who shouts the loudest gets service" system.
> - escrow and exchange of funds in some cases could in theory happen with smart contracts where both parties sign a message to perform the exchange,
The problem with using trustless currency for physical goods is that you need to trust the other party. If they just walk away without providing the keys or clearing the house out, it doesn't matter what it says digitally, you have a problem.
> which would reduce the significant commissions and fees.
On my past property purchase, I paid ~6% of the value in a transaction tax to the government, and ~£1000 in other "legal" fees. Meanwhile the actual transfer of funds cost me £0, (thanks faster payments - free almost immediate transactions up to £250k), and if I was a cash buyer, a bank transfer would have cost me £35. The fees are negligible even today.
I've been banging this drum for years now, the problems you're outlining are not technical, they're policy and regulatory. You can solve all of the above problems with regulation, like we've done in the UK. That said:
> - the process feels archaic compared to buying most other types of property.
Couldn't agree more. It feels like being dragged back to the stone age.
One of my property purchases was in the UK for me as well. The system is horrid. Blind bidding and behind-closed-doors conversations is common in the UK, and often buyers will end up over-bidding since it favours the selling agent’s commission fee. Depending on how well you know your agent and how much they are willing to hint at, you may be in a better position than another bidder. To make things worse, the UK has long periods after accepting a bid but before exchanging contracts, so “gazumping” is a regular fear in UK real estate market
Yes these are mostly policy and regulatory hurdles but there are also some technical solutions that could be applied here.. The fact that a screenshot of a bank website or PDF passes as proof of funds for a 6 or 7 figure cash bid is laughable.. the idea that a concluded auction won’t fully settle for days, weeks or months is wild after being accustomed to bidding and auctions based on smart contracts. if a listing agent accepted USDC and a zk-proof as a proof of funds for the bid, the actual transfer into a solicitor’s holding account could be settled in minutes and with zero privacy invasion.
This is all purely hypothetical, and not likely to work across the board.. but it does present some areas that cryptographic tech could improve upon our traditional financial system
> Blind bidding and behind-closed-doors conversations is common in the UK.
There's nothing about blind bidding that is solved by crypto in any shape or form. Moving to a blockchain approach for bids doesn't guarantee that you have opened bids, you can still allow people outside of the ecosystem to bid externally.
> The fact that a screenshot of a bank website or PDF passes as proof of funds for a 6 or 7 figure cash bid is laughable
Not really - a screenshot or pdf passes if the person you provide the proof to is happy with it. If you try and prove your funds with a screenshot from <local credit union in the phillipines> for a UK property transaction, they're going to ask you for more details, and they're going to ask you where the money comes from.
> if a listing agent accepted USDC and a zk-proof as a proof of funds for the bid, the actual transfer into a solicitor’s holding account could be settled in minutes and with zero privacy invasion.
For transactions under 250k faster payments guarantees transactions in under 2 hours, and anecdotally when sending my deposit for my last purchase, it was confirmed in about 15 minutes. For transactions over 250k, SWIFT transfers take a couple of days _because of regulation_, not because of technical problems. They're subject to AML checks.
> This is all purely hypothetical, and not likely to work across the board.. but it does present some areas that cryptographic tech could improve upon our traditional financial system
It's pie in the sky thinking, frankly, and doesn't even pass the sniff test. I completely disagree that it improves upon our financial system. The delays in these processes today are around AML/KYC checks, surveys, ownership dispute checks, etc. If you remove the legislation around AML/KYC checks, and streamline the surveys/ownership verification process, you could turn the entire process into 30 minutes for transactions under 250k, and some number between 30 minutes and 1-5 days for larger transactions.
Meanwhile, if you keep the regulations, don't fix the manual part of fetching deeds from the previous owner manually verifying them against a local land registry, and move the entire thing to the blockchain, I would bet you'd save a couple of days off a multi-month process, _and_ you still need to trust that your solicitor has correctly verified ownership, sourced your funds, etc.
The policy that's needed to change here has _nothing_ to do with trustless systems, because fundamentally the system you're interacting works on trust. Me telling HSBC to wire £250,000 to my solicitor for a property purchase doesn't actually send them £250,000, it just marks it to be cleared at a later point, but from HSBC's perspective the transaction has mostly happened at that point, and if the receiving bank is Lloyds, they're more than happy to trust that HSBC is good for the £250,000.
> There's nothing about blind bidding that is solved by crypto in any shape or form. Moving to a blockchain approach for bids doesn't guarantee that you have opened bids, you can still allow people outside of the ecosystem to bid externally.
If all parties agree that the smart contract is what settles the auction, then yes it could be superior in some ways, and inferior in others. Bids would be transparently recorded for all parties to see, perhaps held in escrow or using zk-proof to accept each bid, and accounts could be shielded to provide privacy. Accepting a new bid outside of this smart contract auction or after this auction settles would be a violation of the agreement. It also means the auction can be performed through an automated system, without a listing agent facilitating it via emails and phone calls, which is significant as that same agent stands to benefit if all parties bid higher than they really need to.
> For transactions under 250k faster payments guarantees transactions in under 2 hours, and anecdotally when sending my deposit for my last purchase, it was confirmed in about 15 minutes. For transactions over 250k, SWIFT transfers take a couple of days _because of regulation_, not because of technical problems. They're subject to AML checks.
Not all buyers have this smooth of an experience. I'm not disagreeing with you, the UK has good banking infrastructure and if every country in the world could send value through Faster Payments to every other country in the entire world, there would probably be less need for crypto. It is a pretty good model for how financial systems can be improved to facilitate most average use cases.
We are approaching this from different points of view and with different shared experiences around how smoothly our first-world home purchases and bidding processes have been, and that's OK. The fact that you think a PDF or screenshot of a website frontend is "acceptable" proof of 6- or 7-figure cash bid is probably enough of an indicator that we should just agree to disagree and move on with our day.
In this case this is why the base layer of fiat law is important. Common law give wide leeway in letting people setup contracts under whatever form they want. But generally apply common sense judgement for clearly egregious cases. They're not just going to say "this North Korean hacker owns the house because he found an exploit". They'll recognize the plain intent of the LLC bylaws.
A snarky and simplistic question. Here's a simplistic answer: You could program the NFT to not be transferable based on a blockchain datetime or only transferable in an "escrow transaction" with a minimum exchange value (i.e. the market value of the house + some percentage).
Or time delayed exchanges for important things like your house NFT.
It's not a snarky question, it's a genuine concern. Telling people to not worry about the details like "what happens in case of fraud" is handwaving away the problem.
> (i.e. the market value of the house + some percentage).
Where does the market value come from? "Market value" for properties varies wildly, and the number a property does not necessarily track to a fair market value - I might be willing to accept 10% under market value to someone who is a cash buyer because I need a quick sale, or I might be in a ripping hot property market where properties are selling for 20+% over their market valuations
> time delayed exchanges
That's all well and good if everyone involved is digitally contactable for the entire duration of the process, but if I'm ill for a period of time, or otherwise vulnerable, it doesn't matter whether the delay is 2 days or 2 months. The advantage the current system has is that there is inherently a central organisation that says "yes you own this" and they handle disputes. If you have an actual problem of suspected fraud (say your car catches fire with all of your ID in it), you can go to a government office, sign some legal documents, and get new ID and continue. Similarly, if someone impersonates you there are legal protections that can and are enforced.
Market value comes from a decentralised oracle. I don't want to write here the most famous decentralised oracle, but right now, it provides price information to various defi protocols why not also the market value...
Market values aren't generally quantifiable though. Two houses on the exact same street might be valued slightly differently because one has some original features, or one has historic significance. Unless your decentralised oracle factors in all or the unique aspects of an area and a property, it's not an accurate representation of the value, and as I said before market valuation isn't something that dictates a purchase price. If the paper valuation of a house is 500k, I am well within my rights to give it to my children for nothing, or to sell it to a local person for below cost because they have a unique interest in the property that I agree with.
Let me tell you something obvious. The credit system is doomed to fail, and it is not working. This blockchain thingy, defi, NFTs, now we might have a chance to build a better financial system. And yes, those two houses may be valued differently, but trust me, Some of the smart-ass people I know are working in crypto like there is no tomorrow. I'm sure we will solve this minor issue on the way.
>Now we might have a chance to build a better financial system.
Not with blockchains we don't. They're also doomed to fail, and not working. A system where your money loses 25% of its value in a day its completely unusable for a mortgage. Saying "I'm sure the problem will be solved" doesn't mean anything, you could say the same thing about a credit system.
> Realtors are a state-sanctioned monopoly for real estate transactions
This doesn't even make sense. 'Realtors" is plural, and there are many, which is incompatible with monopolies. Realtors have a monopoly on their trade only because anyone competing with them becomes a realtor, by definition.
It's like complaining about the airlines' monopoly in air passenger transport.
"Realtor" is a trademarked term which indicates that a person is a member of the National Association of Realtors. This is the org which the parent commenter is calling a monopoly.
Reduction of complexity somehow yields mobility and fractionalization of a complex physical asset? Why is this a good thing when you skip all the protection, nearly 500 years of property law and understanding all so you can digitize something into meaningless bits?
Replace NFT with deed, and what you think we can’t execute the transfer quick enough? No we can but we don’t because, we want to title search, violation search, inspect, appraise, survey the freaking thing you are about to blow your life’s savings on.
There is a reason why people continue to lose millions and billions on NFTs and crypto and why systems to slow and prevent rampant fraud exist.
There is no real technical problem with a real estate transaction that has not been solved. I closed on my house remotely, in 6 weeks, never having met anyone except my broker. 6 weeks were spent doing due diligence inspections.
I have an NFT of the Brooklyn bridge to sell you, cheap, 200 million dollars.
The "quiet part" that crypto builders won't say loudly about this is that they aren't trying to solve technical problems with real estate transactions. They're trying to make it so you can have real estate transactions with the authority being based on consensus of an unelected and unaccountable group of programmers/miners/validators running a blockchain, instead of the authority of a local government. The "problem" they have is really political in nature, not technical. At least, I cannot see any other reason why they would care about this when there seems to be even less interest in trying to deploy permissioned blockchains operated by governments.
I mean, I was always taught that eval’ing untrusted code was bad but here we are. Let’s keep doing that.
Have you read any of the proofs behind any of these algorithms? Ever notice how often some one finds a crack and disappears millions of dollars? Think we’ll actually make it secure some day?
I’m also not convinced this even needs technology. Some things are better locked up on paper in slow, bureaucratic institutions surrounded by layers of administrators. Makes it a lot harder to break in and steal stuff.
Most people aren’t buying properties online like games on Steam. If it takes 6 weeks or 5 it won’t make much of a difference.
Even if you want to digitize proof of property ownership it would be orders of magnitude more efficient to host your blockchain on a handful of Raspberry Pi’s. You could probably manage all property sales on an entire continent with it. Not dealing the Sybil attack problem is a lot cheaper and easier than trying to deal with it.
As with many proposed blockchain solutions - what's important there is that you've wrapped everything in a legal vehicle that makes fast transfer possible, NOT the fact that the record sits on a blockchain. That record could sit anywhere. A database perhaps.
It's not really the NFT that's the 'win' there, if indeed it is a win.
You'd need some kind of shared database that all parties can trust. It'd have to be regularly audited but also kept as up to date as possible. It should have very precise access controls. Also, it should be as fast as possible, and there should be a record of everything that's ever changed. If you want a full copy of it, you should be able to request it at any time.
It sounds like a lot of work to build that though.
Maybe we can find some nerds to make it for "equity" on the chance that such a database has value? They could use it for other stuff too if they want.
> You'd need some kind of shared database that all parties can trust
Government run then, the institution that is involved with contract oversight here, an easily identifiable authority in this situation. If you don't trust that here, then there's no point in bothering with sales contracts in the first place.
> It'd have to be regularly audited but also kept as up to date as possible. It should have very precise access controls. Also, it should be as fast as possible, and there should be a record of everything that's ever changed. If you want a full copy of it, you should be able to request it at any time.
So like a database with auditing switched on? The type that is already run all over the world for all sorts of things?
> If you want a full copy of it, you should be able to request it at any time.
Like a database that offloads snapshots every so often? And maybe has an API in front of it allowing querying of public data? Like are run ... everywhere? For all sorts of things already?
> It sounds like a lot of work to build that though.
I mean, it sounds exactly like a ton of running systems with fairly standard options, so no, it seems like it would be fairly trivial.
And of course we all know that there are no development costs for blockchain solutions. Nobody needs to build a webpage, or develop smart contracts, or security audit them, or build in permission systems so there can be authority oversight, or provide APIs, no, they all just appear fully formed and fully secure out of the ether... no boring 'work' to build that!
"Blockchain gives you that for free" must be one of the biggest fallacies out there.
> Maybe we can find some nerds to make it for "equity" on the chance that such a database has value?
Doesn't sound to me like we need to give these 'nerds' a continuing stake in a public service. Any old software company can build that sort of thing out for you for a one-off fee. Adding profit motives for unrelated third parties seems to me like a pretty poor choice. But what do I know, perhaps we should introduce more avenues for speculation around the housing market, that sounds healthy.
I suspect we have different governments. I don't see mine doing anything remotely like that.
I come from a place that still has toll booths so that toll booth workers can keep their jobs.
I have to take off my shoes before I can get on an airplane so that my government feels safer.
I personally compute my government taxes, which only occasionally (if ever) get verified. That's how we fund the country.
If I routinely saw the government creating new technology that improved the lives of citizens, I suspect I would share your opinion.
It would be interesting to map "places interested in crypto" against "places that have low trust in their government" and what kind of overlap there is.
The way I see technology in the US: First, the nerds get excited and start forming groups about it. Then, the business people figure out how to monetize it. Eventually, the government gets sold an overpriced enterprise solution. Then we do it all over again.
> I suspect we have different governments. I don't see mine doing anything remotely like that.
Then why are they going to bring in a blockchain solution? It's got the exact same problem there as any other software solution would.
That's my point here, making it a blockchain (or a database!) doesn't magically solve the root cause, it's just an implementation detail.
If it even is a problem (a lot of other posters don't seem to think so), the problem isn't that the data storage medium isn't decentralised, or that there's too much trust in the system, it's the absolute ton of bureaucracy and paper-shuffling that takes several weeks. Choosing blockchain + API vs DB + API here doesn't address that. The gains come from modernising the system, not the storage tech.
> Now instead of directly transacting at the very low-tech county property registrar
I think you've overlooked this in the grandparent, because you've probably never had the experience of going to a low-tech county property registrar's office to pull a record.
> it's the absolute ton of bureaucracy and paper-shuffling that takes several weeks
Of course, but so much of that bureaucracy is about being risk-adverse. I really do have to take my shoes off at the airport because somebody tried to wear explosive shoes once, about 20 years ago.
So, yes it's the "ton of bureaucracy and paper-shuffling that takes several weeks", but that doesn't really address what's going on. Our governments will easily adopt new technologies when they're simple.
If minting officially signed records is as cheap and easy on-chain as it looks like it's going to be, it would be silly not to use the technology, even if you think government should have been the entity to build and maintain it.
> Choosing blockchain + API vs DB + API here doesn't address that.
This whole class of technology precisely addresses that.
It removes the "who has to build and maintain this DB and keep access to it forever" step, which is pretty significant for important records.
Literal teenagers can buy and sell pictures of apes easier than I can prove to a mortgage company that I own my residence. Something isn't right there, and I don't think it's the children and their fancy record keeping that's wrong.
When the intern at a county clerk's office somewhere in the middle of the country says "hey boss, let's mint NFTs for these records, it costs about a penny each and I can set up the computer to do it as a summer project", that's about the threshold we need for widespread local government adoption.
Minting an NFT is not simpler than adding a record to a relational database. It's pretty clear that technology itself isn't the roadblock.
And if governments ordering security theatre at airports is relevant to their ability to administer property then I've got bad news for you about the track record of people working on building important stuff on blockchains. Difference is they have no need to be involved in property transactions whatsoever, whereas when it comes to enforcing property rights you're stuck with government being involved anyway.
Your response is so full of gaping holes it's kinda crazy. I'm not sure I can even begin to address them.
> I think you've overlooked this in the grandparent, because you've probably never had the experience of going to a low-tech county property registrar's office to pull a record.
No, I haven't overlooked this at all, in fact it's bang on with what I'm trying to get you to understand - that pulling a record can be made faster with a better system, yes. But for some reason you're insisting that only a blockchain can fix that, which is just nonsense.
> If minting officially signed records is as cheap and easy on-chain as it looks like it's going to be, it would be silly not to use the technology, even if you think government should have been the entity to build and maintain it.
You're glossing over the massive effort to bring such a system into place for the land registry in the first place, and reducing the entire problem to record signing. The signing of a record is the most trivial part of the problem. In a DB-driven centralised solution it would be actually free.
So I'll repeat myself here - you're trying to address a bureaucratic issue with a data structure, you're choosing one data storage scheme over another as if that makes the difference, when the difference that leads to the speed gains in the proposal is legislative change and modernisation, not a specific storage scheme.
> It removes the "who has to build and maintain this DB and keep access to it forever" step
It does no such thing, as the data structures and smart contracts specific to land registration will still have to be created, and updated as needs change over time, the human-usable interfaces to those will still have to be created, probably involving API servers and web UIs in the exact same way as any other solution. Someone has to build all this. Someone has to run the infrastructure regardless, and those people will want paying somehow. The fact you can abstract some parts of it away through a blockchain doesn't remove the need for that payment, perhaps in the form of transaction fees, for instance, or rent seeking on these tokens you mentioned earlier.
> Literal teenagers can buy and sell pictures of apes easier than I can prove to a mortgage company that I own my residence.
Umm, so? I mean, Ape pictures are again, trivial, land registries are not, and the proof you want could be an entry in a land registry database just as easily as it could be an NFT. (As it could be for that ape picture, and as it usually more or less is anyway, due to centralisation of API-provision...)
> When the intern at a county clerk's office somewhere in the middle of the country says "hey boss, let's mint NFTs for these records, it costs about a penny each and I can set up the computer to do it as a summer project", that's about the threshold we need for widespread local government adoption.
And that intern is going to know how to implement all the smart contracts around property transfer correctly, taking into account all the legal regulations, edge cases, boundary definitions (and disputes), court system oversight and the million and one other things that are implicit in that proposition?
Seriously? You genuinely think the hardest and most complicated part of transfer of property ownership is the bit where you need to sign a record?
Because that's all you're talking about solving here, and even that isn't something a blockchain solution can do any more easily than any other solution.
All of the benefits of moving to a blockchain that you list are possible, probably with lesser effort and lower complexity, using other systems. None of it is because of blockchains, all of it is process modernisation that you feel you can just gloss over because blockchain.
You are vastly over-estimating the scale at which local government operates and I'm not saying this is 100% about signing. Searching, pulling GIS files, whatever, it's all essentially the same problem.
Your argument is akin to being anti-Twitter because the local government could build a notification system just as well. Maybe San Francisco could, but most of America cannot.
Twitter's core function is that it lets you send and receive short messages. That's absolutely great for a local government office, but it didn't make enough sense for any local government to invent Twitter. That's not the job of local government.
The value here is in the network effect of agreed upon protocols between interested parties.
If parties agree on data sharing protocols, which is something we've all been talking about forever, then the network gains value.
> we can transact using an on-chain NFT that grants the equivalent of ownership rights to the house
He's literally talking about ownership rights tokenized for convenient settlement with a governance layer that can be overridden by officials. I think that's a fine idea to try out. It will probably reduce friction most of the time.
> you can just gloss over because blockchain
The idea is that a universally trusted, always-on database allows you to build new types of applications. This seems obvious to me.
I was listening to NPR a while ago and they had story on about governments that paid for ransomware attacks so they could access critical records. That's where we're at today.
All networks are hard to get off the ground. If you can't tell, I was a fan of the "semantic web" idea. I feel like this time it's going to work because there's a money-layer built into it.
> The idea is that a universally trusted, always-on database allows you to build new types of applications.
If you think a government bureaucrat or judge will trust a blockchain because "proof of X" when a dispute does happen, you've got some weirdly conflicting beliefs about government. Furthermore, if you think they would trust it more because it's public then they would trust a DB that, say, Price Waterhouse Coopers were running that any county clerk could sign in to with an audited account and put some information in, then again I really don't understand what is your mental picture of the government.
However you slice it, the fact remains that, if there is ever a dispute on the ownership of your property, the government will want to consult an official paper trail of how that ownership came about. The more layers of abstraction you add, the more places your trail could be attacked, the longer it will take to do it, the more expensive experts will have to be hired for the trial and so on.
Permissionless databases also lend themselves well to a kind of DoS attacks, where someone can trivially bury the real data in mountains of low-effort fake data (perhaps with some high-effort fakes thrown in as well). If the county clerk's intern can mint an NFT for each house in the real registry, I can easily mint 100,000,000 fake NFTs for the same houses as well - good luck disputing the ownership then if your house purchase wasn't registered in the paper registry.
A permissioned DB run by a trusted entity (which could easily be some company, even though I hate that this is what usually happens, and would much rather see the government handling internally) that is responsible for auditing who has access to modify the digital registry and so on is the only possible solution for improving the bureaucracy of this. And even then, it will only improve it so much, since you will still need to send documents that prove you are who you say you are, and the other party is who they say they are, and you both agreed to the contract that made this transfer possible. Of course, much of this can also be fixed by using a government-certified digital certificate proving your identity (this is a common service in the EU at least).
> You are vastly over-estimating the scale at which local government operates
You, and every other crypto bro vastly underestimates the scale at which local government operates. And the scale here means not "number of transactions per second", but "number of edge cases that need to be handled on a daily basis."
Some time ago I was in a conversation about how blockchain is going to solve everything around property registrations. Blockchain is just a slow distributed database that solves jack shit on its own, of course.
>I was listening to NPR a while ago and they had story on about governments that paid for ransomware attacks so they could access critical records. That's where we're at today.
Was that before or after listening to NPR and their story about private companies that paid for ransomeware attacks (https://www.npr.org/transcripts/1003972313, many many others)?
> You are vastly over-estimating the scale at which local government operates
Not really, they could all deploy the same DB solution, we could open source it and containerise it and give it away for free. It could be run as a managed service for a small fee. There's no need for each local government to design their own or even run their own.
Exactly the same as with a blockchain solution.
> Your argument is akin to being anti-Twitter because the local government could build a notification system just as well
My argument is not in the least bit akin to being anti-twitter. My argument is more like saying twitter is possible with multiple different back-ends, conceptually. I'm saying look, your short message service can be implemented in a bunch of different ways - in the back end it could run on a NoSQL server of some sort, or some sort of RDBMS, of which there are many, or we could probably mash something up with SQLite to get off the ground. The important thing that's addressing the need is to build a short message service.
In contrast you're there insisting that only an MSSQL system will enable twitter. But with MSSQL we get archiving for free! And with MSSQL we can just UPDATE a record and it will be changed! Huh, how about that?! Nobody else can do that!
And I'm here scratching my head and saying that's just an implementation detail, sure, it could work, there will be license fees etc, but it's not the only way, and we still need to do the rest of the work.
> If parties agree on data sharing protocols, which is something we've all been talking about forever, then the network gains value.
Yep. And those protocols are still going to have to be designed and deployed by someone, a blockchain solution doesn't magic these into existence any more than any other solution does. APIs and UIs will still have to be built. Data schemas will still have to be defined. It doesn't reduce engineering effort.
> He's literally talking about ownership rights tokenized for convenient settlement with a governance layer that can be overridden by officials.
Sure, and maybe it would work great, but that doesn't require a blockchain either, it doesn't need to be an NFT on a public blockchain to provide that low-friction experience.
Throwing 'blockchain' at a massively complex situation doesn't solve anything in and of itself. It seems to me that saying 'blockchain' allows its proponents to mentally skip to the end of the process, where the value actually comes from one of the early or middle steps.
Step 1: Figure out how to encapsulate land registry records in a simple but comprehensive way
Step 2: Make legislative changes such that these records are now the source of truth
Step 3: Expose these records in an easily digestible and transferable way
"Blockchain" is part of one of several solutions to step 3. That's literally all it is in that picture.
(edit/addendum -
> If you can't tell, I was a fan of the "semantic web" idea.
I always found that really naive, perhaps I just never understood it, but it seemed to rely on honest actors categorising their content in ways that would allow it to be retrieved, catalogued and processed correctly, then presented to users. Some of the professors at my University, Southampton, were well into it. Even back in the late 90s I was jaded enough to know that anything relying on people to be honest and not use all sorts of SEO tricks to game the system was doomed. I know there was more to it than that, and some of its ideas did filter into the modern web in various ways.)
Please don't confuse my criticism as hatred. Being critical of the government is a proud part of the American tradition.
If anything (at the risk of sounding extra American), these threads remind me that the US is still the place to be if you want to build something different.
There's a positive side to how the US works too. The few things we really commit to, like building our military, we really are the best at. Also, the lax regulation does let new technologies like driverless cars get tested on open roads. Hurray? I think so.
Somewhere has to be the test-bed for new ideas. When they fail, they'll be expensive and stupid and maybe even stick around for a lot longer than they should (can we please, please, fix the shoes thing with the TSA?). But all together, we do a lot of cool stuff first that changes the world.
> If anything (at the risk of sounding extra American), these threads remind me that the US is still the place to be if you want to build something different.
Interesting, because recently the USA exited Bloomberg's top 10 innovative countries, while if I remember correctly 7/10 where European countries [0]. Sorry guys, you can't stay on top forever.
> This hatred for the government Americans have is frankly unhealthy.
Governments, by design, are the most dangerous institution we have. In the 20th century they were a leading cause of death. Between the wars and communist policy a lot of people died. Fear of government is entirely sensible, we're more likely to be killed by a government than any serial killer.
And we don't know what the big wars of the 21st century will look like, but we may be about to find out.
If you don't have a government you can trust, the only solution is to fix the government first. Because without that, any database is irrelevant.
You need something that's going to help you solve disputes and enforce contracts. If the government isn't competent or your enemy for arbitrary reasons, they'll just ignore any evidence you can point at and do whatever they want to anyway.
> But in the 99%+ of times you're in the happy path, economic transactions occur based on autonomous rules encoded in software.
In the happy path, people just “trust” that the system works; that the merchant and cc company transact properly, that cc company and bank work together, that the software underpinning all this is tested and has no errors, that the bank and cc company can help in disputes of fraud from the merchant…
It’s actually based on a lot more trust than the normal person realizes and polar opposite to nearly trustless.
(1) Do we really want high frequency markets in real estate? Is that socially and economically desirable?
(2) Land and property records so far have survived centuries (if not millennia), can we hope that an NFT solution will have the same long-term compatibility?
> Land and property records so far have survived centuries (if not millennia)
Not really, no. Just taking the European example, there have been countless cases of litigious states of affair after e.g. invasions, revolutions, nationalizations, privatizations, etc.
E.g. a house in Romania post Ceaucescu fall, a noble family's domain in Russia in 1917 or France in 1790, a German estate in East Prussia in 1945, a property in Kosovo, etc.
So France 1790 is kind of making my point - if that was the last break it's more than 200 years ago. And, yes, well aware of post socialism etc. issues. Not all have to do with records themselves but rather whether certain transfers of property were legal or not - which is different from pure record keeping.
Where I live in Europe nothing litigious for about 200+ years and I can easily pull records for my place beyond 100 years without any need for reading/parsing technology.
In this ‘house NFT within the court system’ paradigm, what happens if the court disagrees with the blockchain on who is the rightful ‘owner’ of the house NFT?
Considering it's a physical house they sould be able to do more than they can when someone steals bitcoin.
So I imagine they can either legal pressure on the illegitimate owner to transfer the NFT to the other owner (which has worked with some bitcoin transactions in the past), or if that doesn't work, then the system of smart contracts created for something like houses would most likely have something in it that allows the smart contract owners to mark that NFT as void in the blockchain (while it remains in the perpetrators wallet, it would no longer be associated with the physical benefits) and have a fresh NFT minted based on the data in the previous one and sent to the legitimate wallet.
Barring all that, they could just not recognize the owner and send police to physically remove someone who thinks they own it because the have the NFT. That's one reason why some people like bitcoin so much, the government can't (easily) take it from you by force (because there's no physical aspect to it) like they can a home or gold.
>Barring all that, they could just not recognize the owner and send police to physically remove someone who thinks they own it because the have the NFT. That's one reason why some people like bitcoin so much, the government can't (easily) take it from you by force (because there's no physical aspect to it) like they can a home or gold.
If this were to happen and the blockchain and the physical world diverge, how would potential house NFT buyers know whether the physical house purportedly linked hasn't been overridden by local government? If the answer is for local registries to publish a list; then that list is the only thing that matters. The entire blockchain component becomes completely superfluous and a centrally managed electronic exchange would be faster, easier and cheaper.
You could check if the NFT was still valid by calling the smart contract directly if they provide public functions for it. No need for a published list by a centralized authority (beyond whatever you're using to call functions on a smart contract, like I'd probably use Etherscan if it's an ETH contract).
And calling read-only functions (doesn't write anything to the blockchain) doesn't cost anything.
I didn't think of this with my original post, but there are NFTs that are used for access to things that people already say "don't buy these on the secondary market, legacy, no longer used". Not too dissimilar of an idea. Those NFTs are still in those people's wallets but it no longer provides the benefits associated with it.
Like the old Premint pass, which gives you access to tools to help launch NFT projects. The description for the old pass says "DO NOT BUY THIS PASS. This pass has been replaced with the PREMINT Creator Key" and the banner image says "THIS PASS IS NO LONGER VALID": https://opensea.io/collection/premint
“NFTs create a frictionless easily exchangeable market for goods… BUT make sure you check with the people, project, company or government that has authority over this good as to whether this particular NFT is actually a useful representation of anything. Because, at any arbitrary point they can just decide to not honor any of these.”
Why not buy the good directly from this party? Then at least the government has authority and can enforce your right to the product or service or at least a refund?
All NFTs are is a token on a blockchain. People might decide that having it let's you do other things, but that's all it is really. That's not being taken away from anyone.
It's up to the organization or society or code written in smart contracts whether they want to honor, and how much they honor, the promises made for having possession of that NFT. It's really no different than any other organization out there for any service.
I can buy a ticket to a concert and be denied entry as well, or the concert be cancelled, or the company goes out of business, or any other manner of things. I still have the ticket, but it no longer provides the benefit associated with it.
Additionally I can go to the concert, and then try to sell the ticket to someone else, possibly claiming that it will let them get into a future concert, and that buyer needs to verify that the legitimacy of the ticket before purchase.
Or someone who buys a video game that's basically just a case with a code to download the game from a store that then redeems the code but sells the game to Gamestop with a no longer valid code, and Gamestop puts it back for sale even though it's basically useless at that point. That's kind of what's going on with people putting those old Premint passes up for sale on the secondary market.
You could argue that organization should not be trusted with future NFTs or be sued and punished, or the person who sold the now defunct NFT be punished, and that's fine, people no longer patronize or sometimes sue organizations or people all the time when they've been wronged somehow.
As for Premint, they do want you to buy directly from them and not from the secondary market. That's what they are directing you to do. I don't know too much of the details of Premint but they probably wanted to upgrade their service and used older smart contracts without update capability built into it, so the contracts were immutable and limited in some way.
So they needed to issue new smart contracts that had better capabilities, and in the process it rendered the old contracts obsolete. I'm guessing, I don't know, I'm not a customer and I don't work for them, it's just a service some people I know were considering using at one point since it's huge and has a large network of users and one of the things their service helps with is limiting access to bots, which is something the people I know cared about preventing, and is difficult to prevent, at least currently, in web3.
It seems like, whenever there is an issue with the representations of blockchain the answer is to ignore the blockchain. (Shoot, our smart contract was a little too limited for the service we want to offer “Hey everyone don’t use that NFT!”) Where as a traditional database the answer is to fix the database or code. I look at any process involving NFTs and have to wonder how they aren’t more easily and cheaply accomplished as digital records in a centralized database and have yet to see any examples where that is not the case. Concert tickets? Set aside the fact that minting an ETH NFT is probably the entire profit margin of a ticket seller, why not a REST API? Or a web interface? (FYI they already do this) If the people who are letting you into the show are the final say whether you get in – you’re already trusting them and they already have full authority. What are you gaining bringing blockchain into this?
There are ways to make upgradeable smart contracts but it wasn't really formalized until recently (there's now open contracts you can import into your projects to enable upgrades).
Additionally, a lot of the community are against upgradeable contracts because they theoretically can be upgraded to something totally different, and they prefer immutability, with all its potential warts. Some projects use upgradeable contracts and don't have to do what Premint did, and some people don't.
But regardless, if you're going to offer an organizational service that's not on the blockchain, then inherently, by definition, it can't be strictly enforced just by the presence of an NFT, because people aren't computers and their physical actions aren't guaranteed to happen by lines of code like a computer program can (at least not yet).
Tickets for a concert were a meatspace analogy, not me arguing to put all tickets on the blockchain. One difference, though, is the NFT 'ticket' can be proven for any organization that wants to incorporate it, without a prior agreement or API access created by the original organization. Like I know some NFT projects allow people who have NFTs from other specific projects in their wallets to have early access in their own projects, or grant access to private Discord rooms, or let them into events, etc. and it can be granted via software, without people checking or verifying anything.
Yes a REST API and a centralized database can provide that, but not if that organization goes defunct.
As an example from my own history, there's a game I worked on once that the company once debated on buying servers to host the multiplayer aspects of it, but eventually I just incorporated the general async turn based api of Apple's for the game. The company went defunct not even six months later. If we had gone the server route, the game would have been unplayable as soon as the company folded, but since we used the general protocol provided by the platform, the game was playable for many years afterwards (might still, I haven't checked in a while).
That's a very real (to me, anyway) benefit of building on a blockchain. As long as the blockchain platform is still up, those smart contracts can still be used, and its support doesn't have to be constantly justified by the parent company / count on the company not going out of business to keep running. Like Nintendo is getting rid of its Wii and 3DS shops here in a few months because they can't justify keeping it up. If the blockchain existed then and those things were stored on there (like files are stored on IPFS or Arweave for web3 today) they'd still be accessible without any continued expenses from Nintendo.
Right now I'm having to decide which of my digital games I need to make sure are downloaded and on my device before I lose the opportunity to redownload in a few months (technically I can hack the device and download stuff from torrents, but I'd rather not have to do that for a while, if ever).
Another benefit, to me, is similar and legacy related. Like my Facebook profile, website, games, journals, etc, when I die, all go away the instant that Facebook stops being a thing, and more importantly when I stop paying for web servers or cloud computing. My SO already made it pretty clear they're not really going to do anything to perpetuate them, so if I want those things to exist and be available I'll need to find something that can withstand not actively paying AWS, Azure, DigitalOcean, etc. to keep it going. Putting these things onto the blockchain would allow for that, and at the very least will outlive anything put onto cloud services, and possibly even the current crop of social media websites (definitely a few of them, maybe not all of them).
Some things I worked on are probably also circulating in some torrents of Flash games or console games also, but a lot of it isn't. And I have some physical copies of things I've worked on also (a lot of board game prototypes, some journals, etc), but I have a feeling a lot of that is just getting thrown away not too long after I die unless I something of mine becomes a big hit, maybe not even then.
You might not personally care about these things, but other people do. Or at least will once the infrastructure and supporting software is built out more.
Thank you cableshaft. I appreciate you taking the time to share your thoughts.
FWIW I also think general protocols on long lived platforms and IPFS are great.
BUT, I really don't think the blockchain has a role to play solving any of the issues you laid out. The reason the game you mentioned was able to continued to be played was because Apple was providing the network. The minimum ETH write fee is almost always at least $1 and frequently cost $3.50. Would people still be interested in playing the game if each write cost that much? Same goes for your archiving plans. IPFS is great but it's not a guarantee that that data will be seeded forever. For that you'd need to write it to one of the chains you're confident will survive. ETH data costs somewhere in the thousands of dollars per MB range? I'm not sure it's a real solution to that.
I'm not dismissing the issues of very long term code and data longevity. They are real issues but in my opinion still quite unsolved.
I would agree it's not necessarily the best solution, but corporations have proven over and over again that they can't be trusted to steward data long-term.
I wish there was something kind of like bit torrent that lived on people's computers that helped maintain a certain amount of data for every person if they wanted to (even if it's just text data, like journals or stories or a simple message to future people that might stumble across it, whatever), that would remain even when they're gone, and can be accessed by people who do searches by certain types of metadata (or by name), and didn't cost any money or web 3 tokens or crap to keep the platform going. That would be my preferred method. I've even been tempted to work on building such a solution at times.
But until then, web 3 seems to have the better solution to what's already out there at the moment.
> Whereas a buy order to execute Microsoft shares happens in microseconds.
To be perfectly pedantic, you still aren't the owner of the Microsoft stock. Your broker makes a record of you being the beneficiary of X shares of Microsoft stock, with about a dozen asterisks. Each of those asterisks fall off over the course of the next few days and then it is all finalized - your broker owns a bunch of shares for your benefit.
It only feels like it is instantaneous because they assume everything will work out (it usually does). They can do this, because everything is reversible if it doesn't.
Now, if you would like to be the actual owner of Microsoft stock, you can do that. If you've never done that before, expect the process to take a few weeks. But go right ahead - head over to ComputerShare [1] and start the process. If you really want, you can even get them to issue you some paper stock certificates in your own name, but that takes even more time and comes with a lot of extra fees.
> "You can sell your house atomically and instantly to anyone in the world with no lawyers or escrow agents. You can pledge it as collateral and borrow against it. You can fractionalize it and sell a portion."
Who enforces seizure when lendee defaults but the lender is "anyone in the world"?
The comparison of buying $1 million house or $1 million of Microsoft stock is a bit complicated - because in nearly all of the transactions you don't formally really buy the Microsoft stock. Here is Matt Levine quote:
"""
Nobody owns stock. What you own is an entitlement to stock held for you by your broker. But your broker doesn't own the stock either. What your broker owns is an entitlement to stock held for it by Cede & Co., which is a nominee of the Depository Trust Company, which is a company that is in the business of owning everyone's stock for them.
"""
Microsoft teams of lawyers, accountants, and regulators ensure that Microsoft is indeed worth what investors think it is. If you want to transfer your house, you need to do due diligence to do the same.
And it is fine to build systems with trusted parties on top of a permissionless network. The article cites USDC which does this, it is one of many applications users can choose to transact with. Attempting to bake reversibility into the protocol would lead to a tightly permissioned system with only a few trusted authorities.
A loose analogy might be the internet, which aims to be a decentralized global protocol that we can then build centralized systems on top of.
I'm not an expert but I think this is what the original letter authors objected to. If you build these mechanisms on top of a blockchain which is inherently baked in stone, then there is no point in having the blockchain be so strict.
In other words, if you allow an organisation to change things like refund you, then they might as well just manage their own leger like they do at the minute.
The goal of modern crypto like Ethereum is to provide a secure, predictable, open source, and decentralized network that many higher-level applications can flourish on top of and co-exist within.
USDC exists with reversibility but not all users in the network are forced to use it. There are other protocols like DAI that have different features and considerations. And in many cases these are open source protocols that can be forked as desired.
Probably the closest thing we have like this is the web, which is more or less a decentralized protocol, atop which we have built a lot of centralized platforms.
There's a benefit to building it on the blockchain.
I can look at the USDC contracts and see that privileged users have the ability to freeze the USDC in my account.
I can look at the DAI contracts and see that they do not.
Good luck getting visibility into the back-end processes of web2 applications. Even if they publish the source on github, there's no way to verify what they're running
> Good luck getting visibility into the back-end processes of web2 applications
"Smart" "contract" are as invisible to the average user as the backends of web2 applications (or any other applications for that matter). The authors of these "contracts" routinely create buggy contracts because the code is complex [1]
But sure. You can definitely look at impenetrable code written in an esoteric language for an equally esoteric VM and see exactly what it does.
Absolutely, the average user won't be looking at the contracts (and yes there will be exploits). All software is buggy, the open-ness just gives malicious users a path to find exploits (and also bug bounty hunters incentive to responsibly disclose). With traditional software, the attackers are often large actors and we may never hear about all the exploits.
But think about where faith is being placed in traditional software vs. decentralized software: with traditional software, you rely on a whistleblower inside the company, or a government agency to expose corruption, malpractice, maliciousness, noncompliance, or incompetence.
In a dapp, there are also knowledgeable watchdogs who are incentivized to expose scams/fraud, or report bugs (I'd wager there are more responsible disclosures in crypto than exploits by bad actors).
Knowledgable researchers keep casual users informed of developments, and give layperson explanations of how dapp works (and Cunningham's law dictates that they're likely to be called out if their explanation is incorrect).
Either way, people are placing their trust somewhere. Traditional applications basically rely a lot on "security by obscurity" which doesn't make them truly secure. And many users enjoy truly transparent applications.
The biggest problem with crypto for the average person is that it's incredibly hard to assess risk in order to develop risk-appropriate strategies and expectations for interacting with crypto. And it can also be hard to get a straight answer when discussing risks (good signals are surrounded by lots of noise). That's why I think that rather than writing off the industry as a whole, those of us who have more insight into the technology (and the risks) should be advising less technical participants to be incredibly cautious, not to approach crypto outside of the top two as an investment without incredible diligence etc. (though, like the author, I'm very much opposed to bitcoin due to proof of work)
> But think about where faith is being placed in traditional software vs. decentralized software: with traditional software, you rely on a whistleblower inside the company, or a government agency to expose corruption, malpractice, maliciousness, noncompliance, or incompetence.
Indeed.
> In a dapp, there are also knowledgeable watchdogs who are incentivized to expose scams/fraud, or report bugs
Indeed. Moreover, they are incentivised to actively seek out and exploit those bugs because there are literally no avenues of recourse.
> Traditional applications basically rely a lot on "security by obscurity"
No. No they don't.
> The biggest problem with crypto for the average person is that it's incredibly hard to assess risk in order to develop risk-appropriate strategies and expectations for interacting with crypto.
Indeed. Whereas with "traditional applications" you have anything from regulations to courts in case something goes wrong.
> those of us who have more insight into the technology (and the risks) should be advising less technical participants to be incredibly cautious
Yeah. Yeah. Those who actually have insight into technology clearly and openly call that almost all crypto projects are scams. And that "smart" "contracts" are neither smart nor contracts and run obscure code whose authors often don't know how it works.
The people who pretend to be knowledgable and advising post things like "I can look at the contracts and see <various things>" perpetuating the myth that this is true.
If you build a system with trusted parties, you no longer need to build it on top of a permissionless network. If permissionless networks were zero-cost and had no downsides, it wouldn't matter. But in fact, they are incredibly expensive and complex compared to conventional systems (like relational databases), and have serious downsides. Once you need a trusted party, there's no way to justify the permissionless network.
Well, I can think of a few reasons: facilitating transactions with other parties on the permissionless network, promoting public verifiability of your system, utilizing the tools and utilities available for public blockchains, requiring your data to be available even after you stop paying your hosting provider, avoiding the hassle of building your own payment on-ramps, etc.
The internet is built on the 'A' server which is a tightly guarded centralized US tool. Commerce lives because the absolute power brokers of the system have chosen to not exercise strong enforcement. The internet technologies are certainly built in a way that could function in completely autonomous blobs all over the world, but that's certainly not the way it functions today.
Bitcoin is a base-layer solution. Do you not want to transact on the base layer because of lack of reversibility or fees? Move to a higher layer solution that sacrifices some characteristic of Bitcoin to enable something new. Want to do lots of (micro)transactions? Use LN where this is made possible by sacrificing the ability to be secure offline.
Do you want to use DeFi-like solutions with smart contracts? Use RSK.
I don't see what the problem is with moving things up one layer if you retain the option to delve back into the base layer.
Bitcoin mining isn't melting the planet. It's not even using more energy than Christmas lights or wash dryers. The comparisons made with [insert random country here] is dumb, because any worldwide phenomenon has a large chance to use more energy than [insert same random country here].
Even if the base layer of Bitcoin is using energy, one can argue that the functionality it offers (trustless, borderless, permissionless, programmable, digitally-native money) is worth the energy cost.
> It's not even using more energy than Christmas lights or wash dryers
I can't come up with any reasonable measure by which Christmas lights use more energy than Bitcoin mining.
The reports that suggest this seem to extrapolate US figures across the world, which looks unrealistic. And they're old enough that they don't account for the switch to LEDs.
Even if a billion households had 50 strings of LED lights each and kept them lit 24/7 for all of December, they'd still use less energy than the annual usage of Bitcoin.
The 2008 paper released by the DOE pegged lights at 6.63TWH per year across all segments in the US. That's 0.02% of electricity usage in the US at the time, which extrapolated is still only 44 TWH in 2008. With 100% LED lights, the usage would be 0.663TWH according to the 2008 DOE paper. I'd assume we aren't quite there, but even so, much more than 2-3 TWH on holiday lights nowadays would be shocking.
> Even if a billion households had 50 strings of LED lights each and kept them lit 24/7 for all of December, they'd still use less energy than the annual usage of Bitcoin.
On the final math, at 5 watts per strand, you'd wind up with 182.5 TWH. Bitcoin at 150TWH-250TWH puts it into the ballpark. Nice.
But we’ve already established that we can do all that without the energy costs if we end up needing a trusted authority anyway. There’s zero need for proof of work if you’re going to trust a central authority to validate the transaction history. What’s the point of such an extremely costly base layer?
The subject of this thread is reversibility, and how implementing that would involve trusting a central authority (goverment, etc) to force reversals of transactions on the chain.
Per an ancestor comment you replied to:
> Reversibility is one example of a design requirement that undoes the claimed advantages of permissionless blockchains that are meant to justify their inherent downsides.
If we need reversibility on a permissionless blockchain, why have a blockchain? A postgres database would do fine. You could even broadcast the write-ahead log to allow any party to verify that history isn’t silently rewritten.
You even said it yourself:
> Do you not want to transact on the base layer because of lack of reversibility or fees? Move to a higher layer solution that sacrifices some characteristic of Bitcoin to enable something new.
If we’ve established that reversibility is a table stakes requirement for a financial system, the thing you’re “sacrificing” is the very thing that makes PoW essential. Since PoW is planet-melting, can’t we just use a database instead?
> Even if the base layer of Bitcoin is using energy, one can argue that the functionality it offers (trustless, borderless, permissionless, programmable, digitally-native money) is worth the energy cost.
The idea that Bitcoin (#23) is worth as much or more as all the economic and general human activity of Poland (25), Thailand (24), or Vietnam (22) is highly suspect:
tl;dr - the claim appears to be based on a combination of pre-LED figures in the US, and just plain wrong figures from other countries, and is probably out by a couple of orders of magnitude.
The argument made was that it's not about the technology itself but the transaction rules. If money are stolen from banks in a specific way (withdrawn into prepaid cards), banks will not and cannot reverse these transactions. Banks do have some rules like chargeback however to reverse legitimate transactions or delayed transactions. The same rules can be converted into Smart Contracts which governs the transaction of a certain currency.
So instead of reversing, we could make all NFTs locked from trading for 3 days after transaction which anyone could appeal for a dispute and buyback the NFT for the same price anytime.
The challenge here is, can we actually come up a set of robust rules that is not too rigid yet not abusable. It's not easy, it won't be right off the bat and it certainly require a lot of critical, innovative thinking. And maybe the solution won't have to be complex at all.
The problem that I see here, is that with the "code is law" approach if there's a bug in the smart contract that is supposed to protect you then you're screwed without recourse.
In a traditional system, if there is a bug in your bank's software that makes you loose money, you can ask the bank to give you the money back. If they refuse, you can take them to court. If instead the smart contract has a bug, there's no one you can appeal to to get your money back. So I think that having humans-in-the-loop is still important, at least for big transactions.
As others pointed out, this problems are much smaller for small transaction so maybe there could be some use there. But I have to think better about this use case.
"you can ask the bank to give you the money back"
"you can take them to court"
Which like the article argues, is not something that can be solved by any ledger, distributed or not. Even if banks reverses records, they don't change the data which is already on the database/record, instead they just issue a new transaction from the backend or withdrawing it from a legit reserve that they own. In any case, no reversing was done.
What if instead of taking the bank to the court, we have something in place for it that runs based on certain "if statements" or "switch case". Of course, is not as easy as it sounds, we need conditions that are robust enough and not vulnerable to abusers. It's a very complicated problem to solve.
> What if instead of taking the bank to the court, we have something in place for it that runs based on certain "if statements" or "switch case"
As I said in my comment, the problem is that if you have a bug in the statements that should protect you, then there is no recourse for your lost money.
No computer programs are perfect, there will be bugs and exploits.
The question then comes to whether we want to deal with unpredictable human "bug" or consistent computer bug. For the later, we can engineer our way to a minimum risk model, where it become punishing to exploit a bug.
We are doing the same thing with the current system, it's just that different banks and companies are responsible for different systems. There are bugs and exploits in systems of our finacial institution and we rely on human to mitigate the risk.
Will computer be better than human or can we build a hybrid system? That's the question we need to answer.
This article doesn’t address the main objection I have about the practical value of cryptocurrency, namely, why I can’t take such an application, replace the distributed ledger with a SQL database, and get a solution that’s better in every way.
As soon as you have a trusted central authority (monitoring and reversing payment transactions, interacting with government agencies to execute real estate transaction, etc.) I’m lost on why you need a blockchain.
"I suspect that legacy industry and regulators have smothered two generations of technological improvement, largely (I suspect) by building a (mostly) closed and permissioned financial system."
It's technically possible to replace any blockchain with a database but where are you going to host it and who is the trusted central authority?
Blockchain might not the solution but it shows us an alternative to trusting some middlemen that have too much power, instead we trust code that is emotionless, non-judgemental and consistent.
A distributed ledger is more than just a database, it's a technology that can orchestrated trust online without a central authority. That's a huge deal, compared to a sql database that is owned by someone, who is the singularity that administrates the whole thing.
>It's technically possible to replace any blockchain with a database but where are you going to host it and who is the trusted central authority?
Who is hosting the blockchain? Who is the trusted authority over the maintenance of the protocol that implements the blockchain, that all miners must use if they want to participate in the system? Who is it you're trusting not to organize a malicious 51% attack against the system, when it has already happened several times to quite a few blockchains? It is a blatant falsehood that blockchains don't have any trusted authorities. They actually require trusted authorities to function. You're not trusting "emotionless code" as the code is well known to have these flaws even by the admission of its own designers; what you're actually trusting is some game theory laid out by programmers you trust, that says the miners won't do bad things because they're getting paid. But in several cases we've seen that they actually will do bad things! And that's not even considering all the other bad things like fraud and ransomware that happens on blockchains that the operators seemingly just throw their hands up and don't do anything about. They don't even consider that to be their problem.
I hate, hate, hate that this line is used so often in discussion of cryptocurrency. It makes no sense at all. In order to have any kind of real discussion around this, the crypto community needs to move past these thought-terminating cliches.
Miners/Stakers who is incentivize to validate the network and maintain the collective consensus.
All your points are valid and universally known but the more important here is whether or not those vulnerabilities are inherently caused by the nature of blockchain or tehcnical problems that we can/need to solve.
A good blockchain is not owned by anyone, any changes made need to go through multiple layers of peer review.
We are still very rooted in our current ways of doing things hence we are seeing phenomenon where companies are trying to take control by either building their own blockchain or centralised service on top of a blockchain. But if I travel back to the 70's and told you that someday you can run an Internet company, would you believe it?
We are no where near endgame but if you dig deep enough, you will see many exciting technical breakthroughs. One of the fascinating one is zero-knowledge validation. Blockchain could be the solution or maybe not, I don't care, I'm excited about the innovative opportunities that it brought upon.
> But if I travel back to the 70's and told you that someday you can run an Internet company, would you believe it?
If I understood what you were talking about, I would probably idly wonder how I could fit it in between being President of the United States, a firefighter, an astronaut, and a professional soccer player, but I wouldn't actually disbelieve it.
(Hey, in the part of the 1970s where I was alive at all, I was pretty young.)
Exactly, I don't see blockchain as a solution to cure world hunger or help us "decentralised" everything but I won't dismissed it as a possible route to a new future. I have high hopes for it to be a better future than it turning out to be a buzzword the same way that I will dismiss the dot com idea (the notion that every business and everything needs the Internet) but I strongly believe in the underlying technology that connects everyone and everything.
No, that's why many people is working on it now. If you compare old smart contract with new ones, you will see that things are slowly getting fixed.
For e.g., you could literally send NFTs to any address (including a smart contract address) which make things stuck forever. Now there's a safe way to transfer things which check whether or not it is a valid address. And this became the de facto standard for almost any NFT smart contract.
Exactly. So when you write something like this: "instead we trust code that is emotionless, non-judgemental and consistent." what you're really saying is: "we trust a bunch of programmers to write perfect code" when even those programmers cannot understand the code they write: https://news.ycombinator.com/item?id=31692704
In an ideal world, things will be build to facilitate the trust, we don't have to trust any programmer at all.
The trust in put on the code itself which not one but all of us agreed upon. Today, we don't have the tools to allow people to actually understand it but it doesn't mean that we won't in the future. Abstraction layers will be built.
Of course this is an optimistic speculation. I'm personally not attached to crypto in anyways but I'm excited about innovative opportunities that it enabled.
There are ponies and magical unicorns that grant you wishes.
> Abstraction layers will be built.
And those abstractions will definitely be built and will be different from any existing ones because? And once again we will have to trust people building them that they are built correctly.
> I'm excited about innovative opportunities that it enabled.
And those innovative opportunities are what exactly?
An opportunity to do things differently. The Internet today have flaws and we had exhausted all the possible way to build a better one on existing technology.
Blockchain present us with a new way to coordinate online activities and transactions. It's the right path forward? We don't know, at least not until we exhaust all the possible options and therein lies a lot of opportunities for technical breakthroughs that could possible solve all the concerns we had, technically.
> An opportunity to do things differently. The Internet today have flaws and we had exhausted all the possible way to build a better one on existing technology.
Demagoguery
> Blockchain present us with a new way to coordinate online activities and transactions.
No it doesn't. Blockchain is a distributed spend-only log. There are very few if any applications for it.
> therein lies a lot of opportunities for technical breakthroughs that could possible solve all the concerns we had, technically.
Yeah, yeah, magical blockchain will solve all the issues, we just have to believe hard enough.
It wouldn't be better "in every way", though. A blockchain is much more resilient; the equivalent would be to have hundreds or thousands of redundant SQL databases around the world and somehow keep them all in sync. By the time you've done that, you've very likely reinvented a blockchain, at many times the cost of just using an already-existing public blockchain.
> monitoring and reversing payment transactions
I disagree with the article on this point. No reasonable person expects to be able to reverse a cash transaction; that the same applies to an electronic equivalent ain't the fatal flaw that critics seem to regularly insist without real basis. Transaction reversal is indeed outright harmful to honest vendors, and is only really necessary for the legacy systems because the legacy systems have borderline zero protection against dishonest vendors retaining customers' payment information and pulling money from it (and/or giving it to others who will do so, be it voluntarily through some shady dealmaking or involuntarily through card skimmers and database breaches and what have you).
> interacting with government agencies to execute real estate transaction
You wouldn't need a central authority for this. Local governments are fully capable of putting real estate NFTs or whatever on something like Ethereum or Cardano and publishing public keys such that people can verify their authenticity. They're much more likely to do that than to try to run an equivalently fault-tolerant and accessible-to-the-public SQL database themselves (and absolutely more likely to do even that than to trust some entity outside their legal jurisdiction to do that, barring outright state/federal mandates to do so).
> I disagree with the article on this point. No reasonable person expects to be able to reverse a cash transaction;
What gave you this idea? If I have proof that I paid you cash for a service, and then proof you didn't provide that service, I absolutely expect to be able to reverse that transaction, via the legal system.
> A blockchain is much more resilient; the equivalent would be to have hundreds or thousands of redundant SQL databases around the world and somehow keep them all in sync.
That level of resilience is completely unnecessary and is part of why blockchain is such an extraordinarily wasteful technology.
> Local governments are fully capable of putting real estate NFTs or whatever on something like Ethereum or Cardano and publishing public keys such that people can verify their authenticity.
And who will hold these NFTs? And where will the data the NFTs sign be stored? If the government holds the NFTs, then nothing will change for you: you will have to bring the exact same kind of proof after you bought a house to the government so that they can update the blockchain record.
If they want to distribute the NFTs to the current owners of the houses, than they now need to establish an Ethereum/Cardano/[...] wallet for each person who owns a house in their district - a decade-long project in the best case, involving a level of bureaucracy to ascertain that no house NFT was incorrectly transferred to the wrong owner that will blow your mind (or, more likely, a process which will cause massive fraud and property disputes for decades to come).
And of course, the NFTs don't solve the problem of actually storing the data (physical scans of the documents that were used before the move to digital, at the very least, since the chain of ownership of each piece of property is an extremely important part of how you can settle disputes). Who will hold these records, and update them as needed? If it's still the county clerk, the problem of bureaucracy flies back in. If they want to make them part of the NFTs and store them on-chain, then minting the NFTs will be exorbitant, and it's doubtful the Ethereum blockchain would survive having the entire archives of home ownership in the USA on-chain.
> If I have proof that I paid you cash for a service, and then proof you didn't provide that service, I absolutely expect to be able to reverse that transaction, via the legal system.
That's very different from what's meant by "reversible transactions" in the context of other payment systems. If the legal system can dictate the reversal of a cash transaction, then it can do so for a crypto transaction - without either needing to have some explicit protocol to do so.
> That level of resilience is completely unnecessary
That's just, like, your opinion, man.
> And who will hold these NFTs?
The owners of the properties they represent.
> And where will the data the NFTs sign be stored?
NFTs can store arbitrary data.
> If they want to distribute the NFTs to the current owners of the houses, than they now need to establish an Ethereum/Cardano/[...] wallet for each person who owns a house in their district
Which is many orders of magnitude easier than the current system.
Besides, it doesn't have to be all or nothing; a gradual opt-in transition would be perfectly doable.
> If they want to make them part of the NFTs and store them on-chain, then minting the NFTs will be exorbitant
On just about anything noteworthy that's not Ethereum, the cost is on the scale of cents. Wow, such unaffordable, many expensive.
And no, you don't need physical scans of the original documents. A transcription will do fine.
Mine and everyone else's who holds important information in databases. The whole financial system for one.
> NFTs can store arbitrary data.
Up to some size.
> Which is many orders of magnitude easier than the current system.
It is not. The current system scales with the number of home transactions. Your proposal scales with the number of homes - a much bigger number.
> Besides, it doesn't have to be all or nothing; a gradual opt-in transition would be perfectly doable.
Sure, but then it's just a whole bunch of extra work for no benefits for 10-20 years. Not just for the county clerk, but also for home owners and buyers: not only will they still need to process the existing requirements, they would also have new requirements to obtain and prove ownership of their ETH/other crypto wallet. And they wouldn't see any advantage at all until the next time they sell their home (hopefully they will still remember their wallet address and private key by then!).
> On just about anything noteworthy that's not Ethereum, the cost is on the scale of cents. Wow, such unaffordable, many expensive.
Well, there are exactly two block chains that are somewhat noteworthy outside the crypto bubble: Bitcoin and Ethereum. And Bitocin doesn't support NFTs.
And any other block gain that becomes even mildly popular quickly explodes in values and transaction fees just like the other two. Turns out that storing hundreds of thousands of copies of the same data, and writing every single transaction to hundreds of thousands of systems before it is considered settled, without any kind of permission system, is actually very costly.
Note: you're right on the cash transaction statement, to some extent. There are still some important differences I feel, mainly related to the fact that today's systems enforce knowing the legal identity of parties to a transaction for something like a house, even if the sale is done in cash - which wouldn't be guaranteed if the house could be traded by selling an NFT on a chain.
> Mine and everyone else's who holds important information in databases.
If your opinion is that your information warrants less redundancy and resiliency than what Zoomer cryptobros get with their sad monkey NFTs, then maybe your information ain't all that important?
> Up to some size.
That size being more than sufficient to store a land parcel's coordinates, address, and other identifying data.
> The current system scales with the number of home transactions. Your proposal scales with the number of homes - a much bigger number.
They both scale with both. Or do you propose that the current system instantaneously sprung into existence without spending centuries distributing paper deeds beforehand?
> Sure, but then it's just a whole bunch of extra work for no benefits for 10-20 years.
If you don't consider the greatly improved auditability and resiliency to be a benefit then that's further reason to question whether your opinion is actually representative of people with important information needing stored.
> not only will they still need to process the existing requirements, they would also have new requirements to obtain and prove ownership of their ETH/other crypto wallet
That doesn't logically follow. It's quite possible for it to be a "one or the other" deal.
And ownership is pretty trivial to prove: you either can initiate transactions with that wallet's private key or you can't.
> Well, there are exactly two block chains that are somewhat noteworthy outside the crypto bubble: Bitcoin and Ethereum.
There are a lot more than only two which are noteworthy. That you believe otherwise is itself reason enough to disregard your comment as thoroughly misinformed...
> And any other block gain that becomes even mildly popular quickly explodes in values and transaction fees just like the other two.
...as is this. There are multiple NFT-capable blockchains that have demonstrated better scalability both in theory and practice by virtue of them using a consensus method more sane than burning energy on useless SHA256 hashes.
> There are still some important differences I feel, mainly related to the fact that today's systems enforce knowing the legal identity of parties to a transaction for something like a house, even if the sale is done in cash - which wouldn't be guaranteed if the house could be traded by selling an NFT on a chain.
It wouldn't necessarily need to be guaranteed, because the information is already in a public ledger. If you want to get fancy you could address that further with NFTs representing personal identification (which has other applications, like tracking licenses and certifications and other endorsements, but I digress).
>Transaction reversal is indeed outright harmful to honest vendors, and is only really necessary for the legacy systems because the legacy systems have borderline zero protection against dishonest vendors retaining customers' payment information and pulling money from it
This isn’t the only form of dishonesty. There’s cases where you initiate an honest transaction, the vendor ships you something you didn’t ask for because they are trying to clear inventory, and then refuses to refund or exchange. Then you file a claim with Amex and get your transaction reversed in about a week.
The flipside is there are times I've been unable to pay with cards because the processors deem it to be too large of a risk, despite me being happy risking my own money. Or, see the risks people take running businesses on PayPal - large companies able to reverse transactions / hold your money solves some issues but raises others.
> It wouldn't be better "in every way", though. A blockchain is much more resilient; the equivalent would be to have hundreds or thousands of redundant SQL databases around the world and somehow keep them all in sync.
Technically true, but also completely pointless. An organisation running an SQL database doesn't need hundreds or thousands of redundant SQL nodes/copies to reach the level of robustness required.
Indeed they don't, but even running two database servers (let alone more for e.g. geographic redundancy) is already more resource intensive than running a full node for a proof-of-stake blockchain. You might as well just run that node and get that resiliency basically for free.
Not every usecase requires that sort of resiliency, of course, nor does every use case prioritize it above latency and throughput; nobody except the truly deranged are asserting that a blockchain could or should replace every SQL database out there. For those who do need that sort of resiliency, though, a public blockchain is much more cost-effective.
> running a full node for a proof-of-stake blockchain
Are there any extant proof-of-stake blockchains that achieve the security guarantees necessary to make a currency viable? Last I heard proof-of-stake was still a hypothetical idea, not something that someone had actually managed to make a working currency with, and that all of the cryptocurrencies in common use were still using proof-of-work (which is of course much more resource intensive).
Proof-of-stake is possible, but requires an honest majority of stakers continuously online.
If you want to eliminate Sybil attacks in PoS, there is no way of externally validating which branch of a split chain is legitimate. Each of them has a majority of stake backing it.
As for PoW however, you can just look at the total work proven.
> Proof-of-stake is possible, but requires an honest majority of stakers continuously online.
Which is itself possible by penalizing stake pools that go offline, thus motivating them to maximize uptime. That's how Ouroboros-based chains (Cardano, Polkadot) do it (among other mitigations against various attacks).
> If you want to eliminate Sybil attacks in PoS, there is no way of externally validating which branch of a split chain is legitimate. Each of them has a majority of stake backing it.
Which is why Ouroboros-based chains consider the "pledged stake" (put simply: an upfront collateral) of each pool when selecting one to control the next block and receive the corresponding rewards. This has its own implications (in particular, the pledge needs to be high enough to deter would-be Sybil attackers but not so high that it's unattainable to honest pool operators), but it seems to be effective in practice.
>Which is itself possible by penalizing stake pools that go offline, thus motivating them to maximize uptime.
This is still unfair to stakers that legitimately have infra disruptions. I have not seen any design for PoS that is actually fair and reasonable and I doubt it will ever happen because this is simply not something you want to just put in an algorithm. The problem space fundamentally requires human intervention at a high level.
> This is still unfair to stakers that legitimately have infra disruptions.
I'd hardly characterize that as "unfair"; it's no more unfair than any other perceived correlation between uptime and trustworthiness.
> The problem space fundamentally requires human intervention at a high level.
It fundamentally requires the opposite. The more human intervention possible, the more room for exploitation and corruption and unfairness. This is evident both within the crypto space (Safemoon comes to mind) and outside of it (the legacy financial system comes to mind).
>it's no more unfair than any other perceived correlation between uptime and trustworthiness.
I am saying that correlation inherently makes no sense. Uptime isn't the same as trustworthiness, that assumption is only made because designers of blockchain algorithms have bizarrely decided that "trustworthiness" is not a real thing so they need to continuously look for other things to use as a substitute for it, instead of just using what most people (including many promoters of cryptocurrencies in their real, physical lives) use: trustworthiness.
>It fundamentally requires the opposite.
No, this is extremely, extremely, extremely wrong on every possible level. Even from the perspective of a cryptocurrency, this is extremely wrong. I can't stress this enough. You are creating a system for humans to use for human purposes. The entire point of it is human intervention. When designing these blockchain algorithms (which I should remind you are designed and maintained by humans as code that needs to be continuously maintained by humans) all that happens is you encode that particular form of exploitation and corruption and unfairness into the system itself. Even within your example it's wrong; discriminating against those with bad uptime enables exploitation and corruption towards areas that have bad infra. And remember since this is code that can be updated and changed by humans it will be vulnerable to the same level of corruption that you see anywhere else. You might trust the maintainers not to do this but now you're back to the same old trustworthiness again.
The former is pretty darn important for the latter. How can I trust something that is prone to outages?
> You are creating a system for humans to use for human purposes. The entire point of it is human intervention.
One does not follow from the other.
> When designing these blockchain algorithms (which I should remind you are designed and maintained by humans as code that needs to be continuously maintained by humans) all that happens is you encode that particular form of exploitation and corruption and unfairness into the system itself.
Well then it's a good thing that code is available to the general public and can be audited by the general public.
> Even within your example it's wrong; discriminating against those with bad uptime enables exploitation and corruption towards areas that have bad infra.
The correct response would be to improve infra in those areas, or for people in those areas to use one of the umpteen gajillion VPS providers in the world to run their stake pools instead of trying to do so from their closets.
> And remember since this is code that can be updated and changed by humans it will be vulnerable to the same level of corruption that you see anywhere else. You might trust the maintainers not to do this but now you're back to the same old trustworthiness again.
Then it's a good thing that the code in question is open to audit by the general public and that new versions of the code require consent from the network before they actually go "live" in any meaningful sense.
> They're much more likely to do that than to try to run an equivalently fault-tolerant and accessible-to-the-public SQL database themselves (and absolutely more likely to do even that than to trust some entity outside their legal jurisdiction to do that, barring outright state/federal mandates to do so).
No they aren't. They are already running public SQL databases (with limited query access) for managing property changes. And they already have a set of processes and employees to manage real estate transactions and taxes. If a blockchain startup wants to try to get a local government office to let them run it on a blockchain, they will need to prove that the taxes always settle, and that fraud can be reversed. These are both important parts of the system for the local government.
I suspect that there is a granule of use in the idea, and that's that you can farm off the infrastructure for your real-estate management onto third parties and ensure they give you your taxes and respect your authority. But that's not really what people think of when they say "blockchain" with dollar signs in their eyes. The incentives for the people running the infrastructure go out the window too, because the profits are modulated by the government, and it's way easier to just sell them software directly that only has to claim to be effective, and rarely has to deliver on it.
> They are already running public SQL databases (with limited query access)
Not a single county I've lived in has offered that, to my knowledge. If they did, then if other online county services are any indication, the uptime would be horrendous and the interface would be 90's era garbage.
> If a blockchain startup wants to try to get a local government office to let them run it on a blockchain, they will need to prove that the taxes always settle, and that fraud can be reversed.
The former is baked into any cryptocurrency worth its salt, and the latter can be done by minting a new record of ownership invalidating the previous one. Better yet, time-limiting parcel NFTs and issuing them in exchange for tax payments would directly tackle both rather cleanly and would work just as well for land leases as it would for traditional real estate.
Ideally you'd have a SQL database and something like a certificate transparency log as a guard against shenanigans. Also, a bunch of regulatory procedures like DNS registrars have to follow.
If 99% of users stuck their fork in their eyeball, it wouldn't mean that a Fork is a bad design or a bad implement, it would mean that the users are using it wrong.
FWIW, in my own usage of crypto, the lack of central authority is exactly why it is used. I don't really care that other people are just hodl-ing their funny money in someone else's wallet. Crypto, outside of an exchange, means I can send money to anyone I want, and no other entity can prevent that.
I feel like the portable sawmill has a place in this discussion, given that the solution to how easy it is to cut something off of yourself with it is to sell them with an amputation kit so when your accident inevitably happens you have the tools to attempt to survive it.
I have witnessed and participated in thousands of user-fork interactions and none of them have involved the user's eyeballs interacting with the fork.
There is a chance (in my estimate, negligible) that my anecdote is an extreme outlier, but I still dare state with confidence that most forks today are designed in a way that less than 99% of users end up sticking them in their eyeballs.
People using forks for the unconventional and usually unintended purpose of impaling their eyes* are a tiny minority of fork users and thus changing fork designs to encourage the intended method of use is not considered a high priority. Most people are naturally disinclined to pierce themselves, particularly in such a delicate part of their face, and as such the design of a typical fork with its pointy tines directs users to avoid this particular usage mistake.
The thesis stated above in the thread was, that cryptocurrencies are very commonly used in a way that defeats their intended purpose of decentralization. It seems reasonable to assume there is a flaw in contemporary cryptocurrency implementations that encourages this kind of use, or at the very least, doesn't discourage it very strongly.
* Excluding specialized forks for non-mainstream audiences such as very young children
> Crypto, outside of an exchange, means I can send money to anyone I want, and no other entity can prevent that.
This is basically it. Crypto-currencies are essentially tool to evade financial regulations. The price that you pay for that is a high operational risk and a lack of property rights.
Except you've replaced something people want: easy access to their crypto and a feeling of assurance with something that people clearly don't want: no one wants to stick a fork in their eyeball.
The thing is, users define the market. If we were talking about a traditional "product", if 99% of users used a product wrong, that product would be considered an abject failure, at least from a UX / messaging standpoint with a clear mismatch between user wants/needs and product capabilities.
The average crypto buyer buys crypto because they want to make money. The average crypto buyer doesn't give a shit about decentralization or removal of bureaucracy. The average crypto buyer is getting exactly what they came for.
I would argue that the decentralised nature is a crucial aspect of the value proposition. It's part of the mythos of why crypto is valuable/worth investing in/going to the moon.
The way it's actually used completely destroys that part of its value, but don't let reality get in the way of a good investment opportunity. I think if you set up a coin that doesn't use a distributed ledger, and instead uses an SQL database, you wouldn't get buy-in from the ~tulip~crypto fanatics because it doesn't line up with aforementioned mythos.
> I would argue that the decentralized nature is a crucial aspect of the value proposition.
I would go so far as to argue it's the entire aspect of the value proposition. Take away decentralization and all you've got is a poorly architected, inefficient, unwieldy PayPal.
But I think this highlights the dichotomy that is the crypto ecosystem right now.
The people in this thread understand this value prop, but for a significant portion of crypto investors, the value prop is gains.
It may be true that some casual crypto investors are interested because of the decentralization aspect, but that same user wants a PayPal-like experience. Most are not willing to deal with the complexity of doing it "right", and most of the non-technical people I know who buy crypto do it for the gains, not for the defi.
In effect, this makes decentralization nothing more than a marketing promise, and the reality is exactly what you said - a poorly architected, inefficient, unwieldy PayPal. Sure, this system is capable of much more, and realizing the "true" value prop of decentralization, but that doesn't matter much if users are in it for other reasons.
If users were doing it "right", or for sake of argument, let's say users are forced to do it right, I suspect they would just stop participating, bringing valuation down with them.
>Crypto, outside of an exchange, means I can send money to anyone I want, and no other entity can prevent that.
No, this is extremely false. The miners/stakers can prevent that by blacklisting your wallet address. You might be thinking of privacy coins which are a very small subset of cryptocurrencies that are hard to use because of the security requirements, and are extremely impractical for most people who aren't criminals, and they only really work correctly if everyone using them has perfect opsec which currently they don't. And also a powerful entity who really wants to stop you can still prevent your transactions just by attacking and disabling the network itself through traditional or non-technical means, such as infiltrating the foundation that manages the project.
That analysis has a major flaw. One of the main advantages of a centralized exchange is that they don't have to process all transactions on chain. As such, this is measuring very different statistics for centralized and decentralized exchanges.
That is true. Probably by pure volume of trades the CEX order books will always be able to facilitate an order of magnitude more than DEX as they can fulfill orders instantly with almost no fees at all, and many beginners and casual traders with crypto will not bother with or even understand what it means to transact on-chain.
But there is a very significant amount of crypto trading occurring on-chain, to the tune of multiple billions of dollars per day.
It's hard to know for sure, but it wouldn't be surprising if the majority of on chain trading is between different accounts of the same person in a (bad) attempt to launder the money.
What does it matter that they go on-chain? They are happening between one Coinbase/Binance/etc. wallet and another. If the exchange wants, they can write a reverse transaction on-chain, nothing's stopping them. Even if it was transferred to a wallet of another exchange, they can work with that other exchange to reverse the transaction.
That's how you end up with Google, Apple, and Facebook, Twitter, etc. They may start out as providing a service that works, but over time as they get bigger the incentive structure pushes them towards monetizing your data, locking you in, building boundaries around who can access what (e.g.Twitter APIs), and sharing data with parties you don't want to share it with.
One way to avoid this lock-in is to change the underlying incentive structure. That's what the blockchain does. The fundamental difference is not about centralized vs. decentralized, it's about the incentives that are a result of centralization vs decentralization.
The other way of changing the underlying incentive structure is have the centralised service provided publicly by a government rather than privately by a corporation. That's what traditional currencies do, and there's no reason that this model couldn't work for digitalised currencies too.
With a blockchain architecture, the app can't go down unless the entire blockchain goes down. And apps can be built piecemeal by many teams/hackers who add small bits of functionality here and there through standardized interfaces, rather than top-down by trusted agencies - "money legos".
Composability is the main one for me that's interesting.
When serving data, I often use HTTP pulling from a Postgres DB. Both of those are massively over engineered for the problems I want to solve but I use them because:
* They're already built so it's not my engineering time.
* Others can interact with them easily.
This is more strongly the case, and becoming more so over time, in crypto work.
I can make something with key based auth that I can uniquely identify such that a user can prove they own it to integrate in my "real world" systems, while letting them sell it, trade it, auction it or whatever.
To build this I do a starter tutorial, load a common library and publish. After I can just use already existing APIs for integration. That's it and it works because the data and APIs and Auth are all common and standardised now (either inherently for Auth or by convention for the data).
+1 on this answer. Put another way, it's a programmable settlement layer for the internet that anyone can access and is always online. Add in standardized interfaces and all applications built on it become easier to work with and extend.
I guess because it's almost impossible to trust an authority which also allows permissionless building on top such data.
Most corps now have proven that they act for their own shareholders and can't be trusted to look after all users.
Gov agencies while are a potential candidate for establishing trustworthy data owners are too beaurocratic to ever allow for permissionaless building on top.
Blockchains sort of allow both trust yourself (by owning private keys) & build permissionlessly on top .
We mostly rely on trust and then prosecute frauds that are "worth" prosecuting (based on dollar value, frequency of fraud, and likelihood of recovery).
I'm sure it's theoretically possible to write a database that only allows reads/inserts and that runs off a CD-R burner, but it's weird that I haven't seen that in the wild. Seems like something that should be doable with SQLite's VFS support (and in fact I'm pretty sure the existing demo VFS for read-only support gets you most of the way there).
In any case, "write-once" media can still be rewritten; the same lasers that etch data into a CD-R can do so to destroy the same data. You're going to want redundancy/backups and you're going to want each new row in the table to cryptographically reference the previous (such that any data destruction invalidates all subsequent rows) - by which point you've reinvented most of what constitutes a blockchain anyway.
I guess I should have specified that I was being a bit tongue in cheek.
I do believe Write-Once was actually a thing with the banking mainframe I was acquainted with in my youth. It wasn't a CD-R thing, it was just an IBM thing which enforced write-only at the BIOS/Hardware level. Honestly, I'm not sure, I was young and impressionable :D. IOW, I might have been misled.
Anyway... All you need is logically write-once with proper signing, audits, etc. and you'll be just as close to unforgeable, etc. etc. as reality demands.
Heck, even journald on Linux provides unforgeable log entries. It is vulnerable to a destruction attack, so whatevs. Everything is. Even a blockchain -- witness the rugpulls.
> by which point you've reinvented most of what constitutes a blockchain anyway.
I love that.
Anyway, I'm here to dissuade you. Do whatever you want. Just be aware of the potential consequences.
The difficult part is not setting up a SQL database, the difficult part are complying with all the banking regulations. If you have a distributed ledger, you do not need to comply with these regulations and everything gets easier.
Are you aware of any project using a SQL database that allows someone to purchase legal porn or donate to legal far right organizations? Mastercard, Visa and Paypal lock such accounts. SEPA (luckily) does not.
Can you answer why the SQL Database in Bank of America or any other bank in the US is not able to transfer money to Edward Snowden's bank account? Or to the millions of people in Russia/elsewhere who were just a collateral damage to Putin's war?
That's just one example - sometimes you need technology which is out of hands of authorities. Cash or Gold bars have similar properties but you literally have to physically take it with you if you want to send it somewhere.
Leaving payments aside - ENS domains, exchanges, insurance, lending borrowing and bunch of other products which are equally accessible to a farmer in Nigeria as it is to a Wall Street suit. You don't see a value in that?
Anyone notice how the author goes to great lengths to 'bold' the claims in the original letter that talk about how worthless the technology is - and then fails entirely to address those points?
Letter: "Crypo rests on tech that is useless."
Blogger: "I disagree, I think there are some fascinating things to be done with blockchain tech! Just... don't expect me to share them. You should DYOR."
Yeah, this is the classic playbook of hype vendors. The bigger the claim, the less specific, the better, because specifics can be settled one way or another.
IMHO Matthew Green often makes bold yet unsubstantiated claims. He also creates and promotes FUD. He may be technically good, but I don't trust his personal opinion, not even on subjects he presumably knows very well.
> In other words, transaction reversibility is not about the ledger, but rather about the transaction rules that a currency uses. A reversible currency requires that someone anoint this trusted party (or trusted parties) and that they use their powers to freeze/burn/transact currency in ways that are at odds with the recorded owners’ intentions.
once you have a trusted third party, though, you no longer need permissionless blockchains and PoW/PoS. that also eliminates the need to "mine" and the environmental concerns. of course it also eliminates the get-rich-quick schemes as well. you wind up with VISA running on top of a permissioned DLT.
There can be multiple VISA protocols running in L2 on top of a permissionless DLT like ethereum. Users can exit one protocol and enter another, like zkSync or Optimism which are not at all like VISA. Or they can use a not-so-centralized L1 protocol like DAI. Or they can just use the base tokens on L1 at the expense of volatility and fees.
Actually, isn't a bank an escrow agent? As in, historically it was a banks jobs to escrow your money. Then to act as an escrow agent for transactions/etc.
At least for buying a house no. The bank is not the escrow. The escrow is a separate entity that is used by both parties. Before the transaction they setup the rules of the transaction (steps and what ifs) and once the transaction starts escrow just follow those rules. The key thing is that escrow receives a fee and after that they have no skin in the game.
So in a sense, the escrow is sort of like a smart contract on the block chain. The disconnect happens between the physical and the virtual world (how would you know activity X took place in the physical world to advance the transaction through its lifecycle?)
The way I would put it is, escrow is a workaround for the property system's inability to support smartcontract-like functionality. Because you can't have property conditionally transfer on certain triggers, you have to give it to a trusted escrow to actually execute the appropriate transfers, conditional on those triggers.
My point there was that the key aspect that makes something a smartcontract is that it automatically causes the property transfer when certain triggers are met, in a sense that is just as real as in the system's normal property-transfer primitives.
Escrow, as it has conventionally existed, tries to accomplish that same thing, but isn't quite that thing. In the moment, the escrow agent must themself manually initiate the "triggered" property transfers, and is capable of violating the rules, hence why they have to be a trustworthy party. Sure, they can be sued later, but in the moment they can effect the transfer.
This is substantively different from a smartcontract where that all happens automatically.
VISA is a payments network. It's a way for banks to connect to each other. They don't have any skin in the game and ultimately it's the issuing bank that gives you all those nice things that you believe come from VISA (like chargebacks, fraud protection, etc).
VISA does not lend any money. They just provide the service of moving money for a fee.
That is short-term. If BTC supply stays the same while fiat currency keeps inflating, and if people will want the same exposure to BTC, then the price of BTC will increase with the amount of fiat in existence.
> "The top credit-card merchant fee actually rose in the United States between 1991 and 2009, and this is a goddamn tragedy, since these fees are baked into the cost of most retail goods and thus born by the working poor (who pay them even if they use cash.) . . . Why are these IT-focused industries so consistently immune to the same technological improvements and cost reductions we see everywhere else?"
The simplest apparent answer is that this (the provision of payment services) is not a competitive market and as small retailers have nowhere else to turn, they're forced to pay high rents to what would have been called a trust in late 19th century Gilded Age terminology.
The solution is also fairly clear: if you have what's called a 'natural monopoly' then it should be state-owned and state-managed (see the network of roads, water pipes, etc.), and if it's not actually a natural monopoly - meaning a system where competition doesn't make sense, i.e. having multiple networks of privately owned roads is silly - then you need anti-trust actions by the government to foster competition in the industry, which would reduce fees and costs for merchants.
Arguably, if consumers had to pay the cost of transactions, rather than merchants, you might seem a lot more political pressure to make credit/debit card transactions the same cost as cash transaction, i.e. no added cost.
Cash is a government-supplied taxpayer-supported service supplied free of charge for merchants and customers, so perhaps that's the best option for the credit/debit interface as well. Of course, this would allow government to track everyone's individual non-cash purchases, but then they already have access to the credit/debit ledgers, don't they?
The solution that has actually been implemented in Europe is to regulate the payment providers, so inter-bank transfers are effectively free and instant, and credit card fees are capped at 0.3% (i.e. 10x less than in the USA).
Which regulations? Don't the regulations pertain to transfer of government currency through banks?
Banks have the privilege of being legally required for any transaction greater than 10k euros or such. Therefore it is only fair that they must ensure cheap service.
Crypto attempts to solve the problem in the same way that web protocols and web standards do. Define a single shared spec that spans all geographic borders, rather than a spec that is reinvented at each jurisdiction.
Few countries allow unrestricted movement of people, goods and capitals across their borders. Payment systems that are meant to support cross-border transactions need to deal with that. If your way of dealing with these regulations is ignoring them, well... now you have two problems.
I agree that anything that can be done with a blockchain can technically be done with a database. But the practical challenge comes down to coordination problems. With blockchains you get credibly neutrality out of the box.
Different developers are comfortable building inside a shared execution environment. If Western Union built a smart contract execution system, you'd have a much, much harder time convincing developers to build inside of it than you would on Ethereum. It would be much less likely that Ethereum would shut off, change the rules, ban you from the platform, etc.
The advantage that gives blockchains is composability. Thousands of different applications can instantly talk to one another using standardized calls inside atomic transactions. Databases by contrast are siloed. So they work really well if you stay within the application that database was built for. But really poorly once you try to cross applications, and hence databases. Imagine how hard it would be and how many hoops you would have to jump through to be able to use Venmo to buy Nasdaq listed stocks. In contrast USDC and Uniswap work together seamlessly because they're both built on the same common credibly neutral layer, Ethereum.
This is totally correct and something that devs on HN seem to struggle to understand. There are many theories as to why, but it is an unending source of amusement.
Better by what metric? Ethereum settlements are nearly instant and global, involve no need for a private third party arbiter, and are built on permissionless and open source protocols. Some of the areas they fall short is often around throughput, energy externalities, and user privacy. As the article points out, there are engineering solutions and new cryptography being applied to all three of those problems.
Composability; as a user I can prove things publicly about my assets and other people can offer services independently of the asset issuer. E.g. take out a loan against my bacon coins or whatever, even if Bacon Bank didn’t think to implement a way for lenders to verify my ownership of bacon coins.
> Cash is a government-supplied taxpayer-supported service supplied free of charge for merchants and customers
Cash ain't free!
Sure, I give you the cash, now you have the cash. But you don't want a heap of singles in the back room, you want money in the bank.
Firstly, you need to keep that cash securely, which has a cost. Then, you need staff to reconcile your takings with your figures for the day, which is a cost. Then it needs (secure) transport to the bank (cost) and the bank may charge you fees for cash handling.
Sure, for individuals who sell things infrequently, it's fine, but for a business there are significant costs. This is why (for example) in the late 90s and early 2ks in the UK, large businesses pushed pretty hard for the 'cashback' feature on debit transactions, so they could offload some of it back to the consumer!
This is almost always missed in this debate. Credit cards are evil because they have fees attached and I, as a pure, innocent cash user have to pay the same price! Scandal!
But you may actually be costing the business more, especially in places where such fees are capped. This is part of the reason why we see card-only retailers popping up in some countries now.
>> it should be state-owned and state-managed (see the network of roads ...)
Where I live, the 'roads' are owned by each individual property owner with an easement to every other property owner in the town. Why would we want a group of government bureaucrats to literally own our roads?
Every land owner has granted reciprocal easement to every other land owner in the town to use what looks like roads through the subdivisions but are actually part of each lot. We don't need government to do this because we use what works like contracts on property - reciprocal easements. In fact, if the town disbanded there would be no questions about who owns what.
No, I don't know how easements work. So, you need to sign a reciprocity agreement with the road owner before they let you use their road for free? What prevents road owners from charging extortionate fees to people who don't own roads themselves?
The easements stay with the land. A land purchaser who uses a competent title search firm will find these easements filed many years ago with county clerk and recorder. Literally it gets set up once.
The easements are reciprocal to everyone else in the town.
An interesting thing with this is that if a giant company wants to drive around, take pictures of everything, and then monetize those pictures (G's street view), they would be trespassing.
Nobody (but my neighbors, rarely and just for short time) parks cars in front of my house because it is private property. No need to ask a government road owner to pass ordinance to restrict parking of RVs, and put up no parking signs, and have police write tickets ... it's private property and a call to towing company gets it removed from my property.
In practice, everybody is polite and friendly.
So the roads are privately-owned and the owners can charge road users anything they want. Such a system is only in the interest of the road owners, since they have monopoly power. Everybody else loses.
Nobody but Google monetizing street view is losing, or even grumbling about any problems. Everyone in town has reciprocal easement to/from all the other landowners to use the strip of private property that looks like a road.
I am curious how anyone other than maybe Google street view is losing. Who do you think is losing? Who is there to charge, as the people using the roads live there and have the easement for use.
A huge positive is that I don't need a stupid license plate or even a license to travel around in a car or on my dirt bike. It's private property and the government rules only apply on government roads.
Everybody loses because there aren't multiple road networks competing to provide access to the same places. There is just one network, right? This means the it's a monopolistic market, and in a monopolistic market everybody loses except the monopolist.
In a small town privately-owned roads can work because there aren't many outsiders using the roads, therefore the road owners are themselves the main road users, and so they may have the right incentives to do adequate road maintenance, and they don't charge anything because they have a reciprocal agreement, but a large road network that is privately owned would lead to a "monopoly equilibrium" where roads would be poorly maintained and road users would be charged high fees.
Because we want road to be a maintained regularly and at once (a patchwork is not convenient to drive) and not depending on the will or the means of the owner of each piece.
We have the town maintain everything through taxes. The town serves us.
If they ever attempt to stop maintenance, we will cut the taxes and make a committee or HOA for that. This really does work well with private ownership.
If you think Mastercard and Visa fees are too high, fees are higher on Bitcoin.
It's like the way Amway victims will try to sell you an $8 tube of toothpaste, "draw circles" to show that 7 people get a cut from that tube of toothpaste and then say "How does Amway bring you great prices on quality products?" (tap whiteboard) "By eliminating the middleman!"
Not really...the fees for Bitcoin, Ethereum and other L2 options are flat fees and are well under Visa/MC fees most of the time. Might want to look at Western Union and the like too...way way under those fees.
Current transaction fee (for 1 cent or a billion dollars)
Credit card fees include reward systems (points), zero liability fraud protection, extended warranties, car rental protection, dispute resolution/chargeback systems, customer service, support for tens of thousands of transactions per second, airline lounge access, priority entertainment tickets, airline miles - the list goes on and on.
Whether you need any of these is debatable of course but it’s extremely disingenuous to consider it an apples to apples comparison seeing as blockchain provides literally none of these things.
For large transfers (a billion dollars) the banking transfer fee is likely zero. I don’t pay for wires with no limit and my status/relationship with banks is nowhere near where it would be for a billion dollar transfer.
Oh and wire transfers provide quite a bit of protection too. I recently had an international wire transfer where the recipient provided the wrong account number. For $10 the funds were returned. With blockchain they would’ve gone up in smoke and lost forever.
People make mistakes. Payment information gets compromised. Fraud happens. As long as blockchain is based on ignoring these fundamental truths it will never achieve any meaningful adoption.
You don't pay for the fees...the vendor does. Not to mention all of the other fees they rake in.
You can have other ways of making sure payments are safeguarded...actually one of the smartest ways to do this was setup on the dark web illegal markets where there was a middle man that didn't have custody of the money (at least in the best multisig ones) but was able to complete or reverse transactions if needed. Basically an escrow account...
We all pay for the fees but IMO it's more than worth it considering all of the things I mentioned and more.
The other fees they rake in (I'm assuming you mean interest) are from issuing unsecured loans. That's another topic entirely.
Escrow is many thousands of years old and certainly exists in many forms in the financial system today. It's just that because of all of the other things I mentioned the average person uses it maybe a few times in their lives for very large and complicated transactions.
The suggestion to use escrow or some other kind of really convoluted system for extremely small payments when I can swipe a card anywhere in the world with all of the benefits mentioned above and more for relatively tiny fees is frankly ridiculous. Of course it makes sense for marketplaces where every single actor in the marketplace is breaking the law in the first place.
I've been involved in crypto since 2017 and I'm STILL waiting for a reasonable use case or application where it results in a net benefit for the average person.
How about real estate transactions. What fees are the average buyer and seller having to pay along with how many third party people have worked themselves into the fold to get their piece of the action? Why would you need title insurance when the blockchain holds all the information?
Why would sellers need to pay up to 6% to a realtor and buyers pay thousands in closing costs...because there is a disparity in access to information. Crypto/Blockchains can change that.
Oh...and wire transfers can take up to 7 days before they are finalized. Crypto transfers it's generally considered settled in a few minutes.
> Why would sellers need to pay up to 6% to a realtor and buyers pay thousands in closing costs...because there is a disparity in access to information.
None of the type of information disparity that realtors help with are going to be solved by blockchains. Perhaps you could eventually build a better title system, but title-related expenses are a tiny portion of closing costs and there are reasons for the complexity.
The biggest portions of the closing costs that aren't directly related to the lender's pricing or real estate commissions-- title insurance-- can't go away anytime soon because the claims they protect against can be decades old. So even if you had a perfect title system today (which seems really hard) and everyone moved to it instantly, we'd still be stuck with those costs.
The structural fees (title transfer, taxes etc.. as mandated by local laws) for real estate won't be eliminated by going Bitcoin, and if you don't want to use a real estate broker then seel your house without one. State ahead of time that you won't pay buyer broker fees. The real estate game (in most if not all jurisdictions) is not restricted, the odds are just more stacked against you if you want to sell directly.
Even worse, because Bitcoin is no recourse, if you find out that there was legitimate fraud (seller doesn't own the deed, house has leans, etc..) you have some possible recourse while Bitcoin doesn't give you anything.
The blockchain ownership may be flawed, just like the current paper one. That's why you'd still need title insurance.
Sellers and buyers don't need agents right now. Thanks to Zillow, the price disparity is moot. I knew more than my past real estate agent when I purchased my current house (it was a corporate move or I wouldn't have used one.)
Wire transfers should be instant and irreversible, that's why scammers use them. Where have you seen one that takes 7 days?
I’ve seen commercial banks reverse wire transfers within the first 30 days.
When you are moving large sums of money between well known institutions the money is very illiquid, mostly to prevent mistakes, fraud, etc. It’s why most fraud that you hear about involves movement of money overseas or into another type of asset or more liquid form, e.g bills, physical goods etc.
No one sits their stolen funds at chase bank… Makes blockchain and NFTs the perfect gateway for fraud.
There's a bit more nuance here than merely Citi wants to reverse a wire transaction. The article explains they were servicing debt and accidentally paid the loan off early (rough summary). The debtors could argue they had no reason to suspect error and viewed the payment as settling the loan.
New payments contracts now include "revlon clawback" clause. The blockchain analogy is a buggy smart contract that gets fixed.
The receiving bank often takes holds on the funds until they are specifically cleared from the originator bank or a fixed holding period. In that time, you can still deduct the money if you had the cash previously available or maybe if you're in good standing with the bank (not entirely sure on this part, probably different per bank).
The money is often frozen completely then returned to the defrauded party if caught quickly enough. Sometimes banks try to screw over people who are found to be victims of fraudulent transfers after the money has been pulled from the receiving bank.
You're absolutely correct in that real estate is a mess and blockchain could clean up and streamline a few aspects of a real estate transaction. Problem is the existing systems have a lot of catching up to do. There was a story of a house being sold as an NFT... Purely promotional gimmick as the only thing that mattered (transfer of deed, etc) had nothing to do with the blockchain and the NFT representing the property has no legal meaning whatsoever.
Wire transfers can take several days, I suppose depending on mechanism/method. That said anyone who's participated in a real estate closing, funding round, etc knows you receive bank confirmation of the wire in minutes-hours and it's a done deal. In funding companies, for example, I've personally experienced this with wires in the tens of millions of dollars.
>That said anyone who's participated in a real estate closing, funding round, etc knows you receive bank confirmation of the wire in minutes-hours and it's a done deal. In funding companies, for example, I've personally experienced this with wires in the tens of millions of dollars.
You are correct...but again this is something the average Joe doesn't have access to. With crypto/blockchain everyone has the same access (more or less) at their fingertips.
It's not a perfect system yet for sure...there is a long way to go, but it is a huge leap forward in leveling the playing field for financial usage for everyone (I mean just looking at western union in 2021 they had $5B in revenue...that's about 5% of the transaction amount with an average transaction size of $300).
The cost of a bitcoin transaction is not adequately captured by transaction fees. There's two alternative ways to look at it:
1. Divide miner revenue (fees + seignorage) by the number of transactions, yielding the total amount that miners extract. It was $34m today, with ~261k transactions, yielding a cost per transaction of $130. [1]
2. Estimate energy cost at 1,173 kWh per transaction [2]. If you assume cheap electricity at say $.09/kWh you get a cost of $105 per transaction in electricity alone, which ignores hardware capital costs, etc.
Either way the cost is over $100 per transaction, and would be reflected in a falling value of BTC. But it may be masked if there's an influx of new money into the system.
I agree, and I think this is the largest problem in BTC.
If the creators had predicted its explosive growth, they would have chosen a faster rate of reward halving, more quickly bringing the transaction fees in line with the externalities.
Perhaps someone could create a "Bitcoin Green" fork which would simply speed up the reward halving to once a year instead of once every 4 years, since by now, everyone has heard of Bitcoin, and only large specialized operations can mine it profitably (thus the reason for its inflation has disappeared).
Well, L2 systems aren't on a blockchain at all, so do they even count?
If we get to cherry-pick from whatever money transfer systems exist, it's worth remembering that bank transfers within the Eurozone area are free and practically immediate. What crypto can beat that? Clearly you don't need cryptocurrency to deliver a service that's ideal for consumers, as regulation has achieved it in Europe.
I think the right way to look at a block chain is to think about it as a global computer that enables trusted execution on untrusted hardware.
At present, this global computer is very weak. Cryptocurrencies are a good first program to implement on this computer because each transaction is essentially just adding and subtracting a few numbers. So yes, in some sense, it's crazy that the cost of adding and subtracting a few numbers costs $20.
However, even though these global computers are currently very weak computationally, the new computational model allows for new things to be built. For instance, smart contracts. Using smart contracts and cryptocurrencies, you could easily implement almost every facet of the global financial system. From bank accounts, to money transfers, to bonds, to securities, brokerage services, margin services, options, credit default swaps, etc. Yes, many of these things can be implemented some other way, but blockchains allow anyone with a computer to build something along these lines.
And yes, it's nice that the Eurozone regulated free money transfers. But how much work went into building the Eurozone and passing the required regulations? What if you want to write your own options contract? How long would it take to get regulation passed in the EU to allow free options contracts? Blockchains allow you to build a system akin to the entire EU banking infrastructure from your laptop. Even if it's not quite as good as the current system, I think it's still a cool idea.
I don't understand why L2 systems are even necessary. There's a relatively well known email exchange between Nakamoto and Mike Hearn in which Nakamoto says:
> The existing Visa credit card network processes about 15 million Internet purchases per day worldwide. Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost.
If the original design of Bitcoin anticipated Visa-scale transactions for a fraction of the cost, what's the motivation for a L2?
I'm assuming Nakamoto wasn't being cheeky when he wrote fraction of the cost. Afterall, 1000/1 is a fraction...
I just don't understand why crypto discussions seems to draw out so many rude comments. If satoshi wanted fame and fortune he could have both easily, but there are a ton of early bitcoins that haven't moved - so obviously he wasn't in it for the money or he would've used those coins.
this is evidence that he wasn't in it for the money. If you came up with an elaborate scam with intentions of hustling people - how likely are you to be wildly successful, but accidentally lose access to the funds you worked so hard for?
This seems like a post hoc rationalization to support a narrative. Key management is hard and just because people mess it up, it doesn't meam that they weren't serious about using that key. Designing and building novel software is a different skill set than keeping your stuff organized enough to not lose things.
I could just as easily come up with a post hoc story that says that the reason that he has never come forward to claim credit is out of extreme embarrassment about the size of the fortune he lost, and that this is evidence that he does care about the money.
I'll just stick with my "innocent until proven guilty" opinion. Taking the most outlandish route possible to smear someones name seems rather unhealthy for everyone. There's no precedence for someone pulling off a huge digital scam and failing to cash out because they forgot their password. Could it happen? Sure, there aren't many things outside of the realm of possibilities when you're tasked with proving a negative. Lucky for us, that isn't the responsibility placed on most anyone in social situations and definitely not for criminal accusations in court.
I'm not sure what you mean by "the most outlandish route possible to smear someones name". I fail to see why me asserting that not spending the coins isn't strong evidence about Satoshi's motivations is some how a smear or trying to assign guilt?
The entire conversation started because someone pointed out that just because Satoshi said something doesn't mean it has to be true (although they made that point in a rude way.)
The vibe I am getting from your responses is: 'satoshi is a saint, everything he said has to be true, and any attempt to point out that we have little evidence about Satoshi's character is a baseless smear.'
I am sure that is an inaccurate and unfair characterization of what you are trying to see, so please correct me as to where I have it wrong.
I see your interpretation now, my apologies. When I read "scheme" I understood that to be slander and mean satoshi had malicious intentions. If you understand scheme to simply be a benign way of suggesting his plan was wrong then it de-escalates this entire conversation.
I thought you were defending the a comment claiming satoshi was being malicious. I would've done better to search for a more charitable interpretation.
Persono, I think that Satoshi was an idealist but not a saint and the reasons that the funds have not been accessed are not due to altruism.
If Satoshi did stretch the truth or lie in that quote, I would be inclinded to view it as motivated by ideolatry rather than greed. However, any speculation as to motives is fairly pointless given the lack of information.
ZK Rollups are definitely “on a blockchain” and exist as any other smart contract application, like USDC. What they move off-chain is the computation and data storage of a transaction, but verified zk proofs result in the same security guarantees as any other contract on the underlying L1.
Bitcoin solves the problem of frozen fx reserves and seized assets. It's a neutral store of value.
the TAM is 400+ trillion.
Payments are low margin, low value business. Often even subsidized by the systemic banks.
Do you really think it costs zero to secure the entire GDP, and the entire wealth, of an entire economy? zero cost SEPA transactions don't secure the EU economy. The US military and their nuclear weapons do, and they don't cost zero, like a SEPA transactions for a coffee.
What's the cost to secure 10 trillion? 100 trillion?
A virtual token is literally useless. It's only worth something, so far as it can be traded for actual goods, so the availability of "secured" goods is quite essential as far as the value of cryptographic tokens go.
By that I mean not easy to steal by anyone at gunpoint.
The point is that money is not wealth. Wealth is the ability to consume goods and services. If you got stranded on a deserted island with a suitcase full of millions you'd still live in extreme poverty despite all your millions.
Therefore securing crypto-currencies doesn't replace the need for securing actual wealth. On the contrary, it's an extra cost that its users have to bear, in addition to the costs of securing GDP and the entire economy.
Note that should you be rescued the suit case full of millions will still worth millions.
The suitcase, stuffed with medium of exchange, holds value across time.
This is the key concept to understand the issue at hand.
For a medium of exchange to become useful, it must first become able to hold value, preferably long term, months/years.
The only way an asset can do that, if there is demand to hold the asset for long durations, committed long term investors.
Bitcoin is an experiment in bootstrapping a neutral money system from scratch.
If you look at bitcoins money velocity, it’s much closer to M2, than M1. Thus comparing it to investment assets, or bonds, is much more relevant today than to payment systems. It’s a store of value for now, maybe a little speculative, sure.
Once it grows large enough and value becomes more stable, it can become a decent medium of exchange then.
This implies market capitalisation in many trillions, and if it proves to be successful: displacement of many other store of value. Negative yield bonds, gold. Maybe even real estate and rental yields on that are actually negative in real terms in many markets. We will see.
As such it would represents a cloud economy of sorts with large amounts of wealth stored in it, trillions of dollars. That would require a correspondingly sizeable security budget to protect.
Maybe I misunderstood you, but I thought your point was that it's okay if maintaining the bitcoin network is very expensive because securing the GDP is even more expensive, which is a flawed argument, because bitcoin doesn't remove the need for securing the GDP. Bitcoin's performance needs to be evaluated according to how it compares to other monetary systems in terms of cost-effectiveness, not against the cost of securing GDP.
Regarding the question of bitcoin's utility as money. The defining trait of money is that it's used widely as medium of exchange, not that it holds value. An asset has to hold value reasonably well, for it to be able to be used as money, but holding value is not what makes an asset money. Some assets depreciate quickly and don't hold value, but most don't, most assets do store value and yet are not money. Is bitcoin a good store of value? No, it isn't, because a good store of value not only has to hold value over long periods, it also needs to have low volatility. Using a high volatility asset such as bitcoin as a store of value, means there's a big chance you may forced to sell it at times when its market price is well below your purchase price.
Lastly, I don't know what "bitcoin's velocity" is. As far as I know, the velocity of money is a concept from the Quantity Theory of Money. The basic assumption that this theory makes is that GDP is sold and paid for with money. If you wanted to apply QTM to bitcoin, first you'd need to locate a country that sells its entire GDP in bitcoin, and only then you could calculate bitcoin's velocity, in principle. This velocity would be specific to this country. Then again, I'm not aware that such a country exist, so I don't know what you mean by bitcoin's velocity or why it is relevant to this conversation.
> it's worth remembering that bank transfers within the Eurozone area are free and practically immediate
In theory. Many banks are not using this system and stayed on old SEPA wire transfers: charges split between sender and receiver or covered by sender, 3 work days to process, ability to pay more to speed-up the process by two days etc. It's slow and/or costly.
> That’s why it recently cost $22 (!) to send a single token transaction on Ethereum
So Ethereum has prices ranging from 3.5$ to 22$? Great.
And vast, vast majority of my transactions would be costlier on Ethereum. I am rarely paying over 267$ in one transaction. 22$ per transactions would result in typical grocery shopping doubling in price. 3.5$ would be noticeable.
Also, in bank transfers that I use I am simply not paying anything at all (within European Union).
> well under Visa/MC fees most of the time
That is simply untrue, and depends on how much you transfer.
A small bit of nuance that could explain why the range could be $3.5 to $22 on a given day would be that they could be referring to different token types. The native token of ethereum (Ether) costs a fixed, smaller number of units of computation to send, whereas custom tokens (erc-20) have to do some additional bootstrapping work during transactions and cost more to send.
So there's the units of computation used x "gas price".
But yes, the "gas price" that serves to price congestion on the network is wildly variable due to congestion and low throughput. And that limited throughput is currently a real practical problem as you've pointed out in that the fees are too high.
The answer will likely be in L2s as other people are pointing out. I think one interesting side effect of this ecosystem is it is actually driving new research and application for cryptography (including substantial funding): for example practical uses of zero knowledge proofs.
Exactly this...it's not apples to apples comparison. Transferring an NFT is a larger transaction size so the cost is higher (hence the $22 price they are referring). The cost of the transaction is also based on how busy the blockchain is...like a way to discourage transactions if it's really busy. Like if you had a gas station that the price of gas (or actually more like a fee to use the gas pump) fluctuated based on how long the lines were.
My fee for sending money to another UK bank account with instant settlement is $0.00 (or £0.00)
Tell me more about the wonders of paying $1.62 plus currency conversion fees plus speculative asset volatility risk to send money to their bank account with eventually consistent settlement...
> Current transaction fee (for 1 cent or a billion dollars)
> Bitcoin - $1.62 per transaction
This is misleading. A best-effort transaction can be submitted with a fee of 1 sat/vB. For a 374 vB transaction (a typical 2-in-2-out P2PKH -- see https://bitcoinops.org/en/tools/calc-size/), this is 11 cents. $1.62 is either an enormous transaction, or one submitted at very high priority.
L2 is pushing the problem a bit further away, but it's not a long term solution. All L2 solutions in existence are fundamentally centralizing (it doesn't have to be, but it's a lot harder and since most cryptocurrency speculators don't actually care about centralization it's much easier to do it that way, and L2 solutions are already super complicated anyway) and they only offer a maximum theoretical transaction count improvement of about 500x in a very optimistic case[1].
Except 500x is not nearly enough. It may be enough to temporarily drop the fees but it a post-blockchain world where everybody does dozens of blockchain transactions a day, be it to play a game or buy a coffee or ride the subway, it's not ever close to being sufficient. Your scaling factor needs to be millions of times better.
So what's the solution? Even more complexity on top of this ridiculous Rube Goldberg machine? All that to emulate solutions that already exist and already work well and vastly more efficiently?
A while back I googled the number of transactions per second for the various types of payments in the US, and it came to less than 100K tx/sec, including credit, debit, cash, checks, wires, and ACH.
Rollups on Ethereum today can handle a couple thousand tx/sec, and the sharding system they have planned will boost that by about a factor of 200. These systems are somewhat centralized for block production but fully decentralized for verification.
Having had to spend time more than once physically visiting bank branches to send wires, or wait for days to get checks to clear from one bank to another, I'm not convinced that today's solutions are all that impressive. They don't exactly seem simple, either.
If you used real sources I'd take this thread seriously, but you don't and this is exactly why I don't respect the majority HN's view on most things with regards to Bitcoin and to a lesser degree crypto in general.
It's currently $0.04 for a high priority tx on the mainchain [0] right now as the memool is pretty clear.
Off topic but I’m really curious, why are these taxes a percentage? What justifies paying $0.1 for every $10 transfer, but $1 for $100? Is it more complicated to move $100 than it is to move $10? In the end it’s still a single transaction, right?
Charging the same price for 1$ and 1000$ transaction would either make 1$ transaction not viable (BTC/ETH is doing this) or would be overall less profitable.
In crypto, transaction fees don't reflect actual transaction costs, because transaction processors are being paid with newly minted coins in addition to the fees, so it's not really an accurate comparison.
- Transactions are more expensive in BTC for small amounts, and more expensive in Visa for big amounts.
- However this is only true if you use on chain transactions for BTC. BTC transactions using lightning are always cheaper than Visa no matter the amount.
- Lightning nodes do not yet form a network big enough to cover 100% of the transactions, and most transactions are small, so the idea that VISA transactions are cheaper for most people is, for all intents and purposes, mostly true at the moment.
Lightning, though, is quite an interesting system. Half of the solution it offers is technical, but half of it will be the social construction of the network of channels. I doubt most people will open one consciously, but I assume wallet providers will make that automatic.
Eventually, this means somebody needing the decentralized aspect of BTC will be able to open a channel and profit, while somebody who wants convenience will use a centralized wallet and be happy.
I suspect most people will want the turn key solution and that the system will centralize a bit.
But again, I see your point: our financial system is already very efficient, BTC will have to be way better than it current is before it can compete with it for day to day use.
I'll keep an eye on lightning though. It makes any transaction, no matter the size, instant, and cost a tenth of a cent. It has potential.
American express may be the best damn card that's not accepted anywhere I transact my business so in the end it doesn't matter how good American express is. It's a piece of plastic for the good it does me. Same with all crypto. Even if I was invested fully, there's still approaching zero of the number of purchases that I make that would ever be viable using crypto. The gold standard answers in this chat about big purchases are even more egregious. The ability for big money exchange without recourse spells disaster. The ability for big purchases which could be cheaper on crypto platforms also subjects that stored value to huge value shifts daily. Maybe in countries that are even more screwed up than crypto volatility there may be some sort of hedge assuming leaders don't lock you up for using them.
That doesn't invalidate what I said, although maybe I should have said "flat" instead of "fixed" to be more precise.
You pay a flat fee per transaction with Bitcoin, you pay a percentage fee with Mastercard and Visa. Yes, the Bitcoin fee changes with time based on a market. The Mastercard and Visa percentage changes based on how much they like you.
Remember that for bitcoin value transaction size is not a factor in the transaction fee. So if you want to transmit a billion dollars worth of bitcoin around the world, it is the same exact fee.
Unlike credit card transactions, which are a percentage of size.
Let's also remember that work is being done to do low cost smaller transactions on L2 networks.
It's all good and well that bitcoin is cheaper than credit cards for billion dollar transactions, but that is not really important for all of us non-billionaires. For smaller amounts, the fixed cost of a bitcoin transaction can make it a significant amount of the total. L2 networks would be nice, but "work is being done" for years now so let's wait to see if they ever get that working properly before touting possible future innovations as a current benefit.
I don't imagine anyone ever uses credit cards for billion dollar transfers anyway, normal banking is good enough for that. I just checked and the business account that I use for contracting has EUR 0.10 flat fee costs per transfer to anywhere in the SEPA region.
> but that is not really important for all of us non-billionaires. For smaller amounts, the fixed cost of a bitcoin transaction can make it a significant amount of the total. L2 networks would be nice, but "work is being done" for years now so let's wait to see if they ever get that working
You gotta get up to speed with these things then. A lot has been happening the past year.
Lightning in it self is used all over the world by small vendors in developing and western countries. And it's a mix of using a service provider for using this (usually in the west) to self custodian where they cannot motivate the cost.
It was one of the big things needed before El Salvador's legal tender roll out.
> Remember that for bitcoin value transaction size is not a factor in the transaction fee. So if you want to transmit a billion dollars worth of bitcoin around the world, it is the same exact fee.
You don't use a credit card to send huge amounts in the first place.
Personally I need to do ten and hundred dollar transactions. One or two dollars for bitcoin would not be terrible for the latter, but it's still a lot more than a debit card ($0.21 + 0.05%), with no advantage to me over debit. I think that's a better comparison than the complex situation credit cards are in.
Hilariously sad to see this, where crypto has gone from an idea of economic freedom to economic handcuffs. Imagine the even more nightmarish world where a person on welfare has their entire economic life controlled by a completely faceless, heartless algorithm.
Despite the rhetoric, most of crypto subtly pushes for handcuffs of some kind. Consider how during the NFT craze some crypto proponents were claiming that, in the future, browsers will enforce NFT ownership so you can't copy/paste their apes. A lot of crypto seems to be about taking resources that are abundant and making them scarce. This even bleeds over into the real world, where crypto helped keep graphics cards a scarce commodity for years now.
Crypto seems like a financial industry wet dream that pretends it exists to help the little guy.
I understand your point from a politically liberal perspective. However, in a social market system, earmarked funds and appropriated money is already flowing through the financial system, e.g., agricultural EU funding or even donations: not using them for the assigned purpose may be considered fraud, which can be legally punishable. So some parts of society seem to have agreed that under certain circumstances using money not for the assigned purpose is not desirable. And programmable money could support that.
NFT is quite a novel and interesting application on its own. For an application of NFT, see Tezos Domains and ENS (Ethereum).
Aside from NFT, stablecoins like USDC and DAI are also quite novel and interesting applications.
These applications are providing value and utility to those using them, and could potentially improve other parts of the world’s payment systems by providing a decentralized option alongside centralized processors.
Crypto will be eternally new, because we will keep finding new ways to build on top of it. A few years ago zkSNARKs we’re not feasible on a blockchain. Now they are becoming widespread and being put into use. A few years in the future, we will likely have new cryptographic primitives that will provide new applications and areas to build and develop.
None of your examples are good ideas though. DNS requires proof of identity and a mechanism for settling disputes (e.g. so you can't buy google.com if you're not named Google; and also can't buy g0ogle.com, gooogle.com, gOogle.com etc) to be a useful system. Minting NFTs simply can't give you that, and once you involve a party that can settle disputes, all advantages of NFTs disappear.
Not to mention, most NFTs as used in reality are 100% vapourware. As the owner of an NFT, you sometimes don't even have the right to reproduce the thing the NFT signs yourself (as in the case of the NBA moments NFTs).
Even when you do, you typically have no official ownership of the thing - for example, if you buy a Bored Ape NFT from someone else (not Yuga Labs directly), you'll likely have no legal standing to sue Yuga Labs if they later decide to delete the Ape you bought the NFT for (sinec you have no commercial relationship with them, and the NFT itself is just an NFT, it's not a contract).
> DNS requires proof of identity and a mechanism for settling disputes
Hah. Like giving Meta the ability to create legal disputes against long-standing companies that happen to share its new name. This is a system that rewards those with the funds to pay the legal fees, or settle disputes outside of court with large lump sums. Not all users want a system where Meta can take a domain you own simply because they now have a trademark that loosely correlates with it.
> Not to mention, most NFTs as used in reality are 100% vapourware. As the owner of an NFT, you sometimes don't even have the right to reproduce the thing the NFT signs yourself (as in the case of the NBA moments NFTs).
I am talking about ENS, not NBA moments or apes. NFT is permissionless tech, so there will be a lot of dumb and stupid ideas built on top of it.
> Not all users want a system where Meta can take a domain you own simply because they now have a trademark that loosely correlates with it.
Agreed, yet the government won't care and will make sure enforcement happens anyway.
If your NFT based domain system is used by a dozen hardcore nerds, then nobody will care, sure.
But if it somehow managed to overtake DNS and become the de-facto standard, the government would just come up with a way to regulate it anyway. Eg, they'd demand that web browsers not implement ENS, or consult some sort of additional blacklist.
Trademark law is an important component of having a market that actually functions. If I go to a site that my registrar says is Spotify.ro, but I can't be sure that it's not some scam company that is squatting a domain with their name, I as a consumer have a problem. Similarly, if I mistyped and arrive at Spotifyi.com and nothing shows me this is not a different entity than Spotify, it's still a problem for me.
That the trademark system can itself be abused to take out other legitimate companies with similar sounding names, as happened with Meta, Apple and many others (even worse with McDonald's vs many family restaurants in Scotland) is a different problem altogether, that ENS won't solve either way.
I was a crypto skeptic for many years. If you look at crypto purely from an engineering lens, you'll always find it wanting. What I didn't understand was that crypto is as much of an economic and political project, as it is an engineering project. If you think decentralisation and trustlessness are valuable, you should think crypto is important. If you don't care for decentralisation then being negative on crypto is a consistent position.
I think this is very close to the truth. Most tech people, like the author of the article, look Bitcoin only from technological perspective. This completely misses the point, because Bitcoin is worse on many purely technical metrics compared to centralized currencies. The benefits are economical and societal, and they are not very easily understood. This misunderstanding leads to both "anti-crypto" and altcoins that are supposedly better than Bitcoin.
Exactly, if you have complete faith and trust in conventional FIAT currencies and the systems they use to transact the use cases for crypto also seem far less compelling.
As an example, the appeal of deflationary Bitcoin is much more salient to a citizen of Argentina than to a citizen of the USA (although recent inflation might make the appeal more obvious). Or on the even more extreme end, the citizen of Zimbabwe would much rather have decentralised solid crypto of one sort or another than their local currency.
No one has complete faith in anything. The institutional system in liberal democracies is such that no single institution has all the power, precisely because we don't completely trust the government.
The answer to dysfunctional governments is not get rid of the government. This is just dumb. We need well-functioning governments to enforce human rights, and law and order.
> The answer to dysfunctional governments is not get rid of the government.
As you're probably aware, central banks are usually intended to operate somewhat indepentently from governments. (One could argue to which degree it's actually the case, though.)
Which means that monetary systems are supposed to be somewhat indepentent from governments.
Assuming that Bitcoin were to be adopted as some kind of reserve currency (held by central banks) and also used by states and citizens, where exactly is the "getting rid of the government" happening there?
Exactly, nowhere.
> We need well-functioning governments to enforce human rights, and law and order.
Agree. But this doesn't rule out the possibility of indeed using Bitcoin.
Central banks are public institutions in charge of conducting monetary policy, they have a public mandate and are accountable to the legislative branch. They're therefore part of the government, even if they have some degree of independence.
Bitcoin undermines governments. For example, bitcoin adoption would seriously limit the government's ability to manage the economy via monetary policy. It would also affect its ability to prevent unrestricted movement of capitals in and out of the country, and within its borders. Financial regulations would be harder to enforce, and a larger chunk of the economy would go underground. So, clearly, it would weaken governments. I don't know that anyone disputes this.
Bitcoin undermines certain possibilities of governments, yes.
As most western governments have been successfully hijacked by big corporations so that politics are skewed heavily in favor of the corporations' interests, it has become a tough decision IMO between:
- A: letting governments continue to be the executive branch of the Exxons, Apples, Googles, Facebooks, Amazons, ... and letting the latter continue with making few people richer and letting Gini coefficient converge to 1
- B: taking away governments' favorite (because in the beginning it's so nicely subtle that people won't object) instrument (more debt) to enact politics and thus forcing them to make uncomfortable choices instead
The current system appears to be instable (at least to me). Instability hurts more than continuity, everything else being equal.
Bitcoin could become either an effective threat to discipline governments to not let their spending get out of hand or the very foundation to build a new stable monetary system.
We'll see. If it turns out to be more stable, people/institutions will in the long term converge to it.
> ... and a larger chunk of the economy would go underground.
Which is exactly what needs to happen (ideally not in a crash but in a soft transition) in order to get humanity's ecological foot print to a sustainable size in the short time that's left.
As soon as the economy has transitioned to sustainable processes, it may of course grow again, but right now, what we need is gentle shrinkage or "degrowth".
You seem confused about a couple of points. Monetary policy is not a tool to finance government spending. Sure, it might be used for this purpose, but this is not the point of it, and in fact, debt monetisation is illegal in most countries, afaik. Second, the underground economy has nothing to do with ecological sustainability or economic degrowth. It's simply a part of the economy that is hidden from the state, for the purposes of circumventing laws and regulations.
Well, I think I misunderstood what you meant by "underground", confused, I wouldn't say I am.
> Monetary policy is not a tool to finance government spending.
Ok, it is not officially intended to be, sure.
> Sure, it might be used for this purpose, but this is not the point of it, ...
Here's the problem. In reality, monetary policy is indeed doing exactly that. ECB is currently planning to stop buying up government bonds. Whatever technical term you use for this buying of bonds is irrelevant. Effectively this ECB policy has been supporting the growing national debt of Euro zone states.
IMO the actual situation matters more than the theoretical/proclaimed purposes/goals of policies.
Yes, the ECB can state "our goal is 2 % inflation". But that statement ought to be a lot less relevant to someone who wants to judge the current state of affairs and make decisions for the future than for example the actual number (inflation).
> Second, the underground economy has nothing to do with ecological sustainability or economic degrowth.
I read "underground" here as "shrinkage" of the economy. That was a misunderstanding on my part then.
To get to your take on this. The claim that Bitcoin would make the "inofficial" sector of the economy grow bigger/worse than it is under the current monetary system is IMO only that, a claim.
Sure, some cryptocurrencies provide working privacy. Bitcoin isn't really one of those.
I'd be confident that - were Bitcoin to become relevant as some kind of reserve currency - there would be effective measures taken, to make anonymous transactions really difficult if not impossible.
Buying bonds in the open market is not debt monetisation. Anyway, public debt is a political problem, and the idea that adopting some sort of a commodity standard will prevent sovereign debt crises is unconvincing, to say the least, considering that such crises were common under the gold standard. You can't be seriously suggesting that the world economy should switch to a whole new monetary system based on these half-baked arguments. Are you kidding me?
Who said anything about getting rid of governments? I certainly am not interested in this. I don't even think it would be a good idea to get rid of fiat (or at least state-backed currencies). At the same time having the option of holding currency that is not directly accountable to one of the 200ish current sovereign states in the world is deeply appealing to me (and many others) for a number of reasons.
I'd go even further: inflation is setting the incentive for full throttle in the economy.
When you're seeing one extreme weather event after the other and a climate catastrophe is imminent, is it a reasonable choice to run the world economy at full throttle, considering that this economy is still based on ~ 80 % fossil energy?
It's like when your car is speeding towards a concrete wall ... and you keep your foot on the gas ... because you "want to make a really fast turn to the side to avoid the wall".
No crypto project has managed to solve the trilemma problem so far. Decentralized chains are way too expensive and the cheap chains are heavily centralized.
ZK Rollups effectively solve this problem by moving computation and data storage off chain without sacrificing security. These protocols include on-chain exit mechanisms so that tokens are never at risk of being taken by the sequencer.
The point of the comment is: governments have abused their position of power, by bailing out irresponsible banks, by giving them an oligopoly in the first place, and by doing all this through spending your savings through inflation.
Therefore, an un-debaseable, trustless and liquid asset is crucial in making the powers-that-be accountable for their actions.
I did not see any real pro crypto argument in this text.
Nothing is really proven in practice and everything is in ideas.
Meanwhile scammers are taking money from enthusiasts and existing blockchains are burning up a huge amount of energy.
I defense of those existing blockchains: the annual worldwide energy usage of blockchain technology is roughly equal to the annual US energy waste from machines plugged in while in standby mode. It is also significantly lower than the annual worldwide usage of Christmas lights, and wash dryers.
US spam postal mail also releases a comparable amount of CO2.
These facts don't provide a defense of one or the other as "not that bad"; these give us multiple opportunities to make small but meaningful reductions in waste with relatively little impact on the quality of life of the world at large.
> the annual worldwide energy usage of blockchain technology is roughly equal to the annual US energy waste from machines plugged in while in standby mode. It is also significantly lower than the annual worldwide usage of Christmas lights, and wash dryers.
... and it benefits much, much fewer people.
That's analogous to the pro-air-travel disinformation argument: "air travel is only 2% of CO2 emissions". It is only so because air travel is only adopted by a small minority of people: that doesn't stop it from being insanely carbon-intensive.
Those things produce joy, dry clothes, and steel. Crypto produces... scams? We're facing climate collapse and need to choose what we burn electricity on very very wisely.
It's the old saying about no silver bullets. There's a lot of small but meaningful low hanging fruit we could take advantage of that begins to add up in a big way.
The Christmas lights number is a little deceptive because it is comparing instantaneous draw and not yearly consumption. When all (US) Christmas lights are on, it might very well be equal to the draw of Bitcoin or Argentina; on a yearly basis, it's about 2-5%, depending on what estimate you are using. Christmas lights just aren't on for more than a week or two each year, by and large, and usually only for a few hours of each of those days.
On a yearly basis, (US) Christmas lights use more electricity than Montenegro or El Salvador.
It doesn't say anything about the worthiness of Christmas lights, but it makes them a much smaller gain if you eliminated them.
I find the last section of this article particularly ironic considering cryptocurrency is one of the biggest steps back for technological efficiency I've seen in my lifetime. No, credit card fees have not improved in 30 years, but at least the energy required to process those transactions hasn't increased by orders of magnitude in the same time period.
I think you pointed out the problem yourself. Bitcoin and pollution don't care about borders, unless you get every country in the world to pass such a tax the miners will just move to wherever they can get away with not paying it.
You forgot to mention: if you lose your keys, youre fucked. That is, of course unless you trust a centralized unregulated entity to manage them for you.
This is a huge UX issue for anyone that wants to self-custody. In the same spirit as the OP, people are working on solutions for this. Vitalik posted about it last year: https://vitalik.ca/general/2021/01/11/recovery.html. I don't know the technical details, but Coinbase is launching a wallet system where the private key is "split" between the user and Coinbase.
After explaining improvements to this specific issue, it still feels like way too much friction for the average person to deal with. I think there will be more improvements as time goes on but maybe that's just the cost of doing self-custody. In the end, I guess it's up to the individual to decide whether it's worth it or not.
I was talking about Coinbase MPC wallet, where they have part of your private key. I think that's pretty far from back to square one, is it not? You still own your private keys but are trusting a centralized organization to keep the other, so it would require both parties to be hacked for the wallet to be at risk.
>You still own your private keys but are trusting a centralized organization to keep the other, so it would require both parties to be hacked for the wallet to be at risk
Wouldn't it just require one to be hacked - where the risk is losing access to your wallet? Say an evil hacker destroys one of the halves of your private key, now the wallet is unavailable.
If the risk is - drain the account - then yes, both would need to be hacked in order to get access.
Hackers aren't usually in the business of locking people out of their money. There's no profit in that for the hacker.
However, I'm sure the MPC wallet prompts you to write down your half of the key on a piece of paper during wallet set-up. That way if your device fails (or you cross fate with a particularly chaotic hacker), you can import your key into a new wallet.
Banks started out unregulated, and I believe it won't be long until crypto custodians are heavily regulated too. The legislative system just needs time to react.
Wallet recovery is similar to reversing transactions: you can have it if you're willing to nominate some third party that you trust to manage it for you.
Many fervent crypto advocates seem to have downright malicious attitudes toward people who either lose money on crypto or refuse to participate in it. They've spawned sarcastic memes like "sorry for your loss" and "have fun staying poor".
It's dishonest to call the author dishonest for this one sentence. They mention Chia in passing at the end of a paragraph on proof-of-work alternatives.
You said it's "dishonest to mention." The author is the mentioner. If the mention is dishonest, then it necessarily follows that the author is dishonest.
The issue with "dishonest" is that honesty implies intent. A statement has no intent, so it can't be honest or dishonest. A statement can only be right or wrong. An author can be honest or dishonest. An honest author can be wrong, and a dishonest author can be right. But to say that a statement is "dishonest" is to call the author, in the context of writing the statement, dishonest.
Not really. It manifestly wastes something with, at worst, a much longer runway toward making the planet uninhabitable for humans. That's the important point about PoW waste.
Disappointing article. Bitcoin IS the innovation. Its energy use will continue to grow for a while, but probably not by as much as alarmists think. In return, you get digital property that can't be debased, corroded, eroded, confiscated or corrupted. Not to mention it's fungible, transportable, custodial, so it can be used as money. It's also completely trustless. You don't need anyone's permission to send value to anyone else.
Other cryptocurrencies are experiments in changing Bitcoin in ways that:
1) Are not enough of an improvement to break Bitcoin's network effects (Monero, Litecoin, etc).
2) Change the consensus rules so much that it ruins the incentives and wildly increases complexity and attack space (Proof of Stake blockchains).
We haven't even come close to unlocking the value of the Bitcoin innovation. Thankfully, short-sighted articles like this won't be enough to stop it.
I think an interesting feature of defences of cryptocurencies is that they are similar in their composition as a block chain. In a block chain you have a cryptographically secure summary of the previous block in your current block - but you don't actually know what's in that previous block. Similarly in the arguments defending cryptocurrencies at the top of the article you have the description of the advantages of cryptocurrencies, but the later blocks of text hold no real understanding of what the previous blocks of text meant. So yes, blockchains are incredible because they solve "trust". No, it's not a problem that we can't reverse transactions because we can just have trusted intermediaries.
Yes, Blockchains inherently get their robustness from an incredibly wasteful algorithm. No it's not a problem they're inefficient because we're actually just going to do everything off-chain. No, it's not a contradiction for my defence of cryptocurrencies to advocate for not using them.
Ok, so I've been a bit snarky here, but the core of what I want to say is this: It is very difficult to read about the compromises made to achieve practical uses of crypto and still have the view that there's any of the original value proposition left.
I think the best cryptocurrency defence is just "We've got a lot of smart people trying new things and maybe something of value will end up being created". That's about as compelling as you can get.
> and still have the view that there's any of the original value proposition left.
While not usable as currency, cryptocurrency is still an asset crucial for holding government accountable for its spending. Government can dilute fiat currency, but not Bitcoin for instance.
I think what we've seen in the last 2 years is that stimulus money flooded into the market, it inflated asset prices massively, and now with rates going up those bubbles are bursting, and crypto has absolutely been one of the bubbles. That doesn't hold the government to account, it let's crypto holders be the ones whose wealth disappears in the crash.
This is a genuine question. Is there a defense of cryptocurrencies that doesn't follow the pattern of, "yes, that is indeed true, however here is an edge case or counterexample which either doesn't exist yet, or is not in wide use so it's not actually a problem"?
Every article or comment defending cryptocurrencies has followed this pattern and it isn't convincing to me. I'd love to have my mind changed, but when every rebuttal follows the same script, I remain am unmoved.
which argument do you find to be an "edge case"? My main argument in favor of crypto is the democratization of finance and leveling the playing field, which as we can already see crypto generally only has real benefits to the poor - for rich it's just a speculative play, but for the poor it can mean the difference between getting paid across borders without corruption stealing your money or being able to save wealth when banks won't help you out of lock you out.
The general form is that crypto can't do X. The response is that an obscure implementation Y does do X. The problem is that Y, while existing, largely doesn't address X in practice because Y's trading volume and/or market cap is insignificant.
I guess to your point. How much corruption is avoided, and how much wealth is being saved that would otherwise be locked out? Without the means to quantify it, it feels like another, "this is theoretically possible"-type argument in the same way. The answer I expect to get is, "No one knows, but it is possible." I guess I'll keep waiting to be convinced. There are a lot of great things that are theoretically possible. Still waiting on them.
> The general form is that crypto can't do X. The response is that an obscure implementation Y does do X. The problem is that Y, while existing, largely doesn't address X in practice because Y's trading volume and/or market cap is insignificant.
Sure, but this presupposes that Y's trading volume and/or market cap are indeed actually insignificant. A lot of people make that presupposition, but it's often about as accurate as a drunk chimpanzee playing darts. Proof-of-stake is the case-in-point: "but but Ethereum hasn't switched yet so therefore PoS is obscure", quoth the "skeptic", entirely ignoring that multiple of the top 10 cryptocurrencies by market cap and/or transaction volume are already proof-of-stake and have been for some time now.
Even taking that presupposition at face value, what's experimental today is less so tomorrow. That experimental solutions do exist bodes well for the state of things even months (let alone years, let alone decades) from now. If you want to wait until then, then you do you; meanwhile, those of us willing to experiment will do so.
I think it's a fair script to use against arguments of the form "cryptocurrencies will never amount to anything".
I would hazard to say that it's not the criticism of the current state of cryptocurrency that irks most of its proponents - most of them agree that it's not very useful currently.
However, it becomes problematic when you take that valid criticism of the technology's current state and use it to support the conclusion that the entire tech is a permanent dead end. That problematic reasoning is what this article's really speaking out against.
If you want your mind changed that cryptocurrency is currently useful, I can't help you there. But if you want your mind changed that many of the drawbacks of blockchain technology are not as insurmountable as detractors would have you believe, the article does a good job of laying out points in favor of that.
> If you want your mind changed that cryptocurrency is currently useful, I can't help you there. But if you want your mind changed that many of the drawbacks of blockchain technology are not as insurmountable as detractors would have you believe.
Let me summarize the sentiment to see if I'm understanding: "I'm excited about crypto now because of what crypto could be in the future."
To me it feels like being really excited about technology X because technology X+n might fix the problems with technology X. I just can't get behind that as a general principle. I've been hypeburned too much and I just don't have it in me anymore.
I'm excited about space exploration now because of what it could be in the future. I'm excited about various up-and-coming programming languages and operating systems and such because of what they could be in the future. Why shouldn't I be excited about crypto because of what it could be in the future?
It's your right to not be excited about cryptocurrency, and your reasoning is fair enough. Also, the article does a good job of clearing up misinformation about what cryptocurrency is intrinsically incapable of. I don't think those two things are in conflict.
Great. But let's agree that the opposite is also false.
Rather, a technology should be judged against its present merits. As an extreme example:
A: I have cancer - just a few months yet to live with the currently developed treatments.
B: That's actually not a problem because cancer treatments might get better in the future.
Should A feel great instead? No. The converse is that any technology can be accepted. Future merits or lack of future merits are simply not a justifiable measure by which a current technology should be judged. It's as absurd. Just as absurd as saying, "You should like natto today because some day natto might taste better."
As a non-extreme example: My government can seize all my funds in my bank and/or put any local currency exchange rate to dollar that they please. Should I fight them, move, or just buy some crypto which cannot be controlled by any single entity? You will ask how I'm going to spend it and this will miss the point: safe storage of assets is also important. (And I can trade crypto with friends for cash, too)
I won't ask that because I'm already checked out debating the details. I'm more interested in the metadebate.
The amount of kettle logic that occurs in these types of discussions inevitably leads to that. I wish there was a way to talk about crypto holistically, but discussions about externalities get detoured into discussions about counter-examples, which get detoured into discussions about value, which get detoured into discussions about monetary policy. Every complaint is met with a just-so rebuttal that brings in a new dimension of justification. Cryptoskeptics end up being defeated by attrition. It's a fine way to cinch a debate rhetorically, but lousy at changing people's minds. I guess that's the rub, people just drop out which looks like a win. I wish cryptoenthusiasts saw how that happens. They could make better arguments.
This article repeats a common misunderstanding of how bitcoin works.
Bitcoin's decentralization does not come from miners. It comes from the fact that users will not recognize blocks that do not follow the protocol rules, as being part of the blockchain.
As a consequence, market participants will not pay as much for "bitcoins" that do not come from valid blocks.
The fundamental service miners provide is that proof of work is used as a "tiebreak" so that bitcoin users can determine the "true" chain among all the chains that follow all the protocol rules.
Miners really are just dumb utilities.
A miner staying within the rules of the protocol can do two things that are negative. First, a denial of service attack by mining empty blocks or censoring transactions. Second, executing a "double spend" if he has more than 50% of the hash capacity.
Those are serious considerations. But we cannot claim that bitcoin's decentralization is reducible to those two things. The current allocation of hash power among miners is actually far more distributed than what is really needed for bitcoin.
Implicit in all the above is, miners do not "vote." That can be a helpful analogy, but it shouldn't be taken too far.
> In fact, I think there are some pretty exciting things happening in the field, even if most of them are further away from reality than their boosters would admit. Moreover, many of crypto’s technical problems are also amenable to some really exciting technical solutions, many of which are already here or on their way to deployment.
I appreciate the article but it's still disappointing to run into a typical misconception about Bitcoin from someone claiming to make a technical defense of cryptocurrency. He states that Bitcoin is now not so decentralized, presumably because of the concentration of mining power. This is a pretty fundamental misunderstanding of what decentralization means with regards to proof of work. What it means is that there is no central authority that can reverse or change transactions, add taxes, only operate from 9 to 5 on weekdays, etc. The protocol defines the behavior, not a centralized org, and it is perfectly decentralized. Anyone can add a mining node, because the protocol itself is decentralized. Having a smaller group of mining pools doesn't change this core characteristic of PoW blockchains.
Most of Green's article goes through, except for the answer to the 'climate change' objection (Objection 1). Which is, of course, the most important, and without it, the article as a whole also fails to convince.
The problem is in this passage (mine the emphasis):
> But the question we should be asking is not whether to be angry about the power consumption of proof-of-work mining. We should be trying to figure out the right path out of this mess. And more concretely, whether there’s a path forward which is more likely to produce *a good outcome* than what is already happening in the industry — namely, that projects are rapidly deploying cleaner technologies to replace proof-of-work.
1. What is a "good outcome?" A good outcome for whom? A great outcome for most species, and most h.sapiens, would be an outright ban, because of the risk spread.
Think actuarially:
There is always the possibility the crypto industry trends cleaner, but legacy chains will be around for yonks, and bluechip crypto is unlikely to ever move off PoW. This means that, yes, while there is a possibility the industry might trend clean, this is an emormously polite way of saying that the downside risk is both severe and likely.
Put another way: if you were selling planet insurance, and you found out they had a lot of PoW crypto going on but were thinking about maybe one day kicking the habit, you'd probably either charge them a fortune or tell them to take a hike, right? Think actuarially.
There is also a suggestion that banning mining (or crypto transactions) might just move the action to other jurisdictions. This suggestion seems strained: for while a coordinated international treaty or ban might make time to confect, it's certainly not impossible. Powerful nations might, say, weave a crypto-ban requirement into multilateral trade agreements, like we already do for intellectual property.
A ban on crypto mining would likely be even easier to implement and spread, as most nation-states correctly view crypto as a threat to their command&control. I mean, look at Ecuador.
Finally, banning crypto would also be something nation-states could take back to their populations as proof of progress on climate change. And they'd even be right.
As harsh as it is for a supporter of crypto (and former industry wonk and former whole-coiner) to say this, I'm sincerely beginning to think that the lasting value of this whole Blockchain Thing has been the thought it has provoked. I, for one, would never have had to think so deeply about the nature of value and currency.
> What is a "good outcome?" A good outcome for whom? A great outcome for most species, and most h.sapiens, would be an outright ban, because of the risk spread.
This only logically follows if literally all cryptocurrencies are proof-of-work (let alone proof-of-work using a hashing algorithm as energy-intensive as SHA256). This is patently false, and therefore the assertion that an outright ban on the very concept of a cryptocurrency is somehow a net benefit to global society requires more of a supporting argument than "Bitcoin exists and is currently dominant". By your metric, banning only proof-of-work cryptocurrencies would be more than sufficient, assuming that such a ban could be enforced...
> Powerful nations might, say, weave a crypto-ban requirement into multilateral trade agreements, like we already do for intellectual property.
Right, and that totally eliminated (or hell, at least even significantly curtailed) copyright infringement in those jurisdictions, right? If you sincerely believe that, then I've got an NFT of Ecuador to sell you.
The cat's out of Pandora's box. You can't "uninvent" peer-to-peer networking, and you can't "uninvent" decentralized ledgers. Nation-states can impose whatever bans they want; unless they're willing to pull a PRC or DPRK and start committing rampant privacy violations for censorship reasons, those bans are toothless.
> This only logically follows if literally all cryptocurrencies are proof-of-work (let alone proof-of-work using a hashing algorithm as energy-intensive as SHA256). This is patently false
Against this, I argue:
- easier/cheaper hashing actually doesn't work -- the yield curve in bitcoin mining is there for a reason, and without it, I doubt PoW would fly.
> ...and therefore the assertion that an outright ban on the very concept of a cryptocurrency is somehow a net benefit to global society requires more of a supporting argument than "Bitcoin exists and is currently dominant".
Bitcoin is an investment, because it's terrible for small, frequent transactions. (Both in UX and eco terms.) Reductio ad absurdum: If it doesn't remain dominant, then it has no use case, as it's a lousy investment instrument. If the above goes throw for bitcoin, then, a fortirori, the same reductio can also apply to any other PoW coin.
And don't get me started on PoS -- it's literally just an MLM you can buy into. A system for centralizing wealth in the hands of whoever already has it.
> Right, and that totally eliminated (or hell, at least even significantly curtailed) copyright infringement in those jurisdictions, right? If you sincerely believe that, then I've got an NFT of Ecuador to sell you.
It did, though? I remember the nineties well -- relatives would go to China and come back with armfuls of factory-pressed CDs and DVDs. Anything you wanted. Clean and new-in-box. That went away because of IP protection baked into trade agreements. And before you say 'BitTorrent', please remember, the analogy is _factory_ piracy -- because, like nineties piracy, Bitcoin requires mining rigs, and these are large, physical assets, like factories, and this is unlikely to change. What happened to IP after Napster is another thing, and does not invalidate the analogy. A similar virtualization/p2p move is unlikely to work for mining. (But I could always be wrong about this -- I'm open to persuasion, if you can paint me a word-picture of what competitive distributed mining would look like, other than NK Monero malware.)
> By your metric, banning only proof-of-work cryptocurrencies would be more than sufficient, assuming that such a ban could be enforced...
It's not hard -- a helicopter and a FLIR cam would work, as well as cooperation from the energy provider. Choke off the supply of mining, and wait for this to in turn cause transactions to become unwieldy.
> The cat's out of Pandora's box.
Shoot it, then.
> You can't "uninvent" peer-to-peer networking, and you can't "uninvent" decentralized ledgers.
Yes, but you can ban the sale of various things. Laws are possible things.
> Nation-states can impose whatever bans they want; unless they're willing to pull a PRC or DPRK and start committing rampant privacy violations for censorship reasons, those bans are toothless.
Expand/explain. I do not understand the point you attempt to make.
> easier/cheaper hashing actually doesn't work -- the yield curve in bitcoin mining is there for a reason, and without it, I doubt PoW would fly.
And yet there are numerous non-SHA256 proof-of-work systems that have worked (pun intended) just fine while having lower energy requirements.
> Reductio ad absurdum: If it doesn't remain dominant, then it has no use case, as it's a lousy investment instrument. If the above goes throw for bitcoin, then, a fortirori, the same reductio can also apply to any other PoW coin.
This presupposes that all PoW coins have the same properties - never mind that pretty much every cryptocurrency created since Bitcoin has had "do it faster and cheaper than Bitcoin" as an implicit if not explicit goal.
> And don't get me started on PoS -- it's literally just an MLM you can buy into.
The people who say this are the same people who know next to nothing about PoS.
> I remember the nineties well -- relatives would go to China and come back with armfuls of factory-pressed CDs and DVDs. Anything you wanted. Clean and new-in-box. That went away because of IP protection baked into trade agreements.
It went away because now you can buy knockoffs on AliExpress instead of relying on relatives in China.
> And before you say 'BitTorrent', please remember, the analogy is _factory_ piracy
Nope. The equivalent to electronic money is electronic piracy. Moving the goalposts does not a good argument make.
> Bitcoin requires mining rigs, and these are large, physical assets, like factories, and this is unlikely to change.
Again: there are other PoW blockchains besides Bitcoin.
Even in Bitcoin's case, hashing ASICs don't have to be large; that's currently the most profitable approach, but mining can and would readily adapt. SHA256 is also a common enough algorithm outside of Bitcoin that hardware accelerators for it have ample non-Bitcoin usecases; you'd have a hard time blanket banning any and all SHA256 hashing unless you're willing to break password authentication for the vast majority of computers in a given jurisdiction, and you'd likewise have a hard time justifying the ban of hardware that makes password hashing faster (even if it just so happens to be capable of mining Bitcoin).
> a helicopter and a FLIR cam would work, as well as cooperation from the energy provider.
And if the farm's off-grid on solar? The energy provider would have zero visibility on that, and the helicopter flying around day in and day out would be far more ecologically destructive.
> Shoot it, then.
Good luck with that.
> Yes, but you can ban the sale of various things.
We're literally talking about a class of electronic currencies which do not give the slightest sliver of a rodent's anus whether there are laws prohibiting a given transaction. That strategy hasn't worked for IP infringement (despite your assertions), it hasn't worked for the drug trade, it didn't work for liquor trade during Prohibition, it's already starting to fail with the firearms trade in gun-restricting countries (thanks, 3D printers and hardware stores!)... there is zero reason to believe it would work for cryptocurrency.
> Expand/explain. I do not understand the point you attempt to make.
It's always interesting to see opinions about crypto currencies by people that actually have no clue where it is about.
Just wait until a few years from now when cash money will be phased out and replaced by CBDC's. That's when suddenly all those critics will wake up in horror and realize that money as we know it ceases to exist. What money is CBDC's than? Well, it's credits, social credits to be more precise, controlled by smart contracts, controlled by governments.
So with these government controlled smart contracts in place, how are you going to give your kid a 1000 bucks? If the government only allows you to give a maximum of 100, than that 100 limit will be programmed into the smart contract and your 1000 bucks transfer will be rejected. Or imagine you want to go a second time on holiday in a year. The smart contract might be programmed to only allow you 1 holiday a year due to carbon footprint, now you cannot book your flight. This is just the tip of the iceberg, when you just take a little time to think about all the ramifications, you should get worried. They are even planning to control how and on what you can spend the money you earn, it's written in publications, and no it's not a conspiracy..
The total control of humanity that CBDC's will bring is a horror story. It's comparable to the Chinese Social Credit System, but then on steroids. Much of the smart contracts will be run by AI. So, what are you going to do when for whatever flaw in the system or whatever reason your credits are blocked? You don't own money, have no wallet, you might not even be able to buy a piece of bread, whatever you credit score was before. That's what's in store for you crypto currency critics.
So please, do your due diligence and think twice before criticizing crypto currencies.
I like this. It's quaint in how they mix and match different dystopias without basis in reality except for what their cryptobros came up with (they can't even tell if 561 is prime or not)
"Smart contracts" okay, the cryptobros can't even make smart contracts for bored monkey pictures without shooting themselves in the foot 10 times, why do you think a government will suddenly need one of those to do anything?
Why do you think the government needs an immutable ledger powered by inneficient computations to keep track of transactions when current DBs work just fine? The cryptobros can't even make lightning scale to the size of a small ecommerce site and want us to believe that somehow that's the future?
But to be fair crypto has its uses: speculation and separating fools from their money
> Why do you think the government needs an immutable ledger powered by inneficient computations to keep track of transactions when current DBs work just fine?
To rephrase what has already been pointed out in other comments: this post focuses on 1) drawbacks of cryptocurrencies as solvable problems that could disappear thanks to X and Y, instead of what 2) essential benefits they supposedly (could) offer.
1) is much easier to address (at least in vague and aspirational terms) but rather uninteresting in the absence of clear examples of 2).
The article hints at some of these at the end of the article, but here's a few things maybe:
- the option for non-custodial and semi-custodial ownership of things like digital assets, from currency to domain names to other types of online property. most of our digital assets today are custodial, owned by companies seeking to gain profit and create moats. maybe some users would like another option, despite the additional risk of having to maintain their own private keys.
- fast settlement times for worldwide payments that do not require routing through a centralized intermediary that will skim a significant percentage off the top of each trade. fees paid in a PoS system can be redistributed to all participants in the network through burning + staking and delegation, which is a very different way of handling payment processor fees than what we have now
- a network of financial applications and systems that is permissionless, so that anybody can fork an existing tool or deploy their own tool without going through regulatory hurdles and roadblocks based on an archaic tightly permissioned boys-club financial system
- smart contract functionality like a 0% fee crowdfund contract that can support hundreds of thousands of participants, settle instantly, and even provide shares as tokens back to donors in case some future rewards should be distributed back to early investors
- generally better payment systems that use new cryptographic primitives rather than pencil signatures on paper, insecure card numbers and 4-digit PINs, constant privacy invasive systems
Finally and Thank Goodness. I have been so depressed lately listening to all the "crypto-haters" bash something "they don't see a need for" that we actually need very desperately that it was really messing with my head. Of course, you don't see the need...you either aren't actually looking at the pain and high costs those on the outside are forced to endure or you just don't care. Finally someone in an actual position to know has written a piece that isn't hampered by their bias. He doesn't run a FinServices company for oldsters or pretend that BTC is worthless while being a part of a group of companies using XRP for years.
> If the entire field turn into toxic waste that no one wants to touch it will be extremely undervalued.
Bagholders will always try to find new victims. Crypto is praised even when it's in the shitter. "Buy the dip, it will be $200k before years end, I'd buy it myself but..." etc.
The biggest problem I see with cryptocurrency is the transaction rate problem. It’s not like attempts haven’t already been made to solve it (Bitcoin Lightning), and Dr. Green fully admits that it’s not certain that any currently proposed changes can solve it either. How long is the world supposed to wait for reasonable transaction rates on this technology? If this is truly like the early internet, they should have vastly improved over the past ten years, and should definitely improve over the next five. But as far as I know they’ve been basically static throughout the technology’s life so far.
> The biggest problem I see with cryptocurrency is the transaction rate problem. (...) How long is the world supposed to wait for reasonable transaction rates on this technology?
The technology to do so already exists / is currently being developed via:
- Optimistic rollups (Arbitrum, Optimism)
- 0-knowledge rollups (zkSync 2.0 (in public testing), Loopring, Immutable X)
At worst, you'll only need to wait for a year or two to get sub-$0.10 transaction fees on the ETH rollups, as user adoption picks up. For me, I've been an active user of Polygon PoS & my transaction fees are often below $0.01, with the most being $0.05.
There're also scalability improvements that're currently in the works, such as EIP-4844 (Proto-Danksharding, partially named after one of the core contributors to the ETH protocol). It should be noted that this is placed in the backburner, as the move to PoS is more important.
> At worst, you'll only need to wait for a year or two to get sub-$0.10 transaction fees on the ETH rollups, as user adoption picks up.
I do hope this works, genuinely. I feel I’ve been burned already on this stuff so I’ll believe it when I see it. Would you say my misgivings would be proven correct if TPS is not well over a thousand in a few years?
> If this is truly like the early internet, they should have vastly improved over the past ten years
They have. There are other cryptocurrencies besides Bitcoin. Even the worst proof-of-stake chains have multiple orders of magnitude better throughput and latency than Bitcoin does. Hell, there are plenty of other proof-of-work chains with better throughput and latency than Bitcoin. And that's all entirely ignoring sidechains and other such shenanigans pushing transaction rates and speeds even further.
"Please don't comment on whether someone read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that.""
I did. He lays out several possible solutions but notes that none are proven. That’s what I’m criticizing: I’ve seen these claims made before, and they were never proven.
The author reasonably concluded that these solutions are early and effectively “beta software” but I think it would be wrong to say they are completely unproven. L2s are currently securing billions of dollars and the amount of block space they take up is on increasing rapidly.[1][2]
The unproven part is whether users will be satisfied enough with the security and censorship considerations of something like a ZK Rollup for it to scale to facilitate a significant part of the world’s economic activity. This is reasonable to question as we are only about 1 year into a range of this tech being heavily applied on mainnet.
Independent of this: "We should be trying to figure out the right path out of this mess. "
For me I'm fine on thinking about how to solve the climate crisis before I will spend energy on solving crypto issues but that's something every one has to decide for themselves.
Fixing climate change will be more beneficial for everyone who has kids and/or likes his/her family members kids or kids from friends.
Which I do.
I think overall people would prefer less energy costs, more food and more water and less extreme weather before crypto but that's just my guess.
But at least on hn I'm reading more about crypto than that.
The whole reason it is so important to be able to reverse digital payments now is because of their incredibly insecure and inferior design compared to cryptocurrency payments.
That's the most obvious reason to move to cryptocurrency. Amazing that people don't see that.
With crypto, I authorize a payment with a secure signature without revealing my credentials. With digital payments like credit cards, I have to give you my credentials and just hope you are honest. In the context of cryptocurrency this is laughably bad.
I believe cryptocurrency is one asset (of multiple ones including gold) that can not be debased by the government, and as such forces the government to be financially accountable (I include central banks under "government").
I also believe lots of them offer a wasteful amount of security - for instance, Bitcoin secures almost $1.2M per hour against double-spending: https://www.crypto51.app/
I also think Bitcoin's inflation should be curbed. Only specialized mining operations benefit from the inflationary mining subsidy. Once inflation is reduced, miners will be limited to spending from transaction fees, not from the future.
Jurat.io is a startup that has solved the transaction irreversibility problem without introducing trusted intermediaries. Instead their process follows court rulings about digital assets in particular blockchain accounts.
In a sense the courts are occupying a position of authority but it’s the same authority that courts have over all property, digital and traditional.
As we speak, regulators are being captured by the bad cryptocurrencies; if we allow that to play out then of course regulators won't come up with nuanced policies. It'll be mining and gambling for everyone, everwhere.
We'd be better off banning it all now then later adding a carve-out for non-PoW, non-deflationary, reversible, scalable, private, actual digital cash.
I agree that all cryptocurrencies should be banned. This would root out all of the weak cryptocurrencies which are not private or resistant to censorship.
Great article but let's get real, a great deal of the cryptocurrency criticism is rationalization. HN recently revealed the true motivation behind much of it[0]:
> It's less that I'm glad the market is crashing, and more that I'm glad that the insufferable crypto bros are finally getting a punch to the mouth. Seriously, these people are the worst. Your average "crypto investor" has no skills, no mathematical foundations, nothing. Except for pure stupid luck, and the ability to spew inane crypto babble 24/7. And yes, they think they are much smarter than you, because they achieved better financial results than you did while only doing 1/1000 of the work to get there. I truly hate the fact that these people are so rich. It makes me want to move to Alaska and just try to ignore society for the rest of my days.
> This came off as pretty bitter. I apologize, but I am bitter, and I'm having a shit couple weeks.
I'm in this rationalization camp since I actually did make insane returns from cryptocurrency. Even then, I can't bring myself to defend this space because of the sheer a) amount of scams, and b) lack of utility.
The scams wouldn't even be a problem - every fledgling platform has them - but the fact that the crypto community embraces scams and even encourages them. Scammers can rug a project for millions and turn around and launch another project within a week and everyone will still buy it because of greed.
And this is the crypto dilemma: the crypto community has utterly failed at self-regulation. Ergo, it has to be regulated by the government. However, a cryptocurrency that's beholden to government rules is antithetical to the core crypto ideas of self-ownership, privacy, and freedom.
There are plenty of existing laws for dealing with scammers and fraudsters, why not use them? Also, are victims really victims when they knowingly buy into scams "because of greed"? At the very least, they don't seem to be the ones calling for a cryptocurrency ban.
I disagree that there is a monolithic "crypto community" that encourages scams. For example, a great deal of the Bitcoin community is fervently anti altcoin and many even consider Ethereum as a "shitcoin".
Regarding utility, everyone is entitled to their opinion. I disagree. There was a time in my life when I was "unbanked" and Bitcoin was the only way I could transact online. In the end, utility is subjective and it is not the government's job to decide whether something has utility or not.
> There was a time in my life when I was "unbanked" and Bitcoin was the only way I could transact online.
This really needs said louder. Writing off the entirety of cryptocurrency as "useless" betrays either stunning ignorance or immense privilege (or possibly even both). Even in the "developed" world (let alone "developing") there are countless people whom the legacy financial system does not serve yet is happy to exploit; cryptocurrency ain't some silver bullet, but it does address quite a few of the legacy system's injustices.
Don't disagree with that, but does banking the unbanked require hundreds of billions of dollars in funding? Do the unbanked need algostables, five-figure APY yield farming, sophisticated options protocols like Ribbon, and memecoins valued at $20B?
The core ideas behind crypto remain solid. Unfortunately that has been hijacked completely by speculators.
Lots of things get hijacked by speculators all the time. That doesn't mean the rest of us need to care; none of that has much bearing on the fact that anyone anywhere in the world of any socioeconomic standing can send money to or receive money from anyone else anywhere in the world of any socioeconomic standing.
Yeah. It used to be Google RSUs, then it was all high-paying software jobs doing LeetCode interviews, now it’s cyber money.
People on here just fucking hate other people making money.
That’s not to say that Google is necessarily ethical, or LeetCode interviews are necessarily good, or that cyber money is necessarily going to work out. Maybe, maybe not on all above.
But that’s not why people scream on here about these things.
The article basically says that crypto currency currently is a huge scammy mess with lots of unsolved problems - BUT those problems are solvable in theory. It then spends most of it's paragraphs explaining what some of those solutions could look like, before finally admitting that even with those problems solved, crypto currency might not actually improve on any of the problems that existing non-crypto payment systems have.
The idea is that if you have more tokens, you will reap more reward in PoS. This is because you receive around 5% return on your stake, so if you set up multiple validators you will earn more per year.
Note that PoW works exactly like this too, except far worse due to economies of scale. Purchasing mining facilities in bulk will give you a much better deal than buying rigs as a home miner. Whereas in PoS, both the ultra-whale (1000 ETH) and mini-whale (32 ETH) are earning the same exact % return on their investment. The average user delegating in a staking pool is also earning fairly similar return to all validators (with some % of their return paid to validators for their services).
I do not think the claim that PoS is more centralizing or more “rich get richer” than PoW is necessarily true.
Your stake is really growing relative to the total supply as fast as a smaller holder's though. Like anything, rich have more opportunities to get richer, but I don't think these problems are specifically egregious in PoS. For chains which have on-chain governance, there's also the possibility that large holders will vote to change distribution in ways that favor them (though this hasn't happened yet), but this is a problem with any vote-by-stake system (imagine if equity share-holders could vote for larger shareholders to get more dividends).
And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future? This could even be combined with zero-knowledge to ensure voters are unique humans without making their wallet<->identity associations publicly discoverable (though there may be situations where this is desireable as well)
> And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future?
This is what I'm hoping for. As soon as this proves viable, this opens up the door for things like automated international UBI.
It probably is not solved without a central authority that distributes and revoked identity tokens, like we have with passports. Decentralized proof of personhood is a pipe dream.
I'm not sure why this was marked dead (unless you're shadowbanned), but this is valid. I think the idea is for centralized entities to issue non-transferable tokens to accounts, which can then be used to verify that account's "personhood" as you call it, while preventing multiple accounts from getting one for the same person.
Depends on the PoS design. Some have a limited number of stakers, or give stakers voting rights in an on-chain governance system. Neither is true of Ethereum's proof-of-stake, but it's not quite in full production yet.
As for the rich getting richer, that's no different from mining. Stakers have much lower ongoing costs, but the rewards are lower too so their percentage annual return isn't necessarily better. And everyone gets the same return so there's no economy of scale, which is not true of mining (or, for that matter, savings accounts).
Power is proportional to stake size. This can be (and is) mitigated by penalizing stake pools that get too big relative to the rest of the network, thus encouraging users to stake on other pools.
Based on these comments I’m surprised that most of this user base is so crypto illiterate. Algorand or even Dash solves 99% of the problems you claim crypto has. Everyone savvy in the space knows btc and eth were always far from the crypto ideal, but they have large economic moat going for them. Crypto is going to change the world for good in a big way. Most of our modern problems stem from economic and political inefficiencies. Crypto can solve both.
Cryptocurrency don’t need defense. I think that people outside of cryptocurrency communities don’t realise how accepted the technology is within them. HN is being misled into thinking they are widely hated
The truth is they’re completely irrelevant to 99% of the internet population. Pick the top 20 coins. Look at their respective block explorers and check tx/day, unique address/day, etc. You’ll quickly come to the conclusion that maybe 100M people actually use cryptocurrencies in any meaningful way. The internet has 5B users. Cryptocurrency use is irrelevant.
The cryptocurrency debate in technical circles reminds me of two extremely obscure religious sects screaming at each other while meanwhile the rest of the world doesn’t know either of them exists.
There are huge crypto.com ads plastered over every F1 track, I don't think this is extremely obscure stuff. I've encountered a lot of non tech people who own crypto. I saw some number somewhere that estimated that around 17% of Ukrainians own crypto, with similar numbers for other countries. The idea that it is an extremely obscure thing also seems like a function of being in a HN tech bubble. There are crypto ads and exchanges everywhere
Exchanges run private order books like any other investment org. People trading (gambling?) one ticker symbol (crypto or not) vs another (crypto or not) has absolutely nothing to do with real world use or utility. I can watch the Euro move up and down on forex and buy/sell to make money in my currency of choice while never touching a Euro, using it for anything, or having any real long term confidence, understanding, or belief in anything Euro or European related. I just know it made me X in USD this day/week/month and that's all I care about. Fill in EUR with BTC, ETH, etc. No one on exchanges cares about anything other than what it means for them in their local currency.
The use of exchanges is a get rich quick scheme not unlike penny stocks in the late 80s/early 90s or dot coms in the late 90s. In the late 90s very few in the general population jumping on dot com stocks had any idea what the hell any of it meant. They just heard a story about someone making $100k in a day and wanted in.
Look at the FOMO ads during the SuperBowl... There was zero value or utility demonstrated and 100% of the messaging was "everyone else is getting rich quick at crypto.com so don't miss out". Their fees (in real money) are absolutely bonkers so of course they're doing everything they can to bring people in.
Have you seen Wolf of Wall Street? There's a scene where the main character gets taken to lunch by an experienced broker. Long story short the lesson was this:
"Fuck the clients. Best case scenario let them think they're getting rich on paper while meanwhile we take home cold hard cash every time they trade via commission."
Be careful with surveys you "read somewhere"... The often cited "300 million crypto users worldwide" stat[0] (for example) comes from a blockchain payments company (surely they're unbiased, right?) that for some reason estimated this number from a Central Bank of Canada phone survey extrapolated to the worldwide population...
It's really interesting that whenever I bring up blockchain explorers and the fact that blockchain has the most transparent and reliable adoption metrics ever no one takes me up on an analysis of the data and deflects to virtually anything else instead.
Adoption and use data is there without bias. It requires some interpretation to determine something more akin to MAU/DAU but even very generous measure will show that 13 years after the launch of bitcoin blockchain is the most poorly adopted technology platform in recent history[1].
in January, 10 trillion of debt wolrdwide was negative yield in nominal terms. in real terms - a whole lot more.
Holding assets IS use. that's the root of your misunderstanding. For some reason everyone here is fixated on cheap payments. That's not what it's about.
I'll give you credit, deflecting to bonds is a new one!
I'll quote myself:
"It's really interesting that whenever I bring up blockchain explorers and the fact that blockchain has the most transparent and reliable adoption metrics ever no one takes me up on an analysis of the data and deflects to virtually anything else instead."
Again, trading on crypto exchanges has nothing to do with the technology or use of a blockchain.
I'm not fixated on payments. I don't care what the activity/use is as long as it uses the actual technology and network (which is reflected in blockchain explorers).
Bonds/digital gold/reserve currency angle isn’t new, I certainly didn’t invent it. You just haven’t spoken to very many people!
Notice my comment did not include “trading”.
Specifically only holding. Only demand to hold an asset for long durations gives it value long term. Gold and bonds are the perfect instances of this that most are familiar with.
Bitcoin is an experiment in bootstrapping a new money from scratch.
Before it can serve as a decent medium of exchange, it needs to first prove it can hold value first, as a store of value.
Otherwise, how can you send value with it, if it can’t even store it value? It’s a necessary precursor.
It is however quite volatile for now and only very few committed investors hold it long term.
Who’d use a volatile asset for savings? For now it’s just a spec asset, and sure people are trading it, but as the market capitalisation growth, and fluctuations subside, it may very well become a decent medium of exchange.
Trading is usage as well, as it increases network effects, and availability of the asset across different trading venues, thus increases market penetration.
For the transition from SoV to MoE to occur, a large well dispersed number of holders is required. What difference does it make if they outsource the custody part? It makes sense for some, and regulated entities cannot warehouse it anywhere but a qualified custodian anyway. So sure, holding can occur on exchanges as well.
If you must insist on the blockchain data, look at bitcoins money velocity. It is much closer to M2 than M1, and thus it acts today as a savings vehicle/investment asset: therefore much more similar to bonds than credit cards.
Is this supposed to be a critique of all financial investment or speculation? I'm not sure what else I'm supposed to take from this.
Also talk about moving the goalposts, we've gone from "no one knows about crypto or cares about if its good or bad" to "they don't really use it they just trade it"
It's not a critique of financial investment or speculation. It's calling all of it what it is - financial investment and/or speculation. If someone claimed they were participating in changing the world and building the future of everything by shuffling Euros around on some forex platform and taking it home as USD you would be skeptical, correct? How is trading BTC any different?
You misunderstand me. Many people trade crypto but this doesn't equate to actual use. Crypto exchanges run order books just like a forex exchange or other investment platform with a SQL or whatever backend.
Do you really consider people speculating on insert-random-coin-ticker-on-exchange-here as use? It moves on an internal order book, it doesn't touch the blockchain itself. That is not use. That is people investing or speculating with an asset just like any other asset. It has nothing to do with the underlying technology or use. Nothing.
Looking at the chains themselves you will see that very few people actually transact off exchanges on actual blockchains (real use). This is what I mean when I say cryptocurrency USE is irrelevant. Buying and selling BTC to take it home in USD to buy a Lambo is not USE of BTC. It's financial investment/speculation on some random asset and USE of USD.
I do consider it a use of crypto, in this case it is a highly volatile speculative investment that can be moved into a hardware wallet where it can be kept safe from theft, and also transferred into fiat. Even if crypto never becomes more than that, I still think this is a valuable thing. With DeFi things get more interesting
I suppose we'll just have to agree to disagree on use. I'm still of the position that trading cryptocurrency on an exchange and never using the underlying technology or touching the network isn't use of that cryptocurrency.
The ironic aspect of this debate is I'm on my second blockchain startup for a reason - I believe there are plenty of use cases where it makes sense. I just don't think the cryptocurrency/blockchain communities are doing themselves a favor operating under the mass delusion that crypto is a big thing (while still being early?) when all available real data says otherwise. Trying to pump the underlying cryptocurrency by shoehorning the tech into anything and everything (and doing so poorly) will backfire as well (and already is).
Blockchain and cryptocurrency advocates need to look inwards to identify blockers to mass adoption and address them while identifying real world use cases where blockchain/cryptocurrency provides real value and utility.
Whether the goalposts have moved depends on whether you consider speculative investment to matter for whether something is "irrelevant".
I think you could reasonably read that post as a critique of speculative investment in assets. With the conclusion that if that's the only meaningful activity with cryptocurrencies then they're not doing very well.
Investing in companies or in future production is a different matter. If cryptocurrencies can actually get that going at some point it'll be interesting!
I think we're in agreement here but I want to be clear.
I'm talking about blockchain explorers. Use of the actual networks and technology. Trading on crypto exchanges does not utilize blockchain in any fashion.
Given that this is HN I would think the focus would lean towards the underlying technology. That said one of the things I appreciate about HN is the wealth of knowledge and conversation about things other than technology.
I suppose there's a valid debate to be had in terms of what constitutes "use" but my focus and emphasis on actual network activity as seen in blockchain explorers refers to use of the network/technology/blockchain for some purpose. I don't care what that use/purpose is as long as it actually uses the technology (which is on network and reflected in explorers).
As we both acknowledge, blockchain explorers representing the reality of blockchain network activity provide an abysmal view of the adoption of that technology relative to historical technology platforms 13 years after release.
Saying that cryptocurrency is widely accepted within cryptocurrency communities seems tautological. Meanwhile many attempts to force NFTs into games have been met with a lot of pushback from the "general" gaming public. I think it's fair to say that there's definitely a group of people for whom cryptocurrency is a "no way, no how" issue. Whether this group is large enough to justify the "widely" in "widely hated" is open to debate.
This article is a rebuttal to a letter, that in his interpretation, claims:
>[...] that the entire technology field is worthless and cannot be used for any practical purpose.
However, instead of addressing the core issue of whether cryptocurrency or DLT serves any practical purpose, the article instead cherry-picks specific issues that he thinks are resolvable:
* Energy waste
* Transaction speed
* Privacy
The author seems to be missing the forest (that he himself identified) for the trees. Why doesn't he provide a real world use case for DLT? I'm still waiting for that.
It does not sound plausible that all of this engineering, required to make these systems even viable in the real world (and, we hope, preventing it from eventually demanding approximately as much energy as Eastern Europe, despite the weak incentives to actually accomplish that) is the best, fastest way to lower transaction fees for the working class.
No disagreement from me. He seems to think it could be viable.
I've seen a few high profile cryptographers get into the crypto space recently. I can't really blame them, it's exciting to see new cryptography put into practice. Who knows, maybe they will solve it all, but I doubt it personally.
I'm not disputing the claims the article makes, I'm just saying: it's not an especially persuasive reason to support cryptocurrency; if the problem is simply "bring transaction costs down for the working poor", there are much simpler ways to do that. Meanwhile: the cryptocurrencies we have today are causing ongoing harm.
Harms like: the aforementioned energy usage equivalent to Eastern Europe, scams wiping out billions on the regular (e.g. the absurd Luna pyramid scheme which collapsed the other week), facilitating vast drug dealing and consumption at huge detriment to poor countries and many users, etc.
Sometimes incentives can be negative. Let your fear of ransomware guide your backup strategy. In the face of an adversarial condition, one should build contingencies as opposed to arguing that the technology is wrong.
I was addicted to heroin, I’m intimately acquainted with the harms of drugs. Whether I or anyone else wants to control others is entirely separate from the question of whether it does harm. And, incidentally, however inarticulably agonising is heroin withdrawal, I suffered far less than those at - or near - the other end of the production chain. Don’t give me this shit about how drug production harms no one just because you like taking them. Tell it to the Colombian fishermen who get a bullet in the head after unwittingly ferrying a package. Tell it to the people strung up off bridges. Tell it to the countless dead.
(I don’t think drugs should be banned or controlled, for what it’s worth. I believe in pragmatic policies of harm reduction. I’m just not going to deny reality, and the harms this system causes.)
It already does lower transaction fees for the working class. Maybe not Bitcoin specifically, but the cryptocurrency industry has spent more than a decade vastly improving on the concept.
The legacy financial system - even just the electronic parts - are meanwhile the product of many decades of development, and it still ain't viable for large swaths of the working class worldwide.
But does comparative advantage apply? Perhaps the best way to solve problems isn't for everyone to work directly on what the single most important problem in the world is. What if it's actually often better for people to work on tasks they find the most suited to their interests and abilities?
I'm fine with that. I just don't think we should give any deference to cryptocurrency projects because they're purportedly solving an important social problem. They should be held to the same standards everyone else is. Finance is intensely regulated (many will say not enough; I take no position on that). Crypto should be as well.
>Why doesn't he provide a real world use case for DLT? I'm still waiting for that.
As you yourself say, they are talking about cryptocurrencies. Cryptocurrencies are money. Digital money is a practical purpose.
This is the letter:
>After more than thirteen years of development, it has severe limitations and design flaws that preclude almost all applications that deal with public customer data and regulated financial transactions and are not an improvement on existing non-blockchain solutions.
They claim the limitations and design flaws make blockchain inferior to existing solutions. The author is arguing that the limitations and design flaws have been or will be overcome.
But people are normally okay with things that are merely interesting or entertaining even if they are perhaps somewhat frivolous, so long as they don't have any obvious large societal downsides.
Have yet to see a reasonable crypto defence, probably because there isn't one. The same people would have been writing "In defence of tulip prices" in age of yore except that was not as bad for the environment.
Crypto is antiprivacy. All of the transactions are public, it just offers psuedo-anonymity. If we used crypto for all transactions you could see when I go to my local watering hole and wait for me to close out my tab.
There's nothing to defend. More ink has been spilled by some of the top experts in the field explaining that there is no use case for blockchain technology itself. It's old technology that has been around for a long time. There's nothing unique or special about it.
It's interesting what the pro-regulation crypto-currency shills are advocating for. In the US a couple of pro-crypto senators proposed a bill that would introduce regulation to cryptocurrencies under the CFTC. They avoid classifying these things as "securities" in order protect crypto from stronger regulation. Despite these "currencies" quacking and walking like securities.
This is more like a compromise made by a mob boss with corrupt government officials: we'll agree to your regulation as long as you agree to look the other way. In other words let's make it look legit and I'll keep scratching your back.
What the letters to congress hope to achieve is stronger regulation on what are effectively unregulated securities. If companies want to dabble in crypto-assets let them: they will have to publicly report their activities, disclose their financials, and face the same penalties as those who are caught breaking the rules.
I somehow doubt this is the outcome the crypto industry wants. A number of executives have been hauled to court over money laundering and fraud charges. I suspect a great deal more would follow suit were the government properly informed and willing to go after them.
>It's old technology that has been around for a long time. There's nothing unique or special about it
<sigh>
I don't know how on earth can people be so confidently wrong, with almost religious fervor backing it up. It's not morally superior to be ignorant. Have you even read the post to the end ?
Blockchains do solve a well known problem in distributed systems in a novel way. The main novelty is PoW consensus, a probabilistic equivalent to an Atomic Broadcast algorithm [https://en.wikipedia.org/wiki/Atomic_broadcast] which ensures that a distributed network of computers all agree on the order of the same set of messages. The protocol uses bits and pieces of ideas that were invented in the 90s (Hash pointer data structures and the idea of PoW itself), but assembles them brilliantly into a novel whole that solves an extremly difficult and decades-old theoritical problem in way unheard of before.
You can talk to the moon and back about how it's enviromentally wasteful or doesn't scale or not a currency or an attractive tool for scammers or etc etc etc..., but if you're unwilling to even understand the raw, neutral techonology it is built on, well, here goes all credibility of all your other non-obvious claims.
I'm experienced enough to read what papers and proofs have been published, have been a programmer for longer than not, but don't take my word for it: https://www.youtube.com/watch?v=J9nv0Ol-R5Q
So they found one way to prevent Sybil attacks that has been a well-known problem. Big deal.
Update
A "blockchain" is not a novel concept. The PoW system used is one way to prevent Sybil attacks when distributing work among untrusted peers, and that's it. Novel, neat, but useless.
If cryptocurrencies needed defending it's because they're a solution in search of a problem. All of the problems they've found so far appeal to conspiracy theorists: people who don't trust banks, government, and all kinds of things. In the mean time the people who've benefited the most have left thousands of people bereft of their life savings and ruined their lives.
My favourite right now are all the scammers who've turned around and stopped ripping off banks and old people and started targeting people who buy NFTs and adverise it on their socials. It'd be freaking hilarious to watch unfold if so many people weren't getting burned in the process.
I do find at least amusing to point out you started this thread with a comment that adamantly stated that "There's nothing unique or special about it [blockchains]"
Only to immediately follow it up by conceding your main point
> "he PoW system used is one way to prevent Sybil attacks when distributing work among untrusted peers, and that's it. Novel, neat, but useless"
Ok, so you shifted the goal post from "there's nothing special about it" to "being novel and neat is insufficient for being 'special'". Whatever special means here.
The weirdest part is that your convictions (and concessions) are based on the Bitcoin whitepaper, which is quite literally the oldest part of modern day blockchains/cryptocurrencies.
Nakamoto style PoW consensus and the UTXO model bitcoin uses - never mind being very much novel and "special" - is the bedrock of the past 13 years of distributed systems and cryptographic research.
I'm more than happy to walk you through the landscape in question and the novel, neat, and useful things therein, but you seem quite content in your veil of ignorance. Feel free to prove me wrong.
> I do find at least amusing to point out you started this thread with a comment that adamantly stated that "There's nothing unique or special about it [blockchains]"
> Only to immediately follow it up by conceding your main point > "he PoW system used is one way to prevent Sybil attacks when distributing work among untrusted peers, and that's it. Novel, neat, but useless"
I don't see any goalpost moving. PoW is not blockchain.
PoW precedes bitcoin but was never used as a distributed consensus algorithm before it, blockchain precedes bitcoin but was never used as a distributed data structure before it, this is all acknowledged in my original comment. Do you argue that innovations composed of several ideas are exactly as novel as those ideas themselves? that would lead you to believe that there is no innovation at all happening in computers and computer science since the 1980s. Neural Networks were invented and reinvented several times since the 1940s, is GPT3 just a boring exercise in implementing common knowledge in your view?
The person I replied to means by the 'it' that they see no novel unique thing about the bitcoin system itself, or perhaps any arbitary cryptocurrency system in general. It's reasonable to assume that in a discussion titled "In defence of cryptocurrency", saying "it" without qualification references the main thing everyone is talking about, not any single part or sub-idea.
But the brilliance of bitcoin is exactly how it merged 2 completely different ideas to obtain a breathtakingly novel 3rd idea that is much more valuable than the sum of its constituents. A centralized blockchain gives you exactly as much trust in its contents as the amount you're willing to put in whoever holds the root hash pointer, a PoW posting/updating algorithm gives you trust that writes by anonymous nodes probably cost that node some amount of computational work (as much trust as the underlying work function has anyway).
On the face of it, those previous 2 things have nothing to do with each other, none of them references (even implicitly) the other in any interesting way. It takes intelligence to look at those 2 things and imagine a distributed append-only database with untrusted unnamed peers, and then come up with the all the rest of details and rules that make it work, and then implement all of this in a (relatively) bug-free open source real system. To the extent that any of this seems obvious or inevitable in retrospect, it's all the more evidence for how genius it is.
It doesn't matter a single gram that the technology later attracted scammers, radicals, and con men who think it's a silver bullet for solving any problem, I can say just as much about OOP. And yet nobody disputes the genius of Alan Kay and the novelty of Smalltalk.
The reason I don't think there's anything genius about cryptocurrency as a technology is because it's not impressive. It's been more than 13 years or so now and wow, PoW managed to do exactly what we said it would: burn a ton of energy on useless work in order to prevent Sybil attacks.
PoS is also really stupid.
Cryptocurrency was cute and easy to ignore when it was a bunch of libertarian crypto hackers messing around in their bedrooms and writing long, naive forum posts about how they were going to replace banking and form a new world order. They made themselves sound like conspiracy crack pots without any help from critics.
But the technology was built and designed by people with dangerous political beliefs and poor understanding of economics. And whether they were naive and had good intentions in the beginning matters little now that it has been completely co-opted by conspiracy theorists and fascists.
They're trying to convince senators to pass bills that would regulate cryptocurrency by the CFTC and not the SEC. They are undermining every possible avenue to regulating cryptocurrencies, exchanges, DAOs and all of the systems built on this technology.
They're doing it because they're making too much money ripping off regular people, retail investors, etc and right now there are few consequences to doing so. The people making money off of cryptocurrencies are suckering people into departing with their life savings, leaving piles of e-waste and new coal plants in the global south, and are generally not interested in helping anyone but themselves. They literally do not give one single ounce for any Joe-Bitcoin user out there. As long as there are enough new people coming in so they can cash out they're happy to say anything.
This is the world that cryptocurrency people want. Small government, no regulation, no sanctions, gold-standard deflationary "money", untraceability, etc.
Regular people don't benefit from this. They benefit from the existing banking and legal system that put limits on what is acceptable to protect them and their businesses from fraud and crime.
There's nothing to defend. Cryptocurrency has spoken for itself. It's not genius magical technology that's going to usher in a new age of peace and prosperity. It's a community run like a conspiracy convention where any crack pot can come in and share their theories about the evils of governments and the global banking system coming for you. It's garbage technolgy promoted by terrible people who want to extract wealth from poor people, commit crimes, and not be subject to regulation by governments.
I find video games to be quite boring and useless. But somehow my opinion on the value of entertainment is ignored, and all the energy used on video games is fine.
> This is dishonest nonsense: estimates hold that at east 60% of mining energy consumption still comes from fossil sources.
Ah so that number keeps going down! It's nice that you all hold Bitcoin/Proof of Work to such high standards that it cleans itself up so fast. I really doubt any other industry can do that or has such great metrics, so keep up the great work everyone.
I was waiting for this comment. I was going to preemptively write the acknowledgment and rebuttal to this in the earlier post but I didn't want to be accused of posting a "strawman argument", by different people, or maybe the same people that would chose to pretend they weren't going to say exactly what you did.
Basically, the idea of "zero-sum energy" is incorrect. So the disdain for Bitcoin/Proof-of-work using any energy source is misplaced. There is plenty of energy currently out there, currently being wasted for decades, that would cost more to store, and cost more to transport. While proof-of-work can (and does) use it directly on the spot. These are often remote, low infrastructure, areas and so unlike other computationally intensive things, such as a data center, Proof-of-work requires very little bandwidth and doesn't even need a steady low-latency internet connection, so it works well. And so far, no other use case has been able to do this - or form the partnerships with the site owners to do this.
> There is plenty of energy currently out there, currently being wasted for decades, that would cost more to store, and cost more to transport. (...) While proof-of-work can (and does) use it directly on the spot. These are often remote, low infrastructure, areas and so unlike other computationally intensive things, such as a data center
this remain almost (or completely) theoretical, vast majority of POW wastes perfectly fine energy displacing productive use
it's not theoretical and I expect it to also become a larger percentage or the network over the next few years.
it occurs mostly for economic reasons, it is somewhat accelerated by the common criticism but ironically mostly irrelevant while getting to the same outcome either way
grid-reliant proof of work is probably going to get deprecated. (remote sites typically can connect to a grid to sell their own excess energy though, they still wouldn't be reliant. when the state will pay more that day than what the operator will make mining, they just turn off the miners and sell that energy that day, but won't draw from the grid themselves. from the site operator, these are all just logical verticals that move towards lowered environmental impact)
> Can you gave examples of PoW using energy that would be wasted otherwise and is not something like reactivation of shut down fossil fuel power plants?
Bitcoin mining helps reduce natural gas flaring. Energy that would otherwise be wasted.[1]
Your next rebuttal will be that this simply incentivizes fossil fuels to be used for longer than would have been the case without Bitcoin mining.
My answer to that will be that fossil fuels will be with us for a long time still, flaring is currently happening whether you like it or not, and this is a way to reduce the environmental cost of flaring.
There are a lot of miners in Texas where occasionally the price of electricity goes negative because wind power exceeds demand. That's a rare scenario though, so the other 95% of the time miners are competing with consumers to buy electricity.
Here is an example where you can read between the lines. The government of Texas is forcing approval for miners to connect to their (shaky mismanaged) grid at all! The article also details how fast its growing in Texas regardless.
Combine those two sentences and you can deduce that that many miners are not connected to the grid and don't need to.
The energy sources being used in Texas are flare gas sites that were billowing many gasses into the atmosphere for decades. The miners are instead separate organizations partnered with the site operator that use their own capital to install generators with catalytic converters and use the energy on the spot. This reduces emissions by over 60% by one metric (I'll try to find that source again, I was surprised it was so only 60%)
A couple things to note. We started this thread talking about how now only 60% of the bitcoin network uses fossil fuel sources. What I described above is a fossil fuel source, like how Electric Vehicles get their power from fossil fuel sources, with a further similarity being that both things reduce emissions in other ways. This means that 40% of the bitcoin network and proof of work industry is not fossil fuel, while some growing portion of the 60% is fossil fuel while still reducing emissions. Its just much more nuanced, the ideal you are asking for is reducing emissions while having a fossil fuel source while not taking away from another use case while not being connected to the grid. Its multidimensional and overlaps on several categories.
Secondly, the flare gas industry also has governmental pressure in Texas, as they cannot add more stacks due to state regulations. But in reality its way worse than that, because the texas energy regulator is a captured entity for that industry, despite the law saying "no increasing emissions from flare gas sites", there is an exception rubber stampable by the regulator, and that exception is basically the rule. Texas has not been able to reach its sustainability promises and goals. Proof of Work mining has been a solution for the sites and the state, and this is politically favorable as the governor and regulator do get detailed analysis to understand how this helps their sustainability situation while not alienating their political party and constituents. (aka, an economical sustainability solution is always OK with Republicans, the economic solution has just been elusive, until the bitcoin miners showed up)
Thirdly, despite this symbiosis, you should be thrilled to know that this pretty much prevents old fossil fuel sites from restarting specifically for bitcoin mining. But we are 100 years into the oil and gas exploration and this is likely not stopping. Bitcoin mining is currently a sideshow in comparison, and is just small enough to be easy enough to try and hate because we are all powerless against "big oil" and have been better off just accepting that its there. My main point here is that the headlines about "coal mine restarted exclusively to mine bitcoin" are egregious outliers that don't reflect whats going on at all. This is kind of intentional, not suggesting a conspiracy, but one way to dissect these headlines is to understand that its state-by-state. New York has a completely different grid style, different geography, and different issues with Proof of Work load. Headlines out of New York (where the coal reactivation plan was by an entrepreneur there, alongside some other negative headlines were) need to be seen as New York specific problems, and not "this validates my perspective against Proof of Work" problems. Its impossible for it to be otherwise, right now, given how energy is set up in this country. The intentional nature of this negative perspective largely comes from the miners themselves: They don't want people to compete with them so its better that nobody knows whats really going on, even if that means the public gravitates to these wildly negative ideas of reality. There is very little publicly available information about these non-grid connected flare gas miners, because they aren't publicly traded. The publicly traded ones so far are doing something else, or simply are grid connected. But there are enough hints in that CBS article about organizations you can look into to find more about whats going on, in Texas.
The same thing is playing out in other Midwestern states, and other areas of North America.
> it argues that the entire technology field is worthless and cannot be used for any practical purpose
Which I concur with. Cryptocoins are worthless, the idea Bitcoin has a market cap of $5-6 hundred billion is absurd, and maybe the increasing fed funds rate etc. will pop this speculative bubble more than it already has (Bitcoin had the even more absurd market cap of $1 trillion toward the end of last year).
Why is a Bitcoin worth anything? I know why my M1 Mac is worth something, I know why a box of raisins is worth something, I know why a bar of gold is worth something. I see no worth in a Bitcoin. I ask why it has any worth and the bag holders cast around looking for an equivalent, and only seem to find that dollars have been unmoored from value for half a century and the response is it's like the dollar (of course the dollar is implicitly, not explicitly like before 1971, backed by tens of thousands of tons of bullion gold among other things, but that's another tangent...)
Well your Mac is worth ‘something’ because of what people are willing to pay for it. It would be worthless to certain people, just as you find bitcoin worthless. What’s the difference?
No, the Mac is worth something in and of itself. It is a tool of productivity, entertainment, education, creation, etc. And, failing all of that, it's valuable for its parts.
A bitcoin is an ID number pointing to pretend money. It has zero intrinsic value.
Productivity, entertainment, education, and creation are all subjective, just like the value of an entry in a ledger.
I could say "I don't use Macs because I find I can't be productive with them." That's a subjective statement.
Or I could say "I don't find it entertaining to sit in front of a Mac," or "I don't learn anything when I use a Mac," "I can't create anything valuable using a Mac." None of the properties you listed are intrinsic properties of the Mac, they're all a function of the Mac's utility to certain people in certain situations.
Perhaps I'm Amish. Or perhaps I don't have an internet connection. Or I am old and blind and don't have a friend to teach me to use a screen reader. The Mac would be valueless to me.
So, the Mac's value is derived solely from its utility to a certain group of people. It lets that group of people perform tasks that they couldn't perform (or would perform less efficiently) without it. That's the same way Bitcoin's value is derived.
> pretend money
All money is pretend.
> It has zero intrinsic value.
All money has zero intrinsic value. Extrinsic value is still value.
Value is subjective in many cases, yes, but there is still intrinsic value in the device itself, if we have to boil it down. You missed that bit - the intrinsic part is literally the metals of which the device is made. Even failing that, it's useful as a weighted object. You can get down to the nuts and bolts of a thing with intrinsic value, such that even in the vent that society collapses and there's no coordinated economy to speak of, there is still SOMETHING for which the thing/service can be used. Cryptocurrencies literally stop existing in such an event, and become entirely worthless in even less catastrophic situations.
Money is an agreed upon tool for exchanging items/services of value - but it also a store of value, because it retains at least a semblance of stability. Cryptocurrencies are... well, not currencies, for starters, but they're also simply a proxy for "real" money (ie: fiat).
Where cryptocurrencies entirely fall apart is when the realization hits that they all fall into the greater fool category - once you run out of new marks, the scheme collapses, and all the money - note actual currency - ends up in the hands of a few early adopters and a couple extra lucky folks who timed it right. Negative sum games are not a good thing to prop up.
I'm not going to argue with you about how a Macbook is valuable to melt down, or has intrinsic value as a paperweight. Frankly I think that line of thinking is a dead-end for insight.
I also don't believe it's helpful to ponder the value of objects in the context of societal collapse. If that's your definition of intrinsic value, I don't think it's useful or practical.
All money falls into the greater fool category. The difference is that fiat money is not opt-in. It too is held mostly people who adopted earlier than you and lucky folks. Millennials are over 20% more likely to cry when trying to buy a home than the general population.[1]
> Negative sum games are not a good thing to prop up.
Your logic is circular - crypto has no value, therefore it's not useful, therefore it's a negative sum game, therefore it has no value.
You could just as easily say the opposite. People perceive crypto to have value, therefore due to its unique storage/transfer properties it has usefulness or extrinsic value, therefore it provides utility and is positive sum, therefore it has value.
I mean, sure, if you'd like to ignore the entire point of inherent or intrinsic value, then... go for it? Weird flex, but sure.
And no, it's not circular - "negative sum game" is literally baked into the concept of a purely speculative unbacked "asset". More money has to go in than can possibly come out, and there's precisely zilch to show for it.
Any place that accepts crypto is simply immediately selling it for fiat, and making the customer pay more than they otherwise would in fees and headache.
Anyway, it's fun to be obtuse, I know, but you're pushing the limits here.
> "negative sum game" is literally baked into the concept of a purely speculative unbacked "asset"
The dollar is also a negative sum game, a purely speculative unbacked "asset".
More effort has to go into keeping track of it than can possibly come out.
> Any place that accepts crypto is simply immediately selling it for fiat, and making the customer pay more than they otherwise would in fees and headache.
Crypto payment processor fees are usually about 1%, which is less than half of the typical credit card processor fee. As for "headache", you'll have to elaborate on that.
Well, don't just sit there and hand-wave. I want to hear why you believe non-state-backed currencies categorically fall into the greater fool theory, but state-backed currencies categorically don't.
Bitcoin is used by people - for example in countries with capital controls or hyperinflation. It is also legal tender in El Salvador.
In any case your argument is a bit silly? There is an infamous Italian artist who sold tins of his own shit [1]. Would you like to argue that these tins are worth ‘something’ because I can empty the shit out and reuse the tin? I’ll take the bitcoin thanks.
I think this is arguing that reversibility is not antithetical to permissionless blockchains, because reversibility can be implemented on top of permissionless blockchains.
But that doesn't answer the critique -- the critique is that most real world systems do need trusted parties, and if you build a system of trusted parties on top of a permissionless blockchain, then you could have saved a lot of complexity, risk, and proof-of-economic-waste burn by building on top of a permissioned distributed ledger instead. Reversibility is one example of a design requirement that undoes the claimed advantages of permissionless blockchains that are meant to justify their inherent downsides.