A faster, more efficient cryptocurrency
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news.mit.edu
‘Would you be happy if the crypto-utopia you bring up happens in the next 10 years, and all value is stored/transacted through a cryptocurrency, but it was a coin that you do not possess now, nor could you transfer any of you current currencies into it?’
Say tomorrow someone releases the one true coin, but no one notices. All other cryptocurrencies drop to zero value, then a crypto miracle occurs - the one true coin is uncovered and almost overnight becomes the defacto monetary standard. Would crypto fans be satisfied?
This is a long way of asking: do you want cryptocurrency to succeed if you knew that you could not profit from it doing so?
My family and friends said i was stupid, utopist, being conned, wasting my time, and so lany things.
Btc was banana money at first, and only people believing it would be a great thing as a concept made it work. We didn't expect to make banks, it was a happy side effect of a mad naive bet.
All great things start like that. Comics are now the thing, but 20 years ago were still for pationate nerds.
"But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright Brothers. But they also laughed at Bozo the Clown."
-- Carl Sagan
Of course, if you don't ever try it, you can never be right for any reasons.
Bitcoin is IMO likely somewhere in between. It kickstarted a new concept in IT but money is a really simple (although powerful) usecase. I'm more interested what will be done with the concept in the future.
That's really rude.
Generally though, merchants wouldn't bother accepting it. Alongside the fees and whatnot, adoption is too low, fees are too high, time to confirm is too high, and it can complicate some legal stuff (like issuing VAT invoices).
Despite being a dominant force in film, they're selling poorly today.
That is a brilliant question!
Instead of all the endless bickering between crypto-fans and -haters reaching from technology to fiscal policy to society, it reduces the conflict to one simple test, as a sort of precondition.
Anecdata, but just going through my set of acquaintances, personal profit was always a factor. And I never even thought to question it. In hindsight, however, it seems (1) such an obvious thing to do, and (2) makes it clear to me that my acquaintances probably wouldn't give a damn about crypto if there wasn't a chance to profit from it.
I mean, the only reason Bitcoin went mainstream in the first place is not because of the technology (which existed for a decade), but because there was a extreme bubble (again) and mainstream people wanted to get rich quick.
I'm talking just about the positive potential of Bitcoin as a technology. There are many downsides and the current landscape of cryptocurrencies is not so great.
My vision is that crypto is going to be used like credit/debit cards, as a way to use money digitally, but it will backed against fiat.
But the problem is not the technology (it is there and exists for decades), but the laws. Better concentrate on that problem.
For example: https://www.coindesk.com/crypto-gaza-west-bank-bitcoin-pales...
* To those people who say, "You can't compare crypto to a company because companies pay dividends," that is specifically why I chose Amazon as an example, a stock that does not pay dividends.
As an example of a tech, if someone asked me would you want self driving cars to succeed if you could not profit off of them, I would say that's a resounding success. A lot of people are excited about this tech because of the improvement in their daily lives, not because of a profit motive. Compare that to crypto
1) I would want Amazon-like businesses to succeed -- in the sense of "someone who finds a sustainable way cut the fat out of retailing" -- even if I could not profit as a shareholder. But I still think I would benefit (as a buyer) from that success.
2) I would want decentralized, arbitrary-money-printing-proof cryptocurrencies like Bitcoin to exist as a shield against governments that inflate away their money (like Venezuela or Zimbabwe) or abuse their central bank status for bailouts (in the first world), even if I could not profit as a holder (sorry, HODLer) of the currency. But I still think I would personally benefit as a prudent saver and (non-politically-connected) investor.
I want a cheap, fast, decentralized solution for token ownership with a great user experience. I want to build back-end solutions for crypto-tokens representing digital collectables, in-game items, etc.
I need a critical mass of users before these services start to become viable as a business model. Thus I need a cryptocurrency for tokens to succeed in a meaningful way. And I want this regardless of whether I own the native token of this network.
It's interesting how something which was built on the idea of decentralization by design has given way to a clear power structure, where those who have the sway to control the fate of the technology have largely used it to pursue their own personal enrichment over the health and success of the system as a whole.
To me it's evidence that some form of governance is required to build something which can actually serve the greater good. I also would like to see a stateless currency work out, but there are clearly still quite a few problems to be solved before that will even seem like a possibility.
Care to elaborate? Some examples?
For example, if there are problems with scams or whatever (e.g. impure gold scams, or cryptocurrency manipulation), people may choose non-coercive governance, like banks (e.g. through something like GNU Taler with a bank-backed currency). You could do this with any currency you choose, so which currency you use has little impact on the structure of government and how it interacts with the population, provided the government stays out of it. Because of this, fiat and resource-based currencies are equivalently acceptable for libertarianism.
So yeah, maybe cryptocurrency is tangentially related to libertarianism in that many libertarians are interested in them as an alternative to central, coercive banking, but that's about where the relationship ends. Libertarianism doesn't care if you have governance, as long as that governance doesn't use force.
And since cryptocurrencies aren't really used for real transactions, we can't really see how they would fare in a competitive currency market.
You say this like it's a fact but I feel like it's the opposite. There aren't many compelling examples of this. And to the extent that there are, they exist in a competitive market and their fate is determined by users and investors, who weigh the cost of the greed vs the benefit of the technology and reward/penalize accordingly.
In that world, there would also be nothing to stop anyone else from just taking your money by force and without any consequences.
The loudest voices against government regulation of finance usually belong to those with the least understanding of it. Most of the regulation is just there to protect market participants.
there are going to be consequences. It's just that they will be enforced by smart contracts instead of governments..
if that 's the only problem with cryptocurrencies, it can easily be solved with insurance
While I have invested in crypto and believe it has great potential, one of its touted benefits by its supporters is also one of its biggest pitfalls, namely that its money supply is predetermined. The inability to actively manage a money supply given exogenous shocks to the economy is a big problem.
Any supply of money will do, the idea that money should increase in supply along with population growth (or some other arbitrary metric) otherwise we’ll permanently live in a deflationary disaster is an imagined monster — we live in the here and now, therefore people have to spend some amount of money to live (food, housing, entertainment, etc) regardless of whether they perceive the purchasing power of money to increase in the future. By centrally planning (and thus inflating) the amount of money in circulation during financial crises the only thing that is accomplished is a re-inflation of the bubble — essentially they’re sowing the seeds of destruction again, causing the next bubble in an attempt to cure the last one.
Please read this explanation of the financial crisis, I’d be happy to comment further if you have specific critiques on this article (and no I didn’t write it):
https://www.unqualified-reservations.org/2008/10/misesian-ex...
With the latter you're constantly guessing and tweaking the model and roughly every 10 years there's a crash and the economists say okay, NOW we have it perfect and we'll never get it wrong again.
Why do you need an unlimited money supply? The only thing causing these shocks is that the economy is doing whatever it wants and then the economic model collapses.
Have we seen this to be a problem within the context of Bitcoin?
Indeed. And not just because they're absolutely terrible at it: giving control over money creation to a government is like giving a drug addict the keys to the heroin factory.
This is what traditionally legal system with the power of violence used to deal with before. Now we see it implemented as a code. This part is more exciting to me than trying to sidestep whatever misguided government (not just US) rules and actions are.
EDIT: Perhaps proof of work based on burning energy, which is expensive and tends to bring centralized parties, is not the best way to ensure rules are enforced, but the fact the whole thing is open source is great in my opinion.
As far as I can see, there's no significant incentive to mine other than money, so miners want money, so you can persuade them with money.
The "consensus" is fundamentally an auction.
Cryptocurrency doesn't do this.
Payments are only relative small function of financial sector. Much more important is to act in credit markets, i.e take deposits and issue loans. How did you think that crypto removes need for fees (interest rate) and trust in those applications?
If cryptocurrencies ever become mainstream, banking services will be built on top of them, just as they were originally built on top of gold.
The only thing I can think of that cryptos let you do cheaper than banks is rapid, relatively frictionless funds transfer, so I’ll admit their utility there. But other than that, what banking services do cryptos give you?
Because your alternative is to trust the crypto infrastructure, which is far less trustworthy.
Most cryptocurrency fans seem to be optimistic investors looking to join in on the massive returns seen by investors in 2016-2017. Most of them care more for generating 'hype' and seeing an increase in the value of the coin they hold, just so they can dump their holdings later. I don't think they'd be too interested in a coin that inflated in value that they didn't hold (they'd probably instead promote something they did hold). Most cryptocurrency fans do not hold one particular coin, and generally change which coin they advocate for pretty often.
Cryptocurrency communities are generally pretty toxic and non-constructive environments. I've been part of a couple, and I've noticed multiple times a massive decline in the quality of the community (and, sometimes, in development as well) as the cryptocurrency got more popular (and more people joined the community).
Plurality is the name of the game. History has endless examples. Yes nothing would last but...the better monies would move to a better monies. It's called competition. There is very little competition when it comes to monetary policies. Crypto will foster more of it. It can get messy but hopefully it won't get deadly.
Those of us who have been here since the beginning just want cryptocurrency to succeed and flourish and fulfill its roles, and we already know Bitcoin won't be the answer so we're all waiting on The One True Coin.
The reason is that I think that while governments can be better at monetary policy, they need competition to keep them in check. Other currencies technically provide that competition, but they can be suppressed via legislation in a given jurisdiction, and this is, in fact, commonly done precisely where such competition would have practical sense (e.g. countries with hyperinflation often try to regulate and even outright ban currency exchange; or the various historical bans on private ownership of bullion gold in many countries).
Bitcoin is always there, available to anyone who has Internet access and can get past "great firewalls" (and when people's money are at stake, they are surprisingly good at learning such things). Consequently, the government can only do so much to its own money before it starts losing that competition - Venezuela is one ongoing example.
I guess I put too much faith in law enforcement.
Personally the computational overhead makes me weep a fair amount; we're simultaneously trying to save the planet while making our payment methods several orders of magnitude more expensive in terms of power. But if there was a "coin" that was comparative in terms of energy expenditure with what currently exists then I'd be more than happy to "lose" my wealth in other coins. That is a very low price to pay for such a system.
and yes i think most cryptocoin loonies want any one of them to succeed , the potential is so crazy high, that wishing otherwise would be foolish
Anyway, I would love cryptocurrency to succeed, and in an efficient manner (say we get all the problems worked out of proof of stake).
So, anecdote: I live in Argentina, work for an UK based company. been doing that for the last 10 years.
Before I could trade bitcoin in an almost frictionless way (I.e., before I discovered Localbitcoin.com) my routine was to go to the ATM after the payment got into my european bank account, do a few extracts per day, rinse and repeat until I got all the money I needed.
Rate per extraction was around a few euros if I didn't hit minimum, to a certain % (That at times could be 5%, but can't quite recall as last time was 6 or so years ago). Minimum depended on the current economic situation of my country at the time (I suppose I don't need to explain that).
So, why not wire the money to your local bank account, you might ask?
Well, last time I checked (I moved a year ago to Buenos Aires and haven't checked how it goes here because I don't need to) the process for wiring money to my local bank account was as follows:
(Argentina is not inserted into the international SWIFT system !!!) I had to wire the money to a specific bank account in the US, that belonges normally to the bank I was checking, but couldn't really say. I had to wire the money there from my european bank account with certain conditions, so it could be recognizable that the money belonged to me.
Then, after some time (Could be as short as 2 weeks, but no bank would assure it would work like that every time, and wait times of 1 month or more were totally possible, considering how the Argetinian banks operate, i.e., mob-like) I would get my money _in the local currency_ with the corresponding loss due to exchange rates. AND (that's kind a really big AND, I need bigger caps) the "charge" for the operation was around 100 bucks. PER OPERATION.
"Thats too much" I said. "Yeah, people tend to group operations in half years so transfer is justified" was the answer I got.
I tested this at 3 different banks, got the same reply in all 3. Seriously.
So, now I trade bitcoin. I buy them in the UK, transfer them to my wallet, and use a broker to get the money in my account. The broker takes 2% on all operations, plus their rate is around 2% below of the current BTC price, but I don't mind. At least I'm getting ripped by somebody I want to get ripped by.
And then we have the speed issue: Since Segwit, it can take as little as half an hour to do the whole operation.
2 months ago I woke up with the money in my EU bank account (I'm not an early raiser, may I say), and by noon I had completed all operations and was just waiting for the broker to deposit the money in my local bank account.
BTW, the reason for me using a broker, is that minimum operation volume in LocalBTC is 0.2 BTC, and with the price hike at the middle of 2017 that became a problem; that, plus mostly everybody in Argentina that deals in BTC are fucking histerical trying to do a quick buck, so they start getting nervous if they don't close the operation in under 30 minutes.
And just in case you want to know how the banks operate here, another anecdote:
The dollar fucking doubled it's rate between May and September last year. The measure the gobernment used to stop the rate rise was to take the credit rate to above 70% (Yes, that's a seven followed by a zero).
Then, a lot of people here manage their finances both with credit and debit cards, because it's a lot easier (Unless you want to be carrying a lot of bills in your pockets).
So, what do banks do? They fuck merchants over, by delaying as much as they can transferring the money, because they put that in the financial market (We're speaking in the weeks here, above 3 of them). Even with the fines and shit, they are making shitloads of money. So, that mean that merchants get fucked over twice: they don't get the money in time, and when they get it prices might have changed a lot, so in a lot of cases they end up losing money.
Regarding the questions re:cryptocurrency I'm here for a long time, not a fun time. I mean, I have no problem if I have some fun with it, but it's not the end goal. And it's going to be fun if crypto takes off, as countries / governments are going to have to deal with the implied loss of power.
By the way if you are buying BTC, Kraken is much cheaper than 2% (more like 0.2%) and I think they take GBP.
It does sound like the banks are iffy.
An overnight crypto miracle won't happen, by the way. Money is too important and requires too much trust for an overnight success to occur.
Every year that the BTC network runs without a major exploit, is another year of confidence in the network protocol's security. Unlike some software categories that are prone to rapid disruption, money is not one of those things.
Disruption occurs a lot slower for very important reasons. People have to trust in a crypto currency in order to store value in it and exchange value for it. That takes time, to test in production if any major exploits exist.
It's not trivial what Bitcoin has accomplished this far.
You seem to be assuming that anyone interested in crypto is in it for the money.
I assure you, that's not the case. To me, getting the money supply out of the clutches of governments is the most important aspect of crypto-currencies.
To answer your question: Which crypto wins and how much it'll be worth are the last of my concern, as I will profit, along with all of society, from getting the govt to surrender management of something they're basically terrible at.
Deflationary tokens are not much good as a currency but they are good as a Ponzi scheme.
This is what most "blockchain" enthusiasts get wrong. They think it is just about technology, and thus, they can come up with "a better bitcoin."
They're missing that the predetermined monetary policy is the key innovation of Bitcoin, and that by creating a new "blockchain" which prints new money, they are shooting themselves in the foot, because they can't ever be "a superior bitcoin" when they have inflation as part of the parcel.
A free market does not really care about whether some people have the opinion that deflation is bad. At the end of the day, nobody can change Bitcoin's monetary policy, and it will be left to the free market to decide whether or not they are going to put their money in this, or whether they're going to bet on inflation.
There was a brief moment where companies began paying employees in crypto.
If the cryptocurrency was at least somewhat open and efficient, then I would be extremely happy. If it was more like a payment layer that only a few large banks could use, I would be still be happy, but much less so.
$100: Absolutely.
$1000: Tough, but I'd do it if it meant the promised change to financial services
$10000: Unlikely, I'd rather keep my non-perfect coins
$100000: No way.
However if there is a slight chance I might profit from it, I'll gladly take those odds.
Imagine a currency that everyone is born with a certain amount of, with the only price of admission your ability to prove your identity. Suddenly, we have solved the problem of proof of work for allowing this to be a distributed ledger since the trust can be based on reputation. Also, we can impose limits such as perhaps a logarithmic scale of wealth interpretation, where ten million dollars isn't all that much more than one million, if it's all in the hands of one person.
The digital age could be an age of fairness, if we choose to use these tools to design a fair game instead of an unfair one. Note that I mean "fair" not in the sense of two people starting out exactly equal, but where the winner can use their advantage to win more over time until the "match" is over, but one that tends towards a fairness equilibrium, where the advantages gained by one person or group over others are minimized over time or at extreme scales.
This is how I write when I have gotten less than 4 hours of sleep, but hey, I can dream. :)
This means a new one popping up every month... Which in turn means that they are useless as currency.
Money isn't effectively and fairly distributed and it's obviously not a pipe dream.
The internet is a technical embodiment of the First Amendment (freedom of speech, freedom of press, freedom of religion, right of peaceable assembly, right to complain about the government).
Bitcoin is a technical embodiment of some of the Fifth Amendment (due process -- protection against deprivation of property, and even life/liberty if you accept the unremarkable proposition that it's hard to live freely if you can't buy anything).
Having these technical protections in place are important regardless of their impact on or benefit to any one person.
How is it in any way different than having money in your bank account? If the government wants to, they can decide to take all your money from all your account, but they can also decide to throw you in jail until you hand over the keys to your Bitcoins. In the end there is no difference.
There are a lot of questions and speculation here about this paper and Algorand. I would be happy to try an answer them to your satisfaction. Some context may be helpful first, though. This paper is an innovation about one aspect of our technology. Algorand has a very fast consensus mechanism and can add blocks as quickly as the network can deliver them. We become a victim of our success. The blockchain will grow very rapidly. A terabyte a month is possible. The storage issue associated with our performance can quickly become an issue. The Vault paper is focused on solving this and other storage scaling problems.
The Algorand pure proof-of-stake blockchain and associated cryptocurrency has many novel innovations aside from Vault. It possesses security and scalability properties beyond what any other blockchain technology allows while still being completely decentralized. Our website, algorand.com, and whitepaper are great places to start to learn more.
If you learn best from videos then I suggest you watch Turing award winner and cryptographic pioneer, Silvio Micali, talk about Algorand: https://youtu.be/NykZ-ZSKkxM. He is a captivating speaker and the founder of Algorand.
Algorand's consensus per the YT video you linked is step 1. 1 user is randomly chosen to propagate a new block (can user make up a fake block? let's assume not) step 2. 1000 users randomly selected vote on that block and if they agree, it's DONE. (what if 1000 users are in the same country/company, etc. how do you prevent collusion on fake blocks)
This is hilarious. So the only thing you rely on for consensus is 1001 random 'users' input weighted by stake? What happens when your network is bombed with 1000tps and you need to contact 1001 staked users for every block? There are also vulnerabilities such as the recent "fake stake" bug that affect pure POS coins which I won't go into.
Now about the article referencing Vault. I believe NANO came up with this bootstrapping feature:
> Each user account only ever stores the balances of the accounts in its assigned shard
Yes they are replicating NANO's block lattice structure using "shards" with an insecure way of trusting any future chain that includes your old tx's but gives no guarantee on the state of any other account. As I understand it, I can be fed a fake chain while bootstrapping and accept phony funds as long as my balance shows up, right? ...Assuming this feature worked without any security holes, what's to stop other coins from implementing it? You don't need an entire cryptocurrency for it, it's just a feature and if it worked everyone would be using it. The sharding problem has not yet been solved and there are coins like Ethereum that are trying really hard to make it happen.
It's really sad to see this low-quality content come out of MIT. This looks like someone trying desperately to get a piece of the Crypto pie using MIT's reputation as a get rich quick scheme. Just for kicks I looked through reddit/r/cc and found only 5 dead posts mentioning Algorand with no comments on any of them. Their website makes all these claims about "pioneering a sortition algorithm" that looks "totally legit" if you ask me.
> Vault reduced the bandwidth for joining its network by 99 percent compared to Bitcoin and 90 percent compared to Ethereum, which is considered one of today’s most efficient cryptocurrencies
1) Since when are these considered efficient? I don't think anybody in the know would say this. They're the most popular, but no means the most efficient.
Bitcoin is 250GB, so 90% of that is still 25GB to join the network, which is still ahhh enormous amount. And what's the baseline for comparison here? Were all of bitcoin's transactions replayed on an Algorand test network for this comparison? Or is this a metric from some test usage? If the latter then that's a huge issue since it grows in size.
2) On top of that you're saying it could accrue a terabyte a month in data. What type of usage is this under? Is that on current bitcoin transaction levels? 2017 transaction levels? A steady state tx/s? Is a backup of this data needed or is it throwaway and summarized in the latest blocks? If it's still needed then that's a decentralization issue because not many people will be maintaining full nodes.
3) What type of specs are affected by these changes? Can you still perform atomic swaps? That's a pretty standard requirement nowadays and would hinder the Blocknet and exchange interiperability.
Ethereum is scared or that so they are implementing some hybrid form.
Bitcoin is doomed from my perspective, because of the focus on proof of work and the confirmation times. When you realize that algorand is super fast, there is no "confirmation time", and there is no waste in energy to mine, then it is hard to back up any cryptocurrency focusing on proof of work.
> Algorand has a very fast consensus mechanism and can add blocks as quickly as the network can deliver them. We become a victim of our success. The blockchain will grow very rapidly. A terabyte a month is possible. The storage issue associated with our performance can quickly become an issue. The Vault paper is focused on solving this and other storage scaling problems.
What prevents a person from using a chain like IPFS?
Ethereum Casper PoS has been under review for quite some time.
Why isn't all Bitcoin on Lightning Network?
Bitcoin could make bootstrapping faster by choosing a considered-good blockhash and balances, but AFAIU, re-verifying transactions like Bitcoin and derivatives do prevents hash collision attacks that are currently considered infeasible for SHA-256 (especially given a low block size).
There was an analysis somewhere where they calculated the cloud server instance costs of mounting a ~51% attack (which applies to PoW chains) for various blockchains.
Bitcoin is not profitable to mine in places without heavily subsidized dirty/clean energy anymore: energy and Bitcoin commodity costs and prices have intersected. They'll need any of: inexpensive clean energy, more efficient chips, higher speculative value.
Energy arbitrage (grid-scale energy storage) may be more profitable now. We need energy storage in order to reach 100% renewable energy (regardless of floundering policy support).
- it is very hard to audit the chain for bugs. If someone finds a bug to create coins through thin air you probably won't notice it.
- regulations by states is made hard. If you are required to pay taxes, and you live in a society, then these things do matter.
If you want cryptocurrencies to work, we need cryptocoins that are not encrypting transactions.
Another way to think about it: if Bitcoin somehow worked without mining, that's no reason for demand or usage of Bitcoin to go down. The value of bitcoins comes from network effects and scarcity.
But the amount of energy being used to mine bitcoin is a real problem - it's not just a technical challenge (like the problems above). This is something that literally affects every human being.
Of the 203 comments (at the time I am posting this), there are only two uses of the word "environment". One of these is about the "regulatory environment".
Let's say Bitcoin, Ethereum, or another coin achieves an economic value & level of efficiency that makes mining an accessible investment for low-income people. Instead of server farms in Iceland, mining would be done by millions of people around the world. Some of the energy used for this would be renewable - but plenty of this is going to be coming from coal. In that sense, the coin would create an economic incentive to pollute (there are plenty of these already), and there's no way to regulate that kind of decentralized network. (That's the whole point)
My favorite summary of crypto is something along the lines of: leaving your car running while it solves sudoku puzzles in exchange for drugs. The drugs part isn't as relevant anymore, but the rest is.
I'm not here with an answer. There are many problems that I think crypto can solve and I'm glad it is something on the horizon.
But we need to talk about the environment.
Bitcoin is one way to use energy. There are hundreds of thousands of other ways.
When you say Bitcoin "hurts the environment", what, concretely do you mean? Presumably, you mean it in a stronger sense than "using energy to produce food hurts the environment" or "using energy to run an ER hurts the environment".
That is, you think that relative to the benefit provided, the use of (harmful) energy to run bitcoin miners doesn't justify its environmental cost.
Which is great, but I could say the same thing of Ferraris for show-off producers in LA, or Hello Kitty backpacks.
What justifies focusing our attention on Bitcoin per se, and not those? Do you plan to publish a universal, agreed-upon list of things whose social value doesn't justify its environmental cost?
The real problem is energy users not bearing the full environmental costs of what they do.
The thing is, we have a well known solution to that: cap the total carbon emissions, or tax them in a way that reflects the harm.
Yes, Bitcoin creates an incentive to use energy. And it will be spent by miners who weigh the costs of the energy against the value of the Bitcoins produced. Like every other good on the market, it will respond to incentives created by laws.
If the damage of energy isn't priced in, then there will be too many resources spent on mining relative to the environmental cost. But this is true of every other good as well.
All Bitcoin does is amplify the problems of the existing failure to appropriately price energy. But this is true of literally every other energy-using good in existence!
There is no reason to single out Bitcoin. To blame it for environmental problems is special pleading or privileging a hypothesis.
"I don't want wiggins at my university. They cheat!"
'Well, a certain percentage of any demographic is going to ch--'
"Irrelevant! We're talking about wiggins!"
EDIT: Should probably add the disclaimer that I'm long Bitcoin.
And that's also the solution.
The reason people are interested in decentralized trust is that the existing system of centralized trust is a dumpster fire. Politicians want to use the banking system to attack their enemies, but not all politicians are good and not all of their enemies are bad, and there is a vast amount of collateral damage.
You can't get your payments processed if you're a terrorist, but also if you're suspected of terrorism without any real evidence, or suspected of political heresy without any real evidence, or suspected of supporting someone else who is suspected of political heresy without any real evidence or due process etc.
People who are afraid to reveal their identities because they have powerful adversaries are impeded from raising money for their cause, or even just making a living, and it's really not obvious that this results in less radicalization. Things that make people angry and scared generally don't.
But it's all caused by AML/KYC laws. The promise of Bitcoin is that you can't have your accounts locked out and your funds stolen because a lazy or corrupt politician in a foreign country leaned on a bank that leaned on a corporation that decided your business was worth less to them than the effort required to resist, regardless of your guilt or innocence.
So now we have a choice. Either we stop using the banking system as a tool for surveillance and political pressure, which cuts the legs off the demand for cryptocurrency, or we keep trying to do that and then all the innocent and guilty people who it was impacting get together to build a workaround, and the rules are ineffective regardless but now people burn an extra billion tons of coal.
I would expect that mining has become an arbitrage market that narrows in on the cheapest possible electricity anywhere in the world, and as such is dominated by excess "free" electricity from e.g. hydroelectric power that is generating more electricity than can be used (or transported).
I think if anything it creates an incentive to use renewable energy. If miners are able to pay less for power, they make more money. As the cost of renewables continue to drop, more miners will move to it.
You know that one of the major motivations for Proof of Stake is environmental, right? Proof of stake eliminates the energy waste problem. That is one of its major motivating factors.
The whole point of proof of stake is to avoid the energy waste that proof of work requires to secure a blockchain. It's not just a technical challenge -- it's one potential solution to very problem you're describing.
Is proof of stake actually going to work at scale? I don't know for sure, and I don't think anybody else really does -- but the point is that not only are people talking about the environment, they're actively working on solutions.
Nevertheless it is safe to assume that the energy use is significant, even at half or a tenth of Digiconomist estimates it is still quite large. It is broadly true that the energy use of Bitcoin is related to the value of Bitcoin, via the mining reward.
The arguments against the energy use that are based upon the merits of Bitcoin are not valid. If Bitcoin is useless and doomed it stands to reason that the energy consumed is a waste, but that is true of anything. To argue specifically against the energy consumption you have to make the case that it is not worth the cost even if Bitcoin is a success.
If you assume that the costs and profit for mining are more-or-less static then the mining network will use roughly the same amount of energy if Bitcoin doubles in value every reward halving. That flattens out to about a 20% increase in value every year. To accept that the energy use will continue at this rate you would have to also accept that Bitcoin will increase in value at that rate. To date Bitcoin _has_ increased in value quicker than that, which is why the energy use has grown so high. Hardly anyone would argue that the increase in value will be sustained perpetually. If just holds its value the mining reward and power consumption will reduce accordingly. If Bitcoin ends up worth pennies, the consumption will be minima.
Furthermore, Bitcoin mining adds options to _how_ electricity is generated and consumed. Being able to convert electricity into money not only acts as a stimulus for cheaper energy generation but as a motivator for building new capacity. We are already at a point where Solar and Wind are becoming the choice not only for Environmental but also Economic reasons. Any new power plant needs customers, those customers take time to appear. If a power plant sold excess generation at cost to mining facilities the investment required to build a new plant is greatly reduced. This presents the possibility of developing nations introducing power generation to areas that currently have little or none.
If Bitcoin did end up stimulating the increase of carbon neutral capacity and efficiency, then people in the future might end up making the argument that Bitcoin ended up carbon negative.
Great, put it in context then:
A. What is the total energy content of the resources consumed each year?
B. What percent of A is lost to "waste" such as powerplant and grid inefficiencies?
C. What percent of the remaining is spent on crypto?
D. What other things are consuming the same order of magnitude or higher than crypto?
E. Which energy use described in D is easiest to make more efficient without harming the purpose/quality?
Then improve #1 discovered in E until it is below #2, then start work on #2, etc.
I think you will find stuff like getting everyone to use i.reddit.com instead of reddit.com and netflix to stop their annoying auto-playing previews should come before anything to do with crypto.
Bitcoin doesn’t use energy, bitcoin is energy, or more specifically bitcoin is as much energy as people value the function and security of money.
Trying to reduce it is absolutely misguided - if you figure out a thousand times more efficient way to generate sha hashes (mine bitcoin), it won’t matter in the slightest - bitcoin mining difficulty will rise thousandfold and exactly the same amount of energy will be spent going forward.
A big part of a decentralized database's design is its protection against DDoSing. Proof of stake is very low environmental cost but you'll discover that the proof of stake networks with low fees can be DDoSed extremely cheaply.
Other networks use the networking architecture to protect against DDoSing.
> amount of energy being used to mine bitcoin is a real problem
Yes, it is. Although I'd like to say that if bitcoin energy use has a crowding-out effect, like an electric car does, then I'd favor mining bitcoin resulting in more hydropower dams being built than people doing business that can't be centralized like mining can and requiring liquid (dirty) fuels.
Datacenters as a whole can be made really efficient and are, in my opinion, a decent investment that can be repurposed better than e.g. an office building full of people doing traditional banking.
So it's not super straightforward even if on net we don't need cryptocurrency miners and I of course agree that it's bad for the environment.
One could argue that Bitcoin should reach the limit sooner, so that mining difficulty would not increase so much, but the mining incentive is mainly a bootstrapping strategy for a currency. Now that everyone is familiar with how the ecosystem works, another coin could launch that was identical in every way except a shorter period of time before all coins were mined.
Does that make it a good use of energy? That is debatable, but energy is used for all sorts of things. How much energy is spent producing weapons, bombs, tanks, etc.? How much is spent producing addictive drugs? Cigarettes? Non-recyclable plastics? How much is spent on illegal surveillance of individuals? Why is it that no one ever talks about these examples?
It is very likely that Amazon, Google, Facebook, Apple, Netflix, Microsoft, etc. each use orders of magnitude more energy than Bitcoin does yet no one ever talks about that either.
Bitcoin gets trashed because people believe that the energy used to run the Bitcoin network is wasteful, but the energy used for other things is not. I am sure that opinion is shared by the majority of folks here as well, but that is what it is. It is an opinion. Does Facebook really improve our lives in a way that can totally justify the energy needed to run it?
Bitcoin mining will accelerate environmental friendly energy production because excess energy can be converted into Bitcoin instead of going to waste. Miners who don't use excess energy will be priced out and there is plenty of excess energy around the world.
How much energy was used to establish and perpetuate the existing fiat currency infrastructure? Has any such comparative analysis been done? Without such an analysis, it seems a little premature to unilaterally declare that bitcoin is a real problem by comparison.
*Don’t have a citation but there may be some research on this being published soon, it’s an open secret in the industry.
https://hackernoon.com/the-reports-of-bitcoin-environmental-...
Personal plug: https://www.konstantinschubert.com/2018/11/28/proof-of-stake...
I used to be very skeptical of bitcoin and cryptocurrency, but I'm even more skeptical of the recent anti-crypto propaganda all over social media.
3 years ago, crypto was going to save the world. Now, we are talking about environment? What gives? What's with the relentless anti-crypto propaganda?
We all want a faster, more efficient, cheaper cryptocurrency, and those features are linked to its ecological efficiency.
Seriously?
By the way, the negative environmental impacts will be significantly reduced after ITER is ready.
Anyway - https://medium.com/coinshares/beware-of-lazy-research-c828c9...
- Attempts to side-step the law (however misguided the law is)
- Trivial to do using a typical centralized database (e.g. Federal Reserver or VISA)
- Tantamount to waiting for a greater fool to buy out the current players
The economist-in-me appreciates that non-legal activities are perfectly capable of both demanding and supporting a novel financial instrument on their own, I only exclude it from my question because it's a rather obvious application and I would like to probe beyond that.
There are a lot of people in the world that live in places where the law is far more gone than "misguided." For these people, it's not a question of "whether" to side-step the law but "how." You may not care, but they do.
It's also worth considering that crypto is effectively the greatest experiment the world has ever seen in free banking: https://en.wikipedia.org/wiki/Free_banking. Hypothetically, this could be done with paper+metal currencies, or centralized digital currencies; but for whatever reason, crypto is getting a regulatory pass where past "experiments" have been shut down hard by states who claim a monopoly on issuing currency, for better or worse.
Rather than viewing blockchains through the narrow lens of "Money 2.0", I think it's more relevant to view both money and blockchains as social technologies to solve coordination problems, and then inquire about those technologies' performance characteristics, incentives, externalities, and moral hazards. I think there's longterm potential for blockchain use cases to find traction; but at the same time, it may be that centralized solutions simply achieve superior results, in the same way that Amazon out-competes mom-and-pop retail, and Netflix out-competes buying DVDs. (The market lessons of the last twenty years seem to indicate that consumers value cost and convenience vastly more than abstract notions of freedom.)
I know of Ukrainian developers being paid in ETH for that reason.
Adult cam models in some countries are another example.
- Attempts to side-step the law (however misguided the law is)
- Trivial to do using a typical centralized database (e.g. Federal Reserver or VISA) - Tantamount to waiting for a greater fool to buy out the current players
The 3rd point is the same for any fiat currency on forex and many governments are the same as the ICO shills.
I'm not justifying them just stating that in many cases the gamble on currency is the same.
You did present a nice Strawman but I'll bite. Ok. I get asked about cryptos quite often also. So if not a digital currency like BTC then what?
Why use cash? Only criminals use cash! Really! If LE should catch you having more than x,xxx.00 in cash they should arrest you? Why? Because obviously you are trying to do something illegal. (civil forfeiture)
Trivial to do tx with 3rd parties???? What with what? PayPal? There have been no alternatives, or equivalent to cash in the electronic age to date. Including BTC. Although BTC is an attempt to provide similar means as cash (fiat) in a global digital sense.
Then again there is this which is perfectly good: https://en.wikipedia.org/wiki/Contaminated_currency
There are many LEGAL activities that people do not want to show up in a central database. For example, think of many things related to love and relationships.
"tantamount to waiting for a greater fool to buy out the current players" <= this is like investing works in general, or? ;-)
Security that no third party can just take your money anytime, without your explicit signature.
Liquidity for new tokens issued by projects / communities without great access to global markets and exchanges.
Programmable money that follows rules you can rely on when you invest in a project / deposit money into a community / donate to Haiti.
UBI on a community level funded by community members or donors
Analytics on how money is flowing around available to everyone and not just stored in a central database with information asymmetry.
These can be combined. For example Analytics can help you figure out the cost of food in your community, then vote for a level of UBI that eliminates food insecurity, and adjust this amount on a daily basis through direct democracy (Provably Random Polling.)
Intercoin’s mission is to make access to local fintech more available to local communities and online projects, without having to rely on central banks for monetary policy or the IRS for collecting taxes and being able to calculate eg the Consumer Price Index on the community level
More info at https://intercoin.org see the presentations and whitepaper.
But... it also brings financial service options to people who have no opinions or only truly awful options.
If you are a non-homeless American, you don’t need crypto. American banks are bending over backwards to serve you. But, if you are a homeless American. Or if you are one of the unbanked billions around the world. Or, if you are a Venezuelan, Nigerian, etc... then the establishment is either dismissing you or actively working to screw you.
Crypto can bring tremendous value to all of them while bringing very little to the establishment by simply acting as a PayPal alternative for the extreme poor. If it manages to survive that, it will get better and better. Eventually it will creep up to becoming useful for rich westerners.
2 - Trivial to do using a typical centralized database (e.g. Federal Reserve or VISA) -> Bitcoin, Ethereum and others can do Smart Contracts which means delayed sending, multi-sender transactions that serve as escrow and in the case of Ethereum programmable using it's own language to do any number of actions/apps. The important feature is that this is handled by the network using your own transaction, you don't have to set up the escrow through a company like VISA, Paypal, etc.
3- Tantamount to waiting for a greater fool to buy out the current players -> This is true of all CC because it's an open, yet small market. The earlier you get in, the better your outcome. However, it's not like CC's NEED to explode in price to be useful, competitive or solve a real-world problem. Getting rich is a secondary effect of having a functional CC reach adoption. Look at MemeCoins like Doge and Banano to see adoption is easier when everyone abandons the idea of getting rich off a coin.
But national currencies are getting increasingly shaky, even the USD where it appears Congress has no political will to control the US national debt and deficit, and where the GOP blows bigger deficit holes with tax cuts and the Dems are talking about MMT. Not to mention the risks to the Euro and Yuan, along with the many smaller countries with distressed currencies.
It’s interesting to me that cryptocurrrency skeptics and critics seem to regularly ignore this as a use case, when in fact it is the most important one (maybe even the only one). It seems many people can’t bring themselves to believe that modern national currencies can fail and don’t need an independent hedge, even though the 1800s and 1900s were full of exactly that.
- micropayments: the products that that enables - web-native currency: Makes it easier for apps to integrate money. Games, chat, maybe torrents we're told - easier to transfer money between institutions (maybe easy in the US but it's super hard in Canada)
Course, you could just use Visa gift cards for these kinds of usages. It's probably a bit more convenient to do it this way, rather than keep topping up a card.
Some other use cases noting that cryptocurrencies tend to have public ledgers.
Besides that, just because something is illegal doesn't make it wrong. Many nations restrict transactions that are not reasonable to restrict.
So what's wrong with side-stepping bad laws (but also monopolistic players in the financial space such as PayPal and Western Union)?
Your second bullet point is mutually exclusive with the first.
And I don't see why you dismiss the importance of the first one. What if I'm trying to flee the country with something to my name, like Venezuela. Tough luck?
It's perfectly legal for me to, for example, donate money to WikiLeaks. But Visa and Mastercard aggressively canceled every merchant account that allowed people to donate to WikiLeaks through the Visa and Mastercard systems, apparently because of secret pressure from US government officials who were unhappy about some of the things that WikiLeaks revealed. The Snowden revelations — which may not have been legal, so they are peripheral to your question — very likely wouldn't have happened without WikiLeaks being able to support him, which they could only do because they could receive Bitcoin.
Similarly, many Patreon accounts are getting canceled because their owners have published things that are embarrassing to Patreon, but not illegal (typically, racist remarks). If Bitcoin becomes mainstream, there won't be a centralized authority like Patreon that is in a position to end people's livelihoods because they publish politically undesirable viewpoints. (Right now, those viewpoints are viewpoints that are odious to you, but there's no guarantee that that will be the case in the future; it's easy to imagine Patreon bending to Chinese government pressure to censor people who talk about Falun Dafa persecution or Tiananmen Square, for example, even in countries where that is legal.)
As another example, many Venezuelans are having difficulty fleeing the country, even though fleeing the country is technically legal, due to both official corruption and armed gangs. You could argue that it's not clear what is and isn't legal in Venezuela right now because there are two competing governments, but neither of those governments authorizes demanding bribes from would-be émigrés.
As yet another example, it's perfectly legal in Iran and France for French companies to do business with Iranian companies. But, because much of the world financial system is controlled by the US, it can be difficult in practice; see https://www.washingtonpost.com/world/europe/europe-says-it-w... for more details. Regardless of whether US law is misguided or not, under well-established principles of international law dating back to the Peace of Westphalia, it certainly does not apply to French companies doing business in France with Iranian companies in Iran.
So, in a sense, I think you're right that the main purpose of cryptocurrencies is to sidestep violent coercion. I think you're terribly naïve about how much illegal violent coercion is actually "the law", although that's understandable if you've never lived outside a developed country.
There are other uses as well; it's a dramatically better way to send money overseas, for example. Last time someone sent me money via Western Union, I had to go to three different locations, stand in line for twenty minutes, hand over a massive amount of personal information (perfectly suited for identity fraud or targeted home robbery) to an unaccountable third party, sign a false statement, and walk out the door into a dangerous neighborhood with a pocket full of small bills. For this "service", WU charged me/them about 10% of the money sent, and also didn't inform me when it arrived. Bitcoin transactions require none of this nonsense and cost much less; the last Bitcoin payment I received from overseas cost 0.3%, and I received a notification in a few minutes in my Bitcoin client of the transaction.
I am curious why you think that those 3 cases are somehow not valid or interesting enough in their own right?
If you want to explore the utility of crypto go check out different online communities that focus on that, some decent ones on reddit. The level of discussion on HN is usually "crypto baaad, centralized goood". As an economist I'm sure you expect more. Unless you want those ideas reinforced, keep the discussion here!
It is trivial to look up the signed transaction to the specific address in the digital currency's blockchain. Hence, the shipping company can handle that situation.
On the other hand, try to get an irrefutable digital proof of payment from a bank. For example, get them to email you anything to you, anything at all, that you can use as proof that you paid last month's rent. A bank cannot do that, not even to save themselves from drowning.
Ethereum is not considered one of today’s most efficient cryptocurrencies, not remotely. One of the most full-featured perhaps, but not efficient. Not even Bitcoin is since the invention of the MimbleWimble protocol, and more recently the even more efficient Coda Protocol. The real efficiency comparison is against those two.
If someone corrupted enough voters, they could theoretically create a "Vault certificate" for an invalid block (e.g. one which spends the same coins several times), and other nodes would accept it. That wouldn't be possible with CODA, unless someone broke their cryptographic primitives.
In Coda we use zero knowledge proofs to stand in for downloading / checking the blockchain. This means you get the identical computation to normal blockchain syncing, but in only the size of the zero knowledge proof and your account, which ends up being both constant and ~20kb. Which makes a big difference if you want to use Coda from a phone or browser.
Check out this video if you want to understand more of the tech behind it: https://www.youtube.com/watch?v=eWVGATxEB6M
And feel free to ask any other questions as well!
I haven't heard anyone say this about Algorand. Can you provide more details? Lets say a bug causes all the Algorand nodes to crash. After a patch is released 90% of the network comes back online. What prevents the selected users from arriving at consensus over the next block?
Is this enough? I'm guessing that if bitcoin would grow to support even 1% of global payments, that 99% performance increase is not going to cut it.
I called out Coda because it's both an independent system and aimed at a very similar set of issues, but it's absolutely a different approach. Figured it might be of interest to folks who were looking at this article.
Seems they've moved to a Proof of Stake solution, rather than a Proof of Work. Ethereum was meant to switch to it, iirc, but never did.
It would be difficult to come out with a new approach that simultaneously advanced the state of the art in every possible scalability dimension. Each individual approach might give a 2-10X improvement on that particular aspect, but it also means that the "bottleneck" keeps shifting, and trending towards scalability.
Source: I'm an academic blockchain researcher.
https://people.csail.mit.edu/nickolai/papers/leung-vault-epr...
I've ran a full node for some time to support the network, the whole blockchain size was about 5GB, but the downside of zero transaction fees is that there is less incentive for people to run full nodes. I stopped mine out of boredom when the market crashed.
Unfortunately the market is so full of overhyped projects and buzzwords that people are no longer interested in something that just works.
XRP, EOS, Tether, Stellar, Tron, Cardano.
All with >$1bn cap.
It achieves 10,000 tx/s on chain and transaction times below 1 minute.
Just tell me how much electricity is require for each transaction. How much is required for minning, Maximum possible transaction per second. etc.
I still believe in Blockchain, one way or another for many possible use case once all the technical / unit cost problems are solved. But I remain extremely sceptical of Cryptocurrency.
I'm no expert on blockchain, but crypto taught me very very very powerful and insightful investing lessons.
Disclaimer: I own some nano
If users cannot verify the amount of coin in the network this is useless.
Quote "Vault, a cryptocurrency that lets users join the network by downloading only a fraction of the total transaction data. It also incorporates techniques that delete empty accounts that take up space"
Security is of critical importance to cryptocurrencies, and it's hard to take anyone seriously on that subject if they can't even get the fundamentals of web encryption right.
e.g. Do you think the advancements are novel, or just a mashup of ideas already tried in other blockchains?
Do any other cryptos do the "breadcrumb" shortcut?
I think proof of space-time (Bram Cohen’s and spacemesh.io’s currencies are examples) is a better way forward.
But basically the deal crypto developers are trying to make with me is to trade US backed dollars for "fun bux". These developers are usually very smart people - often much smarter than I. But I don't like smart. Take US dollars. Little pieces of green paper are very uncomplicated and if anyone starts copying them armed thugs show up at their house to have a very serious discussion. And my corner chemist takes dead presidents on delivery no questions asked.
the complaints people have with state currency are basic political problems that cryptocurrencies are not going to resolve. the basic feature that gives state currencies reliability is the backing of the state. without that, and states will never want to give that to cryptocurrencies, they will always be commodities with no stability and no real use value. and all the people who have bought in already will need to sell to a new generation of suckers, regardless of if they conceptualize it like that or not.
It will make miners fitter with no cost to the environment.
As a result I certainly don't trust Bitcoin with anything more than pocket change. I would, on the other hand, put money on Algorand. A Bitcoin attacker could conceivably DOS a handful of honest miners/network relays (given that mining seems pretty centralized), sequester a third of the mining network, and mint money.
No matter how much DOS power you have, you cannot mint money on Algorand without a substantial proportion of the stake.