Ethereum 2.0 launches
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Then, if you require P2P protocol compatibility, I would say this issue shows that nobody really cares about alternate implementations: https://github.com/btcsuite/btcd/issues/1661
When Btcd was first released, it was pretty capable, and had lots of development. But it has fallen behind, which makes sense. Why would anybody take the risk of trusting that an alternate implementation when it doesn't decide what bitcoin is, in the end? You may have to patch bitcoind a bit to get your desired interface, but that is much less work than maintaining a full P2P and consensus layer.
It is also dangerous to use you a non-standard crypto library. Check this vulnerability, which was caused by LND relying on the btcd project's library: https://lists.linuxfoundation.org/pipermail/lightning-dev/20...
Does that? What I see here is bitcoind adding a new feature that isn't yet implemented in btcd. The new feature uses a different extension mechanism in the p2p protocol (a new message to signal knowledge of a new feature vs using the existing version message bits in the main p2p handshake). That new version of bitcoind also hasn't yet been released, but I'd imagine that btcd will land a fix sooner to permit unknown message types being sent from its PoV.
> Check this vulnerability, which was caused by LND relying on the btcd project's library
Incorrect. The btcsuite libraries we use weren't related to the bug at all. Instead, the bug was introduced by _new_ code which attempted to convert between the fixed 64-byte signature encoding used in the LN Protocol, and the variable sized encoding used in the base Bitcoin protocol. The resulting signatures _were_ valid ECDSA signatures, but didn't adhere to an additional constraint that the Bitcoin system places on this signatures from a mempool policy standpoint. The signatures themselves were still valid from the PoV of Bitcoin consensus, in that they would be included in blocks.
bitcoind doesn't decide what Bitcoin is either: a recent consensus issue introduced for a period of times in _newer_ versions caused it to potentially fork off the "actual" chain. In this instance, btcd was unaffected along with many other implementations and earlier versions of bitcoind.
If there is any way in which different implementations of consensus-critical code behave differently for the same inputs, it can be used to split the network. If you are running a node implementation other than the majority hash-rate reference client, you open yourself up to be potentially vulnerable during the fork. This remains just as true, if not more so with staking instead of proof-of-work.
You can do things to protect yourself like run ALL implementations and shut down if a fork is detected, although properly setting that up is nontrivial and in the end what value is gained? It very, very, VERY rarely makes sense to have multiple reference implementations of consensus code.
The previous official wallet's repository says "Mist and Ethereum Wallet have been deprecated.".
Is it true that the Ethereum foundation isn't providing a wallet software anymore?
Why is that?
I would consider it as quite unsolvable as a user to determine which of the 24 third-party wallets is the most trustworthy, hence I'd prefer to just use one developed by the same people as Ethereum.
Well, they received $ 18.3 million in crowdfunding [1], so I would dare to say it's not only "their" resources but also the resources of the community which they're spending, isn't it?
Given that the central thing a user needs to use a cryptocurrency is the wallet it would seem a bit weird to collect $ 18M from their users to develop a cryptocurrency and then not develop the software which the users need to use the currency?
I mean they're a non-profit organization, if they don't hand anything out for the $ 18.3 M then they have profited quite a bit by taking in money but not delivering effectively usable goods from it?
[1] https://en.wikipedia.org/wiki/List_of_highest-funded_crowdfu...
Developing yet another Ethereum wallet when there are so many on the market would be a waste. It’s better for the foundation to provide a list of high quality wallets that already exist.
It's actually quite easy: I opened the websites of all the 24 wallets they list and checked the imprint of each. None says it was developed by the foundation.
> Developing yet another Ethereum wallet when there are so many on the market would be a waste.
> It’s better for the foundation to provide a list of high quality wallets that already exist.
What would you think of me if I raised $18M to build a non-profit children's hospital and then used it to instead build a website which lists children's hospitals which were built by other people, most of which being for-profit companies, some even proclaiming themselves as registered in shady tax-haven countries, and most not even clearly showing where their company is registered?
Now they've delivered the first part of ETH2 today.
I personally prefer the role of the EF as a facilitator more than monolithic employer. And they can (and do) do facilitate in more ways than just handing out grants. It's just they experience has shown that helping out this way for wallet development (or even more generically software development) works better.
To add, they did start out providing the software as you say. After a certain point though, their efforts were outpaced by community effort or business opportunities arising in the Ethereum ecosystem. At this point it took a while for them to figure out what new role to take on with their ("our") funds, eventually settling on what they're doing now.
> It's just they experience has shown that helping out this way for wallet development (or even more generically software development) works better.
Does it really work better from the perspective of a user though?
Because as a user I am now sitting in front of 24 websites which look equally "meh" in terms of trustworthiness (fancy design and huge claims), each of them trying to get me to hand out money to their software (that's what a wallet is about!), and almost all of them seemingly being for-profit companies which avoid listing their address.
A single 1 well-known website (EDIT: I meant wallet, not website) of a non-profit would "work better" for me as a user in terms of trusting my choice to keep my money safe. (If I had any, not buying ETH in this situation :)
> To add, they did start out providing the software as you say. After a certain point though, their efforts were outpaced by community effort or business opportunities arising in the Ethereum ecosystem.
Do you notice that you're actually arguing in favor of my point? :)
You say that their efforts were "outpaced", i.e. they failed. That's not a good thing to yield for $ 18 M :(
> Because as a user I am now sitting in front of 24 websites which look equally "meh" in terms of trustworthiness (fancy design and huge claims), each of them trying to get me to hand out money to their software (that's what a wallet is about!), and almost all of them seemingly being for-profit companies which avoid listing their address.
Yes, I guess that's definitely a disadvantage of the ecosystem growing so much. It's great that that happened, but it also means that the EF does not control everything anymore. They cannot advertise just one solution with so many out there, lest they rub someone the wrong way. But they also can't say nothing either. And then it just becomes very confusing with this information overload for beginners (though I think "list of 24 websites" is a bit of an exaggeration; it's not _that_ bad imo [0])
I don't think this is entirely new in the world of software though. Generally you then get to things like looking for advice on forums or word-of-mouth, and then there's a guy like me saying "if you're a beginner only wanting to make transactions on Ethereum, get a Ledger Nano X hardware wallet and use their Ledger Live application". And "if you then want to move on interacting with dApps, use Metamask and connect it to your Nano X".
> A single 1 well-known website of a non-profit would "work better" for me as a user in terms of trusting my choice to keep my money safe. (If I had any, not buying ETH in this situation :)
Well, you would definitely know cryptocurrency is a bit different than a website securing your funds. Someone needs to hold onto the private keys. If you're looking for something similar to a bank, then get something similar to a bank (Coinbase?). But this difference (custodial services, private keys, hardware wallet) definitely adds to the barrier one needs to overcome to get started. I would also argue that "1 well-known website" (or 1 major client implementation that then becomes the defacto standard) does not quite fit into the whole "decentralization" aspect of cryptocurrencies, but not everyone cares as much about that.
> Do you notice that you're actually arguing in favor of my point? :)
You could look at it that way I guess ;) Progress is a function of money, and the EF has more to attend to than just software/wallet development. They could certainly blow through all their ("our") money in a year building a super fancy wallet. Or, as has happened, spend a little to jump start the ecosystem, and then comes along not one but multiple better wallets _for free_! None of "your" money was spent on developing these. Seems like a good deal to me, as now "your" money can be spent jump starting other awesome things that no one is paying much attention to yet.
Mmh thanks, well security is more relevant to me, but I nevertheless went to their website.
Apparently it's a browser plugin. That's a big security no-no from my side, too much attack surface - sorry.
Hardware wallets are extremely insecure IMHO:
The people who sell them - and many people in their supply-chain! - are handed the very dangerous combination of:
A) Being able to hard-code software into the silicon whose source code you will be completely unable to inspect unless you own an electron microscope and a very large amount of knowledge on hardware reverse engineering. What if the hardware forces the PRNG to be predictable so they can remotely know my crypto's private keys without any internet connectivity whatsoever?
B) Knowing 100% for sure that the device they sell will be used to store money. They don't need to first find victims, they know ALL of their customers can be. It's like writing "MONEY INSIDE" on your house IMHO. Better use a general purpose PC whose vendor doesn't know what it'll be used for.
In my book that's not too far off from an "official" ethereum wallet.
I went from mining Ethereum and even releasing a minimal mining GUI for folks who wanted to support PortableApps.com to feeling uneasy about it. I don't even have an ETH client on my PC now, so I can't even access the fraction of an ETH I own. I'll probably ditch ETH donations to PortableApps.com as well.
I was, however, right about everything else. Lee sold all his coins, made a giant pile of money, the value of the coin collapsed to literally fractions -- and has yet to come anywhere close to a recovery.
If Elon sold 100% of his Tesla shares and "stayed a visible and active advocate for electric cars" I'm not sure you'd be as bullish.
No, he didn't run away (he's still very active in the community: https://twitter.com/SatoshiLite) and the foundation wasn't on the brink of bankruptcy.
About the only thing you were right about is that he sold his coins. (According to him the reason was so he could be financially secure and able to focus on the project instead of feeling incentivized to pump the price)
I always hated how wasteful and energy-inefficient mining is. Staking reduces energy costs by many, many orders of magnitude. With lightweight clients in development, it is possible to validate chain using Raspberry Pi.
I hope (but don't expect) that some time in the next 10 years Bitcoin will follow. If not, it's just so much CO2 that could have been avoided.
Right now, most of the mining is financed via inflation. But as this comes to an end, eventually, the cost of mining will be borne by anyone making transactions on the network through tx fees.
Somebody has to pay the electricity bill on all these ASICs.
EDIT: One could try to argue that high transaction costs are not a problem because nobody wants to trade bitcoin, people just hodl it. Cool. But if that's what people will do, then the money raised through transaction fees will not be enough to support a sufficient hash rate to protect the network.
I wrote about all this two years ago already: https://www.konstantinschubert.com/2018/11/28/proof-of-stake...
- If people pay high effective tx fees, it's shit because, well, it's expensive.
- If people pay low effective tx fees (through lightning or block size increase or whatever) then, as soon as inflation ends, the money won't be enough to pay for a sufficient hash rate.
This means hash rate will be low compared to the market cap, and the necessary capital for a double spend attack may be worth it.
Maybe it’s all less of an issue because bitcoin will develop a network of trust that can replace the block chain.
But then, why not go with something like Stellar right away.
Doing the same for Bitcoin would be very hard, and if it simply follows Ethereum's footsteps, then it is unclear why even use Bitcoin.
But -- I hope we see this fork sooner rather than later. Bitcoin miners will have no economic incentive to capture back the CO2 produced.
Ethereum is built to a spec. That's why the different client developers had to coordinate their work. This is not the case with Bitcoin. There, the official client is the de-facto spec you have to comply with if you develop another client.
The bigger problem is that the current narrative of Bitcoin heavily discourage hard forks.
Transitioning to PoS would be a social task with Bitcoin, not a technical one. Also note that Ethereum was promised from the beginning to transition to PoS, they just didn't expect to take this long.
If the Bitcoin developers would push for a POS hard fork I would expect the chain to split into a POS and POW version but which version would become the canonical Bitcoin would be up for debate.
ETH is still on PoW and will continue to be on PoW for many more years.
For 'kill' as in 'stops being big and important' I think it's going to happen relatively soon, mostly agreeing with your article. Bitcoin already lost its past domination in users and total fees paid to ethereum, the only missing part is for eth to actually monetize that by fully switching from PoW to PoS. When eth stakers start making even billions annually while btc buyers lose billions annually to mining, btc losing its first place is only a matter of time. After that, PoW is going to be widely discredited and viewed as obsolete.
I'd like to hear from Bitcoin proponents where we are wrong in our thinking. What assumptions are incorrect? Is there a flaw in economic reasoning? If not, what is being done with Bitcoin to address this existential risk for Bitcoin?
https://www.cs.princeton.edu/~arvindn/publications/mining_CC...
>Figure 2: Illustration of Mining Gaps. Miners will only mine when the instantaneous expected reward exceeds the instantaneous cost
This makes no sense, rational actors generally consider discounted future cash flows, not just instantaneous reward. Perhaps the quality of the paper is explained by the researchers following this strategy and only working on 15th and 30th of every month (when their salaries are remitted to their bank account representing an instantaneous reward).
> We also assume that miners always have space to include all available transactions.
This is also a pretty bad assumption. In reality the bitcoin mempool is almost always non-zero as bitcoin has smaller and/or less frequent blocks than many other cryptocurrencies.
Selfish mining is possible, at least for a short period of a time, but sunk costs are eventually sunk costs and you compete for the next block.
That means block rewards plus TX fees need to be greater than the cost of running the network. Block rewards are effectively a tax on existing holders through inflation of supply, but that will go to zero in the long run. As the rewards decreases, TX fees will need to increase, which means the average TX will rise. This will increasingly make using BTC prohibitively expensive unless the block size is increased so as to allow more TX per block.
But if the scenario should arise where revenue no longer covers the costs of being a miner, the whole economic model breaks down. This could even get to the point where going rogue, and attempting to exploit the network with the hash power, could become more profitable for a miner.
The rest of your analysis is correct: as rewards decrease, TX fees may increase. You can also see that due to competition for the limited tps, as seen in 2017.
But this is also exactly why the scenario discussed in the paper is implausible: miners get to pick the transactions with the highest fees for inclusion in the next block. If your transaction is not urgent, you pay the minimum and wait. Eventually, it will be processed - if the expected delay (given the mempool) is not to your liking, you can update the fee with RBF.
But again, it means there will be little variance - just a smooth adjustment, meaning the required condition this whole paper is based on is dead wrong.
About the economic model breaking down, you make 2 mistakes: 1) you fail to account for difficulty adjustments made just for this situation, but even people who do often forgot 2) when revenue no longer covers costs (as say for a factory), the company doesn't immediately give up and fire everybody.
It's industrial organization 101, and due to the difference between short term and long term.
Of course, there is less friction and fewer rigidities with software, and mining equipment could be deployed differently if it was still CPUs or GPUs.
But the genius of ASICs having no alternative use means it can't happen (except maybe switching to another coin with the same algorithm)
Overall, regardless of the situation and what you throw at it, there's no situation I can see where the economic model break - except maybe if miners are tracked and executed on sight by the army? But even then, all it would do is move the mining to another country - or lead to bribes!
Mining is competitive. A miner who shuts down while revenue is less than electricity cost, and starts up again when fees rise, will outcompete a miner who just leaves everything running even while taking losses.
I see your point but doesn’t sound like a great pitch.
This also assumes that miners will be holding enough bitcoin that price increases alone will not only pay for their operations but also cover a reasonable interest in their holdings. It's not logical to think this will happen. And even of it does, you'll be left with only a handful of miners.
Flash loans/minting, for example, have turned the markets into the ultimate meritocracy. Anyone - rich or poor - can access up to hundreds of millions of dollars instantly to execute any profitable transaction, no human review or approval necessary. Liquidity pools, introduced by Uniswap, solved many of the problems and risks associated with holding thinly traded assets. Smart contracts have enabled any new project’s tokens to instantly have real value, because in most cases new tokens can only be released to the market by locking ETH into the contract in exchange for the new tokens.
These innovations, along with those that are coming, enable a shockingly large number of new opportunities in the finance world to a much larger audience than ever before. It might be a few years before security, market manipulation protections, etc. are mature enough for mass adoption. But the opportunities that DeFi enables will drive demand for ETH, in a way that today’s Bitcoin simply cannot.
The inflation curve in Bitcoin is considered sacred. In Ethereum, it's developer whim and EIP approval.
def calc_annual_reward(total_staked_eth):
return math.exp(31556926 / 384 * 64 / 31622 / total_staked_eth ** 0.5) - 1
What does this mean? If I'm poor (or rich), why not borrow hundreds of millions of dollars to make some highly speculative trade? If it goes well, I win big; if it goes tits up, the lender loses big (not me).
I'm certain that's an uncharitable reading of your comment - please take it in the spirit of "this is what I'm asking you to explain to me in simpler terms," not as an argument.
This means you can't take the highly speculative trade, you can only go for a sure thing. But if you do have a sure thing, you can borrow as much currency as the lender can provide.
What sort of situation could this be used in? I'm having a hard time truly imagining use without any risk of transaction rollback.
The markets are not currently too efficient for that, and never will be. In fact Uniswap’s entire design depends heavily on arbitrageurs balancing out the markets between itself and other exchanges.
How are the transactions composed, with a smart contract/s, in combination with Dex API’s?
Then you would have a separate program running on your client machine to scan for market opportunities, and when it spots one, have that program send a transaction to your deployed smart contract to initiate the loan and set into action whatever logic you programmed into the smart contract that will yield a profit.
Yes, it’s quite a rabbit hole indeed. It is hard to believe that something like this is even possible, let alone profitable, but it really can be. I have seen single flash loan transactions yield up to $46k in profits. That profit is irrevocably delivered back to you in a couple of seconds.
[1] https://etherscan.io/tx/0xfd35e99cbbefea68874391a14ddb09a289...
RSK MainNet launched about 3 years ago. Currently, most blocks have no transactions, with 0 gas spent.
I always thought the hardwired reward for mining, namely, X btc every 10 minutes, is the cause of Bitcoin's wasting electricity.
The electricity used is roughly proportional to the hashrate, which in turn is roughly proportional to the price of btc -- until the next halving, which I think is more than one year but less than 2 years from now.
These halvings of the reward every 2 years (which occur on a schedule set before Bitcoin was launched all those years ago) will some time in the next 10 years (which is 5 halving, representing a reduction in the reward by a factor of 2 * 2 * 2 * 2 * 2 == 32) or 12 years bring the Bitcoin network's electricity usage down low enough that a reasonable person will no longer avoid Bitcoin out of worry that it is bad for the global climate.
Note that this mining reward doled out every 10 minutes is not a transaction fee. E.g., neither of the transacting parties (i.e., neither the sender nor the receiver) pays it.
So tell me again what will eventually kill Bitcoin.
https://medium.com/@schwartz4live/invitation-for-community-d...
Congrats to the Eth folks though, this really was a big undertaking.
> Right now, most of the mining is financed via inflation. But as this comes to an end, eventually, the cost of mining will be borne by anyone making transactions on the network through tx fees.
> Somebody has to pay the electricity bill on all these ASICs.
This is just wrong.
If the award available to miners decreases due to lack of inflation they will use less power-consuming hardware.
If that still results in loss due to electricity cost then miners will leave the market until the amount of miners in the market is equal to the amount of tx-fees available.
In other words: This is a market with supply and demand. If one decreases the other also goes down until they're balanced. It won't just make the market disappear!
So even if almost nobody was willing to pay any tx-fees and there was no inflation then Bitcoin would still be running. It may just move back to running in the background on consumer hardware which was bought for other purposes instead of having giant mining data centers.
This also means that mining isn't going to infinitely waste energy:
The demand for energy cannot go higher than the offer of tx fees / block reward.
So there is a finite upper boundary to Bitcoin's power consumption. I think a finite upper boundary is enough to justify its existence, the precise value of such a constant is arbitrary so you might as well not waste your time in arguing if it is too high or too low and instead be happy that there IS a boundary :)
Those tools don't work in this chain death scenario of dwindling hash rate.
Satoshi's coins are always uneffected in case of a reorg. So if everyone else's who have never transacted since the reorg.
Chain reorg's are usually temporary even in chains with low security budget.
But... is it like sports memorabilia at that point, the value is all perception rather than utility and could one day just.. collapse
Primarily two extremes for how this is done: Centralized, like WBTC (https://coinlist.co/help/what-is-wrapped-bitcoin-wbtc), and decentralized, like tBTC (https://defirate.com/tbtc/)
[0] https://www.theblockcrypto.com/daily/76787/ren-bitcoin-walle...
It's a way of selling BTC for other tokens, extracting and removing its value over time, and instead investing it into DeFi and similar.
The very core of Bitcoin is PoW.
GP is correct. The Bitcoin community is fiercely conservative, and a proposal to switch from PoW to PoS would be met with about as much scorn as a proposal to increase the total supply.
Ethereum, on the other hand, has never had any strong attachment to PoW -- quite the opposite, really. Switching to PoS has been a major goal since the early days of the project.
any scaling solution or consensus change that doesn't retain this important feature wouldn't be bitcoin, just another fork. potentially could go from PoW as long as supply is not inflatable it could still be considered Bitcoin (depending on whether users switched to the new version or not)
What about Ripple/XRP or Stellar? I mean, I'm not a fan of it but they've been doing a non-proof-of-work chain since 2012.
Bitcoin solves the need for third parties in the financial system. That's it, it's not meant to be some eco currency - never was.
Where's the validation that the current financial system needs to have its energy needs reduced? Bitcoin cuts out the energy requirements of all the countless third parties, for a start.
POS is a joke.
https://www.invigorlaw.com/sec-says-cryptocurrencies-bitcoin... https://medium.com/blockchain-at-berkeley/does-proof-of-stak...
I don't have numbers (I suspect it's impossible to do a true apples-to-apples comparison), but I feel like Bitcoin still likely fails by this metric. I recall reading a year or so ago that Bitcoin was using the same amount of electricity as a small developer nation. I expect the other financial systems use more than that in total, but consider that these other financial systems handle orders of magnitude more transaction volume, and include a lot more services than Bitcoin does.
> We can just use renewable energy sources long term.
Renewables aren't free. It costs time, effort, and energy to build the infrastructure (solar panels, windmills, etc.), not to mention caustic chemicals for some of these, which do have negative environmental effects. Maintenance has costs, as does eventual replacement. The land required to house these production farms also is not free.
Yes, the energy produced by renewables is obviously much much cleaner than that produced by other means, but they still have costs.
Not true. Cardano has been operational with PoS since early 2020. And it’s staking process is much more straightforward and user friendly.
It doesn't damage the environment if used with solar power or an energy source that isn't damaging to the environment. In other words, it isn't necessary that it damages the environment.
Is it wasteful when you use the elliptical machine or tread mill? It is a tragedy that energy is being wasted in such magnitude in gyms around the world?
"I don't know how to communicate this, or even if it is possible to do so... but the question of justice has concerned me greatly of late. And so I say to any creature who may be listening: There can be no justice, so long as laws are absolute. Life itself is an exercise in exceptions."
- Every system will be gamed, no exceptions.
- It is impossible for the architects of any system to imagine all the ways it will be gamed.
That's why it's not possible to create fixed laws that are just. Inevitably someone will find a hack that turns the intent of the law around while remaining true to its letter.
This seems to be what dooms both pure libertarian capitalist schemes and pure socialist command economy schemes. In the former case there is not enough structure to contain exploits and no recourse when someone finds a good scam. In the latter case it's impossible for central planners to imagine the results of their plans when they are exposed to opportunistic economic agents. The fatal flaw in both ideologies is their dogmatism. It causes them to fail to adapt when flaws and exploits in the rule system are inevitably found.
- people aren't assholes
- all involved parties can audit blockchain transactions
- all involved parties are programmers and can audit a contract written in an esoteric programming language
- all involved parties voluntarily agree to be bound by these contracts despite the fact there's no way they can be enforced
Maybe I'm misunderstanding, but I don't think ETH contracts count on humans doing anything.
However, if you want to use services or exchange goods, then people are involved.
A simple example: person A requests goods or services from person B. According to Ethereum website, "Customers have a secure, built-in guarantee that funds will only change hands if you provide what was agreed." Person B provides goods/services. Person A says no goods or services were provided. The assumed guarantees turn out to be fiction.
Here's a real world example. A typical contract between a supplier and a chain store common in many parts of the world goes something like this:
- supplier provides goods on a continuous basis
- the chain store pays for goods once every three months
In the real world this contract is enforceable by, well, centralised laws of the respective countries. If the chain store reneges on payment, it can be taken to court and forced to pay.
In case of "smart" contracts, well, keep sending goods for three months in the hope that you get paid.
https://twitter.com/VitalikButerin/status/105116093269977088...
> To be clear, at this point I quite regret adopting the term "smart contracts". I should have called them something more boring and technical, perhaps something like "persistent scripts".
> I do think that persistent scripts controlling assets compete with the legal system on some margins, but so do locks on doors. So IMO it's wrong to equate them with a specific philosophy of law privatization.
Then, as I said, it's just a very slow and ineffecient API and protocol.
However, to quote ethereum's marketing material [1]
--- start quote ---
Ethereum allows you to move money, or make agreements, directly with someone else. You don't need to go through intermediary companies.
Commerce guarantees
Customers have a secure, built-in guarantee that funds will only change hands if you provide what was agreed.
--- end quote ---
This directly involves people. With all the issues described above.
On their dapps page [2] currently:
- Foundation. Buy, trade, and sell unique digital artwork and fashion from some incredible artists, musicians, and brands.
- PoolTogether. Buy a ticket for the no-loss lottery.
- Augur. Bet on outcomes of sports, economics, and more world events.
etc. etc.
All this involves people and the belief that they will honor their end of the deal.
As far as smart contracts are concerned; they're hardly "contracts", but you probably already knew that. Even Vitalik Buterin regrets calling them that way [1].
[0]: https://en.wikipedia.org/wiki/Rough_consensus
[1]: https://twitter.com/VitalikButerin/status/105116093269977088...
I think the current lowlevel framework is fine, because it's allowing different projects to explore how to introduce flexibility back into the system at a higher level -- but because it's being done at the level of a project within the Ethereum ecosystem, each approach can live & die on it's own, without risking the entire ecosystem on one approach.
The main set of coding patterns I've seen all center around deploying contracts which act as an "upgradable proxy" -- an immutable frontend contract, which can be redirected to point to another contract that does the actual work.
This "redirect" usually can only be done via txn signed by an "admin" account, which may be a single anon -- or it may be something more complex, like MakerDAO or Aave.com, where any updates are proposed by the dev team, but have to be approved by on-chain governance votes. Said votes in turn literally have $$$ staked on-chain to properly motivate them to make things work. There are also time-locks on many of these updates, giving users a last chance to run for the hills if governance does something malicious / stupid.
The nice thing about that structure is that it also allows governance to let in updates which compensate users for mistakes or exploits at a meta-level, all without violating the underlying immutability of the smart contract bytecode.
---
It's a pretty rapidly evolving space, and I'm sure what I described won't resemble the final form in even a few years.
I think it's really great to see that there is a way to introduce justice and flexibility on top of an immutable system, rather than making the system itself become mutable. This allows the immutability of the lowlevel system to act as a source of trust between anonymous groups, that they have to act within some immutable set of ground rules, while then re-introducing the flexbility on top, so humans can act like humans when mistakes occur.
Put another way: how good is a smart contract if it’s easy to create a deceptive one?
But establishing agreement with another human means I have to establish a common language with them, then work out what we're agreeing to, then establish some set of mutual trust between us (usually involving some form of identity verification, even if it's a "who are you on twitter?" level of thing). And then we perpetually have to track that the other person's incentives haven't changed outside of the contract in such a way that violating it would be more profitable. The effort involved in all of that scales very poorly, especially from the service provider's perspective.
On the other hand, if someone wishes to operate in good faith, their incentive is to make the smart contract as simple as possible, and as amenable to independent verification from outside parties (as well as theorem provers).
And no one has to worry about establishing mutual trust with the other person, or that they'll just change their mind in the future. Even if a contract is upgradable, if you only choose to work with ones that are either immutable, or require a timelock / voting period before changes take effect, you (collectively all the consumers of the contract) know your margin of safety.
And that margin of safety is provided because you can trust the base layer is itself immutable and secured. Whereas with risk mitigation through bonds etc, who is the trusted third party we mutually agree to hold our deposits? how do each of us trust that third party isn't in league with one of us? (I trust the "Certified Bank of Nigeria In England", but do you?).
That's the core bit that a smart contract platform like Ethereum provides -- a base layer for establishing mutual trust in objective terms. You can build whatever manner of agreements on top of such a base layer, but if the base layer isn't there, each separate agreement (expensively) requires the two parties find some common ground.
At least for any contract in which "everybody" is reasonably defined, known upfront, and finite.
The switch to eWASM would greatly improve security, efficiency and perhaps allow a diversity of languages to be used on Ethereum. It should be a matter of exposing the appropriate primitives to call other contracts, generate log events, write to the store and so on.
[0] For instance, see a PR that reduces codegen from 55K to 1.6K bytes on an innocuous contract https://github.com/vyperlang/vyper/pull/1488
[1] I'm guilty of it too; https://github.com/ActorForth/evm-assembler/blob/master/docs...
https://github.com/ethereum/EIPs/blob/master/EIPS/eip-2315.m...
Your evm-assembler looks pretty interesting. It's crossed my mind before to write an evm Forth, just for fun, and the lack of a return stack so far has dissuaded me.
Seems like there's discussion of scrapping the whole phase 2 "execution environments" and just allowing heterogenous execution on rollups.
eWASM does look interesting, though!
As blockchain tech goes, Ethereum always seemed the most interesting.
- scaling issues (it can't be used as a currency if this isn't fixed) - power issues (would be nice if we didn't create a huge pointless energy sink if we could avoid it) - the amount of footguns in ethereum (I think the language is too permissive)
It looks like this solves at least 2 of the three!
The other part, which is on Ethereum mainnet already, is a layer-2 idea called rollups, which store transactions on chain in a very compressed format without losing security guarantees. There are several rollup systems, capable on today's Ethereum of doing 1000 to 9000 simple tx/sec.
Once both systems are live, total capacity will be 20K to 100K tx/sec, not counting the quadratic improvements.
On the research side, there's also work to make data validation more efficient by replacing merkle trees with something more compact, like polynomial commitments. That would add another 10X factor to rollup scaling.
Regarding footguns, people are working on more rigorous languages than Solidity that still compile to the EVM. So far their compilers aren't as solid so they don't get much production use yet.
Anything more than ~3000 tx/sec will be a game changer and maybe ethereum will finally deliver on the promise of usability as currency.
A new virtual machine for smart contracts (EWASM instead of EVM) giving better contract analysis options, and possibly higher sync speeds due to optimisations.
Also, sharding - so multiple jndependent blockchains, that should fix the scalability.
If I’m not mistaken, this release is not yet a full blown new chain, but just a partially functional one, designed to test stabiloty and safety.
Disclaimer - I’m a bit out of loop, so I meay be slightly wrong somewhere.
The roadmap has changed for the phases after this launch so that Eth1 contracts and the Eth1 chain can run on Eth2 so that the past years of Eth1 development are not thrown away.
Reading on the roadmap: https://ethereum-magicians.org/t/a-rollup-centric-ethereum-r...
Disclaimer, this roadmap is valid as of today Dec 1st 2020 but it might have change a couple of months from now.
I wouldn't mind staying with EVM, since EWASM doesn't seem to offer much significant improvement (static jumps only, really).
Last but not least, full eth2 turns eth into a positive yield asset, a share in ethereum (real income depends on fees paid by users - ethereum already dominates).
To not overhype, the current launch is really an incentivized testnet only for PoS itself - real ethereum still runs on PoW as it was. It's important because it shows that after long delays eth2 is finally starting to happen, and because consensus itself is like a car that can drive without transporting anything or anyone - not very useful at the moment, but changes required to make it useful are relatively small compared to building the car from the ground up.
Uh, why do you say that?
The security of PoS in fact ought to be much LOWER than the security of PoW:
The goal of requiring proof of work is that you cannot just send multiple versions of the same transaction into different areas of the network to double-spend your money - because you need to commit work for producing a block, and due to consuming energy you can't fake that.
Well, you can compute two (or more) blocks in parallel, but then you'll spend half of your available CPU (or ASIC nowadays) cycles on each block, thus cutting your speed in half. So the non-malicious competitors on the network will produce more blocks meanwhile because they're not splitting their computation power, and thus your fake blocks will get invalidated because they're on the shorter chain.
With PoS on the other hand you can create as many fake blocks as you want and spam them to the network. The only security is the hope that the random network topology arbitrarily results in the double-spending blocks arriving at the targets under attack after the other blocks arrive.
But if you run thousands of nodes on the cloud and thus have better network connectivity than the victims you can make your double-spend blocks arrive first at the victims.
So:
- PoW: Relies on physical limits, you need to have physical hardware and physical energy to conduct an attack.
- PoS: Relies on the network connectivity of the attacker being hopefully worse than the connectivity of the non-malicious network. Who can guarantee that? Nobody.
Also, I'm not sure why you and the other commenter are so argumentative about this. There are several PoS networks out there such as Cosmos, Tezos, etc, holding more than a billion dollars. If there was an issue, someone would have hacked them by now.
Is that a link to an article from a peer reviewed academic journal?
> There are several PoS networks out there such as Cosmos, Tezos, etc, holding more than a billion dollars. If there was an issue, someone would have hacked them by now.
I'll give you a hint: "slashing" is not a thing that sustains security of these networks.
Last but not least, there's no way to delete PoW attacker's gpus, but hostile stake is always going to be slashed. Asic pow chain can be forked - once - to a gpu pow, but that's it, and after that there's no recourse to sustained attacks. This property virtually guarantees that no attack against PoS with slashing is ever going to happen.
What defends against the attacker configuring his nodes to just not relay the blocks which slash his deposits, by having a majority in the network connectivity, and thereby convincing victim nodes that he in fact is the victim of false slashing because the victims will only discover the slash-claims much after the attackers "valid" blocks?
Or in other words:
Isn't the slashing mechanism also reliant upon mere hope that the network topology randomly happens to be in favor of non-malicious peers?
There are probably many botnets of IoT devices with 10x that many nodes, aren't there?
So a single botnet could probably ensure that a target victim has the majority of peer connections to the attacker.
If I understand it correctly, you are now saying that someone would DDOS the entire gossip network, completely halting any more production of blocks so that their slashing doesn't go through?
We're not even talking about "nothing at stake", or anything having to do with PoS anymore. We're just talking about a massive DDOS of an entire network. Node operators in PoS networks, as well as Bitcoin, have ways of dealing with DDOS which are the same as how anyone deals with it, and I don't need to get into them here.
If someone was able to overcome these DDOS mitigations and completely prevent a PoS network from receiving any legitimate transactions, they could do this to Bitcoin as well.
Who will record this "evidence" to the blockchain? Anyway there will be two versions of the blockchain. In one of them attacker's stake was not slashed and there is no any "evidence" of his malicious actions.
Not sure what these two versions of the blockchain you're talking about are. Signing two blocks at the same height with the same chain id is the slashable offense. It doesn't matter what's in them.
If the attacker wants to have his own blockchain off in the corner where he has all the money, nobody cares.
Really?! One version is "Vitalik's fork" and another one is "non-Vitalik's fork". Which one of them is a valid chain? Any idea?
Assume the attacker is Vitalik and there an "evidence" of his attack. Who will dare to slash him? Vitalik won't include this evidence into "Vitalik's fork". If Vitalik wants to have his own blockchain, nobody cares, isn't it?
when a PoW block is mined, there's no way to know how much hidden equipment is out there mining a parallel chain, which could suddenly appear and take over with more accumulated work. You hope the malicious actor doesn't have 51%, but there's no way to actually prove that they aren't out there.
with PoS on the other hand, the set of validators who are voting on a block is known many blocks in advance. so say a malicious validator has X% of the voting power on a given block: he can't refuse to relay the other votes, because it will be obvious to all other nodes that he only speaks for X%, and what he's broadcasting lacks quorum, because the other (100-X)% votes are missing.
Whereas the other (100-X)% group will be actively broadcasting that they're slashing his stake; and if (100-X) has quorum, those votes will be accepted as valid by all the nodes on the network, regardless of what the malicious actor decides to broadcast.
TLDR: under PoW, silence is assumed to be absence of dissent, since number of miners out there is unknown. Whereas under PoS, silence still allows proving lack of quorum (since the voters are known well in advance), so censorship doesn't let a malicious validator legitimize their vote.
>and thereby convincing victim nodes that he in fact is the victim of false slashing because the victims will only discover the slash-claims much after the attackers "valid" blocks?
It's not possible for 'false slashing' to occur, because slashing requires presenting conflicting votes.
>Isn't the slashing mechanism also reliant upon mere hope that the network topology randomly happens to be in favor of non-malicious peers?
topology doesn't matter in this case, 2/3+ consensus is asynchronous. 2/3 of stake is required to finalize blocks, so the attacker would finalize his own chain without slashing.
There are some ideas about 99+% proof consensus which rely on topology and nodes being online (which means they can observe that censorship is happening) but it's not currently implemented. Eventually I expect it to happen, making attacks a practical impossibility, by coupling asynchronous 2/3+ consensus guarantee with synchronous 99+% guarantee, effectively automatically coordinating anti-censorship forks.
https://vitalik.ca/general/2018/08/07/99_fault_tolerant.html
https://twitter.com/technocrypto/status/1330150362427387910
In proof of stake, mining equipment and electricity consumption is replaced by the cryptocurrency itself. You put up your currency as a bond, get rewarded more for running the network, and lose your bond if you misbehave.
The other big advance for ETH2 will be sharding, so each node doesn't have to process every transaction. But that's not the part that launched today.
Not 100% sure what ETH is using here but there is a mechanism.
If someone would want to fake timestamps, they would need to deviate from the protocol and would thus not be on chain.
https://github.com/ethereum/eth2.0-specs/blob/dev/specs/phas...
Here is how they sync: https://ieeexplore.ieee.org/document/8946264
Assuming they describe the BeaconBlocks mentioned here: https://github.com/ethereum/eth2.0-specs/blob/dev/specs/phas...
Also, which effect would an increased difficulty have?
It would seem to be a way to avoid the rich-get-richer aspect because hiring people wouldn't make sense - they'd get more value going it alone, so existing capital has reduced influence.
Obviously there is no nation that backs its currency value for an objectively "good" common cause - every nation probably only thinks within her interest for most of the time. If you want to create such an institution which can print money backed by the values you like - then the answer is much more political than technical, and the crypto algorithms alone wouldn't help you in achieving that.
I was merely talking about replacing proof of work with a human step rather than something computed. Intellectual labour (such as to plug our gaps in AI) moreso than physical. Answer a quiz when you buy a coffee or sit there for a few hours to mine coins while analysing a corpus. Something like that.
I saw that some exist, I don't know how relevant they are.
If it is useful then it won't be secure because it would be free to "hash". The mechanism has to be costly. Proof-of-work is in many ways proof-of-waste. If tomorrow we find out that hashing is profitable then everyone can start hashing and be able to attack the chain for free (subsidized by the usefulness). Only the hash power above the useful level can add security.
Now that the launch has succeeded, I will stake some of my Eth. As more people do that, APR will fall.
You can't do anything with Eth2 that is locked. Some pool staking services offer a token for each ETH staked, but you can not use the staked ETH.
Using staked ether in the defi ecosystem will be possible once withdrawal and smart contract functionality is enabled. Until then, there are liquid staking services that offer eth2 derivatives that can be used in defi, as you point out.
Poo, minimum 32 ETH or at current prices $19k. This reinforces my dislike of staking. Only making the already rich richer. Keeping lesser ETH holders out of the profit.
But who am I kidding; if I magically had 32 ETH to stake I'd probably feel differently.
i.e. can an ETH holder somehow delegate a pool to be able to stake with that ETH but not spend it?
The trick is that as the pool leader, you have to put up a 16 ETH stake and other participants pool together to make up the other 16 ETH.
If you misbehave as the pool leader, your 16 ETH is the first to get slashed.
They published a blog post this week talking about how they are pushing back their roadmap until the Eth1/Eth2 merge, though.
Their proof of concept was working great on testnets.
The narrative that is often pushed forward is that they have different use cases. Bitcoin is a limited-supply store of value (analogous to precious metals). BTC blockchain isn't well suited for quick transactions, but it is the blockchain that is the most robust and secure. Ethereum, being Turing complete, provides an ecosystem on which other applications can be built.
Ethereum's mining fees exceed Bitcoin's:
That would mean it has better long-term security prospects than Bitcoin, as security is proportional the revenue earned by validators.
That's why I said that Ethereum's long-term security prospects are better. Its mining fees have exceeded Bitcoin's and with the multi-pronged efforts to further scale Ethereum - that are vastly more promising than Bitcoin's - there is a high likelihood of these fees further increasing their gap with Bitcoin's.
As long as speculation is the main thing going on in crypto, BTC is king, since it is purely speculative, has the best name recognition, and doesn't try to hide that fact.
It's different from a conventional bank account, because there the returns are (theoretically) coming from the bank loaning it to entrepreneurs to buy factory and farming equipment and create value.
You could however be morally against earning interest through others speculating. In that case you could still earn better interest by just by being USDC-sUSD LP on curve.fi.
What distinguishes Bitcoin from most cryptocurrencies is that a) It has a (relatively) simple goal -- sound money -- and thus less attack surface; and b) Its community is fiercely conservative, to the point that major changes to Bitcoin (e.g. increasing the total supply) are completely off the table. These properties inspire confidence, making Bitcoin a much safer bet than any other cryptocurrency.
Both are valuable because of their universally recognized scarcity and value. If you want to put your wealth in a SoV cryptocurrency, Bitcoin is the clear schelling point.
Ether will remain competitive with BTC, it may even flip it in market cap, but I doubt Bitcoin will ever go away.
I don't think taxes justify the value of a state currency, otherwise the value would fluctuate wildly when close to tax season.
if one entity somehow manages to control over half to the total ETH tokens, does this enable an attack analogous to bitcoin's 51% problem (which happens when one miner controls over half of the network's raw cpu power)?
Also, see this tweet from Vitalik: https://twitter.com/VitalikButerin/status/130129808602782105...
So even if there was a successful first attack from some organised body that's all the time they get.
I'm not sure that's correct (the tweet doesn't get into any details so I went to ethereum's website https://ethereum.org/en/developers/docs/consensus-mechanisms...)
> The threat of a 51% attack still exists in proof-of-stake but it's even more risky for the attackers. To do so, you'd need to control 51% of the staked ETH. Not only is this a lot of money but it would probably cause ETH's value to drop. There's very little incentive to destroy the value of a currency you have a majority stake in. There are stronger incentives to keep the network secure and healthy.
The keypoint seems to be that if your attack fails your stake gets destroyed so besides the positive incentives (a good stable network working for all) this system also relies on punishing failed attacks.
A 51% staker who just censored transactions could hold out longer. If the problem were severe, the community would have to decide whether they want to manually fork off the attacker. The equivalent for PoW would be changing the hash function.
Gaining 51% can be more expensive to do on PoS than on PoW. If 10% of the tokens are staked, you need to accrue another 10% of the total market cap. On PoW, if the annual inflation rate is 2%, the hardware is good for two years, and half the mining cost is electricity, then the total value of mining equipment is only 2% of the market cap, and that's how much you'll have to spend to get 51%. (If miners are rentable, then much less for a brief attack.)
The community will notice and can decide to do a hard fork of the network where they "delete" the attackers coins.
So the network would have experience a hickup, but the hacker has lost billions of dollars worth of ETH and can't attack anymore.
This is different from Proof of Work & Bitcoin. If an attacker gets 51% of the "mining power" (physical hardware), there's nothing the community can do to "delete" their hardware.
Check out https://ethereum.org/en/eth2/
"What is Eth2?
Eth2 refers to a set of interconnected upgrades that will make Ethereum more scalable, more secure, and more sustainable. These upgrades are being built by multiple teams from across the Ethereum ecosystem."
Long answer: The beacon chain _will_ run in parallel until the two chains are merged. Until that time, ETH in the Beacon Chain isn't transferable, so effectively not a separate asset.
However, exchanges are offering Eth2 staking derivatives which they're branding as "ETH2". But it should be remembered that this is a derivative, not a separate M0 asset.
At any point in time, of course, any node or set of nodes can declare a fork in the chain to be invalid and reorganize on another chain. That's what happened with Ethereum Classic and it could happen again. I think less likely unless there's a vulnerability discovered in Eth2, though.
Also less likely because in some ways the Ethereum Classic incident helped cement Ethereum's place by scaring off all the ideologues and keeping the participants who were more pragmatic.
Wondering if I should invest in the coin itself (which makes sense for deflationary coins) or a company doing something with it (which makes sense for an inflationary coin)
As a matter of fact, knowing how many ETH will be produced over a given period of time is a question I never managed to get a satisfactory answer to.
There's probably an algorithm buried somewhere in the code, but it's likely not a simple one.
For PoS, issuance is a formula depending on the amount staked. How that works out: https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0...
If you want to dig into the actual formula, it's explained here: https://benjaminion.xyz/eth2-annotated-spec/phase0/beacon-ch...
Until PoW migrates to PoS, probably in about a year, they'll operate in parallel and we'll have both rewards added together.
A final factor is an upcoming change to the way transaction fees work, which will burn most of the fees instead of awarding them to validators. That will reduce net issuance further, possibly even taking it negative.
In any case, by the time the full transition to PoS is complete, one thing that will be easy for the market to know is that issuance will be substantially lower than BTC, and possibly negative depending on transaction fees.
Inflation = value of money decreases.
Sargos seems to be confusing 'inflation' and 'monetary inflation' (increase in money supply).
So Ether's (in/de)flationary behaviour is a consequence of multiple factors: network consensus participation (mine or stake), network utilisation (burn due to gas fees for using the Ethereum VM), and network parameters (block or epoch reward)
Some people, Austrians define any change in the amount of base currency as inflation/deflation. This is the traditional definition.
However the normal everyday usage of inflation/deflation talks about the 'General Price Level', usually measured with things like GDP Deflator, or CPI. Some way of trying to measure the general price level. All of those measures are imperfect.
By the first definition, both Bitcoin and ETH are inflationary but only slightly so.
By the second definition it is very hard to say because we don't really have a way to measure it.
Conventional economists use "deflation" to mean "price deflation" -- that is, the price of goods, on average, decreases over time, as denominated in the currency in question.
Austrian (heterodox) economists often use the term "deflation" and "inflation" to refer to changes in the money supply, rather than prices.
In the crypto space, people often use the term "deflationary" to refer to currencies that do not increase exponentially in supply; or more specifically whether the marginal change in supply is decreasing.
For 1, no -- saying "Ethereum is deflationary" is equivalent to saying "the value of Ethereum will always go up", which is clearly nonsensical, because it's saying that Ethereum is a risk-free investment.
For 2, no, Ethereum is not deflationary, the supply increases linearly, so the supply is always increasing.
For 3, yes, Ethereum is deflationary, because the supply increases linearly, which means the marginal change in supply tends to zero.
Your question about investments seems to be following the implication that if 3 is true, then 1 must be true, since they both use the word "deflationary". That may be the case, but I would hesitate to think that a mechanical system can guarantee an increase in value.
People use "deflationary" for hard-capped supplies, "disinflationary" for uncapped supplies that have yearly inflation rate going down toward 0 (such as with a pure linear emission), and "inflationary" for emissions whose yearly inflation rate stay above some constant greater than 0.
It does make sense if you compare a less inflationary currencly to more inflationary currencies. It's risk free in the sense that the USD exchange rate will keep up with inflation of the USD in the long term.
So you can compare how "inflationary" currencies are by 2 & 3, but not by 1 -- that's not a mechanical effect. Even the most stringent monetarist in the world wouldn't at a minimum factor in monetary velocity into the value equation. And monetary velocity is a behavioral thing that can be mediated both by availability of current and future capital as well as liquidity preferences of individuals viewed in aggregate.
I don't understand any of it.
I don't understand cryptocurrencies.
I don't understand what problems they really solve.
> "Ethereum is open access to digital money and data-friendly services for everyone – no matter your background or location. It's a community-built technology behind the cryptocurrency ether (ETH) and thousands of applications you can use today."
I can do all these things already.
> Ethereum is a technology that lets you send cryptocurrency to anyone for a small fee. It also powers applications that everyone can use and no one can take down.
I don't have this need ever, to be frank. Who really does, looking at the larger population?
> It's the world's programmable blockchain.
I don't understand what this means. What does this do for real-life applications?
What problem / which problems are being solved here?
Everyone just seems to want to use it like gold, to store wealth or speculate with. This is stupid. But alas.
Except ethereum has a decentralized composable financial ecosystem gaining traction as we speak with over $15b locked up.
[1]https://blog.coinbase.com/a-beginners-guide-to-decentralized... [2]https://defipulse.com/
It's just programmable money so it's really the beginnings of a new financial system that is a bit divorced from our current one. It's not panacea for the world financial problems, but it's cool and fun.
Hawala has succeeded in performing that role for centuries.
https://www.schneier.com/essays/archives/2019/02/theres_no_g...
1 https://news.bitcoin.com/iran-bitcoin-sanctions-inflation/#:....
Isn't this to be expected when there's no way to balance the currency value by adjusting the supply dynamically?
Then, I deposit them in lending protocols like Aave to earn ~6% interest.
Would you say that I'm using them for their original intended purpose?
https://www.amazon.com/Bitcoin-Standard-Decentralized-Altern...
I'm looking for an explanation in plain English that shows why any of this matters.
Do you believe that any existing cryptocurrencies currently fulfill that criterion?
The premise that trust systems have failed humanity is flawed. I am willing to be persuaded otherwise but I doubt this will come from reading “a couple books” because as it stands I firmly believe that the idea is complete nonsense.
Actually this is a pretty good example of a problem that quadratic funding has a good chance of helping with. It's really hard to coordinate all nations on Earth but not actually that hard to coordinate people from all over the Earth. https://wtfisqf.com/
Sorry but this sounds like the conspiracy drivel commonly heard in crypto circles. To a reasonable person, Bitcoin's price movement is a market signal of people speculating and trying to become richer - simple as. Occam's Razor, and all that.
All reasonal people start as Bitcoin skeptics BTW, that's fine.
Such team undergoes way less scrutiny than any trading firm or sovereign nation, probably.
This is, in the words of their proponents to prevent abuse by the trusted party:
Credit card companies blocking transfers to legitimate companies on the basis of pressure from the US gov.
Banks printing money and devaluing currency of currency holders, etc.
Bailouts/handouts to undeserving private companies with public money.
Often mentioned that this freedom comes at the price of making it easier for bad guys to receive payments for various bad things, increasing their income, increasing the scope of the damage they do.
If you write a program on the eth blockchain, no party can one change the way the contract was written or execute. What is written is what it does. You can't change the TOS later or something similar. They are called contracts for this reason.
They prevent screw-overs in TOS that you have to "accept" or similar shenanigans that big corps use to screw you over, over time.
What guarantees do we have that the developers/maintainers won't push changes to their own benefit? Presumably they already have given themselves a bunch of starting capital that everyone else's buy-in props up, like bitcoin.
When does that really occur in every day life?
I understand that a seller can scam me (send a brick) or I could revoke my payment and scam the seller.
But that problem is never solved?
> Credit card companies blocking transfers to legitimate companies on the basis of pressure from the US gov.
Technology is never going to fix societial problems. Paying with dollars or crypto -> if the USA says no, and you still pay you can get fined or worse.
> Banks printing money and devaluing currency of currency holders, etc.
To keep currencies afloat and thus society operational / functioning, you mean?
> Bailouts/handouts to undeserving private companies with public money.
Technology is never going to solve human problems like that. This is not a technology problem.
Coinbase users put their trust in a custodian. That custodian has the ability to steal from them or be stolen from. That's how MtGox went down in flames.
Uniswap users don't have to custody their funds with anyone to trade. They can use whichever they want.
Coinbase's platform can change on the whims of the company. Users have to accept this if they want to continue using the platform.
Uniswap is nothing more than a handful of small contracts which are unalterable and public. If you don't like, fork it. Don't like the official frontend? You can fork that too. Some wallets just build uniswap directly into the app. And since you don't have to sign up to use uniswap, the experience is completely seamless.
Now there's a lot more you can do with decentralized applications, but this should help get the point across.
The latter. The contracts are deployed to the blockchain itself. The output of the code is secured by ethereum's consensus rules.
>The "forking the official frontend", is that something you just run on your machines or is it run in a distributed manner somehow?
The front end is something that runs locally.
Did things change since the days of the DAO hack?
Actually eliminating this problem by using a cryptocurrency requires 2 crucial aspects:
1. The transaction being performed would have to be stateable and checkable 100% as an eth contract. Thus, if the deal is: I mail you my old iphone, and once I receive it, you shall gain a bunch of digital value, then.. how? How do you put in an eth contract that the iphone is real, not stolen, not broken? How do you protect against someone mailing you a brick? If the entire transaction cannot be _completely_ described in the contract, there are still third parties and plenty of room for scams. As far as I can tell (and I'm no expert, so I'm writing this mostly to check if my assumptions are wrong - plenty of knowledgable folks in the thread), bitcoin, ethereum et al make this _worse_: Normally if you send me a literal brick in a box, I don't have to file in court, I can just make some pictures and make a claim with the payment processor. Yes, this can be abused, but right now, today, this is more of a help than a hinder: They _DO_ prevent the 'mail a brick in a box' scams relatively well. With ethereum and such, if we code in the contract that the money will be transferred once DHL or UPS or whatnot signs off that the package was signed for, then what the heck do I do if you mail me a brick in a box? The kinds of middlemen (courts, governments, payment processors, transaction broker, etc) that can help me out are precisely the middle men that systems like ethereum are trying to eliminate!
2. That Joe Random knows how to program eth contracts and inherently knows how to ensure that the contract code seems like it has no leaks. Given that teaching someone to program is difficult, that there are many folks who don't seem to have a knack for it, and that there are lots of stories about faulty contracts that resulted in massive financial loss, I don't see how Joe Random gets to do this. Thus, Joe Random will need to rely on trusted parties: A programmer for the contract, or a website that shows standard contracts, or a security consultant that will review the contract code Joe Random wrote to ensure it is sound. If that consultant wants to scam Joe, how does Joe stop this? One could make overtures that eth itself will solve this (by using it to convey that a whole boatload of parties all sign off on 'You can trust Jane Consultant, she knows her stuff', but now you're just encoding a web of trust, which you can do just as well for current systems ('You can trust paypal, they know their stuff and will fairly treat chargebacks and complaints' [1]).
Combine the two and I'm left with the idea that the problem eth tries to solve is real, but that it is just the technical part of a more complicated solution - a solution whose human parts are not obviously solved.
In other words, yeah, eth as a concept seems misguided and mostly useless to me. But I'm sure I'm missing something.
[1] PayPal isn't particularly trusted. But that's just proof of the current system working: It's not hard to figure that out, and to get an in-depth analysis of what paypal will and won't do for you if you get scammed.
Cryptocurrencies will only make sense in cataclysmic scenarios or for very niche use cases. Trust systems (of which money is one) work well (some times very well) 99.99% of the time.
It’s certainly been useful to some people for gambling - but that use case could’ve been satisfied with a video game, or a physical casino.
It doesn't even need to be a Madmax situation: just imagine a war between the US and China, with one of the involved causing an prolonged interruption in the communications between the two countries, as they have significant numbers of nodes/miners in most blockchains.
I'm afraid blockchains actually depend on the normal functioning of society with all its governmental structures in more ways than most crypto enthusiasts are ready to admit.
I was thinking of an economic or political collapse where technology otherwise remains more or less intact.
Anyway, we agree that it’s a niche scenario.
[1] I know this thing is more than a decade old, but new and old are very distorted terms in technology and honestly only become apparent post facto.
As somebody who studies history of economics and history of economic of thought the Bitcoin community has taken up very strange ideas about money and some views that are simply wrong.
Bitcoin is a basically a quasi-commodity and behaves much in the same way.
It is basically a distributed computing platform designed to handle money, idea is you make a program that handles money, and it runs in a decentralized manner, this way noone can interfere with it, for example you could make a program that tells the users the password to login on a dissident newspaper if they donate something, since it is decentralized the government would have a harder time taking it down. (that is just a simple example, people doing all sorts of stuff with this)
What does this mean for the average citizen in America or Europe?
Also, I read this:
> Ethereum clients use a listener (TCP) port and a discovery (UDP) port, both on 30303 by default. > If you need to run JSON-RPC, you'll also need TCP port 8545. Note that JSON-RPC port should not be opened to the outside world, because from there you can do admin operations.
Sounds like quite easy to block by any government.
Or just cut off internet access at all.
But saying that is same saying that a normal bank is useless because the government can just "just cut off the power" and thus the bank servers would be down.
And indeed in some siege situations, that would be possible, but Ethereum never promised to be siege-proof.
As for what it means to the average citizen in America or Europe? Well, one of the popular uses of Ethereum is gambling, that in some places is legal, in some others is not. Another use is create business that can't operate in some jurisdictions for whatever reason (for example because sanctions, or just plain old outdated laws that were forgotten).
You are really selling this to me...
However, if you want to have a somewhat modern society taking away basic things like internet and power is very difficult. You can maybe to that for some individuals, but doing it for all is very tricky.
The argument that, its not 100% possible to prevent all ways for a government to do something, then you should do it at all, is a terrible argument.
Why would I use this one?
I read a lot of difficult words I don't understand. It doesn't explain anything to me.
With Bitcoin it just works with 0 issues. Also I don't need to pay taxes which is good thing as I don't like this government and don't want to fund it.
People buy cryptocurrencies and hope the price rises and they can dump it back into the USD it has always been valued in, before everyone else does the same.
Since spamming forums to inflate the price doesn't work as it did a decade ago, in order to prevent them crashing to the floor, all kinds of nonsense white elephant use-cases have to be imagined/invented.
We all understand cryptocurrencies. (You're just not supposed to admit it out loud.)
We've been here before in tech with the dotcom bubble. Lots of noise, nonsense and white elephants. Most projects will crash and burn, some will go on to change our daily lives.
Your central argument is: 'You offer a service to everyone. I already have that service. Therefore you are not creating value'
But - for the sake of argument - if they do, I don't see the unique selling points.
PS: bitcoin holder since 2014, so im not here with anti crypto propaganda
PS2: i find it weird that noone here talks about USDT
I think mostly it's for people don't want the government/Federal Reserve fiddling with the value of their money.
Personally, I think monetary policy is an incredibly valuable and important tool, but I recognize that trusting the powers that be to wield it properly is a bit naïve of me.
I guess all crypto-currency is an attempt at digital cash. I.e. the ability to send "money" between people who do not trust each other digitally; with secrecy/privacy in manner which cannot be taken away by states/governments/banks etc.
Why people want to solve this problem through a scheme of chained hash-values and mining (which I guess is just padding the data you compute hash-values from until it hits a certain number of 0's at the end), is still unclear for me.
How does a cryptocurrency actually solve the lack of trust?
From the few things I do understand, I think it doesn't at all.
I think this article by Bruce Schneier is interesting: https://www.schneier.com/essays/archives/2019/02/theres_no_g...
> with secrecy/privacy in manner which cannot be taken away by states/governments/banks etc.
I don't have a need for that kind of secrecy. I understand the Silk Roads of the world would like it though. But that doesn't sell cryptocurrencies to me.
If you need to hide stuff from the government, there are bigger problems that cryptocurrencies can't solve, as I can tell.
I said it was an attempt, I'm not sure it solves it..
> If you need to hide stuff from the government
All governments are not good. The US government for instance "froze" (basically took) all the money WikiLeaks had, and made it impossible to send them money through traditional banking systems. So crypto-currencies have already been important in funding an organization that uncovered war-crimes; which is a good thing.
Not all secrecy/privacy is criminal behavior, sometimes it is actual journalism. I guess we have seen so little journalism in the last few years we barely remember what it looks like.
How is this solved with crypto? I bought a few things with crypto that they were never delivered, so I got scammed. Yes, crypto helps the part receiving money, not the part sending money. This is not a solution, it's just moving the problem to the other side.
OK, I will let you know if I come up with one :-)
Lets say I want to transfer some assets to a guy without anyone knowing from any internet connection. There is a demand for this global service.
Crypto-currency faciliates this. You buy crypto with your normal currency. Transfer. Switch back to normal currency. Yes you've endured some volatility in price but the whole operation was done in an hour or so.
So legit business will set up as "Bitcoin Banks" allowing people to trade in and out of them.
It's truly "digital cash".
So I put all my money in the BTC blockchain in China and pulled it out in the EU. The other option was to get it in cash and physically bring it over the border, which I considered riskier.
No reinventing -- this tech doesn't require a middleman. Unprecedented.
Not if you use stablecoins like Dai :)
It's an alternative financial system that anyone can hack on and no one can prevent you from using. Many, especially on HN, quickly lose their Hacker ethos and revert to being state worshippers when it comes to the monetary system, for reasons I don't fully understand. But there is a sizable community of programmers around the world that value a completely open, transparent, hackable, and protocol-oriented financial system. Its network effects have allowed it to be greater than the sum of its parts, and novel financial applications continue to be constructed on it.
Neither do I.
I believe it's sour grapes: they missed up on crypto following the advice of people/websites they trusted (given the negative outlook on HN since 2009), and it's becoming harder and harder to justify their past mistakes.
So it turns into cognitive dissonance.
Said differently, just like how it's hard for someone to understand something when them making a living depends on NOT understanding it, they must keep not understanding to justify their past mistakes.
Eventually, I think it will turn into a Ballmer-esque throwing chairs, and calling it a cancer, before coming to terms with reality.
>ETH 2.0 is finally here and will transform Ethereum as we know it. But what is the philosophy underpinning ETH 2.0? And what is Ethereum building towards? It all starts with the idea that Ethereum is the foundation of a social contract for the global economy.
>Ethereum is a global public good that is open, borderless, neutral, transparent, and censorship-resistant.Ethereum provides a system of property rights, rules, and economic opportunity for anyone in the world with an internet connection. With Ethereum users and builders are sovereign and able to determine their own economic destinies.
>This is important in an age of declining trust in institutions where many people don’t have access to stable systems of property rights or economic opportunity. With this in mind ETH 2.0 was designed with five key principles:
- Simplicity - Long-term stability - Sufficiency - Defense in depth - Full light-client verifiability
>Simplicity - Allows ETH 2.0 to minimize development costs, reduce its attack surface, and clearly convince users that protocol parameter choices are legitimate because they’re easier to understand (key for credible neutrality).
>Long-Term Stability - Although Ethereum so far has favored evolution over stability, ETH 2.0 is designed with the idea that once built, there should be little need to change it for long periods of time - a necessity for Ethereum to serve as public infrastructure.
>Sufficiency - Blockchains must be powerful enough for it to be possible to build trust minimized layer2 protocols on top of it. In order to achieve this blockchains must include an expressive programming language, scalable data availability and computation, and fast block times.
>Defense in Depth - Blockchains must work well under a variety of possible security assumptions. A key way to achieve this is to design the system so that it is as decentralized as possible to prevent faults, collusions, and attacks. And in the case where harmful collusion does take place, it’s important to make it extremely expensive for those colluding and easy for non-colluding participants to recover the system.
>These are the core reasons underlying Ethereum’s shift to Proof of Stake.
>Full Light-Client Verifiability - Many users will only interact with Ethereum through light clients. Thus it’s important for those users to be able to verify that the data in the full system is available and valid, even under a 51% attack (under certain assumptions).
[1] Ethereum is on course to settle $1 trillion in one year more than double the transaction volume of Bitcoin.
[0] https://twitter.com/RyanWatkins_/status/1333588739277414401 [1] https://cointelegraph.com/news/ethereum-set-to-become-first-...
The trust factor requirement is removed from the physical infrastructure and operators.
For bitcoin and most cryptocurrencies, this is used for a ledger of value transactions.
Now we have an way to transfer ownership and value. What the internet did for information transfer, we now have for value transfer.
Ethereum generalizes this with a virtual machine that can run arbitrary computation and store arbitrary state.
A trustless global value transfer machine that requires no PII (which could be regulated, and added as a requirement in compliant applications, of course), central point of trust, or custodian of data. Where the security layer between the service/application/protocol and the end-user is abstracted away and taken care of by the Ethereum ecosystem.
In the phase we're in right now, a lot of applications are related to finance. There is both transformation of traditional finance[0], and the new sector of "defi" that IMO is here to stay and grow but is in the early half of a huge bubble that will burst hard).
That aside, this is enabling a new way to structure ownership, applications and anything between. If blockchain-based currencies and smart contract platforms end up as Orweillan tools of control, or liberating and improving our society, is mostly lot up to developers, teams, and users.
I hope more people get it.
But not not too many too soon, because the infrastructure wouldn't handle it. Eth2 improves on that by magnitudes, so this news is a crucial step.
[0]: Source: Working at a digital asset service provider with some bigger and more well-known financial institutions as clients, and friends in the industry.
I really didn't.
Why should I care about any this?
How can you explain this to an average person in the street?
- Someone lives somewhere that the U.S refuses to bank with (Sanctions)
- Someone who lives somewhere that simply has no financial infrastructure readily accessible and relies on prepaid cards for things like water and electricity (Rural Africa?)
- Some industries are forbidden to use the majority of credit card processing facilities without excess fee's (Adult content for example)
These are examples where one could build processes around something like Ethereum, with the understanding that you are primarily just adding another input to the existing system but with the trade-offs being more access and lower fees but also less protections and greater risk.
- To commit a crime
- Not a real use case (If someone has no access to normal financial infrastructure, including Venmo and similar, how would they ever use crypto)
- To avoid processing fees by paying higher fees?
Cryptocurrencies won't solve this problem. If that happens, there are much bigger issues.
> - Someone who lives somewhere that simply has no financial infrastructure readily accessible and relies on prepaid cards for things like water and electricity (Rural Africa?)
Let's be honest. The whole blockhain / cryptocurrency was never about that ever.
> - Some industries are forbidden to use the majority of credit card processing facilities without excess fee's (Adult content for example)
I think there are more than plenty online sites where people can pay for that kind of content without any problems.
I just don't understand any of this.
At it's core cryptocurrency is a way to bypass banks if one was so inclined. Specifically currencies like Monero allow a person to send and receive payments completely anonymously, hence its increased usage on darknet markets.
They enable darkweb sites like Silk Road and it's successors.
Just because something can be used for "bad" doesn't mean it shouldn't exist. The internet also could be considered an enabler for sites like Silk Road, but its not gona get shut down for that reason.
So... the follow up question is, "Are there any good use cases?"
Yes, the biggest that comes to mind is it allows people who may be doing nothing wrong a payment system that cant be stoped. For example, someone of X religion could still make purchases in a society where religious freedom isn't allowed by its governing body.
May not be a concern for you today, but having the option for it is 100% I will support.
Cash I understand, it has benefits. Crypto doesn't, it only seems to have drawbacks and facilitate crime.
We are already starting to see this with Venezuela. The easiest way to get USD equivalents to certain people there is via USDC, which is being worked on with the Treasury Department and Federal Reserve.
"According to the company’s blog post, the Treasury Department and the Federal Reserve deposit funds seized by the U.S. into a bank account in the U.S. tied to the Guaidó government, which converts the funds into USDC that Circle then sends to Airtm." - https://www.coindesk.com/circle-usdc-venezuela-airtm
I'm not sure why you think this. "Banking the unbanked" was a huge Bitcoin mantra back in the day. If anything, it's disappeared more recently as speculation has taken over and the narrative has moved from "p2p cash" to "store of value".
Frankly, if we're going to be broadly racist and otherwise discriminatory about this, I would say that Ethereum and other blockchain systems are vanity projects for first world, white, city dwellers, with very little relevance for the rest of the world.
Their currency is plunging, their banking system is corrupt, so these are their options:
1. Trade Pesos for USD on black market exchanges. Hide cash in safes & under mattresses 2. Purchase Dai or other stablecoins. Keep money in multi-signature vaults, earning interest through lending protocols.
Plus, cryptocurrencies allow many of them to work for foreign companies and get paid directly in stablecoins.
I come from a country with strong currency controls, US/EU sanctions, no access to international credit cards or money, and an almost 1000% inflation rate. No one cares about crypto currencies, everyone wants hard cash US Dollars, money you can actually use on the streets and hold in your hands. You don't want money that adds another layer of indirection and confusion that you somehow need to trust will get you groceries next time you go to the shops.
About your other points: I see no benefit whatsoever in investing my own time trying to teach you about cryptocurrencies.
Think about it as a secret. Act as it doesn't exist and both our lives will be better.
While I understand why you are confused you must understand that many people can't do what you can do and it's not guaranteed you will be able to do it in the future either. Just look at the situation in Venezuela for example. Even in SE Asia loads of people are still unbanked with no way of changing that.
I think this is not why there is such a hype around cryptocurrencies.
I don't live in a third world country, but I do think cryptocurrency would help in this situation.
I can do all these things already.
Up until the invention of Bitcoin, there was ZERO scalable way for me @joeblau to send you @louwrentius money the way I send an email. By that, I mean the only thing I need to rely on is a protocol (like SMTP) and you'll receive it.
What problem / which problems are being solved here?
I don't understand what this means. What does this do for real-life applications?
If it's mine, why can't I just transfer the shares straight to you for the listed price (Currently $567.60)? Because there is no platform digital trustless value transfer that will ensure that we both get what we want: Me getting the money, and you getting the shares.
Maybe because it's not a need most people have?
> The problem is that money (paper money/currency) is not the only thing that has value which human beings transfer among each other. We share music, art, poetry, equity in companies, ideas, code, etc. What Ethereum does is take the idea of "Digital trustless money transfer" and expands it to "Digital trustless value transfer"
This still means nothing to me. I can't relate to this.
> Let's say I own TSLA stock and I want to sell it to you. I can't, without going through a middle-person. (they take cuts and fees..)
So it's about not wanting to pay transaction fees for buying stock. Hmm, doesn't really sell it to me, quite frankly.
For example, intermediaries such as brokerages and banks taking money from your investments and selling your data (and order flow in the case of trading) is clearly inefficient and unnecessary, even if you don't care about it personally.
Yes that's true now, but what about in 1997? That's what year it is in Ethereum now.
I mean, the only way I can pay rent to my landlord in 2020 is by having my bank send them a physical check that takes 5d to arrive (during which time no-one gets any interest), or then use multiple Zelle payments since I have an artificial cap that is lower than my rent.
Maybe because it's not a need most people have?
This still means nothing to me. I can't relate to this.
So it's about not wanting to pay transaction fees for buying stock. Hmm, doesn't really sell it to me, quite frankly
There was no internet before 1969, clearly that's because no one needed it.
>This still means nothing to me. I can't relate to this.
This is clearly a difficult subject but its ok, not everyone is smart enough to understand
>So it's about not wanting to pay transaction fees for buying stock. Hmm, doesn't really sell it to me, quite frankly.
Now you're just trolling.
How can I be sure what you're selling me is in fact what you say it is? And if it's not, what recourse do I have?
If I buy something directly from another person on Facebook Marketplace or Craigslist, I'm not going to pay full retail price, even if the item is unused, because I'm giving up any form of recourse if the item is defective that I would have received had I purchased directly from the manufacturer.
How can I be sure what you're selling me is in fact what you say it is? And if it's not, what recourse do I have?
For your example of FB marketplace/Craigslist, you want an Escrow service with a way to have you or a 3rd party validate you're not getting ripped off. That type of service exists via cryptographic primitives in both Bitcoin and Ethereum allowing a transaction to be blocked if there is something fraudulent.
Compared to Bitcoin, there are consensus mechanisms that are a lot faster (3 orders of magnitude), cheaper (almost free transaction cost), near instant finality (seconds, not 1 hour) and leave almost zero carbon footprint. They just haven't been proven out at scale yet.
Correct me if I'm wrong, but this still falls far short of like, VISA.
It also lays the groundwork for scaling tech that will vastly increase the transactions per second.
2. What happens if I send BTC without paying the middle-people a fee?
If the recipient doesn't typically receive it in seconds (and there's a public log of every sent and received 'message') let's stop making stuff up like bitcoin makes sending money like sending an email.
* you can mine your own transaction if you have the ability
* you can use a layer 2 state channel network like lightening (bitcoin/litecoin) or raiden (ethereum) to exchange value without a miner.
* if you are worried about fees, there are networks like EOS which don't have have them.
* there is at least 1 ethereum wallet that will pay your fees for you.
* if you use monero, the miner can't distinguish your transaction from anyone else's, so there's little to worry about with regard to selective censorship.
* if a bitcoin/ethereum miner does censor you, it doesn't mean your transaction doesn't get processed because there are other miners.
Hope this info is helpful.
Transaction fees are an important economic inventive for persons or organizations who run the “nodes” that make up the network. The hardware, electricity, and maintenance by humans needed to run those nodes cost money, and running them is not an altruistic endeavor. One of the goals is to make a profit; staking/mining rewards and transaction fees make that possible.
What problem is cryptocurrency solving then?
The software behind it is open source and anyone with the know-how can contribute to its improvement.
Anyone with the means and know-how can be part of the network, i.e. operate one/more nodes on the network. With e.g. Ethereum 2.0 (ETH2) the bar is much lower in terms of hardware and electricity costs. For example, I’m running an ETH2 node at home on an Intel NUC (Core i3) with the BIOS set to “low power mode”; its power draw is hovering around 10 Watts, and it would be around 4 Watts if I wasn’t also running a non-mining ETH1 node on the same box (presently necessary as the ETH2 network transitions away from being an ETH1+ETH2 hybrid).
Pretty much anyone with a computer can setup a wallet and near instantly send/receive funds to anyone else in the world who also has a wallet. There is no red tape and no regulation/interference (in the tech itself, that is; your local government may have some laws).
There is the difficulty of acquiring cryptocurrency with USD, CNY, etc. But in most places it’s not that difficult to setup an account with an exchange; or you can arrange for a direct transfer if you know someone who is willing to swap crypto for cash (just be aware of local laws).
I'm skeptical because I read this and it sounds like using technology to create a system with even less accountability and whose outcomes, however horrific, will be justified by "That's just how the system works; I don't know what to tell you."
Simple solution for illegal/semi-legal activities. Think some goods, money laundering (try to transfer money to North Korea, Iran) even to your relative.
Also, there are some privacy minded individuals as well who would like to pay for things like VPN, domains, servers who don't want to get their account tied to theirs credit card.
Speaking of Ethereum, think of it like digital money + some js function which can be executed on demand. It allows you to make scams like bitconnect. In other words casino / gambling. Really hard to do legally but very easy to deploy casino function to Ethereum. Those markets are huge.
In the case of Ethereum, digital scarcity secured by a blockchain enables a turing complete state machine that the world can use. In the most basic terms, this will remove clearing houses for transactions of assets. In the long term this will lead to novel types of assets, and make ownership extremely liquid. Imagine using your phone to buy shares in a recording artist you just discovered, and selling those shares when they win a grammy. Imagine building a stream of passive income based on the shares you've earned in projects you've worked on throughout your life.
As an example, already, anyone in the world can buy property in the US: https://realt.co/
What the web did for infomation, Ethereum will do for value.
Does this sentence actually mean anything?
> In the most basic terms, this will remove clearing houses for transactions of assets. In the long term this will lead to novel types of assets, and make ownership extremely liquid.
What does this mean in concrete terms?
> Imagine using your phone to buy shares in a recording artist you just discovered, and selling those shares when they win a grammy. Imagine building a stream of passive income based on the shares you've earned in projects you've worked on throughout your life.
Who wants this?
In more traditional software engineering language, it means “you can run stored procedures on an incredibly slow and limited distributed database.”
Also those stored procedures are immutable, written in a language with more holes than Swiss cheese, and you have to use a scammy cryptocurrency to pay for the privilege of running these unsafe programs. The adherents call this “web 3.0” in some kind of ironic joke because it’s nothing like the web.
You're probably referencing this fuck up: https://en.wikipedia.org/wiki/The_DAO_(organization)
The huge advantage of smart contracts is that they are supposed to be trustless - you don't need to necessarily trust your business partners because contract is set in stone ... code and will be executed exactly as agreed beforehand.
In reality, you move your trust in your understanding of the code. But then when 18 000+ (probably highly technical) people investing $50 million don't spot the bug in the code, then it calls the whole "trustless" concept into question.
It's not even the first time that the 'Compound' smart contract has been 'hacked', but that doesn't stop fools from putting more money into it again.
All these fuck ups are called 'hacks', but actually the code is working exactly as intended, it's just that there are so many ways to write smart contracts incorrectly that it's more than likely they all have hidden bugs, just waiting to be exploited.
-- nobody ever (except Ethereum ideologists)
https://en.wikipedia.org/wiki/2010_flash_crash
Oh Oops...
Enron alone was responsible for ~$74bn of loss.
But be sure, in doing so, to compare them as a share of total transactions made through smart contracts vs. the total involving 'bankers, brokers, company execs, etc.'
Just because crypto currency is a smaller market than traditional finance doesn't mean it's more honest. I'd imagine the % of fraudulent transactions in ethereum is worryingly high.
The critical difference is that the smart contract lets you peek under the covers. If the contract allows for its owners to do things to your tokens, that will be plainly visible in the code, regardless of what the owner says. The owners can lie about it, but the lie can be seen by all and sundry. The creators of the token mathematically cannot do anything the contract doesn't allow them to do.
A sucker is born every day, this has little to do with the underlying tech though.
It seems like there would be a reasonable argument that taking value from a contract as defined by code (even if not the intention of the programmer) is not theft.
But would be very interesting to see how a court interprets this.
Traditionally a computer that most people are familiar with is a single machine, like PC or the device we can hold in our hands. Etherium is a swarm of millions of computers that anyone can add to the swarm.
When people claim Ethereum is turing complete, it means that anyone can launch a program into it, and the "swarm" runs the program. But which node's output is the truth? Without some mechanism in place, a bad actor could claim to have computed an output that serves them greedily.
Ethereum has baked in protocols so that the distributed result of millions of nodes running a program reaches a stasticial consensus.
Being turing complete means that any computable program can run on Ethereum.
So you can imagine writing a program that, say, runs an auction, or performs escrow for contractors, or whatever. You could run doom on it, albeit at an extremely low framerate because you need the swarm to validate each frame.
I hope this explanation helps.
Edit: I swear autocomplete is becoming more forceful over time.
Usually the reason to run something on more than one computing unit is to achieve additive gains - like getting results faster, or processing more data in the same amount of time. This however sounds like a million computers computing the exact same thing. Why would one want to do that? It's a serious question - I'm having trouble imagining a generic use case.
This enables trustless transactions, which gets rid of a lot of business red tape and unlocks productivity.
So yes, each person participating has to do their own due diligence but once the smart contract is live, it is immutable and therefore trustless since it's just code.
It is what it sounds like, and it isn't ideal. In order for the Ethereum network to reach an agreement on the result of a computation, multiple nodes need to do the computation to check each other. How do you decide how many nodes need to do the computation for it to be accepted by the network? That's not an easy question to answer. The simplest and safest way is to require 100% of nodes to do the computation. Safely getting that % down from 100 to increase the throughput of the network is a problem actively being worked on.
As for a generic use case, think of Ethereum as something like AWS Lambda that happens to have native support for transacting assets.
We have all kinds of markets already, ones that are much faster, more liquid and more efficient than any blockchain-backed exchanges.
There's nothing stopping a recording artist from incorporating and listing shares on any traditional exchanges, or you from making a new exchange.
Literally the only things Ethereum adds are decentralization and no way to dispute or reverse transactions, but for 99% of users those are ANTI-features.
To trust a cryptocurrency, you must trust the algorithm that runs it. It's fully auditable and predictable.
It still takes me several business days to complete an ACH transaction in the US, and requires I trust the banking system. Transferring cryptocurrencies happen much faster and don't require the same kind of trust or centralized management.
What you see as anti-features are good reasons why they won't replace the dollar yet, but they still have a place in the market.
What happens when Ethereum 2 inevitably hits a security bug, much like the ones Ethereum 1 hit that led to the DAO hack/theft (some might say... worked exactly as coded)?
Of course when you leave, the shopkeeper (assuming you didn't murder them) can use a phone to inform the authorities. Then a manhunt begins involving resources like police and their cars, radios, guns, protocols, legal justice system, forensic investigators etc.
Is the sharp piece of metal a bug? Is the patch just more force, monitoring and authority?
Edit: And is the cost and risk of trusting an algorithm comparable to the human cost and risk in maintaining current securities "authenticity", which is basically a might is right system?
Many other countries have systems that allow for nearly immediate person-to-person money transfer without blockchains: https://en.wikipedia.org/wiki/Faster_Payments_Service This is not a good argument for cryptocurrency.
Regarding "trusting" an algorithm: in the real world you also have to trust the implementation, and the configuration, and eventually humans involved in the transaction. How often do we see some big data breach on HN? Very rarely has any cryptographic algorithm been broken, but often one of the other links in the trust chain has broken.
The whole point of Ethereum is to reduce/eliminate those links in the trust chain.
There absolutely is: it is almost unimaginably expensive and administratively complicated, hence the only entities to IPO these days are companies valued in the tens of billions, who have exhausted all other options for raising capital privately and need to raise at least hundreds of millions or billions more.
I’m no expert on Ethereum or blockchain generally, but the potential for low-friction micro-investing in small businesses, artists or even individuals seems highly compelling to me.
For a recording artist to raise funds in this way still requires that they deal with all the administrative complications - laws just tend to not be enforced very frequently in this new space.
If Jay-Z launched Jay-Zcoin and raised $100M, the SEC and IRS are going to be poking around his finances and looking for any place he violated the law and imposing fines.
I think a lot of the "potential business models" for ethereum that people discuss may be (sometimes) technically robust, but the are also usually extremely fragile politically.
But Jay-Z raising $100M is the wrong use-case example; he’s already a superstar and already wildly rich so doesn’t need investors, or can easily get them the old fashioned ways (eg record company advance) if he does.
A more apt one is a little-known up-and-comer raising $20k, as they currently might on Kickstarter or Patreon, but possibly using the smart-contract features of Ethereum to link the provision of rewards to some programmed metric like number of Spotify plays.
You are talking probably from a developed country point of view. For those like me who lives in a developing country none of those are accessible for everyone, only for a few percentage of the society. Cryptocurrencies solves a lot of problems for people in oppressed countries or with a lot of terrible regulations and high inflation rates.
https://en.m.wikipedia.org/wiki/Real_estate_investment_trust
Another difference is the pyramid scheme incentives in the cryptocurrency tech, causing everyone who's bought into it to be incentivised to talk about how great it is.
I'm sorry but I really totally fail to see what is appealing about this future hellscape where literally every aspect of our lives is transacted, monetised and profitable. What is good about this? Why is this something to aim for?
Also, this regards the music an artist makes and sells, not every aspect of their life.
The idea of recording companies will still exist. Maybe somehow the big incumbents get caught out by the change to a "digital economy", but all that will happen is new ones will appear, and will end up doing exactly the same as the old ones.
Digital distribution was supposed to free artists from record companies. Now it is consolidated to a few large companies like Spotify and Apple because musicians don't want to run and market their own digital store front.
He makes the same argument that I think you're making, that these new types of "more accessible" financial markets in crypto can corrupt people if they only use it to seek out money for money's sake.
TLDR: it's a tool, that can be used for good or for bad, but like any tool it's better to have it than not.
This sentence is completely opaque to me. I have no idea what you are trying to say.
> In the most basic terms, this will remove clearing houses for transactions of asset
So I will be able to go to Starbucks, buy a cup of coffee, pay for it with Ethereum and not involve my bank?
> Imagine building a stream of passive income based on the shares you've earned in projects you've worked on throughout your life.
I can currently buy shares in companies I work for. Why is Ethereum different (other than I don't understand it)?
Offline account creation
Instantly liquid programmable assets
Programmable banking
Financial censorship resistant
Micro finance
Anyone can use it, it’s surprisingly simple
You could create your own company+shares if you want and they can be instantly available on any market. Ever tried trading a penny stock, or an international stock? It takes forever to open an account at a brokerage where they may or may not allow you to trade certain types of assets, or at certain times. Trades can be reversed and assets confiscated. It’s a million times easier with crypto. Yes it’s a “dark forest” for now (buyer beware) but there are some legitimate platforms like aave and uniswap. Install metamask and check it out! Feels incredibly futuristic to me
I don't know what KYC is but I'm not US based. Sounds like some fee that's peculiar to US banking environment (which I have heard is extraordinarily bureaucratic).
>Instantly liquid programmable assets
Another example of opaque blockchain jargon. Maybe it makes sense, but not as a way to convert the sceptical.
>Programmable banking
I can currently program transfers to happen regularly every month on a certain date, or every tuesday or on soem other timebased trigger. This pretty much covers my personal needs. Everything else I want to double check before approving. I program for a living. Looking around at my family, I don't see anyone capable of writing a simple Python program in order to e.g. pay a bill and my wife has a PhD.
> Financial censorship resistant
Is this a feature? Don't we as a society want a way to control e.g. drug lords and tax evaders moving their money around?
I have never tried buying penny stocks or any type of stock, but is it really such a big deal that you have to wait a day or week before you can place your bets? And that your bets are limited to the roulette and not the blackjack?
KYC stands for Know Your Customer, basically anti-money laundering regulations. Banks need to have a decent grasp on whether or not the money they're working with was "earned" legitimately.
>Is this a feature? Don't we as a society want a way to control e.g. drug lords and tax evaders moving their money around?
See above :)
Disclaimer: I think cryptocurrencies are a spillover from a couple decades of inflationary monetary policy from the fed causing people to seek yield in more and more esoteric forms. I also think they're stupid.
KYC = Know Your Customer
> but I'm not US based
When sufficiently large sums of money are involved, it's hard to conduct legal business and not play by US rules. Swiss banks discovered this, at considerable expense to themselves and their customers. Cryptocurrency exchanges are going through the same discovery process right now, in both the legal and the philosophical sense.
> > Instantly liquid programmable assets
The unfortunate property of the liquidity of cryptocurrency assets is that they have a tendency to get siphoned away or evaporating in ways not anticipated by their owner.
> > Financial censorship resistant
> Is this a feature? Don't we as a society want a way to control e.g. drug lords and tax evaders moving their money around?
That's precisely one of the questions at stake here. Some folks appear to pine for the benevolent overlordship of the likes of, say, Ross Ulbricht.
As far as programmable banking, I meant it in the sense that people can create "bank apps", aka contracts. It goes way beyond simple routing of funds, since it's turing complete.
Financial censorship is a feature, since the finance industry does exclude people and countries. For example, in the US you need to have a $1M net worth or something to be an "accredited investor" which grants you certain privileges. Ethereum doesn't make such distinctions - you can interact with and create any financial product/contract (depending on its rules). Brokerages also regularly halt trading, and make you answer a bunch of questions before trading certain financial products. There are 2 sides to the financial censorship coin so I'm not going to pretend this is always a great feature.
I'm focusing on finance because so far it is the main use case for ethereum. There are a lot of decentralized financial products and derivates now, that even trade in a "USD"-backed crypto (USDC, DAI). Honestly, it all works pretty well, but its not without its downsides and pitfalls.
One of my favorite things about the whole thing is that it gets rid of ACCOUNT CREATION. It's so nice to visit a website/app and just approve it with your wallet. It's the ultimate SSO - there is no email verification crap, its all so instant and frictionless to play with financial products that would otherwise be a bureacratic maze. It's even easier than logging into hacker news.
I also think it's ok to put in some speed bumps and force a tiny bit of due diligence before allowing people to gamble away their savings. I'm assuming there is a different risk profile to trading Kazakstani stocks as compared to German stocks, and I think people should be made aware of what they are getting into.
Since nobody really answered this one I'll explain it.
Let's say you create 1,000,000 Blah-Tokens. Problem: your new asset has 0 liquidity. Right? Because there isn't a market for it. If you get it listed somewhere, there still won't be a market until people start placing buy and sell orders. So, can ethereum fix this? Yes! With an automatic market maker like uniswap. Put your 1M fresh tokens in a pool alongside some ETH. We'll say this pool will obey the law xy=k, x and y being the two tokens. We'll also say that the exchange rate shall be x/y.
Now anyone can come along and transact with you and the liquidity is already there! No order book is required. The price is quoted and tokens are added/removed from pool in accordance with xy=k. You get a fee for being nice enough to supply the liquidity. Oh, and anyone can supply their own tokens and split the fees with you. Wa-la.
How does Ethereum help create a demand for my Blah-tokens? I can already open a web-shop that sells Blah-tokens. I'm fairly sure the demand will be very low, though. Please explain further how an 'automatic market maker like uniswap' will create demand for my Blah-tokens.
Liquid markets enable demand though.
Since real estate is a physical thing, it needs to interface with the legal system, the recorder of deeds, etc.
The goal of all this is to circumvent the legal system, but it will never happen for anything physical. Won't even happen for ownership of music groups if anyone ever hopes to use a court.
For example, in the mid-aughts I was talking with the CEO of a well-funded "semantic web" company about joining. I liked the people and the tech was cool, but I just couldn't figure out how it would turn a profit. His answer was similar to yours, a "what couldn't they do?" answer. Turns out they never found an answer, and got acquired for their technology without ever turning into a real business.
As somebody who used to write software for financial traders, it's not clear to me that removing clearing houses is a step forward. They provide important services. And I'm even more skeptical that allowing randos to trade in opaque, unregulated assets is a good idea. Music industry actors, for example, have decades of experience in creative accounting and screwing people over. Real estate has a strong caveat emptor tradition, and property management companies are not exactly a watchword for fair dealing. So from you description, I'm mainly imagining people all over the world getting fleeced with no practical legal recourse.
As best I can tell, the cryptocurrency space seems hell-bent on rediscovering why strong markets and government oversight exist in the first place. The only demonstrated market advantage Bitcoin has in a decade of operation is in light financial crime like money laundering, capital control evasion, ponzi schemes, ransom payments, and outright theft.
I do hope these technologies turn out to be useful for something. But the "imagine the possibilities" routine worked much better when there was less of a track record. Now I'd rather examine the actualities.
The problem is that cryptocurrency and the community around it is absolutely crawling with scams to the point that it's hard to find things that are not scams. Bad drives out good. Even if the tech works perfectly and can be made to scale, if the ecosystem is full of scams it will never be used for anything but scams and black/grey market applications. Anyone not looking to scam will run away.
Contrast with the stock market. There are scams, sure, but the majority of stocks are not scams. If you bought stocks at random you have at least >50% odds of buying stock in a real and honest business of some kind. If you participate in cryptocurrency stuff at random I'd say you have a >90% chance of being scammed... probably closer to 99%.
All the ad-hoc regulations and institutions around conventional finance are the outcome of a multiple century long Red Queen's race between productive economic activity and noise. Noise includes scams, frauds, bubbles, and other forms of undesirable action or emergent behaviors in markets that get in the way of productive economic activity. That hodge-podge of adaptations is almost certainly sub-optimal, but you're not going to do better by just ignoring the problem domain and offloading everything onto individual market participants. That means every market participant has to operate their own SEC and investigative journalist outfit to have any chance of not being scammed. Not going to happen.
A recurrent fallacy of techno-libertarians and techno-utopians is to vastly underestimate human avarice and opportunism. The people designing these systems are usually fairly honest, so they have a hard time imagining what sociopaths and con artists will do with the things they create. If you create anything that offers even the tiniest chance at making money or obtaining some form of status or power, it will be DDOSed with fraud and con artistry of every kind.
Edit: I am not totally bearish on this stuff and I see valid uses for it, but I don't think it's as broadly world changing as its evangelists do.
Yes, the number of Bitcoins in a given fork has a limit, assuming whoever controls that for keeps it that way. But that doesn't matter much if market demand is such that other forks or entirely new coins become viable.
I grant that crypocurrency fans will look at me weird, which I'm fine with. But economists (and most others) won't, because they understand that substitutability [1] affects scarcity.
There’s an attribute that you can’t substitute - chain difficulty. I’ll let you figure out the rest.
As Bitcoin itself proved, plenty of people will buy into a commodity because it's new and hot, and not because of any fundamental analysis of its value. In that sense, Bitcoin is not in any way scarce.
Also, bitcoin is scarce because it’s hard to get more of it, what the hell is your definition of scarcity? It seems to change from one comment to another.
My definition of scarcity is when the people in the market to buy cannot easily get more of the thing that they want. For people just wanting to speculate, other cryptocurrencies are substitutable. And given how easy it is to start a cryptocurrency, the supply is effectively infinite.
And just to be clear, it's not Bitcoin in specific I'm concerned about. I think the same thing about all the cryptocurrencies, although I have more hope for other ones to eventually evolve toward delivering value.
Very much has. Wild speculation moved on from bitcoin to altcoins circa 2015, from altcoins to ico in 2017 and from ico to defi in 2019. Bitcoin is old and boring.
Vehicle for financial crime - that’s just ridiculous, not even bothering to respond. Go google what fines banks paid in recent decade for financial crimes before claiming this bs.
And bitcoin is p2p cash for all intents and purposes. Ticks all the boxes for me.
> people in the market to buy cannot easily get more of the thing that they want
Yeah, you can’t get more bitcoin, it’s scarce.
> For people just wanting to speculate, other cryptocurrencies are substitutable.
Well that’s a dumb definition of scarcity, unless you also think gold isn’t scarce because there are tons of substitute metals for purposes of speculation on the market.
I appreciate you not responding on crime, as that saves me some time.
I can believe Bitcoin "ticks the boxes" for ardent Bitcoin fans, but that doesn't say much about the rest of the world. Bitcoin did not end up being cash in the common sense of the term. E.g.: https://www.nytimes.com/2018/04/16/nyregion/new-york-today-l...
For speculation, yes, some metals are substitutable. Silver is a popular alternative to gold. To a lesser extent, platinum, palladium, and rhodium. If you don't believe me, just go look at some of the sites and vendors that cater to gold bugs. And I'll note that Bitcoin has often been called "digital gold" and has drawn plenty of interest from the same kinds of people who speculate in gold, so Bitcoin can also be a substitute.
At this point it seems like you've just recreated being a shareholder in a REIT except without all the legal protections.
1) Consistent with a specific set of ideals (anyone can issue, what happens on the network is a matter of individual responsibility, establish economic incentives to funnel people into good behavior, finders keepers, etc.)
2) Obfuscated enough that it’s not immediately regulated into oblivion by the existing financial system
Many people on this site subscribe to the ideals in #1, thus the fervor. The CFTC has decided to do away with #2 (in the states) but it took them over a decade.
That sounds like the opposite of solving trust.
I think that's basically Ethereum.
Oh, also imagine that instead of costing money directly, you instead have to pay somebody to run their car engine at full speed while up on blocks in a garage. Oh, and if they ever stop revving their car engine, somebody else might rev their engines faster/more and then they can steal all your money.
Edit: Apparently ETH 2.0 has reduced the amount of pointless engine-revving.
Most blockchains are strictly inferior to a modern financial system when it comes to things like speed and cost of transferring small sums of money - which is the use case that most people have. But, if you are running Wikileaks, blockchain payments are superior because the credit card companies can't decide to stop processing your payments.
Does anyone else need it? Right now, I think the answer is "no". But nobody really needed a Linux desktop either, and 25 years on we have Chromebooks and Android.
Ethereum allows you to upload complex scripts to it, where those scripts are executed by a variety of different nodes which compare results and ensure that the script was executed faithfully. Do I personally need this? Probably not, no. There's a competitive market in cloud hosting and very few circumstances where I would be afraid that Amazon, Google, or Microsoft is going to tamper with my computation, or refuse to execute it. But there are situations in which it is difficult to get multiple parties to agree on a trustworthy host for data and applications, and current political trends point toward that problem growing in significance. Maybe at some point we will want to use blockchain systems to maintain audit trails or even to coordinate our computations.
If these systems can prove robustness and reliability over a long period of time, maybe it makes sense to write the rules for multi-party computations as Ethereum scripts, and it becomes a ubiquitous low-level part of the stack. Maybe everyone ends up having an Ethereum account and we use it in place of the current payment system. Who knows? These scenarios are unlikely, but then nobody in 1995 would have believed that in 2020 both the majority of the world's servers and the world's most popular personal computing devices would run Linux.
> But, if you are running Wikileaks, blockchain payments are superior because the credit card companies can't decide to stop processing your payments.
That's not a good example to justify any of this, in my opinion.
> But there are situations in which it is difficult to get multiple parties to agree on a trustworthy host for data and applications, and current political trends point toward that problem growing in significance.
Such as?
I don't read anything I can relate to.
> Who knows? These scenarios are unlikely, but then nobody in 1995 would have believed that in 2020 both the majority of the world's servers and the world's most popular personal computing devices would run Linux.
I think that's just false equivalence.
It's a real example from recent history, where technology A was able to solve a problem that technology B could not. This should affect one's belief in the merits of technology A.
> Such as?
During the recent US election, Facebook has struggled to present itself as a neutral broker of information. There were occasions in which it appears that Facebook charged higher or lower rates to different parties for political advertisements. All of the major social media companies are now facing politically-motivated attacks, where political actors are attempting to undermine confidence in the neutrality and efficacy of moderation, ad allocation, and recommendation algorithms. There is a plausible argument that open, verifiable computing networks could be a useful tool in dealing with such situations.
I put the emphasis on plausible because the standard for plausibility is not especially high. There are plenty of other solutions to this problem. I personally think that this is sufficient to make Ethereum interesting.
> I think that's just false equivalence.
What is false about it? My statement about how Linux was perceived in the early-mid-90s is definitely true. The key difference between Linux and its competitors was that it was an open system that could not be controlled by a single private actor, which was a serious concern given Microsoft's dominance of the OS market (which led to their antitrust trial). Ethereum has broadly similar positioning as a provider of computing services, whose only competitive advantage is that it cannot be controlled by a single private actor.
Oddly enough making payments programmable also introduced some of the first bugs in payment programming which raises many issues with the whole concept. In any case, it is all moving forward very fast.
Vitalik has written some surprisingly approachable pieces on the various problems that cryptocurrencies face. It's not too much of a leap to see how these problems appear in non-cryptocurrency contexts. The value I see in cryptocurrencies is that they must develop robust/antifragile solutions to the coordination problems that have plagued society forever. Even if some problems can't be solved, then there are mental tools for making sense of what's going on.
[1]: https://vitalik.ca/general/2019/04/03/collusion.html [2]: https://vitalik.ca/general/2020/08/20/trust.html
Forget about decentralization/transactions for a second and let's take an example of your company transitioning your 401k to another plan. Think of all the people moving this money, all the legal process that it has to go through, all the find print that must be followed, etc. There's a TON of work to move a 401k and the process typically takes months. What if I told you that you could transfer your 401k plan, without the additional overhead of people, and you could do it in seconds? That's Ethereum.
Let's take another example of buying a house. If you've ever gone through this process it takes months to finish, theres tons of middlemen (bank loan process, approval, selling the loan, lawyers to secure the property, real estate agents, etc). What if I told you that you could buy a house, without this overhead, in seconds? That's Ethereum.
The bottom line is our current financial system is based on an army of lawyers, middlemen, banks etc. and large transactions take time and money to solve. With a concept like Ethereum you just don't need any of that, you can transfer large amounts of value instantly and you don't need this army of people.
It is frankly the difference between horses and cars. It's a technological shift that makes previously impossible actions possible.
You can lend dollars on ethereum for 4% APR at the moment. That's a good reason to use this even for someone not interested in other functions. The interest comes from borrowers, who are mostly speculators going long on crypto.
https://compound.finance/markets
USDC is tokenized dollar that can be swapped to/from dollars in a bank account on coinbase. Recently it was even used by the US Treasury to transfer dollars to Venezuela.
Why don't I use my $100 directly instead?
There are a few cases outside the blockchain where you get loans although you already have the cash (e.g. for tax reasons), but I don't understand how it makes financial sense in this case, if everything happens on the blockchain with no other incentive.
Maybe another direct question would be: as a lender, for which risk are you getting paid some interest?
Because it's not $100 in dollars, but $100 worth of eth or something else. Borrowed dollars can be used to buy something else, hoping the price of that something rises.
>as a lender, for which risk are you getting paid some interest?
It's theoretically possible for prices to fall fast enough so that the liquidated value of the collateral isn't enough to pay the debt. I don't think rewards are risk adjusted at all. More like same people that could provide dollars are likely to speculate on cryptocurrencies themselves, or take part in more risky and active yield generating schemes.
There's also special loans with 0% collateralization which amazingly have even less risk than the type described above. Those are called flash loans and take advantage of ethereum behavior that allows mini-rollbacks in the time before a block is finalized. So you borrow millions of dollars in the span of about ten seconds, and if it doesn't get payed back then it gets reverted. Very powerful if you're smart enough to use it properly.
At least you are honest.
In person, I can exchange value (e.g.: chocolate for firewood) without anyone interfering.
Online, I can exchange information without anyone interfering (using encryption).
Online, I cannot exchange value without anyone interfering.
Exchanging value at a distance is complicated, because there’s so many different laws, bank APIs, apps, regulations, etc etc. We use middle-man services to simplify these problems for us — but they charge hefty fees. There’s delays, and arbitrary restrictions. All these complications also introduce additional risk (compared to exchanging the value in person).
A single, perfect global bank, or a perfect standard for all banks to follow, would allow me to exchange value online without anyone interfering. However, such a thing isn’t likely to happen.
Cryptocurrencies, if executed well, offer a real pathway to “I can exchange value online without anyone interfering.”
See what happened to Greece in 2010, where many individuals lost large amounts of cash stored in their bank accounts. This would not happen with Ethereum. If you hold 10 ETH, you’ll continue to hold 10 ETH until it’s transferred elsewhere (or you lose your keys).
Decentralized finance is already happening. You can take out loans against your Ethereum or borrowing or lend already without a bank or an intermediary like LendingClub.
The orchestration of money and being able to program money is limitless without the intermediary is huge. True peer to peer financial instruments are now possible.
Crypto has its good uses, and I've relied on it for my livelihood before (and even wished it wasn't just used as a speculation vehicle) when traditional banking couldn't meet my needs, so it's a very Americentric/Eurocentric thing to assume it's only ever good to speculate on and buy drugs on the Dark Web.
That's it- that's its killer app, it's an alternative to existing money transfer and store of value mechanisms, anything else like "smart contracts" or reduced carbon footprints from better Proof-of-Stake implementations are a nice bonus and worth developing, of course.
Heres one novel idea I have just seen in my twitter feed for a yearn strategy[1].
You deposit tokens to the yearn contract which employs different strategies to lend/spend those tokens in ways that generate profit for everyone participating in the contract.
This strategy is taking up the rest of the bets that trump wont be re-elected on a decentralised prediction market (blah blah see crypto is all gambling). This ability to be able to program collectively program money is fascinating (and is scary with bugs, but with time hopefully becomes more robust).
fwiw - I don't have a yearn account, and am consequently unable to view your yearn link.
This particular strategy is just a bet. but other strategies would involve borrowing assets and lending them out to gain interest like you mention. You could say "i can do that myself, what is gained by pooling" and there are two things: 1 you dont have to manage this, the strategy keeper manages their strategy and takes a small fee to do so, and 2 you would be in competition with the pool, less lenders means higher rates so it makes sense to pool the lending.
They get increasingly complex involving taking insurance, lending, borrowing, producing tokens, burning tokens, etc. all from other decentralised protocols, it all gets stitched together across platforms. Money lego is a phrase often used, but really its more like `npm install insurance`
Ah sorry about the link, didnt realise (btw you dont need a yearn account, there is no accounts on these platforms, but you probably do need a web3 wallet like metamask. you have a wallet and that is your account across all platforms, so you hold your user data with you, and can have as many identities as you like for each platform).
Another link to read more on yearn specifically is Andre's blog (creator and one of the lead devs) https://andrecronje.medium.com/ it is one of the interesting projects as it is growing organically, with a mix of public and anon devs, with no specific management, and no VC investment behind it (like some other defi projects), just people coming together an building interlinking code as public goods.
Many of us feel the same about programmable money. It seems pretty interesting, unexplored, and has exciting, scary potential. It seems like a great place to build community groups openly, fairly, freely(in the libre sense). It reminds me of being a kid in the 90s dialing up to the internet and discovering peoples homepages and forums, sharing ideas and playing with new ways of organising and working together, playing and having fun. The ethereum dev community is inspiring to me.
But you dont have to agree that it is world changing, thats ok. I think there is value in it and will work to prove you wrong! We're all on the same side in the end.
1. There is $14.17B of value locked in DeFi, so it's clearly useful to someone(and scams don't account for the majority of it).
2. USD is not my primary currency, I'm fortunate my employer agrees to pay me in USDC. The fees are usually around $1.5, previously when I used PayPal fees used to be 5.5% deducted from my side.
3. I keep most of my money in USD, which earns interest around 8% APY monthly on yearn.finance/earn. Contrast with the savings account on my bank which gives me 3%.
I don't trade, I don't speculate. I own a small amount of ETH to pay for fees. If you are from TradeFi you will find it much more useful!
Have you ever had your property nationalized?
Have you ever had to leave everything behind and start from scratch somewhere else?
Have you ever lost your savings because the government tried to print its way out of debt?
Maybe you enjoy the privilege of living in a country where these are very unlikely to happen. Most people don't.
Amateur spaghetti code, even in a good language like Go, will not scale, by definition.
Certain design decisions for achieving scalability should have been adopted from the day one. Basically, it is all the principles behind FP and Erlang - share nothing, in the first place.
Scalability comes from being pure functional. This is the main conclusion from last 30 or 40 years of CS research.
Stateless and share-nothing applies to protocols and services too.
This is why so many failed with so called micro-services - only stateless will work.
Things of the scale of Ethereum require deep CS knowledge. Just being overconfident and too cocky is not enough.
Ethereum is the most heavily used blockchain by far and powers all of DeFi which comprises of digital versions of most of the traditional finance tools. It also powers the entire NFT/collectible space which is used by many games, the NBA, and MLB. The interesting experiments such as quadratic funding and decentralized autonomous organizations are also homed on Ethereum. There's some good overviews out there if you're genuinely interested.
Actually, this might be a very good use case for crypto currencies. Guaranteed payout, based on a triggered scenario.
* Sports betting where the contract itself pays you the winnings.
* Insurance where everyone pools together as peers, and the contract arbitrates payouts (think simple-to-arbitrate things at first, like flight insurance or credit default swaps).
* Financial contracts like futures and options, but with arbitrary asset classes.
* Open hedge funds where someone trusted manages a large portfolio, and the contract awards them with a pre-defined bonus based on performance.
As long as an asset can be represented digitally, it can be awarded based on arbitrary, turing-complete conditions, and any programmer in the world can write those conditions with no permission from any bank and with no legal team.
Money legos.
Bitcoin is the de facto base currency for all cryptocurrency exchanges.
Basically, my small stash of XLM nearly trippled in value in the last weeks. The same keybase handhout has floated between 50$ and 230$ in the last year or so. Most of the price changes have very little to do with the amount of progress/change in the Stellar ecosystem; which actually is not that bad given that some non scammy people are trying to use it for real stuff and they've made some nice progress moving the platform and OSS forward. Actual merit has done little to nothing for the value of XLM. But somebody coughs in the Bitcoin ecosystem and it suddenly jumps by a few hundred percent.
Pretty much any time there's a change in value for XLM it is because something is going on with Bitcoin. Eth2 is a bit more widely used but it seems to have similar issues differentiating itself from Bitcoin.
The ecosystem is basically being driven by so-called crypto experts circle jerking bitcoin to new highs and lows via extremely biased web sites passing themselves off as independent blogs/news channels that are pretty much crooks for hire willing to write whatever in exchange for crypto. Most of that BS is so detached from reality at this point that it's hard to see any patterns other than some whales moving bitcoin around to influence the value of bitcoin and orchestrating lots of hype around this so they get to dump after their pump at exactly the right time.
As projects like Ethereum continue to develop, I imagine it will diverge from Bitcoin more.
It should also be noted that Bitcoin has been highly correlated to the SP500 this year, despite being a completely different asset class.
I feel like both communities generally do a good job of moderating away inconsequential cryptocurrency posts.
Does seeing a fintech post on HN once in a blue moon (and choosing not to read it) really cause you that much anxiety?
As they say, ignorance is bliss.