Comment by riptheworld | Hacker News Reader

Comment by riptheworld | Hacker News Reader

Cryptocurrencies as a whole are an amazing innovation. It’s sad though to see people rushing to adopt things they don’t fully understand, and getting hurt as a result.

Bitcoin and Ethereum are pretty terrible currencies. Proof-of-work is a foundational idea in cryptography, but it’s much better suited for preventing mass email spam than it is as a consensus mechanism.

Not to mention how the cryptocurrency space is crowded with useless AltCoins. Unless you’re an expert in the space, its so hard to distinguish from true innovation and dummies just trying to get a piece of the pie. As a result, you have millions of people pushing things like Dogecoin and Shiba, and it ends up hurting real people.

The way I see it is this: a useful cryptocurrency needs 3 things:

(1) Security (2) Scalability (3) Decentralization

Almost all mainstream crypto fails at (2) miserably, and as a result end up failing at (3). High transaction fees, volatility, low throughput, and energy-intensive participation costs are all barriers to achieving actual utility.

It is not clear that proof of stake can be very decentralized. Proof of work, however, can be.

Bitcoin can scale using 3rd party payment providers . That's exactly how fiat currencies are made to scale. We use Visa, PayPal, Zelle, ACH, Swift, etc. We usually do not talk to a ledger at the Fed or ECB, even though they do have those (for huge banks or wire transfers).

I'm not sure what you mean when you say that Bitcoin can scale by using 3rd party payment providers? Any Bitcoin transaction will only ever be as fast as the underlying blockchain, which currently processes around seven transactions per second (last time I checked).

Of course proof of stake can be decentralized! I think what you mean is that it's not clear whether a widely adopted PoS based blockchain will end up centralizing power in the hands of a few whales. This is a legitimate concern; however, this threat is no different than the threat of centralization of computing power in Bitcoin. In Bitcoin, this isn't even a threat, it’s a reality!

I'll say it again: Bitcoin and Ethereum are not great currencies. There are altcoins that have far surpassed both of them in terms of achieving security, scalability, and decentralization simultaneously.

Can you provide more details/references to your statement on altcoins that have better scalability and decentralization.

> Any Bitcoin transaction will only ever be as fast as the underlying blockchain, which currently processes around seven transactions per second (last time I checked).

Then check again. Go google the Lightning Network. This is outdated FUD.

Lightning sets up secure channels on top of the underlying blockchain. Actual blockchain transactions are only required (I'm simplifying) to record slow trends in average usages.

You’re confusing a layer 2 solution that provides separate (and weakened) transaction assurances than the Bitcoin protocol itself. This is evident in the fact that the lightning network suffers from security vulnerabilities (e.g., wormhole attack [1]) not present in the Layer 1 Bitcoin protocol.

This is not to say that the Lightning Network doesn't significantly improve the usability of Bitcoin as a currency. But it does so at the expense of security. A much better approach is to use a layer 1 solution that achieves scalability, security, and decentralization by default.

[1]https://eprint.iacr.org/2018/472.pdf

> I'm not sure what you mean when you say that Bitcoin can scale by using 3rd party payment providers?

Try thinking about it. It would work the same way PayPal works with USD. Bitcoin payments simply don't need to happen on the blockchain. Similarly, I can buy gold in my brokerage account without any actual gold moving between warehouses.

> Of course proof of stake can be decentralized! I think what you mean is that it's not clear whether a widely adopted PoS based blockchain will end up centralizing power in the hands of a few whales. This is a legitimate concern

That's right, which is why it probably can't be decentralized. Even if the majority of holders are small individuals, the coins still end up on exchanges, which become whales.

> however, this threat is no different than the threat of centralization of computing power in Bitcoin.

This is a common misunderstanding of Bitcoin. Bitcoin miners do not "vote" or participate in governance. Thus, bitcoin does not have vulnerabilities that proof of stake has. Bitcoin's decentralization does not come from miners. It comes from users who run nodes and enforce the rules of bitcoin by not recognizing illegitimate protocol changes, invalid blocks, etc. Market forces also play an important part: Bitcoiners would not pay for coins from a block that breaks the rules of bitcoin, because those coins will not be recognized as being bitcoin.

Oh sheesh. No one said anything about Bitcoin miners voting. I was simply pointing out that centralization of mining power (which has already happened in Bitcoin) has essentially the same security impact as centralization of wealth in proof of stake consensus mechanisms.

> It would work the same way PayPal works with USD. Bitcoin payments simply don't need to happen on the blockchain. Similarly, I can buy gold in my brokerage account without any actual gold moving between warehouses.

This is a terrible idea.

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