In defense of cryptocurrency | Hacker News Reader

In defense of cryptocurrency

blog.cryptographyengineering.com

264 pointsfeross563 comments

"transaction reversibility is not about the ledger, but rather about the transaction rules that a currency uses. A reversible currency requires that someone anoint this trusted party (or trusted parties) and that they use their powers to freeze/burn/transact currency in ways that are at odds with the recorded owners’ intentions. And indeed, this is a capability that many tokens now possess"

I think this is arguing that reversibility is not antithetical to permissionless blockchains, because reversibility can be implemented on top of permissionless blockchains.

But that doesn't answer the critique -- the critique is that most real world systems do need trusted parties, and if you build a system of trusted parties on top of a permissionless blockchain, then you could have saved a lot of complexity, risk, and proof-of-economic-waste burn by building on top of a permissioned distributed ledger instead. Reversibility is one example of a design requirement that undoes the claimed advantages of permissionless blockchains that are meant to justify their inherent downsides.

Transaction irreversability is the whole point of the "peer to peer electronic cash system": "Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments... cutting off the possibility for small casual transactions ... What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud" from the opening lines of the Bitcoin white paper.

So Bitcoin was designed for micropayments, and irreversability is a feature to reduce the friction. That is fine because it was intended for "small casual transactions" which very few people are going to invest the time and effort into disputing. It even looked like it might be successful as a micropayment system at first, given small Bitcoin transactions were initially processed without any transaction fees.

The problem is that it has clearly failed as a "peer to peer electronic cash system". It is now used primarily for large transactions, which you absolutely do need consumer protections for if you are a legitimate user (indeed the fact that there aren't consumer protections has made the space so popular with fraudsters, scammers etc.). And as others have commented, the newer cryptocurrencies which attempt to offer such protections end up being worse in every conceivable way from the traditional solutions. Leading back to the original article - is there any legitimate point to cryptocurrencies nowadays?

>It is now used primarily for large transactions

No it's not. It's now used primarily as a vehicle for speculation.

> It's now used primarily as a vehicle for speculation

Gambling. It’s gambling. A significant fraction of the American economy continues to gear towards gambling. Whether it be short-term dopamine hits from ad-fuelled social media or trading crypto, it’s a similar pattern of decay across a common although growing demographic stripe.

You probably should look at different numbers than just the dollar price.

Number of nodes is rising, number of wallets is rising, number of hash-power is rising.

Also, please look into the "Lightning Network". It's the second layer on top of Bitcoin and that's where the whole ecosystem scales (in terms of numbers of transactions per second). Cheap, scalable and fast transactions.

Adoption is happening in many places.

Nodes rise because businesses that want to build on the chains require them unless they want to a pay far too much for a wrapper API. The number of wallets is literally unbounded, and it’s impossible to know precisely how many entities are attached to those wallets. I am one person. My tens of wallets are only for one person. I make a new wallet every time I try new wallet apps. I make new wallets to try new things. “Number of wallets” and “number of nodes” is a bad metric.

I would be highly interested in finding a serious shop/commerce/ecommerc operation where Lighting Network is actually used.

I check LN every 6 months or so and situation is not looking so great.

As it was with Bitcoin itself in early 2010s the shops advertising crypto acceptance are doing it mostly for publicity/ideological reasons or actually have stopped existing.

So I check: https://acceptlightning.com/map.html

Random selection:

* http://paraeasy.ch/joomla/ - Adobe Flash Player not supported ...

* https://www.kaeserei-lustnau.ch - unclear if the shop actually takes any payments

* https://shop.energy-kitchen.ch/#/shop - application not taking requests at this endpoint

* http://www.room77.de/ - SMTP-packets to port 25 (info[at]room77.de) may very likely get a response just as much as electrons sent to our telephoney landline-device (+49.30.31102260). Single static page.

* https://acceptlightning.com/rummels-acoustics.com - standard Bootstrap page - page not found

Finally I find - https://www.livingroomofsatoshi.com/graphs This looks like a serious operation - and lighting network is used quite a bit for smaller transactions.

Unfortunately, this is something that would be of interest only to someone who already owns BTC or some other crypto.

If you are Joe Sixpack you have very little reason to pay with crypto because it will be more expensive than paying with Visa/MC/Paypal etc.

So where are the successful use cases that utilize Lighting Network?

Lightning network pulls transactions off-chain, thus relying on trusting someone (either the person you transact with or some third party acting as escrow for the funds). By adding in trust, you can mitigate the primary bottleneck caused by proof-of-work consensus methods. But if you have people you can trust to transact with, there's no point in interfacing with Bitcoin at all, just make a micro-payment network without the bitcoin connectivity, like Venmo. This is why we don't see adoption of Lightning Network, it just moves us off of Bitcoin, which lets us get most of the "benefits" for none of the costs.

> allowing any two willing parties to transact directly

And what happens if one of the parties is not willing? If someone's e-wallet gets broken into and funds are transferred? How does any current system handle that situation?

A lot of folks consider irreversibility a feature, when there's a strong case to be made that it is a bug.

The system does not handle it. If that is a problem for you, then cryptocurrencies are not for you. In a way it's like cash. If your wallet is stolen, there is no easy way to get your money back.

>then cryptocurrencies are not for you.

What this means to me is that cryptocurrencies are not for anybody. We don't have to create digital systems with the limitations of cash. We haven't had to do that for decades. Now there's a push to go back to the time before that, for (in general) no discernible reason besides people gambling on the price.

In reality, a crypto wallet is better compared to a bank account, though. Most people don't carry their life savings (or comparable amounts) in cash.

> Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments... cutting off the possibility for small casual transactions ...

Very small transactions happen on the internet all the time. Services like venmo allow for very small casual transactions all the time. And there is no cost for the transaction.

Sure venmo is trusted third party and the transaction is reversible, but it's still significantly easier and cheaper than bitcoin. Or any other other coin for that matter.

Many real world systems are "nearly trustless". Of course you still need some sort of court system if someone decides to break bad. But in the 99%+ of times you're in the happy path, economic transactions occur based on autonomous rules encoded in software.

The analogy I like to use is what's harder to buy a $1 million house or $1 million of Microsoft stock? The former process takes weeks, and dozens of man hours from lawyers, realtors, escrow agents, bankers, county property registrars, etc. Whereas a buy order to execute Microsoft shares happens in microseconds. That's because we've built a highly streamlined autonomous system for executing stock transactions. Yes of course, there's a trusted layer built on courts and fiat law at the bottom. And occasionally for a corner case, real lawyers have to get involved. But the vast majority of the time, this layer is completely abstracted away and trading stocks are just bits flipped on a computer.

When somebody says something like "let's put houses on the blockchain", the idea isn't to get rid of the fiat law system completely. At the end of the day, you still need courts and sheriffs to enforce property rights. But the idea is that we can wrap the house in an LLC, whose bylaws state that it's governed by on-chain contracts. (Which Delaware Chancery courts will absolutely recognize and enforce.)

Now instead of directly transacting at the very low-tech county property registrar we can transact using an on-chain NFT that grants the equivalent of ownership rights to the house. (This is very analogous to how Cede & Co technically owns almost all the stock shares in America, and holds them under your name for you.)

That NFT is way more powerful and efficient to transact with than the county property record. It lives on a credibly neutral level that already has billions in native capital and liquidity and exposes a fully Turing complete smart contract system. You can sell your house atomically and instantly to anyone in the world with no lawyers or escrow agents. You can pledge it as collateral and borrow against it. You can fractionalize it and sell a portion. Or roll it into a larger portfolio and slice into tranches. All with no more than few dozen lines of code. Without blockchains all of those operations would take hundreds of pages of legal documents and weeks of back and forth.

>>The analogy I like to use is what's harder to buy a $1 million house or $1 million of Microsoft stock

It's interesting, both have registries, so why is one harder? Is it because the registry is better? No, it's because real property transactions are more complex:

- What condition will the property be delivered in and when? - What happens if the condition is not as specified? - what personal property is included in the transaction? What condition is it in? - Are there disputes over the property lines? - Are there easements? How do they work? - Are there third party consents needed? How do those work? - Will the seller vacate immediately, or will they rent back? - How will you pay for the property and when? - What happens if you don't pay? How much is the deposit and what are the terms of the deposit?

The complexity of the transaction derives from the complexity of the subject matter. Sure, if you could standardize those items, you could make property more like stocks, and people are trying to do that, which so far limited success. But for the average person, this is a huge investment, and they will want to spend time and create a transaction that works for them.

Almost none of the complexities related to the transfer of real property relate to issues with the county registry. Sure registries could improve, but very little would change.

One of the expenses is paying for title insurance. Sure in some sense a perfect ledger would obviate the need for that insurance. But given there seems to be more fraud in blockchain than in normal US real estate transactions, not sure the insurance price goes down, rather than up...

Let's also not forget the whole deal with financing.

When you buy a house, for $1 million or $50,000, the normal case being described in yours and the parent post is that you are buying a house on margin while using the house itself as collateral for the loan.

If you show up at a house that is for sale and ready to be sold with a million dollars in cash -- well, a million dollars in easily-authenticated cash equivalent -- and ask to buy the house as-is, no conditions or concerns on your part, you can make a deal happen markedly faster. Not microsecond fast, because why, and the sellers might balk at such a weird transaction or shop around to see if they can get another seller at a higher price, but once you take financing and any sort of buyer-protection out of the equation it basically comes down to registering the sale with the local registry.

Exactly.

Microsoft stock is basically fungible whereas houses and most other real-world property very much are not.

Tell me you’ve never bought a house without telling me you’ve never bought a house.

Buying houses are expensive because:

- Realtors are a state-sanctioned monopoly for real estate transactions and suck up a % of the costs. They also provide the necessary service of aggregating information about the market and negotiating on your behalf - Due diligence on the state of the property. This means inspecting that there’s no mold growing everywhere, checking that proper maintenance has been carried out, etc - Property law developed over literal centuries to provide the legal framework that we have now, if you damage something as you move out I can sue you to recover costs involved, we have statements about property state before closing, if the building doesn’t meet code we negotiate about who pays the costs - Property registries matter because legally speaking that’s a part of how you prove ownership. The county knows who to send the tax bill, if you default creditors can impose a lien, these are legal technologies that developed over time

This is why you can’t just pledge your house as collateral and borrow against it in a HELOC like you can borrow against your stock portfolio. The bank needs to verify that nobody else has a claim on your property and that the property actually exists and is worth as much as you say it is.

A house NFT has none of the legal protections of a SPA and all of the risks. If it’s not up to code you’re fucked, if the county has a tax lien there’s nothing you can do, etc. Us engineers like to think that everything is an engineering problem, and that’s often true, but law seldom works that way.

I have bought two properties in two different first-world countries and also bought NFTs with Ethereum.

The idea of houses on a blockchain are pretty much a pipe dream. But there are a lot of systems in traditional house buying that could be made easier with crypto-like ideas. Saying “real estate should be on-chain” should be read as asking for more NFT-like features in how real estate is transacted.

- as a cash bidder you need to provide proof of funds to the estate agent, which might just be a screenshot of your entire bank account balance. privacy with a zk-proof could be used in theory here to hide your balance while still giving the agent confidence you can meet the bid

- blind bidding process is usually opaque and broken, subject to discrimination and some winks and handshakes behind closed doors between friendly parties. a blockchain would give transparency and treat transactions equally regardless of race, sexuality, and friend or family ties.

- settlement times are extremely long in the order of months, not seconds. this is sometimes just because some party including the agents are on holidays, or slow to respond to emails, or forget to sign some paper, or whatever.

- escrow and exchange of funds in some cases could in theory happen with smart contracts where both parties sign a message to perform the exchange, which would reduce the significant commissions and fees.

- the process feels archaic compared to buying most other types of property.

> Realtors are a state-sanctioned monopoly for real estate transactions

You know you can buy a house without a single realtor involved yeah?

What happens if you get hacked and someone steals your house NFT?

Have a trusted third party transfer it back to you? Or give up your house to the hacker?

> Realtors are a state-sanctioned monopoly for real estate transactions

This doesn't even make sense. 'Realtors" is plural, and there are many, which is incompatible with monopolies. Realtors have a monopoly on their trade only because anyone competing with them becomes a realtor, by definition.

It's like complaining about the airlines' monopoly in air passenger transport.

Reduction of complexity somehow yields mobility and fractionalization of a complex physical asset? Why is this a good thing when you skip all the protection, nearly 500 years of property law and understanding all so you can digitize something into meaningless bits?

Replace NFT with deed, and what you think we can’t execute the transfer quick enough? No we can but we don’t because, we want to title search, violation search, inspect, appraise, survey the freaking thing you are about to blow your life’s savings on.

There is a reason why people continue to lose millions and billions on NFTs and crypto and why systems to slow and prevent rampant fraud exist.

There is no real technical problem with a real estate transaction that has not been solved. I closed on my house remotely, in 6 weeks, never having met anyone except my broker. 6 weeks were spent doing due diligence inspections.

I have an NFT of the Brooklyn bridge to sell you, cheap, 200 million dollars.

The "quiet part" that crypto builders won't say loudly about this is that they aren't trying to solve technical problems with real estate transactions. They're trying to make it so you can have real estate transactions with the authority being based on consensus of an unelected and unaccountable group of programmers/miners/validators running a blockchain, instead of the authority of a local government. The "problem" they have is really political in nature, not technical. At least, I cannot see any other reason why they would care about this when there seems to be even less interest in trying to deploy permissioned blockchains operated by governments.

I mean, I was always taught that eval’ing untrusted code was bad but here we are. Let’s keep doing that.

Have you read any of the proofs behind any of these algorithms? Ever notice how often some one finds a crack and disappears millions of dollars? Think we’ll actually make it secure some day?

I’m also not convinced this even needs technology. Some things are better locked up on paper in slow, bureaucratic institutions surrounded by layers of administrators. Makes it a lot harder to break in and steal stuff.

Most people aren’t buying properties online like games on Steam. If it takes 6 weeks or 5 it won’t make much of a difference.

Even if you want to digitize proof of property ownership it would be orders of magnitude more efficient to host your blockchain on a handful of Raspberry Pi’s. You could probably manage all property sales on an entire continent with it. Not dealing the Sybil attack problem is a lot cheaper and easier than trying to deal with it.

As with many proposed blockchain solutions - what's important there is that you've wrapped everything in a legal vehicle that makes fast transfer possible, NOT the fact that the record sits on a blockchain. That record could sit anywhere. A database perhaps.

It's not really the NFT that's the 'win' there, if indeed it is a win.

You'd need some kind of shared database that all parties can trust. It'd have to be regularly audited but also kept as up to date as possible. It should have very precise access controls. Also, it should be as fast as possible, and there should be a record of everything that's ever changed. If you want a full copy of it, you should be able to request it at any time.

It sounds like a lot of work to build that though.

Maybe we can find some nerds to make it for "equity" on the chance that such a database has value? They could use it for other stuff too if they want.

> Many real world systems are "nearly trustless"…

> But in the 99%+ of times you're in the happy path, economic transactions occur based on autonomous rules encoded in software.

In the happy path, people just “trust” that the system works; that the merchant and cc company transact properly, that cc company and bank work together, that the software underpinning all this is tested and has no errors, that the bank and cc company can help in disputes of fraud from the merchant…

It’s actually based on a lot more trust than the normal person realizes and polar opposite to nearly trustless.

Makes no sense. Microsoft stock and houses are very different. I can run an illegal alligator fighting ring in one and not the other.

Bannon? Is that you?

For me that creates two big questions:

(1) Do we really want high frequency markets in real estate? Is that socially and economically desirable?

(2) Land and property records so far have survived centuries (if not millennia), can we hope that an NFT solution will have the same long-term compatibility?

> Land and property records so far have survived centuries (if not millennia)

Not really, no. Just taking the European example, there have been countless cases of litigious states of affair after e.g. invasions, revolutions, nationalizations, privatizations, etc.

E.g. a house in Romania post Ceaucescu fall, a noble family's domain in Russia in 1917 or France in 1790, a German estate in East Prussia in 1945, a property in Kosovo, etc.

In this ‘house NFT within the court system’ paradigm, what happens if the court disagrees with the blockchain on who is the rightful ‘owner’ of the house NFT?

Considering it's a physical house they sould be able to do more than they can when someone steals bitcoin.

So I imagine they can either legal pressure on the illegitimate owner to transfer the NFT to the other owner (which has worked with some bitcoin transactions in the past), or if that doesn't work, then the system of smart contracts created for something like houses would most likely have something in it that allows the smart contract owners to mark that NFT as void in the blockchain (while it remains in the perpetrators wallet, it would no longer be associated with the physical benefits) and have a fresh NFT minted based on the data in the previous one and sent to the legitimate wallet.

Barring all that, they could just not recognize the owner and send police to physically remove someone who thinks they own it because the have the NFT. That's one reason why some people like bitcoin so much, the government can't (easily) take it from you by force (because there's no physical aspect to it) like they can a home or gold.

> Whereas a buy order to execute Microsoft shares happens in microseconds.

To be perfectly pedantic, you still aren't the owner of the Microsoft stock. Your broker makes a record of you being the beneficiary of X shares of Microsoft stock, with about a dozen asterisks. Each of those asterisks fall off over the course of the next few days and then it is all finalized - your broker owns a bunch of shares for your benefit.

It only feels like it is instantaneous because they assume everything will work out (it usually does). They can do this, because everything is reversible if it doesn't.

Now, if you would like to be the actual owner of Microsoft stock, you can do that. If you've never done that before, expect the process to take a few weeks. But go right ahead - head over to ComputerShare [1] and start the process. If you really want, you can even get them to issue you some paper stock certificates in your own name, but that takes even more time and comes with a lot of extra fees.

[1] https://www-us.computershare.com/Investor/#DirectStock/Summa...

I have a degree in finance. Never heard of Cede & Co and I just read the wiki. Cool. Thanks for the fun fact.

> "You can sell your house atomically and instantly to anyone in the world with no lawyers or escrow agents. You can pledge it as collateral and borrow against it. You can fractionalize it and sell a portion."

Who enforces seizure when lendee defaults but the lender is "anyone in the world"?

The smart contract, man. It's smart contracts all the way down.

The comparison of buying $1 million house or $1 million of Microsoft stock is a bit complicated - because in nearly all of the transactions you don't formally really buy the Microsoft stock. Here is Matt Levine quote:

""" Nobody owns stock. What you own is an entitlement to stock held for you by your broker. But your broker doesn't own the stock either. What your broker owns is an entitlement to stock held for it by Cede & Co., which is a nominee of the Depository Trust Company, which is a company that is in the business of owning everyone's stock for them. """

https://www.bloomberg.com/opinion/articles/2015-07-14/banks-...

Also: https://bitsonblocks.net/2019/02/07/who-legally-owns-all-the... compiles similar information on Singapore and Hongkong (googled - not verified).

Microsoft teams of lawyers, accountants, and regulators ensure that Microsoft is indeed worth what investors think it is. If you want to transfer your house, you need to do due diligence to do the same.

thank you for writing this.

And it is fine to build systems with trusted parties on top of a permissionless network. The article cites USDC which does this, it is one of many applications users can choose to transact with. Attempting to bake reversibility into the protocol would lead to a tightly permissioned system with only a few trusted authorities.

A loose analogy might be the internet, which aims to be a decentralized global protocol that we can then build centralized systems on top of.

I'm not an expert but I think this is what the original letter authors objected to. If you build these mechanisms on top of a blockchain which is inherently baked in stone, then there is no point in having the blockchain be so strict.

In other words, if you allow an organisation to change things like refund you, then they might as well just manage their own leger like they do at the minute.

If you build a system with trusted parties, you no longer need to build it on top of a permissionless network. If permissionless networks were zero-cost and had no downsides, it wouldn't matter. But in fact, they are incredibly expensive and complex compared to conventional systems (like relational databases), and have serious downsides. Once you need a trusted party, there's no way to justify the permissionless network.

The internet is built on the 'A' server which is a tightly guarded centralized US tool. Commerce lives because the absolute power brokers of the system have chosen to not exercise strong enforcement. The internet technologies are certainly built in a way that could function in completely autonomous blobs all over the world, but that's certainly not the way it functions today.

Bitcoin is a base-layer solution. Do you not want to transact on the base layer because of lack of reversibility or fees? Move to a higher layer solution that sacrifices some characteristic of Bitcoin to enable something new. Want to do lots of (micro)transactions? Use LN where this is made possible by sacrificing the ability to be secure offline.

Do you want to use DeFi-like solutions with smart contracts? Use RSK.

I don't see what the problem is with moving things up one layer if you retain the option to delve back into the base layer.

The base layer is melting the planet, for one thing.

Maybe the problems is that I cannot see myself trusting anything more than the base layer.

So, the only use case for Bitcoin is as an optional gold alternative.

The missing piece crypto lacks is an opt-in decentralized justice system for resolving disputes.

Check out Bisq.

https://bisq.wiki/Frequently_asked_questions#Dispute_resolut...

The argument made was that it's not about the technology itself but the transaction rules. If money are stolen from banks in a specific way (withdrawn into prepaid cards), banks will not and cannot reverse these transactions. Banks do have some rules like chargeback however to reverse legitimate transactions or delayed transactions. The same rules can be converted into Smart Contracts which governs the transaction of a certain currency.

So instead of reversing, we could make all NFTs locked from trading for 3 days after transaction which anyone could appeal for a dispute and buyback the NFT for the same price anytime.

The challenge here is, can we actually come up a set of robust rules that is not too rigid yet not abusable. It's not easy, it won't be right off the bat and it certainly require a lot of critical, innovative thinking. And maybe the solution won't have to be complex at all.

The problem that I see here, is that with the "code is law" approach if there's a bug in the smart contract that is supposed to protect you then you're screwed without recourse.

In a traditional system, if there is a bug in your bank's software that makes you loose money, you can ask the bank to give you the money back. If they refuse, you can take them to court. If instead the smart contract has a bug, there's no one you can appeal to to get your money back. So I think that having humans-in-the-loop is still important, at least for big transactions.

As others pointed out, this problems are much smaller for small transaction so maybe there could be some use there. But I have to think better about this use case.

"you can ask the bank to give you the money back" "you can take them to court"

Which like the article argues, is not something that can be solved by any ledger, distributed or not. Even if banks reverses records, they don't change the data which is already on the database/record, instead they just issue a new transaction from the backend or withdrawing it from a legit reserve that they own. In any case, no reversing was done.

What if instead of taking the bank to the court, we have something in place for it that runs based on certain "if statements" or "switch case". Of course, is not as easy as it sounds, we need conditions that are robust enough and not vulnerable to abusers. It's a very complicated problem to solve.

This is such an obviously valid objection that I'm disturbed the author didn't address it inline.

This article doesn’t address the main objection I have about the practical value of cryptocurrency, namely, why I can’t take such an application, replace the distributed ledger with a SQL database, and get a solution that’s better in every way.

As soon as you have a trusted central authority (monitoring and reversing payment transactions, interacting with government agencies to execute real estate transaction, etc.) I’m lost on why you need a blockchain.

"I suspect that legacy industry and regulators have smothered two generations of technological improvement, largely (I suspect) by building a (mostly) closed and permissioned financial system."

It's technically possible to replace any blockchain with a database but where are you going to host it and who is the trusted central authority?

Blockchain might not the solution but it shows us an alternative to trusting some middlemen that have too much power, instead we trust code that is emotionless, non-judgemental and consistent.

A distributed ledger is more than just a database, it's a technology that can orchestrated trust online without a central authority. That's a huge deal, compared to a sql database that is owned by someone, who is the singularity that administrates the whole thing.

>It's technically possible to replace any blockchain with a database but where are you going to host it and who is the trusted central authority?

Who is hosting the blockchain? Who is the trusted authority over the maintenance of the protocol that implements the blockchain, that all miners must use if they want to participate in the system? Who is it you're trusting not to organize a malicious 51% attack against the system, when it has already happened several times to quite a few blockchains? It is a blatant falsehood that blockchains don't have any trusted authorities. They actually require trusted authorities to function. You're not trusting "emotionless code" as the code is well known to have these flaws even by the admission of its own designers; what you're actually trusting is some game theory laid out by programmers you trust, that says the miners won't do bad things because they're getting paid. But in several cases we've seen that they actually will do bad things! And that's not even considering all the other bad things like fraud and ransomware that happens on blockchains that the operators seemingly just throw their hands up and don't do anything about. They don't even consider that to be their problem.

I hate, hate, hate that this line is used so often in discussion of cryptocurrency. It makes no sense at all. In order to have any kind of real discussion around this, the crypto community needs to move past these thought-terminating cliches.

"Who is hosting the blockchain?"

Miners/Stakers who is incentivize to validate the network and maintain the collective consensus.

All your points are valid and universally known but the more important here is whether or not those vulnerabilities are inherently caused by the nature of blockchain or tehcnical problems that we can/need to solve.

A good blockchain is not owned by anyone, any changes made need to go through multiple layers of peer review.

We are still very rooted in our current ways of doing things hence we are seeing phenomenon where companies are trying to take control by either building their own blockchain or centralised service on top of a blockchain. But if I travel back to the 70's and told you that someday you can run an Internet company, would you believe it?

We are no where near endgame but if you dig deep enough, you will see many exciting technical breakthroughs. One of the fascinating one is zero-knowledge validation. Blockchain could be the solution or maybe not, I don't care, I'm excited about the innovative opportunities that it brought upon.

> But if I travel back to the 70's and told you that someday you can run an Internet company, would you believe it?

If I understood what you were talking about, I would probably idly wonder how I could fit it in between being President of the United States, a firefighter, an astronaut, and a professional soccer player, but I wouldn't actually disbelieve it.

(Hey, in the part of the 1970s where I was alive at all, I was pretty young.)

> instead we trust code that is emotionless, non-judgemental and consistent.

Yes. Because that code just appeared out of nowhere, and it's perfect, and devoid of issues.

No, that's why many people is working on it now. If you compare old smart contract with new ones, you will see that things are slowly getting fixed.

For e.g., you could literally send NFTs to any address (including a smart contract address) which make things stuck forever. Now there's a safe way to transfer things which check whether or not it is a valid address. And this became the de facto standard for almost any NFT smart contract.

All these didn't came out of nowhere.

Exactly. So when you write something like this: "instead we trust code that is emotionless, non-judgemental and consistent." what you're really saying is: "we trust a bunch of programmers to write perfect code" when even those programmers cannot understand the code they write: https://news.ycombinator.com/item?id=31692704

It wouldn't be better "in every way", though. A blockchain is much more resilient; the equivalent would be to have hundreds or thousands of redundant SQL databases around the world and somehow keep them all in sync. By the time you've done that, you've very likely reinvented a blockchain, at many times the cost of just using an already-existing public blockchain.

> monitoring and reversing payment transactions

I disagree with the article on this point. No reasonable person expects to be able to reverse a cash transaction; that the same applies to an electronic equivalent ain't the fatal flaw that critics seem to regularly insist without real basis. Transaction reversal is indeed outright harmful to honest vendors, and is only really necessary for the legacy systems because the legacy systems have borderline zero protection against dishonest vendors retaining customers' payment information and pulling money from it (and/or giving it to others who will do so, be it voluntarily through some shady dealmaking or involuntarily through card skimmers and database breaches and what have you).

> interacting with government agencies to execute real estate transaction

You wouldn't need a central authority for this. Local governments are fully capable of putting real estate NFTs or whatever on something like Ethereum or Cardano and publishing public keys such that people can verify their authenticity. They're much more likely to do that than to try to run an equivalently fault-tolerant and accessible-to-the-public SQL database themselves (and absolutely more likely to do even that than to trust some entity outside their legal jurisdiction to do that, barring outright state/federal mandates to do so).

> I disagree with the article on this point. No reasonable person expects to be able to reverse a cash transaction;

What gave you this idea? If I have proof that I paid you cash for a service, and then proof you didn't provide that service, I absolutely expect to be able to reverse that transaction, via the legal system.

> A blockchain is much more resilient; the equivalent would be to have hundreds or thousands of redundant SQL databases around the world and somehow keep them all in sync.

That level of resilience is completely unnecessary and is part of why blockchain is such an extraordinarily wasteful technology.

> Local governments are fully capable of putting real estate NFTs or whatever on something like Ethereum or Cardano and publishing public keys such that people can verify their authenticity.

And who will hold these NFTs? And where will the data the NFTs sign be stored? If the government holds the NFTs, then nothing will change for you: you will have to bring the exact same kind of proof after you bought a house to the government so that they can update the blockchain record.

If they want to distribute the NFTs to the current owners of the houses, than they now need to establish an Ethereum/Cardano/[...] wallet for each person who owns a house in their district - a decade-long project in the best case, involving a level of bureaucracy to ascertain that no house NFT was incorrectly transferred to the wrong owner that will blow your mind (or, more likely, a process which will cause massive fraud and property disputes for decades to come).

And of course, the NFTs don't solve the problem of actually storing the data (physical scans of the documents that were used before the move to digital, at the very least, since the chain of ownership of each piece of property is an extremely important part of how you can settle disputes). Who will hold these records, and update them as needed? If it's still the county clerk, the problem of bureaucracy flies back in. If they want to make them part of the NFTs and store them on-chain, then minting the NFTs will be exorbitant, and it's doubtful the Ethereum blockchain would survive having the entire archives of home ownership in the USA on-chain.

> If I have proof that I paid you cash for a service, and then proof you didn't provide that service, I absolutely expect to be able to reverse that transaction, via the legal system.

That's very different from what's meant by "reversible transactions" in the context of other payment systems. If the legal system can dictate the reversal of a cash transaction, then it can do so for a crypto transaction - without either needing to have some explicit protocol to do so.

> That level of resilience is completely unnecessary

That's just, like, your opinion, man.

> And who will hold these NFTs?

The owners of the properties they represent.

> And where will the data the NFTs sign be stored?

NFTs can store arbitrary data.

> If they want to distribute the NFTs to the current owners of the houses, than they now need to establish an Ethereum/Cardano/[...] wallet for each person who owns a house in their district

Which is many orders of magnitude easier than the current system.

Besides, it doesn't have to be all or nothing; a gradual opt-in transition would be perfectly doable.

> If they want to make them part of the NFTs and store them on-chain, then minting the NFTs will be exorbitant

On just about anything noteworthy that's not Ethereum, the cost is on the scale of cents. Wow, such unaffordable, many expensive.

And no, you don't need physical scans of the original documents. A transcription will do fine.

> That's just, like, your opinion, man.

Mine and everyone else's who holds important information in databases. The whole financial system for one.

> NFTs can store arbitrary data.

Up to some size.

> Which is many orders of magnitude easier than the current system.

It is not. The current system scales with the number of home transactions. Your proposal scales with the number of homes - a much bigger number.

> Besides, it doesn't have to be all or nothing; a gradual opt-in transition would be perfectly doable.

Sure, but then it's just a whole bunch of extra work for no benefits for 10-20 years. Not just for the county clerk, but also for home owners and buyers: not only will they still need to process the existing requirements, they would also have new requirements to obtain and prove ownership of their ETH/other crypto wallet. And they wouldn't see any advantage at all until the next time they sell their home (hopefully they will still remember their wallet address and private key by then!).

> On just about anything noteworthy that's not Ethereum, the cost is on the scale of cents. Wow, such unaffordable, many expensive.

Well, there are exactly two block chains that are somewhat noteworthy outside the crypto bubble: Bitcoin and Ethereum. And Bitocin doesn't support NFTs.

And any other block gain that becomes even mildly popular quickly explodes in values and transaction fees just like the other two. Turns out that storing hundreds of thousands of copies of the same data, and writing every single transaction to hundreds of thousands of systems before it is considered settled, without any kind of permission system, is actually very costly.

Note: you're right on the cash transaction statement, to some extent. There are still some important differences I feel, mainly related to the fact that today's systems enforce knowing the legal identity of parties to a transaction for something like a house, even if the sale is done in cash - which wouldn't be guaranteed if the house could be traded by selling an NFT on a chain.

>Transaction reversal is indeed outright harmful to honest vendors, and is only really necessary for the legacy systems because the legacy systems have borderline zero protection against dishonest vendors retaining customers' payment information and pulling money from it

This isn’t the only form of dishonesty. There’s cases where you initiate an honest transaction, the vendor ships you something you didn’t ask for because they are trying to clear inventory, and then refuses to refund or exchange. Then you file a claim with Amex and get your transaction reversed in about a week.

You can simply opt in to those kinds of setups.

The flipside is there are times I've been unable to pay with cards because the processors deem it to be too large of a risk, despite me being happy risking my own money. Or, see the risks people take running businesses on PayPal - large companies able to reverse transactions / hold your money solves some issues but raises others.

> It wouldn't be better "in every way", though. A blockchain is much more resilient; the equivalent would be to have hundreds or thousands of redundant SQL databases around the world and somehow keep them all in sync.

Technically true, but also completely pointless. An organisation running an SQL database doesn't need hundreds or thousands of redundant SQL nodes/copies to reach the level of robustness required.

Indeed they don't, but even running two database servers (let alone more for e.g. geographic redundancy) is already more resource intensive than running a full node for a proof-of-stake blockchain. You might as well just run that node and get that resiliency basically for free.

Not every usecase requires that sort of resiliency, of course, nor does every use case prioritize it above latency and throughput; nobody except the truly deranged are asserting that a blockchain could or should replace every SQL database out there. For those who do need that sort of resiliency, though, a public blockchain is much more cost-effective.

> running a full node for a proof-of-stake blockchain

Are there any extant proof-of-stake blockchains that achieve the security guarantees necessary to make a currency viable? Last I heard proof-of-stake was still a hypothetical idea, not something that someone had actually managed to make a working currency with, and that all of the cryptocurrencies in common use were still using proof-of-work (which is of course much more resource intensive).

Making backups of a centralized database is not reinventing a blockchain, it is much cheaper than the wasteful process of crypto mining.

> Making backups of a centralized database is not reinventing a blockchain

Maintaining read replicas and coordinating writes across all of them starts to look a lot like one after a certain point.

> it is much cheaper than the wasteful process of crypto mining.

It almost as if not all blockchains involve mining.

> They're much more likely to do that than to try to run an equivalently fault-tolerant and accessible-to-the-public SQL database themselves (and absolutely more likely to do even that than to trust some entity outside their legal jurisdiction to do that, barring outright state/federal mandates to do so).

No they aren't. They are already running public SQL databases (with limited query access) for managing property changes. And they already have a set of processes and employees to manage real estate transactions and taxes. If a blockchain startup wants to try to get a local government office to let them run it on a blockchain, they will need to prove that the taxes always settle, and that fraud can be reversed. These are both important parts of the system for the local government.

I suspect that there is a granule of use in the idea, and that's that you can farm off the infrastructure for your real-estate management onto third parties and ensure they give you your taxes and respect your authority. But that's not really what people think of when they say "blockchain" with dollar signs in their eyes. The incentives for the people running the infrastructure go out the window too, because the profits are modulated by the government, and it's way easier to just sell them software directly that only has to claim to be effective, and rarely has to deliver on it.

> They are already running public SQL databases (with limited query access)

Not a single county I've lived in has offered that, to my knowledge. If they did, then if other online county services are any indication, the uptime would be horrendous and the interface would be 90's era garbage.

> If a blockchain startup wants to try to get a local government office to let them run it on a blockchain, they will need to prove that the taxes always settle, and that fraud can be reversed.

The former is baked into any cryptocurrency worth its salt, and the latter can be done by minting a new record of ownership invalidating the previous one. Better yet, time-limiting parcel NFTs and issuing them in exchange for tax payments would directly tackle both rather cleanly and would work just as well for land leases as it would for traditional real estate.

Ideally you'd have a SQL database and something like a certificate transparency log as a guard against shenanigans. Also, a bunch of regulatory procedures like DNS registrars have to follow.

The problem with transparency logs is that you can see that they are doing shenanigans, but not necessarily stop it.

>As soon as you have a trusted central authority

You might have missed the entire point of cryptocurrency. The idea is that it is not centralized and a single entity can't "reverse" transactions.

That works great except for the fact that 99% of crypto trades occur through exchanges which just put you back to the worst of both worlds.

If 99% of users stuck their fork in their eyeball, it wouldn't mean that a Fork is a bad design or a bad implement, it would mean that the users are using it wrong.

FWIW, in my own usage of crypto, the lack of central authority is exactly why it is used. I don't really care that other people are just hodl-ing their funny money in someone else's wallet. Crypto, outside of an exchange, means I can send money to anyone I want, and no other entity can prevent that.

Your statement isn’t really accurate.

https://blog.chainalysis.com/reports/defi-dexs-web3/

>> 99% of crypto trades occur through exchanges

Do you mean 99% of transactions occur on centralized exchanges without going on-chain? I would like to see the numbers you are using.

Right, and the parent comment is asserting that that is worse in every way. Which it is.

It's all fun and games until someone steals your bored ape.

That's how you end up with Google, Apple, and Facebook, Twitter, etc. They may start out as providing a service that works, but over time as they get bigger the incentive structure pushes them towards monetizing your data, locking you in, building boundaries around who can access what (e.g.Twitter APIs), and sharing data with parties you don't want to share it with.

One way to avoid this lock-in is to change the underlying incentive structure. That's what the blockchain does. The fundamental difference is not about centralized vs. decentralized, it's about the incentives that are a result of centralization vs decentralization.

The other way of changing the underlying incentive structure is have the centralised service provided publicly by a government rather than privately by a corporation. That's what traditional currencies do, and there's no reason that this model couldn't work for digitalised currencies too.

And which government has not abused its power? Fiat currency is a prime example.

> ...trusted central authority...

The major point is to not have this. No central authority, or government, will be able to alter the value of the currency.

Reliability and composability are two reasons.

With a blockchain architecture, the app can't go down unless the entire blockchain goes down. And apps can be built piecemeal by many teams/hackers who add small bits of functionality here and there through standardized interfaces, rather than top-down by trusted agencies - "money legos".

Composability is the main one for me that's interesting.

When serving data, I often use HTTP pulling from a Postgres DB. Both of those are massively over engineered for the problems I want to solve but I use them because:

* They're already built so it's not my engineering time.

* Others can interact with them easily.

This is more strongly the case, and becoming more so over time, in crypto work.

I can make something with key based auth that I can uniquely identify such that a user can prove they own it to integrate in my "real world" systems, while letting them sell it, trade it, auction it or whatever.

To build this I do a starter tutorial, load a common library and publish. After I can just use already existing APIs for integration. That's it and it works because the data and APIs and Auth are all common and standardised now (either inherently for Auth or by convention for the data).

+1 on this answer. Put another way, it's a programmable settlement layer for the internet that anyone can access and is always online. Add in standardized interfaces and all applications built on it become easier to work with and extend.

I guess because it's almost impossible to trust an authority which also allows permissionless building on top such data.

Most corps now have proven that they act for their own shareholders and can't be trusted to look after all users.

Gov agencies while are a potential candidate for establishing trustworthy data owners are too beaurocratic to ever allow for permissionaless building on top.

Blockchains sort of allow both trust yourself (by owning private keys) & build permissionlessly on top .

How do you prove that no one manually added or edited database rows? How do you store the transaction logs & verify their accuracy & authenticity?

By the time you build a system with historical "proofs" with enough replication, you'll basically have invented a Blockchain with more complexity.

Oh gosh how does anything in the world work today without the blockchain

We mostly rely on trust and then prosecute frauds that are "worth" prosecuting (based on dollar value, frequency of fraud, and likelihood of recovery).

Just that we already do that successful while Blockchain now needs miners.

How do you defend against a 51% attack in an environment where Bitcoin mining is increasingly uneconomic?

Switch to proof of stake which has better defense mechanisms against 51% attacks.

Write-once physical storage?

I'm sure it's theoretically possible to write a database that only allows reads/inserts and that runs off a CD-R burner, but it's weird that I haven't seen that in the wild. Seems like something that should be doable with SQLite's VFS support (and in fact I'm pretty sure the existing demo VFS for read-only support gets you most of the way there).

In any case, "write-once" media can still be rewritten; the same lasers that etch data into a CD-R can do so to destroy the same data. You're going to want redundancy/backups and you're going to want each new row in the table to cryptographically reference the previous (such that any data destruction invalidates all subsequent rows) - by which point you've reinvented most of what constitutes a blockchain anyway.

The difficult part is not setting up a SQL database, the difficult part are complying with all the banking regulations. If you have a distributed ledger, you do not need to comply with these regulations and everything gets easier.

This is both a good and a bad thing.

Are you aware of any project using a SQL database that allows someone to purchase legal porn or donate to legal far right organizations? Mastercard, Visa and Paypal lock such accounts. SEPA (luckily) does not.

This is the only advantage of bitcoin I see.

Do Visa and Mastercard really block porn purchase in the US?

I just checked and they do not block all porn, but the porn that does not fulfill their regulations.

Can you answer why the SQL Database in Bank of America or any other bank in the US is not able to transfer money to Edward Snowden's bank account? Or to the millions of people in Russia/elsewhere who were just a collateral damage to Putin's war?

That's just one example - sometimes you need technology which is out of hands of authorities. Cash or Gold bars have similar properties but you literally have to physically take it with you if you want to send it somewhere.

Leaving payments aside - ENS domains, exchanges, insurance, lending borrowing and bunch of other products which are equally accessible to a farmer in Nigeria as it is to a Wall Street suit. You don't see a value in that?

Anyone notice how the author goes to great lengths to 'bold' the claims in the original letter that talk about how worthless the technology is - and then fails entirely to address those points?

Letter: "Crypo rests on tech that is useless." Blogger: "I disagree, I think there are some fascinating things to be done with blockchain tech! Just... don't expect me to share them. You should DYOR."

sigh

Yeah, this is the classic playbook of hype vendors. The bigger the claim, the less specific, the better, because specifics can be settled one way or another.

IMHO Matthew Green often makes bold yet unsubstantiated claims. He also creates and promotes FUD. He may be technically good, but I don't trust his personal opinion, not even on subjects he presumably knows very well.

> In other words, transaction reversibility is not about the ledger, but rather about the transaction rules that a currency uses. A reversible currency requires that someone anoint this trusted party (or trusted parties) and that they use their powers to freeze/burn/transact currency in ways that are at odds with the recorded owners’ intentions.

once you have a trusted third party, though, you no longer need permissionless blockchains and PoW/PoS. that also eliminates the need to "mine" and the environmental concerns. of course it also eliminates the get-rich-quick schemes as well. you wind up with VISA running on top of a permissioned DLT.

There can be multiple VISA protocols running in L2 on top of a permissionless DLT like ethereum. Users can exit one protocol and enter another, like zkSync or Optimism which are not at all like VISA. Or they can use a not-so-centralized L1 protocol like DAI. Or they can just use the base tokens on L1 at the expense of volatility and fees.

That's not true. Think about the 3rd party as an escrow, not the bank. You wouldn't eliminate the escrow when you're buying a house, would you?

What's the fundamental difference between VISA, an escrow agent and a bank?

Isn't VISA just an escrow agent between every transaction who also lends money and charges interest to the purchaser?

Actually, isn't a bank an escrow agent? As in, historically it was a banks jobs to escrow your money. Then to act as an escrow agent for transactions/etc.

VISA is a payments network. It's a way for banks to connect to each other. They don't have any skin in the game and ultimately it's the issuing bank that gives you all those nice things that you believe come from VISA (like chargebacks, fraud protection, etc).

VISA does not lend any money. They just provide the service of moving money for a fee.

Visa is none of those things, it's a payments network. It doesn't lend money, it doesn't charge interest.

You card issuer, which is usually a bank, lends the money and deals with the account.

Too bad power corrupts. All fiat currencies so far keep devaluing.

If governments want to spend more than the rest of the economy, they should finance it via taxation, not inflation, which erodes people's savings.

Funny how inflation numbers just dropped which show it still running hot and bitcoin started immediately tanking along with the stock market.

That is short-term. If BTC supply stays the same while fiat currency keeps inflating, and if people will want the same exposure to BTC, then the price of BTC will increase with the amount of fiat in existence.

> "The top credit-card merchant fee actually rose in the United States between 1991 and 2009, and this is a goddamn tragedy, since these fees are baked into the cost of most retail goods and thus born by the working poor (who pay them even if they use cash.) . . . Why are these IT-focused industries so consistently immune to the same technological improvements and cost reductions we see everywhere else?"

The simplest apparent answer is that this (the provision of payment services) is not a competitive market and as small retailers have nowhere else to turn, they're forced to pay high rents to what would have been called a trust in late 19th century Gilded Age terminology.

The solution is also fairly clear: if you have what's called a 'natural monopoly' then it should be state-owned and state-managed (see the network of roads, water pipes, etc.), and if it's not actually a natural monopoly - meaning a system where competition doesn't make sense, i.e. having multiple networks of privately owned roads is silly - then you need anti-trust actions by the government to foster competition in the industry, which would reduce fees and costs for merchants.

Arguably, if consumers had to pay the cost of transactions, rather than merchants, you might seem a lot more political pressure to make credit/debit card transactions the same cost as cash transaction, i.e. no added cost.

Cash is a government-supplied taxpayer-supported service supplied free of charge for merchants and customers, so perhaps that's the best option for the credit/debit interface as well. Of course, this would allow government to track everyone's individual non-cash purchases, but then they already have access to the credit/debit ledgers, don't they?

The solution that has actually been implemented in Europe is to regulate the payment providers, so inter-bank transfers are effectively free and instant, and credit card fees are capped at 0.3% (i.e. 10x less than in the USA).

This solves inter-bank transfers in EU but does not mean payments going out of, or into, the EU are solved.

Crypto takes a different approach: a single protocol that is shared across all countries.

So bitcoin "solves" the problem by being non-compliant with local laws and regulations.

> Cash is a government-supplied taxpayer-supported service supplied free of charge for merchants and customers

Cash ain't free!

Sure, I give you the cash, now you have the cash. But you don't want a heap of singles in the back room, you want money in the bank.

Firstly, you need to keep that cash securely, which has a cost. Then, you need staff to reconcile your takings with your figures for the day, which is a cost. Then it needs (secure) transport to the bank (cost) and the bank may charge you fees for cash handling.

Sure, for individuals who sell things infrequently, it's fine, but for a business there are significant costs. This is why (for example) in the late 90s and early 2ks in the UK, large businesses pushed pretty hard for the 'cashback' feature on debit transactions, so they could offload some of it back to the consumer!

This is almost always missed in this debate. Credit cards are evil because they have fees attached and I, as a pure, innocent cash user have to pay the same price! Scandal!

But you may actually be costing the business more, especially in places where such fees are capped. This is part of the reason why we see card-only retailers popping up in some countries now.

This is why it makes sense to have a narionalised bank which can render financiap services at cost, rather than private, for profit banks.

>> it should be state-owned and state-managed (see the network of roads ...)

Where I live, the 'roads' are owned by each individual property owner with an easement to every other property owner in the town. Why would we want a group of government bureaucrats to literally own our roads?

Because we don't want the road owner be able to demand extortionate fees to use their road?

Every land owner has granted reciprocal easement to every other land owner in the town to use what looks like roads through the subdivisions but are actually part of each lot. We don't need government to do this because we use what works like contracts on property - reciprocal easements. In fact, if the town disbanded there would be no questions about who owns what.

Oh, maybe you don't know how easements work?

Because we want road to be a maintained regularly and at once (a patchwork is not convenient to drive) and not depending on the will or the means of the owner of each piece.

We have the town maintain everything through taxes. The town serves us. If they ever attempt to stop maintenance, we will cut the taxes and make a committee or HOA for that. This really does work well with private ownership.

If you think Mastercard and Visa fees are too high, fees are higher on Bitcoin.

It's like the way Amway victims will try to sell you an $8 tube of toothpaste, "draw circles" to show that 7 people get a cut from that tube of toothpaste and then say "How does Amway bring you great prices on quality products?" (tap whiteboard) "By eliminating the middleman!"

Not really...the fees for Bitcoin, Ethereum and other L2 options are flat fees and are well under Visa/MC fees most of the time. Might want to look at Western Union and the like too...way way under those fees.

Current transaction fee (for 1 cent or a billion dollars)

Bitcoin - $1.62 per transaction

Ethereum - $3.50 per transaction

Ethereum L2 - as low as 12 cents

https://l2fees.info/

Here are credit card fees by comparison (lowest fees assuming you have high volume):

Visa 1.29% + $0.05

Mastercard 1.29% + $0.05

Discover 1.48% + $0.05

American Express 1.58% + $0.10

https://www.fool.com/the-ascent/research/average-credit-card...

Credit card fees include reward systems (points), zero liability fraud protection, extended warranties, car rental protection, dispute resolution/chargeback systems, customer service, support for tens of thousands of transactions per second, airline lounge access, priority entertainment tickets, airline miles - the list goes on and on.

Whether you need any of these is debatable of course but it’s extremely disingenuous to consider it an apples to apples comparison seeing as blockchain provides literally none of these things.

For large transfers (a billion dollars) the banking transfer fee is likely zero. I don’t pay for wires with no limit and my status/relationship with banks is nowhere near where it would be for a billion dollar transfer.

Oh and wire transfers provide quite a bit of protection too. I recently had an international wire transfer where the recipient provided the wrong account number. For $10 the funds were returned. With blockchain they would’ve gone up in smoke and lost forever.

People make mistakes. Payment information gets compromised. Fraud happens. As long as blockchain is based on ignoring these fundamental truths it will never achieve any meaningful adoption.

The cost of a bitcoin transaction is not adequately captured by transaction fees. There's two alternative ways to look at it:

1. Divide miner revenue (fees + seignorage) by the number of transactions, yielding the total amount that miners extract. It was $34m today, with ~261k transactions, yielding a cost per transaction of $130. [1]

2. Estimate energy cost at 1,173 kWh per transaction [2]. If you assume cheap electricity at say $.09/kWh you get a cost of $105 per transaction in electricity alone, which ignores hardware capital costs, etc.

Either way the cost is over $100 per transaction, and would be reflected in a falling value of BTC. But it may be masked if there's an influx of new money into the system.

1: https://ycharts.com/indicators/bitcoin_miners_revenue_per_da...

2: https://fortune.com/2021/10/26/bitcoin-electricity-consumpti...

Well, L2 systems aren't on a blockchain at all, so do they even count?

If we get to cherry-pick from whatever money transfer systems exist, it's worth remembering that bank transfers within the Eurozone area are free and practically immediate. What crypto can beat that? Clearly you don't need cryptocurrency to deliver a service that's ideal for consumers, as regulation has achieved it in Europe.

From article itself:

> That’s why it recently cost $22 (!) to send a single token transaction on Ethereum

So Ethereum has prices ranging from 3.5$ to 22$? Great.

And vast, vast majority of my transactions would be costlier on Ethereum. I am rarely paying over 267$ in one transaction. 22$ per transactions would result in typical grocery shopping doubling in price. 3.5$ would be noticeable.

Also, in bank transfers that I use I am simply not paying anything at all (within European Union).

> well under Visa/MC fees most of the time

That is simply untrue, and depends on how much you transfer.

My fee for sending money to another UK bank account with instant settlement is $0.00 (or £0.00)

Tell me more about the wonders of paying $1.62 plus currency conversion fees plus speculative asset volatility risk to send money to their bank account with eventually consistent settlement...

> Current transaction fee (for 1 cent or a billion dollars)

> Bitcoin - $1.62 per transaction

This is misleading. A best-effort transaction can be submitted with a fee of 1 sat/vB. For a 374 vB transaction (a typical 2-in-2-out P2PKH -- see https://bitcoinops.org/en/tools/calc-size/), this is 11 cents. $1.62 is either an enormous transaction, or one submitted at very high priority.

L2 is pushing the problem a bit further away, but it's not a long term solution. All L2 solutions in existence are fundamentally centralizing (it doesn't have to be, but it's a lot harder and since most cryptocurrency speculators don't actually care about centralization it's much easier to do it that way, and L2 solutions are already super complicated anyway) and they only offer a maximum theoretical transaction count improvement of about 500x in a very optimistic case[1].

Except 500x is not nearly enough. It may be enough to temporarily drop the fees but it a post-blockchain world where everybody does dozens of blockchain transactions a day, be it to play a game or buy a coffee or ride the subway, it's not ever close to being sufficient. Your scaling factor needs to be millions of times better.

So what's the solution? Even more complexity on top of this ridiculous Rube Goldberg machine? All that to emulate solutions that already exist and already work well and vastly more efficiently?

Why?

[1] https://vitalik.ca/general/2021/01/05/rollup.html

> Bitcoin - $1.62 per transaction

If you used real sources I'd take this thread seriously, but you don't and this is exactly why I don't respect the majority HN's view on most things with regards to Bitcoin and to a lesser degree crypto in general.

It's currently $0.04 for a high priority tx on the mainchain [0] right now as the memool is pretty clear.

[0]: https://mempool.space/

I can count the number of >$100 credit card transactions I’ve made in the last month on one hand with fingers to spare.

And for those transactions using cash, let alone BitCoin, would not have eliminated those transaction costs.

Off topic but I’m really curious, why are these taxes a percentage? What justifies paying $0.1 for every $10 transfer, but $1 for $100? Is it more complicated to move $100 than it is to move $10? In the end it’s still a single transaction, right?

In crypto, transaction fees don't reflect actual transaction costs, because transaction processors are being paid with newly minted coins in addition to the fees, so it's not really an accurate comparison.

More accurately:

- Transactions are more expensive in BTC for small amounts, and more expensive in Visa for big amounts.

- However this is only true if you use on chain transactions for BTC. BTC transactions using lightning are always cheaper than Visa no matter the amount.

- Lightning nodes do not yet form a network big enough to cover 100% of the transactions, and most transactions are small, so the idea that VISA transactions are cheaper for most people is, for all intents and purposes, mostly true at the moment.

Lightning, though, is quite an interesting system. Half of the solution it offers is technical, but half of it will be the social construction of the network of channels. I doubt most people will open one consciously, but I assume wallet providers will make that automatic.

Eventually, this means somebody needing the decentralized aspect of BTC will be able to open a channel and profit, while somebody who wants convenience will use a centralized wallet and be happy.

I suspect most people will want the turn key solution and that the system will centralize a bit.

Large amounts aren't settled by VISA - they are settled by bank transfer.

> If you think Mastercard and Visa fees are too high, fees are higher on Bitcoin.

Mastercard and Visa charge a percentage (?!), Bitcoin is a fixed amount per transaction.

Plus Bitcoin won't deny your ability to make a transaction.

American express may be the best damn card that's not accepted anywhere I transact my business so in the end it doesn't matter how good American express is. It's a piece of plastic for the good it does me. Same with all crypto. Even if I was invested fully, there's still approaching zero of the number of purchases that I make that would ever be viable using crypto. The gold standard answers in this chat about big purchases are even more egregious. The ability for big money exchange without recourse spells disaster. The ability for big purchases which could be cheaper on crypto platforms also subjects that stored value to huge value shifts daily. Maybe in countries that are even more screwed up than crypto volatility there may be some sort of hedge assuming leaders don't lock you up for using them.

> Plus Bitcoin won't deny your ability to make a transaction.

Visa will not steal all my money.

> Mastercard and Visa charge a percentage (?!), Bitcoin is a fixed amount per transaction.

No, Bitcoin transaction fees are dynamic. https://bitinfocharts.com/comparison/bitcoin-transactionfees...

> If you think Mastercard and Visa fees are too high, fees are higher on Bitcoin.

Source for this misinformation?

https://ycharts.com/indicators/bitcoin_average_transaction_f...

Remember that for bitcoin value transaction size is not a factor in the transaction fee. So if you want to transmit a billion dollars worth of bitcoin around the world, it is the same exact fee.

Unlike credit card transactions, which are a percentage of size.

Let's also remember that work is being done to do low cost smaller transactions on L2 networks.

It's all good and well that bitcoin is cheaper than credit cards for billion dollar transactions, but that is not really important for all of us non-billionaires. For smaller amounts, the fixed cost of a bitcoin transaction can make it a significant amount of the total. L2 networks would be nice, but "work is being done" for years now so let's wait to see if they ever get that working properly before touting possible future innovations as a current benefit.

I don't imagine anyone ever uses credit cards for billion dollar transfers anyway, normal banking is good enough for that. I just checked and the business account that I use for contracting has EUR 0.10 flat fee costs per transfer to anywhere in the SEPA region.

> Source for this misinformation?

It spent half of 2021 in the 10 dollar range.

> Remember that for bitcoin value transaction size is not a factor in the transaction fee. So if you want to transmit a billion dollars worth of bitcoin around the world, it is the same exact fee.

You don't use a credit card to send huge amounts in the first place.

Personally I need to do ten and hundred dollar transactions. One or two dollars for bitcoin would not be terrible for the latter, but it's still a lot more than a debit card ($0.21 + 0.05%), with no advantage to me over debit. I think that's a better comparison than the complex situation credit cards are in.

Just want to say the Amway example was pretty good and funny.

I really don't want to be a downer but all I read in pro cryptocurrency posts are:

It's still new! It needs time! You need to follow the latest developments! It has a lot of potential!

It's time already that someone shows some of that potential and it better not be something like NFTs!

The last 2 years IMO was "put up or shut up" time for crypto and IMO it just didn't manage to do it.

NFT is quite a novel and interesting application on its own. For an application of NFT, see Tezos Domains and ENS (Ethereum).

Aside from NFT, stablecoins like USDC and DAI are also quite novel and interesting applications.

These applications are providing value and utility to those using them, and could potentially improve other parts of the world’s payment systems by providing a decentralized option alongside centralized processors.

Crypto will be eternally new, because we will keep finding new ways to build on top of it. A few years ago zkSNARKs we’re not feasible on a blockchain. Now they are becoming widespread and being put into use. A few years in the future, we will likely have new cryptographic primitives that will provide new applications and areas to build and develop.

None of your examples are good ideas though. DNS requires proof of identity and a mechanism for settling disputes (e.g. so you can't buy google.com if you're not named Google; and also can't buy g0ogle.com, gooogle.com, gOogle.com etc) to be a useful system. Minting NFTs simply can't give you that, and once you involve a party that can settle disputes, all advantages of NFTs disappear.

Not to mention, most NFTs as used in reality are 100% vapourware. As the owner of an NFT, you sometimes don't even have the right to reproduce the thing the NFT signs yourself (as in the case of the NBA moments NFTs).

Even when you do, you typically have no official ownership of the thing - for example, if you buy a Bored Ape NFT from someone else (not Yuga Labs directly), you'll likely have no legal standing to sue Yuga Labs if they later decide to delete the Ape you bought the NFT for (sinec you have no commercial relationship with them, and the NFT itself is just an NFT, it's not a contract).

I was a crypto skeptic for many years. If you look at crypto purely from an engineering lens, you'll always find it wanting. What I didn't understand was that crypto is as much of an economic and political project, as it is an engineering project. If you think decentralisation and trustlessness are valuable, you should think crypto is important. If you don't care for decentralisation then being negative on crypto is a consistent position.

I think this is very close to the truth. Most tech people, like the author of the article, look Bitcoin only from technological perspective. This completely misses the point, because Bitcoin is worse on many purely technical metrics compared to centralized currencies. The benefits are economical and societal, and they are not very easily understood. This misunderstanding leads to both "anti-crypto" and altcoins that are supposedly better than Bitcoin.

Exactly, if you have complete faith and trust in conventional FIAT currencies and the systems they use to transact the use cases for crypto also seem far less compelling.

As an example, the appeal of deflationary Bitcoin is much more salient to a citizen of Argentina than to a citizen of the USA (although recent inflation might make the appeal more obvious). Or on the even more extreme end, the citizen of Zimbabwe would much rather have decentralised solid crypto of one sort or another than their local currency.

No one has complete faith in anything. The institutional system in liberal democracies is such that no single institution has all the power, precisely because we don't completely trust the government.

The answer to dysfunctional governments is not get rid of the government. This is just dumb. We need well-functioning governments to enforce human rights, and law and order.

How is bitcoin deflationary when the price has fallen 50% or so in the past year, and appears to be highly correlated with tech growth stocks?

No crypto project has managed to solve the trilemma problem so far. Decentralized chains are way too expensive and the cheap chains are heavily centralized.

ZK Rollups effectively solve this problem by moving computation and data storage off chain without sacrificing security. These protocols include on-chain exit mechanisms so that tokens are never at risk of being taken by the sequencer.

Replace “crypto” with “GPL” and the comment still makes sense. And, at the same time, still makes no sense.

The point of the comment is: governments have abused their position of power, by bailing out irresponsible banks, by giving them an oligopoly in the first place, and by doing all this through spending your savings through inflation.

Therefore, an un-debaseable, trustless and liquid asset is crucial in making the powers-that-be accountable for their actions.

I did not see any real pro crypto argument in this text. Nothing is really proven in practice and everything is in ideas. Meanwhile scammers are taking money from enthusiasts and existing blockchains are burning up a huge amount of energy.

I defense of those existing blockchains: the annual worldwide energy usage of blockchain technology is roughly equal to the annual US energy waste from machines plugged in while in standby mode. It is also significantly lower than the annual worldwide usage of Christmas lights, and wash dryers.

US spam postal mail also releases a comparable amount of CO2.

These facts don't provide a defense of one or the other as "not that bad"; these give us multiple opportunities to make small but meaningful reductions in waste with relatively little impact on the quality of life of the world at large.

> the annual worldwide energy usage of blockchain technology is roughly equal to the annual US energy waste from machines plugged in while in standby mode. It is also significantly lower than the annual worldwide usage of Christmas lights, and wash dryers.

... and it benefits much, much fewer people.

That's analogous to the pro-air-travel disinformation argument: "air travel is only 2% of CO2 emissions". It is only so because air travel is only adopted by a small minority of people: that doesn't stop it from being insanely carbon-intensive.

The difference is that the world needs Xmas lights and washer dryers.

https://www.bbc.com/news/technology-56012952

“Bitcoin consumes 'more electricity than Argentina'”

I find the last section of this article particularly ironic considering cryptocurrency is one of the biggest steps back for technological efficiency I've seen in my lifetime. No, credit card fees have not improved in 30 years, but at least the energy required to process those transactions hasn't increased by orders of magnitude in the same time period.

So what? If the pollution is the problem, government should tax the externalities through a Pigovian tax.

In the EU we have a functioning carbon cap, and as such mining is less profitable here.

https://ec.europa.eu/clima/eu-action/eu-emissions-trading-sy...

But the US will hear none of it:

https://www.youtube.com/watch?v=MondapIjAAM

I think you pointed out the problem yourself. Bitcoin and pollution don't care about borders, unless you get every country in the world to pass such a tax the miners will just move to wherever they can get away with not paying it.

I agree. But lawmakers would have a double standard if they imposed such a tax, but only on Bitcoin miners.

> No, credit card fees have not improved in 30 years,

A quick web search tells me that the law which capped credit card fees at 0.3% is from 2015. That's less than 10 years ago.

You forgot to mention: if you lose your keys, youre fucked. That is, of course unless you trust a centralized unregulated entity to manage them for you.

This is a huge UX issue for anyone that wants to self-custody. In the same spirit as the OP, people are working on solutions for this. Vitalik posted about it last year: https://vitalik.ca/general/2021/01/11/recovery.html. I don't know the technical details, but Coinbase is launching a wallet system where the private key is "split" between the user and Coinbase.

After explaining improvements to this specific issue, it still feels like way too much friction for the average person to deal with. I think there will be more improvements as time goes on but maybe that's just the cost of doing self-custody. In the end, I guess it's up to the individual to decide whether it's worth it or not.

But you're still putting your trust into a centralized organization (Coinbase). So we're back to square one.

I was talking about Coinbase MPC wallet, where they have part of your private key. I think that's pretty far from back to square one, is it not? You still own your private keys but are trusting a centralized organization to keep the other, so it would require both parties to be hacked for the wallet to be at risk.

Banks started out unregulated, and I believe it won't be long until crypto custodians are heavily regulated too. The legislative system just needs time to react.

Wallet recovery is similar to reversing transactions: you can have it if you're willing to nominate some third party that you trust to manage it for you.

In which case the entire blockchain thing becomes redundant.

Or use social recovery wallets. https://vitalik.ca/general/2021/01/11/recovery.html

Yeah, and if you lose your private key apparently you deserve to lose everything.

In the same way as someone keeping their savings in cash under their mattress deserves to lose everything or in a different way?

Many fervent crypto advocates seem to have downright malicious attitudes toward people who either lose money on crypto or refuse to participate in it. They've spawned sarcastic memes like "sorry for your loss" and "have fun staying poor".

I think the comment you're replying to is ironic.

Not true, see tor.us

> "and I’m currently working on a startup that is trying to add regulatory compliance capabilities to public blockchains."

(big sigh)

It is dishonest to mention

> proof-of-time-and-space construction used by Chia

as reason to reduce importance of induced waste. Chia just wastes something different and is not improvement in any form.

It's dishonest to call the author dishonest for this one sentence. They mention Chia in passing at the end of a paragraph on proof-of-work alternatives.

I have called this mention dishonest, not the author.

You said it's "dishonest to mention." The author is the mentioner. If the mention is dishonest, then it necessarily follows that the author is dishonest.

Not really. It manifestly wastes something with, at worst, a much longer runway toward making the planet uninhabitable for humans. That's the important point about PoW waste.

SSD/HDD also require energy to produce and overall their production is causing the same type of damage as energy prodction.

Disappointing article. Bitcoin IS the innovation. Its energy use will continue to grow for a while, but probably not by as much as alarmists think. In return, you get digital property that can't be debased, corroded, eroded, confiscated or corrupted. Not to mention it's fungible, transportable, custodial, so it can be used as money. It's also completely trustless. You don't need anyone's permission to send value to anyone else.

Other cryptocurrencies are experiments in changing Bitcoin in ways that:

1) Are not enough of an improvement to break Bitcoin's network effects (Monero, Litecoin, etc).

2) Change the consensus rules so much that it ruins the incentives and wildly increases complexity and attack space (Proof of Stake blockchains).

We haven't even come close to unlocking the value of the Bitcoin innovation. Thankfully, short-sighted articles like this won't be enough to stop it.

I think an interesting feature of defences of cryptocurencies is that they are similar in their composition as a block chain. In a block chain you have a cryptographically secure summary of the previous block in your current block - but you don't actually know what's in that previous block. Similarly in the arguments defending cryptocurrencies at the top of the article you have the description of the advantages of cryptocurrencies, but the later blocks of text hold no real understanding of what the previous blocks of text meant. So yes, blockchains are incredible because they solve "trust". No, it's not a problem that we can't reverse transactions because we can just have trusted intermediaries.

Yes, Blockchains inherently get their robustness from an incredibly wasteful algorithm. No it's not a problem they're inefficient because we're actually just going to do everything off-chain. No, it's not a contradiction for my defence of cryptocurrencies to advocate for not using them.

Ok, so I've been a bit snarky here, but the core of what I want to say is this: It is very difficult to read about the compromises made to achieve practical uses of crypto and still have the view that there's any of the original value proposition left.

I think the best cryptocurrency defence is just "We've got a lot of smart people trying new things and maybe something of value will end up being created". That's about as compelling as you can get.

> and still have the view that there's any of the original value proposition left.

While not usable as currency, cryptocurrency is still an asset crucial for holding government accountable for its spending. Government can dilute fiat currency, but not Bitcoin for instance.

I think what we've seen in the last 2 years is that stimulus money flooded into the market, it inflated asset prices massively, and now with rates going up those bubbles are bursting, and crypto has absolutely been one of the bubbles. That doesn't hold the government to account, it let's crypto holders be the ones whose wealth disappears in the crash.

This is a genuine question. Is there a defense of cryptocurrencies that doesn't follow the pattern of, "yes, that is indeed true, however here is an edge case or counterexample which either doesn't exist yet, or is not in wide use so it's not actually a problem"?

Every article or comment defending cryptocurrencies has followed this pattern and it isn't convincing to me. I'd love to have my mind changed, but when every rebuttal follows the same script, I remain am unmoved.

which argument do you find to be an "edge case"? My main argument in favor of crypto is the democratization of finance and leveling the playing field, which as we can already see crypto generally only has real benefits to the poor - for rich it's just a speculative play, but for the poor it can mean the difference between getting paid across borders without corruption stealing your money or being able to save wealth when banks won't help you out of lock you out.

The general form is that crypto can't do X. The response is that an obscure implementation Y does do X. The problem is that Y, while existing, largely doesn't address X in practice because Y's trading volume and/or market cap is insignificant.

I guess to your point. How much corruption is avoided, and how much wealth is being saved that would otherwise be locked out? Without the means to quantify it, it feels like another, "this is theoretically possible"-type argument in the same way. The answer I expect to get is, "No one knows, but it is possible." I guess I'll keep waiting to be convinced. There are a lot of great things that are theoretically possible. Still waiting on them.

> The general form is that crypto can't do X. The response is that an obscure implementation Y does do X. The problem is that Y, while existing, largely doesn't address X in practice because Y's trading volume and/or market cap is insignificant.

Sure, but this presupposes that Y's trading volume and/or market cap are indeed actually insignificant. A lot of people make that presupposition, but it's often about as accurate as a drunk chimpanzee playing darts. Proof-of-stake is the case-in-point: "but but Ethereum hasn't switched yet so therefore PoS is obscure", quoth the "skeptic", entirely ignoring that multiple of the top 10 cryptocurrencies by market cap and/or transaction volume are already proof-of-stake and have been for some time now.

Even taking that presupposition at face value, what's experimental today is less so tomorrow. That experimental solutions do exist bodes well for the state of things even months (let alone years, let alone decades) from now. If you want to wait until then, then you do you; meanwhile, those of us willing to experiment will do so.

I think it's a fair script to use against arguments of the form "cryptocurrencies will never amount to anything".

I would hazard to say that it's not the criticism of the current state of cryptocurrency that irks most of its proponents - most of them agree that it's not very useful currently.

However, it becomes problematic when you take that valid criticism of the technology's current state and use it to support the conclusion that the entire tech is a permanent dead end. That problematic reasoning is what this article's really speaking out against.

If you want your mind changed that cryptocurrency is currently useful, I can't help you there. But if you want your mind changed that many of the drawbacks of blockchain technology are not as insurmountable as detractors would have you believe, the article does a good job of laying out points in favor of that.

> If you want your mind changed that cryptocurrency is currently useful, I can't help you there. But if you want your mind changed that many of the drawbacks of blockchain technology are not as insurmountable as detractors would have you believe.

Let me summarize the sentiment to see if I'm understanding: "I'm excited about crypto now because of what crypto could be in the future."

To me it feels like being really excited about technology X because technology X+n might fix the problems with technology X. I just can't get behind that as a general principle. I've been hypeburned too much and I just don't have it in me anymore.

I'm excited about space exploration now because of what it could be in the future. I'm excited about various up-and-coming programming languages and operating systems and such because of what they could be in the future. Why shouldn't I be excited about crypto because of what it could be in the future?

It's a less prescriptive sentiment than that.

It's your right to not be excited about cryptocurrency, and your reasoning is fair enough. Also, the article does a good job of clearing up misinformation about what cryptocurrency is intrinsically incapable of. I don't think those two things are in conflict.

This is also how almost any technology can be dismissed.

Great. But let's agree that the opposite is also false.

Rather, a technology should be judged against its present merits. As an extreme example:

A: I have cancer - just a few months yet to live with the currently developed treatments.

B: That's actually not a problem because cancer treatments might get better in the future.

Should A feel great instead? No. The converse is that any technology can be accepted. Future merits or lack of future merits are simply not a justifiable measure by which a current technology should be judged. It's as absurd. Just as absurd as saying, "You should like natto today because some day natto might taste better."

As a non-extreme example: My government can seize all my funds in my bank and/or put any local currency exchange rate to dollar that they please. Should I fight them, move, or just buy some crypto which cannot be controlled by any single entity? You will ask how I'm going to spend it and this will miss the point: safe storage of assets is also important. (And I can trade crypto with friends for cash, too)

This article repeats a common misunderstanding of how bitcoin works.

Bitcoin's decentralization does not come from miners. It comes from the fact that users will not recognize blocks that do not follow the protocol rules, as being part of the blockchain.

As a consequence, market participants will not pay as much for "bitcoins" that do not come from valid blocks.

The fundamental service miners provide is that proof of work is used as a "tiebreak" so that bitcoin users can determine the "true" chain among all the chains that follow all the protocol rules.

Miners really are just dumb utilities.

A miner staying within the rules of the protocol can do two things that are negative. First, a denial of service attack by mining empty blocks or censoring transactions. Second, executing a "double spend" if he has more than 50% of the hash capacity.

Those are serious considerations. But we cannot claim that bitcoin's decentralization is reducible to those two things. The current allocation of hash power among miners is actually far more distributed than what is really needed for bitcoin.

Implicit in all the above is, miners do not "vote." That can be a helpful analogy, but it shouldn't be taken too far.

> In fact, I think there are some pretty exciting things happening in the field, even if most of them are further away from reality than their boosters would admit. Moreover, many of crypto’s technical problems are also amenable to some really exciting technical solutions, many of which are already here or on their way to deployment.

Show me.

I appreciate the article but it's still disappointing to run into a typical misconception about Bitcoin from someone claiming to make a technical defense of cryptocurrency. He states that Bitcoin is now not so decentralized, presumably because of the concentration of mining power. This is a pretty fundamental misunderstanding of what decentralization means with regards to proof of work. What it means is that there is no central authority that can reverse or change transactions, add taxes, only operate from 9 to 5 on weekdays, etc. The protocol defines the behavior, not a centralized org, and it is perfectly decentralized. Anyone can add a mining node, because the protocol itself is decentralized. Having a smaller group of mining pools doesn't change this core characteristic of PoW blockchains.

I would be interested in seeing a similar breakdown of stakers and staking pools for the large PoS chains.

Most of Green's article goes through, except for the answer to the 'climate change' objection (Objection 1). Which is, of course, the most important, and without it, the article as a whole also fails to convince.

The problem is in this passage (mine the emphasis):

> But the question we should be asking is not whether to be angry about the power consumption of proof-of-work mining. We should be trying to figure out the right path out of this mess. And more concretely, whether there’s a path forward which is more likely to produce *a good outcome* than what is already happening in the industry — namely, that projects are rapidly deploying cleaner technologies to replace proof-of-work.

1. What is a "good outcome?" A good outcome for whom? A great outcome for most species, and most h.sapiens, would be an outright ban, because of the risk spread.

Think actuarially:

There is always the possibility the crypto industry trends cleaner, but legacy chains will be around for yonks, and bluechip crypto is unlikely to ever move off PoW. This means that, yes, while there is a possibility the industry might trend clean, this is an emormously polite way of saying that the downside risk is both severe and likely.

Put another way: if you were selling planet insurance, and you found out they had a lot of PoW crypto going on but were thinking about maybe one day kicking the habit, you'd probably either charge them a fortune or tell them to take a hike, right? Think actuarially.

There is also a suggestion that banning mining (or crypto transactions) might just move the action to other jurisdictions. This suggestion seems strained: for while a coordinated international treaty or ban might make time to confect, it's certainly not impossible. Powerful nations might, say, weave a crypto-ban requirement into multilateral trade agreements, like we already do for intellectual property.

A ban on crypto mining would likely be even easier to implement and spread, as most nation-states correctly view crypto as a threat to their command&control. I mean, look at Ecuador.

Finally, banning crypto would also be something nation-states could take back to their populations as proof of progress on climate change. And they'd even be right.

As harsh as it is for a supporter of crypto (and former industry wonk and former whole-coiner) to say this, I'm sincerely beginning to think that the lasting value of this whole Blockchain Thing has been the thought it has provoked. I, for one, would never have had to think so deeply about the nature of value and currency.

But you know what? These days, I stick to fiat.

> What is a "good outcome?" A good outcome for whom? A great outcome for most species, and most h.sapiens, would be an outright ban, because of the risk spread.

This only logically follows if literally all cryptocurrencies are proof-of-work (let alone proof-of-work using a hashing algorithm as energy-intensive as SHA256). This is patently false, and therefore the assertion that an outright ban on the very concept of a cryptocurrency is somehow a net benefit to global society requires more of a supporting argument than "Bitcoin exists and is currently dominant". By your metric, banning only proof-of-work cryptocurrencies would be more than sufficient, assuming that such a ban could be enforced...

> Powerful nations might, say, weave a crypto-ban requirement into multilateral trade agreements, like we already do for intellectual property.

Right, and that totally eliminated (or hell, at least even significantly curtailed) copyright infringement in those jurisdictions, right? If you sincerely believe that, then I've got an NFT of Ecuador to sell you.

The cat's out of Pandora's box. You can't "uninvent" peer-to-peer networking, and you can't "uninvent" decentralized ledgers. Nation-states can impose whatever bans they want; unless they're willing to pull a PRC or DPRK and start committing rampant privacy violations for censorship reasons, those bans are toothless.

> This only logically follows if literally all cryptocurrencies are proof-of-work (let alone proof-of-work using a hashing algorithm as energy-intensive as SHA256). This is patently false

Against this, I argue:

- easier/cheaper hashing actually doesn't work -- the yield curve in bitcoin mining is there for a reason, and without it, I doubt PoW would fly.

> ...and therefore the assertion that an outright ban on the very concept of a cryptocurrency is somehow a net benefit to global society requires more of a supporting argument than "Bitcoin exists and is currently dominant".

Bitcoin is an investment, because it's terrible for small, frequent transactions. (Both in UX and eco terms.) Reductio ad absurdum: If it doesn't remain dominant, then it has no use case, as it's a lousy investment instrument. If the above goes throw for bitcoin, then, a fortirori, the same reductio can also apply to any other PoW coin.

And don't get me started on PoS -- it's literally just an MLM you can buy into. A system for centralizing wealth in the hands of whoever already has it.

> Right, and that totally eliminated (or hell, at least even significantly curtailed) copyright infringement in those jurisdictions, right? If you sincerely believe that, then I've got an NFT of Ecuador to sell you.

It did, though? I remember the nineties well -- relatives would go to China and come back with armfuls of factory-pressed CDs and DVDs. Anything you wanted. Clean and new-in-box. That went away because of IP protection baked into trade agreements. And before you say 'BitTorrent', please remember, the analogy is _factory_ piracy -- because, like nineties piracy, Bitcoin requires mining rigs, and these are large, physical assets, like factories, and this is unlikely to change. What happened to IP after Napster is another thing, and does not invalidate the analogy. A similar virtualization/p2p move is unlikely to work for mining. (But I could always be wrong about this -- I'm open to persuasion, if you can paint me a word-picture of what competitive distributed mining would look like, other than NK Monero malware.)

> By your metric, banning only proof-of-work cryptocurrencies would be more than sufficient, assuming that such a ban could be enforced...

It's not hard -- a helicopter and a FLIR cam would work, as well as cooperation from the energy provider. Choke off the supply of mining, and wait for this to in turn cause transactions to become unwieldy.

> The cat's out of Pandora's box.

Shoot it, then.

> You can't "uninvent" peer-to-peer networking, and you can't "uninvent" decentralized ledgers.

Yes, but you can ban the sale of various things. Laws are possible things.

> Nation-states can impose whatever bans they want; unless they're willing to pull a PRC or DPRK and start committing rampant privacy violations for censorship reasons, those bans are toothless.

Expand/explain. I do not understand the point you attempt to make.

> easier/cheaper hashing actually doesn't work -- the yield curve in bitcoin mining is there for a reason, and without it, I doubt PoW would fly.

And yet there are numerous non-SHA256 proof-of-work systems that have worked (pun intended) just fine while having lower energy requirements.

> Reductio ad absurdum: If it doesn't remain dominant, then it has no use case, as it's a lousy investment instrument. If the above goes throw for bitcoin, then, a fortirori, the same reductio can also apply to any other PoW coin.

This presupposes that all PoW coins have the same properties - never mind that pretty much every cryptocurrency created since Bitcoin has had "do it faster and cheaper than Bitcoin" as an implicit if not explicit goal.

> And don't get me started on PoS -- it's literally just an MLM you can buy into.

The people who say this are the same people who know next to nothing about PoS.

> I remember the nineties well -- relatives would go to China and come back with armfuls of factory-pressed CDs and DVDs. Anything you wanted. Clean and new-in-box. That went away because of IP protection baked into trade agreements.

It went away because now you can buy knockoffs on AliExpress instead of relying on relatives in China.

> And before you say 'BitTorrent', please remember, the analogy is _factory_ piracy

Nope. The equivalent to electronic money is electronic piracy. Moving the goalposts does not a good argument make.

> Bitcoin requires mining rigs, and these are large, physical assets, like factories, and this is unlikely to change.

Again: there are other PoW blockchains besides Bitcoin.

Even in Bitcoin's case, hashing ASICs don't have to be large; that's currently the most profitable approach, but mining can and would readily adapt. SHA256 is also a common enough algorithm outside of Bitcoin that hardware accelerators for it have ample non-Bitcoin usecases; you'd have a hard time blanket banning any and all SHA256 hashing unless you're willing to break password authentication for the vast majority of computers in a given jurisdiction, and you'd likewise have a hard time justifying the ban of hardware that makes password hashing faster (even if it just so happens to be capable of mining Bitcoin).

> a helicopter and a FLIR cam would work, as well as cooperation from the energy provider.

And if the farm's off-grid on solar? The energy provider would have zero visibility on that, and the helicopter flying around day in and day out would be far more ecologically destructive.

> Shoot it, then.

Good luck with that.

> Yes, but you can ban the sale of various things.

We're literally talking about a class of electronic currencies which do not give the slightest sliver of a rodent's anus whether there are laws prohibiting a given transaction. That strategy hasn't worked for IP infringement (despite your assertions), it hasn't worked for the drug trade, it didn't work for liquor trade during Prohibition, it's already starting to fail with the firearms trade in gun-restricting countries (thanks, 3D printers and hardware stores!)... there is zero reason to believe it would work for cryptocurrency.

> Expand/explain. I do not understand the point you attempt to make.

What part did you not understand?

It's always interesting to see opinions about crypto currencies by people that actually have no clue where it is about.

Just wait until a few years from now when cash money will be phased out and replaced by CBDC's. That's when suddenly all those critics will wake up in horror and realize that money as we know it ceases to exist. What money is CBDC's than? Well, it's credits, social credits to be more precise, controlled by smart contracts, controlled by governments.

So with these government controlled smart contracts in place, how are you going to give your kid a 1000 bucks? If the government only allows you to give a maximum of 100, than that 100 limit will be programmed into the smart contract and your 1000 bucks transfer will be rejected. Or imagine you want to go a second time on holiday in a year. The smart contract might be programmed to only allow you 1 holiday a year due to carbon footprint, now you cannot book your flight. This is just the tip of the iceberg, when you just take a little time to think about all the ramifications, you should get worried. They are even planning to control how and on what you can spend the money you earn, it's written in publications, and no it's not a conspiracy..

The total control of humanity that CBDC's will bring is a horror story. It's comparable to the Chinese Social Credit System, but then on steroids. Much of the smart contracts will be run by AI. So, what are you going to do when for whatever flaw in the system or whatever reason your credits are blocked? You don't own money, have no wallet, you might not even be able to buy a piece of bread, whatever you credit score was before. That's what's in store for you crypto currency critics.

So please, do your due diligence and think twice before criticizing crypto currencies.

I like this. It's quaint in how they mix and match different dystopias without basis in reality except for what their cryptobros came up with (they can't even tell if 561 is prime or not)

"Smart contracts" okay, the cryptobros can't even make smart contracts for bored monkey pictures without shooting themselves in the foot 10 times, why do you think a government will suddenly need one of those to do anything?

Why do you think the government needs an immutable ledger powered by inneficient computations to keep track of transactions when current DBs work just fine? The cryptobros can't even make lightning scale to the size of a small ecommerce site and want us to believe that somehow that's the future?

But to be fair crypto has its uses: speculation and separating fools from their money

> Why do you think the government needs an immutable ledger powered by inneficient computations to keep track of transactions when current DBs work just fine?

They mentioned CBDCs, not blockchain.

To rephrase what has already been pointed out in other comments: this post focuses on 1) drawbacks of cryptocurrencies as solvable problems that could disappear thanks to X and Y, instead of what 2) essential benefits they supposedly (could) offer.

1) is much easier to address (at least in vague and aspirational terms) but rather uninteresting in the absence of clear examples of 2).

The article hints at some of these at the end of the article, but here's a few things maybe:

- the option for non-custodial and semi-custodial ownership of things like digital assets, from currency to domain names to other types of online property. most of our digital assets today are custodial, owned by companies seeking to gain profit and create moats. maybe some users would like another option, despite the additional risk of having to maintain their own private keys.

- fast settlement times for worldwide payments that do not require routing through a centralized intermediary that will skim a significant percentage off the top of each trade. fees paid in a PoS system can be redistributed to all participants in the network through burning + staking and delegation, which is a very different way of handling payment processor fees than what we have now

- a network of financial applications and systems that is permissionless, so that anybody can fork an existing tool or deploy their own tool without going through regulatory hurdles and roadblocks based on an archaic tightly permissioned boys-club financial system

- smart contract functionality like a 0% fee crowdfund contract that can support hundreds of thousands of participants, settle instantly, and even provide shares as tokens back to donors in case some future rewards should be distributed back to early investors

- generally better payment systems that use new cryptographic primitives rather than pencil signatures on paper, insecure card numbers and 4-digit PINs, constant privacy invasive systems

Finally and Thank Goodness. I have been so depressed lately listening to all the "crypto-haters" bash something "they don't see a need for" that we actually need very desperately that it was really messing with my head. Of course, you don't see the need...you either aren't actually looking at the pain and high costs those on the outside are forced to endure or you just don't care. Finally someone in an actual position to know has written a piece that isn't hampered by their bias. He doesn't run a FinServices company for oldsters or pretend that BTC is worthless while being a part of a group of companies using XRP for years.

Thank You, Thank You, Thank You

My hot and uneducated take is that in 5 years we will see some Phoenix rise from the ashes of Cryptomania.

If the entire field turn into toxic waste that no one wants to touch it will be extremely undervalued. Therefore it would be a tremendous opportunity.

> If the entire field turn into toxic waste that no one wants to touch it will be extremely undervalued.

Bagholders will always try to find new victims. Crypto is praised even when it's in the shitter. "Buy the dip, it will be $200k before years end, I'd buy it myself but..." etc.

Ok. I don't understand your point.

If this clarifies: I'm talking about blockchain technology and its applications. Not a particular blockchain asset.

It does. Still, not many applications for blockchains, but shitty assets.

The biggest problem I see with cryptocurrency is the transaction rate problem. It’s not like attempts haven’t already been made to solve it (Bitcoin Lightning), and Dr. Green fully admits that it’s not certain that any currently proposed changes can solve it either. How long is the world supposed to wait for reasonable transaction rates on this technology? If this is truly like the early internet, they should have vastly improved over the past ten years, and should definitely improve over the next five. But as far as I know they’ve been basically static throughout the technology’s life so far.

> The biggest problem I see with cryptocurrency is the transaction rate problem. (...) How long is the world supposed to wait for reasonable transaction rates on this technology?

The technology to do so already exists / is currently being developed via:

- Optimistic rollups (Arbitrum, Optimism)

- 0-knowledge rollups (zkSync 2.0 (in public testing), Loopring, Immutable X)

- sidechains (Polygon PoS, Fantom)

https://ethtps.info/ https://l2fees.info/

At worst, you'll only need to wait for a year or two to get sub-$0.10 transaction fees on the ETH rollups, as user adoption picks up. For me, I've been an active user of Polygon PoS & my transaction fees are often below $0.01, with the most being $0.05.

There're also scalability improvements that're currently in the works, such as EIP-4844 (Proto-Danksharding, partially named after one of the core contributors to the ETH protocol). It should be noted that this is placed in the backburner, as the move to PoS is more important.

https://www.eip4844.com/

https://eips.ethereum.org/EIPS/eip-4844

> At worst, you'll only need to wait for a year or two to get sub-$0.10 transaction fees on the ETH rollups, as user adoption picks up.

I do hope this works, genuinely. I feel I’ve been burned already on this stuff so I’ll believe it when I see it. Would you say my misgivings would be proven correct if TPS is not well over a thousand in a few years?

> If this is truly like the early internet, they should have vastly improved over the past ten years

They have. There are other cryptocurrencies besides Bitcoin. Even the worst proof-of-stake chains have multiple orders of magnitude better throughput and latency than Bitcoin does. Hell, there are plenty of other proof-of-work chains with better throughput and latency than Bitcoin. And that's all entirely ignoring sidechains and other such shenanigans pushing transaction rates and speeds even further.

L1 transaction rate has improved from 7 TPS to over 1,000 TPS. If you didn't notice that's on you.

The article says Ethereum’s tx rate is 20-30 per second, and Bitcoin’s is 7. That’s what I’m going off.

Did you read the article? No?

"Please don't comment on whether someone read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that.""

https://news.ycombinator.com/newsguidelines.html

Sorry, will avoid this type of comment next time.

I did. He lays out several possible solutions but notes that none are proven. That’s what I’m criticizing: I’ve seen these claims made before, and they were never proven.

The author reasonably concluded that these solutions are early and effectively “beta software” but I think it would be wrong to say they are completely unproven. L2s are currently securing billions of dollars and the amount of block space they take up is on increasing rapidly.[1][2]

The unproven part is whether users will be satisfied enough with the security and censorship considerations of something like a ZK Rollup for it to scale to facilitate a significant part of the world’s economic activity. This is reasonable to question as we are only about 1 year into a range of this tech being heavily applied on mainnet.

https://l2beat.com/

https://dune.com/funnyking/L2-Gas-Consumption

Good that he talks about the climate.

Independent of this: "We should be trying to figure out the right path out of this mess. "

For me I'm fine on thinking about how to solve the climate crisis before I will spend energy on solving crypto issues but that's something every one has to decide for themselves.

Fixing climate change will be more beneficial for everyone who has kids and/or likes his/her family members kids or kids from friends.

Which I do.

I think overall people would prefer less energy costs, more food and more water and less extreme weather before crypto but that's just my guess.

But at least on hn I'm reading more about crypto than that.

The whole reason it is so important to be able to reverse digital payments now is because of their incredibly insecure and inferior design compared to cryptocurrency payments.

That's the most obvious reason to move to cryptocurrency. Amazing that people don't see that.

With crypto, I authorize a payment with a secure signature without revealing my credentials. With digital payments like credit cards, I have to give you my credentials and just hope you are honest. In the context of cryptocurrency this is laughably bad.

I find people's response to crypto really odd. It's either the messiah or the ultimate evil. There seems to be no in between in people's opinions...

I hold an in-between opinion.

I believe cryptocurrency is one asset (of multiple ones including gold) that can not be debased by the government, and as such forces the government to be financially accountable (I include central banks under "government").

I also believe lots of them offer a wasteful amount of security - for instance, Bitcoin secures almost $1.2M per hour against double-spending: https://www.crypto51.app/

I also think Bitcoin's inflation should be curbed. Only specialized mining operations benefit from the inflationary mining subsidy. Once inflation is reduced, miners will be limited to spending from transaction fees, not from the future.

Jurat.io is a startup that has solved the transaction irreversibility problem without introducing trusted intermediaries. Instead their process follows court rulings about digital assets in particular blockchain accounts.

In a sense the courts are occupying a position of authority but it’s the same authority that courts have over all property, digital and traditional.

As we speak, regulators are being captured by the bad cryptocurrencies; if we allow that to play out then of course regulators won't come up with nuanced policies. It'll be mining and gambling for everyone, everwhere.

We'd be better off banning it all now then later adding a carve-out for non-PoW, non-deflationary, reversible, scalable, private, actual digital cash.

I agree that all cryptocurrencies should be banned. This would root out all of the weak cryptocurrencies which are not private or resistant to censorship.

We'd be better off banning all speech now and later adding a carve-out for statements that I personally like.

Great article but let's get real, a great deal of the cryptocurrency criticism is rationalization. HN recently revealed the true motivation behind much of it[0]:

> It's less that I'm glad the market is crashing, and more that I'm glad that the insufferable crypto bros are finally getting a punch to the mouth. Seriously, these people are the worst. Your average "crypto investor" has no skills, no mathematical foundations, nothing. Except for pure stupid luck, and the ability to spew inane crypto babble 24/7. And yes, they think they are much smarter than you, because they achieved better financial results than you did while only doing 1/1000 of the work to get there. I truly hate the fact that these people are so rich. It makes me want to move to Alaska and just try to ignore society for the rest of my days.

> This came off as pretty bitter. I apologize, but I am bitter, and I'm having a shit couple weeks.

[0] https://news.ycombinator.com/item?id=31356857

I'm in this rationalization camp since I actually did make insane returns from cryptocurrency. Even then, I can't bring myself to defend this space because of the sheer a) amount of scams, and b) lack of utility.

The scams wouldn't even be a problem - every fledgling platform has them - but the fact that the crypto community embraces scams and even encourages them. Scammers can rug a project for millions and turn around and launch another project within a week and everyone will still buy it because of greed.

And this is the crypto dilemma: the crypto community has utterly failed at self-regulation. Ergo, it has to be regulated by the government. However, a cryptocurrency that's beholden to government rules is antithetical to the core crypto ideas of self-ownership, privacy, and freedom.

There are plenty of existing laws for dealing with scammers and fraudsters, why not use them? Also, are victims really victims when they knowingly buy into scams "because of greed"? At the very least, they don't seem to be the ones calling for a cryptocurrency ban.

I disagree that there is a monolithic "crypto community" that encourages scams. For example, a great deal of the Bitcoin community is fervently anti altcoin and many even consider Ethereum as a "shitcoin".

Regarding utility, everyone is entitled to their opinion. I disagree. There was a time in my life when I was "unbanked" and Bitcoin was the only way I could transact online. In the end, utility is subjective and it is not the government's job to decide whether something has utility or not.

> There was a time in my life when I was "unbanked" and Bitcoin was the only way I could transact online.

This really needs said louder. Writing off the entirety of cryptocurrency as "useless" betrays either stunning ignorance or immense privilege (or possibly even both). Even in the "developed" world (let alone "developing") there are countless people whom the legacy financial system does not serve yet is happy to exploit; cryptocurrency ain't some silver bullet, but it does address quite a few of the legacy system's injustices.

Yeah. It used to be Google RSUs, then it was all high-paying software jobs doing LeetCode interviews, now it’s cyber money.

People on here just fucking hate other people making money.

That’s not to say that Google is necessarily ethical, or LeetCode interviews are necessarily good, or that cyber money is necessarily going to work out. Maybe, maybe not on all above.

But that’s not why people scream on here about these things.

The article basically says that crypto currency currently is a huge scammy mess with lots of unsolved problems - BUT those problems are solvable in theory. It then spends most of it's paragraphs explaining what some of those solutions could look like, before finally admitting that even with those problems solved, crypto currency might not actually improve on any of the problems that existing non-crypto payment systems have.

Am I missing something?

>Proof-of-stake systems are not perfect: they still lead to some centralization of power, since in this paradigm the rich tend to get richer.

What does this mean? Is there a central node in PoS, or are they saying that power is proportional to stake size?

The idea is that if you have more tokens, you will reap more reward in PoS. This is because you receive around 5% return on your stake, so if you set up multiple validators you will earn more per year.

Note that PoW works exactly like this too, except far worse due to economies of scale. Purchasing mining facilities in bulk will give you a much better deal than buying rigs as a home miner. Whereas in PoS, both the ultra-whale (1000 ETH) and mini-whale (32 ETH) are earning the same exact % return on their investment. The average user delegating in a staking pool is also earning fairly similar return to all validators (with some % of their return paid to validators for their services).

I do not think the claim that PoS is more centralizing or more “rich get richer” than PoW is necessarily true.

Your stake is really growing relative to the total supply as fast as a smaller holder's though. Like anything, rich have more opportunities to get richer, but I don't think these problems are specifically egregious in PoS. For chains which have on-chain governance, there's also the possibility that large holders will vote to change distribution in ways that favor them (though this hasn't happened yet), but this is a problem with any vote-by-stake system (imagine if equity share-holders could vote for larger shareholders to get more dividends).

And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future? This could even be combined with zero-knowledge to ensure voters are unique humans without making their wallet<->identity associations publicly discoverable (though there may be situations where this is desireable as well)

> And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future?

This is what I'm hoping for. As soon as this proves viable, this opens up the door for things like automated international UBI.

Depends on the PoS design. Some have a limited number of stakers, or give stakers voting rights in an on-chain governance system. Neither is true of Ethereum's proof-of-stake, but it's not quite in full production yet.

As for the rich getting richer, that's no different from mining. Stakers have much lower ongoing costs, but the rewards are lower too so their percentage annual return isn't necessarily better. And everyone gets the same return so there's no economy of scale, which is not true of mining (or, for that matter, savings accounts).

Power is proportional to stake size. This can be (and is) mitigated by penalizing stake pools that get too big relative to the rest of the network, thus encouraging users to stake on other pools.

Based on these comments I’m surprised that most of this user base is so crypto illiterate. Algorand or even Dash solves 99% of the problems you claim crypto has. Everyone savvy in the space knows btc and eth were always far from the crypto ideal, but they have large economic moat going for them. Crypto is going to change the world for good in a big way. Most of our modern problems stem from economic and political inefficiencies. Crypto can solve both.

And I am surprised there are still so many illiterates who believe "blockchain technology" is in any way useful. Or indeed anything new.

And AI can get the senior discount at rite-aid. You don’t have an argument

Cryptocurrency don’t need defense. I think that people outside of cryptocurrency communities don’t realise how accepted the technology is within them. HN is being misled into thinking they are widely hated

The truth is they’re completely irrelevant to 99% of the internet population. Pick the top 20 coins. Look at their respective block explorers and check tx/day, unique address/day, etc. You’ll quickly come to the conclusion that maybe 100M people actually use cryptocurrencies in any meaningful way. The internet has 5B users. Cryptocurrency use is irrelevant.

The cryptocurrency debate in technical circles reminds me of two extremely obscure religious sects screaming at each other while meanwhile the rest of the world doesn’t know either of them exists.

There are huge crypto.com ads plastered over every F1 track, I don't think this is extremely obscure stuff. I've encountered a lot of non tech people who own crypto. I saw some number somewhere that estimated that around 17% of Ukrainians own crypto, with similar numbers for other countries. The idea that it is an extremely obscure thing also seems like a function of being in a HN tech bubble. There are crypto ads and exchanges everywhere

Saying that cryptocurrency is widely accepted within cryptocurrency communities seems tautological. Meanwhile many attempts to force NFTs into games have been met with a lot of pushback from the "general" gaming public. I think it's fair to say that there's definitely a group of people for whom cryptocurrency is a "no way, no how" issue. Whether this group is large enough to justify the "widely" in "widely hated" is open to debate.

Accepted in what sense? Everyone I know who is involved with cryptocurrencies is so for “investment”, not for other kinds of usage.

Accepted as a speculation asset, yes

This article is a rebuttal to a letter, that in his interpretation, claims:

>[...] that the entire technology field is worthless and cannot be used for any practical purpose.

However, instead of addressing the core issue of whether cryptocurrency or DLT serves any practical purpose, the article instead cherry-picks specific issues that he thinks are resolvable:

* Energy waste

* Transaction speed

* Privacy

The author seems to be missing the forest (that he himself identified) for the trees. Why doesn't he provide a real world use case for DLT? I'm still waiting for that.

He says why he cares are the end. That it could be a viable payment system, if you solve the scaling and energy and regulation and a few other things.

It does not sound plausible that all of this engineering, required to make these systems even viable in the real world (and, we hope, preventing it from eventually demanding approximately as much energy as Eastern Europe, despite the weak incentives to actually accomplish that) is the best, fastest way to lower transaction fees for the working class.

>Why doesn't he provide a real world use case for DLT? I'm still waiting for that.

As you yourself say, they are talking about cryptocurrencies. Cryptocurrencies are money. Digital money is a practical purpose.

This is the letter:

>After more than thirteen years of development, it has severe limitations and design flaws that preclude almost all applications that deal with public customer data and regulated financial transactions and are not an improvement on existing non-blockchain solutions.

They claim the limitations and design flaws make blockchain inferior to existing solutions. The author is arguing that the limitations and design flaws have been or will be overcome.

But people are normally okay with things that are merely interesting or entertaining even if they are perhaps somewhat frivolous, so long as they don't have any obvious large societal downsides.

Have yet to see a reasonable crypto defence, probably because there isn't one. The same people would have been writing "In defence of tulip prices" in age of yore except that was not as bad for the environment.

Some others have already countered the letter on that point, but it's very easy to bury your head in the sand if you are not directly affected (yet!).

https://www.financialinclusion.tech/

Crypto is antiprivacy. All of the transactions are public, it just offers psuedo-anonymity. If we used crypto for all transactions you could see when I go to my local watering hole and wait for me to close out my tab.

Do you know who is operating under the pseudonym of Satoshi Nakamoto then?

> Why doesn't he provide a real world use case for DLT? I'm still waiting for that.

Payments?

So why is Stripe [0], MoneyGram [1], Checkout.com [2], still using them? They seem to know that some of the ones that they chose have a use case?

Downvoters: What are these three examples of companies actually using this DLT technology doing then?

[0] https://stripe.com/blog/expanding-global-payouts-with-crypto

[1] https://www.bloomberg.com/news/articles/2022-05-29/moneygram...

[2] https://www.cnbc.com/2022/06/07/checkoutcom-jumps-into-crypt...

There's nothing to defend. More ink has been spilled by some of the top experts in the field explaining that there is no use case for blockchain technology itself. It's old technology that has been around for a long time. There's nothing unique or special about it.

It's interesting what the pro-regulation crypto-currency shills are advocating for. In the US a couple of pro-crypto senators proposed a bill that would introduce regulation to cryptocurrencies under the CFTC. They avoid classifying these things as "securities" in order protect crypto from stronger regulation. Despite these "currencies" quacking and walking like securities.

This is more like a compromise made by a mob boss with corrupt government officials: we'll agree to your regulation as long as you agree to look the other way. In other words let's make it look legit and I'll keep scratching your back.

What the letters to congress hope to achieve is stronger regulation on what are effectively unregulated securities. If companies want to dabble in crypto-assets let them: they will have to publicly report their activities, disclose their financials, and face the same penalties as those who are caught breaking the rules.

I somehow doubt this is the outcome the crypto industry wants. A number of executives have been hauled to court over money laundering and fraud charges. I suspect a great deal more would follow suit were the government properly informed and willing to go after them.

>It's old technology that has been around for a long time. There's nothing unique or special about it

<sigh>

I don't know how on earth can people be so confidently wrong, with almost religious fervor backing it up. It's not morally superior to be ignorant. Have you even read the post to the end ?

Blockchains do solve a well known problem in distributed systems in a novel way. The main novelty is PoW consensus, a probabilistic equivalent to an Atomic Broadcast algorithm [https://en.wikipedia.org/wiki/Atomic_broadcast] which ensures that a distributed network of computers all agree on the order of the same set of messages. The protocol uses bits and pieces of ideas that were invented in the 90s (Hash pointer data structures and the idea of PoW itself), but assembles them brilliantly into a novel whole that solves an extremly difficult and decades-old theoritical problem in way unheard of before.

You can talk to the moon and back about how it's enviromentally wasteful or doesn't scale or not a currency or an attractive tool for scammers or etc etc etc..., but if you're unwilling to even understand the raw, neutral techonology it is built on, well, here goes all credibility of all your other non-obvious claims.

I'm experienced enough to read what papers and proofs have been published, have been a programmer for longer than not, but don't take my word for it: https://www.youtube.com/watch?v=J9nv0Ol-R5Q

So they found one way to prevent Sybil attacks that has been a well-known problem. Big deal.

Update

A "blockchain" is not a novel concept. The PoW system used is one way to prevent Sybil attacks when distributing work among untrusted peers, and that's it. Novel, neat, but useless.

If cryptocurrencies needed defending it's because they're a solution in search of a problem. All of the problems they've found so far appeal to conspiracy theorists: people who don't trust banks, government, and all kinds of things. In the mean time the people who've benefited the most have left thousands of people bereft of their life savings and ruined their lives.

My favourite right now are all the scammers who've turned around and stopped ripping off banks and old people and started targeting people who buy NFTs and adverise it on their socials. It'd be freaking hilarious to watch unfold if so many people weren't getting burned in the process.

> 60% of mining energy consumption still comes from fossil sources.

Even if it would be 0% then it is still wasting energy and removing that consumption would reduce overall waste.

And “green” energy still have massive environmental and economical costs.

Mining is heating my piece of shit house that would be filled with mould otherwise

I find video games to be quite boring and useless. But somehow my opinion on the value of entertainment is ignored, and all the energy used on video games is fine.

> This is dishonest nonsense: estimates hold that at east 60% of mining energy consumption still comes from fossil sources.

Ah so that number keeps going down! It's nice that you all hold Bitcoin/Proof of Work to such high standards that it cleans itself up so fast. I really doubt any other industry can do that or has such great metrics, so keep up the great work everyone.

Even if it would be 0% then it is still wasting energy and removing that consumption would reduce overall waste.

And "green" energy still have massive environmental and economical costs.

I was waiting for this comment. I was going to preemptively write the acknowledgment and rebuttal to this in the earlier post but I didn't want to be accused of posting a "strawman argument", by different people, or maybe the same people that would chose to pretend they weren't going to say exactly what you did.

Basically, the idea of "zero-sum energy" is incorrect. So the disdain for Bitcoin/Proof-of-work using any energy source is misplaced. There is plenty of energy currently out there, currently being wasted for decades, that would cost more to store, and cost more to transport. While proof-of-work can (and does) use it directly on the spot. These are often remote, low infrastructure, areas and so unlike other computationally intensive things, such as a data center, Proof-of-work requires very little bandwidth and doesn't even need a steady low-latency internet connection, so it works well. And so far, no other use case has been able to do this - or form the partnerships with the site owners to do this.

This entire article does not even attempt to counter the claim being made in the letter it’s so up in arms about.

> blockchain technology, specifically so-called “public blockchains”… are not an improvement on existing non-blockchain solutions.

The article may have worked as a standalone article but doesn’t really provide a response to the letter it starts off with.

> it argues that the entire technology field is worthless and cannot be used for any practical purpose

Which I concur with. Cryptocoins are worthless, the idea Bitcoin has a market cap of $5-6 hundred billion is absurd, and maybe the increasing fed funds rate etc. will pop this speculative bubble more than it already has (Bitcoin had the even more absurd market cap of $1 trillion toward the end of last year).

Why is a Bitcoin worth anything? I know why my M1 Mac is worth something, I know why a box of raisins is worth something, I know why a bar of gold is worth something. I see no worth in a Bitcoin. I ask why it has any worth and the bag holders cast around looking for an equivalent, and only seem to find that dollars have been unmoored from value for half a century and the response is it's like the dollar (of course the dollar is implicitly, not explicitly like before 1971, backed by tens of thousands of tons of bullion gold among other things, but that's another tangent...)

Well your Mac is worth ‘something’ because of what people are willing to pay for it. It would be worthless to certain people, just as you find bitcoin worthless. What’s the difference?

No, the Mac is worth something in and of itself. It is a tool of productivity, entertainment, education, creation, etc. And, failing all of that, it's valuable for its parts.

A bitcoin is an ID number pointing to pretend money. It has zero intrinsic value.

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