Then all these centralized exchanges popped up to make it easier.
Whenever I see these types of announcement I have two reactions:
a) I cheer, because the sooner the pyramid collapses the less the damage.
b) I'm sad because these are real people losing real jobs
I don't think the promise of Bitcoin was ever that there would be no exchanges, only that no one would be beholden to any given provider. As long as you can pick up your keys and seamlessly start trading on a different exchange, that part of the crypto world is not centralized.
I once asked a friend who had signed up to some crypto exchange "Do they just give you your keys when you sign up?". They replied, "What keys?" Eventually they found it. But it's not like they educate the user.
What's bad about having more options?
And they don’t bother educating the user. Or suggesting best practice. That’s not in the users favour.
Can't you see this defeats the whole purpose though? By this logic, traditional banks are also decentralized because you can also take your money out and go to a different bank. The word "decentralized" has no meaning in crypto parlance, it means whatever the speaker wants it to mean at any given time. And at least banks are FDIC insured, when a crypto exchange loses all your money then you can't really pick up your keys again because everything is just gone.
This may be considered a feature, but the same is true for the Ruble, or the Real. Having assets on the blockchain means you self-custody them in a more portable way (similar to cash), while still having them in a digital form.
"Self-custody" in crypto is also a lie, there's no such thing. All activity on a blockchain is completely dependent on the miners to run the network.
The point isn't that centralized exchanges are decentralized, but that the network is decentralized in spite of the existence of centralized exchanges. Crypto provides financial democratization by way of an open permissionless financial network. Large entities can't collude to lock in customers or lock out competition. Centralized exchanges offer convenience over the base network and so they see a lot of use. But your freedom to transact with the network can't be taken away by centralized players. There is no analogous "base network" when it comes to bank transactions.
And I hope you can see the uselessness in creating a system that fits some vague definition of the word "decentralized" while nearly everyone who uses it just interacts with the centralized services on top of it, because maintaining the illusion of decentralization is so difficult and pointless that nobody actually bothers with it. Maybe it's "decentralized" if you're a whale and you want to capture large portions of the market with fraud without anyone being able to stop you. For everyone else, it's just not. The "base network" here is just for show and marketing purposes, it adds nothing of value to any real legitimate activity.
Just to make this clear: If you personally don't have a vote then there's no democratization. You don't have one if you don't run a full node, which it's very likely that you don't. And if you do, the hashpower (i.e. voting power) of the full nodes you run is determined by how much money you invest in mining hardware. It's not democratic in any possible way you look at it. I'm not just making this up, crypto developers will readily tell you that the system is purposely designed this way to not be democratic.
>The level of coordination isn't implausible either, it's already happened several times already
For instance? And what may have happened in the early days of the network is irrelevant to what is possible today.
No, I disagree. It's exactly the same, because without that concern your transactions can be deprioritized or blocked. Miners can absolutely interfere with the expected function of the network, because it's entirely them who determine what the expected function is in the first place. There are no other systems in place to guarantee the functioning of the network and as a user (not a miner) you have no say in the matter at all. They do whatever they want and you're forced to accept it unless you can afford to buy huge amounts of mining hardware and take over the network yourself. I believe I addressed this all already, it's not democratic by any definition of that word or in any way you could ever possibly look at it. The original bitcoin whitepaper proposed that many more people would be running full nodes and (correctly) stated that the security properties of the system would come from this, and if that ended up being a realistic way to set the system up then maybe you could have said it was more democratic. But this didn't work out in practice, and it's been very obvious since 2010 that it would never work out that way for multiple reasons, one being that the financial rewards from re-centralizing into mining pools are far too great to pass up.
>For instance? And what may have happened in the early days of the network is irrelevant to what is possible today.
Both bitcoin (in 2013) and ethereum (in 2016) have reverted transactions that the miners didn't agree with. Any statements from them that the network is "immutable" or "decentralized" or "democratic" is simply a lie. Nothing has actually changed since the "early days", the conditions for them to do it again are still there and will likely always be there because this is how the network is fundamentally designed to function, based on a consensus of those who have the most resources available to them to mine. For a smaller coin, it may not even be possible to tell that this is happening, because blocks that the miners all agree they don't want to process can simply be dropped with no log of that happening.
Now, if you could legally require that cryptocurrencies need to set up a legal entity that gives a certain level of democratic control to its stakeholders then that's probably the only realistic way you could change things, but I doubt that would ever happen because crypto enthusiasts don't seem to care much for laws or regulations. And in any case, doing so would not be an innovation, it would still have all the other fatal flaws of cryptocurrency. Best case scenario, it would just be moving back into a poor approximation of a credit union, which is something that already exists.
Like I said, the coordination required to interfere with the expected function is implausible and/or prohibitively expensive. You have given no reason to think this isn't true. There's a common argument that goes like: "X can easily happen, all we need is for everyone to do Y". Call this the fallacy of implausible coordination. "We can break the two-party system, we just all need to vote third party". Your comment reads like this.
>Both bitcoin (in 2013) and ethereum (in 2016) have reverted transactions that the miners didn't agree with
I'm aware of the DAO hack and transaction reversal for ethereum, but what exactly are you referring to for bitcoin? In the case of ethereum, they reversed the transaction because the miners did agree with it. But technically, the transaction wasn't reversed, the network was forked. The original network still operates as ethereum classic. If you get enough people together you can change the past on your alternate chain. But that is not an example of a transaction being reversed.
And please, keep any further replies to focused arguments and free of ranting.
It is disingenuous to point to the 2013 incident and say this proves a lack-of-decentralization myth.
The miners don't agree with Ethereum switching to Proof of Stake, and yet, watch what happens this autumn. Important insight: The users control the network, not the miners. Specifically, it's the users who would be buying the miner's freshly minted coins.
The DAO fork was not driven by the miners.
Yes, this time it will really happen. No way it will be delayed again, no sir.
Also, I don't think that the main proposition of cryptocurrency is that you don't need a centralized exchange. If you want to exchange fiat for cryptocurrency via the credit card or bank transfer, you need a trusted peer who can accept those forms of payment- whether that's a business or an individual. The centralization and insecurity of exchanges is due to their weakest link- the centralization and insecurity of the fiat system.
Real jobs is an interesting one. To the individuals yes they are real. To the economy there is no value creation and therefore the work done by these companies is just ultimately burning investor dollars & the planet in a lose:lose situation (as with everything crypto related).
...for now
If someone’s paying you then it’s a real job.
"...but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network"
Using a centralized exchange ruins the peer-to-peer aspect and centralizes the transactions. Unless I'm missing something?
the value proposition of crypto has nothing to with decentralization. Bitcoin isn't about Bitcoin. The reason bitcoin is valuable has more to do with what's happening with governments and fiat currencies than anything about crypto or bitcoin. Ask anyone, why they got into bitcoin, ask any company that got into holding bitcoin instead of cash: they'll tell you: It basically boils down to "I lost faith in fiat".
There's been a huge 50 year bond bubble brewing and 100 year government bubble brewing where govt uses larger and larger amounts of GDP with ever larger debts. The explosion of debt is insane. Ask any financial professional, and they'll tell you with all that leverage in the system, there absolutely WILL be a deleveraging. The govts of the world will NOT be able to meet all their obligations. They can't raise taxes and they can't cut spending. That means, they must default on their currency (this is basically just a huge huge tax on anyone who's holding cash or bonds, even if inflation only stays at 10%, that 100K tax per year on anyone holding a million dollars). And when the Dollar and all the other fiats of the world go bust, you're only going to want to hold 3 asset classes: Equities, Real estate and commodities (gold and bitcoin). Real estate is hard to execute and not scalable at all. Gold, can't be held outside an IRA. So, what does that leave? just Equities and Bitcoin. and anyone that wants any diversification is going to need some bitcoin. one by one sooner or later, everyone is going to come to this conclusion, it's just a matter of time. the future will be one where a 60/40 portfolio is not 60 stock/40 bonds but 60 stock/40 bitcoin.
Bitcoin isn't attractive. On the titanic, do you think, anyone wants to get onto a rickety row boat with no seaworthiness whatsoever? While the music is still playing and party is going, no one gets on board. But, when it becomes clear that the titanic is sinking, everyone's rushing to get onboard. and when Fiat sinks, there's really only a few liferafs: equities, real estate, gold and bitcoin.
To the extent there is any real value it's primarily a means for wealthy Chinese to evade currency controls.
so, if you had money/life savings where would you put it?
Do you have any proof that Bitcoin's value is driven by wealthy Chinese who are evading currency controls?
Governments can, will, and have printed money to pay their debts. Indeed, for sovereign currency issuers, debt (or whatever) is just an accounting measure. A certain amount of material wealth is collected by government in the form of taxes and redistributed back to society in accordance with the policies of the day. Debt and other financial instruments are just to smooth the process.
Bitcoin will never be a meaningful asset class, anymore than any other pyramid investment scheme.
Whether or not the USA reached that point in our lifetimes as OP is pretty sure will happen, idk, hard to say.
I found this somewhat persuasive.
But despite being very well written, all this does is say why not fiat. If you're looking for a store of value, why not gold? If you're looking to put the money to work, why not value-creating such as real-estate or stocks, growing the wealth through value-creation?
Real estate also sounds promising. I'd love to own real estate over bitcoin. but, have you actually done it? i mean buy property as an investment. i have a real estate buddy that just told us an hour long horror story of all the stuff that can go wrong with buying and holding real estate, the renting issues truely are the stuff of horror stories are made of.
So, all that's left is equities and bitcoin. and I don't want everything to be in equities.
Well, this makes no sense, because the value of crypto is also a fiat backed by nothing. With crypto it's not just the government you have to worry about, any person can mint infinite numbers of new crypto tokens, pump and dump them, take out massive debts and gain infinite leverage and then debase anything they want. The massive collapses and bankruptcies in crypto over the last few months should show you that the rickety row boat is actually an illusion, and you're really just stepping off into the water with no lifejacket. My suggestion? Take a swimming class, if you get my analogy.
Meanwhile fiat currencies across the world are the governments escape vehicle for collecting the enormous taxes they're going to need to collect for their enormous debts, via inflation. this isn't just my assessment. Financial professionals (on net) across the world are dumping cash and bonds in record amounts. This is why the feds across the world needs to constantly buy up more and more bonds.
No, this is another falsehood pushed by crypto promoters. For a user only trying to make a payment, the 21 million is just a magic number. Technically the miners can coordinate to soft fork the protocol to increase the number of bitcoins, and this has been proposed several times already. An uncoordinated group can also hard fork the network and suddenly the 21 million becomes 42 million; this has actually happened several times already to both bitcoin and ethereum.
The idea that bitcoin is inflation proof is simply nonsense, even ignoring all the analysis, you only have to look at its price activity over the last few months to see how much of a lie that is. Another difference is that the bitcoin miners don't need to actually print more bitcoins to experience hyperinflation, the stablecoin issuers can cause that themselves just by printing infinite numbers of stablecoins and dumping them onto the bitcoin market. So it's in multiple ways worse than whatever you think is happening to the US dollar.
>An uncoordinated group can also hard fork the network
What are you talking about? An unintentional hard fork, or an intentional one like BCH?
>The idea that bitcoin is inflation proof is simply nonsense, even ignoring all the analysis
The idea that you can make inferences based on technical analysis alone is based on flawed assumptions.
The bitcoin block reward distribution is not finished yet, so it is too early to say. But I predict that it will be too deflationary, which will harm the network in the long run by creating incentives for selfish mining attacks [0].
>the stablecoin issuers can cause that themselves just by printing infinite numbers of stablecoins and dumping them onto the bitcoin market
That only works insofar as users (irrationally) trust stablecoins disproportionately compared to bitcoin. Eventually they will cash out and the ponzi scheme will fall apart.
If the majority of miners agree to it then the rest of the network either goes along with it, or they're forced to do a hard fork themselves.
>An unintentional hard fork, or an intentional one like BCH?
For the end user just trying to make a payment, it's irrelevant whether it's intentional or not, either way he is now faced with the spitting of his coins and the resulting chaos.
>The bitcoin block reward distribution is not finished yet, so it is too early to say. But I predict that it will be too deflationary
This is also a useless distinction for users, either way hyperinflation or hyperdeflation are both catastrophic.
>That only works insofar as users (irrationally) trust stablecoins disproportionately compared to bitcoin.
Any trust in any cryptocurrency is irrational, there's nothing that actually guarantees any of these coins won't collapse tomorrow. They're all based on ponzi economics. What's the actual value of a bitcoin? There just isn't one.
The only the hashrate attacks can do is alter the order of transactions (for example allowing them to replace their past transactions and double-spend). They cannot change the way in which users interpret blocks (for example, they cannot spend another user's outputs, change the value of a given output such as a coinbase output, or otherwise alter the tokenomics). I recommend watching 3blue1brown's video: https://www.youtube.com/watch?v=bBC-nXj3Ng4
>For the end user just trying to make a payment, it's irrelevant whether it's intentional or not, either way he is now faced with the spitting of his coins and the resulting chaos.
Any reasonable vendor will wait for X amount of blocks to pass before accepting a transaction. You're describing a well known vector called a "Finney Attack", which becomes exponentially less likely for every block you wait.
>What's the actual value of a bitcoin? There just isn't one.
Take the number of pizzas that are being sold for bitcoins, and divide that by the number of bitcoins in circulation. I think you may find that the value of BTC/Pizza has not changed much over the last decade.
I mean, what is the actual value of a dollar. It is not like we use the gold standard anymore. The dollar is valuable because it is a connected to a useful payment system. You don't mind holding some liquidity in US Dollars because you have an expectation that you will be able to spend your dollars somewhere in the near future, not because you trade it in for shiny yellow ingots.
No. This isn't even remotely how the technology works. If the majority of the miners right now decide to start doing something different, they have simply excited the ecosystem. The existing network of users and clients will continue to use the remaining set of miners without having to do any active work to switch to them. In the mean time, the majority of miners that decided to go off in the corner and play their own game are going to start seeing defectors back to the "real" network they left behind as they are no longer making money mining as all of the new Bitcoin they are receiving isn't honored by any of the exchanges or stores or users until they convince people to start switching... a process that, for similar reasons of users wanting their transactions to be honored by other users, can't be done piecemeal. The miners simply don't have the power you claim they do.
> worse than whatever you think is happening to the US dollar.
Bitcoin is risky: it's down over 70% from it's highest point. But the dollar is down over 98%! (from 100 years ago) and let's not forget, the rate at which the dollar and other fiats are crashing is getting faster and faster. at 10%, you'll loose half your purchasing power in just 7 years.
And unless you're trying to retrieve your great-grandparent's piggy bank from 1922 and spend its contents, then the dollar inflation from 100 years ago is irrelevant. Even over a year the small level of inflation in USD is inconsequential for the use of a currency. The thing about the inflation of the dollar is that the rate of inflation has become relatively stable and predictable, this is what actually makes it useful as a medium of exchange. With the way bitcoin is now, its inflation or deflation will never be stable, it always will be completely random making it useless as a currency; bitcoiners simply are philosophically opposed to anything that could control the rate of deflation/inflation, like having capital controls and a reasonable monetary policy.
- currencies can collapse. Venezuela, Zimbabwe; you could add Argentina and (checks chart) Turkey to this list. Against what do they collapse? The dollar.
- therefore the dollar will collapse <= this is the "show your working" bit
- therefore people will hold an asset class that does not pay dividends or coupons, indefinitely, against the possibility of this event
> They can't raise taxes and they can't cut spending
They absolutely can if the alternative is SHTF.
There is also an assumption that bitcoin owners will be allowed on to their reserved lifeboat with no government intervention, which I wouldn't guarantee if SHTF badly enough. It's already been banned in China and India. I suppose the plan is to get enough senators bought-in that they'll protect you.
Look at the 100 year long term trend for all countries worldwide. There's a rather shocking chart out there that shows the massive increase in govt spending as % of GDP. whereas it was in the single digits about 100 years ago, now it's in the 30-50% range for most countries. I just don't see this trend reversing.
1922:
- PRC does not exist
- India is a UK colony; most of Africa is not independent countries
- Japan in "great power catchup" phase
- Soviet Union has just formed and the war against the White Russian forces has not yet ended
Huh, nearly everyone I have asked basically told me they want to get rich (like FU money rich), quickly.
Then all those banks and wire services popped up for cases where physical cash doesn’t work.