I'm disappointed of HN comments whenever cryptocurrency topics come up.
People are forgetting that Nakamoto Consensus is a legitimate CS breakthrough concerning the Byzantine Generals Problem.
Is it acceptable to bash every stock in the Nasdaq just because a second tech bubble popped and some SV companies are behaving unscrupulously?
Frenzied speculation brought about inadvertent side effects but these should not detract from the fact that significant advancements are continuously being researched and implemented.
The comments seem to honestly reflect the state of the technology, its environmental impact, the annoyance factor of its extreme adherents, the total lack of a really compelling non-ideological or criminal use case after more than a decade, and a deflating bubble. The insane gulf between the promises made by the “every day brings a new breakthrough” crowd and the reality of ICO’s and Bitcoin is vast, and hard to ignore. Blockchain is a neat idea, but presently it is used in ways that are far from compelling, and I’m yet to hear of a non-hypothetical application that could change that (apart from buying drugs, or money laundering).
It’s also hard to forget the last few years of relentless evangelism, which was equal parts annoying and ethically challenged.
The comments reflect the (perceived) state of the technology.
One has to admit that the reputation of the entire space has been tarnished by snake oil salesmen. For some historical context it is worth looking at countless examples such as the Railway Mania[1] of the 1840s or the more recent Dot-Com bubble[2]. For more depth one can read Mackay[3].
Some of the most promising advancements in payment channels were only published as papers in 2016[4] and are understandably still being implemented. If anything the speed at which enthusiasts are willing to deploy experimental software at their own risk is breathtaking.
Regarding the environmental impact of the Bitcoin network, while being widely derided for its energy use, it is in fact using less electricity than the major credit card networks. It is also using less energy than global gold mining. There are ways to reduce consumption should a consensus accept the tradeoffs.
The term "Blockchain" as it is currently used often refers to private chains which are in vogue with corporate stakeholders. This appears to be a solution in search of a problem–I have not been able to identify a compelling use case here either.
Most ICOs are outright scams.
It is truly unfortunate that promising advancements of micropayments, smart contracts and the world's closet thing to an incorruptible currency are lumped together with so much rubbish.
> using less electricity than the major credit card networks
I googled around for "Bitcoin vs. VISA energy consumption"; the only argument I found in favor of VISA using more is here [0]. This compares Bitcoin to the entire global banking system, including the cost of e.g. keeping the lights on at physical bank branches. It very approximately guesstimates that the entire global banking system requires ~100 TWh/year, compared to Bitcoin's ~30 TWh/year [1].
For comparison: all data centers worldwide combined use about ~400 TWh/year [2]. I very much doubt that the credit card networks account for 7% of all data center energy consumption.
@corv come on, even if we go with the incredibly generous hypothesis that Bitcoin alone currently uses 1/3 the energy of the entire global banking system including physical lamps at desks (!!!), it is still only providing a tiny, teeny, percentage of the value store or of transaction volume. It's not even remotely a fair comparison. It's like saying my car consumes 1/3 of the world's entire output of gasoline so it's way more efficient than the sum total of all the transportation on the planet.
I didn’t say it’s currently more efficient. I’m saying what it is designed to replace eventually, is already using more energy.
Currencies are adopted and developed on a different time scale than most other technologies we are used to.
Saying cryptocurrency has failed after being around for 10 years is shortsighted and not giving the incredible minds working on these problems enough credit.
It's designed to be actively anti-efficient. The more efficient tech is deployed the less efficient Bitcoin gets. It's already atrocious, and it's going to get more-so, on purpose. What it's designed to replace is using more energy (maybe) because it serves like 3 orders of magnitude more customers, value and transaction volume. A single BTC payment takes 826kWh of energy. Now, a MacBook Pro uses at most 85W, so for a single payment on Bitcoin network you could run your laptop for almost 10,000 hours -- or your house for a WEEK. That's stunning, and only going up (again, intentionally).
Visa OTOH is around 41Wh per transaction, or 20,000x more efficient.
There need be only one decentralized, immutable ledger to handle all transactions, the store of value and registration of assets for the entire planet.
While we’re comparing Apples and Oranges, credit cards don’t confirm payments for weeks and there are significant fees associated with accepting transactions, apart from that risk for the merchant.
Nope, I haven't. The anti-efficiency element applies to core Bitcoin no matter what you run on top of it. If you keep to the maximum 7tx/sec that's what you'll encounter. I can't imagine a world where no matter what you're running L2 that the system won't hit that incredibly low limit.
Second layer technologies, in the form of exchanges, aren't blockchain at all. They're just varying degrees of fly-by-night bookkeeping and/or settlement. They require blockchain tokens as much as they require the dollar - not at all.
There's no viable L2 technology right now that anyone is using (especially LN) yet, so it's too early to speculate. If I recall correctly it takes a traditional transaction to open a channel, and we're still capped at 7 per second. If there's 7.5 billion people on earth and we want to establish a channel for each of them, well, buckle up, we'll be here melting the Earth for 1.071 BILLION seconds, or 34 years. Just to open channels. Then another 34 years to close them. Here's a mathematical proof of the LN issues [1].
Hand-waving and pretending there's a path or some solution today means we're not even talking about objective reality anymore.
> Regarding the environmental impact of the Bitcoin network, while being widely derided for its energy use, it is in fact using less electricity than the major credit card networks. It is also using less energy than global gold mining. There are ways to reduce consumption should a consensus accept the tradeoffs.
That's not the point. The issue is with its growth trajectory.
Setting aside how little Bitcoin network can handle vs. major credit cards per unit of energy used, the "mainstream" financial system treats energy use as waste that has to be minimized. Per constant number of players, it is expected to stay stable or even decrease. Bitcoin treats energy use as a security feature, and is designed up front to grow it continuously. Per constant number of players, it'll still grow fast as the difficulty of mining is increased. Even with growing populations, mainstream system seems at worst O(n log n), and Bitcoin is definitely faster[0].
Another thing is - the mainstream financial system already works, and does its job well. Bitcoin is seen as a way for some mix of greedy and politically fringe types to make money quick, exploiting cheap electricity.
--
[0] - I'm giving a tentative O(n^2) here, I have a feeling it might be faster, but didn't check it. I'd love if someone could list here the sources of growth of energy usage in Bitcoin network.
Yes, the expenditure of energy is a defining feature of Proof of Work security, however there is going to be a plateau.
The immutable base layer Bitcoin provides is also on a trajectory of feature completion and second layer technology will increase the amount of transactions per kWh tremendously.
Who knows what benefits micropayments or smart contracts are poised to bring to further increase the efficiency of the global economy?
If you can’t offer a concrete example of more efficient micropayments or useful smart contracts, you’re basically talking about how great the second coming of Jesus might be.
I should have been more careful in my wording here.
What I meant by this is the total energy expenditure of current payment systems (Credit cards, PayPal, WeChat Pay, Alipay, SWIFT, ACH, SEPA) including the overhead of fraud detection, chargebacks and the cost of fees on the economy.
To be entirely fair you would also factor in the cost of QE & inflation.
Although cryptocurrency isn’t widely used as such, notarization and its associated costs could also be taken into account.
All of these factors are obviously extremely difficult to estimate properly.
I still stand by my assertion that a mature cryptocurrency would be less costly for the global economy than the current systems of regional central banking and the damaging credit & debt cycles it brings with it.
This "I don't see a use-case for my very limited life/experience/work" is very toxic.
I use Bitcoin to get paid and to pay. That is legitimate. I know a lot of people that uses it for the same reason. There is also a whole lot people using it to evade capital controls; which is modern day repression on freedoms.
Also what is wrong about buying "drugs"? Would you say the same about an encrypted messaging platform that operates in China. That the user should not use it since China did not approve that?
The compelling usecase is censorship resistant financial transactions.
The fact that you have never been subject to financial censorship puts you in a priviledged position that you are fortunate to be in.
I am similarly priviledged in that I have never needed to use TOR, but I still recognize the extreme value of something like TOR brings for the billions of people in the world who live under oppressive, censoring governments.
I simply dont like the idea that the government will print more money.
Mainstream 'economics' might not like a deflationary currency, but since the last economic collapse was 10 years ago, I don't exactly trust 'economics'.
I have 2 problems with this line of argument that I haven't really heard anyone address in a useful way.
1)While abundance certainly reduces value (by creating oversupply), scarcity can't in and of itself create value if there isn't demand. Say there is only 1 original Sean Hunter painting in the entire world. Since there are 34 Vermeers, it should be worth more than a Vermeer, right? Well no. Vermeer was much much better at art than I will ever be, so noone is ever going to want to own anything I paint.
2)While there is a finite supply of BTC, there is a limitless supply of alternative altcoins, and no barrier whatsoever to entry, so people can keep creating them. Since these can be made functionally identical to BTC, why should BTC retain value through scarcity? It's not doing anything that can't easily be done via another altcoin.
I think you might like this because it addresses both of your points.
>Vermeer was much much better at art
BTC is a 'much better coin' than alt coins. Its currently used worldwide. No other coin is used worldwide.
Its not just scarce, but its also highly demanded. Consider that people don't care about other coins, AND this is scarce. Its very difficult to become a rockstar, but once you do, your signature is very valuable.
BTC has broken into rockstar status. It has already happened. Alt coins have not.
BTC can't extinguish debts and taxes in any nation-state on Earth.
Taxation is in fact continually reducing the value of Bitcoin when it's applied - you can't pay your taxes in BTC, so you have to sell some of them to gain USD to cover your taxes (easy enough: you do it when you trade). But the person you sell them to has the same requirement - they will have to sell some BTC and trade out into local currency to extinguish tax obligations. The long term trend is everyone eventually must trade out of BTC to cover their taxes.
The trajectory of BTC is inexorably down - the current market is irrational.
> It's not doing anything that can't easily be done via another altcoin.
You can't pay to a Bitcoin wallet with an altcoin. It's a different currency.
I could start printing jstanley dollars but that won't impact the scarcity of actual dollars. Even though a jstanley dollar is still just a piece of paper that can do exactly the same things as a USD piece of paper.
>I’m yet to hear of a non-hypothetical application that could change that
shared accounting systems between collaborates. complete replacement of ap/ar and every company in a consortium not needing to keep their own, isolated, audit requiring, double entry books. the amount of duplication reduction potential is staggering.
"money laundering" is a feature, not a bug. To bucket all forms of monetary subversion as a bad is like saying all drugs are bad. There is too much control exerted by various authorities and companies over transactions and Bitcoin creates a much needed outlet.
Besides the battles over efficiency (it's bad) and novelty (it's not really), there are some truly fundamental blockers to adopting cryptocurrencies. For instance, this poor Redditor lost the keys to a wallet with $40,000 of crypto in it [1]. This happens all the time. Being your own bank is literally the worst. Plenty of jokes ensued:
"It's just like the time I lost my car keys and need to buy a new car next day."
"It’s just like the time that I lost my house keys and had to move into a homeless shelter."
"It's just like the time I forgot my personal question to my 401k account and I got locked out forever, nobody could help me, and I lost the entire balance."
Unlike all the efficiency and speed questions, this part here is a stated, inalienable objective of Bitcoin and other cryptocurrencies. This is the expected behavior. Some clown designed it to work like this. Imagine grandma trying to use this. Remember that time PayPal locked your account and you were so mad you couldn't get at your $600 for a few weeks? Now imagine you lost your life savings because you can't remember your password and literally nobody can help you now, or ever again - and thats the point.
I'd imagine it'll destroy itself anyways, it seems like any random walk ends in 100% of coins lost to human inability to preserve access.
Who cares how amazing the system is technically? It's designed to be actively hostile to human users.
Of course having access to the private key, need to be the most basic way to access funds. It's the only thing that's guaranteed to be uncensorable, while minimizing the requirement of trust. It is a big responsibility though, and should not be taken lightly. The crypto-currency community is partly at fault here, for blaring memes like "If you don't control your private keys, it's not your Bitcoin", without any regard for whether or not people are ready for that responsibility.
That being said, there are number of ways you can store your crypto-currency, with varying degrees of trust-minimization:
- Use a multi-signature smart contract wallet, where a master key has power to move the money. If the master key is lost, the money can be moved by X out of Y keys signing off on the transaction. You can then distribute the Y keys to your trusted associates, preferably without telling them who the other key-holders are.
- Use a dead-hand smart contract wallet, where the money can be retrieved by a trusted associate, if the dead-hand switch hasn't been activated within Z amount of time. Can be combined with the above, in case further trust minimization is needed.
- Store your crypto-currency at a FDIC exchange. Pretty much the same model as the banking world. This really should be the go to way for the average Joe, as it mirrors what you currently can expect from online-banking.
I'm pretty sure the Federal Deposit Insurance Corporation doesn't cover crypto. I know what you mean but even with the more reputable players like Coinbase of Kracken I'm a bit wary of the oops we got hacked / shut down / we can't give to you due to AML type stuff.
The first two are way too complicated for retail banking customers. Do you really think you can explain to your parents how dead handed multi pantsed wallets work? I stopped reading half a line in and I’m well within the target customer group here.
The third, an exchange, violates all the core principals of cryptocurrency and is basically no different than what we have today but way harder and less efficient. Exchanges don’t require crypto they just run a MySQL store and attribute fractional ownership as centralized, opaque records not protected by the blockchain. If everyone just did that because it’s the simplest and easiest and most secure way to hold on to your coins, cryptocurrency would just replace bank to bank transfers which by definition don’t require a trustless backing and all the worlds electricity.
Plus to quote your fellow converts “not your keys, not your coins.”
Why wouldn't people be irrationally angry at crypto? Every mainstream use case marketed online has turned out to be an extreme dud.
Online payment system through bitcoin? High confirmation times, sometimes high fees, and very few accepting vendors
Deflationary store of value through bitcoin? Nope, just speculative frenzy.
"Ethereum World Computer"? More like platform for ERC20 token fraud. Top dapps get low thousands of users, so Etherum has thus far failed to turn up anything of note to the mainstream.
"Will be ready for mainstream once (SegWit / block size increase / lightning / PoS) is done"? None of these have materialized into any mainstream value.
On top every mainstream use case being a dud, the goalposts move every single time there's a discussion about crypto. If you bring up the transaction time, you get "it's supposed to be digital gold". If you bring up the speculative frenzy, you get the "it's supposed to be a foundational technology, not immediately useful". It's exhausting, and it's predictable that there can be no good faith discussion since the speculative price varies based on public opinion & new user buy-in (ie shilling galore).
It's great that some people in Venezuela have found blockchain actually useful for avoiding the collapse of their currency, rather than hypothetically useful like it is for the rest of the world. Personally, I would be happy to not hear from any blockchain project ever again unless it has say 100,000 daily users that actually use it "as intended" - say as a payment system rather than as a speculative investment, or as a decentralized computing platform rather than as a speculative investment disguised as a token.
I don't think anybody denies that Satoshi's Bitcoin whitepaper was novel and extremely clever. At least I don't. But being novel and clever is not enough to justify the "frenzied speculation" that followed IMO.
You seem to root for cryptocurrencies so I can understand your frustration when faced with naysayers like me but understand that the feeling is mutual. Ten years that we hear the same promises, ten years that we're told that "it's being researched", ten years that we only see half-assed solutions to fundamental problems that create as many issues as they solve (e.g. Segwit, PoS) or basically give up on the whole ideal of cryptocurrencies by introducing centralization or trusted peers (Ripple and many others). Ten years on, billions of dollars speculatively invested, "clever people" supposedly working on these issues and what do you have to show for it? People basically reinventing the current banking system on top of an inefficient, wildly speculative asset. "Fidelity just made it easier for hedge funds and other pros to invest in cryptocurrencies". New ways to speculate with cryptocurrencies!
The conversation is frustrating because all's been said. We all know where we stand and at this point the only way to move forward would be for the cryptocurrency scene to come up with something truly novel and useful, not something that reinvents the current banking system but worse.
Ten years on, and with as much intellectual honesty I can muster, I still see only two worthwhile uses of cryptocurrencies: buying drugs online and serving as some sort of notary to timestamp documents. For these two things Bitcoin is actually very competitive. For the rest as far as I'm concerned it's either "reinventing the wheel but worse" (re-creating current infrastructure only less efficiently) or "software cold fusion" (pipe dreams that would require major breakthrough in computer science to achieve their stated goals).
>Frenzied speculation brought about inadvertent side effects but these should not detract from the fact that significant advancements are continuously being researched and implemented.
The frenzied speculation is basically the only actuality surrounding cryptocurrencies these days. Maybe this research you speak of is going to bear fruits and revolutionize the world as we know it or maybe it's going to fizzle out gently as hype dies. This is not a small startup in a garage, this is supposedly a trillion dollar market cap industry, "we're working on it" doesn't cut it for me anymore.
It's also incredibly important to note that Bitcoin (and really all current cryptocurrency implementations) are still very much in their early stages, like a child intuitively understanding the spatial dimensions of the world by bumping into furniture.
The environment probably needs more rigorous and academic consideration in order to legitimise it (if for no other reason than that it does contribute to comp sci theory at least).
I also do not think that Satoshi Nakamoto intended for his technology to be the last say in the crypto space. The implementation was given to the world to iterate on and improve the tech (just like every other tech ever). Environmental impact of mining, inefficiency, scalability etc. should all be considered candidates for improvement as opposed to armchair criticism alone.
The problem is how to achieve agreement (“consensus”) on the truth when at least one person is actively lying and trying to disrupt the truth. In the context of digital money, it’s how you prevent the same coin being spent twice when manipulating digital information is easy.
A related problem is a Sybil attack, where a decentralized peer-to-peer system that is truly open makes it easy to generate new identities and overwhelm the system, so simply relying on the majority of accounts to agree on truth can still be subverted by a motivated attacker.
Bitcoin was a novel solution to this problem by using “mining”, or raw computation power, as a mechanism for enforcing consensus. This made Sybil attacks worthless as the only thing that truly matters in Bitcoin is computation power, which is expensive, and an attacker would need 51% of the power to attack the network.
At the moment, accumulating 51% of the Bitcoin network's hash rate is prohibitely expensive. An attacker would be better off just using that massive hash power to legitimately mine bitcoins. This is the game theory behind bitcoin mining.
Having said that, smaller PoW coins have been recently hit by 51% attacks, as renting the needed hash power for them is cheaper than the profits from selling the double spent coins.
Not too expensive if you're Beijing. 75% of hashpower is centralized within the PRC. All Beijing has to do is inform the miners they now do their bidding. This kind of thing happens all the time in the PRC. The 'community' lost this fight ages ago, at this point Bitcoin effectively operates at the pleasure of Beijing, and one day that may very well change.
Byzantine generals: N generals wish to coordinate their attack on a defending army. The attack will succeed if a majority attack at the same time, so you send messages to the other N-1 generals saying "attack tomorrow at dawn".
But wait: Some of those messages may have been captured by the enemy, and some generals may simply not agree with your strategy. If enough generals don't attack, but you still attack, you will fail. So the new plan is to send a message to the other N-1 generals saying "attack tomorrow at dawn, please reply with confirmation that you will be participate", and then if you get confirmation from at least (N/2 - 1) generals, you can attack with confidence.
But wait: Your fellow generals know that the enemy is potentially capturing messengers, and they won't want to attack if nobody else is attacking, and they know nobody will attack if they don't get the confirmation, so they need confirmation that everyone got their confirmation.
But wait: You'll need confirmation of their confirmation, and so down the rabbit hole we go.
What we end up with is a network of messengers, where every general keeps broadcasting a planned attack date to all the others, but it never able to be certain that the others heard and agreed to it. What's needed to solve this problem is a way of sending a message who's mere existence proves that a majority of generals are committed to the attack, and thus you don't have to reply to the message asking for confirmation that everyone still agrees.
Enter proof of work. What if each general would, upon receipt of the proposed attack date, perform some complex and time consuming calculation; maybe have some poets write a poem in iambic pentameter about the proposed date, and then the first one to finish attachs the poem to the message, and rebroadcasts it? Each time a general receives a new message, they'll take the one with the most poems attached, and start writing a new poem that references the attack date and all previous poems. Fairly soon you'll have a massive chain of dozens of epic poems about the proposed attack date. This tells you a couple of things:
1. All those poems are too much work for one rogue general (or the defending army) to have done. This took the finest minds of the most of the Byzantine general staff to create.
2. And that means that most of the generals must be okay with this plan, because they've spent all week writing poems about it.
3. And most of them must be aware that everyone else is okay with it too, since they've all seen all the poems everyone else saw.
The mere existence of this attack plan, with all of it's self-referentials poems attached, is proof that a consensus attack date exists, and means you're safe to attack, without needing to communicate further.
It's a classic topic of study in the field of distributed systems.
The overarching goal is consensus between agents (e.g servers) over the state of the system.
For example, suppose that you want to achieve atomic consistency (i.e at any point in time the committed/persistent state of the system is homogeneous across all live nodes) in a private cluster replicating a database. The incoming requests are routed randomly to any node in your cluster. You have a synchronization mechanism (a consensus algorithm - like any-Paxos, Raft, Viewstamped Replication etc.) that lets you get this cluster of machines to agree on the state of the database. This is useful if you want fault-tolerance. The synchronization part is the consensus. The agents have to agree on the state-transition.
Now, observe two things:
1. This is a private cluster you own. In other words, you can make all the machines run the same software, trust each other, and assume they act on a best effort basis.
2. The failure model is "fail-stop". If a machine encounters some kind of failure, it won't exhibit arbitrary behavior but rather crash immediately. And you do not consider the case where a machine is taken over and tries to mess with the rest of the cluster in order to violate the desired safety guarantee (atomic consistency).
Obviously, these works if you are a privately own company and can spend resources hardening the parts of your network that are susceptible to be taken over. In a private setting, these assumptions are sufficient even though they are weak and optimistic. In practice, this is not so much an issue.
This falls apart however when you are in an adversarial setting and when your cluster is an open and public network that anyone can join or leave at any point in time. In that model, malicious actors can also show-up and exhibit/fake any kind of failure they want (e.g re-order messages, lie on their internal state, attempt to spoof other agents etc.). In that case, we say the fault-tolerance model is Byzantine. We go one level above in difficulty from the comfortable fail-stop assumption.
That's the gist of what Byzantine fault-tolerance is about. It defines the ability of a distributed system to resist a subset of its network trying to break consensus by any means possible as long as a sufficient majority remains honest.
For years, the major result on Byzantine Fault-Tolerance (BFT) had been a system called PBFT which although innovative and first of its kind, suffered several limitations. One of them was that any node in the network needed to have a complete list of the other nodes in the network, another was high-overhead, and communication complexity.
The innovation of Bitcoin cannot be explained without providing full-context of many different topics (defining asynchronicity, FLP result etc.) but the crux of it is that it offered a way to circumvent these limitations by massaging some of the requirements and cleverly aligning incentives such that you get a system where: 1/ safety is preserved even in an adversarial setting 2/ anyone can join/leave 3/ you get some degree of asynchronicity, 4/ many other things.
I realize this cannot be a satisfactory or exhaustive exposition of all the innovation that Bitcoin introduces but that would turn this comment into x10 its current length.
> I'm disappointed of HN comments whenever cryptocurrency topics come up.
Couldn't agree with you more, however, this story is not about a significant advancement in technology and people are reading too much blockchain into it.
This new investment product is nothing to do with 'proof of stake' or the ethics of bitcoin mining. In essence it is a fund that is backed by bitcoin that has been purchased privately without going through exchanges people know about, e.g. Coinbase.
People investing in this fund do not have their transactions recorded on the blockchain. The bank simply have bitcoin in cold storage to back the fund in a similar way to how banks used to have gold in a vault. With legacy banking the gold did not physically move every time someone used the ATM. Same here, no bitcoins get moved.
This is not a difficult story to understand. There is no need for people to be getting uppity about it and to downvote those that bring information to the story that is obfuscated by how the crypto-media have described it thus far from their understanding of the press releases made available.
We don't have to keep current cryptocurrencies around just because there was a CS breakthrough in its first implementation.
Should keep all of these shitcoins and ICO scams around because 1/100 might be legit while 99/100 of them do real damage to investors? Or do you want to keep them around because a CS breakthrough being implemented takes precedence over enforcing financial fraud?
I don't mind the skepticism. What's disappointing to me is that the comments usually rehash the same tired arguments and ignore the actual article. What's the point?
Well....There is a stark difference in appreciation for TCP/IP the computer science protocol versus the Cesspool that is the internet or the early AOL crap...
"If you don't believe me or don't get it, I don't have time to try to convince you, sorry" - Satoshi Nakamoto
Our job is to keep on grinding to bring these things into fruition.
It's a shame that scammers in the space have turned most technologists against Bitcoin. But really, there's nothing that can be done other than to keep pushing.
Keep up the fight. If it doesn't work, it doesn't work. But really, this mud flinging is distraction. And yeah, there's a bloody lot of it.
HN is incredibly homogenious across certain verticals, crypto being one of them. The earth is flat and you'll be downvoted if you suggest otherwise. All ideas should be up for fair debate and, at worst, let the "wrong" side choose to believe what they please, unless you think your thoughts need external censoring as well.
No, I would never downvote for opinions expressed.
But I certainly downvote ludicrous and dishonest statements like Visa consumes more energy than bitcoin and here's why.
While theoritcally true here's the thing:
While one bitcoin transaction consumes 1'005 kWh of energy 100'000 visa transactions require 169 kWh.[1]
Trying to frame that in a way that Visa is more expensive than Bitcoin, energy wise, is a deeply dishonest sleight of hand, which absolutely deserves to be downvoted into oblivion.
What are the heuristics for computing your chart? How much energy was it to make the plastic on the credit card terminals? Do bankers drive Priuses or Cadillacs? What if Bitcoin eliminates 50,000 bankers's air-conditioned office desks?
Is Bitcoin's cost per transaction a fixed number or improving in efficiency? What if planes were "downvoted" 10 years after invention due to inefficiency over rail transport?
I wonder if they are working with Coinbase behind the scenes on this or if this is a totally independent product. They have a partnership with Coinbase that lets you view your Coinbase balances from your account page on Fidelity.
In a gold rush, you get rich by selling shovels. You don't even have to have a strong opinion on whether there really is any gold to be found, in order to see the market opportunity for shovel sales.
They don't say if the custody is insured against loss/theft which has been a sticking point for institutional investors. They basically can't stick your money in unless it is, and none of the existing custodians have been. I can see why insurers are reluctant when it only takes one or two insiders to transfer the coins to some account they control and say oops we've been hacked.
As I understand it Fidelity have bought a chunk of Bitcoin and are currently trying to buy more. They actually do not care about price, they just need the coins so they can setup these new financial things they will let their bigger customers buy into, as part of the portfolio. The cold storage thing is no biggie, they will be holding their new and shiny bitcoins in many, many wallets. So a customer of theirs will be able to effectively buy one of these wallets rather than a stake in a nebulous fund.
I have heard no mention of them wanting to buy the 'fake crptocurrencies', i.e. anything except 'bitcoin', which I think has appeal to their customers in a way that 'ethereum' or 'crypto-kitties' does not.
But is this really progress? If a cafe has customers wanting some new fad food, e.g. 'kale and pulled pork burgers' and if they have staff that have bought into the 'kale and pulled pork' hype then they might as well add it to the menu.
This is becoming a trope:
"No one said when some of these early-stage Internet companies in 2000 were going out of business, 'Gee, the Internet is toast,'" Jessop said. "We don't focus too much on the price. It's a foundational technology — people are trying to get exposure to the trend and expect volatility in the assets themselves."
Could be said about fidget spinners - they have only got started!
In debating this point with a bitcoin 'bore' I was told that there was no innovation in the internet after the dot-com crash until 'ajax came along' and no 'new innovation' came along after that until the iphone came along. I didn't see it that way, but was it?
Bitcoin is useful for evading currency controls, semi-anonymous digital payments, and speculation
Blockchain is a new type of database that has larger applications that involve the tradeoff between efficiency and trust
To answer your bigger question you have to ask yourself what you define as "progress" - is Bitcoin/blockchain new? Yes. Is either useful? Sure, for people who are looking to move money around semi anonymously, enforce more expensive supply chain tracking solutions, or make money selling new financial products. Is that progress?
If you, like me, don't see new database/financial engineering that benefits a small group of technologists and financiers as potentially equal in value to the raise in standard of living across huge sections of the world brought by electrification, refrigeration, antibiotics, internal combustion engines, public roads, and white goods, then you may be interested in this thesis: https://www.nber.org/papers/w19895
"While no forecast of a future slowdown of innovation is needed, skepticism is offered here, particularly about the techno-optimists who currently believe that we are at a point of inflection leading to faster technological change. The paper offers several historical examples showing that the future of technology can be forecast 50 or even 100 years in advance and assesses widely discussed innovations anticipated to occur over the next few decades, including medical research, small robots, 3-D printing, big data, driverless vehicles, and oil-gas fracking."
Keeping track of an asset without a centralized authority? That’s the point of a blockchain - a sliding scale where increasing decentralization causes a decrease in efficiency, where the trade off makes sense.
> Keeping track of an asset without a centralized authority?
Question was:
"And in what applications are blockchains superior to centralized applications?"
You really did not answer the question. What is the application where it is superior to track the asset without central authority? (I come up with criminal money transfers. I hope someone comes up with something else because I do not think that is too solid a foundation to build a sustainable technology...)
No fees to middlemen, enabling micro-payments at scale (obviously need to drastically reduce blockchain fees, but that is an area of active development). Elimination of charge-backs and a huge amount of fraud, especially in industries that have an abnormally high level of fraud. Borderless payments. The highest density of wealth storage ever invented. Completely different threat model for theft with its own pros and cons.
Everyone immediately jumps to the criminal aspects. The existing financial system has absolutely no problem handling all the crime, the blockchain did not invent money laundering.[0]
1) you pay fees to middleman to make a transaction.
2) micropayments are ridiculously slow and low volume compared to any other payment system.
3) We have all seen that chargeback are possible and already occurred, with the small side effect that also all the other legitimate transactions were rollbacked, as with the dao huge fuckup.
4) There are plenty of frauds involving bitcoins.
5) borderless payments have been possible for ages, and are not dependent on a Chinese network of miners.
1) They are pretty small for most cryptocurrencies.
2) This is false if you understand that Visa/MC do not settle instantly, rather 24-48 hours down the line and their instantaneous consumer network is not identical to that settlement layer. Similar to BTC's blockchain + Lightning network.
3) This is not really a thing outside of Ethereum, but yes, it was a very bad decision.
4) There are plenty of frauds using USD. Way more than BTC. Like, a lot.
5) I'm not sure what this random bit of racism against China has anything to do with anything, but the network's locations of nodes doesn't have much to do with nationality preference.
To clarify: Ethereum didn’t roll back any legitimate transactions (or any transactions at all) when restoring the DAO funds, which conflicts with the original #3 point you responded to.
Having the dev of the network reversing transactions makes a mockery of “decentralized” and “trust-less”.
More hilariously is that there is a branch of Ethereum that still contains the DAO hack transactions, Ethereum Classic . It’s generally assumed that that branch is run by the DAO hacker, which is kind of hilarious to me.
There are fees with bitcoin - the transactions that leave higher fees for the miners get processed quicker. If you don't include fees with your transaction it could take hours to be bundled into a verified block.
People, myself included, jump to the criminal aspects because those are the only real world applications that are currently creating value for Bitcoin "users" (vs. speculators). Getting around borders/currency controls is valuable because it's hard to do/illegal, and Bitcoin makes it easier.
The rest of the things you listed such as "highest density of wealth storage every invented" and "completely different threat model" are not use cases, and are not inherently good/bad, just different (and actually usually bad when optimizing for verification speed/efficiency and transaction clearance over chargebacks/fraud)
PS did you get hired into the crypto/blockchain world, or just more optimistic after doing research? I remember us being in agreement / you being skeptical about it before
> There are fees with bitcoin - the transactions that leave higher fees for the miners get processed quicker. If you don't include fees with your transaction it could take hours to be bundled into a verified block.
As I said, the fee issue is being worked on (scaling, layer 2 networks) but that's a potential of the technology.
> People, myself included, jump to the criminal aspects because those are the only real world applications that are currently creating value for Bitcoin "users"
I simply disagree, if you want me to enumerate all the use cases that aren't criminal I can, but google can help.
> The rest of the things you listed such as "highest density of wealth storage every invented" and "completely different threat model" are not use cases, and are not inherently good/bad, just different (and actually usually bad when optimizing for verification speed/efficiency and transaction clearance over chargebacks/fraud)
Yes, it is a different sort of tradeoff, that may be useful in some cases. It's novel.
> PS did you get hired into the crypto/blockchain world, or just more optimistic after doing research? I remember us being in agreement / you being skeptical about it before
I have posted a lot on cryptocurrency, I have been in the industry for a while, but I am not universally optimistic about all things crypto. But overall I am bullish.
>if you want me to enumerate all the use cases that aren't criminal I can.
Could you start with one? And I mean one that is obviously superior to centralized solutions? What are the measures that make blockchain superior in this use case and why a centralized solution can't achieve those measures? Why the tradeoffs in other measures are insignificant? Let's further assume that decentralization itself is not an acceptable measure.
Do you not see the value of censorship resistance?
There are billions of people in the world currently living under repressive governments. The world does not revolve around the western world with all of our privileged freedoms.
I already accepted that blockchain offers value in criminal money transfers. Obviously censorship resistance is criminal in repressive regimes. It just is a bit difficult in western world to sell a product whose only actual value proposition is criminal money transfer.
I think if you were the target (or initiator) of legal actions that don't involve criminality on your end but do involve discovery, you would think a lot differently about pseudonymous payments, and potentially encrypted communications. Speaking as someone involved in three active civil lawsuits, trust me when I say criminality is not the only reason to hide things. Being subjected to the discovery process where adversaries can uncover things about your personal life is an experience that will change most peoples' feelings about all things privacy.
> People, myself included, jump to the criminal aspects because those are the only real world applications that are currently creating value for Bitcoin "users" (vs. speculators). Getting around borders/currency controls is valuable because it's hard to do/illegal, and Bitcoin makes it easier.
This is definitely false. I buy a lot of things that are completely legal using cryptocurrency and find it to be pretty painless. I am a small-time miner and use the profits to buy computer gear from Newegg or resellers who want BTC and get a pretty huge discount on Amazon gear. I have zero problem spending all of my cryptocurrency on valid electronics if I desire.
So if you want to be safe from censorship, a decentralized Leger is better.
If you do not care about censorship resistance, then you should count yourself lucky and very privileged. There are billions of people in the world who are currently living under repressive governments.
It should also deflate as the economy grows. Wrt the problems of deflation, it may or may not cause some, but it doesn't really matter because people who don't want to participate in Bitcoin don't have to. They can still choose to use inflationary stores of value.
Deflationary "problems" are largely strawmen. We've never had such deflationary money systems to know how it plays out long term.
In the end, people still need to eat and drink, and they're going to pay to meet those needs no matter how much it costs them.
Most of the complaints about deflation are from the Keynesian economists, who for them, it is a major problem. How are they going to pay back all that interest they keep accumulating if people aren't continuously spending?
So, who signs the transactions? When an asset changes hands the transaction needs to be signed, how are those keys managed?
How are blockchain transactions confirmed to match the real world? You have to make sure that physical assets or financial instruments are properly cleared. Not everything can live on the blockchain.
Miners spend a ton of money on electricity, and this is necessary to protect the network from a 50% attack. What systems are in place to incentivize miners to spend the electricity to verify blocks?
Getting back to the article, this is best seen as a variant of 'Banking 1.0'. Remember how in the old days banks would have gold that your paper money could be converted into?
Well, with these new investments you can buy into the Bitcoin goodness much like how our forefathers could have their wealth backed by gold.
With a bank backed by gold the actual gold does not leave the vault very often. It was theoretical that you could go to the bank and get your paper notes changed for actual gold.
In this brave new world of Bitcoin backed investments your transactions to and from the fund do not involve anything being added or removed from the blockchain. There is just a wallet there, in the bank cold storage with however many bitcoins on it. The bank does not have one wallet for its bitcoins it has thousands of the things, so the account is sharded this way.
The difference is that rather than gold being the real backing it is a Bitcoin wallet. If you get out of the fund then the bank won't be selling the contents of that wallet on Coinbase, it will just sit there in the fund ready for the next punter to buy into.
An investment fund that has gold as the backing store of wealth is able to track the value of the gold, same with Bitcoin. If Bitcoin goes up then your investment is worth more, the fund takes its percentage and it all works fine.
This is what Bitcoin has come to, if you strip away all the 'fintech' mumbo-jumbo buzzword legalese this is all it is, a variant on 'Banking 1.0'.
Public blockchains like Bitcoin where anyone can download the software, the previous transaction history, and start participating as a node are very different than the private blockchains you are asking about.
At a fundamental level, it tracks digital assets with certainty. This can be bitcoins, software licenses, whatever can be 100% digital. The link between the real world and the blockchain is an area of active research and innovation. Stablecoins backed by audited bank accounts are an area getting a lot of interest lately.
Also, your previous criticism of blockchain being worthless because “it’s 10 years old” is meaningless. The first email was sent in the 1970’s. Technology takes time.
Why would a software vendor want that? Why would anyone else participate in that chain? There are a ton of existing systems to cover these needs, and there has to be a compelling reason to shift over to the blockchain.
I’m not sure I’d go with stablecoins, since the main one appears to be a massive fraud. It’s still unclear why you would want a “decentralized” stablecoin that’s actually managed by a central trusted authority that, pinky swear, has the backing cash.
The assertion was made that blockchains are new, and I pointed out that’s nonsense. I never said that old=worthless, you made that up.
The innovation is that assets can be tracked and traded without any third party saying it’s OK. Essentially we now have programmable money with no middlemen. What comes from this innovation is anyone’s guess, but if you are an entrepreneur, this is a very intriguing technology in which to start new ventures. It may remain niche, or it may fundamentally alter the financial industry (currencies, securities, payments...) and perhaps many others. Time will tell!
> The innovation is that assets can be tracked and traded without any third party saying it’s OK.
That is exactly the opposite of what most software vendors and similar want. They want more control over the assets they release, not less.
If the asset is financial in nature, this is basically illegal. KYC and AML laws still apply, even to crypto, as do other related securities law.
If the asset is physical, you have to solve the issue of making the blockchain match reality. I know you said there's a ton of work being done in that space, but I have yet to see a lot of solutions.
> Essentially we now have programmable money with no middlemen.
Given the rate of bugs in "smart" contracts, that is not an appealing pitch.
I also find that the people angriest at the middlemen often know the least about why the middlemen exist. Hint: they often provide a service to match their fees.
> What comes from this innovation is anyone’s guess, but if you are an entrepreneur, this is a very intriguing technology in which to start new ventures.
It's also a fantastic way to lose your shirt.
> It may remain niche, or it may fundamentally alter the financial industry (currencies, securities, payments...) and perhaps many others.
You basically said "anything could happen". If your prediction is basically "anything", why bother prognosticating?
> That is exactly the opposite of what most software vendors and similar want. They want more control over the assets they release, not less.
Maybe? The ability for something like this didn't exist before, maybe an entrepreneur will come up with something new and valuable around the licensing use-case. I also don't know if such a blanket statement about "most software vendors" can be asserted.
> If the asset is financial in nature, this is basically illegal. KYC and AML laws still apply, even to crypto, as do other related securities law.
Major companies like Coinbase and Circle are not violating any laws. They have lawyers, licenses, and so on. Just because something is regulated, doesn't mean an entrepreneur can't invent a new and innovative product - they just comply with the laws and regulations.
> If the asset is physical, you have to solve the issue of making the blockchain match reality. I know you said there's a ton of work being done in that space, but I have yet to see a lot of solutions.
Time will tell, I agree.
> Given the rate of bugs in "smart" contracts, that is not an appealing pitch.
Active area of research and development, such as formally verified computation. I would bet that technologists are more likely to solve this issue than not.
> I also find that the people angriest at the middlemen often know the least about why the middlemen exist. Hint: they often provide a service to match their fees.
Sure, but if the same service can be provided at drastically reduced cost, then it's a win, and blockchain may be able to do this. Middlemen exist for reasons, but that doesn't mean they can't be disrupted.
> It's also a fantastic way to lose your shirt.
Investing in anything is risky, let alone seed-stage startups on unproven technology, but luckily there is an industry that funds such risky endeavors.
> You basically said "anything could happen". If your prediction is basically "anything", why bother prognosticating?
You are making the bear-case for crypto and blockchain, while I am an optimist making the bull-case. I'm basically saying that a huge amount of potential is there, and writing it all off as worthless or barely useful at best in October 2018 is very premature.
> If the asset is physical, you have to solve the issue of making the blockchain match reality. I know you said there's a ton of work being done in that space, but I have yet to see a lot of solutions.
There are no solutions. The perfect oracle does not exist and any such system is going to have all of the same problems that any non-digital, non-blockchain based system could have.
Any token held in the blockchain is only valuable if the token in itself has inherent value. A token which is merely a proxy for some external value is a waste of time.
The only use I see for the blockchain beyond money is for fraud-proof timestamps, since the ledger is also a distributed timestamp server, but even that has limited applicability because there's no way to prove that something did not happen earlier, for which someone just copy-pasted into the blockchain afterwards.
Currently, none. If you wanted to do it right, the correct way would be to treat so-called stablecoins like a bank and audit them accordingly, except with a 100% capital requirement.
It’s highly entertaining to me how many issues with cryptocurrencies have to be resolved with classical financial instruments and regulatory processes. It’s almosf as if these systems were slowly built over a few centuries and are actually pretty good at what they do, and that you can’t just throw computers at the problem and pretend that you know better.
> brought by electrification, refrigeration, antibiotics, internal combustion engines, public roads, and white goods
Most of that stuff required financial engineering. The most developed countries on Earth, with the best of those things, also have the most developed financial markets. Coincidence?
Antibiotics means Fleming, one guy worked it out, I wouldn't be here if it wasn't for him, my grandpa was one of the first to use penicillin and I don't see the bean-counters as having had anything to do with it, however, the war machine did.
Henry Ford was the man that got America and the world motoring. He is an incredibly complex character however, he did not go to the city to raise money and he had no time for bean counters, hence the Jew-bashing nonsense that he got involved in. As for early motor innovation/discovery in Europe and America, it was the bicycle workshop that made it happen, not the bean counters with their 'financial engineering'. We are talking organic growth from paying customers buying bicycles from people that had workshops. The Wright Brothers also started with bicycles, hence the left/right hand thread they also lay claim to.
Public roads also have a debt to the bicycle. Trains came before bicycles and roads ceased to connect towns when the trains were how people travelled. It was actually the bicycle and cyclists that got the roads paved, motorists were to come along a lot later. Your Interstate Highway System was again military-industrial complex, not some wonder brought to the world by bean-counters.
Of course capitalism and the need to raise capital made a lot of things possible, the railways were obviously a massively speculative bubble at first. However, the industrial revolution is not a story of financial engineering. The bean counters had nothing to do with progress. And Henry Ford was not alone in wanting to avoid 'investors' like the plague. In the UK - cradle of the industrial revolution - the prominent industrialists tended to be Quakers with god rather than mammon on their side. (We skip over the slave trade part conveniently here - but you don't want that because that really is 'financial engineering', a.k.a. rape and pillage.)
The discovery is one thing, the mass production and delivery all over the world quite another.
> industrial revolution is not a story of financial engineering
Financial engineering in general is invisible to the general public:
> As well as industry, banking also developed during the Industrial Revolution as the demands of entrepreneurs in industries like steam led to a vast expansion of the financial system.
Cryptocurrencies, thanks to their unstoppable and uncensorable properties, enable organic commerce in a frictionless and scalable way.
At this time, I don't know if you can point out a single "industry" that will be revolutionized by cryptocurrencies.
But what's certain to me is that there will be (subtle at first but no less powerful) lasting shifts in how human societies are organized, which today rely so much on governments for order and enforcement.
Where have you seen that they've bought Bitcoin and are trying to buy more? It would be interesting to see the evidence of this I think.
And as a note... other cryptocurrencies aren't 'fake cryptocurrencies' since they're actually cryptocurrencies. There might be some scams for sure, but ones that are not Bitcoin are just not Bitcoin yet are still currency.
Also, why are you putting quotes around different things like 'fake cryptocurrencies,' 'bitcoin,' 'ethereum,' 'crypto-kitties,' 'kale and pulled pork burgers,' 'bore,' 'ajax came along,' and 'new innovation?' I'm not sure I understand what you're trying to imply there.
Not every financial dealing is in the papers, sometimes you need to know people with skin in the game to know what is going on. They aren't buying coins through the 'over the counter' ways basement-dwelling kids buy coins though. If you want sizeable quantities of Bitcoin then you need to be buying very differently in a whole new world of brokering. None of this affects the price you see on exchanges, as you can imagine someone buying USD billion worth of coins is an entirely different venture, exchanges can't supply that, they don't have enough sellers. You have to reach out to people who mined significant quantities years ago and also have the problem of not being able to sell on 'Coinbase grade' exchanges.
Regarding 'fake cryptocurrencies', there is a big distinction between Bitcoin and every other coin. Bitcoin genuinely isn't controlled by one individual, it is actually decentralized in the true sense. Is anything else?
A second point regarding 'fake cryptocurrencies' is that a currency - crypto or otherwise - has to be a means of exchange. Apart from in-game tokens and gambling chips there are not a lot of things you can buy with these wonders of the blockchain. Bitcoin is different in that regard, you might struggle to buy things with it at your local newsagent, however, it did gain value as a currency for buying drugs in the days of the Silk Road. You can donate to Wikileaks with it too. There was a time when you could buy other things with it, even a Dell computer. Although Bitcoin did not make the cut for retail transactions it did morph into digital gold, definitely with value as a currency in the eyes of many, albeit with tax dodging benefits.
A third point. From a city point of view Bitcoin is a commodity, everything else is merely an 'unlicensed security'. Of course there are those who want to beg to differ on this. But we live in a world where tomato ketchup can be deemed a 'vegetable' by regulatory types.
The distinction is that coins that are decentralised in name are still with a central point of control due to having a company/org that can be identified as starting it. This is an inescapable distinction. Due to history Bitcoin has ended up as a unicorn, it is not possible to anonymously setup another coin and walk away from it as happened with 'Satoshi Nakamoto', who created what 'he' did from the 1996 NSA White Paper on blockchain things, allegedly. Every subsequent coin has creators, whether they promise anonymity and give away 100% of the coins to strangers matters not.
At time of writing it does not look like anything but Bitcoin really is satisfying points 1 - 3 to make it as something that is a currency in the true sense of the word. Words are our servants and not our masters and the term 'unlicensed security' is generous, 'crypto-currency' is a bit too generous since means of exchange is far from satisfied. 'Tokens' is good, as in those things you might buy to spend in a car wash. 'Chips' would suit me fine too, as in those things you buy at a casino.
Regarding the use of quotes, I am not an American and I know that U.S. readers do not understand humour that is used elsewhere in the English speaking world. American English is very different, for instance the country name 'Ireland' is pronounced 'Ireland' but Americans think it is 'I-re-land'. Poe's Law applies and on HN there is not the custom of using emojis, therefore I tend to use air quotes to indicate that I am not being deadly serious about analogies and phrases that Americans may consider pejorative.
You are seemingly arguing that you have insider information that they are buying coins because you happen to know people 'with skin in the game.' That's a hard argument to buy with such a claim and no evidence. And don't get me wrong since I actually thought it was interesting that they would be buying the coins so I'm not even trying to disprove you. You're just not making a solid case.
Second, referring to everyone else that buys coins as 'basement-dwelling kids' is pretty disingenuous and insulting. Middle class people have purchased them. Grandparents have purchased them. Average people have purchased them. Billionaires have purchased them. Snoop Dog, Ashton Kutcher, Gwyneth Paltrow, and many more celebs have purchased them.
You have stated that you can't buy coins at that level (presumably the Fidelity level) the same way you would purchase them off Coinbase, but your example is that they're seeking out people who mined significant quantities of coins years ago. How did they find these people from a bitcoin address? What's the evidence of this? Why do these people have problems selling their coins on Coinbase?
Your arguments about fake cryptocurriences basically boil down to other coins are not exactly Bitcoin so they're something you consider fake. Other coins however are currencies since you can exchange them for things as has happened with many types of coins other than Bitcoin. They might not be as popular but they still can do the same things for the most part.
I don't understand your third point. It doesn't seem here or there.
Someone could certainly create a new coin anonymously. I'm not sure why you think that's not possible. A throw-away email address, a github account paid with a pre-paid card, and some nodes hosted anonymously with the same card and voila you've got yourself a new cloned coin made by someone you don't know.
I don't think your argument that Bitcoin is the only one that satisfies points 1-3 holds water since those points themselves don't seem to hold water either. (And you should check out Litecoin and Ethereum which both do all of the things that Bitcoin does)
I'll be frank and say I still don't understand your last paragraph about the quotes. I now understand that you're not American but you seem to be implying something about American English being different than English elsewhere and using the way Ireland is pronounced doesn't seem to support that. No worries here though... it's not significant so no need for us to waste any more time on it.
I dunno. For me, this initiative does not leave a good impression about Fidelity. Okay, maybe they're not buying a stake in bitcoin themselves, but even serving/promoting the cryptocurrency scene/culture seems pretty sketchy to me. (And wasn't the big selling point supposed to be that you bypassed the big financial institutions?)
The sketchy aura of cryptocurrencies(at least with regards to Bitcoin and Ethereum) seems to be progressively fading away. And if you’re solely looking at cryptocurrencies as a long term investment vehicle, it makes sense for Fidelity to have an offering for their customers.
Bitcoin/crypto was designed with express intent of allowing financial transactions to be safe and trustworthy without a central broker (ie a bank). Since the value of a coin was essentially arbitrary, speculators with big graphics cards drove the price up leading a bubble which has attracted the sharks and now the whales. I haven't seen any major breakthroughs in the technology, but there has been innovation in the usage of coins from simple currency to investment securities. Arguably we've come full circle and Bitcoin is now the opposite of what it intended but that doesn't mean it isn't innovation. Frisbees used to be pie plates.
More capital wasted to entrench a fairly useless commodity[1] that requires electrical energy expenditure that rivals entire nations' usages[2]. We are bounding toward climate catastrophe and our largest institutions are taking stakes in actively destructive tulips.
The energy is available on the free market. Or acquired for the express purpose of blockchain mining (I.e. new geothermal energy created specifically for this industry and impractical to transmit other places).
If you want to ban bitcoin mining because it “wastes” energy, there is an argument to be made for banning any industry not absolutely necessary for society because it destroys the planet. Why do we have sports stadiums? Rock concerts? Car racing?
The other argument is that what bitcoin achieves through mining is only possible with financial institutions, the court system, and so on. What power does that system use?
And finally, new innovations will likely end PoW mining for some major block chains like Ethereum, but it is extremely doubtful bitcoin will ever switch.
Also, your first link is a white paper on scaling unrelated to the statement that bitcoin is a “useless commodity”, so I’m not sure why you are using it to back up your assertion.
The paper describes the problems inherent to bitcoin. I think blockchain might be a good fit for some things, but bitcoin makes a terrible currency.
The relevant section:
>Today’s representative blockchain such as Bitcoin takes 10 min or longer to confirm transactions, achieves 7 transactions/sec maximum throughput. In comparison, a mainstream payment processor such as Visa credit card confirms a transaction within seconds, and processes 2000 transactions/sec on average, with a peak rate of 56,000 transactions/secnsactions/sec on average, with
a peak rate of 56,000 transactions/sec
The blockchain is not comparable to the Visa network as you use it as a consumer. It is comparable to the Visa network regarding settlement, which is extremely slow and periodic, just like the blockchain. Your bank has a series of pending charges that settles 24-48 hours later, which is similar to a dual-layer model - for example, Bitcoin's blockchain (settlement layer) and the Lightning network (consumer Visa network).
That doesn't mean it's useless, it's just that the current state of the technology does not have the same throughput as other technologies in regards to payment processing. Bitcoin has many other aspects that make it more than a "useless commodity", which wasn't implied by the linked article or the fact you quoted.
>it's just that the current state of the technology does not have the same throughput as other technologies in regards to payment processing.
This makes it an extremely poor currency. It is also an extremely poor distributed linked list with that throughput. If you use the energy resources of a small country just to get 7 transactions per second max recorded in a ledger, you've failed as a system designer.
If the intent was to create a currency, Satoshi failed. If the intent was to create a white elephant, Satoshi succeeded beyond their wildest dreams. If our largest institutions are buying in, we will be collectively saddled with the maintenance of the network for the foreseeable future.
Bringing up a comparison to Visa is immaterial: Bitcoin isn't competing with Visa. Visa's purpose is to update the bank accounts of distrusting parties (and credit and quality dispute issues). You need FedWire and an entire banking apparatus to use Visa.
Bitcoin is competing with central banks with a state-backed monopoly on currency creation, and the court systems that enforce settlement. If you live in a first-world country where those banking systems work relatively well (Read require bailouts every 10-20 years, never innovated, leach value) and are subsidized by industry great for you but for bitcoin to offer such a service, for fractions of what it would cost a lawyer to do, to the rest of the world.
Do you honestly believe the government has a magic/economic-violating ability to create $100 worth of value when it spends $0.13 printing a new paper bill? [1] Or even less when it's digitally inflated? How much consumptive waste is created by artificial demand induced by central banks?
Bitcoin has already has a compelling solution to its layer 1 scaling bottleneck with reasonable trade offs: Layer 2 payments that are layer 1 enforceable, inflation proof, cryptography enforced.
> Do you honestly believe the government has a magic/economic-violating ability to create $100 worth of value when it spends $0.13 printing a new paper bill? [1] Or even less when it's digitally inflated?
That's basically a complete misunderstanding of what money is. The fact that money is a store of value is (and mostly has always been) an emergent property. This is part of why when systems that try to tie value to things like gold pop up every now and then, they always eventually fail and the peg breaks - because it's just not how it actually works. The primary purpose of money is to represent an obligation to provide a good or service at a later time. In the Government's case, their spending from money they create is actually putting money into the economy so they can tax it back later.
It's actually around the requirement of a population to pay tax in a certain currency that the wider economy emerges around it (this is called 'baseline demand' for a currency).
Now, to the question of 'does the Government magically create $100 of value when they issue a banknote?' No. But the if the economy has produced $100 of new value, then it actually needs somebody to create $100 more money to operate in a non-deflationary way. At the moment, a lot of that comes from banks, which also expand the money supply when they create new loans, but at the same time create private debt. And it's actually when you get too much private debt and something happens in the economy that stops enough people being able to pay up that banks require bailouts.
You are arguing that something that can be effortlessly created (paper money) is a better store of value than something that cannot be effortlessly created (bitcoin).
>systems that try to tie value to things like gold pop up every now and then, they always eventually fail and the peg breaks - because it's just not how it actually works
They fail because there's trust in pegging something to gold, one must obviate the peg. i.e. bitcoin
>It's actually around the requirement of a population to pay tax in a certain currency that the wider economy emerges around it (this is called 'baseline demand' for a currency).
The term you're looking for is Chartalism [1] and it's a naive view of money.
>if the economy has produced $100 of new value, then it actually needs somebody to create $100 more money to operate in a non-deflationary way.
Let's assume that the central-planning of money does create a economic free lunch and that it is a superior money. Why then does it need a state-enforced monopoly around it? If it clearly was superior, it would win in a free market without the aid of a state-enforced monopoly.
>The link you provided actually contradicts this statement.
If Chartalism was a valid theory then no fiat money -- which required to be used to pay tax -- would have ever failed. That is to say, history and time provide real-world proof[1] that Chartalism is a specious theory of money.
At the end of the day though, if you know more than the market, take negative delta exposure to bitcoin and profit handsomely.
> If Chartalism was a valid theory then no fiat money -- which required to be used to pay tax -- would have ever failed.
That's...not a justifiable conclusion; there's at least two obvious failure modes consistent with Chartalism: withdrawal of the exclusive mandate for taxes to be paid in the currency, and practical failure of the State imposing the requirement. The latter, especially, is not a binary condition, and can easily occur in a mutual death-spiral of state and currency in response to some shock.
Most collapses (or even temporary near collapses) of fiat currency I can think of were that kind of mutual death spiral with the sponsoring state resulting either from war or internal crisis of order.
That aphorism is used by naive people who 1.) want to capture the upside of if they're right but suffer no penalty if they're wrong. 2.) Don't understand how to take low probability, high payout exposure:
Buy a deep, out-of-money put you'll profit handsomely if right.
>When the Gold Standard was abandoned, our paper currency became backed by nothing but promises. Ever since then, the value of currency has tended to zero, and money to infinity.
It fails the sniff test with its naive understanding of what currency is.
People are forgetting that Nakamoto Consensus is a legitimate CS breakthrough concerning the Byzantine Generals Problem.
Is it acceptable to bash every stock in the Nasdaq just because a second tech bubble popped and some SV companies are behaving unscrupulously?
Frenzied speculation brought about inadvertent side effects but these should not detract from the fact that significant advancements are continuously being researched and implemented.