Blockchain was never intended to be a solution to several things, it was designed to be a solution to one thing and do it well. Scammers seized the oportunity to market blockchain as a solution to all your problems to profit themselves and a lot of people were fooled.
> it was designed to be a solution to one thing and do it well
What is that thing? It seems like the best application of blockchain is as a semi-decentralized, semi-anonymous token for transferring value.
But it's not even really good at that. It's not liquid, it's prone to bugs and attacks, and it doesn't even seem to be that anonymous.
So I'd personally argue it was designed to be a solution to one thing, and it does not do that well.
> Scammers seized the oportunity to market blockchain as a solution to all your problems to profit themselves and a lot of people were fooled.
So anyone who advocates blockchain for something other than cryptocurrency is a scammer?
That seems a little farfetched. There are plenty of "true believers" who have completely bought into the blockchain-for-everything nonsense, and they're now using "DeFi" to rebrand because blockchain has become such an embarrassing buzzword.
To be fair you can be a scammer without necessarily being aware of it, like the hordes of MLM people who run around and actually think it's a business.
has the same dynamics like the crypto world even, with it promising in a sense to create value out of nothing by just holding on long enough and spreading the gospel
You're absolutely right. I just think of these "unwitting scammers" as victims, because they lose money from their participation. But I admit that they could certainly be considered both scammers and victims, as the two are not mutually exclusive.
> But it's not even really good at that. It's not liquid, it's prone to bugs and attacks, and it doesn't even seem to be that anonymous.
All software is prone to bugs and attacks, and for something that's only just entered its second decade I'd say Bitcoin did remarkably well in that regard (no currency nullifying epxloits).
Complete anonymity was never Bitcoin's core feature (it aimed to keep the users pseudonymous with its addresses), but anonymous blockchains are possible, and Monero and Zcach demonstrate that really well.
> Blockchain brilliantly solves one and only problem, double spending. This single problem it solves enables the creation of true digital cash securely.
Considering how many cryptocurrencies have had to mitigate bugs, hacks, and 51% attacks[1], it clearly doesn't solve this problem at all. Like the traditional monetary system, it requires careful design, policing, maintenance, "bug" fixes, and regulation to prevent double spending.
> *if there is any kind of token sale, yes.
You're contradicting yourself by moving the goalpost. You dismissed the core premise of the article, which is that lots of people propose blockchain as a solution to non-currency problems.
You dismissed it by claiming that all people advocating for non-currency blockchain applications are scammers. They're demonstrably not.
You can see people on Twitter and reddit who are just investors in a wide variety of coins. I'd call these people suckers or victims, not scammers. They believe in their coin(s) of choice, and many of those coins are supposedly going to become valuable when they become app platforms.
> You're contradicting yourself by moving the
> goalpost. You dismissed the core premise of the article,
> which is that lots of people propose blockchain as
> a solution to non-currency problems.
Whenever I see a proposed blockchain solution to problem, in particular problems that are not related to currencies, I read their descriptions to figure out what they are actually proposing.
I don't think I've ever seen such a proposal not involving some value token of some kind kind. In other words, even non-currency problems becomes currency-problems when you apply a blockchain solution.
If I'm wrong, I really want to see a blockchain solution which is not centred on participants earning tokena that holds value.
He is taking the example of a bank transfer to show how bank are efficient and bitcoin is inefficient... Well is France BTC transfer are much faster than traditional bank transfer, and we are not talking about international bank transfer that could take up to a week, and require 5 or 6 banks and institutions to work together (and you have to trust each of those institution), and the cost will be mush higher than an (already expensive) BTC transaction...
But Bitcoin is not really a currency used for everyday life transaction, it is more like digital gold. As such it is doing well !
He is saying we can trust bank, and as such crypto and DeFi have no use. Some people feel otherwise, for 4 different points.
1) Some bank do fail... Icelandic's bank are a big example in Europe. 2008 is another example... People did lost some money there, despite massive state intervention.
2) Government can go and take part of the money you have in your bank account. Cyprus (part of the EU, not a random third world dictatorship) is an example of it
3) Government and central bank choose the monetary policy, which has a direct impact on the value the money you get into your bank account
4) Bank "use" your money in your account the way they want, not the way you want. You have a very little say in the current banks.
BTC do consume a lot of energy... But there are other ways to do transaction with a much lower environmental impact (eg lightening network) and most other leading blockchain are using or moving toward much much much more energy efficient protocol.
BTC is pseudonymous, but you can use other network to do anonymous transaction if needed
I remember being at a blockchain for government event in 2018 and one of the speakers said "anywhere you use a database now, you could use blockchain".
I think this was a great example of how people missed the point of how blockchain added value to bitcoin, got excited about the wrong things, and caused the boom/bust we saw: bitcoin replaced anti-counterfeit measures with the blockchain itself, and centralized transaction processing with distributed miners. It didnt replace a database, it used a decentralized database for a new purpose.
Other new ways of using blockchain have clearly not emerged, but I feel like the rollercoaster of popularity came from people completely misunderstanding how it added value to cryptocurrency and looking for the wrong kind of applications. Distributed tasks (bitcoin is uber for transaction verification) are where it's at, not a database.
Cars don't solve a majority of life's problems so by this logic they must be the solution for almost nothing. Forget the fact they are incredible at the thing they do well.
Blockchain also solves very few of life's problems, but it's great for a distributed trustless currency potentially with smart contracts.
If cars had gotten overhyped and someone wrongly said you should use them as money, that doesn't make them stop being good transportation.
In my view, cryptocurrency is the only real use case for blockchain tech. It's an incredibly important use case though. It's a great store of value.
Because of its scarcity, a cryptocurrency soaks up surplus currency created by banks and prevents it from being wasted on creating less-than-useless startups and jobs which harm society. It also stops surplus currency from being soaked up by corporate monopolies that are eroding our personal freedoms and society.
Also, PoS and DPoS cryptocurrencies consume very little electricity and don't require specialized hardware so they store value very efficiently.
> Because of its scarcity, a cryptocurrency soaks up surplus currency created by banks and prevents it from being wasted on creating less-than-useless startups and jobs which harm society. It also stops surplus currency from being soaked up by corporate monopolies that are eroding our personal freedoms and society.
I've read this several times and can't make sense of it. Can you explain what "surplus currency" means and what "soaks up" means in economic terms?
My read is that it's a critique against low interest rates and quantitive easing making cheap (thus unvalued/excessive - a surplus) money abundantly available to corporations and people already with money, but mostly out of hands of every day people. If everyday people however had faith in a cryptocurrency, they could ride up the asset inflation bubble with the moneyed class - thus negating the effects of wealth destruction present in this implied case of class warfare (waged by the moneyed class).
I was skeptical about Bitcoin for a long time. I could not understand how the price kept going up every year for so many years.
So I started reading everything I could about our monetary system and learned that it essentially became a ponzi scheme in 1971.
Then I found out about Proof of Stake and learned that it consumes very little electricity and doesn't require specialized hardware and that's what won me over.
I feel like the HN community and many people in tech are in the same boat as I was 3 years ago. 3 years ago, when I saw people buying up $20K worth of crypto, I thought that they were completely reckless and that they would lose everything. Now, I feel like crypto is the safest asset of all (same level as Gold and Silver). I think people are insane to keep more than $20K in the stock market.
Given what I know now, I could not bring myself to invest even $10K of my hard-earned money in the stock market because:
- I don't trust the stock broker (intermediary) to hold my shares on my behalf. What if they go bankrupt? What if they are malicious and disappear with my money?
- I don't trust corporate executives to have my best interests.
- I don't trust corporation revenue numbers because they are inflated by artificial currency supply and manipulation (e.g. corporations feeding off of debt-fueled shell companies to generate fake revenue).
With cryptocurrency, I hold my money in my own wallet on-chain so I trust no one and I benefit from the inflation and manipulations of reserve banks and corporations without actually participating in it.
----
As a developer, the mental hurdles which were holding me back 3 years ago included:
- Insane amount of electricity consumption of Bitcoin - I can now see the benefits of this in terms of added security, but for me personally (as someone who is not a billionaire), it's way overkill so I can't say that I've moved past that mental hurdle. I've heard some decent arguments about Bitcoin mostly consuming surplus or green electricity from the grid but I'd probably have to see it for myself to fully believe it.
- A blockchain's scalability has hard limits. As a developer who had experience in building scalable (centralized) systems, this perplexed me a lot initially. Now, I see it as an advantage in that it will ensure decentralization by forcing people to adopt multi-blockchain interoperability solutions as they become more popular. I think that interoperable blockchains will end up forming hierarchies and you will be able to pay for stuff using any token from any blockchain within that hierarchy; different blockchain tokens will be accepted interchangeably since the historical price and volume data can be calculated from the blockchains themselves. They will all be connected together via decentralized exchanges.
> I don't trust the stock broker (intermediary) to hold my shares on my behalf. What if they go bankrupt? What if they are malicious and disappear with my money?
You don't have to trust the stock broker. If they go bankrupt or steal your money, you'll get it back through SIPC insurance (https://www.sipc.org/)
> I don't trust corporate executives to have my best interests.
You don't have to trust corporate executives to have your best interests at heart, only that they have their own best interests at heart: corporations pay executives with stocks and stock options, thus aligning incentives between executives and shareholders.
> I don't trust corporation revenue numbers because they are inflated by artificial currency supply and manipulation (e.g. corporations feeding off of debt-fueled shell companies to generate fake revenue).
You don't have to take corporate revenue numbers on trust, since they are audited. Yes, sometimes things slip through the audit, but you can just buy a well-diversified portfolio, such as an index fund, to largely eliminate the effect of outliers.
> So I started reading everything I could about our monetary system and learned that it essentially became a ponzi scheme in 1971.
Even if you want to argue that all fiat money are 'ponzi schemes' then it would have been a ponzi scheme many times over. In fact if you assume the pre 1971 system to be ok, then it might surpirse you to learn that it only came into effect in the late 1950s. That system (Brandon Woods system) actually was not even close to a real gold standard and didn't operate like one either. I don't see how you can say its not a ponzi scheme while those system before and after it were. If anything Brandon Woods was a US controlled ponzi scheme where the US could inflate their currency while pretending it was gold to other currencies.
So the system you think of as non-ponzi existed for 10-20 years max. And before that it was a ponzi scheme again? It was also a ponzi scheme in and post WW1 if that is the case?
Not even sure what it means to be a ponzi scheme for money. In a ponzi scheme you pay interest on old money with new money, that is very different from the goal of a monetary system.
The way you talk about it, it seems to me you read a heavily 'bitcoin fan' recommended literature on monetary history. What you say is very far away from almost all academic literature on money.
Maybe it was a ponzi scheme before 1971 in the sense that they were probably printing more bills than they had gold (even though the bills claimed that they could be redeemed for gold). But the fact that banks knew that there was a limit on how much gold they could create was in itself a good way to prevent the money supply from growing out of control. There will always be some banks who don't play by the rules.
>> In a ponzi scheme you pay interest on old money with new money, that is very different from the goal of a monetary system.
That is literally what they do. Why do you think a dollar is worth a bit less every year?
When regular banks make loans to people, the loan money is new money that they just typed into your account out of nowhere (only limited by reserve ratios which coincidentally have been lowered to 0%), then for example, when you buy a house from someone else using that new loan money and you allow them to pay off their debt, you're just paying the person who was there first.
New generations take out new loans to pay for the loans of old generations collectively.
> But the fact that banks knew that there was a limit on how much gold they could create was in itself a good way to prevent the money supply from growing out of control. There will always be some banks who don't play by the rules.
Banks are still restricted by the same mechanism as before, just that now the mechanism is not backed by gold. The central bank is in full control of how much lending can be done.
> That is literally what they do. Why do you think a dollar is worth a bit less every year?
Because the central banks WANTS the dollar to be worth a bit less every year. Because economist determainted that is the right way to do things.
And because it is known that this happens its included in loan contracts. That is why economist stress predicitibility.
In a ponzi scheme you don't have enough money to pay the interest and pay back everything, this however is not the same with fiat currency. The amount of fiat currency you can create is not limited by anything other then the choices of the central bankers.
I think you're creating a straw man here. No one is saying that the only two investment options are Bitcoin and stock. There are literally millions of other investment vehicles, from real estate to cattle to Legos.
You also have to acknowledge that most people don't pick stocks. They have exposure to the stock market indirectly through pension funds, or they manage their retirement funds by investing in ETFs.
If your ETF is sufficiently broad, you're not really betting on a single thing. Buying crypto is betting on the liquidity of that coin (or equity in a company or whatever the coin was made to track).
Buying a stock is betting on the dividends of that stock.
Buying industry-wide or nationwide index funds is betting on the long-term stability of society. If that society crashes (due to war, a pandemic, or climate change), you're probably screwed anyway because, well, your entire society has crashed.
Perhaps you could argue that investing in crypto is the opposite bet -- that society will crash in our lifetimes -- but it seems unpalatable to most people to bet on a Mad Max-like future for themselves at an old age and for their children.
> Then I found out about Proof of Stake and learned that it consumes very little electricity and doesn't require specialized hardware
So I'm skeptical about this frankly. Mostly because the security is inherent in no one having 51% of the currency. Given that governments can create currency at will, I don't foresee the rank and file bitcoin devotees to fall in line with this at all.
The thing about bitcoin is there's this "Gold Rush" aspect to it. Remove that and you remove all of its popularity.
>> So I'm skeptical about this frankly. Mostly because the security is inherent in no one having 51% of the currency.
I find that this is not a problem in practice. Even the government with infinite money would struggle to buy even 20% of circulating supply because they would have to drive the price to absolutely insane amounts in order to achieve that.
I'm involved in a DPoS project called Lisk and participants are constantly observing each other's wallets on the blockchain. If a whale tries to move too many tokens to an exchange to sell, the whole community will know and that individual risks losing their delegate position. There is a strong incentive to not sell too many tokens because everyone in the community can see it and it can have negative ramifications. Some groups of forgers make deals with each other and they agree to keep 50% of their forged tokens as reserves in exchange for votes.
Also, you can vote to earn interest on your tokens so a lot of people only sell a portion of the interest they earn and would never sell their principal.
In practice, investors' hands tend to become stronger as the price goes up.
It would be essentially impossible for an outsider to accumulate 51% of tokens. By the time they accumulated 10%, they would have paid so much money to get them that they would totally lose the incentive to harm the project.
> I find that this is not a problem in practice. Even the government with infinite money would struggle to buy even 20% of circulating supply because they would have to drive the price to absolutely insane amounts in order to achieve that.
And even if they did accumulate enough to carry out a 51% attack, they could only attack once, and then would be slashed [0].
True, and because the blockchain is public, the community would see the tokens accumulating.
When there is high demand, individuals in the community will naturally tend to tighten the supply on the markets. Typically, they will sell fewer and fewer tokens as the price gets higher.
This is because most community members really believe in the project and they believe that fiat is worthless, so they usually only sell just enough to fund a modest lifestyle. They know that the token is the most valuable asset in this economy. They know that once they sell it, they can't get it back.
