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FIs are very interested in Bitcoin, except for the Bitcoin part, which leads to lots of talk about trying to use blockchains for various unconvincing purposes.

by HillRat 11y ago

FIs are very interested in Bitcoin, except for the Bitcoin part, which leads to lots of talk about trying to use blockchains for various unconvincing purposes. The problem is that btc isn't suitable for large financial products, because it's an illiquid, volatile virtual asset with a market-wide price floor of zero. If FIs thought there was a bounded-risk revenue stream to be extracted from Bitcoin, rest assured they'd be doing it -- you'd see efforts to increase liquidity (more than one Bitcoin millionaire, I think, would be willing to pay ten to fifteen points to convert significant fractions of their cryptotokens to fiat currency), hedge products, and so on. The fact that you don't see that suggests that FIs can't figure out how to value btc in a way that the downside doesn't far outstrip the upside potential. Theoretically btc could become so commonly-held and widespread enough that they gain stability through ubiquity (like gold and gems), but I think the problems outlined in the original post -- specifically the fact that a small number of maintainers control the protocol, and, more damningly, that almost all the hashing power in the system is controlled by set of individuals who could trivially collude -- make that less likely than it seemed a few years ago.

CyberDildonics 11y ago
Plenty of what you are saying is true but > specifically the fact that a small number of maintainers control the protocol, Is not all that fundamental. Really the miners control the protocol and it seems that the big companies involved and the miners have enough of the destructive tactics of the blockstream guys. > that almost all the hashing power in the system is controlled by set of individuals who could trivially collude This isn't really true either. There are large pools, but as soon as a pool goes rogue, they will lose the mining power that makes them up and never get it back, since they don't own the machines themselves. Fundamentally though all of this is about the big picture. Bitcoin can't replace large financial products now, but eventually some crypto-currency could. The big finance companies could get together and make their own shared ledger, which might work well for them, but there isn't much reason they couldn't achieve similar effects already. If they create their own currency, that could be a big deal however, because they could gradually put more and more resources into it. The core issue though, is that a blockchain without mining is either not open to anyone or not secure, and without a currency attached to it, the incentives to mine are unknown to me.

by HillRat 11y ago

CyberDildonics 11y ago

Plenty of what you are saying is true but > specifically the fact that a small number of maintainers control the protocol, Is not all that fundamental. Really the miners control the protocol and it seems that the big companies involved and the miners have enough of the destructive tactics of the blockstream guys. > that almost all the hashing power in the system is controlled by set of individuals who could trivially collude This isn't really true either. There are large pools, but as soon as a pool goes rogue, they will lose the mining power that makes them up and never get it back, since they don't own the machines themselves. Fundamentally though all of this is about the big picture. Bitcoin can't replace large financial products now, but eventually some crypto-currency could. The big finance companies could get together and make their own shared ledger, which might work well for them, but there isn't much reason they couldn't achieve similar effects already. If they create their own currency, that could be a big deal however, because they could gradually put more and more resources into it. The core issue though, is that a blockchain without mining is either not open to anyone or not secure, and without a currency attached to it, the incentives to mine are unknown to me.