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Proponents of Ethereum ignore the fact that Ethereum fails to address any of the most significant problems in Bitcoin. Bitcoin's major advantage is decentraliza

by Taek 11y ago

Proponents of Ethereum ignore the fact that Ethereum fails to address any of the most significant problems in Bitcoin. Bitcoin's major advantage is decentralization, and it's about the only thing that Bitcoin does better than anything else. Bitcoin is an extremely expensive way to build a financial system, and there's no reason to go through the trouble unless you are utilizing the decentralization. Bitcoin's major problems are scale, miner centralization, and developer centralization. Ethereum is worse than Bitcoin in all three respects. Transactions on Ethereum are heavier, develoepment is very heavily controlled by the Ethereum foundation and by Consensys, and the block algorithm in Ethereum more strongly favors larger miners as compared to Bitcoin (which already favors bigger miners). Further, the Ethereum develoepment team is under qualified. There have been several ametuer mistakes, including allowing negative balance, leaking private keys, and putting consensus at risk by advocating that different users should be running different consensus codebases. Most of the highly capable developers in the cryptocurrency ecosystem avoid Ethereum because it's not been constructed well, nor does it's design suggest strong resistance to adversarial environments. Bitcoin did go through similar growing pains. Bitcoin did have many ametuer mistakes when getting started. But those have all been fixed, and there is a positively enormous amount of competent mindshare powering Bitcoin, and the thoroughness of decentralization in Bitcoin is unmatched by any altcoin, including Ethereum. Ethereum has offered a lot of cool tricks with its turing complete scripting language, but is standing on a house of cards. It scales less well than Bitcoin, it's design more heavily promotes centralization, it's development is more ametuer, and the potential applications offered by its fancy scripting language are not actually that much stronger than what you can do with Bitcoin. The showcase applications such as Augur and Slockit suffer from weak cryptographic fundamentals and under-qualified developers even worse than Ethereum does.

kushti 11y ago
Bitcoin is highly centralized, 90% of mining power was in one room recently. Ethereum's Ethash is better protected against specialized hardware, but not well verified yet. In other aspects you've mentioned, especially scaling, Ethereum is surely nightmare.
- manigandham 11y ago
  > 90% of mining power was in one room recently Any details on this?
  - jnbiche 11y ago
    S/he means the principles of the component mining groups were in one room, I presume. I stopped following Bitcoin closely a while back, but I can't imagine one party getting 90% of the hashrate without dire consequences.
  - kushti 11y ago
    https://news.bitcoin.com/scaling-bitcoin-workshop-hong-kong-wrap/ https://news.bitcoin.com/scaling-bitcoin-workshop-hong-kong-... "I think the biggest news to come out of the conference is that miners representing over 90% of the hashing power on the network all agreed that the block size needs to be increased."
  - ufo 11y ago
    A handful of chinese miners control a huge chunk of the mining power for bitcoin. They recently appeared together in a bitcoin conference, which technically meant that 90% of the hashing power appeared under the same roof. - https://twitter.com/lopp/status/673398201307664384 https://twitter.com/lopp/status/673398201307664384 - https://www.reddit.com/r/Bitcoin/comments/3vn0go/photo_on_scaling_bitcoin_stage_people/ https://www.reddit.com/r/Bitcoin/comments/3vn0go/photo_on_sc... - https://www.reddit.com/r/Buttcoin/comments/3vn984/decentralization_has_been_finally_debunked/ https://www.reddit.com/r/Buttcoin/comments/3vn984/decentrali...
- Taek 11y ago
  That's not really the case. There were representatives for 90% of the hashing power, but pools are composed of many individuals who each own their own rigs, and companies like BitFury are also composed of many people. There was 1 or 2 representatives from each organization out of the many that actually participate in the mining process. It's not great, but if you look at Ethereum you'll see the same distribution (2 pools have 50%, 4 pools have 75%) and Ethereum does not have anywhere near the same throughout load, which is where most of the centralization pressure comes from. Further, Ethereum is supposedly much more vulnerable to selfish mining attacks, which means a pool that decides to start doing selfish mining should be able to overtake the others in terms of profitability very quickly.
natrius 11y ago
> the potential applications offered by its fancy scripting language are not actually that much stronger than what you can do with Bitcoin I disagree. When I learned about what can be built with the Ethereum Virtual Machine, I quit my job to build decentralized applications full time. You can either wait for decentralized apps to work their way into your life, or you can ignore the naysayers and find out for yourself if these tools are worth building with.
- panabee 11y ago
  your conviction is awesome. good luck! mind sharing some of the decentralized apps you're building or believe are better with ethereum?
- scient 11y ago
  I would also love to know what are the apps that you are thinking about that could be improved so much by this technology that you quit your job. I have tried to think of all kinds of uses cases and just can't get excited over this technology.
  - writtles 11y ago
    i had an idea that if I were a US bank I would create a USD token on Ethereum that would be redeemable at my bank (or my network of banks). A eUSD token would created via smart contract and be pegged to the dollar and thereby tradable on the Ethereum network. Individuals and business could then do business in USD (or any fiat of choice for that matter. Obtainable on an Ethereum exchange or through said bank(s)). Other implications: An accounting firm could create a smart contract that calculates and or files my taxes. A business structure (LLC, IPO etc) in can be written into a smart contract. And so on.
    - joosters 11y ago
      Ah, the magic trustless dollar-pegged digital token. Many tales have been spoken of them, but none stand up to close scrutiny. You need to solve this problem before basing anything else upon it.
lololomg 11y ago
Even if they can fix all of that, I still don't see the application here. It's tantalising but ... there's nothing new or interesting you can really do with Etherium. Is there?
mike_hearn 11y ago
Bitcoin's biggest problem is that its developers are wildly incompetent, to the extent that they repeatedly promised to entirely replace the block chain with the Lightning Network ... without actually being able to do so. Needless to say, their crazy promises of a perfect solution that involved no tradeoffs never even came close to reality. Meanwhile, their existing system broke down to the extent that its problems are now in the New York Times. The idea that Bitcoin developers are competent and Ethereum developers aren't is simply not borne out by basic observations of what the two camps have been doing lately. And the market is responding to that. Hence, this article.
- bachback 11y ago
  The problem with Bitcoin development is and was its not related to the economic underpinnings. Maxwell, Back, et. al. have zero understanding of economics. Not a surprise they would invent side-chains which removes incentives from blockchains. Big blocks are however likewise not an answer. Bitcoin is failing because it is limited, not (just) decisions by Core-dev. But it likely will be around for many years as a platform to fund other chains.
  - BenoitEssiambre 11y ago
    Yup, a deflationary currency cannot become widespread without becoming highly unstable. Proponents of cryptocurrencies could easily fix this by creating one that grows by k% forever (like Friedman's k-percent rule). But they won't because this destroys the "get rich quick" aspect of the technology which they won't admit is the main thing they are drawn to. If they were serious they would have fixed this problem and made sure bitcoins generate long run inflation. Could bitcoin's popularity stand on its own with just its net benefits as a transaction medium after the allure of ponzi investment has been removed?
    - bachback 11y ago
      The problem is solvable. Yes, Bitcoin is supported by subsidies, but it can also be based on fees per transactions. Inflation doesn't help - that just means old coin holders get diluted. The appeal of Bitcoin is precisely the limited supply. Bitcoin or Altcoins are not a get rich quick scheme. They provide value for users by making transfer of wealth globally possible. The traditional infrastructure cost for this is many trillions of dollars (you pay it with taxes and inflation).
api 11y ago
I have a hard time imagining a proof of work based distributed system that isn't guaranteed to be monopolized after a sufficient amount of time. Work -- any form of work -- is subject to industrial scaling effects and economies of scale: https://en.wikipedia.org/wiki/Economies_of_scale https://en.wikipedia.org/wiki/Economies_of_scale Meanwhile all these POW-based currencies have deflationary economics and deflating mining revenue due to rising difficulty. That makes less efficient mining less profitable over time, driving smaller miners out of business and accelerating the effect. Any proof of work based system like Bitcoin or Ethereum will in the end be monopolized by whomever has the cheapest electricity, cooling, and hardware, and the most labor-efficient mining operation. This is the most powerful bearish argument on Bitcoin and other cryptocurrencies that I have. Gold and other hard currency materials are randomly distributed by geology and physics, helping prevent total monopolization of mining. Paper currencies are monopolized by default, so you know it's controlled by the Fed or some government... the devil you know. But these things are guaranteed to be monopolized by... uhh... we don't know yet. You could end up with a currency controlled by Kim Jong Un or Dr. Evil and his white Persian cat. (I'll take Dr. Evil.) Serious global organizations are not going to adopt a reserve currency whose future control is up for grabs by whomever can build the most efficient data center and/or snow over the development community most effectively. That's why Chinese miners have so much power on the Bitcoin block chain. Cheap coal and a total lack of an EPA makes power very cheap for them, and they also have local access to very cheap labor and cheap hardware production. In the very long term if Bitcoin or any other POW-based currency became cumulatively worth enough, someone in a chilly place like Russia, Scandinavia, or Canada could build a hydroelectric powered arctic circle (free cooling) super data center full of ASICs and own the entire block chain. There are places on Earth with unbelievably cheap power (big hydro, constant prevailing winds, etc.) and free cooling due to a cold local climate. A coastal location in the arctic using arctic seawater for cooling and a dam on a local river would be ideal. Nobody would be able to compete with that. Bitcoin has two big things going for it, at least insofar as the mainstream market is concerned: 1) The 2008 financial crash and its terribly bungled and corrupt aftermath destroyed peoples' long term faith in the "devils we know," creating essentially a market niche for a competing financial system that offers better governance and transparency. Bitcoin, Ethereum, etc. and the many companies working in these ecosystems are trying to address that niche. (Side note: I wish the West's leadership would wake up and realize just how profound a loss of confidence occurred in 2008-2009. I don't think the effect has manifested yet. It's too deep and profound a loss of faith and the population is still processing it.) 2) Existing methods of sending cash overseas like Western Union are absolutely freaking horrible. We've used Bitcoin to pay overseas contractors because it amounts to only one root canal vs. Western Union's three or four tooth extractions with pliers per payment. Bank wires requires that I physical visit a f'ing physical bank, which is even worse. That means though that Bitcoin's advantage would disappear if: 1) Entities like the US Federal Government and the Federal Reserve took actual steps to reform themselves and implement a plan of action for dealing with things like the 2008 crash that is more honest, equitable, and well thought out than "yank money out of our arse and hand it to other Yale alumni until the fires go out." 2) Companies like Western Union realize they are in the 21st century and act accordingly, implementing low friction easy to use methods of wiring money with low fees. Bitcoin would still have a niche if those two things happened, but its niche would be smaller and probably further outside the mainstream of commerce. Of course if Bitcoin ends up controlled by the Chinese PLA, none of those above advantages might matter much.

by Taek 11y ago

kushti 11y ago

Bitcoin is highly centralized, 90% of mining power was in one room recently. Ethereum's Ethash is better protected against specialized hardware, but not well verified yet. In other aspects you've mentioned, especially scaling, Ethereum is surely nightmare.

manigandham 11y ago
> 90% of mining power was in one room recently Any details on this?
- jnbiche 11y ago
  S/he means the principles of the component mining groups were in one room, I presume. I stopped following Bitcoin closely a while back, but I can't imagine one party getting 90% of the hashrate without dire consequences.
- kushti 11y ago
  https://news.bitcoin.com/scaling-bitcoin-workshop-hong-kong-wrap/ https://news.bitcoin.com/scaling-bitcoin-workshop-hong-kong-... "I think the biggest news to come out of the conference is that miners representing over 90% of the hashing power on the network all agreed that the block size needs to be increased."
- ufo 11y ago
  A handful of chinese miners control a huge chunk of the mining power for bitcoin. They recently appeared together in a bitcoin conference, which technically meant that 90% of the hashing power appeared under the same roof. - https://twitter.com/lopp/status/673398201307664384 https://twitter.com/lopp/status/673398201307664384 - https://www.reddit.com/r/Bitcoin/comments/3vn0go/photo_on_scaling_bitcoin_stage_people/ https://www.reddit.com/r/Bitcoin/comments/3vn0go/photo_on_sc... - https://www.reddit.com/r/Buttcoin/comments/3vn984/decentralization_has_been_finally_debunked/ https://www.reddit.com/r/Buttcoin/comments/3vn984/decentrali...
Taek 11y ago
That's not really the case. There were representatives for 90% of the hashing power, but pools are composed of many individuals who each own their own rigs, and companies like BitFury are also composed of many people. There was 1 or 2 representatives from each organization out of the many that actually participate in the mining process. It's not great, but if you look at Ethereum you'll see the same distribution (2 pools have 50%, 4 pools have 75%) and Ethereum does not have anywhere near the same throughout load, which is where most of the centralization pressure comes from. Further, Ethereum is supposedly much more vulnerable to selfish mining attacks, which means a pool that decides to start doing selfish mining should be able to overtake the others in terms of profitability very quickly.

natrius 11y ago

> the potential applications offered by its fancy scripting language are not actually that much stronger than what you can do with Bitcoin I disagree. When I learned about what can be built with the Ethereum Virtual Machine, I quit my job to build decentralized applications full time. You can either wait for decentralized apps to work their way into your life, or you can ignore the naysayers and find out for yourself if these tools are worth building with.

panabee 11y ago
your conviction is awesome. good luck! mind sharing some of the decentralized apps you're building or believe are better with ethereum?
scient 11y ago
I would also love to know what are the apps that you are thinking about that could be improved so much by this technology that you quit your job. I have tried to think of all kinds of uses cases and just can't get excited over this technology.
- writtles 11y ago
  i had an idea that if I were a US bank I would create a USD token on Ethereum that would be redeemable at my bank (or my network of banks). A eUSD token would created via smart contract and be pegged to the dollar and thereby tradable on the Ethereum network. Individuals and business could then do business in USD (or any fiat of choice for that matter. Obtainable on an Ethereum exchange or through said bank(s)). Other implications: An accounting firm could create a smart contract that calculates and or files my taxes. A business structure (LLC, IPO etc) in can be written into a smart contract. And so on.
  - joosters 11y ago
    Ah, the magic trustless dollar-pegged digital token. Many tales have been spoken of them, but none stand up to close scrutiny. You need to solve this problem before basing anything else upon it.

lololomg 11y ago

Even if they can fix all of that, I still don't see the application here. It's tantalising but ... there's nothing new or interesting you can really do with Etherium. Is there?

mike_hearn 11y ago

Bitcoin's biggest problem is that its developers are wildly incompetent, to the extent that they repeatedly promised to entirely replace the block chain with the Lightning Network ... without actually being able to do so. Needless to say, their crazy promises of a perfect solution that involved no tradeoffs never even came close to reality. Meanwhile, their existing system broke down to the extent that its problems are now in the New York Times. The idea that Bitcoin developers are competent and Ethereum developers aren't is simply not borne out by basic observations of what the two camps have been doing lately. And the market is responding to that. Hence, this article.

bachback 11y ago
The problem with Bitcoin development is and was its not related to the economic underpinnings. Maxwell, Back, et. al. have zero understanding of economics. Not a surprise they would invent side-chains which removes incentives from blockchains. Big blocks are however likewise not an answer. Bitcoin is failing because it is limited, not (just) decisions by Core-dev. But it likely will be around for many years as a platform to fund other chains.
- BenoitEssiambre 11y ago
  Yup, a deflationary currency cannot become widespread without becoming highly unstable. Proponents of cryptocurrencies could easily fix this by creating one that grows by k% forever (like Friedman's k-percent rule). But they won't because this destroys the "get rich quick" aspect of the technology which they won't admit is the main thing they are drawn to. If they were serious they would have fixed this problem and made sure bitcoins generate long run inflation. Could bitcoin's popularity stand on its own with just its net benefits as a transaction medium after the allure of ponzi investment has been removed?
  - bachback 11y ago
    The problem is solvable. Yes, Bitcoin is supported by subsidies, but it can also be based on fees per transactions. Inflation doesn't help - that just means old coin holders get diluted. The appeal of Bitcoin is precisely the limited supply. Bitcoin or Altcoins are not a get rich quick scheme. They provide value for users by making transfer of wealth globally possible. The traditional infrastructure cost for this is many trillions of dollars (you pay it with taxes and inflation).

api 11y ago

I have a hard time imagining a proof of work based distributed system that isn't guaranteed to be monopolized after a sufficient amount of time. Work -- any form of work -- is subject to industrial scaling effects and economies of scale: https://en.wikipedia.org/wiki/Economies_of_scale https://en.wikipedia.org/wiki/Economies_of_scale Meanwhile all these POW-based currencies have deflationary economics and deflating mining revenue due to rising difficulty. That makes less efficient mining less profitable over time, driving smaller miners out of business and accelerating the effect. Any proof of work based system like Bitcoin or Ethereum will in the end be monopolized by whomever has the cheapest electricity, cooling, and hardware, and the most labor-efficient mining operation. This is the most powerful bearish argument on Bitcoin and other cryptocurrencies that I have. Gold and other hard currency materials are randomly distributed by geology and physics, helping prevent total monopolization of mining. Paper currencies are monopolized by default, so you know it's controlled by the Fed or some government... the devil you know. But these things are guaranteed to be monopolized by... uhh... we don't know yet. You could end up with a currency controlled by Kim Jong Un or Dr. Evil and his white Persian cat. (I'll take Dr. Evil.) Serious global organizations are not going to adopt a reserve currency whose future control is up for grabs by whomever can build the most efficient data center and/or snow over the development community most effectively. That's why Chinese miners have so much power on the Bitcoin block chain. Cheap coal and a total lack of an EPA makes power very cheap for them, and they also have local access to very cheap labor and cheap hardware production. In the very long term if Bitcoin or any other POW-based currency became cumulatively worth enough, someone in a chilly place like Russia, Scandinavia, or Canada could build a hydroelectric powered arctic circle (free cooling) super data center full of ASICs and own the entire block chain. There are places on Earth with unbelievably cheap power (big hydro, constant prevailing winds, etc.) and free cooling due to a cold local climate. A coastal location in the arctic using arctic seawater for cooling and a dam on a local river would be ideal. Nobody would be able to compete with that. Bitcoin has two big things going for it, at least insofar as the mainstream market is concerned: 1) The 2008 financial crash and its terribly bungled and corrupt aftermath destroyed peoples' long term faith in the "devils we know," creating essentially a market niche for a competing financial system that offers better governance and transparency. Bitcoin, Ethereum, etc. and the many companies working in these ecosystems are trying to address that niche. (Side note: I wish the West's leadership would wake up and realize just how profound a loss of confidence occurred in 2008-2009. I don't think the effect has manifested yet. It's too deep and profound a loss of faith and the population is still processing it.) 2) Existing methods of sending cash overseas like Western Union are absolutely freaking horrible. We've used Bitcoin to pay overseas contractors because it amounts to only one root canal vs. Western Union's three or four tooth extractions with pliers per payment. Bank wires requires that I physical visit a f'ing physical bank, which is even worse. That means though that Bitcoin's advantage would disappear if: 1) Entities like the US Federal Government and the Federal Reserve took actual steps to reform themselves and implement a plan of action for dealing with things like the 2008 crash that is more honest, equitable, and well thought out than "yank money out of our arse and hand it to other Yale alumni until the fires go out." 2) Companies like Western Union realize they are in the 21st century and act accordingly, implementing low friction easy to use methods of wiring money with low fees. Bitcoin would still have a niche if those two things happened, but its niche would be smaller and probably further outside the mainstream of commerce. Of course if Bitcoin ends up controlled by the Chinese PLA, none of those above advantages might matter much.