4 ms·

I think that Bitcoin is the Friendster or Napster of cryptocurrencies. It is paving the way, but the fundamentals of how it works are unsustainable. Transaction

I think that Bitcoin is the Friendster or Napster of cryptocurrencies. It is paving the way, but the fundamentals of how it works are unsustainable. Transactions cost too much, take too long, and require too much proof of work. I also expect that a mild inflationary aspect is necessary to maintain liquidity and discourage hoarding. I think the South Sea Company or tulip mania are good analogies.

mattrices 9y ago
Friendster and napster were central systems that were shut down for legal reasons and were replaced with other more distributed systems. Btc value is derived from its distributed "anti-fragile" nature which would require a lot more effort to shut down.
- iMuzz 9y ago
  When drawing an analogy to Friendster and Napster, I think the point linkregister is trying to make is that bitcoin is similar in the sense that it's a "first mover" and not a "last mover". The underlying _why_ for these "first movers" fail are not related at all since it's a totally different vertical.
  - mattrices 9y ago
    Sure, but first movers have an advantage due to wider name recognition and in this case a large established market cap and mining network. Unless the underlying tech shifts to somthing more stable or more profitable, last movers are at a disadvantage. The deflation and high transaction fees seem to favor btc bc miners wouldn't shift to somthing less profitable and those using btc as a value store profit from deflation long term.
- linkregister 9y ago
  I absolutely agree with your distinction. I was using them as analogies for pioneer technologies. I have faith in the overall Bitcoin architecture. Its greatest threat is a malicious actor taking over enough processing power to alter the blockchain. I doubt that Bitcoin itself will be the dominant cryptocurrency due to the reasons I mentioned in my original post. These are two different issues and I appreciate your pointing that out.
- testestx 9y ago
  A better analogy is with KaZaA. It's still around, but was largely replaced by BitTorrent.
- jklein11 9y ago
  The analogy between napster and bitcoin is interesting. Both are decentralized and "stateless." Ultimately p2p solutions like napster were replaced by Spotify/Apple Music. I think this is because the benefits of a stateless and decentralized solution weren't worth the additional complexity. Not sure if the same will be said of cryptocurrency.
  - Akujin 9y ago
    Napstar was replaced by torrents. People still download music without paying for it all day every day.
    - PeterisP 9y ago
      IIRC if we track the number of downloads or songs played, even spotify and youtube outcompete torrents by a huge margin, downloaded torrents are just not that popular for music nowadays compared to streaming. The legal services took over most of the mindshare and volume of music distribution, most of the people who used napster back then now get their music from a streaming service, not on a torrent.
      - Akujin 9y ago
        MP3s are so small compared to the rest of the internet now that there's a glut of shady websites that cater to people trying to get MP3s. Rings tones are a great example why someone with a Spotify account might google an mp3 for a song. Meanwhile you've got tons of semilegal mixes on Soundcloud and Mixcloud. Spotify and Apple Music is just convenience. These sites also cater to the leaks scene. Every single hot album to drop recently was leaked 24-72 hours before dropping on "official" sources like Spotify. This makes even those people that have Spotify accounts look for MP3s.
      - mattrices 9y ago
        Spotify was spun out of private torrent network libraries that still exist independant of spotify. Youtube still gets a lot of uploads from private torrenters trying to generate ad revenue. Just because they are percieved as legal and convienient they get more views, but ultimately where did the content come from? https://torrentfreak.com/spotifys-beta-used-pirate-mp3-files-some-from-pirate-bay-170509/ https://torrentfreak.com/spotifys-beta-used-pirate-mp3-files...
sushid 9y ago
Interesting... So with that example, would you equate Ethereum with being the Facebook or iTunes of cryptocurrecy? Or do you think this entire generation of crypto needs to more or less die off first?
rlpb 9y ago
> It is paving the way, but the fundamentals of how it works are unsustainable. The fundamentals of how it works can be changed. It is true that entrenched actors may dig in their heels and prevent it from changing, and so some other more fast moving cryptocurrency may take over. An alternative is a hard fork. I think it's possible that a hard fork that has figured out the "right way" will do better than a fresh cryptocurrency doing the right thing but from scratch, because by hard forking you don't have to convince everyone to bootstrap. I accept it may equally go the other way; we'll have to wait and see. > Transactions cost too much, take too long, and require too much proof of work. Let's see what the lightning network brings. As for requiring too much proof of work, I think that's a fallacy. You're looking at it backwards. "Much" proof of work isn't required; that miners compete by providing it is a consequence of the current value of the block reward and transaction fees. Relatively little hash power is actually required to maintain the network. The reason the current hash rate is so high is because hash rate follows price rather than the other way round. The high value of the mining rewards has attracted many miners. In the future, when the block reward becomes zero and the lightning network has relieved congestion on the main blockchain, traders (actually probably just parties seeking clearing) won't have to bid against each other so hard in fees to get their transactions confirmed. Then transaction fees will drop, so the reward for finding the next block will also drop, unprofitable miners will leave, and so will the hash rate. So: 1) transactions cost too much and take too long is currently true but if the lightning network effort succeeds then this will no longer be a problem; and 2) too much proof of work is not actually "required".
- PeterisP 9y ago
  If we figure out better fundamentals, then it's not a given that eventually successful incarnation of those better fundamentals will be Bitcoin. If Ethereum or Bitcoin Cash or Litecoin or Monero or rlpb_coin or whatever else becomes the cryptocurrency of the future and becomes worth billions, then everyone who bought bitcoin at $10000 or $20000 per BTC will have wasted their money. If the concept of the lightning network is the next big thing, but for whatever reason Bitcoin Cash happens to fit work with it better, then again you lose your bet/investment.
  - 9y ago

mattrices 9y ago

Friendster and napster were central systems that were shut down for legal reasons and were replaced with other more distributed systems. Btc value is derived from its distributed "anti-fragile" nature which would require a lot more effort to shut down.

iMuzz 9y ago
When drawing an analogy to Friendster and Napster, I think the point linkregister is trying to make is that bitcoin is similar in the sense that it's a "first mover" and not a "last mover". The underlying _why_ for these "first movers" fail are not related at all since it's a totally different vertical.
- mattrices 9y ago
  Sure, but first movers have an advantage due to wider name recognition and in this case a large established market cap and mining network. Unless the underlying tech shifts to somthing more stable or more profitable, last movers are at a disadvantage. The deflation and high transaction fees seem to favor btc bc miners wouldn't shift to somthing less profitable and those using btc as a value store profit from deflation long term.
linkregister 9y ago
I absolutely agree with your distinction. I was using them as analogies for pioneer technologies. I have faith in the overall Bitcoin architecture. Its greatest threat is a malicious actor taking over enough processing power to alter the blockchain. I doubt that Bitcoin itself will be the dominant cryptocurrency due to the reasons I mentioned in my original post. These are two different issues and I appreciate your pointing that out.
testestx 9y ago
A better analogy is with KaZaA. It's still around, but was largely replaced by BitTorrent.
jklein11 9y ago
The analogy between napster and bitcoin is interesting. Both are decentralized and "stateless." Ultimately p2p solutions like napster were replaced by Spotify/Apple Music. I think this is because the benefits of a stateless and decentralized solution weren't worth the additional complexity. Not sure if the same will be said of cryptocurrency.
- Akujin 9y ago
  Napstar was replaced by torrents. People still download music without paying for it all day every day.
  - PeterisP 9y ago
    IIRC if we track the number of downloads or songs played, even spotify and youtube outcompete torrents by a huge margin, downloaded torrents are just not that popular for music nowadays compared to streaming. The legal services took over most of the mindshare and volume of music distribution, most of the people who used napster back then now get their music from a streaming service, not on a torrent.
    - Akujin 9y ago
      MP3s are so small compared to the rest of the internet now that there's a glut of shady websites that cater to people trying to get MP3s. Rings tones are a great example why someone with a Spotify account might google an mp3 for a song. Meanwhile you've got tons of semilegal mixes on Soundcloud and Mixcloud. Spotify and Apple Music is just convenience. These sites also cater to the leaks scene. Every single hot album to drop recently was leaked 24-72 hours before dropping on "official" sources like Spotify. This makes even those people that have Spotify accounts look for MP3s.
    - mattrices 9y ago
      Spotify was spun out of private torrent network libraries that still exist independant of spotify. Youtube still gets a lot of uploads from private torrenters trying to generate ad revenue. Just because they are percieved as legal and convienient they get more views, but ultimately where did the content come from? https://torrentfreak.com/spotifys-beta-used-pirate-mp3-files-some-from-pirate-bay-170509/ https://torrentfreak.com/spotifys-beta-used-pirate-mp3-files...

sushid 9y ago

Interesting... So with that example, would you equate Ethereum with being the Facebook or iTunes of cryptocurrecy? Or do you think this entire generation of crypto needs to more or less die off first?

rlpb 9y ago

> It is paving the way, but the fundamentals of how it works are unsustainable. The fundamentals of how it works can be changed. It is true that entrenched actors may dig in their heels and prevent it from changing, and so some other more fast moving cryptocurrency may take over. An alternative is a hard fork. I think it's possible that a hard fork that has figured out the "right way" will do better than a fresh cryptocurrency doing the right thing but from scratch, because by hard forking you don't have to convince everyone to bootstrap. I accept it may equally go the other way; we'll have to wait and see. > Transactions cost too much, take too long, and require too much proof of work. Let's see what the lightning network brings. As for requiring too much proof of work, I think that's a fallacy. You're looking at it backwards. "Much" proof of work isn't required; that miners compete by providing it is a consequence of the current value of the block reward and transaction fees. Relatively little hash power is actually required to maintain the network. The reason the current hash rate is so high is because hash rate follows price rather than the other way round. The high value of the mining rewards has attracted many miners. In the future, when the block reward becomes zero and the lightning network has relieved congestion on the main blockchain, traders (actually probably just parties seeking clearing) won't have to bid against each other so hard in fees to get their transactions confirmed. Then transaction fees will drop, so the reward for finding the next block will also drop, unprofitable miners will leave, and so will the hash rate. So: 1) transactions cost too much and take too long is currently true but if the lightning network effort succeeds then this will no longer be a problem; and 2) too much proof of work is not actually "required".

PeterisP 9y ago
If we figure out better fundamentals, then it's not a given that eventually successful incarnation of those better fundamentals will be Bitcoin. If Ethereum or Bitcoin Cash or Litecoin or Monero or rlpb_coin or whatever else becomes the cryptocurrency of the future and becomes worth billions, then everyone who bought bitcoin at $10000 or $20000 per BTC will have wasted their money. If the concept of the lightning network is the next big thing, but for whatever reason Bitcoin Cash happens to fit work with it better, then again you lose your bet/investment.
- 9y ago