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OP here. A small clarification: there are some legitimate criticisms of the Register piece that I cited in the first tweet, but I merely cited it as an example

OP here. A small clarification: there are some legitimate criticisms of the Register piece that I cited in the first tweet, but I merely cited it as an example of why I think the hype is calming down. The arguments I make are independent of that piece; the limitations I point out have always been there, rather than something new that happened in 2018. I also wanted to add a couple of points that I didn't get to in the Twitter thread. Economics. Blockchain technologists seem to overestimate the extent to which new insights in economics are needed to understand cryptocurrencies and blockchains, as opposed to applying basic principles from economics and game theory. For example, a recent paper shows that thinking about miners and attackers in terms of stock and flow exposes important limitations of the security of Proof of Work. [1] I learnt of many other such examples at a recent conference on the economics of blockchains. [2] So I think a lot of the "cryptoeconomics" hype is misplaced. Privacy. It's often taken for granted that decentralized architectures will improve privacy. This seems obvious given everything we've learnt about Facebook, but a better way to think about it is that decentralized systems exchange one set of privacy problems with another. I coauthored a paper a few years ago skeptical of the "decentralization ==> privacy" story in the context of social networks [3], but I think many of the arguments in that paper apply to blockchain/dApps that are being built today. [1] http://faculty.chicagobooth.edu/eric.budish/research/Economic-Limits-Bitcoin-Blockchain.pdf http://faculty.chicagobooth.edu/eric.budish/research/Economi... [2] https://bfi.uchicago.edu/events/cryptocurrencies-and-blockchains https://bfi.uchicago.edu/events/cryptocurrencies-and-blockch... [3] http://randomwalker.info/publications/critical-look-at-decentralization-v1.pdf http://randomwalker.info/publications/critical-look-at-decen...

AndrewKemendo 8y ago
As I mentioned in the Twitter thread, my chief criticism of cryptocurrency since the beginning is it's naivete of the history and politics of money. The discussions about economics applied here focus too much on microeconomic rather than macroeconomic arguments. So they end up missing the point entirely which is this: Money isn't a neutral instrument and it's not something that can be decoupled from societal/political concepts and structures. You can evaluate it as though it is neutral, but it has not ever been and will never be a neutral instrument because of the historical tendency for resources to pool and therefore become power centers, among other things. Therefore if you view cryptocurrency as having the primary intention to de-couple commerce from coercive power structures [1], then you'll see immediately the historical problem. Namely, history doesn't favor distributed power, especially not when it can easily be co-opted by the powerful systems in which they rely. In the best case scenario for crypto-utopians, millions of people transact and do commerce on a decentralized currency. In that case, whatever sovereign is most impacted, will then either outlaw commerce by crypto by force or require parity with the sovereign currency and control of the crypto currency through tax payments. This has happened multiple times over the centuries with alt-currencies and they are killed off by the most powerful (see: Most powerful economy/military) organization. Politically, there is nothing different about Bitcoin than there was with the confederate states dollar for example. [1] From the original whitepaper: "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party." https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf
- jondubois 8y ago
  >> whatever sovereign is most impacted, will then either outlaw commerce by crypto by force or require parity with the sovereign currency and control of the crypto currency through tax payments That's not possible. Even if all the governments of the developed world coordinated to ban cryptocurrencies or impose taxes on them, this will be an opportunity for developing countries to use cryptocurrencies as a competitive advantage to catch up financially.
  - throwawaymath 8y ago
    Uh, how?
  - sk5t 8y ago
    I suppose you could hitch your wagon to the Marshall Islands economy and see how that goes.
  - skywhopper 8y ago
    Very curious about how you foresee "developing countries to use cryptocurrencies as a competitive advantage to catch up financially" working if the cryptocurrencies are unusable in larger economies.
  - eeZah7Ux 8y ago
    Why the downvotes? "traditional" cryptocurrencies are more useful in absence of a stable and reliable banking system and political system. As smartphones spread across developing countries, hypothetical non-minable cryptocurrencies that works well on intermittent or local networking might become relevant.
- mathnmusic 8y ago
  > history doesn't favor distributed power In that case, why do we have ~200 nations instead of a single world government? Clearly, sovereignty matters to groups of people. "Sovereignty of money does not matter to LARGE groups of people" - might be a more defensible argument.
wallacoloo 8y ago
> there are some legitimate criticisms of the Register piece that I cited in the first tweet, but I merely cited it as an example of why I think the hype is calming down. On the one extreme, you've got the evangelicals who insist that everybody will benefit from cryptocurrency today and the only reason it hasn't replaced all of modern finance is because of a conspiracy. These people ignore anyone's attempt at a rational counterargument. On the other extreme you've got people who are very strongly against the idea of cryptocurrencies. They see that tremendous harm can come to individuals who jump into this system unprepared and who aren't aware of the security or privacy implications (for example), because the previous group doesn't admit that there are any. They are also able to see through the greed and the overhype and as a result dismiss Bitcoin for being nothing. The thing to recognize is that these are both extremes. They both contain some truth, but it feels that the public discourse is largely just a fight between the extremes rather than any meaningful discussion. If you want to contribute something meaningful to the discussion, be honest. You have some good points in this followup and in your twitter comments, but your opening line is just blatantly dishonest. > For example, a study of 43 use cases found a 0% success rate So, apparently nobody is buying drugs with cryptocurrency anymore. Seriously! This line is demonstrated to be blatantly misleading if you give it TEN SECONDS of thought. Did you? In truth, I think you did give it thought, and then you dismissed it because it's a good line that supports the way you want things to be and supports the message you want to push. > but I merely cited it as an example of why I think the hype is calming down. You said a misleading thing; own up. Don't downplay it. Nobody expects an apology or anything, but just admit to yourself that it was to some degree dishonest, and think about whether that's really an attribute you want to preserve in your writing and in the way you present yourself, and whether exaggeration which doesn't present itself as such really does anything to advance the discourse.
- dhh2106 8y ago
  I posted this as a response below but still I find it interesting that OP says public crypto failed because of both fundamental misunderstandings and immature tech (internet trying to compete with newspapers in the 80s). Eventually, the internet was able to compete with newspapers and I think eventually public blockchain will compete with centralized companies. Networks can benefit from economies of scale without the rent seeking bottlenecks of centralized agents. I agree with op that in some cases centralization naturally happens but it doesn't follow that this is true in all cases. On a diff note, has anyone read the Master Switch that OP recommended? Worth reading?
darawk 8y ago
> Economics. Blockchain technologists seem to overestimate the extent to which new insights in economics are needed to understand cryptocurrencies and blockchains, as opposed to applying basic principles from economics and game theory. For example, a recent paper shows that thinking about miners and attackers in terms of stock and flow exposes important limitations of the security of Proof of Work. [1] I learnt of many other such examples at a recent conference on the economics of blockchains. [2] So I think a lot of the "cryptoeconomics" hype is misplaced. Are people suggesting that new economics are needed? I don't think most people are suggesting that. They are suggesting that blockchains allow you to implement economic incentive schemes that weren't previously feasible. > Privacy. It's often taken for granted that decentralized architectures will improve privacy. This seems obvious given everything we've learnt about Facebook, but a better way to think about it is that decentralized systems exchange one set of privacy problems with another. I coauthored a paper a few years ago skeptical of the "decentralization ==> privacy" story in the context of social networks [3], but I think many of the arguments in that paper apply to blockchain/dApps that are being built today. Nobody serious says that decentralization == privacy. However, decentralization does allow you to to implement strong privacy systems, like Monero/Zcash.
- NikolaNovak 8y ago
  To a certain degree, like with many wildly held beliefs, dispelling biggest cryptocurrency zealotry becomes a whack-a-mole game: of the thousand disprovable beliefs, any given person presented with any given disproof will claim "Well I certainly don't believe that, so you've not done anything against my specific (possibly shifting) 17 beliefs". In particular, re: "Nobody serious says that decentralization == privacy" -- this is presented as tautology on regular basis, by people that certainly hold themselves as serious and I'm willing to take as such, on Hacker News and other IT-related forums, as well as many other venues. "Are people suggesting that new economics are needed? I don't think most people are suggesting that" - a lot of more zealous cryptocurrency supporters are very much on the "this is like nothing we've ever seen before" bandwagon, and/or are explicitly desiring as a goal/hope a massive disruption of economic and financial systems. Just like, if there are N Christians, there are in my experience N+1 Christian belief systems, so it appears to be the case for cryptocurrencies. People more patient than myself are trying to make a dent by tackling those N+1 arguments, hopefully cognizant that for any set of believes P, they'll be presented with those exclaiming set of beliefs Q which obviously has nothing to do with P, those people into P are deluded/irrelevant, and they would never agree with them (unless it offered them temporary advantage:).
EGreg 8y ago
Full disclosure I started the intercoin.org project. So I am speaking from about 2 years experience working on and thinking hard about these problems, such as doublespending and distributed hash timestamping. There have been very interesting PARALLELIZABLE distributed byzantine fault tolerant systems being built, like MaidSAFE and Holochain. They are based around Distributed Hash Tables and have no centralized bottlenecks unlike the miners in proof of work. This is much older than cryptocurrency, we are talking 2002 - Kademlia and Merkle Trees, used in eg BitTorrent. That is the key. Any technology, like a blockchain, where the entire network has to store all the data, scales ridiculously poorly. To coin a phrase, it’s EMBARASSINGLY UNSCALABLE. You can call the opposite of that sharding, but I will call it PARALLELIZABLE. The good news is future is simply to take EXISTING systems (eg the Web) and INCREMENTALLY make them end to end encrypted and make the backend into a DHT where each activity or token is watched by SOME but not all computers. The current Web topology is scalable but TERRIBLE for security, as evidenced by the steady stream of hacks and leaks and untrustworthy behavior by platforms. We throw up our hands like after every school shooting, as if there is nothing we can do. We can, and blockchains are not necessary. More details can be found here, including mathematical results from 2009 on the probability of a successful double-spend attack as a function of how many computers watch each token. The results are perhaps surprising: https://forum.intercoin.org/t/intercoin-technology-the-ledger https://forum.intercoin.org/t/intercoin-technology-the-ledge... Debates about consensus: https://forum.intercoin.org/t/intercoin-technology-consensus https://forum.intercoin.org/t/intercoin-technology-consensus If you want to discuss architecture of DLTs in detail, you are welcome to post in our forum. (The guy arguing in that particular thread is the chief crytographer of Ripple, he signed up to debate ideas of the architecture.) Anyway the short story is that any “blockchain” system with global consensus simply can’t scale, not enough to support actual transactions. Has a single ETHEREUM token been used for its intended purpose in daily transactions? (Cryptokitties is the closest and it nearly brought the whole system to a halt.) It’s all been relegated to speculation on upcoming things, and this is what killed the dream. The exchanges are centralized databases. The actual ledger they post to when you cash out can handle 10 transactions per second regardless of the number of computers on the network. The same is NOT true of almost any other distributed protocol (email, web, etc.)
SquishyPanda23 8y ago
I've been trying to tell people similar things for about a year now. Most people just think I haven't grasped how truly amazing and revolutionary blockchain is. Thanks Arvind for all your work. You're doing some of my favorite work in CS. Every time I hear about an awesome project in privacy/security it turns out you're involved.
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deleted 8y ago
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LysanderSpooner 8y ago
Since my argument was instantaneously flagged and hidden, without any rebuttal, then I am deleting it and replacing it with this: You are all a bunch of uneducated, illiterate dumb fucks, incapable of thinking, programmed NPCs spewing the same tired marxist bullshit that you fuckwits have been spewing since Marx was actually alive. You can't defend your positions so you censor. You're right out of 1984. You hate bitcoin because you can't stop it and its making your ideological enemies rich! So censor all you want, dumb fucks. You're obsolete and you know it. dsafdasfdas
LysanderSpooner 8y ago
Since my argument was instantaneously flagged and hidden, without any rebuttal, then I am deleting it and replacing it with this: You hate bitcoin because you can't stop it and its making your ideological enemies rich! You are all a bunch of uneducated, illiterate dumb fucks, incapable of thinking, programmed NPCs spewing the same tired marxist bullshit that you fuckwits have been spewing since Marx was actually alive. You can't defend your positions so you censor. You're right out of 1984. You hate bitcoin because you can't stop it and its making your ideological enemies rich! So censor all you want, dumb fucks. You're obsolete and you know it.
LysanderSpooner 8y ago
I'm sure you don't even know who Lysander Spooner is, you undeucated marxist hypocrites.

AndrewKemendo 8y ago

As I mentioned in the Twitter thread, my chief criticism of cryptocurrency since the beginning is it's naivete of the history and politics of money. The discussions about economics applied here focus too much on microeconomic rather than macroeconomic arguments. So they end up missing the point entirely which is this: Money isn't a neutral instrument and it's not something that can be decoupled from societal/political concepts and structures. You can evaluate it as though it is neutral, but it has not ever been and will never be a neutral instrument because of the historical tendency for resources to pool and therefore become power centers, among other things. Therefore if you view cryptocurrency as having the primary intention to de-couple commerce from coercive power structures [1], then you'll see immediately the historical problem. Namely, history doesn't favor distributed power, especially not when it can easily be co-opted by the powerful systems in which they rely. In the best case scenario for crypto-utopians, millions of people transact and do commerce on a decentralized currency. In that case, whatever sovereign is most impacted, will then either outlaw commerce by crypto by force or require parity with the sovereign currency and control of the crypto currency through tax payments. This has happened multiple times over the centuries with alt-currencies and they are killed off by the most powerful (see: Most powerful economy/military) organization. Politically, there is nothing different about Bitcoin than there was with the confederate states dollar for example. [1] From the original whitepaper: "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party." https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf

jondubois 8y ago
>> whatever sovereign is most impacted, will then either outlaw commerce by crypto by force or require parity with the sovereign currency and control of the crypto currency through tax payments That's not possible. Even if all the governments of the developed world coordinated to ban cryptocurrencies or impose taxes on them, this will be an opportunity for developing countries to use cryptocurrencies as a competitive advantage to catch up financially.
- throwawaymath 8y ago
  Uh, how?
- sk5t 8y ago
  I suppose you could hitch your wagon to the Marshall Islands economy and see how that goes.
- skywhopper 8y ago
  Very curious about how you foresee "developing countries to use cryptocurrencies as a competitive advantage to catch up financially" working if the cryptocurrencies are unusable in larger economies.
- eeZah7Ux 8y ago
  Why the downvotes? "traditional" cryptocurrencies are more useful in absence of a stable and reliable banking system and political system. As smartphones spread across developing countries, hypothetical non-minable cryptocurrencies that works well on intermittent or local networking might become relevant.
mathnmusic 8y ago
> history doesn't favor distributed power In that case, why do we have ~200 nations instead of a single world government? Clearly, sovereignty matters to groups of people. "Sovereignty of money does not matter to LARGE groups of people" - might be a more defensible argument.

wallacoloo 8y ago

> there are some legitimate criticisms of the Register piece that I cited in the first tweet, but I merely cited it as an example of why I think the hype is calming down. On the one extreme, you've got the evangelicals who insist that everybody will benefit from cryptocurrency today and the only reason it hasn't replaced all of modern finance is because of a conspiracy. These people ignore anyone's attempt at a rational counterargument. On the other extreme you've got people who are very strongly against the idea of cryptocurrencies. They see that tremendous harm can come to individuals who jump into this system unprepared and who aren't aware of the security or privacy implications (for example), because the previous group doesn't admit that there are any. They are also able to see through the greed and the overhype and as a result dismiss Bitcoin for being nothing. The thing to recognize is that these are both extremes. They both contain some truth, but it feels that the public discourse is largely just a fight between the extremes rather than any meaningful discussion. If you want to contribute something meaningful to the discussion, be honest. You have some good points in this followup and in your twitter comments, but your opening line is just blatantly dishonest. > For example, a study of 43 use cases found a 0% success rate So, apparently nobody is buying drugs with cryptocurrency anymore. Seriously! This line is demonstrated to be blatantly misleading if you give it TEN SECONDS of thought. Did you? In truth, I think you did give it thought, and then you dismissed it because it's a good line that supports the way you want things to be and supports the message you want to push. > but I merely cited it as an example of why I think the hype is calming down. You said a misleading thing; own up. Don't downplay it. Nobody expects an apology or anything, but just admit to yourself that it was to some degree dishonest, and think about whether that's really an attribute you want to preserve in your writing and in the way you present yourself, and whether exaggeration which doesn't present itself as such really does anything to advance the discourse.

dhh2106 8y ago
I posted this as a response below but still I find it interesting that OP says public crypto failed because of both fundamental misunderstandings and immature tech (internet trying to compete with newspapers in the 80s). Eventually, the internet was able to compete with newspapers and I think eventually public blockchain will compete with centralized companies. Networks can benefit from economies of scale without the rent seeking bottlenecks of centralized agents. I agree with op that in some cases centralization naturally happens but it doesn't follow that this is true in all cases. On a diff note, has anyone read the Master Switch that OP recommended? Worth reading?

darawk 8y ago

> Economics. Blockchain technologists seem to overestimate the extent to which new insights in economics are needed to understand cryptocurrencies and blockchains, as opposed to applying basic principles from economics and game theory. For example, a recent paper shows that thinking about miners and attackers in terms of stock and flow exposes important limitations of the security of Proof of Work. [1] I learnt of many other such examples at a recent conference on the economics of blockchains. [2] So I think a lot of the "cryptoeconomics" hype is misplaced. Are people suggesting that new economics are needed? I don't think most people are suggesting that. They are suggesting that blockchains allow you to implement economic incentive schemes that weren't previously feasible. > Privacy. It's often taken for granted that decentralized architectures will improve privacy. This seems obvious given everything we've learnt about Facebook, but a better way to think about it is that decentralized systems exchange one set of privacy problems with another. I coauthored a paper a few years ago skeptical of the "decentralization ==> privacy" story in the context of social networks [3], but I think many of the arguments in that paper apply to blockchain/dApps that are being built today. Nobody serious says that decentralization == privacy. However, decentralization does allow you to to implement strong privacy systems, like Monero/Zcash.

NikolaNovak 8y ago
To a certain degree, like with many wildly held beliefs, dispelling biggest cryptocurrency zealotry becomes a whack-a-mole game: of the thousand disprovable beliefs, any given person presented with any given disproof will claim "Well I certainly don't believe that, so you've not done anything against my specific (possibly shifting) 17 beliefs". In particular, re: "Nobody serious says that decentralization == privacy" -- this is presented as tautology on regular basis, by people that certainly hold themselves as serious and I'm willing to take as such, on Hacker News and other IT-related forums, as well as many other venues. "Are people suggesting that new economics are needed? I don't think most people are suggesting that" - a lot of more zealous cryptocurrency supporters are very much on the "this is like nothing we've ever seen before" bandwagon, and/or are explicitly desiring as a goal/hope a massive disruption of economic and financial systems. Just like, if there are N Christians, there are in my experience N+1 Christian belief systems, so it appears to be the case for cryptocurrencies. People more patient than myself are trying to make a dent by tackling those N+1 arguments, hopefully cognizant that for any set of believes P, they'll be presented with those exclaiming set of beliefs Q which obviously has nothing to do with P, those people into P are deluded/irrelevant, and they would never agree with them (unless it offered them temporary advantage:).

EGreg 8y ago

Full disclosure I started the intercoin.org project. So I am speaking from about 2 years experience working on and thinking hard about these problems, such as doublespending and distributed hash timestamping. There have been very interesting PARALLELIZABLE distributed byzantine fault tolerant systems being built, like MaidSAFE and Holochain. They are based around Distributed Hash Tables and have no centralized bottlenecks unlike the miners in proof of work. This is much older than cryptocurrency, we are talking 2002 - Kademlia and Merkle Trees, used in eg BitTorrent. That is the key. Any technology, like a blockchain, where the entire network has to store all the data, scales ridiculously poorly. To coin a phrase, it’s EMBARASSINGLY UNSCALABLE. You can call the opposite of that sharding, but I will call it PARALLELIZABLE. The good news is future is simply to take EXISTING systems (eg the Web) and INCREMENTALLY make them end to end encrypted and make the backend into a DHT where each activity or token is watched by SOME but not all computers. The current Web topology is scalable but TERRIBLE for security, as evidenced by the steady stream of hacks and leaks and untrustworthy behavior by platforms. We throw up our hands like after every school shooting, as if there is nothing we can do. We can, and blockchains are not necessary. More details can be found here, including mathematical results from 2009 on the probability of a successful double-spend attack as a function of how many computers watch each token. The results are perhaps surprising: https://forum.intercoin.org/t/intercoin-technology-the-ledger https://forum.intercoin.org/t/intercoin-technology-the-ledge... Debates about consensus: https://forum.intercoin.org/t/intercoin-technology-consensus https://forum.intercoin.org/t/intercoin-technology-consensus If you want to discuss architecture of DLTs in detail, you are welcome to post in our forum. (The guy arguing in that particular thread is the chief crytographer of Ripple, he signed up to debate ideas of the architecture.) Anyway the short story is that any “blockchain” system with global consensus simply can’t scale, not enough to support actual transactions. Has a single ETHEREUM token been used for its intended purpose in daily transactions? (Cryptokitties is the closest and it nearly brought the whole system to a halt.) It’s all been relegated to speculation on upcoming things, and this is what killed the dream. The exchanges are centralized databases. The actual ledger they post to when you cash out can handle 10 transactions per second regardless of the number of computers on the network. The same is NOT true of almost any other distributed protocol (email, web, etc.)

SquishyPanda23 8y ago

I've been trying to tell people similar things for about a year now. Most people just think I haven't grasped how truly amazing and revolutionary blockchain is. Thanks Arvind for all your work. You're doing some of my favorite work in CS. Every time I hear about an awesome project in privacy/security it turns out you're involved.

deleted 8y ago

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deleted 8y ago

[deleted]

LysanderSpooner 8y ago

Since my argument was instantaneously flagged and hidden, without any rebuttal, then I am deleting it and replacing it with this: You are all a bunch of uneducated, illiterate dumb fucks, incapable of thinking, programmed NPCs spewing the same tired marxist bullshit that you fuckwits have been spewing since Marx was actually alive. You can't defend your positions so you censor. You're right out of 1984. You hate bitcoin because you can't stop it and its making your ideological enemies rich! So censor all you want, dumb fucks. You're obsolete and you know it. dsafdasfdas

LysanderSpooner 8y ago

Since my argument was instantaneously flagged and hidden, without any rebuttal, then I am deleting it and replacing it with this: You hate bitcoin because you can't stop it and its making your ideological enemies rich! You are all a bunch of uneducated, illiterate dumb fucks, incapable of thinking, programmed NPCs spewing the same tired marxist bullshit that you fuckwits have been spewing since Marx was actually alive. You can't defend your positions so you censor. You're right out of 1984. You hate bitcoin because you can't stop it and its making your ideological enemies rich! So censor all you want, dumb fucks. You're obsolete and you know it.

LysanderSpooner 8y ago

I'm sure you don't even know who Lysander Spooner is, you undeucated marxist hypocrites.