7 ms·

The disadvantage compared to Bitcoin is that it’s hardly meaningfully different from using Paypal or something.

by wyager 6y ago

helen___keller 6y ago
How do you figure?
- capableweb 6y ago
  In short, the suggested method by Chaum requires a trusted 3rd party (bank). The topmost invention of Bitcoin is that it requires no trusted 3rd party.
  - 1e-9 6y ago
    > it requires no trusted 3rd party Or, at least not the same 3rd parties. Instead, it requires trusting a much larger host of other 3rd parties, many of which are anonymous, and likely none of which will provide recourse if you lose your bitcoin due to their failure or malicious intent.[1] Bitcoin represents a shifting of trust; not an elimination of trust. That's not to say there is no value. It's just that there are significant risks involving trust that are overlooked by most holders. [1] https://www.schneier.com/blog/archives/2019/02/blockchain_and_.html https://www.schneier.com/blog/archives/2019/02/blockchain_an...
    - shawnz 6y ago
      I wouldn't say those risks are overlooked by most holders, rather that risk profile is exactly the reason why anyone would want to use cryptocurrency to begin with. Perhaps some hype artists would claim otherwise, but they shouldn't be defining how you view the technology itself.
      - ineedasername 6y ago
        Yes, I think it's important to distinguish between the technology & its current use case. The technology is promising (though in bitcoin, stagnant). The primary use case right now seems to be financial speculation. That would have to change in order for any crypto currency to really gain any sort of mainstream traction as an alternative to traditional cash or credit (banks).
    - rogueSkib 6y ago
      I don't believe this is accurate. As trust is spread across the network to an increasing number of people running nodes, the trust assigned to any individual participant approaches zero. This can be observed in the resilience of the network, as it self-heals against any attacker or alternative fork from the consensus. Bitcoin has democratically ossified into a store-of-value with absolute scarcity, deterministic monetary policy, and a priority on decentralization. It's extremely unlikely that those attributes will be compromised.
      - 1e-9 6y ago
        > As trust is spread across the network to an increasing number of people running nodes, the trust assigned to any individual participant approaches zero. If only we knew this was true. An increase in the number of people running nodes does not guarantee that the maximum trust assigned to any individual participant approaches zero. What is the size of the largest Bitcoin whale? What is the size of the largest Bitcoin cartel? How do you know that the share of the largest Bitcoin whale or cartel isn’t increasing? What prevents China from deciding to eliminate the Bitcoin threat to its control by taking over the Chinese miners and launching a 51% attack? Even if you are willing to believe that trust is well distributed across many independent entities, you still need to have greater trust in your own security and IT skills. When your wallet is hacked or you lose your credentials, there’s no number to call to recover your Bitcoin. Bitcoin still requires significant trust, which is often overlooked.
        wyager 6y ago
        > What prevents China from deciding to eliminate the Bitcoin threat to its control by taking over the Chinese miners and launching a 51% attack? China isn’t stupid. If they 51% attacked Bitcoin (completely contrary to their self interest), everyone would switch to a different hash algorithm and now China has burned tens of billions of capital, hurt their reputation, and achieved nothing.
        1e-9 6y ago
        You trust China to not attack Bitcoin because you consider it against their self interest. China just launched its own digital currency.[1] “In order to protect our currency sovereignty and legal currency status, we have to plan ahead,” said Mu Changchun, who is shepherding the project at the People’s Bank of China. China isn’t the only major power that needs to monitor transactions and maintain control of its money supply. There are plenty of capable parties that could launch a 51% attack and they’re unlikely to take responsibility for it afterwards, so reputation is hardly a factor. The fact that another hash algorithm could be used later doesn’t matter. A government doesn’t stop defending its interests just because threats change. Certainly, there may never be a 51% attack, but it will not be surprising if it happens. [1] https://www.wsj.com/articles/china-creates-its-own-digital-currency-a-first-for-major-economy-11617634118 https://www.wsj.com/articles/china-creates-its-own-digital-c...
    - wyager 6y ago
      You don’t have to trust a “host of third parties” - you merely have to predict that a majority of third parties will not economically sabotage themselves.
  - betterunix2 6y ago
    ...and to achieve that, Bitcoin has a backwards approach to security where the honest parties must work harder than the attackers, which ultimately means that nobody can confidently say that the system is secure unless a majority of energy produced on Earth is being devoted to honest parties mining Bitcoin. It is also wrong to suggest that the bank in Chaum's system is a "trusted third party," as if the bank can unilaterally break any security property of the system. In fact the bank in an ecash system is very much constrained. The bank cannot violate a user's privacy (in the sense of linking a user's transactions) unless the user attempts to spend the same coin twice. The bank's ability to claim that a user was trying to conduct some kind of double-spending attack is also constrained (the no-frame-ups property) so that a user must actually attempt to double spend a coin for the bank to produce evidence of such a crime. It is also possible to create a distributed trust model where several parties must jointly issue the coins (threshold blind signatures). Unlike Bitcoin, the security model of ecash is well-defined and follows the basic philosophy of cryptographic security: the computational difficult of attacking the system grows exponentially with the computational work performed by honest parties. Put another way, the energy expended in an ecash system will grow linearly with the number of transactions being performed in the system, and the incentive is to reduce the energy consumption by finding more efficient ways to process transactions. If the cost of a well-defined, rigorous security model, a system that incentivizes minimizing energy consumption, and features that Bitcoin can never actually support (e.g. direct peer-to-peer payments that do not require an Internet connection or any communication with any third parties), is to have a central bank or consortium of banks that issues the coins, you can count me in.
    - billytetrud 6y ago
      > unless a majority of energy produced on Earth is being devoted to honest parties mining Bitcoin. Nope, try again
      - betterunix2 6y ago
        How do you know when enough computational effort / energy has been devoted to mining i.e. how do you know that there is no attacker out there who is working harder than all the honest users combined?
ulrikrasmussen 6y ago
What do you mean? It's not like PayPal because the sender is actually anonymous (assuming that exact amounts are hidden by always withdrawing fixed size coins).
- ineedasername 6y ago
  Bitcoin isn't quite anonymous, as a variety of criminals have found out. Cash is anonymous: there is no unique identifier associated either with the transaction or the parties to the transaction. Bitcoin on the other hand is, at best, pseudonymous. This is particularly problematic because it gives information about true identities when the owner of coins wants to spend it in any way on anything where bitcoin is not an accepted form of payment. Then, the "off ramp" becomes much more closely associated with the owner of the coins. Heck, even in a world where on-ramps & off-ramps to bitcoin weren't necessary because everyone used bitcoin this would still be problematic: An address suspected of holding coins obtained through illegal enterprise pays a car dealership in bitcoins for a new car, and the authorities simply go to the dealership with a warrant and say "tells us everything you possibly can about that transaction and the people involved in the purchase & delivery of that vehicle".
  - ziml77 6y ago
    And figuring out those addresses can come from finding another criminal address. By its whole design Bitcoin lets everyone see which wallets have transacted with each other.
    - ineedasername 6y ago
      Precisely. I'm not saying it's a bad thing, but it really doesn't mesh with the common bitcoin dogma of a virtual currency free of the ability of governments to interfere with it. There's nothing stopping governments from shutting it down either. The US by itself could practically take it down alone (or any other crypto) by banning US banks from working with it, or from working with any non-US bank that that deals with bitcoin. No need for a 51% attack, no need to track electricity usage to locate potential miners, just a simple piece of legislation. Or even simpler, an executive order issuing the same ban, stating that bitcoin enables significant financial activity by terrorists & criminals.

The disadvantage compared to Bitcoin is that it’s hardly meaningfully different from using Paypal or something.

by wyager 6y ago

The disadvantage compared to Bitcoin is that it’s hardly meaningfully different from using Paypal or something.

helen___keller 6y ago

How do you figure?

capableweb 6y ago
In short, the suggested method by Chaum requires a trusted 3rd party (bank). The topmost invention of Bitcoin is that it requires no trusted 3rd party.
- 1e-9 6y ago
  > it requires no trusted 3rd party Or, at least not the same 3rd parties. Instead, it requires trusting a much larger host of other 3rd parties, many of which are anonymous, and likely none of which will provide recourse if you lose your bitcoin due to their failure or malicious intent.[1] Bitcoin represents a shifting of trust; not an elimination of trust. That's not to say there is no value. It's just that there are significant risks involving trust that are overlooked by most holders. [1] https://www.schneier.com/blog/archives/2019/02/blockchain_and_.html https://www.schneier.com/blog/archives/2019/02/blockchain_an...
  - shawnz 6y ago
    I wouldn't say those risks are overlooked by most holders, rather that risk profile is exactly the reason why anyone would want to use cryptocurrency to begin with. Perhaps some hype artists would claim otherwise, but they shouldn't be defining how you view the technology itself.
    - ineedasername 6y ago
      Yes, I think it's important to distinguish between the technology & its current use case. The technology is promising (though in bitcoin, stagnant). The primary use case right now seems to be financial speculation. That would have to change in order for any crypto currency to really gain any sort of mainstream traction as an alternative to traditional cash or credit (banks).
  - rogueSkib 6y ago
    I don't believe this is accurate. As trust is spread across the network to an increasing number of people running nodes, the trust assigned to any individual participant approaches zero. This can be observed in the resilience of the network, as it self-heals against any attacker or alternative fork from the consensus. Bitcoin has democratically ossified into a store-of-value with absolute scarcity, deterministic monetary policy, and a priority on decentralization. It's extremely unlikely that those attributes will be compromised.
    - 1e-9 6y ago
      > As trust is spread across the network to an increasing number of people running nodes, the trust assigned to any individual participant approaches zero. If only we knew this was true. An increase in the number of people running nodes does not guarantee that the maximum trust assigned to any individual participant approaches zero. What is the size of the largest Bitcoin whale? What is the size of the largest Bitcoin cartel? How do you know that the share of the largest Bitcoin whale or cartel isn’t increasing? What prevents China from deciding to eliminate the Bitcoin threat to its control by taking over the Chinese miners and launching a 51% attack? Even if you are willing to believe that trust is well distributed across many independent entities, you still need to have greater trust in your own security and IT skills. When your wallet is hacked or you lose your credentials, there’s no number to call to recover your Bitcoin. Bitcoin still requires significant trust, which is often overlooked.
      - wyager 6y ago
        > What prevents China from deciding to eliminate the Bitcoin threat to its control by taking over the Chinese miners and launching a 51% attack? China isn’t stupid. If they 51% attacked Bitcoin (completely contrary to their self interest), everyone would switch to a different hash algorithm and now China has burned tens of billions of capital, hurt their reputation, and achieved nothing.
        1e-9 6y ago
        You trust China to not attack Bitcoin because you consider it against their self interest. China just launched its own digital currency.[1] “In order to protect our currency sovereignty and legal currency status, we have to plan ahead,” said Mu Changchun, who is shepherding the project at the People’s Bank of China. China isn’t the only major power that needs to monitor transactions and maintain control of its money supply. There are plenty of capable parties that could launch a 51% attack and they’re unlikely to take responsibility for it afterwards, so reputation is hardly a factor. The fact that another hash algorithm could be used later doesn’t matter. A government doesn’t stop defending its interests just because threats change. Certainly, there may never be a 51% attack, but it will not be surprising if it happens. [1] https://www.wsj.com/articles/china-creates-its-own-digital-currency-a-first-for-major-economy-11617634118 https://www.wsj.com/articles/china-creates-its-own-digital-c...
  - wyager 6y ago
    You don’t have to trust a “host of third parties” - you merely have to predict that a majority of third parties will not economically sabotage themselves.
- betterunix2 6y ago
  ...and to achieve that, Bitcoin has a backwards approach to security where the honest parties must work harder than the attackers, which ultimately means that nobody can confidently say that the system is secure unless a majority of energy produced on Earth is being devoted to honest parties mining Bitcoin. It is also wrong to suggest that the bank in Chaum's system is a "trusted third party," as if the bank can unilaterally break any security property of the system. In fact the bank in an ecash system is very much constrained. The bank cannot violate a user's privacy (in the sense of linking a user's transactions) unless the user attempts to spend the same coin twice. The bank's ability to claim that a user was trying to conduct some kind of double-spending attack is also constrained (the no-frame-ups property) so that a user must actually attempt to double spend a coin for the bank to produce evidence of such a crime. It is also possible to create a distributed trust model where several parties must jointly issue the coins (threshold blind signatures). Unlike Bitcoin, the security model of ecash is well-defined and follows the basic philosophy of cryptographic security: the computational difficult of attacking the system grows exponentially with the computational work performed by honest parties. Put another way, the energy expended in an ecash system will grow linearly with the number of transactions being performed in the system, and the incentive is to reduce the energy consumption by finding more efficient ways to process transactions. If the cost of a well-defined, rigorous security model, a system that incentivizes minimizing energy consumption, and features that Bitcoin can never actually support (e.g. direct peer-to-peer payments that do not require an Internet connection or any communication with any third parties), is to have a central bank or consortium of banks that issues the coins, you can count me in.
  - billytetrud 6y ago
    > unless a majority of energy produced on Earth is being devoted to honest parties mining Bitcoin. Nope, try again
    - betterunix2 6y ago
      How do you know when enough computational effort / energy has been devoted to mining i.e. how do you know that there is no attacker out there who is working harder than all the honest users combined?

ulrikrasmussen 6y ago

What do you mean? It's not like PayPal because the sender is actually anonymous (assuming that exact amounts are hidden by always withdrawing fixed size coins).

ineedasername 6y ago
Bitcoin isn't quite anonymous, as a variety of criminals have found out. Cash is anonymous: there is no unique identifier associated either with the transaction or the parties to the transaction. Bitcoin on the other hand is, at best, pseudonymous. This is particularly problematic because it gives information about true identities when the owner of coins wants to spend it in any way on anything where bitcoin is not an accepted form of payment. Then, the "off ramp" becomes much more closely associated with the owner of the coins. Heck, even in a world where on-ramps & off-ramps to bitcoin weren't necessary because everyone used bitcoin this would still be problematic: An address suspected of holding coins obtained through illegal enterprise pays a car dealership in bitcoins for a new car, and the authorities simply go to the dealership with a warrant and say "tells us everything you possibly can about that transaction and the people involved in the purchase & delivery of that vehicle".
- ziml77 6y ago
  And figuring out those addresses can come from finding another criminal address. By its whole design Bitcoin lets everyone see which wallets have transacted with each other.
  - ineedasername 6y ago
    Precisely. I'm not saying it's a bad thing, but it really doesn't mesh with the common bitcoin dogma of a virtual currency free of the ability of governments to interfere with it. There's nothing stopping governments from shutting it down either. The US by itself could practically take it down alone (or any other crypto) by banning US banks from working with it, or from working with any non-US bank that that deals with bitcoin. No need for a 51% attack, no need to track electricity usage to locate potential miners, just a simple piece of legislation. Or even simpler, an executive order issuing the same ban, stating that bitcoin enables significant financial activity by terrorists & criminals.