6 ms·

The crypto revolution is failing

25 points by chewz 5y ago

shapefrog 5y ago
Crypto is a solution looking for a problem.
- 0xdeadb00f 5y ago
  I'm not a fan of the whole crypto hype. But I disagree. I think crypto in general is an imperfect solution to a variety of different problems.
  - qeternity 5y ago
    > I think crypto in general is an imperfect solution to a variety of different problems. Would you mind enumerating what these problems are, and how blockchain solves them?
    - bob229 5y ago
      There is no blockchain use case that is not superior when the blockchain element is removed. It is a cult
    - nextaccountic 5y ago
      Spending money on the Internet without asking permission from governments and corporations. Like cash. Or, in crypto lingo, having a permissionless payment system. Any other payment system is "permissioned". You need permission from some or many entities to make a bank account, a paypal account, or anything else. You don't need permission to use cash. If you have a dollar bill in hand, you can go anywhere and spend it. You don't need an account at any financial corporation, you can just spend it. And crypto can be like that. (currently most, but not all cryptocurrencies have exorbitant fees, so they are an imperfect solution for this problem, but they are indeed a solution)
      - shapefrog 5y ago
        > You don't need permission to use cash Really? The one dollar bill you can go anywhere and spend has this ability due to legislation, or as you maye describe, permission from the government. It has the Seal of the Federal Reserve and The Treasury Department on it. In turn these institutions can withdraw at any point in time these dollar bills from circulation rendering them worthless. With crypto, you need permission from the blockchain.
        nextaccountic 5y ago
        People don't specifically care about the government when they accept cash. It's fungible, they just accept and pass it along. The US government has control of the monetary policy (and can thus tank the currency if they wish) but it has no control on how you spend a specific bill you carry.
        shapefrog 5y ago
        And the reason it is fungible is that it has the backing of the US Government, US Treasury and Federal Reserve. People might not 'care' about the govenement when they use cash, but try and pay with something that doesnt have some backing - say for example small rocks. They too are fungible, you can buy bags of them at any good hardware store. They are decentralised, trustless, effectively untraceable and could in theory be exchanged for goods and services, if both parties were willing.
        nextaccountic 5y ago
        About needing permission from the blockchain.. the challenge is exactly how to make a permissionless, non-censorable blockchain! Indeed in many (but not all) cryptocurrencies, if the miners collude they can censor a given transaction they don't like[0]. This is pretty bad, but at least it can't happen in secret: if and when a transaction is censored, we can always point to a specific transaction in mempool that is getting ignored. Privacy coins like Zcash and Monero makes it infeasible to track who is transacting with who, and thus can only be completely shut down or not at all. At the moment, they are the best bet for people that want a permissionless digital currency. A lot of work in the crypto space is being done to tackle this problem[1], and most people in this space reckons this as a real problem. It's not fully solved, but this wasn't claimed: as said before, cryptocurrencies are indeed incomplete solutions. [0] In Bitcoin there's a group of miners that is attempting to censor transactions based on US law https://www.coindesk.com/tech/2021/05/07/marathon-miners-have-started-censoring-bitcoin-transactions-heres-what-that-means/ https://www.coindesk.com/tech/2021/05/07/marathon-miners-hav... - and they are willing to give up a lot of money in the process. So far they control less than 50% of the network so they can't really enforce their views. And all of this just means that Bitcoin is indeed censorable. [1] Here's 6 yers old blog post about this on Ethereum https://blog.ethereum.org/2015/06/06/the-problem-of-censorship/ https://blog.ethereum.org/2015/06/06/the-problem-of-censorsh... - with censorship, Bitcoin might ban some drug dealers from transacting; but Ethereum, being a smart contract platform, would be totally worthless to enforce contracts. So they have an incentive to solve this.
    - 0xdeadb00f 5y ago
      The problems I'm thinking of are general ones like: - Transaction cost and/or speed - Security - Anonymous/private payments - Avoiding censorship Whether or not crypto/blockchain solves these is entirely dependant on the cryptocurrency we're talking about, but I will say no currency comes close to solving all of these at once.
      - shapefrog 5y ago
        > Transaction cost and/or speed - Security These two, in the context of crypto are incompatible. If you have high security, it means lower speed, higher cost. If you want high speed, low cost, it means lower security. > Anonymous/private payments - Avoiding censorship Yes of course there is a single crypto that has these features, the other 99.99% do not, and by the very design, can not. If these were the features being designed for, crypto would have taken an entirely differnt design path. If these were the problems trying to be solved, they sure went about doing it the hard way. Rather than assuming the motivations, I prefer just to take the motivations that were stated at the time; "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution." I believe that is the problem they were solving for, not any of the others suggested.
  - jqpabc123 5y ago
    The primary problem begging to be solved is instantaneous transfer of funds at near zero cost. It's insane that a computerized transaction currently consumes 2-3% of amount. This is an unnecessary drag on the entire world economy. Not only is Bitcoin no help, it actually makes the problem worse. The perfect solution to this could be a virtual dollar --- which I suspect is where the Fed is headed. A real working solution would obsolete existing crypto overnight for just about everything except maybe money laundering.
    - ostenning 5y ago
      That may be the primary problem for the west, but for many poorer nations crypto could be used to rescue the population from political corruption and economic neglect. Cryptocurrencies undoubtedly do have a lot of problems though. PoW will be phased out from Etherium soon which is a good start.
      - iudqnolq 5y ago
        Or they could just use the digital USD like they use the physical USD right now.
Havoc 5y ago
That seems a little overdramatic. Notice how all the companies named as betraying the crypto revolution are the ones that by necessity of their role must have one foot in the fiat world. (USDC, coinbase). And thus partially at least need to play by those rules. That was always going to be necessary unless you wanted crypto to exist in a vacuum. Plus all that money fueling the current crypto success has to get onto the chain somehow
- megameter 5y ago
  In my own assessment, fiat exchanges are just the tip of the crypto iceberg. None of the cozy corporate firms want to go near privacy coins, to name one example. They know that those don't fit into the plan, so they're ignored. But so long as you can exit their exchange, there's a path towards trading them - and therefore a problem for regulators akin to digital media piracy. Bitcoin never set out with the goal of being the currency that literally everyone uses - it had in mind the cypherpunk framing of being underground by default. So it's just totally unsurprising that upon its adoption by the existing power structure, alternatives would pop up. That's not a failing, just a step towards an arms race.
qeternity 5y ago
> Right now, it seems inconceivable that the financial elites would bail out the crypto market. But as the bubble gets bigger and becomes tied to Wall Street through its investments, the likelihood increases. This is really all one needs to understand in the current cycle. It's pretty much a foregone conclusion that Tether and ilk aren't a bunch of angels who can be trusted. But regulators are slow to act, and their gambit appears to grow so large, and have enough Average Joes sucked in, that they can't be brought down, due to populist pressure.
tellersid 5y ago
The article talking about Tether: "don’t be surprised when the Federal Reserve comes to its rescue." This is completely delusional. As if the Fed is going to hold Tether on its balance sheet to stabilize the price in some crisis event? The lack of correlation with the broader markets is because of all these crypto Three-card Monte games happening that make the space seem much larger than it is. "500 billion" gets shaved off the "market cap" and the broader markets don't even notice.

25 points by chewz 5y ago

shapefrog 5y ago

Crypto is a solution looking for a problem.

0xdeadb00f 5y ago
I'm not a fan of the whole crypto hype. But I disagree. I think crypto in general is an imperfect solution to a variety of different problems.
- qeternity 5y ago
  > I think crypto in general is an imperfect solution to a variety of different problems. Would you mind enumerating what these problems are, and how blockchain solves them?
  - bob229 5y ago
    There is no blockchain use case that is not superior when the blockchain element is removed. It is a cult
  - nextaccountic 5y ago
    Spending money on the Internet without asking permission from governments and corporations. Like cash. Or, in crypto lingo, having a permissionless payment system. Any other payment system is "permissioned". You need permission from some or many entities to make a bank account, a paypal account, or anything else. You don't need permission to use cash. If you have a dollar bill in hand, you can go anywhere and spend it. You don't need an account at any financial corporation, you can just spend it. And crypto can be like that. (currently most, but not all cryptocurrencies have exorbitant fees, so they are an imperfect solution for this problem, but they are indeed a solution)
    - shapefrog 5y ago
      > You don't need permission to use cash Really? The one dollar bill you can go anywhere and spend has this ability due to legislation, or as you maye describe, permission from the government. It has the Seal of the Federal Reserve and The Treasury Department on it. In turn these institutions can withdraw at any point in time these dollar bills from circulation rendering them worthless. With crypto, you need permission from the blockchain.
      - nextaccountic 5y ago
        People don't specifically care about the government when they accept cash. It's fungible, they just accept and pass it along. The US government has control of the monetary policy (and can thus tank the currency if they wish) but it has no control on how you spend a specific bill you carry.
        shapefrog 5y ago
        And the reason it is fungible is that it has the backing of the US Government, US Treasury and Federal Reserve. People might not 'care' about the govenement when they use cash, but try and pay with something that doesnt have some backing - say for example small rocks. They too are fungible, you can buy bags of them at any good hardware store. They are decentralised, trustless, effectively untraceable and could in theory be exchanged for goods and services, if both parties were willing.
      - nextaccountic 5y ago
        About needing permission from the blockchain.. the challenge is exactly how to make a permissionless, non-censorable blockchain! Indeed in many (but not all) cryptocurrencies, if the miners collude they can censor a given transaction they don't like[0]. This is pretty bad, but at least it can't happen in secret: if and when a transaction is censored, we can always point to a specific transaction in mempool that is getting ignored. Privacy coins like Zcash and Monero makes it infeasible to track who is transacting with who, and thus can only be completely shut down or not at all. At the moment, they are the best bet for people that want a permissionless digital currency. A lot of work in the crypto space is being done to tackle this problem[1], and most people in this space reckons this as a real problem. It's not fully solved, but this wasn't claimed: as said before, cryptocurrencies are indeed incomplete solutions. [0] In Bitcoin there's a group of miners that is attempting to censor transactions based on US law https://www.coindesk.com/tech/2021/05/07/marathon-miners-have-started-censoring-bitcoin-transactions-heres-what-that-means/ https://www.coindesk.com/tech/2021/05/07/marathon-miners-hav... - and they are willing to give up a lot of money in the process. So far they control less than 50% of the network so they can't really enforce their views. And all of this just means that Bitcoin is indeed censorable. [1] Here's 6 yers old blog post about this on Ethereum https://blog.ethereum.org/2015/06/06/the-problem-of-censorship/ https://blog.ethereum.org/2015/06/06/the-problem-of-censorsh... - with censorship, Bitcoin might ban some drug dealers from transacting; but Ethereum, being a smart contract platform, would be totally worthless to enforce contracts. So they have an incentive to solve this.
  - 0xdeadb00f 5y ago
    The problems I'm thinking of are general ones like: - Transaction cost and/or speed - Security - Anonymous/private payments - Avoiding censorship Whether or not crypto/blockchain solves these is entirely dependant on the cryptocurrency we're talking about, but I will say no currency comes close to solving all of these at once.
    - shapefrog 5y ago
      > Transaction cost and/or speed - Security These two, in the context of crypto are incompatible. If you have high security, it means lower speed, higher cost. If you want high speed, low cost, it means lower security. > Anonymous/private payments - Avoiding censorship Yes of course there is a single crypto that has these features, the other 99.99% do not, and by the very design, can not. If these were the features being designed for, crypto would have taken an entirely differnt design path. If these were the problems trying to be solved, they sure went about doing it the hard way. Rather than assuming the motivations, I prefer just to take the motivations that were stated at the time; "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution." I believe that is the problem they were solving for, not any of the others suggested.
- jqpabc123 5y ago
  The primary problem begging to be solved is instantaneous transfer of funds at near zero cost. It's insane that a computerized transaction currently consumes 2-3% of amount. This is an unnecessary drag on the entire world economy. Not only is Bitcoin no help, it actually makes the problem worse. The perfect solution to this could be a virtual dollar --- which I suspect is where the Fed is headed. A real working solution would obsolete existing crypto overnight for just about everything except maybe money laundering.
  - ostenning 5y ago
    That may be the primary problem for the west, but for many poorer nations crypto could be used to rescue the population from political corruption and economic neglect. Cryptocurrencies undoubtedly do have a lot of problems though. PoW will be phased out from Etherium soon which is a good start.
    - iudqnolq 5y ago
      Or they could just use the digital USD like they use the physical USD right now.

Havoc 5y ago

That seems a little overdramatic. Notice how all the companies named as betraying the crypto revolution are the ones that by necessity of their role must have one foot in the fiat world. (USDC, coinbase). And thus partially at least need to play by those rules. That was always going to be necessary unless you wanted crypto to exist in a vacuum. Plus all that money fueling the current crypto success has to get onto the chain somehow

megameter 5y ago
In my own assessment, fiat exchanges are just the tip of the crypto iceberg. None of the cozy corporate firms want to go near privacy coins, to name one example. They know that those don't fit into the plan, so they're ignored. But so long as you can exit their exchange, there's a path towards trading them - and therefore a problem for regulators akin to digital media piracy. Bitcoin never set out with the goal of being the currency that literally everyone uses - it had in mind the cypherpunk framing of being underground by default. So it's just totally unsurprising that upon its adoption by the existing power structure, alternatives would pop up. That's not a failing, just a step towards an arms race.

qeternity 5y ago

> Right now, it seems inconceivable that the financial elites would bail out the crypto market. But as the bubble gets bigger and becomes tied to Wall Street through its investments, the likelihood increases. This is really all one needs to understand in the current cycle. It's pretty much a foregone conclusion that Tether and ilk aren't a bunch of angels who can be trusted. But regulators are slow to act, and their gambit appears to grow so large, and have enough Average Joes sucked in, that they can't be brought down, due to populist pressure.

tellersid 5y ago

The article talking about Tether: "don’t be surprised when the Federal Reserve comes to its rescue." This is completely delusional. As if the Fed is going to hold Tether on its balance sheet to stabilize the price in some crisis event? The lack of correlation with the broader markets is because of all these crypto Three-card Monte games happening that make the space seem much larger than it is. "500 billion" gets shaved off the "market cap" and the broader markets don't even notice.