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What I'm trying to figure out about blockchain in general is how people think it will avoid the inevitable consolidation that efficient economies drive towards.

What I'm trying to figure out about blockchain in general is how people think it will avoid the inevitable consolidation that efficient economies drive towards. A few examples: - In the early days of the automobile there were hundreds of car companies. Now there are essentially what, 10 worldwide? - In the early days of personal computing there were hundreds of competing platforms, PC brands, etc. Now there are essentially what, 10 worldwide? - In the early days of the internet there were hundreds (thousands?) of dial-up and last mile internet providers (sometimes literally some person in your neighborhood with a T1 and modems in a garage). Now there are what, 10 in the US? - In the early days of the internet there were hundreds of web hosting companies, e-mail providers, etc. Now almost all of the internet runs on what, three? These examples go on and on (mobile devices, cell providers, pretty much anything and everything). Point being it's extremely unlikely (to me) that as the immutable blockchain ledgers all of this is built on grow endlessly (storage, compute, bandwidth, etc) and attempt to scale to any meaningful application, transaction rate, etc beyond the toy level it's at now "decentralized" will almost certainly turn into a handful of power players that can bring the advantages offered by massive economies of scale.

_8j50 5y ago
I don't agree with some of your examples but setting that aside, all of what you mentioned are economic products and services. Crypto is neither. Without crypto you have cash, credit card, debit card, prepaid card, gift card, paypal, ecash, applepay, western union, money gram, epay and a myriad of other non-crypto payment methods that are based on central bank currency. They did not consolidate. Or look at currencies in general, every country has one by design. Also decentralized does not mean that there are no hubs where decisins and power is concentrated, it simply means there is no one center. Much like how people say the US is democratic because you have two parties to choose from instead of just one like China. I do think perect decentalization is egalitarian in that all important decisions are 51% majority consensus with every vote having equal weight. However most practical decentralized systems are distributed with the capacity to be fully decentralized. Crypto currencies that will last long term will reflect a demand for specific payment needs. To use your example, we have lesser number of PC makers because they all make similar varieties of PCs. With payment systems you have ACH,SWIFT,card payment (instant), cash (anonymous),etc... there will be cryptocurrencies that will reflect popular payment and speculative investment needs for the long term. Heck, I would even speculate in a crypto lottery!
- kkielhofner 5y ago
  I'm aware I'm talking very broadly and generally about the "majority" and in many cases "overwhelming majority" of these cases. I know some of my examples are hyperbolic and a little "loose". I've been meaning to research and document actual numbers and examples to either validate or invalidate my take. Now that I'm really thinking about it because of your thoughtful reply I just might! That said I think banking and payments are further examples. The vast, vast majority of banking and payment activity happens through a relatively tiny number of banks and payment processing networks. The US dollar is used officially and unofficially in many other countries. Europe went to the Euro. As I understand it much of worldwide settlement internationally happens in the US dollar which is also more-or-less the official worldwide reserve currency. Bitcoin currently does about 500k transactions/day worldwide (as best as I can tell). That's probably roughly the number of daily transactions for a mid-sized US city. At a future point in time where a significant number of people are transacting in cryptocurrency multiple times per day an immutable blockchain ledger with no upper bound on growth will swell to astronomical size when a significant number of people are transacting with it multiple times per day. Now your $3 Starbucks purchase is recorded for eternity and replicated across hundreds or thousands of nodes?
  - _8j50 5y ago
    > The vast, vast majority of banking and payment activity happens through a relatively tiny number of banks and payment processing networks. Not by choice of merchants or connsumers, does not reflect demand but incentives > The US dollar is used officially and unofficially in many other countries. Kind if like BTC? > Now your $3 Starbucks purchase is recorded for eternity and replicated across hundreds or thousands of nodes? Great point, hence the demand there created zcash and monero. I would say BTC is akin to ACH and SWIFT not credit cards or cash payment. Whatever the limits of exiting currencies is, it only opens up room for demand. Heck, you can even have central bank crypto (as JPM and China are trying). There is hardly anything new about crypto other than specifics of implementation. BTC does not define or reflect upon all crypto. Currency is not a new concept, using a distributed ledger is new-ish and using proof of work, bandwidth, storage,etc... while these backing value stores are new, having precious metals, livestock, land, etc... as a backing value store is not that different, crypto is just an adaptation of having something difficult to obtain or of value to others and using it as a value store.
betwixthewires 5y ago
I'm not a web3 evangelist but I feel the need to say, all of these examples are the result of incentives. Dig into "theory of the firm" it is a very poorly yet somewhat understood set of principles. If you can construct a system with incentives that make consolidation more costly you can by and large prevent it where you want to prevent it. Of course, there are still things that are more efficient after consolidation, there are things you wouldn't want to disincentivize consolidation in, and carefully designing incentives is a lot like preventing security exploits: you have to think of everything to prevent an unwanted outcome, but all you have to do is miss one thing and you get unwanted outcomes.

_8j50 5y ago

I don't agree with some of your examples but setting that aside, all of what you mentioned are economic products and services. Crypto is neither. Without crypto you have cash, credit card, debit card, prepaid card, gift card, paypal, ecash, applepay, western union, money gram, epay and a myriad of other non-crypto payment methods that are based on central bank currency. They did not consolidate. Or look at currencies in general, every country has one by design. Also decentralized does not mean that there are no hubs where decisins and power is concentrated, it simply means there is no one center. Much like how people say the US is democratic because you have two parties to choose from instead of just one like China. I do think perect decentalization is egalitarian in that all important decisions are 51% majority consensus with every vote having equal weight. However most practical decentralized systems are distributed with the capacity to be fully decentralized. Crypto currencies that will last long term will reflect a demand for specific payment needs. To use your example, we have lesser number of PC makers because they all make similar varieties of PCs. With payment systems you have ACH,SWIFT,card payment (instant), cash (anonymous),etc... there will be cryptocurrencies that will reflect popular payment and speculative investment needs for the long term. Heck, I would even speculate in a crypto lottery!

kkielhofner 5y ago
I'm aware I'm talking very broadly and generally about the "majority" and in many cases "overwhelming majority" of these cases. I know some of my examples are hyperbolic and a little "loose". I've been meaning to research and document actual numbers and examples to either validate or invalidate my take. Now that I'm really thinking about it because of your thoughtful reply I just might! That said I think banking and payments are further examples. The vast, vast majority of banking and payment activity happens through a relatively tiny number of banks and payment processing networks. The US dollar is used officially and unofficially in many other countries. Europe went to the Euro. As I understand it much of worldwide settlement internationally happens in the US dollar which is also more-or-less the official worldwide reserve currency. Bitcoin currently does about 500k transactions/day worldwide (as best as I can tell). That's probably roughly the number of daily transactions for a mid-sized US city. At a future point in time where a significant number of people are transacting in cryptocurrency multiple times per day an immutable blockchain ledger with no upper bound on growth will swell to astronomical size when a significant number of people are transacting with it multiple times per day. Now your $3 Starbucks purchase is recorded for eternity and replicated across hundreds or thousands of nodes?
- _8j50 5y ago
  > The vast, vast majority of banking and payment activity happens through a relatively tiny number of banks and payment processing networks. Not by choice of merchants or connsumers, does not reflect demand but incentives > The US dollar is used officially and unofficially in many other countries. Kind if like BTC? > Now your $3 Starbucks purchase is recorded for eternity and replicated across hundreds or thousands of nodes? Great point, hence the demand there created zcash and monero. I would say BTC is akin to ACH and SWIFT not credit cards or cash payment. Whatever the limits of exiting currencies is, it only opens up room for demand. Heck, you can even have central bank crypto (as JPM and China are trying). There is hardly anything new about crypto other than specifics of implementation. BTC does not define or reflect upon all crypto. Currency is not a new concept, using a distributed ledger is new-ish and using proof of work, bandwidth, storage,etc... while these backing value stores are new, having precious metals, livestock, land, etc... as a backing value store is not that different, crypto is just an adaptation of having something difficult to obtain or of value to others and using it as a value store.

betwixthewires 5y ago

I'm not a web3 evangelist but I feel the need to say, all of these examples are the result of incentives. Dig into "theory of the firm" it is a very poorly yet somewhat understood set of principles. If you can construct a system with incentives that make consolidation more costly you can by and large prevent it where you want to prevent it. Of course, there are still things that are more efficient after consolidation, there are things you wouldn't want to disincentivize consolidation in, and carefully designing incentives is a lot like preventing security exploits: you have to think of everything to prevent an unwanted outcome, but all you have to do is miss one thing and you get unwanted outcomes.