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Blockchain-based systems are not what they say they are

168 points by headalgorithm 5y ago

garydevenay 5y ago
This article seems to be intentionally written in a hyperbolic fashion, comparing things which are completely different with each other under the guise of "web3" or "blockchains". Bundling a bunch of bad sounding things up and pretending they are interrelated is intellectually dishonest and counter productive to anyone who takes the time to read the article.
- chank 5y ago
  I was about to comment that I think this person needs to understand the difference between blockchain and the applications created using it.
  - _xnmw 5y ago
    The writer understands the difference clearly. Literally a heading in the article: "First, a note on the theoretical vs. the actual".
    - garydevenay 5y ago
      The writer doesn't. There are multiple clear instances of mental gymnastics in this article. From previous articles the author has written it seems like they have been researching this topic for 4 days before writing this article. Hardly enough time to become a domain expert.
      - newswasboring 5y ago
        > There are multiple clear instances of mental gymnastics in this article Care to give an example for the uninitiated?
        garydevenay 5y ago
        > For example, if you bring up the question of whether the major centralized exchanges could all decide based on instructions from an oppressive government to freeze exchange of tokens belonging to a dissident, you’ll be told that that’s no problem in their theoretical world where a Bitcoin is a Bitcoin and if an exchange won’t accept yours, you can easily find an exchange that will. Centralised exchanges can't freeze the exchange of Bitcoin. They themselves can decide that THEY won't accept money from certain individuals (Centralised exchanges are required to complete KYC for users), but they have no power to stop UTXOs being spent on the network. The only way UTXOs can be prohibited from being spent is via consensus between node operators. This is just one example of many points where the author decides to fuse centralised services which interact with the decentralised network with the network itself.
        _xnmw 5y ago
        I agree the wording is a little vague, but now you're just being pedantic. Her point still stands. "Freeze exchange of tokens" doesn't have to mean "stop the Bitcoin network from operating", it could also mean simply issuing a government order to all exchanges to not accept a particular UTXO. Anybody operating an exchange who doesn't want to go to prison has to comply with the order. Governments can do that -- it's not that hard to issue an Interpol alert for a particular UTXO, legislation and enforcement just haven't caught up yet. That effectively "freezes the money", because then the person holding that UTXO cannot withdraw it anywhere. Governments already do this with paper money, which is why laundering cash is such a headache, and Bitcoin only makes it EASIER to track and prevent illegal flows of money. Paper cash is still more decentralized than Bitcoin, hence the article's main point stands: Blockchain-based systems are not what they say they are.
        newswasboring 5y ago
        If bitcoin is the only crypto currency that exists then yes you are right. But there are already ways to work around such a ban (like swapping to monero). In several of the recent hacks, big exchanges did try to ban addresses but were not successful in stopping the laundering. Or at least that is my understanding right now.
- _xnmw 5y ago
  If you have a specific criticism of the article, you should make a specific quote and make your counterargument.
dgb23 5y ago
This web3 craze should be an incredibly interesting topic for interdisciplinary research. Historians, economists, computer scientists, psychologists and so on have been handed a wild field study here.
- Joker_vD 5y ago
  It's a speculative bubble, we've been having and studying those since the Tulip Mania of 1634—1637. The only novel thing about it is what thing exactly is being hyped.
  - bsenftner 5y ago
    The other novel issue is the craze participants are here now, alive, and we can learn directly about and from them.
  - dgb23 5y ago
    It has some unique aspects, they try to introduce ad-hoc version of a monetary system, regulation and so on on top of it. These systems and regulatory institutions (which are private) emerge almost spontaneously, plus there is a huge marketing hype surrounding it, even ethical and political rationalizations. Another aspect is how quickly it becomes centralized and privately controlled. And then there is a whole story about social media hype and anxiety. It also had recent heavy real world effects: The protestors in Kazakhstan have shut down a large bitcoin facility. It's an interesting experiment to say the least. Sure there are parallels to previous instances in history, which is why many of us have been very critical of it, but it seems to be a unique blend.
  - yawnxyz 5y ago
    We're using NFTs as a way to represent IP, to bring more academic research to the forefront. It's not about shilling it on OpenSea all the time — we're collaborating with https://www.molecule.to/ https://www.molecule.to/ and https://www.vitadao.com/ https://www.vitadao.com/ to speed up the cumbersome tech transfer landscape
  - mhkool 5y ago
_xnmw 5y ago
We have words for such things. Anything which is NOT what it claims to be, while soliciting money, is by definition a "scam". A specific kind of sophisticated scam works by paying out older investors using money gained from new investors, and that is called a "ponzi scheme". And so the web3 wheel keeps turning.
- deleted 5y ago
  [deleted]
- andrewla 5y ago
  I thought there was a thread about this a couple of days ago. A Ponzi Scheme is where the sum of all investor's reported account values exceed the total value of assets held by the institution. In order to sustain the fraud, new investors are sought out to get capital to pay out old customers. Bitcoin may be a scam, or may be used by scammers, etc., but it's not a Ponzi. Rather than give it a label, say what you think is happening -- that it's an asset bubble sustained only by the existence of greater fools and thin, unregulated, manipulated markets. That's fine and we can argue points on that. But calling it a Ponzi just makes things confusing.
  - deltree7 5y ago
    Yes, Gold is definitely the closest asset class that aligns with Bitcoin. Not a pyramid scheme
    - andrewla 5y ago
      Gold I think is a good benchmark. But really any forex asset is just as good or better for a comparison. Gold has some portion of its value derived from decorative uses and numismatic purposes. People don't put 100 dollar bills on necklaces or wear quarter pendants. If you hold Euros as an investment as an American (or vice versa with dollars) then this as an investment class is extremely similar to Bitcoin. Sovereign debt has similar characteristics but is subject to interest-rate based fluctuations to a greater dgree. The main difference is that the markets for foreign exchange are tightly regulated and trade with huge amounts of liquidity -- it is difficult to inconceivable for any entity to affect the price in any way useful for market manipulation (with some exceptions, like Soros's little game with the Pound).
shaolinspirit 5y ago
this is why I don't like marketing, cause usually it is deceptive, even when somebody has the best intent. It's like language (even math has boundaries), you cannot precisely transfer meaning.
- _kulang 5y ago
  Often the words become Proper Nouns and take on a life of their own. Viral marketing creates organisms
newswasboring 5y ago
> In June 2016, attackers exploited a vulnerability to steal 3.6 million ETH (then about $50 million) of the project’s 11.5 million ETH (about $160 million). People love to tout this example, I did too, until that realized that one a one off event. There are regularly significantly more larger thefts of crypto currencies these days[1] and nobody is even willing to discuss a hard fork. I now chalk this up as growing mistakes which every project makes in early stages. I'm still not into this whole idea of crypto currencies, but don't think we can use this point fairly any more. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/
- buttpie 5y ago
- e1g 5y ago
  Another informative and entertaining place to read about the nearly-daily rug pulls is https://web3isgoinggreat.com https://web3isgoinggreat.com
  - spiralx 5y ago
    Isn't that from the same person?
- FabHK 5y ago
  Yes. Similarly, you can totally rely on your gold or fiat money being yours. Ok, there was this small incidence in 1933 where the US government took most of your gold, but that was a one off event [1]. And then during the hyperinflation in Germany your money actually became worthless, but that was a growing mistake. Of course, that was multiple generations ago, not a few years. Conclusion: On the dimension of reliability and censor resistance, crypto might be as good as gold or fiat (while on all other axes it remains much worse). [1] Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve in exchange for $20.67 (equivalent to $413 in 2020)[5] per troy ounce. https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
mattwilsonn888 5y ago
The points on immutability are incorrect. When Ethereum was rolled back to reverse the 2016 DAO hack the data was not lost, it continues on the Eth Classic chain - it is still immutable. That chain is no where near as valuable today - that's true of most forks, one wins and the other loses. For most Ethereum users, and for the Polkadot users for which a similar fork happened recently, the early reversion to remedy loss caused by an exploit is considered a feature, not a bug and it was the community that decided which fork would win. There has been much more money lost to similar exploits in various contracts since the infamous DAO hack, and the chain was not rolled back - if it ever was it would likely be a losing fork unless the community of users agreed on its value. For Ethereum specifically this is more problematic as its full nodes are expensive to run and don't have much say compared to miners or centralized node providers like Infura, but this type of fork in principle isn't an example of immutability, and chains which do subsidize node costs to avoid the centralization seen in Eth's user facing nodes remain in control of the users. In total, picking out the worst parts of the Ethereum network and generalizing it to 'blockchain' is lazy, and doesn't even fulfill the modest goal of the essay to "[discuss] how these technologies work in practice today," as it ignores the nascent systems whose developers were the first on scene to many of these problems and decided that they were solvable rather than bloggers with slightly deeper than surface level understanding seeing the same problems years later and deciding they were unsolvable.
- consp 5y ago
  Considering this only happens to "big" projects and not a simple user making a mistake it's pointless to see it as immutable. It's immutable in practice only for you, but not in practice (like the article claims) for bigger projects who happened to make a mistake. It's all 'in practice' as yes, the original data is not lost but for all practical purposes it is. Calling it out to all blockchains is valid in my opinion, as it counts for all blockchains despite happening more often around some than others.
  - meheleventyone 5y ago
    With smaller chains that have much smaller amounts of total mining power its feasible for people to just jump in and run a 51% attack. So even in that sense they're not necessarily immutable.
adim86 5y ago
I find the article disappointing. I would say this article itself is not what it says it is. Its title is written in click-bait fashion in that they are about to reveal something we don't know about blockchain technology and then the first paragraphs are written in the tone that they realize theoretically blockchain technology ideally runs a certain way but they want to tell us how it runs today and then proceeds to bash the implementation of the technology today even though they realize it probably wont work that way in the future. It is like bashing the internet of not fulfilling the potential people pitched about it in the 90s. Blockchain is currently in the dail up stage of the internet, it is centralized, slow and needs adoption and lots of man hours to unleash its potential. There are second and third order effects that need to actualize before the "dream" of blockchain technology can be realised. The article purports the lack of this actualisation of the blockchain dream as if we are being deceived. It's like when people bashed Tesla and said it wont work because there were not enough charging stations across the USA, as if world changing technologies are realized in a day. I find it boring that people push these kind of articles as think pieces. We can do better
- theaeolist 5y ago
  The article makes some specific points, which you fail to address. Your objection is a generic "never mind that, just give it more time". You can do better.
  - civilized 5y ago
    We keep seeing this from the crypto crowd. "It's still early days" to solve these thorny social problems with yet more tech innovation. Always just around the corner.
    - jethro_tell 5y ago
      And then you need network adoption. Once there is an environmentally friendly Blockchain, you still gotta shut down all the rest.
    - davidgerard 5y ago
sandworm101 5y ago
>> an NFT out of child sexual abuse material, That is a really interesting question. Would that NFT be illegal to own or posess? It isnt the actual material. It could be a hash and ownership information, but the illegal material need not be in the NFT. Hashes for such material are not illegal. In fact there are databases full of such hashes in use by file hosting services to detect and remove such things. Owning an associated NFT would be like owning an NFT for "cocaine" but never being anywhere near real cocaine. It may be worthless, but i dont see how it would be actually illegal.
- meheleventyone 5y ago
  Anyone that would want to own such a thing probably cares about what it points at so they're more than likely going to possess the illegal content as well. For example if you own an art NFT that is on IPFS you probably want to pin it yourself to make sure the link doesn't rot whilst you own it. Then some images are actually on-chain so the NFT and a copy of the picture exist together. That said there is an explicit link between the NFT and the child sexual abuse material so I'd presume there is a legal case that keeping one is keeping the other. Like if you made sure your hard-drive was totally clean but kept bookmarks to abuse material. In the example of cocaine there is no explicit link but if they could connect the NFT to a criminal enterprise then I guess there's likely some laws around profiting/handling gains from criminal activity.
- notahacker 5y ago
  I think the general principle behind the criminalisation of such images is that the sharing creates market demand for the abuse; the hash of the image isn't what gets file hosts off the hook because their moderators won't be punished for manually checking and deleting images either. On that basis, I can see someone apparently knowingly purchasing tokens symbolically representing actual acts of child sex abuse for a lot of money being in plenty of trouble even if the images never touch any of their computers. Perhaps their best defence would be that NFTs are complete nonsense which have no tangible connection with the mutable, third-party-controlled URL endpoint they are supposedly a token representation of...
- topynate 5y ago
cryptica 5y ago
They're just alternative currencies for people who want to escape fiat and they are more tamper-proof than regular currencies. That's all.
- mhkool 5y ago
  Why do people want to escape fiat currencies? Because the central banks inflate them. If only we could have an inflation-proof currency...
  - cryptica 5y ago
    Well pretty much. Gold would be good but it's difficult to audit as only a limited number of people can access the vaults; this auditing process is highly corruptible as history has shown us over and over again... In reality, because of this auditing issue, there was never enough gold to back the paper, even under the gold standard. With Bitcoin, anyone can audit holdings of BTC since the ledger is public.
Geee 5y ago
Maybe it's a good time to remind that Bitcoin is not Ethereum. Bitcoin has always focused on maximizing decentralization. This debate goes back to blocksize war in 2015-2017, when small blocks and decentralization won over big blocks and increased throughput. The idea is simple; the network is more decentralized, when more people can reasonably run a full node on their own home computer. It is possible to run a full Bitcoin node on a typical laptop or desktop PC, or a dedicated Raspberry Pi with external 1 TB hard drive. It doesn't mean that everyone has to run their own node; it's enough that it is possible. For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. That's why most of the nodes are run by companies such as Infura. This is also the root of the argument why many bitcoiners think that most altcoins such as Ethereum are scams. Like the article suggests, they're promoted and sold as decentralized but in reality are quite far from it.
- thebean11 5y ago
  > For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. You can run an Ethereum node on a Raspberry Pi with a 1TB USB hard drive, what are you talking about?
- sergiosgc 5y ago
  > For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. That's why most of the nodes are run by companies such as Infura. I have never tried to run a full node, but from what I read, the specs for a full node are nowhere near the realm of impossible: https://www.reddit.com/r/ethereum/comments/jv8ovb/what_are_the_minimum_specifications_to_run_an/gcit6rc/?utm_source=reddit&utm_medium=web2x&context=3 https://www.reddit.com/r/ethereum/comments/jv8ovb/what_are_t... 1TB SSD, 16GB RAM, an i5 is pretty run-of-the-mill.
- davidgerard 5y ago
  Bitcoin mining centralised by 2014, when GHash hit 51% and promptly spit into smaller pools so as not to frighten the suckers. In 2015, the guys controlling 80% of mining pools stood on the same stage together. It's important to distinguish "decentralised" as in "can't sue me bro" from "decentralised" as in actual operational terms. Bitcoin contains tremendous operational centralisation at all levels.
cabirum 5y ago
> The data itself is quite decentralized, at least on the popular blockchains, but that’s about where the decentralization ends. Yes. Web2 is where users generate content and generate profit for companies. Web3 is where companies went further and offload storage/compute costs to users, while maintaining control over services/apis. It's like Youtube where videos are hosted by users but Google gets the money.
cblconfederate 5y ago
Flawed, hasty generalization arguments. Email has a large degree of centralization with gmail/outlook etc but it is still meaningfully decentralized because it is very hard to get the vast majority of email servers to ban an address. Bitcoin is similar, its advertised decentralization is not a scam
- zepto 5y ago
  Email is a terrible example. An email address is usefulness if just gmail bans it. Add outlook.com and yahoo to that list and it’s effectively dead.
Nekorosu 5y ago
It's easy to bash emerging technologies using prevalent public opinion and ignorance as a vehicle. The article just uses negative public image as a fuel and doesn't try to be fair. NFT platforms are not OpenSea on ETH. There is a fraction of non-ETH based NFT platforms that are actually what they say they are. objkt.com, hic.af, www.fxhash.xyz
- pwinnski 5y ago
  OpenSea + ETH represent the vast majority of NFT activity, but the existence of some also-rans demonstrates... what, exactly?
- defaultprimate 5y ago
  13 years in the technology world is not "emerging"
  - Nekorosu 5y ago
    Depending on one's age.
- kkvamshee 5y ago
  He was referring to the concept of centrelization by these NFT Marketplace platforms. Doesnt matter if it is AirNFT or any other platforms you just mentioned. These platforms can freeze any asset at any time.
  - mw888 5y ago
    Freeze is a complete overstatement. If you want to hate NFTs then the minor technical hurdles which smaller platforms already alleviate will not your most sustainable route.
  - Nekorosu 5y ago
    I have provided the examples of the exact opposite, platforms that can't freeze assets.
yawnxyz 5y ago
I feel like writing one-sided hit pieces on how blockchain projects aren't decentralized is a new strategy to get to the front page of HN. I like how nuanced the moxie.org article was, compared to this one.
a_shovel 5y ago
> One extremely common phenomenon when discussing issues surrounding blockchain-based technologies is that proponents will often switch between discussing the theoretical implementations of these ecosystems and discussing the ecosystems we have today as it suits their argument. This is an endemic problem in crypto spaces. The biggest example I see regularly is deflecting concerns about environmental impact by stating they'll move away from proof of work any day now, so it's no big deal. Maybe you will, maybe you won't, but until you have, you haven't.
- Entwickler 5y ago
  In the case of Ethereum, I see it more as acknowledging it is a problem under Proof of Work and they are moving off it this year _because_ it's a problem. They are making tangible progress with the Kintsugi test net coming out last month. How else are they supposed to address it other than acknowledging the problem, laying out a roadmap, and taking steps towards the end goal?
  - VHRanger 5y ago
    Proof of stake has been ~18months away for ethereum since 2015. Sure, they've built some stuff at this point, but have made no progress on the inner politics of the issue. So it remains in some untouchable future for the time being.
    - Entwickler 5y ago
      Remind me by year end if this is still the case and I'll eat humble pie. It's true it's been discussed about for ages, and even Vitalik was inviting laughs at his really low initial estimate, so it's fair to be skeptical
    - kordlessagain 5y ago
      Lightning is PoS for Bitcoin. Ready today!
      - VHRanger 5y ago
api 5y ago
Decentralization is hard because centralization is so easy. The downsides of centralization are mostly longer-term issues like moral hazard, privacy, cost of scaling, and robustness, and those can be ignored for a while. Up front centralization is incredibly easy to reason about and deploy while the costs can be ignored for a long time. Markets optimize for cost and efficiency now, not later. It's the same reason things like climate change or the eventual danger of fossil fuel depletion are ignored by the market. They haven't happened yet. Centralization is cheap coal; decentralization is solar power and batteries. Pay later vs. pay now. Pricing signals and markets are great optimizers but they have very little foresight and can't consider issues that can't easily be priced. As a result even if a system is designed to be decentralized, centralization will usually start creeping in. It starts at the edges with convenient SaaS APIs, value-add services like search and filtration, and dashboards and moves inward from there. Eventually the entire system is embraced, extended, and extinguished. It doesn't matter if anyone planned it this way. It happens organically because centralized systems are cheaper and easier to build and can iterate fast. The last part, fast iteration, is massively important in today's fad-driven hyper-accelerated shifting sands software market. If something can't iterate fast the sand will get washed out from under it and it's dead.
- mw888 5y ago
  It’s a fair point, they to bring it back to basics a Bitcoin maximalist still has a point: do you want the money in your centralized, easy to use bank under control of a private bank down the line, or in control of a predictable and permanent protocol? The truth about web3 is that much of it will remain centralized or peer to peer, but the fallback to certainty is the ultimate value; avoiding the long term moral hazard you mentioned the market often ignores, or at least deterring it. There will always be people who prefer control over convenience and distributed ledger technology hopes to raise that ceiling of user control over what they own significantly.
xbar 5y ago
"The worst of both worlds." Sounds about right.
kordlessagain 5y ago
So, we should expect to see Opensea shills pushing NFT memes, basically.

168 points by headalgorithm 5y ago

This article seems to be intentionally written in a hyperbolic fashion, comparing things which are completely different with each other under the guise of "web3" or "blockchains". Bundling a bunch of bad sounding things up and pretending they are interrelated is intellectually dishonest and counter productive to anyone who takes the time to read the article.

chank 5y ago
I was about to comment that I think this person needs to understand the difference between blockchain and the applications created using it.
- _xnmw 5y ago
  The writer understands the difference clearly. Literally a heading in the article: "First, a note on the theoretical vs. the actual".
  - garydevenay 5y ago
    The writer doesn't. There are multiple clear instances of mental gymnastics in this article. From previous articles the author has written it seems like they have been researching this topic for 4 days before writing this article. Hardly enough time to become a domain expert.
    - newswasboring 5y ago
      > There are multiple clear instances of mental gymnastics in this article Care to give an example for the uninitiated?
      - garydevenay 5y ago
        > For example, if you bring up the question of whether the major centralized exchanges could all decide based on instructions from an oppressive government to freeze exchange of tokens belonging to a dissident, you’ll be told that that’s no problem in their theoretical world where a Bitcoin is a Bitcoin and if an exchange won’t accept yours, you can easily find an exchange that will. Centralised exchanges can't freeze the exchange of Bitcoin. They themselves can decide that THEY won't accept money from certain individuals (Centralised exchanges are required to complete KYC for users), but they have no power to stop UTXOs being spent on the network. The only way UTXOs can be prohibited from being spent is via consensus between node operators. This is just one example of many points where the author decides to fuse centralised services which interact with the decentralised network with the network itself.
        _xnmw 5y ago
        I agree the wording is a little vague, but now you're just being pedantic. Her point still stands. "Freeze exchange of tokens" doesn't have to mean "stop the Bitcoin network from operating", it could also mean simply issuing a government order to all exchanges to not accept a particular UTXO. Anybody operating an exchange who doesn't want to go to prison has to comply with the order. Governments can do that -- it's not that hard to issue an Interpol alert for a particular UTXO, legislation and enforcement just haven't caught up yet. That effectively "freezes the money", because then the person holding that UTXO cannot withdraw it anywhere. Governments already do this with paper money, which is why laundering cash is such a headache, and Bitcoin only makes it EASIER to track and prevent illegal flows of money. Paper cash is still more decentralized than Bitcoin, hence the article's main point stands: Blockchain-based systems are not what they say they are.
        newswasboring 5y ago
        If bitcoin is the only crypto currency that exists then yes you are right. But there are already ways to work around such a ban (like swapping to monero). In several of the recent hacks, big exchanges did try to ban addresses but were not successful in stopping the laundering. Or at least that is my understanding right now.
_xnmw 5y ago
If you have a specific criticism of the article, you should make a specific quote and make your counterargument.

dgb23 5y ago

This web3 craze should be an incredibly interesting topic for interdisciplinary research. Historians, economists, computer scientists, psychologists and so on have been handed a wild field study here.

Joker_vD 5y ago
It's a speculative bubble, we've been having and studying those since the Tulip Mania of 1634—1637. The only novel thing about it is what thing exactly is being hyped.
- bsenftner 5y ago
  The other novel issue is the craze participants are here now, alive, and we can learn directly about and from them.
- dgb23 5y ago
  It has some unique aspects, they try to introduce ad-hoc version of a monetary system, regulation and so on on top of it. These systems and regulatory institutions (which are private) emerge almost spontaneously, plus there is a huge marketing hype surrounding it, even ethical and political rationalizations. Another aspect is how quickly it becomes centralized and privately controlled. And then there is a whole story about social media hype and anxiety. It also had recent heavy real world effects: The protestors in Kazakhstan have shut down a large bitcoin facility. It's an interesting experiment to say the least. Sure there are parallels to previous instances in history, which is why many of us have been very critical of it, but it seems to be a unique blend.
- yawnxyz 5y ago
  We're using NFTs as a way to represent IP, to bring more academic research to the forefront. It's not about shilling it on OpenSea all the time — we're collaborating with https://www.molecule.to/ https://www.molecule.to/ and https://www.vitadao.com/ https://www.vitadao.com/ to speed up the cumbersome tech transfer landscape
- mhkool 5y ago

_xnmw 5y ago

We have words for such things. Anything which is NOT what it claims to be, while soliciting money, is by definition a "scam". A specific kind of sophisticated scam works by paying out older investors using money gained from new investors, and that is called a "ponzi scheme". And so the web3 wheel keeps turning.

deleted 5y ago
[deleted]
andrewla 5y ago
I thought there was a thread about this a couple of days ago. A Ponzi Scheme is where the sum of all investor's reported account values exceed the total value of assets held by the institution. In order to sustain the fraud, new investors are sought out to get capital to pay out old customers. Bitcoin may be a scam, or may be used by scammers, etc., but it's not a Ponzi. Rather than give it a label, say what you think is happening -- that it's an asset bubble sustained only by the existence of greater fools and thin, unregulated, manipulated markets. That's fine and we can argue points on that. But calling it a Ponzi just makes things confusing.
- deltree7 5y ago
  Yes, Gold is definitely the closest asset class that aligns with Bitcoin. Not a pyramid scheme
  - andrewla 5y ago
    Gold I think is a good benchmark. But really any forex asset is just as good or better for a comparison. Gold has some portion of its value derived from decorative uses and numismatic purposes. People don't put 100 dollar bills on necklaces or wear quarter pendants. If you hold Euros as an investment as an American (or vice versa with dollars) then this as an investment class is extremely similar to Bitcoin. Sovereign debt has similar characteristics but is subject to interest-rate based fluctuations to a greater dgree. The main difference is that the markets for foreign exchange are tightly regulated and trade with huge amounts of liquidity -- it is difficult to inconceivable for any entity to affect the price in any way useful for market manipulation (with some exceptions, like Soros's little game with the Pound).

shaolinspirit 5y ago

this is why I don't like marketing, cause usually it is deceptive, even when somebody has the best intent. It's like language (even math has boundaries), you cannot precisely transfer meaning.

_kulang 5y ago
Often the words become Proper Nouns and take on a life of their own. Viral marketing creates organisms

newswasboring 5y ago

> In June 2016, attackers exploited a vulnerability to steal 3.6 million ETH (then about $50 million) of the project’s 11.5 million ETH (about $160 million). People love to tout this example, I did too, until that realized that one a one off event. There are regularly significantly more larger thefts of crypto currencies these days[1] and nobody is even willing to discuss a hard fork. I now chalk this up as growing mistakes which every project makes in early stages. I'm still not into this whole idea of crypto currencies, but don't think we can use this point fairly any more. [1] https://rekt.news/leaderboard/ https://rekt.news/leaderboard/

buttpie 5y ago
e1g 5y ago
Another informative and entertaining place to read about the nearly-daily rug pulls is https://web3isgoinggreat.com https://web3isgoinggreat.com
- spiralx 5y ago
  Isn't that from the same person?
FabHK 5y ago
Yes. Similarly, you can totally rely on your gold or fiat money being yours. Ok, there was this small incidence in 1933 where the US government took most of your gold, but that was a one off event [1]. And then during the hyperinflation in Germany your money actually became worthless, but that was a growing mistake. Of course, that was multiple generations ago, not a few years. Conclusion: On the dimension of reliability and censor resistance, crypto might be as good as gold or fiat (while on all other axes it remains much worse). [1] Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve in exchange for $20.67 (equivalent to $413 in 2020)[5] per troy ounce. https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102

mattwilsonn888 5y ago

The points on immutability are incorrect. When Ethereum was rolled back to reverse the 2016 DAO hack the data was not lost, it continues on the Eth Classic chain - it is still immutable. That chain is no where near as valuable today - that's true of most forks, one wins and the other loses. For most Ethereum users, and for the Polkadot users for which a similar fork happened recently, the early reversion to remedy loss caused by an exploit is considered a feature, not a bug and it was the community that decided which fork would win. There has been much more money lost to similar exploits in various contracts since the infamous DAO hack, and the chain was not rolled back - if it ever was it would likely be a losing fork unless the community of users agreed on its value. For Ethereum specifically this is more problematic as its full nodes are expensive to run and don't have much say compared to miners or centralized node providers like Infura, but this type of fork in principle isn't an example of immutability, and chains which do subsidize node costs to avoid the centralization seen in Eth's user facing nodes remain in control of the users. In total, picking out the worst parts of the Ethereum network and generalizing it to 'blockchain' is lazy, and doesn't even fulfill the modest goal of the essay to "[discuss] how these technologies work in practice today," as it ignores the nascent systems whose developers were the first on scene to many of these problems and decided that they were solvable rather than bloggers with slightly deeper than surface level understanding seeing the same problems years later and deciding they were unsolvable.

consp 5y ago
Considering this only happens to "big" projects and not a simple user making a mistake it's pointless to see it as immutable. It's immutable in practice only for you, but not in practice (like the article claims) for bigger projects who happened to make a mistake. It's all 'in practice' as yes, the original data is not lost but for all practical purposes it is. Calling it out to all blockchains is valid in my opinion, as it counts for all blockchains despite happening more often around some than others.
- meheleventyone 5y ago
  With smaller chains that have much smaller amounts of total mining power its feasible for people to just jump in and run a 51% attack. So even in that sense they're not necessarily immutable.

adim86 5y ago

I find the article disappointing. I would say this article itself is not what it says it is. Its title is written in click-bait fashion in that they are about to reveal something we don't know about blockchain technology and then the first paragraphs are written in the tone that they realize theoretically blockchain technology ideally runs a certain way but they want to tell us how it runs today and then proceeds to bash the implementation of the technology today even though they realize it probably wont work that way in the future. It is like bashing the internet of not fulfilling the potential people pitched about it in the 90s. Blockchain is currently in the dail up stage of the internet, it is centralized, slow and needs adoption and lots of man hours to unleash its potential. There are second and third order effects that need to actualize before the "dream" of blockchain technology can be realised. The article purports the lack of this actualisation of the blockchain dream as if we are being deceived. It's like when people bashed Tesla and said it wont work because there were not enough charging stations across the USA, as if world changing technologies are realized in a day. I find it boring that people push these kind of articles as think pieces. We can do better

theaeolist 5y ago
The article makes some specific points, which you fail to address. Your objection is a generic "never mind that, just give it more time". You can do better.
- civilized 5y ago
  We keep seeing this from the crypto crowd. "It's still early days" to solve these thorny social problems with yet more tech innovation. Always just around the corner.
  - jethro_tell 5y ago
    And then you need network adoption. Once there is an environmentally friendly Blockchain, you still gotta shut down all the rest.
  - davidgerard 5y ago

sandworm101 5y ago

>> an NFT out of child sexual abuse material, That is a really interesting question. Would that NFT be illegal to own or posess? It isnt the actual material. It could be a hash and ownership information, but the illegal material need not be in the NFT. Hashes for such material are not illegal. In fact there are databases full of such hashes in use by file hosting services to detect and remove such things. Owning an associated NFT would be like owning an NFT for "cocaine" but never being anywhere near real cocaine. It may be worthless, but i dont see how it would be actually illegal.

meheleventyone 5y ago
Anyone that would want to own such a thing probably cares about what it points at so they're more than likely going to possess the illegal content as well. For example if you own an art NFT that is on IPFS you probably want to pin it yourself to make sure the link doesn't rot whilst you own it. Then some images are actually on-chain so the NFT and a copy of the picture exist together. That said there is an explicit link between the NFT and the child sexual abuse material so I'd presume there is a legal case that keeping one is keeping the other. Like if you made sure your hard-drive was totally clean but kept bookmarks to abuse material. In the example of cocaine there is no explicit link but if they could connect the NFT to a criminal enterprise then I guess there's likely some laws around profiting/handling gains from criminal activity.
notahacker 5y ago
I think the general principle behind the criminalisation of such images is that the sharing creates market demand for the abuse; the hash of the image isn't what gets file hosts off the hook because their moderators won't be punished for manually checking and deleting images either. On that basis, I can see someone apparently knowingly purchasing tokens symbolically representing actual acts of child sex abuse for a lot of money being in plenty of trouble even if the images never touch any of their computers. Perhaps their best defence would be that NFTs are complete nonsense which have no tangible connection with the mutable, third-party-controlled URL endpoint they are supposedly a token representation of...
topynate 5y ago

cryptica 5y ago

They're just alternative currencies for people who want to escape fiat and they are more tamper-proof than regular currencies. That's all.

mhkool 5y ago
Why do people want to escape fiat currencies? Because the central banks inflate them. If only we could have an inflation-proof currency...
- cryptica 5y ago
  Well pretty much. Gold would be good but it's difficult to audit as only a limited number of people can access the vaults; this auditing process is highly corruptible as history has shown us over and over again... In reality, because of this auditing issue, there was never enough gold to back the paper, even under the gold standard. With Bitcoin, anyone can audit holdings of BTC since the ledger is public.

Geee 5y ago

Maybe it's a good time to remind that Bitcoin is not Ethereum. Bitcoin has always focused on maximizing decentralization. This debate goes back to blocksize war in 2015-2017, when small blocks and decentralization won over big blocks and increased throughput. The idea is simple; the network is more decentralized, when more people can reasonably run a full node on their own home computer. It is possible to run a full Bitcoin node on a typical laptop or desktop PC, or a dedicated Raspberry Pi with external 1 TB hard drive. It doesn't mean that everyone has to run their own node; it's enough that it is possible. For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. That's why most of the nodes are run by companies such as Infura. This is also the root of the argument why many bitcoiners think that most altcoins such as Ethereum are scams. Like the article suggests, they're promoted and sold as decentralized but in reality are quite far from it.

thebean11 5y ago
> For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. You can run an Ethereum node on a Raspberry Pi with a 1TB USB hard drive, what are you talking about?
sergiosgc 5y ago
> For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. That's why most of the nodes are run by companies such as Infura. I have never tried to run a full node, but from what I read, the specs for a full node are nowhere near the realm of impossible: https://www.reddit.com/r/ethereum/comments/jv8ovb/what_are_the_minimum_specifications_to_run_an/gcit6rc/?utm_source=reddit&utm_medium=web2x&context=3 https://www.reddit.com/r/ethereum/comments/jv8ovb/what_are_t... 1TB SSD, 16GB RAM, an i5 is pretty run-of-the-mill.
davidgerard 5y ago
Bitcoin mining centralised by 2014, when GHash hit 51% and promptly spit into smaller pools so as not to frighten the suckers. In 2015, the guys controlling 80% of mining pools stood on the same stage together. It's important to distinguish "decentralised" as in "can't sue me bro" from "decentralised" as in actual operational terms. Bitcoin contains tremendous operational centralisation at all levels.

cabirum 5y ago

> The data itself is quite decentralized, at least on the popular blockchains, but that’s about where the decentralization ends. Yes. Web2 is where users generate content and generate profit for companies. Web3 is where companies went further and offload storage/compute costs to users, while maintaining control over services/apis. It's like Youtube where videos are hosted by users but Google gets the money.

cblconfederate 5y ago

Flawed, hasty generalization arguments. Email has a large degree of centralization with gmail/outlook etc but it is still meaningfully decentralized because it is very hard to get the vast majority of email servers to ban an address. Bitcoin is similar, its advertised decentralization is not a scam

zepto 5y ago
Email is a terrible example. An email address is usefulness if just gmail bans it. Add outlook.com and yahoo to that list and it’s effectively dead.

Nekorosu 5y ago

It's easy to bash emerging technologies using prevalent public opinion and ignorance as a vehicle. The article just uses negative public image as a fuel and doesn't try to be fair. NFT platforms are not OpenSea on ETH. There is a fraction of non-ETH based NFT platforms that are actually what they say they are. objkt.com, hic.af, www.fxhash.xyz

pwinnski 5y ago
OpenSea + ETH represent the vast majority of NFT activity, but the existence of some also-rans demonstrates... what, exactly?
defaultprimate 5y ago
13 years in the technology world is not "emerging"
- Nekorosu 5y ago
  Depending on one's age.
kkvamshee 5y ago
He was referring to the concept of centrelization by these NFT Marketplace platforms. Doesnt matter if it is AirNFT or any other platforms you just mentioned. These platforms can freeze any asset at any time.
- mw888 5y ago
  Freeze is a complete overstatement. If you want to hate NFTs then the minor technical hurdles which smaller platforms already alleviate will not your most sustainable route.
- Nekorosu 5y ago
  I have provided the examples of the exact opposite, platforms that can't freeze assets.

yawnxyz 5y ago

I feel like writing one-sided hit pieces on how blockchain projects aren't decentralized is a new strategy to get to the front page of HN. I like how nuanced the moxie.org article was, compared to this one.

a_shovel 5y ago

> One extremely common phenomenon when discussing issues surrounding blockchain-based technologies is that proponents will often switch between discussing the theoretical implementations of these ecosystems and discussing the ecosystems we have today as it suits their argument. This is an endemic problem in crypto spaces. The biggest example I see regularly is deflecting concerns about environmental impact by stating they'll move away from proof of work any day now, so it's no big deal. Maybe you will, maybe you won't, but until you have, you haven't.

Entwickler 5y ago
In the case of Ethereum, I see it more as acknowledging it is a problem under Proof of Work and they are moving off it this year _because_ it's a problem. They are making tangible progress with the Kintsugi test net coming out last month. How else are they supposed to address it other than acknowledging the problem, laying out a roadmap, and taking steps towards the end goal?
- VHRanger 5y ago
  Proof of stake has been ~18months away for ethereum since 2015. Sure, they've built some stuff at this point, but have made no progress on the inner politics of the issue. So it remains in some untouchable future for the time being.
  - Entwickler 5y ago
    Remind me by year end if this is still the case and I'll eat humble pie. It's true it's been discussed about for ages, and even Vitalik was inviting laughs at his really low initial estimate, so it's fair to be skeptical
  - kordlessagain 5y ago
    Lightning is PoS for Bitcoin. Ready today!
    - VHRanger 5y ago

api 5y ago

Decentralization is hard because centralization is so easy. The downsides of centralization are mostly longer-term issues like moral hazard, privacy, cost of scaling, and robustness, and those can be ignored for a while. Up front centralization is incredibly easy to reason about and deploy while the costs can be ignored for a long time. Markets optimize for cost and efficiency now, not later. It's the same reason things like climate change or the eventual danger of fossil fuel depletion are ignored by the market. They haven't happened yet. Centralization is cheap coal; decentralization is solar power and batteries. Pay later vs. pay now. Pricing signals and markets are great optimizers but they have very little foresight and can't consider issues that can't easily be priced. As a result even if a system is designed to be decentralized, centralization will usually start creeping in. It starts at the edges with convenient SaaS APIs, value-add services like search and filtration, and dashboards and moves inward from there. Eventually the entire system is embraced, extended, and extinguished. It doesn't matter if anyone planned it this way. It happens organically because centralized systems are cheaper and easier to build and can iterate fast. The last part, fast iteration, is massively important in today's fad-driven hyper-accelerated shifting sands software market. If something can't iterate fast the sand will get washed out from under it and it's dead.

mw888 5y ago
It’s a fair point, they to bring it back to basics a Bitcoin maximalist still has a point: do you want the money in your centralized, easy to use bank under control of a private bank down the line, or in control of a predictable and permanent protocol? The truth about web3 is that much of it will remain centralized or peer to peer, but the fallback to certainty is the ultimate value; avoiding the long term moral hazard you mentioned the market often ignores, or at least deterring it. There will always be people who prefer control over convenience and distributed ledger technology hopes to raise that ceiling of user control over what they own significantly.

xbar 5y ago

"The worst of both worlds." Sounds about right.

kordlessagain 5y ago

So, we should expect to see Opensea shills pushing NFT memes, basically.