39 ms·

David Rosenthal on cryptocurrencies

227 points by codebolt 5y ago

TheColorYellow 5y ago
There are some fundamental misconceptions still, but it's a great post. First, crypto currencies networks are not attempting to rely on no intermediaries, but rather removing the need for trusted intermediaries. Yes there are challenges and constraints to this, but the successful operation of the Bitcoin network without a single trusted intermediary (and surviving several large physical shifts and attacks from the mining community) is a testament to its success. Prior to Bitcoin, there wasn't a single non-bank digital currency system that succeeded precisely because of the trust issues. Bitcoins success in that regard is not mentioned once. Second, the current cost of token ownership is not always the representative cost of entry for users. Where the network requires high fees, this may be true, but there are low fee networks with varying degrees of decentralization (Stellar, Hadera, Avalanche, Solana to name a few) that get no mention here. And no, because they are less decentralized that doesn't make the point moot. It's a spectrum, and ultimately many infrastructure services do try to achieve some form of decentralization in even more traditional contexts, so to throw out the low cost fee networks makes no sense. For things like Ethereum and Bitcoin, the fees are akin for users having access or using underlying settlement and base infrastructure systems (like mainline Telcom cables, the water main, or the high value payment system of a country). These systems are all expensive. The fact that they are expensive is indicative of demand at best and a limitation of performance given security constraints at worst. Third, the alleged illicit use of cryptocurrencies continues to be incorrect. The early years of the ransomware wave didn't even take place on Bitcoin although they both existed simultaneously, to prove that ransomware did grow on its own accord just fine. And today the vast majority of criminal activity occurs through traditional payment rails. Many studies have shown Bitcoin network criminal activity to be incredibly small (in the range of one percent). Bitcoin cannot simultaneously be an incredibly useless, overly expensive, non-currency like system but also be purposely built for criminal payments when those criminals have the exact same requirements with traditional payment systems. Of the 4B hack made almost 6 years ago, not even a billion dollars was successfully laundered. That's appalling by criminal standards in which multi trillions of dollars are laundered every year. Fourth, feeding off my last point, KYC/AML should never be the shining bastion of success to stand behind. Simply look at the reported success numbers, read the 2011 UN report, or listen to the markets estimated billions in wasted cost. It's empirically a failure of the modern financial system more than a success. Finally, the presence of tokens in a network more than anything represents the monetization of that networks underlying value. How this is not applauded and encouraged blows my mind in the current age we live in. Digital networks in their modern form have been the source of incredible monopolies, abuse, and systemically destabilizing elements within society for two decades now. That we should not wish to see their fundamental arrangements challenged baffles me. The usage of a token to facilitate network activity, direct user ownership, and provide a scarcity element in an otherwise infinitely reproducible domain is necessary work. I would support this innovation to be done within the confines of our traditional financial system had the current banking system not proven itself to be ossified and unusably gridlocked in innovation. Just look at the rise of fintech, the growth of nonbank finance, and the continued failure of developing market funding (not just developing economies, but the actual lower end segments of our individual markets characterized by small businesses) as proof. And I agree with parts of his presentation. Cryptocurrencies are currently incredibly divisive, unreliable, risky, and a few have incredibly poor environmental outcomes. But there is incredibly necessary innovation that is occurring at the core of the market. The existing high wealth inequality, cyber risks, overconcentration, and stagnation of our broader more traditional markets is proof that there are raw opportunities that need to be solved. In the end, I am saddened to see the state of our world. I see the initiation of this work from a small group of anarchists and libertarians as both a failure of our system and as the only probably place it could have come from. The existing system has failed, I am shocked at anyone who can refute that claim after the insane levels of market corruption and speculation that characterized the 90s, the financial crisis of 2008, and the absolute global stagnation of production following that has then led to the progressively high levels of public and private indebtedness since. To act as if Bitcoin, once characterized as the "evil spawn of the crisis", wasn't exactly what our society deserved is IGNORANT and ARROGANT.
codebolt 5y ago
Interesting to note that the CTO of Azure cites this article as a source of reasons 'blockchains are a dead end'. https://twitter.com/markrussinovich/status/1492174833945231360?t=k7UM7n5yz1jEesFyAFemQA&s=19 https://twitter.com/markrussinovich/status/14921748339452313...
- deleted 5y ago
  [deleted]
ssss11 5y ago
This is a very well written article thank you op
newyankee 5y ago
Criticisms are valid but has there been anything more decentralized that exists today. The participants should have some incentive to participate and not mostly volunteers like Wikipedia. Genuine question.
- WA 5y ago
  Traditional fiat, and on a global scale, it is decentralized through various institutions with different goals.
  - lowkey 5y ago
    With Bitcoin, anyone can create new coins via mining - but it takes a lot of work and is difficult. With fiat, only central banks can print new money but it is cheap and easy for them to do so. Claiming traditional fiat is decentralized is like saying Central Banks are decentralized. It is simply not true.
    - giaour 5y ago
      You can print new fiat money. The tried and true ways are: - Make loans that with less than 100% reserve backing (be a bank) - Print up your own negotiable instruments denominated in an existing currency (sell gift cards) - Create a new currency and hope others accept it (be a central bank)
- lkrubner 5y ago
  Under a system of fiat currency, new currency is created when a bank makes a loan, typically under restrictions set by a central bank and within a price band that is loosely set by that central bank. There are 212 countries and hundreds of thousands of banks, each making individual decisions about when to make a loan. There are more such banks than there are miners of Bitcoin, so the fiat system is more decentralized than Bitcoin.
  - inter_netuser 5y ago
    ...so hundreds of thousands of banks globally, and yet all dance to the tune of the fed. either directly or indirectly via the local cb. very decentralized.
inter_netuser 5y ago
Key phrase in the article: "I was asked at short notice to fill in for a speaker" I'll spare you the time: he's either wilfully or intentionally misinformed, far too many errors to count. Utterly unaware of any scaling solutions, and stuck on the "zomg carbon footprint" FUD, unable to utter the word "nuclear". This is despite the common knowledge that today good chunk of hashrate being produced by renewables in the US and nuclear in Russia. Quotes unreliable sources that have a stated agenda and apparent conflicts of interest. Outdated, inaccurate, sloppy.
- PhileinSophia 5y ago
- thematrixturtle 5y ago
  I'll bite, would you care to list three of those "far too many" errors?
  - inter_netuser 5y ago
    1. not a single mention of any scaling solutions whatsoever. 2. "zomg carbon footprint" - apparently renewables can't properly supply enough to power a tiny country size of Portugal or Netherlands? I thought we are going to power the Earth with renewables? Something seems rather inconsistent here. Of course this Malthusian cannot bring himself to utter the word "nuclear". 3. Mining pools are made up of many individual miners andm depending on the protocol, the lucky hashing units and not the pool, constructs the block, and as such would not be a trusted third party. Something he seems to be blissfully unaware of. Even if the pool constructs the block - hashing units can be pivoted away from a malicious pool in seconds. 4. Banks get hacked and lose money on the regular, it's not unique to DeFi. Insurance for DeFi exists, just it banks purchase fidelity bonds. 5. Not a single mention of censorship resistance at all. This alone should disqualify this immediately, tbh. Reads like something written by a privileged, out of touch person who has never had to face a day of actual hardship in his life, such as: confiscation of wealth, destruction of savings by inflation, personal bankruptcy due to sovereign default, or even outright denial of access to banking for the politically suppressed minorities.
vmception 5y ago
> even if it were true that cryptocurrencies ran on renewable power, the idea that it is OK for speculation to waste vast amounts of renewable power assumes that doing so doesn't compete with more socially valuable uses for renewables, or indeed for power in general Yes, this is exactly what is going on. If you think you have a solution to this decades old reality, then thank cryptocurrency for forcing you to notice. Energy was being wasted, renewable energy was also being wasted, in perpetuity, forever, until cryptocurrency producers put their applications at the site and started using it. There is still a lot more energy of this kind that will be tapped into by miners. Again, if you really think you have another economically viable alternative, emphasis on economically viable, then dont forget to thank bitcoin, and also do the thing. You’ll single handled help many people and gain leverage in public policy to enforce your dream world that excludes proof of work.
- netcan 5y ago
  Economic viability depends on price. Where mining drives up prices, outcompeting other uses, it's driving out otherwise viable uses.
  - chrisco255 5y ago
    Wherever mining drives up prices it cuts directly into the profit margins of that miner. The electricity market is local while the Bitcoin market is global. A miner who faces an increase in electric costs will lose to miners in other parts of the globe with cheaper electricity.
  - vmception 5y ago
    That happens sometimes, but just like the talk OP posted, it requires imagining the coal plants and ignoring all the other operations more applicable to what I described Although relaunched coal operations or weak electrical grids is what makes the news, the other energy use is just a much greater opportunity for miners and much more prevalent already in use and scale. I think anti-POW vigilantes actually have a role in making sure it stays that way because there is a real threat, but it requires then acknowledging that it already happens that way, but since people are searching for ways to be anti-POW instead of looking for energy uses that were worse before POW moved in, it is an ironic way to lose this battle.
yrral 5y ago
Points 8-12 about energy consumption are well written, but ignore the fact that the flexibility in which bitcoin mining consumes electricity uniquely allows development of renewables in areas where further development would otherwise be economically non-viable. In places with a high renewable generation mix, electricity prices are often very volatile, sometimes very cheap and even negative in times of high production and sometimes very expensive when production is low and demand is high. Proof of work mining uniquely only draws electricity when prices are economically viable, only buying electricity when there is excess supply, and can quickly shut down when that situation changes. You can see this eg: in Texas where ERCOT has signed demand response agreements with many bitcoin mining companies to cut power when demand is high and supply is low (not that they would choose to continue operating anyway given the marginal price of electricity vs the marginal bitcoin production). https://www.cnbc.com/2021/12/04/bitcoin-miners-say-theyre-fixing-texas-electric-grid-ted-cruz-agrees.html https://www.cnbc.com/2021/12/04/bitcoin-miners-say-theyre-fi... https://www.dallasnews.com/business/energy/2022/02/04/texas-crypto-miners-voluntarily-shut-down-to-keep-electricity-flowing-to-homes-during-freeze/ https://www.dallasnews.com/business/energy/2022/02/04/texas-...
- raverbashing 5y ago
  > n Texas where ERCOT has signed demand response agreements with many bitcoin mining companies to cut power when demand is high So the "cryptobros" think this is new and exclusive for crypto? No and no. Their hype to damage ratio is starting to match those of tobacco companies.
  - yrral 5y ago
    I am not aware of any other large consumer of power that can cut power with seconds of notice without economic harm. Eg: google/facebook datacenters, aluminum smelters, factories, etc.
    - rrrazdan 5y ago
      Aluminum smelters do this all the time btw. Also there is economic harm in shutting down mining I.e loss of mining fees.
WaxedChewbacca 5y ago
bogota 5y ago
- inter_netuser 5y ago
  It's great actually. As soon as this orange website accepts the orange coin as holy gospel - then, and only then, has crypto truly peaked.
  - birracerveza 5y ago
    Nah, I think people here (and generally all "crypto bad, period" mindset folks) would rather starve to death than use crypto, were it to replace all currencies globally. You still see people keep repeating the same talking points over and over, even if they were made obsolete years ago. I don't see that happening anytime soon.
    - NicoJuicy 5y ago
      Euh, i went out of crypto at 2018. I think many people here experimented with it and werec at least early adopters. Later on, i ( and probably similar) didn't "believe" in the benefits it would bring. What left is this that speculate with it ( and Ethereum trying to reduce the decline). Sure, perhaps there will be a actual use-case. But 14 years is a long time, should have been long enough.
  - deleted 5y ago
    [deleted]
  - yxhuvud 5y ago
    No. It is more that lots of people have been here a long time. Some of us were here not only during the $300 bubble but also during the $35 bubble and some also remember the posts around the time when the first pizza transaction happened. That is, we have seen a lot of the history of bitcoin and tend to have become less positive and more skeptical over time.
    - inter_netuser 5y ago
roenxi 5y ago
What a gripping read. Probably the most curious part is that this is the EE380 course but the topics that need to be probed are largely the domain of economics, philosophy and law. And since crypto is new, these are arguably at the cutting edge of those fields. Nobody has ever had to deal with actual immutability of a trade good before. There is work here to synthesise cryptocoins into the existing frameworks. It may not be the most exciting area to work in, but these are new.
JonathanBeuys 5y ago
Over the last weeks, I have been thinking a lot about how "substantial" cryptocurrencies are. When I think about a new technology, I like to come up with a "proof" that something is or is not substantial. Something like "Email transfers a message just as well as a letter, but is orders of magnitude faster. Therefore, email has substantial value". For Bitcoin (and other crypto), I came up with this "proof" that it is not a fad: You can freely buy all kinds of stuff everywhere. A company can sell you a bag of stones. A hammer. A knife. A pencil. A lamp. But you cannot buy Bitcoin freely anywhere. If you want to buy Bitcoin, the government jumps in and says "Oh no! This is extremely dangerous! Write down the identity of this person. We need to monitor them!". If Bitcoin is so dangerous to governments, it cannot be just a fad.
- prox 5y ago
  You’re making a strange leap there in the second part of your bitcoin example. In your email your argument is “email is faster” In your bitcoin example it is “you can buy (with) bitcoin everywhere” and then suddenly “but governments monitor me so it cannot be a fad.” That seems a non-sequitur to me. Something is not a fad because a government tracks you.
  - danlugo92 5y ago
    > “you can buy (with) bitcoin everywhere” He didn't say that, read his comment againt.
- inter_netuser 5y ago
  1. It's so dangerous! 2. It's going to boil the oceans! 3. We officially recognize it as currency.
  - jakupovic 5y ago
    "First they ignore you, then they laugh at you, then they fight you, then you win"
- amscanne 5y ago
ajkdhcb2 5y ago
To point out one part that is completely false: > 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity. >In other words, 90% of Bitcoin's carbon footprint is used in a partially successful attempt to compensate for its deficient anonymity. Miners are mainly rewarded by the new bitcoins that are created in each new block. The energy usage does not come from processing transactions; it is largely independent, it is not uncommon that miners even mine blocks that contain no transactions. If you stop 90% of transactions you will definitely not see the hashrate drop by 90%. It shocks me that so few people seem to understand this; we keep having articles saying that bitcoin transactions are a waste of energy, and everyone ignoring that the block reward halves every few years until it drops to zero, so it not built with the incentives to use this much energy forever. In fact there is the opposite concern: with widespread usage of systems like Lightning Network and no block reward, there may not be enough incentive for people to mine enough to secure the network.
- senectus1 5y ago
  I wonder if anyone has modeled what the energy usage is AFTER all the mining is done?
  - inter_netuser 5y ago
    It's a complete unknown and entirely open field of inquiry. It's like asking about what types of books will be published in a 100 years from now, given we just invented the Gutenberg press. In short, it will depend entirely upon the demand. This whole thing is about money, technology is secondary.
  - meheleventyone 5y ago
    Presumably high transaction fees to offset the loss of direct reward for mining to keep the engine of PoW running so the network remains secure.
    - ajkdhcb2 5y ago
BillyTheKing 5y ago
I think what's usually being overlooked by 'people in the West' is how crypto-currencies are being used by individuals in emerging markets to evade domestic currency controls. I've recently had the chance to get a glimpse into the crypto volumes generated by that sort of activity, let's just say they're staggeringly high. Domestic currency controls seem to offer all sorts of arbitrage possibilities that can be exploited using crypto currencies, the cycle usually goes -> some weak currency -> somehow convert to crypto -> sell crypto for USD -> sell USD back for that same weak domestic currency with a markup. In addition, compared to those currencies, crypto currencies offer both stability and interchangeability into stronger store of values (be that other currencies or stocks or what not). In this system crypto exchanges have become global banks of sorts that allow their clients to manage their now globally available funds. Putting all other things and considerations etc. aside this is a pretty fascinating system fuelled by weak states and failing economies all around the world. I think as long as those states exist there will always be an incentive for such systems to exist.
- ngc248 5y ago
  people keep saying this in every thread. I don't understand how that works. Is it that people in the "weak" states are using BTC for commerce or are they exchanging BTC to USD and then using it. How does it work? I doubt there are exchanges which will do the BTC -> USD conversion. So what are these people using to do this? Coinbase?
  - meheleventyone 5y ago
    Yes and it always curiously ignores that mobile banking is the actual technology that has actually massively helped the unbanked. I suspect if Bitcoin is helping people in these countries evade currency controls it’s helping the rich not the poor and rather enabling capital flight than adding stability.
    - eru 5y ago
      You are mostly right, but do keep in mind that enabling capital flight is a _good_ thing! Just like helping people to leave bad places is a good thing. The risk of capital flight puts a limit on how bad the local regime can screw up the economy and still squeeze money out of it. (And calling it capital flight is just a mean way of saying 'people want to invest elsewhere'.)
rdbell 5y ago
Alex Gladstein has been doing good work interviewing and documenting the ways marginalized people are using Bitcoin to escape tyranny and oppression. https://alexgladstein.com/ https://alexgladstein.com/ Anyone who understands what Bitcoin enables and still doesn’t agree that Bitcoin is valuable and good for the world has a wildly different set of values that I can’t understand. David Rosenthal’s article says he IPO’d 3 startups back-to-back. I suspect he’s living in a different world than the people who can see the biggest benefits from Bitcoin.
- 74B5 5y ago
  The Problem is, there is a fundamental contradiction between what a currency and what a investment is. Unfortunately, cryptobros can enforce the latter and the system will go from decentral to federated to centralized. I hope you can understand me.
  - rdbell 5y ago
    Yes, I understand that perspective. I'm uninterested in whatever latest hype projects are sucking up money from get-rich-quick investors and it's unfortunate that the general understanding of what cryptocurrencies are has shifted, because that's how you end up with FUD articles that don't differentiate between Bitcoin and other projects. But ultimately, alt projects don't affect the Bitcoin technology and centralized platforms don't affect anyone's ability to self-custody.
- stormbeta 5y ago
  > Anyone who understands what Bitcoin enables and still doesn’t agree that Bitcoin is valuable and good for the world has a wildly different set of values that I can’t understand. You have that right at least. I cannot understand anyone who promotes the use of systems that catastrophically increase the risks of human error, particularly for the most vulnerable, and which pointedly ignore that other solutions may work better. Particularly when the people promoting those systems have an obvious financial incentive to misrepresent them.
  - 5y ago
5350-uiop-1130 5y ago
I gave up on the technical merits and accepted that I invest for the same reason one would invest in a company. The hope that of selling to a greater fool - or maybe I would be the fool, who knows. I believe there is merit in BTC but it's value is propped up by fake USDT unbacked $. I don't think there is liquidity for everyone to cash out at same time. Which is why exchanges always shutdown during periods of turbulence.
- nefitty 5y ago
  I respect that. I don't respect seemingly intelligent people bullshitting their participation farther beneath technical obscurantism. I mean, some of these people seem like hyper-intelligent savants, but then again, I guess Wall Treet suffers from the same type of self-delusion or outright fraud. Just be honest. You're playing musical chairs hoping you'll have a seat when the music stops.
  - 5350-uiop-1130 5y ago
    Of course. I think anyone that's done a bit of research knows that it's just a form of ponzi. But this is the clown world we seem to be living in for now.
    - hiq 5y ago
      What's your exit strategy?
      - 5350-uiop-1130 5y ago
        I was fortunate to buy BTC in 2014, so I have the luxury of patience. For my other holdings I take profits aggressively and don't lose any sleep over missed opportunities. The way I see, it's a coin toss and I'm too lazy to get into technical analysis. What I've learnt over the years is to ignore the optimism, in the right circumstances pretty much every cryptocurrency trends towards zero. So I'm very cynical about it.
- lariati 5y ago
sprusemoose 5y ago
it's beautiful how blockchain is evolving/reflexive with society, storing wealth has a collective consciousness. David Rosenthal flaps his butterfly wings
bluecalm 5y ago
It's good to see more people coming out against crypto currencies. While it's clear to competent people the tech is just bad and the crypto space is worse we are far beyond "the fad will go away by itself without incurring much damage" stage. We are in serious danger of the cancer growing and affecting other industries and at this point millions of people the same way some Ponzis and pyramids grew in the past. It's becoming a moral issue and I feel it's time to make a serious stand against it. As to the article: I feel the most important point is missing. Yes, crypto is a bad, inefficient, wasteful, slow, insecure technology which only got traction because it allowed skipping over financial regulation. Still, even if it wasn't all that it would still be a terrible idea as a currency with inflexible money supply scheme can't work. We went through it many times in human history. It's easy to see from simple thought experiments and simulations as well. It's elementary economics. How can we ever hope to make an economic argument when we can't use it against the simplest thing out there? The whole crypto currency thing removes whatever was left from my faith in humanity. It getting traction in the tech space is just a final slap in the face as there was some hope people in our space care just a bit more beyond "number goes up if we throw enough coal on it" distributed Ponzi. We are ready to pick up our pitchfork when it comes to privacy violations even though there is at least a lot of value provided by the main offenders or against dark patterns in website design or even when it comes to a bit old fashioned politically incorrect language. Here we have one big dark cloud of a ticking bomb and I see my colleagues accepting job offers from the grifters, buying the scam tokens and trying to sell them to others before they collapse, CEOs of supposedly serious companies advocating for it (Twitter anyone? No matter it's down since IPO with that kind of person at the helm), youtubers producing Ponzi propaganda en masse, sponsorship being accepted at major events. If it continues for a few years at this pace it will result in a dotcom bubble on steroids with a lot of desperate people and a lot of crime barons ending up with millions to use in the real world. It will not be as nice out there when it's all done.
- jakupovic 5y ago
  >The whole crypto currency thing removes whatever was left from my faith in humanity. Just a friendly advice, get out more and stare less at computers. In the big scheme of things, crypto doesn't matter, nor does HN and the same with me telling you this. Peace :)
jakupovic 5y ago
Another article with a bunch of questionable data. Why can't crypto be dealt with the same as other technologies we don't like? Vote with your wallet, you don't like it don't use it. But don't try to convince me that I'm wrong because I do use it. Because if you do, but leave things of the table, such as fashion, military, sporting entertainment and a million other things people are not up in arms about, that makes you ignorant at best.
- nosianu 5y ago
  > Another article with a bunch of questionable data Could you please elaborate? > Vote with your wallet, you don't like it don't use it. But don't try to convince me I don't understand this argument. You can easily do exactly what you ask of others: Don't click on the headline (the reader equivalent of "vote with your wallet"). Nobody is trying to convince you of anything. You came to the thread all on your own, and there since nobody reads every single topic posted on HN you made a conscious decision and an effort to expose yourself to this article and this discussion. > Because if you do, but leave things of the table... That argument makes just as little sense. We cannot discuss something because we have not yet discussed something else? Since this can be applied to every single topic, nothing can ever be discussed. The argument only makes some sense, depending on context, if the topics are chained together and the one being discussed depends on some other, and we don't have a result yet, so discussing the dependent one is not possible without knowing more about the previous one.
  - jakupovic 5y ago
    > Because if you do, but leave things of the table... [......] The point of the article is: "BTC POW bad because too much energy". So, author is allowed to discuss, bitcoin, energy, waste, other equivalent technologies, but I cannot bring up other industries which also waste energy and whose use is questionable? That's the sense or logic if you prefer.
- koonsolo 5y ago
  There is 1 difference. People are voting with their wallets, and it's paying off. So even though we are reaping the benefits now, they need to prove we are all "stupid and the whole ponzi scheme will collapse and you will cry and we will say told you so." Jealousy, plain and simple. HN hates crypto, but instead of ignoring it, articles such as these keep popping up, to comfort everyone that "we're not stupid but they are."
yellowapple 5y ago
Re: proof-of-stake, it's pretty disingenuous to seemingly base the entirety of one's criticism of it on a cryptocurrency that has yet to migrate onto it rather than, say, the multiple cryptocurrencies in the top 10 by marketshare that are already on it and have at least claimed to have addressed the vaguely-alluded-to centralization issues. This seems to be a recurring theme of proof-of-stake criticisms: "well obviously PoS is a PoS because Ethereum hasn't addressed its problems yet... Cardano? Solana? Never heard of 'em!". That ain't to say that proof-of-stake is perfect, either, but it's painfully obvious that its critics are coming in seeking to appease their confirmation biases rather than evaluate new technologies objectively and rationally. Full disclosure: I do own a decent amount of some cryptocurrencies, including various PoW and PoS currencies. I'm obviously biased in favor of them, but at least I'm willing to admit that.
koonsolo 5y ago
> Bitcoin is notorious for consuming as much electricity as the Netherlands, but there are around 10,000 other cryptocurrencies, most using similar infrastructure and thus also in aggregate consuming unsustainable amounts of electricity. Nice generalization. I stopped reading after that. How much is the banking system with all of its employees and buildings wasting I wonder.
- NicoJuicy 5y ago
  They aren't including the people of Binance and etc. In every country either in that calculation, you should try reading it. It has some pretty good points.
  - koonsolo 5y ago
    Sorry, but Binance is not web3. Why didn't you give SushiSwap or any other decentralized exchange as example?
    - NicoJuicy 5y ago
      ? > How much is the banking system with all of its employees and buildings wasting I wonder. So, you want to compare the entire banking sector with just a subset of a subset ( eg. Sushiswap)? I took Binance as an example that the whole Bitcoin electricity thing didn't take into account and that your comparison isn't even in the same league. Binance has eg. Obvious employees/developers. There are many more things not included in your "reference". Sushiswap is just a subset of what wasn't included either.
627467 5y ago
Looking forward to rebuttal of the argument where cryptocurrencies aim to unbundle a fundamental state monopoly: money creation and finance.
- csdvrx 5y ago
  Great point, as there're only 2 ways to make money in business: bundling and unbundling https://anderson-review.ucla.edu/bundling/ https://anderson-review.ucla.edu/bundling/
jasfi 5y ago
I think that crypto is still going through it's early stages. There are many problems to overcome, such as mining which wastes huge amounts of energy. One problem I'm working to overcome is safety during buying and selling cryptocurrencies. It's very easy to make a mistake when buying/selling, especially for inexperienced users. Even experienced users also make mistakes. The answer is automated trading, which has more safety built-in. You can use it whether you want to invest over the long term or look for short term gains. https://tradecast.one https://tradecast.one
- NicoJuicy 5y ago
  As the article mentioned, we are 14 years in which is not "early stage". 14 years after the first browser we had: Google, WordPress, ...
  - jasfi 5y ago
    5 years after most people were not aware of crypto, maybe ever later than that. The stage of something can't be determined by a number of years.
    - NicoJuicy 5y ago
      Useful things get adopted pretty fast. Except when it's too early for eg. The hardware ( tablet and ml come to mind)
mattdesl 5y ago
I think this article addresses some legitimate concerns of Bitcoin and PoW, but fails to present a strong argument against cryptocurrency networks running on Proof of Stake. Gini coefficient is a poor metric to describe distribution in a cryptocurrency network. A single user may utilize dozens of wallet addresses, with the majority of their value centralized on only one or two addresses. In some cases, users may deposit value into shared contracts (DAI, WETH, staking, liquidity pools, DAOs, etc), giving the impression that the token balances are unequally distributed across the network. The WETH contract address, for example, is holding $22B USD worth of tokens. There are many current Proof of Stake cryptocurrencies that would be worth considering and analyzing: Tezos, Solana, Avalanche, Cosmos, Polkadot, Cardano, Celo, Mina.
lifeisstillgood 5y ago
There is a ream of "real" papers and studies linked here that I simply did not know existed (proof of work papers before Satoshi etc). This is going to be a very dumb question but how does one catch up on the computer science academic literature ?
EVa5I7bHFq9mnYK 5y ago
There is a misconception that Bitcoin electricity usage is increasing exponentially and uncontrollable. In fact, it is limited by Bitcoin price times Bitcoin issuance rate. For example, at current BTC price, electricity usage has an upper limit of $37m per day. If miners spend more than that, their operation becomes unprofitable. In fact, they spend less, because there are also other expenses. From April 2024, the new upper limit will be $18mln/day, if the price remains stable. If Bitcoin price rises in line with it's decreasing issue rate, in 12 years we'll have Bitcoin at $328,000, but the electricity costs will stay same as today. $37m per day is about $1.1B a month. If we divide this by world's population of 8 billion people, we arrive at a figure of 14 cents per month. 14 cents is what you are paying to Visa for your morning croissant in transaction fees. On top of this, you pay a lot of taxes to the government to maintain and secure the money system. Now what are we getting for 14 cents a month? We are getting money that is unforgeable, uninflatable, irreversible, uncensorable, electronic, capable of millions of transactions per second, available to anyone worldwide 24/7/365. We are getting a piece of freedom in a world that is becoming more and more centralized and controlled from above.
- fragmede 5y ago
  > their operation becomes unprofitable That assumes that everyone needs to spend more than they get in crypto for it to be worth their while. If I had $100, and I gave it to you, and you gave me back $80, that would be a bad deal for me, right? Except if that $100 is "dirty", and the $80 is "clean", that might be worth it to some.
  - EVa5I7bHFq9mnYK 5y ago
    It is theoretically possible, but I doubt it really happens at scale. If it were, we'd already had front page articles about it.
- Eddy_Viscosity2 5y ago
  Did you just divide the bitcoin electric costs by the ENTIRE population of the Earth, as if all 8 billion people are currently using bitcoin???
gregwebs 5y ago
There are some intelligent criticisms here along with some fundamental misunderstandings. The biggest misunderstanding that crypto critics and even many advocates have is that Bitcoin is a currency that people will buy stuff with. If Bitcoin has any use, it is as a final settlement layer. The Lightning network that is layered on top of Bitcoin is what is actually useful for buying stuff. Much of this article is based on this misunderstanding. A correct criticism is that Bitcoin can be controlled by pooling mining. But a more nuanced take would be to say that it is a system that works due to aligning the economic interest of the miners providing the decentralized security with the users. The real problem with government fiat currency is less the centralization but more that the centralized actor is incentivized to monkey around with it, and particularly to devalue everyone else's money by printing as much new currency as they can without creating rampant inflation. With Bitcoin, miners could attempt to control the currency, but then it would lose all its value, so they choose not to. It's certainly still a risk to the system, particularly when one nation state like China previously did most of the mining.
- aNoob7000 5y ago
  Is Bitcoin an asset or a currency? Because right now it is being traded and used like an asset not a currency.
  - gregwebs 5y ago
    There’s similar issues with gold currency. Gold is a self custody asset like Bitcoin: https://www.lynalden.com/gold-and-bitcoin/ https://www.lynalden.com/gold-and-bitcoin/ Just as dollars used to use a gold standard, Lightning is using a Bitcoin standard. So it’s an asset that can be used as a base layer for currency.
  - TheColorYellow 5y ago
    Currencies ARE assets. Even fiat currency requires it be viewed as an asset by society to then lend its usage as a currency.
    - giaour 5y ago
cannabis_sam 5y ago
[flagged]
cannabis_sam 5y ago
It’s hilarious and embarrassing, the extent that people are willing to go, just to deny that every single problem with crypto stems directly from the underlying economic system.

227 points by codebolt 5y ago

There are some fundamental misconceptions still, but it's a great post. First, crypto currencies networks are not attempting to rely on no intermediaries, but rather removing the need for trusted intermediaries. Yes there are challenges and constraints to this, but the successful operation of the Bitcoin network without a single trusted intermediary (and surviving several large physical shifts and attacks from the mining community) is a testament to its success. Prior to Bitcoin, there wasn't a single non-bank digital currency system that succeeded precisely because of the trust issues. Bitcoins success in that regard is not mentioned once. Second, the current cost of token ownership is not always the representative cost of entry for users. Where the network requires high fees, this may be true, but there are low fee networks with varying degrees of decentralization (Stellar, Hadera, Avalanche, Solana to name a few) that get no mention here. And no, because they are less decentralized that doesn't make the point moot. It's a spectrum, and ultimately many infrastructure services do try to achieve some form of decentralization in even more traditional contexts, so to throw out the low cost fee networks makes no sense. For things like Ethereum and Bitcoin, the fees are akin for users having access or using underlying settlement and base infrastructure systems (like mainline Telcom cables, the water main, or the high value payment system of a country). These systems are all expensive. The fact that they are expensive is indicative of demand at best and a limitation of performance given security constraints at worst. Third, the alleged illicit use of cryptocurrencies continues to be incorrect. The early years of the ransomware wave didn't even take place on Bitcoin although they both existed simultaneously, to prove that ransomware did grow on its own accord just fine. And today the vast majority of criminal activity occurs through traditional payment rails. Many studies have shown Bitcoin network criminal activity to be incredibly small (in the range of one percent). Bitcoin cannot simultaneously be an incredibly useless, overly expensive, non-currency like system but also be purposely built for criminal payments when those criminals have the exact same requirements with traditional payment systems. Of the 4B hack made almost 6 years ago, not even a billion dollars was successfully laundered. That's appalling by criminal standards in which multi trillions of dollars are laundered every year. Fourth, feeding off my last point, KYC/AML should never be the shining bastion of success to stand behind. Simply look at the reported success numbers, read the 2011 UN report, or listen to the markets estimated billions in wasted cost. It's empirically a failure of the modern financial system more than a success. Finally, the presence of tokens in a network more than anything represents the monetization of that networks underlying value. How this is not applauded and encouraged blows my mind in the current age we live in. Digital networks in their modern form have been the source of incredible monopolies, abuse, and systemically destabilizing elements within society for two decades now. That we should not wish to see their fundamental arrangements challenged baffles me. The usage of a token to facilitate network activity, direct user ownership, and provide a scarcity element in an otherwise infinitely reproducible domain is necessary work. I would support this innovation to be done within the confines of our traditional financial system had the current banking system not proven itself to be ossified and unusably gridlocked in innovation. Just look at the rise of fintech, the growth of nonbank finance, and the continued failure of developing market funding (not just developing economies, but the actual lower end segments of our individual markets characterized by small businesses) as proof. And I agree with parts of his presentation. Cryptocurrencies are currently incredibly divisive, unreliable, risky, and a few have incredibly poor environmental outcomes. But there is incredibly necessary innovation that is occurring at the core of the market. The existing high wealth inequality, cyber risks, overconcentration, and stagnation of our broader more traditional markets is proof that there are raw opportunities that need to be solved. In the end, I am saddened to see the state of our world. I see the initiation of this work from a small group of anarchists and libertarians as both a failure of our system and as the only probably place it could have come from. The existing system has failed, I am shocked at anyone who can refute that claim after the insane levels of market corruption and speculation that characterized the 90s, the financial crisis of 2008, and the absolute global stagnation of production following that has then led to the progressively high levels of public and private indebtedness since. To act as if Bitcoin, once characterized as the "evil spawn of the crisis", wasn't exactly what our society deserved is IGNORANT and ARROGANT.

codebolt 5y ago

Interesting to note that the CTO of Azure cites this article as a source of reasons 'blockchains are a dead end'. https://twitter.com/markrussinovich/status/1492174833945231360?t=k7UM7n5yz1jEesFyAFemQA&s=19 https://twitter.com/markrussinovich/status/14921748339452313...

deleted 5y ago
[deleted]

ssss11 5y ago

This is a very well written article thank you op

newyankee 5y ago

Criticisms are valid but has there been anything more decentralized that exists today. The participants should have some incentive to participate and not mostly volunteers like Wikipedia. Genuine question.

WA 5y ago
Traditional fiat, and on a global scale, it is decentralized through various institutions with different goals.
- lowkey 5y ago
  With Bitcoin, anyone can create new coins via mining - but it takes a lot of work and is difficult. With fiat, only central banks can print new money but it is cheap and easy for them to do so. Claiming traditional fiat is decentralized is like saying Central Banks are decentralized. It is simply not true.
  - giaour 5y ago
    You can print new fiat money. The tried and true ways are: - Make loans that with less than 100% reserve backing (be a bank) - Print up your own negotiable instruments denominated in an existing currency (sell gift cards) - Create a new currency and hope others accept it (be a central bank)
lkrubner 5y ago
Under a system of fiat currency, new currency is created when a bank makes a loan, typically under restrictions set by a central bank and within a price band that is loosely set by that central bank. There are 212 countries and hundreds of thousands of banks, each making individual decisions about when to make a loan. There are more such banks than there are miners of Bitcoin, so the fiat system is more decentralized than Bitcoin.
- inter_netuser 5y ago
  ...so hundreds of thousands of banks globally, and yet all dance to the tune of the fed. either directly or indirectly via the local cb. very decentralized.

inter_netuser 5y ago

Key phrase in the article: "I was asked at short notice to fill in for a speaker" I'll spare you the time: he's either wilfully or intentionally misinformed, far too many errors to count. Utterly unaware of any scaling solutions, and stuck on the "zomg carbon footprint" FUD, unable to utter the word "nuclear". This is despite the common knowledge that today good chunk of hashrate being produced by renewables in the US and nuclear in Russia. Quotes unreliable sources that have a stated agenda and apparent conflicts of interest. Outdated, inaccurate, sloppy.

PhileinSophia 5y ago
thematrixturtle 5y ago
I'll bite, would you care to list three of those "far too many" errors?
- inter_netuser 5y ago
  1. not a single mention of any scaling solutions whatsoever. 2. "zomg carbon footprint" - apparently renewables can't properly supply enough to power a tiny country size of Portugal or Netherlands? I thought we are going to power the Earth with renewables? Something seems rather inconsistent here. Of course this Malthusian cannot bring himself to utter the word "nuclear". 3. Mining pools are made up of many individual miners andm depending on the protocol, the lucky hashing units and not the pool, constructs the block, and as such would not be a trusted third party. Something he seems to be blissfully unaware of. Even if the pool constructs the block - hashing units can be pivoted away from a malicious pool in seconds. 4. Banks get hacked and lose money on the regular, it's not unique to DeFi. Insurance for DeFi exists, just it banks purchase fidelity bonds. 5. Not a single mention of censorship resistance at all. This alone should disqualify this immediately, tbh. Reads like something written by a privileged, out of touch person who has never had to face a day of actual hardship in his life, such as: confiscation of wealth, destruction of savings by inflation, personal bankruptcy due to sovereign default, or even outright denial of access to banking for the politically suppressed minorities.

vmception 5y ago

> even if it were true that cryptocurrencies ran on renewable power, the idea that it is OK for speculation to waste vast amounts of renewable power assumes that doing so doesn't compete with more socially valuable uses for renewables, or indeed for power in general Yes, this is exactly what is going on. If you think you have a solution to this decades old reality, then thank cryptocurrency for forcing you to notice. Energy was being wasted, renewable energy was also being wasted, in perpetuity, forever, until cryptocurrency producers put their applications at the site and started using it. There is still a lot more energy of this kind that will be tapped into by miners. Again, if you really think you have another economically viable alternative, emphasis on economically viable, then dont forget to thank bitcoin, and also do the thing. You’ll single handled help many people and gain leverage in public policy to enforce your dream world that excludes proof of work.

netcan 5y ago
Economic viability depends on price. Where mining drives up prices, outcompeting other uses, it's driving out otherwise viable uses.
- chrisco255 5y ago
  Wherever mining drives up prices it cuts directly into the profit margins of that miner. The electricity market is local while the Bitcoin market is global. A miner who faces an increase in electric costs will lose to miners in other parts of the globe with cheaper electricity.
- vmception 5y ago
  That happens sometimes, but just like the talk OP posted, it requires imagining the coal plants and ignoring all the other operations more applicable to what I described Although relaunched coal operations or weak electrical grids is what makes the news, the other energy use is just a much greater opportunity for miners and much more prevalent already in use and scale. I think anti-POW vigilantes actually have a role in making sure it stays that way because there is a real threat, but it requires then acknowledging that it already happens that way, but since people are searching for ways to be anti-POW instead of looking for energy uses that were worse before POW moved in, it is an ironic way to lose this battle.

yrral 5y ago

Points 8-12 about energy consumption are well written, but ignore the fact that the flexibility in which bitcoin mining consumes electricity uniquely allows development of renewables in areas where further development would otherwise be economically non-viable. In places with a high renewable generation mix, electricity prices are often very volatile, sometimes very cheap and even negative in times of high production and sometimes very expensive when production is low and demand is high. Proof of work mining uniquely only draws electricity when prices are economically viable, only buying electricity when there is excess supply, and can quickly shut down when that situation changes. You can see this eg: in Texas where ERCOT has signed demand response agreements with many bitcoin mining companies to cut power when demand is high and supply is low (not that they would choose to continue operating anyway given the marginal price of electricity vs the marginal bitcoin production). https://www.cnbc.com/2021/12/04/bitcoin-miners-say-theyre-fixing-texas-electric-grid-ted-cruz-agrees.html https://www.cnbc.com/2021/12/04/bitcoin-miners-say-theyre-fi... https://www.dallasnews.com/business/energy/2022/02/04/texas-crypto-miners-voluntarily-shut-down-to-keep-electricity-flowing-to-homes-during-freeze/ https://www.dallasnews.com/business/energy/2022/02/04/texas-...

raverbashing 5y ago
> n Texas where ERCOT has signed demand response agreements with many bitcoin mining companies to cut power when demand is high So the "cryptobros" think this is new and exclusive for crypto? No and no. Their hype to damage ratio is starting to match those of tobacco companies.
- yrral 5y ago
  I am not aware of any other large consumer of power that can cut power with seconds of notice without economic harm. Eg: google/facebook datacenters, aluminum smelters, factories, etc.
  - rrrazdan 5y ago
    Aluminum smelters do this all the time btw. Also there is economic harm in shutting down mining I.e loss of mining fees.

WaxedChewbacca 5y ago

bogota 5y ago

inter_netuser 5y ago
It's great actually. As soon as this orange website accepts the orange coin as holy gospel - then, and only then, has crypto truly peaked.
- birracerveza 5y ago
  Nah, I think people here (and generally all "crypto bad, period" mindset folks) would rather starve to death than use crypto, were it to replace all currencies globally. You still see people keep repeating the same talking points over and over, even if they were made obsolete years ago. I don't see that happening anytime soon.
  - NicoJuicy 5y ago
    Euh, i went out of crypto at 2018. I think many people here experimented with it and werec at least early adopters. Later on, i ( and probably similar) didn't "believe" in the benefits it would bring. What left is this that speculate with it ( and Ethereum trying to reduce the decline). Sure, perhaps there will be a actual use-case. But 14 years is a long time, should have been long enough.
- deleted 5y ago
  [deleted]
- yxhuvud 5y ago
  No. It is more that lots of people have been here a long time. Some of us were here not only during the $300 bubble but also during the $35 bubble and some also remember the posts around the time when the first pizza transaction happened. That is, we have seen a lot of the history of bitcoin and tend to have become less positive and more skeptical over time.
  - inter_netuser 5y ago

roenxi 5y ago

What a gripping read. Probably the most curious part is that this is the EE380 course but the topics that need to be probed are largely the domain of economics, philosophy and law. And since crypto is new, these are arguably at the cutting edge of those fields. Nobody has ever had to deal with actual immutability of a trade good before. There is work here to synthesise cryptocoins into the existing frameworks. It may not be the most exciting area to work in, but these are new.

JonathanBeuys 5y ago

Over the last weeks, I have been thinking a lot about how "substantial" cryptocurrencies are. When I think about a new technology, I like to come up with a "proof" that something is or is not substantial. Something like "Email transfers a message just as well as a letter, but is orders of magnitude faster. Therefore, email has substantial value". For Bitcoin (and other crypto), I came up with this "proof" that it is not a fad: You can freely buy all kinds of stuff everywhere. A company can sell you a bag of stones. A hammer. A knife. A pencil. A lamp. But you cannot buy Bitcoin freely anywhere. If you want to buy Bitcoin, the government jumps in and says "Oh no! This is extremely dangerous! Write down the identity of this person. We need to monitor them!". If Bitcoin is so dangerous to governments, it cannot be just a fad.

prox 5y ago
You’re making a strange leap there in the second part of your bitcoin example. In your email your argument is “email is faster” In your bitcoin example it is “you can buy (with) bitcoin everywhere” and then suddenly “but governments monitor me so it cannot be a fad.” That seems a non-sequitur to me. Something is not a fad because a government tracks you.
- danlugo92 5y ago
  > “you can buy (with) bitcoin everywhere” He didn't say that, read his comment againt.
inter_netuser 5y ago
1. It's so dangerous! 2. It's going to boil the oceans! 3. We officially recognize it as currency.
- jakupovic 5y ago
  "First they ignore you, then they laugh at you, then they fight you, then you win"
amscanne 5y ago

ajkdhcb2 5y ago

To point out one part that is completely false: > 90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity. >In other words, 90% of Bitcoin's carbon footprint is used in a partially successful attempt to compensate for its deficient anonymity. Miners are mainly rewarded by the new bitcoins that are created in each new block. The energy usage does not come from processing transactions; it is largely independent, it is not uncommon that miners even mine blocks that contain no transactions. If you stop 90% of transactions you will definitely not see the hashrate drop by 90%. It shocks me that so few people seem to understand this; we keep having articles saying that bitcoin transactions are a waste of energy, and everyone ignoring that the block reward halves every few years until it drops to zero, so it not built with the incentives to use this much energy forever. In fact there is the opposite concern: with widespread usage of systems like Lightning Network and no block reward, there may not be enough incentive for people to mine enough to secure the network.

senectus1 5y ago
I wonder if anyone has modeled what the energy usage is AFTER all the mining is done?
- inter_netuser 5y ago
  It's a complete unknown and entirely open field of inquiry. It's like asking about what types of books will be published in a 100 years from now, given we just invented the Gutenberg press. In short, it will depend entirely upon the demand. This whole thing is about money, technology is secondary.
- meheleventyone 5y ago
  Presumably high transaction fees to offset the loss of direct reward for mining to keep the engine of PoW running so the network remains secure.
  - ajkdhcb2 5y ago

BillyTheKing 5y ago

I think what's usually being overlooked by 'people in the West' is how crypto-currencies are being used by individuals in emerging markets to evade domestic currency controls. I've recently had the chance to get a glimpse into the crypto volumes generated by that sort of activity, let's just say they're staggeringly high. Domestic currency controls seem to offer all sorts of arbitrage possibilities that can be exploited using crypto currencies, the cycle usually goes -> some weak currency -> somehow convert to crypto -> sell crypto for USD -> sell USD back for that same weak domestic currency with a markup. In addition, compared to those currencies, crypto currencies offer both stability and interchangeability into stronger store of values (be that other currencies or stocks or what not). In this system crypto exchanges have become global banks of sorts that allow their clients to manage their now globally available funds. Putting all other things and considerations etc. aside this is a pretty fascinating system fuelled by weak states and failing economies all around the world. I think as long as those states exist there will always be an incentive for such systems to exist.

ngc248 5y ago
people keep saying this in every thread. I don't understand how that works. Is it that people in the "weak" states are using BTC for commerce or are they exchanging BTC to USD and then using it. How does it work? I doubt there are exchanges which will do the BTC -> USD conversion. So what are these people using to do this? Coinbase?
- meheleventyone 5y ago
  Yes and it always curiously ignores that mobile banking is the actual technology that has actually massively helped the unbanked. I suspect if Bitcoin is helping people in these countries evade currency controls it’s helping the rich not the poor and rather enabling capital flight than adding stability.
  - eru 5y ago
    You are mostly right, but do keep in mind that enabling capital flight is a _good_ thing! Just like helping people to leave bad places is a good thing. The risk of capital flight puts a limit on how bad the local regime can screw up the economy and still squeeze money out of it. (And calling it capital flight is just a mean way of saying 'people want to invest elsewhere'.)

rdbell 5y ago

Alex Gladstein has been doing good work interviewing and documenting the ways marginalized people are using Bitcoin to escape tyranny and oppression. https://alexgladstein.com/ https://alexgladstein.com/ Anyone who understands what Bitcoin enables and still doesn’t agree that Bitcoin is valuable and good for the world has a wildly different set of values that I can’t understand. David Rosenthal’s article says he IPO’d 3 startups back-to-back. I suspect he’s living in a different world than the people who can see the biggest benefits from Bitcoin.

74B5 5y ago
The Problem is, there is a fundamental contradiction between what a currency and what a investment is. Unfortunately, cryptobros can enforce the latter and the system will go from decentral to federated to centralized. I hope you can understand me.
- rdbell 5y ago
  Yes, I understand that perspective. I'm uninterested in whatever latest hype projects are sucking up money from get-rich-quick investors and it's unfortunate that the general understanding of what cryptocurrencies are has shifted, because that's how you end up with FUD articles that don't differentiate between Bitcoin and other projects. But ultimately, alt projects don't affect the Bitcoin technology and centralized platforms don't affect anyone's ability to self-custody.
stormbeta 5y ago
> Anyone who understands what Bitcoin enables and still doesn’t agree that Bitcoin is valuable and good for the world has a wildly different set of values that I can’t understand. You have that right at least. I cannot understand anyone who promotes the use of systems that catastrophically increase the risks of human error, particularly for the most vulnerable, and which pointedly ignore that other solutions may work better. Particularly when the people promoting those systems have an obvious financial incentive to misrepresent them.
- 5y ago

5350-uiop-1130 5y ago

I gave up on the technical merits and accepted that I invest for the same reason one would invest in a company. The hope that of selling to a greater fool - or maybe I would be the fool, who knows. I believe there is merit in BTC but it's value is propped up by fake USDT unbacked $. I don't think there is liquidity for everyone to cash out at same time. Which is why exchanges always shutdown during periods of turbulence.

nefitty 5y ago
I respect that. I don't respect seemingly intelligent people bullshitting their participation farther beneath technical obscurantism. I mean, some of these people seem like hyper-intelligent savants, but then again, I guess Wall Treet suffers from the same type of self-delusion or outright fraud. Just be honest. You're playing musical chairs hoping you'll have a seat when the music stops.
- 5350-uiop-1130 5y ago
  Of course. I think anyone that's done a bit of research knows that it's just a form of ponzi. But this is the clown world we seem to be living in for now.
  - hiq 5y ago
    What's your exit strategy?
    - 5350-uiop-1130 5y ago
      I was fortunate to buy BTC in 2014, so I have the luxury of patience. For my other holdings I take profits aggressively and don't lose any sleep over missed opportunities. The way I see, it's a coin toss and I'm too lazy to get into technical analysis. What I've learnt over the years is to ignore the optimism, in the right circumstances pretty much every cryptocurrency trends towards zero. So I'm very cynical about it.
lariati 5y ago

sprusemoose 5y ago

it's beautiful how blockchain is evolving/reflexive with society, storing wealth has a collective consciousness. David Rosenthal flaps his butterfly wings

bluecalm 5y ago

It's good to see more people coming out against crypto currencies. While it's clear to competent people the tech is just bad and the crypto space is worse we are far beyond "the fad will go away by itself without incurring much damage" stage. We are in serious danger of the cancer growing and affecting other industries and at this point millions of people the same way some Ponzis and pyramids grew in the past. It's becoming a moral issue and I feel it's time to make a serious stand against it. As to the article: I feel the most important point is missing. Yes, crypto is a bad, inefficient, wasteful, slow, insecure technology which only got traction because it allowed skipping over financial regulation. Still, even if it wasn't all that it would still be a terrible idea as a currency with inflexible money supply scheme can't work. We went through it many times in human history. It's easy to see from simple thought experiments and simulations as well. It's elementary economics. How can we ever hope to make an economic argument when we can't use it against the simplest thing out there? The whole crypto currency thing removes whatever was left from my faith in humanity. It getting traction in the tech space is just a final slap in the face as there was some hope people in our space care just a bit more beyond "number goes up if we throw enough coal on it" distributed Ponzi. We are ready to pick up our pitchfork when it comes to privacy violations even though there is at least a lot of value provided by the main offenders or against dark patterns in website design or even when it comes to a bit old fashioned politically incorrect language. Here we have one big dark cloud of a ticking bomb and I see my colleagues accepting job offers from the grifters, buying the scam tokens and trying to sell them to others before they collapse, CEOs of supposedly serious companies advocating for it (Twitter anyone? No matter it's down since IPO with that kind of person at the helm), youtubers producing Ponzi propaganda en masse, sponsorship being accepted at major events. If it continues for a few years at this pace it will result in a dotcom bubble on steroids with a lot of desperate people and a lot of crime barons ending up with millions to use in the real world. It will not be as nice out there when it's all done.

jakupovic 5y ago
>The whole crypto currency thing removes whatever was left from my faith in humanity. Just a friendly advice, get out more and stare less at computers. In the big scheme of things, crypto doesn't matter, nor does HN and the same with me telling you this. Peace :)

jakupovic 5y ago

Another article with a bunch of questionable data. Why can't crypto be dealt with the same as other technologies we don't like? Vote with your wallet, you don't like it don't use it. But don't try to convince me that I'm wrong because I do use it. Because if you do, but leave things of the table, such as fashion, military, sporting entertainment and a million other things people are not up in arms about, that makes you ignorant at best.

nosianu 5y ago
> Another article with a bunch of questionable data Could you please elaborate? > Vote with your wallet, you don't like it don't use it. But don't try to convince me I don't understand this argument. You can easily do exactly what you ask of others: Don't click on the headline (the reader equivalent of "vote with your wallet"). Nobody is trying to convince you of anything. You came to the thread all on your own, and there since nobody reads every single topic posted on HN you made a conscious decision and an effort to expose yourself to this article and this discussion. > Because if you do, but leave things of the table... That argument makes just as little sense. We cannot discuss something because we have not yet discussed something else? Since this can be applied to every single topic, nothing can ever be discussed. The argument only makes some sense, depending on context, if the topics are chained together and the one being discussed depends on some other, and we don't have a result yet, so discussing the dependent one is not possible without knowing more about the previous one.
- jakupovic 5y ago
  > Because if you do, but leave things of the table... [......] The point of the article is: "BTC POW bad because too much energy". So, author is allowed to discuss, bitcoin, energy, waste, other equivalent technologies, but I cannot bring up other industries which also waste energy and whose use is questionable? That's the sense or logic if you prefer.
koonsolo 5y ago
There is 1 difference. People are voting with their wallets, and it's paying off. So even though we are reaping the benefits now, they need to prove we are all "stupid and the whole ponzi scheme will collapse and you will cry and we will say told you so." Jealousy, plain and simple. HN hates crypto, but instead of ignoring it, articles such as these keep popping up, to comfort everyone that "we're not stupid but they are."

yellowapple 5y ago

Re: proof-of-stake, it's pretty disingenuous to seemingly base the entirety of one's criticism of it on a cryptocurrency that has yet to migrate onto it rather than, say, the multiple cryptocurrencies in the top 10 by marketshare that are already on it and have at least claimed to have addressed the vaguely-alluded-to centralization issues. This seems to be a recurring theme of proof-of-stake criticisms: "well obviously PoS is a PoS because Ethereum hasn't addressed its problems yet... Cardano? Solana? Never heard of 'em!". That ain't to say that proof-of-stake is perfect, either, but it's painfully obvious that its critics are coming in seeking to appease their confirmation biases rather than evaluate new technologies objectively and rationally. Full disclosure: I do own a decent amount of some cryptocurrencies, including various PoW and PoS currencies. I'm obviously biased in favor of them, but at least I'm willing to admit that.

koonsolo 5y ago

> Bitcoin is notorious for consuming as much electricity as the Netherlands, but there are around 10,000 other cryptocurrencies, most using similar infrastructure and thus also in aggregate consuming unsustainable amounts of electricity. Nice generalization. I stopped reading after that. How much is the banking system with all of its employees and buildings wasting I wonder.

NicoJuicy 5y ago
They aren't including the people of Binance and etc. In every country either in that calculation, you should try reading it. It has some pretty good points.
- koonsolo 5y ago
  Sorry, but Binance is not web3. Why didn't you give SushiSwap or any other decentralized exchange as example?
  - NicoJuicy 5y ago
    ? > How much is the banking system with all of its employees and buildings wasting I wonder. So, you want to compare the entire banking sector with just a subset of a subset ( eg. Sushiswap)? I took Binance as an example that the whole Bitcoin electricity thing didn't take into account and that your comparison isn't even in the same league. Binance has eg. Obvious employees/developers. There are many more things not included in your "reference". Sushiswap is just a subset of what wasn't included either.

627467 5y ago

Looking forward to rebuttal of the argument where cryptocurrencies aim to unbundle a fundamental state monopoly: money creation and finance.

csdvrx 5y ago
Great point, as there're only 2 ways to make money in business: bundling and unbundling https://anderson-review.ucla.edu/bundling/ https://anderson-review.ucla.edu/bundling/

jasfi 5y ago

I think that crypto is still going through it's early stages. There are many problems to overcome, such as mining which wastes huge amounts of energy. One problem I'm working to overcome is safety during buying and selling cryptocurrencies. It's very easy to make a mistake when buying/selling, especially for inexperienced users. Even experienced users also make mistakes. The answer is automated trading, which has more safety built-in. You can use it whether you want to invest over the long term or look for short term gains. https://tradecast.one https://tradecast.one

NicoJuicy 5y ago
As the article mentioned, we are 14 years in which is not "early stage". 14 years after the first browser we had: Google, WordPress, ...
- jasfi 5y ago
  5 years after most people were not aware of crypto, maybe ever later than that. The stage of something can't be determined by a number of years.
  - NicoJuicy 5y ago
    Useful things get adopted pretty fast. Except when it's too early for eg. The hardware ( tablet and ml come to mind)

mattdesl 5y ago

I think this article addresses some legitimate concerns of Bitcoin and PoW, but fails to present a strong argument against cryptocurrency networks running on Proof of Stake. Gini coefficient is a poor metric to describe distribution in a cryptocurrency network. A single user may utilize dozens of wallet addresses, with the majority of their value centralized on only one or two addresses. In some cases, users may deposit value into shared contracts (DAI, WETH, staking, liquidity pools, DAOs, etc), giving the impression that the token balances are unequally distributed across the network. The WETH contract address, for example, is holding $22B USD worth of tokens. There are many current Proof of Stake cryptocurrencies that would be worth considering and analyzing: Tezos, Solana, Avalanche, Cosmos, Polkadot, Cardano, Celo, Mina.

lifeisstillgood 5y ago

There is a ream of "real" papers and studies linked here that I simply did not know existed (proof of work papers before Satoshi etc). This is going to be a very dumb question but how does one catch up on the computer science academic literature ?

EVa5I7bHFq9mnYK 5y ago

There is a misconception that Bitcoin electricity usage is increasing exponentially and uncontrollable. In fact, it is limited by Bitcoin price times Bitcoin issuance rate. For example, at current BTC price, electricity usage has an upper limit of $37m per day. If miners spend more than that, their operation becomes unprofitable. In fact, they spend less, because there are also other expenses. From April 2024, the new upper limit will be $18mln/day, if the price remains stable. If Bitcoin price rises in line with it's decreasing issue rate, in 12 years we'll have Bitcoin at $328,000, but the electricity costs will stay same as today. $37m per day is about $1.1B a month. If we divide this by world's population of 8 billion people, we arrive at a figure of 14 cents per month. 14 cents is what you are paying to Visa for your morning croissant in transaction fees. On top of this, you pay a lot of taxes to the government to maintain and secure the money system. Now what are we getting for 14 cents a month? We are getting money that is unforgeable, uninflatable, irreversible, uncensorable, electronic, capable of millions of transactions per second, available to anyone worldwide 24/7/365. We are getting a piece of freedom in a world that is becoming more and more centralized and controlled from above.

fragmede 5y ago
> their operation becomes unprofitable That assumes that everyone needs to spend more than they get in crypto for it to be worth their while. If I had $100, and I gave it to you, and you gave me back $80, that would be a bad deal for me, right? Except if that $100 is "dirty", and the $80 is "clean", that might be worth it to some.
- EVa5I7bHFq9mnYK 5y ago
  It is theoretically possible, but I doubt it really happens at scale. If it were, we'd already had front page articles about it.
Eddy_Viscosity2 5y ago
Did you just divide the bitcoin electric costs by the ENTIRE population of the Earth, as if all 8 billion people are currently using bitcoin???

gregwebs 5y ago

There are some intelligent criticisms here along with some fundamental misunderstandings. The biggest misunderstanding that crypto critics and even many advocates have is that Bitcoin is a currency that people will buy stuff with. If Bitcoin has any use, it is as a final settlement layer. The Lightning network that is layered on top of Bitcoin is what is actually useful for buying stuff. Much of this article is based on this misunderstanding. A correct criticism is that Bitcoin can be controlled by pooling mining. But a more nuanced take would be to say that it is a system that works due to aligning the economic interest of the miners providing the decentralized security with the users. The real problem with government fiat currency is less the centralization but more that the centralized actor is incentivized to monkey around with it, and particularly to devalue everyone else's money by printing as much new currency as they can without creating rampant inflation. With Bitcoin, miners could attempt to control the currency, but then it would lose all its value, so they choose not to. It's certainly still a risk to the system, particularly when one nation state like China previously did most of the mining.

aNoob7000 5y ago
Is Bitcoin an asset or a currency? Because right now it is being traded and used like an asset not a currency.
- gregwebs 5y ago
  There’s similar issues with gold currency. Gold is a self custody asset like Bitcoin: https://www.lynalden.com/gold-and-bitcoin/ https://www.lynalden.com/gold-and-bitcoin/ Just as dollars used to use a gold standard, Lightning is using a Bitcoin standard. So it’s an asset that can be used as a base layer for currency.
- TheColorYellow 5y ago
  Currencies ARE assets. Even fiat currency requires it be viewed as an asset by society to then lend its usage as a currency.
  - giaour 5y ago

cannabis_sam 5y ago

[flagged]

cannabis_sam 5y ago

It’s hilarious and embarrassing, the extent that people are willing to go, just to deny that every single problem with crypto stems directly from the underlying economic system.