Notice the vague treatment of actual cryptocurrency applications. There are lots of predictions about startup activity, "flippenings" and venture capital, but little about the goods and services customers will actually be buying, or what specifically startups will be building.
It's this kind of thinking that leads people into the dark thicket that is "tokens": digital instruments bought and sold largely for speculative purposes. It's understandable. The ability to print money is a fantasy of many people from a young age.
The last two years have seem a solid refutation of this notion. Almost every token has lost value against Bitcoin. It seems reasonable to conclude that the carnage will continue.
So the money printing press ship has sailed. It's going to come as a shock for many people (some with economics degrees), but bootstrapping censorship-resistant money is a one-time deal. Any attempt to profit from the undertaking harms the credibility of the founders. Only the genuine scammers are left to continue the exercise.
Here's a vision for the future of Bitcoin. Bitcoin will extend its role as a refuge from the growing foreign and domestic militarization of money. It will become an indispensable weapon against civil asset forfeiture, international sanctions, deplatforming, and mass surveillance.
That's your application for Bitcoin in the '20s. And it's a doozy. It places Bitcoin on the side of personal freedom and on a collision course with some of the world's biggest governments, including the US. There will be many attempts to "ban" Bitcoin.
Startups will play a marginal role at best because their ultimate aim of monopolization flies in the face of what Bitcoin was designed to do.
It's not, the majority of hash power is in China. That means the Chinese government could start censoring bitcoin transactions in a week if they wanted to - by orphaning non-compliant blocks. Regardless of anything else, this centralization alone makes bitcoin a failed experiment.
https://cointelegraph.com/news/study-chinas-btc-miners-contr...
Second, I don't think we can conclude what would happen if China tried to censor.
China certainly has 51% attack capability against Bitcoin, but the only implication that of that which is clear to me is that they could potentially execute double-spends. Using 51% attack capability to orphan transactions is different.
With a double spend, there's two transactions, both signed with the same key, and no way to determine which is valid (which came first). There's no source of truth for that information.
With an orphaned block, there's only one transaction signed with the key, so you have a single source of truth. You know the transaction exists, and at some point (i.e. after a certain number of blocks), if the transaction isn't included in the chain, you can conclude with reasonable certainty that the transaction is being intentionally orphaned. This allows you to reject the chain that doesn't include the transaction as invalid, and choose the longest chain that does include it. We already don't blindly follow the longest chain: for example, blocks that are improperly formatted are already rejected.
This would, of course, having different criteria for what is considered a valid block would cause fork in the currency. There would be the Chinese censored branch and the uncensored branch everyone else is using. But for a lot of reasons, I think people would be unwilling to trade as much traditional currency for the Chinese censored currency as they would for uncensored Bitcoin.
> Startups will play a marginal role at best because their ultimate aim of monopolization flies in the face of what Bitcoin was designed to do.
I'd go further with this and say that decentralization is an active impediment to startups trying to create monopolies in the crypto space.
I think there's still room for development, but it will be hard for it to be motivated by profit. Particularly, a better-executed namecoin could be revolutionary if people started building infrastructure around it (i.e. as usernames, or a DNS replacement).
And until and unless you can use it to purchase the goods and services needed for daily life, and the military and police forces needed to secure the supplies lines of those, it will be at best a theoretical form of personal freedom.
Even if Bitcoin doesn't rely on trust, the rest of the functions of human society do.
Maybe you don't know what it is for. People that are sane like Mr. Armstrong and Satoshi Nakamoto intended it to be used as a currency. If Satoshi is still alive I'm sure he was quite disappointed when Bitcoin decided to not scale past its blistering 7 transactions per second.
"Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost. It never really hits a scale ceiling." -Satoshi Nakamoto
https://steemit.com/bitcoin/@cryptodailyuk/bitcoin-broke-coi...
Inevitably that hamstrings permissible opinions.
Not only that, the purpose of his company is to profit from cryptocurrency in a specific way, whether or not that's the 'right thing' for the space or not.
Their business model basically falls apart, for example, if people stop using fiat currencies and atomic swaps allow trades to happen without a clearing house.
All over this thread you can see waffle about money laundering or whatever else; which Coinbase cannot sidestep because they're forced to interface with banks that will cut them off, governments that don't like it if you don't do what they say, etc.
Increasing block size utilization has series tradeoffs for decentralization, privacy and reliability. Each year we learn and understand those tradeoffs better. Pro block-size increase people never seem to directly address them though, just talk around them and imply they don't matter. They do matter, a great deal.
This entire model does not sit comfortably with a permissionless, even anarchic construction like Bitcoin. Partially because it puts you in constant conflict with regulators whose relationship is your business. Secondly because if Bitcoin becomes a major currency in its own right, your role as an onramp is no longer necessary, or at least far more competitive.
And as every other exchange discovered, the real money is in offering a blistering array of coins and taking a percentage on trade between them.
Thus, it might be disappointing to cypherpunks that Coinbase is only a reluctant proponent of Bitcoin, but it's also quite predictable.
I'm not super familiar with Bitcoin's tech, but that seems sensible to me. The blockchain is already 250 GB at 7 transactions per second. If you multiplied that by 100, you still have orders of magnitude less transactions per second than credit card processors, but the hardware requirements are now high enough that few individuals could afford to run full nodes.
1) have centralisation
2) assume storage space will expand exponentially since the entire point of bitcoin is many many copies of its ledger
3) come up with a new method more secure than PoW but still decentralised
Good luck with (3). (1) and (2) are not good choices. So they moved it off the chain into lightning network.
Bitcoin will definitely singularly emerge as the new common 'numéraire' in the near to mid-term (5 to 10 years). I love that you specifically call out the omnipresent crypto scams, because they are what disappointed me from the whole endeavor once they emerged in the ICO craze. Once 1 bitcoin has price of 500,000 to a few million in USD per individual 'bitcoin' UXTO, it'll be obvious for governments to just start using it, and create dual money systems that are just layers on top of the (maybe single, maybe not) existing, working blockchain, despite its slowness. China is pursuing this now, even in anticipation of large price increases.
IMO Bitcoin is definitely the numeraire of the future, and it is certainly not a sure thing right now but I am extremely certain of this. It then becomes so trivial to do aggregate balance of payments calculations without so much sketchy behavior by fraudulent sovereigns that want to represent their own vision of 'real trade' for various purposes, such as economic warfare.
For non-finance people, numeraire is a representative abstraction of a 'unit of exchange', used to simplify things. You can then idealize situations like having riskless borrowing, which simplifies many formulae. But this is not an accurate portrayal of reality, (look up sovereign defaults, as one example. Greece, Spain, Italy, some Asian countries at different times, Argentina, Venezuela, etc.) So having a numeraire that isn't sovereign would be really impactful in making all economic participants way more honest, outside of the immediate smaller-scale effects of allowing people to get their cryptos ropped by unscrupulous people on the darknet.
From Wiki: "The numéraire is a basic standard by which value is computed. In mathematical economics it is a tradable economic entity in terms of whose price the relative prices of all other tradables are expressed"
Anyways, the Bitcoin protocol could definitely fail, for any number of a few different reasons, but at present barring some kind of major technological paradigm shift that breaks existing cryptography (maybe QC, maybe something different) it is uniquely positioned to become the de-facto standard for all balance of payments activity internationally. Scalability issues are definitely a factor, but hey, the mempool is working its hardest until they rewrite the underlying consensus mechanisms to work at larger scale. But as a settlement system and a darknet unit of exchange, it is extremely clear that this is the first hard asset that won't just vanish at the mercy of sovereigns. Very powerful new technology.
My guess is that governments will more and more realize that the main utility of blockchains is money laundering and speculation. As has been remarked over and over again, they don't solve any above board problem more efficiently or with lower expense than existing technologies. I predict we'll see growing regulation increased amounts of crackdowns on cryptocurrency and its applications going forward.
I've commented in the past here that the use of public blockchains to automate the functions of clearinghouses and escrow services will be a huge cost reduction for many industries such as finance. The technology as of today is not ready to handle that use case, but with the developments currently in the pipeline for Ethereum v2, progress is being made in that direction.
If you look at what MakerDAO is doing with the Dai stablecoin, they've proven that it's possible to create a synthetic asset closely pegged to the dollar purely through financial incentives, and they did it all just using Ethereum v1. A holder of Dai can earn 4% APY through a Dai Savings Account, and a vote is currently in place to raise the rate to 6%.
I personally find it incredible that an asset exists on the blockchain that's equivalent in value to USD, with a higher APY than you can get from any US bank. And because everything is on the blockchain, there's a public ledger of exactly how much is being collected in interest from those who are collateralizing their Ether for a Dai loan, how much of that interest is being paid to savings account holders, and how much is being collected by the system as surplus. It's the closest thing we have right now to a decentralized bank.
Whether or not you buy into the technology, it's improving by the day and more and more use cases and applications are being tried out and built. If all you see in blockchain is money laundering and speculation, you haven't been paying attention.
I also find this “incredible”, but in the old sense of the meaning as “not believable”.
But we don't want financial transactions to be fully automated and immutable. We want escrow services to be subject to laws, we want a judicial undo and modify button. So if you remove the whole "no one can change history" bit because it's an anti-feature, it is unclear why we need blockchain in the first place.
I'll redily accept that my understanding of blockchain is limited, so I'm open to being told why I'm wrong. Consider this a strong opinion weakly held.
pegged decentralized synthetic digital bearer assets.
That's a mouthful. Each word has a purpose and together they describe a hugely innovative and valuable technology. It is my belief that there are very, very few people who have an understanding of how important this innovation is.
And too few people understand the importance of the more simple digital bearer asset, of which bitcoin is the prime example. This still surprises me, especially amongst HN readers, who are certainly more insightful than the average bear when it comes to most existing and emerging technologies...
Surprises me. but also gives me hope.
There is so much room to grow. Long road. Massive upside.
Why not just vote to make it a million percent?
I also expect that the fashion for it in VC investment, already waning, will totally fade by the end of the 2020s. And that regulators like the SEC will have ended the various its-not-equity equity investments, cutting off the other major source of funds.
[1] E.g.: https://www.nytimes.com/2018/04/16/nyregion/new-york-today-l...
[2] For "significant" contrast it with M-PESA, which is also digital money and launched around the same time: https://en.wikipedia.org/wiki/M-Pesa
or hasn't tried to fund their IRA via an ACH transfer but their bank won't allow it bcs rules..
or hasn't wanted to wire money (or receive a wire) for a fraction of the price (and hassle) of a wire transfer.
I have sent hundreds of bitcoin transactions. And I admit that it's not perfect. There's lots of room for improvement. But even given bitcoin's flaws, there are times where bitcoin is massively, gobsmackingly better than the traditional US banking system.
And the US financial system has been around 10x+ as long...
So much expectation born of such ignorance. It's a common problem for bitcoin. But not new. And it hasn't stopped bitcoin yet. and I doubt it will.
I believe we're on the cusp of a state change in the world of digital bearer assets. It's not that bitcoin will simply survive, it's more that programmable digital assets and digital bearer assets will steadily win over most other forms of value.
Unfortunately this isn't the kind of conversation that's likely to change minds - forum chats just don't tend to move the needle for most people who are entrenched in their positions. If we were to have a face to face conversation, I suspect we'd be able to find more common ground.
Oh well, I've watched the tide steadily turn over the last 7yrs. And I'll gladly watch opinion continue to shift over the next decade.
I know this is a crime, but it's not a financial crime: cryptocurrency has HUGE advantages over alternative tech for buying drugs online.
Slight nitpick: Cryptocurrencies have demonstrable advantages over existing solutions (pseudo-anonymity, decentralization, inflation-proof, etc) but consumers don't care about these advantages enough to make the switch.
You've picked two arbitrary criteria, which certainly don't cover the entire range of useful properties that anybody in the world might want. And even still, you're only right about one of them. Cryptocurrency is very inefficient from a power consumption standpoint, no denying that. Not sure what you mean about lower expense though, sending money internationally (in a perfectly above-board way, like placing an order or supporting relatives in another country) can be a lot cheaper via bitcoin than alternatives like Western Union. It's also useful as a store of value that's not tied to a single government, so similar to gold in its intrinsic value but with the benefit that it doesn't take up physical space and can be sent and received much more easily.
I'm still quite bullish on bitcoin itself, for these properties alone, I see these properties as basically a floor on the value that it can provide and even just for for this use there's room for a lot of growth. If Ethereum-style contracts/apps and all the other kinds of things discussed in the post also gain wide adoption (which certainly seem like far from a sure thing at this point, but also not completely crazy), that's just a bonus.
If you mean by that, it's possible to have a fiat currency with no dilution, that is true.
Crypto currencies are fundamentally a political innovation; it is much more politically expensive to force dilution onto a crypto-currency than a fiat one. Whether that's valuable enough, I suppose we'll see.
if a regime is threatened with removal of a sovereign power (issuance of currency), i'm sure they will forcifully retake that power by outlawing the means of doing so. Bitcoin is of no exception. political problems can only be solved with political tools, not technological tools.
Also crypto currencies, are not currencies. They are commodities. It is far more accurate, conceptually to think about them the same as precious metals and grains, not dollars.
I agree with you in general, but also: The reason it's not that many is because the ones who see further growth, gets a interest into it, maybe even vested interest. So, not a good argument.
So 90% of this post's accuracy is unchanged whether the CEO of Coinbase was the CEO of Coinbase or not. Lets look at some of the points:
People are working on removing the surveillance aspect of cryptocurrencies. thats a truth that has nothing to do with adoption.
People are working on making them faster. that's a truth that has nothing to do with adoption.
The Chinese Government has said they will a central bank digital asset for currency. that's a truth that has nothing to do with bagholding other cryptocurrencies
Every industry experiences consolidation, it doesn't really take a soothsayer with a conflicting interest in to tell you that.
and so on
https://www.deeds.com/articles/the-real-estate-deal-declutte...
This involves state and county governments recognizing a current problem that is easily solved with blockchain technology. In this particular use case, blockchain is used to prevent fraud and provide a more efficient process.
Where did you get the data that justifies that assertion?
In any case, don't bother with cryptocurrencies. I'd recommend that you keep all your wealth anchored in US Dollars for the next 3-5 years.
This literally already happened for a hot second, did you not notice the everyone doing their own ICO when bitcoin was 20k? Are you saying it will happen again?
I don't think that's what they're saying. I suspect it'll be more like support for existing major cryptocurrencies like Ethereum and Bitcoin. Either for payments or smart contracts, or other decentralized book-keeping.
I'm not convinced about "almost every tech startup", but I do think it'll become more mainstream.
[1] https://torrentfreak.com/filesharing-and-vpn-traffic-grow-ex...
https://defipulse.com - 3m ETH locked so far as of today (1 year ago = 1.9m ETH, 2 years ago = 63k ETH)
This space is difficult, after the last years there's some stigma and trust-levels towards and within the crypto-community are super low (similar to the porn space) and I decided for myself, this sector is over. Main reason is: distributed DBs are hard, publicly distributed DBs are even harder, there are so little use cases that justify the effort involved (except currency & fund raising).
Maybe I am wrong.
Tech-focused projects, like Ethereum 2, Algorand, won't be successful. Decentralized coins, Libra, corporate coins, government coins will be.
For decentralized coins, I think the market needs to find a way to incorporate inflationary economics into the system. Bitcoin needs an inflating parallel blockchain. It's all about money. I put my focus there.
I wrote a post on the topic: Emerging Markets of Cryptocurrencies
https://bitflate.org/post/2019/11/10/emerging-markets-of-cry...
Not much people using it though. Seems like best selling items are gift cards.
So either this is a way for crypto to be "used" for purchases at popular stores, or it's being used for money laundering. (those gift cards are easily sold on eBay and other marketplaces for fiat; this is how you'd take payment in mostly untraceable crypto and cash out without having to subject yourself to exchange KYC/AML)
This misses a key piece of information. They take the price as an an assumption for their argument, but that is insufficient to draw this conclusion. When Bitcoin reaches $200,000 is also a factor.
The worlds existing billionaires will not sit still. If it takes 70 years then it would be pretty easy to make better money elsewhere. I have no idea if or when it will happen. I'm inclined to think on average it will increase at a decreasing rate.
Perhaps one day, the tech community will understand that some problems require a political solution and simply cannot be solved by technological means alone.
The value of our public goods however is not being captured by any financial asset, and is a huge market that can be addressed by cryptocurrencies. This is something I'm quite passionate about and have put a lot of time into thinking through how they might work (see link below). As an example, AirCarbon (https://www.aircarbon.co) is a Singapore exchange being built on an Ethereum token and will tokenize CORSIA-certified carbon credits for the airline industry. This is a fantastic example of a huge market ($100+ billion) that is right now extremely inefficient, and will benefit greatly from moving onto a globally accessible and permissionless ledger. It'll provide everyone in the world the ability to invest in the reduction of carbon dioxide emissions, and even better, since the tokens also work as stores of value, investors can sell their tokens in the future.
This type of financial asset has enormous potential.
"Tokenized Goods - A New Store of Value": https://medium.com/@tpgwhitepaper/tokenized-public-goods-a-n...
Crypto is not money and company like coinbase thrive on that information asymmetry because a normal person do not understand that cryptocurrency is not really a money,but a network of computers trying to fix some arbitrary value to a sequence of string which are worthless in themselves if not widely used for exchange of goods and services.
Hopefully in 2020 peer to peer exchange of good and services evolve and companies like coinbase don’t need to exist (this was the true purpose of distributed currency to get rid of companies like coinbase and being hold hostage by them by keeping wallets under their supervision without liability unlike the way bank maintains account with liability and protection).
As I understand it Bitcoin has some problems in this regard, but others have solved it.
I just can’t find it hard to believe we get to 2030 without a way to buy things anonymously online.
Nope. Bitcoin and others don't solve this at all. They're a literal permanent ledger of every single transaction you've ever made. Other coins might be better at anonymity, but BTC and its derivatives are certainly not.
In the end, it might depend on a chain becoming popular first before people want to use privacy features on top of it, like using Ernst & Young's Nightfall protocol that's built on top of Ethereum.
ZCash uses zksnarks which are a pseudo homomorphic encryption strategy to hide payments whereas monero is using linkable ring signatures.
Generally speaking, the blockchain community has really advanced the crypto field
Other options such as Monero are better for this.
Obviously every transaction can not be processed and stored by everyone. That much is clear even to casual observers. There has been two or three main ways people have tried to achieve this during the past decade.
The obvious thing to try would be to shard the blockchain like you would a database. This turns out to be hard to do in a trustless way since shards would need to interact. This realization and the contracts required to securely swap assets between otherwise separate chains leads naturally to:
Full on separate blockchains that run in parallel to the main one, checkpointing when needed (rootstock, drivechains). These are not limited by the main chain and can be specialized for custom use cases. The parallel chains are only interoperable by way of the main chain and need not know about each other, which helps scaling out.
Payment channels by the way of time locked contracts. Satoshi sketched out an initial implementation that turned out to be flawed. This has since been improved on and made bidirectional and made into a standard which is now the Lightning network. It has a number of real world limitations but the general idea is that only the parties involved in a transaction needs to know about it. An added benefit of this is that finality among these parties is immediate.
There have also been some work squashing a large number of transactions into a large transaction. This has the added benefit of obfuscating the flow of individual transactions, which otherwise makes everyone's holdings transparent (mimblewimble, grin). This requires new signature schemes and is hard to retrofit to existing blockchains and make security guarantees about.
There used to be ideas about Chaum like schemes on top of blockchains, but most of that interest probably went on into separate blockchain schemes.
Those are some of the ideas that have been tried, most have shown some promise but are more or less still at the research stage. Don't expect radical changes overnight.
Most mobile wallets are light wallets, that query servers for the information on demand. It works great, but you have the risk of the server lying to you.
So the next level up is SPV wallets, which verify that transactions are included in blocks and that the proof-of-work is valid. So the cheat them you need to reproduce POW, which is very expensive, and also very secure.
This notion that everyone needs to run a full node is simply false. SPV security, and even light wallets security, is enough for almost everyone. Exchanges, payment processors and the paranoid few can still run full nodes.
The other easy way is to do what either win (ETH) did and change the average time between blocks from 10 minutes to say 10 seconds or so.
I've become very pessimistic around cryptocurrency after a year of chasing coins.
Wake me up when Turtlecoin hits $10.
I think the way forward for acalability will be multi-chain. Each blockchain has its own accounts and own token but is connected to other chains via fully automated DEXs. The blockchains will form a hierarchy of chains with the most trusted and busiest one at the top. I think there will be a trend to make a consistent payment API so that any cryptocurrency can be used in the place of any other, online shops will use on-chain DEX trade price and volume data to determine which coins they accept and for what value.
There is a maximum of 21x10^6 bitcoins, imagining a 0.01 chance of losing 1 bitcoin/day ?
Also it's untested if miners will continue mining after Bitcoin inflation completely stops
Doesn't that make it virtually valueless by definition ?
I perhaps cynically believe that is what has kept, keeps and will keep cryptocurrency going.
https://whycryptocurrencies.com/challenges.html#privacy-and-...
As a blockchain developer of 2 years who understands the principles behind Tendermint and who has build many scalable systems in his career, I can say for sure that Tendermint doesn't add any scalability to any given blockchain. It only aids with certain specific interoperability scenarios (nothing to do with scalability). The statement on their website is not accurate. The people who wrote this statement are marketing people who do not understand the first thing about scalability of any system. The leaders of these projects wash their hands of any responsibility by pretending to believe their own dogma.
Most blockchain marketing is a flat out scam IMO. As a result of all this deception, almost everything that everyone knows about blockchain today is wrong. Everyone thinks that all the trendy cryptocurrencies can scale but they can't. None of the ones that I analyzed in the last 2 years could scale. And I looked at many; for those whose whitepaper made the most sense, I even made the time to discuss the tech with their lead developers, node operators and community members. The reality is always far behind the marketing.
Unfortunately, investors are investing based on hype and their personal connections, not based on demonstrable facts. Investors are being mislead en-mass. As a developer who understands the tech and who actually believes in its potential to incentivize productive collaboration, it's disturbing to watch how the industry is unfolding.
