So sure, in theory people could be corrupted into for example changing the code that controls the monetary policy in the reference client, but you still need to get miners and full nodes to run your new version of the software. This is what makes it so hard to make any changes to Bitcoin, and forms the stability that many feel is one of its key strengths.
The tech encourages large miners in terms of hardware and infrastructure investment. There's a race to the bottom for compute and power consumption that small miners can't really compete with. In this way the system could conceivably move towards that small powerful group.
Crypto groups do not have this authority, and cannot impose their will beyond what the masses will accept. They compete with forks and alternative products. Some chains don't even use mining, some use alternate algorithms where SHA-256 ASICs have no advantage. If powerful groups try to force unpopular change, they'll just split the chain and more or less divide the value proportionally to the user-base that they can convince to join them.
We saw this with Bitcoin Cash, Ethereum Classic, etc. So if the Bitcoin network does something I don't like, I have the option of leaving and supporting one of the potential forks I do like. Force cannot be imposed, and products must compete. This is one of the advantages of open source, decentralized software design.
Something that's interesting to me is that forking the blockchain creates money out of thin air, if people accept both sides of the fork -- I've seen people who recovered old wallets make sure to collect the extra bit from Bitcoin Cash along with the main windfall of regular Bitcoin. If blockchains really do take over finance, there's interesting implications for inflation control / monetary policy there, I think.
[0] Where large is defined as something the ASIC designer did not predict needed to be a flexible part of the system.
This is an open system, but it's also very undemocratic, and it's design and direction are determined by the financial incentives of the beneficiaries and the developers.
So looking back at the 2016 hard fork of Ethereum after the DAO thing[0], is it a feature that "the community"[1] can choose to hard fork to revert transactions that are "bad"[2], or is it a bug?
[0] https://blog.ethereum.org/2016/07/20/hard-fork-completed/ [1] I'm not sure who defines this [2] I'm also not sure who defines this
However, there are a number of things right, and a number of things wrong in this article. I will use my experience as an example. But note, while I use Bitcoin Cash as an example for my response, I do not ideologically support it for a number of reasons outlined in this article. Although, I do still hold Bitcoin Cash for the time being.
> Who governs the blockchain system and issuance? > Usually this is an open-source community of developers. Note that I say that developers control the cryptocurrency issuance because despite the issuance is (usually) determined algorithmically, developers have the power to change these algorithms.
This is completely true. However, they still only release code/binaries. The users must run these binaries, and there is no "Nakamoto consensus" for doing so. This results in huge internet political battles where people launch propaganda campaigns to vying over whose code is ran. Take Bitcoin Cash as a primary example:
The people who moved to Bitcoin Cash from Bitcoin Core are ideologically opposed to the Bitcoin Core Team's roadmap for Bitcoin. There was a huge online propaganda war between r/Bitcoin and r/BTC with large amounts of disinformation being produced on both sides, as well as banning and censorship on these forums. Ultimately the "big blockers" lost and moved over to creating their own blockchain in 2017.
This kind of political warfare happened again when Bitcoin SV and nChain's development team was ousted off onto their own blockchain.
And then in 2019, when Bitcoin ABC -- the development team who launched Bitcoin Cash in the first place -- decided to change the issuance rules to send themself some funds out of the block reward, they lost the political battle and were kicked off the network generating another fork called Bitcoin ABC.
Ultimately the users and exchange determine what code represents the ticker and naming of the coin they trade. This is the stalwart to developer control.
> Also, I suspect that most cryptocurrency developers have big portions of their net worth stored in the very currency that they develop. The developers are biased when they make decisions regarding the project because the relative value of the cryptocurrency can change a lot as the result.
This is a good thing. It means the developers must be very careful with the thing they work on, and it aligns their incentives. You can see other Bitcoin Cash development groups (such as Bitcoin Unlimited) who do not hold their treasury in Bitcoin Cash constantly propose questionable ideas and attempt to push for them to be included in Bitcoin Cash.
> How the agents verify that the their counteragents transferred them some money?
This is a valid concern. In fact, Bitcoin Core is largely run by engineers who work for Blockstream. They took VC investment from PayPal and other companies who demand a return-on-investment. The product they pitched is called Liquid. Liquid itself depends on Bitcoin not processing very many transactions on-chain.
Common wisdom is that it simply doesn't work to do so. However, A quick look at the contingent of Bitcoiners who launched Bitcoin Cash, and their reasons for doing so will tell you this is false. Bitcoin Cash can easily process hundreds of transactions per second -- and can be scaled up to do quite a bit more -- using almost identical code to Bitcoin Core.
We fixed a number of quadratic scalability problems with how BTC operates at the protocol level that enabled this. Why do people still pretend that on-chain scaling doesn't work?
> When people say that blockchains are “decentralised”, they often conflate the computing operations structure and the logical structure of the system. Blockchains rely on distributed computation, but they also represent a singular logical stream of transaction history.
This is 100% correct, and I have written on it multiple times. There is no such thing as decentralized development. Decentralization is a network topology.
> In effect, blockchains are totalitarian algorithmic systems. They anticipate the rule of soulless machines over people described in many dystopias and that can very realistically come true if we as a society keep being as excited and mesmerised by the developments such as cryptocurrencies.
100%. The monetary policies of most cryptocurrencies are antithetical to functioning societies. The wild volatility in cryptocurrencies, in large part, is due to the issuance. Most cryptocurrency enthusiasts are ignorant of how money operates, or are attached to a particular ideology -- completely ignoring modern observations about how money (when functional) as always operated. The volatility makes them useless for denominating business contracts.
Ultimately, cryptocurrency is in its infancy. I think that eventually it will "work." But right now, it does not work for what people ultimately need it to be doing. As far as I am concerned, people are currently trading pogs or magic cards.
This is what I want, my wealth to be tied up in a currency that's at the mercy of a Bitcoin subreddit flame war.
I'm sorry. I appreciate that a lot of people have become extremely wealthy from Bitcoin and other crypto-currencies. I also that a significant, maybe unprecedented, amount of technical excellence and labor has gone into developing this ecosystem. I appreciate that block chain and all of the other derivative technologies have a significant amount of realized and unrealized potential, and I'm sure that my comment will be downvoted to nothing.
I just can't, for the life of me, understand why I would want the intrinsic value of my daily labor locked into something like this. This reads like the type of drama that I - don't - want in any way, shape, or form associated with a legitimate currency or other store of value.
Flame wars on forums are certainly immature and embarrassing, but I think what you refer to as "legitimate" currencies all have much worse associations.
Don't say "disinformation on both sides though", the heavy handed censoring of /r/bitcoin (and other forums) was open and intentional.
Anyone can go there and ask reasonable questions about why bitcoin has the transaction throughput of a 56k modem when the fee of a single transaction can pay for a hard drive that stores the entire chain. You will either get some reply that makes zero technical sense or you will get your comment deleted, shadow banned or banned. Sharp high quality people who wanted to make bitcoin better were in charge at first and it became a complete cesspool while being taken over slowly with a lot of lying in between.
This is the key point that small-blockers kept denying and obfuscating.
> The wild volatility in cryptocurrencies, in large part, is due to the issuance. [...] The volatility makes them useless for denominating business contracts.
Gold is "issued" at a slow and predictable rate just like Bitcoin and was very stable when it was used as currency. The volatility in Bitcoin is because most transactions are speculation instead of real commerce, just like gold is today.
Oh really? Why does it go parabolic? Bitcoin issuance is nothing like gold. Gold supply responds to demand. The more people mine the more gold goes into circulation. With Bitcoin the more people mine, the same amount of bitcoin is issued.
You're one of the developers who helped launch Bitcoin Cash. I'd be curious to hear you talk about why you find (or found?) the project worthwhile, if crytocurrency currently "does not work for what people ultimately need". Do you see yourself as laying the groundwork for a better future implementation?
Bitcoin's average transaction cost has been anywhere from $18 to $60 over the last few months. Even dodge coin is approaching $2 for each transaction. Bitcoin Cash transactions cost $0.02 (2 cents) and the transaction throughput can grow 30x without the blocks being full.
In the venn diagram of (decentralized) cryptocurrencies that are widely accepted and have reasonable transaction costs, litecoin, monero and bitcoin cash are what end up being viable for real use right now.
Many details about how cryptocurrencies function -- in practice; as opposed to the dogma -- that aren't obvious until you're working on the node software itself and you start having to interact with industrial miners, exchanges, and the user base.
But yes, I think the technology is worthwhile and I still work on it heavily in my free time -- just not Bitcoin Cash. I have a couple projects I am slowly working on, but it's not my intent of my post to advertise them -- if you want to know ask and I'll tell you about them.
There are technical problems with cryptocurrency, but most of those are fixable. The biggest problem with cryptocurrency is people. My current projects are an attempt to address both sets of issues.
The following might be off-putting, but some of the unintuitive things I learned:
1. People en-masse almost always follow economic incentives. 2. People rationalize their behavior and will tell you reasonably sounding explanations; but they are really following incentives and are quite predictable. Not on an individual level, but on a group level. 3. People often are not able to understand counterfactual thinking regarding economics. They will explain how something makes economic sense -- but it only makes in the absence of considering alternative futures from the one under consideration. 4. Most people are not able to understand the economic incentives of other individuals. They lack "empathy" in this regard. 5. Money attracts sociopaths like moths to a flame. I have never seen so much toxicity in one "place" until I started working on Bitcoin Cash. I do not believe it is unique to that "community." 6. This is probably the most controversial thing: if you look at the core groups shilling any particular cryptocurrency, they are attracted to that cryptocurrency because the economic incentives align with their value system. Ultimately the value of cryptocurrency comes from how people value it, and that comes from a value system (or a belief system). They are best understood as pseudo-religious cults.
With 6 said, the relationship between the value system and the cryptocurrency is bi-directional. When you hitch your financial future to the success of a coin it has a way of perverting the beliefs of the individuals invested in them.
Money is now being issued by pseudo-religions for the benefit of the members. Imagine what would happen if Scientology had its own cryptocurrency? It would obtain "superpowers" as now there's an economic incentive to join. You get "paid" to join, and you have a large incentive to bring in new members due to the impact of Metcalfe's law (network value increases quadratically with number of users). Right now, these "communities" are coalescing organically, but eventually things like Scientology will "catch up". You can already see it with Bitcoin SV and it's personality cult around Craig Wright (who I met many times) backed by Calvin Ayre.
I was raised in a very problematic religious cult and managed to escape -- and I find this very troubling. I also think it is an inevitability.
I happen to know a bit about the mechanisms of totalitarianism, and the comments about politics sound like there is a de facto bluecoin/redcoin thing going on. Is the split actually ideological, or is it just a power struggle as an artifact of a vaccuum?
Of the 3 network splits I was involved in, they were always along ideological lines. However, if you go read through the forum posts at the time, you will see lots of plausible sounding falsehoods used to justify siding with one camp or the other.
I spent a lot of time writing essays debunking these talking points. However, hundreds of posts repeating a short semi-plausible phrase is much more effective in persuading people than the essays it takes to rebut them.
Don't miners and nodes then have to adopt those algorithmic changes though? It's essentially voting by adoption - if a majority of miners/nodes don't adopt a set of changes (e.g. increasing the supply cap or rate), then they aren't propagated to the blockchain.
This seems a lot more decentralized than the US/Fed monetary system that the article compares it to, where citizens have effectively zero influence on policy.
Unlike democratic policy, the votes for bitcoin policy are not 1 citizens 1 vote. You can claim that citizens have effectively no control (although they clearly do have some control). If you're not a miner you have absolutely no control. Even if you are a miner, your control is some function of your hash power.
The economic majority of Bitcoin users ultimately decides what "Bitcoin" even means and can enforce that against miners with e.g. a User Activated Soft Fork: https://uasf.co
The distribution of USD cash across the world would appear be (almost uniquely?) decentralized... If the Fed were to decide that as of midnight tonight, negative interest rates apply on all USD cash balances, how exactly could that affect the suitcase full of USD you buried at the bottom of your garden? [Spoiler: it wouldn't...]
trust minimized is valid as well
doesn't really matter. in less theoretically secure networks, validators don't reverse transactions because doing so deters commerce to their network. it works well enough, the market can bear it. a state that disagrees with it would still have trouble coercing all of the validators, and the state can buy up all the tokens with public money to try to become the majority of the validators... be my guest, I would call that success because its a moon cannon. All the holders get rich because a silly government agency pumped the coin to try and take over a network.
so this discussion isn't about Bitcoin
but I can understand how that might not have been clear. I'm not saying these points don't also apply to bitcoin in some degree, this thread just wasn't about it.
All mining is done on earth. Does that mean it's centralized?
I think the implication is that the Chinese government has influence over the currency. If that's true (and I don't think it is, or that they even have any interest, given the rise of crypto capitalism in HK and mainland China) then they could at most attack the network once, completely destroying its value. Sounds like a lot of wasted energy when people can 1) fork BTC to circumvent this 51% attack, and/or 2) opt for another currency to replace BTC as "digital gold".
I was always under the impression that they would be more susceptible to attacks from national governments, since they'll have greater access to the resources needed for a 51% attack.
The attacks don't need to be on the currency, it can be on the privacy.
The ledger is like a giant warrantless paper-trail of who paid whom.
As a side-note, how would I reject a payment that came through bitcoin?
If I were an unscrupulous government who wanted to target an individual, I'd just send them some money from a suspicious account and then bring them in for questioning over that payment.
But even 1,000,000 Zimbabwe dollars is not the same as 1 US dollar. International trade requires USD. The US can basically wipe out an entire country's saved wealth by flipping a switch in a computer. That can't happen with the decentralized nature of Bitcoin. This entire article is undefendable sophistry.
>However, from the global system perspective, creating such unstoppable systems is dangerous because at the root of the complex system evolution and stability is that the agents (subsystems) in the environment can die and give way for newer, better things.
Bitcoin was intended as an alternative to USD. USD has proven to be a tool of wall street to impose US imperialism on the third world, and on its own citizens. Obviously cryptocurrencies have proven way more opportunities for "giving way for newer better things" than the US banking system has.
EDIT: Here is the US using the dollar to mess with countries it had a beef with.
https://www.rferl.org/a/explainer_how_does_swift_ban_hurt_ir...
https://www.theguardian.com/us-news/2019/aug/06/trump-freeze...
(Eurodollar are one way to bypass it tho)
The main benefit I can think of that this gets you is the ability to trade the NFT itself on the blockchain, but most the other supposed advantages fall apart under any kind of scrutiny, at least from what I can tell.
The key problem here is that the experience or capability that the NFT provides is likely going to be entirely mediated by the game software itself, not by any smart contracts on the blockchain or anything like that. The NFT would most likely be validated by connecting to a server and making an API call... because validating the NFT locally would require downloading the relevant blocks in the blockchain. Since any "promises" about what the NFT are ultimately mediated by the game software, which is entirely controlled by the game developers, there is no real "ownership" in any sense beyond what you could achieve without blockchain... except for the fact that you can trade the NFTs in blockchain transactions.
Could be fun to trade.
Lots of interesting economic effects would come out of the ability to resell IP at the same market as the author:
- if a movie came out, and nobody likes it, they may instantly resell it at a market price after viewing. If it's unpopular enough, perhaps the original creator would only be able to get hundreds of licenses on the market before price to consumer is forcibly reduced against the will of the creator. Bad creators have to compete in price against dissatisfied fans.
- Great IP owners will want to carefully manage number of circulating licenses to maximize their overall earnings. A great film will not be resold after viewing, so owner may choose to gradually increase price until sales volume falls off. This invites speculators and enables IP owners to capture the lifetime value of their property more rapidly via effectively selling off future profits. Perhaps let IP owners could 'lock' or declare a frequency limit on license issuance to guarantee a level of scarcity to encourage investment.
- Scalpers can try to corner properties, but the IP owner can always issue more licenses to break the corner. It'd be a risky bet.
- If all of this lives on a blockchain, it'd make a bunch of cool publicly available metrics to economically quantify the value of IP over time.
I think someone at the publisher would do the math, and figure that they get more money by selling to two people, then selling a (possibly higher-priced) transferable license to one person.
If you want transferable licenses, make it happen. It’s the law in the EU, so if you pass similar laws in the US, you’ll get the ability to resell your game license, NFTs or no.
I'm a little surprised about the lack of discussion around code forks and hard forks.
Thousands upon thousands of networks based on either the actual Satoshi code or the ideas it embodies have been launched over the last ten years. Bitcoin itself sustained one major hard fork that persists to this day (Bitcoin Cash).
Each one of those projects represents someone making a choice that the status quo wasn't good enough. Most will die sooner than Bitcoin, but some won't.
The result is a kind of decentralization that's very hard to control: hundreds of competing projects, each one trying to be the next X.
Some think that has already happened in the case of at least one major cryptocurrency, but what happens if a system is changed to depart from the core values that the users care about? Those users create and adopt new systems.
Many of the other criticisms are sort-of true, but not in a way that I think is particularly concerning.
It is true that currently people lose money when they lose their keys, and that most implementations of blockchain systems don't have the ability to recover mistaken or fraudulent transactions.
However, these are true because of the interests of the people using and leading development on blockchains at the moment. If we start to prioritise UX, or decide to create systems with some sort of authority to determine fraudulence (maybe government?), fixing these problems is not outside the realms of a smart contract system or a new blockchain system.
The broad technology is very flexible, and could even be adapted to incorporate government actions etc if that's what the developers and users want (so far it seems not to be).
For me, the aspect that I'm interested in is that with blockchain there are no gatekeepers that stop you creating software that does interesting things with value. This is still not true with the fiat ecosystem - even the OpenBanking API, forced on the banks by governments is not a great system for democratising algorithmic access to money, and for me that's the most exciting thing about decentralised money.
Touched upon in the article:
> But in blockchains, we have something almost opposite to that. Since blockchain systems are logically indivisible, and also in many ways more formal and algorithmic than traditional financial systems, blockchains practically defy any authority, even the authority of people over their own accounts.
My bias is more towards how adaptable & flexible systems are. There's little loose coupling, little flexibility, it feels like. Sometimes flexibility is engineered in, with smart contracts, but those virtual machines are enormously unadaptable, unflexible systems, by design, and trying to extend or grow or adapt them feels highly unlikely. Governance models for these systems seem rare, and- speaking as an outsider, a not regular user- I rarely if ever come across descriptions of how these blockchains are changing or adapting. It takes many years it feels like to get basic life-preserving measures happen such as the bitcoin block size limits. Decentralized somewhat, but extremely high authority, extremely unadaptable, unchanging. They possess few of what we think of as the general resilliency, adaptability measures that decentralization & distributiziation beget.
Cardano is decentralized.
With 2,459 active stake pools operating all around the world to process Cardano transactions.
You can see the distribution of Cardano in Biggest Groups (Stake) on top left in the link below.
It would take many many groups getting together to take over 50% of staked Ada in Cardano.
Bitcoin on the other hand is not that decentralized
Bitcoin Mining Pools 2020
https://external-content.duckduckgo.com/iu/?u=https%3A%2F%2F...
You can see that if three major mining pools joined together, they could take control of the entire Bitcoin network.
Decentralized? - Charles Hoskinson https://youtu.be/0QtQGzqAIiU
China Could Hold 60% of the Residual Bitcoin- Tough Competition for Digital Yuan https://coinpedia.org/news/china-could-hold-60-of-the-residu...
(March 6, 2021) China Declares War on Bitcoin - China Uncensored
(April 19, 2021) After a bitcoin crackdown, China now calls it an ‘investment alternative’ in a significant shift in tone - CNBC https://www.cnbc.com/2021/04/19/china-calls-bitcoin-an-inves...
I know this is a site where everyone likes to think they are way more informed than the world population but in terms of cryptocurrency, I find the posts here woefully poor in quality and information.
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And I haven't even started on Cardano's Project Catalyst - their democratic method of funding new cryptocurrency projects/developers and adding projects on the Cardano Network. All decided and controlled by ADA holders and not necessarily IOHK/Cardano Foundation/Emurgo, the organizations who made Cardano.
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If you have a problem with my statement, then actually challenge what I have to say instead of hiding behind a downvote. Cut the bullshit propaganda and have an actual conversation about it.
Does this guy know that there are already multiple forks with competing communities in Bitcoin?
