Bitcoin, Ethereum, Blockchain, Tokens, ICOs: Why Should Anyone Care?
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> In some ways, Bitcoin could be considered the first decentralized application since it runs on blockchain technology, is fully open-source, and runs without a central authority.
Decentralization is not a new thing that only came into existence with Bitcoin... Torrents are decentralized, the email protocol is decentralized, Tor is decentralized, etc. Decentralized protocols and applications have existed before the blockchain and what the blockchain adds as a decentralized application is decentralized transaction validation. Basically decentralizing the validation of what can and cannot get written to a database. If you make your "writes" application state, then you can generalize the validators to be not only validating database-writes, but program execution steps as well (Ethereum).
> By no means do I believe that decentralized applications have no benefits. In fact, I foresee a future where applications are 10x more secure, 10x cheaper, 10x more efficient, or 10x more on some dimension than the current ones.
Decentralization is always costlier. Netflix is faster and more reliable than torrents, Facebook is more reliable, faster and easier to use than Diaspora. Fiat and credit cards are faster and easier to use than Bitcoin. AWS is faster, cheaper and more reliable than StorJ, and on and on. When you decentralize something, you must add coordination and communication costs such that your overall costs will always be at least as high as the centralized alternative. So the claim that the decentralized applications will magically be faster and cheaper definitely needs research and a [citation needed].
If we realize that the decentralized application will always be costlier than its centralized alternative, we must ask ourselves: why do we need decentralization? Then, we will really know what blockchains are for!
This is why torrents worked. They allowed people to share media even though it wasn't legal. Then people found a way to make a more performant centralized alternative and it is so much easier to use that most people now are willing to pay for it, even though free torrents still exist.
Email and git are also prone to centralizing forces. They are both decentralized protocols, but everyone ends up using Github and Gmail anyway, and not actually using them in a decentralized way. If you are sending "sensitive" emails or are sharing code for a dark market, email and git will be useful if you steer clear from centralized hubs.
Bitcoin is the same thing. Some people don't want you to send money to Wikileaks, so Bitcoin is the first time we can now send money online and disregard who the authorities tell us we can or cannot pay.
With Ethereum, decentralizing computation is an open question. Do we not already have censorship resistance in computation? Is anyone preventing us from running code? Is Tor not sufficient to run shady decentralized apps? I don't know.
Bitcoin gave us decentralized consensus for simple ledger updates, and Ethereum does it for more general computation and statefulness.
"Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer)"
[0] https://medium.com/@VitalikButerin/the-meaning-of-decentrali...
A lot of people feel like Bitcoin etc. are Stick-it-to-the-man endeavors. In the long term I think they will be disappointed.
I think the real benefit of this sort of decentralization would be if multiple governments took an active part in its operation. America could propose something but it wouldn't take effect if they can't convince the mining majority of China,Russia,France,Australia,Nigeria and India. No one entity can unilaterally make a decision for their own benefit.
That difference is the whole point. It could be argued that Vitalik has enough political clout in the community now to do nearly whatever he wants, but that only goes so far as whatever he's proposing is agreeable upon a consensus.
If the miners disagree, then it's a no go because they make it work. If the larger userbase disagrees, then the miners will be bent to disagree because there won't be any money in it if everyone sells off. It's shortsighted to think that because there are influential parties the whole system is broken. (hint: functioning democracies work this way. As far as most people can tell so far, it's a good thing)
I also agree with the rest of your positions here. To wit: while governments are hesitant and slow to get directly involved, they _are_ doing active research[0][1] into how/why/when it will be valuable to use existing blockchains or for what reason they could employ new ones. So are many banks. The distributed ledger seems to hold inherent value for everybody.
[0] Being from Canada, I know more about the goings here than elsewhere. The article has a rather negative tone, but the point being they are experimenting and recognize the need to keep up technologically, and the need to improve upon current systems. They are speaking more directly to virtual currencies here. -- https://www.theglobeandmail.com/report-on-business/bank-of-c...
[1] Fintech and Financial Services: Initial Considerations - IMF -- http://www.imf.org/~/media/Files/Publications/SDN/2017/sdn17...
Also, the legal systems and social contracts are not immutable either, expecting that you can set rules now that can persist forever is naive.
That's just a protocol. He uses the term "logic centralization" to describe the fact that we agree on a protocol. Bitcoin, and any other protocol, doesn't exist in spite of "logical centralization", it exists because of it, since that's what a protocol is (if you want to use that term).
How much worse, as in less creative and less free, would the internet be if not just China, but every government knew in the 80's or 90's what they know now about the internet?
That decentralization has let a "trillion flowers/websites bloom", and from that extreme experimentation (think of it like life's evolution over billions of years, but condensed in two decades) a lot of great things have resulted, and many more things will come.
Because Netflix puts their content in the internet exchanges (IXs) (Netflix Open Connect), bypassing CDNs in some cases, thus getting as close to the users as they can given the current internet piping infrastructure [1]. Sure, decentralization (being operated by an aggressive management that can strike background deals with IXs) makes that possible, but we all ought to wonder if it is a good thing in the long run. Netflix, YouTube, etc. have found ways of getting their data faster to the users and the little guy running his podcast stands no chance.
Are you really asking why money should be decentralized? Also do you realize that bitcoin takes about 30 minutes for an irreversible transaction, while credit cards take 30 days before you can spend the money that someone gave you.
You are thinking about it purely from a consumer standpoint, where credit cards are built on top of another currency.
In the case of a consumer spending money, a method of electronic spending that's not unilaterally reversible is most definitely a bug. For a lot of honest vendors that's also true - they want a situation in which people don't feel constrained from spending because of the high level of risk involved.
Reconciliation between finance houses? Not so much, sure.
Is it more expensive, though? In a lot of cases it is certainly more expensive (bitcoin, Facebook, etc) but Netflix should be a counter example. In theory, a decentralized Netflix should be a lot cheaper because there are very little bandwidth costs. In practice, though, this is impossible because of all the DRM regulations. There is just no way one could design a decentralized network without getting into legal troubles. Furthermore, adoption would be another problem because a decentralized Netflix would mean I have to upload content and download it. In practice, this would put me a long time into jail if I did that in my country (sometimes even more then murderer and rapists).
We have only seen one such successful "decentralized" application so far: popcorn time. It proves that it can be more reliable and easier to use but in reality the legal implications are just too impractical.
Furthermore, decentralizing other video platforms such as YouTube could be a lot harder. Netflix has a small amount of viewing content but a huge amount of viewers. YouTube has a lot of content and less viewers per minute of content then Netflix has. This means any user would have to store much more then they would on Netflix. There is just no way to save content for a long time. On YouTube I recently found a video I did when I was 13 about a tutorial for a video game. If I stored it on a hard drive, I would have lost it for sure (because I never really cared about it much) and there is no way it would have been stored for some many years by just 3000 viewers who have ever seen that. Just seeing this video after all those years is kind of amazing. I know that there is no guarantee that this video will stay on YouTube forever but the chances are a lot higher (and I don't see it disappearing as long as YouTube stays popular and their main business model is make small video makers big)
I don't think this is true... My friend used popcorn time and I can tell you that it is not easier or more reliable. The movie comes in somewhat random chunks so most of the time you are stuck having to download a large portion of the movie before being able to view it. The content discovery is lacking too. You have to rely on people hosting old movies and most of the time only blockbusters or recent movies are available. If you do get lucky on more obscure films, downloading it becomes an issue because of lack of seeders, and seeders come and go.
It is close to Netflix quality, but still not quite, which moreso is evidence for my "will always be at least as costly" point. Pick a not-super-recent and average-popularity film, say V for Vendetta, and see how Netflix and Popcorn Time compare.
You can also think about the tech: one ensures it's hosting high quality content on reliable servers that have the highest possible connectivity to its users. The other relies on users' good-will and connectivity, and both of those come and go.
Because Level3's peering agreements with Verizon/Comcast are under negotiation and the 10 high bandwidth data center owners don't want to set a precedent of paying more for a pipe because the end users want it (and are paying both services already), so the streams get throttled. But with a decentralized world, maybe it's harder to track a bunch of small packets that never leave the Verizon/Comcast network.
Source: https://www.theverge.com/2014/7/21/5922793/verizon-level-3-n...
This is a huge paradigm shift, and it will enable revival of all kinds of P2P applications, and actually make them viable and able to compete with centralized solutions. There's Sia for decentralized storage (StorJ is not decentralized) and Mysterium for decentrarized VPN, etc.
https://support.sia.tech/knowledge_base/topics/why-do-you-ha...
To the first question: "Sia" doesn't have to defend anything, because Sia is software, and not a legal entity. The developers have no control, authority or ownership of the network, and thus are not legally responsible for the contents. Individual hosts are responsible for the content that they host, and will have to respond to legal queries and remove illegal content.
> Problem #1: Lack of developer friendliness As we described above, Ethereum solves this problem by design through its expressive programming language and strong developer tooling.
The author doesn't have direct experience with Solidity, where the tooling is buggy and there are many subtle ambiguities and security issues that are not yet addressed. Any ICO, smart contract developer, or security auditor knows this and this is why ERC20 tokens that are only a few lines of code and very repetitive can hide terrible issues. You can check for example: "Smart contract short address attack mitigation failure" https://blog.coinfabrik.com/smart-contract-short-address-att...
I think that there are three ways in which something can have some sort of "value."
(1) The object is scarce and has uses --- e.g., gold.
No matter what, people are going to want gold. It's scarce (assume you can't just produce it) and is essential to modern electronic equipment (besides its appeal as THE famous precious metal).
(2) The government backs it --- e.g., the U.S. dollar
Techno-libertarians are going to lambast me for this one, but governmental backing actually means a lot to a currency. There is a reasonable expectation that the U.S. government, for example, be around tomorrow; if they aren't, we've got bigger problems than what we're going to do with our portraits of dead presidents.
(3) Agreement within a community --- e.g., Chuck E. Cheese's tokens, bitcoins
Now we've reached the most basic level of commerce. I'm not going to explain the social structures behind bartering and tokens, but essentially, everybody in the Chuck E. Cheese's agrees that a token is worth a game (or everybody involved in bitcoin transactions agrees a token has a certain worth).
Being a computer geek, the idea of a digital transaction becomes obviously quite appealing. However, bitcoin (and ether et al.) seem to be a waste to me: just a token that a useless computation has been done on an abused piece of hardware. Perhaps it would be better to get token credit for contribution to medical research or the like.
The altcoins and these bullshit "ICO"s are the next level of dumb. Now, not only do we not have any computing value (as they're 99% perfect clones of bitcoin or ether), we don't even have the ONE thing that bitcoin did right: recognition, which led to some insane valuations in those early, early days.
Today's news story: Invest in our ICO: we're totally not a scam based around fake currency. People totally value what we sell. Yeah, right. People barely accept current coins.
In a year or so you'll be buying cryptocurrency, especially when the Yield Curve starts dropping and we enter another downturn in the Market.
There is a generation of kids who will only know electronic gold aka cryptocurrency.
See: https://www.mixcloud.com/TheTimFerrissShow/244-the-quiet-mas...
if all you want to do is crash bitcoin then you'd have achieved your goal (albeit at a huge expense), but it's certainly not a good way of making money.
because blocks contains transactions, not balances, and transactions are validated individually (simplified: bitcoins are sent to public keys, and to spend those coins, you need to sign "send coins to public key x" with your private key), thus ensuring that if you took control right now, you can't make arbitrary transactions, and you're stuck with the current transaction state.
* mine arbitrary amounts of money, since how much you can get from each block is enforced by every node in the network
* generate arbitrary transactions (ie. stealing people's money) since those transactions would need to be signed by those peoples' private keys (which you don't have), and the validity of those signatures are checked by every node in the network.
* rewrite history (ie. saying a transaction from a year ago never happened), since your block builds on top of those blocks, and forcibly putting transactions in your block that contradict the history contained in those blocks would cause other clients to reject your block. you could get around this by building your block on top of a block that was around before that transaction occurred, but then you will be met by the "catching up" problem, since the "tip" of the chain is determined by the sum of the proof of work in all of its blocks. your chain of 7 years + 1 block would have much less proof of work than the legitimate chain of 8 years. by proof of work i'm referring to the same mechanism that controls the difficulty in mining blocks.
what you could do:
* collect the 12.5 BTC/block mining reward (but you can get this without being evil)
* block other people's transactions from being processed, essentially freezing other peoples' balances at the point when the fork started (doesn't get you any money though)
* doubling your income as a miner by not building on top of other miners' blocks, allowing you to capture all the block rewards instead of only 51%. (the ensuing panic and market crash would most likely make this move not profitable)
I think that if there was any mistake of QE, the mistake was that it didn't go far enough. Looking back, the recession ended up being deeper and longer than initially expected, and worries over inflation ended up not proving true. With the benefit of this hindsight, it seems clear to me that more QE would have helped the country.
In contrast, bitcoin exchanges have a high rate of getting hacked and losing all customers money. There is no protections against insider trading... and mining is controlled by a couple guys in China, not a body that we have democratic control over. How is that better than the current system?
Perhaps. Equally possible is that we're somewhere on the peak portion of the usual technology hype cycle (https://en.wikipedia.org/wiki/Hype_cycle). The part dominated by rife speculation of potential applications of the technology and overly optimistic estimations of it's benefits. That does sound a lot like the current crypto currency hubbub. Especially since as mentioned in the OP article, actual killer applications of crypto currency have yet to appear.
So when speculation and the confidence game surround it subsides, we'll enter the trough of disillusion, where if anything the technology will be undervalued for a time. Finally if practical uses emerge, the curve ticks up and levels off as a true reflection of the reality of the situation. We are certainly not there yet.
"Miss the boat" is a dead giveaway that we're in the hype phase. It's a simple appeal to the Fear of Missing Out (FOMO) which often drives investors into a bubble at it's peak. The trope of 'this time it's different' may prove right once in a blue moon, but the burden of proof definitely sits with the party making the claim.
Specific to crypto currency as a technology, there are some very real reasons to be cautious at this time. All value right now is based on the sole foundation of perceived future value. This mirrors housing market bubbles etc. Without significant real-world utility emerging, the value of bitcoins will disappear once everyone figures out that selling them to each other is not actually increasing their value.
Bitcoin is not the singleton of crypto currency, merely the first implementation to gain a significant following. This is very different to nation-based currencies and even for them, a significant portion of their value rests on the backing provided to them by their respective nation's prosperity and stability. Accordingly, expect unbacked crypto currency to be extremely unstable, over the long term.
You don't understand the fundamentals of Bitcoin. The computation isn't useless. Go find out why, and perhaps things will make a little more sense.
The nonce must be brute-forced to prove that the computing power was expended. It is precisely this expenditure of computing power that makes it expensive to cheat.
> The nonce must be brute-forced to prove that the computing power was expended. It is precisely this expenditure of computing power that makes it expensive to cheat.
No, I understand why it's done. But it has no practical use outside of Bitcoin.
In the real world, we pay people money for useful work (a gross oversimplification, but let's keep going).
Imagine a world where it's impossible to print money, and the only way to create money is by drawing dollar bills by hand, which is a very difficult task. Surely, people are being paid for their work here? Well, yes, but if the work is going only into the creation of the tokens, then it's useless. Why would you want an economy that revolves around the value of having wasted computing power on a nonce value? Maybe if we assigned tokens to those who expend computing power on medical research or the like, that's more useful. But Bitcoin is a waste of resources to generate.
There have been attempts to do others but none that really work, because in part of the problem you cite. It's also very hard to have a tune-able difficulty for the mining process.
However, regardless of the "usefulness" of the actual work, it ties the value of bitcoin to a very tangible resource: the amount of mining power available in the network. This is actually more similar to the gold standard than fiat currency, where proven reserves are needed to print more currency.
The other thing that I feel went wrong as a direct result of this is that instead of Bitcoin using the /ability/ to do work as a lottery for handing out initial currency it has been biased towards nonce specific hardware (instead of general computing) being used; with the result that the protocol has stagnated and cabals are now able to collude to control the protocol.
So, what advantages does bitcoins more expensive solution to this problem give us?
Furthermore, there is plenty of criticism that could be levied upon central banking, financing wars between nation states being chief among them. There's an enormous social cost to central banking.
Unless you are sending huge amounts of money, bitcoin is more expensive.
[1]: https://www.reddit.com/r/btc/comments/6gek0z/average_bitcoin...
You realize there's no such thing as 'free' right? What's the saying? "If you don't know who is paying for a product you're using that's free, you're the product."
And the cost of this to the end-user is the risk that if everyone simultaneously tries to withdraw their money, the bank won't have it. That's happened once in U.S history. I think it's a safe enough bet.
You don't have to be excited about this but if enough people are you'll just have to follow.
I was at a pot luck just a few weeks ago and people were gathering money for pizza. One person paid and the others just sent bitcoins to the one paying. This wasn't even a tech-related event.
I send Bitcoin. Sometimes a lot. But Bitcoin of 2017 and small transactions do not make sense.
Sorry if this is too bitter and tangential, but ... I'm not so sure I'd name-drop my employer so gratuitously, when they had ~3-4 site outages in two weeks[1], all of them coinciding with a major price drop (to say nothing of the miffed customers that are seeing their money and cryptocurrencies disappear [2]).
[1] https://status.coinbase.com/?again#month
https://engineering.coinbase.com/may-22-24-downtime-post-mor...
Having said that, Tim Swanson has some good critiques of bitcoin/blockchain. http://www.ofnumbers.com/ He does work for R3, the banking consortium which isn't creating blockchain technology, but distributed ledger technology.
(But then I'm biased against some of these tokens — I actively short them.)
Coinbase is also crediting back the affected users https://blog.gdax.com/eth-usd-trading-update-2-216a3b946ef6
Miners will tend to expand their operations until the electricity cost approaches the block reward. So if we plug in some numbers[1] we can estimate that bitcoin may soon consume a significant fraction of all electricity production. And it gets even worse as the price rises.
[1] http://www.wolframalpha.com/input/?i=(2500$%2Fbitcoin+*+12.5...
Well, you probably shouldn't care. It is not too long until we will be a decade into this adventure and for all practical purposes there is still zero adoption. We may or may not get a useful mainstream product one day but right now we don't seem to be substantially closer to it than when the Bitcoin genesis block was mined. Sure, tomorrow someone might have this one idea that makes all the pieces snap together but it might as well take another decade or not happen at all. So unless you belong to a small group of speculators, early adopters, or want to invent the killer application yourself, you probably should just care as little as 99 % of all people do.
Bitcoin will probably still be used as a medium of exchange for illicit goods but that's about it.
As if this was a small use case...
Those wondering why they should care, will not care enough to read this much information.
Edit: Not saying Truffle isn't useful as a framework. You just won't learn a lot more about Ethereum by just learning Truffle.
It took me a few days to figure deploy my first contract on Ropsten testnet with Truffle and a local node.
Now it's easy :D
I dont see how any of this stuff benefits anyone I know. Most people don't need to care, and I can't see any application being discussed that sounds useful.
The only reason people are interested right now is that you can make money out of a ponzi scheme - just remember to get out early before the house of cards collapses.
There is more innovation to come to outpace the current proven technologies. In the last 18 months or so there is an explosion of new blockchain whitepapers, especially this one: https://www.cryptocoinsnews.com/red-belly-blockchain-to-proc...
https://www.scuttlebutt.nz/stories/design-challenge-avoid-ce...
The original Ripple was decentralized in this way. No global consensus was required. What changed that now it has an entire whitepaper on global consensus?
As a developer, I think giving so much money, no strings attached, to a team before a product even exists sounds crazy and kills incentive. I must be missing something.
Fiscal policy is an important tool and I just don't see a future where the world's nations give that up.