When the internet first got going, everything worked with protocols. Protocols are open, decentralized, interopable. Think email. Anyone can send an email as long as they follow the protocol.
Then people figured out that you can't make any money from protocols. Instead we got platforms: closed, centralized, and most importantly monetizable. Think facebook.
Cryptocurrencies are a way to combine open protocols with making money. Instead of building a cloud-storage business, you build a cloud-storage protocol and make money on the coin that is used within that protocol. ICOs are how you fund development of these protocols.
Now, in reality, a huge number of coins are borderline useless or outright scams, and the current valuations are absurd. But long-term I think it's a very valuable technology.
Anyone who believes this probably wasn’t alive then.
Everything we take for granted is built on open and free (as in beer) protocols. The people who created and supported TCP/IP, HTTP, XMPP, etc. figured out ways to have successful careers without a micropayment scheme for basic participation.
And personally, I remember a simultaneous mix of excitement and disappointment from the internet of the 90s.
For example, the little guy might be able to make a small income from IPFS/Filecoin that would otherwise be strictly the domain of AWS and other giants.
Seems like a bit of wand waving going on in your description there.
There actually already exists a coin connected to messaging protocols, Kin. I don't see much practical use for it however.
This is my limited understanding:
1) You want to allow users to send and businesses to receive (micro-)payments within your messenger/protocol.
2) You want to allow users donate/vote/gift/award other users/groups/posts with their tokens within your messenger.
3) You want to allow users create custom (chat-)bots which could apply some scripted logic to send/receive tokens; etc.
Inventing a new distributed messenger/protocol with cryptocurrency, you essentially create (and own) a new platform with services operating on "virtual money". Rules of money (tokens) distribution in theory must be guaranteed by your protocol implementation (usually presented via whitepaper).
If potential future users like your idea (whitepaper), they may invest into your new shiny platform via ICO (with other cryptocurrencies) to get some of your initial (limited) tokens. They want to get them while they cost less than they potentially will cost later, if your platform becomes popular. It's assumed that in the case of an open distributed blockchain platform, amount and belonging of tokens won't be able to be painted by you, but guaranteed by algorithms and public network.
We've seen how it works on totally scam projects. And apparently, we'll have a chance to witness how this works out in case of the already popular platform[1].
[1] https://techcrunch.com/2018/01/15/inside-telegrams-ambitious...
It seems like a bit of a chicken-and-egg problem (at least in the way I keep seeing it described): you fund your project/app/scam with money from your ICO, but you only get money from your ICO when people believe in your project enough to put ("real") money in it prematurely.
At best, this is basically the Kickstarter model that everybody likes to trash, is it not?
But people who participate and invest from the start can make money if the project succeeds. So the economic incentives for those involved are greater than the incentives in a walled garden.
But this makes zero sense! What purpose does the coin serve here? Imagine coins had somehow gotten tied in with email protocols. The person who came up with the protocol somehow gets to magically siphon off money every time someone sends an email? Why? How?
The same is true with Bitcoin or Ethereum. You can fork it and make your own, but the majority of the people want to use one of the original protocols, and you can only use the protocol if you pay with the proper protocol token (either BTC or ETH).
But not value that can be captured by the creator of the protocol. Let's go back to cloud storage. Sellers of storage sell 1GB-Month for 1 token (or whatever). Buyers of storage eventually run out of tokens because they've given them all to sellers. So they have to purchase the tokens back from sellers for dollars. How much will sellers charge? The cost of storage (plus whatever profit they can get away with).
At that point buyers of storage are paying exactly what they'd pay for storage if the token system didn't exist. It's just this goofy middle layer of scrip. There's no magical extra money that the protocol creator can siphon off.
Step back and look at the big picture. The only way for a protocol creator to make money is for either sellers of storage to charge less than they otherwise would or for buyers of storage to pay more. Why would either of those two groups ever want to do that?
I'm saying that the creator of the protocol won't.
That's also how proof-of-work systems should have worked with surplus compute cycles, except ... ASICs. I basically consider Bitcoin broken because of this.
As to how the protocol creator makes money, they can sell storage like everyone else, but creating a protocol doesn't require the same initial capital as starting a whole cloud storage company.
Because? Value?
Sorry, I really lost a lot of faith after that one.
No, it doesn't. Being scarce, by itself, is not valuable at all. Being useful is was gives something value. In fact, I'd argue a protocol that I have to have a coin for is much, much, much less useful, and therefore less valuable, than one that doesn't.
They don't, why would they?
The only people who need to be magically paid are the ones executing the contract... miners, signers, etc.
In FoodCoin the cooks would get paid, the health inspectors would get paid, the poisoning investigators would get paid, the underwriters would get paid when those people do their jobs and lose their stakes when they don’t. The eaters would pay.
These people are paid for doing work in alignment with the contract incentives. A good cryptocontract makes it hard to get rewarded for work that goes against the planned incentive scheme. A bad one fails at this.
In order for this to work without a centralized payment gateway like PayPal, you need to issue tokens. Those tokens will have a value of TOTAL_TRANSACTED_PER_AVERAGE_HOLDING_PERIOD. Their price will depend on speculation about that value over time. Contracts finding more use will tend to have a bigger TOTAL_TRANSACTED_PER_AVERAGE_HOLDING_PERIOD.
In that case it is not an open protocol (at least not in spirit). It is better to go with platforms.
What Ethereum for instance did is genius. It distributes storage and compute across the world to those willing to share their resources and you get paid by doing so. It's a way to drive decentralization, because there is an incentive for mining. Is it perfect? Not quite yet for various reasons (performance, privacy), but its an interesting new paradigm.
In theory, protocols like the blockchain are open, decentralized, interoperable. Yet in current practice a cryptocurrency only works with platform lock in: if you don't lock people into your platform it isn't monetizable. Market forces push toward closed (artificial scarcity, rising costs for new players to enter the market versus entrenched players/miners/etc) and centralized (central wallets/brokers/exchanges on the one side, complex miner unions as complex political boundaries form on the other side).
I'm not sure cryptocurrencies can save the internet from platform problems when they themselves are platforms.
Email is not centralized under a single authority, but I disagree that it's so decentralized that "anyone" can do it.
The openness worked so well in the short-term that spammers and scammers started using it, so all the major email providers started running serious spam filtering. As an individual, I can't realistically set up a mail server to send email to anyone, like I could in 1995, since Gmail will reject it.
SMTP is a pretty simple protocol but now I have to use major third-party services for both sending and receiving internet email.
In the case of email, that's fine, because there was never a centralized alternative. In the case of currency, what's the point? Isn't it just going to circle back around to (mostly) centralization again, and so what was the point?
I'm an individual who runs his own mailserver and all emails are accepted by Gmail.
Sure, today a mailserver must be absolutely properly configured. Not just to play with Gmail, but with all other players as well. The HELO string, DNS settings and especially reverse DNS settings must be correct. Don't run it in a non-dynamic IP range. And for IPv6, better have correct SPF/whatever records.
This is initial effort, for sure, but absolutely doable for an idividual who plays with their own server/VM anyway. Pro tip: It is more fun if you share the infrastructure with friends.
And there are properly configured projects with ready-to-use VM images and good tutorials out there.
In some sense it is even easier than HTTPS, because for SMTP+TLS and IMAP+TLS a self-signed certificate is sufficient, you don't need Let's Encrypt certificates, let alone pay dubious CAs for certs if you are commercially active.
>but isn't centralized wallets/exchanges like coinbase defeating the entire purpose of crypto currency
This is true. This is my biggest problem with the current ecosystem. If history is any guide, they'll eventually suffer from some sort of scandal and/or run that drives customers to a superior competitor. This only kicks the can, I realize, and is far from the original vision. But at least each centralized service learns from the costly mistakes of previous ones.
Step 2: make use of Bitcoin illegal. You know, "ban" it. It's a plaintext P2P protocol, not exactly magic. If you control the network, you can identify Bitcoin nodes and charge their owners, exactly how law enforcement can enforce laws against other illicit P2P traffic. This would drive any remaining die-hard users to services like Tor.
Step 3: if Bitcoin is somehow still popular enough to be considered a problem, block Tor.
“One has a moral responsibility to disobey unjust laws.” ― Martin Luther King Jr.
The most obvious way is to make it a crime to exchange bitcoin for USD, goods, or services. (Doesn't even have to be bitcoin specifically; they can say "blockchain-backed digital resources" or whatever.) Scope it under interstate commerce, in the US; who's going to stop them? Obviously that wouldn't kill BTC overnight, but it would kill any legitimate market. If they're really worked up they can compel financial entities to disclose or block payments to/from known BTC exchanges, or compel telcos to do the same for blockchain mining traffic. They could even ban owning bitcoin; delete your keys or you're committing a felony.
How wouldn't they ban bitcoin, really?
In that scenario I suppose bitcoin's only hope would be that the countries of the world wouldn't coordinate to enforce a global ban. Seems unlikely that they would. But, back to your point, a total US ban might be enough to eventually kill the ecosystem.
So whilst you can transfer money censorship free, you and the recipient need to then handle the transfer into and out of crypto which seems to be in many cases more difficult than actually transferring money other ways.
Not to mention the fact that that purpose is an astonishingly niche thing to want to do - at least in first world countries.
Are you suggesting crypto has no long-term value in the west?
Don't get me wrong. That vision of the future isn't here yet. Far too few vendors accept bitcoin today for it to be a viable closed loop system.
So, how does this work if I'm, say, trying to support the protests in Iran, who just shuts the internet off?
https://bitcoin.org/bitcoin.pdf
It's just not reality for today's Bitcoin. We'll need better scaling in production to make it reality, either on Bitcoin or other cryptocurrencies.
Edited to provide additional information:
- low fees ($0.01) to have your transaction confirmed in next block
- zero confirmation transactions safe for most users
- same pre-fork ledger
- businesses are starting to integrate with the technology because it's usable again (e.g. yours.org)
Even satoshi(before you try to cite him) himself said off chain might be needed.
Doge coin is still going even though the creator did it as a joke.
Bitcoin cash has by forking from bitcoin itself also guaranteed it would have users as it gave everyone who had bitcoin some bitcoin cash. It's a clone of bitcoin with the brakes removed.
For me, it would be its value plummeting to near-zero. If no one values it or uses it for anything, I'll be convinced it was a scam. Now, your turn.
It was designed to avoid a fix that would prevent the use of asicboost.
You're goalpost of a zero or near zero value is bad. Even fake art can be sold.
Also, I'm happy to pay a (reasonable) fee to miners to compensate them for the resources they spend in keeping the network secure for me.
I have kind of mixed feelings about removing ASIC boost. I do feel it is everyones right to innovate and get an advantage, then patent that advantage. It takes money to do that R&D, so it should be protected. Others can do so as well, or operate from countries where these patents are not respected. On the other hand, others have so far been unable to get their own advantages, so maybe it is time to hardfork (yes, hardfork, SegWit does not fix it, not until > 90% of transactions are using SegWit) to prevent getting this advantage.
Actually... I like that, just phrased a little different - Bitcoin Cash - it's bitcoin with the parking break disengaged!
... if you have to result to namecalling, you'll probably a shill.
There's an anti-miner narrative that bitcoin core is selling, but in the end, the market will decide.
As for developers removing the malleability fix (SegWit) to break the LN, that is just a plain lie. First, SegWit was removed because it is just an hack that can be achieved in much better ways. SegWit is such technical debt because it did in a soft fork what should have been done in a hard fork. Second, you can see on the development mailing list that fixing it has been discussed well, and a fix for third party malleability is actually already active. You can also see that nobody is against 2nd layer systems like Lightning Network, and it will be supported if and when it is actually useful.
The EDA that was in place in the first 3 months was indeed a big mistake and has since been replaced with a well performing fast acting DAA, but it is not the reason people push for 0-conf. 0-conf was a pretty well used and working feature of BTC before the blocks first became full. It is only logical to use it again on a chain that does not intend to let its blocks become full.
There's always going to be niche markets for people who can't use fiat currencies for one reason or another (international commerce, failed states, black markets, etc.), and there's probably going to be some number of hobbyists who want to transact in crypto as a political or technical end in itself.
But why would the median consumer possibly want to migrate to a world where their real net worth could halve or double literally overnight, repeatedly, at any time, for reasons they can neither predict nor control?
3rd gen tech is here, with instant transactions and 0 fees. Look at RaiBlocks and IOTA, these things make microtransactions a reality.
I passed funds with RaiBlocks the other day, fast as hell, 0 fees. Try to beat that.
IOTA has an absolutely unprofessional development team, doing things like saying critical security vulnerabilities are there on purpose so they can point it out when someone forks or saying that the network being unusable due to a DOS attack is fine because they can use it for testing. Don't forget the time they turned off the network for 2 days without any prior notice (yes, they can do that). I'm all for new technology, but Bitcoin is 9 year old proven technology at this point, while IOTA and RaiBlocks are both new and unproven. Let them mature a bit before suggesting people rely on them. Would be quite bad if someone turned off IOTA when you need your money, wouldn't it?
I agree with you that bitcoin derivatives (with blockchain) have proven themselves with a robust security implementation. But if you look at adoption, none of the cryptocurrencies really proved itself. Bitcoin was even dropped by some (such as Steam). And with the high transaction fees, you couldn't really blame them, it just makes no sense.
I also agree with you that RaiBlocks hasn't proved itself yet in security and scaling. But in my opinion, instant and free transactions is a total game changer. If these technologies are able to stand, it's a total game changer for all cryptocurrencies that focus on fast transactions and low fees. That includes Bitcoin Cash and Litecoin.
As for IOTA, I consider that tech in alpha stage. They are not trying hard to make it usable, but it seems they are putting all their focus on trying to build up a standard for the industry. All the partnerships and relations they have going on make sense. Is it usable for end users? No. But RaiBlocks is. And instant feeless transactions indeed could have nice synergy with IOT.
These are definitely interesting times. But I wish more focus would be put on applications and use cases than on the market cap of each coin.
We rely on many central authorities because that was the only way to get safety, security, dependability. Governments enforce ownership, banks maintained records. When the systems were created it was the only way, short of physical ownership of all of your money (who wants $100,000 under their bed?).
Blockchains and related technologies offer an alternative. You can have all the same things, but without the need for central authority. That appeals to some people.
The centralized wallets and exchanges are indeed a potential problem, but you can always switch your money elsewhere, choose a different central authority or choose none. And whatever you choose, the underlying system is still free from central authority. No one can control what you own except you.
The problem that I think is overlooked is that central authorities like governments do more than just that small list of things. They offer protection from inflation and deflation. They offer protection from scams (rollback of the transaction, if you will). They can use physical violence (arrest, confinement, and so on) to enforce their central authority. They can enforce, to some degree, that illegal actions aren't occurring using their centrally controlled currencies. Blockchains do not offer that- for better or worse, you decide.
It most likely still is, and forever will be, in any practical sense.
Bitcoin, et al. provide an alternative through literally flushing humongous amounts of energy down the toilet (ironically, at the very moment in history, when we can't afford to do that). Energy requirements for maintaining the integrity of blockchains is unbounded and scales up with network use. If we were to accept Bitcoin as the primary world currency and use the network for the next hundred+ years, I'm confident we'd had to eventually (within couple of centuries) start sucking stars dry to keep up with the energy requirements.
Compare with the "traditional" economic system, which prefers to minimize waste and exploits benefits of centralization to improve efficiency, while still delivering mostly the same thing Bitcoin promises.
(In fact, all this gives me an idea for a sci-fi story: humanity is visited by aliens and encouraged to join an interstellar trade empire; only too late they realize that the friendly aliens are going to suck the Sun dry within couple hundred years, in the process of maintaining a blockchain-based interstellar currency.)
Note: I am not a big fan of the stock market either (it's pretty much a fake investment), we need investing 2.0, we have the tools, we just need the "Elon Musk" of finance
Note #2: I don't do what i'm preaching. I do own Ethereum because i'm hoping the smart contract layer might actually become useful someday (right now there are about 1000 DApps and they aren't that useful just yet IMHO)
Hm? In the stock market, you pay a current stockholder for their share(s). The company sees no money from the transaction. It sounds like what you're thinking of is banking, which is something different.
The current "valuation" suffers from the same issues as the valuation of any asset.
A quick, rough calculation - if ~30 TWh were spent on mining Bitcoin, and the marginal rate of death for electricity generation is at least 100 per TWh (https://www.forbes.com/sites/jamesconca/2012/06/10/energys-d... or https://www.nextbigfuture.com/2016/06/update-of-death-per-te...), this means that we have sacrificed the lives of at least 3000 people to make this happen. Are the benefits worth this cost?
Clearing transactions, the (comparably small) part of a financial transfer that Bitcoin does, is comparably simple and easy and constitutes a minority of both the effort and cost of financial transactions. Things like dispute resolution, fraud control, client-side tools, customer service and acquisition, etc take more than that, but that's not included in the standard Bitcoin transaction fee / miner's expense.
Or, said another way: what service does bitcoin provide, as opposed to say banking? Because that is what it is "trying" to replace. How many deaths does banking produce? Will replacing a part of the banking activities with bitcoin increase or decrease the death rate?
If I look at the headcount structure of a typical bank or at the tasks where the wider financial industry employs people, the settlement of payments takes 1%, perhaps 2% depending on how widely you interpret the area. So total worldwide adoption of Bitcoin (or some newcoin) might replace at most 1%-2% of the current banking employment and energy cost. As far as I understand, this energy cost is already smaller than Bitcoin's despite processing multiple orders of magnitude more transactions.
Second, the resources used by the banking industry to provide the services they do are not limited to the direct associated costs: we also have technology development, personnel costs (including energy used by the banking personnel to reach their workplace, the costs of turning on the lights in all the bank offices, and the fuel consumed by the bank managers to attend the party on the other side of the country without which the industry can not function, since, you know, you need some fun in order to sign the required contracts), the fuel consumed by the customers to reach the branch where, for the third time, they are going to evaluate their mortgage application, ... A long list.
In summary, yes, you are probably right that bitcoin is currently inefficient, and that currently it is not providing much value. But the sector is ripe for disruption, it is easy to disrupt, and any change in the current status quo will be an improvement, since the banking industry is so hugely inefficient for society as a whole.
At the core, the banking industry is just information processing, and that is the cake that technology is eating at the moment.
It's also used to speculate.
It's also used in industry.
It's actually pretty easy to turn gold into fiat and vice versa outside of north America. It's also fairly easy to do it in North America as well. The spread between buy/sell is also quite low.
There's not a lot of love here on HN for a lot of that effort, but it's not terribly controversial to say that there are a large number of dev teams working on products in a multitude of fields that are putting the blockchain to work.
The controversy seems to be whether blockchain tech is a sensible solution to some of these problems (that is, people ARE actually building lots of things, but the verdict is contentiously out on how sensible/lasting those things will be).
When corporate bylaws are written in code, you can replace a single legal entity with thousands of former employees operating as sole proprietorships.
Like I said, it depends on how you define "the blockchain". Many problems don't involve an open set of untrusted peers, and many problems don't require proof-of-work. So if you include those in the definition, then the blockchain isn't appropriate for a lot of those problems. And if you exclude those aspects, then what do you have left? A chain of cryptographically signed nodes that each point to their predecessor? That's been an underpinning of x.509 for, what, over 20 years? It's nothing new.
(I do agree that 99% of the decentralization of protocols can happen off the blockchain, amongst trusted parties... just saying that doesn’t get you all the way to “McDonalds Corp Replacement”.)
One positive effect this is possibly having (I haven't seen a direct analysis of this) is to boost GPU R&D. Right now it sucks for people who want to use GPUs for other things, because it's causing shortages, but that's presumably not a permanent state of affairs. And better GPUs will be good for a lot of other fields, particularly AI.
This is not true, at all. Only one of the regular Bitcoin Core contributors, Pieter Wuille, works at Blockstream. Other companies, Chaincode in particular (http://chaincode.com/#team) have many more Bitcoin Core developers.
Current and former Blockstream employees that work on core or have worked on core:
* Dr. Pieter Wuille
* Greg Maxwell (CTO)
* Andrew Poelstra
* Mark Friedenbach (Founder)
* Luke Jr (Contractor for Blockstream)'
* Jorge Timón (Founder)
* Patrick Strateman (core tech engineer)
* ฿tcDrak (anonymous dev, but publicly support blockstream)
The list is more extensive than this, but I can't be bothered to waste my time. Your propaganda and lies are disgusting.
Maxwell JUST left a few days ago and spent plenty of time at both Blockstream and Bitcoin Core simultaneously.
Timon is still there.
You also left out Strateman.
In any case, your strong assertion that only one contributor works at Blockstream is flat out wrong and easily shown to be wrong by anyone with 2 minutes to google.
You seem to know all these people, which indicates intentional deception rather than ignorance.
I use the word "disgusting" because the choking off of BTC is an intentional play to further a greedy business model and not just an act of stupidity.
Bitcoin Is None Of The Things It Was Supposed To Be
https://theoutline.com/post/2592/bitcoin-is-none-of-the-thin...
After you forget about that, take a look at the posibilities this new tech has to offer.
3rd gen crypto is here, with instant transactions and 0 fees. It's working today. Try RaiBlocks if you don't believe me.
Imagine that you own a fully automated Tesla. When you're not driving it, it's making money, driving Lyft and Uber passengers. When it needs to recharge, it goes to the most advantaged station and recharges.
The cool thing about this device is that it's a real actor in the economy, making money, and paying for things it needs.
If you give this device some pocket money such as IOTA, it can receive payments from anyone, and pay for electricity in any station. Each coin that goes over budget is passed to your account, or maybe to multiple if it's co-owned. Remember 0 fees and instant transactions.
In such a wold, why would you work with wire transfers from a bank account, if you can let machines work with "cash" internet money?
If such internet money is worth $0.000001, it has value, because you can make instant, feeless transactions with it. A corrupt state is also not able to mess with your money.
So yeah, I see a bright future for cryptocurrency. Even when the market crashes, it will still have value and plenty of usecases where it dominates all other options.
Centralized exchanges will remain a thing for rapid and cheap exchange; Bitcoin in particular has the flaw that it's slow and expensive to transfer between wallets, so the exchanges provide a fast alternative. You give up the decentralized nature in favor of fast and cheap transfers between wallets and currencies. This is more for the traders though.
In practice, running a mining node without specialized equipment is prohibitively expensive so we're stuck finding a third party. Most of those third parties are looking to do a volume business and aren't interested in one-off small dollar transactions, so it's centralized exchanges or nothing.
On that note, shameless self promotion in case someone wants to understand how transaction and fees work in bitcoin and most cryptocurrencies, I have written this post:
https://medium.com/@smith.garg/fees-calculation-in-bitcoin-a...
Imo it's an experiment in a decentralized privatized currency. And what we're learning is the benefits of centralized banking may outweigh the potential costs (namely inflation, a fairly justified fear depending on where you live).