Comment by EthanHeilman | Hacker News Reader

Comment by EthanHeilman | Hacker News Reader

Parent Full thread

Disclaimer: I've co-founded a company building cryptographic protocols for existing cryptocurrencies. I'm also a cryptocurrency security researcher.

I believe in Bitcoin and the recent developments in both cryptography and distributed systems which are underlying many cryptocurrency projects. I think the skepticism of Hn is rational, valuable to the community and often correct. The cryptocurrency space is a great space to work in, but it requires a constant investment in skepticism and critical thought. I hope Hn always remains skeptical of technology.

> The underlying technology is actually pretty worthwhile. Ethereum is providing a base layer protocol for apps that never go down, never fail, and are fully trusted.

I disagree with this statement. Ethereum DApps can fail, Ethereum can be rendered unavailable via: scalability issues, forks, bugs or failures in the P2P network. Furthermore the additional infrastructure that many DApps rely on can fail as well. Ethereum is not a solution for achieving high-availability, high-availability is probably harder to achieve with a DApp. Ethereum is a solution for building and managing assets outside the control of a single party or company. This intentional loss of control comes with many costs and does not provide universal business benefits.

Well said. Decentralization does not magically give you reliability or high availability. Sometimes it is quite the opposite. It is still just a bunch of software running on a bunch of miscellaneous computers over an unreliable network.

To me there are strong parallels between the cryptocurrency boom and the previous P2P boom. P2P technology was exciting and super interesting, but people assumed that it would magically be the solution to a million problems just because the tech was awesome and decentralized. But that didn't happen, instead Netflix happened. Netflix found a way to solve the actual problems that people were having and at the end of the day the underlying technology didn't matter.

I expect to see something similar happen with a lot of the current crypto use cases. More centralized solutions like Amazon QLDB[1] will provide the majority of the benefits that people really need: a transparent, immutable, and cryptographically verifiable transaction log, while also being performant and highly available.

Many people see decentralization as the solution to all problems because it will finally make things fair, a level playing field for all. I just don't see it happening. Not because of some sinister world order trying to retain control, but simply because that is not how human interactions and trust tend to work. I think we can continue to move towards more decentralization, but it shouldn't be the end goal in and of itself and we should always be skeptical when there is more focus on that than there is on solving the problem at hand.

1. https://aws.amazon.com/qldb/

>Netflix found a way to solve the actual problems that people were having and at the end of the day the underlying technology didn't matter.

This, one thousand times this, it is always this. People have problems and they want solutions, they don't care about particular technology architectures.

To be fair p2p was, and still is, a better technical solution, and had it not been illegal, would probably have won.

(p2p wasn’t illegal, but what people wanted out of it was)

There are services that incorporate P2P (e.g., Spotify, and you can find others if you do some research). If you're writing closed-source software that operates on content that belongs to you (or that you've legally licensed) there's nothing preventing you from using peer-to-peer technologies in your stuff.

I can't believe that Netflix didn't seriously consider P2P. I imagine they didn't do it because there are issues with consuming limited upload bandwidth that doesn't belong to NF, and having poor control over the resulting complicated network flows and the ultimate customer experience (think about what your first customer service action for a customer having video quality issues would be).

No doubt there are many managers and system engineers who shy away from P2P because it's associated with bad actors. But there are sound reliability engineering and customer-facing reasons not to use it, too.

Didn’t Netflix start providing ISP level caching vis boxes? In any case if they didn’t this method would make P2P pointless as consumer peers would still route traffic back to their ISP, and in worst cases another consumer could be at another ISP network.

In this case it is a little stranger though. It seems that the problem is that the economic system is rigged against them, and their payment systems are spying on them. When the “solution” to this becomes evident it has been flowing to the participants in that economy. They then realize that Bitcoin was solving their monetary problem all along and the awakening happens - only when they rush to the solution it appears to be a mirage as the very act of them rushing on their realization turns into instant debt liberation for the long term participants. Then it all crumbles and they say it’s a scam and was never a solution. In reality, nothing really changed, and the slow crawl will continue for the long term participants.

I am genuinely interested what are those problems that decentralized apps and cryptocurrency solve? Anonymity of payments? Bitcoin is a shitty way to pay for anything and I want convenience first and most of the time I do not care about anonymity at all. Smart contracts? After 2008 there was talk about including Python code into contracts to codify distribution of gains in MBS’s. Pretty low tech and workable. Did not happen, because finance is still largely a business of relationships and trust.

>Anonymity of payments? Bitcoin is a shitty way to pay for anything and I want convenience first and most of the time I do not care about anonymity at all.

Unfortunately Bitcoin provides much less anonymity than cash or credit card payments. Bitcoin provides excellent censorship resistance, in that Bitcoin lets anyone who has Bitcoin send Bitcoin to anyone that wants Bitcoin (assuming of course internet access and fairly technical users). Additionally Bitcoin lets people custody Bitcoins like cash or gold and also lets those same users send Bitcoins digitally. This is a new development and something people couldn't do before. We are still in the early stages of seeing how people use this new capability. Check back in 20-100 years.

Smart contracts, especially legally enforceable smart contracts, have existed well before cryptocurrencies, however cryptocurrencies provide a fairly natural setting for them.

>Did not happen, because finance is still largely a business of relationships and trust.

Relationships and trust mean a high cost of doing business, both because trust is expensive and because relationships are not able to be automated. Cryptocurrencies and smart contracts offer a technical substitute for trust. This substitute is not good in all cases and has some serious tradeoffs. However there are some areas in which it is a clear improvement.

I agree that cash is better for anonymous transactions ... Sometimes. But I don't follow that credit cards are more anonymous that Bitcoin.

You generally have to give up your ssn and lots of private data to get a credit card. Your name is tied to it.

Cash is great, but does require you or someone to physically deliver it.

But crypto can be laundered through a mixing service over a tor connection and when done properly and carefully, would be essentially untraceable.

>But I don't follow that credit cards are more anonymous that Bitcoin.

Credit card transactions are private between you, the merchant, the processor and your bank and anyone those parties sell your data to. Whereas Bitcoin transactions are recorded on a public immutable ledger.

>But crypto can be laundered through a mixing service over a tor connection and when done properly and carefully, would be essentially untraceable.

You can certainly obfuscate Bitcoin transactions. I even wrote a tumbling protocol for Bitcoin[0] and have been involved with other cryptocurrency privacy projects. I believe that cryptocurrencies can achieve a high degree of privacy, but we aren't there yet.

Note you can do similar things to make credit card payments more privacy. For instance by buying and trading gift cards or store credits.

At the end of the day if you buy physical goods online you have to have them delivered to your house, drop site or PO box. That means giving out a physical address which greatly reduces your anonymity.

[0]: https://eprint.iacr.org/2016/575.pdf

> Bitcoin is a shitty way to pay for anything and I want convenience first and most of the time I do not care about anonymity at all.

As a side comment, just two hours ago I paid an IPTV service with BTC using coinpayments.net and it was easy (scan QR code and click send) and quite fast (at first I was going to pay for BCH because usually it is faster, but I only had BTC in my wallet).

Really cool as payments technology if you tell me.

> Bitcoin is a shitty way to pay for anything

I think following the reasoning of many BTC optimists, your quote is equivalent to saying "PPP (the one in OSI layer 2) is a shitty way to have globally distributed, secured real-time chats"

> I am genuinely interested what are those problems that decentralized apps and cryptocurrency solve?

Censorship resistant, electronic, financial transactions.

You can make an electronic payment to anyone, and nobody is going to stop you. No transactions are currently being censored on most of the big crypto platforms, so we have provable evidence that it works for this usecase right now.

Thank you. So, electronic financial transactions is a problem already solved by other means (and much better at that). Censorship - I totally recognize my first world privilege - what are the contexts in which this is relevant? Even if payment censorship problem is somehow solved, the delivery of goods and services can still be blocked, be it by customs or firewalls.

If people end up really wanting something like asset management that's not in the hands of a middleman, of course your Netflix and Amazon examples don't apply.

People want fast, cheap, easy ways to move money. Most don't particularly care whether or not a middleman is involved. They just want the job to get done and they want it to be simple.

I cannot find a good analogy, but I am starting to look at Ethereum as a really good proof of concept, but one that probably won't survive. I cannot put my finger on exactly why, but I am starting to feel like nothing will survive that is not built on Bitcoin itself.

Some projects will die in this during this current crash. The most likely force to kill off projects will be:

1. lack of developers to adapt to cheap 51% attacks,

2. cheap 51% attacks will lead to those coins getting delisted from exchanges since attacks will cheat exchanges via 51% double spending attacks (something which has happened a few times already)

3. With no ability for people to safely buy or sell coins those coins will die.

I don't think this will happen to BTC or ETH. I think Ethereum will look very different in 5-10 years.

BTC may survive, but ETH is down more than 90% and it's not looking good.[1]

[1] https://coinmarketcap.com/currencies/ethereum/

It is counter-intuitive but 90% drops in the price of a cryptocurrency don't result in that cryptocurrency dying. What kills a cryptocurrency is exchanges delisting it and/or having no developers. Price decreases are unlikely to directly cause either of these to happen to Ethereum.

Isnt the price reduction what can lead to the 51% attack?

there's no pressing need for ethereum, it's a cool experiment but it's much less efficient than the centralized databases that power 99.9% of the worlds computing needs today. it will die from lack of use once the hype and funding runs out. bitcoin will survive because people actually use it to evade currency control laws and launder money. not to mention traders will keep it alive as an alternative asset and good source of volatility

Centralized databases power 99.9% because Ethereum like technologies aren’t ready for general use yet. My money is on Ethereum getting there first with sharding, proof of stake, and adoption but whichever one does will unlock many, many use cases.

Which use cases?

Bitcoin will just die. The problem wit pretending it's an asset is you're doing exactly that - pretending. When you hold stocks you hold actual ownership of a productive corporation, when you hold bonds you hold repayment promises from productive corporations or governments which can tax their citizens etc.

When you hold Bitcoin...you don't hold anything which can convert into something useful at the end of the day - you hold the useless result of expended computing power. A bitcoin isn't a password which unlocks anything, it doesn't convert back into computing power - it can't do anything into the future.

I don't hold any bitcoin or cryptocurrency and am a crypto skeptic in general but isn't this argument commonly rebutted with the comparison to gold, to which all of the same criticisms apply but which has nonetheless maintained value for millenia?

Gold at least has legitimate industrial uses that put a floor under its valuation.

What do you hold when you hold USD in a bank account? The best argument I've heard for the value of USD is:

1. is that you can pay your US federal and state taxes in USD

2. and many companies and individuals will accept USD in trade for goods and services.

Measuring BTC by that same rule you'll find:

1. You can pay your Ohio state taxes in Bitcoin [0],

2. and you can trade BTC (Bitcoin) for some goods and services (overstock for example).

Thus if USD has value by the measure above than BTC must share some of that value. The value of BTC might be significantly smaller than USD but it must be non-zero.

>When you hold stocks you hold actual ownership of a productive corporation

Not every company is productive. The stock is worth what someone is willing to pay for it now or at some future point. Companies have issued stock as cryptocurrency tokens.

>When you hold Bitcoin...you don't hold anything which can convert into something useful at the end of the day - you hold the useless result of expended computing power

You raise an interesting point here. Should currencies have a use other than being a medium of exchange? For example you can burn paper money to generate heat or melt down coinage into useful metals. Does having that property make paper money or physical coins better as a currency? Goldbugs would say yes, I'm less sure.

[0]: https://www.wsj.com/articles/pay-taxes-with-bitcoin-ohio-say...

>>1. is that you can pay your US federal and state taxes in USD

>>2. and many companies and individuals will accept USD in trade for goods and services.

First of all to have USD someone needed to borrow it first and they need to return it. The USD you hold is useful for someone else to pay their debt back. This is much more important than taxes.

>>Thus if USD has value by the measure above than BTC must share some of that value.

No, the reasoning is based on missing the point of fiat currency: someone else owns USD to the central authority with a lot of power.

>>For example you can burn paper money to generate heat or melt down coinage into useful metals. Does having that property make paper money or physical coins better as a currency? Goldbugs would say yes, I'm less sure.

The point is that USD represents someone's debt. They will need to come up with goods/services to pay that debt back if they don't currently own enough USD. BTC represents wasted power and its only value is a hope someone wants to accept it as payment even though no one really needs to (unlike USD).

> First of all to have USD someone needed to borrow it first and they need to return it.

This is a novel concept to me - could you please elaborate on that or provide suitable search keywords?

Look up "Credit theory of money".

Thanks!

You can’t actually pay your Ohio state taxes with BTC. They convert immediately to USD when you pay with BTC. If it didn’t convert, you can bet they would not accept BTC.

This is a tired argument, comparing Bitcoin to stock and using words like "actual" in the context of stock while using words like "pretending" in the context of Bitcoin.

Most stock today doesn't pay dividents and has no direct relationship to the company's assets. You own some tradeable tokens and you bet on them going up or down in value. Implying stock ownership gives you something that's tangible and non-speculative is the real pretending.

fewer than 20% of the stocks in the S&P500 do not pay dividends:

https://www.dividend.com/investor-resources/sp-500-companies...

Arguably the whole human civilisation is based on imaginary things - that is on 'pretending'.

There's nothing make believe about the trillion dollar US armed forces that backs the full faith and credit of the US dollar.

I put my finger on it being too expensive. It works when it is subsidized by all these speculators - but eventually this cost needs to be paid.

Replication of fixed infrastructure and computing costs come to mind.

Reply on news.ycombinator.com