Hard Problems in Cryptocurrency: Five Years Later
vitalik.ca
vitalik.ca
All of this research is producing a fascinating array of solutions in search of problems. Fun stuff to think about, but I suspect that the added complexity will only create a system that is just as prone to fraud and abuse as the existing centralized order.
Do you have an example?
1. https://eprint.iacr.org/2019/748.pdf 2. https://arxiv.org/pdf/1810.11605.pdf 3. https://eprint.iacr.org/2019/775.pdf 4. https://users.encs.concordia.ca/~clark/papers/2019_wtsc_fron... 5. http://homepages.cs.ncl.ac.uk/patrick.mccorry/minerbribery.p...
This one isn't an attack per se, it is mostly an exploration of arbitrage bots in decentralized exchanges running on Ethereum smart contracts. However, they point out that miners can trivially capture the value of the arbitrage transactions by front-running, and that this "free money" is like a bonus block subsidy that falls outside of the PoW consensus models:
6. https://arxiv.org/pdf/1904.05234.pdf
This one actually operates through transaction fees only, so it doesn't depend on smart contract functionality. However, it is waaaaay more expensive (for the attacker) than the others:
One of the ideas of PoW is that if you have enough money to bribe the miners, it's better for you to be a miner yourself. Is this the principle your examples weakens? I may have misinterpreted them.
It’s like... the people most interested in trustless collaboration are people who are untrustworthy. A trustless settlement layer seems fine, but any real human application is going to have an element of trust and doesn’t belong alongside settlement.
But more to the point: allowing smart contracts in a blockchain introduces all of the complexity of trying to make any other piece of software secure. Except... now it’s on a blockchain where the code is open source and mistakes can allow adversaries to steal money, not just data. How is this an improvement?
I think it’s great that more and more people are jumping in and learning what it’s like to develop in such an unforgiving domain (no point here, I just think it’s great!)
Production ready in 18 months! Forever...
These two together have already caused lots of damage https://hackernoon.com/yes-this-kid-really-just-deleted-150-... and they make most real-world uses impossible.
It is pretty much impossible to sell anything digital with smart contracts, because due to the source code being accessible to everyone you can always figure out the password, key, or secret URL to whatever is being sold. Without paying for it.
Pirating most software/movies/music is pretty easy, but people still sell it. I'm not sure this is as big a problem as you think it is.
If you disagree, would you be fine with changing the political and justice system of your country into a fully opaque black box? As in, you still can vote for the policies you want, but it's impossible to know how the government functions, what are the reasons for its decisions, or even who personally forms the government, to the point it could be run by aliens or an ai. Sometimes people are arrested for crimes, but it's impossible to know what's the evidence or even what the crime was, even after sentencing.
If you don't consider this equivalent to the currently utilized system in your country, you have to agree that there's value in trust minimization.
A blockchain? not so much
You basically replace trust (with doubts) with faith.
Afaik, oracles are used to synchronize the blockchain to the real world and there are sophisticated mechanisms to keep them honest.
One example is MakerDAO which has around $300 million in value locked, and has been running without incident for a while now.
Although the main achilles heel with Maker is the governance and the oracle. The new version of maker has minimised the governance, and the new oracle design has better protection against an oracle attack. Ideally, you want as little governance as possible.
This may have been true in the past, but not anymore. Here's [1] an example of a minor bug that was recently discovered in the MCD deployment and how they're going to patch it. The modules in the Maker system have variables that point to which smart contract to call to execute their actions, and the Maker governance is involved in changing these values.
[1] https://forum.makerdao.com/t/proposal-upgrading-the-flopper/...
If some entity holds the keys to control what code is run, why not let them run the code to begin with? This simplifies implementation significantly, and has obvious scaling benefits.
You can still operate this in a transparent way with multiple independent stakeholders that validates data. Many other systems work this way.
The Maker system was bootstrapped this way, but now with the release of MCD, the system will be modified so that the Maker corporation's key is revoked and changes to the system will only be able to be made through MKR token governance votes moving forward. [1] When people refer to the "Maker governance", they refer to those decisions that are voted on by holders of the MKR token. In practice in the short term, the Maker corp will still hold a voting majority of MKR, but it's a long term goal that eventually the Maker corporation won't have to exist and the system is totally maintained by the holders of MKR token.
The more important reason though for doing it on the blockchain is reducing technological centralization. Right now, as long as the Ethereum network exists, the Maker system will be on the blockchain and can't be shut down, even if the Maker corporation is dissolved.
US FinCEN has recently set their eyes on stablecoins, declaring that the entities that offer them will need to comply with KYC regulations. [2] By deploying the system on a public blockchain, it's arguable that the US govt will not be able to cease the distribution of Dai itself and will only be able to go after its holders.
[1] https://forum.makerdao.com/t/mkr-token-authority-transfer/83...
[2] https://finance.yahoo.com/news/fincen-stablecoin-issuers-mon...
From what I can tell browsing through this website those digital "assets" seem to be yet another speculative outlet with some limited gamification on top. It's cool from a technical perspective but where do we go from there?
I can confirm that the blockchain is way more convenient than centralized solutions for buying and selling digital assets once you get over the initial friction (which is still way too much). The keys here are open standards, composability, and trustless atomic transactions. As a user, I basically look at ethereum as an in-game currency—and the game is the whole of the ethereum gaming space (still nascent, yes, and polluted by a great many scammy speculative shell games) rather than a single game.
As for working outside of digital asset use cases, there are certainly a large number of people trying to get it to work though I agree the use case is much less clear cut. Without exactly agreeing with Vinay here, I at least appreciated the perspective he shared in detail on this episode of the NonFunGerbils podcast: https://nonfungerbils.com/podcast/3-vinay-gupta-indexing-the...
How to solve it? Well, I guess it needs more governance and rules :)
They've got a gagillion dollars in funding. What's the problem they're facing.
You can do much better with composable state machines, because everything you do gets the same level of security as the native token transfers https://www.radixdlt.com/post/radix-engine-a-simple-secure-s...
Disclaimer: I work at Radix
Does it matter whether the language is turing-complete or not? you're trusting a contract, not the PL used to write the contract, and the contract can be very simple (and formally verified, if the PL has a formal semantics).
I also did a blog post in back in 2018 on whats keeping blockchains from full mainstream adoption.
For those interested, its here https://asindu.drileba.capital/2018/05/why-bockchain-is-not-...
Everything scales too easily and massively when you digitize things. Especially money and voting.
You are also not going to have a say about paper money getting banned in the coming years. You'll have a choice between different digital currencies, most of them centralized and some that are not.
Safari, Chrome give errors now.
btw, if you use Chrome and you see an SSL error, just type "thisisunsafe" and it will load the webpage. Try it here: https://expired.badssl.com/
>Issued by: Let's Encrypt Authority X3
>Expires: Thursday, 23January, 2020, 0:16:50 Central Standard Time
Random-X is a significant step towards ASIC resistance, requiring near general purpose computation to perform efficiently (i.e. if you can build a better CPU than Intel/AMD/ARM, you've already won).
https://github.com/tevador/RandomX/blob/master/doc/design.md
(Random-X requires code JITting, large CPU caches, compliant floating point, SIMD, hardware AES, as well as large amounts of system RAM, and other things.)
Innovation continues. If you stop having ideas, step aside.
Isn't that true of basically all software?
At least here we can build an economy off an economic model instead of what we do now which is build an economic model off of the economy.
1) If we are talking about central banks such as FED - non-QE QE happening right now in the USA could be good example of why one would not be want to be part of the game.
2) If we are talking about centralized banking as a group of banks operating under the rule of the government - similar question to yours could apply to the general cryptography - why you need it (unless you are a criminal) if the state protects your rights? We seen countless examples where it doesn't quite work like that.
I really want you to consider that desire to not be forced to use the only one available medium of exchange does not mean someone wants to do something illegal (also, try to define illegal in the very general way, that would apply equally in the USA and in Venezuela, and in Russia, and in Somalia =))
Crypto doesn't get you away from this. Not to sound like a mediocre Ashton Kutcher film, but it's all connected. In short, too much fiat, cryto prices in terms of fiat will go up and the converse is true as well.
The only way crypto wins or is THE place to put your money is if the entire world stops using fiat money.
It's not your money in a bank. The bank barely has $1 or two for every $100 you put in. There's plenty of people who have philosophic disagreement with fractional reserve and some who couldn't care less about ethical matters and just there preparing for the worst as good evolutionary diversity dictates they should.
It's easy to sit in a country that hasn't ever suffered these things and think it's all silly, but there's plenty of people who don't have those luxuries. How do you think someone in Cyprus, Zimbabwe or Venezuela would feel about your statement saying to trust the banks? Venezuela was one of the richest countries in the world for a very long time. They still have enormous amounts of mineral wealth and yet people are buying their groceries with wheelbarrows full of money.
I doubt crypto is the solution to these problems that are fundamentally burnt into modern economies now but make no mistake crypto was born out of these problems by a lone developer who virtually everyone ignored. It's easy to criticise until you've walked in those boots for a year suffering at the hands of central banksters.
Someone from Zimbabwe here - I endorse their statement: trust the banks. I lost my money to a bank closure in early 00s, eventually got some of it back from the zombie entity that the central bank resuscitated. The CEO of a Zimbabwean crypto-exchange[1] "lost the password" of a cold wallet (wink) a year ago - the deposits therein were lost with no recourse; the exchange is struggling with solvency[2]. So yeah, if you're not going to stuff money under your mattress, give it to a bank before going full crypto.
1. Golix - you might have heard of it as it was offering the world's highest USD:bitcoin rates. The fine print was that you couldn't get USD out of Zimbabwe
2. https://cointelegraph.com/news/ceo-of-zimbabwean-crypto-exch...
Personally, I lost 3 bitcoin when someone hacked my MtGox account in 2012. I think they'd had 2fa for a little while at that point, but I was stupid and didn't enable it. Furthermore, I had reused my account/password on some fledgling bitcoin forum. In my defense, when I made the accounts I didn't think the valuation of bitcoin would peak around $20k :)
Solid argument mate. Next you'll tell me that forced land seizures is good for the economy too.
This is bait.
How can this be a requirement?
data = input;
for (1..10)
{
JITtedCode = CodeGen(CryptographicHash(data));
for (1..100000)
{
data = JITtedCode(data);
}
data = CryptographicHash(data);
}
output = data;And seems like a TERRIBLE idea, anyway. The rich get richer, built right into the system!
Proof of stake reduces the issuance of new ETH to pay for the cost of securing the network. It's cheaper than paying miners. And anybody can buy ETH to stake so it's more egalitarian than mining which requires economies of scale in hardware and electricity.
You might consider if perhaps the parties in control of that system have a different idea of its point than you do.
Proof of work is also terrible, obviously. Proof of stake seems like an awful thing to _aspire_ to, tho.
[1] CoinMarketCap used as source.
https://docs.nano.org/glossary/#open-representative-voting-o...
Sure, it's an optionally-delegated-proof-of-stake. In practice, most do delegate their stake. But at the end of the day the "voting weight" that secures transactions is majority stake and not a proof of work.
It's also true in bank accounts; the more money deposited, the more interest you earn. At least in proof of stake everybody gets the same interest rate regardless of deposit size. Banks generally give better rates to larger accounts.
Yeah that was 5 years ago too if you don't remember.
It's an incredibly difficult problem and anyone claiming to have actually solved it in a decentralised way that proof-of-work did is a charlatan.
Given all the money slushing around in cryptocurrency looking for a problem to solve I'd argue it's an intractable issue that needs yet another breakthrough rather than marketing and bubble hype.
Visual illustration of the asymmetric security in action: https://www.pohjoiseen.fi/wp-content/uploads/2016/03/2083960...
Also, MR=MC doesn’t imply that wealth is never created, it just means that it can’t be created purely through exchanging commodities.
In other words, he first assumes that no improvement is possible, and then indeed manages to show that, according to the assumptions, no improvement is possible.
I think PrimeCoin was a great example of a PoW that had very small but non-zero value.
The 2 biggest barriers to be solved are:
-lack of trust/ease of use for the layman
-volatility
These problems may or may not sort themselves out with time.
-a lack of reason to use cryptocurrencies when centralized alternatives perform much better for non-illegal usecases
If the justification is “you don’t need to pay credit processing fees” then things would have to be priced cheaper. But I think you’d have to pay me more than the credit card fee to give up the ability to do chargebacks for a lot of online transactions.
Maybe I’d use it for making donations where I’m not expecting anything back from a transaction that the other party could fail to deliver.
They’re just not solving a problem that I have.
I played around with bitcoin a bit in 2015, and it back then it was a pretty good experience. Transactions were quick and cheap. The problem is it seems to have gotten less usable in almost every way since then.
https://bitinfocharts.com/comparison/bitcoin-confirmationtim...
Average block time data doesn't agree with you, or are you talking about something else?
Censorship resistant transactions.
Back in 2010, for example, banks blocked all transactions being sent to WikiLeaks, even though they broke no laws, and we're never charged with a crime.
So even though, these were not illegal transactions, banks blocked them anyway. But the crypto transactions weren't!
So, this is an example where perfectly legal bank transactions were blocked, but the crypto payments weren't.
I stopped using Bitcoin for daily transactions because of the stress of having to report every coffee purchase on my tax return.
https://www.wsj.com/articles/fed-adds-104-5-billion-to-finan...
How long ago were the exchanges found to be manipulating prices fraudulently?
As if crypto is immune to systemic issues.
It's not a closed system after all, is it?
If you can't get a bank account it's unlikely your basic needs are going to be met by a stranger you've never met.
It's not just poor people in countries without banks who have these problems. Even rich porn stars have had their bank accounts closed (for being porn stars) and people in the marijuana business too.
Some more info here: https://whycryptocurrencies.com/for_the_unbanked.html
"High risk" is often mistaken for illegal, but that's incorrect. Many industries that are completely legal are still viewed as high risk and become deplatformed. Small companies are at the highest risk of being deplatformed.
Crypto currency allows anyone to send and receive money, without depending on the blessing of a third party which can decide whether or not to serve your business. Access to the financial system is not seen as a basic human right.
> There is no KYC process.
How does an unbanked put their paper money into their cryptocurrency account without a KYC process? (Please don't say trust a random third party stranger in a pub offering cryptocurrency at an exorbitant markup.)
> There are no fees for opening or having an account
I've never paid a fee to open or have a bank account, but how does an unbanked put their paper money into their cryptocurrency account without paying a fee (or an exorbitant markup)?
> You don’t need to trust a third party with your money.
How does an unbanked get their paper money into their cryptocurrency account without trusting a third party?
> There’s no need to visit a financial institution. As long as you have internet access you always have access to your money and can make payments.
Online and phone banking existed decades before Bitcoin was created.
> Around 60% said they had too little money to use a bank account
Yet they'd somehow have enough to put into cryptocurrency account?
Mining perhaps?
I'm not saying having a bank account is necessary, but the life conditions that prevent bank access (poverty, homelessness, addictions, abuse, violence, etc) will certainly prevent anyone from mining/
One possibility is that they can receive their income directly in cryptocurrencies.
By an interesting coincidence, 0 is also the number of unbanked people who should risk the money they need to eat on unregulated, complicated and easily stolen intangible financial assets which wealthy foreigners invented to print themselves money.
m-pesa isn't a cryptocurrency in the same mold that bitcoin is, but it's electronic money for the unbanked that you're arguing can't exist.
It's wrong. The exact details of bitcoin aren't the right thing for it, but there are many cryptocurrencies that are more like m-pesa in their use requiremnts than they are bitcoin.
M-Pesa would not have succeeded in helping the unbanked if people living in remote villages needed to set up a mining rig or navigate to Coinbase.com and enter debit card details to obtain it. There'd be no reliable way for most unbanked people to get it or get rid of it. And since the unbanked world needs the network of regulated agents offering cash conversion and really can't afford for their assets to be backed by speculator optimism rather than legal tender in a trusted party's bank account or vault, there's really not much advantage in building that trusted centralised entity's database in something as computationally expensive as a blockchain. Certainly it's not lack of blockchain technology that's been the obstacle to people from creating more electronic money transfer service for the unbanked.
Not really, if you read what you replied to it says that none of the unbanked have cards to buy it with, and that they don't need to be risking what little they have on "unregulated, complicated and easily stolen intangible financial assets which wealthy foreigners invented to print themselves money."
That doesn't describe M-Pesa, but it does describe cryptocurrency.
Any income is instantly frozen and collected. Even when they want to eventually pay debt, lack of liquidity prevents them from work.
They can only use cash, or bank accounts of friends, or things like Revolut or PayPal (bailiff doesn't know about them because they operate in different country).
(assuming, of course, that the government doesn't shut down the Internet, as it did just days ago: https://ooni.org/post/2019-iran-internet-blackout/)
What a short-sighted view. Perhaps no use case for you personally. There are 7.7 billion people in this world who have vastly different life circumstances, some of them certainly need crypto to make their lives better. In no particular order: hyperflation, financial censorship, instant low-fee international transfers, etc
Practice is the criterion of truth. Can provide cases, when crypto solves problem better than existing instruments?
* Uncensorable donations
* No way for a third party to freeze your payments (internet is full of horror stories of PayPal)
* Not all businesses can accept digital payments (marijuana stores or porn have trouble)
* Credit cards and payment processors take a 2-4% cut, of all transactions.
* You can use cryptocurrencies anonymously (to for example buy VPNs)
* It's possible to flee your country with some of your wealth intact (for example by converting to Bitcoin and crossing the Venezuela border)
I also want to point out that the use-case of "get your money out of the country" is not exactly perfect for Bitcoin because of how volatile it is (imagine if someone had to get their money out during December 2017).
I'd say anonymous payments is a little different from being uncensorable though. You'll stay anonymous even after the payment has gone through.
As for transaction fees, if we exclude Bitcoin which has really high fees, cryptocurrency fees are very small and almost negligible.[0]
Getting money out of the country is always relative. Even with Bitcoin's volatility it's much preferred to losing all your money. Either you cannot bring it with you through the border, or Venezuela's hyperinflation will eat it up in a flash.
That's probably because their popularity among users is also negligible. Problem with cryptocurrencess is that they don't scale well, with increased transaction volumes the fees and processing times also tend to rise until network's hashing power catches up.
Of course scaling is difficult. But Bitcoin isn't a good example of that.
For most people, the utility of sticking your money into a volatile and slow system with no recourses is just never going to be there. A municipal credit union would be more useful and offer an out from private for-profit banking for most people.
So, this is an example of where a fully law abiding citizen, had their transactions blocked, but the crypto payments weren't.
The legal Bitcoin payments weren't blocked, but the bank transactions were.
Libertarians aren’t anti-law, they are pro-constitution. Libertarians are against the drug war, pro-marijuana legalization, against civil asset forfeiture, and trying to end the endless wars waged in the Middle East.
You will not find a better friend than a libertarian if you ever find yourself arrested or sued for any reason. Judges inventing laws is the antithesis of the belief system - libertarians follow the law as written.
That said, why is the emphasis on constitution (BTW, do you mean any constitution or US constitution in particular)? Constitution is just a special kind of law after all and I can totally imagine libertarians claiming that it is inadequate, pushing to change it and make it more aligned with their principles.
In the USA we have the Bill of Rights that protects each person from government overreach, such as the 1st amendment which protects freedom of speech, and the 5th amendment against testifying against yourself.
The government however often passes laws that violate these rights, and then the courts have to overturn laws that are unconstitutional because they violate our rights.
I am of the opinion that the government is a very dangerous entity with unlimited power and ability to harm citizens, so we should always be skeptical of all laws passed and work as much as possible to limit the power of government.
However the adoption is severely lacking.
The problem is that it has gotten worse not better. There has not been a good use case for a Joe NormalCitizen for crypto in a while.
Anecdata: I first mined BTC in 2011 and used BTC quite a bit in 2013 to buy bunch of online and offline services. It was relatively painless since I had my own BTC. (Also it was really pseudo-anonymous since I was only using mining rewards and didn't reuse addresses).
Since I do not own any significant crypto anymore there is no use case for me anymore.
If I want do something shady, I'd have the problem of onramp KYC etc.
If I want to do something legal, crypto costs including onramp is less convenient/costs more than normal SEPA/CC etc.
Is it still possible to circumwent KYC by mining? Or is it too expensive?
Sounds like an advantage of PoW over PoS
Not really. You can't earn much at all mining any coins without significant and reoccurring capital investment.
There are de-centralized exchanges like Bisq that you can use without KYC.
Also Monero has true anonymity so while you might need a KYC onramp to get into crypto, once your value is on the Monero chain it's anonymous, transactions cannot be followed, balances can't be seen (without permission).
Most payments regular people make every day are sub three-digit. On those payments 2-4% in the US is much cheaper than the current Bitcoin (and similar) transaction fees. That means crypto is rather unusable for most people. I won't even start talking how Bitcoin doesn't compete at all with European SEPA Instant payments for most use-cases.
The only use crypto currently has is censorship resistance, pseudonymity and illegal purposes.
Bitcoin is a horrible example. Bitcoin Cash for example have fees of less than a cent.
It's not Bitcoin Cash that's special. It's Bitcoin, but in a bad way. Even Monero has very low fees with better capacity for example.
People need to get over the concept of inflation. Inflation is GOOD.
It’s bad if you have little money, your wages don’t raise automatically with inflation, and every year what little you have has been reduced in value 1 to 10%.
I as a homeowner with a government-subsidized 30 year fixed rate mortgage love it however, as what I pay for my asset each month is less and less as inflation helps me and the tax payers finance my wealth creation. Renters, not so much!
"So every year, your savings get watered down and you lose wealth", is not what one wants to hear.
The negative impacts of volatility on the economy are very well documented.
Inflation has zero impact on a household as long as their savings are kept in assets other than cash.
Lastly, to say that a currency losing 99% of its value over time is not damaging to a household is either ignorance or corruption. The lower tiers of society furthest away from the money printer are the ones that are impacted the most. Coincidentally, I'm going to assume you want to help these tiers the most but end up hurting them.
There is something called the Cantillon effect, where those closest (banks, those connected to the gov) to the "stream" of money get benefited while those furthest away (regular people) get hurt.
A warning for those who think getting a degree is useless. At least, it will force you to think deep about some problems. I hope Vitalik will find his focus and really solve a concrete problem.
For those who think I'm 10 times less smart than Vitalik. Here's my take on Ethereum and its prospect.
https://bitflate.org/post/2019/11/16/ethereum-and-computer-l...
I have solutions to some of the problems he lists.
10. Stable-value cryptoassets
13. Proof of excellence
My solution is to add inflation into supply. A percentage point inflation, not tail emission.
Inflation will discourage HODL behavior and stabilize token price. It's not perfectly stable. But it'll be more stable, more efficient than DAI and its financial engineering on top of Ethereum volatile price. That solves #10.
For #13, with inflation, we don't have to worry about bag holders. Everyone has incentive to drive the system. Otherwise, their tokens will worth less over time.
I designed a crypto that can help bootstrap inflation. My solutions are simpler. I think they'll work.
https://bitflate.org/post/2019/04/14/bitflate-cryptocurrency...
I was involved with Dogecoin back then. I advocated for inflation for the same reasons you want it. It has not led to Dogecoin having any great breakthrough in usage.
I want to create a chain that has inflation as its main feature. Its supply schedule is designed to bootstrap inflation. It looks like this:
0: 50 (supply: 10 million)
1: 25 (supply: 15 million)
2: 12.5
3: 6.25 (end of halving)
4: 6.56 (start of inflation 7%)
5: 7.02
6: 7.51
7: 8.04
8: 8.60
9: 9.20
10: 9.85 (supply: 31 million)
The chain has 7% inflation. It is a fairly high rate. It's designed to break out of Store of Value and HODL narrative.
In 2014, people were still attached to the idea of limited supply and Austrian economics. Maybe, in 2019, people will have second thought about Keynesian.
If you still have interest in the idea, please reach out to me contact@bitflate.org.
Vitalik started out years ago with writings consisting entirely of self-citing the Ethereum echo-chamber. Judging by the citations here he's starting to understand the value in the works of the established institutions, tenured university professors, and career cryptographers -- people whom it's obvious in his circles are either loathed as some irrelevant elites or simply, wholly unknown.
Now that Vitalik has spent the last few years actually surveying the last decades of theoretical achievements in the literature, maybe it's time to build a secure distributed world-computer. Oh wait.
I'm not going down the path of personal attack. Vitalik is smart. He lacks self criticism and focus. I do hope he'll find success.
Meanwhile, thousands of poor souls have been lost in the basements of universities doing real honest-to-god useful work which may never be understood and used by industry, or even see the light of day; they lack this disingenuous excessive hyper-promotion and the means to compete for media attention with our favorite cult heroes like Vitalik.
He was involved in crypto prior to Ethereum; he was a co-founder of Bitcoin Magazine.
There are A LOT of these accounts, Adam is well known for employing these guys like Greg Maxwell to social engineer their narrative into sites like this.
In general the blockchain space does have this syndrome where issues that boil down to "trans light speed travel?, discuss.." are conflated with things that are like "how to do trans sonic flight without breaking apart". This could be intentional as a way to get investors fired up.
For an analog in regular tech see: self driving cars.
Ethereum itself was the original sin in this respect. In Bitcoin, for the most part, the economic value at stake in a block is (1) the block reward, (2) the transaction fees, and (3) the amount transacted. (1) + (2) + (3) is therefore the maximum amount that can theoretically be "moved" if a block is invalidated through an adversarial fork, since someone else can claim the miner rewards and every transaction could possibly be double-spent. Anyone who wants to be assured of transaction immutability can, at the very least, calculate the total value that is at stake and wait until at least this much PoW has been layered on top of the transaction.
Not so with smart contracts. A paper I read yesterday showed how smart contracts can be used to execute trustless, crowd-sourced DoS attacks on rival blockchains (https://eprint.iacr.org/2019/775.pdf). It's ridiculous. Once you open the Pandora's Box of smart contracts, you can throw your consensus guarantees out the window.
And that's a good thing. We needed an established way to attack rival blockchains that use the same PoW mechanism. They are insecure by design of PoW, and until they are all torn down by attacks, unsuspecting people can loose a lot of money.
What? Nothing could be more unfair. His articles on zk-snarks and starks are probably the most approachable explanations available.
https://medium.com/@VitalikButerin/quadratic-arithmetic-prog...
During the 2016-2017 bubble he was even tweeting that the crypto space had done very little to even deserve the runup. However you had several other prominent people tweeting things that only amplified the bubble, so it did little to tame things, but at least he wasn't participating in it.
If he's a scammer, as you put it, he's doing a very poor job of that.
I don't know much about the details of this particular attempt , but the strategy is not ridiculous on its face. Very implausible, yes, but it contradicts no theorem nor any established law of physics. Mostly, it's implausible because many people have tried very hard to find efficient classical simulations of quantum computers and all have failed.
1. How do we stop using more power than Switzerland to process 4 transactions per second (lol)
2. How do we stop payments to international terrorists and rogue states.
3. How do we stop money laundering.
4. How do we stop price manipulation by fraudulent actors.
5. How do we allow people who lost access to their money by negligence, fraud, theft, act of god or otherwise, access to their money again.
[bonus] how do we generate the right quantity of new cryptocurrency so that the pace of money growth matches that of economic and population growth so as not to disproportionately reward early comers just for “being early”?
You know, the “currency” problems and not the “crypto” problems. These are the actual hard problems of cryptocurrency and until solved it will never, and I mean never, reach mass adoption, making the questions from the article totally irrelevant.
If that would be stopped, crypto would be pointless. We already have real (regulated) money. But with crypto you can online pay your drug dealer.
To your implication- what's legal and what's right are orthogonal concerns. Individuals decide which to follow based on their own principles.
Not sure why you think technology is outside the context of our society. This stuff isn't built by elves.
You're not solving the actual problem by going out and convincing society you're right (and you are, the Portuguese model shows that full decriminalization and even legalization lead to much better outcomes and no material increase in usage).
You're convincing people to deploy magic bean producing power wasters that just happen to let you buy drugs. It doesn't help mitigate or undo the harm foisted upon the millions in US prisons who got there because they wanted drugs. It doesn't help bring about the downfall of the cartels. If anything, it props those things up.
> Writing code collaboratively and convincing thousands of people to run nodes replicating your slow database is a social act -- I'd even call it a political act.
Yes, in and of itself it is.
The social act is deploying a slow database, which in turn provides technological workarounds to the actual social issues (like drug policy) that should be tackled head-on.
Our democracy is purposely designed to allow such checks and balances through mechanisms like the fifth amendment. It is an important part of what makes our democracy strong and prevents lawmakers from throwing people in prison at their whim.
While I don't believe this myself, I could see a logically consistent case for supporting the development of ciphers and banning something like TrueCrypt. It's not about the technology, it's about how you choose to use it.
2. You can't -- this is a cultural problem, not a technological one
3. There's no such thing as money laundering
4. Peer-to-peer, transparent finance infrastructure
5. User-money as a layer on top of cryptocurrency
This has yet to be proven, and as you say, there’s reasons why it has yet to land. I give this one vitaliks sideways smiley face.
> 2. You can't -- this is a cultural problem, not a technological one
Uh, one that doesn’t exist in the current financial system. I’m sure y’all will find a way. As I said, it’s a prerequisite.
> 3. There’s no such thing as money laundering.
Hilarious. I see someone never took compliance training at work. With that attitude I’d love to see you explain your position to a judge. Money laundering is literally financial transactions arranged in such a way as to conceal the original source of funds.
> 4. Buzzword soup.
> 5. More buzzword soup.
More buzzword soup that immediately falls down as once you use crypto as only a bulk transport instrument you’ve lost out on all its ostensible benefits. No transparency, no security, it’s no better than just using a wire transfer.
Is that sarcasm? How do you think criminal groups get funded? They use the financial system like anybody else. You should have a look into the history of HSBC, money laundering and financing drug cartels is one of their main specialty.
I though anonymity and legal safeharbour were founding principles of cryptocurrency? The original comment is correct that what we call money laundering is an artificial construct of power.
It's DAI, a stable currency based on derivatives, built on Ethereum and backed by ETH. It's not perfectly stable but it's done a reasonably good job keeping a value of one dollar, despite a 94% drop in the ETH price. Current DAI supply is $86 million.
Yeah, the hundreds of cryptocurrencies using it isn't enough.
Maybe I'm in too deep but peer-to-peer is a buzzword? I mean person-to-person, without intermediaries. This seems useful and powerful to me (and my politics I suppose).
> 5. no transparency/security using crypto as bulk transport
I don't mean building a social layer on top, I mean building digital infrastructure on top, 'smart contracts' etc.
I still maintain hope for something like this but after watching the gradual but massive increase in the complexity of 'DeFi' (decentrialized finance) in the Ethereum community I don't know where to look and what to work on these days...
POS has been a solved problem for years. RDD did it back in the beginning. XTZ is a current working POS chain.
This, on its face, is a pretty outrageous assertion.
I think if you throw a statement like this into the discussion I'm sure you don't mind if I demand that you prove it.
Maybe "Money laundering doesn't exist in a hypothetical world of private peer-to-peer transactions" is better? That's what I believe the crypto-folk are working towards.
I recognize the existence of laws again 'money laundering' in countries like the USA. I suppose a better way of framing what I think is that money laundering is an invented crime in order to further empower agents of a State to seize assets of those suspected of actual crimes. By 'invented' and 'actual' I'm appealing to a sense of legitimacy separate (or adjacent?) to said State's legal system.
Hm, so the dollar won't reach wide adoption until we close Wells Fargo, HSBC, and other major banks that have been party to large-scale money laundering?
I can only imagine that with less controls and regulations they would behave even worse.
AML at its core is asking a bank to purposefully reduce their profit. Other than fines and morals, there’s no real incentive for them to give their all, and those don’t seem to bother most of the industry.
No currency ever achieved that.
You are looking for some power to control cryto but still offer everything it currently does. It can't..
"How do we stop payments to international terrorists and rogue states".. Most of their wealth comes from cash/diamonds/oil/grain.. why would cryto be any different?
We should definitely build a technical system that stops payments to terrorists but allows payments to freedom fighters; that stops payments to rogue states but allows payments to states that stand up to bullying by tyrannical regional powers.
/s
Seriously I think these kinds of questions need un-asking rather than answering.
That’s equivalent to conceding that the concept cannot work and giving up. No matter your personal views on a particular issue, this is really just asking how to comply with legal obligations: governments don’t care if your system is broken by design and makes compliance hard, and that’ll deter most legitimate users.
In reality there is an ongoing battle over encryption where various governments try to ban it, people fight back, etc. I suspect that we will see the same thing play out over cryptocurrency.
In any case I don't see anyone on hacker news asking how we can design an encryption algorithm that prevents all and only the bad uses of encryption. It is generally understood to be a dumb question because good and bad are complicated enough that we cannot hope to formalize them right now, and ad-hoc attempts to make a technology only work for the good guys have been repeatedly shown to help the bad guys (e.g. backdoors etc)
Tor is a better comparison, especially with the reason why most people consider it highly risky to run an exit node.
In both cases there mere existence of the technology helps both good and bad parties to achieve their aims, that is all that matters.
Now, suppose that there’s a transaction chain which involves you – say said local dealer buying from one of the few other people using it — and how you’d prove that you weren’t a knowing participant in some sort of laundering scheme or deal. This is why tumblers aren’t likely to be used by most people and why running a Tor exit node is so risky: you have to worry about being charged with the worst thing done over the network and proving that you aren’t just trying to look like a naive user.
I think that the ZK (ZCash, AZTEC, etc) technology will solve this problem and we will be back to the case where the government wants to make the technology itself go away.
> Analysts estimate that underground economic transactions account for one-third (33%!) of the total economy in developing countries and slightly more than 10% of the total economy in developed countries. [0]
On the Bitcoin blockchain it may be around 19% (approximately USD $380bn in yearly transactions on Bitcoin [1], $72bn of which may be illegal [2])
So it's hard to say which "monetary system" is doing better in that regard. Of course, I would argue that cryptocurrencies are still in the experimental phase, trying to figure out where they are going and how.
[0] https://www.investopedia.com/articles/markets-economy/062216... [1] https://www.blockchain.com/charts/estimated-transaction-volu... [2] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3102645
You seem to be looking for fiat currency, that already exists.
The point of cryptocurrency is that not everyone wants fiat, some people place more of a priority on certain things and less on certain other things.
I'm not saying that's not a fine thing to want, but if that is what you want, then you don't want cryptocurrency. Cryptocurrency is purposefully antithetical to that goal.
The fact that authority figures can't break it is a feature, for the kind of people who would want to use it in the first place (which should be all of us, but sadly is not yet).
Like I said, this is why it will stay irrelevant. Most people don't want to perform those actions, nor support those actions by using the systems that do. We're never, as a society, going to want to support money-laundering, terrorist-funding or price manipulation.
Do you always log into every machine as root? Do you want everyone to have admin powers on HN and every other social media/chat/forum you use? Authorities exist for a reason.
Cash wasn't solving this either, yet lot of people prefer it to digital money owned by banks. And bitcoin is sometimes called digital cash, because it behaves like cash in that way. One could argue that it makes people more cautious on what they spend money on.
An analogous for "Hard Problems for PC Work Processors [vs Pen and Paper]" would be:
1. How to record a single essay without the price a hundred reams of paper?
2. How to function when there is no electrical power whatsoever? And not contribute to rising technological inequality in developing countries.
3. How to allow governments to still do handwriting analysis on printed word docs to thwart bad actors, ransom note writers, etc?
4. How to stop international terrorists and rogue states from printing multiple pieces of propaganda to recruit?
5. How do we allow people a closer sense of connection to the writer of a word processed doc when handwriting is missing.
[bonus] how do we ensure jobs are not destroyed in the lumber industry? how do we ensure manufacturing of these so-called PCs to not contribute to environmental destruction / leeching of toxic chemicals if/when they become popular?
Let's look at these for cash, which has some level of mass adoption.
> 2. How do we stop payments to international terrorists and rogue states.
Both of these are amply funded today, so between cash and banking system, this isn't really a thing. Whatever form does work, isn't hampering adoption.
> 3. How do we stop money laundering.
(a) This is an invented problem. Just because it's propagandized in compliance training doesn't make it real, and it's unfortunate banks are having to spend time and money obliging local governments so politicians can pretend they're having an effect. (b) Neither cash nor banking system succeed at stopping it today, yet both enjoy mass adoption.
> 4. How do we stop price manipulation by fraudulent actors.
Mass adoption? See pink sheets versus mainstream stocks. Chicken and egg problem, granted.
> 5. How do we allow people who lost access to their money by negligence, fraud, theft, act of god or otherwise, access to their money again.
A friend once tossed a $100 bill from her birthday into the wood stove with birthday wrapping paper. There was no expectation this form of currency could recover access by negligence, fraud, theft, acts of god, or otherwise, yet she was thrilled to mass-adopt that $100 until it turned into ash.
> You know, the “currency” problems and not the “crypto” problems.
It doesn't seem as though these are real problems for the adopters of currency. It seems as though they're problems for authorities who wish their jobs were easier.
A friend once tossed a $100 bill from her birthday into
the wood stove with birthday wrapping paper. There was no
expectation this form of currency could recover access by
negligence, fraud, theft, acts of god, or otherwise, yet
she was thrilled to mass-adopt that $100 until it turned
into ash.
Put that together with the fact that it is far and away easier to lose your cryptocoin holdings than it is to lose cash or money in your bank account and a cryptocoin is in most ways a step backward for consumers. They benefits they tout (Easier to send money to someone else, Proof against government meddling) sound good but the second is why it's a step backward for most people and the first is hampered by the combination long transaction times and the volatility of the coins value.
Is it possible that these will all get remedied? Sure. But until you remedy them most people shouldn't be using a cryptocoin unless they can afford to lose what they put in there.
Not with cash or gold. Yet we consider them money.
And yeah, if someone steals your cash or your gold, you can sue them and obtain a restorative court judgement. With your magic beans you just blame the victim and shrug suggesting they should have been more careful, aka "SFYL."
The rest of your points are as you say "currency" and usability problems, problems that a layer above will decide to solve or not. There is a lot of work being done on these points too, but Vitalik and the Ethereum 2.0 research teams are tackling a more low level set of issues.
Think of it like Visa, SWIFT, or the internet: those are also technical platforms that need to be engineered and thought about, often in abstraction of other issues like monetary policy and local regulations.
Many systems are built that way, where the underlying platform is kept "dumb", and requirements that need highly flexible enforcement (like the selective censorship/cancelation in your examples) are applied a level above, where humans are kept in the loop.
There aren't any protocol-level rules in TCP/IP that says network packets containing information about the Tiananmen square protests can't go from US to China, those rules are implemented in Chinese routers. Maybe if you had your say in the design of TCP/IP things would've been different, but this approach has so far proven wildly successful.
I've become very skeptical of the idea that technology can solve social problems, and unfortunately decades of futility propaganda by the existing order has convinced us that the political order we have now cannot be improved upon.
On the flip side this principle also makes me skeptical of cryptocurrency, which seems like a very expensive attempt to use technology to solve social problems.
Existing simple money systems work and are highly efficient. Corruption in those systems is a social problem.
Wouldn't this be a subcategory of homomorphic encryption?
Are there any people using crypto to actually do work for clients and solve fiat currency based businesses problems? I am curious if the crypto start up space is mostly filled with crypto-to-crypto services or if there are many successful crypto-to-regular business cases.
Edit: I’m interested in if there are many people making meaningful money from doing client work or building a business, mostly in the crypto space. There seems to be two camps: crypto idealists that don’t care about making money, and the crypto application people who might be a little idealist, but also want to make money here and now. This is more geared towards the latter.
I think most of us here believe we are building tools that will have had a role in the long-term future of (decentralized) finance.
The author is Roger Wattenhofer. Currently taking his Computer Systems class at ETH.
Ethereum is a scam and has always been a scam from its inception. Multiple reasons for that:
1) Overly complex, obfuscating its lack of problem to solve by having lots of features and code
2) Constantly coming up with new terms and features and "new hot thing" to try and pump the price and keep the interest going.
3) No real world use case. Only promises and cryptokittes.
4) Literally controlled by one guy (see the now famous "Can you guys stop trading" quote).
5) Only produced scam ICOs with 99.99% of ICO projects practically stealing money from investors with no repercussions whatsoever.
There are many more, but the thing to remember is - Bitcoin solves a real problem: it allows people to escape and bypass existing financial system and continue doing business, save and not be subject to policies outside of their control. It is black market money which governments hate and will try to outlaw in some way. That is the real pain Bitcoin solves for people: not agreeing to unjust laws peacefully and quietly exiting the system.
I agree with you about the core use case for Bitcoin currently being an escape from the government-forced financial system. It pierced the monopoly successfully. But the Ethereum screed is just lies at this point, Ethereum is one of the good ones.
Or having a fair pricing model as investors buy in using a bonding curve, eliminating priced rounds and other crap, pg said that’s the “future” - Ethereum makes it possible.
All this is only possible because enough gateways trade ETH that it can now be considered money. And it can be used as an input to tons of cool smart contract things. You couldn’t do this stuff 10 years ago, at best you’d have some sorta hookup to Stripe API and banks.
Why does everything have to be about voting and receiving dividends?
Amazon’s shareholders don’t do either one but value the shares greatly.
And dividends can be programmed into the smart contracts too. Want them in DAI, USDT, ETH? You can! One way would be for the company to put them into a new smart contract that refers to the other smart contract which stores who owns what share, at that particular time. You could also program tons of fancy rules like a UBI from the company or whatever. They would also be distributed fairly.
And for minority of projects where indeed they're expected to be paid using their own token, how do I know the company owners don't run away with all the money they raised? Because this is exactly what happened with 99.99% of ICOs created on Ethereum. Now, of course scams happen in the traditional financial system too, but not to the same extent, because there's an enforcement mechanism in place. So, following your example, what stops a YC company from declaring bankruptcy and spending all the money on things founders want for themselves? Well, an investigation may be launched: founders are known, they can be found, prosecuted and sentenced. With tokens issued online, where you may not even have a company registered or have a company registered in some obscure jurisdiction, there is very little incentive NOT to steal the money. And, once again, that's exactly what happened during the ICO craze, which Ethereum is directly responsible for. A lot of people lost a lot of money funding scammers - and nobody blinks an eye!
I don't argue that everything has to exist within the traditional financial system. On the contrary. But in order to provide real value and allow investors to have some level of certainty that at least their money won't be outright stolen, the solution MUST include an enforcement or incentive mechanism strong enough to deter scammers.
No person enforces anything. Only the math does. And I think that’s entirely the point.
Do you have an example of an organization that works this way, 100% automated? It's hard to think of a system that can be 100% foolproof, there is always someone somewhere that has to trigger something manually, and that 's the weak spot.
I think the ultimate goal is to have smart contracts which don’t require any of the human intervention you’re mentioning. How that’ll be possible remains to be seen...
I thought the point of this would be that the contract code, that defines organization would automatically pay you back in whatever. No need in regulators with laws, that random judge can overturn any day. And that is the whole point of it...
...the smart contract? Maker pays interest (via buy and burn). It's really not that different than a corporate board agreeing to pay dividends. We don't need a state regulator to pay ourselves, do we?
And you can't really say "Ethereum is one of the good ones" if it literally enabled the wholesale defrauding of billions of dollars from ill-informed speculators by providing the platform for those fraudulent ICOs.
I'm sure everybody just wanted a faster horse, but I certainly do have some good uses for distributed computing (with a larger bandwidth than Ethereum can provide, though). And any new tech can be seen as the "Pandora's Box of attack vectors" and a fraud platform, including the internet itself.
Not every experiment is a scam.
Previously: https://news.ycombinator.com/item?id=2107770
Remember: Markets can stay irrational longer than you can stay solvent.
1. Both are very complex. How did you compare?
2. "Constantly coming up with new terms and features and "new hot thing"" - this is a fact. "to try and pump the price" - this is a speculation. Even if it is not - I don't know why is it necessarily bad. That is one of the major goals of every company applying to YC, or doing any kind of innovation in business.
3. Technically, all the use cases for Bitcoin are the same as the use cases for Ethereum, AFAIK.
4. It has the same proof of work system with miners, so in the end Buterin has the same 0 direct control over it, as Nakamoto would over Bitcoin. True, a lot of influence.
5. "97.3% of all statistics are made up."
I heard about Bitcoin in 2010 a few days before MagicalTux announced Mt. Gox on the Bitcoin forums. Once graphic card mining became a thing I quickly started a small farm while in school.
When I first understood PoW I immediately knew PoW must die for cryptocurrency to become sustainable. It is the single largest flaw with contemporary cryptocurrency. Bitcoin has become stale and unwilling to progress, instead choosing to retreat in maximalist dogma. This prevents bitcoin from solving some of these obvious technical issues. The block size debates is far more than enough to turn me away.
For me the ethereum community has been a breath of fresh air and is far more progressive than those left in the bitcoin world. After seeing the ethereum community gracefully handle the 2016 DOA hack with a hard fork, I was sold. Ethereum's community understood technology serves us, not the other way around while acknowledging and actively working toward solving problems bitcoiners often simply ignore.
I believe in the human spirit of solving problems through technology. Ethereum is not a panacea, but the ethereum project tries to remember that progressive spirit.
Bitcoin is slow.
There are better alternatives out there.
https://trade.dydx.exchange/markets
>Bitcoin solves a real problem: it allows people to escape and bypass existing financial system and continue doing business, save and not be subject to policies outside of their control. It is black market money which governments hate and will try to outlaw in some way.
Bitcoin completely failed, as majority of its hashpower is located in China. The Chinese government can tell miners to censor transactions tomorrow and to orphan blocks from non-compliant miners and it would happen. There's no defense against this. Changing PoW via a hard fork would result in a gpu-secured network that's even more vulnerable than an asic-based one, as it's easier to a large entity to rent or buy enough gpus.
PoS is the only defense against such centralization. Most hashpower is going to be an impossible to hide industrial facilities, while PoS only needs an internet connection, much harder to catch. More importantly, even if a determined attacker acquires a very big fraction of the tokens and attacks the network, a hard fork can just delete the hostile accounts. One a gpu based PoW network is attacked there's no solution, as it's not possible to make the attacker's mining hardware ineffective via a hard fork.
Other than that (fatal problem), its a great technical project.