Blockchain, the Solution for Almost Nothing
thecorrespondent.com
thecorrespondent.com
1: https://news.ycombinator.com/item?id=24241488
This is clearly transformative. Governments are one of the least reliable organisations I deal with. There are few entities more fickle, less reasonable, less governed and more prone to random fits of violence. Having a mechanism to transact online while cutting them out is a big deal. The implications are still unclear but the idea is amazing. I don't think Bitcoin is going to realise this potential but the technology is really quite something.
It clearly is not, as evidenced by the lack of transformation of the banking sector since Bitcoin first came out in January 2009.
By 1998, the internet had failed to transform a lot of industries despite a lot of hype and grifters ( WebVan, WorldCom, etc etc etc).
Regardless, it was progressing fast. People with enough technical understanding understood its tremendous underlying promise--not the promise of a quick buck, but the opportunity to make things that were previously impossible, and the inevitability of eventual transformative change across a whole range of industries.
Remind you of anything?
Around the time Bitcoin originated (or at least when the name was finally decided upon and the domain registered), the first commercial Android device was launched.
Since then the latter creation has put interconnected computers literally into the hands of virtually everyone on the planet, allowing for numerous other technologies, industries and markets to be built upon it.
That's clearly transformative.
What has "blockchain" transformed? Still unclear? After 12 years, that means clear.
No, not a solid argument would be counting the adoption of "blockchain" from when it was created, but everything else from the 1970s for some reason.
> The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server.
Perhaps the only thing blockchains are unambiguously good at is starting internet arguments.
https://en.wikipedia.org/wiki/Capital_controls_in_Greece
https://www.thenationalherald.com/archive_general_news_greec...
https://www.cadtm.org/The-Troika-s-Policy-in-Greece-Rob-the-...
People have such a short memory.
On a side note the work involved with blockchain is the most interesting stuff I’ve ever done. I’ve got to learn and play with cryptography, formal methods, programming language theory, and work with some developers famous enough to have significant Wikipedia pages.
Edit: If someone can show me a non-blockchain design for decentralised over-collateralised loans then I’ll concede and go back to full skeptic :)
I agree that there are cases where blockchain don't have alternatives. Those are where you want a decentralized ledger and you can't trust anyone.
It can accomplish that, but is extremely inefficient doing it, so you really need to decide whether the cost is worth it.
Edit: also, it’s a way of borrowing money immediately from others by locking up collateral until you’ve repaid the loan, else at a certain time the collateral is sent to the loaner. It’s a really cool way of decentralising micro loans and removing financial risk to the loaner. For people who don’t have access to credit it’s proving popular with around a billion dollars in loans locked at the moment.
Anyway you mentioned "If someone can show me a non-blockchain design for decentralised over-collateralised loans then I’ll concede and go back to full skeptic :)"
My question is, why it has to be decentralized and come with that huge cost?
As to the decentralised question: as someone from the UK sure we have loans but these allow you to get them without a credit check and they’re accepted/paid immediately. Someone in a third world country might not have access to the same financial instruments we get to enjoy.
A loan with a <100% loan-to-value ratio to the value of the supporting collateral, like traditional mortgages.
Why does that have to be decentralized? I already can make a loan against a mortgage and to do it I don't need to use as much of energy to power Switzerland.
Since “decentralized finance” is typically defined in terms of blockchain use, there are, by the standard definitions, no non-blockchain decentralized finance solutions of any kind.
If you can't define the problem without reference to blockchain, then no one can offer a non-blockchain solution. That doesn't mean there isn't a non-blockchain solution to the actual problem, just that you are so wrapped up on a preconceived solution that you can't specify what the problem is separate from the solution you've already chosen.
Giving real money to kids as a reward has always been a bit iffy. What are they going to spend it on? Candy? Video games?
Screen time would probably be better since its something they’re going to consume multiple times everyday, but also something parents want to control.
Instead of giving them cash for completing chores, or getting good grades, give them something they could exchange for screen time. Let them earn interest accumulated screen time, or trade it away to their siblings. That’ll help them build some basic financial sense without them actually holding currency your family might need.
Would this need a blockchain? I’m not sure. I imagine a single company trying to do it wouldn’t go so well since there’s so a couple closed off ecosystems out there (ie Apple), and collecting data on children has legal problems.
https://www.hyperledger.org/learn/publications/soramitsu-cas... - central bank digital currency in Cambodia built on Hyperledger Iroha
https://defipulse.com - $6b+ locked in DeFi applications
I don't see how tech inclined people don't see value in what's being created right now unless your eyes are closed. A new web is being created.
Playing with defi applications and dex’s this week got me pretty excited about where the space is headed.
There are now smart contracts that exist where the admin controls are disabled and users can do things like flash loans where you put up some collateral borrow huge sums of tokenized money and then pay it back in seconds or years later. No paper work, no counter party risk, intermediary is code. You pay gas fees and whatever apr you agreed to. https://dydx.exchange/
Dex’s are becoming awesome, https://uniswap.org is friggin rad. So easy to use.
There’s obviously going to be tons more scams and projects that blow up or get hacked, but out of this will come some very useful finance applications that never existed before.
I mean, we've already gone through several distributed file stores, FreeNet, eDonkey, Gnutella, OpenNap, etc. They were still attackable by organizations like the RIAA, but more than that, they were slow and unreliable. Adding financial incentives in I don't really think will improve things that much. How many people are running Ethereum clients and yet DApps are horrifically slow.
Arweave is based on a new consensus mechanism called ‘proof of access’ (PoA). Arweave is more suitable for slow write (upload) and fast read (download). Download is more useful for most use cases, like hosting websites, unlike other decentralized storage projects which are more suitable for write (Upload)
Arweave has developed a system for data storage which makes it economically sustainable and feasible to store data for centuries. The system allows you to have highly available low latency data storage while maintaining an incentive model where miners will store user's data forever.
Some apps you can check out built on the permaweb:
https://medium.com/@arweave/the-arweave-open-web-incubator-d...
https://3255w57x4jrhpmzwesguivvjyqnphc4cej5mea5mdpllp46fnrtq...
https://7usqj2gxzeg2hek6sngrsap3fcizkfklqr2trdkl4tpibc6cgs3q...
I see no evidence that this is true. Look at their economic analysis[1]. It uses an extremely idealized view of the cost of storing data - they assume that cost of permanent storage is solely a product of the cost of a hard drive and the rate at which hard drives fail. They ignore so many real world costs - internet costs, electricity costs, paying for space to store the hard drive, maintenance cost, opportunity cost, transition costs (i.e. when the hard drive changes hands, the effort to ensure there is a new maintainer).
[1] arweave.org/yellow-paper.pdf (section 3.2.2)
From the splash page: "Store data, permanently." "creating truly permanent data storage for the first time"
From the 'yellow paper'.
"[T]he core Arweave team does not expect that the network as it is currently formulated will continue to produce blocks in true perpetuity. This does not, however, mean that we expect that the information stored inside the weave will be lost after the final block is mined. It is our expectation that when eventually a permanent information storage system more suited to the challenges of the time emerges, the Arweave’s data will be ‘subsumed’ into this network. After the mining of the final block, the financial incentive mechanisms for data preservation will subside and give way to social incentives for data preservation"
The "truly permanent" aspect is based on hand waving and hoping that this system (which was designed with a finite lifetime) will be picked up and stored by someone else.
I have nothing against crypto or this idea (in fact I like that someone is working on this!), but the baseless claims, the barely-honest way that companies present their technology, the blatantly unsolved problems that underly the big claims and dreams - it's all so exhausting. Far too often when I investigate projects in the Blockchain space I try to understand how a company has achieved a shockingly impressive goal only to find that underneath the hype there is no solution, just blind faith and a promise that the core problems will be solved in the future.
I don't know how you can look at the Blockchain space and see anything other than: interesting but very incomplete tech propping up preposterous claims.
The second camp believes that block chain is cool technically but has very little real world use. I'm in the second camp.
The tricky part about this is that every new technology looks this way at first - cool but of limited utility - until it's not. I think at this point tho that block chain has had it's chance to be useful and has mostly failed.
I don’t actually know anyone who was persuaded by the merits of bitcoin or similar.
The really tricky part is that a lot of promising-at-first-but-ultimately-useless technologies look exactly the same way.
Cars didn't solve the transportation problem. Horses still worked fine. What problem did the internet solve specifically? We think of the infinite amount of possibilities it created (along with new problems) not the problems it solved (most of those would be irrelevant today anyways).
I think trying to apply the standard startup pitch (problem -> solution) to everything in life is a terribly reductive perspective.
There's just so much that can be done with blockchain: financing new ventures, generating a financial incentives for sharing behaviors (whether files, computing powers or potentially tangible assets), transferring funds... Yes you can frame all of those as "solutions" to problems, but I think that's still missing the points. Most of my net worth is in crypto assets, I use it to store value, invest, buy goods, send money to friends, etc... Give it a couple more years, and I'll probably close my bank accounts. It doesn't "solve" any problems for me, it just provides a more convenient service than traditional banking and more opportunities than traditional ways of investing. I'm assuming a lot of people see it that way too and that more will come to see it that way.
Blockchain solves the platform problem. Finance needs a platform. Right now, there are a myriad of broken, old, difficult to upgrade systems that prevent basically any significant innovation from taking place in the payment transfer landscape. This has been commented on a lot. But I think it's important to step back a bit and understand why that is.
Finance is dominated by extremely large, extremely risk averse institutions, that all compete with one another. Any one of them certainly has the resources to develop "the app store" for finance, but the problem is that all the other ones are incentivized not to adopt it. JPMorgan doesn't want BofA to own the app store for finance, and so they will never integrate with it.
This is, fundamentally, a tragedy of the commons. All these big institutions, and all of us customers would benefit from some unified, universal financial platform. But nobody can build it, because every actor in a position to doesn't want to accept anyone else owning such an important choke point.
So what happens? Well, we get standards imposed by the only actor in the space powerful enough to create something like this: governments. Governments are, in general, not great at this sort of thing, and they certainly aren't very fast moving, or responsive to consumer demand.
This, is the problem that blockchain solves. We all know that anything you can do on Ethereum you can do in a relational database 1000x more efficiently and better. Better in every way except one: Ownership. Any traditional relational database is going to be owned by someone. Public blockchains are owned by no-one. JPMorgan can build applications on top of Ethereum or Bitcoin, not because they need its technical capabilities, but because Bank of America doesn't own it.
This is the critical insight to understanding why this stuff is important and valuable. It solves the coordination problem imposed by platforms. Platforms have tremendous value to users and efficiency, but they confer far too much power upon their owner for any financial institution to use a platform owned by another. The ability to make a 'financial commons' that is not owned by any one institution, government, or entity is what makes this technology powerful and useful.
Inspectable and freezable payments systems are one core part of the infrastructure that enables regulation. The point at which it looks like Blockchain technologies are successfully enabling an alternative financial system that’s not subject to these controls is the point at which blockchain technology gets severely constrained by law.
Intermediaries aren’t always a bad thing. Stock settlement intermediation was transformative for the securities industry, greatly increasing the liquidity of the market.
But seriously, wish blockchain was replaced by zsnarks as a hype term.
Zsnark sex for everyone! (Just kidding, hope humor is allowed)
Mostly because blockchain technology was meant to fundamentally work as a viable alternative to existing payments systems, not data stores or other kinds of stuff. One of the local grocery stores (Carrefour iirc) prints a code on the receipt through which, allegedly, I could read the receipt off a blockchain. Why anyone care about that?
Now you tell me I can have access to money transfer services without the hassle of dealing with banks and intermediaries, that is actually interesting.
James Mickens has made an interesting talk abou blockchains and how most of them are basically the wrong solutions to most problems. And it's kinda fine but mostly misses the whole point of blockchains as monetary system.
Tl;dr: yeah blockchains are the solution to /almost/ nothing, but can you blame a screwdriver for being bad at opening a can of soup?