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Comment by wyager | Hacker News Reader

The only two known usage of blockchain that actually seem to offer a clear advantage over some other strategy (running the thing centralized, not having coordination at all, etc) are A) solving double spend (a la Bitcoin) B) solving zooko’s triangle (a la Namecoin, or the clone you mentioned from ipfs).

Identity on blockchain beyond resolving zooko’s triangle (I.e. stably mapping pseudonyms to pubkeys) typically does not offer an advantage over (partially) centralized identity providers. E.g. putting anything related to government ID on a blockchain is pointless because you might as well have the ID issuer run a central or federated service.

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Why does Bitcoin have a clear advantage in solving double spend over a centralized solution?

It does not.

Bitcoin (and it's successors) are a decentralized solution to the double spend problem. If "decentralized" is a requirement, then a cryptocurrency can be an excellent solution. Other known solutions (like "just trust everyone") don't scale well (an understatement!).

If "decentralized" is not a requirement then there are other solutions to the double-spend problem.

So it's your contention that the current traditional financial system "don't scale well (an understatement!)"?

Because the trust is distributed. One single person can't cause the entire system to break down or steal all them money. With blockchain coins, the incentives are aligned. The weird thing that happened with BTC that I don't think Satoshi could forsee is that the more valuable it got, the less usable it got. This is one of the unsolved issues: how to create decentralized consensus very very quickly that can't also be attacked via a PoW that is too easy.

Do you know of any lines of research that are out to prove mathematically that it is impossible to have these desirable characteristics simultaneously? I.e. any improvement in consensus efficiency necessarily gives up some amount of decentralization, appropriately defined.

This is the sort of thing that really needs to be questioned.

1. How much security do we need for this transaction?

2. For this block of transactions?

3. Can we have varying levels of security?

What we are ultimately trying to know is, is it profitable to double spend? If the answer is yes, then no one should be transacting, and anything they do transact is a gamble. If the answer is no, there's much less risk, and the farther the answer is no, the safer the transaction.

But we likely don't need as much security as we do now. In fact, it's very easy to handle at a user level.

A. Put the transaction on the blockchain.

B. Wait for additional blocks.

C. If your transaction is huge, wait for more additional blocks. Wait a week, a month. This is an important transaction. When the blockchain has not reverted for such a long time, finally do the transaction in the real world.

If you are transacting with yourself, you don't need any security at all. If you are transacting with a bar and the bar knows you, much like a tab, you don't need much security. If you are transacting with an anonymous person, you want high security.

So security is currently handled on a blockchain by blockchain basis, where it should be a transaction by transaction basis. What if you can't wait a month? Then you should put heavy fees on that transaction and it should be put in with other higher fee transactions.

4. How does security change with transaction size? Does it make sense to have limits?

5. How does security change with total transaction block size? Does it make sense to have limits?

6. When the coin price goes up, how does that change these factors?

7. When the mining reward in coins drops, how does that affect security?

8. When Bitcoin, in 100 years, moves to 100% transaction fee system, what happens to security? What would the transactions fees look like?

9. In 50 years when the block reward has been halved 5 times, either the price of Bitcoin moves to $1 million, or the security drops. Is that okay?

I don't trust the collective anonymous users of Bitcoin more than I trust my bank and the court system though.

If someone hacks into my account, my bank will likely reimburse me for any losses. There are controls in place to stop them from stealing it al. If someone just transferred it to their own account, I could use the courts to get it back. If I use a credit card to pay a scam, I can do a charge-back.

With cryptocurrencies, it's just "bye money". They're not going to fork for you. There's no logic to stop people in Russia transferring my entire account. It's too hard to find criminals to get any relief. It's just your fault for using cryptocurrencies and not having 100% perfect security.

Not to mention, the chance of my bank stealing all my money is nil. They'd be sued and arrested, and the FDIC would reimburse me anyway.

I don't think this is the kind of "trust" that is relevant in the prevention of double-spending.

> There are controls in place to stop them from stealing it al. If someone just transferred it to their own account, I could use the courts to get it back.

What if it's taken thorough wrongful civil forfeiture? Will you be able to afford to navigate the courts to get your assets back after they've been seized?

Not always, but wrongful civil forfeiture is just one of many possible ways to steal. In other cases using the court system will be possible. With bitcoin, it is never possible.

So if you think the risk of permanently losing your assets via legal channels is, let's say, 99-to-1 compared to the risk of losing your assets to cryptocurrency attacks, then wouldn't it make sense to hold 99% of your assets in the bank and 1% in cryptocurrencies?

Cryptocurrencies don't have to replace all existing financial instruments to be a useful hedge. They can just be one tool of many to diversify your risk profile.

Especially consider that for people living outside the developed world, the risk of having your assets stolen through legal channels is going to be much higher.

If you think it is indeed 99-to-1, then perhaps. My perception of the trustworthiness of most crypto projects is certainly much lower (see the endless parade of crypto horror stories on https://www.reddit.com/r/SorryForYourLoss/), so personally I would think the odds of a crypto project going under or just simply losing my wallet keys is way higher than the chance my bank or my government will steal my money or my stocks or whatever. Then again, I do live in western Europe so YMMV if you live in Venezuela or someplace like that.

Many/most people don't worry about having large amounts of cash stolen, whether by authorities or criminals precisely because they trust the banking system to keep track of their money.

The banking system would obviously cooperate with authorities.

Cryptocurrencies are like Swiss bank accounts without Switzerland?

Well on the 2008 Crash your ""acount"" was robbed and if you live in US you did not get your money back.

You had to cover the "too big to fail" system.

On btc no.

> One single person can't cause the entire system to break down or steal all them money.

Funny - I have never seen someone in the traditional financing system do that and not get caught. Closest things were ponzi schemes like Madoff (and he did get caught)

I have, however, heard of dozens of exactly this incident happening with cryptocoin exchanges (wallets, services, the most general term for all combined slipped my mind)

> centralized

If you want to trust a conglomerate of folks who have a vested interest in keeping you small and poor to solve your problems, then there is no advantage. If you do not, then the advantage is exactly that it is not centralised.

Why are you so convinced that cryptocurrency solves the "outside forces much larger and more powerful than me have influence over the system" problem? It exchanged a solution to some problems for a new set of problems to be solved.

You are questioning what I'm saying by telling me something incredibly vague. I'm afraid I just don't know what to do with your question.

I can rephrase it: why do you think it impossible for vastly resourceful entities to acquire so much power they can control the decentralized system - in a softer way, probably but still.

Imagine a world tmr where bitcoin is everywhere. You ll have mining conglomerates in the cheapest electricity providers working as cartels to help each other and protect their interests (so can envision centralizing a blacklist of addresses they dislike, coordination on software version etc), de facto cartels of whales (like todays "billionaires" people describe as a collaborative force), and large lenders who concentrate capital and therefore still can buy out whatever they want (today called banks).

How do you think the blockchain solve any of that?

It's easy. Copy-paste the blockchain and start over with a fork. When the system delegitimizes itself, a debt jubilee lies around the corner. This stuff is just glue now - a cheap way of making a financial system.

So if you don't like the history of the currency, scrap it entirely and start over. That seems like the opposite of the point of Blockchain.

What keeps people small and poor is the insistence that people should save in monetary terms.

It's not rocket science. When you keep your wealth in monetary terms, you don't get to have it in physical terms. Money represents how much real wealth you could have if you spent it. It's deferred consumption. There is no real wealth in something that didn't happen.

Money is a store of value. Money is a measure of wealth.

If you’re fine with all the downsides of trusting you bank, the bank’s central bank and currency issued, the bank’s government, etc then that obviously makes Bitcoin less appealing for you. Remaining upside includes reduced friction for things like international settlement. Don’t tell me that international settlement is easy with traditional banks - I am a financial system power user and it is not.

I think this is an accurate assessment but I think authentication and account management should be seen as separate from 'identity'. Authentication can be useful without being associated with a real-world identity; for example, it can be useful for spam-prevention as an alternative to signups with captcha. You could theoretically log into multiple services which you don't trust by signing messages using your private key without revealing your passphrase to any of those services.

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