Web3 is not going to change the world
sifted.eu
sifted.eu
God bless this fella.
I bought tesla stock futures in a country that wouldn't allow it via blockchain. I reduced a portion of my ecommerce store checkout fees to <1% by using a crypto payment processor > stripe's highway robbery of 3% per sale.
Ps: [should i redact the word 'stripe' on here to avoid shadowbanning?]
etc.
This is misleading because it moves all of the costs to other transactions: Your users have to get their money into exchanges (credit card fees occur here if using a card), buy the cryptocurrency (exchange fees), transfer it to you (transaction fees), and then you need to transfer the cryptocurrency somewhere else (more transaction fees), and exchange it back to another currency (more exchange fees).
Then you have to account for exchange rates, which fluctuate constantly. If I need to buy something for $100 from your store, I need to buy at least $101-$102 of cryptocurrency in case the exchange rate slips while I’m going through all of the above steps. That extra $1-$2 floats around in my wallet forever if you’re using some obscure cryptocurrency that I’m not going to use again any time soon. At best, I now have yet another account to maintain and track and do math on whenever I need to buy something.
It ends up being far, far more expensive than Stripe’s checkout payments. It’s just misleading because the expenses are spread out across so many different touch points.
The idea is that this type of currency should hold value and buy the same amount of goods and services. A 1 ounce gold coin in 1920 would buy a nice tailored suit. Today a 1 ounce gold coin still buys a nice tailored suit.
Could this idea be extended to a crypto currency that is not used for pure speculative trading, but really as a store of value?
The equation is MV=PY - monetary base times velocity equals price level times total output. You are aiming to hold the price level constant.
You can't really control the output, apart from making it lower, which you don't want. Controlling the velocity is hard. That leaves the monetary base... which is very easy to control if you admit centralized control. Or maybe someone smarter than me can figure out an algorithm to control it automatically. Either way, fixing M doesn't work. To stabilize P, you have to adjust M to counteract the change in Y÷V.
Additionally, ethereum fees are pretty reasonable for layer2 and getting cheaper on a regular basis. Right now on the order of $0.15 per transaction. That could get 10-100x cheaper with some tech on the roadmap.
So I think it'll end up cheaper than stripe.
We’re talking about cryptocurrency, which comes in thousands of different flavors. 99.99% of the population doesn’t receive their paycheck in cryptocurrency, so the exchange rate is happening one way or another.
Ignoring the exchange rate and pretending everyone always happens to have the exact cryptocurrency that a store wants is misleading.
> Additionally, ethereum fees are pretty reasonable for layer2
Which would be great, but again you’re assuming that the stars have aligned and everyone is already using the exact cryptocurrency system you have in mind from end to end. In practice, they’re not, and they still need to incur exchange and transaction fees to get to that point.
The fees are incurred one way or another. You can’t honestly expect us to pretend that everyone already has everything in cryptocurrency and everyone is already using the exact wallets and systems as each other. Reality is entirely different than the hypothetically optimal scenario.
In the crypto world steal 250 million dollars in hack attach and not a single thing anyone can do. This is an inferior model in every single definition of the word.
yeah, try to convince a highstreet bank to return you your money when it thinks otherwise [1] [2] [3]
[1] https://www.reddit.com/r/UKPersonalFinance/comments/aqxz5n/h...
[2] https://www.reddit.com/r/UKPersonalFinance/comments/l4tps5/h...
[3] https://www.reddit.com/r/UKPersonalFinance/comments/cbpxit/h...
Why don't you just use no-fee debit cards then? Or a bank that offers no-fee credit cards? Pay it off on time and you won't have to worry about contributing to their profits.
You clearly don't understand what the 3% is for. For one, I don't have any crypto, so I can't use your payment processor. My American Express card which charges a 3.5% processing fee is actually subsidized here.
How does your crypto payment processor handle chargebacks? Does help protect you from fraud? Do they protect your customers if you act fraudulently?
When I need to send my sister who has a bank account with the same bank that I have an account with, I can zelle her within minutes. I've done this once every month for the last year. In the beginning, it told me that it takes "a few days" to send amounts over USD 500 (my amount is USD 2,000). However, recently I have noticed that it says "a few minutes" for my request. There is no cost associated with it.
Assuming there is zero fraud protection, zero liability, zero anything for the transaction, is it possible to send and receive payments for free, at no cost, using any block chain technology? If yes, how can we get there? If not, why not?
There's a thin, but opaque difference between "transfers" - what you're doing - and "payments" which Stripe or Paypal are doing.
Actually, I very much might have something to hide. As do you.
You're also ignoring the censorship that happens through the exchanges when they blacklist wallets. Sure, you can send cryptocurrency from wallet to wallet, but if the exchanges blacklist the wallets, you can never get the money out to fiat currency.
I'm positive you're going to next say use monero or zcash, but then you're limited to using shady exchanges, and if you want to have your fiat bank accounts flagged, there's a great way to do it.
I could be wrong, I don't believe there's any current blockchain scheme in which this is possible: they all rely on some positive financial incentive structure for verifiers, which translates to some transaction cost.
It's conceivable that, in the near future, more blockchain financial providers offer to cover transaction fees (the way my debit card covers FX and ATM fees). But that's not a meaningful improvement from the status quo, and it's still worse, fee-wise, for the average consumer than direct ACH or PCN transfer.
The only way vendors come out net ahead by using cryptocurrency is if it affords them some additional protections at the expense of the customer. For example, forcing customers to eat the transaction costs and exchange fees, eliminating the possibility of chargebacks if the product or service is bad, and so on.
Or more simply, they use cryptocurrency to dodge taxes. Or try to, anyway.
Also, Bitcoin has lightning now. A second layer protocol that allows fast and cheap payments. Like less of a penny cheap.
Ethereum Rollups are much more promising L2 solutions.
Your biases are blatant for all to see. But misinforming people to serve your interests is really uncalled for.
> Lightning has very little adoption, is hard to use because 1. you need to always be online to receive transactions and 2. routing is failure-prone, and costly in capital lock up - in an internet-connected hot-wallet no less - for payment channel collateral requirements.
Actually, Square via CASH App just enabled LN tx on it app to both iOS and Android users; so if you want to play the numbers game that is a significant onboarding--perhaps the largest in the entire ecosystem to date.
With that said, you don't have to run a node to take advantage of low tx fees: DL Muun wallet and you now have the ability to receive funds from both mianchain and LN without running a node.
FYI: Mempool on BTC mainnet is is clearing 1 sat/byte transactions (approx 5 cents.)
I've been curious to try these things out for myself but I don't feel like I understand Muun wallet enough (as far as trusting myself not to screw it up)
Yes, I just tried it: this is what I did and it was all pretty seamless.
- I sent out a desired amount to my muun wallet using a LN invoice from my CASH wallet and it was received instantly for no fees.
- Once in my Muun wallet I sent it back to my CASH app bitcoin wallet using a Segwit address, as you cannot currently create a LN invoice within CASH.
So, it seems that while CASH supports LN it is only for withdraws and not deposits; this could possibly be added later as a feature by the CASH team, though. But as of now, only Segwit layer 1 address deposits are available to a CASH wallet.
Still, I paid ~7 cents with a 1sat/byte tx and it arrived in the next block since the mempool is clear using a segwit address.
If a retailer wants to take payments via BTC and LN they have two choices: use custodial wallets like Muun that support both Layer 1 and 2 protocols and move to a secure wallet where they hold the keys. Or invest in running their own nodes and a deploy a system that works for them.
LN has less than 3.5K BTC for channel collateral, meaning relatively few people use it.
>>With that said, you don't have to run a node to take advantage of low tx fees:
I didn't say you need to run a node to use it. I said you needed an always online hot wallet. You need it because even to receive a LN transaction, your private keys need to sign a series HTLC of transactions linking the originating node with yours.
Seeing as how the 2nd layer network is optimized for instant micro txs, that still is not accurate; the point is to be able to have low/no cost instant txs for small sums in order to not clog up the mempool on layer 1.
> I didn't say you need to run a node to use it. I said you needed an always online hot wallet. You need it because even to receive a LN transaction, your private keys need to sign a series HTLC of transactions linking the originating node with yours.
Sure, but that is like saying you need an internet connection to post on HN and decrying it as a pitfall of a system.
But even that is being worked on as we speak [0].
0: https://protos.com/bitcoin-lightning-dev-fix-existential-pro...
It was also marketed as being a substitute for ordinary retail transactions, like purchasing a coffee, not solely micro-transactions.
>>Sure, but that is like saying you need an internet connection to post on HN and decrying it as a pitfall of a system.
Having to have your hot-wallet always online just to receive transactions is different than needing to connect to the internet to submit a comment on HN. You can still receive replies on HN when you're not connected to the internet. And connecting to the internet to post on HN doesn't expose your money to theft the way exposing your hot wallet to the internet does.
They do have L2 rollups in the works like Polygon Hermez which has $0.25 transaction fee right now.
L2's are Ethereum's official scaling solution (along with sharding).
Maybe the fees are worth it for currency stability? Saving 2% doesn't help much if the price of crypto plunges 10% the next day.
[1] https://www.bloomberg.com/news/articles/2022-01-11/citadel-s...
Meanwhile, the banking infrastructure you all seem to love so much continues to not be programmable, continues to have multi-day settlement delays even between your own accounts (that it takes multiple days to pay off my credit card is insane), and continues to be actively exploitative of people with lots of regressive fees with built-in traps that regularly screw over the most vulnerable of people. But somehow that is all ignorable when people want to complain about crypto.
Can't crypto just solve a problem for someone and we can be happy for that? Does it really have to be better at everything at once? This person said they were getting cheaper transfers: they were paying 1% instead of 3%. Isn't that good? Why is it somehow broken if it is done with a stable coin? If these banks you love so much are so smart, why is this person so happy using crypto? Put elsewise: why are they wrong for using crypto?
This is like someone saying "I love sandwiches: they let me hold my food while I am on the go" and someone with a sour face responding "I guess if you like unhealthy heavy food! I love my salads". And I say "they do make vegetable sandwiches: they are healthy and holdable!" and being pushed back with "this is the problem I have with this new sandwich movement: they are attempting to recreate everything from salads". I mean, come on :/. If your salads are so good, why can't I hold them? Oh right, because sometimes I need a sandwich.
No, you're misrepresenting long_time_gone's point. EUR, for example, is very stable without being tied to USD, and EUR/USD will almost never fluctuate by 10% within a single day. Fiat currencies tend to be very stable even when not tied to USD.
Non-tied cryptocurrencies are extremely volatile to pretty much all fiat currencies (and to most other non-tied cryptocurrencies), while most fiat currencies are comparatively stable to most other fiat currencies, without being tied to them.
The original poster complained about:
A) Crypto being too volatile B) Crypto recreating existing finance
Which seems to be a contradiction.
I think the original complaint was it's volatile, to which the solution was "well use this one tied to the dollar"... well what about the ones that aren't volatile and aren't tied to the dollar?
(They don't exist, which was the whole point)
The point was that each individual criticism of crypto (speed, instability, energy efficiency) brings a new solution which seemingly recreates an existing financial function or institution. This is the logical thing to do as it increases trust in crypto and speeds adoption. However, in the end, we have a crypto economy stabilized and supported by the exact institutions it was supposed to displace.
Imagine walking into Netflix and saying "you can't replace Blockbuster because you'll have to re-create all their existing infrastructure"
Centralization of wealth is a big problem.
Buying Tesla futures might seem innocent but you realise that means other types of illegal finance shenanigans, like money laundering, are also facilitated by the same process. Bad actors can use it to bypass regulation just like you did.
> Third, immutability has its downsides. Blocks in the blockchain are for all intents and purposes completely fixed. This means that a transaction that happened erroneously or illegally can never be changed. Or bad data can never be changed. Imagine if you move house and the gas company says: “There is literally no way to change your address in our database.”
I mean... does the author actually believe this is some unsolved problem in Blockchains?
But the whole point of Bitcoin is that no one should have the authority to reverse transactions or print new coins. And all of Web3/Eth/NFT crypto shares the idea that this technology is useful because it removes the need for trusting a central authority (you trust the code and the distributed network instead)
The idea is that you have the coins and NFTs in your own wallet and no one can take those away from you. So if you are going to add a layer that allows transactions to be immutable you are literally describing a bank or a credit card and there is no need for crypto.
Immutability means you can’t change history not that you can’t update state. If my utility company needs my new home address and they use a blockchain for some reason (maybe part of a near-realtime electricity payment system), I can always sign a transaction to associate my blockchain address with my new home address. Perhaps the electricity equipment itself can sign my signature to ensure that I am physically located with it and have authority to change who it’s representing.
But what happens if you lost your keys and no central authority has the ability to change your address?
Maybe if it is a physical address. After all, you presumably live there. But what if it's just some payment contract? As far as they care you yourself signed it, and they have the proof. If you can get them to cancel the contract, what was the point of using blockchain anyway?
Why is it that the numerous famous people that have gotten kicked off Facebook and Twitter never set up a blog or Mastodon instance on their own domain or use a platforms not controlled by American companies? It's because they know that the big platforms is where the people are, and trying to rebuild it all over again is not a waste of time and resources.
So.. not anywhere.
Or can the data be available in a highly fragmented fashion _and_ still be useful? I just can't imagine any content system that does not end up being centralized or highly inconvenient.
If you care about high availability of a piece of content, you will dedicate infrastructure to hosting it on IPFS, just like you would on the Internet.
Why would I engage in the dance of crypto just to host some content no one will read anyway?
What's IPFS?
Is this not an unsolved problem in blockchain?
It's a ledger, not a database.
The author is critiqueing blockchain, and broadly I agree with the critique. But it's pretty shallow. It just regurgitates what we already know. Perhaps the salient observation is that Web3 is just blockchain hype with a new name; but the author doesn't actually make a case for that at all.
What about people that do not know much about the topic?
I prefer to upvote things that I think are good, and should be uplist.
I just thought it was a shallow article.
The idea that the blockchain is something that can be used as a database seems to be one of the big Web3 claims. Clearly, it's a thing in which arbitrary data can be stored; but that's not it's primary purpose, and it seems to be an astonishingly-inefficient way to store data.
If someone were to help me understand why it makes sense to use blockchain as a database (or as a webserver), maybe the scales would fall from my eyes, and I'd begin to grok "Web3". But as far as I can see, the only relationship between records in the blockchain is that each record has all earlier records as its parent. You can't establish any other relationship between two records, other than that each one contains a hash of all its parents.
Yes, a ledger has an implied schema. But it's a single table, so it's not much of a big deal, as schemas go. And everyone who wants to use the blockchain as a database is obliged to use the same implied schema. A flat text-file would be more versatile.
Then there are some hilarious misgivings.
> Blocks in the blockchain are for all intents and purposes completely fixed. This means that a transaction that happened erroneously or illegally can never be changed. Or bad data can never be changed. Imagine if you move house and the gas company says: “There is literally no way to change your address in our database".
Er, no, you just submit a correction to the address. Exactly the same as issuing an SQL UPDATE, it's just that at the lower level the SQL transaction of the UPDATE is stored, rather than the updated final result.
Numberwang is an absurd game show featured in the sketch comedy series That Mitchell and Webb Look. The basic "game" consists of the contestants repeatedly calling out numbers -- apparently at random most of the time -- until one of the numbers "is Numberwang", for which the contestant is (presumably) awarded points.
Aren't Bitcoin nodes also guessing numbers until one of them passes a meaningless test, for which the node is then rewarded? The metaphor is imperfect (like all metaphors), but I think this one is a better fit than you're giving it credit for.
Me writing this comment to you is playing snooker, because the protons are bouncing off each other and stuff.
It's an attempt to discredit the network by using low-brow humour as a comparison.
I guess we just have very different expectations about tone in the context of this particular article.
Erroneous transactions are a different question entirely that are too complicated to really explain in a comment.
I'd basically just say though that if you want a company or state actor to be able to reverse transactions, you probably aren't interested in cryptocurrencies, and that's fine. The five pound note I just gave to my mate isn't reversible either and I like it that way.
> I'd basically just say though that if you want a company or state actor to be able to reverse transactions, you probably aren't interested in cryptocurrencies, and that's fine.
reversing transactions are basic functionalities. we have enough issues as it is with fraud etc. having transactions that you cannot reverse is a complete non-starter.
Send $1000 to a friend or anyone you owe money through Zelle, then call your bank and tell them you misclicked and sent it to the wrong person.
Go ahead try it.
i know financial systems in the US are about a decade behind those here.
for example: we have Faster Payments in the UK. completely free instant payments between bank accounts. and when i say instant, they’re millisecond instant.
if i mistype a name when sending a bank payment, it will warn me and ask for a confirmation.
if i mistype a bank account but not the name it either comes back to me or it goes to the right bank account.
and there are many other features like these.
Zelle is millisecond instant as well.
Ok so, use this "Faster Payments" thing to do what I said then report back.
I don't. We can use different payment methods, that's cool.
of course no reversible tx is ok as long it’s some obscure niche that no-one uses. otherwise there will be issues.
I couldn't give a toss about "market penetration", the masses are willing slaves.
And the consumption of ~ 110 TWh/year is going to produce some changes to the climate.
If your product is based on the value provided by blockchains then that is one thing, but Web3 simply can't be like Web2.0 because so few use cases actually benefit from it.
it's all about having the guile to get into stuff early and out before it collapses on itself. follow the fool kind of situation.
it's nothing more than unprincipled greed disguised as a new paradigm. nothing new about greed and redirecting money from bottom to the top.
If you believe it'll pop and disappear, at least use a better analogy, like the dutch tulip bubble.
Web3 is just web2 with a different focus. it's not decentralised, it runs on web2 stacks, it does none of the thing it purports.
Just like the lack of any real revolution in this supposed 4th iteration
The cypherpunk thing is happening now, not in the 90s like you might have hoped. It's startling to me how poorly received it is on HN from people who would ostensibly be a part of it otherwise.
“Late Show with David Letterman” clip courtesy of David Letterman
“What the hell is [the internet] exactly?” Letterman asks Gates.
“A place where people can publish information. They can have their own homepage, companies are there, the latest information,” Gates says.
“It’s wild what’s going on.”
Letterman wasn’t sold.
“I heard you could watch a live baseball game on the internet and I was like, does radio ring a bell?” Letterman says.*
Gates said unlike with radio, the internet would allow users to watch a baseball game whenever they wanted instead of live.
″[Do] tape recorders ring a bell?” Letterman asks.
There are a lot of people promoting Web3 who can't explain why it is any good in such a way that anyone can see the potential. That's on them, not the skeptics. If there is actually some real value to the concept, then someone out there should be able to explain it. And if that's impossible but the benefits are real, then who cares? It'll eventually make its value clear just like the internet eventually did and why care about that now? Oh right... because the scam doesn't work without the FOMO part.
> Programmable money is really interesting.
Why would I want to "program" money? What does that actually do for me?
> Random things I’d like to do, such as buying a gamertag for my Xbox account that’s already taken from a stranger, suddenly have viable solutions.
Yeah, see, I can't see much reason to want to do this other than to use it as part of a scam. I don't have a gamertag, but nearest I can figure it's just an online identity. Why would you want to buy someone else's identity? I suppose they might have some kind of vanity username that's being squatted? So what are we promoting here? Just a useful tool for black markets? Sure, that has some utility, but it is hardly what I would call exciting new world changing technology.
> Atomic transactions allow pretty interesting things too - imagine payments like SQL transactions where your own custom logic has to be met for the transaction to occur.
I'm imagining that, and I can't see what it does that I can't already do today in the real world without having to know any over-complicated technology.
> The issue is it’s still a really new, complicated, and fast evolving domain.
The complexity is part of the reason I don't have any trust in it. When people are trying to sell me something by saying "it's complicated, but trust me it's great!" I am immediately suspicious. They call it 'confidence' artistry for a reason.
And christ, whenever people talk about this stuff it is always about money. Does it have any uses not related to financial trickfuckery? Theoretically this is supposed to enable decentralized youtube and the like, but nobody talks about that. This makes the whole space very untrustworthy.
I feel like there has to be a name for the fallacy here. If you looked at the cryptocurrency space, especially the blockchain builders, you'd likely find a lot of people who you'd be willing to accept are smarter than you working on it. Silvio Micali and Vitalik Buterin are 2 big names that come to mind (I don't hold/use algorand FWIW, but Silvio seems like one of the brightest minds in the field solely based on accomplishments).
Besides, if the technology is actually valuable in some way I cannot yet perceive but that will become obvious over time, then I can just wait until it becomes ubiquitous and reap the benefits without risking anything.
The tokenization of everything is a mixed bag. On one hand it leads to perverse incentives that result in an incredibly low signal-to-noise ration. On the other hand it enables types of consensus that don't exist when there's not a penalty for misbehaviour (specifically for proof-of-stake and staking, the token makes it possible to reward network participants, while making the cost of attacking the network higher than the market cap of the network).
If you are outside of the financial industry, you probably don't. Maybe you can do some amateur high-frequency trading on the side. It's not "programmable money" in the sense of "please send $30 to the gas company every month".
As I see it, the main application is financial derivative products i.e. investment products. You can make any kind of "ownable thing" based upon other ownable things on the blockchain. Remember the mortgage-backed securities that caused the 2008 crash? Now anyone can create their own variety with some coding effort and a $100 fee. And if you pay another $100 fee, they will automatically become tradeable on major exchanges.
It's peak capitalism, basically. From a purely technological point of view, I think this is pretty damn cool. From an economic point of view, it's going to be our downfall.
And from the looks of it, everything crypto is centralizing extremely fast, see Binance/Coinbase for exchanges, Opensea for NFTs. So at the end of the day you're still at the whims of large entities.
The people that are fine using and working with Web3 are here and numerous, just not paying attention well enough to bring traction to better posts
What in your opinion would count as an optimistic conclusion?
For example, the article spends a lot of time on OpenSea and how their wallet was using the OpenSea API, to bolster their "hey that doesn't match the ideal from proponents" crux of the article. What do you think the people that built OpenSea did when they decided to build OpenSea? So build another OpenSea, or submit a pull request to the wallet to render NFTs differently, use your own node, make a better node software, make an infura competitor which is a CDN of nodes, improve the build tools.... any part of the stack is up for grabs.
Thats what permissionless is. Pretty easy to get traction for any variant you release because there is immediate utility from it from other people looking for painpoints improved upon.
There are plenty of developer blog posts from people doing those specific things, they're just not posted on HN or moving up very high often. We could post conversations in github issues, or pull requests all day here. Easily shift the discussion. It's out of character that the HN audience as an aggregate only considers a few parts to make a conclusion on this specific topic.
To answer you, Web3 is solving both the data ownership problem and the centralization problem, and currently there is no other solution that is even remotely comparable to what Web3 is achieving.
> And is it really simpler to use than the alternative?
I understand why it can be daunting for a new user, but UX is improving each and every day, and I imagine that eventually you'll be able to use it without even needing to install Metamask or using a wallet somehow. ICP is doing something similar, so that you can use dapps without approving each and every single transaction. However, as a developer I can tell you that it's MUCH simpler to use than the legacy web. I developed a dapp that essentially uses no backend and requires me to host nothing. It is much, much better, even though the infrastructure is essentially nonexistent.
Please send these articles back to Reddit; I haven't been living under a rock and barely know what Web3 is. What a nothingburguer piece.
"It's going to change the world". Yeah right. It's written by a marketing dept. to generate hype.
"It's not going to change the world". Now, who writes that and why? There's definitely something interesting about this tech.
There may be something interesting about it, but I have no idea what that could be. It's possible that the cryptocurrency promoters are like the Homebrew Computer Club people of the late '70's and Visicalc hasn't been invented yet.
> buy drugs
> ransomware
> uses the same amount of energy as the Netherlands
There's nothing here but trite clichés. The most nuanced criticisms of Web3 come from its proponents these days.
I wonder if there's any conflict of interest for the author?
> founder of Cantab Capital Partners [a hedge fund]
hmm
This is the literal stated intent of the Federal Reserve (your bank's bank) at a rate of 2% a year.
Moderate inflation is a feature not a bug. It drives investment and increases the money supply.
On the opposite side, major coins (including BTC and ETH) are massively deflationary, so much so that there's a day to celebrate the purchase of a pizza for $800 million [1]. We shouldn't even call them "currencies" because they're not. They're assets and hugely speculative ones at that.
It's really just as well it's an asset because deflationary currencies aren't good for anyone. Ostensibly your money goes up in value over time but no one spends it so the economy just grinds to a halt.
[1]: https://interestingengineering.com/bitcoin-pizza-day-celebra...
Hah! Indeed. By 'drives investment' do you mean massively inflated asset prices (you may have heard the term 'Everything Bubble') and wild speculation (i.e. crypto, VCs) such as hasn't been seen since the Roaring 20s?
> We shouldn't even call them "currencies" because they're not. They're assets and hugely speculative ones at that.
Quite. I was going to point out that there's a difference between 'currency' and 'money', but I can see you're busy trying to school me. Please continue.
> It's really just as well it's an asset because deflationary currencies aren't good for anyone. Ostensibly your money goes up in value over time but no one spends it so the economy just grinds to a halt.
Well, I'll take that over the USD dollar, which has collapsed in value by almost 99% since 1913 (when the Fed was created), and is about to collapse even further. All of your bullet points are perfectly in line with government and central bank propaganda—I mean, talking points.
Overall, I would posit the complexity of our 'modern financial system' is a great way to obfuscate the truth about it—don't confuse knowledge of facts with understanding. Plenty of people smarter than you have both, and have come to the opposite conclusion[0].
Investments, valued in USD, beat inflation, so it doesn't matter that the USD is inflationary.
Forget the propaganda about the financial system that we've all grown up with, blame it on user error, and utterly disregard anyone who doesn't derive their income from assets and has to buy groceries (i.e. most of the user base).
It fundamentally isn't as simple as inflation good, no inflation bad.
It's all fine and dandy until central banks lose control and inflation causes catastrophic issues. Not to mention that it's most definitely a bug for people that intend to save for basics like housing on smaller incomes that can't efficiently invest in assets. Inflation tends to benefit those closest to the money first, common assets second then everything else by which point a new cycle has already begun.
BTC & ETH aren't deflationary as much as they are predictable in their money supply. You could say that they elongate the time preference of investments and that isn't only a bad thing.
Genuinely curious: what issues are you specifically referring to?
> BTC & ETH aren't deflationary as much as they are predictable in their money supply.
See this is another crypto myth. So yes Bitcoin is limited to ~21M coins theoretically but we don't actually know what the limit is because wallets have gotten lost and will continue to be lost. Second, a lot of crypto people don't seem to understand the impact of derivatives to effectively increase the supply and thus bring about all the problems crypto advocates say crypto doesn't have.
I mean look at GameStop. There are a fixed number of shares on the market (buybacks and issuing new shares notwithstanding). Yet derivatives created a situation where there simply weren't enough outstanding shares to cover short interest. Taken to its extreme this would mean those shares would have infinite value.
What really undid the subprime mortgage market (other than the fraudulent ratings for which no one went to jail and they absolutely should have) was all the derivatives on top of actual mortgages. I forget the exact number but it was something like a factor of 10-20 (meaning $10-20 in derivatives for each $1 of a mortgage).
The exact same thing can (and will) happen to crypto. That's why fixed supply is a myth.
When central bank/governments lose control or get greedy you end up with hyperinflation. Should I go into examples of how hyperinflation has been catastrophic?
> we don't actually know what the limit is because wallets have gotten lost and will continue to be lost.
We know the limit but we don't know how much is being circulated. Central bank money is the opposite, you know roughly how much is being circulated (if you're government is nice to you) and there is no limit.
> The impact of derivatives to effectively increase the supply
Derivates don't increase the money supply itself, they play tricks using the underlying asset. If you hold the Bitcoin asset yourself, someone playing with derivatives means very little to you. Though if you have your balance on an exchange, that's on you.
On the other hand, in the current system, you have no access to the underlying asset. You don't own 0.00001% of the central bank. In other words, everything you are using _is_ a derivative. Even something as simple as keeping your money in the bank means you are using a derivative. That being the option of the bank to hold no reserves for the money you deposited.
Instead you have hyperdeflation. Wonderful.
> Derivates don't increase the money supply itself, they play tricks using the underlying asset.
That's why I said "effectively".
> If you hold the Bitcoin asset yourself, someone playing with derivatives means very little to you.
That's complete nonsense. There are countless examples where derivatives have affected the price of the underlying asset. I gave several. Derivatives drove up the price of GameStop. The subprime mortgage collapse devastated house prices even for people who didn't hold a mortgage at all.
> On the other hand, in the current system, you have no access to the underlying asset.
Let's be honest: you don't have access or any control over the underlying crypto asset either. 0.00002% is really 0%. Bitcoin is concentrated in very few hands [1]. The vast majority of BTC is held and not traded [2]. Lots of people are holding ("hodling") BTC on the expectation that the price will continue to rise.
That's... a bubble. Eventually that sentiment will turn and some large unaccountable players will simply dump it and get out.
> In other words, everything you are using _is_ a derivative.
No, it isn't. The cash itself is the asset. What gives it value is that it is backed by [insert government here].
> Even something as simple as keeping your money in the bank means you are using a derivative.
No, you're trusting your money to a custodian that is overseen by the government.
> That being the option of the bank to hold no reserves for the money you deposited.
Again, wrong. Banks are required to hold a portion of their assets and loans in hard currency. This is the fractional reserve system.
A lot of former gold bugs love crypto. They too are under a lot of misconceptions (eg the USD has never once been 100% backed by gold). Additionally, fiat currencies are a response to the problems created by trying to peg assets to other assets yet we're going to learn those same lessons with so-called "stablecoins".
[1]: https://fortune.com/2021/12/20/001-percent-bitcoin-holders-c....
[2]: https://news.bitcoin.com/only-3-5-million-bitcoin-is-traded-...
How and where? At worst, it's gradual and predictable. Where is the central planning of the bitcoin supply? Hyperinflation on the other hand is as a direct result of the control of a few in the matters of an economy. Not the same.
> Let's be honest: you don't have access or any control over the underlying crypto asset either. 0.00002% is really 0%.
I don't know how to response to this 0.00002% != 0% just like $20k != $0. There is nothing wrong with saving. Whether it's speculating or not is a completely different matter. Let's not pretend no other assets are speculated on especially given the degree of novelty.
You are ranting about derivatives being bad, which I agree with. I'm giving you an option that decreases the effect and increases the options for opting out of derivatives. One of the reason derivates and bubbles are so strong is precisely because of inflation and central planned economy. Meme stocks sparked primarily as a result of short time preference and centrally planned economy.
> Again, wrong. Banks are required to hold a portion of their assets and loans in hard currency. This is the fractional reserve system.
Here's your "fractional reserve system":
> As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions. [0]
> backed by [insert government here]. > custodian that is overseen by the government.
I'm sure the banks and governments are very friendly and wouldn't ever have incentives that are to the detriment of others.
[0] https://www.federalreserve.gov/monetarypolicy/reservereq.htm....
If have my crypto sitting in an exchange, i get nothing. Likewise moving my crypto around shaves off value each time in gas fees and whatnot.
There is a crypto exchange offering 1.01% APY on BTC, a difference of 10,000% compared to Chase (and much higher APYs on other tokens).
Not shilling, I moved everything from Ally to a money market account elsewhere, I'd genuinely like to know where you're seeing a relevant amount of interest.
1000% inflation, now that's stealing.
"It looks awful."
"Someone paid a million dollars for it."
"Did they buy some tulips as well?"
Here's a much more even-handed view of what is(and isn't!) interesting in the nascent "web3" space:
Apart from that were yet to see something people use because they like to use it
An absolute claim that is easily disproven by doing even a modicum of research into the space.
https://twitter.com/willyuwaychang/status/148903393883621376...
Here's another fun project: https://www.poapathon.com/
And probably spending an absurd amount of money for more or less Auto-Generated art?
In terms of ownership, so far, I haven't seen any NFT space that actually adds any value over picrews let alone comissioned artwork. There's no legal framework binding the blockchain ledger entry to the copyright of the images and even if it existed, what's the value add over traditional proof-of-purchases?
Tokenization opens a lot of doors that traditional models otherwise don't.
If you believe there is, then I'd love to hear what it adds that's 1. unique and 2. actually desirable.
Information wants to be free! So stop trying to charge for it!
> it’s clear that Web3 is just a new spin on the same blockchain tech that we’ve been discussing for the last decade.
Web3 is everything blockchain. Queue the astronaut holding a gun "always has been" meme. Its adopted a new label, but the core commerce frameworks (Bitcoin, ETH) and the applications of those frameworks (NFT, DeFi, .eth, etc) are inextricable, technically and philosophically.
I mean, really, Web3 sucks, but this article is clearly written by a 60 year old who has been slowly following its developments through Bloomberg articles. The clearest signal that someone hasn't put much critical thinking at all into why Web3 is bad, is prioritizing a complaint about the environmental impact, because that is a problem, but one the community will fix. Its an argument about implementation, not philosophy.
> But unless you’re trying to create a cryptocurrency, buy drugs or blackmail a company using ransomware there aren’t really any sensible use cases for a blockchain
As bearish as I am on most Web3 technologies; the one that I feel does have use-cases are the core currencies. Look, if you believe the only use-cases for crypto are illegal, and obviously you aren't buying anything illegal with it (I'd bet this guy even drives the speed limit), then you just by-definition outed yourself as being critically misinformed. Because (1) illegal use-cases are still use-cases, and won't stop growth, and (2) there are plenty of legitimate use-cases.
What an ass. Just watch this: https://www.youtube.com/watch?v=YQ_xWvX1n9g
"But unless you’re trying to create a cryptocurrency, buy drugs or blackmail a company using ransomware there aren’t really any sensible use cases for a blockchain"
This is just incorrect and plain lazy. If you take the entire space of crypto, there's no evidence that "buying drugs" or ransomware are the dominant use cases.
Further, there's a well known list of actual web3 use cases: decentralized storage, DAOs, NFTs, crypto gaming, Defi (which has tons of individual use cases), yield farming and more.
You may believe that all of these use cases are worthless and never make it into the mainstream. It's fine to think that. But they are use cases, and it's where most activity is. Failing to even mention them and wrapping it up as "buying drugs" is ridiculous.
"So most people who use the bitcoin blockchain don’t actually have their own copy. As such, it’s not widely distributed."
Here the author contradicts his own point. He argues that scaling a distributed ledger is hard, implying it can't work due to inefficiencies. The very fact that the typical user does not run their own node whilst Bitcoin is still widely distributed directly negates this point as well as the scaling point.
"But if you’re wanting to store your invoices, customer lists or financial data, having a public database is a very bad idea indeed."
Nobody, including blockchain proponents, ever made the point that you should use it for this.
"Or bad data can never be changed. Imagine if you move house and the gas company says: “There is literally no way to change your address in our database."
That's not at all how this works. To correct data in a block chain, you add to it. The history entry with the incorrect data will persist, as it should. Incorrect data is not the issue, illegal data is.
"Finally, trust is an important aspect of all transactions"
This is a very complex topic which I won't fully explore. But the counter point here is that crypto proponents aim to cut out powerful monopolist middlemen for particular use cases. The idea of trustless in this context does not mean absence of trust, it means putting trust in protocols, smart contracts, the like.
"There is an argument that the blockchain is increasingly using electricity from renewable sources, but that’s a red herring. If bitcoin is using that renewable power, then somebody else is having to use coal and gas to power their house."
This is another dumbed down generalization. This depends entirely on how and where the renewable energy is generated. In an urban area with mixed out grid, Bitcoin mining would compete with mainstream energy consumers, which is bad. If Bitcoin mining is instead done in a remote area with a surplus of renewable energy, then it typically does not compete, because said energy can't be transported anyway.
"For example, ethereum, the current go-to blockchain for Web3, uses the same amount of energy as the Netherlands."
Correct, and it's bad. But an honest author would include the pretty essential statement that ethereum merges to PoS in less than 6 months from now.
"Bitcoin produces nothing"
It produces and settles about 1T$ in value. It provides new use cases for the unbanked. It doesn't matter what your political stance on it is, clearly it's not nothing.
To be clear, you might find my counter points to be biased towards pro-crypto. They are, but the point is not to claim absolute truth, rather that the original article lacks any substance. It makes sweeping statements without any basis, it offers no counter points, no pros and cons, important information is left out, it's just pure garbage. I find it shocking that a "Dr" gets away with writing this drivel. It seems to me has absolutely no idea what he's talking about, yet presents himself as an authoritative voice.
The important difference being that the EVM allows us to add logic to transactions.
>Web3 enthusiasts want to add a blockchain layer to our internet infrastructure ...Rather than online services and data being delivered from centralised servers owned by the likes of Amazon, Google, and Facebook, it will be delivered from the blockchain...
It is a new layer, and that obviously means other services are not replaced. You can't add a layer that replaces what's below it. A new layer is always built on top.
>Blockchains are generally defined as distributed, public, immutable, trustless databases.
No they're not. Blockchains are a cryptographic means of achieving distributed consensus. They can be private, mutable, and require trust.
>...there aren’t really any sensible use cases for a blockchain — and Web3 doesn’t change that.
OpenSea did $1 billion in transactions last month. Ethereum moved more value than Visa last year. People are using it.
>...who needs every user of a database to have their own copy?
This is wrong in many different ways.
>...The web is really a giant public database.
No it isn't.
>But if you’re wanting to store your invoices, customer lists or financial data, having a public database is a very bad idea indeed....
If it isn't a good use-case, then use an actual database...?
>... Imagine if you move house and the gas company says: “There is literally no way to change your address in our database.”
You can just update the data in a new block... This makes no sense.
>Finally, trust is an important aspect of all transactions. Apart from crypto assets, there is no activity that operates in a trust-free environment.... I trust the gas company to bill me correctly...
You trust, but verify. You wouldn't blindly pay your gas company no matter what the bill amount. If it shot up 100x, you wouldn't just pay it. You'd investigate what's going on.
>...most crypto enthusiasts put their trust in incredibly dodgy exchanges and blatantly fraudulent crypto assets.
Most of them do this? Really? How do you know? In my experience, most crypto enthusiasts are just holding BTC or ETH.
>And this is without getting to the damage that blockchains are causing the environment.
Not all blockchains run on energy intensive Proof of Work. Ethereum will soon run on Proof of Stake, which will reduce energy costs dramatically.
>There is an argument that the blockchain is increasingly using electricity from renewable sources, but that’s a red herring. If bitcoin is using that renewable power, then somebody else is having to use coal and gas to power their house.
This does not make logical sense. It isn't a 1:1 rate of electricity that is generated to electricity used. There is waste. Proof of Work is using waste electricity first. It is a constant load on the system. It is also seeking the cheapest electricity, so it is incentivized to operate at off-hours to use more waste, and then slow at peak times to allow that waste to go to other uses. It's like a battery that uses social/financial means to store energy rather than electrons.
or subsidized fossil fuels
Why you just don't shut up. If it actually doesn't change the world, you were just one of the critics, if it actually does, the size of the change will be the same as the size of your foolness.
/sarcasm
"Web3" needs MORE critics, not fewer. With brand-new multi-million dollar consequence-free hacks, rug-pulls, and general pyramid schemery happening seemingly on the daily, the critics need to be _louder_ than all of the hucksters and deluded hopefuls.
So... in your opinion something deserves to be critizised because people use it for crimes? So, FIATs should also be critized because of that? Since people have been using those to commit all sort of crimes for decades.
Your argument is kinda invalid because it says a technology should be critized because someone are using to commit crimes.
Where did this trend of capitalizing this in crypto communities come from? It isn't an acronym or initialism. Is this some kind of weird shibboleth?
"Ransomware and drug dealers!" is the depth of discussion we expect from TV news or Facebook.
The underlying infrastructure for the "ideal" Web3 is still being built. A lot of projects are still underway, and there's a LOT of work to do before we'll see truly groundbreaking stuff. But that, of course, takes time. What does NOT take time is creating a website, slapping metamask integration on it to sell monkey jpegs for millions via wash trading and use web3 as a marketing buzzword.
I'm no proponent or opponent to Web3, I'm just waiting to see if any sort of good will come out of it.
It's time for the OP and people agreeing with the article look deeper into DeFI. https://compound.finance/ & https://pooltogether.com/ are two great examples. Borrow or lend (and earn interest (on dollars if you wish so by using stablecoins like USDC or DAI) much higher than in banks), or participate in no-loss lotteries. All you need is an internet connection and you can use it without any arbitrary rules imposed by governments or companies.
If you are into technology and finance, you should be in awe with this stuff in my opinion.
> Honestly I think we emphasize flashy defi things that give you fancy high interest rates way too much. Interest rates significantly higher than what you can get in traditional finance are inherently either temporary arbitrage opportunities or come with unstated risks attached.
Put another way: there's no such thing as a free lunch.
[1]: https://twitter.com/VitalikButerin/status/127444312437552332...
The responsibility and risk of maintaining wallet keys seems on par to me with storing literal gold bullion. Laypeople aren't qualified. I'm not even convinced most programmers are qualified.
There are many aspects of blockchain that just don't make sense, but the opportunities in providing more equitable gambling opportunities are, in a word, staggering.
FOMO statements like this do not at all help the cause of trying to show that this stuff isn't a giant scam.
You have financial interest in spewing propaganda like this.
This is such a charade. The money for the pool comes from somewhere: it's the returns you would otherwise accrue on the money you need to invest in the pool in order to play the lottery. There are definitely still losers; you're just losing your potential future interest instead of the money you have on hand today.
Things like this only serve to highlight that the principal interest of the vast majority of crypto/defi proponents is to make money for nothing (and chicks for free?) But there is no free lunch. Someone always loses, regardless of how clever we are at masking the loss.
> no-loss lotteries
The Ponzi hallmarks are getting more obvious by the day, aren’t they.
Ironically the author is a hedge fund founder, they are likely more acquainted with actual Ponzi schemes than a rando shilling for Compound.
(and since when are "no-loss lotteries" hallmarks of Ponzi schemes?)
Tweeting "buy DOGE" is a great example. "Buy DOGE" really means "buy DOGE from existing investors". It's a textbook case.
No, that is market manipulation, you've made a common mistake, a Ponzi scheme is very specific.
Is tweeting "Buy TSLA!" a Ponzi scheme? Do you know what Charles Ponzi's role in his scheme was?
In a Ponzi, the operator actively channels the money to older investors. It's not an abstract "investors get richer" idea.
Bitconnect was a true Ponzi scheme, and it used cryptocurrency. So if all cryptocurrencies are Ponzis by their nature, what makes it any different?
If you answered yes to these questions, you wouldn't be saying what you're saying; I guarantee it.
As any reasonable person would note: If it sounds too good to be true, it probably is. So either it isn't actually as good as it claims to be or you have to explain how it accomplishes the seemingly impossible.
'No-loss lottery', unsurprisingly, isn't as "free money" as it sounds. From what I can gather, you're putting the equivalent of earned interest into the lottery pool and then it all gets given away to someone in that pool. You're playing the lottery with the interest you could have earned if you were not in the lottery.
I was able to explain this without knowing much of anything about how Blockchains or Etherium work. Question is then, why didn't Parent explain it? It clearly doesn't require deep knowledge.
2. Go learn Solidity. Write a few smart contracts. Go try to hack a few. https://docs.soliditylang.org/en/v0.8.11/ & https://ethernaut.openzeppelin.com/ is a good starting point.
3. Read Smart Contracts that you use. Understand them (if you can't, go ask people who created them on Discord or reddit).
4. Be in awe that we can have such applications without any 3rd party.
Have more questions? Ask on reddit or Discord.
Look, you're the evangelist for the technology here. If you can't explain to people why they should give a damn, that's on you. As far as I can tell, you're just promoting a scam on too-good-to-be-true promises and FOMO.
5. ??? 6. Free high interest! 7. Oh no, a bug! 8. The code is the contract, sorry. 9. Coins lost forever.
You just have multiple random third parties.
5. Learn to get Wallstreet-level smarts, or be the sheep that just moves along.
I've published research on EVM issue detection in a top venue. The "if you weren't ignorant you'd agree with me" argument is a crap one.
The other more important question is always: why is the interest so high? What risks are being taken?
I do like DeFi, but I don't like getting to hand-wavy with laws, regulation, and risk, because that is always more towards wanting to have a different society/politics etc., which is not a technical point.
Who's paying this interest? Why are they paying more for this than they would with bank loans?
My biggest issue with a lot of the defi lending stuff is that it attempts to mix the on-chain concept of immutable trust, with the human and legal-level trust necessary to facilitate lending. When I borrow money from a bank, its being lent to a person, who can be tracked down, brought to court, assets repossessed, and all of this while being horrific for the person going through it, is necessary to increase the probability of loan repayment. Increasing the probability of loan repayment is directly correlative with increasing the amount of money capable of being lent out, and the frequency of loans.
In other words; the US financial system actually consists of two inextricable systems: the financial system, and the legal system. One system is on the ledger, the other isn't.
The way some lending platforms have gotten around this is to require 100% collateralization of the loan amount, with in-kind assets. There's some mildly interesting reasons why this is useful, primarily tax related, but it certainly looks quite different from how most loans work in traditional finance systems; examples, a SoFi personal loan is of-course not 100% collateralized; a mortgage is more-or-less a 100% collateralized loan but not with in-kind assets; for very high-wealth borrowers you oftentimes see loans that are structured like personal loans but 100% collateralized against physical assets the individual owns (eg house) or corporate shares; but "I'll give you $100, you give me $100, and I'll pay you back $105 in a year" just isn't common.
To be clear: I think on-chain verification of off-chain trust/identities in web3 will happen eventually. It'll piss off a lot of crypto die-hards. It'll lead to a lot of anti-crypto chads screaming about "whats the point"; and they have a valid argument. But when viewed through the lens of a value addition which enables greater access to more traditional financial vehicles and regulation, without compromising the original promise of more equitable access to financial systems, it could be a best case of both worlds.
In other words; it'd be like having access to the core American ACH system, but global, but maybe some institutions won't do business with you (or your wallet) unless that wallet has a verified real identity tied to it. You can still transact with people who don't require such a verification; which is more than you can say for the current system, and has been the source of tremendous socioeconomic hardship for massive portions of the world.
A big question is whether this is good. We've seen surveillance capitalism turn much of our lives into advertising derivatives over the last two decades and many people think that this is a bad thing, enabling megacorporations to extract value from our ordinary lives. I can see the same thing happening over the next two decades with megacorporations extracting value by creating financial derivatives of my behaviors as expressed on a public blockchain. And I'm not super excited about corporations betting on how much money I will pay to watch a superhero movie or whatever.
We saw how much damage financialization of just mortgages could cause. Imagine how much damage the unregulated financialization of everything could cause.
Please attack and critique the 'alleged' state of the art blockchains of today that don't use PoW.
Once again, only attacking the easiest examples in the blockchain industry (which use PoW). Everyone knows that Bitcoin, and Ethereum are both destroying the planet. Not all cryptocurrencies are the same as those two and many do not use PoW today.
It's very easy to criticise the environmental impacts of the first commercial petrol car and use that as an argument to say that all cars should not be used or that cars will not change the world, since petrol cars are more hostile to the environment.
The author is doing the same thing, but generalising and bundling all cryptocurrencies having the same environmental negatives as PoW cryptocurrencies (Including Bitcoin, and Ethereum).
It’s not some “upgrade” to PoS. It’s a huge downgrade in security of your coin. I think a combination of PoS and PoW chains, with PoW being a base layer in public chains, with PoS chains anchoring commitments. Only when the probabilistic finality from PoW commits this, the house of cards political game that is PoS txs become final. PoS is fakery. Human failings. Everything of value in this universe takes work.