The technological case against Bitcoin and blockchain
lukeplant.me.uk
lukeplant.me.uk
Of course Chia has already demonstrated that all the pro-environmental claims of proof of space were also nonsense (of course at least it still isn’t as bad as bitcoin+with, but it’s still pretty terrible).
The core problem with crypto as I see it, is that by design it cannot scale, and by design any increase in value requires an increase in energy cost - however unlike rare metals or what have you, the value/watt seems simply horrific.
It’s worth looking into blockchain scaling solutions like ZKSync, Optimism, and Arbitrum. They use Rollups (basically transaction batching) paired with either validity or fraud proofs to allow for high throughput at a low cost with low trust requirements.
> and by design any increase in value requires an increase in energy cost
This isn’t the case with PoS coins anymore than an increase of value at Google requires an increase in energy cost as they spin up more servers to serve more traffic. They aren’t strongly correlated.
It’s important to have definition of “trust” for this statement.
If we use an Etheruem optimistic rollup with on-chain data availability guarantees as an example and we assume it’s out of beta, we have three situations where I can be in trouble:
1. Censoring my transactions
2. Refusal to allow me to withdraw my funds to L1
3. The network itself shuts down and there are no longer any operators
If I am censored, I can force transaction inclusion by directly submitting the layer2 transaction to the inbox on Ethereum (the validator will get punished if they don’t include it). This will be more expensive for me since I have to interact with Ethereum, but it should only be done very rarely and my next rep should be to exit the L2 network.
If the network refuses my withdraw transaction, I can perform an emergency exit by making a call to be L1 contract and demanding an exit happens (I can also use the strategy in the censoring case).
If the network shuts down, then my only choice is to perform an emergency exit, which has probably already been started by other participants on the network.
These options do get more complicated when you start using layer 2s with off-chain data availability committees (validiums and volitions) and that’s where you do need to trust third parties to ensure you can get the correct transaction data, but it only requires that one honest party is serving that transaction data.
The trust requirements are actually pretty low for “out of beta” L2 networks while keeping the costs low enough that people can afford to use them.
ZKRollups have similar features and even lower costs but ZK-proofs are still very new and harder to reason about.
You don’t have to trust that the process works when you can see that it works by looking at the code and even become a validator/data provider yourself to ensure there’s always at least one honest participant (from your perspective).
There was even uncertainty around the US forming a central bank with some worrying about the power it would have.
Unless it would have been your approach already, not having confidence in L2s because they’re new technology isn’t a reason to dismiss them and decide to let the government manage all of your financial guarantees.
> I don't have to "trust" the banks, I have legal guarantees and transparency mandates enforced by governments
In this scenario, banks = L2 and government = L1.
Are there scenarios where a bank (or other financial institution) can steal/withhold funds from you, or where they can censor your ability to transact with your own money? What is the recourse you have in those situations. What if the L1 itself uses its “right” to take your money through civil forfeiture or eminent domain?
Are there cases where you may not trust the government (or where someone may not trust their government) because it is controlled by a small number of appointed or elected individuals?
In that case, you can compare it to an L1/L2 blockchain setup where the L1 is controlled by a small number of validators (say 1000). That system would be easily corruptible (I can bribe 1k people) and I’d never treat it as a safe settlement system.
Blockchain is all about your choice of who and what to trust.
In the traditional financial system, some people will be fine with fully trusting their government and large financial institutions, whiles others will bury precious metals in the backyard and surround them with land mines. There’s all sorts of middle ground and blockchains let you choose where you want to sit on that spectrum.
Eminent domain is about land use. Civil forfeiture and eminent domain are well described in the laws of all developed countries. And they exist for very good reasons, we don't want to get rid of this at all.
The aim of the article is a critique of the potential for cryptocurrencies to be a true exchange medium equivalent to currencies as we have today. That is the illusion that feeds speculation and big dreams. If you are proposing that the use case for cryptos is individuals that have a reason to fear their own government, that leaves us criminals, political dissidents and wealthy oligarchs in third world countries. And it's still unclear whether they would be better served by storing their wealth in such a volatile and fraud-prone medium, versus actually digging a hole in the backyard as you describe. Or, you know, trusting another government/banking system like Switzerland like they all do.
The only promise I see for cryptocurrency is a weird one, one that is the exact opposite of practically all crypto designs. It deals with a fundamental issue of "cash": Once you have "laundered" whatever it is you did into cash, you are mostly absolved of the sins you committed to getting that cash. Sure there are regulations, laws, and fees. But over the long haul of our civilization, there is far more money extracted for the detriment of the world and whitewashed by political influence, apathy, or legal precedent.
So most cryptocurrencies are for furthering the "money laundering" aspect of cash. Make it even more laundered and flexible. I want it instead to represent something that anti-launders the measurement of wealth, by storing some facsimile datapath of the money being extracted and then intermingled in the economy. I want MORE karma in my currency, not less.
What I would like is a cryptocurrency that could devalue currencies that represent activity that resulted in destruction. The ledger would track the source of money from transactions and payments, and devalue those monies that, say, resulted in the destruction of the environment, killed many people, gave an entire city cancer.
With current money, once you have it in money, you're home free. There is no simplified "undo" function in the economy.
Now, HOW you would do that? Ok, no idea, but a blockchain is a distributed way to do it. Well, ok you could use a database too. Really the best anti-crypto argument I saw was "think you want blockchain? You probably just need a database", posted here about a year ago.
Imagine corrupt politicians getting their hands on that.
Whether it is good or bad is irrelevant. It reminds me of the arguments against evolution, “no, we didn’t come from that”, or “no, we can’t be turning into that”. There are awful things happening in biological evolution, and yet it proceeds despite condemnation.
Bitcoin and blockchain exist because the existing financial order is at best questionably sustainable for the next 50 years, and there must be something that replaces it. The new system only needs to be sustainable within a niche to have value, and this niche grows stronger the more it is alienated by the dominant system.
Why would you expect them to enter into dialogue with the scammers?
"Uniquely abrasive"?? I see you haven't seen all the trash-talking from the Laser-Eyed bros in Twitter.
He changed his whole life by moving away from Turkey to the country with the reserve currency status and then says that ,,everything's fine with the money and banking system''. I challenge him to move back to Turkey and interview some people there.
You can also get paid for securing the cryptoasset system in a PoS system although I don't think that has an equivalent in the fiat space.
Some inflation is fine (some would argue has some value/purpose) - what you don't want is too much inflation, or deflation ("hyper"). But I doubt any cryptocurrencies can truly solve it (Bitcoin least of all).
But what I find fascinating, especially from the Bitcoin crowd, is how they trash all fiat currencies ("because inflation!!"), but still use fiat to compare/set the price of Bitcoin.
Basically, without fiat to give it value, their precious Bitcoin is worthless.
If you did not have inflation - or had deflation even, like in the case of bitcoin - everything would "become cheaper", but it would make certain types of goods/services scarcer (since they'd be paid less and less for doing the same labour due to the deflation, and so would choose to stop doing it at some point).