Blockchain in a Nutshell
arxiv.org
arxiv.org
> Trust is the biggest bottleneck in realizing transactions. It is the biggest bottleneck in advancing the society. As a trust-less system, blockchain removes that bottleneck.
Indeed, apparently trust in transactional system is our biggest problem. And indeed, apparently, blockchains provide that trust.
here's me thinking its trust in social institutions which is our biggest problem, an issue made much worse by blockchain, which offers no systems of redress (perhaps the most significant benefit of institutions and trust).
Now you may argue that you can't pay for your, uh, illegal or immoral material with a Visa card. That's a different matter. In my opinion, the government should recognize modern payments rails as critical infrastructure and require them to process all legal transactions without discrimination. A sort of payments net neutrality.
[edit] You may also argue that merchant fees are "too high" - yeah they're high in America. They're 0.3% in Europe, because again, that's a job for regulation. They don't get card transaction rewards (because that's where the overwhelming majority of interchange goes) but that's the trade-off they've chosen to make.
Replacing modern payment rails with magic beans that live in your computer solves literally nothing for the overwhelming majority of people, which indeed, is why the overwhelming majority of people never transact on-chain. They speculate on the sidelines from centralized, trusted exchanges. It's gambling on unregistered securities to most people.
You may not mind yourself -- Visa is useful -- but adding this kind of closure isn't cost-free (look at Wikileaks) and the fundamental innovation in how to do this without introducing any trusted third parties is a big deal.
With that said, I agree most of the new POS variants and DAGs are sneaking closure back in amd pretending it is OK because the resulting systems look and feel like Bitcoin.
A Bitcoin transaction costs a few hundred dollars once you price in both the direct transaction fees and the socialized fees (block reward). I'll stick with Visa.
note: Of course Bitcoin still has trusted third parties - just lots of them.
Bitcoin isn't a solution to trustless banking. Its a solution to trustless _central_ banking.
The first counter-argument would be that we have laws and procedures that protect most people from such actions, which is mostly true. There are however a number of clear examples where either the government or society underwent rapid change which allowed for these assets to be seized (think: revolutions, exectutive order 6102, etc).
Bitcoin (not crypto -> bitcoin) solves this through offering you the option or sovereignly hold an asset outside the control of anyone who doesn't have the private keys.
IMHO the larger concern is that our current online payment rails and modes of value transfer & digital ownership are all inextricably linked with centralized, oligopolistic, and for-profit corporate entities (and, typically US-based and USD-dependent). A public, open source, decentralized, and peer-to-peer transactional system that spans the globe is a desirable goal, even if you do not feel the current blockchain-based solutions are sufficient or user-friendly enough.
Cryptobros would kill for transaction fees that low
you also seem to be taking the opinion that all crypto must eventually be exchanged to fiat. obviously it is wise to exchange enough to fiat for taxes, monthly expenses, and to have a balanced portfolio. but some users may choose to keep some in crypto, for example to stake, continue paying for other crypto-localized goods and services, or exchange into a stablecoin in order to have self-custody of a USD-pegged asset.
fwiw, if more merchants did accept crypto and taxes were payable in crypto (as it is becoming the case in some very specific jurisdictions around the world), there would be less need to exchange to fiat via a CEX.
Cool. So the same as a debit card payment in Europe, which is capped at 0.2%. It's also way more expensive than a Faster Payments UK transaction. In exchange you take on huge counter-party risk, and massive forex risk. This doesn't sound better, in fact, it sounds a lot worse.
> fwiw, if more merchants did accept crypto and taxes were payable in crypto (as it is becoming the case in some very specific jurisdictions around the world), there would be less need to exchange to fiat via a CEX.
Taxes are only 'payable' everywhere on earth for crypto in the sense that some governments offer a gateways that exchange it to fiat. Like Pay1040 does for credit card tax payments in the US. That doesn't make 'taxes payable in credit card.' The issue isn't payable it's denominated in.
Crypto might seem appealing because, yes, the traditional banking system is very bad (though not everywhere is it as bad as in the US), but in nearly all cases there is a better solution available (good old fintech) without the inefficiencies of crypto.
Not international; not a payment processor on any popular platform.
> TransferWise is dirt cheap.
Not really, when you compare it to low-fee crypto networks. If you sent 1.5 GBP to USD the fee is 0.35 GBP (23% of total), which makes it a poor choice for tips and small payments. Sending 15K GBP to USD carries a 61 GBP fee, or 150K GBP to USD carries a 563 GBP fee.
Compare with a low-fee network like Tezos or zkSync. My last Tezos transfer was a fixed fee of 0.000544 XTZ or $0.001 USD. zkSync currently has an approx fee of $0.11 per transfer (a cost which will likely be reduced in the coming months with EIP 4844). These fees are fixed, regardless of whether you are sending 0.1, 1, 10K, or 100K tokens to the beneficiary.
Sending money this way is almost certainly slower, more expensive, way more prone to failure and exposes you to tons of counter-party risk. Remember the guy who lost $400,000 trying to send himself money between the US and Canada using Quadriga and got caught without a seat in the game of musical chairs?
A better comparison would be a Wise Multi Currency Account [1]. You get a variety of worldwide bank account numbers. You can ACH into it for free (and SEPA, and EFT, and so on). There is no step two. Anyone in most world jurisdictions can open such an account. Anyone in much of the world can perform a free domestic transfer to send money into it no matter where you are. $0.00. This is what innovation looks like, IMO.
Places payment processors charge you a large fee are almost certainly to cover the risk associated with that transaction - the risk which is not covered when performing a crypto payment. Let alone all the new risks that enter the picture when performing a crypto payment. You're still on the hook for these risks personally, mind you, it's just an unaccounted for externality.
Dig into the business model of these payment processors and you'll quickly learn exactly why they charge what they do.
Unpopular opinion: we have middlemen because they add value.
we are both talking about sending 'value' across the globe, e.g. Ko-Fi-style tips, international payments, charitable donations, Kickstarter-like crowdfunding, etc.
for example, as an artist I am selling digital + physical media and accept fiat and crypto as a form of payment. I know many others in a similar situation, including nonprofit organizations that accept crypto.
obviously not everybody accepts crypto and it is highly localized; but any merchant or online platform that decides to accept XTZ as a form of payment can already do so to mitigate the 2-5% payment processing fees that I mentioned earlier.
> ... but any merchant or online platform that decides to accept XTZ as a form of payment can already do so to mitigate the 2-5% payment processing fees that I mentioned earlier.
But of course they won't because they can't spend it on things, like the inputs to the goods they sell (be that physical, rent or mortgage). They'll need to convert it, and that conversion fee will be something you pay by marking up the cost of goods.
Assertions presented without evidence can be immediately dismissed along with further statements from the author.
When blockchain is described as "trust-less", that is an accurate statement, but is placed on the wrong side of the pro/con chart. Blockchain doesn't provide a method by which to trust people. Blockchain dives headfirst into a low-trust society and keeps digging, paying the inefficiency cost the entire way.
To add more weight to this being propaganda divorced from the reality of the system, the abstract mentions a positive impact on the environment, which is a laughable claim.
I’ve met blockchain maximalists who passionately painted their vision of a future where you inherit some karma from your ancestors, increment or decrement it with every action you do in your life, and pass it on to your descendants.
They seem like smart and successful people, and their passion seems genuine. However, I feel like they have made some fundamentally incompatible assumption somewhere early in their thinking process. I can never understand how could anyone see removal of trust as a feature, and their vision intuitively strikes me as incredibly dystopian.
My personal take is that this all is an elaborate workaround for the fact that there are malicious actors (due to whatever reason, but mostly probably upbringing-related mental health issues and emotional/financial insecurities)—addressing that root cause will render such symptomatic treatments irrelevant; while enacting these treatments without addressing the root cause will result in much suffering.
The issue is that these tech-utopians havent understood that this is really a pun on the word "trust", and our social issues are in a sense, precisely the opposite.
No idea if the "blockchain" solves all this though.
While individual transactions are secure, many blockchain projects involve some level of trust and risk that is simply assumed to be zero because the project is happening on the blockchain. Examples abound, like Tether and their questionable reserves or SafeMoon and their vanishing[1] "locked" LP.
The existence of rug pulls is proof enough that blockchain doesn't solve any non-trivial trust issues. Otherwise, how could there be an entity that can break your trust and take your money?
I think what it really needs is to find a problem that it's objectively better than the non-blockchain alternative.
As a store of value, currency or payment network it's yet to be able to prove that.
For more interesting applications, smart contracts etc the networks themselves are still struggling to find ways to keep transactions/operating costs in line with value. Even those more complex cases aren't yet objectively superior to other technology choices.
I think we will find use-cases for byzantine-proof distributed ledger but nothing has yet been compelling enough to supplant other options.
I don't think blockchains are the only or even best solutions to fake news, but the ecosystem build around them uses public-key cryptography for everything.
A world where every piece of information is signed, could be a harsh blow for fake news. It's what PGP always wanted to go mainstream. Maybe, the money behind it (reasonable or not) is finally enough to motivate the mainstream.
A) fake news is hard to define and agree upon
B) different people will have different criteria definition and Venn diagrams of fake news
C1) many people and organizations start and distribute fake news knowing them to be such
C2) many people and organizations start or propagate fake news while earnestly believing them
Can you help understand how block chain or public key cryptography will help or address anything relating to fake news? Is there an underlying assumption that ascertaining identity will help? Because from my perspective majority of fake news are created and propagated by readily and eagerly identifiable people, whether potus or my cousin on Facebook and anything in between.
In other words, today already I pretty much know who is relating any given piece of news. I may even know where or who originated them. It does not in the least solve the problem that my liberal and conservative, atheist and religious. Rich and poor, immigrant and local, technical and humanities etc neighbours have completely different parameters and selection of trust. Identifying the source helps not a bit with radically different selections of source. And then we get to "disagreeable" topics - how will block chain help those who fundamentally disagree on climate abortion religion economy foreign politics military basic income refugees healthcare rights etc. They will continue to pick and choose whatever our inherent bias is. There is this utopian notion that tech framework will solve a human problem.
That does not seem to be the problem (and insofar as it is, HTTPS/TLS seems pretty good at fixing it: if you go to https://www.nytimes.com, you can be pretty sure that you get the NYT). I don't see what blockchain could add here?
In my experience, the reason fake news is actually a problem is because supposedly-reputable people and organizations are themselves spreading partially or completely false information. So the information they spread would have a perfectly valid, legitimate signature—and still be just as false.
Blockchain cannot solve the problem of people lying. It cannot differentiate between what is true and what is false in the real world.
The current financial system is perfect for most people in the first world. Once you start going down the path of least resistance though, that system turns out to be a gatekept, permissioned system with very clearly defined borders.
Try using a bank as a rural Honduran and see if you are even allowed on. Attempt a transaction between yourself and a person in Chad and see how many hurdles are presented.
Ahh, yes, bank the unbanked. We've been hearing about this for a decade and it's yet to actually solve it. Might have something to do with the fact that the minimum hardware requirement to engage with a "trustless, peer-to-peer, global digital cash" system runs in the annual earning of the average unbanked labourer in the Third world. Any attempt to solve the _political_ problem of the distribution of wealth and access to the monetary systems (banks) that starts with a technical system (crypto) is bound to fail because of that mismatch.
Even trying to solve a political problem with a technical solution requires one to first solve the problem of being allow to use the technical solution - which is a political problem!
You can use that for copyright or trademark matters without revealing the work itself, or you can ensure the integrity of your logs this way. No third parties that have to be trusted or that could be bribed.
Of course that doesn't really work as the primary purpose of a blockchain, to get good trust guarantees you need to piggy-back on a blockchain that does something more valuable, so it's not really a killer problem.
For example, inflation forces market participant behaviour that they would have otherwise avoided. For example, a pensioner is 'forced' to take on market risk to gain a real return on their savings when they are very risk adverse.
Savers are disincentivized as there is a negative yield on their capital, and this has an impact on capital investment.
in the blockchain the code is the law, so in order to trust the blockchain you have to trust its code. have you audited the bitcoin code? why do you trust it over anything else then? just admit that you trust the global community more than you trust international regulatory bodies.
>It is the technology behind the success of Bitcoin, Ethereum, and many disruptive applications and platforms that have positive impact in numerous sectors, including finance, education, health care, environment, transportation, and philanthropy, to name a few.
have they "disrupted" anything? is this a comprehensive explanation or plain propaganda? who would someone use such an elevator-speech terminology for a supposedly serious explanation?
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Can't go wrong, it's on the blockchain and you don't have to second-guess trust!!11!!!11!
/s
That is incomplete in two ways:
1. Intermediaries are not the only solution to the trust problem, there are many many others. (See for example Bruce Schneider's Liars and Outliers, where he lists morality, reputation, institutions, security systems [1,2].)
2. Intermediaries don't only solve the problem of trust, but can also make things more efficient. If any two nodes need a connection, a graph needs O(N^2) edges. With a central intermediary, it only needs O(N) edges.
[1,2] See https://www.schneier.com/books/liars-and-outliers, or https://www.wired.com/story/theres-no-good-reason-to-trust-b...
Hahaha, not at all. As for trust, well remember that the blockchain proves absolutely nothing about the real world. It only can prove things that happened on the chain. This is called the oracle problem.
1. Isn't scrypt a key-derivation-function, and thus (by design) much slower and more work intensive than SHA-256 (a cryptographic hash)??
2. Isn't anyway difficulty adjusted depending on the available hash power (such that a target block rate is reached), so that "faster and easier to run than SHA256" does not make any sense at all?
Have the authors even understood PoW?
Less mining power does roughly correlate to an easier attack on the network, but this is mostly independent of the technical decisions made by a given blockchain (there is some impact if e.g. the work function is sufficiently different that hardware from a larger network cannot be repurposed to mount an attack on a smaller network, e.g. using scrypt means bitcoin ASICs cannot mine on the network, making an attack much less easy to carry out. Ethereum's work function is designed to be memory bandwidth instead of compute limited, making GPUs generally optimal, and monero uses a funky algorithm designed to run best on general purpose CPUs).
I will also note (and this is a point I don't see made often), that there is not really a specific mechanism in most blockchains to set the total mining rewards (and thus the total amount of effort mining which is incentivised) to an optimal value. It might be entirely excessive, in which case the network is secure but even more inefficient, or it might be insufficient, there is nothing which really sets this to a particular value. This is in part because it's hard to know exactly what level of mining is necessary (what's the difficulty required to fend off all attackers? probably depends on what they could gain from an attack, which is hard to assess), and because it depends on the price of the coin, which is something the network does not really have a means to assess within itself. (This is one of the reasons why I think bitcoin as a "long term store of value" does not make sense. The deflationary design requires ever-diminishing mining rewards, but the network will still require significant mining effort to secure it, especially if the amount of value stored keeps going up. In the 'bitcoin as currency' model, the transaction fees would keep the incentive present, but with a relatively low rate of transactions you will need extremely high transaction fees to secure the network, making it potentially quite an expensive store of value to maintain.
Agreed - it stands to reason that as BTCUSD rises, more miners will come in until the electricity and electronics wasted per day reaches a certain, relatively fixed proportion of the daily block rewards (900 BTC/d until 2024, currently about USD 35m per day). With that, BTC now consumes about 0.5% of world electricity. If BTC goes 10x, its electricity consumption could approach 5% of world electricity consumption - insanity.
Bitcoin could very well be simultanously ridiculously inefficient and yet have insufficient incentive to keep mining at a secure level long-term.
Lots of people get scammed with crypto. Whatever web3 is solving, this ain’t it.
You can think of many advantages of Bitcoin (I surely think so), but please do not include "positive for the environment" as one of them, especially in the abstract of the paper.
* https://csrc.nist.gov/publications/detail/nistir/8202/final
See especially Figure 6 ("p. 42", 53 of the PDF), which is a flow chart to help you decide on whether blockchain may match one's use case. Extracted:
Generally you need the conditions of needing both (a) append-only log and (b) distributed/decentralized before considering blockchain 'technology'.
Recommended read for anyone interested in the space from my perspective! Despite potential imperfections.
Here, I saved you a click.
It seems the person you have just replied to has already admitted that they have read as far as just one sentence before rushing here in minutes later.
Perhaps they do this with every article they see. There are those who are unable to read beyond the headlines or the first paragraph and react here immediately. No wonder they are manipulated all the time these days as evident in their own reply below.
Is that what it has gotten to on this site?