Ask HN: Could Bitcoin be replaced by an ERC-20 token? | Hacker News Reader

Ask HN: Could Bitcoin be replaced by an ERC-20 token?

16 pointsTekMol52 comments

One of the main arguments against Bitcoin is its energy consumption.

On the other hand, it is often said that there will be no new blockchain that achieves what Bitcoin has achieved: Being distributed without a premine that makes the founders rich and with no way for the people in power to inflate the supply.

What would happen is an ERC-20 token would be created that is distributed just as Bitcoin. In a way that everyone who holds Bitcoin automatically owns the same amount of this token? A fork of Bitcoin on the Ethereum blockchain, so to say.

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Yes. I've been saying for years that the largest threat to bitcoin is tokenized bitcoin.

The centralized version is called WBTC [1] and there are several less centralized versions as well, such as renBTC [2].

Once you've wrapped your bitcoin, it opens up a lot more possibilities, such as using it as collateral for loans or providing it as liquidity in DeFi. It brings actual usability to bitcoin beyond just as a store of value (hodl) or payment mechanism. Projects like Badger Finance [3] have been working for over a year now on this area.

[1] https://wbtc.network/

[2] https://renproject.io/

[3] https://badger.finance/

Could it be that these 3 approaches still rely on the existence of Bitcoin?

I don't think "tokenized Bitcoin" would replace it. As Bitcoin would still be the basis for the tokens.

Similar to how "tokenized Tesla shares" would not replace Tesla. Tesla would still be needed for those tokens to have value.

I'm not talking about replacing bitcoin. Bitcoin, the network, needs to stay around. There needs to be one asic controlled network.

The usage model does not. This is likely part of why the lightning network struggles so much for adoption. It doesn't add the same amount of value as tokenized bitcoin. I can borrow any coin against my tokenized bitcoin (which can often result in a positive apy), then move that coin to any other L2 (ie: low cost transaction network) and use that to do transactions.

Imagine a day where instead of racking up debt on your credit cards each month and paying it off. You simply borrow against your existing holdings and pay that debt back while earning interest on your holdings. This model makes that 1-5% cashback on credit cards look like a joke.

> You simply borrow against your existing holdings and pay that debt back while earning interest on your holdings. This model makes that 1-5% cashback on credit cards look like a joke.

You can do this today with existing investment portfolios. If someone is willing to give you an unsecured line of credit -without the risk of margin call- why would you borrow against holdings?

The magic issue is that markets don’t always go up so borrowing against a depreciating asset (even short term) is asking for trouble.

(Also most people don’t have serious investment holdings, and if you live paycheck to paycheck this model doesn’t work. Also you’d need a nearly free interest rate since credit cards have no interest until the bill is due which can be 30+ days after the purchase.)

Yes, there are risks involved. Not saying there aren't. That said, there can be organizations, which are not credit card companies, that buffer that risk.

Correct, this model does not work for everyone's financial situation. However, people who are living paycheck to paycheck arguably shouldn't also be floating on debt. This is why credit cards ask for income statements in order to determine how much credit to extend.

I think people have an overly negative view of debt. People without a money buffer benefit from easy revolving credit. The best and only sane use of credit cards is as a float between paychecks. If you need a real loan for long term debt, I agree that people should get one on much better terms than credit card interest rates.

Paid on fridays but want to grocery shop on Wednesday? Better hope you have enough in your account on Wednesday.

Your last paragraph exists in the form of margin loans and is already well utilized by savvy people.

Yes, however today, this is done in a centralized way. You have to ask for permission to get that loan. DeFi does this in a collateralized decentralized way. If I have bitcoin, I can borrow against that bitcoin without having to walk into a bank and fill out reams of paperwork.

Tell me you’ve never taken out a margin loan without telling me you’ve never taken out a margin loan. There is no paperwork. I can withdraw enough cash from my brokerage to buy a house through my phone and in only the time for an ach to post. Entirely collateralized by my assets. I regularly float 250k intraday for free through margin to support trading. You don’t need defi for this. The defi kids are reinventing traditional finance poorly one step at a time.

Recently, as a long time customer, I got in on the Backblaze IPO. I had to open up a Fidelity account. In order to do so, I had to drive into a local office and fill out stacks of paperwork while a twenty-something kid watched me. There was no option to even gasp, fax it in.

It sounds like you setup your brokerage account a long time ago and forgot about the paperwork.

You see it as a bad thing, but I'm fine with "defi kids" re-inventing trad fi. Just like Uber did to the taxi industry... despite Uber being a shit company.

The fact that I can already take out a loan against my bitcoin for a fraction of a cent in the span of a single transaction (seconds), without calling anyone, seems like it isn't so poorly done after all. That seems like some real progress.

That works for those living somewhere with good rule of law.

I live in USA, so a letter crafted by IRS or child support enforcement to a financial institution is all that is needed to wrongly steal my funds. After my funds are stolen, it is difficult to fight back. Lack of rule of law.

Then how is that a "threat to bitcoin"?

Block rewards will eventually be replaced by transaction fees, meaning that to keep transaction fees low, transaction volume needs to be high. If most transactions aren't taking place on the Bitcoin network, then either transaction fees will have to increase to incentivize miners, or the security of the network could be jeopardized.

Security won't be jeopardized because of PoW difficulty adjustments. The 'fear' here is that say 50% of the hashrate turns off, difficulty adjusts... and then it all turns back on and attacks the network.

That won't happen as long as mining is as decentralized as it is today. Saying that 'China' controls the hashrate is wrong because it isn't 'China'... it is a bunch of smaller individuals and they are acting in their own best interests. Attacking the network wouldn't help them at all.

AA covers this in a video:

https://www.youtube.com/watch?v=KUd8ZGgm6Qo

Bitcoin maxi's get their panties in a twist as people stop using their network and all the bitcoin gets wrapped up into these bridges. The real value gets developed elsewhere.

I think maxis like Saylor think that the L1 bitcoin network will become one where fewer big blocks are traded (like gold transactions) rather than where daily payments are running. The tx fees will become bigger too.

And L2s like lightning or the various wrapped BTCs will be quicker and more commonplace for smaller sizes.

Yes, that pretty much sums it up.

Once emissions stop on BTC, fees should have to increase to replace the emissions. Except that fees won't increase because fewer people will be using the network, having long moved to L2's. The majority of transactions will be checkpoint transactions for L2's.

If you zoom out, transactions per block have flatlined, even during this last couple year bull run...

https://www.blockchain.com/charts/n-transactions-per-block

Miners will stop mining because they depended on the emissions and not just the fees. Difficulty will go down and so will power usage, but the network will remain as secure because of the adjustments.

This is part of why we see such a large land grab right now to mine as much BTC as possible. I'm sure Saylor owns large stakes in mining companies.

Bitcoin maxis believe that Ethereum won't be stable and secure in the long term so everything running on Ethereum inherits that concern. People would also worry that the Ethereum community could modify the token in some way due to the precedent of The DAO hack.

It isn't about modifying the token, it is about rolling back transactions with hard forks. This could be done on any blockchain. The social consensus of the bitcoin miners is the only thing that prevents this from happening.

If you replace Bitcoin with a smart contract, a hard fork could change any aspect of its behavior, such as removing the 21M cap. The social consensus of Bitcoin is that no changes will ever be made, but Ethereum is much more open to changes.

Except you can't replace bitcoin with a smart contract, it wouldn't be bitcoin.

> Could Bitcoin be replaced by an ERC-20 token?

No. Here's why.

Ethereum is already a pre-mined, VC fuelled project that is compromised by the fact that it was able to reverse its the hack due to the DAO hack situation to cater to these investors who lost money. If another giant hack like that was to happen again, it seems that the founders can do just that again; something the Bitcoin maxis would reject and detest.

I guess this question is best answered by them, especially by randomhodler84. I would say Bitcoin does not need to be replaced as a ERC-20 token and I'd just leave it alone to them.

Tokenising Bitcoin won't achieve anything.

Oh hi :-) It cannot be “replaced” by a token, any more than webpages can be replaced by hyperlinks. I agree with your position.

ERC20 tokens are a contact state variable, Bitcoin is a global peer to peer software and network. It’s a shared memory address vs actual software product.

I have relaxed my position on WBTC as I am seeing it’s value as a neutral store of value as collateral on EVM networks, etc. I do see some value here and I believe it further increases demand for the underlying BTC asset. Non-ETH EVMs can transfer BTC cheaper than Lightning (however you lose the privacy implicit to LN).

An uncharitable position would be that all tokenized Bitcoin is just an excuse at rehypothication, but I think with transparency this can be dealt with.

In addition, the immutability of EVMs (demonstrated in ETH, BNB, etc) does pose a risk to the integrity of BTC ownership. But treating it like any L2 pre-settlement is fair, in that buying WBTC on-chain is practically equivalent to buying on coinbase until you settle on BTC L1.

No, there's dozens of such tokens already but they're not going to replace Bitcoin. The "high" energy consumption is what keeps the network secure in PoW btw, it doesn't work any other way. You're going to see more "green" mining in the future and frankly the cheapest energy will always be overcapacity from renewable sources so that's where mining is going to gravitate towards even without the social pressure. Take farms in Iceland as an example.

How do they handle the additional e-waste?

Additional in relation to what? Legacy systems need hardware and electricity too, people tend to forget this. I'd like to see the math on how much additional hardware is needed, if at all. My suspicion is that there's a lot of redundancy in the current infrastructure because each bank has to maintain their own record, given that they can't trust each other. A trustless and decentralized system, if it became the base layer for interbank payments, might actually reduce resource consumption.

And? Bitcoin is already consuming tons of energy while not being anywhere close to what our current system is doing

And not only in context of storing and sending money around.

There is still no fraud detection or account recovery or any other protection in place.

And all that while Bitcoin has not even a strategy on how you would be able to onboard everyone on the Blockchain fair and square. Everyone joining Bitcoin after someone else has less value.

No one will be dumb enough to start trading their fiat with crypto in the long run.

And clearly you don't know how banking works with your suspicion.

Indeed. Trading floors. ATM networks. Primary and secondary data centres. Sky scapers in the financial district. Etc etc.

That shit all needs power too. For as long as that shit is actually needed.

It's taken more than 10 years for Bitcoin to be as distributed as it is now in regards to mining and halving using POW.

But in regards to your question, someone has already made a POS Bitcoin coin called Bitcoin Green in 2017.

Whitepaper is link is available here https://www.coingecko.com/en/coins/bitcoin-green

"Bitcoin Green (BITG) is a sustainable cryptocurrency modeled after Satoshi Nakamoto’s vision for Bitcoin. It is a decentralized, peer-to-peer transactional currency designed to offer a solution to the problematic exponential increase in energy consumed by Bitcoin and other proof-of-work currencies. Proof-of-work mining is environmentally unsustainable due to the electricity used by high-powered mining hardware. Bitcoin Green utilizes an energy efficient proof-of-stake algorithm, can be mined on any computer, and will never require specialized mining equipment. The Green Protocol offers a simple solution to Bitcoin sustainability issues and provides a faster, more scalable blockchain that is better suited for daily transactional use."

What happened to Bitcoin Green? It is dead. Why? Because people don't want a Bitcoin POS. Maybe someone owning 16% of the supply had something to do with it.

https://web.archive.org/web/20190809182919/https://bitg.org/

Bitcoin Green deserved to die because it's yet another blatant cash-grab, as apparent from this nonsense:

> Development Fund: 4%; Awareness Fund: 5%; Community Fund: 4%; Team Fund: 7%

Bitcoin is here to stay since it is the only real decentralised system. I know that you guys will say now “bitcoin maximalist”, but hey, ETH is becoming a centralised shitcoin. Just get over it.

One last thing: PoS will NEVER be as much as good as PoW. So please document yourself a little bit more regarding energy consumption and what Bitcoin CAN help solving.

Nothing is black or white.

Bitcoin is not solving anything really.

People think that PoW just solved the trust issue but it has not.

On one side Bitcoin still depends on miners and big countries like china could have a significant motivation to do a 51% attack in 20 years. People could form a secret org and take over Bitcoin. Bitcoin would require a lot more independent people to mine which people actually don't care for.

And on the other hand a Blockchain itself is only trustworthy inside it's Blockchain. It's easy to send trustworthy money around but the fraud doesn't happen when exchanging the money it happens when real life items are getting exchanged. Bitcoin doesn't help here. The same issue is with smart contracts.

And the best solution is actually PoS. Our current fiat system is not perfect but by far the most stable system we have.

And yes Bitcoin is also not suddenly fixing/solving inflation problems etc.

PoS is just the foundation of a new oligarch system just like the current FIAT system, giving more to who already owns.. lot. This is what you’re advertising. And I like to think that you’re doing it in good faith.

And btw what you’re saying regarding mining is factually wrong https://endthefud.org/

Another person already shared that link collection and it's just utterly garbage. Pls see my other answer regarding that page.

Btw. I actually read now even more articles from that page than before and they all ignore fundamental issues.

To you: did you actually read them?

And no I'm not advocating for a new PoS system. I advocate for our current existing PoS system. That system we currently have. The system which works across our planet, has been grown naturally, is still evolving and actually fixes a ton of issues which have not even be mentioned by Bitcoin bros.

Alone the fact that I can go to a bank with my passport and get money is not solved.

Not one person describes how Bitcoin makes everyone who invests in Bitcoin early rich and everyone else poorer is not mentioned.

Problems like 51% attacks get ignored.

Antidemocratic issues are ignored like sanctions (Russian oligars anyone?)

And I'm not advertising something. I'm only talking against Bitcoin because it's bullshit and it doesn't solve problems. We need to put every non sustainable resource we extract from our earth into renewable energy and not create an additional system which competes with this...

Man, I understand your point. For real. But the 51% attack I cannot say it’s impossible, but very close to it. You cannot attack the chain by just conquering the mining power. This is something very basic on how btc works. But you know, anyway..

The 51% problem was quite real a few years back due to the underlying motivation to be part of a mining pool.

And it's not too far fetched that china might control a big mining pool if BTC would take off.

And yes decentralization doesn't just fix the issue of regimes like china.

It is more controllable than you would like to make it out.

Especially with the great firewall.

> Our current fiat system is not perfect but by far the most stable system we have.

ROTFL. Have you taken a look at inflation lately? Are you aware that the number of US dollars in existence has gone up by at least 40% since the start of COVID?

Not sure how anyone could call this "stable"

1. Money isn't just created.

2. Bitcoin is not inflation save either.

And much more volatile.

> 1. Money isn't just created.

Er.. It is.

Between quantitative easing and fractional reserve banking it is created in 2 ways.

Spend some time reading and researching on these topics please

And, by definition, bitcoin _is_ inflation-safe as it's supply is capped. Inflation means inflation of the money supply (often thought of as an increase in prices).

Bitcoins price may vary against other assets but it's supply will never exceed 21m

Just because you will not be able to make more Bitcoin doesn't mean that you will experience no inflation.it just means that it will express itself different.

'Inflation is the rate of increase in prices over a given period of time'.

Either this will break Bitcoin because it is limited or the Bitcoin domination will change.

Already people are no longer buying one Bitcoin but subbitcoins like 0.01

Edit: and just in case you want to argue that this is deflation: Deflation is also bad. But BTC might reach a fluctuation point were it would see deflation and inflation.

I did and still think your sentiment simplifies it too much .

The banking crisis was the last big thing which imploded but otherwise we do create eqvilent new wealth with it. Real one

https://www.endthefud.org

Have you read any of it and actually understood it?

I read now 8 articles and all of them are really bad :-/

I really don't have the motivation to go through all of that Garbage...

One dude compares the Bitcoin energy consumption with aluminum while ignoring that aluminum is actually helpful to smelt while Bitcoin is not.

There is so much ignorance in all of them.

'But how much energy should a monetary system consume?

How you answer that likely depends on how you feel about Bitcoin'

Another one plays around with marginal costs and writes pearls like this: "We will never know for sure but, if we look at the sale prices at the time of mining, and assume that they were mined with minimal initial profit, it comes to less than $20 billion. That would mean we put into circulation coins worth $200 billion for a tenth of their price."

Or this one were he just doesn't care to discuss the obvious issue of dividing bitcoins forever: 'But for now, just work on the assumption that the supply of bitcoin is capped at 21 million. In contrast, no one knows the supply of dollars.'

He just accepts that bitcoins are capped. Totally ignoring also how the transition to Bitcoin would make everyone richer who invests in it first. He just doesn't talk about it. And he goes on and on how Bitcoin is fixed while it's not.

Another article doesn't even mention Bitcoin just inflation and deflation in some weird writing style

And this one even points out issues: "The mining process is arguably wasteful, and justifiably has environmentally conscious people concerned. " Or "For this reason I think that even Bitcoin’s coin allocation schedule is flawed"

Again my question to you: did you read and understood those links you shared?

0. A dollar your ancestors earned in 1919 buys about a 1/100 right now of what it used to.

1. A dollar you earned in 2019 buys about a quarter right now of what it used to.

2. A bitcoin you bought in 2019 buys about 5 times right now of what it used to.

3. A bitcoin bought in 2135 will buy around the same in 2135, that it will buy in 2235.

...and 2335

...and 2435.

You don't seem to care about [0] and [1]? I DEEPLY care about that.

[2] is noise, just like a dollar in 2019 buys more than a dollar in 2002, who cares, it's not whole picture, and you'd be wrong calling the USD a ponzi by looking at that particular timeframe

[3] is the whole point of Bitcoin.

If you don't care about [3], then more power to you, keep working for the politicians, as for me, I want to work for my family and children, and my grandchildren.

If you don't /get/ [3], then I don't know what to say.

Everything else, every single other talking point is noise, [3] is where it's at.

Even [3] is ultimately noise, and all of this discussion about Bitcoin is noise because...

...you cannot ban Bitcoin, so why go against it?

Acccept it.

Embrace it.

Adapt.

Overcome.

Start doing at least some of those steps because bro, you cannot ban it, as simple as that.

Bitcoin is here to stay.

You would be right if it would be the same thing.

It's not.

I talked about the specific issue that right now dollar has to be transferred into Bitcoin.

And Bitcoin would look very similar to what dollar currently looks like. It would also has issues with inflation etc.

Technically speaking, it is possible. But in real life such event could:

- dilute overall value of BTC if it was a 1:1 airdrop (this could be avoided by maybe minting the ERC20 version after providing a proof of burn of real BTC)

- get backlash from BTC maxis who attribute its value to the fact that BTC is secure thanks to PoW, or that Ethereum blockchain relies on an asset that has traits of a security, etc.

- uncertainty related to risk of incorrect smart contract implementation, entity behind it, etc.

These factors could cause a lot of volatility to both tokens, and only one of them would prevail in the long term (historically I would bet it would follow similar path of BCH or BSV, or gazillion other BTC killers)

Of course. Bitcoin has first mover advantage, but its tech has remained fairly stagnant. First mover advantage goes a long way... until it doesn't.

Replaced no, but various tokenized BTC instruments will exist for things like defi. They all depend on the underlying BTC network.

Yes it can, but bitcoin is more than a crypto asset. It's turned into a cult that believes certain tenets. That's why I believe that it will never disappear even if the price falls to a fraction of a cent. A radical change like a change to a Ethereum token would never be accepted.

No, erc-20 and eth suck

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