“As a result, the rise of the railroads inspired entirely new forms of corporate securities and governance. They also yielded stupendous levels of fraud and chicanery, wrote business historian Alfred D. Chandler Jr. in his 1965 book, The Railroads: The Nation’s First Big Business”
1. Decentralized currency
2. Immutable ledger
3. Transparent transactions
4. Streamlined transactions (no T+2 or T+1 settlement)
5. Borderless transactions (between people in other countries)
6. Microtransactions (transactions a tiny fraction of a cent)
7. Smart contracts
These are innovations, the question is do they solve real world problems without creating more? For example, decentralization is great until you lose your keys or the government wants to shut down money laundering.
I have yet to see a real world benefit from blockchain / cryptocurrency technology. web3 is the closest to reality but I feel like it goes against human nature and the concept of decision fatigue. I don't want Netflix to prompt me, "Want to watch the next episode for 4 cents?"
Neither does netflix. Vast amounts of under-used subscriptions paid at a full rate would suddenly get a huge discount. At the other end they wouldn't be getting much more revenue out of those that watch more than average because they'd likely cut down.
There must be plenty of ways of making a microtransaction in ways customers don't mind, many of those haven't been invented yet. I have no idea why blockchain is necessary for microtransactions nor why we all have to pay a microtransaction sized spending tax to the owners of the payment systems every time we spend our money now. Will blockchain fix this? I have my doubts about blockchain but damn, someone should. It seems popular amongst the powerful that they can cancel someone's ability to raise funds on the basis of an accusation alone. Most people hate that idea as stated, except for "$that_guy who I've just heard of and is clearly a creep so that's fine." Who is it today? How did that work out in the past? Maybe it will be more like justice this time than before? Who knows?
I've been a big proponent of crypto over the years and think its pretty cool technology. I just can't think of any problem it solves that isn't better solved by some other solution.
The usual rebuttal to crypto is that something else is cheaper, faster, more safe, more convenient. And within the crypto space itself, the worst actors have sold themselves on being cheaper, faster, more safe, more convenient. And then, much like the early railroads, they exploit anyone who buys in, and do nothing to deliver on the principled part of the tech.
Well, you do this for a while, and it does seem like it's scams everywhere. But the bull cycle creates a round of scattershot investments in the core tech. Some of them become survivors and succeed at some kind of pro-social function, if only in proof-of-concept. We can even extend this cycle back to the pre-Bitcoin electronic cash ventures. Bitcoin proof-of-concepted the idea that it was actually possible. Of course now it's a chain inhabited by laser-eyed prospective future masters of the universe. But the people working on the tech have largely moved on from it.
Crypto's real allure as a tech is not that it has to be good at the things that are already good(as much as that tends to be the inclination), it has to be not bad at the things that are presently hopeless and normalized as unsolvable nature-of-man type problems. And it has to be roughly as boring as a train running on time.
No prompt needed - just as your electricity company doesn't prompt you before you watch TV either. You trust the rate to be reasonable and you just get billed for it.
This pricing model is the consumer's ideal pricing model for most things - pay close to what it actually costs at a reasonable rate - because that's the most efficient and keeps decision fatigue minimal. We just don't have it for everything because the industry hasn't matured yet.
Railroads, scams aside, were extremely important for the economy for at least 50 years after this scam.
Same with crypto? Really? And NFTs, too?
In twenty years the use of public blockchains in everyday finance and trade will be mundane. Former crypto skeptics will explain that their earlier complaints pertained only to the crazy things happening in 2020, not the boring & ordinary things that crypto is used for in 2040. And meanwhile, nearly everything "financial" involving counter-parties will happen on-chain.
Why? Because public blockchains eliminate counter-party risk for a large number of transactions, provide unparalleled transparency, and give anyone with an internet connection access to global financial markets, enfranchising billions of people who are otherwise locked out due to unsatisfactory local conditions. Blockchain tech will make developed economies more efficient, and will accelerate development world-wide.
If you don't agree that public blockchains actually do anything useful, then you'll probably object to the railroad analogy. But if you see value in blockchains, then there are clear parallels:
• Initial cost of the build-out being funded by early investors who might not be around to realize the long-term benefits of the technology.
• Speculative energy attracting scammers alongside legitimate operators.
• Long-term benefits not being obvious after the first wave of investment dies down.
• The true value of the technology only being realized when network effects are fully realized, years after the technology's introduction.
Saying this doesn’t make it self evident. What exact counter party risk is eliminated by blockchain technology? I know there’s alot of hype around the public ledger, but what transparency does it provide beyond that? It’s not like I audit the entire trail of any arbitrary transactions, which is usually where things like that come into play.
What about fraud?
Also, how’s blockchain better than existing and ongoing open banking projects? They’re enfranchising people today. Look at all the good micro loans have done in developing nations for instance
Some specific examples currently available:
• Atomic swaps, where traded assets are immediately moved between accounts upon execution of the trade, eliminate the possibility that settlement will not complete.
• Real-time commerce, where merchants accept payments in a format that can immediately be turned around and spent, without waiting for reimbursement from third-party networks.
• Loans backed by on-chain collateral, such that default triggers immediate transfer of collateral, eliminates the risk that collateral may not be obtainable upon default, or that the value of collateral may fall too far before the loan is liquidated.
> It’s not like I audit the entire trail of any arbitrary transactions, which is usually where things like that come into play.
Open databases can be digested and analyzed by open-source tools, and by trusted independent third-parties. Closed databases cannot be analyzed by anyone except for the database owner and government authorities. Some government authorities are trustworthy, others are under-resourced, incompetent or corrupt. Even if you personally won't read the full history, you benefit from other people being able to do so.
> Also, how’s blockchain better than existing and ongoing open banking projects? They’re enfranchising people today.
Problems can have multiple good solutions! Still, open API access is different from open access to underlying data and algorithms. Open APIs and blockchains can co-exist and benefit from each other.
> What about fraud?
Fraud is a complex topic. The traditional financial system has seen lots of fraud over the years (think about what we witnessed in 2008). Credit card fraud is also a rampant problem that is only managed by large financial firms heavily surveilling payment networks.
There are fraud vectors that blockchain networks are more susceptible to—just like there are other fraud vectors that blockchain networks are less susceptible to than traditional financial systems.
In my view, the greatest fraud risk in crypto comes from the issuance of tokens that are questionable in some way—a risk that I think can be eliminated if strong controls are implemented regarding the issuance of tokens on-chain.
Cash already does that and so does my chip n pin card.
There's an advertisement showing in the UK that lampoons crypto. A bloke buys some onions from a stall (ie direct sale from field to consumer) and he is asked which crypto he will use to pay with. The putative buyer says he has a fiver (cash).
Blockchain transactions require time to work. The ledger has to be updated correctly by agreement with the rest of the network to work and that takes time. I can do a tap to pay and my phone beeps within a very few seconds to note a transaction.
Does the merchant who accepts your chip n pin payment receive the funds in their account immediately after they accept your payment? In the US, merchants have to pay fees and/or interest to get same-day access to that money—because such access effectively functions as an advance on receivables. In most countries, same-day settlement is completely unavailable.
Cash isn't much better. Can a store owner pay for inventory with cash? Maybe some inventory, but most things need to be paid for electronically. Can a retailer process payroll using cash? Turning cash into electronic money is a hassle and a security nightmare. Armored cars exist for a reason, and they aren't free.
Crypto payments can be spent immediately upon receipt. No settlement delay, no need for armored cars.
> There's an advertisement showing in the UK that lampoons crypto. A bloke buys some onions from a stall (ie direct sale from field to consumer) and he is asked which crypto he will use to pay with. The putative buyer says he has a fiver (cash).
Funny. What is the advertisement selling?
> Blockchain transactions require time to work. The ledger has to be updated correctly by agreement with the rest of the network to work and that takes time. I can do a tap to pay and my phone beeps within a very few seconds to note a transaction.
This comment reminds me of the Kodak executives who thought there would never be a market for the digital camera the company had invented, because its resolution was so much lower than that of film.
Your information is out-of-date. Bitcoin is slow. Next-gen crypto is fast. Personally, I'm partial to the lightning network, which finalizes payments in seconds.
Yes they do. I also get notified about a Chip n PIN transaction or an account to account transfer before I've turned around and walked off (I hear my phone beep).
The advert is for onions ... OK for a mobile phone company.
> In twenty years the use of public blockchains in everyday finance and trade will be mundane. Former crypto skeptics will explain that their earlier complaints pertained only to the crazy things happening in 2020, not the boring & ordinary things that crypto is used for in 2040.
While this is certainly possible, it is not assured. We KNOW that railroads ended up being very important; we can, at best, guess that crypto will be as important for our financial systems.
I am also skeptical of White if he is implying that access to capital was a central limiting factor in the Civil War; a more focused problem was that by far the largest industrial complex in the South was located in Baltimore, Maryland. Since neither opponent, whatever its funding, was in a position to be building new cities during the conflict, the de jure loss of its largest city limited the Confederacy's production of war materiel. In fact in a counterfactual USA where the robber baron Gilded Age had been the first Renaissance of a seceded CSA, I can imagine that a lot of the period's economic development and chicanery which occurred in Philadelphia, New York and New Jersey would have been located in Maryland and of course Virginia.
> Cooke had donated millions of dollars to Grant’s winning re-election bid for the presidency in 1872. Before that, Cooke had grown immensely wealthy by building an investment network that sold more than $1.6 billion in Civil War bonds to small-time investors across the North. Grant had lauded him for ensuring the Union’s successful campaign against the Confederacy, which had far less capital.
> Cooke later harnessed his pioneering direct-to-consumer investment concept to offload bonds in a scheme selling the latest technology—railroads—to the next generation of individual investors. “It was like selling to crypto investors today,” says historian Richard White, author of Railroaded: The Transcontinentals and the Making of Modern America. “These investors were basically living off of the promises of famous people they had trusted before.”
Railroads are a physical device for logistical transportation. This has a very obvious value prop.
Crypto is an "alternative" "financial" "system", which is missing the key components of regulation and trust that back all functioning financial systems.
Hard to draw the parallel for me.
I thought that those are supposed to be the key components of crypto. You trust that it is regulated by mathematics, the market, and infrastructure, rather than relying on fiat.