Crypto has been rallying like all speculative assets. If crypto was like beanie babies (as HN group think says) it would have crashed years ago and stayed dead.
Thanks for accusing me of group think! To turn the tables around, the burden of proof is on crypto to be useful, not on me. Stuff is not useful by default. So, instead of stooping to your insults, let me ask you - what use does it have?
Also, I found you online, you work for crypto, pretty dishonest of you to not disclose that before commenting.
Prosecuting a company is way different than trying to find some guy that posted something on the internet. Good luck with the last one, especially when that person is tech savvy and paranoid.
Crypto actually works kind of great as a speculative casino. If you think that isn't a real world use case then you may have a rather rose tinted view of the world.
The blockchain is the solution to a specific problem Bitcoin has, so when people and businesses were saying "we like blockchain but not Bitcoin", it just didn't make any sense.
The problem is how to be able to synchronize an ever-growing database across an unlimited number of peers, and the answer is "through chunks we call blocks".
Blocks are not needed to sync a growing transation database, as exemplified with Mimblewimble blockchains, whose sync just downloads the UTXO set and list of all transaction kernels.
I’m not a fan of crypto currencies and markets, but is there not a use case for a distributed ledger? It is my understanding that that’s all a blockchain really is.
The thing is you can't have a decentralized ledger without a native currency. Without a native currency, you lose the mechanism that secures the ledger (mining).
There are however extremely few use cases for an immutable distributed ledger, which is sadly the other property blockchains have.
There are simply too many cases when there are legal requirements to be able to delete data. DMCA, GDPR, Right-to-be-forgotten, anti-terror-laws, anti-libel laws, and so on.
You can store things that aren’t money on a blockchain.
If you think a distributed mutually-distrustful ledger is useful but shouldn’t be used for money, the statement “we like blockchain but not Bitcoin” makes sense.
I'm waiting for a nice github repo called "You might not need Blockchain". I kind of am actually. I heard someone trying to convince a credulous interviewer why blockchain would be the perfect solution for a bike register to prevent theft. The whole time I was thinking this could be solved by a plain old database hosted by a trusted third party.
Blockchains are an alternative pricing model for data hosting. Instead of a monthly bill, the transaction fee gets the data stored forever-ish. As scaling techniques are implemented, this makes more applications suitable for storing data on chain.
What use do you currently have for private irreversible transactions in an adversarial environment, or is this simply short-hand for illegal money transfers?
All transaction should be, at least legally and after a court decision, reversible. All those blockchain transactions are also covered by local law, including taxes. Bein "annonymous" means that those laws can be circumvented. Seems to be a feature, even if I see it as a bug.
I can work as a consultant with clients anywhere in the world, for example. It is significantly more difficult to be employed by a company in another country (and many “remote” and contractor positions are increasingly becoming “US-only” in the current conditions). So yes, I have quite a lot of uses for crypto money in adversarial environment, and I expect it will have to use it even more, for perfectly legal work.
The remittance example doesn't even touch on use of stablecoins, which at the moment, are substantially easier to do international remittance with than bank deposits.
I wrote a list of other use cases where blockchain-based systems are clearly more efficient than centralized ones:
With respect to stocks, yes companies can maintain their own list of shareholders, but publishing that list to the blockchain standardizes the process of third party verification. The ERC20 token standard is widely adopted with tens of millions of installed wallets, and major blockchain explorers, that can interact with any ERC20 token contract. The activity the author briefly touches upon - trading - can also be made massively more efficient with a public blockchain. Being able to swap between any two tokens in the world using nothing more than Uniswap and your browser-based MetaMask wallet, is in most aspects a major UX improvement over the status quo, and thus it's perhaps not surprising that Uniswap has overtaken the top centralized exhanges in liquidity depth for several major trading pairs:
I suspect the author has never used stablecoins, or Uniswap, and if they had, they would come away with a completely different take on the potential utility of blockchain-based systems.
The big risk for blockchain based systems right now is the prospect of governments massively restricting internet freedoms to stop end users from transacting freely and privately without intermediaries.
The US Treasury placing an autonomous software program - Tornado Cash - on its list of sanctioned entities (a list intended to comprise people and organizations, not software), and thereby making it illegal for any American to interact with this smart contract, was the dramatic opening salvo in such a war on internet freedoms. To think that any US based person sending ETH to the TC smart contract from their MetaMask wallet, to gain privacy for their blockchain activity, now potentially faces years in the US prison system for that action, is extremely disturbing.
And this sort of draconianism is ultimately what the large public sector entities need to resort to keep their income-tax-dependent system alive in the age of distributed financial systems. The question is whether the public will accept their argument that crypto is so evil, that these sorts of curtailments of internet freedom are a price worth paying to stop it.
One of the users of TC was an affiliate of the DPRK, was it not? So this isn't just about "transacting freely and privately without intermediaries". If you want to change sanction policy, might need to go down the policy route, I think.
By that logic, we shouldn't have invented the Internet because it has also benefited the DPRK. We can't just stop inventing new useful things just because it might also be useful to people we don't like.
Ok. Now let's say we abandon policing money the way we currently do (and arguably the current AML framework isn't very effective, looking at some studies). What do we do then? That would be the kind of policy debate worth having - not just anger about banned tools.
Not only current AML framework isn't very effective to say the least, it is also becoming very clear sanction regimes are ineffective as well perhaps even counter-productive in most cases.
Maybe diplomacy and mutually beneficial settlements are a way to go.
Why give the DPRK an extra tool? Is the value of TC to society so high? If the value of TOR for society became negative, for example, why not shut it down?
Edit: Happy to see the case made for why TC or similar should be there given the externalities. Maybe it is a good case, but I have not seen it.
TC is a protocol that lets users privatize their wallets. "Privacy is good" and "privacy is not a crime" should be enough reason to understand its value.
Some example applications:
- User wants to anonymously donate to another country that their current regime is currently at war with.
- User wants to pay for an abortion without it being easily traceable.
- User with a public ENS identity wants to hold ETH on a private account that is not linked to their public identity. This might be for safety reasons, or another reason such as wanting to make investments that are not broadcast to the entire world.
The attack against TC is the US government saying "you are not entitled to privacy here, and if you even so much as try to seek privacy, you will be treated as a criminal and have all of your assets frozen."
I think already on your first point you would struggle to find much backing in the US if it includes US citizens being allowed to donate to a country actively at war with the US.
If that is the society you want to have, I think you'll face an uphill battle. If you want no or very little policing of money, need to make probably some proposal to prevent certain things in other ways.
> which at the moment, are substantially easier to do international remittance with than bank deposits
Is this an uniquely American angle? For all my needs, Wise is very fast, cheaper than blockchain, and I’m less likely to lose money by fat-fingering a transaction.
Rely on taxes that can't be evaded: taxes on usage of natural resources, the largest category of which is land value taxes. Perhaps industrial scale emission of CO2 could also be taxed.
Land value taxes not only are evasion-proof - which means they are extremely fair in applying to all equally - but they require very little administration, and no invasions of privacy, to enforce (a consequence of a person needing to include their land in the government maintained land title registry in order to enforce their ownership over it).
They are also considered by many economists as the "perfect tax" due to their economic efficiency:
Ultimately though the public sector will need to shrink as a share of GDP, as the LVT alone cannot support current spending levels. In other words, the trend seen in this graph will have to reverse:
Two interest groups stand to lose from the change I describe:
Those who own real estate, and those whose income derives from government spending.
I would suggest the constructive path forward is to propose a multi-trillion dollar settlement package for both groups, to compensate them for the losses they would incur from transitioning to the new system I describe, which has much less government spending, and much higher taxes on land ownership.
The settlement can be paid for over subsequent decades, similar to the bonds the UK issued to pay former owners of slaves as part of its Slavery Abolition Act of 1833.
As costly as all of this sounds, it would probably actually be much less costly than perpetuating an increasingly inefficient system, which leads to escalating culture wars, and growing repression.
Thank you! Interesting. Why would it necessarily reduce culture wars or repression? Because the public sector gets smaller? Or because taxes are "fairer"? Edit: middleman free finance? How?
1. the taxes are more just, and thus cause much less collateral damage (like enforcement actions related to prohibiting Americans from using financial privacy software on their computer) that elicits hostility/acrimony from a broad cross-section of the population toward governing institutions, and
2. by offering a settlement to those negatively affected by reduced government spending and the introduction of a LVT, we are not threatening to deprive major interest groups of their livelihoods, which would create avowed opponents of the reform plan in whose interest it is to vilify the reformers and their plan.
The goal is to align interests so that all major groups support reform toward a more just and efficient economic system.
Thanks. Just so that I can close the mental loop here: because "the state" is smaller, things like sanction control also matter less/will be handled differently, hence privacy can be stronger?
I'd say the decision by a state to enact sanctions is orthogonal to the size of the state.
With respect to sanctions, I think targeting financial transactions would be less appealing to policy makers if it didn't align with broader income tax enforcement goals and couldn't utilize the controls set up for that purpose.
Anonymity is good and all, but the moment a known intermediary comes into the picture, it becomes a target for government enforcement.
If you need a service like Tornado Cash to preserve anonymity, as long as there is a physical name attached to that service, government regulation becomes enforceable.
In other words, there's still a long way to go before salary payments or other forms of taxable money transfers become evasive enough that they're unenforceable. The small number of exceptions (e.g., tech-savvy remote workers taking payments through blockchain) are not large enough to set the rule.
My personal stance on why Blockchain is often not required is that a core feature of the Blockchain - decentralization( based on a lack of trust on a single entity) is not needed in the business world. In business, trust is an essential factor by which you pick your partners and suppliers, and often businesses reject cheaper offers in favour of business partners they know and trust based on past cooperations.
Isn’t this an argument for blockchains? If you could rely on blockchains instead of trusting based on past cooperation, you could save money and thus add more value. Obviously blockchains have a cost, but in some cases the cost savings you could achieve may outweigh that.
We have Yelp, Google reviews, Amazon reviews… how would something like that work on a blockchain/ledger and not be gamed just like the review systems we have now?
And how would we avoid this reputation blockchain from being populated by maliciously deceptive information, be it positive reputation promoted by the business through bribed or fake customers, or negative reputation promoted by unethical competitors?
Reinventing existing trust mechanisms but with an extra (computationally expensive) layer of things that can go wrong is the opposite of an improvement.
> If you could rely on blockchains instead of trusting based on past cooperation
What about blockchains would make them an effective stand-in for building trust over time? One is a ledger, the other is an interpersonal relationship, and the two really are not the same.
If I'm going to take a risk, I'd rather take a risk where there's some human expectation of managing bumps in the road, and which has some means of redress if sufficient malice is involved, instead of one where a smart contract bug means that I've lost a lot of money.
Most of the ways businesses need to trust each other can’t be captured by rules on the blockchain. It’s things like - I trust my supplier won’t go bankrupt. I trust my supplier will deliver work of a consistent quality. I trust that if I have some problem, I can call someone on the phone and they’ll take my call, listen to my problem and take responsibility for fixing the issue.
How would you express any of this stuff on a blockchain in a useful way? We could have “blockchain yelp” but it’s hard to protect that against fake reviews. And seeing a mix of reviews isn’t enough to know if you should go into business with someone.
Yes blockchain based tokens (so anything but pure currency) always runs into issues when they meet the physical world. Oracles are just trust anchors and as you say there's no way to avoid the reality that physical auditing is necessary to ensure clean exchange of goods and services. OpenBazaar has run into numerous issues over the years and it's been out there as a marketplace before Ethereum ever existed; they all stem from the general difficulty of interfacing with the physical world.
This isn't the case for digital only assets though. There are certainly much fewer digital assets people use than physical ones, but they're there. Domain names, forum membership, entry gates, game skins, etc. How many times have you entered a community and thought it would be great to have a tiny bar to contribution, like a small membership fee, enough to weed out spammers and young children?
This is aside from enterprise oriented chains like Ripple that just use chains help facilitate regular business.
Some of the "better" arguments i've seen are obsoleting/maintaining anything that is quasi public record. Think all sorts of land/legal transactions where it's basically "once x and y and z have said yes, process transaction from x to z"
Codifying ANY logic is doable, but especially simple logic like that has it's upsides in how many middle men it can help eliminate, and the TONS of human error that comes with it.
In the examples you're giving, you could have codified "here's what happens if the supplier cannot complete the transaction" or "here's what happens if parties cannot agree on the quality of the work" or a zillion other things that already exist.
You did, however, hit on the big one, that when something goes wrong or something is misunderstood or somehow someone needs to talk to a human...well good fucking luck.
The obvious downside of all the decentralization mantra is that of course it means you're liable for your own mistakes, which is just NOT a business model that ever works. That said, the crypto space has gotten massively more centralized (because it turns out market forces still don't give a fuck about your philosophy), and I think the future of the tech lies somewhere else entirely, where end users functionally never interact with it.
> Some of the "better" arguments i've seen are obsoleting/maintaining anything that is quasi public record. Think all sorts of land/legal transactions where it's basically "once x and y and z have said yes, process transaction from x to z"
The validity of any transaction can only be determined and guaranteed by the state, so honestly just having the state host a central database seems much easier
I’d be quite happy seeing the state host a signed, public append only log for records like this. Basically blockchain without the mining. Anyone can subscribe, but only the state (or anyone paying a nominal fee per byte) can write.
It could be used for notarising contracts, recording crop yields, declaring bankruptcies, listing property sales - you name it. Pay $1/kb and your data will be stored forever.
Anyone can replicate the changes to their own computer to validate the hashes and prove the government isn’t changing anything.
I think that would capture 90% of the value of a blockchain with almost none of blockchain’s downsides and it would be trivially easy to implement.
wouldn't you just put all those things into a contract and put the contract into the blockchain along with their signature as proof?
You seem to be arguing that blockchain has to magically solve real world physical problems, but paper contracts don't do that either. You still end up in court. Its just a question of how you are substantiating they really signed the contract.
No GP is arguing that since the blockchain cannot solve any of the mentioned problems, it does not provide any real benefit. The dispute for companies today are seldomly about whether they signed a contract (the part the blockchain could help settle - though you still need to provide the legal entity -> cryptographic key mapping) but how to interpret the contract and align the legal world(words on a page) with the real world (widgets delivered, machines broken, etc.).
If the problem was about enforcing a signature, you do not need a blockchain, each party to a contract can just store the cryptographic signature themselves or with one or more trusted custodians. That is a fundamental feature of cryptographic signatures not blockchains. And then you need some mapping from legal entities to public keys, but this might as well be a centralized database run by the government (potentially outsourced to a private contractor), after all in many jurisdictions the government already keeps a list of legal entities and metadata about them.
I as a business would not want to work with people who do not trust me to fulfill my (e.g. contractual or financial) obligations.
If they have to trust me to pay them, do my job, fulfill my contract anyways, what value is there in some sort of digital system that technically decentralizes trust, but where the other side still has to trust me I did nothing malicious with it?
If anything all that the developments in cryptocurrencies show is that a technically trustworthy infrastructure can (and will) be used for nefarious means. That means even if you were to use such an infrastructure you'd still have some interface to the real world, where people cannot pay, not do their job, do their job in a way you did not agree, etc. So you still would have to protect your interest in the traditional way and you'd still have to trust the other side.
So using a blockchain is just like using a database and giving up a certain amount of control over it.
Given a set of parties that I trust and I am willing to do business with, why should I spend money and technical resources, and give up privacy, for the privilege of using a blockchain to state to the world that I trust them? Why should I embrace a dependency on a crypto provider, or trust someone because the crypto provider's blockchain says that I should?
EDIT: replaced "cryptoscammer" with "crypto provider" for generality.
That's a false dichotomy. Anyone would choose someone they trust most out of other need-to-trust counterparties. If there was an alternative to not use any unnecessary counterparty at all - that would be even better. E.g. if you transfer Bitcoin from country A to country B you know for sure that it will arrive without any intermediate bank inserting their opinion in the process and causing surprising delays.
Some of the delays are effectively by law, so what you're really saying is "without any laws I may be breaking inserting their opinion, and any pesky police causing surprising delays".
Reminds me of how GWB said that it would be much easier to be president if he were a dictator.
Yeah, I bet! But despite that it's a terrible idea.
Banks don't cause delays because they want to. And it's not a technical problem. Worth repeating: Delays in bank transfers is NOT a technical problem.
All these cryptocurrency "solutions" are trying to tear down a fence they have no idea why it's there. Turns out it was put up over centuries to solve actual societal problems.
People should work on improving the fence instead of thinking it should be torn down to be replaced by nothing.
Yeah we could give deeper into this question. Yes, the US has not adopted the technical solutions for quick (usually essentially instant) and free payments that Europe has.
And Europe isn't perfect either. E.g. in Sweden bank transfers are only quick and easy on weekdays. But then again nobody uses bank transfers because Swish is instant and 24/7, and all banks support it.
So yes, it's a technical problem that a transfer is not instant, but the "surprising delays" mentioned by previous commenters are not due to any of that.
Or do you have in mind technical solutions for improving AML/KYC handling that would reduce legit transfers getting delayed?
Sure, systems (legal and technical) can always be improved, but "surprising delay" is a problem from law, not technology. So bypassing it with technology just means (de facto) breaking the law.
What I meant is that many banks do not offer fast payments/transfers as a service, but they could do it if they wanted.
The most common complaint I hear is that bank transfers take a long time to settle as a default at a protocol level, not that law enforcement manually interferes with them.
The second most common complaint I hear is that sometimes the transfer is impossible.
For the first there are solutions, newer SEPA transfer can complete in seconds because fraud checking is done faster; this requires some kind of widespread cooperation between banks and governments. For the second complaint there are often no (legal) solutions.
You are right, that's not a technical problem and Bitcoin is not a technical solution either — that's a social game of "let's make ourselves some new money without built-in constraints".
Then you would need to add some constraints over it for security, but the key difference would be that it's an open market: you can invent one solution, I can invent another and people will be free to choose between them or nothing at all.
When your money comes with some regulatory framework built-in, there is no much room for any choices in that respect and more temptation for all kinds of bureaucrats to abuse their power.
> but the key difference would be that it's an open market
It's not really, though.
Banking is also an open market. You could already start a bank, and some people do. But it comes with a bunch of red tape.
But you can't just say "this is blockchain, so red tape is not required". That's up to the government of the countries you operate in.
And if it looks like a bank (or financial institution), quacks like a monetary transfer or financial product, then why would it not get customers like one, and not be regulated as one?
> people will be free to choose between them or nothing at all.
This was already the case. Wall street invents financial products all the time. Credit default swaps, anyone?
There are scenarios where a multi-party ledger can be useful in business...
Think about a logistics chain where everybody needs to know that a record wasn't modified in retrospect.
But then you only need a mini-blockchain along the lines of what IBM calls blockchain, you may have a few industry players and say a customs agency agree to sign the entries and then there will be no dispute about whether an entry was signed on a particular day. Energy cost of that is negligible. (and you don't need to put the actual transaction info into the ledger... just the signature is enough so everyone on the chain can confirm later that it wasn't modified).
All of this is also pretty ancient tech by now... IBM just basically jumped on the blockchain branding bandwagon I'd say...
You could already do this without blockchain, the problem is adoption.
If I create a leger that requires basic crypto-signing, I would need everyone to agree to use the system, perhaps try and make it the only system so there is an incentive to use it - and that is the difficult part.
Have some blockchain doesn't solve the problem of how you try and get people to adopt it.
The various crypto meltdowns of the recent years show that crypto actually involves lots and lots of trust.
From the frontend doing what it really says, through intricacies of how the smart contracts work, manual control over wallets, and trusting the business logic.
Transaction security is kind of the last thing to worry about.
The author falls into the same trap as many others who write about blockchains: “people will build centralized apps on top of the decentralized protocol, so there is no need for the decentralized protocol in the first place!”
A better way to understand blockchains is as a base settlement layer: they are a shared, permissionless and open source protocol that is resistant to takeover by a single entity.
What this means is that a company, like Meta or Coinbase or even a US bank, can build a centralized platform that lets users manage their crypto assets. But as long as users can still withdraw into a non custodial address, they have the option to escape to that neutral base layer.
This is a different design than what we see currently in the web and banking sector. You can hold ETH or an ENS domain with nothing but a private key. But with a .com domain, if you want to withdraw from GoDaddy, you will be forced to transfer that into another centralized service like Namecheap that will also extract rent. There is no “neutral base layer” with traditional digital assets.
Assuming you are allowed to transfer into the base layer. Most currencies and finance have a similar decentralized base layer: Cash. However in many jurisdictions your ability to transfer into that base layer is severely restricted due to money laundering, anti-terror-financing and / or currency-control regulation.
This is not guaranteed as a general property of blockchain systems, but can be guaranteed on a case-by-case basis by the immutable nature of smart-contract systems. I.e., if a centralized system sets up a lockup contract such that value can be forcibly unlocked by making a request on the blockchain side, and the centralized system just has to observe the event and deal with that — then for the company running the centralized system, that contract becomes an immutable part of "the way things are"; they can't decide to later renege on it, keeping people's funds locked up, because nothing can change the working of the [non-upgradable] contract once deployed — it just "is what it is."
By deploying such an immutable contract to be the custodian of customer funds, such an entity is essentially making a hard/inescapable precommitment to doing for users, whatever the contract happens to do. In a sense, the central entity's owner is not the true custodian of people's locked funds; rather, the contract itself is, and the contract can be independently audited by anyone who cares, before anyone begins using it, to prove that it will only ever be able to act in the public interest, rather than in the corporation's interest.
They technologically cannot. The central entity has no power to decide to keep user funds, nor can anyone compel them to do so, because they don't truly have the user funds in their possession; rather, the contract has control of the funds, and they don't control the contract, the immutable rules burned into the contract upon its creation control the contract.
The central entity get to initially craft those rules however they like, and so can certainly design the contract to act favorably to them; but then the contract gets (immutably) deployed, and everyone else then gets the opportunity to look at the rules of the contract-as-deployed, to decide for themselves if they're equitable. If they're not, nobody will bother to interact with the contract.
Societies (and their evolutions) don't run by truly immutable rules - so having truly immutable things is placing things outside of them in a way. Would mean either the use cases for immutable rules are highly regulated and limited or there has to be a way to change them.
The immutability of a blockchain isn't fundamental; it's rooted in the consensus of the chain state. Look at the Ethereum "The DAO" state-fix hard-fork: if the entire community of node operators agrees to forcefully alter the state-database of the chain, they can do arbitrarily anything they like to that state.
But crucially, this "community of node operators" consists of a multilateral coalition of people and companies operating under every different society / government jurisdiction on the planet, with no single government that can compel enough operators at once to actually get the majority required to compel the state of the blockchain to change.
In other words, blockchains are systems with democratic recourse, but not authoritarian recourse. They can be altered from the bottom up to fix problems caused by immutability, if basically "a referendum run against a representative sampling of the population of Earth" agrees with the alteration; but they cannot be commanded to change from the top down, just because some individual entity with a conflux of power wants it to happen. No legal system can force a smart contract to do what you like; but common sense and human empathy can still override bad machine decisions when necessary.
Very bold societal proposal to abandon the rule of law (in parts), but it is an intriguing way to consider certain things - is there data on how stuff like that (i.e. consensus forming in good ways) performs through big changes in societies?
So we can choose rule of law, or cryptocurrencies?
I vote for rule of law, 100%.
> In other words, blockchains are systems with democratic recourse, but not authoritarian recourse.
No, "lawful" and "authoritarian" are not synonyms. No, letting people "vote" with their money is not democracy.
You pervert the meanings of the words sufficiently that you have literally reversed their meanings. Laws are created by the people's representatives, who are elected democratically.
> No, "lawful" and "authoritarian" are not synonyms.
I didn't say they were. But laws that the majority of the public agree with / would enforce themselves if given the chance, don't really need to be laws; in such cases, bottom-up action (not in a lynch-mob sense, but in a "petition that literally everyone signs, so people just agree amongst themselves to make it happen" sense) will correspond 1:1 with what any government optimizing for "the public good" would institute top-down as law. You can ignore the existence of bottom-up-supported top-down laws when speaking about the interface between "law" and decentralized technology, because regardless of whether the law can influence the decentralized system, the cultural zeitgeist of societal pressure that underlies the law, still can.
As such, it's only laws that the majority don't agree with — i.e. top-down dictated laws in authoritarian societies, un-audited regulations from corrupt bureaucracies, etc — where things behave differently in a decentralized system than they would under rule of law.
(Good secondary example of this: BitTorrent trackers. The majority of people seemingly don't agree with the sort of corporate IP "use rights" that underlie the illegality of media piracy; so most/all BitTorrent trackers do nothing to prevent the sharing of copyrighted materials. But the majority of people do generally agree that CSAM is unethical to distribute; and so public BitTorrent tracker operators do bother to prevent their nodes from enabling the sharing of such files.)
Also, I think you're potentially forgetting that there are multiple "rules of law" to talk about here. A decentralized system is inherently a single system shared across participants who exist under multiple countries — i.e., a multilateral system. If you want "rule of law" to pertain to such a system's logic, then whose rule of law would that be? Do you want China, Russia, and Saudi Arabia to all have a say in what transactions you're allowed to do?
(To be very pedantic, a world government could easily dictate what happens on a blockchain, because they would have authority over every single node operator. So one could technically say that blockchains aren't abandoning the rule of law per se... but rather are just holding "the rule of law" to a very high standard — ignoring any law that everyone on earth can't all agree on.)
> No, letting people "vote" with their money is not democracy.
Nobody said anything about voting, or money. Blockchains exist on a lower level than the abstractions they enact. Fundamentally, changes are made to how a blockchain works not because people vote, or stake, or whatever else; but rather because blockchain-node-software operators voluntarily opt in to upgrading their nodes to versions/variants that have a given feature, and then to enabling a proposed hard-fork upgrade point that makes that feature happen.
These blockchain node operators are peers in a network, and the "democracy" they participate in is one of voluntarism — i.e. choosing to run a piece of node software that encodes particular rules, or not; choosing to validate/mine for a particular network, or not. Networks that people don't care for, die, because people voluntarily stop running the nodes. Network changes (which really means "node software changes") that people don't like, don't get adopted by node operators, because doing so is always an explicitly opt-in process.
This isn't representative democracy. This is direct democracy. Each software change is a default-deny referendum, "proposed" by coding it into a piece of node-software, which operators "sign" by upgrading+configuring their node software. The network only changes if enough people actually do upgrade+configure their node software, for the fork block that was created using the novel code to reach fixation in the network over the fork block that would be created by anyone in the network still running the old code.
Three properties of cash make it tend toward centralization: physical size, difficulty of movement, and ease of access.
If you store a lot of cash in your home safe, eventually you will need more space - this is one reason banks exist. If you try to move a lot of cash quickly from one person or location to another, you will have a hard time - this is another reason banks and money transfer exists. If somebody breaks into your home safe, they probably will have immediate access to your cash - see smart contract wallets[1] and social recovery wallets[2] as an example of a more secure "crypto safe."
I agree that a concern in blockchain is that regulation and services may restrict users ability to withdraw to the base layer, see my other comment[3]. To me this is not a failing of the blockchain. It would be like governments restricting the use of internet or E2EE chat protocols - which is happening in some parts of the world - this does not mean the protocols have failed to meet their goals.
To add, cash is not neutral, it is tied to a particular state. It is a US centric view to say that USD cash is the base layer, rather than the EUR or GBP.
> But as long as users can still withdraw into a non custodial address, they have the option to escape to that neutral base layer.
Using blockchains for money is just about the most absurd solution a society can come up to the problems of financial centralization. Money is a form of power and the solutions to power problems are always political.
We need a financial system that protects individual privacy while reducing the options for money laundering, tax evasion, bribes, fraud and all the types of crimes motivated by money. There is a inherent contradiction in these requirements, the hope that a private actor or some non-accountable peer to peer algorithm can find a good political compromise is an ideological pipe dream.
What's more, this idea that the blockchain lies in a magical place outside the reach of the law is a persistent error that blockchain promoters make. Treasury could overnight decide to step up sanctions enforcement against DPRK and declare that anybody who recognizes a block that includes a transfer to one of DPRK's known wallets is not complying with sanctions. This would force Coinbase, Binance, and any exchange accepting Americans' money to hard fork the chain, removing noncompliant blocks. Whoever last accepted a DPRK coin or any other coins that were in those blocks or downstream whose transactions aren't replayed would end up a bag-holder, or transactions would grind to a halt to wait for allowed old transactions to be replayed into the fork. Whether Treasury would do this is another question, but that they have the technical ability to do so is not in question, and Treasury's counterparts in other countries have the same power.
> they are a shared, permissionless and open source protocol that is resistant to takeover by a single entity
Sure, but what’s an actual real world use where that’s a good thing? For domain names it’s exceptionally useful that a stolen, infringing, or fraudulent domain can be recovered through the legal system.
> it’s exceptionally useful that a stolen, infringing, or fraudulent domain can be recovered through the legal system.
Useful for who? It is often useful for large companies with powerful legal teams who will try to exert control over domain name registrars as they see fit.[1]
The nice thing with the blockchain is that you have the choice. If you want your asset to be recoverable through the legal system and courtroom decisions, it can be put into a centralized custodian. If you want to maintain complete ownership of that asset even though you risk not being able to recover it if somebody steals it from you, you might like to hold it non-custodially.
It is very possible that laws end up being defined around ownership of blockchain assets to give them a stronger degree of legal and intellectual property.
People who use DNS to resolve any service they rely on and expect to end up at that service, rather than on some hijacked version, which is essentially everyone who uses the DNS system.
Your linked examples are of companies attempting to put themselves beyond the reach of the legal system, which doesn't really counter the pervasive idea that crypto is only useful for breaking the law and for speculation.
Interesting you mention hijacking, only yesterday Curve’s .com DNS was hijacked and users lost funds as a result[1]. This is also possible with ENS but ownership can be secured more easily, two ways this could be approached:
1. ENS ownership is held by a 5-of-7 multisig. Attacker would need to socially engineer 5 entities instead of just one, Namecheap. Users can also clearly see when ENS ownership changes as it’s broadcast to the network.
2. ENS is set to a 100 year expiry and ownership records are then set to the burn address. Now, short of faulty RPC or frontends, there is no way that the domain can point to a different address.
My previously linked example was that of Meta entering into a court battle with a domain name registrar, who has full control over these records and may decide to alter them to avoid paying the cost of defending themselves in court. See [2] which is loosely related to this discussion of centralized services exerting control over name aliases. In a hypothetical blockchain application where usernames are secured with ENS or another smart contract, there would be limited recourse for anybody except the owner of these aliases to be able to transfer ownership.
> as long as users can still withdraw into a non custodial address
Uh, that’s a pretty big “if”, right? It’s completely up to the custodian whether you can withdraw or not, and we’ve seen several large platforms freeze withdrawals recently (and then fold). To an average individual, the hypothetical possibility of withdrawing to the “base layer” is at best a marginal improvement over the existing financial system; hardly a revolution.
This is why many crypto proponents will say things like "not your keys not your coins" which means, do not hold tokens in a custodial service without understanding the risk.
Many advocates of decentralization and blockchain do not want to support centralized services like Celsius.
This is an area that laws and regulation could be added to protect users. If a service is holding user funds, there should be recourse to allow those users to withdraw the funds to a base layer, or if the funds are at risk of being frozen as we see with Celsius, this should be more clearly indicated. FDIC style insurance could be addressed in some hypothetical future crypto banks, giving users further protection.
Yes, recreating some aspects of the financial system but with an open source, permissionless, and decentralized base layer that uses more modern code and cryptography.
From that, additional applications can also be built on top - multi signatory accounts, a social graph, ownership of digital property, decentralized exchange and lending services, escrow, crowdfunding, and more.
Celsius is a centralized custodian, not a blockchain. Anybody can build a company that uses the blockchain technology and accept funds into their USD bank accounts, and after entering insolvency, be unable to pay their creditors.
The DAO is a more interesting scenario. Users deposited into a smart contract that had a bug. This happens often in DeFi - see all the recent bridge hacks. The difference with the DAO is that the users were able to withdraw their assets because of a blockchain hard fork.
I made this point in another comment: this is not a failing of the blockchain.
To compare, imagine an E2EE chat app built on Matrix protocol is blacklisted in your country. Anybody attempting to use it is treated as criminal, and the app will not be accepted into your country's App Stores. Does this mean the Matrix protocol has failed to deliver on its goals of end-to-end encryption?
In practical terms, it is very possible that a government can "shut down" the usefulness of a blockchain for many people. They could go as far as to criminalize any person who is found to be hosting their own blockchain nodes, or sending or receiving message packets to an RPC without first going through a centralized and permissioned service. If this were to happen, people would not willingly be using a blockchain out of fear of prosecution. Some countries like China and Russia seem to be moving in that direction, and some might argue the US too with their strong-arm censorship of Tornado Cash and all things related to it.
The government can blacklist all they want, they can't prevent you from transferring your assets to someone else. They can't freeze ETH like they can freeze your bank accounts or traditional capital assets.
>>they are a shared, permissionless and open source protocol that is resistant to takeover by a single entity
And to prevent that takeover by a single entity (AKA 51% attack) it uses a very expensive (as in processing power) mechanism - proof-of-work to delegate the right of adding new transactions to the chain. And that makes is unscalable because as the network grows, you need more processing power. It flies in the face of economies of scale. It's a feature not a bug but that also makes it unsuitable for any business use cases.
Like any other market, consolidation will eventually lead to 2-3 whales will end up controlling majority of the nodes and can control an entire chain. In fact some of the new age blockchain startups are straight up centralized. What they are peddling is anything but a shared, permission-less and trust-less blockchain.
This argument rests on the idea that blockchains cannot operate without Proof of Work, but this statement is untrue as there are several decentralized blockchains running today and securing millions of dollars on Proof of Stake.
Ethereum has successfully merged Proof of Stake on all of its test networks, and is aiming for a complete merge on the main network some time next month.
This is an extremely poorly researched article. If somebody were to spend a dozen billion dollars to gain 51% control of Eth PoS, the users could coordinate to ignore their chain, or even burn their stake and destroy their purchased funds.
Good writeup. It's amusing to me all the VCs and developers running around trying to find the "killer app" for blockchains, somehow not realizing that reinventing money is the most killer app possible.
VCs know blockchain has no use case. They are only in it to flip the tokens to starry eyed idiots and make most of their money back without a real IPO or dilution.
Hyperledger can offer a chain of authenticated data ownership transfers, and has several use-cases outside the classical database approaches.
It does however solve key logistics issues with distributed inventory ownership transfer involving 3rd parties. For example, Walmart has successfully deployed a blockchain system, and reported good performance of the technology under high-volume stress.
This is one of those edge cases most will never encounter unless they are handling millions of transactions an hour. It's a good problem to have though... =)
Walmart is one of the world's most sophisticated supply chain management companies. They use a private blockchain network to automatically reconcile invoices and payments. There are entire companies that make REALLY good money today that basically reconcile invoices for trucking fleets. Their blockchain technology does all that work for free, and as a result, they spend far less human hours chasing down data to ensure that the invoices are correct. It creates the paper trail for you automatically.
Okay, but what does the blockchain do exactly? You can have all that with traditional databases and asymmetric signatures.
My suspicion is that all these benefits were just from traditional process improvements, but the suits only approved the expense once someone slapped "blockchain" on the Powerpoint slide to sufficiently bamboozle them.
> Okay, but what does the blockchain do exactly? You can have all that with traditional databases and asymmetric signatures.
I know nothing about this, but my guess is that the "blockchain" Walmart uses is more or less that: a distributed database (not everyone online all the time) with some signatures and eventual consistency.
They've been developing this technology since 2010. Nobody outside of academia even knew what a blockchain was at the time. The blockchain gives them an easy way to create an immutable sequence of invoice and shipping data that reduced the overhead for freight companies by 20% and reduced their manual reconciliation burden from 70% to less than 1%.
My SO used to work in factoring. She and others would spend every day reconciling invoices and shipping information in order to allow the company she worked for to supply freight haulers with short term business loans. Not only would a lack of reconciliation result in not getting paid immediately, but if enough of these pile up (see the 70% number for manual reconciliations), then you're not going to be able to get a factoring loan either and you're dead in the water until something happens. Because it worked so well, everyone jumped on board almost immediately. Freight carriers are spending 20% less to haul the same goods, and Walmart is spending less trying to reconcile invoices.
Could they have used something else? I guess. But blockchains are pretty much just immutable lists of receipts anyway. They're perfect for the use case.
Working professionally with VMI / 3rd party inventories, I don't see how Blockchain would solve anything that isn't solved already. Maybe a well implemented blockchain solution is solving it easier, that's it so.
The main problem with third party inventories is always the question is the reported inventory levels and movements are actually correct. The real world answer to that is counting, together with the third party if so desired. Blockchain doesn't help with that since in itself it cannot guarantee that the physical movements and the dogital information flow are always in sync.
I don't think you can judge the validity of an idea, or a technology, or anything really by looking at its (perceived) failures. The fact you don't think blockchains don't work for bank transfers, shares, currency, contracts, or whatever else doesn't mean they aren't useful. It just means no one has found a use that you think is appropriate yet, or they haven't persuaded you that you're wrong about any of the things you don't like.
The one thing that gives me a ray of hope about blockchain is git. A git repo is a very similar to a blockchain. It has blocks, and each block has a payload, and they're all chained together in a way that allows distributed additions. git looks, walks, and quacks like a blockchain. It's just lacking the consensus bit really. As someone who would gladly apply git to practically every problem in tech it makes me think that blockchains could be really damn useful if only people would stop trying to pretend they're the future of money.
Also that "the consensus bit" isn't a small thing that you just tack on to an existing system for very little cost. That bit turns something really efficient and widely applicable like git, merkle trees, etc. into a vastly more complicated and inefficient system.
What a really strange idea. Of course you can. What better way is there to judge a technology other than its failures and successes?
You reserve judging until you're sure that there's no possible route to success left, and for a reasonably general tech that's a really, really long time. You can judge the attempts along the way, so saying things like cryptocurrencies are stupid is fine, but to write off the entire technology as invalid and useless is going too far. Besides, you don't need to. It doesn't add anything to the conversation. You can just say "no one has found a good use for it" and leave it at that. Saying "no one will find a use" is pointlessly negative.
We've had 14 years of promises and so far, nothing. Why would any rational person believe you?
“despite the passage of time, Bitcoin and blockchain technologies have a kind of permanently nascent feel to them - as though widespread adoption is forever just around the corner”
This perfectly describes how I have felt about VR since the late nineties.
The most amazing feature of Blockchain is the anonymity provided by monero/zcash/tornado etc. However it's being banned by governments because it can be used to launder money.
Digital signatures is the underlying technology of blockchain.
And the most popular use of digital signatures? Application integrity and authenticity.
Git is a perfect answer why blockchain is almost never the answer. It implements an immutable distributed log, just without the mutually distrusting part, and does it for a millionth of the computational resources.
What if bitcoins got disallowed as a currency in most places where you can use it to buy things. Would ransomware go away in that case? I imagine that if the possibility to have anonymous payments disappear, it would be much harder to target regular people with ransomware as well.
> What if bitcoins got disallowed as a currency in most places where you can use it to buy things.
Places where bitcoin is rarely accepted as currency (like Norway where I'm living), does not make it "unpopular" for ransomware (or other anonymous digital payments). As long as someone accepts it as payment, it will always be popular in that type of scenario.
I dislike the idea that anonymous digital payments are inherently bad; since they can be used for criminal transactions; which I often see here at HN. Being anonymous should not be a crime.
At our startup we use a hybrid mechanism. Whenever a user makes a transaction on our app, it gets processed on our standard AWS-hosted postgres database, but then one of our engineers gets into his old truck and drives around the block for an hour or two. This gives us the fast, cheap, and reliable performance of a regular database, with comparable energy usage to a blockchain.
The OP makes a very valid point with satire which, in this case, is relevant.
Proof of work blockchain is horribly energy-inefficient. It's hard to justify it - on a number of grounds - as a solution for a large majority of legitimate use cases.
Outside of speculation and regulatory evasion, has there been a sufficient use-case for Bitcoin and other proof of work chains that justify the costs, inconvenience, and disruptive impacts that go along with it?
> when there are other solutions that are way more efficient
I was explicitly clear that I was commenting on proof of work blockchains. Crypto has a whole host of other issues, but I agree that there are other blockchain/crypto-like solutions that fit - some - of the touted use cases (e.g., GNU Thaler for digital currencies and currency-backed transactions).
The issue, however, is that for good or bad, crypto is currently dominated by Bitcoin. The parent comment is relevant and meaningful in this context, and should not have been flagged.
It was tedious flamebait making a point that has already been a cliché for years—surely in the top 10 clichés of the most flamewar-prone topic that exists right now.
Regardless of one's position is on the underlying issue, that's off topic for HN. We're not here to repeat the same talking points over and over; that's the opposite of what we're here for.
It's weird to see such a widely used technology dismissed as not being useful (it seems we get those articles weekly on HN). There are literally millions of users and billions of dollars worth of value transacted daily[0] but this is just not good enough evidence for the critics. If they can't find a use case that satisfies them, then surely everyone else using it is just wrong.
There are $146B USD of daily transactions that go through the automated clearing house (ACH) system.
While Visa doesn't give a daily transaction amounts, going off of sources online, in 2018, it looks like they processed around or slightly more than 1B credit and debit transactions with an average value of $80.
$3.5B in daily transactions is nothing to sneeze at, but it's a relatively (very) small slice of the monetary system.
Indeed, Bitcoin is still relatively small. Its money supply (aka "market cap") isn't even 2.5% of the USD M1 money supply. Not to count all other fiat currencies.
Honestly, when I first heard of it in ~2011 I never expected it to grow as much as it did. I thought it would probably remain a small experiment confined to nerds and hackers. When it first started hitting mainstream news a few years later I was quite amazed. And while I'm here amazed at how far it got, critics are dismissing it because it hasn't replaced USD yet...
wasn't the original purpose of BTC blockchain made as decentralised payment gateway?
since, that failed, or became impractical it seems people now trying to come up with contrived use-cases as a means to dump a bunch of shitty tokens on greedy retail investors
if vitalik wanted he could create a new chain buterinchain, press a single keystroke to mint 1,000,000 tokens and those tokens would instantly be worth 10s or 100s of $, without any use-case. it's just a joke.
People here on HN are such NPCs when it comes to blockchain. Yaah sure cite another times that VISA has more tx volume or whatever.
I've been working more than seven years in this tech and don't let yourself be deceived - wide scale PKI and immutability of storage is very useful for lots of things.
Sure, 99% of all projects are shitcoins. But it changes nothing about the core tech.
E.g. there are people building quietly the new software supply chain package managers with fully content-addressable and re-producible builds where all hashes are stored onchain to be immutable. But yeah, it's not a VC funded milliondollar project so people can't be happy/angry about it
I want to be happy/angry about it, it sounds actually exciting. Tell me more. Reminds me of how Phoenix BIOS was reversed engineered from the IBM BIOS, and the documentation between documentation team and programmer was entirely written and attested, for legal purposes.
Happy that you're interested. Sadly though, as this community has decided to not have a neutral stance towards new technology, I doubt these efforts will ever be talked about. Instead, the algorithm will serve up a few more NPC-compatible "blockchain is bad" posts. Bon appetite
The blockchain as understood today is a sloppy idea plagued with even sloppier implementations. 100% of the blockchain's legit use cases can be solved with free software that predates it.
- OFAC just sanctioned Tornado Cash which enabled truly private digital cash equivalent
- HN: "There aren't that many uses for blockchain"
- Is privacy considered not a use case anymore? Who here is still following PG advice? Has anyone talked to *their users* recently? Because privacy is a pretty good use case!
It seems to me that this whole issue is fairly simple: does the blockchain technology solve any real-world problem that people have?
A mere analysis of its logic says it does not, actually, solve any meaningful problem whatsoever. Secure transactions are already feasible, it doesn't prevent mischief and the way to settle a dispute is always the same (through the legal system) and decentralization prevents it from scaling.
I agree, it's probably the one use-case where it can be useful and ease the process: funding things anonymously as to circumvent the scope of the law/avoid the eyes of the authorities, far easier with Monero really. This includes funding politically persecuted individuals as well as buying drugs or other things. After all it's mostly what it's been used for (if we ignore speculation), though so far mostly through BTC and the dark web networks of obfuscation.
Found this less convincing than expected. They seem to mostly base the criticism on (a) it's cheaper to use non-blockchain equivalent for the use cases they could think of, and (b) some point in the blockchain equivalent process generates a need to trust another party.
It seems to me that block chains will win at the things they are good for a bit the way git won at version control: decentralised systems just require lower overheads and less barrier to entry in general, so people just automatically use them.
It's fine to point at legacy use cases where all the trust relationships are already established. Those are living off fully amortised costs. But new systems do not have that benefit and for that context, you are faced with a proposition of having to set up a whole lot of new trust infrastructure and associated processes.
So for example, if you were setting up a library today and there were no pre-existing library systems out there. You might want to maintain a history of who borrowed each book, so you know who last had it. You will either have to establish a whole legal entity to become the owner of the books, electronic systems to track them and administer everything, and everyone will have to agree on its governance, who controls it and most importantly, trust them implicitly not to tamper with the transactions.
It'll be a whole lot of work. So why would you do all that work when you can opt for a block chain with literally no overheads?
> It seems to me that block chains will win at the things they are good for a bit the way git won at version control: decentralised systems just require lower overheads and less barrier to entry in general, so people just automatically use them.
Git really only had an inflection point of adoption when Github came out and offered a really compelling centralized service. Before Github, there wasn't a huge drive to move away from SVN (there was some but it was more because the new decentralized ones were better in other ways besides being decentralized and fixed some annoying bugs that SVN had) and it was much less certain that git would win out over mercurial or bazaar or one of the others.
My experience at the time was also that the decentralized nature of git/hg/etc was arguably a barrier to their adoption. Existing teams were used to a workflow with a central repository and it wasn't clear how you would replace that with these decentralized tools. You had to do a lot of work to come up with a new workflow for your team or you made a central server somewhere and tried to make them work as similarly as possible to a centralized system. I remember a lot of pushback on moving to git from people who didn't understand the whole decentralized thing and found it more confusing than what they were used to. And with Github, that seems to be the approach that the vast majority of the world has gone with. Yeah, you can use git as a fully decentralized tool and there are people who prefer that to using Github, but that's pretty uncommon compared to how many teams just centralize with Github.
This is like saying there aren't many uses for computers, they just manipulate 1s and 0s very quickly. It's true but it fails to understand why that's enough.
Blockchain enables digital peer to peer trustless exchange of money (and various other things of which the utility can be debated, many of which are low value) but that's enough. That's a lot
Saying that blockchain is bad at being a database for all of these other things is like saying a cpu is bad at heating your home. Again, technically true and not particularly insightful, because they happen to be really good at manipulating 1s and 0s
A very good explanation of why Blockchain is useless for anything else other than storing speculative tokens. A public, permission-less and trust-less ledger of transaction that uses proof-of-work as a consensus mechanism to add new transactions to the ledger is expensive and slow by design. It's a feature not a bug. That makes it unsuitable for any real world use case at scale. In order to make it fast and cheap - a private, permissioned, trustful blockchain kind of defeats the purpose and thus pointless.
Blockchains can encapsulate identity and payment in a single transaction. If someone were to tie these to HTTP requests (the 402 response, for example) then they would have micropayments for Web requests (API requests).
People always focus on the speculative trading of the assets, but the real killer use case is stuff making calls to other stuff to do more stuff. AI models paid for with micro transactions is going to be a thing. It's just going to take time to get there.
I am sorry, I didn't understand anything of that. You are jumping from HTTP requests to AI models to micro transactions. Real world is much more than API calls.
My problem with blockchains is that they AREN'T decentralized. If controlling a blockchain becomes valuable enough then it's a matter of time before someone will figure out how to profit from it and invest the required resources.
Decentralized in my mind means there is not one single source of truth.
Do we even have an established definition for blockchain?
My understanding is that a blockchain is just a data structure. Saying there aren't that many uses for blockchains is like saying there aren't that many uses for tries or red-black trees.
Blockchains don't have to be decentralized for example.
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