the value proposition of all the crypto nonsense is that some people don't like trusted entities.
I tend to think its not worth the trade off (and the "decentralization" is questionable in practise), but this line of criticism is basically begging the question.
Centralization offers many benefits that some people value. There is nothing whatsoever wrong with that.
Bitcoin offers the choice and makes trusting a 3rd party completely optional.
For some institutions, they already have legal departments and experience with valuable contracts, so this service presents nothing new. Securing the private keys of a cryptographic currency, however, is not something they have experience with.
There is certainly some truth about reality vs. the cypherpunk vision, but I also think this is largely a strawman; many people in the Bitcoin community don't believe in overthrowing governments or that everyone will participate in completely decentralized systems. Bitcoin can still offer value alongside traditional financial markets and the legal authority of the state.
I think you have to want or need decentralization in order to buy into most of the use-cases of the technology, either because you don't trust institutions or because you're in a part of the world where either the institutions aren't safe or the currency isn't.
Assuming you do believe that decentralization is nice to have, applications like decentralized banking (ie. lending, borrowing, exchange of assets) become valuable.
There are also emergent culture sources of "value" in the industry, such as medium native artforms in on-chain generative artworks, distributed multiplayer "runtime" systems artworks, on-chain gaming and metagaming, etc.
I understand that for many people, even if you grant that _some_ people might find the above legitimately valuable or useful you may still believe that it doesn't justify the energy costs. To that my response would be that all of the above are serviced by networks like ethereum and its various layer two solutions, none of which utilize proof of work, and the sum of which have a fairly modest carbon footprint, as with other computationally inexpensive digital technologies.
If you take issue with Bitcoin specifically I can't really offer an argument with conviction. BTC is what got me into the industry, and I think the BTC whitepaper is a brilliant example of human ingenuity, but more recent advancements in the technology leave me skeptical about the societal ROI on large scale PoW operations.
Just shouting "BUT DECENTRALIZATION!" bears as much sense as "BUT BITCOIN".
Decentralization doesn't have inherent value, and has a while host of problems that cryptopeddlers don't want to either acknowledge or pretend to solve.
The resilience, usefulness, and value of a system often isn' its elegance but its adaption. A decentralized trust system IS immensely valuable if it can be done because it allows for a lot of transactions that right now falls between chairs in the digital space.
A lot of the critique of the blockchain is based on the belief that digital allows for abundance (copy paste) and that that is the value of digital. But the reality is that there is plenty of value in scarcity ESPECIALLY in the digital space as it opens up for establishing a unique digital footprint which itself has a lot of value.
As an example, you can't easily exchange a piece of music with a game asset. Or an ebook with a digital pokemon card as there is no medium for the transaction. In other words, a decentralized trust-based system allows, for example, for a second-hand market for among other things digital assets. Or put another way a decentralized blockchain based trust system allows for more fluidity in the market and allow for an ever-increasing level of sophisticated trades.
Our legal infrastructure is built for a non-digital reality, even governments would be interested in adopting the blockchain to allow them to implement regulation in the digital space too.
So I don't think it's silly at all, in fact, it feels a little bit like we are reliving the birth of the internet again when it comes to peoples opinions about it.
I would argue that the decentralised nature is a crucial aspect of the value proposition. It's part of the mythos of why crypto is valuable/worth investing in/going to the moon.
The way it's actually used completely destroys that part of its value, but don't let reality get in the way of a good investment opportunity. I think if you set up a coin that doesn't use a distributed ledger, and instead uses an SQL database, you wouldn't get buy-in from the ~tulip~crypto fanatics because it doesn't line up with aforementioned mythos.
I'm very interested to see how far things can be decentralised.
The problem is that crypto people seem overly keen on decentralising without thinking whether or not there is an actual advantage in doing so, or whether the advantages might outweigh the disadvantages. There is an unfortunate viewpoint that decentralisation is just always a "good thing".
Crypto's value depends on the perception of decentralization which is more marketing that science. In crypto, "relatively centralized" is the same as "decentralized enough".
Decentralized trust on Bitcoin is an illusion in practicality. There are trust bottlenecks all over the place when most people go to use it.
It’s ultimately a quixotic goal. So compromising a bit on mathematical decentralized trustlessness to accomplish some of the other goals of cryptocurrency while addressing the massive waste is a valid goal IMHO.
I think the author of this article is making an either/or argument about centralized vs. decentralized trust when this can just as easily be a both/and proposition.
Cryptocurrencies have not yet eliminated and may never eliminate the need for centralized reputation based systems of trust. Centralized trusted systems are more efficient for reasons that may be fundamental and rooted in physics and math, and they can do things that no current generation decentralized system can do. Complex secure computations that are cheap to perform on a server are massively expensive on a block chain or other distributed system.
Yet what cryptocurrencies do offer is a system that levels the playing field between trusted entities and allows a once-trusted but now corrupt entity to be replaced without completely ditching the entire system. That's not true of things like centrally banked fiat currencies. If the current US financial system becomes irredeemably corrupt, this can't really be fixed without risking the destruction of the dollar and all assets and contracts denominated in dollars. A new dark age is a very high price to pay for the replacement of a corrupt or incompetent system.
I think an argument can be made that replacement of institutions will always be necessary at some point. As institutions become large their size insulates them from reality, allowing something like "genetic drift" to occur that gradually erodes their competence. Combine this with the fact that psychopaths gravitate toward positions of power and you have a general tendency of large powerful systems toward decay and corruption over time.
We saw a very concrete example of this in 2008 when banking institutions that had failed badly due to a mixture of incompetence, hubris, and corruption received a blank-check bailout on the backs of taxpayers and the rest of the non-financial economy. It is no coincidence that cryptocurrency went mainstream right after this, since these events demonstrated the need to start thinking about ways to devolve power away from these systems or at least to reduce the cost of doing so.
Decentralisation offers the following value over centralisation:
* Control by a majority, not a minority. (democratic)
* Open ecosystem that visible and able to be analysed by anyone (transparent)
* Immutable (no one makes up assets without everyone knowing about it)
* Fair. Same price for everyone at all times, no chance of a monopoly.
Those don't exist in central systems and so the price you must pay for that is speed, scalability and anonymity (which is both used for good or bad). I don't believe crypto is the answer to everything, but I certainly don't see it as useless.
This kind of argument came to mind when I first read the thread, but then I thought... isn't the whole point of crypto to be decentralized? To avoid these kinds of concentrated power structures?
We have the ability to remove it, yes, but not for free. Decentralized systems based on proof-of-work are inherently less efficient than centralized, trust-based systems.
The question is, do the costs and downsides of cryptocurrencies outweigh the benefits of not having to trust a third-party intermediary? The author is arguing no, and for the overwhelming majority of real-world cases, I would tend to agree.
Decentralization is not essential to cryptocurrency as a technology. It's essential to a view of how it could be used for the betterment of many.
The technology can just as easily be applied for other purposes, mandated by an authoritarian government to be the only legal way to conduct commerce. You'd use it not because you want to, but because you want to avoid their ire.
Because they are not really decentralised. Vast amounts of cryptocurrencies as they are designed right now are disproportionately held by the early adopters, who will inevitably engage in rent seeking in one way or another (I wish I was wrong on this one).
Decentralisation has to happen through increasing trust between people, while cryptocurrencies are designed to replace trust. Yeah, current institutions controlling our monies are hardly worth the trust, but honestly bitcoin doesn't even remove that trust (it just shifts it to some random self-proclaimed experts at Tether, twitter gurus or god knows what else the crypto people are up to nowadays).
But I think this highlights the dichotomy that is the crypto ecosystem right now.
The people in this thread understand this value prop, but for a significant portion of crypto investors, the value prop is gains.
It may be true that some casual crypto investors are interested because of the decentralization aspect, but that same user wants a PayPal-like experience. Most are not willing to deal with the complexity of doing it "right", and most of the non-technical people I know who buy crypto do it for the gains, not for the defi.
In effect, this makes decentralization nothing more than a marketing promise, and the reality is exactly what you said - a poorly architected, inefficient, unwieldy PayPal. Sure, this system is capable of much more, and realizing the "true" value prop of decentralization, but that doesn't matter much if users are in it for other reasons.
If users were doing it "right", or for sake of argument, let's say users are forced to do it right, I suspect they would just stop participating, bringing valuation down with them.
I tend to think its not worth the trade off (and the "decentralization" is questionable in practise), but this line of criticism is basically begging the question.
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