The part about Lightning making "higher throughput blockchains irrelevant" is correct though. Blockchains inherently do not scale unless you sacrifice decentralization, and once you've done away with decentralization then you don't need a blockchain. You're better off for many reasons using a database instead.
Lightning is a complex piece of technology. It basically requires an ISP-like layer-2 solution where nodes peer with each other in order to route payments. This is not a silver-bullet solution to scaling. ZK rollups[0] are another solution and are live on Ethereum right now.[1]
Lightning is live right now too, and has been for two years. The "ISP"-like (???) layer-2 thing you're referring to is just the fact that Lightning is decentralized and also scales, which is probably why the author accurately claimed that it makes many-TPS blockchains irrelevant.
ZK rollups are completely new and they do not scale nearly as well as Lightning, which performs at nearly 500 transactions per second /per payment channel/. So take the number of channels existing currently on the Lightning Network and multiply by 500 and you have a theoretical ceiling. It comes out to some multiple millions of transactions per second.
As a typical client, when using the Lightning network you open a channel with a peer, which requires an on-chain (slow) transaction and locks up funds. If you don't wish to do this with every single person you want to transact with, then you select a peer who is a major node (exchange, payment processor, etc.) who already has channels with the other major nodes. This will allow you to quickly route payments to anyone affiliated with the large network.
This is why it is like an ISP layer-2 solution. IP packets route through the internet in a similar way.
Its true that blockchains don’t scale, but it doesn’t follow that Lightning is the answer. Especially since it always seems like lightning will be ready for public use “soon”.
Thank you for posting this, it made me look up narcissism of small differences and it sums up this article well. Maybe it would be a better idea to start infighting once bitcoin and other crypto’s make it mainstream.
mostly accurate piece. I can't say I agree with the stablecoin analysis since many are being used as novel financials instruments, but I see where he is coming from.
If future funds aren't investing in Coinbase, Etherscan, and CoinMarketCap because those companies already exist then the risk profile is much higher. All of these companies can make money in up and down markets. It's less obvious that other crypto startups can do the same.
Amen to this part: "Yes but what PROBLEM are we trying to SOLVE?"
Every time a blockchain-based solution comes up, I try asking that question. There's only occasionally a real answer. Then my next question is, "How EXACTLY does this solve the problem BETTER?" The answers there are almost always tautological, some version of, "because blockchain!"
(For what it's worth, I give the original bitcoin paper [1] full marks on these points. It has a clear thesis: distributed e-cash will solve particular problems for particular people. It turns out it was wrong on every count, but at least the idea was clear.)
A while back a friend asked me to meet with a first-time entrepreneur pal. The entrepreneur had a business plan that was, like so many others, "existing business, but blockchain". After some explanation of how it would work, I asked, "Ok, how does this help your users?" The answer was, "It's more secure, because blockchain!" I said that wasn't sure it really was more secure. But either way, how could customers know it was better? Because the customer experience for the blockchain version and the non-blockchain version were the same. Either way, it came down to a company saying, "Trust us!" Would the new company's customers see a claim of blockchain usage as better? And better enough to compensate for the product limitations imposed?
They didn't really have an answer for that. And, unsurprisingly, I never heard back again. Nobody likes it when you tell them their baby is perhaps not the most beautiful child ever. ¯\_(ツ)_/¯
Blockchain is good for permission-less financial innovation including raising funds. It doesn't matter if the SEC considers a digital asset a security if everything is offshore and the purchasers are offshore or anonymous. It is a financial network without regulation.
Regulation can pierce areas of the network that interface with physical entities, just as regulators can regulate pieces of the internet they can control but lack capabilities around the darknet. This is what blockchain is - purely digital and open financial networks.
The laws of sellers of digital assets based in Caribbean islands, and purchasers in locations such as Eastern Europe and Russia, do not necessarily agree with the laws of western nation like the USA. This has nothing to do with sovereign citizens.
> Blockchain is an append-only database. It does not create sovereign citizens.
Telecommunications push bits over a wire or the ether. They do not create "cyber spaces". My point is: There are some interesting applications of these funny distributed systems that do lots of work to maintain an increasingly-consistent cryptographically-secured append-only shared state. Your statement is a bit too reductionist.
Frankly I'm surprised to read this kind of thing on Hacker News. I suppose the days of zeal for revolutionary self-sovereignty are truly over:
> Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.
> This is our world now... the world of the electron and the switch, the beauty of the baud.
When I first read that, I too was inspired by it. But I don't think it aged well. Cyberspace ultimately isn't a space, any more than there was a "telephone-space" or a "telegraph-space" before that. Blind techno-utopianism is an understandable but erroneous reaction that keeps happening, and it generally ends up being ridiculous: https://www.amazon.com/Victorian-Internet-Remarkable-Ninetee...
> Cyberspace ultimately isn't a space, any more than there was a "telephone-space" or a "telegraph-space" before that.
Cyberspace is not a physical space, indeed, but that's missing the forest for the trees. The Internet has enabled a totally new social paradigm for which 'cyber space' is an apt term. Do you disagree that a person's experience and patterns of use on Facebook is fundamentally different from someone whose only electronic means of communication is the telegraph?
> Blind techno-utopianism is an understandable but erroneous reaction that keeps happening [...]
Techno-utopianism is related to but distinct from to the traditional hacker rejection of the state as a valid authority over the Internet. I don't consider either _The Declaration of Independence of Cyberspace_ or _The Conscience of a Hacker_ "blind techno-utopianism". Idealistic, definitely. Heady with anticipation for the world-changing implications of the Internet and frustrated by political dinosaurs who don't get it, sure. Blind or techno-utopian, no, I don't think so.
Your comments are dripping with disdain for the idea that cyberspace might be something fundamentally new and that people might imagine a new paradigm for governance that may be better suited to it.
It is sad to see such cynical pessimism and lack of vision from someone who has the skills that might help to turn their vision into reality.
You can use technology to make the world a better place. It's up to you to actually want to do it.
If everything is offshore it's not subject to the SEC's jurisdiction in the first place.
"Permission-less financial innovation" generally means "breaking federal securities law" because nearly all of these scheme ultimately choose to involve US persons at some point.
Exactly. And there's a clear effect here akin to adverse selection. Financial innovators on the up and up will just use the existing platforms. People who are up to no good and are hoping not to get arrested will have a strong incentive to use new platforms. That moves right on to the slippery slope: the new platforms get reputations for being the financial equivalent of bad neighborhoods, which means even less legitimate financial innovation. Eventually, nobody in their right mind will use the new platform, so it's down to criminals and fools.
I used to write software for financial traders, so I'm more familiar with financial markets and their history than most. It's my firm conclusion that consequence-free "financial innovation" is an absolutely terrible idea.
Every major market started out with little or no regulation, and every one has ended up with quite a bit. This is true even of self-regulating entities, even of markets owned by traders. Why? Because there are tradeoffs between various market virtues. Openness to innovation is certainly one of them. But not having your money taken by scammers and criminals is another.
One of the main things that makes modern financial markets work is trust. If I buy shares of a US-regulated stock, I have some confidence that it's not an out-and-out fraud. A great example of this is WeWork. The only reason they're not public now is that going public in the US requires a fair bit of tightly regulated disclosure. When the world finally got a proper look at their numbers, the scam unwound.
That's obviously great for people who might have purchased the stock. But it's also great for every company who wants to issue stock to raise money. The more people trust that major-exchange stocks are real businesses, the more readily they'll put in their hard-won cash. That's good for everybody: investors, entrepreneurs, and the economy as a whole.
As we've seen with Bitcoin, unrestricted "financial innovation" leads to a lot of incompetence (e.g., MtGox), market manipulation, and outright fraud. So I predict that none of these "permission-less" platforms will ever amount to much until they tackle the same regulatory problems that successful markets everywhere have been forced to tackle.
One interesting application is virtual economies with very low levels of trust and high degrees of fraud. Lets say I'm selling virtual gold items in an MMORPG like WoW or Runescape, if I sell my gold to somebody through Paypal the buyer can quite easily revert the charge or use a stolen credit card found online, the cash will eventually be removed from my financial account or my financial account will be locked or even terminated as a result - while the buyer gets to keep their virtual gold.
It's no surprise that Bitcoin becomes a preferred payment method here because once it's sent it's sent and not going back.
Bitcoin provides an opportunity to remove consumer protections when that effect may be desired, weird as it sounds it is very effective in a trusted seller : untrusted buyer relationship. This process lubricates trade between some international exchanges with countries with higher amounts of fraud or fewer legal protections.
Can't say for sure, there are probably more instances in third world countries were corruption or monopoly creates market inefficiencies that bitcoin can blast through - though I think it boils back to "bitcoin will save us from predatory transaction fees" which I think has been invalidated at this point. Notably the same virtual grey market forums I mentioned for WoW and Runescape have been using high reputation middle men (who charge a 10% fee) to broker the transaction for over a decade. Bitcoin is just more efficient then those middlemen transactions because people are willing to trust entities in exchange for the convenience of a near-instant transaction.
>Bitcoin lightning makes higher throughput blockchains irrelevant.
Lightning is a UX disaster that is not easily solvable as the headaches are part of the protocol itself (opening/closing channels with nodes etc.). I've used some of the various apps that have been released and I find it very difficult to see how "normal" people are going to understand and use it at all. Instead of trying to innovate with new blockchain designs, there is a significant amount of minds trying to hack together bandaids for Bitcoin, a protocol and blockchain that has already been crippled by Blockstream and the scaling debacle.
If one steps back and takes stock of the ecosystem, I find it very difficult to see what value proposition BTC has other than reputation and being a first mover. Store-of-value is something that Monero can do better as it guarantees privacy which I'm sure a lot of people would like. Instant transactions is something that NANO has solved on the protocol/blockchain layer (and without using clunky hacks like Lightning) whereby transactions are settled almost instantly and at zero cost.
Quite frankly, the only thing BTC has going for it is brand value - technically it has already been superseded by other protocols, but BTC maximalists (such as the author of the article) are ignoring this reality likely due to sunk-cost fallacy.
So no, I disagree strongly with the author. There is a lot that can be built within the cryptosphere, and I think trying to gatekeep innovation by limiting it to the BTC protocol is extremely disingenuous.
Lightning absolutely was a UX disaster, but things are improving quickly. There are wallets now that manage your funds completely without the notion of channels, and thats how it should be for most users. You don't even care whats going on under the hood, because it's all automatically managed.
> Store-of-value is something that Monero can do better
Monero has worse scaling issues than Bitcoin and is even harder to use for most people.
> Instant transactions is something that NANO has solved
Every design decision is a trade off. Something free and instant is also infinitely spammable.
If every transaction requires a PoW, its not actually free, and if it's easy enough for a phone to do, its 1000x easier for an ASIC to do, and still doesn't prevent spam.
No one wants to actually store spam data forever, and a lot of blockchains have the issue no one one is actually incentivized to store the crap forever, and _someone_ has to.
I completely agree Bitcoin, at it's base layer could be a better protocol, but nearly every other protocol you'll encounter has made design trade offs that make it less decentralized in the long term
> nearly every other protocol you'll encounter has made design trade offs
MimbleWimble makes pretty good tradeoffs. It improves on both privacy and scalability, while sacrificing transparent supply auditability.
It also does away with all the bitcoin script complexity while still supporting most functionality with "scriptless scripts" including multisig outputs, atomic swaps, discreet log contracts, and even payment channels.
Agreed. I like MW a lot, it's just far from usable for normal people at this point.
On the downside, I don't see any path for such privacy centric projects getting any regulatory support whatsoever, and sadly I think this is needed to become a mainstream thing. I still think MW has immense value, it just may be relegated to niche usage.
Tone is very tribalistic and low level. "If it's not Bitcoin it's not crypto". Irrational dismissiveness of innovation because their investment is at risk from competition.
Like the saying goes "It is difficult to get a man to understand something, when his salary depends on his not understanding it." Similar dynamic here.
If it's not bitcoin, it does not inherit the fix for inflation. If you have a useful innovation, it is possible to deploy it as a bitcoin sidechain, or colored coin on bitcoin, which retains the fix for inflation (no need to create new tokens), whilst enabling whatever developments you've created.
There's one, and only one reason why people prefer to do the print your own token strategy: to generate lots of low cost tokens early on with the expectation of exchanging them for real wealth later on when an exchange market with some liquidity arises and you can market your product to naive investors.
If it's not bitcoin, it's a money grab. It really is that simple.
Bitcoin is a fix for unpredictable and arbitrary emission. But its finite supply, said to be modeled after Gold's, is questionable.
Gold may have a finite supply, but it's been mined for millenia and has slowly increased its supply rate over time, and will likely continue to do so in our lifetime.
In contrast, Bitcoin's emission which ranges from 2009 through 2140 is heavily tilted to the first few years.
Its final century from 2040 through 2140 accounts for only about 0.5% of emission.
The only point of the halvings is to be able to claim "finite supply". A constant reward would still have the yearly supply inflation rate (stock to flow ratio) going to 0, albeit more slowly. So crucially, supply would still be scarce, would be more predictable (time independent), more fair to late adopters, and be much closer to Gold's emission over our lifetime.
It would also avoid the inherent instability [1] of mining rewards dominated by transaction fees.
If we further consider the fact that coins inevitably get lost, then even a constant reward will yield a softcap of supply, where yearly emission merely serves to balance the yearly losses.
Unfortunately, practically all cryptocurrencies subscribe to the notion that early miners must receive greater rewards, even when they often already enjoy lower difficulty.
37 comments
[ 2.7 ms ] story [ 102 ms ] threadBitcoin lightning makes higher throughput blockchains irrelevant.
Bitcoin maximalist hit piece. All other coins are worthless to the bitcoin maximalist.
I love BTC but there is a lot of innovation in crypto, almost all of which is not on BTC.
[0] https://docs.ethhub.io/ethereum-roadmap/layer-2-scaling/zk-r...
[1] https://loopring.org/#/protocol
ZK rollups are completely new and they do not scale nearly as well as Lightning, which performs at nearly 500 transactions per second /per payment channel/. So take the number of channels existing currently on the Lightning Network and multiply by 500 and you have a theoretical ceiling. It comes out to some multiple millions of transactions per second.
This is why it is like an ISP layer-2 solution. IP packets route through the internet in a similar way.
The narcissism of small differences comes for all of us, it seems.
https://en.m.wikipedia.org/wiki/Narcissism_of_small_differen...
Every time a blockchain-based solution comes up, I try asking that question. There's only occasionally a real answer. Then my next question is, "How EXACTLY does this solve the problem BETTER?" The answers there are almost always tautological, some version of, "because blockchain!"
(For what it's worth, I give the original bitcoin paper [1] full marks on these points. It has a clear thesis: distributed e-cash will solve particular problems for particular people. It turns out it was wrong on every count, but at least the idea was clear.)
A while back a friend asked me to meet with a first-time entrepreneur pal. The entrepreneur had a business plan that was, like so many others, "existing business, but blockchain". After some explanation of how it would work, I asked, "Ok, how does this help your users?" The answer was, "It's more secure, because blockchain!" I said that wasn't sure it really was more secure. But either way, how could customers know it was better? Because the customer experience for the blockchain version and the non-blockchain version were the same. Either way, it came down to a company saying, "Trust us!" Would the new company's customers see a claim of blockchain usage as better? And better enough to compensate for the product limitations imposed?
They didn't really have an answer for that. And, unsurprisingly, I never heard back again. Nobody likes it when you tell them their baby is perhaps not the most beautiful child ever. ¯\_(ツ)_/¯
[1] https://bitcoin.org/bitcoin.pdf
Regulation can pierce areas of the network that interface with physical entities, just as regulators can regulate pieces of the internet they can control but lack capabilities around the darknet. This is what blockchain is - purely digital and open financial networks.
Blockchain is an append-only database. It does not create sovereign citizens.
Telecommunications push bits over a wire or the ether. They do not create "cyber spaces". My point is: There are some interesting applications of these funny distributed systems that do lots of work to maintain an increasingly-consistent cryptographically-secured append-only shared state. Your statement is a bit too reductionist.
Frankly I'm surprised to read this kind of thing on Hacker News. I suppose the days of zeal for revolutionary self-sovereignty are truly over:
> Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.
> This is our world now... the world of the electron and the switch, the beauty of the baud.
Cyberspace is not a physical space, indeed, but that's missing the forest for the trees. The Internet has enabled a totally new social paradigm for which 'cyber space' is an apt term. Do you disagree that a person's experience and patterns of use on Facebook is fundamentally different from someone whose only electronic means of communication is the telegraph?
> Blind techno-utopianism is an understandable but erroneous reaction that keeps happening [...]
Techno-utopianism is related to but distinct from to the traditional hacker rejection of the state as a valid authority over the Internet. I don't consider either _The Declaration of Independence of Cyberspace_ or _The Conscience of a Hacker_ "blind techno-utopianism". Idealistic, definitely. Heady with anticipation for the world-changing implications of the Internet and frustrated by political dinosaurs who don't get it, sure. Blind or techno-utopian, no, I don't think so.
Your comments are dripping with disdain for the idea that cyberspace might be something fundamentally new and that people might imagine a new paradigm for governance that may be better suited to it.
It is sad to see such cynical pessimism and lack of vision from someone who has the skills that might help to turn their vision into reality.
You can use technology to make the world a better place. It's up to you to actually want to do it.
"Permission-less financial innovation" generally means "breaking federal securities law" because nearly all of these scheme ultimately choose to involve US persons at some point.
Every major market started out with little or no regulation, and every one has ended up with quite a bit. This is true even of self-regulating entities, even of markets owned by traders. Why? Because there are tradeoffs between various market virtues. Openness to innovation is certainly one of them. But not having your money taken by scammers and criminals is another.
One of the main things that makes modern financial markets work is trust. If I buy shares of a US-regulated stock, I have some confidence that it's not an out-and-out fraud. A great example of this is WeWork. The only reason they're not public now is that going public in the US requires a fair bit of tightly regulated disclosure. When the world finally got a proper look at their numbers, the scam unwound.
That's obviously great for people who might have purchased the stock. But it's also great for every company who wants to issue stock to raise money. The more people trust that major-exchange stocks are real businesses, the more readily they'll put in their hard-won cash. That's good for everybody: investors, entrepreneurs, and the economy as a whole.
As we've seen with Bitcoin, unrestricted "financial innovation" leads to a lot of incompetence (e.g., MtGox), market manipulation, and outright fraud. So I predict that none of these "permission-less" platforms will ever amount to much until they tackle the same regulatory problems that successful markets everywhere have been forced to tackle.
It's no surprise that Bitcoin becomes a preferred payment method here because once it's sent it's sent and not going back.
Bitcoin provides an opportunity to remove consumer protections when that effect may be desired, weird as it sounds it is very effective in a trusted seller : untrusted buyer relationship. This process lubricates trade between some international exchanges with countries with higher amounts of fraud or fewer legal protections.
Are there markets with this kind of trust asymmetry that aren't up to something totally dodgy?
Now though... pervasive wireless is available for most circumstances and is cheaper than the complexity of a distributed blockchain.
Lightning is a UX disaster that is not easily solvable as the headaches are part of the protocol itself (opening/closing channels with nodes etc.). I've used some of the various apps that have been released and I find it very difficult to see how "normal" people are going to understand and use it at all. Instead of trying to innovate with new blockchain designs, there is a significant amount of minds trying to hack together bandaids for Bitcoin, a protocol and blockchain that has already been crippled by Blockstream and the scaling debacle.
If one steps back and takes stock of the ecosystem, I find it very difficult to see what value proposition BTC has other than reputation and being a first mover. Store-of-value is something that Monero can do better as it guarantees privacy which I'm sure a lot of people would like. Instant transactions is something that NANO has solved on the protocol/blockchain layer (and without using clunky hacks like Lightning) whereby transactions are settled almost instantly and at zero cost.
Quite frankly, the only thing BTC has going for it is brand value - technically it has already been superseded by other protocols, but BTC maximalists (such as the author of the article) are ignoring this reality likely due to sunk-cost fallacy.
So no, I disagree strongly with the author. There is a lot that can be built within the cryptosphere, and I think trying to gatekeep innovation by limiting it to the BTC protocol is extremely disingenuous.
Lightning absolutely was a UX disaster, but things are improving quickly. There are wallets now that manage your funds completely without the notion of channels, and thats how it should be for most users. You don't even care whats going on under the hood, because it's all automatically managed.
> Store-of-value is something that Monero can do better
Monero has worse scaling issues than Bitcoin and is even harder to use for most people.
> Instant transactions is something that NANO has solved
Every design decision is a trade off. Something free and instant is also infinitely spammable.
If every transaction requires a PoW, its not actually free, and if it's easy enough for a phone to do, its 1000x easier for an ASIC to do, and still doesn't prevent spam.
No one wants to actually store spam data forever, and a lot of blockchains have the issue no one one is actually incentivized to store the crap forever, and _someone_ has to.
I completely agree Bitcoin, at it's base layer could be a better protocol, but nearly every other protocol you'll encounter has made design trade offs that make it less decentralized in the long term
MimbleWimble makes pretty good tradeoffs. It improves on both privacy and scalability, while sacrificing transparent supply auditability.
It also does away with all the bitcoin script complexity while still supporting most functionality with "scriptless scripts" including multisig outputs, atomic swaps, discreet log contracts, and even payment channels.
On the downside, I don't see any path for such privacy centric projects getting any regulatory support whatsoever, and sadly I think this is needed to become a mainstream thing. I still think MW has immense value, it just may be relegated to niche usage.
If by that they mean 'losing adoption and acceptance around the world' then, sure.
BTC has obviously lost the game at being any kind of 'currency' and as a real store of value beyond the speculative type, it's not quite there.
Are there any serious funds putting BTC in their portfolio as a matter of regular discourse?
When Buffet pulled out of stocks and went 'cash' a few years ago, did he allocated 4% to BTC? No, why not?
The industry is in a death-march, the path forward for blockchain, and such things is not quite clear.
Like the saying goes "It is difficult to get a man to understand something, when his salary depends on his not understanding it." Similar dynamic here.
There's one, and only one reason why people prefer to do the print your own token strategy: to generate lots of low cost tokens early on with the expectation of exchanging them for real wealth later on when an exchange market with some liquidity arises and you can market your product to naive investors.
If it's not bitcoin, it's a money grab. It really is that simple.
Bitcoin is a fix for unpredictable and arbitrary emission. But its finite supply, said to be modeled after Gold's, is questionable.
Gold may have a finite supply, but it's been mined for millenia and has slowly increased its supply rate over time, and will likely continue to do so in our lifetime.
In contrast, Bitcoin's emission which ranges from 2009 through 2140 is heavily tilted to the first few years.
Its final century from 2040 through 2140 accounts for only about 0.5% of emission.
The only point of the halvings is to be able to claim "finite supply". A constant reward would still have the yearly supply inflation rate (stock to flow ratio) going to 0, albeit more slowly. So crucially, supply would still be scarce, would be more predictable (time independent), more fair to late adopters, and be much closer to Gold's emission over our lifetime.
It would also avoid the inherent instability [1] of mining rewards dominated by transaction fees.
If we further consider the fact that coins inevitably get lost, then even a constant reward will yield a softcap of supply, where yearly emission merely serves to balance the yearly losses.
Unfortunately, practically all cryptocurrencies subscribe to the notion that early miners must receive greater rewards, even when they often already enjoy lower difficulty.
[1] https://www.cs.princeton.edu/~arvindn/publications/mining_CC....