This article seems to be intentionally written in a hyperbolic fashion, comparing things which are completely different with each other under the guise of "web3" or "blockchains".
Bundling a bunch of bad sounding things up and pretending they are interrelated is intellectually dishonest and counter productive to anyone who takes the time to read the article.
The writer doesn't. There are multiple clear instances of mental gymnastics in this article. From previous articles the author has written it seems like they have been researching this topic for 4 days before writing this article. Hardly enough time to become a domain expert.
> For example, if you bring up the question of whether the major centralized exchanges could all decide based on instructions from an oppressive government to freeze exchange of tokens belonging to a dissident, you’ll be told that that’s no problem in their theoretical world where a Bitcoin is a Bitcoin and if an exchange won’t accept yours, you can easily find an exchange that will.
Centralised exchanges can't freeze the exchange of Bitcoin. They themselves can decide that THEY won't accept money from certain individuals (Centralised exchanges are required to complete KYC for users), but they have no power to stop UTXOs being spent on the network. The only way UTXOs can be prohibited from being spent is via consensus between node operators.
This is just one example of many points where the author decides to fuse centralised services which interact with the decentralised network with the network itself.
I agree the wording is a little vague, but now you're just being pedantic. Her point still stands. "Freeze exchange of tokens" doesn't have to mean "stop the Bitcoin network from operating", it could also mean simply issuing a government order to all exchanges to not accept a particular UTXO. Anybody operating an exchange who doesn't want to go to prison has to comply with the order. Governments can do that -- it's not that hard to issue an Interpol alert for a particular UTXO, legislation and enforcement just haven't caught up yet. That effectively "freezes the money", because then the person holding that UTXO cannot withdraw it anywhere. Governments already do this with paper money, which is why laundering cash is such a headache, and Bitcoin only makes it EASIER to track and prevent illegal flows of money. Paper cash is still more decentralized than Bitcoin, hence the article's main point stands: Blockchain-based systems are not what they say they are.
If bitcoin is the only crypto currency that exists then yes you are right. But there are already ways to work around such a ban (like swapping to monero). In several of the recent hacks, big exchanges did try to ban addresses but were not successful in stopping the laundering. Or at least that is my understanding right now.
If you freeze a UTXO, one can spend that UTXO inside the network by committing a transaction and the output will be a new UTXO which is different from the previous one, thereby unfreezing it.
This is the basis for mixing services which do this at scale.
The fact is that the author is using intellectually dishonest arguments to try and convey something as the truth, which is not true.
The above also doesn't take in to consideration any L2 or Taproot transactions that provide even easier ways to mitigate Government overreach.
You've selected an awful example. The one you choose wasn't an argument on anything technical concerning bitcoin, nor was it a claim on possibility of centralized exchanges blocking on chain transaction.
It is like you haven't read the preceding and the following paragraphs.
Author was simply relying his/her experience in discussing with crypto supporters. In the paragraph you quoted the response of crypto supporters is that exchanges have no power. In the following paragraph the response of crypto supporters is that exchanges have the power.
This web3 craze should be an incredibly interesting topic for interdisciplinary research. Historians, economists, computer scientists, psychologists and so on have been handed a wild field study here.
It's a speculative bubble, we've been having and studying those since the Tulip Mania of 1634—1637. The only novel thing about it is what thing exactly is being hyped.
It has some unique aspects, they try to introduce ad-hoc version of a monetary system, regulation and so on on top of it. These systems and regulatory institutions (which are private) emerge almost spontaneously, plus there is a huge marketing hype surrounding it, even ethical and political rationalizations.
Another aspect is how quickly it becomes centralized and privately controlled. And then there is a whole story about social media hype and anxiety. It also had recent heavy real world effects: The protestors in Kazakhstan have shut down a large bitcoin facility.
It's an interesting experiment to say the least. Sure there are parallels to previous instances in history, which is why many of us have been very critical of it, but it seems to be a unique blend.
We're using NFTs as a way to represent IP, to bring more academic research to the forefront. It's not about shilling it on OpenSea all the time — we're collaborating with https://www.molecule.to/ and https://www.vitadao.com/ to speed up the cumbersome tech transfer landscape
Even billionaires and hedge funds participate in this bubble.
We have seen in the past that people start to invest in risky assets before a depression. I think a depression is coming.
We have words for such things. Anything which is NOT what it claims to be, while soliciting money, is by definition a "scam". A specific kind of sophisticated scam works by paying out older investors using money gained from new investors, and that is called a "ponzi scheme". And so the web3 wheel keeps turning.
I thought there was a thread about this a couple of days ago.
A Ponzi Scheme is where the sum of all investor's reported account values exceed the total value of assets held by the institution.
In order to sustain the fraud, new investors are sought out to get capital to pay out old customers.
Bitcoin may be a scam, or may be used by scammers, etc., but it's not a Ponzi. Rather than give it a label, say what you think is happening -- that it's an asset bubble sustained only by the existence of greater fools and thin, unregulated, manipulated markets. That's fine and we can argue points on that. But calling it a Ponzi just makes things confusing.
Gold I think is a good benchmark. But really any forex asset is just as good or better for a comparison.
Gold has some portion of its value derived from decorative uses and numismatic purposes. People don't put 100 dollar bills on necklaces or wear quarter pendants.
If you hold Euros as an investment as an American (or vice versa with dollars) then this as an investment class is extremely similar to Bitcoin. Sovereign debt has similar characteristics but is subject to interest-rate based fluctuations to a greater dgree.
The main difference is that the markets for foreign exchange are tightly regulated and trade with huge amounts of liquidity -- it is difficult to inconceivable for any entity to affect the price in any way useful for market manipulation (with some exceptions, like Soros's little game with the Pound).
If BTC-style price manipulation was the rule with gold, married couples would be melting their wedding rings.
You simply cannot rely on bidding for price discovery when a significant portion (>50%) of the trading volume in cryptocurrencies appear to be wash trades, and with nothing else to tether it to, the prices keep bouncing around.
Gold doesn't make false claims about being "decentralized" while being anything but. Gold also has actual industrial uses outside of simply being a store of value.
Neither of those pertains to pyramid schemes. You want to say that Bitcoin is useless so you should say that. Words mean things and Bitcoin is not a pyramid scheme.
This is a question of solvency. They were not Ponzis beforehand because the fair market valuation of their assets was correct. When the valuation changed, then they had the opportunity to become Ponzis, but things went a different way.
If banks had been forced to mark their assets mark-to-market, then they would have had to either 1) become insolvent, or 2) write-down customer deposits, or 3) take out huge amounts of loans to cover the difference.
The idea of TARP was to artificially mark up their assets so that they appeared to be solvent, with the Fed and the Treasury acting as the backstop in case of liquidity crunches or runs on the market. This never really panned out and the Fed just took the money and did 3 instead, and Congress was just "hey, fuck it, whatever".
2 is out of the question -- the formalism of the banking infrastructure created by the Fed and later the New Deal basically forbids saying "hey, you're taking a haircut on your savings account because you were really investing and investments may lose value".
1 was what some of them did, too, and then bigger banks came in and bought them up with borrowed money.
Sure, to the technical definition of assets, but the point is that by definition fractional reserve banks don’t have the money on hand to pay out if all of their customers decided to withdraw at once.
> A Ponzi Scheme is where the sum of all investor's reported account values exceed the total value of assets held by the institution.
Which is exactly what Tether, other stablecoins, and a lot of shady centralized exchanges did. They report account values in USD, coin market caps in USD, total on-chain trading volumes in USD, where are there is often no USD to be found anywhere, just lots of digital play-money being thrown around. It's a completely false report of account values, so while Bitcoin itself might not fit the strict definition of a Ponzi, many of the enterprises operating in the ecosystem do.
Sure; you want to accuse Tether of being a Ponzi Scheme? I think it fits the plain definition to some degree. The points that have to be dealt with are:
1. How much tether is held by Tether itself (and thus is a self-cancelling asset) vs. how much is held by outsiders (and does Bitfinex count as an outsider?)
2. What is the fair-market valuation of Tether-held assets. A bank may have non-cash assets (like outstanding loans); that does not make it fraudulent unless the valuations are fraudulent, and does not necessarily make it insolvent.
Regardless this doesn't make Bitcoin into a Ponzi. To even connect it to Bitcoin, the question is to what degree fraudulently issued tether affects the market for other cryptocurrencies? Madoff, for example, was a Ponzi that "operated in the ecosystem" of traditional finance, but that does not taint the stock market by definition.
I continue to feel that stablecoins are far more dangerous than floating cryptocurrencies because they are piggybacking off of the legal status of sovereign currencies but are not under their supervision, so like S&L or LTCM they are a shadow banking system that imposes two-way risks on finance systems. But this doesn't really affect my thinking around floating cryptocurrencies in any significant way.
this is why I don't like marketing, cause usually it is deceptive, even when somebody has the best intent. It's like language (even math has boundaries), you cannot precisely transfer meaning.
The points on immutability are incorrect. When Ethereum was rolled back to reverse the 2016 DAO hack the data was not lost, it continues on the Eth Classic chain - it is still immutable.
That chain is no where near as valuable today - that's true of most forks, one wins and the other loses. For most Ethereum users, and for the Polkadot users for which a similar fork happened recently, the early reversion to remedy loss caused by an exploit is considered a feature, not a bug and it was the community that decided which fork would win.
There has been much more money lost to similar exploits in various contracts since the infamous DAO hack, and the chain was not rolled back - if it ever was it would likely be a losing fork unless the community of users agreed on its value.
For Ethereum specifically this is more problematic as its full nodes are expensive to run and don't have much say compared to miners or centralized node providers like Infura, but this type of fork in principle isn't an example of immutability, and chains which do subsidize node costs to avoid the centralization seen in Eth's user facing nodes remain in control of the users.
In total, picking out the worst parts of the Ethereum network and generalizing it to 'blockchain' is lazy, and doesn't even fulfill the modest goal of the essay to "[discuss] how these technologies work in practice today," as it ignores the nascent systems whose developers were the first on scene to many of these problems and decided that they were solvable rather than bloggers with slightly deeper than surface level understanding seeing the same problems years later and deciding they were unsolvable.
Considering this only happens to "big" projects and not a simple user making a mistake it's pointless to see it as immutable. It's immutable in practice only for you, but not in practice (like the article claims) for bigger projects who happened to make a mistake. It's all 'in practice' as yes, the original data is not lost but for all practical purposes it is.
Calling it out to all blockchains is valid in my opinion, as it counts for all blockchains despite happening more often around some than others.
With smaller chains that have much smaller amounts of total mining power its feasible for people to just jump in and run a 51% attack. So even in that sense they're not necessarily immutable.
Fine, let's talk about practicality. The practicality of a blockchain protocol which is never allowed to 'update' via a fork is fairly kludgy. So if we allow forks, how can we be sure that in practice, for users, their account balances are immutable?
Well its easy, a sufficiently decentralized protocol, like Bitcoin for example, can have a large group of miners and nodes agree to scam one or more users out of their account balances by simply forking the chain. Anyone not in on the scam, even if it was as small as to take $10 from a single user, has no reason to even consider that fork - the fork which scams any user to any degree is worthless, as well as being provably invalid. It only takes one node with the honest history to maintain what users care about.
Saying this is practically mutable is like saying today's newspaper is mutable because we can all agree to print an altered version of it, while ignoring the fact that it is trivial to find and prove ownership of the original (being generous with my analogy, carbon dating, time-stamping the paper, w.e.).
I don't think it's fair to say their point is incorrect. If you're talking in absolute technical terms about what "a blockchain" is in the abstract then, sure, a blockchain is immutable... but cryptocurrencies don't use "a blockchain" they have "the blockchain" and "the blockchain" is just whichever blockchain the network has decided is the blockchain. For all intents and purposes, "the Ethereum blockchain" is mutable because it can be swapped out if everyone agrees.
All us crypto-skeptics know about this is that it's technically possible to effectively erase and redistribute transactions by doing a hard-fork and that "the community" have shown they're quite willing to do so. Saying that they technically can't be erased but that they'd always exist in a potentially-worthless fork isn't exactly reassuring. In fact it's a little bit disingenuous because I think it's pretty clear what people's issue is with "immutability" (namely "they say it's immutable, but it looks like they can and will mutate it") and this is quite an artful dodge around around that. And people like us see that the world of cryptocurrencies is rife with scammy activity and bad actors, so we go "ah ok, it's just another one of those" and move on.
If worth matters to you you should be reassured that in the Ethereum style fork of 2016 no matter which side you agreed with you owned your coins in both chains (unless you were a hack victim or hacker). No one was punished for "choosing wrong."
The concern about forks happening willy-nilly at the expense of users is sometimes legitimate in smaller chains or maybe even chains like Ethereum which do not incentivize decentralized node services and as a result has majorly centralized nodes, but for Bitcoin and more nascent protocols which understand this problem the concern over arbitrary forks is thankfully frivolous.
The blockchain that we now know as Etherium does not contain the blocks that were erased. The fact that those blocks still exist on a completely different blockchain is irrelevant. They have been deleted from the Etherium chain.
If you are calling that "The Ethereum Chain" then it seems your preferred fork won. Those who believe rolling back exploited funds was wrong see what you call "The Ethereum Chain" as the fork and Eth Classic as "The."
Either way, members of each fork kept their account balances, so anyone who really believed in Eth Classic but held their forked tokens is no worse off. If you want to talk about Eth politics and immutability (which is a good conversation) then it shouldn't be applied to all blockchain; not all chains are subject to such political influence if you claim that was a factor.
But everyone (even you) refers to Eth Classic as Eth Classic. I think we can accept that the fork succeeded and "Etherium" is not Eth Classic.
I don't claim anything, except that the blockchain we now call "Etherium" does not contain the deleted blocks, and that therefore blockchains are not immutable.
> In June 2016, attackers exploited a vulnerability to steal 3.6 million ETH (then about $50 million) of the project’s 11.5 million ETH (about $160 million).
People love to tout this example, I did too, until that realized that one a one off event. There are regularly significantly more larger thefts of crypto currencies these days[1] and nobody is even willing to discuss a hard fork. I now chalk this up as growing mistakes which every project makes in early stages. I'm still not into this whole idea of crypto currencies, but don't think we can use this point fairly any more.
Yes. Similarly, you can totally rely on your gold or fiat money being yours. Ok, there was this small incidence in 1933 where the US government took most of your gold, but that was a one off event [1]. And then during the hyperinflation in Germany your money actually became worthless, but that was a growing mistake. Of course, that was multiple generations ago, not a few years.
Conclusion: On the dimension of reliability and censor resistance, crypto might be as good as gold or fiat (while on all other axes it remains much worse).
[1] Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve in exchange for $20.67 (equivalent to $413 in 2020)[5] per troy ounce. https://en.wikipedia.org/wiki/Executive_Order_6102
This. Ultimately the defence blockchain has against hard forks is exactly the same as the defence other monetary systems have against things like hyperinflation and mass asset seizure which cryptoenthusiasts worry about: generally the people with the [hash]power have strong incentives not to do so. Except when those incentives change. In both cases, how much confidence you can place in that theoretical incentive structure protecting you varies widely according to who and why (you can be pretty confident that your US dollars won't be hyperinflated, the contents of your Swiss bank account won't be seized to balance another government's books and nobody with significant hashpower cares that you scammed Joe Sixpack out of BTC. You can't be so confident your Venezuelan Bolivars or shitcoins won't become worthless next month or that you'll get to spend gains from a heist against an Ethereum Foundation or US government flagship project.
> On the dimension of reliability and censor resistance, crypto might be as good as gold or fiat (while on all other axes it remains much worse).
I completely agree. My only point was its bizarre that people choose the DAO incident to bash crypto people. They have plenty of evidence that the community learned from the incident.
> I now chalk this up as growing mistakes which every project makes in early stages.
Except it's not new at all; regular banks and the fiat money they have been handling have been dealing with these things for literally centuries.
But the cryptobros decided they could do better, converting their PHP Magic the Gathering trading platform to a Bitcoin trading platform and thinking yeah, that's good enough for handling billions. To name but one example.
That is quite a uncharitable read. I understand they made mistakes, but so does every technology in the beginning. They also had the unenviable task of coming up with how to behave in a community. They are trying to do something new, and had some failures which are obvious in hindsight. But that should not be used to bash in their heads on each instance. Especially because they have shown consistently now that they understand the mistake and have not repeated it.
I don't trust ETH for this reason, and it seems eth people have not taken measures to prevent this from happening again -- probably they will not hesitate to do it again. Thankfully there is more to crypto than eth
All chains can do this though. We have to remember crypto is inter-subjective. A chain only has value when other people agree it has value. Eth Classic still exists, it even has some value for whatever reason. Block chains are about crowd consensus, and any block chain community can decide to hard fork. I don't think its possible to prevent that on a block chain.
I find the article disappointing. I would say this article itself is not what it says it is. Its title is written in click-bait fashion in that they are about to reveal something we don't know about blockchain technology and then the first paragraphs are written in the tone that they realize theoretically blockchain technology ideally runs a certain way but they want to tell us how it runs today and then proceeds to bash the implementation of the technology today even though they realize it probably wont work that way in the future.
It is like bashing the internet of not fulfilling the potential people pitched about it in the 90s. Blockchain is currently in the dail up stage of the internet, it is centralized, slow and needs adoption and lots of man hours to unleash its potential. There are second and third order effects that need to actualize before the "dream" of blockchain technology can be realised. The article purports the lack of this actualisation of the blockchain dream as if we are being deceived.
It's like when people bashed Tesla and said it wont work because there were not enough charging stations across the USA, as if world changing technologies are realized in a day. I find it boring that people push these kind of articles as think pieces. We can do better
The article makes some specific points, which you fail to address. Your objection is a generic "never mind that, just give it more time". You can do better.
We keep seeing this from the crypto crowd. "It's still early days" to solve these thorny social problems with yet more tech innovation. Always just around the corner.
It's like when people bashed Tesla and said it wont work because there were not enough charging stations across the USA, as if world changing technologies are realized in a day.
Tesla built a network of chargers to fix that problem. They didn't hand-wave it away with "it probably won't work that way in the future" - they came up with a real plan of action and executed on it. After that a lot of the skeptics came around.
The same is true for cryptocurrencies and NFTs I imagine. When devs in that industry come up with a workable solution and execute it people will change their minds. Until that happens it's entirely fair and reasonable to say that cryptocurrencies and NFTs have some serious problems, and claiming "it probably wont work that way in the future" is not an answer.
You can't just ignore problems by saying they're not problems. That doesn't work.
Same goes for Tesla's autodrive efforts. People are right to bash it while the promises are not delivered. When the cars can drive themselves properly, people will mostly forgive them.
I agree wholeheartedly with you that these issues around web3 (immutability, decentralisation etc) will be solved in the future. Do I know how they’ll be solved? No! I could guess but doubt my guesses would be any good - but pretty much every single piece of technology or large tech company has started off with something that seemed a bit fragile or silly etc. It’s interesting that there’s so much scepticism around the future of web3 on HN (could it be mix of disappointment that marketing is running amok with the term “web 3”, that it’s currently over-hyped and under-delivering, that there’s so many scams and easy money-grabs going on?)
Ethereum has been around since 2013. It's time to stop claiming "this is broken but we just need more time to fix it". Nearly 10 years later Ethereum still doesn't have a single app (or dApp) with more than a million daily active users (DAU). That's an extremely slow adoption rate for something that is touted as "revolutionary technology". For comparison, Facebook had about 482 million active users only 5 years after launch. TikTok reached 50 million daily active users in less than a couple years.
That is a really interesting question. Would that NFT be illegal to own or posess? It isnt the actual material. It could be a hash and ownership information, but the illegal material need not be in the NFT. Hashes for such material are not illegal. In fact there are databases full of such hashes in use by file hosting services to detect and remove such things. Owning an associated NFT would be like owning an NFT for "cocaine" but never being anywhere near real cocaine. It may be worthless, but i dont see how it would be actually illegal.
Anyone that would want to own such a thing probably cares about what it points at so they're more than likely going to possess the illegal content as well. For example if you own an art NFT that is on IPFS you probably want to pin it yourself to make sure the link doesn't rot whilst you own it. Then some images are actually on-chain so the NFT and a copy of the picture exist together.
That said there is an explicit link between the NFT and the child sexual abuse material so I'd presume there is a legal case that keeping one is keeping the other. Like if you made sure your hard-drive was totally clean but kept bookmarks to abuse material.
In the example of cocaine there is no explicit link but if they could connect the NFT to a criminal enterprise then I guess there's likely some laws around profiting/handling gains from criminal activity.
I think the general principle behind the criminalisation of such images is that the sharing creates market demand for the abuse; the hash of the image isn't what gets file hosts off the hook because their moderators won't be punished for manually checking and deleting images either. On that basis, I can see someone apparently knowingly purchasing tokens symbolically representing actual acts of child sex abuse for a lot of money being in plenty of trouble even if the images never touch any of their computers.
Perhaps their best defence would be that NFTs are complete nonsense which have no tangible connection with the mutable, third-party-controlled URL endpoint they are supposedly a token representation of...
Footnote #1 suggests the author is concerned with solutions to the availability of CSAM. In this light the ownership of the NFT is actually irrelevant. Anyone can read the data in the NFT. That data will either point to CSAM or it won't. The problem, if there is one, would be with anyone with a copy of the blockchain's ledger – it would have nothing to do with the ability of anyone to update the ledger.
Yes. This is true. It also confirms that owning an NFT of a thing is not the same thing as owning the actual thing.
You are not guilty of owning CSA material until it's found on your computer.
You do not own that cat picture unless you have some documentation that transfers copyright from the author to you (like a receipt, a contract, or similar). An entry on a blockchain is not that.
Can I own something without possessing it? Clearly one can own a copyright over something without possessing a copy. So while it is illegal to possess CSA, is it illegal to own rights over it?
This issue came up a few years ago with those stolen iphone images of celebs, some of which were underage. If the photos are illegal, then DMCA takedowns might not work if one cannot own the copyright to an illegal image.
Well pretty much. Gold would be good but it's difficult to audit as only a limited number of people can access the vaults; this auditing process is highly corruptible as history has shown us over and over again... In reality, because of this auditing issue, there was never enough gold to back the paper, even under the gold standard.
With Bitcoin, anyone can audit holdings of BTC since the ledger is public.
Maybe it's a good time to remind that Bitcoin is not Ethereum. Bitcoin has always focused on maximizing decentralization. This debate goes back to blocksize war in 2015-2017, when small blocks and decentralization won over big blocks and increased throughput. The idea is simple; the network is more decentralized, when more people can reasonably run a full node on their own home computer. It is possible to run a full Bitcoin node on a typical laptop or desktop PC, or a dedicated Raspberry Pi with external 1 TB hard drive. It doesn't mean that everyone has to run their own node; it's enough that it is possible.
For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. That's why most of the nodes are run by companies such as Infura.
This is also the root of the argument why many bitcoiners think that most altcoins such as Ethereum are scams. Like the article suggests, they're promoted and sold as decentralized but in reality are quite far from it.
> For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. That's why most of the nodes are run by companies such as Infura.
Bitcoin mining centralised by 2014, when GHash hit 51% and promptly spit into smaller pools so as not to frighten the suckers. In 2015, the guys controlling 80% of mining pools stood on the same stage together.
It's important to distinguish "decentralised" as in "can't sue me bro" from "decentralised" as in actual operational terms. Bitcoin contains tremendous operational centralisation at all levels.
> The data itself is quite decentralized, at least on the popular blockchains, but that’s about where the decentralization ends.
Yes. Web2 is where users generate content and generate profit for companies.
Web3 is where companies went further and offload storage/compute costs to users, while maintaining control over services/apis. It's like Youtube where videos are hosted by users but Google gets the money.
Email has a large degree of centralization with gmail/outlook etc but it is still meaningfully decentralized because it is very hard to get the vast majority of email servers to ban an address. Bitcoin is similar, its advertised decentralization is not a scam
It's easy to bash emerging technologies using prevalent public opinion and ignorance as a vehicle. The article just uses negative public image as a fuel and doesn't try to be fair. NFT platforms are not OpenSea on ETH. There is a fraction of non-ETH based NFT platforms that are actually what they say they are. objkt.com, hic.af, www.fxhash.xyz
He was referring to the concept of centrelization by these NFT Marketplace platforms. Doesnt matter if it is AirNFT or any other platforms you just mentioned. These platforms can freeze any asset at any time.
Freeze is a complete overstatement. If you want to hate NFTs then the minor technical hurdles which smaller platforms already alleviate will not your most sustainable route.
> One extremely common phenomenon when discussing issues surrounding blockchain-based technologies is that proponents will often switch between discussing the theoretical implementations of these ecosystems and discussing the ecosystems we have today as it suits their argument.
This is an endemic problem in crypto spaces. The biggest example I see regularly is deflecting concerns about environmental impact by stating they'll move away from proof of work any day now, so it's no big deal.
Maybe you will, maybe you won't, but until you have, you haven't.
In the case of Ethereum, I see it more as acknowledging it is a problem under Proof of Work and they are moving off it this year _because_ it's a problem. They are making tangible progress with the Kintsugi test net coming out last month.
How else are they supposed to address it other than acknowledging the problem, laying out a roadmap, and taking steps towards the end goal?
Proof of stake has been ~18months away for ethereum since 2015.
Sure, they've built some stuff at this point, but have made no progress on the inner politics of the issue. So it remains in some untouchable future for the time being.
Remind me by year end if this is still the case and I'll eat humble pie. It's true it's been discussed about for ages, and even Vitalik was inviting laughs at his really low initial estimate, so it's fair to be skeptical
There’s no such thing as PoW pollution. Think of solar panels, wind power and fuel burn offs, all power at the edge, made efficient by PoW, not socialistic PoS nonsense.
The problem is not that they're not addressing it, or trying to, or at least thinking about how to. The problem is that criticism of crypto's electricity use is immediately dismissed with "but POS will solve that" as if it has already solved it. Which it hasn't.
Decentralization is hard because centralization is so easy.
The downsides of centralization are mostly longer-term issues like moral hazard, privacy, cost of scaling, and robustness, and those can be ignored for a while. Up front centralization is incredibly easy to reason about and deploy while the costs can be ignored for a long time.
Markets optimize for cost and efficiency now, not later. It's the same reason things like climate change or the eventual danger of fossil fuel depletion are ignored by the market. They haven't happened yet. Centralization is cheap coal; decentralization is solar power and batteries. Pay later vs. pay now. Pricing signals and markets are great optimizers but they have very little foresight and can't consider issues that can't easily be priced.
As a result even if a system is designed to be decentralized, centralization will usually start creeping in. It starts at the edges with convenient SaaS APIs, value-add services like search and filtration, and dashboards and moves inward from there. Eventually the entire system is embraced, extended, and extinguished. It doesn't matter if anyone planned it this way. It happens organically because centralized systems are cheaper and easier to build and can iterate fast.
The last part, fast iteration, is massively important in today's fad-driven hyper-accelerated shifting sands software market. If something can't iterate fast the sand will get washed out from under it and it's dead.
It’s a fair point, they to bring it back to basics a Bitcoin maximalist still has a point: do you want the money in your centralized, easy to use bank under control of a private bank down the line, or in control of a predictable and permanent protocol?
The truth about web3 is that much of it will remain centralized or peer to peer, but the fallback to certainty is the ultimate value; avoiding the long term moral hazard you mentioned the market often ignores, or at least deterring it. There will always be people who prefer control over convenience and distributed ledger technology hopes to raise that ceiling of user control over what they own significantly.
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[ 3.2 ms ] story [ 155 ms ] threadBundling a bunch of bad sounding things up and pretending they are interrelated is intellectually dishonest and counter productive to anyone who takes the time to read the article.
Care to give an example for the uninitiated?
Centralised exchanges can't freeze the exchange of Bitcoin. They themselves can decide that THEY won't accept money from certain individuals (Centralised exchanges are required to complete KYC for users), but they have no power to stop UTXOs being spent on the network. The only way UTXOs can be prohibited from being spent is via consensus between node operators.
This is just one example of many points where the author decides to fuse centralised services which interact with the decentralised network with the network itself.
This is the basis for mixing services which do this at scale.
The fact is that the author is using intellectually dishonest arguments to try and convey something as the truth, which is not true.
The above also doesn't take in to consideration any L2 or Taproot transactions that provide even easier ways to mitigate Government overreach.
It is like you haven't read the preceding and the following paragraphs.
Author was simply relying his/her experience in discussing with crypto supporters. In the paragraph you quoted the response of crypto supporters is that exchanges have no power. In the following paragraph the response of crypto supporters is that exchanges have the power.
Another aspect is how quickly it becomes centralized and privately controlled. And then there is a whole story about social media hype and anxiety. It also had recent heavy real world effects: The protestors in Kazakhstan have shut down a large bitcoin facility.
It's an interesting experiment to say the least. Sure there are parallels to previous instances in history, which is why many of us have been very critical of it, but it seems to be a unique blend.
A Ponzi Scheme is where the sum of all investor's reported account values exceed the total value of assets held by the institution.
In order to sustain the fraud, new investors are sought out to get capital to pay out old customers.
Bitcoin may be a scam, or may be used by scammers, etc., but it's not a Ponzi. Rather than give it a label, say what you think is happening -- that it's an asset bubble sustained only by the existence of greater fools and thin, unregulated, manipulated markets. That's fine and we can argue points on that. But calling it a Ponzi just makes things confusing.
Gold has some portion of its value derived from decorative uses and numismatic purposes. People don't put 100 dollar bills on necklaces or wear quarter pendants.
If you hold Euros as an investment as an American (or vice versa with dollars) then this as an investment class is extremely similar to Bitcoin. Sovereign debt has similar characteristics but is subject to interest-rate based fluctuations to a greater dgree.
The main difference is that the markets for foreign exchange are tightly regulated and trade with huge amounts of liquidity -- it is difficult to inconceivable for any entity to affect the price in any way useful for market manipulation (with some exceptions, like Soros's little game with the Pound).
You simply cannot rely on bidding for price discovery when a significant portion (>50%) of the trading volume in cryptocurrencies appear to be wash trades, and with nothing else to tether it to, the prices keep bouncing around.
You mean like all of the "Cash 4 Gold" commercials that aired in the 2000s when gold went on a huge climb?
Also how fractional reserve banking works
If banks had been forced to mark their assets mark-to-market, then they would have had to either 1) become insolvent, or 2) write-down customer deposits, or 3) take out huge amounts of loans to cover the difference.
The idea of TARP was to artificially mark up their assets so that they appeared to be solvent, with the Fed and the Treasury acting as the backstop in case of liquidity crunches or runs on the market. This never really panned out and the Fed just took the money and did 3 instead, and Congress was just "hey, fuck it, whatever".
2 is out of the question -- the formalism of the banking infrastructure created by the Fed and later the New Deal basically forbids saying "hey, you're taking a haircut on your savings account because you were really investing and investments may lose value".
1 was what some of them did, too, and then bigger banks came in and bought them up with borrowed money.
Which is exactly what Tether, other stablecoins, and a lot of shady centralized exchanges did. They report account values in USD, coin market caps in USD, total on-chain trading volumes in USD, where are there is often no USD to be found anywhere, just lots of digital play-money being thrown around. It's a completely false report of account values, so while Bitcoin itself might not fit the strict definition of a Ponzi, many of the enterprises operating in the ecosystem do.
[1] Anyone Seen Tether’s Billions? https://www.bloomberg.com/news/features/2021-10-07/crypto-my...
1. How much tether is held by Tether itself (and thus is a self-cancelling asset) vs. how much is held by outsiders (and does Bitfinex count as an outsider?)
2. What is the fair-market valuation of Tether-held assets. A bank may have non-cash assets (like outstanding loans); that does not make it fraudulent unless the valuations are fraudulent, and does not necessarily make it insolvent.
Regardless this doesn't make Bitcoin into a Ponzi. To even connect it to Bitcoin, the question is to what degree fraudulently issued tether affects the market for other cryptocurrencies? Madoff, for example, was a Ponzi that "operated in the ecosystem" of traditional finance, but that does not taint the stock market by definition.
I continue to feel that stablecoins are far more dangerous than floating cryptocurrencies because they are piggybacking off of the legal status of sovereign currencies but are not under their supervision, so like S&L or LTCM they are a shadow banking system that imposes two-way risks on finance systems. But this doesn't really affect my thinking around floating cryptocurrencies in any significant way.
For example UST stablecoin from Terra maintains the price in another way.
That chain is no where near as valuable today - that's true of most forks, one wins and the other loses. For most Ethereum users, and for the Polkadot users for which a similar fork happened recently, the early reversion to remedy loss caused by an exploit is considered a feature, not a bug and it was the community that decided which fork would win.
There has been much more money lost to similar exploits in various contracts since the infamous DAO hack, and the chain was not rolled back - if it ever was it would likely be a losing fork unless the community of users agreed on its value.
For Ethereum specifically this is more problematic as its full nodes are expensive to run and don't have much say compared to miners or centralized node providers like Infura, but this type of fork in principle isn't an example of immutability, and chains which do subsidize node costs to avoid the centralization seen in Eth's user facing nodes remain in control of the users.
In total, picking out the worst parts of the Ethereum network and generalizing it to 'blockchain' is lazy, and doesn't even fulfill the modest goal of the essay to "[discuss] how these technologies work in practice today," as it ignores the nascent systems whose developers were the first on scene to many of these problems and decided that they were solvable rather than bloggers with slightly deeper than surface level understanding seeing the same problems years later and deciding they were unsolvable.
Calling it out to all blockchains is valid in my opinion, as it counts for all blockchains despite happening more often around some than others.
Well its easy, a sufficiently decentralized protocol, like Bitcoin for example, can have a large group of miners and nodes agree to scam one or more users out of their account balances by simply forking the chain. Anyone not in on the scam, even if it was as small as to take $10 from a single user, has no reason to even consider that fork - the fork which scams any user to any degree is worthless, as well as being provably invalid. It only takes one node with the honest history to maintain what users care about.
Saying this is practically mutable is like saying today's newspaper is mutable because we can all agree to print an altered version of it, while ignoring the fact that it is trivial to find and prove ownership of the original (being generous with my analogy, carbon dating, time-stamping the paper, w.e.).
The concern about forks happening willy-nilly at the expense of users is sometimes legitimate in smaller chains or maybe even chains like Ethereum which do not incentivize decentralized node services and as a result has majorly centralized nodes, but for Bitcoin and more nascent protocols which understand this problem the concern over arbitrary forks is thankfully frivolous.
Either way, members of each fork kept their account balances, so anyone who really believed in Eth Classic but held their forked tokens is no worse off. If you want to talk about Eth politics and immutability (which is a good conversation) then it shouldn't be applied to all blockchain; not all chains are subject to such political influence if you claim that was a factor.
I don't claim anything, except that the blockchain we now call "Etherium" does not contain the deleted blocks, and that therefore blockchains are not immutable.
People love to tout this example, I did too, until that realized that one a one off event. There are regularly significantly more larger thefts of crypto currencies these days[1] and nobody is even willing to discuss a hard fork. I now chalk this up as growing mistakes which every project makes in early stages. I'm still not into this whole idea of crypto currencies, but don't think we can use this point fairly any more.
[1] https://rekt.news/leaderboard/
Conclusion: On the dimension of reliability and censor resistance, crypto might be as good as gold or fiat (while on all other axes it remains much worse).
[1] Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve in exchange for $20.67 (equivalent to $413 in 2020)[5] per troy ounce. https://en.wikipedia.org/wiki/Executive_Order_6102
I completely agree. My only point was its bizarre that people choose the DAO incident to bash crypto people. They have plenty of evidence that the community learned from the incident.
Except it's not new at all; regular banks and the fiat money they have been handling have been dealing with these things for literally centuries.
But the cryptobros decided they could do better, converting their PHP Magic the Gathering trading platform to a Bitcoin trading platform and thinking yeah, that's good enough for handling billions. To name but one example.
It is like bashing the internet of not fulfilling the potential people pitched about it in the 90s. Blockchain is currently in the dail up stage of the internet, it is centralized, slow and needs adoption and lots of man hours to unleash its potential. There are second and third order effects that need to actualize before the "dream" of blockchain technology can be realised. The article purports the lack of this actualisation of the blockchain dream as if we are being deceived.
It's like when people bashed Tesla and said it wont work because there were not enough charging stations across the USA, as if world changing technologies are realized in a day. I find it boring that people push these kind of articles as think pieces. We can do better
Tesla built a network of chargers to fix that problem. They didn't hand-wave it away with "it probably won't work that way in the future" - they came up with a real plan of action and executed on it. After that a lot of the skeptics came around.
The same is true for cryptocurrencies and NFTs I imagine. When devs in that industry come up with a workable solution and execute it people will change their minds. Until that happens it's entirely fair and reasonable to say that cryptocurrencies and NFTs have some serious problems, and claiming "it probably wont work that way in the future" is not an answer.
You can't just ignore problems by saying they're not problems. That doesn't work.
That is a really interesting question. Would that NFT be illegal to own or posess? It isnt the actual material. It could be a hash and ownership information, but the illegal material need not be in the NFT. Hashes for such material are not illegal. In fact there are databases full of such hashes in use by file hosting services to detect and remove such things. Owning an associated NFT would be like owning an NFT for "cocaine" but never being anywhere near real cocaine. It may be worthless, but i dont see how it would be actually illegal.
That said there is an explicit link between the NFT and the child sexual abuse material so I'd presume there is a legal case that keeping one is keeping the other. Like if you made sure your hard-drive was totally clean but kept bookmarks to abuse material.
In the example of cocaine there is no explicit link but if they could connect the NFT to a criminal enterprise then I guess there's likely some laws around profiting/handling gains from criminal activity.
Perhaps their best defence would be that NFTs are complete nonsense which have no tangible connection with the mutable, third-party-controlled URL endpoint they are supposedly a token representation of...
You are not guilty of owning CSA material until it's found on your computer.
You do not own that cat picture unless you have some documentation that transfers copyright from the author to you (like a receipt, a contract, or similar). An entry on a blockchain is not that.
This issue came up a few years ago with those stolen iphone images of celebs, some of which were underage. If the photos are illegal, then DMCA takedowns might not work if one cannot own the copyright to an illegal image.
With Bitcoin, anyone can audit holdings of BTC since the ledger is public.
For Ethereum and most other altcoins, it's not possible to run a full node on a home computer. That's why most of the nodes are run by companies such as Infura.
This is also the root of the argument why many bitcoiners think that most altcoins such as Ethereum are scams. Like the article suggests, they're promoted and sold as decentralized but in reality are quite far from it.
I have never tried to run a full node, but from what I read, the specs for a full node are nowhere near the realm of impossible: https://www.reddit.com/r/ethereum/comments/jv8ovb/what_are_t...
1TB SSD, 16GB RAM, an i5 is pretty run-of-the-mill.
You can run an Ethereum node on a Raspberry Pi with a 1TB USB hard drive, what are you talking about?
It's important to distinguish "decentralised" as in "can't sue me bro" from "decentralised" as in actual operational terms. Bitcoin contains tremendous operational centralisation at all levels.
Yes. Web2 is where users generate content and generate profit for companies.
Web3 is where companies went further and offload storage/compute costs to users, while maintaining control over services/apis. It's like Youtube where videos are hosted by users but Google gets the money.
Email has a large degree of centralization with gmail/outlook etc but it is still meaningfully decentralized because it is very hard to get the vast majority of email servers to ban an address. Bitcoin is similar, its advertised decentralization is not a scam
I like how nuanced the moxie.org article was, compared to this one.
This is an endemic problem in crypto spaces. The biggest example I see regularly is deflecting concerns about environmental impact by stating they'll move away from proof of work any day now, so it's no big deal.
Maybe you will, maybe you won't, but until you have, you haven't.
How else are they supposed to address it other than acknowledging the problem, laying out a roadmap, and taking steps towards the end goal?
Sure, they've built some stuff at this point, but have made no progress on the inner politics of the issue. So it remains in some untouchable future for the time being.
Pollution is equal to resource use, which is equal to mining rewards.
Mining rewards are proportional to market price, not # of transactions.
So lightning could help with scale (I dont think it will) but wont help with resource waste
Will the Ethereum community offset the carbon footprint of their pet project?
The downsides of centralization are mostly longer-term issues like moral hazard, privacy, cost of scaling, and robustness, and those can be ignored for a while. Up front centralization is incredibly easy to reason about and deploy while the costs can be ignored for a long time.
Markets optimize for cost and efficiency now, not later. It's the same reason things like climate change or the eventual danger of fossil fuel depletion are ignored by the market. They haven't happened yet. Centralization is cheap coal; decentralization is solar power and batteries. Pay later vs. pay now. Pricing signals and markets are great optimizers but they have very little foresight and can't consider issues that can't easily be priced.
As a result even if a system is designed to be decentralized, centralization will usually start creeping in. It starts at the edges with convenient SaaS APIs, value-add services like search and filtration, and dashboards and moves inward from there. Eventually the entire system is embraced, extended, and extinguished. It doesn't matter if anyone planned it this way. It happens organically because centralized systems are cheaper and easier to build and can iterate fast.
The last part, fast iteration, is massively important in today's fad-driven hyper-accelerated shifting sands software market. If something can't iterate fast the sand will get washed out from under it and it's dead.
The truth about web3 is that much of it will remain centralized or peer to peer, but the fallback to certainty is the ultimate value; avoiding the long term moral hazard you mentioned the market often ignores, or at least deterring it. There will always be people who prefer control over convenience and distributed ledger technology hopes to raise that ceiling of user control over what they own significantly.
Sounds about right.