Cryptocurrencies as a whole are an amazing innovation. It’s sad though to see people rushing to adopt things they don’t fully understand, and getting hurt as a result.
Bitcoin and Ethereum are pretty terrible currencies. Proof-of-work is a foundational idea in cryptography, but it’s much better suited for preventing mass email spam than it is as a consensus mechanism.
Not to mention how the cryptocurrency space is crowded with useless AltCoins. Unless you’re an expert in the space, its so hard to distinguish from true innovation and dummies just trying to get a piece of the pie. As a result, you have millions of people pushing things like Dogecoin and Shiba, and it ends up hurting real people.
The way I see it is this: a useful cryptocurrency needs 3 things:
(1) Security
(2) Scalability
(3) Decentralization
Almost all mainstream crypto fails at (2) miserably, and as a result end up failing at (3). High transaction fees, volatility, low throughput, and energy-intensive participation costs are all barriers to achieving actual utility.
It is not clear that proof of stake can be very decentralized. Proof of work, however, can be.
Bitcoin can scale using 3rd party payment providers . That's exactly how fiat currencies are made to scale. We use Visa, PayPal, Zelle, ACH, Swift, etc. We usually do not talk to a ledger at the Fed or ECB, even though they do have those (for huge banks or wire transfers).
I'm not sure what you mean when you say that Bitcoin can scale by using 3rd party payment providers? Any Bitcoin transaction will only ever be as fast as the underlying blockchain, which currently processes around seven transactions per second (last time I checked).
Of course proof of stake can be decentralized! I think what you mean is that it's not clear whether a widely adopted PoS based blockchain will end up centralizing power in the hands of a few whales. This is a legitimate concern; however, this threat is no different than the threat of centralization of computing power in Bitcoin. In Bitcoin, this isn't even a threat, it’s a reality!
I'll say it again: Bitcoin and Ethereum are not great currencies. There are altcoins that have far surpassed both of them in terms of achieving security, scalability, and decentralization simultaneously.
> I don’t want to turn this thread into a crypto version of Wall Street Bets where people are arguing over their favorite coins
it seems like that's exactly what you want. Given that you are spreading lots of misinformation and don't seem to be trying to understand the other side's point.
> The Algorand cryptocurrency achieves thousands of transactions per second
And is it possible to sync to the current Algorand state by downloading and verifying the complete transaction history, like I can with Bitcoin? And if so, how big is that download?
Bitcoin limits the tx rate on purpose so that the Initial Block Download remains feasible on average hardware, and no trust is needed beyond the integrity of the client software.
Bitcoin’s throughput is limited as a function of network security and network delay. It has nothing to do with making it easier for clients to sync with the current state. You can improve Bitcoin’s transaction rate in two ways:
1.) decrease mining difficulty, i.e., the amount of hashing required to produce a valid proof-of-work on average. This impacts the security of the network.
2.) increase the block size so you can fit more transactions into a single block. This negatively impacts network latency (and therefore scalability, as it increases the burden of propagating messages across the network).
To your question on Algorand: yes, new consensus participants can quickly and easily sync with the current state of the blockchain through fast catch-up [1], without any meaningful security degradation [2].
So there's no way to trustlessly verify Algorand history; you have to trust a checkpoint, or trust some signatory quorum in some alternative design that's not even implemented yet.
You can trustlessly verify the entire Algorand history by verifying it yourself (same as Bitcoin). However, almost all blockchains (including Bitcoin) will suffer from this problem of longer and longer sync times, and so some bootstrapping solution is necessary.
> Any Bitcoin transaction will only ever be as fast as the underlying blockchain, which currently processes around seven transactions per second (last time I checked).
Then check again. Go google the Lightning Network. This is outdated FUD.
Lightning sets up secure channels on top of the underlying blockchain. Actual blockchain transactions are only required (I'm simplifying) to record slow trends in average usages.
You’re confusing a layer 2 solution that provides separate (and weakened) transaction assurances than the Bitcoin protocol itself. This is evident in the fact that the lightning network suffers from security vulnerabilities (e.g., wormhole attack [1]) not present in the Layer 1 Bitcoin protocol.
This is not to say that the Lightning Network doesn't significantly improve the usability of Bitcoin as a currency. But it does so at the expense of security. A much better approach is to use a layer 1 solution that achieves scalability, security, and decentralization by default.
> I'm not sure what you mean when you say that Bitcoin can scale by using 3rd party payment providers?
Try thinking about it. It would work the same way PayPal works with USD. Bitcoin payments simply don't need to happen on the blockchain. Similarly, I can buy gold in my brokerage account without any actual gold moving between warehouses.
> Of course proof of stake can be decentralized! I think what you mean is that it's not clear whether a widely adopted PoS based blockchain will end up centralizing power in the hands of a few whales. This is a legitimate concern
That's right, which is why it probably can't be decentralized. Even if the majority of holders are small individuals, the coins still end up on exchanges, which become whales.
> however, this threat is no different than the threat of centralization of computing power in Bitcoin.
This is a common misunderstanding of Bitcoin. Bitcoin miners do not "vote" or participate in governance. Thus, bitcoin does not have vulnerabilities that proof of stake has. Bitcoin's decentralization does not come from miners. It comes from users who run nodes and enforce the rules of bitcoin by not recognizing illegitimate protocol changes, invalid blocks, etc. Market forces also play an important part: Bitcoiners would not pay for coins from a block that breaks the rules of bitcoin, because those coins will not be recognized as being bitcoin.
Oh sheesh. No one said anything about Bitcoin miners voting. I was simply pointing out that centralization of mining power (which has already happened in Bitcoin) has essentially the same security impact as centralization of wealth in proof of stake consensus mechanisms.
> It would work the same way PayPal works with USD. Bitcoin payments simply don't need to happen on the blockchain. Similarly, I can buy gold in my brokerage account without any actual gold moving between warehouses.
When inflation across the world becomes high like Turkey, crypto currencies will become unstoppable. When atomic swaps start to take off, there will be no way to stop these currencies with regulations.
I don't think you are wrong, there is plenty of logic that would lead one to believe this. However, every major crypto is down 40% or so while the US is reporting its highest inflation prints since the 70s. By your logic, these currencies should be at all time highs, instead, they seem more correlated with the NASDAQ recently and actually negatively correlated with inflation.
Since more people use crypto as speculation (including leverage) rather than for payments or store of value, interest rate increases result in net outflows
The dollar price of many cryptos is being manipulated by things behind the scenes, e.g. exchanges pretending they've bought Bitcoin when they haven't, or stablecoins messing with the market.
Think about what happened to crypto and other inflation hedges in march 2020. They got ahnilated worse than equities in the initial risk off and then out performed ever since.
I think that's where we are now. If there is a market sell off, crypto is along for the ride initially. the question will be what it looks like from there.
Inflation wasn't a problem in March 2020 -- at least it wasn't a primary concern at that time. As you said, first crypto sold off (just like stocks) and then rallied aggressively for the next 20 months or so (just like stocks). Bitcoin's entire existence has been during a major extended bull rally in stocks -- it's never been tested during a market crash or bear market like 1999 or 2008.
I don’t think this deserves to be downvoted. Crypto is an asset class. During uncertainty and sell offs almost all assets sell off in tandem due to either deleveraging or flight to safety (of cash), and crypto isn’t special here.
Over long horizons, the argument that crypto is a hedge against inflation or weakened purchasing power of fiat currency makes sense. But during acute corrections that matters very little, especially since very few people are actually paying for real world goods using crypto.
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[ 2.7 ms ] story [ 51.7 ms ] threadBitcoin and Ethereum are pretty terrible currencies. Proof-of-work is a foundational idea in cryptography, but it’s much better suited for preventing mass email spam than it is as a consensus mechanism.
Not to mention how the cryptocurrency space is crowded with useless AltCoins. Unless you’re an expert in the space, its so hard to distinguish from true innovation and dummies just trying to get a piece of the pie. As a result, you have millions of people pushing things like Dogecoin and Shiba, and it ends up hurting real people.
The way I see it is this: a useful cryptocurrency needs 3 things:
(1) Security (2) Scalability (3) Decentralization
Almost all mainstream crypto fails at (2) miserably, and as a result end up failing at (3). High transaction fees, volatility, low throughput, and energy-intensive participation costs are all barriers to achieving actual utility.
Bitcoin can scale using 3rd party payment providers . That's exactly how fiat currencies are made to scale. We use Visa, PayPal, Zelle, ACH, Swift, etc. We usually do not talk to a ledger at the Fed or ECB, even though they do have those (for huge banks or wire transfers).
Of course proof of stake can be decentralized! I think what you mean is that it's not clear whether a widely adopted PoS based blockchain will end up centralizing power in the hands of a few whales. This is a legitimate concern; however, this threat is no different than the threat of centralization of computing power in Bitcoin. In Bitcoin, this isn't even a threat, it’s a reality!
I'll say it again: Bitcoin and Ethereum are not great currencies. There are altcoins that have far surpassed both of them in terms of achieving security, scalability, and decentralization simultaneously.
it seems like that's exactly what you want. Given that you are spreading lots of misinformation and don't seem to be trying to understand the other side's point.
And is it possible to sync to the current Algorand state by downloading and verifying the complete transaction history, like I can with Bitcoin? And if so, how big is that download?
Bitcoin limits the tx rate on purpose so that the Initial Block Download remains feasible on average hardware, and no trust is needed beyond the integrity of the client software.
1.) decrease mining difficulty, i.e., the amount of hashing required to produce a valid proof-of-work on average. This impacts the security of the network.
2.) increase the block size so you can fit more transactions into a single block. This negatively impacts network latency (and therefore scalability, as it increases the burden of propagating messages across the network).
To your question on Algorand: yes, new consensus participants can quickly and easily sync with the current state of the blockchain through fast catch-up [1], without any meaningful security degradation [2].
[1] https://youtu.be/BOnond-J3Zo
[2] https://eprint.iacr.org/2018/269.pdf
Then check again. Go google the Lightning Network. This is outdated FUD.
Lightning sets up secure channels on top of the underlying blockchain. Actual blockchain transactions are only required (I'm simplifying) to record slow trends in average usages.
This is not to say that the Lightning Network doesn't significantly improve the usability of Bitcoin as a currency. But it does so at the expense of security. A much better approach is to use a layer 1 solution that achieves scalability, security, and decentralization by default.
[1]https://eprint.iacr.org/2018/472.pdf
Try thinking about it. It would work the same way PayPal works with USD. Bitcoin payments simply don't need to happen on the blockchain. Similarly, I can buy gold in my brokerage account without any actual gold moving between warehouses.
> Of course proof of stake can be decentralized! I think what you mean is that it's not clear whether a widely adopted PoS based blockchain will end up centralizing power in the hands of a few whales. This is a legitimate concern
That's right, which is why it probably can't be decentralized. Even if the majority of holders are small individuals, the coins still end up on exchanges, which become whales.
> however, this threat is no different than the threat of centralization of computing power in Bitcoin.
This is a common misunderstanding of Bitcoin. Bitcoin miners do not "vote" or participate in governance. Thus, bitcoin does not have vulnerabilities that proof of stake has. Bitcoin's decentralization does not come from miners. It comes from users who run nodes and enforce the rules of bitcoin by not recognizing illegitimate protocol changes, invalid blocks, etc. Market forces also play an important part: Bitcoiners would not pay for coins from a block that breaks the rules of bitcoin, because those coins will not be recognized as being bitcoin.
> It would work the same way PayPal works with USD. Bitcoin payments simply don't need to happen on the blockchain. Similarly, I can buy gold in my brokerage account without any actual gold moving between warehouses.
This is a terrible idea.
Since more people use crypto as speculation (including leverage) rather than for payments or store of value, interest rate increases result in net outflows
I think that's where we are now. If there is a market sell off, crypto is along for the ride initially. the question will be what it looks like from there.
Over long horizons, the argument that crypto is a hedge against inflation or weakened purchasing power of fiat currency makes sense. But during acute corrections that matters very little, especially since very few people are actually paying for real world goods using crypto.