Blockchain in a Nutshell(arxiv.org)
arxiv.org
Blockchain in a Nutshell
https://arxiv.org/abs/2205.01091
66 comments
Trust in transactions isn't an issue at all. When was the last time you threw down your Visa card and worried about ... anything? They offer redress via chargebacks. You trust Visa, Visa trusts the merchants. Something goes wrong, call your bank. Ezpz.
Now you may argue that you can't pay for your, uh, illegal or immoral material with a Visa card. That's a different matter. In my opinion, the government should recognize modern payments rails as critical infrastructure and require them to process all legal transactions without discrimination. A sort of payments net neutrality.
[edit] You may also argue that merchant fees are "too high" - yeah they're high in America. They're 0.3% in Europe, because again, that's a job for regulation. They don't get card transaction rewards (because that's where the overwhelming majority of interchange goes) but that's the trade-off they've chosen to make.
Replacing modern payment rails with magic beans that live in your computer solves literally nothing for the overwhelming majority of people, which indeed, is why the overwhelming majority of people never transact on-chain. They speculate on the sidelines from centralized, trusted exchanges. It's gambling on unregistered securities to most people.
Now you may argue that you can't pay for your, uh, illegal or immoral material with a Visa card. That's a different matter. In my opinion, the government should recognize modern payments rails as critical infrastructure and require them to process all legal transactions without discrimination. A sort of payments net neutrality.
[edit] You may also argue that merchant fees are "too high" - yeah they're high in America. They're 0.3% in Europe, because again, that's a job for regulation. They don't get card transaction rewards (because that's where the overwhelming majority of interchange goes) but that's the trade-off they've chosen to make.
Replacing modern payment rails with magic beans that live in your computer solves literally nothing for the overwhelming majority of people, which indeed, is why the overwhelming majority of people never transact on-chain. They speculate on the sidelines from centralized, trusted exchanges. It's gambling on unregistered securities to most people.
Merchant fees are pretty high for most online and international payment systems. For example donating to an artist via Ko-Fi will result in 2-3.4% + $0.30 fees due to Stripe/PayPal payment processor.
IMHO the larger concern is that our current online payment rails and modes of value transfer & digital ownership are all inextricably linked with centralized, oligopolistic, and for-profit corporate entities (and, typically US-based and USD-dependent). A public, open source, decentralized, and peer-to-peer transactional system that spans the globe is a desirable goal, even if you do not feel the current blockchain-based solutions are sufficient or user-friendly enough.
IMHO the larger concern is that our current online payment rails and modes of value transfer & digital ownership are all inextricably linked with centralized, oligopolistic, and for-profit corporate entities (and, typically US-based and USD-dependent). A public, open source, decentralized, and peer-to-peer transactional system that spans the globe is a desirable goal, even if you do not feel the current blockchain-based solutions are sufficient or user-friendly enough.
SEPA transfers within the EURO area are basically free. TransferWise is dirt cheap.
Crypto might seem appealing because, yes, the traditional banking system is very bad (though not everywhere is it as bad as in the US), but in nearly all cases there is a better solution available (good old fintech) without the inefficiencies of crypto.
Crypto might seem appealing because, yes, the traditional banking system is very bad (though not everywhere is it as bad as in the US), but in nearly all cases there is a better solution available (good old fintech) without the inefficiencies of crypto.
> SEPA transfers within the EURO area are basically free.
Not international; not a payment processor on any popular platform.
> TransferWise is dirt cheap.
Not really, when you compare it to low-fee crypto networks. If you sent 1.5 GBP to USD the fee is 0.35 GBP (23% of total), which makes it a poor choice for tips and small payments. Sending 15K GBP to USD carries a 61 GBP fee, or 150K GBP to USD carries a 563 GBP fee.
Compare with a low-fee network like Tezos or zkSync. My last Tezos transfer was a fixed fee of 0.000544 XTZ or $0.001 USD. zkSync currently has an approx fee of $0.11 per transfer (a cost which will likely be reduced in the coming months with EIP 4844). These fees are fixed, regardless of whether you are sending 0.1, 1, 10K, or 100K tokens to the beneficiary.
Not international; not a payment processor on any popular platform.
> TransferWise is dirt cheap.
Not really, when you compare it to low-fee crypto networks. If you sent 1.5 GBP to USD the fee is 0.35 GBP (23% of total), which makes it a poor choice for tips and small payments. Sending 15K GBP to USD carries a 61 GBP fee, or 150K GBP to USD carries a 563 GBP fee.
Compare with a low-fee network like Tezos or zkSync. My last Tezos transfer was a fixed fee of 0.000544 XTZ or $0.001 USD. zkSync currently has an approx fee of $0.11 per transfer (a cost which will likely be reduced in the coming months with EIP 4844). These fees are fixed, regardless of whether you are sending 0.1, 1, 10K, or 100K tokens to the beneficiary.
"low-fee" crypto networks are not a comparison because your goal is not to send "low-fee" cryptos, it's to transfer money. Transferring money requires a domestic transfer from your bank account to an exchange, purchasing on an exchange for a 1-2% fee, performing a "low-fee" transfer, selling on an exchange for a 1-2% fee, then performing a domestic transfer to a local bank account. Then adding these taxable events to your income taxes.
Sending money this way is almost certainly slower, more expensive, way more prone to failure and exposes you to tons of counter-party risk. Remember the guy who lost $400,000 trying to send himself money between the US and Canada using Quadriga and got caught without a seat in the game of musical chairs?
A better comparison would be a Wise Multi Currency Account [1]. You get a variety of worldwide bank account numbers. You can ACH into it for free (and SEPA, and EFT, and so on). There is no step two. Anyone in most world jurisdictions can open such an account. Anyone in much of the world can perform a free domestic transfer to send money into it no matter where you are. $0.00. This is what innovation looks like, IMO.
Places payment processors charge you a large fee are almost certainly to cover the risk associated with that transaction - the risk which is not covered when performing a crypto payment. Let alone all the new risks that enter the picture when performing a crypto payment. You're still on the hook for these risks personally, mind you, it's just an unaccounted for externality.
Dig into the business model of these payment processors and you'll quickly learn exactly why they charge what they do.
Unpopular opinion: we have middlemen because they add value.
[1] https://wise.com/gb/multi-currency-account/
Sending money this way is almost certainly slower, more expensive, way more prone to failure and exposes you to tons of counter-party risk. Remember the guy who lost $400,000 trying to send himself money between the US and Canada using Quadriga and got caught without a seat in the game of musical chairs?
A better comparison would be a Wise Multi Currency Account [1]. You get a variety of worldwide bank account numbers. You can ACH into it for free (and SEPA, and EFT, and so on). There is no step two. Anyone in most world jurisdictions can open such an account. Anyone in much of the world can perform a free domestic transfer to send money into it no matter where you are. $0.00. This is what innovation looks like, IMO.
Places payment processors charge you a large fee are almost certainly to cover the risk associated with that transaction - the risk which is not covered when performing a crypto payment. Let alone all the new risks that enter the picture when performing a crypto payment. You're still on the hook for these risks personally, mind you, it's just an unaccounted for externality.
Dig into the business model of these payment processors and you'll quickly learn exactly why they charge what they do.
Unpopular opinion: we have middlemen because they add value.
[1] https://wise.com/gb/multi-currency-account/
> "low-fee" crypto networks are not a comparison because your goal is not to send "low-fee" cryptos, it's to transfer money.
we are both talking about sending 'value' across the globe, e.g. Ko-Fi-style tips, international payments, charitable donations, Kickstarter-like crowdfunding, etc.
for example, as an artist I am selling digital + physical media and accept fiat and crypto as a form of payment. I know many others in a similar situation, including nonprofit organizations that accept crypto.
obviously not everybody accepts crypto and it is highly localized; but any merchant or online platform that decides to accept XTZ as a form of payment can already do so to mitigate the 2-5% payment processing fees that I mentioned earlier.
we are both talking about sending 'value' across the globe, e.g. Ko-Fi-style tips, international payments, charitable donations, Kickstarter-like crowdfunding, etc.
for example, as an artist I am selling digital + physical media and accept fiat and crypto as a form of payment. I know many others in a similar situation, including nonprofit organizations that accept crypto.
obviously not everybody accepts crypto and it is highly localized; but any merchant or online platform that decides to accept XTZ as a form of payment can already do so to mitigate the 2-5% payment processing fees that I mentioned earlier.
Ok but it's not value if you can't spend it on things. In order to spend it on things you have to convert it to something that can be spent. So it's disingenuous to exclude that conversion step from your calculus.
> ... but any merchant or online platform that decides to accept XTZ as a form of payment can already do so to mitigate the 2-5% payment processing fees that I mentioned earlier.
But of course they won't because they can't spend it on things, like the inputs to the goods they sell (be that physical, rent or mortgage). They'll need to convert it, and that conversion fee will be something you pay by marking up the cost of goods.
> ... but any merchant or online platform that decides to accept XTZ as a form of payment can already do so to mitigate the 2-5% payment processing fees that I mentioned earlier.
But of course they won't because they can't spend it on things, like the inputs to the goods they sell (be that physical, rent or mortgage). They'll need to convert it, and that conversion fee will be something you pay by marking up the cost of goods.
I already am spending it on things e.g. art, donations, and peer-to-peer international payments. The number of services accepting crypto can continue to grow without transfers reaching the 2-5% processor fees I mentioned earlier.
>For example donating to an artist via Ko-Fi will result in 2-3.4% + $0.30 fees due to Stripe/PayPal payment processor
Cryptobros would kill for transaction fees that low
Cryptobros would kill for transaction fees that low
Many digital artists I know have a Tezos address, and I could send them a donation of any size for a fixed fee of about 0.000544 XTZ or $0.001 USD.
And since you can't exchange Tezos for goods and services, you need to send it to an exchange, sell it for 1-2%, deal with foreign exchange changes over the time you held it, counter-party risk on the exchange, then perform a domestic transfer into your bank account, and add the transaction to your income taxes.
not really. I just checked a CEX - to exchange 1,000 XTZ into 2,268K GBP and have it directly deposited into fiat account, the fee is 3.76 GBP, i.e. 0.17% rather than 1-2%.
you also seem to be taking the opinion that all crypto must eventually be exchanged to fiat. obviously it is wise to exchange enough to fiat for taxes, monthly expenses, and to have a balanced portfolio. but some users may choose to keep some in crypto, for example to stake, continue paying for other crypto-localized goods and services, or exchange into a stablecoin in order to have self-custody of a USD-pegged asset.
fwiw, if more merchants did accept crypto and taxes were payable in crypto (as it is becoming the case in some very specific jurisdictions around the world), there would be less need to exchange to fiat via a CEX.
you also seem to be taking the opinion that all crypto must eventually be exchanged to fiat. obviously it is wise to exchange enough to fiat for taxes, monthly expenses, and to have a balanced portfolio. but some users may choose to keep some in crypto, for example to stake, continue paying for other crypto-localized goods and services, or exchange into a stablecoin in order to have self-custody of a USD-pegged asset.
fwiw, if more merchants did accept crypto and taxes were payable in crypto (as it is becoming the case in some very specific jurisdictions around the world), there would be less need to exchange to fiat via a CEX.
> not really. I just checked a CEX - to exchange 1,000 XTZ into 2,268K GBP and have it directly deposited into fiat account, the fee is 3.76 GBP, i.e. 0.17% rather than 1-2%.
Cool. So the same as a debit card payment in Europe, which is capped at 0.2%. It's also way more expensive than a Faster Payments UK transaction. In exchange you take on huge counter-party risk, and massive forex risk. This doesn't sound better, in fact, it sounds a lot worse.
> fwiw, if more merchants did accept crypto and taxes were payable in crypto (as it is becoming the case in some very specific jurisdictions around the world), there would be less need to exchange to fiat via a CEX.
Taxes are only 'payable' everywhere on earth for crypto in the sense that some governments offer a gateways that exchange it to fiat. Like Pay1040 does for credit card tax payments in the US. That doesn't make 'taxes payable in credit card.' The issue isn't payable it's denominated in.
Cool. So the same as a debit card payment in Europe, which is capped at 0.2%. It's also way more expensive than a Faster Payments UK transaction. In exchange you take on huge counter-party risk, and massive forex risk. This doesn't sound better, in fact, it sounds a lot worse.
> fwiw, if more merchants did accept crypto and taxes were payable in crypto (as it is becoming the case in some very specific jurisdictions around the world), there would be less need to exchange to fiat via a CEX.
Taxes are only 'payable' everywhere on earth for crypto in the sense that some governments offer a gateways that exchange it to fiat. Like Pay1040 does for credit card tax payments in the US. That doesn't make 'taxes payable in credit card.' The issue isn't payable it's denominated in.
You keep mentioning localized EU/UK bank transfer fees when my original post that triggered this discussion is referring to international payment processor APIs (Stripe, PayPal) and the web that builds on top of them (Ko-Fi, Etsy, Bandcamp, Kickstarter, Patreon, Shopify).
If you read the whitepaper it flags (first paragraph) that the problem with payment systems that rely on trusted third parties like Visa is not that they don't work but that these parties are compelled to mediate.
You may not mind yourself -- Visa is useful -- but adding this kind of closure isn't cost-free (look at Wikileaks) and the fundamental innovation in how to do this without introducing any trusted third parties is a big deal.
With that said, I agree most of the new POS variants and DAGs are sneaking closure back in amd pretending it is OK because the resulting systems look and feel like Bitcoin.
You may not mind yourself -- Visa is useful -- but adding this kind of closure isn't cost-free (look at Wikileaks) and the fundamental innovation in how to do this without introducing any trusted third parties is a big deal.
With that said, I agree most of the new POS variants and DAGs are sneaking closure back in amd pretending it is OK because the resulting systems look and feel like Bitcoin.
> You may not mind yourself -- Visa is useful -- but adding this kind of closure isn't cost-free (look at Wikileaks) and the fundamental innovation in how to do this without introducing any trusted third parties is a big deal.
A Bitcoin transaction costs a few hundred dollars once you price in both the direct transaction fees and the socialized fees (block reward). I'll stick with Visa.
note: Of course Bitcoin still has trusted third parties - just lots of them.
A Bitcoin transaction costs a few hundred dollars once you price in both the direct transaction fees and the socialized fees (block reward). I'll stick with Visa.
note: Of course Bitcoin still has trusted third parties - just lots of them.
I'd like to point out that the majority of people on Earth don't transact digitally at all, because those systems we trust don't allow them on. I'd also like to point out that trusting a system of accounting is a moot point when that system is built on a flawed monetary system where unelected officials can debase the unit of account with a press of a button. The significant asset inflation we've seen in real estate, stocks, bitcoin, gold, etc, is all due to that.
Bitcoin isn't a solution to trustless banking. Its a solution to trustless _central_ banking.
Bitcoin isn't a solution to trustless banking. Its a solution to trustless _central_ banking.
Ok, so hold all your assets in real estate, stocks, or gold and only convert it to fiat when you need to pay for something. I'm not sure what cryptocurrency adds here besides another (rather volatile) investment vehicle.
bit late, but: real estate and stocks (and most gold) isn't held sovereignly, but in vaults, managed by gatekeepers. I own some stocks though a platform that manages it for me. They can force me off their system at a moments notice. Real estate is managed by the government. They can also take it away.
The first counter-argument would be that we have laws and procedures that protect most people from such actions, which is mostly true. There are however a number of clear examples where either the government or society underwent rapid change which allowed for these assets to be seized (think: revolutions, exectutive order 6102, etc).
Bitcoin (not crypto -> bitcoin) solves this through offering you the option or sovereignly hold an asset outside the control of anyone who doesn't have the private keys.
The first counter-argument would be that we have laws and procedures that protect most people from such actions, which is mostly true. There are however a number of clear examples where either the government or society underwent rapid change which allowed for these assets to be seized (think: revolutions, exectutive order 6102, etc).
Bitcoin (not crypto -> bitcoin) solves this through offering you the option or sovereignly hold an asset outside the control of anyone who doesn't have the private keys.
Sure, the monetary system is flawed (in the sense that all systems are flawed and the current one seems to be doing particularly poorly _at the moment_) but we also had a trustless central banking system before called the Gold Standard and iirc that didn't work either? What is it about digital currencies that make this better than the Gold Standard?
Every vision of blockchain-centered future society that I have encountered so far in a nutshell implies that trust between fellow humans is inherently bad, and tries to eliminate it as much as possible.
I’ve met blockchain maximalists who passionately painted their vision of a future where you inherit some karma from your ancestors, increment or decrement it with every action you do in your life, and pass it on to your descendants.
They seem like smart and successful people, and their passion seems genuine. However, I feel like they have made some fundamentally incompatible assumption somewhere early in their thinking process. I can never understand how could anyone see removal of trust as a feature, and their vision intuitively strikes me as incredibly dystopian.
My personal take is that this all is an elaborate workaround for the fact that there are malicious actors (due to whatever reason, but mostly probably upbringing-related mental health issues and emotional/financial insecurities)—addressing that root cause will render such symptomatic treatments irrelevant; while enacting these treatments without addressing the root cause will result in much suffering.
I’ve met blockchain maximalists who passionately painted their vision of a future where you inherit some karma from your ancestors, increment or decrement it with every action you do in your life, and pass it on to your descendants.
They seem like smart and successful people, and their passion seems genuine. However, I feel like they have made some fundamentally incompatible assumption somewhere early in their thinking process. I can never understand how could anyone see removal of trust as a feature, and their vision intuitively strikes me as incredibly dystopian.
My personal take is that this all is an elaborate workaround for the fact that there are malicious actors (due to whatever reason, but mostly probably upbringing-related mental health issues and emotional/financial insecurities)—addressing that root cause will render such symptomatic treatments irrelevant; while enacting these treatments without addressing the root cause will result in much suffering.
"trust" as an issue between machines on a network is ideally solved in a trustless way.
The issue is that these tech-utopians havent understood that this is really a pun on the word "trust", and our social issues are in a sense, precisely the opposite.
The issue is that these tech-utopians havent understood that this is really a pun on the word "trust", and our social issues are in a sense, precisely the opposite.
Even the blockchain world needs blind trust in its inputs - oracles or humans. Any society is by definition formalized trust and a blockchain society is no exception, just moves the trust in some other corners. And anyway when I hear about the blockchain goal to remove the need for "unreliable trust" I remember the hawala money transfers which are the very embodiment of a system based on human trust, the complete antithesis to the blockchain premises AND which works just fine in the real life.
Definitely agreed. High-trust societies can be much more efficient than low-trust societies, as the cost of double-checking somebody else's work is paid at every level.
When blockchain is described as "trust-less", that is an accurate statement, but is placed on the wrong side of the pro/con chart. Blockchain doesn't provide a method by which to trust people. Blockchain dives headfirst into a low-trust society and keeps digging, paying the inefficiency cost the entire way.
To add more weight to this being propaganda divorced from the reality of the system, the abstract mentions a positive impact on the environment, which is a laughable claim.
When blockchain is described as "trust-less", that is an accurate statement, but is placed on the wrong side of the pro/con chart. Blockchain doesn't provide a method by which to trust people. Blockchain dives headfirst into a low-trust society and keeps digging, paying the inefficiency cost the entire way.
To add more weight to this being propaganda divorced from the reality of the system, the abstract mentions a positive impact on the environment, which is a laughable claim.
It's funny. Cryptocurrency claims to solve the "trust" issue, but in fact does not.
While individual transactions are secure, many blockchain projects involve some level of trust and risk that is simply assumed to be zero because the project is happening on the blockchain. Examples abound, like Tether and their questionable reserves or SafeMoon and their vanishing[1] "locked" LP.
The existence of rug pulls is proof enough that blockchain doesn't solve any non-trivial trust issues. Otherwise, how could there be an entity that can break your trust and take your money?
[1] https://m.youtube.com/watch?v=kIUrE7Ovm5k
While individual transactions are secure, many blockchain projects involve some level of trust and risk that is simply assumed to be zero because the project is happening on the blockchain. Examples abound, like Tether and their questionable reserves or SafeMoon and their vanishing[1] "locked" LP.
The existence of rug pulls is proof enough that blockchain doesn't solve any non-trivial trust issues. Otherwise, how could there be an entity that can break your trust and take your money?
[1] https://m.youtube.com/watch?v=kIUrE7Ovm5k
Dunno much about advancing the society, but in the current state of things in the USofA finworld, trust really is a kind of a pain in the ass. Just to name a few things, KYC is intrusive and expensive (even Coinbase made me upload my documents). ACH, which is how a ton of money gets moved, requires 3-10 calendar days to settle, because lack of trust (same day ACH is either expensive or only available for credits). Chargebacks on credit cards (friendly fraud or legit complaints) are a huge problem for merchants who get kicked off of their billing system once it loses "trust" in them.
No idea if the "blockchain" solves all this though.
No idea if the "blockchain" solves all this though.
> Trust is the biggest bottleneck in realizing transactions. It is the biggest bottleneck in advancing the society.
Assertions presented without evidence can be immediately dismissed along with further statements from the author.
Assertions presented without evidence can be immediately dismissed along with further statements from the author.
Blockchain as it stands still remains primarily an interesting solution looking for a killer problem.
I think what it really needs is to find a problem that it's objectively better than the non-blockchain alternative.
As a store of value, currency or payment network it's yet to be able to prove that.
For more interesting applications, smart contracts etc the networks themselves are still struggling to find ways to keep transactions/operating costs in line with value. Even those more complex cases aren't yet objectively superior to other technology choices.
I think we will find use-cases for byzantine-proof distributed ledger but nothing has yet been compelling enough to supplant other options.
I think what it really needs is to find a problem that it's objectively better than the non-blockchain alternative.
As a store of value, currency or payment network it's yet to be able to prove that.
For more interesting applications, smart contracts etc the networks themselves are still struggling to find ways to keep transactions/operating costs in line with value. Even those more complex cases aren't yet objectively superior to other technology choices.
I think we will find use-cases for byzantine-proof distributed ledger but nothing has yet been compelling enough to supplant other options.
It's great as a public immutable timestamping service. Make any transaction on a popular blockchain with a low transaction cost, and add a hash into the transaction. Now you can prove beyond the shadow of a doubt that you knew this hash at that point in time (precise to a couple minutes), and by extension if you produce content that matches that hash it proves that you had that content at that point in time.
You can use that for copyright or trademark matters without revealing the work itself, or you can ensure the integrity of your logs this way. No third parties that have to be trusted or that could be bribed.
Of course that doesn't really work as the primary purpose of a blockchain, to get good trust guarantees you need to piggy-back on a blockchain that does something more valuable, so it's not really a killer problem.
You can use that for copyright or trademark matters without revealing the work itself, or you can ensure the integrity of your logs this way. No third parties that have to be trusted or that could be bribed.
Of course that doesn't really work as the primary purpose of a blockchain, to get good trust guarantees you need to piggy-back on a blockchain that does something more valuable, so it's not really a killer problem.
It's a lot like quantum computing. It's hip, and exciting, and easy to raise money for. But the set of algorithms that are better implemented by extant quantum computers than classical systems is, last I checked, the empty set.
A very obvious problem bitcoin solves is Wikileaks getting kicked off the Visa/MasterCard rails, because it published articles the government didn't want published.
The current financial system is perfect for most people in the first world. Once you start going down the path of least resistance though, that system turns out to be a gatekept, permissioned system with very clearly defined borders.
Try using a bank as a rural Honduran and see if you are even allowed on. Attempt a transaction between yourself and a person in Chad and see how many hurdles are presented.
The current financial system is perfect for most people in the first world. Once you start going down the path of least resistance though, that system turns out to be a gatekept, permissioned system with very clearly defined borders.
Try using a bank as a rural Honduran and see if you are even allowed on. Attempt a transaction between yourself and a person in Chad and see how many hurdles are presented.
>Try using a bank as a rural Honduran and see if you are even allowed on. Attempt a transaction between yourself and a person in Chad and see how many hurdles are presented.
Ahh, yes, bank the unbanked. We've been hearing about this for a decade and it's yet to actually solve it. Might have something to do with the fact that the minimum hardware requirement to engage with a "trustless, peer-to-peer, global digital cash" system runs in the annual earning of the average unbanked labourer in the Third world. Any attempt to solve the _political_ problem of the distribution of wealth and access to the monetary systems (banks) that starts with a technical system (crypto) is bound to fail because of that mismatch.
Even trying to solve a political problem with a technical solution requires one to first solve the problem of being allow to use the technical solution - which is a political problem!
Ahh, yes, bank the unbanked. We've been hearing about this for a decade and it's yet to actually solve it. Might have something to do with the fact that the minimum hardware requirement to engage with a "trustless, peer-to-peer, global digital cash" system runs in the annual earning of the average unbanked labourer in the Third world. Any attempt to solve the _political_ problem of the distribution of wealth and access to the monetary systems (banks) that starts with a technical system (crypto) is bound to fail because of that mismatch.
Even trying to solve a political problem with a technical solution requires one to first solve the problem of being allow to use the technical solution - which is a political problem!
Indeed. And there are payment systems that successfully tackle the issue of banking the unbanked (M-Pesa, Wave, ...), but they don't touch crypto with a ten-foot-pole.
https://en.wikipedia.org/wiki/M-Pesa
https://www.wave.com/en/blog/world/
https://en.wikipedia.org/wiki/M-Pesa
https://www.wave.com/en/blog/world/
Some 'defi' approaches do seem to provide things you don't get elsewhere - mainly visible with DEXs where to transact you only have to trust an application for that one operation at that one moment and you can read all the code of the operation and be certain that's what's happening. You genuinely don't get that elsewhere.
I deal with one of these 'killer problems' every day. Hard money, aka inflation, is a very important economic problem.
For example, inflation forces market participant behaviour that they would have otherwise avoided. For example, a pensioner is 'forced' to take on market risk to gain a real return on their savings when they are very risk adverse.
Savers are disincentivized as there is a negative yield on their capital, and this has an impact on capital investment.
For example, inflation forces market participant behaviour that they would have otherwise avoided. For example, a pensioner is 'forced' to take on market risk to gain a real return on their savings when they are very risk adverse.
Savers are disincentivized as there is a negative yield on their capital, and this has an impact on capital investment.
The killer problem is fake news.
I don't think blockchains are the only or even best solutions to fake news, but the ecosystem build around them uses public-key cryptography for everything.
A world where every piece of information is signed, could be a harsh blow for fake news. It's what PGP always wanted to go mainstream. Maybe, the money behind it (reasonable or not) is finally enough to motivate the mainstream.
I don't think blockchains are the only or even best solutions to fake news, but the ecosystem build around them uses public-key cryptography for everything.
A world where every piece of information is signed, could be a harsh blow for fake news. It's what PGP always wanted to go mainstream. Maybe, the money behind it (reasonable or not) is finally enough to motivate the mainstream.
I'd love to hear more.
A) fake news is hard to define and agree upon
B) different people will have different criteria definition and Venn diagrams of fake news
C1) many people and organizations start and distribute fake news knowing them to be such
C2) many people and organizations start or propagate fake news while earnestly believing them
Can you help understand how block chain or public key cryptography will help or address anything relating to fake news? Is there an underlying assumption that ascertaining identity will help? Because from my perspective majority of fake news are created and propagated by readily and eagerly identifiable people, whether potus or my cousin on Facebook and anything in between.
In other words, today already I pretty much know who is relating any given piece of news. I may even know where or who originated them. It does not in the least solve the problem that my liberal and conservative, atheist and religious. Rich and poor, immigrant and local, technical and humanities etc neighbours have completely different parameters and selection of trust. Identifying the source helps not a bit with radically different selections of source. And then we get to "disagreeable" topics - how will block chain help those who fundamentally disagree on climate abortion religion economy foreign politics military basic income refugees healthcare rights etc. They will continue to pick and choose whatever our inherent bias is. There is this utopian notion that tech framework will solve a human problem.
A) fake news is hard to define and agree upon
B) different people will have different criteria definition and Venn diagrams of fake news
C1) many people and organizations start and distribute fake news knowing them to be such
C2) many people and organizations start or propagate fake news while earnestly believing them
Can you help understand how block chain or public key cryptography will help or address anything relating to fake news? Is there an underlying assumption that ascertaining identity will help? Because from my perspective majority of fake news are created and propagated by readily and eagerly identifiable people, whether potus or my cousin on Facebook and anything in between.
In other words, today already I pretty much know who is relating any given piece of news. I may even know where or who originated them. It does not in the least solve the problem that my liberal and conservative, atheist and religious. Rich and poor, immigrant and local, technical and humanities etc neighbours have completely different parameters and selection of trust. Identifying the source helps not a bit with radically different selections of source. And then we get to "disagreeable" topics - how will block chain help those who fundamentally disagree on climate abortion religion economy foreign politics military basic income refugees healthcare rights etc. They will continue to pick and choose whatever our inherent bias is. There is this utopian notion that tech framework will solve a human problem.
This presumes that the reason fake news is a problem is because people are spreading something they claim was said by a reputable person or organization, but is actually edited or completely false.
In my experience, the reason fake news is actually a problem is because supposedly-reputable people and organizations are themselves spreading partially or completely false information. So the information they spread would have a perfectly valid, legitimate signature—and still be just as false.
Blockchain cannot solve the problem of people lying. It cannot differentiate between what is true and what is false in the real world.
In my experience, the reason fake news is actually a problem is because supposedly-reputable people and organizations are themselves spreading partially or completely false information. So the information they spread would have a perfectly valid, legitimate signature—and still be just as false.
Blockchain cannot solve the problem of people lying. It cannot differentiate between what is true and what is false in the real world.
Ugh? Yes, fake news is about a trust problem - people trusting sources which spread nefariously incorrect or distorted views. But no, public key cryptography or blockchain does not solve this problem. I am not sure what do you even propose exactly but think for a moment what differentiates a "real news" and "fake news" source from each other, and you are back to square one. People who read fake news already now choose to trust and subscribe to their reporting.
Sorry, do you think that the problem with fake news is that malicious actors impersonate, say, the NYT or Snopes, and "publish" fake articles under the name of a trusted source?
That does not seem to be the problem (and insofar as it is, HTTPS/TLS seems pretty good at fixing it: if you go to https://www.nytimes.com, you can be pretty sure that you get the NYT). I don't see what blockchain could add here?
That does not seem to be the problem (and insofar as it is, HTTPS/TLS seems pretty good at fixing it: if you go to https://www.nytimes.com, you can be pretty sure that you get the NYT). I don't see what blockchain could add here?
[deleted]
What about as a store of value for people in countries with sketchy banking systems/government seizures/risk of runaway inflation, etc.? I don't mean to raise a counterpoint - I am genuinely curious if there is a better option in that scenario.
this is a very original and novel insight. thank you
>Blockchain enables a digital society where people can contribute, collaborate, and transact without having to second-guess trust and transparency.
in the blockchain the code is the law, so in order to trust the blockchain you have to trust its code. have you audited the bitcoin code? why do you trust it over anything else then? just admit that you trust the global community more than you trust international regulatory bodies.
>It is the technology behind the success of Bitcoin, Ethereum, and many disruptive applications and platforms that have positive impact in numerous sectors, including finance, education, health care, environment, transportation, and philanthropy, to name a few.
have they "disrupted" anything? is this a comprehensive explanation or plain propaganda? who would someone use such an elevator-speech terminology for a supposedly serious explanation?
in the blockchain the code is the law, so in order to trust the blockchain you have to trust its code. have you audited the bitcoin code? why do you trust it over anything else then? just admit that you trust the global community more than you trust international regulatory bodies.
>It is the technology behind the success of Bitcoin, Ethereum, and many disruptive applications and platforms that have positive impact in numerous sectors, including finance, education, health care, environment, transportation, and philanthropy, to name a few.
have they "disrupted" anything? is this a comprehensive explanation or plain propaganda? who would someone use such an elevator-speech terminology for a supposedly serious explanation?
> where people can contribute, collaborate, and transact without having to second-guess trust and transparency.
Donate to the Ukraine and to the children and to the world peace here:
1BvTh1slsN0tAScam100%SrslyK
Can't go wrong, it's on the blockchain and you don't have to second-guess trust!!11!!!11!
/s
Donate to the Ukraine and to the children and to the world peace here:
1BvTh1slsN0tAScam100%SrslyK
Can't go wrong, it's on the blockchain and you don't have to second-guess trust!!11!!!11!
/s
The article proclaims "the intermediaries" as the solution to the trust problem.
That is incomplete in two ways:
1. Intermediaries are not the only solution to the trust problem, there are many many others. (See for example Bruce Schneider's Liars and Outliers, where he lists morality, reputation, institutions, security systems [1,2].)
2. Intermediaries don't only solve the problem of trust, but can also make things more efficient. If any two nodes need a connection, a graph needs O(N^2) edges. With a central intermediary, it only needs O(N) edges.
[1,2] See https://www.schneier.com/books/liars-and-outliers, or https://www.wired.com/story/theres-no-good-reason-to-trust-b...
That is incomplete in two ways:
1. Intermediaries are not the only solution to the trust problem, there are many many others. (See for example Bruce Schneider's Liars and Outliers, where he lists morality, reputation, institutions, security systems [1,2].)
2. Intermediaries don't only solve the problem of trust, but can also make things more efficient. If any two nodes need a connection, a graph needs O(N^2) edges. With a central intermediary, it only needs O(N) edges.
[1,2] See https://www.schneier.com/books/liars-and-outliers, or https://www.wired.com/story/theres-no-good-reason-to-trust-b...
>many disruptive applications and platforms that have positive impact in numerous sectors, including finance, education, health care, environment, transportation
Hahaha, not at all. As for trust, well remember that the blockchain proves absolutely nothing about the real world. It only can prove things that happened on the chain. This is called the oracle problem.
Hahaha, not at all. As for trust, well remember that the blockchain proves absolutely nothing about the real world. It only can prove things that happened on the chain. This is called the oracle problem.
> The choice of cryptography to use determines the performance and guarantees of the blockchain. For example, Dogecoin blockchain clones Bitcoin but using simpler cryptographic functions to increase transaction throughput; the mining in Dogecoin is based on SCRYPT which is faster and easier to run than SHA256 used in Bitcoin. This, however, results in weaker security, less robust to attacks by dishonest nodes.
1. Isn't scrypt a key-derivation-function, and thus (by design) much slower and more work intensive than SHA-256 (a cryptographic hash)??
2. Isn't anyway difficulty adjusted depending on the available hash power (such that a target block rate is reached), so that "faster and easier to run than SHA256" does not make any sense at all?
Have the authors even understood PoW?
1. Isn't scrypt a key-derivation-function, and thus (by design) much slower and more work intensive than SHA-256 (a cryptographic hash)??
2. Isn't anyway difficulty adjusted depending on the available hash power (such that a target block rate is reached), so that "faster and easier to run than SHA256" does not make any sense at all?
Have the authors even understood PoW?
Yes, this is complete nonsense. Block time and difficulty can both be adjusted independently of your work function (in fact it's a critical property of the work function that such adjustment is possible). The difficulty is automatically adjusted to keep to the target average block time of the network as the amount of mining increases and decreses. Dogecoin simply has a lower target block time than bitcoin (which, given equal mining power, would mean less difficulty), but also has a much lower difficulty because there's much less mining power on the network due to the relatively lower mining rewards (a function of how much currency the network awards miners at the moment and the price of the coin).
Less mining power does roughly correlate to an easier attack on the network, but this is mostly independent of the technical decisions made by a given blockchain (there is some impact if e.g. the work function is sufficiently different that hardware from a larger network cannot be repurposed to mount an attack on a smaller network, e.g. using scrypt means bitcoin ASICs cannot mine on the network, making an attack much less easy to carry out. Ethereum's work function is designed to be memory bandwidth instead of compute limited, making GPUs generally optimal, and monero uses a funky algorithm designed to run best on general purpose CPUs).
I will also note (and this is a point I don't see made often), that there is not really a specific mechanism in most blockchains to set the total mining rewards (and thus the total amount of effort mining which is incentivised) to an optimal value. It might be entirely excessive, in which case the network is secure but even more inefficient, or it might be insufficient, there is nothing which really sets this to a particular value. This is in part because it's hard to know exactly what level of mining is necessary (what's the difficulty required to fend off all attackers? probably depends on what they could gain from an attack, which is hard to assess), and because it depends on the price of the coin, which is something the network does not really have a means to assess within itself. (This is one of the reasons why I think bitcoin as a "long term store of value" does not make sense. The deflationary design requires ever-diminishing mining rewards, but the network will still require significant mining effort to secure it, especially if the amount of value stored keeps going up. In the 'bitcoin as currency' model, the transaction fees would keep the incentive present, but with a relatively low rate of transactions you will need extremely high transaction fees to secure the network, making it potentially quite an expensive store of value to maintain.
Less mining power does roughly correlate to an easier attack on the network, but this is mostly independent of the technical decisions made by a given blockchain (there is some impact if e.g. the work function is sufficiently different that hardware from a larger network cannot be repurposed to mount an attack on a smaller network, e.g. using scrypt means bitcoin ASICs cannot mine on the network, making an attack much less easy to carry out. Ethereum's work function is designed to be memory bandwidth instead of compute limited, making GPUs generally optimal, and monero uses a funky algorithm designed to run best on general purpose CPUs).
I will also note (and this is a point I don't see made often), that there is not really a specific mechanism in most blockchains to set the total mining rewards (and thus the total amount of effort mining which is incentivised) to an optimal value. It might be entirely excessive, in which case the network is secure but even more inefficient, or it might be insufficient, there is nothing which really sets this to a particular value. This is in part because it's hard to know exactly what level of mining is necessary (what's the difficulty required to fend off all attackers? probably depends on what they could gain from an attack, which is hard to assess), and because it depends on the price of the coin, which is something the network does not really have a means to assess within itself. (This is one of the reasons why I think bitcoin as a "long term store of value" does not make sense. The deflationary design requires ever-diminishing mining rewards, but the network will still require significant mining effort to secure it, especially if the amount of value stored keeps going up. In the 'bitcoin as currency' model, the transaction fees would keep the incentive present, but with a relatively low rate of transactions you will need extremely high transaction fees to secure the network, making it potentially quite an expensive store of value to maintain.
> The deflationary design requires ever-diminishing mining rewards, but the network will still require significant mining effort to secure it, especially if the amount of value stored keeps going up.
Agreed - it stands to reason that as BTCUSD rises, more miners will come in until the electricity and electronics wasted per day reaches a certain, relatively fixed proportion of the daily block rewards (900 BTC/d until 2024, currently about USD 35m per day). With that, BTC now consumes about 0.5% of world electricity. If BTC goes 10x, its electricity consumption could approach 5% of world electricity consumption - insanity.
Agreed - it stands to reason that as BTCUSD rises, more miners will come in until the electricity and electronics wasted per day reaches a certain, relatively fixed proportion of the daily block rewards (900 BTC/d until 2024, currently about USD 35m per day). With that, BTC now consumes about 0.5% of world electricity. If BTC goes 10x, its electricity consumption could approach 5% of world electricity consumption - insanity.
My point is it also goes in the other direction (not to understate how ridiculous bitcon's energy usage is, though): the reward in BTC reduces exponentially over time (this is why there is a finite amount of bitcoin that will ever exist). Even if the value goes all the way to the moon, the rewards will eventually peter out (though it might be on the scale of many decades: the reward halves every 4 years or so). This means the cost of sustaining the 'value' stored in bitcoin will need to fall on those who own that value (lest it be stolen), and that could be very expensive compared to other forms of value storage.
Bitcoin could very well be simultanously ridiculously inefficient and yet have insufficient incentive to keep mining at a secure level long-term.
Bitcoin could very well be simultanously ridiculously inefficient and yet have insufficient incentive to keep mining at a secure level long-term.
Right. Including the invisible fees (due to increased BTC supply accruing to the miners), a transaction right now costs around USD 100. As the mining reward drops, either miners make less (good, they'd stop wasting), or fees paid by the user would have to increase substantially. If users don't pay up, there'd be much less hash power devoted to the system, rendering it insecure.
> transact without having to second-guess trust and transparency
Lots of people get scammed with crypto. Whatever web3 is solving, this ain’t it.
Lots of people get scammed with crypto. Whatever web3 is solving, this ain’t it.
It seems a little optimistic, if not misleading, to say about Bitcoin "Bitcoin, Ethereum, and many disruptive applications [...] that have positive impact in numerous sectors, including [...] environment [...] to name a few".
You can think of many advantages of Bitcoin (I surely think so), but please do not include "positive for the environment" as one of them, especially in the abstract of the paper.
You can think of many advantages of Bitcoin (I surely think so), but please do not include "positive for the environment" as one of them, especially in the abstract of the paper.
I try to also raise awareness of NIST's Blockchain Technology Overview, which is a good explainer:
* https://csrc.nist.gov/publications/detail/nistir/8202/final
See especially Figure 6 ("p. 42", 53 of the PDF), which is a flow chart to help you decide on whether blockchain may match one's use case. Extracted:
* https://imgur.com/a/RlUj9Ed
Generally you need the conditions of needing both (a) append-only log and (b) distributed/decentralized before considering blockchain 'technology'.
* https://csrc.nist.gov/publications/detail/nistir/8202/final
See especially Figure 6 ("p. 42", 53 of the PDF), which is a flow chart to help you decide on whether blockchain may match one's use case. Extracted:
* https://imgur.com/a/RlUj9Ed
Generally you need the conditions of needing both (a) append-only log and (b) distributed/decentralized before considering blockchain 'technology'.
No matter the many critical comments this is actually a pretty concise summary of the technology / concepts behind blockchain including recent developments such as scalability / rollups and interoperability, which are hard to find good explanations for.
Recommended read for anyone interested in the space from my perspective! Despite potential imperfections.
Recommended read for anyone interested in the space from my perspective! Despite potential imperfections.
It could also do without the marketingspeak - it has way to go until it will become "disruptive".
Isn't blockchains just git graphs where only the lucky ones get to push commits to?
It is the technology behind the success of ...
Here, I saved you a click.
Here, I saved you a click.
Do you usually first click on the article or directly jump into the comments? I tend to do both at the same time.
I assume that for each post on this site, everyone has read the article (and in this case, this paper) before jumping into the comments section to discuss what they have just read.
It seems the person you have just replied to has already admitted that they have read as far as just one sentence before rushing here in minutes later.
Perhaps they do this with every article they see. There are those who are unable to read beyond the headlines or the first paragraph and react here immediately. No wonder they are manipulated all the time these days as evident in their own reply below.
Is that what it has gotten to on this site?
It seems the person you have just replied to has already admitted that they have read as far as just one sentence before rushing here in minutes later.
Perhaps they do this with every article they see. There are those who are unable to read beyond the headlines or the first paragraph and react here immediately. No wonder they are manipulated all the time these days as evident in their own reply below.
Is that what it has gotten to on this site?
I usually start with comments. Only after that, if majority of the comments are not "this article is false and bad" I open the article.
Is it good or bad? No idea.
Cryptosphere is a cesspool full of lies and manipulation. People who understand this will read the comments first, I guess.
50 pages!
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> Trust is the biggest bottleneck in realizing transactions. It is the biggest bottleneck in advancing the society. As a trust-less system, blockchain removes that bottleneck.
Indeed, apparently trust in transactional system is our biggest problem. And indeed, apparently, blockchains provide that trust.
here's me thinking its trust in social institutions which is our biggest problem, an issue made much worse by blockchain, which offers no systems of redress (perhaps the most significant benefit of institutions and trust).