I literally spent the past week reading a couple dozen papers on cryptocurrency attacks, in service of a term paper which should hopefully turn into a master's thesis (and possibly more during my PhD campaign). I'm pretty damn pessimistic as a result. Smart contracts basically throw all of your consensus guarantees out the window because they can cause arbitrary exchanges of value in the application layer, which can be used to incentivize miners into all sorts of shenanigans.
All of this research is producing a fascinating array of solutions in search of problems. Fun stuff to think about, but I suspect that the added complexity will only create a system that is just as prone to fraud and abuse as the existing centralized order.
Smart contracts are a bad paradigm for developing applications on the ledger, they're far too permissive, the stakes are too high to want to trust your assets to arbitrary turing-complete code.
> the stakes are too high to want to trust your assets to arbitrary turing-complete code.
Does it matter whether the language is turing-complete or not? you're trusting a contract, not the PL used to write the contract, and the contract can be very simple (and formally verified, if the PL has a formal semantics).
Smart contract language doesn't have to be Turing complete. In 2018 there was a few related R&D projects, so I hope some of them are more mature by now.
> Smart contracts basically throw all of your consensus guarantees out the window because they can cause arbitrary exchanges of value in the application layer, which can be used to incentivize miners into all sorts of shenanigans.
This one isn't an attack per se, it is mostly an exploration of arbitrage bots in decentralized exchanges running on Ethereum smart contracts. However, they point out that miners can trivially capture the value of the arbitrage transactions by front-running, and that this "free money" is like a bonus block subsidy that falls outside of the PoW consensus models:
This one actually operates through transaction fees only, so it doesn't depend on smart contract functionality. However, it is waaaaay more expensive (for the attacker) than the others:
You're using a poor implementation of an app as a reason why smart contracts are bad. I hope you realize this is the same thing as saying databases are bad because of the Equifax hack.
I don’t think you understand. The arbitrage bots aren’t exploiting poorly written contracts, they are capturing free value that users of a dApp have opened up. This free value is available to miners as well, and could be used to subsidize an otherwise-unprofitable double spend attack.
But more to the point: allowing smart contracts in a blockchain introduces all of the complexity of trying to make any other piece of software secure. Except... now it’s on a blockchain where the code is open source and mistakes can allow adversaries to steal money, not just data. How is this an improvement?
I do understand. I work in the industry, specifically with decentralized exchanges. Both the order book and the order matching should be P2P with 0 conf transactions and client side verification. The fees paid by the user should be top off fees for the contract balance rather than pay to play fees.
I did about 0.1% of the amount of research you did a few years ago and was really struck by the irreversibility of mistakes. Other engineering domains can have irreversible (e.g. fatal) mistakes as well, but they don't have as many enthusiasts jumping in to the field.
Our CTO likens developing a smart contract to civil engineering. Our CTO also remembers what it was like to ship your software in its final form on a floppy disk!
I think it’s great that more and more people are jumping in and learning what it’s like to develop in such an unforgiving domain (no point here, I just think it’s great!)
I completely agree! It's sparked an interest in formal methods and learning more about how engineering takes place in other disciplines to improve their product quality.
The blockchain is indeed fraught with peril. Code review, audits, and bug bounties are an absolute necessity when it comes to smart contracts! Learning in a high stakes situation seems pretty good as long as you have a robust support structure.
I haven't read all those papers, but basically you could always bribe miners, even without smart contracts, just by giving them money outside the blockchain they mine.
One of the ideas of PoW is that if you have enough money to bribe the miners, it's better for you to be a miner yourself. Is this the principle your examples weakens? I may have misinterpreted them.
Bribing outside of the system (i.e. in real life) could be a tremendous coordination and logistical challenge, especially given the amounts needed to make these attacks profitable. Smart contracts can make all of that trivially easy.
It’s like... the people most interested in trustless collaboration are people who are untrustworthy. A trustless settlement layer seems fine, but any real human application is going to have an element of trust and doesn’t belong alongside settlement.
Paper money already was a level of abstraction above the physical assets like gold and silver. The problem with paper money is that it can be devalued very easily.
You are also not going to have a say about paper money getting banned in the coming years. You'll have a choice between different digital currencies, most of them centralized and some that are not.
Gold and silver are already a level of abstraction over the things you are buying with them or selling for them. Gold and silver's value as commodities have little to do with their values as useful for anything practical, although gold happens to have become useful for electronics.
The point isn't that there is a level of abstraction, but the kind of abstraction. The abstraction of paper money as opposed to metals comes with the potential for abuse through unrestrained printing.
Miners in Proof of Work currencies that find a block can choose what transactions in what order get mined. Through which they can change the order of operations, but they can’t invent transactions or manipulate them directly. I have found the issue of miners and transaction manipulating to be overblown.
Plus there's the problem that smart contracts cannot be easily modified if they are found to be buggy and that one can always reverse engineer them, because they're distributed to everyone.
It is pretty much impossible to sell anything digital with smart contracts, because due to the source code being accessible to everyone you can always figure out the password, key, or secret URL to whatever is being sold. Without paying for it.
The best smart contracts don't need to be reverse engineered, they've got shared, verified source code. The bugginess is a real problem as you've pointed out. The "impossible to sell anything" couldn't actually be farther than the truth from all my experience buying and selling NFTs. Over $150,000 USD worth of digital collectable game cards have been traded this week alone over at https://opensea.io/recent - everything is based on cryptographic signing and verified ownership on smart contracts, and it works great.
Digital assets are obviously the best possible use case for blockchains and smart contracts, but can it really work outside of that use case? And even for that use case is it really more convenient than centralized solutions?
From what I can tell browsing through this website those digital "assets" seem to be yet another speculative outlet with some limited gamification on top. It's cool from a technical perspective but where do we go from there?
I can confirm that the blockchain is way more convenient than centralized solutions for buying and selling digital assets once you get over the initial friction (which is still way too much). The keys here are open standards, composability, and trustless atomic transactions. As a user, I basically look at ethereum as an in-game currency—and the game is the whole of the ethereum gaming space (still nascent, yes, and polluted by a great many scammy speculative shell games) rather than a single game.
As for working outside of digital asset use cases, there are certainly a large number of people trying to get it to work though I agree the use case is much less clear cut. Without exactly agreeing with Vinay here, I at least appreciated the perspective he shared in detail on this episode of the NonFunGerbils podcast: https://nonfungerbils.com/podcast/3-vinay-gupta-indexing-the...
> It is pretty much impossible to sell anything digital with smart contracts, because due to the source code being accessible to everyone you can always figure out the password, key, or secret URL to whatever is being sold. Without paying for it.
Pirating most software/movies/music is pretty easy, but people still sell it. I'm not sure this is as big a problem as you think it is.
There hasn't been any high profile smart contract hacks for a while now. Early days are always fraught with disasters.
The field is evolving with "best practices", formal verification and lessons learned from past mistakes, so you'll find that these days things are more stable.
One example is MakerDAO which has around $300 million in value locked, and has been running without incident for a while now.
I bet you that their smart contract, like most other significant ones, has been designed to be upgradable. That means the authors can modify the smart contract whenever they want, which means it implicitly has a centralised trust mechanism (I.e. you had better hope that the authors don’t go rogue and screw over the users) Central point of trust => blockchain part is now pointless, as ever.
Although the main achilles heel with Maker is the governance and the oracle. The new version of maker has minimised the governance, and the new oracle design has better protection against an oracle attack. Ideally, you want as little governance as possible.
This may have been true in the past, but not anymore. Here's [1] an example of a minor bug that was recently discovered in the MCD deployment and how they're going to patch it. The modules in the Maker system have variables that point to which smart contract to call to execute their actions, and the Maker governance is involved in changing these values.
Perhaps a naive question, but in that case, why bother with a blockchain?
If some entity holds the keys to control what code is run, why not let them run the code to begin with? This simplifies implementation significantly, and has obvious scaling benefits.
You can still operate this in a transparent way with multiple independent stakeholders that validates data. Many other systems work this way.
The Maker system was bootstrapped this way, but now with the release of MCD, the system will be modified so that the Maker corporation's key is revoked and changes to the system will only be able to be made through MKR token governance votes moving forward. [1] When people refer to the "Maker governance", they refer to those decisions that are voted on by holders of the MKR token. In practice in the short term, the Maker corp will still hold a voting majority of MKR, but it's a long term goal that eventually the Maker corporation won't have to exist and the system is totally maintained by the holders of MKR token.
The more important reason though for doing it on the blockchain is reducing technological centralization. Right now, as long as the Ethereum network exists, the Maker system will be on the blockchain and can't be shut down, even if the Maker corporation is dissolved.
US FinCEN has recently set their eyes on stablecoins, declaring that the entities that offer them will need to comply with KYC regulations. [2] By deploying the system on a public blockchain, it's arguable that the US govt will not be able to cease the distribution of Dai itself and will only be able to go after its holders.
If you have to trust an oracle, you have essentially thrown away all of the plusses of decentralisation/trustlessness. At that point, the blockchain becomes pointless busywork, useful only for duping mug investors.
The impossibility of a full elimination of trust, for any particular problem, doesn't mean a partial reduction isn't valuable.
If you disagree, would you be fine with changing the political and justice system of your country into a fully opaque black box? As in, you still can vote for the policies you want, but it's impossible to know how the government functions, what are the reasons for its decisions, or even who personally forms the government, to the point it could be run by aliens or an ai. Sometimes people are arrested for crimes, but it's impossible to know what's the evidence or even what the crime was, even after sentencing.
If you don't consider this equivalent to the currently utilized system in your country, you have to agree that there's value in trust minimization.
I think we're detached from the original discussion. "That's what oracles do" was a response to the problem that "smart contracts cannot be easily modified if they are found to be buggy". Trust minimization is valuable, but a smart contract that allows an oracle to unilaterally override its terms doesn't minimize trust in any meaningful way.
Some hubris in this post. Claims ASIC resistant PoW is "Solved as far as we can", with Ethash being the near end-all of hashing.
Random-X is a significant step towards ASIC resistance, requiring near general purpose computation to perform efficiently (i.e. if you can build a better CPU than Intel/AMD/ARM, you've already won).
(Random-X requires code JITting, large CPU caches, compliant floating point, SIMD, hardware AES, as well as large amounts of system RAM, and other things.)
Innovation continues. If you stop having ideas, step aside.
This is what I really dislike about owning crypto long term as a store of value. It's a cat-and-mouse game with hardware and software development, and there's a lot of faith in maintainers to stay ahead of the threats.
Bitcoin's software development could completely freeze right now, and it would still be useful. Most other projects require constant upgrades and tweaks, since they are very far from the stage they promised when they started. This is especially true for Ethereum.
Just wondering, unless you’re doing something illegal or are targeted by the government and your money is at risk of seizure, why would you keep it in crypto with all its associated risks instead of in a bank? Banks are highly regulated and so can’t just run away with your money.
1) If we are talking about central banks such as FED - non-QE QE happening right now in the USA could be good example of why one would not be want to be part of the game.
2) If we are talking about centralized banking as a group of banks operating under the rule of the government - similar question to yours could apply to the general cryptography - why you need it (unless you are a criminal) if the state protects your rights? We seen countless examples where it doesn't quite work like that.
I really want you to consider that desire to not be forced to use the only one available medium of exchange does not mean someone wants to do something illegal (also, try to define illegal in the very general way, that would apply equally in the USA and in Venezuela, and in Russia, and in Somalia =))
> 1) If we are talking about central banks such as FED - non-QE QE happening right now in the USA could be good example of why one would not be want to be part of the game.
Crypto doesn't get you away from this. Not to sound like a mediocre Ashton Kutcher film, but it's all connected. In short, too much fiat, cryto prices in terms of fiat will go up and the converse is true as well.
The only way crypto wins or is THE place to put your money is if the entire world stops using fiat money.
Even more than that - crypto developers can decide they want to have more than 21m (or whatever fixed number) of coins out there changing the whole mechanic of it. But it is one fork away if majority disagree. Try to fork USD.
> Banks are highly regulated and so can’t just run away with your money.
It's not your money in a bank. The bank barely has $1 or two for every $100 you put in. There's plenty of people who have philosophic disagreement with fractional reserve and some who couldn't care less about ethical matters and just there preparing for the worst as good evolutionary diversity dictates they should.
It's easy to sit in a country that hasn't ever suffered these things and think it's all silly, but there's plenty of people who don't have those luxuries. How do you think someone in Cyprus, Zimbabwe or Venezuela would feel about your statement saying to trust the banks?
Venezuela was one of the richest countries in the world for a very long time. They still have enormous amounts of mineral wealth and yet people are buying their groceries with wheelbarrows full of money.
I doubt crypto is the solution to these problems that are fundamentally burnt into modern economies now but make no mistake crypto was born out of these problems by a lone developer who virtually everyone ignored. It's easy to criticise until you've walked in those boots for a year suffering at the hands of central banksters.
> How do you think someone in Cyprus, Zimbabwe or Venezuela would feel about your statement saying to trust the banks?
Someone from Zimbabwe here - I endorse their statement: trust the banks. I lost my money to a bank closure in early 00s, eventually got some of it back from the zombie entity that the central bank resuscitated. The CEO of a Zimbabwean crypto-exchange[1] "lost the password" of a cold wallet (wink) a year ago - the deposits therein were lost with no recourse; the exchange is struggling with solvency[2]. So yeah, if you're not going to stuff money under your mattress, give it to a bank before going full crypto.
1. Golix - you might have heard of it as it was offering the world's highest USD:bitcoin rates. The fine print was that you couldn't get USD out of Zimbabwe
That is very unfortunate, you have my sympathy. But I think it has to be pointed out that leaving your money in a crypto-currency exchange is generally considered to be worse than leaving it in a bank, regardless of where you stand on cyptocurrency in general.
Personally, I lost 3 bitcoin when someone hacked my MtGox account in 2012. I think they'd had 2fa for a little while at that point, but I was stupid and didn't enable it. Furthermore, I had reused my account/password on some fledgling bitcoin forum. In my defense, when I made the accounts I didn't think the valuation of bitcoin would peak around $20k :)
Banking software and all the algorithms that power the global economy are vulnerable. Every 10 years or so there's a major crash because of dinne oversight and the result is "this will never happen again", yet it continues to happen again.
At least here we can build an economy off an economic model instead of what we do now which is build an economic model off of the economy.
Each hash input generates a code sequence that has to be executed 1000s of times in an inner loop. The code sequence is different for each input meaning there is no reason to save the JITted code as the next hash will use a new code sequence which you cannot predict.
data = input;
for (1..10)
{
JITtedCode = CodeGen(CryptographicHash(data));
for (1..100000)
{
data = JITtedCode(data);
}
data = CryptographicHash(data);
}
output = data;
Besides proof-of-stake, there's also a coin that tries (tried?) a proof-of-work with greater public utility: Primecoin [1]. It creates Cunningham chains of prime numbers [2].
Yes, and there's also SolarCoin which rewards users for producing renewable energy. The problem is that these coins are centralised, so while they may be very useful for what they do, they don't solve the same problem as proof-of-work coins which aim to be decentralised.
there is also gridcoin but they are not useful pow. they are proof of stake where the stake is the amount of contribution towards boinc projects and the likes, and they are affected by the oracle problem
Wouldn't work, the security of PoW explicitly relies on waste. If the external value from mining is X and an attack costs Y, the net cost of the attack is X-Y=Z, so the real security is Z, the waste portion.
Incorrect. The supposed MR=MC law means that the entire economy is zero-sum and wealth creation is impossible. His reasoning also directly translates to real world physical security, as in, if you want to protect wealth worth $1000 from theft, according to him you have to spend $1000-epsilon, otherwise someone is going to outspend you and steal it. Fortunately, that's not how the world works.
Nothing special about commodity exchange. The difference between marginal revenue and marginal cost is marginal wealth creation (destruction if negative). A world in which MR=MC is in a global maximum and no improvement is possible - any state changes imposed externally can either lead to the same score ('wealth') or make it worse.
In other words, he first assumes that no improvement is possible, and then indeed manages to show that, according to the assumptions, no improvement is possible.
PoW is exactly the same. The rich can afford the most hardware and electicity. PoS just short circuits the burning power step. It's also the same as bank interest.
PoW provides significant economies of scale for those with lots of scale and makes mining with a single GPU a waste of time.
PoS doesn't offer much economies of scale at all as the main cost is the ETH, so it's much fairer to smaller validators.
When you put your money in a bank, it doesn’t just sit there. Deposits, while possibly not the most efficient way to do it, support useful economic activity.
Proof of work is also terrible, obviously. Proof of stake seems like an awful thing to _aspire_ to, tho.
The minimum stake of 32 eth is probably going to require something like a laptop to run. Those with larger stakes are going to need to devote more computer resources to the network.
Expected payout depends on the total amount staked. With a large amount staked it's only a couple percent annually; with a small amount it's up to 18% annually. The idea is an equilibrium will be reached in the middle somewhere.
The return isn't based on how much you stake. It's based on how much everybody stakes. It's targeting an approximate amount of total ETH staked and doesn't really care how much is staked by each individual.
Proof-of-stake has been in use in other non-Ethereum cryptocoins for a very long time [1] [2]. In Nano's case, there's no transaction fees paid to stakeholders (nor their delegated representatives).
Nano consensus mechanism is called Open Representative Voting (ORV). It has similar sides to proof-of-stake, but differs in important places. e.g. it is less a "stake" than a voting weight that the users themselves distribute to nodes of their choice (or their own). ORV's self-description at:
Sure, it's an optionally-delegated-proof-of-stake. In practice, most do delegate their stake. But at the end of the day the "voting weight" that secures transactions is majority stake and not a proof of work.
Phase 0 of Ethereum v2 arrives in Q1 2020. Coming since 2014 but finally arriving :)
Proof of stake reduces the issuance of new ETH to pay for the cost of securing the network. It's cheaper than paying miners. And anybody can buy ETH to stake so it's more egalitarian than mining which requires economies of scale in hardware and electricity.
PoS would be more egalitarian if it was that way from the start, however as it is transitioning from PoW this means that anyone that bought in early, now has an opportunity to solidify their position. For new entrants to reach the same level of investment would be significantly higher. So the ETH rich get richer and it widens the gap.
The rich get richer in proof of work, too. It's not like those giant mining rigs are free.
It's also true in bank accounts; the more money deposited, the more interest you earn. At least in proof of stake everybody gets the same interest rate regardless of deposit size. Banks generally give better rates to larger accounts.
Ethereum wasn't launched until July 2015 so there's one inaccuracy. Also given you're on HN you should likely be aware that (a) timelines are difficult to estimate and often things take much longer than you thought, even more so with being the first to do something, (b) there's a lot of discussion and review for financial software, (c) it's much harder to change the carriage of a moving train
Decred set up it's mixed PoS/PoW so that there is an opportunity cost to staking - your funds are locked for a random amount of time up to several months. The staking rewards are also not enough to keep indefinitely staking. Your share of stake will continuously decrease, and, aside from ticket splitting, you would need to acquire more decred along the way to continue staking at the same level.
Yeah that was 5 years ago too if you don't remember.
It's an incredibly difficult problem and anyone claiming to have actually solved it in a decentralised way that proof-of-work did is a charlatan.
Given all the money slushing around in cryptocurrency looking for a problem to solve I'd argue it's an intractable issue that needs yet another breakthrough rather than marketing and bubble hype.
I'm disappointed that PrimeCoin didn't really catch on. It's mathematically sound, relatively quantum safe, and produces useful output. Any improvements to factoring or finding prime chains would be genuine advances in the field, whether algorithm or hardware (ASIC) based.
Even if I could use it for regular transactions, I’d still need a reason to want to.
If the justification is “you don’t need to pay credit processing fees” then things would have to be priced cheaper. But I think you’d have to pay me more than the credit card fee to give up the ability to do chargebacks for a lot of online transactions.
Maybe I’d use it for making donations where I’m not expecting anything back from a transaction that the other party could fail to deliver.
Sure, let me give an example of a problem that it solves.
Censorship resistant transactions.
Back in 2010, for example, banks blocked all transactions being sent to WikiLeaks, even though they broke no laws, and we're never charged with a crime.
So even though, these were not illegal transactions, banks blocked them anyway. But the crypto transactions weren't!
So, this is an example where perfectly legal bank transactions were blocked, but the crypto payments weren't.
I think there are some use cases where it makes sense. For instance, I have somewhat of a split life between the US and Europe, and I really wanted cryptocurrency to succeed as a cheap way of moving money between currencies.
I played around with bitcoin a bit in 2015, and it back then it was a pretty good experience. Transactions were quick and cheap. The problem is it seems to have gotten less usable in almost every way since then.
Bitcoin certainly got enormously slower. But the other major currencies (ethereum, xrp, etc) are both much faster and more liquid than BTC was in 2015.
That has only been an issue around the Dec '17 congestion. I can have my transaction mined in the next block for the satoshi equivalent of $0.61 today.
That's interesting, I didn't know it speeded up again. I guess it still is an issue though: it's hard to trust a currency with the knowledge that it's transaction speed could potentially slow down by hours or days if there is too much traffic.
Certain use cases are currently very difficult/too expensive on current payment rails (Card networks, ACH etc.). Whilst I am not bullish on using Crypto directly. I think a clearing layer that can be settled with crypto can create a very interesting space for real time value exchange. We are currently working in the space on Interledger.
Is it a project that hasn't been released yet ? Or by "clearing layer that can be settled with crypto" you simply mean route ILP payments between two currencies with crypto in the middle ?
The latter. The underlying settlement is separate concern to clearing. Crypto just makes settlement easier for low-zero trust environments or situations where you want to manage liquidity better.
Centralized alternatives work perfectly well until they fail (corruption, mismanagement, war, police state .. ). And when this happens there will be decentralized alternatives ready.
Funny. Article discussing hard problems of crypto and ignoring the elephants in the room. There is still no actual and relevant use case for crypto outside illegal transactions and gambli^H^H^H^H^Hinvestment purposes. The second elephant is that it brings monetary policy back to medieval times. Third is that in practice the whole concept of credit and ots role in money creation is ignored.
Excluding the transaction fees problem you mentioned (which cryptocurrencies also have -- while it might not be 4% it's definitely not 0%), all of the uses you listed are really just one use-case -- uncensorable transactions. Don't get me wrong, that's a very good feature of cryptocurrencies (assuming that you have the ability to transform crypto back to real money on the other end), but you should be aware that your list of use-cases is only one element long.
I also want to point out that the use-case of "get your money out of the country" is not exactly perfect for Bitcoin because of how volatile it is (imagine if someone had to get their money out during December 2017).
I'd say anonymous payments is a little different from being uncensorable though. You'll stay anonymous even after the payment has gone through.
As for transaction fees, if we exclude Bitcoin which has really high fees, cryptocurrency fees are very small and almost negligible.[0]
Getting money out of the country is always relative. Even with Bitcoin's volatility it's much preferred to losing all your money. Either you cannot bring it with you through the border, or Venezuela's hyperinflation will eat it up in a flash.
>> As for transaction fees, if we exclude Bitcoin which has really high fees, cryptocurrency fees are very small and almost negligible.[0]
That's probably because their popularity among users is also negligible. Problem with cryptocurrencess is that they don't scale well, with increased transaction volumes the fees and processing times also tend to rise until network's hashing power catches up.
Not exactly. Fees are high in Bitcoin because they want it to be. Bitcoin Cash could for example handle at least 20x of transaction throughput, with the same low fees.
Of course scaling is difficult. But Bitcoin isn't a good example of that.
I'm struggling to understand if uncensorable transactions are a good thing (note: struggling not in a sense of "I actually think it is evil but let's hear your bullshit arguments so that I can easily debunk them", but in a sense of really being undecided). I am not a libertarian so I don't think that laws are just a useless form of violence. So how can uncensorable transactions be useful for a law-abiding citizen? One thing I can think of is when a transaction is in the gray area - you do it without asking anyone and then can argue that it is legitimate from a relative position of power, similar to asking for forgiveness instead of permission. Another thing is that existence of uncensorable money can push nation-states to adopt more equitable and just laws. But of course there are downsides in enabling crime and so on. So is uncensorable money a good thing in aggregate? I don't know.
The most obvious example I can think of is when WikiLeaks (or pick your own politically-unfriendly charitable cause) had their PayPal and bank accounts frozen -- people donated using Bitcoin because the transactions couldn't be blocked by private companies. There are also several other examples of completely legal but unfriendly-to-large-corporations transactions -- in the several US states where marijuana has been legalised it is still difficult to conduct non-cash transactions with the proceeds because most payment processors are under federal jurisdiction thus making it possible for your (completely legal) funds to be seized.
You are always at the mercy of your platform. But wikileaks could have continued accepting cash in the mail instead of being sidelined by a third party service. And at least with legal pot the tide is quickly shifting to make traditional banking easier; there was talk in LA about opening a municipal bank kinda for this purpose.
For most people, the utility of sticking your money into a volatile and slow system with no recourses is just never going to be there. A municipal credit union would be more useful and offer an out from private for-profit banking for most people.
> I am not a libertarian so I don’t think that laws are just a useless form of violence.
Libertarians aren’t anti-law, they are pro-constitution. Libertarians are against the drug war, pro-marijuana legalization, against civil asset forfeiture, and trying to end the endless wars waged in the Middle East.
You will not find a better friend than a libertarian if you ever find yourself arrested or sued for any reason. Judges inventing laws is the antithesis of the belief system - libertarians follow the law as written.
Yes, "libertarian" is probably not the right term - a quick skim of wikipedia shows that it is very broad with a varied attitude towards legitimacy of state power. What I specifically meant is that I don't see all restrictions on financial activity as a priori bad.
That said, why is the emphasis on constitution (BTW, do you mean any constitution or US constitution in particular)? Constitution is just a special kind of law after all and I can totally imagine libertarians claiming that it is inadequate, pushing to change it and make it more aligned with their principles.
I am specifically speaking about the USA as I am a libertarian from the USA, but the libertarian ideology is universal. It has a rich history of thinkers and writers if you want to explore more. Basically libertarians begin with the idea that the rights of the individual are the most important, and government should be restricted from infringing on individuals.
In the USA we have the Bill of Rights that protects each person from government overreach, such as the 1st amendment which protects freedom of speech, and the 5th amendment against testifying against yourself.
The government however often passes laws that violate these rights, and then the courts have to overturn laws that are unconstitutional because they violate our rights.
I am of the opinion that the government is a very dangerous entity with unlimited power and ability to harm citizens, so we should always be skeptical of all laws passed and work as much as possible to limit the power of government.
The problem is that it has gotten worse not better. There has not been a good use case for a Joe NormalCitizen for crypto in a while.
Anecdata: I first mined BTC in 2011 and used BTC quite a bit in 2013 to buy bunch of online and offline services. It was relatively painless since I had my own BTC. (Also it was really pseudo-anonymous since I was only using mining rewards and didn't reuse addresses).
Since I do not own any significant crypto anymore there is no use case for me anymore.
If I want do something shady, I'd have the problem of onramp KYC etc.
If I want to do something legal, crypto costs including onramp is less convenient/costs more than normal SEPA/CC etc.
> Is it still possible to circumwent KYC by mining?
Not really. You can't earn much at all mining any coins without significant and reoccurring capital investment.
There are de-centralized exchanges like Bisq that you can use without KYC.
Also Monero has true anonymity so while you might need a KYC onramp to get into crypto, once your value is on the Monero chain it's anonymous, transactions cannot be followed, balances can't be seen (without permission).
> Credit cards and payment processors take a 2-4% cut, of all transactions.
Most payments regular people make every day are sub three-digit. On those payments 2-4% in the US is much cheaper than the current Bitcoin (and similar) transaction fees. That means crypto is rather unusable for most people. I won't even start talking how Bitcoin doesn't compete at all with European SEPA Instant payments for most use-cases.
The only use crypto currently has is censorship resistance, pseudonymity and illegal purposes.
No, it's so cheap because Bitcoin has full blocks and people have to outbid each other to get their transaction through. Bitcoin Cash could handle at least 20x the volume of Bitcoin, with the same low fees.
It's not Bitcoin Cash that's special. It's Bitcoin, but in a bad way. Even Monero has very low fees with better capacity for example.
If that's the case, why is the transaction count per time period for Bitcoin Cash about 20% of Bitcoin's? On the other hand, it's a significant problem that Bitcoin Cash has about 2% of the hashrate of Bitcoin. Any sensible person would not put any significant value into Bitcoin Cash when such a small percentage of Bitcoin miners could reorg the chain.
One legitimate use case for cryptocurrency is so you can transact with individuals who do not have bank accounts. Cryptocurrency allows anyone in the world to get a cryptocurrency "bank account" and that "bank account" allows the individual to transact freely in society. It is important for a free society.
Here's a practical example: due to US sanctions, no Iranian citizen can have a Visa or a MasterCard. Assuming they've acquired cryptocurrencies somehow, it's their only way of paying for digital goods.
There are 1.7 billion adults in the world who are unbanked. 420 million of them have internet access. You can find them in countries all over the world. For example USA have 18 million and France have 3 million who don't have a bank account.
It's not just poor people in countries without banks who have these problems. Even rich porn stars have had their bank accounts closed (for being porn stars) and people in the marijuana business too.
How does an unbanked put their paper money into their cryptocurrency account without a KYC process? (Please don't say trust a random third party stranger in a pub offering cryptocurrency at an exorbitant markup.)
> There are no fees for opening or having an account
I've never paid a fee to open or have a bank account, but how does an unbanked put their paper money into their cryptocurrency account without paying a fee (or an exorbitant markup)?
> You don’t need to trust a third party with your money.
How does an unbanked get their paper money into their cryptocurrency account without trusting a third party?
> There’s no need to visit a financial institution. As long as you have internet access you always have access to your money and can make payments.
Online and phone banking existed decades before Bitcoin was created.
> Around 60% said they had too little money to use a bank account
Yet they'd somehow have enough to put into cryptocurrency account?
How do you expect someone who doesn't have access to banking to set be able to set up a mining rig?
I'm not saying having a bank account is necessary, but the life conditions that prevent bank access (poverty, homelessness, addictions, abuse, violence, etc) will certainly prevent anyone from mining/
> How does an unbanked put their paper money into their cryptocurrency account without a KYC process? (Please don't say trust a random third party stranger in a pub offering cryptocurrency at an exorbitant markup.)
One possibility is that they can receive their income directly in cryptocurrencies.
Yes, one big issue is that payment processors are incredibly centralized and massive. These two combined means that they are incentivized to de-risk their platforms and stop serving customers they determine to be "high risk".
"High risk" is often mistaken for illegal, but that's incorrect. Many industries that are completely legal are still viewed as high risk and become deplatformed. Small companies are at the highest risk of being deplatformed.
Crypto currency allows anyone to send and receive money, without depending on the blessing of a third party which can decide whether or not to serve your business. Access to the financial system is not seen as a basic human right.
There are 0 adults in the world who are unbanked but have access to a mining rig or card payments to buy cryptoassets.
By an interesting coincidence, 0 is also the number of unbanked people who should risk the money they need to eat on unregulated, complicated and easily stolen intangible financial assets which wealthy foreigners invented to print themselves money.
The point of the OP was that he believes electronic money cannot benefit the unbanked.
It's wrong. The exact details of bitcoin aren't the right thing for it, but there are many cryptocurrencies that are more like m-pesa in their use requiremnts than they are bitcoin.
No, my point is that unlike M-Pesa, cryptocurrencies do not have a trained, regulated agent in every village who will reliably exchange them for local cash at a fixed rate. The centralisation is fundamental to its success - probably only the mobile providers or maybe a money transfer network like Western Union could have pulled it off.
M-Pesa would not have succeeded in helping the unbanked if people living in remote villages needed to set up a mining rig or navigate to Coinbase.com and enter debit card details to obtain it. There'd be no reliable way for most unbanked people to get it or get rid of it. And since the unbanked world needs the network of regulated agents offering cash conversion and really can't afford for their assets to be backed by speculator optimism rather than legal tender in a trusted party's bank account or vault, there's really not much advantage in building that trusted centralised entity's database in something as computationally expensive as a blockchain. Certainly it's not lack of blockchain technology that's been the obstacle to people from creating more electronic money transfer service for the unbanked.
> The point of the OP was that he believes electronic money cannot benefit the unbanked.
Not really, if you read what you replied to it says that none of the unbanked have cards to buy it with, and that they don't need to be risking what little they have on "unregulated, complicated and easily stolen intangible financial assets which wealthy foreigners invented to print themselves money."
That doesn't describe M-Pesa, but it does describe cryptocurrency.
«There is still no actual and relevant use case for crypto»
What a short-sighted view. Perhaps no use case for you personally. There are 7.7 billion people in this world who have vastly different life circumstances, some of them certainly need crypto to make their lives better. In no particular order: hyperflation, financial censorship, instant low-fee international transfers, etc
>> Hyperinflation
Human competence the main cause.
>> Instant low-fee international transfers
We have it already
>>financial censorship
Depends firstly on political system. If you have undemocratic government crypto won't help you anyway, because it will be banned or controlled.
Practice is the criterion of truth. Can provide cases, when crypto solves problem better than existing instruments?
I have to say crypto seems much easier to solve than bad politics. If you'll grant this, your argument hinges on crypto being useless under an oppressive government, because it will be controlled. I find this implausible given that no government in history has ever really succeeded in fully controlling black markets. Indeed, the trend is that the more dysfunctional the government, the more power the black markets have.
Can you describe to me how inflation is good for a household? The literature you've probably seen is ex post facto about inflation trying to convince themselves and the world that the inflationary behaviors that were done are "good".
"So every year, your savings get watered down and you lose wealth", is not what one wants to hear.
Inflation is good for an ECONOMY because it ensures that currency is not sitting on the side lines, but being actively invested wherever possible. ...so the velocity of money is increased, and hence volatility is decreased.
The negative impacts of volatility on the economy are very well documented.
Inflation has zero impact on a household as long as their savings are kept in assets other than cash.
So unless you're hiding bags of gold underneath your bed as "saving" then that money is going to circulate across the economy naturally as investment. But it is sort of weird that any single person/group can fully know what is best for all individual actors in an economy (not possible).
Lastly, to say that a currency losing 99% of its value over time is not damaging to a household is either ignorance or corruption. The lower tiers of society furthest away from the money printer are the ones that are impacted the most. Coincidentally, I'm going to assume you want to help these tiers the most but end up hurting them.
There is something called the Cantillon effect, where those closest (banks, those connected to the gov) to the "stream" of money get benefited while those furthest away (regular people) get hurt.
Inflation is good for governments who want to reduce their debt obligations denominated in their own currency, and it encourages economic activity.
It’s bad if you have little money, your wages don’t raise automatically with inflation, and every year what little you have has been reduced in value 1 to 10%.
I as a homeowner with a government-subsidized 30 year fixed rate mortgage love it however, as what I pay for my asset each month is less and less as inflation helps me and the tax payers finance my wealth creation. Renters, not so much!
Sure, those are all good points, but cryptocurrency has one special, virtually unique characteristic in the current era - newness. We should cut it a bit of slack.
I consider myself fairly knowledgable with cryptocurrency. I create and run a crypto project myself. I read this post and maybe understand 10% of it. This is probably the rate of things I read from Vitalik. Either Vitalik is extremely smart or he just doesn't know what he's talking about. Overall, his opinions are just confusing and distracting like the whole Ethereum ecosystem.
A warning for those who think getting a degree is useless. At least, it will force you to think deep about some problems. I hope Vitalik will find his focus and really solve a concrete problem.
For those who think I'm 10 times less smart than Vitalik. Here's my take on Ethereum and its prospect.
> Either Vitalik is extremely smart or he just doesn't know what he's talking about. Overall, his opinions are just confusing and distracting like the whole Ethereum ecosystem.
Vitalik started out years ago with writings consisting entirely of self-citing the Ethereum echo-chamber. Judging by the citations here he's starting to understand the value in the works of the established institutions, tenured university professors, and career cryptographers -- people whom it's obvious in his circles are either loathed as some irrelevant elites or simply, wholly unknown.
Now that Vitalik has spent the last few years actually surveying the last decades of theoretical achievements in the literature, maybe it's time to build a secure distributed world-computer. Oh wait.
What is he really supposed to represent? Skipping all the hard work, middle-fingering the system, and getting rich quick? That's worth at most 15 minutes of fame, and a long long time ago. Mr. Buterin isn't in jail simply because no government has the slightest fucking idea how to parse this massive exabyte jumble of cryptocoin hodgepodge over the last decade.
Meanwhile, thousands of poor souls have been lost in the basements of universities doing real honest-to-god useful work which may never be understood and used by industry, or even see the light of day; they lack this disingenuous excessive hyper-promotion and the means to compete for media attention with our favorite cult heroes like Vitalik.
huycfhct is a troll account pushing the, Adam Back invented Bitcoin narrative.
There are A LOT of these accounts, Adam is well known for employing these guys like Greg Maxwell to social engineer their narrative into sites like this.
He is, that's what Ethereum 2.0 is which is being released over the next couple years. He's also worked with academics from outside the crypto space since the beginning.
How is Ethereum broken? It is working right now as we speak. ETH2 is just an upgrade of the network. Just because you percieve it as nonsensical doesn't mean it is and you provided no facts to back up your claims.
In what sense is it working? It's currently very expensive to use, almost all functional apps are essentially speculating, and the system is quickly outgrowing commodity hardware.
huycfhct is a troll account pushing the, Adam Back invented Bitcoin narrative.
There are A LOT of these accounts, Adam is well known for employing these guys like Greg Maxwell to social engineer their narrative into sites like this.
Assessing crypto problem is itself a problem. Vitalik maybe 10 times smarter than me. But his track record is poor. He hasn't really proposed a solution that is worthy contribution to crypto.
I have solutions to some of the problems he lists.
10. Stable-value cryptoassets
13. Proof of excellence
My solution is to add inflation into supply. A percentage point inflation, not tail emission.
Inflation will discourage HODL behavior and stabilize token price. It's not perfectly stable. But it'll be more stable, more efficient than DAI and its financial engineering on top of Ethereum volatile price. That solves #10.
For #13, with inflation, we don't have to worry about bag holders. Everyone has incentive to drive the system. Otherwise, their tokens will worth less over time.
I designed a crypto that can help bootstrap inflation. My solutions are simpler. I think they'll work.
At first glance, your coin looks like a copy and paste bitcoin clone with some tweaked parameters. If something like that was going to make a difference, I think we would have seen it happen in 2014 when a lot of copy and paste coins were being created.
I was involved with Dogecoin back then. I advocated for inflation for the same reasons you want it. It has not led to Dogecoin having any great breakthrough in usage.
I'm glad to find someone who has the same idea. Crypto is very niche and specific. From start, I think each coin has a narrative. It'll be very hard to change that narrative. I think Dogecoin started out as a meme and fun coin. It currently has tail emission which is not really percentage inflation. Long-term, tail emission behaves like zero supply. Adding inflation to Dogecoin won't change its narrative. I don't think its community will be supportive of a change that devalues their bags and change its narrative.
I want to create a chain that has inflation as its main feature. Its supply schedule is designed to bootstrap inflation. It looks like this:
0: 50 (supply: 10 million)
1: 25 (supply: 15 million)
2: 12.5
3: 6.25 (end of halving)
4: 6.56 (start of inflation 7%)
5: 7.02
6: 7.51
7: 8.04
8: 8.60
9: 9.20
10: 9.85 (supply: 31 million)
The chain has 7% inflation. It is a fairly high rate. It's designed to break out of Store of Value and HODL narrative.
In 2014, people were still attached to the idea of limited supply and Austrian economics. Maybe, in 2019, people will have second thought about Keynesian.
If you still have interest in the idea, please reach out to me contact@bitflate.org.
Hmm. As an outsider, having spent a year learning about this space, I was able to skim the article and recognize all the "problems" and I suppose "understand" them in that I could stand at whiteboard and explain what the problem is about.
But these are mostly problems in the sense of Hilbert's problems: things that folk muse about for decades. They're not "engineering problems" as in something to be figured out and built in short order.
In general the blockchain space does have this syndrome where issues that boil down to "trans light speed travel?, discuss.." are conflated with things that are like "how to do trans sonic flight without breaking apart". This could be intentional as a way to get investors fired up.
For an analog in regular tech see: self driving cars.
Vitalik and ETH are the definitions of scam and scammer. He's very good at obfuscating it by appearing very smart: read his articles and tweets, they always sound complex, but can be rewritten in much simpler terms. And ETH is the same: it obfuscates its uselessness and nonsense by being overly complex, every year employing new terms and coming up with tons of code that only increases the attack surface and complicates things even more.
Please don't cross into personal attack. It degrades discussion. Maybe you don't owe every person better, but you owe the community better if you're posting here.
> tons of code that only increases the attack surface
Ethereum itself was the original sin in this respect. In Bitcoin, for the most part, the economic value at stake in a block is (1) the block reward, (2) the transaction fees, and (3) the amount transacted. (1) + (2) + (3) is therefore the maximum amount that can theoretically be "moved" if a block is invalidated through an adversarial fork, since someone else can claim the miner rewards and every transaction could possibly be double-spent. Anyone who wants to be assured of transaction immutability can, at the very least, calculate the total value that is at stake and wait until at least this much PoW has been layered on top of the transaction.
Not so with smart contracts. A paper I read yesterday showed how smart contracts can be used to execute trustless, crowd-sourced DoS attacks on rival blockchains (https://eprint.iacr.org/2019/775.pdf). It's ridiculous. Once you open the Pandora's Box of smart contracts, you can throw your consensus guarantees out the window.
> smart contracts can be used to execute trustless, crowd-sourced DoS attacks on rival blockchains
And that's a good thing. We needed an established way to attack rival blockchains that use the same PoW mechanism. They are insecure by design of PoW, and until they are all torn down by attacks, unsuspecting people can loose a lot of money.
>He's very good at obfuscating it by appearing very smart: read his articles and tweets, they always sound complex, but can be rewritten in much simpler terms.
What? Nothing could be more unfair. His articles on zk-snarks and starks are probably the most approachable explanations available.
I don't agree, but anyway, how does that even make him a scammer? Vitalik rarely talks about the price of ETH, and he's very open about the risks and shortcomings.
During the 2016-2017 bubble he was even tweeting that the crypto space had done very little to even deserve the runup. However you had several other prominent people tweeting things that only amplified the bubble, so it did little to tame things, but at least he wasn't participating in it.
If he's a scammer, as you put it, he's doing a very poor job of that.
I don't know much about the details of this particular attempt , but the strategy is not ridiculous on its face. Very implausible, yes, but it contradicts no theorem nor any established law of physics. Mostly, it's implausible because many people have tried very hard to find efficient classical simulations of quantum computers and all have failed.
From what I've seen, it's true, but Ethereum launched when Vitalik was 19 and his quantum silliness was years before that. Personally I'm glad nobody's looking at the stupid things I was thinking about at that age.
None of these are the actual hard problems in cryptocurrency and the fact this is the focus speaks volumes. The real hard problems are:
1. How do we stop using more power than Switzerland to process 4 transactions per second (lol)
2. How do we stop payments to international terrorists and rogue states.
3. How do we stop money laundering.
4. How do we stop price manipulation by fraudulent actors.
5. How do we allow people who lost access to their money by negligence, fraud, theft, act of god or otherwise, access to their money again.
[bonus] how do we generate the right quantity of new cryptocurrency so that the pace of money growth matches that of economic and population growth so as not to disproportionately reward early comers just for “being early”?
You know, the “currency” problems and not the “crypto” problems. These are the actual hard problems of cryptocurrency and until solved it will never, and I mean never, reach mass adoption, making the questions from the article totally irrelevant.
> 2. How do we stop payments to international terrorists and rogue states.
We should definitely build a technical system that stops payments to terrorists but allows payments to freedom fighters; that stops payments to rogue states but allows payments to states that stand up to bullying by tyrannical regional powers.
/s
Seriously I think these kinds of questions need un-asking rather than answering.
> Seriously I think these kinds of questions need un-asking rather than answering.
That’s equivalent to conceding that the concept cannot work and giving up. No matter your personal views on a particular issue, this is really just asking how to comply with legal obligations: governments don’t care if your system is broken by design and makes compliance hard, and that’ll deter most legitimate users.
By pretty much the same argument strong encryption cannot work because governments would prefer it not to exist; terrorists and rogue states can use encryption, and it is not technically possible to build encryption that "only works for the good guys".
In reality there is an ongoing battle over encryption where various governments try to ban it, people fight back, etc. I suspect that we will see the same thing play out over cryptocurrency.
In any case I don't see anyone on hacker news asking how we can design an encryption algorithm that prevents all and only the bad uses of encryption. It is generally understood to be a dumb question because good and bad are complicated enough that we cannot hope to formalize them right now, and ad-hoc attempts to make a technology only work for the good guys have been repeatedly shown to help the bad guys (e.g. backdoors etc)
Encryption isn’t quite the right comparison because it’s not a running network. Anyone doing merchant/banking activities with a cryptocurrency isn’t just using the same software but also risking being involved in a transaction chain involving someone trying to launder money. Imagine how the crypto wars would have gone if GPG users had to take active measures to prevent forwarding messages from untrusted strangers.
Tor is a better comparison, especially with the reason why most people consider it highly risky to run an exit node.
You should think about it from a legal perspective: if you use GPG, will the FBI show up at your house just because the local drug dealer also does even though they never send you a message?
Now, suppose that there’s a transaction chain which involves you – say said local dealer buying from one of the few other people using it — and how you’d prove that you weren’t a knowing participant in some sort of laundering scheme or deal. This is why tumblers aren’t likely to be used by most people and why running a Tor exit node is so risky: you have to worry about being charged with the worst thing done over the network and proving that you aren’t just trying to look like a naive user.
> This is why tumblers aren’t likely to be used by most people
I think that the ZK (ZCash, AZTEC, etc) technology will solve this problem and we will be back to the case where the government wants to make the technology itself go away.
It is hard to make a definitive statement either way. For example:
> Analysts estimate that underground economic transactions account for one-third (33%!) of the total economy in developing countries and slightly more than 10% of the total economy in developed countries. [0]
On the Bitcoin blockchain it may be around 19% (approximately USD $380bn in yearly transactions on Bitcoin [1], $72bn of which may be illegal [2])
So it's hard to say which "monetary system" is doing better in that regard. Of course, I would argue that cryptocurrencies are still in the experimental phase, trying to figure out where they are going and how.
Once you eliminate the fake transactions, wash trading, tape painting, manipulation, etc, I'd wager you're left with a much much larger proportion of crypto transactions being illicit. Probably close to 100% if you exclude speculation too, since only about 2 or 3 big merchants accept crypto at all.
Points 2, 3, and 5 are essentially "how do we give the government the authority to block or reverse payments even when the sender possesses the relevant private key, or send payments even without the relevant private key".
I'm not saying that's not a fine thing to want, but if that is what you want, then you don't want cryptocurrency. Cryptocurrency is purposefully antithetical to that goal.
Chargebacks? Reversing accidental payments? Theft? Fraud? These are all pretty important parts of the currency system, and people aren't going to give them up just for the sake of some nebulous idea of decentralization for decentralization's sake.
Do you always log into every machine as root? Do you want everyone to have admin powers on HN and every other social media/chat/forum you use? Authorities exist for a reason.
Cash wasn't solving this either, yet lot of people prefer it to digital money owned by banks. And bitcoin is sometimes called digital cash, because it behaves like cash in that way. One could argue that it makes people more cautious on what they spend money on.
You can build a reversible payment system on top of a irreversible one, but not the other way around.
Bitcoin allows mathematical forms of escrow.
Bitcoin also allows extremely secure ways to store your cryptocurrency.
You don't always want to log into your computer as root. But would you want a third party to log into your computer as root so they can watch and control what you do?
That's like arguing that TLS will stay irrelevant unless it comes with government backdoors.
The fact that authority figures can't break it is a feature, for the kind of people who would want to use it in the first place (which should be all of us, but sadly is not yet).
> The fact that authority figures can't break it is a feature, for the kind of people who would want to use it
Like I said, this is why it will stay irrelevant. Most people don't want to perform those actions, nor support those actions by using the systems that do. We're never, as a society, going to want to support money-laundering, terrorist-funding or price manipulation.
Points number 7, 8, and 9 in Vitalik's article are about your 1, if you cared to read it.
The rest of your points are as you say "currency" and usability problems, problems that a layer above will decide to solve or not. There is a lot of work being done on these points too, but Vitalik and the Ethereum 2.0 research teams are tackling a more low level set of issues.
Think of it like Visa, SWIFT, or the internet: those are also technical platforms that need to be engineered and thought about, often in abstraction of other issues like monetary policy and local regulations.
Many systems are built that way, where the underlying platform is kept "dumb", and requirements that need highly flexible enforcement (like the selective censorship/cancelation in your examples) are applied a level above, where humans are kept in the loop.
There aren't any protocol-level rules in TCP/IP that says network packets containing information about the Tiananmen square protests can't go from US to China, those rules are implemented in Chinese routers. Maybe if you had your say in the design of TCP/IP things would've been different, but this approach has so far proven wildly successful.
Hm, so the dollar won't reach wide adoption until we close Wells Fargo, HSBC, and other major banks that have been party to large-scale money laundering?
Luckily there are efforts being made to stop it, and fines paid and systems put in place. Are they perfect yet? No. It is still orders of magnitude better than pretending the problem doesnt exist or outwardly encouraging and abetting it.
I work in banking. AML is always a fine line. Don’t do your job well, you get hit for enabling laundering. Do your job too well and you kill millions/billions in deposits.
AML at its core is asking a bank to purposefully reduce their profit. Other than fines and morals, there’s no real incentive for them to give their all, and those don’t seem to bother most of the industry.
So the right answer is to... give up and hope for the best? Develop systems where it's impossible to stop? C'mon now. That's why it's one of the actual hard problems of cryptocurrency.
These aren't problems but one of the many reasons why people use cryto.
You are looking for some power to control cryto but still offer everything it currently does. It can't..
"How do we stop payments to international terrorists and rogue states".. Most of their wealth comes from cash/diamonds/oil/grain.. why would cryto be any different?
I don't think you know what the word "fiat" means. Crypto is fiat currency. It's backed by nothing but wasted electricity and a lucky guess. You can't trade it in for anything of value.
I do know what fiat means, and my meaning in this context is government-issued fiat such as dollars, pounds, euros, etc, though I think that was pretty clear to everyone else!
2. The problem is that there are so many terrorists and such.
I've become very skeptical of the idea that technology can solve social problems, and unfortunately decades of futility propaganda by the existing order has convinced us that the political order we have now cannot be improved upon.
On the flip side this principle also makes me skeptical of cryptocurrency, which seems like a very expensive attempt to use technology to solve social problems.
Existing simple money systems work and are highly efficient. Corruption in those systems is a social problem.
My apologies, I shouldn't treat HN like Twitter. My statement was meant to spark a discussion but I should try to explain myself.
Maybe "Money laundering doesn't exist in a hypothetical world of private peer-to-peer transactions" is better? That's what I believe the crypto-folk are working towards.
I recognize the existence of laws again 'money laundering' in countries like the USA. I suppose a better way of framing what I think is that money laundering is an invented crime in order to further empower agents of a State to seize assets of those suspected of actual crimes. By 'invented' and 'actual' I'm appealing to a sense of legitimacy separate (or adjacent?) to said State's legal system.
This has yet to be proven, and as you say, there’s reasons why it has yet to land. I give this one vitaliks sideways smiley face.
> 2. You can't -- this is a cultural problem, not a technological one
Uh, one that doesn’t exist in the current financial system. I’m sure y’all will find a way. As I said, it’s a prerequisite.
> 3. There’s no such thing as money laundering.
Hilarious. I see someone never took compliance training at work. With that attitude I’d love to see you explain your position to a judge. Money laundering is literally financial transactions arranged in such a way as to conceal the original source of funds.
> 4. Buzzword soup.
> 5. More buzzword soup.
More buzzword soup that immediately falls down as once you use crypto as only a bulk transport instrument you’ve lost out on all its ostensible benefits. No transparency, no security, it’s no better than just using a wire transfer.
Hilarious. I see someone never took compliance training at work. With that attitude I’d love to see you explain your position to a judge. Money laundering is literally financial transactions arranged in such a way as to conceal the original source of funds.
I though anonymity and legal safeharbour were founding principles of cryptocurrency? The original comment is correct that what we call money laundering is an artificial construct of power.
> Uh, one that doesn’t exist in the current financial system. I’m sure y’all will find a way. As I said, it’s a prerequisite.
Is that sarcasm? How do you think criminal groups get funded? They use the financial system like anybody else. You should have a look into the history of HSBC, money laundering and financing drug cartels is one of their main specialty.
Maybe I'm in too deep but peer-to-peer is a buzzword? I mean person-to-person, without intermediaries. This seems useful and powerful to me (and my politics I suppose).
> 5. no transparency/security using crypto as bulk transport
I don't mean building a social layer on top, I mean building digital infrastructure on top, 'smart contracts' etc.
I still maintain hope for something like this but after watching the gradual but massive increase in the complexity of 'DeFi' (decentrialized finance) in the Ethereum community I don't know where to look and what to work on these days...
It's DAI, a stable currency based on derivatives, built on Ethereum and backed by ETH. It's not perfectly stable but it's done a reasonably good job keeping a value of one dollar, despite a 94% drop in the ETH price. Current DAI supply is $86 million.
Serious question, is this list specifically designed to troll crypto? It literally lists the exact items the technology is designed against, with little good faith to recognize the problems crypto is actually solving.
An analogous for "Hard Problems for PC Work Processors [vs Pen and Paper]" would be:
1. How to record a single essay without the price a hundred reams of paper?
2. How to function when there is no electrical power whatsoever? And not contribute to rising technological inequality in developing countries.
3. How to allow governments to still do handwriting analysis on printed word docs to thwart bad actors, ransom note writers, etc?
4. How to stop international terrorists and rogue states from printing multiple pieces of propaganda to recruit?
5. How do we allow people a closer sense of connection to the writer of a word processed doc when handwriting is missing.
[bonus] how do we ensure jobs are not destroyed in the lumber industry? how do we ensure manufacturing of these so-called PCs to not contribute to environmental destruction / leeching of toxic chemicals if/when they become popular?
Funny you can online pay your drug dealer in countries where drugs are legal, like pot in Canada. It’s almost like social solutions are the right way to solve social problems.
No, it’s a technological problem. The social solution is to make what you’re trying to do legal. And yeah you’re free to do whatever you want so long as you’re willing to pay the consequences such as fines and jail time.
Writing code collaboratively and convincing thousands of people to run nodes replicating your slow database is a social act -- I'd even call it a political act.
Not sure why you think technology is outside the context of our society. This stuff isn't built by elves.
I mean sure, to an extent everything involves society. However, what I'm suggesting is that instead of tackling the problem at hand (that you want drugs to be legal) you're suggesting creating tools that make funding anything impossible to stop.
You're not solving the actual problem by going out and convincing society you're right (and you are, the Portuguese model shows that full decriminalization and even legalization lead to much better outcomes and no material increase in usage).
You're convincing people to deploy magic bean producing power wasters that just happen to let you buy drugs. It doesn't help mitigate or undo the harm foisted upon the millions in US prisons who got there because they wanted drugs. It doesn't help bring about the downfall of the cartels. If anything, it props those things up.
> Writing code collaboratively and convincing thousands of people to run nodes replicating your slow database is a social act -- I'd even call it a political act.
Yes, in and of itself it is.
The social act is deploying a slow database, which in turn provides technological workarounds to the actual social issues (like drug policy) that should be tackled head-on.
So then should we forget about easily accessible encryption, since it's a social problem if your government spies on your data and not a technological one? That's not a very "defense in depth" approach.
Our democracy is purposely designed to allow such checks and balances through mechanisms like the fifth amendment. It is an important part of what makes our democracy strong and prevents lawmakers from throwing people in prison at their whim.
Cryptography is a tool that enables applications. Cryptocurrency is an application of cryptography.
While I don't believe this myself, I could see a logically consistent case for supporting the development of ciphers and banning something like TrueCrypt. It's not about the technology, it's about how you choose to use it.
1. Bitcoin isn't meant to be fast, it's meant to be reliable, and that's what you're paying for. Other chains are a different question.
2. We don't. One man's terrorist is another's freedom fighter.
3. We don't. The system is broken, Bitcoin is a new system. We need to figure out a new way to transact.
4. Maturity of the system will achieve this, just like it did with Wall Street. Or did it? :P
5. Many many solutions. Threshold signatures, regular multisig, mintable cryptos, etc...
[bonus] Life is not fair. Early birds always get the worm.
> These are the actual hard problems of cryptocurrency and until solved it will never, and I mean never, reach mass adoption...
Let's look at these for cash, which has some level of mass adoption.
> 2. How do we stop payments to international terrorists and rogue states.
Both of these are amply funded today, so between cash and banking system, this isn't really a thing. Whatever form does work, isn't hampering adoption.
> 3. How do we stop money laundering.
(a) This is an invented problem. Just because it's propagandized in compliance training doesn't make it real, and it's unfortunate banks are having to spend time and money obliging local governments so politicians can pretend they're having an effect. (b) Neither cash nor banking system succeed at stopping it today, yet both enjoy mass adoption.
> 4. How do we stop price manipulation by fraudulent actors.
Mass adoption? See pink sheets versus mainstream stocks. Chicken and egg problem, granted.
> 5. How do we allow people who lost access to their money by negligence, fraud, theft, act of god or otherwise, access to their money again.
A friend once tossed a $100 bill from her birthday into the wood stove with birthday wrapping paper. There was no expectation this form of currency could recover access by negligence, fraud, theft, acts of god, or otherwise, yet she was thrilled to mass-adopt that $100 until it turned into ash.
> You know, the “currency” problems and not the “crypto” problems.
It doesn't seem as though these are real problems for the adopters of currency. It seems as though they're problems for authorities who wish their jobs were easier.
A friend once tossed a $100 bill from her birthday into
the wood stove with birthday wrapping paper. There was no
expectation this form of currency could recover access by
negligence, fraud, theft, acts of god, or otherwise, yet
she was thrilled to mass-adopt that $100 until it turned
into ash.
Remove the negligence item and fraud and theft are still there. Banks and other regular institutions have remedies for these and they are an "improvement" for most users in this area.
Put that together with the fact that it is far and away easier to lose your cryptocoin holdings than it is to lose cash or money in your bank account and a cryptocoin is in most ways a step backward for consumers. They benefits they tout (Easier to send money to someone else, Proof against government meddling) sound good but the second is why it's a step backward for most people and the first is hampered by the combination long transaction times and the volatility of the coins value.
Is it possible that these will all get remedied? Sure. But until you remedy them most people shouldn't be using a cryptocoin unless they can afford to lose what they put in there.
Nobody has considered gold money since the fall of Bretton-Woods. Gold is an asset class.
And yeah, if someone steals your cash or your gold, you can sue them and obtain a restorative court judgement. With your magic beans you just blame the victim and shrug suggesting they should have been more careful, aka "SFYL."
I usually hate the cryptocurrency articles that get posted here, but I do like this one — a decent overview of technical challenges & possible solutions
The hardest problem of all is getting consensus to put in front of regulators whose legal frameworks are stuck in the early 90's. SEC Securities law is the 800 pound gorilla on the globe and the workarounds 'offshore' of the SEC (Malta EU framework etc) are pea shooters against this reality. I've been involved in a european utility token against a real asset (Beer) which is live but it has been very time consuming and difficult to navigate the regulatory maze.
Can some people from the crypto space give a quick tl;dr of what’s going on in the space that’s of note? Seems like I hardly hear about interesting stuff after the bubble burst (kind of at least).
Are there any people using crypto to actually do work for clients and solve fiat currency based businesses problems? I am curious if the crypto start up space is mostly filled with crypto-to-crypto services or if there are many successful crypto-to-regular business cases.
Edit: I’m interested in if there are many people making meaningful money from doing client work or building a business, mostly in the crypto space. There seems to be two camps: crypto idealists that don’t care about making money, and the crypto application people who might be a little idealist, but also want to make money here and now. This is more geared towards the latter.
I build blockchain development tools at Truffle (a for-profit company). Most of our efforts are on Ethereum tooling, but not all, we are building some tools for enterprise blockchain tech as well as other public chains.
I think most of us here believe we are building tools that will have had a role in the long-term future of (decentralized) finance.
Interestingly, advances on currency stability are much more interesting than this post make it sound like: Libra backed 1:1 with a reserve, grincoin with its forever inflation model, and even tether with its controversial fractional reserve.
That moment when you click on the first paper referenced in the article, and the author is the professor of the lecture you currently should actually study for
It's even more funny to leave a comment like this without even elaborating on the argument and not contributing to the overall discussion. Why would this blog post mention Cardano?
Because Cardano is what ETH might have been if done right. They did a tons of (actually scientific) research on the topics mentioned in this article but the author won't mention Cardano as it is his direct competition (even nicknamed Ethereum killer).
What does "actually scientific" and "real research" (mentioned by jki275) mean? I'm pretty sure most people doing research in the cryptocurrency space are trying to use the scientific method as much as they can.
To be fair, Vitalik didn't mention many research projects outside of Ethereum. I don't think he was intentionally ignoring Cardano, he just didn't need to reference them to make his points.
Whether or not you're aligned with Bitcoin political values and goals, please don't be duped by Ethereum. It may appear as something useful, without the stigma of Bitcoin being black market money. However, you ONLY need black market money. Everything else that's ok with being regulated, does not need a blockchain. The hard problem that Bitcoin solved was "How do we create money that wouldn't collapse and lose value once outlawed". The proof-of-work solution cannot be replicated (for reasons I won't go into here, homework for you). And that's a good thing.
Ethereum is a scam and has always been a scam from its inception. Multiple reasons for that:
1) Overly complex, obfuscating its lack of problem to solve by having lots of features and code
2) Constantly coming up with new terms and features and "new hot thing" to try and pump the price and keep the interest going.
3) No real world use case. Only promises and cryptokittes.
4) Literally controlled by one guy (see the now famous "Can you guys stop trading" quote).
5) Only produced scam ICOs with 99.99% of ICO projects practically stealing money from investors with no repercussions whatsoever.
There are many more, but the thing to remember is - Bitcoin solves a real problem: it allows people to escape and bypass existing financial system and continue doing business, save and not be subject to policies outside of their control. It is black market money which governments hate and will try to outlaw in some way. That is the real pain Bitcoin solves for people: not agreeing to unjust laws peacefully and quietly exiting the system.
Ethereum is a blockchain for general purpose computing. It’s not a scam, it delivered what it promised. MakerDAO, mentioned in the post, is a cool and useful project running on Ethereum.
I agree with you about the core use case for Bitcoin currently being an escape from the government-forced financial system. It pierced the monopoly successfully. But the Ethereum screed is just lies at this point, Ethereum is one of the good ones.
"a blockchain for general purpose computing" is precisely the problem. Nobody wanted or needed that. Bitcoin was created as digital money. A bunch of people mistakenly thought that the best "feature" of Bitcoin was its programmability, and doubled down on that by allowing arbitrary computations in transactions, which just opened up the Pandora's Box of attack vectors.
And you can't really say "Ethereum is one of the good ones" if it literally enabled the wholesale defrauding of billions of dollars from ill-informed speculators by providing the platform for those fraudulent ICOs.
I'm sure everybody just wanted a faster horse, but I certainly do have some good uses for distributed computing (with a larger bandwidth than Ethereum can provide, though). And any new tech can be seen as the "Pandora's Box of attack vectors" and a fraud platform, including the internet itself.
What has it delivered exactly? Where is it being used that's not itself a scam? MakerDAO - which seems to be some sort of token issuance thing - has no real world mechanism for enforcement. That is, if an autonomous decentralized organization issues a token, who's to make it pay you dividends or enforce your rights for whatever this token represents? This is the thing that ETH fanboys are completely delusional about. Securities only work because state regulators enforce the laws guaranteeing their value.
> That is, if an autonomous decentralized organization issues a token, who's to make it pay you dividends or enforce your rights for whatever this token represents? This is the thing that ETH fanboys are completely delusional about. Securities only work because state regulators enforce the laws guaranteeing their value.
I thought the point of this would be that the contract code, that defines organization would automatically pay you back in whatever. No need in regulators with laws, that random judge can overturn any day. And that is the whole point of it...
How about being able to raise money for a project, and whitelist investors, without people having to trust you to send them the securities after they send you the money, and them seeing exactly what is being done with dilution or whatever instead of having to trust?
Or having a fair pricing model as investors buy in using a bonding curve, eliminating priced rounds and other crap, pg said that’s the “future” - Ethereum makes it possible.
All this is only possible because enough gateways trade ETH that it can now be considered money. And it can be used as an input to tons of cool smart contract things. You couldn’t do this stuff 10 years ago, at best you’d have some sorta hookup to Stripe API and banks.
Explain the mechanism by which people who invest can exercise their rights as stakeholders, receive dividends etc? Who's to enforce they actually own anything? What's stopping this project from taking all the money and producing nothing (which is exactly what happened with pretty much every ICO out there)?
As far as I understand it, all that matters is the logic of the smart contract code, and possession of private keys. Humans are removed completely from the process. If you own the private key involved in a transaction, then that is the guarantee you’re looking for. All that’s left is to examine the smart contract code in order to figure out what sort of contract to which you’re now a cryptographically-guaranteed party.
No person enforces anything. Only the math does. And I think that’s entirely the point.
Do you have an example of an organization that works this way, 100% automated? It's hard to think of a system that can be 100% foolproof, there is always someone somewhere that has to trigger something manually, and that 's the weak spot.
Nope, I don’t. And I’m not a particular proponent of this approach. This is just how I understand it.
I think the ultimate goal is to have smart contracts which don’t require any of the human intervention you’re mentioning. How that’ll be possible remains to be seen...
What’s stopping a YC startup from going bankrupt after having disclosed tons of risks in a PPM? At least here we know exactly how much was invested.
Why does everything have to be about voting and receiving dividends?
Amazon’s shareholders don’t do either one but value the shares greatly.
And dividends can be programmed into the smart contracts too. Want them in DAI, USDT, ETH? You can! One way would be for the company to put them into a new smart contract that refers to the other smart contract which stores who owns what share, at that particular time. You could also program tons of fancy rules like a UBI from the company or whatever. They would also be distributed fairly.
Explain the mechanism. How do I know this organization made this much money and that the amount I'm being paid is fair in regards to their profits? How can this code track all the money the company is making? It's not like they're being paid with their tokens.
And for minority of projects where indeed they're expected to be paid using their own token, how do I know the company owners don't run away with all the money they raised? Because this is exactly what happened with 99.99% of ICOs created on Ethereum. Now, of course scams happen in the traditional financial system too, but not to the same extent, because there's an enforcement mechanism in place. So, following your example, what stops a YC company from declaring bankruptcy and spending all the money on things founders want for themselves? Well, an investigation may be launched: founders are known, they can be found, prosecuted and sentenced. With tokens issued online, where you may not even have a company registered or have a company registered in some obscure jurisdiction, there is very little incentive NOT to steal the money. And, once again, that's exactly what happened during the ICO craze, which Ethereum is directly responsible for. A lot of people lost a lot of money funding scammers - and nobody blinks an eye!
I don't argue that everything has to exist within the traditional financial system. On the contrary. But in order to provide real value and allow investors to have some level of certainty that at least their money won't be outright stolen, the solution MUST include an enforcement or incentive mechanism strong enough to deter scammers.
>That is, if an autonomous decentralized organization issues a token, who's to make it pay you dividends or enforce your rights for whatever this token represents?
...the smart contract? Maker pays interest (via buy and burn). It's really not that different than a corporate board agreeing to pay dividends. We don't need a state regulator to pay ourselves, do we?
Afraid of a little competition? This is the paradox of the bitcoin maximalist: The 'free market' is good but don't try to compete with my 'one true asset'!
I heard about Bitcoin in 2010 a few days before MagicalTux announced Mt. Gox on the Bitcoin forums. Once graphic card mining became a thing I quickly started a small farm while in school.
When I first understood PoW I immediately knew PoW must die for cryptocurrency to become sustainable. It is the single largest flaw with contemporary cryptocurrency. Bitcoin has become stale and unwilling to progress, instead choosing to retreat in maximalist dogma. This prevents bitcoin from solving some of these obvious technical issues. The block size debates is far more than enough to turn me away.
For me the ethereum community has been a breath of fresh air and is far more progressive than those left in the bitcoin world. After seeing the ethereum community gracefully handle the 2016 DOA hack with a hard fork, I was sold. Ethereum's community understood technology serves us, not the other way around while acknowledging and actively working toward solving problems bitcoiners often simply ignore.
I believe in the human spirit of solving problems through technology. Ethereum is not a panacea, but the ethereum project tries to remember that progressive spirit.
Disclaimer: I hold positions in both, more in Ethereum.
1. Both are very complex. How did you compare?
2. "Constantly coming up with new terms and features and "new hot thing"" - this is a fact. "to try and pump the price" - this is a speculation. Even if it is not - I don't know why is it necessarily bad. That is one of the major goals of every company applying to YC, or doing any kind of innovation in business.
3. Technically, all the use cases for Bitcoin are the same as the use cases for Ethereum, AFAIK.
4. It has the same proof of work system with miners, so in the end Buterin has the same 0 direct control over it, as Nakamoto would over Bitcoin. True, a lot of influence.
Ethereum has the first ever decentralized banking system based on on-chain smart contracts. I'm earning high interest on usd stablecoins for several months now. The interest rate was double digit until very recently, but even 5% is still very good for a completely anonymous system.
DAI itself is a decentralized usd stablecoin, meaning it can't be confiscated by the issuer. It's overcollateralized by locked eth. Anyone can generate new dai after locking eth. Those two together make the previously impossible possible - an Iranian or Venezuelan citizen earning interest on a USD-denominated savings. This is all called DeFi. Once mortgages and other external assets are tokenized, it's going to allow fully decentralized mortgages.
>Bitcoin solves a real problem: it allows people to escape and bypass existing financial system and continue doing business, save and not be subject to policies outside of their control. It is black market money which governments hate and will try to outlaw in some way.
Bitcoin completely failed, as majority of its hashpower is located in China. The Chinese government can tell miners to censor transactions tomorrow and to orphan blocks from non-compliant miners and it would happen. There's no defense against this. Changing PoW via a hard fork would result in a gpu-secured network that's even more vulnerable than an asic-based one, as it's easier to a large entity to rent or buy enough gpus.
PoS is the only defense against such centralization. Most hashpower is going to be an impossible to hide industrial facilities, while PoS only needs an internet connection, much harder to catch. More importantly, even if a determined attacker acquires a very big fraction of the tokens and attacks the network, a hard fork can just delete the hostile accounts. One a gpu based PoW network is attacked there's no solution, as it's not possible to make the attacker's mining hardware ineffective via a hard fork.
Let’s be clear about the problem with ETH. It has a 60% pre-mine, and the next 35% of the mining was done by just a small subset of the same people. Only 5% of the supply was ever “up for grabs”. A currency requires highly-decentralized float. ETH will always be speculative.
Other than that (fatal problem), its a great technical project.
Any progress on the problem of cryptocurrency being a vastly inferior solution to far easier ones, almost on every metric, in virtually every use-case?
Oh shut up already with big block phobia. BSV proves that big blocks is the most rational way to scale. The small block mantra started by blockstream completely rotted the crypto space
Big blocks will scale you one or two orders of magnitude. There are still 3-5 MORE orders of magnitude to go before you approach that of a standard Credit Card transaction processor.
All of this research is producing a fascinating array of solutions in search of problems. Fun stuff to think about, but I suspect that the added complexity will only create a system that is just as prone to fraud and abuse as the existing centralized order.