It’s the story of the moment, isn’t it. As the price of Bitcoin continues on its wild and crazy rollercoaster ride, everyone’s talking about cryptocurrencies, and in almost mystical terms, about blockchains. Perhaps to be a little more accurate, we should report that they are talking about The Blockchain, a single entity which it seems is now the answer to all ills.
Of course, there is no single blockchain, instead blockchain technologies form the underpinnings of the cryptocurrency boom. Since little dollar signs seem to be buzzing around in front of everyone talking about that subject, it has attracted the attention of hordes of people with little understanding of it. APNIC have a good article aimed at those people: Don’t Get Caught Up In Blockchain Hype, which is worth a read even if you do understand blockchain technologies.
It makes the point that many large enterprises are considering investments in blockchain technologies, and lists some of the potential pitfalls that they may encounter. There may be a slight element of schadenfreude for some of the technically literate in seeing this in action, but given that such things can have consequences for those among us it’s too important to ignore.
As an analogy of a relatively clueless executive jumping on a tech-driven bandwagon, a software company of our acquaintance had a boss who decided in the heady days before the dotcom crash that the organisation would fully embrace open-source. Something to be welcomed, you might think, but given that the software in question was a commercially sensitive asset upon which all company salaries depended, it was fortunate that he listened to his developers when they explained to him exactly what open source entails.
Whether you are a blockchain savant or an uninterested bystander, it’s worth a read as you may sometime need its arguments to save someone from their own folly. If you fancy a simple example to help understand something of how blockchains work, we’ve got that covered for you.
Bitcoin coins image: Mike Cauldwell [Public domain].
95 thoughts on “Don’t Get Caught Up In Blockchain Hype”
It is really funny and a shame at the same time. Funny because of all the ignorants running at it like mad. Shame on the other side, because not having bought some bitcoins when it was still 2$ each… :/
Just think of what you could have done if Bc ASICs had been available when everyone was using CPUs.
my story is worst, one guy owned me money (he still does) and i wanted to buy bitcoins from that cash, just for the fun, same thing when the ebay was new and we brought stupid things :)
Don’t feel bad about not investing in bitcoin. There is no value being generated. In other words: If you make money out of bitcoin you steal from someone else. My reason o not investing is the waste of energy that comes with a proof of work model.
The article is an interesting read. Consider the best way to solve your problem is a good point. The other way around is too common: We have a new technology, how can we solve our problems with it?
> If you make money out of bitcoin you steal from someone else.
Steal is a bit strong, but what hes saying is that it’s completely zero sum. Because the underlying “investment” doesn’t actually do anything, when you make money from selling it, you’re just directly taking money from someone else who thinks that the value will go up later. Most commercial transactions aren’t zero sum, in that both parties benefit somehow. jwrm22 is saying that bitcoin is a bubble, so any money made by selling it is money that will be lost by other naiive people when the value crashes.
I agree, and I think the reason is that people are conflating blockchain with bitcoin, and think that because companies are really interested in blockchain technology, that means they’re really interested in bitcoin and it’s now somehow worth more. Once people realise that their bitcoin holdings aren’t actually useful, and that these companies are not using bitcoin, I imagine the price will crash.
The underlying investment is a way to store wealth, and transact it decentrally across the world. That makes it worth something.
Seems like the same as any “nationality” currency trading operation to me. A nations currency value goes up, some people win and others lose.
Very well explained. Also, as stated by Ostracus below, it is a Ponzi scheme. The folks that got in early make a killing and the folks at the end get shafted.
“I imagine the price will crash.”
You don’t imagine people will want to buy cheap bitcoin?
@Artenz, saying that Bitcoin’s worth is that it “stores wealth” is a stretch. The recent daily, no hourly, fluctuations of 20% or more is the antithesis of your claim.
It is a very old con, and is technically legal in the US as long as something is exchanged.
Often people just end up with a garage full of worthless health/beauty products, and the initial participants always cash out as the growth begins showing collapse.
I mined bit-coins very early with a screen-saver for benchmarking my systems, and still can’t believe it got this far.
Amway, Shaklee, etc.
I’m not going to argue that Bitcoin may or may not be a scam (though I think even if it turns out to be a bubble and really bad investment, it’s not a ‘scam’ per say as that implies the intent to defraud. Though many services set up AROUND it ARE… Beware of online coin retailers.. I myself lost some money attempting to buy).
I will take issue with the use of the term Ponzi scheme though:
A Ponzi scheme (/ˈpɒn.zi/; also a Ponzi game) is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading.
The very definition of it says that Bitcoin isn’t one.
Fiat (paper) currency, at least in America, doesn’t technically have any intrinsic value, either, but you can still buy whatever you want… until the market crash…
Bitcoin is the same way.
The GNP of a country backing it.
It’s the same with cryptocurrency, except that it’s not a singular country. The biggest difference is that regular money can get printed and manipulated, which is much harder to do with cryptocoin.
“GNP backing” — not in any modern country. The root reason that you want to hold any country’s currency is that their government will only accept tax payments in that currency. If you fail to pay your taxes, they put you in jail. Staying out of jail is a very real source of value.
Then there are all the investment reasons, but that’s a longer story.
Apropos, does any bank give you interest on Bitcoin deposits? Interest rate differences between currencies is a major explanatory factor in exchange rates — pull your money out of dollars and into Euros if euro-land banks are offering higher interest rates. (“Interest rate parity” for the search engines.)
And that’s definitely as reliable as the computational complexity of prime factorization, right? National economies never fail and governments never allow hyperinflation, right?
“you steal from someone else” is rather a stretch.
If you win at poker, are you stealing from the other people at the table? No value is being generated, and your gain is certainly someone else’s loss. Same with stocks speculation and a dozen other things people do routinely.
A agree that this bubble will burst at some point, but that is a different issue.
If I look at Bitcoin and compare it to gold, I see the two as being similar. There is a limited fixed amount of both, yet I never see people saying that gold bubble will burst at some point. The price of gold just can’t keep on increasing, it has to crash.
Correct that gold and bitcoin are similar. Incorrect that gold isn’t subject to bubbles. Here is a nice chart of the last 5 years: https://seekingalpha.com/article/4132146-gold-starts-new-search-fear-catalyst
I should probably also add that I see any recent cryptocurrency as a ponzi scheme, and if it has an ICO – I just see that as fraud.
You get your money from the sucker you sell your bitcoins to. Who does it voluntarily. And presumably knows what he’s doing. So that isn’t “stealing”, it’s not even ripping off, because the buyer knows what he’s getting. It’s an entirely honest transaction.
“[I] agree that this bubble will burst at some point, but that is a different issue.”
Are you basing that on past performance?
>”If you win at poker, are you stealing from the other people at the table?”
Do you think that mining cryptocurrency takes from other people, or are you talking about trading on exchanges? If it’s the latter, boy do I have some news for you about stock markets, real estate, commodities trading, and pretty much every other form of investment.
>”A agree that this bubble will burst at some point”
The amazing thing about a bubble is that it only hurts some people for some time.
Tulips were bubble, and the bubble burst. There’s still market demand for tulips.
Houses were a bubble, and the bubble burst. There’s still market demand for houses and houses still hold value.
The Internet was bubble, and the bubble burst. Now the Internet isn’t just bigger than ever, it is an inextricable component of modern society, industry, and government. You’re using it now, and Hackaday is using it to make money. Did you avoid using the Internet in the 90’s because it was an obvious bubble? Given the chance, would you go back and invest in some early Internet firms prior to the bubble?
Cryptocurrency is bound to collapse eventually, some will be hit harder than others, but most will be back eventually. I’ve gotten all of my cryptocurrencies through trading, faucets, and a little mining, so I have nothing ventured. I’m very low-risk and cowardly, so I don’t put cash into anything more volatile than a 401k. When the bubble bursts, my assets will decrease in market value compared to USD, but they’ll be back eventually and then in 60 years I’ll liquidate them to supplement my retirement savings.
I just pity the high-risk investors who are dumping their life savings into buying cryptocurrency, because they’re the ones who will feel the sting of the burst, sell low to cut their losses, and end up with less than they started with. Then again, they knew the risks when they got in so any loss is their own responsibility.
Wtf. I don’t think oil industry would have turned out moral on a free market.
Interesting, any sites to back up your comment?
Just a view examples, in a totally free market you would just build as many cheap and of course unsave atomic reactors as you could. Because here a problem arises because the negative value of the product is not directly connected to the product you sell. The negative aspect are expressed first on others who might even buy your product. Here free market fails. Also with unsave oil tankers.
I would agree that the government is where the free market goes wrong… but the problem is that it is not possible to stop the government from being influenced by a free market. The video gives to much credit to consumers, consumers do not ethically support the companies they purchase from but they value their products.
Customers will give money to large corporations who will then use that money to profit off the government by changing laws to reduce their bottom line in unethical ways, the customers may not support the unethical practices but they will financially support the company.
> There is no value being generated.
I don’t like BTC for several reasons, but this isn’t one of them. This is true of pretty much any traditional investment. What value is generated by me buying stock in traditional corporation? Or government bonds? Forex?
No one ever explained in plain English how it worked. All i’ve read so far is technobabble from a bunch of shadowy hucksters right out of a MLM scheme like Amway who shout to the heavens how good it is.
Same at Zerohedge
All you guys remind me of the Silver hucksters at Zerohedge who from trailers and parents basements promoted Silver like crazy saying it’s headed to $200 a ounce. then got blow torched when the market collapsed.
Trade cash for coin. Coin’s value increases due to an increase of the amount of people trading cash for coin and vise versa (the opposite counts for an interesting reason). Trade back coin for cash at an increased value than before (same amount of coin is now more valuable) to get more cash than invested. The value of the coin dips as more people cash out.
Now that it’s cheap, more people buy in again on the hope that an upswing in value occurs again while hoping to cash out at the right time. They need previous information on that downturn (drop in value) which only happened during the previous downturn. This information helps to give some predictability to the coin’s value and thus helps to stabilize the investments of the coin. Predictability, stability, and information helps increase people’s confidence in their investment making them more likely to invest even if it’s during a downturn. This makes any increase, whether trading cash for coin or vise versa, a good thing. That’s the aim of all stock market investments.
Hope that helps.
> “No one ever explained in plain English how it worked.”
Extremely simplified explanation:
Well you have a blockchain, which is basically an immutable database. New entries can be added by anyone, but nothing can ever be deleted (some special cases excluded). This is because the data that makes up each block depends on the data of every block prior, so if you trust the previous blocks you can verify that the new block is legitimate. Cryptocurrencies like Bitcoin (BTC) use a blockchain as a gigantic, unified ledger of who has how much BTC and all transactions involving BTC moving from one wallet to another.
For a transaction to go through, it must be included in a block which is added to the blockchain. When you issue a transaction through a (normal, self-hosted) BTC wallet, your transaction data (sender, receiver, and quantity) get sent out over a peer-to-peer network of computers (miners) that are running software to accumulate transactions into blocks and add them to the blockchain (mining blocks).
It is called mining because BTC (and most others) uses a Proof-of-Work (PoW) system to validate new blocks on the blockchain. Basically for a block to be valid, it must have a hash that fits a certain condition (i.e. has a specific number of leading 0’s). The hash algorithm is exceptionally complex (BTC uses SHA-256, I think) so the only way to find a suitable hash is brute-force through millions and millions of iterations until you find one. The first miner to find one packages it and the transaction data (multiple transactions per block) and shoots it out over the peer-to-peer network. When a peer receives the new block, it validates that the found hash is legitimate (which is extremely easy compared to finding it in the first place), adds the new block to its local copy of the blockchain, and passes it to the other peers it is connected to. This repeats until the block distributes across the entire peer-to-peer network, globally.
The PoW system means that creating the block involves a MASSIVE amount of time, energy, and computational effort, and the requirements of new hashes keep getting tighter so finding one that works keeps getting harder. Someone trying to produce a fake block would simply be ignored by the P2P network as the peers reject the fake block. Now, a miner could go out of its way and mine a legitimate block that is skewed in their own favor (specifically excluding some transactions, including others) but that adds a lot of extra complexity so it is unlikely unless someone has enough mining power to mine their desired block sooner than anyone else on the network can mine a different one.
Now, why would anyone mine at all? When a block is mined, it contains a data record or who mined it (specifically their unique wallet address), so the final transaction in the block is a payment of the block reward to the miner. This reward is currently 12.5 BTC, which at current market value can be sold for a LOT of US dollars. So this means supply increases forever? Not so much, because when you create a transaction you pay a fee. You can choose your own fee, but miners will prioritize higher fees first when filling a block with transactions, so it may take a while (or forever) until yours gets into a block and goes through. On top of that, the mining reward is decreased by 50% every 210,000 blocks and is currently down to 12.5 BTC. Eventually the supply is supposed to freeze at 21,000,000 where the mining reward will be the same as the transaction fees.
Now, you might notice a few flaws in this system, and you’d be right. SHA-256 ASICs outperform consumer CPUs and GPUs by a massive margin, leading to industrial-scale mining operations run by a select few with the potential to manipulate blocks as discussed before. There’s also competition to pay higher fees to get your transaction processed faster, bringing BTC transaction fees up to a whopping $20 or more at market value, eliminating the usefulness as a currency. Then there’s the wastefulness of a PoW system that does nothing practical. And of course there’s the fact that every transaction is immutable public record so once you become associated with a wallet address you lose all privacy. These are indeed flaws, and are why BTC isn’t the final word in cryptocurrencies.
It is a slight shame that I my self did not invest in BTC when I first noticed it.. I would defiantly be doing something else and sitting on millions if not billions by now.. but there is still time HAHAHA!!.. I see a lot of people talking about how bitcoin is a scam blah blah.. I will ask all of you the question, if you take a look around you and at the economics of this world.. what ISN’T a scam???…
No blockchain here.
Yeah, they managed to come up with something worse. IOTA relies on a closed-source central server called the “coordinator” to provide the protection against double-spending usually provided by the blockchain. It’s effectively a centralised system, except that a traditional centralised systems like PayPal and VISA work a hell of a lot better than IOTA. People seem to have endless problems with balances not showing up, transactions never confirming, etc. I’ve also seen plausible arguments that their core idea of using a DAG fundamentally doesn’t work since you can’t merge branches with conflicting transactions. They also implemented their own crypto for no good reason which turned out to be horribly broken. (Plus, from what I recall, the big-name brands they claim are backing the project really aren’t.)
Paypal and Visa don’t work for machine to machine microtransactions, which is exactly what IOTA was designed to do. Your other points are largely standard FUD spread on Reddit, and IOTA have directly addressed the last point which was due to misreporting by the media, not by misleading statements from IOTA.
IOTA’s Tangle does have teething issues, but it’s fundamentally a superior alternative to Blockchain for its specific purpose, and has tangible advantages especially when it comes to scaling – which is the major problem being experienced by 1st generation blockchains at the moment.
I don’t like IOTA for a great many reasons. Allow me to enumerate:
1. The devs think ternary computing is the answer. They have so many other problems right now that trying to shoehorn ternary computing into it is a joke. Get something that works in good ole binary first and then maybe port to ternary.
2. If you spend from a wallet, you have to get a new address or anyone can steal your funds. When this is brought up, the answer is always “IOTA wasn’t designed for humans, be a machine.”
3. Devs are way too political for my tastes. Companies should be providing a good or service, not preaching their values.
That being said, Distributed Acyclic Hashgraphs are probably the future of cryptocurrency, allowing near-instant zero fee transactions. Raiblocks uses a DAG that works right now, too bad it’s only available on some shifty sideshow exchanges.
Every time I would attend an IBM sponsored event on Linux and System Z, (or System Z and VM) they’d discuss blockchain and it’s seemingly important processes. One of the favorites that someone would ask about was bitcoin. Naturally they’d heap great amounts of smelly stuff on it to bury the idea claiming that it wasn’t worth anything else.
Now? It isn’t worth it.
Do people still buy and sell tulip bulbs?
Do people still buy whisk[e]y by the barrel after it is made and hope its value increases as it ages?
Of course they do! Plenty of gardeners want tulips and generate a demand, while plenty of growers produce bulbs to sell supply.
I’d never looked at the details before. It’s obviously nuts because there is no limit on the number of crypto-currencies. But the really crazy part is the inherent transaction cost. What happens to the value of a Bitcoin when the transaction costs in electricity becomes unsustainable? If you can’t make a transaction because no one can afford to compute a new hash, the coins have no value. Weirdest thing I’ve ever heard of.
> What happens to the value of a Bitcoin when the transaction costs in electricity becomes unsustainable?
It won’t. There’s a difficulty adjustment algorithm that ensures that mining is just sustainable. If miners walk away, the difficulty will be lowered again.
“It’s obviously nuts because there is no limit on the number of crypto-currencies.”
There is no real limit on currencies, other than us people who make them.
> “It’s obviously nuts because there is no limit on the number of crypto-currencies.”
You’re confusing cryptocurrency with government-issued currency.
Cryptocurrency is (usually) created only as a result of an excessively complex mining process (or staking process which is much less energy-consuming) and the amount awarded decreases geometrically until the award equates the loss from transaction fees, freezing the total quantity.
Government-issued currency is created in massive, unlimited quantities by a central authority and then distributed to banks, who then store the currency. Banks at the same time create entirely fictional money by adding interest into accounts that are tracked internally and not in any trustless manner, while also loaning out the money your account numbers represent. If those loans fall through, the government bails them out with more money produced from thin air.
There is a limit on (most) cryptocurrency supplies. There is absolutely no limit on federal currency supplies.
It’s funny how git was already a blockchain before blockchains became cool. Very easy to use for community databases that you want many people to edit but no-one to change after the fact.
But can I wildly speculate about its cash value?
I smell a new coin on the way…GitCoin!
Take my money! :-D
I’m reasonably certain that Git doesn’t have any sort of proving, and is not immutable.
Anyone can add a record instantly, unless there is some sort of proof-of-work or proof-of-stack in Git that I’m not aware of, which would be sort of silly for a version control system.
From Wikipedia: “A blockchain, originally block chain, is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data.” All this applies to git.
Immutability of history is achieved because git will by default refuse to pull from a branch that erases old commits. What you are describing is the mining part of cryptocurrencies, but blockchains do not have to be mined to work. And blockchains have many applications where mining would be silly, such as government records being published as blockchains.
What git does not have is any secure automatic rules for verifying new commits/transactions before accepting them, though one could script them.
I am always hoping that the hard math is not just burning electricity but there is some wacky James Bond distributed problem being solved by and arch villain to open up a space portal or something else sci-fi cool.
Damnit being limited by thermodynamics; fuel and battery energy limitations gigantic fission and hyper massive energy negative fusion reactors really screw with our sci-fi future present.
That’s a pretty good plot! I want to see that movie now !
Imagine if they found a way to gamify folding@home by letting people trade completed work units.
They did. There have been several coins created to distribute useful computation in this way.
Unfortunately they never caught on to any significance.
There’s something else in the works, though. The Golem Network is intended to distribute any arbitrary processing job across the peer-to-peer mining network. You pay GNT tokens proportional to the amount of processing time required, the job gets divided into small parts and workers process one part at a time in exchange for a portion of the GNT you paid. Miners can then use the GNT themselves or trade it like any cryptocurrency. The normal cryptocurrency functions (the blockchain, mining transactions, etc.) are all handled by the much larger Ethereum network, because Golem is an Ethereum token.
The current version implements Blender rendering as a proof of concept, and while development has been slow and fraught with obstacles, I am hopeful. Regardless, it is already pretty nice for Blender users like myself.
I cashed out a week ago, made just over 2 million USD profit in just under 3 years.
Have fun with the IRS (or your countrys equivalent) ;)
What, with his free money? However much they take, he’s still ahead.
I figure JD did something to earn the whatever was “cashed out”.
Bitcoin mining, AKA sat in front of his computer, or ignored it and went to bed, or had his tea, or whatever else. His computer earned it, not him. And he paid for a few quid’s worth of electricity to generate his millions. In most businesses that’d be less than the tea budget. If it’s not literally free it’s unbelievably cheap.
Early Bitcoin mining was as close to free money as there ever was. And I couldn’t be bothered!
I’m no high-roller like JD, but I took up cryptocurrency as a hobby a few months ago. A little mining, milking faucets, and a little day-trading between different coins. I’m not rich (yet) but it’s my only hobby where I make a net profit. A few dollars’ worth per day is pretty satisfactory, especially when you hold those coins and tokens and watch them appreciate.
Here (Belgium) it is apparently tax free, as long as you hold it for long enough and don’t take high risks so it is considered normal management of ones capital. Someone asked for a ruling and the result was that it is treated as an investment in any other currency.
Make me even more depressed, why don’t you… I remember when Bitcoin started. People were mining on GPUs that they’d bought with Bitcoin. I didn’t see it really ending up as anything so I didn’t bother. Of course ultimately it probably will come to nothing. I just didn’t foresee the bit in the middle where it’s hyped up to being worth millions.
I’ll read that article when I get home. So far every explanation of blockchain has just sailed over my head. It seems most people describe it using buzzwords and its potential. Never a plain language definition.
That’s what’s kept me skeptical of the whole crypto currency thing.
Bitcoin for the befuddled (ebook) is a great in depth and accessible read if you want more practical infos.
They have reasons to use buzzwords: blockchain based stuff is distributed computing on the P2P cloud! ;)
The youtube video’s from a couple years ago quite clear, with few buzz-words. for example this one is quite good: https://www.youtube.com/watch?v=l9jOJk30eQs
That was actually very helpful, thanks for that video.
Fantastic technology, crappy currency. Only people that make money are the ones that cash out.
Sounds like all the Fiat currencies too. 2008 saw a down turn and a subsequent recession, the drop in the markets was just 1% of the drop in the market in 1929. Many governments if not all are printing money like mad. Maybe it’s not bit coin that is going up but the Fiat currencies crashing.
Mark my words, A STORM IS COMING!
Can’t print more bitcoins! Reed’s Jewelers (east coast) selling gold for b-coins.
A blockchain is perfect for bitcoin and bitcoin transactions on Earth. (Transactions tp/from Mars would work but mining bitcoin on Mars does’n because speed of light sets you back more than 10 minutes. Mars will need to mine its own coin locally.) Other uses of a blockchain are very limited. It could be used by a large group of banks to do non-reversible transactions with other banks they don’t thrust, but banks don’t want to give up control and don’t want exchange rates that are fairly based on demand. For most financial institutions setting up a decentralized system would eliminate themselves, which they generally have no interest in. Maybe not in the US, but people in small countries know that transferring money internationally is a slow and expensive affair, and they see the value of a fast, reliable and non-reversible system.
That could be true of banks. Beats me, but they do seem pretty concerned with watching the money. :-) But I reckon that most money movement is digital already, at least by $$$ volume.
However, there are plenty of other businesses or people that want trustworthy transactions at lower cost. Think about how real estate transactions often happen. Parties who are strangers to each other have to have some way of making sure the transaction happens completely or not at all. If they get together in an office for a face-to-face closing, there is a small period of time between signing over the deed and the money changing hands (or vice versa). If the money is a check, then there is still risk until the recipient gets the check to the bank. If the closing is not face-to-face, the risk is even greater, or at least of longer duration. So, somebody pays a lawyer or an escrow company to hold the money, and they are (mostly) trusted by both parties. If things go wrong, there are courts and lawsuits that you hope will resolve things properly (not guaranteed).
The bottom line is that there is an overhead for guaranteeing a transaction that proceeds correctly 99.999% of the time. In other words, economic friction. If you were a computer scientist or a crypto maven, how might you solve this problem with math so that even the 0.001% of things that go wrong are easy to investigate and resolve? Voila, blockchain or something like it. (Of course, there is still the friction of the infrastructure providers and software vendors who provide the blockchain plumbing. The expectation is that it’s an order of magnitude or two lower than the current system.)
Blockchain is grease for reducing economic friction.
You can do business digitally today with trustworthy digital signatures, but they involve a trusted 3rd party “notary” underwriting the timestamp that something was signed. The main conceptual innovation in blockchain is the elimination of the notary.
((I am not in the blockchain marketing department. :-) ))
Great point. Perhaps companies can start a btc proxy service for earth-mars transfers
I’m waiting for the quantum computing to rise because none of the current crypto (potentially/theoretically) will matter. Can you imagine all encrypted traffic ever captured, encrypted data sources, and block chains being broken?
NP complete block chains (and encryption already has) will emerge so long as the economy or novelty is there.
Wow I’m quite surprised of all the ignorance here for a technology blog. Decentralization is the future guys and it actually solves a lot of problems we are facing today. Not saying that bitcoins is the future, but it started a move in the he right direction.
Like last mile ISPs. Come on, future.
In the APNIC article cited, a couple of the “cons” mentioned are actually “cons” of bitcoin-like systems. They have little to do with the blockchain concept. For example, for bitcoin, there is only one blockchain. OK, but that doesn’t mean there can’t be a zillion other blockchain databases for specialized purposes, orthogonal to each other. The same with the compute cost of adding to the blockchain. For an article that wants to clear up confusion inspired by misunderstanding, those are not very good assertions to make.
This hackaday article does not make those mistakes.
Also I don’t get the decentralised part, the blockchain is allready 150gb . So most people would use light wallets like electrum. Making you trust whoever it is you have this light wallet account on, aka the bank. At this time its still possible to store the blockchain on the disk and keep up with all the synchronising. But with this kind of grow it would hit unmanagable levels by individuals within a decade. Also energy usage would be probably more then who usa today for mining alone.
So we end up with banking like structure anyway, and nothing is changed.
Even if everything is split up in multiple coins. and you have to trust that individual coin to hold value toward the others. So it stays a game of trust, even if thats the only thing bitcoin trying to add (validation of transaction by miners calulating hashes, so you don’t have to trust others)
Even for anonimity you should not use bitcoin anymore, all is traceable using the blockchain. Monero can be used, but you have to be really careful (for example have a individual in and out wallet because payment sites ask for refund address if something happens and you are traceable again if you use a single wallet)
Electrum doesn’t require trust; you don’t have an “account” on a server. Queries to the server are used to avoid having to store the whole blockchain, but an evil server can’t e.g. steal your money.
Mining doesn’t not need to use that much energy, just that the more % of the mining a single person dose the more money they get.
You make a lot of valid points. This is why other cryptos have been developed to address these sorts of issues.
I don’t believe one solution is ideal for every use case, but I do believe that’s okay. Different systems for different needs, and some means of exchanging back and forth.
I mean, it’s just a permissionless, censorship resistant payments layer for the internet. Probably won’t amount to anything.
Proof of Stake is the answer. Or lets keep wasting energy on mining, or like for centuries now, we will keep cutting trees to fabricate more paper notes + spending even more money on security marks to make them difficult to fake. It is logical that money needs to evolve just like the information did when it went from paper to PCs, and from PCs to the Internet. This is the Internet of the Economy Revolution(already got the PCs hahaha). I visualize a future with trackable money (more transparency, less corruption) and with many other parallel internets (dedicated to different industries and communities) but I still see the Governments controlling and taxing everything (most of the banks and governments acuse Bitcoin and other coins of being a fraud, but surprisingly they are the first ones buying cryptos in very big quantities). Just in case, I invested some money in crypto( got already 2000% in profit, big time) and I guess I’ll wait to see what happens next. Glad to see it happening during my lifetime.
I thought all the warnings were ludicrously pointless for something so obvious as the risk of the current bitcoin situation, but now I heard someone mention that some people actually put extra mortgages on their house to buy bitcoin..
But hey, these people can lose their money as far as I’m concerned, and I don’t think anybody should care for them losing it, and in fact it might be better that way.
As for Bitcoin, I think its almost dead now, once shops stop taking a currency as money as is happening with bitcoin now, then it becomes ONLY a commodity, but a commodity with no self-worth then, which is vaporware/Zimbabwean-dollar territory. Sad but seeing they actually registered to be traded as futures it seems to me they themselves gave up on retaining its use as currency.
LiteCoin is up and coming though, and they seem to want to be a currency. Not sure about Ethereum’s reaction if they became the target of this insane hype cycle like Bitcoin is undergoing, perhaps they would also like it better than being a currency.
>” some people actually put extra mortgages on their house to buy bitcoin..”
That’s absurd. I always caution people when I shill for cryptocurrencies. I’m more or less obsessed, and even I refuse to actually spend money to buy any, because that sort of volatility is way too much for me. Even my 401k makes me nervous.
>” it becomes ONLY a commodity, but a commodity with no self-worth then, which is vaporware/Zimbabwean-dollar territory.”
I don’t like Bitcoin either, but this isn’t a solid assertion. Plenty of things have little or no intrinsic value and still have solid market value. Diamonds, stocks, bonds, vintage comic books, etc.
Merchants aren’t accepting Bitcoin anymore because nobody in their right mind would make a Bitcoin transaction small enough for a consumer purchase while the transaction fees are $20 or higher and their coins could be worth 20% more tomorrow. Bitcoin’s function as a currency is long dead, but its function as a commodity is independent of that. Nobody buys stock because they expect to buy a sandwich with it.
Also, unlike Zimbabwean dollar, Bitcoin has a restricted supply. Less is produced every day, and eventually the growth in supply will converge on zero.
I found a solution for that last issue: Bitcoin credicards – and bitcoin bonds and bitcoin derivatives and all the imaginations they use for regular finance already.
They already have futures as you know, so it’s cleared for the whole nonsense.
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