this post was submitted on 19 Mar 2024
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Privacy
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A public forever storage of all transactions is not good but bad for privacy.
Send money to someone and they can see your wallet and all transactions.
Identifying wallet owners may require different levels of effort. But that's kinda besides the point.
I thought Monero solves this issue, with a level of effort large enough that it's almost impossible to crack.
and here lies the issue with asking about crypto in non-crypto circles… everyone thinks they completely understand blockchain in its entirely. what they actually have is a rudimentary understanding of a single blockchain as it was literally 15 years ago
of course the problem with asking in crypto circles is that they’re all trying to sell you their new big thing which is probably total trash
so really there’s no good way to ask and get reasonable answers about crypto
Have they solved the problem yet that proof-of-work essentially makes the whole thing an environmental nightmare and means it doesn't scale to anything useful in terms of transaction rates? Or the problem that "proof-of-stake" is essentially just a "the rich get richer" scheme? Or the problem that transaction latencies are huge compared to traditional payment methods? Or the problem that blockchains do not have a defined point where a seller of some good or service can be sure the transaction is actually part of the longest chain? Or the problem that the blockchain only ever grows which means it is not feasible to work directly on it on most devices? Or the problem of uncontrolled deflation with a fixed money supply (well, shrinking really if you take into account wallets people lost access to)?
The whole concept is just deeply flawed and meanwhile 99% of actual uses that are not just research are basically scammers.
I could go through each of your concerns, but I'll just leave it at two:
The reason I'm not going to go through each is because each problem has a solution, whether that's in an already existing currency, or will go away as it scales.
Here are the real problems as I see it:
Even if we get past the FUD, we're still going to have adoption issues because of the above. And I don't have a good solution for that, but we need adoption to stabilize the currency and motivate solutions for problems.
I like the idea of cryptocurrencies, but we need a large institution to normalize it before people will adopt it, and I don't see that happening. Maybe stable coins are the way forward, IDK.
One thing I'm interested in is GNU Taler, which is a relatively simple digital transaction system that preserves payer privacy. If we could get a big institution to use it (e.g. Mozilla for micro payments to websites), people may feel more comfortable experimenting with digital currencies.
GNU Taler isn't cryto. (Which makes much better)
The problem with crypto is that there really isn't anything to give it value. It basically is a super unpredictable stock.
I wouldn't say "better," just different. GNU Taler is centralized, so it's only as reliable as the issuer, whereas cryptocurrencies are as reliable as the distributed network. So Taler can't replace a fiat currency, it's just a toolkit to create your own fiat currency.
So it's great for privacy-minded folks in stable economies, but not great for international transactions or transactions where central authority isn't trusted. Essentially, cryptocurrencies are supposed to replace precious metals and whatnot for barter.
So I'm excited to see what privacy products people make with things like GNU Taler because it can be used today, but something like Monero is preferred if it can stabilize and start being accepted in more places.
Energy costs are magnitudes less than banks
imo i actually hate the idea of a public crypto currency
people think that the government having their hands on the levers of a fiat currency is a bad thing, but it’s an incredibly useful property to make sure that we can stabilise things and push away from recession etc! without those levers we can end up in a spiral a lot easier
i think though that where these problems don’t exist is behind the scenes: what if the whole world replaced SWIFT with a private blockchain? maybe a wire transfer wouldn’t take 5 days and cost like $20 (or maybe it would because it’s probably not the technology that makes these things slow)… in this case, you have a known group of semi-trusted actors (international banks), which is actually a perfect set of properties for a blockchain: they’re all able to cooperate but don’t implicitly trust, and can verify each other but mainly use blockchain so they can all automatically agree
I'm not saying government fiat currencies shouldn't exist, just that they aren't needed for regular transactions.
Argument that monetary policy can be harmful
The natural business cycle has booms and busts, and government interference in that cycle (i.e. attempts to prevent the busts) can instead delay the busts and result in more severe downturns.For example, look at the recent inflationary period. We had a huge bull run largely fueled by really low borrowing rates, so when things started to crash, we couldn't lower rates to encourage expansion (or at least as refused to go negative), so we instead threw money at the problem, which is an inflationary policy. The result was rapid inflation, and we had to rush to raise rates to get that back under control, and the rapid rate hikes resulted in bank failures, layoffs, and high borrowing rates. If we had instead raised rates slowly from 2014 or so and on, we could've cut rates instead of throwing stimulus money at the problem.
But the main problem with fiat currencies is that the issuing authority has a vested interest in tracking transactions. Cash isn't really a thing for digital transactions, and if the government realizes it can discourage use of cash, it will.
Fiat and cryptocurrencies can absolutely exist. Use fiat when interacting with the banking system (loans, savings, etc), and use cryptocurrencies like Monero for keeping transactions private (e.g. shopping). The government raising rates only really impacts borrowing, so companies and borrowers will use the local fiat currency and you'll get the desired effects.
I'm honestly not familiar enough with international transactions to really weigh in on this. Maybe it's a good idea, IDK.
but that kinda defeats the point of a central authority having control: the value of any currency is entirely based on what you can use it for… unless you tied their value in a way that the government regulates - eg to have a banking license you must swap USD for eUSD and visa versa on a 1:1 basis without fees (perhaps they burn eUSD to get new USD; IDK - you can’t oversupply. it gets tricky)… anyway, beside the point: regular transactions is exactly what the government needs some control over
Not having a fiat currency isn't really as bad as people make it out to be. But we're talking about whether cryptocurrencies make fiat currencies ineffective.
Most people will likely keep using their local fiat currency because that's what credit cards, mortgages, and paychecks are denominated in. A minority (even a sizeable one) using an alternative currency won't change that. Even if most people use cryptocurrencies for transactions, the US can still require any federally backed transactions (i.e. anything touching regulated banks) to be denominated in USD.
A cryptocurrency merely keeps the fiat currency honest. If the fiat is more stable, people will keep their savings there. If the cryptocurrency is more stable (unlikely), people will switch to that and governments will react by tightening monetary policy.
Inflation numbers won't really be impacted because they'll just use some average across money exchanges to figure out the inflation figures for the fiat currency. Inflation is already benchmarked between currencies, so this doesn't change much.
So I honestly don't see much reason for change. If people move to cryptocurrencies in droves, the Treasury will just issue fewer dollars as needed to keep inflation in check.
But what we get in return is pretty great! I can now make international transactions without going through international exchanges, so fees would likely end up being lower. I can use the cryptocurrency as cash in digital transactions to maintain privacy from my bank and potentially government. If I go to a country like Argentina or Turkey, I can avoid day to day inflation. If I go to a country like Venezuela or Cuba, I don't have to play games with black market money changers to avoid government price fixing. I'm also much less likely to get my payment into compromised, so this would make things like virtual credit card numbers unnecessary because attackers knowing my payment info doesn't allow them to initiate transactions.
The main problem is many places don't accept crypto, so that's why I haven't used it much. I'm probably never going to keep a lot of my money there, but perhaps I'd load it up for a trip or monthly expenses or something.
Objection. Proof of work negates this. By making rapid block solving intentionally more difficult in order to slow down said solving, energy wasted on solving increases exponentially.
More transactions means a new block is completed faster. Last block was solved too soon, so tack another zero requirement to the next hash. More computation and energy wasted when there are perfectly acceptable hashes almost instantaneously.
Which is balanced by decreased value of additional coins, so less interested miners should drop out.
But the energy itself is kind of misleading, because miners will flock to lower cost energy, which should primarily be excess green energy. If we actually adopt this at scale, I expect energy companies to help in mining crypto with their excess energy generation, which should work well since that excess should be fairly consistent I'm a global scale.
That said, I'm extremely interested in seeing how proof of stake works out for Ethereum, since it just seems wasteful to mine coins for verifying transactions. But I think it's a lot less wasteful than opponents make it out to be.
I like what you're saying, but I see it differently.
What people should do is not what people will do. Because of the hype, people are still investing into ever more expensive rigs and consuming ever more electricity competing in races they have no chance in until they realize they can compete in other races.
Yeah, it should, but it isn't. Personally I'd prefer excess energy drive electricity prices down, rather than demand increasing reliance on more stable and constant sources.
Well yeah, another problem is that there's always another cryptocurrency. Since there's no widely adopted coin (Bitcoin is closest), people jump to the next one hoping that they'll get in early before it takes off.
So the problem isn't that a given cryptocurrency takes too much energy, it's that speculators jump from coin to coin. I think that will settle down as well, and we'll be left with mostly serious miners looking for actual profit who optimize costs down with cheap excess energy.
So what we're looking at is kind of a worst case scenario. Bitcoin rewards halve every four years, and Bitcoin valuations are unlikely to keep up. Lots of cryptocurrencies are also switching to proof of stake. Both of these together should result in drastically less energy being used.
So I'm bullish on crypto energy usage falling going forward, even if it gains mainstream adoption as a currency (unlikely).
you’re saying a buzz word without understanding the trade offs in designs… POW doesn’t have to imply higher energy cost for more transactions: shove more transactions in a block and POW cost is the same… that’s a trade off sure because then a block becomes a more valuable thing to 51%
POW is also only 1 of a lot of different consensus algorithms, all with their own trade-offs… POS benefits those with money for example (although you can still form mining pools - TBH i’d argue it’s exactly the same in this respect to POW in practice - good luck mining anything of value in POW without investing $ millions)
some blockchains aren’t built to be entirely trustless and uncoordinated, merely semi trusted and loosely coordinated (think a consortium of banks - they don’t trust each other entirely but a blockchain means no individual member working alone can cheat. in this case because it’s semi-organised they can use POS with a special token and delegate those “mining tokens” 1 per member of the consortium or something… you can even set this kind of chain up as an ethereum side chain!)
I wasn't going to reply because this conversation will likely no longer go in a positive or productive direction, but I'm quite peeved and decided to allow myself the gratification of issuing corrections.
I understand quite well, and I resent you for not only assuming me to be an uninformed commentator, but for also having the audacity to state it as if it were fact.
But it does imply it for every major coin on the market today, and said coin owners seem quite content with how things are, Only the fooled are interested in investing in another new block chain, which will likely turn into a scam as soon as someone realises the money they can steal.
What the world could be is not a rebuttal to its current state. Further it's quite disingenuous to tell people problems aren't problems because of what could be.
Please have a pleasant evening. Good night.