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The blockchain paradox: Why DLTs may do little to transform the economy

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Re: The blockchain paradox: Why DLTs may do little to transform the economy

#61

Post by arethuza »

dragonwriter wrote: post #41
chii wrote: post #37

Earlier quoted context omitted.

> users of bitcoin (and other cryptocurrencies) have effectively no say in the design of the system they have to trust. how is that any different to the existing currency system like credit cards and banking? And users _do_ have a say in bitcoins. Namely, they can vote with their wallet (literally and figuratively).

> how is that any different to the existing currency system Fiat currency is governed by central banks, which are arms of government, and are accountable to the public in the same way as the issuing government. Obviously, the degree of accountability varies from government to government.

Except for the Eurozone where the ECB doesn't appear to really act as an arm of anyone's government.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#62

Post by ateevchopra »

wildbunny wrote: post #59
DINKDINK wrote: post #42

Earlier quoted context omitted.

>miners control bitcoin Incorrect, I can sign or construct any type of cryptographic payment I wish. Miners trade their Proof of work to prevent double spends in exchange for coinbase (currency issuance) that the market values. If miners chose to mine on a chain that no one wants, no one will trade for their coinbase. The game theory nuance is, how do you organize an economy around changes to blockchain consensus? Th…

If miners chose to mine on a chain that no-one wants, then everybody has to grudgingly go along with it, or cease to transact. The longest chain is always the most valuable.

If miners chose to mine on a chain that no-one wants, they'll run into losses. Users will probably move to some other chain. As an example: Bitcoin users might wanna switch to Litecoin. And guess what miners will do then ?

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#63

Post by ceejayoz »

arethuza wrote: post #61
dragonwriter wrote: post #41

Earlier quoted context omitted.

> how is that any different to the existing currency system Fiat currency is governed by central banks, which are arms of government, and are accountable to the public in the same way as the issuing government. Obviously, the degree of accountability varies from government to government.

Except for the Eurozone where the ECB doesn't appear to really act as an arm of anyone's government.

Brexit demonstrates an available route to expressing disapproval of the ECB's actions.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#64

Post by qznc »

I don't understand why "competition" should not work? Switching currencies is easier than switching citizenship. There are plenty of alternative cryptocurrencies with different rules. User can switch to different ones (and Ethereum is quite a challenger at the moment).

The network effects are great, because otherwise everything would explode into a million different currencies.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#65

Post by qqg3 »

rb808 wrote: post #38
jankotek wrote: post #6

Blockchain already transformed economy; it brought fast international payments with small fees.

One of the reasons there are fees for international payments is to comply with the legal requirements set up by governments to monitor and control such transactions. The cost of transferring FX wholesale is near zero. If a bitcoin based processor implements the controls, the costs will be the same as a regular payment provider. So bitcoin can only become cheaper than tradition payments if you bypass the legally requi…

While you're not wrong, the fees for international payments vary wildly depending on how you do it, which service or bank you use, how much you transfer etc. Which makes it hard to sell the "its about governance" line for justifying those fees.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#66

Post by KirinDave »

jasode wrote: post #7

I agree with Vili Lehdonvirta's analysis about governance and wrote a similar conclusion previously.[1] Yes, the concept of "money" existed before governments and therefore doesn't require government. That said, today's modern money is very much an instrument of government power. This is why alt-coins will not overthrow fiat currencies like some enthusiasts believe because Bitcoin does not come with its own Bitcoin-p…

"Distributed block chains" have been well understood (if not popular) technology for a long time and have not really been that popular. They've been cost-prohibitive until recently.

I'm not sure they will fundamentally change anything either. You're making the same implicit assumption that there is an appetite in the market for a wide but not-quite-real-time distribution mechanism. I submit to you that outside of medical records and other specialist applications, there isn't.

As for the currencies, when they are backed by the promise of more energy as opposed to backed by the promise of spent energy I'll find that more interesting. I see the big weakness of Bitcoin being that it exists as it does only so long as the majority of computing power within it does not hijack it.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#67

Post by rhino369 »

rlpb wrote: post #9
jasode wrote: post #7

I agree with Vili Lehdonvirta's analysis about governance and wrote a similar conclusion previously.[1] Yes, the concept of "money" existed before governments and therefore doesn't require government. That said, today's modern money is very much an instrument of government power. This is why alt-coins will not overthrow fiat currencies like some enthusiasts believe because Bitcoin does not come with its own Bitcoin-p…

> Bitcoin does not come with its own Bitcoin-police-force and Bitcoin-law-courts My government will enforce a contract even if it is denominated in some foreign currency, will it not? Currency used is independent of jurisdiction. They may award damages in legal tender, rather than in Bitcoin, but I have to pay taxes in legal tender anyway, so there will always be a market to convert back. Right now they might be conf…

Sure. But having to convert to pay taxes and debts is huge pain point for trying to conduct all your business in a foreign currency. It also adds transaction costs.

If you are a business, why would you ever try to run on bitcoin alone? There would have to be a huge advantage. And we see that in many small cottage industries where that is an advantage, like buying drugs online or illegal gambling.

But without the need for pseudo-anonymity why would anyone ever use it? Why would your grocery store use bitcoin over dollars? They wouldn't.

So crypto will probably be a currency in the long run, but it won't overthrow regular fiat.

Plus, if there was a huge benefit to crypto, the Fed could just do a crypto dollar and peg it to the real dollar.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#68

Post by KirinDave »

wildbunny wrote: post #59
DINKDINK wrote: post #42

Earlier quoted context omitted.

>miners control bitcoin Incorrect, I can sign or construct any type of cryptographic payment I wish. Miners trade their Proof of work to prevent double spends in exchange for coinbase (currency issuance) that the market values. If miners chose to mine on a chain that no one wants, no one will trade for their coinbase. The game theory nuance is, how do you organize an economy around changes to blockchain consensus? Th…

If miners chose to mine on a chain that no-one wants, then everybody has to grudgingly go along with it, or cease to transact. The longest chain is always the most valuable.

You're also referring to a major weakness in the distributed consensus of bitcoin: the longest-chain-preferred mechanism is almost certainly a vector of attack on the chain.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#69

Post by KirinDave »

qznc wrote: post #64

I don't understand why "competition" should not work? Switching currencies is easier than switching citizenship. There are plenty of alternative cryptocurrencies with different rules. User can switch to different ones (and Ethereum is quite a challenger at the moment). The network effects are great, because otherwise everything would explode into a million different currencies.

Currencies need to have systems in place that work to make them stable and preserve value, otherwise they're just tools for transactions.

This might be a better state of affairs if currencies are backed by something exchangeable (e.g., joules of carbon neutral energy, etc...). We don't have many currencies like that in the world, as I understand it. Most are essentially contracts between governments that may or may not end in violence.

Re: The blockchain paradox: Why DLTs may do little to transform the economy

#70

Post by delegate »

Interestingly, the way things are right now, when it comes to governance model on a global scale, the Big Bad Banks are more decentralized than Bitcoin or any other crypto currency.

Even if it weren't so, I still don't get why total decentralization is an absolute good thing.

Nature seems to be a symbiosis between centralized and decentralized systems - at every level; extremes (too much or too little centralization) will lead to isolation/extinction or explosion/implosion - think biological systems or stars in galaxies.

I disagree with my crypto anarchist friends who believe that changing the money system will change society (eg. society is a function of money) and I tend to think that the relationship is more symbiotic - society has to change in order for the money to take other roles.

Even so, given human nature, it is not clear if a totally decentralized monetary system is a good thing for society as a whole.

People trust 'authorities' more than they trust math written by a bunch of 'core' devs and that's because the former can easily apply brute force and coerce the latter. Yes, we're still primates and the bigger/stronger argument is still valid.

So I don't think Bitcoin will dramatically change society, but some form of symbiosis between the current banking system and the crypto currencies will emerge eventually - and then we can talk about centralization at a whole different level. Either way, there's no escaping it.

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