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The Blockchain Bubble Will Pop, What Next?

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Re: The Blockchain Bubble Will Pop, What Next?

#141

Post by nradov »

craigc wrote: post #126
sp527 wrote: post #112

Earlier quoted context omitted.

> The thing that keeps me up at night is not scalability, it is user adoption beyond the use cases which Bitcoin already successfully fulfills. This felt like the canary in the coal mine that the anarchist crowd has wholesale ignored for years. Joe and Jane LIKE that the dollar is backed by the full faith and credit of USG. From the POV of the average person, crypto is fairy dust next to a currency endorsed by what i…

I totally agree with your sentiment, but I will say one thing. If there is some shock in the world economy crypto could be a way out. Imagine - A bank run where every bank goes under and it is not possible to easily bail them out - The government has to increase inflation and we far exceed the 2% target - The existing financial system gets hacked and records get destroyed Not saying any of this is likely, but it coul…

That's not how economics or the banking system actually work. The Federal Reserve can issue effectively unlimited credit to solvent banks in case of runs. The government has no way to directly "increase inflation". Generally when bank runs occur it's because the bank has a lot of bad loans; when loans go bad it effectively removes money from circulation thus decreasing monetary inflation.

There is no single central "financial system". Individual financial institutions get hacked all the time. It's not a major problem.

Ultimately the US dollar (and other fiat currencies) are backed by something: a government with an effective monopoly on violence over a particular territory including all the people and assets therein. In the real world that's a lot more powerful than any cryptocurrency fantasies.

Re: The Blockchain Bubble Will Pop, What Next?

#142

Post by nradov »

malloryerik wrote: post #83
craigc wrote: post #18

The biggest problem is that blockchains are inherently not scalable. That is more or less by design, but it limits the types of applications that can run on top of them. I think a more likely outcome is that most types of payment infrastructure and settlement/transaction layers move to blockchains and not actual applications. For example, it’s not too difficult to imagine the stock market switch to tokenized stocks t…

As we speed toward the era of deep fakes and extreme forgery of media, I wonder if blockchains might play some crucial social role as sources of truth and proof.

How specifically would you use a blockchain as a source of truth and proof for media, and how exactly would that be superior to digital signatures applied using tamper-resistant hardward embedded in recording devices?

Re: The Blockchain Bubble Will Pop, What Next?

#143

Post by hacknat »

I don’t buy the hype of the blockchain as much as the average hacker news user, but this article lacks anything but anecdotal data.

A bubble needs two things:

1. Misallocated hype

2. Real money

As far as I can tell no one has done much digging on how much money blockchain ventures represent in terms of real world investment dollars. Can you call something a bubble if there isn’t much “real” money in it?

If all the blockchain related companies died tomorrow how many people would be out of a job, and how much money would be “lost”?

As far as I can tell most investors, even the ones bullish on the future of blockchain, are suspicious of new blockchain ventures.

This isn’t how bubbles work, unless I am massively misinformed about the amount of money in this area.

Re: The Blockchain Bubble Will Pop, What Next?

#144

Post by rspeer »

malloryerik wrote: post #83
craigc wrote: post #18

The biggest problem is that blockchains are inherently not scalable. That is more or less by design, but it limits the types of applications that can run on top of them. I think a more likely outcome is that most types of payment infrastructure and settlement/transaction layers move to blockchains and not actual applications. For example, it’s not too difficult to imagine the stock market switch to tokenized stocks t…

As we speed toward the era of deep fakes and extreme forgery of media, I wonder if blockchains might play some crucial social role as sources of truth and proof.

So... uh... why wouldn't someone just fake a photo and not use your blockchain?

Re: The Blockchain Bubble Will Pop, What Next?

#145

Post by [deleted] »

coralreef wrote: post #136
bepotts wrote: post #17

In all seriousness, what are the advantages Blockchain has over a public SQL database with limited reads and writes that also maintains a public transaction history? Cause when I hear people talk about the problems Blockchains solves (outside of cryptocurrency which is a whole other topic), I don't see what advantages Blockchain has over that. A public SQL database isn't the most "clean" solution, but it'll save ever…

If you lived in Greece or Venezeuala, you may have a different opinion about your government's fiscal policies and trustworthiness.

[deleted]

Re: The Blockchain Bubble Will Pop, What Next?

#146

Post by rspeer »

coralreef wrote: post #136
bepotts wrote: post #17

In all seriousness, what are the advantages Blockchain has over a public SQL database with limited reads and writes that also maintains a public transaction history? Cause when I hear people talk about the problems Blockchains solves (outside of cryptocurrency which is a whole other topic), I don't see what advantages Blockchain has over that. A public SQL database isn't the most "clean" solution, but it'll save ever…

If you lived in Greece or Venezeuala, you may have a different opinion about your government's fiscal policies and trustworthiness.

Why do proof-of-work fans believe that the only alternative to trusting nobody is trusting everybody?

You get out of the proof-of-work mess by trusting one entity, and it doesn't have to be the government. And to use proof-of-work, you implicitly trust the people who wrote all the code you use anyway.

Re: The Blockchain Bubble Will Pop, What Next?

#147

Post by woodman »

jwhite wrote: post #124
woodman wrote: post #85

Earlier quoted context omitted.

First: the dotcom bubble burst five years after it began, and the technological advancements didn't see "mass adoption" - because they were not consumer facing. I get the feeling that you're thinking that pets.com was the dotcom bubble... the bubble was centered around telecom technology - not retail websites. The bubble is fairly disconnected from what one would describe as the success of the internet today - web 2.…

On your first point: I seem to remember plenty of companies that failed that were not telecom. In fact when I went looking just now I found a bunch of listicles about retail startups that failed. The telecom bubble and crash was almost a side-effect. The telco executives saw the web taking off and used it to justify wildly over-inflated projections of traffic demand growth, and then began building out debt-financed n…

> In fact when I went looking just now I found a bunch of listicles about retail startups that failed.

Their contribution to losses in the dotcom bubble were measured in the millions. Telecom, last mile service providers and B2B losses were measured in the billions. [0] You obviously know those lists are infotainment.

> The telecom bubble and crash was almost a side-effect.

I'd characterize it as more of a feedback loop. They weren't simply increasing capacity with the expectation of a customer demand that didn't materialize, they were pushing through an evolutionary hump in search of a global minimum. The world would look very different today if they hadn't, at great cost, setup the network the way it is today - pushing way beyond the original design of NAPs (Network Access Points) to IXPs (Internet Exchange Points). I guess you could attribute the change to capacity, but I'd say it is more accurate to describe it as a recognition of inevitable scalability problems and as a result - a change in philosophy. That change, the official government handoff, occurred in '95. There was also an amazing amount of very interesting R&D work going on, from strange new operating systems to packet switching on fiber optics without copper interruption. Even Enron was getting in the game by trying to setup a commodity market for bandwidth. The entire situation reminds me of the evolutionary problem, where you've got massive metabolic costs in brain size growth.

So no, it wasn't an overestimation of traffic growth. Everybody was trying to figure out the way the new world would work, a lot of people got it wrong.

Also... 401k participation spiked in '95 - I don't think that is a coincidence.

[0] https://money.cnn.com/2000/11/09/technology/overview/

Re: The Blockchain Bubble Will Pop, What Next?

#148

Post by craigc »

nradov wrote: post #141
craigc wrote: post #126

Earlier quoted context omitted.

I totally agree with your sentiment, but I will say one thing. If there is some shock in the world economy crypto could be a way out. Imagine - A bank run where every bank goes under and it is not possible to easily bail them out - The government has to increase inflation and we far exceed the 2% target - The existing financial system gets hacked and records get destroyed Not saying any of this is likely, but it coul…

That's not how economics or the banking system actually work. The Federal Reserve can issue effectively unlimited credit to solvent banks in case of runs. The government has no way to directly "increase inflation". Generally when bank runs occur it's because the bank has a lot of bad loans; when loans go bad it effectively removes money from circulation thus decreasing monetary inflation. There is no single central "…

Those were three separate ideas. A bank run would most likely be a result of deflation, yes, but it is not guaranteed that if that were to occur that the bank would be able to stay solvent.

The inflation example can already be seen in Venezuela, where the people there have been using cryptocurrencies as a way to survive.

> Ultimately the US dollar (and other fiat currencies) are backed by something: a government with an effective monopoly on violence over a particular territory including all the people and assets therein.

Are you suggesting that the US military will use force to ensure that people use the dollar and that is its backing? I am not saying you are wrong, but that is not exactly a friendly thought. Sounds more like a dictatorship than a free market economy.

Re: The Blockchain Bubble Will Pop, What Next?

#149

Post by 1996 »

nradov wrote: post #141
craigc wrote: post #126

Earlier quoted context omitted.

I totally agree with your sentiment, but I will say one thing. If there is some shock in the world economy crypto could be a way out. Imagine - A bank run where every bank goes under and it is not possible to easily bail them out - The government has to increase inflation and we far exceed the 2% target - The existing financial system gets hacked and records get destroyed Not saying any of this is likely, but it coul…

That's not how economics or the banking system actually work. The Federal Reserve can issue effectively unlimited credit to solvent banks in case of runs. The government has no way to directly "increase inflation". Generally when bank runs occur it's because the bank has a lot of bad loans; when loans go bad it effectively removes money from circulation thus decreasing monetary inflation. There is no single central "…

This is exactly the point: the fed can conjure unlimited credit out of thin air. Cryptocurrencies can't.

The limitation becomes a feature: debt can't be inflated way.

We are one major crisis away from people preferring an asset that can't be inflated, or forcefully converted by executive order, under threat of confiscation.

When that happens, you will be right: by Gresham law, people will prefer paying for stuff (including taxes) in fiat currency.

Re: The Blockchain Bubble Will Pop, What Next?

#150

Post by skewart »

Here's the big reason I've gotten skeptical about blockchain: it seems like very few people are excited about actually using it. Almost everyone talking about it is excited about getting rich from trading currencies or starting a blockchain-based company. And plenty of people are excited about a grand vision for how it might transform society one day, or how it might solve problems they think other people might have. But it seems like almost nobody is genuinely excited to use any blockchain product themselves purely because it does something useful or fun or cool, and with no monetary interest in the tech taking off.

This is all in stark contrast to the 90s internet boom when, sure, there were lots of speculators and lots of get-rich-quick dreamers, but there were also tons of random people genuinely excited about using the internet who never stood to make a dime from it.

A lot of the grand visions behind blockchain mania are indeed compelling, and I suspect something blockchain-ish will take off at some point in the future. But it will probably be a distant descendant of anything that exists today.

Am I wrong about this? Are there blockchain-based products that have lots of users who are using them because they like using the product and not just because they're hoping to get rich off the hype?

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