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In defense of cryptocurrency

blog.cryptographyengineering.com

91–100 of 578 posts

Re: In defense of cryptocurrency

#91

Earlier quoted context omitted.

Owning crypto != actually using it. Exchanges run private order books like any other investment org. People trading (gambling?) one ticker symbol (crypto or not) vs another (crypto or not) has absolutely nothing to do with real world use or utility. I can watch the Euro move up and down on forex and buy/sell to make money in my currency of choice while never touching a Euro, using it for anything, or having any real…

Is this supposed to be a critique of all financial investment or speculation? I'm not sure what else I'm supposed to take from this. Also talk about moving the goalposts, we've gone from "no one knows about crypto or cares about if its good or bad" to "they don't really use it they just trade it"

Whether the goalposts have moved depends on whether you consider speculative investment to matter for whether something is "irrelevant".

I think you could reasonably read that post as a critique of speculative investment in assets. With the conclusion that if that's the only meaningful activity with cryptocurrencies then they're not doing very well.

Investing in companies or in future production is a different matter. If cryptocurrencies can actually get that going at some point it'll be interesting!

Re: In defense of cryptocurrency

#92

Earlier quoted context omitted.

it's not theoretical and I expect it to also become a larger percentage or the network over the next few years. it occurs mostly for economic reasons, it is somewhat accelerated by the common criticism but ironically mostly irrelevant while getting to the same outcome either way grid-reliant proof of work is probably going to get deprecated. (remote sites typically can connect to a grid to sell their own excess energ…

> it's not theoretical Can you gave examples of PoW using energy that would be wasted otherwise and is not something like reactivation of shut down fossil fuel power plants?

Here is an example where you can read between the lines. The government of Texas is forcing approval for miners to connect to their (shaky mismanaged) grid at all! The article also details how fast its growing in Texas regardless.

Combine those two sentences and you can deduce that that many miners are not connected to the grid and don't need to.

https://www.cbsnews.com/dfw/news/i-team-cryptocurrency-miner...

The energy sources being used in Texas are flare gas sites that were billowing many gasses into the atmosphere for decades. The miners are instead separate organizations partnered with the site operator that use their own capital to install generators with catalytic converters and use the energy on the spot. This reduces emissions by over 60% by one metric (I'll try to find that source again, I was surprised it was so only 60%)

A couple things to note. We started this thread talking about how now only 60% of the bitcoin network uses fossil fuel sources. What I described above is a fossil fuel source, like how Electric Vehicles get their power from fossil fuel sources, with a further similarity being that both things reduce emissions in other ways. This means that 40% of the bitcoin network and proof of work industry is not fossil fuel, while some growing portion of the 60% is fossil fuel while still reducing emissions. Its just much more nuanced, the ideal you are asking for is reducing emissions while having a fossil fuel source while not taking away from another use case while not being connected to the grid. Its multidimensional and overlaps on several categories.

Secondly, the flare gas industry also has governmental pressure in Texas, as they cannot add more stacks due to state regulations. But in reality its way worse than that, because the texas energy regulator is a captured entity for that industry, despite the law saying "no increasing emissions from flare gas sites", there is an exception rubber stampable by the regulator, and that exception is basically the rule. Texas has not been able to reach its sustainability promises and goals. Proof of Work mining has been a solution for the sites and the state, and this is politically favorable as the governor and regulator do get detailed analysis to understand how this helps their sustainability situation while not alienating their political party and constituents. (aka, an economical sustainability solution is always OK with Republicans, the economic solution has just been elusive, until the bitcoin miners showed up)

Thirdly, despite this symbiosis, you should be thrilled to know that this pretty much prevents old fossil fuel sites from restarting specifically for bitcoin mining. But we are 100 years into the oil and gas exploration and this is likely not stopping. Bitcoin mining is currently a sideshow in comparison, and is just small enough to be easy enough to try and hate because we are all powerless against "big oil" and have been better off just accepting that its there. My main point here is that the headlines about "coal mine restarted exclusively to mine bitcoin" are egregious outliers that don't reflect whats going on at all. This is kind of intentional, not suggesting a conspiracy, but one way to dissect these headlines is to understand that its state-by-state. New York has a completely different grid style, different geography, and different issues with Proof of Work load. Headlines out of New York (where the coal reactivation plan was by an entrepreneur there, alongside some other negative headlines were) need to be seen as New York specific problems, and not "this validates my perspective against Proof of Work" problems. Its impossible for it to be otherwise, right now, given how energy is set up in this country. The intentional nature of this negative perspective largely comes from the miners themselves: They don't want people to compete with them so its better that nobody knows whats really going on, even if that means the public gravitates to these wildly negative ideas of reality. There is very little publicly available information about these non-grid connected flare gas miners, because they aren't publicly traded. The publicly traded ones so far are doing something else, or simply are grid connected. But there are enough hints in that CBS article about organizations you can look into to find more about whats going on, in Texas.

The same thing is playing out in other Midwestern states, and other areas of North America.

Re: In defense of cryptocurrency

#93
post #85

Earlier quoted context omitted.

> it's not theoretical Can you gave examples of PoW using energy that would be wasted otherwise and is not something like reactivation of shut down fossil fuel power plants?

There are a lot of miners in Texas where occasionally the price of electricity goes negative because wind power exceeds demand. That's a rare scenario though, so the other 95% of the time miners are competing with consumers to buy electricity.

> so the other 95% of the time miners are competing with consumers to buy electricity.

The ones that pull energy from the grid, yes

There are many that don't, and I expect them to increase, partially because the state energy company there is forcing approval applications now

Re: In defense of cryptocurrency

#94

Earlier quoted context omitted.

Is this supposed to be a critique of all financial investment or speculation? I'm not sure what else I'm supposed to take from this. Also talk about moving the goalposts, we've gone from "no one knows about crypto or cares about if its good or bad" to "they don't really use it they just trade it"

It's not a critique of financial investment or speculation. It's calling all of it what it is - financial investment and/or speculation. If someone claimed they were participating in changing the world and building the future of everything by shuffling Euros around on some forex platform and taking it home as USD you would be skeptical, correct? How is trading BTC any different? You misunderstand me. Many people trad…

I do consider it a use of crypto, in this case it is a highly volatile speculative investment that can be moved into a hardware wallet where it can be kept safe from theft, and also transferred into fiat. Even if crypto never becomes more than that, I still think this is a valuable thing. With DeFi things get more interesting

Re: In defense of cryptocurrency

#95

Earlier quoted context omitted.

You don't pay for the fees...the vendor does. Not to mention all of the other fees they rake in. You can have other ways of making sure payments are safeguarded...actually one of the smartest ways to do this was setup on the dark web illegal markets where there was a middle man that didn't have custody of the money (at least in the best multisig ones) but was able to complete or reverse transactions if needed. Basica…

We all pay for the fees but IMO it's more than worth it considering all of the things I mentioned and more. The other fees they rake in (I'm assuming you mean interest) are from issuing unsecured loans. That's another topic entirely. Escrow is many thousands of years old and certainly exists in many forms in the financial system today. It's just that because of all of the other things I mentioned the average person u…

How about real estate transactions. What fees are the average buyer and seller having to pay along with how many third party people have worked themselves into the fold to get their piece of the action? Why would you need title insurance when the blockchain holds all the information?

Why would sellers need to pay up to 6% to a realtor and buyers pay thousands in closing costs...because there is a disparity in access to information. Crypto/Blockchains can change that.

Oh...and wire transfers can take up to 7 days before they are finalized. Crypto transfers it's generally considered settled in a few minutes.

Re: In defense of cryptocurrency

#96

> "The top credit-card merchant fee actually rose in the United States between 1991 and 2009, and this is a goddamn tragedy, since these fees are baked into the cost of most retail goods and thus born by the working poor (who pay them even if they use cash.) . . . Why are these IT-focused industries so consistently immune to the same technological improvements and cost reductions we see everywhere else?" The simplest…

The solution that has actually been implemented in Europe is to regulate the payment providers, so inter-bank transfers are effectively free and instant, and credit card fees are capped at 0.3% (i.e. 10x less than in the USA).

Re: In defense of cryptocurrency

#97

Earlier quoted context omitted.

It's not a critique of financial investment or speculation. It's calling all of it what it is - financial investment and/or speculation. If someone claimed they were participating in changing the world and building the future of everything by shuffling Euros around on some forex platform and taking it home as USD you would be skeptical, correct? How is trading BTC any different? You misunderstand me. Many people trad…

I do consider it a use of crypto, in this case it is a highly volatile speculative investment that can be moved into a hardware wallet where it can be kept safe from theft, and also transferred into fiat. Even if crypto never becomes more than that, I still think this is a valuable thing. With DeFi things get more interesting

I suppose we'll just have to agree to disagree on use. I'm still of the position that trading cryptocurrency on an exchange and never using the underlying technology or touching the network isn't use of that cryptocurrency.

The ironic aspect of this debate is I'm on my second blockchain startup for a reason - I believe there are plenty of use cases where it makes sense. I just don't think the cryptocurrency/blockchain communities are doing themselves a favor operating under the mass delusion that crypto is a big thing (while still being early?) when all available real data says otherwise. Trying to pump the underlying cryptocurrency by shoehorning the tech into anything and everything (and doing so poorly) will backfire as well (and already is).

Blockchain and cryptocurrency advocates need to look inwards to identify blockers to mass adoption and address them while identifying real world use cases where blockchain/cryptocurrency provides real value and utility.

Re: In defense of cryptocurrency

#98
"transaction reversibility is not about the ledger, but rather about the transaction rules that a currency uses. A reversible currency requires that someone anoint this trusted party (or trusted parties) and that they use their powers to freeze/burn/transact currency in ways that are at odds with the recorded owners’ intentions. And indeed, this is a capability that many tokens now possess"

I think this is arguing that reversibility is not antithetical to permissionless blockchains, because reversibility can be implemented on top of permissionless blockchains.

But that doesn't answer the critique -- the critique is that most real world systems do need trusted parties, and if you build a system of trusted parties on top of a permissionless blockchain, then you could have saved a lot of complexity, risk, and proof-of-economic-waste burn by building on top of a permissioned distributed ledger instead. Reversibility is one example of a design requirement that undoes the claimed advantages of permissionless blockchains that are meant to justify their inherent downsides.

Re: In defense of cryptocurrency

#99

Earlier quoted context omitted.

We all pay for the fees but IMO it's more than worth it considering all of the things I mentioned and more. The other fees they rake in (I'm assuming you mean interest) are from issuing unsecured loans. That's another topic entirely. Escrow is many thousands of years old and certainly exists in many forms in the financial system today. It's just that because of all of the other things I mentioned the average person u…

How about real estate transactions. What fees are the average buyer and seller having to pay along with how many third party people have worked themselves into the fold to get their piece of the action? Why would you need title insurance when the blockchain holds all the information? Why would sellers need to pay up to 6% to a realtor and buyers pay thousands in closing costs...because there is a disparity in access…

You're absolutely correct in that real estate is a mess and blockchain could clean up and streamline a few aspects of a real estate transaction. Problem is the existing systems have a lot of catching up to do. There was a story of a house being sold as an NFT... Purely promotional gimmick as the only thing that mattered (transfer of deed, etc) had nothing to do with the blockchain and the NFT representing the property has no legal meaning whatsoever.

Wire transfers can take several days, I suppose depending on mechanism/method. That said anyone who's participated in a real estate closing, funding round, etc knows you receive bank confirmation of the wire in minutes-hours and it's a done deal. In funding companies, for example, I've personally experienced this with wires in the tens of millions of dollars.

Re: In defense of cryptocurrency

#100

Earlier quoted context omitted.

How about real estate transactions. What fees are the average buyer and seller having to pay along with how many third party people have worked themselves into the fold to get their piece of the action? Why would you need title insurance when the blockchain holds all the information? Why would sellers need to pay up to 6% to a realtor and buyers pay thousands in closing costs...because there is a disparity in access…

You're absolutely correct in that real estate is a mess and blockchain could clean up and streamline a few aspects of a real estate transaction. Problem is the existing systems have a lot of catching up to do. There was a story of a house being sold as an NFT... Purely promotional gimmick as the only thing that mattered (transfer of deed, etc) had nothing to do with the blockchain and the NFT representing the propert…

>That said anyone who's participated in a real estate closing, funding round, etc knows you receive bank confirmation of the wire in minutes-hours and it's a done deal. In funding companies, for example, I've personally experienced this with wires in the tens of millions of dollars.

You are correct...but again this is something the average Joe doesn't have access to. With crypto/blockchain everyone has the same access (more or less) at their fingertips.

It's not a perfect system yet for sure...there is a long way to go, but it is a huge leap forward in leveling the playing field for financial usage for everyone (I mean just looking at western union in 2021 they had $5B in revenue...that's about 5% of the transaction amount with an average transaction size of $300).

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