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In defense of cryptocurrency

blog.cryptographyengineering.com

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Re: In defense of cryptocurrency

#441

Post by mirceal »

7steps2much wrote: post #192
lamontcg wrote: post #182

Earlier quoted context omitted.

What's the fundamental difference between VISA, an escrow agent and a bank? Isn't VISA just an escrow agent between every transaction who also lends money and charges interest to the purchaser?

Actually, isn't a bank an escrow agent? As in, historically it was a banks jobs to escrow your money. Then to act as an escrow agent for transactions/etc.

At least for buying a house no. The bank is not the escrow. The escrow is a separate entity that is used by both parties. Before the transaction they setup the rules of the transaction (steps and what ifs) and once the transaction starts escrow just follow those rules. The key thing is that escrow receives a fee and after that they have no skin in the game.

So in a sense, the escrow is sort of like a smart contract on the block chain. The disconnect happens between the physical and the virtual world (how would you know activity X took place in the physical world to advance the transaction through its lifecycle?)

Re: In defense of cryptocurrency

#442

Post by 676234e117 »

hiq wrote: post #386

To rephrase what has already been pointed out in other comments: this post focuses on 1) drawbacks of cryptocurrencies as solvable problems that could disappear thanks to X and Y, instead of what 2) essential benefits they supposedly (could) offer. 1) is much easier to address (at least in vague and aspirational terms) but rather uninteresting in the absence of clear examples of 2).

The article hints at some of these at the end of the article, but here's a few things maybe:

- the option for non-custodial and semi-custodial ownership of things like digital assets, from currency to domain names to other types of online property. most of our digital assets today are custodial, owned by companies seeking to gain profit and create moats. maybe some users would like another option, despite the additional risk of having to maintain their own private keys.

- fast settlement times for worldwide payments that do not require routing through a centralized intermediary that will skim a significant percentage off the top of each trade. fees paid in a PoS system can be redistributed to all participants in the network through burning + staking and delegation, which is a very different way of handling payment processor fees than what we have now

- a network of financial applications and systems that is permissionless, so that anybody can fork an existing tool or deploy their own tool without going through regulatory hurdles and roadblocks based on an archaic tightly permissioned boys-club financial system

- smart contract functionality like a 0% fee crowdfund contract that can support hundreds of thousands of participants, settle instantly, and even provide shares as tokens back to donors in case some future rewards should be distributed back to early investors

- generally better payment systems that use new cryptographic primitives rather than pencil signatures on paper, insecure card numbers and 4-digit PINs, constant privacy invasive systems

Re: In defense of cryptocurrency

#443

Post by dcolkitt »

xthrowawayxx wrote: post #263
e63f67dd-065b wrote: post #149

Earlier quoted context omitted.

Tell me you’ve never bought a house without telling me you’ve never bought a house. Buying houses are expensive because: - Realtors are a state-sanctioned monopoly for real estate transactions and suck up a % of the costs. They also provide the necessary service of aggregating information about the market and negotiating on your behalf - Due diligence on the state of the property. This means inspecting that there’s n…

What happens if you get hacked and someone steals your house NFT? Have a trusted third party transfer it back to you? Or give up your house to the hacker?

In this case this is why the base layer of fiat law is important. Common law give wide leeway in letting people setup contracts under whatever form they want. But generally apply common sense judgement for clearly egregious cases. They're not just going to say "this North Korean hacker owns the house because he found an exploit". They'll recognize the plain intent of the LLC bylaws.

Re: In defense of cryptocurrency

#444

Post by randomran01234 »

adgjlsfhk1 wrote: post #439
randomran01234 wrote: post #256

Earlier quoted context omitted.

Your statement isn’t really accurate. https://blog.chainalysis.com/reports/defi-dexs-web3/

That analysis has a major flaw. One of the main advantages of a centralized exchange is that they don't have to process all transactions on chain. As such, this is measuring very different statistics for centralized and decentralized exchanges.

That is true. Probably by pure volume of trades the CEX order books will always be able to facilitate an order of magnitude more than DEX as they can fulfill orders instantly with almost no fees at all, and many beginners and casual traders with crypto will not bother with or even understand what it means to transact on-chain.

But there is a very significant amount of crypto trading occurring on-chain, to the tune of multiple billions of dollars per day.

Re: In defense of cryptocurrency

#445

Post by maccard »

boughtahouse wrote: post #435
maccard wrote: post #312

Earlier quoted context omitted.

I live in the UK (scotland specifically, where the process is different here). The house buying process here _is_ essentially decentralized but it's not trusting potential adversories by default. I don't think that many of your suggestions of crypto like improvements will help though. > as a cash bidder you need to provide proof of funds to the estate agent, Here, you don't provide them to the seller, you provide the…

One of my property purchases was in the UK for me as well. The system is horrid. Blind bidding and behind-closed-doors conversations is common in the UK, and often buyers will end up over-bidding since it favours the selling agent’s commission fee. Depending on how well you know your agent and how much they are willing to hint at, you may be in a better position than another bidder. To make things worse, the UK has l…

> Blind bidding and behind-closed-doors conversations is common in the UK.

There's nothing about blind bidding that is solved by crypto in any shape or form. Moving to a blockchain approach for bids doesn't guarantee that you have opened bids, you can still allow people outside of the ecosystem to bid externally.

> The fact that a screenshot of a bank website or PDF passes as proof of funds for a 6 or 7 figure cash bid is laughable

Not really - a screenshot or pdf passes if the person you provide the proof to is happy with it. If you try and prove your funds with a screenshot from for a UK property transaction, they're going to ask you for more details, and they're going to ask you where the money comes from.

> if a listing agent accepted USDC and a zk-proof as a proof of funds for the bid, the actual transfer into a solicitor’s holding account could be settled in minutes and with zero privacy invasion.

For transactions under 250k faster payments guarantees transactions in under 2 hours, and anecdotally when sending my deposit for my last purchase, it was confirmed in about 15 minutes. For transactions over 250k, SWIFT transfers take a couple of days _because of regulation_, not because of technical problems. They're subject to AML checks.

> This is all purely hypothetical, and not likely to work across the board.. but it does present some areas that cryptographic tech could improve upon our traditional financial system

It's pie in the sky thinking, frankly, and doesn't even pass the sniff test. I completely disagree that it improves upon our financial system. The delays in these processes today are around AML/KYC checks, surveys, ownership dispute checks, etc. If you remove the legislation around AML/KYC checks, and streamline the surveys/ownership verification process, you could turn the entire process into 30 minutes for transactions under 250k, and some number between 30 minutes and 1-5 days for larger transactions.

Meanwhile, if you keep the regulations, don't fix the manual part of fetching deeds from the previous owner manually verifying them against a local land registry, and move the entire thing to the blockchain, I would bet you'd save a couple of days off a multi-month process, _and_ you still need to trust that your solicitor has correctly verified ownership, sourced your funds, etc.

The policy that's needed to change here has _nothing_ to do with trustless systems, because fundamentally the system you're interacting works on trust. Me telling HSBC to wire £250,000 to my solicitor for a property purchase doesn't actually send them £250,000, it just marks it to be cleared at a later point, but from HSBC's perspective the transaction has mostly happened at that point, and if the receiving bank is Lloyds, they're more than happy to trust that HSBC is good for the £250,000.

Re: In defense of cryptocurrency

#446

Post by Olreich »

lumannnn wrote: post #390
DebtDeflation wrote: post #359

Earlier quoted context omitted.

>It is now used primarily for large transactions No it's not. It's now used primarily as a vehicle for speculation.

You probably should look at different numbers than just the dollar price. Number of nodes is rising, number of wallets is rising, number of hash-power is rising. Also, please look into the "Lightning Network". It's the second layer on top of Bitcoin and that's where the whole ecosystem scales (in terms of numbers of transactions per second). Cheap, scalable and fast transactions. Adoption is happening in many places.

Lightning network pulls transactions off-chain, thus relying on trusting someone (either the person you transact with or some third party acting as escrow for the funds). By adding in trust, you can mitigate the primary bottleneck caused by proof-of-work consensus methods. But if you have people you can trust to transact with, there's no point in interfacing with Bitcoin at all, just make a micro-payment network without the bitcoin connectivity, like Venmo. This is why we don't see adoption of Lightning Network, it just moves us off of Bitcoin, which lets us get most of the "benefits" for none of the costs.

Re: In defense of cryptocurrency

#447

Post by javert »

This article repeats a common misunderstanding of how bitcoin works.

Bitcoin's decentralization does not come from miners. It comes from the fact that users will not recognize blocks that do not follow the protocol rules, as being part of the blockchain.

As a consequence, market participants will not pay as much for "bitcoins" that do not come from valid blocks.

The fundamental service miners provide is that proof of work is used as a "tiebreak" so that bitcoin users can determine the "true" chain among all the chains that follow all the protocol rules.

Miners really are just dumb utilities.

A miner staying within the rules of the protocol can do two things that are negative. First, a denial of service attack by mining empty blocks or censoring transactions. Second, executing a "double spend" if he has more than 50% of the hash capacity.

Those are serious considerations. But we cannot claim that bitcoin's decentralization is reducible to those two things. The current allocation of hash power among miners is actually far more distributed than what is really needed for bitcoin.

Implicit in all the above is, miners do not "vote." That can be a helpful analogy, but it shouldn't be taken too far.

Re: In defense of cryptocurrency

#448

Post by kkielhofner »

forum_ghost wrote: post #133
kkielhofner wrote: post #79

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…

>Owning crypto != actually using it. How do you use bonds? in January, 10 trillion of debt wolrdwide was negative yield in nominal terms. in real terms - a whole lot more. Holding assets IS use. that's the root of your misunderstanding. For some reason everyone here is fixated on cheap payments. That's not what it's about.

I'll give you credit, deflecting to bonds is a new one!

I'll quote myself:

"It's really interesting that whenever I bring up blockchain explorers and the fact that blockchain has the most transparent and reliable adoption metrics ever no one takes me up on an analysis of the data and deflects to virtually anything else instead."

Again, trading on crypto exchanges has nothing to do with the technology or use of a blockchain.

I'm not fixated on payments. I don't care what the activity/use is as long as it uses the actual technology and network (which is reflected in blockchain explorers).

Re: In defense of cryptocurrency

#449

Post by [deleted] »

boughtahouse wrote: post #241
e63f67dd-065b wrote: post #149

Earlier quoted context omitted.

Tell me you’ve never bought a house without telling me you’ve never bought a house. Buying houses are expensive because: - Realtors are a state-sanctioned monopoly for real estate transactions and suck up a % of the costs. They also provide the necessary service of aggregating information about the market and negotiating on your behalf - Due diligence on the state of the property. This means inspecting that there’s n…

I have bought two properties in two different first-world countries and also bought NFTs with Ethereum. The idea of houses on a blockchain are pretty much a pipe dream. But there are a lot of systems in traditional house buying that could be made easier with crypto-like ideas. Saying “real estate should be on-chain” should be read as asking for more NFT-like features in how real estate is transacted. - as a cash bidd…

[deleted]

Re: In defense of cryptocurrency

#450

Post by Olreich »

omh wrote: post #382
once_inc wrote: post #371

Earlier quoted context omitted.

Bitcoin mining isn't melting the planet. It's not even using more energy than Christmas lights or wash dryers. The comparisons made with [insert random country here] is dumb, because any worldwide phenomenon has a large chance to use more energy than [insert same random country here]. Even if the base layer of Bitcoin is using energy, one can argue that the functionality it offers (trustless, borderless, permissionle…

> It's not even using more energy than Christmas lights or wash dryers I can't come up with any reasonable measure by which Christmas lights use more energy than Bitcoin mining. The reports that suggest this seem to extrapolate US figures across the world, which looks unrealistic. And they're old enough that they don't account for the switch to LEDs. Even if a billion households had 50 strings of LED lights each and…

The 2008 paper released by the DOE pegged lights at 6.63TWH per year across all segments in the US. That's 0.02% of electricity usage in the US at the time, which extrapolated is still only 44 TWH in 2008. With 100% LED lights, the usage would be 0.663TWH according to the 2008 DOE paper. I'd assume we aren't quite there, but even so, much more than 2-3 TWH on holiday lights nowadays would be shocking.

> Even if a billion households had 50 strings of LED lights each and kept them lit 24/7 for all of December, they'd still use less energy than the annual usage of Bitcoin.

On the final math, at 5 watts per strand, you'd wind up with 182.5 TWH. Bitcoin at 150TWH-250TWH puts it into the ballpark. Nice.

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