Guy's, I think that cryptocurrency inherently cannot stay "decentralised"

[oali24]

Guys, Bitcoin isn't decentralized and I think it and other cryptocurrencies never will be, it is based on people maintaining a network like a torrent swarm, but because there is money involved people will try to get more hardware like GPU's to maintain it becoming larger part and centralizing.

 

[Levent]

Oh ok. I also dont think you know what decentralized means.

[IkeaGnome]

More people mining it means more decentralization.

[oali24]

So guys what is bitcoin? it is a system of computers connected through the internet that share a workload of encypting and decrypting statements of exchange of a certain digital unit called bitcoins, right? so its a network of computers that work together to do a certain verification and exchange, the big hype that supporters promise is an incredibly durable system of trust where you can exchange cryptocurrency that cannot be forged, which means it can function as a sort of currency as the digital unit can be verified to belong to a certain account or "wallet", their main talking point is that other currencies are issued by government's, usually through a central bank which means they effectively control how much of it there is, while bitcoin is independent of any single bank or government which means its apparently decentralised. But here's the thing the supposed "decentralised" nature of it means that anyone can allocate computing resources to it either for "mining" in the case of bitcoin or with the proof of stake system that ethereum is moving to this means there is nothing to stop anyone from allocating more computing resources bbecoming a bigger part of the network that is under control by individuals or individual groups, in effect centralising it, because cryptocurrency works under capitalism in its current form profit motives dictate whether someone allocates resources to it or not, so by its own design it will always move to centralising, we can see this with bitcoin as most mining of it takes place in only a few countries like China and Iran.

What do you guys think? I can't be the only one who has come to this conclusion. I would like to hear your thoughts on this.

[Avocado Diaboli]

I've been skeptical about the claims made in the initial whitepaper outlining cryptocurrencies from the beginning. One reason was that, at least for certain currencies, there's only a finite number of currency to be mined. But mining pays out its own currency as a reward for people who invest resources to help the system function in the first place, by processing transactions. If that eventually stops, there's no incentive to keep processing transactions, because the system itself isn't going to pay out currency to you anymore. So what then? Do you need to pay miners to keep running the system so you can transfer currency from one wallet to the next one? In that case, you're now giving power the entities with the biggest investment in mining infrastructure, who themselves possess more capital to oust smaller players from the market. Capitalism happens again, where money and power consolidates at the top.

 

Same thing with your example of proof of stake currencies, there is no mechanism in place to stop someone from hijacking the system and monopolizing it if they have enough initial capital to make a big enough purchase.

[Sauron]

It's much simpler than that. If people actually want to use cryptos as currency they need to go through exchanges and convert them into real money. Boom, there's your centralization.

 

For this not to be the case you'd have to go through the banking system which is already centralized.

 

Otherwise a bunch of people would have to accept and use cryptocurrency and hope that everyone else also accepts and uses them. This would result in absolute legal chaos and anyone doing it would most likely get screwed over financially. If I pay you in poultry that is technically a decentralized payment system, that doesn't make it good.

[Mark Kaine]

i could be wrong but i dont think its illegal to create/invent alternative currencies to state currencies… 

 

and the "decentralized" is just like "anonymous" nothing but marketing bullocks.  thing is as long it makes people money they will continue to use these "crypto" currencies, they do not care about the imaginary ideology behind it, why would they.

 

… Im not actually sure what you're trying to say… centralized or not it doesnt really matter, more interesting  would be if a currency can be a long term solution with literally nothing (material) backing it up.

[Levent]

23 minutes ago, oali24 said:

But here's the thing the supposed "decentralised" nature of it means that anyone can allocate computing resources to it either for "mining" in the case of bitcoin or with the proof of stake system that ethereum is moving to this means there is nothing to stop anyone from allocating more computing resources becoming a bigger part of the network that is under control by individuals or individual groups, in effect centralising it, because cryptocurrency works under capitalism in its current form profit motives dictate whether someone allocates resources to it or not, so by its own design it will always move to centralising, we can see this with bitcoin as most mining of it takes place in only a few countries like China and Iran.

Part of the problem of being decentralised is that being vulnerable to 51% attacks. There are ways to mitigate those but last part of your sentence makes no sense whatsoever.

[Sauron]

3 minutes ago, Mark Kaine said:

more interesting  would be if a currency can be a long term solution with literally nothing (material) backing it up.

Uhhhh... all modern currencies work like that.

[Avocado Diaboli]

4 minutes ago, Sauron said:

Uhhhh... all modern currencies work like that.

Yes, but since governments control currencies, that means they are publicly backed and no single actor can take control of them. Unlike crypto.

[oali24]

9 minutes ago, Levent said:

Part of the problem of being decentralised is that being vulnerable to 51% attacks. There are ways to mitigate those but last part of your sentence makes no sense whatsoever.

If bitcoin is supposed to be spread out and mined by many many different entities then isn't it a bit weird that most miners are concentrated in a few countries? That means that less entities have more control over the network.

[Kanna]

Oooo Kobayashi

  

[Levent]

1 minute ago, oali24 said:

If bitcoin is supposed to be spread out and mined by many many different entities then isn't it a bit weird that most miners are concentrated in a few countries? That means that less entities have more control over the network.

Nope, you are coming up with that on your own. If mining is more profitable somewhere then more it will be concentrated there, simple as that.

[Mark Kaine]

9 minutes ago, Sauron said:

Uhhhh... all modern currencies work like that.

Since when? 

 

 

Quote

Central banks hold gold reserves as an insurance policy against hyperinflation or other severe economic catastrophes. ... Some countries have also started to increase their gold holdings in response to the global economic crisis in a bid to make their currency more reliable than competing currencies.

without something to back it up money would be literally worthless…

 

which is why "crypto" is so hilarious btw

[oali24]

6 minutes ago, Levent said:

Nope, you are coming up with that on your own. If mining is more profitable somewhere then more it will be concentrated there, simple as that.

That's the problem the issuers of cryptocurrency are concentrated in a specific area, so how can it be decentralised if their is a central place that manages it?

[Lurick]

30 minutes ago, oali24 said:

That's the problem the issuers of cryptocurrency are concentrated in a specific area, so how can it be decentralised if their is a central place that manages it?

That's not how it works, just because mining is more popular in some places doesn't mean they manage it.

[tikker]

Ooh another crypto post yay  

1 hour ago, oali24 said:

What do you guys think? I can't be the only one who has come to this conclusion. I would like to hear your thoughts on this.

No, but at his point it has had a decade for this to happen and it hasn't. There have been instances where some pools had close to a majority share and it was decided this was bad and they voluntarily limited their pool hashrate because of this. The second point is that Bitcoin (and some others) is worth a lot right now. It is not in your interest to derail this train.

1 hour ago, oali24 said:

their main talking point is that other currencies are issued by government's, usually through a central bank which means they effectively control how much of it there is, while bitcoin is independent of any single bank or government which means its apparently decentralised.

The main talking point is a system of transactions without the need of a trusted third party. If I transfer 10k by wire to you, the bank is the only party that acknowledges and confirms it. In crypto you have basically the entire world confirm it and store it on a public record. Even if there are people frauding it, as long as the majority is honest the network will remain honest. Decentralised has nothing to do with banks. It just means there is not a single centralised entity controlling everything. Torrenting is an example of decentralised file sharing.

1 hour ago, oali24 said:

But here's the thing the supposed "decentralised" nature of it means that anyone can allocate computing resources to it either for "mining" in the case of bitcoin or with the proof of stake system that ethereum is moving to this means there is nothing to stop anyone from allocating more computing resources bbecoming a bigger part of the network that is under control by individuals or individual groups, in effect centralising it, because cryptocurrency works under capitalism in its current form profit motives dictate whether someone allocates resources to it or not, so by its own design it will always move to centralising, we can see this with bitcoin as most mining of it takes place in only a few countries like China and Iran.

Yes everyone can add compute power and there is in principle no real problem with that. The important thing to avoid is indeed the 51% attack where a single entity controls >51% of the hashrate. At this point however that is 1) hard to do and 2) very expensive to do. Crypto51 tracks the cost of a 51% attack on various coins. I don't know why BTC disappeared, but you can see that a 51% attack on ETH would cost you $1.6 million per hour. BTC would be even more. It does happen however and is a real risk. For the big coins I would say it's no longer a serious threat, but for the small coins most won't bother with it can be. A lot of hashpower in a single country is not necessarily a problem either. It'll become problematic if they all coordinate. A subtle detail can be for example that most of the hashrate can come from a pool in that country, while the individual miners mining on that pool come from worldwide.

 

Proof of stake does not depend significantly on your compute power anymore, so adding more won't help you. In that case it's about how much you own and stake on the network combined with maybe some other factors. In other words for a 51% attack on ETH using proof of stake you would need to own 51% of all the ETH in existence. In other words you would need to own 58 089 754 ETH, or $157 248 964 078 (yes, 157 BILLION dollars).

 

47 minutes ago, Avocado Diaboli said:

Yes, but since governments control currencies, that means they are publicly backed and no single actor can take control of them. Unlike crypto.

A single actor controlling everything is exactly what crypto is trying to avoid.

41 minutes ago, oali24 said:

If bitcoin is supposed to be spread out and mined by many many different entities then isn't it a bit weird that most miners are concentrated in a few countries? That means that less entities have more control over the network.

A significant fraction of hashpower is concentrated in those countries. This comes from pools. To my knowledge the majority of miners isn't (or we don't know).

 

39 minutes ago, Mark Kaine said:

Since when? 

 

 

without something to back it up money would be literally worthless…

 

which is why "crypto" is so hilarious btw

Since quite a while now. Pretty much every currency nowadays is a fiat currency and is not backed by anything physical like gold or silver. Your point is correct: our money is literally worthless. Its only worth is that the government allows us to pay taxes with it and that we colloquially agree a $5 bill is worth $5 when trading for goods. Your quote illustrates exactly that. Since fiat is worthless, they try and keep a fraction as gold or whatever else that does have/maintain value.

[Lurick]

42 minutes ago, Mark Kaine said:

Since when? 

 

 

without something to back it up money would be literally worthless…

 

which is why "crypto" is so hilarious btw

The USD is not backed by anything but the faith people place in the US government, the USD hasn't been backed by the gold standard since 1971

[Avocado Diaboli]

6 minutes ago, tikker said:

A single actor controlling everything is exactly what crypto is trying to avoid.

It's trying to avoid it with a system that inherently doesn't disallow it, meaning it's a poorly thought out system.

[tikker]

1 minute ago, Avocado Diaboli said:

It's trying to avoid it with a system that inherently doesn't disallow it, meaning it's a poorly thought out system.

You're right, I should explained myself better. It isn't just trying to avoid centralisation by splitting things up. It's trying to provide a transaction network that doesn't require a trusted 3rd party to confirm your transaction (i.e. your bank). Bitcoin solved the double spending problem with proof of work. As long as the majority of the network is honest, you can even have dishonest people in there and they won't harm the network. Everything is logged and locked in a public ledger and if you want to change something, you'll have to redo everything and outpace the current honest chain.

[Sauron]

1 hour ago, Mark Kaine said:

Since when?

Since like a century ago https://en.wikipedia.org/wiki/Gold_standard#Abandonment_of_the_gold_standard

[Mark Kaine]

1 hour ago, Sauron said:

Since like a century ago

I know that currencies arent fully backed by gold, but it still plays a significant role - without it everything would collapse, doesnt need a Nostradamus to see that.

 

Which is what ive tried to point out, crypto doesnt have anything like that afaik, which is why its seen as "volatile".  There is nothing backing it up if things go south.

 

Quote

Why do other nations hold gold in their reserves? Again, there are two primary reasons.

One reason is to protect the credibility of their currencies. Although the world long ago abandoned the gold standard, the metal still maintains virtually universal confidence. So if confidence in a nation's political or economic stability is shaken, gold stands as a backstop buttressing trust in its creditworthiness.

For example, Germany's decision last year to repatriate a portion of its gold reserves was driven, in part, by German public concern about the state of the euro. These concerns reached a peak as the European Union struggled with its debt crisis and confidence in the euro eroded. Bringing a portion of the country’s gold back from France and the U.S. provided Germans some security that if the value of the euro collapsed, the German central bank would have substantial gold reserves in its vaults.

Thats also why its difficult to compare crypto with "centralized" currencies which the world economics rely on, it doesnt seem to serve that purpose and wont be for a long time if ever.

 

[Sauron]

20 minutes ago, Mark Kaine said:

I know that currencies arent fully backed by gold, but it still plays a significant role - without it everything would collapse, doesnt need a Nostradamus to see that.

No, gold plays no role in the value of a currency like the US Dollar. Instead of Nostradamus you should be invoking some economics textbooks

21 minutes ago, Mark Kaine said:

Which is what ive tried to point out, crypto doesnt have anything like that afaik, which is why its seen as "volatile".  There is nothing backing it up if things go south.

Crypto doesn't have a state backing it up. That's the only difference and the reason its value is so volatile. If you invest in the USD you're basically investing in the US economy being successful. If you invest in BTC you're investing on... other people investing in it too.

[artuc]

Gold and silver also are somewhat based on how "ooh shiny" they are. Both and other precious metals do have utility of course but their perceived worth is not for those reasons alone.

 

The argument that crypto has no intrinsic value I think is a bit short sighted. In terms of infrastructure and potential future uses then it in of itself could be valuable, if the chain or resources on it are worth money, provide a service, societal good, lubricate a financial system etc.