Awesome deep dive into the space. The two positions I object to are:
> In some ways, Bitcoin could be considered the first decentralized application since it runs on blockchain technology, is fully open-source, and runs without a central authority.
Decentralization is not a new thing that only came into existence with Bitcoin... Torrents are decentralized, the email protocol is decentralized, Tor is decentralized, etc. Decentralized protocols and applications have existed before the blockchain and what the blockchain adds as a decentralized application is decentralized transaction validation. Basically decentralizing the validation of what can and cannot get written to a database. If you make your "writes" application state, then you can generalize the validators to be not only validating database-writes, but program execution steps as well (Ethereum).
> By no means do I believe that decentralized applications have no benefits. In fact, I foresee a future where applications are 10x more secure, 10x cheaper, 10x more efficient, or 10x more on some dimension than the current ones.
Decentralization is always costlier. Netflix is faster and more reliable than torrents, Facebook is more reliable, faster and easier to use than Diaspora. Fiat and credit cards are faster and easier to use than Bitcoin. AWS is faster, cheaper and more reliable than StorJ, and on and on. When you decentralize something, you must add coordination and communication costs such that your overall costs will always be at least as high as the centralized alternative. So the claim that the decentralized applications will magically be faster and cheaper definitely needs research and a [citation needed].
If we realize that the decentralized application will always be costlier than its centralized alternative, we must ask ourselves: why do we need decentralization? Then, we will really know what blockchains are for!
Vitalik (of ethereum) has a pretty good blog post talking about the different types of decentralization: architectural, political, and logical.[0] For blockchains, he says:
"Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer)"
> Decentralization is always costlier. Netflix is faster and more reliable than torrent
Is it more expensive, though? In a lot of cases it is certainly more expensive (bitcoin, Facebook, etc) but Netflix should be a counter example. In theory, a decentralized Netflix should be a lot cheaper because there are very little bandwidth costs. In practice, though, this is impossible because of all the DRM regulations. There is just no way one could design a decentralized network without getting into legal troubles. Furthermore, adoption would be another problem because a decentralized Netflix would mean I have to upload content and download it. In practice, this would put me a long time into jail if I did that in my country (sometimes even more then murderer and rapists).
We have only seen one such successful "decentralized" application so far: popcorn time. It proves that it can be more reliable and easier to use but in reality the legal implications are just too impractical.
Furthermore, decentralizing other video platforms such as YouTube could be a lot harder. Netflix has a small amount of viewing content but a huge amount of viewers. YouTube has a lot of content and less viewers per minute of content then Netflix has. This means any user would have to store much more then they would on Netflix. There is just no way to save content for a long time. On YouTube I recently found a video I did when I was 13 about a tutorial for a video game. If I stored it on a hard drive, I would have lost it for sure (because I never really cared about it much) and there is no way it would have been stored for some many years by just 3000 viewers who have ever seen that. Just seeing this video after all those years is kind of amazing. I know that there is no guarantee that this video will stay on YouTube forever but the chances are a lot higher (and I don't see it disappearing as long as YouTube stays popular and their main business model is make small video makers big)
I see the article full of text just as a SEO tactic. There is no real substance there:
> Problem #1: Lack of developer friendliness
As we described above, Ethereum solves this problem by design through its expressive programming language and strong developer tooling.
The author doesn't have direct experience with Solidity, where the tooling is buggy and there are many subtle ambiguities and security issues that are not yet addressed. Any ICO, smart contract developer, or security auditor knows this and this is why ERC20 tokens that are only a few lines of code and very repetitive can hide terrible issues. You can check for example: "Smart contract short address attack mitigation failure" https://blog.coinfabrik.com/smart-contract-short-address-att...
Well said. I hate when every new technology is always a panacea when in reality it is about tradeoffs. It may be much better at one thing but have other costs/issues. The blockchain is interested because it creates distributed trust that enables anonymity not cause it is cheaper.
You forgot that blockchain enables capitalism and free markets on decentralized applications. Voluntarist models such as BitTorrent don't quite work, as we know (BitTorrent only works for popular files).
This is a huge paradigm shift, and it will enable revival of all kinds of P2P applications, and actually make them viable and able to compete with centralized solutions. There's Sia for decentralized storage (StorJ is not decentralized) and Mysterium for decentrarized VPN, etc.
> Decentralization is always costlier. Netflix is faster
Because Netflix puts their content in the internet exchanges (IXs) (Netflix Open Connect), bypassing CDNs in some cases, thus getting as close to the users as they can given the current internet piping infrastructure [1]. Sure, decentralization (being operated by an aggressive management that can strike background deals with IXs) makes that possible, but we all ought to wonder if it is a good thing in the long run. Netflix, YouTube, etc. have found ways of getting their data faster to the users and the little guy running his podcast stands no chance.
One of the main characteristics of decentralization, and one that must not be underestimated, is censorship-resistance.
How much worse, as in less creative and less free, would the internet be if not just China, but every government knew in the 80's or 90's what they know now about the internet?
That decentralization has let a "trillion flowers/websites bloom", and from that extreme experimentation (think of it like life's evolution over billions of years, but condensed in two decades) a lot of great things have resulted, and many more things will come.
> If we realize that the decentralized application will always be costlier than its centralized alternative, we must ask ourselves: why do we need decentralization? Then, we will really know what blockchains are for!
Are you really asking why money should be decentralized? Also do you realize that bitcoin takes about 30 minutes for an irreversible transaction, while credit cards take 30 days before you can spend the money that someone gave you.
The idea of the ICO is ridiculous to me. It's nothing but a scam: here's why.
I think that there are three ways in which something can have some sort of "value."
(1) The object is scarce and has uses --- e.g., gold.
No matter what, people are going to want gold. It's scarce (assume you can't just produce it) and is essential to modern electronic equipment (besides its appeal as THE famous precious metal).
(2) The government backs it --- e.g., the U.S. dollar
Techno-libertarians are going to lambast me for this one, but governmental backing actually means a lot to a currency. There is a reasonable expectation that the U.S. government, for example, be around tomorrow; if they aren't, we've got bigger problems than what we're going to do with our portraits of dead presidents.
(3) Agreement within a community --- e.g., Chuck E. Cheese's tokens, bitcoins
Now we've reached the most basic level of commerce. I'm not going to explain the social structures behind bartering and tokens, but essentially, everybody in the Chuck E. Cheese's agrees that a token is worth a game (or everybody involved in bitcoin transactions agrees a token has a certain worth).
Being a computer geek, the idea of a digital transaction becomes obviously quite appealing. However, bitcoin (and ether et al.) seem to be a waste to me: just a token that a useless computation has been done on an abused piece of hardware. Perhaps it would be better to get token credit for contribution to medical research or the like.
The altcoins and these bullshit "ICO"s are the next level of dumb. Now, not only do we not have any computing value (as they're 99% perfect clones of bitcoin or ether), we don't even have the ONE thing that bitcoin did right: recognition, which led to some insane valuations in those early, early days.
Today's news story: Invest in our ICO: we're totally not a scam based around fake currency. People totally value what we sell. Yeah, right. People barely accept current coins.
I do not immediately see the difference between (2) and (3). In what way supports a government a currency ? A government controls more or less the quantity but in the end a currency's value is just supply and demand. If the public does not trust a currency anymore then it looses its value. E.g. its also a community agreed value ?
You don't have to be excited about this but if enough people are you'll just have to follow.
I was at a pot luck just a few weeks ago and people were gathering money for pizza. One person paid and the others just sent bitcoins to the one paying. This wasn't even a tech-related event.
...Aaaaaaand this is exactly why you're going to miss the boat here on new forms of innovative currency that represents a flight to quality from more corrupt financial markets.
In a year or so you'll be buying cryptocurrency, especially when the Yield Curve starts dropping and we enter another downturn in the Market.
There is a generation of kids who will only know electronic gold aka cryptocurrency.
>I’ve been personally invested in this space for a while now — most recently as an engineer for Coinbase
Sorry if this is too bitter and tangential, but ... I'm not so sure I'd name-drop my employer so gratuitously, when they had ~3-4 site outages in two weeks[1], all of them coinciding with a major price drop (to say nothing of the miffed customers that are seeing their money and cryptocurrencies disappear [2]).
It would also be great to read about these technologies from a source without the bias of being personally invested in them. It seems impossible to find a writer with any kind of expertise in this field who isn't also personally betting on it's success.
One troubling aspect of the bitcoin proof-of-work is its tendency to eat the world.
Miners will tend to expand their operations until the electricity cost approaches the block reward. So if we plug in some numbers[1] we can estimate that bitcoin may soon consume a significant fraction of all electricity production. And it gets even worse as the price rises.
Well, you probably shouldn't care. It is not too long until we will be a decade into this adventure and for all practical purposes there is still zero adoption. We may or may not get a useful mainstream product one day but right now we don't seem to be substantially closer to it than when the Bitcoin genesis block was mined. Sure, tomorrow someone might have this one idea that makes all the pieces snap together but it might as well take another decade or not happen at all. So unless you belong to a small group of speculators, early adopters, or want to invent the killer application yourself, you probably should just care as little as 99 % of all people do.
Easy. Don't. One day the bubble is going to pop and cryptocurrencies will be largely forgotten. The entire bubble is built on speculation. This is clearly unsustainable.
Bitcoin will probably still be used as a medium of exchange for illicit goods but that's about it.
I looked into making a simple dapp with Solidity. They deployment of a dapp on the mainnet is not easy... There are only a few tutorials, and they are not very clear. When you deploy to the mainnet you start playing(wasting) with real wallets, i.e. real money, and the lack of clarity does not help here. For now I gave up in the middle of configuring geth node. This whole scene does not seem to be developer/user-friendly. Perhaps someone can recommend simple dapp/solidity tutorials, and most importantly, clear deployment howtos?
Thorough report but fails to answer the important part of the title: Why should anyone care?
I dont see how any of this stuff benefits anyone I know. Most people don't need to care, and I can't see any application being discussed that sounds useful.
The only reason people are interested right now is that you can make money out of a ponzi scheme - just remember to get out early before the house of cards collapses.
I laugh when I read the petition asking Amazon to support bitcoins payments. Not because of the volatility but because of being the slowest database to date. How can Amazon or other big retailer support a tech with 7 t/s for bitcoin or 20 for eth when they have in ten of millions of customers?
The original Ripple was decentralized in this way. No global consensus was required. What changed that now it has an entire whitepaper on global consensus?
Who are the people investing in ICOs? Does anyone know? Which countries do they tend to live in and why are they so speculative?
As a developer, I think giving so much money, no strings attached, to a team before a product even exists sounds crazy and kills incentive. I must be missing something.
I can't help but feel cryptocurrency is a fad. The technology seems sound but the economic policy isn't. There's a reason we don't use the gold standard.
Fiscal policy is an important tool and I just don't see a future where the world's nations give that up.
[+] [-] hudon|8 years ago|reply
> In some ways, Bitcoin could be considered the first decentralized application since it runs on blockchain technology, is fully open-source, and runs without a central authority.
Decentralization is not a new thing that only came into existence with Bitcoin... Torrents are decentralized, the email protocol is decentralized, Tor is decentralized, etc. Decentralized protocols and applications have existed before the blockchain and what the blockchain adds as a decentralized application is decentralized transaction validation. Basically decentralizing the validation of what can and cannot get written to a database. If you make your "writes" application state, then you can generalize the validators to be not only validating database-writes, but program execution steps as well (Ethereum).
> By no means do I believe that decentralized applications have no benefits. In fact, I foresee a future where applications are 10x more secure, 10x cheaper, 10x more efficient, or 10x more on some dimension than the current ones.
Decentralization is always costlier. Netflix is faster and more reliable than torrents, Facebook is more reliable, faster and easier to use than Diaspora. Fiat and credit cards are faster and easier to use than Bitcoin. AWS is faster, cheaper and more reliable than StorJ, and on and on. When you decentralize something, you must add coordination and communication costs such that your overall costs will always be at least as high as the centralized alternative. So the claim that the decentralized applications will magically be faster and cheaper definitely needs research and a [citation needed].
If we realize that the decentralized application will always be costlier than its centralized alternative, we must ask ourselves: why do we need decentralization? Then, we will really know what blockchains are for!
[+] [-] clamprecht|8 years ago|reply
"Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer)"
[0] https://medium.com/@VitalikButerin/the-meaning-of-decentrali...
[+] [-] Matt3o12_|8 years ago|reply
Is it more expensive, though? In a lot of cases it is certainly more expensive (bitcoin, Facebook, etc) but Netflix should be a counter example. In theory, a decentralized Netflix should be a lot cheaper because there are very little bandwidth costs. In practice, though, this is impossible because of all the DRM regulations. There is just no way one could design a decentralized network without getting into legal troubles. Furthermore, adoption would be another problem because a decentralized Netflix would mean I have to upload content and download it. In practice, this would put me a long time into jail if I did that in my country (sometimes even more then murderer and rapists).
We have only seen one such successful "decentralized" application so far: popcorn time. It proves that it can be more reliable and easier to use but in reality the legal implications are just too impractical.
Furthermore, decentralizing other video platforms such as YouTube could be a lot harder. Netflix has a small amount of viewing content but a huge amount of viewers. YouTube has a lot of content and less viewers per minute of content then Netflix has. This means any user would have to store much more then they would on Netflix. There is just no way to save content for a long time. On YouTube I recently found a video I did when I was 13 about a tutorial for a video game. If I stored it on a hard drive, I would have lost it for sure (because I never really cared about it much) and there is no way it would have been stored for some many years by just 3000 viewers who have ever seen that. Just seeing this video after all those years is kind of amazing. I know that there is no guarantee that this video will stay on YouTube forever but the chances are a lot higher (and I don't see it disappearing as long as YouTube stays popular and their main business model is make small video makers big)
[+] [-] wslh|8 years ago|reply
> Problem #1: Lack of developer friendliness As we described above, Ethereum solves this problem by design through its expressive programming language and strong developer tooling.
The author doesn't have direct experience with Solidity, where the tooling is buggy and there are many subtle ambiguities and security issues that are not yet addressed. Any ICO, smart contract developer, or security auditor knows this and this is why ERC20 tokens that are only a few lines of code and very repetitive can hide terrible issues. You can check for example: "Smart contract short address attack mitigation failure" https://blog.coinfabrik.com/smart-contract-short-address-att...
[+] [-] snarf21|8 years ago|reply
[+] [-] Geee|8 years ago|reply
This is a huge paradigm shift, and it will enable revival of all kinds of P2P applications, and actually make them viable and able to compete with centralized solutions. There's Sia for decentralized storage (StorJ is not decentralized) and Mysterium for decentrarized VPN, etc.
[+] [-] abhinavkulkarni|8 years ago|reply
Because Netflix puts their content in the internet exchanges (IXs) (Netflix Open Connect), bypassing CDNs in some cases, thus getting as close to the users as they can given the current internet piping infrastructure [1]. Sure, decentralization (being operated by an aggressive management that can strike background deals with IXs) makes that possible, but we all ought to wonder if it is a good thing in the long run. Netflix, YouTube, etc. have found ways of getting their data faster to the users and the little guy running his podcast stands no chance.
[1] https://arxiv.org/pdf/1606.05519.pdf
[+] [-] mtgx|8 years ago|reply
How much worse, as in less creative and less free, would the internet be if not just China, but every government knew in the 80's or 90's what they know now about the internet?
That decentralization has let a "trillion flowers/websites bloom", and from that extreme experimentation (think of it like life's evolution over billions of years, but condensed in two decades) a lot of great things have resulted, and many more things will come.
[+] [-] JohnJamesRambo|8 years ago|reply
[+] [-] CyberDildonics|8 years ago|reply
Are you really asking why money should be decentralized? Also do you realize that bitcoin takes about 30 minutes for an irreversible transaction, while credit cards take 30 days before you can spend the money that someone gave you.
[+] [-] mod50ack|8 years ago|reply
I think that there are three ways in which something can have some sort of "value."
(1) The object is scarce and has uses --- e.g., gold.
No matter what, people are going to want gold. It's scarce (assume you can't just produce it) and is essential to modern electronic equipment (besides its appeal as THE famous precious metal).
(2) The government backs it --- e.g., the U.S. dollar
Techno-libertarians are going to lambast me for this one, but governmental backing actually means a lot to a currency. There is a reasonable expectation that the U.S. government, for example, be around tomorrow; if they aren't, we've got bigger problems than what we're going to do with our portraits of dead presidents.
(3) Agreement within a community --- e.g., Chuck E. Cheese's tokens, bitcoins
Now we've reached the most basic level of commerce. I'm not going to explain the social structures behind bartering and tokens, but essentially, everybody in the Chuck E. Cheese's agrees that a token is worth a game (or everybody involved in bitcoin transactions agrees a token has a certain worth).
Being a computer geek, the idea of a digital transaction becomes obviously quite appealing. However, bitcoin (and ether et al.) seem to be a waste to me: just a token that a useless computation has been done on an abused piece of hardware. Perhaps it would be better to get token credit for contribution to medical research or the like.
The altcoins and these bullshit "ICO"s are the next level of dumb. Now, not only do we not have any computing value (as they're 99% perfect clones of bitcoin or ether), we don't even have the ONE thing that bitcoin did right: recognition, which led to some insane valuations in those early, early days.
Today's news story: Invest in our ICO: we're totally not a scam based around fake currency. People totally value what we sell. Yeah, right. People barely accept current coins.
[+] [-] virtuexru|8 years ago|reply
[+] [-] Gys|8 years ago|reply
[+] [-] xutopia|8 years ago|reply
You don't have to be excited about this but if enough people are you'll just have to follow.
I was at a pot luck just a few weeks ago and people were gathering money for pizza. One person paid and the others just sent bitcoins to the one paying. This wasn't even a tech-related event.
[+] [-] programmarchy|8 years ago|reply
You don't understand the fundamentals of Bitcoin. The computation isn't useless. Go find out why, and perhaps things will make a little more sense.
[+] [-] gaetanrickter|8 years ago|reply
In a year or so you'll be buying cryptocurrency, especially when the Yield Curve starts dropping and we enter another downturn in the Market.
There is a generation of kids who will only know electronic gold aka cryptocurrency.
See: https://www.mixcloud.com/TheTimFerrissShow/244-the-quiet-mas...
[+] [-] SilasX|8 years ago|reply
Sorry if this is too bitter and tangential, but ... I'm not so sure I'd name-drop my employer so gratuitously, when they had ~3-4 site outages in two weeks[1], all of them coinciding with a major price drop (to say nothing of the miffed customers that are seeing their money and cryptocurrencies disappear [2]).
[1] https://status.coinbase.com/?again#month
[2] https://news.ycombinator.com/item?id=14523126
https://news.ycombinator.com/item?id=14587941
[+] [-] dublinben|8 years ago|reply
[+] [-] enra|8 years ago|reply
Coinbase is also crediting back the affected users https://blog.gdax.com/eth-usd-trading-update-2-216a3b946ef6
[+] [-] AlexCoventry|8 years ago|reply
[+] [-] wcoenen|8 years ago|reply
Miners will tend to expand their operations until the electricity cost approaches the block reward. So if we plug in some numbers[1] we can estimate that bitcoin may soon consume a significant fraction of all electricity production. And it gets even worse as the price rises.
[1] http://www.wolframalpha.com/input/?i=(2500$%2Fbitcoin+*+12.5...
[+] [-] danbruc|8 years ago|reply
Well, you probably shouldn't care. It is not too long until we will be a decade into this adventure and for all practical purposes there is still zero adoption. We may or may not get a useful mainstream product one day but right now we don't seem to be substantially closer to it than when the Bitcoin genesis block was mined. Sure, tomorrow someone might have this one idea that makes all the pieces snap together but it might as well take another decade or not happen at all. So unless you belong to a small group of speculators, early adopters, or want to invent the killer application yourself, you probably should just care as little as 99 % of all people do.
[+] [-] Fej|8 years ago|reply
Bitcoin will probably still be used as a medium of exchange for illicit goods but that's about it.
[+] [-] danmaz74|8 years ago|reply
As if this was a small use case...
[+] [-] rdiddly|8 years ago|reply
Those wondering why they should care, will not care enough to read this much information.
[+] [-] cft|8 years ago|reply
[+] [-] eyezick|8 years ago|reply
It took me a few days to figure deploy my first contract on Ropsten testnet with Truffle and a local node.
Now it's easy :D
[+] [-] SkyMarshal|8 years ago|reply
http://truffleframework.com/
[+] [-] kaffeemitsahne|8 years ago|reply
[+] [-] rb808|8 years ago|reply
I dont see how any of this stuff benefits anyone I know. Most people don't need to care, and I can't see any application being discussed that sounds useful.
The only reason people are interested right now is that you can make money out of a ponzi scheme - just remember to get out early before the house of cards collapses.
[+] [-] ciocan42|8 years ago|reply
There is more innovation to come to outpace the current proven technologies. In the last 18 months or so there is an explosion of new blockchain whitepapers, especially this one: https://www.cryptocoinsnews.com/red-belly-blockchain-to-proc...
[+] [-] EGreg|8 years ago|reply
https://www.scuttlebutt.nz/stories/design-challenge-avoid-ce...
The original Ripple was decentralized in this way. No global consensus was required. What changed that now it has an entire whitepaper on global consensus?
[+] [-] taysic|8 years ago|reply
As a developer, I think giving so much money, no strings attached, to a team before a product even exists sounds crazy and kills incentive. I must be missing something.
[+] [-] jayd16|8 years ago|reply
Fiscal policy is an important tool and I just don't see a future where the world's nations give that up.
[+] [-] atomi|8 years ago|reply
[+] [-] polotics|8 years ago|reply
[+] [-] lucidguppy|8 years ago|reply