We are switching, from paper, declared by fiat to be "money" to a digital decentralized ledger, it is just that simple.
Get caught holding the last of the paper stuff just one day longer than the next greatest fool and you will be sorry. SWIFT knows this, governments know this and now the legacy financial industry (5 years too late) is starting to get it too.
This "digital decentralized ledger" you are talking about is ever-growing. To be able to handle its size and keep its integrity, special entities have to keep it running for the layman to use. Nobody can carry terabytes of "blockchain" around all the time.
These special entities need to record all transactions and verify them against this ledger. As a result you are now even more dependent on these entities than ever before. You basically just re-invented banking, only in a bad, uncontrollable way that is prone to takeovers (51% attack) by anonymous actors.
> To be able to handle its size and keep its integrity, special entities have to keep it running for the layman to use. Nobody can carry terabytes of "blockchain" around all the time. (...) As a result you are now even more dependent on these entities than ever before.
And yet here I am verifying the entire Bitcoin blockchain on an old crappy Toshiba netbook with a normal Internet connection and an old hard-drive. I use this one weird trick and big entities hate me: I have my node configured to prune already verified blocks, it only needs about 20GB of disk to store the last few months.
By the way, if you want to archive it all, a 1TB HDD can store roughly 10 years of completely full 2MB blocks. You can get one of those for less than $40, or $4/year.
I come from a country where the central bank can issue money (not print it, that's someone else's job).
It's great. They can use their powers to keep inflation at a small positive level, help smooth out economic bumps, and help the money supply keep pace with the economy.
A fixed amount, ever, would constrain economic growth, reward hoarders rather than investors, disincentivise spending and generally be a poor substitute.
As evidence I present ... the entirety of the Western world and it's multiple decades of unparalleled prosperity.
You've provided no evidence or argument as to why central banking might be 'awful', after I just explained why there is much to be liked about it.
Please do provide your reasons, but if they're just the usual libertarian tripe about inflation and taxes, I'm afraid I might not give them much credence.
I have an app that lets me transfer money to stores, friends, whatever instantly and without a fee. It’s build by our largest bank but works any bank. In stores it functions like apple or google pay.
If it gets hacked I get my money back.
Basically it does everything cryptos promised to do, except it actually works and it’s centralized.
Mean while I have a few cryptos sitting in a wallet with no real way of turning them into anything because nobody accepts them and no services currently let me turn them into fiat in my country.
It’s been 9 years and I think we’re further away from seeing a decentralized currency than we were 8 years ago. Back then you could at least buy coffee with BTC, you can’t even do that anymore.
I do think crypto helped the financial industry step up. We wouldn’t have had our bank app if there hadn’t been competition, but I don’t see us ever moving to a decentralized economy.
> We are switching, from paper, declared by fiat to be "money" to a digital decentralized ledger
...that is also declared "money" by fiat, exactly the same as paper money. It has value because we say it has value. That's not the interesting property.
The interesting property of cryptocurrencies is that the supply of money is constricted and can't be manipulated by any nation's central bank.
> The interesting property of cryptocurrencies is that the supply of money is constricted and can't be manipulated by any nation's central bank.
I don't understand how people believe this is a good thing (not implying you do specifically). One of the leading factors in the economic recovery following the 2008 crisis was Quantitative Easing and expansionary policies by the fed. Without these tools at the government's disposal, if there was another credit crisis, the effects would almost certainly be much worse and prolonged.
Like any tool, sure, it can be abused. But getting rid of it entirely by switching to a decentralized ledger (ignoring the reality that total decentralization seems infeasible), eliminates the very tangible benefits of having a central bank.
I think the effects would have been worse in the short term, but the long term effect is much worse -- signaling to an industry that wanton risk taking will essentially be rewarded and if you're large and connected enough the government will debase the currency to keep you in business, so you're free to fuck up again.
I think you're arguing on the side of "countries need monarchies because the people can't be trusted" and "printing presses allow seditious ideas to spread and must be outlawed or tightly controlled", but, again, I can't be certain.
How is it that we can have two totally different interpretations of the truth? Isn't economics a science? Why is it that there are such varying opinions? I think it's because economies are too complex for any one person to accurately model. What you need is markets to decide what works and what's valuable and what the prices should be. What you need is competition, and that's what cryptocurrencies provide.
Bitcoin is already competing with weak currencies of corrupt governments and winning. A lot of improvements need to be made before Bitcoin is anywhere close to making a run for the #1 currency in the world, but if you're watching the technology closely, there's still a lot happening in crypto and it might be sooner than you think.
> I think you're arguing on the side of "countries need monarchies because the people can't be trusted" and "printing presses allow seditious ideas to spread and must be outlawed or tightly controlled", but, again, I can't be certain.
Hard to imagine how you reached that conclusion from what I wrote.
I do somewhat agree that having the precedent of a prior bailout might encourage some potentially stupid behaviour that might not otherwise be considered. The alternative, however, is much worse (in my opinion). The point isn't to keep Morgan Stanley or Merrill Lynch or whoever in business, the point is to make sure that the rest of the country doesn't lose their entire life savings because of one recession. If the cost of economic stability is propping up a few rich people, it's probably worth it considering the alternative. Of course, I'm sure the anarcho-captilist blockchain experts might feel differently.
Most "paper" money is already digital, IIRC only something like 10% exists in physical form as bank notes and metal coins.
And which decentralized ledger would this be? Bitcoin, with its maximum of 7 TX/sec? Before you come back with the "but LightningNetwork will fix that!" argument, please do a back of the envelope calculation of how long it would take 1 billion people to open just one channel on the LN, and let that sink in...
Not really. If a country switches to pure digital money to it wil peg the value to its paper money and allow citizens to trade paper money for digital currency
It may be true that a digital decentralized ledger will be used, but in the end, the government will still run the ledger. Banks aren't going to be hurt at all by this, and I don't think paper is going anywhere anytime soon; of course, governments do want it to go away..
While it may be a ledger that utilizes cryptographic primitives, it is no longer decentralized if run by the government. While I disagree with the idea that base protocols like bitcoin or ethereum make for sound money, I think it's likely that some decentralized stable asset takes the place of existing fiat.
My government denominates my tax obligations in my government's currency. This includes taxes based on transactions of non-currency goods.
So there's always demand for my local currency so long as my government exists.
What demand is there for a decentralised digital currency? What motivates stable demand for it compared to the currency I can pay my taxes in and which my employer can be legally compelled by the courts to settle debts to me in?
Can you explain to me how to solve the decentralization problem then? It seems that with the current generation of blockchain, the problem is that eventually it will become no longer feasible to store the entire ledger on one device, and therefore some level of centralization will be required in order to keep the system functional. Throw in the enormous amount of (ever increasing) energy required for proof-of-work systems like bitcoin, and it seems unlikely that true decentralization is possible with current technology.
Storing the entire blockchain isn’t as important as having check point blocks that are agreed upon via consensus. At that point, you can prune the historical blockchain state and new nodes can sync from multiple nodes to get the latest state, starting with the most recent checkpoint.
With things like state receipts, light clients can rely on other network nodes to provide the state of transactions that were recently confirmed, without giving up security.
This does require that some nodes are processing and storing the most recent N blocks and their transactions. Today, non-mining full nodes do this for free out of kindness, but in the future, this could be offered as a paid service instead.
Proof of work is only one option for securing a chain. Research into proof of stake and delegated proof of stake will hopefully make PoW a thing of the past and drastically reduce the energy requirements to secure a blockchain.
The Ethereum team has two main focuses right now:
1. Proof of Stkae transition (Casper)
2. Implementing sharding
At the same time, teams are working on sidechain technology such as Plasma, Plasma Cash, and Loom which will essentially allow transactions to happen on another blockchain whose state is persisted in the root chain.
This not only benefits blockchain users (higher scalability, little to no fees), but is also good for the blockchain network since the data persisted to the main chain is only a set of merkle roots from the sidechain, no matter how many transactions the sidechain has.
Get caught holding the last of the paper stuff just one day longer than the next greatest fool and you will be sorry. SWIFT knows this, governments know this and now the legacy financial industry (5 years too late) is starting to get it too.