This is a rambling article, but the core premise that Bitcoin is leaky because it has an energy INPUT is a weird one. The argument that other tokens being fully closed loops that don’t leak value is certainly a take…
Proof of work plays many roles in the Bitcoin. One role it plays is that it ties a digital token to a real world, scarce, valuable resource. The only thing a digital token can be tied to: computation, or energy. Closed loop staking tokens have no tie. It is a formless, virtual, free floating concept. Not to mention that they are all highly centralized, so they don’t even have confidence in their monetary policy to fall back on.
With Ethereum, Cardano, Solana, etc, your value is in the hands of where the developers choose to take the protocols. They can and have changed their monetary policies, and they will again.
This person’s real concern appears to be “number go up”. It seems to have infected their thinking. They see a system that decided to engineer for NGU instead of stability and confidence, and thinks that’s “not leaky”. It is extremely short sighted.
In the stormy world of crypto, Bitcoin is the port.
No it doesn't. It has one purpose, and one purpose only: to secure the network against double-spending attacks by making it infeasible to reverse transactions.
I won't comment on PoS. I am not familiar with it, but it seems like it bypasses this need simply because it is more of a compromise based on classical consensus.
> With Ethereum, Cardano, Solana, etc, your value is in the hands of where the developers choose to take the protocols. They can and have changed their monetary policies, and they will again.
This is a bad premise because it frames the discussion as a false dichotomy: between Bitcoin and Ethereum/Cardano/Solana/etc. There are PoW cryptocurrencies like Monero, Litecoin, and many others that have community-driven development and institute a less dangerous emission schedule than Bitcoin.
> This person’s real concern appears to be “number go up”. It seems to have infected their thinking. They see a system that decided to engineer for NGU instead of stability and confidence, and thinks that’s “not leaky”. It is extremely short sighted.
This is a misreading of the post. The problem is that (this is an over-generalization) bitcoin's resilience to attacks requires that the price of bitcoin increase twofold every halfening, or the relative hashrate to some outside attacker will be cut in half.
>In the stormy world of crypto, Bitcoin is the port.
This is an idiotic statement. Bitcoin development has completely succumbed to corporate capture at this point by Blockstream and the likes.
> No it doesn't. It has one purpose, and one purpose only: to secure the network against double-spending attacks by making it infeasible to reverse transactions.
I won’t argue with you on this point. A better way to phrase it might be to say “POW has many features or implications for Bitcoin…”
> There are PoW cryptocurrencies like Monero, Litecoin, and many others that have community-driven development and institute a less dangerous emission schedule than Bitcoin.
Disagree that it is dangerous. We don’t have enough information about the future to determine that. It is just as likely that fee markets will be enough, thus implementing some kind of “perpetual emission” would only damage the value of the network.
It's true that nobody knows for certain what will happen. I am skeptical of the idea that bitcoin in particular will be able to scrounge up enough fees on "L1" to keep the network secure, especially given its small throughput.
As the author mentions, the "L2" scaling solutions like LN still require security on "L1". However, to the extent that "L2" is scalable, it will not increase "L1" fees.
> >In the stormy world of crypto, Bitcoin is the port.
This is an idiotic statement. Bitcoin development has completely succumbed to corporate capture at this point by Blockstream and the likes.
I disagree. Bitcoin has never had a hard fork. There isn’t a “Bitcoin classic” chain floating around with an old set of consensus rules. Block stream and/or minors can’t force a hard fork like ETH devs can.
> There isn’t a “Bitcoin classic” chain floating around with an old set of consensus rules.
Yes, there literally is a Bitcoin Classic, and prior to that was a Bitcoin XT. There's also Bitcoin Cash, and many others.
Even excluding hard forks which were chain splits (so upgrade only), there have been several. There were two hard forks in 2010, one to add OP_NOP and one fixing a critical bug where anyone could spend any Bitcoin. There was a hard fork in 2013 (BIP-50) because a block broke a limit and at least one double spend occurred.
Why comment if you aren't educated on the topic? Or rather, why actively spread misinformation?
No, this was very different than ETH/ETC. Bitcoin cash was a minority of people forking away from the BTC chain to increase the blocksize. ETC was the original chain that was forked away from to reclaim stolen funds because of a smart contract hack.
Generally when people are talking about “hard forking” they are referring to the majority making a backwards incompatible change that leaves little activity or economic value on the original chain. Bitcoin never forks like this, because who would coordinate it?
Bitcoin core maintainers tried to fork it and were not successful (See bitcoinXT).
Miners and community leaders tried to fork it and were not successful (see bitcoin cash).
Bitcoin exchanges and businesses tried to fork it and were not successful (see segwit2x).
And many more will come, I imagine a PoS fork will inevitably come and not be successful.
Sure, but I would argue that blockstream and others control bitcoin not by forcing upgrades, but instead by preventing upgrades to the network and creating commercial solutions to easily fixable problems.
I'm not saying that blocksize, LN, etc are solved problems. But I am saying that the indecision and lack of community involvement is slowly killing bitcoin. It is succumbing to corporate capture. They continue to invent increasingly custodial methods of using bitcoin.
There is a fundamental difference of opinion here. There will always be people pro changes and against. Its conservatism against progressivism. So, while it's useless to even argue (you're either one or the other, and that probably won't change, ever), let me just say that if you want any kind of digital property to exist, it's pretty important for such property to remain constant in regards to it's features, or better say, both it's virtues or flaws. That's why Bitcoin maximalists, as they are called, are very conservative towards bitcoin development.
Because of all that, making a case that someone controls Bitcoin just because they are preventing changes is rather far-fetched. So, while your other points may be valid, this is certanly an invalid one.
> I won't comment on PoS. I am not familiar with it, but it seems like it bypasses this need simply because it is more of a compromise based on classical consensus.
Proof of Work and Proof of Stake round to the same thing.
In PoW you input cash to buy miners and power to obtain coins. Cash > ??? > Coins.
In PoS you input cash to buy coins to obtain coins. Cash > ??? > Coins.
In both PoS and PoS those with the most money get to control the system. PoW adds a layer of indirection by wasting mountains of components and a country worth of power but at the end of the day there's no real difference.
In Proof-of-Work, a large fraction of the money you put into the system is destroyed. There are physicially meaningful economies (and dis-economies) of scale involved. You are generally incentivized to sell your cryptocurrency as fast as possible to cover your real-world costs (lowering the price of the cryptocurrency).
In Proof-of-Stake, you are incentivized to keep your money into the system so you can control more and more of it. It's like a ponzi scheme where you are incentivized to re-invest your winnings. This falls apart when everyone starts to cash out.
The use of bitcoin mining as indoor heating is one such example of a dis-economy of scale (but this is an oversimplification because it does not factor depreciation costs). Also, there are systems like RandomX which encourage CPU-based mining, which has economies of scale for home miners or botnets over larger mining operations.
Ethereum's PoS also pays only a tenth as much reward as Bitcoin, as a percentage of total supply.
According to whattomine.com, with an electricity cost of $0.03/kWh your cost is about 2/3 of the Bitcoin reward. Combined with a 10X higher reward, that means a Bitcoin miner with that electricity cost gets about three times as much return on investment, as a percentage basis, as an Ethereum staker. That's money they can reinvest in new mining equipment.
> you are incentivized to keep your money into the system so you can control more and more of it. It's like a ponzi scheme where you are incentivized to re-invest your winnings.
So you think the stock market is a ponzi scheme? Shares pay dividends, you are insentivised to keep putting money into the system
In the stock market, the money you invest into a company is used to pay for workers, equipment, etc that generates more dividends. Anything you invest in staking is competing in a zero-sum with other stakers.
> In the stock market, the money you invest into a company is used to pay for workers, equipment, etc that generates more dividends.
Only if you invest in the IPO or later stock offerings directly from a company. Otherwise you're just buying in the secondary market and no part of the price you pay goes to the company.
Shares represent voting control in the companies decisions. Even the existence of non-voting shares is still a message about expectations of future profitability - i.e. a companies ability to issue additional stock profitably depends on expectations about the value and future value of presently held stock...which in turn is a signal about confidence in the company's direction, profitability etc.
When you get into non-voting shares, you move closer and closer to "corporate branded" crypto. We'll see when a major company with a lot of non-voting shares really struggles and gets acquired at a discount or moved private, how much value is given to the non-voting shareholders.
You're confusing funding and cash flow. Funding is invested in value generating assets. Just because the money is spent doesn't mean the asset (like a conveyor belt) evaporates. It's essentially the equity holders allowing the firm to use their stuff. Which is an ongoing thing.
Stocks are different because stocks derive intrinsic value from non-investor participants. When a customer buys something at a store, the profit from that is saved in a cash account, re-invested in the business or returned to investors via dividends. Yield through dividends is no different at the limit than that money accruing to intrinsic value in the business.
Crypto only has investor participants. You cannot ever get more money out of a Bitcoin than someone else puts in buying Bitcoin. Less, actually, because you have to pay miners to operate the network.
Stocks as a whole are positive-sum due to the contributions of non-investor participants.
Futures, options and PoS crypto are zero-sum.
PoW cryptos are negative-sum due to the contributions of miners.
> In PoW you input cash to buy miners and power to obtain coins. Cash > ??? > Coins.
In the long run yes but mining equipment is an asset which can be sold or used as collateral for a loan.
I’m not an accountant but I’m sure there are some tax benefits to depreciation. In a bull run the miners even appreciate in value too so I don’t know how that would work out.
A better way of thinking about mining is it’s a way to dollar cost average into Bitcoin if you have access to cheap power.
It's a fact that PoW involves quite a bit of waste, just like it's a fact that e.g. a coffee shop will waste quite a bit of coffee (by discarding it at close or when it gets too old). That the market dynamics all but require the coffee shop to do this doesn't somehow stop it from being waste.
The market can't disagree with definitions of words. What it can do, is encourage the waste.
The mystical powers people assign to proof-of-work are quite something to behold. The only thing keeping Bitcoin devs from changing the issuance schedule is social consensus, just like with any proof-of-stake chain.
PoW may tie the token value to a real resource, but that's a correlation where many advocates get the causation reversed. Because of difficulty adjustment, the energy devoted to hashing is the result of the current price, not the other way around.
To add, the energy devoted to Bitcoin hashing is a product of the bitcoin price, block reward, and the wide acceptance in the Bitcoin community of the idea that provable energy burn is a good way to ensure rarity of the coins.
Even if we maintain proof of work chains as the fundamental consensus tech, there is absolutely nothing (aside from momentum) stopping the community from decreasing the block reward to the a lower value required to prevent double spends of reasonable size. The current hashing power and energy burn in Bitcoin is absurdly oversized for that specific purpose.
You could even maintain the current coin issuance schedule - there is absolutely no need to burn coins into existence, you could simply distribute them randomly to existing holders.
The article simply points out PoW imposes a huge cost on the system, and that such a cost is assumed by the token holders whether they like it or not. This has been known for a long time.
The key difference is that there's an entire network that needs securing with a minimum cost to secure. By contrast you can secure your own gold for free by burying it in the ground if you so wish, and other people not securing it properly didn't prevent people from transacting with gold throughout history.
The gold storage cost is the equivalent of buying a cold wallet and keeping it in a safe place (crypto has that as well, but it's not a problem). The 'mining' is the equivalent of subsidising a banking system
But surely the gold-owner would have to cash out some of their gold to pay the guard in cash? Does it make a difference if he pays the guard in gold and then lets the guard cash it out?
The owner would buy less gold, i.e. the gold they intended to buy minus the cost of securing it, but they don't have to sell gold. Buying less of something and selling an equivalent quantity of it is not equivalent.
Does it? The Protection Department of the United States Mint spends about $50M / year, and they look after the United States Bullion Depository which has over $10B worth of gold in deep storage - so no more than 0.5%/year.
BTC miners make around 20mil / day and with a 400B market cap, that's around 1.78% / year so definitely higher. But I'd argue the United States Mint also relies at least partly on the US military.
The Protection Department would not last long against a nation-state attack. In contrast, BTC has no nation-state or military protection.
It doesn't matter about the US military, because the gold market doesn't have to prop up the US military - it gets that ride for free. The point isn't "who is cheaper" in some theoretical sense, it's that as a practical matter the nation of Bitcoinia is importing a large amount of electricity from the USD, RMB, EUR etc economies. This is equivalent in effect to what the gold market as a whole has to pay in storage/holding costs for physical gold. If physical gold holding costs were to rise substantially for some reason, that would significantly reduce the returns available from holding gold.
Gold is useful in chemical and industrial processes. Bitcoin obviously has no use other than money, so I don't know if they are completely comparable in this sense.
If people decided that gold was not valuable as money, it would retain at least some value based on its usefulness alone.
Thought-provoking post, but this is an argument I just don't get. Oxygen and CO2 are useful in chemical and industrial processes too. If you want something more limited, then Aluminium. That's the value Gold will retain if people decided it was of no use as long-term money. Gold's use in industry has very little to do with its value. What am I missing?
I consider Bitcoin’s use only as money to be a good thing for Bitcoin. It has no competing uses, thus has ultimate comparative advantage as money. The best monies throughout history had no competing consumption uses.
An interesting idea. I think digital and paper currency[0] are the obvious competitors however, so it isn't uniquely the ultimate comparative advantage.
[0] Ok, I guess you can burn paper money or use it as a chair, I think Weimar hyperinflation had examples of that…
This is an oft-cited example, but if you look at the numbers, the industrial demand is mostly insignificant. If for some reason people lost interest in gold as a store of value, the industrial market would be so oversaturated that the gold price would likely be very nearly zero.
> With Ethereum, Cardano, Solana, etc, your value is in the hands of where the developers choose to take the protocols. They can and have changed their monetary policies, and they will again.
The consensus mechanism has nothing to do with governance in most chains. Bitcoin and Ethereum governance is both determined off-chain through social consensus, based on what node and client software the honest users of the chain choose to run.
Yup - typically referred to as layer 0. The ETH devs cant willy-nilly change the protocol and expect social consensus to agree. As a solo staker i also have the choice of which node and client to run (like you said).
How is it a rambling article? The author has an opinion and articulates it. It could be wrong, but that doesn't make it a ramble.
To me, it seems like an interesting take and makes a lot of sense. If the network is kept running by miners, and they need a certain price to make it profitable, then the price needs to keep going up as the rewards halve. Seems straightforward. It's also made clear that the price will eventually need to be astronomical. The second argument is that the price will need to go up even more, since the hashrate will need to go up as well, plus electricity prices will also go up. I wouldn't mind hearing where the author is wrong here.
The argument about Ethereum I am less interested in.
Constant supply and fluctuating demand will lead to times where you must choose between paying low fees and waiting a long time for confirmation, or paying high fees for faster confirmation. If you zoom out all the way, you can see this has played out with every halving so far.
This argument made sense when Bitcoin was still a “peer-to-peer electronic cash system” as Satoshi envisioned, but it doesn’t make sense under the current “store of value” narrative. If people are just buying and holding, they aren’t creating much demand for block space.
People do hold this viewpoint, and that's why I linked hard data. You can see the fees fluctuating from day to day. On Sep 3, many transactions had 10x the normal fees. On low volume days such as Sep 11, very few transactions had high fees.
You can argue philosophically about whether a chosen narrative makes sense or "should" create demand for block space, but I'm ignoring philosophy and looking at empirical data. Since this is already happening, and has been for the history of the project, it's not a stretch to predict it will continue happening.
There's day-to-day fluctuation, sure, but the overall share of mining rewards that transaction fees make up has been trending down over the last year[1] to around 1-2% today. That means that to maintain the current level of security in the system, aggregate transaction fees will need to go up 50-100x over time to offset the lower block rewards. Even just considering the next halving in 2024, transaction fees would need to go up ~50x from where they are today to make up for the incentive lost to miners.
If I zoom your chart out, I could make all the same arguments about 2018. It looks like just another cyclical metric that follows the halvings.
In the year after the 2018 peak, fees approached zero, but in the year after the 2021 peak, they stayed higher. As long as that keeps up and they don't actually go to zero, and people are competing for block space, miners will keep lining up, and the network will be fine.
Halvings matter less as time goes on. I didn't shed any tears for miner incentives when the reward went down by 25, and I won't shed any tears when it goes down by a mere 3.125. Mining was never meant to be profitable beyond BTC's bootstrapping phase. In fact the protocol actively makes difficulty adjustments to keep profitability near zero. Let their profits go down. As long as people are competing for block space, and transaction fees keep coming in, miners will continue competing for their fractions of a percent, and the network will be fine.
I don't understand the relation you're alluding to between halvings and transaction fees. As far as I'm concerned, they're entirely unrelated. It's true that both big spikes in transaction fees happened to occur four years apart and in the vicinity of halvings, but that could just be coincidental -- if it's not, I don't understand the mechanism that would cause it.
In any case, neither spike was particularly long-lasting, and even if they were sustained at their peak, neither would make up for the mining incentive lost in the next halving.
I only brought up halvings because it explained the chart. But let's ignore halvings and talk about mining incentive then. Fees are the less important half of the story. The main driver is difficulty adjustments. If scarce fees come in, difficulty goes down so profitability increases. If plentiful fees come in, difficulty will go up so profitability decreases. Fees are actually damped by the adjustments so the absolute amount of fees doesn't really matter. So long as fees are above 0.00000000, the network will be fine. I predict that there will always be some baseline level of competition keeping fees above 0.00000000, but if that is wrong, then things would likely fall apart one day.
The problem is, that when it become inprofitable -- miners would shut down their ASICs and wait for better time -- causing difficulty to drop.
And at this point somebody with huge computing power disabled could enable theirs Rig and quickly generating block to perform double-spend, and create soft fork.
The security of the network depends on the difficulty. It’s true that in the absence of bad actors the network will run as long as fees are nonzero, but the whole point of bitcoin is that it’s supposed to be resilient to attacks.
The original comment asking for a source was quoting an assertion that Proof of Stake blockchains, as opposed to Proof of Work ones, "are all highly centralized".
So given the context, I was implicitly asking for what distinguishes Proof of Stake from Proof of Work to make the former centralized where the latter is not.
People are so quick to dismiss cryptocurrency now because it isn't "green", but disregard the enormous infrastructure, capital, and resources that the global fiat industry uses that is completely automated away by crypto.
Even if you only factor the value of human life alone, just the time saved by the hundreds of thousands or millions of worldwide fiat employees who's positions largely would not need to exist anymore should surely be factored into these discussions about resource consumption. And that's before factoring things like wages. Or the ultra-weathy executives. Let alone physical infrastructures, skyscrapers, data centers, private jets, marketing, R&D, legal teams, IT/security, fraud depts, and loads of other internal costs.
I just don't buy that it's much worse than many existing costs we already turn a blind eye to. I believe that the growing use of safe nuclear power and other future alternative energy sources make this a moot position in these arguments anyway.
Crypto has not automated away anything useful beyond toy projects nor shown potential to do more with less. If crypto disappeared today its disappearance would have zero impact on goods and services.
I had to cash a check yesterday. This would have been a single CLI command with crypto. Ignoring the fact that this is a 100+ mile journey for me, I had to speak with real humans to get payment in hand. Just how much manpower and resources are spent simply in getting the cash from these federal printers to my hand, resources that I am inadvertently paying for? From Multiple CEO salaries to armored truck transportation to the cleaning person at the branch. and much more. I just think if people are going to slam crypto for resource consumption, you can't overlook fiat's true overall resource consumption.
Let me guess, your passport cover is painted with the correct color. You probably never had to submit a mountain of paperwork officially translated to English because you committed the crime that is to help your mother back in your home country to pay for medicine. Your bank never blocked your funds and demanded explanations on why you withdraw that cash on an ATM. You've never been through the AML racist and fascist bullshit that subverts the concept of people being innocent into proven guilty. You probably also never lived through the hell of hyperinflation or government mandated confiscation of savings accounts[0].
Saying the only reason Bitcoin is needed is to help facilitate illegal transactions is not exact a resounding endorsement that will enable its widespread adoption. Most people don't want to actively encourage / support the breaking of laws.
Bitcoin doesn't have a defined mechanism for honoring the rule of law when society determines that something bad has happened. That's a pretty fundamental and potentially fatal flaw for some (unless, perhaps, you're a libertarian). For those of us that live in a society where the rule of law provides tangible benefits to our daily lives, that's a problem.
Personally, I'm perfectly happy with the banking system the way it is. I can send modest sums of money to others via an Interac e-Transfer via an email or SMS in a matter of seconds. I can transfer funds using EFT/ACH within 24 hours with no fees thanks to the credit union I use. Bitcoin isn't really an improvement on this situation for me.
You need to understand and accept that there are a non-trivial number of people in society which feel similarly and hold the same belief. Adopting something new just because it's tech is never going to win everyone over, especially when worries about personal wealth are involved. This isn't a simple technical problem that can be easily fixed with a bit more code.
I don't believe it's shitting over the value proposition: to me, adherence to rule of law is a requirement for the financial systems that I use. If someone compromises my credit card or bank account, the bank can reverse the fraudulent transactions. If someone compromises my Bitcoin wallet and transfers the contents out, the funds are gone and I have nobody to turn to for help, and the odds of recovery are negligible. This is a feature of the banking system. To me this is a bug in Bitcoin (not a feature). I'm not "shitting" over the value proposition -- I'm telling you that it doesn't meet my requirements.
You didn't bother to look up Henry Duncan did you.
Go do the proper homework and come back.
This financial network and it's rule of laws did not start that way, learn from history or don't I frankly don't care what you feel/think, you are literally 1 person that does not represent anyone but yourself.
You're entire argument is a strawman, I gave you the hint to understand why but you are too lazy to learn.
I read up on Henry Duncan prior to making my previous post, and it's mostly irrelevant. He created savings and loan entities that were still regulated by the government and had to abide by the rule of law. More importantly, they were run by and employed humans. Humans have incentive to abide by the rule of law which computers (nodes in the Bitcoin network) do not. That's a pretty massive difference between the two approaches to financial transactions which you have not addressed in the slightest.
I've explained what my major concerns are. You have not provided any explanation for how these concerns can / will be addressed. Your claim that Henry Duncan explains things seems to be a very indirect way of stating that laws need to be changed. Great -- let's say the law is changed. How do you retroactively implement governance mechanisms in Bitcoin whereby a transaction can be reversed upon an order by the court? Right now you can't! This is a real concern for myself and others. Hand waving it away is not addressing the problem. Why would I even remotely consider giving money to people that insist upon hand waving concerns about governance issues away?
Please respond with facts and ideas, not vitriol. I really do want to understand how people involved crypto currencies are going to implement the governance that is needed in the real world, as the current approaches appear to be completly ad-hoc and unpredictable to an outsider.
It was completely unregulated when he launched it and he was the proponent of regulation but that didn't come for another 10 years+ after he rolled it out and open sourced the idea.
If you can't see the parallels then meh, it's pretty much the same process any new financial network goes through.
You're entire argument is one big strawman, people will figure out over time how to regulate it, ie custodian solutions are just the beginning, you know all of these funds can be held in escrow.
Your lack of vision is a you problem, not the network's.
Innovate or get left behind, I gave you a clear example from history which refutes your core concept and you just...hand wave it away.
Btw - I genuinely believe that there are applications of blockchains that would improve governance in the real world. Most notably, blockchains as a public ledger tracking the actual ownership of publicly traded stocks and other financial instruments would be a really good idea, as it would enable the verify part of "trust, but verify". Sadly, this is not the application that has captured mainstream attention as of yet.
No but I have been through exchange mandated confiscation of crypto wallets. Be your own bank you say? Keep my own keys you say?
You think the average person from the article would hold their own keys? No the reality is if crypto was adopted en-mass, people would use services to manage their keys and you literally solve zero problems.
"This would have been a single CLI command with crypto."
Would it? Would you have actual cash at that point? Physical banknotes in your hand you can then spend in an ordinary shop? Are you genuinely comparing similar things here?
At the very minimum crypto showed that you can run an efficient, highly liquid, double digit billion dollar, fungible or non fungible exchange market in a fully automated and distributed manner.
A huge fiat equity market such as NYSE averages $3B/d, crypto DEXes alone is around $2B/d.
Crypto also completely removes the need for middle and back offices, clearing houses, etc. on these platforms.
Just technology wise (if we were to drop the self-sovereignty of crypto tokens and just use central bank backed crypto euro/dollar/etc to replace the current financial system) a monstrous amount of manpower and energy could be saved by removing the banks, exchanges, brokers, clearing houses, compensation chambers, back office, etc. industries.
In practice, crypto markets are not any more decentralized than others. In real life people use hosted wallets on exchange platform. Transactions happen on a distributed (not decentralized!) ledger. The underlying network is only somewhat decentralized (the mining economy tends to the concentration of big players).
Also the way you seem to imagine we could be "removing the banks, exchanges, brokers, clearing houses, compensation chambers, back office, etc." just shows how much you don't know about how an economy works. Real-world transactions need to be reversible, need escrow, guarantees and a lot of other mechanisms that are by design not available using blockchains based assets (if they are there, it means the assumptions which would have made a blockchain useful have been broken, and that we can achieve the same features and services without a blockchain in a more efficient manner).
Why bother replying if you have no clue what you are talking about...
> In practice, crypto markets are not any more decentralized than others.
I specifically mentioned DEX, you are talking about CEX.
> Also the way you seem to imagine we could be "removing the banks, exchanges, brokers, clearing houses, compensation chambers, back office, etc." just shows how much you don't know about how an economy works.
So you are at lost of arguments and start questioning the argumenter pedigree instead? if you want to go that route: I have 15 years of experience in financial markets, am partner and founder in 2 (running) investments funds, trading equities, FX forwards, equity futures and interest rate swaps for ~1.5B AUM. I am currently a registered MIC on 5 accounts with the SFC (some of these including operational risk). I have setup multiple front office systems, work daily with middle office systems, and have a fairly good understanding of back office. I have worked extensively with clearing houses, most recently for the implementation of central clearing on interest rate products.
So please, explain me how you somehow have such a deep knowledge of these subjects that you can obviously see from my comment that I "don't know much about how finance works"?!
> Real-world transactions need to be reversible, need escrow, guarantees and a lot of other mechanisms that are by design not available using blockchains based assets
I will play your game: you have definitely 0 idea what exists in the crypto space. Everyting your mentions and much, much more already exists. The sophistication available on crypto contracts and protocols nowadays is at the very least on par with traditional finance entities and contrats, if beyond.
> In real life people use hosted wallets on exchange platform.
The parent mentions DEX volume, which tracks on-chain wallet usage, not what is being traded in a CEX.
> Real-world transactions need to be reversible, need escrow, guarantees and a lot of other mechanisms that are by design not available using blockchains based assets
Many blockchain transactions have reversibility, employ escrow, and have very strong cryptographic guarantees.
The only point of your post that is not easily refuted is: blockchain is not decentralized enough. But compared to what? Is Ethereum, open source software with many thousands of nodes and developers spread across the world, more or less centralized than the US dollar?
Well, it has at least facilitated the Silk Road and many others to do business.
Regardless, I suppose that I agree with your point here. But I think that cryptocurrency could possible be useful for everyday transactions: it must first overcome network effects.
Proof of work plays many roles in the Bitcoin. One role it plays is that it ties a digital token to a real world, scarce, valuable resource. The only thing a digital token can be tied to: computation, or energy. Closed loop staking tokens have no tie. It is a formless, virtual, free floating concept. Not to mention that they are all highly centralized, so they don’t even have confidence in their monetary policy to fall back on.
With Ethereum, Cardano, Solana, etc, your value is in the hands of where the developers choose to take the protocols. They can and have changed their monetary policies, and they will again.
This person’s real concern appears to be “number go up”. It seems to have infected their thinking. They see a system that decided to engineer for NGU instead of stability and confidence, and thinks that’s “not leaky”. It is extremely short sighted.
In the stormy world of crypto, Bitcoin is the port.