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Thus, bitcoin — a currency without the backing of ''anyone''. It just bootstraps itself into existence like a [[skyhook]]. This makes loads of sense to a tech guy. It makes none to a banker. (But you ''would'' say that, banker dude). | Thus, bitcoin — a currency without the backing of ''anyone''. It just bootstraps itself into existence like a [[skyhook]]. This makes loads of sense to a tech guy. It makes none to a banker. (But you ''would'' say that, banker dude). | ||
===Architectural conundrums=== | |||
David Rosenthal’s blog<ref>https://blog.dshr.org/2022/02/ee380-talk.html</ref> has a wealth of learning on limitations of blockchain architecture. | |||
Generally software is designed to go as fast as fast as possible. But, problem: if such software is hacked, it performs maliciously as fast as possible, too. The Bitcoin protocol avoids this problem, ensuring resiliences through decentralised consensus and proof-of-work which makes it ''mathematically too much work'' to subvert the network. | |||
Decentralisation (theoretical ''and'' practical — in that the network must not only be architected to be able to have many participants, but it must actually have many participants) is necessary but not sufficient for that resilience. BTC is not ''practically'' decentralised. There are only a handful of significant miners. | |||
Permission''ed'' blockchains have a central authority controlling which how blocks can be added to the chain. Because they don't require period is work they have a much lower carbon footprint & are much more efficient. But they are thus centralised and require confidence in the central authority. If it is hacked, you're in trouble. | |||
Permission''less'' blockchains (like Bitcoin’s and Ether’s) do not have a central authority, but just still defend against “Sybil” attacks, where an attacker gains controls of a majority of ostensibly independent participants. Hence the practical need for many participants. Permission''less'' blockchains achieve this defence by making the reward for a successful attack uneconomical: it costs more to mount an attack than stand toyou gain by making it. | |||
Therefore: participating in a permissionless blockchain ''has to be expensive''. Inefficiency and slowness is a design principle. | |||
To encourage anyone to be a participant (i.e., a miner) and so proof of work, you must reward them. There being (by design) no central authority who can raise funds from users to distribute to miners, the blockchain must generate renumeration by itself within its system. It creates its own transferable tokens of value on the blockchain. This is a cryptocurrency. Therefore, a permissionless blockchain needs its own cryptocurrency to be secure. | |||
A cryptocurrency at its moment of creation, does not have intrinsic value, of course. It can only acquire that by people attaching value to it. This is a magical bootstrapping process. But it must acquire intrinsic value, for it to be worth the miners’ while doing the proof of work to earn it. | |||
The miners will want to convert this crypto token for fiat currency: cold, hard, folding green stuff. | |||
To convert crypto to fiat, someone must be prepared to buy the crypto. Only those who believe the crypto currency will hold/increase value vs fiat over time will do that. | |||
Therefore a permissionless blockchain ''needs'' bullish speculators to work. It needs people with an unfathomable confidence in an invented currency. This is not a curious and inexplicable phenomenon: it is fundamental to the very architecture of blockchain. ''Cryptomania is a designed principle of permissionless blockchain''. | |||
Now you could make an argument this is true of any [[paradigm]] or [[power structure]]. All depend on “the punters” earnestly believing; while those in authority or operating infrastructure or institutions of the paradigm cannot do anything to destroy the illusion, they needn't (and often don’t) literally believe it themselves. They ''may'' do, but they don't ''need'' to. | |||
This is true of faith, and politics and is increasingly true of modern morality. It is definitely true in markets: market makers don't care whether things are going up or down, as long as market users have these views. There a number of traditional firms who have piled into crypto because it is opaque, unregulated, full of suckers, and opportunities for free arbitrage are (therefore) immense. They don't need to believe in crypto at all, as long as someone else does. | |||
===Pace layering=== | |||
Now given crypto emerged as an ultra-libertarian solution for operating in Hobbesian environments of zero trust, its need for the marks to have a cargo-cult faith in its value in order to work is kind of ''ironic'' can we say? | |||
But there is trust and there is trust.iterally, and they operate at different layersin Stewart Brand’s pace layering schema. The layering point is important to understand the level at which the argument works. | |||
The “trustless society” bit is a gimmick - a fad - playing to the present libertarian ultra-dystopian fashion of not trusting [[intermediaries]], experts or institutions, even though through history our the institutions have proven imperfect, but largely trustworthy (in that they’ve got us this far) and better than any of their utopian alternatives.<ref>You know, communism, fascism etc.</ref> The requirement for “punter faith” in the value of cryptocurrency is ''much'' deeper, as it is part of the engineering, being the only way to incentivise miners to do proof of work. | |||
===So how — ?=== | ===So how — ?=== | ||
Because some folks got a bit giddy—and some techno-Unabomber types, but they were kind of giddy in the first place. Blythe Masters — she who invented the [[credit default swap]]<ref>I know what you’re thinking. The Midas touch!</ref> — thought it was so profound that she joined a startup in 2015. And folks listen to Blythe — why wouldn’t you?<ref>Update: in December 2018 Masters stepped down from Digital Asset Platform to spend more time with her giraffes, or whatever Masters of the Universe do, I guess. “Blythe Masters is stepping down as chief executive of Digital Asset Holdings due to personal reasons, the company said. Masters was not available for further comment.”</ref> | Because some folks got a bit giddy—and some techno-Unabomber types, but they were kind of giddy in the first place. Blythe Masters — she who invented the [[credit default swap]]<ref>I know what you’re thinking. The Midas touch!</ref> — thought it was so profound that she joined a startup in 2015. And folks listen to Blythe — why wouldn’t you?<ref>Update: in December 2018 Masters stepped down from Digital Asset Platform to spend more time with her giraffes, or whatever Masters of the Universe do, I guess. “Blythe Masters is stepping down as chief executive of Digital Asset Holdings due to personal reasons, the company said. Masters was not available for further comment.”</ref> | ||