Large networks "create" value and cryto tokens are an excellent way to overcome some of the key barriers of network building, and potentially to allocate value to members (users, developers, infrastructure providers) in a better way than traditional centralized networks. Very exciting from all those perspectives; not to mention the innovation that will be unshackled by lowering the cost of entry.
That said, I am trying to understand if there is enough value to go around when the network is smaller than (n) nodes? What if the application is not one that will benefit greatly from network effect, doesn't have need for the security/auth model and doesn't need massive compute/resources? What if it will never grow beyond a certain number of nodes (for whatever reason)? Note: those are NOT my opinions expressed in question form...they are pure questions that I want to brainstorm and hope that the responses are along the lines of "here's how those types of apps can benefit".
Also, at mass adoption levels (while understanding we are nowhere near that, but for the sake of the thought experiment), do we end up with millions of micro-networks, rather than the relatively small number of networks we have today? If so, does the crypto token model still hold up? My gut is it would for the infrastructure providers because they can support (n) networks. I am not sure about the rest of the ecosystem or what constructs need to be built/added if that model is to thrive?
You raise a very valid point. If you break down a public blockchain by resources used you find those transacting on the network are getting a phenominal deal on storage and compute resources. In the case of bitcoin your data is being backed up and verified on thousands of machines forever for just a few cents. The economics of this are not sustainable which can be verified by a simple comparison to any other storage cost such as s3 or even just the raw spinning disk cost.
We at present are seeing the Bitcoin network saturate and the average cost per transaction has climbed as it should continue to if it is moving towards optimal economics. Ethereum's scaling problem is even more conplex than Bitcoin's considering the state information held in the chain and scripting capabilities.
There are a few approaches being built to handle these issues. One is payment channels like lightning where the public chain is only used for settlement. Another is private blockchains like consortiums which would allow limited access and abuse of the ledger. Yet another factor is sidechains that could create a way to keep information off of the main public chain.
If you break down the necessary costs (storage, bandwidth, CPU cycles for verification), it's actually very low, at about $0.001 (a tenth of a cent) a transaction:
The only reason Bitcoin transactions cost so much is artificial scarcity of block space, which increases the proof of work generated per transaction. The absence of a static limit in Ethereum is one of its major advantages over Bitcoin.
That kind of napkin math is both dangerous and misleading. The block size limit is a security parameter, and the math above assumed that nobody was trying to attack the network. In attack situations, a larger block size is more expensive and more dangerous.
Also, the resource requirements for running a node are a lot higher than most people are willing to tolerate even at 1mb blocks. Huge portions of the incentives, security, and decentralization of the network depend on people running full validating nodes. A big misconception in cryptocurrency is that miners can set the rules of the network. That's only true if you aren't running a full node.
The dynamic block size in ethereum is an easy attack vector that can be exploited by a large miner. The miner simply increases the blocksize as much as possible, and fills blocks with autogenerated transactions to make verification more expensive for small nodes. Once you get it high enough, your competition will start dropping off the network. If home users stop running full nodes too, now it's a lot easier to change the rules of the network - instead of convincing everyone, you only need to convince everyone willing to pay for a full node. And if that's tens of thousands per month, it's not going to be many people.
>That kind of napkin math is both dangerous and misleading. The block size limit is a security parameter, and the math above assumed that nobody was trying to attack the network. In attack situations, a larger block size is more expensive and more dangerous.
The costs under an attack scenario were not what the parent comment was making a claim about. The defence costs per transaction actually decrease with each marginal increase in the number of transactions, because the number of parties worldwide with the resources capable of attacking a blockchain diminishes as the cost of a successful attack increases.
>Also, the resource requirements for running a node are a lot higher than most people are willing to tolerate even at 1mb blocks.
Again, not relevant to the issue at hand, which is the cost of the computing resources used per transaction in a distributed network.
>The dynamic block size in ethereum is an easy attack vector that can be exploited by a large miner.
I think even if Etherium/Crypto Tokens or likewise are the best idea since the typewriter, humans have a staggering way of choosing the worst solutions to problems.
I have a bet on for £1000 with a futurist friend that he say with 10 years half of humanity will have made a transaction on a blockchain and I say not.
My only regret at this stage is that I didn't make the bet in Bitcoin...
How would you even measure that to tell who won the bet?
These tokens might have great potential in third world countries where confidence in central government and justice is low, so your friend has a chance.
I mean, it can't be too difficult to roughly guesstimate the number of individuals using blockchain tech, and if that is greater than half the population your bet is sorted.
The only thing that makes blockchains better than privately owned databases is that you don't have to trust a private party. They are otherwise hugely inefficient. For the life of me, the only "application" I can think of that they are clearly better at is if you use them to replace the investment and trading of precious metals.
That's a huge thing, but in the long run, I think that will be the only thing.
The top dozen or so players (I think it was 13, last I checked) own over 75% of the hashrate.
There are 6 large banks in the US, with at least another 2 dozen managing upwards of $100 billion in assets.
No one has really explained to me why I'm better off trusting a cartel of unregulated miners to a cartel of regulated banks, especially when there's several dozen banks who have assets equal to the total value of cryptocurrencies just in the US.
Because the powers that the miners have are a lot less than the powers that the banks have. Miners, even at 99% hashrate, are unable to change the rules of the network. The most they can do is censor transactions and spend their own money multiple times. But even a miner spending their own money multiple times costs money - you have to redo blocks (costing tens of thousands each).
Banks on the other hand can print money, change the interest rate, steal, block people from the system for arbitrary reasons.
Most people don't realize that a 51% attack is not a 'we get to do anything we want now' attack. Miners still need to follow the fundamental rules of the network, and they also need to blow huge amounts of cash on electricity to maintain the attack. Today that would cost millions of dollars -per day-. That money needs to come from somewhere, and generally that comes from selling the coins that the miners get paid. If they make the system useless, the coins they get won't have enough value to pay the bills.
So there are a lot of dimensions that mean a cartel of miners could reasonably be construed as an acceptable alternative to banks.
In that case, you're talking about mining pools, which are different from miners. Individual miners participate in different mining pools, and can choose to use different pools at any time. Pool operators don't have that much control over the mining power, as miners will readily use a different pool if it's seen as a better alternative.
Historically, any time that a particular pool gets large enough to be a concern, miners switch off from using it as the risk to the network easily outweighs the small marginal benefit they may get from using a popular pool.
Miner centralization is certainly one of the primary risks in the Bitcoin network, but it's also one that's easy to overstate. Even with fairly extreme miner centralization, it's hard to come up with a good way to abuse that power without the rest of the network participants simply forking away from you.
There's good reason to think that the current level of geographic centralization in China is likely a maximum. The rapid development of ASIC hardware has kept investment timelines short as old hardware is rapidly obsolete. As hard limits in IC design are reached, this development has slowed, and may result in more competitive opportunities in other areas.
You don't have to trust the miners if they don't follow the rules their blocks are automatically discarded. The interesting thing with Bitcoin is you don't have to trust anyone else. It's also a push model vs the pull model of traditional banking.
You have to trust those miners in aggregate -- they have the power to change the rules, effectively, since the vast majority of network users will follow the majority of hashing power.
Similarly, if any one bank doesn't follow the rules, they get kicked out of the financial network, to similar effect. You don't have to trust a bank, you trust the banking (and legal) system.
If these malicious miners you speak of "change the rules", it creates a fork in the blockchain. Even if they have a majority hash rate, if the economy does not support their decision, the market value of that forked chain will be low while the unchanged fork will keep the market. A group of malicious miners can do very little to destroy bitcoin.
Miner hardware is tied to the specific proof-of-work algorithm used in the cryptocurrency they mine. They make extensive capital investments that are, at least in the case of Bitcoin, useless for any other purpose.
Blockchain-based contracts seem like a useful thing in the abstract, but I've always had two questions that no one has really been able to satisfactorily answer. These might have been answered, though, because it's been awhile since I looked into it:
1. What about blockchain length? The article kind of alludes to this, but there seems to be this "we'll deal with that problem later" idea, even though it seems critical. The answer I always got that chains would fork or be stored distributively but then that suggested the primary use would be in small networks, or that there would be critical problems to solve sooner rather than later.
2. Isn't a guaranteed decrease in monetary supply a problem? I was kind of under the impression that ideally a currency experiences a small amount of increase monetary supply, to avoid things becoming prohibitively expensive. The process of generating coin seems kind of backward to me in many ways, although I'm not an expert in the area.
1. Not sure what your question with. I'm assuming you're thinking the blockchain length could get long enough that it's hard to store or verify completely? The size of Bitcoin's blockchain is currently around 115 GBs. Unless you're a miner or working with a sensitive transaction, you don't need the whole blockchain to operate. If I remember correctly, you could just 'ask' several reliable parties of whether or not your partial copy of the ledger is legitimate [1].
2. No, as the cost of the token or cryptocurrency goes up, the nominal price of service goes down. For example, Siacoin is currently around $0.015; let's assume it costs a dollar a month to store 1 TB. You would pay around 67 siacoin. However, as the value of siacoin goes up to $.02, you would only need to pay 50 siacoins instead (assuming the cost of storage is constant).
Can someone please explain this to me like I'm 5? I get what tokens are but I still don't understand it.
Traditionally say I have a php/mysql site, that's on a server, say Digital Ocean and files are uploaded to Amazon storage.
How does that translate to Etheruem? What about private messages? If everything is public on the block chain, isn't that an issue? Does Etheruem run code?
Can anyone point me to some reading on this? And how to create a 'decentralized' social network?
This is the future and I'd like to get a handle on it, thanks!
I write this from my phone, so I can't find the links to docs in an easy manner. I'll try to explain this as easy as possible: blockchains are distributed ledgers that can store information that can't be altered. They're mostly used now to store transactions info, but they can store anything. In a distributed app the blockchain would be the db. In order to store info on the blockchain one has to pay a transaction fee to the network. This transaction fee goes to the miners that validate the transaction. The ethereum network (and some others) can execute smart contracts: each node is able to execute such a contract. On the ethereum network, smart contracts are written in a language called solidity, which is similar to js. Having a smart contract executed also require a small amount to be paid. Smart contracts can interact with the blockchain: store and retrieve info from it, so the smart contract would be your PHP equivalent. The front end part is done on ethereum using their own, open source client, called mist. Mist is basically an electron app which can interact with an ethereum node. In order to use a distributed app, one has to use a smart contract, which resides at an address in the blockchain, using mist.
Of course, having all the dbs of all the apps replicated in every node is not really optimal and that will be solved using sidechains.
The part about the private messages and huge media files is not clear. If I want to share some message with my friends only should I encrypt the message using their public keys and publish the result on blockchain? Would those be $number_of_friends messages or is there a way to publish it just once? How expensive that would be? Should I use IPFS for media files? Has anybody ever implemented these parts in practice?
How can I convince people to use my Facebook killer app instead of Facebook if they have to pay for every action (update profile, send message, post something, etc.), the price is not clear in advance (who knows how much "gas" every action would cost), and the process of publishing is not instant (IIRC Facebook has 2 billions of active users, can Ethereum handle that scale? It's supposed to be used by thousands of different projects, right?).
What's sidechain? Is it something I have to develop myself (i.e. something Ethereum does not provide out of the box)? If that's the case why do I need Ethereum at all?
Ethereum is definitely in a strong hype-cycle right now. It is an interesting crypto, but much remains to be seen about how it will actually be used. I'd take a look at e.g. Augur to see the direction it might take, but realize that the applications it promises aren't yet in wide use.
Although I do think some of these coins are here for the long term and their value in the long term will probably increase, there seems to be a hype cycle every now and then, when the price explodes and so do all the articles being written about those coins. And then an inevitable crash follows, and people stop caring about the coins for a while or start dismissing them, until another hype cycle appears.
Etherium has serious potential as a distributed network, and as a networked means of greatly enhancing transaction and contract efficiency. I think we are seeing just the tip of the tip of its iceberg.
Bitcoin concerns me. If/when BTC is makes its appearance in the every day lives of ordinary people, its anonymity value will have eroded significantly. Traditional currencies have not yet started to compete with BTC, but they can and they will if necessary. Try getting a mortgage, car loan, business loan with BTC as collateral as one example of where my concerns rest. Look at the grossly inverted price of BTC and gold prices (artificially assuming 1BTC = 1Oz).
Before BTC there was growing dissatisfaction with money center currencies that persists today. BTC 'took the edge off' for many in those circles and may have relieved pressure on gold prices.
I don't necessarily believe this, but I've read in economic revisionist circles that BTC would be means for certain central banks to redirect some demand and attention for precious metals away from their vaults and toward an asset class they, better than anyone, are capable of mining with their existing computing infrastructure. So, by invention or acquiescence, BTC serves money center interests, for now, but not indefinitely.
BTC remains a highly speculative and risky asset/network in my mind.
Ethereum's biggest failure is its name. It sounds like a kid came up with it for a syfy video game. How can an investor or new user take it seriously? "Send me some Ethereum honey, I'm going to the grocery store". Nope.
lets assume for the sake of argument some of these platforms aren't scams/bullshit hype and actually add value in some way. like the prediction platforms augur or gnosis.
the main problem, i then see is that if these tokens are required to use the platform, wouldnt their cost be prohibitive? and the platform wont be useful?
these tokens are going up in value just like bitcoin which always had actual use (mostly on blackmarket) so their incentives are aligned with the token being used as a currency, but not as an app token that is required for the product.
so in effect, these are just over hyped quasi securities offerings and trading.
There are several tokens such as Tether and Digix DGD that are backed by real world securities to create a more stable asset that can still be traded with the advantages of a blockchain. Not ideal because you're back putting your trust in the hands of a centralized value store but It's early days… All this to say, not all tokens are created equal and aren't subject to dramatic price swings such as ETH / BTC
Even Augur and Gnosis are overhyped IMO, their proponents don't seem to realise that these prediction markets already exist outside of the US. Their only differentiator is that they sidestep existing regulations.
Eh, it's like saying bitcoin has no value because electronic payment systems exist. And while I understand some would indeed argue that's the case, to me _trustless_ prediction markets have great value, enabling eg autonomous AI enterprises, self settling smart contracts linked to the "off chain" world.
I think that token networks in general have potential. While its impressive that cryptotokens have proven to be a store of value, as they exist now don't offer any significant advantages to cash, except for black market transactions.
What i'm interested in is the ability of token networks to be useful for legitimate transactions between entities. I think in particular there's potential for token networks to increase the trust and liquidity of virtual goods. Right now cryptocoins are basically only useful for traditional transactions that cash is already very efficient at. What I want to see more of is using the logging and trust ideas of token network to develop transactions between virtual goods, that normally exist in siloed ecosystems.
That said, I am trying to understand if there is enough value to go around when the network is smaller than (n) nodes? What if the application is not one that will benefit greatly from network effect, doesn't have need for the security/auth model and doesn't need massive compute/resources? What if it will never grow beyond a certain number of nodes (for whatever reason)? Note: those are NOT my opinions expressed in question form...they are pure questions that I want to brainstorm and hope that the responses are along the lines of "here's how those types of apps can benefit".
Also, at mass adoption levels (while understanding we are nowhere near that, but for the sake of the thought experiment), do we end up with millions of micro-networks, rather than the relatively small number of networks we have today? If so, does the crypto token model still hold up? My gut is it would for the infrastructure providers because they can support (n) networks. I am not sure about the rest of the ecosystem or what constructs need to be built/added if that model is to thrive?