I think the true answer to this question is that it was/is a gold rush with low interest rates that led large amounts of capital to be allocated to less than competent people. In particular, the companies and operators that look the smartest when a bubble is inflating are the ones that genuinely hedge downside risk the least, while pretending to enough to fool people with capital to allocate. This only becomes apparent, of course, when the bubble pops.

As you may notice, this also describes the tech VC bubble of the last decade, too. However, where normal tech has already found its use cases and does real things for real people in the real economy, downside is a little more capped. If you want to be generous to crypto, it's currently tech in 2000, where almost everyone has a total nonsense business model, but that a lot of the vague ideas will eventually find some variant with product-market fit. If you want to be less generous, it's all a house of cards.

EDIT: I'll also add that, of course, thinking very carefully about which narrative is true here and being right is the stuff fortunes and careers are made of. The people that weren't dissuaded by the tech crash in 2000 profited handsomely by thinking carefully for themselves about what was actually true and what information was actually latent in the financial crash. Of course, the tulip true believers in 1638 didn't fare nearly as well.

> normal tech has already found its use cases and does real things for real people in the real economy

For all the problems with gig economy companies, they're not crypto. Uber fell from its high, but it's still facilitating rides and deliveries.

And still loses money, right?

Yup. They're barely profitable in terms of the metrics they made up ;)

> I think the true answer to this question is that it was/is a gold rush with low interest rates that led large amounts of capital to be allocated to less than competent people.

Ironic, given that the narrative during its rise was that the "Best and Brightest" were working in crypto and everyone else was fighting over the "B" level people.

Essentially yes.

Bitcoins scalability issue should have killed off al notions that it could ever gain widespread usage as an alternative to traditional currency for regular payments and after that it became yet another speculative derivative without any real backing in real world assets.

It was never actually going to replace fiat currencies for most people and the industry is absolutely dominated by exotic financial instruments(mostly of the ponzi variant), run by a mixture of fools and scammers.

On the other hand, people chasing the dream of crypto scalability have actually invented a remarkable amount of math and tooling around large scale proof construction, summarization and validation. The Zero Knowledge proof ecosystem (and its relatives in multi-party computation and fully homomorphic encryption) might be the only useful thing that is left after the current incarnation of crypto fully implodes.

And yet their fundamental lack of functional economic theory means that all of that is currently being completely wasted on crypto projects that's often little more then window dressing for what is basically very unimaginative financial scams.

There is probably scenario's where a temporary blockchain can solve some synchronization issues but the idea that a single static blockchain will replace traditional dynamic structures for organizing the economy is basically not viable.

I think you'll see the ZK stuff used increasingly for non-financial applications, it's a legitimately novel and powerful area of mathematical primitives for verifiable computation. FHE is also very cool and just starting to be usable for privacy preserving ML.

> might be the only useful thing that is left

That's a good point. If nothing else, the stupid money caused more practical exploration of ZKP and other exotic math constructs than we'd seen in decades previously.

I'd like to see more "toy" exploration of this stuff as the money drains out. That's where interesting things are going to come from, for a while. Time for a zero-knowledge app to select lunch destinations, a dating matcher that doesn't leak before the reveal, secret agent spy communicators for kids...

I agree that Bitcoin has chosen some trade-offs against mass adoption, like limiting block size. I think this is a bad move, since security is more than enough.

Lightning is not viable, because it requires "watchtowers" to check for early state commit attacks. Not everyone will be able to run such a server.

But, for instance, Bitcoin Cash has larger blocks (the reason for the first fork of Bitcoin). However, in spite of its technical advantages, adoption severely lagged compared to Bitcoin. I wonder why that is.

> I think this is a bad move, since security is more than enough.

Security isn't/wasn't the concern, the trade-offs exist to ensure verifiability in the most trustless way possible (low hardware and bandwidth requirements). This enables a decentralized system which is open to any participant and keeps miners accountable. If running a node is limited to miners and exchanges and requires a renting server racks there is just no point.

> Lightning is not viable, because it requires "watchtowers" to check for early state commit attacks

This is inaccurate. LN has shortcomings currently but this isn't one. Without a watchtower your peer in a channel can force close it while you are offline by publishing an outdated state on-chain and attempt to defraud you, but if at any point before the end of the grace period (usually ~2 weeks) you are online and you produce a more recent state you get the whole balance of this channel back (this is how dishonest peers are punished). This is one channel mechanism (Poon-Dryja), another mechanism (Eltoo) which doesn't require as much monitoring/penalties will eventually come but depends on changes to Bitcoin protocol which are still pending.

Secondly theses optional watchtowers which automate this process minimize trust a lot as they can only publish the most updated state IF and ONLY IF the counterparty in your channel published their outdated state. So they have no real custody of your funds.

Lastly solutions like local federations (Fedi to name one) can address your concern of people not being able to run servers, if the users aren't content with the public offers of existing watchtowers.

> But, for instance, Bitcoin Cash has larger blocks (the reason for the first fork of Bitcoin). However, in spite of its technical advantages, adoption severely lagged compared to Bitcoin. I wonder why that is.

Because having larger blocks is not a technical advantage if your goals are the principles mentioned in the first paragraph. If you intent to compromise on these then just build a centralized database, it will be more efficient and at least you won't lie to people pretending that your system is open/decentralized (like Bcash supporters do).

> This is one channel mechanism (Poon-Dryja), another mechanism (Eltoo)

I can not thank you enough. I was under a wrong impression, and you have provided me with easy-to-search-for terms where I can get more info.

I see now there is a larger-than-I-thought grace period (which I thought was ~3 days) as well as penalty for fraud attempts.

2 weeks is a reasonable time to be away, like going on vacation.

The industry is mostly built by bad actors on a house of cards.

It's a house of cards, all interlinked and interdependent, all 'investing' in each others' black boxes that magically produce returns, suspiciously in tokens they self-issue, swapping 'billions' in imaginary value and claiming billions more in assets which all mysteriously evaporate in the light of day.

And at the bottom of it all, one of the first dominos to tumble, was a company called 3 Arrows Capital, which promised to generate revenue by buying crypto-dickbutt NFTS... and then went on the run. I'm not even kidding.

>And at the bottom of it all, one of the first dominos to tumble, was a company called 3 Arrows Capital, which promised to generate revenue by buying crypto-dickbutt NFTS... and then went on the run. I'm not even kidding.

They lost borrowed funds in a ponzi scheme called Luna. I get that you wanted to poke at nfts, but the last remark may make someone think this is how it actually went down.

It is part of what they were doing, part of their investment strategy to grow the funds that were invested with them was to nfts such as "cryptodickbutt #1462". Look it up if you don't believe me.

Yes, I'm sure that Terra/Luna was a big part of it, and you're right that it's worth calling out, it may even have been the single biggest factor. But it wasn't the only way 3AC squandered invested funds.

Perhaps Terra/Luna should be called out as the first domino to fall, it was indeed spectacular. If it was a ponzi it was a complex one with extra steps, an algorithmic stablecoin that was metastable at best, and IIRC a lending protocol that charged less for loans than it paid for deposits. All sorts of crazy.

But 3AC still invested in dickbutt...

That cryptodickbutt is probably one of their best investments.

I can't see how much they paid for it, it was a transfer. Maybe someone sent it to them as a joke, who knows.

In any case, it was around the time they were created, so easily it 20x to today's price.

I guess they should have invested more in cryptodickbutts.

Look it up if you don't believe me.

I will, but that just makes the whole thing more utterly ridiculous.

rule 37 on bigfoot?

That's the thing, you only depend on centralized actors if you want to. The entire point of cryptocurrencies are to not depend on centralized institutions that can screw you over.

When designing the iPhone, one of Apple's findings was that majority of people struggle with understanding the concept of the file system (and hence, there's no visible file system in iOS). In such world, only a small minority of people will be interested in decentralized cryptocurrencies, as the bar of technical skills required is too high for most people. This is what led to the success of centralized cryptobanks.

Ding ding ding! Crypto isn’t cool to majority, nor do most want to (or need to) care about it. People want to spend money and if crypto makes that happen so be it. Society had been sending money for awhile without crypto and the edge cases crypto addressed are just that, edge cases.

I’m intrigued by crypto but merely because I’m a nerd. I don’t care about crypto when it comes to my day to day life.

This exactly. I recently came across a tweet explaining how Merkle trees in some new crypto would make it better or something. If with a CS degree I find it hard to understand what this remotely has to do with my money, I don't think my 80 year old granddad is going to fare any better. Which is why I believe crypto is fundamentally doomed for anything but the most niche use cases.

I hate how accurate this comment is. Without going too far with examples, PGP exists, but using it is simply harder so most people default to an easier email sending.

Now.. the question remains as to whether it would be the same, if it tech was not made so accessible ( some people would be forced to learn since the bar was high ). I mostly think that battle is already lost.

>PGP has horrible user experience for experts. Its CLI is incredibly un-intuitive and needlessly complex and integration with mail clients is poor to non-existent.

Thunderbird[0] has pretty good (see what I did there?) PGP integration[1]. The UI is decent and there is discoverability support with various key servers as well.

But that would require folks to break their addiction to web-based email and use an actual email client. As such, I won't hold my breath.

[0] https://www.thunderbird.net/

[1] https://support.mozilla.org/en-US/kb/openpgp-thunderbird-how...

You were never intended to craft your own blockchain transactions any more than to hand-write your network packets or interbank transfers. Wallets are/were expected to advance and handle this for users and mostly have.

The issue is that the problem cryptocurrencies solve is not a real problem.

The blockchain, being a public ledger, ensures that transactions are accurately recorded and can be publicly verified as such.

But it’s been centuries since the actual accurate recording of transactions has been an issue. The real problems are far removed from this. When was the last time you heard about people complaining that they paid off their Visa but it did not credit them for the payment?

Meanwhile, real problems that people do face, such as a vendor not providing you the goods or services that you paid for, are still a problem with blockchain.

The fundamental problem with cryptocurrencies are that they add a whole lot of complexity to solve a problem which is a trivial issue in practice at best, without providing any tools to solve the actual problems people face and in many cases making it harder to find solutions for those problems.

> real problems that people do face, such as a vendor not providing you the goods or services that you paid for, are still a problem with blockchain.

Not just still a problem. Far worse off a problem. Chargebacks exist for credit cards and most bank transactions including wired funds. Send the crypto the wrong way at the wrong time or to the wrong place? Poof. Bye bye money.

You ignore the other big benefit which is impossibility of censorship. When was the last time you heard about people complaining that they can't do lawful and legitimate business because Visa or MasterCard (basically a duopoly) don't like them?

This problem is not trivial, and as far as I can see crypto is the only scalable solution to it outside of legislation that isn't ever going to happen.

What about the privacy implications of having nearly every payment on the planet go through 2 megacorporations?

And I can see the response now, while every crypto transaction is public, it's a lot harder to tie identities to wallet addresses than it is to tie a name to a credit card number.

> You ignore the other big benefit which is impossibility of censorship.

That's a silly claim. Ethereum forked because of a hack and enough people wanting to undo it. Tether regularly freezes funds (https://www.coindesk.com/business/2022/11/10/tether-freezes-...). Ownership of a cryptocurrency can be made a crime. Developers can be sanctioned and arrested.

A fork implies 2 diverging lines. Nobody's hand was forced in the ether versus ether classic fork.

Tether is centralized and a scam (and arguably a scam because it is centralized) and irrelevant to the discussion. Anyone can make any token they want and run it according to whoever's rules; this logic would indict the entire internet based on the existence of badly moderated websites.

And cryptography can be made a crime as well. Meanwhile, in the world we inhabit today rather than infinite hypothetical ones, no such thing is happening outside of totalitarian governments, and despite their effort, not one single crypto currency transaction has ever been successfully censored.

> A fork implies 2 diverging lines. Nobody's hand was forced in the ether versus ether classic fork.

The two diverging lines were very much unequal.

> Tether is centralized and a scam (and arguably a scam because it is centralized) and irrelevant to the discussion.

Arguing Tether is irrelevant to the crypto space is absurd. (I agree it's a scam. That's a major problem for the whole ecosystem.)

> And cryptography can be made a crime as well.

Correct. You can censor cryptography. https://en.wikipedia.org/wiki/Export_of_cryptography_from_th...

Talk to any business and they will tell you that they don't want to pay %3 to visa or any other credit card. Having a ledger of transactions is how any currency works, it isn't the problem being solved.

Being able to use money electronically without a 3rd party is something that wasn't possible before. Anyone wanting to cut a credit card out of their deal or choose a currency other than their what their country mandates can now do that.

Without a centralized actor of some sort, most 'investors' are not going to be able to get into or out of a crypto position. Vanishingly few people care about using the tokens themselves for anything but gambling.

These institutions can also screw you over by massively inflating the crypto bubble and then crashing spectacularly, tanking your value and poisoning the public perception of cryptocurrency.

The 'point' of cryptocurrency may well be to avoid dependence on centralized institutions, but the effect of cryptocurrency has been to enable all this nonsense. At this point in time you can't say "well it's not crypto's fault!" because it absolutely is. You don't just look at intent when assessing outcomes.

yeah if only a few thousand crypto fanatics trade all these coins there is effectively no ecosystem and thus no upward price pressure to make the nerds rich.

I think most people want a bank that they can trust with their assets. I don't want to store my assets on a hardware wallet that can break or lose and I have to store the backup key in a a safety deposit box. Do you know how hard it is to get a safety deposit box today? Irony is I have to have a bank secure my crypto holdings in case my house burns down.

If you stored your Luna/FTT/whatever on a personal wallet and never touched an exchange, you still lost all your money. The centralized actors run the show whether you interact with them or not.

If you bought BTC before centralized actors became dominant, you didn't lose money. If you bought BTC after, you should have known that could happen.

Crypto has shown that decentralized actors certainly screw you over. All those laws and corporate governance and backup from the govt for banks (which costs something in terms of fees the banks pay) yields people not losing their deposits if banks fail. Occasionally banks still fail today! It doesn't make the news because people don't lose their money.

It's because of these "idiots" choosing to centralize their decentralized crypto, not due to the smart ones holding on to their keys, that the valuation has skyrocketed.

So I'm a nerd interested in this stuff and I have specific ideas -- but I just want to say that I appreciate simply seeing this idea in words in a forum. Lately it's just been positively weird how infrequently I see this very very obvious point of the whole thing.

What idea? The idea of "centralised actor" isn't even an idea, it's gibberish.

It's shorthand for "a possibly unnecessary/overpowered/arbitrary middleman that handles money on behalf of other people and organizations."

This is pretty well established, almost to the point that it doesn't need to be said.

If it is gibberish, why do many people apparently think it makes sense? Are you using 'gibberish' to disparage something you dislike, rather than to describe something as nonsensical?

A lot of people repeat what they hear without giving things any thought. I say it's gibberish because it doesn't mean anything. Try to explain what characteristics set a decentralised actor apart from a centralised actor. Remember that you can't use the word decentralised/centralised, because that's the words we're trying to define.

According to wikipedia, under 'Central Bank': "a central bank possesses a monopoly on increasing the monetary base. Most central banks also have supervisory and regulatory powers to ensure the stability of member institutions, to prevent bank runs, and to discourage reckless or fraudulent behavior by member banks."

Since the major collapses were by organizations which had a monopoly on creating their own currencies ("tokens") you could call them 'central banks'. Note I am not defending cryptocurrencies -- I am pointing out that you calling something 'gibberish' when people do have an understanding of the meaning is not productive.

Sorry. We were talking about what it means for an "actor" to be "decentralised". Now you're saying that a central bank is someone who has a monopoly on issuing their own currency. So apparently I'm a central bank, you're a central bank, the Chinese restaurant around the corner is a central bank... First of all, none of these people or organisations are central banks. And second, we weren't talking about central banks. I say it again: we were talking about what it means for an "actor" to be "decentralised".

This is one of those 'can't win' situations because no matter how I respond you will find something to pick apart and keep decrying your victory. Good day.

You could give simple, logical, concrete definition of 'decentralised actor' and show the concept isn't gibberish. If you can't come up with anything, maybe you have to concede that it is gibberish.