[didroe]

Decentralised systems are always more inefficient. If certain kinds of transactions are currently cheaper, it's due to lack of regulation (lack of competition in many cases is sadly a symptom of regulation). When the inevitable economic crises present themselves (assuming it ever gets used for anything serious), regulators won't stand by and do nothing.

> Coins going up in value just because they are scarce or first movers, is just like Pets.com being valuable because they have a good domain name.

Isn't scarcity baked in to Bitcoin? Any investments made using it will have to return more than the deflation / speculative-hoarding rate, which means useful things won't get funded.

[BLKNSLVR]

> If certain kinds of transactions are currently cheaper, it's due to lack of regulation

I just can't see any truth in that statement, but admittedly I'm probably looking at it from a different angle to you.

Cryptocurrency cuts out the middleman in a transaction, or at least minimises the cost and 'touch' of a middleman, and that's where the cheaper-ness comes from - no vampiric-squid-encircling-the-globe sized multi-national taking its monopolistic percentage. That's my angle. The behaviour of said percentage-takers over the last century haven't exactly made regulation the saviour of the common citizenry either.

[didroe]

You have to ask yourself, why are those middlemen there at the moment? We have digital trading platforms / banking systems, the technological side of it is not the issue.

It's because regulation says only certain institutions are allowed to perform certain transactions, and have to perform certain checks, etc. I'm not saying there aren't inefficiencies that aren't directly related to regulation, eg. monopolistic behaviours. But that's the side-effect/price you pay for some kind of oversight. There is of course lots of room for improvement in the systems/regulation we have.

When you look at the history of where the regulations came from, it's usually in response to a major crisis. Humans tend to be reactionary, especially the ones in positions of power when they're enacting laws that limit their paymasters.

> The behaviour of said percentage-takers over the last century haven't exactly made regulation the saviour of the common citizenry either.

Look at the most recent major economic crisis of 2008. The main reason it was so devastating was due to rolling back regulation from previous crises, along with "innovative" financial products that regulators had turned a blind eye to. What do you think would have happened to business lending (ie. jobs) and the stock market (ie. people's pensions) if there had been zero regulation and no ability to inject liquidity into the system?

[BLKNSLVR]

> Look at the most recent major economic crisis of 2008. The main reason it was so devastating was due to rolling back regulation from previous crises, along with "innovative" financial products that had no oversight. What do you think would have happened to business lending (ie. jobs) and the stock market (ie. people's pensions) if there had been zero regulation and no ability to inject liquidity into the system?

I totally agree.

I am also, however, 100% skeptical as to the motivations of those pushing to regulate cryptocurrency because of the combination of facts that cryptocurrency is a threat to the encumbent financial institutions and the deregulation that caused the GFC was due to the lobbying of said encumbent financial institutions.

Basically, I think the system is corrupt from top to bottom and so their motivations are protection of status quo as opposed to protection of Joe Street-Level.

The total lack of understanding of how cryptocurrencies work, as evidenced by the infrastructure bill, shows they don't care about understanding it, they care about suppressing it. That's the message they're sending.

Yes, it should be regulated, there are too many scams in the space, and that gives the space a bad reputation but, damn, put some research time in before, how does that phrase go...:

Better to remain silent and thought a fool than to speak and remove all doubt.

[dragontamer]

> no vampiric-squid-encircling-the-globe sized multi-national taking its monopolistic percentage

What do you think about the Gigawatts of energy + transaction fees that are going to miners? Because your hyperbolic statement is what I think of the miners in the cryptocurrency world.

They do nothing but buy up critical parts (GPUs, ASICs, etc. etc.), use up rare resources (energy / coal / etc. etc.) and then are paid to do so (mining rewards, transaction fees), without offering much innovation on their own.

Doubling the number of miners in the world for the BTC network won't improve the speed of the network, nor would it improve the rewards. All it would do, is double the energy usage.

[BLKNSLVR]

I'm entirely supportive of Ethereum moving to Proof of Stake and think that Bitcoins Proof of Work is what may eventually kill it if it's not modified somehow.

I'm a tree hugging hippie and the energy use of bitcoin bothers me very little, as it's a barely a blip on the radar in comparison to numerous other human activities that have been going on for multiple decades and that no one mentions alongside BITCOIN ENERGY USE!!! for comparison because they're pushing an agenda.

I'm annoyed about the GPU thing, but that's capitalism; that's the market doing it's thing. Not sure how else to argue that point. It's probably also exacerbated by COVID messing up supply chains.

[lxgr]

In a functioning market, any middleman has competitors and its "vampiric profits" should quickly converge towards marginal costs.

Regulation, compliance and customer support actually cost money, and by cutting most or all of it out, crypto based services are obviously cheaper.

A better criticism of regulation would be that, depending on how it's enforced, it can serve to create regulatory motes for incumbents and hinder mentioned competition.

Crypto doesn't solve this – it just sidesteps the problem, and that isn't feasible in the long term.

[BLKNSLVR]

Bitcoin was created for the very reason that US finance was, indeed, not a functioning market and was unlikely to be a functioning market in the foreseeable future.

Theoretically, I can't argue your points. Practically, however, in the world that produces the news articles I read, the theory remains entirely ... theoretical.

The point of crypto is to sidestep the way finance markets work in practice. Regulatory capture, paid-for ratings, revolving door appointments between finance companies and government, all sidestepped, by design, by bitcoin and various other cryptocurrencies.

But, yes, cryptocurrency is an immature alternative market, so the myriad potential opportunities to deflower its purity are many a long year from being discovered and exploited.

[lxgr]

Thanks for a very nuanced reply!

> Regulatory capture, paid-for ratings, revolving door appointments between finance companies and government

This is a very valid concern to have about traditional finance.

I'm just not convinced that the same structures won't emerge in DeFi sooner rather than later, and that in the regulatory vacuum in between a lot of retail investors will be left holding bags.

[BLKNSLVR]

The, hah, theory with DeFi is that the 'code is law' ideology and decentralised governance acts as defacto regulation.

Uniswap's dropping of a number of coins / tokens fairly recently proved that a decentralised exchange that supposedly had decentralised governance could still be controlled by a central entity.

DeFi is so young, however, that there just hasn't been the time to run through enough scenarios to see how well, or poorly, it works.

It doesn't help that there have been so many rug-pulls and scams because so many people are blinded by dollar signs they can't see an elephant sized flashing neon sign saying "we will steal whatever isn't nailed down". This is what needs regulation, somehow...

Regulating against greed and / or stupidity is one of those eternal problems: If humans could do it, they wouldn't need to.

The conundrum of DeFi is the lack of a centralised entity to either have a trustworthy reputation or take to court. Uniswap being a counter-example.

My approach is to move slowly and diversify to minimise risk.

Re-reading what I just wrote, I think I just repeated your last paragraph in a whole lot more words.

[imtringued]

>But, yes, cryptocurrency is an immature alternative market, so the myriad potential opportunities to deflower its purity are many a long year from being discovered and exploited.

Strange, the vast majority of complementary currencies simply work and have no existential crisis. Nobody dreams of a day when they live up to their full potential. People simply use them. Even stranger, the vast majority of cryptocurrencies are not designed to be complementary currencies and are subsequently never used for that purpose.

Here is an example: https://en.wikipedia.org/wiki/WIR_Bank

[uuidgen]

> Cryptocurrency cuts out the middleman in a transaction

How are you going to do ANY crypto transaction without a middleman? Will you wait months and burn insane amount of electricity to finally mine the block yourself? Of will you submit your transaction somewhere and pay the fee?

I have free next-day transfers, pay $1,2 for instant transfer up to $1200 - and those are bank transfers, with all the security of it, not some shady apps. This is in highly regulated market. What are commissions on bitcoin transfers again?

[BLKNSLVR]

There are more words after the comma. There will be quibbling about the definition of "middleman".

Yes, bank transferral of money for basic things can often be free and very fast these days, but it wasn't when bitcoin was created, and cryptocurrency does more than just that nowadays too.

Both areas are constantly evolving, so comparisons are a bit fraught with bias.

[Karrot_Kream]

I gotta say, hats-off to you for answering all of these emotionally charged posts with nuance and without losing your temper. Cheers!

[BLKNSLVR]

I've already had many of these arguments in my own head, and it's only been with research (education, the universal silver bullet) and experience that I've been able to find trustworthy answers, so I try to share how I got 'from there to here'.

It's also taken me far too many years to learn that ridicule and dismissal are not paths towards persuasion. Not that I've permanently learnt that lesson though.

[zrm]

> Decentralised systems are always more inefficient.

Decentralized systems are always more efficient.

Suppose you have something a hundred million people want. It's on one server. The server is in Virginia. If a million of the people who want it are in Japan, it has to traverse the ocean a million times. If a million more are in the UK, etc.

Compare this with something like BitTorrent. The million people are in the UK, the first one gets it over the ocean. From then on, people in the UK can get it from other people in the UK. Either because the client chooses peers with lower latency, or because closer networks are just faster and so when you're receiving from 100 peers at once, the closer ones will send faster and the download will finish from them before you've sucked too much data through the thinner pipe across the pond.

Even centralized companies build decentralized systems internally. Because it's the only way to build a reliable system and it's the only thing that scales.

The hardest part about decentralized systems is paying for the initial implementation. Somebody has to write the code. But in a true decentralized system, they can't sit in the center and suck out a percentage, because there is no center.

So that's how the evolution of systems goes. The first system is centralized, because when it's small the disadvantages of centralization are small, and as it grows the creators retain control of it for a while.

Then the disadvantages of large centralized systems start to manifest. Single point of failure, monopoly power, censorship etc. So people start building a decentralized alternative. At first it's terrible, because it's people working on it in their spare time. Eventually it gets better and takes over. And then nobody ever worries about it anymore, because it's there, and it's reliable and efficient and it works, and it just fades into the background because nobody pays attention to things that are working. Like TCP/IP, or Wi-Fi, or the global market for wheat.

[fomine3]

For centralized vs decentralized, comparison should be CDN vs P2P. CDN is centralized but distributed. P2P isn't efficient as like CDN because it uses uplink from user, and possibly need transit from other ISP user. Top CDN's edge is located on ISP. But P2P is still useful tech.

[zrm]

Modern P2P networks already prefer closer peers. This also happens naturally because closer peers generally have fewer bottlenecks between them, so if you connect to many random peers, the ones that are e.g. on your LAN will intrinsically end up doing most of the sending.

This is often more efficient than a CDN because a CDN won't have a box on your LAN even if there are multiple peers there.

And a CDN is only efficient to begin with if there are already multiple peers on the same ISP's network. If you're the only person on the ISP's network who wants some particular content then it has to come over a transit link just for you anyway. If you're not, you can get it from the other close peer(s) in a P2P network and not use the transit link.

[billytetrud]

Lack of regulation is not an accurate way to describe what goes on in one of the most highly regulated industries. Rather what I think you mean is the lack of a specific regulation that limits the price of various services. In actuality, it's regulatory capture that keeps competition at bay and keeps prices high. We actually need to remove specific malicious regulations in order to solve the problem of competition in the banking and money transfer industry.

[thebean11]

> Decentralised systems are always more inefficient.

A centralized system like Western Union is very efficient, unfortunately the owner of that system keeps the excess efficiency (fees) for themselves..from the perspective of the user it's not efficient.

[andreilys]

Decentralised systems are always more inefficient.

Quite the statement, anything to back it up with?

Is it more efficient that your centralized system can at any moment be seized by the state, and turned over to a bureaucrat to run in the name of nationalization?

[a_conservative]

What about distinguishing between long term efficiency and short term efficiency?

Decentralized systems tend to be more efficient in the long term. Centralized systems tend to be more efficient in the short term.

I think this may be true-ish??