[spir]

I don't think many people on HN realize how globally systemically important public blockchains are on track to become, especially Ethereum.

The understandable hatred of the casino and many scams has blinded most of HN as to the true potential of the technology and its associated new public institutions.

That's what a decentralized public blockchain is, a new kind of public institution.

One small example of this is that the most state-of-the-art perpetual futures market in the world is an Ethereum Layer 2 named Lighter https://app.lighter.xyz/markets/

[wmf]

I guess you could help educate us by giving some non-gambling and non-criminal examples of innovation powered by Ethereum that justify its importance.

[miohtama]

I would say stablecoins.

They are so important that now every country in the world has and is making laws about them.

[spir]

1. Stablecoins

2. Tokenizing all assets (equities, commodities, real estate, etc.)

3. Being able to use those stablecoins/tokenized assets in DeFi protocols that are more automated, more impartial, and less extractive than corresponding traditional finance systems. Including lending and marketplaces to buy/sell. Many industries will see parts of their back offices go onchain. Tokenized real estate + onchain swapping = onchain real estate markets. Stablecoins + onchain swapping = onchain forex markets.

4. All of these being inherently global, so anyone in the world with a mobile phone can access these assets and the onchain financial system.

5. All of these being size-agnostic. The same assets and technologies work with a 5 cent buy of tokenized TSLA stock just as they do with a 50 million buy.

6. All of these capabilities enjoy instant settlement. The act of trading the tokenized asset also settles the trade. There is no more T+1 settlement risk or delay. This reduces risk and improves capital efficiency.

7. Decentralized public chains, especially Ethereum, offer new kinds of credible commitments that are strong enough to bind corporations and governments because the agreements are automated by the highly decentralized chain. Centralized chains (almost all chains) can't do this because they are too easy to rewrite history if governments apply pressure. When using Ethereum, instead of relying on a counterparty to keep their word and then suing them if they don't, parts of that agreement can become automated by the chain, reducing risk of breach of contract and cost of compliance. Maximum decentralization greatly reduces overall risk, which is very valuable at global scale.

8. Generally increased permissionless innovation, stronger property rights, and freer markets. Anybody can use onchain or build onchain, there's no gatekeepers.

[Nextgrid]

> Tokenizing all assets (equities, commodities, real estate, etc.)

How does that work?

The blockchain can only enforce its desired state on the blockchain itself. It cannot affect the real world unless you delegate said effects to a trusted party... which defeats the whole point of a decentralized, trust-less blockchain, and you could let that trusted party just run a centralized database.

How do you reconcile the ability to lose a private key with real-world assets? In the "fiat" system we rely on courts to be the ultimate arbiters in such cases and it works well enough. In this system, what should happen if someone owning a tokenized real estate asset loses the corresponding private key?

> The act of trading the tokenized asset also settles the trade

This again only works on the blockchain. When the tokens represent real-world assets the two are not in sync, and there's a risk they may not be reconcilable (you "buy" some real-estate on the blockchain, but the government having jurisdiction over the real-world location contests your ownership claim and people in uniform with guns prevent you from entering into said real estate).

[spir]

> which defeats the whole point of a decentralized, trust-less blockchain, and you could let that trusted party just run a centralized database

A centralized token (like USDC) being held in a trustless wallet is much much better and more useful than the traditional financial system.

For example, USDC in my wallet can be lent out in any onchain lending venue I pick and be sent to anybody in the world instantly.

> lose a private key with real-world assets

You're right, private key security is super important. The practical solution here is that there will be many different kinds of wallets with different trust assumptions and recovery models, and people/corporations will be directed to use the one that's net best for them. Many will be fully or semi custodial.

> When the tokens represent real-world assets the two are not in sync, and there's a risk they may not be reconcilable

Right. The idea here is to have very stringent evaluations of tokenization frameworks, to figure out which real-world asset tokens are actually quality bearer assets (from both a legal and technical standpoint) and which are not. An early example of the work here is BlueChip's stablecoin ratings https://bluechip.org/en

[beeflet]

I don't realize, care to enlighten us?

[spir]

Here's a list of some transformative benefits of decentralized public chains https://news.ycombinator.com/item?id=46175312

[beeflet]

the tokenized assets are only as good as their backing entity allows them to be. It's a centralized system with a facade of decentralization. Same applies to stablecoins.

You inherit all of the inefficiency of cryptocurrency and none of the decentralization. This is why the idea was abandoned back with colored coins in like 2013. With etherium, you inherit even more centralization due to the nature of the scripting system and PoS.

[spir]

> It's a centralized system with a facade of decentralization. Same applies to stablecoins.

Centralized assets in an on-chain wallet are much more useful than in the traditional financial system, for many reasons, but it comes down to friction reduction.

[biorach]

> the most state-of-the-art perpetual futures market in the world is an Ethereum Layer 2 named Lighter

Is this not just a state of the art innovation in the Ponzi scheme and online casino space?

[spir]

It's true that perp platforms are zero-sum games mostly catering to extremely high risk traders that overwhelmingly rely on luck more than skill. I don't use perp platforms myself.

It's also true that perp platforms can provide very accessible and efficient hedging. For example, if you own NVDA and don't want exposure to their quarterly results volatility, you can take a much smaller amount of collateral than your underlying NVDA shares and use that to open a 10x leveraged short on NVDA in the same size as your main NVDA position. This makes you "delta neutral" so the USD value of your position won't change even if NVDA craters on quarterly results. All without selling your underlying shares. Then you can close the short after the quarterly results are absorbed by the market.

Separately, here is a list of transformative benefits of public decentralized chains https://news.ycombinator.com/item?id=46175312