This is what is going to happen to all meme cryptocurrencies

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fskimospy

Elite Member
Mar 10, 2006
83,717
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Fenixgoon did a good summary. But, I'd like to elaborate a bit.

With anonymous transactions, someone has to be a trustworthy source. I can't just say that "hal2kilo gave dullard all his money" and take everything you own. You would respond with something along the lines of "dullard is lying". How would the world know who is correct? Who should get all of hal2kilo's money?

With cash, that trustworthy source is usually a bank or it could be a government. You tell a bank to send me all of your money. My bank accepts. All is good since we trust the banks to decide that you legitimately sent your money (large transactions go through detailed fraud checks before being sent).

But with crypto, people decided that they can't possibly have a bank be the trustworthy mechanism to decide if transactions are legitimate. There was no real strong universal reason for this, but there are fringe reasons that banks are not good for everyone (there are numerous unbanked people). So, some other source of trust had to be created. Proof of work is one possible method. Basically, if you are wealthy enough to buy lots of equipment and waste lots of resources, then you must be trustworthy. I can't quite agree with that logic that wealthy people are more trustworthy than banks, but proof of work does function in general. It just is impossible to keep up. There is not enough equipment nor enough energy in the world to do it.

Proof of stake is another possible method. If you have invested enough into the crypto, then supposedly you want to do good and are trustworthy (why would you want to destroy the money you invested in that crypto?). Again, though, it assumes the wealthy are the trustworthy ones because they are the ones with large shares. Also, it has a major flaw. If ~49% of the owners currently online say one thing, they win--whether they are telling the truth or not. Cut a few international cables and suddenly even a small owner can have 49% of the currently online shares and suddenly "hal2kilo gave dullard all his money" is the truth because I said so.

There are other methods, but those are the main two that are being tried. I personally would just go back to banks since it is cheap and works with a lot less "the wealthy are the trustworthy people" hogwash.
Yes, proof of stake has always seemed to have that one large problem (not sure if any steps have been taken to address it?). People with lots of holdings of one crypto token are incentivized to preserve its value right up until they don't want to anymore. Seems like if you got 50.1% of the 'votes' you could engineer some sort of financial preemptive strike, wipe everyone out, cash out, and be gone before enough people noticed.
 

dullard

Elite Member
May 21, 2001
24,998
3,326
126
Yes, proof of stake has always seemed to have that one large problem (not sure if any steps have been taken to address it?). People with lots of holdings of one crypto token are incentivized to preserve its value right up until they don't want to anymore. Seems like if you got 50.1% of the 'votes' you could engineer some sort of financial preemptive strike, wipe everyone out, cash out, and be gone before enough people noticed.
I think the most likely scenario is to make certain people (or governments) suddenly broke. And 50.1% isn't needed, only about 49% and that is before you do any tampering such as denial of service attacks on the other 51%. https://www.npr.org/transcripts/1105815143
someone could use those bottlenecks to take over the blockchain process, say, to stop someone from getting paid or just to make an asset disappear. This is usually called a 51% attack because you're trying to take over most of the network. But Guido's team has found that you'd really need only 49%, and because of those bottlenecks, sometimes even less.

Let's say somebody with great top-down control of the internet in their country starts to interfere with that network, we can actually start bringing that 49% down to 40%, to 35%. And these sorts of margins of safety get whittled away.

You could see a scenario in which, say, Russia used this approach to block crypto donations to Ukraine.
The chain isn't damaged long term, your 49% is still there and you didn't lose anything, but suddenly your target is weakened or bankrupt. Steps to prevent it would include better server security. But, we still have no method to stop many denial of service attacks. And we recently saw a pipeline destroyed, it wouldn't take much to consider destruction of internet connections a real possibility. Or just take over physical control of / damage to a few main servers that control most of the internet traffic. It is really hard to prevent those types of attack.
 
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hal2kilo

Lifer
Feb 24, 2009
23,331
10,236
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Fenixgoon did a good summary. But, I'd like to elaborate a bit.

With anonymous transactions, someone has to be a trustworthy source. I can't just say that "hal2kilo gave dullard all his money" and take everything you own. You would respond with something along the lines of "dullard is lying". How would the world know who is correct? Who should get all of hal2kilo's money?

With cash, that trustworthy source is usually a bank or it could be a government. You tell a bank to send me all of your money. My bank accepts. All is good since we trust the banks to decide that you legitimately sent your money (large transactions go through detailed fraud checks before being sent).

But with crypto, people decided that they can't possibly have a bank be the trustworthy mechanism to decide if transactions are legitimate. There was no real strong universal reason for this, but there are fringe reasons that banks are not good for everyone (there are numerous unbanked people). So, some other source of trust had to be created. Proof of work is one possible method. Basically, if you are wealthy enough to buy lots of equipment and waste lots of resources, then you must be trustworthy. I can't quite agree with that logic that wealthy people are more trustworthy than banks, but proof of work does function in general. It just is impossible to keep up. There is not enough equipment nor enough energy in the world to do it.

Proof of stake is another possible method. If you have invested enough into the crypto, then supposedly you want to do good and are trustworthy (why would you want to destroy the money you invested in that crypto?). Again, though, it assumes the wealthy are the trustworthy ones because they are the ones with large shares. Also, it has a major flaw. If ~49% of the owners currently online say one thing, they win--whether they are telling the truth or not. Cut a few international cables and suddenly even a small owner can have 49% of the currently online shares and suddenly "hal2kilo gave dullard all his money" is the truth because I said so.

There are other methods, but those are the main two that are being tried. I personally would just go back to banks since it is cheap and works with a lot less "the wealthy are the trustworthy people" hogwash. (Consider for a moment if a bank or a government was wealthy, then we ultimately just put all our trust in that bank or government).
That was the amazing first part of the story in the NOVA show. It was political, somewhat libertarian, I might ad, philosophy which created this whole nightmare. Supposedly creating un manipulable/political money. Sure does burn a lot of power to make it so. I concur with your suggestion of just using banks.
 

Vic

Elite Member
Jun 12, 2001
50,415
14,303
136
Looks like the guy was running a ponzi scheme while donating millions to the Democrats. How much of the money being sent to the Ukraine getting recycled through this guy and then donated back?
Lol.. even when the Republican dream of financial deregulation is realized they still find a way to blame Democrats.
 

fskimospy

Elite Member
Mar 10, 2006
83,717
47,406
136
And now Binance has paused withdrawals after $1.9b in 24 hours. Yet another crypto bank run.

I just looked up Binance's interest rates and they were up to 8%. How does anyone not know that's either a scam or that Binance is using deposits to finance its own investing of sorts?
 

dullard

Elite Member
May 21, 2001
24,998
3,326
126
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Vic

Elite Member
Jun 12, 2001
50,415
14,303
136
I just looked up Binance's interest rates and they were up to 8%. How does anyone not know that's either a scam or that Binance is using deposits to finance its own investing of sorts?
These crypto exchanges are blatant ponzi schemes IMO. How investors keep ignoring this despite all the losses and collapsed frauds this year is just mindboggling.
 

pmv

Lifer
May 30, 2008
12,974
7,891
136
These crypto exchanges are blatant ponzi schemes IMO. How investors keep ignoring this despite all the losses and collapsed frauds this year is just mindboggling.

I really don't understand anything about this cryptobollocks. In particular I don't understand why this stuff requires centrally-controlled 'exchanges' that seem to have so much power to walk off with all the money. I thought the whole point of it was to not rely on such centralised institutions?

Edit - I read something about it (probably in this very thread) that seemed to contrast using 'exchanges' with something called 'proof of work' but I lost the will to try and understand what they were talking about or what that meant. Just seems as if none of this is working out 'as advertised' and am glad I never went anywhere near it.
 
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