Blockchain as it exists today is a proof of concept. It shows that people can use code to create a monetary system. The system does not need to be backed by any government or physical good guaranteeing its value.
This proof of concept can now manifest itself in a variety of formats. Many of which we cannot fathom today, because they haven't yet been invented. There are many intelligent people now working on this problem and improving the way a blockchain works, or even pulling from that proof of concept and rethinking the solution without traditional blockchain.
People are too heavily focused on what the technology is capable of right now. That is irrelevant. The industry is in its infancy. Up until 5 years ago, the only blockchains that still exist today in any meaningful format are Bitcoin and Litecoin. Litecoin is just a Bitcoin clone.
Just wait and see how this space will develop over the next 10, 20, 30 years. The proof of concept is that people will assign value to digital assets without any authority backing them. That's the most important development.
Yah and that proof-of-concept shows that you need insane amounts of power per transaction, killing the idea completely and making it unusable.
> There are many intelligent people now working on this problem and improving the way a blockchain works, or even pulling from that proof of concept and rethinking the solution without traditional blockchain.
In other words, no blockchain is better than blockchain.
> Yah and that proof-of-concept shows that you need insane amounts of power per transaction, killing the idea completely and making it unusable.
Why? There are many Proof of Stake coins out there too, for instance Dash and NEO (and many more coming).
I mean let me put it this way, how can you even claim that a blockchain requires more energy than a Visa transaction? Isn't the price of a transaction an indicator of the amount of energy needed for it, for ordinal comparison?
For instance, if Visa charges $0.3 per transaction, and another network (Whether it's cryptocurrencies or Gnomes carrying gold from you to the other person) charges $0.2 per tx, then as long as the two compete freely, you can say that the energy required by the latter is lower than the energy required by the former.
Keep in mind, I said 'compete' and 'freely'. Visa may have a higher profit margin because the alternate payment system isn't popular enough yet, so Visa's power expenditure could be much lower than reflected by their tx fee.
No cryptocurrency is a monetary system, they aren't even a functioning currency. For that to happen they would need to fulfill three functions that currently none do. Namely:
A means of exchange
A unit of account
A store of value
They satisfy the first but not the other two. I cannot know for sure what value my coins have on any given day, let alone what they are likely to be valued at by next year. Thus they do not act as a store of value nor a unit of account.
If it takes the electricity consumption of Denmark to secure less than $10bn in transactions, how much will it take to replace the $6tn daily Forex volumes?
Honestly I wish people would realise how utterly pointless crypto is as a currency. Maybe then I'll get a cheap graphics card.
Definitely one issue with crypto-currencies today is that they have volatile pricing which makes them difficult to use in commerce. There are several projects working to use smart contracts in order to peg the value of the coin to currencies like USD, EUR, etc. As liquidity increases in decentralized exchange formats, such as atomic swaps and DEX applications, there will be enough volume to properly manage these smart contracts to peg coins to fiat currencies.
A unit of account from my understanding simply means that other people are willing to price their goods/services in your currency. This is a by-product of people participating and using the token, and it being stable enough. So once there is a "stablecoin" that gains traction, this will surely follow.
I've enjoyed your posts in this thread but I have a question. How are the projects you allude to fundamentally different than PayPal, iPay, GooglePay, Venmo or just strait up Visa or MC?
Crypto-currency is different in the sense that it is decentralized. Paypal and other payment systems can and do freeze people's balances at will. Many countries have features disabled. Some countries are flat out discluded.
At the end of the day, there is no button that can be pressed to remove your access to the system.
The problem is a catch 22, you cannot be stable until you gain volume and you cannot gain volume until you are stable.
Simply using a smart contract between two parties doesn't give the underlying coin stability, and it introduces the risk that one party ends up with an undervalued/overvalued coin. The average person will still earn in dollars, shop in dollars, pay tax in dollars and do accounts in dollars. The demand for crypto as a result will be restricted to speculators, criminals and (some) geeks. I cannot see stability anywhere on the horizon.
Their value is so volatile because their total valuation is not big enough to make them stable. Multiply Bitcoin's or Ethereum's total valuation by 100 and suddenly you have a much more stable asset at the price range of gold. And being stable makes them way more valuable so their price would keep increasing just because of that.
To solve proof-of-work consuming too much electricity, Ethereum is upgrading to proof-of-stake which is on the roadmap and consumes a negligible amount of power.
Their value is so volatile because they have no intrinsic value, no government (that I am aware of) is demanding tax paid in a cryptocoin. There is also no mechanism for increasing the value of the coin, through a central bank interest rate. There's also no means to increase the supply (after mining runs out) to allow for economic expansion, eventually you will end up with run away inflation, with no mechanism to control it. Honestly they don't work as currencies, they are speculative assets underpinned by some interesting but largely redundant technology.
Proof of stake is built on trust, much like the financial system, so why reinvent the wheel for a corruptible ledger of a non-trustless, non-currency?
This is probably the one "feature" of blockchains that will kill it, since they're based on proof-of-lots=of-work, and work needs power.