The discussions about economics applied here focus too much on microeconomic rather than macroeconomic arguments. So they end up missing the point entirely which is this:

Money isn't a neutral instrument and it's not something that can be decoupled from societal/political concepts and structures.

You can evaluate it as though it is neutral, but it has not ever been and will never be a neutral instrument because of the historical tendency for resources to pool and therefore become power centers, among other things.

Therefore if you view cryptocurrency as having the primary intention to de-couple commerce from coercive power structures [1], then you'll see immediately the historical problem. Namely, history doesn't favor distributed power, especially not when it can easily be co-opted by the powerful systems in which they rely.

In the best case scenario for crypto-utopians, millions of people transact and do commerce on a decentralized currency. In that case, whatever sovereign is most impacted, will then either outlaw commerce by crypto by force or require parity with the sovereign currency and control of the crypto currency through tax payments. This has happened multiple times over the centuries with alt-currencies and they are killed off by the most powerful (see: Most powerful economy/military) organization.

Politically, there is nothing different about Bitcoin than there was with the confederate states dollar for example.

[1] From the original whitepaper: "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party." https://bitcoin.org/bitcoin.pdf

In that case, why do we have ~200 nations instead of a single world government? Clearly, sovereignty matters to groups of people.

"Sovereignty of money does not matter to LARGE groups of people" - might be a more defensible argument.

Italy alone used to be a dozen+ independent city states. Divided the world 200 ways seems like a lot unless you look at how much it's been divided historically. And in comparison, that's extremely centralized.

Stealth, space supremacy, global surveillance, carrier groups, strike wings, nuclear arsenals, reaper drones and all the other crazy battlefield robot tech in service or development can cut to pieces any obsolete nation state military, let alone some rebels armed with cheap 3d-printed guns.

So why isn't the US (which has all this tech) winning in Afghanistan over some rebels with AK 47s? Likewise Vietnam after literally a decade of fighting.

Weapons superiority is one factor in winning wars. Likewise, to address the gp's point, the history of political organization is partly driven by military technology.

And the current struggles of the American military only result in hundreds or maybe thousands of American deaths, which historically, would be a mere rounding error. Afghanistan, Iraq, Syria, et. al. are a mess, but they don't come to a significant human cost to America.

The United States and its voting populace doesn't really care about whether or not developing countries are wartorn, and quality of life is decimated—America and other states have completely destroyed the backbone of several societies in the Middle East and caused the deaths and relocation of hundreds of thousands of innocents, but you don't feel the pain of that when you live states-side. So the country has little incentive to quickly resolve these conflicts besides the bad PR; ongoing conflicts mostly buy time for protracted, proxy diplomacy with other major powers to lay claim to natural resources, and aren't viewed as conflict with a tangible human cost.

The number of states waxes and wanes throughout history, there's not a clear trend.

What's interesting is to consider that while the world is very centralized in the sense you described, "day-to-day" operations are even more decentralized than ever. That is, (very generally speaking) order is established and maintained, and people go about their lives without huge, burdensome micro-management from "above" in the important aspects of their daily life.

It probably turns out that the most consequential decision-making affecting the modern person's daily life is happening very locally in the social & spatial/temporal sense. So, in that way, authority is effectively decentralized.

The long run trend is very obviously toward a single government. Consider that until the Sumerians established cities less than 7000 years ago, humanity was just thousands small traveling groups of nomads with no defined borders.

Sovereignty gets a lot of lip service, but in practice most people don't really want it. It's a lot of work.

Is it? I believe there are far more countries now than 30 years ago.

We seem to have some more powerful international organisations now than a century ago, but earlier than that we had world spanning empires, and Europe was less than 10 countries before WW1.

I want to believe that we're heading towards a star trek like unified post scarcity planet, but I'm unsure we're not just seeing a local trend.

Much how King Arthur, Lord of the Britains was not known to the members of the anarcho-syndicalist commune.

Hmm, I think you will have to justify that statement, rather than simply claim it is a very obvious fact. Generally, there were fewer governments in the past as compared to the modern day.

If the answer is no then your point stands. However I tend to think that the answer is in fact yes and the trend does indeed seem to be toward centralized world government given a long enough time period.

all we need is an event that demonstrates the need for a world government - for eg a massive asteroid headed at earth or a planetary scale food drought to see these systems implemented.

the world is stagnating

It's easier for powerful central organizations to influence smaller countries which are divided against each other, while believing that they are relatively independent.

Also: latency of information transfer and the speed of light, which lead to local variance and central filtering of changes which are allowed to diffuse elsewhere.

It's more likely that the cities will become the dominant form of a citizen's home sovereignty rather than a nation, with only a few national boundaries around the world. People are inherently tribal and human behavior isn't changing anytime soon but countries are quickly becoming stretched too thin to keep up with all the varied and changing populations and their needs.

Coase won a Nobel Prize for this. Simply, the trade-off between bureaucratic inefficiency and economies of scale.

The correct starting question is "why do we have 200 nations, instead of millions of individuals and families living autonomously?" and the answer is: human beings are basically tribal people, and military conquest.

And then the answer to your question about why 200 is that military conquest never got any farther before the atom bomb eliminated direct warfare between major nations.

My point is that sovereignty, innovation etc. are valuables which centralization can't deliver. "Monopolies will maximize profits and therefore, under-supply the product" is Economics 101. So, yes, economics of scale and network effects do encourage centralization but there are counter-balancing forces.

What we need is protocols that allow a sliding scale as opposed to non-interoperable silos. DNS, TCP/IP, Git delivered exactly that. While GitHub has the scale and network effects, plenty of people are happily using GitLab, BitBucket etc.

Deltas in space and time plus the fact face to face conversations give you a better idea of the sender's mental state. Comms over the Internet are untrustworthy, if you don't have prior experience with the sender.

Also, language, which is related to deltas in time and space.

From my study of it, it's closer to a ratchet. So while dissolution might happen at the highest organizational level, the hierarchies trend toward growing over successive cycles.

The big political difference is that Bitcoin transcends borders and national governments.

While the United States could have outlawed the Confederate dollar, the United States cannot outlaw Bitcoin because it can be sustained by miners globally.

Interestingly, the United States didn't have to outlaw the Confederate dollar, or the Texas dollar, because both of them were destroyed by their creators through over-printing.

That's not possible. Even if all the governments of the developed world coordinated to ban cryptocurrencies or impose taxes on them, this will be an opportunity for developing countries to use cryptocurrencies as a competitive advantage to catch up financially.

As smartphones spread across developing countries, hypothetical non-minable cryptocurrencies that works well on intermittent or local networking might become relevant.

Are people suggesting that new economics are needed? I don't think most people are suggesting that. They are suggesting that blockchains allow you to implement economic incentive schemes that weren't previously feasible.

> Privacy. It's often taken for granted that decentralized architectures will improve privacy. This seems obvious given everything we've learnt about Facebook, but a better way to think about it is that decentralized systems exchange one set of privacy problems with another. I coauthored a paper a few years ago skeptical of the "decentralization ==> privacy" story in the context of social networks [3], but I think many of the arguments in that paper apply to blockchain/dApps that are being built today.

Nobody serious says that decentralization == privacy. However, decentralization does allow you to to implement strong privacy systems, like Monero/Zcash.

In particular, re: "Nobody serious says that decentralization == privacy" -- this is presented as tautology on regular basis, by people that certainly hold themselves as serious and I'm willing to take as such, on Hacker News and other IT-related forums, as well as many other venues.

"Are people suggesting that new economics are needed? I don't think most people are suggesting that" - a lot of more zealous cryptocurrency supporters are very much on the "this is like nothing we've ever seen before" bandwagon, and/or are explicitly desiring as a goal/hope a massive disruption of economic and financial systems.

Just like, if there are N Christians, there are in my experience N+1 Christian belief systems, so it appears to be the case for cryptocurrencies. People more patient than myself are trying to make a dent by tackling those N+1 arguments, hopefully cognizant that for any set of believes P, they'll be presented with those exclaiming set of beliefs Q which obviously has nothing to do with P, those people into P are deluded/irrelevant, and they would never agree with them (unless it offered them temporary advantage:).

I think maybe you're reading them uncharitably. Decentralization does enable privacy. But it isn't identical and equivalent to it.

That's a mantra I've heard non-stop for as long as I've been paying attention to cryptos.

To be fair, though, I hear it almost exclusively from the evangelists and traders, who have an economic interest in pushing that narrative.

Thanks Arvind for all your work. You're doing some of my favorite work in CS. Every time I hear about an awesome project in privacy/security it turns out you're involved.

There have been very interesting PARALLELIZABLE distributed byzantine fault tolerant systems being built, like MaidSAFE and Holochain. They are based around Distributed Hash Tables and have no centralized bottlenecks unlike the miners in proof of work. This is much older than cryptocurrency, we are talking 2002 - Kademlia and Merkle Trees, used in eg BitTorrent.

That is the key. Any technology, like a blockchain, where the entire network has to store all the data, scales ridiculously poorly. To coin a phrase, it’s EMBARASSINGLY UNSCALABLE.

You can call the opposite of that sharding, but I will call it PARALLELIZABLE. The good news is future is simply to take EXISTING systems (eg the Web) and INCREMENTALLY make them end to end encrypted and make the backend into a DHT where each activity or token is watched by SOME but not all computers.

The current Web topology is scalable but TERRIBLE for security, as evidenced by the steady stream of hacks and leaks and untrustworthy behavior by platforms. We throw up our hands like after every school shooting, as if there is nothing we can do. We can, and blockchains are not necessary.

More details can be found here, including mathematical results from 2009 on the probability of a successful double-spend attack as a function of how many computers watch each token. The results are perhaps surprising: https://forum.intercoin.org/t/intercoin-technology-the-ledge...

Debates about consensus: https://forum.intercoin.org/t/intercoin-technology-consensus

If you want to discuss architecture of DLTs in detail, you are welcome to post in our forum. (The guy arguing in that particular thread is the chief crytographer of Ripple, he signed up to debate ideas of the architecture.)

Anyway the short story is that any “blockchain” system with global consensus simply can’t scale, not enough to support actual transactions. Has a single ETHEREUM token been used for its intended purpose in daily transactions? (Cryptokitties is the closest and it nearly brought the whole system to a halt.) It’s all been relegated to speculation on upcoming things, and this is what killed the dream. The exchanges are centralized databases. The actual ledger they post to when you cash out can handle 10 transactions per second regardless of the number of computers on the network. The same is NOT true of almost any other distributed protocol (email, web, etc.)

On the one extreme, you've got the evangelicals who insist that everybody will benefit from cryptocurrency today and the only reason it hasn't replaced all of modern finance is because of a conspiracy. These people ignore anyone's attempt at a rational counterargument.

On the other extreme you've got people who are very strongly against the idea of cryptocurrencies. They see that tremendous harm can come to individuals who jump into this system unprepared and who aren't aware of the security or privacy implications (for example), because the previous group doesn't admit that there are any. They are also able to see through the greed and the overhype and as a result dismiss Bitcoin for being nothing.

The thing to recognize is that these are both extremes. They both contain some truth, but it feels that the public discourse is largely just a fight between the extremes rather than any meaningful discussion.

If you want to contribute something meaningful to the discussion, be honest. You have some good points in this followup and in your twitter comments, but your opening line is just blatantly dishonest.

> For example, a study of 43 use cases found a 0% success rate

So, apparently nobody is buying drugs with cryptocurrency anymore. Seriously! This line is demonstrated to be blatantly misleading if you give it TEN SECONDS of thought. Did you? In truth, I think you did give it thought, and then you dismissed it because it's a good line that supports the way you want things to be and supports the message you want to push.

> but I merely cited it as an example of why I think the hype is calming down.

You said a misleading thing; own up. Don't downplay it. Nobody expects an apology or anything, but just admit to yourself that it was to some degree dishonest, and think about whether that's really an attribute you want to preserve in your writing and in the way you present yourself, and whether exaggeration which doesn't present itself as such really does anything to advance the discourse.

I find it interesting that OP says public crypto failed because of both fundamental misunderstandings and immature tech (internet trying to compete with newspapers in the 80s). Eventually, the internet was able to compete with newspapers and I think eventually public blockchain will compete with centralized companies.

Networks can benefit from economies of scale without the rent seeking bottlenecks of centralized agents. I agree with op that in some cases centralization naturally happens but it doesn't follow that this is true in all cases.

On a diff note, has anyone read the Master Switch that OP recommended? Worth reading?

In fact I think this is the Big Lie of Disruption. The reality is that instead of breaking up existing monopolies, "disruption" simply creates new, bigger, even more centralised and powerful monopolies.

Economic systems are rather like cellular automata. They either splutter around for a while and die out, or they take over the board and assimilate everything.

Although it claims to solve this problem, blockchain doesn't - not even close. You can only solve it by consciously moving entropy around the system to keep it in a permanently metastable state - supporting smaller structures that generate new information, and splitting up large structures that threaten to engulf everything around them.

This metaphor is amazing. I wanted to reply that cellular automata can in fact produce highly-localized, stable systems (like glider cannons in Conway's GoL). Then I realized that while those systems are stable, they are also so brittle that a single flipped bit will destroy them incredibly fast. That sounds a lot like economics.

The banking system? Sure it ends up a bit centralised but still most countries have their own ones.

Keep in mind that both of those technologies took years. TCP started development in 1973. It didn't fully mature for another decade, and then it wasn't mainstream until 1994-1996.

And even then it was the web that drove the adoption of the internet, not the other way around. Until the web, the internet was more of an academic curiosity.

> Networks can benefit from economies of scale without the rent seeking bottlenecks of centralized agents.

But there are side effects of non-centralized agents -- everyone needs to agree upon running the same algorithm (forking, security holes, etc). And immature networks can suffer a majority attack.

Meanwhile from a security perspective, there's greater efficiency with a centralized system. One security hole can be fixed for everyone on the network in one spot.

It's a dishonest line to come out with and people on Hacker News should know better.

I'm partial to this comment I made recently.

https://news.ycombinator.com/item?id=18538733

The point wasn't to defend bitcoin and blockchain, but just the opposite, to point out how immature the technology is to something vastly simpler, moving data from point A to B on the internet. And TCP took years to get right.

The privacy use case in blockchain has trade-offs and is not a panacea. There are some situations where the centralized efficiency outweighs the risks

Wu also has a new book "The Curse of Bigness" that I recommend: https://www.amazon.com/gp/product/B07HRLQSLG/ref=dbs_a_def_r...

The fact you're able to imagine two different positions and label them both "extreme" does not in fact mean the truth lies as you'd prefer somewhere in the middle.

"Four is an odd number" and "Four is an even number"

... can be portrayed as two extremes with the option to take some vague bullshit middle ground position like "Maybe four is sometimes an odd number" but actually the situation is just that one of them is right and the other is wrong.

How on earth is this a good metaphor for the positions being discussed here?

How about "all integers are odd" and "all integers are even"? That's much more similar to the views being discussed above, roughly "all blockchain applications are bullshit" v.s. "all blockchain applications are beneficial".

Is the statement, "some blockchain applications are bullshit" or "some blockchain applications are beneficial [to some group]" really a "bullshit middle ground"?

If your answer is "yes", then what you're doing is exercising willful ignorance -- there are examples of both bullshit and beneficial applications in this thread and that proves both extremes false.

If the answer is "no", then take a break from the ill-fitting metaphors. A metaphor should preserve the novel properties of the thing it mirrors while illustrating things in a way the reader can more easily understand. If it doesn't preserve the properties being emphasized -- say, if it reduces a continuum of possibilities down to a binary option -- then it's not a good metaphor. It's misleading; its author is pursuing some goal other than the truth.

Extremism is ruining the discourse in the public sphere. It happens in politics, but now more in tech too. Everybody seems to have an opinion and their goal is to push that opinion at all costs, including blatantly disregarding truths. How is this possibly a good thing for communication? Increasingly if I want to have any meaningful conversation -- one where I might get something from it (e.g. one where I will understand more sides to an argument, one where I might change my opinions, one where I might improve my philosophies), I have to go hunt down the people who I know are truthful. That almost always takes me offline, or at least out of the public sphere. And it seems like an oversight that all the real discussion of a thing has to happen in private. It feels like so many lost opportunities that could have benefited more people.