The ideas that Ethereum is innovative, that there are lots of possibilities in cryptocurrencies/blockchain, that at the moment the scene has major environmental issues, and that the current high valuations are unjustified, to my mind can all be true at the same time.

I'm part of a community that's currently being overtaken by the crypto art craze, and I'm still convinced it's "all for a quick buck".

The crypto art economy seems to be driven by "collectors" who will drop thousands of dollars on anyone who can get them more exposure. People who have no followers and aren't tweeting about NFTs every day generally don't get their art bought. Some of these kids who made $10,000 off a png then feel some social pressure to put some of that money back into the community, so they purchase more crypto art with the proceeds.

Some collectors openly advertise their ongoing bids on social media. They want people to see that they're dropping big money on art. If it was a true art collector, wouldn't they not want to be outbid? Wouldn't they be hoping that there were as few people in the auction as possible? None of it smells right to me.

A lot of people buy art not because they like looking at it, but because they want everyone to know that they have lots of money to drop on worthless art purchases. This motivation is reinforced if a.) everybody knows how much money they're dropping on art purchases and b.) the price keeps going up, yet they still win the bid. They want the price to go up, since a higher price just signifies how baller they are.

You get the same veblen bragging rights, the artist (assuming they are not simply your own alter ego) gets a visibility boost and nobody is going to be motivated enough to go digging around the custody trail to prove this was a sham.

This sleight of hand (in a slightly modified form) is standard operating procedure for inflating the value of ICO offerings (and by extension, crypto as a whole); I don't see why people wouldn't do it for NFTs, with the same motivations at work.

They've succeeded in demonstrating their wealth, but no one has any idea who they are, which seems to poke a hole in that theory.

- Is the long term alternatives to PoW actually viable, given the huge power consumption of cryptocurrency currently?

- Are the valid use cases (other than drugs, ransomware and speculation) worth the valuation?

- If Tether collapses, due to the reports of its sketchiness, what will the shock to cryptocurrency, broadly speaking, be?

PoS and derived schemes like DPoS have been sound on paper. Their drawbacks have largely been accepted by the community as a good tradeoff for most usage models. However, it can take years of "production" usage to get a good feeling about the long term macro economics, so I wouldn't expect a straight answer to this. The good news is that there will be plenty of big tier networks like ETH2 and EOS experimenting with different variants.

I think it's fair to say that the current valuation of cryptocurrencies have nothing to do with their tech or use cases. These markets have the same signs as the dot com bubble. However, there are valid use cases if you're willing to search for them. One of them is decentralized DNS name registration without third parties like GoDaddy or ICANN (https://handshake.org/), though this is a market, not a currency per say.

- Read the whitepaper of whichever crypto you're asking about. The answer is "it depends", because each one exists to fill a different niche.

- Nobody really cares about Tether, so probably nothing.

There’s more wrong with PoW besides just environmental effects. PoW creates different incentives for a blockchain’s miners than for its users. Often these are conflicting, and have a tendency to gridlock the protocol development. This is especially pronounced today in Ethereum where the majority of users are in favor of certain protocol upgrades that would scale throughput, but miners are opposed to it because it comes at an economic cost to them.

There’s no inherent reason for this dichotomy between users and miners: if it’s the same people using the protocol as securing it, you’d expect to have better outcomes for everyone. PoS makes it so that the users are also the ones securing the protocol. It’s not _perfect_ alignment, but it is much more aligned than the miner/user split in POW.

Memory-hard PoW algorithms, rather than computational ones, might be one way to reduce the amount of energy. Memory is expensive regardless of whether you make ASICs or use regular PCs.

The present demand is spurred by the boom phase of a potential boom-bust cycle (similar to oil). You have two (actually more) sources of demand: crypto, conventional buyers (retail and industry customers). If they adjust production upward (which requires an investment of capital) to meet the present demand then they reduce their profit, prices will go up (at least a bit) to compensate. But they also face another risk: what if there's a bust? If the crypto demand for hardware bottoms out (whether because of a change in crypto or having satisfied the demand) they will be left with excess capacity and potentially excess inventory. The increased production capacity may be able to be redirected to other productive endeavors, or it may just end up idle. And the excess inventory has to be sold off at a potential loss as the hardware becomes worth less and less as each day passes (plus holding inventory costs money).

Instead, if they leave production as is (or only increase it slightly) they can virtually guarantee their products will sell out and increase the prices because they know people will continue to buy it. Obviously, the retail and industry customers get screwed because they have less profit to make (if any) directly off the hardware purchase, but the miners will continue to buy almost without regard to the price because their profits (presently) justify the investment.

This is doubly true for people outside the US, not to mention people who are trying to skirt capgain taxes. Of course, an argument could also be made that a tether failure would cause people to flee to BTC or ETH and paradoxically cause prices to rise.

2. Yes.

3. It'll be a significant issue for decentralized exchanges and liquidity pools, but far from existential. The seasonal Tether FUD is generally overstated. (I have done a detailed analysis of this, but it exceeds the scope of this conversation.)

This is sadly a non-answer to the question posed.

I am asked this question all the time by people I know, and the best I can come up with is illegal activities, super niche tech applications (e.g., DNS name reg), and libertarian fantasies.

You have an audience here at HN who is more than willing to advocate for cryptocurrencies if they/we can be shown a compelling use case.

“Yes” is not an obvious compelling use case.

Please elaborate.

That's the answer to your question.

I’m sure this answer will send them running to buy.

/s

All joking aside, for a conversation you say you have weekly, this is a really lame answer due to the abstractness of it.

My guess is the reason you don’t give concrete answers is because either tech already exists for that use case or non-crypto tech could be easily developed if it doesn’t already exist.

Please, please, prove me wrong. I want to be a crypto fan, but vague answers like the ones you provided above are the reason a lot of people think crypto is smoke and mirrors and/or snake oil salesmen.

>...any kind of marketplace or platform but with community governance and no rents, decentralized exchanges, global-by-default payments, highly interoperable and efficient financial infrastructure...

As seen in various forms here: https://ethereum.org/en/dapps/

I can only guess that you are not familiar with the technical jargon.

Your pleading strikes me as potentially disingenuous, but I will speak earnestly in spite of that.

You will or (will not) be a "crypto fan" after you've absorbed enough technical literature to make your own judgement about what is happening. If you have the time, I recommend starting with the Bitcoin and Ethereum whitepapers.

I am familiar with the jargon.

The list that was provided was of abstract ideas without stating a specific market — any market.

The ethereum apps you linked to might be interesting from a technological standpoint, but they don’t really add value — they just are [banking function] or [payment function] with cryptocurrency.

The most generous example that I can come up with is that crypto makes it possible to displace PayPal and similar payment processing middlemen, but I’m not sure most people (outside of a few legal outliers) actually want those middlemen replaced. So even then, the issue isn’t that crypto is so great, it’s just that the fiat currency system is slightly inefficient while being incredibly fixable.

I guess I just don’t see the demand in the marketplace for what crypto is providing the supply for (other than as a tool for speculation... it’s really good at that).

I will offer some criticisms:

Aave - Earning interest on a speculative asset with counter party risk seems a bit silly. Most of the risk is bundled in the asset itself. If you invested $1,000 in a token as a small percentage of your retirement portfolio you're probably hoping the return is 20x. In this incredibly logical scenario 2% is meaningless.

Uniswap - It's cool if you trade tokens because it skips the extra step of sending the asset to a centralized exchange, trading it, and withdrawing it. The centralized scenario might actually be cheaper. Either way it's only impressive if trading tokens is impressive. And at this point it's not.

They both said some variation of “why would I want to use that?”

The product of crypto does a crappy job of selling itself.

It’s certainly not fun to contribute to Geth nowadays when every bug can have huge consequences, and the community constantly demands more performance so they can have lower costs. Peter was very clear about the burnout this causes.

You can simplify that to - It’s fun to work on things when there isn’t pressure to work on them.

I’ve run into this multiple times in my life, including in the blockchain space, but it isn’t really anything specific to Ethereum. Though I do feel like the author has a limited view and is attributing this to be something Ethereum specific.

https://news.ycombinator.com/item?id=599852

The only surprise is that HN is still a terrible place to discuss crypto. Not many posters or commenters seem to have much knowledge, which is strange for HN

So in the spirit of education - what amazing things are there about ethereum or Bitcoin that will change my mind about their intrinsic value that I don't already know? (My current opinion is that the intrinsic value of PoW systems is negative due to low actual utility and very high cost.)

For me in my daily work, this manifests itself as companies that want to use more obscure currencies as a transaction method in games. I say: "That currency is not on a lot of servers, how will you protect against 51% attacks?" They say: "All transactions are also verified by trusted servers.." So does the person understand what they are talking about, or are they used to talking to people (investors / business partners) who don't have a great understanding. Doubts raised.

However: There are times when experts dismiss new things and are wrong. So I try to keep an open mind.

But really, it kind of feels like the Tether investigation is the only thing shaking up the ecosystem in an interesting way, and it's doing so at a glacial pace. There really isn't much else new to say.

Every year the USD is worth less. Every year BTC is worth more.

Hope that helps.

These are the sort of real-world constraints that you can't just ignore. Attempting to do so makes me less charitable towards other assertions you might make. You come across as an idealist talking about their perfect dream world, not someone describing reality. Now don't get me wrong - it's important to have a perfect dream world. If you aren't working towards something, what are you doing?

But at the same time, you have to accept that "this system is perfect, if you also change these thousand other things" is not compelling to someone who doesn't share your idea of utopia. To convince someone like me, you have to explain how the system improves the world as it exists now.

These constraints were drafted by a handful of rich white bankers in a secret meeting. I have no problem ignoring their constraints. It seems you do.

Can you imagine all the hot-takes HN would generate if email were invented today?

"You can't just encroach on the sovereignty of USPS like that" "Electronic Mail doesn't do anything the pony-express can't do" "If we allow Electron Mail then how do we attach a postage stamp"

Email adoption, like Crypto doesn't require convincing the entire population. The laggards will join eventually.

I think we can do better.

(As for your email counterfactual... Why? Do you find it an effective rhetorical tactic to imagine what people might do instead of looking at what people have done?)

This Jeff guy, what a radical. Probably will never amount to anything.

No one said those things. Why would they?

People do bring up quite reasonable objections like environmental costs, but it stories get a lot of upvotes and suggesting many people are strong supporters.

Also, proof of stake will reduce 99% of the environmental cost.

I immediately found this: https://www.bloomberg.com/opinion/articles/2021-01-26/is-bit...

"One Bitcoin transaction would generate the CO2 equivalent to 706,765 swipes of a Visa credit card,"

Another way to look at it:

Bitcoin uses over 0.5% of the world's electricity: https://interestingengineering.com/why-bitcoin-mining-consum...

With that, Bitcoin does about 300,000 transactions a day. https://www.statista.com/statistics/730806/daily-number-of-b...

But there are over a billion daily credit card transactions alone - 3000 times as much.

So if each credit card transaction were replaced by a Bitcoin transaction, we'd use 30 times as much electricity as the entire planet produces.

---

These numbers are so grossly lopsided and so widely bandied about that when I hear someone say, "I have yet to hear anyone make an analysis of the environmental cost" I think, "Perhaps you don't want to hear it."

Meanwhile, we're burning coal to produce bitcoin whose only value is that number gets green and goes up. Eth is slightly better on that point, but still wasted multiple TWh of electricity while it was in PoW mode, and it still is today.

Waste would be an incandescent bulb that throws away the majority of its energy generating heat that isn't used for any purpose.

This should be obvious when you consider proof of work systems that generate less waste heat by using a memory bound rather than a computationally bound algorithm. They both operate on the principle of wealth destruction as all proof of work algorithms do, but you get different externalities.

Interestingly, if you found something really useful to do with the waste heat of crypto then the systems would become roughly equivalent.

PS: The idea of a memory bound algorithm is 1 million dollars of RAM consumes less energy than 1 million dollars of ASIC’s.

..which in the case of the average crypto, is overshadowed many times over. One block mined equates to $333K worth BTC generated alone, and that's not counting the value of every transaction included in that block. A block happens every 10 minutes give or take, so in an hour, that's about 2 million worth of coin generated and 13K transactions.

There's no way on earth every bitcoin miner, combined, is using $2M+ worth of electricity every hour, even factoring in negative environmental externalities (which in the case of crypto mining, will be lower than most people think given their proximity to renewable, hence cheap, energy.)

It is, objectively speaking, not a waste.

Similarly, as I just pointed out different algorithms would use more or less energy and therefore be more or less efficient. Thus the heat produced is a waste byproduct mining, and electricity is the fuel. A more efficient process simply uses less fuel though it may have higher capital costs.

The same is true of say cars, you’re burning gas because driving is useful. But, increasing efficiency means less fuel while creating identical value etc etc.

It seems to me that crypto is being unfairly singled out. Things that are digital have meaningful existence.

It’s directly offensive to many people in the field that an inefficient first implementation is maintained because people’s investments in hardware are considered more valuable than anything else. Not latency, not transactions per second, not environmental costs, just maximize the value of their hardware investments.

Completely understandable, yet still horrific.

That’s not meant as an attack, it’s simply a ballpark comparison. For those pro crypto take it a sign of possible future growth.

Of course even if you count all that, the power consumption per transaction will be at least five orders of magnitude lower than the 0.6MWh per transaction in BTC.

Before you start with the morality of the situation, just ignore that. You wanted to see a real use case, and I am telling you about it.

As it turns out, not everyone shares your moral code, or lives in the similar legal system which allows them the similar property rights.

Replace that person with a Venezuelan whose currency is completely destroyed and Venezuelan Americans are trying to provide their families with money.

The sky is the limit in terms of innovations possible, it's literally some code running on the global computer that is Ethereum.

You might say "why the hell would I do that?", in order of importance: 1) you hold on to your asset's appreciation, 2) access the liquidity, 3) avoid capital gains tax.

So you're right, this isn't a thing that exists today outside of crypto because it's not needed outside of crypto. Someone who can pay a loan back as part of the same transaction in which the loan is issued is not a default risk, and in the real world you just don't bother with the loan: you just pay for the underlying transaction directly.

Are we really allowing blockchains to annex the word "crypto"? "Crypto" is "cryptography". HN is not "anti-crypto", it is staunchly pro-encryption.

Sure, usually the tokens come with a print, and you support the artist, but those are things you can do via other means. What is the NFT adding? It seems only slightly more authentic than "buying" a star from a star registry.

I know artists that think this is going to be their ticket. But it was never the lack of crypto that kept them from making money. It was the lack of any consumer value to their art.

There are two ways to make money as an artist: you either make a few, huge pieces that sell to very rich people (making your yearly bank on one or two pieces), or you make a huge number of easily reproduceable pieces that sell to the general populace. The difficulty in both is not the creation of the pieces. It's the marketing and sales pipeline. Both rely on selling a purchaser a narrative on what the art will mean to them. Exclusivity in the former, worldliness in the latter.

If you can't crack that marketing problem, you're going to ask equally zero pieces as NFT than as any other medium. And if you can crack that marketing problem, selling it as NFT does nothing for you as the artist.

A lot of times, people just want a limited-supply token from a third-party saying "yes, I paid for this, and that distinguishes me from the hoi polloi who got it for free".

1. What is the value of art?

2. What is the value of money?

When we look for analogues, they're of the industrial era, things about intellectual property, branding, merchandise etc. This is a way of directly speculating on an idea. Is it a good idea? If so, then other people will want it, right? Then, the token must have value. There are no gatekeepers or enforcers to say otherwise.

We have barely begun to grasp what that means.

And yes, people have made a lot of money on pure speculation too. That's not an application.

Until we see some actual real-world uses for crypto - full-time, serious uses, not someone buying a pizza as a demo - that aren't crime, we have every logical reason to be desperately skeptical of this overhyped technology.

The point of Ethereum was to build an open world computer, to decentralize power, to build collective intelligence, and to supersede the corrupt global financial system with non-speculative economic models that served the needs of humanity and the planet.