Just using BTC to replace all of McDonald's daily transactions in the Berlin metropolitan area alone would be enough to destroy the system. (Of course this is where people come along and talk about layers on top of BTC, but all those seem to me to just be extra ways to replace trivial transaction-level auditing with Turing-hard code auditing).

It also seems like those "layers on top of BTC" erode one of the only aspects of blockchain that has appeal for me -- the full transparency of the system, such that you can see every exchange of BTC on the network.

The minute you offload any of that to other systems, you're essentially creating dark pools and money laundering opportunities because of differential oversight.

If there's one thing that people should correctly point out as scams in the world of crypto, it should be L2 chains. Every single one of them is a ploy to enrich their creator, full-stop. I don't even know what kind of pipe dream they sell to their investors to get capital.

It's particularly funny, because I remember Justin Sun trying to scam people like this years before cryptocurrency had really taken off. Back then, though, everyone who had skin in the game actually cared about the health of the community, and the guy lost millions of dollars trying some really insane hostile takeover tactics. Nowadays though, nobody cares. The hucksters of this world make their money hand over fist now.

That’s a rather myopic view.

You could look at L2s as a sort of credit card system, and from a systems and technology POV there’s nothing inherently “scammy” about it. For web3 applications of any meaningful large scale, L2 solutions are necessary.

For better or worse, the L2 developer platforms that I assume you’re referring to are essentially low-code solutions to abstract away the actual systems software engineering aspect of web3 development. Are the low-code SaaS companies overvalued or “scammy”? I’m not suggesting they are or are not.

Well-staffed tech companies building web3 applications often build their own implicit L2 solutions because it’s just how you connect things in a distributed system with modern L1 blockchain constraints.

I think the person you're responding to was talking about Bitcoin L2 chains, probably more specifically the lightning network.

I actually agree with that about Bitcoin.

Web3 is generally done on EVM or cosmos chains, some of which are L2s (and some of which are loosely considered L2s). But most of them are still separate chains, so not L2s in the sense that the Lightning network is an L2. If you're looking at EVM chains, then L2s are certainly required to handle significant throughput, but the "lack of transparency" mentioned by GP isn't an issue with them.

How is lightning “a ploy to enrich its creator”?

Especially considering that it is being independently developed by three organisations as an open source protocol that offers complete self-hosting and doesn't require an intermediary during operation...

Basically it leads to hubs forming where lightning nodes with large amounts of funds are better able to facilitate transactions, and also benefit from that due to transaction fees.

This is as clear and succinct a statement as to why "web3" has nothing to offer as I have read.

Translation: we will rebuild existing financial institutions with a bunch of move-fast break-things poorly-regulated "difi" companies which will both intentionally and through ignorance recapitulate every flaw of the existing financial industry.

Purpose: as in the Celsius case, to intentionally exploit regulatory response time so as to extract money through opaque extra-legal and unethical exploits, intended to allow ourselves and chosen insiders to run off it, leaving deluded last-fools holding the bag.

There is literally no benefit to anyone except the VC backing the scam, who are using chaff and FOMO to farm rubes.

I think this has been going on for at least 2000 years…

It doesn’t matter if it’s crypto or gold, there will always be people manipulating financial systems, but that doesn’t mean any system is inherently good or bad.

https://en.m.wikipedia.org/wiki/Financial_crisis_of_33

https://en.m.wikipedia.org/wiki/Financial_crisis_of_2007%E2%...

https://en.m.wikipedia.org/wiki/WeWork

> Well-staffed tech companies building web3 applications often build their own implicit L2 solutions because it’s just how you connect things in a distributed system with modern L1 blockchain constraints.

Sure. The banks do the exact same thing, which is what makes them so goddamn profitable to run. The problem is that the entire cryptocurrency space now has to choose between two destinies:

a. Default on the trustless model in order to continue scaling, passing the actual verification process to private validators who may or may not be scamming you.

b. Let every token lose it's value, allow the system to suffocate and continue pushing for airtight security until the bitter end.

Now, neither of those are attractive choices. I'll tell you what, though: I'd rather have a $20 bill than $20,000 of Monopoly money.

> I'd rather have a $20 bill than $20,000 of Monopoly money

All currencies we use are smoke and mirrors. The difference is that that $20 bill is backed by well armed US Marines and an crypto currency is not

Can I sell the underlying Marines in the event I lose faith in the investment?

I’m a relative crypto noob, but I did see certain “lightspeed” transactions which would allow for high-volume and “instant” transactions. Is this also considered an L2 chain, or not? If not, how does it circumvent the limitations of the bitcoin blockchain without sacrificing transparency?

> Is this also considered an L2 chain, or not?

I can't say for sure without actually seeing the tech, but if a company promises to scale cryptocurrency transactions then they're probably doing it on an L2 chain. The problems with this are obvious: trusting a single party to handle all of your transactions and not abuse that insider info is crazy. These people are going to use their power over the chain to eke out every cent they can, otherwise it doesn't make financial sense to operate in the first place. It looks attractive from a VC standpoint, but that's because it's a deliberate honeypot.

What about a decentralized L2 with zk-proofs?

I don't know, and I don't really care. Any sufficiently complicated technology is indistinguishably from magic, and I don't trust magic to manage my finances. L1 chains are simple and their trust models are transparent, I don't think any L2 chain is going to see widespread adoption when decidedly better alternatives exist.

> one of the only aspects of blockchain that has appeal for me -- the full transparency of the system, such that you can see every exchange of BTC on the network.

Which is interesting for many applications but kind of kills BTC as something that could be an everyday currency.

I'm already uncomfortable with the amount of data my bank has about me. No matter what scheme has been used to obfuscate it, I'm not comfortable with that data being held by anyone with a hard drive and internet connection.

And you're trusting some central authority to manage your money along with that of countless others. You're right back in the same situation you presumably wanted to avoid with fiat and banks, only with exponentially greater environmental impact and no regulations in place to protect your money when things go FUBAR.

The L2 systems built on bitcoin have faults, but centralization is not one of them. You don’t go custodial when you put bitcoin into a lightning channel.

and the L2 systems on ETH have even fewer faults.

Money not stolen by who do not earn it. I love the idea.

But this feels like "Just using Model T's to transport all of the corn in the early 1900's would destroy the Model T system." Doesn't really say anything meaningful about "the impact of cars and trucks."

I don't get why this is a useful argument; BTC and/or Crypto is definitely going to evolve. The question is how.

The problem, as with many things from the current tech cycle is that the valuation demands that this techomnology is available today.

DeFi may need to evolve, and it may need to do something other than blockchain - but something pre-product/market fit shouldn’t have a multi trillion dollar market cap.

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> The key difference is that BTC and all cryptocurrencies in general are not getting better about being scalable to many total transactions and transactions/second - they're getting worse.

> This is true for all blockchain-based currencies, and it's fundamental to the technology. There is no "fix". It's not just a case of poorly written code or limited infrastructure, it's the core premise of the idea that's rotten.

You are very confident for someone who seemingly hasn't researched much about optimistic and zero knowledge rollups. These systems inherit the security of Ethereum while providing exponentially greater transaction throughout which means scale improves and these networks cannot steal your money or do anything nefarious.

Honestly, that someone can be this confidently incorrect is really fascinating to me, both in theory and practice.

Even setting aside the fact that you're wrong in practice (i.e. there are already far more efficient cryptocurrencies in existence today) it's just very weird that the sort of person who goes to a site like this will confidently say something that's roughly equivalent to "We've reached the maximum speed of CPUs, they cannot get faster than this."

This sums up how I feel about so many crypto related comments on HN. Just look at this thread. It's full of people confidently presenting 100% false statements as facts. Several of the comments contain something like "I looked into crypto years ago and then I saw problem X and discarded it." My guess is remorse because they could have been "early" compounded with confirmation bias.

To anyone who spent a few hours, days, weeks looking into crypto a few years ago and thinks you have any idea what's been going on in research in the field since then you're sorely mistaken.

Most people did not have a car in the early 1900s. Not everyone can go into space today, it doesn't scale. BTC may have a maximum number of transactions today but many are using bitcoin and the big advantage is it doesn't matter how much you move you pay the same transaction fee. It is not ready for micro payments but works great for larger payments.

What size transaction do you think it helps with? My transaction fees are usually zero, even internationally, with the only exception being trivial costs when I visited the USA. Conversely, when I bought a flat I was legally required to add the much larger in-all-but-name transaction fee of having a lawyer sign off that I and my money and my payment of it and the flat itself and the seller I was buying it from were all legit, and still would have had that even if I'd used BTC.

I think the argument for this would be that things like smart contracts could do away with lawyers and such.

Except who vets the smart contracts? How does the customer execute the transaction in a fool proof way?

You've perfectly hit why "Smart Contracts" are perhaps literally the worst named thing in tech. They're not smart, and they're not contracts.

In real life, the things we "Contracts" are not the the execution of the transaction itself, they are the written statement that attempts to describe the intent of the parties and most importantly -- what you do if things go wrong.

Despite what I've said above, I will definitely go full Luddite and say we are not remotely close to a world in which the lawyers are not needed.

They're definitely contracts, just programming ones, not legal.

While I'm generally not a language prescriptivist, I gotta say no here. In real life, up until now, AFAIK we have NEVER used the word "contract" to refer to the underlying act that the contract is about. We've ALWAYS used it to refer to the associated documentation/statements of intent about the humans involved.

"Building a house" is not a contract. It's an act.

They're NOT CONTRACTS. They're automated transaction robots.

> up until now

I gave up telling people not to call cryptocurrency "crypto" — I would suggest suggesting a better term, or expect to be disappointed/it to continue.

Again, different -- This isn't a mere choice of word thing. It's that uninformed people are making harmful, and perhaps even stupid, choices because they are relying on an effectively false phrase -- where the "real version" of the thing is essentially a safety mechanism, and overzealous tech bro types absolutely incorrectly believe that their thing can replace the real thing.

Now, as a lawyer, I could just sit back and wait for the f**ups to happen and get paid cleaning them up -- and I might -- but also, I like the idea of warning people as well.

In a world where people think the phrase "autopilot" means the pilot of the plane can take a nap, I think we're doomed to disappointment.

Your transaction fees are zero. Most people sending money through western union don't share that rate and western union requires id and travel to a pickup place.

That sounds like a problem with Western Union, not a problem with e.g. USD.

You're comparing apples to oranges. Debit/credit card transactions are done through centralized systems. Bitcoin transactions can also be done at scale on those same centralized systems (aka "off-chain transactions").

Then you are back to having a bank… Then what's the point?

You have the option to settle down to a decentralized system. Imagine the US still on a gold standard. If you lose trust in USD because of changes in the government (election of obviously corrupt or incompetent officials), you can settle out of the US Dollar to gold, which is apolitical and allows you to be self-sovereign.

The breaking of the gold standard has allowed the US government to extend its monetary base significantly, which is a price future generations (read: our generations) will be footing the bill for.

I'm a bitcoin maximalist, but I don't mind if all existing banks were to build a second layer that scales vastly, so long as I'm allowed to settle my bitcoin in their ecosystem with bitcoin on chain.

THIS. I feel like I keep smashing my head against a wall explaining the same thing to everybody. This isn't quantum mechanics. Why is this so hard to understand for others :(

Your money can't be debased. You can withdraw your money from your bank (digitally).

It would. Agreed 100%.

This is why second layer solutions are being built, which offer the option of settling on-chain at the user's request. Second layer systems allow you to transact within that system without needing to publish each transaction. Block space is valuable, and your 1c purchase probably isn't worth putting on everyone's hard disk for all eternity.

Bitcoin is actively managed to prevent bloat to keep it decentralized. A layered system allows you to scale massively, much like the OSI model used by the internet.

Gosh. Have you guys even heard about the Lightning Network? Throughput higher than visa. We're already well past the scale needed to handle the world's txns.

https://watcher.guru/news/morgan-stanley-says-bitcoin-lightn...