Post by fschmidt on Dec 26, 2020 2:46:53 GMT
I spent the last two weeks investigating cryptocurrencies. The value proposition of cryptocurrencies is that they are like digital cash without inflation, thereby being both a good store of value and a means of efficient anonymous transactions. But none of this is true as I will explain. I will look at Bitcoin which is the worst cryptocurrency, and Monero which is the best cryptocurrency.
Bitcoin puts the public keys of people doing transactions on the public blockchain. This means that if anyone can tie your public key to you, then they know all transactions you made and how much Bitcoin you have. And anyone who does a transaction with you will know this. So Bitcoin is not anonymous. Bitcoin also isn't very efficient for transactions for various technical reasons. Bitcoin claims to be immune to inflation because its supply is limited. But Bitcoin competes with other cryptocurrencies that are just a good or better than it is. I have heard people claim that Bitcoin has some special network benefit like leading social media platforms have, but this is nonsense because cryptocurrencies can easily be exchanged so there is no natural monopoly here. Bitcoin currently has an advantage by being the leading brand in a new space, so all the morons flock there. This advantage will fade as people become familiar with cryptocurrencies in general. And when this happens, cryptocurrencies in general will suffer from inflation, especially Bitcoin.
Monero has a much better case than Bitcoin. Its blockchain is designed for privacy. And it is technically efficient. Being the best cryptocurrency means that a case could be made that it won't suffer from inflation. But unfortunately none of this really matters as I will explain.
Monero's blockchain requires a user to use a key to see his transactions. Therefore it is anonymous to those who don't have the key. But it is not anonymous for anyone who can get the key. So someone can point a gun at your head and demand the key, and then the anonymity is lost. And of course that someone is most likely to be the government. The government can simply demand that everyone has to file a read-only key with their taxes. The American government is already moving in this direction with new regulations on exchanges. The government is unlikely to ban cryptocurrencies. Instead it will simply destroy their privacy with increasing regulation.
Monero is efficient, but so are most other new cryptocurrencies. Governments will soon offer digital currencies which will be just as efficient as any cryptocurrency, so this advantage of cryptocurrency over government fiat currency will disappear.
The only advantage that Monero will have over government digital currencies is that its supply is limited. Monero may suffer from competition from other cryptocurrencies, but maybe this can avoided if Monero developers manage to maintain a technical competitive advantage. The real competitor to Monero will be gold. Here Monero has absolutely no advantage since gold is truly limited in supply. The point that gold is not so good for transactions is irrelevant since Monero has no advantage here over government digital currency. And strictly as a store of value, gold wins.
So are cryptocurrencies worthless? Theoretically no. I have thought about this and I can see a way of creating a cryptocurrency without a blockchain. Such a cryptocurrency would be like cash or precious metal coins in the sense that it would be anonymous because no record would exist. To understand the idea, consider how time differs from physical dimensions. Time is a one-way dimension while one can move in either direction in the other dimensions. Therefore the past isn't accessible in time. This property needs to be replicated for an anonymous cryptocurrency. To do this, one can use one-way cryptographic functions. Such a function produces Y from X but it is impossible to get X from Y. If one applies such a function iteratively then one gets a sequence of values with the one-way characteristic of time. And if one only keeps the current value then the past is lost. If one uses this idea to iteratively generate private keys, then one can construct a cryptocurrency where the past is inaccessible.
So are cryptocurrencies worthless? Practically yes. Just because a theoretical solution exists means nothing. Humanity has degenerated into depraved moronic scum, and programmers are the worst of them all, the scum of the scum. Such people hate everything that is good and love everything that is bad. So any good suggestion will be hated and whatever is worst (in this case Bitcoin) will be most loved. I assume that Bitcoin will continue to increase in price because it is the worst investment in history being bought by the worst population in history. Eventually this will come to an end and Bitcoin will collapse. But as the Bible says, God is slow to anger.
So what is the practical course of action? If you are in tune with the trends of the masses of moronic scum, then maybe you can trade to make money from Bitcoin. I am not, so I won't try. Stocks are the traditional form of investment, so that is how I invest. And gold is the most traditional form of money, so I will keep some gold coins in my possession as safe money. And I won't waste any more time thinking about cryptocurrencies.
Bitcoin puts the public keys of people doing transactions on the public blockchain. This means that if anyone can tie your public key to you, then they know all transactions you made and how much Bitcoin you have. And anyone who does a transaction with you will know this. So Bitcoin is not anonymous. Bitcoin also isn't very efficient for transactions for various technical reasons. Bitcoin claims to be immune to inflation because its supply is limited. But Bitcoin competes with other cryptocurrencies that are just a good or better than it is. I have heard people claim that Bitcoin has some special network benefit like leading social media platforms have, but this is nonsense because cryptocurrencies can easily be exchanged so there is no natural monopoly here. Bitcoin currently has an advantage by being the leading brand in a new space, so all the morons flock there. This advantage will fade as people become familiar with cryptocurrencies in general. And when this happens, cryptocurrencies in general will suffer from inflation, especially Bitcoin.
Monero has a much better case than Bitcoin. Its blockchain is designed for privacy. And it is technically efficient. Being the best cryptocurrency means that a case could be made that it won't suffer from inflation. But unfortunately none of this really matters as I will explain.
Monero's blockchain requires a user to use a key to see his transactions. Therefore it is anonymous to those who don't have the key. But it is not anonymous for anyone who can get the key. So someone can point a gun at your head and demand the key, and then the anonymity is lost. And of course that someone is most likely to be the government. The government can simply demand that everyone has to file a read-only key with their taxes. The American government is already moving in this direction with new regulations on exchanges. The government is unlikely to ban cryptocurrencies. Instead it will simply destroy their privacy with increasing regulation.
Monero is efficient, but so are most other new cryptocurrencies. Governments will soon offer digital currencies which will be just as efficient as any cryptocurrency, so this advantage of cryptocurrency over government fiat currency will disappear.
The only advantage that Monero will have over government digital currencies is that its supply is limited. Monero may suffer from competition from other cryptocurrencies, but maybe this can avoided if Monero developers manage to maintain a technical competitive advantage. The real competitor to Monero will be gold. Here Monero has absolutely no advantage since gold is truly limited in supply. The point that gold is not so good for transactions is irrelevant since Monero has no advantage here over government digital currency. And strictly as a store of value, gold wins.
So are cryptocurrencies worthless? Theoretically no. I have thought about this and I can see a way of creating a cryptocurrency without a blockchain. Such a cryptocurrency would be like cash or precious metal coins in the sense that it would be anonymous because no record would exist. To understand the idea, consider how time differs from physical dimensions. Time is a one-way dimension while one can move in either direction in the other dimensions. Therefore the past isn't accessible in time. This property needs to be replicated for an anonymous cryptocurrency. To do this, one can use one-way cryptographic functions. Such a function produces Y from X but it is impossible to get X from Y. If one applies such a function iteratively then one gets a sequence of values with the one-way characteristic of time. And if one only keeps the current value then the past is lost. If one uses this idea to iteratively generate private keys, then one can construct a cryptocurrency where the past is inaccessible.
So are cryptocurrencies worthless? Practically yes. Just because a theoretical solution exists means nothing. Humanity has degenerated into depraved moronic scum, and programmers are the worst of them all, the scum of the scum. Such people hate everything that is good and love everything that is bad. So any good suggestion will be hated and whatever is worst (in this case Bitcoin) will be most loved. I assume that Bitcoin will continue to increase in price because it is the worst investment in history being bought by the worst population in history. Eventually this will come to an end and Bitcoin will collapse. But as the Bible says, God is slow to anger.
So what is the practical course of action? If you are in tune with the trends of the masses of moronic scum, then maybe you can trade to make money from Bitcoin. I am not, so I won't try. Stocks are the traditional form of investment, so that is how I invest. And gold is the most traditional form of money, so I will keep some gold coins in my possession as safe money. And I won't waste any more time thinking about cryptocurrencies.