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dale_glass t1_izfq4ap wrote

How is cryptocurrency ever going to work as an actual currency? It's been around for more than a decade now, and as far as I can see, this idea has completely failed on several fronts:

  • Cryptocurrency scales extremely badly -- it relies on every node performing a significant amount of work, and which is exactly the same calculations done on every node. This means it can only run as fast as the slowest node wanted on the network, and that extra nodes don't add capacity. If say, ETH bumps its limits it means some nodes won't be able to keep up and desync.
  • Inflation seems an unsolved problem. Either there's none, in which case the currency deflates and becomes unappealing to use as a currency. Or it inflates at some constant rate, which means it's unlikely to match economical needs.
  • Decentralization isn't working on the user end -- exchanges and custodial wallets are plentiful. Dealing with the actual network as an user is complicated and impractical.
  • Decentralization isn't working for governance either -- In practice cryptocurrencies have "tiers" of users. Developers, miners, and exchanges have far more influence than normal people, and turn into effectively new, unelected rulers of the system.

So, are any projects working on fixing these issues, and how?

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novapbs t1_izg5x8h wrote

Oof, I mean, you're not wrong. At all. When we talk about what cryptocurrency is notionally doing it has failed to meet all those criteria. Not truly decentralized, by a long shot; not really circulating as currency, huge problems with scale, huge problems with consistency of value (as opposed to hyperinflating or remaining deflationary and therefore hoarded). Far from the goal of transparent and trustless, in terms of how third parties and middlemen are now everywhere in the process: the exchanges in particular have been, obviously, a catastrophe.

(EDIT: sorry one more ranty point: the WHOLE DAMN PURPOSE of the p2p blockchain apparatus in Bitcoin was so you didn't need exchanges, custodians, or banks! You could have a trustless, transparent account and settlement system that didn't require any intermediaries! You didn't need some loser in Miami purporting to be a custodian whose admin password is "dudesrock1" losing your life savings! And yet here we are.)

This is not a satisfying answer, b/c I don't see any work happening in the current landscape to directly address it -- but also, I'm a historian rather than an industry dude so I might be missing something.

But with my historian hat on, I would say that part of what we're witnessing now is the consequence of a prototype technology with a philosophical agenda that is smacking into the reality of how it is being adopted and used. BTC originates among highly technical people -- being kicked around as a fun experiment on a list for cryptographers -- and was never intended for broad adoption. It was trying to square a conceptual circle -- to produce a provably unique but fungible digital object, which could be verified while being impossible to copy -- with an idiosyncratic goal in mind: to make something digital that could hold value like a precious metal. It's got all these weird incentives, most of which have backfired in one way or other.

Not to be glib, but due to a unique combination of historical and economic circumstances (particularly with technology hype cycles), we ended up with a lot of people -- everyday investors, big whales, miners with all their sunk costs in equipment, the people who loan money to miners, hell, even pension funds -- with a whole lot of money put into what is effectively the alpha rollout of an experimental technology. It's as if we, as a society, went completely 100% all in on wood-burning, steam-powered cars and then just kept tinkering with those forever.

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