A Review of Cryptocurrency

Yes, in many cases they are, but people who say this often aren't getting the whole picture. Popular cryptocurrencies such as bitcoin often have the expectation attached to them that whoever is marketing it is either a sleezy businessperson trying to take your money, a financial institution that likes gambling on retail liquidity, or a libertarian techbro whose only hopes are to make a money that is untracable, often to the detriment of society due to factors such as the lack of financial regulation, sound monetary policy, high transaction fees, etc. Bitcoin in particular takes a lot of the blame for being the biggest Ponzi scheme on earth. However, if other cryptocurrencies have value, that would peg the price of bitcoin to being the de-facto metric of cryptocurrency success, thus pegging it to some real value in the world.

To prove what I just said, most cryptocurrency prices move with bitcoin, rather than moving independently, which is a fact known to almost anyone that has done trading in the cryptocurrency world. Additionally, because bitcoin is the first of these currencies to exist, it is basically the face of the industry, with the largest market cap (as of me writing this) out of all of these cryptocurrencies. In essense, purchasing bitcoin is equivalent to an informal prediction market on cryptocurrency success, plus the added cost of the small chance it has of replacing fiat currency (something I think will not happen).

You have ownership to a pointer of a picture but not the rights to the picture via copyright. This is correct, but this is not usually what people value. Rather, what people value when they buy digital artwork is just some conception of "owning" the picture in question. Yes, you can copy the image, but the particular token you are trading will always be both non-fungible and scarce.

Smart contracts! DeFi! Web3! Those are all just buzzwords, they couldn't mean anything, right? Well, if you've actually been paying attention for long enough, you can assign a meaning to all of these words in a completely logical manner. DeFi is actually a particularly interesting usage of smart contracts, as it allows one to automatically transfer liquidity (make loans, make financial contracts between willing parties; see AAVE). This is useful because it automates the job that banks have. We like automation when it comes to everything else (unless you're a luddite or don't know anything about economics), so we should try to automate arbitration jobs in the same way. But people, for some reason, lose their minds when we do this.

In any case, Web3, like I said above, can literally just be taken to mean Blockchain-Internet Facing. This is important as a phrase because blockchain itself is a walled garden, with very specific informational requirements (the network and all data that gets supplied to the network as inputs to smart contracts have to be trustless). Smart contracts are legitimately just the term used to describe the type of financial transaction automated by cryptocurrencies.

That's all industry/technology right now, why would you expect blockchain to be any different? Okay, maybe it uses more power than some other things, but that's because I think we have a combination of a few things:

1. we might have a genuine blockchain bubble
2. the technology is not mature, so everyone is rushing to use blockchain while the technology to make it scalable is not there

but proof of stake does really well at counteracting blockchain energy usage, currently.

Proof of stake solves this to an extent, but there are also some high transaction-per-second (TPS) networks (such as Polygon) that stack up well against existing payment processors with respect to TPS. Also, I think some currencies should be more liberal for how much they print for miner rewards (paying miners/validators costs a lot of money for the network it turns out), which is pretty easy to try out, and would reduce the transaction costs by quite a lot.

I don't know, and if I knew for sure, I would be trading options on cryptocurrency right now, but I'm clearly not. However, what I do know is that the promise of automating arbitration jobs is niche yet enticing (also, blockchains can do other cool things like with Chainlink and manufacturing truth with a decentralized network). Already, they have some niche usecases like in prediction markets and in the NFT space (although, yes, that space does run a lot of scams, it'll eventually be just the beneficial stuff). Monero is already used as THE currency on the dark web because it's anonymous (not an endorsement of the dark web usage, just a living example of a crypto economy). If one of these experimenters could come up with a good enough algorithm that could keep into account price stability, cryptocurrency might actually be the superior way of transacting, simply because it has a lot of programability baked into it.

Even anonymity can be used to its advantage. With the inception of Monero, corrupt governments have a harder time tracing usually-legal citizen activity. Yes, it does give a lot of power to money launderers, but at the same time, it's not like it doesn't have its upsides and usecases.

I don't know, I can't go to the universe where they haven't been invented, but so long as they exist, we should probably make the most of them. My personal opinion, though, is that they are a net gain.

DAOs, or decentralized autonomous organizations, is made up of a collection of smart contracts that enables certain NFT or token owners to be able to take part in actions in a particular organization, usually something like a company. Because they are trustless, they are sovereign which means they need no other institution to legitimize them. In this way, DAOs usually outline an ownership structure of stuff on the blockchain (which represents capital) and contracts can be made that mimic the shareholder capabilities in conventional companies.

They are useful already for managing DeFi organizations. For instance, AAVE, the smart contract linked above, runs on a DAO and they generally move (as of me writing this) $14B USD in financial assets* at any given point in time.

So there are successful DAOs on-chain because they seem like a natural and integrated company structure for on-chain services, but are there any DAOs which run in real life? Well, that would be pretty illegal at the moment, but at the same time, I think it's plausible that they will in the future. People are experimenting with the many ways in which DAOs could potentially out-perform joint-stock companies in a trustless manner, and I think they have potential as a systems engineering tool for formalizing the hierarchy structure of existing companies via code. It's pretty enticing to just be able to copy and paste an existing management structure that you think works well for your own company, and I think it would be pretty useful for that reason. But also, maybe something can be done with trustlessness that just beats the government-granted joint-stock system out there in some miracle of efficiency, which is definitely something that can happen.

There are projects such as Layer Zero which work off-chain but in a conventional peer-to-peer trustless fashion, which aims to provide the ability to communicate between different blockchains. These kinds of projects also exist within the cryptocurrency sphere, and utilize conventional computing methods in order to take load off of blockchains. Blockchains only need to handle a small part of the job, i.e. they are an environment that both provides incentives and ensures trustlessness. But in some cases, the incentives part can be done in other ways, so you can scrap the monetary or scarce aspect of these networks, which means you don't need a blockchain. In the case of layer zero, it is believed that any organization which manages a blockchain would also want to host a node because they gain access to liquidity over a wider range of blockchain networks, for example. Volunteer networks such as tor already run decently well (with a small centralization problem with NSA controlled nodes but overall pretty secure), with i2p being another protocol that incentivizes hosting nodes without any direct payment, only entry into the network.

Before you talk about cryptocurrency like you know everything about it, you should figure out more about the underlying ecosystem. Although I like listening to and reading Paul Krugman, he gets cryptocurrency pretty wrong, maybe because a lot of libertarians shill the technology. You might be the same. I'm pretty confident that I know a decent bit about the technology, but if you think I'm wrong, then you can message me. Though, it seems pretty obvious that how legacy media talks about cryptocurrency isn't the full picture, and neither is how libertarian tech-bros talk about it.