I read Bruce Schneier’s article in Wired about Bitcoin and crypto. With all due respect, very disappointed by his ignorance of the reasons for cryptocurrencies existence and misunderstanding of blockchain technologies. I would like to respond to his statements.
There’s also the less intimate, less personal trust—we might not know someone personally, or know their motivations, but we can trust their future actions. Blockchain enables this sort of trust: We don’t know any bitcoin miners, for example, but we trust that they will follow the mining protocol and make the whole system work.
It is very well known fact that no one trust that miners will follow protocols - we simply know that they have to to follow protocol, because otherwise they they will create a fork and fall out of the network!
Financial institutions, merchants, and individuals are all concerned with their reputations, which prevents theft and fraud. The laws and regulations surrounding every aspect of banking keep everyone in line, including backstops that limit risks in the case of fraud.
This is untrue! 1) Regarding financial institutions - just think about the financial crisis of 2008 that caused great recession - banks and other financial institutions failed, and there were no laws and regulations that could protect us. 2) Regarding merchants - let's look at the rich history of security breaches where millions of credit card accounts were stolen from merchants - no laws or regulation prevented those breaches. I also wrote a book, but it's not about trust, rather the opposite - how bad technologies and regulations failed to protect merchants and consumers from credit card fraud. 3) Regarding individuals - since when the reputation concerns prevent theft and fraud?
A good example is the credit card system, which allows untrusting buyers and sellers to engage in commerce. His fourth trust architecture is distributed trust.
I doubt this is a good example, with millions and millions of dollars stolen from merchants and consumer. The whole businesses (such as PayPal) were created just to patch the fundamental problems with credit card system. Blockchain is our only chance to get rid of credit card system and replace it with more secure and private equivalent.
What blockchain does is shift some of the trust in people and institutions to trust in technology. You need to trust the cryptography, the protocols, the software, the computers and the network. ... In many ways, trusting technology is harder than trusting people.
This is matter of personal choice. If you trust governments and corporations that continue promoting 50 years old failing technologies which are perfectly suitable for violating our privacy and breaching our security - continue to trust institutions and use banks and plastic cards.
blockchain trust is also costly; the cost is just hidden. For bitcoin, that's the cost of the additional bitcoin mined, the transaction fees, and the enormous environmental waste.
Bitcoin is not the only crypto, and the wasteful proof-of-work is not the only consensus algorithm.
Credit card fees are still higher than most crypto fees in most cases, but they are invisible for buyers because, unlike crypto, merchants pay the credit cards' fees. There are even cryptos with zero fees, although my personal opinion is the fee-based model is the most sustainable one, if the fees are charged to merchants.
Credit card fees are still higher than most crypto fees in most cases, but they are invisible for buyers because, unlike crypto, merchants pay the credit cards' fees. There are even cryptos with zero fees, although my personal opinion is the fee-based model is the most sustainable one, if the fees are charged to merchants.
Blockchain doesn’t eliminate the need to trust human institutions. There will always be a big gap that can’t be addressed by technology alone. People still need to be in charge, and there is always a need for governance outside the system.
This is correct, but unlike banks, credit card brands, and other financial institutions - the crypto governance can be democratic, and every stakeholder can vote and promote any changes.
In any distributed trust system, there are backdoor methods for centralization to creep back in. ... There are only a few dominant exchanges.
This is untrue. There are a lot of exchanges, and they are dispersed geographically and by jurisdiction, so if any single government or even several governments decide to crack down on crypto, they won't be able to kill the entire ecosystem. And the number and quality of decentralized exchanges is growing.
Honestly, cryptocurrencies are useless. They're only used by speculators looking for quick riches, people who don't like government-backed currencies, and criminals who want a black-market way to exchange money.
This is very limited view as there are more important aspects of cryptocurrencies. Only crypto can ensure real, full privacy of our finances. Only crypto can ensure that absolutely everyone has permissionless, unconditional access to basic financial services: payments, trading, investment, savings, credit.
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