Is Wall Street really waiting to move trillions of dollars into the blockchain space?
According to a new article trillions of dollars are waiting to move into the blockchain space. The real question would be could any blockchain handle such an influx of capital at this time? In my humble opinion, none of the blockchains are currently secure and this includes Bitcoin. I see problems with pure proof of work which I'll highlight below.
The problems with proof of work (Bitcoin)
The main problem with Bitcoin style proof of work is that it centralizes power into the miners. In essence Bitcoin may be described as a constitutional monarchy where the protocol itself is like a constitution and the mining monopolist (Monarch Mining Inc) can be viewed as a monarchy. The problem with this form of governance is that it is very fragile and the reason it is fragile is because the interests of the miners don't align with the interests of the users. In my humble opinion, a truly secure blockchain must always put the interests of the users first and to do that requires a feedback loop between the stakeholders who have something to lose and the developers.
In pure proof of work the developers and users have no say yet also have the most interest. Miners can over time gain control of the coin and if a mining cartel or cabal or Monarch Mining Inc were to take over then this clandestine mining organization would be able to choose the winning forks or simply strategically fork in such a way as to take control and keep control over the evolution of the coin. Under this set up there is nothing to guarantee that the coin over the long term will respect the rights of individualusers or adhere to the specification.
Hybrid Proof of Work + Proof of Stake
My preference from a governance and security perspective is either pure Proof of Stake or hybrid Proof of Work + Proof of Stake. In the case of currency application then the hybrid model can make plenty of sense because you can have something like Bitcoin which also must respect the rights of stakeholders. The stakeholders in essence would be the guardians (think Plato's guardians) who keep mining honest. DIshonest miners can simply be removed from their positions which is something that isn't even possible under pure Proof of Work. Under pure Proof of Work like with Bitcoin it is not possible to remove the miners and even when you fork the miners remain the monarch who can choose which fork will win. Under a hybrid model if miners promote a direction against the interests of stakeholders then the stakeholders have veto power over all authority in the network. Authority is a privilege under proof of stake which is given and can be taken away which in my opinion is critical to a network being resilient and having an ability to recover from a successful attack.
In general the security is about the incentives and in pure Proof of Work the incentives are not well aligned. In addition, if miners are corrupt they don't have anything to lose because their mining equipment doesn't go up in smoke if they collude to gain control of the network. Under Proof of Stake they mine with their $ which is captured in the tokens used as collateral and their collateral can go up in smoke. This allows the network to trust them because they actually have something to lose when they mine with the network token as stakers (they can lose because token price collapses or if they violate the rules).
Conclusion
Is the blockchain space really ready for trillions of dollars as early as 2018? While it sounds nice because Steem would benefit I would say at this point in time the security of most protocols cannot yet handle the sort of growth in price. If these trillions are spread out between many protocols then I think perhaps the entire space could handle 1 trillion in 2018. That is to say all of coinmarketcap as a whole worth 1 trillion and that would have to be spread out a lot more than it is now where it is very concentrated on a few coins at the top. This is because currently the governance capabilities and scaling capacity of even the top blockchain projects are very limited and these limitations will become very apparent as more money (and greed) flow in.
I make a prediction:
I expect Bitcoin to collapse over time as users discover they have no ability to influence the evolution of the protocol which favors miners almost exclusively. I expect over time users to flow where they have the most control of the protocol.
Proof of Stake and hybrid Proof of Work + Proof of Stake protocols will in my opinion capture mainstream users. Proof of Work coins will in my opinion continue to be traded and the price may continue to rise because on some level miners are running what resembles a casino. At the same time miners have no reason to care about the rights of users and so the casino doesn't have to produce anything of utility over time or aim for mainstream adoption.
Finally, none of of my posts are investment advice. Feel free to comment and tell me how I'm wrong if you think I'm wrong in my prediction.
I have always felt that Bitcoin has to fail at some point. Compared to the Steem blockchain it is out of date as I understand it. It is not the technology that is driving the Bitcoin price but the FOMO. Greed of course is what drives anything when there is money concerned. It seems inevitable that, try as we may to create a fair decentralised network, that somehow it ends up being control by the few.
According to this article, Bitcoin developers have faulty incentives as well.
The government does not need to purchase the miners. They ready own the infrastructure. Rember what happened in Egypt during the revolution. The government shut down all internet access. In that senario crypto currency has no value. You have talked about net neutrality in another post. I think we are moving toward a cashless society and the central bank will have more control than ever. Don't get me wrong I love the idea of Blockchain and decentralization, but I don't think the powers that be will allow us to be freed from our chains. It seems that we are doing exactly what they want and we are volunteering to do it
I would argue crypto would have much more value if the government shut down the Internet. People would use radio waves to send packets to make transactions and if that fails they'll use pieces of paper.
Possibly, a major diversification might be extend to the block-chain and cryptocurrency.
Evidently, it smoothens international transaction and money transfers. A major interest and investment into it by governments and countries of the world would be well applauded
Reading all your posts I have observed you're always giving your honest opinion on every topic and that's a thing we all should appreciate.
Steem On & Never give up!
This article validates what I've seen some speculate . Wealth needs to hide somewhere to crash the U.S . FIAT currency . The debt structure is not sustainable and austerity doesn't bring in votes . This may be the something that one day needs to give way .
Bitcoin was a prototype to what the future might hold but falls short of addressing centralized concerns and the powers that be can control all major stakes in a coin through POW or POS. Why is there no outrage over huge mining organizations? it's no different than a central bank that can inflate or deflate currencies with very little effort. The future looks bright but much imagination and work is ahead. First regulatory bodies will have to be eliminated coupled with a fair distribution system where hording huge sums of said currency is useless or even harmful to the horder.
Let us not forget, currency being exchanged for goods and service has value & currency sitting still serves only the ego of the holder at the expence of all others.
I used to be in banking and banking transactions are valued at trillions of dollars a day. Once the banks decide the blockchain market is reliable, they will be putting trillions through and into blockchain ventures.
Interesting assumptions @dana-edwards - I must admit this is the first post I've read that takes this outlook and its great to read other perspectives.
Certainly exciting times ahead. I think you'd like my video on Monero, the cryptocurrency that focusses on privacy. Would love to hear your thoughts on our assumptions.
Up-voted and followed.
Anton
Awesome Words That How you Describe it !