Updated November 20, 2017
Dear Cryptocurrency Enthusiasts,
Trust, trust, trust — or baloney?
In each other, we trust?
Trust, but verify…especially with cryptocurrency?
It seems that we have three developments occurring simultaneously, now — in the Fintech Crypto-World.
- Proof-of-Work (PoW) is moving to Proof-of-Stake (PoS).
- Public is moving to Private or “choice.”
- And governments are trying to regulate.
Did I tell you something you don’t know? I hope not.
PoW. It was the most trusted way to create and maintain a person-to-person (P2P) network. But what happened? Has the crypto-space evolved?
PoW has become labor intensive, energy hogging and increasingly centralized. Bitcoin, Ethereum, Litecoin etc. Ethereum is attempting to move to a PoS system or at least use some of its protocols. Really? Again, why?
Why was the PoS protocol developed in the first place? Peercoin, Blackcoin, Cloakcoin and others. Were there long term issues? Security disadvantages? They drew less power, were faster, but they were essentially a pre-mine. But they reward those who maintain balances – and help to secure the network, right? Reward with an ever growing supply of cryptos, unless that supply is fixed — which appears to be the plan for Cardano.
What were (are) the results of PoS? Marginal success. Can a new PoS protocol reverse that trend?
Peercoin, for example, had problems with their code early on. Their primary developer is anonymous. Cloakcoin has changed hands.
What was worse, these PoS coins were more vulnerable than PoW types – less secure. So, why is Ethereum attempting to move in that direction? Aside from the official reports, I mean?
Competition from Cardano?
We know Cardano was developed – at least in part – by a former Ethereum developer, turned Ethereum Classic developer/supporter. To, me, that smells of trust. That smells of new blood — underdog — PoS+ blood type.
But the underdog is only in name. Like Ripple, Cardano has removed the curtain to reveal that it too is willing, at some level, to cooperate with regulators. They are willing — and able — to compromise. If we look to Ripple, they are succeeding.
To roll back the blockchain, as Ethereum did, to stop one criminal – okay, one “advantage taker” – smacks of centralization. (See the DAO Incident.) At that juncture, no matter how benign a dictator, Ethereum lost its way. One cannot punish the whole, to catch one mistake.
So what stain does Cardano have? As a free market supporter, the stain is called compromise? Or is it realism.
In other words, Cardano is not seemingly attempting to create a separate cryptocurrency and/or protocol, as much as it is attempting to “get along” with the regulators. It wants to identify you, at least on one level. KYC — know your customer. The smart contract-currency platform that might be too smart for its own good.
And, in my mind, Cardano, unlike Ripple, wants you to participate. Game changer?
Ethereum Classic is “righting” the wrong of Ethereum. Still, the system – the protocol – is slow. It devours resources. Energy for mining. Power hungry.
So, what is the solution?
A PoS Ethereum, with new math: Cardano?
Here’s a recent opinion from Charlie Lee about PoS.
Now, we must decide. Do we trust the PoS? The pre-mine with a large chunk of coins held back for the “company.” Do we trust corporations? They act in their own interests, right? They must make a profit to survive, certainly. How much is enough?
And they are willing to share profits if we support the system?
Many cryptocurrencies are headed by corporations today. Mining warehouses keep many coins alive – corporations regulated by their respective governments. Of course, letting governments create cryptocurrencies will be a cluster-fork, of enormous proportions. But it’s heading that way today, in many countries.
Bitcoin’s reality is that it is managed by people with differing points of view, but they must come to a consensus to move forward. Hence the slow-to-change mentality. Is it outliving its usefulness? Some will tell you it has.
It seems that the move to privacy coins, created by unknown players, is an accident waiting to happen. We need – IMO – the human factor. The “part” in the virtual machine that is not virtual. To service the humans who use the crypto. Or do we?
Privacy coins obscure their process, as to be non-auditable (or having a choice to audit), in a way that gives many the willies. Not because we want cash-like privacy, but because we wonder who else is using the protocol and why.
So, what can we say. Cash has no feelings. It’s just cash. True. But if you have the protocol to trace the bad actor and you don’t? What does that make you? An accomplice?
The one weakness in that cash-privacy crypto, one which you might hold on your flash-drive, is the customer service angle. If the currency “forks” and you didn’t update in time, what then? Get on Reddit and start complaining? Really?
Where is the “Complaint Department?”
Grandma likes to call people, right? The old school likes warm voices, emails to real organizations, faces to names. The old school lives and saves, on trust. Is Cardano that trust? The new Savings and Loan of Fintech Crypto?
And isn’t that what it’s all about? If we strip away the layers of protocols, unload the software, and just listen – who do you trust to keep your money? I’m not talking about playing the crypto-markets, drifting from one coin to the other, riding the emotion-horse. I mean, the bare-bones of it.
It is not the machines we trust, yet. It’s the people.
Isn’t that what it boils down to?
The fact that governments want to regulate may not be the best reason to flee into the “dark” coins. They will chase any entity that threatens the fiat empire. The darkness only eggs them on.
Regulations change because of force. What is the force of millions of cryptocurrency wallets, worldwide? It is a wave. A tidal wave.
Put your ship in the deep water.
A cryptocurrency that is backed (or less regulated by whole countries), will place pressure upon the bankers of old – the money-changers of the past. Especially, when it is trusted by people everywhere.
How would the empires of old stop that?
Can they, ICANN?
I don’t know if Cardano is the answer, but maybe they are onto something.