The rules of the game on the modern crypto-market

imageIn this publication I will try to dispel some of the myths that cryptomir is saturated with. Believe me, after reading this small note you will significantly change your point of view, since many questions become visible only when you can devote a large amount of time to studying this area.

So, to begin with, let's find out why such popularity has fallen on cryptocurrencies.

Undoubtedly these are selling ideas:

  1. Decentralization.
  2. Privacy
  3. Honesty in the economic "game."

A person who has come to a cryptotuska, first of all hears the words about the injustice of modern states: capital has long ago merged with state structures and applies their repressive possibilities to absolutely honest people to retain their power. That is why capital decentralization and privacy are needed. And the observance of fair rules of the game is followed by an incorruptible algorithm for calculating SHA-256 hashes.

And now let's look at the reality of the cryptomere. Most of the consideration will be done on the example of Bitcoin, since a large proportion of other currencies are its clones. We also consider Ethereum and Gram, which are knocked out of the general range and were proposed by Vitaly Buterin and Pavel Durov, respectively.

For the issue of money was chosen strategy PoW (Proof of Work). In this case, those who want to make money are invited to compete with each other in calculations, and every 10 minutes, the lucky person receives a predetermined amount by the algorithm. It is worth noting that these calculations have no practical meaning and do not improve the Bitcoin network in any way. At one time it was proposed to use scientific tasks, but due to the impossibility of changing the complexity dynamically (so that the money was given out only once in about 10 minutes), all of them were rejected.

Agree, a strange way to get money: not working for the good of society, but keeping a mining farm at home with the risk of making a fire. It is clear that no adequate person sees in it at least some improvement in our world and does not participate in this ape activity. Moreover, it turned out that for the selected task, in the calculation of which the miners compete (calculation of hash functions by the SHA-256 algorithm), you can create a special chip that will perform calculations at the iron level as quickly as possible.

So we came to the current state of things: almost all crypto-money is concentrated in the hands of a small group of people. For example, the Bitmain plant, which produces these chips, has 43.4% of bitcoins.and it does not specifically pass the 50% barrier so that voting on the network is not taken by him alone (otherwise no one will participate in this circus). Of course, the chips that were managed by him (in order not to lose influence on the world) fell into the hands of similar crypto-oligarchs and the rest of the bitcoins were also distributed in large portions between a very small number of people: today the 4 largest Chinese Bitcoin holders own 80% of the currency. Obviously, the next 4-5 major Chinese holders own 80% of the remainder of the currency (excluding the locked 5% of coins in favor of Satoshi Nakamoto) and so on. Ridiculous crumbs remain to ordinary participants of the system, but, competing for these crumbs, they develop and cement the system of their own slavery.

Can only the initial distribution of capital be unfair, and then cryptocurrency shows a more honest economic scheme? Unfortunately, this assumption is wrong: when performing each payment transaction, any person is obliged to pay a commission to the miners, which, as we have already found out, are very limited. Moreover, with the increasing popularity of Bitcoin and therefore the number of payment transactions, it was decided not to increase the volume of operations recorded in the blockchain, but to introduce competition between payments using the ability to voluntarily increase the commission. The first solution required additional expenses from crypto-oligarchs, and the second meant their additional income. Therefore, the second option was chosen, and now, in any transactions, users must “push” each other with money, setting maximum commissions, so that it would be profitable for miners to add their payment transaction to the fixed block. Thus, a scheme has been created in which rich people will automatically receive their capital back, and the poor will work for them in order to get at least a little money (and gradually return them in the form of commissions with the usual calculations between themselves).

Since Ethereum is the currency of the “second generation”, Vitaly Buterin logically continued the economic scheme and replaced the accrual principle from PoW (Proof of Work) to PoS (Proof of Stake). According to his idea, only those who have more than 1,500 coins of the ether on the account will be able to receive money upon release, which is approximately $ 200,000 at the current rate (and this is after the collapse of the etirium rate by 90%!). At the same time, the capitalists will no longer have to burden themselves with unnecessary calculations, instead they will receive money only for providing a hard disk of 1TB size for the ethernet network and launching a small bot that will confirm their high status. Like Bitcoin, each payment transaction will require payment of a commission in favor of holders of large packages of cryptocurrencies.

Mr. Durov, in turn, decided to release the Gram currency, and declares it the currency of the third generation. In it, it retained 4% of the initial capital, and 44% distributed to investors, which it drew at the ICO stage (a simplified analogue of the IPO), taking each $ 200,000. The rest will not get anything. And also commissions have been introduced in favor of those who can provide high-performance servers with a large amount of collateral (although the calculations on these servers will also not be performed on the Ethereum network).

Notice how each stage of the “development” of a cryptocurrency makes an ordinary person more and more powerless, and the rules of the game all the more unfair. Economic “life” in the opinion of crypto-oligarchs is more similar to the life of Egyptians BC: a person must work for gentlemen in order to be able to pay them a commission for the simplest payment operations performed during elementary exchange activities (such as buying bread). But today, when I buy in stores using ordinary fiat money (or plastic cards), I don’t pay anything to anyone ...

In the scheme proposed by crypto-oligarchs, the size of the commission is essentially a turnover tax payable to a very strange circle of people. Anyone who understands taxes at least somewhat understands that such a tax is very inefficient and stifles production with a large number of processing stages. In this case, the full amount of tax is charged at each stage of production in settlements between counterparties, and it is inefficient to organize all stages in one place, since different technological processes may have different production rates and therefore require aggregation / splitting of semi-finished products from several counterparties within one production. Thus, such a tax leads to the degradation of production and after all of society.

Well, the system is not decentralized. Maybe she even private? No, it turned out that all transactions are stored in clear text, and each output of the current transaction necessarily refers to the input of the previous one. Therefore, it is even easier to trace money from their deposit to withdrawal than with bank transfers (where the source account and the destination account are also stored).

The bet on the algorithm also failed miserably. This was demonstrated by the new chips, which were perfectly integrated into the proposed scheme: it turned out that a loophole can always be found and only living people can adequately respond to a changing situation. It's funny, but occasionally hackers steal Bitcoin money, formally following all the rules of the game, while the “wooden” algorithm does not see any violations of the game.

Actually, all economic rules and laws appeared in our material world: this desire to find the optimal interaction scheme in a society that is constantly changing flexibly. In essence, we have a choice: to trust an inflexible algorithm, which can be circumvented “just in time”, or to create a dozen mutually balancing institutions with living people. For example, today I trust state institutions more than the proposed scheme.

What do you choose?

UPDATE (on cryptocurrency privacy):
With cryptocurrency, you will not be able to privately:
  • buy coffee in the machine (which should have a public wallet so that you can pay for the coffee), because attackers will know that at about 9:15 a rich person buys coffee every morning in such a place.
  • go to the cinema, because when you exit the hall you will already have to wait for criminal elements.
  • buy a ticket to rest, because through a certain operator, not so many customers buy tickets to a certain direction (the latter is set at a price).
  • zadonat blogger, because you can trace the intersection of your donations and establish your identity.

Attach to this the possibility of obtaining additional information (data from video cameras from the streets of the city, transactions of online stores, network activity, a geo base with bindings for the location of cars kosheringa ...) and then you realize that with the help of Bitcoin you cannot safely perform almost any transaction .
Do you think that you are not doing “stupid” actions and therefore you cannot be calculated? But the money was transferred to the mother, who sometimes orders goods from catalogs with home delivery (and, of course, indicated her address). That is, if it is impossible to “punch” you, then for your friends, relatives, colleagues ... you cannot vouch. In other words, you can always establish the owner of the wallet on his social ties.
In this interesting video, the author tells how specific individuals were identified who made transactions during the fall of Bitcoin (in the video description the same information is presented in text form).

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