Owning cryptocurrency may make you more desirable on the dating scene, study finds

Trump’s website discloses that the buyer’s digital address is 497Zu5gfWSv4VNsoQfjixWXQZmKZ2pDzkVSASDBqnFL2. This is where she got creative. At the end of last month, that address was given 1,800 SOL by an address that was itself funded by the very address that created Melania’s NFT. Once the auction concluded, the original creator’s address sent 180,000 SOL back to this newly invented and self-funded address, which converted it into USDC (a stablecoin linked to the U.S. dollar). Dizzy yet?

Bitcoin is notorious for consuming as much electricity as the Netherlands, but there are around 10,000 other cryptocurrencies, most using similar infrastructure and thus also in aggregate consuming unsustainable amounts of electricity. This is far from the only externality the cryptocurrency mania imposes upon the world. Among the others are that Bitcoin alone generates as much e-waste as the Netherlands, that cryptocurrencies suffer an epidemic of pump-and-dump schemes and wash trading, that they enable a $5.2B/year ransomware industry, that they have disrupted supply chains for GPUs, hard disks, SSDs and other chips, that they have made it impossible for web services to offer free tiers, and that they are responsible for a massive crime wave including fraud, theft, tax evasion, funding of rogue states such as North Korea, drugsmuggling, and even as documented by Jameson Lopp's list of physical attacks, armed robbery, kidnapping, torture and murder.

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90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity. ... the vast majority of Bitcoin transactions between real entities are for trading and speculative purposes
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exchanges play a central role in the Bitcoin system. They explain 75% of real Bitcoin volume
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Our results do not support the idea that the high valuation of cryptocurrencies is based on the demand from illegal transactions. Instead, they suggest that the majority of Bitcoin transactions is linked to speculation.

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Decentralization is a necessary but insufficient requirement for system resilience. Centralized systems have a single locus of control. Subvert it, and the system is at your mercy. It only took six years for Bitcoin to fail Nakamto's goal of decentralization, with one mining pool controlling more than half the mining power. In the seven years since no more than five pools have always controlled a majority of the mining power.

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Why are economies of scale a fundamental problem for decentralized systems? Because there is no central authority controlling who can participate, decentralized consensus systems must defend against Sybil attacks, in which the attacker creates a majority of seemingly independent participants which are secretly under his control. The defense is to ensure that the reward for a successful Sybil attack is less than the cost of mounting it. Thus participation must be expensive, and so will be subject to economies of scale. They will drive the system to centralize. So the expenditure in attempting to ensure that the system is decentralized is a futile waste.

Most cryptocurrencies impose these costs, as our earlier system did, using Proof-of-Work. It was a brilliant idea when Cynthia Dwork and Moni Naor originated it in 1992, being both simple and effective. But when it is required to make participation expensive enough for a trillion-dollar cryptocurrency it has an unsustainable carbon footprint.


The advantage of permissionless over permissioned blockchains is claimed to be decentralization. How has that worked out in practice?

As has been true for the last seven years, no more than five mining pools control the majority of the Bitcoin mining power and last month two pools controlled the majority of Ethereum mining. Makarov and Schoar write:Six out of the largest mining pools are registered in China and have strong ties to Bitmain Techonologies, which is the largest producer of Bitcoin mining hardware, The only non-Chinses [sic] pool among the largest pools is SlushPool, which is registered in the Czech Republic.
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Bitcoin mining capacity is highly concentrated and has been for the last five years. The top 10% of miners control 90% and just 0.1% (about 50 miners) control close to 50% of mining capacity. Furthermore, this concentration of mining capacity is counter cyclical and varies with the Bitcoin price. It decreases following sharp increases in the Bitcoin price and increases in periods when the price drops ... the risk of a 51% attack increases in times when the Bitcoin price drops precipitously or following the halving events.

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Immutability is one of the two things that make the cryptocurrency crime wave so effective. These systems are brittle, make a single momentary mistake and your assets are irretrievable.

Immutability sounds like a great idea when everything is going to plan, but in the real world mistakes are inevitable. Lets take a few recent examples — the $23M fee Bitfinex paid for a $100K transaction, or the $19M oopsie at Indexed Finance, or the $31M oopsie at MonoX, or the $90M oopsie at Compound and the subsequent $67M oopsie, all of which left the perpetrators pleading with the benficiaries to return the loot.

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Just as economics forces theoretically decentralized blockchain-based systems in practice to be centralized, economics forces theoretically trustless blockchain-based systems in practice to require trusting third parties.

Implementing mutability at the blockchain level requires trust, and trust requires a reliable identity for the locus of trust. Most activity in cryptocurrencies actually uses trusted third parties, exchanges, that are layered above the blockchain itself. These use conventional Web-based identities and are routinely compromised. In most cases immutability means the pilfered funds are not recovered.

But, more fundamentally, the entire cryptocurrency ecosystem depends upon a trusted third party, Tether, which acts as a central bank issuing the "stablecoins" that cryptocurrencies are priced against and traded in[8]. This is despite the fact that Tether is known to be untrustworthy, having consistently lied about its reserves.

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The other main enabler of the cryptocurrency crime spree is the prospect of transactions that aren't merely immutable but are also anonymous. Anonymity for small transactions is important, but for large transactions it provides the infrastructure for major crime. In the physical world cash is anonymous, but it has the valuable property that the cost and difficulty of transacting increase strongly with size. KYC/AML and other regulations leverage this. Cryptocurrencies lack this property. The ease with which cryptocurrency can be transferred between institutions that do, and do not, observe the KYC/AML regulations means that absent robust action by the US, the KYC/AML regime is doomed.

…90% of transaction volume on the Bitcoin blockchain is not tied to economically meaningful activities but is the byproduct of the Bitcoin protocol design as well as the preference of many participants for anonymity.In other words, 90% of Bitcoin's carbon footprint is used in a partially successful attempt to compensate for its deficient anonymity.

Because there are existing alternatives that provide greatly increased anonymity, attempts to mitigate the externalities of pseudonoymous cryptocurrencies are likely to be self-defeating. As the ransomware industry shows, users will migrate to these alternatives, reducing the effectiveness of chain analysis.

Conclusion

The prospects for mitigating each of the four attributes are dismal:

• Decentralization: although the techniques used to implement decentralization are effective in theory, at scale emergent economic effects render them ineffective. Despite this, decentralization is fundamental to the cryptocurrency ideology, making mitigation of its externalities effectively impossible.
• Immutability: although mutability is necessary in the real world of mistakes and crime, implementing it in a decentralized system and thereby mitigating its externalities is an unsolved problem.
• Trustlessness: even if you think this would be a good thing, it is impractical[12].
• Anonymity: attempts to mitigate its externalities are likely to be self-defeating.

Thus it seems highly unlikely that any effort to mitigate cryptocurrencies' externalities would succeed

Update December 9th: I realized too late that I omitted an important step in the argument. Let me expand upon it here.

Because participation in a permissionless blockchain must be expensive to ensure that the reward for a Sybil attack is less than the cost of mounting it, miners have to be reimbursed for their expensive efforts. There is no central authority capable of collecting funds from users and distributing them to the miners in proportion to their efforts. Thus miners' reimbursement must be generated organically by the blockchain itself. Thus a permissionless blockchain needs a cryptocurrency to be secure.

Because miners' opex and capex costs cannot be paid in the blockchain's cryptocurrency, exchanges are required to enable the rewards for mining to be converted into fiat currency to pay these costs. Someone needs to be on the other side of these sell orders. The only reason to be on the buy side of these orders is the belief that "number go up". Thus the exchanges need to attract speculators in order to perform their function.

Thus a permissionless blockchain requires a cryptocurrency to function, and this cryptocurrency requires speculation to function.

Remember LimeWire? Shuttered file-sharing service is back with NFTs

March 9, 2022

STOCKHOLM/LONDON, March 9 (Reuters) - File-sharing service LimeWire, which shut down in 2011 under fire from the music industry, is making a comeback as a digital collectibles marketplace for art and entertainment, initially focusing on music.

Launched in 2000, LimeWire became the world's biggest outlet for people to share music, movies, and TV shows free of charge over the internet, attracting 50 million monthly users at its peak popularity.

Blaming piracy as one of the main reasons for declining music sales, record companies sued LimeWire in 2006, forcing it to shut down five years later. But now LimeWire plans to jump on the latest internet bandwagon: NFTs.

A non-fungible token (NFT) is a crypto asset which uses blockchain to record who owns a digital file such as an image or video.

While NFTs would allow artists and musicians to have more control over digital copies of their work — repairing the damage caused by illegal streaming — the nascent market is rife with scams, fraud and market manipulation.

It was a complex process for the new team - led by co-CEOs Paul Zehetmayr and Julian Zehetmayr - to own LimeWire intellectual properties after 12 years of inactivity.

LimeWire said it will partner with the music industry and the artists, who can sell pre-release music, unreleased demos, graphical artwork, exclusive live versions, as well as digital merchandise and backstage content.

The new LimeWire team, spread over Austria, Germany and the UK, plans to launch the service in May that would allow music fans and collectors to buy and trade a variety of music-related assets.

"We want to open up the gates for small, medium and big artists with a lot of moderation and curation," Zehetmayr said.

It plans to give up to 90% of the revenue to the artists and looking to onboard one million users within the first year.