Bubble or Revolution - The Present and Future of Blockchain and Cryptocurrencies

 

Chapter 1: Bitcoin and the Blockchain

• Shared log, or ledger.
• Transactions are batched into blocks.
• The only way to mine a block is to guess nonces over and over until you win, like playing a digital lottery.
• The word nonce comes from "number used only once".

Chapter 2: Bitcoin Economics

• Intersubjective reality: you think this thing has value because you know that other people think it has value. Yuval Noah Harari.
• By one estimate, 30% of all mined bitcoins have been lost.
• The majority of Bitcoin users are speculators hoping to make a buck.
• The thing that makes currencies good is stability, while the thing that makes investments good is growth. These are, of course, mutually exclusive.
• Bitcoin may not be the future of money, but it may well be the future of investing.

Chapter 3: Bitcoin's Blunders

• Mempool: all unconfirmed transactions.
• Since Bitcoin can only process a few thousand transactions an hour (12000 to 15000 an hour at the time of writing), it took an average of 16 hours for a transaction to get confirmed and put on the blockchain.
• Fee spikes have become a common feature in Bitcoin rallies.
• Mike Hearn, a well-known early Bitcoin developer, estimated that Bitcoin could only handle about 3 transactions per second.
• The name "SegWit" is an abbreviation of "segregated witness"; the metadata with the signature is called the "witness", and it's "segregated" away from the main transaction data.
• The remarkable transparency of Bitcoin's blockchain makes Bitcoin far less anonymous than its supporters might make it out to be.
• The Bitcoin wallet is only as secure as its private key, and if someone gets ahold of that private key, the money is theirs, and if they steal it, it's practically irreversible.
• The only way to undo that theft is to make a "fork" of the blockchain that erases that theft from history.
• Experts say that the best approach is to keep long-term savings in cold storage and keep money for daily expenses in a normal internet-connected computer, known as "hot-storage".
• Bitcoin mining is a competition to waste the most electricity possible, by doing pointless arithmetic quintillion's of times a second.
• The University of Cambridge estimates that Bitcoin's annual energy consumption skyrocketed from about 6 Terawatt-hours (roughly the annual consumption of Luxembourg) in 2017 to over 80 terawatt-hours (roughly the annual power consumption of Finland in 2020)
• We're estimating that a MacBook can do one billion hashes per second, or 1GH/s.
• The popular pickaxe (pioche) theory argues that it's hard to get rich by participating in the latest technological craze, but it's very profitable to sell equipment to those who are.
• Bitmain now controls 70-80%. of the Bitcoin mining hardware market.
• Some smaller cryptocurrencies that are ASIC-Resistant, meaning that GPUs are actually the best way to mine them.
• At the time of writing, the number of Bitcoin full nodes hasn't budged from about 10000 in the last two years.
• This should worry any proponent of decentralization: the software that's at the heart of Bitcoin is primarily owned and maintained by a small group of people that are employed and funded by a single company. The potential for conflicts of interest and user-hostile changes by Blockstream is high

Chapter 4: Altcoins

• Bitcoin and Bitcoin Cash's blockchains, software, community, developers, and roadmap are all different now.
• Buterin's big idea was that blockchain can do more than just record transactions: they can run code, host apps, store data, and really do any kind of computation.
• The remarkable part of smart contracts like these is that they will always operate as intended, once they are set in motion, humans can't mess with their behavior.
• Non-blockchain-powered institutions that smart contracts have to trust are known as oracles.
• Without people to watch them, algorithms can do some unfair things.
• Just like with money, middlemen bring costs and benefits. It's not always a good thing to get rid of them, but with DApps, at least there's an alternative to middlemen for situations where getting rid of them makes sense.
• Art critics are hailing the blockchain as the potential future of arts and culture: there's finally a way to prove that you, and only you, own a piece of digital art.
• While Bitcoin aims to be an investment vehicle and Ethereum aims to be an app platform, another class of cryptocurrencies, stablecoins, aims to be just a classic payment system.
• The best-known stable coin is called Tether: each Tether coin (known as a USDT, for US dollar Tehtehr) always trades at $1.
• CDP: Collaterized Debt Position.
• You borrow DAI coins by using your ether as collateral; this loan is a CDP.
• MakerDAO runs another currency named MKR.
• ICO:Initial Coin Offerings, a crypto version of initial Public Offerings, or IPOs, when startups start selling shares on the stock market.
• Bitcoin isn't really anonymous. Every single payment is stored public and permanently on the blockchain, ssh anyone can see how wealthy people are, who does business with whom, and where money has flowed.
• Monero is popularly known as privacy coin.
• You can have a web browser run a snippet of Javascript code, the same kind of code that makes websites like Spotify and Google Docs Interactive, to mine Monero coins.
• You can see why crypto jackers love Monero: it's easy to mine it on a browser, and since it's totally anonymous, the crooks don't leave any fingerprints behind. This illustrates one of the fundamental tensions of cryptocurrencies: anything designed to promote privacy and anonymity, which are usually good things, ends up helping criminals more than anyone else.

Chapter 5: Public Blockchains

• The idea of blockchain voting relies on tokens, which are digital assets whose movement can be tracked on the blockchain.
• The big difference between tokens and ether is that anyone can create a token out of nothing and issue as many tokens as they want, whereas ether is the only official form of money on Ethereum, and new ether can only be madly mining.
• One potential solution to the anonymity problem is called homomorphic encryption.
• If you put a link to a webpage in a book or document or other webpage, there's a 50% chance that the link will no longer work after seven years.
• A project called FileCoin aims to pay people who store copies of IPFS files on their computers.
• No matter what blockchain you use, blockchains are slow: a classic centralized database called MySQL can handle 60000 times more transactions per second than Ethereum (which itself can handle five times as many as Bitcoin)
• The top selling points of blockchains are that they're decentralized, trustless, transparent, and tamper-proof.
• Blockchains are great technological innovations, but they aren't enough to drive social change, you have to think hard about getting people and institutions to change their behavior.
• That's a common problem for blockchain apps: focusing too much on the technical problems without thinking about the people problems.

Chapter 6: Business on the Blockchain

• Benefits: decentralization (many computers still keep copies of the blockchain), immutability (proof-of-work still makes it hard for an attacker to forge blocks) and transparency (everyone can get exactly the information they need without having to hunt down people across companies.
• Azure's blockchain-as-a-service feature.
• Blockchain technology has a remarkable amount of overlap with some of the other hot technology trends: cloud computing, big data, and machine learning.
• Implementing a private blockchain ins't really a technical challenge at all; it's a social challenge.
• In all three cases we explored, the hard part has been the people part.
• For most private e blockchains projects, it's not the technology that matters, it's getting adoption, getting people comfortable with change, and working out all the legal and financial difficulties that come up.

Chapter 7: Cryptocurrency Policy

• Exit scam: it's when a company raises money based on a white paper but disappears before building anything.

Chapter 8: What's next

• It had been rumored for years that Facebook would be adding a stable coin to WhatsApp and Messenger.
• But why would a social networking company get into crypto? The most obvious reason was that it would help Facebook track exactly what people where spending money on; which would be extremely valuable data for advisers.
• We think cryptocurrencies will primarily be used behind the scenes, such as for transactions between banks or for large payments between companies.
• China has made no secret that it's trying to make its yuan the world's primary reserve currency.
• Then we think China will build a prototype tokenized yuan and test it in Africa. China is Africa's largest economic partner and has been investing heavily in infrastructure throughout the continent. Given how volatile African currencies are, large swaths of the continent may welcome the relative transparency and stability of a tokenized yuan. Perhaps China will create a yuan-backed "Afro" currency that is adopted  throughout Africa, similar to the Euro in Europe.
• For IoT to succeed, IoT devices need a secure, tamper-proof, and decentralized way to store, access, and share data.

Chapter 9: Bubble or Revolution?

• Bitcoin futures, which are contracts saying a buyer will buy a certain number of items for a certain price at a certain time.
• The regulation is, on the whole, a good thing for crypto.
• So, while inflation is usually a bad thing for investors, it's a good thing for gold holders.
• It's clear that the two biggest use cases for cryptocurrencies going forward will be as payment methods (primarily for large or international transfers) and as investments (supplementing, but not replacing, stocks and bonds).
• Countries are adopting cryptocurrency, but by tokenizing their existing fiat currencies.
• The idea of an immutable, shared history of past transactions is extremely powerful.
• The technologists who created blockchain and cryptocurrencies were better at solving the thorny technical problems and not these social problems.