What went wrong with Crypto?

Don't you feel something isn't right? I mean, the whole idea of cryptocurrencies was to actually be a currency, but today the whole crypto mraket feels like a casino, with tons of scams everywhere.

Bitcoin

Bitcoin presented itself as a peer-to-peer money. At its core it is just an shared ledger file like an excel spreadsheet (the blockchain), that records who sent what, to whom, and when. Like a torrent, this file is shared thought a network of computers, not living in a central server, but unlike a torrent, it needs to mutate (append transactions), while being tamper proof, so a consensus algorithm is needed.

Proof-of-work solved the issue, tons of transactions are shoved into a block, then hash together the block data, the previous block's hash, and a random “nonce” (the magic number every miner is trying to find). If the hash has N leading zeroes, then it is accepted and appended to the blockchain.

But why did crypto even pop up?

After the 2008 market crash, it hit home that banks could wreck everything, nobody would get punished, and taxpayers would foot the bailout bill.. And why is it?

The major weapon a country has is their central bank. The Federal Reserve is able to print money at will. Well, actually, it's more complicated than that, but at the end of the day they decide how much money floats around by inflating or “deflating” the supply.

Back then every note was an IOU for gold. If Bank A ended up holding Bank B's notes, it could walk in and grab Bank B's gold. That kept everyone honest: if you print too many notes, you may get illiquid and then you get overthrown by other banks, game over.

Then governments cut the gold cord. Now the note is just fancy paper, there is no actual redeemable asset backing it up.

Picture this: four people, $1000 total, $250 each. One guy fires up the printer and makes another $1000 for himself. The new supply becomes $2000. He now owns $1250 (62.5%). While everyone else just got halved to 12.5%. They were all 25% before.

If notes were still tied to 1 kg of gold, that same 1 kg now “backs” twice as many notes. (This would be fraud and a crime).

In a fiat world it's worse, the printer's fresh cash buys real stuff, before prices adjust. So the one that is receiving the fresh printed money has an great advantage.

Some people would say that inflation benefits the economy or that it has an strategic importance or whatever, but think about this: equal printing to everyone would only double prices and keep the ratios intact. If we duplicate everyone's fiat balance, then prices would just duplicate as well an NOTHING would change.

There is an strategic key in increasing the money supply, aka doing inflation: central banks and their buddies pump the supply first, shop first, and hand the inflated mess to the rest of us.

So they gather more real assets, while we keep worthless paper. It enriches the rich, while enslaves the poor.

Satoshi’s very first Bitcoin block called out that scam with a headline about bank bailouts. The warning was baked right into block 0.

Where it all went off the rails

Early alts were fine, Litecoin sped things up, Monero hid your tracks.

Then Ethereum showed up. "Smart contracts" sounded cool; what we got was NFTs, rug-pull tokens, and nonstop scams. Who use smart contracts? For what? We keep hearing about the tokenized economy, the next big thing... What, a Monkey or TO THE MOON coin?

It's just shitcoins and memecoins everywhere, with zero real world usage.

Bitcoin itself flopped as day-to-day cash

10-minute blocks (when the network isn’t jammed) and fees that can eat half a $10 send? What the hell dude.

It's consensus algo made aberrations like ASICs, yeah, 2 kilograms of metal and circuitry that run SHA 256 and that's it, will become e-waste in no time. Not mentioning the astonishing amount of energy usage.

I don't want to sound like a environment activist, but energy is a very important commodity. In case of war, do you really think governments would let you use gigawatts on some "internet money"? An light and less energy intensive cryptocurrency is more resilient.

No, the intensive energy usage is not "required" to "protect" the network. The absurd energy usage is required by the rudimentary proof-of-work algorithm.

The "community"

Now you may be feeling somewhat angry about my takes on Bitcoin. If so, let's address one of the most important issues: the cult.

It's not a community, it's a cult. You are politicizing a freaking digital currency instead of dealing with it rationally. So you begin to defend and protect and ignore every and any criticism.

My take on what went wrong is that we've lost the essence of it all. We forgot that the main objective of cryptocurrency is to be a currency after all. It should serve us, not the other way around.

Nano

Yeah, Bitcoin was the first project, it as a pioneer, it was a proof-of-concept that worked! But is it perfect? Hell no.

But I do understand maximalists. As I've said, there are tons of shitcoins. There are tons of just plain bad projects that need to be contested!

Now, letting ideologies aside, and focusing on logical arguments and fundamentals, What would be the de-facto strong currency? Well... It should:

• NOT be inflationary (have a fixed supply)
• Decentralised (and have the incentives to keep it decentralised)
• Preferably use as little energy as possible (for resilience)
• Preferably have no fee at all (fees are only present in Bitcon because of it's consensus mechanism)
• Preferably be fast

People keep defending the Lightning network, the L2 solution that will solve all of our problems. No it won't. The project is a disaster, tons of security vulnerabilities, tons of devs have abandoned the project, and it still incur fees, while keeping your Bitcoin hostage.

Nano (XNO) is one particular project that seems to check a lot of boxes.

Its block-lattice design gives every address its own mini-chain, enabling asynchronous transactions, so Alice → Bob doesn’t wait on Charlie → Dave.

Consensus is “Open Representative Voting” (ORV)↗. You pick a representative, your whole balance stays in your wallet but counts as voting weight for that rep.

When a double spend is detected, reps broadcast votes, weighted by the balances that back them. The Majority wins and bad block dies.

You know who first drafted a very similar solution? Satoshi Nakamoto himself↗.

Hashing is only a tiny anti-spam PoW, so it's very green, again, resilient. So by combining PoW, PoS, ORV and a block-lattice design, and other mechanisms like anti spam protection etc, we get a near-instant, feeless digital currency with a UX that doesn’t suck. Also, fixed supply on ~133M units.

But were is the incentive to run a node?

For Bitcoin, it’s simple: you mine a block you get payed. But this incentives for centralisation, the more computing power you have, the more you can earn.

You can’t bully the Nano network with raw compute, you’d have to buy XNO itself. And once you hold a fat stack, nuking the network means nuking your own bag. The smart move is to spread your vote weight across reps and keep the thing healthy.

But the incentive is the network itself. You have access to a global, feeless, instantaneous payment system.

Nano network is 10+ years live, 200M+ tx processed, shrugged off spam attacks, and v28 hardens it even more. It’s not flawless (I have my own criticism on it), but it’s the best real-world crypto money I’ve found so far.

If I encounter other project that has better fundamentals than Nano (XNO) then of course I will look forward to it. Because I am a crypto enthusiast, and cash is a tool.

So instead of watching Bitcoin being hijacked by big institutions, central banks actively working on CBDCs and memecoins and shitcoins everywhere, what about we get rational again and move forward with advancements in crypto tech?

That's my rant.

So... Will Bitcoin die?

No? Bitcoin established a very important position, and as it being the first of it's kind, it has got an advantage.

It still is a hard asset, very liquid, traded 24/7, SoV, digital gold... But just like gold, it's crappy for actual transactions.

It still has a very long run forward, but it isn't it. Saying that Bitcoin is the ultimate cryptocurrency is wrong. It's like saying we wouldn't progress from rudimentary solutions like floppy disks..

Will XNO (Nano) take it's position? Will they run side by side?

I think each hard asset crypto (discarding bullshit projects, memecoins and shitcoins) have their own use cases. BTC (Bitcoin), XMR (Monero), XNO (Nano), LTC (Litecoin)...