Crypto is a way to store and exchange things over the internet without counterparty risk. Crypto has value for the same reason gold has value beyond its practical use. Think SVB type situations or needing to flee a country that just became a dictatorship.
The article espouses a very US centric view where the government is a trusted arbiter of all financial transactions and there is always a trusted third party to take on counterparty risk. This is obviously not the case all over the world.
The question is how much is that actually worth and can it support crypto's current market capitalization?
Crypto also has value as being able to create digital scarcity and ownership. For example, when you play games online today and you purchase cosmetic items or you play magic the gathering and buy cards, it's pretty silly that you only own a license to use those things for as long as the game exists and there is no way to trade them.
The above concept obviously falls flat when there is no effective scarcity, ie when everyone and their mother can produce nfts that are just jpegs with no actual use. Compare this to a magic the gathering or pokemon card that is just cardboard but still manages to maintain its value.
> Crypto is a way to store and exchange things over the internet without counterparty risk.
I feel like I must be missing something, because there's still massive amounts of counterparty risk. If you're engaging with a bad actor, the only thing that it can guarantee is that the transfer of payment is completed, but there are no guarantees around the exchange of value.
If you're trading with someone operating in bad faith, there is nothing about blockchain that is going to help you, and in fact it becomes much worse, because there is no mechanism for forcing refunds. At least with legal tender you have entire systems in place for dealing with bad actors. I'm more that willing to recognize there are massive problems with those systems, but I have never understood how blockchain replaces those systems.
Can you explain in detail what you mean when you say there isn't any counterparty risk?
You are right that in the scenario of exchanging crypto for physical goods there is counterparty risk but when using crypto along with digital contracts there is not.
I think what you are missing is that in all transactions in the current financial system there is an additional source of counterparty risk in the bank itself. When SVB failed, if the government did not intervene all depositors would have lost all the money stored in the bank and all pending transactions would also have been lost. Or if you use a credit card, if the issuing bank goes bankrupt between the time the purchase was made and the business received the funds in their bank the business would lose the thing they sold and not receive money for it.
> I think what you are missing is that in all transactions in the current financial system there is an additional source of counterparty risk in the bank itself.
This is not a risk I have really worried about. I much much larger problems dealing with bad faith actors dealing meatspace goods than I have with my bank.
Plus, you gloss over the fact that my money in the bank is actually federally insured. If both the bank and the federal insurance fails, I will have much larger problems than my bank account - there is unlikely a scenario where that happens and my basic livelihood is not threatened, and doubly unlikely that I'll have access to a reliable network for engaging with a blockchain.
You're describing things that are very unlikely.
Perhaps you're right about digital contracts? Maybe goods that can be encrypted are able to be effective traded without risk - though I have a hard time envisioning completely removing the risk of a bad actor. There will always need to be some kind of trusted third party to arbitrate, and block chains do not provide that.
Not to mention, I can't think of a single digital good that I've needed where the transaction would have been improved by using a blockchain cryptocurrency.
> You're describing things that are very unlikely.
It happened not even a year ago with SVB. Also, like my original comment says, you are taking a very US centered perspective when you say things are low risk.
Not OP, but based on my (limited) understanding.. it should be possible to use something like a smart contract to provide a stable and auditable surface area whereby two parties could exchange funds for goods via escrow. You would be trusting the underlying platform, but it seems to remove the dependence on the person selling to you as being a good actor.
Can’t you do that with a normal escrow service? People do it every day when they buy houses and other expensive items.
Why bother with blockchain?
Crypto hasn't solved the digital scarcity issue at all. If the game stops existing so do the servers hosting the assets, since most crypto systems can only hold small tokens rather than the assets themselves. There are plenty of NFT examples where the underlying company went broke and the assets themselves disappeared from the internet. The MTG example falls flat if Wizards (the owners) take down their asset hosting services, so it's still mostly centralized and dependent on a company to function.
I believe this depends on the location of hosting. One version is that things are hosted by URI on wizards.com. Another is the data being stored on something content-addressable like IPFS where anyone with the content can verifiably attest to both ownership (b/c it's on the block chain) and that this is the real thing (b/c the content hashes match).
Plus even if you have the assets themselves they're likely useless without the game's original proprietary software for interpreting them.
> Crypto also has value as being able to create digital scarcity and ownership. For example, when you play games online today and you purchase cosmetic items or you play magic the gathering and buy cards, it's pretty silly that you only own a license to use those things for as long as the game exists and there is no way to trade them.
This is nonsensical. Unless two games support some agreed upon mesh/texture format you're never going to be able to transfer your SpongeBob NFT into Call of Duty. Games aren't going to import foreign mechanics into their engines, a fantasy RPG doesn't have a way to use your Laso-o-blast 5000. A Magic card is useless in a game of Pokémon. Your Magic card isn't an unbeatable poker hand.
Digital scarcity is a problem looking to insert itself where no problem needs to exist. The world doesn't need digital scarcity. There's enough scarcity in the world already.
The marginal cost of digital goods is effectively zero. It's an anti-feature to try to push the marginal cost above zero.
That is one perspective but I think people actually want digital scarcity. The rare pokemon card that someone owns makes them happy because it's rare, otherwise they could have just bought a high quality print of it and stuck it on the wall of their room.
I think scarcity is obviously terrible for things like food and housing but for entertainment like above I don't think it is.
The pokémon card is only valuable in the context of the pokémon game. Like the above comment said, a magic player doesn’t care about your pokémon card, so this isn’t a shareable asset.
On the other hand, if you have a rare pokémon card and another player sees it in game, that’s a cool moment, blockchain or not.
> That is one perspective but I think people actually want digital scarcity.
In the same way that a heroin addict wants heroin.
> For example, when you play games online today and you purchase cosmetic items or you play magic the gathering and buy cards, it's pretty silly that you only own a license to use those things for as long as the game exists and there is no way to trade them.
Those cosmetics or digital MtG cards would be just useless strings of bytes without a game to use them in. Might as well tie them to the game explicitly, by storing them on the game's server. Also, there's a way to trade digital MtG cards in Magic: Online (not in Magic Arena though). A friend of mine has made a living trading those digital cards for many years (by running trading bots).
I've heard the argument about online games using blockchain to store ownership data. I've not heard how it would actually improve things in practice. I'd love to know scenario people are thinking of here.
As charitably as possible, I can only think of a situation where there was no central server and instead the game was peer to peer. But then, it's very hard to imagine how to run the other parts of the game in a way that prevents cheating and makes the items 'meaningful'. The hard part would not be the storage of agreed item data but running the world real time on the client without verification but trusted.
Peer to peer worlds are an exciting idea but blockchains just don't solve them.
The other way people seem to suggest is when the servers are offline? Usually, that means the game is dead but let's imagine they open sourced the server. Well, then I guess you either have to trust the new server admins (no need for blockchain) or you could only allow items generated by the original game server only. But in this case, too, you could simplify things by just having a private key signature from the original server and a public key on each client. No need for blockchain there either.
Please help me understand because I'm genuinely interested.
One idea is to have a central network of 3d game assets and to give a license that anyone can use them for free in their game or experience as long as their game is part of the network and enforces the rule that assets can only be used by players that own them.
To make this beneficial to the game creators and artists, they can receive a percentage of each transaction made.
Thanks for sharing.
Can you detail why you would use blockchain to solve this?
If I wanted to keep things simple, and I already had to rely on a central server for the assets, why not also do verification there too? It seems like it would be a lot easier. The participating games still rely on your servers being available.
Or is it that the assets themselves are stored in a peer to peer fashion? In this case, how do you deal with the large size of the assets for each client? Blockchains are huge for the amount of data that they might contain, and game assets tend to be pretty big.
If the network runs only on the participating developer servers - maybe then the size isn't too big of a deal? But then those developers would still have to be trusted to participate (enforced via contract) so then it's back to the central server being a lot simpler solution.
The HN community grew sceptical of blockchain after some initial interest because it didn't seem to help in a lot of places it was marketed for.
The technology seems to stay alive because it turned out that it's a great vehicle for some kind of new multi-level-marketing. You can promise a piece of the action to people in some partially verifiable way. The tech is complicated enough that a lot of people think they own something when they don't.
Just because it is a good vehicle for scams doesn't mean it is not also useful for legitimate technology, but I haven't seen too many examples of the latter.
This is the theory that has been pitched for years. The reality, it turns out, is that no game creator is motivated to build their game in such a way that it can support third-party assets tied to a blockchain.
This doesn’t make any sense to a developer.
Do you have to support all assets on the chain? That has a very high barrier of entry, unless the assets are shared between games. But that’s not how art styles work, you can’t just drop a random asset in your game and expect it to fit in. So unless all the games are just reskins of each other that doesn’t make sense.
I guess it could be a mod situation? But then the platform holder can just do profit sharing a la Roblox.
Or do you only support certain assets? At that point why not just make your game off the chain and collab with other properties?
This is more a personal stance than anything else but digital scarcity shouldn’t exist. We’ve created this digital world that doesn’t have much of the physical constraints on it, why introduce them into it. What’s the point?