The De-Facto List of Blockchain Claims and “Use-Cases”

Original: https://old.reddit.com/r/CryptoReality/comments/lq6xpq/the_defacto_list_of_cryptocurrencyblockchain/

Last Update: 6/4/23

UPDATE: A good bit of the research put into this (and more) has been incorporated into a feature length documentary on Blockchain – please take a look!

Is blockchain really an innovative/disruptive technology? Let’s look at all its claims and the facts. Is there anything blockchain does better than non-blockchain technology?

UPDATE: Due to out-of-control crypto bot spammers, comments on this post have been disabled – if you want to debate, create a new post at /r/CryptoReality but be sure to read through this whole article – there’s a 99% chance your argument has already been addressed here.

Examples of blockchain applications that are superior to existing tech:

*crickets*

NOTE: In the list below, we single out “Bitcoin” in most cases but these arguments can also apply to just about any crypto. The claims below imply that crypto/bitcoin is the only/best approach to accomplish the listed objectives. When we say “nope” – we prove that there are non-crypto, non-blockchain solutions that can accomplish the same objectives, often faster and better.

Debunked claims that suggest Blockchain is a superior solution:

Seriously… still waiting for something to put on the list. Let me know if I’ve left out any arguments.

Bitcoin is “de-centralized”, and is not under anybody’s control. – False. While the Bitcoin code is open source and public, what goes in that code is under the control of specific private interests. As of this writing there are only a handful of people who have access to the source code, and only 6 who have the ability to commit code changes. Those with access to the source are associated with organizations like Chaincode Labs, OkCoin, BitMEX, Blockstream, MIT DCI, etc. The MIT Digital Currency Initiative lends an air of legitimacy to the guardians of the source, until further investigation reveals that it is an organization funded by Chaincode, BitMEX, Jack Dorsey, Coinshares (Europe’s largest digital asset management company), and others. The interests of these companies and their owners are aligned in that they are focused more on increasing the price and less about improving the tech or making it more de-centralized. I’m using Bitcoin (BTC) as an example, but as far as is known, all other major crypto currencies are similarly configured, and in all likelihood have even fewer, less diverse people in exclusive charge of the code. So the notion that it’s “open source” and “de-centralized” is more of a marketing blurb than a realized technological advantage.
Bitcoin is up to $$$$ Wow. Now are you willing to admit you’re wrong? – Nope. There are lots of holes in the bitcoin-is-a-store-of-value argument. Someone just paid $120k for a banana taped to a wall. That doesn’t mean it’s the best designed banana ever, or that it will be worth anything a year from now, despite how many people are talking about it. Beyond this there’s plenty of evidence the market is manipulated.
Helps Bank the Un-banked – Nope. A pre-paid gift/debit card is better/accepted at more places and easier to use. Additionally, there’s a system already helping “bank the un-banked” called “Mobile Money” which is used worldwide and has less technical requirements than crypto, is much faster, and more consumer protections. Also there is over billion dumb phone users globally, mostly in developing nations in Africa and Asia. they can’t use shitcoins but they can use mobile money networks https://www.cnbc.com/2017/03/22/4g-feature-phones-emerging-markets-apple-iphone-samsung.html (h/t Cthulhooo) There is also M-Pesa – these systems are more ubiquitous and have less resource requirements than crypto.
Allows money to be sent around the world instantly – Nope. Wire transfers, Moneygram, Paypal and other systems are easier to use. Paypal even works in often cited countries like Zimbabwe, Nigeria, Vanuatu, China and El Salvador.
Thanks to blockchain, it is possible to carry out transactions and transfer assets without having to rely on a trustee. This can be done globally and cost-efficiently, and it can be proven at any time without any gaps. – Incorrect. First: Crypto is not an “asset”. It’s a token you hope to redeem for an actual asset. Second: The process of redeeming such a token requires a trustee. Third: Crypto and blockchain runs on the Internet, uses radio waves (WiFi, Satellite, Cellular) and terrestrial wiring (fiber, twisted pair, undersea cables) all of which exist and are reliable because of a trustee: centralized government authority. Multiple “trustees” are needed.
Can’t Be Manipulated – Adherents claim crypto’s “de-centralized” nature makes it immune from manipulation. In actuality the entire market is very actively being manipulated as we speak. One of the big manipulators is Bitfinex/Tether.
Can’t Be Seized – Nope. Authorities all around the world have seized crypto, and more.
Bypasses government/taxation – Nope. You can’t use crypto for anything useful without converting it into fiat and passing through regulatory boundaries.
Inflation proof – Nope. There is no guarantee crypto will perpetually increase in value. And its exchange rate will still be dependent upon the current inflation rate..
It’s more secure than other payment methods – Nope. There’s not much “security” when a simple mistake can mean you lose your money forever with no recourse.
It’s censorship resistant – Nope. Crypto still relies on an internet/communications infrastructure which is tightly controlled and regulated by special interests with competing agendas. There’s no evidence that various municipalities cannot severely restrict its use if desired. While it’s impossible to 100% stop crypto, municipalities can absolutely make it no longer worthwhile to use
Blockchain is new technology – Nope. A blockchain is an append-only linked list using cryptographic hashes, which have been around for decades. There’s a reason this technology is not widely in use, because it’s not very efficient. In 2021 this tech still doesn’t work.
Blockchain is immutable – Nope. It can and has been changed. (See forks, 51% attacks, etc). As of this writing, there are 436 forks of BTC.
Bitcoin can’t be hacked – Incorrect. See above about 51% attacks, which everybody in the industry acknowledges is possible. Beyond this, in the history of Bitcoin, there have been numerous vulnerabilities discovered that have caused hacks to the blockchain, including one that created 185 Billion BTC out of thin air.
Blockchain has “smart contracts” – So-called “smart contracts” are neither innovative, nor very “smart“. They’re just a series of very limited IF-THEN statements that can be executed on blockchain transactions. A typical web server script is infinitely more smart and useful than a smart contract. Also, smart contracts are subject to the Oracle Problem.
Major industry players are adopting crypto – Not really, and those that are, aren’t doing well. Stripe abandoned bitcoin support, Microsoft also shut down their blockchain service. Financial firms who claim to be “exploring” crypto or “handling crypto” aren’t really doing that – they’re still basically dealing in fiat, like Paypal who is outsourcing the crypto part to Paxos Trust Company, LLC. Most are instead partnering with exchanges who convert that crypto into fiat within their existing systems. IBM and Maersk touted an ambitious supply chain blockchain project called Tradelens that ended up being abandoned for being non-viable. The same thing happened with the Australia Securities Exchange, ASX’s ambitious blockchain project.
You can’t print Bitcoin like the fed prints cash – Wrong. Yes you can. First, bitcoin has forked several times; second you don’t necessarily need to print more bitcoin. You can create artificial inflation through wash trading with tokens like Tether. Stablecoins are printed out of thin air and traded for bitcoin and vice-versa. Same difference. Also there’s rampant evidence that stablecoins are not asset backed and creating their own market inflation.
Bitcoin is the best performing asset class of the decade – Nope. In reality, due to inflation created in the crypto market as a result of unrestricted stablecoin printing, there’s no way to actually qualify how much liquidity is actually in the market. The “increase in the price of bitcoin” is more likely the result of market manipulation which has been going on from the beginning to present time.
Nobody can control crypto – Nope. There are already mining consortiums that have the ability to manipulate the blockchain if they so desire.
Crypto is “trustless money” – Nope. Whether you decide to trust government, or various computer programmers, unless you audit all the code yourself, you’re still “trusting” in some other party.
People want “trustless transactions” – Nope. People prefer to do business with entities they trust. Trust is a key component in fair trade as well as a moral/ethical society. A system that panders to the untrustworthy is unlikely to attract anybody other than parties that aren’t worthy of trust, which explains crypto’s significant use as an exchange of value involving criminal activities (much higher per-capita than all other major monetary systems).
Bitcoin has value because of Proof-of-Work – Nope. If I spend my life savings sailing a boat to a foreign place where somebody gives me a password, that password is not worth the money I spent getting there. To anybody else it’s still just a bunch of letters and numbers. However many resources were consumed to create it, does not matter. And ideally, if it was that difficult to create, it’s a stupid idea that just wastes resources unnecessarily.
You can make a lot of money in crypto – Unlikely. Not for most people. The only way someone makes money in crypto is if someone else loses money. Don’t be fooled by survivorship bias. NOTE: If you are “HODL”ing crypto, you have no value. That money is gone and only becomes useful when/if you can cash out. Like traditional bank runs, there’s inadequate liquidity in the market to pay even 1% of holders at the current market rate.
L2 solutions like “Lightning Network” will make crypto better – “Better” still isn’t competitive unfortunately. First, the fact that you’d need another layer of bureaucracy is proof the tech isn’t practical nor innovative. Second, L2 solutions like LN are nowhere near as efficient as claimed, and will still be bottlenecked by the underlying blockchain inefficiency.
Company X is making a fortune in crypto – Nope. They’re making a fortune exploiting people who hope to make money in crypto. There is a difference, like the difference between someone heading to California for the gold rush, and someone setting up a hardware store to sell shovels and buckets to greedy suckers. Exchanges don’t make money from crypto. They make money from people. Crypto doesn’t generate any value.
Helps bypass corrupt/hyper-inflated countries’ monetary systems – Nope. In countries with dysfunctional economies, basic trade and bartering of goods and services works better and is more used than crypto. In a crippled economy, using a volatile, unsecured token like crypto is simply replacing one unstable monetary system with another.
Crypto is a good investment – Nope. You’re not “investing” in anything. Stocks represent actual intrinsic value in companies that own assets and can generate income. Ownership of crypto does not create any value or represent any assets. The only way crypto increases in value is through recruitment of downline buyers – which is the textbook definition of a MLM/Pyramid scheme. Just because some people make money does not mean the model is in any way, lucrative for even a noticeable percentage of players. Most people will lose.
Bitcoin is a store of value, better than gold, etc. – Nope. See the above “Crypto is a good investment” myth. Comparing crypto to another system and saying it’s better is also foolish. Gold is also a relatively lousy “store of value” when compared with stocks and other securities. A “store of value” is just that: a store of value. Bitcoin neither represents anything “stored”, nor anything of “value.” Bitcoin has value because of marketing hype, not anything tangible. It’s popularity is a “fad.” And yes, some fads can last decades. That doesn’t mean they’ll be forever appealing.
If money can’t be created from thin air, governments will spend more frugally. – Nope. History shows that when monetary systems were asset-backed, it didn’t have much of an impact on government spending; what it did have an impact on was government engaging in more draconian legislation to have more control over assets like silver and gold. Plus, as outlined before, crypto can be created out of thin air; it can be forked; it can be further sub-divided, and it can be augmented with so-called “stable-coins” which are fractionally reserved. You want more responsible government spending? You don’t need a new monetary system. Just pass a balanced budget amendment.
Crypto is great because __ [fiat, government, The Fed, taxes, etc.] sucks – Nope. This is a fallacy of distraction. If you have to talk shit about a very useful and necessary part of society and the economy, in order to make your fantasy digital dollars seem reasonable, your argument is weak. “I have a car with square wheels. It’s the best because soon, everybody will learn the secret of how corrupt round wheels are!”
Crypto solves the “Byzantine General Problem!11one!1” – Ironically The “BGP problem” is a problem that crypto creates that other payment systems have already solved through more reliable protocols and centralized stanadrds. It’s ultimately not a problem that a payment system should have to encounter if the payment system is well-designed. See earlier arguments about trust and security. Crypto enthusiasts like to toss about this notion that blockchain solves some kind of epic hypothetical scenario they call the “Byzantine General Problem” which suggests if you have different armies that you need to get instructions to, there should be a way to get perfect instructions to each one if any part of your com network fails. — The idea being that with blockchain, there is no way to subvert the transaction between parties so any breakdown on the Internet doesn’t corrupt the transaction. Problem solved? No. It’s not solved. Because Just like in the actual Byzantine General scenario, [you’re still dependent on the “generals” to decide to act on the message or come up with their own plan. Bitcoin doesn’t solve this situation. Bitcoin has forked multiple times, code can be hacked, miners can form consortiums and choose to do something different. Aside from this fact, there’s another issue with the “Byzantine General Problem” that also applies even more obviously in crypto: If for some reason you lose communication with your armies, perhaps they should already have a plan for that scenario and not wait around for a message that may or may not be legit? Perhaps it’s better to wait and re-assess the situation until you regain contact? Likewise if your payment network is damaged and not operating normally, maybe it’s not a good idea to toss your money into that void and hope for the best?
Blockchain can prove ownership and legitimacy – Not really. First there’s the Oracle Problem of whether the ownership info on blockchain is legit in the first place – at its best blockchain can only verify the info initially entered hasn’t been changed. It can’t guarantee the info is true. Second, all the blockchain “verification” apps are basically another, more convoluted and less-efficient version of two-factor-authentication, which is common and been around for longer than blockchain. Third, unlike 2FA, the design of blockchain actually makes it possible to fake ownership. Something much more difficult to do in non-blockchain scenarios. Here’s an example. Using blockchain and smart contracts, it’s possible to acquire an asset, use the asset for verification, then return the asset in a single transaction. So using blockchain for ownership/legitimacy is actually significantly less secure than most other methods.
Crypto (i.e. Monero) is anonymous – Nope. None of these crypto currencies, even the ones that have better obfuscation of transactions, are truly “anonymous”. In most cases, converting fiat to/from XMR undermines the anonymity. The legitimacy of this claim relies on a hypothetical scenario where the transaction doesn’t cross through any other systems that aren’t as secure, which is unrealistic. Also fiat is a more anonymous currency than XMR, and can be more easily sent from one party to another. It may be slightly slower than digital transmission, but this again isn’t really a problem among people who aren’t criminals and don’t have a need for instant, non-reversible, secret international monetary transactions.

If there is any moral to the crypto argument it seems to be that “crypto is awesome” if __ (insert obscure, atypical, crazy scenario here).

Are you a Venezuelan or someone living in a completely screwed up economy that while it doesn’t have a functioning monetary system, has rock solid Internet, cellular, smart phones and computer tech available for everybody even people who lack the resource to use traditional banking systems? Congrats! Crypto may be a slight improvement to what you have!

Are you a drug addict or dealer that is interested in acquiring illegal (and potentially fake or lethal) substances from anonymous random people on the other side of the planet? Congrats! Crypto may be a slight improvement to your existing way of conducting that business!

Aside from the bizarre scenarios proponents cite where “crypto is useful”, we still cannot find an example of where it offers any unique value to the rest of humanity…. still waiting.. and there are no good arguments. It wasn’t this difficult to demonstrate the value of other disruptive technology like: e-mail, Internet, fax machines, telephones, automobiles, etc.

That which can be attributed value with no net worth, can also be attributed as having zero value.

Additional resources: Harvard Computer Science Professor James Mickens on Why Blockchain Is A Bad Idea

Potentially “Honorable Mentions”:

Crypto is a disruptive technology (in the black hat community) – /u/Chipfox brought up this very interesting point. This may be the first example of crypto disrupting an industry. Prior to the implementation of bitcoin, it was more profitable to hack into other systems, individual companies, etc. Now those seeking vulnerabilities to profit from are much more focused on attacking crypto currency-based operations. Crypto has disrupted the black hat community and made it much more focused.
Crypto is great for money laundering, extortion, drug deals and black market transactions – Ok, this may be the one actual example of where crypto actually does something close to as good as existing methods out there, but there are still better ways. If you can get somebody to wire you fiat for your criminal enterprise, it will be easier to use. And it’s easier to get victims to send a moneygram than bitcoin. And dealing with cash leaves no “digital trail” that would be forever etched into the blockchain, making the money paid almost always identifiable wherever it lands. Yes, there are some cryptos that are more anonymous than others, but they still suffer from being largely unusable in non-criminal transactions, which makes the likelihood of them ever being widely used for everyday useful purchases unlikely. And again, crypto tokens don’t represent anything intrinsic.

Additional resources worth examining:

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