Wow, I just checked out the forum again after getting my regular digest email. It seems like this ecosystem is imploding right now. People are upset about videos not being hosted on a whitelist-based blockchain, and money-based governance is also used to cause lots of contention. I didn’t follow this community enough to really get a clear picture, though. I had already written about the problem of hosting files on a blockchain earlier in this thread.
You are entirely correct that cryptocurrencies that are not directly issued by the state or international banks will not be tolerated. Even proof of work coins got seriously crippled when they were treated like currencies for the sake of taxation, but not allowed as a regular means of payment or paying those taxes. And the KYC/AML laws and “tainted” coins make it almost impossible to transact value in the real world. Even if CBDC may use blockchain as a technology, they have nothing in common with what blockchain has always stood for: souvereignty of the individual, obsolescence of middlemen, and decentralisation (especially in the sense of being public goods, operated by anyone who volunteers).
End-game wise, even proof of work is insufficient, IMO. Nobody wants to store and verify the integrity of thousands of years of payments back to genesis. And nobody wants a fork going back more than a few blocks. To even use a blockchain, you have to have a pre-funded account to pay transaction fees. All state is managed on-chain, and transactions are processed on-chain as well. However, there is no actual need for all of this. Even if we ignore the history problem, a naive PoW blockchain could have been much more lightweight and more centralised and more user-friendly if it simply included only the transactions, without any verification, and did not track currencies or UTXOs or any other kind of state. Instead of paying transaction fees, a per-transaction proof of work for competing for block space could have been used, and that proof of work could also be used to strengthen recent blocks.
The actual cryptocurrency ledger would then be a secondary program that reads the blockchain and looks for valid transactions in the blocks, and processes them separately. This way, the blockchain nodes themselves would not need to track any state, and there would be nothing forcing you to have pre-funded accounts to do anything on the chain, as the block space contention problem would be solved without spending money. Not requiring pre-funded accounts, and no transaction fees, would mean that you do not have to go through KYC/AML to do literally anything at all on a blockchain, even if it wasn’t suppose to involve money. Such as updating a DNS record or something. This would mean you don’t need to ID with a centralised exchange, and you don’t need a potentially multi-day setup process to access the ecosystem. And you would have much stronger privacy, even when using currencies. It would also be much harder to regulate or track.
Another mistake of blockchains is to try to have eternal storage. Garbage will always get posted on a blockchain, and even useful data turns to garbage after a while. It is an eternally-lasting, eternally growing system. Eternity is pretty long, and eternal growth is obviously impossible.
Once you have a blockchain that is not inherently coupled to state and currencies, you can also look at weaker versions of blockchains that do not need to guarantee the ability to validate everything back to genesis. A distributed system that only needs to create consensus among currently active participants for a timeframe of maybe an hour or even a few days could be designed in a vastly different fashion, without causing the eternal growth problem. Such a system would have weaker guarantees than a blockchain, but almost nothing really requires the excessive guarantees of a blockchain.
Web3 in general, as it currently is, has a flawed endgame. Many blockchain foundations have started prefer to fund self-sustaining projects instead of foundational technology. Meaning most things that pop up now will be something like a staking scheme or an NFT flip or something useless like AI on the blockchain.
I would like to take this opportunity to restate the obvious: blockchain and web3 was initially intended to remove trusted middlemen and authorities (even the state), and replace their role with cryptography and technology. It was supposed to give everyone privacy, souvereignty, and protection against tyranny and theft and inflation. Looking back at over 15 years of cryptocurrencies, nothing tangible has been achieved. Nobody can use souvereign money to buy groceries (mostly due to regulations). But even outside of the currency aspect, web3 still relies on DNS and cloud providers to host websites and content. Blockchains are still unusably slow and complicated to use, and their only use so far has been gambling/speculation and money laundering (NFTs). Blockchains were supposed to be eternal systems with simple rules, yet they never finish development, constantly bloating themselves and even breaking running systems with hard forks (for example Ethereum). No web3 solution was yet able to provide a replacement for web2 hosting. Even TOR with all its faults is better and more user friendly for hosting actual web services than anything the web3 has produced. It lets you provide your own infrastructure, host your stuff from wherever you want, without having to pay fees and without having to rent servers somewhere.
And looking at the wider blockchain community itself, it is disappointing that everyone is just focused on the next thing to gamble on or to launder funds with. Where did everyone who was enthusiastic about the technology 10 years ago go? People want an AI or even a tiktok clone on the blockchain. Decentralised brainrot, wow. What about striving for the creation of technology that actually provides actual tangible value to people? Tools that let you host your own website without requiring Frankenstein-abomination legacy protocols such as HTTPS and DNS, a web standard that actually respects your privacy and doesn’t let documents execute telemetry code that fingerprints you? Tools and protocols that let you host your own email without requiring a static IP for rDNS lookup? Tools that don’t cost money for every little click you do, and not requiring KYC verification for everything you do? And while the IC hides the cost from users by making the developers / deployers pay, it simply raises the bar for developers to go into production. Even in a system of volunteers, even if that system does not involve money at all, it forcibly introduces the need to be “profitable”. Torrents don’t have that. TOR doesn’t have that. And the only solution is either to beg for donations, to pay for everything the users do out of your pocket, or to make users KYC/AML themselves and pay for every button they click.
I think blockchains lost. Sure, the legal side lost years ago, but the ideology was also completely lost along the way, somewhere between cum rockets and poop coins, bored monkeys on a boat and omnipresent “AI”. I don’t see any hope for a resurgence of the old dream, or of any progress towards that vision. If 15 years, strong hype, and billions of dollars didn’t do it, nothing will. The community failed, the foundations failed.