Money, Blockchains, and Social Scalability
the secret to Bitcoin’s success is that its prolific resource consumption and poor computational scalability is buying something even more valuable: social scalability
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Jack Dorsey's Cash App is allowing users to send and receive bitcoin without any transaction fees - Markets Insider
Jack Dorsey's Cash App has enabled its users to send and receive bitcoin for free.
The payments company announced a $1 million bitcoin giveaway to users based in the US, aged over 18.
Square has about 36 million active customers as of December 2020.
ETH in Whales’ Wallets Is Barely Budging - Decrypt
The number of wallets with 100 to 10K Ether have dropped by 7.2% since the cryptocurrency hit an all-time high four weeks ago. In contrast, the amount of wallets with over 10K ETH, valued at more than $18.4M, dropped only 0.9% in that time according to data provided by data analysis platform, Santiment.
Money, blockchains, and social scalability
by Nick Szabo | February 9, 2017 | 18 min read
This essay is from a few years ago, but we’ve personally found the ideas that Nick Szabo lays out here to be among the most important in crypto. Szabo is one of the most respected figures in the industry, and in this essay he articulates a compelling vision of unprecedented global cooperation facilitated through cryptocurrencies. The essay isn’t the easiest read as it’s technically dense and dives deep into the ideas of Adam Smith and Friedrich Hayek. However, it’s essential for grasping the longer-term potential of crypto. Below are a few excerpts:
the secret to Bitcoin’s success is that its prolific resource consumption and poor computational scalability is buying something even more valuable: social scalability. Social scalability is the ability of an institution –- a relationship or shared endeavor, in which multiple people repeatedly participate, and featuring customs, rules, or other features which constrain or motivate participants’ behaviors -- to overcome shortcomings in human minds and in the motivating or constraining aspects of said institution that limit who or how many can successfully participate.
Without institutional and technological innovations of the past, participation in shared human endeavors would usually be limited to at most about 150 people – the famous “Dunbar number”. In the Internet era, new innovations continue to scale our social capabilities. In this article I will discuss how blockchains, and in particular public blockchains that implement cryptocurrencies, increase social scalability, even at a dreadful reduction in computational efficiency and scalability.
eBay, Uber, AirBnB, and online financial exchanges have brought social scalability via often great improvements in commercial matchmaking: searching for, finding, bringing together, and facilitating the negotiation of mutually beneficial commercial or retail deals. These or related services also facilitate performances such as payment and shipping, as well as verification that other obligations undertaken by strangers in these deals have been performed and communication about the quality of such performances (as with “star rating” systems, Yelp reviews, and the like).
Whereas the main social scalability benefit of the Internet has been matchmaking, the predominant direct social scalability benefit of blockchains is trust minimization. A blockchain can reduce vulnerability by locking in the integrity of some important performances (such as the creation and payment of money) and some important information flows, and in the future may reduce the vulnerability of the integrity of some important matchmaking functions.
Markets and money involve matchmaking (bringing together buyer and seller), trust reduction (trusting in the self-interest rather than in the altruism of acquaintances and strangers), scalable performance (via money, a widely acceptable and reusable medium for counter-performance), and quality information flow (market prices).
That is what proof-of-work and broadcast-replication are about: greatly sacrificing computational scalability in order to improve social scalability. That is Satoshi’s brilliant tradeoff. It is brilliant because humans are far more expensive than computers and that gap widens further each year.
Read the full essay here.
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