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A discussion of Technique, Finance, Economics, and Blockchain

A discussion of Technique, Finance, Economics, and Blockchain

Etherum Reddit

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This thread was initially intended for a different subreddit, but it felt appropriate to post here. I also want the opinions of the Ethereum Community.

I am going to discuss a fair bit about economics, finance, and how it pertains to technique. This thread is by no means intended to be taken as financial advice.

To me it is clear that the current financial and economic system we have in place only deprives humanity of dignity and freedom. Can alternatives permanently solve the problem, or will the problem exist as long as technique exists? When I speak about technique, I am using Jacques Ellul's definition in his book "Technological Society" "Technique is the totality of methods, rationally arrived at and having absolute efficiency (for a given stage of development) in every field of human activity".

The Federal Reserve is looking to create a Central Bank Digital Currency (CBDC). This gives the federal reserve a lot more influence on the consumption habits of Americans who hold USD IE Negative interest rates, inflation. Since your money loses its value over time, it is said that a small inflation rate is actually better for the economy since this encourages consumers to consume sooner rather than later. With the implementation of CBDC's, the Federal reserve will likely implement negative interest rates on those dollars, again further encouraging consumption as you are losing wealth if you do not. There are also major privacy risks involved with CBDC's. CBDC's are already becoming popular in China. I argue that this is an insult to human dignity and freedom.

Alternatives to our traditional banking system currently exist, like Ethereum, a censorship resistant, decentralized, trustless, smart contract blockchain. Ethereum has various applications such as lending pools (pools of assets where you can earn solid interest and borrow from) with decentralized stable coins (coins soft pegged to USD using Ether and other ERC-20 tokens as collateral, governed by MakerDAO holders). It is a very speculative technology, but I believe Ethereum has really matured. The asset Ether recently surpassed Paypal in terms of market cap as well as Ethereum settling more transactions in a quarter than Paypal did in a year. Lending pools like AAVE or Compound host a decentralized stable coin called DAI which offer far more competitive rates than a traditional savings account and especially more than a CBDC.

This technology I have been a passionate advocate for for over a year now regardless of my increasingly anti-technical views, however I often ponder on how this technology may only temporarily solve the issue of centralization in the financial sector, and it by no means solves the issue of technique. A lot of these projects utilize a governance token model, meaning that you vote using your tokens, and the more tokens you have, the more voting power you have. Depending on how these tokens are allocated, on how much early investors hold, or how much money you have, that voting power can be very centralized amongst few people. Popular Decentralized Exchange (Dex) aggregator 1Inch has 41% of all tokens held by one Ethereum wallet owned by popular crypto currency exchange Binance. This gives Binance the ability to swing any 1Inch proposal 41% in their favor instantly. Unfortunately there isn't a good way to remedy this at the moment. There are also issues with these exchange tokens potentially being labeled as securities and being subject to regulation by the SEC. Because of this and many other things it is becoming increasingly clear to me that Ethereum, despite being an improvement to the traditional banking system, is not enough.

Due to the efficiencies of blockchains, I also fear that this technology can be used as a means to coerce. Ethereum after upgrades and rollups is projected to be able to settle up to 100,000 to 150,000 transactions per second. Visa currently settles closer to 20,000-40,000. It should be no surprise that Visa has decided to utilize Ethereum to settle stable coin transactions. I fear that because they are so efficient, they can be utilized as a way to surveil or coerce. There was a blockchain in South Korea used to verify if people were vaccinated. It is not my intention to start a discussion about the covid vaccine, but merely a warning of how blockchain can be used to determine your status. Are you a dissenter? Did you pay your taxes? There is also nothing stopping governments or corporations from creating their own centralized blockchains, likely having more throughput than decentralized chains (with a few exceptions IE Solana) which may end up being the traditional, legal, settlement layer.

Since Ethereum is a public blockchain, anyone can view any transaction you make on the blockchain. This can be a corporation, a government, your neighbor. There are ways to increase your privacy, however I fear that people A. will not care about privacy (you would be surprised about how little people care) or B. that the ability to track on-chain data drastically improves. It is true that Ethereum is not the only blockchain. Monero is an example of a blockchain that allows for private transactions and the inability to search where a transaction is being sent. This asset is heavily regulated however. The only way you can obtain this asset without giving up information is if you buy it locally or if you mine it yourself. There is also limited functionality other than being a private decentralized blockchain.

It has become more apparent to me that these improvements over time degenerate to the very thing it sought to destroy. The United States has undergone numerous radical reforms to prevent corruption i.e. the Jackson Era and the Progressive reforms of 1920. These reforms only had temporary effects. As the movement relaxes, the corruption crept back in. I fear that blockchain is merely a temporary solution, and will resemble what it replaced, with only small practically insignificant differences. Does no solution exist as long as technique exists?

I have my doubts that a popular leftist philosophy taking hold of our society will end up improving the overall freedom and welfare of society. A prominent talking point I have heard from many left wing anarchist types is that AI can be used to decide the best way to allocate resources, including labor. This is an even more blunt manipulation of human behavior. Human beings will progressively let technology and AI make more and more of our decisions and play a bigger role in our lives, however turning it off would amount to suicide. Think of what would happen tomorrow if the internet or electricity was ripped from our society? This means that an industrial technological system would softly take power from all of humanity. One can argue that this already happened. Ellul mentioned in the Technological Society that the electronic brains running automatically has reduced seemingly powerful leaders into mere figureheads who only seem to direct procedures which are so complicated that no human brain could replicate them. Regardless of whatever system is in place, communism, capitalism, socialism, anarchism, etc, as long as there is technique, it will invade every faucet of your life and will continue to regulate your behavior until individual liberty ceases to exist.

I hope to set myself up in such a way where coercive forces have little to no influence in anything I do. I hope others do the same.

I have only briefly begun to mention my concerns regarding finance, economics, and technology. Please feel free to comment on anything that anyone wants to add.

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