Thread by @ChainLinkGod

1/ Interesting discussion today with @elonmusk about the differences between #Bitcoin and #Dogecoin in regards to decentralization and the ability to serve as a new digitally-native money for the people

Here are some additional nuances on the subject

2/ As one of the people who helped bootstrap @PayPal to where it is today, I understand Elon's perspective regarding the traditional centralized currencies like $USD in the context of payments

But blockchains are entirely different technology with very different considerations

3/ Blockchains are designed to be inherently decentralized, censorship resistant, and permissionless in order to lower the barrier of entry for financial activity

Centralized finance does not reflect these values due to its centralized, censorable, and permissioned nature

4/ Therefore when considering how such infrastructure should be designed, what works for a centralized payments provider is not necessarily going to work for a distributed network of ten thousand plus nodes

You can't scale blockchains the same way you can with exisitng systems

5/ The point about miner centralization that Elon brings up may seem like a worrying statistic on the surface level, but miners do not control a blockchain network

Miners are simply service providers who are bound by the social consensus of the community operating full nodes

6/ Users themselves choose which version of the chain they wish to follow and choose which client version they choose to run on their computer

There's also the additional dynamics that miners have significant skin in the game due to their financial exposure to Bitcoin and ASICs

7/ In order to maintain security and decentralization of a blockchain network, the hardware requirements for operating a node must be bound so that people can run a validation node on a laptop computer

As a side effect, this does indeed reduce the scalability of blockchains

8/ Simply lowering the blocktime and raising the blocksize directly increases the hardware requirements of running a blockchain node, therefore compromising on the exact value proposition that blockchains aim to provide

This dynamic has been discussed for over a decade now

9/ From my perspective, Elon's preference of cryptocurrency comes from a societal standpoint that anything can be money if there is social consensus around it

And this is a fair point, but the ultimate goal of blockchain-based monetary assets is creating a superior form of money

10/ I believe the core value proposition of blockchains are smart contracts, but this requires digitally native money to provide the most amount of value to users

If only a select few entities are able to audit this money because of the HW requirements, it has little value

11/ Since so while we all want to see blockchains and cryptocurrencies succeed in scaling to a maximum extent to provide access to everybody, we can't compromise on the values for which makes blockchain and cryptocurrency powerful in the first place

12/ Therefore my recommendation to @elonmusk is to look deeper into how blockchain networks are able to scale while retaining these decentralization, censorship resistance, and permissionless activity

#Ethereum moving to sharding is one example
vitalik.ca/general/2021/0…

13/ In regards to energy consumption, a point that Elon previously bought up, it's an area of research that the Ethereum community in particular has been focusing on for years

Proof of Stake is a viable alternative that will reduce energy usage by 99.9%+
vitalik.ca/general/2020/1…