this post was submitted on 20 Aug 2023
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If Federation/Decentralization could be combined with decentralized crypto currency payments through something like Monero in a way that is not a scam, it would actually be great. We need some kind of monetization model for the Federated Web, and crypto currencies are actually great for that purpose but so far all implementations of this haven't really worked or were just a scam.
Why are Miners a problem? You need people who mine the crypto and then sell it to you, cryptos with a pre-mined supply are garbage. The problem is not with the miners, cryptos like BTC or ETH that can be mined with ASICs are the root of the problem. The only crypto currency I consider legitimate is Monero (XMR) because its RandomX algorithm makes it resistant to ASICs and GPUs. It is meant to be mined with a CPU, and only CPU-mining is efficient and economically viable. (Although in the Monero community, we don't mine Monero for the money, we do it to support the decentralized system) XMR has the core idea that 1 CPU = 1 vote on the blockchain. Everyone has a device with a CPU, thus everyone can mine. ASIC-powered mining farms in China (which are often the ASIC factories themselves) don't have an advantage over regular users, as it should be.
Why do you need mining or artificial scarcity at all? Yes, CPU mining is more 'efficient', but what is the point? And why are all (as far as I can tell) crypto currencies deflationary? It encourages hoarding rather than spending and investment which can be economically devestating. Maybe that doesn't matter for black market usage, but there are many crypto supporters who see it as the future of actual currency.
BTW Monero is like the one crypto I find kinda interesting, due to the privacy aspects.
Because that's how the blockchain works. Without validation (which is what Mining does) anyone could just claim they have e.g. 1 million XMR when they have zero. Because you don't have a central authority in crypto currencies, you need some other mechanism which verifies that transactions are legitimate. That mechanism is a whole bunch of complex math, or in other terms, Mining (in the context of crypto currency). Glad you like XMR though.
Not all cryptocurrencies are deflationary. Yes the deflationary model encourages holding/discourages spending however for some projects this is a desired outcome based on the utility the coin/token is aiming to provide.
Additionally deflationary crypto can act as a hedge against inflation, hyperinflation, and stagflation. The decreasing supply can counteract inflationary pressure caused by externalities like government policies and economic shake ups.
I think any hedge against inflation is countered by the extreme volatility most of them suffer from.
Which cryptos are non-deflating BTW?
ETH moved to proof of stake, no more POW mining needed.