Crypto Without Blockchains

In the increasingly centralized world of web3, are there any benefits to using a blockchain? What would crypto look like without the blockchain?

There are fundamental tradeoffs to using a blockchain architecture (see Blockchain tradeoffs). Blockchains choose transparency over privacy and decentralization over scalability. Decentralization is costly.

For example, permissionless blockchains must deal with bad actors and spammers. A centralized service like Gmail can detect and eliminate spam by analyzing data on a large scale. However, Blockchains must deal with spam by transaction fees.

Without a blockchain, some of the bottlenecks of crypto would be easily solved. Transaction throughput would significantly increase using a traditional system (see Visa/Mastercard). Privacy controls would be easier to implement. Transaction fees could be near zero—the cost: centralization and trust in a company, technology, or person.

Web3 is already more centralized than it seems. Many of the scaling solutions are centralized solutions in disguise. On-ramps to crypto such as Coinbase will always be centralized. Would it ever make sense to ditch the blockchain for the rest of the ecosystem?

What is web3 without a blockchain? Cryptographically signed transactions, smart contract languages, and abstractions (tokens, NFTs, etc.). I'd argue that these advancements are fundamentally new and different from our existing financial system. But are they valuable on their own? I've said before: Don't Ship an Architecture (ship a product).

The reverse argument has been tried – blockchain without crypto. This was the 2017-2018 era of enterprise private blockchains. While there are use cases for transparency logs and other Merkle trees, I don't believe the future is bright for enterprise blockchains.

Streaming Applications

Netflix and the ability to stream on-demand, non-interactive media was a significant innovation in the last two decades. Streaming interactive applications over the internet is an exciting and logical next step. Here are three different products that implement interactive streaming applications.

Streaming web browser (Mighty). The browser is the new operating system. More complex applications are run inside the browser (e.g., Figma, Google Earth) that can sometimes be resource-heavy. Mighty aims to solve this by streaming an instance of Google Chrome running on a beefy cloud machine straight to your desktop.

Streaming desktop environment. (Windows 365 Cloud PC). Although the browser is the new operating system, the operating system is the, well, original operating system. Windows 365 Cloud PC takes the same technology and streams the entire operating system to your machine. This helps organizations secure end-user devices easier and makes it simple for end-users to work remotely and access their files, applications, and desktop from anywhere.

Streaming games (Google Stadia). Instead of buying a gaming console with dedicated hardware, imagine playing a video game on any device with a device connected to the internet. Then, pick up where you left off or quickly switch games without downloading new content or updates.

Of course, some major trends are working against a streaming future. For example, hardware advancements like the M1 chips make devices more powerful. In addition, streaming requires fast network speeds, so those users might not benefit as much compared to the alternative (simply downloading the media or application). SaaS moves much of the burden of applications to the cloud. Edge and CDNs have made asset delivery quicker than ever.

I'm not sure what the correct layer is to stream. Is it the operating system? The browser? Specific classes of applications?

Some other ideas of things you could stream:

  • IDEs
  • iPhone/Android apps
  • Website
Minsky Cycle

Hyman Minksy was an economist at Washington University in St. Louis. His most enduring work was proposing hypotheses on how financial market instability was linked to speculative investment bubbles – work that went largely unnoticed until the 2008 financial crisis.

Minsky's hypothesis can be simplified as a cycle of disruption that leads to significant returns, lower volatility, and increased investment. Some have called it the Minsky Cycle.

There are five stages to the Minsky Cycle.

  • Disruption
  • Boom
  • Euphoria
  • Profit-taking
  • Panic

A new technology or policy disrupts the market. Outsized returns encourage more capital, and continued capital often lowers volatility. Seeing low volatility and great returns, there begin to be highly leveraged bets. The smart money knows that this exuberance can't last and takes their profits. Finally, panic strikes and there's a market selloff.

Minsky's hypothesis hasn't had much impact on real macroeconomic theory or financial policy, but it's a helpful mental model to view these events (and mental model only, Minsky never built an actual model). Sometimes a narrative is more important than it seems.