Understanding Crypto 5: Stephen Diehl: The Case Against Crypto
The Rational Reminder Podcast
Is Code as Law?
The underlying block chain technology truly is an innovation and will be here to stay. One narrative out there is that, while crypto might be in an asset bubble. The idea that code is law isn't necessarily a great way to run a financial system because code and expectations on always match.
Welcome back to another limited series of Rational Reminder Podcast, focused on learning about cryptocurrencies. Our journey about cryptocurrencies has led us to speak to various experts on the subject, all of whom see some benefits to cryptocurrencies and the underlying blockchain technology. However, what does a skeptic think about cryptocurrencies and the benefits to the current financial system? In today’s episode, we speak to Stephen Diehl, a software engineer who works with financial technology within the finance sector and is an outspoken cryptocurrency skeptic. His engineering background, coupled with his experience working with financial technology, provides a unique perspective on the future of cryptocurrencies. We move through the episode learning about public blockchain technology, different consensus mechanisms, what potential problems blockchain technology can solve, whether crypto can improve the current financial system, if Bitcoin really is decentralized, what drives crypto prices, reasons why crypto will not work, what makes it similar to gambling, and more. Tune in today to hear a unique opposing view of cryptocurrencies and DeFi technology with expert and skeptic, Stephen Diehl!
Key Points From This Episode:
- A brief breakdown of public blockchain technology. [0:03:28]
- The current problems that public blockchain technology is trying to solve. [0:04:16]
- Proof of work consensus and how it tries to eliminate the need for a trusted third party. [0:05:44]
- Some of the downsides associated with the proof of work concept. [0:07:41]
- How other consensus mechanisms have improved the proof of work concept. [0:09:21]
- What the costs associated with proof of stake relative to proof of work are. [0:11:09]
- Problems that both consensus methods have regarding recentralization. [0:12:07]
- What other problems blockchain technologies can be used to solve. [0:12:50]
- The problems in the financial technological system that public blockchains solve. [0:14:29]
- Why finality of payments associated with cryptocurrencies is not a good thing. [0:15:42]
- What limitations can blockchain technology remove regarding international money transfers. [0:17:06]
- How to prevent double-spending under the current financial system. [0:20:34]
- What Stephen thinks drives the value of cryptocurrencies. [0:21:15]
- Whether Bitcoin is decentralized in Stephen’s opinion. [0:23:19]
- Reasons why concentrated mining power does not cultivate decentralization. [0:24:46]
- How permissioned blockchains can improve on the pitfalls of public blockchains. [0:25:40]
- A discussion about the potential benefits of private blockchains. [0:27:15]
- We learn what a smart contract is. [0:29:49]
- Outline of other useful applications for smart contracts. [0:31:25]
- Examples of illicit activities associated with cryptocurrencies. [0:32:08]
- Code is law: deferring to code for implementing law. [0:33:17]
- What Stephen thinks is the value of the underlying blockchain technology. [0:34:32]
- Stephen explains what Web3 is and if it improves the financial system [0:37:05]
- We find out if there is anything about crypto technologies that excite him. [0:41:06]
- The most compelling argument for crypto that Stephen has heard. [0:43:08]
- He explains what he means by suffering stemming from cryptocurrencies. [0:44:40]
- Stephen shares his experiences as an outspoken crypto skeptic. [0:45:26]
- How he began working with researchers from the London School of Economics. [0:47:03]
- Discussion about the narrative of cryptocurrencies and why Stephen is outspoken on the subject. [0:50:33]
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