Fully agree. I'm heavily in crypto but keep saying the same - people will demand banks, will demand regulation, will demand insurance.
One recent example: a few days ago there was a big movement in crypto market. Due to huge traffic spike that went with that, one unnamed chain practically ground to a halt. The only thing that continued working normally was liquidation bots...
So tons of people got liquidated coz they couldn't adjust their positions. And now obviously they all are calling for compensation. But in the decentralized world of de-humanized smart contracts with no legal framework, there's obviously nobody responsible, hence nobody to pay any compensation.
I don't want to spread FUD here. For the point I wanted to convey it's not relevant. Feel free to look it up, but please don't write it here, coz it will turn to flame war.
They're referring to openly "manipulating sentiment" (with facts?) around a given coin/institution. I guess people are ostracized for this in crypto circles? Seems pretty lame honestly.
It's a breath of fresh air to read some level-headed (and realistic) response in this topic. I find it usually when btc is in a downswing, it's easier to have a meaningful conversation about it.
That’s obviously true. And once you accept that then the whole premise behind crypto is gone - if centralization is the only way to make it work, then traditional banking is preferred. All that’s left are use cases that are in the gambling and money laundering category.
I disagree. I believe there's a lot of areas where crypto can bring much more efficiency and transparency into financial markets, and that's a good thing. I agree the point is not to replace banks, but perhaps evolve them, bring about new types of financial institutions, products and instruments.
What kind of efficiency are you talking about? It's far, far from clear -- at best -- that crypto can be more energy-efficient than traditional banking.
Transparency? Really? For whom? Do you want your taxes on the blockchain for everyone to see?
I am not an expert in crypto at all, but what I would love to see maybe, is some type of stablecoin supported by the USPS. USPS used to be in the banking business and are now looking into it again. Is there an opportunity for the USPS to support USDC, to replace money orders to help serve the underbanked?
Why wouldn't the USPS just be a bank, with accounts with the Fed and FDIC insurance though? The USPS not providing banking services is because Congress won't let it.
While I expect there are important new types of financial institutions, products and instruments that may be evolved by cryptocurrency experimentation, I would be extremely surprised if normal people could do a coherent analysis of the pros and cons of them, and expect they would not be able to distinguish the good ideas from the scams. I mean, look at how many people think literal lotteries are a good investment, or who are furious about the existence of inflation, or whose mind is blown when they first learn about fractional reserve banking.
I don’t know what you mean about efficiency, as there are multiple different ways to count this. Energy efficiency clearly isn’t a selling point, so can you expand on what you do mean?
I believe the current state of affairs has governments holding a monopoly on lotteries and actively promoting and marketing said lotteries to the financially illiterate. The odds of coming out ahead are wildly better in crypto vs lotteries. Perhaps we should put an end to government-controlled scams such as lotteries before claiming that regulated industries can do no wrong?
I’m not saying regulated industry can do no wrong, I’m saying the graph of for frequency vs. quantity of wrong for regulated is smaller overall and closer to the axis than for unregulated.
I would counter with the great financial crisis of 2008 - and the stated reason for the creation of Bitcoin. Those were all regulated banks and financial entities that were deeply involved in a fraudulent scam to mis-represent the quality and contents of their mortgage backed securities. They took sub-prime mortgages and then added massive amounts of leverage and somehow the ratings agencies all gave them a AAA rating. This was all in a heavily regulated environment and as such it proved the need for a decentralized alternative.
My questions for those who trust in regulation:
-Why was no one ever prosecuted for this fraud?
-Why did regulation not work in the case if the 2008 GFC?
-If it didn’t work then, why would it work the next time?
It’s not really a counter though: for that you’d need to compare 2008 against markets with weaker or absent regulation.
I’m not sure the relative weighting of causes, between fraud, the misuse of Black Scholes[0], the elimination of various regulations which has been created at the end of the previous crisis, and the failures of credit rating agencies.
At least some of the fraud which did occur resulted in prison time.
[0] I did hear one of the big problems was everyone looking at the (Nobel Prize for economics winning) Black Scholes model, applying it inappropriately, and justifying this in the grounds everyone else was doing it. This is hard to fix, and group-think of this type is also very much the kind of failure mode I expect to happen more often in unregulated markets, but that doesn’t mean I don’t expect it to pop up everywhere given time.
> At least some of the fraud which did occur resulted in prison time.
Could you point me to any examples? When I looked into this the only person to serve prison time during this period was Bernie Maddoff and his great crime was stealing from the rich.
Thanks for sharing that link. It was very informative. They didn’t go far enough (e.g. None of the ratings agencies were impacted) but I’m glad to be proven wrong on this issue.
on a related note: I mentioned in other comment here that people will demand regulation. On the other hand, on numerous occasions I've stated that the next financial crisis will come from crypto. You already have wrapped tokens, tokens that wrap other yield making tokens, tokens that are just confirmation of collateral, yet they can be used as collateral elsewhere, tokens that can wrap multiple different tokens, NFTs that can wrap other NFTs, etc. etc.
Given the human nature, it's pretty much inevitable that some dirt will get lost in this chain, and we will face the exact same fate as we did with CDOs, just with different terminology.
I’m furious about the existence of inflation. I think it should really be called monetary debasement instead of inflation. Satoshi Nakamoto created Bitcoin in part to provide an alternative inflation free money option.
Why am I being naive or foolish to be furious about the existence of inflation? Is it a good thing that I simply misunderstand?
I am genuinely curious. Please help me understand.
Curiously, I was just thinking how I personally am often wrong about inflation right before logging back in to see what responses I’ve had to this comment.
One of the important things I tend to forget, is that effective rate of inflation is different for different people within the same economy.
This is because inflation isn’t just caused by just governments printing money, it’s also caused by a reduction in the availability of things to spend that money on and even the rate at which money changes hands (https://en.wikipedia.org/wiki/Velocity_of_money).
There’s also a totally unrelated argument that I can follow but not adequately repeat about the impact of various levels of inflation on consumer spending and the feedback that has on employment etc., but that’s not an argument that I expect to do anything at all to reduce anger.
I believe the accurate answer here is twofold:
- money is perpetually not supposed to be a great perpetual store of value relative to goods and services. Government policy aims for some inflation, fears too much and fears too little. Why? Because a bit of inflation is an incentive to use your money on more productive asset - eg don’t hold on to it but instead invest in a startup or go use someone’s services or goods (go to a restaurant!). The issues happen when inflation is so high that the money melts away before you have time to figure out how to use it productively. Deflation is also bad because then people stop spending on services, stop investing - and just hold onto money. (“No I don’t want to invest in this startup! I have the best investment I need, just holding onto my cash!”) That slows down the economy.
- either way Bitcoin doesn’t solve inflation in any way. It’s just another asset - that can go up or down or whatever, and happens to have gone up for a long time (just like Facebook stock) and then dropped a lot. Just like any stock or any asset, Bitcoin can have higher-than-inflation real returns or lower-than-inflation. And more recent returns have definitely been lower. What will happen in the future? Who knows. Same answer applies to the S&P500 and to Gold and to the new condo in my neighborhood.
> All you're doing is chattering on the web. You will never understand anything this way.
Is that why you feel justified throwing insults instead of engaging like an adult? This isn’t the only comment where you’ve directed insults my way. It seems you are only capable of name calling, not substantive discussion.
I mine ETH. I have flexpool.io configured to pay me out after I accumulate 0.05 ETH which is about $140 right now.
They pay me out to my MEW wallet and the transfer costs me about $7.
I then have to transfer from my MEW wallet to my Coinbase wallet which costs me about $5 since I choose the MEW turtle speed which takes longer.
I then sell the ETH immediately because I realize how useless this crypto crap is for transactions or store of value. That costs me about $2.50.
So about $15 in fees to get my $140. You call that a great transfer of value network? I’ve mine cryptocurrency since you could use a GPU for BTC. There is no legitimate use for cryptocurrency today and I doubt there ever will be. It is structurally flawed in numerous ways.
I'm curious, why you don't just have the pool payout straight to your Coinbase wallet, especially since that is your consistent destination, so at least some of the transfer fees are avoided?
I could theoretically do that. But Coinbase says not to. And every single time I transfer ETH to Coinbase they give me a different wallet address to send the ETH to.
Bottom line, they say not to do it and I personally can't guarantee I'm sending the ETH to my Coinbase account with an old ETH address that I've remembered.
Mining profits are pretty low right now with EIP-1559 live, difficulty being so high and reduction in ETH price.
For example, one of my RTX-3070s is making about $2.10 per day after electricity costs. Before EIP-1559 on high volume days (ex: Shiba Inu launch) I was making $75 per day with just one card!
Supposedly Ethereum 2.0 is coming in June although that has been delayed repeatedly. So who knows when ETH will switch from PoW to PoS. I can't wait for that day to come because then there will be infinite used graphics cards readily available for sale. Everyone thinks they'll move on to Raven or ETC or other coins but those coins can't handle the hashrate that is current on ETH so I truly think PoW mining will not be profitable after Ethereum 2.0.
Let me know if you have any questions but basic setup I use is gminer on flexpool.io. It's dirt simple to set up if you have a 6GB+ video card (i.e. it has to have enough memory to fit the DAC).
The whole premise behind crypto isn't gone. You can build centralized custody wallets on the blockchain and you still get programmable money, no middle-men for transactions and lower barrier to entry for innovation in financial services (and of course self-managed wallets for powerusers)
Where there's code, there are bugs. I don't want that in my money, thanks.
> no middle-men for transactions
At what cost? Most people don't care about censorship resistance, they want free/cheap/fast payments and transfers.
> lower barrier to entry for innovation in financial services
There's plenty of innovation in finance given the proper legal framework. See the number of fintech startups popping up every year. The only innovation we see in the cryptocurrency space is the recycling of old scams that are impossible in modern finance.
But none of that is true... transactions still require middle-men, and decentralised finance is fundamentally incompatible with financing. So we are left with "programmable money"... whatever that means.
All of this would be nice if we didn't stumble into negative interest rates territory for a while. Having to pay to hold a depreciating asset is going to make the choice much less evident.
Depends on who you ask, during 2010 - 2012 so many people were enthusiastic about running their own bitcoind node.
Every other day I see a new reddit post of a cute little node running on a rPI with an external SSD and a tiny e-ink display.
Also people in countries facing hyperinflation or corrupt banking system (Venezuela, Zimbabwe, Argentina, Turkey, Lebanon etc ) might be forced to run their own crypto piggy banking infrastructure, as inconvenient it might be.
Well, I can understand being enthusiastic about storing a 2-4GB blockchain, but today we're already at 390GB, growing by about 60 GB a year. And that's just bitcoin, Ethereum is another 350 GB (up 100 GB last year).
Just the cost of hardware, download and energy makes this prohibitively expensive for "banking the unbanked" at least.
It's true. But the world is moving away from cash, and soon the type of privacy and freedom it affords will be gone.
People who need that sort of privacy and freedom need an alternative. Fortunately, the alternatives available are 100% opt-in and can be ignored and avoided if you don't like them - a stark contrast to retail banking in the USA, which we are all forced to use even if we don't want to.
I agree with you and the article. I believe that crypto currencies solve if you need privacy with your money use case. What I think is that governments are interested in seeing we’re every penny goes so they can tax you properly. Centralized banks are somehow governments agents, they report were every penny goes. With regards to the money you had in your wallet, it was never your full assets, but the money you got to spend on something you don’t care and you do not want people to know what it was. This is your crypto wallet.
The blockchain is public and immutable. There is no privacy. Every transaction of every coin everywhere is completely visible. Even if you run BTC through a tumbler...the overall flow of BTC is going to be moving towards whichever wallet holds it at the end of the chain when a physical transaction takes place.
At which point if the physical transaction is picked up, the entire chain unrolls back to every initial source.
Who are these people who need "privacy and freedom" that can't be had with regular banking?
I mean, it's not like your account balance is public on regular banks..
I struggle to come up with an example which does not involve shady business, and if that's what we want, it seems like a better solution to just legalise those businesses...
An oppressive regime will just make crypto illegal if they want to, make even possessing cryptographic keys punishable, etc. And crypto transactions make it easier to trace spending to you anyway, especially when the regime can unabashedly MITM any traffic within or into/out of their country, etc...
There are semi-competent oppressive regimes, like china, and incompetent ones, like many in south america. Still useful on a spectrum, and significantly more useful with low-tech or poor oppressive regimes.
Also large orgs run on percentages, economics and so on. Anything that makes it more expensive to be oppressive or change the balance of things is useful. It doesn't have to be a %100 solution to be helpful.
The banks in the US can point-and-click freeze your assets and ability to transact even in the absence of any burden of proof of reasonable suspicion of a crime. They frequently do this upon request from the government well prior to a conviction or even charges.
They did this to Wikileaks, for example, long before any charges against Assange were made public.
It's, to borrow a phrase, "turnkey tyranny", ready for abuse at all times. Those it is wielded against can't then afford representation to get it fixed, as they can't send or receive any payments.
Why not both? Making use of "crypto banks" but still be able to freely interact with the underlying financial network whenever I wish to? That's pretty hard today without relying on middlemen such as Stripe et. al. thanks to the fact that most banks do not provide any useful APIs.
> So people use banks. In the UK, they're mostly free. I give an institution my money and, due to a combination of their size, insurance, and regulators, I'm confident that my money will still be there tomorrow. They are unlikely to give me fake notes, and they can refund me if I've been defrauded. I trust them.
That's nice that you trust your bank. I wouldn't be so trusting. Nevertheless, if you want someone else to handle your funds for you, there are lots of reputable services that can hold your cryptocurrency with all of the guarantees you are desiring.
I'm keeping my keys though.
Fortunately, there are more countries than Germany, and some of them have a very fragile banking ecosystem that many people would like to avoid taking a part of. Just as one example, remember the Greece bank run some years ago? The banks ended up implementing limits on how much you could withdraw each month, which frustrated many people. I'd say that's pretty fishy when the banks give the impression that the money you put into the bank, you'll for sure be able to get out whenever you want.
Yeah that Greek incident wasn't great. Still a lot better than when the biggest crypto exchange of Turkey just left with all the money that one time. That was catastrophic for many customers!
Well, right, banks generally work as intended. It's just they blow up sometimes. The oldest bank up until the 80's was Baring Brothers and they were so respectable, just so respectable, and then they collapsed by doing fishy things. The worse thing is, conditions can change very rapidly and you may no longer be able to withdraw your money for a few months while the currency is being devalued (like Argentina), or all the banks might start blowing up at the same time (United States, Chile in the 80s), or you might get invaded (will the bank's security save the day?), or the bankers might not be cut out to be bankers (I know a bank with 4-digit passwords).
These business have been around for quite a while (in technology terms) and each are trusted by many with managing cryptocurrency valued at billions of dollars.
And your answer will invariably be some new threshold to move the "trust" goalpost to next.
> It won't. The only "goalpost" I have is: congrats, you've invented banks...
Actually you moved it from "holding your cryptocurrency" to being a bank with safety nets.
If you want someone to hold your funds with guarantees to make sure you don't mishandle them then you use dollars in a bank. But if you want to put anything other than, it will not have those guarantees or protections. Only dollars have been given these privileges. You have none of these privileges on other things like stocks, bonds, property, etc. But you can (and do) still hold them in banks and institutions without the guarantees you're asking for. Cryptocurrency is currently treated as an investment and a property (in the US) and will have the same guarantees available to it as stocks, bonds and other property from traditional institutions because that is the risk profile they have established and understand best.
So, if you want the guarantees associated w US dollars, then you need to use US dollars. But having those guarantees from an institution holding your assets was never a goal of Bitcoin... that is, it intended to be a peer-to-peer electronic cash system. It is to distribute the power we currently give to those who manage monetary policy instead to a network of trust-less actors. It is to enable individuals with the means to accumulate and protect wealth. It provides permission-less commerce between private parties who would otherwise be prevented from using their assets as they choose.
It is up to society how it uses and enables Bitcoin and other cryptocurrencies. If society chooses to treat it in a way that it doesn't deserve the guarantees you seek, then you should seek elsewhere in the market to get the guarantees you desire. And those which are looking for the above value propositions will be able to consider cryptocurrency among their options. Just because cryptocurrency does not do what you're asking, that doesn't make it any less useful to the rest of the market with different needs from yours.
> Actually you moved it from "holding your cryptocurrency" to being a bank with safety nets.
The comment I literally responded to is:
--- start quote ---
That's nice that you trust your bank. I wouldn't be so trusting. Nevertheless, if you want someone else to handle your funds for you, there are lots of reputable services that can hold your cryptocurrency with all of the guarantees you are desiring.
--- end quote ---
I didn't read the rest because it ends up in "It is up to society how it uses and enables Bitcoin and other cryptocurrencies." which has moved the goalposts so far, they are now orbiting Jupiter.
I'm not even sure why you replied if you're not going to add anything to the conversation here. You talked about trusting your "bank" with cryptocurrency and I replied that you don't have to....your argument comparing cash to cryptocurrency is like comparing cash to property/stocks.... it was a strawman and doesn't make much sense.
The market (and you) decide to use cryptocurrency however you want, in a bank, in a wallet, or not at all. And that includes whether you think the "bank" holding your funds has enough guarantee that your funds are safe.
And that ("Many people underestimate...") is before you factor in all the extremely talented people who are looking for ways to remotely steal crypto wallet data.
Having a small amount of money on-chain can work as a hedge in many scenarios. Risk of losing, sure it is high, but the failure mode is very different from anything else you own, so the overall risk is lowered.
I think it is a lot easier than reliably storing say, gold, and yet it is considered not unusual for people to keep some gold or other physical assets of value in personal home vaults. Unlike physical assets, you can make redundant copies of digital assets giving anyone not lazy a huge durability advantage.
Anyone that wants to learn reliable self custody hit me up.
My job is teaching self custody to major fintech companies but anyone asking questions for personal use in public in places like #!:matrix.org I will help for free as I have time.
The difference between storing gold and crypto, is the range of people that can attack it.
With Gold someone has to physically come to the location I've stored it in, that necessarily limits my attacker set.
With crypto, if I use a hot wallet the whole world can attack me. And I know you can use a cold wallets and air-gapping, but now you need to get into managing those well. This is possible but inherently not easy for the average lay-person.
And yep you can duplicate them, and again I look at how many relatively savvy people have DR incidents where they don't test their backups and restores regulaly and get a nasty surprise when they try a restore and realise they got corruption.
All to say, it's possible sure, but I'm not sure for non-specialists I'd say it's a lot easier than gold.
Any non technical person can learn to use a cold hardware wallet like a Trezor or Ledger these days. Anyone that can put a combination into a home vault can use one.
I am not aware of anyone who has tried a modern hardware wallet that still argues that crypto self custody is above the abilities of anyone technical enough to use traditional online banking.
Once they use a pen to write down the 24 word backup then they can simply write it down a second time, or a third. Store a copy in a safety deposit box or anywhere resistant to theft or fire. Easy.
Anyone that can store paper stock certificates can do this only with these the copies are valid.
So once I've got my 24 word backup, how is that any safer than storing gold? Anyone who could come steal my gold can come take my hardware wallet, could they not?
Also the problem with duplicate hard wallet backups is, if I'm understanding it correctly, a thief can take any one of them to access the crypto?
If so it's a tradeoff, redundancy against increased risk of loss...
They can come take your hardware wallet but they can't use it without your passphase/pin and most have a built in self-destruct if you get the pin wrong too many times.
Now if someone has an electron microscope and can read the raw memory cells, that is another matter, but not your typical adversary trying to steal for a quick buck at a pawn shop.
It is also more durable because gold you can only store in a single location, whereas with a hardware wallet you could put you 24 word backup somewhere hard to access, maybe spread across one or more safety deposit boxes.
Then if your funds ever feel at risk, you can simply erase your hardware wallet and go on vacation with confidence knowing you can trivially restore it when you get back with a trip to the bank.
People don't want to store gold and valuable at home without insurance. There are businesses that will store your gold for you. And yes home robberies do occur along with disasters from flood, quakes, and weather.
Just in that list of commands, there are a dozen different pieces of software that a user has to trust not to steal their keys or make some sort of error. I have more faith in the legal system than software I haven't personally audited. So now I have to audit whatever btchip_setup is, ndeftool, and a bunch of other software if I really want technical security. Oh, and if I really want to do it right, I've got to audit the chip designs and inspect the chips to make sure they are to spec and don't have secret cred-stealing hardware.
Then you have to trust the hardware storing the data not to fail. But every physical storage medium will fail eventually, so now you need a system by which you create backups and test your backups. And now you have to secure your backups separate in case of fire or technical theft too. It starts to become a part time job very quickly...
The end result is storing 24 english words. You can store them on paper, on a CD, an NFC tag, a stone tablet. Storing words long term is a well understood problem.
Do not trust any or this software to generate those words truly randomly? No problem. Use bip39 diceware to literally generate your words with dice.
When it comes to not trusting software to convert those words to a keypair deterministically, use NASA dual path tactics.
Use two unrelated software suites to convert those words to keypairs and sign a transaction and ensure the final signed payload output from both unrelated toolchains is identical. Bip39 has been implemented in many programming languages.
Now you can form strong confidence in your entire supply chain from key generation entropy to a final transaction with perhaps a couple hours of effort. If you are moving millions in value and worried about supply chain attacks the extra effort may be worth it.
For most a Trezor or a Ledger used as the instructions that come with it advise will be in fine shape.
How many people on earth would even understand what you just said? It's limited to a (probably small) subset of software experts. For the vast majority of people it's basically "trust the shady nerds and the VCs backing them".
It wouldn't be a web article if there wasn't some hyperbole in the title, like speaking for everybody :)
But ignoring the title, here is how I see it working out long-term between "Running your own bank" VS "Using someone else's bank":
It's true that most people don't want to run their own bank, it comes with lots of issues. But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this.
So can we solve for both things? Yes, I do believe we can. The primitives that support the whole system can be "Running your own bank" while allowing entities above that layer to offer "Use my bank if you want to instead, with insurance and all that", so we get the best of two worlds. The opposite cannot be true, we cannot offer people to run their own banks, on top of a set of entities being the only ones running their banks.
In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it.
Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.
Very well said. The more centralized "layers of abstraction" will be built, no question about that. Smaller, more specialized, more efficient institutions. For example, the US has a long tradition of small Credit Unions – that's fairly similar in principle to some of the DAOs popping up these days.
I disagree that anything crypto-related is similar to https://en.wikipedia.org/wiki/Credit_union (or even useful, for that matter), but yeah, if you want to run your own bank, credit union is IMHO as decentralized as it can ever be.
That's OK, complaining helps the ecosystem improve. If gmail ends up being so bad that people start abandoning it (which I haven't seen yet in my friend-circle, most people are happy enough with it), it's possible to migrate to something else and still interact with people who use gmail.
Contrast that to Facebook Messenger. Either you're a user of it and can message others using it, or you're not and you can't interact with others using it. You have no choice, it's either in or out.
This is the difference between centralization and decentralization, the amount of options you have available.
How is it substantially different from the current centralized core where we can also 'run our own bank' if we choose. We can today keep stashes of cash, convert it to real estate, art, precious metals, whatever, as with crypto we can use different wallets, currencies, NFTs, etc. In fact, we can exchange between all these assets - exchange cash for crypto, for art, for real estate, for bank deposits... Just a variety of risk/reward profiles for various situations, with the core being either a government or a herd of developers, whales and miners...
I would also note that the benefits the author states about fiat can equally apply to crypto:
> There's an inherent fragility built into cryptocurrencies. If your physical bank notes are damaged, the bank will replace them. If you are defrauded, the bank will reimburse you. If your loved one dies, and you inherit their assets, the bank is legally obliged to give you access.
Damaging bank notes is probably covered by the fed. Fine. But fraud is a real expense. It's just not generally borne directly by the victim. Someone still pays it (normally the bank) but they make up for it by lending out your cash. As for handing over assets to someone that passed away, that's currently done through the legal process. Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? Seems like crypto would help there as well
A technical solution could be implemented by a bank as well, but I'm not sure it is even legal in most jurisdictions. Same goes for any solution on the block chain.
> someone still pays it (normally the bank) but they make up for it by lending out your cash.
You're skipping over large parts of the things fiat can do and crypto can't. E.g. there are chargebacks for fraud. There's the legal process that can be used by the bank to recover money from the fraudster (maybe not always, but also not "never").
> Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money?
No, it wouldn't be great, it would be horrible. Real world is messy and hard to encode in a "smart contract". What if the will says something but the law invalidates it? Going through the legal process is a feature not a bug... remember how people complain about e.g. automatic bans that are handled and appealed by robots? How your Google account can be disabled with no recourse, and no explanation from a human? Yeah, that can happen to your grandma's crypto - it doesn't go to the family, and there's no way to appeal that or even find out "why".
The legal system still exists though, and people can still be forced to do things. That leaves the non-automatable work to humans and takes away the automatable things rather than forcing everything through humans to manage edge cases where you need them.
For my will I literally enter into a form what I want to happen, but then when I die it'll be down to another human to go through it and manually carry out my instructions.
Chargebacks can be opt-in and escrow is a tutorial for smart contracts. I don't need chargebacks on a cup of coffee, and I've been unable to make a payment due to high chargeback risk - despite me being entirely willing to take on the risk of non-fulfillment.
Have you ever dealt with an estate, or a disputed estate? I have, and I can tell you that technical processes would probably not accomplish very much. I have seen people go to court over whether or not a person was mentally competent when they wrote their will. What is the technical process for resolving that? If anything, a technical solution would make things worse in cases where an elderly person really was taken advantage of when they were planning their estate by leaving less room for a dispute.
The fact of the matter is that we have had the ability to create a technical process for executing a will for a long time. Banks allow you to designate a beneficiary who receives your assets after you pass away and that is executed automatically. We do not have to allow people to dispute that, and cryptocurrency does not really add much over such a system -- but we do not want that system because some objections are legitimate and disputes need to be resolved.
> What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit.
Again, in my argument there are two choices at play. One of the choice allows the other, whereas the other doesn't. You can still have centralization if you want, on top of decentralization. But if you chose centralization for the core, you cannot have decentralization on top of that, even if you'd really want it.
What exactly does decentralization offer considering all governments are centralized?
The Holy Grail of crypto seems to be some sort of dream of a fully decentralized society without banks or governments.
What if that doesn't happen? There's no reason to assume that even if crypto wins, banks or governments go away. My personal bet is that governments (and probably banks, too) will be around long after cryptocurrencies go away.
What exactly are we winning? Practical stuff, not ideology.
I can't speak for other people but I personally believe most of the folks into Bitcoin aren't crazy libertarians longing for a world without a functioning society. It's a loud minority.
With regards to practical wins I can see a number that are even playing out today:
- The ability to skirt sanctions making it possible to donate to organisations that are deemed "illegal"
- Banking for those that are deemed unprofitable by banks. El Salvador has a large portion of unbanked citizens. Making it possible for them to interact with the wider world economy seems like a good thing to me?
- The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
- Promotes the build-out of new energy production; especially renewables since they are the cheapest form of electricity. This is a topic that deserves a thread in itself so probably not worth going into here.
You should care because the world doesn't exist solely in the privileged western hemisphere.
I agree, most of the crypto usage is just speculation. I'd even go so far as to say 99.999% of all cryptocurrencies are scams of some sort, either incidental or intentional. I view Bitcoin as pretty different to the others.
I'd suggest looking for news stories or posts from El Salvador. You can find both positive and negative ones, of course.
The low transaction rates and high transaction fees argument isn't really valid anymore. A lot of the transactions have moved to L2 (Lightning Network) and thus current transaction fees on Bitcoin are regularly reaching $0.05. Using LN you also bypass any bottlenecks associated with number of transactions per second and confirmation time.
- Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
- That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
- Valid(ish). But also other stores of value exist and governments have many options for coercion, in the end, nothing will be safe.
- Could be used like that, but so can normal money and incentives
Generally, I'd say using crypto as fallback in broken political systems/societies relies on having at least somewhere working parts of society that can keep suppling/cooperating (or indeed from the outside).
> Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
I think individuals themselves should decide what is and isn't OK to spend money on. In such a world you rely on law enforcement doing actual work instead of using vague KYC, AML and Terrorism laws that are extremely obtuse.
Real criminals just use a middle man while regular citizens have to endure this insane regulatory environment without any benefit.
KYC/AML is just a waste of time, energy and manpower.
> That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
What if you don't have a functioning banking sector? Or even a functioning government? You're just supposed to accept that you're not going to be able to participate in a global society?
> The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
Sure, but most (if not all) of those things can be taken from you. Bitcoin can not. Of course, there's always the $5 wrench attack but relative to other assets, Bitcoin is superior in this regard. Even if it's just slightly better than other assets it's a win.
> Could be used like that, but so can normal money and incentives
Yes, but Bitcoin mining is a natural free market incentive to this problem, incentives and money is not.
So I should be allowed to fund proper terrorist groups then? Saying that maybe KYC/AML/CFT etc. is disproportionate to its effects is one thing, but going the other way and having no control about who funds what could be outright enemies is certainly an extreme position.
And if a country has no functioning government, no banking etc., i.e. it is broken, then the country or place needs fixing, not some magic crypto sprinkled on top (might alleviate the symptoms, but not the cause). I see this all the time as crypto point, but society building is so much more difficult than that. Once you are in a environment where physical violence is the norm, things are really different.
Also, this setup means that the banks have to compete against people choosing not to use them. This shouldn't be hard (because most people don't want to run their own bank), but it does prevent rent-seeking. If people are able to bypass them, then that provides some downwards market pressure on their charges. Without that, there is none except for regulation.
What? Banks are already subject to competition from other banks. And a blockchain is inefficient by design, any bank using that would have to charge more, not less.
> Banks are already subject to competition from other banks.
They are also in a cartel with the other banks, the sense that you can't access the financial system at all without one of them. For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks. They can do this because they aren't competing in this kind of niche area.
> For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks
I think you can attribute that one to capitalism, not collusion. Profits are important for banks. It's a rare for-profit institution provides services at cost.
Any entity can join the "send money internationally cartel", but they have to adhere to the laws in both countries. This is a loophole that cryptocurrencies are bypassing today, but I expect the law to catch up in this area, and it won't be pretty.
> It's a rare for-profit institution provides services at cost.
In a healthy market, competition forces down the price of services approach such that they approach cost. A large profit margin can indicate a free market failure, such as a barrier to entry.
(it may also represent some kind of necessary capital investment for entry, but I don't think that's the case here)
> it may also represent some kind of necessary capital investment for entry, but I don't think that's the case here
Discounting laws, registrations, offices, staff, etc., you would still have to distribute sufficient capital between nations to provide for the transfer of money before the actual money itself can be transferred.
The shifting of money between entities within a single country can take several days, and most international money transfers are expected to happen in hours, not weeks. It's a low risk loan - given from one branch of your own company to another - but you still have to have the money to loan out.
It depends.. for example international wire transfers within the European Union are free. Transfers to other parts of world can be more expensive. So I'm not sure that the problem is a lack of competition.
It adds a lot of extra complexity and failure points? Fits.
Where the analogy falls apart is in the low transaction capacity of most existing blockchain-based currencies. Microservices' greatest asset is that of scaling in a way monolithic structures can't.
Author here. I broadly sympathise with what you're saying. But I think I disagree with:
> In other words, you can build centralization on top of decentralization, but the opposite is not true.
In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core.
So, in a way, a decentralised system is being built on top of a centralised system.
I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
I would advise you to look at the Lightning protocol which allows you to do transactions off chain via credit lines for as long as you like. You only pay a fee to record to the blockchain ledger for eventual settlement.
Lightning is only safe if you constantly monitor the blockchain, otherwise your transactions aren't safe (as in double spending is still possible).
Opening and closing Lightning channels is an operation that requires a transaction on the blockchain - no real win there.
Due to the restriction just mentioned, most L2 transactions will take place via intermediaries who you need to trust and who can take arbitrary fees for their service as well (the whole routing business).
Lightning might be ok for regular payments (subscriptions, etc.), but at the same time it offers not a single advantage over traditional banking and credit cards other than explicitly not being either.
It might alleviate the transaction time and energy problems of the blockchain, but it does nothing to tackle any of the other problems mentioned by the author.
> "constantly" in this case means "once every 2 weeks"
No. Constantly means exactly that - revoked transactions for either party cannot be checked otherwise. I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
> You can also have a third party do it for you without having to hand over your keys.
And of course that 3rd party is totally trustworthy for some reason and offers their service for free? The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
>No. Constantly means exactly that - revoked transactions for either party cannot be checked otherwise.
Source? My understanding is unless the channel is cooperatively closed, there's a waiting period (ie. the two weeks) before the transaction is finalized to the blockchain. During that time that transaction can be challenged/overridden.
>I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
That seems to be a completely separate issue. Short of receiving random donations, I can't think of any situation where you want to make a payment, but somehow aren't online.
>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
ETH =/= BTC
It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
> I can't think of any situation where you want to make a payment, but somehow aren't online.
Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
Go ahead and call me a Boomer, but we seem to exist in very different realities.
> Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
> It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
I think you missed something here. Lightning isn't a single centralised implementation.
Just look at chapter 8.4 - once routing tables are in place, there's a wide open door for routing payment channels through profitable routes and tracking, for example.
Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
If you actually read the whole story, you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts, incentives, and edge software that "does the right thing" (e.g. periodically make backups and checking the other party's state for honesty).
>Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
>Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
>The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
I'm not really clear how your source contradicts mine. The source you provided is talking about how to ascribe blame, but then you magically turned it around to talk about having to be online 24/7? I'm not following the logic there.
>Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
1. always-online mobile payment systems (eg. alipay/wechat) are quite successful in asia. while I agree being able to pay without internet access is great, internet access requirement isn't some sort of insurmountable barrier.
2. you do realize that even though the credit card doesn't require internet access, the terminal itself does? Also, payment terminals has bidirectional communication with the card via NFC. It's not hard to imagine some sort of NFC based protocol that allows limited information to be communicated between the terminal and the wallet software on your phone, so it can gather the requisite information to make the transaction.
>>>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
>>You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
Are you losing track of the thread, or are you trying to move the goalposts? We were previously talking about how watchtowers would be operated/funded, now you're talking about how transaction fees for intermediary nodes?
>I think you missed something here. Lightning isn't a single centralised implementation.
As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious. This is different than difi-project-of-the-day that have one implementation and one protocol (the two are essentially the same thing in ethereum).
>Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
>you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts
yes, that's how cryptocurrencies are supposed to work - trust in systems rather than trust in people. Which is better has already been debated to death so I'm not interested in discussing that again here.
> always-online mobile payment systems (eg. alipay/wechat) are quite successful in asia.
I don't live in Asia.
> you do realize that even though the credit card doesn't require internet access, the terminal itself does?
I do, that's why I emphasised that 'I' don't need to be online. I don't care about the payment processor's requirements.
> Are you losing track of the thread, or are you trying to move the goalposts?
No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
Have you actually read the resources? The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
> What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry, there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
> trust in systems rather than trust in people.
That's an interesting assumption given that systems are created and operated by people. It's trust in people with extra steps minus regulatory and legislative safeguards. Brave new world.
The point is that always-online payments works. At most the problem you described is a minor annoyance.
>I don't care about the payment processor's requirements.
But you otherwise don't have any objections if we can come up with a NFC protocol that allows an offline phone to make lightning network transactions?
>No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
1. "hobbyists are running nodes" were in reply to the question of who is going to be running watchtowers. You sneakily switching to a separate topic (transaction fees) as a reply to that is moving the goalposts.
2. what's wrong with intermediaries taking fees? Credit cards have fees. Debit cards have fees. ACH has fees. Cash has fees (resulting from costs associated with handling it)
>> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
>The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
My original point was relating to having to trust peers. As long as you do your part correctly, ie. keeping your keys secure and checking every two weeks (or getting someone to do it for you) if you have channels open, then you don't have to trust them. I agree the requirements are more onerous than on-chain transactions, but I never claimed they weren't, and I think it's a fair trade-off to make for the benefits.
>The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry
The same "regulated finance industry" that allows you to withdraw money from your account with just your account numbers, and it's up to you to wrestle with bureaucracy to get it reversed? If that doesn't count as "inherently insecure" to you I don't know what is.
>there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
1. As opposed to "increased fees or delays" in the form of ATM fees (just one example) that are present in the "regulated finance industry"?
2. With regards to the problem of suboptimal/"extortive" routes. Is this an theoretical problem or a practical one? Are lightning users getting scammed left and right by these malicious peers? If it's free money and as easy as you make it out to be, such attacks should be very popular.
>You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
The "unsolved problem" of having to monitor the blockchain every two weeks means... what? The whole project is DOA? That we shouldn't use it? That we should use sink the whole thing and go back to "regulated finance industry"? Is the internet DOA because of the "unsolved problem" that you need to keep your system up to date and patched to not get hacked?
I know people that use Lightning frequently at a local coffee shop via long term tabs there is no rush to close. Saves them a ton in Visa transaction fees long term even after they eventually pay a Bitcoin transaction fee to close the tab.
I am only a home owner because the value of my deflationary BTC savings dramatically outpaced inflationary USD savings account interest.
If bitcoin is coming in constantly you get it at the average price via dollar cost averaging and the average value of Bitcoin has trended sharply up for a decade.
Selling BTC for USD is most likely a loss to inflation if you intend on holding for a year or more.
You gambled your money against other people. You won, and they lost. Their losses paid for your house.
12m y/y bitcoin is up 8% and the S&P is up 18%, so if you gambled your money into bitcoin a year ago, you made a bad choice. Note that last week bitcoin was down 5% y/y. Bitcoin, y/y is hardly beating USD inflation, right now, after a major increase in the price today.
Also, stop comparing a speculative asset to a currency. USD isn't meant to be held as an investment. It's meant to be spent, or invested in an asset that appreciates more than inflation.
Lightning is worse than that. When you do try to convert from BTC to USD, you pay a transaction fee twice. Once to close the channel, and another to transfer to the party where you want to exchange your BTC.
And further, you can't predict the fee you'll pay. And I hope you aren't in a hurry to settle in those cases.
I'm not really sure how that changes anything I said. You're naïve if you think the service isn't going to pass those costs onto their users.
And if you need to resort to a custodial service, what are you even using BTC for? Using a custodian to give you permission to enter and exit a market is antithetical to everything Bitcoin stands for and exactly what it was created to fix.
I know people who pay their coffee in cash, leave a tip and don't even own a credit card. No need to keep a tab open and no need to pay any additional fees ¯\_(ツ)_/¯
I know people that also pay cash for two piece of gum at the gas station while clogging the line as the cashier counts out the change for a $100 bill. There are fees associated with handling cash. Banks don't store and transport cash for free and insurance companies don't insure cash losses for free. Why do some places either don't accept cash or put silly restrictions such as "Limit $20 Bills" They don't want to deal with the risks and costs of cash.
Sure there's cost associated with handling cash, just like there's cost associated with crypto currency and BTC in particular.
Just imagine how long the line in your gas station would be clogged up for if you had to wait for a BTC transaction to be confirmed...
The difference is that while you are hit with arbitrary fees when dealing with crypto (be that transaction fees on the BC or fees by intermediaries and services in case of Lightning), cash related costs are already priced into the product and can be planned for from business's point of view.
I guess you should be reminded that lightning does not require intermediaries, and informed that the fees associated with long term operation of a lightning channel are negligible. Even in the case of premature settlement due to counter-party attacks you are paid out the full channel balance and therefore almost always profit in such a scenario - opening a channel with less counter-party collateral then an on chain fee is simply avoided to enable profit or recuperation every time.
Are merchants and businesses that accept cryptocurrency payments converting to US currency immediately or do they hold and convert at the opportune time whether that time is related to market values, exchange rates, tax/accounting purposes?
Other than securing the wallet, there's no carrying costs for whatever amount of cryptocurrency a merchant holds? It's not as if you don't hold a minimum amount in your business account, the bank levies fees since you deposit money so they can lend it back out and charge borrowers 10x as much.
I'm sorry, but Lightning is a mess and it would be irresponsible to suggest that it's safe.
1. Unpredictable fees make usage for small amounts almost require a long-lived channel to be worthwhile.
2. UX around Lightning channels are painful. You can't receive BTC in a channel unless you put BTC in as collateral. You can't spend more than the channel allows. Routing is unpredictable and fickle causing transactions to fail just as often (if not worse) as complete successfully. (Perfect for one-off transactions /s) All Lightning wallets (with the exception of one or two) are custodial and if they aren't, they cost a lot of energy to run on your phone because they're constantly chatting with the network.
3. The whole point of cryptocurrency is diversify the control across the network. The design of Lightning motivates large hub and spoke connections between users which consolidate control to a few individuals.
4. The complexity for any business to integration Lightning into their purchase flow is expensive due to the many states your channel can exist in and need to considered as part of your integration. Not to mention the added costs of monitoring the BTC network to protect your channels. Or you find a merchant provider you have to trust with your processing...at which point, you're just using credit cards by another name.
5. And due to the complexity of Lightning's design, there are systemic bugs which expose users to more risk than if they just used a gift card or credit card in the first place. (One case in particular, a channel which is mostly settled on side B (versus side A) such that A's value on their side of the channel is less than the dust limit of the BTC network (which is often given the highly fluctuating fees) will allow B to force the close of the channel causing A to lose their value in the channel (because A will need to spend more than their side of the channel is worth and will be a worse outcome than if channel A just ate the loss from the channel being maliciously closed)).
> I imagine it won't be long before Coinbase, for example, will warn you against transferring to wallets which aren't held by one of the big providers.
Perhaps, but I'm not sure if that answers my question.
Cryptocurrency networks are decentralized on their own, but I'd say the way we generally interact with them is not. It sounds like we agree on this point.
However, whether a decentralized system is accessed through a centralized layer or vice verse, the result is a service that is not fully decentralized. If any entity, such as a bank, third-party banking service provider, cryptocurrency exchange, etc., is involved at any point, that entity effectively has some control over what happens on the associated decentralized system. This results in an at least _partially_ centralized system.
No, the financial sector is not a centralised system. There are multiple providers of financial services that compete in the market for customers. So it's fundamentally decentralised.
Given that there are multiple providers of cryptocurrency network access services which compete in the market for consumers, do you also feel that cryptocurrency exchanges make up a fundamentally decentralized system?
Explain how banking is decentralized while also explaining the role of central banks, as well as the Bank of International Settlements. Hint: Traditional Banking is centralized.
All USD flow from a single institution, the central bank. Other banks can create debt, but only with permission (the initial money supply) from the fed. You'd have to really squint to consider that decentralized.
I fail to see how the monopoly of the central bank on money creation affects in anyway the centralised or decentralised nature of private banking.
It’s like arguing construction is a fundamentally centralised business in your local area because every builders buy their bricks from the same factory. It doesn’t make much sense.
Because those "private banks" can only practice banking with the authority and funding that flows from the central bank. The structure is completely hierarchical.
This is factually incorrect. Evidence shows banks can operate without the oversight of a central bank and without a lender of last resort. It's more convenient and safe for everyone to have those, but it's not required.
A bank that isn't a member of the federal reserve by law needs to keep a portion of deposits in a federal reserve bank, so I wouldn't consider it independent from the fed.
Regulations require banks to keep a certain amount of capital and reserves, and these reserves are typically kept in a deposit with the central bank, so that the regulator, i.e. the central bank, is able to monitor the reserves to ensure the minimum reserve requirements are met at all time. It's got nothing to do with centralisation. Businesses are subject to all sorts of regulations. Some are required to have fire extinguishers in their premises. That doesn't mean they are centralised.
They are forced not only to keep money, but to keep it in a bank who is a member of the centralized authority. Regulations in general do not make it centralized, this specific one does however.
How does the fact that banks are required to keep a deposit with the central bank limit their autonomy (i.e. become centralised)? As I see it what limits the autonomy of banks is not that the deposit is with a central bank but that they have to satisfy a reserve requirement. But according to your argument the reserve requirement itself is not what makes the banking system centralised, but the specific fact that banks have to keep a deposit with the central bank. How does that make sense? What does the word 'centralised' mean to you in the context of the banking system?
While they can technically accept money without being a fed member, they must keep that money with a fed member.
They need to keep money (printed by the fed) with a bank controlled by the fed. If you don’t see why that is a centralized system then not sure there’s much to discuss.
It’s distinct from reserve requirement, which doesn’t force you to store your money with a member of a single organization.
So, if they had auditors to check that banks comply with the reserve requirements (instead of requiring them to hold a deposit somewhere), the banking system would cease to be centralised? Is that what you're saying?
And what about a smart contract that requires participants to make a deposit with the smart contract itself? According to what you're saying such smart contracts are by definition centralised. Am I getting this right?
That would be less centralized, yes. The fact that one organization, the fed, has the unilateral and exclusive authority to create more money (essentially unlimited) would still be a very important point of centralization though.
> And what about a smart contract that requires participants to make a deposit with the smart contract itself?
What do you mean "requires"? Is there forced participation? Presumably anybody could make a competitor to this smart contract. I think I'd need a more specific example to understand exactly what you mean here.
It also depends on the contract itself. A contract that has an owner encoded into it who can make unilateral decisions is more centralized than an ownerless / immutable one.
> All USD flow from a single institution, the central bank.
Hmm, no.
> Other banks can create debt, but only with permission (the initial money supply) from the fed.
More like a license. But it's no different than me creating supply by promising you to pay. That's really how it works in the banking world (and why the big guys have an advantage: they have a reputation).
> You'd have to really squint to consider that decentralized.
The current system is still relatively decentralized which is why governments and central banks depends on banks (and love them). Which is also why they want to try their hand at a CBDC (because it removes the role of banks)
Standardizing an API by a central authority means more centralization, not less.
It is not difficult to sympathize with people who do not fully trust banks, especially if you grew up in a third world country with corrupt institutions. There have been times in history where you could trust banks and times in history when you could not. I'm not sure the past 70 years of grand prosperity for the west is a good way to gauge the trustworthiness of institutions owned and operated by others, since in the full scope of history the outcomes have been mixed.
That doesn't mean decentralized web3 cryptocurrency stuff is the one-size-fits-all answer, but I am sure to some people it is. And people should be free to choose the way to protect their assets and hedge bets against different local and global outcomes as they choose. Governments are the same way, with their large stockpiles of real physical goods like weapons and gold.
If they are generated ad-hoc by members of the public and agreed to not by coercion. In the case of the UK open banking initiative, it was largely a collaboration between large banks and some fintech providers after being mandated by parliament. Hardly the Linux mailing list or a Python enhancement proposal.
edit: Not sure why I'm being down-voted. If you believe that government created and mandated "open protocols" are really the same as decentralized protocols, imagine what it would be like if the US government forced every major institution to use the backdoored Dual_EC_DRBG they created instead of a sane cryptography protocol. A government enforced "open protocol" is not open at all if you're forced to use it.
> In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core.
> So, in a way, a decentralised system is being built on top of a centralised system.
Why would offering an API mean that the service is decentralised? It doesn't - it just lets you get some data in or out. You are still beholden to a single party that can cut you off at a moments notice.
> I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
Not true at all. Bitcoin has a Layer 2 solution where transactions are done off-chain in a non-custodial manner. Those don't need to be recorded on the ledger, only the settlement is (if you decide you do not wish to participate any longer).
This is definitely true in EU (and presumably in UK as well). If your bank doesn't like the businesses you're interacting with, e.g. gambling sites or cryptocurrency exchanges, they can close your account without notice or recourse.
And even if your account doesn't get closed immediately you are still subjected to invasive KYC procedures, even if you haven't done anything wrong. Failure to comply of course leads to your account being closed.
Any particulate service agreement isn't decentralized necessarily (I am still using one central bank), but the market is (I can change providers if I choose).
A _standardized_ API would allow providers and consumers a choice, which distributes the power to some degree and can encourage the parties to make choices that support the entire ecosystem rather than just their own ends.
> In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core.
I don't think you can though, not without passing an expensive certification process, right?
I mention this because as a German, the EU Open Banking initiative made my life worse. Banks are phasing out actually open FinTS standard, for which their are a pletora of Open Source libraries, and many apps by independent developers that were able to connect to any bank. /I/ was actually able to start up a shell and pull data from my bank accounts. This does not seem to be the case with Open Banking, where I have to pay a service provider that has passed certification to allow me to access my bank data.
This is an important aspect of crypto currencies - the goal is to be permissionless. The decentralization is merely a requirement to achieve this.
No you can't. Because you need to check those keys on the blockchain. And you have no idea if those keys are being traded in a hundred other back alleys simultaneously.
Some good points, but missing the most important understanding of what cryptocurrency actually is at it's core. Once you understand this, you will see that although humans are treating the technology idiotically as they do everything, fundamentally it's a basic and critical advance. And arguing against it is holding back society.
Cryptocurrency is just the best contemporary approach we have for applying computer science to money. That involves cryptography and blockchains because they are the most relevant technologies for accounting.
The typical alternative is a database from the 1970s or 80s running on something like a private mainframe, that can be modified at whim by those who control it. The biggest problem with this is that when so many have a chance to cheat, some will. But the core failing of the concept is that it's a private database with no mechanism for external (or even necessarily internal) verification. The core thing that people such as yourself will eventually learn about is that cryptography and blockchains are the best approach we have for solving these problems. It's just the basic application of computer science to accounting.
Many of these systems were built before cryptography was well known, and some run on hardware that may not even be capable of current cryptographic standards.
Fundamentally, arguing against cryptocurrency is like arguing against calculus in the 17th century.
The vast majority into crypto today do not care about the fundamentals. It's barely used as a currency and mostly traded as a commodity. Nobody cares about crypto being decentralized. They care if their crypto 'lottery ticket' wins.
If all crypto does is give people more options, there are a lot more efficient ways to do that.
This is so f’ing stupid, and in that way perfectly epitomizes what’s so broken about crypto.
Nobody wants to run their own bank, which ALSO means nobody wants to use Jim’s shady internet bank or their buddy’s bank or their mom’s bank or or or…
Like, nobody in crypto seems to think for one second about how the world actually works or what people not brainwashed by crypto might want.
It’s a tech that has thoroughly, definitively lost the argument. It’s as clear a dead end as the metaverse, or pivots to video (let alone Meta/FB’s pivot to video)
Ironically your response is the tone-deaf and stupid one here.
The person you're replying to isn't arguing for people to be using "Jim's shady internet bank" or a random buddys bank, they are discussing the ability of current trusted actors to act as custodians and insurers for cryptocurrency-wallets, hiding the scary and difficult aspects of cryptocurrency, while operating on top of an open-source, trust-less, publicly auditable, open base-layer like a blockchain.
They are saying it's possible to regard cryptocurrency as a base-layer for economic transactions, and that without it it's basically not possible today to leave the traditional banking world behind if one wants to maintain a digital presence. Don't you think it should be? Why should an individual be forced to have someone else be custodian for their wealth?
Cryptocurrencies also aren't really finished yet, there are a lot of improvements to be made before it is possible to replace the existing financial infrastructure and maintain its scale.
> Cryptocurrencies also aren't really finished yet
It’s been 14 years. When will they be “finished”? What does that look like? What are the goals?
It seems to me like the original goals failed (take over the world, everyone use Bitcoin like cash) and so the goalpost moving began (sidechains, PoW “soon”, NFTs, etc).
I’ve seen nothing of value produced out of 14 years if hype. Only wasted resources and what seems to be an accidental Ponzi scheme.
> In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it.
What you're describing is basically how the IP protocol has been manifesting itself with something like Twitter vs Mastadon.
To bring this analog to bear - my local police department accepts credit cards online now for paying a ticket violation. What if they don't support <insert whatever crypto protocol I want to use>. I still need to use the "old" protocol (USD via Visa).
Your example of the police department is actually a reason why so many people are looking at crypto. Current fiat while being a means of exchange is also a method of enforcing government control. The governments enforcers of state sponsored violence are now allowing you to pay their arbitrary fines via a method that directly connects to your identity. At the same time the IRS is now requiring that centralized banks report all transactions of greater than $600 to them. This will allow them to more efficiently tax the poor and middle class, the rich probably dont care about $600. Get pulled over with a large amount of cash in the car and the police and seize it and then you have to engage in a costly legal battle to get it back by proving to them that you are not a criminal. That's if you can even afford an attorney. Today's centralized system is very much about enforcing government control over the individual on every level. For some crypto is just a last gasp at trying to get some control back and the pitfalls and complications are worth it.
Nope, but why would it? Does Signal solve this or Slack or AWS?
I never indicated that it does, its just software. It addresses a specific set of problems or use cases as does all software. Crypto just attempts to claw back a limited subset of privacy. Trying to make it seem like it does or does not do more seems very agenda driven and both sides of the debate are rife with talking heads promising doom and salvation.
> It addresses a specific set of problems or use cases as does all software. Crypto just attempts to claw back a limited subset of privacy.
And it's just that - an attempt. If it makes you feel better that you feel like your thwarting the government then have at it.
> I never indicated that it does
Unless Crypto is widely adopted, then it doesn't solve any of the aforementioned things you mentioned.
> the pitfalls and complications are worth it.
They might seem like their worth it, until you realize you can't gain any of the benefits you mentioned without having solutions for the discussion of "who is going to pay for this bridge".
The fact that crypto advocates don't think of any of these logistics is what makes me not take any of your arguments seriously.
> But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this.
Most of the crypto-bros don't run their own banks either.
All of them depend on institutions that effectively act as banks somewhere down the line... first of all, the overwhelming majority of actual cryptocoin users doesn't run their own nodes (which, as "bookkeeping", is one of the core functions of running a bank), instead keeping their wallet at some sort of wallet service or transaction gateway, because running a node requires disk space and a continuously running machine. And then, almost everyone participating in any coin requires exchanges to turn the coins back into fiat money or vice versa - I've yet to see any actual real-world economy that does not use fiat money but instead handles everything with Bitcoins or whatever.
> Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.
The only thing "decentralization" enables is a lot of elaborate, irreversible scams, hacks and thefts. A banking system without some sort of centralized entity to deal with disputes and prevent usage for criminal activity eventually will break down... there's a new exchange that got hacked, a "smart contract" drained via intentional or unintentional bugs, NFTs being doubly-sold (if I understand that recent OpenSea bug correctly) or rug-pull scams exposed almost every other week. That is not a trustworthy environment.
Not to mention that all cryptocurrencies to date have led to enormous waste of resources: electricity, CPUs, GPUs, ASIC fab capacity, RAM, HDD... literally everything that could be used to mine coins got used for that purpose and outright killed the market for these, because miners can always pay far greater sums for components than individual people can.
But if the vast majority of people want the convenient feature-rich centralised version, why pay for the immense inefficiencies that a decentralised infrastructure incurs?
Just one example: If everyone on earth used Bitcoin, there'd just be enough capacity for everyone to get in around one or two transactions in their lifetime.
Decentralization at the core is a massive waste, while providing almost no benefit except to a very few.
If you build with centralization on top you can ignore most of the inefficiencies by doing the majority of operations outside of the base Blockchain and only integrate and settle just enough on-chain to be able to integrate with the rest.
> In other words, you can build centralization on top of decentralization, ...
We see that with Coinbase (a HN unicorn btw): lots of people are apparently not only fine leaving shitloads of coins on Coinbase, many are also totally fine using the USDC "token" which is (mostly) backed 1:1 with actual USD. I don't remember the stats but big "exchanges" hold a sizeable part of the circulating coin and it's not just people "trading": it's a lot of people simply holding to their coins and using Coinbase as, basically, a bank.
Heck, I think if they sell for USD (not USDC, don't know about USDC), their USD at Coinbase are even FDIC insured up to $250 K (for each american on Coinbase: it's not the same with Coinbase in the EU).
I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank".
But people often don't want to "run their own bank", they want to run something like a bank without the hassle of running a bank, i.e. way less regulations etc. (which is why it is happening in crypto space, not in real money space). Otherwise, why not create a little coop bank with like-minded people? For me, the option to "run your own bank" does actually exists for small-ish groups already.
While the current level of financial and banking regulation is certainly debatable, creating super lightweight version of banks might not necessarily the way forward.
Came here to say this. Credit unions are a thing, and it is increasingly easy to offer debit cards (via aggregators) through them. There's even open source software to help:
> Otherwise, why not create a little coop bank with like-minded people?
The problem isn't the bank organization itself: it's the money that you deal in. Regardless of your bank structure, whether it's some typical commercial bank or some kind of cooperative association, you're still left holding a fiat currency that is inflated on a whim.
The beauty of crypto (and especially Bitcoin) is that there's either a fixed amount, or at least the rate of change of the money supply (inflation) is at least perfectly transparent and mathematically provable.
If you believe the money is "wrong" then Bitcoin won't safe you, nothing will safe you totally, in fact. Whether or not the money supply is fixed or not doesn't matter, you can make one type of money worthless vs. another form of money (happened so many times in history, and not necessarily due to inflation).
And Bitcoin's hard cap is based on incentives and code, i.e. it could be changed (difficult to see in reality absent some really strong outside coercion, perhaps). Another attack on the value of Bitcoin could be from a state actor using nearly unlimited resources to take over most of the mining or validating and using it against it. I.e., there are ways to degrade it as a store of value (other than just arresting everyone found using, for example).
Currencies are not to store or create wealth. No-one in their right mind holds anything close to "wealth" in cash-like things (heck, not even bonds really).
In defense against 2), I'd venture it is probably better to own production assets (and parts thereof) rather than crypto.
Also, if inflation is sky high and destroying everything left and right, they could very well come for 1). So there is a spectrum of inflation where crypto might(!) be a hedge, but similarly a lot of other assets might(!) deliver said hedge. Just because it is limited in supply does not mean people will always imbue it with value (stamps are great example of staff that is dropping in value as far as collectables are concerned).
Now where I could see an issue is then with people who don't have "wealth" but some savings that get inflated away and potentially limited asset selection to invest in. Whether or not crypto will help, is up to crypto, not some law of nature, though.
> I'd venture it is probably better to own production assets (and parts thereof) rather than crypto.
Maybe I'm misunderstanding something about your response, but I think your response is too focused on my use of the word "wealth". Obviously, genuinely wealthy people have a large part of their assets tied up in physical assets that might serve as a hedge like land, resources, real-estate, businesses, and likely aren't anywhere close to entirely liquid.
I'm more focused on the impact of inflation on normal people. An average person of average or below average means likely holds most of their life savings in cash-like things or even literal cash. Being able to afford land, an investment property, a factory, a McDonalds franchise, or physical assets isn't even on their radar screen. The average person of average means is screwed by inflation far more than the wealthy because they have far less of an ability to buy real assets that might always have some value.
The reason inflation makes me angry is that it's a stealth tax, primarily on the poor. Whatever else you want to say about Bitcoin, the fact that there can only ever be 21 million units is extraordinarily positive in this respect.
Ok. I am with you that the effects of inflation are (often) quite regressive. I am just not sure that Bitcoin etc. are the solution vs. better wages (more collective bargaining?), automatic tax adjusters etc.
Relying on speculative assets, in the sense that they are not producing widgets that can be sold at higher prices due to inflation, to compensate for inflation might or might not work. The world isn't running on Bitcoin, so the limit doesn't quite bite into the real world without enough people imbuing it and Bitcoin with value. I am not taking an anti crypto stance here, more saying that trying to solve this problem via crypto might not pan out/there are other approaches, too, that should be pursued.
> I am just not sure that Bitcoin etc. are the solution
Bitcoin probably isn't the ultimate solution out there, but I'm simply pointing out that it at least doesn't have an attribute that allows you to steal value through inflating the currency.
Inflation is a particularly pernicious theft from people: most people don't realize where it comes from and just think that "prices go up over time" without realizing what's happening. The awful media even tries to gaslight people that they're doing better because "wages go up too."
> vs. better wages (more collective bargaining?), automatic tax adjusters etc.
There's a lot more that can be done to help non-rich people, but the problem is that one's opinion of what's actually helpful to people change when you really begin to understand economics and prioritizing systems over goals.
well, one could argue that one of the use cases that cryptocurrencies are not good for is "digital cash". transactions are quite slow and expensive, so vast majority of cryptocurrencies are unusable for e.g. buying a coffee in starbucks.
Lightning offers fast, cheap, anonymous transactions with Visa-like transaction throughput as well as instant final settlement. Why do people assume there have been no new technical developments since Satoshi’s invention in 2009?
Lightning Payments would allow you to buy a coffee at Starbucks instantly while avoiding the 2-3% in payment processor fees.
I disagree and believe that Lightning is not yet safe or easy for users. Here are my primary talking points if you'd like to discuss further: https://news.ycombinator.com/item?id=30210023
I read through your talking points on Lightning and for the record I agree for the most part with all of them. Lightning is a newish technology and like most of the cryptocurrency space, the UX is not great. However, I didn’t see any talking points in your list that could not be addressed by building solutions to improve UX. In fact, I am working on solutions for many of these issues and I encourage others to do the same.
It’s similar to how Linux on the desktop isn’t as easy as simply buying a Mac. There is real value in alternative solutions such as Bitcoin and Linux even though it may be harder to use these technologies today.
> However, I didn’t see any talking points in your list that could not be addressed by building solutions to improve UX.
These things are problem with the protocol specification. I'm curious to know how you can solve things like without reducing the value proposition of Bitcoin being trustless and permissionless and Lightning being a fast settlement layer for daily transactions.
- Removing the pain of settling twice on-chain with an unpredictable cost. The best I can think of is to create some fund which amortizes the channel handling cost across all users. Which means you're sacrificing permissionlessness to whatever is doing the amortization of fees.)
- Fixing routing and the convergence of the network toward a hub-and-spoke shape. (This is bad because Bitcoin is suppose to be trustless/permissionless...if you need to trust a hub node, then you're getting all of the negatives and none of the positives.)
- Fixing the dust attack that HTLCs enables. (Context for others: HTLCs are a critical piece of the Lightning network protocol and is what enables channels to be created/destroyed at all.)
I understand the point you're trying to make but I disagree with your analogy. Linux is not being advertised to the masses as safe and easy to use like LN is.
> Why do people assume there have been no new technical developments since Satoshi’s invention in 2009?
Not sure where this came from, but certainly from me. Lightning is a joke, we have ~20 better solutions already. Still they have some way to go to fulfill Sathoshi's vision.
Lightning is working for an entire nation in El Salvador. Why is Lightning a Joke? I commented below that the UX for Lightning needs work but I would consider that par for the course for an emerging technology.
What are some of the ~20 better solutions and how do they compare in terms of programmatic inflation policy, security budget, decentralization etc? Or are you just trying to equate Lightning to Nano or Visa since they all have low fees and fast transactions?
It's not working for the whole nation in El Salvador. Those people there are dependent on remittances from their relatives in the US. Since the incoming remittances are controlled by de facto mafia, they were hoping that bitcoin might be a way to avoid fishy middlemen.
However they are exposed to extreme volatility. If your income is so low that you need to rely on relatives abroad, then mere 10% price dip could be deadly for you, suddenly you cannot pay rent, etc.
A safer solution for them might be stablecoin transfers on some other quick and cheap chain. It has its own set of downsides and risks, but they might be relatively low compared to huge fx risk of BTC.
Disagree. Slow and expensive might apply to Bitcoin but there are plenty where it doesn't apply. (For example, Bitcoin Cash which solves these problems. But there are plenty of others which work quickly and cheaply.)
I think this very short-sighted. People don't want to run their own banks now because the UX behind Crypto sucks. But the space is moving like a rocket and who knows what the future holds.
Anecdote: I am a fairly technical person but stayed away from the whole self-custody stuff because no way anyone in my family can figure it out and if something happens to me, its all gone.
Two days ago, my wife (non-tech as you can get) got a muun wallet and was very happy about the experience. She got the point of being able to send money to her relatives in the middle east without the normal shadiness that goes on over there.
(getting USD or any hard currency in and out of some middle eastern countries is a nightmare)
I think you are being disingenuous and emotional about it. Previously, the UX was terrible and didn't protect non-technical users at all, so these scenarios could happen.
Newer tech with better UX does a wonderful job protecting users and is improving at rocket speed. The example I used protects the user from all these scenarios you mentioned.
Also, the US doesn't care about moving USD in and out of most countries (Iran, NK excluded). It's these countries themselves that want that level of control.
Your Bitcoin lives on the ledger. You can recover your wallet with your private keys under most circumstances (unless the Bitcoin network itself dies). Hardware failure is not relevant.
As far as the addresses goes, it’s the same thing as sending a wire transfer to the wrong account in a different country. You won’t get it back.
How many people make international wire transfers? It's an extremely rare and risky kind of transaction, which is why banks have built up their own opsec around it.
If cryptocurrency enthusiasts had their way, though, the high-risk transaction the GP called out would be required to buy a gallon of milk.
My man, not even the wildest Bitcoin maxi is calling for a world where you are required to buy milk with bitcoin lol. People just want their savings accounts to match inflation. (and the option to spend from that savings account for some transactions).
Give them that and Bitcoin will go back to being a niche investment vehicle where 99% of the people don't care about it.
Hardware failure is extremely relevant if that hardware is the drive you store your private key on,at which point the wallet is gone forever. One could say "don't do that, have elaborate backup strategies" but that brings us back to UX. Even professionals who should know better tend to be awful at this.
I have no problems with this. Like I said in the original comment, people not wanting to run their bank is a solvable UX problem. Fundamentally, I don't see why it has to stay this way.
We're at a point where you can have your coins on a hardware wallet, and have a simple route into an proper exchange with the possibility to pay fiat to your bank account. Documenting this and updating it yearly is not that much extra work if you really believe in it. Every year, practice the process with your wife/sibling/whoever and 10$ so they are accustomed to it.
It's a self-custody wallet. Money moves over the Bitcoin network or the lighting network. Developer has no control. (literally, can't be evil vs. won't be evil is the whole point). Are you sure you know how Bitcoin and self-custody wallets work?
Ok. Let me explain to you how Bitcoin works. Satoshi created the software and nodes maintain it. Anyone can maintain a node and enforce the rules of the network. A ledger lives on the network says who has what.
To interact with the ledger on an easy non-technical way, you can:
1. Use a centralized exchange (coinbase)
2. Use a self-custody cold-storage wallet (ledger)
3. Use a self-custody hot wallet (muun)
4. Use a custodial wallet
For #2, and #3. You have your own private keys. The developer of the wallet can’t do anything to your money. Even if they shut off the servers(#2 doesn’t have servers), the ledger on the network still says you have x amounts of Bitcoins. You can access the ledger and interact with the network in another way.
Respectfully, you need to do more research on this.
Look up how ETC (Ethereum Classic) came into being.
Look up a 51% attack.
Look up forks from BTC to BCH and then BSV.
Look up Craig Wright and his claims to be Satoshi Nakamoto.
Again, respectfully, your many comments here make you appear to be someone that just learned about cryptocurrency in the last six months and you have only the simplest of surface understandings of it.
You’re INcorrecting several people that have been at the forefront of cryptocurrency for over a decade.
Respectfully, you have a new account on HN and if it lasts another month before dang shadowbans you I’ll be shocked.
You’ll know it happens when people just stop responding to you.
I have showdead turned on and I shake my head as people post comments for years never knowing that 99.99% of people don’t see their posts and comments.
As for my cryptocurrency background I mined BTC with a GPU when it was very profitable. My ETH mining rigs are doing their job while I’m posting on the Internet as you say. I have no problem profiting from it while recognizing it’s a total and complete scam.
Muun ensures your decrypted private keys are never stored in the same place:
- Your phone stores only the first key
- Muun's servers store only the second key
--- end quote ---
Oh, there's also the Emergency Kit that--I pinky swear--is encrypted in a way that Muun knows nothing about both keys in it.
Moreover, if you go ahead and install Muun, there's literally nothing about secret keys in the app: you can immediately send and receive bitcoin. Which really tells you all you need to know about its security.
Around here, if one half of a married couple dies, the surviver can't access the shared account until the state gives its OK. Which can take up to 6 months.
Imagine living without money for 6 months while having to pay a funeral. I saw it happen to an elder woman. She had to loan from friends and family because of this.
Now I heard the law has been updated to avoid the most egregious excesses, but the basic principle still stands.
I know of a few people who keep 1 or 2 months worth of money at home, just in case. Can't blame them.
Banks are generally good at what they do, but don't put all your eggs in 1 basket. Someone will make a mistake at your expense, better be prepared and have some buffer.
I'd wager that "oh fuck, my partner died and I have no idea how to access their private key" is considerably more likely than "my partner died and I cannot access their traditional bank account but it's all good because I've got their private key to access emergency funds stored in BTC."
This does not work. When married, all your and his/her accounts are locked, as they are considered shared property, no matter the name on the account. The legal proces after death is to decide who owns what as this decides what share the state gets.
Also not advocating for crypto, just saying you should be able to live a while without access to a bank.
If I die, a quorum of friends around the world can verify this fact independently and when satisfied can provide those I will my funds to pieces of a private key that when assembled can recover all funds without my help.
Schemes like that are not easily possible with physical assets or fiat currency.
> Schemes like that are not easily possible with physical assets or fiat currency.
Of course they are. It's called last will and testament.
You can easily set this up, choose a lawyer to hold it and your friends don't even need to know.
If you have substantial assets it's even much safer that way, because using your method you'd actually put them in danger as criminals might pay them a visit one by one whether you're still alive or not. Not to mention the fact that your friends could also just get together and cash out early...
1. Said friends have no need to know who each other are. They only need to know their role to deliver a package to designated individuals.
2. The shards they hold can only be used by the recipient via hardware they have physical access to. They can not collude without the recipient. I also trust the, far more than any potentially malicious bank insiders.
3. Wills can take a long time to process and bank accounts can be frozen for months following the death of a spouse. I want a plan that gives those I wish access to capital as soon as they are in a safe location to receive it and get the bulk of it stored in a coercion resistant way with a new quorum.
> The shards they hold can only be used by the recipient via hardware they have physical access to.
Sounds like multiple points of failure right there. From lost/faulty hardware to friends passing away. If your scheme relies on every single one of them having access to working hardware of sorts and being alive and well, that's an elaborate way to setup for failure, but maybe I just completely misunderstood your setup there.
> 3. Wills can take a long time to process and bank accounts can be frozen for months following the death of a spouse.
I don't see how that's a problem given that your scattered group of friends needs to verify your demise and somehow get on a quest to gather the key shards without even knowing of each other's existence (again, I could totally have misinterpreted your scheme here).
This all sounds more like a D&D questline to me than a solid plan to ensure your assets get to the right people after your passing.
Why would said individuals need to know who each other are. They should all act independently of each other and simply hand off their payload to the recipient.
Assume the individuals in my scheme are all lawyers at different firms around the world that all have instructions to hand an envelope they do not know the contents of to designated individuals in the event of my death. This is a well understood scheme. I just do it with a redundant quorum so I can avoid any one lawyer being able to consume the contents of said envelope themselves and tolerate some of them failing to perform their duties.
As far as the hardware the recipient has access to, that can be duplicated to any similar off the shelf hardware via a 24 word paper backup and storing paper redundantly and durably is a solved problem.
These schemes use well understood standard cryptographic protocols as well. Shamirs secret sharing and bip39. The rest is just human logistics.
SSS is one of those things that remains highly un-ergonomic. We'll see how it works out, but I suspect that a lot of people are going to be in for interesting surprises when they chose not to use k-of-n and one of their friends lost a key part. A lot of tech people become very attracted to fun ideas (I definitely remember people falling in love with SSS decades ago). But building foolproof systems is not just about cryptography. Heck, the very first "Why Johnny Can't..." was precisely about a solid cryptographic system nonetheless leading to people fucking up all the time.
And you absolutely could publish an encrypted password and distribute key parts in precisely the same manner, enabling your quorum of friends to access your bank accounts or whatever.
What about when the banking system mandates password rotation, or randomly closes the account because of suspected fraud, or it gets wiped out due to actual fraud, or it gets frozen because of a pending investigation, or gets drained dry without warning over a forgotten debt etc. Bank accounts are brittle and I have seen every one of these situations happen to myself, family, or friends.
Also not to mention leaving USD in a bank account long term rots it to inflation.
Meanwhile in crypto-assets the funds stay exactly where they are and are impossible to move until a private key is available.
Shamirs. hardware wallets in vaults, paper wallets... the point is you have choice and control. Any process documented well enough can be followed in the future. We still cook recipes generations old after all.
Ok. Those are completely different issues to the one we are discussing. We were talking about accessing credentials and funds when somebody dies. Swapping to talking about incorrect account closures or inflation is just changing the subject.
Yes, nobody can close your wallet (well sort of, big players like Coinbase or OpenSea can absolutely treat your wallet as poisoned and refuse to transact with you).
This is a frustrating component of the discussion about crypto. “It is better for survivors” shouldn’t be defended with “inflation is bad.”
This essay is too simplistic about the motivations of some crypto holders. For many people, the more complete sentiment is this: People don't want to run their own bank but they'd rather deal with that extra hassle instead of letting the government erode their purchasing power or confiscate their savings.
How much of a reality that is to particular person depends their economic environment. A Venezuelan living with hyperinflation thinks about the fragility of their savings differently than an American.
Likewise, many don't really want to run their own electric generator because it's noisy and keeping diesel fuel on hand is extra work. However, they'd rather deal with that than have no electricity when the power company issues rolling blackouts.
So, an option can be framed as a "bad choice" but it must also be compared to other bad choices that may be worse. Which bad choice do people prefer? A noisy diesel power generator they have to babysit or a no power at all?
Writing a hypothetical essay titled "People Don't Want to Run Their Own Diesel Generators" -- will not actually educate readers on what's happening.
Yes, crypto POW uses too much energy. But how do you get people to prioritize the environmental impact over their fears of government manipulation?
Author here. I broadly agree with you. I run my own power generation. They're solar panels on my roof and require zero maintenance.
People don't want to run generators. They want stable electricity. There are a variety of ways we can give it to them.
Similarly, people in a hyper-inflation environment don't want crypto - they want stability.
But there's nothing inherent in crypto which prevents hyperinflation. Yes, I've read the original bitcoin paper. That talks about monetary supply - it doesn't do anything if a cartel decides to raise prices.
This article seems like it could have been written in 2009 at the launch of Bitcoin. It has no real world examples or data. There are so many disaster stories. Is there a reason you chose to write such a high level article now?
One of the things that made Moxie's piece a hit was it had real examples of his experiences trying to do things.
But this article has none of these examples or experience.
For example, your article misses people who are indeed using cryotocurrencies as banks [1]. It misses the current conversation around social management of keys. The rise of automated exchanges like Uniswap.
Lots of room for critiques on these items. That the only examples of people using crypto for real banking are in collapsing currencies. That if there's such a problem managing keys that social management will still fail. But you seem to have missed all of them which really undercuts your article to me. Again, this seems like it could have been written in 2010 based on the concept of crypto rather than real world experience. Just curious about your motivations for such a piece. It certainly has attracted commenting here.
Nice! Sounds like the course and book aren't delivering what you want. Agree with your points about the summaries and mining doge. Bizarre. I found your reflections in these posts much more engaging than the main post for this thread.
Absolutely right, the essay writes from a comfortable UK perspective and ignores large amounts of the world where well-regulated, trustworthy financial institutions aren't available. And even UK banks aren't immune from failure or just mistakes which can freeze people's savings and put them in terrible situations that take months to resolve.
To add to your counterpoint, the OP's praise of going cashless as opposed to the problems of cash is another fine example. It's certainly more convenient to use your card everywhere, but if everyone did it then just a handful of payment processors would gain immense power, with the ability to track, monitor, and censor all transactions. Plenty of dystopian fiction like The Handmaid's Tale covers what can happen when this infrastructure is abused. Cash may have problems but it plays an important role in an open society, and redundancy when a major payment network goes down (as Visa did across Europe on 1st June 2018, causing retail chaos). But many vendors no longer accept cash and this will only accelerate as more people never use it. In praising going cashless as protecting ourselves from being our own banks, the OP misses the forest for the trees.
Bitcoin does. The math is simple. No government in the world can debase the value of Bitcoin whose total supply is < 21 million and no central bank can print more.
Agree if the US banned Bitcoin the USD price would drop - in the short-term. However, it is impossible for any government to kill Bitcoin by outlawing it. The best they could hope for is to prevent their citizens from participating in the global Bitcoin network. When you consider it’s scarcity, security and censorship-resistance properties, it is clear why game theory suggests that so long as some governments have not banned Bitcoin - the value will migrate away from those countries towards countries that allow it.
Similarly, when the US gov banned alcohol in prohibition, it did not eliminate demand for booze. It just moved the market underground.
The Bitcoin network is not controlled by the miners. This was proven a few years ago when the CEOs of the largest miners and the largest exchanges all tried to increase the blocksize. They were thwarted by individual users who run nodes on the network. Those running nodes are the ones who broadcast valid transactions. If any or many of the miners decided to unilaterally change any parameter of the Bitcon blockchain, their blocks would be considered invalid by the network and would not propagate.
They would be considered counterfeit and ignored by all Bitcoin clients and nodes. Case studies include BCH and BSV.
If you are genuinely curious about the mechanics do some research to understand why no miner in the past 12 years has successfully modified any parameter of the Bitcoin network.
Since the value of bitcoin is based on fiat, it's relatively easy for the government to debase it. By banning the conversion of fiat to bitcoin, it removes the value. You can still pass coins around on the bitcoin network, but if no one accepts them, and you can't turn them into usable currency, then what's the value?
Governments have banned alcohol, heroine, cocaine, and other illicit drugs yet somehow a market always continues to exist despite being banned. In the case of the above banned substances, the market value of the contraband ended up being higher than it would have been if it were legal due to constrained supply relative to demand.
Also, unlike cryptocurrencies, none of the other contraband could be stored on a password that could be memorized or transmitted to anyone anywhere in the world.
If governments banned Bitcoin, the market price of Bitcoin could very well go up over time not down after the initial shock.
Markets for those exist because people use those things. Bitcoin is used as a speculation device, that's converted back into fiat, not as a thing by itself.
The government won't ban the use of bitcoin, it'll ban the legal on-ramps and off-ramps for converting between cryptocurrencies and fiat. The value of cryptocurrencies is based on hype. When most people can't legally invest, the liquidity will dry up and the price will plummet. That'll lead to less hype, which will lead to lower interest, and so on.
Most likely, the bubble will burst, normal people will lose lots of money, the rich will make a lot of money, and the government will regulate cryptocurrency.
It's already semi-banned for bank-to-crypto and crypto-to-bank transactions. P2P transactions are unstoppable. You are confusing the government to god.
> I don't have the time, energy, or skill to securely run important servers all by my self.
But some other people do.
> I give an institution my money and, due to a combination of their size, insurance, and regulators, I'm confident that my money will still be there tomorrow. They are unlikely to give me fake notes, and they can refund me if I've been defrauded. I trust them.
Good luck! Your trust in them is not a guarantee that you are able to get your money back from them at any point [1] [2] [3] [4]
Your first example was caught up in a government mandated anti money laundering investigation.
If the government is after you, crypto isn’t going to protect you. It might make the cost to go after your money a little higher if you’re willing to violate court orders and live as a fugitive.
"the government is after you" is a spectrum. The fact that you're under suspicion for money laundering doesn't mean they'll send seal team six after you. Using crypto raises the barrier for seizing your money, just like having cash on hand means that you can still pay for necessities when your accounts are "caught up in a government mandated anti money laundering investigation".
In the US at least, the method for seizing crypto is the same as for seizing money in a bank account. The only difference is that the warrant is served on the person who owns the crypto wallet instead of a bank.
That’s what I meant when I said the cost to seize your money goes up if you’re willing to defy a warrant.
However, if using crypto as a currency becomes mainstream, governments will crack down.
Crypto might be decentralized, but governments could easily require registering wallets, and force businesses to only transact with people who are registered.
Mainstream crypto money does not negate non-mainstream means of owning and securing your funds, similarly to how centralised chat platforms do not negate p2p or federated chats that use gateways to interact with the mainstream world if necessary, but are totally independent otherwise.
The problem with crypto is that since the price goes up people rationalize everything.
If the price went down 10% year after year forever I guarantee people would shut up about it even though none of the underlying reasons for supporting it should have changed.
I mean that notion right there sums up everything about it: the "price" of crypto - as related to USD. That's what people care about. No one's treating it as a currency.
This is also not true and is just a "wide brush" principle. Many people are dollar cost averaging into Bitcoin and buying weekly/monthly regardless of the price, saving up in a secondary store of value.
Just because you see a few cryptobros shilling some altcoins on Twitter/Reddit or wherever doesn't mean your assumptions apply to everyone, or even a vast majority.
Many real life folks I know buy little chunks of Bitcoin on a consistent base regardless of the price as a form of savings.
I don't understand the point that you are trying to make.
This is what it looks to me: "the problem with gravity is that since the objects fall down people rationalize everything (e.g. give explanations why they should fall down). If the objects went up year after year forever I guarantee people would shout up about it even though none of the underlying reasons for supporting it should have changed"
The point is not in comparing cryptocurrency with anything, but showing, that the the structure of your argument admits absurd consequences thus showing that the argument is invalid.
> the usefulness and popularity of crypto shouldn’t be related to its value in relation to fiat
Are you sure that the usefulness and popularity of crypto are related to its value beyond some reasonable correlation?
It's not a step backwards, it's a tradeoff. Crypto is a tool, just like a bank is a tool. It has different pros, it has different cons. Personally I greatly enjoy sending any amount to any country without the possibility of a hold or embargo because "MuH TeRrOrIsM, tHiNk Of ThE cHiLdReN and WaR oN DrUgZ" which is in reality just about governments always wanting more power since all three of those are routinely found to be enabled by and participated in by big banks anyways.
At the end of the day, you relinquish control for a false sense of security. Everyone storing their money in banks in Venezuela found this lesson out the hard way: you don't have any money. The government allows you to store and pass around notes for debt, which are commonly agreed upon as valuable and so our economy spins onward. You know what they say about those willing to give up freedom for security.
Realistically, use your head please. Full tradfi and full defi are equally unwise. It's risk management 101. And yes, some very unsavory things going down in any country are always a risk if you are planning a resilient infrastructure for your estate spanning generations. Usually this has taken the form of multinational diversification, but now we have the extra option to secure long-term wealth without all the legal expenses. Don't dismiss it.
A non-material agreed upon medium of value transfer completely outside of control of governments is unprecedented. You can go to any country, and get someone to give you their paper currency, for a digital one you possess - without ANY restrictions or moratoriums. I'm not sure how that can possibly be called a step backwards. It's a valuable tool even if most of HNs audience has no use for it. Control comes with risks and responsibilities. This is true for being your own bank, running your own infrastructure, and everything else. Literally nothing about this tradeoff is new or shocking, except that it's now available for currency as well.
This is also why I don't believe in "Smart Contracts" and the term "code is law", ultimately people want people to be answerable to people. We have courts specifically to address contract and financial disputes, they are essential and provide a level of insurance over business and financial operations.
With smart contracts you have none of this as well as the risk of a bug or backdoor in the code. No one is going to be auditing all smart contracts. They want to be able to use the legal system to address a problem after the fact if it goes wrong.
Admittedly I am no expert, but those concerns have kept me away from ever considering exploring them.
> This is also why I don't believe in "Smart Contracts" and the term "code is law", ultimately people want people to be answerable to people. We have courts specifically to address contract and financial disputes, they are essential and provide a level of insurance over business and financial operations.
This is exactly wrong. Some people ultimately want people to be answerable to people. There are plenty of people however, who want to be answerable to code instead. Unlike with other people, you can potentially verify that the code you trust in is neither irrational, nor cruel.
This is by far the dumbest ever HN post that has made it to #1. Too many fallacies to bother taking apart but the worst one must be "banks are free that means they're preferable".
When the author's PayPal, Square Cash, Amazon Smile, Ko-Fi and Flattr accounts all get shutdown, for no reason whatsoever, they will crawl back to using cryptocurrencies and stablecoins for donations.
There was just this [0] right here, which is directly related to [1]. Regular banking is useless for both of these users. Maybe they and the problem don't matter since they are 0.0001% of cases, even when the banks have the ability to do that.
Platform-wise, I won't be surprised if they do same thing as GoFundMe [2].
Using multisig keys distributed around trusted family members makes most of these problems invalid. There are many ways you can structure a Multisig wallet (this is how many crypto foundations and NFPs manage their assets)
It doesn't matter if people want to run their own bank. This is about freedom and principle. If you'd like to deposit your money into some bank, you're free to do so. However, nothing in society should require a bank for anything.
For example, a paycheck should be deposited directly into a worker's cryptocurrency wallet. Anyone who wants their payments to go into their bank account can simply provide the address of their bank wallet instead of their personal wallet. This way nobody is forced to create some bank account just to get paid their salary.
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[ 0.44 ms ] story [ 1750 ms ] threadOne recent example: a few days ago there was a big movement in crypto market. Due to huge traffic spike that went with that, one unnamed chain practically ground to a halt. The only thing that continued working normally was liquidation bots...
So tons of people got liquidated coz they couldn't adjust their positions. And now obviously they all are calling for compensation. But in the decentralized world of de-humanized smart contracts with no legal framework, there's obviously nobody responsible, hence nobody to pay any compensation.
What chain? Any links to stories on this?
Are you talking about Solana?
https://www.youtube.com/watch?v=AwDbx-nuQ5o
https://www.bloomberg.com/news/articles/2022-02-03/solana-po...
Transparency? Really? For whom? Do you want your taxes on the blockchain for everyone to see?
I dunno.
https://executivegov.com/2021/10/usps-launches-pilot-banking...
I don’t know what you mean about efficiency, as there are multiple different ways to count this. Energy efficiency clearly isn’t a selling point, so can you expand on what you do mean?
My questions for those who trust in regulation:
-Why was no one ever prosecuted for this fraud?
-Why did regulation not work in the case if the 2008 GFC?
-If it didn’t work then, why would it work the next time?
It’s not really a counter though: for that you’d need to compare 2008 against markets with weaker or absent regulation.
I’m not sure the relative weighting of causes, between fraud, the misuse of Black Scholes[0], the elimination of various regulations which has been created at the end of the previous crisis, and the failures of credit rating agencies.
At least some of the fraud which did occur resulted in prison time.
[0] I did hear one of the big problems was everyone looking at the (Nobel Prize for economics winning) Black Scholes model, applying it inappropriately, and justifying this in the grounds everyone else was doing it. This is hard to fix, and group-think of this type is also very much the kind of failure mode I expect to happen more often in unregulated markets, but that doesn’t mean I don’t expect it to pop up everywhere given time.
Could you point me to any examples? When I looked into this the only person to serve prison time during this period was Bernie Maddoff and his great crime was stealing from the rich.
Given the human nature, it's pretty much inevitable that some dirt will get lost in this chain, and we will face the exact same fate as we did with CDOs, just with different terminology.
Why am I being naive or foolish to be furious about the existence of inflation? Is it a good thing that I simply misunderstand?
I am genuinely curious. Please help me understand.
One of the important things I tend to forget, is that effective rate of inflation is different for different people within the same economy.
For example, the official rate of inflation in the U.K. right now is 5.4%, but if you’re poor, you’re likely to be constrained by fuel prices (which just went up ten times that: https://www.msn.com/en-us/news/world/uk-faces-record-rise-in...) and food (which has done worse, but unevenly and over the whole year: https://twitter.com/BootstrapCook/status/1483778776697909252).
This is because inflation isn’t just caused by just governments printing money, it’s also caused by a reduction in the availability of things to spend that money on and even the rate at which money changes hands (https://en.wikipedia.org/wiki/Velocity_of_money).
There’s also a totally unrelated argument that I can follow but not adequately repeat about the impact of various levels of inflation on consumer spending and the feedback that has on employment etc., but that’s not an argument that I expect to do anything at all to reduce anger.
That suggests that you don't know what inflation is.
.
> I am genuinely curious. Please help me understand.
You say this too much. You can't understand from fly-by comments on the internet, which is why you're in the state that you're in.
If you're actually as genuinely curious as you pretend to be three times a day, go to the library and read a book.
All you're doing is chattering on the web. You will never understand anything this way.
Is that why you feel justified throwing insults instead of engaging like an adult? This isn’t the only comment where you’ve directed insults my way. It seems you are only capable of name calling, not substantive discussion.
They pay me out to my MEW wallet and the transfer costs me about $7.
I then have to transfer from my MEW wallet to my Coinbase wallet which costs me about $5 since I choose the MEW turtle speed which takes longer.
I then sell the ETH immediately because I realize how useless this crypto crap is for transactions or store of value. That costs me about $2.50.
So about $15 in fees to get my $140. You call that a great transfer of value network? I’ve mine cryptocurrency since you could use a GPU for BTC. There is no legitimate use for cryptocurrency today and I doubt there ever will be. It is structurally flawed in numerous ways.
Bottom line, they say not to do it and I personally can't guarantee I'm sending the ETH to my Coinbase account with an old ETH address that I've remembered.
For example, one of my RTX-3070s is making about $2.10 per day after electricity costs. Before EIP-1559 on high volume days (ex: Shiba Inu launch) I was making $75 per day with just one card!
Supposedly Ethereum 2.0 is coming in June although that has been delayed repeatedly. So who knows when ETH will switch from PoW to PoS. I can't wait for that day to come because then there will be infinite used graphics cards readily available for sale. Everyone thinks they'll move on to Raven or ETC or other coins but those coins can't handle the hashrate that is current on ETH so I truly think PoW mining will not be profitable after Ethereum 2.0.
Let me know if you have any questions but basic setup I use is gminer on flexpool.io. It's dirt simple to set up if you have a 6GB+ video card (i.e. it has to have enough memory to fit the DAC).
Where there's code, there are bugs. I don't want that in my money, thanks.
> no middle-men for transactions
At what cost? Most people don't care about censorship resistance, they want free/cheap/fast payments and transfers.
> lower barrier to entry for innovation in financial services
There's plenty of innovation in finance given the proper legal framework. See the number of fintech startups popping up every year. The only innovation we see in the cryptocurrency space is the recycling of old scams that are impossible in modern finance.
Yeah, money should be data, dumb configuration, not code.
Add another, completely separate layer on top of that, for the code.
use the currency that is as volatile as their own? Why?
Switching from an inflationary currency to a stable one is already tough, switching to a volatile deflationary currency would be a nightmare.
Just the cost of hardware, download and energy makes this prohibitively expensive for "banking the unbanked" at least.
People who need that sort of privacy and freedom need an alternative. Fortunately, the alternatives available are 100% opt-in and can be ignored and avoided if you don't like them - a stark contrast to retail banking in the USA, which we are all forced to use even if we don't want to.
At which point if the physical transaction is picked up, the entire chain unrolls back to every initial source.
I mean, it's not like your account balance is public on regular banks..
I struggle to come up with an example which does not involve shady business, and if that's what we want, it seems like a better solution to just legalise those businesses...
Also large orgs run on percentages, economics and so on. Anything that makes it more expensive to be oppressive or change the balance of things is useful. It doesn't have to be a %100 solution to be helpful.
They did this to Wikileaks, for example, long before any charges against Assange were made public.
It's, to borrow a phrase, "turnkey tyranny", ready for abuse at all times. Those it is wielded against can't then afford representation to get it fixed, as they can't send or receive any payments.
Crypto currencies don't afford privacy, do they.
That's nice that you trust your bank. I wouldn't be so trusting. Nevertheless, if you want someone else to handle your funds for you, there are lots of reputable services that can hold your cryptocurrency with all of the guarantees you are desiring. I'm keeping my keys though.
Insurance? Regulatory oversight? Which services?
And once we do that, cryptocurrencies doesn't gain us much compared to traditional banking.
I do appreciate the optimism, though!
Next step would be: "which are those services" and "by saying reputable, who vouches for their reputation".
And the answer will invariably be silence or "just google it".
- https://www.sofi.com/invest/buy-cryptocurrency/
- https://gemini.com/
- https://coinlist.co/
These business have been around for quite a while (in technology terms) and each are trusted by many with managing cryptocurrency valued at billions of dollars.
And your answer will invariably be some new threshold to move the "trust" goalpost to next.
It won't.
The only "goalpost" I have is: congrats, you've invented banks, with none of the safety nets.
Actually you moved it from "holding your cryptocurrency" to being a bank with safety nets.
If you want someone to hold your funds with guarantees to make sure you don't mishandle them then you use dollars in a bank. But if you want to put anything other than, it will not have those guarantees or protections. Only dollars have been given these privileges. You have none of these privileges on other things like stocks, bonds, property, etc. But you can (and do) still hold them in banks and institutions without the guarantees you're asking for. Cryptocurrency is currently treated as an investment and a property (in the US) and will have the same guarantees available to it as stocks, bonds and other property from traditional institutions because that is the risk profile they have established and understand best.
So, if you want the guarantees associated w US dollars, then you need to use US dollars. But having those guarantees from an institution holding your assets was never a goal of Bitcoin... that is, it intended to be a peer-to-peer electronic cash system. It is to distribute the power we currently give to those who manage monetary policy instead to a network of trust-less actors. It is to enable individuals with the means to accumulate and protect wealth. It provides permission-less commerce between private parties who would otherwise be prevented from using their assets as they choose.
It is up to society how it uses and enables Bitcoin and other cryptocurrencies. If society chooses to treat it in a way that it doesn't deserve the guarantees you seek, then you should seek elsewhere in the market to get the guarantees you desire. And those which are looking for the above value propositions will be able to consider cryptocurrency among their options. Just because cryptocurrency does not do what you're asking, that doesn't make it any less useful to the rest of the market with different needs from yours.
The comment I literally responded to is:
--- start quote ---
That's nice that you trust your bank. I wouldn't be so trusting. Nevertheless, if you want someone else to handle your funds for you, there are lots of reputable services that can hold your cryptocurrency with all of the guarantees you are desiring.
--- end quote ---
I didn't read the rest because it ends up in "It is up to society how it uses and enables Bitcoin and other cryptocurrencies." which has moved the goalposts so far, they are now orbiting Jupiter.
The market (and you) decide to use cryptocurrency however you want, in a bank, in a wallet, or not at all. And that includes whether you think the "bank" holding your funds has enough guarantee that your funds are safe.
Good luck to you.
And that ("Many people underestimate...") is before you factor in all the extremely talented people who are looking for ways to remotely steal crypto wallet data.
For readily accessible warm wallets not storing kidnapping-worthy amounts, this airgapped pattern can work well for the modestly technical https://github.com/hashbang/airgap/blob/master/docs/HD-Crypt...
Anyone that wants to learn reliable self custody hit me up.
My job is teaching self custody to major fintech companies but anyone asking questions for personal use in public in places like #!:matrix.org I will help for free as I have time.
With Gold someone has to physically come to the location I've stored it in, that necessarily limits my attacker set.
With crypto, if I use a hot wallet the whole world can attack me. And I know you can use a cold wallets and air-gapping, but now you need to get into managing those well. This is possible but inherently not easy for the average lay-person.
And yep you can duplicate them, and again I look at how many relatively savvy people have DR incidents where they don't test their backups and restores regulaly and get a nasty surprise when they try a restore and realise they got corruption.
All to say, it's possible sure, but I'm not sure for non-specialists I'd say it's a lot easier than gold.
I am not aware of anyone who has tried a modern hardware wallet that still argues that crypto self custody is above the abilities of anyone technical enough to use traditional online banking.
Once they use a pen to write down the 24 word backup then they can simply write it down a second time, or a third. Store a copy in a safety deposit box or anywhere resistant to theft or fire. Easy.
Anyone that can store paper stock certificates can do this only with these the copies are valid.
Also the problem with duplicate hard wallet backups is, if I'm understanding it correctly, a thief can take any one of them to access the crypto?
If so it's a tradeoff, redundancy against increased risk of loss...
Now if someone has an electron microscope and can read the raw memory cells, that is another matter, but not your typical adversary trying to steal for a quick buck at a pawn shop.
It is also more durable because gold you can only store in a single location, whereas with a hardware wallet you could put you 24 word backup somewhere hard to access, maybe spread across one or more safety deposit boxes.
Then if your funds ever feel at risk, you can simply erase your hardware wallet and go on vacation with confidence knowing you can trivially restore it when you get back with a trip to the bank.
That said, as the post I was responding to mentioned there are definitely people who absolutely do store gold.
Home robberies and floods do also occur... and those things can take out offline hard-wallets just like they can take out gold.
Then you have to trust the hardware storing the data not to fail. But every physical storage medium will fail eventually, so now you need a system by which you create backups and test your backups. And now you have to secure your backups separate in case of fire or technical theft too. It starts to become a part time job very quickly...
Do not trust any or this software to generate those words truly randomly? No problem. Use bip39 diceware to literally generate your words with dice.
When it comes to not trusting software to convert those words to a keypair deterministically, use NASA dual path tactics.
Use two unrelated software suites to convert those words to keypairs and sign a transaction and ensure the final signed payload output from both unrelated toolchains is identical. Bip39 has been implemented in many programming languages.
Now you can form strong confidence in your entire supply chain from key generation entropy to a final transaction with perhaps a couple hours of effort. If you are moving millions in value and worried about supply chain attacks the extra effort may be worth it.
For most a Trezor or a Ledger used as the instructions that come with it advise will be in fine shape.
That said only people that need to understand tactics this strict are those storing VC levels of value.
For an individual just buy a Trezor or a Ledger and follow the point and click instructions. It is no harder than traditional online banking.
But ignoring the title, here is how I see it working out long-term between "Running your own bank" VS "Using someone else's bank":
It's true that most people don't want to run their own bank, it comes with lots of issues. But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this.
So can we solve for both things? Yes, I do believe we can. The primitives that support the whole system can be "Running your own bank" while allowing entities above that layer to offer "Use my bank if you want to instead, with insurance and all that", so we get the best of two worlds. The opposite cannot be true, we cannot offer people to run their own banks, on top of a set of entities being the only ones running their banks.
In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it.
Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.
Contrast that to Facebook Messenger. Either you're a user of it and can message others using it, or you're not and you can't interact with others using it. You have no choice, it's either in or out.
This is the difference between centralization and decentralization, the amount of options you have available.
> There's an inherent fragility built into cryptocurrencies. If your physical bank notes are damaged, the bank will replace them. If you are defrauded, the bank will reimburse you. If your loved one dies, and you inherit their assets, the bank is legally obliged to give you access.
Damaging bank notes is probably covered by the fed. Fine. But fraud is a real expense. It's just not generally borne directly by the victim. Someone still pays it (normally the bank) but they make up for it by lending out your cash. As for handing over assets to someone that passed away, that's currently done through the legal process. Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? Seems like crypto would help there as well
There's a reason we still talk about Kafka almost 100 years after his death.
You're skipping over large parts of the things fiat can do and crypto can't. E.g. there are chargebacks for fraud. There's the legal process that can be used by the bank to recover money from the fraudster (maybe not always, but also not "never").
> Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money?
No, it wouldn't be great, it would be horrible. Real world is messy and hard to encode in a "smart contract". What if the will says something but the law invalidates it? Going through the legal process is a feature not a bug... remember how people complain about e.g. automatic bans that are handled and appealed by robots? How your Google account can be disabled with no recourse, and no explanation from a human? Yeah, that can happen to your grandma's crypto - it doesn't go to the family, and there's no way to appeal that or even find out "why".
For my will I literally enter into a form what I want to happen, but then when I die it'll be down to another human to go through it and manually carry out my instructions.
Chargebacks can be opt-in and escrow is a tutorial for smart contracts. I don't need chargebacks on a cup of coffee, and I've been unable to make a payment due to high chargeback risk - despite me being entirely willing to take on the risk of non-fulfillment.
The fact of the matter is that we have had the ability to create a technical process for executing a will for a long time. Banks allow you to designate a beneficiary who receives your assets after you pass away and that is executed automatically. We do not have to allow people to dispute that, and cryptocurrency does not really add much over such a system -- but we do not want that system because some objections are legitimate and disputes need to be resolved.
What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit.
Again, in my argument there are two choices at play. One of the choice allows the other, whereas the other doesn't. You can still have centralization if you want, on top of decentralization. But if you chose centralization for the core, you cannot have decentralization on top of that, even if you'd really want it.
The Holy Grail of crypto seems to be some sort of dream of a fully decentralized society without banks or governments.
What if that doesn't happen? There's no reason to assume that even if crypto wins, banks or governments go away. My personal bet is that governments (and probably banks, too) will be around long after cryptocurrencies go away.
What exactly are we winning? Practical stuff, not ideology.
What do we get? Why should I care?
With regards to practical wins I can see a number that are even playing out today:
- The ability to skirt sanctions making it possible to donate to organisations that are deemed "illegal"
- Banking for those that are deemed unprofitable by banks. El Salvador has a large portion of unbanked citizens. Making it possible for them to interact with the wider world economy seems like a good thing to me?
- The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
- Promotes the build-out of new energy production; especially renewables since they are the cheapest form of electricity. This is a topic that deserves a thread in itself so probably not worth going into here.
You should care because the world doesn't exist solely in the privileged western hemisphere.
I'd really, really love to hear about stories of widespread cryptocurrency usage in developing countries.
Also, considering the low transaction rates and the high transaction fees, how would this magic vision of the future work for poor people, anyway?
I'd suggest looking for news stories or posts from El Salvador. You can find both positive and negative ones, of course.
The low transaction rates and high transaction fees argument isn't really valid anymore. A lot of the transactions have moved to L2 (Lightning Network) and thus current transaction fees on Bitcoin are regularly reaching $0.05. Using LN you also bypass any bottlenecks associated with number of transactions per second and confirmation time.
One country's criminal is another's activist. You're making it sound so simple.
- Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
- That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
- Valid(ish). But also other stores of value exist and governments have many options for coercion, in the end, nothing will be safe.
- Could be used like that, but so can normal money and incentives
Generally, I'd say using crypto as fallback in broken political systems/societies relies on having at least somewhere working parts of society that can keep suppling/cooperating (or indeed from the outside).
> Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
I think individuals themselves should decide what is and isn't OK to spend money on. In such a world you rely on law enforcement doing actual work instead of using vague KYC, AML and Terrorism laws that are extremely obtuse.
Real criminals just use a middle man while regular citizens have to endure this insane regulatory environment without any benefit.
KYC/AML is just a waste of time, energy and manpower.
> That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
What if you don't have a functioning banking sector? Or even a functioning government? You're just supposed to accept that you're not going to be able to participate in a global society?
> The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
Sure, but most (if not all) of those things can be taken from you. Bitcoin can not. Of course, there's always the $5 wrench attack but relative to other assets, Bitcoin is superior in this regard. Even if it's just slightly better than other assets it's a win.
> Could be used like that, but so can normal money and incentives
Yes, but Bitcoin mining is a natural free market incentive to this problem, incentives and money is not.
And if a country has no functioning government, no banking etc., i.e. it is broken, then the country or place needs fixing, not some magic crypto sprinkled on top (might alleviate the symptoms, but not the cause). I see this all the time as crypto point, but society building is so much more difficult than that. Once you are in a environment where physical violence is the norm, things are really different.
They are also in a cartel with the other banks, the sense that you can't access the financial system at all without one of them. For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks. They can do this because they aren't competing in this kind of niche area.
I think you can attribute that one to capitalism, not collusion. Profits are important for banks. It's a rare for-profit institution provides services at cost.
Any entity can join the "send money internationally cartel", but they have to adhere to the laws in both countries. This is a loophole that cryptocurrencies are bypassing today, but I expect the law to catch up in this area, and it won't be pretty.
In a healthy market, competition forces down the price of services approach such that they approach cost. A large profit margin can indicate a free market failure, such as a barrier to entry.
(it may also represent some kind of necessary capital investment for entry, but I don't think that's the case here)
Discounting laws, registrations, offices, staff, etc., you would still have to distribute sufficient capital between nations to provide for the transfer of money before the actual money itself can be transferred.
The shifting of money between entities within a single country can take several days, and most international money transfers are expected to happen in hours, not weeks. It's a low risk loan - given from one branch of your own company to another - but you still have to have the money to loan out.
...because of regulation, not competition.
So microservices are a better idea than monolithic core?
Where the analogy falls apart is in the low transaction capacity of most existing blockchain-based currencies. Microservices' greatest asset is that of scaling in a way monolithic structures can't.
> In other words, you can build centralization on top of decentralization, but the opposite is not true.
In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core.
So, in a way, a decentralised system is being built on top of a centralised system.
I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
Opening and closing Lightning channels is an operation that requires a transaction on the blockchain - no real win there.
Due to the restriction just mentioned, most L2 transactions will take place via intermediaries who you need to trust and who can take arbitrary fees for their service as well (the whole routing business).
Lightning might be ok for regular payments (subscriptions, etc.), but at the same time it offers not a single advantage over traditional banking and credit cards other than explicitly not being either.
It might alleviate the transaction time and energy problems of the blockchain, but it does nothing to tackle any of the other problems mentioned by the author.
"constantly" in this case means "once every 2 weeks". You can also have a third party do it for you without having to hand over your keys.
No. Constantly means exactly that - revoked transactions for either party cannot be checked otherwise. I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
> You can also have a third party do it for you without having to hand over your keys.
And of course that 3rd party is totally trustworthy for some reason and offers their service for free? The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
Source? My understanding is unless the channel is cooperatively closed, there's a waiting period (ie. the two weeks) before the transaction is finalized to the blockchain. During that time that transaction can be challenged/overridden.
https://wiki.ion.radar.tech/tech/channels/channel-closing
>I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
That seems to be a completely separate issue. Short of receiving random donations, I can't think of any situation where you want to make a payment, but somehow aren't online.
>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
ETH =/= BTC
It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
https://lightning.network/lightning-network-paper.pdf
Chapter 3.1.4 Commitment Transactions: Ascribing Blame
Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
> I can't think of any situation where you want to make a payment, but somehow aren't online.
Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
Go ahead and call me a Boomer, but we seem to exist in very different realities.
> Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
> It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
I think you missed something here. Lightning isn't a single centralised implementation.
Just look at chapter 8.4 - once routing tables are in place, there's a wide open door for routing payment channels through profitable routes and tracking, for example.
Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
If you actually read the whole story, you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts, incentives, and edge software that "does the right thing" (e.g. periodically make backups and checking the other party's state for honesty).
>Chapter 3.1.4 Commitment Transactions: Ascribing Blame
>Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
>Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
>The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
I'm not really clear how your source contradicts mine. The source you provided is talking about how to ascribe blame, but then you magically turned it around to talk about having to be online 24/7? I'm not following the logic there.
>Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
1. always-online mobile payment systems (eg. alipay/wechat) are quite successful in asia. while I agree being able to pay without internet access is great, internet access requirement isn't some sort of insurmountable barrier.
2. you do realize that even though the credit card doesn't require internet access, the terminal itself does? Also, payment terminals has bidirectional communication with the card via NFC. It's not hard to imagine some sort of NFC based protocol that allows limited information to be communicated between the terminal and the wallet software on your phone, so it can gather the requisite information to make the transaction.
>>>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
>>You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
Are you losing track of the thread, or are you trying to move the goalposts? We were previously talking about how watchtowers would be operated/funded, now you're talking about how transaction fees for intermediary nodes?
>I think you missed something here. Lightning isn't a single centralised implementation.
As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious. This is different than difi-project-of-the-day that have one implementation and one protocol (the two are essentially the same thing in ethereum).
>Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
>you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts
yes, that's how cryptocurrencies are supposed to work - trust in systems rather than trust in people. Which is better has already been debated to death so I'm not interested in discussing that again here.
I don't live in Asia.
> you do realize that even though the credit card doesn't require internet access, the terminal itself does?
I do, that's why I emphasised that 'I' don't need to be online. I don't care about the payment processor's requirements.
> Are you losing track of the thread, or are you trying to move the goalposts?
No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
Have you actually read the resources? The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
> What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry, there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
> trust in systems rather than trust in people.
That's an interesting assumption given that systems are created and operated by people. It's trust in people with extra steps minus regulatory and legislative safeguards. Brave new world.
The point is that always-online payments works. At most the problem you described is a minor annoyance.
>I don't care about the payment processor's requirements.
But you otherwise don't have any objections if we can come up with a NFC protocol that allows an offline phone to make lightning network transactions?
>No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
1. "hobbyists are running nodes" were in reply to the question of who is going to be running watchtowers. You sneakily switching to a separate topic (transaction fees) as a reply to that is moving the goalposts.
2. what's wrong with intermediaries taking fees? Credit cards have fees. Debit cards have fees. ACH has fees. Cash has fees (resulting from costs associated with handling it)
>> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
>The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
My original point was relating to having to trust peers. As long as you do your part correctly, ie. keeping your keys secure and checking every two weeks (or getting someone to do it for you) if you have channels open, then you don't have to trust them. I agree the requirements are more onerous than on-chain transactions, but I never claimed they weren't, and I think it's a fair trade-off to make for the benefits.
>The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry
The same "regulated finance industry" that allows you to withdraw money from your account with just your account numbers, and it's up to you to wrestle with bureaucracy to get it reversed? If that doesn't count as "inherently insecure" to you I don't know what is.
>there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
1. As opposed to "increased fees or delays" in the form of ATM fees (just one example) that are present in the "regulated finance industry"?
2. With regards to the problem of suboptimal/"extortive" routes. Is this an theoretical problem or a practical one? Are lightning users getting scammed left and right by these malicious peers? If it's free money and as easy as you make it out to be, such attacks should be very popular.
>You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
The "unsolved problem" of having to monitor the blockchain every two weeks means... what? The whole project is DOA? That we shouldn't use it? That we should use sink the whole thing and go back to "regulated finance industry"? Is the internet DOA because of the "unsolved problem" that you need to keep your system up to date and patched to not get hacked?
If bitcoin is coming in constantly you get it at the average price via dollar cost averaging and the average value of Bitcoin has trended sharply up for a decade.
Selling BTC for USD is most likely a loss to inflation if you intend on holding for a year or more.
12m y/y bitcoin is up 8% and the S&P is up 18%, so if you gambled your money into bitcoin a year ago, you made a bad choice. Note that last week bitcoin was down 5% y/y. Bitcoin, y/y is hardly beating USD inflation, right now, after a major increase in the price today.
Also, stop comparing a speculative asset to a currency. USD isn't meant to be held as an investment. It's meant to be spent, or invested in an asset that appreciates more than inflation.
And further, you can't predict the fee you'll pay. And I hope you aren't in a hurry to settle in those cases.
And if you need to resort to a custodial service, what are you even using BTC for? Using a custodian to give you permission to enter and exit a market is antithetical to everything Bitcoin stands for and exactly what it was created to fix.
Just imagine how long the line in your gas station would be clogged up for if you had to wait for a BTC transaction to be confirmed...
The difference is that while you are hit with arbitrary fees when dealing with crypto (be that transaction fees on the BC or fees by intermediaries and services in case of Lightning), cash related costs are already priced into the product and can be planned for from business's point of view.
Other than securing the wallet, there's no carrying costs for whatever amount of cryptocurrency a merchant holds? It's not as if you don't hold a minimum amount in your business account, the bank levies fees since you deposit money so they can lend it back out and charge borrowers 10x as much.
1. Unpredictable fees make usage for small amounts almost require a long-lived channel to be worthwhile.
2. UX around Lightning channels are painful. You can't receive BTC in a channel unless you put BTC in as collateral. You can't spend more than the channel allows. Routing is unpredictable and fickle causing transactions to fail just as often (if not worse) as complete successfully. (Perfect for one-off transactions /s) All Lightning wallets (with the exception of one or two) are custodial and if they aren't, they cost a lot of energy to run on your phone because they're constantly chatting with the network.
3. The whole point of cryptocurrency is diversify the control across the network. The design of Lightning motivates large hub and spoke connections between users which consolidate control to a few individuals.
4. The complexity for any business to integration Lightning into their purchase flow is expensive due to the many states your channel can exist in and need to considered as part of your integration. Not to mention the added costs of monitoring the BTC network to protect your channels. Or you find a merchant provider you have to trust with your processing...at which point, you're just using credit cards by another name.
5. And due to the complexity of Lightning's design, there are systemic bugs which expose users to more risk than if they just used a gift card or credit card in the first place. (One case in particular, a channel which is mostly settled on side B (versus side A) such that A's value on their side of the channel is less than the dust limit of the BTC network (which is often given the highly fluctuating fees) will allow B to force the close of the channel causing A to lose their value in the channel (because A will need to spend more than their side of the channel is worth and will be a worse outcome than if channel A just ate the loss from the channel being maliciously closed)).
Is this not still fundamentally a centralized system?
I imagine it won't be long before Coinbase, for example, will warn you against transferring to wallets which aren't held by one of the big providers.
These automated exchanges seem to be growing rapidly. At one point last year Uniswap had 77% of Coinbase's trading volume: https://tokenist.com/with-33x-fewer-employees-uniswap-has-77...
Perhaps, but I'm not sure if that answers my question.
Cryptocurrency networks are decentralized on their own, but I'd say the way we generally interact with them is not. It sounds like we agree on this point.
However, whether a decentralized system is accessed through a centralized layer or vice verse, the result is a service that is not fully decentralized. If any entity, such as a bank, third-party banking service provider, cryptocurrency exchange, etc., is involved at any point, that entity effectively has some control over what happens on the associated decentralized system. This results in an at least _partially_ centralized system.
It’s like arguing construction is a fundamentally centralised business in your local area because every builders buy their bricks from the same factory. It doesn’t make much sense.
They need to keep money (printed by the fed) with a bank controlled by the fed. If you don’t see why that is a centralized system then not sure there’s much to discuss.
It’s distinct from reserve requirement, which doesn’t force you to store your money with a member of a single organization.
And what about a smart contract that requires participants to make a deposit with the smart contract itself? According to what you're saying such smart contracts are by definition centralised. Am I getting this right?
> And what about a smart contract that requires participants to make a deposit with the smart contract itself?
What do you mean "requires"? Is there forced participation? Presumably anybody could make a competitor to this smart contract. I think I'd need a more specific example to understand exactly what you mean here.
It also depends on the contract itself. A contract that has an owner encoded into it who can make unilateral decisions is more centralized than an ownerless / immutable one.
Hmm, no.
> Other banks can create debt, but only with permission (the initial money supply) from the fed.
More like a license. But it's no different than me creating supply by promising you to pay. That's really how it works in the banking world (and why the big guys have an advantage: they have a reputation).
> You'd have to really squint to consider that decentralized.
The current system is still relatively decentralized which is why governments and central banks depends on banks (and love them). Which is also why they want to try their hand at a CBDC (because it removes the role of banks)
Who else can make USD? Banks can create M2 but only as a function about how much M0 the central bank creates
You have demanded six explanations in drive-by form of standard concepts from strangers in the last 24 hours
This is the behavior of flat earthers and anti-vaxxers
It is not difficult to sympathize with people who do not fully trust banks, especially if you grew up in a third world country with corrupt institutions. There have been times in history where you could trust banks and times in history when you could not. I'm not sure the past 70 years of grand prosperity for the west is a good way to gauge the trustworthiness of institutions owned and operated by others, since in the full scope of history the outcomes have been mixed.
That doesn't mean decentralized web3 cryptocurrency stuff is the one-size-fits-all answer, but I am sure to some people it is. And people should be free to choose the way to protect their assets and hedge bets against different local and global outcomes as they choose. Governments are the same way, with their large stockpiles of real physical goods like weapons and gold.
No. Standards and protocols are the essence of decentralisation and collaboration.
edit: Not sure why I'm being down-voted. If you believe that government created and mandated "open protocols" are really the same as decentralized protocols, imagine what it would be like if the US government forced every major institution to use the backdoored Dual_EC_DRBG they created instead of a sane cryptography protocol. A government enforced "open protocol" is not open at all if you're forced to use it.
Why would offering an API mean that the service is decentralised? It doesn't - it just lets you get some data in or out. You are still beholden to a single party that can cut you off at a moments notice.
> I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
Not true at all. Bitcoin has a Layer 2 solution where transactions are done off-chain in a non-custodial manner. Those don't need to be recorded on the ledger, only the settlement is (if you decide you do not wish to participate any longer).
Not in the UK, nor in Europe. Don't project your (presumably US) failed institutions onto the rest of us.
And even if your account doesn't get closed immediately you are still subjected to invasive KYC procedures, even if you haven't done anything wrong. Failure to comply of course leads to your account being closed.
[1] https://www.vice.com/en/article/pak7wb/exclusive-secret-blac...
PS. I am in the EU. What kind of argument is that, anyway?
A _standardized_ API would allow providers and consumers a choice, which distributes the power to some degree and can encourage the parties to make choices that support the entire ecosystem rather than just their own ends.
I don't think you can though, not without passing an expensive certification process, right?
I mention this because as a German, the EU Open Banking initiative made my life worse. Banks are phasing out actually open FinTS standard, for which their are a pletora of Open Source libraries, and many apps by independent developers that were able to connect to any bank. /I/ was actually able to start up a shell and pull data from my bank accounts. This does not seem to be the case with Open Banking, where I have to pay a service provider that has passed certification to allow me to access my bank data.
This is an important aspect of crypto currencies - the goal is to be permissionless. The decentralization is merely a requirement to achieve this.
Cryptocurrency is just the best contemporary approach we have for applying computer science to money. That involves cryptography and blockchains because they are the most relevant technologies for accounting.
The typical alternative is a database from the 1970s or 80s running on something like a private mainframe, that can be modified at whim by those who control it. The biggest problem with this is that when so many have a chance to cheat, some will. But the core failing of the concept is that it's a private database with no mechanism for external (or even necessarily internal) verification. The core thing that people such as yourself will eventually learn about is that cryptography and blockchains are the best approach we have for solving these problems. It's just the basic application of computer science to accounting.
Many of these systems were built before cryptography was well known, and some run on hardware that may not even be capable of current cryptographic standards.
Fundamentally, arguing against cryptocurrency is like arguing against calculus in the 17th century.
If all crypto does is give people more options, there are a lot more efficient ways to do that.
Nobody wants to run their own bank, which ALSO means nobody wants to use Jim’s shady internet bank or their buddy’s bank or their mom’s bank or or or…
Like, nobody in crypto seems to think for one second about how the world actually works or what people not brainwashed by crypto might want.
It’s a tech that has thoroughly, definitively lost the argument. It’s as clear a dead end as the metaverse, or pivots to video (let alone Meta/FB’s pivot to video)
The person you're replying to isn't arguing for people to be using "Jim's shady internet bank" or a random buddys bank, they are discussing the ability of current trusted actors to act as custodians and insurers for cryptocurrency-wallets, hiding the scary and difficult aspects of cryptocurrency, while operating on top of an open-source, trust-less, publicly auditable, open base-layer like a blockchain.
They are saying it's possible to regard cryptocurrency as a base-layer for economic transactions, and that without it it's basically not possible today to leave the traditional banking world behind if one wants to maintain a digital presence. Don't you think it should be? Why should an individual be forced to have someone else be custodian for their wealth?
Cryptocurrencies also aren't really finished yet, there are a lot of improvements to be made before it is possible to replace the existing financial infrastructure and maintain its scale.
It’s been 14 years. When will they be “finished”? What does that look like? What are the goals?
It seems to me like the original goals failed (take over the world, everyone use Bitcoin like cash) and so the goalpost moving began (sidechains, PoW “soon”, NFTs, etc).
I’ve seen nothing of value produced out of 14 years if hype. Only wasted resources and what seems to be an accidental Ponzi scheme.
> nobody wants to run their own bank
It sure looks like A LOT of people do. The real question is why are you so mad about it?
What you're describing is basically how the IP protocol has been manifesting itself with something like Twitter vs Mastadon.
Here's the problem - if I can't get my weather alerts from my local city township from Mastadon, but have to use Twitter, then the point is moot. For example - https://twitter.com/TravisCountyTX/status/148934948869109350...
To bring this analog to bear - my local police department accepts credit cards online now for paying a ticket violation. What if they don't support <insert whatever crypto protocol I want to use>. I still need to use the "old" protocol (USD via Visa).
It's still better than if it was completely impossible to communicate to others without twitter.
You're totally right. So now explain to me in this crypto libertarian fantasy world how:
- People agree where internet cable lines get installed
- People agree on how roads should be laid out and
- People agree on who is going to bear arms and defend their sovereignty
Does a blockchain solve all of that?
And it's just that - an attempt. If it makes you feel better that you feel like your thwarting the government then have at it.
> I never indicated that it does
Unless Crypto is widely adopted, then it doesn't solve any of the aforementioned things you mentioned.
> the pitfalls and complications are worth it.
They might seem like their worth it, until you realize you can't gain any of the benefits you mentioned without having solutions for the discussion of "who is going to pay for this bridge".
The fact that crypto advocates don't think of any of these logistics is what makes me not take any of your arguments seriously.
Most of the crypto-bros don't run their own banks either.
All of them depend on institutions that effectively act as banks somewhere down the line... first of all, the overwhelming majority of actual cryptocoin users doesn't run their own nodes (which, as "bookkeeping", is one of the core functions of running a bank), instead keeping their wallet at some sort of wallet service or transaction gateway, because running a node requires disk space and a continuously running machine. And then, almost everyone participating in any coin requires exchanges to turn the coins back into fiat money or vice versa - I've yet to see any actual real-world economy that does not use fiat money but instead handles everything with Bitcoins or whatever.
> Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.
The only thing "decentralization" enables is a lot of elaborate, irreversible scams, hacks and thefts. A banking system without some sort of centralized entity to deal with disputes and prevent usage for criminal activity eventually will break down... there's a new exchange that got hacked, a "smart contract" drained via intentional or unintentional bugs, NFTs being doubly-sold (if I understand that recent OpenSea bug correctly) or rug-pull scams exposed almost every other week. That is not a trustworthy environment.
Not to mention that all cryptocurrencies to date have led to enormous waste of resources: electricity, CPUs, GPUs, ASIC fab capacity, RAM, HDD... literally everything that could be used to mine coins got used for that purpose and outright killed the market for these, because miners can always pay far greater sums for components than individual people can.
Maybe the existence of banks would be better evidence that 'some' people wanna run their own banks?
Just one example: If everyone on earth used Bitcoin, there'd just be enough capacity for everyone to get in around one or two transactions in their lifetime.
Decentralization at the core is a massive waste, while providing almost no benefit except to a very few.
We see that with Coinbase (a HN unicorn btw): lots of people are apparently not only fine leaving shitloads of coins on Coinbase, many are also totally fine using the USDC "token" which is (mostly) backed 1:1 with actual USD. I don't remember the stats but big "exchanges" hold a sizeable part of the circulating coin and it's not just people "trading": it's a lot of people simply holding to their coins and using Coinbase as, basically, a bank.
Heck, I think if they sell for USD (not USDC, don't know about USDC), their USD at Coinbase are even FDIC insured up to $250 K (for each american on Coinbase: it's not the same with Coinbase in the EU).
I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank".
Exactly. That's a big 'no thanks, and no deal' as it defeats the whole purpose if one leaves all their coins on an exchange for 'long term' holding.
Nothing wrong with downloading a crypto wallet app and sending and storing the USDC, USDP stablecoins on there. No need for Coinbase.
Job done. Your keys and your coins without the volatility.
While the current level of financial and banking regulation is certainly debatable, creating super lightweight version of banks might not necessarily the way forward.
https://www.fineract.dev/
The problem isn't the bank organization itself: it's the money that you deal in. Regardless of your bank structure, whether it's some typical commercial bank or some kind of cooperative association, you're still left holding a fiat currency that is inflated on a whim.
The beauty of crypto (and especially Bitcoin) is that there's either a fixed amount, or at least the rate of change of the money supply (inflation) is at least perfectly transparent and mathematically provable.
And Bitcoin's hard cap is based on incentives and code, i.e. it could be changed (difficult to see in reality absent some really strong outside coercion, perhaps). Another attack on the value of Bitcoin could be from a state actor using nearly unlimited resources to take over most of the mining or validating and using it against it. I.e., there are ways to degrade it as a store of value (other than just arresting everyone found using, for example).
Some things are just far more likely to happen than others.
Which of these 2 things are more likely to happen?
1) An attack or change on Bitcoin that renders it completely valueless or unusable
2) Governments inflating fiat currencies and robbing you of your wealth
I'd say that 1 is merely theoretically possible, but 2 is about as close to complete metaphysical certainty as you can get.
In defense against 2), I'd venture it is probably better to own production assets (and parts thereof) rather than crypto.
Also, if inflation is sky high and destroying everything left and right, they could very well come for 1). So there is a spectrum of inflation where crypto might(!) be a hedge, but similarly a lot of other assets might(!) deliver said hedge. Just because it is limited in supply does not mean people will always imbue it with value (stamps are great example of staff that is dropping in value as far as collectables are concerned).
Now where I could see an issue is then with people who don't have "wealth" but some savings that get inflated away and potentially limited asset selection to invest in. Whether or not crypto will help, is up to crypto, not some law of nature, though.
Maybe I'm misunderstanding something about your response, but I think your response is too focused on my use of the word "wealth". Obviously, genuinely wealthy people have a large part of their assets tied up in physical assets that might serve as a hedge like land, resources, real-estate, businesses, and likely aren't anywhere close to entirely liquid.
I'm more focused on the impact of inflation on normal people. An average person of average or below average means likely holds most of their life savings in cash-like things or even literal cash. Being able to afford land, an investment property, a factory, a McDonalds franchise, or physical assets isn't even on their radar screen. The average person of average means is screwed by inflation far more than the wealthy because they have far less of an ability to buy real assets that might always have some value.
The reason inflation makes me angry is that it's a stealth tax, primarily on the poor. Whatever else you want to say about Bitcoin, the fact that there can only ever be 21 million units is extraordinarily positive in this respect.
Relying on speculative assets, in the sense that they are not producing widgets that can be sold at higher prices due to inflation, to compensate for inflation might or might not work. The world isn't running on Bitcoin, so the limit doesn't quite bite into the real world without enough people imbuing it and Bitcoin with value. I am not taking an anti crypto stance here, more saying that trying to solve this problem via crypto might not pan out/there are other approaches, too, that should be pursued.
Bitcoin probably isn't the ultimate solution out there, but I'm simply pointing out that it at least doesn't have an attribute that allows you to steal value through inflating the currency.
Inflation is a particularly pernicious theft from people: most people don't realize where it comes from and just think that "prices go up over time" without realizing what's happening. The awful media even tries to gaslight people that they're doing better because "wages go up too."
> vs. better wages (more collective bargaining?), automatic tax adjusters etc.
There's a lot more that can be done to help non-rich people, but the problem is that one's opinion of what's actually helpful to people change when you really begin to understand economics and prioritizing systems over goals.
Sorry, but that's just not true. Crypto exists because people think they can win money with this Ponzi Scheme!! ONLY reason! Greed
Not everyone wants to use cash. That's fine. For those of us that do, there is now a solution.
I think most people generally agree that most of the world aren't going to be using Bitcoin Core with a wallet.dat.
They don't need to, though.
Maybe 3% of us use desktop Linux. If it or something like it didn't exist, we'd still have to create it.
I use it as digital cash all the time. Not every cash transaction is for trivial amounts, and as you say, not every blockchain is expensive.
Lightning Payments would allow you to buy a coffee at Starbucks instantly while avoiding the 2-3% in payment processor fees.
It’s similar to how Linux on the desktop isn’t as easy as simply buying a Mac. There is real value in alternative solutions such as Bitcoin and Linux even though it may be harder to use these technologies today.
These things are problem with the protocol specification. I'm curious to know how you can solve things like without reducing the value proposition of Bitcoin being trustless and permissionless and Lightning being a fast settlement layer for daily transactions.
- Removing the pain of settling twice on-chain with an unpredictable cost. The best I can think of is to create some fund which amortizes the channel handling cost across all users. Which means you're sacrificing permissionlessness to whatever is doing the amortization of fees.)
- Fixing routing and the convergence of the network toward a hub-and-spoke shape. (This is bad because Bitcoin is suppose to be trustless/permissionless...if you need to trust a hub node, then you're getting all of the negatives and none of the positives.)
- Fixing the dust attack that HTLCs enables. (Context for others: HTLCs are a critical piece of the Lightning network protocol and is what enables channels to be created/destroyed at all.)
I understand the point you're trying to make but I disagree with your analogy. Linux is not being advertised to the masses as safe and easy to use like LN is.
Not sure where this came from, but certainly from me. Lightning is a joke, we have ~20 better solutions already. Still they have some way to go to fulfill Sathoshi's vision.
What are some of the ~20 better solutions and how do they compare in terms of programmatic inflation policy, security budget, decentralization etc? Or are you just trying to equate Lightning to Nano or Visa since they all have low fees and fast transactions?
However they are exposed to extreme volatility. If your income is so low that you need to rely on relatives abroad, then mere 10% price dip could be deadly for you, suddenly you cannot pay rent, etc.
A safer solution for them might be stablecoin transfers on some other quick and cheap chain. It has its own set of downsides and risks, but they might be relatively low compared to huge fx risk of BTC.
Anecdote: I am a fairly technical person but stayed away from the whole self-custody stuff because no way anyone in my family can figure it out and if something happens to me, its all gone.
Two days ago, my wife (non-tech as you can get) got a muun wallet and was very happy about the experience. She got the point of being able to send money to her relatives in the middle east without the normal shadiness that goes on over there.
(getting USD or any hard currency in and out of some middle eastern countries is a nightmare)
And the one “legitimate” use case you list is to use cryptocurrency to bypass US controls on money transfers to monitored countries.
How long do you think that hole will remain open?
Newer tech with better UX does a wonderful job protecting users and is improving at rocket speed. The example I used protects the user from all these scenarios you mentioned.
Also, the US doesn't care about moving USD in and out of most countries (Iran, NK excluded). It's these countries themselves that want that level of control.
How does it protect against hardware failure? How does it protect against sending Coin X to a wallet meant for Coin Y?
Also, the US doesn't care about moving USD in and out of most countries
That's funny. And even if what you said were true, other countries will eventually control what appears to not be controllable today.
As far as the addresses goes, it’s the same thing as sending a wire transfer to the wrong account in a different country. You won’t get it back.
If cryptocurrency enthusiasts had their way, though, the high-risk transaction the GP called out would be required to buy a gallon of milk.
Give them that and Bitcoin will go back to being a niche investment vehicle where 99% of the people don't care about it.
It's work, but you are running your own bank.
Developed by a centralised developer that you trust not to screw up your money transfers.
> But the space is moving like a rocket and who knows what the future holds.
We know. All the crypto bros will slowly and inefficiently learn why regulations and centralisation exist
Developer literally created the software you use.
To interact with the ledger on an easy non-technical way, you can:
1. Use a centralized exchange (coinbase) 2. Use a self-custody cold-storage wallet (ledger) 3. Use a self-custody hot wallet (muun) 4. Use a custodial wallet
For #2, and #3. You have your own private keys. The developer of the wallet can’t do anything to your money. Even if they shut off the servers(#2 doesn’t have servers), the ledger on the network still says you have x amounts of Bitcoins. You can access the ledger and interact with the network in another way.
Literally can’t be evil!
Look up how ETC (Ethereum Classic) came into being.
Look up a 51% attack.
Look up forks from BTC to BCH and then BSV.
Look up Craig Wright and his claims to be Satoshi Nakamoto.
Again, respectfully, your many comments here make you appear to be someone that just learned about cryptocurrency in the last six months and you have only the simplest of surface understandings of it.
You’re INcorrecting several people that have been at the forefront of cryptocurrency for over a decade.
Eth classic is exactly why there is Bitcoin and everything else.
Forks are exactly why Bitcoin will always protects it’s userbase from big miner money.
Craig white claims is exactly why no one person can control the network.
You haven’t been at the forefront of anything my man. Bitcoin has returned 1000% and you are sitting here fighting over the internet.
You’ll know it happens when people just stop responding to you.
I have showdead turned on and I shake my head as people post comments for years never knowing that 99.99% of people don’t see their posts and comments.
As for my cryptocurrency background I mined BTC with a GPU when it was very profitable. My ETH mining rigs are doing their job while I’m posting on the Internet as you say. I have no problem profiting from it while recognizing it’s a total and complete scam.
So at all times they have access to both of your keys that are used to sign transactions:
https://blog.muun.com/muuns-multisig-model/
--- start quote ---
Muun ensures your decrypted private keys are never stored in the same place:
- Your phone stores only the first key
- Muun's servers store only the second key
--- end quote ---
Oh, there's also the Emergency Kit that--I pinky swear--is encrypted in a way that Muun knows nothing about both keys in it.
Moreover, if you go ahead and install Muun, there's literally nothing about secret keys in the app: you can immediately send and receive bitcoin. Which really tells you all you need to know about its security.
- People don't want to run their own IoT server -> Their device/subscription stops working if the company goes out of business or changes the ToS.
- People don't want to create their own subscription feed -> They are being manipulated by the algorithm and misinformation.
- People don't want to run their own bank -> ...
There are lots of good reasons to run your own infra and we should strive to make it easier to do for everybody
Imagine living without money for 6 months while having to pay a funeral. I saw it happen to an elder woman. She had to loan from friends and family because of this.
Now I heard the law has been updated to avoid the most egregious excesses, but the basic principle still stands.
I know of a few people who keep 1 or 2 months worth of money at home, just in case. Can't blame them.
Banks are generally good at what they do, but don't put all your eggs in 1 basket. Someone will make a mistake at your expense, better be prepared and have some buffer.
Also not advocating for crypto, just saying you should be able to live a while without access to a bank.
Schemes like that are not easily possible with physical assets or fiat currency.
Of course they are. It's called last will and testament.
You can easily set this up, choose a lawyer to hold it and your friends don't even need to know.
If you have substantial assets it's even much safer that way, because using your method you'd actually put them in danger as criminals might pay them a visit one by one whether you're still alive or not. Not to mention the fact that your friends could also just get together and cash out early...
2. The shards they hold can only be used by the recipient via hardware they have physical access to. They can not collude without the recipient. I also trust the, far more than any potentially malicious bank insiders.
3. Wills can take a long time to process and bank accounts can be frozen for months following the death of a spouse. I want a plan that gives those I wish access to capital as soon as they are in a safe location to receive it and get the bulk of it stored in a coercion resistant way with a new quorum.
Security by obscurity is a poor choice.
> The shards they hold can only be used by the recipient via hardware they have physical access to.
Sounds like multiple points of failure right there. From lost/faulty hardware to friends passing away. If your scheme relies on every single one of them having access to working hardware of sorts and being alive and well, that's an elaborate way to setup for failure, but maybe I just completely misunderstood your setup there.
> 3. Wills can take a long time to process and bank accounts can be frozen for months following the death of a spouse.
I don't see how that's a problem given that your scattered group of friends needs to verify your demise and somehow get on a quest to gather the key shards without even knowing of each other's existence (again, I could totally have misinterpreted your scheme here).
This all sounds more like a D&D questline to me than a solid plan to ensure your assets get to the right people after your passing.
Assume the individuals in my scheme are all lawyers at different firms around the world that all have instructions to hand an envelope they do not know the contents of to designated individuals in the event of my death. This is a well understood scheme. I just do it with a redundant quorum so I can avoid any one lawyer being able to consume the contents of said envelope themselves and tolerate some of them failing to perform their duties.
As far as the hardware the recipient has access to, that can be duplicated to any similar off the shelf hardware via a 24 word paper backup and storing paper redundantly and durably is a solved problem.
These schemes use well understood standard cryptographic protocols as well. Shamirs secret sharing and bip39. The rest is just human logistics.
And you absolutely could publish an encrypted password and distribute key parts in precisely the same manner, enabling your quorum of friends to access your bank accounts or whatever.
Also not to mention leaving USD in a bank account long term rots it to inflation.
Meanwhile in crypto-assets the funds stay exactly where they are and are impossible to move until a private key is available.
Shamirs. hardware wallets in vaults, paper wallets... the point is you have choice and control. Any process documented well enough can be followed in the future. We still cook recipes generations old after all.
Yes, nobody can close your wallet (well sort of, big players like Coinbase or OpenSea can absolutely treat your wallet as poisoned and refuse to transact with you).
This is a frustrating component of the discussion about crypto. “It is better for survivors” shouldn’t be defended with “inflation is bad.”
How much of a reality that is to particular person depends their economic environment. A Venezuelan living with hyperinflation thinks about the fragility of their savings differently than an American.
Likewise, many don't really want to run their own electric generator because it's noisy and keeping diesel fuel on hand is extra work. However, they'd rather deal with that than have no electricity when the power company issues rolling blackouts.
So, an option can be framed as a "bad choice" but it must also be compared to other bad choices that may be worse. Which bad choice do people prefer? A noisy diesel power generator they have to babysit or a no power at all?
Writing a hypothetical essay titled "People Don't Want to Run Their Own Diesel Generators" -- will not actually educate readers on what's happening.
Yes, crypto POW uses too much energy. But how do you get people to prioritize the environmental impact over their fears of government manipulation?
People don't want to run generators. They want stable electricity. There are a variety of ways we can give it to them.
Similarly, people in a hyper-inflation environment don't want crypto - they want stability.
But there's nothing inherent in crypto which prevents hyperinflation. Yes, I've read the original bitcoin paper. That talks about monetary supply - it doesn't do anything if a cartel decides to raise prices.
One of the things that made Moxie's piece a hit was it had real examples of his experiences trying to do things.
But this article has none of these examples or experience.
For example, your article misses people who are indeed using cryotocurrencies as banks [1]. It misses the current conversation around social management of keys. The rise of automated exchanges like Uniswap.
Lots of room for critiques on these items. That the only examples of people using crypto for real banking are in collapsing currencies. That if there's such a problem managing keys that social management will still fail. But you seem to have missed all of them which really undercuts your article to me. Again, this seems like it could have been written in 2010 based on the concept of crypto rather than real world experience. Just curious about your motivations for such a piece. It certainly has attracted commenting here.
Disclosure: I own crypto
[1] Reporting of LocalBitcoin use in Venezuela. Certainly room to use these examples of why cryptocurrencies will never scale, but not mentioned in the article: https://www.reddit.com/r/Bitcoin/comments/s5i64l/24_btc_were...
Highly recommend the MIT video course on blockchains: https://youtube.com/playlist?list=PLUl4u3cNGP63UUkfL0onkxF6M...
And for a deep dive into any specific project, it there's an episode of the Zero Knowledge podcast about a project it's worth listening to.
To add to your counterpoint, the OP's praise of going cashless as opposed to the problems of cash is another fine example. It's certainly more convenient to use your card everywhere, but if everyone did it then just a handful of payment processors would gain immense power, with the ability to track, monitor, and censor all transactions. Plenty of dystopian fiction like The Handmaid's Tale covers what can happen when this infrastructure is abused. Cash may have problems but it plays an important role in an open society, and redundancy when a major payment network goes down (as Visa did across Europe on 1st June 2018, causing retail chaos). But many vendors no longer accept cash and this will only accelerate as more people never use it. In praising going cashless as protecting ourselves from being our own banks, the OP misses the forest for the trees.
Crypto doesn't protect you from either of those things
Similarly, when the US gov banned alcohol in prohibition, it did not eliminate demand for booze. It just moved the market underground.
A government can't, but a cartel of miners can and they do every time they mint bitcoins via mining rewards and they won't stop at 21 million.
They would be considered counterfeit and ignored by all Bitcoin clients and nodes. Case studies include BCH and BSV.
If you are genuinely curious about the mechanics do some research to understand why no miner in the past 12 years has successfully modified any parameter of the Bitcoin network.
Also, unlike cryptocurrencies, none of the other contraband could be stored on a password that could be memorized or transmitted to anyone anywhere in the world.
If governments banned Bitcoin, the market price of Bitcoin could very well go up over time not down after the initial shock.
The government won't ban the use of bitcoin, it'll ban the legal on-ramps and off-ramps for converting between cryptocurrencies and fiat. The value of cryptocurrencies is based on hype. When most people can't legally invest, the liquidity will dry up and the price will plummet. That'll lead to less hype, which will lead to lower interest, and so on.
Most likely, the bubble will burst, normal people will lose lots of money, the rich will make a lot of money, and the government will regulate cryptocurrency.
But some other people do.
> I give an institution my money and, due to a combination of their size, insurance, and regulators, I'm confident that my money will still be there tomorrow. They are unlikely to give me fake notes, and they can refund me if I've been defrauded. I trust them.
Good luck! Your trust in them is not a guarantee that you are able to get your money back from them at any point [1] [2] [3] [4]
[1] https://www.reddit.com/r/UKPersonalFinance/comments/aqxz5n/h...
[2] https://www.reddit.com/r/UKPersonalFinance/comments/ryc8i4/b...
[3] https://www.reddit.com/r/UKPersonalFinance/comments/l4tps5/h...
[4] https://www.reddit.com/r/UKPersonalFinance/comments/cbpxit/h...
If the government is after you, crypto isn’t going to protect you. It might make the cost to go after your money a little higher if you’re willing to violate court orders and live as a fugitive.
You can co-operate with an investigation whilst also not handing over complete control of ~all of your assets for the interim.
That’s what I meant when I said the cost to seize your money goes up if you’re willing to defy a warrant.
However, if using crypto as a currency becomes mainstream, governments will crack down.
Crypto might be decentralized, but governments could easily require registering wallets, and force businesses to only transact with people who are registered.
If the price went down 10% year after year forever I guarantee people would shut up about it even though none of the underlying reasons for supporting it should have changed.
Many real life folks I know buy little chunks of Bitcoin on a consistent base regardless of the price as a form of savings.
If your problem is the government might go crazy, the solution is to be part of society and stop that happening, not run away and hide in your cave
This is what it looks to me: "the problem with gravity is that since the objects fall down people rationalize everything (e.g. give explanations why they should fall down). If the objects went up year after year forever I guarantee people would shout up about it even though none of the underlying reasons for supporting it should have changed"
The point is pretty obvious - the usefulness and popularity of crypto shouldn’t be related to its value in relation to fiat, yet here we are.
> the usefulness and popularity of crypto shouldn’t be related to its value in relation to fiat
Are you sure that the usefulness and popularity of crypto are related to its value beyond some reasonable correlation?
At the end of the day, you relinquish control for a false sense of security. Everyone storing their money in banks in Venezuela found this lesson out the hard way: you don't have any money. The government allows you to store and pass around notes for debt, which are commonly agreed upon as valuable and so our economy spins onward. You know what they say about those willing to give up freedom for security.
Realistically, use your head please. Full tradfi and full defi are equally unwise. It's risk management 101. And yes, some very unsavory things going down in any country are always a risk if you are planning a resilient infrastructure for your estate spanning generations. Usually this has taken the form of multinational diversification, but now we have the extra option to secure long-term wealth without all the legal expenses. Don't dismiss it.
A non-material agreed upon medium of value transfer completely outside of control of governments is unprecedented. You can go to any country, and get someone to give you their paper currency, for a digital one you possess - without ANY restrictions or moratoriums. I'm not sure how that can possibly be called a step backwards. It's a valuable tool even if most of HNs audience has no use for it. Control comes with risks and responsibilities. This is true for being your own bank, running your own infrastructure, and everything else. Literally nothing about this tradeoff is new or shocking, except that it's now available for currency as well.
With smart contracts you have none of this as well as the risk of a bug or backdoor in the code. No one is going to be auditing all smart contracts. They want to be able to use the legal system to address a problem after the fact if it goes wrong.
Admittedly I am no expert, but those concerns have kept me away from ever considering exploring them.
This is exactly wrong. Some people ultimately want people to be answerable to people. There are plenty of people however, who want to be answerable to code instead. Unlike with other people, you can potentially verify that the code you trust in is neither irrational, nor cruel.
Have there even been moderate - not even large - scale protests against banks freezing accounts?
Regular banking is slow and cumbersome, but it does work for most people.
Platform-wise, I won't be surprised if they do same thing as GoFundMe [2].
[0] https://news.ycombinator.com/item?id=30213365
[1] https://theintercept.com/2022/01/19/crypto-afghanistan-sanct...
[2] https://news.ycombinator.com/item?id=30187172
For example, a paycheck should be deposited directly into a worker's cryptocurrency wallet. Anyone who wants their payments to go into their bank account can simply provide the address of their bank wallet instead of their personal wallet. This way nobody is forced to create some bank account just to get paid their salary.