I don’t buy that. Let’s say someone stole your life savings, would you still not want reversible transactions? What if someone stole your parent’s or sibling’s life savings?
Because 1) on a personal level you won't be able to pay to avail yourself of the court system, and 2) on a social level the cost of doing fraud screening at the payment processing level is trivial in comparison to the expense associated with fraud litigation.
Furthermore I want to point out that this "no refund" policy of cryptocurrencies is by design, there's no way to change that without effectively turning it into a "regular" centralized and "trustful" currency. It's not a feature, it is a technical limitation of the algorithm, the question is just whether it's a problematic one or not.
Meanwhile Visa and friends, if threatened, could relatively easily launch a competing product with the same characteristics (no chargeback, buyer pays the fees instead of the seller, etc...). I suspect that the main problem with starting something like that is that it would run afoul of existing regulation.
So basically the reason that we're not using Bitcoin-like currency right now is not because we couldn't do it before, it's because we actually realized that we didn't want it. The market has spoken!
[1] https://support.coinbase.com/customer/en/portal/articles/222...
I'm sure I'd want to reverse that transaction if it could be done as a special case with no further implications, but I don't think it would change my mind about reversible transactions in general, and I make the decision to hold a currency/commodity with non-reversible transactions understanding that it could backfire in a scenario like the one you describe. I make this tradeoff in part because it allows me to have funds which cannot be accessed by anyone else without the Randall Monroe method of brute force: https://xkcd.com/538/ This is actually a pretty high bar compared to a system where a bank can be ordered to freeze your account. Nobody can freeze my crypto without breaching my physical security, and personally, I'm willing to accept a good deal of risk for that property. It's okay that you have different priorities.
The IRS, US Government, EU or whomever has jurisdiction over your local bank already has the power and ability to seize your physical person. So I don't see what's being gained; if I put all my bank accounts into bitcoin the people you're trying to guard from can still come and coerce me with a gun anyway.
Meanwhile, anybody who isn't one of the aforementioned entities cannot do this, because even if they threaten or kill me, the banking system will reverse the transaction. Thus there isn't any incentive for anybody else to try to physically coerce me, because there's no way for them to keep the money.
Bearer instruments like gold and Bitcoin are important because of the fact that when stored properly they cannot be seized from you by a 'trusted' third party such as a bank and it's exactly because they can't be reversed.
It's good that we have both options.
For most websites, it's good that people can do a password-reset if things go wrong.
For password-management systems, though, this must be impossible by design, or else the whole system is a joke.
I think we'd have a healthier view of credit cards if we indeed only used them when we actually wanted their features beyond the sheer convenience.
I use bitcoin online where possible precisely because I know I am not going to make a chargeback down the road and I don't want to give someone pull access to my bank account. Only few banking services offer virtual/"OTT" card numbers.
If chargebacks were so critical for every purchase, then everyone would be scared of ever using cash. But that's not why people don't use cash.
I thought that the benefit of reversible transactions would be for the case someone steals my credit card and uses it.
If credit card companies could tell it wasn't me who used it they could have declined it in the first place. Since I have had other people charge things to my credit card before, I'll assume that's not possible and so I'm thankful the transactions are reversible.
There is also the case where there's a bug with payment processing. My friend was recently charged for 5 computers because Lenovo's website kept saying there was an error with the transaction when it actually went through.
Sure, 10 minutes after you request it.
Second, a large portion of the interchange fees are remanants of older less-digitized systems. The surplus from improved systems has been transferred into benefits for consumers in preference to reducing the cost to retailers (rewards points, extended warranties, bundled insurance, and extension do credit to riskier classes of borrowers). There have been class-action lawsuit launched by retailers in Canada and the US which sought redress on high fees, but only resulted in modest anti-trust actions (eliminating the clauses that disallowed retailers to give discounts for paying with cash, or charging a surcharge to customers who use rewards cards that carry higher fees for instance).
Contra to this is the example of Australia which took a regulatory approach and capped interchange fees at a level that allowed banks to cover thier costs, including fraud (a fraction of the fees in North America). This resulted an massive reduction of rewards programs, and greatly reduced the fees paid by retailers.
TL;DR: the costs associated with credit card fees is an accident of history and contingent on the actions taken or not taken by regulators. They have less to do with fraud or the cost of processing transactions than most people assume.
Reference (though there are better ones with more detail if you dig around for reports from the Australian government): https://en.wikipedia.org/wiki/Interchange_fee#Australia_and_...
If you're a business, it's a bug. Ideally, you would prefer to not even accept credit card payments and only accept cleared funds, but since you'll potentially lose out on business by not accepting credit card payments, you have to take the risk sometimes.
Reversibility does not reduce the incentive to commit fraud, it just enables it. People can use stolen credit cards to purchase real goods, and the seller usually ends up footing all of the cost.
Bitcoin puts business first. You don't need to depend on Visa doing their (useless) fraud investigations anymore. You take payment, and you decide whether or not to return it. Anyone who isn't willing to provide the money up front can pay the additional escrow fee.
If some random stranger in the street asked you to hand them some money in return for a product you want which they will send you in the post, are you gonna cough up the cash?
Why would you do so for a stranger on the internet without taking the necessary precautions?
I like the fact that you get to chose your escrow and are not dependant on Paypal, which is a terrible escrow because they have an entrenched buyer bias.
one practical reason could end up being cost. with the ubiquity of credit cards, most businesses need to bake in the credit card fee and chargebacks into the cost of their goods. its possible that some buyers would be willing to forgo the buyer protection in exchange for a discount on some purchases (assuming the credit card industry doesn't lobby to make offering these types of discounts illegal...)
Also, savvy buyers can already make back most or all of the processing fees that are baked into prices without giving up the convenience or protection of credit cards. Lots of credit cards give cash back or other rewards that are worth ~2% of the purchase price.
This is false in most jurisdictions.
After all if deflationary currency is worth more tomorrow, one wants to make sure an investment in the future is sustainable.
Notably one is especially interested to invest in a deflationary economy because the gains are multiplicative.
Bitcoin inflation rate per annum: 3.87%
USD Current inflation rate for the United States is 2.7%.
Aprox 4.11% of Bitcoin users (addresses) control 96.53% of all bitcoins in circulation.
What is that called? It's not deflation.
Saving is a perfectly viable choice. If someone wants to save, it is not for you or your cronies to tell them they can't, or that you must shave your cut off their savings each year.
It's a myth that people won't spend. People will save the good money and spend bad money. The bad money is still getting spent, but of course, it's constantly losing its value.
The difference is the perspective on how money should be spent. Savers are low time preference people. They would rather spend their money on the future, on things that last. High time preference proponents on the other hand, only care about the next quarter, will cut corners to maximize their short term profit, and will spend their profit on cars and other depreciating assets to avoid paying the tax on their profits. They also build products which are intended to fail, so that the consumer has to buy the upgrade in a few years.
- Uncensorability. I can pay whoever I want whatever I want, with no third party able to insert themselves between me and the recipient (or dictate who can send or receive money) for any purpose.
- Irreversibility. Yes, often held up as a weakness, but has its uses. Not all transactions are physical merchandise where a third party enforcing refunds is useful.
An address could be kept anonymous with good op-sec. If you know that your actions are going to attract the ire of some people with guns, you will practise op-sec.
Well, what's wrong with cash?
- Uncensorability
Well, what's wrong with cash?
- Irreversibility
Well, what's wrong with cash?
Except for the fact that cash is issued by the "evil" government your points provide zero reasons why I should prefer crypto "currencies" over cash.
And that's a purely ideological stance.
-Privacy: See the recent example where the state sponsored espionage involving sophisticated hackers had their activity traced though Bitcoin's blocktchain transaction log.
Even Monero's XMR is prone to statistical analysis to unmask users:
https://content.sciendo.com/view/journals/popets/2018/3/arti...
https://www.wired.com/story/monero-privacy/
A more serious question will be what happens when the laws catch up with users using a system designed for money laundering, tax evasion, and enabling black markets?
-Uncensorability
The software which enables blockchains and proof of work is susceptible to attacks by motivated state level attackers, so far only smaller blockchains have been targeted (presumably by rival groups with expendable mining resources).
A much easier censorship attack occurs at lower network levels.
One important point: if we actually include all 7 billion
people on the earth, most of whom have zero BTC or
Ethereum, the Gini coefficient is essentially 0.99+. And
if we just include all balances, we include many dust
balances which would again put the Gini coefficient at
0.99+. Thus, we need some kind of threshold here. The
imperfect threshold we picked was the Gini coefficient
among accounts with ≥185 BTC per address, and ≥2477 ETH
per address. So this is the distribution of ownership
among the Bitcoin and Ethereum rich with $500k as of July
2017.
In what kind of situation would a thresholded metric like
this be interesting? Perhaps in a scenario similar to the
ongoing IRS Coinbase issue, where the IRS is seeking
information on all holders with balances >$20,000.
Conceptualized in terms of an attack, a high Gini
coefficient would mean that a government would only need
to round up a few large holders in order to acquire a
large percentage of outstanding cryptocurrency — and with
it the ability to tank the price.
With that said, two points. First, while one would not
want a Gini coefficient of exactly 1.0 for BTC or ETH (as
then only one person would have all of the digital
currency, and no one would have an incentive to help boost
the network), in practice it appears that a very high
level of wealth centralization is still compatible with
the operation of a decentralized protocol. Second, as we
show below, we think the Nakamoto coefficient is a better
metric than the Gini coefficient for measuring holder
concentration in particular as it obviates the issue of
arbitrarily choosing a threshold.
...However, the maximum Gini coefficient has one obvious
issue: while a high value tracks with our intuitive notion
of a “more centralized” system, the fact that each Gini
coefficient is restricted to a 0–1 scale means that it
does not directly measure the number of individuals or
entities required to compromise a system.
Specifically, for a given blockchain suppose you have a
subsystem of exchanges with 1000 actors with a Gini
coefficient of 0.8, and another subsystem of 10 miners
with a Gini coefficient of 0.7. It may turn out that
compromising only 3 miners rather than 57 exchanges may be
sufficient to compromise this system, which would mean the
maximum Gini coefficient would have pointed to exchanges
rather than miners as the decentralization bottleneck.
Conversely, if one considers “number of distinct countries
with substantial mining capacity” an essential subsystem,
then the minimum Nakamoto coefficient for Bitcoin would
again be 1, as the compromise of China (in the sense of a
Chinese government crackdown on mining) would result in
>51% of mining being compromised.
Again, PoW is not immune to "Irreversibility" it actually constantly has a known attack surface for reversing transactions and double spending. The only thing preventing it is so far no only a limited amount of attacks on smaller blockchains have taken place.
Do you know who is willing to sell a cash equivalent for a 15% discount to face value? A carder. The 15% is their payment for services rendered.
That has yet to be seen. Except for true believers I yet have to find a serious economist who suggests crypto currencies as a store of value due to its volatility.
The international decentralized non-government issued aspects of cryptocurrencies are cool though.
As many scams as are in the space, there really is a seed of a neat idea.
Also, another way to look at it, is that your Bitcoin will be worth exactly the same in Bitcoin in three years. The bitcoin you own as a proportion of the total supply is fixed. Compared to fiat markets, the proportion you own to what is printed is declining year on year.
Bitcoin will eventually become not less volatile, but involatile. This is because you won't be measuring its value in USD, but you will be measuring the value of USD in Bitcoins.
Accepting a hypothetical future where other currencies are generally compared against bitcoins, bitcoins would still not be "involatile." While markets tend to use one currency as a reference point for another, there are other reference points available. Economists often use a basket of staple goods, like milk and eggs, to get a sense of how much the dollar has fluctuated in value. As you're aware Bitcoin was designed to be deflationary. If we expect human population to rise, and bitcoins to be stagnant in number while remaining a cornerstone of the economy, our hypothetical future should see the value of bitcoins continuing to grow in the long term.
The spirit of your comment is totally true, but I have a pendatic (though vitally important!) objection.
Governments in most countries don't create money and government policy in general neither controls nor influences money creation; instead, money is created by private companies (aka "banks") or a consortium of private companies (aka the owners of "central banks.")
I can't say if their fraud investigation is useless or not.
In those (rare) cases were my card was charged fraudulently charges were reversed immediately and (except when they issued a new card) I never heard back.
From my perspective their fraud investigation is very effective.
The fraud protection works from the consumer side. It is useless from the business side, where no amount of evidence will convince them that you took a payment legitimately.
Paypal are the same. They side with the buyer 99% of the time. No proper fraud investigation is even done.
Only if you think that people would still spend their money with you without it.
A lot of folks (myself included) would be far, far more reluctant to spend money with smaller players or new businesses without the layer of protection.
> Reversibility does not reduce the incentive to commit fraud
Of course it does - merchants have been committing fraud since the dawn of time. It's a constant throughout history. Look up "Caveat Emptor" sometime.
When people do a Bitcoin transaction, its akin to me send give you a $5 note on the internet not a credit card transaction.
This is a feature, not a bug. I'd want to see evidence that the total cost of fraud in crypto is less per user than the cost of fraud in traditional credit. I would guess that the cost of fraud in traditional credit is actually far lower because reversibility reduces the incentive to commit fraud. It's very difficult to steal money from someone's account because they can dispute the charge and get it back.
Compare that to the case where your crypto account is hacked. There is zero recourse, the thief generally gets away with it scott free, so the incentives to commit fraud are huge.