There are a lot of people in the world that live in places where the law is far more gone than "misguided." For these people, it's not a question of "whether" to side-step the law but "how." You may not care, but they do.
People who bring this up are almost always people who have never lived anywhere near real poverty or conflict. Barring individual cases, the vast majority of the world's less privileged have neither the means nor the knowledge to buy crypto in any shape
The hard part is not adoption within poverty-stricken nations, rather adoption in developed nations with complicated tax codes and lack of incentives for merchants to invest in more payment processing tech is the true challenge ahead.
My country - India - has the world's largest number of poor. Even if these people were to get smartphones, there are already deeply entrenched players (PayTM, Google Pay) who offer free and instant transactions.
This is true for a lot of African countries as well. No reason for anyone to use a new currency when there's already M-Pesa and UPI and PayTM that use the currency they already know and trust.
For example, while it'd be a bit of a hack, you could fairly easily re-use even the various Certificate Transparency blockchains to trade stocks.
Also, I wouldn't say that the incentive mechanisms keep the ledger running. Rather they keep the PoW consensus mechanism running; in all existing trustless decentralized currencies it's your node that verifies the ledger is working correctly, and other people are voluntarily distributing the data without a reward.
It's also worth considering that crypto is effectively the greatest experiment the world has ever seen in free banking: https://en.wikipedia.org/wiki/Free_banking. Hypothetically, this could be done with paper+metal currencies, or centralized digital currencies; but for whatever reason, crypto is getting a regulatory pass where past "experiments" have been shut down hard by states who claim a monopoly on issuing currency, for better or worse.
Rather than viewing blockchains through the narrow lens of "Money 2.0", I think it's more relevant to view both money and blockchains as social technologies to solve coordination problems, and then inquire about those technologies' performance characteristics, incentives, externalities, and moral hazards. I think there's longterm potential for blockchain use cases to find traction; but at the same time, it may be that centralized solutions simply achieve superior results, in the same way that Amazon out-competes mom-and-pop retail, and Netflix out-competes buying DVDs. (The market lessons of the last twenty years seem to indicate that consumers value cost and convenience vastly more than abstract notions of freedom.)
Only question is when it will end.
I know of Ukrainian developers being paid in ETH for that reason.
Adult cam models in some countries are another example.
FWIW, complianceless payments are dejure illegal by definition. So any economic activity being made possible by them is roadkill of the current regulatory environment, legally speaking. A nice example of Bastiat's "That which is not seen".
A transaction does not become illegal just because some class of players do not want to become part of it.
- Attempts to side-step the law (however misguided the law is)
- Trivial to do using a typical centralized database (e.g. Federal Reserver or VISA) - Tantamount to waiting for a greater fool to buy out the current players
The 3rd point is the same for any fiat currency on forex and many governments are the same as the ICO shills.
I'm not justifying them just stating that in many cases the gamble on currency is the same.
You did present a nice Strawman but I'll bite. Ok. I get asked about cryptos quite often also. So if not a digital currency like BTC then what?
Why use cash? Only criminals use cash! Really! If LE should catch you having more than x,xxx.00 in cash they should arrest you? Why? Because obviously you are trying to do something illegal. (civil forfeiture)
Trivial to do tx with 3rd parties???? What with what? PayPal? There have been no alternatives, or equivalent to cash in the electronic age to date. Including BTC. Although BTC is an attempt to provide similar means as cash (fiat) in a global digital sense.
Then again there is this which is perfectly good: https://en.wikipedia.org/wiki/Contaminated_currency
In areas that are ahead in digital payments technologies, cash is dying out very fast.
In the US, you may want to use cash (as a seller) to avoid transaction fees. But in countries like Norway that has implemented a cheap national debit payment system (BankAxept), that's not been a big issue. Now the banks in Norway has implemented a common payment app as well (Vipps), which is free for transactions between individuals.. this has started to kill off cash in all the areas it held out before (sales of used items, buying cookies from scouts, etc)
> What with what? PayPal? There have been no alternatives, or equivalent to cash in the electronic age to date.
If you ask me, that's because making payment systems is actually extremely hard. It's just that cryptocurrencies pretend it's not, by simply ignoring a whole lot of real-world issues that you would address if you were making a payment system that wasn't trying to make blockchains fit the problem.
Most of the challenges with payment systems are social. Challenges related to what happens if there's an error, a scam, a theft, etc. Cryptocurrencies just avoid it all by saying there is never any errors, even when any reasonable person would say there is.
If you think there's no alternatives, I'd say you're very US-centric. Outside the US there are lots of places that are already most of the way there.
There are many LEGAL activities that people do not want to show up in a central database. For example, think of many things related to love and relationships.
"tantamount to waiting for a greater fool to buy out the current players" <= this is like investing works in general, or? ;-)
Unfortunately cryptocurrencies aren't just a central database they're a distributed database - all transactions are public. You can try using a tumbler service but since these are obviously money laundering havens they're not going to last long.
Not the case, see payment channels.
Security that no third party can just take your money anytime, without your explicit signature.
Liquidity for new tokens issued by projects / communities without great access to global markets and exchanges.
Programmable money that follows rules you can rely on when you invest in a project / deposit money into a community / donate to Haiti.
UBI on a community level funded by community members or donors
Analytics on how money is flowing around available to everyone and not just stored in a central database with information asymmetry.
These can be combined. For example Analytics can help you figure out the cost of food in your community, then vote for a level of UBI that eliminates food insecurity, and adjust this amount on a daily basis through direct democracy (Provably Random Polling.)
Intercoin’s mission is to make access to local fintech more available to local communities and online projects, without having to rely on central banks for monetary policy or the IRS for collecting taxes and being able to calculate eg the Consumer Price Index on the community level
More info at https://intercoin.org see the presentations and whitepaper.
Prepping makes sense to the mainstream once they experience a disaster. And those disasters are being manufactured even now by mis-management of debt.
But... it also brings financial service options to people who have no opinions or only truly awful options.
If you are a non-homeless American, you don’t need crypto. American banks are bending over backwards to serve you. But, if you are a homeless American. Or if you are one of the unbanked billions around the world. Or, if you are a Venezuelan, Nigerian, etc... then the establishment is either dismissing you or actively working to screw you.
Crypto can bring tremendous value to all of them while bringing very little to the establishment by simply acting as a PayPal alternative for the extreme poor. If it manages to survive that, it will get better and better. Eventually it will creep up to becoming useful for rich westerners.
I think I can buy that. The unbanked could become centrally-banked like all of us as their countries develop, but there is a competition between that and the cryptocurrency which could wedge itself in at this point and outcompete the local government simply because the government is small and lacks in experience (maybe corrupt too). Another contender here is WeChat and similar centralized payment technologies, but they too are hamstrung by their own current governments (I'm sure that Payapal is) giving breathing room to competition.
It is not obvious to me which one of the three will win among the unbanked.
In the long run I think banks will win amongst the unbanked.
2 - Trivial to do using a typical centralized database (e.g. Federal Reserve or VISA) -> Bitcoin, Ethereum and others can do Smart Contracts which means delayed sending, multi-sender transactions that serve as escrow and in the case of Ethereum programmable using it's own language to do any number of actions/apps. The important feature is that this is handled by the network using your own transaction, you don't have to set up the escrow through a company like VISA, Paypal, etc.
3- Tantamount to waiting for a greater fool to buy out the current players -> This is true of all CC because it's an open, yet small market. The earlier you get in, the better your outcome. However, it's not like CC's NEED to explode in price to be useful, competitive or solve a real-world problem. Getting rich is a secondary effect of having a functional CC reach adoption. Look at MemeCoins like Doge and Banano to see adoption is easier when everyone abandons the idea of getting rich off a coin.
But national currencies are getting increasingly shaky, even the USD where it appears Congress has no political will to control the US national debt and deficit, and where the GOP blows bigger deficit holes with tax cuts and the Dems are talking about MMT. Not to mention the risks to the Euro and Yuan, along with the many smaller countries with distressed currencies.
It’s interesting to me that cryptocurrrency skeptics and critics seem to regularly ignore this as a use case, when in fact it is the most important one (maybe even the only one). It seems many people can’t bring themselves to believe that modern national currencies can fail and don’t need an independent hedge, even though the 1800s and 1900s were full of exactly that.
At the moment cryptocurrencies seem a good be worse than fiat. Imagine your salary or mortgage was a set number of bitcoins.
There were probably a number of initial uses imagined but if you look as Szabo's twitter pretty much the first link is The Crypto Anarchist Manifesto about circumventing government and libertarian freedom which I think was a big part of the inspiration.
(https://mobile.twitter.com/NickSzabo4/status/107401811082955... )
Yes they’re volatile, but they’re new, immature tech, with shallow market depth. None of those things will last forever.
https://en.bitcoin.it/wiki/Genesis_block
"The coinbase parameter (seen above in hex) contains, along with the normal data, the following text:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"- micropayments: the products that that enables - web-native currency: Makes it easier for apps to integrate money. Games, chat, maybe torrents we're told - easier to transfer money between institutions (maybe easy in the US but it's super hard in Canada)
Course, you could just use Visa gift cards for these kinds of usages. It's probably a bit more convenient to do it this way, rather than keep topping up a card.
Some other use cases noting that cryptocurrencies tend to have public ledgers.
Besides that, just because something is illegal doesn't make it wrong. Many nations restrict transactions that are not reasonable to restrict.
So what's wrong with side-stepping bad laws (but also monopolistic players in the financial space such as PayPal and Western Union)?
Your second bullet point is mutually exclusive with the first.
And I don't see why you dismiss the importance of the first one. What if I'm trying to flee the country with something to my name, like Venezuela. Tough luck?
It's perfectly legal for me to, for example, donate money to WikiLeaks. But Visa and Mastercard aggressively canceled every merchant account that allowed people to donate to WikiLeaks through the Visa and Mastercard systems, apparently because of secret pressure from US government officials who were unhappy about some of the things that WikiLeaks revealed. The Snowden revelations — which may not have been legal, so they are peripheral to your question — very likely wouldn't have happened without WikiLeaks being able to support him, which they could only do because they could receive Bitcoin.
Similarly, many Patreon accounts are getting canceled because their owners have published things that are embarrassing to Patreon, but not illegal (typically, racist remarks). If Bitcoin becomes mainstream, there won't be a centralized authority like Patreon that is in a position to end people's livelihoods because they publish politically undesirable viewpoints. (Right now, those viewpoints are viewpoints that are odious to you, but there's no guarantee that that will be the case in the future; it's easy to imagine Patreon bending to Chinese government pressure to censor people who talk about Falun Dafa persecution or Tiananmen Square, for example, even in countries where that is legal.)
As another example, many Venezuelans are having difficulty fleeing the country, even though fleeing the country is technically legal, due to both official corruption and armed gangs. You could argue that it's not clear what is and isn't legal in Venezuela right now because there are two competing governments, but neither of those governments authorizes demanding bribes from would-be émigrés.
As yet another example, it's perfectly legal in Iran and France for French companies to do business with Iranian companies. But, because much of the world financial system is controlled by the US, it can be difficult in practice; see https://www.washingtonpost.com/world/europe/europe-says-it-w... for more details. Regardless of whether US law is misguided or not, under well-established principles of international law dating back to the Peace of Westphalia, it certainly does not apply to French companies doing business in France with Iranian companies in Iran.
So, in a sense, I think you're right that the main purpose of cryptocurrencies is to sidestep violent coercion. I think you're terribly naïve about how much illegal violent coercion is actually "the law", although that's understandable if you've never lived outside a developed country.
There are other uses as well; it's a dramatically better way to send money overseas, for example. Last time someone sent me money via Western Union, I had to go to three different locations, stand in line for twenty minutes, hand over a massive amount of personal information (perfectly suited for identity fraud or targeted home robbery) to an unaccountable third party, sign a false statement, and walk out the door into a dangerous neighborhood with a pocket full of small bills. For this "service", WU charged me/them about 10% of the money sent, and also didn't inform me when it arrived. Bitcoin transactions require none of this nonsense and cost much less; the last Bitcoin payment I received from overseas cost 0.3%, and I received a notification in a few minutes in my Bitcoin client of the transaction.
I am curious why you think that those 3 cases are somehow not valid or interesting enough in their own right?
If you want to explore the utility of crypto go check out different online communities that focus on that, some decent ones on reddit. The level of discussion on HN is usually "crypto baaad, centralized goood". As an economist I'm sure you expect more. Unless you want those ideas reinforced, keep the discussion here!
I rather like the level of discourse on HN in general - it's not unusual to find someone providing a high-level though-out response on various subjects. Asking the right question is also hard, but not as hard.
I think they subconsciously see it as an attack on state-sovereignty or something like that. The ability to tax and redistribute. That's just me reading between the lines.
It is trivial to look up the signed transaction to the specific address in the digital currency's blockchain. Hence, the shipping company can handle that situation.
On the other hand, try to get an irrefutable digital proof of payment from a bank. For example, get them to email you anything to you, anything at all, that you can use as proof that you paid last month's rent. A bank cannot do that, not even to save themselves from drowning.
Whenever you need to digitally prove payment to a third party, you need to use a payment method that can provide such proof.
I don't see why the shipping company needs to verify anything themselves - they just need a call from the owner of the goods directing the shipment.
And when it comes to trade between untrusted parties, it starts slow. To build trust.
Though crypto is great to making faster payments, that's sometimes an issue, and it can save the seller from the buyer's scam, but on the other hand completely exposes the buyer to the seller's scams. (Because cryptocurrency transfers are non-reversible usually [as in ever, except with a hard fork].)
The economist-in-me appreciates that non-legal activities are perfectly capable of both demanding and supporting a novel financial instrument on their own, I only exclude it from my question because it's a rather obvious application and I would like to probe beyond that.