In a larger sense, that's a general trend of "innovation". Social media is just advertising that avoided regulation by being on the internet. Now it's rediscovering why public broadcasting laws are necessary. The whole gig economy is rediscovering why workers' rights & protections were invented. AirBnB is rediscovering why zoning and safety standards were created for hotels.

Nothing has really changed at all. Innovation seems more about inventing a way to do an old thing that feels new enough to avoid legal scrutiny until a company gets large enough and the public angry enough that laws create regulatory capture.

Is it rediscovering them or pointing out the weaknesses of such laws?

And if I might say so, for a tech forum, there seems to be a remarkable number of luddites who sit mighty high on their horses as they sing the praises of Chesterton's fence while simultaneously baying over the stagnation of housing, transportation, and their flavor-of-the-week, dead-on-arrival revolution, etc.

Should we never have used GPS because a good map won't lead you into a desert? Should we stop using phones because a one-to-one conversation may end up as dead an art as Latin is a language? Not everything that was done before was done for the right reason. Not now or even then. They were done mainly because there was no other given choice or someone on a high chair said so and signed his name on a piece of paper declaring it as law.

I'd say it's beneficial that those regulations have been circumvented even if I don't necessarily cheer on the particular actors who do the circumventing or what they do afterwards. Innovation is about finding novel ways to get from A to B as speedily, efficiently, and effectively as possible. And if regulations create a roadblock to it, all the more reason to invent around them. After all, there wouldn't a modern desktop if it wasn't for Compaq engineers reverse-engineering and reimplementing IBM's BIOS.

As for the "luddites" part, you miss an important distinction. Technology itself, such as GPS, is ethically neutral. However, there are many greedy people who will abuse it for their own advantage not caring at all about the consequences. It is especially clear once you have built a large company with a large influence on people's lives, attitudes, economy, and mental health. When you listen to people like Zuckerberg, it is clear they want to push away the responsibility in order to have all the benefits without any costs. When you see Uber develop Greyball it's clear that what their motives are. Investors flock to another "disruption" startup but if it turns out successful after some time people realize the very regulations that were attacked did have their purpose. We are not luddites, we are just reasonable people - humans first, then techies.

What you are advocating for is undemocratic lawlessness. Which, ultimately, is what many arguments for crypto boil down to.

> undemocratic lawlessness

What is that supposed to be? It’s not a known concept. If you think it means something you should define it.

As a lawyer, it’s perfectly legal to circumvent a law by designing around it. Crypto does that perfectly. So does everybody else. Heck, the whole open source movement does it.

If you willfully ignore regulations you don’t like, ones that were established through democratic processes, and advocate for others doing the same … that’s undemocratic lawlessness.

If instead you are saying that it’s good to find loopholes in laws that violate the spirit of the law, but not the letter of the law … well, you just explained why smart contracts are stupid and will never work.

Edit: by your definition, this “hack” was just innovation designed around the “law” of the smart contracts ;)

You make a great point and I think it's hard to generalize. Nukes have made large scale devastating wars irrelevant but could potentially end civilization or be used to terrorists to evaporate a city. The single largest improvement in quality of life for humanity came from burning fossil fuels but now we face imminent and dire consequences from climate change and have already made humanity one of a handful of mass extinctions on Earth. Radio broadcasts brought music and news into every household but also brought propaganda and contributed significantly to the rise of Nazism (1). Our similar advances in communication technology seem to strike a similar chord. Even GPS, the internet, encryption, and TOR were only developed as military technologies later coopted for civilian use.

The theme appears to be that innovation brings many benefits and great risks. I would advise appreciation of nuance and thoughtfulness. As we become a Kardashev Type I civilization, we could carefully consider the way we organize our society and the existential risks we create for ourselves. For the first time in our history, we have the ability to pretty much completely annihilate ourselves and we're only creating more ways to do it. Maybe some caution is due.

(1) https://daily.jstor.org/an-affordable-radio-brought-nazi-pro....

> Social media is just advertising that avoided regulation by being on the internet. Now it's rediscovering why public broadcasting laws are necessary.

Weirdly, online advertising is in some cases more restricted than traditional broadcasting. I've never seen a movie pause half-way through so someone can go "By the way, Microsoft paid us $5,000,000 to feature this extremely close-up shot of a Surface with the branding visible", but that's a legal requirement for YouTube videos containing sponsored content.

Yeah, that's part of the new regulations / guidelines by the FTC. If FB/Youtube/IG/TikTok have to enforce that, it would be probably be a complicated and difficult system to build. This would increase the barriers to start a social network. This is part of the transition from innovation to regulatory capture. 10 years ago there weren't really any limits or regulatory clarifications and I expect to only see more.

It's not really about "innovation", it's about fooling investors, customers and employees/gig workers for as long as possible until economic, technological or legal reality catches up with you. See: WeWork, Uber, etc.

> Regulatory capture is an economic theory that regulatory agencies may come to be dominated by the interests they regulate and not by the public interest. The result is that the agency instead acts in ways that benefit the interests it is supposed to be regulating.

I'm not sure if I am reading your comment correctly.

Regulatory capture doesn't sound like a desirable thing, and wouldn't do the desired regulating. What did/do you believe the definition is?

I'm sorry I wrote my comment quickly but I'll expand and I do think I used "regulatory capture" somewhat correctly. Once an innovative industry gets big enough, the public will want it regulated and the largest companies will regulate it in such a way to stifle competition. It's certainly not a good thing.

The stock market, oil/gas, telecommunications are all examples of industries that started as innovative with no regulation. Once established, they were regulated. The stock market got consumer protections. Oil/gas faced environment & safety regulations. Telecommunications face many regulations around zoning and providing rural and not always profitable access. In return, this regulation raised the startup costs so significantly that only the pre-existing large companies could adapt and new entrants effectively ceased to exist.

It's a bit of a tradeoff. As consumers, we get some benefits and the company gets their existence & rent guaranteed indefinitely. The same will happen with digital advertising and the gig economy. The public is already getting tired of the wild west and calling for regulation. This regulation will be twisted and controlled by the companies it impacts to secure their future.

> It's a bit of a tradeoff. As consumers, we get some benefits and the company gets their existence & rent guaranteed indefinitely.

You have misunderstood regulatory capture. Regulatory capture occurs when the regulator puts the interests of those in the industry ahead of consumers.

> In return, this regulation raised the startup costs so significantly that only the pre-existing large companies could adapt and new entrants effectively ceased to exist.

This isn't regulatory capture. Regulatory capture is things like making laws that it is only possible for incumbents to be licensed to do specific jobs.

I don't think the world is that simple. Corporations will usually use some consumer benefit that gives them an even greater benefit. I think I'm literally saying the same thing as you but with some nuance added. Companies don't just own the regulators and force them to do whatever they want. Companies justify extremely self interested regulations through the guise of some consumer benefit.

For industries emerging from the innovation stage to the regulatory capture state, usually the first regulations increase the startup cost to some extremely high level that only the incumbents can support. Only in the advanced stages to governments grant monopolies to specific companies.

This might be true, but it's not what regulatory capture I'd talking about.

That's a very specific term with a specific meaning.

>Regulatory capture doesn't sound like a desirable thing

It's not a desirable thing for the public - plenty desirable for industry...

It worked out pretty well with Ajit Patel and the FCC... Or the CRTC and it's board members and adhoc meetings in bars/pubs with the telecom industry.

Ajit Pai right? Mr. Reese's Pieces Cup.

Sigh - my GoogleFu failed me.

you're using regulatory capture wrong: first comes regulation (pro consumer, for example), then comes regulatory capture (pro industry)

Crypto is what the real markets would look like if the SEC gave everyone the decade off, and it's the worst. There's a reason we have an SEC. 1929 all over again.

Regulation S needs to be extended to all crypto trading. [1]

[1] https://www.dorsey.com/~/media/files/newsresources/publicati...

Why this one in particular?

I misspoke a little bit, but to clarify: the regulatory regime in the US requires that US persons only trade US equities at SEC regulated brokerages. As such, broadly speaking, Americans cannot open brokerage accounts in foreign countries. Regulation S offers an exemption to this blanket rule, saying they're trading exclusively offshore in some circumstances that's ok too.

What I'm advocating is that all crypto trading by US persons be at SEC/CFTC/etc regulated exchanges.

Offshore appears to be where the chaos happens, see: Binance.

Not all cryptocurrencies are securities. They don't all fall within the purview of the SEC.

Bitcoin is not is a security. Neither is Etherium. I'm not an expert on this area but I don't believe the SEC has the power to regulate them, unless they stray into naughty territory.

New Initial Coin Offerings are something that it can evaluate and deem a security, requiring proper SEC listing as a security; but the existing established digital currencies are not securities and do not require trading through brokers just like trading cash (or exchanging one currency for another) does not require brokers.

The SEC hasn't declared them currencies but neither are they securities. They are assets that you can trade with anyone. That's my best understanding of the SEC's current stance.

Future ICOs could also being avoid classified as securities if the avoided matching the rules that the SEC uses to evaluate whether an offering is a security. There's a checklist of criteria, including whether the asset is being advertised as something that people can buy and expect to make money on.

Ethereum launched as a network where you could perform functional operations more complex than Bitcoin, and was a bit before the SEC got its evaluation rules together (from what I understand), and so may have slipped under the radar; but it certainly wasn't a pump-and-dump scheme like many other ICOs have been.

Ethereum definitely was, they just decided not to enforce the rules. Gensler I think recently re-iterated as much. And I don't really care the classification, I care that they're traded in a regulated venue. After all the CFTC has clear jurisdiction over ETH and BTC today.

> The SEC hasn't declared them currencies but neither are they securities.

They are commodities and fall under the purview of the CFTC, and are subject to their regulation.

> Ethereum launched as a network where you could perform functional operations more complex than Bitcoin, and was a bit before the SEC got its evaluation rules together (from what I understand), and so may have slipped under the radar; but it certainly wasn't a pump-and-dump scheme like many other ICOs have been.

Nope, they failed the Howey test which is the legal standard for determining whether something is a security. This was because they raised capital in their ICO. It was at the SECs discretion not to treat them as securities. Just because something isn't a pump-and-dump doesn't mean it's not a security. In fact, one would expect most securities not to be given it's kind of illegal. [1]

I know it is today considered a commodity, however, it was always a security as determined by the Howey test. The SEC elected not to treat it as one at its discretion.

[1] https://bitcoinist.com/secs-gary-gensler-crumbles-when-asked...

I think you are mistaken about Ethereum being classified as a security. This is just a quick Google search for the first result but:

> On Thursday, June 14, 2018, the U.S. Securities and Exchange Commission’s (SEC) Director of Corporate Finance, William Hinman (Hinman), announced that the commission would not be treating Ether or Bitcoin as securities. The SEC’s announcement is in line with the recent comments of SEC Chairman, Jay Clayton, who recently noted the difference between cryptocurrencies and digital tokens, saying that cryptocurrencies as “replacements for sovereign currencies” were not securities, while digital assets revolving around a venture are often securities.

https://cassels.com/insights/sec-declares-bitcoin-and-ether-....

Maybe you meant to say that it just escaped being classified as a security, but as far as I can tell it's a commodity at present.

> Maybe you meant to say that it just escaped being classified as a security, but as far as I can tell it's a commodity at present.

Indeed it is today considered a commodity. This is broadly what I was getting at, yes.

I encourage you to review the Howey test however as it is the framework ordinarily used for making this determination. [1]

[1] https://www.investopedia.com/terms/h/howey-test.asp

Doesn't permit Americans from trading securities overseas outside the watchful gaze of the SEC. IMO that's where the bulk of the insanity and manipulation happens.

Somewhat similar to how an Uber now costs what a cab did since they are no longer subsidizing the ride cost. And also now seems to have similarly low margins.

But, it did greatly improve the quality and availability of the service. Maybe crypto helps push banks the same direction.

I will only partially agree with you; mainly because indeed, that's what they're pitching crypto as - To be your own bank. But practically, most blockchains are replacing the inter-banking networks (like SWIFT) rather than the banks themselves, as you still need centralised entrypoints.

To save some comments; Yes, they do have the potentials to create their own closed-circle economic ecosystems, but for the retail banking services to work (eg overdrafts, mortgages etc) you will end-up with centralised players as these kind of services need to be backed by wealth (it's not a tech-issue).

2 of the biggest benefits I see are:

- leveling the playing field with an open interface that anyone can build on top of

- allowing true ownership of assets

> - allowing true ownership of assets

What is ownership and how is it true? This is philosophically on the deep end, as the evil powers can seize your wallet just as easily and you may have no (legal) recourse, https://xkcd.com/538/

Seriously if I own a traditional asset within the current legal system (e.g. stocks, bonds, real estate), "the system" can help me protect and enforce my ownership rights, if you're in good social standing. In crypto "the system" cannot help you as much.

However if you are in bad social standing, the system can seize the wallet or the stocks easily.

Actually they are still blockchains in their own ecosystem. The only one who bridges blockchains between old and new ledgers is Quant including replacing SWIFT.

Indeed.

The uncertainty inherent in the universe we understand today and in all human endeavors is difficult to contend with in code.

In the main, contracts serve to reduce uncertainty and to attempt to manage uncertainty that can't or shouldn't be reduced. Of necessity, contract law has developed a myriad of principles and rules in service of this aim. However, these principles and rules are themselves predominantly characterized by uncertainty. See, for example, the implied covenant of good faith and fair dealing.[0]

Humility — and a corollary respect for our ancestors — is a defining characteristic of my own study of the law.

---

[0] https://en.wikipedia.org/wiki/Good_faith_(law)

The amount of regulation that any particular industry has is institutional knowledge about all of the failures and shady practices that have previously occurred and would otherwise be forgotten:

* Banks

* Finance

* Insurance

* Building and fire codes

* Pharma

* Travel (airlines, trucks, and cars)

* Energy

This is a very closed minded view. You're basically saying that every inefficiency in the current financial system is justified and we shouldn't try and change them?

Of course we should, but the solution is primarily politics, not technology.

As if thefts never occur in legacy banking. Here's a SWIFT network hack that successfully stole $81 million from the central bank of Bangladesh:

https://en.wikipedia.org/wiki/Bangladesh_Bank_robbery

At a lower level, mortgage wire fraud is a serious problem in real estate closings, and once it happens it's very difficult to get your money back:

https://www.rocketmortgage.com/learn/mortgage-wire-fraud

81 million out of ~950 million attempted, then 18 of the 81 later recovered.

So it was originally about the same scale as this one.

Not all crypto currencies are the same.

Ethereum has had lots of these hacks, due to bugs in the smart contracts provided.

You don't see these types of (protocol level) hacks in bitcoin, litecoin, or monero.

> Ethereum has had lots of these hacks, due to bugs in the smart contracts provided.

Code is law, bro. These aren't hacks or bugs. They are inert chunks of code that all play by. Even "bugs" in the execution engine are fair game when code is law...

The fine folks who carefully investigated the DAO smart contract and transferred lots of its value to their possession are just as entitled to that wealth as the people who possessed it in the first place. There was no hacking and no thievery. The smart contract was executing exactly as it was written. I argue the only people playing in bad faith were the makers of ethereum and the DAO, who rolled back the blockchain and stole the funds back into their hands.

Now this argument sounds silly, but I stand by it. Code is law is a horrible idea. But if you want to live in that world... all "bugs" are just as much of the "law" as the stuff that isn't a "bug".

The Ethereum core devs didn't unilaterally decide to roll back the blockchain, that's not how the governance system works. The majority of the community decided to return the funds, the dissenters left and formed Ethereum Classic. The community decides what is law, not the code or the devs.

Next they’ll learn why we have this thing called democracy and how it’s used to enact laws and oversee enforcement.

Wait, what is crypto about again? I can’t figure it out.

These days it is about anything can meme and get people to make fomo-driven buys of crypto at spot prices.

It used to be about decentralized peer-to-peer money that is highly resistant to censorship.

Then that got blown to bit because satoshi didn’t possess enough foresight to realize that one day it will get owned by a handful of people who will leverage the artificial scarcity to conduct endless pump-and-dumps to enrich themselves at the expense of the poor.

How do you think Satoshi would have reacted to the current state of affairs? You think he would see this “cryptocurrency” space as the path to solving the problem of money and corruption in finance?

It’s almost like the finance system we have today is the result of complex adaptation. It’s not perfect, but it seems less corrupt, more stable, more approachable, and more useful than the crypto space.

Definitely. Cryptocurrency had a chance to be very useful (to society) in a niche but then it blew up in scope. Now, everyone seems to have missed the forest for the trees.

You can’t fix fundamental problems in modern economics by fixating on the properties of money which can be altered (presumably for the better) through technology?

The governance process is essentially democratic, it's been like that since the beginning. Many, probably most, of the strict "code is law" are more aligned with bitcoin and left after the DAO fork.

You and I have very different ideas about the definition of democratic.

Community == mob rule.

Post like this are why I read this board.

Going to think about this while I walk. That is a tough argument to counter.

No argument..bro.

Still, last time they called it a bug and rolled back the chain.

"Bugs are law" :))

These aren't protocol level hacks. These hacks exploit logic flaws in the smart contracts.

Apparently, this wasn't a smart contract hack:

https://twitter.com/Mudit__Gupta/status/1425115177771405312

Ah, the old "single-key multisig".

It was a multisig.

It's not multisig if keys_required=1.

Doesn't the key compromise make it even less of a protocol hack?

Which are enforced by the protocol.

If an AWS hosted site gets SQL injected who is to blame?

Russia? /s

If your solution blindly trusts buggy user-space code due to its construction, is it not to blame?

Ethereum actually offers interesting features and possibilities as well as being a currency. Bitcoin, litecoin and especially monero are only useful when you want to spend money in a way a government doesn't want you too.

Solutions for problems that don't exist. While opening up a huge attack surface.

Blockchains don't need to be turing complete, for reasons like the contents of this article.

Not only tearing down, but it also introduce a new system as an exchange. That is innovation. There will be cons and challenges, but those will evolve crypto even further

It is amazing to me how dilgently people who criticise cryptocurrency are attacked when they comment about it online. I think cryptocurrency is a story of how easily the work of idealistic software authors is co-opted to support the motives of people with more selfish intentions. One could argue its a microcosm of the problems with the internet and so-called "tech industry" as a whole.

Meanwhile, Citibank goes around showing you why these rules can still leave you a sucker.

More calls for crypto regulation in 3..2..1..