2) Beyond censorship, one needs safety. It may not be censored, but its certainly traceable, so how useful is the lack of censorship without anonymity?
3) If we take it that it solves this (both 1 and 2), then moving on to the other part of the question, how does it solve it better than any other distributed infrastructure? You could build a censorship resistant payment system without the insanely excessive hoarding of base wealth (like the gold mining analogy in the payment article), and without the insane environmental impact.
4) Let's say it solves 1, and 2, but we can't do better and I am wrong in 3. Is this problem worth the massive environmental cost to solve?
No offense, but that's a very egocentric view. You may be (probably) a middle/upper-class westerner who has never encountered censorship, but I assure you there are billions (literally) of people on the planet for whom censorship is an issue.
Wouldn't it make more sense to use fiat from elsewhere like EUR or USD? There's probably already a decent stream of it into the country (from exporters and remote workers) so exchange could be done internally, lessening the above problem. Its value is far more stable than any crypto, it can actually be used in foreign trade without lossy conversions, it's just as easy to use, you can get bank accounts, etc.
I'm sure there are local traders savvy enough to get a +30% premium in local cash which they then immediately exchange for more durable assets.
So international traders wouldn't but national ones that know the country, they would.
If I could sell my crypto for +30% and then immediately use that money to buy gift cards at a store (just brainstorming here) and could put those online and redeem them and cash out with a 10% slippage, allowing me to keep +20%. Why wouldn't I do it?
I don't know such a method since I'm Western-European. But if I'd be from Venezuela, then I'd know to what extent a plan like this is feasible among: friends, family and perhaps even certain strangers.
>>Wouldn't it make more sense to use fiat from elsewhere like EUR or USD?
That's a good question. The only use-case I can see where cryptocurrencies are a better fit is when digital/international payments need to be made. Crypto allows that without any formal approval, from the state, for a USD/EUR supporting payments/e-wallet/banking firm to operate in that country.
Also international waters.
Also digital goods.
However it won't be soon. It's financial infrastructure - just different from the ordinary. And that takes decades to build. Cards were accepted at only few establishments at first too.
So is the view that PayPal/Zille will block their transactions.
> billions of people for whom censorship is an issue I would love to read a source on that. PayPal/Venmo isn’t the de facto exchange in the world and many newly industrialised countries have robust p2p payment systems like mPesa/UPI.
2) Not all currencies have the privacy implications of Bitcoin.
3) Not all currencies have the inherent environmental cost that 'proof of work' currencies like Bitcoin do. Is preventing the hoarding of wealth really a goal here?
A key tenet of crypto is that you cannot, in fact, do that. To make the system secure it needs to make the people running it rich or they wouldn't bother. This is debated, of course, but so far blockchains that don't have "number go up" have been stillborn.
I don't think this is even debatable anymore. We were promised decentralization and transaction costs at a fraction of traditional payments. Instead we have astronomical transaction/gas fees and effective centralization around a different cast of characters.
Of course there are positives. For instance, if you are sending large sums, it can be cost-effective. But, this is far from the world of micropayments and fractional penny transaction costs, and that money is going somewhere.
Seems pretty clear that we've just dislocated some percentage of the financial incumbents to create new ones. And, even the old incumbents are buying back in. Reminds me of the early promise of the Internet itself giving way to corporate overlords and capital.
I'm not anti-crypto, but it is kind of silly to keep pretending it's close to or even on track to realizing its early promise.
And yet again a bunch of tech-enthusiasts are forced to face that fact that their breakthrough technology does not infact lead to the techno-utopia they imagined, and instead is heavily directed by human factors, and leveraged/exploited by the same types of systems and entities that had the most power/influence prior to it.
Can't wait till we start again on this cycle with widely deployed machine learning systems in about 15 years. The same exact arguments of "it's just a technology." "It doesn't matter how it will be used in society." "By nature it's more [democratic/egalatarian/...]" "It will help to remove people problems by being tech".
Which will yet again change to: "Wait what?" "Not like that." "It's not supposed to be used like that". "It's been corrupted and taken over by X. Who could've foreseen this??"
If you're designing tech without designing how it will interact with society, you're just designing foot-guns. Hopefully at somepoint as an industry we'll get past this stage from teenage "look what I can do isn't this cool" to resonsible adult "Yes I have the freedome/ability to do this, and here's how I'll do it responsibly."
However, Ethereum is moving to proof-of-stake, so this won't be relevant once that transition is complete.
2. If the centralized legal system is needed, then what's the point? The immutable crypto ledger say GO, the people with guns say NO. Which one's right?
Said in a different way to do all financial transactions on the blockchain would use a lot more energy then it currently does.
140TWh out of 170000TWh is about 0.8%. relative impact is bigger than 0.08%. Coal is 36% of the power mix. Under the assumption that most bitcoin mining happens connected to the grid (seems reasonable) and that these grids contain coal powerplants (also reasonable with the exception of Iceland), that 0.08% translates to 0.22% of global coal based emissions. On a global scale, being responsible for 1/500th is a lot (for me at least)
the numbers are more relatable when looking at absolute impact. Assuming a average coal power plant of 600MW (you can find bigger, but this is a representative plant near me[1]). That’s 5TWh/yr per plant. Bitcoin then represents 28 of such coal powerplants running at 100% capacity 24/7. That - to me - seems like a massive amount of CO2 for a niche application.
And if I read your source correctly, that’s just bitcoin
1: https://en.wikipedia.org/wiki/Amercentrale
Coal is about 36%
Paper fiat is much better in this regard as bills are much more difficult to trace and taint. The infrastructure isn't in place to comprehensively enforce serial tracking. More importantly, there are usually laws that guarantee the fungibility of bills, which means it's usually very difficult as a legal matter to force a current, honest holder of a circulating bill to relinquish it. Such laws exist precisely because of the difficulty of cheaply tracking the provenance of bills.
A large country like the U.S. could easily mandate verification by its citizens and businesses of all bitcoin transactions against a central registry. Then in a blink of an eye it could begin flagging bitcoins the way car VINs can be flagged.
Sure, you can send it to people not subject to the mandate or otherwise willing to risk accepting it, but the value of that bitcoin is now diminished as compared to the rest of them because the market will be smaller. Transparency means they're not perfectly fungible, yet perfect fungibility is what you need for censorship resistance. To avoid the cost of receiving coins from illegal activity there'll be various escrow and insurance schemes which will make bitcoin transactions even less efficient than they currently are.
The flip-side, however, is that for law abiding people without privacy concerns, bitcoin might prove an excellent asset store. Nobody could steal it from you, at least not without fooling the legal system and/or central authorities, which [ideally] would require alot of non-anonymous, conspicuous activity. Which is why NFTs are enticing. Relatedly, NFTs make no sense without a centralized, easily queryable database linking legal ownership of an asset to the NFT. But, ironically, it would be the central database, not the NFT itself, that truly establishes ownership. Similar to how land title registries, not occupation of a piece of real estate or chain of title, establish rightful ownership in jurisdictions with such registries.
It is in China, since 2013.[1] ATMs which do "cash recycling", giving out bills they took in earlier, have the hardware for it, because they have to do a detailed scan of incoming bills for counterfeits and wear anyway.
[1] https://hkmb.hktdc.com/en/1X09V6YK/hktdc-research/ATMs-to-pr...
The basic question is whether you can force forfeiture of an innocent receiver of a tainted bill. You can always legally do this, but it diminishes the utility of the medium--the very purpose of currency, afterall, is to provide an efficient substitute for barter, and the greater the fungibility the greater the efficiency. Is the benefit in suppressing criminal activity worth the cost imposed on economic activity? The more potential innocent, protected receivers, the greater potential for effective money laundering, the less effectively you can suppress illegal activity.
The cost is a function of determining provenance at the point of a transaction, and the benefit a function of degree of ubiquity. This cost is most minimal when all transactions already occur electronically, online, and in real-time, as with Bitcoin. Similarly, it's precisely such a system where you can impose the burden most ubiquitously--literally every individual and every transaction subject to your legal authority without very much technical effort. So it's with something like Bitcoin where you're most likely to see heavy reliance on tracing and tainting because shifting the burden onto innocent receivers imposes the least cost to them individually and to the transaction system generally. By contrast, paper fiat is the place you're least likely to see this strictly employed, so long as it remains a substantial medium for exchange. (Rather, the tracing is most useful for catching criminals, not passively diminishing their ability to utilize the transactional system itself.)
AFAIU, not only does China have systems in place to more ubiquitously trace bills at certain points in the system, they're also actively encouraging (i.e. forcing) a shift to electronic payment platforms. The details of precisely what they're doing, when, and how I don't know much about. But the basic principles and concepts are clear, making the trajectory of what they need to accomplish easy to predict.
Especially in jurisdictions with long established, legally mandated fungibility guarantees regarding paper fiat, many Bitcoin advocates are unwittingly ushering in the future they claim to fear most.
Depends on the jurisdiction. US, probably. France, probably not.
This cost is most minimal when all transactions already occur electronically
Tracking bills through ATMs is picking up as ATMs add "recycling", where received bills can later be dispensed to another customer. That requires much better scanning of bills. Serial number recording is a by-product of counterfeit detection and bill-damage detection. So the hardware and software come standard.
> Mixers are of little consequence, just like money laundering schemes aren't a magical loophole around laws regulating transactions and tracking asset ownership.
The key is understanding that governments don’t just say “oh, it involves computers, guess we have to give up”. Once something grows to the point where it’s worth caring about, blockchains are easily censored as we’ve seen in e.g. China. It’s not just that they’re a complex high-volume network stream which is easily blocked but, more importantly, that most of what people want to do happens in the real world where those governments control things.
If businesses are required to report their customers, a blockchain doesn’t help you because the auditors are going put them out of business if they don’t comply.
If you are linked to a mixer or anonymous coin network, congratulations, you’re now at risk of being charged as an accomplice for the worst crime committed using that system – better hope you can prove and they care that you weren’t knowingly helping them! (Are you sure that service isn’t run by the police so you can pay them to make a confession?)
All of this is fully retroactive, too: you might think you’ve evaded attention but that changes when someone you transacted with turns over their transaction history. How many of the people you’ve transacted with are you willing to go to jail for rather than testify against them? If the government published a list of tainted addresses involved in illegal activity, it’s going to be quite expensive to ignore it since whoever does do is taking on both the risk of prosecution and a reduced pool of potential buyers.
All of those things cut into legitimate usage: most people have alternatives so if a blockchain isn’t cheaper people aren’t going to touch it if it involves legal risks.
So it isn't perfect yet, but still a lot better than any other approach.
The argument "but it is against the law" (like money laundering) isn't really a good argument against an attempt to hedge against unfair governmental interventions.
You can't. You would need to control 100% of miners.
You would need to control or force 100% of exchanges, 100% of merchants, in fact 100% of all participants in the Bitcoin network to reject tainted coins. See how this can't work?
The tainted coins remain usable everywhere and anywhere that doesn't track tainted coins. The owner of such coins only has to find a SINGLE such party to be able to launder the coins.
And then what? The poor shmuck who wasn't aware they received tainted coins, eg. an online store in Oceania, would get scolded by The Tainted Coins Authority who would maybe decide, after investigation, he was a victim, and would "untaint" the coins.
Multiply these incidents by a thousand per day. Unworkable.
Who funds all this effort?
And who actually would be "The Tainted Coins Authority"? It sounds just like a centralized thing that pretty much all Bitcoin exchanges & participants are against.
If the government passes a law that says nobody is allowed to transfer a US $100 note with serial 123-456-789, then if it catches you transferring the note, it can penalize you. It doesn't need to void the transfer that changed possession as technically defined by the system. It needn't care about what happens to that particular note, it only cares about your behavior. And through controlling your behavior (as all laws do, good and bad), it can ultimately effect how the system is used, even the parts not directly under its control or authority.
For a variety of reasons it's very cost prohibitive to enforce such a system for paper fiat. But most of those costs disappear in a transactional system that is inherently electronic, online, and real-time. There are still costs--like needing to maintain and make available a blacklist, and compliance costs for both users and legal authority--but they're still unfathomably cheaper than requiring and enforcing verification when passing a bill to a clerk at a grocery store.
FWIW, forgery of paper currency also imposes costs. The street value of a US $100 bill is actually worth slightly less than 5 x $20 bills. But the cost is very small because enforcement is difficult. A bank may refuse deposit of a forged note, but a store can almost as easily pass it on directly to another payee as when it received it. The more places you can easily utilize and enforce verification, then the more difficult it is to pass on forged bills, diminishing the value of forging bills in the first place. And this happens even if forged bills can be and are still exchanged among some subset of people. Unsurprisingly, this ease of verification is precisely what makes Bitcoin so seemingly useful. You can't forge Bitcoin because provenance is easy (i.e. relatively cheap) to track and enforce. But fundamentally that ease of identification cuts both ways--easy to detect forgery, but even easier to match a Bitcoin against a blacklist registry. And if its cheap for you to make the match, then there's less inherent cost to burdening someone with a legal mandate to make that verification. (And it's even easier to verify compliance because the government could regularly taint a Bitcoin, test passing it on, and track it as it goes through the system. Everybody who accepts it is busted, at least up to the last entity that didn't verify the legal identity of a payee, but you can impose even costlier fines in that case, which we actually do today--ever apply for a mortgage recently?)
You can obviously still trade in them off platform but a lot of value is lost due to that.
No anonymity, means sure you are free to transfer, but the gov is free to track you down, and if you live in an anti crypto gov, that means entering or exiting the crypto universe is very difficult.
You say $100 or $100 million, but this is a large failure of Bitcoin. You are tying it's value to fiat. That compounds on my previous point, if all governments crack down on crypto, would it actually have any value? If tomorrow, all exchanges were shut down, the truth is, Bitcoin would be dead.
Lastly, the largest flaw of Bitcoin is it's failures to scale. That means that in the golden crypto universe that every follower dreams of, every text, transaction, breath, thought, all exists on the blockchain, Bitcoin inevitably collapses. You have the problem of both the blockchain size has grown to such a size that the barrier to entry for nodes becomes too large, as well as the failure for Bitcoin to handle any rate of transactions/seconds to handle the real world.
Which puts cryptocurrency at a minimal advantage over other currencies: it's easier to crack down on currencies whch have centralized control.
> in the golden crypto universe that every follower dreams of, every text, transaction, breath, thought, all exists on the blockchain
Bitcoin is necessarily, explicitly inefficient, by virtue of being an immutable append-only log. A first-year CS student with a week of Data Structures and Algorithms classes could tell you that.
And it's not even being widely used as a payment system yet - at that point the transaction volume would explode, and the computational and storage inefficiency would become even more salient issues than they are now.
I never hold more than leftovers-worth of Bitcoin, so I'm not tied up in its success financially, but it has been a great way to support people who have been oppressed governments and corporations, many of whom who have never even been accused of a crime.
Wouldn't this effectively make it impossible to exchange bitcoin for currency rendering it utterly useless?
This is not completely true. There are middleman and in bitcoin world they are called miners. They are the ones that need to add your transaction to a block and who you need to pay so that they do that. Control the miners and you can censor all you want.
Is a router a middleman on the internet? No. Same thing.
No it does not.
> Is a router a middleman on the internet?
If that router is controlled by a third party, then yes, a router(entity owning that router) is in fact a middleman.
If you are buying from coinbase like most Americans you are forced to provide identity to buy, sell or receive over various levels. Same on the other exchanges. Exchanges do freeze accounts.
How does a regular person who doesn't mine get around these same controls?
The reason this seems useless is that most of the time you can trust a third party, but sometimes (e.g. paying for illegal stuff) you can't.
Middlemen are useful, as annoying as they may be. I’d love to be proven wrong here.
Devil's advocate here: How is a state not going to see that as a bug not a feature? Do you think that governments will let the loophole stand and grow? Won't there inevitably be a choice eventually: get regulation and oversight like any other mass payment method, or be banned outright, and driven to the margins of society?
If you were adding a hypothetical transaction that would heavily injure a majority of miners (think shifting a huge number of the Satoshi owned coins to the US Gov) do you think they would still happily process it?
This entirely depends on your point of view. What you call a problem, I call a feature. I do not want the monetary system I'm apart of supporting Organised Crime, Terrorism, etc. Things like Sanctions, Unexplained Wealth Orders, Proceeds of Crime, suspicious transactions etc.. Are there to protect me.
At best, I would say Bitcoin is resistant to unjust-censorship. However the only real instance I'm aware of that I would call unjust is Visa refusing to accept WikiLeaks donations.
This is true of all significant monetary systems. It's also notable that btc is not anonymous, so leave as much as (or more) of a papertrail.
> the only real instance I'm aware of that I would call unjust is Visa refusing to accept WikiLeaks donations
What about the practise of Civil forfeiture?
As I say, it depends on your point of view. There are proponents and critics of Civil Forfeiture but as an Englishman I do not have the Cultural/Societal understanding of America to form my own view on the subject that doesn't directly affect me.
That's not a feature of a particular monetary system, it's a US-specific legal doctrine governing any kind of property.
It's not relevant that this is US-specific, because this is an example, which must be based somewhere.
I'd imagine that includes BTC too
That cryptocurrencies make money more private and easier to move is not really a benefit at all.
Except for this bit though. Eventually it too gets regulated and has been.
people are just hopes that things will be good... do you really know who built the bitcoin? is there any person you can point ? no? then do you really think that people are smart, decisive enough to keep this kind of systems up in spite of their loss of monry or etc.
do you really think that there ls no trust issue with the bitcoin? let say "some" guy "one" day finds a way to steal your wallet ... can you find a way to make it safe as it is with the current banking system? think about even if your credit card used by scammers you still have some kind of safety... banking systems are not there to be perfect but here to secure people's ( who are not thst smart ) money safe...
lastly censorship rsistant is my ear! it is clear that you have never lived in an opressed country..
Easy: it's censorship-resistant. You send a transaction and no middleman, no financial organization, no one can prevent you from sending it. You can transact with anyone, anywhere, 24/7/365, however much you want, $100 or $100 million. No other system does this.
On the other hand, with legacy systems, Paypal can freeze your account, Zelle limits your sends to $2500/month, a credit card company can deny your transaction, a bank chooses to not process your international wires on "weekends and holidays", etc. Limits everywhere.