It is, and I've had a nagging suspicion for a while now that this is the flaw at the heart of cryptocurrency and related phenomena. It's all built on the premise that the answer to "we can't trust existing institutions" is to try and design systems that don't require us to have trust in any actor, but as Sharlin noted, it's difficult to impossible to do anything transactional that doesn't require some level of trust. Perhaps "trust no one" is not actually the right solution to the problem.

It's the same as open source software, most people don't personally look at the source code of the Linux Kernel, but they trust it more than Windows because they know many thousands of others have looked at it and haven't found issues.

Open systems lead to less trust required, because anyone can verify and report issues. Open finance leads to less trust required because anyone can verify and report issues with the smart contracts.

> haven't found issues

No, they have.

https://www.cvedetails.com/vulnerability-list.php?vendor_id=...

That's just less important than running free software to some people. For better or worse.

> anyone can verify and report issues with the smart contracts.

.. anyone who finds an issue in a smart contract can just steal it. Potentially all of it. Pseudonymously.

Don't the smart contract systems not allow patching, so there's no point in reporting issues?

Many are upgradeable, though it's the common libraries that people use that matter. The Ethereum ones have been battle hardened over years of exploits so you can use them just like you can build on common Unix primitives to avoid mistakes in new projects.

The real problem is that if you don't trust the existing system, the normal solution is to patronize a different one. Go trust a bank in Japan or Switzerland or India or Brazil, which has a decent enough reputation but does things differently.

But the existing system latches onto any point of centralization in any kind of alternative and uses it to impose the same problematic constraints of the existing system that the alternative was intended to redress. Hence the desire for decentralization. The lack of those pressure points.

It would work well enough if we would just have multiple banking systems and let them compete with each other without international pressure to conform to a uniform set of defects, but that isn't what we have. So how do we fix that, if not with this?

That's the core semantic confusion at the heart of this issue. Cryptocurrency protocols eliminated the need for trust for cryptocurrency transactions. So you can exchange BTC or ETH all day and night and always know who you're paying and no one can get in the middle and mess that up.

But it does nothing for transactions outside of that world. The core idea behind the "DeFi economy" is making things happen in the real world (by financing business ideas, buying 230 year old documents, etc...). And that part requires that the crypto resources be given to some kind of real actor in the real world who's going to do something real with them.

And those actors are people, and they cheat. Hence the new term of art "rugging". You can cheat people in the crypto world, in some sense, more easily than you can regular consumers precisely because they got fooled into thinking they didn't need to trust you.

> I thought the whole point was to be trustless?

No, it is not trustless, it simply shifts trust from central authorities to more nebulous entities such as anonymous developers, shady mining cartels, unregulated exchanges, and even yourself to not lose your private keys. Which you consider to be better is essentially a political decision.

The obvious solution is to have both and then make sure that people understand what they're getting into.

Traditional banks should exist and be regulated and insured etc. People with a low risk tolerance should be encouraged to use them.

People with a higher risk tolerance or who are trying to do something innovative or disruptive should have a system that works for them too. People with a low risk tolerance are not required to use it. People with a high risk tolerance will be exposed to a high risk, as requested.

This is a really gloomy look on "distributed".

Having trust in a system is different from trusting individual actors. You have to trust something, there’s no way around it.

It may be technically different, but it’s no different at all for the average consumer who hasn’t done a threat analysis.

In general, one shouldn't "invest" in things one doesn't understand very well.

A fairly meaningless statement in reality, since it’s not how most people behave.

Well, what is there to do about it? A fool and their money are soon parted. Must we coddle them at the expense of everyone else?

Just like with any kind of criminal, stopping deceptive crypto scammers isn’t ‘coddling’ people at the expense of everyone else.

Society relies on trust. The crypto dream that it can be trustless is just a way to cheat people.

> Just like with any kind of criminal, stopping deceptive crypto scammers isn’t ‘coddling’ people at the expense of everyone else.

It is if you're trying to stop these scams by putting greater constraints on, say, the fiat on- and off-ramps.

I mean, how exactly are you going to stop the average investor in doing something dumb like dumping their money into a shady project, without placing additional hurdles on everyone else? The whole point is that you're allowed to move, manage, and spend your assets as you see fit, without any government's ability to freeze your assets or block you from accessing financial services via sanctions -- for better or for worse, of course. And yes, the freedom to manage your assets as you see fit includes the freedom to make stupid financial decisions -- as you see fit.

> The whole point is that you're allowed to move, manage, and spend your assets as you see fit, without any government's ability to freeze your assets or block you from accessing financial services via sanctions

That’s a selling point advanced by crypto advocates.

Frankly, it’s ok to make that point. What is not ok is pretending that crypto isn’t also a high risk environment full of scams.

I’m not trying to police anything. I can’t stop crypto advocates claiming it’s a good place for regular people to invest.

> What is not ok is pretending that crypto isn’t also a high risk environment full of scams.

I don't pretend that at all. Like I've said elsewhere in this thread, "caveat emptor." I am sorry if others have told you that is not the case about crypto. Unfortunately, I cannot do anything about them.

> I’m not trying to police anything. I can’t stop crypto advocates claiming it’s a good place for regular people to invest.

Then we are in full agreement. As I said elsewhere, the average Joe who cannot remember their own passwords should not be using crypto, IMO. With freedom comes the freedom to shoot yourself in the foot, and unless you understand basic digital safety procedures, you are best off not shooting yourself in the foot.

> As I said elsewhere, the average Joe who cannot remember their own passwords should not be using crypto

Yes, I agree with you on this.

However this is far from the dominant narrative coming from crypto advocates. That is all I am objecting to.