The problem is that irreversible transactions are just bad. There is no way around it. Crypto is broken at the most fundamental level.

This kind of fuckup could not happen with regular banking and if you somehow did mess up you can almost always have your money recovered. There is no way to just black hole it never to be seen again.

Some cryptocurrencies make it impossible to black hole funds by requiring the recipient to prove they can spend the money they're about to receive before they receive it. Needless to say, these cryptocurrencies do not feature smart contracts.

Afaik bank transactions are also non-reversible. I don't think that is the main issue, although certainly it is a problem.

If it bothers you, you could probably also go through some service that insures your transactions and gives you a degree of reversibility.

I am unaware of any country where this is true. Many countries have limits on how / when transactions can be recovered but AFAIK there is nowhere where bank transfers are absolutely final with no recourse.

In my country (Germany) afaik if you transfer money, the bank is not guaranteed to be able to get it back (if it has already processed it). There are other forms, for example other people can withdraw from your account and you can contest it within a certain time frame.

A service...like...a bank ?!?

Sure, if it is important to you? But I think there are also smart contracts/escrow services that require you to do additional things besides pushing "send".

The classic is for a trade, and the receiver has to confirm they received the stuff before the money is released.

Afaik "traditional" companies like ebay also struggle with that kind of thing.

The problem is, they have a fundamentally simple concept that solved the double spend and trust problems for a decentralized (sort of currency).

That part we kind of figured out, maybe it's ok, albeit super slow and power intensive, but let's put that aside for a while.

But is there a solid mathematical and cryptographical basis for everything else layered on top? I don't get that impression, it just looks like they're just plugging gaping holes because there's a gold rush to be continued!

If they're just rebuilding a crappier version of the global financial system, there's no point in the rest of us following them.

The financial system cannot run on blockchain technology, even if the technology worked well. This is because "decentralisation" requires blockchain assets to be "unconfiscable", but financing is only feasible if the assets are "confiscable" (otherwise the borrower can walk away with the money and suffer no consequences).

That doesn't seem to make sense. Don't people usually borrow money to spend it (for example to buy a house or finance their startup)? So in most cases the borrowed money is also gone and at most you can confiscate the collateral (for example the house). That is still possible with crypto.

In decentralised finance the legal system, which in conventional finance has the power to seize the borrower's assets in the event of default, is replaced with "dumb contracts", but dumb contracts don't have such a power. Financing is basically impossible with decentralised finance.

Just because finance is decentralized doesn't mean the law doesn't still apply. I don't know where you get that idea from. Also not sure what you mean by "dumb contracts" - crypto contracts can contain code on top of text, whereas traditional contracts can only contain text. So obviously the crypto contracts are strictly superior.

The counter-party to both the borrower and the lender is a dumb contract. A dumb contract is not a legal person, and therefore it cannot initiate legal action, nor legal action can be initiated against it. Furthermore, there's no legal agreement between the dumb contract and its counter-parties, since, again, a dumb contract doesn't have a legal personality which is required to enter into legally-binding agreements.

Depends on the service, but I would think (ianal) if somebody publishes a smart contract and says "you can buy my house via this smart contract", then that person is the counter party, not the smart contract.

Of course you can burn your crypto and send it so some random contract. You can also take traditional money, go to the woods and burn it.

If the borrower and the lender sign a loan agreement with an intermediary, or among themselves, then sure, but this is conventional finance, not decentralised finance. In this situation the dumb contract becomes redundant. It doesn't do anything.

In the case of real estate, it replaces the solicitor. And it facilitates the money transfer, so it also replaces the bank.

No. A dumb contract doesn't replace a solicitor and it doesn't replace a bank. You're just saying things now.

That's why you use smart contracts. You are just unwilling to consider any possibility that crypto could be useful.

You use a dumb contract in a situation where otherwise you'd need a solicitor? Please, explain.

In my country at least, the government charges lots of money (several thousands) to change ownership of real estate in a government managed ledger. That obviously could be replaced by crypto, which (in its basic form) is a distributed ledger. Ownership can be proven via the blockchain.

> That obviously could be replaced by crypto

Could.

So far you've been using the present tense, "the [dumb] contract replaces the solicitor", or such.

Obviously it doesn't. Or could you tell me in which countries in the world you won't, at present, have to pay the government to register real estate ownership changes in its ledger just because you paid the seller in a crypto-"currency"?

> That obviously could be replaced by crypto

It's not obvious at all that it could be replaced by crypto.

I went to some workshops when Ethereum was developed (sadly I decided against investing in the ICO because some aspects didn't convince me or I didn't understand them well enough). Even back then the discussion was that they were trying to do too much and it would be difficult to make it work reliably. Bitcoin deliberately chose a more conservative approach. Bitcoin also actually has a scripting language and allows for smart contracts, but they were much slower with unlocking its features for real. (I don't know the current state of it).

Just to say, it really doesn't make sense to judge "crypto" by the state of Ethereum. There are different philosophies, different approaches, different people.

Domains where the basics are still being actively researched should never be part of the backbone of human society, though.

Maybe they'll find solutions. Cool, let them put those solutions in practice in 2040 when all the bugs have been worked out.

Frankly that is the best case scenario for crypto. It's similar to the dot com bubble in 1999 actually, it's 20 years later and the internet is finally somewhat useful and intergrated into our lives. Originally it was just a bubble inflated with ad revenue inflated with investor money

Yeah, but the web was instantly useful for a huge array of legitimate uses.

It was never a solution in search of a problem.

In 1999 the tech wasn't there but everyone could see where it was going, like all investments, it was a matter of timing.

Crypto is still at the fundamental research phase and we don't even have consensus that it does more good than bad, yet.

It does good when your bank accounts get shut down, as happened to Wikileaks for example.

That's a super niche application, not a mass market use.

And yes, I know about the supposed use for people in countries with unstable regimes but I'm not convinced at the moment. Plus that use case, being that of people generally having low disposable incomes (barring China) absolutely doesn't justify the market value of crypto at the moment.

Inflation hits the masses, or in general money supply manipulation schemes. In the last few weeks, markets tanked just because the FEDs announced they plan to increase interest rates. Is that really how we want to go on?

Cryptocurrencies are only used for speculation.

That's your best argument against regular currencies? That they're being manipulated, too? :-)

Bitcoin is not being manipulated. You may be confusing it with Bitcoin markets and Bitcoin trading. Nobody can conjure Bitcoin out of thin air or manipulate interest rates on it.

> Nobody can conjure Bitcoin out of thin air

That's exactly what Bitcoin miners do: They take pure thin air and convert it into noxious power plant fumes. Pure air is what the odiferous Bitcoin is conjured out of.

Bitcoin has been working pretty well for years now.

Working well for what? It's useless as currency.

Working well at letting people keep and transfer crypto coins.

Cabbage patch dolls and pet rocks also work very well at letting people keep and transfer cabbage patch dolls and pet rocks, but that doesn't make cabbage patch dolls and pet rocks a sensible base for the economy. Crypto-"currency" proponents sound pretty much like the folks who used to think cabbage patch dolls and pet rocks would be the future currency.

It seems to me the philosophical mistake is that banking and financial system regulations came about randomly. As if these are just unintended software bugs. As if there was no reason for the regulations.

So all this complexity to get around regulations but you are going to run into the reasons this regulation came about at some scale.

I'm not convinced the government regulations around finance are a net win. Might often just be wishful thinking by politicians, just decree things have to be in some specific way, rather than tackling the root causes for issues.