> In other words, you can build centralization on top of decentralization, but the opposite is not true.
In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core.
So, in a way, a decentralised system is being built on top of a centralised system.
I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
Why would offering an API mean that the service is decentralised? It doesn't - it just lets you get some data in or out. You are still beholden to a single party that can cut you off at a moments notice.
> I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
Not true at all. Bitcoin has a Layer 2 solution where transactions are done off-chain in a non-custodial manner. Those don't need to be recorded on the ledger, only the settlement is (if you decide you do not wish to participate any longer).
Not in the UK, nor in Europe. Don't project your (presumably US) failed institutions onto the rest of us.
And even if your account doesn't get closed immediately you are still subjected to invasive KYC procedures, even if you haven't done anything wrong. Failure to comply of course leads to your account being closed.
[1] https://www.vice.com/en/article/pak7wb/exclusive-secret-blac...
PS. I am in the EU. What kind of argument is that, anyway?
A _standardized_ API would allow providers and consumers a choice, which distributes the power to some degree and can encourage the parties to make choices that support the entire ecosystem rather than just their own ends.
I don't think you can though, not without passing an expensive certification process, right?
I mention this because as a German, the EU Open Banking initiative made my life worse. Banks are phasing out actually open FinTS standard, for which their are a pletora of Open Source libraries, and many apps by independent developers that were able to connect to any bank. /I/ was actually able to start up a shell and pull data from my bank accounts. This does not seem to be the case with Open Banking, where I have to pay a service provider that has passed certification to allow me to access my bank data.
This is an important aspect of crypto currencies - the goal is to be permissionless. The decentralization is merely a requirement to achieve this.
It is not difficult to sympathize with people who do not fully trust banks, especially if you grew up in a third world country with corrupt institutions. There have been times in history where you could trust banks and times in history when you could not. I'm not sure the past 70 years of grand prosperity for the west is a good way to gauge the trustworthiness of institutions owned and operated by others, since in the full scope of history the outcomes have been mixed.
That doesn't mean decentralized web3 cryptocurrency stuff is the one-size-fits-all answer, but I am sure to some people it is. And people should be free to choose the way to protect their assets and hedge bets against different local and global outcomes as they choose. Governments are the same way, with their large stockpiles of real physical goods like weapons and gold.
No. Standards and protocols are the essence of decentralisation and collaboration.
edit: Not sure why I'm being down-voted. If you believe that government created and mandated "open protocols" are really the same as decentralized protocols, imagine what it would be like if the US government forced every major institution to use the backdoored Dual_EC_DRBG they created instead of a sane cryptography protocol. A government enforced "open protocol" is not open at all if you're forced to use it.
Is this not still fundamentally a centralized system?
It’s like arguing construction is a fundamentally centralised business in your local area because every builders buy their bricks from the same factory. It doesn’t make much sense.
They need to keep money (printed by the fed) with a bank controlled by the fed. If you don’t see why that is a centralized system then not sure there’s much to discuss.
It’s distinct from reserve requirement, which doesn’t force you to store your money with a member of a single organization.
And what about a smart contract that requires participants to make a deposit with the smart contract itself? According to what you're saying such smart contracts are by definition centralised. Am I getting this right?
> And what about a smart contract that requires participants to make a deposit with the smart contract itself?
What do you mean "requires"? Is there forced participation? Presumably anybody could make a competitor to this smart contract. I think I'd need a more specific example to understand exactly what you mean here.
It also depends on the contract itself. A contract that has an owner encoded into it who can make unilateral decisions is more centralized than an ownerless / immutable one.
Hmm, no.
> Other banks can create debt, but only with permission (the initial money supply) from the fed.
More like a license. But it's no different than me creating supply by promising you to pay. That's really how it works in the banking world (and why the big guys have an advantage: they have a reputation).
> You'd have to really squint to consider that decentralized.
The current system is still relatively decentralized which is why governments and central banks depends on banks (and love them). Which is also why they want to try their hand at a CBDC (because it removes the role of banks)
Who else can make USD? Banks can create M2 but only as a function about how much M0 the central bank creates
You have demanded six explanations in drive-by form of standard concepts from strangers in the last 24 hours
This is the behavior of flat earthers and anti-vaxxers
I imagine it won't be long before Coinbase, for example, will warn you against transferring to wallets which aren't held by one of the big providers.
These automated exchanges seem to be growing rapidly. At one point last year Uniswap had 77% of Coinbase's trading volume: https://tokenist.com/with-33x-fewer-employees-uniswap-has-77...
Perhaps, but I'm not sure if that answers my question.
Cryptocurrency networks are decentralized on their own, but I'd say the way we generally interact with them is not. It sounds like we agree on this point.
However, whether a decentralized system is accessed through a centralized layer or vice verse, the result is a service that is not fully decentralized. If any entity, such as a bank, third-party banking service provider, cryptocurrency exchange, etc., is involved at any point, that entity effectively has some control over what happens on the associated decentralized system. This results in an at least _partially_ centralized system.
Opening and closing Lightning channels is an operation that requires a transaction on the blockchain - no real win there.
Due to the restriction just mentioned, most L2 transactions will take place via intermediaries who you need to trust and who can take arbitrary fees for their service as well (the whole routing business).
Lightning might be ok for regular payments (subscriptions, etc.), but at the same time it offers not a single advantage over traditional banking and credit cards other than explicitly not being either.
It might alleviate the transaction time and energy problems of the blockchain, but it does nothing to tackle any of the other problems mentioned by the author.
"constantly" in this case means "once every 2 weeks". You can also have a third party do it for you without having to hand over your keys.
No. Constantly means exactly that - revoked transactions for either party cannot be checked otherwise. I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
> You can also have a third party do it for you without having to hand over your keys.
And of course that 3rd party is totally trustworthy for some reason and offers their service for free? The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
Source? My understanding is unless the channel is cooperatively closed, there's a waiting period (ie. the two weeks) before the transaction is finalized to the blockchain. During that time that transaction can be challenged/overridden.
https://wiki.ion.radar.tech/tech/channels/channel-closing
>I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
That seems to be a completely separate issue. Short of receiving random donations, I can't think of any situation where you want to make a payment, but somehow aren't online.
>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
ETH =/= BTC
It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
https://lightning.network/lightning-network-paper.pdf
Chapter 3.1.4 Commitment Transactions: Ascribing Blame
Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
> I can't think of any situation where you want to make a payment, but somehow aren't online.
Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
Go ahead and call me a Boomer, but we seem to exist in very different realities.
> Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
> It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
I think you missed something here. Lightning isn't a single centralised implementation.
Just look at chapter 8.4 - once routing tables are in place, there's a wide open door for routing payment channels through profitable routes and tracking, for example.
Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
If you actually read the whole story, you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts, incentives, and edge software that "does the right thing" (e.g. periodically make backups and checking the other party's state for honesty).
>Chapter 3.1.4 Commitment Transactions: Ascribing Blame
>Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
>Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
>The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
I'm not really clear how your source contradicts mine. The source you provided is talking about how to ascribe blame, but then you magically turned it around to talk about having to be online 24/7? I'm not following the logic there.
>Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
1. always-online mobile payment systems (eg. alipay/wechat) are quite successful in asia. while I agree being able to pay without internet access is great, internet access requirement isn't some sort of insurmountable barrier.
2. you do realize that even though the credit card doesn't require internet access, the terminal itself does? Also, payment terminals has bidirectional communication with the card via NFC. It's not hard to imagine some sort of NFC based protocol that allows limited information to be communicated between the terminal and the wallet software on your phone, so it can gather the requisite information to make the transaction.
>>>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
>>You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
Are you losing track of the thread, or are you trying to move the goalposts? We were previously talking about how watchtowers would be operated/funded, now you're talking about how transaction fees for intermediary nodes?
>I think you missed something here. Lightning isn't a single centralised implementation.
As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious. This is different than difi-project-of-the-day that have one implementation and one protocol (the two are essentially the same thing in ethereum).
>Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
>you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts
yes, that's how cryptocurrencies are supposed to work - trust in systems rather than trust in people. Which is better has already been debated to death so I'm not interested in discussing that again here.
I don't live in Asia.
> you do realize that even though the credit card doesn't require internet access, the terminal itself does?
I do, that's why I emphasised that 'I' don't need to be online. I don't care about the payment processor's requirements.
> Are you losing track of the thread, or are you trying to move the goalposts?
No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
Have you actually read the resources? The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
> What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry, there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
> trust in systems rather than trust in people.
That's an interesting assumption given that systems are created and operated by people. It's trust in people with extra steps minus regulatory and legislative safeguards. Brave new world.
The point is that always-online payments works. At most the problem you described is a minor annoyance.
>I don't care about the payment processor's requirements.
But you otherwise don't have any objections if we can come up with a NFC protocol that allows an offline phone to make lightning network transactions?
>No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
1. "hobbyists are running nodes" were in reply to the question of who is going to be running watchtowers. You sneakily switching to a separate topic (transaction fees) as a reply to that is moving the goalposts.
2. what's wrong with intermediaries taking fees? Credit cards have fees. Debit cards have fees. ACH has fees. Cash has fees (resulting from costs associated with handling it)
>> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
>The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
My original point was relating to having to trust peers. As long as you do your part correctly, ie. keeping your keys secure and checking every two weeks (or getting someone to do it for you) if you have channels open, then you don't have to trust them. I agree the requirements are more onerous than on-chain transactions, but I never claimed they weren't, and I think it's a fair trade-off to make for the benefits.
>The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry
The same "regulated finance industry" that allows you to withdraw money from your account with just your account numbers, and it's up to you to wrestle with bureaucracy to get it reversed? If that doesn't count as "inherently insecure" to you I don't know what is.
>there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
1. As opposed to "increased fees or delays" in the form of ATM fees (just one example) that are present in the "regulated finance industry"?
2. With regards to the problem of suboptimal/"extortive" routes. Is this an theoretical problem or a practical one? Are lightning users getting scammed left and right by these malicious peers? If it's free money and as easy as you make it out to be, such attacks should be very popular.
>You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
The "unsolved problem" of having to monitor the blockchain every two weeks means... what? The whole project is DOA? That we shouldn't use it? That we should use sink the whole thing and go back to "regulated finance industry"? Is the internet DOA because of the "unsolved problem" that you need to keep your system up to date and patched to not get hacked?
Just imagine how long the line in your gas station would be clogged up for if you had to wait for a BTC transaction to be confirmed...
The difference is that while you are hit with arbitrary fees when dealing with crypto (be that transaction fees on the BC or fees by intermediaries and services in case of Lightning), cash related costs are already priced into the product and can be planned for from business's point of view.
Other than securing the wallet, there's no carrying costs for whatever amount of cryptocurrency a merchant holds? It's not as if you don't hold a minimum amount in your business account, the bank levies fees since you deposit money so they can lend it back out and charge borrowers 10x as much.
If bitcoin is coming in constantly you get it at the average price via dollar cost averaging and the average value of Bitcoin has trended sharply up for a decade.
Selling BTC for USD is most likely a loss to inflation if you intend on holding for a year or more.
12m y/y bitcoin is up 8% and the S&P is up 18%, so if you gambled your money into bitcoin a year ago, you made a bad choice. Note that last week bitcoin was down 5% y/y. Bitcoin, y/y is hardly beating USD inflation, right now, after a major increase in the price today.
Also, stop comparing a speculative asset to a currency. USD isn't meant to be held as an investment. It's meant to be spent, or invested in an asset that appreciates more than inflation.
And further, you can't predict the fee you'll pay. And I hope you aren't in a hurry to settle in those cases.
And if you need to resort to a custodial service, what are you even using BTC for? Using a custodian to give you permission to enter and exit a market is antithetical to everything Bitcoin stands for and exactly what it was created to fix.
1. Unpredictable fees make usage for small amounts almost require a long-lived channel to be worthwhile.
2. UX around Lightning channels are painful. You can't receive BTC in a channel unless you put BTC in as collateral. You can't spend more than the channel allows. Routing is unpredictable and fickle causing transactions to fail just as often (if not worse) as complete successfully. (Perfect for one-off transactions /s) All Lightning wallets (with the exception of one or two) are custodial and if they aren't, they cost a lot of energy to run on your phone because they're constantly chatting with the network.
3. The whole point of cryptocurrency is diversify the control across the network. The design of Lightning motivates large hub and spoke connections between users which consolidate control to a few individuals.
4. The complexity for any business to integration Lightning into their purchase flow is expensive due to the many states your channel can exist in and need to considered as part of your integration. Not to mention the added costs of monitoring the BTC network to protect your channels. Or you find a merchant provider you have to trust with your processing...at which point, you're just using credit cards by another name.
5. And due to the complexity of Lightning's design, there are systemic bugs which expose users to more risk than if they just used a gift card or credit card in the first place. (One case in particular, a channel which is mostly settled on side B (versus side A) such that A's value on their side of the channel is less than the dust limit of the BTC network (which is often given the highly fluctuating fees) will allow B to force the close of the channel causing A to lose their value in the channel (because A will need to spend more than their side of the channel is worth and will be a worse outcome than if channel A just ate the loss from the channel being maliciously closed)).
Cryptocurrency is just the best contemporary approach we have for applying computer science to money. That involves cryptography and blockchains because they are the most relevant technologies for accounting.
The typical alternative is a database from the 1970s or 80s running on something like a private mainframe, that can be modified at whim by those who control it. The biggest problem with this is that when so many have a chance to cheat, some will. But the core failing of the concept is that it's a private database with no mechanism for external (or even necessarily internal) verification. The core thing that people such as yourself will eventually learn about is that cryptography and blockchains are the best approach we have for solving these problems. It's just the basic application of computer science to accounting.
Many of these systems were built before cryptography was well known, and some run on hardware that may not even be capable of current cryptographic standards.
Fundamentally, arguing against cryptocurrency is like arguing against calculus in the 17th century.
Just one example: If everyone on earth used Bitcoin, there'd just be enough capacity for everyone to get in around one or two transactions in their lifetime.
Decentralization at the core is a massive waste, while providing almost no benefit except to a very few.
If all crypto does is give people more options, there are a lot more efficient ways to do that.
Nobody wants to run their own bank, which ALSO means nobody wants to use Jim’s shady internet bank or their buddy’s bank or their mom’s bank or or or…
Like, nobody in crypto seems to think for one second about how the world actually works or what people not brainwashed by crypto might want.
It’s a tech that has thoroughly, definitively lost the argument. It’s as clear a dead end as the metaverse, or pivots to video (let alone Meta/FB’s pivot to video)
The person you're replying to isn't arguing for people to be using "Jim's shady internet bank" or a random buddys bank, they are discussing the ability of current trusted actors to act as custodians and insurers for cryptocurrency-wallets, hiding the scary and difficult aspects of cryptocurrency, while operating on top of an open-source, trust-less, publicly auditable, open base-layer like a blockchain.
They are saying it's possible to regard cryptocurrency as a base-layer for economic transactions, and that without it it's basically not possible today to leave the traditional banking world behind if one wants to maintain a digital presence. Don't you think it should be? Why should an individual be forced to have someone else be custodian for their wealth?
Cryptocurrencies also aren't really finished yet, there are a lot of improvements to be made before it is possible to replace the existing financial infrastructure and maintain its scale.
It’s been 14 years. When will they be “finished”? What does that look like? What are the goals?
It seems to me like the original goals failed (take over the world, everyone use Bitcoin like cash) and so the goalpost moving began (sidechains, PoW “soon”, NFTs, etc).
I’ve seen nothing of value produced out of 14 years if hype. Only wasted resources and what seems to be an accidental Ponzi scheme.
> nobody wants to run their own bank
It sure looks like A LOT of people do. The real question is why are you so mad about it?
Most of the crypto-bros don't run their own banks either.
All of them depend on institutions that effectively act as banks somewhere down the line... first of all, the overwhelming majority of actual cryptocoin users doesn't run their own nodes (which, as "bookkeeping", is one of the core functions of running a bank), instead keeping their wallet at some sort of wallet service or transaction gateway, because running a node requires disk space and a continuously running machine. And then, almost everyone participating in any coin requires exchanges to turn the coins back into fiat money or vice versa - I've yet to see any actual real-world economy that does not use fiat money but instead handles everything with Bitcoins or whatever.
> Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.
The only thing "decentralization" enables is a lot of elaborate, irreversible scams, hacks and thefts. A banking system without some sort of centralized entity to deal with disputes and prevent usage for criminal activity eventually will break down... there's a new exchange that got hacked, a "smart contract" drained via intentional or unintentional bugs, NFTs being doubly-sold (if I understand that recent OpenSea bug correctly) or rug-pull scams exposed almost every other week. That is not a trustworthy environment.
Not to mention that all cryptocurrencies to date have led to enormous waste of resources: electricity, CPUs, GPUs, ASIC fab capacity, RAM, HDD... literally everything that could be used to mine coins got used for that purpose and outright killed the market for these, because miners can always pay far greater sums for components than individual people can.
What you're describing is basically how the IP protocol has been manifesting itself with something like Twitter vs Mastadon.
Here's the problem - if I can't get my weather alerts from my local city township from Mastadon, but have to use Twitter, then the point is moot. For example - https://twitter.com/TravisCountyTX/status/148934948869109350...
To bring this analog to bear - my local police department accepts credit cards online now for paying a ticket violation. What if they don't support <insert whatever crypto protocol I want to use>. I still need to use the "old" protocol (USD via Visa).
You're totally right. So now explain to me in this crypto libertarian fantasy world how:
- People agree where internet cable lines get installed
- People agree on how roads should be laid out and
- People agree on who is going to bear arms and defend their sovereignty
Does a blockchain solve all of that?
And it's just that - an attempt. If it makes you feel better that you feel like your thwarting the government then have at it.
> I never indicated that it does
Unless Crypto is widely adopted, then it doesn't solve any of the aforementioned things you mentioned.
> the pitfalls and complications are worth it.
They might seem like their worth it, until you realize you can't gain any of the benefits you mentioned without having solutions for the discussion of "who is going to pay for this bridge".
The fact that crypto advocates don't think of any of these logistics is what makes me not take any of your arguments seriously.
It's still better than if it was completely impossible to communicate to others without twitter.
What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit.
Again, in my argument there are two choices at play. One of the choice allows the other, whereas the other doesn't. You can still have centralization if you want, on top of decentralization. But if you chose centralization for the core, you cannot have decentralization on top of that, even if you'd really want it.
The Holy Grail of crypto seems to be some sort of dream of a fully decentralized society without banks or governments.
What if that doesn't happen? There's no reason to assume that even if crypto wins, banks or governments go away. My personal bet is that governments (and probably banks, too) will be around long after cryptocurrencies go away.
What exactly are we winning? Practical stuff, not ideology.
What do we get? Why should I care?
With regards to practical wins I can see a number that are even playing out today:
- The ability to skirt sanctions making it possible to donate to organisations that are deemed "illegal"
- Banking for those that are deemed unprofitable by banks. El Salvador has a large portion of unbanked citizens. Making it possible for them to interact with the wider world economy seems like a good thing to me?
- The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
- Promotes the build-out of new energy production; especially renewables since they are the cheapest form of electricity. This is a topic that deserves a thread in itself so probably not worth going into here.
You should care because the world doesn't exist solely in the privileged western hemisphere.
- Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
- That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
- Valid(ish). But also other stores of value exist and governments have many options for coercion, in the end, nothing will be safe.
- Could be used like that, but so can normal money and incentives
Generally, I'd say using crypto as fallback in broken political systems/societies relies on having at least somewhere working parts of society that can keep suppling/cooperating (or indeed from the outside).
> Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
I think individuals themselves should decide what is and isn't OK to spend money on. In such a world you rely on law enforcement doing actual work instead of using vague KYC, AML and Terrorism laws that are extremely obtuse.
Real criminals just use a middle man while regular citizens have to endure this insane regulatory environment without any benefit.
KYC/AML is just a waste of time, energy and manpower.
> That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
What if you don't have a functioning banking sector? Or even a functioning government? You're just supposed to accept that you're not going to be able to participate in a global society?
> The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
Sure, but most (if not all) of those things can be taken from you. Bitcoin can not. Of course, there's always the $5 wrench attack but relative to other assets, Bitcoin is superior in this regard. Even if it's just slightly better than other assets it's a win.
> Could be used like that, but so can normal money and incentives
Yes, but Bitcoin mining is a natural free market incentive to this problem, incentives and money is not.
And if a country has no functioning government, no banking etc., i.e. it is broken, then the country or place needs fixing, not some magic crypto sprinkled on top (might alleviate the symptoms, but not the cause). I see this all the time as crypto point, but society building is so much more difficult than that. Once you are in a environment where physical violence is the norm, things are really different.
One country's criminal is another's activist. You're making it sound so simple.
I'd really, really love to hear about stories of widespread cryptocurrency usage in developing countries.
Also, considering the low transaction rates and the high transaction fees, how would this magic vision of the future work for poor people, anyway?
I'd suggest looking for news stories or posts from El Salvador. You can find both positive and negative ones, of course.
The low transaction rates and high transaction fees argument isn't really valid anymore. A lot of the transactions have moved to L2 (Lightning Network) and thus current transaction fees on Bitcoin are regularly reaching $0.05. Using LN you also bypass any bottlenecks associated with number of transactions per second and confirmation time.
They are also in a cartel with the other banks, the sense that you can't access the financial system at all without one of them. For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks. They can do this because they aren't competing in this kind of niche area.
I think you can attribute that one to capitalism, not collusion. Profits are important for banks. It's a rare for-profit institution provides services at cost.
Any entity can join the "send money internationally cartel", but they have to adhere to the laws in both countries. This is a loophole that cryptocurrencies are bypassing today, but I expect the law to catch up in this area, and it won't be pretty.
In a healthy market, competition forces down the price of services approach such that they approach cost. A large profit margin can indicate a free market failure, such as a barrier to entry.
(it may also represent some kind of necessary capital investment for entry, but I don't think that's the case here)
Discounting laws, registrations, offices, staff, etc., you would still have to distribute sufficient capital between nations to provide for the transfer of money before the actual money itself can be transferred.
The shifting of money between entities within a single country can take several days, and most international money transfers are expected to happen in hours, not weeks. It's a low risk loan - given from one branch of your own company to another - but you still have to have the money to loan out.
...because of regulation, not competition.
While the current level of financial and banking regulation is certainly debatable, creating super lightweight version of banks might not necessarily the way forward.
The problem isn't the bank organization itself: it's the money that you deal in. Regardless of your bank structure, whether it's some typical commercial bank or some kind of cooperative association, you're still left holding a fiat currency that is inflated on a whim.
The beauty of crypto (and especially Bitcoin) is that there's either a fixed amount, or at least the rate of change of the money supply (inflation) is at least perfectly transparent and mathematically provable.
And Bitcoin's hard cap is based on incentives and code, i.e. it could be changed (difficult to see in reality absent some really strong outside coercion, perhaps). Another attack on the value of Bitcoin could be from a state actor using nearly unlimited resources to take over most of the mining or validating and using it against it. I.e., there are ways to degrade it as a store of value (other than just arresting everyone found using, for example).
Some things are just far more likely to happen than others.
Which of these 2 things are more likely to happen?
1) An attack or change on Bitcoin that renders it completely valueless or unusable
2) Governments inflating fiat currencies and robbing you of your wealth
I'd say that 1 is merely theoretically possible, but 2 is about as close to complete metaphysical certainty as you can get.
In defense against 2), I'd venture it is probably better to own production assets (and parts thereof) rather than crypto.
Also, if inflation is sky high and destroying everything left and right, they could very well come for 1). So there is a spectrum of inflation where crypto might(!) be a hedge, but similarly a lot of other assets might(!) deliver said hedge. Just because it is limited in supply does not mean people will always imbue it with value (stamps are great example of staff that is dropping in value as far as collectables are concerned).
Now where I could see an issue is then with people who don't have "wealth" but some savings that get inflated away and potentially limited asset selection to invest in. Whether or not crypto will help, is up to crypto, not some law of nature, though.
Maybe I'm misunderstanding something about your response, but I think your response is too focused on my use of the word "wealth". Obviously, genuinely wealthy people have a large part of their assets tied up in physical assets that might serve as a hedge like land, resources, real-estate, businesses, and likely aren't anywhere close to entirely liquid.
I'm more focused on the impact of inflation on normal people. An average person of average or below average means likely holds most of their life savings in cash-like things or even literal cash. Being able to afford land, an investment property, a factory, a McDonalds franchise, or physical assets isn't even on their radar screen. The average person of average means is screwed by inflation far more than the wealthy because they have far less of an ability to buy real assets that might always have some value.
The reason inflation makes me angry is that it's a stealth tax, primarily on the poor. Whatever else you want to say about Bitcoin, the fact that there can only ever be 21 million units is extraordinarily positive in this respect.
Relying on speculative assets, in the sense that they are not producing widgets that can be sold at higher prices due to inflation, to compensate for inflation might or might not work. The world isn't running on Bitcoin, so the limit doesn't quite bite into the real world without enough people imbuing it and Bitcoin with value. I am not taking an anti crypto stance here, more saying that trying to solve this problem via crypto might not pan out/there are other approaches, too, that should be pursued.
Bitcoin probably isn't the ultimate solution out there, but I'm simply pointing out that it at least doesn't have an attribute that allows you to steal value through inflating the currency.
Inflation is a particularly pernicious theft from people: most people don't realize where it comes from and just think that "prices go up over time" without realizing what's happening. The awful media even tries to gaslight people that they're doing better because "wages go up too."
> vs. better wages (more collective bargaining?), automatic tax adjusters etc.
There's a lot more that can be done to help non-rich people, but the problem is that one's opinion of what's actually helpful to people change when you really begin to understand economics and prioritizing systems over goals.
Maybe the existence of banks would be better evidence that 'some' people wanna run their own banks?
Contrast that to Facebook Messenger. Either you're a user of it and can message others using it, or you're not and you can't interact with others using it. You have no choice, it's either in or out.
This is the difference between centralization and decentralization, the amount of options you have available.
We see that with Coinbase (a HN unicorn btw): lots of people are apparently not only fine leaving shitloads of coins on Coinbase, many are also totally fine using the USDC "token" which is (mostly) backed 1:1 with actual USD. I don't remember the stats but big "exchanges" hold a sizeable part of the circulating coin and it's not just people "trading": it's a lot of people simply holding to their coins and using Coinbase as, basically, a bank.
Heck, I think if they sell for USD (not USDC, don't know about USDC), their USD at Coinbase are even FDIC insured up to $250 K (for each american on Coinbase: it's not the same with Coinbase in the EU).
I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank".
Exactly. That's a big 'no thanks, and no deal' as it defeats the whole purpose if one leaves all their coins on an exchange for 'long term' holding.
Nothing wrong with downloading a crypto wallet app and sending and storing the USDC, USDP stablecoins on there. No need for Coinbase.
Job done. Your keys and your coins without the volatility.
Sorry, but that's just not true. Crypto exists because people think they can win money with this Ponzi Scheme!! ONLY reason! Greed
> There's an inherent fragility built into cryptocurrencies. If your physical bank notes are damaged, the bank will replace them. If you are defrauded, the bank will reimburse you. If your loved one dies, and you inherit their assets, the bank is legally obliged to give you access.
Damaging bank notes is probably covered by the fed. Fine. But fraud is a real expense. It's just not generally borne directly by the victim. Someone still pays it (normally the bank) but they make up for it by lending out your cash. As for handing over assets to someone that passed away, that's currently done through the legal process. Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? Seems like crypto would help there as well
You're skipping over large parts of the things fiat can do and crypto can't. E.g. there are chargebacks for fraud. There's the legal process that can be used by the bank to recover money from the fraudster (maybe not always, but also not "never").
> Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money?
No, it wouldn't be great, it would be horrible. Real world is messy and hard to encode in a "smart contract". What if the will says something but the law invalidates it? Going through the legal process is a feature not a bug... remember how people complain about e.g. automatic bans that are handled and appealed by robots? How your Google account can be disabled with no recourse, and no explanation from a human? Yeah, that can happen to your grandma's crypto - it doesn't go to the family, and there's no way to appeal that or even find out "why".
For my will I literally enter into a form what I want to happen, but then when I die it'll be down to another human to go through it and manually carry out my instructions.
Chargebacks can be opt-in and escrow is a tutorial for smart contracts. I don't need chargebacks on a cup of coffee, and I've been unable to make a payment due to high chargeback risk - despite me being entirely willing to take on the risk of non-fulfillment.
The fact of the matter is that we have had the ability to create a technical process for executing a will for a long time. Banks allow you to designate a beneficiary who receives your assets after you pass away and that is executed automatically. We do not have to allow people to dispute that, and cryptocurrency does not really add much over such a system -- but we do not want that system because some objections are legitimate and disputes need to be resolved.
There's a reason we still talk about Kafka almost 100 years after his death.
So microservices are a better idea than monolithic core?
Where the analogy falls apart is in the low transaction capacity of most existing blockchain-based currencies. Microservices' greatest asset is that of scaling in a way monolithic structures can't.
But ignoring the title, here is how I see it working out long-term between "Running your own bank" VS "Using someone else's bank":
It's true that most people don't want to run their own bank, it comes with lots of issues. But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this.
So can we solve for both things? Yes, I do believe we can. The primitives that support the whole system can be "Running your own bank" while allowing entities above that layer to offer "Use my bank if you want to instead, with insurance and all that", so we get the best of two worlds. The opposite cannot be true, we cannot offer people to run their own banks, on top of a set of entities being the only ones running their banks.
In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it.
Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.