I’ve written this elsewhere when this topic routinely comes up and crypto is dismissed, but the capability of self-custody is the thing to pay attention to.

Nothing else has this capability to the same extent.

Today we store most of our wealth in assets (market index funds, stocks, real estate, etc.) and some (typically very little, and rarely outside of a bank account) in cash.

Most of this is not actually controlled by you.

With BTC (and cryptocurrency more generally) you have the capability of having your private key in a hardware wallet under your control and retain the capability to transact independently of other institutions.

If you keep some percentage of your wealth here you retain certain advantages that you can't get elsewhere. The closest alternative would be having cash (in cash form), but it's hard to have that much, hard to travel with it (you can memorize your wallet seed words and recreate your wallet on the other side of a border), and cash is vulnerable to government stupidity (see: Russia).

I'm not sympathetic to the Canadian truck protests, but whether or not you care about what they're protesting - it's the capability wielded by the Canadian government over their private finances that's alarming.

All this is to say the focus on what crypto is worse at is kind of missing the forest for the trees.

The capability of a global self-custody capable store of value that can be trivially moved anywhere is a big deal and puts power back in the hands of individuals.

I don't pretend there are no risks with cryptocurrency. The security requirements are obviously harder, the UX is bad and even technical users fuck it up.

Some of this will be improved by tooling, some of it is just what's required for self-custody.

Still, the capability it provides is new and gives individuals more power even with these tradeoffs. That capability is valuable and shouldn't be dismissed imo. It's a lever against authoritarian control and increasing centralization of power.

Governments can trivially prevent this if they wanted to. Bringing your wallet along will be of no use if nobody dares to transact with you because they themselves will then need to explain the source of their newfound wealth.

The current ability of crypto to (sometimes) escape government oversight is temporary and only exists because it's currently a rounding error in the grand scheme of things, but I can guarantee you it will be cracked down on.

The specific case I read about was someone escaping the Russian occupied areas of Ukraine this way: https://www.forbes.com/sites/tatianakoffman/2020/06/13/why-b...

It’s also more common in countries with bad currencies and limited access to USD (Venezuela).

You’re right it’s not perfect, but it gives more power to individuals than the alternatives. It’s also possible something like Zcash could allow individuals to transact despite an all seeing panopticon, but I don’t know how that works well enough to have a strong opinion.

Or in fact, any financial law by any government. And yet if you say a major application of crypto is crime everyone gets all hurt...

That being said, most studies point to the conclusion that the major application of Bitcoin at least is not crime:

https://www.forbes.com/sites/haileylennon/2021/01/19/the-fal...

https://cryptoforinnovation.org/resources/Analysis_of_Bitcoi... (by Michael Morell, former Acting Director, Deputy Director and Director of Intelligence at the Central Intelligence Agency (CIA))

Indeed. By regulating the transparent cryptocurrencies and banning privacy coins from exchanges like Monero and MobileCoin which is how the criminals and scammers cash out their ransomware money into fiat currencies.

Notice that although many points are raised, it doesn’t address the direct objections of the previous post.

Obfuscate, misdirect, and confuse the marks.

But even given those cons we see benefits in things mentioned above. E.g. my colleague can send bitcoin to his brother in russia. Tell me what other options to transfer value there are at the moment between west and russia. Very similar for ukraine.

This is half-true. A wire transfer can't be reversed due to end-user error, which can be abused by fraudsters. However, Incorrect input on the bank's behalf does warrant a reversal.

I'd compare my bank screwing up vs a crypto exchange screwing up (Like getting hacked). I'm still not protected if the exchange gets hacked and my coin is exfiltrated. I am protected if my bank fatfingers a wire transfer.

Also, banks are insured by the FDIC against financial catastrophes. Savings accounts held in FDIC-regulated banks are insured up to $250k if the bank fails for some reason. I get no such protection holding crypto with an exchange. The FDIC turns around an audits banks to make sure they're compliant with liquidity requirements, loan quality measures, etc. Nobody in crypto is watching anyone else in crypto to make sure everything is kosher because that is fundamentally impossible in a system that is meant to be decentralized.

Scammers are everywhere and not nearly enough is being done to address it. It's not even clear whether it's possible or not to even address crypto scams.

Exchange risk is tempered somewhat by Coinbase which is more comparable to a standard bank in terms of risk (imo).

The true value and capability that’s distinct with crypto is self-custody and that is the important part of my comment.

The fine print does not bear this out at all. Coinbase states in their TOS that your funds may not replaced in the case of a breach because they do not insure the entirety of accounts, nor do they stipulate a guaranteed insured amount:[0]

> In case of a covered security event, we will endeavor to make you whole. However, total losses may exceed insurance recoveries so your funds may still be lost.

Comparing the risk profile of Coinbase to a bank is no different than blindly trusting a big bank not to fail. These are not analogous institutions from a risk management standpoint.

0: https://help.coinbase.com/en/coinbase/other-topics/legal-pol...

> “Comparing the risk profile of Coinbase to a bank is no different than blindly trusting a big bank not to fail.”

That’s kind of my point? They share a similar risk.

The most interesting thing with crypto is the new capabilities it enables for self custody of wealth.

There’s also the non-government controlled supply and global store of value which are interesting too, but easier self-custody is the prerequisite differentiator imo. It’s also one of its core advantages over gold (the others being easier to transact with, easier to move/store which is related).

> The most interesting thing with crypto is the new capabilities it enables for self custody of wealth.

Serious question: what are the new capabilities that this opens up? These tokens are really unstable which makes them poor candidates to use as actual currency, research shows that decentralized networks are no less susceptible to market manipulation than traditional financial markets and there's an unbelievable amount of fraud everywhere in this space.

The whole reason the Federal Reserve was created was to weed out endemic fraudulent activity around the country during the era of "Wildcat Banking"[0], when banks were essentially creating their own currencies. Crypto is largely the digital reincarnation of this philosophy, and isn't really doing anything about shitcoins and other scams. Now, we're starting to see the legitimization of shitcoins through sports team fan tokens that provide no tangible value beyond the purely speculative "hodl" mentality.

0: https://en.wikipedia.org/wiki/Wildcat_banking

This argument seems completely non-sensical to me.

Western governments have been arguing for 3+ decades that we do business with countries like China because integrating them into the global economic system will encourage them to change. But now we're making the same argument that we need to expel Russia from the global economic system because it will encourage them to change. What? At least crypto doesn't flip-flop on what it's moral or ethical purpose is. It's just a tool and an exchange of value, not a weapon.

The sanctions mean nothing if you haven't already integrated the countries into the global economic system, because they won't be losing anything.

I'll grant the implementation leaves a lot to be desired, but the principle is quite sound.

No, this is a person sending money to their brother, who is presumably not engaged in "waging war."

Crypto bros telling us how great it is for the poor people in such countries to get money. Now we see the downside of this as well. Oligarchs protecting their assets as well.

Leveled playfield.

No added benefit from crypto anymore.

And yes right now for me, sanctioning is more critical to me to increase the pressure on Russia to stop killing people than Russian people being able to use crypto.

The more that financial repression and "cancellations" become mainstream, the more obvious crypto's use cases become - whether or not you support the individual examples of repression.

How much is a human life worth to you? How much are we all responsible for everything and nothing?

Collective punishment? It's just that there are limitations on tools global politics can use.

Independently of this perhaps my expectations on fellow humans are different than yours.

And at the end of the day crypto can be blocked and will be blocked sooner than later. every event like this which circumvent global mechanism will be worked against

Not all governments are good, not all laws are just. It’s easy to roll eyes at this in the west, but a lot of countries in the world are lead by bad people acting in their own self-interest.

The other bit you get from Bitcoin at least is programmatic guarantees of supply. This protects you from increases in supply inflating your savings away. It makes it a better store of value than fiat.

A standard currency is not always available. The same is true for safe financial systems. This is more relevant for people trying to save in places like Venezuela. Crypto provides new capabilities that may be your best option.

If one potential future is authoritarian governments leveraging total control on their citizens financial transactions via centralized financial systems (what the ccp is trying to build) - crypto is a technology that provides a relief valve from that. It’s a good thing it exists imo.

Limited supply is not irrelevant or “factually wrong” for a long term store of value (like gold) which is more the role BTC plays specifically.

[1] https://static.wixstatic.com/media/e17377_2a348fd21fc543f9a0...

We’re talking about advantages and capabilities - specifically granted by crypto of which self-custody is a prerequisite (yes technically true of stock, but not indexes and not as comparable). Within that context it has advantages over other options and more capabilities.

I’m not pretending it’s better at everything or it should be 100% of your holdings or anything like that, but it is better at some things and the new capabilities it provides are interesting and valuable.

That chart is a limited slice of time. The nice thing about economic bets is it doesn’t really matter what you (or I) think, the market will play it out. I suspect you’re probably wrong, but we’ll see.

Focusing on this despite the rest of what I wrote is still kind of missing my point.

There’s not really much point in further discussion, there’s not much more to say. We just don’t agree.

But feel free to disagree, of course. The evidence doesn't care if you don't agree with it. It's still there, for everyone to see.

You have a clear motivated reasoning bias (crypto = bad and useless) paired without understanding the basics of how crypto works.

You don’t have conversations with people, you just ignore details that disagree with your pre-existing conclusion and focus on digressions you think prove your point (typically against a strawman argument I’m not making).

Your submissions betray this bias too. Crypto (and conversation) is more interesting when considering the nuanced bits even if it may disagree with “your side”.

https://www.lesswrong.com/posts/PeSzc9JTBxhaYRp9b/policy-deb...

You’re right about one thing though, the evidence is there for people to see.

That isn't exactly arguing in good faith, to use your own words.

E.g. you want to support independent reporters in Russia. What can you do? Support your family? Maybe even foreign students there?

Crypto wallet owners can be entirely hidden and impossible to sue.

Have you ever worked a retail/food chain job and gotten to see how many CC transactions are invalid/fraudulent resulting in the business losing money? I worked at a pizza place where 5-10% of CC transactions were bogus (college town). Checks were more like 20%.

All financial transactions are trust relationships. Some are higher trust than others. If you could buy groceries at Wal-Mart or a new iPhone from apple.com with bitcoin you would have no concern about that. If you send money to a rando on the internet, well it doesn't matter all that much whether it's crypto or dollars.

Sometimes you will have third party intermediaries, like VISA, who will offer certain guarantees/insurance for a fee. It's as simple as that.

It's silly to compare transactions with known/trusted entities like a physical business or trusted insurance provider/intermediary like VISA with sending your money to a random anonymous bitcoin address. You would not generally be wiring money to a random anonymous bank account either.

If you could buy stuff with it and it wasn't an absolute headache (install app, pay transaction fees) and it was easier, it would be more popular.

That would also remove the "it's a speculative asset bubble" problem.

For the interim, using it as a private bank, assuming you can cache it out at an exchange for local legal tender, is the next best thing.

The only true way to make it a currency is for it to have its own country - bunch of people somewhere decide to use it for all their stuff, trade goods and services. Problem with that OFC is a lack of free land and energy.

So maybe when we live in space, and need a long term store of value, but don't really want to carry around bars of gold or platinum, it can have some serious uses. Until them it is exactly like buying oil - technically asset trading but really hard to realize the value in any meaningful way.

You can choose to ignore the nuance, but it exists anyway.

I've been doing blockchain on and off since 2008. Recently I lost a few thousand dollars by sending crypto to a L1 address when I was on a L2.

I work on self-soverign identity in my day job. I've written smart contracts. I'm a careful person. Basically I think if I'm dumb enough to do this what chance do most people have of getting this right?

> Nakamoto stated that work on the writing of the code for bitcoin began in 2007. On 18 August 2008, he or a colleague registered the domain name bitcoin.org, and created a web site at that address. On 31 October, Nakamoto published a white paper on the cryptography mailing list at metzdowd.com describing a digital cryptocurrency, titled "Bitcoin: A Peer-to-Peer Electronic Cash System".

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

I just re-checked. It was actually 2009 sorry.

My x to doubt is because nobody claims to have “been in blockchain since 2008” it’s a give away that your talking trash. The Genesis block date was Jan 3rd 2009. You were talking to satoshi about Bitcoin pre launch?

I was one of those people (might have been early 2010 for me though, can't quite remember when I first became aware of bitcoin, but it was pretty early). I remember seeing the post about bitcoin first being exchanged for pizza after I had a bitcoin wallet. I read the forums sometimes but never posted (which is odd, because I posted on a bunch of forums back then).

Of course if I had a time machine I would have been mining nonstop back then, instead of just briefly to play around with it, and held on to it until much later. I thought it was cool but at the time I thought if it was successful it just meant it would get up to roughly the same value as a US dollar, i.e. $1 for 1 bitcoin, and wouldn't go up much beyond that.

By the way, I held on to my coins for as long as I did in part because I was super paranoid about fucking up my transactions, so I get where the OP is coming from. For a casual user they probably don't want that stress. Hell, whenever I do a transaction to another wallet now that's more than $50 even today I check the address three or four times and still sweat a bit until I see it go through.

I thought the tech was cool, but never owned any real amount and didn’t really have an understanding of why there might be long term value.

There was Bitcoin faucet which used to give out some free - I think that was how I got some tiny amount in my first wallet that I eventually lost when I wiped the laptop for sale.

I do have this from 2014:

Project Proposal: Data Rental using the Ethereum Blockchain, Spetember 2014

https://imgur.com/a/XLo2P3Z

If you know the history of Ethereum you'll know that is pretty early.

I was on the old "decentralization" Yahoo mailing list and the p2p mailing list back in the early 2000's too. If you can find an archive (which I can't!) you can check my background there.

Self custody is a critical part of this ecosystem. It’s been the biggest mantra of the ecosystem, so I really don’t understand how you can think this is for a small segment. A vast majority of BTC and ETH is not on exchanges. It’s the entire point. What you are admitting to is saying “I was there at the start but I still don’t really get why…”

Where do you get that?

I understand the reasoning entirely. I disagree that it is important or that the security trade off is appropriate for almost anyone.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution“

Nah, who needs it???

I'm saying (again!) that I don't think the trade-offs involved with self-custody are worth it.

So far all you've done is (a) attacked me personally, and (b) made some kind of circular argument that either I don't understand what Bitcoin is or restated your argument that it is important.

Ok, I get you think that. Just saying the same thing over and over again isn't actually a convincing argument.

I don't think that trade off is worthwhile because the risks associated with it outweigh the risk associated with it for almost anyone.

Sorry mate. Not high scores for that.

I’d your going to claim to be OG sign a message with the keys…

> I’d your

Let the person who has never made a typo be the first to throw stones.

Wait.. you are being critical of me and you are stuck on BTC? To put it simply, people who BTC Maxis in 2022 are like those people on HN at the Facebook IPO who didn't understand why it was profitable.

Screw Meta.

They will if you didn't initiate the wire. If you typed the wrong account number then you are SOL, but that's true of BTC too.

I've found that when I wire a large amount of money to a new account, humans sanity check the transaction at both banks.

Also, I once did something weird (wire to same escrow firm a few days apart), and got a call of the form "What's going on? Did you buy two houses or something?"

Oh dear.

[0] https://www.bbc.co.uk/news/business-59826345

There are also courts etc to get involved, if someone sends you a million dollar wire and you keep it (for no services rendered), courts generally don't let you just have it (cross border caveats etc).

Frankly banks also rarely help people scammed via other means (Venmo, Apple Pay, Zelle, etc.)

I think this will forever be the sticking point for crypto for a lot of potential users. It boils down to trust. And the relevant question is: for an average person, do they trust FDIC insurance more than they trust their own ability to understand the crypto infrastructure and protect themselves from rogue or compromised transaction facilitators (because for Bitcoin at least, it's fundamentally impractical to transact for most things without a facilitator; the time it takes for the transaction to get buried into the chain alone is enough to take most day-to-day uses off the table).

And personally, I think for most people the risk model is that trusting FDIC insurance is a superior option.

The capability added by crypto doesn’t mean everything else can’t exist or isn’t preferable a lot of the time for most people.

I do think there’s a lot of room for the current tooling to continue to improve though which may make it more of an option for more people.

For the record, The Current Thing at the moment is to recommend citizens hurting from their government's stupidity to overthrow said government (and if you are averse to dying, then it's only fair that you suffer).

I'm being facetious, but there's a grain of truth in that notion.

If your government robs you with its economic policies you could, of course, invest in croins or other hard to sanction assets -- or you could instead take action to make your government better, more transparent and reliable.

It’s harder to control your transactions when you have self-custody. It requires a higher level of coordination.

Bitcoin is of no use if you can't exchange it for anything tangible.

Zoom out to the "all" range on https://www.bitcoinprice.com/ and try to tell me with a straight face that you're looking at a graph that belongs to a stable currency. Heck, even just look at the last two years.

Part of the problem with Bitcoin in specific among all of these cryptocurrencies is that the Bitcoin community in particular is completely divided on whether they want a speculative asset or a functional currency. You can not have both. A currency that is regularly spiking in value to the degree that Bitcoin spikes (even a currency that spikes upwards in value) is not suitable for everyday transactions. A currency that doubles or even triples its value in 2 years is not a good currency.

The bigger thing to understand is that it is impossible to fix this problem with Bitcoin, because a sizable portion of the Bitcoin community doesn't want Bitcoin to be a currency. They want a speculative asset. In my opinion, that portion of the community is significantly larger and has significantly more influence than the portion of the community trying to create a currency.

Bitcoin is more akin to a gold like store of value than a currency.

----

> You just need to control the onramps and offramps.

> Bitcoin is of no use if you can't exchange it for anything tangible.

----

> All that's required for people to exchange it for something tangible, is for people to start.

----

The need to move BTC over to a stable coin before you spend it was part of Nextgrid's criticism to begin with. It requires an off-ramp, a functional exchange that will accept Bitcoin and give you something spendable.

I guess to be charitable, maybe the argument you're making is that the stablecoin is the transactable part of all of this and the stablecoin will be accepted ubiquitously and that it will be harder to regulate those kinds of exchanges. However, it's worth asking in that world why anyone would be using Bitcoin for transactions if they're just going to transfer it over to a better cryptocurrency later to spend it? Why wouldn't they just use the stablecoin?

This is a good question and I think there’s a two part answer.

Part one is stable coins still have smart contract risk in the arbitrage style version, and fraud/authority risk in the custodial version.

Stable coins that peg a government currency are also vulnerable to all the same issues fiat currencies are vulnerable to.

Bitcoin is a better store of value than fiat (which is a bad store of value - we store wealth in assets primarily because of this).

So you’re better off storing value in BTC like gold and then moving pieces of it to transact in small amounts if you must. If you can’t (exchanges are locked) you’ll need to find someone willing to transact in BTC despite volatility (or someone willing to trade you fiat in person).

Is this optimal? No, but it’s about degrees of control. Wealth locked up in banks controlled by authoritarian governments give you fewer options.

This is the part I have an issue with when talking about Bitcoin as a currency. Forgive my oversimplification, but it really sounds like what you're saying to me is that Bitcoin is not a good currency, it's an investment asset, but for the moment it can be converted into other good currencies. However, it turns out that most of these stablecoins and other currencies have very similar properties to traditional government-issued currencies (risks of fraud, inflation through issuance, etc). These are all the things that Bitcoin is supposedly going to fix, but then it turns out that transacting with Bitcoin is largely reliant on keeping those types of currencies around.

The hope is that Bitcoin will continue to be convertible into good currencies, and to a certain extent that's a valid hope. There are scenarios where a government might censor traditional currencies before they regulate exchanges (see Wikileaks, for example). But that's also exactly what people are calling out here; we're questioning how reliable or censorship-resistant those exchanges actually are in the long run. I'm not sure that's a problem that can be glossed over, it's a big fundamental part of the disagreement.

Additionally, I would ask the question, how much of Bitcoin's current value as an asset store is tied up in the fact that exchanges are operational and relatively easy to use? I strongly suspect that if the US government ruled that exchanges were illegal tomorrow, the value of Bitcoin would plummet. And if that's the case, then we have a currency that not only needs some way of exchange with traditional currency in order to be spent, it's also kind of reliant on those exchanges being easy and operational in at least one or two wealthy countries in order for it to be used as an investment vehicle or store of value at all.

If those exchanges get shut down, and Bitcoin is hard to exchange but still valuable, then that's not the worst thing in the world for Bitcoin. It's pretty bad, but it's still a store of value in that scenario. However, if those exchanges get shut down and Bitcoin is both hard to exchange and the value is plummeting because ordinary/rich people aren't using it as an easy investment vehicle anymore, then that's an extremely bad outcome for Bitcoin.

> Wealth locked up in banks controlled by authoritarian governments give you fewer options.

Really, really important to clarify that we're mostly talking about theory here. In practice, wealth locked up in banks controlled even by authoritarian governments like China currently still give me exponentially more options than Bitcoin does for most purchases, with only a few minor exceptions. Could that change? Sure, absolutely. But it's not the current situation.

Even looking at something like Russia; I think depending on how this war continues, it's going to be interesting to see if Bitcoin actually ends up being useful for ordinary people there in the long run. I am fairly skeptical; multiple countries have tried to use Bitcoin in the past during currency disasters and I have not been super-impressed with the average result. And none of those countries were being as aggressively sanctioned as Russia currently is.

Gold has held up as a value store and is the closest analog I think, but it’s not a perfect comparison and there are trade-offs for each.

I mostly think the technology is cool and provides a new capability to individuals. How much this ends up having a lasting effect remains to be seen (though I lean optimistic).

If you think your currency might be worth a lot more if you just hold on to it, you don't want to spend it for FOMO. Stablecoins don't change that.

Thats a nice theory, but in reality it is false/implausible to be able to control every single on and off ramp in the world.

Evidence: Nobody is currently controlling all the on an off ramps, despite the fact that I have heard the same exact argument that you are making right now, for literally over a decade.

I could cut your lawn, sell you an Xbox, or buy an old tractor completely with BTC. The government can cry about it all it wants, it can pass a hundred laws, or issue a thousand court orders. But at the end of the day, it has absolutely zero control if two individuals want to voluntarily exchange crypto with each other. We've already seen this play out with the illegal drugs trade and P2P file sharing. Spoiler alert: The government lost.

So really, in FreedomLand, you can work and get paid in BTC, but if FreedomLand only recognizes FreedomDollar as legal tender, then when you need to pay income tax, the government will charge you in FreedomDollar, and you need to exchange your BTC to FreedomDollar.

If you cannot or don't want to pay tax, then of course police will prosecute you, and courts will also require settlements in FreedomDollar. Nevermind you have millions of BTC or XBoxes.

Now of course, this "problem" would disappear if FreedomLand recognizes BTC as legal tender, but now FreedomLand government loses all monetary control, and then economic activity descends into chaos.

Even so, it’d have to be a global restriction on all exchanges which is more challenging to coordinate.

The thing crypto gives you is the capability to get your wealth out intact (at least whatever you had moved into self-custody). If you have fiat in banks frozen by the Canadian government your wealth is trapped.

You’re right if Canada banned Bitcoin it could influence the value of the coin. Similar to governments refusing transactions in rubles. The difference in capability is in the ability to move your wealth and that short of global coordination a global store of value (controlled supply, non-government etc.) is more resilient. The fiat comparison would be having the entirety of your wealth in cash in your house - obviously not viable (and good luck trying to cross a border with it).

Crypto is also more resilient to government meddling in currency production (this is often over-stressed in US, but is a real problem in developing countries where kleptocrats devalue the currency to steal the wealth).

It’s more similar to buying gold and having it on you, but with crypto you don’t have to keep it on your person to maintain direct control of it. You just need to know the seed words.

The fiat equivalent would be moving money to an overseas account. Before you are sanctioned, doing so is just as easy as buying Bitcoin. After you are sanctioned, both are equally hard. The difference is that your Bitcoins can be demonetized, while your overseas assets can only be seized if the governments cooperate.

Say I'm an American, for example. I'd receive "sanctioned" bitcoins from a Canadian and then send them non-sanctioned bitcoins back to a different wallet address. There is no "exchange" being used in this process. I could then happily spend or transfer said coins in the 99% of the world that isn't Canada.

Your money on that account is still being trusted to some authority and your guarantees on it are limited.

The real fiat equivalent would be moving all your wealth into cash first (literally physical bills in your house), which is obviously worse and harder to move.

Your bitcoins cannot also be demonetized any differently than fiat. It’s similar to sanctions on rubles. Both types of value are vulnerable to government bans affecting the price. The difference is with crypto and self-custody you can transact privately despite that (similarly to if you held cash, but holding lots of cash is again harder and more vulnerable to a single government’s stupidity).

If your dollars in a bank are frozen you can’t transact at all. Your self-custody BTC can’t be frozen on the blockchain, you retain a lot more ability to transact globally.

With fiat in a bank, you don’t have a chance since it just gets frozen and you don’t actually have custody. With crypto it’s more likely you can continue to transact.

It’s a matter of degree.

What I'm arguing is that this impact doesn't cause the price to be zero, requires global coordination to have a big impact, and that even in this case, the self-custody capability of crypto is still something better than the alternative (no access to any funds or any ability to transact). We're also discussing an extreme worst case (and even in that case it's still better than frozen non-custodial fiat funds).

Flagging wallets to exchanges also requires targeting and many people wouldn't get hit by this. There are also a lot of cases that benefit from self-custody in a world that doesn't have this extreme global coordination to sanction crypto.

Imagine the case where you're a random Ukrainian citizen in Russian occupied territory trying to get your wealth out across a hostile border. Your crypto wallet is not likely to be flagged to exchanges (even if it was most exchanges wouldn't care). You can memorize the seed words and get out safely with the ability to recreate your wealth on the other side.

This has already happened at least once: https://www.forbes.com/sites/tatianakoffman/2020/06/13/why-b...

This is probably why Chinese wealth leverages it to get around attempted controls by the ccp despite regulation.

Why? It is just as easy to regulate as any other tracked asset. Physical items are much harder to regulate.

China simply hasn't started enforcement.

Mostly because it’s harder to confiscate (more akin to a physical item in your possession)

The difference is that while allowing a (properly set up) crypto bank to transfer funds you may also at any point and for any reason take full custody over your coins. The private key which enables that should not be used for anything other than emergency (minimize attack surface) and keeping such a key secure is not all that difficult. With this combination you get all the benefits of a normal bank yet they are powerless without express authorization to do anything with your funds. You can withdraw at any point for any reason.

Services and practices securing your private key will need to be widespread before adoption seriously takes off. Storing a seed phrase in your sock drawer is not acceptable: Vitalik Buterin secured his billions via two physical pieces of paper which summed to his private key; surely a step in the right direction. An n of m scheme with each n being held by parties unlikely to collaborate is another solution.

This is all not even mentioning massive private banking and its relationship to the economy and bias towards the wealthy. Crypto is FOSS finance, it works for the people as stated and expected. As I said, you are correct - using your layer 1 sovereign access for everyday use is a security blunder - you now know where progress points.

A laughable statement in the face of crypto’s negative externalities. We’ll wreck the planet we all share, but at least we’ll have FOSS finance!

I’d be shocked if video games as an industry outranked crypto for energy use. Even if we assume all gamers run their GPU’s at 100% the entire time they play games, miners will quickly dwarf the energy usage because games don’t play 24/7.

Machine Learning is computationally expensive, but unlike crypto, is basically constantly trying to make their systems faster and more efficient all the time. Again-computation isn’t used as a gatekeeper here. There’s no “hash this pointlessly until enough work as been done so you can do x”, it’s just “do this work as quickly and efficiently as possible”. Things like TPU’s in ML aren’t a threat or arms race, they’re a net improvement.

Crypto gets targeted for its energy use because it uses an insane amount of energy for even the most rudimentary functions. Even if current payment processors use the same amount of energy right now as crypto does, you have to consider the relative scales: those payment processors handle the vast, vast majority of payments with that energy; scaling current crypto up to that levels would bring its energy use to astronomical levels.

So you must now convince people why crypto does not bring value, which first requires coherently stating the argument for why it does - which most skeptics fail and which you have not attempted.

> I'd be shocked if video games as an industry outranked crypto for energy use

The point is that they use energy, and is that energy worth the benefit? No one brings that up when discussing climate - so an ignorance of the value crypto can bring must be the source rather than genuine bookkeeping on value vs. energy usage. If we are really cutting back than I don't see how most video games have any place in our electric grid.

> Machine Learning is computationally expensive, but unlike crypto, is basically constantly trying to make their systems faster and more efficient all the time.

Unlike crypto? This is why skeptics like you get ridiculed. Spending two days researching crypto will reveal that most of the market which isn't into simply holding Bitcoin and waiting or DeFi schemes is solely focused on making ledgers more efficient.

> scaling current crypto up to that levels would bring its energy use to astronomical levels.

Again raw ignorance of the technology, economics and logistics of it all drives your thinking. Layered, custodial approaches, PoS advancements and why that all works seem to be beyond what you understand about the space despite your persistent pontification about the direction it should be heading.

Let this sink in: crypto is money that is backed by energy. Finally a money that is backed by some tangible thing. The systems providing it might be suboptimal, but the basic premise, that this is finally backed by a universally accepted thing, energy, is absolutely perfect.

Just like coal is concentrated sunlight, crypto money is concentrated energy.

Thassal.

That’s nice for you I guess?

> Have you heard of Chesterton's Fence?

I have, but this comes across as a slightly more sophisticated version of the fallback that’s often resorted to by defenders of crypto: if in doubt, claim that your opponents “simply don’t get it” or just proclaim “have fun being poor”. We understand crypto too, we’re just not convinced.

Bitcoin… do they even have any plans to move to PoS?

In short, I’ll believe it when I see it. I certainly hope you’re right, though.

maybe it will require pow regulation to change the risk-reward calculation for eth to finalize its transition to pos.

there are two way to do this currently- multisig wallets and shamir's secret sharing algorithm.

multisig wallet is more widely supported. Gnosis Safe is a popular implementation, but requires multiple transactions per final action.

shamir's secret sharing allows splitting the secret off-chain, which means you only pay gas once. it's hard to find a safe implementation and be confident that it works correctly.

I believe this is viewed as a feature in the blockchain / cryptocurrency world.

That's not how currency works, people have to want your coins for you to spend them. At best, having this perspective relegates Bitcoin to be nothing more than a speculative asset/investment. But if you want it to be more than that and you're just scoffing at normal people who point out why they don't want to transact with you, well then... surprise, they won't want to accept your currency for transactions.

Popularity actually matters for a currency.

The year is 2011. Visa and Mastercard have denied everyone the ability to donate money to wikileaks, despite the fact that they were not charged with any crimes.

And yet, back then, I could still send them bitcoin.

So yes, actually, even though only a small subset of people actually used bitcoin (especially back then!), it provided a very real and immediate usecase, for people who wanted to achieve that usecase of sending money to a charity that broke no laws, that the credit card companies were block payments so.

Everything that you are saying, is immediately counteracted and proven wrong by actual real world examples of people using crypto currencies.

A point that's been raised multiple times elsewhere on this page is that Bitcoin has no backup strategy for when exchanges start getting targeted. It's not a good anti-authoritarian tool because the ability for it to be converted into a usable form exists at the pleasure of governments, who are increasingly looking at regulating exchanges.

Sure, you can send Bitcoin to people who want Bitcoin. Great. The question is, who is going to want Bitcoin under an authoritarian regime if it can't be easily converted into a spendable currency for real goods and services? Does Bitcoin survive when it has to be spendable on its own? Because at that point it's not just Wikileaks that has to accept it, the people/businesses that Wikileaks is buying from and transacting with have to accept it as well.

There's a difference between a currency and transfer mechanism. Bitcoin right now works (somewhat, kinda) as a transfer mechanism because exchanges exist and because people trust it as a transfer mechanism for other currencies.

Involuntary adaptation historically leads to drastic inflation with the trust in the purchasing power degrading. If you are forced to accept it despite low trust, you are motivated to exchange it for any other store of value. And are reluctant to produce stuff for which you have to accept a degrading currency. Both of which harms the actual economy.

Right, and the issue here is that Bitcoin is not spendable without first being converted to a better currency that normal merchants like your grocer will accept. That's Bitcoin's weak point, you clamp down on exchanges and suddenly it can't be used with most merchants.

> Involuntary adaptation historically leads to drastic inflation with the trust in the purchasing power degrading.

I don't mean to jump between threads here, but didn't you just finish telling me elsewhere that Bitcoin would be accepted once people had no better choice of other currencies to use, and that's why it didn't matter whether or not it was a currently attractive currency for my local grocer?

That sounds a lot like involuntary adoption to me.

To the other point, i described the mechanism of adaptation. If the current mechanism of transfer stops working people historically fall back to anything else that works. They have to use something, trade must go on so they choose the next best thing till something better emerges. The involuntary pressure on the value then starts over when that emerging currency is blocked by force again.

Its all just the description of peoples behavior. People dont like loosing money and will act to prevent it.

It's not completely clear to me that Bitcoin would even work for drugs or ransomware if those people weren't then converting Bitcoin into local currencies. This argument really undervalues the role that exchanges play in this process. I can earn a dollar, spend it on something, and the person I give it to as payment can spend that same dollar somewhere else. It never really needs to be converted. Sure I can convert that to other currencies if I want or if I'm trying to bridge the gap between economies in different countries, but importantly there's a rather large section of the economy that works just with dollars.

That's not really what's happening with Bitcoin even on the drug market. People pay Bitcoin for drugs, that gets mixed up to try and preserve anonymity, and then it gets cashed out into other currencies.

> To the other point, i described the mechanism of adaptation. If the current mechanism of transfer stops working people historically fall back to anything else that works.

It seems odd to simultaneously say that Bitcoin will be adopted because people won't have any other options (not because they like how it works), and also that people needing to use currencies that they don't trust leads to inflation and economic harm. Do you expect drastic inflation to happen if Bitcoin becomes the only viable currency for people to use?

It might boil down to the same in the big picture (people having to use it) but people react differently in the two described situations. One is somebody trying to tax you through inflation, one is using something that is tiresome to use. You will be a lot more motivated to find an alternative for the former then the later.

To the other point, bitcoin being exchanged into other currencies is caused in the expectation of what will in the future be exchangeable for goods and services. IE Adaption. At the end of the day its the transfer of credit. Me paying the supermarket in fiat doesnt speak for an intrinsic value in the pieces of paper, but the expectation, that i worked for those tokens in the past or promised to work for them in the future. Thats all currencies are, what we use is determined by force (government pressure), ease of use and adaption.

I hope we are not talking in circles here, i am trying to get across that its important to look at what actually drives peoples behavior.

1) Inflation is inflation expectation, which just means a loss of trust. You expect to get less for it in the future and if everyone does, it happens.

1a) No individual wants to hold their savings in devaluing stores of value. There is a fear of value loss that drives behavior and Greshams law sets in

1b) Nobody wants to produce for a loss. If you pay more then you can expect to get, you might not do it if you are not allowed to raise prices.

1c) Forcing people to accept it (ie price dictates) doesnt really work, see 1b.

2) You need some transfer medium. Our economy works by me having worked or having promised to work for what i buy in the supermarket. Just because one currencies is buged or exploited doesnt mean i no longer have to buy stuff. Adaption is then driven by market chains. I pay the supermarket in those tokens they pay their suppliers who they in turn can exchange for what they need. Those tokens are generally the ones the government wants for taxes and forces people to use, but if governments fuck up to badly, people still have to eat. Same story over and over again.

Currencies are a con game. They are the best thing we have to keep tab of who gets what in what we produce daily. If it gets exploited (me promising to work in the future every day in the supermarket while never doing it), people tend to realize that sooner or later. If you cant cut off the individual doing it the currency gets devalued over time which triggers psychological effects. Modern monetary theory is the assumption that while you cant force people to use it, it wont devalue if people have no other store of value to flee into. I think thats very optimistic if you look at stock prices (another store of value with even less practicality for daily exchange).

At the end of the day, all crypto needs to be is something any market chain can fall back on once the current one is broken so baldy that the chain halts. (Producers stopping to produce)

Governments trying to ban exchanges falls into the same category as dictating that a farmer has to accept fiat for his stuff. If its not profitable, the farmer will stop and i will still have to eat. Adoption of literally any other functioning store of value then gets forced Which leads us to the second theory behind modern monetary theory. That we are technologically far enough to prevent off book transactions. Which would however still trigger the dont produce for a loss part.

In short, printing money wont work forever, as it only works as long as people believe it to. That sets a mechanism in motion that requires another means of exchange. Who ever has something working will get the job to keep the economy running. All crypto have to be is less bad then trust people have in the governments ability to manage the currency.

If your perspective is that Bitcoin isn't going to be a ubiquitous alternative to the USD for general purchases until after the government collapses and no longer has the political power to prop up the dollar, then I have bad news for you about your currency's usefulness as an anti-authoritarian weapon/tool.

Before that, gold and silver were often used as lowest common denominators internationally. See The power of gold: the history of an obsession by Bernstein for that. However metals weren't used everywhere: e.g., China used paper currencies for many years, and giant rocks where used in Micronesia:

* https://en.wikipedia.org/wiki/Rai_stones

Money: the true story of a made-up thing by Goldstein has a good pop-history overview.

Power often didn't come into play for currency choice, and neither did things "implode" as opposed to a gradual shifting in preference amongst currency users.

Power comes into play as to dictating what currency people are forced to use. That the old coins had to be handed back in or dictating the adaptation. They implode when there is nothing backing it what so ever. At its core its Greshams law at work, with currencies or with other store of values.

If i am not mistaken Graeber has quite a few examples of this mechanism.

The rest of us probably actually want an anonymous, "like cash" crypto currency that is resilient against theft (which basically implies some sort of non-repudiation and compensating transactions).

But, such a currency probably wouldn't be great for speculation or black market transactions, which are the killer use cases for bitcoin.

> Chaum published the idea of anonymous electronic money in a 1983 paper;[1] eCash software on the user's local computer stored money in a digital format, cryptographically signed by a bank. The user could spend the digital money at any shop accepting eCash, without having to open an account with the vendor first, or transmitting credit card numbers. Security was ensured by public key digital signature schemes. The RSA blind signatures achieved unlinkability between withdrawal and spend transactions. Depending on the payment transactions, one distinguishes between on-line and off-line electronic cash: If the payee has to contact a third party (e.g., the bank or the credit-card company acting as an acquirer) before accepting a payment, the system is called an on-line system.[2] In 1990, Chaum together with Moni Naor proposed the first off-line e-cash system, which was also based on blind signatures.[3]

* https://en.wikipedia.org/wiki/Ecash

All laws and regulations necessarily take freedom away. That is the basis of the social contract: you aren’t free to harm others.

It is nakedly authoritarian for the government to restrict, at the point of a gun, consenting adults from choosing their own method of transaction.

This doesn’t check out. The existence of good laws doesn’t preclude the existence of (other) bad laws.

> It is nakedly authoritarian for the government to restrict, at the point of a gun, consenting adults from choosing their own method of transaction.

This doesn’t factor in negative externalities (e.g. climate impact).

Thats a bad case of framing. Contract implies willing participants and free choice. You have a story which with you justify forcing people around.

I repeat: that’s the definition of the social contract. You are forced, by threat of violence, not to engage in harmful activities.

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

1) Contract implies consenting parties. Using the word in another capacity is a frame. It being a popular one doesnt change that.

2) Your actions entailing a lot more then just your declared intentions. As in your definition of harmful being quite broad.

Or differently put, you have a story which with you justify forcing people around.

As an example, if you enter into a legal contract, that contract is backed up by the threat of litigation (and by extension, force). If it weren’t, there wouldn’t be any incentive to obey it.

And yes, I do believe that the consensus is that activities with an outsized climate impact are harmful.

And if it were consensus you wouldnt have to force it.

Both "contract" and "consensus" are nice frames for forcing people to do what you think is right. At least be honest about it.

If you instead hold the view that _every single individual_ should be able to opt out of the contract (i.e. should be able to choose not to be subject to the rule of law), then you go back to ‘anarchism is the only form of free government’, which is where we started this discussion 6 comments ago. QED.

For the individual there is no contract and no consensus, you just said so. For the individual its do as you are told at the threat of violence.

Differently put, you just repeated a story which with you justify forcing other individuals around.

You not liking this framing doesnt change that.

edit: I am not repeating myself for fun here. Once we agree that your "consensus based societal contract" is code for "forcing other individuals to do as you tell them at the threat of force", we can look at what anarchists actually say and how much better of a story they have.

How much better is "being born into an involuntary "contract" that dictates your actions at the threat of violence" described as slavery vs "consensual contract"?

All completely unrelated to the implications. Facts generally dont care for implications. You not wanting to hear them dont make them go away.

It seems that we are in agreement on this point?

If so, I'm really not sure on which point you're disagreeing with me (with a healthy amount of sneering, nonetheless, which I might remind you is against HN guidelines).

Is it that the term 'social contract' offends you? You may also replace 'contract' with 'flubbitz' in my argument; the argument still holds. I used the term 'social contract' because it's a well-understood term in the English language ('high school level' according to Dictionary.com).

You argument is that my assertion cant be true because it would mean Anarchism to be the only form of government.

I think this is intellectually dishonest, you dont end up at it as a logical conclusion, after all, there are some practical problems with Anarchism that dont just disappear. If i had to guess why you might think this, it might be caused by you wanting to look favorably on your worldview? (no offense intended, its an honest guess that might help to self reflect)

The description of reality is however absolutely unrelated to the implications drawn from it. Just because you think there is a logical conclusion doesnt change the basic facts and i think we should communicate them plainly. Because doing so might show errors in what conclusions you drew from it.

My initial statement is true unrelated to its implications. I tried getting away from the individual vocabulary to the meaning behind it so we dont get hung up on the wording.

What you describe here (yes i heard of societal contracts before) is the justification of why this is a good and necessary flubbitz. I point out that this is a bit dishonest, because on paper the Flubbitz you describe is a lot closer to slavery then to a consensual contract. You just think its necessary because of (story + implications) which makes your use a common but dishonest frame. You could make a good argument, that "Good and necessary type of slavery" is an equally fitting description, after all, you agree that it entails not giving individuals a choice and forcing them to comply by force. We by no means have to agree on it being slavery but think about the structure we exist in. So:

Statement 1, calling that a consensual contract is a frame aimed at making it more palpable because of (implications + intentions). It is still forcing individuals to do something they never had the chance to disagree with

Your answer to this is repeating the intentions and implications you see. You dont disagree over the basics, just argue that it is necessary.

All of the above might be seen as just an annoying attempt of smearing a righteous worldview. However, my argument is that this dishonesty has substantial implications. Namely

Statement 2, the wording of the contract being quite broad and exploitable. Not just are you stuck in a good Flubbitz, there exist a power structure that has the ability to redefine its terms how it sees fit.

Saying that this would would mean we had to start anarchism is no different then saying due to problems with capitalism we now have to start communism. The problems still exist and have to be dealt with them. Sugarcoating to feel better about a bad situation is counterproductive. Politics is an ugly business, maybe we should think about where the terms of the Flubbitz get interpreted to broadly, no? After all, its not as cuddly and innocent as it sounds.

Re: statement 1, if any single individual were able to disagree, a murderer could just say 'I don't consent with the social contract, because I believe it's within my rights to murder'. At that point, I don't see how you can describe it any other way than 'anarchism', as anybody can then choose the rules that apply to themselves without regard to other members of society.

Re: statement 2, the terms aren't set in stone, they can be changed by the people, i.e. via democratic processes or via revolution.

Anyway, we are going in circles here, and you are also continuing to call my attempt at a good-faith discussion 'dishonest', so this will be my last comment on the topic. Have a good day.

You can transfer money to an escrow smart contract that reverts the transaction if a third party confirms malicious activity.

> They can block transactions if they think it's stolen, and if I report it as stolen I can claw back money from fraudulent purchases.

Certain DLTs allow you to secure your account with SSI/DPKI methods. You can create complex multi signature authorization and revocation schemes.

> With crypto, I have to triple check the address I'm sending coins to because I can't undo it.

With time the UX of wallets and wallet integrations will improve. Many wallets already offer address books, where you give addresses names. Also, decentralized name service is being worked on (but still an unsolved problem).

> With crypto, I have to spend what's sometimes a significant amount of money just to complete a transaction, and transactions can take minutes or hours to complete.

Crypto isn't Bitcoin or Ethereum, crypto is much larger. The field is constantly evolving, and things like txn costs are non-issues for sophisticated architectures.

> I think there's a future in crypto but we're in the dotcom boom days of it where most of the value is in speculation. I'll wait for crypto 2.0.

100% agree. This field is full of speculation. The version 2.0 however will absolutely find impact.

>> With crypto, a software flaw used to steal crypto can kill an entire company. They're largely powerless to stop it once the transaction has gone through.

>> With crypto, a xss attack or a misplaced password can cost me all of my coins.

>> With crypto, I have to triple check the address I'm sending coins to because I can't undo it.

>> With crypto, I have to spend what's sometimes a significant amount of money just to complete a transaction, and transactions can take minutes or hours to complete.

> You can transfer money to an escrow smart contract that reverts the transaction if a third party confirms malicious activity.

In practice, who would you trust with such significant transactions as a company though? If you want to get anywhere close to the level of protection that you'd get in the "old" system, you'd need to thoroughly vet both the smart contract and the third party to be sure that there are no additional bugs in the contract (after all, it's just software like anything else, so there can be exploitable bugs) and that the third party won't screw you over. Some sort of neutral third party that both the buyer and seller can trust due to being known for such trusted transactions...like a bank. How is this any different than what we have, just with extra steps?

It's declarative. There's no vagueness about the state of the transaction, and settlement can be cryptographically proven. This creates transparency and accountability. It's also sovereign. Not every transaction NEEDS this level of customer protection. Paying in person at a restaurant or supermarket can be done with a simple transaction.

Also, some transactions like subscriptions (which are very common) need a cancel functionality that follows strict rules: perfect for a smart contract.

And finally, even your bank won't be able to protect you in many cases.

Not every transaction needs that level of customer protection, but it's very nice to have. Currently, banks that provide consumer protections are motivated to hunt down fraud, which helps everyone, not just credit card users. It keeps the level of fraud overall low.

And while I do agree some transparency would be gained through smart escrow contracts as opposed to credit card transactions, I disagree it's any more "sovereign". For the system you're describing to function, you need established third parties that both you and sellers trust. These third parties may choose to revoke your access, restrict your purchases, etc in the same way banks do now. In short, crypto still has not solved the trust problem.

(Also, while smart contracts do work for cancelable contracts, being able to "issue" a new credit card for each company as a consumer and then cancel it whenever solves it better and without any blockchain this or that)

What's to stop network effects from this just ending up with a bunch of centralized verifiers that in practice make it impossible not to use them for most daily things?

1. I can ALWAYS choose to transact on L1 with others. This option is non-existant in our current system.

2. Because payment provision and customer protection are now split, it means that there can be more competition. You don't need to be a payment provider at the same time.

And most importantly: have you ever had to deal with scams and chargebacks? These "verifiers" (paypal, visa) are often utterly useless, with lots of unclear rules.

It turns out that many people don't actually WANT this "protection". What people want is an efficient, global payment system with strong authentication methods. And maybe a way to lock their account (which is much easier to realize with DLTs)

There's also other things that even make it attractive for governments and financial institutions. E.g. you can use transaction fees as a form of consumption tax (especially valuable if you're the world's reserve currency or that of a major area). Through a country cryptocurrency you could set a federal consumption tax (providing a new and difficult to avoid revenue stream), give everyone free access to banking (wallets), make buying treasury bonds trivial, and other modern things that most of us take for granted but not everyone has access to (5.4% of Americans are unbanked). This would have the potential to simplify taxes but could equally complicate them. Hell, the Fed Reserve could pre-mine coins (for fast transactions and low environmental impact) and even offer interest on wallets through POS. These things could be beneficial.

Also one thing that makes it attractive to governments is that you have the ability to track every transaction, making it a data rich environment. This is an extreme authoritarian route although could make for simple return free filing and "stop terrorists and criminals" (I'm not bullish on that). Though personally I hope it doesn't go this route and we have ZKP transactions (i.e. anonymous like cash). Personally I don't think the gov should see that grandma gave me lunch money. Most cryptocurrencies aren't anonymous/private (not what the crypto stands for), despite what is common belief. I, unfortunately, think that this is a big reason large financial institutions and governments are interested.

But definitely agree on this being full of speculation and uncertainty. There are also plenty of people creating scams and abusing the systems. But just because a big part of the ecosystem is corrupt doesn't mean the underlying technology is useless. To determine that we'll have to wait and see, but there has been shown at least the potential for utility. I'm not trying to say that cryptocurrencies are going to be the future. I'm just also saying that there's reasons that smart people are attracted to the idea other than scams. But that also doesn't mean the ideas will work out.

Did you even look at why they are unbanked?

--- start quote [1] [2] ---

According to the Federal Reserve data, 14% of households making less than $40,000 are unbanked, compared to only 3% of households making more than that amount.

...

“Don’t have enough money to meet minimum balance requirements” was cited by 29.0 percent of unbanked households as the main reason for not having an account—the most cited main reason

--- end quote ---

But sure. Do tell me how magical crypto that expects you to pay wildly fluctuating fees for every single transaction is going to save the unbanked.

Cue in "not all cryptocurrencies in 3... 2... 1..."

[1] https://www.forbes.com/advisor/banking/costs-of-being-unbank...

A related thing that's bonkers to me is how much progress there has been in ZK cryptography.

But people just dismiss the field, saying "ZK existed since the 80s it's a fad", and post yet another Bruce Schneier article.

But also, to be clear, it is hard to separate the signal from the noise. Especially with hyped subjects like CC/BC.

For example, in the smart contract introduce some authorities that are allowed to block and revoke transactions for some time (if the block chain has no support for certified timestamps, use "number of new blocks mined and appended to the blockchain" as substitute).

Let the market decide what kind of protection stakeholders prefer.

Exactly the same can be said about the legal system. People are just a lot more used to the many existing "glitches" of the legal system in comparison to "bugs" in smart contracts.

People keep losing money making coding mistakes that even "gcc -Wall -Werror" would refuse to compile. Examples: type errors like L1 vs L2 (whatever that even means, not a crypto person), wrong number of function parameters causing some sort of currying, allowing that massive ETH heist a few weeks back.

I'm sure there are hundreds of other similar horror stories.

"-Wextra -pedantic" would protect against even more bugs.

(I'm not saying C is a reasonable choice, just that JavaScript was a laughably bad choice.)

It's a piece of code written in an esoteric programming language that even people who are experts in have trouble understanding and spotting errors in.

Compared to actual contracts which are human readable.

People are just more used to and exposed to texts written in, say, Englisch in comparison to code written in, say, Solidity.

Moreover, human languages will always be more simple at expressing human interactions than programming languages. "You pay me 2.5% of the agreed sum on the 25th of each month" will always be infinitely more understandable to an average human than whatever the implementation of that would be in Soldity.

The credit card company can also unilaterally decide to block your purchases if it thinks you have become a bad credit risk or if you donate to a frowned upon political cause or any other reason they arbitrarily decide.

Bitcoin is simply digital property. And like real world property, you can mess up and lose it irrevocably.

If you give your gold to the wrong person or drop it to the bottom of the sea, you're probably not getting it back.

If you under fund your military, and someone else comes in and takes control of your land, you're probably not getting it back.

If you send your bitcoin to the wrong address, or mismanage your private keys such that they are stolen, you're probably not getting it back.

There is a reason nobody goes around trading tiny bits of gold for goods and services. It is useful to have an abstraction that makes transactions easier and helps mitigate risk.

Credit cards, paypal and all the rest existed before bitcoin. I mean it's nifty that I can do it without a single intermediary authority, but it's not that special.

I think the lack of revocation available to bitcoin is a (and I had myself for saying this) 'a feature'. If somebody sends me payment in bitcoin, I definitely know it can't be charged-back for example. It's like sending cash in the mail. Now that comes with the flip side, that they are putting all their trust in me.

The way I see it, people with money want to drive crypto adoption because it will tip the balance of power further in their favor. A fully unregulated currency and transaction system can be much more easily controlled by the people with the most capital without having to let that pesky democratic process getting in the way by letting the poors have a say.

Maybe some people were hyping it as a PayPal replacement back in the pre-2017 days, but that narrative has largely failed to gain followers and is now very out of favor.

The digital gold narrative and layer one of the new global, open, permisionless, and fair financial system narrative have been big and growing ever since I got involved in 2015ish.

In fact, it was only the emergence of the lightning network that proved the layered system approach that has made me consistently bullish for these past 7 years. If we had to scale payments on the base blockchain's 7tps limit, it would absolutely be an absurd, silly speculative bubble doomed to collapse.

Luckily, the layered approach is proving itself and winning.

This used to be the case years and years ago but it's been understood that without some additional layers this will never be the case. It is being billed as a value-store like gold by large institutions on and off of Wall Street though, so that's far more likely (and to be fair has proven to be fairly stable for a few years now).

I'm not saying that it's an impossible problem to solve, but our society and legal system aren't structured in a way that makes it easy.

Your base assumption of knowing or finding them is not strong

Crypto means you will always know who has your money and where it goes.

We can build systems around repercussions for crypto too.

I'm not starting a fight, I'm having a discussion, which I think is the point of HN.

> Crypto means you will always know who has your money and where it goes.

If a stranger in another country steals $500 from me I'm going to have a really hard time doing anything about it. And knowing their wallet doesn't mean I know who they actually are, as those aren't tied to an identity.

What about exit scams? How many people have gotten their money back in those situations, or had any justice? You can make the argument that these people are investing in something that may not pan out, but we have a ton of legal regulations around that with fiat - lawsuits, criminal charges. Elizabeth Holmes is going to jail for misrepresenting what people were investing in. Institutional investing is limited to high-net-worth individuals or accredited investors to keep uneducated people from getting fleeced.

So how is this different from Cash? Except you actually have an idea of where the money is going and can track it, e.g. if it goes to a CEX. This is way better than cash.

Which exit scam?

Don’t get involved in shady schemes and try to double your money.

I encourage you to put a tiny bit of fiat into the system and play with it. Low risk. Buy some Bitcoin. Make a wallet on your phone and transfer it. I think it’s something that needs to be seen to understand. Stop fearing what is designed not to happen.

Yes that is a major double-edged sword but it is ultimately a feature of blockchains (at least the base layer), not a bug. Everyone who has ever been a victim of fraudulent chargebacks can vouch for that. If you want reversibility you are free to create a smart contract which allows that using its own token. Frankly I wouldn't want to use a blockchain where someone can acquire my personal info and then social engineer their way into stealing my money, as commonly happens within the traditional financial system.

Can we, just for a moment, think critically about whether or not this is a good* thing?

As a consumer / client of the credit card company it seems great at first glance. I get scammed? No problem, I'll get my money back. But where does that money come from? Certainly not from the thief. My hypothesis (I'm not an expert in this field) is that it actually comes from you, the consumer, albeit very indirectly and in two main ways:

1) Credit cards companies charge businesses that allow consumers to use them a fee. Business often pass this fee on to the consumer, sometimes even explicitly. For example gas stations usually publish separate prices for gas w/ or w/o credit card. That fee is the main revenue source for the credit card company, and fraud reimbursement is one of their expenses. Expenses go up? Fees go up. In this way businesses (and less directly you) are paying an insurance premium on top of the credit card company's operating costs and profit margin.

2) Credit card companies most likely write fraud reimbursement off when filing taxes. So taxes that they would otherwise pay vanish. If the taxing entity wants a minimum tax revenue, that means increased rates elsewhere (and quite possibly for individuals).

So what's an alternative? Putting more effort in to the prevention of theft/fraud in the first place.

* "Good thing" meaning net benefit to society.

With bitcoin you have both: high fees and no fraud protection.

> Credit card companies most likely write fraud reimbursement off when filing taxes. So taxes that they would otherwise pay vanish. If the taxing entity wants a minimum tax revenue, that means increased rates elsewhere (and quite possibly for individuals).

So what you saying this is better, because when fraud happens you (an individual) can't deduct it from your taxes?

I think the arguments are very weak, much stronger would be that government can't supposedly stop you from paying or receiving payments, but they still can do it in other ways (like prevent converting the money or physically get you).

I think though that (at least for me) ability to reverse charge to stop fraud is more valuable than the above.

But after thinking about it a while I realized that I've probably paid more in this hidden premium than I've recovered from reimbursement. Until COVID hit and I had to refute multi thousand dollar plane tickets that were never able to be used. Will I have paid more for the premium or less by the end of my life? No idea.

What it ultimately comes down to is the value, role, and scope of insurance. That's a massive debate of its own.

I've used a 2% cash back credit card for the last 5+ years. If the CC Company offered to make it 3% in exchange for reduced or inhibited fraud insurance I would seriously consider it.

I've also foregone health and home insurance in some instances.

But I appreciate that risk assessment is absolutely not for everyone.

Why do you bother with either? Just try harder to not get sick and try harder to not have your house burn down. Are you not actively trying as hard as you can to prevent your house from getting destroyed? Are you not trying to stay healthy?

People make mistakes. Our society should not be an unforgiving one that heavily punishes mistakes or can’t handle basic situations like fraudulent transactions. Prevention of fraud is a cat and mouse game.

Even for people who don't care about the credit card incentive programs, the feeling that the credit card company will take your side in a dispute is itself an incentive to do business with companies you don't know very well.

Consider a traveller shopping in a foreign city, or someone buying things from unknown third parties via Amazon, or buying an app from an unknown vendor in an app store. The customer gets certain reassurances from the credit card / Amazon / app store vendor that certain scams are less likely, though not eliminated. And if you do get a counterfeit you might be able to get a refund just because you say you deserve one.

Yes, ultimately the money comes from consumers, but the same is true of advertising and every other business expense. As a consumer you can often get a discount if you shop places with low overhead and pay with cash, but with perhaps somewhat less assurance that you're not getting ripped off.

Fraud prevention isn't free. The police do some of it, but maybe you want more protection than that?

The benefit to society is that it lowers the risk of making transactions, so people actually spend their money. The inherent risk in crypto transactions has a (very slight) chilling effect on people's willingness to buy things with it. Why would you pay for something with BTC when you can use a safer payment method?

Also, let's not ignore the fact that crypto has fees too, and few people are paying taxes on the money they make from them, so there's little difference on that side of things except the benefit to the consumer is missing.

As for net benefit to society, it's not the first thing I'm thinking of when I've had my credit card skimmed. What I'm thinking is, thank goodness there's some modicum of protection for me and I haven't been wiped out with no recourse, which could be the case with crypto.

Is it good for the consumer to have these protections? I think people would much rather have the safety net of the financial institution and maybe need to pay a passed on fee at a merchant than not pay a fee and risk being completely drained of funds.

Is it good for banks? Not really, I think? Regardless of whether they're writing it off on taxes, it's still money that's leaving their hands. That does leave the point about them being able to dodge taxes, but, if there's one thing corporations are good at, it's dodging taxes.

--

Forgive typos, on my phone.

You sound like Gov. Abbott. Don't worry about abortion in the case of rape, we'll just get rid of rape.

Why didn't we just think of that before? Just get rid of crime, and there won't be any problems!

I left that little blurb about reducing fraud at the end of that post because I was trying to anticipate the (shallow) counter-argument: "what's the alternative"? "End"ing fraud, by the way, would be a great alternative to the implicit insurance premium we pay if it was at all viable.

To give you some examples of what "more effort in to the prevention of theft/fraud" looks like cf: https://sgp.fas.org/crs/misc/R43925.pdf

Look, I agree we should try harder to reduce crime. But arguing having insurance against fraud is bad and we should instead just try to get rid of crime seems incredibly naive. Sure, there are things which could potentially be done to help reduce fraud, but there will still be fraud. In which case the value from the insurance is still >0 for the victims of said fraud. And a ton of Americans will still be a victim of fraud even if we try harder with technology available today. If we were to move to all Blockchain transactions, those people would have no recourse.

But yeah, I do think clawbacks are a good thing.

Snark aside, my 70yo dad fell into a very stupid fraud where someone called him and convinced him to send money from his bank account to some other (this is using Mexican Gov digital money transfer network SPEI). After he did and realized it was a scam, he called his bank and they basically told him that they couldn't reverse it, nor do anything.

So, bank transactions are not as revocable as they want you to think, for the lay person at least.

Santander [0] agrees with you.

[0] https://www.bbc.com/news/business-59826345

It is all but impossible to block a crypto wallet from receiving funds.

There are pros and cons everywhere.

For example: https://www.msn.com/en-us/money/companies/feds-seize-dollar3...

This not much of an issue in pure Mimblewimble based blockchains, where sender and receiver interact to construct a transaction, and the receiver essentially has to prove the ability to spend received funds before the transaction can happen.

The two responses to my very simple question prove to me that crypto is a fad that will fade into the background. Maybe a few big players will use it as their protocol, but the average consumer is never going to think about it.

This is mainly with Smart Contracts or Hot Wallet Storage specifically. A bug in a Smart Contract can be detrimental considering that it's code is immutable. A Hot Wallet could be misconfigured or exploited by a remote attacker. This is why it's important to use cold storage methods for larger amounts of funds, typically using a paper wallet, or even memorizing the seed phrase as a last resort. If you're an institution, then you should be employing institutional level security (though, I don't really see this happening as often as it should). You can even employ segregated witness to divy the funds amongst contract holders.

> They're largely powerless to stop it once the transaction has gone through

That's pretty much the entire point. This isn't a bug. It's a feature. It's up to the end user to determine the execution of the transfer of value from one to another on the ledger. The ledger can only ever be written to; making it immutable.

> With crypto, a xss attack or a misplaced password can cost me all of my coins.

I mean, this can happen anyways, even with the current system. If you get phished, click on a redirect, execute a payload locally, or whatever. Not really sure how this is even considered a cryptocurrency specific issue; It's a fairly universal issue as it is already. Also, you're more likely to see something like this with anything utilizing a Smart Contract.

> With crypto, I have to triple check the address I'm sending coins to because I can't undo it.

Well, not if you're using QR Codes. Remember those? They've been around for awhile. I would do this with my Account and Routing numbers if I'm wiring money or setting up a direct deposit regardless. I find my self checking the numbers to make sure I get paid. Even though the bank can reverse it, it would still be a pain. Knowing I can't reverse a crypto tx makes me a bit on edge, yes. It's, again, a feature... not a bug. If you have that much doubt with a transaction, then you should be using QR Codes instead. I personally find them to be convenient. Otherwise, I'm putting the public address in my clipboard and pasting it and then checking the first 6 and last 6 hex symbols. If they match, I'm happy.

> With crypto, I have to spend what's sometimes a significant amount of money just to complete a transaction, and transactions can take minutes or hours to complete.

The more congested the base layer of the network becomes, the more likely the fees are to be driven up. Bitcoin has a side-chain called the Lightening Network to mitigate this while focusing on processing micro-transactions. You can basically send 10 Sats for the cost of 1 sat. Some tx are basically free because of how the network is setup. With Ethereum, the base layer can process upto about 15 tx/s. Bitcoin is about 7 tx/s. Lightening can process up to 100k+ tx/s. That's 4 times the speed of either Visa or Mastercard. If you're executing a smart contract on the Eth network, then things can get expensive because you're using gwei as gas to execute the smart contract which is used to deter bad actors from abusing the EVM. Solana can process a 50 tx in about 500 ms which is impressive to be honest.

> I think there's a future in crypto but we're in the dotcom boom days of it where most of the value is in speculation (and I suppose illegal purchases on the darknet). I'll wait for crypto 2.0.

Less than 2% of crpyto is used for criminal activity and that's mainly because you can get caught using it. A lot of people believe that it's completely anonymous when it's not. You're usually KYC'd somewhere and the only way to avoid this is to do direct p2p transaction without having it linking back to something that's tracable. Bitcoin is a criminals worst nightmare simply because it's a public ledger which anyone can audit.

> their usage as currency will be limited unless the inefficiency problem is solved.

This is common point that's brought up as well and was in the article. In PoW, this inefficiency is not a problem. It's Bitcoins network security to maintain it's own decentralization. It's the base layer and you can build on top of it to address the transaction speed as well as the network congestion; Lightning Network being a prime example of this as a potential Layer 1 solution to Bitcoins Layer 0 solution.

I feel like alot of people are missing the forest for the trees. I've done my research. Have you?

There is no crypto 2.0