Unless crypto becomes actually useful for real world transactions, it has to be converted to fiat currency for use, and all the exchanges or technologies that do that conversion are subject to the will of governments.
There was literally a post on HN today in which a government proposed to curtail crypto transactions for entities it considers hostile: https://www.coindesk.com/policy/2022/03/17/senator-elizabeth...
Recently another government seized crypto assets from those it considered adversaries: https://www.coindesk.com/policy/2022/02/16/canada-sanctions-...
And those are just actions taken by relatively benign governments that use regulation to accomplish their goals instead of force. It's tough to think that government-level actors couldn't just disrupt the crypto networks directly if they so desired, either through cyber attacks (ie denial of service or exploiting vulnerabilities that almost certainly exist in the crypto networks). Or in extreme cases even just taking control of network infrastructure directly. Or shutting off the internet. And no, Starlink will not save crypto users against adversaries who can jam EM communications.
Governments are powerful and to think that crypto or anything in the internet space is resistant to that power in the most extreme situations is not wise.
>Unless crypto becomes actually useful for real world transactions, it has to be converted to fiat currency for use, and all the exchanges or technologies that do that conversion are subject to the will of governments.
This is true, except that in some places governments are too inefficient to even control those things. The IT people works for them for pennies, and got there because they are the cousin of some politician. They are also not very capable, otherwise they would work for someone who paid them better and on time. I'm using my country as an example, where people trade them for money in fintech wallets and not banks, since they are more difficult to control despite also having a KYC process.
>Governments are powerful and to think that crypto or anything in the internet space is resistant to that power in the most extreme situations is not wise.
Other decentralized technologies simpler than cryptocurrencies prove this to be wrong. And I'm talking about torrents and some other kinds of P2P networks.
Those things are used mostly for piratery, they make companies lose money, so there's an incentive for governments to take them down, yet they fail to do so. On the other hand, crypto is seen as an investment by people who actually own a lot of money. Investors from big banks sometimes have at least a very, very small portion of their portfolios on it because it would be dumb to not take that risk for just a small amount of money they can afford to lose. So a government might not be that much focused into taking it down since a lot of "important" folks of the business industry are on it too
The only thing I think the US government might be truly worried about are the so-called stablecoins. Having an alternative to the USD is risky for their monetary control, since the supply can be artificially expanded with cryptos like UST which is a decentralized stablecoin, instead of centralized and backed by real dollars
Currency is not an investment.
Yes, people trade currency, but for very small margins and as a hedge. When a currency swings 10,000x as crypto has done, it typically only happens in countries whose economies are going belly-up, see: Zibabwe.
If crypto is an investment, that means it is fluctuating dramatically, and if it is fluctuating dramatically, it isn't a currency (or it is a currency of a failed economy).
Don't believe me? Then I would expect you to be investing in stablecoins. If you only invest in Bitcoin and Ether and not stablecoins, then you are playing the stock market, because stablecoins are kept stable the same way countries can float their currenct to avoid wild swings in valuation.
I believe crypto will have a use in the future, but only with stablecoins, similar to commercial paper. As it is today, it is a scam for gambling and illegal activity, and a few people who want penalize their impoverished foreign relatives by sending them tokens that might be worth much less the day after they are sent (the cost of sending >US$10,000 is peanuts compared to the loss of value due to BTC/ETH fluctuations).
Yes, that's unintentional, but it is an investment anyway. Yes, it's also a gamble, like any other kind of investment. Every investment has its risks. This is a very, very risky one.
>Don't believe me? Then I would expect you to be investing in stablecoins. If you only invest in Bitcoin and Ether and not stablecoins, then you are playing the stock market, because stablecoins are kept stable the same way countries can float their currenct to avoid wild swings in valuation.
Of course I believe you, I'm an argentine. In my country people is forbidden to buy other currencies. They "can", but they are limited to 200 USD every month (minus the consumption they spend by paying Netflix and Spotify with credit cards) and it's taxed. And I'm not taking into account a lot more rules. So it's mostly obligatory to use our local currency that loses 50% of its value every year.
We even have a black market for the dollar. It's sold for twice more from what the government says it's worth. When you Google for our currency, that's just the official value. valordolarblue.com.ar shows you the real value for a dollar in pesos, that's how much it's sold for in the streets. The official value only exists for paying us programmers and other exporters half of what we earn when we work for foreign companies (and that's before the 50% of taxes), as we are obligated to convert all our money to argentine pesos. The situation is even worse for farmers, they pay them like 60 pesos per dollar. So yes, people in my country use crypto mostly for the USD stablecoins. It made the life of a lot of people better too, as the best "investment" here is saving dollars.
>I believe crypto will have a use in the future, but only with stablecoins, similar to commercial paper. As it is today, it is a scam for gambling and illegal activity, and a few people who want penalize their impoverished foreign relatives by sending them tokens that might be worth much less the day after they are sent (the cost of sending >US$10,000 is peanuts compared to the loss of value due to BTC/ETH fluctuations).
I do so too, but I don't think that the investing / gambling side will disappear. Like it or not.
But I also think that tying the value to the US Dollar or any other currency is disappointing and a bad idea, as it's keeping itself to being marketed as such and, as I said, causes a competition against the Fed. And the disappointing part is that crypto shouldn't strive to be just a dollar or an euro.
Having an stablecoin without pegging it to another specific currency would be ideal.
You don't have to find either of these use cases acceptable to understand the risk at play when the financial system can be used as a mechanism of control used to try to snuff out things the establishment upper class doesn't like without going through proper legal channels and kept in check by our elected representatives.
What you’re asking for is a way to make these disproportionately illegal transactions on demand at scale. This isn’t a position on technology, it’s a position on government.
As it stands, I remain pretty unconvinced that cryptocurrencies writ large solve this kind of (at least, what I call) "borderless" free speech problem today. They simply don't do enough to frustrate the state or the incumbent banking institutions, mostly because they aren't actually peer to peer enough where it counts. Notably, I can't transact with other people on the network with only my smartphone or a small computer communicating 1000's of kilometers over the radio using digital modes without also relying on, e.g., an exchange to act as an intermediary.
How do these systems handle large-scale network partitions where an entire geographic region stops announcing its prefixes to the wider Internet but continues to process transactions and append to the blockchain within its borders? Does the blockchain fork? How is that fork resolved? (Is it ever resolved? The existence of Ethereum Classic implies to me that it isn't, or at least isn't required to be, and I find that prospect frankly frightening.)
The tank analogy is quite apropos, I find. Without a convoy of trucks bringing in fuel, the tanks stop. An adversary powerful enough to sever your connection to the outside world (whether in terms of electricity to keep things going or network connectivity) for the purposes of transacting seems like quite the Achilles' heel.
[0]: Modulo other rulings. Modulo the impartiality of SCOTUS.
https://www.openssh.com/releasenotes.html
* ssh(1), sshd(8): add the [email protected] hybrid
ECDH/x25519 + Streamlined NTRU Prime post-quantum KEX to the
default KEXAlgorithms list (after the ECDH methods but before the
prime-group DH ones). The next release of OpenSSH is likely to
make this key exchange the default method.
This might not require a full application of Shor's algorithm, as studies continue with statistics from quantum annealers.
https://www.forbes.com/sites/arthurherman/2021/06/07/q-day-i...
If this happens, cryptocurrency as currently designed collapses.
On the mining side, miners would pick a new algorithm, vote, and then cut over when approved. Although, if a post-quantum technique allowed faster mining, a change to the mining algorithm may not be needed. Bitcoin would notice the faster hashrate and increase the difficulty, miners would rush to buy quantum hardware. As long as quantum hardware is generally available for purchase, we'd still have decentralized mining.
On the wallet side, we'd need miners to vote for and approve quantum safe wallet operations. Users would need to update their software and their wallets. I'd expect some stuck wallets (like the initial blocks, lost keys) could get spent. This is sort of like someone recovering gold from a sunken ship.
I agree this seems like an existential threat, but there is an update path. Unless there's a sudden onset where no-one has time to react, I suspect the miners would reach consensus. Some users may be slow to update their wallets, and may suffer losses.
I think we'd eventually see recovery of the coins from the mining of the initial blocks, which are generally believed to lost/stuck. This would sort of be like recovery of gold from a sunken ship. I've heard that recovery of those coins would destabilize Bitcoin value, due to the large value. However, unless they are all unexpectedly recovered at once, I'd expect the market to "price that in" gradually as recovery begins.
I'd expect many cryptocurrencies not to survive the transition, although I'm a crypto skeptic and I don't expect hype/scam coins to survive anyway.
[1] https://blog.coinbase.com/bitcoin-s-elegant-upgrade-mechanis...
One thing seems certain, waiting for NIST is folly.
https://stribika.github.io/2015/01/04/secure-secure-shell.ht...
https://csrc.nist.gov/Projects/post-quantum-cryptography/rou...
"Formal complaint regarding 8 June 2021 incident - 2021.06.15, Daniel J. Bernstein
"Executive summary. A week ago Dr. Daniel Apon from NIST publicly accused me of professional misconduct. Specifically, he accused me of initiating private contact with NIST so as to provide false information to NIST regarding the timing of an upcoming announcement relevant to NIST’s ongoing decisions..."
To wit: it may be very difficult for me to ensure that the smart contract does not contain a malicious payload. Even if we pinky swear to there being no malicious payloads. Perhaps even if I read the code in an effort to personally confirm that there's no funny business going on.
This very problem is a big part of why smart contracts are becoming a popular tool for confidence artists. There seem to be a lot of people who are very (one might even say unreasonably) confident that the fact that smart contracts can't be altered after the fact makes them inherently trustworthy.
Yes. In the early days, people were thinking retail sales of illegal drugs. That turned out to be a petty cash application. What really powered Bitcoin usage was getting money out of China despite exchange controls. There have been disclosures in recent years which established that the money laundering sector was much larger than previously thought.[1][2][3] Just a fraction of that moving through the cryptocurrency system may account for most of the growth in Bitcoin.
[1] https://www.icij.org/investigations/panama-papers/
You'd be lucky to have working computers, power sources and internet connections in a hostile environment. Cash and physical assets are king in that domain.
Governments can order exchanges to halt trading and liquidation, or demand haircuts, and 99% of people who hold cryptocurrency won't be able to do anything about it.
It is completely reasonable to have some assets that the government cannot take away from you without actually going through the court process, putting the screws to someone and arguing to a judge that a crime took place. And that inflates in a predictable, controlled manner.
The last 3 years has convinced me that I will own crypto by the time I die. Not bitcoin - indeed, I don't know what protocol it will be yet. But something.
This doesn't mean anything. Lots of things "need to be there" and aren't. If it doesn't work, it won't work, even if you think it should work.
I would not personally be quite so confident that a state actor (or a well-capitalized non-state adversary such as a criminal organization) would not have the ability to severely curtail, if not outright eliminate, some other party's ability to execute cryptocurrency transactions. Most of us have no idea what unexploited vulnerabilities these sorts of organizations have found, and they didn't get to be as powerful as they are by habitually playing an ace up the sleeve when a three will do.
Compare with the proverbial suitcase full of cash. From a security perspective, it has the interesting property that transactions involving one don't have to be publicly recorded and processed on a public, global, openly accessible peer-to-peer network in order to complete.
Indeed, but it also has drawbacks. You need to find someone with capability to use that much cash without suspicion.
Also, I think most of the money laundering is made across borders, from people willing to enjoy their wealth in a country different than the one they earned it. Think money earned to US to be used in Mexico, or nationals of a heavy currency export regulated country (rmb, ruble). Customs are very efficient at looking for cash moving through these borders.
Hence why governments around the world are pushing towards cash free societies.
Physical cash is where most illegal (whether you think it's the good illegal or the bad illegal) transactions happen.
I believe the possibility of breaking the law is a necessary escape hatch against authoritarianism. Back in the day this was achieved by physical limits (omnipresent surveillance & control just wasn't physically possible - the tech just wasn't there), nowadays this is becoming more and more difficult - which is great if your government is sane but recent events suggest that even relatively stable governments can quickly turn sour.
This is a very valid use-case when you need to transact against the will of a powerful adversary such as governments. It needs to be there and needs to be protected just like free speech needs to be protected.
However, day-to-day, if you're making transactions that the government approves of, it's better and more convenient to rely on said government to protect you and end up using a much more efficient (in terms of transactions per second, fees & energy usage) and convenient system such as credit cards.
Crypto is like a tank - useful if you need to go into battle and defend yourself, and while it can be used to go buy groceries at the mall, it's not the most convenient. When you're not in battle, you're better off just using a normal car and relying on local laws and subsequent enforcement to deter anyone from harming you, which, at least in civilized countries, works the majority of the time.