It's more like blaming a water utility company that doesn't give potable water, and its supporters tell you "but you can always buy a bottle of water from the store. Or maybe dig for water yourself!".
Yes, one can build the "fraud prevention" and other measures on top of blockchain. But then you have a financial institution just like a bank, and you can drop the blockchain part - anything it "solves" can be solved much simpler and with 1000x less energy once you have the other trappings of a financial institution.
Neither the "full blockchain solution" would, once the fraud protection and other safety checks are added.
Which is the point I've made.
You can't simultaneously claim the benefits of blockchain being without protection, and respond to the criticism about the dangers with "it's just a toolkit, you can add protection in layers above". Or you can, but you're claiming the pros on both sides of a XOR feature set.
Outside of that use case crypto is a speculative investment vehicle. Maybe BTC will replace gold as a store of value. But that is just speculation.
Well, so is Git!
The big difference is that the blockchain requires all transactions to appear on all nodes, and has a wildly expensive and slow consensus phase.
Thing is, these two features provide great negative utility for the average person and no positive utility at all unless you are an anonymous entity wanting to transact with other anonymous entities with no legal framework at all.
I have experienced bank accounts of mine and those I know be frozen, emptied without warning due to identity theft, a false criminal accusation, forgotten debts, etc. I also know very well that banks have data sharing relationships with Visa, etc, that form a full map of where and when you spend money to aid data brokers in selling changes in your behavior to advertisers. Do you really want metadata on every purchase you make at a sex shop or a pharmacy stored in databases and sold to the highest bidder?
Cash has limits though. It is impractical and unsafe to put cash in the mail when paying friends back for dinner after we all go our separate ways or if I am buying something online I wish to be anonymous like a VPN subscription. In those cases Bitcoin solves a problem and I have legitimately used it on a regular basis for many years. I never use venmo etc and friends and I regularly settle debts with Bitcoin.
I would prefer not to have to carry around cash all the time so when possible to use Bitcoin in retail, I do. I have used bitcoin to buy drinks at bars in Germany, electronics at big box stores in Japan, meals at various restaurants, and coffee hundreds of times. I can also get cash from Bitcoin ATMs worldwide without having to deal with a bank denying me my own money because I am in an unexpected country.
Bitcoin, when purchased with cash, gives me all the privacy of cash with all the portability of a visa card.
Your bank account has been frozen and emptied at least four times?!
Surely the common factor in these incidents is you!
Mine was frozen once over a clerical error. I have also had mine frozen a number of times for trying to make medium sized cash withdrawals when traveling. This is a common anti fraud tactic but it is very annoying when I can not spend my own money. I do not carry a phone and even if I did waiting on hold with a bank in front of an ATM in a random country sucks.
Several people I know, including family, have suffered identity theft and had accounts drained that way. I know someone else who had an account frozen due to a false accusation.
Someone I know had theirs drained with no warning due to a decade old forgotten debtor getting a court order. I know others who have had accounts frozen or dismissed because the bank did not like the nature of their business. They commonly do this for legal cannibis, adult, gambling, or crypto asset business they consider a brand risk.
In short banks have a lot of nasty edge cases I like to avoid.
Similarly when you get BTC in exchange for cash or p2p exchange without KYC then those transactions are no more tagged to you than the list of transactions in the register of each vendor you pay cash to.
Even when you use cash, serial numbers can be logged on withdrawal and deposit to track movements of cash and secret service does do this when they are targeting someone.
Being anonymous with cash and Bitcoin is similar. Do not identify yourself when you obtain or spend your cash/bitcoin and then logs of their use, which do happen, are at least not directly tied to you.
Bitcoin has the added advantage of each vendor usually generates random withdrawal addresses so no one from the public even can easily identify the recipients, unlike with a credit card transaction where both sides are IDed and logged.
Neither cash or Bitcoin will stop someone tailing me on foot and tagging transactions to me but my primary adversary is surveillance capitalism and it would not be profitable for them to go that far.
Similarly I am also paid directly in Bitcoin by some of my clients I do consulting for so neither side needs to fuss with bank transfers. Lastly I can always buy on an exchanges, convert to Monero, then back to Bitcoin to de-associate the Bitcoin to me.
So you do KYC and AML on one exchange, transfer BTC there, exchange to Monero, then transfer those to your own wallet, do KYC and AML on another exchange, transfer the Monero there, and exchange it back to BTC?
But I like to think this is like buying medicine from a street dealer. Maybe it's faster or more convenient, maybe you get the same quality. But those "maybes" are clearer for people when buying medication from a back alley. It's not at all visible to people using crypto as a replacement for their classic currency.
Every time there's an exchange hack, a massive fraud, a price crash, etc. more people start feeling the drawbacks and push for the kind of regulation, oversight, supervision that today are antithetical with cryptocurrencies and its associated parties.
A person probably wouldn't use bitcoin at the grocery store to buy milk, but it works better for sending grandma (located in a third world country) a bunch of money.
You deposit and withdraw Kenyan Shillings, or your local equivalent, just as if it were a shilling-denominated bank account.
In fact bitcoin makes it harder[1], so we probably need MORE people doing these investigations.
So we actually maybe need millions MORE people to work these things.
[1] mostly. In some ways also easier. But probably on net harder.
Even when fraud occurs, the recipient is a known actual person. Know your costumer rules successfully prevent these kinds of scams to a sufficient degree.
Banks will also monitor transactions and will delay execution when there are signs of fraud. That's why so many scams rely on other methods of payment, especially gift cards, western union and... Crypto coins.
Not really. It's easy enough to set up fake identity that people who go and scam people on the internet usually do that.
I mean crypto and gift cards are way worse than banks of course. I'm just saying that there's no expectation in Europe that most payments are reversible.
These features and capabilities are usually implied for financial systems. It's really just common sense.
Blockchain currencies are basically counterfeit-proof, digital cash with an audit trail. comparing them to credit cards is an apples:oranges comparison.
Regulation around "cash" transactions are quite strict here (including the definition of a verbal contract etc.), so unless one is engaged in "under the counter" activities, you can benefit from similar protections. Of course, in contrast to credit cards and online transactions, recovery from cash fraud/mistakes is more complicated since you'd need to contact the authorities/the other party yourself and deal with the whole process "manually" (instead of just clicking a button in your bank's web portal and letting them take care of it)
There's no part of the article that ever said crypto people aren't aware of this problem, it pointed out the problem. It's a problem. "I have intentionally chosen a path that runs into this glaring problem" is not helpful or interesting at all. If you have nothing more to say beyond "they know", then I guess I don't have anything more to say either.
Obviously you don't think it's a good trade-off, but they do.
I’m not a blockchain die-hard, but there are some solid practical uses. For instance, in trade finance where multiple parties in an environment with limited trust have to settle a complex transaction asynchronously, blockchain / DLT can really help. Have a look at Corda/R3 as an example; there’s a reason why big financial institutions are investing a lot in this space because it can really drive efficiencies.
As with most things in life, the answer is seldom black or white. The same rule applies to blockchain as well.
When does that happen?
Banks act as facilitators of such as transaction on import / export side, often have to interact with shipping / logistics and insurance providers to ascertain that goods have been sent in order to clear and settle payment from buyer to seller. It’s an entirely event-driven and very paper-based business with lots of complex processing logic which can very well be replaced by a smart contract, especially because each party may not trust each other a lot (eg exporter wishing to audit transactions of the importer’s bank). A blockchain works quite well for this type of problem.
Disclaimer: I do not work for Corda.
I don't think this argument is nonsensical. It's true that these things were not goals.
The author's point, I think, is that obviously they should have been. Because this is how people lose money. You can't just call all the most important aspects of monetary transfers "out of scope" if you're trying to create a system for monetary transfers.
> Clearly people feel [the loss of reversal] is a price worth paying.
I don't think so. I think the vast majority of even pro-bitcoin people are actually either in the camp of not realizing the full meaning of this, or they don't truly understand that there's no recourse, until it actually happens to them.
Certainly people in general expect "the bank" or "the police" or "courts" to "just fix it". If cryptocurrency people were honest about this in their MLM pitches then people would tell them to piss off.
> It can be used for storing and (slowly) transferring value in a decentralised way, and that is really the main idea.
Well, "store of value" is the idea now, now that the initial plan proved a massive failure.
Different people have different perspectives. Clearly a lot of coiners think it's totally fine to put the burden on the user. Of course the author is free to disagree, but it's silly to pretend there is only one possible set of priorities.
The governments of the world - pretty much all the major ones - are behaving in a completely irresponsible way. "Trustless" isn't something to be applied to a neighbour. It is a polite way of saying that people are really sick of the lies emanating from the halls of power about what good economic management looks like.
It still baffles me that the official policy is that prices should rise exponentially. I haven't seen evidence it is a good policy and it is weird that there are no serious political challenges to it. Easy to explain, but still weird.
In a sense, it admits that traditional banking has the advantage in that regard because it has things like traceability, reversibility, insurance, accountability, and legal guarantees. These have been put aside on purpose in the crypto market, and while I think I understand the whys and wherefores, I don't see giving up these consumer protections is worth it.
Well, not to me anyway, but I'm not getting rich off of crypto.
...so therefore crypto is better?
And if you're afraid of cancel culture coming to a financial instrument near you, why would you want to put all your financial transactions on a permanent record? Sure, it's pseudonymous, but your entire purchase history is one hell of a fingerprint.
Traditional currency has a perfectly anonymous payment method: send cash.
Crypto currencies being volatile is not inherent in the technology. You can easily imagine a crypto currency pegged to something like gold, ideally not run by scammers like in the case of tether. The purchase history is also a non-argument, that's not inherent in the concept of a crypto currency.
Also, the problem with inflation is not really volatility as such, it's depreciation. Having a currency that jumps up and down by a factor of 2 like bitcoin in the last year is still better than one that melts away, so if BTC can remain as "stable" as it is now that would be pretty acceptable
How so? It has no control mechanism to prevent it. I get that the brakes (central banks) don't always work perfectly, but removing them entirely is an odd choice.
> Having a currency that jumps up and down by a factor of 2 like bitcoin in the last year is still better than one that melts away
To whom? When?
> You can easily imagine [...], that's not inherent in the concept of a crypto currency
It's easy to win an argument when you compare a real world system to one that doesn't exist.
> To whom? When?
To most people. Look at BTC/USD for the last year, and then look at a currency during hyperinflation, that loses 10% a day, every day. Which would you rather hold?
Speaking of cherry picking, the hyperinflation events that you mention happened a few times over centuries, but they happen on a quarterly basis in cryptoland. And somehow that makes crypto better?
How does "everyone" benefit from a massively unstable currency? Who actually desires money that can double and halve in value overnight, and why?
> Who actually desires money that can double and halve in value overnight, and why?
As I said twice above, if you live in Zimbabwe, or even Argentina, bitcoin is probably preferable to the state currency. That's really all I'm saying. Technical hyperinflation is not all that common perhaps, but even at 10-20% a month it gets hard.
But it's not a binary question. Some people are already "giving up consumer protections" in some cases. And not just by buying crypto. Ordering stuff from Wish is also a gamble.
> I don't think protection against human-factor scams and frauds was ever a goal, you certainly never hear it as an argument.
The problem is any payment system DOES need that. And the competition has it.
Abstract goals without connection to real life needs are nice. Not useful.
It's like saying that any messaging system needs to be traceable, so you can see who sent you something. That is convenient and useful, but we survived until email without it.
If you get a contract/receipts you can use the legal system to attempt to recover your cash. With blockchain that's technically impossible?
There recently was a piece of news about some blockchain believers who locked themselves out of 20 million in <random crypto coin> because they used a "smart contract" and their code was buggy. Both the payer and the payee would like the transaction to go through but neither can do anything about it.
Edit: random link
https://vnexplorer.net/aku-ethereum-nft-launch-ends-with-34m...
Doesn't matter if "it was a goal".
It should have been a goal, and it's necessary (doesn't have to be perfect, but absolutely has to exist) for anything wanting to be used as a means of exchange in a modern economy, outside of Mad Max situations and speculation.
>Clearly people feel it is a price worth paying.
People felt that for smoking too. Then they didn't. And tons of people are just misinformed with Amway-style proselitization, and when they lose money without recourse they are surprised...
Why are you the one to decide what should have been a goal? And aren't you aware that a lot of people do live in Mad Max like scenarios? Even in a modern country like Argentina the currency is in free fall, not to mention many unstable African countries.
Not to mention that Trudeau let the cat out of the bag, you can't even trust that teddybear of a country with your money if you say something the government doesn't like.
Notice how this is an absurd strawman. Also how this is not an argument.
I'm not claiming "I am the one to decide", if it wasn't obvious.
I'm stating my opinion on what should have been decided, followed by some arguments/qualifiers on where/why it should be applicable.
Generally, when people say something, it's their opinion. No clarification is required on that, it's a convention of human discussion. Even though people state things should be X or Y, they don't necessarily make the claim that they are the sole arbitrers of the ultimate authority on a subject: they convey their take on what should be/have been done.
>And aren't you aware that a lot of people do live in Mad Max like scenarios? Even in a modern country like Argentina the currency is in free fall, not to mention many unstable African countries
We've had inflation and catastrophes and we managed to move value without the blockchain.
>Not to mention that Trudeau let the cat out of the bag, you can't even trust that teddybear of a country with your money if you say something the government doesn't like.
You can trust the blockchain even less then.
Nobody claims that life is impossible without crypto, we were talking about reasons and situations where it makes sense, and one example is when fiat currencies fail or are inflated away. No, it's not the only solution, but it's a solution.
>> Not to mention that Trudeau let the cat out of the bag, you can't even trust that teddybear of a country with your money if you say something the government doesn't like.
> You can trust the blockchain even less then.
That's objectively false. Bitcoin, for example, is not controlled by any single entity, especially not any political entity, so obviously you can trust "the blockchain" not to steal your money for supporting the wrong politics, that can't even happen in theory. But we did just see it happen in the regular banking system in a supposedly free democracy.
It can only do this for as long as ownership of a certain private key is valuable. Some keys have shown to hold value for ~10 years (those tied to the BTC ticker symbol), but some keys have gone from valuable to worthless pretty quick. The fact that you have to bet on holding the right kind of private key I think makes it pretty clear that blockchains do not, in fact, reliably store value.
> transferring value in a decentralised way
There are no longer any decentralized blockchains that also have significant value (ie. worth transferring). For instance, the figurehead known as Bitcoin has been centralized for a while [0].
[0] https://freedom-to-tinker.com/2015/07/28/analyzing-the-2013-...
It depends on how many parties, relative to the whole, are coordinating. It is a very strong indication when 2 devs are coordinating a fundamental decision for thousands of people.
You have to realize also that "bugfix" is subjective to human judgement. It's often unclear whether a given behavior is truly contrary to intent or not, and it takes humans in authority to judge this for the rest to avoid perpetual conflict.
And there's a reason you never hear it as an argument - the lack of such fundamental protection is a massive weakness of these blockchain currencies. The extremely technical savvy early adopters do not care, because evading authorities is actually an objective and they profit regardless as long as the value of their holdings goes up, but protecting normies from scams is actually kind of important if you want to be used as a "normal" currency rather than a speculative asset.
A central authority with the ability to deal with bad actors is a fundamental aspect of making fiat currency actually work in the real world.
If people really thought it were a price worth paying, everyone would be using Ethereum Classic instead of Ethereum.
One example of those smart contracts was involving a trusted third party into a payment. The smart contract in that payment would only clear if two parties signed off on the payment. That's definitely a way to avoid fraud.
I was never asked and I really don't think phone scams and ransomware, which are both enabled by cryto currency, is a price worth paying. In fact, I think it's a major disservice to humanity really.
I bring that up on all Blockchain discussions.
This "could" happen, but in practice it rarely happens because the money has moved on as soon as it hits the account. Additionally, for many types of fraud, there has to be an actual court order to get a bank to take action. So the argument is predicated on a false assumption.
But yes, there are plenty of other types of transactions, like gift card scams, that you would not be made whole for.
That's the advantage of a high trust society. Heck, once an ATM retracted my cash because I wasn't quick enough, I called the bank and they just credited my account with the €300 or whatever it was. No questions asked.
In my experience transfers are pretty much always successfully reversed.
Hell, when one of the PirateBay founders hacked a bank and tried to rob it they actually reversed/prevented most of that, even though he had full access to the bank mainframe. He only managed to extract a couple of thousand that his accomplices took out of an ATM, IIRC.
> But even if all code was without mistakes, blockchains can’t do anything against threats like scams, fraud, hacking of devices with keys for the blochain or just plain old typos in a coin transfer.
I don't think protection against human-factor scams and frauds was ever a goal, you certainly never hear it as an argument.
> Normally, cases of fraud or mistakes could be rectified or reverted by the bank or similar institutions after a review of the situation by humans. However, in the world of blockchain there is no human supervisory authority.
This is a well-known, probably inevitable effect of what is probably the main point of using blockchains. Clearly people feel it is a price worth paying.
I do agree that 99% of blockchain usage is pointless at best, but that is really a different question. It can be used for storing and (slowly) transferring value in a decentralised way, and that is really the main idea.