Decentralized finance has thus far been demonstrably worse than everything in modern finance. It's illiquid, transaction costs are higher, full of scams, buggy, and recourseless.
The whole space needs to grow up fast.
The vast majority of people losing money in the crypto world are the equivalent of people installing sketchy extensions in the early days of the internet that perform attacks on unsecured online banking portals. That this doesn't happen more often against banks is largely a function of the gated-ness of browsers and that targetting banking infrastructure (and national-level infrastructure for that matter) is the hot ticket that guarentees getting the undivided attention of three letter agencies.
For example, if you buy something on eBay and the seller sends you a brick packed in a cardboard box instead, you dispute the charge on PayPal and most likely get your money back. Or suppose that some pissed off hotel clerk decides to charge your credit card for made-up damages during your stay in a hotel.
My experience is that it’s not hard to get your money back. This is why actual scams tend to involve some step where you convert money into something else—since a wire transfer or ACH transfer can be reversed or at least traced, you have scams where the patsy has to turn transfers into cash or gift cards.
And no, a wire transfer or intra-bank transfer is typically not reversed. Even for big-names, like Linus, it is not so simple and requires personal connections with industry insiders to even get simple cases of fraud reversed.
[1] https://twitter.com/swiftonsecurity/status/15121875924140523... He mentioned it in his long WAN VODs, so there isn't a nice source to link to
At the end of the day, what I care about is that I can safely make a transaction to get something I want in exchange for something that I have. The safety protections involve the ability to identify accounts with real people within the reach of the law, the ability to reverse transactions made fraudulently, etc. If I have US dollars and want something that isn’t US dollars, then I have a ton of safe options to do that (with different protection depending on what I choose). If I instead have some kind of crypto asset and want something that’s not a crypto asset, the fraud protection is much weaker.
Yeah, crypto is kinda bare-metal. Isn’t that a major problem with it?
> And no, a wire transfer or intra-bank transfer is typically not reversed.
Yes, it sounds like we agree on this point. This is part of why most people don’t use wire transfers.
There are, however, conditions where wire transfers can be reversed. Banks are also somewhat proactive about protecting you from making wire transfers. It’s not a service that they offer lightly.
Crypto's closest anologue is wire transfers... which you excluded with the reason of "most people don't use them".
>At the end of the day, what I care about is that I can safely make a transaction to get something I want in exchange for something that I have. The safety protections involve the ability to identify accounts with real people within the reach of the law, the ability to reverse transactions made fraudulently, etc. If I have US dollars and want something that isn’t US dollars, then I have a ton of safe options to do that (with different protection depending on what I choose). If I instead have some kind of crypto asset and want something that’s not a crypto asset, the fraud protection is much weaker.
Again, try applying any of this to wire transfers. Almost all of these concerns apply to both crypto and wire transfers.
>Yeah, crypto is kinda bare-metal. Isn’t that a major problem with it?
What's the issue with having access to a permisionless, bare-metal system?
>There are, however, conditions where wire transfers can be reversed. Banks are also somewhat proactive about protecting you from making wire transfers. It’s not a service that they offer lightly.
That is not reversing, that's simply preventing you from initiating the transfer.
I had thought that this was a comparison of modern non-crypto banking / finance systems to the infrastructure provided by crypto, but you have made it very clear that you consider a more general comparison "out of scope" for whatever point you are trying to make.
A person pays the price of a house for NFTs of pictures of apes, gets tricked into giving them away to scammers, then buys them back from the scammers? Ha, what a fuckin' idiot.
It also means the anti-crypto folks will also realise that destroying 'all of them' is another delusion that activists like the free software foundation for example who's mission is still to remove all non-free software in existence. After 37 years, its still here and it is co-existing with some open-source software.
The undeniable fact is that regulations will be put in place for crypto and only a surviving useful few will continue to co-exist with the current system which both the anti-crypto folks and pro-crypto maximalists will be disappointed in achieving their utopian ideals.
might this be part of the DYOR reasoning? some gut-level reaction that “unless we encourage every individual user to take responsibility, then most of those users will welcome 3rd party (govt/bureaucratic) regulators”?
i don’t know that this is wholly delusional, either — i think it’s just a difficult culture to preserve during massive growth. but look at any mid/large crypto project and they usually show off their audits. audits which they willingly paid for because enough users care about it that demonstrating your system is hardened actually has positive ROI. it happens enough that distinct auditors each have their own reputation (oh, X audited notable project Y => their audit on new project Z probably means something). this whole auditing system is in some very real sense a form of “self-regulation” — but the whole thing is predicated on DYOR.
why is this so undeniable? I would think well-implemented cryptocurrencies would be fairly regulation resistant
There will be cases in which a weak state economy can become bitcoinized the same way some have become dolarizesld, but for strong states it is easy to make the border between the currencies as tight as they want it.
You do? What is the purpose of cryptocurrency if you are just going to convert back into cash the moment you use it? I think the end goal for cryptocurrency is to create a circular, P2P economy[0][1]
Seems pretty difficult to regulate only some cryptocurrencies if it's already possible to anonymously and trustlessly swap between them[2]
If they don’t comply, you tell the registrar/host/ISP to shut them down, then they don’t have a website anymore.
The point is that at some point real people, subject to laws and regulations, will have to touch the thing you’re buying. If you’re buying a sandwich, it doesn’t matter the guy making the sandwich accepts crypto if the government can put them in jail for doing so.
Regurgitated “fiat” meme.
Counter-example 1: buying services over the internet. What fiat and where is the relevant border?
Counter-example 2: go overseas and use services. What fiat and where is the relevant border?
Arguments about fiat and borders are often silly. However, a jurisdiction can make crypto illegal or risky.
A government can make it arbitrarily hard or illegal to do that.
You can write and pass whatever law you want. If it can not be enforced, it does not exist.
https://ij.org/press-release/new-report-finds-civil-forfeitu...
But there's no evidence it stops much real money laundering:
https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1...
If money laundering were effectively dealt with, that would stop almost all theft and organized crime, as laundering the proceeds of these crimes to spend them would be nearly impossible.
Obviously that will never happen.
Anyway I’m not saying money laundering doesn’t happen, it does… and that’s probably the best case use case for crypto and one of the pillars of its value-add. People who don’t care about legality won’t care if crypto is regulated away either. I’m just demonstrating it’s not free to get away with these crimes. Plenty of people get nailed for money laundering every year.
Regulation and law indeed may not be able to beat crypto technologically. They don't need to. Humans are the weak squishy link in the chain. I don't need a supercomputer to crunch down your crypto, I need a warrant for your arrest or subpoena to ask for all your documents. I can outlaw your ability to operate without logs. Sure that would suck, but equally in crypto currency and normal world. Either exists as much at the mercy of the government, democratic or otherwise, to preserve the privacy, as much as the technological capability.
Unless we go completely anarchic (and I'm not personally looking forward to that), humans will remain squishy and laws will remain relevant.
Strong cryptography still remains a formidable barrier for law enforcement, regardless of what pessimists like munroe would have you think.
I guess the joke is that security is presented as an all-or-nothing situation, when in reality security is just about disproportionally increasing the cost for attackers and decreasing the severity of their attacks.
In what world is the Government your only threat?
But until we can make cryptography that is criminal-proof but not government-proof, and until the government can feasibly enforce its use, then I don't think it really matters.
It's hard to imagine any tool that only works against criminals but not against the government. Especially considering that there's a spectrum between criminal organizations and government organizations.
You are missing the point; the point of Randall's comic is that most, if not all, cryptographic methods fails under the threat of physical violence. For most of us in the western world, and certainly for most of us on this forum the most likely threat of someone using violence to extract cryptographic secrets from you would be the entity that claims a monopoly on it - the government (your local mugger is not going to request you install his CA root store).
Most criminals, and the majority of white collar criminals who would benefit the most from the world disabling HTTPS do not have the mechanism, infrastructure or capability to exact violence on me the same way the government can.
So your implication that "because cryptography is violence resistant, we should unlock our hard drives" is very naive.
Even going full Nazi, how do you enforce a law that technically challenging without bankrupting the government or crippling the economy? And what time-frame does it take to phase in?
Drugs paid with cash are challenging. Crypto is not. Authoritarian states can do deep packet inspection and random phone/computer checks. Advanced states can just roll it into their AML frameworks, as well as track the purchase of mining equipment and their inputs. Both will offer whistleblower rewards.
There will still be people who use it. But it will fall out of the mainstream. More people are more enthusiastic about cocaine than about crypto, and your enjoyment from an ounce of cocaine isn’t dependent on others using it. For crypto, it is.
It only needs to be better in enough ways to persuade enough people to adopt it such that it hits a tipping point and becomes the de facto standard.
I take it that you still use a CRT monitor then? After all, modern displays (eg. IPS/VA) aren't better than CRTs in every respect (response time, motion clarity, arbitrary scaling).
A replacement doesn't have to be better in every single facet.
No.
I don't think this follows logically at all. Can you explain your thought process? (FWIW, I think that most likely the only component of finance that will be replaced by "crypto" [most likely just bitcoin] is the money and payments layer, so I probably agree with you in general.)
I don’t think fiat money or banks can go away unless all their functionality can be replaced by crypto and do at least as well.
With finances, it’s more about preventing the bad over getting the good. As long as crypto introduces a big problem, there’s no way it becomes the primary financial tool.
In fairness, I am making some assumptions here, so maybe my view of finance is very wrong. I welcome any alternative opinions.
Crypto is trying to replace banks and modern finance, correct?
Its better at preventing a type of scam, but significantly worse at legal scam -> how much is an 8% inflation of the dollar on dozens of trillions of USD denominated financial instruments?
And there is also plenty of equity scams that are sanctioned by government - the kind that suppresses the ability of people to invest or get funded, to give special permissions to those that play the rules, etc. The way some get bailouts at the expense of the rest.
A system with a high degree of freedom and lack of oversight will have higher scams. The big question is, if people were given the choice to participate in both systems, which one will thrive?
calling inflation a legal scam is borderline on the conspiracy fence.
> if people were given the choice to participate in both systems, which one will thrive?
Well, crypto has been around for about 10 years. There's been plenty of choice, and yet what do you see today?
What do you mean conspiracy? It's the official purpose of the Fed to maintain inflation low, it has failed, it has cost a devaluation of the assets of everyone holding dollars or dollar-linked financial instruments, and it's gone significantly down in value.
> Well, crypto has been around for about 10 years. There's been plenty of choice, and yet what do you see today?
A thriving crypto market big enough to be acknowledged as a threat by the head of the federal reserve, the head of the central european bank, and several other high ranking officials.
For crypto to replace modern finance, it needs to be better in every way (so it’s a total replacement).
Decentralized currency is better for some things, worse for things like preventing scams. If modern finance prevents scams better, than crypto won’t replace it in that area at least.
Solution? Easy: scams aren’t a problem. Modern finance isn’t better in fixing that problem, cause it’s not a problem. Now crypto is once again better in every way.