> For example, illegal transactions, scams and gambling together make up less than 3% of volume.
Note that:
1. This quote is talking specifically about bitcoin, not crypto overall
2. This paper is written by a notable crypto skeptic, so he's not using bro logic. He found the main usage by volume is speculation, with very little illegal activity.
In fact, the US underground economy is 11-12% of US GDP[1], which is a much worse proportion than bitcoin.
[1]: https://www.investopedia.com/terms/u/underground-economy.asp
It's all fraud.
I read that crypto is also being used for rapid cross country remittances, which may be totally legal.
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Don't think I'm a crypto fan. The value is all based purely on shared beliefs. At least government fiat is backed by the taxing authority (while undermined by the printing authority)
1. >flows to addresses which have been identified as illegal
These are only identified as illegal. First off, only a small number of adressess has been marked as illegal, since it doesn't make much sense to have everyone know the dirty deals you're making, most of the real illegal traffic is not there. Also a large number of DN markets uses 1-time wallets, so it's impossible to identify those.
2. Most of the traffic analysis is based on private to/from exchange and exchange to/from exchange data. As exchanges require a KYC, it can be assumed that most of the exchange routed transactions aren't illegal, or first go into a mixer if they are coming from an exchange, decreasing the odds that it can be classified as illegal.
3. Analysis was done in a crypto bubble market, where everybody and their moms were trading it on a daily basis to earn money.
In conclusion - the paper is bull. Yes, a large amount of usage is speculation, but illegal activity is way larger than assumed in the paper. But also, when you remove trading/gambling for speculative profits, what usages remain? Mostly illegal ones, small amount of legal ones and a few believers.
1. They analyzed clusters of addresses, not individual addresses, so one-time addresses are accounted for (unless the vendor never collected their payment from the DN, in which case they gave away the drugs for free)
And anyway since 5 years ago all the DNMs use monero, not bitcoin, so talking about DNMs in the context of bitcoin is an anachronism. If you use a traceable currency with a public ledger for drugs, you're not very bright.
2. Volume associated with a mixer is classified as illegal in the paper, so it's part of the 3%. Bitcoin mixers are not plausibly deniable the way Tornado Cash is (because of UTXOs) - mixers still leave an obvious trail.
3. The analysis covers data from 2015-2021, so it covers two halving cycles.
> flows to addresses which have been identified as illegal transactions, scams, and gambling together make up about 4% of the volume at the beginning of our sample in 2015. By the end of of our sample in the middle of 2021, this fraction has fallen to less than 0.4%
Illegal activity is 0.4% in a bull market and 4% in a bear market. Overall it averages to the headline 3%. You can infer speculation volume goes up 10x in a bull market.
The whole point of it is _not_ to get caught. In a space like cryptocurrencies where creating a new wallet to launder your money through and no longer have anything associated with evil_wallet_of_bad_illegal_man (which had all its funds sent to a tumbler and came back to the new account anyways). The whole point of underground transactions is to not be tracked.
I can understand the appeal, but I do find it amusing how we (humans) instantly abuse anything if modicum of abuse is possible :)
This seems like a good example of the just-world fallacy.
The current system absolutely has many arbitrary restrictions. The problems those restrictions allegedly solve don't have only one possible solution, but that's what we got stuck with.
The distinction matters because it raises the question of that process repeating again. Since it’s not random, the same forces will push in the same direction unless those problems can be recognized and countered in a different means.
For instance, do you think our regulatory framework would look the same today had Prohibition not happened? That's a case where the State created a problem (black market funding large scale organized crime) and then added yet more rules to try and fix that problem.
Edit: so one could argue that we "need" those regulations because of crime, but another could say if we eliminate the prohibitions funding those crime syndicates, then the problem is equally solved. Doesn't that make those regulations kind of arbitrary?
Since this was a very vaguely defined claim, it might be more useful if you had something specific to talk about.
Yes, it's directed at solving a problem, but the specific solution we arrived at is somewhat random. I'm not sure how to make this clearer.
If you take any set of historical problems and the regulations that were intended to address them, do you agree that a different set of regulations could have solved the same problems? If different ones would also have worked, then aren't the ones we ended up with somewhat arbitrary?
Completely and utterly unlike and in no way whatsoever similar, at all, to stock markets, futures exchanges, CFDs, options, CDOs, etc, etc, etc.
Crypto is just a speculative digital asset. Sure it's been a playground for all kinds of scams and charlatanry, because there's no oversight, just as stock markets once were (and still can be in some areas eg pink sheets), but crypto is not a scam in itself.
Those things are backed by cash flows, which crypto isn't because noone ever wants their coin to be considered a security.
And from that you can tell you live in a nice country with reasonable laws. You can't fathom that not all countries are like that.
If people in Venezuela want to use bitcoin, they can go ahead. That doesn't mean we should embrace is in the Western world. It's a net negative for us.
Come now ! With that statement(s) I can say, sneakers and comfortable clothes are also propping up the drug-market ? What is your point exactly ?
-I'm sure there are drug dealers using USD and nice sneakers to sell drugs.
-I'm sure there are drug dealers using USD and NOT nice sneakers to sell drugs.
-I'm sure there are drug dealers using Crypto and nice sneakers to sell drugs.
-I'm sure there are drug dealers using Crypto and NOT nice sneakers to sell drugs.
-I'm sure there are drug dealers using Crypto to sell drugs.
-I'm sure there are drug dealers using USD to sell drugs.
Crypto and NFTs are just easier, less risk, less chances of being caught.
Maybe we should talk diamonds. Inherently worthless objects, easy to hide and transport, easy to make part of jewelry, and thus free to transport almost anywhere. Yet that one tiny rock can cost tens of thousands and will allow the corrupt politician to sell for cash money perfectly fine.
I suspect in most cases Wise or similar would be cheaper and safer.
Today, I can buy USDC/USDT in the US, head to any country in SE Asia and sell it locally there, paying less in fees than I would with USD. No KYC on the receiving end.
Wise is a pain the KYC ass and has a lot of limits.
And is BTC goes close enough to zero, double spend protection becomes increasingly tenuous, and the incentive to switch to something else gets stronger.
This is not true for digital property. Digital property is just as "made up" as the NFT that proves its ownership. People hear "NFT" and for some inexplicable reason jump to physical art.
If the network believes, by whatever consensus methods for proof of ownership that are employed by this network, that you own one coin then those same methods can be used so that the network can believe that you own a certain digital asset. That ownership is just as real as the ownership of a coin.
What people get confused with is the concept of copying or using (both are actually the same problem) this asset. But, this is not an NFT problem, it is a digital problem. All digital assets have this problem, if you give me the asset I can copy and use it without your consent.
Example: I can trivially copy the entire Netflix catalogue on my hard-drive. Since those bits land on my system to be shown on a screen they can just as easily land on my HD as an mp4 file. Are we on any disagreement that Netflix owns those shows? No. But once made available to me, I can use them however I want. Ownership and "use" are to unrelated things when it comes to digital.
>Tokens signed by an app-trusted key solve the problem with almost zero resource cost.
This ensures safety against access and not against copying. Of course I can not copy assets I don't have access to but the same is true for NFTs.
Enforcement of digital rights is actually easier via NFTs than contracts/client apps etc. because NFTs mathematically can prove ownership (courts just have not caught up yet).
As all things, technically, theoretically possible to circumvent, but you can make it exceedingly difficult.
Yeah because every single government out there is competent, non-corrupt and cares for its citizens. You are definitely not living in a bubble /s
That's because the value these things provide is money-laundering, bypassing of international financial regulations and tax fraud.
Yeah that's a superb value proposition right there, and definitely something we want to keep free and available /s
The current system is flawed in many, many ways, but none of it happened arbitrarily; the restrictions we have are the because malicious actors abused the system.