Technical feasibility of regulating public Blockchain explored
techtake.info
techtake.info
What does this look like in practice? The Federal Reserve being hacked? Why would an immutable blockchain make that more pleasant than our current, reversible system where something like the 1933 eight-day bank holiday [1] is possible?
Practically speaking, central banks get compromised by political factors much more frequently than by hackers.
Some countries, e.g. the Cayman Islands or Zimbabwe, peg (or have pegged) their currency to a foreign currency [1]. There has also been discussion of rule-based monetary policy [2], where central bankers' discretion is limited. A blockchain would be a stricter form of both, amplifying their benefits as well as downsides.
TL; DR We don't understand monetary policy well enough, broadly enough, to have a set of rules everyone agrees are good. Such strictures are better than an economy being left to incompetent central bankers, or in certain limited cases (e.g. Hong Kong or Bermuda's financial proximity to much-larger economies). For general cases, or in a permanent structure such as a blockchain, however, much more work needs to be done.
[1] https://en.wikipedia.org/wiki/Currency_board
[2] http://www.frbsf.org/education/publications/doctor-econ/2001...
I built a self driving car. The only human discretion is the steering wheel.
The problem is that «manipulation» by governments as you call it, is part of its toolkit, and a lot of empirical evidences shows that the cost of doing nothing when something should have been done is orders of magnitude worse than «manipulation for political reasons». Take for instance Germany is the 1920s: the hyper-inflation during the early 20s was a huge mess, but it had much lower consequences than the inaction after the crisis of 1929 with a huge economic slowdown caused by deflation.
A government not controlling its currency is catastrophic when something go wrong, you can see what happened to southern Europe during the last decade. I'm not saying the Quantitative Easing is the best way to go out of a financial crisis, but for sure it's better than doing nothing and waiting for the market to correct itself.[1]
Imo, people afraid of the Government and wanting to drastically limit its power are a bit like anti-vaxer: vaccines can indeed cause problems (and they do, a few people have dramatic secondary effects, like with any medicine) and must be controlled, but wanting to abolish them is suicidal. The anti-state psychology was understandable during the cold war, as people had a good example of what can happen when a government has total power on the economy and society as a whole, yet this irrational fear is really polluting the debate when it comes to defining the economic policies.
[1]: scientific evidences are hard to find in Economics, but this particular topic was the point of the Keynes / Hayek controversy during the great depression and, on this particular topic, Keynes proved right.
However I think there are still a lot of things that a government could do too help its people in extreme situations, even if they were normally using a currency out of its control. Things that don't involve limiting the flow of currency or reducing its value.
The ideal of people being able to transact in a frictionless way, beyond borders and without having to deal with massive opaque entities (banks) just makes so much sense from my perspective that it's worth trying to find new solutions to any problems starting from that point.
I simply struggle to accept that an individual should suffer the consequences of an incompetent or malicious government in what should be a fundamental right (trading and securing your wealth). As a Greek I have experienced some of these consequences first-hand, in the form of capital controls and cross-border trading restrictions. People in other countries are experiencing them in a much more extreme scale.
But a citizen of a highly prosperous developed nation can still experience too much friction in day-to-day transactions that should be simple, a lot of which happens under the disguise of "your own security". Well, if someone wants to assume the responsibility of his own security, I don't see why he shouldn't be able to.
If the most dramatic consequences you had to face from the past decade policies, you're probably pretty affluent among the Greeks (which isn't surprising here on HN, I don't think anyone here is part of the 30% lower incomes of his country)
> I simply struggle to accept that an individual should suffer the consequences of an incompetent or malicious government in what should be a fundamental right (trading and securing your wealth)
You're free to assign the priority you want in the role of State, depending on the personal believes and values, but I personally think there are more fundamental rights than trading or securing your wealth, and I'm not shocked to see a government making trade-offs between those rights.
In normal time, all those rights should be preserved and defended, but in troubled times it, I have no problem seeing a government cutting back the free trade right in order to provide food to everyone, or education, health, safety or whatever human basic rights I feel more important than business freedom. Call me a socialist if you want.
I don't live in Greece any more but no, I was earning a slightly above average full-time wage -which when you don't have a family, pay rent or care to go out much might feel pretty affluent, but if you have to support a family or pay rent because you don't want to live with your parents any more, is not.
My perspective is also the perspective of many people I know in Greece that are definitely not affluent (some earning sub €800 per month):
If you're lucky to have a stable job, you are working all day long to get a half-decent wage (that over the last decade lost 40% of it's effective value through tax increases, health contribution increases towards a completely broken health system, pension contribution increases -that you literally don't trust that you will get back, inflation, etc) and can't even do whatever the fuck you want with whatever little is left of it! They are strong-arming you to keep it in banks, transact through banks -accepting their fees and inconveniences-, restrict how much cash you can withdraw or spend, even limit what you can buy! They are still blocking Greek card transactions outside the country for a series of types of business such as gambling, pornographic, jewels, works of art, auctions, etc (which of course they fail to detect properly, so you get plenty of false positives :p)
Is this the most dramatic consequence considering everything else I just mentioned? Probably not, but it's the one that constantly reminds you that you're not in control of the rewards of your own labor. And it's also the one that you can suddenly avoid for good, giving them the finger, thanks to cryptocurrencies.
> Call me a socialist if you want.
Socialist policies can work great if a government is competent and honest like perhaps in Scandinavian countries. The problem is that no-one can guarantee when and for how long a government will be like this.
So I'd rather make both choices impossible for my government and be in control as an individual, for better or for worse. Socialism in Greece has failed. Either failed to exist, or failed to work, failed regardless.
I should remind you that 11 months ago, Donald Trump became the head of what's arguably the most powerful government in the world. I'm glad there are restrictions on the power of that government and very much concerned that they're not stringent enough.
While I do have some sympathy for anarchist positions, I don't think a complete abolition of government as we know it is likely to be pretty. That certainly doesn't mean government should have unlimited power. If we're using the last century or so to source our examples, the governments we've seen fail with disastrous results had fewer limits on their power than those that are still with us.
People tend to think that the free market won against socialism, but it did not : welfare state won against socialism ! People being happier, they didn't want the revolution, but if a government can't buy social peace it's going to be replaced by someone who will do it. That's exactly the kind of mindset that made Trump president of the US (America first, no more globalization), and the fact that he is betraying his promises won't change the fact that a huge chunk of the population want some dramatic change (even at the expense of a lot of important things).
I don't have enough expertise or moral authority to say for sure whether that would be good or not. Governments fought very hard to get substantially increased monetary power during the 20th century, and the world that followed is a pretty good place. For all the bad news we hear, violence, starvation, disease and other metrics of badness are near historic lows. Some attribute those gains largely to government action, but I think a lot of the improvements were social and technological. As an example, better access to information makes people aware that those who employ violence usually don't get good results, so others are less likely to do so.
What I do feel fairly confident in saying is that for better or worse, it's fairly likely to happen. Here's the approximate scenario I see playing out:
First, a cryptocurrency becomes somewhat popular for actual use as a currency. It won't be Bitcoin. It might not even be one that exists yet, but it will happen sooner or later. It need not be universally accepted, but if you can buy groceries, fuel and a cup of coffee in most major cities on one or more continents, that will be sufficient.
Next, there needs to be a financial crisis affecting that continent. These happen every couple decades. It's a near certainty. Bonus points for runs on banks, slowness or failure of protection mechanisms like FDIC, rapid inflation or political instability.
The next step is that people start using the cryptocurrency in preference to the government currency, banks and payment cards. Of course, the government might want to prevent this, but any actual attempt at enforcing a ban would meet great resistance from the significant fraction of the population already using it.
I'm not sure what follows. I have little doubt that parts of the transition will be quite ugly. I hope the improvements the world has made survive it.
By layering it with a secure regulatory system, we get what you are asking for. If you like, have an eight-day bank holiday (if your jurisdiction wants that).
Bitcoin is technology. It’s assembling different parts into a tool that people can choose to use. Much like a car is assembled from different parts.
Regulation is politics. It’s a social phenomenon that concerns how we use the tools offered to us by technology.
The issue is that most, if not all, tools can be used both ethically and unethically. This reveals the fact that regulation has nothing to do with the tool itself, which means trying to modify the tool itself — as a form of regulation — doesn’t make sense, since it ends up hurting the people who use the tool for doing good.
By all means, prosecute people who break the law, but do we really need to regulate the shape and size of vases, such that they can’t be used to hit a spouse over the head during an argument?
Regulating cryptocurrencies can have the same effectiveness that regulating information exchange through the internet had. Yeah sure it can be a bit impractical or scary for most to go around artificial limitations imposed by their state but it is practically impossible to keep the really motivated from doing what they want.
There are many regulations are about how certain things should look, for example, construction code, or food quality control. Even internet has been changed by regulation, like the EU data protection plan, it is just behind the scene, but greatly affects the way how company operates.
So I don't think there is a clear cut between regulation and things affected by it. There are intrusive ones and there are reactive ones. As to Bitcoin, I think it is probable that the regulatory body will require transparency for recognition of its legitimacy as a demand.
It would seem like this layer would be fighting the very nature of systems like Bitcoin, or Ethereum.
A better approach would be to regulate the exchanges, which is probably not too far off. However, even in this case decentralised exchanges like BISQ could most likely completely avoid any regulation.
If a company or market segment is organized in a way that makes regulation enforceable, then the government will find a way to regulate it. The only way for a company to avoid such regulation is to operate outside the bounds of the corporocracy, foregoing the benefits of legitimacy in hopes that the strengths of decentralization will ultimately prevail.
A block-chain has no stance for or against anything. Saying that a block-chain could be for or against governance is similar to saying that b*trees are pro-life.
This article shows a deep misunderstanding of why crypto currencies took off.
What does a world without regulation look like? In my opinion it is like playing with fire. It may cause forest fires or it may cook delicious meals.
In the interim, it is better to deal with a "known enemy" (personally I dont view regulation as an enemy). Decentralize regulation. If someone wants to create his own regulation, sure go ahead. Its just that your country's regulation may agree to trade with your regulation or may be not, based on what you have created. Negotiate well with your country's regulator, and get coins flowing across "your borders".
For example they say which coins are clean and which are dirty and define a rule that upon a transaction you must first spend away your clean coins (the clean and dirty coins sets are updated by watching the blockchain).
By creating such an overlay currency over an exiting one they can provide incentive for actors to self regulate (i.e. you won't be willing to accept coins which you know are dirty if it means you won't be able to cash them out).
Anyone can create such an overlay coin (I call them rainbow coins). For example you can define a rule which will add a stamp to coins which go through a specific address (The idea being that people then send coins to this address, you send them back a fraction but this fraction is now "stamped").
What is great about this solution is that it can be applied to all public ledgers.
It doesn't work for the crypto currencies which don't have a public ledger (like Monero, Zcash, ...) but those are more risky per nature, as any implementation bug could mean that all the money can be diluted away and nobody would know.
As an authority, you express your policy goals via a set of rules which grants you a fine policy-making abilities, and then either the market takes you into account and self-regulate to respect your policy or they give you ground for a global ban (but most likely some people will endorse it through fear and the others will have no other choice than to follow or be the one with the "hot potato" (divide&conquer) ).
But as every good tool/technology there are always multiple facets, and it can also be used to create value :
The beauty of decorating the ledger is that it allows to tie ethic to money. For example you can define some decoration rules, which can help promote environmental practices. For example you receive green coins when you donate to wwf, or when you interact with an eco-friendly business. (green token aren't new but the fact of it being public info is)
The great strength of this is that you are no longer bounded to be a summing to zero ledger for your decorated coins.
It can also helps people to cluster and transact only with people which shares some common values. For example if you want to avoid touching drug related money, then you can choose not to.
You can also reward with some coins certain behavior, like transactions between different communities which create out of thin-air coins received by both parties. It gives you fine knobs to adjust your economy.
You can build an e-reputation system upon these.
It probably can be exploited but it's not so easy as because all the books are public it removes incentives to cheat as you risk being marked.
You can create "coins that can't be bought". It is kind of fingerprinting your economic behavior to tell society what you want it to become.
If you can convince some people to share some set of values these rainbow coins can help you smoothly go from "ignored by society" values to values which can bring you new customers.
The top node of the hierarchy of regulation can be created by anyone.
However, those who want to legitimately (within their jurisdictions) use blockchains to improve the experience of transfer of coins (not just money, could be equity as well) can use it with the regulatory framework of the country.
Also, we must not forget that unregulated blockchains are being used as a bridge to transfer money between the legal and the illegal businesses.
By adopting the regulatory nodes framework, the transfer of coins will happen only between (or within) "well intended" regulations.
“Voluntary regulation” is an oxymoron.
> Also, we must not forget that unregulated blockchains are being used as a bridge to transfer money between the legal and the illegal businesses.
Nor must we forget that many countries, like Argentina, make it illegal for people to save up for retirement in currencies that are less inflationary than the national currency.
In these countries, this makes saving up in bitcoins illegal activity. But it should be clear who’s committing a crime against whom (the government against the people).
Bitcoin was built for exactly this purpose: to fight against government regulation whose purpose is only the survival of government at the expense of the people, as opposed to being a service to the people.
I do not know about the cases you are referring to, as I am not a lawyer, nor an economist and not a statesman.
Within the reasonable countries (most part of the world) one should be able to trade legally, transfer the coins without violating laws of the involved jurisdictions. This would be possible even between different countries.
If you see through it, you will notice that you can create your own "Regulation" within / between a group of your counterparts. Its not taking away your freedom, its just breaking the bridge between legal and illegal businesses.
Since you need the states money to pay taxes and you need to obtain it or be jailed then there will always be exchanges. So you just regulate on the state money side of the fence and ban all exchange transactions into the states money that cannot prove their source.
Once enough people have been burned in the Wild West the fad will fade to an eclectic elite. Just like buying fine art.
And the stuff that's useful - like decoupling your account from the transaction provider - will be adopted by state currencies.
I told her I'm from Vancouver. She said that's not what she meant, so I assumed she was asking whether my background was Iranian to make conversation (this was the branch in North Vancouver, which has a large Iranian-Canadian population, so I thought she was going to make a remark about Iranian-Canadian clients that she knows).
I told her my background is Iranian. She said that anyone of Iranian background would need to get special approval to open a Euro denominated account with HSBC Canada due to US sanctions.
I explained to her that I'm a Canadian citizen, that I moved to Canada when I was three years old, and that I don't have Iranian citizenship or any connections to Iran.
She said it doesn't matter, and that even if only my parents were born in Iran, or I had extended family living in Iran, I was considered to be a person with "connections to Iran", and thus needing special approval to get an account.
A week later the bank representative called me and told me that my request to open an account was rejected.
What saddens me most is that in a sense, I'm one of the lucky ones: I genuinely don't have any connections to Iran. I might be able to complain and have the policy reversed on people like me.
But what if I did have connections to Iran? What if I had immigrated at 22, and still had Iranian citizenship? Or what if I never got a chance to immigrate, and still lived in Iran? In that case, I would be totally rejected by a world that justifies official discrimination against me, in the name of enforcing sanctions that are deemed necessary to achieve geopolitical objectives.
The worst part of it all would be knowing that the world at large considers me expendable, and would accept policies that lead to my discrimination as a lesser of two evils.
There would be no way out if I were in that position, because the quality of mine that is discriminated against is one I was born with, and complaining wouldn't help, because most people would just say "tough luck". When the crowd thinks you deserve to suffer because of what you are, rather than what you've done, it's a crushing feeling. I have a taste of that now and it's terrifying.
Regarding racism and discrimination in Canada: I agree that there is much more of it here than people generally perceive. I do think Canada is less racist/discriminatory than most countries, but the difference is not as big as commonly believed.
In addition, the Law Society of BC offers half-hourly consultations for $25, it's called the Lawyer Referral Service.
Let's say that government decides the only legal tender for purchasing real estate is the government's fiat currency of choice, for example euros or dollars, and that the only way to obtain a deed or to legally borrow money is to show through a government run website that you paid for the real estate with that fiat currency. That's it. Now government indirectly controls crypto currencies. You can develop all the crypto currencies you want, but if you can't use it for purchasing real estate, the ramifications of that constraint will trickle down through almost anything else. Then receiving rent in crypto is less interesting. then being paid in crypto is useless.
And about that: Want to pay or receive a salary? What if government says that can only happen with fiat and that any attempt of paying or receiving salary in crypto currencies is a felony that will land you in a fiat funded correctional facility for years? You would think twice. How will government know? The same way they know that you bought drugs: Through witnesses, agents, ISPs telling on you etc. It doesn't have to be 100 percent efficient. If they have the ability to catch 0.01 percent of transactions and the punishment is severe, most people will not do it. Don't tell me that crypto is encrypted and anonymous. As soon as you use it for a real world thing, you leave traces. You buy a car; someone sold it. Someone heard. Someone saw. You can't show a fiat transaction; that will be the proof that legislator says is enough to convict you. If government decides to make crypto illegal, or to make certain transactions illegal when paid with crypto, crypto will only be good for the grey economy.
Or what if government said that no matter in what currency you make your money, taxes have to be settled in fiat.
The point is that all government has to do is to ensure that fiat is needed for certain key parts of the economic system. Then people will need fiat, and government can then focus on regulating the exchanges between fiat and crypto. There is a very limited number of banks, and a small number of payment providers and a small number of ISPs. They just need to ensure that these organisations enforce the rules (register who bought or sold what crypto currency etc.). Pretty soon, the only crypto currency that 99 percent would use would be the government backed one, the one that had backdoors or whatever government demanded built in.
However, the control can't really extend to remote work (I'm sure VR headsets will make it easy enough) - workers can live in N countries and it's not like the government will start controlling their every minute. Some countries will surely be on the crypto-economy side too.
And it's not like those countries will stay idle - people will be directly incentivised to immigrate to them. Some wars may be fought because of it, sanctions or dictators will try to prevent it.
But in the end there is nothing any government can do really: a tool now exists to send any kind of value any distance in a matter of a second, without a trace, using maybe even thoughts alone. It's as if a completely new law of physics suddenly appeared. Everyone will eventually have to adapt.
Oh, how quickly the private market looks to the wider community to externalize its losses.