Telegram quietly snuck its blockchain past regulators
decrypt.co
decrypt.co
On one hand (not to be an anarchist or anything) I like the idea of government having less control of things (up to a point) and that we could potentially have lots of choice of currencies although that could be a problem in itself if you have to "hold" lots of currencies.
On the other hand, the reality will be one or two mega-currencies, FB, Amazon, Google etc. will be eventually used for everything. And the last thing I want is Google telling me one day that I have violated their TOS and all my currency belongs to them. Especially if I pay for a ton of stuff in it and there is no recourse due to using AI.
If I had to pick a side, I think I'd stick with centralised gov. in this case!
Edit: Changed a word or two
I have never seen an argument against crypto currency that doesn't already apply to the current systems, we just pretend its not the same.
0. https://www.washingtonpost.com/news/the-watch/wp/2017/10/18/...
> I have never seen an argument against crypto currency that doesn't already apply to the current systems, we just pretend its not the same.
This is wrong. While they are imperfect, the US government has a much better developed body of law and practice to protect citizens from its actions than Google does. Citizens have much more leverage over what laws are written than they have over the terms in Google's TOS.
Google reserves the right to unilaterally terminate its relationship with for you for any reason with little to no ability to appeal, and regularly exercises that right. When it does that, you lose access to all accounts and all data you've stored with them. If the government were like that, it'd regularly be revoking people's citizenships and confiscating all of their property without even giving a reason, let alone a trial. The US government doesn't do that, and if it did it would be illegal.
In my view, cryptocurrency is in fact more primitive and less advanced than government currency in all but a few narrow, technical senses. There's a huge amount of valuable social technology that most cryptocurrencies just threw away for ideological reasons.
I disagree that's an accurate way of stating it. IRS isn't lawless, and unlike Google it doesn't unilaterally write its own laws. It's got significant internal controls that prevent it from lawlessly "seize[ing] assets, garnish[ing] wages, place[ing] liens, etc" without relying on necessary cooperation from non-government actors to keep it in check. The US Government as a whole is also inhibited from much lawlessness through deliberately designed checks and balances and other mechanisms, mechanisms that are largely absent in private corporations like Google. Then there are elections, which provide some measure of accountability to the general population; rather than a smaller, self-interested set of shareholders as is the case with Google.
All these mechanisms aren't perfect, but their importance needs to be understood and recognized.
Google/FB have to ... well, nothing. I have the same say with them as I would with a video game company and in-game gold. They could decide I simply don't exist. Ticket closed. Block chain (from the implementations I have seen) does not solve this.
Google is far less likely to ever let you tell them what they can or can't do, even as a regulator. The government is you, fundamentally, while Google is not.
When the nature of the problem is such that rational customer behavior leads to one player taking all, the market deteriorates, and customers lose the benefits of competition.
This is a problem that the anti-monopoly laws exist to solve.
Another body of law prevents the federal government from seizing all the power, and to keep different branches on power competing without mergers and acquisitions of each other.
An anarchist / libertarian approach would work if minting your own interoperable coin was possible and reasonable. With gold coins, it is (was) technically trivial. Digital currency has still to solve this.
Not only that, but all these self-cryptos would be backed by the word of the person, and people lie, so you could potentially just end up with a whole bunch of crypto coins worth nothing in the end.
Gold has some intrinsic value (you can make stuff out of it at least). Same for makeshift currencies like the Tide detergent.
US dollars are backed by US industrial and military power.
Random crypto tokens have about as much value as paper money: they are relatively hard to produce, but not very much so. They need to be backed by a power / reputation of some kind, or a directly consumable resource of some kind, to be widely usable.
If the USD has $1TT stolen or an anti-counterfeit measure is bypassed, the US government could step in and support use of the dollar with some guarantee or security advancement like better counterfeiting protections or freezing stolen assets then (as bad as it is often seen) printing replacement bills or something. Some of this is already ongoing with the Mint developing anti-counterfeit measures for each new bill released.
Crypto can't do that, it's just a volatile stock like commodity with no underwritten assets or real world backing. There's no centralized backer that can prop it up in crisis. That's risky.
Even the insane concept of asset forfeiture in the USA is on its way out.
https://www.nytimes.com/2019/02/20/us/politics/civil-asset-f...
Easy side to choose I'd say
Also, do not confuse functional with efficient. Efficiency is at a third place way bellow fairness and efectivity on a government's priority.
Short answer: yes. Don't dismiss the good because it's not perfect.
And there is still due process - flawed as it might be for governments - which Google does not even need to pretend it does.
I'd say it's a step sideways.
The USD or any fiat currency is not controlled democratically or by a democratic entity either. When was the last time we heard of a vote before increasing the money supply of a nation's currency? If there is a vote, it is done by people who have not been democratically elected.
>I have never seen an argument against crypto currency that doesn't already apply to the current systems, we just pretend its not the same.
It's not the same: cryptocurrencies are generally more restrictive about reversing transactions (in that you can't), for instance. We can reverse some transactions in the current system.
Some call this a feature, but they're likely okay with every day people getting their shit stolen easily because they don't know anything about computer security.
It's a middleman or escrow who performs this service. Credit Cards and banks act as the middlemen to reverse transactions. No reason cryptos can't have those too. I imagine Uphold or Coinbase or whoever can serve this function.
as far as people being thieved I would agree that it is important to shore up computer security. Physical wallets and stashes of cash also are stolen when security is lax. Again, a middleman might play a role to secure, just as banks do for USD/EUR /etc. Giving money to a bank is essentially delegating the protection of your savings. The alternative being a home safe or under a mattress where the security remains the holder's responsibility.
To me, electronic cash is far from the first thing on the chopping block when we look at the sheer wastefulness of our society.
Maybe the externalities should be priced into the cost of energy so that we don't have to conduct these witchhunts on how others spend their energy, like whether they use a dish washer or clothes dryer or A/C. Seems inconsistent to me.
We are comparing the energy consumption of crypto currencies vs regular money. From what I read (granted, not much), Bitcoin would not scale to the current usage of regular money.
From [1]:
"Digiconomist compared bitcoin's network energy consumption to another payment system like Visa. It reports that bitcoin consumed the equivalent energy of nearly 2.8 million U.S. households, while Visa's consumption numbers around 50,000 U.S. households."
"That's about 0.13 percent of total global electricity consumption, according to Digiconomist. That would rank bitcoin as 61st if it were its own country."
"Bitcoin mining uses more electricity than […] Ireland or Nigeria."
"Nearly 10 U.S. households can be powered for one day by the electricity consumed for a single bitcoin transaction"
Nothing remotely comparable to using a dishwasher. And all this is considering that very few people use Bitcoin.
> how others spend their energy
It's not a problem at the individual level. It's not "other spending their energy". It's people spending everybody's resources. This cannot be solved with money.
[1] https://www.cbsnews.com/news/bitcoin-mining-energy-consumpti...
The Cambridge bitcoin electricity consumption index is probably a more superior and realistic model.
Yes it uses electricity, (what doesn't these days), but it is often renewable and excess power that would otherwise not be used e.g Hydro in China.
So it's not as bad as it seems, doesn't mean it can't be improved, but electricity consumption is not the issue digiconomist makes it out to be.
The Tyranny of Structurelessness (https://www.jofreeman.com/joreen/tyranny.htm) is a great and pretty timeless piece on why decentralisation does not lead to some sort of greater freedom or community control.
(This has become very apparent among all the bitcoin forks; the "default" fork has won every time because hardly anyone can be bothered to pick a specific one and it's far better to be on the majority one)
Network forks simply show that the entire system is voluntary and non-coersive: if you disagree, you're free to built an alternative with like-minded people. But if the economic activity doesn't follow you, you're left with a not much more than a free software project.
And of course at the fringes of the community with no power are the retail investors who bought the thing during a bubble peak 10x higher and now spend their days harassing critics on Twitter because all the promises of the technology are coming true Real Soon Now.
Fiat is great, if cash exists.
The trick is that government is actually people, so make sure it's the right people
That's the entire point of crypto, the government has nothing to do with it. Bitcoin was being used for years before any laws came out.
I can't help but wonder whether or not people realize that everything from fascist dictators to literal jihadist terrorists desperately want government-less crypto currency to finally unlock their finances from western sanction, so they can super-charge their activity (be it oppressing their people, committing terror attacks, invading their neighbors, etc).
There's a very real political cost to uncontrollable finance systems, and that cost is bourne in violence and suffering.
That's before we begin to discuss unregulated black markets that thrive on unregulated currencies.
How many kids are being hospitalized or dying because of black market vaping products they bought online?
How many kids are being hospitalised because of black market vaping products bought online with VISA/MASTERCARD/PAYPAL?
Every issue you have with bitcoin exists with other currencies and mediums if exchange. Bitcoin is a drip in the ocean in comparison.
If these are genuine concerns of your you should focus on another method of preventing them.
A lot less than you think. These networks, UNLIKE BITCOIN, are regulated, must follow the law, and actively combat fraud and crime on their networks. They keep records and turn records over to law enforcement and many criminals have been caught because they used these networks.
>are all happy to transact in USD.
Where we have laws and regulations, flagging, bank reporting, and entire law enforcement divisions dedicated to tracking financial crime, combating it, and bringing lawsuit against those who do it.
Almost every major criminal who chose to use USD got caught because of that choice.
Unlike Bitcoin, which is unregulated, unmonitored, with no ability to flag suspicious transactions, and no ability to ban bad actors.
>Every issue you have with bitcoin exists with other currencies and mediums if exchange.
This is extremely false. Major networks all obey law and regulation, assist law enforcement actively, track and report suspicious uses, and are vital in combating sex trafficking, drug trafficking and terrorism.
I'm frankly shocked at the illogical nature of your reply, to false equivocate between a fully deregulated currency that has no law enforcement whatsoever, with one of the most regulated and monitored currencies in the world -- it's breathtaking.
To prove how illogical and ridiculous you are being, I will ask you one question:
If you want to buy $15,000 worth of heroin from a dark net drug distributor, would you do it in bitcoin, or a USD wire transfer?
Your answer to this question should help you realize the ridiculously fallacious nature of your reply to me.
>If these are genuine concerns of your you should focus on another method of preventing them.
We successfully combat these things in USD, Visa, etc. We cannot combat them BY DESIGN in bitcoin. For you to suggest that we abandon the only mediums where we can track and stop criminals and switch to a medium where criminals are largely untrackable and operate freely without fear, it's beyond illogical, it's downright insane.
"Someone got murdered once, that proves the police are 100% ineffective and we should switch to a society without police!"
Citation please.
>If you want to buy $15,000 worth of heroin from a dark net drug distributor, would you do it in bitcoin, or a USD wire transfer?
Sure, you use bitcoin because thats what online distributors accept. But you answer me this, if I want to buy 50kg of cocaine or heroin, am I paying the Mexican Cartels/Afghan warlords/Colombian cartels USD or BTC?
>We successfully combat these things in USD, Visa, et
If we could successfully combat these with VISA would carding still be a thing? Would identity theft be a thing?
1bn was stolen from Moldovan banks by bank transfer and they still couldn't get the money back. https://en.m.wikipedia.org/wiki/Moldovan_bank_fraud_scandal
So it's hardly like any of these are a secure medium, sure there are laws that can be used to prosecute offenders, same ones that can be used for crimes involving bitcoin. Bitcoin is also trackable/traceable with the right resources BY DESIGN (not sure why that matter but it matters to you).
Also I think it was the SEC who said that cash was the preferred option for criminals, with bitcoin being a very small area for money laundering or other criminal activities.
There is a lot of hyperbole in your comment (breathtaking, insane, illogical) and a significant misunderstanding of bitcoin. Perhaps don't act so superior when you don't know everything.
Crazy, I know.
That countries usually overstretch their economies is something different from inflating money.
Do Mexican cartels accept bitcoin? Do black market arms dealers? Prostitution, modern slavery?
Bitcoin increased a thousand times in value, and it made no material difference to circulation of illegal goods. You can't even buy weed from local dealers with it.
I'm sure Putin would like to see you try. Sometimes a political solution is not possible (e.g. Russia, China), so a technological solution is the only option.
Isn't this already the case? it's just in day to day life they don't exert that control over you, but they can. Which of your assets are currently out of reach by your government?
FB (and by extension any private entity) can ban my account for nothing if they like.
And Google actually does that. I'm not bringing up Google to shift the example from Facebook, but only to remind everyone that there already is at least one company controlling important aspects of lives of many people, that's known for shutting down people's account seemingly without reason (maybe there are good reasons, but they don't communicate them well) and without recourse (except posting on HN and hoping some googler will spot it). So what you describe isn't a hypothetical problem.
For instance, if someone buys drugs with cash, there's no automatically generated electronic record of that transfer.
That's different than if you Venmo your dealer or whatever.
A sovereign government has full control of the life, liberty and assets of everyone in their territory, subject to all kinds of due process on how they're going to exercise that control or not. The main restraints on gov't power are the ethical and legal choices we the people make to say what the government should be allowed to do, not a physical impossibility to do them. It's not really relevant to debabate whether gov't is capable to seize your virtual assets if it's capable to come and shoot you in the head; it doesn't do that because it's not supposed to do that, not because it's incapable.
I put 'free' in quotes because complete freedom for one person is slavery for another, so it is never completely clear to me what people actually want when they talk about free society or free markets.
My understanding is that free markets must be non-coersive and non-violent, where all participants exercise freedom in how they act or not within the marketplace. Otherwise, if we allow any form of coersion (including any price controls) we have at least some slavery, not a free markets.
Can I sell dangerous products? Can I lie about my product? Am I obligated to explain the negative consequences of using my products? Can I sell drugs to kids?
For most people there comes a point where they say 'hang on, you are not allowed to do that!' And then the regulation debate starts.
> My understanding is that free markets must be non-coersive and non-violent, where all participants exercise freedom in how they act or not within the marketplace. Otherwise, if we allow any form of coersion (including any price controls) we have at least some slavery, not a free markets.
I don't think you're really answering the GP's question. You could have a literal slave market that's totally free, non-violent, and non-coercive, because in that market, the slaves are products, not market participants. If you don't want stuff like slave trading, then you need to put limits on the free market, so an important question is what limits (if any) does the speaker want on the "free market."
When I read my previous comment again I see it can come off as a bit preachy, I'm actually all for regulated free markets and regulated capitalism. But I also hate regulations that are only for the benefit of entrenched players, like for example when you need a license to call yourself a hairdresser or something. I do support the need for a license to call yourself a doctor or structural engineer, so it's a tricky path.
In the hands of humans, liberty and justice are always proximate, not ultimate (though I think they can be real).
You also have vastly more freedom over whether to deal with any specific company or not than you do with the government, and they either genuinely don’t care about you so they’ll leave you alone, or they want your money so they’ll try to please you. If the government worked as well as Google, a company with legendarily bad customer service that would probably be an improvement for most over now.
Given the choice between exit and voice the former is vastly better at getting good results.
Government collects taxes.
There is an unavoidable obligation for companies to provide value.
There are plenty of companies that provide negative value to some of their stakeholders. If you imagine adding up all the value provided to the primary and secondary stakeholders, for some companies this sum arguably ends up being negative. Business models where that sum ends up strongly negative tend to be banned quickly, though.
"He who controls the money supply controls the British Empire, and I control the money supply" Rothschild
Never let a for-profit entity control the money supply. Last time we tried it, serious suffering was the result https://en.wikipedia.org/wiki/Company_town
When you stick with the government this statement indeed could become a reality. And that's why non-regulated payment systems are preferred. In the hands of banks, corporations, etc.. cryptocurrencies lose their ideal because these parties will always build their regulating mechanisms in the algorithm, without it they are not interested.
I think that's similar to the feelings you're expressing: centralization isn't great, but if we have centralization anyways, let's use the government. The big question in this case being how centralized do we think things might end up in practice.
Otherwise, good list.
The crypto that will win, will be the one that people adopt to a higher frequency over traditional currency because it will bring them more value over time. Then the ones who will be upset at this will be the ones who benefited from the inefficiencies of the prior monetary system, which by its very nature was prejudiced.
Right now, that's the only use case which warrants crypto over fiat currency is if you ever want to send large sums of money and not leave a trail.
Amazon has its own Managed Blockchain for currencies https://aws.amazon.com/managed-blockchain/ as well as a ledger https://aws.amazon.com/qldb/ along with a POW https://cointelegraph.com/news/amazon-patent-casts-light-on-... so I wouldn't exactly be surprised if they push out their own coin.
I don't think Google has made any big moves in crypto. Though if Amazon/FB really start pushing for their own coins I doubt Google wouldn't try something to compete on that market.
They are a bit neither one thing or another. Bitcoin is fully unregulated so you can use it in ways that governments would ban if they could, fiat is pretty much regulated (apart from cash in hand), but Libra etc combine the inconvenience of crypto with being subject to regulation.
Bitcoin is big because it's adopted and decentralized.
The same fears about Facebook is why their currency will not be trusted. I don't trust Amazon, but I do trust Bitcoin.
Every content creator and distribution network needs to have their own closed streaming platform and app and monthly fee schedule.
Every tech platform that connects one user to others in any form or fashion needs to have their own blockchain system for the transfer of value.
Apparently.. this is where we're headed right now.
There are many, many examples of this behavior in new markets (e.g. railroads, search engines), which is eventually followed by market consensus around a small number of winners and a market consolidation.
I don't see any reason the examples you mentioned will be different.
Target advertising their own delivery services was news to me... of course I was familiar with all the food delivery services (UberEats, DoorDash, etc).
This will crash, as you say, and some will survive as the Lyfts of the market.
But I don't hear a lot about Zipcar anymore...?
Ultimately, I think the end result will be a stable market with a few competitors, as some of the existing companies fail, some of the bigger chains offering delivery shut down their internal service and outsource the work while others spin out their service to support external customers, etc.
Zipcar still exists and seems to be doing fine in my area, with car2go and a couple others as competitors.
When capital disappears or the economy becomes more dynamic, this will change.
> well-designed economic game theory
Game theory is loosely based on the idea of behavioral economics, which is an imperfect science.
The fact that the Winkelvoss twins have to store their BTC password separated into several hidden physical vaults (bank safes mind you) is all you have to know about how the trust system actually works in real life.[0]
[0] https://www.nytimes.com/2017/12/19/technology/bitcoin-winkle...
> What about a protocol regulated by mathematics and well-designed economic game theory...
Currency should be a medium for exchanging goods and services. It should be boring and reliable.
Bitcoin removes the third option, helping to hold government abuses it check a little bit. It's not a solution for everything, but hopefully it restores money to a function of communicating value rather than being both political control and theft. If Bitcoin works it will also force governments towards greater fiscal responsibility.
Bitcoin is not a perfect solution for all problems, but a partial solution in a deeply broken world.
Think for a moment about the implications of a world with a single currency mediated through a block-chain predicated on the idea than no-one can ever get more than 50% of the processing capacity. Think about Angola, China, Sweden and the US sharing that currency
The whole history of cryptocurrency forks shows this very nicely.
He who achieves this will be the currency of the future.
I disagree. The currency of the future is one that is readily available and easy to use. Because generally, regular users don't care about privacy, government control or decentralisation, they care about being able to buy and sell crap easily.
A currency that achieves all the stuff you've listed would be the best-case scenario, yes, but I'm not so sure the general public will be accepting of it.
[Also, hasn't Monero achieved all this? (I'm not that knowledgeable on crypto)].
Also, I can't help but compare this to Keybase's affiliated payment system, Stellar. I'm curious what the differences are in the two projects.
Otherwise, you can go through one of the Stellar exchange frontends and convert the lumens (there are a few institutions set up to accept lumens and convert them into a token tied to the value of a fiat currency (these tokens are still part of the Stellar network) -> real currency via bank transfer)
payment in a chat application right now is the best way to bring electronic payments to everyone. because within that chat application you already established trust with your communication partner, and using the same tool to exhange payments thus builds on that trust and reduces the chances for fraud. (it does not eliminate fraud, but when making payments to a known entity, i can trust that the payments go to the right place)
this is independent from using a blockchain to do that, or facilitating payments in regular currency. the principal is the same. payments across an existing chat system are simply easier to trust than payments across a new wallet where i have to make sure that the wallet target actually match who i want to send money to.
That's basically it. Marketing of financial services is regulated. TON hasn't been heavily marketed yet. So there's no marketing to criticise.
Does anyone have any detail to add? Are the tokens "free floating" or are they supposedly pegged to real money? Are they for a utility purpose or purely for speculation?
(I also wonder if they're delaying the launch given the disappointing Bakkt launch and the implosion of Kik)
As long as people have the power to consent to which currencies they use the availability and competition among them creates a market for competition and innovation.
[1]Post seems to have been removed, available on Google Cache - https://webcache.googleusercontent.com/search?q=cache:https:...
The world is not a meritocracy or a rational place. It operates just like a giant high school. No one cares about Telegram's money simply because no one cares. The cool kids haven't started talking about it yet. That's it.
It actually is similar to Libra and other projects in lots of ways.
Pavel Durov is a Kremlin ally who pretends to be in exile from Russia. The app being sort-of blocked in Russia is just a part of the elaborate PR campaign to legitimize this VK spin-off.
https://theoutline.com/post/2348/what-isn-t-telegram-saying-...
Telegram has shipped blatant backdoors in the past (This one is particularly egregious as there's no way to explain away this MITM feature as a bug) http://habrahabr.ru/post/206900/
Telegram isn't Russian at all at this point.
"Although Telegram was founded by a Russian, Pavel Durov (more on him later), the messaging app rejects any affiliation with Russia."
https://www.nytimes.com/2018/05/02/world/europe/telegram-ira...
Telegram, please don't crash
>> If there is one person who manages the payment system, it is this person who must comply with all the laws and regulations of the regulators, and if there is no central agent, then there is no one to present the requirements to.*
Is this correct? Or do all users need to be GDPR compliant? Blockchains rely on lots of people storing the same data, and their interaction constitutes "running the service". Playing Devil's Advocate, I don't see how Bitcoin mining that validates drug-purchase transactions is legally much different to running a TOR exit node -- you're looking the other way while potentially abetting crimes.
Morally I think I don't have a problem with it, but I don't think it would be difficult to ban or regulate after the fact.