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Comment by westoque | Hacker News Reader

I used to be a believer in cryptocurrency, and I still it think it has practical applications, but not as currency. When my credit card got skimmed and the thief started to make unauthorized transactions, I was immediately informed of this, called my bank and eventually got my money back. This is the moment where I realized if I have my all my money in crypto, when it gets stolen or otherwise, I will never get it back.

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You are advocating for crypto insurance. With regard to banks, if a thief withdraws cash from your ATM card, that money is gone. The bank has lost it. An outside insurer (or, if a large enough bank, self insurance) pays out the bank the amount they lost. Same is true if a thief is able to do a wire. ACH transfers may be a bit easier because typically the receiving bank won't allow withdrawals before the sending bank's chargeback period, but if they do, then their insurance will compensate for the loss.

I agree that crypto doesn't have a solid financial system backing it and that is necessary to be a replacement for the current one.

I'm not a huge crypto-believer, but I do think your criticism here is ultimately not really a criticism of crypto itself, but the financial system around it. Plenty of real-world currency suffers from the same lack of solid financial system. For example, I imagine you would be hard-pressed to find the same guarantees from banks dealing with venezuelan bolivars.

That being said, I think the best use case for crypto is still not one where every single person runs their own wallet. Rather, most people would use depository institutions who could run settlement on the blockchain. The main contribution and innovation is removal of red tape that is typically incurred when one wants to become a depository institution (mainly obtuse technical interfaces, slow clearing houses, etc).

I think you are focusing on the specifics of that complaint and not the general reasoning behind it. It is a problem if cryptocurrencies need a mature financial system built around them to be usable when one of the primary selling points that people were hyping about cryptocurrencies was the ability to circumvent the current financial system.

> one of the primary selling points that people were hyping about cryptocurrencies was the ability to circumvent the current financial system

Perhaps you primarily heard relatively uninformed people. "circumvent the current financial system" would probably be called some out of touch with reality woo-woo by many.

Many would instead say decentralization is the primary selling point.

Specifically, the inability of a small group to affect monetary policy, particularly the inflation rate, or to prevent access to the system.

The exisiting settlement system serves the banking, regulatory and foreign policy interests of the US better than a distributed ledger would, so those institutions have no incentive to switch.

The only people who have reason to use Bitcoin (or have ever used it) are individuals wanting uncensorable transactions. Bitcoin isn't intended to be used for carrying your life savings around on your smartphone. It's a fast, cheap and secure way to send money over long distances.

This is the risk of "being your own bank", but I don't think it means crypto is destined to fail. You can have managed services that provide insurance to end users. I think cyrpto-currencies have a lot to offer the world. Prime example is Monero, it offers a digital equivalent to cash which is a rarity in this age of ultra-surveillance.

Edited to convey my message in a clearer manner.

The same is true of cash. Almost all of the complaints I have seen with regards to cryptocurrency limitations are in the ways in which it resembles cash. The transactions are untraceable and permit criminals to hide transactions - same as cash. If lost to fraud or theft, no one will replace it - same as cash. If you are in legal trouble, the government cannot freeze the assets - same as cash. Compare cryptocurrencies to cash, rather than a balance claim made by a bank. With a credit card it's even closer, as nothing whatsoever would prevent someone offering credit backed by cryptocurrency rather than backed by USD offering a credit card with the same capabilities. Your credit card isn't 'your money' and you're not transferring money when you make a purchase with it. You are requesting a loan from a company, and that company is handling paying for the transaction. You then later settle that debt. It's quite different from cash in many ways.

"The transactions are untraceable"

How can this be if every transaction is in a public ledger?

That is a feature of the regulatory framework, not the credit card.

The bank cares and takes quick action because they are liable for fraud in most cases. In other situations, like compromised PIN transactions or ACH fraud, their level of attention is very low.

A credit card means you’re spending your bank’s money, so having your credit card hacked means basically nothing because by law you aren’t liable and it’s not actually your own money that is being spent.

Well the card got skimmed targeting the store/machine that attracted the thief in the first place, as a consequence of being a giant honey pot. So you fell victim thanks to the system and you're thankful for it?

Still super early days and there are some services that are starting to offer some services for custody or key storage in case safe keeping like Casa and whatnot. Just give it time. There are positive knock on effects to reducing credit fraud and charge backs.

I think the likelihood of being hacked is far greater than the likelihood of being skimmed.

Really? Chances are you’re part of $recent_hack at $large_co which is a feature of the current system and not a feature in crypto.

Why not? You just bought a car and paid by sending $XX to $COMPANY. But why are they still waiting for it to settle? OOPS! They were hacked and you actually ended up sending that to North Korea. You think they're going to still give you the car?

A credit card is credit by definition, and credit is ultimately controlled by your bank, not you.

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