Comment by px43 | Hacker News Reader

Comment by px43 | Hacker News Reader

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Hey there. I'm one of those people who read Schneier's Applied Cryptography in highschool in the 90s, and immediately recognized the groundbreaking potential of using asymmetric cryptography for currency.

I work in information security, and have seen first hand how our existing financial infrastructure is held together with string and scotch tape. For 10 years or so, every time I heard about some big credit card theft, or wire fraud, or SWIFT hack, I would go see if anyone had figured out how to do cryptocurrencies yet. Then 2009 rolled around and I got an email forwarded to me from someone named Satoshi who had apparently figured out a really solid mitigation for the double spend problem, and had actually released some working PoC code in the form of Bitcoin.

Yes, there are a ton of problems with Bitcoin. I've been extremely critical even since that first email, but those problems are nothing compared to the existing systemic problems plaguing traditional finance.

Getting rich was never a draw for me. I'm not quite retired (though this year has been pretty good) but I have spent 10s of thousands of Bitcoins over the years building up various aspects of the economy in order to maximize the utility of the network. I could easily be living on my own private island if I had held onto the coins I CPU mined in the early days, but I have no regrets at all about how I spent those coins. I'm more passionate about this than most, I know, but I 100% believe that legacy finance is a massive hindrance to the sustainability of our species, and crypto-economics will be a key aspect in building healthy incentives for a technologically driven society.

So, what about refunds when corporations rip us off?

And what about losing 100% of my funds when my key is lost or stolen? All keys are lost/stolen - it doesn't take a rocket degree to have observed that from human behavior.

Who enforces splitting of equity when some rich dick beats his wife into submission? The courts don't control any bitcoin keys.

The problems of bitcoin are proportionately larger than then problems with fiat. The only people saying otherwise are those that are profiting from the opposite perspective.

If we are not a bitcoin miner, then how will we get the funds to begin with? Right now I can trade fiat for it, but in the future my children would not be able to trade fiat for it (assuming it's as good as you say it is). So, they will become indentured servants to the bitcoin miners.

Some of the following applies more to chains with smart contracts, rather than Bitcoin itself, but:

> refunds when corporations rip us off?

Easily implemented in various ways. One old scheme is a simple 2-of-3 multisig, where the keys are buyer, seller, and arbitrator. If buyer and seller agree, the arb doesn't have to be involved, otherwise the arb decides where the funds go.

> what about losing 100% of my funds when my key is lost or stolen?

Hence Vitalik's advocacy of social recovery wallets: https://vitalik.ca/general/2021/01/11/recovery.html

> Who enforces splitting of equity when some rich dick beats his wife into submission? The courts don't control any bitcoin keys.

No, but courts have effective ways to make you pay up even when they don't directly control your funds, including putting you in jail for contempt.

> my children would not be able to trade fiat for it

If Bitcoin or whatever isn't available to anyone besides miners, then I don't see why it would have any value at all. Cryptocurrency that succeeds is out in the economy, not locked up in a small group of professionals. There are plenty of cryptocurrencies owned only by a small group of enthusiasts, and they are nearly worthless.

This third party arbitrator’s decision... if it is not liked by one party. Wouldn’t that party demand an arbitrator on the decision1? But then couldn’t decision2 be demanded to be arbitrated by the other party. And then. And then... it doesn’t seem to stop? In other words it seems you would need some kind of judicial process to keep in check the arbitrators. Which then sounds just like regular money, where you can usually arbitrate many times?

I’m also in the grandparent’s boat and I just want to get another view on this.

That's not how it works in regular life. If two parties agree on an arbitrator, then that arbitrator's decision is binding.

One old scheme is a simple 2-of-3 multisig, where the keys are buyer, seller, and arbitrator

Who is the arbiter? Who pays for the arbiter? Do I have to negotiate for an arbiter for every purchase I make? There's a candy store down the street that takes Bitcoin. Am I really supposed to figure out an arbitration scheme just to buy a tub of popcorn?

> Who is the arbiter? Who pays for the arbiter? Do I have to negotiate for an arbiter for every purchase I make?

How do you do it with traditional financial instruments? You probably sign a long-term contract with some agency just as you would if you were signing up for a credit card. Or you could simply not worry about arranging any kind of arbitration for such a low-value purchase, or simply just use fiat currency for those things (there's no reason it can't continue to coexist with cryptocurrencies).

It would be solved in the same way those problems are solved today, through court. Not following court orders ultimately leads to enforcement through force. You'd end up arrested and jailed at some point.

>> If we are not a bitcoin miner, then how will we get the funds to begin with? Right now I can trade fiat for it, but in the future my children would not be able to trade fiat for it (assuming it's as good as you say it is). So, they will become indentured servants to the bitcoin miners.

I don't quite understand the point you are trying to make here? Cash just don't magically appear today either. Why wouldn't they be able to trade fiat for crypto in the future?

> You'd end up arrested and jailed at some point. - assuming they didn't flee - assuming they didn't spend the bitcoin - assuming they didn't transfer the bitcoin, and then claim it was stolen/lost.

With fiat controlled by banks, most liquid assets are frozen during these sorts of disputes for the above reason. A threat of jail in the future also doesn't really help the other person during that timeframe.

Cash does magically appear, actually. It's printed by mints and released via monetary control.

Civil forfeiture has become a controversial issue lately. It's not clear that the ability of financial institutions to do that is actually a net positive for society.

Consider how it'd be easier to catch criminals without the fourth and fifth amendment, but it is thought to be more important that we provide protections against government overreach.

> Cash just don't magically appear today either.

Cash doesn't, but money does. The principal function of central banks is controlling the rate of money creation to ensure that the money supply supports economic activity.

All of those are the same problems money has. Refunds capability is something built on top of cash. It will be built on top of cryptocurrencies. Money can be stolen and locked and hidden and whatnot.

But if it is built on top of cryptocurrencies then you don't have the trustlessness that makes it different from cash and banking. Why would banks and businesses choose to transact primarily in btc?

Because the markets wants to trade on it. Going with the assumption that crypto will "succeed" in the future, any business or bank not trading on it would be loosing out to businesses that are capable to do both.

That is circular. BTC will succeed as an investment because it will supplant other systems for banking. BTC will supplant other systems for banking because it succeeds as an investment.

I think that's the same issue that every new technology related to network effects has had. Like Napster, Myspace, facebook, etc

Yes, and we have built safety measures to protect individuals in these cases, none of which work in a trustless key-based storage world.

Just continue to use fiat currency for those situations where you'd prefer the risk profile that they provide. The success of cryptocurrencies doesn't preclude the continued existence of fiat currencies.

I think you are very confused.

Asymmetric cryptography is a completely separate, much older technology that has nothing directly to do with cryptocurrencies.

Furthermore, Bitcoin does nothing to solve the kind of fraud problems you are talking about, and in fact makes the consequences of them much worse, since you no longer have a central authorities that can reverse fraudulant transactions and the like. The "double spend" problem refers to a problem in distributed systems, not applied security.

> Asymmetric cryptography is a completely separate, much older technology that has nothing directly to do with cryptocurrencies.

It does, Bitcoin wouldn't work without it, the whole thing relies on cryptographic signatures.

> The "double spend" problem refers to a problem in distributed systems, not applied security.

Is it not both? It's a security issue present in distributed systems.

Bitcoin wouldn't work without it - sure, it's a building block, but the core innovation behind Bitcoin is not asymmetric crypto. The parent comment was implying that using asymmetric crypto in finance would solve problems with security and fraud, when in truth, asymmetric crypto has already been in use since well before Bitcoin came along, and is an important technology but has not magically solved all our security problems. There are multiple separate things being conflated here in incorrect ways.

>There are multiple separate things being conflated here in incorrect ways.

Only by you. Read more carefully.

What a weird comment. There's tons of fraud within the bitcoin ecosystem, and it's also used in a lot of fraud too.

> What a weird comment

It's just another comment by someone who tries to fabricate a self-fulfilling prophecy.

Maybe you can help me out, then? How does the network increase the transaction rate to current global rates (at least 10^4 higher)? What happens when the mining phase completes, or if there is a drop in value? What is a sustainable transaction fee for miners to take absent mining incentives? What happens over long periods of time from hardware failures where wallets are lost? It's probably my problem not researching well enough, but if you know or can point me to anything I would be grateful.

> How does the network increase the transaction rate to current global rates (at least 10^4 higher)?

Efficiency improvements on the base chain, 2nd layer technologies like Lightning Network and ultimately increasing the base block size limit.

> What happens when the mining phase completes, or if there is a drop in value?

Mining doesn't "complete". There have been many massive drops in value in Bitcoin's history, not sure what you're asking about, it just keeps working?

> What is a sustainable transaction fee for miners to take absent mining incentives?

Anything above 0 is sustainable, you can mine for free if you're using the energy to heat your house.

The question is how much energy the network needs to spend to remain secure, that I don't know, depends on how much any potential attackers are willing to spend to attack it.

> What happens over long periods of time from hardware failures where wallets are lost?

Bitcoin deflates? If some coins are lost but demand remains the same the value of the remaining coins goes up.

I 100% believe that legacy finance is a massive hindrance to the sustainability of our species,

Could you please expand on that? Why?

Why only healthy incentives? Could they not equally be unhealthy ones?

First off, "healthy" is subjective, and open to the interpretation of the builder. Second, why would someone work to build unhealthy incentives? Seems counterproductive.

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