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Comment by wyck | Hacker News Reader

This opinion is really common, I used to have it but what changed my mind was realizing there are not really any "real world" use cases. I look at crypto as actual money, with the same definition: "money is a verifiable record that is generally accepted". Money in of itself does not have any "real world" use cases, money is money. Money facilitates economic velocity and growth in the same way crypto does, except crypto has the potential to be more efficient and secure. One of the key reasons money exists is "currency velocity", crypto improves upon this a lot. Banks make money with money, they don't make money with real use cases. Good crypto projects act like decentralized banks, nothing more.

In other words ignore all the bullshit projects and look at the ones who are structured like banks, financial instruments, or risk management. Then the use cases of cypto become very clear.

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> except crypto has the potential to be more efficient and secure

Except that's not clear at all.

It's currently less efficient than electronic bank ledgers by many orders of magnitude, in any way you measure -- energy consumption, cost, speed, etc.

And it's paradoxically less secure, as tons of successful hacks/thefts have proven. If my bank gets hacked, I'm still FDIC-insured. The courts will make me whole. Crypto is exactly the opposite.

And there is no indication any of this is changing. Crypto is inherently inefficient because of the need for proof, and for the average person it's far riskier so your money is far less secure in that sense -- and that's inherent too because illegal transactions like hacking and theft can't be undone, by design.

So the use cases of crypto are... not at all clear, except, really, for illegal transactions. Which is why the main real-world use cases, so far, have been... ransom payments, online recreational drug sales, and cross-border transactions. Not even remotely the "banks, financial instruments, and risk management" you're suggesting.

Agreed on the FDIC (although not everyone banks in the US) part but “speed” is not an area where traditional banks beat the right crypto solutions.

My wife and I just had a major fiasco trying to transfer mortgage payments from one major bank to another. Our credit score was damaged severely. I’ll spare you the details but the diagnosis was eventually determined to be “not enough time for clearance” as in I need to have the money transfer start a full week before it needs to be in the second account. This allows for the typical BS 1970’s SWIFT transaction clearance time, including of course that these transactions “can’t” process on the weekends.

If I could pay with USDC on either the Ethereum or Solana networks, my transaction would clear a few orders of magnitude faster (irreversibly buried in the blockchain within an hr). A friend who works in real estate foreclosures told me that everyone he works with is using stable coins now for this very reason.

Are you being purposely disingenuous here?

Perhaps crypto is an improvement over some archaic US banking standards but in the UK transactions will clear basically immediately and cost nothing. A money transfer is asymptotically just updating a couple of database records in a transaction. Execution speed is a technical problem, and one that is not solved efficiently by cryptos.

Finally, most western countries offer an analogue of FDIC for bank accounts. Countries which don't have such a scheme in place need to install one, again its not something that cryptos solve in any (novel) way.

Same goes for half a dozen countries in Europe that I had the fortune to live in.

They are being serious.

Crypto financial services are a huge step forward in environments with broken banking systems. The US is one such place.

You're living in comfort and wealth in a civilized nation with modern regulated banks, so your perspective is narrow.

Ironically, the only times I've wired money internationally was so I could deposit fiat to a crypto exchange.

Canada to Japan, Canada to Poland. Each time it takes more than 2 weeks to arrive or be accessible in my account.

Whenever I "wire" crypto, it shows up in my account and is accessible in hours.

This is due to AML/KYC. The only reason you can do that with crypto is it's got the safety off.

No, I'm not being disingenuous. I'm telling you that it can take a number of days (4 if a weekend is involved) for retail transfers between American bank accounts to clear. I'm very aware that this is a matter of updating a simple database record--that's why it's so frustrating and why many people are bypassing this system entirely with stablecoins.

Cash is instant. Venmo is instant. You can pay for goods with a credit card and know it was approved instantly.

In the very rare case you need to make a domestic wire transfer, yes it's currently slow, but that's not a technological problem, it's a political/institutional one. Plenty of countries have instant bank transfers as well.

AND -- instant bank transfers should be coming to the US in 2023, when FedACH is supplemented with FedNow (settles in seconds) [1].

So the slowness of wire transfers is just a temporary problem that's already been solved or is being solved. Crypto isn't necessary here at all.

[1] https://en.wikipedia.org/wiki/FedACH

Venmo isn't instant in the same way that USDC is though. When a USDC transaction settles, I know the money is mine, when a venmo transfer settles, or an ach transfer settles, there is an opportunity for the money to be clawed back for quite a bit of time [0]. We can argue if this is a good or a bad feature, but it does mean that the transfer really isn't instant as I don't have guarantees behind the money being mine.

Wire transfers are a bit better in this regard (my understanding is that "clawbacks" are quite difficult / impossible), but they tend to be expensive for consumers, and take a few hours domestically, days internationally. My employer regularly has to deal with overseas wire transfers, we would hands down use USDC instead if it were an option.

To me the fundamental difference between crypto and legacy finance is that my crypto is mine. I can move it when and how I want. With legacy finance, I am effectively asking a custodian to move the funds for me, and I'm tied to whatever antiquated system they use.

[0] https://twitter.com/bweidlich/status/1403084816665354241

Venmo is instant.

Clawbacks are an entirely different matter.

And while yes, the absence of clawbacks means your money is then "yours", it also means that if you're hacked or defrauded, there's no way to recover funds because it's now "theirs".

For people who aren't engaged in illegal activity, the ability for banks and courts to retrieve illegally (or even accidentally) transferred funds is widely seen as a feature. Most people prefer the legal system to be able to ultimately determine who owns money (or real estate or shares of a company), instead of something anonymous and irreversible. After all, enforcement of property and contracts is the main reason government even exists, if you're a libertarian -- which means restoring property in case of theft and fraud and breach. (If you're a regular liberal or conservative, then it's one of the main reasons.) Are you suggesting it's beneficial for cryptocurrencies to be outside the realm of property rights and the legal system?

Your concerns about your funds being "yours" are really only worth worrying about if you live in a failed/anarchic/warlord/etc state... which fortunately isn't the case for most HN'ers, or most people generally.

Venmo isn't instant. Send yourself more than 15k. If that goes through, try to send it back.

Sure, the row in the database is instant though.

I agree it is a feature for a bank to be able to undo mistakes. The problem happens when a bank commits the mistakes and refuses to acknowledge it.

This is akin to all of us submitting to google and gmail, its great unless our account gets flagged by an algorithm by mistake. No mistake, i would be screwed.

It's exactly as instant as Strike.

Further, both will be totally instant vis-a-vis your actual bank account in a few years as RTP rolls out. No crypto needed. [1] I'm led to believe the delays in implementation were ensuring small community banks had a risk model.

> This is akin to all of us submitting to google and gmail, its great unless our account gets flagged by an algorithm by mistake. No mistake, i would be screwed.

Have you met typos?

[1] https://www.theclearinghouse.org/payment-systems/rtp

I'm not arguing that crypto is necessary. I'm telling you that I can use it to settle a transaction in the US right now in minutes that currently takes days to settle through bank transfer. I'm glad to hear that instant bank transfers are coming and I'll use that tech happily when / if it arrives.

> A friend who works in real estate foreclosures told me that everyone he works with is using stable coins now for this very reason.

How exactly does that work? Have trustees started accepting stablecoins for deposits? Are there auctions where you can pay with stablecoins? Or is it just for payments from foreclosure buyers to their representatives who make bids on the buyers' behalf?

I believe they were just using it as a method to prove available funds while waiting on the traditional banks / lawyers to do their thing. The more interesting part to me was that he said it was guys in their late 50's / early 60's with backgrounds in construction learning how to use crypto for these foreclosure auctions.

> I believe they were just using it as a method to prove available funds while waiting on the traditional banks / lawyers to do their thing.

That sounds really vague. A proof of funds letter has nothing to do with money transfers. You can walk into a bank branch and get a signed proof of funds letter right there. The people actually selling the property that require a proof of funds letter are going to be either a trustee or court auction (foreclosure), or when making an offer to a bank for an REO/bank-owned property (what some people mistakenly call foreclosures).

It would be really interesting if those parties started accepting stablecoin signed messages as proof of funds letters, but I do not know of any that do. The real interesting part in that scenario would have nothing to do with cryptocurrencies - it would mean the widespread acceptance of public key cryptography for legal and financial documents and transactions. Once that happens there would be even less reason for the really shitty distributed database part of cryptocurrencies anymore. Not a popular opinion, but one I have held for a long time, and if you think the system through it is hard not to arrive at the same conclusion. "You mean this all could be done with PGP in the 1990s?"

What it sounds like is happening is that third-party companies involved in foreclosure buying are accepting stablecoin signed messages to act as financing intermediaries. That really does not mean a lot - there are even financing companies out there specializing in supplying "instant" proof of funds letters to house flippers that are really conditional loan offers.

> Except that's not clear at all.

Well it is when you realize the main feature of crypto is a decentralized bank and not a centralized one. A concept which makes it truly revolutionary in the time scale of humans using banks, but also very challenging as a technology.

The speed and security is constantly being worked on, there are other protocols like Solana which has a peak of 65k transactions per second.

Crypto is still a baby, saying it's slow short sighted to say the least.

Money classically has three use cases: a unit of account (I have X dollars in my bank account, Y dollars in my 401(k), etc.); a medium of exchange (I trade my labor for dollars and trade those dollars for rent, food, etc.); and a store of value (I save up for a house, car, engagement ring in dollars because I expect them to be fairly stable).

Nobody in the real economy uses crypto as a unit of account. Most tokens are too volatile to be very useful as media of exchange, and this use case has traditionally been limited to goods (drugs) and services (hitmen) you can’t legally buy in the dollar system. “Store of value” is in the eye of the beholder, of course, but generally speaking you don’t want your store of value to be something that can depreciate 40% against the dollar in two days.

> Most tokens are too volatile to be very useful as media of exchange

I wonder if this was half of the motivation behind Tesla no longer accepting Bitcoin.

But we already have banks. Seems like nobody is aware of exactly what problems they're trying to solve here.

"crypto has the potential to be more efficient and secure" Sounds charmingly vague.

> Banks make money with money, they don't make money with real use cases.

Banks make money with money + effort. They provide loans and vet the recipients of those loans, because the banks are exposed to the risk of default (at least, ideally, obviously this failed in 2008). If you want a small business loan, then you typically have to have not only a good credit rating, but a business plan. Sounds like a real use case to me.

Exactly - banks make money with money, but it's the money that real people use in the real world for real goods & services!!

Want to buy a house? (Mortgage) Want to spread out the cost of a large purchase (car/boat/appliance)? (Credit card, consumer loan) Want to borrow money to pay contractors for home improvements? (HELOC) Want to pay for a coffee with a payment that is accepted in seconds? (Credit/Debit card or you know.. paper money) Want to save excess income in an interest-bearing account? (Savings, Money markets, etc) Want to invest excess income in partial ownership of income producing businesses? (IPOs, stock market) If banks don't make money with real use cases, please close all your accounts and attempt to live a week or a month without any interaction with the banking system.

The banking system matches borrowers and savers of different risk profiles & durations so that people can go about their lives in a more convenient fashion.

Right now DeFi is replicating some aspects of this in a fraud-laced decentralized manner except with an alphabet soup of crypto "money" which you can't do anything with other than trade it for more/other crypto "money" or the dirty-word "fiat".

> Money facilitates economic velocity and growth in the same way crypto does, except crypto has the potential to be more efficient and secure.

Does crypto do that? I highly doubt that. Real-world economies based on crypto are none existent, or so small they are insignificant. I feel like what you are saying is a huge simplification and may not be true at all.

The potential future use cases become clear in some future world where you can pay for real goods & services in said crypto. Then all the DeFi stuff replicating the existing dollar financial services industry in decentralized form makes sense. In the current world, its just circular references with a lot of fraud.

Use cases of blockchain maybe. What part of that requires a separate "crypto currency"? Not any legal ones that I can think of.

If you think legal is good, and you agree with the law, congratulations, you live in a developed country with a mature law system, AND you are probably at least middle class or higher in that society.

There are a lot of people in the world for which the law itself is unethical.

Well yes the developed world has a tendency to go after terrorists and criminals who use crypto.

+1 - crypto-based lending is an incredibly smooth digital process vs legacy dollar-based lending, which is frankly a nightmare of "wire cutoff deadlines," entering the same info 40 times for 6 people, "security theatre" like call-to-confirm and notary public with people who don't know you and are trusting pieces of paper, etc etc etc

What you call bugs I call features. See e.g. https://news.ycombinator.com/item?id=25443212

Yep, no deadlines when you don’t do due diligence.

Examples?

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