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Comment by omk | Hacker News Reader

A point that most crypto heads miss is that the world does not run algorithmically. Legal contracts do not work like a software program and that characteristic is a feature not a bug. Not being able to reverse transactions that were part of an exploit is in infact a bug. Businesses need that tolerance for error. You need an oracle in your system. The oracle can maintain transparency of the attestations carried out if that is what matters.

An extreme anti-establishment view is driving most crypto enthusiasts into opting for tech that isn't going to remain in everyone's interest for too long. These lessons started with DAO.

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I'm gonna be honest I don't know what the audience is for a product where you risk losing your entire life savings because you typed a wrong word in a smart contract rather than paying a middleman a fraction of a percent.

It's almost like a sort of willful ignorance of division of labour and the concept of pooling risk.

Doing illegal things, mostly.

If you are working a w2 job and paying taxes and paying your mortgage / auto loan... crypto doesn't really help you.

Blackmail? Awesome. Buying illegal substances? Awesome. Gambling? You got it...

You said it, when you are a debtor fiat with its constant debasement is great. For creditors fiat doesn't work that well.

You can literally say that about cold hard cash. Blackmail? Pay cash. Buying illegal substances? Cash. Gambling? Get your cash out. It's all in how you use it.

https://eandt.theiet.org/content/articles/2021/05/moon-missi...

Anything is a store of value, wood, gold, water, dogecoin ect. If people want to accept something for something else this is a way of life.

It's just sad that people only see the bad use cases. How about if I transact only in crypto (Monolith card), now every purchase I make is via crypto, nothing different to using a bank card with US dollars backing it, just you have the full control over your own money.

Do people who had SafeDollar have control over their own money? Did the people whose money got locked in the DAO because of a software bug have control over their own money?

> How about if I transact only in crypto (Monolith card), now every purchase I make is via crypto

Do you in fact do this?

> nothing different to using a bank card with US dollars backing it

There certainly is if you read Monolith's fine print, and it's wildly disingenuous to pretend otherwise:

The Monolith account and Visa Debit Card are electronic money products which are not covered by the Financial Services Compensation Scheme or the Deposit Insurance System of the Republic of Lithuania. The funds will be safeguarded by Contis Financial Services Ltd or UAB „Finansinės paslaugos „Contis“. For any disputes, the Financial Ombudsman Service and the Bank of Lithuania consumers disputes resolutions institution are available.

> Do people who had SafeDollar have control over their own money? Did the people whose money got locked in the DAO because of a software bug have control over their own money?

Nope, because they didn't do their due diligence. Do you deposit your savings to a new bank that's not had a single audit done? Are there any specific banks that you won't do business with? It's the exact same in the crypto sphere.

> Do you in fact do this?

I do indeed. I use it as my daily spending card. Should Contis Financial Services Ltd collapse it'd be a bummer, but I've lost more on a night out by dropping a paper note. I will agree it's not like using a bank card, I should specify more like a pre-paid card.

Whilst you don't get the financial protection that you do with standard institutions it's the price you have to pay to start working towards a different financial future.

Valid points, but the financial future crypto like this paints is not a future that seems better to me, not like a future I want to live in, or work toward.

> Do you deposit your savings to a new bank that's not had a single audit done?

Sure, because banks in my country are regulated, and deposits are insured, so I trust literally any bank.

The difference is you can't use dollars to do digital transactions. Good luck with sending a suitcase full of cash to SatoshiDice. Even better luck getting a suitcase back.

The only value add for crypto right now is that it's pseudoanonymous and you can use it for black market transactions. Other than that why not just use Venmo or CashApp?

This is one reason cash is being phased out in many countries. It took me most of a week to deposit money on my account -- the bank literally would not take my money! They told me to find a machine, and they were either out of order, removed, or did not take cash.

Well, that's the noble explanation. Another consequence is they can now have an electronic record of every single purchase almost every citizen makes.

> It's just sad that people only see the bad use cases

Yeah, when 95%+ of the actual things that people use crypto for are those things, it's hard not to. Can you honestly say the "valid" uses for crypto take up more than 5% the total volume in any possible metric you can think of? It's always ransomware, extortion, blackmail, money laundering, drugs, you name it.

Do you have a source for '95%+'?

https://www.forbes.com/sites/haileylennon/2021/01/19/the-fal...

https://www.cnbc.com/2021/01/24/overall-bitcoin-related-crim...

One I personally know of - https://cryptoslate.com/another-big-cardano-ada-deal-is-in-t...

There is many other cases for blockchain / crypto technologies far beyond the world of ransomware, extortion, blackmail, money laundering.

> The country will implement a national, blockchain-based student and teacher ID and attainment recording system to digitally verify grades, remotely monitor school performance and boost education and employment nationwide.

> IOHK’s Atala PRISM identity solution will enable authorities to create tamper-proof records of educational performance across 3,500 schools, 5 million students, and 750,000 teachers to pinpoint the locations and causes of educational under-achievement and allocate educational resources effectively.

You've got Walmarts chinese subsidy investing in vechain for logistics:

https://cointelegraph.com/news/walmart-china-subsidiary-team...

These are just two off the top of my head, let alone all the partnerships in the works that we haven't heard about yet.

There's big money getting into crypto whilst simultaniously lots of news and opinions regarding the fact it's used for nefarious acts.

So you're just making up number because they sound right to you? In the future, if you do some simple googling before you join a conversation you'll sound less uninformed.

https://www.newsweek.com/illegal-use-bitcoin-dropped-50-2020...

Totally true.

That said, to deposit 10k of cash in a bank you need to fill out some forms.

I also don't have a great way to send you say 100k in cash. Suitcase full of dollars? But I can send you 2 BTC much easier.

The big hole in demanding giant ransoms was always taking delivery of the suitcase full of money. Not so hard to do with digital currency.

> Gambling? You got it...

I had high hopes for betsofbitcoin but after making a bet on the 2014(?) superbowl the mtgox scandal occurred and my last bet was never redeemed.

Or just small experimental things. I can pay for jmp.chat with bitcoin, the dev doesn't have to deal with paypal and I don't have to worry about my credit card being stollen.

To be fair illegal is not the same as immoral. For example, cryptocurrencies can also be used to transfer money out of financial system controlled by oppressive regime which is largely a positive use. The problem is that "oppressive regime" is a matter of opinion and therefore these transfers are indistinguishable from tax evasion and other financial crimes. Techno-libertarians see that as a feature, I think most of the rest of us see that as a bug. There is no economic or technical solution there. It is almost exclusively an issue of personal politics.

Right, I am not passing judgement. I am not saying gambling in certain ways is immoral, but I am saying that it is illegal and thus bitcoin is often used to try and stay hidden.

> If you are working a w2 job and paying taxes and paying your mortgage / auto loan...

You forgot to add "and live in a stable country with a stable currency and relatively functional contract/justice system".

I’m making an assumption here that “crypto” means “crypto coin” and, perhaps further, any form of blockchain based, consensus maintained, public ledger.

I don’t understand this “crypto is good for doing crime” narrative.

When I’m doing crime, I strongly prefer there to be no record of the transaction. The closer I can get to an assurance there is no permanent record of the transaction, the safer I feel in deviating from the law.

Conducting any illegal business in a permanent public ledger is a non-starter for me. Even with a public ledger that ”guarantees” privacy, I’m staking my freedom on the underlying cryptography not being broken before the statute of limitations for my crime passes.

I’d go as far as reversing this narrative. Crime moving to a permanent public ledger strikes me as any regulating body’s dream.

> When I’m doing crime, I strongly prefer there to be no record of the transaction. The closer I can get to an assurance there is no permanent record of the transaction, the safer I feel in deviating from the law.

You're exactly right about this, which is why it's important to remember that a plurality (majority?) of those who speculate in cryptocurrencies don't seem to be especially aware of the whole "immutable, irrefutable public ledger" aspect.

Those considerations notwithstanding, people are actually using crypto for criminal behavior. However great your arguments are against it, the reality is that it's happening.

Reasons it might be happening: You can say they're being shortsighted and taking on unnecessary risk, but then, people who make criminal livings tend to have a higher appetite for risk than e.g. I do.

The thing about Bitcoin right now is that it is being used for good AND nefarious purposes. So you get some level of "hiding in the noise".

Add in the ability to move it around the world easily, its liquidity and transaction volume and you have just about the perfect grey / black activity currency.

I would argue that many criminals don’t care if you know who they are. Plus cash doesn’t “scale”. Try ransomwaring millions of computers and cashing out with untraceable money.

Criminals don’t care if there’s a record of their transactions because trans-national law enforcement is basically non existent. You got ransomwared from Ukraine? Nobody cares. Until, apparently, you cause havoc across the eastern seaboard by infecting a few corporate machines associated with a gas pipeline.

> I strongly prefer there to be no record of the transaction.

Other than cash, this isn't viable. You'll have to launder your money no matter what, at some point. Crypto just makes transferring trivial, it's less regulated, you can't go to your bank and ask them for help, etc. It's good for criminals for these reasons.

There's radically more infrastructure for this sort of thing in existing systems. Crypto is far less regulated, you can transfer across countries easily, laundering becomes trivial, transfers via hacked accounts, etc.

This just isn't correct. Public ledger cryptocurrencies are able to be digitally transferred without any form of personal identification, unlike almost any other form of payment. Just because the ledger is public does not mean that one's identity is public, merely the addresses involved in the transaction are public. If there is nothing tying one's identity to an address or transaction, then the transaction being public is meaningless.

Further, this point is completely nullified by the fact that there are private ledger cryptocurrencies (e.g. Monero). Widely available public cryptocurrencies like Bitcoin are useful for crime because they're (relatively) easily understandable, usable, and purchasable by laypeople. This results in a process that goes as such:

> Customer wants illicit good

> Customer goes on coin brokerage and buys Bitcoin

> Customer sends Bitcoin to illicit goods dealer in exchange for goods/services

> Dealer exchanges Bitcoin for Monero

> Dealer now has "clean" currency that could be used for anonymous cash drops, speculation, or even withdrawal from a public marketplace.

There are at least hundreds of people operating in the many millions of revenue using this model (with some additional safeguards) that have been successful for years and years. You are correct in saying that you are staking your freedom on the safety of something such as Monero, although you are free to analyze its safety and determine whether or not it is suitable for your threat model.

I agree with you. But I think there is nuance. When I hear “crypto is good for crime” I hear “crypto is good for all criminals” (where “criminal” is anyone conducting an illegal $$ transaction).

In your process, my statement was 100% talking about the “customer” steps. You’re right. But, at scale, it’s hard to conduct any crime that doesn’t leave a record. At the many millions of dollars of revenue scale, I could see crypto being a trade-off conversation.

> Public ledger cryptocurrencies are able to be digitally transferred without any form of personal identification, unlike almost any other form of payment.

Absolutely correct. But for any crime I’d likely commit, I’d be operating at a scale where anonymity would be hard to achieve. For example, I’d be hard pressed to acquire Bitcoin in a way that didn’t associate the wallet with my identity (if you have methods, please share!). For most transactional crimes I’d likely commit, I’d substitute “show up with cash for crime” with “show up with cash for Bitcoin, then use Bitcoin for crime.” It seems like an extra, unnecessary, step. Cash is already a record-less value transfer system.

> Further, this point is completely nullified by the fact that there are private ledger cryptocurrencies

I’m not sure if we are arguing semantics on this one. But my understanding of tech like Monero and ZK-snarks is that the ledger IS public, but it’s a bunch of locked boxes. Without the keys you can’t see the contents of the ledger. But now you’re in a race against time between implementation bugs (or broken crypto) and the statute of limitations. It’s not enough to audit it yourself. You’re not betting that _you_ couldn’t break it _today_, but that _no one_ will _ever_ break it. The incentive model seems broken. My crime may not be of interest, but I’m committing the transaction to the same ledger where nation states may have interest in decrypting other transactions. I can’t “uncommit” my transaction if the crypto falls to a nation state; my private business becoming public will just be collateral damage.

At a small scale, I’d much prefer taking a one time risk of conducting a no name cash transaction.

Hiya, sorry for a little bit of a late response!

I think there are a couple fundamental misunderstandings here regarding cash. Answering this question may fix that a little bit:

> I’d be hard pressed to acquire Bitcoin in a way that didn’t associate the wallet with my identity (if you have methods, please share!)

If one purchases BTC on Coinbase, trades it for XMR, and then trades the XMR for BTC back to a separate BTC wallet, it is currently unfeasible to determine that the final BTC is linked to the initial BTC. Also, cash is not completely private- bills have serial numbers that are tracked in a similar way as to how one might track Bitcoin (unless you're dealing solely in coins). BTC and XMR are both able to be cashed out fairly easily as well. They could be legally sold, given that they're functionally untraceable. You can also fairly easily coordinate cash overnighted to a PO box set up with a fake identity.

Re: Private ledger cryptocurrencies

With Monero (for example), the sender, receiver, and transaction amount are all private. The quality of Monero's privacy is up for debate, but I see no reason why explicitly tracked cash bills are more secure than a private ledger cryptocurrency.

In conclusion, within the initial context of, "When I’m doing crime, I strongly prefer there to be no record of the transaction", I don't believe that there is an opsec-based reason for you to choose cash over cryptocurrencies. There is always going to be a risk when committing crimes- that is unavoidable. Maybe this is a big point for dealing in gold, haha?

Why would any of those things be better bought with crypto? If anything, better to buy all of those things with fiat cash, no? Why would you want a permanent record recorded every time you buy something? (Crypto)

The only audience are people who don't know about that or have more to win than to loose.

> rather than paying a middleman a fraction of a percent.

Having a middle man doesn’t ensure safety. It just means that you have someone to blame if it all goes wrong. And even if you blame them, they most likely won’t see any negative repercussions anyway.

The audience is the people who don’t want to deal with the government for whatever reasons, the most obvious one is doing something illegal like buying drugs or costly like sending money overseas in developing countries.

First world citizens like to complain about how little they trust their govts, but I find it very telling when those same citizens can only see crypto as a benefit to nefarious actors. It's like complaining about Facebook and continuing to use Instagram.

I think it is because we are allowed to complain in the first place. Free speech is free (monetarily and legally).

Or where you do the equivalent of stuffing cash under your mattress by hiding the password to your cryptowallet inside a safe, or using one of the various incantations of writing your password on a post-it note.

Sure, the vast potential of reward justifies the added risk. But I'm also not in the US, I'm not rabidly anti-government, and I don't want to store my money under my floorboards. Good, old-fashioned, regulated banks serve a valuable purpose.

> by hiding the password to your cryptowallet inside a safe, or using one of the various incantations of writing your password on a post-it note.

This is the scariest bit about crypto by far and that I will not deny. This is why whilst I don't trust banks, they do have big safes with locked boxes in. Using these with shamir backups is what protects my assets, and worst case scenario my private key is also split in two and engraved in two seperate countries.

If it's ever at the point where I can't access any of these, there's bigger shit going on in the world.

It's also why I think crypto is suffering a bit of the Dunning-Kruger syndrome. We've had well over 2000 years of banking and it's always the case that protecting your money then becomes a legit business-case. The business plan is ages-old and always the same: take the money under protection, ensure a certain percentage in reserve, and profit off the venture by using a percentage of funds for investment and speculation. Just, not so much that you can't pay people back.

The latter point is a stickler, so get regulation in there and ensure anyone doing banking is protected up to a certain sum. Any money beyond that... you put all your eggs in one basket, sorry. Other people need to be made whole, too.

Use the same regulation so that banks that embezzle protected customer funds can be prosecuted, too. This equally applies to insurance, credit cards, loans, and other industries that make money out of offering money.

You can't stop a run on the bank if everyone loses confidence at the same time, as we saw in 2008 (Northern Rock in the UK) or in 1929 (Wall Street). But as you say... that's when bigger shit is going on.

But now... to me crypto feels like a group of upstarts thinking they can reinvent millennia of economics and come up with something better. All I've seen so far is a skeuomorphism to a scarce resource, essentially treating silicon as if it were gold.

It's making a handful of people filthy rich, people who would have been well-off in the first place, but it's not changing the world for the better. It's siphoning another resource for a wealthy elite.

> This is why whilst I don't trust banks, they do have big safes with locked boxes in.

This doesn't matter at all. Banks will hand your money over during a robbery - it's policy and it happens often. What matters is that banks have insurance and legal infrastructure to deal with theft. When a bank is robbed insurance covers the loss, the FBI begins investigations, etc. The lockboxes are for show (I worked in a bank, no one will tell you otherwise).

> I'm gonna be honest I don't know what the audience is for a product where you risk losing your entire life savings because you typed a wrong word in a smart contract.

Some of crypto's loudest voices are young, college-aged people who've recently read Atlas Shrugged or Catcher in the Rye and are certain that they will never be the ones to lose their keys.

As of today, the audience is "people trying to get rich fast".

Yes, secure your own keys or risk losing everything doesn't work in the real world. This is a level of required diligence by the end-user that is unacceptable for any real world use.

With billions being syphened from African countries, it's hard to make the case that crypto microloans are a net good for the continent.

Many of those taken in some of these elaborate scams, are security EXPERTS. Assuming that Joe T Dillhole is going to be better at securing their bag than security experts is a stretch.

> that the world does not run algorithmically

Sure it does: moving gold and commodities between countries in non-mutually-friendly regimes, very much resembles crypto.

Fiat finance is a system of contract law built on top of a de-facto "state of nature" of irreversible no-arbitrator commodity transfers. It exists in places where people can agree on who the arbitrating party should be. It does not exist outside of those places. It especially does not exist between powers that are actively at war.

Cryptocurrency platforms are, at a base layer, a digital equivalent to the commodities-transfer "state of nature." Many crypto platforms also have the mechanisms within them to build fiat finance systems atop them. (The keyword to search here is "security tokens".)

I personally think that's for the best. Build something that can simulate all the kinds of finance the real world operates on, rather than only some.

Most people, most of the time, if they touch crypto at all, should be doing so using one of the fiat "layers" on top of crypto, rather than the commodities-transfer base layer. Just like people should be buying things using credit cards, rather than by sending gold bullion in the mail.

But if the fiat layer were the only layer, then you'd have a system that only worked where contract law works, which would be no better than the existing fiat ecosystem, in the sense that it wouldn't enable many of the use-cases that cryptocurrency enables. Chief among those use-cases being securely transferring commodities to people in countries that your own fiat regime's financial infrastructure refuses to deal with, for them to then convert to local fiat money. (See e.g. the saga of this YouTuber https://www.youtube.com/channel/UCAPrhJwVweWZA8GEPoClSdw trying to pay his employees/contractors in Nigeria, Liberia, etc. for their work.)

I can't tell if this is a joke or not but the example of moving gold between non-friendly countries (do you mean smuggling?) is probably the least algorithmic thing out there... It's something where you absolutely will fail if you don't have tolerance for faults and flexibility to recover potential losses or change course while transacting...

The parent comment's real point was that the world isn't run algorithmically. An enterprise which tries to smuggle goods may not be able to reverse transactions if they transfer too much, but they should be able to react to an overcharge and shut down operations before they lose everything. Or they should be able to stop a shipment before it reaches the border. Or they should be able to change the rules of their trade if government rules change in between.

That's the kind of stuff smart contracts tend to ignore or forget about. They have little flexibility in them in a world that's constantly in flux.

So... sending money to where your own government forbids you to send it? It sounds like you're admitting that the point of cryptocurrency is simply to break the law, while pretending like the purpose is much bigger.

There is more than one "law." Each fiat ecosystem is its own system of financial law, each mutually-incompatible with any other fiat ecosystem. Cryptocurrency gives an alternative arbitrator that allows for these mutually-incompatible systems of law to be bridged.

Also, to be clear, in the example I mentioned, the government of the US does not forbid trading with Nigeria/Liberia/etc. Traditional money-transfer services (Paypal, Western Union, most savings banks, etc.) are just unwilling to do it, because of the frequency of those transactions being scams. But this prevents people who "know what they're doing" (like people employing people in those countries!) from having any means to send money there.

This is a gap in the market, in some sense, but it's one that couldn't really be filled by any other fiat "retail" solution, as that solution would then be what scammers use to bilk people. So you really need something that's "complex and finance-nerdy" in the way that crypto is, to ensure that it's hard enough for regular people to use it to transfer money, that scammers just don't bother to try talking people through it. (Such a product would then never find product-market fit, as it would have no retail customers. Only a system run "for its own sake", like cryptocurrency systems are, can really be a good base platform to enable such transfers over the long term.)

Wait, so BitCoin's benefit now is that it's too hard to use? lol

edit: And that's why it can't be used for scams! Oh my. I'm not sure what universe you live in, but it's different from mine.

Crypto is too hard to use — or more specifically, requires too much financial and technical acumen to understand — to make it profitable for someone to operationalize a mass-market "volume" scam (a scam involving stealing small amounts of money from a large number of people) based on it.

"Volume" scams are the really successful scams — the ones that fly under the radar for years/decades because no individual person is ever out for enough money to make large institutions upset to the point of pursuing them. Tons of "volume" scammers get their start every day.

The opposite kind — the scams where large sums are stolen from relatively small numbers of people — are flashy, but ultimately futile, as high-value scammers almost always get caught, and quickly.

Does Wise (fka TransferWise) send money to those countries?

> Chief among those use-cases being securely transferring commodities to people in countries that your own fiat regime's financial infrastructure refuses to deal with, for them to then convert to local fiat money.

Ah, the "I want to break laws" use case for cryptocurrencies.

At least to me, and possibly others, any system which I have my money invested and I can lose everything I own with no recourse due to some exploit is completely laughable and something I will never ever touch. There's a reason folks keep their life savings in a Chase bank account, because if something like this happens you have recourse to recover your money.

People have never lost their life savings when held in a bank account?

I'm just gonna leave this here:

https://youtu.be/CS9ptA3Ya9E

It's a dark comedy sketch that has an answer to your question.

Then don't put your money in a newly created contract?

You yourself say you keep it in a Chase bank account, you sure as hell wouldn't put your life savings in a newly created bank and trust everything to them would you?

Look at what you put your money into, has it had any audits done (this applies to both tax / financial audits for brick and morter stores, and code audits to smart contracts).

I will never ever invest my money with HSBC, they have shown time and time again to willfully break the law and soley gain monetarily from it, the governments or financial institutions don't do anything about it. Just like I will never ever invest my money into USDT, I think it's a massive scam and don't touch it in the slightest, doesn't stop millions of others investing though.

I'll take an FDIC insured bank over some new cool crypto project any day of the week.

That's different, that's because you trust the insurance. If you had insurance you trusted for the new cool crypto project, you might feel differently.

The defacto state of nature is reversible transactions.

Unless the things have been destroyed, the trade can be undone

I think your position is essentially at odds with parent.

> Sure it does: moving gold and commodities between countries in non-mutually-friendly regimes, very much resembles crypto.

Parent is talking about a legal framework and yet your counter-example is a transaction between two jurisdictions/parties/legal entities that are in less-than-legal agreement with each other. Apples to oranges.

Also, I'm quite certain you and parent interpret "the world" differently. You seem to interpret it in the sense of a pre-formalized economic framework society. Whereas parent (with whom I side with), use the term "the world" to refer to that sector of society with a codified economic framework.

> Many crypto platforms also have the mechanisms within them to build fiat finance systems atop them. (The keyword to search here is "security tokens".)

That might very well be the case but parent's argument is that our legal economic system is not purely algorithmic. Crypto might have features that are analogous to our current fiat systems but those features do not describe the whole fiat system; it misses some features (or "bugs", depending on how you look at it).

To paraphrase parent's statement, having someone able to override transactions is a feature of our existing systems, for better and for worse. Conversely, a system without this arbitrator has pros and cons too. You pick your poison.

Indeed. Credit cards are far less decentralized than cash. But because credit cards have an administrator to protect the consumer, they are also preferable to cash.

The majority of people in the world can't get a credit card.

but they can get and use {meme}coin?

This is true, but with that said 54 countries have instant payments [1] [2]. This number will only grow, as you’re just pushing messages around queues. Once Congress lit a fire under the Fed, it’s only taking ~4-5 years to roll out instant payments in the US. This is very fast for such endeavors.

Your average financial consumer in most countries is going to trust their bank and government to protect their fiat vs cryptopunks, blockchains, “smart contracts”, and “stablecoins”. To compete with fiat, you need to sell trust and recourse, not speed, and that’s something crypto inherently doesn’t support.

(No need to point out Venezuela and the like about where crypto might have a chance, ground truth shows those folks overwhelming used Zelle and clandestine US deposit accounts to circumvent government monetary controls [3] [4])

[1] https://www.moderntreasury.com/journal/real-time-payments-ar...

[2]https://empower1.fisglobal.com/rs/650-KGE-239/images/Report_... (pdf, start at page 30)

[3] https://www.coindesk.com/venezuela-is-a-testing-ground-for-d...

[4] https://mobile.twitter.com/jp_koning/status/1254009112263868...

The crypto movement in South America is growing explicitly because people are increasingly not trusting their banks and government to protect their fiat. I've never heard of Zelle and not everyone has access to a clandestine US account, while anyone can buy open a crypto wallet and get some DAI.

Could you provide evidence or a citation of crypto uptake in South America?

Here's a survey[0] that says the following: > In addition to users in Africa and Southeast Asia, one more world region where many cryptocurrency users are located is Latin America. Peru leads adoption with 16 percent of respondents, while Brazil, Colombia, Argentina, Mexico and Chile all reached double digits.

If you follow local news, you see reports every day saying how growth is constant and spiking, this[1] Chilean headline reads "people who deal Bitcoin grow over 100% in a year" just to give a quick example. I suggest googling news for "<country> criptomonedas" and you'll see most of them will have news of the sort from the past year at the most reflecting on just how many people are getting into it. Google trends for "crypto" for every country in South America have also spiked recently.

I also have anecdata, which is worthless of course but it's there. Nearly everyone I've spoken with who saves here either already has some crypto or is learning about it in order to get started.

[0] https://www.statista.com/chart/18345/crypto-currency-adoptio... [1] https://www.df.cl/noticias/mercados/bolsa-monedas/se-dispara...

This argument does not help. Those same folks cannot carry around a crypto-buck either.

There are plenty of mobile-only banking solutions that are widely used in non-western worlds, and that's likely a model for emerging economies. When electronic banking comes, OP is saying that standard banking ("perfected over millenia TM") is honestly quite preferable over algorithmic contracts.

> This argument does not help. Those same folks cannot carry around a crypto-buck either

I'm not a big DeFi booster, but I don't think that's true. All it takes is a mobile phone. There's some pretty compelling videos coming out of El Salvador showing just how easy it is to instantly transact Bitcoin between two people simply by scanning a QR code on the other person's phone and then sending a Lightning Network transaction. This is already reality on the ground, and seemingly more accessible than getting access to credit.

You'd have to ignore the rest of the comment to honestly think this is a reply to the point OP was making and I was clarifying.

How is that different from M-Pesa or Venmo? The difference is that no one has shown up yet in that particular location to set those up, but someone did come set up Bitcoin infra in El Salvador.

Still, the ease of spending crypto in El Salvador, great as it is, does not prove it's safe and that everyone won't get hacked and robbed.

> Those same folks cannot carry around a crypto-buck either.

Many of them can. Smartphones have much higher adoption than credit cards in these areas.

> There are plenty of mobile-only banking solutions that are widely used in non-western worlds, and that's likely a model for emerging economies. When electronic banking comes, OP is saying that standard banking ("perfected over millenia TM") is honestly quite preferable over algorithmic contracts.

> This argument does not help. Those same folks cannot carry around a crypto-buck either.

I'm commenting on this as well as sibling and descendant comments: There are First World countries (several in Europe) in which credit cards are both uncommon and pretty much inaccessible to the majority of the population while at the same time crypto services apps and wallets are ubiquitous. The reason why credit cards are not is because governments want to discourage excessive personal debt.

Let's hear about the several European countries where crypto of much more popular than credit cards.

FWIW, traditional banking and credit processes existed over a millennia ago. The Book of Ezekiel which writes a lot about the "sin" of interest was written around 593 BC. Exodus which classically is attributed to Moses was probably actually written down around that time as well also talks about charging interest. Clearly people over 2500 years ago had concepts of loans, interest, and debt.

Note: I am not a religious extremist, I have a traditional mortgage and an auto loan.

https://biblehub.com/ezekiel/18-13.htm

https://biblehub.com/exodus/22-25.htm

Exactly. This system has been polished to some definition of fairness over a long period of time. "millenia".

Ah oops for some reason in my mind I read that as singular millennium. My bad!

I thought it was very informative anyway, so thanks!

Those same people are way less equipped to use crypto. I have been to shops in rural areas in third world countries which have credit card machines running over telephone lines. Broadband internet and fancy tech is still a decade+ away for a lot of parts of the world.

Much of the world literally does run algorithmically. Literally every day you trust your life, privacy and money to algorithms that make decisions without human intervention. The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision. Hedge funds and banks already trust algorithms that if broken could lose billions.

The existence of flawed software does not mean that it’s impossible to make reliable or trustworthy software. If you’ll never trust your money to a smart contract no matter how vetted, then I’d recommend you never fly a plane or store personal data in the cloud.

Sure. But when you get pissed off at those algorithms, you can turn to the government to force the entities behind the algorithms to change the result. That's the whole point. It's not algorithmic in the end. Code is not law, and if it is, that's a bug, not a feature, to most people.

But in many cases, there are ways to dispute and/or retrospectively fix or amend a transaction that is mis-classified.

In the exceptionally rare case that something is exploited within a cryptocurrency, there is no recourse for the victim.

> Much of the world literally does run algorithmically.

I think you're missing the parent's point, which is around the world running on legal contracts.

It's that legal disputes are settled non-algorithmically. If someone harms you through fraud or other illegal action, a judge can order a transaction reversed, etc.

None of this has anything to do with algorithmic trading, or using algorithms in finance generally for efficiency.

It literally does not. The world runs advised by algorithms, but not governed by them. It's a fundamental difference. When algorithms in the real world create lose-lose outcomes, people override them, which is why when your credit card gets stolen you don't end up paying for stuff. You can bake that logic into a software contract, but if the design of your system is that the totality of software contracts are the final word, you have the same problem; you can't predict all the corner cases. It turns out a lot of the human beings that work for companies engaged in the financial system actually do stuff to solve problems.

> When algorithms in the real world create lose-lose outcomes, people override them, which is why when your credit card gets stolen you don't end up paying for stuff.

An exploit where I take all your bitcoins isn't a lose-lose outcome, and neither is that. If I steal your credit card and you have to pay for my stuff, you're the only party who loses.

If you steal my credit card and buy things with it, I will call my bank and I won't need to pay for it when I settle my statement balance at the end of the month. The bank will follow up with the merchant and/or law enforcement and, in most cases, the bank will get its money back somehow. In the cases where it doesn't, I'm sure the bank is insured against losses. Banks and insurance companies probably have a complicated model for estimating $X/yr in theft.

If someone steals my wallet's private key (= stealing my credit card), I'm done. There is no recourse AFAIK.

> If you steal my credit card and buy things with it, I will call my bank and I won't need to pay for it when I settle my statement balance at the end of the month.

This is an epically terrible argument for why you shouldn't have to pay for things someone else purchased with your stolen credit card. "I shouldn't have to because I don't have to"?

Compare tptacek's claim:

>>> which is why when your credit card gets stolen you don't end up paying for stuff.

There are four parties involved: you, the thief, the bank, and the merchant.

When you can afford to pay, here's a win/loss table in the case where you have to pay:

    you:      lose
    bank:     win
    merchant: win
    thief:    win

And in the case where you don't have to pay, but the bank collects from the merchant:

    you:      win
    bank:     win
    merchant: lose
    thief:    win

You don't have to pay, and the bank can't collect from the merchant:

    you:      win
    bank:     lose
    merchant: win
    thief:    win

When you have to pay, but you can't afford it:

    you:      win
    bank:     lose
    merchant: win
    thief:    win

Where's the lose/lose scenario?

I was sure someone would make this argument and debated dumping more words into my comment to address it preemptively, but figured instead I'd wait for someone to spell it out first.

So, just to clear this up: you, the customer, and your credit card company agree that it's lose-lose for retail customers to be on the hook for credit card fraud. It makes it much harder to actually use the credit card transaction processing system, which you want to do because it's way better and safer than carrying cash, and the credit card companies want you to do because they're credit card companies.

In any given situation, a merchant on the hook for stolen stuff does not agree that this is lose-lose. Them getting paid with stolen money is a win-lose for them. But the credit card company takes the long view: if customers were always on the hook for this stuff, customers would stop using credit cards as much. It's better for everyone if it's easy to buy things, and not terrifying to shop online.

Merchants that disagree with this assessment can refuse to take credit cards. They can just take Bitcoins, The Currency Of The Future. The consensus view here is not hard to discover.

As the holder of the credit card I can't think of a good reason why I would/should pay the debt off for a purchase I didn't make. I did not initiate the sale with the merchant, I did not verify I was the rightful card holder, I did not authorize the funds to be transferred, and I will not send money to that bank to make up for any of that. Banks are in the business of encouraging transactions and my card number could be skimmed from a physical device, or from hacked website on the internet, or I used it at Target https://money.cnn.com/2013/12/18/news/companies/target-credi..., or someone physically stole my wallet.

If they did try to collect then that sounds like a great reason to go back to cash because even if I get mugged, criminals can't spend me tens of thousands of dollars into debt by stealing my cash on hand. They are limited to what's in my wallet.

> As the holder of the credit card I can't think of a good reason why I would/should pay the debt off for a purchase I didn't make.

This applies to everyone involved, but someone's going to pay for the loss anyway, unless you can recover from the thief.

There is no reason for the merchant to pay for the purchase either -- he is even less culpable than you are. But that's what everyone is advocating here.

There obviously is a reason for merchants to eat the losses, or else virtually every merchant in the modern world wouldn't accept credit cards. The reason is that merchants (on the whole) agree with credit card companies that it is better for customers to feel safe and comfortable shopping, and thus increase transaction volume, even if doing so means that merchants will occasionally eat losses from fraud.

You are discussing a different level of "reasons" than frumper is. In your sense, there is a reason for merchants to take the losses, and there is also a reason for customers to take the losses. But in the sense that there is no reason why customers should take these losses:

>>> I did not initiate the sale with the merchant, I did not verify I was the rightful card holder, I did not authorize the funds to be transferred

there is also no reason why merchants should.

The fact that the system currently operates in a certain way is not actually evidence that it cannot operate in a different way.

It's pretty good evidence that there's no consensus that favors structurally irreversible transactions. But again, if you do, there's a Coin for that!

But there is a price to pay for the responsibility you burden off onto the bank. Banks charge fees, pay almost zero interest (at least currently) and are usually very unpleasant to deal with when you want to borrow money.

I’d say it depends. You probably shouldn’t manage your life savings using a crypto wallet. Keep some money at a bank. Keep some money in cryptos.

Cryptos are not a solution to every financial problem out there but they add new and exciting options for us. Don’t think black and white. But embrace more freedom to choose.

Crypto transactions have fees, crypto wallets don’t accrue interest, and my exchange won’t loan me coins. So I’m not sure this is the slam dunk on banks that you were going for.

> crypto wallets don’t accrue interest

The Coinbase wallet integrates the major lending protocols. Ethereum fees are reasonable these days. So lending USDC or DAI and earning interest has become a great alternative to saving accounts.

If you hold fair amounts of Bitcoin or Ethereum long term, you can use it as collateral and borrow USDC. This way you can not only let your money work for you, you can also use it to borrow dollars for a short term credit — like getting a mortgage but without a bank.

Furthermore, these days there are other emerging financial tools that banks simply can’t provide. Earning exchange fees on liquidity pools, for example, or staking cryptos and earn validation fees like a miner for Proof-Of-Stake networks.

Point is: Lots of innovation, here. When I look at banks nothing really has been happening there for decades.

Replying to adtac:

But what if someone does not want the insurance of the bank? There is no opt out. With something like bitcoin you ideally have the option to take the risk of final settlement on your own or delegate it to some insurance deliberately

You are aware that the vast majority of financial market trading is run by algorithms that govern not advise vast amounts of capital in an irreversible way.

Sometime these algorithms break or are exploited. Often in spectacular disasters. Knight lost half a billion dollars in 30 seconds. Nobody reversed though, even though it was clear error.

If you have a 401k I guarantee you that a significant amount of your money was traded by an algorithm that if broken would have lost everything. If the question is whether people would ever trust capital to irreversible algorithms, the answer is they already do. It’s called the stock market.

The world is more than just automated trading systems

The matching engine on the exchange is also automated. The settlement system is electronic. Etc. etc.

Yes and if any of those make mistakes, the trades can be rolled back with human intervention.

> Sometime these algorithms break or are exploited. Often in spectacular disasters. Knight lost half a billion dollars in 30 seconds. Nobody reversed though, even though it was clear error.

This actually blew my mind. The exchanges bust trades all the time. I don't why they didn't do it in this case.

I think quite a few people who find crypto objectionable will also consider many, even most of the weirder technological outgrowths of the stock market to be every bit as objectionable.

As we've repeatedly learned, to the detriment of most people in the world.

In a previous lifetime not so long ago, I was paid to find vulnerabilities in exchange infrastructure --- order routers, match engines, FIX gateways, all that stuff. When I was getting started, any interesting finding was super exciting. "This is a billion-dollar vulnerability! Suck it, Mark Dowd!"

Then I learned about out-trades. In reality, these heavily automated markets screw up (or, rather, customers of these markets screw up) somewhat regularly. Surprise: one of the reasons lots of humans work both at the exchanges and at companies that program directly to them is that mistakes happen, and are often resolved not by code but by hashing things out between cooperating blobs of electrified fat tissue. Gross, I know!

Obviously, there are big screwups where the rules coded into the algorithm are the last word. But those rules aren't always the final word, and, more importantly, the rules themselves are easily changed when the electric meat blobs want them to.

// Knight lost half a billion dollars in 30 seconds. Nobody reversed though, even though it was clear error.

You cited Knight twice in this thread, and it's just not the same concept. I think your point is that people should accept irreversible transactions in whole because there are some edge cases where they exist today, and that just doesn't make sense.

First, there's a difference between an average person and Knight in the degree of sophistication of tools that they can wield. So the fact that Knight is allowed to operate like this is in no way connected to whether this mode should be the default for an average person.

Second, the Knight example can be interpreted as an exception that proves the rule. They had an unforced error that (from what I recall) looked to the rest of the world like real trading. But there's a whole other slew of issues (clearly bad prices, exchange-errors, etc) that cause trades to be unwound. Some exciting reading if you care: https://www.investopedia.com/terms/e/erroneous-trade.asp

You have a point that yes to some extent we're all subject to underlying risk of irreversible activity but the bigger point is that we as society try to minimize it where possible. So moving the system in the other direction, especially where it makes it easy for Joe-Blow to fuck it up, is not the way.

There’s no categorical difference between Knight and Vanguard. If Vanguard fucks up its trading, the exchange is not under any obligation to make it right. The only difference is that Knight was a lot more aggressive in terms of pushing the envelope on its algorithms to reap excess profit. I’m sure Vanguard is a lot more politically sympathetic, but I’d trust that “guarantee” a hell of a lot less than I’d trust battle tested software.

Say the fund managers running your 401k decided to say “fuck it, turn off all the circuit breakers.” Would you just shrug your shoulders and say “no worries, I’m sure FINRA’s got my back if anything goes wrong. Blindly trusting the people running institutions to keep you safe is as misguided as assuming that all software is infallible .

I agree with the individual bits of data but I don't agree with your ultimate conclusion.

The point is - do you aim to make the system fixable by human judgement or not? This thread is full of examples we like: the credit card protecting us from fraudulent charges, FDIC insurance, etc. Are there places in our life that society is forced to operate without such backstops? Yes. But we want to minimize, not maximize those - especially when it comes to consumer-facing capabilities.

> If you have a 401k I guarantee you that a significant amount of your money was traded by an algorithm that if broken would have lost everything

How so? My 401k is invested in a fund that just owns a broad index of stocks, not an algorithmic trading hedge fund.

Even that has an "algorithm" behind it - they have to manage inflows & outflows, the heartbeat trades if it's an ETF, etc. Vanguard doesn't have a person sitting there buying a little bit of AAPL every time someone invests in VTSAX.

OP is trying to say that even something as simple as VTSAX could have a problem and, I don't know, accidentally sell all its AAPL and so it's proof that even for the current market there are rules that govern.

Except, of course, if VTSAX dumped all their AAPL somehow the trade would be unwound, as trades occasionally are. Selling stock on the market is not nearly as irreversible as it may seem.

Knight took closer to an hour to melt down than 30 seconds.

NYSE and the SEC _chose_ not to reverse those trades but they could have. There are plenty of ways the exchange can undo those and also trade busts happen daily on every exchange.

Almost certainly if a large index etf or fund lost everything to a software glitch the trades would be reversed and even if for policy reasons they weren’t they could be. The facility exists.

> The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision.

Nope. Regulations require human supervision, in some way, of that trading.

Furthermore, those trades have exactly the kind of non-algorithmic softness that omk talks about: if an algorithm makes a trade which is obviously incorrect, you can ask the exchange to bust it.

I'd say most of the systems you mention either a) have human failsafes b) have years of pre-algorithmic precedent such that the algorithm matches some well-known accepted process or c) are speculative in nature and therefor can assume the risk of a faulty algorithm.

Algorithmic stablecoins are mostly in category "c" so far. There is no human failsafe and there is no predetermined process that can shape the algorithm.

> The existence of flawed software does not mean that it’s impossible to make reliable or trustworthy software.

It also doesn't mean that it is economically feasible to make 100% reliable or trustworthy software.

> If you’ll never trust your money to a smart contract no matter how vetted, then I’d recommend you never fly a plane or store personal data in the cloud.

Isn't vetting of contracts the opposite of having a no human touch algorithmically run world?

And who does the vetting of the code? Who does the vetting of the people the vet the code? Who does the vetting of the people that run the code?

To have your money in smart contracts right now is tantamount to seeing those 737 max plane crashes in the past, then plugging your ears with your fingers and saying I can't wait to fly on a 737 max tomorrow. It's kind of a mess out there right now [1].

[1] https://cryptoslate.com/binance-smart-chain-sounds-alarm-ove...

>Literally every day you trust your life, privacy and money to algorithms that make decisions without human intervention. The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision.

... but when that stuff goes wrong, which it does, we don't just say "geez that's too bad, the code is the code".

Look at the 2010 flash crash: something like 20,000 trades were broken after discussion between FINRA and the exchanges based on how far they were from the reference price.

Similarly, I don't end up eating the entire loss if my bank's anti-fraud system mistakenly approves a transaction on a stolen credit card, because I have 60 days from the statement date to report the problem under the FCBA.

The point is that in most cases where physics is not involved (e.g. flight control systems), the real-time behavior of the systems is backstopped by processes to deal with exceptions in a slower, more considered way.

Knight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed.

Every hedge fund and market maker knows that if their algorithms break, their money is gone. Period. No backsies. The point is billions in capital is already completely trusted to algorithms with no human fail safe.

>Knight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed.

I am pretty sure that NYSE canceled trades in six names after Knight; and the LULD pause rules that were introduced after the 2010 flash crash (unfortunately too late to save Knight) also create opportunities for human intervention.

I don’t disagree with you, but I think the only fallacy here is that it’s an extremely zero-sum way to look at things.

Are we perhaps better off for many — maybe even all — of our status quo legal contracts not working like software programs? Sure.

Is there a class of legal contracts — either already in existence, or made possible by crypto — that’d make much more sense if ran like software (with different requirements/constraints than the error tolerance you described)? I don’t see why not, and why this would be mutually exclusive with the first premise.

Where does the legality of a contract get determined?

The execution of a contract seems distinct from is legal validation.

What would such a contract look like?

The whole point of crypto-like contracts is that the terms of the contract are defined solely by code. Ambiguity is, by definition, impossible.

If you remove that, why not just use a regular contract?

I agree that it isn't a zero sum game and that there are valid use cases. But I don't see any of these use cases operating over a multi-million dollar business. There has to be a way to override an exploit when a sum like that is at stake.

Not to suggest that this is the best way to do it, but that’s already happened on Ethereum: https://en.wikipedia.org/wiki/The_DAO_(organization)

This is consistently the case too, not just in financial systems. Even language, which is loosely structured and something we get 'wrong' a lot on a day to day basis, is better for that reason - strictness just doesn't fit into the world of human beings. We're much better at using context to make case by case calls - a rigorous, inflexible system is playing against our greatest strengths.

I think the word „smart contract“ does not actually describe them very good. Of course, a piece of software can not replace a legal contract, really, because software is stupid and inflexible.

Think of smart contracts rather as vending machines for financial transactions. For example: You enter some crypto coins, maybe select an option and the machine returns a receipt for redeeming your investment plus some interest later.

If the machine is well designed it will forever do the same thing and, hence, be reliable and convenient. Of course, bugs can happen. But like with vending machines, you test and audit its code before deploying it everywhere.

In a very real way, those contracts are less smart than existing legal contracts.

In the same way a "smart speaker" allows for interactive and sensitivity to its environment compared to a "dumb speaker", a "legal contract" allows for arguing and bugfixing and sensitivity to its environment compared to an block chain "contract".

They should call them "strict contracts" or "inflexible contracts" or "software-enforced contracts". The smarts have been taken out on purpose.

> The smarts have been taken out on purpose.

Yes. Where dumb contracts make sense, they make many financial services much cheaper. But investing your life savings somewhere will probably forever demand counselling by a human being.

> In a very real way, those contracts are less smart than existing legal contracts.

It's more that they're just entirely separate things. Smart contracts are programmable money. Contracts are agreements between parties. The fact that you can use smart contracts to automatically take actions required by an actual contract is interesting and useful, but it's not enough to make the two comparable.

I'm not the one who decided to name them "smart contracts" instead of "programmable money". Not that I think the latter term makes sense...

I'm a crypto head but I don't think it will ever replace traditional systems in any way. For me, DeFi is its own cyberpunk universe where this stuff is part of the game.

A point that most people miss is that the world is slowly being eaten by algorithms. One example would be trading floors being converter from mosh pits to electronic ledger books. Another example would be slow advent of self driving, sure it's not here yet, but I think we can agree it is possible.

So, is it that much of a stretch to assume that some day a significant fraction of contracts will be more algorithmic? "The best way to predict future is to create it" - unatributed.

The backstop needs to be humans.

The rest of the world doesn't want to lose millions due to an exceptional condition in a contract that wasn't apparent on audit.

That isn't how the law works, and that's a good thing.

When it comes to contract disputes you ultimately wind up before a human with hopefully decades of experience trained by a system with centuries of experience which can deploy some level of nuance.

Which is not how geeks think the legal system works. Or if they do understand it works that way they feel that it is flawed. That isn't a flaw, that's a feature.

Sometimes it goes wrong. But if you're ever the beneficiary of a judge going "yeah that contract term was always bullshit. you think you're clever, but i wasn't born yesterday. nullified." then you'll appreciate it.

This is the reason crypto enthusiasts are enthusiastic in the first place.

Crypto enthusiasts want to defect from the system of democratic law in favor of algorithmic law.

These topics are orthogonal to the technology. It's perfectly possible to create tokens using smart contracts on the ethereum blockchain that have keys that can reverse transactions. I deployed a simple one to a testnet a while back as a proof of concept for a bank (any time an enforcement action was taken, a reason had to be provided, and it was broadcast as an event).

And just because you're using a smart contract, doesn't mean that the legal system of the jurisdiction you're in no longer has an opinion or the ability to make judgements against you.

So, I agree, some of these things are features not bugs to normal humans, but to most cryptocurrency enthusiasts they are anathema. Ultimately we'll need systems that are a bit more friendly to error. It's early days though, and the technology is flexible enough to incorporate nearly any kind of system you want.

That’s precisely my point. An oracle in the system is needed for an override. But introduction of such an oracle is viewed by most crypto enthusiasts as a undebatable compromise.

> Legal contracts do not work like a software program and that characteristic is a feature not a bug.

Not everyone agrees with that. Everyone using smart contracts is opting in to code-as-law - nobody who doesn't want that needs to use or touch them.

When I was young I remember when I showed Excel to my parents, they always calculated through the numbers because they didn't trust computers.

Maybe we have a similar phenomenon with blockchains nowadays... Of course there will be errors in the source code somewhere, it is software written by humans!? It is just a matter of creating another level of abstraction as a safeguard in the smart contract, maybe even with 4 eye principles...

So long as these are software errors, we can fix them. We can't drain swamps, though.

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