Crypto community slams ‘disastrous’ new amendment to big infrastructure bill
techcrunch.com
techcrunch.com
When you hear about the environmental consequences of crypto, the massive amounts of electricity, the GPU shortages, that’s all PoW. PoS is designed to eliminate that and make crypto no more resource intensive than any other p2p network like BitTorrent.
Regardless of your view on crypto, there’s no defensible justification for the Portman-Warner amendment. It’d be like passing a bill banning electric vehicles but not gasoline, or shutting down solar plants but not coal plants.
Bitcoin is PoW for many reasons, a fork of bitcoin could switch it to PoS and end the discussion, but its decentralized nature where one hash = one vote is part of the core of its economic policy.
Ethereum and other PoS chains take trade off but advantages from utilizing PoS one that it desires to be a blockchain that can settle contracts on its layer 1.
This Portman-Warner amendment favors PoW chains dissuading competition between the two.
Even if you don't like PoS, you still shouldn't like the Portman-Warner amendment.
Proof of Stake relies almost entirely on the internal game theory of the system and while external influence (such as some level of proof of authority via gov oversight or hybrid PoS/PoW) can be used as a crutch, they open the system up to a new set of vulnerabilities.
Additionally, while the bills are "just" changing the reporting requirements, those new requirements are incredibly vague and whether read in a narrow or a wide sense they impose such a significant reporting requirement that it would be anywhere from very difficult for an individual on their own to legitimately impossible even with unlimited funding and manpower. The reporting requirements would effectively impose KYC reporting on any validator (including full nodes) or software developer involved in a cryptocurrency ecosystem for all users of the ecosystem. This effectively prevents US validators or SW devs from even participating in the ecosystem outside of creating a completely siloed "US only" cryptocurrency ecosystem.
The originally proposed wording is bad, the Warner amendment is worse. The Wyden-Lummis-Toomey amendment is a reasonable compromise that provides some capacity for tax compliance oversight without burdening the entire ecosystem with reporting requirements that are mutually incompatible with 99% of networks.
(source: https://twitter.com/jerrybrito/status/1423429377459736577)
The exclusion is for "validating distributed ledger transactions through proof of work (mining)" -- is that meant to cover validation by any full Bitcoin node (e.g. random person who wants full control over transactions involving a personal wallet), or adding new transactions to the ledger via mining?
(I guess, this basically comes down to what's meant by "validating through proof of work" -- the actual PoW is provided by the miner, but other full nodes are needed to validate the actual transaction.)
Because to me, either the validators are affected (thereby significantly impacting the overall robustness of the network, which I would hope reduces its trustworthiness and therefore the currency's value as a result, as well as the ability for individuals to control their own wallets), or miners are affected directly.
A mistake like this really suggests that the proposed regulation is not well thought out, and that it should probably be revisited after further education and discussion.
Worth saying a million times: the massive uproar in the crypto industry this week is not because we don't want to be regulated. It's because these proposed regulations are:
+ massively over-reaching + proposed at the last minute + attached to a must-pass bill + given very little room for proper discourse
What kind of sarcasm is most appropriate here? A coy shocked face or faux outrage?
I guess my point is that even PoW systems won't be entirely unaffected (albeit not quite to the extent that PoS systems are), since validators are crucial to the integrity of the blockchain.
To attempt to extend the electric car ban analogy: this feels like adding onerous/infeasible reporting requirements to pipeline operators (PoW validators) and power plants (PoS stakers), neither of whom know anything about the end customer refueling at the pump / charger station, but not the oil refineries (PoW miners).
And yes, the reporting requirements would also be in place for the electric utility (PoS validators), which still doesn't know anything about the charger station's customers.
This is an attempt to expand surviellance to make revenue collection easier for the state.
Excuse me if I'm not thrilled about the state having even more information about our lives. I pay my taxes to avoid being jailed, but they're never satisfied until they have complete control over society.
For many reasons this regulation would be unenforceable and/or impossible to comply with. How would a miner be able to fill out a 1099?
In Bitcoin, it could either be interpreted as exempting both miners and node operators or neither. That is because the Bitcoin node software does both validation and mining, but the economic environment and network topology means typically people running the software will only do one of the two. Very strange turn of events.
In PoS, as in PoW, security comes from computations done by network participants. For example, in Algorand, nodes generate a proof that they ran a lottery with the correct seed. That's still work, is it not? Does it matter that it's more efficient work than the work that is done to maintain the Bitcoin blockchain? Can someone formulate an argument as to why this should be excluded from the definition of "mining"?
Without rigorous technical definitions, the result may just be that PoS networks adopt terminology like Efficient PoW and Efficient Mining.
Software should be protected with the same rights we have with speech. If the Wyden/Toomey/Loomis amendment doesn't pass today this will effectively censor and control the code that an American software dev would have to write to comply with proper reporting. This bill, if passed, should be taken to the courts.
And this happens constantly, on all types of things, not just technology.
And also regulated the same way as anything else. If you’re operating as an unlicensed money transmitter, you can’t pretend that it’s legit because your ledgers are printed and therefore protected by the First Amendment. Same applies to “but it’s just code”.
It's basically saying "if you've made a pull request to the bitcoin-core codebase, even just as a bugfix, you may be responsible for providing KYC'd information on all users of Bitcoin and on all Bitcoin transactions, regardless of where they happen or what your relationship to those people is".
Which is why the entire crypto ecosystem is up in arms. This bill is an extreme over-reach and would threaten the viability of essentially all crypto startups in the entire US.
It also may apply to other non-crypto digital money, although that might be the point of the bill, since it would allow the US more easily to chase anyone evading its sanctions (for example: China is creating digital currency, Iran has some ideas too, they could use this to ignore SWIFT and thus ignore sanctions, this bill would allow US to sanction that thing too)
Money transfer fraud also goes all the way back to "steamship agents" in the early 20th century. See, e.g., https://digital.library.temple.edu/digital/collection/p16002...
More specifically:
> this will effectively censor and control the code that an American software dev would have to write to comply with proper reporting
The idea that software today isn’t already, and has been from the times when bugs were actual insects, been the subject of (or had to account for) regulation is simply absurd.
As just the most obvious example, the financial sector is heavily regulated, and that includes the software, from KYC rules similar to those now proposed for cryptocurrencies, to endless requirements for documentation and archival or the exact prescription of the algorithm to be used to settle transactions.
The software in your car, plane, phone, or nuclear plant is required to follow a few dozen regulations, ISO standards, and best practice standards elevated to requirements. Every website accepting payments must implement some minimum of consumer and data protection. Your emails should respect the Oxford Dictionary and The New York Times Manual of Style, and the ADA may or may not include some requirements, although I’m not sure how binding they are.
What’s happening here is the collision of reality with two fundamental misunderstandings in the crypto community: first, they considered themselves valiant warriors challenging the FED/$/governments, certain to be immediately targeted by “the establishment” trying to defend its mighty power. Then, they expected to win that fight with superior technology. Or, as seems to be happening here, the idea that “it’s online” and thereby outside the jurisdiction of the law.
What happened was that for a decade or so, “the establishment” reacted with some mixture of mild interest, bemused looks, and just not giving a shit. Then, when cryptocurrencies had proven worthless except for scams, tax evasion, and CO_2 production, they started cutting it down to size, with maybe a few weeks’ effort at the SEC and probably half a dozen backbenchers’ amendments to the “Stuff We Should Do IDK Could Start To Get Annoying Act of 2022”.
I guess what will be most annoying, besides being the last fool sitting on a million $’ worth of random strings, is how maddeningly unspectacular the end will be.
If you're for this increased regulation fine, just understand it will push innovation and capital elsewhere in the world. And despite what you may want, bitcoin will not die.
Politicians of any age aren't domain experts and don't appear to be any smarter than they have to be to get and hold office. Judging from reading the writings from politicians of yore, I do have to say that the better minds in Congress can't compare to their 19th C. equivalents. It could simply be that a classical education served as a sort of filter.
As far as implications, humans are notably bad at that generally, whether it's tax law or something that involves those computer things. The laws of unintended consequences continue on, but that never stopped the writing (by Congressional staff) of more and more rules for us all.
Why should governments care about opinions from the crypto industry, if the whole point is to evade legislation?
What does this even mean? What innovation did Bitcoin bring to the world other than an easy way to bypass government control? That cat and mouse game has existed as long as governments existed. This only helps if you are fleeing from a worse government to a better government. Completely avoiding governments is impossible. Even on El Salvador Bitcoin acceptance depends on the government.
Pushing capital doesn't even make any sense. What are you going to do with all your "Bitcoin" capital if nobody is trading their USD for BTC? Is the economy of El Salvador really powerful enough to counteract the loss of USA as your trading partner? USD and BTC are just numbers on a balance sheet. You still need to convince people in the real world to give up their real wealth in exchange for it. For the USD it's pretty obvious. People pay their taxes and debts in USD. If the number of people doing that is shrinking then the amount of real wealth you can extract will shrink. That also applies to BTC. It's not like moving BTC from USA to El Salvador will also move factories (you know, the capital in capitalism) there.
Today it might just be El Salvador but bet on more countries joining the network based off of the game theory of the network. This innovation is profound and will revolutionize economies in the 21st century leading to better allocation of capital and the world finally getting off of the petrodollar.
But, reality check, it will not be a matter of laws once the threat becomes existential.
... you do realize just how many restrictions exist and have historically existed on speech, right?
https://en.wikipedia.org/wiki/Censorship_in_the_United_State...
Political ownership calls the shots. Might look different if the politically detached organized against rent seeking and monopoly but you’re all busy building rent seeking startups, easily monopolized blockchains for pump and dumpers funded by nation states.
What a shock politics are going fascist.
Remember when taxes were high and people were politically engaged, America was held up as a haven.
Now it’s mocked as a shit hole.
It's actually easy to explain: lawmakers don't write laws; lobbyists write laws and lawmakers rubberstamp them. Lawmakers don't even read laws, eg, they routinely vote on legislation that is hundreds of pages long that was modified and printed the night before they voted on it.
You don’t want generalist lawyers to write laws. You don’t want specialists to write laws and then have generalists debate them, since apparently the current multi-week unfinished legislative process is rubber stamping to you.
It took me a long time to know what the phrase "going off half-cocked" meant. This is an excellent example.
It also feels quite exemplary of some of the recent discussion on HN of the stereotypical situation where management makes decisions on a very simplified understanding of a situation and will remain in stoic avoidance of having any exposure to the details that may impinge upon their chosen world view.
Although maybe not quite to this scale[0][1].
[0]: https://www.newscientist.com/article/2140747-laws-of-mathema...
[1]: https://www.newscientist.com/article/2140747-laws-of-mathema...
Of course, we know that "crypto" really stands for "cryptosporidium". You can even substitute the full word into most articles about "crypto" tokens and it'll still be accurate.
A good test is to look at a sentence like "are you into crypto?". Absent any other context, the majority of the English speaking world will interpret that question as being about cryptocurrency, and most won't even try to disambiguate. Someone who wanted to ask if you are into cryptography would have disambiguated in the first place.
There aren't many contexts where "crypto" means cryptography anymore.
gcc -lcrypto
Military grade crypto
Anything else?
"historically under-regulated" is the most biased way I could imagine to present this information
Fighting tax loopholes increases the revenue without "tax-increase" optics, and it's extremely popular.
This is happening because our system is completely broken beyond the point of return. Once wealth takes hold of law-making powers, that's it.
I guess I answered my own question.
I guess you can get around that by targeting both equally. If you're concerned about reporting-- well, just because you're using a technology that technically can be anonymous doesn't mean you're legally entitled to anonymity.
Also, it is clear that congress could care less about understanding what crypto really is in a deep way. They only care about using power and extracting their rents.
By misrepresenting validators as "brokers", cryptocurrencies such as Nano, which uses six million times less energy per transaction, are effectively outlawed in the US.
Miners, on the other hand, are not penalised by this bill whatsoever.
If you feel that crypto is an environmental disaster, you should be vigorously opposed to the Portman-Warner amendment.
The base wording is untenable to a certain extent. The Wyden amendment is a reasonable compromise but the Warner amendment (which is the one with White House support) that came out at the last second includes absolutely everyone in the ecosystem except those that burn extraordinary amounts of power.
The lobbying is strong.
I've never understood this narrative. There is no narrative about other industries like gold mining that also consume exorbitant amounts of power that you could deem useless. If you do not believe in the thesis of a decentralized currency and the freedom it brings it is easy to say things like this.
That green energy could easily be used to take coal-fired plants offline, if it wasn’t being arbitrarily consumed for crypto. Also I seriously doubt that anywhere near 50% of mining is done with clean energy.
Miners don’t care where energy comes from as long as it’s cheap. Energy consumed for one thing is energy that can’t be used for something else.
It almost doesn’t matter which power plant they’re closest to because we have a power grid that ties everything together. This idea of miners being isolated from the grid and consuming clean energy that would otherwise go to waste is pure myth.
> I've never understood this narrative. There is no narrative about other industries like gold mining that also consume exorbitant amounts of power that you could deem useless.
Gold is extremely useful in many industrial processes and many products. It’s not even close to “useless”.
Crypto mining is literally designed to burn power. No other industrial process is literally designed to be inefficient with energy consumption. Nothing compares.
Proof of work is an algorithm that burns power as an input to the algorithm. Miners have to burn power just to continue the existence of the currency, which isn’t comparable to one-time extraction costs of resources.
Worse, proof of work is literally designed to be more inefficient with every new miner while also incentivizing new miners to join. Can you name any other industry that incentivized everyone to do things to make the system less efficient while burning more power all of the time?
It's not a myth it's exactly what happens. Stranded power is a real thing and not every country has the same power grid infrastructure that the US has.
As soon as China actually built out a high voltage grid that can make use of some of their stranded power they kicked out the miners, who moved to other areas with near free power.
The rest: Cough whataboutism cough