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Comment by thewarrior | Hacker News Reader

Thankfully centralized things ljke laws, courts and police exist to bail out the code is law jungle of “decentralized” finance.

It’s becoming apparent to me that the main innovation of crypto is a form of regulatory arbitrage. You or me cannot sell derivatives like Goldman Sachs but in crypto land you totally can from your home with a laptop.

You can start a gambling casino on ethereum and get away with not following any of the laws regarding gambling as long as you couch it in financial and blockchain buzzwords. Some people will make a lot of money doing legitimate work and some scamming others until all of this becomes big enough to become mainstream and regulated.

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It's endlessly amusing to watch a group of (mostly) finance "outsider" engineering teams rediscover all the reasons the current financial system works like it does.

This is what happens when you try to solve people problems with code.

It's like people watch and read all these Cyberpunk stories and say that nah, it's all fake, can't happen here, tech can solve everything.

https://www.cnn.com/2021/02/16/business/citibank-revlon-laws...

Just sayin…

This story is only notable because mistaken transactions get reversed all the time. This scenario was the result of a strange but intentional quirk in the law.

Of course the big difference is Citi actually owed that money.

Did you read your own link past the headline? Citi accidentally repaid the loan in its entirety earlier than necessary. No money was lost or stolen. The lender decided to keep the early repayment of its money which is legally allowed.

Yes, I did. Did you read the comment I was replying to? Isn’t it ‘endlessly amusing’ to observe one of the biggest banks in the world discover why the finance system works the way it does? And if it was ‘no big deal’ then why did Citibank sue to get the money returned?

I don’t use or advocate for DeFi, but the weird smugness of random people defending the existing financial system is quite off putting and frankly hard to understand given the last few decades.

In the process of that rediscovery, plenty of people will become rich. That's an incentive to not be too quick remaking those discoveries...

You are forgetting the multi-millions of people that lost money on crypto so far. They are just written off as sore losers...

Confirmation bias plays a big role in the popularity of crypto, in unsettingly the same way as it does with people dreaming to become a famous soccer player... mostly through confirmation bias and very little value-add.

It's also endlessly amusing to watch traditional finance types take every crypto 'bump in the road' as an opportunity to justify their careers + justify their delusions about the status-quo & future of finance.

It can only be "endlessly amusing" because there are "endless" of these bumps, so far.

But, as with cryptocurrencies, it just doesn't make any sense. Maybe a boxer taking it on the chin round after round can derive some satisfaction from still being conscious. But they aren't making any progress and would be rather stupid to continue considering it a winning strategy.

Oh, wait.. maybe it does make sense.

Yes, it's main innovation is "not doing KYC"

For those with a longer history on Wall St, it was essentially a new asset class with all the easy money arbitrage opportunities that went away in equities 20+ years ago back again.

Strategies that haven’t worked in regulated markets in 25-30 years are still minting cash in crypto.

Arguably "not doing KYC" was also Robinhood's secret sauce..

It’s like the NoSQL of finance.

There's a large difference in capex required to start and operate a lending/borrowing protocol on Ethereum vs starting a bank/credit union that has nothing to do with regulation.

Where do the capex differences come from ?

Look at the size of a dev team for Uniswap or Aave, then look at the number of employees for Wells Fargo. Then look at the physical assets of a bank like their branches and office space.

Or, like in the case of Ethereum’s DAO hack, they can hyper-narrowly renege on “code is law” for this one case, where the logic error affects politically connected leaders, which is soooo much better than the corrupt legal system it’s replacing.

That's the thing that kills it for me.

Always look for the chump at the table. If you can't spot them, you're the chump.

This is why I don’t play.

I’ve always heard it as: “Never play a game where you don’t know what the patsy is. Because you’re the patsy.”

You're right, but is this news?

I understand the whole point of crypto is the future bet that centralisation/regulation by state actors will eventually be _less_ trustable. This one hack means $600MM lost, but how much has been routinely lost to bad governance, inflation or corruption? How much value has been destroyed in the 2008 housing crisis?

In the long run, the crypto market can professionalize enough while remaining decentralised, such that the risk/reward is attractive compared to holding 100% fiat – this seems to be people's bet, not that crypto is inherently safe.

While I understand how inflation may, in theory, be something that could change with some breakthrough in economics (even though I don't buy that inflation is actually a problem, or that cryptocurrencies represent such a breakthrough), I have no idea how they would be of help fighting "corruption and bad governance".

Which is the problem with that community: they seem to have these extremely naive yet cynical view of politicians just being "stupid", money being wasted, everyone being corrupt etc. And that, somehow, their funny little hashes are the silver bullet to solve these issues.

I think the Bitcoin community give the rest of the space a bad name. There are too many people with fringe libertarian views in that space that dominate the narrative. Ethereum, I've found is a much more interesting space. It's valuable because you can actually use the blockchain for things more complicated than just sending coins around. As stupid as many of the NFTs are right now, they have the potential to completely change how the art, music and gaming industries are monetized. Defi has a huge potential to make banking more efficient and provide banking services to underserved areas as long as they have an internet connection.

Bitcoin is an attempt to redesign the international monetary system by people who are clueless about economics. The result speaks for itself. A payment system that doesn't work and can't work, and a currency that would sink any country adopting it into a deep depression. Defi is to finance what bitcoin is to currency. A bunch of kids who wanted to "do finance" without actually knowing anything about finance. They still haven't figured out that you can't do finance with unconfiscatable assets. The main problem isn't lack of professionalism, but the fact that it's broken by design.

There is about 80 billion being used in defi right now and growing, I'd say that they are "doing finance" pretty well. The scams are outliers, comparable to the number of scams pulled over the internet in general. Calling them kids is just rude, save your ad hominem attacks for another site.

That's a lot of money being used in defi (whatever that means) but do you have a single example of financing through defi? Financing means providing borrowers with resources (such as money) that they don't already have. I think you'll have a hard time finding examples, because it turns out financing requires the ability to seize assets from a defaulting borrower, an ability which defi lacks.

That's just untrue, all borrowers from defi apps are required to be overcollateralized. The ability to pull from their collateral in case of a default is built into the smart contract.

Of course, but that's not financing. If they post more collateral than the amount they're borrowing, the net amount borrowed is < 0.

You most certainly can buy and sell derivatives. Many (most?) discount brokers offer at least equity options, and many offer commodity futures.

I don't need a license or a lawyer or anything ? I'm talking about creating and selling new types of contracts not trading what brokers already offer.

Have any crypto hackers even been found, let alone punished by the law?

I don't know about punishment, but the recovery rate for stolen/extorted crypto is much higher than for fiat cash.

This is likely an issue of sophistication -- crypto hackers don't have decades of "best practices" knowledge to draw from, and may also feel a false sense of security.

> recovery rate for stolen/extorted crypto is much higher than for fiat cash.

Citation needed for such an extraordinary claim.

I can't find it for the life of me, but I remembered reading that recovery of stolen crypto was both faster and more successful. I'll retract that claim for now.

In the meantime, this article explains how and why that would be the case:

https://www.nytimes.com/2021/06/09/technology/bitcoin-untrac...

Basically the openness of the ledger allows law enforcement to skip some slow and difficult tracing and requesting of warrants.

On top of that, cybercriminals seem to make exploitable mistakes that have enabled stealing their private keys.

MtGOX comes to mind. A bunch of the ICOs were simple frauds so they would practically have a Wordpress website with a Bitcoin wallet address.

They still are. There are more coins released than ever

A distinction with MtGOX is that it was providing a centralized exchange and legally binding contract to its users (not a smart contract), which the owners violated. In this case they'd be criminally and civilly liable.

A person following the letter of a smart contract for their benefit, while not breaking the terms of any legally binding contract they've signed, has yet to be charged with a crime (to my knowledge)

$2.3 Million of the Colonial Pipeline ransom was recovered [1].

I haven't seen news of anyone from DarkSide being arrested for that hack yet though.

[1] https://www.justice.gov/opa/pr/department-justice-seizes-23-...

FBI confiscated a billion dollars from the silk road exit. https://www.cbsnews.com/news/doj-seize-69k-bitcoin-1-billion...

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