Wonder how many people follow this reasoning to the next logical conclusion and realize that there is literally nothing to differentiate the coins at all from regular banking except for the lure of speculation.
Despite all the criticisms that come with "the banking system", banks do provide a lot of value to individuals. It is completely understandable that people would want to wrap their decentralized currency inside of a centralized system (exchanges, custodianship, IRAs, etc.) for the benefits that having a bank-like organization can provide.
This does involve using a centralized service to an extent, but the amount of trust you are asked to extend is limited. They can't unilaterally take your funds, and they can't stop you from moving them to another wallet which you fully control. At the same time, you can safely use the wallet online with the additional convenience and safeguards provided by Muun, and it would be difficult to lose your funds permanently from "one small mistake".
As I said, it's a hybrid—so it has some elements of "being your own bank" as well as elements of a custodial system. The point of the multi-sig model is to allow the wallet to be used for day-to-day transactions like a "hot" wallet or a custodial exchange without the risk of carrying the complete keys everywhere on an Internet-connected device and without giving up control over the funds. The backup and the 2-of-2 multi-sig each serve important functions; neither "defeats" the other.
> If their backup is stolen, the thief can empty their wallet.
And no one ever has their traditional bank account emptied due to poor password hygiene or a vulnerability in the bank's 2FA system? Transferring custody to a third party doesn't mean you can stop worrying about security. If you don't have something equivalent to this offline backup then it's true that there is one less way for a thief to gain access to the account, but then you risk being unable to prove that you are the authorized owner of the account and losing your funds that way.
> Not much different from using a hardware wallet in that respect.
Hardware wallets have a different set of trade-offs. Personally I don't like to carry mine around with me like a ordinary wallet (or my phone) for use in daily payments. It's probably secure enough that I could do that safely, but there's always the risk of losing it, and for small, everyday payments it's just not as convenient as using an app on your phone. Also, Muun works with the Lightning network, which requires an online component; I'm not aware of any hardware wallets which can fill that role.
Could a scam system be made that seemed to work, be advertised, and otherwise identical up until the point of failure as muun?
The biggest potential point of failure, if you installed pre-built binaries from a third party such as Google Play or the Apple App Store, is that it could be updated to a new version which leaks the wallet-side private key. Which is a potential concern with any wallet software you don't audit for yourself. Of course you're also trusting the system software provider (i.e. Google or Apple) to run the application properly, as with any software running on their respective operating systems.
Personally I trust it with funds comparable to what I would normally keep in a wallet for daily use, not a safe or a bank vault. For larger amounts where the inconvenience of cold storage is justified I use a hardware wallet (Trezor).
It's amazing how many smart people take so long to realize why banks exist.
I just had to physically cross an ocean twice because my bank won’t send wires for more than $25k via their website, and that’s one of the gentler failure modes.
Here are some examples: https://old.reddit.com/r/fatFIRE/comments/pycgjx/what_in_the...
Retail banking in the USA is terrible.
It's the reason to do the crypto part at all that's more confusing. Unless of course we all just admit that gambling is unbelievably popular and fun and has been a continued hit throughout human history.
The smallest possible fraction of a dollar is $0.01. You can transact BTC in denominations with a lot more zeros behind the decimal point.
https://www.visualcapitalist.com/purchasing-power-of-the-u-s...
> fixed supply
Perhaps we've identified a small crack in this otherwise bulletproof logic.
That's not snark, those are great use cases, both have thousands of years of popularity behind them and tons of demand.
Hence my parent comment, which points out that when you use the more heavily regulated centralized exchanges like coinbase the one remaining use case is gambling.
Classic answers like "banking the unbanked in third world countries" don't seem to be shaking out yet.
What I really mean is what can do you in DeFi that is connected with the real world? In other words, what can you do other that doesn't fall into the category of using your money to make more money with no effect on the material world?
Examples of things that traditional finance enables that connect to the real world:
- Get a student loan (you get an education)
- Get a car loan (you get a car)
- Get a home loan (you get a house)
- Insure your car or home (perhaps including insurance in finance is a bit broad, but I think it's appropriate)
- Have some claim on the future cash flows of a company that makes real things (public equities)
Obviously traditional finance isn't some bastion of providing "real world" value and resistance to over-financialization. But DeFi seems like pure financialization so far. I suppose the first step is to enable payments (arguably the definition of money is a payment system), but it doesn't seem like that has caught on very much either.
An end goal of crypto is to have all financial and ownership services exist on-chain. To conceptualize the real world as somehow forever separate is going to lead to the correct conclusion that DeFi doesn't seem to affect "the real world".
> - Get a student loan (you get an education)
Requires identification.
> - Get a car loan (you get a car)
Requires identification.
> - Get a home loan (you get a house)
Requires identification.
> - Insure your car or home (perhaps including insurance in finance is a bit broad, but I think it's appropriate)
Requires identification.
> - Have some claim on the future cash flows of a company that makes real things (public equities)
Doesn't necessarily require identification. There are cryptos looking to tokenize and fractionalize public/private equities. The equity would exist on chain, not on the private ledgers of banks/clearing houses/brokers/the NASDAQ. You would own your equity via a private key, and not by the say so of Fidelity (e.g.) and the government.
You've listed three types of loans that require you to have some form of identity which allows for the existence of credit/reputation. Until crypto has a functional decentralized identity ((which is being worked on by many)[1], and even has a (W3C draft)[2]) and government recognition, you will likely not see traditional lending products. Doesn't mean it isn't possible.
Insurance also requires identification for reputational purposes, but less for enforcing payments and more for measuring risk.
Crop insurance is a popular use case being investigated for poor rural areas to get insurance. Remember, traditional finance requires massive human capital infrastructure, general civil infrastructure, and minimized governmental corruption to ensure debt repayment occurs. It's may be easier bootstrap insurance from a decentralized network/blockchain + satellite internet, for certain communities.
I get this, and I definitely am not suggesting the real world is forever separate. I am somewhat suggesting it currently is though.
> There are cryptos looking to tokenize and fractionalize public/private equities.
Yes, but the ones I'm aware of are entirely doing it on the backs of traditional finance equities.
> Requires identification.
This is a good point and I almost explicitly called it out myself - traditional finance is valuable much because it acknowledges the existence of the individual in society, not as an abstract entity with cash flows.
Solving the identification problem is a goldmine for society at large, not just DeFi. I just find it hard to imagine a suitable solution that doesn't involve trust in the government and other institutions.
I want to make it clear that I am not anti-crypto/DeFi. I think most payment will one day be distributed/trustless at its lowest layer. But I also think that true value (in the "real world") will come when all of the trust built into the rest of society is layered on top.
Apart from the fact that you can save value over time? Because the dollar is only going down.
You can however bet 100% that your dollar is going to be worth WAY less in 20 years than now.