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Comment by RustyConsul | Hacker News Reader

It seems our difference in opinion comes from our definition of value.

I know people point to the current system and infrastructure of stock exchanges, SWIFT, the IMF, Central Banks, Retail and Commercial Banks, Internet Banks (Such as Stripe, Paypal, ETC.), Credit Unions, Savings and Loan Associations, Investment Banks and Companies, Brokerage Firms, Insurance Companies as working good enough. But for me... Occams razor hits me hard. Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? If there was no value in it, why did we create all those institutions in the first place?

If we can recreate those in a more humane, democratized, decentralized way, I think it's worth the .001% of the global financial system that it currently is. Even if it's grabbing 5% of the current headlines.

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> Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code?

All of these systems are already software.

> If there was no value in it, why did we create all those institutions in the first place?

Centralization makes them massively more efficient than crypto. If there was a way to make them more efficient that did not involve throwing risk models out the window or regulatory arbitrage, someone could just do that in the traditional economy without crypto.

This is a lot like the programmer tendency to want to re-write instead of refactor because to understand a system is way harder than to set out on a quest to build a new one. Although they always end up the same way: at best what you started with. To me this falls squarely under Spolsky's "things you should never do." [1]

There hasn't been a single actual competitive business built on top of crypto in fourteen years. That's because they're all hamstrung by the massive inefficiencies they boat-anchor to their solutions. Decentralization and trustlessness and permissionlessness don't matter at all to 99.9% of humans. Attempting to offer these is incredibly inefficient and makes it totally uncompetitive with centralized solutions for every legal use case.

I would argue it fails Occam's razor to try and add miners to a monetary system.

The simplest, most efficient, most economical solution to moving value around is centralization. If there's a better way to solve any of the given problems with crypto, there's an easy way to optimize it further: get rid of crypto.

[1] https://www.joelonsoftware.com/2000/04/06/things-you-should-...

Do you think we will forever be organized and segregated by governments?

Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future?

The current financial system is not all software. When i pay in crypto, i give you my money. When i pay in the current financial system I am giving you every bit of information to rob me blind and hoping you don't take it all. My currency(Value i produce) is not my own and at any moment in time some outside entity can cause rapid inflation, devaluing of my currency or take everything i own straight out of my bank account. My contracts are not upheld by code, but by courts of law. I have to do a credit check to outside entity's to ensure you've got the collateral to extend you a loan. I have to physically go into a bank, have a minimum balance, an address, a phone number in order to even have a bank account. That doesn't sound like all code to me.

Also, you're right. POW as a consensus method is flawed. But again, all V3 cryptos have essentially transitioned to delegated proof of stake at this point.

Lastly, in a generation of cancel culture gone wild and as an avid reader of history, I'm glad crypto is available to me as the nation-state that we've all known and loved is looking more and more stressed.

If you still claim there's absolutely no value in any of it, then me and you have very different definitions of the term.

Edit: There are 104 protocols/coins that have over $1B market cap. Value isn't a personal judgement, it's a group one.

> When i pay in the current financial system I am giving you every bit of information to rob me blind and hoping you don't take it all.

I don't understand this. You're saying if I send you $0.01 via internet banking, you can somehow take everything in the account?

It doesn't work this way in NZ, where it is common to put your bank account details on invoices so people can pay you directly.

When i pay for something online, I am giving away my credit card/ debit card/ ACH information away for them to subtract the total amount of my transaction (Or debit it).

I am trusting that outside entity in a number of different ways; To only take the required amount, b.) encrypt my information to prevent my information from leaking.

Credit card data is leaked regularly in mass uploads for pennys on the dollar. Credit card fraud is mediated by the credit companies themselves and is just an insurance issue to them.

Crypto, I sign the transaction to send it to you. You don't get anything but my public id, amount and block time.

This sounds like a check that's signed electronically rather than physically.

I think another thing to note is that the other party is ASKING your bank/credit issuer to debit. The transaction can be stopped if not approved.

Normally I see the argument for crypto being that this helps merchants by avoiding charge backs, etc.

I often notice this expressed by Americans. I can't remember last time I gave my debit card (why would anyone need a credit card anyway) to any party other than big companies like PayPal. Locally I pay with Blik (I have to confirm exact amount transferred on my phone and the seller doesn't have an option to extract/ask for more). If a company really wants a card I create a virtual, load it up with a chosen small amount and get rid of it when I no longer need it. We also have instant bank transfers if needed (normal ones take several hours).

Even with debit cards you have 3D secure these days which requires confirmation on your phone.

Just because USA is behind in banking department and even credit/debit card thing doesn't mean those problems are especially hard to solve. The rest of the world is already partially there and with more fintechs putting pressure on banks things will improve even more.

My citi card offers virtual 1 time use numbers [0] and comes with all the normal benefits that you get from credit cards.

Also, you are trusting that the person you are sending money to honors their agreement as there is no intermediary to dispute transactional claims.

[0]: https://www.cardbenefits.citi.com/Products/Virtual-Account-N...

> Do you think we will forever be organized and segregated by governments?

Since you asked, yes. I do. To me, it's like asking if a beehive will always have a queen. It's in our DNA.

> Also, you're right. POW as a consensus method is flawed. But again, all V3 cryptos have essentially transitioned to delegated proof of stake at this point.

I honestly don't know enough about "V3 cryptos" to speak to it, and I'm not trying to add any FUD to the conversation :) I'll have to DMOR if you will before I can speak to that, which is why I've been constraining my comments to the system I know (BTC).

> Edit: There are 104 protocols/coins that have over $1B market cap. Value isn't a personal judgement, it's a group one.

[edit] Market cap isn't a judgement of value, just the most recent price multiplied by supply. Control the most recent price, you control the market cap. Unless you include legitimate market depth it's not really a meaningful number. SHIB for instance.

> Since you asked, yes. I do. To me, it's like asking if a beehive will always have a queen. It's in our DNA.

Not the asker, but thank you for answering this--it goes a long way toward understanding where your arguments are coming from.

Places without a functional government have a history of doing pretty poorly.

I think the burden of proof that there is a possible future without government lies on those making that claim. That burden has definitely not been met and the thus the feverent belied in that claim by cryptocurrency bulls is not rational.

This is kind of a straw man… while I’m sure there are some fringe John McAfee-types who think crypto is the door to anarcho-capitalism, I don’t take any of them seriously. So I’m not sure who you’re directing your argument towards.

Couldn’t it similarly have been said some hundreds of years ago that, places without a functional monarchy have a history or doing poorly?

It would be accurate, for the time, but hugely short sighted.

All humans enforce laws with physical interactions, especially violent ones. If you have no central governing body then every human makes their own rules and laws and when they enforce these rules they will be just as violent as the governments they wanted to run away from.

You should probably read some philosophy. There are much more sophisticated and nuanced ways of thinking about government and law than your comment seems to endorse.

Really enjoyed this convo, if you want a bit more of a long form of my thought process on this, read the Sovereign individual (With a grain of salt, it gets a bit wild)

My main point is don't completely dismiss a nescient technological field based on it's lack of utility now. Sustained development effort with real venture capital only dates back to around 2017, 2018.

All major silicon valley firms have launched funds to develop early research teams, nobel prize winning mathematicians developing protocols and some of these people are currently the richest individuals on the planet, just no one really know how much they actually have and obvious issues with liquidity withstanding.

> SHIB for instance

As many (If not more) of the crypto industry is marketing teams riding the 'Wave'. However, some of the projects have 100's of employees building infrastructure for the new internet. Check out Parity if you want an example of a true crypto company.

I love discussing both this topic specifically, and all sorts of things I have a strong opinion on with folks who disagree. I'm always open to being wrong; I've added The Sovereign Individual to my Kindle library and my reading list. Hope you have a great evening. Enjoyed the back-and-forth as well.

Just want to chime in and say I enjoyed reading this interaction. Both well-reasoned points, politely and maturely presented (one of the things I love about HN.) I happen to agree entirely with your side, but that's irrelevant. Thanks!

Is there any short form version of something someone can read to get a sense of the value you’re seeing? I followed this conversation with interest, but still find myself unenlightened as to what there is I haven’t understood yet about the space. Whenever I talk to a proponent it seems very theoretical.

There are often analogies to the early internet, but I was alive then and remember some of the early, tangible use cases which had me hooked:

* You can look at Nintendo’s website. It has information about games, which you are currently getting from magazines (my first exposure)

* You can buy books you can’t buy locally (Amazon)

* You can mail a friend from another location, for free (hotmail, gmail)

* You can call a friend in another country, for free (skype)

* You can call a phone in another country, for cheap (skype)

What are some crypto equivalents, today, that would convince someone who is not already invested in crypto that they need to get into crypto to use it?

E.g. saying “you can get a loan of 66% of your Bitcoin holdings!” is a use case for people already in crypto.

I would also exclude stablecoin yields because the risks there are massive, and there exist plenty of investments with high risk and high return in normal land.

I think two of the coming applications that has me most excited (of which there are many others on the horizon), are permission-less stock markets where shares are fully accounted for at all times in real-time (an actually transparent financial market), and proper third party markets for digital goods whereby goods bought online can essentially be treated like you do physical goods.

Both are applications of NFTs and both have significant players developing them.

I can elaborate more on these two applications if you want. Currently on mobile.

I’m much more interested in something already happening, now. Crypto is full of “wait and see, this is the future” but the early internet had immediate utility.

What can I do, today that should make me want to buy the crypto to do a thing with crypto. Rather than buy crypto to hope for an increase in value.

> permission-less stock markets where shares are fully accounted for at all times in real-time

We can already achieve this without blockchain technology! Indeed that's not the way the system works, but that's not due to technological limitation. What makes you think that once "permissionless stock markets" are available on the blockchain then secondary derivative markets won't spring up, making the ownership situation as murky is it currently is for stocks?

Transparency is always a sliding scale, and right now there is very little transparancy with regards to who owns what stock and how much of it. The system is currently more paper based than digitally reconcilled. And the onus is on every financial firm (bank, hedge fund, brokerage, settlement house, etc.) to maintain their own books and report back as best they feel inclined to. What they volunatarily report back can be ammended, or late. And when you add up all the human induced delays / data entry mistakes, what the public has available to look at can be months out of date or just plain wrong.

In principal, yes, the trusted parties could have stepped up and implemented a more transparant and automated system. No, they did not need to base such a solution on a blockchain. But the reality is that they were not inclined to change the status-quo, and now we find ourselves in a world where every relevant financial system is looking at, testing, or in the process of rolling out a blockchain based solution.

For anyone asking where the value in the technology lies, the proof is in how seriously the large players [1] are taking it.

[1] just one of the many public facing examples of a blockchain-based stock market (under the CHESS replacement program): https://www2.asx.com.au/markets/clearing-and-settlement-serv...

Just want to chime in (on the flip side) and say I enjoyed reading this interaction. Both well-reasoned points, politely and maturely presented (one of the things I love about HN.) The opposite of what i wrote below: I happen to not agree with your point, but that doesn't matter. Thanks for sharing your perspective!

> POW as a consensus method is flawed.

It's not flawed, just hardcore. It's like the gold bars sitting in vaults deep underground in London, rarely moved and usually just relabeled to account for change in ownership. Every now and then someone gets spooked and asks to take custody, and it's expensive as hell to move it but you can lay your hands on it and know your ownership is secure.

lol - the cyberpunk future we never saw coming.

> Do you think we will forever be organized and segregated by governments?

As long there is scarcity of resources, there will be wars/conflicts and humans will be collective species, even if we don't have scarcity of resources, some humans will invent a few, and even if humans will not invent one, it is debatable since I don't know of any evidence where humans can survive individually. This is without mentioning social classes over multiple generations.

> Do you think we will forever be organized and segregated by governments?

> Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future?

Without governments, how are social strictures enforced? How are externalities, positive or negative, accounted for? How does a government-less world not look like Somalia? (Or are you suggesting that you really would like to live in a place like Somalia?)

This isn't to suggest that existing governments are perfect (far from it), but it seems to me that the anarchic counterpart is infinitely worse.

Fun fact: Somalia seemed to do a lot better without government than with a government. (though of course it's not simple) https://www.peterleeson.com/Better_Off_Stateless.pdf

And once again, we arrive at the real definition of cryptocurrency: It's not a currency, or financial system, it's a counterpoint to democracy.

Good, a bit of competition works out better for the end user. Political systems tend to be a monopoly, and monopolies lend themselves to abusive practices.

> Do you think we will forever be organized and segregated by governments?

> Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future?

All of this is doing nothing to change my view that cryptocurrency requires me to buy into this whole weird worldview in a way that few other products do. No, I don't particularly want to be an anarcho-capitalist.

I think I liked your previous phrasing better:

> I really would like to see a defense of Bitcoin that doesn't rest on the assumption that I want to live in Galt's Gulch.

I completely agree with this; the prior example given for bitcoins value (that it is used in defi for flash loans, etc) is literally deriving its value from moving value around (internal to the crypto ecosystem).

Flash loans are used to arbitrage across exchanges, not create any extrinsic value.

Yeah! Isn't it fantastic? You solve the double spend problem you have in traditional finance!

Due to this emergent phenomena of smart contracts you can have very low slippage between exchanges, high liquidity and high yields.

A.K.A Every stock market financiers dream.

> If there was a way to make them more efficient that did not involve throwing risk models out the window or regulatory arbitrage, someone could just do that in the traditional economy without crypto.

This is assuming there is no value in regulatory arbitrage, which is wrong.

The value of this is proportional to the dysfunction of the existing system in any given country. In countries that impose currency exchange limitations or other authoritarian policies enforced through the financial system, cryptocurrency has more value.

You could capture that value by reforming the laws and governments in those countries, but that hasn't happened.

And one of the benefits of cryptocurrencies is encouraging those reforms. If you can't use the financial system to impose authoritarian policies because people will just use cryptocurrency instead, you might as well not try to use the financial system to impose authoritarian policies, at which point people can use the more efficient ordinary banking system instead of cryptocurrencies. But we're not there yet, are we?

You’re shifting the argument, which was about financial institutions in functional markets.

The argument is that cryptocurrency is useless under the assumption that the traditional financial market is functioning perfectly, i.e. that there is no regulatory inefficiency at all. There currently exist countries where this is not the case, so that assumption is incorrect and cryptocurrency is useful until such time as that is no longer the case.

The only people that have no issues with centralisation are the people who are benefiting from it.

World Bank estimates 31 percent of people globally do not have a bank account. Decentralisation helps these people.

When you deposit money into a bank account, it is not your money. It is the bank's money. You aren't allowed to use it, or spend it how you like without the permission of your bank. Crypto doesn't have this issue.

There are financial tools that only people with net worths of over $100 million have access to, such as market making, arbitrage, liquidations, insurance lending etc. Crypto solves this.

99.9% of banks in traditional finance run their systems on outdated, closed source, barely maintained and bug ridden software. Contracts, money and agreements than can happen in seconds in crypto, takes weeks and months in centralised finance.

If centralised finance had the potential to be more efficient, there should have been more innovation decades ago. Centralised finance needs to catch up.

> World Bank estimates 31 percent of people globally do not have a bank account. Decentralisation helps these people.

Banking helps these people. Remember a fully-realized BTC transaction fee (pricing in electricity and mining hardware) is right around $250 each. That's a non-trivial amount of the GDP per capita of a lot of these countries you're alluding to.

Poor folks are also the most vulnerable to the massive volatilities of this so-called currency.

Real, centralized solutions help these people. Solutions like M-Pesa [1]. And Postal Banking, which a hundred years of legacy solving exactly these problems. [2]

> There are financial tools that only people with net worths of over $100 million have access to, such as market making, arbitrage, liquidations, insurance lending etc. Crypto solves this.

It certainly does not haha. It makes them less efficient, which is why not a single crypto-powered business in the last 14 years is competitive with any centralized solutions except in the areas of regulatory arbitrage or by throwing risk models out the window.

> If centralised finance had the potential to be more efficient, there should have been more innovation decades ago. Centralised finance needs to catch up.

It's obviously more efficient, and pretending otherwise doesn't change that.

[1] https://en.wikipedia.org/wiki/M-Pesa

[2] https://en.wikipedia.org/wiki/Postal_savings_system

The lack of a bank account doesn't have to do with centralization, for the most part, and decentralization doesn't matter if you can't spend the decentralized "money" without turning it into the local currency, because to do that, you need to have a bank account.

Crypto doesn't help bank the unbanked.

I personally know people who were running a HFT market making fund when their net worth were below one million. It's true it's not the easiest field to enter but that's the case for many others as well (medicine, law, competitive bike racing etc.).

My friend's family lives in Bosnia. He lives in the United States.

He supports his family with his income, and frequently sends money from the United States to Bosnia.

Best case scenario, using Paypal (Xoom), a centralized company, this takes him two days. Two days is the best case scenario!

With Bitcoin it is almost instant.

They switched to cryptocurrency after a near disastrous situation with the length of time the transfer took.

How is Bitcoin less efficient here?

Sure, it's one use case, but just because something doesn't benefit you does not mean it's not beneficial for anyone.

His best case scenario is opening a Wise multi-currency account, with supporting instant transfers free of charge in many cases.

Bitcoin is not accepted anywhere, practically speaking.

As such you're only looking at a small fraction of the transaction. You actually need to (1) transfer money into a crypto exchange for a 1-2% fee and whatever delay the domestic transfer takes (2) purchase Bitcoin for whatever fee the exchange charges (3) transfer it for $0.50-50 depending on the fee du jour (4) hope the market doesn't collapse out from under you while all this is happening (5) sell it at the destination unregulated exchange for whatever fee they charge and hope they don't flee with your money (6) transfer to the destination bank account, waiting as long as a domestic transfer takes.

This is probably a few days total, with severe counter-party risk, forex risk, and substantial transaction fees.

Or you can use Wise for a very low fee directly bank-to-bank, or open a Wise multi-currency account and support almost-free instant transactions. They're also super, duper regulated by a number of world regulators.

I know which I'd do, but to each their own.

Yeah, usehackernews@ can you detail which exchanges he is using on both ends because I'm guessing your standard ACH transfer to an exchange to make the initial USD->Bitcoin transfer would probably make the supposed time speedup moot.

> This is a lot like the programmer tendency to want to re-write instead of refactor because to understand a system is way harder than to set out on a quest to build a new one.

And what if they did want to refactor the existing system. Can they? What does that iteration process look like? Is the system currently evolving to fit everyone’s needs?

Remember, RMS actually did want to refactor the printer. He just wasn’t allowed to. [0]

Contrast that with how fast things are moving in DeFi. It’s permissionless innovation at its best and worst. We can barely even wrap our heads around OHM, but nobody needs permission to fork it into SPELL. Systemic refactors happen faster. [1]

When somebody in the future doesn’t like a piece of decentralized infrastructure, they can _literally_ fork all of it and just make their change. With fewer black-boxes, we share more intellectual property.

[0] https://www.fsf.org/blogs/community/201cthe-printer-story201...

[1] https://thedefiant.io/olympusdao-forks/

> Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? If there was no value in it, why did we create all those institutions in the first place?

One of the primary reasons for the rise of the complex system of interactions, as you put it, is trust. A lot of financial interactions require dealing with people who might not merely not have your best interests at heart but are literally in diametric opposition to your interests--several financial transactions are inherently zero-sum. So you need mechanisms that give you trust that your counterparty will actually honor their side of the transaction.

Code fundamentally does not provide trust--indeed, you might even say it is the antithesis of trust. Even accomplished software developers are frequently unable to write code that works in edge cases or even slightly abnormal operation. For regular users, code is as opaque as if it were written in Linear B. Indeed, to popular sentiment, software is often equated with a learned notion of bugginess--people tolerate the frequent mistakes of their computers far more than we would any other piece of equipment.

And the cryptocurrency community takes their misunderstanding of trust to new levels. I mean, we're being told by people like you that we shouldn't trust the government, but instead trust code [that the lay person can't and won't understand] written by people like the owners of Tether--people who have been convicted of stealing people's money and, in the history of their own company, lied about what they were doing.

As Matt Levine put it, only in the cryptocurrency industry is "we may be charlatans who will run off with all your money" literally something people feel necessary to put in their risk prospectus.

I've been a big fan of Matt Levine's commentary on crypto--he doesn't get all histrionic and judgmental because he knows (and his regular readers know) that whatever craziness is happening in crypto is basically exactly what happens in traditional finance, just dialed up a notch or two.

His column a couple weeks ago about the "main move" in finance (i.e. transmuting an amorphous pile of risk into tranches with radically different riskiness) and how this explains Tether was absolutely brilliant.

Nobody wanted Freicoin.

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