People don't want to run their own bank
shkspr.mobi
shkspr.mobi
* Transactions are private. There is no middleman between you and the merchant to censor your transaction or to sell your purchasing habits to advertising companies.
* Transactions are final. The merchant has no risk of chargebacks.
* Transactions are bounded. Once you walk away, the merchant cannot take more money from you. Whereas with credit cards, they could store your number and charge you again at a later date, without your knowledge.
* The amount transferred is known to you. Whereas with credit cards, the merchant terminal could lie and show you an incorrect amount, and you could approve the fraudulent transaction.
* The maximum amount you can lose is limited by the amount of cash in your wallet (let's say $100), not by your credit limit (let's say $3000).
* It's easy to understand - you have physical tokens with numbers on them. There are no accounts, statements, minimum payments, interest, fees, reward points, customer service phone numbers, etc.
Cash obeys the principle of least privilege much better than cards do. Though, I think electronic payments can be a lot safer if we had a culture of push payments ("I send $123 to Amazon to purchase widgets") instead of pull payments ("here's my credit card number, have fun").
"Transactions are final. The merchant has no risk of chargebacks." Is this a plus all the time?
What if I buy something and the vendor just takes my money and does not send me my purchase? I have no recourse.
This is a large reason why many cryptocurrency vendors online require you to use irreversible payments (cash, wire transfer) to buy crypto, in order to match the finality of crypto transactions.
The answer is yes for almost all businesses I've seen.
This is actually my 100% use case for crypto. Making legal online purchases at a discount to avoid credit card fees, not retarded speculation or the spectre of crime all the nay-sayers worry about.
That's a decent amount of extra work.
> * The amount transferred is known to you. Whereas with credit cards, the merchant terminal could lie and show you an incorrect amount, and you could approve the fraudulent transaction.
> * The maximum amount you can lose is limited by the amount of cash in your wallet (let's say $100), not by your credit limit (let's say $3000).
To be fair, all of these are American oddities. In Europe where people mostly use debit cards and neither chargebacks nor returns for functional goods bought in store exist, all of these are true for card transactions. Only the privacy point remains.
I can use cash to buy groceries or a soda at the corner store each day, and while I suppose I'm not entirely anonymous to those parties I may as well be. The grocery store is certainly reporting my cash transaction to the appropriate authorities.
Sure, this doesn't apply for all use cases. However, it applies for a lot of things that currently are tracked by using electronic forms of payment. These spending patterns were simply not tracked on an individual basis until the advent of the shopping club cards, which eventually became redundant due to the use of electronic forms of payment.
The level of tracking from "I take out $400 in cash every payday from the ATM" vs. "I spend it in $10 increments on the following items" is wildy more invasive.
Example, as a teenager mowing lawns for your neighbors, you just told the IRS you made $x,xxx mowing lawns for the fiscal year. Not that your neighbor named Susan at 1234 fake street paid you $xxx/month to mow her lawn 4 times a month, or that Joe from 4321 real street purchased the upcharged package that includes managing his compost bin.
Cash is the undisputed champion of privacy for financial transactions.
However since the transactions are cash, no identifying information will be shown, so it's anonymous.
As the buyer I have the CHOICE to declare it as a deduction or not. So it is also anonymous at my discretion.
In speaking for how it is in Slovenia, it might be different in other EU countries.
Are they? I can't speak for Europe, but in Australia we have a chargeback system. If I don't recognise a transaction on my credit or debit card, I can request a chargeback via the bank.
It would surprise me if none of the 40+ countries in Europe offered this. What do you do if there's a transaction you don't recognise?
How frequent are these types of frauds, e.g., by merchants/terminals? Doesn't seem to be a thing around where I live - is it a US thing?
>f frauds, e.g., by merchants/terminals?
Pretty common. Virtually everyone I know has been defrauded by CC or debit card at least once. When it happened to me my bank dragged me through a months long process after which they refused to refund the fraud, essentially accusing me myself of lying, and ultimately they even shut down my checking account. For this reason I've basically divested from keeping cash in banks, now that I've learned the fraud protection is a farce and the fed is going to inflate it to hell anyway.
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>Well, actually, they could get a court order to seize whatever is in your pockets while some burly men hold you down.
If people are going to come kill me in the street then come let it happen. Better than cowardly seizing it behind my back via locking a number in a database. And in the third world, it's typically a lot easier to find accounts than it is people.
I can't say I know what would happen, I've only been attempted robbed at gunpoint once. I wish I could say I kicked their ass, but all I managed to do was hurt them enough that we stalemated and they went off to find some other victim.
False [0].
[0] https://ij.org/wp-content/uploads/2015/03/seize-first-questi...
'Federal civil forfeiture laws give the Internal Revenue Service the power to clean out bank accounts without charging their owners with any crime. [ goes on to give many examples of bank accounts subjected to civil asset forfeiture ]'
Whether one is easier than the other depends on circumstances. Domestic bank accounts are easily found. Those who may want to seize them quite likely work in an office, down the street from a judge who will rubber-stamp if needed.
Seizing cash requires a lot more:
0) Willingness to engage in policing in the field rather than cowardly slob sitting in office searching for new victims.
1) Determining the person actually has the cash
2) Knowing where the cash is
3) Employing force against any persons resisting the seizure, and risking that person may employ self defense.
Seizing a bank account usually requires none of those above. You know where the cash is (the bank), the bank will tell you how much they have, and the bank employees aren't going to resist the seizure from the police. For all we know someone could bury cash somewhere and not even a metal detector is going to pick that up.
So you're correct. To me, the massive difference is a bank account seizure is just how much easier it is to seize. (and to most people, just how much more devastating it is)
>happening to drive through a jurisdiction where the police like stealing from people, and having them confiscate your car and the contents of your wallet.
It's worth noting it usually goes more along the lines of police asking someone if they have a "large amount of currency" and the person being dumb enough to answer in the affirmative and then being dumb enough to consent to a search. They have to ask a lot of people too to even get that far, so not exactly a fast or easy process. Sure there are all sorts of other scenarios, but seizing cash in the field randomly like this is a lot more work than some IRS agent sitting in their office, running some VBA script to find someone in a few seconds who had a couple consecutive transaction that ran above a sum of 10k.
Just as another couple examples:
- Civil asset forfeiture is something that local police departments around the country can do to people within their jurisdiction. Seizing a bank account is something only the IRS can do—and the IRS is known to be woefully understaffed and under-resourced at the moment.
- As I understand it, when the IRS seizes a bank account, that money doesn't go to the IRS; I believe it goes into some more general fund, but I'm afraid I'm not well-informed about that. Civil asset forfeitures go, in most cases, directly to the police department that seized them. That makes the incentives completely different. (Even if I'm wrong, and assets seized by the IRS go into its budget, that still doesn't create the same kind of incentive that we see with these police departments, given the number of stories of officers in these small podunk towns driving extremely expensive cars off the job and buying extremely fancy police toys on the job with the seized money. The IRS, being a much more supervised federal government department, is going to have to account much more clearly for its expenditures.)
You may want to read up a bit on how this stuff works.
[0] https://ij.org/report/policing-for-profit-2/grading-state-fe...
I think you are confusing state sponsored violence and street violence. The state can always get you, unfortunately. Crypto does try and address this, to varying degrees of success.
" I'm not much interested in being baited (whether intentionally or not) into answering this kind of legally precarious question about it being MY fault that I 'made' someone hurt me." Really not trying to bait you here at all. Seems like we have a communication issue, maybe my fault. all the best.
Neither side can resist the temptation to use the other side to "resolve" disputes.
And to your point and from my perspective, I would disagree as there are many cryptocurrency experiences where "understanding it" is reduced to similar UX as using zelle or paypal. More than likely, you've (or whomever you're describing) already made your (their) opinion and aren't interested in understanding.
- It is open and requires that you protect the numbers on the outside or access to the data on-chip. Many of these security problems have hurt consumers over and over again despite how "easy" cards are to use specifically because those users don't understand the complexity of the card's system. - It requires you to insert, tap, or swipe it to borrow funds. This interaction is not obvious for a child who has never done this before. It is a learned behavior. And that learned behavior for interfacing with the credit card network with your CC token is complex enough that the US has had significant friction introducing chipped and contactless credit cards over the past years. Because the interface and the UX are there for cards too.
I'm not sure the reason for your distinction between understanding the UX vs the complexity of the system. You can't consider UX without considering complexity... one follows the other necessarily.
You can find any number of shortcomings, but the point is crypto _does_ solve many of this problems.
After all, most people trade in public blockchain crypto through CEXs and leave their coins in hot wallets. Effectively the same as using a bank.
To put it differently, crypto _can_ solve many of these problems, but it does not _inherently_ solve them, it takes a skilled and cautious person to use crypto in a way that does not link to their identity.
And I also agree that cryptocurrency is still not easy to use, but I'm not sure why it needs to "inherently" solve something (even though it has intrinsic value in certain dimensions). HTTP was inherently made to transfer structured text. No one was hoping it was going to replace the postal service, and yet the majority of the worlds information is transmitted using the protocol.
And just because you couldn't use "HTTP" when it was being first developed by researchers, it still served a purpose for them at the time and gradually became the invisible technology that it is today. Now replace "HTTP" with "cryptocurrency" and "at the time" with "now".
This is exactly what I meant when I said that maybe cryptocurrency wasn't ready for (collective) you.
You realise that's a bad thing, right?
>* Transactions are bounded. Once you walk away, the merchant cannot take more money from you. Whereas with credit cards, they could store your number and charge you again at a later date, without your knowledge.
And if they do that you can... issue a chargeback.
> You realise that's a bad thing, right?
Frauds where people ask for payment via Venmo or Paypal for Craigslist transactions are incredibly common. Craigslist recommends using cash to avoid getting defrauded, because transactions being final is a feature for in-person transactions, and a good one at that.
This is not remotely a guaranteed thing. It works until the credit card issuer says nope.
Chargebacks are 100% at the pleasure of your issuing bank, they are not your choice in the end. Most consumer banks will more or less have an internal credit score where they allow you a small number before they start pushing back. Depends on how much profit you make the bank.
Chargebacks against small vendors are mostly guaranteed, but once you go up against a large party the tables very quickly turn against you.
I'm sure you also realise that chargebacks can be abused by these users right?
The merchants can get their (PayPal, Stripe, etc) accounts locked or shutdown and their money withheld for months due to the payment processors locking the money and they always side with the bank, which they have zero context whether if the chargeback is fraudulent or not.
- Transactions are final. The merchant has no risk of chargebacks
So as a consumer, if I pay for something and the merchant stiffs me, I have no recourse? That's supposed to be a selling point?
- The amount transferred is known to you. Whereas with credit cards, the merchant terminal could lie and show you an incorrect amount, and you could approve the fraudulent transaction
Do you have any evidence of that actually happening? Even anecdotal evidence? I've never experienced nor heard of anyone experiencing a situation where a point-of-sale terminal showed one price and they were charged another. I have heard of merchants (airlines, especially) tacking on "hidden" fees, but those hidden fees become quite visible when you get to the final checkout page for and you see that the price you're about to pay is x dollars or euros more than the price in bold letters on the listing for the price. I have never once seen a merchant (online or off) display a price on the checkout step and then have a different amount charged show up on my credit card statement.
- The maximum amount you can lose is limited by the amount of cash in your wallet (let's say $100), not by your credit limit (let's say $3000).
Incorrect. The Fair Credit Billing Act (in the US, not sure what the equivalent EU legislation is) gives consumers 60 days from the statement date to dispute transactions. If the consumer files a dispute, the financial institution has 90 days to correct the charge, or give a written explanation as to why they think the charge was valid. If the transaction is fraudulent, the consumer's liability is limited to $50. I have way more safety against fraudulent transactions on my credit card than I do with cash or check.
- It's easy to understand - you have physical tokens with numbers on them. There are no accounts, statements, minimum payments, interest, fees, reward points, customer service phone numbers, etc.
Only if you're storing your cash at home, under your mattress. If you're using a bank account, you most assuredly have to deal with accounts, statements, interest and fees.
The only valid advantage of cash (and crypto) that you've cited is:
- Transactions are private. There is no middleman between you and the merchant to censor your transaction or to sell your purchasing habits to advertising companies.
That is why I have a crypto balance. That is why I have a certain amount of cash in my wallet. If Visa, Mastercard, etc. get into a dispute with my merchant, or if the centralized payment infrastructure goes down (i.e. due to a storm knocking out power), I still want to be able to pay people. But would I want to use cash for most transactions? Absolutely not.
I know people who prefer cash, because they are not tech-savvy and all the digital stuff including cards gives them anxiety. There is a difference between just having a bank account and using all the digital services that come with it.
In Germany there is an online service called barzahlen/viacash (they are renaming) https://www.barzahlen.de that allows people to pay cash for online shopping. After checkout, the buyer gets a code that can be scanned by cashiers in certain drugstores and supermarkets, so buyer can pay in cash.
I use cash where possible in order to avoid leaving a massive data trail that inevitably will get exploited. It is a method of self-defense for me.
Only recently I've learned that in the USA people don't pay through bank transfers.
In Europe it's main mode of payment to give you bank account number and amount and expecting you'll make the transfer. Either directly by interacting with your bank or through payment processor which has integrations with various banks and will prepare the transfer for you and redirect you to your bank's authorization gateway.
But ignoring the title, here is how I see it working out long-term between "Running your own bank" VS "Using someone else's bank":
It's true that most people don't want to run their own bank, it comes with lots of issues. But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this.
So can we solve for both things? Yes, I do believe we can. The primitives that support the whole system can be "Running your own bank" while allowing entities above that layer to offer "Use my bank if you want to instead, with insurance and all that", so we get the best of two worlds. The opposite cannot be true, we cannot offer people to run their own banks, on top of a set of entities being the only ones running their banks.
In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it.
Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.
Contrast that to Facebook Messenger. Either you're a user of it and can message others using it, or you're not and you can't interact with others using it. You have no choice, it's either in or out.
This is the difference between centralization and decentralization, the amount of options you have available.
> There's an inherent fragility built into cryptocurrencies. If your physical bank notes are damaged, the bank will replace them. If you are defrauded, the bank will reimburse you. If your loved one dies, and you inherit their assets, the bank is legally obliged to give you access.
Damaging bank notes is probably covered by the fed. Fine. But fraud is a real expense. It's just not generally borne directly by the victim. Someone still pays it (normally the bank) but they make up for it by lending out your cash. As for handing over assets to someone that passed away, that's currently done through the legal process. Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? Seems like crypto would help there as well
There's a reason we still talk about Kafka almost 100 years after his death.
You're skipping over large parts of the things fiat can do and crypto can't. E.g. there are chargebacks for fraud. There's the legal process that can be used by the bank to recover money from the fraudster (maybe not always, but also not "never").
> Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money?
No, it wouldn't be great, it would be horrible. Real world is messy and hard to encode in a "smart contract". What if the will says something but the law invalidates it? Going through the legal process is a feature not a bug... remember how people complain about e.g. automatic bans that are handled and appealed by robots? How your Google account can be disabled with no recourse, and no explanation from a human? Yeah, that can happen to your grandma's crypto - it doesn't go to the family, and there's no way to appeal that or even find out "why".
For my will I literally enter into a form what I want to happen, but then when I die it'll be down to another human to go through it and manually carry out my instructions.
Chargebacks can be opt-in and escrow is a tutorial for smart contracts. I don't need chargebacks on a cup of coffee, and I've been unable to make a payment due to high chargeback risk - despite me being entirely willing to take on the risk of non-fulfillment.
The fact of the matter is that we have had the ability to create a technical process for executing a will for a long time. Banks allow you to designate a beneficiary who receives your assets after you pass away and that is executed automatically. We do not have to allow people to dispute that, and cryptocurrency does not really add much over such a system -- but we do not want that system because some objections are legitimate and disputes need to be resolved.
What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit.
Again, in my argument there are two choices at play. One of the choice allows the other, whereas the other doesn't. You can still have centralization if you want, on top of decentralization. But if you chose centralization for the core, you cannot have decentralization on top of that, even if you'd really want it.
The Holy Grail of crypto seems to be some sort of dream of a fully decentralized society without banks or governments.
What if that doesn't happen? There's no reason to assume that even if crypto wins, banks or governments go away. My personal bet is that governments (and probably banks, too) will be around long after cryptocurrencies go away.
What exactly are we winning? Practical stuff, not ideology.
What do we get? Why should I care?
With regards to practical wins I can see a number that are even playing out today:
- The ability to skirt sanctions making it possible to donate to organisations that are deemed "illegal"
- Banking for those that are deemed unprofitable by banks. El Salvador has a large portion of unbanked citizens. Making it possible for them to interact with the wider world economy seems like a good thing to me?
- The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
- Promotes the build-out of new energy production; especially renewables since they are the cheapest form of electricity. This is a topic that deserves a thread in itself so probably not worth going into here.
You should care because the world doesn't exist solely in the privileged western hemisphere.
I'd really, really love to hear about stories of widespread cryptocurrency usage in developing countries.
Also, considering the low transaction rates and the high transaction fees, how would this magic vision of the future work for poor people, anyway?
I'd suggest looking for news stories or posts from El Salvador. You can find both positive and negative ones, of course.
The low transaction rates and high transaction fees argument isn't really valid anymore. A lot of the transactions have moved to L2 (Lightning Network) and thus current transaction fees on Bitcoin are regularly reaching $0.05. Using LN you also bypass any bottlenecks associated with number of transactions per second and confirmation time.
One country's criminal is another's activist. You're making it sound so simple.
- Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
- That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
- Valid(ish). But also other stores of value exist and governments have many options for coercion, in the end, nothing will be safe.
- Could be used like that, but so can normal money and incentives
Generally, I'd say using crypto as fallback in broken political systems/societies relies on having at least somewhere working parts of society that can keep suppling/cooperating (or indeed from the outside).
> Where does this end in societies governed by the rule of law? Who can decide to opt-out or in?
I think individuals themselves should decide what is and isn't OK to spend money on. In such a world you rely on law enforcement doing actual work instead of using vague KYC, AML and Terrorism laws that are extremely obtuse.
Real criminals just use a middle man while regular citizens have to endure this insane regulatory environment without any benefit.
KYC/AML is just a waste of time, energy and manpower.
> That can also be achieved by mandating banks to offer accounts (as some countries have). So I put that down to a political failure.
What if you don't have a functioning banking sector? Or even a functioning government? You're just supposed to accept that you're not going to be able to participate in a global society?
> The ability for people in extreme situations to store value in something other than their governments currency. Think Lebanon, Argentina, Venezuela, Turkey, etc.
Sure, but most (if not all) of those things can be taken from you. Bitcoin can not. Of course, there's always the $5 wrench attack but relative to other assets, Bitcoin is superior in this regard. Even if it's just slightly better than other assets it's a win.
> Could be used like that, but so can normal money and incentives
Yes, but Bitcoin mining is a natural free market incentive to this problem, incentives and money is not.
And if a country has no functioning government, no banking etc., i.e. it is broken, then the country or place needs fixing, not some magic crypto sprinkled on top (might alleviate the symptoms, but not the cause). I see this all the time as crypto point, but society building is so much more difficult than that. Once you are in a environment where physical violence is the norm, things are really different.
They are also in a cartel with the other banks, the sense that you can't access the financial system at all without one of them. For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks. They can do this because they aren't competing in this kind of niche area.
I think you can attribute that one to capitalism, not collusion. Profits are important for banks. It's a rare for-profit institution provides services at cost.
Any entity can join the "send money internationally cartel", but they have to adhere to the laws in both countries. This is a loophole that cryptocurrencies are bypassing today, but I expect the law to catch up in this area, and it won't be pretty.
In a healthy market, competition forces down the price of services approach such that they approach cost. A large profit margin can indicate a free market failure, such as a barrier to entry.
(it may also represent some kind of necessary capital investment for entry, but I don't think that's the case here)
Discounting laws, registrations, offices, staff, etc., you would still have to distribute sufficient capital between nations to provide for the transfer of money before the actual money itself can be transferred.
The shifting of money between entities within a single country can take several days, and most international money transfers are expected to happen in hours, not weeks. It's a low risk loan - given from one branch of your own company to another - but you still have to have the money to loan out.
...because of regulation, not competition.
So microservices are a better idea than monolithic core?
Where the analogy falls apart is in the low transaction capacity of most existing blockchain-based currencies. Microservices' greatest asset is that of scaling in a way monolithic structures can't.
> In other words, you can build centralization on top of decentralization, but the opposite is not true.
In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core.
So, in a way, a decentralised system is being built on top of a centralised system.
I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
Opening and closing Lightning channels is an operation that requires a transaction on the blockchain - no real win there.
Due to the restriction just mentioned, most L2 transactions will take place via intermediaries who you need to trust and who can take arbitrary fees for their service as well (the whole routing business).
Lightning might be ok for regular payments (subscriptions, etc.), but at the same time it offers not a single advantage over traditional banking and credit cards other than explicitly not being either.
It might alleviate the transaction time and energy problems of the blockchain, but it does nothing to tackle any of the other problems mentioned by the author.
"constantly" in this case means "once every 2 weeks". You can also have a third party do it for you without having to hand over your keys.
No. Constantly means exactly that - revoked transactions for either party cannot be checked otherwise. I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
> You can also have a third party do it for you without having to hand over your keys.
And of course that 3rd party is totally trustworthy for some reason and offers their service for free? The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
Source? My understanding is unless the channel is cooperatively closed, there's a waiting period (ie. the two weeks) before the transaction is finalized to the blockchain. During that time that transaction can be challenged/overridden.
https://wiki.ion.radar.tech/tech/channels/channel-closing
>I didn't even include the need to be online all the time, since otherwise payments don't work either as multiple interactions are required for each payment.
That seems to be a completely separate issue. Short of receiving random donations, I can't think of any situation where you want to make a payment, but somehow aren't online.
>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>The 3rd parties still need to run scripts that have to work correctly. We all see how well that one works on a regular basis, what with the multi-million dollar thefts that happened recently due to flawed contracts and scripts.
ETH =/= BTC
It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
https://lightning.network/lightning-network-paper.pdf
Chapter 3.1.4 Commitment Transactions: Ascribing Blame
Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
> I can't think of any situation where you want to make a payment, but somehow aren't online.
Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
Go ahead and call me a Boomer, but we seem to exist in very different realities.
> Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
> It's far easier for the community to scrutinize one set of code than for everyone to scrutinize the implementation they rolled themselves.
I think you missed something here. Lightning isn't a single centralised implementation.
Just look at chapter 8.4 - once routing tables are in place, there's a wide open door for routing payment channels through profitable routes and tracking, for example.
Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
If you actually read the whole story, you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts, incentives, and edge software that "does the right thing" (e.g. periodically make backups and checking the other party's state for honesty).
>Chapter 3.1.4 Commitment Transactions: Ascribing Blame
>Penalties for contract violations can only be enforced "if one is able to ascribe blame for broadcasting an old transaction."
>Broadcasting transactions takes place on the BC, so identifying an old transaction is only possible by finding it on the BC.
>The same is true for revocable commitment transactions. Both parties must observe the BC at all times in order to know whether the other party did indeed violate the contract by broadcasting a transaction. Contract violations cannot be detected otherwise.
I'm not really clear how your source contradicts mine. The source you provided is talking about how to ascribe blame, but then you magically turned it around to talk about having to be online 24/7? I'm not following the logic there.
>Out here in The Real World(tm) I find the opposite to be the case. I cannot think of a situation in which I want to make a payment that requires me to be online. Neither my debit card, nor my credit card, and especially not cash has such requirement. I can buy petrol, groceries, clothes, pay the barber, eat at a restaurant, have a drink at a bar, pay admission for a ball game, etc. etc. all without being online.
1. always-online mobile payment systems (eg. alipay/wechat) are quite successful in asia. while I agree being able to pay without internet access is great, internet access requirement isn't some sort of insurmountable barrier.
2. you do realize that even though the credit card doesn't require internet access, the terminal itself does? Also, payment terminals has bidirectional communication with the card via NFC. It's not hard to imagine some sort of NFC based protocol that allows limited information to be communicated between the terminal and the wallet software on your phone, so it can gather the requisite information to make the transaction.
>>>And of course that 3rd party is totally trustworthy for some reason and offers their service for free?
>>You're making it sound like it's an issue, but I'm not seeing it. Thousands of hobbyists run bitcoin nodes for free, which costs storage and bandwidth.
>That's orthogonal to the problem of Lightning network routing fees. It doesn't matter who operates a node and how. What matters is that unless you open a bi-directional payment channel, you'll route transactions through intermediaries that will take fees.
Are you losing track of the thread, or are you trying to move the goalposts? We were previously talking about how watchtowers would be operated/funded, now you're talking about how transaction fees for intermediary nodes?
>I think you missed something here. Lightning isn't a single centralised implementation.
As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious. This is different than difi-project-of-the-day that have one implementation and one protocol (the two are essentially the same thing in ethereum).
>Routing also requires keys to held online for intermediary nodes for latency reasons, which is another considerable risk since unlike with banking, there's neither oversight nor security regulations in place.
What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
>you'll quickly notice that a lot of Lightning's mechanisms are built on trust in scripts
yes, that's how cryptocurrencies are supposed to work - trust in systems rather than trust in people. Which is better has already been debated to death so I'm not interested in discussing that again here.
I don't live in Asia.
> you do realize that even though the credit card doesn't require internet access, the terminal itself does?
I do, that's why I emphasised that 'I' don't need to be online. I don't care about the payment processor's requirements.
> Are you losing track of the thread, or are you trying to move the goalposts?
No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
Have you actually read the resources? The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
> What's your objection here? That you can get hacked, or that your intermediaries can get hacked and somehow cause you to lose money?
The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry, there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
> trust in systems rather than trust in people.
That's an interesting assumption given that systems are created and operated by people. It's trust in people with extra steps minus regulatory and legislative safeguards. Brave new world.
The point is that always-online payments works. At most the problem you described is a minor annoyance.
>I don't care about the payment processor's requirements.
But you otherwise don't have any objections if we can come up with a NFC protocol that allows an offline phone to make lightning network transactions?
>No, I'm not moving goal posts. You said that hobbyists are running nodes, I say so what? That has zero to do with transaction fees.
1. "hobbyists are running nodes" were in reply to the question of who is going to be running watchtowers. You sneakily switching to a separate topic (transaction fees) as a reply to that is moving the goalposts.
2. what's wrong with intermediaries taking fees? Credit cards have fees. Debit cards have fees. ACH has fees. Cash has fees (resulting from costs associated with handling it)
>> As it relates to scrutiny, how is an issue? Unless there's some fatal flaw with the protocol itself, you should be secure against loss of money, even if the peer was malicious.
>The protocol itself explicitly does not protect you against loss of money - it can't. It has to rely on trust in intermediaries and software trying to give security guarantees that the protocol itself cannot provide (hence the need to monitor the BC).
My original point was relating to having to trust peers. As long as you do your part correctly, ie. keeping your keys secure and checking every two weeks (or getting someone to do it for you) if you have channels open, then you don't have to trust them. I agree the requirements are more onerous than on-chain transactions, but I never claimed they weren't, and I think it's a fair trade-off to make for the benefits.
>The issue is that the intermediary is inherently insecure (and shouldn't be trusted by design) and in contrast to the regulated finance industry
The same "regulated finance industry" that allows you to withdraw money from your account with just your account numbers, and it's up to you to wrestle with bureaucracy to get it reversed? If that doesn't count as "inherently insecure" to you I don't know what is.
>there's nothing protecting customers from fraudulent or extortive behaviour of 3rd parties. Manipulated routes (no hacking required) can lead to increased fees or delays without any transparency or protection for users.
1. As opposed to "increased fees or delays" in the form of ATM fees (just one example) that are present in the "regulated finance industry"?
2. With regards to the problem of suboptimal/"extortive" routes. Is this an theoretical problem or a practical one? Are lightning users getting scammed left and right by these malicious peers? If it's free money and as easy as you make it out to be, such attacks should be very popular.
>You might find that acceptable as The System is a sufficient safeguard, but even the Lightning team admits that there are unsolved problems (i.e. monitoring of the BC is required to mitigate these flaws, which brings us back to initial point).
The "unsolved problem" of having to monitor the blockchain every two weeks means... what? The whole project is DOA? That we shouldn't use it? That we should use sink the whole thing and go back to "regulated finance industry"? Is the internet DOA because of the "unsolved problem" that you need to keep your system up to date and patched to not get hacked?
If bitcoin is coming in constantly you get it at the average price via dollar cost averaging and the average value of Bitcoin has trended sharply up for a decade.
Selling BTC for USD is most likely a loss to inflation if you intend on holding for a year or more.
12m y/y bitcoin is up 8% and the S&P is up 18%, so if you gambled your money into bitcoin a year ago, you made a bad choice. Note that last week bitcoin was down 5% y/y. Bitcoin, y/y is hardly beating USD inflation, right now, after a major increase in the price today.
Also, stop comparing a speculative asset to a currency. USD isn't meant to be held as an investment. It's meant to be spent, or invested in an asset that appreciates more than inflation.
And further, you can't predict the fee you'll pay. And I hope you aren't in a hurry to settle in those cases.
And if you need to resort to a custodial service, what are you even using BTC for? Using a custodian to give you permission to enter and exit a market is antithetical to everything Bitcoin stands for and exactly what it was created to fix.
Just imagine how long the line in your gas station would be clogged up for if you had to wait for a BTC transaction to be confirmed...
The difference is that while you are hit with arbitrary fees when dealing with crypto (be that transaction fees on the BC or fees by intermediaries and services in case of Lightning), cash related costs are already priced into the product and can be planned for from business's point of view.
Other than securing the wallet, there's no carrying costs for whatever amount of cryptocurrency a merchant holds? It's not as if you don't hold a minimum amount in your business account, the bank levies fees since you deposit money so they can lend it back out and charge borrowers 10x as much.
1. Unpredictable fees make usage for small amounts almost require a long-lived channel to be worthwhile.
2. UX around Lightning channels are painful. You can't receive BTC in a channel unless you put BTC in as collateral. You can't spend more than the channel allows. Routing is unpredictable and fickle causing transactions to fail just as often (if not worse) as complete successfully. (Perfect for one-off transactions /s) All Lightning wallets (with the exception of one or two) are custodial and if they aren't, they cost a lot of energy to run on your phone because they're constantly chatting with the network.
3. The whole point of cryptocurrency is diversify the control across the network. The design of Lightning motivates large hub and spoke connections between users which consolidate control to a few individuals.
4. The complexity for any business to integration Lightning into their purchase flow is expensive due to the many states your channel can exist in and need to considered as part of your integration. Not to mention the added costs of monitoring the BTC network to protect your channels. Or you find a merchant provider you have to trust with your processing...at which point, you're just using credit cards by another name.
5. And due to the complexity of Lightning's design, there are systemic bugs which expose users to more risk than if they just used a gift card or credit card in the first place. (One case in particular, a channel which is mostly settled on side B (versus side A) such that A's value on their side of the channel is less than the dust limit of the BTC network (which is often given the highly fluctuating fees) will allow B to force the close of the channel causing A to lose their value in the channel (because A will need to spend more than their side of the channel is worth and will be a worse outcome than if channel A just ate the loss from the channel being maliciously closed)).
Is this not still fundamentally a centralized system?
I imagine it won't be long before Coinbase, for example, will warn you against transferring to wallets which aren't held by one of the big providers.
These automated exchanges seem to be growing rapidly. At one point last year Uniswap had 77% of Coinbase's trading volume: https://tokenist.com/with-33x-fewer-employees-uniswap-has-77...
Perhaps, but I'm not sure if that answers my question.
Cryptocurrency networks are decentralized on their own, but I'd say the way we generally interact with them is not. It sounds like we agree on this point.
However, whether a decentralized system is accessed through a centralized layer or vice verse, the result is a service that is not fully decentralized. If any entity, such as a bank, third-party banking service provider, cryptocurrency exchange, etc., is involved at any point, that entity effectively has some control over what happens on the associated decentralized system. This results in an at least _partially_ centralized system.
It’s like arguing construction is a fundamentally centralised business in your local area because every builders buy their bricks from the same factory. It doesn’t make much sense.
They need to keep money (printed by the fed) with a bank controlled by the fed. If you don’t see why that is a centralized system then not sure there’s much to discuss.
It’s distinct from reserve requirement, which doesn’t force you to store your money with a member of a single organization.
And what about a smart contract that requires participants to make a deposit with the smart contract itself? According to what you're saying such smart contracts are by definition centralised. Am I getting this right?
> And what about a smart contract that requires participants to make a deposit with the smart contract itself?
What do you mean "requires"? Is there forced participation? Presumably anybody could make a competitor to this smart contract. I think I'd need a more specific example to understand exactly what you mean here.
It also depends on the contract itself. A contract that has an owner encoded into it who can make unilateral decisions is more centralized than an ownerless / immutable one.
Hmm, no.
> Other banks can create debt, but only with permission (the initial money supply) from the fed.
More like a license. But it's no different than me creating supply by promising you to pay. That's really how it works in the banking world (and why the big guys have an advantage: they have a reputation).
> You'd have to really squint to consider that decentralized.
The current system is still relatively decentralized which is why governments and central banks depends on banks (and love them). Which is also why they want to try their hand at a CBDC (because it removes the role of banks)
Who else can make USD? Banks can create M2 but only as a function about how much M0 the central bank creates
You have demanded six explanations in drive-by form of standard concepts from strangers in the last 24 hours
This is the behavior of flat earthers and anti-vaxxers
It is not difficult to sympathize with people who do not fully trust banks, especially if you grew up in a third world country with corrupt institutions. There have been times in history where you could trust banks and times in history when you could not. I'm not sure the past 70 years of grand prosperity for the west is a good way to gauge the trustworthiness of institutions owned and operated by others, since in the full scope of history the outcomes have been mixed.
That doesn't mean decentralized web3 cryptocurrency stuff is the one-size-fits-all answer, but I am sure to some people it is. And people should be free to choose the way to protect their assets and hedge bets against different local and global outcomes as they choose. Governments are the same way, with their large stockpiles of real physical goods like weapons and gold.
No. Standards and protocols are the essence of decentralisation and collaboration.
edit: Not sure why I'm being down-voted. If you believe that government created and mandated "open protocols" are really the same as decentralized protocols, imagine what it would be like if the US government forced every major institution to use the backdoored Dual_EC_DRBG they created instead of a sane cryptography protocol. A government enforced "open protocol" is not open at all if you're forced to use it.
Why would offering an API mean that the service is decentralised? It doesn't - it just lets you get some data in or out. You are still beholden to a single party that can cut you off at a moments notice.
> I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
Not true at all. Bitcoin has a Layer 2 solution where transactions are done off-chain in a non-custodial manner. Those don't need to be recorded on the ledger, only the settlement is (if you decide you do not wish to participate any longer).
Not in the UK, nor in Europe. Don't project your (presumably US) failed institutions onto the rest of us.
And even if your account doesn't get closed immediately you are still subjected to invasive KYC procedures, even if you haven't done anything wrong. Failure to comply of course leads to your account being closed.
[1] https://www.vice.com/en/article/pak7wb/exclusive-secret-blac...
PS. I am in the EU. What kind of argument is that, anyway?
A _standardized_ API would allow providers and consumers a choice, which distributes the power to some degree and can encourage the parties to make choices that support the entire ecosystem rather than just their own ends.
I don't think you can though, not without passing an expensive certification process, right?
I mention this because as a German, the EU Open Banking initiative made my life worse. Banks are phasing out actually open FinTS standard, for which their are a pletora of Open Source libraries, and many apps by independent developers that were able to connect to any bank. /I/ was actually able to start up a shell and pull data from my bank accounts. This does not seem to be the case with Open Banking, where I have to pay a service provider that has passed certification to allow me to access my bank data.
This is an important aspect of crypto currencies - the goal is to be permissionless. The decentralization is merely a requirement to achieve this.
Cryptocurrency is just the best contemporary approach we have for applying computer science to money. That involves cryptography and blockchains because they are the most relevant technologies for accounting.
The typical alternative is a database from the 1970s or 80s running on something like a private mainframe, that can be modified at whim by those who control it. The biggest problem with this is that when so many have a chance to cheat, some will. But the core failing of the concept is that it's a private database with no mechanism for external (or even necessarily internal) verification. The core thing that people such as yourself will eventually learn about is that cryptography and blockchains are the best approach we have for solving these problems. It's just the basic application of computer science to accounting.
Many of these systems were built before cryptography was well known, and some run on hardware that may not even be capable of current cryptographic standards.
Fundamentally, arguing against cryptocurrency is like arguing against calculus in the 17th century.
If all crypto does is give people more options, there are a lot more efficient ways to do that.
Nobody wants to run their own bank, which ALSO means nobody wants to use Jim’s shady internet bank or their buddy’s bank or their mom’s bank or or or…
Like, nobody in crypto seems to think for one second about how the world actually works or what people not brainwashed by crypto might want.
It’s a tech that has thoroughly, definitively lost the argument. It’s as clear a dead end as the metaverse, or pivots to video (let alone Meta/FB’s pivot to video)
The person you're replying to isn't arguing for people to be using "Jim's shady internet bank" or a random buddys bank, they are discussing the ability of current trusted actors to act as custodians and insurers for cryptocurrency-wallets, hiding the scary and difficult aspects of cryptocurrency, while operating on top of an open-source, trust-less, publicly auditable, open base-layer like a blockchain.
They are saying it's possible to regard cryptocurrency as a base-layer for economic transactions, and that without it it's basically not possible today to leave the traditional banking world behind if one wants to maintain a digital presence. Don't you think it should be? Why should an individual be forced to have someone else be custodian for their wealth?
Cryptocurrencies also aren't really finished yet, there are a lot of improvements to be made before it is possible to replace the existing financial infrastructure and maintain its scale.
It’s been 14 years. When will they be “finished”? What does that look like? What are the goals?
It seems to me like the original goals failed (take over the world, everyone use Bitcoin like cash) and so the goalpost moving began (sidechains, PoW “soon”, NFTs, etc).
I’ve seen nothing of value produced out of 14 years if hype. Only wasted resources and what seems to be an accidental Ponzi scheme.
> nobody wants to run their own bank
It sure looks like A LOT of people do. The real question is why are you so mad about it?
What you're describing is basically how the IP protocol has been manifesting itself with something like Twitter vs Mastadon.
Here's the problem - if I can't get my weather alerts from my local city township from Mastadon, but have to use Twitter, then the point is moot. For example - https://twitter.com/TravisCountyTX/status/148934948869109350...
To bring this analog to bear - my local police department accepts credit cards online now for paying a ticket violation. What if they don't support <insert whatever crypto protocol I want to use>. I still need to use the "old" protocol (USD via Visa).
It's still better than if it was completely impossible to communicate to others without twitter.
You're totally right. So now explain to me in this crypto libertarian fantasy world how:
- People agree where internet cable lines get installed
- People agree on how roads should be laid out and
- People agree on who is going to bear arms and defend their sovereignty
Does a blockchain solve all of that?
And it's just that - an attempt. If it makes you feel better that you feel like your thwarting the government then have at it.
> I never indicated that it does
Unless Crypto is widely adopted, then it doesn't solve any of the aforementioned things you mentioned.
> the pitfalls and complications are worth it.
They might seem like their worth it, until you realize you can't gain any of the benefits you mentioned without having solutions for the discussion of "who is going to pay for this bridge".
The fact that crypto advocates don't think of any of these logistics is what makes me not take any of your arguments seriously.
Most of the crypto-bros don't run their own banks either.
All of them depend on institutions that effectively act as banks somewhere down the line... first of all, the overwhelming majority of actual cryptocoin users doesn't run their own nodes (which, as "bookkeeping", is one of the core functions of running a bank), instead keeping their wallet at some sort of wallet service or transaction gateway, because running a node requires disk space and a continuously running machine. And then, almost everyone participating in any coin requires exchanges to turn the coins back into fiat money or vice versa - I've yet to see any actual real-world economy that does not use fiat money but instead handles everything with Bitcoins or whatever.
> Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.
The only thing "decentralization" enables is a lot of elaborate, irreversible scams, hacks and thefts. A banking system without some sort of centralized entity to deal with disputes and prevent usage for criminal activity eventually will break down... there's a new exchange that got hacked, a "smart contract" drained via intentional or unintentional bugs, NFTs being doubly-sold (if I understand that recent OpenSea bug correctly) or rug-pull scams exposed almost every other week. That is not a trustworthy environment.
Not to mention that all cryptocurrencies to date have led to enormous waste of resources: electricity, CPUs, GPUs, ASIC fab capacity, RAM, HDD... literally everything that could be used to mine coins got used for that purpose and outright killed the market for these, because miners can always pay far greater sums for components than individual people can.
Maybe the existence of banks would be better evidence that 'some' people wanna run their own banks?
Just one example: If everyone on earth used Bitcoin, there'd just be enough capacity for everyone to get in around one or two transactions in their lifetime.
Decentralization at the core is a massive waste, while providing almost no benefit except to a very few.
We see that with Coinbase (a HN unicorn btw): lots of people are apparently not only fine leaving shitloads of coins on Coinbase, many are also totally fine using the USDC "token" which is (mostly) backed 1:1 with actual USD. I don't remember the stats but big "exchanges" hold a sizeable part of the circulating coin and it's not just people "trading": it's a lot of people simply holding to their coins and using Coinbase as, basically, a bank.
Heck, I think if they sell for USD (not USDC, don't know about USDC), their USD at Coinbase are even FDIC insured up to $250 K (for each american on Coinbase: it's not the same with Coinbase in the EU).
I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank".
Exactly. That's a big 'no thanks, and no deal' as it defeats the whole purpose if one leaves all their coins on an exchange for 'long term' holding.
Nothing wrong with downloading a crypto wallet app and sending and storing the USDC, USDP stablecoins on there. No need for Coinbase.
Job done. Your keys and your coins without the volatility.
While the current level of financial and banking regulation is certainly debatable, creating super lightweight version of banks might not necessarily the way forward.
The problem isn't the bank organization itself: it's the money that you deal in. Regardless of your bank structure, whether it's some typical commercial bank or some kind of cooperative association, you're still left holding a fiat currency that is inflated on a whim.
The beauty of crypto (and especially Bitcoin) is that there's either a fixed amount, or at least the rate of change of the money supply (inflation) is at least perfectly transparent and mathematically provable.
And Bitcoin's hard cap is based on incentives and code, i.e. it could be changed (difficult to see in reality absent some really strong outside coercion, perhaps). Another attack on the value of Bitcoin could be from a state actor using nearly unlimited resources to take over most of the mining or validating and using it against it. I.e., there are ways to degrade it as a store of value (other than just arresting everyone found using, for example).
Some things are just far more likely to happen than others.
Which of these 2 things are more likely to happen?
1) An attack or change on Bitcoin that renders it completely valueless or unusable
2) Governments inflating fiat currencies and robbing you of your wealth
I'd say that 1 is merely theoretically possible, but 2 is about as close to complete metaphysical certainty as you can get.
In defense against 2), I'd venture it is probably better to own production assets (and parts thereof) rather than crypto.
Also, if inflation is sky high and destroying everything left and right, they could very well come for 1). So there is a spectrum of inflation where crypto might(!) be a hedge, but similarly a lot of other assets might(!) deliver said hedge. Just because it is limited in supply does not mean people will always imbue it with value (stamps are great example of staff that is dropping in value as far as collectables are concerned).
Now where I could see an issue is then with people who don't have "wealth" but some savings that get inflated away and potentially limited asset selection to invest in. Whether or not crypto will help, is up to crypto, not some law of nature, though.
Maybe I'm misunderstanding something about your response, but I think your response is too focused on my use of the word "wealth". Obviously, genuinely wealthy people have a large part of their assets tied up in physical assets that might serve as a hedge like land, resources, real-estate, businesses, and likely aren't anywhere close to entirely liquid.
I'm more focused on the impact of inflation on normal people. An average person of average or below average means likely holds most of their life savings in cash-like things or even literal cash. Being able to afford land, an investment property, a factory, a McDonalds franchise, or physical assets isn't even on their radar screen. The average person of average means is screwed by inflation far more than the wealthy because they have far less of an ability to buy real assets that might always have some value.
The reason inflation makes me angry is that it's a stealth tax, primarily on the poor. Whatever else you want to say about Bitcoin, the fact that there can only ever be 21 million units is extraordinarily positive in this respect.
Relying on speculative assets, in the sense that they are not producing widgets that can be sold at higher prices due to inflation, to compensate for inflation might or might not work. The world isn't running on Bitcoin, so the limit doesn't quite bite into the real world without enough people imbuing it and Bitcoin with value. I am not taking an anti crypto stance here, more saying that trying to solve this problem via crypto might not pan out/there are other approaches, too, that should be pursued.
Bitcoin probably isn't the ultimate solution out there, but I'm simply pointing out that it at least doesn't have an attribute that allows you to steal value through inflating the currency.
Inflation is a particularly pernicious theft from people: most people don't realize where it comes from and just think that "prices go up over time" without realizing what's happening. The awful media even tries to gaslight people that they're doing better because "wages go up too."
> vs. better wages (more collective bargaining?), automatic tax adjusters etc.
There's a lot more that can be done to help non-rich people, but the problem is that one's opinion of what's actually helpful to people change when you really begin to understand economics and prioritizing systems over goals.
Sorry, but that's just not true. Crypto exists because people think they can win money with this Ponzi Scheme!! ONLY reason! Greed
How much of a reality that is to particular person depends their economic environment. A Venezuelan living with hyperinflation thinks about the fragility of their savings differently than an American.
Likewise, many don't really want to run their own electric generator because it's noisy and keeping diesel fuel on hand is extra work. However, they'd rather deal with that than have no electricity when the power company issues rolling blackouts.
So, an option can be framed as a "bad choice" but it must also be compared to other bad choices that may be worse. Which bad choice do people prefer? A noisy diesel power generator they have to babysit or a no power at all?
Writing a hypothetical essay titled "People Don't Want to Run Their Own Diesel Generators" -- will not actually educate readers on what's happening.
Yes, crypto POW uses too much energy. But how do you get people to prioritize the environmental impact over their fears of government manipulation?
People don't want to run generators. They want stable electricity. There are a variety of ways we can give it to them.
Similarly, people in a hyper-inflation environment don't want crypto - they want stability.
But there's nothing inherent in crypto which prevents hyperinflation. Yes, I've read the original bitcoin paper. That talks about monetary supply - it doesn't do anything if a cartel decides to raise prices.
One of the things that made Moxie's piece a hit was it had real examples of his experiences trying to do things.
But this article has none of these examples or experience.
For example, your article misses people who are indeed using cryotocurrencies as banks [1]. It misses the current conversation around social management of keys. The rise of automated exchanges like Uniswap.
Lots of room for critiques on these items. That the only examples of people using crypto for real banking are in collapsing currencies. That if there's such a problem managing keys that social management will still fail. But you seem to have missed all of them which really undercuts your article to me. Again, this seems like it could have been written in 2010 based on the concept of crypto rather than real world experience. Just curious about your motivations for such a piece. It certainly has attracted commenting here.
Disclosure: I own crypto
[1] Reporting of LocalBitcoin use in Venezuela. Certainly room to use these examples of why cryptocurrencies will never scale, but not mentioned in the article: https://www.reddit.com/r/Bitcoin/comments/s5i64l/24_btc_were...
Highly recommend the MIT video course on blockchains: https://youtube.com/playlist?list=PLUl4u3cNGP63UUkfL0onkxF6M...
And for a deep dive into any specific project, it there's an episode of the Zero Knowledge podcast about a project it's worth listening to.
To add to your counterpoint, the OP's praise of going cashless as opposed to the problems of cash is another fine example. It's certainly more convenient to use your card everywhere, but if everyone did it then just a handful of payment processors would gain immense power, with the ability to track, monitor, and censor all transactions. Plenty of dystopian fiction like The Handmaid's Tale covers what can happen when this infrastructure is abused. Cash may have problems but it plays an important role in an open society, and redundancy when a major payment network goes down (as Visa did across Europe on 1st June 2018, causing retail chaos). But many vendors no longer accept cash and this will only accelerate as more people never use it. In praising going cashless as protecting ourselves from being our own banks, the OP misses the forest for the trees.
Crypto doesn't protect you from either of those things
Similarly, when the US gov banned alcohol in prohibition, it did not eliminate demand for booze. It just moved the market underground.
A government can't, but a cartel of miners can and they do every time they mint bitcoins via mining rewards and they won't stop at 21 million.
They would be considered counterfeit and ignored by all Bitcoin clients and nodes. Case studies include BCH and BSV.
If you are genuinely curious about the mechanics do some research to understand why no miner in the past 12 years has successfully modified any parameter of the Bitcoin network.
Also, unlike cryptocurrencies, none of the other contraband could be stored on a password that could be memorized or transmitted to anyone anywhere in the world.
If governments banned Bitcoin, the market price of Bitcoin could very well go up over time not down after the initial shock.
The government won't ban the use of bitcoin, it'll ban the legal on-ramps and off-ramps for converting between cryptocurrencies and fiat. The value of cryptocurrencies is based on hype. When most people can't legally invest, the liquidity will dry up and the price will plummet. That'll lead to less hype, which will lead to lower interest, and so on.
Most likely, the bubble will burst, normal people will lose lots of money, the rich will make a lot of money, and the government will regulate cryptocurrency.
One recent example: a few days ago there was a big movement in crypto market. Due to huge traffic spike that went with that, one unnamed chain practically ground to a halt. The only thing that continued working normally was liquidation bots...
So tons of people got liquidated coz they couldn't adjust their positions. And now obviously they all are calling for compensation. But in the decentralized world of de-humanized smart contracts with no legal framework, there's obviously nobody responsible, hence nobody to pay any compensation.
What chain? Any links to stories on this?
Are you talking about Solana?
https://www.bloomberg.com/news/articles/2022-02-03/solana-po...
If the price went down 10% year after year forever I guarantee people would shut up about it even though none of the underlying reasons for supporting it should have changed.
Many real life folks I know buy little chunks of Bitcoin on a consistent base regardless of the price as a form of savings.
If your problem is the government might go crazy, the solution is to be part of society and stop that happening, not run away and hide in your cave
This is what it looks to me: "the problem with gravity is that since the objects fall down people rationalize everything (e.g. give explanations why they should fall down). If the objects went up year after year forever I guarantee people would shout up about it even though none of the underlying reasons for supporting it should have changed"
The point is pretty obvious - the usefulness and popularity of crypto shouldn’t be related to its value in relation to fiat, yet here we are.
> the usefulness and popularity of crypto shouldn’t be related to its value in relation to fiat
Are you sure that the usefulness and popularity of crypto are related to its value beyond some reasonable correlation?
With smart contracts you have none of this as well as the risk of a bug or backdoor in the code. No one is going to be auditing all smart contracts. They want to be able to use the legal system to address a problem after the fact if it goes wrong.
Admittedly I am no expert, but those concerns have kept me away from ever considering exploring them.
This is exactly wrong. Some people ultimately want people to be answerable to people. There are plenty of people however, who want to be answerable to code instead. Unlike with other people, you can potentially verify that the code you trust in is neither irrational, nor cruel.
Transparency? Really? For whom? Do you want your taxes on the blockchain for everyone to see?
I dunno.
https://executivegov.com/2021/10/usps-launches-pilot-banking...
I don’t know what you mean about efficiency, as there are multiple different ways to count this. Energy efficiency clearly isn’t a selling point, so can you expand on what you do mean?
My questions for those who trust in regulation:
-Why was no one ever prosecuted for this fraud?
-Why did regulation not work in the case if the 2008 GFC?
-If it didn’t work then, why would it work the next time?
It’s not really a counter though: for that you’d need to compare 2008 against markets with weaker or absent regulation.
I’m not sure the relative weighting of causes, between fraud, the misuse of Black Scholes[0], the elimination of various regulations which has been created at the end of the previous crisis, and the failures of credit rating agencies.
At least some of the fraud which did occur resulted in prison time.
[0] I did hear one of the big problems was everyone looking at the (Nobel Prize for economics winning) Black Scholes model, applying it inappropriately, and justifying this in the grounds everyone else was doing it. This is hard to fix, and group-think of this type is also very much the kind of failure mode I expect to happen more often in unregulated markets, but that doesn’t mean I don’t expect it to pop up everywhere given time.
Could you point me to any examples? When I looked into this the only person to serve prison time during this period was Bernie Maddoff and his great crime was stealing from the rich.
Given the human nature, it's pretty much inevitable that some dirt will get lost in this chain, and we will face the exact same fate as we did with CDOs, just with different terminology.
Why am I being naive or foolish to be furious about the existence of inflation? Is it a good thing that I simply misunderstand?
I am genuinely curious. Please help me understand.
One of the important things I tend to forget, is that effective rate of inflation is different for different people within the same economy.
For example, the official rate of inflation in the U.K. right now is 5.4%, but if you’re poor, you’re likely to be constrained by fuel prices (which just went up ten times that: https://www.msn.com/en-us/news/world/uk-faces-record-rise-in...) and food (which has done worse, but unevenly and over the whole year: https://twitter.com/BootstrapCook/status/1483778776697909252).
This is because inflation isn’t just caused by just governments printing money, it’s also caused by a reduction in the availability of things to spend that money on and even the rate at which money changes hands (https://en.wikipedia.org/wiki/Velocity_of_money).
There’s also a totally unrelated argument that I can follow but not adequately repeat about the impact of various levels of inflation on consumer spending and the feedback that has on employment etc., but that’s not an argument that I expect to do anything at all to reduce anger.
That suggests that you don't know what inflation is.
.
> I am genuinely curious. Please help me understand.
You say this too much. You can't understand from fly-by comments on the internet, which is why you're in the state that you're in.
If you're actually as genuinely curious as you pretend to be three times a day, go to the library and read a book.
All you're doing is chattering on the web. You will never understand anything this way.
Is that why you feel justified throwing insults instead of engaging like an adult? This isn’t the only comment where you’ve directed insults my way. It seems you are only capable of name calling, not substantive discussion.
They pay me out to my MEW wallet and the transfer costs me about $7.
I then have to transfer from my MEW wallet to my Coinbase wallet which costs me about $5 since I choose the MEW turtle speed which takes longer.
I then sell the ETH immediately because I realize how useless this crypto crap is for transactions or store of value. That costs me about $2.50.
So about $15 in fees to get my $140. You call that a great transfer of value network? I’ve mine cryptocurrency since you could use a GPU for BTC. There is no legitimate use for cryptocurrency today and I doubt there ever will be. It is structurally flawed in numerous ways.
Bottom line, they say not to do it and I personally can't guarantee I'm sending the ETH to my Coinbase account with an old ETH address that I've remembered.
For example, one of my RTX-3070s is making about $2.10 per day after electricity costs. Before EIP-1559 on high volume days (ex: Shiba Inu launch) I was making $75 per day with just one card!
Supposedly Ethereum 2.0 is coming in June although that has been delayed repeatedly. So who knows when ETH will switch from PoW to PoS. I can't wait for that day to come because then there will be infinite used graphics cards readily available for sale. Everyone thinks they'll move on to Raven or ETC or other coins but those coins can't handle the hashrate that is current on ETH so I truly think PoW mining will not be profitable after Ethereum 2.0.
Let me know if you have any questions but basic setup I use is gminer on flexpool.io. It's dirt simple to set up if you have a 6GB+ video card (i.e. it has to have enough memory to fit the DAC).
Where there's code, there are bugs. I don't want that in my money, thanks.
> no middle-men for transactions
At what cost? Most people don't care about censorship resistance, they want free/cheap/fast payments and transfers.
> lower barrier to entry for innovation in financial services
There's plenty of innovation in finance given the proper legal framework. See the number of fintech startups popping up every year. The only innovation we see in the cryptocurrency space is the recycling of old scams that are impossible in modern finance.
Yeah, money should be data, dumb configuration, not code.
Add another, completely separate layer on top of that, for the code.
And that ("Many people underestimate...") is before you factor in all the extremely talented people who are looking for ways to remotely steal crypto wallet data.
For readily accessible warm wallets not storing kidnapping-worthy amounts, this airgapped pattern can work well for the modestly technical https://github.com/hashbang/airgap/blob/master/docs/HD-Crypt...
Anyone that wants to learn reliable self custody hit me up.
My job is teaching self custody to major fintech companies but anyone asking questions for personal use in public in places like #!:matrix.org I will help for free as I have time.
With Gold someone has to physically come to the location I've stored it in, that necessarily limits my attacker set.
With crypto, if I use a hot wallet the whole world can attack me. And I know you can use a cold wallets and air-gapping, but now you need to get into managing those well. This is possible but inherently not easy for the average lay-person.
And yep you can duplicate them, and again I look at how many relatively savvy people have DR incidents where they don't test their backups and restores regulaly and get a nasty surprise when they try a restore and realise they got corruption.
All to say, it's possible sure, but I'm not sure for non-specialists I'd say it's a lot easier than gold.
I am not aware of anyone who has tried a modern hardware wallet that still argues that crypto self custody is above the abilities of anyone technical enough to use traditional online banking.
Once they use a pen to write down the 24 word backup then they can simply write it down a second time, or a third. Store a copy in a safety deposit box or anywhere resistant to theft or fire. Easy.
Anyone that can store paper stock certificates can do this only with these the copies are valid.
Also the problem with duplicate hard wallet backups is, if I'm understanding it correctly, a thief can take any one of them to access the crypto?
If so it's a tradeoff, redundancy against increased risk of loss...
Now if someone has an electron microscope and can read the raw memory cells, that is another matter, but not your typical adversary trying to steal for a quick buck at a pawn shop.
It is also more durable because gold you can only store in a single location, whereas with a hardware wallet you could put you 24 word backup somewhere hard to access, maybe spread across one or more safety deposit boxes.
Then if your funds ever feel at risk, you can simply erase your hardware wallet and go on vacation with confidence knowing you can trivially restore it when you get back with a trip to the bank.
That said, as the post I was responding to mentioned there are definitely people who absolutely do store gold.
Home robberies and floods do also occur... and those things can take out offline hard-wallets just like they can take out gold.
Then you have to trust the hardware storing the data not to fail. But every physical storage medium will fail eventually, so now you need a system by which you create backups and test your backups. And now you have to secure your backups separate in case of fire or technical theft too. It starts to become a part time job very quickly...
Do not trust any or this software to generate those words truly randomly? No problem. Use bip39 diceware to literally generate your words with dice.
When it comes to not trusting software to convert those words to a keypair deterministically, use NASA dual path tactics.
Use two unrelated software suites to convert those words to keypairs and sign a transaction and ensure the final signed payload output from both unrelated toolchains is identical. Bip39 has been implemented in many programming languages.
Now you can form strong confidence in your entire supply chain from key generation entropy to a final transaction with perhaps a couple hours of effort. If you are moving millions in value and worried about supply chain attacks the extra effort may be worth it.
For most a Trezor or a Ledger used as the instructions that come with it advise will be in fine shape.
That said only people that need to understand tactics this strict are those storing VC levels of value.
For an individual just buy a Trezor or a Ledger and follow the point and click instructions. It is no harder than traditional online banking.
Does the author realize how much people in the third world have been screwed over by banks and why they wouldn't want to trust one? The author's opinion would be vastly different if the author were a resident of Turkey or Lebanon or Nigeria right now.
(I'd like to clarify I'm pointing out that this argument can be made, I'm not actually claiming to be familiar with anyone's circumstances or privileges.)
> In 2022, the number of smartphone users in the world today is 6.648 Billion, which translates to 83.89% of the world's population owning a smartphone. In total, the number of people that own a smart and feature phone is 7.26 Billion, making up 91.62% of the world's population.
No, but it's better than the infrastructure in their countries.
Would you use cryptocurrency for currency or for savings?
Regarding the volatility of non-stablecoins, those who hold believe that we are still early in the price discovery of a new class of assets and while I can’t speak for others, personally, I have a longer term investment horizon on the order of 4-5 years at a minimum. Looking back on the price of Bitcoin or Ethereum over any 4 year time horizon, the valuation has grown much faster than any traditional asset class.
There's a reason we don't have huge return on investment on most assets.
There's not way that 50:1 ratio can ever possibly work at a large scale. Unless, you know, it's a scam.
It's Econ 101.
For example with stablecoin cryptocurrencies I can move an arbitrary amount to another party with no risk of censorship, no permission required, on an arbitrary Saturday morning at 3am if I wish - all in about 10 minutes. This is impossible with USD fiat.
Because of this utility, there is significant demand for stablecoins by traders and institutional investors who prefer stables over fiat and are willing to pay a premium for this utility.
Also my 50x claim on interest paid on savings is based on a typical US bank paying 0.1% APY.
50x 0.1% = 5% which is lower than many stablecoin savings products offer today.
What makes you so certain that a 5% APY on stablecoins is unsustainable at scale or a scam?
Their overhead is big, but not that big, plus they follow the central bank interest rates.
Your case is a localized anomaly, this can happen with regular banking, too, but it's not scalable. You can't ramp that up to population levels.
At the end of the day, you relinquish control for a false sense of security. Everyone storing their money in banks in Venezuela found this lesson out the hard way: you don't have any money. The government allows you to store and pass around notes for debt, which are commonly agreed upon as valuable and so our economy spins onward. You know what they say about those willing to give up freedom for security.
Realistically, use your head please. Full tradfi and full defi are equally unwise. It's risk management 101. And yes, some very unsavory things going down in any country are always a risk if you are planning a resilient infrastructure for your estate spanning generations. Usually this has taken the form of multinational diversification, but now we have the extra option to secure long-term wealth without all the legal expenses. Don't dismiss it.
A non-material agreed upon medium of value transfer completely outside of control of governments is unprecedented. You can go to any country, and get someone to give you their paper currency, for a digital one you possess - without ANY restrictions or moratoriums. I'm not sure how that can possibly be called a step backwards. It's a valuable tool even if most of HNs audience has no use for it. Control comes with risks and responsibilities. This is true for being your own bank, running your own infrastructure, and everything else. Literally nothing about this tradeoff is new or shocking, except that it's now available for currency as well.
People who need that sort of privacy and freedom need an alternative. Fortunately, the alternatives available are 100% opt-in and can be ignored and avoided if you don't like them - a stark contrast to retail banking in the USA, which we are all forced to use even if we don't want to.
At which point if the physical transaction is picked up, the entire chain unrolls back to every initial source.
I mean, it's not like your account balance is public on regular banks..
I struggle to come up with an example which does not involve shady business, and if that's what we want, it seems like a better solution to just legalise those businesses...
Also large orgs run on percentages, economics and so on. Anything that makes it more expensive to be oppressive or change the balance of things is useful. It doesn't have to be a %100 solution to be helpful.
They did this to Wikileaks, for example, long before any charges against Assange were made public.
It's, to borrow a phrase, "turnkey tyranny", ready for abuse at all times. Those it is wielded against can't then afford representation to get it fixed, as they can't send or receive any payments.
Crypto currencies don't afford privacy, do they.
Anecdote: I am a fairly technical person but stayed away from the whole self-custody stuff because no way anyone in my family can figure it out and if something happens to me, its all gone.
Two days ago, my wife (non-tech as you can get) got a muun wallet and was very happy about the experience. She got the point of being able to send money to her relatives in the middle east without the normal shadiness that goes on over there.
(getting USD or any hard currency in and out of some middle eastern countries is a nightmare)
And the one “legitimate” use case you list is to use cryptocurrency to bypass US controls on money transfers to monitored countries.
How long do you think that hole will remain open?
Newer tech with better UX does a wonderful job protecting users and is improving at rocket speed. The example I used protects the user from all these scenarios you mentioned.
Also, the US doesn't care about moving USD in and out of most countries (Iran, NK excluded). It's these countries themselves that want that level of control.
How does it protect against hardware failure? How does it protect against sending Coin X to a wallet meant for Coin Y?
Also, the US doesn't care about moving USD in and out of most countries
That's funny. And even if what you said were true, other countries will eventually control what appears to not be controllable today.
As far as the addresses goes, it’s the same thing as sending a wire transfer to the wrong account in a different country. You won’t get it back.
If cryptocurrency enthusiasts had their way, though, the high-risk transaction the GP called out would be required to buy a gallon of milk.
Give them that and Bitcoin will go back to being a niche investment vehicle where 99% of the people don't care about it.
It's work, but you are running your own bank.
Developed by a centralised developer that you trust not to screw up your money transfers.
> But the space is moving like a rocket and who knows what the future holds.
We know. All the crypto bros will slowly and inefficiently learn why regulations and centralisation exist
Developer literally created the software you use.
To interact with the ledger on an easy non-technical way, you can:
1. Use a centralized exchange (coinbase) 2. Use a self-custody cold-storage wallet (ledger) 3. Use a self-custody hot wallet (muun) 4. Use a custodial wallet
For #2, and #3. You have your own private keys. The developer of the wallet can’t do anything to your money. Even if they shut off the servers(#2 doesn’t have servers), the ledger on the network still says you have x amounts of Bitcoins. You can access the ledger and interact with the network in another way.
Literally can’t be evil!
Look up how ETC (Ethereum Classic) came into being.
Look up a 51% attack.
Look up forks from BTC to BCH and then BSV.
Look up Craig Wright and his claims to be Satoshi Nakamoto.
Again, respectfully, your many comments here make you appear to be someone that just learned about cryptocurrency in the last six months and you have only the simplest of surface understandings of it.
You’re INcorrecting several people that have been at the forefront of cryptocurrency for over a decade.
Eth classic is exactly why there is Bitcoin and everything else.
Forks are exactly why Bitcoin will always protects it’s userbase from big miner money.
Craig white claims is exactly why no one person can control the network.
You haven’t been at the forefront of anything my man. Bitcoin has returned 1000% and you are sitting here fighting over the internet.
You’ll know it happens when people just stop responding to you.
I have showdead turned on and I shake my head as people post comments for years never knowing that 99.99% of people don’t see their posts and comments.
As for my cryptocurrency background I mined BTC with a GPU when it was very profitable. My ETH mining rigs are doing their job while I’m posting on the Internet as you say. I have no problem profiting from it while recognizing it’s a total and complete scam.
So at all times they have access to both of your keys that are used to sign transactions:
https://blog.muun.com/muuns-multisig-model/
--- start quote ---
Muun ensures your decrypted private keys are never stored in the same place:
- Your phone stores only the first key
- Muun's servers store only the second key
--- end quote ---
Oh, there's also the Emergency Kit that--I pinky swear--is encrypted in a way that Muun knows nothing about both keys in it.
Moreover, if you go ahead and install Muun, there's literally nothing about secret keys in the app: you can immediately send and receive bitcoin. Which really tells you all you need to know about its security.
That said, this article is simply the rationalization of the author's choice about why he won't use crypto, raising basic concerns that anyone that knows about crypto should be aware of, but of course it reached the front page based solely on the fact that it's anti-crypto.
However, I want to address the closing quote.
>Would you carry around your life savings in your wallet? Would you store everything of value in your home in a safe? Would you want to run your own banking infrastructure?
You don't have to carry all your life savings in a single wallet that you carry around. You can split everything in multiple wallets, distributed in a safe way so that you don't lose everything if your house burns down, or you are held at gunpoint, or you become amnesiac, or you die, or whatever. How you do that is your responsibility. You don't want that responsibility? Then just use a bank. Also, I didn't know I had to run my own banking infrastructure to use crypto, up until now I just used a wallet.
But some other people do.
> I give an institution my money and, due to a combination of their size, insurance, and regulators, I'm confident that my money will still be there tomorrow. They are unlikely to give me fake notes, and they can refund me if I've been defrauded. I trust them.
Good luck! Your trust in them is not a guarantee that you are able to get your money back from them at any point [1] [2] [3] [4]
[1] https://www.reddit.com/r/UKPersonalFinance/comments/aqxz5n/h...
[2] https://www.reddit.com/r/UKPersonalFinance/comments/ryc8i4/b...
[3] https://www.reddit.com/r/UKPersonalFinance/comments/l4tps5/h...
[4] https://www.reddit.com/r/UKPersonalFinance/comments/cbpxit/h...
If the government is after you, crypto isn’t going to protect you. It might make the cost to go after your money a little higher if you’re willing to violate court orders and live as a fugitive.
You can co-operate with an investigation whilst also not handing over complete control of ~all of your assets for the interim.
That’s what I meant when I said the cost to seize your money goes up if you’re willing to defy a warrant.
However, if using crypto as a currency becomes mainstream, governments will crack down.
Crypto might be decentralized, but governments could easily require registering wallets, and force businesses to only transact with people who are registered.
Not everyone wants to use cash. That's fine. For those of us that do, there is now a solution.
I think most people generally agree that most of the world aren't going to be using Bitcoin Core with a wallet.dat.
They don't need to, though.
Maybe 3% of us use desktop Linux. If it or something like it didn't exist, we'd still have to create it.
I use it as digital cash all the time. Not every cash transaction is for trivial amounts, and as you say, not every blockchain is expensive.
Lightning Payments would allow you to buy a coffee at Starbucks instantly while avoiding the 2-3% in payment processor fees.
It’s similar to how Linux on the desktop isn’t as easy as simply buying a Mac. There is real value in alternative solutions such as Bitcoin and Linux even though it may be harder to use these technologies today.
These things are problem with the protocol specification. I'm curious to know how you can solve things like without reducing the value proposition of Bitcoin being trustless and permissionless and Lightning being a fast settlement layer for daily transactions.
- Removing the pain of settling twice on-chain with an unpredictable cost. The best I can think of is to create some fund which amortizes the channel handling cost across all users. Which means you're sacrificing permissionlessness to whatever is doing the amortization of fees.)
- Fixing routing and the convergence of the network toward a hub-and-spoke shape. (This is bad because Bitcoin is suppose to be trustless/permissionless...if you need to trust a hub node, then you're getting all of the negatives and none of the positives.)
- Fixing the dust attack that HTLCs enables. (Context for others: HTLCs are a critical piece of the Lightning network protocol and is what enables channels to be created/destroyed at all.)
I understand the point you're trying to make but I disagree with your analogy. Linux is not being advertised to the masses as safe and easy to use like LN is.
Not sure where this came from, but certainly from me. Lightning is a joke, we have ~20 better solutions already. Still they have some way to go to fulfill Sathoshi's vision.
What are some of the ~20 better solutions and how do they compare in terms of programmatic inflation policy, security budget, decentralization etc? Or are you just trying to equate Lightning to Nano or Visa since they all have low fees and fast transactions?
However they are exposed to extreme volatility. If your income is so low that you need to rely on relatives abroad, then mere 10% price dip could be deadly for you, suddenly you cannot pay rent, etc.
A safer solution for them might be stablecoin transfers on some other quick and cheap chain. It has its own set of downsides and risks, but they might be relatively low compared to huge fx risk of BTC.
The rest of the world is desperate for banking without gatekeepers, ridiculous wire fees, corrupt inflation, etc.
Tech like bitcoin will liberate millions who only own a cellphone and are either denies banking alltogether, milked dry with 30% plus fees, or whose nearest bank is hours away.
Let banks compete.
Not having the faintest idea of how to do such a thing I set out to at least collect a roadmap of the paperwork needed to do that, so I could glean some knowledge in the process.
Ended up consulting with a lawyer and gathering a grand total of 1700 distinct bits of paperwork I needed to fill and complete as a random person. Every one of those things would have to be accompanied by documentation, most of which had to be presented in person at least back then. Would have taken me about 5 years if I managed to file a paper a day every day. To this day I still have no idea how on earth do banks just pop up one day.
For example, a paycheck should be deposited directly into a worker's cryptocurrency wallet. Anyone who wants their payments to go into their bank account can simply provide the address of their bank wallet instead of their personal wallet. This way nobody is forced to create some bank account just to get paid their salary.
The important thing that crypto brings is optionality. Without crypto, what option do we have if not to trust the handful of BofAs, Itaús, Deutsche Banks, Santanders and the Goldmans out there? Decentralization is a spectrum [0].
The Finance/Banking system is getting ever more centralized, more faceless, more intractable to individuals. Community banks and credit cooperatives are getting extinct. My dream goal for Hub20 [1] is that it allows us to bring community banks back. So those that do want to go through all the work of "being their own bank", can do so, but those that are simply looking for an alternative to the big banks, can go look for a more local, human-scale "bank" which can be powered by Hub20.
[0]: https://twitter.com/rlullis/status/1307420668372430848
[1]: https://blog.hub20.io/decentralization-costs-and-tradeoffs/
Who said anything about "anonymous groups"?
What happened with the idea of family-owned businesses, local communities, cooperatives? Have millennials become that alienated from their immediate environment?
Is it so hard to conceive of a world where a small-medium business can "run their own bank" so that any of its employees/contractors/suppliers have accounts at their local "crypto bank" to get paid? Or a farmers cooperative that providers sales/distribution services to its members and uses a Hub20 instance to manage payouts, or provide mutual insurance services?
That is only true in most developed countries, but far from the reality in the developing world. Even in the developed world, having the alternative is good, as it gives room for competition.
> Banking loves SME's and vice versa
In Germany, there are plenty of restaurants and bars that are cash-only, because the transaction fees + the cost of operating a PoS is not worth it.
Try running a (legal) cannabis dispensary or a sex shop and knock on a bank to get a loan for rotating capital.
> years of trust, not mentioning underwriting, lending, risk scoring etc.
And all of that is going away with the increased consolidation of banks, the "AI models" that deny you a credit line based on your postal code, the fintechs that want disrupt retail banking but provide Google-level of customer support, etc, etc, etc...
> Germany being a cash-preferred society doesn't automatically mean businesses are eager to accept cryptos. It's not that they don't trust banks or because of transaction fees - believe me their margins are there. I hope you didn't set up a business based on this false assumption. Other than that, unless you use Nano, every crypto transaction comes with a fee, and usually way clunkier and slower than normal transactions (for now). In EU we have immediate and free bank transfers everywhere.
> The other two industries mentioned are good examples, outlines the fact cryptos are indeed no good for anything other than anonymized illegal transactions.
> And yes, fintech customer support is said to be bad, but usually equally so is crypto app support. And if you're running your bank, there's zero support. You screwed up a tx and lost 100k? Too bad. This never happens with a brick-and-mortar bank.
> Other than that, unless you use Nano, every crypto transaction comes with a fee (...) slower than normal transactions
- https://raiden.network (near-zero fee transfers, akin to Lightning Network, running on Ethereum)
- https://aztec.network/ (private payments, running on Ethereum)
- https://loopring.io (super fast roll-up based on Ethereum, transfers are instant and cost less than 20 cents)
> The other two industries mentioned are good examples
No, I said the EXACT opposite. These are PERFECTLY LEGAL businesses that banks do not want to provide services either because of stigma and or because they are seen as too risky.
> And if you're running your bank, there's zero support.
Again, either you haven't read the links or you don't understand what I am doing with Hub20. I'm guessing you didn't really read, because if you did you'd see that it's not a business, but merely an open source project.
Anyway, the point of Hub20 is EXACTLY to address the issues (UX/technical/social) from the "fully decentralized" wallets. It abstracts away the complexity from crypto for the users and puts this burden on the hub operators. It avoids the cost of decentralized/"trustless" operations when they a more "conventional" token transfer/exchange can be done. I went as far as writing in the docs Do not open an account on a hub20 instance if you can not personally knock on the door of its operator. It is part of its design to sacrifice some of the decentralization in favor of established social bonds. It's not meant for those making 6-digit transfers, it's meant for someone who wants to run a mini-checking account.
You can keep nonmonetary stores of value (gold bars, fine art, silos of harvested wheat) and then convert them to cash as needed. If you find the right counterparty, you can even skip the conversion and barter directly.
> Decentralization is a spectrum
We're on this spectrum now. There is no world currency; anybody is free to make their own (the hard part is getting others to accept it). The existence of cryptocurrency is proof of this.
CBDC's are directly aimed at controlling how people are allowed to spend their money. I'm sure most people will be fine with that as there will be a lot of grooming beforehand to normalize what we're allowed to spend our money on in the name of checks current state of emergency - climate change. "We're sorry, it was decided there's too much housing in the region you want to build that house, we're denying all of your purchases related to housing in this geographic area".
I know it sounds over the top, it will certainly be denied until CBDC's are here and in use, only then will it start happening. But only in a few cases, and "we're ok with how monetary control is being decided in the cases that made the news so far, it's being blown out of proportion".
https://headlineusa.com/bank-of-international-settlements-ch...
I know for a fact that this is not true. YCombinator knows this is not true. How?
YC invests in P2P companies. Those folks already run some form of their own bank. In particular the lending function. Why do they choose to do so...because they don't want to earn 0% (or less) on their own funds. They lend them to others at rates they like, generally 8% and up. People who invest in tax liens (some of those reach 16% interest) also run a lending function. Currently, neither run these operations on the blockchain. But that could change and I think it will be easier for them once they do. The reporting costs should go down and ease of any legal ramifications should go up. The same is true for anyone who handles personal investing (the trust function) or stock trading (the investing function). Many of you do both...you just call it something else.
The main problem though is all these articles by rich, white guys that ignores 99% of the World...and tells us all what we want to do or not do.
Please please stop.
The author is trusting banks too much.
-> counterfeiting: It's impossible to check that your bank is not counterfeiting money by cooking books. There are strict measures but not all countries have these. Also, your government can "counterfeit" your currency and neither cash or a bank account will help against that.
-> store it safely: You need to store safely your online access codes and your credit/debit cards.
-> insure against loss: Banks lose money but it's socialized on all customers (or multiple banks). Theoretically, you should compare people loss vs bank loss of money; but insurance gives you protection against a single accident and it's difficult to get such insurance as an individual.
-> protect against theft: Banks do help in modern countries but it's far from a 100% guarantee.
-> project future needs: don't even know what this means?
> So people use banks. In the UK, they're mostly free. I give an institution my money and, due to a combination of their size, insurance, and regulators, I'm confident that my money will still be there tomorrow. They are unlikely to give me fake notes, and they can refund me if I've been defrauded. I trust them.
Fair enough. 2008 was 14 years ago. I guess that's the average person's memory?
> So people will gather around big institutions. Those which have the funds, insurance, and regulatory oversight to provide a reasonable degree of trust.
So that's Coinbase & co but with the extra feature that you can take matters on your own hands. How is that worse than a fully closed system?
> But don't come running to *me*
Sorry but this dude is full of himself and I don't think he understands cryptocurrencies
Imagine living without money for 6 months while having to pay a funeral. I saw it happen to an elder woman. She had to loan from friends and family because of this.
Now I heard the law has been updated to avoid the most egregious excesses, but the basic principle still stands.
I know of a few people who keep 1 or 2 months worth of money at home, just in case. Can't blame them.
Banks are generally good at what they do, but don't put all your eggs in 1 basket. Someone will make a mistake at your expense, better be prepared and have some buffer.
Also not advocating for crypto, just saying you should be able to live a while without access to a bank.
Schemes like that are not easily possible with physical assets or fiat currency.
Of course they are. It's called last will and testament.
You can easily set this up, choose a lawyer to hold it and your friends don't even need to know.
If you have substantial assets it's even much safer that way, because using your method you'd actually put them in danger as criminals might pay them a visit one by one whether you're still alive or not. Not to mention the fact that your friends could also just get together and cash out early...
2. The shards they hold can only be used by the recipient via hardware they have physical access to. They can not collude without the recipient. I also trust the, far more than any potentially malicious bank insiders.
3. Wills can take a long time to process and bank accounts can be frozen for months following the death of a spouse. I want a plan that gives those I wish access to capital as soon as they are in a safe location to receive it and get the bulk of it stored in a coercion resistant way with a new quorum.
Security by obscurity is a poor choice.
> The shards they hold can only be used by the recipient via hardware they have physical access to.
Sounds like multiple points of failure right there. From lost/faulty hardware to friends passing away. If your scheme relies on every single one of them having access to working hardware of sorts and being alive and well, that's an elaborate way to setup for failure, but maybe I just completely misunderstood your setup there.
> 3. Wills can take a long time to process and bank accounts can be frozen for months following the death of a spouse.
I don't see how that's a problem given that your scattered group of friends needs to verify your demise and somehow get on a quest to gather the key shards without even knowing of each other's existence (again, I could totally have misinterpreted your scheme here).
This all sounds more like a D&D questline to me than a solid plan to ensure your assets get to the right people after your passing.
Assume the individuals in my scheme are all lawyers at different firms around the world that all have instructions to hand an envelope they do not know the contents of to designated individuals in the event of my death. This is a well understood scheme. I just do it with a redundant quorum so I can avoid any one lawyer being able to consume the contents of said envelope themselves and tolerate some of them failing to perform their duties.
As far as the hardware the recipient has access to, that can be duplicated to any similar off the shelf hardware via a 24 word paper backup and storing paper redundantly and durably is a solved problem.
These schemes use well understood standard cryptographic protocols as well. Shamirs secret sharing and bip39. The rest is just human logistics.
And you absolutely could publish an encrypted password and distribute key parts in precisely the same manner, enabling your quorum of friends to access your bank accounts or whatever.
Also not to mention leaving USD in a bank account long term rots it to inflation.
Meanwhile in crypto-assets the funds stay exactly where they are and are impossible to move until a private key is available.
Shamirs. hardware wallets in vaults, paper wallets... the point is you have choice and control. Any process documented well enough can be followed in the future. We still cook recipes generations old after all.
Yes, nobody can close your wallet (well sort of, big players like Coinbase or OpenSea can absolutely treat your wallet as poisoned and refuse to transact with you).
This is a frustrating component of the discussion about crypto. “It is better for survivors” shouldn’t be defended with “inflation is bad.”
That's nice that you trust your bank. I wouldn't be so trusting. Nevertheless, if you want someone else to handle your funds for you, there are lots of reputable services that can hold your cryptocurrency with all of the guarantees you are desiring. I'm keeping my keys though.
Insurance? Regulatory oversight? Which services?
And once we do that, cryptocurrencies doesn't gain us much compared to traditional banking.
I do appreciate the optimism, though!
Next step would be: "which are those services" and "by saying reputable, who vouches for their reputation".
And the answer will invariably be silence or "just google it".
- https://www.sofi.com/invest/buy-cryptocurrency/
These business have been around for quite a while (in technology terms) and each are trusted by many with managing cryptocurrency valued at billions of dollars.
And your answer will invariably be some new threshold to move the "trust" goalpost to next.
It won't.
The only "goalpost" I have is: congrats, you've invented banks, with none of the safety nets.
Actually you moved it from "holding your cryptocurrency" to being a bank with safety nets.
If you want someone to hold your funds with guarantees to make sure you don't mishandle them then you use dollars in a bank. But if you want to put anything other than, it will not have those guarantees or protections. Only dollars have been given these privileges. You have none of these privileges on other things like stocks, bonds, property, etc. But you can (and do) still hold them in banks and institutions without the guarantees you're asking for. Cryptocurrency is currently treated as an investment and a property (in the US) and will have the same guarantees available to it as stocks, bonds and other property from traditional institutions because that is the risk profile they have established and understand best.
So, if you want the guarantees associated w US dollars, then you need to use US dollars. But having those guarantees from an institution holding your assets was never a goal of Bitcoin... that is, it intended to be a peer-to-peer electronic cash system. It is to distribute the power we currently give to those who manage monetary policy instead to a network of trust-less actors. It is to enable individuals with the means to accumulate and protect wealth. It provides permission-less commerce between private parties who would otherwise be prevented from using their assets as they choose.
It is up to society how it uses and enables Bitcoin and other cryptocurrencies. If society chooses to treat it in a way that it doesn't deserve the guarantees you seek, then you should seek elsewhere in the market to get the guarantees you desire. And those which are looking for the above value propositions will be able to consider cryptocurrency among their options. Just because cryptocurrency does not do what you're asking, that doesn't make it any less useful to the rest of the market with different needs from yours.
The comment I literally responded to is:
--- start quote ---
That's nice that you trust your bank. I wouldn't be so trusting. Nevertheless, if you want someone else to handle your funds for you, there are lots of reputable services that can hold your cryptocurrency with all of the guarantees you are desiring.
--- end quote ---
I didn't read the rest because it ends up in "It is up to society how it uses and enables Bitcoin and other cryptocurrencies." which has moved the goalposts so far, they are now orbiting Jupiter.
The market (and you) decide to use cryptocurrency however you want, in a bank, in a wallet, or not at all. And that includes whether you think the "bank" holding your funds has enough guarantee that your funds are safe.
Good luck to you.
I still have bank accounts for clients that really want to pay via ACH. I keep enough USD in the account for a few bills and a little cash on hand for purchases IRL and recently adopting prepaid debt cards since some stores refuse cash. The rest is sold for Bitcoin and other crypto-assets to hardware wallet devices backed by cold wallets managed offline that can be recovered via a quorum of people I trust spread across several countries. No one government or individuals would have any legal or even practical means of seizing my cold wallet assets. I pay my taxes but the rest is mine and free from inflation long term.
Meanwhile I have friends that have had their accounts frozen over (eventually proven bogus) legal claims filed by individuals, stolen by randos social engineering bank tellers, and my own account frozen multiple times over them thinking my own small purchases were fraud... and deleted once because I had a PO Box on file as my street address. Nevermind the fact I was homeless for years and the homeless do not have street addresses and are thus deemed unworthy of bank account unless they get creative with street addresses.
The security, availability, and stability of bank accounts is greatly oversold. I have done subcontracting work for major banks and I can confirm at least one still uses ie6 and activex as recently as a few years ago to touch your personal data. Big banks like Chase do not even allow you to have even last gen poor security hardware 2FA unless you maintain a balance over $100k with $500k in yearly deposits. Security is a feature they sell to those too rich to care about inflation eating their lunch with large USD balances.
Online I use Bitcoin anywhere possible and a Coinbase visa as a fallback I can send Bitcoin to in order to proxy to USD on the fly.
I also am one of those crazy people that hosts their own online web services in a closet server rack. I would like to see the UX of flows like this become easy enough that anyone can do it with minimal risk of shooting themselves in the foot.
Some of us do care about personal privacy, security, and sovereignty... these days more than ever. The political future of any country is never certain.
Your alternative is to write all your transaction history to a public ledger?
A store publishing a public log of all cash transactions wont alone identify if any of them are mine.
No central marketing firm has a chance of working out which transactions on chain are mine and who is involved in them. They can at best determine what major exchanges are involved.
In this explanation, clearly the exchanges themselves have done KYC and have your entire history on-chain. They can sell this to any marketing agency…
For example, Coinbase:
Blockchain Data: We may analyze public blockchain data to ensure parties utilizing our Services are not engaged in illegal or prohibited activity under our Terms, and to analyze transaction trends for research and development purposes.
We report taxable events but the transaction histories need not be shared with central third party private companies.
Also even when you buy Bitcoin on exchanges you can always trade it for Monero via a number of swap services then back to Bitcoin again. Now you broke the history and have private Bitcoin again.
And, you trust exchanges to not sell/use your data?
And, you expect everyone to be their own bank and laundering/mixing pool?
That's a lot of effort...
This anti-crypto cult has been rehashing the same arguments for years while the crypto space continues to build new applications and innovate.
Do it online or write and mail a check?
One card and very little thought, or fumble with bills and receive useless coins?
Just wave my phone like a magic wand? OK.
So if I can pay with crypto as easily as I can pay with my credit card (with or without the phone), then we're in business. I'm sure I'm not the only one.
You don't store all of your money in ONE private key. You must have backups and plans for a spouse or family member to access funds. Just as with cash, nobody stores ALL of their cash in one wallet or location.
If you don't want to use Bitcoin then just continue to do whatever it is you are doing and stop writing nonsense articles that make zero sense.
The vast amounts of money gained and lost in such a short time seems to have clouded many peoples views, either through greed or jealousy.
Google & co. could have implemented a Web Payment API in the last 20 years, they didn't.
Instead we got Google Pay & co.
It's not going to make them (enough) money, so, again, why would they? Why not build a proprietary thing or even a proprietary blockchain, if we're that adamant it has to be crypto?
It's just like running your own server: hard to do, many won't, but the fact that it is achievable using a reasonable amount of resources is a good thing on its own.
use the currency that is as volatile as their own? Why?
Switching from an inflationary currency to a stable one is already tough, switching to a volatile deflationary currency would be a nightmare.
Just the cost of hardware, download and energy makes this prohibitively expensive for "banking the unbanked" at least.
Have there even been moderate - not even large - scale protests against banks freezing accounts?
Regular banking is slow and cumbersome, but it does work for most people.
Platform-wise, I won't be surprised if they do same thing as GoFundMe [2].
[0] https://news.ycombinator.com/item?id=30213365
[1] https://theintercept.com/2022/01/19/crypto-afghanistan-sanct...
Cryptography is a technology that will increasingly be interwoven into all systems. So you might still be using a traditional bank account. But you will be protected from identity theft. If someone impersonates you and claims you have lost your credentials, the bank will say "Ok, we can unlock your funds with our master key. But that will take 7 days from the moment we write the recovery message to the blockchain".
Then the real you can see that message and intervene.
I might not want to run my own bank. But I totally want to be protected from my banks incompetency.
And from the incompetency of my domain registrar, land registry, phone provider etc.
And odd statement, banks generally seem more competent than any given crypto operation.
How does one “see” this message? In fiat, my bank just calls/emails me.
> But I totally want to be protected from my banks incompetency
In your example, what if you’re “incompetent” and lose your keys, or get kidnapped and keys are stolen - how would a message on the blockchain help mitigate this?
- People don't want to run their own IoT server -> Their device/subscription stops working if the company goes out of business or changes the ToS.
- People don't want to create their own subscription feed -> They are being manipulated by the algorithm and misinformation.
- People don't want to run their own bank -> ...
There are lots of good reasons to run your own infra and we should strive to make it easier to do for everybody
OA (original author), does this mean I'm not a person?
> The world is moving away from cash. Just before the pandemic, I went a year without using cash. Since then, I haven't withdrawn any notes.
I have used cash my entire life, and this hasn't changed with COVID (no I have never got COVID. yes I go outside every day, usually to buy ingredients for whatever I'm cooking).
> Holding on to cash is like running your own bank.
I carried $20K in my pocket for years and told nobody. Never had a problem.
> So people use banks.
A bank I use requires Chrome to login, it literally will not work with anything else. This is the worst fucking UX in existence and is not some special nerd concern. They are telling you they have a webapp, as in, a thing you can use with a browser, but it's really just like a normal program but gimped because you need to install a dependency to use it (and you have to figure this out for yourself or call them at which point they'll suggest using Chrome after an hour). And the ATM is some half working garbage on top Windows. The phone banking doesn't work either and is deprecated as it requires real staff.
I also use cash for public transit. Wheras convenience idiots end up wasting hours of time navigating half working websites trying to load new funds into their account, getting interrupted by website updates, Windows OS updates, etc.
> As Moxie wrote a few weeks ago that most people don't want to run their own servers.
Moxie is observing how the current state of software is trash and concluding that normal people don't want to deal with trash (which is frankly written by low intelligence programmers who believe things like "C is more secure than Java").
> If your hardware wallet or keys are destroyed, you've lost everything.
Who cares? Use a bank if this is your concern. They will happily give your money away to whoever claims they lost it. No seriously, this is such a dipshit article. It lies on this idea that corpos just solve everything for you, including identifying you, which they don't, because they don't have a real human to establish a relationship with you. This entire idea that a corpo can authenticate you because they have some special hocus pocus[1] is a myth.
1. This could include things like, a government provided attestation channel, ID cards, knowing where you spent money from a card, being an Authority (TM) and therfore having big boy know how
> If your loved one dies and didn't give you access, you've lost everything.
You are a muppet. The smallest concern I have in the world is what happens to my parent's money when they die. And you use this as 1/3rd of the reason why "cryptocurrency bad" (the real reason they're bad is because they're centralized).