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Comment by PragmaticPulp | Hacker News Reader

One of the themes in pro-crypto writings has been the idea that as long as you “do your own research” then the bad things won’t happen on your chosen cryptocurrency. The prevailing idea (among pro-crypto spaces) is that bad things only happen to other people who deserve them because they didn’t do the right research.

Recently we’re seeing the bad things happen in more and more mainstream chains. Even famous NFT proponents have been losing their NFTs to scams at a shocking rate. I wonder if this will drive people back to simpler chains like Bitcoin, or if we’re going to see enough bad things (including crashes) that it just sucks the enthusiasm out of the crypto space entirely.

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Not to be super “arm chair psychologist” about this, but I always thought the whole “you deserve it if you got scammed” mentality comes from the people that believe crypto will replace all modern finance.

For crypto to replace modern finance, it needs to be better in every way (so it’s a total replacement).

Decentralized currency is better for some things, worse for things like preventing scams. If modern finance prevents scams better, than crypto won’t replace it in that area at least.

Solution? Easy: scams aren’t a problem. Modern finance isn’t better in fixing that problem, cause it’s not a problem. Now crypto is once again better in every way.

>it needs to be better in every way

It only needs to be better in enough ways to persuade enough people to adopt it such that it hits a tipping point and becomes the de facto standard.

No, it needs to be better in every way. If it’s not, then what’s the fucking point? Popularity and a better replacement are two different things.

Here's a new type of computer - it's exactly the same as your current computer, except it consumes 1/10th of the power...

A replacement doesn't have to be better in every single facet.

Do you mean 10x the power?

> consumes 1/10th the power.

No.

Unless you value inefficiency and spending a lot of money on electricity, the answer is "no", the parent comment actually meant 1/10th power.

>No, it needs to be better in every way. If it’s not, then what’s the fucking point?

I take it that you still use a CRT monitor then? After all, modern displays (eg. IPS/VA) aren't better than CRTs in every respect (response time, motion clarity, arbitrary scaling).

It's going to be tough to convince the politicians and financial system regulators. Cryptocurrency will be mostly useless for legitimate transactions until they allow using it for tax payments.

The pro-crypto folks have created the delusion that 'crypto will replace all modern finance' and they will quickly realise that regulations will wipe out the majority of tokens and projects unable to comply with them; and a remaining few of them existing and surviving.

It also means the anti-crypto folks will also realise that destroying 'all of them' is another delusion that activists like the free software foundation for example who's mission is still to remove all non-free software in existence. After 37 years, its still here and it is co-existing with some open-source software.

The undeniable fact is that regulations will be put in place for crypto and only a surviving useful few will continue to co-exist with the current system which both the anti-crypto folks and pro-crypto maximalists will be disappointed in achieving their utopian ideals.

>The undeniable fact is that regulations will be put in place for crypto

why is this so undeniable? I would think well-implemented cryptocurrencies would be fairly regulation resistant

Because you have to convert the crypto into fiat to procure goods and services and the state will just control the border.

There will be cases in which a weak state economy can become bitcoinized the same way some have become dolarizesld, but for strong states it is easy to make the border between the currencies as tight as they want it.

>Because you have to convert the crypto into fiat to procure goods and services

You do? What is the purpose of cryptocurrency if you are just going to convert back into cash the moment you use it? I think the end goal for cryptocurrency is to create a circular, P2P economy[0][1]

Seems pretty difficult to regulate only some cryptocurrencies if it's already possible to anonymously and trustlessly swap between them[2]

[0] https://monerica.com/

[1] https://localmonero.co/

[2] https://unstoppableswap.net/

At some point, you ll need to pay taxes. in the money of choice of your current governing body.

Right, that's the point. Unless you're stuck in some shithole country like El Salvador, there's no purpose to cryptocurrency.

Easy: if congress bans all crypto tomorrow, you can trivially check which websites accept crypto, and then send them a letter to not do that.

If they don’t comply, you tell the registrar/host/ISP to shut them down, then they don’t have a website anymore.

The point is that at some point real people, subject to laws and regulations, will have to touch the thing you’re buying. If you’re buying a sandwich, it doesn’t matter the guy making the sandwich accepts crypto if the government can put them in jail for doing so.

Would these regulations prevent something like offshore merchants selling goods, perhaps gold bars or something, for crypto and converting into fiat?

well it already happens with cash, so no

> into fiat to procure goods and services and the state will just control the border.

Regurgitated “fiat” meme.

Counter-example 1: buying services over the internet. What fiat and where is the relevant border?

Counter-example 2: go overseas and use services. What fiat and where is the relevant border?

Arguments about fiat and borders are often silly. However, a jurisdiction can make crypto illegal or risky.

By border I meant the point in which you have to convert the bitcoin to obtain something. The moment when you have to buy local currency to pay taxes, utility bills, food, fuel, clothes, pay toll taxes on the roads etc ...

A government can make it arbitrarily hard or illegal to do that.

What exactly is "over the internet" and "overseas"? Aren't those real world countries, with real world legislation, where real world offerers of services can be jailed for using crypto? Or your entire argument is based that there will always be some exotic country (like El Salvador tried and apparently failed) will have a better view on crypto and also offer all services you might need?

How would a technical implementation detail block legislation?

The point is not the legislation. The point is enforcement.

You can write and pass whatever law you want. If it can not be enforced, it does not exist.

If our government can catch money launderers because they’re running empty washing machines or selling unused tickets to shows, it’s hard to think of anything useful crypto can do that couldn’t be meaningfully regulated away.

The government takes billions of dollars from people every year without due process, using civil forfeiture laws:

https://ij.org/press-release/new-report-finds-civil-forfeitu...

But there's no evidence it stops much real money laundering:

https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1...

If money laundering were effectively dealt with, that would stop almost all theft and organized crime, as laundering the proceeds of these crimes to spend them would be nearly impossible.

Obviously that will never happen.

I’m against civil forfeiture laws, I don’t think they are important in the fight against money laundering.

Anyway I’m not saying money laundering doesn’t happen, it does… and that’s probably the best case use case for crypto and one of the pillars of its value-add. People who don’t care about legality won’t care if crypto is regulated away either. I’m just demonstrating it’s not free to get away with these crimes. Plenty of people get nailed for money laundering every year.

There is a crypto subculture that thinks crypto is unbannable for a variety of reasons that fail the hit-them-with-a-wrench test.

With some level of plausible deniability, you pass the hit-them-with-a-wrench test because you can't just hit everyone with a wrench.

Not with that attitude you can't.

Do an internet search for UIGEA for a blueprint on how to do this in the US.

Xkcd of course had it right even back when "crypto" meant something else :)

https://xkcd.com/538/

Regulation and law indeed may not be able to beat crypto technologically. They don't need to. Humans are the weak squishy link in the chain. I don't need a supercomputer to crunch down your crypto, I need a warrant for your arrest or subpoena to ask for all your documents. I can outlaw your ability to operate without logs. Sure that would suck, but equally in crypto currency and normal world. Either exists as much at the mercy of the government, democratic or otherwise, to preserve the privacy, as much as the technological capability.

Unless we go completely anarchic (and I'm not personally looking forward to that), humans will remain squishy and laws will remain relevant.

Go ahead, unlock your hard drives then. Disable HTTPS, it makes no difference right? The government can just do evil maid attacks while you're asleep or rubber-hose whatever CA you're using anyways. While you're at it, why don't you leave the door to your house unlocked? The government can just kick it in whenever they want, no biggie, right?

Strong cryptography still remains a formidable barrier for law enforcement, regardless of what pessimists like munroe would have you think.

Munroe isn't a pessimist: he's a humorist.

well you know what they say about humor on the internet, poe's law and all.

I guess the joke is that security is presented as an all-or-nothing situation, when in reality security is just about disproportionally increasing the cost for attackers and decreasing the severity of their attacks.

>Go ahead, unlock your hard drives then. Disable HTTPS, it makes no difference right?

In what world is the Government your only threat?

It's a good question. I wonder this too.

But until we can make cryptography that is criminal-proof but not government-proof, and until the government can feasibly enforce its use, then I don't think it really matters.

It's hard to imagine any tool that only works against criminals but not against the government. Especially considering that there's a spectrum between criminal organizations and government organizations.

>It's hard to imagine any tool that only works against criminals but not against the government. Especially considering that there's a spectrum between criminal organizations and government organizations.

You are missing the point; the point of Randall's comic is that most, if not all, cryptographic methods fails under the threat of physical violence. For most of us in the western world, and certainly for most of us on this forum the most likely threat of someone using violence to extract cryptographic secrets from you would be the entity that claims a monopoly on it - the government (your local mugger is not going to request you install his CA root store).

Most criminals, and the majority of white collar criminals who would benefit the most from the world disabling HTTPS do not have the mechanism, infrastructure or capability to exact violence on me the same way the government can.

So your implication that "because cryptography is violence resistant, we should unlock our hard drives" is very naive.

I’m curious how you know it’s a formidable barrier. You sure they just don’t care about you? I’ve never tested this hypothesis, I assume everything I do online is basically “in the clear” for advanced nation states.

> I can outlaw your ability to operate without logs.

Even going full Nazi, how do you enforce a law that technically challenging without bankrupting the government or crippling the economy? And what time-frame does it take to phase in?

> how do you enforce a law that technically challenging without bankrupting the government or crippling the economy?

Drugs paid with cash are challenging. Crypto is not. Authoritarian states can do deep packet inspection and random phone/computer checks. Advanced states can just roll it into their AML frameworks, as well as track the purchase of mining equipment and their inputs. Both will offer whistleblower rewards.

There will still be people who use it. But it will fall out of the mainstream. More people are more enthusiastic about cocaine than about crypto, and your enjoyment from an ounce of cocaine isn’t dependent on others using it. For crypto, it is.

This. Also enforcement does not need to be 100% to spook others out of the game. This is the same reason so few people cheat on income taxes even though the audit rate of the IRS is abysmally low.

> they will quickly realise that regulations will wipe out the majority of tokens and projects unable to comply with them

might this be part of the DYOR reasoning? some gut-level reaction that “unless we encourage every individual user to take responsibility, then most of those users will welcome 3rd party (govt/bureaucratic) regulators”?

i don’t know that this is wholly delusional, either — i think it’s just a difficult culture to preserve during massive growth. but look at any mid/large crypto project and they usually show off their audits. audits which they willingly paid for because enough users care about it that demonstrating your system is hardened actually has positive ROI. it happens enough that distinct auditors each have their own reputation (oh, X audited notable project Y => their audit on new project Z probably means something). this whole auditing system is in some very real sense a form of “self-regulation” — but the whole thing is predicated on DYOR.

To be fair, "you deserve it if you got scammed" also plays well with the anti-crypto crowd.

A person pays the price of a house for NFTs of pictures of apes, gets tricked into giving them away to scammers, then buys them back from the scammers? Ha, what a fuckin' idiot.

People get off on criticizing crypto. It makes them feel better about themselves.

No doubt the crypto fanatics also get off on believing in the superiority and 100x growth of cryptos then.

You've basically described all startup culture.

From what I have read, crypto folk seem to claim primarily that the decentralized currency 'not be a scam' in contrast to a currency managed by a central bank. Whether or not the currency discourages or enables scams via the currency is a secondary concern. Of course, Solend's interference seems like something 'a central bank' might do.

> For crypto to replace modern finance, it needs to be better in every way

I don't think this follows logically at all. Can you explain your thought process? (FWIW, I think that most likely the only component of finance that will be replaced by "crypto" [most likely just bitcoin] is the money and payments layer, so I probably agree with you in general.)

So I am thinking about how many crypto fans suggest fiat money and banks are a thing of the past.

I don’t think fiat money or banks can go away unless all their functionality can be replaced by crypto and do at least as well.

With finances, it’s more about preventing the bad over getting the good. As long as crypto introduces a big problem, there’s no way it becomes the primary financial tool.

In fairness, I am making some assumptions here, so maybe my view of finance is very wrong. I welcome any alternative opinions.

If you look at the history of finance, all it takes is some better notion of credit. If I can get a better deal using one system over another, that’s what I’ll do. I don’t care how many millions of people are employed offering thousands of niche services by the system I don’t choose.

Hasn’t the current system of banks and paper currency basically been the financial system of chose since the 1700s? I see additions to financial systems, not total replacements.

Crypto is trying to replace banks and modern finance, correct?

Modern finance is much better at handling fraud. Insurance exists, and recourse also exists since anonymity is not a requirement.

Decentralized finance has thus far been demonstrably worse than everything in modern finance. It's illiquid, transaction costs are higher, full of scams, buggy, and recourseless.

The whole space needs to grow up fast.

Modern finance does have a high barrier to entry. So it makes sense to try and become a big financial player any way you can and then figure out how to make it better once you are there. But that is really hard, and impossible if your efforts get cooped by scammers and day traders.

Try wiring someone money and see how helpful your bank will be at reversing that transaction.

The vast majority of people losing money in the crypto world are the equivalent of people installing sketchy extensions in the early days of the internet that perform attacks on unsecured online banking portals. That this doesn't happen more often against banks is largely a function of the gated-ness of browsers and that targetting banking infrastructure (and national-level infrastructure for that matter) is the hot ticket that guarentees getting the undivided attention of three letter agencies.

Most people do not wire money, they transfer money through some other mechanism that has fraud protection.

For example, if you buy something on eBay and the seller sends you a brick packed in a cardboard box instead, you dispute the charge on PayPal and most likely get your money back. Or suppose that some pissed off hotel clerk decides to charge your credit card for made-up damages during your stay in a hotel.

My experience is that it’s not hard to get your money back. This is why actual scams tend to involve some step where you convert money into something else—since a wire transfer or ACH transfer can be reversed or at least traced, you have scams where the patsy has to turn transfers into cash or gift cards.

And most people do not use crypto? I don't see how the comparison to payment processing companies built on-top of the financial infrastructure is relevant, when bare-metal level of crypto acts most like wiring / transfering money between banks.

And no, a wire transfer or intra-bank transfer is typically not reversed. Even for big-names, like Linus, it is not so simple and requires personal connections with industry insiders to even get simple cases of fraud reversed.

[1] https://twitter.com/swiftonsecurity/status/15121875924140523... He mentioned it in his long WAN VODs, so there isn't a nice source to link to

I don’t see how “most people don’t use crypto” is at all germane to the discussion. Of course most people don’t use crypto—it’s kinda new. No other explanation is needed.

At the end of the day, what I care about is that I can safely make a transaction to get something I want in exchange for something that I have. The safety protections involve the ability to identify accounts with real people within the reach of the law, the ability to reverse transactions made fraudulently, etc. If I have US dollars and want something that isn’t US dollars, then I have a ton of safe options to do that (with different protection depending on what I choose). If I instead have some kind of crypto asset and want something that’s not a crypto asset, the fraud protection is much weaker.

Yeah, crypto is kinda bare-metal. Isn’t that a major problem with it?

> And no, a wire transfer or intra-bank transfer is typically not reversed.

Yes, it sounds like we agree on this point. This is part of why most people don’t use wire transfers.

There are, however, conditions where wire transfers can be reversed. Banks are also somewhat proactive about protecting you from making wire transfers. It’s not a service that they offer lightly.

>I don’t see how “most people don’t use crypto” is at all germane to the discussion.

Crypto's closest anologue is wire transfers... which you excluded with the reason of "most people don't use them".

>At the end of the day, what I care about is that I can safely make a transaction to get something I want in exchange for something that I have. The safety protections involve the ability to identify accounts with real people within the reach of the law, the ability to reverse transactions made fraudulently, etc. If I have US dollars and want something that isn’t US dollars, then I have a ton of safe options to do that (with different protection depending on what I choose). If I instead have some kind of crypto asset and want something that’s not a crypto asset, the fraud protection is much weaker.

Again, try applying any of this to wire transfers. Almost all of these concerns apply to both crypto and wire transfers.

>Yeah, crypto is kinda bare-metal. Isn’t that a major problem with it?

What's the issue with having access to a permisionless, bare-metal system?

>There are, however, conditions where wire transfers can be reversed. Banks are also somewhat proactive about protecting you from making wire transfers. It’s not a service that they offer lightly.

That is not reversing, that's simply preventing you from initiating the transfer.

I don't understand what kind of argument you are trying to make here. It seems like you are interested in comparing wire transfers to cryptocurrency, but I don't understand what comparison you're trying to make or what the purpose of the comparison is. Either I just don't understand what you're saying, or maybe your argument doesn't make any sense, or maybe you're just really bad at explaining things.

I had thought that this was a comparison of modern non-crypto banking / finance systems to the infrastructure provided by crypto, but you have made it very clear that you consider a more general comparison "out of scope" for whatever point you are trying to make.

I actually have had a wire rejected due to fear of fraud before.

As soon as that wire is fired off, it isn't coming back. It sounds like your bank is on the ball, and is erring on the side of more false positives than false negatives.

Insurance just taxes the risk onto everyone, which isn't a universally desirable feature.

It's a form of just-world fallacy. It's comforting to think "bad things happen only to stupid people, and I'm not stupid."

https://en.wikipedia.org/wiki/Just-world_hypothesis

Right but I am saying why they adopt that mentality. They want a “just-world” of crypto not just for feeling safe but to justify crypto’s superiority.

> If modern finance prevents scams better,

Its better at preventing a type of scam, but significantly worse at legal scam -> how much is an 8% inflation of the dollar on dozens of trillions of USD denominated financial instruments?

And there is also plenty of equity scams that are sanctioned by government - the kind that suppresses the ability of people to invest or get funded, to give special permissions to those that play the rules, etc. The way some get bailouts at the expense of the rest.

A system with a high degree of freedom and lack of oversight will have higher scams. The big question is, if people were given the choice to participate in both systems, which one will thrive?

> legal scam ...

calling inflation a legal scam is borderline on the conspiracy fence.

> if people were given the choice to participate in both systems, which one will thrive?

Well, crypto has been around for about 10 years. There's been plenty of choice, and yet what do you see today?

> conspiracy fence.

What do you mean conspiracy? It's the official purpose of the Fed to maintain inflation low, it has failed, it has cost a devaluation of the assets of everyone holding dollars or dollar-linked financial instruments, and it's gone significantly down in value.

> Well, crypto has been around for about 10 years. There's been plenty of choice, and yet what do you see today?

A thriving crypto market big enough to be acknowledged as a threat by the head of the federal reserve, the head of the central european bank, and several other high ranking officials.

Is it truly decentralized when it’s so reliant on exchanges and wallets that are abstracted away from the chains - often through third party layers akin to Infura?

Crypto doesn't exist without centralization. Sorry.

They say "do your own research" and then when you do and have questions about difficult to conceive (or seemingly irrational things) they belittle you, attack you, and—at least on Twitter—reply with snarky memes. As soon as I started investigating Ethereum, ERC-20 tokens, etc. at a technical level, I realized it was a house of cards of immense proportions.

The place that didn't happen? Bitcoin. There's not a lot of esotericism around Bitcoin (skim 1-2 books, listen to a couple of talks on YouTube, and generally speaking you "get it"). If you're genuinely interested, people are more than happy to help you and set you on the right path.

What's wrong with erc20 tokens?

Not him, but in my opinion upgradeable contracts (not all erc20 use them of course)

DYOR = watching 10 min vids from influencers pumping up shitcoins, hanging around in various discord or telegram echo chambers, skimming through whitepapers you don't understand.

This is a common life viewpoint in general.

Bad things happen to other people because they did something to deserve it. Good things happen to them because of luck.

Good things happen to me because I deserve it. Bad things happen to me because of bad luck.

We're not talking about people getting struck by lightning here, we're talking about an intentionally built and voluntarily used computer system. If you don't understand the risk, don't invest.

I find it as absurd as anyone else.

The field is unfortunately rifled with people who are shills and religious believers. I have talked to a few VCs and technical people drilling down into the tech - I had better arguments than them for why someone would use the projects they funded or created.

Just last night the owner of the neighborhood convenience store was asking me to explain NFTs, as one of his other regulars was hyping them up earlier that day. This man has run his business for decades, understands commercial banking services, etc. I could not for the life of me fully convince them that with NFT's, "there's no there there." Like these things have been so hyped by so many people close enough to the main stream that the fomo style "those rich guys have to be onto something smart with this" assumption is incredibly hard to disprove. The closest I got was using beanie babies as an example.

I lead with "Amateurs calculate gains; professionals calculate risk."

Research is fuzzy word in this bubble. I've seen people crafting their own tiny metric: twitter liveness, github activity, size of source code, website quality. White paper reading (I skimmed through a few, it felt like marketing speach most of the time). It only feels solid for newbs who never designed a system or seen math above HS level.

Basically anyone I consider especially credible has been consistently saying "everything except bitcoin is overwhelmingly likely to be a scam", which has proven to be a fairly reliable heuristic. I think anyone who actually "DTOR" and has the brain power to interpret the results comes to a similar conclusion.

Solend is just some random lending market that I--despite being in this space full time--don't think I've ever heard of... supposedly it is similar to AAVE, but on Solana? Just because something happens "in more and more mainstream chains" is meaningless: the chain on which something is running is unrelated to whether it is a good idea or not. I want to be very clear about this: I highly doubt that any normal person CAN do enough research to safely manage loans or borrow and invest with leverage, which is what these lending platforms are for, but that doesn't mean that they are fundamentally broken or are scamming people.

NFT is just an URL pointing to CDN (or even S3) stored on the ledger, how one can "lose" it?

Like with normal investing, consumers do not have the ability to “do their own research” about the internals of companies who create and promote cryptocurrencies. Which means that the research is flawed.

This one was about the concentration of voting power. It turned out that a single, anonymous owner of governance tokens had enough votes to decide this hugely consequential issue on their own. Almost as if corporate shareholding concentration and acquisition-disclosure laws are as good as it gets for "decentralisation" of decision-making, and crypto is now going to have to reinvent that as well.

Like, there are literally already laws in many jurisdictions that prevent multiple apparently-independent parties conspiring to avoid jumping over ownership thresholds but nevertheless acquire a majority of a company. Have fun emulating that with pseudonymity, no central regulator and no law enforcement with jurisdiction everywhere the participants are!

Most of the things that cause these problems, like stolen apes, would not work on Bitcoin as it lacks smart contract functionality.

Bitcoin has some scripting[0] functionality, and its non-fungibility[1][2] can facilitate NFT-like colored coins[3][4]

[0] https://en.bitcoin.it/wiki/Script

[1] https://en.bitcoin.it/wiki/Fungibility

[2] https://sethforprivacy.com/posts/fungibility-graveyard/

[3] https://en.wikipedia.org/wiki/Colored_Coins

[4] https://www.youtube.com/watch?v=889JSfIaPzs

Colored coins is one of my #1 favorite topics! The same issue (high fees) that plagued ETH would soon arise if doing "Colored Coins" for NFTs on BTC. Regardless, this could certainly be done. Colored coins was actually one of the 1st concepts that seriously drew my interest to this space.

One might think Lightning Network would be a good solution, but LN is fungible, so that wouldn't work.

Still, colored coins is an awesome concept and I'm planning to help with at least 1 use-case (fingers crossed!) in the next few months.

Theoretically possible but practically impossible, and one of the reasons that NFTs and DeFi will probably never be adopted on Bitcoin L1 unless the protocol changes.

That's not the impression I get about this one action being discussed, but odd take.

There are a variety of amateurish and hysterical things about this Solend project. Why don't you just talk about that project?

Like, how the liquidation won't be that bad? Or how half a million dollars in Solend tokens gets to vote to seize $170m of funds? those things are hilarious.

These are tokens not crypto currencies. Please stop confusing them.

That's a straw man. Doing your own research doesn't guarantee protection against all scams or losses, it just increases it and scams and freezes are to be expected, that's why diversification and taking profits is key.

Very flawed argument.

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