> and it seems one by one the promises of crypto of the last several years are evaporating
Promises of crypto have nothing to do with some random US-based centralized entity. Not your keys, not your coins.
Promises of crypto have nothing to do with some random US-based centralized entity. Not your keys, not your coins.
If you don’t like the result, you need to redesign the technology so it works within the real world that exists. And it don’t.
Once you use Coinbase, you are out of the self-custodial crypto ecosystem and you pay a price for it. You give up all control over your assets. In return you gain convenience and the security of something backed by the US government.
For some people that tradeoff is worth it, for other it isn't. The point of crypto is that you have the option to not do that. Nobody ever forces you to use centralized exchanges.
I'm genuinely curious how one could do this at scale. I'm not talking about buying $1,000 of BTC on a P2P marketplace so you can then use it to buy drugs somewhere. I'm talking about someone wanting to buy $1 Million worth of BTC, then exchange half of it for ETH, then convert all of the BTC and ETH for fiat. How would one do this quickly and cost effectively without the use of any sort of exchange?
Remove the fiat part from the equation, and the way to answer is easy, you can trade crypto-tokens in the many decentralized exchanges.
And if you just want to hold volatile currency, you can trade the BTC or ETH for some stable token (like DAI, synthetix USD if you don't want to rely on fintech-backed tokens. If you are fine with using tokens backed by more credible institutions, you can hold USDC or Gemini USD)
Irrespective, if I want to lock in trading gains I want FIAT. Because that's what I use to buy stuff. Sticking it in some proxy to FIAT is taking counterparty/credit/etc risk for no return.
1)centralized and has all these centralization risks (USDT had frozen 360M on ether alone),
2) crypto-overcallaterized that has less centralization risks but limits in stability.
3) or something else, that usually doesn’t work (terraUSD)
I keep 99% on my money in crypto (plus I recently got pretty much excluded from banking system) so i have my money where my mouth is: DAI. I don’t like everything about it, like lots of USDC is collateral, or ineffective liquidation system, and for that reason I’m participating in StableUnitDAO to build far-better alternative (feel free to join us, i bet all my lifesavings on this project) but for sake of this argument it’s not good fiat vs bad crypto stablecoins. For lots of people it’s strictly opposite.
That the important thing is giving people an option, and not just some high-stakes casino.
And then:
> I bet all my lifesavings on this project.
You are not helping me, dude. You are not helping anyone...
> I recently got pretty much excluded from banking system
Does it have anything to do with xSigma, perhaps?
4.5 years is not a lot of history. I wouldn't fit a basic credit model on that much data.
open disclosure, I know nothing of DAI (indeed little of crypto). But if I want a dollar-like asset, a risk free asset, then "limits in stability" is not compatible with that.
For now, for lack of competitive alternatives.
I'm not even saying that you will be buying everything with crypto in the coming years. But I do see a future where it can be more secure and more practical to buy some things with crypto: digital goods, concert tickets, service subscriptions... put all of these things together and suddenly we will find ourselves with a crypto wallet making transactions worth a few hundred dollars every month.
The transition from paper fiat dollars to electronic (credit/debit cards and later NFC apps) for ordinary everyday payments which began in ernest ~1990* is still not complete (30+ years). This is despite the fact that it is only a different method of payment, not a change in monetary system like gold/silver -> fiat was.
Why would anyone expect a transition from fiat (paper and/or electronic) money to crypto to only take 10 years?
* one of the places I worked in high school in 1988 was People's Drug (CVS). While we did have the primitive early electronic swipe terminals for credit cards, they were only used by the cashier for pre-authorizations (replacing the earlier method of calling an 800 number). The pre-auth step could take several minutes. We then had to imprint the card on carbon paper vouchers with the mechanical "click-clack" machines and write down various information on the vouchers with ballpoint pens. Fortunately very few customers used credit cards due to this long tedious process. Payment by check wasn't much faster as we had to write down driver's license number and address on the check by hand.
In 1990 or so the first gas stations started to accept payments at the pump. Before that you had to walk inside and pay with paper money or the old slow mechanical credit card method or checks. For the first few years they only accepted debit cards at the pump, not credit. A few grocery stores started accepting debit cards around the same time as the gas stations.
The question is not whether cryptographically secured algorithmic money will be a part of future monetary systems but who will control the algorithm and/or how will different systems compete with each other.
(http://www.paulgraham.com/organic.html)
> you can't use this currency for day to day transactions
Not with this attitude, you can't. ;)
What currency is "this"? BTC, ETH, Doge, USDC, DAI?
> incredibly volatile
How volatile is USDC, DAI, GUSD?
> risky to hold significant amounts of it
It's also risky to walk around with significant amounts of cash in the wallet. It doesn't stop people from wanting to carry some money around. And more importantly, the alternative of "going cashless" is a whole other set of systemic risks.
> it might be useful!
The use cases exist already. Micropayments and streaming transfers (as an alternative for subscriptions) using stable currencies are already possible. If you don't care about it, it's a different story.
They are both ways to dismiss an idea though.
You could make that argument 10 years ago. It's been plenty long enough to find a use case that isn't breaking laws.
It's impressive... Like clockwork, there will always be one coming to throw the "only use-case is illegal stuff!" line. It's like people can't wait to throw their opinions about a topic while displaying their complete ignorance of it.
Tell me how you can do the use-case for Brave - ie, sharing revenue from the ads with millions of users from anywhere in the world - within the traditional payment networks.
You can't. There is no Paypal or any other financial institution interested in making monthly transactions that can go as low as a few dollar cents. And somehow Brave does it, legally, and it all works out.
Brave collects money from advertisers, Brave sends money to sites and users. Nothing in that requires any sort of blockchain. If the monthly amounts are so small as to make flat transaction costs significant, then the amounts are themselves insignificant. None of this requires a decentralized trustless ledger.
That is the hole in your argument. Imagine the amount of business opportunities if the total cost of a transaction was a fraction of a cent.
> None of this requires a decentralized trustless ledger.
That is an implementation detail. If you find any other method to securely send value across the world for fractions of a cent (even if with intermediaries), I'm all for it.
YC is not a miracle product. The man had money and said "Hey I'm going to give it to higher risk companies to get some money back". It takes zero ability. Venture capital has existed for centuries. He's a glorified bank, except my bank doesn't put out pompous essays on their blog at least.
HN, aside from being a great purveyor of laughably inaccurate comments does not nearly have the global impact you think it has. It's the laughing stock of most of the tech internet. But at least sometimes the links posted are good.
Anyway, I'd be eager to hear all the amazing achievements from Mr. ohgodplsno. You must be very fun at parties.
Once again, you said it yourself. His accomplishments are "he made money" and "he found ways to give money". Let's not mention the fact that YC has funded many extremely dubious companies and that _giving money isn't work_. Had PG not been here, someone else would have had that money, and would have given it to startups. He's a glorified (quite bad) essayist with money.
Anyway, I've heard lots of PG critics, and some of them I even say I'd admire because they actually did something of interest and according to their values. But you? You haven't shown anything of value that you can do. Let me repeat: I'd love to know more about your accomplishments.
But if anything, you just keep proving that you might just have a talent for egregiously mind numbing, self absorbed essays just like PG
(It's amazing how inconsistent the skeptics are, when they are only trying to score some cheap points against what they don't like)
Most people looking to trade large quantities of crypto have most of their wealth in other assets and expect to be able to convert between them, with the dollar as the default go-between.
This is true of practically every traded asset, including FX. It’s not true of e.g. MGM tokens. But that disparity highlights the difference between crypto and other traded assets.
Also, the fact that people currently use USD as "the default go-between" does not mean that people have to keep using it. Crypto OTC desks already exist.
OTC desks are the correct answer, not “why would you want to” use a dollar. Yes, in a hypothetical world people wouldn’t use dollars as a go between, but instead use [insert theme of the decade]. In reality, we do and will for the foreseeable future.
Also, a crypto OTC desk that doesn’t ask for KYC is by almost every country’s law laundering money. So it doesn’t sidestep the core issue of this post.
If the idea is, like you said, just about being able to convert between different asset classes, we could have OTC desks that would be taking crypto and (after following proper KYC/AML regulations) giving you any of stock/bonds/real estate titles/commodities/etc, and vice-versa, without any need of USD as intermediary.
- Because every USD <-> local currency may have processing fees (credit cards on retail, withdrawal fees for large FX traders)
- Because some banks use the opportunity to slap tons of other fees
By holding crypto, one can legally avoid all of these costs.
It’s almost exactly the use case you want for an exchange (or really in fx a consumer liquidity platform as they aren’t really traditional exchanges).
Is that different in the crypto world? If so why? All of the costs (ie risk management) seem more expensive in crypto than fiat.
What do you mean? If Coinbase goes bust or steals your assets you’re just an unsecured creditor.
It isn’t like a brokerage in regulated markets or a bank, which have specific rules protecting your money.
That's very different from managing your own keys. Nobody can take anything from you. But you also have zero legal protection against an attacker stealing your keys. In other words, you are in full control, for better or worse.
That seems hard to believe in light of Coinbase's own recent disclosure: https://www.barrons.com/articles/coinbase-customers-crypto-b...
Investment funds suffer from the same problem. And so do banks, for amounts exceeding the FDIC insurance.
This hand-waves away a century of banking and investment protections everyone with assets at Coinbase willingly waives. Your funds at Fidelity are insured up to $500k by the SIPC [1]. Every person at Chase is insured up to $250k by the U.S. government, which backs the FDIC with its full “faith and credit” [2], a number which happily doubles with your account at Bank of America. (People concerned about this sweep [3] their money across multiple banks.)
When Lehman went bankrupt, customers’ assets were ringfenced [4]. A private equity firm can’t buy a bank, lever it up and gamble away customers’ deposits and assets.
None of the above apply to Coinbase. Nor should they. Everyone in crypto opted out of that system.
[1] https://www.sipc.org/for-investors/what-sipc-protects
[2] https://www.fdic.gov/resources/
[3] https://en.m.wikipedia.org/wiki/Sweep_account
[4] https://corpgov.law.harvard.edu/wp-content/uploads/2008/10/0...
Running the banking system on permissioned blockchains, where it makes sense, is simpler than extending federal protection to what currently behaves like a gambling industry. Also, spending the tax dollars of the young, poor and/or financially-conservative to subsidise a demographically-constrained pursuing a high risk / high reward strategy is inefficient.
"Cryptocurrency is not legal tender and is not backed by the government. Cryptocurrency, (including but not limited to tokens such as bitcoin, litecoin and ethereum, and stablecoins such as USDC), is not subject to Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection Corporation protections." [https://help.coinbase.com/en/coinbase/other-topics/legal-pol...]
So any Bitcoin etc... you hold in your wallet at Coinbase could just be sold off to pay for debt if a bankruptcy occurs (which doesn't happen if a FDIC bank goes bankrupt).
Taking those protections would mean a lot more regulation for the industry, regulation they’ve worked hard to avoid
https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
You’re protected “against the risk of loss should any FDIC-insured bank(s) where [Coinbase] maintain custodial accounts fail[s]” [1]. If Coinbase maintains “accurate records,” which nobody is checking, and “on determinations of the FDIC as receiver at the time of a receivership of a bank holding a custodial account.”
If Coinbase itself fails, you’re just another unsecured creditor. Maybe a bankruptcy judge will find your deposits to be a § 507(a)(7) customer deposit, in which case $2,600 of it is a priority claim [2]. For the rest of it, you’re a general unsecured creditor. Behind every lender.
Note that the Coinbase FAQ we cite is worded in an intentionally misleading manner. That copy wouldn’t fly at a bank, or, at the very least, produce liability for it in a manner that would actually pay out.
[1] https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
[2] https://www.bdo.com/insights/industries/retail-consumer-prod...
> Fiat balances, such as U.S. dollars, British pounds, or euros, are held in your Coinbase e-money wallets as a balance in your Coinbase or Coinbase Pro account(s). For U.S. customers, Coinbase combines your balance with the balances of other customers and holds those funds in either: custodial accounts at U.S. banks and/or invests those funds in liquid U.S. Treasuries, or USD denominated money market funds in accordance with state money transmitter laws.
> Funds could be held in any one of these three manners so customers should not assume that funds are being held in one manner over the other.
So, if your funds were held in the custodial account (which you're explicitly told not to assume), and if Coinbase maintained "accurate records" (lolwut?), and if the bank where the custodial account is failed, then you're going to be made whole. Notably, Coinbase itself failing isn't part of that "if" chain.
To handwave away the FDIC insurance like that makes you sound like you think everyone under that threshold just doesn't matter.
I doubt I'll ever be able have over $250k in savings at any one time, so it wasn't something that seemed too much worth my time to learn more about.
This is an incredibly misleading way to describe the difference between unsecured deposits in Coinbase and FDIC insured deposits. Because the U.S. Government is involved in both bankruptcy proceedings and FDIC liquidations, there's no difference in how likely it is a person will be made whole? No, that's not how it works.
> Of course they can still go bankrupt. But then, again, the U.S. courts would decide what happens to their assets and yours.
Right, but Coinbase has explicitly stated that in the case of bankruptcy, users with deposits are considered unsecured creditors. In the case of bankruptcy, your assets are now coinbase's assets, coinbase's other creditors can go after the assets you deposited and you are last in line to salvage whatever is left.
Coinbase wanted people to think it was as conventional and safe as any other federally-insured brokerage because that's the only way they were going to appeal to the average casual investor. But they aren't a brokerage, and you're fucked if they go bankrupt, which is the reason coinbase stock plunged in May when they updated the risk disclosure to their quaterly statement.
I agree with your overall point, but these two things are not the same.
I looked at your comment history and you vehemently argue against DeFi but your posts show that you have little understanding of any technology behind it.
Where you ARE right is that centralized exchanges/entities are needed as a fiat on-ramp and off-ramp. There is no way to get around interacting with centralized governments if you want to use government-issued fiat currency.
You don't. You don't need to interact with any websites to make transactions. It's on-chain. You can always run a (light, non-archival) node to ensure the transaction does exactly what you expect it to (before submitting it) do without ever going to a website.
You're right that if you trust absolutely nobody, not even chain explorers, you need to put in more work, do some digging and understand how the system works. You're exchanging usability for security/trust. The point is that you have the option to do that. If you are paranoid and don't trust centralized entities you don't have to. Decentralized exchanges can't cheat you, steal from you, freeze your coins, or go under. It's technically impossible because they don't have custody of your coins at all.
There is a lot of arbitragers on all chains equalizing prices between them all. What you've described with office space is known as MEV in the DeFi world.
All the exchanges are completely open source, you can learn how they work if you put the time into it. I recommend the Balancer whitepaper.
If you can figure out how they can go wrong feel free to explain. But it seems you don't actually understand them yet and are just making assumptions.
Your belief that we need centralized exchanges is just an opinion, and it's wrong, which you'll discover as you dive deeper into seeing how they work.
Beyond mining, how do I exchange $100 of USD for Crypto without going through a trusted party to ensure my $$ gets me BTC?
Do not wildly profitable to mine; but you can untraceably convert USD to crypto via mining.
Curious what it looks like to do this with large sums of cash.
Crypto holdings in Coinbase are backed by the US government? By what mechanism?
> You can trade crypto assets without ever using Coinbase or any other centralized exchange
Do tell, how do you expect the average person to convert fiat to cryptocoins?
Crypto can be exchanged locally and anonymously with your friends, too.
Maybe it's not obvious though, and we're just talking theoretical techno-utopias.
Google scanning all your emails does not undermine the promise of email, just as coinbase forcing addresses doesn’t undermine the promise of crypto.
The protocol is open and designed to be decentralized, but the system as implemented in the real world is fairly centralized at this point. Saying "you can run your own mail server" doesn't matter if virtually nobody actually does.
If the end state of crypto will just be a bunch of web2 style companies running centralized servers that (maybe) interact with blockchains, and we say "that doesn't undermine the promise of crypto, you can run your own node", I guess I'll have to agree to disagree.
This is the critical point. Adoption matters, and always ends up with consolidated power. It's just how things are, and how they stay, short of the severe intervention of dramatically easy-to-use tools for "click to host your own stuff".
It allows us to trust gmail/coinbase more knowing we can move away from it if required. Because they know that too
This is why the Kraken CEO [0] recently told its customers to take their coins off of their exchange and put it your own wallet. Brian Armstrong (Coinbase CEO) also said the same thing on Twitter: [1].
[0] https://twitter.com/jespow/status/1494462097161220104
[1] https://twitter.com/brian_armstrong/status/14934534250102988...
Also: re your comment below a reply, yeah sure you don’t need Coinbase to trade crypto. coin ase is complying with local regulations, others will have to follow. So again, the original comment from OP around promises of Crypto is still accurate
its a public ledger, the goal wasnt anonymity, it was autonomy
Still worthless tech, but in the interest of fairness. :-D
Also not as sensational if you tell people that.
This is likely to satisfy regulators. I highly doubt that this change has anything to do with practical usefulness
> why might 'regulations' be in place such that when large sums of money change hands
I have done some work in the financial compliance space. You would be surprised how small some of these "large sums" are and they keep getting smaller even while inflation weakens the value of the currency involved. In some locations, the limit is as low as ~$1000 USD.
Yes the motivation is anti-terrorism, protect the children, national security etc... but in practice it is just a vehicle for governments to collect data on its people. In this case, good actors will behave the same while their data is collected and shared. Bad actors who are aware of these restrictions can just pay the $0.25 to transfer through a newly created wallet and then send without these restrictions while regulators pat themselves on the back for stopping money laundering.
What can end up happening with policies like this? Well if governments, regulators, or monopolies get out of hand all of a sudden you cannot send money to a political party. Maybe all your bank accounts are frozen for supporting a protest or all of a sudden you have no way to purchase a flight to leave. Maybe Mastercard/Visa ban donations to entities like Wikileaks for "moral reasons" while allowing donations to the KKK and other similar organizations. These changes don't typically happen all at once. Freedoms are salami sliced away at a rate that doesn't upset the majority and the norm slowly moves to believe that these restrictions are for our own good. (sorry I went a bit off topic here)
Also, why was "regulations" in quotes? Sorry if I missed something or misinterpreted your tone here. Hopefully I answered your question.
It's not mostly 'terrorism and protect the children' - it's tax evasion, wire fraud, bribery, insider trading, financial fraud, scams etc.
Without fairly consistent regulations up and down the financial spectrum, civil society basically would not exist.
We mostly derive our protections from 'government overreach' via the constitution, not anonymity.
Is there an opposite of "semantics"? Isn't semantics just the topic around the meaning of words and communication? Is the opposite just everything else?
Anyways the point was that Coinbase is likely acting not because it extends the "practical usefulness" of their products, i.e. it adds no new features or functionality. They are likely acting out of regulatory necessity.
The semantic argument is whether regulatory necessity falls under "practical usefulness". I'd argue no, as the usefulness of their product as it applies to users either doesn't change or actually goes down as a result of this, but one can similarly argue that not satisfying regulators likely results in the loss of the product altogether.
> It's not mostly 'terrorism and protect the children' - it's tax evasion, wire fraud, bribery, insider trading, financial fraud, scams etc.
Can you elaborate on this a bit? Collecting beneficiary data is useful for things like redundant checks against sanction lists such as OFAC (terrorism, organized crime, and human trafficking falls under here). I don't see how tax evasion, insider trading, and bribery even apply here.
- Tax evasion would likely deal with the exchange reporting both trades and received funds for a user, neither of which applies to beneficiary data on outgoing funds afaik
- How is insider trading relevant here? Would that not be dependent on trading and not the transferring of assets. Does providing beneficiary data do anything to shed light on trading with privileged data?
- Bribery? Maybe, but seeing as this still happens fairly regularly with traditional finance, I doubt that this will curb much behavior.
> We mostly derive our protections from 'government overreach' via the constitution, not anonymity.
I assume you are talking about the US constitution which doesn't much apply to non-US persons. The US Constitution doesn't provide much context or protection around the financial system either.
In Section 8 we have
> "Congress shall have Power [...] to coin Money, regulate the Value thereof, and of foreign Coin."
And in Section 10,
> "no state [...] shall make any Thing but gold and silver Coin a Tender in Payment of Debts."
I don't care if someone is not paying taxes, good for them if they can avoid having the government steal their profits and stay out of jail. I don't even care if they're doing something the government deems illegal, especially if it's a victimless crime.
Regardless, I'd rather have the victims pursue the offenders through legal means (which, in a world without a government with monopoly on violence, will likely take the shape of multiple competing protection agencies) and victimless crimes not to be considered crimes at all.
I agree for some transactions you may want to exchange data and legal jurisdictions or setup a contract so that goods / services (+ future support) and money are exchanged safely and without scams - but that's irrespective from the means of payment.
... that's you're right but 'we' don't care if you don't care.
We know that without decent regulation, tax evasion on a massive scale, money laundering, criminal activities, insider trading, bribery, extortion, illegal political influence etc. etc. will seriously degrade civil society.
So 'we' put some regulations in there for those reasons.
And without attributing financial transactions to specific legal entities, there's no way to facilitate commercial or litigation otherwise, thereby destroying trust in even regular business transactions, which makes commerce impossible.
'The Means of Payment' is the mechanism by which the transaction is effective, so we'd rather have that in place or not.
For small sums, under $500, it's unlikely we need to worry, but beyond that it gets tricky.
You don't know that.
When has it ever been tried?
We didn't explore societies where transactions are voluntarily (eg. no taxes) and we don't persecute victimless crimes (eg. drugs)
I argue my interests are aligned with the majority of non political people.
That said I'm not a proponent of crypto, I think private banks without government regulations are a more efficient alternative than a blockchain.
Chaum's original digicash worked something like that. It could only be transferred anonymously once. It could only be converted to and from regular cash at regulated entities like banks. So you'd buy some coins at the bank. You could then use the one anonymous transfer to send them to some youtuber. Neither the youtuber nor the government would have any way to learn who sent these coins. But, the youtuber would have no way to send them to a third random person. The only thing he or she could do with them would be bring them to a bank and convert them back to normal currency--along with doing any required tax reporting that is required when you bring cash to a bank. All this was mathematically enforced by the crypto protocol (blinded RSA signatures). It wasn't that great for libertarian madness like Bitcoin supposedly was, but we've since seen how that turned out.
Maybe it's time to revisit Digicash, especially since the patents have expired.
Nothing in the Digicash blinded RSA signature scheme would prevent the tokens from being traded person-to-person any number of times before being presented back to the issuer. It requires some trust in the previous token holders, much like exchanging BTC by trading private keys in place of on-chain transactions, but it's perfectly doable given some other means of discouraging defection. And of course the blinding system itself ensures that the tokens being deposited can't be linked to any particular withdrawals.
Edit: In the case of off-chain exchange of Bitcoin wallets it would reveal the private key (naturally, since that's what you're exchanging) but for that reason you would only trade a wallet with a unique private key not used anywhere else. The only thing that key is useful for is spending the funds in that wallet. It's not linked to your identity. This is exactly like the "physical bitcoin" model (BitBills, Cascascius coins, etc.) except there is no tamper-evident hologram to prove that the private key hasn't been accessed—you're taking that on trust until you empty the wallet or hand it off to someone else.
Out of curiosity, what percentage of the population could skip paying taxes before you would care?
Are you okay with the government having no funds whatsoever?
Publicly funded armies replaced hired mercenary forces for a reason.
For developing nations? I know a few countries were the government having little to no funding would make very little material difference to daily life, since they already steal so much public funding that private services have long since filled the gap. In this case the percentage for caring about tax payment is zero, or close to it
Read about agorism (konkin) and anarchocapitalism (rothbard, friedman).
If you think there’s some other reason all those billions of dollars got poured into it you’re delusional.