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Comment by mudrockbestgirl | Hacker News Reader

There is nothing wrong with Coinbase. It's an easy-to-use onramp and offramp, which is a valuable service. But people need to realize that Coinbase has nothing to do with the promise of crypto. You can trade crypto assets without ever using Coinbase or any other centralized exchange. Lots of people do that.

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.

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>You can trade crypto assets without ever using Coinbase or any other centralized exchange.

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?

Easy, you take your tokens on a flash drive and fly to the Bahamas, where you meet in a back alley with Giancarlo and Paolo, who give you the keys from a dump truck full of unmarked twenties. And there reverse is possible of course - you get the dollars to Giancarlo, end he gives you his IGUs (it's like IOUs, but without "O", because he officially doesn't "owe" you anything, as per terms of service). This is called "institutional investors". It is fun to stay rich :)

Why would you do that (the fiat)?

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)

Because you still have to buy food with Fiat

OP was not asking how to buy $1M worth of food. OP was asking how to trade large amounts at scale.

(It's amazing how inconsistent the skeptics are, when they are only trying to score some cheap points against what they don't like)

> amazing how inconsistent the skeptics are

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.

That is anyway still beyond what was asked. The question was "how can anyone trade large amounts of crypto without a centralized exchange?"

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.

> question was "how can anyone trade large amounts of crypto without a centralized exchange?"

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.

I am not even challenging the need for KYC, but I would challenge the expectation that USD will remain king for the foreseeable future.

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.

The only currency denomination that could work to evade the feds for a contract like what you're describing is CNY, which would basically require you to be Chinese and/or have a trusted party and be big enough to negotiate something like this. Maybe a couple thousand people in the world could do it

Who is talking about evading the feds?

Why else would you want to avoid transacting in USD?

- The exchange rate from USD <-> country where I live can be expensive

- 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.

I asked another poster who mentioned an OTC desk so I’ll ask here to. I have functionally no experience with crypto but am pretty well versed in traditional fx. The amount the op mentioned would be quite hard to trade otc unless you were doing it frequently (read daily) with a fx partner. It’s just too small an amount.

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.

https://www.kraken.com/en-us/features/otc-exchange

Yes, however trading also implies the ability to liquidate positions and "cash out". Imagine a world in which a "stock trader" can exchange shares of one company for another but can never liquidate all of their positions and go to cash. Most people would not consider that to be stock trading at scale.

My model for stable coins is that they're either backed by risk-free assets (cash/short term gov) which are externally audited, or they're not stable. I have no idea which of the above meet that criteria.

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.

> Because that's what I use to buy stuff.

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.

I'm always amazed at how many years into the future crypto enthusiasts are willing to wait for the basic use case of their product to be practical. "Sure, you can't use this currency for day to day transactions, and it's incredibly volatile and risky to hold significant amounts of it, but one day, by magic one assumes, it might be useful!"

Don't be discouraged if what you produce initially is something other people dismiss as a toy. In fact, that's a good sign. That's probably why everyone else has been overlooking the idea. The first microcomputers were dismissed as toys. And the first planes, and the first cars. At this point, when someone comes to us with something that users like but that we could envision forum trolls dismissing as a toy, it makes us especially likely to invest.

(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.

> Don't be discouraged if what you produce initially is something other people dismiss as a toy.

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 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.

> 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

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.

> If the monthly amounts are so small as to make flat transaction costs significant, then the amounts are themselves insignificant.

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.

Quoting Paul Graham simply makes you look as incompetent as he is, watch out.

Of all the insults you could throw at PG as an attempt to make an ad-hominem, are you really going to stick with incompetent?

I could also go with full of himself, pompous, pretentious, more-boring-than-a-slatestarcodex-post-at-3AM-without-drugs, but incompetent is a good recap for a man whose career can be resumed as "got lucky during the dot com boom and has been riding that money ever since"

And creating YC after and completely changing the nature of venture capital, that doesn't count as well. Right?

Anyway, I'd be eager to hear all the amazing achievements from Mr. ohgodplsno. You must be very fun at parties.

You're damn right, I'm fucking hilarious at parties. But maybe not the ones where it's just a bunch of VC bros.

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.

I am not into VC parties either, and I have no intention of budding with anyone into the Silicon Valley life.

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.

My man, I am not looking for your admiration. And I'm not looking to make you an admirer either. Worship your billionaires all you want, and I have nothing to prove to you.

But if anything, you just keep proving that you might just have a talent for egregiously mind numbing, self absorbed essays just like PG

Paul Graham is a successful entrepreneur, investor, and essayist. He's done multiple things which have a global impact - YC and HN for example. He's made a billion plus dollars for himself. Calling him "incompetent" is, objectively, wrong.

And we all wished that he skipped the essays part, because it's a bunch of self centered bullshit from a man who got rich and had an easy life.

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.

Paul Graham is incompetent??

I'm not dismissing crypto as a toy. Most cryptos are Ponzi Schemes. BTC and ETH I'm dismissing as not practical.

For the purposes of an application, calling it "not practical" is the same as calling it a "toy".

Eeeeh? I think not. A toy implies that is has no, or cannot have, practical uses and is a property of the object or idea. Not practical is an engineering problem, it is contingent on external factors. A fidget spinner is a toy, a space elevator is not practical.

They are both ways to dismiss an idea though.

The part where you moved BTC and ETH from the 'ponzi' slot to the 'not practical' slot will continue for other elements. BTC will slide into the next slot soon probably, going from 'not practical' to 'practical for a very narrow set of things that aren't the set of things people originally expected.' So it goes.

It took many thousands of years to switch from gold/silver money to paper (fiat) money. It was tried many times and failed each time until the US succeeded in the 20th century. Even that final transition took 38 years to complete from 1933-1971 despite the US having the power of both nuclear weapons and the world's reserve currency after 1945.

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.

If this comment means "the current transition to crypto is likely to fail" then we agree.

Many central banks including the Fed are looking into CBDC's. While not quite the same as the distributed consensus based algorithm of Bitcoin, there are too many benefits to governments/central banks to ignore the technology.

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.

Eeeeh, a lot of stuff we think of as being normal or obvious took a really long time to develop into something useful, so I don't know if "early adopters excited about technology well before it becomes useful or even has a clear use" is really the strongest point you can make. Especially on a tech centered forum right?

DAI track record for the last 4.5 years had proven you wrong. It’s either

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.

> DAI track record for the last 4.5 years had proven you wrong.

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.

I think I am spending a couple of hours every day here arguing with the barrage of web3 skeptics, trying to spread the message that crypto can be a net positive for society without replacing traditional finance.

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?

Look up “OTC desk.”

There are otc desks that will do that small a transaction? Where?

I’m myself traded over 1M regularly the last year. We even developed a decentralized exchange for Chinese customer (although with nasdaq traded parent) that made over billion dollars in stabelcoins in just about 12 weeks. DEXs usage is big. Perhaps you mixed two different thighs: fiat on ramp, and exchange ? If so, as far as I concerned even at the beginning of defi summer 2020 bestchange ramps in Moscow city alone had around $30m a day against fiat. I can’t verify this numbers but given the level of crypto adoption in eastern Europe these numbers don’t seem very off really.

By your reference to stable coins, it's unclear if any of the values you talk about are real dollars (or euros or rubles or any other fiat money), or just the dollar equivalent in crypto.

Uniswap (a completely decentralized on-chain exchange) process over $1 Billion in volume per day, that $1M is a tiny drop in the bucket. You can load that BTC on Ethereum as WBTC, swap for ETH, then swap for DAI/USDC and withdraw via about 50 different offramps. None of these trades will give even 0.01% slippage and total cost will be about $50 on Ethereum, or 10c on Polygon.

> the security of something backed by the US government.

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.

Crypto assets may not be FDIC insured, but Coinbase can't just steal and run away with your assets without facing legal ramifications in the U.S. And that would also mean founders/shareholders face consequences (look at Theranos). Of course they can still go bankrupt. But then, again, the U.S. courts would decide what happens to their assets and yours. In either case it's up to the U.S. legal system, i.e. government.

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.

> Coinbase can't just steal and run away with your assets

That seems hard to believe in light of Coinbase's own recent disclosure: https://www.barrons.com/articles/coinbase-customers-crypto-b...

> Coinbase: Customers Could Lose Crypto if It Ever Went Bankrupt

Investment funds suffer from the same problem. And so do banks, for amounts exceeding the FDIC insurance.

> 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...

Cash held at Coinbase is insured by the FDIC to $250,000.

https://help.coinbase.com/en/coinbase/other-topics/legal-pol...

> Cash held at Coinbase is insured by the FDIC to $250,000

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...

Reading the text a couple of times, it's actually far, far less secure than that:

> 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.

Sorry, _why_ shouldn't the above apply to Coinbase?

As I understand it, because the Cryptocurrencies are not legal tender:

"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).

> _why_ shouldn't the above apply to Coinbase?

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.

Because their customers' assets are not segregated.

I don’t know about “should” but those protections don’t extend for Coinbase customers

Taking those protections would mean a lot more regulation for the industry, regulation they’ve worked hard to avoid

Many types of financial organizations such as stock brokers (which seem an appropriate analogy for coinbase) have specific legal protections for customer funds in their custody, where even in bankruptcy the creditors of the organization do not have any claim on the customer assets, which are not treated as part of the organizations' debt but is held separately from their own balance sheet assets/liabilities.

Anyone who has to worry about losing money above $250k per bank can bloody well afford it.

To handwave away the FDIC insurance like that makes you sound like you think everyone under that threshold just doesn't matter.

It's not $250k per bank. It's $250k per account type. So you get your savings, money market, checking and CD and boom, it's a million at a single bank FDIC insured.

It's $250k per per depositor, per insured bank, for each account ownership category. So if you'd need to move your CD, savings, checking, etc. into separate ownership categories (e.g. one held in a single account, another held in a joint account, another held in a revocable trust) for that to work.

Ah, I missed the nuance. I knew that it was possible to duplicate coverage and misunderstood how.

My apologies; I was unaware of that nuance.

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.

Sorry, I had the wrong nuance. According to the other poster, it's by ownership type, not account type.

If my broker goes bankrupt, the shares I have through them are indisputably mine, and the government will help me retain them.

> The U.S. legal system, i.e. government

I agree with your overall point, but these two things are not the same.

> In either case it's up to the U.S. legal system, i.e. government.

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.

Being an unsecured creditor under US law is much better than the law of the jungle, where rug-pulls are just tough luck. Unsecured creditors are still ahead of stockholders in the event of a bankruptcy.

That’s very cold comfort. As an unsecured creditor you’re back of the line among creditors in a situation when there manifestly are not enough assets to pay creditors

Centralized exchanges are a necessity. Who can you trust to trade into and out of fiat? Who can you trust to make a exchange? Who can you trust to use security that works with your wallet? Sure there are decentralized exchanges but how much does anyone trust those, and how decentralized are they really? What happens if those go down? Hell most people don’t buy their own crypto just because they don’t trust random websites that claim to have secure wallets let alone that if they make a non-reversible transaction that the other party will come through. There needs to be an enforcer, most likely a government, that adds threats if someone breaks any of the trust above. There needs to be a centralized exchange to facilitate all these activities. It isn’t forced but anything else is just not as practical, so the majority of people won’t do it outside of an exchange.

You can repeat these claims all you want but ultimately we're going to just find out if this is true. It seems to me more likely its not true. At least, that a hypothetical future with minimal centralized exchange activity is also one where crypto is one of if not the predominant forms of held capital.

I don't think you have an understanding of how Ethereum or DeFi works. What you are saying makes no sense except for one point (see below). The whole purpose of DeFi and chains like Ethereum is that you don't need to trust decentralized exchanges or apps on top of Ethereum. The system is trustless. These exchanges don't have any control over your assets. They can't "go down" or disappear with your assets because they don't have access to them in the first place. There also is no counterparty risk and wallet security is a totally different thing that's unrelated to any application.

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.

I’m not even talking about defi here. Let’s say I just want to trade ETH into BTC or some random coin. I need to trust some website to get that done and be the decentralized exchange. Sure 1000s if websites claim to be decentralized exchanges but how as a user are you supposed to know they are working as they describe themselves? Simply you can’t without an insane amount of digging, so you have to trust a centralized exchange that is regulated by the government. Otherwise if the exchanges cheat you, steal from you, freeze your coins, go under, you just have zero recourse.

> I need to trust some website to get that done and be the decentralized exchange

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.

I’m taking about working between chains, not staying on a chain or other cryptos built on the same chain. Someone is building a decentralized exchange, the interaction or adding the next new crypto currency to that exchange and choosing how it is setting the price of the exchange or possibly relaying on other centralized exchanges - typically to set the exchange rate you would rely on the bid ask spread, but if it doesn’t look at other exchanges someone can just buy from one exchange where it’s cheaper and sell on the other. Have you seen office space? The movie where they make the program steel fractions of a penny in each transaction? This is doable in the setting of the prices and fees and the way rewards are set for liquidity, benefiting the person who created them - so who knows how these places work, no one except programmers, and maybe they gain trust over time from others that never had a problem with them before. But when something does goes wrong, who will foot the bill and be held accountable. That’s why centralized exchanges are a must because if something goes wrong you call the police.

Decentralized exchanges don't use an order book, they are Automatic Market Makers (AMM's) that use a bonding curve instead. They don't rely on centralized exchanges 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.

The whole point of cryptocurrencies was to use them for everything without converting to fiat currency. There should be no need to trade into or out of fiat in the first place. Everything that's wrong with cryptocurrencies today can be traced back to exchanges showing up.

Is it possible to acquire crytpo through a non-centralized way?

Beyond mining, how do I exchange $100 of USD for Crypto without going through a trusted party to ensure my $$ gets me BTC?

You and counterparty agree on source of truth (e.g. some bank’s database) and use some sort of proof framework. It’s just an off-chain computation.

I don’t think an average person would understand a word of what you just wrote.

Just use a proof framework and off-chain computation, you dolt! Monads are just burritos!

Sure, ask a friend or someone in your local crypto community. P2P is the default in crypto.

Mining is the solution to this problem. It's a simple USD -> electricity -> computer -> cryptocurrency process.

That’s interesting. It’s essentially a push right?

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.

> In return you gain convenience and the security of something backed by the US government.

Crypto holdings in Coinbase are backed by the US government? By what mechanism?

What is the advantage of crypto over dollars when using Coinbase? Why not just use a traditional bank and dollars to trade goods and services?

Coinbase is not backed by the US government

Neither is my bank. Only banks and government agencies have accounts with the central bank.

Coinbase has _everything_ to do with Crypto, and that is precisely my point.

> It's an easy-to-use onramp and offramp

> 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?

It's a similar question to "do tell how the average person is going to benefit from the right to repair?", or "do tell how the average person is going to benefit from free software?". All these three questions have the same answer: By relying on the free market competition, by paying someone sufficient money, or by learning to use the technical tools.

Crypto can be exchanged locally and anonymously with your friends, too.

Cool, so do explain. This is HN, I’m sure we’d all like to understand.

I'm interested in approaches for this, bearing in mind that I don't know people in real life who I can give cash for crypto, and can't mine coins. I wanted to buy some tokens to set up a side project, but the prospect of giving all my details to Coinbase or some other exchange is unappealing.

There are various p2p platforms for meeting people with whom you can exchange fiat for crypto (and vice-versa) directly. Some of these platforms include an escrow system (LocalBitcoins is the most well-known of that type, but I think it has KYC requirements), others rely on a 'web of trust' style system, etc.

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