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Comment by arlcode | Hacker News Reader

Cryptocurrencies impose some complex constraints on themselves that require complex solutions.

Conceptually banks and exchanges solved the consensus problem decades ago and they did it with a highly secured simple database and lots of crosschecks.

But if you trust nobody (except some developers somehwere) then things get tricky

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Could you go into more detail or provide references on where I could read up more on how banks do this? I've always wondered why we hear a lot about crypto exchanges getting hacked, but seldom about banks. What is it that banks are doing right (or crypto exchanges doing wrong) in terms of security?

I'm not sure if you're half joking, but banks authentify every single tenant in the transaction (from account owners, to institutions) in the most rigid way. Fraud usually happens at the edge (credit card), but everything "inside" the system is a legally registered entity. It is completely integrated with the legal system.

> everything "inside" the system is a legally registered entity. It is completely integrated with the legal system.

Well then, that's not at all solving the same consensus problem that crypto solves.

Oh ok, yes from that point of view they're solving entirely different problems, for sure.

They do solve the consensus problem but don't have the same constraints crypto does.

The consensus (of who owns what and how did that happen) is whatever the banking says it is at the moment. This works because society places a lot of trust in the actors and the checks and regulations surrounding them (e.g. liability regimes) as well as the ways to rectify mistakes (through the legal system).

Crypto adds the additional requirement that every participant of the system (even end users) can independently come up with the same state without a single entity being the arbitrator of truth. The tradeoff is added technical complexity and inefficiency (storage and computation)

Banking systems do not require consensus. So, it is a single party that has to make a trust decision with a counterparty that it partially trusts, but may potentially be a fraudulent party masquerading as a trusted party.

Crypto requires consensus amongs millions of untrusted and possibly malicious parties i.e., no trust, all cryptography.

Both require cryptography to work (eg: online banking transaction vis-a-vis crypto currency transfer). But the former is well-known (Public Key Encryption and Symmetric Encryption) client and server with established trust relationships that can be cryptographically verified whereas the latter is a distributed system with untrusted nodes and has different dynamics.

The other issue is about correctness. If there is an error (system or human) in the banking system, there are compensatory transactions/procedures possible. Crypto has not evolved yet to accommodate these real world issues. It is also not proven that the crypto protocols are 100% correct. Therein lies the rub. The banking system is also not 100% correct, but has procedures to address the failures (complaint system, appeals, courts etc.,) but with crypto, there is no way to address the failure cases (hacks, lost wallets, corrupted drives, 51% attacks etc.,)

First things that come to mind reading GP are the existing interbank payment clearing networks: Fedwire, CHIPS, SWIFT, etc.

And, on the contrary, SWIFT was hacked not so long ago: https://en.wikipedia.org/wiki/2015%E2%80%932016_SWIFT_bankin...

This is all about ledgers, traditional banks have a centralized ledger that only they can edit. Blockchains the ledger is decentralized, anyone can edit the ledger (based on specific rules) this provides allot of avenues of attack.

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