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Comment by zeroclip | Hacker News Reader

Three clear and obvious outcomes of this unwinding:

1. The crypto mantra "not your keys, not your coins" rings true.

2. Entrusting your personal financial data with a private company is sure to end in disaster, either by hack or court order. Privacy should be a basic and legally protected feature of blockchains.

3. Centralized Finance or CeFi is mostly a sham and deserves to be heavily regulated. Not to be confused with on-chain and transparent Decentralized Finance or DeFi platforms like Aave that have behaved predictably through this downturn, and have never required KYC.

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> 1. The crypto mantra "not your keys, not your coins" rings true.

The alternative being you hold your keys.

This is another area where I swear it's almost as though the entire crypto space is run by aliens or a poorly trained AI.

Interview 100 people and ask them two questions:

1) Have you ever had to reverse or dispute an electronic (credit card) transaction?

2) Have you ever forgotten a password?

The answer for 100 or 100 million people to both of these questions is "YES". 100% of them. Yet the main foundational principles of crypto operate directly against both of these universal human truths.

It's utterly bizarre.

Interview 100 people and ask them if they've ever used cash. There is no "universal human truth" that you should be able to regret a transaction months later.

Crypto works the same way, except it's new and people aren't educated about it, so the space is filled with grifters and con artists.

> Interview 100 people and ask them if they've ever used cash.

All people I know IRL only ever carry small amounts of cash at a given point in time. The bulk of their liquidity is held at a financial institution.

While I appreciate the tremendous risk they run of having that institution go bust, the significant improvements in regulatory oversight of the past centuries have made it, in my mind, an acceptable compromise.

Meanwhile, the risk of getting cash stolen or lost remains uncomfortable.

Unfortunately, that risk is also present for people that manage their own keys. Either the private key is on a physical device which can be lost or pickpocketed, or they memorized a random sequence which they input in a hackable device every time they pay, to get a key they enter in various software at risk of vulnerabilities.

1) There will always be fraud, bad actors, scams, theft, etc. Shit happens.

2) People forget stuff and lose things. Shit happens.

Not to be snarky but if we can't agree these are universal human truths I'll assume you're a chat bot run by the crypto AI I've been talking about...

Also, please stop saying it's new. Bitcoin came out in 2009 - the same year as Android, Venmo, Uber, Square, and countless other companies, platforms, and concepts overwhelmingly positively and safely used by millions if not billions of people every day.

"Mobile works the same way, except it's new and people aren't educated about it, so the space is filled with grifters and con artists."

"Ride sharing works the same way, except it's new and people aren't educated about it, so the space is filled with grifters and con artists."

The "it's new" excuse ran out at least half a decade ago.

>There will always be fraud, bad actors, scams, theft, etc. Shit happens.

And we have the courts to solve any disputes. What jurisdiction does bitcoin reside in?

If you asked those cash users if they had a transaction they wanted to reverse they'd all say yes. The non reversibility of cash is a downside to most users, not a feature.

It is a feature for the people who were paid in cash. Not being stripped away from soemthing you have earned is important. Ask merchants their feelings about chargebacks.

Furthermore nothing prevents you from using an escrow/third party for transactions in crypto that you hope to be able to reverse under a certain time.

But obviously you lose some of the main advantages of crypto. It provides this optionality, soon, with the accelerated dispariton of cash money this choice will not exist with fiat money... even less with CBDCs in my estimation.

Cash transactions are reversible in developed countries. In the US, there are federal laws that make them reversible with very little room for a merchant to wiggle free.

Ask the Celsius investors whether they, in hindsight, would have preferred custody over their investment in the way that Aave users have come to have. Most would say yes.

If you are just storing a moderate amount of USD in an account with no interest, the safest option is a bank with FDIC insurance. If you don’t happen to live in a country with this kind of banking and insurance, or if you are investing higher than FDIC limits, or you are seeking higher yield, this is where people begin to look at options like Celsius and Aave.

> The crypto mantra "not your keys, not your coins" rings true.

Which just highlights why "crypto" is largely useless. The vast majority of people are incapable of operating sufficiently secure infrastructure. And even for people who can, it doesn't offer any meaningful advantages that would justify the enormous effort required.

> Privacy should be a basic and legally protected feature of blockchains.

This is impossible when you are using blockchains, because all data is, by design, public, and there is no way of preventing anyone from data mining it.

You should read up on Zcash, because it seems like you have a very limited understanding of what is actually possible with this kind of technology :(. Hell: TornadoCash--which is based on similar mechanisms--apparently worked so well, despite being fully decentralized software running on an existing blockchain (Ethereum), that it is now sanctioned (which is honestly a bit strange as it isn't even a group of people: it is software) by the legacy system that refuses to allow people to have financial privacy (which is a travesty) :(. Also, as much as I despise MobileCoin for various reasons (and thereby haven't used either it or Signal), as far as I understand, not only do you "own your keys", but the UI is almost as easy to use as Apple Cash (or whatever the name is for the specific payment feature Apple provides where you have an account filled with money that you can send to people using iMessage).

Impossible? No it's not.

Monero does it and to an extent shielded transactions in zcash too.

The vast majority of Aave users still have their funds, compared to Celsius users. The effort required to hold keys is not really that significant.

Privacy in blockchains is certainly possible. Tornado cash, Monero, zcash, Aztec.

>>it doesn't offer any meaningful advantages that would justify the enormous effort required<<

I'm blown away by the complete disregard most of this community has for crypto. Yes, it is currently full of scams and charlatans. But you honestly believe there are no meaningful advantages to decentralized currency?

Is anti-censorship not an advantage? I'm not a huge fan of the government's ability to seize assets without any due process (See, e.g. Canada https://www.bbc.com/news/world-us-canada-60383385), which corporations are starting to get interested in (see, e.g. Paypal https://fortune.com/2022/10/10/paypal-users-fine-misinformat...). Bitcoin and other coins go a long way to solving these issues.

How about effectively free, instant transfers at any time of day or night? Traditionally if I wanted to wire money oversees, it's a full-day affair. I can transfer any amount of crypto I want in seconds to minutes, for far less than a wire fee.

How about the ability to instantly settle debts and contracts? This was literally impossible just a few years ago.

I know it's easy to shit on crypto (and there are many legitimate reasons for doing so), but you guys need to dream bigger.

I don’t understand #2. What’s the point of bothering at all if we ultimately need a government to impose their centralized power of enforcing laws on the usage of blockchain?

It feels like yet another “crypto people discover organically why centralized banking is the way it is.”

I don't think the GP is saying the government needs to enforce laws on the usage of the blockchain, in general. Rather, one use of the blockchain is to run a centralized investment bank. In such cases, the government should regulate them just as they would any other investment bank, on or off the blockchain.

> 1. The crypto mantra "not your keys, not your coins" rings true.

I confess that I don't follow this.

I only have assets on Coinbase and generally assume they're reliable enough (from a technical/security stand-point and legal) that I don't bother jumping through hoops to do a wallet on my own device or hardware wallet.

Is it stupid? Maybe, but I think I'd be more likely to screw up somehow with the other approaches.

What you need to be concerned about is if coinbase fails for totally normal business reasons and they halt all transactions, what rights do you have?

With real banks, there are pretty clear pecking orders for creditors vs depositors and depositors have FDIC to cover at least some in the worst disasters.

Would you have higher priority in getting your own coins back over senior debt holders?

“Not your keys, not your coins” is exactly what it sounds like. You really have no say at all in how the above scenario plays out.

There have been a hundred+ years of laws to figure out how to give rights to cash, bonds, equities to people who have them held by an institution. That hasn’t happened with crypto.

The thing is, "not your keys, not your coins" is not just true technically, but true legally. If Coinbase were to become insolvent and decide to use your coins to repay their creditors, you might say, "Hey, you can't do that, that's my money!", and they would-- correctly-- respond, "No, it isn't. Read that user agreement again." They really are not your coins: Coinbase is extending you a temporary permission to access them which they can revoke at any time (and would, if they were in trouble).

By contrast, as another commenter alluded to, fiat banking has an extensive system of laws and precedents that decides what happens in cases like this, which crypto lacks.

I have a similar approach, and with evidence to back it up. All my coinbase coins are still in coinbase. The coins in the wallet on my old desktop that I have somehow misplaced the tower for several years ago on the other hand...

Maybe they are. But in the advent of a hack. Even then they might have there arses covered with insurance and what not.

But who can tell how long until you get your coins in such a situation.

“Not your keys, not your coins” has a doomsday prepper tinge to it. (Not quite as much as someone dismissing centralized emergency management with “not your bunker, not your rations,” but in the same spirit.) Maybe it’s the right attitude for some people, but it’s highly exclusionary as a general rule.

I mean if centralized EMS had failed as often as crypto-currency exchanges, then "not your bunker, not your rations" might be a good saying...

To keep the analogy fair, people would need to regularly get botulism from eating their bunker rations (or some other consequence on par with getting permanently locked out of a crypto wallet).

>1. The crypto mantra "not your keys, not your coins" rings true.

How do you do the "Fi" bit of "DeFi" if all you do is HODL?

"Not your keys, not your coins" still applies for decentralised platforms.

With Celsius, the contract doesn't maintain this because the contract owner can freeze funds at any time. Because of this, your keys are no longer enough to access your funds. You also need "consent" from Celsius to withdrawal.

Compare this to a smart contract where the contract owner can't arbitrarily freeze or seize funds, alter state, or upgrade/modify the contract (or at least require some level of community consensus to do so). These platforms can still largely do what Celsius did but with the caveat that everything needs to be done on chain or through some auditable/provable off-chain method. Likewise changes to parameters or code would need to be done using either some consensus method (higher centralisation risk) or manually by users migrating to a new contract (lower risk).

Unfortunately the "your keys" part isn't terribly clear in the account model since contracts largely all have global state. The UTxO model on the other hand allows you to more easily analyse state changes and conditions under which you could lose control (if at all) however the tooling on that side is significantly less developed.

Ultimately, anything sent to a smart contract is not "yours" any more though; under the "not your keys, not your coins" premise though - right? As you point out, you are depending on the strength of the technical, social and security controls on the contract.

You don’t need to hodl. You can spend, invest, trade, all self custodially by just interacting with the chain.

4. use regulated bank

Not if you want a return higher than 0.2%. People investing in Celsius and Aave are not using it as a low risk savings account.

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