Binance's books are a black box, filings show, as it tries to rally confidence
reuters.com
reuters.com
I was wondering how an audit for a company moving billions of dollars ended up in the hands of a South African branch office of an accounting firm (Mazars).
Has anyone tried to verify this?
its measurable on chain if you know what wallet addresses to watch, which can be crowd sourced by people taking money off exchanges.
An interesting way to phrase it but do you have any sources to back your claim?
I know that Binance is being investigated for money laundering and sanctions violations. But this could just be a consequence of corporate greed and operating in unregulated markets (not some conspiracy against west).
You have the choice between a free, transparent, technically stable, instant payment system (< 10 seconds until 100'000 EUR), using a stable currency.
or
an unregulated system where unknown people create and control the currency, that is generally slow, often with high payment or exchange fees and where you need to trust a lot of unknown parties (software, tools, network, coins, etc), where you can lose your key, that is falsely transparent (you see transactions, but you don't know who control the network).
Mhhh...
Because of that, as part of the "West", I hardly see any benefit of crypto, unless you are in some other camp (aka: "anti-West").
This is what I meant.
That part of "West" you are referring to also had ultra low or even negative interest rates, thus eroding the buying power of Euros and other peripheral currencies. No wonder European countries also account for some of the highest numbers of bitcoin nodes (per capita).
It is not transparent as to how much currency debasement is taking place, nor does anybody outside a small group at the ECB have any control over it.
It is quite clear who owns decentralized networks - the participants. Are they perfectly equal? No but they are more egalitarian than what they seek to replace.
Decentralized networks are more resilient to outages than the electrical supply of some countries. It may not make sense for you to use but millions around the world have found a use for it.
Also noteworthy, cash payments are limited to 10,000 Euros (1000 Euro in Spain)
By the way, currency debasement is not an economic term. The only people who use it are conspiracy theorists and crackpots, as far as I know.
Fed’s Powell begging people to quit their jobs atm. So, it this the public mandate you are talking about?
Out of curiosity, where did you read this?
Proof of stake blockchains operate on the basis of more dollars = more votes, for this to be true for proof of work blockchains one would first need to spend that capital for mining equipment.
It is very egalitarian since everyone can participate on an equal footing, everyone can run a node and get a complete copy of all transactions and verify correctness. It is challenging and expensive to get the same kind of insight into the stock market.
The European Central Bank has arguably failed its mandate of keeping price stability within the eurozone when some countries have more than 20% inflation.
Currency debasement is more commonly known related to coins but I'll leave the term as is
I have friends that can pay rent but don’t have much left over. There are people in my city that live hand to mouth. I know plenty of people who are well off enough, but aren’t ever going to (or have the technical inclination, or sore cash to) run a node.
> get a complete copy of all transactions and verify correctness
I’m sure this is a real benefit for all the single parents struggling to feed and cloth their kid.
The reality is, most people don’t have the resources (time, technical or monetary) to participate in “egalitarian” crypto currencies. Moreover, even if they all did, it still wouldn’t be egalitarian, because they’d still be out-purchased by those with capital. So we’re back to where we started, except with more e-waste, energy bills and more exaggerated hyper-capitalism.
One doesn't need to run a node to use the system but it is accessible to everyone, just as the code is there to be scrutinized publicly.
The entire point was to reform currency where economic policy is more predictable and the currency less susceptible to kleptocracy.
Interestingly enough the inflation rate of both Bitcoin and Ethereum is now lower than that of major world currencies. So while volatility still needs to trend lower for day to day usage, the case for a store of value has already been established in the past decade and anyone can see the price history and number of wallets increasing exponentially.
I'm curious how you think people "make money" on crypto. Wouldn't those people getting rich be doing it at the expense of people losing money investing in crypto?
Of course everyone cashing out at the same time would be akin to a bank-run. In practice this doesn't happen since people bought in at different times and have a different cost basis.
If I bought 10k of ethereum at one point in time and sold if for 100k, I put 10k into a pot which I took 100k out of.
Basic math tells me there won't be a "rising tide" for the boats that are left when anyone else pulls out.
I do not see how crypto is not a zero sum game, actually its a negative sum game if we deduct the mining costs, lost coins and the exchanges fees. Wasnt this supposed to work without whaleish, centralised exchanges?
Just to clarify - this really depends on which chains you are talking about. Some proof of stake chains implement direct on chain governance, in which stake does directly translate into explicit voting power to implement policy changes. Polkadot in particular does this. But Ethereum, does not have anything resembling on-chain governance. Ethereum validators have no more say in what makes for valid ethereum blocks then what proof of work miners had to say. The folks that really matter is everyone running non-validating nodes and the people who choose to interact with those nodes for their transactions or inspecting the chain history.
It's not that simple. They could rise interest rates more but Italy and Greece would probably default on its debt, which would make euro a lot more unstable than keeping 20% inflation rate in three very small eastern european countries which corresponds to 3.6% of the whole EU population. Current inflation in euro zone is ~10%.
Errr, no. One dollar one vote is not equal footing. If you have more dollars you can buy more votes. That's the opposite of egalitarian.
Yeah, Bitcoin has really held up great in value in comparison to euros or dollar… it’s only down 70 % on top of those currencies‘ inflation.
It is still one of the best performing assets in history
Even putting that aside, it’s not equal footing because the wealthy people who are wealthy based on the traditional economy make crypto a defacto plutocracy because they can afford to buy their way into it one way or another.
Transparent you say? Could you point me to the SEPA explorer where I can inspect every single transaction and account balance please? Here is the one for ethereum https://etherscan.io/ and for bitcoin https://blockchair.com/bitcoin/transactions
Ethereum and Bitcoin are transparent on transactions but intransparent on beneficial owner. Who is Satoshi?
Transparency plays both ways, and be sure that every address can be deanonimized
Seems people everywhere are largely the same.
Checkout via Paypal or debit/credit cards is much more straightforward and user-friendly, which is why they are still widely used (along with local services like Swish). A crypto wallet app that just requires scanning a QR code is even better, and miles ahead of anything SEPA/PSD2 offers in terms of user experience.
If it’s so great, why is nobody using it?
If people are so easily fooled into MITM attacks, why do they not happen?
Have you used Apple Pay? Works quite well.
> If it’s so great, why is nobody using it?
Where I live people pay by scanning QR codes all the time.
> If people are so easily fooled into MITM attacks, why do they not happen?
They do! People are getting scammed on these systems all the time; usually the provider agrees to repay the funds to keep them quiet.
Its quite lovely on invoices i must say.
Whats probably not there is that not every EU country uses this but that is matter of time. The banks are international, popular features spread. It will probably become standard very soon.
And I doubt the North Korean or Russian governments are using Binance.
North Korea has amassed a veritable crypto fortune, hundreds of millions worth, that they're using to finance their illicit nuclear weapons programs. They don't need to use binance, but binance continued existence props up the value of the crypto space and their holdings allowing their games to continue.
[edit] To be clear I'm not saying that NK or any other state actor is propping up binance or Tether (I just don't know) however it's pretty clear IMO that they benefit from its continued existence.
Thank Satoshi for true net neutrality.
If it helps exert pressure then financial sanctions are strictly better than kinetic war. The ability to end around those sanctions can lead to significantly more death and suffering - both there and potentially elsewhere. It's not about fairness it's about minimizing harm. If you disagree, vote.
> Thank Satoshi for true net neutrality.
No thanks man. Seems like an interesting cult y'all have there.
[edit] Nobody has the right to trade. If you want to not conform to social norms and pose a risk, fine - but you don't have a fundamental right to exchange with foreign powers whom you detest. If you want to go down that path you better be prepared to be self-sufficient.
Then again fanatical users speaks to good product design somewhere
Or to a conflict of interest. Unlike consumer products, crypto usually ends up being worth more if more people are using it. Most crypto proponents hold some crypto and have a financial incentive to get more people into it.
Metcalfe's law applies here as the utility of the network rises with the number of participants.
Speaking objectively here: obviously yes.
There is no government on earth that does not function without at least tacit consent of those governed. That consent may be obtained in all sorts of manners (many coercive or brutal) but fundamentally that matters very little from the perspective of an external nation.
The entire point of cutting a nation out of the financial system is to generate internal pain among the population that removes consent for their government that is currently committing atrocities.
If they want back in... the options are clear and simple: Choose a new government (through any of several means - up to and including rebellion or civil war). Stop the actions of your current government.
One thing I've noticed visiting Russia (multiple times) is how politically indifferent the average Russian is. (Or more precisely the average big city Russian). There's this idea everywhere that, you know politics is really complicated and you don't really understand it, so let the people in charge make decisions.
So yes, Russian people have exactly the government they want.
That's the whole point...
You seem to be implying a value judgement I'm not making. I'm not making some random condemnation of Russia/Iran/Whoever, or extolling the virtues of western countries - I'm telling you the point of sanctioning those countries is that it's a path towards adjusting behavior by removing consent of those governed.
If the Russian/Iranian/Whoever people are happy, content, well-fed, and have easy access to luxury items... what the hell is their incentive to change how their government is acting on the international stage?
The sanctions serve to show those people providing consent that the rest of the group of nations they are interacting with are not happy.
It's a feedback mechanism that is not: "hey - we're going to kill you now". Which Western nations are using 1) because it's less expensive in terms of both capital and bodies. 2) because it's arguably more humane. 3) Because nuclear weapons have made countries averse to full war.
There's no value judgement about whether the sanctions are good or bad, or some prescriptive judgement that the west is better. It's just the clear intent of the sanctions is to make life harder for the citizenry without having to kill them.
Whether the countries making the sanctions are moral or not (in my opinion, your opinion, or that of anyone else) has fuck all to do with the functional manner in which they are being used.
Sanctions are a tool, whether that tool is being used justly has zero relation to how the tool itself functions.
It's essentially a signaling mechanism - how strong that signal is received can vary a lot.
In the case of Russia at least - it's dampened quite a bit because both India and China are not participating. While they're not outright supporting Russia - they don't find the current government so unpalatable that they're willing to break off economic activities (and again - this is not a value judgement either way... simply a statement of efficacy).
In my opinion - I don't really think sanctions are going to be terribly effective (I also think the price cap on oil purchases will not be effective), but people don't seem to grasp that a very real possible alternative is outright war. Which, at least personally, I'd like to avoid. So I'm willing to let sanctions ride for a bit and see. But I'm also in favor of providing more arms and weapons systems to Ukraine in the meantime.
that said... I also have a bunch of duct-tape, plastic sheeting, water, and some iodine pills in my basement - because while I tend to hope that all the nuclear powers involved here will act with some restraint, those items will be very difficult to acquire in the 15 minutes when I might really need them, and they're relatively cheap to buy right now. So picking between that and sanctions... again - I vote for sanctions right now.
Speaking as an American, I'd say "yes". At least for the citizens who were adults at the time and were aware.
I'm suspicious of any moral framework that's hand-tuned to paint some persons as upright.
I think we just shy away from the fact that we are in fact culpable, so we look for rationalizations.
Very much so, but as far as I can tell nobody cares enough. Just to give an example: in my city Ukrainian asylum seekers get free public transportation, whereas those who escaped war in Africa ans went through the Libyan lagers we help finance don't. And don't get me wrong I would really like to see everybody get treated like a human, I'm not advocating for any mistreatment of Ukrainians...
... Yes. Just like how the former are currently being conscripted to fight their relatives in a stupid war, started by their government.
Life isn't fair, and people generally suffer when they allow bad governance to ruin their country. Ultimately, any government, even a repressive one can only function when the people it governs believe it to be legitimate. I hear that this sort of thing is being protested in Iran[1] these days.
[1] The thing they are protesting has little to do with the cause of the sanctions, though, but that's another story.
Hundreds of millions isn't a fortune for a state. Certainly financing a credible nuclear program costs way more than that every year. Let alone everything else a state needs to finance.
(Not buying the theory though; if Binance does have access to unlimited funds they're not doing a great job of propping their coin up)
Strange to call Tether and Binance, "weapons aimed at the West", when their implosion would surely do more to damage cryptocurrencies than global US Dollar hegemony.
Of course one would be smart to use other platforms rather than creating single points of failure....
Crypto never threatened the dollar. What is creating issues is crypto’s risks causing losses to Americans and, possibly, the American financial system.
Quantitative easing directly lead to inflated asset prices and inflation.
Then VCs jumped on the bandwagon and pushed FTX to unsustainable heights.
Now people all over the world are suddenly supposed to sit in cash while everything is crashing with high inflation to boot?
Isn't Tether based in Hong Kong?
Edit: Just the daily trading volume of, say, the forex market, completely dwarfs both the total market cap of tether or the daily volume of Binance. The total value of global equity trading worldwide is also insanely bigger than these two combined.
It should/could/is. However, there are two things you need to understand:
1. Crypto is mostly a young people game. Who happens to be quite broke. The people who have money where I'm from, are not comfortable with crypto. They'd rather deal cash, real estate, gold or valuable objects.
2. You can't launder money with crypto. You can only launder money with something that has an off-ramp. For now, crypto acceptance is very limited. The number of places, stores and businesses that accept crypto is quite minuscule that you almost always need an off-ramp into the traditional financial system. And that's where the laundering will happen, and is happening.
Even if we assume 100% of Binance and Tether are money laundering - it would be a fraction of the traditional money laundering industry already
From the AG statement:
>Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie…
>…for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations.
>In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’
>… the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one
The AG’s statement was pretty clear in going much further than “strongly implying” there are actual serious problems with Tether’s backing claims.
https://ag.ny.gov/press-release/2021/attorney-general-james-...
I guess US regulators will know if Tether is really holding half its reserves in Treasuries (around $30bn). Of course that's not a 1:1 but it's also not 0.
I don't regard Tether's market cap as evidence in either direction for it's level of backing. And I'm not sure US regulators have a straightforward mechanism that would allow them to determine the amount for treasury notes held by Tether. TRACE may be mandatory for member OTC traders, but not necessarily automatic. Also TRACE data is available & even free for non-commercial use so if there was a clear way to use treasuries transaction data to determine ownership like that then I'm sure plenty of curious folks would have already verified exactly how much in treasuries are held by Tether.
Right now all people have is the assurance reports from BDO Italia which is a small & independent accounting firm. It's a member of the BDO network, and all of their websites seem to go on at some length about how none of them have any control over or liability for what others in the network might do. Out of any list of the largest accounting firms, the top 10, minus BDO, all seem to have much more control and formal structure regarding their network offices than BDO. Even were that not the case, one or another of these accounting firms pop up in the news on a fairly regular basis for bribery, money laundering, assistance in dodging sanctions, and so on.
And of course BDO Italia may be acting very professionally, collecting their fees and honestly looking at Tether accounts once a month to make sure everything is fine. Meanwhile Tether is using the same trick of transferring funds in & out, and may continue to do so up until the music stops and one day the BDO Italia rep shows up and has to write up a bad report. Or just gets fired before that can happen, or for being a little more curious because "We pay you to confirm the numbers you see right now, we don't pay you to confirm or think about any other numbers".
I just am constantly astonished at how a large number of crypto enthusiasts, cynical & distrusting of traditional finance, will essentially take Tether's word for it while if we were talking about Goldman Sachs and the BDO USA it would likely be torches & pitchforks.
Agreed on the regulation front though, that may well - and should - happen.
The US recently during the Covid shutdowns rapidly spent and extra $trillion, then did it again 3 more times roughly a year. This is essentially done via minting fiat money.
The US also has too many strategic interests in Europe to allow an economic attack there either, although all of crypto is still too small to bother the EU to any high degree in terms of an economic attack.
Finally, Binance may be filled with criminal gains but criminals frown on people taking their money so if anything Binance, to the extent it’s resources have criminal origins, is constrained in deploying them beyond a certain point to defend their business.
No, Binance is far from immune to collapse, it’s just that if they start down that pathway then the criminals will be pretty insistent on being first in line to get their money out.
That being said, Tether USDT is priced (and supposedly backed) in USD. Is the USA part of the West?
So everybody can say: Hey, it was crypto, not money.
Most of the US dollars that exist are already digital -- numbers in a bank account, only some of which is backed by actual dollar bills. It is trivially easy to use them to pay for things or transfer them to other accounts, and they can easily be converted to/from paper money in reasonable amounts.
What we have now is fine. I don't see any benefit to making our existing currencies more "digital" than they are.
But that’s immaterial to the discussion. The original question was whether or not the idea of digital cash (regardless of implementation) has any value.
Either way, as far as I understand it, the protocol keeping DAI stable requires participants to be able to tell how much money has been deposited by a particular wallet (so that the agreed upon collateral requirements can be enforced). If that understanding is correct, then DAI requires pseudonimity instead of anonimity, and so can't have any of Monero's strict privacy guarantees.
(It's possible none of them have been exchanges; I admit I only pay peripheral attention to that sphere.)
Ironically, a lot of Americans were using VPNs to trade there and lost their savings. Why? Because FTX.US is regulated so heavily that it isn't as attractive of a product.
There have been exchanges, as far back as MtGox, and as recently as FTX and FTX.US.
What is the gift of predicting events that have already occurred called?
Learning from your mistakes.
Retroactive precognition?
The other interesting element is that the most vocal crypto backers, often for ideological reasons, want to deal with this completely unregulated system that crypto has created. If the SEC had intervened before FTX collapsed, I'm sure you would hear cries of "authoritarianism" and "fiat banks are scared" from the usual suspects. Perhaps we should let these people have what they want - consequences and all - and just limit the ability to buy Super Bowl commercials in regulated markets for unregulated products.
FTX collapsed, in part, because they weren't maintaining reserves. Instead they gambled with customer money.
This had basically nothing to do with how FTX collapsed. It collapsed because they stole the money. They may have papered up the theft as a loan to Alameda. But that wasn't done consistently, and was ad hoc rationalization of plain-vanilla theft.
Exchanges should be required to hold 100% reserves in the deposit currencies of their users if they want to be called exchanges, but that would require regulations to be enforced that don't even exist yetm
They are not popular as they require annoying banking level KYC and are very limited by regulation as to who they can deal with. In many places, only audited high net worth individuals.
These are not the places crypto-bros trade on as the fees are not subsidised by house trading or self issued coins.
I am not sure why an auditor would not touch crypto.
It should be the opposite. Any normal company that operates in financial markets should have normal company accounting and normal auditing. The issues at the moment pretty much stems from people thinking 'crypto' should be different.
Note: I personally believe in the utility of crypto and think much of the hate for it on HN is downright idiotic and ignorant, but giant shenanigans like these are are a separate matter of natural human greed, fraud, lies and self destructive foolishness.
https://www.theguardian.com/technology/2022/nov/11/binance-f...
In that sense Binance is guilty here with their BNB token, having also set the example for FTX' FTT token.
Until they suddenly don't
DCG owns CoinDesk but not Gemini.
https://www.reuters.com/technology/crypto-exchange-gemini-tr...
I don't wanna be a full-on hater of crypto. And I do wanna hear of use-cases that are relevant and intuitively understandable or at baseline, usable, to laymen.
What utility do you see – through all the noise and chaos and human flaws that taint all things – from crypto, that to you just makes sense and will prevail in light of all the deserved and undeserved criticism?
What led you to think laws are being broken in those scenarios?
Law ≠ moralityb
Finding out that somebody used crypto to buy something that harmed your family shouldn't make you dislike crypto. Bad people will get a hold of weapons regardless.
If it didn't change anything then by the same token it wouldn't help people in oppressive regimes.
> Finding out that somebody used crypto to buy something that harmed your family shouldn't make you dislike crypto. Bad people will get a hold of weapons regardless.
Security is always a tradeoff. You can't make it impossible to get hold of weapons, but you can make it harder, and that matters at the margin.
I said "doesn't change anything there", not "doesn't change anything".
> Security is always a tradeoff. You can't make it impossible to get hold of weapons, but you can make it harder, and that matters at the margin.
The payment itself is not where these efforts should go to. Transport, manufacturing, advertising. These are all much more fruitful places to look at stopping illegal trade.
But there's a symmetry to the situations. To the extent that it helps people evade government controls, it will help people evade government controls.
> The payment itself is not where these efforts should go to. Transport, manufacturing, advertising. These are all much more fruitful places to look at stopping illegal trade.
That's pure whataboutism. Enforcing laws against bitcoin makes all kinds of illegal activity harder, without significant downsides for law abiding people. So it's a worthwhile measure, regardless of what else you do or don't do.
I said that crypto didn't create black market trading and so I'm unsure what you mean by this?
> That's pure whataboutism. Enforcing laws against bitcoin makes all kinds of illegal activity harder, without significant downsides for law abiding people. So it's a worthwhile measure, regardless of what else you do or don't do.
That's not what whataboutism means. I said that it's a better idea to target other aspects of the black market.
Sure, but plenty of bad actors have broken the law as well - the examples of these are far more numerous. While there are hypothetical moral use cases for crypto, some of the most common actual uses are greed (yield farming, speculation), scams (rug pulls, pump and dumps, wash trading, ransomware), tax evasion, and as currency for contraband like drugs. What ratio of moral to immoral use cases is acceptable to the crypto community? 1:10? 1:100? Or is anything ok as long as someone out there is using it to escape repression?
People know what Monero is, and it's likely one of the most important cryptos for many people.
It's also in a legally tenuous area in many jurisdictions, and therefore perhaps not considered as 'safe' for people who just want to speculate on price.
It's still massive, and a 2.6 billion $ market cap is nothing to sneeze at. Not sure why we need to compare everything to the price of other projects in the space. The fact that people inevitably place so much emphasis on 'price' (as denominated in USD of course), is really the most negative consequence of the space.
Interesting framing.
I would have thought the ability to control what goes into a person's body, ie bodily autonomy would have far outweigh religious freedom.
If I had to give one up, and I don't think anyone should have to give up either, I would give up religious freedom long before having to give up control over my own body.
I guess that goes hand in hand with the abortion debate, you're either in the religious freedoms camp or the bodily autonomy camp.
it's good to see there are other's who think the opposite.
I appreciate the differing opinion.
An abortion kills a baby by directly attacking his or her body (dismemberment, lethal injection, etc.). You can firmly be in the bodily autonomy camp and in the religious freedoms camp at the same time.
https://vitalik.ca/general/2022/12/05/excited.html
https://astralcodexten.substack.com/p/why-im-less-than-infin...
I won't summarize, beyond agreeing with the second that a lot of the view that "all of crypto is a scam" is driven by the fact that essentially all public facing crypto advertisements are for scams. However behind the scenes there are open decentralized system that do move billions of dollars smoothly and safely for millions of people.
The personal example Scott gives of sending money to Russians is probably illegal and circumvents currency controls that the Russian government has deliberately put in place, so not really a demonstration for crypto as much as it is an example that people find these types of transactions useful for various reasons.
[Insert conspiracy theory here about Tether being a CIA op to dollarize the developing world.]
We know banks work in the dark ages. Even after a nuclear war within years someone will found a bank.
His house was filled with petrol (gas) because he'd been paid and he had to buy something the same day that would keep for a month and hold it's value or his money would evaporate. So we sat in his house praying there wasn't a fire.
That's the use case for Bitcoin: currency of final resort. It's the same as gold only better (can't be faked, hard to steal etc).
I think in countries with stable currencies and after 2 decades of low interest and inflation, that's underrated as a use case...
I also believe (forgive the digression into my weird conspiracy theories) that one reason the US has made so much progress on legalised weed is because crypto and the dark web basically mean you can get whatever you want delivered right to your door. But that's just my own weird world view.
Plus if you have the ability to turn arbitrary currency X into BTC, you can certainly change it into USD, which is far more stable than BTC. So, nope. This is not a good use for BTC.
With enough time passing you have an entire underground economy- conveniently denominated in dollars.
I'm guessing the friend sold the petrol for USD, right?
Zimbabwean who lived through this checking in - let me add context and help deconstruct this for HN: People (and banks) were converting Zimbabwean dollars to anything that could hold value and could be easily resold (in US Dollars) ASAP - this could be petrol or petrol vouchers, groceries, cookies - anything at all that could be bought with Zimbabwean dollars and flogged for USD. One of the retail banks got in trouble with the central bank after adding masonry bricks to their commodity portfolio[1]. Petrol was definitely a risky. Bitcoin would not have solved this because the using Zimbabwean dollars to purchase of commodities was only the first step to procuring US dollars while arbitrating the delta between the official exchange rate that formal businesses had to use, and the much higher real exchange rate as determined by the market. The hypothetical bitcoin:Zimbabwean dollar exchange rate in 2008 would have always tracked the market rate with no opportunity for arbitration.
1. Not brick futures or other fiscalised instrument: the bank bought and took possession of piles of bricks for resale later to hedge against inflation
- transfer of provably discrete (and sometimes fully private) values between machines, without a central intermediary. It takes what HTTP/S, FTP, all the information protocols that opened up the internet to what it became, and adds the ability to know that packet_a is the only packet_a out there.
- it's on the back 30-40 years of research of the same computer scientists that brought you consumer cryptography, Tor, and many other consequential innovations. As in, it didn't just pop out of SBF's head.
- Think of what non-discrete digital information transmission did to everything. Now we have discrete digital information transmission. This is where the "money of the internet" terminology comes from IMO.
- "but we have Google/ApplePay, Venmo, etc!:" look at the protocols that govern the internet and similar examples like linux. how many of them are "owned" by a central party like digital payments currently are? yes, some have heavy influence, and ICANN, DNS, etc are somewhat centralized when you really get down to it. But there is no vendor-specific HTTPs.
Not technical:
- simply put: people, governments, financial institutions, and on and on are using it. The opinion pieces and select loud voices in government and HN would make you believe that only criminals or techies putting the dotcom bubble to shame are using it. However, hand on the bible, it has penetration across quite a lot of use cases as a digital, international currency, beyond NFTs and moonCoins. Bank of International Settlements just let member banks deposit 2% of their holdings in BTC. This is not a small event, and its one of many out there. While Senators, ECB, and coworkers in HN are shaming it, it's getting adopted by their peers. And normal folk who don't know better see it as an open question still or fraud somehow.
- payment censorship: The largest capital outflows from CN where when crypto was legal there, and then subsequently banned. Ok though, "it could never happen here" is often thought if you live in the West. People saw Julian Assange's cut off from payment rails and rightfully so perhaps dismissed it. But then what about OnlyFans last year almost having to change its entire product because someone didn't like porn and pressured enough investors/payment providers in the West to cut them off? Mindgeek (Pornhub) lost payment providers access as well last year. Ok though, "well that's porn." When you combine the march of digital payment censorship based on the values of the day, combined with the digitization of cash and limitations around paper currency, that's a trend to note. What about abortion? What about pro-life funding? What about...? What about Equifax selling your compensation history to competitors, and your lack of opt-out from that system because you get paid in USD via digital banks? In short, digital currency is not currently trustless and censorship-less in the same way paper currency more or less is and has been for centuries, crypto is the only (perhaps imperfect!) alternative out there right now.
- inflation: 8% inflation in the US is one thing, but I know for a fact restaurants where I live (normal town, US) have faced 100% raw ingredient prices YoY. money printing == inflation is irresponsibly simplifying it, but where is your right to have a currency backup that at least has some boundaries around the monetary policy of the day, enables to you exist and spend online, and aligns with your incentives to spend or not spend? Dgital currencies built in CN have test trial "expiration dates" on them to spend for instance. The US is in the middle of similar tech. "It could never happen here" but if you dig in and read some Keynes which our monetary policy is based on... it certainly could.
There are better bets out there against inflation. Dollar is “down” 8% because of inflation but BTC is down 65%.. Just buy gold if you want a hedge that is not correlated with the general stock market. Crypto is just a proxy for tech stocks
That’s a lot of details and context beyond “crypto is just a proxy for tech stocks,” but usually that seems to be the flavor of the response one will get after going out in a limb to engage in dialogue.
I worked as a lawyer in NYC unwinding many of the 2008 financial crises bankruptcies and can tell you that billions of dollars of mortgages, home deeds, commercial loans, etc are traded with bankers sending each other excel files. Which means that the property ownership is literally a spreadsheet (often with a date in the file name). It was shocking but how it was done.
There are massive third party organizations that are tasked with tracking those transactions MERS. The commodities exchanges etc but they weren’t much better organized. Lots of excel files.
So if there could be a common accounting ledger that could be verified it would be a big improvement. The question is though would that be 10x better? Or rather enough to get the various stakeholders to adopt the ledger. So far. No.
Excel may be cheaper and faster for companies but governments care about legitimacy and could probably end up forcing implementation. So imagine that instead of county deed offices that have physical books dating back hundreds of years with title info, they had a blockchain ledger then the third party systems the evolved on top to make title transfer lowers friction will technically not being a true legal transfer could have a middle ground where the transaction has the certainty and legitimacy of a public record and the low friction of a digital transaction rather than physically having to go to each county to record the transaction.
Similarly all large banks now have to submit stress tests to the federal reserve and one of the hardest things to do is trace asset transfers and liabilities to get at contagion risk. If regulators were smart they would mandate a blockchain or time series database so that unwinding transactions didn’t have to happen through junior attorney and bankers manual review of transfers in bankruptcy court.
Transactions are harder to do, they take longer, they're massively more inefficient, etc. And what do we gain from this? Blockchains are not immutable (as we've seen), they're usually controlled by a single entity or group of entities (as we've seen), they're public but in a bad way - as soon as the connection between a person and a key is revealed, that person's entire transaction history is revealed. And so on.
I know that "all these problems are being solved" but you could solve them all in an instant by just using a database and having sufficient oversight over who gets to manage it. I don't understand the enthusiasm to use a blockchain here (or anywhere)
I can say the same things of Visa? If the point is that economic incentives are what keep miners honest, what do you think keeps Visa honest? (I'll tell you as soon as they start doing things that don't follow the rules, their market cap will plummet)
Central point of failure argument seems moot - there are simple architectures to solve this for databases.
As soon as you tie it to real-world assets it's no different than an Excel sheet because you must validate everything manually anyways.
It can work outside of the digital realm.
https://blockpit.io/en/blog/how-to-solve-the-oracle-problem/
> A decentralized oracle uses a decentralized network of nodes to obtain real-life data from off-chain sources of information and transfer it to smart contracts on-chain. These decentralized oracles are like public libraries with multiple sources of information. Using many sources of information helps to minimize counterparty risk. More importantly, decentralized oracles aim to reduce concerns about reliability and trust because oracles that provide false data will be penalized for data manipulation.
Whoever hosts the database is in a position to manipulate data to the disadvantage of the other. Which entity gives in and gives up that power to the other? Why should either party agree to take on that sort of counterparty risk when they don’t have to?
Also, what instances of non-immutable blockchains are you referring to? Blockchains by definition are immutable post-finality.
Both?
> manipulate data to the disadvantage of the other
How is this even possible? Don't they sign their transactions?
> How is this even possible? Don't they sign their transactions?
In a blockchain, yes. What you quoted was talking about a database. It seems like you accidentally just realized the issue with your own argument by trying to find an issue with his. Great way to get around bias.
If I'm a company, I already have a database of transactions, even if it is a spreadsheet or physical file folders.
> It seems like you accidentally just realized the issue with your own argument by trying to find an issue with his.
Where is the issue? The two companies can sign and keep separate copies of the contract/transaction. That's literally what they do now. Just digitize it, no blockchain necessary.
Companies could sign a text file of a contract with PGP keys. We could standardize a transaction format and both companies could sign each exchange. Company A would keep the contract and Company B's signature, and vice versa. Trusted third parties (our attornies, banks) could sign as witnesses for bigger transactions.
What do cryptocurrency and blockchain achieve over that, especially given the high costs of transactions?
https://www.cfainstitute.org/en/advocacy/issues/central-clea...
The premise of your argument is that building a clearinghouse is cheaper and easier than using a blockchain. That seems laughable, honestly.
Sure and what if unicorns were real? Horses would seem pretty boring then I bet.
> The premise of your argument is that building a clearinghouse is cheaper and easier than using a blockchain. That seems laughable, honestly.
I guess it’s good that we are both laughing at each other then.
"no, that's ridiculous, let's build a clearinghouse, get a bunch of lawyers and have paper contracts drafter, ad deal with differences in international law."
Like, either the terms are known and you put them in a smart contract or they’re unknown and you need lawyers anyway.
I dig the energy, but at least be sort of realistic in your “owns”
It's a bit like hearing people dismiss email and saying "just use snail mail", "just have a scribe write the letter for you", "just use a personal carrier so it's faster".
> An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties.
Expenses involved is such a process include legal fees to draft and negotiate the agreement; paying the escrow agent for their bother; paying for litigation in the event of a dispute. Plus, you have the risk of the escrow agent misappropriating the funds.
Escrows can be implemented on a blockchain as well. If the use case is suitable, you can save a lot of money and hassle! And if settlement is on-chain and is indisputable, you might not even need any escrow at all.
Clearing houses do not provide any real information what they do. Supposedly they are regulated, but nobody really seems to look under the rug - which seems to have a lot of dead bodies (anyone remembers the Clearstream scandals?).
DTCC was accused multiple times during the Gamestop saga for allowing naked short selling + for allowing "fail to deliver" all the time. And the worst is that we really dont know. There were no real investigations, no real audits, no information provided to the general public. We are supposed to "trust" the clearing house, but without the ability to verify what it is doing. So how can we know what they are doing? The things we have dont really show what they are doing; also different thing is that they can claim to do one thing, but do something different in reality.
I bet that clearing houses are allowing naked shorts all the time, because nobody can really control it. Are there any programmers doing complicated code reviews with sys admins? The "big four" audits are a joke, they check some papers, of things that supposedly happened or did not happen.
Audits are done by accounting by graduates, who barely understand basics of accounting and here we talk about inspecting complicated software of some clearing house that does a million things per second. Everything is done inside some complicated operatically tool - and I doubt big 4 has any chance to understand it, if even they investigate it, because probably it is outside of scope - they just investigate the print outs, or Excel files "provided by customer". Everyone who works in finance knows that audits are a joke; the auditors barely understand what normal things are doing - and they can barely keep up with the financial part; here we talk about actual checking if the business side isnt cheating somehow inside its software.
A clearing house can just run two sets of books; also how can anyone know it isnt front-running, or naked shorting? There is a lot of money on the table in that and I bet someone tried to skim some of it from time to time. And as I said, we will never know, since this information is hidden from public. We dont really have any way to check it and very doubt if those who check really do.
It also doesn't really do much for most real world transactions because of the oracle problem. Unless both businesses only care about entities that exist on that blockchain as well having the transactions there doesn't provide any additional benefit since the blockchain cannot verify nor enforce anything outside of it. Regardless of whether the transaction of you sending me money is immutable I can still just not send you what you paid me for.
Also, I agree that blockchains only work in the context of a functioning legal system, in that the link between on-chain assets and physical assets must be enforced via some legal or governmental mechanism. This should be possible using contracts under current law, however, and such contracts could be limited to establishing this linkage, avoiding more complex issues that might otherwise come into play if it were not for the use of a blockchain for record-keeping, transfers and settlement.
You want to shield your transactions some of the time to prevent competitive analysis of your business expenses etc but other times require provable transaction reporting and tracking for stuff like tax purposes and financial disputes.
You want to be able to prove you sent a payment or need to document yearly expenditures for instance, being anonymous in those situations could cause issues. You could use signatures to prove ownership of the keys involved in a transaction I suppose but I’m not familiar enough with the laws in this context to know if it’s sufficient legally nor am I an accountant.
I guess stuff like that is kind of a gray area and is an example of the unclear guidance that pro-regulation crypto folks in the US have been asking for the government to provide clarity on.
Imagine installment sales where the original seller transfers their right to collect the remaining balance to two separate companies. How does the original buyer have any confidence that their payments will be applied correctly if they are reliant on and beholden to shoddy records of the seller or some third party?
More importantly though I don’t feel like blockchain prevents shoddiness and human error from causing problems, it just changes the methods available and how they manifest.
Badly written contracts, mistyped addresses, and misplaced keys have lost people tons of coins. And the lack of reversibility and centralization makes cleaning up mistakes significantly more difficult.
What happens to the buyer when the original seller writes a broken contract to transfer the recipient for the remaining balance that results in the payments being completely irretrievable?
If the two rivals can't abide by a contract, a blockchain wouldn't resolve the scenario either. Imagine "bug vs boot" or "shooting war" kinds of contract violations where overwhelming force is in play; why would a blockchain make a difference?
Human history has lots of "people don't trust each other" scenarios, and they've been resolved in the past, with reasonable efficiency, without blockchain.
The reason so much time is spent negotiating legal agreements is to reduce the surface area of dispute. On one hand, we want to reduce the possibility of misunderstandings that could lead to a "shooting war" as you put it, and also to reduce as much as possible the scope of the matter that may need to be evaluated by a court in the event of a litigation.
Using a blockchain in a situation like this can make achieving both of those objectives much easier and less costly from both legal and operating points of view. There would still need to be some contractual relationship among the participants, but the scope of the contract can be simplified and reduced.
And if the number of participants involved exceeds two entities, a blockchain can vastly simplify the relationships of all the participants with each other, without needing to empower a centralized entity to coordinate among all the participants.
> Human history has lots of "people don't trust each other" scenarios, and they've been resolved in the past, with reasonable efficiency, without blockchain.
Sure, but what's wrong with reducing costs and complexity even further?
And it's interesting to note that no-one (as far as I'm aware) is doing this. Blockchains have been around for a decade and escrows are still going strong - I don't see any movement to adopt blockchain for this.
For the end user sending a transaction is quicker and cheaper than getting your lawyers to draft contracts, maintaining your own books, paying an accountant or someone else to manage/balance the books, coordinating a deal/terms with them, etc.
Also there's Proof of Stake which is much more efficient than Proof of Work.
The commenter up above is directly referencing where existing 3rd party / escrow services are pretty terrible today and they're certainly not easily accessible to the general public or your average piece of computer code.
A lot of the pre-boom blockchain contract excitement really was as simple as "turn the awful banking middlemen into code so we can get the advantages of them programmatically."
"It's math, bro" isn't actually comforting if the contents of the distributed database are actually in question, perhaps because of mistakes, shenanigans or misbehavior.
No sane risk assessment of "our company depends on this being correct and consistent" is going to sign up for this.
This is the greatest misunderstanding. Immutability is NOT a property of blockchains. Its a property of Bitcoin and possibly Ethereum through PoW/PoS
As I noted, "by definition" a block that has reached finality will not be removed. Any attempt to add, modify or delete transactions or blocks prior to this point would be self-defeating because it would be automatically rejected.
Yes, newer blocks can be forked out of existence before they reach finality, which is why only blocks that have reached finality are deemed immutable.
So basically, the only use-case of the blockchain is "virtual currency" like bitcoin and we've seen that these "virtual currencies" doesn't actually operate as a practical currencies but rather a speculative investments and means of laundering money/control-of-sources (if you have free electricity, you can turn it into cash at a cost to the planet etc).
The best thing about a blockchain in a situation like this is that the different participants don't need to reconcile their transaction records to make sure they agree. Reconciliation between the participants—which is costly and can lead to disputes—is unnecessary.
Of course there are other technologies you can use as well, but using a blockchain would be easier and cheaper—especially if additional parties begin to participate in the arrangement as well.
The blockchain simplifies the arrangement. Where is the additional complexity you are referring to?
All of these questions need serious consideration if you are doing real business. Particularly when a database looks like it gets you 98% of the way there and your legal department covers the other 2%. What value is a blockchain actually adding compared to MySQL and a lawyer?
After all, the threat of a lawsuit is enough to keep the databases in sync almost 100% of the time, and to resolve most other problems quickly. For anything more serious, you will need to do a full reconciliation of the stuff and the money, which a blockchain won't help you with anyway.
Why do internet companies not use blockchains like git for all their transactions and instead use some form of database?
And git doesn't prevent software developers from pushing bad/hostile code/data into their repos. A blockchain wouldn't prevent financial institutions from publishing incorrect/fraudulent transactions into the blockchain.
What you theoretically gain out of a public blockchain is just that it is permanent and public. You could try to pass laws to require permanent and public access to a companies books instead and be technology agnostic. This law would be highly unlikely to ever pass. But you don't need a blockchain to do it.
And if it isn't public and immutable then the company can change the ledger whenever they like and throw away the old chain and commit fraud, there's nothing magical about the word "blockchain" which prevents that. It is the public nature of it which makes it immutable. If you want to make it private and immutable a normal database with a public, published cryptographic hash of the entire contents published at intervals would make that possible. What you need then is an append-only database where incorrect prior data is fixed not by throwing away the bad data, but by publishing new records which update the old data, and then a way of publicly validating that the old data hasn't been tampered with. That can actually be solved without blockchain. It definitely can be solved without public blockchain, you just the company to periodically "publish" its bookkeeping hashes to an agency (or the public) that tracks them.
That doesn't fix fraud, though, those records could all be bullshit the first time they're entered. Just makes it harder to go back and commit fraud. And if the company never opens it books and is never audited then none of it really matters, blockchain or not it just becomes a private diary of lies.
Neither of those things are the defining feature of cryptocurrencies, decentralization is.
Decentralization is one of the most pointless endeavors in technology, because it's so hard to scale anything decentralized (case in point, how expensive on-chain BTC/ETH transactions are).
The entire Internet is built on various levels/degrees of decentralization, and while there are performance costs, it's still usually cheaper than the alternative in the long term.
It’s so wild to hear this, when, actually let’s just count some decentralized failures.
1) Remember when Solana just turned off? I bet you do since it happens so often. (I know, it’s the miners fault; crypto can never fail, only be failed)
2)Remember when Bitcoin hard forked 8+ times and many of those forks suffered 51% attacks due to lack of interest? If decentralization were good, then why does everyone centralize on the original chain?
> The entire Internet is built on various levels/degrees of decentralization, and while there are performance costs, it's still usually cheaper than the alternative in the long term.
Explain to me how many machines running at under 100% capacity is cheaper. Why does the cloud exist if that’s the case?
https://www.justice.gov/usao-sdny/pr/us-attorney-announces-h...
https://www.justice.gov/opa/pr/two-estonian-citizens-arreste...
https://mashable.com/article/biggest-crypto-scams-2022
Please post some links where Crypto is beneficial to anyone other than those that speculate in it.
Imagine you run a fast food franchise with 10 restaurants, each keeping their inventories in a local database, how do you coordinate global restocking? Manual reconciliation across each database. Ok move to the cloud. Now you have a global picture where state is adjusting in closer to real time and reconciliation is an inherent property of they system rather than a process implementation operationally. Well as I have described elsewhere in this thread. A lot of financial transactions are managed in an equivalent process of local databases with manual reconciliation.
I am oversimplifying because there are a number of road blocks that prevent a solution like “implementing a cloud database” and also conflating what happens within a company (using the franchise analogy) rather than a market (where every single franchise had a common inventory and ordering system not tied to a third party supplier). By my point is that a block chain ledger would solve many of these problems without users even being fully aware of the problem in the first place.
If I (a trusted third party) maintained a giant public database that anybody could append to, it would be trivial to release checksums or hash values at specific intervals to prove that nothing in the past was altered.
You're opening yourself up to equivalent of DDoS for databases.
Add extra maintainers for redundancy and economically incentivise people to act in good faith. Congratulations, you now have a proof of stake blockchain.
If there is a network of financial institutions - why can't they trust each other?
If you want to know that the data is correct, you have to test it - for example by making stocktaking, or random spot checks. Otherwise, someone can write on blockchain that they sold 10000 hamburgers, while in reality they sold none.
As for your example of "10 restaurants" - it seems that you have very poor knowledge of ERP systems and concepts like MRP
https://en.wikipedia.org/wiki/Material_requirements_planning
Might as well start here:
https://en.wikipedia.org/wiki/Supply_chain_management
Companies have been using databases to collect information about their resources since their inception. You have a very naive view when you think that "databases have to be moved to the cloud", when in reality companies have been using own servers that collected data from shops since the 1980s if not earlier.
If you really think that storing data in one database is some new concept, or you think that basic MRP for 10 restaurants is impossible.. then maybe read a bit about supply chain management. Those concepts are not new at all; tons of tools help with that, since last ~30 years, if not more.
Bitcoin is not even useful in this scenario; because if 1 restaurant fat fingers something into blockchain, then this error sits there forever, while in a classic database, someone can usually correct it in an easier way. And people make mistakes all the time.
Are you implying that the spreadsheet is/was itself a legal document signifying ownership? Because that is radically different for my understanding of home ownership. I have never owned property, but to my knowledge ownership is conferred by way of a deed that is registered with the government.
Which leads to the main issue with the crypto hype that I see. The majority of the space is taken up by two overlapping camps: get rich quick shills and techno libertarians who believe we’d have utopia if not for the pesky government.
Worse, there were instances in 2008 of banks stealing homes out from under people - who sometimes didn't even have a mortgage - by getting fake paperwork waved through, because it was impractical for all the competing claims on a loan to be properly validated.
https://www.salon.com/2013/08/12/your_mortgage_documents_are...
Would blockchain fix this? No. The problem wasn't tracking the transactions, it was the fact that banks and the financial industry fraudulently hid the true risk of various loan bundles.
Blockchain would only have solved this problem if the loan context - creditworthiness, payment history, and so on - was included with every loan transaction, and could easily be accessed and summarised for all the transactions in all of the loan bundles.
Which blockchain doesn't do.
Coincidentally, this is exactly the same problem that blockchain hasn't solved for FTX, Binance, Mt Gox, etc. Blockchain does not provide an objective assessment of risk, value, or corporate credibility. It's just a ledger.
Even if you can't manipulate the ledger, you can still manipulate the perceived meaning of the numbers in the ledger. Especially if you're a trusted party in the cryptoverse.
In fact it doesn't just fail to fix these problems, it creates new opportunities for spectacular frauds.
In fact counts eventually started getting harder on banks, rejecting the argument that tracking transactions was impractical and ruling in favor of homeowners and making the banks eat the loss for their own shoddy paperwork. But for many it was too late.
So imagine Bank of America issues a mortgage. They don’t want to keep the risk on their balance sheet so they create a mortgage backed security with 1000 other mortgages. Then they sell that to Goldman Sachs who in turn sells it to Lehman, but not the full portfolio only a portio, say tiers 8-10 of 10. In order to “facilitate liquidity” and “market efficiency” they wouldn’t document every transaction on the local county register of deeds. They would “trade” the securities by sending each other spreadsheets and hopefully “record” the transaction with a 3rd party like MERS. But when 2008 hit it often required going to court to fight out who owned what. Worse lots of homeowners ended up being foreclosed on because their payments didn’t go to the right owner on file.
So yes, the legal title is recognized by a written record held by the government, the market implementation adds layers on top to facilitate trading the paper.
Or at least, I don’t see what benefit the blockchain provides over such a centralized structure.
I'd agree the Merkle tree is good as the ledger. AFAIK it is also used in certificate transparancy logs: Every block of log entries contains a cryptographic hash to a previous block, so you can't rewrite log entries, only append them. This is what guarantees honesty in the certificate world, and is I assume the only aspect you need for your proposal.
But the Proof of work is basically a race to do as much computation as possible. This is the part that wastes so much energy and resources, the part that slows things down, but also the part that provides value to cryptocoins by proving that someone wanted to waste/spend the resources.
Do you see value in a system that has both aspects?
Where this becomes interesting is that someone can just change the past data, then go through and update all the subsequent additions to come up with a the new final value. CT handles this by having multiple other entities check that the CT root values are not changing over time. Git handles this by allowing for similar mechanisms - if you believe Linus he memorizes the root hash of his local repo before bed each night. A post-it note would work just about as well for the Linus/Git case, but I am getting off topic.
I don't see value in proof of work because it assumes that any system would have more entities (where each entity has some amount of computing power..) watching than there is computing power attempting to rewrite it. That doesn't really scale up across most industries use cases. A set of say, mortgage companies, could just exchange data in a merkle tree format and raise an alarm if it looks like the values changed from the prior root. This is very fast and cheap to compute and doesn't require proof of work calculations.
When a loan is made, a loan document exists; and accounting entries exist somewhat separately. A contract can be entered without writing, a contract can result in complex accounting treatment which may be investigated, rules clarified, decided, corrected when methodology errors were made.
Do you mean that the blockchain is supposed to help with the accounting side, or with the contract side, or both?
So yes, in theory it could be a centralized database but I don't think there exists this mystical "global trusted entity" that has the population's best interests as their main incentive because everything within a single nation state is clouded by politics. Banks and big tech are prime examples. That's why it needs to be decentralized, decoupled from specific governments and people in power.
In practice, maintaining anonymous ownership of your assets on BTC is excruciatingly hard, because it's a public record.
The organizations that monopolize violence ("governments", typically) have ways of compelling people that simply ignore some magic number in a distributed database. Please do a thing or we'll do a thing to someone you care about. I suspect even Satochi would happily give up the private keys to avoid a visit to Lubyanka...
That's not to say that there's no value to these things, but real life violence trumps imaginary freedom.
You believe you've done a thing in contravention of your government's laws. Perhaps you've done it and will not be caught. Perhaps you've done it and they haven't gotten around to asking you politely not to do this. Some crypto currency obviously leaves a paper trail for all to see; some states it doesn't and perhaps doesn't, but perhaps does.
Autonomy to break a law and not get immediately punished for it isn't really freedom from that law.
To clarify -- breaking a law is not imaginary. Maybe you've broken the law and haven't immediately faced any repercussion, but that doesn't mean that bypassing money laundering controls renders those money laundering controls or punishments for breaking the controls imaginary.
(edited to add the clarification)
You might ask “what does such a crackdown look like?” And the answer is, they would simply round up and throw in jail prominent crypto people, make it a crime to do anything with crypto (buy, sell, use as currency etc.) and put the fear of god in everyone else so that nobody dares touch crypto.
Do the deals between your crypto things that are not controlled by governments and taxations and leave the rest of us and our economies alone.
No real world government that I'm aware of, even the liberal democracies, would pass a law that is circumventable by crypto and then ignore it when crypto becomes widely used to bypass that law. They'll restrict access in such a way that they can identify who is who (KYC) or ban the network altogether. This is what we already see happening.
The only way this works to bypass the government is if it remains a relatively uncommon tool. And if it's an uncommon tool, it's not a useful currency.
[0] https://bitcoinmagazine.com/legal/nigeria-looking-to-legaliz...
I will say that this could be a valid use case: if you have an ineffective oppressive regime, you may benefit.
Crypto is an alternative financial system. Financial systems, on their own, are castles in the air. They provide no value to anyone. Financial systems derive their fundamental economic value by being wired to the real world in some way. That is, efficiently allocating capital to productive enterprises, cheaply translating capital between different forms (e.g. currencies, but also product <-> currency), and transferring risk from those who don't want it to those who do. This is why finance exists, and what it is for.
The cryptocurrency financial system as it exists now is only very weakly connected to the real economy, and only in a few places of marginal or possibly negative social value (e.g. drugs, gambling, prostitution, ransomware). However, there are a few places that actually use crypto fairly heavily for legitimate, socially useful transactions, such as Vietnam, Ukraine and Venezuela. Most people here tend not to find those examples particularly convincing, and neither do I - but they are important to mention.
But what crypto represents is an alternative model for how a financial system could operate. It is a financial system that offers many of the same features that our existing system does, but is different in some ways. Asking "What good is crypto?" is a bit like asking "What good is Linux when we already have Windows?". They both do very similar things, but they do them differently, and most critically, they imply different distributions of power.
If you build your business around Microsoft products, that's fine, but in several important senses that makes you beholden to Microsoft. If you want to build a financial business in the traditional financial economy, you will probably have to go to one of the major money center banks, hat in hand, and ask them to let you do whatever it is that you want to do (or an intermediary that has done this). Depending on what it is you want to do, you may have to go to all of them and ask this.
Crypto is different. If you want to build a financial business in crypto, you simply write the code and deploy it. You don't ask anyone for permission, and there is nobody on earth that can tell you "no". Even the US Treasury hasn't shut down Tornado cash, they've merely sanctioned it. The drawbacks of this approach should be obvious, but so too should the benefits. Whether you like the approach crypto offers is simply a question of values. But it is, in my opinion, undeniable that it is meaningfully different while being capable (in principle) of offering most of what traditional finance does.
The fact that crypto has not yet been wired to the real economy is the reason that it has not yet provided much in the way of concrete utility in most developed markets. The reason it hasn't been wired to the real economy is that regulators and lawmakers mostly have not allowed it. And I agree with them! I would like to see a little more experimentation in that direction, but crypto is fairly obviously not ready for prime time in this sense - not yet, and maybe never. Many things would need to happen first. However, don't mistake the absence of this connection for the theoretical inability to create it. It hasn't been created because people are cautious about things this important, as they should be.
There is nothing in principle right now preventing anyone from tokenizing a house, or a corporate debt instrument. And even if you think "nobody has done those things because they're stupid and crypto is just worse than traditional finance", you may be right! But it should be obvious that there are enough crypto believers out there that this would have been done if it were legal to do so, even if it were a bad idea. Hence, given their total non-existence, it should be clear that the reason it hasn't happened is regulatory, not fundamental capability.
You will know crypto has failed if and when there are a few real estate titles, car titles, equity shares, bond instruments, and other assorted things from the traditional financial realm that have been tokenized, but nobody cares about them. Assets placed there by a few true believers, traded for a bit, and then forgotten. That is how you will know crypto has nothing to offer. But for now nobody has done those things, because the traditional legal system (correctly!) won't respect them sufficiently.
EDIT: To extend the Linux metaphor a bit, Linux was created in the early 90s, but I would argue it didn't become clearly economically significant until the late 2000s. Prior to that it was a toy for nerds and anyone serious used "real products" built by "real companies" and purchased for money[1]. Crypto is FOSS for finance, and maybe the traditional world is right this time, and when it comes to money walled gardens and closed ecosystems are best. But it's not the world that I personally want to live in.
[1] The exact timelines here are obviously fuzzy and certainly you can argue with whether it was late or mid or early 2000s, but what is inarguable is that Linux went through a long "just a toy" phase in the minds of most people
Non-permissioned financial services is valuable, it represents pent up interest that has been muted for decades, while we pretended that only ivy league quants who also had lots capital could do anything with financial services. it was never true, just the capital barrier was high and the industry was protectionist
Even if you just look at whatever actions that the gatekept financial services are ostensibly trying to prevent, that undeniably has a value, and now that the gates are down many people transfer value this way because its fun and lucrative and quick. It serves everyone that shows up.
And most importantly: it doesn't have to be the best technological solution. nobody using it cares that a managed database could run the whole platform, people care that a managed database is permissioned and under many arbitrary whims of advertisers, shareholders, executives, and governments. Mitigating that undermines the performance. Not that controversial.
irrevocable timestamping of information
That seems pretty useful to me.
With all the VC money that pored into defi ponzi schemes gone now, we will hopefully see more sustainable products and growth now. There just was no oxygen left to compete with those Ponzi schemes.
“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.” – F.A. Hayek 1984
Ponzi schemes will always exist (they are not a new phenomena) and scammers will leverage whatever mean (stock market, real products, etc..) to create their schemes. Should we also shutdown the stock market, or restrict the sale of products?
Sure, many people use centralized systems for this now even with crypto and thus miss out on that fundamental aim of these blockchain systems, but the idea itself is doable even in its current form and needed for many edge cases, and for basic financial privacy without often idiotic restrictions and snooping.
I know many people here will hate on that because they're firm believers in the twin gospels of KYC and AML, but so many of these laws are utter abominations in their intrusiveness that i'm glad to see at least something exists which can eventually be made to circumvent them more broadly.
Most of us are not terrorist money laundering cyber criminal drug dealers, and don't deserve to be treated as such with presumptions of guilt and zero privacy rights just because we'd like to spend and move money around without being pried into as if we were little children spending their piggy bank change.
Paper/metal cash used to widely, nearly universally allow for this without so much hand wringing, but sadly, it's slowly going the way of the dodo, and something needs to take its place that isn't loaded with moralizing, puritanical scumbaggery such as that found with credit card companies and banks, or the utter mondstrosity that would be CBDC if implemented as some regulators are planning.
That seeing utility in crypto requires faith is telling.
i'm not a fan personally having worked for a time with people invovled in crypto, it just feels like the condensiation of everything wrong with technology
eitherway imo the rise of legal gambling apps will probably kill the industry since that scratches the itch most people went to cryptocurrency to remedy
I should be suspicious of what I want.
- Rumi (13th C Persian poet, tr. Barks)
The culture is a real problem for crypto.
People really underrate CZ. I've been following him for several years now and he has taken a measured approach to risk. People have attacked him instead of Brian Armstrong. I don't see a difference. Armstrong is choosing to list tokens that are likely securities.
Binance chain (BNB) is a fork of ethereum that is specifically created for frauds. Coinbase does not have one.
Binance lists monero, the currency of darknet markets. Coinbase stays far away from any privacy coin that could raise flags.
My argument is that tokens on Coinbase are unregulated and haven't been approved by regulators. That point still stands even if Coinbase publishes financial statements as a public company.
> Armstrong has a giant mansion in LA. Where is Binance or CZ?
He said once that he lives in Airbnb's and doesn't like the hassle of owning a house. I'm with him on this one. Do you really want a bunch of strangers (cleaners, maintenance, gardeners, etc) walking around your house as a wealthy person? That's a business. Not a home.
> Binance chain (BNB) is a fork of ethereum that is specifically created for frauds. Coinbase does not have one.
Coinbase originally just listed a few cryptocurrencies. Nothing changed in terms of regulation and then they started to list a lot more. So what changed in terms of Coinbase's thinking? Profit motive became more intense after they went public.
> Binance lists monero, the currency of darknet markets. Coinbase stays far away from any privacy coin that could raise flags.
Almost every cryptocurrency on Coinbase raises red flags. Quite a few of them did ICO's or something similar. They sold to investors without proper disclosures. ICO's are a slimy way to raise funds. So why does Coinbase list tokens that did ICO's?
The submission is about Binance, but the comment tries to broaden the subject to "crypto". It succeeds.
Some might say introducing a tangent, here about a theory of utility of something, acts to deflect attention away from the facts, in this case an operation that has been under investgation by US authorities for years and is now under more public scrutiny, and for (arguably) good reason.
I am not disgreeing with the comment. Everyone is entitled to an opinion. I am simply observing it has introduced a tangent. The thread got hijacked. The subject of the submission is Binance, specifically its accounting practices.
SBF was a pure unadulterated scammer. He was a thief, a crook, with no redeeming qualities. The guy who picks your pocket - SBF is as bad, worse, than that.
The founder of Binance voiced some doubts about the safety of SBF's exchange. Why? Because he had some insight into it. Because he knew people had their money in it and, by staying silent, people could lose more. And because, if SBF turned out to be a scammer, he doesn't owe him 'respect' - he owes the people in the industry a warning, if he can give them a timely one.
He was right about every single suspicion he had, and when it comes to his 'criticisms' of SBF, he deserves absolutely zero blame.
I think blockchain as a backend for protocols for various services and activities is a good idea.
Did Reuters solicit a response from Mars on that?
In a statement, Mars said it was "absurd" to compare its corporate governance and financial reporting requirements with Binance's, adding that its goods and services are "highly regulated."
In my imagination this PR person, with odd brevity for someone in their profession, chose the simplest and most fundamental reason to explain things. And then at the end remembered they should put in a good word for their products while they had the chance.
Sadly it's not the world we live in, but if there's any Mars, Incorporated person stumbling on this comment (maybe a dev? They have to have all sorts of IT departments...) do what you can, spread the word, and try to get a PR rep to say something hilarious about this.
Maybe something like "Our customers do often find our products have completely disappeared after acquiring them, but in our case they usually find the process enjoyable."
Or: "We were crypto before crypto was crypto. Every year countless customers airdrop our "tokens" to children in costumes, or while lying to their kids about a bunny. And as for our industry as a whole if not Mars Inc. itself, I can tell you with absolute truth that what we produce has gone to the moon!"
They don't care about job losses.
The "investigative" part is public data that any of us can view. If there was something remarkable there, crypto bros would have found it without waiting for reuters to "review" things.
Obviously since binance is not based in the US or EU, its users don't expect the same level of transparency that banks have. If reuters wanted more transparency maybe it should ask some country to allow it to base itself there. But given that they have been effectively on the run for most of their existence, it's not strange that they are keeping their secrets to themselves. I think reuters is trying to be sensational but none of the news it reports are.
They are welcome to base themselves in any jurisdiction however they would rather not because they have no interest in complying with the kinds of financial regulations that underpin a modern and functional economy.
Why on earth would we want to compromise on these regulations and onshore these bucket shops? Just look what happens when you let them do as they will.
Are they? They are not unless they transform to another boring bank which defeats the purpose of the exchange. Banking is not why their users joined
Sure, but if their users joined to participate in an unlawful offshore casino then my point remains. They can comply with regulations, or not. It's not the responsibility of the states to bow down to binance and allow this silliness, but on binance to conform to a state regulatory framework.
Which is not something they want. That was my comment about actually, Reuters article implies that binance must comply with some state.
If people want these products and they are regulated out of the market, offshore is where these companies will go to provide them.
https://en.wikipedia.org/wiki/BetonSports
And hey, what's 33 months in prison?
I am not a Binance user. My tax dollars will be used to clean up this mess once it implodes. I am also not too keen on it playing piggy bank to Iran and North Korea.
Really? have they been used to clean up the mess of some other offshore company imploding?
Investigating FTX, extraditing SBF and putting people in jail isn't free.
The FBI isn't gonna get the recovered money from FTX (what's left of it). That'll go to the bankrupt entity's creditors.
Nope, that's incidental. If he were foreign, and had committed the fraud he did against the US, he would likely also be extradited to here to stand trial, the same as, e.g., these three Nigerian nationals [1] or this Jamaican [2] (or, if you search for a moment, hundreds of other cases).
>And presumably this is all paid by the recovered money, not the taxpayer.
It's paid by the taxpayer, through the budgets of the DOJ, the same way things like Enron, Madoff, and other massive frauds are not paid out of recovered money, which is used to pay off creditors.
You can check the line item in the federal budget that pays the DOJ, so that's not a question that taxpayers pay for these legal enforcements. If you want to claim "presumably" please show the valid source where this entire criminal cost will be paid for by the recovered money.
[1] https://www.justice.gov/opa/pr/three-nigerian-nationals-extr...
[2] https://www.justice.gov/opa/pr/jamaican-national-extradited-...
(it is a different entity)