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Comment by epolanski | Hacker News Reader

You got to love how industry regulations really defeat most of the benefits and points of the decentralization by going in the opposite direction.

The problem in reality would be non existent if people used crypto currencies for what they were meant to be used for: an alternative economy with no need for exchanges and third parties: you sell me a banana, I give you some satoshis.

Not saying this is convenient IRL, requiring to sync to a network and chain is expensive and difficult from a phone, but that was the supposed use case.

I'm more and more convinced that blockchain industry solves no real world problems at all, except in the crypto sphere itself (like smart contracts do have a use...for crypto exchanges, crypto games and crypto gambling) and that 99% of the people who get involved couldn't care less about crypto use cases, only if they will sell for more $ than they bought for.

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> You got to love how industry regulations really defeat most of the benefits and points of the decentralization by going in the opposite direction.

Are industry regulations preventing self custody?

I hope and believe we're talking about regulation being rightly applied to centralised exchanges. So they don't front run customers on token listings (Coinbase), use customer funds when customer's haven't allowed them to (FTX), replace their customer's coins with a different currency (Binance), or whatever else.

    industry regulations really
    defeat most of the benefits
    and points of the
    decentralization

How so? Bitcoin's use cases seem unaffected:

1: Hold something that is expected to stay scarce and not printed or mined to infinity

2: Make international, fast and cheap payments that are instantly finalized.

1: How do you easily get bigger amounts of crypto, without a centralized exchange?

2: How does the receiving person use the received bitcoins, unless there is a real economy or again a centralized exchange?

Who said anything about not having a centralized exchange? Centralized on ramps are not necessarily antithetical to a decentralized system.

I’m sorry, but yes they are… the security of the system was supposed to be built in, and it was supposed to have its value built in. Neither are true. It’s not decentralized and at this rate it never will be, and seeing how it turned out so far, it would be a good thing to fail.

In this specific argument, it was about regulations, which such centralized exchanges would need to comply with.

Generally, it's literally the whole basic premise of everything 'crypto'!

This argument kills me all the time.

Like, yes, when I take my kids to Chuck E. Cheese I do want to convert my money into the tokens. I do not want to store them as that.

Most regulations around securities involve disclosures as in over some percent threshold the entity owning that security must disclose their ownership and report on it every quarter to the SEC.

Disclosure of ownership in crypto really should be around a dollar threshold, not percentage and that mostly defeats the purpose of anonymity. I think financial institutions (banks, exchanges, wall st.) should have to disclose holdings in crypto for both crypto trader awareness but also for their customers in other business sectors awareness.

There should also be strict rules preventing operating an exchange/market maker and any sort of investment firm (hedge fund, etc.) by any degrees of separation. That means they can have no relationships at all organizationally (parent/grandparent company owns both type of thing). Any transactions between exchanges and funds of that sort should 100% be reported and tracked. I think it can be anonymously tracked for some period of time but must be disclosed to an independent regulating organization.

Bitcoin is not a security though. Both the CFTC and SEC have said so publicly:

https://bitcoinist.com/cftc-chair-only-bitcoin-is-a-commodit...

https://decrypt.co/103926/sec-chair-gensler-bitcoin-not-secu...

maybe it should be?

on SoFi for example the UI/UX for trading stocks and ETFs is the same flow for trading crypto and people trade it like it is one. Else, why hodl at all if it's not in hopes it'll go up in value?

You seem to have jumped my second sentence:

> The problem in reality would be non existent if people used crypto currencies for what they were meant to be used for

Which is more or less what you're pointing at.

> A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution

> We have proposed a system for electronic transactions without relying on trust.

Any regulation introduces a 3rd party which Bitcoin was designed to remove.

When it comes to money, a purely peer to peer system of payment is just not possible unless you are doing barter. Even when you use cash, you are using the cash issued by a third party that both the payer and the receiver trust to have value. Whoever wrote the Bitcoin whitepaper was definitely a brilliant programmer but had no idea about human psychology and economics. Trust is the most important factor in economic transactions. In a complex world like ours third parties like government, banks, exchanges provide the trust.

You cannot outsource the trust to code. Code is not law. You cannot solve all problems with code.

I tend to agree with you.

Yeah ok but the first use case kind of doesn't work. The "nanny" state raises interest rates a tiny bit and suddenly nobody cares about the scarcity of Bitcoin. What gives?

> The problem in reality would be non existent if people used crypto currencies for what they were meant to be used for

In other words, "if people would stop exercising their free will and acting in ways that may benefit them, but are detrimental to my idea/this system/society/etc, everything would be fine!"

As the admin and main developer of a small browser-based game, this is a hard lesson I've had to learn over the past several years: We don't get to define how people act and think. When we build systems, we must take into account how people will actually try to use them...and if we find that they're using them in ways that are detrimental to the structure as a whole, we need to rethink our systems.

Do you mean that crypto actually might not solve a real problem within the realm of finance and that the tools and structures that exist today actually serve a purpose?

Who could have seen that coming? /s

you ought to tell that to the millions of people across the developing world who suddenly have a means of resistance to their governments debasing their savings: https://upload.wikimedia.org/wikipedia/commons/5/5d/Venezuel...

crypto is many things, but the single most important is demonstrating cryptography as a foundation for robust digital rights. we can guarantee digital rights in a way that require complex and frequently corrupt institutional enforcement in the real world. this is a mind-bending achievement and we're only at the very outset

The idea that money (which is made as a mean of transmission between goods) should be hoarded is stupid.

No wealthy person in this planet got wealthier by hoarding pieces of paper with pictures of national heroes, but by investing it in gold, art, land, real estate, stock markets and many others.

If you and some other people agree that specific hashes on a specific blockchain have some value for you and avoid "debasing your savings" you're free to hoard them.

The problem isn't necessarily hoarding but rather governments decided to only have one legal tender and sabotaging that legal tender is effectively the same as sabotaging the entire economy. Hoarding is a kind of sabotage but if people hoard something that isn't legal tender they are not threatening the economy.

The wealthy might be hoarding Lamborghini's but we can always build more cars. Can't do that with money unless the government or a commercial bank does it.

Except that's not really what's happening. In Venezuela the only people using crypto to any extent is people who already are tech savvy and have the skills to work around these limitations. The "unbanked" however still don't use crypto and hardly any shops are using it because of the volatility and the long times to approve transactions. It's good for payments of services (e.g. utilities) I hear, however.

But I think more crucially is that what's increasingly looking like "the only good use of crypto" is really a consequence of social issues a similar way to how cars are very popular in countries with poor infrastructure (e.g. USA). If the country gets its act together, this aspect of crypto's value add vanishes and will just be seen as a slow and poor quality volatile payment system.

if the existence of cryptocurrency uhh, solves central banking then i think it will have achieved its purpose regardless

That's not the point OP is making.

"If the country gets its act together".. you know by fair elections, good governance and you know by similar such 'non-crypto' things.

Ok but the only one that even attempts to "solve" central banking is RAI. So according to your hypothesis, the vast majority of cryptocurrencies don't serve any purpose.

> Except that's not really what's happening.

Or maybe you are just ignorant? Here are some examples I have compiled (took me <5 min): https://news.ycombinator.com/item?id=32406095

I've been in crypto a long time. I chose specifically Venezuela as I know that is a good case of Bitcoin not achieving its objectives and was called out specifically as an example of it supposedly being successful. And I very much stand by this and my related points.

> And I very much stand by this and my related points.

You say - "If the country gets its act together...". I think crypto will get its act together and get around the adoption blockers before despot regimes of the world get their act together. Just a gut feeling based on our history so far. I also agree that there will be multiple crypto scams along the way. Such is the allure of the new tech.

Since I cannot edit my other reply to this comment anymore, here is one more counterpoint: Nigeria is 11th in terms of Crypto adoption [1] while its government is hostile to Crypto [2]. A great example of how Crypto can help ordinary people fight shitty regimes with unstable currencies.

[1] https://blog.chainalysis.com/reports/2022-global-crypto-adop...

[2] https://www.bloomberg.com/news/articles/2022-11-27/nigeria-s...

Furthermore, crypto is spectacularly effective at violating rights; "so, Mr Arnold, I see on the blockchain your paid for your wife to have an abortion. That's 10 years in jail for you".

Democratic world could provide that service without exposing their own citizens to a world of scams.

Instead, by declining against the dollar by a factor of three in the past year, Bitcoin is quite good at debasing people's savings on its own.

Mere issuance isn't enough to guarantee price stability.

(There's an interesting question to be asked about whether the US should allow the usage of its digital dollars by non-US persons as a means of evading the currency controls of South American governments, effectively exporting price stability. Much as the existing Eurodollar system. But I don't think this is the place for that discussion)

> Instead, by declining against the dollar by a factor of three in the past year, Bitcoin is quite good at debasing people's savings on its own.

Srilankan rupee lost 50% value overnight in March 2022 and is subject to futher deterioration due to the corrupt incompetent government. Same with Venezuela. Bitcoin or Gold or USD/EUR are the only good options for the millions of citizens of those countries, albeit generally available on black markets because of government controls. My colleague has his family in such a country. Guess what is the easiest way for him to help his family in need? [Hint: gold is hard to transfer and USD/EUR transfers are sanctioned because of US/EU govt policies].

In these situations, I always have to ask: who's taking the other side of the transaction, and for what fee? Who's trading Bitcoin for rapidly inflating Sri Lankan rupees?

People who have opportunities to buy at shops with old prices is my guess.

One anecdote from someone I know personally - it is more of a barter. Her family needed to do a medical procedure, she transferred bitcoin from the US to her family who then gave that to Doctor in exchange for medical services. Probably, Bitcoin is working as intended?

> Who could have seen that coming? /s

Clearly someone who lives in some small insular corner of the world with good governance and stable currencies would definitely imagine all the benefits of crypto. /s

Some real life examples of problems crypto has solved (compiled just for comments like yours which seem to be lacking empathy or imagination or both): https://news.ycombinator.com/item?id=32406095

Exactly! What's the blooming point?

What governments want is digital currencies, all the privacy concerns and none of the benefits of cryptos.

But, let's see if crypto can survive this pressure. Really it must be robust to this if it has any purpose.

Currencies are already mostly digital since decades.

Not disagreeing but to many's surprise cash is more popular than ever.

Most of us no longer us bank notes, yet the amount in circulation climbs...[0] what's going on?

It actually probably acts like a buffer, with BOE spending the net on government assets while the notes vanish off to places we prefer not to think of

[0] https://www.bankofengland.co.uk/statistics/banknote

> Most of us no longer us bank notes, yet the amount in circulation climbs.

The plots you shared are meaningless if they are not normalized against the total money supply. I think if normalized by total amount of money in circulation the percentage would be shrinking and not growing.

didn't read the article

its regulation on centralized popup companies and letting onchain activity and constructs operate as they are

> The problem in reality would be non existent if people used crypto currencies for what they were meant to be used for: an alternative economy with no need for exchanges and third parties

You know, I think we can help you with that: crypto exchanges should be banned on sight. Including localbitcoins.

Let the libertarians have their playground, but there must be no linkages between it and the regular world of money.

Even in the case described by OP, exchanges would still be a thing, just like they are between EUR & USD.

Depends on legislation.

why?

"Regular world of money" is bizarre phrase. I'm assuming you mean the government monopoly on currency, but the idea that a country outsourcing its currency management to a central banking cartel is "regular" is lunacy.

It looks pretty regular to me? Currency issuance has been a function of the government since the Bronze age? And paper money since, what, the Song Dynasty?

You missed the part where I pointed out that the US government outsourced the administration of its currency to a private banking cartel and some people just think it's normal.

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