Hacker News Reader

Comment by testacct22 | Hacker News Reader

Why do so many of the comments here and journalists assert that crypto and exchanges are the same thing?

Doesn't keeping coin in an exchange (as opposed to in a wallet, locally) sort of violate the ideology of crypto? Wasn't this shit invented to circumvent the banks?

I don't get it, using something meant to circumvent the banks, just to invest it in a less regulated form of a bank

Isn't to say I have a problem with crypto, but the one camp of people who shill these exchanges and the other that is saying crypto = exchanges = ponzi scheme are both wrong

View on HN

I can't find the original source, but a while ago I read a really compelling article (linked from here) which explained why centralization is inevitable. I think it's relevant here, because if centralization is inevitable then it's reasonable to treat crypto as interchangeable with the exchanges.

Essentially, the thesis was that a decentralized protocol can never evolve and adapt as quickly as a centralized platform, because the protocol has to reach consensus with all stakeholders before it can change. This leaves a gap between user expectations and the protocol's capabilities, which platforms are happy to fill. They extend the protocol with bespoke and proprietary features, these features draw users, and users come to depend on these extensions. Thus, lock in.

You can see this with email and Gmail, with the web and Facebook et al. NFTs had OpenSea, and crypto in general has the exchanges. You can't separate crypto from the exchanges because the existence of crypto necessarily implies exchanges.

https://moxie.org/2022/01/07/web3-first-impressions.html

Yes! That's the one!

> This might suggest that decentralization itself is not actually of immediate practical or pressing importance to the majority of people downstream, that the only amount of decentralization people want is the minimum amount required for something to exist

Seems to me like building a centralized system on top of a decentralized one, similar to my earlier example of building a bank on top of something designed to circumvent the bank

General rule seems to be greed v laziness -> centralization

What about BitTorrent?

That's a reasonable counterexample. I'd say that probably happened because the primary use case for BitTorrent is piracy (I know there are other use cases, but that's the main one), so there was never a space for a legit business to form. Crypto had speculation, which was less obviously illegal than downloading pirated TV shows and provided a great revenue stream to boot.

It's an interesting point, but I think you've stretched it a little thin. Taking one of your examples, I don't think anyone would ever say "it's reasonable to treat the web as interchangeable with Facebook". Sure, for some people Facebook is all they use the web for - but that's definitely not true for everyone. And the web doesn't depend on Facebook existing either. When Facebook dies, the web will be just fine.

Certainly Facebook alone, but that's why I included the "et al". For most of the world, "the internet" is interchangeable with "the few big platforms I regularly use". It's not technically accurate, but I don't begrudge them the usage because that is their internet.

In your analogy, "Facebook et al" seems equivalent to "Binance et al". And OP asked about journalists too. Imagine if CNBC ran an article titled "Facebook fined for privacy violations - is this the end of the internet?" We'd all have a field day. I don't begrudge your grandma for not knowing the difference. But a journalist or HN commenter is expected to know. I wish we held crypto discourse to that same standard of being at least minimally informed.

> Why do so many of the comments here and journalists assert that crypto and exchanges are the same thing?

Exchanges are what make crpyto usable, to the extent it is.

> Doesn’t keeping coin in an exchange (as opposed to in a wallet, locally) sort of violate the ideology of crypto?

Maybe, so what? “Exchanges as a venue for, um, exchange” and “keeping coin in an exchange” aren’t the same thing (except to the extent that exchanges make it difficult to move coin off the exchange, which AFAIK usually isn’t an issue for crypto so much as it is sometimes is for fiat.)

> Wasn’t this shit invented to circumvent the banks?

That’s been part of the marketing, sure, and not just banks but the financial services industry more generally. But, as it turns out, you need a lot of those services for anything money-like to be usable, especially when its not the primary currency of the economy you are trying to operate in. A lot of the marketing of cryptocurrency is…not particularly realistic. (Of course, a lot of it is done by the people running the crypto-community versions of financial services, so…)

Without the exchanges, buying and selling for 'real' currency would be next to impossible.

Without access to 'real' money, the get rich quick crowd (and probably a lot of the scam crowd, and probably a lot of the dark market crowd) move on. With them gone... there's probably not very much left of a cryptocurrency user base.

Seems like there's two ways of looking at exchanges: using it to buy/sell, then immediately transferring to a personal wallet. Or using it as some kind of investment. I'm criticizing the latter

Wrt to the get rich quick crowd, things were fine before they showed up. They should go somewhere

10 years ago I used to hold the concept of 'accredited investor' in disdain. It's largely just creating a giant paywall (or at least wealthwall) preventing lower income individuals from accessing some of the most potentially lucrative ventures. But yeah, the past ten years of seeing people decide to go buy BTC on news of "BTC reaches record high! It's going to to the Moon!" and then decide to go sell it on news of "BTC is crashing! This is the end!", and then [loudly] complain about losing money, or even that it's all a scam, has really made me change my mind and, in part, my worldview.

> I'm criticizing the latter

I think if you remove the latter there won't be many people left playing with cryptocurrency. Which would be fine from my perspective (a lot fewer people being ripped off in what appears to basically be a huge unregulated casino). And it sounds like from yours too.

I think the thing is that a ton of people are using crypto as speculative investments and an exchange facilitates that, especially once it layers leverage and derivatives on top.

It's because bitcoin's p2p user interface is awful or nonexistant.

The Bitcoin p2p interface is quite excellent. Literally all you need to do is download a wallet, the overwhelming majority of which are open source, and then generate an ID which is also done with the press of a button. And that's it. Give that ID to somebody and they can send money to you which will momentarily show up in your account. Vice versa, for sending to somebody else.

In a world where people were using nothing but some sort of a peer-to-peer currency this system would be unbelievably amazing. The reason exchanges exist is because fiat currencies still exist, and so there's a lot of demand for exchanging between peer-to-peer currencies and fiat currencies.

Reply on news.ycombinator.com