Comment by ranger207 | Hacker News Reader

Comment by ranger207 | Hacker News Reader

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The story of crypto is the story of recreating the existing financial system from scratch, particularly including all its regulations that make the current modern financial system so annoying. Yes, the current financial regulations suck, but each one was put into place because of failures like you see in crypto every day. In the long run cyrpto regulation will wind up looking much like modern financial regulation because it suffers from the same pressures, incentives, and attack surfaces as the modern financial system. This isn't to say that the current financial regulation regime is good in any sense of the word, just that it's effective at what it's explicitly designed to respond to. Crypto that lacks the regulation of modern finance will suffer from one set of problems; modern financial regulation suffers from another set of problems emergent from the system of regulation itself. That crypto doesn't suffer from problems caused by the system of regulations does not make it inherently better than modern finance

Cryptocurrencies had two main goals

- Let individuals freely transact. Which as you rightly point out, has failed for good reasons.

- Prevent state institutions from controlling monetary policy. This has not failed yet - mainly because crypto is not even remotely big enough that the state has tried to control how much cryptocurrency is printed. If cryptocurrency ever gets big enough, we will find out whether it can withstand the pressure. While cryptography to secure your communications has withstood state pressure for 30 years now to not allow backdoors, I think the pressure on cryptocurrency will be higher.

> Let individuals freely transact. Which as you rightly point out, has failed for good reasons.

How has it failed on this metric? A user holding crypto can transact freely and without intermediaries, that much is true of the blockchain. That some governments around the world may decide to restrict this activity with the threat of force (some countries more than others) does not mean it isn’t achieving its goals of a permissionless digital network.

Of course, X can send Y cryptocurrency, and Y will receive it.

The problem is that for the vast majority of people, the only way for X to acquire the cryptocurrency is to sign up for an exchange. And for Y to actually use it, they will have to convert to fiat via an exchange. And when signing up, X and Y will have to reveal complete financial details about themselves - home address, bank account details, identification document scans, etc.

This means that governments across the world now exercise significant control over who you transact with. And how much tax you pay for your crypto activities. If governments don't like you, they will force the exchange to kick you out. Or they will block all your bank accounts - like my own country often does - almost completely destroying your life.

This is a far cry from the early dreams of cryptocurrency, where people thought that governments would have close to zero control over their transactions. Yes, right now, crypto is a bit more free than other types of transfers, particularly for international transactions, but the noose tightens every year.

It doesn't matter what the technical details of the protocol are, what matters is what you can do in practice.

A government prohibiting crypto and/or making it impractical to access isn't evidence of the technology's failure.

To make an analogy, see the laws and prohibitions around encryption. Many countries (USA, France, etc) have had severe restrictions on cryptography over the years; some countries like China still do have these in place, and others like UK are considering new laws that further impede access to encryption. Yet none of these policies are strong evidence of some failure of encryption technology and the ideas it has brought forth.

France, 1999:

> France to end severe encryption restrictions [...] Until 1996 anyone wishing to encrypt any document had to first receive an official sanction or risk fines from F6000 to F500,000 ($1000 to $89,300) and a 2-6 month jail term. Right now, apart from a handful of exemptions, any unauthorised use of encryption software is illegal. Encryption software can be used by anyone, but only if it's very easy to break.

https://www.theregister.com/1999/01/15/france_to_end_severe_...

Indeed, cryptography for information transfer has been a successful technology. This is due to the work of many activists leveraging the prior existence of the fundamental rights related to communicating freely in the constitutions of many countries. Despite this, as you say, governments have tried to make laws around this, which are partly successful. But there is a crucial difference between cryptography for communication and cryptocurrencies.

You have to provide an account of your financial activities at the end of the year to your government, and lying on it will get you in serious hot water. You don't have to annually tell the government who you communicated with and how. So, you using encryption technology will never land you in trouble, unless the government catches you. For instance, millions pirate copyright material around the world, but governments find it very difficult to catch the ones setting up the sharing sites.

But any non-trivial usage of cryptocurrency has to be reported by you to the government, and if you don't the tax authorities will come after you. So the government at this point has close to complete control over which cryptocurrency transactions you can freely engage in, and which ones you can't.

States have been actively shutting down p2p fiat to crypto trades, but they cannot shut down all of them. Currently if you don’t have an exchange account, the most popular platform is Bisq for secure p2p fiat/crypto trades. And if you’re more oldschool there’s always localmonero or irc.

I disagree with your first point, Bitcoin let has let individual transact freely for a decade now. Sure, it has a hard time scaling but apart from that I think it's doing great on this point. Could you detail what you had in mind if you disagree ?

There are fraud prevention institutions out there who secretly colour your coins and won't let you deposit to an exchange (or trigger some very intensive verification and a police report) if you try to deposit certain coins.

That's true, but there's ongoing work about this to add some kind of plausible deniability to all transactions. There's also privacy coins like Monero where this problem has been solved already. Many institutions then banned Monero, but they won't be able to ban all cryptocurrencies if they get on par with Monero's privacy protecting techniques.

Of course they'll be able to ban all cryptocurrencies. They already banned Monero, didn't they? Nothing stops them banning more.

> Let individuals freely transact. Which as you rightly point out, has failed for good reasons.

How has this failed? Every month I transact in crypto while I could not do the same using traditional methods.

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