I continue to be convinced that the only valid use cases for crypto are scams and money laundering -- chalk up this one to the latter.
Can anyone name an application besides those two things that traditional finance doesn't handle better?
Can anyone name an application besides those two things that traditional finance doesn't handle better?
* Sending money without paying an obscene amount of settlement fees and having to wait in some cases half a week. International transfers are an absolute UX nightmare for many banking providers.
* Being able to secure your account with proper OpsSec, i.e. identity/account management with proper hardware-based 2FA without any SMS loopholes. To date, I haven't found a bank that actually completely disables SMS 2FA as an option.
* Being able to pay without giving away your credentials. The credit card system is completely backwards. If you're online shopping regularly, your financial info and home address probably get leaked once a year.
I feel 10x more safe with self-custody than any banking solution I've used in the last decade. Traditional finance imo has been an absolute nightmare compared to crypto. Trad finance services bleed you out left and right, not to mention the hidden CC transaction fees people conveniently leave out of these discussions.
The UK banking system has had chip&pin for 20+ years, has had (Europe-wide?) instant payments for at least a decade.
Banking numbers in the UK are push not pull, you cannot take someone else's money just because you have their bank number. *
Payments require CVV (and have done for almost 30 years) and often additional 2fa verification through an app for larger payments. "Card not present" transactions are particular guarded against.
The regularatory framework is such that the banks must absorb the cost of fraud, unless they can demonstrate the customer has been particular negligent. The average banking customer in the UK does not live in fear of "identity theft", and does not own "identity insurance" or similar protection packages, the legal framework provides protection.
Solving the problem for international transfers simply requires greater international cooperation, not a different technical solution. It is a particular shame of Brexit that the UK has lost it's ability to lead in this area, because Europe generally has had a similar transformation over the past 20 years.
Expanding that banking cooperation to bring in more trusted countries would further reduce the cost of international remittance.
Someone trying to sell a technical solution to a social problem ought to always be treated with extra skepticism.
* Some pedant will point out direct debits, but that is only available to trusted providers, and is backed up by the Direct Debit Guarentee, so the risk won't fall to the customer if things do go wrong.
> Payments require CVV
Many companies regularly violate regulations and store CVVs against your will. How do you think millions of CC CVVs get leaked in many of these major hacks?
> Solving the problem for international transfers simply requires greater international cooperation
Sounds great in theory. How long has traditional finance had to work out these problems? We're in 2023 and I still can't send money to an US account without paying absurd fees.
Now compare that to what several crypto projects have achieved a handful of years after their inception.
> Someone trying to sell a technical solution to a social problem ought to always be treated with extra skepticism.
What makes secure payments more social than secure messaging or secure browsing? Imagine trying to solve TLS and E2E messaging with social solutions.
You think that is a technological problem? Using crypto appears cheap (despite being inferior technology) because it simply skips 99% of what banks are doing.
> despite being inferior technology
Could you clarify? Are you talking about a particular protocol, or an implementation component, or mean crypto in general?
a) Theory: In any engineering or optimisation problem, adding a constraint makes the solution not better, and, if the constraint is binding, worse. So, we would not expect distributed state machine replication (which was solved in the late 90s, with BFT-style consensus such as Paxos and Raft etc.) to get better by requiring permissionlessness. (And the latter is, in my view, the actual defining characteristic of what's now known as blockchain; though of course you have a couple of permissioned blockchains that are basically rebranding of existing technology to ride the hype-train.)
b) Practice: You could trivially run a BTC (ie, Longest Chain Rule) or ETH (ie, BFT-type) style network with extremely high reliability with some, say, 10 nodes that are permissioned and (at least 51%) trusted. That would use around 10-100 W (and you could probably achieve far higher throughput). Instead, BTC uses 20 GW, ETH around 1 MW. So, the requirement of permissionlessness increases energy usage by a factor of several thousand to billions.
Furthermore, you lose many many other features of centralised systems (such as that you can correct mistakes cheaply, replace lost keys, undo fraud, etc.)
So, basically, you employ a vastly inferior technology, just so you can circumvent the law. Really don't see why anyone should support that.
Raft cannot deal with byzantine failures, so it's not a BFT protocol. Neither is the original Paxos, unless extended to Byzantine Paxos. Both are CFT by default.
> So, we would not expect distributed state machine replication to get better by requiring permissionlessness.
Right, but the banking system isn't a 600LoC Raft implementation. By your own admission, the bulk of inefficiencies come from the other 99% of stuff banks do.
So the question is: how much regulatory burden can be reduced if we were to switch to a crypto-based infrastructure.
> just so you can circumvent the law.
I can pay taxes in crypto to my local government. We also have crypto ATMs in several places here. Blockchain companies are working very closely with financial regulators. Not sure what kind of laws I'm supposedly circumventing here.
Then, so, just moving stuff around in a robust and even distributed ledger is, we can all agree, while not trivial, a solved problem.
So then one can impose further constraints. Either, 1), comply with the law and rules and regulation, and sure, that will make it less efficient. But that is the 99% of the work banks do that crypto doesn’t do, and they are not being done for fun, but for good reasons. Or 2), permissionlessness, but what for? So you can avoid 1), because otherwise you wouldn’t need to incur the tremendous costs of 2).
I don’t think we should adapt the AirBnB/Uber approach (how much of the regulatory cost of fire regulations/working time restrictions/insurance cost can we avoid) to money transmission.
It is obviously trivially possible to do legitimate transactions with crypto, just as you can cut an onion with a machine gun. But that’s not the raison d’être of a machine gun. And the raison d’être of crypto is to escape regulation, as Satoshi basically said in the original emails, and as is abundantly clear not only from looking at the last 15 years of history, but also from the willingness to incur the massive overheads of permissionlessness.
ETA: appreciate the discussion, btw.
By ignoring regulations entirely. Guess what, if you're the bank, now you're liable.
Right, simply need to solve for world peace, ending all wars and economic sanctions. Kumbaya.
Self-custody as is common in crypto isn't really a thing in traditional finance (for most people anyways) - having your money backed 1:1 by cash is an extremely expensive service.
The bank accounts most people have are essentially low-risk lending agreements.
So any kind of cost calculation should factor in the financial gain of lending out your assets.
Credit card fees are high in bank-friendly jurisdictions. Not in most jurisdictions. PayPal only came about because the banking system in the US is so utter crap - that doesn't mean that it's bad as bad elsewhere.
The crappiness of banks is contingent on bad regulation. The crappiness of crypto is inherent in the sub-par technology: adding a constraint (eg permissionlessness) is costly.
2. Sending money to relatives in the third world
3. Keeping your savings when the currency of your nation is going through hyperinflation
Crypto, being permissionless, is just a bit harder to shut down; but not any more legal.
That is not only about savings (3) but business transactions.
Argentines adopted the US Dollar, not any cryptocurrency, to solve their problems.
What crypto has shown long term stability and isn’t subject to the same forces that cause volatility in any currency?
Crypto's claim in this area is that could be cheaper than remittances in the traditional banking system. But remittance fees using traditional banking are already only 1.5% so we're not talking about saving massive amounts of money in most circumstances.
Which is probably why virtually nobody has switched to it for remittances.
In my opinion, it's a shame, because this is something that crypto could do extremely well. But here we are. I do believe that it will be solved at some point, as long as regulation doesn't make that impossible. It is making it much more difficult for new coins to get started. Obviously that is needed to some extent because we saw all the shit coins over the last several years that ripped people off, but finding a happy medium is essential and challenging.
So crypto is actually more expensive that the traditional banking system on top of just being weirder. Like, you have to use Binance's P2P in my country which is just way more complicated than the traditional remittance system of "give us their bank account details".
2) Have you actually done it? There are many services that do this for cheap and fast. Your relatives don't have to open a crypto trading account and use banking to convert the money back into a currency they can use to purchase stuff, they can simply take cash from a chain store, the post office or a local bank branch.
3) When the local currency goes through hyperinflation people store their money in USD, EUR or GOLD. Putting money into crypto is an extra step that don't have to be there doesn't add any value because needs to go through a digital channel like a bank and when shits the fan banks can be PIA. Your local Change office in the mall or the guy at the street who sells and buys USD/EUR/GOLD tend to be more reliable.
Asset tokenization is another big one- getting solved, at least.
And inflation hedging.
Regulatory def has not caught up but in 10-20 years you individually will definitely have some portion of your financial transactions, whether payments or investments, settling on blockchain.
The reason 'tradfi' doesn't offer T+0 has nothing to do with technology (or lack of). It's an intentional policy choice and not due to technical limitations.
America just moved to T+1 down from T+2. If you want T+0 now instead of a decade or two from now, you have an option
The question is: why should we let you do that?
LOL. Here's a novel idea: take debt, and chop it into fungible pieces that can be traded (a process we could call "securitisation"). Let's call it a bond. Or: Take equity, and chop it into fungible pieces that can be traded. Let's call it a share. That's impossible to do without crypto. Right? Right???
Buying drugs is an obvious thing that crypto's much better for. Similarly sending money to people in countries the US government doesn't like.
The mindset that can't understand the valid use cases of cryptocurrencies is approximately the same mindset that believes the status quo is acceptable, and that smashing the boot of the State into the necks of private citizens' ability to transact is a moral good.
If world governments and traditional finance were far less oppressive and moralistic about the freedom to transact, then you'd have a solid point. (Although depending on the jurisdiction in question, I'd say money laundering may be a valid use case, as well).
People who want to subtract themselves to what Central Bankers (who are de-facto unelected Sovreigns) are doing have no other option if not for crypto and gold.
In general what you say about scams and money laundering could also be concomitant...how do you think Goldman Sachs and JPMorgan arrived to be the companies they are today? They were pulling so many scams and laundring especially during the 1880-2011 period. And quite frankly also after the touted post GFC regulations they keep laundering and breaking laws (Credit Suisse, Wells Fargo, JPMorgan etc, they all had a major multi billion dollar scandal or more in the aftermath of the GFC)
People aren't stupid, they can see how nowadays Central Banks, Governments, big Commercial Banks, big tech are all about stability AKA the winners realize that they won and want to prevent other spins at the roulette, actually ideally they want to close all the tables in the Casino so they'd be the perpetual winners from now on.
If you zoom out and see the picture from 30.000ft you might guess how some scams and laundering option for the common person isn't the worst thing that can happen when the powers that be want to freeze everything in place and sit on their winnings (while also continuing to break the law , scamming and laundering money)
The fact that the non-athlete universe seems entirely unaware of this quite well-functioning parallel economy does not mean it doesn't exist.
HN is largely pro-status-quo. Deferring to parasitic gatekeepers is how things get done in the worldview of the HN mindset, so this reaction shouldn't surprise you.
When evaluating a given action from the HN zeitgeist, a decent rubric is: if a Western government authorizes it, it is universally good. If a Western government discourages it, it is Hitler.
Further, and importantly: if the action in question is determined to be Hitler, it is not merely bad; it is unthinkable (because the mere act of considering it would make you, the thinker, also Hitler), and therefore not worthy of being considered an option in the first place.
Otherwise I agree, although special purpose ones like helium I can see encoding interesting rewards.
That's where your premise is wrong.