> So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad.
Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. Cryptocurrencies improve on this slightly by allowing you set up multisignature schemes, so you can get redundancy in the event of a loss.
>Is there a way I can get my crypto held my an institution with SIPC insurance, the way I hold stocks at a brokerage, so I can outsource this issue to someone else who is backed by a government guarantee?
If you want government guarantees, crypto might not be right for you.
> Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it.
You can’t steal my house by obtaining the deed. You can’t steal my stock by obtaining the stock certificates. That’s not how it works. The vast majority of wealth in developed countries doesn’t rely on physical security to maintain ownership. We’ve collectively outsourced that function to the government and other institutions, so we don’t have to individually hire bodyguards to prevent criminals from taking possession of our homes and stealing our assets.
Most people only hold a relatively small amount of wealth in forms that can by physically stolen (eg. petty cash, electronics). This means that you only need to defend yourself against a $1000 crime (stealing your TV), which is a lot easier than defending against a $1M crime (stealing your house or 401k).
If crypto requires holding my wealth in a hardware wallet that can be stolen, that means I’m only going to be willing to invest the amount of wealth I would spend on a TV, not the kind of wealth I am going to allocate to stocks or bonds.
Granted, crypto has utility for people who can’t use the government-backed institutions, like criminals. And in some countries where the government will steal your money, it has broader appeal. I won’t argue with that.
> Perhaps specific aspects of crypto (e.g. NFT used for real estate transactions) will be the killer app?
I consider myself to be very good at security, offsite encrypted backups, managing private keys, and other opsec details.
But there's no way I'd ever want the ownership of my house or cars or other property controlled by an NFT. If something happens to my private keys, am I stuck with the house forever? If my private keys are stolen, does someone else suddenly own my house because they have the NFT?
In a hypothetical world where NFTs were the token of real estate ownership, governments would simply step in and make sets of laws to override and re-issue the NFTs according to legal outcomes. They would store the overrides and other information in a centralized database that they control, and everyone would be bound to respect the overrides in the centralized database. So the NFT becomes a gimmick.
> if a government wants to freeze your crypto assets, they can do so easily
They can, but only if they get physical hold of you and like, threaten you with a $5 wrench. This is not limited to governments, if whoever gets hold of you and threatens you, they will mostly be able to get your assets, and there's nothing anyone can do about that.
> So in all seriousness, what is the point of crypto, other than a "new stock market"?
The second time you mention the stock market. From my pov, (most?) crypto is very dissimilar to stock market. Stock market includes mostly somewhat productive assets. Crypto usually isn't productive, it's just predictably scarce. Esp Bitcoin and similar are much closer to digital gold than to stocks. See eg https://www.lynalden.com/what-is-money/
> Who do you hold accountable when your crypto funds get lost? Who do you go to when your crypto funds go to the wrong address?
> Many have tried this with crypto and this has completely failed as unrealistic at any scale.
1) I know it's scary, but living with personal responsibility can be a thing that some people actually want.
2) We're extremely early into the invention of cryptocurrencies. Bitcoin is only about 14 years old. Better interfaces and best practices for how these things are handled and moved around are developing. You remind me of somebody being around in say 1978, seeing the simple computers of the day, and remarking that there's no practical use for normal people having a computer because you think that they currently suck and cannot conceive of them improving.
3) Look at human economic history. It took humans in some cases hundreds of years to figure out what we might see as best practices for new accounting concepts or technologies. Some kind of basic ledger system with tablets, sticks, or other implements proving that a tax payment or loan was made took a long time to figure out. Humans didn't know how to handle silver coins initially, it took time to figure out that hey had to put ridges on gold/silver coins to prevent certain people from clipping chunks off them. Fiat has been around a while and many humans still haven't made the connection between printing money and inflation directly robbing them. Is it any surprise that crypto isn't completely developed just 14 years in?
> nobody or any business wants to use or deal with in the real world
Do you not notice an inherent contradiction in what you're saying: why would you need to block exchanges if nobody wants to use it in the real world?
> The government won't accept your crypto / magic beans as a way to pay your taxes.
"Use fiat. Not necessarily because you think it has the best attributes for you, but because men with guns will throw you in a metal cage if you do not."
> So cryptography is fine, unless it's part of a network that you don't like, used to secure a ledger that you don't like.
What is the legitimate use case for this, that is better than current system?
Why does it need to solve billions of useless puzzles, incinerate the planet and waste gargantuan amounts of energy at the same time to secure it?
> Why can't you let people have their worthless internet tokens without the government getting involved?
Because when your uncle, aunt, sister or in-laws comes to you for money when they are in a financial loss after placing their life savings into an ICO, or a crypto token.
It indirectly becomes your problem. If the crypto industry cannot regulate itself to find a legitimate use case beyond rampant speculation, it needs to be regulated as it is out of control.
The FTX crash is just one of many reasons why you cannot lose $8BN of crypto funds without getting the government involved.
There are $12BN lost and counting which is documented below for your recommended reading.
>> Currently your statement is true, but in the future that's what changes.
You can chose to let others do your computing for you, but don't be surprised when they want to charge you for it.
>> My money that is stored in some bank's DB is not on my local computer, but I sure hope it's mine.
I trust my bank to hold my money because there are legal protections in place to protect against bad behavior. I can sue them if they violate the laws that protect me.
What can be done if someone steals your cryptocurrecy?
> The SEC has consistently seen utility tokens as securities. The workaround, so far unproven in court, is the SAFT (simple agreement for future tokens).
The issue with all of this is that people are trying to fit a new technology into a series of boxes when it doesn't fit into any of them.
The problem cryptocurrencies aim to solve looks like this. I have a hardcopy of a book that I've finished reading and I'm prepared to sell it so I can use the money to buy a copy of another book. I am not keen on the efficiency of the barter system, so what I need is currency that allows me to sell the book I have and then buy the book I want.
But currency isn't a security. The rules for securities are much more strict, because you have to worry about people defrauding investors and engaging in stock price manipulations etc. In the normal everyday currency transaction where I exchange my book for a $20 bill and then go somewhere else and exchange my $20 bill for a book, there is never any paperwork for me to fill out. I don't have to give anyone my name or anything else to allow them to compile a database of which books I read or which social clubs I patronize or what kind of contraceptives I use.
The rules for digital credit transactions are also strict, because they were designed for credit transactions, where you have to worry about someone buying something on credit and then not paying, or taking out credit in someone else's name.
What's really needed is a digital version of cash. But there is no law designed for digital cash, so people keep trying to squeeze things that aim to serve that purpose into one box or another when the rules were clearly designed for something else.
What we need is for the law to more explicitly allow the internet to work like the real world.
> If you consider that the government is always the enemy and it can't be fixed and should instead be thoroughly destroyed, then and only then do cryptocurrencies make sense. It's not about good vs. bad government, it's about no government.
Certainly not. As I keep telling people here, cryptos are property, not currency. Why should governments be in the business of telling people what type of property they can and can't own?
A coin is nothing but a couple of large numbers that are easy to multiply together but very difficult to factor...that's it. If the people of earth want to assign large fiat currency values to complicated key-pairs, then why shouldn't they have the right to do that?
Of course crypto-traders need government...like we need libraries and schools and police and all that, just like everyone else, right?
> If you’re living in a dysfunctional government then at least crypto protects you from random seizures/freezing of your assets.
How so? We've already seen large scale shutdowns of crypto projects by centralized authorities like OpenSea. I highly doubt dysfunctional and authoritarian governments are going to swallow allowing their citizens to use these platforms without also ensuring that they have a measure of control over it. And if an authoritarian government wants to steal your assets, they'll just install malware on your device and take your keys, then you've lost everything. Or they'll just disappear you until you agree to hand things over.
> Unfortunately people are not 100% trustable, devices are not 100% secure and code is not 100% perfect.
- which is actually why you use crypto.
> If someone steals my credit number, I will likely not be on the hook for the money and will not lose anything.
- because the bank guarantees the safety of the payment means you use. The fact that you don't have to pay (as a private customer) doesn't mean that stolen credit card numbers and fraud transactions don't cost money. Someone has to pay somewhere in the chain. If the principal is recovered (the stolen money), then someone still has to pay for the overhead of recovering the money (for you). There're insurance and liability-shift mechanisms in place, but the money transfer would be much safer, faster, and cost-efficient if crypto was in place.
> If I make a mistake during banking, I can turn to people at the bank about it.
- So? It's not because your infrastructure uses crypto that you give up of customer support.
Ownership of your funds, which is the primary requirement from which all others stem. You will still have those when you regain access to the internet, or the ability to spend them.
The reality is that a government having the ability to confiscate the funds in your bank account, and attempting to restrict you and your neighbours peer to peer actions, personal mobility or internet access are totally different things. This sort black and white thinking provides lacks a valuable analysis of actual power structures. No one claims your crypto currency will protect you from a bullet.
>>If they wired me 6 billion dollars, I would not get to keep it.
And this is why Crypto is unlikely to see wide use for large, legitimate transactions.
The legal concept of ownership is based on the intent and understandings of real humans amongst each other, and with each other's consent. It is technology independent. There are legal remedies to fix mistakes and unwind transactions. This is critically important for people feeling comfortable engaging in these transactions. If a typo can cost you your life savings, you're going to have a tough time moving forward.
Crypto does not have this. It would be like paying for something with a briefcase full of cash that you leave behind the third trashcan on the right. Or was it the second one on the left?
> Do you really trust governments to handle the monetary system?
I have no choice; my wages are paid in their currency, and they demand taxes in the same.
So I take on very little additional risk in using their money for everyday things.
Buying cryptocurrency, on the other hand, would expose me to a ton of new risks I'm not currently exposed to: to get remotely robbed with no recourse, that it should collapse in value by the time I would want to spend it.
It would not alleviate the risk from government at all: I can try keeping it secret from them, not declare it (which is illegal, risky, and gives additional headaches at the point I would want to spend it). Or I could let them know, which would leave me just as exposed to their old shenanigans.
It's clear that current cryptocurrencies are absolutely not solving that problem either. There's a fact if you like facts, consult the Bitcoin price.
> Trustless custody
Not clear to me that people outside the crypto bubble want this; people want trusted counterparties, not trustless obfuscated counterparties. It is IMO a solution looking for a problem.
I'd be a lot more sympathetic to this space if wasn't full of grifters and fraud. As it is I think the crypto experiment has irreversibly been tainted by that association (and by people losing lots of money), and I would not trust a 'trustless' solution from any of the current crypto companies or individuals.
> how to restore keys when they lose them or they are stolen
This is a v. hard problem, why make it 100x harder by insisting on decentralising the solution? And then 1000x harder by insisting on anonymity? Those may be properties of your chosen solution, which is I suspect why you're insisting they are necessary, but they are a bad design IMO - these are the fundamental design flaws of current cryptocurrencies.
Normal people don't keep backup keys on a second device etc etc, web of trust is a very old idea which has been tried quite a few times (see pgp for example, keybase for another corporate one), and you need a way for a normal person to prove they are who they say they are and regain access via courts or a central authority, take over inherited accounts etc. At some point these systems have to interface with the real world and real world authorities and laws/courts.
Just to propose alternative solutions to safely storing cryptographic keys (note those are useful for all sorts of things and unrelated to cryptocurrencies):
Corporations like Apple, Google could provide such a service, as they already own most of the infrastructure. There are obvious and significant downsides to this.
Enlightened governments could propose such an infrastructure of identity verification and private keys, there are obviously problems with that too, but it could be workable if you trust your government.
Utopian techno-geeks could also provide such an infrastructure, but somebody has to pay for it, and people fundamentally have to trust the people who create and run the system - that's a hard problem without financial incentives for the devs/maintainers. One example of an existing system is DNS and another is certificate authorities - both are not great but do work in the real world for their intended purpose.
I do believe at some point we'll come to solve this problem of digital identity and authentication because it is so fundamental, both for humans and corporate entities. I'm not sure we'll like the solution which ends up winning, and I certainly don't think cryptocurrencies are a contender.
>Take what you said and apply the same logic to privacy-focused cryptocurrencies
Is this supposed to be a gotcha? Those have mostly been used as Ponzi schemes or hobbyist toys that extract wealth from those who don’t have it to lose
> People use it literally all the time. I don't buy that people mean it figuratively. Maybe you do. But this statement is banded out so often and with no regard to the situation except where the coins are gone, it reflects little insight into the situation besides what I have pointed out.
Well, see, when you use more words to express yourself, it actually makes it possible to understand what your point was.
I was not aware that your perception existed. So thank you (genuinely) for explaining it.
I think that this could be better explained to new users, especially by crypto exchanges which are usually the onboarding vector for them.
I think one good way to solve this, is actually for crypto exchanges to require that a relatively strict test about some crypto, investment and trading basics should be passed when you first register for an account at a crypto exchange, before these new users would be able to start operating with crypto currencies or any such trading products.
I wish crypto exchanges did this out of their own initiative rather than the government requiring such regulations, but since this is clearly not happening so far, I'm not against some government regulation for exchanges in this direction (although I'm against requirements about minimum investment amounts, as that promotes inequality and unfairness).
> A group of people who just so happen to think that the crypto is somehow exempt from the law
I'm not aware that this is the case, but I'm willing to concede that there might still be some unwarranted beliefs in this general direction, given all the carelessness that's going on from companies and projects in this sector. I hope that these people are proven wrong and either responsibility improves substantially, or that at least justice gets served when bad things happen.
> which they reflect with statements like "not your keys, not your crypto" which is said with absolutely no reflection on how property law works. It's not as if this is even a new thing, intangible property has existed long before crypto. Yet in the crypto world, the statement which you find so meaningful goes so far!
As you're already aware, I never interpreted this statement literally and never thought other people did, so I don't know... maybe you're right that the expression is not clear enough. I think my suggestion above about the test requirement for onboarding new users would improve the status quo with regards to this issue that you are pointing out.
> How do we get rid of crypto entirely then? Stop everyone using it, shut it down and ban all of it?
Govts around the world could start treating tokens and NFTs as just another kind of security. Bitcoin and Ethereum would also qualify. Free speech never allowed anybody to issue ownership in projects for future gains without satisfying the regulations.
> But how is this different from anything else in life?
In other things in life, there are things like consumer protection. You can tell your credit card agency to refund you, you can use the judicial system to sue scammers. If you lose login secrets to your bank account, you can call the bank, they know who you are, the problem can be solved.
Crypto currency is designed from the ground up with the goal of eliminating all such centralized power and protection mechanisms. Anything that goes wrong is your fault and you have no recourse, and that is not a flaw that will be fixed, that is the most central thing in its design.
Society has protections for the weak, crypto is designed to remove those protections.
> Saying that blockchains are less secure than a relational database storage points towards not understanding immutable ledgers with shared state at all.
If I crack your Bitcoin keys, your money is mine. Nobody is going to restore your property.
If I hack into a bank or rob you at an ATM, police will come and get me, and the judicial system will put me in jail.
Crypto is stateless. Lawless. You can't own math. You just have a solution to a problem that you haven't shared with anyone.
And if someone with compute resources cared, they'd take it away from you.
Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. Cryptocurrencies improve on this slightly by allowing you set up multisignature schemes, so you can get redundancy in the event of a loss.
>Is there a way I can get my crypto held my an institution with SIPC insurance, the way I hold stocks at a brokerage, so I can outsource this issue to someone else who is backed by a government guarantee?
If you want government guarantees, crypto might not be right for you.
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