Sure, safety's difficult -- but precisely because its the exact same issue as cryptography. Your point about bug bounties is a perfect example of antifragility -- and cryptos success in this regard is far more interesting than its failures (none of which have been fundamental to the concept)
Increased value. Again, no different from any other financial instrument in any fundamental way. Every criticism you can make of crypto, you can make of bonds, etc. The zero-sum argument is especially bad in this regard.
I don't think that's a good way to summarize my point - I have expressed no opinion about financial risk, either my own or others. (Did you mean to address someone else?)
However, whatever financial risk you would like to tolerate, you should make sure you're pursuing goals that do in fact match that financial risk, and that you're not concluding that something more or less risky than it is because you are uninformed. Also, if you are tolerating increased risk, you should do so because there is a purpose for it (e.g, better potential upside), not because high financial risk seems inherently cool. It isn't, and I will certainly defend that point, but it's just a lemma on the way to my actual point.
Arguing that it's okay that cryptocurrencies are hackable because the traditional financial system is hackable is simply factually incorrect: it's a misunderstanding of why the existing financial system looks the way it does, and why its risk tolerances are built the way it is (not a lot done to secure transactions, but a lot done to be able to reverse transactions if needed).
If you really want a simple point out of me, I think G. K. Chesterton made it in 1929:
> In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, "I don't see the use of this; let us clear it away." To which the more intelligent type of reformer will do well to answer: "If you don't see the use of it, I certainly won't let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it."
If you do not understand the existing financial system, you cannot honestly claim that your new one is better. First figure out how it works and why, and get that right, then you can describe how your changes are improvements.
All of those things are contingent on perfect scenarios. As in, bug free contracts; which not to even mention the human willful engineering part of manipulating trust. Many people confuse permission and trust.
The things you outline are optimistic visions for what cryptocurrencies can offer as an alternative to the "root" financial system; however it is certainly not better in every case, and only maybe better in some very specific cases. Perhaps this will change overtime, but one thing I know for sure.... every piece of software ever written and every piece of hardware ever built has bugs and has been hacked. The human is even weaker to exploitation, so... without middle-men to act as a safety net, lawlessness and ill incentive can run rampant. Unfortunately the human condition optimizes for this opportunity if it shows itself.
You do admit there are cons, and I appreciate that. I think anyone who has some technical know-how should do what they can to at least point out any dogma. Dogma has clearly ruined a lot of the cool things about the technology.
In the eyes of the majority of people, the current financial system is safe. People believe that their funds are safe (backed by things like FDIC), and that they have certain types of protection.
I'm a fan of cryptocurrency for a variety of reasons, but most of the problems that cryptocurrencies solve are not widely perceived as problems by most people.
I don't disagree with that there have always been niche areas where there is a high cost to programming errors (like space or medical).
But with crypto, the effect is much more direct. The programmer is handling money much more directly and if something goes wrong, they are much more directly affected and not being insulated from the effects.
This is not a problem with crypto, because there are solutions to this, it's a problem with how people use it. The real danger is that people get too comfortable with this way of doing things and we never switch to more secure solutions.
The problem is the crypto community’s skepticism of proven financial safeguards. Large financial systems are centralized for a reason and they seem intent on finding out why by hitting every bump in the road at full speed.
Yes, and even the "no single point of failure" thing is overrated. For people using cryptocurrency to try to do things (as opposed to the system perpetuating itself), there are lots of risks caused by irreversibility.
I don't disagree with you and I don't pretend there are no risks with cryptocurrency. The security requirements are obviously harder, the UX is bad and even technical users fuck it up.
Some of this will be improved by tooling, some of it is just what's required for self-custody.
Still, the capability it provides is new and gives individuals more power even with these tradeoffs. That capability is valuable and shouldn't be dismissed imo. It's a lever against authoritarian control and increasing centralization of power.
The "problem" here is that a market for infrastructure bugs now exists. The birth of a market isn't a bad thing, though. Furthermore, the market hasn't created the bugs, but exposed them! This exposure is a net benefit to society because the bugs have value that predates the advent of cryptocurrencies. It's just that before cryptocurrencies the value was hidden and only unlockable by nation states in times of war. Far better for infrastructure to be continuously under attack and strengthened via ransomware than to completely collapse in battle.
I'm not sure I agree here. Those are definitely real issues that you've highlighted, but they're not because of crypto currency.
There's no reason that a crypto-exchange cannot be as secure as a bank (or more), and that governments cannot insure crypto deposits up to some value. Those are purely problems for regulators/governments, which have been relatively slow to adapt legislation.
The problems you highlight are real, and can be good reasons to favour traditional currencies, but they're also easy problems to solve - the thinking has already been done once for traditional currencies and the solutions for crypto are mostly identical.
It’s not a trope. It’s being realistic about the problems and advantages of crypto. Problem: Counterparty risk from crypto exchanges is much, much higher than that of traditional banking. Advantage: Self-custody of crypto is much more secure than stuffing stock certificates under your mattress. Solution: Exchange crypto on crypto exchanges. But, don’t rely on them for custody any longer than necessary.
It's more immune to moral hazards. But I'm not really into crypto, I'm just purely frustrated by the current system. It's an absolute joke at this point.
Well said. In a perverse way, financial schemes built on top of cryptocurrencies represent the crowning achievement of traditional finance: we've successfully made it so safe, so incredibly boring for ordinary citizens that technologists believe they can derive the same system from first principles.
It is simply a wicked problem, and not the one Crypto is intended to solve.
Crypto is intended to automate the role of the trusted third party. Bitcoin's ledger is much less intelligent than even the dullest central banker, but it has no self-interest. In cases where the trusted third party to a transaction has a reason to abuse their power - see e.g. 2008 bank bailouts - having a transparent algorithm handle that role is a massive savings. The problem of assigning creditworthiness remains, it's just that there is one less party whose trustworthiness needs to be assessed (and compensated). It's not that it solves the creditworthiness problem, but it makes the problem easier for others to solve.
Things that regularly go wrong in cryptocurrency go wrong in cryptocurrency and that is an argument for using cryptocurrency???
I couldn't make this up!
As for the "smart contracts", nobody who is familiar with programming bugs would want there not to be better checks and balances there. The depressing frequency of 8 figure hacks of the terms of said contracts is a concrete demonstration of this principle. Thanks, but no thanks in anything like its current state.
For most users, traditional finance is faster, cheaper, and safer in practice than crypto. Which is exactly why the main use cases for crypto are speculation, money laundering, and various illegal activities like paying ransoms for ransomware attacks.
I'm pretty favourable towards crypto, but it is absolutely an inherent property of blockchains.
The whole point is that it's immutable and transactions are not reversible. That means users are susceptible to losing their money with no recourse.
Seed phrases are also a pain in the ass. No one wants to deal with that, and average consumers would absolutely lose/forget/misplace them and lose access to their wallets.
The risk of ruin in crypto is ridiculously high compared to traditional finance.
I've done published research in cryptocurrencies in its earlier days when I was in academia and I was very open-minded about it, but ultimately I came to the same conclusion: it's difficult to think of much that it does better than more straight-forward solutions and easy to think of downsides.
As I've gotten older and had to interact with various bureaucracies and paperwork, I've only become more convinced that lauded cryptocurrency features, such as (purported) immutability and decentralization, are a bug, not a feature. In my relatively short time on this mortal coil I've probably had to contravene some codified system four or five times by getting the right person in the loop so some rule, regulation, or contractual obligation can be lifted. No matter how hard we try, we can't anticipate everything. People will die, keys (and other vital paperwork) will be lost or destroyed, contracts will have mistakes, fraud will be perpetuated, money will be mistakenly transferred to the wrong parties, etc. All of these have happened to me and all were resolved by a sometimes annoying but ultimately effective system set up to handle such cases with some backstop authority empowered to fix things.
All of us will eventually get into some hell where we need a human to override the computer and just make the sensible thing happen. How often is it that we're on a support line just trying to get an exception to some stupid corner case into which we've gotten ourselves. It's always a relief when you can finally plead your case to the higher authority, whatever that may be, and get some damn relief. Why aren't more people concerned about a world where this isn't possible? It's an honest question. It totally baffles me.
The problem is the system is incredibly complex and adds no value to anything, and opens up tons of risk.
It's one thing for crypto to be a fun thing where people can day trade on made up numbers, arguably harming 'no one', but when major transactions get problematic, then it's a huge source of pain. Civil and legal lawsuits galore.
It demonstrates that net-net crypto is a value destroyer and is just a bad distraction.
The moment we try to regulate it (and we would have to do this if we wanted to normalized it and make it usable in the commons), then 'all the fun' would be drained out of the bubble as it boils down to just regular banking, more or less.
It's like an intellectual 'Chinese Finger Trap' for smart people with a bit of money to burn, that has negative externalizes.
If it's going to be 'money' then regulate it as money, and watch it the Tower collapse under the weight of it's own complexity.
Increased value. Again, no different from any other financial instrument in any fundamental way. Every criticism you can make of crypto, you can make of bonds, etc. The zero-sum argument is especially bad in this regard.
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