3 ms·

Stating the obvious here, but... Fiat financial security is based on monitoring, paper trails, and legal consequences for fraud. Yes, you can initiate a fraudu

by kentonv 10y ago

Stating the obvious here, but... Fiat financial security is based on monitoring, paper trails, and legal consequences for fraud. Yes, you can initiate a fraudulent ACH knowing only the numbers printed on a check you received, but you'll probably end up in jail for it. It's far from perfect but it mostly works. Cryptocurrency intentionally doesn't have any paper trails. Anonymity is the selling point. If you find a bug in the code and exploit it, the anonymity protects you and you likely won't be caught. That means that security depends entirely on the code (and the theory!) being correct. So yes, when bugs in fact lead to massive amounts of money being lost... some point are going to argue that cryptocurrency may not be a good idea. (Note: My personal opinion is mixed.) > Zerocoin has a bug, money gets stolen, the bug is fixed. You say this as if it isn't a big deal. Sure, the bug is fixed, but the attacker essentially stole 25% of everyone else's zcoin (via inflation), and fixing the bug doesn't bring any of it back. That seems like a big deal to me.

tdfx 10y ago
Actually the whole point of the distributed blockchain is that there's a very public paper trail. The only hope for anonymity is obfuscating the movement of value through the blockchain, which can be accomplished to varying degrees depending on the sophistication of who is trying to track you. If your theft is high profile enough then you'll have a good deal of trouble liquidating your funds anonymously.
- wmf 10y ago
  That's how Bitcoin works, but some newer cryptocurrencies like Monero, Zerocoin, and ZCash have no such paper trail.
- rtpg 10y ago
  it's the ultimate irony. It feels like anonymity because you decouple the "get a bunch of BTC" from "cash out to USD", so it's the worst of both worlds. It's anonymous at first, so fraud can't easily be reversed. But it's "eventually completely public", so people who might want to use it for anonymity are sitting on a ticking time bomb. Eventually, their identities will be revealed.
  - blunte 10y ago
    Indeed, but people just don't seem to get this. As long as people are converting fiat to crypto at the front end, and then crypto back to another fiat at the back end, then there is no anonymity. There may be a lot of obfuscation in the middle, but ultimately the guy who converts back to fiat will be asked the question by his government, "Where did this money come from?" Then he needs a provable paper trail. Maybe someday enough goods and services will be available to be purchased by cryptocurrency that fiat use will be diminished or eliminated. But at that point, the companies that are accepting cryptocurrency as payment for services will have to keep their own accounting in order to show their governments where their money is coming from. And then again the anonymity breaks down. The customer records, with email, ip, and shipping addresses are part of the audit trail.
    - legohead 10y ago
      "I found a printout of the bitcoin key."
- kentonv 10y ago
  As others pointed out, Zerocoin intentionally provides much more anonymity than Bitcoin. But even with Bitcoin, money laundering is much easier than it is under the regular banking system.
Pyxl101 10y ago
Yes, the security of the traditional financial system is largely based around the ability to reverse transactions. One time I was transferring money from one of my accounts into a trading institution. Except by mistake, I was looking at one of my parents' checks instead of my own. I typed the wrong account number. Only after my parents noticed the unexplained withdrawal of a five figure sum, and called the bank to reverse it, was the mistake detected.

by kentonv 10y ago

tdfx 10y ago

Actually the whole point of the distributed blockchain is that there's a very public paper trail. The only hope for anonymity is obfuscating the movement of value through the blockchain, which can be accomplished to varying degrees depending on the sophistication of who is trying to track you. If your theft is high profile enough then you'll have a good deal of trouble liquidating your funds anonymously.

wmf 10y ago
That's how Bitcoin works, but some newer cryptocurrencies like Monero, Zerocoin, and ZCash have no such paper trail.
rtpg 10y ago
it's the ultimate irony. It feels like anonymity because you decouple the "get a bunch of BTC" from "cash out to USD", so it's the worst of both worlds. It's anonymous at first, so fraud can't easily be reversed. But it's "eventually completely public", so people who might want to use it for anonymity are sitting on a ticking time bomb. Eventually, their identities will be revealed.
- blunte 10y ago
  Indeed, but people just don't seem to get this. As long as people are converting fiat to crypto at the front end, and then crypto back to another fiat at the back end, then there is no anonymity. There may be a lot of obfuscation in the middle, but ultimately the guy who converts back to fiat will be asked the question by his government, "Where did this money come from?" Then he needs a provable paper trail. Maybe someday enough goods and services will be available to be purchased by cryptocurrency that fiat use will be diminished or eliminated. But at that point, the companies that are accepting cryptocurrency as payment for services will have to keep their own accounting in order to show their governments where their money is coming from. And then again the anonymity breaks down. The customer records, with email, ip, and shipping addresses are part of the audit trail.
  - legohead 10y ago
    "I found a printout of the bitcoin key."
kentonv 10y ago
As others pointed out, Zerocoin intentionally provides much more anonymity than Bitcoin. But even with Bitcoin, money laundering is much easier than it is under the regular banking system.

Pyxl101 10y ago

Yes, the security of the traditional financial system is largely based around the ability to reverse transactions. One time I was transferring money from one of my accounts into a trading institution. Except by mistake, I was looking at one of my parents' checks instead of my own. I typed the wrong account number. Only after my parents noticed the unexplained withdrawal of a five figure sum, and called the bank to reverse it, was the mistake detected.