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> Security is defined with respect to certain threats, and blockchain is rarely the most secure with respect to the threats in a monetary system. Wow, this is

> Security is defined with respect to certain threats, and blockchain is rarely the most secure with respect to the threats in a monetary system. Wow, this is a great way to frame this! What do you see as the largest threats to the effective operation of a monetary system?

pron 7y ago
I think this question is best answered by economists, and I'm certainly not one. But blockchain does seem to interfere with some of the best regulatory defenses against economic disasters.
- rossdavidh 7y ago
  Blockchain gives the impression that the primary threat it is designed to defend against, is a government deciding (like Germany between world wars) to inflate their currency for whatever reason. So, not surprisingly, in order to defend a currency against being decreased in value by a central authority, it is vulnerable to all of the threats that a central monetary authority might help you with. Which of these threats you think is the more salient is, of course, a matter on which people may disagree. I personally find the risk of a central monetary authority devaluing my money, to be not one of my top concerns, but I could understand why others might think differently (especially if they were in a different country, that used a different currency).
  - kragen 7y ago
    Right, here in Argentina our currency has lost more than half its value this year, and the US dollar has lost 96% of its value since the end of the gold standard in 1973. I carry a Zimbabwe 100 trillion dollar bill in my wallet to remind people what real hyperinflation is. I don't think that's the main threat Bitcoin is designed to defend against, though; I think there's a whole spectrum of confiscation threats, ranging from thieves tunneling into bank vaults (I know a woman here who lost her savings that way), to immigration authorities confiscating jewelry, to pirates, to trumped-up "money laundering" charges. And of course if we're mentioning Germany and World Wars, we must not forget the confiscation of Holocaust victims' entire possessions, including jewelry and fillings after the gas chambers. Bitcoin can't make genocide impossible but maybe at least it can make it unprofitable.
    - rossdavidh 7y ago
      I see your point, but I think there are plenty of examples of people losing their Bitcoins through analogous nefarious activities (e.g. MtGox). For an expert in cybersecurity perhaps Bitcoin is safer, but for the average non-technical person (in the U.S.) it is probably _more_ likely to get your money taken by a thief than if you had it in fiat currency in a bank, though of course either one is possible. Again, this could vary depending upon your nation's government and crime situation.
      - kragen 7y ago
        I think it's true that "for the average non-technical person (in the U.S.) it is probably more likely to get your money taken by a thief than if you had it in fiat currency in a bank." But I think you're locating the problem in the wrong part of the conjunction: the reason fiat currency in a US bank is more secure is because US banks are fairly secure, not because the fiat currency is secure. It seems like some sort of confusion to blame the Mt. Gox heist on Bitcoin. Mt. Gox's depositors gave their Bitcoins to Mt. Gox; Mt. Gox didn't give them back and claims that an unknown party absconded with them. If you lent your car to a random French PHP programmer in Japan and he came back without the car, you wouldn't blame that on cars in general being an "unsafe" investment. If the Mt. Gox depositors had kept their Bitcoins in a paper wallet in a Bank of America safe deposit box rather than in Mt. Gox, they'd still have their money. (In fact they'd have enormously more money, but that's sort of random; it demonstrates the fickleness of markets rather than any kind of fundamental security of Bitcoin.) Conversely, the investors and banks who invested or lent dollars and yen to Mt. Gox lost as much or more as the Bitcoin depositors. Probably a BofA Bitcoin account would be better, but that's a matter of convincing BofA to offer Bitcoin or similarly secure currencies, instead of or in addition to dollar-denominated accounts. And that's where Libra comes from.
        not_kurt_godel 7y ago
        > But I think you're locating the problem in the wrong part of the conjunction: the reason fiat currency in a US bank is more secure is because US banks are fairly secure, not because the fiat currency is secure. Fiat currency is secure in US banks because there is vast institutional protection for banks such as FDIC insurance and extremely strict laws against bank theft, the Federal Reserve, and so on. There are no such institutional protections for Bitcoin and there never really can be, by design. > If you lent your car to a random French PHP programmer in Japan and he came back without the car, you wouldn't blame that on cars in general being an "unsafe" investment. Sure I would - if lending a car to strangers was an effective necessity to use one in the same way using an exchange is an effective necessity to use Bitcoin, and there were "alternative cars" (aka fiat currency) that required no such lending to strangers.
pyrale 7y ago
Basically, scams. The ability to block a planned payment or ask your bank to chargeback is one of the keys to trust in online economy. If our banking system had used something like bitcoin to implement online transactions, odds are that e-business would have had much less successs and much higher barrier to entry.
- nybble41 7y ago
  Given a system with irreversible transactions you can always add structure on top to support escrow, chargebacks, or whatever other protection mechanisms you deem prudent. It doesn't work so well the other way around.
  - PeterisP 7y ago
    Protection from scams requires that a malicious actor with full technical control of some account is still unable to make irreversible transactions by opting out of whatever structure supports escrow, chargebacks, etc; so either those mechanisms (conditional reversibility, with technical controls defining a reasonable regime of when reversals will be possible and when not) are built in the core system and aren't optional, or the system doesn't have a sufficiently usable reversibility because all the really large scams will simply avoid that "structure on top". The other alternative, of course, is someone taking on full legal liability for transactions that can't be secured technically. If Facebook would offer Libra to consumers in e.g. UK, then all that "transactions are technically irreversible" means is that Facebook would be required to "reverse" the transaction to customer while being unable to recover the funds from the beneficiary - and if they can afford to do that, that's their choice to make.
    - nybble41 7y ago
      You're asking way too much. It's not as if the current system actively prevents you from opting out of all the safety measures and, say, irreversibly handing cash (or something else of value) directly to a scammer; nor should it. Reversible transactions come with costs, especially when the other side of the transaction is not reversible. Chargeback fraud, for example, is a big problem for merchants, and can only occur in a system with reversible transactions. Contracting parties should be free to negotiate both the form of payment and the degree of risk each side is willing to take. The main problem is simply the novelty of it all. Once reasonable and customary structures to handle disputes are in common use asking people to bypass those structures without a very good reason will be just as much of a red flag as it is under the current system. Facebook is not a party to a transaction between any other two Libra users and should have no liability in the event of a dispute over payments beyond maintaining accurate records and providing a fair and above all neutral platform to conduct business.
jpadkins 7y ago
There are a lot of minor threats to monetary systems that blockchain does not address. Bitcoin addresses the rare but fatal threat of hyperinflation (runaway inflation). Historical examples https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperinflationary_episodes https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperin... The only known solution to this threat is not have a single supplier of money (i.e. a lot of independent miners digging metal out of the ground, or the block chain equivalent)

pron 7y ago

I think this question is best answered by economists, and I'm certainly not one. But blockchain does seem to interfere with some of the best regulatory defenses against economic disasters.

rossdavidh 7y ago
Blockchain gives the impression that the primary threat it is designed to defend against, is a government deciding (like Germany between world wars) to inflate their currency for whatever reason. So, not surprisingly, in order to defend a currency against being decreased in value by a central authority, it is vulnerable to all of the threats that a central monetary authority might help you with. Which of these threats you think is the more salient is, of course, a matter on which people may disagree. I personally find the risk of a central monetary authority devaluing my money, to be not one of my top concerns, but I could understand why others might think differently (especially if they were in a different country, that used a different currency).
- kragen 7y ago
  Right, here in Argentina our currency has lost more than half its value this year, and the US dollar has lost 96% of its value since the end of the gold standard in 1973. I carry a Zimbabwe 100 trillion dollar bill in my wallet to remind people what real hyperinflation is. I don't think that's the main threat Bitcoin is designed to defend against, though; I think there's a whole spectrum of confiscation threats, ranging from thieves tunneling into bank vaults (I know a woman here who lost her savings that way), to immigration authorities confiscating jewelry, to pirates, to trumped-up "money laundering" charges. And of course if we're mentioning Germany and World Wars, we must not forget the confiscation of Holocaust victims' entire possessions, including jewelry and fillings after the gas chambers. Bitcoin can't make genocide impossible but maybe at least it can make it unprofitable.
  - rossdavidh 7y ago
    I see your point, but I think there are plenty of examples of people losing their Bitcoins through analogous nefarious activities (e.g. MtGox). For an expert in cybersecurity perhaps Bitcoin is safer, but for the average non-technical person (in the U.S.) it is probably _more_ likely to get your money taken by a thief than if you had it in fiat currency in a bank, though of course either one is possible. Again, this could vary depending upon your nation's government and crime situation.
    - kragen 7y ago
      I think it's true that "for the average non-technical person (in the U.S.) it is probably more likely to get your money taken by a thief than if you had it in fiat currency in a bank." But I think you're locating the problem in the wrong part of the conjunction: the reason fiat currency in a US bank is more secure is because US banks are fairly secure, not because the fiat currency is secure. It seems like some sort of confusion to blame the Mt. Gox heist on Bitcoin. Mt. Gox's depositors gave their Bitcoins to Mt. Gox; Mt. Gox didn't give them back and claims that an unknown party absconded with them. If you lent your car to a random French PHP programmer in Japan and he came back without the car, you wouldn't blame that on cars in general being an "unsafe" investment. If the Mt. Gox depositors had kept their Bitcoins in a paper wallet in a Bank of America safe deposit box rather than in Mt. Gox, they'd still have their money. (In fact they'd have enormously more money, but that's sort of random; it demonstrates the fickleness of markets rather than any kind of fundamental security of Bitcoin.) Conversely, the investors and banks who invested or lent dollars and yen to Mt. Gox lost as much or more as the Bitcoin depositors. Probably a BofA Bitcoin account would be better, but that's a matter of convincing BofA to offer Bitcoin or similarly secure currencies, instead of or in addition to dollar-denominated accounts. And that's where Libra comes from.
      - not_kurt_godel 7y ago
        > But I think you're locating the problem in the wrong part of the conjunction: the reason fiat currency in a US bank is more secure is because US banks are fairly secure, not because the fiat currency is secure. Fiat currency is secure in US banks because there is vast institutional protection for banks such as FDIC insurance and extremely strict laws against bank theft, the Federal Reserve, and so on. There are no such institutional protections for Bitcoin and there never really can be, by design. > If you lent your car to a random French PHP programmer in Japan and he came back without the car, you wouldn't blame that on cars in general being an "unsafe" investment. Sure I would - if lending a car to strangers was an effective necessity to use one in the same way using an exchange is an effective necessity to use Bitcoin, and there were "alternative cars" (aka fiat currency) that required no such lending to strangers.

pyrale 7y ago

Basically, scams. The ability to block a planned payment or ask your bank to chargeback is one of the keys to trust in online economy. If our banking system had used something like bitcoin to implement online transactions, odds are that e-business would have had much less successs and much higher barrier to entry.

nybble41 7y ago
Given a system with irreversible transactions you can always add structure on top to support escrow, chargebacks, or whatever other protection mechanisms you deem prudent. It doesn't work so well the other way around.
- PeterisP 7y ago
  Protection from scams requires that a malicious actor with full technical control of some account is still unable to make irreversible transactions by opting out of whatever structure supports escrow, chargebacks, etc; so either those mechanisms (conditional reversibility, with technical controls defining a reasonable regime of when reversals will be possible and when not) are built in the core system and aren't optional, or the system doesn't have a sufficiently usable reversibility because all the really large scams will simply avoid that "structure on top". The other alternative, of course, is someone taking on full legal liability for transactions that can't be secured technically. If Facebook would offer Libra to consumers in e.g. UK, then all that "transactions are technically irreversible" means is that Facebook would be required to "reverse" the transaction to customer while being unable to recover the funds from the beneficiary - and if they can afford to do that, that's their choice to make.
  - nybble41 7y ago
    You're asking way too much. It's not as if the current system actively prevents you from opting out of all the safety measures and, say, irreversibly handing cash (or something else of value) directly to a scammer; nor should it. Reversible transactions come with costs, especially when the other side of the transaction is not reversible. Chargeback fraud, for example, is a big problem for merchants, and can only occur in a system with reversible transactions. Contracting parties should be free to negotiate both the form of payment and the degree of risk each side is willing to take. The main problem is simply the novelty of it all. Once reasonable and customary structures to handle disputes are in common use asking people to bypass those structures without a very good reason will be just as much of a red flag as it is under the current system. Facebook is not a party to a transaction between any other two Libra users and should have no liability in the event of a dispute over payments beyond maintaining accurate records and providing a fair and above all neutral platform to conduct business.

jpadkins 7y ago

There are a lot of minor threats to monetary systems that blockchain does not address. Bitcoin addresses the rare but fatal threat of hyperinflation (runaway inflation). Historical examples https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperinflationary_episodes https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperin... The only known solution to this threat is not have a single supplier of money (i.e. a lot of independent miners digging metal out of the ground, or the block chain equivalent)