4 ms·

The issue is converting that crypto into cash.

refurb 6y ago
This is what I don’t get. Great, you can transfer Bitcoin to anyone for cheap, anywhere in the world. But that Bitcoin is useless to you or whoever you give it to unless it’s converted to currency. That’s where the gov’t puts it’s grip. Move as much Bitcoin wherever you want. Who cares. Want to convert to dollars or Euros or Yen? That’s where the gov’t steps in and say fine - prove who you are for this transaction. With the public Bitcoin ledger they can now connect you back to the source of the money.
- intotheabyss 6y ago
  Just wrap your Bitcoin into renBTC on Ethereum, and exchange it for DAI stablecoin. Then, deposit it into a zero knowledge mixer contract called tornado.cash and withdraw to a fresh address. Now you've broken the link. An entirely decentralized process of converting BTC into a stablecoin without an intermediary while maintaining some privacy.
  - Karunamon 6y ago
    How many bites of the pie did you lose during those 4 transactions? Besides, you still need to convert DAI to fiat to use it IRL in most ways, DAI is just another form of space money despite being pegged to the dollar. I could also see criminalization of mixing tools being a thing.
    - tuxxy 6y ago
      > How many bites of the pie did you lose during those 4 transactions? Probably between ~1-2%, if that.
      - Karunamon 6y ago
        That would depend on the transaction size and market, no? As early as yesterday, any single transaction involving ETH would have cost no less than $3 due to gas prices even at the slowest acceptable pace, and that's before the bid/ask spread on the exchanges eat some more I'm quickly coming to the conclusion that while crypto cuts out a lot of the obvious middlemen, there are a lot more hidden ones. It is currently non-economical to do small transactons.
    - freeone3000 6y ago
      It's already a thing - it's money laundering to conceal the source of funds that may have been used in an illegal activity.
      - Karunamon 6y ago
        No, I mean criminalization of mixing services in specific, regardless of their use. In the same vein as KYC laws. It's currently not illegal to obscure your financial trail as long as it's not in service of anything that is itself illegal, but I could see the legislators saying that any funds from a mixer are to be considered tainted, and made de facto illegal all on their own.
  - thefounder 6y ago
    In the end you still need to convert/exchange that last rinse crypto into cash. The exchanger may want to know where you've got that crypto from and the person(s) that sent you the crypted have been subjected to KYC. Just like with real money.
  - refurb 6y ago
    Right, so how do I convert stable coin to cash to pay my rent? I’d need to go through a registered money exchange and the gov’t will have a record of my name and the cash I received in the exchange. If it’s enough cash they will ask about the source of funds.
- t0astbread 6y ago
  That's what obfuscating coins like Monero or ZCash (with private transactions) are for - in theory. In practice no exchange directly offers conversions between those and "classic" currencies so you have to somewhat awkwardly convert via a more commonly used cryptocurrency. Oh and if anyone ever finds a deadly bug in the protocol transactions might be de-anonymized in the future. On the other hand if you pay digitally with "classic" currencies today, your privacy is severely diminished as well. Fintech companies often rely on third parties for some aspects of their services and financial data has special legal standing making it harder to control like you could do with other personal data (under the GDPR, for example).
- CogitoCogito 6y ago
  It doesn't need to be convertible to cash to have economic value. As long as people are willing to trade bitcoins for other goods, they have value. So even if it could never be converted to another currency, that wouldn't necessarily mean it's useless.
  - refurb 6y ago
    Are you sure? At some point someone along the line needs to convert it to currency. The only time that wouldn’t be true is if there was a big enough marketplace that anything you might ever want can be purchased in Bitcoin. Otherwise you’d need some way to convert to currency to access other goods and services.
    - CogitoCogito 6y ago
      Of course. Currency itself only has value due to its ability to be traded for other objects. Currency on its own has no value. Bitcoins are in the same boat. If bitcoins can be traded for other objects, they have value regardless of any ability to trade them for currency. Put another way, the only thing that bitcoins (and dollars for that matter) require are that people perceive them to have value. Besides even if bitcoins cannot be directly traded for dollars on an exchange, the same could still occur with intermediate objects. If I give you bitcoins in exchange for a laptop, I can then turn around and sell that laptop for money. It's not as convenient (and could be illegal), but it would work.

This is what I don’t get. Great, you can transfer Bitcoin to anyone for cheap, anywhere in the world. But that Bitcoin is useless to you or whoever you give it to unless it’s converted to currency. That’s where the gov’t puts it’s grip. Move as much Bitcoin wherever you want. Who cares. Want to convert to dollars or Euros or Yen? That’s where the gov’t steps in and say fine - prove who you are for this transaction. With the public Bitcoin ledger they can now connect you back to the source of the money.

intotheabyss 6y ago
Just wrap your Bitcoin into renBTC on Ethereum, and exchange it for DAI stablecoin. Then, deposit it into a zero knowledge mixer contract called tornado.cash and withdraw to a fresh address. Now you've broken the link. An entirely decentralized process of converting BTC into a stablecoin without an intermediary while maintaining some privacy.
- Karunamon 6y ago
  How many bites of the pie did you lose during those 4 transactions? Besides, you still need to convert DAI to fiat to use it IRL in most ways, DAI is just another form of space money despite being pegged to the dollar. I could also see criminalization of mixing tools being a thing.
  - tuxxy 6y ago
    > How many bites of the pie did you lose during those 4 transactions? Probably between ~1-2%, if that.
    - Karunamon 6y ago
      That would depend on the transaction size and market, no? As early as yesterday, any single transaction involving ETH would have cost no less than $3 due to gas prices even at the slowest acceptable pace, and that's before the bid/ask spread on the exchanges eat some more I'm quickly coming to the conclusion that while crypto cuts out a lot of the obvious middlemen, there are a lot more hidden ones. It is currently non-economical to do small transactons.
  - freeone3000 6y ago
    It's already a thing - it's money laundering to conceal the source of funds that may have been used in an illegal activity.
    - Karunamon 6y ago
      No, I mean criminalization of mixing services in specific, regardless of their use. In the same vein as KYC laws. It's currently not illegal to obscure your financial trail as long as it's not in service of anything that is itself illegal, but I could see the legislators saying that any funds from a mixer are to be considered tainted, and made de facto illegal all on their own.
- thefounder 6y ago
  In the end you still need to convert/exchange that last rinse crypto into cash. The exchanger may want to know where you've got that crypto from and the person(s) that sent you the crypted have been subjected to KYC. Just like with real money.
- refurb 6y ago
  Right, so how do I convert stable coin to cash to pay my rent? I’d need to go through a registered money exchange and the gov’t will have a record of my name and the cash I received in the exchange. If it’s enough cash they will ask about the source of funds.
t0astbread 6y ago
That's what obfuscating coins like Monero or ZCash (with private transactions) are for - in theory. In practice no exchange directly offers conversions between those and "classic" currencies so you have to somewhat awkwardly convert via a more commonly used cryptocurrency. Oh and if anyone ever finds a deadly bug in the protocol transactions might be de-anonymized in the future. On the other hand if you pay digitally with "classic" currencies today, your privacy is severely diminished as well. Fintech companies often rely on third parties for some aspects of their services and financial data has special legal standing making it harder to control like you could do with other personal data (under the GDPR, for example).
CogitoCogito 6y ago
It doesn't need to be convertible to cash to have economic value. As long as people are willing to trade bitcoins for other goods, they have value. So even if it could never be converted to another currency, that wouldn't necessarily mean it's useless.
- refurb 6y ago
  Are you sure? At some point someone along the line needs to convert it to currency. The only time that wouldn’t be true is if there was a big enough marketplace that anything you might ever want can be purchased in Bitcoin. Otherwise you’d need some way to convert to currency to access other goods and services.
  - CogitoCogito 6y ago
    Of course. Currency itself only has value due to its ability to be traded for other objects. Currency on its own has no value. Bitcoins are in the same boat. If bitcoins can be traded for other objects, they have value regardless of any ability to trade them for currency. Put another way, the only thing that bitcoins (and dollars for that matter) require are that people perceive them to have value. Besides even if bitcoins cannot be directly traded for dollars on an exchange, the same could still occur with intermediate objects. If I give you bitcoins in exchange for a laptop, I can then turn around and sell that laptop for money. It's not as convenient (and could be illegal), but it would work.