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Yet another reason crypto will never become the de facto currency. Can you imagine if we treated other currency like that? If everyone had to protect their own

Yet another reason crypto will never become the de facto currency. Can you imagine if we treated other currency like that? If everyone had to protect their own cash, and if you put it in a bank you were considered foolish? Although at least with cash most people would understand how to protect it. A vast majority of people in the world are never going to understand crypto well enough to be fully capable of securing it themselves.

derefr 6y ago
Real banks are regulated and insured by government institutions like FDIC. If there were crypto exchanges with those properties, they’d be fine to trust too. Current crypto exchanges are basically like holding your money in a gaming account in an offshore casino. The companies don’t submit themselves to anyone’s jurisdiction—so there’s no implied legal safety.
- rawtxapp 6y ago
  Most trusted exchanges have some kind of insurance in place [1][2][3]. 1: https://support.gemini.com/hc/en-us/articles/205823016-Are-my-funds-insured- https://support.gemini.com/hc/en-us/articles/205823016-Are-m... 2: https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured https://help.coinbase.com/en/coinbase/other-topics/legal-pol... 3: https://www.coindesk.com/bitgo-600m-insurance-capacity-big-time-bitcoin-holders https://www.coindesk.com/bitgo-600m-insurance-capacity-big-t...
  - joosters 6y ago
    None of these are as good as the protection of your money in a bank. e.g. Coinbase's insurance covers just their 'hot storage', but that's only 2% of your currency. Plenty of exchanges have lost their supposedly secure cold wallets to hackers.
    - PragmaticPulp 6y ago
      Coinbase is so large that if their cold storage was compromised, the ripple effects on the entire crypto market would destroy immense value everywhere. Returning coins to users would only be part of the problem. Everyone’s coins would be worth less from the fallout alone.
- cortesoft 6y ago
  So what does using a “bank+crypto” offer over just using a bank?
  - dandanua 6y ago
    being a part of a financial pyramid
    - arcticbull 6y ago
      My wife, she still does not believe in me, what am I going to do?!
  - derefr 6y ago
    What does that even mean? Cryptocurrencies are currencies; there’s nothing fundamentally different about holding them for investment purposes vs. doing regular ForEx trading, save for the fact that the existing ForEx infrastructure hasn’t caught up to support crypto yet.
    - cortesoft 6y ago
      Most people don’t hold currency as an investment, they hold it so that they can spend it on things.
      - derefr 6y ago
        That's why I said ForEx. People don't tend to hold their own currency as an investment (except in the form of treasury bonds); but they do tend to hold (a portfolio of) currencies other than their own — or bonds from the governments that issue those currencies — for investment purposes. The exact kind of trading that crypto people already do all day, is called ForEx trading when applied to fiat currencies; and (investment) banks know how to do it very well. Those banks just haven't built the infrastructure to allow them to manage a BTC or ETH holding through the same ForEx account that they use to manage fiat holdings. If they did build that infrastructure, most of the crypto exchanges would go extinct overnight. Why would I do my (crypto) ForEx trading on a crypto exchange, if I could trade it with my bank instead? (There are benefits to using a DEX over a hypothetical crypto-enabled investment bank for crypto-trading; just no real benefits to using a regular centralized exchange over said bank. Centralized exchanges are investment banks — just fly-by-night ones compared to real investment banks.)
rawtxapp 6y ago
Internet was pretty complicated in the 90s as well, example: "What is the internet, anyway?"[1]. Things are becoming more and more intuitive by the day and I expect that to continue. 1: https://www.youtube.com/watch?v=UlJku_CSyNg https://www.youtube.com/watch?v=UlJku_CSyNg
- foepys 6y ago
  In my country there is an official government warning to not click on links in fake package delivery SMS that are going around and are impersonating DHL to get you to download an app. People click them regardless and supply the spammers with more and more phone numbers linked to real names. Will be fun when all the people clicking on these links lose all their currency.
- PragmaticPulp 6y ago
  But we already had viable money and a working banking system. Crypto is a step back in usability. It had a long way to go before it reaches parity with the existing solution that everyone already uses. It’s not like the Internet, which was an all-new solution.
ArkanExplorer 6y ago
Not only that, but if you send your (Bit)coins to the wrong wallet address, there is no verification that the address even exists, and the coins could be permanently destroyed. At least with all other assets classes, there is some verification of the transaction and receiver by the exchange, and the possibility to reverse an error.
- NavinF 6y ago
  > there is no verification that the address even exists Bitcoin addresses are created with a built in checksum code. Generally speaking, it is not possible to send Bitcoin to a mistyped address.
  - nisegami 6y ago
    Wasn't GP talking more about valid but non-existent addressed? I'm guessing this is essentially the same as sending it to an address for which the key has been lost.
    - NavinF 6y ago
      Yes, but that's pretty uncommon in practice. Why would anyone ask you to send money to a valid address that they don't own? It can't be a transcription error because the checksum would catch that It's like sending gold over snailmail to a random address
      - andirk 6y ago
        And what happens if one sends gold over snailmail to a random address? You need to finish your analogy.
- CyberDildonics 6y ago
  Bitcoin and Bitcoin Cash (possibly doge coin and lite coin) all have checksums. If you are sending to an address a single character off will not work because the checksum won't line up and the address will not be valid. If you are sending to an address you did not create, then you are sending to an address where you don't have the key anyway. If you are sending to a specific address (given by someone else or generated by you) the checksum will only line up if it is unchanged. Ethereum does not have this as far as I know.
3np 6y ago
A large part of this is also just the immaturity of the industry as such. Kraken now has a US banking license, Coinbase is not more likely to shut down or screw you over than any normal bank, etc. The people saying "not your keys, not your coins" are in general applying the same logic to banks - so, yes, "not your cash, not your fiat" holds just as true in principle. Banks and government institutions can still freeze your funds for arbitrary reasons. In many places you also don't have any recourse in the event of, say a combined hacking + SIM-jacking attack resulting in loss of funds from your bank account. Understanding how to protect your funds properly will continue to get easier to understand and do over time (and honestly, a hardware wallet like for example Ledger is in principle not more complicated or difficult to use properly than using the various 2FA systems banks utilize today). It's not that hard today, and it will continue to get easier. More secure ways to do custodial/multisig/etc that relies on a third party like a bank are being continuously worked on as well. It's still early days. But at the end of the day, if you're happy to forfeit your independence for convenience, banks will be happy to fill that void for you. The promise of cryptocurrency is that you have the choice. That choice does not exist in the legacy fiat economy.
- pjc50 6y ago
  > Coinbase is not more likely to shut down or screw you over than any normal bank What is the minimum set of people, or computers, or cellphones that one would have to compromise to steal a substantial chunk of Coinbase? How vulnerable are Coinbase to, say, Solarwinds style supply chain attacks?
- arcticbull 6y ago
  > Coinbase is not more likely to shut down or screw you over than any normal bank Coinbase literally just direct listed, had their executive team dump every single vested share on the open market, and then listed Tether. Not a mention of Tether in their regulatory filings under "OMG WTF ARE YOU THINKING". Hmmmm. Starting to smell a bit like an exit scam.
  - 3np 6y ago
    > Coinbase literally just direct listed, had their executive team dump every single vested share on the open market AFAIUI this is not uncommon practice for IPOs in general That being said - time will have to tell of the CB executive team is honest or not. I wouldn't be surprised either way TBH. Jumping on Tether seems very shortsighted in CBs position.
andxor 6y ago
There are solutions for this - i.e. social wallets. https://vitalik.ca/general/2021/01/11/recovery.html https://vitalik.ca/general/2021/01/11/recovery.html
grey-area 6y ago
Yes one of the big problems with cryptocurrencies is that they solve problems that nobody has, which in turn create problems nobody wants (for values of nobody < 0.0001% of population). We don't need or want a trustless distributed consensus currency... We don't need or want a fully public ledger... We don't need or want to be in charge of their own keys... We don't want to deal directly with other agents without a middleman to protect us from fraud and theft. Slow transactions and distributed public ledgers are built into the design of something like bitcoin and are fundamentally tied to it - take away all those things by redesigning it or trying to augment it and you're left with a bad copy of a centralised transaction network. People need to trust their money and trust the agents they transact with, validation of identity (something bitcoin actively works to undermine) is key to financial transactions, it should be central to any network. There really are some fundamental flaws in the design and in the aspirations of currencies like bitcoin which mean they will only ever be used by a tiny minority. Hence bitcoin has recently become a vehicle for pure speculation instead, which will end very badly when this bubble bursts.
- hanniabu 6y ago
  > without a middleman to protect us from fraud and theft The blockchain and smart contracts serve this purpose. Regardless, there's additional protocols and tools being created for decentralized insurance, escrow, custodians, etc.
  - grey-area 6y ago
    > The blockchain and smart contracts serve this purpose. They do not, and the bitcoin blockchain in particular eschews identity verification in favour of pseudo-anonymity and puts people in charge of their own anonymous keys - perfect for criminals (anonymous enough to evade police) and states monitoring citizens (not anonymous enough to evade states, lasts forever for retrospective enforcement), but terrible for normal citizens who just want to be sure who they are transacting with and be able to get compensation if they are defrauded. Blockchains and smart contracts are no substitute for real-world contracts enforced by courts and regulators, and the cryptocurrency attempt to supplant state currencies and their legal supports actively undermines any attempt to get regulators to seriously go after fraud. So instead regulators have classed them as assets (so they can tax every transaction in theory) and washed their hands of them.

derefr 6y ago

Real banks are regulated and insured by government institutions like FDIC. If there were crypto exchanges with those properties, they’d be fine to trust too. Current crypto exchanges are basically like holding your money in a gaming account in an offshore casino. The companies don’t submit themselves to anyone’s jurisdiction—so there’s no implied legal safety.

rawtxapp 6y ago
Most trusted exchanges have some kind of insurance in place [1][2][3]. 1: https://support.gemini.com/hc/en-us/articles/205823016-Are-my-funds-insured- https://support.gemini.com/hc/en-us/articles/205823016-Are-m... 2: https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured https://help.coinbase.com/en/coinbase/other-topics/legal-pol... 3: https://www.coindesk.com/bitgo-600m-insurance-capacity-big-time-bitcoin-holders https://www.coindesk.com/bitgo-600m-insurance-capacity-big-t...
- joosters 6y ago
  None of these are as good as the protection of your money in a bank. e.g. Coinbase's insurance covers just their 'hot storage', but that's only 2% of your currency. Plenty of exchanges have lost their supposedly secure cold wallets to hackers.
  - PragmaticPulp 6y ago
    Coinbase is so large that if their cold storage was compromised, the ripple effects on the entire crypto market would destroy immense value everywhere. Returning coins to users would only be part of the problem. Everyone’s coins would be worth less from the fallout alone.
cortesoft 6y ago
So what does using a “bank+crypto” offer over just using a bank?
- dandanua 6y ago
  being a part of a financial pyramid
  - arcticbull 6y ago
    My wife, she still does not believe in me, what am I going to do?!
- derefr 6y ago
  What does that even mean? Cryptocurrencies are currencies; there’s nothing fundamentally different about holding them for investment purposes vs. doing regular ForEx trading, save for the fact that the existing ForEx infrastructure hasn’t caught up to support crypto yet.
  - cortesoft 6y ago
    Most people don’t hold currency as an investment, they hold it so that they can spend it on things.
    - derefr 6y ago
      That's why I said ForEx. People don't tend to hold their own currency as an investment (except in the form of treasury bonds); but they do tend to hold (a portfolio of) currencies other than their own — or bonds from the governments that issue those currencies — for investment purposes. The exact kind of trading that crypto people already do all day, is called ForEx trading when applied to fiat currencies; and (investment) banks know how to do it very well. Those banks just haven't built the infrastructure to allow them to manage a BTC or ETH holding through the same ForEx account that they use to manage fiat holdings. If they did build that infrastructure, most of the crypto exchanges would go extinct overnight. Why would I do my (crypto) ForEx trading on a crypto exchange, if I could trade it with my bank instead? (There are benefits to using a DEX over a hypothetical crypto-enabled investment bank for crypto-trading; just no real benefits to using a regular centralized exchange over said bank. Centralized exchanges are investment banks — just fly-by-night ones compared to real investment banks.)

rawtxapp 6y ago

Internet was pretty complicated in the 90s as well, example: "What is the internet, anyway?"[1]. Things are becoming more and more intuitive by the day and I expect that to continue. 1: https://www.youtube.com/watch?v=UlJku_CSyNg https://www.youtube.com/watch?v=UlJku_CSyNg

foepys 6y ago
In my country there is an official government warning to not click on links in fake package delivery SMS that are going around and are impersonating DHL to get you to download an app. People click them regardless and supply the spammers with more and more phone numbers linked to real names. Will be fun when all the people clicking on these links lose all their currency.
PragmaticPulp 6y ago
But we already had viable money and a working banking system. Crypto is a step back in usability. It had a long way to go before it reaches parity with the existing solution that everyone already uses. It’s not like the Internet, which was an all-new solution.

ArkanExplorer 6y ago

Not only that, but if you send your (Bit)coins to the wrong wallet address, there is no verification that the address even exists, and the coins could be permanently destroyed. At least with all other assets classes, there is some verification of the transaction and receiver by the exchange, and the possibility to reverse an error.

NavinF 6y ago
> there is no verification that the address even exists Bitcoin addresses are created with a built in checksum code. Generally speaking, it is not possible to send Bitcoin to a mistyped address.
- nisegami 6y ago
  Wasn't GP talking more about valid but non-existent addressed? I'm guessing this is essentially the same as sending it to an address for which the key has been lost.
  - NavinF 6y ago
    Yes, but that's pretty uncommon in practice. Why would anyone ask you to send money to a valid address that they don't own? It can't be a transcription error because the checksum would catch that It's like sending gold over snailmail to a random address
    - andirk 6y ago
      And what happens if one sends gold over snailmail to a random address? You need to finish your analogy.
CyberDildonics 6y ago
Bitcoin and Bitcoin Cash (possibly doge coin and lite coin) all have checksums. If you are sending to an address a single character off will not work because the checksum won't line up and the address will not be valid. If you are sending to an address you did not create, then you are sending to an address where you don't have the key anyway. If you are sending to a specific address (given by someone else or generated by you) the checksum will only line up if it is unchanged. Ethereum does not have this as far as I know.

3np 6y ago

A large part of this is also just the immaturity of the industry as such. Kraken now has a US banking license, Coinbase is not more likely to shut down or screw you over than any normal bank, etc. The people saying "not your keys, not your coins" are in general applying the same logic to banks - so, yes, "not your cash, not your fiat" holds just as true in principle. Banks and government institutions can still freeze your funds for arbitrary reasons. In many places you also don't have any recourse in the event of, say a combined hacking + SIM-jacking attack resulting in loss of funds from your bank account. Understanding how to protect your funds properly will continue to get easier to understand and do over time (and honestly, a hardware wallet like for example Ledger is in principle not more complicated or difficult to use properly than using the various 2FA systems banks utilize today). It's not that hard today, and it will continue to get easier. More secure ways to do custodial/multisig/etc that relies on a third party like a bank are being continuously worked on as well. It's still early days. But at the end of the day, if you're happy to forfeit your independence for convenience, banks will be happy to fill that void for you. The promise of cryptocurrency is that you have the choice. That choice does not exist in the legacy fiat economy.

pjc50 6y ago
> Coinbase is not more likely to shut down or screw you over than any normal bank What is the minimum set of people, or computers, or cellphones that one would have to compromise to steal a substantial chunk of Coinbase? How vulnerable are Coinbase to, say, Solarwinds style supply chain attacks?
arcticbull 6y ago
> Coinbase is not more likely to shut down or screw you over than any normal bank Coinbase literally just direct listed, had their executive team dump every single vested share on the open market, and then listed Tether. Not a mention of Tether in their regulatory filings under "OMG WTF ARE YOU THINKING". Hmmmm. Starting to smell a bit like an exit scam.
- 3np 6y ago
  > Coinbase literally just direct listed, had their executive team dump every single vested share on the open market AFAIUI this is not uncommon practice for IPOs in general That being said - time will have to tell of the CB executive team is honest or not. I wouldn't be surprised either way TBH. Jumping on Tether seems very shortsighted in CBs position.

andxor 6y ago

There are solutions for this - i.e. social wallets. https://vitalik.ca/general/2021/01/11/recovery.html https://vitalik.ca/general/2021/01/11/recovery.html

grey-area 6y ago

Yes one of the big problems with cryptocurrencies is that they solve problems that nobody has, which in turn create problems nobody wants (for values of nobody < 0.0001% of population). We don't need or want a trustless distributed consensus currency... We don't need or want a fully public ledger... We don't need or want to be in charge of their own keys... We don't want to deal directly with other agents without a middleman to protect us from fraud and theft. Slow transactions and distributed public ledgers are built into the design of something like bitcoin and are fundamentally tied to it - take away all those things by redesigning it or trying to augment it and you're left with a bad copy of a centralised transaction network. People need to trust their money and trust the agents they transact with, validation of identity (something bitcoin actively works to undermine) is key to financial transactions, it should be central to any network. There really are some fundamental flaws in the design and in the aspirations of currencies like bitcoin which mean they will only ever be used by a tiny minority. Hence bitcoin has recently become a vehicle for pure speculation instead, which will end very badly when this bubble bursts.

hanniabu 6y ago
> without a middleman to protect us from fraud and theft The blockchain and smart contracts serve this purpose. Regardless, there's additional protocols and tools being created for decentralized insurance, escrow, custodians, etc.
- grey-area 6y ago
  > The blockchain and smart contracts serve this purpose. They do not, and the bitcoin blockchain in particular eschews identity verification in favour of pseudo-anonymity and puts people in charge of their own anonymous keys - perfect for criminals (anonymous enough to evade police) and states monitoring citizens (not anonymous enough to evade states, lasts forever for retrospective enforcement), but terrible for normal citizens who just want to be sure who they are transacting with and be able to get compensation if they are defrauded. Blockchains and smart contracts are no substitute for real-world contracts enforced by courts and regulators, and the cryptocurrency attempt to supplant state currencies and their legal supports actively undermines any attempt to get regulators to seriously go after fraud. So instead regulators have classed them as assets (so they can tax every transaction in theory) and washed their hands of them.