4 ms·

Why is cryptocurrency/blockchain necessary for that? You could have all of this with open banking standards.

by leifg 5y ago

ipnon 5y ago
Very simple game theory answer to this question: tragedy of the commons. There is a reason popular culture stereotypes financiers as greedy sociopaths. If the system can be cracked then it will be cracked. No shortage of examples, Bernie Madoffs, subprime lending crises, endless financial crashes and crises. Blockchains solve this problem, as in mathematically proves that certain classes of exploits requiring information asymmetry are impossible. We could have all of this with open banking standards? You're looking at them!
- leifg 5y ago
  That sounds like a typical blockchain enthusiast answer: The banking industry is corrupt. Blockchain solves this. End of argument. I have yet to see a specific, easy to explain answer on how blockchain solves any kind of fraud. Who is forcing any of these fraudsters to put any information on the blockchain? As soon as you need external safe guards you are back to square one. I don’t have the solution to any of the problems of the banking industry but in my experience technical solutions don’t solve any of these societal problems.
  - ipnon 5y ago
    Well my answer would be that there are many different types of exploits that we may consider fraud. As I said blockchains prevent _some_ of these exploits but not all. I don't think we can prevent laundering of illegal arms sales with cryptocurrency just as I don't think we can prevent the same laundering with actual paper bills.[a] However blockchains do prevent problems like double spending and information asymmetry from occurring. My counter point to the lack of specific, easy answers on how blockchain solves any kind of fraud would be that there aren't any, in that there is a certain amount of financial and technical know how that is prerequisite to explaining _why_ these problems are provably non existent. We will need to wait for higher level abstractions to be invented before mainstream adoption is possible, and until that happens I will admit cryptocurrencies are almost hopelessly confusing in their mechanisms of action. [a] China's new central bank currency may be able to solve this problem to some extent but I consider the forced adoption of such a currency in the Western world to be too draconian to be practical.
    - leifg 5y ago
      So blockchain solves some unspecified subset of fraud. But only people who know enough about finance and technology are able to understand how this fraud is prevented? A lot of time has passed. Why has no one come up with these higher level abstractions?
      - ipnon 5y ago
        All I can say is that it can't be built overnight. There were 32 years between ARPANET implementing TCP/IP and AOL mailing install floppies around the country. I cannot claim to know that crypto will have the same impact as the Web has, but I claim it will require a similar amount of time to develop.
        leifg 5y ago
        ARPANET implemented TCP/IP in 1983. The first AOL floppy disks were sent out in 1993. So thank you for proving my point. Even assuming your timeline is correct. And even ignoring that the top comment on this HN addresses this exact point pretty well: Are you telling me the goal post is now 32 years? And while we’re picking arbitrary points in computer history. The iPhone was released in late 2007 and is around 2 years older than the Bitcoin blockchain. I hope I don’t have to make the argument that smartphones have had a bigger impact on society than any kind of crypto/blockchain solution.
  - rockemsockem 5y ago
    Say instead of using a bank to store your money you store it on the blockchain. Suddenly you don't have to worry about Wells Fargo opening accounts in your name and charging you fees for those accounts. https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scan... Say something like a traditional bank emerged on the blockchain in the form of a smart contract and you stored money with them to have them invest it or something. There would be a public record of all charges the smart contract billed you for and tracking the history of it would be way easier than piecing together your Wells Fargo statements to figure out they've been charging you a couple dollars more every month. This also would be much easier for auditors and financial crime investigators to notice.
    - leifg 5y ago
      > Say instead of using a bank to store your money you store it on the blockchain. Suddenly you don't have to worry about Wells Fargo opening accounts in your name and charging you fees for those accounts. Great you solved a very specific problem and replaced it with a myriad of other problems. Who is gonna take care of your private key? Are you really that confident in your tech skills that you can keep the private key to your money safe? I am not. If someone else issues and protects your private key, what’s stopping them from charging you fees for nothing (or spending all your money). > There would be a public record of all charges the smart contract billed you for I as a bank customer have exactly zero interest in my transactions being “public” (I know they would be pseudonym, still pretty risky). The risks I imagine coming with this outweigh the supposed advantages by a lot. > tracking the history of it would be way easier than piecing together your Wells Fargo statements I don’t know in which century you live but I have a history of all my transactions of all my bank accounts in the interface of my budgeting tool. I can immediately see if there is a suspicious charge. But maybe you have a recommendation for a blockchain based budgeting tool that lets me see details of every transaction, rather than public keys. > This also would be much easier for auditors and financial crime investigators to notice. If it was so easy to investigate shady things on the blockchain why aren’t all these pump and dump scammers and ransomware groups in prison?
revel 5y ago
No you can't. The protocols for buying and selling or making payments haven't changed in decades. The problem is communication authority and scaling, not the data format. Blockchain enables so-called triple entry accounting. Everyone sees everything everyone else is doing (if you want them to). There is never an argument about who did something or why. Just consider the audit and servicing cost savings.
- eloff 5y ago
  You can do all that with a centralized db and Merkel trees. The technology has been around for 40 years.
  - Sargos 5y ago
    Who's going to run that db? How much are they going to charge? Are they going to let anyone write apps on top of it? Do they have a plan for %99.999999999 uptime? Will people lose their data/businesses/livelihoods if this system stops being operated and what's the assurance for entrepreneurs? There's a lot of details that go into running something like that and none of those questions are trivial.
    - leifg 5y ago
      Companies (and especially banks) have been running large scale databases for decades. The cost of IT infrastructure is absolutely negligible compared to salaries. And yes they have been given assurances to entrepreneurs. I have been on this planet for 30+ years and my bank accounts have never gone to 0 because of a “database problem” I really don’t understand what your point is.
      - Sargos 5y ago
        Your bank isn't doing anything very advanced. It's just keeping the equivalent of an excel spreadsheet in a database with some front end software to manage it. You can't write apps on your banking platform. > How much are they going to charge? Are they going to let anyone write apps on top of it? Banks don't currently do this and never will as the overhead is way too much work and far too expensive. The closest example we have is AWS which is extremely complex and can't actually be used for anything dealing with money. It's easy to naively think about a big organization building a platform like Ethereum but once you start designing it out you realize the problem is far larger than it first appears and it would take years and an army of lawyers to make any headway.

Why is cryptocurrency/blockchain necessary for that? You could have all of this with open banking standards.

by leifg 5y ago

Why is cryptocurrency/blockchain necessary for that? You could have all of this with open banking standards.

Very simple game theory answer to this question: tragedy of the commons. There is a reason popular culture stereotypes financiers as greedy sociopaths. If the system can be cracked then it will be cracked. No shortage of examples, Bernie Madoffs, subprime lending crises, endless financial crashes and crises. Blockchains solve this problem, as in mathematically proves that certain classes of exploits requiring information asymmetry are impossible. We could have all of this with open banking standards? You're looking at them!

leifg 5y ago
That sounds like a typical blockchain enthusiast answer: The banking industry is corrupt. Blockchain solves this. End of argument. I have yet to see a specific, easy to explain answer on how blockchain solves any kind of fraud. Who is forcing any of these fraudsters to put any information on the blockchain? As soon as you need external safe guards you are back to square one. I don’t have the solution to any of the problems of the banking industry but in my experience technical solutions don’t solve any of these societal problems.
- ipnon 5y ago
  Well my answer would be that there are many different types of exploits that we may consider fraud. As I said blockchains prevent _some_ of these exploits but not all. I don't think we can prevent laundering of illegal arms sales with cryptocurrency just as I don't think we can prevent the same laundering with actual paper bills.[a] However blockchains do prevent problems like double spending and information asymmetry from occurring. My counter point to the lack of specific, easy answers on how blockchain solves any kind of fraud would be that there aren't any, in that there is a certain amount of financial and technical know how that is prerequisite to explaining _why_ these problems are provably non existent. We will need to wait for higher level abstractions to be invented before mainstream adoption is possible, and until that happens I will admit cryptocurrencies are almost hopelessly confusing in their mechanisms of action. [a] China's new central bank currency may be able to solve this problem to some extent but I consider the forced adoption of such a currency in the Western world to be too draconian to be practical.
  - leifg 5y ago
    So blockchain solves some unspecified subset of fraud. But only people who know enough about finance and technology are able to understand how this fraud is prevented? A lot of time has passed. Why has no one come up with these higher level abstractions?
    - ipnon 5y ago
      All I can say is that it can't be built overnight. There were 32 years between ARPANET implementing TCP/IP and AOL mailing install floppies around the country. I cannot claim to know that crypto will have the same impact as the Web has, but I claim it will require a similar amount of time to develop.
      - leifg 5y ago
        ARPANET implemented TCP/IP in 1983. The first AOL floppy disks were sent out in 1993. So thank you for proving my point. Even assuming your timeline is correct. And even ignoring that the top comment on this HN addresses this exact point pretty well: Are you telling me the goal post is now 32 years? And while we’re picking arbitrary points in computer history. The iPhone was released in late 2007 and is around 2 years older than the Bitcoin blockchain. I hope I don’t have to make the argument that smartphones have had a bigger impact on society than any kind of crypto/blockchain solution.
- rockemsockem 5y ago
  Say instead of using a bank to store your money you store it on the blockchain. Suddenly you don't have to worry about Wells Fargo opening accounts in your name and charging you fees for those accounts. https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scan... Say something like a traditional bank emerged on the blockchain in the form of a smart contract and you stored money with them to have them invest it or something. There would be a public record of all charges the smart contract billed you for and tracking the history of it would be way easier than piecing together your Wells Fargo statements to figure out they've been charging you a couple dollars more every month. This also would be much easier for auditors and financial crime investigators to notice.
  - leifg 5y ago
    > Say instead of using a bank to store your money you store it on the blockchain. Suddenly you don't have to worry about Wells Fargo opening accounts in your name and charging you fees for those accounts. Great you solved a very specific problem and replaced it with a myriad of other problems. Who is gonna take care of your private key? Are you really that confident in your tech skills that you can keep the private key to your money safe? I am not. If someone else issues and protects your private key, what’s stopping them from charging you fees for nothing (or spending all your money). > There would be a public record of all charges the smart contract billed you for I as a bank customer have exactly zero interest in my transactions being “public” (I know they would be pseudonym, still pretty risky). The risks I imagine coming with this outweigh the supposed advantages by a lot. > tracking the history of it would be way easier than piecing together your Wells Fargo statements I don’t know in which century you live but I have a history of all my transactions of all my bank accounts in the interface of my budgeting tool. I can immediately see if there is a suspicious charge. But maybe you have a recommendation for a blockchain based budgeting tool that lets me see details of every transaction, rather than public keys. > This also would be much easier for auditors and financial crime investigators to notice. If it was so easy to investigate shady things on the blockchain why aren’t all these pump and dump scammers and ransomware groups in prison?

revel 5y ago

No you can't. The protocols for buying and selling or making payments haven't changed in decades. The problem is communication authority and scaling, not the data format. Blockchain enables so-called triple entry accounting. Everyone sees everything everyone else is doing (if you want them to). There is never an argument about who did something or why. Just consider the audit and servicing cost savings.

eloff 5y ago
You can do all that with a centralized db and Merkel trees. The technology has been around for 40 years.
- Sargos 5y ago
  Who's going to run that db? How much are they going to charge? Are they going to let anyone write apps on top of it? Do they have a plan for %99.999999999 uptime? Will people lose their data/businesses/livelihoods if this system stops being operated and what's the assurance for entrepreneurs? There's a lot of details that go into running something like that and none of those questions are trivial.
  - leifg 5y ago
    Companies (and especially banks) have been running large scale databases for decades. The cost of IT infrastructure is absolutely negligible compared to salaries. And yes they have been given assurances to entrepreneurs. I have been on this planet for 30+ years and my bank accounts have never gone to 0 because of a “database problem” I really don’t understand what your point is.
    - Sargos 5y ago
      Your bank isn't doing anything very advanced. It's just keeping the equivalent of an excel spreadsheet in a database with some front end software to manage it. You can't write apps on your banking platform. > How much are they going to charge? Are they going to let anyone write apps on top of it? Banks don't currently do this and never will as the overhead is way too much work and far too expensive. The closest example we have is AWS which is extremely complex and can't actually be used for anything dealing with money. It's easy to naively think about a big organization building a platform like Ethereum but once you start designing it out you realize the problem is far larger than it first appears and it would take years and an army of lawyers to make any headway.