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Much of the world literally does run algorithmically. Literally every day you trust your life, privacy and money to algorithms that make decisions without human

Much of the world literally does run algorithmically. Literally every day you trust your life, privacy and money to algorithms that make decisions without human intervention. The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision. Hedge funds and banks already trust algorithms that if broken could lose billions. The existence of flawed software does not mean that it’s impossible to make reliable or trustworthy software. If you’ll never trust your money to a smart contract no matter how vetted, then I’d recommend you never fly a plane or store personal data in the cloud.

jtbayly 5y ago
Sure. But when you get pissed off at those algorithms, you can turn to the government to force the entities behind the algorithms to change the result. That's the whole point. It's not algorithmic in the end. Code is not law, and if it is, that's a bug, not a feature, to most people.
dswalter 5y ago
But in many cases, there are ways to dispute and/or retrospectively fix or amend a transaction that is mis-classified. In the exceptionally rare case that something is exploited within a cryptocurrency, there is no recourse for the victim.
crazygringo 5y ago
> Much of the world literally does run algorithmically. I think you're missing the parent's point, which is around the world running on legal contracts. It's that legal disputes are settled non-algorithmically. If someone harms you through fraud or other illegal action, a judge can order a transaction reversed, etc. None of this has anything to do with algorithmic trading, or using algorithms in finance generally for efficiency.
tptacek 5y ago
It literally does not. The world runs advised by algorithms, but not governed by them. It's a fundamental difference. When algorithms in the real world create lose-lose outcomes, people override them, which is why when your credit card gets stolen you don't end up paying for stuff. You can bake that logic into a software contract, but if the design of your system is that the totality of software contracts are the final word, you have the same problem; you can't predict all the corner cases. It turns out a lot of the human beings that work for companies engaged in the financial system actually do stuff to solve problems.
- thaumasiotes 5y ago
  > When algorithms in the real world create lose-lose outcomes, people override them, which is why when your credit card gets stolen you don't end up paying for stuff. An exploit where I take all your bitcoins isn't a lose-lose outcome, and neither is that. If I steal your credit card and you have to pay for my stuff, you're the only party who loses.
  - adtac 5y ago
    If you steal my credit card and buy things with it, I will call my bank and I won't need to pay for it when I settle my statement balance at the end of the month. The bank will follow up with the merchant and/or law enforcement and, in most cases, the bank will get its money back somehow. In the cases where it doesn't, I'm sure the bank is insured against losses. Banks and insurance companies probably have a complicated model for estimating $X/yr in theft. If someone steals my wallet's private key (= stealing my credit card), I'm done. There is no recourse AFAIK.
    - deleted 5y ago
      [deleted]
    - thaumasiotes 5y ago
      > If you steal my credit card and buy things with it, I will call my bank and I won't need to pay for it when I settle my statement balance at the end of the month. This is an epically terrible argument for why you shouldn't have to pay for things someone else purchased with your stolen credit card. "I shouldn't have to because I don't have to"? Compare tptacek's claim: >>> which is why when your credit card gets stolen you don't end up paying for stuff. There are four parties involved: you, the thief, the bank, and the merchant. When you can afford to pay, here's a win/loss table in the case where you have to pay: you: lose bank: win merchant: win thief: win And in the case where you don't have to pay, but the bank collects from the merchant: you: win bank: win merchant: lose thief: win You don't have to pay, and the bank can't collect from the merchant: you: win bank: lose merchant: win thief: win When you have to pay, but you can't afford it: you: win bank: lose merchant: win thief: win Where's the lose/lose scenario?
twic 5y ago
> The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision. Nope. Regulations require human supervision, in some way, of that trading. Furthermore, those trades have exactly the kind of non-algorithmic softness that omk talks about: if an algorithm makes a trade which is obviously incorrect, you can ask the exchange to bust it.
orthecreedence 5y ago
I'd say most of the systems you mention either a) have human failsafes b) have years of pre-algorithmic precedent such that the algorithm matches some well-known accepted process or c) are speculative in nature and therefor can assume the risk of a faulty algorithm. Algorithmic stablecoins are mostly in category "c" so far. There is no human failsafe and there is no predetermined process that can shape the algorithm.
bostonsre 5y ago
> The existence of flawed software does not mean that it’s impossible to make reliable or trustworthy software. It also doesn't mean that it is economically feasible to make 100% reliable or trustworthy software. > If you’ll never trust your money to a smart contract no matter how vetted, then I’d recommend you never fly a plane or store personal data in the cloud. Isn't vetting of contracts the opposite of having a no human touch algorithmically run world? And who does the vetting of the code? Who does the vetting of the people the vet the code? Who does the vetting of the people that run the code? To have your money in smart contracts right now is tantamount to seeing those 737 max plane crashes in the past, then plugging your ears with your fingers and saying I can't wait to fly on a 737 max tomorrow. It's kind of a mess out there right now [1]. [1] https://cryptoslate.com/binance-smart-chain-sounds-alarm-over-well-organized-defi-attacks/ https://cryptoslate.com/binance-smart-chain-sounds-alarm-ove...
NovemberWhiskey 5y ago
>Literally every day you trust your life, privacy and money to algorithms that make decisions without human intervention. The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision. ... but when that stuff goes wrong, which it does, we don't just say "geez that's too bad, the code is the code". Look at the 2010 flash crash: something like 20,000 trades were broken after discussion between FINRA and the exchanges based on how far they were from the reference price. Similarly, I don't end up eating the entire loss if my bank's anti-fraud system mistakenly approves a transaction on a stolen credit card, because I have 60 days from the statement date to report the problem under the FCBA. The point is that in most cases where physics is not involved (e.g. flight control systems), the real-time behavior of the systems is backstopped by processes to deal with exceptions in a slower, more considered way.
- dcolkitt 5y ago
  Knight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed. Every hedge fund and market maker knows that if their algorithms break, their money is gone. Period. No backsies. The point is billions in capital is already completely trusted to algorithms with no human fail safe.
  - NovemberWhiskey 5y ago
    >Knight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed. I am pretty sure that NYSE canceled trades in six names after Knight; and the LULD pause rules that were introduced after the 2010 flash crash (unfortunately too late to save Knight) also create opportunities for human intervention.

jtbayly 5y ago

Sure. But when you get pissed off at those algorithms, you can turn to the government to force the entities behind the algorithms to change the result. That's the whole point. It's not algorithmic in the end. Code is not law, and if it is, that's a bug, not a feature, to most people.

dswalter 5y ago

But in many cases, there are ways to dispute and/or retrospectively fix or amend a transaction that is mis-classified. In the exceptionally rare case that something is exploited within a cryptocurrency, there is no recourse for the victim.

crazygringo 5y ago

> Much of the world literally does run algorithmically. I think you're missing the parent's point, which is around the world running on legal contracts. It's that legal disputes are settled non-algorithmically. If someone harms you through fraud or other illegal action, a judge can order a transaction reversed, etc. None of this has anything to do with algorithmic trading, or using algorithms in finance generally for efficiency.

tptacek 5y ago

It literally does not. The world runs advised by algorithms, but not governed by them. It's a fundamental difference. When algorithms in the real world create lose-lose outcomes, people override them, which is why when your credit card gets stolen you don't end up paying for stuff. You can bake that logic into a software contract, but if the design of your system is that the totality of software contracts are the final word, you have the same problem; you can't predict all the corner cases. It turns out a lot of the human beings that work for companies engaged in the financial system actually do stuff to solve problems.

thaumasiotes 5y ago
> When algorithms in the real world create lose-lose outcomes, people override them, which is why when your credit card gets stolen you don't end up paying for stuff. An exploit where I take all your bitcoins isn't a lose-lose outcome, and neither is that. If I steal your credit card and you have to pay for my stuff, you're the only party who loses.
- adtac 5y ago
  If you steal my credit card and buy things with it, I will call my bank and I won't need to pay for it when I settle my statement balance at the end of the month. The bank will follow up with the merchant and/or law enforcement and, in most cases, the bank will get its money back somehow. In the cases where it doesn't, I'm sure the bank is insured against losses. Banks and insurance companies probably have a complicated model for estimating $X/yr in theft. If someone steals my wallet's private key (= stealing my credit card), I'm done. There is no recourse AFAIK.
  - deleted 5y ago
    [deleted]
  - thaumasiotes 5y ago
    > If you steal my credit card and buy things with it, I will call my bank and I won't need to pay for it when I settle my statement balance at the end of the month. This is an epically terrible argument for why you shouldn't have to pay for things someone else purchased with your stolen credit card. "I shouldn't have to because I don't have to"? Compare tptacek's claim: >>> which is why when your credit card gets stolen you don't end up paying for stuff. There are four parties involved: you, the thief, the bank, and the merchant. When you can afford to pay, here's a win/loss table in the case where you have to pay: you: lose bank: win merchant: win thief: win And in the case where you don't have to pay, but the bank collects from the merchant: you: win bank: win merchant: lose thief: win You don't have to pay, and the bank can't collect from the merchant: you: win bank: lose merchant: win thief: win When you have to pay, but you can't afford it: you: win bank: lose merchant: win thief: win Where's the lose/lose scenario?

twic 5y ago

> The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision. Nope. Regulations require human supervision, in some way, of that trading. Furthermore, those trades have exactly the kind of non-algorithmic softness that omk talks about: if an algorithm makes a trade which is obviously incorrect, you can ask the exchange to bust it.

orthecreedence 5y ago

I'd say most of the systems you mention either a) have human failsafes b) have years of pre-algorithmic precedent such that the algorithm matches some well-known accepted process or c) are speculative in nature and therefor can assume the risk of a faulty algorithm. Algorithmic stablecoins are mostly in category "c" so far. There is no human failsafe and there is no predetermined process that can shape the algorithm.

bostonsre 5y ago

> The existence of flawed software does not mean that it’s impossible to make reliable or trustworthy software. It also doesn't mean that it is economically feasible to make 100% reliable or trustworthy software. > If you’ll never trust your money to a smart contract no matter how vetted, then I’d recommend you never fly a plane or store personal data in the cloud. Isn't vetting of contracts the opposite of having a no human touch algorithmically run world? And who does the vetting of the code? Who does the vetting of the people the vet the code? Who does the vetting of the people that run the code? To have your money in smart contracts right now is tantamount to seeing those 737 max plane crashes in the past, then plugging your ears with your fingers and saying I can't wait to fly on a 737 max tomorrow. It's kind of a mess out there right now [1]. [1] https://cryptoslate.com/binance-smart-chain-sounds-alarm-over-well-organized-defi-attacks/ https://cryptoslate.com/binance-smart-chain-sounds-alarm-ove...

NovemberWhiskey 5y ago

>Literally every day you trust your life, privacy and money to algorithms that make decisions without human intervention. The financial system trades trillions of dollars in automated systems that make split-second decisions in a way that precludes human supervision. ... but when that stuff goes wrong, which it does, we don't just say "geez that's too bad, the code is the code". Look at the 2010 flash crash: something like 20,000 trades were broken after discussion between FINRA and the exchanges based on how far they were from the reference price. Similarly, I don't end up eating the entire loss if my bank's anti-fraud system mistakenly approves a transaction on a stolen credit card, because I have 60 days from the statement date to report the problem under the FCBA. The point is that in most cases where physics is not involved (e.g. flight control systems), the real-time behavior of the systems is backstopped by processes to deal with exceptions in a slower, more considered way.

dcolkitt 5y ago
Knight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed. Every hedge fund and market maker knows that if their algorithms break, their money is gone. Period. No backsies. The point is billions in capital is already completely trusted to algorithms with no human fail safe.
- NovemberWhiskey 5y ago
  >Knight lost half a billion dollars in 30 seconds and not a single trade was reversed. If anything similar happened to any major hedge fund or market maker, nothing would get reversed. I am pretty sure that NYSE canceled trades in six names after Knight; and the LULD pause rules that were introduced after the 2010 flash crash (unfortunately too late to save Knight) also create opportunities for human intervention.