3 ms·

Sometimes I wonder if crypto is making the mistakes that led to regulation for standard money systems.

deepsun 5y ago
By all means crypto coins are assets, not currency.
rsynnott 5y ago
I mean, it's making many of them, but DeFi/"Smart Contracts" is a novel mistake. "Due to misdrafting of a contract we have to give all of the bank's funds to a cat" isn't a thing that happens in the real world; while contract mistakes can be expensive, the sheer ridiculousness common in DeFi-world is unique and new.
- rsj_hn 5y ago
  Superficially, the mistakes are different, but the evolution is the same. E.g. the original goal of bitcoin was to be a digital form of cash. Cash because the transaction is just between you and the buyer - cash is a bearer instrument. With ACH it's a custodial relationship with the bank, and the bank's interest may not be aligned with yours. They can decline transactions, freeze your funds, monitor what you do, etc. So there was less "ownership", and this true ownership combined with digital payments was the original vision. Except that true ownership is really limiting. Sometimes you want the intermediary or need money held in escrow and that's when you want a custodial relationship. So enters Etherium and the notion of contracts. Now it's no longer payer and payee, but you have the contract sitting between the two, much as the bank. And just as the bank, the contract can act against your interests. Now it's true, the specific ways that you get screwed by the smart contract are different than by the bank. Next up, we are seeing the need for adjudication/rollback for when the custodians screw up, as people want to unwind errors in smart contracts or make policy changes. So this will be like re-inventing the court system. Soon, someone will be able to sue you and put a lien on your digital currency, using smart contracts, for example, with appeal to an adjuticating system that can force you to enter into the contract against your will. Then we will be back to longing for the days of bearer currencies.
- mminer237 5y ago
  The difference is that in real life, contracts aren't read by a thoughtless computer. Things can be implied based on the usual business practice. If there's an ambiguity, the intent of the parties can be used to resolve it. If something really unfair would happen, it can be thrown out as unconscionable or against public policy.
trutannus 5y ago
This is the second crypto startup this week I've seen cost people a lot of money. The other was a startup destroying a bunch of NFTs that got produced in a hack. Catch was, these tokens had already been bought and sold. Cavalier stuff like this will absolutely get you regulated. The draw of crypto is supposed to be immunity from this sort of thing, but the frequently amature execution of the products leaves end users often more vulnerable to attack than had they shoved their money in Bank of Your Nation. Banks invest eye-wateringly large sums of money every year in security. Crypto startups are just unable to match this level of security analysis and testing.
floatboth 5y ago
Yes, "speedrunning 500 years of bad economic history" — https://www.youtube.com/watch?v=xCHab0dNnj4 https://www.youtube.com/watch?v=xCHab0dNnj4
- elliekelly 5y ago
  This was really interesting, thanks for sharing!
jl2718 5y ago
All that plus a lot of mistakes that weren’t even possible before. Like, epic disaster stuff we couldn’t even imagine yet. But the accessibility and costs will be massively superior to the old system, which will be unable to compete in anything but politics, and and thus will get worse rather than better, and will fail with near certainty. Financial history is full of these moments.

By all means crypto coins are assets, not currency.

I mean, it's making many of them, but DeFi/"Smart Contracts" is a novel mistake. "Due to misdrafting of a contract we have to give all of the bank's funds to a cat" isn't a thing that happens in the real world; while contract mistakes can be expensive, the sheer ridiculousness common in DeFi-world is unique and new.

rsj_hn 5y ago
Superficially, the mistakes are different, but the evolution is the same. E.g. the original goal of bitcoin was to be a digital form of cash. Cash because the transaction is just between you and the buyer - cash is a bearer instrument. With ACH it's a custodial relationship with the bank, and the bank's interest may not be aligned with yours. They can decline transactions, freeze your funds, monitor what you do, etc. So there was less "ownership", and this true ownership combined with digital payments was the original vision. Except that true ownership is really limiting. Sometimes you want the intermediary or need money held in escrow and that's when you want a custodial relationship. So enters Etherium and the notion of contracts. Now it's no longer payer and payee, but you have the contract sitting between the two, much as the bank. And just as the bank, the contract can act against your interests. Now it's true, the specific ways that you get screwed by the smart contract are different than by the bank. Next up, we are seeing the need for adjudication/rollback for when the custodians screw up, as people want to unwind errors in smart contracts or make policy changes. So this will be like re-inventing the court system. Soon, someone will be able to sue you and put a lien on your digital currency, using smart contracts, for example, with appeal to an adjuticating system that can force you to enter into the contract against your will. Then we will be back to longing for the days of bearer currencies.
mminer237 5y ago
The difference is that in real life, contracts aren't read by a thoughtless computer. Things can be implied based on the usual business practice. If there's an ambiguity, the intent of the parties can be used to resolve it. If something really unfair would happen, it can be thrown out as unconscionable or against public policy.

trutannus 5y ago

This is the second crypto startup this week I've seen cost people a lot of money. The other was a startup destroying a bunch of NFTs that got produced in a hack. Catch was, these tokens had already been bought and sold. Cavalier stuff like this will absolutely get you regulated. The draw of crypto is supposed to be immunity from this sort of thing, but the frequently amature execution of the products leaves end users often more vulnerable to attack than had they shoved their money in Bank of Your Nation. Banks invest eye-wateringly large sums of money every year in security. Crypto startups are just unable to match this level of security analysis and testing.

floatboth 5y ago

Yes, "speedrunning 500 years of bad economic history" — https://www.youtube.com/watch?v=xCHab0dNnj4 https://www.youtube.com/watch?v=xCHab0dNnj4

elliekelly 5y ago
This was really interesting, thanks for sharing!

jl2718 5y ago

All that plus a lot of mistakes that weren’t even possible before. Like, epic disaster stuff we couldn’t even imagine yet. But the accessibility and costs will be massively superior to the old system, which will be unable to compete in anything but politics, and and thus will get worse rather than better, and will fail with near certainty. Financial history is full of these moments.