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You make a good point about software development in general, but I don't think it applies to things as fundamentally revolutionary as crypto. Sometimes system _

by _9omd 5y ago

You make a good point about software development in general, but I don't think it applies to things as fundamentally revolutionary as crypto. Sometimes system _do_ have to be completely re-thought from the ground up. I don't believe it's possible for our current financial systems to morph into an open network for storing and transmitting value (the internet of money as some call crypto).

Joeri 5y ago
Let’s assume (and that’s a big if) that crypto is a fundamentally better foundation to base finance on. Even if it is, we cannot presently know that it is, and we cannot predict what its unique failure scenarios will be and how to counter them. Therefore for me arguing a headlong dive into crypto is indeed like a junior developer arguing for the big rewrite. I also fail to see the fundamental difference between crypto and gold. Anyone can mine gold, there is no central authority creating gold or determining its value. Gold is just as decentral a currency as crypto. If gold was not the solution to the financial system, why would crypto be?
- jakub_g 5y ago
  > Anyone can mine gold Bizarre comment - there's only a handful of places in the world where gold is located (most countries have close to zero), and they're probably controlled by some powerful private entity and probably under a gov license.
  - Negitivefrags 5y ago
    Nothing is preventing you just going to a gold producing river and panning for gold. You will be just as effective doing that as someone who just runs the Bitcoin client at home. Getting serious requires specialised hardware setup and capital intensive operations in both gold mining and Bitcoin mining.
    - aaronharnly 5y ago
      Interestingly enough, between 1933 and 1975, it was a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins. https://en.wikipedia.org/wiki/Gold_Reserve_Act https://en.wikipedia.org/wiki/Gold_Reserve_Act
- _9omd 5y ago
  I agree that gold and Bitcoin have some very key similarities, but gold and crypto in general are quite different. With regards to Bitcoin, yes they're both stores of value, but Bitcoin has the added ability to transact globally and be much more divisible. Bitcoin seems to have settled into two roles within the greater crypto ecosystem; store of value and reserve currency for the entire crypto economy. Now there are also things happening in the Bitcoin payments space using lightening, but I don't think there will ever be a large appetite for payments using a deflationary currency (It's your savings account, not your checking account). But outside of Bitcoin there is a ton of cool stuff happening in the DeFi space which could have big implications for our financial systems. One example is stablecoins which has a much better chance of being used in payment systems than a store of value like Bitcoin. In general I don't see this stuff replacing the financial system so much as finance companies slowly adopting crypto on the backend. Just like companies adopted internet technology as it allowed them to run more efficiently.
  - themacguffinman 5y ago
    Crypto blockchains are a technical boondoggle in a financial system that already has trusted institutions. The whole costly & complex system of blockchain transactions is designed to simulate trust without authorities, I don't see any technical reason why it would be more efficient than a simple encrypted packet + an optimized database that a regulated institution can implement when it doesn't need to simulate trust. Even Proof of Stake is totally unnecessary in a regulated financial system.
- zarzavat 5y ago
  The fundamental difference between cryptocurrency and gold is that cryptocurrency can be transmitted whereas gold can only be carried. Try carrying a bar of gold across a border and you'll end up in an interrogation room.
  - soco 5y ago
    How about declaring it in the first place?
    - zarzavat 5y ago
      You'll still end up in the room regardless. Most governments are pretty interested in people who carry large amounts of gold through borders! They might make you forfeit that gold if they don't like your answers, or if you have too much. Cryptocurrency's digital nature makes it much more useful than gold. It can be stored like gold in a vault, but it can also be transmitted over the internet like a bank transfer. It's pretty incredible stuff.
  - alchemism 5y ago
    That is why diamonds are traditionally used for that sort of transfer.
- dcow 5y ago
  Not totally disagreeing with the rest of your comment, but we haven't had a gold standard for awhile now, and that’s the problem. Lifting fiat off gold lets institutions play games with fiat to increase their fiat with the appearance of being a good steward of fiat. This is what people don’t trust.
curiousllama 5y ago
You're right, but it's because we made the conscious decision to not have a totally-open playing field after seeing how it went. It's like the old code base: we made a bunch of incremental design decisions over 50+ years that are all layered on top of each other. They are now so complex that nobody can coherently explain the whole thing. But does that mean we should burn it down? Not necessarily. If we rebuild from scratch, we're liable to simply re-learn why we built the hacky solution in the first place. Crypto is great. It's a wonderful innovation - and will likely succeed in many ways. But it won't replace central banks and regulators (except, potentially, by replicating them) because the institutions are actually useful.
- _9omd 5y ago
  I don't think crypto will replace the financial systems we have or that we should burn down what's already there. I think the way it will play out is that it will increasingly get used on the backend of the legacy financial system. So the front end will appear similar to the consumer with the same usability and protections they're used to, while the backend will be settling transaction using a variety of crypto networks. The consumer will then have the option of using the centralized front ends or communicating directly with the decentralized crypto protocols.
  - MauranKilom 5y ago
    What is the benefit of using crypto on the backend?
dmitriid 5y ago
> as fundamentally revolutionary as crypto. This is a huge claim, and needs to have just as huge of a proof. However, all cryptos can offer is poof (as in poof, and gone) than proof.
- _9omd 5y ago
  Well of course there's no way to prove it now. Could you have proved how revolutionary the internet would be in its early days? You have to be open minded and extrapolate from the principles of the new system and its interactions with society at large to _guess_ how impactful it may be. I believe the fundamental principles of crypto (open, permissionless, decentralized, global, neutral, etc.) make it highly likely to revolutionize finance.
  - dmitriid 5y ago
    > Could you have proved how revolutionary the internet would be in its early days? Yes. Yes, you could. 10 years after ARPANet was made public you already had things like France's Minitel. Blockchains? They still have zero use cases: https://medium.com/@kaistinchcombe/ten-years-in-nobody-has-come-up-with-a-use-case-for-blockchain-ee98c180100 https://medium.com/@kaistinchcombe/ten-years-in-nobody-has-c... > You have to be open minded and extrapolate Ah yes. "Revolutionary tech", and all you have to do is blindly believe in it.
    - _9omd 5y ago
      This zero use cases rhetoric is really low effort. Here are some just off the top of my head. sovereign store of value (useful if your government sucks) permissionless payments (funding wikileaks) private/anonymous transactions (Monero) event tickets (good use of NFTs) synthetic assets (anyone/anywhere can speculate on TSLA) decentralized asset exchange - AMM decentralized prediction markets DAO - a new way for people to organize and form internet native companies
      - serverholic 5y ago
        How a tech enthusiast doesn't think these are all extremely interesting is beyond me.
icehawk 5y ago
The point makes sense since a lot of the complexity of the current financial system isn't because of the money, it's because of the /people./ The complexity comes from the rules enacted to shield people from bad actors, and that's just going to be re-applied to crypto in some way shape or form.

by _9omd 5y ago

Joeri 5y ago

Let’s assume (and that’s a big if) that crypto is a fundamentally better foundation to base finance on. Even if it is, we cannot presently know that it is, and we cannot predict what its unique failure scenarios will be and how to counter them. Therefore for me arguing a headlong dive into crypto is indeed like a junior developer arguing for the big rewrite. I also fail to see the fundamental difference between crypto and gold. Anyone can mine gold, there is no central authority creating gold or determining its value. Gold is just as decentral a currency as crypto. If gold was not the solution to the financial system, why would crypto be?

jakub_g 5y ago
> Anyone can mine gold Bizarre comment - there's only a handful of places in the world where gold is located (most countries have close to zero), and they're probably controlled by some powerful private entity and probably under a gov license.
- Negitivefrags 5y ago
  Nothing is preventing you just going to a gold producing river and panning for gold. You will be just as effective doing that as someone who just runs the Bitcoin client at home. Getting serious requires specialised hardware setup and capital intensive operations in both gold mining and Bitcoin mining.
  - aaronharnly 5y ago
    Interestingly enough, between 1933 and 1975, it was a criminal offense for U.S. citizens to own or trade gold anywhere in the world, with exceptions for some jewelry and collector's coins. https://en.wikipedia.org/wiki/Gold_Reserve_Act https://en.wikipedia.org/wiki/Gold_Reserve_Act
_9omd 5y ago
I agree that gold and Bitcoin have some very key similarities, but gold and crypto in general are quite different. With regards to Bitcoin, yes they're both stores of value, but Bitcoin has the added ability to transact globally and be much more divisible. Bitcoin seems to have settled into two roles within the greater crypto ecosystem; store of value and reserve currency for the entire crypto economy. Now there are also things happening in the Bitcoin payments space using lightening, but I don't think there will ever be a large appetite for payments using a deflationary currency (It's your savings account, not your checking account). But outside of Bitcoin there is a ton of cool stuff happening in the DeFi space which could have big implications for our financial systems. One example is stablecoins which has a much better chance of being used in payment systems than a store of value like Bitcoin. In general I don't see this stuff replacing the financial system so much as finance companies slowly adopting crypto on the backend. Just like companies adopted internet technology as it allowed them to run more efficiently.
- themacguffinman 5y ago
  Crypto blockchains are a technical boondoggle in a financial system that already has trusted institutions. The whole costly & complex system of blockchain transactions is designed to simulate trust without authorities, I don't see any technical reason why it would be more efficient than a simple encrypted packet + an optimized database that a regulated institution can implement when it doesn't need to simulate trust. Even Proof of Stake is totally unnecessary in a regulated financial system.
zarzavat 5y ago
The fundamental difference between cryptocurrency and gold is that cryptocurrency can be transmitted whereas gold can only be carried. Try carrying a bar of gold across a border and you'll end up in an interrogation room.
- soco 5y ago
  How about declaring it in the first place?
  - zarzavat 5y ago
    You'll still end up in the room regardless. Most governments are pretty interested in people who carry large amounts of gold through borders! They might make you forfeit that gold if they don't like your answers, or if you have too much. Cryptocurrency's digital nature makes it much more useful than gold. It can be stored like gold in a vault, but it can also be transmitted over the internet like a bank transfer. It's pretty incredible stuff.
- alchemism 5y ago
  That is why diamonds are traditionally used for that sort of transfer.
dcow 5y ago
Not totally disagreeing with the rest of your comment, but we haven't had a gold standard for awhile now, and that’s the problem. Lifting fiat off gold lets institutions play games with fiat to increase their fiat with the appearance of being a good steward of fiat. This is what people don’t trust.

curiousllama 5y ago

You're right, but it's because we made the conscious decision to not have a totally-open playing field after seeing how it went. It's like the old code base: we made a bunch of incremental design decisions over 50+ years that are all layered on top of each other. They are now so complex that nobody can coherently explain the whole thing. But does that mean we should burn it down? Not necessarily. If we rebuild from scratch, we're liable to simply re-learn why we built the hacky solution in the first place. Crypto is great. It's a wonderful innovation - and will likely succeed in many ways. But it won't replace central banks and regulators (except, potentially, by replicating them) because the institutions are actually useful.

_9omd 5y ago
I don't think crypto will replace the financial systems we have or that we should burn down what's already there. I think the way it will play out is that it will increasingly get used on the backend of the legacy financial system. So the front end will appear similar to the consumer with the same usability and protections they're used to, while the backend will be settling transaction using a variety of crypto networks. The consumer will then have the option of using the centralized front ends or communicating directly with the decentralized crypto protocols.
- MauranKilom 5y ago
  What is the benefit of using crypto on the backend?

dmitriid 5y ago

> as fundamentally revolutionary as crypto. This is a huge claim, and needs to have just as huge of a proof. However, all cryptos can offer is poof (as in poof, and gone) than proof.

_9omd 5y ago
Well of course there's no way to prove it now. Could you have proved how revolutionary the internet would be in its early days? You have to be open minded and extrapolate from the principles of the new system and its interactions with society at large to _guess_ how impactful it may be. I believe the fundamental principles of crypto (open, permissionless, decentralized, global, neutral, etc.) make it highly likely to revolutionize finance.
- dmitriid 5y ago
  > Could you have proved how revolutionary the internet would be in its early days? Yes. Yes, you could. 10 years after ARPANet was made public you already had things like France's Minitel. Blockchains? They still have zero use cases: https://medium.com/@kaistinchcombe/ten-years-in-nobody-has-come-up-with-a-use-case-for-blockchain-ee98c180100 https://medium.com/@kaistinchcombe/ten-years-in-nobody-has-c... > You have to be open minded and extrapolate Ah yes. "Revolutionary tech", and all you have to do is blindly believe in it.
  - _9omd 5y ago
    This zero use cases rhetoric is really low effort. Here are some just off the top of my head. sovereign store of value (useful if your government sucks) permissionless payments (funding wikileaks) private/anonymous transactions (Monero) event tickets (good use of NFTs) synthetic assets (anyone/anywhere can speculate on TSLA) decentralized asset exchange - AMM decentralized prediction markets DAO - a new way for people to organize and form internet native companies
    - serverholic 5y ago
      How a tech enthusiast doesn't think these are all extremely interesting is beyond me.

icehawk 5y ago

The point makes sense since a lot of the complexity of the current financial system isn't because of the money, it's because of the /people./ The complexity comes from the rules enacted to shield people from bad actors, and that's just going to be re-applied to crypto in some way shape or form.