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It wouldn't be a web article if there wasn't some hyperbole in the title, like speaking for everybody :) But ignoring the title, here is how I see it working o

It wouldn't be a web article if there wasn't some hyperbole in the title, like speaking for everybody :) But ignoring the title, here is how I see it working out long-term between "Running your own bank" VS "Using someone else's bank": It's true that most people don't want to run their own bank, it comes with lots of issues. But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this. So can we solve for both things? Yes, I do believe we can. The primitives that support the whole system can be "Running your own bank" while allowing entities above that layer to offer "Use my bank if you want to instead, with insurance and all that", so we get the best of two worlds. The opposite cannot be true, we cannot offer people to run their own banks, on top of a set of entities being the only ones running their banks. In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it. Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it.

dorena 5y ago
You say that some people want to have their own bank. "That the cryptocurrency space exists in the first place is the evidence of this." Sorry, but that's just not true. Crypto exists because people think they can win money with this Ponzi Scheme!! ONLY reason! Greed
josefrichter 5y ago
Very well said. The more centralized "layers of abstraction" will be built, no question about that. Smaller, more specialized, more efficient institutions. For example, the US has a long tradition of small Credit Unions – that's fairly similar in principle to some of the DAOs popping up these days.
- js8 5y ago
  I disagree that anything crypto-related is similar to https://en.wikipedia.org/wiki/Credit_union https://en.wikipedia.org/wiki/Credit_union (or even useful, for that matter), but yeah, if you want to run your own bank, credit union is IMHO as decentralized as it can ever be.
practice9 5y ago
Yes, decentralization at the core creates a better environment for experimentation and competition at the 2nd level built upon it
- UncleMeat 5y ago
  People say this but also complain like hell about gmail making up a huge portion of email or facebook making up a huge portion of web browsing.
  - capableweb 5y ago
    That's OK, complaining helps the ecosystem improve. If gmail ends up being so bad that people start abandoning it (which I haven't seen yet in my friend-circle, most people are happy enough with it), it's possible to migrate to something else and still interact with people who use gmail. Contrast that to Facebook Messenger. Either you're a user of it and can message others using it, or you're not and you can't interact with others using it. You have no choice, it's either in or out. This is the difference between centralization and decentralization, the amount of options you have available.
- soco 5y ago
  Also fuels better competition and experimentation in the attack space - replay, dusting... novel ways to part people from their assets.
toss1 5y ago
How is it substantially different from the current centralized core where we can also 'run our own bank' if we choose. We can today keep stashes of cash, convert it to real estate, art, precious metals, whatever, as with crypto we can use different wallets, currencies, NFTs, etc. In fact, we can exchange between all these assets - exchange cash for crypto, for art, for real estate, for bank deposits... Just a variety of risk/reward profiles for various situations, with the core being either a government or a herd of developers, whales and miners...
bko 5y ago
I would also note that the benefits the author states about fiat can equally apply to crypto: > There's an inherent fragility built into cryptocurrencies. If your physical bank notes are damaged, the bank will replace them. If you are defrauded, the bank will reimburse you. If your loved one dies, and you inherit their assets, the bank is legally obliged to give you access. Damaging bank notes is probably covered by the fed. Fine. But fraud is a real expense. It's just not generally borne directly by the victim. Someone still pays it (normally the bank) but they make up for it by lending out your cash. As for handing over assets to someone that passed away, that's currently done through the legal process. Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? Seems like crypto would help there as well
- Thlom 5y ago
  A technical solution could be implemented by a bank as well, but I'm not sure it is even legal in most jurisdictions. Same goes for any solution on the block chain.
  - oblio 5y ago
    I'm not even sure we want it to be legal. There's a reason we still talk about Kafka almost 100 years after his death.
- virgilp 5y ago
  > someone still pays it (normally the bank) but they make up for it by lending out your cash. You're skipping over large parts of the things fiat can do and crypto can't. E.g. there are chargebacks for fraud. There's the legal process that can be used by the bank to recover money from the fraudster (maybe not always, but also not "never"). > Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? No, it wouldn't be great, it would be horrible. Real world is messy and hard to encode in a "smart contract". What if the will says something but the law invalidates it? Going through the legal process is a feature not a bug... remember how people complain about e.g. automatic bans that are handled and appealed by robots? How your Google account can be disabled with no recourse, and no explanation from a human? Yeah, that can happen to your grandma's crypto - it doesn't go to the family, and there's no way to appeal that or even find out "why".
gitfan86 5y ago
It sounds like you are saying that the bank will use a blockchain type ledger instead of a SQL based ledger on the back end. What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit.
- capableweb 5y ago
  > What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit. Again, in my argument there are two choices at play. One of the choice allows the other, whereas the other doesn't. You can still have centralization if you want, on top of decentralization. But if you chose centralization for the core, you cannot have decentralization on top of that, even if you'd really want it.
  - gitfan86 5y ago
    So it isn't solving a problem that current bank customers are looking to solve, it is just adding a buzzword to the feature set of the bank.
    - GLGirty 5y ago
      It's solving the problem of, 'we want programmers to be a more powerful caste.'
  - oblio 5y ago
    What exactly does decentralization offer considering all governments are centralized? The Holy Grail of crypto seems to be some sort of dream of a fully decentralized society without banks or governments. What if that doesn't happen? There's no reason to assume that even if crypto wins, banks or governments go away. My personal bet is that governments (and probably banks, too) will be around long after cryptocurrencies go away. What exactly are we winning? Practical stuff, not ideology. What do we get? Why should I care?
    - kevinak 5y ago
rlpb 5y ago
Also, this setup means that the banks have to compete against people choosing not to use them. This shouldn't be hard (because most people don't want to run their own bank), but it does prevent rent-seeking. If people are able to bypass them, then that provides some downwards market pressure on their charges. Without that, there is none except for regulation.
- lottin 5y ago
  What? Banks are already subject to competition from other banks. And a blockchain is inefficient by design, any bank using that would have to charge more, not less.
  - rlpb 5y ago
    > Banks are already subject to competition from other banks. They are also in a cartel with the other banks, the sense that you can't access the financial system at all without one of them. For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks. They can do this because they aren't competing in this kind of niche area.
    - falcolas 5y ago
      > For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks I think you can attribute that one to capitalism, not collusion. Profits are important for banks. It's a rare for-profit institution provides services at cost. Any entity can join the "send money internationally cartel", but they have to adhere to the laws in both countries. This is a loophole that cryptocurrencies are bypassing today, but I expect the law to catch up in this area, and it won't be pretty.
      - rlpb 5y ago
        > It's a rare for-profit institution provides services at cost. In a healthy market, competition forces down the price of services approach such that they approach cost. A large profit margin can indicate a free market failure, such as a barrier to entry. (it may also represent some kind of necessary capital investment for entry, but I don't think that's the case here)
amelius 5y ago
> Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. So microservices are a better idea than monolithic core?
- falcolas 5y ago
  It adds a lot of extra complexity and failure points? Fits. Where the analogy falls apart is in the low transaction capacity of most existing blockchain-based currencies. Microservices' greatest asset is that of scaling in a way monolithic structures can't.
edent 5y ago
Author here. I broadly sympathise with what you're saying. But I think I disagree with: > In other words, you can build centralization on top of decentralization, but the opposite is not true. In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core. So, in a way, a decentralised system is being built on top of a centralised system. I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.
- lrvick 5y ago
  I would advise you to look at the Lightning protocol which allows you to do transactions off chain via credit lines for as long as you like. You only pay a fee to record to the blockchain ledger for eventual settlement.
  - qayxc 5y ago
    Lightning is only safe if you constantly monitor the blockchain, otherwise your transactions aren't safe (as in double spending is still possible). Opening and closing Lightning channels is an operation that requires a transaction on the blockchain - no real win there. Due to the restriction just mentioned, most L2 transactions will take place via intermediaries who you need to trust and who can take arbitrary fees for their service as well (the whole routing business). Lightning might be ok for regular payments (subscriptions, etc.), but at the same time it offers not a single advantage over traditional banking and credit cards other than explicitly not being either. It might alleviate the transaction time and energy problems of the blockchain, but it does nothing to tackle any of the other problems mentioned by the author.
    - gruez 5y ago
      >Lightning is only safe if you constantly monitor the blockchain "constantly" in this case means "once every 2 weeks". You can also have a third party do it for you without having to hand over your keys.
snarfy 5y ago
The vast majority into crypto today do not care about the fundamentals. It's barely used as a currency and mostly traded as a commodity. Nobody cares about crypto being decentralized. They care if their crypto 'lottery ticket' wins. If all crypto does is give people more options, there are a lot more efficient ways to do that.
abrahamepton 5y ago
This is so f’ing stupid, and in that way perfectly epitomizes what’s so broken about crypto. Nobody wants to run their own bank, which ALSO means nobody wants to use Jim’s shady internet bank or their buddy’s bank or their mom’s bank or or or… Like, nobody in crypto seems to think for one second about how the world actually works or what people not brainwashed by crypto might want. It’s a tech that has thoroughly, definitively lost the argument. It’s as clear a dead end as the metaverse, or pivots to video (let alone Meta/FB’s pivot to video)
- glerk 5y ago
  > This is so f’ing stupid, and in that way perfectly epitomizes what’s so broken about crypto. > nobody wants to run their own bank It sure looks like A LOT of people do. The real question is why are you so mad about it?
- danlugo92 5y ago
  Remember this comment when in 10 years there's a bitcoin balance alongside your usd balance in your bank account.
  - abrahamepton 5y ago
- rekoil 5y ago
  Ironically your response is the tone-deaf and stupid one here. The person you're replying to isn't arguing for people to be using "Jim's shady internet bank" or a random buddys bank, they are discussing the ability of current trusted actors to act as custodians and insurers for cryptocurrency-wallets, hiding the scary and difficult aspects of cryptocurrency, while operating on top of an open-source, trust-less, publicly auditable, open base-layer like a blockchain. They are saying it's possible to regard cryptocurrency as a base-layer for economic transactions, and that without it it's basically not possible today to leave the traditional banking world behind if one wants to maintain a digital presence. Don't you think it should be? Why should an individual be forced to have someone else be custodian for their wealth? Cryptocurrencies also aren't really finished yet, there are a lot of improvements to be made before it is possible to replace the existing financial infrastructure and maintain its scale.
mbesto 5y ago
> In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it. What you're describing is basically how the IP protocol has been manifesting itself with something like Twitter vs Mastadon. Here's the problem - if I can't get my weather alerts from my local city township from Mastadon, but have to use Twitter, then the point is moot. For example - https://twitter.com/TravisCountyTX/status/1489349488691093504 https://twitter.com/TravisCountyTX/status/148934948869109350... To bring this analog to bear - my local police department accepts credit cards online now for paying a ticket violation. What if they don't support <insert whatever crypto protocol I want to use>. I still need to use the "old" protocol (USD via Visa).
- hkt 5y ago
  Or in other words,one of the fundamental properties of money is actually being able to spend it.
  - mbesto 5y ago
    Precisely. A concept called "medium of exchange".
- max51 5y ago
  >Here's the problem - if I can't get my weather alerts from my local city township from Mastadon, but have to use Twitter, then the point is moot. For example - https://twitter.com/TravisCountyTX/status/148934948869109350 https://twitter.com/TravisCountyTX/status/148934948869109350... It's still better than if it was completely impossible to communicate to others without twitter.
- wonderwonder 5y ago
  Your example of the police department is actually a reason why so many people are looking at crypto. Current fiat while being a means of exchange is also a method of enforcing government control. The governments enforcers of state sponsored violence are now allowing you to pay their arbitrary fines via a method that directly connects to your identity. At the same time the IRS is now requiring that centralized banks report all transactions of greater than $600 to them. This will allow them to more efficiently tax the poor and middle class, the rich probably dont care about $600. Get pulled over with a large amount of cash in the car and the police and seize it and then you have to engage in a costly legal battle to get it back by proving to them that you are not a criminal. That's if you can even afford an attorney. Today's centralized system is very much about enforcing government control over the individual on every level. For some crypto is just a last gasp at trying to get some control back and the pitfalls and complications are worth it.
mschuster91 5y ago
> But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this. Most of the crypto-bros don't run their own banks either. All of them depend on institutions that effectively act as banks somewhere down the line... first of all, the overwhelming majority of actual cryptocoin users doesn't run their own nodes (which, as "bookkeeping", is one of the core functions of running a bank), instead keeping their wallet at some sort of wallet service or transaction gateway, because running a node requires disk space and a continuously running machine. And then, almost everyone participating in any coin requires exchanges to turn the coins back into fiat money or vice versa - I've yet to see any actual real-world economy that does not use fiat money but instead handles everything with Bitcoins or whatever. > Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it. The only thing "decentralization" enables is a lot of elaborate, irreversible scams, hacks and thefts. A banking system without some sort of centralized entity to deal with disputes and prevent usage for criminal activity eventually will break down... there's a new exchange that got hacked, a "smart contract" drained via intentional or unintentional bugs, NFTs being doubly-sold (if I understand that recent OpenSea bug correctly) or rug-pull scams exposed almost every other week. That is not a trustworthy environment. Not to mention that all cryptocurrencies to date have led to enormous waste of resources: electricity, CPUs, GPUs, ASIC fab capacity, RAM, HDD... literally everything that could be used to mine coins got used for that purpose and outright killed the market for these, because miners can always pay far greater sums for components than individual people can.
Boritanian 5y ago
> That the cryptocurrency space exists in the first place is the evidence of this. Maybe the existence of banks would be better evidence that 'some' people wanna run their own banks?
FabHK 5y ago
But if the vast majority of people want the convenient feature-rich centralised version, why pay for the immense inefficiencies that a decentralised infrastructure incurs? Just one example: If everyone on earth used Bitcoin, there'd just be enough capacity for everyone to get in around one or two transactions in their lifetime. Decentralization at the core is a massive waste, while providing almost no benefit except to a very few.
- seibelj 5y ago
- Tenoke 5y ago
  If you build with centralization on top you can ignore most of the inefficiencies by doing the majority of operations outside of the base Blockchain and only integrate and settle just enough on-chain to be able to integrate with the rest.
- ilaksh 5y ago
  Arguing against cryptocurrency by using bitcoin as an example is like arguing against aviation by citing an early Wright crash.
TacticalCoder 5y ago
> In other words, you can build centralization on top of decentralization, ... We see that with Coinbase (a HN unicorn btw): lots of people are apparently not only fine leaving shitloads of coins on Coinbase, many are also totally fine using the USDC "token" which is (mostly) backed 1:1 with actual USD. I don't remember the stats but big "exchanges" hold a sizeable part of the circulating coin and it's not just people "trading": it's a lot of people simply holding to their coins and using Coinbase as, basically, a bank. Heck, I think if they sell for USD (not USDC, don't know about USDC), their USD at Coinbase are even FDIC insured up to $250 K (for each american on Coinbase: it's not the same with Coinbase in the EU). I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank".
- rvz 5y ago
  > I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank". Exactly. That's a big 'no thanks, and no deal' as it defeats the whole purpose if one leaves all their coins on an exchange for 'long term' holding. Nothing wrong with downloading a crypto wallet app and sending and storing the USDC, USDP stablecoins on there. No need for Coinbase. Job done. Your keys and your coins without the volatility.
RandomLensman 5y ago
But people often don't want to "run their own bank", they want to run something like a bank without the hassle of running a bank, i.e. way less regulations etc. (which is why it is happening in crypto space, not in real money space). Otherwise, why not create a little coop bank with like-minded people? For me, the option to "run your own bank" does actually exists for small-ish groups already. While the current level of financial and banking regulation is certainly debatable, creating super lightweight version of banks might not necessarily the way forward.
- hkt 5y ago
  Came here to say this. Credit unions are a thing, and it is increasingly easy to offer debit cards (via aggregators) through them. There's even open source software to help: https://www.fineract.dev/ https://www.fineract.dev/
- logicalmonster 5y ago
  > Otherwise, why not create a little coop bank with like-minded people? The problem isn't the bank organization itself: it's the money that you deal in. Regardless of your bank structure, whether it's some typical commercial bank or some kind of cooperative association, you're still left holding a fiat currency that is inflated on a whim. The beauty of crypto (and especially Bitcoin) is that there's either a fixed amount, or at least the rate of change of the money supply (inflation) is at least perfectly transparent and mathematically provable.
  - RandomLensman 5y ago
    If you believe the money is "wrong" then Bitcoin won't safe you, nothing will safe you totally, in fact. Whether or not the money supply is fixed or not doesn't matter, you can make one type of money worthless vs. another form of money (happened so many times in history, and not necessarily due to inflation). And Bitcoin's hard cap is based on incentives and code, i.e. it could be changed (difficult to see in reality absent some really strong outside coercion, perhaps). Another attack on the value of Bitcoin could be from a state actor using nearly unlimited resources to take over most of the mining or validating and using it against it. I.e., there are ways to degrade it as a store of value (other than just arresting everyone found using, for example).

dorena 5y ago

You say that some people want to have their own bank. "That the cryptocurrency space exists in the first place is the evidence of this." Sorry, but that's just not true. Crypto exists because people think they can win money with this Ponzi Scheme!! ONLY reason! Greed

josefrichter 5y ago

Very well said. The more centralized "layers of abstraction" will be built, no question about that. Smaller, more specialized, more efficient institutions. For example, the US has a long tradition of small Credit Unions – that's fairly similar in principle to some of the DAOs popping up these days.

js8 5y ago
I disagree that anything crypto-related is similar to https://en.wikipedia.org/wiki/Credit_union https://en.wikipedia.org/wiki/Credit_union (or even useful, for that matter), but yeah, if you want to run your own bank, credit union is IMHO as decentralized as it can ever be.

practice9 5y ago

Yes, decentralization at the core creates a better environment for experimentation and competition at the 2nd level built upon it

UncleMeat 5y ago
People say this but also complain like hell about gmail making up a huge portion of email or facebook making up a huge portion of web browsing.
- capableweb 5y ago
  That's OK, complaining helps the ecosystem improve. If gmail ends up being so bad that people start abandoning it (which I haven't seen yet in my friend-circle, most people are happy enough with it), it's possible to migrate to something else and still interact with people who use gmail. Contrast that to Facebook Messenger. Either you're a user of it and can message others using it, or you're not and you can't interact with others using it. You have no choice, it's either in or out. This is the difference between centralization and decentralization, the amount of options you have available.
soco 5y ago
Also fuels better competition and experimentation in the attack space - replay, dusting... novel ways to part people from their assets.

toss1 5y ago

How is it substantially different from the current centralized core where we can also 'run our own bank' if we choose. We can today keep stashes of cash, convert it to real estate, art, precious metals, whatever, as with crypto we can use different wallets, currencies, NFTs, etc. In fact, we can exchange between all these assets - exchange cash for crypto, for art, for real estate, for bank deposits... Just a variety of risk/reward profiles for various situations, with the core being either a government or a herd of developers, whales and miners...

bko 5y ago

I would also note that the benefits the author states about fiat can equally apply to crypto: > There's an inherent fragility built into cryptocurrencies. If your physical bank notes are damaged, the bank will replace them. If you are defrauded, the bank will reimburse you. If your loved one dies, and you inherit their assets, the bank is legally obliged to give you access. Damaging bank notes is probably covered by the fed. Fine. But fraud is a real expense. It's just not generally borne directly by the victim. Someone still pays it (normally the bank) but they make up for it by lending out your cash. As for handing over assets to someone that passed away, that's currently done through the legal process. Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? Seems like crypto would help there as well

Thlom 5y ago
A technical solution could be implemented by a bank as well, but I'm not sure it is even legal in most jurisdictions. Same goes for any solution on the block chain.
- oblio 5y ago
  I'm not even sure we want it to be legal. There's a reason we still talk about Kafka almost 100 years after his death.
virgilp 5y ago
> someone still pays it (normally the bank) but they make up for it by lending out your cash. You're skipping over large parts of the things fiat can do and crypto can't. E.g. there are chargebacks for fraud. There's the legal process that can be used by the bank to recover money from the fraudster (maybe not always, but also not "never"). > Wouldn't it be great if there was a technical solution such that there is no ambiguity about what happens to your money? No, it wouldn't be great, it would be horrible. Real world is messy and hard to encode in a "smart contract". What if the will says something but the law invalidates it? Going through the legal process is a feature not a bug... remember how people complain about e.g. automatic bans that are handled and appealed by robots? How your Google account can be disabled with no recourse, and no explanation from a human? Yeah, that can happen to your grandma's crypto - it doesn't go to the family, and there's no way to appeal that or even find out "why".

gitfan86 5y ago

It sounds like you are saying that the bank will use a blockchain type ledger instead of a SQL based ledger on the back end. What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit.

capableweb 5y ago
> What problem does that solve? For people to want to switch to this type of bank there has to be a net benefit. Again, in my argument there are two choices at play. One of the choice allows the other, whereas the other doesn't. You can still have centralization if you want, on top of decentralization. But if you chose centralization for the core, you cannot have decentralization on top of that, even if you'd really want it.
- gitfan86 5y ago
  So it isn't solving a problem that current bank customers are looking to solve, it is just adding a buzzword to the feature set of the bank.
  - GLGirty 5y ago
    It's solving the problem of, 'we want programmers to be a more powerful caste.'
- oblio 5y ago
  What exactly does decentralization offer considering all governments are centralized? The Holy Grail of crypto seems to be some sort of dream of a fully decentralized society without banks or governments. What if that doesn't happen? There's no reason to assume that even if crypto wins, banks or governments go away. My personal bet is that governments (and probably banks, too) will be around long after cryptocurrencies go away. What exactly are we winning? Practical stuff, not ideology. What do we get? Why should I care?
  - kevinak 5y ago

rlpb 5y ago

Also, this setup means that the banks have to compete against people choosing not to use them. This shouldn't be hard (because most people don't want to run their own bank), but it does prevent rent-seeking. If people are able to bypass them, then that provides some downwards market pressure on their charges. Without that, there is none except for regulation.

lottin 5y ago
What? Banks are already subject to competition from other banks. And a blockchain is inefficient by design, any bank using that would have to charge more, not less.
- rlpb 5y ago
  > Banks are already subject to competition from other banks. They are also in a cartel with the other banks, the sense that you can't access the financial system at all without one of them. For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks. They can do this because they aren't competing in this kind of niche area.
  - falcolas 5y ago
    > For example, charges to send payments internationally are often vastly more expensive than the actual cost to the banks I think you can attribute that one to capitalism, not collusion. Profits are important for banks. It's a rare for-profit institution provides services at cost. Any entity can join the "send money internationally cartel", but they have to adhere to the laws in both countries. This is a loophole that cryptocurrencies are bypassing today, but I expect the law to catch up in this area, and it won't be pretty.
    - rlpb 5y ago
      > It's a rare for-profit institution provides services at cost. In a healthy market, competition forces down the price of services approach such that they approach cost. A large profit margin can indicate a free market failure, such as a barrier to entry. (it may also represent some kind of necessary capital investment for entry, but I don't think that's the case here)

amelius 5y ago

> Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. So microservices are a better idea than monolithic core?

falcolas 5y ago
It adds a lot of extra complexity and failure points? Fits. Where the analogy falls apart is in the low transaction capacity of most existing blockchain-based currencies. Microservices' greatest asset is that of scaling in a way monolithic structures can't.

edent 5y ago

Author here. I broadly sympathise with what you're saying. But I think I disagree with: > In other words, you can build centralization on top of decentralization, but the opposite is not true. In the UK, we now have "Open Banking". Which means my bank offers an API which I can plug into. It also means that loads of 3rd parties can now offer banking services on top of the "centralised" core. So, in a way, a decentralised system is being built on top of a centralised system. I'll also note that - in my opinion - Blockchains aren't really decentralised. There's no way you can do an "Off-Chain" transaction. Everything has to be recorded on a single ledger.

lrvick 5y ago
I would advise you to look at the Lightning protocol which allows you to do transactions off chain via credit lines for as long as you like. You only pay a fee to record to the blockchain ledger for eventual settlement.
- qayxc 5y ago
  Lightning is only safe if you constantly monitor the blockchain, otherwise your transactions aren't safe (as in double spending is still possible). Opening and closing Lightning channels is an operation that requires a transaction on the blockchain - no real win there. Due to the restriction just mentioned, most L2 transactions will take place via intermediaries who you need to trust and who can take arbitrary fees for their service as well (the whole routing business). Lightning might be ok for regular payments (subscriptions, etc.), but at the same time it offers not a single advantage over traditional banking and credit cards other than explicitly not being either. It might alleviate the transaction time and energy problems of the blockchain, but it does nothing to tackle any of the other problems mentioned by the author.
  - gruez 5y ago
    >Lightning is only safe if you constantly monitor the blockchain "constantly" in this case means "once every 2 weeks". You can also have a third party do it for you without having to hand over your keys.

snarfy 5y ago

The vast majority into crypto today do not care about the fundamentals. It's barely used as a currency and mostly traded as a commodity. Nobody cares about crypto being decentralized. They care if their crypto 'lottery ticket' wins. If all crypto does is give people more options, there are a lot more efficient ways to do that.

abrahamepton 5y ago

This is so f’ing stupid, and in that way perfectly epitomizes what’s so broken about crypto. Nobody wants to run their own bank, which ALSO means nobody wants to use Jim’s shady internet bank or their buddy’s bank or their mom’s bank or or or… Like, nobody in crypto seems to think for one second about how the world actually works or what people not brainwashed by crypto might want. It’s a tech that has thoroughly, definitively lost the argument. It’s as clear a dead end as the metaverse, or pivots to video (let alone Meta/FB’s pivot to video)

glerk 5y ago
> This is so f’ing stupid, and in that way perfectly epitomizes what’s so broken about crypto. > nobody wants to run their own bank It sure looks like A LOT of people do. The real question is why are you so mad about it?
danlugo92 5y ago
Remember this comment when in 10 years there's a bitcoin balance alongside your usd balance in your bank account.
- abrahamepton 5y ago
rekoil 5y ago
Ironically your response is the tone-deaf and stupid one here. The person you're replying to isn't arguing for people to be using "Jim's shady internet bank" or a random buddys bank, they are discussing the ability of current trusted actors to act as custodians and insurers for cryptocurrency-wallets, hiding the scary and difficult aspects of cryptocurrency, while operating on top of an open-source, trust-less, publicly auditable, open base-layer like a blockchain. They are saying it's possible to regard cryptocurrency as a base-layer for economic transactions, and that without it it's basically not possible today to leave the traditional banking world behind if one wants to maintain a digital presence. Don't you think it should be? Why should an individual be forced to have someone else be custodian for their wealth? Cryptocurrencies also aren't really finished yet, there are a lot of improvements to be made before it is possible to replace the existing financial infrastructure and maintain its scale.

mbesto 5y ago

> In other words, you can build centralization on top of decentralization, but the opposite is not true. So by having the base being decentralized (and dangerous for the common human), we can still have centralized parties on top of that (less dangerous for the common human), that offers the traditional security people are used to, for the ones who want it. What you're describing is basically how the IP protocol has been manifesting itself with something like Twitter vs Mastadon. Here's the problem - if I can't get my weather alerts from my local city township from Mastadon, but have to use Twitter, then the point is moot. For example - https://twitter.com/TravisCountyTX/status/1489349488691093504 https://twitter.com/TravisCountyTX/status/148934948869109350... To bring this analog to bear - my local police department accepts credit cards online now for paying a ticket violation. What if they don't support <insert whatever crypto protocol I want to use>. I still need to use the "old" protocol (USD via Visa).

hkt 5y ago
Or in other words,one of the fundamental properties of money is actually being able to spend it.
- mbesto 5y ago
  Precisely. A concept called "medium of exchange".
max51 5y ago
>Here's the problem - if I can't get my weather alerts from my local city township from Mastadon, but have to use Twitter, then the point is moot. For example - https://twitter.com/TravisCountyTX/status/148934948869109350 https://twitter.com/TravisCountyTX/status/148934948869109350... It's still better than if it was completely impossible to communicate to others without twitter.
wonderwonder 5y ago
Your example of the police department is actually a reason why so many people are looking at crypto. Current fiat while being a means of exchange is also a method of enforcing government control. The governments enforcers of state sponsored violence are now allowing you to pay their arbitrary fines via a method that directly connects to your identity. At the same time the IRS is now requiring that centralized banks report all transactions of greater than $600 to them. This will allow them to more efficiently tax the poor and middle class, the rich probably dont care about $600. Get pulled over with a large amount of cash in the car and the police and seize it and then you have to engage in a costly legal battle to get it back by proving to them that you are not a criminal. That's if you can even afford an attorney. Today's centralized system is very much about enforcing government control over the individual on every level. For some crypto is just a last gasp at trying to get some control back and the pitfalls and complications are worth it.

mschuster91 5y ago

> But there is a section of people who do want to run their own bank. That the cryptocurrency space exists in the first place is the evidence of this. Most of the crypto-bros don't run their own banks either. All of them depend on institutions that effectively act as banks somewhere down the line... first of all, the overwhelming majority of actual cryptocoin users doesn't run their own nodes (which, as "bookkeeping", is one of the core functions of running a bank), instead keeping their wallet at some sort of wallet service or transaction gateway, because running a node requires disk space and a continuously running machine. And then, almost everyone participating in any coin requires exchanges to turn the coins back into fiat money or vice versa - I've yet to see any actual real-world economy that does not use fiat money but instead handles everything with Bitcoins or whatever. > Decentralization at the core gives people more options, which I think in the long-term leads to a better world, compared to the alternative. Not because it is decentralized, but because it gives more options to the ones who need it. The only thing "decentralization" enables is a lot of elaborate, irreversible scams, hacks and thefts. A banking system without some sort of centralized entity to deal with disputes and prevent usage for criminal activity eventually will break down... there's a new exchange that got hacked, a "smart contract" drained via intentional or unintentional bugs, NFTs being doubly-sold (if I understand that recent OpenSea bug correctly) or rug-pull scams exposed almost every other week. That is not a trustworthy environment. Not to mention that all cryptocurrencies to date have led to enormous waste of resources: electricity, CPUs, GPUs, ASIC fab capacity, RAM, HDD... literally everything that could be used to mine coins got used for that purpose and outright killed the market for these, because miners can always pay far greater sums for components than individual people can.

Boritanian 5y ago

> That the cryptocurrency space exists in the first place is the evidence of this. Maybe the existence of banks would be better evidence that 'some' people wanna run their own banks?

FabHK 5y ago

But if the vast majority of people want the convenient feature-rich centralised version, why pay for the immense inefficiencies that a decentralised infrastructure incurs? Just one example: If everyone on earth used Bitcoin, there'd just be enough capacity for everyone to get in around one or two transactions in their lifetime. Decentralization at the core is a massive waste, while providing almost no benefit except to a very few.

seibelj 5y ago
Tenoke 5y ago
If you build with centralization on top you can ignore most of the inefficiencies by doing the majority of operations outside of the base Blockchain and only integrate and settle just enough on-chain to be able to integrate with the rest.
ilaksh 5y ago
Arguing against cryptocurrency by using bitcoin as an example is like arguing against aviation by citing an early Wright crash.

TacticalCoder 5y ago

> In other words, you can build centralization on top of decentralization, ... We see that with Coinbase (a HN unicorn btw): lots of people are apparently not only fine leaving shitloads of coins on Coinbase, many are also totally fine using the USDC "token" which is (mostly) backed 1:1 with actual USD. I don't remember the stats but big "exchanges" hold a sizeable part of the circulating coin and it's not just people "trading": it's a lot of people simply holding to their coins and using Coinbase as, basically, a bank. Heck, I think if they sell for USD (not USDC, don't know about USDC), their USD at Coinbase are even FDIC insured up to $250 K (for each american on Coinbase: it's not the same with Coinbase in the EU). I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank".

rvz 5y ago
> I'm not saying it's good or bad: I'm just saying that people leaving coins or USDC or USD on Coinbase are very far from "running their own bank". Exactly. That's a big 'no thanks, and no deal' as it defeats the whole purpose if one leaves all their coins on an exchange for 'long term' holding. Nothing wrong with downloading a crypto wallet app and sending and storing the USDC, USDP stablecoins on there. No need for Coinbase. Job done. Your keys and your coins without the volatility.

RandomLensman 5y ago

But people often don't want to "run their own bank", they want to run something like a bank without the hassle of running a bank, i.e. way less regulations etc. (which is why it is happening in crypto space, not in real money space). Otherwise, why not create a little coop bank with like-minded people? For me, the option to "run your own bank" does actually exists for small-ish groups already. While the current level of financial and banking regulation is certainly debatable, creating super lightweight version of banks might not necessarily the way forward.

hkt 5y ago
Came here to say this. Credit unions are a thing, and it is increasingly easy to offer debit cards (via aggregators) through them. There's even open source software to help: https://www.fineract.dev/ https://www.fineract.dev/
logicalmonster 5y ago
> Otherwise, why not create a little coop bank with like-minded people? The problem isn't the bank organization itself: it's the money that you deal in. Regardless of your bank structure, whether it's some typical commercial bank or some kind of cooperative association, you're still left holding a fiat currency that is inflated on a whim. The beauty of crypto (and especially Bitcoin) is that there's either a fixed amount, or at least the rate of change of the money supply (inflation) is at least perfectly transparent and mathematically provable.
- RandomLensman 5y ago
  If you believe the money is "wrong" then Bitcoin won't safe you, nothing will safe you totally, in fact. Whether or not the money supply is fixed or not doesn't matter, you can make one type of money worthless vs. another form of money (happened so many times in history, and not necessarily due to inflation). And Bitcoin's hard cap is based on incentives and code, i.e. it could be changed (difficult to see in reality absent some really strong outside coercion, perhaps). Another attack on the value of Bitcoin could be from a state actor using nearly unlimited resources to take over most of the mining or validating and using it against it. I.e., there are ways to degrade it as a store of value (other than just arresting everyone found using, for example).