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Cryptocurrency off-ramps, and the shift towards centralization
- deleted 5y ago[deleted]
- skybrian 5y agoHow much do people trading on exchanges need to worry about counterparties giving them tainted crypto and ending up in a situation like this?
- NovemberWhiskey 5y agoWith an exchange, your counterparty is the exchange.
- ycombobreaker 5y agoIs that really true? On traditional exchanges, the exchange itself is a mostly neutral party, a technology-and-marketplace provider. If a clearing member becomes insolvent, the other clearing members have agreements in place to "pitch in" together to keep the whole system functional. (Edit: to be clear, this isn't a rosy situation: it's usually a adjacent to fraud, so the SEC, CFTC, etc. pursue criminal charges; and other clearing members tend to sue the bankrupt one, letting the courts figure it out.)
- NovemberWhiskey 5y agoThe cryptocurrency "exchanges" are not structured similarly to the stock market. There's no separation of broker, matching venue and central counterparty clearing service.
- bonestamp2 5y agoIt depends on the exchange. Some are peer to peer and some trade from their hot wallet.
- NovemberWhiskey 5y agoHow does a peer-to-peer exchange work? They match you with someone and then you find some way to do a swap, potentially cross-chain?
- gostsamo 5y agoIf the platform has verified you, it has verified everybody else there. So, the question is how reputable is the exchange.
- deleted 5y ago[deleted]
- simonw 5y agoEvidently it's something you should keep an eye out for. I find the fact that Bitcoin isn't actually a fungible token - that there are "corrupt" Bitcoins out there that need to be avoided - pretty fascinating.
- jacobra2 5y agoAgreed it is interesting. The US dollar has a similar dynamic. The degree to which a currency is fungible should incorporate its corruptability.
- devoutsalsa 5y agoIt’s not clear to me, but I’d guess that one who uses centralized exchanges would do well to focus on sites that use KYC. I’m sure not everyone would agree with that, but we still live in a world where one needs to convert crypto to fiat currency at some point, and centralized exchanges are the best way I know of to do that. Avoiding shady projects seems wise.
- 5350-uiop-1130 5y ago> cash out you're not supposed to do that!
- alexb_ 5y agoDon't kid yourself. Bitcoin does not have any place as a real currency (at least for legal purchases) - it is solely a speculative asset. People buy cryptocurrencies in hopes it will become worth more USD, or to buy drugs.
- fullshark 5y agoSo it has a proven use case, that will never go away: illegal purchases.
- gjvc 5y agoIt has a proven use case as a result of what?
- tomjakubowski 5y agoWhat's the size of that market, and what portion of participants bother to try covering up their transactions on the blockchain between exchanging with a real currency and buying/selling the drugs (or nuclear weapons, or hitman contracts, etc.)?
- fullshark 5y agoI don't know! I'm not a huge crypto fan at all, but say 5 years ago there was this belief among crypto bears that it would be a forgotten memory in 50 years, I just don't see that happening. Illegal monetary transactions are a huge use case for Crypto, and i'm not naive enough to think crime will be a distant memory in 50 years. Now does that mean you should buy bitcoin cause your savings will 10, 100, 1000x? Not necessarily, it could be replaced, and also go sideways or down but I'd be surprised at this point if there's no crypto-economy in 50 years.
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- zionic 5y agoThis is a valid criticism and part of why privacy-by-default MUST become the new norm for major cryptos if they’re going to thrive. A lot of people don’t understand that when you deposit to say, Coinbase, they are looking at the COMPLETE history of your wallet back to genesis. If there’s anything they don’t like your funds are toast.
- axiosgunnar 5y agoWhat does being toast mean? Do they confiscate your deposit and give nothing in return?
- hamiltonians 5y agothey can close your account and limit to only withdrawls
- ajross 5y agoJust to be clear, though: this means that you view the evasion of existing AML statutes as a precondition for crypto "thriving". It's the same problem. Coinbase isn't doing this to be evil or centralized or controlling, they're literally just following the law. Now, I'm sure there's a place for a reasoned discussion about the breadth of laundering regulation and how it might be improved. But your position seems to be an absolutist one (that AML simply can't be allowed in crypto), and it's not clear to me if you realize that.
- javert 5y ago> Coinbase isn't doing this to be evil or centralized or controlling, they're literally just following the law. Nah, they're definitely in the business of regulatory capture. But they have to be. If they don't capture the regulators, someone else will.
- hamiltonians 5y agowouldn,t this lead to lots of false positives
- miracle2k 5y agoIt is true that exchanges are a pressure point, and that anonymised transactions are a compliance risk-factor. While the article is notably lacking evidence for the claim that we are "now" seeing this "increasingly", assuming it is not yet the case, it may well be an increasing problem going forward. Ultimately, this a civic matter; as much as we want to ensure we have the right to encrypt our communications, to not disclose our passwords to police even when being prosecuted for a crime, as activists commonly insist on, so should we fight to maintain our existing rights to financial privacy.
- ClumsyPilot 5y agoBut we also have to keep the lid on fraid, mafia, tax evasion, organised crime, blood money, etc. To me the point of blockchain is to democratise access to financial technology. To other's, it's to create a currency that cannot be manipulated by central bank politics. Only to some people it's about privacy - i woupd be quite happy with a totally open and public financial system if it applies to all people equally.
- deleted 5y ago[deleted]
- Andrew_nenakhov 5y ago> But we also have to keep the lid on fraid No we don't. The dangers from allowing use of cryptocurrencies by criminals are far less than dangers to freedoms from corrupt totalitarian governments. When government can easily shut down your finances, you need some kind of way to defy it. And if you think that your government will never do such thing, think again, harder. Citizens must have a leverage against abuse. With shrinking use of cash, cryptocurrencies allow people to evade a chokehold that can instantly smother them.
- D13Fd 5y agoWow. I know this comment is old at this point, but this is an incredibly dangerous point of view. Corruption is crime. Our ability to have a non-corrupt government depends in large part on the ability of our legal system to track the movement of money and detect corrruption. If you want to create an unstoppable superhighway to absolute government corruption, untraceable currency with perfect privacy is a wonderful way to do it. People think privacy means "they'll never know I had that porn subscription or bought those legal recreational drugs." But the reality is more likely "they'll never know I took that bribe to deny that permit to that company's competitor."
- olah_1 5y agoFor off-ramps, can't you just put up a bunch of orders on something like Bisq? Slightly more work involved, but it is a totally decentralized way to do it.
- danuker 5y agoIf you get large amounts of money in short periods of time, you might receive calls from your bank's or government's anti-money-laundering office regardless.
- ravenstine 5y ago[EDIT: I wrote a somewhat long comment that really wasn't directly related to the article, so I chose to remove it.]
- deleted 5y ago[deleted]
- cuteboy19 5y agoThe original intent was "peer to peer digital cash". When that failed we got "decentralised digital gold". I can only wonder what the next iteration will be
- redisman 5y ago“Web3”
- aaaaaaaaata 5y agoWhich is...drumroll...where the payment endpoints will be for using the digital gold (coins that have won the race) for the P2P payments.
- danlugo92 5y ago> "decentralised digital gold" You're saying like that is not a huge deal. Central banks will hold Bitcoin in the future, it's inevitable.
- WJW 5y agoEven if we accept the thesis that central banks are interested in holding crypto as part of their reserves, is there any reason that it would be bitcoin? It is the largest cryptocurrency right now, but the space is also famously volatile so it might not be the largest in a few years. (Btw, I doubt a country would want to hold something as volatile as bitcoin since the whole point of national currency reserves is to be a stable source of value. Bitcoin is basically the opposite of that)
- ojr 5y agoBitcoin has found product market fit with the correct privacy needed for regulators to be happy with it. A few examples of bitcoin privacy shortcomings, doesn’t mean the system isn’t wildly successful. One of the best electric car company in the world, Tesla, holds $2 billion worth of bitcoin today. A lot of bitcoin is bad and centralized and whatever narratives are missing the big picture.
- ClumsyPilot 5y ago"One of the best electric car company in the world, Tesla, holds $2 billion worth of bitcoin today." I don't think that's what bitcoin is for, it's a bit like saying a speaker is great because is makes a great footrest
- fastball 5y agoWhat is Bitcoin for then?
- VHRanger 5y ago"regulators to be happy with it" What world do you live in? All regulators are increasing regulation and oversight on crypto, whether it's the western world, China or Russia. The only ones happy with it seem to be El Salvador and some crypto lobbyists
- ajross 5y agoOne thing not noted here, and that I'd love to see some numerate analysis on, is the fact that the KYC requirements among the major exchanges have effectively bifurcated crypto assets. There is "clean" BTC and "dirty" BTC now. One is clearly worth more than another by dint of its greater flexibility (i.e. if you're offered 3 clean ETH or whatever for your Pondering Lemur NFT, or 5 dirty ETH that you can't convert via Coinbase, which offer do you pick? It seems to me that many people might prefer the former). Yet... no one anywhere is trying to track that price discrepancy? This seems like it would be an important bit of data!
- danuker 5y ago> no one anywhere is trying to track that price discrepancy Let me just ask everyone what they got after laundering their dirty ETH. I am sure they will answer truthfully.
- ajross 5y agoI didn't say it was easy. But a black market is still a market, and has prices. People talk with some level of precision about market prices for kalashnikovs and heroin, why not for "mixed BTC"? My surprise is that no one is talking about this.
- capeterson 5y agoUnless I'm misunderstanding, IME the exchange rate always stays the same, there's just more built-in cost to account for things like trading for XMR and back out. This is generally how it goes for IRL cash as well. It's common for things to be cheaper in XMR as well, given that part of the equation has already been accounted for.
- DennisP 5y agoIt's a little trickier with Ethereum's account model. On Bitcoin each address has a list of inputs (and outputs, if spent), but on Ethereum it's just accounts with balances. If ETH goes into a contract that holds funds from a lot of sources, then the ETH that comes back out is just from that contract. If you wanted to assign it some particular previous source you'd need to come up with some arbitrary method like FIFO or LIFO.
- noman-land 5y agoI have a controversial opinion. You don't need offramps.
- WJW 5y agoSay you are a miner. How would you buy the electricity to run your mining rigs without fiat currencies?
- epgui 5y agoPresumably the commenter is imagining that everyone would accept crypto as payment, including the energy company. This is not my opinion. My opinion is that no matter how many people and companies become excited about accepting and using crypto as a method of payment, all of them need to pay some form of tax at some point, and I'm not sure I see a reason why typical governments and / or central banks would be as enthusiastic about relinquishing their sovereignty on their own currency. I imagine that this tax will most likely need to be paid in the currency which is controlled by the government or its central bank, and this is where the off-ramp problem can no longer be avoided. I really cannot shake off the idea that cryptocurrency has just created high-tech casino chips that are not attached to any particular casino, and I'm not completely sure what problem this really solves in practice. At the end of the day, I stay away from crypto because I fully admit that I do not understand crypto: not from a technical perspective (which IMO is not that important), but from a macro-social perspective (which IMO is the most important).
- nathias 5y agoyes, US has been doing regulatory capture to extract profits from crypto since 2016, it's horrible but the silver lining is that crypto was forced to innovate and produced the wonderful jungle of DeFi that currently exists and is used by many
- ta-crypto 5y ago
- 0xbadcafebee 5y agoIt sounds like buying cryptocurrency might be risky.
- jqpabc123 5y agoAny financial system is built on on an element of trust. Crypto doesn't displace trust --- it misplaces it. Instead of trusting the regulated banking system, you end up trusting unregulated "exchanges" --- where fraud is not even illegal. Need an example of crypto-fraud? The most widespread example is Tether, USDT. The idea that USDT is backed by USD is a well known joke. No one really knows the full extent of this fraud but all indications are it is one of epic proportions. Yet the exchanges maintain the $1 peg for USDT.
- alexb_ 5y agoThe day that tether, and all of the other "stablecoins" die, is going to be absolutely brutal. Makes me glad to not be a crypto speculator. This is the type of stuff that they write books, movies, and papers about.
- dragosmocrii 5y agoI've noticed so many ads on Crypto "investing" recently, that makes me think we might be in the last stage of this bubble. I've had a discussion with a family member and their friend, and they were talking to me about investing in crypto, and how XRP is backed by gold, and how they have cold storage with their phone to hold their "assets" in case the Internet is taked down, and how the stock market will crash and big companies will disappear (like Google, Amazon, etc). And I'm like what the heck.. If the Internet is taken down, why do you even need to have your crypto on cold storage, it's just bits.. you've got bigger problems at that time. But nope, they're adamant crypto is the future, even if they have bo idea how it works. Fascinating, and terrifying when thigs go South.
- alexb_ 5y agoWhen taxi drivers give out investment advice...
- rhn_mk1 5y agoIt's worth noting that if the internet splits up into large pieces, the blockchain splits, and the coins will suddenly lose a lot of their value. That's because there's no telling which fork of the blockchain wins when there's a merge later. Double-spending galore!
- JonathanBeuys 5y agoNo word about the lightning network? The receiver of a LN transaction does not know anything about the sent coins. Are any exchanges accepting payments via the LN? I so, the issue is solved, no?
- lawn 5y agoThe privacy of LN is constantly overstated.
- colesantiago 5y agoLightning network is not Bitcoin and not decentralised.
- jazzyjackson 5y agoI would say a lightning channel is centralized, but seeing that there are many channels, surely the network is not. And the magic internet points are bitcoin-equivelants, settled in bitcoin, seems pretty bitcoiny to me.
- kevinak 5y agoA bunch of them are and more are working on it. Here are some non custodial crypto to crypto ones: https://wiki.ion.radar.tech/tutorials/lightning-exchanges https://wiki.ion.radar.tech/tutorials/lightning-exchanges And here are some traditional ones: https://github.com/theDavidCoen/LightningExchanges https://github.com/theDavidCoen/LightningExchanges
- bonestamp2 5y ago> someday, goods and services will be exchanged for cryptocurrency rather than traditional money I mean, I've seen that happening at an increasing rate since 2013 (the first time I bought a drink at a bar with crypto). Today, there are several monthly services that I pay for with crypto. It's not for everyone of course, but there is a virtual world where crypto is the preferred or only currency. Over time, that world and the real world will converge. We can already see that starting to happen with China's national crypto currency. As more exchanges support that currency, it will bring this convergence full circle, at least for part of the world. The rest will follow in time.
- deleted 5y ago[deleted]
- topranks 5y ago> there is a virtual world where crypto is the preferred or only currency There sure is.
- Projectiboga 5y agoI like this recent South Park clip https://youtu.be/N8f-BQFo7lw https://youtu.be/N8f-BQFo7lw
- vmception 5y agoBasically people need to launder their legitimately earned/acquired crypto just so financial institutions don't flag it.
- capableweb 5y agoNot sure how you understanding "laundering" but legitimately earned cryptocurrencies does not need laundering in any sense, just a explanation about where it comes from, like when you receive any other large amount of money to your bank account. This has happened to me (the bank approached me asking where it comes from) both when "selling" large amount of startup stocks/options and when receiving money from selling legitimately earned cryptocurrencies on a exchange (the cryptocurrency exchange approached me asking where it comes from).
- vmception 5y agoThis article is about the explanation being sufficient but the bank deciding the prior owner had illegitimate earnings due to the prior use of a mixer so flagged it anyway. So the way around that would be to further obfuscate and layer.
- WJW 5y agoDo you think the exchanges will throw up their hands and go "oh well tricked us you clever bastard, you go free now"? I think it is much more likely that, if they can't determine the origin of coins because it has been obfuscated so much, they will just block it just to be sure. Making crypto an unacceptable KYC/AML risk will not convince the banks to allow it anyway; that's just not how banks work.
- vmception 5y agoI do think that, yes, I know what technology they use to assign thresholds to transactions for flagging or freedom.
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- nootropicat 5y agoIt's getting increasingly easier to buy assets like real estate with stablecoins. Barring further regulations I think the peak financial repression era has already passed. The worst time was probably 2018 - local peak in crypto interest bringing in heat, but no dexes with any liquidity. Since then it's only getting better - now anyone can hold millions of dollars anonymously and transfer them to anyone in the world, dexes are so liquid there are no reasons to use spot cexes except to cash out, several debit card solutions that can be loaded with crypto and stablecoins. Laundering money from crypto is the easiest it was since probably 2013 when no one cared at all - manufacture fake profits on tokens/nft held in clean wallets. Without new laws, the situation is only getting better. Exchanges already demand very heavy kyc/aml, so the only thing that would reverse the trend would be making anonymous defi a crime for the users. I think it's unlikely at this point.
- cletus 5y agoIt's amazing to watch in real time Crypto Andys learn all the hard lessons that went into making the financial system they seem to despise. The common denominator in the examples in the article is that the crypto system at some point has to at some point interface with the Real World and that's where it all falls apart. There's an example of a woman whose bank won't process the transaction. Just because it's crypto doesn't mean you can escape KYC/AML laws. Another example was the person whose crypto was tainted by going through the same service used to launder ill-gotten gains, which even assumes their story is true (eg their Bitcoins may well have been ill-gotten). NFTs are the same. I could buy an artwork but something outside of that system is required to show it's "authentic". I mean I could save the same image to my hard drive (possibly modifying a pixel) and then create a new NFT and what's really to distinguish it from the original? If there is no original NFT, how will a potential buye revaluate the artist actually issued the token? I've yet to see an actual problem crypto solves other than avoiding laws. It's the biggest solution looking for a problem I've ever seen.
- ReactiveJelly 5y agoYou don't even have to change one pixel. NFTs don't enforce uniqueness or copyright laws or anything. You can 'mint' the same image or hash or URL as new NFTs, forever. They're taking the old confidence scam of "This is the original copy of something that other people are gonna want! (with no intrinsic value)" and tech-washing it to claim that the blockchain enforces originality. It doesn't, it's still all up to humans to say "This is the oldest copy of all the copies." People keep saying "But it might be good for concert tickets!" I'm sick of hearing that. Don't carry water for a scam based on some what-aboutism that hasn't even been implemented. Concert tickets are working fine and TicketMaster would be dead if someone didn't like the way they did things. The venue still has to honor the ticket, so NFTs are still a middle-man, just dumber.
- pl0x 5y agoCrypto has always been about centralization. It's how the VCs make their x10000 return.