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There are several properties of blockchains that could improve upon our current financial structures. 1) Custody: with fiat, the concept of self-custody is "st

There are several properties of blockchains that could improve upon our current financial structures. 1) Custody: with fiat, the concept of self-custody is "store your cash under your bed," and as we continue to move away from cash into digital money, this option is being eroded. In crypto, the concept of self-custody may be an EOA (account based on a private key) smart contract (such as a multi-signatory account), or some combination. This is not to say that all users should be choosing non-custodial wallets, but the ability to choose and diversify your assets across a range of these technologies is, in my opinion, better than having no choice at all. 2) Mitigating the need for intermediaries in certain situations. Currently to handle escrow of digital assets in fiat systems, you typically need to hire or use a third-party agency. In some cases escrow could instead be managed by a (cryptographically-verified) program execution, e.g. "transfer X domain name record for Y amount of stablecoin assets". 3) Privacy-preserving attestations via zero-knowledge proofs, which could use a public (decentralized) ledger so that all parties can verify the validity of the proof. 4) The immutable and public nature of smart contracts gives them certain properties we do not have with our traditional financial systems. For example Libor manipulation went unnoticed for several years; partly because the systems were closed and difficult to analyze. The public ledger is comparatively easy to analyze and difficult to manipulate. (The most common manipulations rely on social engineering; e.g. convincing somebody to sign a transaction, or buy ShitCoin2000.) 5) General security and operational improvements. Much of our traditional system is upheld by FORTRAN and questionable security methods (PINs, passwords, cell phone 2FA). Crypto currencies are extremely adversarial environments that are forcing new security models and cryptographic primitives: zk-proofs and zk-VMs, multi-party computation, new methods of private key storage and management, post-quantum cryptography. Hopefully some of these advancements (being funded by crypto currencies) will eventually spill over to other sectors.

greybox 5y ago
While I agree with some of your points here, (Mitigating the need for intermediaries in certain situations) - Crypto inherently holds no security benifits over traditional banking. Fortran has been used for decades because it has worked, and there has been little need for change.Fortran isn't a security hole in itself. In fact it has all of the same problems with private PIN access and MFA, PLUS all the downsides that come with malicious smart contracts. As far as personal security goes, crypto is much much worse. - The immutable and public nature of smart contracts. Why should anything be immutable? What if something is done by mistake, or by fraud? The benefits of traditional banking is that at the end of the day, there is a human on the other side that can reverse things if stuff goes wrong. - I see no benefit of the entire chain being public, just because I give someone my public key, because I spend money with them, or my employer needs to pay me, why should they be able to see EVERY transaction I have ever made?
- mattdesl 5y ago
  - Banks and financial systems use COBOL/FORTRAN not because they want to, but because the systems are decades old, the knowledge of how it works often lost, and making small changes or adding new features could lead to catastrophic failure[1][2][3]. Crypto on the other hand tends to be on the cutting edge of cryptography and heavily reliant on open source. Despite crypto systems having a better bedrock than a bank trying to maintain their multimillion lines of COBOL spaghetti, I can agree that many end-user applications in crypto do not provide better security than today's banks (e.g. MetaMask hot wallet storing user private keys in the cloud). - The ledger is generally considered immutable; but the platforms and protocols built on top of it need not be. Social consensus can pivot to a new contract address. An analogy would be a git commit; you can update the head of your codebase, but your past changes are still present and analyzable. - Better support for zero-knowledge proofs would be the eventual end goal for many of these systems, allowing users to shield data and maintain their privacy. I agree that not every transaction should be public, and it's a limitation of current crypto currencies that will likely take several years to solve. [1] https://federalnewsnetwork.com/tom-temin-commentary/2020/01/irs-programming-mystery-continues/ https://federalnewsnetwork.com/tom-temin-commentary/2020/01/... [2] https://increment.com/programming-languages/cobol-all-the-way-down/ https://increment.com/programming-languages/cobol-all-the-wa... [2] https://www.wealthsimple.com/en-ca/magazine/cobol-controls-your-money https://www.wealthsimple.com/en-ca/magazine/cobol-controls-y...

greybox 5y ago

While I agree with some of your points here, (Mitigating the need for intermediaries in certain situations) - Crypto inherently holds no security benifits over traditional banking. Fortran has been used for decades because it has worked, and there has been little need for change.Fortran isn't a security hole in itself. In fact it has all of the same problems with private PIN access and MFA, PLUS all the downsides that come with malicious smart contracts. As far as personal security goes, crypto is much much worse. - The immutable and public nature of smart contracts. Why should anything be immutable? What if something is done by mistake, or by fraud? The benefits of traditional banking is that at the end of the day, there is a human on the other side that can reverse things if stuff goes wrong. - I see no benefit of the entire chain being public, just because I give someone my public key, because I spend money with them, or my employer needs to pay me, why should they be able to see EVERY transaction I have ever made?

mattdesl 5y ago
- Banks and financial systems use COBOL/FORTRAN not because they want to, but because the systems are decades old, the knowledge of how it works often lost, and making small changes or adding new features could lead to catastrophic failure[1][2][3]. Crypto on the other hand tends to be on the cutting edge of cryptography and heavily reliant on open source. Despite crypto systems having a better bedrock than a bank trying to maintain their multimillion lines of COBOL spaghetti, I can agree that many end-user applications in crypto do not provide better security than today's banks (e.g. MetaMask hot wallet storing user private keys in the cloud). - The ledger is generally considered immutable; but the platforms and protocols built on top of it need not be. Social consensus can pivot to a new contract address. An analogy would be a git commit; you can update the head of your codebase, but your past changes are still present and analyzable. - Better support for zero-knowledge proofs would be the eventual end goal for many of these systems, allowing users to shield data and maintain their privacy. I agree that not every transaction should be public, and it's a limitation of current crypto currencies that will likely take several years to solve. [1] https://federalnewsnetwork.com/tom-temin-commentary/2020/01/irs-programming-mystery-continues/ https://federalnewsnetwork.com/tom-temin-commentary/2020/01/... [2] https://increment.com/programming-languages/cobol-all-the-way-down/ https://increment.com/programming-languages/cobol-all-the-wa... [2] https://www.wealthsimple.com/en-ca/magazine/cobol-controls-your-money https://www.wealthsimple.com/en-ca/magazine/cobol-controls-y...