13 ms·

So if the chain is supposed to enable "trustless" finance, what enabled Alameda to take anything? Seems Alameda and its clients should be screwed, but FTX's ho

by Digory 4y ago

So if the chain is supposed to enable "trustless" finance, what enabled Alameda to take anything? Seems Alameda and its clients should be screwed, but FTX's holders should be relatively easy to identify and restore. But everyone seems to say that's not the case. So what broke down here? Why isn't the ledger ledgering?

delusional 4y ago
The ledger ensures that the handing over of the "thing" can happen without trust in any intermediary. You still ultimately have to trust the counterparty to deliver what they promise. Think of it like HTTPS. Nobody can sneak anything into the request, but the counterparty you're contacting could still be a fraud.
- ChadNauseam 4y ago
  There are fully-decentalized exchanges which have to have much less counterparty risk (because anyone could take the other side of your deal, so you don't want to trust them). As a simple example, imagine a contract which I send 1 ETH to, and if you send it 1000 USDC it'll send you the ETH. The big counterparty risk with that system is that the price of ETH will skyrocket and someone else will call the contract to make the trade before I can cancel it, but that kind of thing is hard to avoid in any system.
  - LeafGuild 4y ago
    >but that kind of thing is hard to avoid in any system. No it isn't, that's what limit orders are for. There's still the exact same counterparty risk there anyway, in the form of USDC. Circle is another big dodgy centralized provider. The major critical flaw with all this defi stuff is that it can only reliably trade cryptos for other cryptos. Once you actually try to get any of it out into real assets, the counterparty risk immediately comes back again. No crypto defi stuff can ever solve that. The idea is just bad, it's a scam from the very beginning.
  - topranks 4y ago
    The big risk with that system is a bug in the smart contract that lets me take all the ETH and USDC.
- Digory 4y ago
  But this isn't counterparty risk, it's fraud risk, right? It sounds like "Atrium borrowed a bunch of houses from FX, but FX didn't own the houses." When you check the Recorder (the blockchain for houses), the deeds should all say "John Doe owns 123 Main St." In the world with a Recorder of Deeds, Atrium is screwed, and FX might be screwed, but John Doe is easily confirmed as the owner of 123 Main. It sounds like people here gave their coins to FX, so that the "deed" shows FX "owns" the coin. In effect, they destroyed the 'trustless' part of the equation. And then SBF violated the trust. So, the next innovation seems to be a blockchain that shows an owner and an agent?
  - fnordpiglet 4y ago
    I think technically you would look at this as exchange risk. Securities regulations exist because of precedent, and this isn’t specifically fraud but lack of customer funds segregation from the business risks.
  - lupire 4y ago
    "fraud" is a subjective assessment of intent. Empirically, in the marketplace, fraud looks the same as incompetence.
phas0ruk 4y ago
FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a traditional centralised trading house.
- Digory 4y ago
  So the internal trades aren't on chain. Well, that's going to leave a mark. Is there a coin that distinguishes agent and owner? Seems like you want trustless agency if you're pursuing trustless finance.
  - legutierr 4y ago
    This is the whole idea behind DeFi. All trading is done autonomously on-chain, and owners retain custody throughout.
    - LeafGuild 4y ago
      That's a marketing line, it's not true. Nobody actually has any custody of anything in crypto. The value of the tokens is completely and totally dependent on a consensus of crypto miners doing their job within the parameters of the system, assuming you want them to maintain a price and trading volume that's favorable to the token holders. If the majority of miners suddenly go bust due to outside circumstances, or they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull, or any number of other malicious actions, then it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin.
      - abhimanyue1998 4y ago
        that is true, but the whole ethos of DeFi is to make the process of mining as decentralised as possible. Have many validators, separated across the globe etc. Obviously, there are still chances that all the miners conspire and kill the system, but the chances of that are decreased with increased decentralisation in the mining and validation process.
twawaaay 4y ago
That's because it is all built on greed and a lot of lies. The only time you actually are part of the trustless system is when you are sole custodian of any private keys necessary to access the coins. The issue with this is that a whole lot of people have no idea what it is, how it works, how to be part of the system and how to keep keys secure and safe at the same time. And it is fine. People can't know everything. But one thing I know, if you buy stuff you do not understand and then you loose money, it is on you.
- zen21 4y ago
  What about if you buy something you thought you understood, but that’s only because you were lied to?
  - tartoran 4y ago
    Still on you. Who did you trust that lied to you? Then starting to ask oneseld: Why did you trust them in the first place. Understanding that part would make it possible not fall for it the second time.
    - zen21 4y ago
      Luckily in many cases this is in fact not “on you”, but rather is a crime, or is subject to civil litigation depending on the nature of the fraud in question. This helps to avoid instances of retributive violence, which is the general solution when a legal system isn’t available.
      - lupire 4y ago
        That's fiat thinking, which is exactly what crypto people want to avoid.
        zen21 4y ago
        How do they plan to avoid violence when there are betrayals of trust?
joe_the_user 4y ago
Maybe you're thinking of Etherium or other smart-contract systems, Etherium is a system where things like that happen automatically. With Bitcoin, the only thing you have is a secure (but static) ledger of who (which wallet/id) has what bitcoins. Any transfers have to be "manually" and just recorded by the blockchain. Of course, the automatic processes in Etherium produce a bunch of other weird effects.
- mccorrinall 4y ago
  Where does this Etherium-meme(?) come from? I’ve seen several people writing Etherium and Monaro instead of Ethereum and Monero on mailing lists, but never understood what it means and where it comes from.
  - UncleEntity 4y ago
    Since when is bad spelling a meme?
    - chidg 4y ago
      This particular misspelling happens often enough (on this forum) that I don't think it's unreasonable to think that some people are doing it intentionally as a form of trolling.
    - mccorrinall 4y ago
      It must be a meme, especially since a quick search reveals that joe_the_user wrote it correctly 1 year ago!
      - joe_the_user 4y ago
        My gawd, I'm moderately dyslexic and I need to check my spelling on everything unusual. I generally succeed but this time I didn't. It's truly bizarre that you think there's anything weird here. Overall, I'd suspect people not immersed in the crypto world would easily fall into a spelling that "sounds" like they remember it - spelling phonetically is a lousy way to spell but some percentage of the world does it.

by Digory 4y ago

delusional 4y ago

The ledger ensures that the handing over of the "thing" can happen without trust in any intermediary. You still ultimately have to trust the counterparty to deliver what they promise. Think of it like HTTPS. Nobody can sneak anything into the request, but the counterparty you're contacting could still be a fraud.

ChadNauseam 4y ago
There are fully-decentalized exchanges which have to have much less counterparty risk (because anyone could take the other side of your deal, so you don't want to trust them). As a simple example, imagine a contract which I send 1 ETH to, and if you send it 1000 USDC it'll send you the ETH. The big counterparty risk with that system is that the price of ETH will skyrocket and someone else will call the contract to make the trade before I can cancel it, but that kind of thing is hard to avoid in any system.
- LeafGuild 4y ago
  >but that kind of thing is hard to avoid in any system. No it isn't, that's what limit orders are for. There's still the exact same counterparty risk there anyway, in the form of USDC. Circle is another big dodgy centralized provider. The major critical flaw with all this defi stuff is that it can only reliably trade cryptos for other cryptos. Once you actually try to get any of it out into real assets, the counterparty risk immediately comes back again. No crypto defi stuff can ever solve that. The idea is just bad, it's a scam from the very beginning.
- topranks 4y ago
  The big risk with that system is a bug in the smart contract that lets me take all the ETH and USDC.
Digory 4y ago
But this isn't counterparty risk, it's fraud risk, right? It sounds like "Atrium borrowed a bunch of houses from FX, but FX didn't own the houses." When you check the Recorder (the blockchain for houses), the deeds should all say "John Doe owns 123 Main St." In the world with a Recorder of Deeds, Atrium is screwed, and FX might be screwed, but John Doe is easily confirmed as the owner of 123 Main. It sounds like people here gave their coins to FX, so that the "deed" shows FX "owns" the coin. In effect, they destroyed the 'trustless' part of the equation. And then SBF violated the trust. So, the next innovation seems to be a blockchain that shows an owner and an agent?
- fnordpiglet 4y ago
  I think technically you would look at this as exchange risk. Securities regulations exist because of precedent, and this isn’t specifically fraud but lack of customer funds segregation from the business risks.
- lupire 4y ago
  "fraud" is a subjective assessment of intent. Empirically, in the marketplace, fraud looks the same as incompetence.

phas0ruk 4y ago

FTX is a centralised exchange, it is not routing all customer trades on chain. It’s not a blockchain failure, it’s just a lack of client asset segregation by a traditional centralised trading house.

Digory 4y ago
So the internal trades aren't on chain. Well, that's going to leave a mark. Is there a coin that distinguishes agent and owner? Seems like you want trustless agency if you're pursuing trustless finance.
- legutierr 4y ago
  This is the whole idea behind DeFi. All trading is done autonomously on-chain, and owners retain custody throughout.
  - LeafGuild 4y ago
    That's a marketing line, it's not true. Nobody actually has any custody of anything in crypto. The value of the tokens is completely and totally dependent on a consensus of crypto miners doing their job within the parameters of the system, assuming you want them to maintain a price and trading volume that's favorable to the token holders. If the majority of miners suddenly go bust due to outside circumstances, or they decide to conspire together and attack the system, or conspire with some whales to perform a rug pull, or any number of other malicious actions, then it's extremely likely that your tokens aren't going to be worth anything anymore. This applies to every token, including bitcoin.
    - abhimanyue1998 4y ago
      that is true, but the whole ethos of DeFi is to make the process of mining as decentralised as possible. Have many validators, separated across the globe etc. Obviously, there are still chances that all the miners conspire and kill the system, but the chances of that are decreased with increased decentralisation in the mining and validation process.

twawaaay 4y ago

That's because it is all built on greed and a lot of lies. The only time you actually are part of the trustless system is when you are sole custodian of any private keys necessary to access the coins. The issue with this is that a whole lot of people have no idea what it is, how it works, how to be part of the system and how to keep keys secure and safe at the same time. And it is fine. People can't know everything. But one thing I know, if you buy stuff you do not understand and then you loose money, it is on you.

zen21 4y ago
What about if you buy something you thought you understood, but that’s only because you were lied to?
- tartoran 4y ago
  Still on you. Who did you trust that lied to you? Then starting to ask oneseld: Why did you trust them in the first place. Understanding that part would make it possible not fall for it the second time.
  - zen21 4y ago
    Luckily in many cases this is in fact not “on you”, but rather is a crime, or is subject to civil litigation depending on the nature of the fraud in question. This helps to avoid instances of retributive violence, which is the general solution when a legal system isn’t available.
    - lupire 4y ago
      That's fiat thinking, which is exactly what crypto people want to avoid.
      - zen21 4y ago
        How do they plan to avoid violence when there are betrayals of trust?

joe_the_user 4y ago

Maybe you're thinking of Etherium or other smart-contract systems, Etherium is a system where things like that happen automatically. With Bitcoin, the only thing you have is a secure (but static) ledger of who (which wallet/id) has what bitcoins. Any transfers have to be "manually" and just recorded by the blockchain. Of course, the automatic processes in Etherium produce a bunch of other weird effects.

mccorrinall 4y ago
Where does this Etherium-meme(?) come from? I’ve seen several people writing Etherium and Monaro instead of Ethereum and Monero on mailing lists, but never understood what it means and where it comes from.
- UncleEntity 4y ago
  Since when is bad spelling a meme?
  - chidg 4y ago
    This particular misspelling happens often enough (on this forum) that I don't think it's unreasonable to think that some people are doing it intentionally as a form of trolling.
  - mccorrinall 4y ago
    It must be a meme, especially since a quick search reveals that joe_the_user wrote it correctly 1 year ago!
    - joe_the_user 4y ago
      My gawd, I'm moderately dyslexic and I need to check my spelling on everything unusual. I generally succeed but this time I didn't. It's truly bizarre that you think there's anything weird here. Overall, I'd suspect people not immersed in the crypto world would easily fall into a spelling that "sounds" like they remember it - spelling phonetically is a lousy way to spell but some percentage of the world does it.