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So, having been around since the early bitcoin days, core to the salespitch back then was the fact you would have control. You'd have your coins in your wallet,

by brnt 4y ago

So, having been around since the early bitcoin days, core to the salespitch back then was the fact you would have control. You'd have your coins in your wallet, and no need for banks etc. Apparently nobody does this anymore, and gives their wallets to these exchanges (i.e. banks) and balks when the obvious happens in pyramid schemes. People just don't get distributed currency if they promptly undistribute it. Or is it I who's doing the not getting things?

julianlam 4y ago
No, that's exactly it. People love the idea of decentralization and doing things on your own, except then they realize that it's actually kind of hard to be off-exchange and still be liquid (whatever the hell that means in crypto-land). So basically no real change except they're much more exposed to risk (fraud and market swings notwithstanding)
rchaud 4y ago
> Apparently nobody does this anymore, and gives their wallets to these exchanges (i.e. banks) and balks when the obvious happens in pyramid schemes. The name of the game is pump and dump, you can't play the game (speculation) if you're not on the field (the exchange). Crypto's marketing is 'financial freedom' as in get-rich-quick, not free as in libre.
- qudat 4y ago
  That's right. Not to mention the transaction fees are so high that moving from a wallet you own to an exchange can cost non-insignificant amount of money. Add on top of that the general volatility of crypto, people not wanting to deal with maintaining their own wallet, and you have a recipe for people keeping their funds on exchanges.
  - bogomipz 4y ago
    >"Not to mention the transaction fees are so high that moving from a wallet you own to an exchange can cost non-insignificant amount of money." I realize that transaction fees are probably a moving target but is there a ballpark figure you or someone else could say? I'm guessing it's percentage-based?
    - xanthrax 4y ago
      It is not percentage based but based on the demand for the next block space. That demand is on the basis who will pay the most per byte for each transaction so your is based on the number of bytes in your transaction (usually directly proportional to the number of inputs and outputs) and how quickly you want it in the next block. Currently about 44 cents will guarantee you in the next block - note this is a moving target based on the competition for block space. mempool.space is a good visualisation.
    - michaelt 4y ago
      According to https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f... it's varied between $2 and $0.5 in the last 6 months. There have been times (mid-2021) where it was >$20 for a single payment. Needless to say, this is much more affordable for a million-dollar transaction than for buying a cup of coffee :)
    - qudat 4y ago
      I used to trade with eth every once in awhile. It wasn't uncommon for a tx fee to be on the order of $5-20.
    - ncallaway 4y ago
      > I realize that transaction fees are probably a moving target but is there a ballpark figure you or someone else could say? I'll give the answer for Bitcoin as of a couple of years ago, and others can chime in for things like Etherium and other cryptocurrencies. With bitcoin it's not a fixed fee, it's more like a priority bid. So, there's a pool of "pending" transactions that any miner can grab from. Each pending transaction has a bid for its transaction fee. Each miner will then grab whatever set of transaction it wants to bundle into a block, and try and compute the hash for that block. Once a miner finds a hash for that block, all the transactions in that block are added to the chain and the transaction is "complete" (in practice, people will often wait until one or two blocks are added _after_ the transaction is included in the block chain to be _sure_ it's done). So, to your question, ultimately the transaction fee is a bid for how quickly you want your transaction included. You can bid $0, and it's likely your transaction will _never_ be included. It doesn't really matter how _much_ you're transferring, but _how quickly_ you need it included in the chain. How much you'd practically pay for a transaction (in USD) has been super variable over the lifetime of Bitcoin. It fluctuates with how many miners there are, how many transactions are happening, and the exchange rate of BTC to USD (since the feeds are paid in BTC). See the chart at the bottom of this page: https://privacypros.io/tools/bitcoin-fee-estimator/ https://privacypros.io/tools/bitcoin-fee-estimator/ It looks like it's generally between $0.75-$1.00 right now. So if you're making a transaction of $1M the fee is trivial, but if you're buying a cup of coffee for $5 it's...pretty high.
spamizbad 4y ago
Most people hold Bitcoin these days in the hopes of making money. The distributed consensus nature of crypto is irrelevant.
- Ajedi32 4y ago
  This is the key to understanding a lot of things about the "cryptocurrency community". There are two groups there with wildly different interests. A large chunk (probably even a majority) of the people involved in the cryptocurrency space don't actually care about cryptocurrency as a technology at all, they're just there to make money. To these people, market price is everything, and the technology is irrelevant except to the extent that it affects the market price. Then in the other camp there's a group of people who don't care about the current trading price, they're just interested in the technology and the new capabilities it enables. I'm in that second camp (perhaps unsurprisingly, since this is Hacker News), so in my view this story isn't really all that interesting or surprising. From a legal/societal perspective, yeah this is terrible and probably someone should go to jail. But from a technical perspective, the fact that exchanges can scam people out of their money is hardly new information. As the saying goes: not your keys, not your crypto. Though obviously for those who are interested in cryptocurrency solely to make money on speculation, yeah this is a big story.
knorker 4y ago
You're not taking crazy pills. It's become abundantly clear that the vision of everybody being their own bank will never work. People don't want to be their own bank, just like they don't want to be their own bakery, or their own farmer. Sure, some people do bake their own bread, but they do it either because they have to, or because they enjoy it. So the people who control their own keys need to have a reason to do so. Because it takes more effort than not managing your own bank. What exactly are the reasons to run your own bank? What problems in your life are solved by it? I can think of a two: * You want to hold more cash than FDIC guarantees. * You think the government will seize money out of savings accounts, as happened in Cyprus. These have to be weighed against the facts that while not literally in your mattress, the money becomes pretty easy to steal, for anyone willing to point a gun at you. And being your own bank comes with obligations, too, so the government will come after you if they want to drain your bank. And the justice system can put you in a box if you don't comply. Basically: If you already have a bank, why would you not just use it? And if they refuse to do your thing (like order a hit), then buy tokens and pay a hitman in tokens. If there were FDIC for tokens at your real bank, redeemable in same number of tokens, then any general public that wanted to use cryptocurrency would likely just use that. Because outside of fringe LARPing nobody wants to run their own bank.
- JumpCrisscross 4y ago
  > You want to hold more cash than FDIC guarantees This is a solved problem up to millions of dollars [1]. Past that, you buy Treasuries. The real third case is you’re doing something illegal. [1] https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...
  - mikeyouse 4y ago
    Yeah - there's a whole industry of this.. I worked with a large nonprofit that had something like $50M FDIC insured through CDARs. https://www.intrafinetworkdeposits.com/ https://www.intrafinetworkdeposits.com/ I suspect the government / Fed will have something to say about these in the future since it's a bit contra the purpose/intent of FDIC insurance but for the moment, you can abstract away all of the complications.
0xAFFFF 4y ago
The core truth in this day and age is that nobody (understand this a non-significant minority if you prefer) wants to host their own stuff. It's way more convenient to use centralized services that do the heavy lifting for you. If you don't have that convenience, you can't have mass adoption.
- Watchwatcher 4y ago
  Another way to say, you reap what you sow, right?
mattbrewsbytes 4y ago
I think once crypto gained traction beyond early adopters into more mainstream people it became an "app" and that "app" was the exchange and non tech, non crypto people don't put more effort into it then that. What is alarming and becoming more revealing is how much of this crypto was being back-doored from one crypto "product" (exchange, fund, coin, ICO, etc.) into another. In programmer terminology: it looks like there are (were) a lot of pointers to the same memory address.
tomjakubowski 4y ago
I think so many cryptocurrency users avoid maintaining their own wallet for the same reasons most people (these days) don't store all their wealth as cash or gold under the mattress: it's both inconvenient and easy to lose. Of course what folks are seeing now is that it's real easy for exchanges to lose their buttcoin deposits too.
dralley 4y ago
Distributed currency turns out to be too difficult for most people, and a currency that only 5% of the population can use isn't very useful.
kkielhofner 4y ago
As I've noted before on HN the entire concept of people being able to manage their own wallets flies against everything we know about people. People forget stuff, make mistakes, and lose things. The margin of error for a wallet is tiny. It's not rare for crypto forums, twitter, etc to prescribe completely ridiculous processes and systems for securing wallets, backing up seed phrases, etc. There's an entire cottage industry built around people etching their seed phrases on steel plates for people to (I'm not kidding) bury them like they're gold in the 1800s. Plus funds in a wallet require extra steps when you want to trade on an exchange (extra costs via gas, time, possible errors, etc). The use cases for crypto are so minimal for the general population one could argue it's only survived this long through making trades on exchanges - to what essentially amounts to gambling. You can't gamble with funds in a wallet which defeats the entire purpose of crypto for the vast majority of the "users" in the space.
- nanna 4y ago
  > As I've noted before on HN One of the joys of HN is that on the whole no one knows who anyone else really is nor keeps track of what they've argued previously.
  - skinnymuch 4y ago
    Some of us put out real info in our profiles.
    - zen21 4y ago
      Some people copy and paste other people’s profile info into their profiles.
    - CliffStoll 4y ago
      some of us use our real names
      - skinnymuch 4y ago
        haha I never thought of that.
asoneth 4y ago
The use of intermediaries is due to the deficient user experience of cryptocurrencies and cryptocurrency community: 1) They downplay the expertise and knowledge required to manage your own tokens. 2) They advocate for the use of cryptocurrencies by normal (i.e. non-expert) users as this increases the value of their holdings. 3) They prefer to blame users who make mistakes, are hacked/scammed, or otherwise lose (real) money for their lack of technical expertise. Given this, it's not surprising that the enormous gap between naive engineering assumptions and human reality is filled by intermediaries despite how consistently they fail. As long as cryptocurrencies continue to exist beyond a tiny niche I don't see this changing.
- nobody9999 4y ago
  Agreed. The knowledge gap between "normies" and "crypto-aficionados" is pretty large. Which is, of course, why so many crypto "businesses" turn out to be scams of one sort or another -- the asymmetry of information makes most folks easy meat for scammers. To point up this asymmetry, go ahead and watch this[0]. The lack of knowledge WRT crypto-currencies (let alone smart contracts) among the hoi polloi is striking in comparison to those who are in the know. [0] https://www.pbs.org/wgbh/nova/video/crypto-decoded/ https://www.pbs.org/wgbh/nova/video/crypto-decoded/ (Recent NOVA episode).
ineedasername 4y ago
You get things, I think, but bitcoin’s transaction bottleneck meant it was never going to be able to handle anything approaching wide scale adoption for day to day transactions. Attempts to address that with other coins or centralized exchanges is at least one of the major factors that lead to this point.
phone8675309 4y ago
The people who were pushing the fact that you'd have sole control over your wallet were those who wanted to be immune from the government seizing their money: scammers, criminals, tax dodgers, and exchange runners (a combination of the first three). Those people put a bunch of money into bitcoin to inflate the price, but they need a bunch of rubes trading the currency to keep the value of the coin (relatively) stable so they can withdraw their holdings, but they don't care much if those rubes have full control, and that's where exchanges come in. Exchanges are there as a way for the first movers and the ultra-wealthy to extract wealth from uninformed, naive new investors into crypto.
- cypress66 4y ago
  > The people who were pushing the fact that you'd have sole control over your wallet were those who wanted to be immune from the government seizing their money: scammers, criminals, tax dodgers, and exchange runners How sad that you think the only people that cares about not giving governments control of everything are "scammers, criminals, tax dodgers, and exchange runners".
tootie 4y ago
I read an interesting thread on why this isn't a pyramid scheme. Basically there's no one at the top. It's decentralized so there's a loose federation of edges arranged in a many-sided polygon. So we need a new name. Instead of Ponzi, this is a Nakamoto Scheme.
- oblio 4y ago
  That's much better. It's not a monopoly, it's an oligopoly :-)
- abruzzi 4y ago
  DePy - decentralized pyramid. I say this in jest. There are more than one reason to be interested in crypto, but when bitcoin suddenly went from 1BTC=USD$1 to $1BTC=USD$100 (I don't actually know when the boom happened--I wasn't watching that closely) the individualist, libertarians were obscured by the quick-buck types looking to turn their thousand into a million. Thats when the scammers all came out.
tylersmith 4y ago
Many people are managing our own coins, you just don't hear from us because we don't get burned every year.
- ryandrake 4y ago
  Somehow, humanity has gotten good at taking systems that were designed to be decentralized and distributed (like crypto, E-mail, personal websites, and so on) and instead, surrender them to a few big companies who become single points of failure. We keep failing to learn from this every time.
  - Apocryphon 4y ago
    It’s almost as if most people are too busy to figure out the complex processes at doing things themselves, and the very concept of civilization is built on exchanging good and services for money whereby tasks are delegated to parties that are better suited to focus on them.
  - asoneth 4y ago
    I suspect the problem is due to the fact that designers of decentralized systems often underestimate the importance of the user experience. Managing your own mail server, website, social media instance, music streaming, cryptocurrency wallet, power grid, vegetable garden, etc requires more time and skill than just paying someone else to do it for you. The result is that most people end up using a handful of centralized offerings except for a small niche of enthusiasts who derive enjoyment from the work and/or can justify spending the additional time. Ultimately it's up to the designers of distributed systems to make them trivially easy to use if they want them to be popular and remain distributed. (Napster and maybe BitTorrent are the examples that come to mind.) Otherwise it remains a niche for enthusiasts and/or ends up with centralized intermediaries.
goodoldneon 4y ago
You still have people with their own wallet. But the vast majority of people don't want to deal with the complexity of decentralization so they prefer centralization
- chasd00 4y ago
  I think the vast vast majority of people just want to increase the balance of their checking account. The fastest way to do that with crypto is speculating on an exchange. I bet 95% of the people getting burned on these exchanges don't even know what a "wallet" is (in the context of crypto currencies).
fleddr 4y ago
The thing is that the people that are most active in crypto and typically have the largest stacks are traders. They grow their stack by shorting/longing, leverage, staking and DeFi, all of which require an exchange.
zeroclip 4y ago
A lot of crypto investors are day traders or naive hodlers who have no idea what blockchain and DeFi means. But DeFi protocols like Uniswap and Aave are holding up fine and are incapable of pausing user withdrawals.
- alasdair_ 4y ago
  There is still the question of how to convert your crypto to actual spendable dollars again. Sure, uniswap will let you get another token but you still need an exchange to get dollars. This gets particularly important when, say, the giant scam that is Tether finally crashes and burns,
  - zeroclip 4y ago
    Yes, a regulated centralized exchange is valuable for on and off ramp. All they would need to do is process user transactions, take a small fee, and not gamble with user funds. Regulators could do audits and keep consumers protected. But regulators have failed to provide clear framework for exchanges in the US[1], so most CEXes are running off shore. [1] https://www.cnbc.com/2022/11/11/op-ed-crypto-markets-need-regulation-to-avoid-ftx-type-situations.html https://www.cnbc.com/2022/11/11/op-ed-crypto-markets-need-re...
probiab 4y ago
You do have control. You can start your own blockchain and keep the transactions flowing. Of course, transactions imply other people will use your chain. It's like you can create value not by gold, or tobacco, or even math, but by the very trust people have in your asset. And this brings us to a concept that some may be familiar with but is relatively new to the crypto community. A new kind of coin is here. This is a concept that probably never existed before crypto, called "fiat." "fiat" is the latest and greatest in crypto technology. True decentralization. Multiple countries. Multiple municipalities. Multiple systems, multiple institutions, multiple protocols and multiple contracts, the picture of decentralization that crypto could only dream of. And of course, if you make a mistake, you can revert your transaction, a form of technology crypto has not yet mastered. Oh, NFTs? Please. "fiat" utilizes advanced art international HS92 commodities exchange codes to kick start the burgeoning modern art scene of completely legitimate businesses.
kypro 4y ago
I think it depends on your goals. I mean, do you store all your cash under your bed in case your bank go bust? People keep crypto on the exchange because it makes transactions easier, and in some cases you might have other perks such as being able to lend it for interest or spend it with crypto credit cards. This idea that you can have a digital currency without some kind of bank or exchange is fundamentally flawed imo. Unless you believe the only valid usecase of crypto is as a digital alternative to physical gold then it probably makes more sense on an exchange. The main issue here is that the exchanges are not regulated. But I suppose given the lack of regulation I would have to agree with you that the only safe use case right now is as a "store of value" in a cold wallet.
amadeuspagel 4y ago
> Apparently nobody does this anymore The right way to do that is to use a hardware wallet. There are many companies making and selling those, so there's definitely a market for that.
runeb 4y ago
That is still the promise and unlock of cryptographic currencies. But that does not seem to be the use case for much of the people I've seen in the space the last years. I think the fact it is crypto currencies is incidental, it is all about earning money through appreciation of some popular asset.
dqpb 4y ago
I do this (for the most part). Whenever I buy currency on an exchange, I Immediately transfer it to a personal wallet. This is actually what drove me away from anything based on Ethereum, because the transfer speed and fee system for Ethereum is so horrendous, I found myself leaving that currency in the exchange managed wallets.
treffer 4y ago
Well, run a full bitcoin node. I am doing thwt. It's close to just running your own email / fileserver etc. IMHO. So while possible it's also annoying and not worth it for most people, and I get that.
ransom1538 4y ago
Fuck. Exchanges. I lost all my dogecoin in the early days to an exchange. I knew no better it was too early.
pc86 4y ago
The same thing has happened with git over time, no? Decentralized source control, forking whatever you want/have access to when you have a flash of inspiration, etc. Now everything is in github, gitlab, or bitbucket, and centralized there.
- anon84873628 4y ago
  Pretty good analogy. Discovery and trade (clones/PRs) are so much easier in a centralized system. At one point I asked (rather naively - not trying to sound wise here) whether our dependence on GitHub was an outage risk. Response from CTO was that git is distributed and everyone has a copy and whatnot. In retrospect, yeah, the code is not lost, but we had never actually built the infrastructure / tested the procedures to actually handle that fallback to a distributed world...
setgree 4y ago
Trading is addictive. Like all forms of gambling, it lights our reward centers up. On decentralized exchanges, you pay each time you trade (gas fees and such). That cuts right through the endorphin rush. Centralized exchanges keep those fees low by making everything centralized. It's akin to casinos keeping their guests comfortable and liquored up. As a person who works in crypto, I'd like to see us engage with this more forthrightly. When we cut out gambling, how many use cases are left? How many are viable today?
dotnet00 4y ago
"Not your keys, not your coin" is a popular adage, but it doesn't really seem like many people follow it. Thus the popularity of coins with high transaction fees. The original crypto culture which emphasized privacy (although speaking of a public list of all transactions ever performed on the network as privacy oriented is pretty hilarious), control and decentralization has for the most part been lost to crypto's eternal September.
lawn 4y ago
That's because nobody really cares about what crypto can do anymore, and only cares about making fast money. If you internalize this fact, then it explains why people just keep their coins on exchanges, why they buy centralized "cryptocurrencies" , why they leap at the chance of buying the latest Paris Hilton NFT and why they keep defending Tether as legitimate. Fundamentals are thrown out of the window unfortunately.
IndrekR 4y ago
> People just don't get distributed currency if they promptly undistribute it. Same as with source code version control. As soon as distributed VCS appears (git), people promptly centralize it with another abstraction layer (github, gitlab, bitbucket, etc).
hristov 4y ago
The crypto community is very much to blame for this. Initially, back when bitcoin was hovering about $1 per coin, everyone was talking about personal wallets, and educating people how the wallet was just a bunch of numbers you can write on a piece of paper and which you can keep hidden in the lining of your pants, etc. But then bitcoin started getting popular and emerging towards mainstream culture, the talk about wallets seized. All the new crypto firms started marketing accounts and "cloud wallets" and the personal pocket wallet was never mentioned. Crypto then continued to advance in mainstream culture and personal wallets were kept a secret. I doubt the average crypto user even knows about personal wallets. And if you disagree, please prove me wrong. There are many crypto commercials on mainstream media, show me one that has mentioned that you can keep a personal wallet. So the crypto industry is to blame for this. They basically hid the most important part of crypto from the public because they would make more money without it.
- b112 4y ago
  Greybeard here. This just sounds like AWS to me. The cloud! The wondrous cloud!
- remram 4y ago
  Is that the right takeaway? People didn't know cryptocurrencies could be kept on your computer? Or could it be that users just don't want to deal with the complexity enabled by cryptocurrencies, and the bank model is just the natural one that always appears when the public starts making use of money?
deleted 4y ago
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SevenNation 4y ago
The user growth is high enough that at any given time roughly half of the people involved have been at it for less than 18 months. So the space is dominated by the least-savvy and has been for some time. Many people will never be capable of self-custody because the lack the interest to do it. They see money to be made and ignore the warnings of those who try to explain what they have on an exchange is a promise of money, not money itself. When you say "nobody does this anymore," that's kind of true, but also not true. Those who have learned the hard way do, the newbies (which vastly outnumber the first group) don't. Self custody requires knowledge of some basic math, cryptography, and the ability to understand basic security principles. User growth explodes with exchange rates. Those diving in understand very little about what they're doing and should stay out. They don't listen to people saying such things and the result is, well, predictable.
netheril96 4y ago
I do it. Certainly some people else.

by brnt 4y ago

julianlam 4y ago

No, that's exactly it. People love the idea of decentralization and doing things on your own, except then they realize that it's actually kind of hard to be off-exchange and still be liquid (whatever the hell that means in crypto-land). So basically no real change except they're much more exposed to risk (fraud and market swings notwithstanding)

rchaud 4y ago

> Apparently nobody does this anymore, and gives their wallets to these exchanges (i.e. banks) and balks when the obvious happens in pyramid schemes. The name of the game is pump and dump, you can't play the game (speculation) if you're not on the field (the exchange). Crypto's marketing is 'financial freedom' as in get-rich-quick, not free as in libre.

qudat 4y ago
That's right. Not to mention the transaction fees are so high that moving from a wallet you own to an exchange can cost non-insignificant amount of money. Add on top of that the general volatility of crypto, people not wanting to deal with maintaining their own wallet, and you have a recipe for people keeping their funds on exchanges.
- bogomipz 4y ago
  >"Not to mention the transaction fees are so high that moving from a wallet you own to an exchange can cost non-insignificant amount of money." I realize that transaction fees are probably a moving target but is there a ballpark figure you or someone else could say? I'm guessing it's percentage-based?
  - xanthrax 4y ago
    It is not percentage based but based on the demand for the next block space. That demand is on the basis who will pay the most per byte for each transaction so your is based on the number of bytes in your transaction (usually directly proportional to the number of inputs and outputs) and how quickly you want it in the next block. Currently about 44 cents will guarantee you in the next block - note this is a moving target based on the competition for block space. mempool.space is a good visualisation.
  - michaelt 4y ago
    According to https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f... it's varied between $2 and $0.5 in the last 6 months. There have been times (mid-2021) where it was >$20 for a single payment. Needless to say, this is much more affordable for a million-dollar transaction than for buying a cup of coffee :)
  - qudat 4y ago
    I used to trade with eth every once in awhile. It wasn't uncommon for a tx fee to be on the order of $5-20.
  - ncallaway 4y ago
    > I realize that transaction fees are probably a moving target but is there a ballpark figure you or someone else could say? I'll give the answer for Bitcoin as of a couple of years ago, and others can chime in for things like Etherium and other cryptocurrencies. With bitcoin it's not a fixed fee, it's more like a priority bid. So, there's a pool of "pending" transactions that any miner can grab from. Each pending transaction has a bid for its transaction fee. Each miner will then grab whatever set of transaction it wants to bundle into a block, and try and compute the hash for that block. Once a miner finds a hash for that block, all the transactions in that block are added to the chain and the transaction is "complete" (in practice, people will often wait until one or two blocks are added _after_ the transaction is included in the block chain to be _sure_ it's done). So, to your question, ultimately the transaction fee is a bid for how quickly you want your transaction included. You can bid $0, and it's likely your transaction will _never_ be included. It doesn't really matter how _much_ you're transferring, but _how quickly_ you need it included in the chain. How much you'd practically pay for a transaction (in USD) has been super variable over the lifetime of Bitcoin. It fluctuates with how many miners there are, how many transactions are happening, and the exchange rate of BTC to USD (since the feeds are paid in BTC). See the chart at the bottom of this page: https://privacypros.io/tools/bitcoin-fee-estimator/ https://privacypros.io/tools/bitcoin-fee-estimator/ It looks like it's generally between $0.75-$1.00 right now. So if you're making a transaction of $1M the fee is trivial, but if you're buying a cup of coffee for $5 it's...pretty high.

spamizbad 4y ago

Most people hold Bitcoin these days in the hopes of making money. The distributed consensus nature of crypto is irrelevant.

Ajedi32 4y ago
This is the key to understanding a lot of things about the "cryptocurrency community". There are two groups there with wildly different interests. A large chunk (probably even a majority) of the people involved in the cryptocurrency space don't actually care about cryptocurrency as a technology at all, they're just there to make money. To these people, market price is everything, and the technology is irrelevant except to the extent that it affects the market price. Then in the other camp there's a group of people who don't care about the current trading price, they're just interested in the technology and the new capabilities it enables. I'm in that second camp (perhaps unsurprisingly, since this is Hacker News), so in my view this story isn't really all that interesting or surprising. From a legal/societal perspective, yeah this is terrible and probably someone should go to jail. But from a technical perspective, the fact that exchanges can scam people out of their money is hardly new information. As the saying goes: not your keys, not your crypto. Though obviously for those who are interested in cryptocurrency solely to make money on speculation, yeah this is a big story.

knorker 4y ago

You're not taking crazy pills. It's become abundantly clear that the vision of everybody being their own bank will never work. People don't want to be their own bank, just like they don't want to be their own bakery, or their own farmer. Sure, some people do bake their own bread, but they do it either because they have to, or because they enjoy it. So the people who control their own keys need to have a reason to do so. Because it takes more effort than not managing your own bank. What exactly are the reasons to run your own bank? What problems in your life are solved by it? I can think of a two: * You want to hold more cash than FDIC guarantees. * You think the government will seize money out of savings accounts, as happened in Cyprus. These have to be weighed against the facts that while not literally in your mattress, the money becomes pretty easy to steal, for anyone willing to point a gun at you. And being your own bank comes with obligations, too, so the government will come after you if they want to drain your bank. And the justice system can put you in a box if you don't comply. Basically: If you already have a bank, why would you not just use it? And if they refuse to do your thing (like order a hit), then buy tokens and pay a hitman in tokens. If there were FDIC for tokens at your real bank, redeemable in same number of tokens, then any general public that wanted to use cryptocurrency would likely just use that. Because outside of fringe LARPing nobody wants to run their own bank.

JumpCrisscross 4y ago
> You want to hold more cash than FDIC guarantees This is a solved problem up to millions of dollars [1]. Past that, you buy Treasuries. The real third case is you’re doing something illegal. [1] https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...
- mikeyouse 4y ago
  Yeah - there's a whole industry of this.. I worked with a large nonprofit that had something like $50M FDIC insured through CDARs. https://www.intrafinetworkdeposits.com/ https://www.intrafinetworkdeposits.com/ I suspect the government / Fed will have something to say about these in the future since it's a bit contra the purpose/intent of FDIC insurance but for the moment, you can abstract away all of the complications.

0xAFFFF 4y ago

The core truth in this day and age is that nobody (understand this a non-significant minority if you prefer) wants to host their own stuff. It's way more convenient to use centralized services that do the heavy lifting for you. If you don't have that convenience, you can't have mass adoption.

Watchwatcher 4y ago
Another way to say, you reap what you sow, right?

mattbrewsbytes 4y ago

I think once crypto gained traction beyond early adopters into more mainstream people it became an "app" and that "app" was the exchange and non tech, non crypto people don't put more effort into it then that. What is alarming and becoming more revealing is how much of this crypto was being back-doored from one crypto "product" (exchange, fund, coin, ICO, etc.) into another. In programmer terminology: it looks like there are (were) a lot of pointers to the same memory address.

tomjakubowski 4y ago

I think so many cryptocurrency users avoid maintaining their own wallet for the same reasons most people (these days) don't store all their wealth as cash or gold under the mattress: it's both inconvenient and easy to lose. Of course what folks are seeing now is that it's real easy for exchanges to lose their buttcoin deposits too.

dralley 4y ago

Distributed currency turns out to be too difficult for most people, and a currency that only 5% of the population can use isn't very useful.

kkielhofner 4y ago

As I've noted before on HN the entire concept of people being able to manage their own wallets flies against everything we know about people. People forget stuff, make mistakes, and lose things. The margin of error for a wallet is tiny. It's not rare for crypto forums, twitter, etc to prescribe completely ridiculous processes and systems for securing wallets, backing up seed phrases, etc. There's an entire cottage industry built around people etching their seed phrases on steel plates for people to (I'm not kidding) bury them like they're gold in the 1800s. Plus funds in a wallet require extra steps when you want to trade on an exchange (extra costs via gas, time, possible errors, etc). The use cases for crypto are so minimal for the general population one could argue it's only survived this long through making trades on exchanges - to what essentially amounts to gambling. You can't gamble with funds in a wallet which defeats the entire purpose of crypto for the vast majority of the "users" in the space.

nanna 4y ago
> As I've noted before on HN One of the joys of HN is that on the whole no one knows who anyone else really is nor keeps track of what they've argued previously.
- skinnymuch 4y ago
  Some of us put out real info in our profiles.
  - zen21 4y ago
    Some people copy and paste other people’s profile info into their profiles.
  - CliffStoll 4y ago
    some of us use our real names
    - skinnymuch 4y ago
      haha I never thought of that.

asoneth 4y ago

The use of intermediaries is due to the deficient user experience of cryptocurrencies and cryptocurrency community: 1) They downplay the expertise and knowledge required to manage your own tokens. 2) They advocate for the use of cryptocurrencies by normal (i.e. non-expert) users as this increases the value of their holdings. 3) They prefer to blame users who make mistakes, are hacked/scammed, or otherwise lose (real) money for their lack of technical expertise. Given this, it's not surprising that the enormous gap between naive engineering assumptions and human reality is filled by intermediaries despite how consistently they fail. As long as cryptocurrencies continue to exist beyond a tiny niche I don't see this changing.

nobody9999 4y ago
Agreed. The knowledge gap between "normies" and "crypto-aficionados" is pretty large. Which is, of course, why so many crypto "businesses" turn out to be scams of one sort or another -- the asymmetry of information makes most folks easy meat for scammers. To point up this asymmetry, go ahead and watch this[0]. The lack of knowledge WRT crypto-currencies (let alone smart contracts) among the hoi polloi is striking in comparison to those who are in the know. [0] https://www.pbs.org/wgbh/nova/video/crypto-decoded/ https://www.pbs.org/wgbh/nova/video/crypto-decoded/ (Recent NOVA episode).

ineedasername 4y ago

You get things, I think, but bitcoin’s transaction bottleneck meant it was never going to be able to handle anything approaching wide scale adoption for day to day transactions. Attempts to address that with other coins or centralized exchanges is at least one of the major factors that lead to this point.

phone8675309 4y ago

The people who were pushing the fact that you'd have sole control over your wallet were those who wanted to be immune from the government seizing their money: scammers, criminals, tax dodgers, and exchange runners (a combination of the first three). Those people put a bunch of money into bitcoin to inflate the price, but they need a bunch of rubes trading the currency to keep the value of the coin (relatively) stable so they can withdraw their holdings, but they don't care much if those rubes have full control, and that's where exchanges come in. Exchanges are there as a way for the first movers and the ultra-wealthy to extract wealth from uninformed, naive new investors into crypto.

cypress66 4y ago
> The people who were pushing the fact that you'd have sole control over your wallet were those who wanted to be immune from the government seizing their money: scammers, criminals, tax dodgers, and exchange runners How sad that you think the only people that cares about not giving governments control of everything are "scammers, criminals, tax dodgers, and exchange runners".

tootie 4y ago

I read an interesting thread on why this isn't a pyramid scheme. Basically there's no one at the top. It's decentralized so there's a loose federation of edges arranged in a many-sided polygon. So we need a new name. Instead of Ponzi, this is a Nakamoto Scheme.

oblio 4y ago
That's much better. It's not a monopoly, it's an oligopoly :-)
abruzzi 4y ago
DePy - decentralized pyramid. I say this in jest. There are more than one reason to be interested in crypto, but when bitcoin suddenly went from 1BTC=USD$1 to $1BTC=USD$100 (I don't actually know when the boom happened--I wasn't watching that closely) the individualist, libertarians were obscured by the quick-buck types looking to turn their thousand into a million. Thats when the scammers all came out.

tylersmith 4y ago

Many people are managing our own coins, you just don't hear from us because we don't get burned every year.

ryandrake 4y ago
Somehow, humanity has gotten good at taking systems that were designed to be decentralized and distributed (like crypto, E-mail, personal websites, and so on) and instead, surrender them to a few big companies who become single points of failure. We keep failing to learn from this every time.
- Apocryphon 4y ago
  It’s almost as if most people are too busy to figure out the complex processes at doing things themselves, and the very concept of civilization is built on exchanging good and services for money whereby tasks are delegated to parties that are better suited to focus on them.
- asoneth 4y ago
  I suspect the problem is due to the fact that designers of decentralized systems often underestimate the importance of the user experience. Managing your own mail server, website, social media instance, music streaming, cryptocurrency wallet, power grid, vegetable garden, etc requires more time and skill than just paying someone else to do it for you. The result is that most people end up using a handful of centralized offerings except for a small niche of enthusiasts who derive enjoyment from the work and/or can justify spending the additional time. Ultimately it's up to the designers of distributed systems to make them trivially easy to use if they want them to be popular and remain distributed. (Napster and maybe BitTorrent are the examples that come to mind.) Otherwise it remains a niche for enthusiasts and/or ends up with centralized intermediaries.

goodoldneon 4y ago

You still have people with their own wallet. But the vast majority of people don't want to deal with the complexity of decentralization so they prefer centralization

chasd00 4y ago
I think the vast vast majority of people just want to increase the balance of their checking account. The fastest way to do that with crypto is speculating on an exchange. I bet 95% of the people getting burned on these exchanges don't even know what a "wallet" is (in the context of crypto currencies).

fleddr 4y ago

The thing is that the people that are most active in crypto and typically have the largest stacks are traders. They grow their stack by shorting/longing, leverage, staking and DeFi, all of which require an exchange.

zeroclip 4y ago

A lot of crypto investors are day traders or naive hodlers who have no idea what blockchain and DeFi means. But DeFi protocols like Uniswap and Aave are holding up fine and are incapable of pausing user withdrawals.

alasdair_ 4y ago
There is still the question of how to convert your crypto to actual spendable dollars again. Sure, uniswap will let you get another token but you still need an exchange to get dollars. This gets particularly important when, say, the giant scam that is Tether finally crashes and burns,
- zeroclip 4y ago
  Yes, a regulated centralized exchange is valuable for on and off ramp. All they would need to do is process user transactions, take a small fee, and not gamble with user funds. Regulators could do audits and keep consumers protected. But regulators have failed to provide clear framework for exchanges in the US[1], so most CEXes are running off shore. [1] https://www.cnbc.com/2022/11/11/op-ed-crypto-markets-need-regulation-to-avoid-ftx-type-situations.html https://www.cnbc.com/2022/11/11/op-ed-crypto-markets-need-re...

probiab 4y ago

You do have control. You can start your own blockchain and keep the transactions flowing. Of course, transactions imply other people will use your chain. It's like you can create value not by gold, or tobacco, or even math, but by the very trust people have in your asset. And this brings us to a concept that some may be familiar with but is relatively new to the crypto community. A new kind of coin is here. This is a concept that probably never existed before crypto, called "fiat." "fiat" is the latest and greatest in crypto technology. True decentralization. Multiple countries. Multiple municipalities. Multiple systems, multiple institutions, multiple protocols and multiple contracts, the picture of decentralization that crypto could only dream of. And of course, if you make a mistake, you can revert your transaction, a form of technology crypto has not yet mastered. Oh, NFTs? Please. "fiat" utilizes advanced art international HS92 commodities exchange codes to kick start the burgeoning modern art scene of completely legitimate businesses.

kypro 4y ago

I think it depends on your goals. I mean, do you store all your cash under your bed in case your bank go bust? People keep crypto on the exchange because it makes transactions easier, and in some cases you might have other perks such as being able to lend it for interest or spend it with crypto credit cards. This idea that you can have a digital currency without some kind of bank or exchange is fundamentally flawed imo. Unless you believe the only valid usecase of crypto is as a digital alternative to physical gold then it probably makes more sense on an exchange. The main issue here is that the exchanges are not regulated. But I suppose given the lack of regulation I would have to agree with you that the only safe use case right now is as a "store of value" in a cold wallet.

amadeuspagel 4y ago

> Apparently nobody does this anymore The right way to do that is to use a hardware wallet. There are many companies making and selling those, so there's definitely a market for that.

runeb 4y ago

That is still the promise and unlock of cryptographic currencies. But that does not seem to be the use case for much of the people I've seen in the space the last years. I think the fact it is crypto currencies is incidental, it is all about earning money through appreciation of some popular asset.

dqpb 4y ago

I do this (for the most part). Whenever I buy currency on an exchange, I Immediately transfer it to a personal wallet. This is actually what drove me away from anything based on Ethereum, because the transfer speed and fee system for Ethereum is so horrendous, I found myself leaving that currency in the exchange managed wallets.

treffer 4y ago

Well, run a full bitcoin node. I am doing thwt. It's close to just running your own email / fileserver etc. IMHO. So while possible it's also annoying and not worth it for most people, and I get that.

ransom1538 4y ago

Fuck. Exchanges. I lost all my dogecoin in the early days to an exchange. I knew no better it was too early.

pc86 4y ago

The same thing has happened with git over time, no? Decentralized source control, forking whatever you want/have access to when you have a flash of inspiration, etc. Now everything is in github, gitlab, or bitbucket, and centralized there.

anon84873628 4y ago
Pretty good analogy. Discovery and trade (clones/PRs) are so much easier in a centralized system. At one point I asked (rather naively - not trying to sound wise here) whether our dependence on GitHub was an outage risk. Response from CTO was that git is distributed and everyone has a copy and whatnot. In retrospect, yeah, the code is not lost, but we had never actually built the infrastructure / tested the procedures to actually handle that fallback to a distributed world...

setgree 4y ago

Trading is addictive. Like all forms of gambling, it lights our reward centers up. On decentralized exchanges, you pay each time you trade (gas fees and such). That cuts right through the endorphin rush. Centralized exchanges keep those fees low by making everything centralized. It's akin to casinos keeping their guests comfortable and liquored up. As a person who works in crypto, I'd like to see us engage with this more forthrightly. When we cut out gambling, how many use cases are left? How many are viable today?

dotnet00 4y ago

"Not your keys, not your coin" is a popular adage, but it doesn't really seem like many people follow it. Thus the popularity of coins with high transaction fees. The original crypto culture which emphasized privacy (although speaking of a public list of all transactions ever performed on the network as privacy oriented is pretty hilarious), control and decentralization has for the most part been lost to crypto's eternal September.

lawn 4y ago

That's because nobody really cares about what crypto can do anymore, and only cares about making fast money. If you internalize this fact, then it explains why people just keep their coins on exchanges, why they buy centralized "cryptocurrencies" , why they leap at the chance of buying the latest Paris Hilton NFT and why they keep defending Tether as legitimate. Fundamentals are thrown out of the window unfortunately.

IndrekR 4y ago

> People just don't get distributed currency if they promptly undistribute it. Same as with source code version control. As soon as distributed VCS appears (git), people promptly centralize it with another abstraction layer (github, gitlab, bitbucket, etc).

hristov 4y ago

The crypto community is very much to blame for this. Initially, back when bitcoin was hovering about $1 per coin, everyone was talking about personal wallets, and educating people how the wallet was just a bunch of numbers you can write on a piece of paper and which you can keep hidden in the lining of your pants, etc. But then bitcoin started getting popular and emerging towards mainstream culture, the talk about wallets seized. All the new crypto firms started marketing accounts and "cloud wallets" and the personal pocket wallet was never mentioned. Crypto then continued to advance in mainstream culture and personal wallets were kept a secret. I doubt the average crypto user even knows about personal wallets. And if you disagree, please prove me wrong. There are many crypto commercials on mainstream media, show me one that has mentioned that you can keep a personal wallet. So the crypto industry is to blame for this. They basically hid the most important part of crypto from the public because they would make more money without it.

b112 4y ago
Greybeard here. This just sounds like AWS to me. The cloud! The wondrous cloud!
remram 4y ago
Is that the right takeaway? People didn't know cryptocurrencies could be kept on your computer? Or could it be that users just don't want to deal with the complexity enabled by cryptocurrencies, and the bank model is just the natural one that always appears when the public starts making use of money?

deleted 4y ago

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SevenNation 4y ago

The user growth is high enough that at any given time roughly half of the people involved have been at it for less than 18 months. So the space is dominated by the least-savvy and has been for some time. Many people will never be capable of self-custody because the lack the interest to do it. They see money to be made and ignore the warnings of those who try to explain what they have on an exchange is a promise of money, not money itself. When you say "nobody does this anymore," that's kind of true, but also not true. Those who have learned the hard way do, the newbies (which vastly outnumber the first group) don't. Self custody requires knowledge of some basic math, cryptography, and the ability to understand basic security principles. User growth explodes with exchange rates. Those diving in understand very little about what they're doing and should stay out. They don't listen to people saying such things and the result is, well, predictable.

netheril96 4y ago

I do it. Certainly some people else.