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What's your question about crypto?

by dmak 4y ago

JKCalhoun 4y ago
Questions arise all the time when reading about crypto. I sadly don't have a list. Just reading the thread here though reminded me of one: is crypto traceable by the feds or not? I've seen people very confidently declare both.
- dmak 4y ago
  You can follow transactions on the blockchain, but the question is if you can tie that wallet to an identity. If the last wallet belongs to a CEX then it's likely they know the identity of the owner due to KYC regulations. Tornado Cash previously broke that trail using asset pools, but that has been sanctioned now.
- deleted 4y ago
  [deleted]
- idunno246 4y ago
  the ledger is public, so every transaction is traceable. maybe you create a wallet/entity thats not clearly linked to a person. you could probably claim its not traceable with a wallet address alone, you can see its transactions but have no idea who it is. at some point in the future or past you interact with the real world, like say sell crypto and withdraw USD, or start by buying crypto with USD. at that point they link that entity with a person(exchanges generally have to follow Know Your Customer rules), and can trace the transactions to the person through the public ledger.
- colechristensen 4y ago
  In general the ledger of all transactions is public. But it’s like all of the transactions are tied to a random id. So to unmask a person you have to find at least one transaction that identifies the person tied to the id. So you can remain anonymous if you try really hard, but make one mistake and your whole history can be unraveled and known. In general it is considerably easier to unmask people using crypto than other methods because perfect security is hard (criminals are dumb).
- c54 4y ago
  It depends on the specific protocol (aka blockchain or token) you're using. For instance, bitcoin is very simply publicly visible, each transaction is broadcast in the clear and you can trace inputs and outputs online [0] Other protocols, such as zcash, specifically obfuscate the inputs and outputs using cryptography, in ways that I'm not specifically sure how to explain, but are supposed to work. In some ways to me this is unsurprising in a way different from the ponzi nature of crypto. I can't explain Ed25519 either, and I'd also get bogged down reading a paper explaining it. I can get my head around the basics of btc and pre-proof-of-stake ethereum though, this[1] 3Blue1Brown video went a long way. Definitely not going to disagree that lots of tokens are ponzis, and lots of the tech and promises are imaginary vaporware. But there are some real pieces of tech in the mix too. [0] https://blockstream.info/block/00000000000000000003590ca79f77e36a4e104444ff356425b2798502ffd896 https://blockstream.info/block/00000000000000000003590ca79f7... [1] https://www.youtube.com/watch?v=bBC-nXj3Ng4&vl=en https://www.youtube.com/watch?v=bBC-nXj3Ng4&vl=en
stackbutterflow 4y ago
At a high level, could a cryptocurrency be used as a normal currency? What would be the benefit of using a cryptocurrency? Is the goal to be used at a large scale globally or would it at best remain niche? And behind "normal currency" I hide a lot of things that I don't know about. Does it has to be stable? Does it have to follow a real currency like the USD?
- cammikebrown 4y ago
  You can buy drugs on the dark net with them!
- Nursie 4y ago
  > could a cryptocurrency be used as a normal currency? They mostly aren't suited to this. A desirable property in a normal currency is relative stability (generally with small, managed levels of inflation to encourage useful investment). But in order to bootstrap a cryptocurrency you need to get people interested in using it to establish a value, so you set up the currency in a way that disproportionately rewards early adopters and encourages speculation, to pull people in. This in turn makes it a lot less stable and you see where this is going > What would be the benefit of using a cryptocurrency? For those who are true-believers, the idea is that you have currency which is free from government manipulation, free from authority, is unstoppable, uncensorable, irreversible, may be anonymous etc etc. For those of us who are not, most of those are actually negatives. Plus an honest evaluation of the largest cryptocurrencies often shows they don't fulfil these pipedreams anyway. Bitcoin, for instance, can be censored if wallet addresses are known and the government manages to get 'miners' onboard with a blacklist. Exchanges can refuse to accept deposited funds unless they come from known, KYC/AML compliant organisations. And given that mining BTC is a huge, expensive, energy and equipment intensive operation, there are not actually all that many firms, so collusion is a definite possibility, and with about half the hash power they could collude to block transactions. > Is the goal to be used at a large scale globally or would it at best remain niche? There are as many aims as there are users. Some want complete freedom from government monetary interference, implying large scale use. Some want to revolutionise the finance sector and disenfranchise the established banks. Some are basically addicted to gambling. Some want to get rich, and see it as an easy way, or the only way. Some just want to facilitate 'dark' transactions (contraband of various forms). > Does it has to be stable? No, but there are so-called stablecoins which attempt to peg their value to normal currencies, specifically the US dollar. Some attempt to do this algorithmically - see Terra/Luna/UST and the chaos from that collapse earlier in the year. Most algortihmic stable coins are vulnerable to some sort of bank-run scenario. Others attempt to do it by having their stablecoins backed 1:1 with the normal currency they are pegged to, the largest of these is "Tether" also known as USDT. They used to claim there was a dollar in a bank-account for every token issued, but they refused audit for years and eventually dropped the claim. They have various redemption barriers ($100k minimum payout, for example) to stop any sort of run from happening, and there are strong feelings in crypto communities and sceptic communities that they are playing fast and loose, and have perhaps backed a lot of their tokens retrospectively (create token, use it to buy an asset, now that token is backed) or purely manipulatively (giving out billions to friendly exchanges to use to prop up BTC prices without getting any more backing than an IOU). > Does it have to follow a real currency like the USD? That seems to be the gold standard here! Though stablecoins against other currencies probably exist, and I believe I heard about gold and silver backed stablecoins at some point. The problem with all of the backed ones is "Hey, I have this massive bank account, just sitting there backing my coin, surely nobody would notice if <shenanigans>"

What's your question about crypto?

by dmak 4y ago

What's your question about crypto?

Questions arise all the time when reading about crypto. I sadly don't have a list. Just reading the thread here though reminded me of one: is crypto traceable by the feds or not? I've seen people very confidently declare both.

dmak 4y ago
You can follow transactions on the blockchain, but the question is if you can tie that wallet to an identity. If the last wallet belongs to a CEX then it's likely they know the identity of the owner due to KYC regulations. Tornado Cash previously broke that trail using asset pools, but that has been sanctioned now.
deleted 4y ago
[deleted]
idunno246 4y ago
the ledger is public, so every transaction is traceable. maybe you create a wallet/entity thats not clearly linked to a person. you could probably claim its not traceable with a wallet address alone, you can see its transactions but have no idea who it is. at some point in the future or past you interact with the real world, like say sell crypto and withdraw USD, or start by buying crypto with USD. at that point they link that entity with a person(exchanges generally have to follow Know Your Customer rules), and can trace the transactions to the person through the public ledger.
colechristensen 4y ago
In general the ledger of all transactions is public. But it’s like all of the transactions are tied to a random id. So to unmask a person you have to find at least one transaction that identifies the person tied to the id. So you can remain anonymous if you try really hard, but make one mistake and your whole history can be unraveled and known. In general it is considerably easier to unmask people using crypto than other methods because perfect security is hard (criminals are dumb).
c54 4y ago
It depends on the specific protocol (aka blockchain or token) you're using. For instance, bitcoin is very simply publicly visible, each transaction is broadcast in the clear and you can trace inputs and outputs online [0] Other protocols, such as zcash, specifically obfuscate the inputs and outputs using cryptography, in ways that I'm not specifically sure how to explain, but are supposed to work. In some ways to me this is unsurprising in a way different from the ponzi nature of crypto. I can't explain Ed25519 either, and I'd also get bogged down reading a paper explaining it. I can get my head around the basics of btc and pre-proof-of-stake ethereum though, this[1] 3Blue1Brown video went a long way. Definitely not going to disagree that lots of tokens are ponzis, and lots of the tech and promises are imaginary vaporware. But there are some real pieces of tech in the mix too. [0] https://blockstream.info/block/00000000000000000003590ca79f77e36a4e104444ff356425b2798502ffd896 https://blockstream.info/block/00000000000000000003590ca79f7... [1] https://www.youtube.com/watch?v=bBC-nXj3Ng4&vl=en https://www.youtube.com/watch?v=bBC-nXj3Ng4&vl=en

stackbutterflow 4y ago

At a high level, could a cryptocurrency be used as a normal currency? What would be the benefit of using a cryptocurrency? Is the goal to be used at a large scale globally or would it at best remain niche? And behind "normal currency" I hide a lot of things that I don't know about. Does it has to be stable? Does it have to follow a real currency like the USD?

cammikebrown 4y ago
You can buy drugs on the dark net with them!
Nursie 4y ago
> could a cryptocurrency be used as a normal currency? They mostly aren't suited to this. A desirable property in a normal currency is relative stability (generally with small, managed levels of inflation to encourage useful investment). But in order to bootstrap a cryptocurrency you need to get people interested in using it to establish a value, so you set up the currency in a way that disproportionately rewards early adopters and encourages speculation, to pull people in. This in turn makes it a lot less stable and you see where this is going > What would be the benefit of using a cryptocurrency? For those who are true-believers, the idea is that you have currency which is free from government manipulation, free from authority, is unstoppable, uncensorable, irreversible, may be anonymous etc etc. For those of us who are not, most of those are actually negatives. Plus an honest evaluation of the largest cryptocurrencies often shows they don't fulfil these pipedreams anyway. Bitcoin, for instance, can be censored if wallet addresses are known and the government manages to get 'miners' onboard with a blacklist. Exchanges can refuse to accept deposited funds unless they come from known, KYC/AML compliant organisations. And given that mining BTC is a huge, expensive, energy and equipment intensive operation, there are not actually all that many firms, so collusion is a definite possibility, and with about half the hash power they could collude to block transactions. > Is the goal to be used at a large scale globally or would it at best remain niche? There are as many aims as there are users. Some want complete freedom from government monetary interference, implying large scale use. Some want to revolutionise the finance sector and disenfranchise the established banks. Some are basically addicted to gambling. Some want to get rich, and see it as an easy way, or the only way. Some just want to facilitate 'dark' transactions (contraband of various forms). > Does it has to be stable? No, but there are so-called stablecoins which attempt to peg their value to normal currencies, specifically the US dollar. Some attempt to do this algorithmically - see Terra/Luna/UST and the chaos from that collapse earlier in the year. Most algortihmic stable coins are vulnerable to some sort of bank-run scenario. Others attempt to do it by having their stablecoins backed 1:1 with the normal currency they are pegged to, the largest of these is "Tether" also known as USDT. They used to claim there was a dollar in a bank-account for every token issued, but they refused audit for years and eventually dropped the claim. They have various redemption barriers ($100k minimum payout, for example) to stop any sort of run from happening, and there are strong feelings in crypto communities and sceptic communities that they are playing fast and loose, and have perhaps backed a lot of their tokens retrospectively (create token, use it to buy an asset, now that token is backed) or purely manipulatively (giving out billions to friendly exchanges to use to prop up BTC prices without getting any more backing than an IOU). > Does it have to follow a real currency like the USD? That seems to be the gold standard here! Though stablecoins against other currencies probably exist, and I believe I heard about gold and silver backed stablecoins at some point. The problem with all of the backed ones is "Hey, I have this massive bank account, just sitting there backing my coin, surely nobody would notice if <shenanigans>"