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> In early 2021, a Chinese cryptocurrency exchange froze Alameda's trading account, and the firm lost access to approximately $1 billion in assets. The anti-th

> In early 2021, a Chinese cryptocurrency exchange froze Alameda's trading account, and the firm lost access to approximately $1 billion in assets. The anti-thesis of cryptocurrency.

SilasX 3y ago
Can we stop with this kind of low-effort snipe on cryptocurrency exchange topics? Yes, if you run a crypto exchange, you have to interface between crypto and the conventional financial markets. So yes, you at times have to hold money with others in trust and are vulnerable to those counterparty risks. That's not some kind of brilliant "gotcha". --- Edit: Okay. Since HN now seems to love low-effort "gotchas", maybe I should take some time to show what a meaningful, curious discussion, that actually attempts to engage, would look like. So: You've heard that crypto is trustless. With that curious hacker mentality, you think you've found a contradiction (that wasn't addressed the 30 times this came up before): hey, why was FTX trusting someone with their crypto assets? Doesn't crypto obviate that? Yes and no. Like others might have told you in those previous 30 discussions, at the point where you have to move something from the trustless crypto realm to the conventional financial system, the conventional part doesn't have the same trustless guarantees, and you are vulnerable to assets being frozen. Since the role of a crypto exchange is often to interface between the crypto realm and the conventional, then, in those cases, the crypto can be seized the same way. For example, if your exchange exists to interface between crypto and the Chinese financial system, then anything held on the latter side of it can be seized under the Chinese financial system's rules. Similarly, if you trust someone with physical cash, you have less protections against them running away with it than if you e.g. paid them via PayPal. "Okay but then still, doesn't that mean that some subset could still live in the trustless realm of cryptocurrency? Why use an exchange for that part?" Well, one downside of the trustless crypto realm is that transactions are more expensive -- you incur costs to maintain the trustless guarantee. Depending on your specific use case, you may consider an institution trustworthiness enough, and the alternative expensive enough, to do the trustful way. So, yes, it is a valid criticism to say, "hey, despite being trustless, it sure sucks that crypto can't also bring down costs to handle all this stuff on cost comparable to conventional." Of course, there are limits to that to: as long as you have to convert back to the conventional financial system -- which that FTX exchange existed to facilitate -- you still have to trust counterparties in the financial system at some point. There, mystery solved! Now I have a comment to reword for the next 30 times someone makes this brilliant argument!
- quest88 3y ago
  [flagged]
- maxbond 3y ago
  If a system is billed as having certain properties, but in practice it repeatedly fails to have those properties, there's a legitimate criticism to be made. I can understand why it might be frustrating to hear the same criticisms repeatedly but it doesn't make them illegitimate.
  - SilasX 3y ago
    But this thing happened in the conventional financial system, which is not billed as having those properties, so no, it's not a legitimate criticism.
    - maxbond 3y ago
      The criticism is that cryptoassets do not, in practice, have the censorship resistance they are billed as having. Blaming "tradfi" is passing the buck - cryptoasset promoters signed a check they couldn't cash, and no one made them do that. There are myriad rebuttals you could make, but dismissing it entirely isn't one of them, imho. This is the libertarian equivalent of claiming that Soviet Russia wasn't real communism. Sure, in both cases, things weren't realized in the way they had been envisioned. If proponents want to be successful in the future, they need to reckon with that and not shirk it.
      - SilasX 3y ago
        >The criticism is that cryptoassets do not, in practice, have the censorship resistance they are billed as having. Correct: when you have assets in the traditional financial system, you don't have censorship resistance, which everyone knew. This is not an argument that the cryptocurrency itself lacks censorship resistance. >There are myriad rebuttals you could make, but dismissing it entirely isn't one of them, imho. Which I didn't do. I correctly pointed out that if you interface between systems A and B, you inherit the problems of both A and B. Which everyone already knew, and didn't require the enlightened insight of you and almost_unusual to point out specific instances of. It's just that most people also don't equate this with the argument that "A always has B's problems". >This is the libertarian equivalent of claiming that Soviet Russia wasn't real communism. Sure, in both cases, things weren't realized in the way they had been envisioned. If proponents want to be successful in the future, they need to reckon with that and not shirk it. It would be more like saying, "if you're in a libertarian paradise, and then travel to Soviet Russia, your economic freedoms will be infringed. Checkmate libertarians!" No one was arguing that economic freedoms wouldn't be infringed outside of a libertarian country, just like no one claims that if you move assets off a crypto blockchain, they will still have all the properties of blockchain transactions. Whatever the problems of libertarianism/blockchain, this would be a bad argument. "If you put the wrong numbers in, do the right answers still come out?" No, they don't. And if you don't use the blockchain, you don't get the benefits of the blockchain (or the costs), and vice versa.

> In early 2021, a Chinese cryptocurrency exchange froze Alameda's trading account, and the firm lost access to approximately $1 billion in assets. The anti-thesis of cryptocurrency.

SilasX 3y ago

Can we stop with this kind of low-effort snipe on cryptocurrency exchange topics? Yes, if you run a crypto exchange, you have to interface between crypto and the conventional financial markets. So yes, you at times have to hold money with others in trust and are vulnerable to those counterparty risks. That's not some kind of brilliant "gotcha". --- Edit: Okay. Since HN now seems to love low-effort "gotchas", maybe I should take some time to show what a meaningful, curious discussion, that actually attempts to engage, would look like. So: You've heard that crypto is trustless. With that curious hacker mentality, you think you've found a contradiction (that wasn't addressed the 30 times this came up before): hey, why was FTX trusting someone with their crypto assets? Doesn't crypto obviate that? Yes and no. Like others might have told you in those previous 30 discussions, at the point where you have to move something from the trustless crypto realm to the conventional financial system, the conventional part doesn't have the same trustless guarantees, and you are vulnerable to assets being frozen. Since the role of a crypto exchange is often to interface between the crypto realm and the conventional, then, in those cases, the crypto can be seized the same way. For example, if your exchange exists to interface between crypto and the Chinese financial system, then anything held on the latter side of it can be seized under the Chinese financial system's rules. Similarly, if you trust someone with physical cash, you have less protections against them running away with it than if you e.g. paid them via PayPal. "Okay but then still, doesn't that mean that some subset could still live in the trustless realm of cryptocurrency? Why use an exchange for that part?" Well, one downside of the trustless crypto realm is that transactions are more expensive -- you incur costs to maintain the trustless guarantee. Depending on your specific use case, you may consider an institution trustworthiness enough, and the alternative expensive enough, to do the trustful way. So, yes, it is a valid criticism to say, "hey, despite being trustless, it sure sucks that crypto can't also bring down costs to handle all this stuff on cost comparable to conventional." Of course, there are limits to that to: as long as you have to convert back to the conventional financial system -- which that FTX exchange existed to facilitate -- you still have to trust counterparties in the financial system at some point. There, mystery solved! Now I have a comment to reword for the next 30 times someone makes this brilliant argument!

quest88 3y ago
[flagged]
maxbond 3y ago
If a system is billed as having certain properties, but in practice it repeatedly fails to have those properties, there's a legitimate criticism to be made. I can understand why it might be frustrating to hear the same criticisms repeatedly but it doesn't make them illegitimate.
- SilasX 3y ago
  But this thing happened in the conventional financial system, which is not billed as having those properties, so no, it's not a legitimate criticism.
  - maxbond 3y ago
    The criticism is that cryptoassets do not, in practice, have the censorship resistance they are billed as having. Blaming "tradfi" is passing the buck - cryptoasset promoters signed a check they couldn't cash, and no one made them do that. There are myriad rebuttals you could make, but dismissing it entirely isn't one of them, imho. This is the libertarian equivalent of claiming that Soviet Russia wasn't real communism. Sure, in both cases, things weren't realized in the way they had been envisioned. If proponents want to be successful in the future, they need to reckon with that and not shirk it.
    - SilasX 3y ago
      >The criticism is that cryptoassets do not, in practice, have the censorship resistance they are billed as having. Correct: when you have assets in the traditional financial system, you don't have censorship resistance, which everyone knew. This is not an argument that the cryptocurrency itself lacks censorship resistance. >There are myriad rebuttals you could make, but dismissing it entirely isn't one of them, imho. Which I didn't do. I correctly pointed out that if you interface between systems A and B, you inherit the problems of both A and B. Which everyone already knew, and didn't require the enlightened insight of you and almost_unusual to point out specific instances of. It's just that most people also don't equate this with the argument that "A always has B's problems". >This is the libertarian equivalent of claiming that Soviet Russia wasn't real communism. Sure, in both cases, things weren't realized in the way they had been envisioned. If proponents want to be successful in the future, they need to reckon with that and not shirk it. It would be more like saying, "if you're in a libertarian paradise, and then travel to Soviet Russia, your economic freedoms will be infringed. Checkmate libertarians!" No one was arguing that economic freedoms wouldn't be infringed outside of a libertarian country, just like no one claims that if you move assets off a crypto blockchain, they will still have all the properties of blockchain transactions. Whatever the problems of libertarianism/blockchain, this would be a bad argument. "If you put the wrong numbers in, do the right answers still come out?" No, they don't. And if you don't use the blockchain, you don't get the benefits of the blockchain (or the costs), and vice versa.