4 ms·

This is starting to prove -- the hard way -- why regulations, certifications, and all that other stuff that feels like meaningless overhead the majority of the

by biff 14y ago

This is starting to prove -- the hard way -- why regulations, certifications, and all that other stuff that feels like meaningless overhead the majority of the time has become a grudgingly accepted part of our lives. It comes back to the most difficult problem: you inevitably need to trust someone, so how do you minimize your risk in that trust? I always thought the Bitcoin trust issues would revolve around the inability to trust that a service would be delivered once the provider is paid -- something that could theoretically be worked out with their reputation over the long run in a free market. But it's unsettling to see that breaches like this don't evidently leave the impression with the Bitcoin community that a believer in the free market might hope they would, that providers in this market might not be driven to produce quality and reliability because somehow there isn't the demand for it.

sneak 14y ago
As the big banks in the USA have proven, government regulation is definitively not the answer to the question "How can you know whom to trust?" Seriously. Knock that shit off. It's a red herring. You can't abstract away the personal process of choosing trust anchors and metrics, no matter how hard you try. Changing your trust anchor to "the government" just means you end up getting fucked on a larger scale, over a larger timeline.
- _delirium 14y ago
  I think it's considerably more complex than that, and not at all a red herring. I agree it's a coordination/network problem either way, but you would need actual evidence to argue that some methods of coordination are better than others. I've read a reasonable amount about currency history, and the U.S. government's stewardship of currency in particular is not bad imo. Its stewardship of the banking system leaves more to be desired. I'm not sure its stewardship of the banking system is worse than what we had in the "free banking" era, though. You don't really have to be against markets to have an ordoliberal-style view (vaguely following Hayek) that markets work best within certain frameworks, as opposed to having a view that anarcho-capitalism will always produce the best solutions (more following Rothbard).
- raganwald 14y ago
  As the big banks in the USA have proven, government regulation is definitively not the answer to the question "How can you know whom to trust?” A common sentiment: “Big Government doesn’t work.” No, it doesn’t work. But in many cases, it’s less broken then no government a/k/a The Free Market. I’m reminded of Winston Churchill’s quip: "It has been said that democracy is the worst form of government except all the others that have been tried.” It could be that trusting democratic governments to manage a monetary system is fundamentally unsound. I’m listening: What alternative do you propose, and how is it going to scale beyond protecting the few wealthy info-elite that can protect themselves?
  - stinkytaco 14y ago
    >how is it going to scale beyond protecting the few wealthy info-elite that can protect themselves? This is why I have trouble with Bit Coin. I actually like the idea of Bit Coin, a predictable monetary policy that has many of the advantages of a traditional inflationary economy, but without the ability of a political entity to make short term fixes that screw us over in the long term. But the problem is that we're transferring elite status to a different group of people. In the end, your ability to mine coins, process transactions, protect yourself and transact business using a non-trivial system is an advantage and screw everyone who doesn't get it. If you don't have advanced hardware and cheap electricity, you're disadvantaged. If you don't know how to use a mouse, you're disadvantaged. I wish I was smart enough to come up with a better solution.
  - guscost 14y ago
    Without any rules, there is no such thing as personal property and therefore a free market cannot exist. You're describing anarchy, where people take what they want by force.
    - sneak 14y ago
      > You're describing anarchy, where people take what they want by force. Like taxes taken by the government with the consent of the majority? Anarchy is solving for the general case.
- JackC 14y ago
  Saying that government regulation for financial markets is a red herring is like saying that SSL for ecommerce is a red herring. Sure, it's imperfect. It's not a complete solution. It gets circumvented sometimes. It creates a false sense of security sometimes. The people who run it do embarrassingly dumb things sometimes. But there's still a big difference between marketplaces with that protection and marketplaces without it.
- Mvandenbergh 14y ago
  Is it not? How much money have you lost in deposit accounts with US banks?
sneak 14y ago
> that providers in this market might not be driven to produce quality and reliability because somehow there isn't the demand for it Also, the market is young and small and very inefficient as yet. The tools for allowing market participants to reasonably evaluate trustworthiness of service providers don't really exist yet. You can't really blame that on "lack of demand for quality and reliability". Give it five years and try your analysis again.
- rmc 14y ago
  The market might be young, but IT security is not. Unix has had salts on passwords for decades.
kiba 14y ago
But it's unsettling to see that breaches like this don't evidently leave the impression with the Bitcoin community that a believer in the free market might hope they would, that providers in this market might not be driven to produce quality and reliability because somehow there isn't the demand for it. This time, It's simply bitcoinica users are caught waiting for a refund after the second breach. They ARE NOT using bitcoinica, at all. The site have been offline for months.
rwallace 14y ago
Banking, as regards regulation, is a special case. If a taxi company or a pizza company goes belly up, people shake their heads sadly and move to a competitor. The free market is the best arbitrator. If a chain of banks goes belly up and people's life savings are gone, you get rioting in the streets. That's the kind of situation that let Hitler into power. For the sake of preserving civilization, governments act as the de facto underwriters of bank deposits. This free insurance is an effective subsidy, and people don't give you free money without demanding control to go with it, so it's inevitable that governments end up having a say in how the banking business is carried out. People put their fucking life savings into Bitcoinica. If that starts happening on a large scale - if Bitcoin becomes a major currency, and people have the opportunity to put their life savings into bitcoin banks - then bitcoin banks will start being regulated, just as fiat currency banks are. As a libertarian, I'm not entirely happy about this, but we have to deal with the world as it is, not as it should be.
- b-man 14y ago
  I disagree strongly. The reason that bank runs and failures are so destructive is because of the state build cartel, driven by central banking. That was built in order to prevent competition and to let fractional reserve(which is in essence fraud) to run wild. The only reliable way to ensure stability in banking is to separate it from the state and let the free market do what it does in every industry known to man, weed out stupidity and fraud.
  - makomk 14y ago
    Except, of course, that there's no way to tell as an ordinary customer whether your bank is genuinely secure or just following cargo-cult security until they get hacked and lose all their money. There's also no way to make sure that your bank isn't using fractional reserve banking until there's a bank run and it fails. And that's assuming people are rational and wise. They're not. For example since the Bitcoinia failure, the free market has lead to a whole bunch of Bitcoin users investing in something that has all the hallmarks of a ponzi scheme and accusing anyone who points this out of trolling and slandering the guy running it.
jerf 14y ago
"But it's unsettling to see that breaches like this don't evidently leave the impression with the Bitcoin community that a believer in the free market might hope they would, that providers in this market might not be driven to produce quality and reliability because somehow there isn't the demand for it." It is not as if the regulated world is all sweetness and light with no problems. The LIBOR scandal involved lots of violations of law, ethics, and regulation, for instance, and as the rot is found to go deeper that only further proves regulation can't cure all ills. Compare only the benefits of any thing with only the negatives of another and you get a predetermined result. BitCoin is only about a billionith as old as the regulated money system. Growing pains should be somewhat expected. (And I say this as someone who does not generally believe in it.)

by biff 14y ago

sneak 14y ago

As the big banks in the USA have proven, government regulation is definitively not the answer to the question "How can you know whom to trust?" Seriously. Knock that shit off. It's a red herring. You can't abstract away the personal process of choosing trust anchors and metrics, no matter how hard you try. Changing your trust anchor to "the government" just means you end up getting fucked on a larger scale, over a larger timeline.

_delirium 14y ago
I think it's considerably more complex than that, and not at all a red herring. I agree it's a coordination/network problem either way, but you would need actual evidence to argue that some methods of coordination are better than others. I've read a reasonable amount about currency history, and the U.S. government's stewardship of currency in particular is not bad imo. Its stewardship of the banking system leaves more to be desired. I'm not sure its stewardship of the banking system is worse than what we had in the "free banking" era, though. You don't really have to be against markets to have an ordoliberal-style view (vaguely following Hayek) that markets work best within certain frameworks, as opposed to having a view that anarcho-capitalism will always produce the best solutions (more following Rothbard).
raganwald 14y ago
As the big banks in the USA have proven, government regulation is definitively not the answer to the question "How can you know whom to trust?” A common sentiment: “Big Government doesn’t work.” No, it doesn’t work. But in many cases, it’s less broken then no government a/k/a The Free Market. I’m reminded of Winston Churchill’s quip: "It has been said that democracy is the worst form of government except all the others that have been tried.” It could be that trusting democratic governments to manage a monetary system is fundamentally unsound. I’m listening: What alternative do you propose, and how is it going to scale beyond protecting the few wealthy info-elite that can protect themselves?
- stinkytaco 14y ago
  >how is it going to scale beyond protecting the few wealthy info-elite that can protect themselves? This is why I have trouble with Bit Coin. I actually like the idea of Bit Coin, a predictable monetary policy that has many of the advantages of a traditional inflationary economy, but without the ability of a political entity to make short term fixes that screw us over in the long term. But the problem is that we're transferring elite status to a different group of people. In the end, your ability to mine coins, process transactions, protect yourself and transact business using a non-trivial system is an advantage and screw everyone who doesn't get it. If you don't have advanced hardware and cheap electricity, you're disadvantaged. If you don't know how to use a mouse, you're disadvantaged. I wish I was smart enough to come up with a better solution.
- guscost 14y ago
  Without any rules, there is no such thing as personal property and therefore a free market cannot exist. You're describing anarchy, where people take what they want by force.
  - sneak 14y ago
    > You're describing anarchy, where people take what they want by force. Like taxes taken by the government with the consent of the majority? Anarchy is solving for the general case.
JackC 14y ago
Saying that government regulation for financial markets is a red herring is like saying that SSL for ecommerce is a red herring. Sure, it's imperfect. It's not a complete solution. It gets circumvented sometimes. It creates a false sense of security sometimes. The people who run it do embarrassingly dumb things sometimes. But there's still a big difference between marketplaces with that protection and marketplaces without it.
Mvandenbergh 14y ago
Is it not? How much money have you lost in deposit accounts with US banks?

sneak 14y ago

> that providers in this market might not be driven to produce quality and reliability because somehow there isn't the demand for it Also, the market is young and small and very inefficient as yet. The tools for allowing market participants to reasonably evaluate trustworthiness of service providers don't really exist yet. You can't really blame that on "lack of demand for quality and reliability". Give it five years and try your analysis again.

rmc 14y ago
The market might be young, but IT security is not. Unix has had salts on passwords for decades.

kiba 14y ago

But it's unsettling to see that breaches like this don't evidently leave the impression with the Bitcoin community that a believer in the free market might hope they would, that providers in this market might not be driven to produce quality and reliability because somehow there isn't the demand for it. This time, It's simply bitcoinica users are caught waiting for a refund after the second breach. They ARE NOT using bitcoinica, at all. The site have been offline for months.

rwallace 14y ago

Banking, as regards regulation, is a special case. If a taxi company or a pizza company goes belly up, people shake their heads sadly and move to a competitor. The free market is the best arbitrator. If a chain of banks goes belly up and people's life savings are gone, you get rioting in the streets. That's the kind of situation that let Hitler into power. For the sake of preserving civilization, governments act as the de facto underwriters of bank deposits. This free insurance is an effective subsidy, and people don't give you free money without demanding control to go with it, so it's inevitable that governments end up having a say in how the banking business is carried out. People put their fucking life savings into Bitcoinica. If that starts happening on a large scale - if Bitcoin becomes a major currency, and people have the opportunity to put their life savings into bitcoin banks - then bitcoin banks will start being regulated, just as fiat currency banks are. As a libertarian, I'm not entirely happy about this, but we have to deal with the world as it is, not as it should be.

b-man 14y ago
I disagree strongly. The reason that bank runs and failures are so destructive is because of the state build cartel, driven by central banking. That was built in order to prevent competition and to let fractional reserve(which is in essence fraud) to run wild. The only reliable way to ensure stability in banking is to separate it from the state and let the free market do what it does in every industry known to man, weed out stupidity and fraud.
- makomk 14y ago
  Except, of course, that there's no way to tell as an ordinary customer whether your bank is genuinely secure or just following cargo-cult security until they get hacked and lose all their money. There's also no way to make sure that your bank isn't using fractional reserve banking until there's a bank run and it fails. And that's assuming people are rational and wise. They're not. For example since the Bitcoinia failure, the free market has lead to a whole bunch of Bitcoin users investing in something that has all the hallmarks of a ponzi scheme and accusing anyone who points this out of trolling and slandering the guy running it.

jerf 14y ago

"But it's unsettling to see that breaches like this don't evidently leave the impression with the Bitcoin community that a believer in the free market might hope they would, that providers in this market might not be driven to produce quality and reliability because somehow there isn't the demand for it." It is not as if the regulated world is all sweetness and light with no problems. The LIBOR scandal involved lots of violations of law, ethics, and regulation, for instance, and as the rot is found to go deeper that only further proves regulation can't cure all ills. Compare only the benefits of any thing with only the negatives of another and you get a predetermined result. BitCoin is only about a billionith as old as the regulated money system. Growing pains should be somewhat expected. (And I say this as someone who does not generally believe in it.)