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This article rambles endlessly and mentions crypto 145 times and appears to assume banks are not corrupt. So is illegitimate debanking an example of a real use

by rapjr9 2y ago

This article rambles endlessly and mentions crypto 145 times and appears to assume banks are not corrupt. So is illegitimate debanking an example of a real useful purpose for cryptocurrencies? I'm also thinking of the current Musk takeover of the Treasury payments system as perhaps leading to a useful purpose for cryptocurrency. For example, the regular payment of funds from a grant could be set up as an Ethereum smart contract. Or funds allocated by the US House could be a smart contract to prevent any other level of government from tampering with them. If you can't trust the banks or government then does cryptocurrency have some benefits? This was not seen as a Western problem because we had rule of law, but now, maybe it is. Decentralization and operating outside the control of a bank or government can be very useful features if the bank or government is corrupted. Like holding gold, except much easier to use because it is digital. Much easier to hide from a corrupt government also, maybe, though the government could know you had the funds depending on how the cryptocurrency works. In the old days people used to hide grain underneath their house to keep the government or armies from taking it, so they could survive the winter. Yes, criminals can hide and use cryptocurrencies also, but they always used money/fungible assets even before cryptocurrencies, to the tune of trillions of dollars. Seems like trying to control money has not worked very well in controlling criminals and instead root causes should be addressed.

tadfisher 2y ago
At this point, I have to assume this take is intentional, with the goal of misleading everyone involved to view the crypto industry as a victim of evil bankers and their bought-and-paid-for regulators. 1. Define "illegitimate debanking". Debanking of whom? Crypto companies, end users, their surrogate banks and holding companies? You'll find the original article defines several forms of what crypto people mean when they say "debanking", and that the explicit goal of the term is to conflate all of them. Which is restated quite clearly in this "rambling", and as you seem to have missed the central thesis of this and the preceding article, I believe you are complicit. 2. If you believe the banking system and the government is corrupted, how does cryptocurrency solve the problem? Does it matter if the US debt is held in dollars or Dogecoin when the US defaults on the debt? Or, as I suspect, when you ask if it makes sense to use crypto in order to hide funds from the government, are you advocating that the act of government taking money through taxation (i.e. "funding the government") is the corruption you speak of? 3. Yes, criminals deal in all sorts of securities to launder money. Cryptocurrency is a wonderful way to facilitate this, as is art, cars, or anything else of value. Are you saying we should address the root cause of criminality, and ignore the tangible financial risk of supporting cryptocurrencies in the regulated financial industry?
- rapjr9 2y ago
  I'm taking a Zero Trust approach to the movement of money. You have to assume there are insiders in banking and government with malicious intent. How do you protect against them? Could cryptocurrencies be worked into a solution?
  - tadfisher 2y ago
    > I'm taking a Zero Trust approach to the movement of money. This is begging the question. > You have to assume there are insiders in banking and government with malicious intent. How do you protect against them? We have a system of rules in place to disincentivize certain behaviors in government. This system is written down as the U.S. Code. If you can't trust this system, you might as well write off the concept of democracy as a whole, because a lot more than our banking system depends on a very deep-seated social contract which assumes that the people trust the government they elect. > Could cryptocurrencies be worked into a solution? Of course they can. The questions are: Why would we want this? What problems do cryptocurrency solve uniquely? What trade-offs would we make by implementing such a solution? And that is why statements like this belie the fallacy of crypto proponents: you are begging the question when you ask how to integrate crypto with the financial system, and do not address any of the myriad of shortcomings of doing so.
  - Analemma_ 2y ago
    > I'm taking a Zero Trust approach to the movement of money. One of the points Patrick stresses repeatedly in both the original article and in his response to McCauley is that providing banking services to cryptocurrency companies is not merely being a "dumb pipe" which facilitates transactions. Giving anybody (whether an individual or a business) a checking account means opening yourself up to counterparty risk, which can blow you up if you model it incorrectly. And this is not a hypothetical: he specifically points out that this is what happened to Metropolitan when they worked with Voyager. And Patrick further elaborates that crypto companies love to push this counterparty risk under the rug by heaping it onto others, then complaining when the inevitable result is that nobody wants to do business with them. The point of all the above is that "a zero trust approach to money movement" does not and cannot exist. You can pretend it exists, by finding some patsy to take the counterparty risk for you, but once you run out of suckers, reality will reassert itself and no amount of complaining about government interference will change the fact that you're an unacceptably risky customer and that's why nobody wants to give you an account.
quinnjh 2y ago
> For example, the regular payment of funds from a grant could be set up as an Ethereum smart contract. Not clear to me what problem this solves- but the result would be so incredibly kafkaesque that I can actually see it happening.
- rapjr9 2y ago
  I was thinking the smart contract part would just be the periodic disbursement of funds, nothing complex. The hope was that using a cryptocurrency and smart contract would make periodic disbursement untamperable. If smart contracts can be tampered with, then I see no point in their existence. The untamperability of a disbursement process for cryptocurrency would depend on the implementation. Maybe it's not possible to do that. Has anyone tried? Maybe the money could always be shut off at the source, but that could also take down all payments (something the Democrats are currently threatening to do). Bugs in such a system could be a big problem, they might initiate things that would be very difficult to stop. Ultimately the input to the system, the laws passed by Congress, would affect the correctness of the system. Laws are not always logical, which could be an issue, though they tend to get very specific where money is involved.
  - dumah 2y ago
    The law has recently changed quite a bit with respect to the very nature of a smart contract (Tornado). I don’t think they’re very specific. The lack of specificity was such that the government is now purporting to end “regulation by enforcement”.
perching_aix 2y ago
> and appears to assume banks are not corrupt. Did we read the same article?

by rapjr9 2y ago

tadfisher 2y ago

At this point, I have to assume this take is intentional, with the goal of misleading everyone involved to view the crypto industry as a victim of evil bankers and their bought-and-paid-for regulators. 1. Define "illegitimate debanking". Debanking of whom? Crypto companies, end users, their surrogate banks and holding companies? You'll find the original article defines several forms of what crypto people mean when they say "debanking", and that the explicit goal of the term is to conflate all of them. Which is restated quite clearly in this "rambling", and as you seem to have missed the central thesis of this and the preceding article, I believe you are complicit. 2. If you believe the banking system and the government is corrupted, how does cryptocurrency solve the problem? Does it matter if the US debt is held in dollars or Dogecoin when the US defaults on the debt? Or, as I suspect, when you ask if it makes sense to use crypto in order to hide funds from the government, are you advocating that the act of government taking money through taxation (i.e. "funding the government") is the corruption you speak of? 3. Yes, criminals deal in all sorts of securities to launder money. Cryptocurrency is a wonderful way to facilitate this, as is art, cars, or anything else of value. Are you saying we should address the root cause of criminality, and ignore the tangible financial risk of supporting cryptocurrencies in the regulated financial industry?

rapjr9 2y ago
I'm taking a Zero Trust approach to the movement of money. You have to assume there are insiders in banking and government with malicious intent. How do you protect against them? Could cryptocurrencies be worked into a solution?
- tadfisher 2y ago
  > I'm taking a Zero Trust approach to the movement of money. This is begging the question. > You have to assume there are insiders in banking and government with malicious intent. How do you protect against them? We have a system of rules in place to disincentivize certain behaviors in government. This system is written down as the U.S. Code. If you can't trust this system, you might as well write off the concept of democracy as a whole, because a lot more than our banking system depends on a very deep-seated social contract which assumes that the people trust the government they elect. > Could cryptocurrencies be worked into a solution? Of course they can. The questions are: Why would we want this? What problems do cryptocurrency solve uniquely? What trade-offs would we make by implementing such a solution? And that is why statements like this belie the fallacy of crypto proponents: you are begging the question when you ask how to integrate crypto with the financial system, and do not address any of the myriad of shortcomings of doing so.
- Analemma_ 2y ago
  > I'm taking a Zero Trust approach to the movement of money. One of the points Patrick stresses repeatedly in both the original article and in his response to McCauley is that providing banking services to cryptocurrency companies is not merely being a "dumb pipe" which facilitates transactions. Giving anybody (whether an individual or a business) a checking account means opening yourself up to counterparty risk, which can blow you up if you model it incorrectly. And this is not a hypothetical: he specifically points out that this is what happened to Metropolitan when they worked with Voyager. And Patrick further elaborates that crypto companies love to push this counterparty risk under the rug by heaping it onto others, then complaining when the inevitable result is that nobody wants to do business with them. The point of all the above is that "a zero trust approach to money movement" does not and cannot exist. You can pretend it exists, by finding some patsy to take the counterparty risk for you, but once you run out of suckers, reality will reassert itself and no amount of complaining about government interference will change the fact that you're an unacceptably risky customer and that's why nobody wants to give you an account.

quinnjh 2y ago

> For example, the regular payment of funds from a grant could be set up as an Ethereum smart contract. Not clear to me what problem this solves- but the result would be so incredibly kafkaesque that I can actually see it happening.

rapjr9 2y ago
I was thinking the smart contract part would just be the periodic disbursement of funds, nothing complex. The hope was that using a cryptocurrency and smart contract would make periodic disbursement untamperable. If smart contracts can be tampered with, then I see no point in their existence. The untamperability of a disbursement process for cryptocurrency would depend on the implementation. Maybe it's not possible to do that. Has anyone tried? Maybe the money could always be shut off at the source, but that could also take down all payments (something the Democrats are currently threatening to do). Bugs in such a system could be a big problem, they might initiate things that would be very difficult to stop. Ultimately the input to the system, the laws passed by Congress, would affect the correctness of the system. Laws are not always logical, which could be an issue, though they tend to get very specific where money is involved.
- dumah 2y ago
  The law has recently changed quite a bit with respect to the very nature of a smart contract (Tornado). I don’t think they’re very specific. The lack of specificity was such that the government is now purporting to end “regulation by enforcement”.

perching_aix 2y ago

> and appears to assume banks are not corrupt. Did we read the same article?