
Cryptocurrencies: looking beyond the hype - jonbaer
https://www.bis.org/publ/arpdf/ar2018e5.htm
======
CrazyInNewYork

        it is hard to identify a specific economic
        problem which they currently solve
    

Receiving, owning and spending money anonymously. Remember when extortionists
had to be paid with a suitcase full of banknotes?

Receiving money without being exposed to the danger of fraud. Receiving money
via Credit Card is surprisingly risky for the merchant.

Transferring money internationally without additional costs.

Portfolio optimization. Crypto currencies are probably not perfectly
correlated to other assets. So it stabilizes the portfolio to add some crypto.

All kinds of contractual setups. Example: "This accounts money can only be
spend if 2 of the following 3 account holders agree: ..." .

~~~
banachtarski
> Receiving money without being exposed to the danger of fraud. Receiving
> money via Credit Card is surprisingly risky for the merchant.

We have this well established thing called a credit score which is handled by
the credit card agency and resolves trust issues for the merchant entirely. If
a person suspects identity theft, they can put a hold on a card, preventing
further use. Cards have expiration dates and periodically cycle out. I'm sorry
but when people explain to me that using a token they are personally
responsible for encrypting is "safer" somehow, I raise my eyebrows.

~~~
kneel
>We have this well established thing called a credit score which is handled by
the credit card agency and resolves trust issues for the merchant entirely.

We have this well established phenomenon called 'data breaches' which has
compromised nearly everyone's credit/personal data.

Your info is on the dark web. Lots of databases that can be cross correlated.
Banks increasingly don't know who they're dealing with, fraud is increasing.

~~~
a_c_s
Consumers don't need to worry about this though: all fraudulent charges are
removed from the customer's account and are somebody else's problem. The
customer gets a new credit card sent to them, sometimes even overnight, for
free.

I've had both credit and debit card fraud happen to my accounts: it is a
pretty minor annoyance.

(A data breach of my Social Security Number would be a whole different story
however!)

------
viach
> it is hard to identify a specific economic problem which they currently
> solve

It is hard to identify such a problem till you believe you can withdraw your
money from a bank anytime. Visiting a bank and getting an answer "please come
tomorrow" for several weeks changes a person's view on cryptocurrencies and
problems they could solve, imo.

~~~
cliffy
Let's imagine a scenario where you're not able to withdraw from a bank due to
insolvency. If you're in the US your deposits (principal + interest) are
insured up to $250,000 by the federal government. [0] If the federal
government is insolvent your cryptocurrency will be useless because you won't
have reliable Internet access and thus you won't have access to the resources
needed to make or verify transactions on your block-chain of choice.

If anything, people will revert to cash or tangible assets if the federal
government fails. No way crypto or technology in general is going to fill that
gap.

Now tell me, what institution is going to make a holder of cryptocurrency
'whole' again if something goes wrong with their wallet or the block-chain
itself?

[0]
[https://www.fdic.gov/deposit/deposits/faq.html](https://www.fdic.gov/deposit/deposits/faq.html)

~~~
stale2002
You are talking about societial collapse using the future tense, as if this is
some hypothetical situation.

It is not a hypothetical situation. It is happening right now in Venezuela.

All you have to do is look how Venezuelans are using Bitcoin right NOW to
understand it's value.

~~~
NathanCH
Venezuela is not using Bitcoin on any large scale. And if the people were,
they would have lost 30% of their money in the last month.

I don't think this is a good argument.

~~~
stale2002
Losing 30% of their money I'm the last month is an AMAZING deal for
venzuelens.

The Venezuelan dollar would have lost much more in value during that time
period.

Volatility doesn't matter when your nation's currency is way way worse.

A mere 30% loss in a single month is an amazing deal, compared to what they
have to deal with.

------
CiPHPerCoder
> Yet, looking beyond the hype, it is hard to identify a specific economic
> problem which they currently solve.

People seem to forget that cryptocurrencies emerged from a culture of
cryptoanarchy, not from economists or governments.

Anarchists generally don't want to help the government solve problems, they
view the government as the very problem to solve. (I'm speaking very broadly
here.)

~~~
bena
I find that most extreme ideologies simply boil down to people not wanting
someone to have any control over them.

They don't care for certain aspects of the social contract and want to be able
to flaunt it at will with no repercussions. Or they don't want to pay taxes or
some other thing. Whatever, they feel that society at large is what's holding
them back, not simply a lack of ability or drive.

At least with religious fundamentalists or whatever flavor of totalitarianism
you're comfortable with, it's clear what their answer to the problem of force
is: be the force.

Anarchists have no answer to that. They want to "be free to do whatever" but
when confronted with the question of what happens when I want their shit, they
invariably create government. Oh, I can't take their shit because there will
be rules. In the community they live, you can't live there if you take other
people's shit.

Yeah. That's just government. That's politics. That's the social contract. We
all agree not to do shit in order for us to live relatively peaceful, chill
lives.

Government, in the broad sense, is not the problem. The problem is that
governments are still run by people. And we're kind of fucked up. And we often
make mistakes.

~~~
drdeca
I wonder whether some substantial portion of cryptoanarchism isn't really
meant to be anarchism in the fullest sense, but more anarchism-but-only-
within-a-particular-domain?

Like, less "make the government not exist", and more "make it so goverments
are unable to control things like communication, and some sorts of commerce"?

I don't know that self-described cryptoanarchists almost always have much
opposition to the requirement of a drivers license in order to drive on the
public roads.

I suspect that a non-negligible portion does really object to that
requirement, but I'm not confident that the majority of them do.

~~~
CiPHPerCoder
> I wonder whether some substantial portion of cryptoanarchism isn't really
> meant to be anarchism in the fullest sense, but more anarchism-but-only-
> within-a-particular-domain?

It varies from person to person. I happen to like the message in _A Cipherpunk
's Manifesto_, but I also happen to dislike blockchain mania.

------
segmondy
I hate to be the one, but the reason I can't embrace crypto? The wealth
distribution is even worse than fiat currency. It's horrible.

it's no long about the 1% it's more about the .0001%.

How many women have crypto? How many colored folks have crypto? How many
people in all of Africa have crypto?

I've had conversations where some don't believe this is a problem. I'm not
convinced. You can come up with a new XYZ crypto and the issue is that the
distribution never gets to be fair. The haves end up always having much more
than the havenots.

~~~
turblety
But remember, with fiat, the government just prints money [1] whenever it
likes and gives it directly to its banker friends. With bitcoin that’s
impossible (well unless 51% of the minors agree)

1\.
[https://en.wikipedia.org/wiki/Quantitative_easing](https://en.wikipedia.org/wiki/Quantitative_easing)

~~~
root_axis
You're simply trading one government for another more nebulous and less
accountable one; the schism over block-size is a perfect example of this and
that's _peanuts_ compared to the types of issues that are to come.

There is _absolutely zero_ guarantee that the mining cartels won't print more
bitcoin; the final decision on whether or not to do so rests with them and it
is in their direct financial interest to do so even if it may not be in their
political interest. Even then, it is very possible that the impact of high
fees might make the idea of printing more bitcoins politically palatable.

Either way, the bottom line is that _it is_ a political issue, just like the
current system.

~~~
brandonsometig
Miners don't have the ability to 'print' more Bitcoin. They can release blocks
with whatever transactions they like in but they will simply be rejected by
the network.

The fact that there is 10,000 public bitcoin nodes (and probably x10 private
ones) keeps the system honest.

~~~
root_axis
You're right that the miners don't have unilateral authority to print more
bitcoin, but ultimately they are the muscle behind the process. This is akin
to saying "the military can't just print more money to pay for military
spending". This is true, and it's unlikely that the military would turn their
guns on the institutions in order to achieve this goal because it would
threaten the stability of the entire system in which they thrive (like with
the miners and bitcoin)... yet... somehow things always work out in such a way
where they get their money. It never gets to the point where they have to turn
their guns on anyone because their silent authority confers enough influence
that the politicians making the decisions (i.e. developer cabals in the case
of bitcoin) manage to find solutions that keep them fat and happy while
delivering enough voluble rhetoric to ensure that the general population
doesn't revolt.

Same thing will happen for the miners eventually.

------
sebleon
> hard to identify a specific economic problem which they currently solve

Problem: a handful of private companies could exert monetary censorship.

World changing organizations like Wikileaks are possible because of
cryptocurrencies, when Visa/Mastercard/etc began blocking donations.
Cryptocurrencies enable anyone to take online payments. [1]

> Transactions are slow and costly, prone to congestion, and cannot scale with
> demand

Lightning Network has found a very promising solution to these issues. Off-
chain transactions can be completed in under a second, without the scalability
concerns of on-chain transactions. I highly recommend checking this out if
you're unfamiliar [2]

[1]
[https://www.forbes.com/sites/jonmatonis/2012/08/20/wikileaks...](https://www.forbes.com/sites/jonmatonis/2012/08/20/wikileaks-
bypasses-financial-blockade-with-bitcoin/#219909167202)

[2] [https://lightning.network](https://lightning.network)

~~~
tootie
You're basically talking about evading sanctions and/or money laundering.

~~~
sebleon
I'm pointing out a clear example that invalidates a major assertion from the
BIS report.

------
dintech
"The Bank for International Settlements (BIS) is an international financial
institution owned by central banks."

You can make your own mind up on whether this would make them biased or not.

~~~
ttoinou
I like the phrasing :

    
    
       Policy responses need to prevent abuses while allowing further experimentation.
    

Maybe bitcoin and cryptos were actually allowed to exists thanks to central
banks and friendly governments

------
Mc_Big_G
This might not be particularly relevant to the article, but I'm still
genuinely shocked that the HN crowd is so anti-cryptocurreny. Most of the
arguments against it are akin to someone in 1995 saying the internet isn't
viable because it's insecure, there's no real business use-case for it, no
major corporations are investing in it, it's super slow, no one is ever going
to use it for real-world business transactions, it's only used by geeks,
etc... If you said that in 1995 you were terribly wrong and you'll be wrong
about this as well. Criticisms of alta-vista may have had some relevance but
criticizing the underlying ideas and technology is short-sighted.

~~~
sireat
Many on HN have seen the promise of crypto since 2010-2011.

We mined some, we bought some, we dealt with technological issues, we were
ecstatic for a while.

Yet the big crypto promise is to be fulfilled and we are now on 3rd or 4th big
hype/decline cycle.

We see the big negatives of various cryptocurrencies(energy usage, affecting
various hardware markets, supporting fraud on massive scale, insecurity for
normal folks, etc. etc.) but do not see any big positive developments.

Sure, if you are able to be paid in crypto in some country with a lousy
banking system that's great but you are in a tiny minority then.

All those tales of normal non-tech people using crypto for every day tasks are
closer to fairy tales.

The worst is the tendency for various cryptosolutions to tend back to
centralized PRIVATE control. Tether is the worst offender in this regard. The
cognitive dissonance is fantastic here.

I have no doubts that there will be another hype cycle attracting new
followers with blinders.

For a brief moment in 2013 crypto(Bitcoin especially) actually seemed useful
as a currency.

To conclude, maybe in 2023 someone will come up with a killer app for crypto
but crypto kitties is not the answer.

"What has been will be again, what has been done will be done again; there is
nothing new under the sun."

------
densitycity
Cryptocurrencies are interesting to me right now in that they have not
suffered any plausible advanced attacks capable of zeroing them. What is
stopping a state actor from using their backdoors in internet infrastructure
to destroy the Bitcoin network topology for a long enough period of time to
destroy the network? Is secp256k1 backdoored? My bet is that state actors are
saving their guaranteed Bitcoin destruct buttons for the perfect moment.

~~~
21
> What is stopping a state actor from using their backdoors in internet
> infrastructure to destroy the Bitcoin network

Laws. In the Western world, something is legal unless explicitly forbidden by
laws.

Countries which don't care very much about freedom explicitly banned Bitcoin
more or less (China, Russia, India, Indonesia, Venezuela, ...)

~~~
vthallam
I'm really surprised you including India in the list. India is as democratic
as the USA. The laws were put in place in India at least around Crypto to save
people from being scammed.

~~~
21
Fair enough. I don't know that much about India. I do know they tend to limit
financial freedoms - capital controls, gold imports, now Bitcoin. Maybe it's
for the better, but it's less free than the Western world on this front
nonetheless.

------
4n0nym00s3
How about currency monopoly? Hyper inflation? Debt slavery for all mankind?

~~~
drngdds
>How about currency monopoly? Hyper inflation?

Not real problems in most countries.

>Debt slavery for all mankind?

How does crypto stop people from borrowing lots of money?

~~~
drdeca
Well, I haven't seen any banking (borrowing and lending) systems built on top
of a cryptocurrency yet,

But that is probably largely because there isn't a good enough reputation
system or other way to encourage the payment of debts that is compatible with
the cryptocurrency ecosystem yet, I think.

Or, alternatively, they exist and are used, but I haven't noticed them yet.

------
mikkqu
Am I understand it right?

Pretty much the most active users of cryptocurrencies so far are different
kinds of investors who use it to avoid taxes and exposure of their assets to
government and such?

------
kruhft
I think they make good data stores.

~~~
nwah1
Extremely slow and expensive data stores that are reliant on a large number of
gullible people to waste their computational resources in order to provide it
to you.

~~~
kruhft
More like permanent data stores. "Stone printers" I call them. Life lives as
long as the data has value, and what a better way to represent the value of a
blockchain but the value of the data that's stored in it rather than
speculation.

If data is so fucking valuable.

