Sure, but what real-world problem does a trustless solve? I thought this was all very interesting years ago but now that we’ve had blockchain for years it seems it’s only good for illegal or morally questionable transactions.
There’s a case to be made for a currency that facilitates illegal transactions, or transactions that corporations object to. Just because something is legal in your country doesn’t mean it might not be unjustly restricted. Or could just be unjustly illegal in your country or another country. The problem of course is that distributed currency also facilitates things that should be illegal.
But WikiLeaks is a good example - their legacy is a little mixed now, but when they first came on the scene they were doing work which was a valuable service to the public. If you wanted to donate money to support wikileaks you couldn’t because the credit card processors shut them off. Blockchain lets you get around that.
Likewise it’s the combination of distance and direct - I can give $5 in cash to my local leaking consortium, but I can’t give $5 to the leaking consortium on the other side of the world without relying on the knowledge and consent of third parties.
I was hoping it would help me save on international transfer fees when I was an overseas postdoc, but it would have actually cost more between the exchange fees and my time setting up all the exchanges in various countries, meanwhile also introducing risk in me being robbed of said money and screwing something up and introducing myself to some sort of tax liability. Needless to say, I continued to just pay for the bank transfers
That’s really the thing, isn’t it? In my experience cryptocurrency fees are quite high. I bet there’s a way to find a lower fee but then I’d have to do a ton of research and hope it’s accurate. I’d rather just pay a bank that requires me to do no research.
It cannot be cheaper, other than by avoiding taxes and regulation.
Consider sending money from US Dollar to Euro:
Sane way: An intermediary (IE a bank) handles this. You give them USD and they give the receiver Euros. This involves some service costs and 2 bank transfers.
Because people exchange money in both ways, the banks need not run out of either Euro or USD. In the background there is the currency market, on which the proper exchange rate is haggled out, which takes care of imbalances in cash flow.
Crypto way: You give a crypto exchange (an intermediary) USD and they give you crypto. This already involves 2 transfers and service costs. One of those 2 transfers is a crypto transfer, which is much more expensive (IE uses more resources) than a bank transfer.
This is already more expensive and then you have to do the same thing again to cash out.
And then we are still not done. Say there is an imbalance in that more people transfer money from USD to Euro than vice versa. That means that crypto becomes more expensive in USD and cheaper in Euro. There’s more demand in terms of USD and more supply for Euro, right?.
That creates an arbitrage opportunity. You can exchange USD for Euro, and then buy crypto for Euro to sell for USD. This closes the circle and puts everything back to the initial state. But to do that, we still have to exchange the real currencies. So now the markets bake the cost of exchanging currency into the crypto prices. At a guess, for some currencies (probably not so much Euro/USD), that would have a significant effect. I’m thinking smaller, poorer countries that send many migrant workers, who send money back home. These workers would not only end up paying the insane overhead of the crypto system, but also, still, most of the normal, direct exchange costs (if they relied on crypto).
See I think more nuanced takes like this are good. I’m not familiar with the Chinese banking issue that you are describing, but it sounds like deposit insurance (like the FDIC) might be a better solution than cryptocurrency, and it’s definitely better understood. Since the real world value of cryptocurrencies are so volatile they are a questionable store of value, and taking a risk on a poorly regulated bank might be better than taking a risk on storing your money in a volatile and unregulated security like cryptocurrency. Honestly it’s hard to know which is the better risk. So it could be better or it could be worse.
I agree with your point about transferring money internationally, and even within the US transferring money used to be a real pain. So I’m still interested to see if cryptocurrency can be a better medium of exchange or medium of transfer than traditional ways, or at least give traditional systems incentive to improve. But again the volatility is a concern so for most people the best move is probably to get in and out of the crypto market as quickly as possible or else risk getting a vastly different amount of money out of it than you put in. Admittedly it could appreciate, but when I’m transferring money to someone I don’t want that to simultaneously be an investment. The few times I have used Bitcoin to purchase something the whole process has taken hours, and there’s no guarantee there won’t be price swings — a lot could happen in those hours.
I appreciate the brutal honesty about cryptocurrency not being for the average Joe. It’s not that long since many cryptocurrency boosters were hoping it would replace fiat currency, but now that I think about it I haven’t heard as much about that recently. In its current state it is really not for the average Joe.
Since the real world value of cryptocurrencies are so volatile they are a questionable store of value
It will not be so volatile if it’s primary means of transaction for everyone(obviously not yet). Value of thoose cryptos are just like the values of normal money in different countries.
For example, if you can buy an apple for 10 shitcoins, instead of buying it in USD, then the value is not volatile. The problem arises when the apple is 5 USD and you have to transfer the shitcoin amount which is equal to the exchange rate of 5USD at that time.
This is true, but it’s hard to see why we would ever move from fiat currency to cryptocurrency as the primary means of exchange. Currently cryptocurrency’s advantages are modest and its disadvantages are substantial, and I haven’t seen a lot of movement toward fixing that balance. I’d like to give traditional finance channels some competition to reduce fees, lock-in, and inconvenience, but cryptocurrency is going to have to get a lot better for average people if it’s going to be a real alternative.
Advantages of cryptos is that they are decentralised. Just like lemmy is decentralised, no single entity or government control the money. Transaction happen from peer to peer. No middlemen involved. I don’t understand the disadvantages yet except environmental concerns. I heard coins like ethereum switched to proof of stake model which is more environmental friendly.
I don’t understand the disadvantages yet except environmental concerns.
As you point out, PoS basically solves the environmental concerns. (Some people might say it still consumes too much power but I disagree, I think power consumption under PoS is acceptable).
This is just my opinion, but I think the big disadvantage is cryptocurrencies are a pain in the ass to use. Lengthy story about what a pain it’s been to use them in Spoiler tag. I think this story is a bit of an outlier since I hit all of these issues, but the fact that a technically inclined person who is just getting back into cryptocurrency after a long hiatus can have this much trouble with it does not speak well use ability or safety.
:::
I have a few coins I mined back in the day (before switching all my computing power to BOINC), and I saved off my wallet.dat from those wallets. I wanted to use them recently, so I reinstalled the wallet software. That worked, but then I had to download the entire chain again, so I had to wait more than a day to actually use the coins. Putting cash in a bank is faster if I’m already a customer of the bank. If I’m a new customer I might have to wait, but the point is cryptocurrency doesn’t have a clear advantage here.
The coins I had weren’t Bitcoin, but the shop I wanted to buy from only accepts Bitcoin. So then I had to exchange mine for Bitcoin and pay transaction fees. I guess you could say it’s my own fault for holding a less-popular coin but I’m not sure cryptocurrency is living up to its own hype if there’s exactly one or two coins that you have to use, just like how in the US there’s no real alternative to USD.
I found a no-account exchange, and I had to carefully enter keys and figure out amounts of coin > BTC. And I had to trust the exchange to give me what I wanted. If the no-account exchange didn’t exist, I would have to create a whole new account on a website I don’t entirely trust just to exchange one coin for Bitcoin. That’s a layer of trust in a “trustless” system. I also don’t like creating yet another account with my info in it — yet another way that cryptocurrency is not better than traditional finance.
Then not only did it cost transaction fees, it took hours for the transaction to go through. I could pay more for it to go faster, but now we’re talking about fees that far exceed those of credit cards or regular money transfers. Then I had to send the Bitcoin to the online store and wait for that transaction to clear. More time and more transaction fees. The purchase worked without a hitch, but it wasn’t any better than using a credit card.
I had to buy extra BTC because it’s really difficult to know exactly how much you’re going to pay including transaction fees, so after the transaction went through I tried to turn my remaining Bitcoins (I think it was worth ~$13?) back into the kind of coins I keep, but I set my transaction fee too low and the trade I set up expired before my coins went through. Luckily I had given the exchange a refund account, but that meant I had to wait over 24 hours before my transaction actually happened, and then the exchange had to send back my Bitcoin, incurring fees at each step.
While waiting I tried to cancel this Bitcoin transaction, but the software I used didn’t support that. So then I tried to extract my private key to enter into another piece of software, and that was surprisingly difficult. I thought cryptocurrency was supposed to put me in control, but without a LOT of technical knowledge I was just as powerless as I’d be with a bank that froze a transfer. I asked for help on a few forums and some people tried to help but the whole thing was confusing and eventually I had to give up and just wait for the transaction to go through.
Then I had to do the BTC > mycoin transaction again, and this time I think the fees were 5-10% of the amount I was transferring. That’s way more than Venmo’s immediate transfer fee or even credit card fees (I think those are around 3%?).
I will say that during this process I discovered the Electrum wallet, which is very good and works on a lot of platforms. Some of the issues I had would not have happened if I had used that all along. But there are so many wallets out there it’s hard to know which one is best and obviously when I started this process no one told me it was the best. And maybe it’s not and that just my opinion.
In summary, I’m interested in cryptocurrency and kind of enjoyed using it in the way learning new things can be fun. But it was slower, less convenient, and more expensive than regular currency. Cryptocurrency boosters are going to have to improve all of these problems before it’s competitive with regular currency, and I don’t see a lot of discussion about how much these pain points suck and how to improve.
Can the unbanked still benefits from crypto these days though? How can you cash your crypto without doing KYC? Even localbitcoin got folded due to increased regulation. If you can pass KYC, then you’re probably not the unbanked. Less and less business accept crypto these days, it’s hard purchase daily necessities without cashing out your crypto (except probably in venezuela).
Trusting Humans is literally a security flaw. Any system with trust you can find examples with fraud and abuse from those who held power by holding that trust.
We trusted bankers to invest our money, and some short sold the housing market with that money
I could go on, but trust really is a security issue. Decentralization has its efficiency issues, but saying “Bitcoin uses as much power as the 90th largest nation” is peanuts when you consider the energy inequality that America spends and compare what Bitcoin delivers with that energy versus how much energy centralized banks need to deliver a system that’s easier to fraud
Exactly, and using Bitcoin does not solve that because you still have to transact with humans. If you buy something with Bitcoin and the seller never sends you anything, you’re out of luck. Your money is gone.
If you use a regulated financial system you have some options. If you paid with credit card you can charge back and dispute the charge. Your money in the bank is backed by insurance that is guaranteed by the government.
Bitcoin only cuts out the middleman. Every other issue of trust with the recipient still exists, and those are the problems regulation solves, and the reason fraudsters love Bitcoin so much.
More seriously, every system can be used for fraud. The question is whether the solution is actually better overall. We could prevent all wire fraud by returning to a cash-only economy. But that would be hugely inconvenient and therefore create a huge drag on the economy compared to a world where we can do electronic transfers even though electronic transfers open us up to wire fraud. Returning to cash-only is not worth the increase in security, and it opens us up to other issues (e.g., bank runs and someone stealing all the money under my mattress).
And while power use is a problem with Proof of Work coins, it’s not my biggest concern about cryptocurrency because Proof of Stake can fix that issue. It’s a shame that the biggest coin now is PoW but hopefully that will change. The bigger issue is “is cryptocurrency better than traditional currency?” So far it hasn’t proven to be better except in extremely limited circumstances. And a lot of the ways cryptocurrency is better will go away if governments start regulating it like other forms of finance. Having your money in cryptocurrency won’t protect you from the police and courts.
We trusted bankers to invest our money, and some short sold the housing market with that money
Okay? You could do that with cryptocurrency if traders started accepting cryptocurrency for shorts. The only reason you can’t do that today is traders won’t accept cryptocurrency for shorts, and that’s basically security through obscurity.
I didn’t say cryptocurrency was any better or worse for fraud and abuse than regular currencies. Honestly I have no idea which one is better or worse for fraud and abuse. I’m just saying it’s not clear that the particular way that cryptocurrency is more secure than regular banking is actually beneficial.
Sure, but what real-world problem does a trustless solve? I thought this was all very interesting years ago but now that we’ve had blockchain for years it seems it’s only good for illegal or morally questionable transactions.
There’s a case to be made for a currency that facilitates illegal transactions, or transactions that corporations object to. Just because something is legal in your country doesn’t mean it might not be unjustly restricted. Or could just be unjustly illegal in your country or another country. The problem of course is that distributed currency also facilitates things that should be illegal.
But WikiLeaks is a good example - their legacy is a little mixed now, but when they first came on the scene they were doing work which was a valuable service to the public. If you wanted to donate money to support wikileaks you couldn’t because the credit card processors shut them off. Blockchain lets you get around that.
Likewise it’s the combination of distance and direct - I can give $5 in cash to my local leaking consortium, but I can’t give $5 to the leaking consortium on the other side of the world without relying on the knowledge and consent of third parties.
I was hoping it would help me save on international transfer fees when I was an overseas postdoc, but it would have actually cost more between the exchange fees and my time setting up all the exchanges in various countries, meanwhile also introducing risk in me being robbed of said money and screwing something up and introducing myself to some sort of tax liability. Needless to say, I continued to just pay for the bank transfers
That’s really the thing, isn’t it? In my experience cryptocurrency fees are quite high. I bet there’s a way to find a lower fee but then I’d have to do a ton of research and hope it’s accurate. I’d rather just pay a bank that requires me to do no research.
It cannot be cheaper, other than by avoiding taxes and regulation.
Consider sending money from US Dollar to Euro:
Sane way: An intermediary (IE a bank) handles this. You give them USD and they give the receiver Euros. This involves some service costs and 2 bank transfers.
Because people exchange money in both ways, the banks need not run out of either Euro or USD. In the background there is the currency market, on which the proper exchange rate is haggled out, which takes care of imbalances in cash flow.
Crypto way: You give a crypto exchange (an intermediary) USD and they give you crypto. This already involves 2 transfers and service costs. One of those 2 transfers is a crypto transfer, which is much more expensive (IE uses more resources) than a bank transfer.
This is already more expensive and then you have to do the same thing again to cash out.
And then we are still not done. Say there is an imbalance in that more people transfer money from USD to Euro than vice versa. That means that crypto becomes more expensive in USD and cheaper in Euro. There’s more demand in terms of USD and more supply for Euro, right?.
That creates an arbitrage opportunity. You can exchange USD for Euro, and then buy crypto for Euro to sell for USD. This closes the circle and puts everything back to the initial state. But to do that, we still have to exchange the real currencies. So now the markets bake the cost of exchanging currency into the crypto prices. At a guess, for some currencies (probably not so much Euro/USD), that would have a significant effect. I’m thinking smaller, poorer countries that send many migrant workers, who send money back home. These workers would not only end up paying the insane overhead of the crypto system, but also, still, most of the normal, direct exchange costs (if they relied on crypto).
deleted by creator
See I think more nuanced takes like this are good. I’m not familiar with the Chinese banking issue that you are describing, but it sounds like deposit insurance (like the FDIC) might be a better solution than cryptocurrency, and it’s definitely better understood. Since the real world value of cryptocurrencies are so volatile they are a questionable store of value, and taking a risk on a poorly regulated bank might be better than taking a risk on storing your money in a volatile and unregulated security like cryptocurrency. Honestly it’s hard to know which is the better risk. So it could be better or it could be worse.
I agree with your point about transferring money internationally, and even within the US transferring money used to be a real pain. So I’m still interested to see if cryptocurrency can be a better medium of exchange or medium of transfer than traditional ways, or at least give traditional systems incentive to improve. But again the volatility is a concern so for most people the best move is probably to get in and out of the crypto market as quickly as possible or else risk getting a vastly different amount of money out of it than you put in. Admittedly it could appreciate, but when I’m transferring money to someone I don’t want that to simultaneously be an investment. The few times I have used Bitcoin to purchase something the whole process has taken hours, and there’s no guarantee there won’t be price swings — a lot could happen in those hours.
I appreciate the brutal honesty about cryptocurrency not being for the average Joe. It’s not that long since many cryptocurrency boosters were hoping it would replace fiat currency, but now that I think about it I haven’t heard as much about that recently. In its current state it is really not for the average Joe.
It will not be so volatile if it’s primary means of transaction for everyone(obviously not yet). Value of thoose cryptos are just like the values of normal money in different countries.
For example, if you can buy an apple for 10 shitcoins, instead of buying it in USD, then the value is not volatile. The problem arises when the apple is 5 USD and you have to transfer the shitcoin amount which is equal to the exchange rate of 5USD at that time.
This is true, but it’s hard to see why we would ever move from fiat currency to cryptocurrency as the primary means of exchange. Currently cryptocurrency’s advantages are modest and its disadvantages are substantial, and I haven’t seen a lot of movement toward fixing that balance. I’d like to give traditional finance channels some competition to reduce fees, lock-in, and inconvenience, but cryptocurrency is going to have to get a lot better for average people if it’s going to be a real alternative.
Advantages of cryptos is that they are decentralised. Just like lemmy is decentralised, no single entity or government control the money. Transaction happen from peer to peer. No middlemen involved. I don’t understand the disadvantages yet except environmental concerns. I heard coins like ethereum switched to proof of stake model which is more environmental friendly.
As you point out, PoS basically solves the environmental concerns. (Some people might say it still consumes too much power but I disagree, I think power consumption under PoS is acceptable).
This is just my opinion, but I think the big disadvantage is cryptocurrencies are a pain in the ass to use. Lengthy story about what a pain it’s been to use them in Spoiler tag. I think this story is a bit of an outlier since I hit all of these issues, but the fact that a technically inclined person who is just getting back into cryptocurrency after a long hiatus can have this much trouble with it does not speak well use ability or safety.
::: I have a few coins I mined back in the day (before switching all my computing power to BOINC), and I saved off my wallet.dat from those wallets. I wanted to use them recently, so I reinstalled the wallet software. That worked, but then I had to download the entire chain again, so I had to wait more than a day to actually use the coins. Putting cash in a bank is faster if I’m already a customer of the bank. If I’m a new customer I might have to wait, but the point is cryptocurrency doesn’t have a clear advantage here.
The coins I had weren’t Bitcoin, but the shop I wanted to buy from only accepts Bitcoin. So then I had to exchange mine for Bitcoin and pay transaction fees. I guess you could say it’s my own fault for holding a less-popular coin but I’m not sure cryptocurrency is living up to its own hype if there’s exactly one or two coins that you have to use, just like how in the US there’s no real alternative to USD.
I found a no-account exchange, and I had to carefully enter keys and figure out amounts of coin > BTC. And I had to trust the exchange to give me what I wanted. If the no-account exchange didn’t exist, I would have to create a whole new account on a website I don’t entirely trust just to exchange one coin for Bitcoin. That’s a layer of trust in a “trustless” system. I also don’t like creating yet another account with my info in it — yet another way that cryptocurrency is not better than traditional finance.
Then not only did it cost transaction fees, it took hours for the transaction to go through. I could pay more for it to go faster, but now we’re talking about fees that far exceed those of credit cards or regular money transfers. Then I had to send the Bitcoin to the online store and wait for that transaction to clear. More time and more transaction fees. The purchase worked without a hitch, but it wasn’t any better than using a credit card.
I had to buy extra BTC because it’s really difficult to know exactly how much you’re going to pay including transaction fees, so after the transaction went through I tried to turn my remaining Bitcoins (I think it was worth ~$13?) back into the kind of coins I keep, but I set my transaction fee too low and the trade I set up expired before my coins went through. Luckily I had given the exchange a refund account, but that meant I had to wait over 24 hours before my transaction actually happened, and then the exchange had to send back my Bitcoin, incurring fees at each step.
While waiting I tried to cancel this Bitcoin transaction, but the software I used didn’t support that. So then I tried to extract my private key to enter into another piece of software, and that was surprisingly difficult. I thought cryptocurrency was supposed to put me in control, but without a LOT of technical knowledge I was just as powerless as I’d be with a bank that froze a transfer. I asked for help on a few forums and some people tried to help but the whole thing was confusing and eventually I had to give up and just wait for the transaction to go through.
Then I had to do the BTC > mycoin transaction again, and this time I think the fees were 5-10% of the amount I was transferring. That’s way more than Venmo’s immediate transfer fee or even credit card fees (I think those are around 3%?).
I will say that during this process I discovered the Electrum wallet, which is very good and works on a lot of platforms. Some of the issues I had would not have happened if I had used that all along. But there are so many wallets out there it’s hard to know which one is best and obviously when I started this process no one told me it was the best. And maybe it’s not and that just my opinion.
In summary, I’m interested in cryptocurrency and kind of enjoyed using it in the way learning new things can be fun. But it was slower, less convenient, and more expensive than regular currency. Cryptocurrency boosters are going to have to improve all of these problems before it’s competitive with regular currency, and I don’t see a lot of discussion about how much these pain points suck and how to improve.
:::
Also, the unbanked.
Also, privacy and anonymity (to an extent).
Also, complete predictability in the system (its at least domain constrained).
Can the unbanked still benefits from crypto these days though? How can you cash your crypto without doing KYC? Even localbitcoin got folded due to increased regulation. If you can pass KYC, then you’re probably not the unbanked. Less and less business accept crypto these days, it’s hard purchase daily necessities without cashing out your crypto (except probably in venezuela).
There’s no privacy, it’s an open ledger, only anonymity
It’s a bad way of hiding money if you’re about to be investigated for crime
Trusting Humans is literally a security flaw. Any system with trust you can find examples with fraud and abuse from those who held power by holding that trust.
We trusted bankers to invest our money, and some short sold the housing market with that money
I could go on, but trust really is a security issue. Decentralization has its efficiency issues, but saying “Bitcoin uses as much power as the 90th largest nation” is peanuts when you consider the energy inequality that America spends and compare what Bitcoin delivers with that energy versus how much energy centralized banks need to deliver a system that’s easier to fraud
Exactly, and using Bitcoin does not solve that because you still have to transact with humans. If you buy something with Bitcoin and the seller never sends you anything, you’re out of luck. Your money is gone.
If you use a regulated financial system you have some options. If you paid with credit card you can charge back and dispute the charge. Your money in the bank is backed by insurance that is guaranteed by the government.
Bitcoin only cuts out the middleman. Every other issue of trust with the recipient still exists, and those are the problems regulation solves, and the reason fraudsters love Bitcoin so much.
Amen, exactly.
Ah yes Bitcoin, famously free of fraud and abuse.
More seriously, every system can be used for fraud. The question is whether the solution is actually better overall. We could prevent all wire fraud by returning to a cash-only economy. But that would be hugely inconvenient and therefore create a huge drag on the economy compared to a world where we can do electronic transfers even though electronic transfers open us up to wire fraud. Returning to cash-only is not worth the increase in security, and it opens us up to other issues (e.g., bank runs and someone stealing all the money under my mattress).
And while power use is a problem with Proof of Work coins, it’s not my biggest concern about cryptocurrency because Proof of Stake can fix that issue. It’s a shame that the biggest coin now is PoW but hopefully that will change. The bigger issue is “is cryptocurrency better than traditional currency?” So far it hasn’t proven to be better except in extremely limited circumstances. And a lot of the ways cryptocurrency is better will go away if governments start regulating it like other forms of finance. Having your money in cryptocurrency won’t protect you from the police and courts.
Okay? You could do that with cryptocurrency if traders started accepting cryptocurrency for shorts. The only reason you can’t do that today is traders won’t accept cryptocurrency for shorts, and that’s basically security through obscurity.
Sure, drugs and fraud surround Bitcoin, but drugs, fraud, and banking imperialism surround the petrodollar
I didn’t say cryptocurrency was any better or worse for fraud and abuse than regular currencies. Honestly I have no idea which one is better or worse for fraud and abuse. I’m just saying it’s not clear that the particular way that cryptocurrency is more secure than regular banking is actually beneficial.