An exchange is basically a bank without the regulations and consumer protections of real banks. It also defeats the purpose of crypto. It's the worst of both worlds.
This is what most people got wrong. Crypto solves one problem and one problem only: censorship. Crypto is the only, single censorship resistant asset on the entire earth. You can't remove private key by force ($5 wrench is not an argument). You can confiscate land, stocks, freeze bank accounts, take gold. You can't extract a string of numbers which you aren't even sure is there in the first place. Not yet at least. Might not be the biggest threat in US, but in Asia right now that property is crucial.
> Crypto solves one problem and one problem only: censorship
It doesn't even do that properly, because there is no guarantee of service given by the system. Miners could just decide that they don't like you very much and refuse to process your TX. Or they could conspire to blackmail you: "pay us or your tokens are useless". Sure, someone might be willing to process your TX, or you could try to do it yourself, but that might take a long time or it might fail altogether.
Furthermore, as the Ethereum rollback has shown when the original "DAO" was hacked, the vast majority of crypto project have some sort of backdoor that can and will be used.
The only thing crypto "solves" is oversight by governments, and the people who are interested in that the most are criminals or actors who have been sanctioned like North Korea or Russia. Somehow, I don't quite see the value in that.
First: I guess you guys are talking about mining pools, not miners.
Second: so long as there's one single mining pool that is not colluding, then any censorship attempt is going to be moot. You would need to have, not just 51% of mining-pool collusion, you need 100%!
Third: even if you had 100% collusion, this "problem" is actually being solved with technology, it's called Stratum V2 protocol. Stay tuned.
Last but not least: I'm really surprised this level of ignorance still exists in the HN community wrt crypto. I guess we are still early.
What we are talking about is something that already happened: the DAO rollback. So, it’s impossible? I’m really not surprised this level of ignorance exists in crypto fandom.
If the DAO rollback had been a successful attempt at censorship (e.g. 100% collusion of miners), then there would have not been a chain-split, but there was one, and as a result of that, both ETC and ETH exist today.
Now, if you're suggesting one-off cases like this are the counter-argument for the censorship argument, I'll bring you the bad news: this has never happened on chains that are not shitcoins, e.g. bitcoin.
(And what I mean with that is that bitcoin has never hard-forked to attempt a censorship attack like it happened with the ETH community. BTC has only hard-forked in emergency situations to fix bugs.)
This exposes exactly why crypto is _not_ a solution: It's only a preferable alternative when the broader societal context is a strong net negative. In the current US, while financial censorship can happen, it doesn't happen often enough that the pains of using crypto as a primary currency are are outweighed by the benefits. And if the situation changes to a place where that's true, we've got some bigger problems. That is, in that situation, making an economy function smoothly isn't as important as removing the problematic censorship. Our GPUs could be put to much better work than bitcoin.
This also doesn't account for a government being able to just outlaw cryptocurrencies. They may not be able to confiscate your bitcoin, but they sure can throw you in jail for trying to spend it at the grocery store. Or impact your ability to access the blockchain, etc.
So, people have no problem - say - redeeming tokens that have been through Tornado? Or trouble redeeming bitcoins that have been through known, sanctioned wallets?
How is “Everyone can see every transaction you have ever done” censorship-resistant, doesn’t that mean you have to be extra careful about every single person or service you have ever transacted with?
And, excluding the $5 wrench seems a really, really large oversight when it results in every single asset or piece of ”money” you own being irretrievably, instantly stolen.
> So, people have no problem - say - redeeming tokens that have been through Tornado? Or trouble redeeming bitcoins that have been through known, sanctioned wallets?
Nothing prevents us agreeing to trade those bitcoins for cash or anything else.
You are correct that some Bitcoins are "tainted", which is why it's not the absolute, most perfect cryptocurrency. But they are still censorship resistant. That was my point. They still can't be confiscated.
And to further your argument, if you want to find the best crypto that is actually fungible - that would be Monero (all Moneros are the same, there are no "tainted" or "blacklisted" Moneros). However, because of that very fact it is banned on exchanges and blacklisted everywhere. It's just too good.
Bitcoin is good enough to get popular yet at the same time shitty enough (traceable) not to get outright banned, that's why BTC is here to stay while better coins like Monero will perish.
> How is “Everyone can see every transaction you have ever done” censorship-resistant, doesn’t that mean you have to be extra careful about every single person or service you have ever transacted with?
Just to reiterate. It's because not even the government can confiscate your Bitcoin (them beating you into telling your seed phrase means you still giving it up and let's not pretend there aren't 21st seeds and duress phrases just for this very reason).
> And, excluding the $5 wrench seems a really, really large oversight when it results in every single asset or piece of ”money” you own being irretrievably, instantly stolen.
Again. Anyone with significant amount of crypto will not be public about it, will keep duress phrases, 21st seed words and extra wallets while giving up the minimum. In theory, with $5 wrench you could keep beating a totally innocent person hoping they give you a crypto wallet that doesn't even exist and if they gave you one, you could keep beating them until they give you the "other one" and the "third one", it just isn't a solid argument.
> It's because not even the government can confiscate your Bitcoin.
They can really easily do that though. A court can say "give us your keys or you are going to sit in jail until you do and we will record your conversations so if you tell the keys to someone else, we'll sell them"
> They can really easily do that though. A court can say "give us your keys or you are going to sit in jail until you do and we will record your conversations so if you tell the keys to someone else, we'll sell them"
So? If sums is high enough they STILL can't confiscate it. In some cases it is preferable to spend some time in jail versus giving up outrageous fortune. They still can't take it by force. Also, only a few countries with backward laws (like the United States of America) have laws that allow that. Something insane like what you propose would never be possible in a developed country with a solid judicial branch like Estonia, for example.
You can't travel overseas with billions of gold in your pocket. You can literally travel everywhere with billions in crypto saved inside your neural pathways. Crypto is better gold.
I feel like surely yours isn't a point made in good faith, because the point I'm trying to make is so simple.
If I've got $20 bill or a gold bar in my pocket, I can use it at the store if I can get to the store, but someone could easily confiscate it from me. If I have a $20 bill or gold bar buried in the woods behind my house, it can't be easily confiscated from me, but I can't use that at the store, even aside from whether I can access a store. If I have a cryptocurrency wallet, I can use it in the hypothetical cryptocurrency store if I can access it, and it also cannot be easily confiscated from me (assuming reasonable security measures).
The real criticism is "what cryptocurrency store?" and that's the real reason cryptocurrency isn't very useful. I'm not arguing that cryptocurrency is good or useful, I'm arguing very narrowly for one specific point: "owning cryptocurrency" is more like knowing something than it is like possessing something.
People still use it as a permisionless financial platform, which allows the delivery of novel consumer goods. Primarily gambling, speculation, and other forms of entertainment.
The volatility alone must be a dealbreaker for most people. Shockingly, the average consumer does not enjoy the rollercoaster thrill of having no idea how much buying power they'll have tomorrow.
Maybe, but the world's major currencies have a long way to go before they're anywhere near Bitcoin levels of volatility. At the moment crypto is suitable for speculation and not much else. As a currency it's only superior in a couple of use cases, namely if a government has frozen your accounts or you're doing something illegal.
Completely agree with the general idea of your comment. Although there are non-custodial (decentralized/P2P) exchanges that, because they don't hold user's funds, would not fall into the category that you have described. E.g.:
* P2P exchanges: LNP2Pbot, hodlhodl, etc.
* Decentralized exchanges: FixedFloat, Uniswap, etc.
Still, exchanges exist because there is a large demand of customers converting between fiat and crypto, also probably reduce transcation fee and time to be low enough to allow trading derivative products. Not perfect but probably a necessary evil.
The demand for simply converting from fiat to crypto to hold or spend it does exist, but is probably negligible compared to wanting to do the equivalent of investing or day trading.
