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horsawlarway

But that ledger isn't accurate. It's just distributed and difficult to change.

I technically am the owner of (quite a few) bitcoin that were being processed by MtGox when they imploded.

The wallet they were in at the time was emptied and no longer exists.

I still receive the relevant court documents as the case continues still.

As far as the ledger is concerned - they are no longer mine.

---

So question to you: How do you reconcile the theft of my property with the ledger at this point?

It turns out I have no ability to do so at all. The ledger is distributed and impossible to meaningfully change.

So while I trust that the ledger can't be changed easily - I don't trust the ledger to accurately reflect ownership (it can only represent possession, not true ownership).

So now what?

Now it turns out I have to turn around and trust a central authority anyways! That authority being the government that is handling the prosecution of MtGox for fraud and theft.

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“I don't trust the ledger to accurately reflect ownership (it can only represent possession, not true ownership).”

Possession is ownership on the Bitcoin network. Not ownership in the sense of it is written down in some legal document somewhere but ownership in the sense that you have the power to perform a transaction with what you say you own.

You were trusting a central party all along. If you didn’t you wouldn’t be in the position you are in.

But the alternative here is that you have to place all your trust in an unknown and untrusted 3rd party to ever actually make an exchange.

Even the silk-road used an escrow service that required that the seller trust the buyer, and both parties trust the silk-road. (a buyer places coins in escrow with the silk-road, the silk-road confirms it has the coins to the seller, the seller ships the product, the buyer unlocks the coins escrow upon receipt)

So the whole things boils down to "trust" and it turns out that the ledger can't actually provide any trust.

After enough confirmations a transaction is final and I can trust that the transaction is final and my account balance on the ledger is correct.

Present forms of digital cash do not offer this. A payment can be reversed if the buyer claims the transaction was fraudulent and the banks involved agree to reverse the transaction. Money can be accidentally withdrawn from my account and I have to ask the bank to return it. In both these cases if the institutions involved refuse to return my money then I have to take the issue to court and I am deprived of using or investing this money in the meantime.

If consumer protections are your concern these laws exist in many countries regardless of the payment medium.

But the trust that a bitcoin transaction is final isn't enough trust to make an exchange!

Lets say you and I decide right now that we're going to use these comments to make an exchange. I will give you $5 of bitcoin in exchange for you mailing me a postcard.

Now what? How do we proceed in a meaningful manner?

How do we go about making that exchange happen if we assume that either party is self-interested, and not interested in actually completing the deal?

If I send the bitcoin first? - the second it hits your account you know for sure it's yours: No need to bother sending the postcard - that's just cash out of your pocket.

If you mail the postcard first? - Well, job's done for me, no need to send any bitcoin at all.

What if we both agree that we trust Bob, and you send him the postcard, and I send him the bitcoin, and he only forwards them along after he gets both? - Oops, now Bob can do all those things you complained about letting the bank do! He can send that bitcoin back and I won't ever get a postcard. He can mail the postcard back and you won't ever get any bitcoin (Transaction reversed!). Worse, he can take anything you give him and do what he wants while he has it (like disappear!) - or hold them much longer than you'd like after he gets them. (Freeze it).

How do you get your stuff back from Bob? Same way you would from a bank - appeal to the government.

Basically - Bitcoin without enforcement is only a ledger. The thing that keeps it in check with reality is an appeal to an authority somewhere, who provides trust that both parties in an exchange aren't getting screwed.

"But the trust that a bitcoin transaction is final isn't enough trust to make an exchange!"

Correct. Who said it was?

"How do we go about making that exchange happen if we assume that either party is self-interested, and not interested in actually completing the deal?"

We don't make that exchange in that case. Or like you mentioned we both acknowledge that we don't trust each other and get a trusted third party involved who we both trust more that the each other. No payment method is immune to this. Notice though that regardless of how much trust that we have or don't have for each other we can both trust that if you do send me $5 of Bitcoin I will receive it. Provided I've taken the necessary steps the transaction will not be reversed. Also note that if I wish I can also be certain that no one can erase whatever I rightfully claim is mine from the ledger or transfer it to another address once I have received it. This cannot be said for any non crypto digital payment system currently.

Bitcoin is a shared digital ledger hosted on a transaction network that is not controlled by a single trusted third party. The thing that keeps the ledger in check with reality is the correctness that it guarantees to those who are using the network to send and receive payments.

If you say you are going to send me a 1700 sats to post a postcard to you and I deliver as promised but in reality you don't perform your part of the deal the ledger is still correct. You still owe me 1700 sats according the deal we made and I can confirm this by checking the ledger. The ledger itself does not know about the deal we made but we both know we made a deal and according to that deal you still owe me 1700 sats. Now with a traditional bank what happens if you claim you sent it and the bank says you didn't. How can I verify that the transaction took place? I can't. I have to trust what you or the bank tell me and I don't know who is telling the truth. Maybe the transaction got lost. Maybe you didn't send it. There is no way to discover the reality of the situation without having to make an uninformed choice about who I trust.

At present Bitcoin is still clunky and has many issues both technical and non-technical to overcome. It is unknown whether these issues can or will be overcome. It has a far way to go if it is to realise the creators vision in a meaningful way by gaining mainstream adoption and use as "digital cash".

> The ledger itself does not know about the deal we made but we both know we made a deal and according to that deal you still owe me 1700 sats. Now with a traditional bank what happens if you claim you sent it and the bank says you didn't. How can I verify that the transaction took place? I can't. I have to trust what you or the bank tell me and I don't know who is telling the truth. Maybe the transaction got lost. Maybe you didn't send it. There is no way to discover the reality of the situation without having to make an uninformed choice about who I trust.

Because the bank is acting as the (government approved) escrow service! Basically - The bank is arbitrating the dispute to resolve it (whether you like how the bank resolves that dispute is mostly irrelevant here).

Let me ask you to follow up, given what you've said:

> If you say you are going to send me a 1700 sats to post a postcard to you and I deliver as promised but in reality you don't perform your part of the deal the ledger is still correct. You still owe me 1700 sats according the deal we made and I can confirm this by checking the ledger. The ledger itself does not know about the deal we made but we both know we made a deal and according to that deal you still owe me 1700 sats.

Now what? Fill me in on how we resolve this situation in your mind, once we've reached this point.

"Now what? Fill me in on how we resolve this situation in your mind, once we've reached this point."

In the example you gave whether we chose to transact in cash, wire-transfer or bitcoin the result would be the same. I would have to rely on layers, civil or criminal courts, police, insurance companies, debt collectors, thugs or myself to physically retrieve the funds (or equivalent) if possible. If that was not possible some form of fair physical or financial punishment would be dealt to you or not. Honestly for that amount of Bitcoin I wouldn't be bothered and wouldn't follow it up. I would just never do business with you again and from that point forward never relinquish physical custody of goods for sale prior to receiving payment.

"Because the bank is acting as the (government approved) escrow service! Basically - The bank is arbitrating the dispute to resolve it (whether you like how the bank resolves that dispute is mostly irrelevant here)."

Trusted third parties will always be an issue where there is no trust between the buyer and seller. Sure multisig helps but the difference is Bitcoin gives us power to choose who we involve in the transaction. I and the other party I am transacting with combined are not forced to involve any one individual, company or nation state in the transaction if we do not wish them to be part of it.

I think you are conflating trust in the Bitcoin network with trust in the humans transacting over the network. Regardless of the medium of exchange in order for transactions to occur we as humans need some level of trust in the party we are transacting with, trust in the network we are using to perform the transaction and trust that other humans are going to continue to value the medium being exchanged. Not everyone's level of trust in these aspects are going to be the same and people are going to value some aspects more than others.

Personally I think if bitcoin doesn't overcome some of its hurdles soon it will probably just turn into a form of the existing banking network through legislation. It's already beginning to look like that with most individuals storing their Bitcoin on exchanges. Private wallets will be banned, transacting with non KYCd entities will become impossible using regulated custodians and any Bitcoin received from (or linked to) non KYCd addresses will be automatically seized by the government. At that point the supply can be artificially inflated. The number of Bitcoins in your account doesn't actually have to reflect the amount of bitcoin the custodian holds for you. The surveillance apparatus will become hyper focused on the Bitcoin network and everyone interacting with it. Like Ross Ulbricht you may be able to resist seizure of your Bitcoin but it will just result in a lengthy prison sentence. It may not stay like this forever though.

So do you want a postcard? :)

> Personally I think if bitcoin doesn't overcome some of its hurdles soon it will probably just turn into a form of the existing banking network through legislation.

Ok - I think we're pretty closely aligned here.

I'm further along that trajectory than you, mainly because I think this isn't really an optional outcome that might be avoided, but rather the only functional end state of a currency: The currency is only as good as the government that mediates its exchange.

If mediating that exchange incurs costs, then the government will take steps to either stop mediating those exchanges (ex: China - where all crypto exchanges are illegal by default, so the legal system can no longer be used to offset the cost of those exchanges at cost to itself) or it will bring that currency under control so that it can make those costs predictable and acceptable (ex: The US - where crypto is getting "all the bad bits" added back through legislation)

Which means the original intent of crypto only works in this honeymoon period (which I actually think ended not too long after the silk road went down) where it happens to get treated as an asset by a government that hasn't yet found out that they're essentially mediating exchanges in a foreign currency for free (not something most governments want to do).

"The currency is only as good as the government that mediates its exchange."

That's an interesting way to conceptualise it but I see it from a different broader perspective: A government is only as strong as its ability to issue/acquire meaningful amounts of a valued currency.

Anything that negatively affects these activities will be killed or subjugated to contribute towards them. Bitcoin in its intended form is detrimental to both of these activities so it will be sabotaged by governments one way or another until it is not.

Bitcoin has unique properties that drive it's adoption but all these properties can be diminished or undermined by laws.

"Which means the original intent of crypto only works in this honeymoon period"

If Bitcoin had managed to gain widespread adoption and a large enough percentage of its users held their private keys then it would have been too difficult and unfavourable for governments to start attacking it.

The unsolved technical issues hindered adoption so Bitcoin has been relegated to a volatile store of value giving government the time to realise the threat and act accordingly. Regardless of how unreasonable, harsh or onerous a set of laws are they can be effectively implemented if the portion and power of people they affect is small enough.

You're overlooking defi, this is the thing being revolutionized right now; you can make all the transactions you can afford to pay transaction fees for, trade hundreds of assets, swap tokenized USD for tokenized EUR, all without an intermediary.

To be candid, you are generally trusting the contracts you're interacting with to be bug free, but you are able to audit the code just as easily as anyone else, and verify that the contracts are as advertised. Unlike dealing with a bank portal, all the logic running on the blockchain is visible and verifiable.

Afaik markets use multisig now, so the facilitator never has access to the funds unilaterally.

Not your keys not your coins. Unless you trust some central authority to take care of you, which you should by now understand that doesn't always work, and when it doesn't work, it's usually a spectacular failure.

So to answer your questions. Although possible, no reconcile is the pure spirit of a trustless network. Now? you make sure to avoid custodian services and keep your keys safe. or stay away from crypto until/if it becomes as ubiquitous as the Internet.

So we both agree - the ledger is "accurate" only in the sense that the ledger matches... (drumroll) the ledger.

Which is entirely true, and there are some useful properties to that, but the whole thing falls down the second you have a real dispute over the trade of goods for value (which I might remind you, outside of the pure speculation/gambling that occurs in bitcoin pricing, is the point of actually holding a currency).

So how do I go about safely spending these things? Oh - it turns out that still only works in the context of a central authority and the legal system they support.

the dispute concern is long solved. it happens every day with cash, but also with other form of payments. freight shows interesting practices. and, escrow is still an option.

Spending these things? I can show you how to hold securely some wallet with your own private keys (no custody), receive then "spend" these things for a few pennies per transactions and with the guarantee nobody will interfere with our exchange. from wherever you happen to reside. there is no central authority able to (practically) control many of the blockchain networks out there.

> Spending these things? I can show you how to hold securely some wallet with your own private keys (no custody), receive then "spend" these things for a few pennies per transactions and with the guarantee nobody will interfere with our exchange.

Yes, and because no one can interfere in the exchange, no one can prevent either party from abusing the other, and no third party can later reconcile the dispute without an outside framework.

I find it pretty unbelievable how comfortable the crypto crowd is about just dismissing reconciliation, when it's literally some of the oldest history have, and one of the more important roles of a functioning government (we literally have 4 thousand year old stone tablets dealing with this: https://en.wikipedia.org/wiki/Complaint_tablet_to_Ea-nasir)

> Not your keys not your coins.

so the same thing as "code is law", which is a fundamentally bad idea.

No idea is perfect. I find that one preferable over the other popular alternatives where a few people's whim are the law. Note: code is law doesn't imply it can't evolve, adapt, improves. the idea of code is law is the same as being against retro active legislation.

>Now it turns out I have to turn around and trust a central authority anyways! That authority being the government that is handling the prosecution of MtGox for fraud and theft.

In theory, DeFi can solve this. In practice it is hampered by poor UX and high transaction/gas fees. I think in the far future, the idea of ever having "your" assets in a wallet whose key you don't control will be seen as a ludicrous archaism. Sorry for your loss btw, that really sucks

> Sorry for your loss btw, that really sucks

You and me both - 41 bitcoin at $4.17 a piece. Admittedly, if they hadn't been stolen I was planning on buying a 1/4 of weed with them, so I probably wouldn't be rich either way... shrug

Fun story though - I can honestly say I spent more than USD 10 million in bitcoin on weed in college. Only about $500 at the time.

You know they recovered 150000 Bitcoin from a cold wallet and are going to repay holders?

You should be getting some of them back soon then right?

This exactly.

Turns out there is some utility to a central authority.

Proof of Authority systems

Not your private keys, not your coins. You CHOSE to gamble with your property when you gave it to someone else. Whether you understood this before you lost your property or not, is irrelevant. I've not lost any of my coin UTXOs associated with my own private keys. Unregulated, foreign Magic The Gathering trading card exchange use was never a wise choice from the day Jed McCaleb started that garbage database.

I see your perspective. There's another perspective from which you could look at the details of your situation.

You deferred to a trusted party to secure your wealth and because that third party was untrustworthy, you have to defer to an intermediary.

Had you deferred to yourself to secure your wealth you wouldn't be in this situation. The ledger would be the canonical one of ownership and possession, and you wouldn't have to defer to anyone.

Basically, you kept your bitcoin in a traditional, legally enforceable arrangement instead of the bottom layer, algorithmically enforced environment and now have to defer to the traditional system to restore possession.

Ok - so follow along with me here:

I owned no bitcoins at the time I desired to trade bitcoins for a physical product (in this case: ~7g of Cannabis)

What recourse do I have that does not require trusting a third party?

I do not own the required compute power to mine it myself (not technically true at the time, although certainly true today)

I'd like to have you walk me through the exact set of steps to acquire my bitcoin and use them to purchase that physical good, where I can magically avoid placing any trust in a 3rd party.

They want you to go back to frontier days before specialization in the economy, you are supposed to hoard your wealth yourself and protect your family with a gun

This exactly! (not to mention only ever making exchanges in person, because remote exchanges require trust)

Which is hilarious. Because that's actually all that bitcoin was good for: black market deals/trades, where enforcement is left up to you anyways.

Unfortunately, that makes it a (fucking terrible) medium of exchange for absolutely anything else, unless you add back in all the government regulation that the crypto folks hate.

You could have reduced the risk substantially by transferring off their wallet to yours right after purchase. You still could have purchased your weed too.

There was no holding. It wasn't an asset I was interested in holding, it was a medium of exchange to purchase a good I couldn't otherwise get.

The coins would sit in the wallet for as long as it took me to figure out how to place an order on silk-road again, where I would buy down to as small an amount of bitcoin as I could.

I got unlucky the last time through and hit it right when the service went down.

Which is funny - because the attitude that I should be hiding my coins away as tightly as possible is exactly why I'm so non-plussed on bitcoin: It's no longer an medium of exchange, it's a speculative asset with price completely unhinged from utility (which in my opinion is basically just buying black market goods).

1) generate a private key,

2) move it to the private key.

When you're ready to spend it, spend it. Those places where you were looking to buy cannabis have escrow services, at the time you'd have had to trust the platform only upon purchase, nowadays multisig escrow is standard, which requires significantly less trust in a single party.

Move what to the private key? How do I get those coins in the first place?

Move the bitcoin to your brigade key.

However you can.

Any time you make a purchase, of anything, you're trusting the seller. Leaving it in their custody is where you screw up. Imagine you bought bitcoin from me, but then asked me to hang on to it for you for free. Or a car. Or anything. It's absurd.

Ok, so we're in a spot where trust is literally required - but the ledger cannot be updated to reflect when that trust was broken or misplaced (at least not without falling back to an external power - namely: government).

So again - the entire value of the medium is predicated on having a legal system you can use to resolve these disputes.

Following - that legal system requires all sorts of control to actually resolve those disputes: Many of the things bitcoin advocates actively rail against are just methods of reconciliation (Funds freezing, reversed transactions, 3rd party control of assets, etc).

So either

1. The legal system will stop supporting exchanges of that medium (see: China)

2. The legal system will add back all those controls (see: Legislation in the US)

Basically - My entire point is that bitcoin only has value if current governments support its exchange, and they WONT do that if it's a negative to them (and it is, unless they can tax and control it).

> How do you reconcile the theft of my property with the ledger at this point?

Authorities must find whoever received those bitcoins and make them transfer the funds back to you.

You know, there is a reason why crypto people chant "Not your keys, not your coins".

Sure, but value without an enforcement mechanism is not very useful.

People usually want to trade stored value in exchange for goods and services (at least in a functioning value store - I don't really believe bitcoin serves that purpose at the moment).

So lets say we agree that I pay you 10k in bitcoin in exchange for you remodeling my bathroom (and ignore how unlikely this scenario is with real crypto currencies). I pay you 50% up front (to purchase materials), and 50% on completion.

Then you run off with my initial 50%.

Now what?

----

Every solution I've seen is riddled with pitfalls and gotchas

- Use escrow? Wait - now we're just trusting a central authority again.

- Use Eth contracts? Well, maybe - but it requires a perfectly written contract or you're open to all sorts of strange edge behavior and side effects.

- Sue over the theft? Now the central authority is just the government again, and we're back at square one!

You see the disconnect I'm getting at? Eventually, if disagreements occur about how value was traded, there has to be a reconciliation mechanism. Right now, even in modern crypto - that reconciliation mechanism is still a central authority: Your government.

You're conflating two issues with each other. One is having a decentralized currency with a fixed monetary policy. Another issue is the counterparty risk.

Bitcoin is not designed to solve the counterparty risk, it's just a digital cash that has a fixed emission schedule. It can be stolen just like regular physical cash can be.

Smart Contracts try to solve the counterparty risk issue, but it's just an extra layer around cryptocurrencies, that has it's pros and cons.

See, I think you're disconnecting two issues which are inherently related.

Fraud is not going anywhere anytime soon. If you have no proposed mechanism to reconcile fraud, I'd argue there's not any true value stored.

If the proposed mechanism is "just use the existing government" then the whole house of cards in built on the back of that central authority enforcing ownership for you anyways in which case why not just use the currency that authority already sponsors and has a proven track record of enforcing?

The reason I am disconnecting those issues is that Bitcoin was never designed to solve the type of fraud you're talking about. There is no proposed mechanism to solve it, because it's outside of it's scope.

It was designed to solve a specific set of frauds related with having a central authority though: censoring people from financial system, seizing your savings from your bank account and debasing the currency for the benefit of the political elite.

Counterparty risk is real, but there are other ways to solve it, besides having a central authority that has the power to revert transactions, which comes with it's own risks.

But now we're back to a spot where bitcoin doesn't work as a fungible good without an appeal to an outside authority of some sort. Whether that's escrow/insurance/legal contract/etc.

We started with:

"Anyone who says blockchain-driven assets don't have intrinsic value seems to ignore the value of trust - the ability to trust that the ledger is accurate seems extremely valuable."

Except the ledger doesn't actually provide any remedy to counter-party risk at all - I still have to trust a 3rd party at the time of exchange.

So the value of bitcoin is entirely dependent on the risk of the counter-party (because I have to pay to offset that risk, whether that's insurance, a private militia, legal contract enforced by a gov that I pay taxes to, simply eating the lost coins, etc)

Which means the intrinsic value of bitcoin is dependent on my ability to offset that risk - which I realistically (as a law abiding citizen) have to rely on the government to do, because the government has a monopoly on violence and imprisonment.

Which means the intrinsic value of a bitcoin is entirely at the whim of government control anyways. (which we already have an intuitive understanding of - this is why the price will fluctuate so much when news about government regulation or enforcement breaks).

The ledger gives you a guarantee that only you can spend the BTC that you have access to. Nobody can "freeze" your UTXO or forbid you from accepting transactions.

Sure, the state can declare that the Bitcoin you own is not legitimate. It might do so because you're unable to prove the source of funds or maybe because it doesn't like your race or something else about you.

The cool thing about Bitcoin is that it is money that is separated from the state, the same way like Gold is. So as long as you can find a jurisdiction that considers your funds valid, you can escape your state violence. Of course this has it's pros and cons, but that's how it works when you separate money from the state.

This is the 5th comment that I'm making with this throwaway account, after which, I believe, I'm going to be rate-limited and unable to reply for a day. So, sorry for not being able continue this conversation :D

> The cool thing about Bitcoin is that it is money that is separated from the state, the same way like Gold is. So as long as you can find a jurisdiction that considers your funds valid, you can escape your state violence. Of course this has it's pros and cons, but that's how it works when you separate money from the state.

But this is true of all assets!

Bitcoin's only tangible value is that it weighs nothing (which is actually a nice property if you're fleeing your current government - gold is heavy!). But I don't think that's enough to make it a good long term value store for the amount of capital pouring into it.

And just like other assets - I believe its value is entirely based on having a government somewhere that will enforce a code of conduct around exchanges of that asset, and a definition of ownership.

The government issues the currency because the government is able & willing to do absolutely anything in order to resolve disputes between parties that involve real assets - up to and including killing people, killing corporations, or even trying to kill other governments.

Without that commitment, bitcoin sits in a really strange place. I don't believe it will hold value if the governments of more major economies stop supporting it.

Either way - Appreciate the conversation! Thanks for helping fill some time on an otherwise boring afternoon before the holidays!

> seizing your savings

If I'm understanding this thread, you're saying that bit coin is simultaneously designed to allow for this kind of seizure and not.

Swap the mtGox hacker with the government.

It's useful keeping the two problems connected though, since both are features of competing payment methods

Not sure why you're being downvoted for providing a good answer here. When you use Bitcoin, or cash it is solely your responsibility to protect that counterparty risk via your own means. Without a contract and receipt, the same would happen to your cash if you walked into a business and the owner decided to keep a small sum of your money with no record of transaction. If you gave a shop owner or autobody mechanic $50-500 cash with no receipt he could very easily just keep your cash. You have no recourse. Call the police? Doesn't matter in real life because you have no receipt or contract. It's your word against his. Since I see that you've just replied and still want "recourse" if someone steals your money I'll just clearly spell that out for you. You cause the level of recourse of your stolen money that you require. Whether via violence or a counter-theft and damage to the thief equaling what was stolen from you. It's left up to you with Bitcoin. If you can't stand the heat, get out of the kitchen. We don't want government intervention.

Except you just wrote a long comment telling me that I should be using government intervention if I want to actually trade bitcoins for goods or services.

You hinted that somehow a general user of bitcoin might have the power to influence or extort a third party to offset risk - but the reality of the situation is that the only entity I'm in contact with that can provide the resources to influence or extort a 3rd party is my government (doubly so if we assume I'm still bound by my local laws and rote violence isn't an answer).

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