How the Feds bounced Binance
programmablemutter.com
programmablemutter.com
Making big $$$, obviously.
It's very clear that the whole decentralization tech angle failed a long time ago. I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up.
It seemed completely clear to me that a "Peer-to-Peer Electronic Cash System" couldn't tolerate such dysfunction. Usage as cash wasn't working. In the end capacity had to be promptly increased, or obviously there'd be huge problems for everyone.
The first nail in the coffin was that blocks weren't expanded. The second one was that while there were plenty alternatives, BTC retained dominance, and that even forks that theoretically were superior because they did what they were supposed to do far better, BTC still won out.
So clearly I was wrong, BTC wasn't functioning as a "cash system", and this obviously didn't matter to the BTC users, and didn't matter to the world at large either.
Thus eventually it dawned on me that there were maybe a few people out there that had some interest in a "Peer-to-Peer Electronic Cash System" and the "tech", but the vast majority out there were only interested in a world-wide game of hot potato, where the only point is to accumulate coins early, then sell them to some fool on the top, and cash out.
Decentralization was the original tech angle. Email, HTTP, the basic Internet infrastructure is all decentralized with only the minimal necessary coordination. Decentralized money is iffy when it isn't a real thing with intrinsic value like a metal coin or trading commodities directly.
Everything else though can absolutely be decentralized, somebody just needs to be happy about writing open standards and giving people the means to have systems that use them.
If a fork or alternative to Bitcoin doesn’t get enough people to think of it as money, then it doesn’t really matter if it is ‘superior’. It won’t win against the thing that a very large number of people think is money.
Edit: punctuation.
A good speculative instrument is also definitionally a bad currency, even aside from the technical “barriers” BTC faces.
As an instrument of enthusiastic speculation with rapid gains and fungibility, cryptocurrency became concentrated holdings of wealthy and unscrupulous speculators.
Oh, and of some governments.
Even Bitcoin proponents now longer propose "using Bitcoin" but "holding Bitcoin" and cashing out to fiat if they have to use money.
You are actually holding digital gold, not digital money which also needs constant maintenance to keep functioning (gold, for all its disadvantages at least doesn't need miners that keep mining just for gold to keep existing).
Like with gold the currency properties just aren't there. You would need to create the same financial constructs as with gold to add those properties. But would you want let entrust your Bitcoin to a custodian so you could use a Bitcoin backed currency? Not your keys, not your coins.
Perhaps they thought it was an asset that others would pay money for, like a pyramid scheme. They were buying shares of Bitcoin, essentially. People were buying financial instruments linked to worthless real estate in the 2000s; they thought they were (sufficiently liquid) assets, not money.
What evidence do we have that people thought Bitcoin was currency and not an investment instrument? I know there's some Bitcoin-as-cash going on, but how much, and how much today?
I don’t think Bitcoin will be a cash-type unit of account. It’s like gold: it is divisible and fungible, but a pain to actually use as cash. Hundreds of years ago gold became a store of value used to back paper currencies.
Bitcoin has value in that owning Bitcoin means owning a unit of account in a tamper-proof, global, decentralized ledger. To the extent many many people think that the Bitcoin ledger is worth holding units in (and not a fork or alternative), the units of the ledger become valuable.
When people treat Bitcoin as a speculative investment, what they’re really doing is expecting even more people in the future to consider Bitcoin THE ledger to want to own units in, which would make the units in the ledger even more valuable. But the type of value they’re expecting to see more of is already there: a huge number of people think the Bitcoin ledger is the ledger to own units in, and comparatively very few care about owning units in the forks or alternatives.
Doesn't that describe a pyramid scheme that's not yet bust?
If people think bitcoin will become more valuable, because they suspect future people will think it will become valuable, because future people think it will become more valuable, because future people think it will become more valuable, then eventually you run out of people and it collapses.
We can visualize this as the last person on earth not investing in bitcoin because there is nobody after him left to invest in bitcoin to make the price rise more. And by that same logic, the previous-to-last person wouldn't invest either because he knows the last person won't invest, and by that same logic, the previous-to-previous-to-last person wouldn't invest, etc etc etc. At some point the pyramid simply stops because it's used up all the fertile soil, and the growth itself was the only value creation. It stops ways before the last person on earth, the moment the market is saturated the growth stops and the entire thing collapses.
But if people think bitcoin will become more valuable, because they suspect it will be useful as a decentralized currency to more and more people, then it's not a pyramid scheme in the same way. Even the last person on earth would have ample reason to start using bitcoin, it's just a convenient way to be able to pay for goods and services in any context. Early adopters do get a big payout, but that's because they were early in on something that's valuable on it's own.
Obviously these days the later scenario looks less and less likely as Bitcoin's everyday adoption has slowed down, while Bitcoin's role as a growth speculation seems to have taken over.
The other big one is wide acceptance, meaning many different people being willing to accept it as payment for goods and services. You can argue that Bitcoin has achieved this as well, though maybe not as much as one might wish or dream.
Bitcoin was designed to be money, so it has the properties of money. That’s not true of pretty much any other type of speculative investment.
Edit: added more to first paragraph.
Yeah: silver.
There are many more requirements than that for an artefact to become money
Bitcoin misses out on most
For all meaningful fiat currencies, there's at least a moderately sized, easily definable, reasonably contiguous market that will accept the currency without a hassle. Even a stack of 5000KPW notes, you could take them to a shopping centre somewhere and spend them, although that shopping centre is in Pyongyang.
Conversely, Bitcoin acceptance tends to be a few random scattered vendors, and technical obstacles (poor connectivity) make it harder still. Even in El Salvador, despite their attempts to make it a legal tender, you're not going to be able to reliably and seamlessly spend Bitcoin.
And that's a huge problem, because the whole point of Bitcoin was decentralization and lack of need to trust anyone. And yet it seems the winner is simply whoever plays the PR game best and has the most inertia.
Yes, this was the last straw for a ton of people actually interested in developing the technology, and it's when a lot of people moved their primary focus to Ethereum.
In 2017, the Bitcoin developer community did a hard pivot away from "electronic cash" and towards this "store of value" obsession, where Bitcoin is meant to replace gold. This was an incredibly noisy and disruptive pivot that tore the community in half. These were the "Blocksize Wars", and I could rant for hours about them, but obviously not here.
The thing is, Bitcoin up until that point was functioning very well as cash. Starting in 2013 I was regularly using it to buy coffee from coffee shops, and pay my bill at restaurants, and with literally a one line change it could have kept enabling the cash use case easily for another decade, and with maybe a 20 line change proposed by Jeff Garzik in 2015, it could have easily scaled forever.
The focus on serving the financial industry over everyday users was a very deliberate one. It wasn't a bad move, tactically, just very disappointing.
We've seen the alternative play out in forks that have become completely centralized as a result of ignoring the tradeoffs with the technology in use, and as a result have been undermined with "functionality" like confiscation transactions (transactions that let miners take any coins they choose).
What bitcoin isn't is a paypal clone. That already exists and it's not of substantial value to the world to add another centralized high volume payments rail. It's absolutely fine that people also want to use it that way, but optimizing for that case can't come at the expense of the security properties that make Bitcoin interesting in the first place. Alternatives that make different tradeoffs do exist, and I think the results speak for themselves.
Except we know as software engineers that solutions to problems at scale are never that simple. The "just increase the block size limit bro" solution doesn't consider the externalities that increasing it would have on the network performance and decentralization. This is the same line of reasoning about this whole thread, compromising decentralization compromises the ability to use a credibly peer-to-peer (cash) system.
It changes the chain growth rate from up to ~52 gigabytes/yr to up to ~410 gigabytes/yr, it also means that the network takes 8 times as long to propagate blocks, which makes selfish mining attacks more viable, which weakens the game theory and adds a mining centralization force. Also consider that network bandwidth is a much more scarce resource for people in developing countries than it is for us in our first world country, and having a relatively-trustworthy payment system has a much greater relative utility for them than it would for us. And consider that full nodes don't only download blocks, they have to rebroadcast them to (ideally) at least 2 other nodes in order for blocks to even propagate at a decent rate.
This is data that has to be kept by somebody forever, even if particular users run pruned nodes, and the best way to ensure that it's readily available for anyone to inspect is to limit how much of it there is.
Since Bitcoin doesn't have state commitments, it's much less safe to use light clients, and increasing the bandwidth also shifts the balance more towards running light clients, compromising users' trust in the network. Making it more difficult to run fully verifying nodes like this is another centralization force.
Also, you should read about induced demand. https://en.wikipedia.org/wiki/Induced_demand
2. Most people, even today, use light wallets.
> Since Bitcoin doesn't have state commitments, it's much less safe to use light clients, and increasing the bandwidth also shifts the balance more towards running light clients, compromising users' trust in the network
3. Everybody except whales already uses light wallets. Even downloading the ledger in 2014 took a long long time.
> And consider that full nodes don't only download blocks, they have to rebroadcast them to (ideally) at least 2 other nodes in order for blocks to even propagate at a decent rate.
4. Rebroadcasting 8MB is nothing
> Making it more difficult to run fully verifying nodes like this is another centralization force.
5. Verification nodes aren't as important as miners and mining basically requires a lot of money put into ASICs so the system is already designed against the hobbyist enthusiast contributing to the network on their bedroom.
> Also, you should read about induced demand.
6. What's the point of a system if it can't scale?
And why shouldn't people in developing countries run full nodes? Are you saying it's fine for them to be dependent on service providers in rich countries that can then control/surveil their activity?
I ran a Bitcoin node on and off for 7 years. I remember the day it cost more to bootstrap an entire node than make a transaction. Your argument about "developing countries" and "internet costs" in other comments is completely disingenuous for this reason alone.
Bitcoin's runway was cut incredibly short by not raising the blocksize. The excitement around decentralization died because it was strangled.
> "We know as software engineers that solutions to problems at scale are never that simple"
Yes, L2s are needed - But it's insane to suggest 10x-ing the throughput at the bottleneck for a rounding error cost is a bad idea.
In what units?
If you're referring to the blocksize wars, you aren't looking at a long enough time horizon. No system can afford to keep settlement records of every transaction processed by VISA/Mastercard for the rest of eternity. In order for bitcoin to finish displacing existing payment systems some sort of off-chain settlement is unavoidable.
Refusing to increase the blocksize forced people to start working on this instead of just kicking the can yet again. And hey, guess what, five years later I can use Lightning to upvote posts on https://stacker.news (without even waiting for the next block to be mined!).
So once all the coins are mined and if there are not many p2p transactions occurring, then what incentive is there to mine and support the network?
Will coin owners just mine their own private blocks whenever they need to move coin?
Curious if this has already been considered by the bulls or bears. Seems like bitcoin will need to increase the upper limit of coins to continue to work.
I'm more curious how they plan to handle a drop in popularity from a security standpoint. Will the total compute always need to remain high enough to keep a bad actor from dominating? As popularity wanes that sounds expensive.
Ideally without compromising security, which can be done with zero-knowledge proofs and such. But it's unclear if the political will is there from the community around the Bitcoin project.
There's a single world-wide winner of the mining competition per 10 minutes. So if you want to have free transactions 50% of the time, the way to get there is to take the current world-wide mining capacity, and replicate it.
That's obviously not a viable tactic.
Is this a bitcoin you have in a cold wallet somewhere? Are you running a connected node with the intention of exchanging your bitcoins with someone else? Or is your "bitcoin" just an entry in an exchange's ledger somewhere, in that case is it a bitcoin or just faith in that exchange?
Is a bitcoin a store of value in the same way a bag of uncut diamonds is a store of value?
https://bitinfocharts.com/comparison/bitcoin%20cash-transact...
BCH has plenty spare capacity, but the actual usage shows it's not taking off. The idea of buying coffee with crypto is dead.
In this scenario, when do people cash out.
It seems like if people starting cashing out in large numbers, some folks are going to end up losing money.^1
1. Assuming they spent any money to acquire their Bitcoin.
Or, people will flood out to someone who hasn't been hit by that "contagion", because the entire point is to have unregulated money.
For some vanishingly small percentage of crypto-faithful, maybe. For the vast majority, the point is to turn (regulated) fiat money into more (regulated) fiat money. Or lose it all trying.
TLDR there is always a throat to choke in meatspace.
Most private crypto coins are private by declaration rather than robust mathematical proofs (often because proving the absence of side channels is very difficult)
[Edited for some horrible mobile autocorrect attrocities]
For example: https://crypto.stanford.edu/timings/paper.pdf is for zcash and monero
It’s possible that someone comes up with a robust mechanism but if you interact with any other coin (crypto or fiat) it can expose additional side channels that are impossible to close.
Crypto is easy to make both transparent and regular.
In the few cases I’ve seen someone expend effort on it, it was trivial. Most people have terrible opsec. Even if you do, if you transact with someone who doesn’t (or who will deanonymise you for shockingly-trivial compensation), you’re partly compromised.
It's true that people sometimes get caught via chainalysis/etc., but I think there is a lot of sampling bias here. Someone who isn't an idiot and washes their funds through dodgy asian exchanges/privacy coins is probably quite safe, even compared to using cash.
Demonstrably untrue. Also, many people using crypto are unknowingly commiting crimes. They're not the smartest bunch. Between taxes and reporting requirements, you can usually nail a crypto user with less than $1k PI time.
Great reference, I found it at: https://ens-paris-saclay.fr/sites/default/files/Laboratoires...
Reading it right now.
However, a significant volume is being traded today on DEXs (ie: uniswap). The OP fails to mention that. Uniswap did around $1bn in volume on a Saturday. These amount are very hard to fake as uniswap fees are simply brutal comparing to CEXs. This means a part of the market has moved off-grid and it’s significant. I don’t think the article argument can ignore that fact.
Yes, there's the SAR lookback, but no one reads those anyways and probably won't give the government much because criminals routinely use accounts registered with fake or stolen IDs. Binance still accepts customers from countries like Venezuela, Nigeria, Zimbabwe, etc that "respected" financial institutions wouldn't touch with a 39.5 foot pole. There are still people making $50,000 USDT -> cash transactions every day with Binance P2P.
I've been reading about how that is imminent here for 3 years now.
Theranos seemed ultra sketchy for a long time before something actually happened.
I think we are completely missing something in the discussion of stable coins such as Tether and USDC even if they are not equal: while the currency is fixed toward the dollar in the blockchain, they receive interest on the real money they have (whatever real balance it is). This could make them very profitable with time.
$94,120,164,388.60 > $90,912,507,793.55
[1] https://blockworks.co/news/tether-pushes-back-timeline-on-au...
That and they are fully cooperating with regulators (ie: they have blacklist functionality in their smart contract)
They also use it for OTC transactions, which are typically also hedged on centralized markets due to their uncertainty.
The centralized markets also function as banks, where you can borrow or cross-margin your positions.
So it works, it's just that only using blockchain is not good enough to deal with speculation needs and market volatility.
The decentralization aspect was mostly necessary in the early days to avoid being shut down by government. Now that crypto is widespread, it is not as important. What is important though are things that are missing from our current fiat monetary system; transparency and reliability.
While the fiat monetary system appears to be very reliable for the individual, it is in fact extremely unreliable due to its lack of transparency. Governments can easily manipulate the supply (and therefore the true value) of currency behind the scenes without your knowledge and that is one of the primary mechanisms via which it steals wealth from individuals and deprive them of opportunities.
Arguments against cryptocurrency are essentially saying that these individuals who are being robbed and deprived of opportunities don't matter because the system only needs to work for rich people and fool the poor into thinking that it doesn't harm them.
Unfortunately, many poor people understand exactly how the system robs them.
- It devalues our salary contracts via inflation of buying power.
- Centralized currency creation centralizes opportunities due to the Cantillon Effect and this creates an asymmetric playing field which unfairly benefits corporations and large organizations.
- Given that income tax is levied against each transfer between individuals, newly issued currency cannot travel very far from the government money printers as each hop away from the printers incurs a significant additional tax in the remaining untaxed amount which keeps shrinking. This exacerbates the Cantillon Effect and punishes regional areas and individuals who are far from the centers of money printing. It keeps all economic activity on a very short leash which is held tightly by the government.
None of those have panned out. Reliability and transparency aren't there either, because the state of crypto so far is that people keep on falling for scam after scam and getting screwed.
No, just like with the original concept of "Peer-to-Peer Electronic Cash System", there's very few true believers that are into it for any such reasons like decentralization, reliability or transparency.
The vast, vast majority just wants to get rich. It's that simple. The technical merits or characteristics of the underlying system are completely unimportant to the vast majority.
In any case, individuals should be allowed to choose their monetary system and not be coerced into a specific scam which is what the fiat system is. If people could choose who their scammer is, that is already progress from what we have now.
I think the theory that they're intentionally enabling scams though fails occam's razor. A simpler explanation is that they're lazy and dysfunctional, it's much much easier to prosecute a scam AFTER its vanished everyone money than before.
At that point you may as well admit the system is malicious by design as its complexity facilitates advanced incompetence.
As far as the sponsorship. I think that is largely due to the general advantage scams have: Real systems have limits and honest people will be willing to admit to them. A scam can promise the moon because they're not beholden to the truth or reality.
Parties who aren't thoughtful will flock to the scams that promise them all they want to hear: "Our blockchain is green, organic, whole food, and promotes equality for disenfranchised African dwarfs at unlimited scale!" --- "Sounds great, you rank 10/10 according to our metrics, here's a grant!"
If crypto has reliability and transparency, then how did FTX happen? Transparency should have made it obvious to everyone something fishy was going on very early on.
Can you provide an example? Central bank fucking with interest rates or doing QE is broadcast widely to the public. If one believes such moves will de-value the currency, there are ways to hedge against that - including the old standby: gold. And what does "true value" mean in this case? The value of anything is what someone is willing to trade for it. There's no "true value" the government can set that won't show up in the market somewhere.
The government has historically benefited those who understood the system, but it doesn't benefit them now. Quite the opposite. The system is now working against those who understand it most. That's why we're seeing a decline in the west.
Obviously the number of big macs you can buy per unit currency.
This certainly has not been the case with 'big tech' or 'big insurance'. Regulation amounts to slaps on the wrist, fines. Not being shut down or the key people arrested.
Mandate that all government spending use a block chain so that all citizens can see government spending. All public finances visible to all citizens.
I think we have got it backwards trying to use the technology as untraceable peer to peer currency, instead focus on visibility into government finances to combat corruption and nepotism.
https://fiscaldata.treasury.gov/americas-finance-guide/feder...
I’m not really buying the sociological/political angle in the article. The centralizing force is attention.
If only we could limit problems to death, and not taxes! And I got paid interest rates!