Crypto is like the invention of ink that cannot be erased. How that technology would weaken trust and accountability is beyond me. It's literally perfect for finance (especially once multi-sig wallets become common). If Celsius had been more all-in on crypto tech, they would have had FEWER problems.
Also, I don't know any law that exempts crypto companies from being taken to court.
> How that technology would weaken trust and accountability is beyond me. It's literally perfect for finance
Because modern legal systems and modern economies work on the assumption that malfeasance is a reason to un-do what crypto systems want to make indelible. This is an obvious and obviously good thing to people who are not absorbed by this odd groupthink. That impedance mismatch is an excellent indicator of why this technology is viewed as stuff for cranks and grifters, even were there useful applications to be had for the public.
> Also, I don't know any law that exempts crypto companies from being taken to court.
...while at the same time the crypto community is wracked by disposable entities fleeing into the night, beyond any practical legal reach.
On the other hand, if somebody compromises your debit card, Bank of America will make you whole while they reverse the transactions on the backend.
The legal system can only be used to settle payment disputes when parties are known. Buying a tv from the back of a van going home to find out it doesn't work will leave you with little legal recourse. The legal system can only work with entities within it's power. Get ripped off from a foreign supplier can require a lawsuit if available to you in an unfriendly legal system. Cryto can solve these trustless entities problems.
Bank of America can do very little for your Russian payment disputes.
> Get ripped off from a foreign supplier can require a lawsuit if available to you in an unfriendly legal system. Cryto can solve these trustless entities problems.
It is important to understand that crypto is not an expression of finance (although financial transactions do take place on top of crypto), but an attempt to express law outside of the bounds of IRL legal frameworks, stating, "code is law", which is of course, not true. The legal system always takes precedence when they have a monopoly on force (financial and physical), which is why crypto is destined to be a niche system so long as it does not have mechanisms for the legal system to exert its will on it. What is business logic of traditional systems if not expressions of business rules operating within the constraints of legal frameworks?
It is not about immutability or what level of transparency the ledger has, it is about control and who can influence both business as usual contract execution and exception handling. It is a power struggle. Don't miss the forest for the trees.
"Code is law" is a property of Ethereum Classic, not all cryptocurrency. I don't really see many crypto people arguing that code should supersede law.
I'm no expert but I understand that undo-ing transactions is pretty trivial if you use multi-sig. The owner and the bank (or government) can each have a signature, and a chargeback can occur when both signatories agree to execute it.
By the way, the law already has ways of punishing irreversible actions (i.e. murder, destruction of property).
> I don't really see many crypto people arguing that code should supersede law.
Evading tax laws or conducting illicit transactions is a core appeal of crypto, and obfuscating identifiers in crypto to achieve those ends is what crypto tumblers are all about.
> I'm no expert but I understand that undo-ing transactions is pretty trivial if you use multi-sig.
Per [1] multi-sig only lets you require multiple signatures to create a transaction, reducing the chance you do something stupid, so sort of like a physical check that requires multiple physical signatures. Multi sig doesn't let you (or the other signers) reverse the transaction once it is complete.
For that, you must contact the recipient and convince them to return the crypto, hopefully by asking them nicely.
> Crypto is like the invention of ink that cannot be erased. How that technology would weaken trust and accountability is beyond me.
The other important aspect of a working financial system is the ability for a 3rd party (courts/law enforcement) to undo transactions. Crypto makes that impossible without the cooperation of the offender.
Many traditional types of payments, such as wire transfers, cash etc. are also non-undoable.
Incarceration and a variety of other tools at law enforcement's disposal are used to recover funds.
Those payment instruments are generally subject to fairly low transaction limits due to the potential for abuse. Cash is the exception there, but it's extremely inconvenient to move or store large sums of cash and nearly impossible to do so anonymously.
Crypto is unique in that transactions are immutable and do not scale in difficulty with the amount being transferred. Ransomware gangs do not choose to accept cryptocurrency payments because it aligns with their politics; they do so because it is the only way to move millions of dollars across international borders in an undoable fashion.
Those transactions are still undoable by a third party. Using the legal system you can file lawsuits and the perpetrator can have the cash or electronic debits removed without their participation.
With crypto, you must have the help of the criminal, because only they can unlock the wallet.
You keep talking about "multi-sig wallets" in multiple posts. Are you going to have courts in every relevant jurisdiction have a handle on that wallet? That seems unlikely to go over well with the sorts of people who take these seriously.
One should demonstrate an actual, tangible, serious raison d'etre that is within the bounds of the modern legal system before bothering to find out if it's plausible.
It’s useful for a cartoon version of finance. It’s "perfect for finance” in that crypto users are willing to tolerate high fee burdens, which makes them profitable.
> Crypto is like the invention of ink that cannot be erased.
No, that was invented in the late 70s, with the Merkle tree.
The whole wildly expensive consensus phase in cryptocurrencies is absolutely not needed for immutable ledgers.
> It's literally perfect for finance
People have been using digital certificates in finance since the 80s. When there is a single source of truth, which is the case for almost all finance except cryptocurrencies, there is no need for the horrific expense of the blockchain.
> Also, I don't know any law that exempts crypto companies from being taken to court.
>> Crypto is like the invention of ink that cannot be erased.
> No, that was invented in the late 70s, with the Merkle tree.
Ok then, crypto is like ink that cannot be erased, with distributed copies throughout the world.
My point is that like ink it's a technology like any other, that can be applied to various problems by various entities including the government. Crypto is not automatically subversive or incompatible with law/finance.
> Also, I don't know any law that exempts crypto companies from being taken to court.
As many are finding as the U.S. Securities and Exchange Commission works down their case backlog.[1] Four enforcement actions in the last week. Kim Kardashian paid $1.1 million for hyping some crypto product without disclosing how much she was paid to do so.
Financing is the advancement of funds in exchange for a promise that those funds will be repaid later. For this to work the borrower must own assets that can be seized in the event of default. Since blockchain-based assets cannot be seized, this means financing is fundamentally impossible using blockchain technology. The best they can do is overcollateralised loans, where the borrower must first advance themself the funds that they are "borrowing". This isn't financing because there isn't any advancement of funds. Funds are simply swapped.
I don't see the distinction you're drawing. If they've been deposited into a smart contract like a Maker CDP, then they can be liquidated, which is much like being seized and auctioned in traditional finance.
> Funds are simply swapped.
If I take a margin loan against some TSLA stock, would you say I've swapped TSLA for cash? Most people (tax authorities included) would say that I still own the TSLA, and simply borrowed against it.
Crypto lending platforms like Aave work in the same way - users borrow against assets. Yes they're overcollateralized, but so are margin loans and many other useful loans.
The reason the collateral needs to be deposited with a smart contract is because the collateral assets are unseizable. But that defeats the purpose...
Imagine you want to make purchase, but you don't have the funds. You have two options. Option A, you save money first, until you have enough funds. Option B, you borrow money, and save later (while you repay the loan). In economics, option A is called "saving" while option B is called "financing".
Collateral isn't strictly necessary, but it's useful because it reduces credit risk and therefore lowers the cost of borrowing funds (i.e. the interest rate that the borrower is charged). However, notice that if the collateral is equal or exceeds in value the amount borrowed and it is deposited with the lender until the loan is paid off, this is no longer option B, this is option A. This is not financing.
Financing requires that the collateral (if any) is not deposited with the lender until the loan is paid off, or that, if it is, it doesn't cover the whole of the borrowed amount. For financing to work, you need legal procedures that enable the lender to seize the borrower's assets in the event of default. You can't do that with smart contracts, because smart contracts can't seize assets that are in somebody else's wallet. You can do other things for sure, but not financing.
Suppose I make an NFT which support liens. I.e. upon mutual agreement, a transaction can modify the NFT to add a lien, while (simultaneously) transferring some USDC from the lender to the NFT owner. The NFT can't be transferred while it has a lien, but the owner can remove the lien by repaying the lender. The lender can also transfer the NFT to herself if the loan isn't repaid after a certain period.
If I wanted to finance an NFT, first I would negotiate with a lender and get a pre-approved loan. The NFT marketplace wouldn't even need to know about the lending mechanism. In a single transaction, I could take a flash loan, purchase the NFT from the marketplace, take the pre-approved loan, and use that to repay the flash loan. I now own an NFT with a lien, which I can enjoy in the usual ways, e.g. I could integrate it with my Twitter profile.
You make an NFT, and then you get a loan that you use to purchase the NFT, and if you don't repay the loan the owner gets to keep the NFT? It seems that you're financing the purchase of something you already owned. And of course the supposed financing is being done by this "pre-approved loan" which you tell us absolutely nothing about. What is that? A loan agreement? What does the agreement say and how is it enforced?
I mean Person A makes an NFT and lists it for sale for $X USDC. Then Person B, who only has $Y USDC ($Y < $X), buys it using a pre-approved loan from Person C in the amount of $X - $Y.
If Person B repays the loan within T days, the lien is removed, so Person B owns it free and clear. Otherwise, the NFT is transferred to Person C.
The pre-approved loan would just be a message signed by Person C, granting anyone permission to transfer a certain amount out of Person C's account if (in the same transaction) they also grant Person C a lien on that particular NFT.
Person C's loan funds wouldn't be in an ordinary account, but rather in a smart contract which understands these liens and loan approval messages.
I see... yes I think such a mechanism could be used to finance the purchase of an NFT. So, I'll admit that I was wrong. You can do financing with a smart contract, although from what I gather you'd be limited to buying NFTs. Not terribly useful, but congrats on coming up with this example.
Also, I don't know any law that exempts crypto companies from being taken to court.