> Couldn't we consider a nation-state "illegally leaving its sovereign territory" if it started policing a globally distributed project in cyberspace?
Oh my god it's the 90s peer-to-peer information super highway argument. It's back all over again, with the same complete unwaivering faith that adding the word "computers" to something means that all the existing laws are now invalid. Go read up about what happened to Napster. It's not even 20 years old... it's not ancient history...
Regulators are requiring financial technology to support existing laws and regulations. What’s strange is that it seems the author of this post never contemplated this would be the outcome of DeFI or crypto.
> If crypto and DeFi are truly that great for innovation now, isn't it kind of ironic that after nine months of work, I'm starting to realize that my project's challenges don't lie within technology but are made of legal uncertainty?
It certainly is ironic that somebody put nine months of work into a financial product before they considered the legal complexities that might arise. I suspect that I'm missing the trees for the forest in saying so.
The business model of companies like Uber and AirBnb is based on becoming so big and popular they can’t regulate you out of existence so crypto is far from the first to try this.
The author seems naive to think that being "cyber" somehow justifies immunity to regulation by any country. As the Internet has already shown - it doesn't exempt you, if anything it makes you subject to every legal jurisdiction under the sun (at least any where people reside who interact with your system).
The hypothesis of the "blockchain startup" rests on the idea that this tech can succumb to the standard platform monopolization plays and ultimately see a new "big tech" company emerge. A lot of the market action to date is driven by this: capital pouring money down a chute to create a dog and pony show of heavily hyped tokens. There's still smoke in the air from all the action, but the picture is getting clearer.
By building it as a company, you're taking a fundamental disadvantage to anonymous competitors, because the anonymous act as a sovereign micronation and can make the rules for themselves, while you are just another striver within the state, forced to compromise and not step on toes. I wouldn't rule out tokenization as a company, but I sense it existing in a separate, collaborative niche from the anon projects.
the difference between "Many" and "Largely" in rhetoric is... pretty trivial, especially in something that can't be accurately counted - Since it's almost tautological that criminal activity will try to hide or disguise itself.
> Couldn't we consider a nation-state "illegally leaving its sovereign territory" if it started policing a globally distributed project in cyberspace?
If this were true then criminals could setup a globally distributed database of child prn or something else illegal. The "cyberspace" isn't just some magical place with no affect on the real world. It has real consequences on real people's lives.
A "distributed database" is a willfully naive approach to understanding crypto.
Most people frankly probably hype crypto as a get rich quick scheme. They see a green pasture with a lack of established players and hope they can be the next "Wolf of Blockchain Street" (or at least make some more modest profit).
Many people hyping the tech on less greedy grounds see it as a way around governments. And it is.. sorta. You still need to follow laws, but now the government has a weaker arm to enforce them against you since you don't need big financial firms.
On the flip side, Crypto also is potentially more egalitarian since you don't need big financial firms to do financial stuff - anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in smart contracts (conditional swaps/lending, escrow, multi-sig transactions). Obviously you're not doing "real world" items in escrow like a house, but many financial transactions that are done in complex trades and wall-street type activities often require underwriting from big banks.
This is good and bad. Take flash loans:
> Flash loans are uncollateralized cryptocurrency loans structured so that they must be paid back instantly using smart contracts, making them attractive for things like arbitrage across exchanges. If the loan isn’t paid back, then it never happens, because both occur in the same transaction.
The good:
You can't do such transactions as a regular person in the real world, because most banks would never talk to you if you asked for such uncollateralized loans for trading.
LOL, of course not, people loan others money all the time. My parents loaned me money as a kid to buy candy. That is not the same thing as borrowing $130M for complex financial transactions like in the linked article. I bet there are very few transactions worth 130M that take place without major financial institutions (like a bank).
The point was not about loans, per se, it was about broadly the complex financial services industry. Most of that is done by large wall-street like banks dealing with rich cash flush clients, and not very available to average people.
Using crypto though. No one is trading real estate on DeFi. they are trading crypto. Obviously some people are converting the crypto back into cash and buying real estate with their gains, but those gains come from the losses of other people eventually. Crypto has no cash flow.
Imagine a regular, government-approved bank that only stores (government insured) deposits. If its only "job" is to store money, and it obviously can't operate for free, people have to pay for the right to store their money there. Weird bank, but easy to understand. People pay monthly fees for storage boxes and could theoretically store cash in it, for example - obviously no interest growth in box-money. In Europe they have had negative interest rates at times, which is essentially the same thing to a bank that costs money - in that regulatory environment, people pay for that government backed security of their money. Just because a bank uses EUR and not USD does not mean its bad, or invalid, or whatever.
In crypto, it is a similar thing, but obviously without government insurance. To secure the ledger, you pay for it. It is paid by the holders and given to miners to secure the ledger (via deflation and tx costs). Its a similar idea. People find this distributed blockchain security to have value, so they pay for it.
This should so far be easy to see parallels. People find value in the security, there is just a different provider and regulatory environment, but in both cases people pay for that security. You may not value one kind or the other, but do accept that some people somewhere values each of them.
With this framing of the value provided by the blockchain, don't think of cryptocurrency like a typical stock market type trading. You can think of it more like currency. We legally treat it like a security (in US), but understand its value-proposition is more currency-like.
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> Obviously some people are converting the crypto back into cash and buying real estate with their gains
Yes people usually convert it back to fiat money to buy things like real estate. Not always, but usually. Nothing is absolute. Think of this like a European person taking euros to America. Most of the time, they'll change it to USD before buying things, but maybe they find a person in America who wants EUR because they're selling their American home to move to Paris. The EUR economy in America is small, and so is the BTC.
> those gains come from the losses of other people eventually. Crypto has no cash flow.
When you trade stocks, people buy/sell the security, and in theory the act of the business conducting itself (profits, etc) should impact the value, eg by generating a dividend or increasing share value. Therefore, overtime the market becomes worth "more" because more economic activity is represented by the shares. Therefore it is not a 0 sum game. In a rising market, the market increases in value (positive sum).
This is not crypto. That is true, but this doesn't mean it should all be thrown out.
Crypto gains are generated at the expense of others. That is also how FOREX trading works, and people do that and its not controversial to most anti-crypto people. Speculative investing is not something I'll push for or attack, but people seem to want to do it, but it is not a good or only reason d'être for crypto in my opinion.
These financial transactions can sometimes be improved with more complex financial engineering. At times, is way more accessible with crypto than traditional financial institutions.
International transfers are another crypto use that is common. There is no inherent reason that a blockchain has to be used to perform this, but somehow in this world it came to be that crypto is one of the cheapest ways to move money overseas.
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TLDR: Crypto has a different value proposition than you think it should, and yes, it has value to people. Also speculative trading is not everything.
Yes, avoiding banks for international wire transfer and avoiding a banks for storing money are use cases that some people use crypto for. But these are not world changing to my original point, you could have done that with physical moving money or putting it under your bed.
There is no world changing feature needed to make it a valid and useful system. even you could agree that while you could ship cash across the ocean, crypto is way easier and frankly more secure. Existing solutions never stop people from inventing new ones.
Again, plenty of DeFi applications are way more accessible than fiat counterparts and that’s a unique feature that probably can’t exist elsewhere - better availability of certain types loans for trading, ability to earn income from providing liquidity to exchanges, decentralized exchanges without third parties. Not all defi is particularly useful or better than fiat counterparts, eg a crypto mortgage will not likely exist anytime soon.
Sounds like we are on the same page. You could build a trading platform on top of a NoSQL database instead of a distributed database. If people used that platform and found value in it, it would be valid.
I don't know if you read the article but the last paragraph is what inspired my original comment. FTA in quotes below.
"If crypto and DeFi are truly that great for innovation now, isn't it kind of ironic that after nine months of work, I'm starting to realize that my project's challenges don't lie within technology but are made of legal uncertainty?"
Unfortunately people are getting the idea that crypto technology is revolutionary and jumping in with unrealistic expectations.
Dude, are you trying to miss the point to score internet argument wins?
This man is writing large, thoughtful explanation -complete with concessions and limits- that is not hyped and not biased and you’re latching on to minor details and using that as a reason to poo-poo the logic? You’re petty arguing against a calm factual explanation. They’re not even good arguments.
“You could have done that by putting it under your bed” is so silly and intellectually dishonest. Try to imagine the other side here, and at least consider the possibility that there is room for additional value beyond your world view. At least try to see the other side even if you won’t want to see from the other side.
I certainly appreciate that he makes concessions and thoughtfully explains his side. But my point is pretty simple, as I said in the beginning crypto isn't a world changing technology. It has marginal use cases like being cheaper for some specific countries that to do wire transfers. I never said it was never going to have any use cases ever. I'm more than happy to learn about more use cases as they appear. But nothing new has been presented here.
As far as intellectual dishonest goes, storing your wealth in physical items that are in your physical possession is something that people actually do. I personally don't do that, but the reality is that some people don't trust banks and they don't trust a network of computers. To say that it is dishonest to point out that there were already alternatives to banks seems inaccurate.
One seriously expects an industry with captured and revolving door of regulators from big banks will make it easy (not to mention so far up the assess of politicians around the world)?
Creating a centralized corporate entity and centralized operating protocols is like painting a huge target on your back that screams: "Here big banks and captured gov, come screw me and all the users over please!"
No need to be strictly anon, just don't play the same game… if you really want to build, what you build needs to be "metadata drone strike" proof…
Oh my god it's the 90s peer-to-peer information super highway argument. It's back all over again, with the same complete unwaivering faith that adding the word "computers" to something means that all the existing laws are now invalid. Go read up about what happened to Napster. It's not even 20 years old... it's not ancient history...