What is your threshold? Who decided what is "not legitimate" activity? Clearly in this case the money was spent using the keys that were allocated to be able to control the money, what process overrides that?
I mean we have an answer to that, it's called the law, and its worked since 1750BC. [edit] This guy, Hammurabi - king of the First Babylonian Dynasty - faced a similar quandary, so there's some prior art.
No one in crypto typically wants to acknowledge this, but this is the clear and robust answer.
Your keys your coins is obviously a situation rife for unreconcilable fraud, and is not a functional solution for anyone who might - ya know, want to spend these things as a currency.
I disagree. It's definitely a trade-off, and there are downsides to it (this security breach being a good example), but there are also advantages.
With normal ACH and credit card transactions, the payment never really settles, and can be reverted due to fraud for months. That means I have to slurp up lots of data (privacy?) about my users in order to increase my confidence that they won't try to scam me. And even with that, I end up losing significant amounts of money due to payments with stolen card numbers, etc.
With crypto, I know that any payment I receive is final, and I don't have to build privacy violating systems to avoid losing $$$.
Not saying this is necessarily "better", but there are advantages to it. As a user, I'd be happy to pay with crypto if the merchant passed some of the savings on to me.
The savings associated with transactions fees (reasonable for very large spends - utterly ridiculous for small amounts, even today after the major drops, at more than 1.7 USD/tx)?
The savings associated with double spend fraud that occurs if you don't delay the transaction for 3 to 6 blocks even though you say it's final (hint - that's not true, and waiting is a large downside for prompt processing at a point of sale)
The savings associated with being literally dragged into court because it turns out that fraud is still a thing, and the legal system still matters, and despite you saying that the transaction has settled - the courts can and WILL disagree?
I just don't see it. I see a very nice way to send money to folks who are working dark markets and understand escrow (which re-introduces the risk that your transaction isn't actually settled), and a really shitty transaction method for basically everything else.
> The savings associated with transactions fees (reasonable for very large spends - utterly ridiculous for small amounts, even today after the major drops, at more than 1.7 USD/tx)?
On mainnet ETH, sure, but that arguably shouldn't be used for small payments like you are discussing. There are second layer networks that can do this for pennies on the dollar and make a lot more sense.
And arguably $1.7 USD / tx would compete quite well with credit card transactions. 0.17% vs credit card's 2-3%.
> The savings associated with double spend fraud that occurs if you don't delay the transaction for 3 to 6 blocks even though you say it's final (hint - that's not true, and waiting is a large downside for prompt processing at a point of sale)
Again second layer networks, but even on ETH itself, you're talking 10 - 20 seconds for 1-2 blocks, which is PLENTY. It's not going to be worth carrying out a double spend attack for a few thousand dollar transaction.
I do get that you don't "get" it, but I'll just say - I happily send and receive both BTC and ETH, and it is a night and day difference from sending using traditional bank accounts. I actually feel like I own the money, I can send it to anyone I want at any time, and the transaction settles in seconds. Last time I sent money via ACH, it took a solid 4 days (since I initiated on a Friday). I can deposit money into my crypto backed debit card in under a minute in the middle of a weekend.
> I do get that you don't "get" it, but I'll just say - I happily send and receive both BTC and ETH, and it is a night and day difference from sending using traditional bank accounts. I actually feel like I own the money, I can send it to anyone I want at any time, and the transaction settles in seconds. Last time I sent money via ACH, it took a solid 4 days (since I initiated on a Friday).
This is just a criticism of US banking, not 'TradFi' as a whole. Most countries have let you do the exact same thing for free or at a low cost out of your existing bank account, no overhaul required, for years. The EU has SEPA, the UK has FPS, Canada has Interac e-Transfers, Australia has NPP. I suspect you'd have a hard time finding a country other than America which doesn't support this.
... and the US has RTP for about half the population, and is getting FedNow for everyone next year. Not to mention Cash App and Venmo and so on.
This is a solved problem.
If you can even call it a problem. The thing is, if it were actually a meaningful source of friction instead of a talking point, it would have been resolved years ago.
I get it, moving money is boring unless the money is also a scratch-off lotto ticket.
> I can deposit money into my crypto backed debit card in under a minute in the middle of a weekend.
This is also how Cash App and Venmo support instant transfers/deposits to a dollar-denominated bank account 24/7. You can do this via unlinked refund or whatever the new mechanism is. That's not crypto related, it wasn't developed for crypto but rather coopted (not just by crypto, but by Venmo and Cash App). That's just how debit rails work.
> This is just a criticism of US banking, not 'TradFi' as a whole. Most countries have let you do the exact same thing for free or at a low cost out of your existing bank account, no overhaul required, for years. The EU has SEPA, the UK has FPS, Canada has Interac e-Transfers, Australia has NPP. I suspect you'd have a hard time finding a country other than America which doesn't support this.
But what these services offer is still fundamentally different from what crypto offers. The money shows up in your account instantly, but it doesn't actually settle for weeks afterwards [0]:
> Unlike cards, SEPA does not have an additional authentication layer, such as a CVC check or 3D Secure. Consequently it is important to have good risk management tools in place to offset the threat of fraud.
> A shopper can perform a chargeback online eight weeks after the purchase, with no questions asked.
You're conflating two separate things: bank-to-bank person-to-person transfers and Adyen, which is a merchant acquirer. Merchant acquirers and credit networks operate under different terms. Chargebacks exist because there is a demand for them. They exist because customers want them - and yes, even businesses want them. It gives folks the confidence to buy without having to worry about trusting the merchant (because they trust the network to resolve a dispute). It increases average ticket sizes and payment volume. This is a good thing that crypto lacks. Finality isn't actually what you want in most cases.
However it's irrelevant to this conversation because it also doesn't apply to any of the networks I listed. Adyen != FedNow. The systems I listed actually do provide instant settlements - as the money hits your account it's yours to spend.
If for the bank, settlement isn't instant (and that's an if because again for the services I listed I don't believe it to be the case) they can just do what everyone else does and borrow against it for basically no cost while it settles.
Again, this is a solved problem and broadly not an issue.
[edit] Just as I suspected, FedNow settles instantly. [1] And all for the low, low price of $0.045 per payment, and $0.01 per invoice! I know, its pretty unbelievable they found a way to decrement a number in one database while incrementing it in another database without involving a global network of graphics cards, burning down the rainforest and re-inventing the very concept of money. (that is to say, without "going Rube Goldberg on it").
Unlike cards, SEPA does not have an additional authentication layer, such as a CVC check or 3D Secure. Consequently it is important to have good risk management tools in place to offset the threat of fraud.
And this? Literally describes crypto. Because they both offer instant, final settlements without a second factor like a CVC check or 3DS.
Same thing as "code is law". If a restaurant puts their ordering process on a smart contract and someone orders -1 packets of hot sauce and that rolls over to 2 billion packets that means the restaurant has to provide 2 billion packets of hot sauce to the customer?
Why does that sound like a good situation to anyone?
The only way to apply the court’s judgement (in the case of ETH) is to hark fork, because there is no governance contract in place.
A blockchain can in theory support such things, which would allow a majority vote to approve the court’s judgement, but not ETH as it currently stands.
Alternatively if you could get enough miners to just collectively agree to replay the blocks without that transaction you could let the owners move the funds, but it’s monumentally difficult as time goes on and the number of blocks to rewrite increases.
If it was detected in seconds, an emergency protocol does exist between certain large mining pools for this sort of thing.
Specifically, if you have contracts holding that kind of balance, if a transaction appears on the network which touches a percentage of the funds, you get blistering alarms ringing and someone can “break glass / pull lever” to lock the contract balance into an emergency cold vault. It freezes the DEX but better that then lose the funds. You partner with mining pools to pre-clear that TX and ensure your transaction gets priority in the next block, before the attacker’s transaction goes thru (making theirs the double-spend).
But they weren’t even watching. They didn’t even know until the next DAY.
> The only way to apply the court’s judgement (in the case of ETH) is to hark fork, because there is no governance contract in place.
Courts can and do issue orders against any kind of asset in order to enforce justice and unlike smart contracts, their orders are backed by men and women with dogs and guns.
Put another way: a court will not say "gee, gosh, if only ETH had a mechanism I could give orders for! I guess I'm beaten". They will instead say "you owe $X and I will seize all assets you have today, or will ever possess in future, in order to pay that debt". And when it turns out that people thought they were clever by evading the court order by keeping everything in a coin, they will then learn that ethereum can't buy top bunk at the federal penitentiary if you don't have access to a computer.
We are talking about two different things. I’m talking about a decentralized algorithm which runs on your own machine and can reach a conclusion about a transaction being invalid even though it may have a valid signature.
For example, imagine the thief just burns the ETH. $600mm notional value is destroyed in a few bytes of crypto. Whether someone goes to jail or not is besides the point.
Can the funds be recovered, and what is the algorithmic mechanism to provide for that recovery?
Disputes can still be resolved like that in crypto, it's just up to the legal system to track down the key holders to revert the transaction. Essentially - solve it at the legal layer, don't complicate the protocol.
As someone who has actually purchased real goods with bitcoin (silkroad) and has dealt with the blowback of the MtGox scandal (still receiving court details to this day...)
Those crypto people are snake oil salesmen. Full fucking stop. They aren't interested in making anything usable, they're interested in wild speculation, gambling, and outright scams.
There are lots of us that recognize the new capability crypto provides (improved self-custody over assets, currency scarcity not controlled by governments) while also not claiming a new world order.
Like most things it's not all or nothing and there are pros and cons.
Hitting yourself in the head with a hammer might offer some benefits:
- The cool metal might cool your head on a hot summer day
- Might knock yourself unconscious to avoid boredom (could be real handy during long flights!)
But these nice features are inseparable from the fact that you're hitting yourself in the head with a hammer, which has many serious downsides, too.
The "improved self-custody" crypto offers is one side of the ledger. The other side is: you lose regulatory protection, and can be swindled with virtually zero repercussions. Crypto's entire reason for existing is to circumvent government control—it's pretty "new world order" all the way to the core.
This is a comparison dumb enough to basically be in bad faith.
Ignoring that and focusing on the substance:
> "The "improved self-custody" crypto offers is one side of the ledger. The other side is: you lose regulatory protection, and can be swindled with virtually zero repercussions."
Yeah I don't disagree with this - the risks are real. Some of this can improve with better tools, but some is just higher risk that exists with self-custody. You don't need to move 100% of your wealth into crypto (and I'd argue you shouldn't in nearly all cases).
Crypto provides a new capability to take control in a way that other options don't or don't support as well. There is value in this capability even though it has associated risks.
> "Crypto's entire reason for existing is to circumvent government control—it's pretty "new world order" all the way to the core."
Not all governments are good and even good governments can implement bad policy. Self-custody is a lever against the kind of top down CCP like control of entire economies and a totally controlled cashless future. It's also a hedge against stupid actions from your government (like what we're seeing in Russia currently).
New world order suggests replacing the entirety of the existing thing. I'm not suggesting that, I'm focusing on the fact that it offers a new/improved capability that gives individuals more power. I think this is a good thing, but good/bad subjectivity aside it's just a true feature of crypto.
> Not all governments are good and even good governments can implement bad policy.
Indeed! Many governments are truly awful. And it's a deeply complex problem to solve. The strategy of "screw it, let's just bypass the laws when I feel like it" is deeply troubling. And I think you needn't look further than the fact that so many despots have wholly embraced Bitcoin: Bukele, Putin, Kim Jong-un, Erdogan, Maduro, Assad, etc. Why do you suspect that is? Are they just clueless dummies who're getting fleeced by the Bitcoin pumper geniuses?
The problems with corrupt governments is the lack of accountability via regulation and legal redress. The solution is increasing accountability—often a difficult problem, no doubt. But advocating for crypto as the solution, is advocating for the harms done to people to be anonymized, and ultimately made unaccountable. That's a Very Bad Idea™.
With all due respect, I don't think you understand the full weight of what you're arguing. Which was the point of my original comment. You don't get to just pick-and-choose which aspects of crypto are beneficial and ignore the side-effects. Crypto, by design, bypasses the legal system. There are some heavy consequences to that design.
I acknowledge the higher risk associated with crypto and self-custody. I just think the capability it provides is valuable. Like most things it's a nuanced issue and it's not all good or bad.
A lot of your argued side-effects are also true of cash. Yet most (at least for now) are not arguing to get rid of cash because not every transaction can be monitored and controlled.
Crypto gives more capability to individuals which is good (similar to cash). It creates a store of value outside of government monetary policy (in the BTC case more similar to gold).
People tend to simplify these things into "crypto is entirely bad" or "crypto is entirely good". I think it's a new tool that gives individuals new capabilities, but also has its own risks. I value the new capabilities and acknowledge the risks.
> "Crypto, by design, bypasses the legal system. There are some heavy consequences to that design."
This is mostly false. In the case of public ledgers - it's even easier to see transaction history than it is with cash (though this is less true of Zcash). It doesn't bypass the legal system it just requires a higher degree of intervention for your money to be taken from you (which is often desirable, especially if living under an oppressive government). Does cash bypass the legal system by design?
Hammurabi's laws only work when they have a monopoly on violence to enforce said laws.
Shitcoins (all of them) remove the potential of violence as a means of corrective action. Instead, you have crazy hard math stopping you. Can't do the math? Then you're not forcing your decision.
Think about this a bit more: I steal your cryptocurrency. When the police show up at my door and I say “you’d have to solve an impossible math problem to get it back!” do they a) threaten beat me and/or my family (Russia, China, etc.), b) shoot my dog and put me in jail where they look the other way while other inmates beat me (U.S. version), or c) toss me in jail (best-case Scandinavian version) until I tell them the key? There isn’t any case where they say “math is hard, guess you get away with it!”
> Shitcoins (all of them) remove the potential of violence as a means of corrective action. Instead, you have crazy hard math stopping you. Can't do the math? Then you're not forcing your decision.
Oh no they don't. You can still go to prison, and they can still smack you around. To pretend otherwise is to play emu.
No no no. Crypto enthusiasts reject the idea of the law, and the tyrannical governments that enforce them. Code is Law! Therefore, this is perfectly legal.
Conceding that this situation sounds absurd destroys the entire raison d'être of crypto.
