Item — HN Reader

> The fallacy in this argument is that there's something special in crypto that makes this more likely to happen.

I think this goes without saying: money and financial systems are regulated—to some degree—everywhere in the World. They are regulated by Governments, and there are real penalties for evading those regulations and getting caught. Many of these regulations were put in place to prevent the kind of shenanigans that is commonplace in crypto.

In crypto, by design, there is no regulation, nor is it really possible. This is the something that's special about crypto.

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Crypto can also be regulated and it probably will get regulated.

Regulation always comes after the fact. The history of the "modern" banking system is that merchants at some point got bored getting robbed of their gold while traveling from A to B. Also, moving around tonnes of gold is actually expensive and tedious. So, they started sending each other bank notes underwritten by bankers who kept the gold in their vaults. Out of that modern banking and eventually central banks emerged. The notion of keeping gold in a vault became optional some time later. The regulation we have resulted from robbery getting more sophisticated. Initially all of this was unregulated. Regulation just happened as a reaction to all the inevitable bad stuff that happened.

What's a bank: a ledger of value denominated in currencies and a promise to account those ledgers correctly. Why do banks need regulation? Because ledgers are manipulated by people that can and will cheat if they can get away with it.

What's a blockchain: a tamper proof, shared ledger. If that sounds like a useful tool to have in a bank that would be because it is. You need a bit less regulation to keep the ledger correct. But you still need some regulation to ensure bankers use them properly and appropriately. Technology doesn't fix their tendencies to not do that.

Using an unregulated blockchain is not a whole lot different from using bank accounts in dodgy jurisdictions to evade taxes and oversight. Popular with the same types of people for the same types of reasons.

The fact that crypto people will tell you with a straight face that the irreversibility of transfers is a feature and not a bug should be enough of a tell...

Crypto allows irreversible transfers, but traditional reversible transfers are also possible on smart contract chains, although definitely not the norm.

The real bug is that irreversibility, and immutability in general, isn't possible in centralized systems. Which is why you can never be 100% sure that your bank account won't be empty next time you check. This doesn't happen in crypto.

> This doesn't happen in crypto.

Sure it does.

In crypto, you have two options when it comes to keeping your money safe:

1. You can try to keep your keys and devices safe from hackers (The equivalent of buying a safe. DIY security) 2. Or you can trust an exchange to keep your money safe.

In either case, don’t be surprised if you wake up and find your account empty.

Anyone who's ever been screwed by PayPal or the like has plenty of reason to support the irreversibility of transfers. That's not to say that there should not be a way to recoup losses, but the fact that a third party can just pull money out of your account, pecunia ex machina, goes way too far in the other direction. And no, the reams of incomprehensible legalese that supposedly justify this are not good enough.

> In crypto, by design, there is no regulation, nor is it really possible.

That's demonstrably untrue—at least, that it's not possible. (I'm perfectly willing to believe it was designed to be unregulatable; it's just that, as usual, programmers echo-chambering at each other about how they think the law works didn't actually take into account how the law really works.)

Crypto is becoming regulated more and more as time goes on.

There's nothing special and magical about it; it was just new, and with the US Congress hopelessly dysfunctional, it was not hard to predict that it would take some time for them to actually catch up and start doing something about it.

4 real. The networks regulate themselves to the extent of their protocols’ game theoretic designs, which cover Sybil-resistance and Byzantine-fault-tolerance. The VMs will define some permissions for owning and transferring resources and cryptography for validating transactions.

Beyond the protocol is the arena of application standards and legal jurisdictions, which is the subject of economics.

> In crypto, by design, there is no regulation, nor is it really possible. This is the something that's special about crypto.

If by "regulation" you mean an external authority dictating rules to the crypto world, then yes, there is no regulation. But how many times have regulatory authorities for legacy finance lost track of the ball and permitted dangerous activity and even outright fraud? In the late aughts, regulators were so blind to reality that they permitted the Madoff scam and even the completely reckless trade in CDOs & CDSs that tanked the global economy. Then they promulgated "too big to fail" and bailed out the banks that had defrauded us (though at least Madoff went to jail).

On the other hand, if by "regulation" you mean a set of rules that can help guarantee the credibility, transparency and stability of financial institutions, then crypto can absolutely do that via e.g. smart contracts. That regulation would be entirely opt-in and the onus would he be on the buyer to evaluate the crypto for dangerous & vulnerable bits. That may be easier said than done.

Regardless, GP's point is well made, and the story about crypto regulation isn't so clear-cut.

Crypto is insanely regulated. For example, anyone who touches it in the US has to report every single transaction when they do their taxes. Not to mention the heavy hurdles involved in establishing an exchange.