If it's a centrally controlled project that is capable of executing an "emergency shutdown" on the decision of a few people, then it's not really a cryptocurrency, just scam riding on the coattails of legitimately decentralized systems.
This is a blunt misunderstanding of power in general.
Nearly every citizen that's not running an extensive mining operation is going to be required to go through a centralized exchange at some point or another.
There is no way to avoid this issue of trust with crypto, unless crypto itself becomes the de-facto currency of choice (hint: it won't).
There is simply no meaningful way to avoid "trust", despite the snake oil that crypto folks like to coat everything in.
It's a DAO. The idea of most DAOs is they are set up to grow into being more decentralized and driven by smart contracts as the number of stakeholders goes up. I am not familiar with the details of how MakerDAO is structured but the fact that a given DAO is exposed to the typical risks of centralization isn't surprising - the entire DAO ecosystem is young and is literally a decade behind the first successful cryptocurrency in terms of reach.
Just like cyberspace in the 90s where Napster thought they were untouchable because they added computers to things, people often confuse "uncensorable digital technology" with "nobody just gives a shit, yet". When people start giving a shit, it all goes to hell very quickly.
I don't think this is the same thing. There are technologies now within crypto that are outside of the ability of the US government to nuke from orbit, like the Bitcoin blockchain. The frontiers of DeFi and DAOs however still have not hit the same level of 'escape velocity' to survive this kind of direct hit. If the US Treasury sanctioned Bitcoin, yes, it would be a significant event, but I don't think it's feasible to think such a thing would destroy Bitcoin at this point. The question really boils down to how extendible this dynamic is to other downstream applications of blockchains and subsequent technologies adjacent to blockchains.
Yes, and this is not fundamentally different from companies that run servers in jurisdictions outside of the US's control.
I would agree - bitcoin will likely continue even if sanctioned by the US, but I'd not be willing to bet all that much on it.
If there is no on-ramp for new US dollars... I don't see it faring well. The market will likely collapse back to the only genuine use case: dark market exchanges.
> outside of the ability of the US government to nuke from orbit, like the Bitcoin blockchain
At least the threshold is shifting. This was once said about DeFi.
Bitcoin is nukable. Banning would go far on its own. Yes, some people would still use it. But if a computer search or errand text resulted in criminal charges, the network effect would reverse. Total annihilation would involve committing to mounting attacks on the chain, buying up or even building massive mining rigs to sow chaos on the chain.
You have to keep running that thought experiment. If a computer search or errand text resulted in criminal charges, then there would be an opposing counterforce to that. I don't know how it ultimately would sift out, but I don't think there's any future where a significant % of global transactions isn't occuring on Bitcoin or some direct descendant.
I mean, we can agree to disagree if you think there would be quiet acceptance of a law where it is criminal to search for cryptocurrency information in google.
People also thought it would be a new age of transparency in media. It took the typical propagandists and spin doctors about five years to figure out how to completely subvert online discourse. The "firehose of falsehood" technique was also discovered as a way to herd people back to traditional media by DOSing the digital public square.
This was a completely foreseeable outcome. The primary function of the Internet is to accelerate and broaden communications. Somehow people thought that it would accelerate good communications (for whatever definition of 'good' you prefer)!!!
But it turns out that bad actors also know how to use the Internet to accelerate their bad communications. Surprise, surprise!
Had no idea DAI was so heavily backed by USDC. Goes to show how much of the ecosystem is interconnected. More importantly, as the article shows, much of it is at the mercy of governments, completely defeating the technology’s original purpose.
I think it's interesting to remember too that these asset-backed centralized stablecoins (I'm referring to USDC here) are actually driving centralized control of the chains on which they reside.
Asset-backed stablecoins, being ostensibly on-chain references to real-world value, cannot fork and retain their value across both forks. They provide the overwhelming majority of the actual economic utility of a given chain which means that a fork of any major chain that hosts them is basically impossible. A contentious network decision is at basically the sole discretion of Jeremy Allaire and lord help us Paolo Ardoino.
The MakerDAO/DAI community fucked up. People have criticized that community's collateral choices for a long time, as the article mentions, it is pejoratively called "wrapped USDC".
Their primary issue was being early and there weren't really collateral choices.
There was no trustless bridge for Bitcoin when they needed it. So they wound up using BitGo's WBTC. People got afraid of the volatility of the assets so started approving stablecoins as collateral, and Tether wasn't an option, other stables didn't exist, so they went with USDC.
For more modern iteration of this concept with different collateral choices and community ethos, look at Magic Internet Money $MIM (yes, naming is intentional re-appropriation). So far all the collateral are yield generating assets, they generate yield from liquidity pools and volume. The automated liquidation functions the same and its worked. It has ancillary issues from its founder's reputation on other projects, so there is still room for yet another stablecoin that inspires more confidence without really needing the baggage of a leader.
At some point when the incentives keep driving these "institutions" to make choices like this maybe you need to start questioning how the existing structures drive those incentives forward.
This rhetorical comment actually has a specific answer. MakerDAO tokens were sold to VCs like Andreesen Horowitz and Polychain and Dragonfly, the latter of which are less patient crypto native funds, who wanted the infrastructure for trading immediately. Their outsized ownership allowed for ethos breaking changes, to great financial success, but before organically created infrastructure was in place. There were no liquidity pools, liquidity pool optimizers, borrowing and lending protocols, value extraction.
Again taking a look at Magic Internet Money, one part of the structure is that their SPELL token (the equivalent of the MAKER token) was launched more organically and at least has been able to keep an ethos within the owners. Nothing here prevents more consolidated ownership, or any novelties in governance (and I argue that governance can be vassstly improved, there are no bylaws or even continuity between governance anywhere). Only a case study into the contrast between MakerDAO and the answer to your rhetorical comment.
withdraw your sanctioned Tornado Cash notes to a virgin address, don't worry about cashing them out at an exchange, just deposit them as collateral in MakerDao to create DAI
deposit those funds into lending protocols until you have a LTV ratio of 80% or higher
Sell all the borrowed funds and walk away from the collateral and that address
protip: Uniswap V2 swap/exchange code has a recipient feature that isn't present on the GUI. When you trade assets, you can designate yet another address as the beneficiary. Exchanges don't read custom smart contract inputs to flag source of funds to prevent you from cashing out, for now.
> Exchanges don't read custom smart contract inputs to flag source of funds to prevent you from cashing out, for now
This will probably happen eventually but I imagine it would be pretty easy to circumvent. There are lots of convoluted ways of transferring ETH that I'm not sure Chainlysis would pick up on. Stuff like:
1. Withdraw from Tornado to address A
2. From address A, call a contract that flashloans the amount you just withdrew minus the fee from dydx to a new address B
3. Repay flashloan with funds from address A, but address B keeps the ETH that was "from" dydx.
or
1. Withdraw from Tornado to address A
2. From address A, convert ETH to WETH
3. From address A, transfer WETH to Uniswap v2 DAI/WETH pool
4. From a new address B, call skim() on the Uniswap contract and get all the WETH you just transferred to it, but now it looks like it was from Uniswap.
Both of these rely on the fact that they probably aren't going to flag all the funds in a defi protocol just because one of its users used Tornado Cash.
> 3. From address A, transfer WETH to Uniswap v2 DAI/WETH pool
> 4. From a new address B, call skim() on the Uniswap contract and get all the WETH you just transferred to it, but now it looks like it was from Uniswap.
the second one is dangerous! are you suggesting to just transfer WETH to the pool address without using the pool's swap function? that means anyone can see the imbalance and skim before you do! and if you did a composable or flash loan style transaction to do it all in a single transaction, that just makes it more obvious (eventually) that the same party was involved
and even that could be frontrun! which is actually kind of funny because maybe you could frontrun yourself for plausible deniability, and put MEV protection around that transaction!
> the second one is dangerous! are you suggesting to just transfer WETH to the pool address without using the pool's swap function?
Yeah. I meant to add that it should be done atomically in one transaction but come to think of it just using flashbots and having it as 2 transactions would make it look more legitimate.
The way you suggested by pumping a token is also pretty good but depending on how many initial holders there are you may lose some money in the process. I watched the Tornado Cash 100 ETH address for a while and I think I saw a guy doing something like this.
> The way you suggested by pumping a token is also pretty good but depending on how many initial holders there are you may lose some money in the process. I watched the Tornado Cash 100 ETH address for a while and I think I saw a guy doing something like this.
Don't have initial holders. Create the liquidity pool yourself (in any of your identities) and have that be the only place to get the tokens. In the Uniswap V2 style of liquidity pool, the token can't go below the initial price (or ratio) you set. Anybody that buys in, even bots, will just push the price up, anybody that sells can only push it back down to the initial ratio.
Part 1:
Ident A - any money: Create token, create liquidity pool
Ident B - clean money: Buy as much token as you want
Ident C, D, E ... n - tornado cash withdrawals: Buy all the token, depositing Ether into the liquidity pool, removing token from liquidity pool.
Part 2:
Ident B - clean money: sells the tokens back into the liquidity pool, receives more ether.
I could see how you could lose money if too many bots and onlookers bought in before one of your idents deployed the tornado Ether, the tornado cash withdrawals need to already be finished then and waiting to buy. Any address that misses a pump due to bots can just be sidelined until creating the next token to pump.
and you can always just pretend to be an early speculator in a new token, using clean money you earned from employment
but that token was pumped by all your tornado cash withdrawals to virgin addresses you control
just sell your clean money tokens back into the liquidity pool and walk away, this is indistinguishable from everything that happens today. who cares if Chainlink was pumped by Tornado Cash funds, for example of something relatable.
I'm not sure of all the details but what about people that maybe used tornado.cash legally? Not everyone who participates in the crypto space, is doing so illegally..
Are they going to shut down banks and ban cash in the US since the US dollar is the most used currency in terms of money laundering?
sure, if you like, but let's be generous and say, warzone journalists, whistleblowers, etc. It's not a big cohort, but I guess it's a legitimate use. The trouble is that I can't think of literally anyone else.
> there literally anyone else truly affected who isn't a bad actor?
Those curious, paranoid or with unique threat models. The same ones who distrust banks and use only cash. (They, like anyone using a mixer, should maintain records in case they fall under suspicion.)
If I could tick a box every time I spend money that said: “let the recipient know all of the history of where this money came from”, I’d avoid ticking it.
> let the recipient know all of the history of where this money came from
Using a blockchain that's designed to work this way, and then claiming to need tools capable of laundering money in order to avoid that outcome, doesn't strike me as a particularly good argument in favor of either of those things.
At this point I'm convinced Satoshi Nakamoto was actually a public administration professor trying to teach kids why financial institutions have the rules in place that they do given enough time the entire crypto space will have reinvented every regulation they tried to get rid of and understood why they existed in the first place
The best theory (by which I mean darkly thought provoking) is one I saw from HN that Satoshi is actually an extragalactic intelligence wiping out humanity with the least possible effort.
At this point I am convinced that every know-it-all on HackerNews is just a corporate drone who never understood the spirit of independency and freedom from overtly authoritarian societies.
My fear is not that crypto project A or B stumbles or fails while trying to do something different. My fear is that the place that I once considered crucial for the development of a counterculture becomes dominated by reactionary "intellectuals" who got so rich by tech and now have become the status quo.
My fear is that the place that I once considered crucial for the development
of a counterculture becomes dominated by reactionary "intellectuals" who got
so rich by tech and now have become the status quo.
So basically, you are beginning to understand the "why" regulatory structures spring up but do not yet accept it?
My problem is with universal regulatory structures. My problem is when people blindly accept these structures and ignore the cases of people who are at the margins and can not subject to said rules even if they wanted to.
Money-centre economies (e.g. the U.S., U.K. and Singapore) are using a light tough. Rulemaking is competitive. And prosecution is de-prioritised.
There was marketing aimed at the libertarian inclined spouting nonsense about ending war and governments or whatnot. But that’s old news. It mirrors Treasury pitches in the 50s (more anti-banker than anti-state) and gold buggery in the 80s and 2000s (more anti-state). Crypto unified those pitches right after a financial crisis and during an ongoing series of political crises.
Just like Tor. And BitTorrent. And non-backdoored cryptography. All super useful if you're doing something illegal, right? Governments really should be cracking down on all this stuff, it enables way too much criminal activity.
If you disagree with the paragraph above as I do but don't feel the same way about cryptocurrency, consider why. Tor, BitTorrent, etc undeniably do enable criminals, and cryptocurrencies undeniably do have legitimate uses. My personal position is consistent: I'm on the side of freedom, even if it does sometimes come at the expense of a little safety.
According to Peter L. Bernstein’s The Power of Gold: The History of an Obsession (a book I’d highly recommend), fractional banking has its origins in scams perpetrated by goldsmiths, who’d issue promissory notes for more precious metal than they had in stock. Once they saw how they could utilize it for its own purposes, European governments legalized what was previously a widespread criminal practice.
So if governments end up appreciating this particular “scam”, crypto might conceivably (although I personally doubt it) go through a similar process in the future.
Do you think that might be because the overwhelming majority of people don't use crypto? Per capita I think the numbers are quite different. Where's the majority of ransomware happening again? And of course, you know that in the fiat world, we try and stop it whereas in the crypto world it's embraced with open arms as economic freedom.
Most certainly. Most "normies" or everyday people do not use or interact with crypto yet.
Likely also just a case of using the best tool fit for the job.
If you tried to ransomware a company and demanded cash, that would make it a lot harder to obtain without being caught. Although there are nation-state ransomware groups like Moses Staff (Iran) who deploy ransomware without a demand for money. They do it to cause disruption and to make the company have to spend $ to get fixed.
All secured by mathematics/tech from the field of cryptography, itself informed by pioneers in those p2p applications!
I want all three (Web3). I believe all three are crucial for the future of our diverse and Internet-connected societies on this planet Earth. Therefore, I choose to spend my remaining years and resources advancing such projects, in whatever ways I can, no matter any consequences, i.e. "what other people think" or more extreme things.
When there are no longer central actors specifying/implementing/revising the protocols for ultimately-social interactions, or such central actors are rendered impotent, the world will be a better place, even if it remains a complicated and divided place.
All those things are means, not ends. Nobody starts their day off saying "wow I could really go for some open p2p consensus this morning" in the same way nobody starts the day off with "damn I really need my TCP/IP to start the day off right."
The things you can build with these tools are better built without these tools.
It's been 13 years. Crypto is old enough to be in high school, and it still hasn't found a use case better served with it than without it - despite a list proponents pull out as long as my arm of 'killer applications' that are 'just around the corner, @remind me 6 months'. Soon crypto will be old enough to go off to college without a use case. But of course we're still early, right?
They've lost the plot. They're not building products, you know things people want and use.
I think it's a dual case of architecture astronauts combined with the stickiniess of money that's made a weird mess out of everything.
What many wanted (many still wants) is a bittorrent-equivalent-for-social-media,etc.. "free" of the clutches of companies like FB, somehow along the way Etherum made the promise of monetary incentives for distributed computing (even if the computation wasn't the "work" function but rather something more focused on Etherum needs itself).
p2p storage,messaging,etc is what people envisions as the building blocks for this (because they don't want to be stuck with a single design).
The saddest part is that seemingly most enthusiasts of these kind-of exciting technologies strapped themselves onto the dead end cryptocash bandwagon(bitcoin is fundamentally unscalable, lighting is an interesting bandaid but nowhere near needs required for global scale in practice) and still hasn't let go.
If people want distributed social media, there are already great models for that. Mastodon is one. Hell, you can make the case that USENET is still a great fit for that application.
Adding crypto and blockchains to the story really doesn't gain us anything, and it may lose us the ability to delete messages, which is actually a feature you sometimes want in a social network. If everything you said when you were 12 was indelibly chiseled into cryptographic Stones somewhere, why would you speak into the device that does that in the first place?
We can do all three of those today if we substitute "just a little bit of trust" for "distributed cryptography." So these applications do not a killer app make.
It's not like you can trust the content of the blockchain, only that the content has not changed. Big fallacy about blockchain and trust has been spread
This may not be the fiat-breaking revolutionary digital currency we're looking for.