[Cryptography] Incentive Politics

[efc at swisscows.email]

On Mon, 2 Oct 2023, Phillip Hallam-Baker wrote:

> This is why any 'smart contract' scheme that allows this type of activity is going to end up being shut down.
> 
> Governments can't stop people encrypting their conversations, but they are very good at regulating the flow of money.

Hello Phillip,

I agree. I've deabted this with crypto enthusiasts, and the governments
of the world will do one out of two things. 1. Regulate crypto so hard,
that it won't have any benefits over cash any longer. It will just be
slower, less accepted and more expensive to use.

2. Make it illegal and clamp down on the on/off ramps (exchanges,
vendors who accept it etc.) coupled with stiff penalties for the people
using it.

Absolutely worst case, but I think thisis highly unlikely, would be a
ban on encryption between clients and servers which are not white listed 
and approved by the government (major banks, retailers etc.).

> The weakness of the whole pseudo-currency world is beginning to be seen even by some of its strongest adherents as the value of NFTs
> has declined to $0 as I predicted and the large exchanges are starting to collapse under the sheer weight of the frauds upon frauds.

The question of value I also find very interesting. Many crypto enthusiasts
do not acknowledge that crypto is just another fiat currency. But I
think it is, and its value lies in its utility. Here is also the
weakness of crypto. For regular people, the utility is close to zero, if
not negative compared with current systems.

The utility I see where crypto shines is tax evasion, the ability to get
around currency embargoes and crime (collecting black mail money).

This utility (where crypto is way better than fiat) is at direct odds
with society and the government, which is why we'll see 1 or 2 above if
crypto should become too successful.

There are attempts at pinning crypto to underlying assets, but so far I
don't think there's been any attempt which is 100% audited at all times
and which has become very successful.

> What we were promised was decentralized finance. What was delivered instead was a classic Ponzi fraud wrapped up in psychobabble.
> Pseudo-currencies are to the world of cryptography what astrology is to astronomy and esoteric alchemy to chemistry.

For crypto to succeed, the on/off ramps to the physical world need to be
eliminated. People need to be able to receive and accept crypto
directly, without exchanges or centralized players in between. That
means nothing will happen in terms of broad acceptance unless the
general regular economy is crashing. Maybe then, there might be an
upswing in crypto use. Another option is perhaps small failing states,
and digital nomads. Digital nomads still need to eat though, and the nr
of farmers I know who directly accept crypto is low.

> adding energy into your system. The same holds for proposals for better assassination markets: if a system allows such, the system is
> going to be regulated out of existence.

I imagine assasination markets will exist on darknets only, but the idea
is sound, so I'm certain there already are ones we are not aware of.

Last, but not least, my personal small sunshine story when it comes to
crypto is trying to transfer money to a service called Wise in the US.
This is apparently impossible for my bank, so after having lost 88 EUR
in the process which the bank stole I tried binance. Binance was so
heavily AML/KYC regulated that I could almost not register. Once I did,
I discovered that there was a ban on transferring crypto from EU to US
binance. In the end, I had to find a crypto enthusiast and ask him to
transfer, and then it worked flawlessly.

Ergo: The greatest ally in crypto adoption are the banks and government
regulations. The banking system is so heavily regulated today that it
almost no longer functions outside of your local country.

Best regards, 
Daniel