1\ I woke up choosing violence today, so here is a thread on why crypto is *provably* broken, and why 13 years after the Bitcoin white paper, crypto's only real world uses are a few loopholes awaiting regulatory closure
2\ The issue is that "fair exchange" (you get what you want, I get what I want, and neither of us reveals our identity) is provably impossible without a trusted intermediary
(yes I know about atomic swaps, but what we care about is exchanges between crypto and physical goods)
(yes I know about atomic swaps, but what we care about is exchanges between crypto and physical goods)
3\ For some reason this class of impossibility theorems seems not to have a punchy name like "Byzantine Fault Tolerance"
But it's a big literature, and you can find tons of papers on it:
But it's a big literature, and you can find tons of papers on it:
4\ The impossibility of trustless fair exchange explains why innovation happens *within* crypto, but not at the border between crypto and the real world
DeFi is a sandbox in which you *can* do fair exchange, but for all its autistic complexity, it can't buy you a cup of coffee
DeFi is a sandbox in which you *can* do fair exchange, but for all its autistic complexity, it can't buy you a cup of coffee
5\ When you *can* buy a cup of coffee with crypto, it's because a trusted party like Strike is acting as intermediary
Strike is trustworthy *because* it makes itself answerable to regulation and the courts. They have an address you can serve process on, directors you can sue.
Strike is trustworthy *because* it makes itself answerable to regulation and the courts. They have an address you can serve process on, directors you can sue.
6\ So congratulations: Strike has reinvented "merchant acceptance", the business model of Visa and FirstData
But if you're encumbering yourself with TradFi regulatory costs, why run everything on a costly decentralized blockchain? It's the worst of both worlds.
But if you're encumbering yourself with TradFi regulatory costs, why run everything on a costly decentralized blockchain? It's the worst of both worlds.
7\ Nor are Distributed Anonymous Organizations an escape. A crypto-based arbitral body could exist to adjudicate payment disputes, and it's conceivable that the value of protecting their brand would (within some parameters) exceed the temptation to steal
Voila: anonymous trust!
Voila: anonymous trust!
8\ But the problem is that the DAO has to shake hands with the physical world. And in the physical world, regulators have state violence on their side
They cay say "No selling coffee to anyone not fully KYC'd"
They cay say "No selling coffee to anyone not fully KYC'd"
9\ So that's the thread.
If you want commerce based on fair exchange, you need trusted third parties
But if you have trusted third parties, it's cheaper just to run everything on centralized databases, rather than on costly blockchains
If you want commerce based on fair exchange, you need trusted third parties
But if you have trusted third parties, it's cheaper just to run everything on centralized databases, rather than on costly blockchains
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