The most obvious use case is as a store value; “digital gold” as Peter Thiel likes to call it. Bitcoin is limited in supply and has enough network effect behind it to succeed in the long term, other cryptocurrencies much less so regardless of any technical advantages. I don’t see crypto getting banned because A) there is too much institutional investments in it and B) it’s not a threat to Western governments any more than gold is.
Regarding B: this is not true. Someone who accepts crypto for their business can easily set up the system in a way that it is optional which transactions they report. Sort of how cash only businesses—or at a lower level, people paid cash tips—probably nearly all cheat to some degree on their taxes. Some of the cash can be spent on personal expenses without any records kept. Crypto makes this way easier—no longer is there large sums of cash around, it’s harder for the IRS to audit, and the same ‘benefits’ apply—someone can accept crypto for a transaction to a randomized new account they control, and sometimes they import that transaction into the books they show the government, and sometimes they don’t.
The government has to collect money to operate, it can’t have everyone cheating. It leads to failure of the state when too many people are cheating the system.
It also allows for purchase of things that governments don’t want citizens to have far more easily than before. Yes, in any major city, you can probably find a drug dealer for whatever recreational drug you are seeking. But can you find the parts for a specific model of machinegun? A rocket or even guided missile launcher? (ok I’ve never heard of one of those for sale on the dark web but it’s possible). A hitman who isn’t definitely a cop? (I’ve never actually heard of the dark web successfully being used for this, but combined with Smart Contracts for escrow it’s at least possible ). Can you get a data set of stolen credit card numbers, or a zero day for a major type of computer system?
None of these illegal goods were easy to get before because they are so specialized. It’s the same problem where if you were doing hobbyist electronics and shopping at radio shack, you were limited to very basic designs. The government being able to control access to weapons—which both heavy weapons and high end hacking tools count as—are part of their monopoly on the use of force and again a threat to them.
Anyways I’m not disputing (A) but I can see a possible crash of crypto if (B) ever leads to a major incident, such as a major government VIP assassinated with a guided missile, all arranged through the dark web with payment through crypto. Governments can regulate crypto, as mentioned—they merely need ban Western banks from knowingly allowing funds in the bank accounts from being used to buy crypto, or allowing the proceeds from a sale of crypto sale to be deposited in them. This would pretty much kill crypto.
A hitman who isn’t definitely a cop? (I’ve never actually heard of the dark web successfully being used for this, but combined with Smart Contracts for escrow it’s at least possible ).
But can you find the parts for a specific model of machinegun? A rocket or even guided missile launcher?
Neither of which is a meaningful challenge to state monopoly of violence. You can even legally own tanks, but these weapons are very powerful only in limited contexts. Sure you can blow up a few people with it before being subdued, but an assault rifle or even a truck would do the job just as well. You’d have to go to WMDs before the situation becomes problematic.
The more fundamental problem with this argument is that, once important state secrets/WMDs have been stolen, the damage is done; the fact that someone is trying to make an extra buck off of it afterwards via crypto is rather trivial.
A hitman who isn’t definitely a cop? (I’ve never actually heard of the dark web successfully being used for this, but combined with Smart Contracts for escrow it’s at least possible ).
The problem with hiring a hitman on the web is first and foremost that there is no incentive for the hitman to follow through. There is obviously no legal recourse for the buyer, and using cryptocurrency actually disincentivizes the hitman from doing his job even more. If you’re untraceable, you’re also reputationless. I don’t see what problem is being solved by smart contracts here; at the end of the day you have to interact with the real world to enforce your contracts.
Someone who accepts crypto for their business can easily set up the system in a way that it is optional which transactions they report. Sort of how cash only businesses—or at a lower level, people paid cash tips—probably nearly all cheat to some degree on their taxes. Some of the cash can be spent on personal expenses without any records kept. Crypto makes this way easier—no longer is there large sums of cash around, it’s harder for the IRS to audit, and the same ‘benefits’ apply—someone can accept crypto for a transaction to a randomized new account they control, and sometimes they import that transaction into the books they show the government, and sometimes they don’t.
You could do the same thing with gold, yet no one bothers to do it. That’s basically my knock-down argument against crypto being revolutionary in general: there is no important aspect in which crypto differs from gold. I guess we’re not really disagreeing here; I think governments will just slap some regulations on coin exchanges and that will be end of the story, no need for more drastic measures.
I don’t see what problem is being solved by smart contracts here; at the end of the day you have to interact with the real world to enforce your contracts.
The smart contract would specify the identities of other network accounts who will be able to vote on the outcome of the contract. So there could be, say, 10 third party accounts who represent “observers” who vote on whether or not they believe the target was killed. (from reading the paper). These “observers” would have a reputation built up over past predictions and might not actually be human beings who can be arrested. (or they might be living in countries where this action is not considered a crime). This means the hitman can either hunt down each anonymous observer and force them at gunpoint to vote the hitman’s way (which other mechanisms would need to zero out their reputation score for this false observation) or kill the target or forfeit the money back to the buyer when the contract expires.
You’re just delegating the problem away to an observer reputation system that has the same problem one level deeper. Who actually has incentive to align reputations of observers with what actually happened?
This is a thorny problem, and I’m not working in this space. Having thought a bit about the problem and rejected many other possibilities, what I arrived at is this:
day 0, no one has a reputation but n accounts ‘volunteer’ to be judges
Day n, each “judge” has a history log of the (evidence, decision). Automated tools detect a corrupt judge by looking at the log and looking for decisions not justified by the evidence, and then the buyer and the seller agree on a possible list of non-corrupt judges, and a random sampling of them is chosen. (simplest way is to look at a judge making a different decision from another judge, but determining who is “right” when the majority is wrong is a difficult unsolved problem)
There are some difficulties with this, namely that a judge can only make decisions on publicly available information. For example, you could in theory use it to place a bet for an event that will later happen, and these judges vote whether or not your bet is good.
The incentive that the judges have is the longer the history log of correct decisions, the more that judge is “worth” and the larger the fee they will get.
The most obvious use case is as a store value; “digital gold” as Peter Thiel likes to call it. Bitcoin is limited in supply and has enough network effect behind it to succeed in the long term, other cryptocurrencies much less so regardless of any technical advantages. I don’t see crypto getting banned because A) there is too much institutional investments in it and B) it’s not a threat to Western governments any more than gold is.
Regarding B: this is not true. Someone who accepts crypto for their business can easily set up the system in a way that it is optional which transactions they report. Sort of how cash only businesses—or at a lower level, people paid cash tips—probably nearly all cheat to some degree on their taxes. Some of the cash can be spent on personal expenses without any records kept. Crypto makes this way easier—no longer is there large sums of cash around, it’s harder for the IRS to audit, and the same ‘benefits’ apply—someone can accept crypto for a transaction to a randomized new account they control, and sometimes they import that transaction into the books they show the government, and sometimes they don’t.
The government has to collect money to operate, it can’t have everyone cheating. It leads to failure of the state when too many people are cheating the system.
It also allows for purchase of things that governments don’t want citizens to have far more easily than before. Yes, in any major city, you can probably find a drug dealer for whatever recreational drug you are seeking. But can you find the parts for a specific model of machinegun? A rocket or even guided missile launcher? (ok I’ve never heard of one of those for sale on the dark web but it’s possible). A hitman who isn’t definitely a cop? (I’ve never actually heard of the dark web successfully being used for this, but combined with Smart Contracts for escrow it’s at least possible ). Can you get a data set of stolen credit card numbers, or a zero day for a major type of computer system?
None of these illegal goods were easy to get before because they are so specialized. It’s the same problem where if you were doing hobbyist electronics and shopping at radio shack, you were limited to very basic designs. The government being able to control access to weapons—which both heavy weapons and high end hacking tools count as—are part of their monopoly on the use of force and again a threat to them.
Anyways I’m not disputing (A) but I can see a possible crash of crypto if (B) ever leads to a major incident, such as a major government VIP assassinated with a guided missile, all arranged through the dark web with payment through crypto. Governments can regulate crypto, as mentioned—they merely need ban Western banks from knowingly allowing funds in the bank accounts from being used to buy crypto, or allowing the proceeds from a sale of crypto sale to be deposited in them. This would pretty much kill crypto.
The Russian dark website Hydra was used for it.
Neither of which is a meaningful challenge to state monopoly of violence. You can even legally own tanks, but these weapons are very powerful only in limited contexts. Sure you can blow up a few people with it before being subdued, but an assault rifle or even a truck would do the job just as well. You’d have to go to WMDs before the situation becomes problematic.
The more fundamental problem with this argument is that, once important state secrets/WMDs have been stolen, the damage is done; the fact that someone is trying to make an extra buck off of it afterwards via crypto is rather trivial.
The problem with hiring a hitman on the web is first and foremost that there is no incentive for the hitman to follow through. There is obviously no legal recourse for the buyer, and using cryptocurrency actually disincentivizes the hitman from doing his job even more. If you’re untraceable, you’re also reputationless. I don’t see what problem is being solved by smart contracts here; at the end of the day you have to interact with the real world to enforce your contracts.
You could do the same thing with gold, yet no one bothers to do it. That’s basically my knock-down argument against crypto being revolutionary in general: there is no important aspect in which crypto differs from gold. I guess we’re not really disagreeing here; I think governments will just slap some regulations on coin exchanges and that will be end of the story, no need for more drastic measures.
I don’t see what problem is being solved by smart contracts here; at the end of the day you have to interact with the real world to enforce your contracts.
The smart contract would specify the identities of other network accounts who will be able to vote on the outcome of the contract. So there could be, say, 10 third party accounts who represent “observers” who vote on whether or not they believe the target was killed. (from reading the paper). These “observers” would have a reputation built up over past predictions and might not actually be human beings who can be arrested. (or they might be living in countries where this action is not considered a crime).
This means the hitman can either hunt down each anonymous observer and force them at gunpoint to vote the hitman’s way (which other mechanisms would need to zero out their reputation score for this false observation) or kill the target or forfeit the money back to the buyer when the contract expires.
You’re just delegating the problem away to an observer reputation system that has the same problem one level deeper. Who actually has incentive to align reputations of observers with what actually happened?
This is a thorny problem, and I’m not working in this space. Having thought a bit about the problem and rejected many other possibilities, what I arrived at is this:
day 0, no one has a reputation but n accounts ‘volunteer’ to be judges
Day n, each “judge” has a history log of the (evidence, decision). Automated tools detect a corrupt judge by looking at the log and looking for decisions not justified by the evidence, and then the buyer and the seller agree on a possible list of non-corrupt judges, and a random sampling of them is chosen. (simplest way is to look at a judge making a different decision from another judge, but determining who is “right” when the majority is wrong is a difficult unsolved problem)
There are some difficulties with this, namely that a judge can only make decisions on publicly available information. For example, you could in theory use it to place a bet for an event that will later happen, and these judges vote whether or not your bet is good.
The incentive that the judges have is the longer the history log of correct decisions, the more that judge is “worth” and the larger the fee they will get.