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Technical feasibility of regulating public Blockchain explored

techtake.info

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Re: Technical feasibility of regulating public Blockchain explored

#21

I have been denied a bank account in Canada due to my ethnic background. Articles like this terrify me.

As a Canadian I’m curious for details.

I went to HSBC Canada to open a Euro denominated account. The bank representative noted my named, and asked, smiling, what my background is.

I told her I'm from Vancouver. She said that's not what she meant, so I assumed she was asking whether my background was Iranian to make conversation (this was the branch in North Vancouver, which has a large Iranian-Canadian population, so I thought she was going to make a remark about Iranian-Canadian clients that she knows).

I told her my background is Iranian. She said that anyone of Iranian background would need to get special approval to open a Euro denominated account with HSBC Canada due to US sanctions.

I explained to her that I'm a Canadian citizen, that I moved to Canada when I was three years old, and that I don't have Iranian citizenship or any connections to Iran.

She said it doesn't matter, and that even if only my parents were born in Iran, or I had extended family living in Iran, I was considered to be a person with "connections to Iran", and thus needing special approval to get an account.

A week later the bank representative called me and told me that my request to open an account was rejected.

Re: Technical feasibility of regulating public Blockchain explored

#22
Oh, there are countless ways governments can regulate crypto currencies without such regulation being built into the currencies themselves. Right now, crypto currencies are entirely useless for 99 percent of real world purchases. You cannot buy a cup of coffee with your satoshis. All you can do is to buy a few digital assets and a tiny fraction of the world's real assets. You might as well try to buy dinner with your facebook stock or to pay your rent with cacao or tulips.

Let's say that government decides the only legal tender for purchasing real estate is the government's fiat currency of choice, for example euros or dollars, and that the only way to obtain a deed or to legally borrow money is to show through a government run website that you paid for the real estate with that fiat currency. That's it. Now government indirectly controls crypto currencies. You can develop all the crypto currencies you want, but if you can't use it for purchasing real estate, the ramifications of that constraint will trickle down through almost anything else. Then receiving rent in crypto is less interesting. then being paid in crypto is useless.

And about that: Want to pay or receive a salary? What if government says that can only happen with fiat and that any attempt of paying or receiving salary in crypto currencies is a felony that will land you in a fiat funded correctional facility for years? You would think twice. How will government know? The same way they know that you bought drugs: Through witnesses, agents, ISPs telling on you etc. It doesn't have to be 100 percent efficient. If they have the ability to catch 0.01 percent of transactions and the punishment is severe, most people will not do it. Don't tell me that crypto is encrypted and anonymous. As soon as you use it for a real world thing, you leave traces. You buy a car; someone sold it. Someone heard. Someone saw. You can't show a fiat transaction; that will be the proof that legislator says is enough to convict you. If government decides to make crypto illegal, or to make certain transactions illegal when paid with crypto, crypto will only be good for the grey economy.

Or what if government said that no matter in what currency you make your money, taxes have to be settled in fiat.

The point is that all government has to do is to ensure that fiat is needed for certain key parts of the economic system. Then people will need fiat, and government can then focus on regulating the exchanges between fiat and crypto. There is a very limited number of banks, and a small number of payment providers and a small number of ISPs. They just need to ensure that these organisations enforce the rules (register who bought or sold what crypto currency etc.). Pretty soon, the only crypto currency that 99 percent would use would be the government backed one, the one that had backdoors or whatever government demanded built in.

Re: Technical feasibility of regulating public Blockchain explored

#23
post #20

The regulatory nodes seem to have created quite a stir! I believe this stir is partly because it is being viewed as a central authority to control the blockchain. This is an incorrect understanding of the proposal. The top node of the hierarchy of regulation can be created by anyone. However, those who want to legitimately (within their jurisdictions) use blockchains to improve the experience of transfer of coins (no…

If adopting this technology is voluntary, it has nothing to do with regulation. It would simply be a superior protocol, that people choose to use. “Voluntary regulation” is an oxymoron. > Also, we must not forget that unregulated blockchains are being used as a bridge to transfer money between the legal and the illegal businesses. Nor must we forget that many countries, like Argentina, make it illegal for people to s…

If one voluntarily chooses to trade coins of "out of jurisdictional regulation part of the blockchain", the person will not be able to get those coins into the "regulated part of the blockchain". This is how the bridge between legal and illegal businesses would be broken.

I do not know about the cases you are referring to, as I am not a lawyer, nor an economist and not a statesman.

Within the reasonable countries (most part of the world) one should be able to trade legally, transfer the coins without violating laws of the involved jurisdictions. This would be possible even between different countries.

If you see through it, you will notice that you can create your own "Regulation" within / between a group of your counterparts. Its not taking away your freedom, its just breaking the bridge between legal and illegal businesses.

Re: Technical feasibility of regulating public Blockchain explored

#24
post #11
post #7

Earlier quoted context omitted.

> To govern and regulate a public block-chain is fundamentally against what they stand for. A block-chain has no stance for or against anything. Saying that a block-chain could be for or against governance is similar to saying that b*trees are pro-life.

Decentralisation and censorship resistance are fundamental properties of Bitcoin.

A blockchain is just a data structure. Bitcoin is more than just a data structure.

Re: Technical feasibility of regulating public Blockchain explored

#25
I believe there is an elegant way for regulation. Regulation authorities just have to "taint" the coins according to some rules and publish the result.

For example they say which coins are clean and which are dirty and define a rule that upon a transaction you must first spend away your clean coins (the clean and dirty coins sets are updated by watching the blockchain).

By creating such an overlay currency over an exiting one they can provide incentive for actors to self regulate (i.e. you won't be willing to accept coins which you know are dirty if it means you won't be able to cash them out).

Anyone can create such an overlay coin (I call them rainbow coins). For example you can define a rule which will add a stamp to coins which go through a specific address (The idea being that people then send coins to this address, you send them back a fraction but this fraction is now "stamped").

What is great about this solution is that it can be applied to all public ledgers.

It doesn't work for the crypto currencies which don't have a public ledger (like Monero, Zcash, ...) but those are more risky per nature, as any implementation bug could mean that all the money can be diluted away and nobody would know.

Re: Technical feasibility of regulating public Blockchain explored

#26

Earlier quoted context omitted.

As a Canadian I’m curious for details.

I went to HSBC Canada to open a Euro denominated account. The bank representative noted my named, and asked, smiling, what my background is. I told her I'm from Vancouver. She said that's not what she meant, so I assumed she was asking whether my background was Iranian to make conversation (this was the branch in North Vancouver, which has a large Iranian-Canadian population, so I thought she was going to make a rema…

This is outrageous. As a fellow Canadian whose parents immigrated here, I am fed up with Canada's reputation as friendly and welcoming to foreigners. While it is to a degree, the racism here is much stronger than people seem to be willing to acknowledge.

Re: Technical feasibility of regulating public Blockchain explored

#27

Earlier quoted context omitted.

I went to HSBC Canada to open a Euro denominated account. The bank representative noted my named, and asked, smiling, what my background is. I told her I'm from Vancouver. She said that's not what she meant, so I assumed she was asking whether my background was Iranian to make conversation (this was the branch in North Vancouver, which has a large Iranian-Canadian population, so I thought she was going to make a rema…

This is outrageous. As a fellow Canadian whose parents immigrated here, I am fed up with Canada's reputation as friendly and welcoming to foreigners. While it is to a degree, the racism here is much stronger than people seem to be willing to acknowledge.

Thanks for your words of support. The experience has been surreal for me.

What saddens me most is that in a sense, I'm one of the lucky ones: I genuinely don't have any connections to Iran. I might be able to complain and have the policy reversed on people like me.

But what if I did have connections to Iran? What if I had immigrated at 22, and still had Iranian citizenship? Or what if I never got a chance to immigrate, and still lived in Iran? In that case, I would be totally rejected by a world that justifies official discrimination against me, in the name of enforcing sanctions that are deemed necessary to achieve geopolitical objectives.

The worst part of it all would be knowing that the world at large considers me expendable, and would accept policies that lead to my discrimination as a lesser of two evils.

There would be no way out if I were in that position, because the quality of mine that is discriminated against is one I was born with, and complaining wouldn't help, because most people would just say "tough luck". When the crowd thinks you deserve to suffer because of what you are, rather than what you've done, it's a crushing feeling. I have a taste of that now and it's terrifying.

Regarding racism and discrimination in Canada: I agree that there is much more of it here than people generally perceive. I do think Canada is less racist/discriminatory than most countries, but the difference is not as big as commonly believed.

Re: Technical feasibility of regulating public Blockchain explored

#28
post #3

If this is the financial world you want, you just need a government database (ledger) of who has what currency and an API. Would be a lot simpler than blockchain which is designed to be de-centralized. Using blockchain for this is putting a square peg in a round hole.

There is an arguement to be made for starting with a secure system and adding in regulatory features. For instance, if we adopt the articles proposed regulatory node idea, where the only role of the trusted nodes is to approve transactions, then a complete compromise of the trusted systems would only allow an attacker to perform a DOS attack or bypass the regulatory checks. In contrast, in a traditional system, compr…

> compromising the central party gives you the keys to the kingdom

What does this look like in practice? The Federal Reserve being hacked? Why would an immutable blockchain make that more pleasant than our current, reversible system where something like the 1933 eight-day bank holiday [1] is possible?

Practically speaking, central banks get compromised by political factors much more frequently than by hackers.

[1] https://en.wikipedia.org/wiki/Emergency_Banking_Act

Re: Technical feasibility of regulating public Blockchain explored

#29

Earlier quoted context omitted.

There is an arguement to be made for starting with a secure system and adding in regulatory features. For instance, if we adopt the articles proposed regulatory node idea, where the only role of the trusted nodes is to approve transactions, then a complete compromise of the trusted systems would only allow an attacker to perform a DOS attack or bypass the regulatory checks. In contrast, in a traditional system, compr…

> compromising the central party gives you the keys to the kingdom What does this look like in practice? The Federal Reserve being hacked? Why would an immutable blockchain make that more pleasant than our current, reversible system where something like the 1933 eight-day bank holiday [1] is possible? Practically speaking, central banks get compromised by political factors much more frequently than by hackers. [1] ht…

Slightly off-topic but something doesn't have to be hacked to be compromised. In my book, manipulation by government for political or plain self-interest reasons counts as compromising.

Re: Technical feasibility of regulating public Blockchain explored

#30
post #29

Earlier quoted context omitted.

> compromising the central party gives you the keys to the kingdom What does this look like in practice? The Federal Reserve being hacked? Why would an immutable blockchain make that more pleasant than our current, reversible system where something like the 1933 eight-day bank holiday [1] is possible? Practically speaking, central banks get compromised by political factors much more frequently than by hackers. [1] ht…

Slightly off-topic but something doesn't have to be hacked to be compromised. In my book, manipulation by government for political or plain self-interest reasons counts as compromising.

> manipulation by government for political or plain self-interest reasons counts as compromising

Some countries, e.g. the Cayman Islands or Zimbabwe, peg (or have pegged) their currency to a foreign currency [1]. There has also been discussion of rule-based monetary policy [2], where central bankers' discretion is limited. A blockchain would be a stricter form of both, amplifying their benefits as well as downsides.

TL; DR We don't understand monetary policy well enough, broadly enough, to have a set of rules everyone agrees are good. Such strictures are better than an economy being left to incompetent central bankers, or in certain limited cases (e.g. Hong Kong or Bermuda's financial proximity to much-larger economies). For general cases, or in a permanent structure such as a blockchain, however, much more work needs to be done.

[1] https://en.wikipedia.org/wiki/Currency_board

[2] http://www.frbsf.org/education/publications/doctor-econ/2001...

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