[arcticbull]

"Forcing" a trusted party into the exchange is the optimization, and it only works because everyone does it. This is like pre-existing conditions. You only get coverage for them if everyone agrees to be covered all the time in the first place. As soon as one entity opts out and you have to build a system to accommodate it, the efficiency is rendered void/unworkable.

Your optional-trust model is effectively what we have now, with bitcoin + exchanges. You can opt to trust an exchange, and yes, that does reduce load on the network, however the network is still wildly inefficient because it needs to also support the use case of zero-trust transactions. Traditional banking is an exchanges-mandatory system, which is why it's so much more efficient.

NOTE: This is not an equivocation of the wild-west unregulated crazy-town exchanges of the crypto space and real banks, just the roles they play in their respective systems.

[baddox]

I don’t see how it is comparable to preexisting conditions. Two people using one payment system does not prevent two other people from using some other payment system.

We already have limited options with different features regarding fraud/chargebacks, like paying for something with cash versus with a credit card. Clearly both cash and credit cards can exist together.

[arcticbull]

I was attempting to make the analogy that a system designed to support both untrusted peer to peer payments and exchanges must support the lowest common denominator, the peer to peer untrusted payment which forces huge inefficiency into the system.

Similarly a health care system designed to support people with and without preexisting conditions must be designed to support the lowest common denominator, those without cover, which forces huge inefficiency into the system.

Maybe a poor analogy.

Cash and credit aren’t really analogous to exchange and peer-to-peer as in crypto the former is built on top of the latter. Credit isn’t built on top of cash in the same way, as a trusted intermediary abstracts the two concepts. To some extent they’re both eventually built on top of ACH.

[CryptoPunk]

>>"Forcing" a trusted party into the exchange is the optimization, and it only works because everyone does it.

The point you're skipping over is that there are network effects in the role of trusted third party, leading to monopolies/oligopolies, which can extract artificially high fees.

This is where distributed consensus has an advantage: it can provide the same and even stronger guarantees on the integrity of records, while preventing any third party from using their monopolistic position to extract high fees.