[victorvosk]

BTC and a lot of other chains are Level 1 (L1). Final settlement layers for transactions. To compare that to normal banking, your credit card is like an L5. Tons of things go on in-between your CC transactions before its actually settled even if it appears to be instant and final to the end user.

Truth is crypto enthusiasts have been overly ambition in this space, insisting a single L1 chain will come along and be the solution.

The average user A) Doesn't care and B) needs a higher level transaction layer that is flexible, where charges can be reversed or funds restored in the presence of theft or fraud. That stuff happens all the time in real life.

There is no way to improve the blockchain as currency UX without a centralized mediator(s) for average people. People get scammed all the time despite there being dozens of safety nets in place. How is that going to work when an attacker just needs your crypto keys to steal your entire net worth?

[bearjaws]

That just sounds like banking with extra steps.

[olalonde]

Spoken like someone who doesn't know the steps involved in opening a bank account (hint: many people can't), accepting online payments using a bank account (hint: hope you have deep pockets), using a bank for sending interbank/international payments (hint: might need to collect a page worth of information from your recipient. second hint: their bank might refuse to receive the payment), etc. Bonus steps: do all the above programmatically using an API (hint: you might have a billion-dollar startup in your hands).

Now do all the above using Bitcoin/lightning network. You'll be done in 15 mins.

[bytelines]

Would lightning network approach comply with KYC laws?

[olalonde]

That question is highly dependent on jurisdiction. The prevailing opinion right now is that Lightning nodes are not subject to KYC regulations in the US.

[bytelines]

What is to prevent the network from facilitating money laundering and purchase of illegal goods?

[jayd16]

You know you're still supposed to collect all the same info for a BTC transaction, right? Just because it's easy doesn't mean it's not tax evasion.

[olalonde]

No, you are not supposed to. KYC is a legal requirement for money transmitters[0]. It does not apply to Bitcoin users.

[0] Money transmission is the act of receiving currency from one party and transferring it to another party. Basically, middlemen in a transaction (e.g. banks).

[dragonwriter]

If you are processing financial transactions (including something of “value that substitutes for currency”) between other people at their direction, you are a money transmitter. The whole point of both Bitcoin is decentralizing this function from banks to a network of miners, and a similar thing is done in Lightning with its nodes.

[olalonde]

That's correct. In the case of Bitcoin, the thing that most closely resembles a "money transmitter" are miners but FinCEN ruled that they are not[0]. A sensible decision because otherwise, Bitcoin would have effectively been banned from the United States (or Bitcoin miners, at least).

[0] https://www.coindesk.com/policy/2014/01/31/fincen-declares-b...

[toolz]

Ignoring the fact it isn't tax evasion - just because it's against the law, doesn't mean it's unethical. Further, obeying laws can be (and often is) unethical. Not everything is on the level of requiring people to turn in jews, but there's plenty of room to argue that companies that are ill-equipped to protect your personal data should not be allowed, much less required, to collect your identifying information.

[lxgr]

You'll also reduce your potential (new) customer base by almost 100%. Trust can't be bootstrapped trustlessly.

[cortesoft]

You can set up a stripe account to accept payments very easily.

You can buy a prepaid Visa with cash in just a few minutes.

[olalonde]

> You can set up a stripe account to accept payments very easily.

Doesn't it require having a U.S. corporation? That's a few hundred dollars off the bat. It also requires you to provide evidence that you are within the types of businesses they authorize. I also suppose it requires having a bank account. Opening a business bank account does not take a few minutes and it can be close to impossible for certain categories of businesses. Multiply that by 10 if you are not a citizen/resident. I also don't believe Stripe allows sending money. Furthermore, receiving payments on Stripe effectively takes a week due to the waiting period. Finally, if Stripe decides to freeze or terminate your account, you are f'ed.

[notpushkin]

Stripe is not worldwide, but works pretty much everywhere in EU at least. You can open a company in Estonia in a couple hours (once you have a digital signature key, which they offer to everybody now, not just Estonian citizens [1]). Getting a bank account might be a bit trickier, but still doable (hint: Wise [2], while not a bank, might be an easier option).

That said, Bitcoin is still a whole lot easier to accept, and on the L1 level can't be blocked by anybody. Cryptocurrency is definitely the future, but traditional banking is trying to compete sometimes :-)

[1]: https://e-resident.gov.ee/ [2]: https://wise.com/

[skinnymuch]

A business or business bank account isn’t needed, so it doesn’t matter. It’s the same with many payment providers. I linked to references for Stripe on this here: https://news.ycombinator.com/edit?id=32102762

PayPal etc don’t require any business stuff. Being a traditional bank is unimportant for getting paid for online stuff.

There’s a lot of ways to get access to something that qualifies as a bank account. For example, Cash App got big because it provides what a bank account does and qualifies as one, even if it is not a traditional bank at all.

Once multiple apps are available worldwide as well as multiple ways to have a bank account or a bank account equivalent, why would cryptocurrency be the future?

Multiple apps are already available for the majority of the population. The west, India, and China alone are close to half the world population.

[skinnymuch]

Stripe does not require having a business.

In the west, opening a business bank account does indeed take a few minutes. There’s more than enough that allow opening one online.

It isn’t needed for Stripe or many payment providers, so it’s a moot point. Same with many payment providers not requiring a business.

References: - https://support.stripe.com/questions/selling-on-stripe-witho... - https://www.statrys.com/blog/connect-stripe-bank

[notpushkin]

Not sure about the U.S., but in at least in Russia and Estonia sole proprietorship is a form of business – in a sense that you have to register it, do annual reports (or more often), calculate taxes etc.

In Russia, it is a bit easier than running an LLC, so many entrepreneurs choose to start as an SP. In Estonia I've seen zero sole proprietors – the burden is the same, but LLC taxes are more favourable (0% income tax until you pay out dividiends) and limited liability (which you don't get as an SP).

[MuffinFlavored]

> To compare that to normal banking, your credit card is like an L5.

Could you tell us what L1, L2, L3, L4 are in a credit card example?

[olalonde]

It's an imperfect analogy but it might look something like this:

L1: Central bank (implements monetary policy)

L2: Member banks (have accounts at the central bank)

L3: Non-member banks

L4: Clearing house, SWIFT, etc. for interbank payments

L5: Credit card networks

[TradingPlaces]

How is this better than Visa and MC?

[Centmo]

The 1.5-3.5% credit card processing fee for starters. Also, you can't use a CC to send money peer-to-peer globally at near-zero cost.

[dmitriid]

> The 1.5-3.5% credit card processing fee for starters.

Compared to... 1 dollar, no, 15 dollars, no, 5 dollars, no, 65 dollars, no, ... transaction fees for Bitcoin.

[bytelines]

That creates opprotunities for other Level 1 chains. Solana for example charges $0.00025 per transaction (however this is still denominated in the SOL currency so it will fluctuate). Hedera network is $0.0001 per transaction and is fixed in USD.

[dmitriid]

They have other problems. Solana's entire supply is said to be 5% of the current world population. I'll let you do the math on the rich/poor inequality this entails.

Each problem that's dismissed out of hand by crypto proponents is compounded by the endless streams of bigger and worse problems.

[bytelines]

I'm very confused by both of your points. The supply of a cryptocurrency is equal to a person? A crypto token is not a person so I'm guessing you missed a few words there?

How is building a competing chain to more efficiently solve a problem (high transaction fees) in a competitive market in any way "dismissing" that problem? That seems the exact opposite of dismissing a problem.

Do those new solutions come with new problems? Sure, that's true of any technology. Dynamo-based databases solved high availability and network partitionability of data but come with several trade-offs. That doesn't mean you shouldn't use Cassandra for anything.

That said, Solana is not the hill I'm willing to die on and it's hot garbage. Hedera seems good though.

[Centmo]

How much are Lightning transaction fees?

[dmitriid]

Same. Lightning gets around them by bunching a bunch of transactions into one bitcoin transaction. Which is exactly what people have been doing with card processing for ages now.

And of course there other payment systems around the world that don't rely on card transactions.

And don't forget that the entire lightning thing is dependent on banks aka nodes with large sums of money to provide liquidity in the system.

[bubersson]

Between 1 to 100 satoshi usually - so fractions of a cent. (1 BTC = 100 000 000 sats)

[hiq]

More relevant: how much are Lightning transaction costs?

[olalonde]

Visa and MC could be L5 networks for Bitcoin, why not? Lightning is lower level and more decentralized, but it doesn't solve issues like dispute arbitration which credit cards do.

[lxgr]

Settlement is among the least interesting problems that Visa and Mastercard solve for merchants and customers.

Yes, being able to settle across currencies pretty efficiently is nice, but the real value is just what you mention: Dispute arbitration and managing liability in case of fraud.

[varajelle]

It keeps many of the properties of bitcoin:

- decentralised

- trustless

- censure resistance

Edit: - pseudonymous

[lxgr]

All of that remains to be proven in practice.

The incentive structure of Lightning to me seems to heavily incentivize the formation of a few centralized nodes affiliated with wallet providers – a structure which would forfeit many, if not all, of these properties.

[bendtheblock]

but what's the benefit of these?

- decentralised: why is this good?

- trustless: I trust the companies I use, it works

- censure resistance: OK, fringe case for most

- pseudonymous: why do I want anyone to be able to see my transaction history?

[olalonde]

- decentralised: why is this good?

Imagine a world where the web is controlled by a single entity, say Facebook. They get to decide who is allowed to create a website. They get to decide how much it cost. If they're not happy with the site's content, they can take it offline. Do you believe that would be a better world to live in?

- trustless: I trust the companies I use, it works

That's because there's usually no alternative. But when there's a trustless alternative, you may find that it is less risky or costly. Many people chose e2e encrypted messengers because they don't trust a third party with their private messages.

- censure resistance: OK, fringe case for most

"[...] Then they came for me—and there was no one left to speak for me."

It may be fringe but it's a massive issue for those who are censored. It's also not that uncommon. It is estimated that there are over 1 billion unbanked people worldwide. Also, try "PayPal horror stories" on Google.

- pseudonymous: why do I want anyone to be able to see my transaction history?

What parent meant is you can transact with people without knowing their real identity. I could send you a BTC tip on HN without knowing your name or address. Regarding your concern about privacy, no one can really determine your transaction history by looking at the blockchain. It's possible to do some guessing but all you really see are transactions going from opaque addresses to other opaque addresses with no attached identity information. Also, this can be further solved with CoinJoin[0].

[0] https://en.bitcoin.it/wiki/CoinJoin

[dmitriid]

> you may find that it is less risky or costly. Many people chose e2e encrypted messengers because they don't trust a third party with their private messages

Private messages are not money. Example: you ordered some goods and those arrived in bad shape. What's your recourse in the trustless world?

[olalonde]

There are some semi-trustless systems that work with escrows [0]. But realistically, an arbitration system does indeed require a trusted party.

There is no trustless world, just a world where trustless is an option and where "trustful" systems can be built on trustless foundations.

[0] Those systems give some guarantees about the trusted party (e.g. that they can't just run with the money).

[Empact]

> The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.

— Satoshi, 2009-02-11 https://satoshi.nakamotoinstitute.org/posts/p2pfoundation/1/...

> pseudonymous: why do I want anyone to be able to see my transaction history?

Transactions are viewable in the blockchain so that every party involved can audit the system and confirm the issuance.

[cortesoft]

> Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.

Right, which is why we have regulations on reserve requirements for banks, as well as things like FDIC insurance that guarantees your money in a bank account.

[imtringued]

>The root problem with conventional currency is all the trust that's required to make it work.

Surely this is a joke? Most currencies enjoy a high degree of trust until they collapse due to structural reasons that have nothing to do with trust whatsoever.

The euro zone and the dollar show that there is practically no shortage of trust whatsoever.

Seriously, this dude is supposed to liberate us from the evils of money?

How did it come to this? The root problem with currency is the zero lower bound of interest and liquidity preference which both combined result in permanently positive interest rates. When you refuse to pay interest, the economy stagnates and it can result in mass unemployment. This has nothing to do with trust. The Bitcoin economy is plagued with mass unemployment. The insanity of unemployment is a consequence of the insanity of non neutral money. Alternatively, you can pay interest, however this means you must perpetually borrow more money, e.g. Keynesian fiscal stimulus, notice that the insanity originates in money itself, not in the political response, the political response must be at least as insane as the money system, no less and it collapses. Now, there is a third way, QE aka not bothering to ask people whether they want to lend their money out, however, due to liquidity preference, the additionally created money will stagnate somewhere, meaning you can't ever stop QE. Again, in this case the insanity is a structural property of the currency, the monetary intervention has to be as insane as the money system and no less.

The apparent untrustworthiness of politicians is the result of the insanity of money, not the other way around. If money worked properly, you wouldn't need politicians to mess with it, you wouldn't even consider trust to be the problem because the amount needed would be so miniscule as to never matter in the grand scheme of things.

It is really strange to me, that people notice a constant problem with money and yet they still come up with the same conclusion "you're holding it wrong", what if it is impossible to hold it properly? What if permanent money is irreparably broken and forces its own debasement and all the other problems?

[dmitriid]

> Satoshi, 2009-02-11

Yes. Because society is built in trust. Something crypto world is busy rediscovering.

[pirate787]

I'm confused by your comment, L2 transactions are by definition run by centralized entities.

[varajelle]

What's your definition of L2 that include centralised entities?

There is no central authority in LN. There may be "hubs" which are more or less important, but that's not centralisation because there are several of them, it can also work without them, and also they can't steal your money.

Would you say that email is centralised because there area few big server (Gmail, Microsoft)? But even if it may more convenient to use one of the big server, you still have the choice not to use them.

[bubersson]

With LN you can have a private channel with your friend and do unlimited number of transactions with (literally!) 0 fees. Thanks to recent developments it's also much easier (and cheaper) to then swap those BTC to onchain - sometimes even cheaper than a comparable single onchain BTC transactions.

[ftlio]

That's the whole problem that Lightning solves with other tradeoffs. There are no centralized entities.