[ethanbond]

But you realize that banks (and individuals) could have all the advantages of decentralization if they just chose to be decentralized too, right? This prompts the question: why are they so centralized? It turns out the advantages of centralization are more significant than the advantages of decentralization, and this is true even in a market with religious orientation toward decentralization.

All you've gotta do to get people to keep their coins "correctly" is eliminate the benefits of agglomeration. Good luck!

[yuvadam]

Banks can't choose to be decentralized when the whole point of their existence is to custody centralized fiat money.

[toyg]

The point is to custody money, of any sort. And for that, they are excellent - the economy of scale in having a single organization arrange for security of such money for thousands or millions of customers, is unbeatable. Unless you enjoy employing security guards, building vaults (digital or otherwise), and arranging transports, you want to use a bank - or risk losing all your valuables to skillful thugs every single day.

[lottin]

The banking industry is not centralised. Banks provide financial services and compete against each other for customers. DeFi can't even get the most basic terminology right, yet somehow thinks that it can replace the entire financial sector.

[chitowneats]

Banks existed long before fiat currency. If you're ignorant of the history, I suggest you look up "history of the bank note".

[mikepurvis]

Individuals can, though. Just stuff your cash into your mattress— boom, decentralization achieved.

[mtkhaos]

Issue is they reinvented the wheel in the crypto space. Centralized or decentralized it's all on the same market is only a matter of scale. As even in centralized markets the concept of edge is just hitting parity.

What really surprised me about the space was the refusing of not registering as a speculative asset. As even if you look into the regulations, it's merely making the mechanisms transparent and creating reporting.

As if DeFi followed through with the true promise of decentralization and transparency. The FTX situation would never have happened in the first place. So with that, the crypto space actually went against its principles and we are seeing the result.

[more_corn]

There are benefits to both centralization and decentralization. In fact this tension drives a lot of technological improvement.

[dncornholio]

Centralisation isn't even a problem. Not getting any money is a problem though. Doesn't matter if the place where it's at is centralised or not.

The decentralised instances are experiencing all kinds of trouble.

I fucking love centralisation!

[warinukraine]

> But you realize that banks (and individuals) could have all the advantages of decentralization if they just chose to be decentralized too, right?

What are the advantages of decentralization in this context? Be specific.

[ethanbond]

Namely no risk of you losing your assets due to technical glitch, fraud, or overextension. Of course this is not a substantial advantage, especially in the US, given the various non-technical (i.e. legal/cultural) guarantees against these failure modes. It doesn't overcome the disadvantages of e.g. having to physically protect your own assets - thus why people tend to use financial institutions.

[warinukraine]

Exactly, this isn't an advantage. If there's a technical glitch, there's insurance for that.

What else?

[ethanbond]

You may be missing the point of my original post. It is that there are not substantial advantages to decentralization.

[gruez]

>But you realize that banks (and individuals) could have all the advantages of decentralization if they just chose to be decentralized too, right?

The closest you can get to decentralization with the traditional finance system is to withdraw and store cash, which is expensive/risky and causes inflation to eat away at your savings. Good luck with other parts of the finance system (eg. investments or loans). It's ironic how you portray centralization as something that people willingly engaged in because it was beneficial, considering that the disadvantages are all there by design (eg. the government refusing to make high denomination bills, or instituting a monetary policy that causes inflation).

[kergonath]

> The closest you can get to decentralization with the traditional finance system is to withdraw and store cash, which is expensive/risky and causes inflation to eat away at your savings.

I don’t see how it’s any different from the situation with, say, bitcoin. If you store a bitcoin, it just sits there, and its value follows that of the market. The fact that bitcoin is deflationary has nothing to do with decentralisation; a central bank could do that as well. They don’t because deflation is a terrible way of running an economy, not because it’s not possible.

> Good luck with other parts of the finance system (eg. investments or loans).

You could loan cash as well and get interests from that. Decentralised, anonymous, not traceable in any practical sense if you use regular used notes. Again, this has nothing to do with cryptocurrencies. The infrastructure that was built on top of cryptocurrencies enable doing it at larger scales and over longer distances, but that’s not a qualitative difference (besides the fact that this tends to concentration, running against the decentralisation ideal).

> It's ironic how you portray centralization as something that people willingly engaged in because it was beneficial,

It’s something that emerged because of economies of scale. Personally, I feel much safer with my money with an institution that is big and resilient enough that I am very close to 100% certain that it’ll still exist tomorrow. This can also be done with cryptocurrencies, but against this goes against the dogmatic ideal of decentralisation.

> the government refusing to make high denomination bills

How is it a problem in practice?

> instituting a monetary policy that causes inflation

Mild inflation is much better than deflation from an economic point of view. What do you think are the advantages of deflation? I can see the “the value of my pile keeps getting bigger”, but how would that work e.g. for farmers who need to invest to produce food, or people who need a loan to buy a house, if the whole system is deflationary?

But again, that’s a red herring because central banks can have deflationary policies. They don’t because that causes the economy to contract, unemployment to rise, and investments to fall.

[gruez]

>I don’t see how it’s any different from the situation with, say, bitcoin. If you store a bitcoin, it just sits there, and its value follows that of the market.

Note, that by "expensive/risky" I was talking about the physical storage of the bills (eg. risk of theft or needing to install security equipment), not the opportunity cost of not putting the money to work. The latter is a whole can of worms that I don't want to get into.

>The fact that bitcoin is deflationary has nothing to do with decentralisation; a central bank could do that as well. They don’t because deflation is a terrible way of running an economy, not because it’s not possible.

>Mild inflation is much better than deflation from an economic point of view. What do you think are the advantages of deflation? I can see the “the value of my pile keeps getting bigger”, but how would that work e.g. for farmers who need to invest to produce food, or people who need a loan to buy a house, if the whole system is deflationary?

>But again, that’s a red herring because central banks can have deflationary policies. They don’t because that causes the economy to contract, unemployment to rise, and investments to fall.

I don't doubt there are great reasons to run an inflationary monetary policy, but the fact still remains that if you want to keep cash around you'll be subject to inflation.

>You could loan cash as well and get interests from that.

But now it turns into a full time job.

>Again, this has nothing to do with cryptocurrencies. The infrastructure that was built on top of cryptocurrencies enable doing it at larger scales and over longer distances, but that’s not a qualitative difference (besides the fact that this tends to concentration, running against the decentralisation ideal).

No, because with cryptocurrencies you can deposit your money into some sort of lending protocol and have that handle it for you, rather than having to do it yourself by being a loan officer/servicer and debt collector.

>It’s something that emerged because of economies of scale. Personally, I feel much safer with my money with an institution that is big and resilient enough that I am very close to 100% certain that it’ll still exist tomorrow. This can also be done with cryptocurrencies, but against this goes against the dogmatic ideal of decentralisation.

But the whole reason why you have to worry about your whether your money is in a "big and resilient" institution is that the only way of storing money in the finance system is at a fractional reserve institution, which can be subject to bank runs. It's possible to structure a bank that doesn't have this problem (eg. narrow banking), but for some reason the government isn't too big on it.

>How is it a problem in practice?

It's an issue any time you want to store/transfer a large amount of money. Although to be fair most americans don't have enough savings for this to be an issue so I'll let that slide.

[ethanbond]

It’s completely trivial to store and transfer money on the order of millions of dollars. What “large amount” are you talking about?

Also no, there’s no risk of a bank run in the US due to other protective systems such as FDIC.

[gruez]

> It’s completely trivial to store and transfer money on the order of millions of dollars. What “large amount” are you talking about?

Please check the thread. We were talking about doing it in a decentralized way.

>Also no, there’s no risk of a bank run in the US due to other protective systems such as FDIC.

Again, not decentralized.