> So you’re saying that to use crypto properly, I have to secure a physical object that grants irrevocable ownership of my wealth? That sounds bad.
Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. Cryptocurrencies improve on this slightly by allowing you set up multisignature schemes, so you can get redundancy in the event of a loss.
>Is there a way I can get my crypto held my an institution with SIPC insurance, the way I hold stocks at a brokerage, so I can outsource this issue to someone else who is backed by a government guarantee?
If you want government guarantees, crypto might not be right for you.
> Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it.
You can’t steal my house by obtaining the deed. You can’t steal my stock by obtaining the stock certificates. That’s not how it works. The vast majority of wealth in developed countries doesn’t rely on physical security to maintain ownership. We’ve collectively outsourced that function to the government and other institutions, so we don’t have to individually hire bodyguards to prevent criminals from taking possession of our homes and stealing our assets.
Most people only hold a relatively small amount of wealth in forms that can by physically stolen (eg. petty cash, electronics). This means that you only need to defend yourself against a $1000 crime (stealing your TV), which is a lot easier than defending against a $1M crime (stealing your house or 401k).
If crypto requires holding my wealth in a hardware wallet that can be stolen, that means I’m only going to be willing to invest the amount of wealth I would spend on a TV, not the kind of wealth I am going to allocate to stocks or bonds.
Granted, crypto has utility for people who can’t use the government-backed institutions, like criminals. And in some countries where the government will steal your money, it has broader appeal. I won’t argue with that.
When this stuff happens, you can engage in a legal process that has the power to get your property back. The process to recover from this can be slow and difficult. I acknowledge that this is a failure of the institutions involved, which can and should be fixed. However, the existence of these avenues for recovery acts as a strong deterrent that limits the frequency of such crimes. That’s why I am slightly worried about the local gang stealing my TV (and my safe full of Kruggerands) but not at all worried about them stealing my house.
When your crypto is stolen, the theft cannot be reversed, by design.
The same legal processes that can be used to recover funds stolen from your bank account or stocks stolen from your brokerage account can be used to recover cryptocurrency.
>When your crypto is stolen, the theft cannot be reversed, by design.
If someone sends you a phishing link, gets your info, logs into your online banking and sends all of your money overseas, that theft generally can't be reversed either. (You'll find that the CFPB recently updated their Reg E interpretation on this, but that interpretation isn't binding and directly contradicts decades of practice)
If you're a business and get hit by banking malware, you're similarly fucked.
Not for Bitcoin no. For other more advanced currencies (everything that supports smart contracts) rules likes these can be coded into the wallet.
You can have a rule that allows spending <$1k at known places, but anything over that has to have approval from 3/5 board members, or your manager etc. Any spending rule can be coded like this.
> The same legal processes that can be used to recover funds stolen from your bank account or stocks stolen from your brokerage account can be used to recover cryptocurrency.
If that is the case, then doesn't that destroy (at least) one of the basic principles of cryptocurrency that people constantly harp on?
A house? Maybe. Hasn't worked out for the guy in the BBC story so far.
Brokerage account hacked, stocks sold and money wired away? Your chances of recovery are extremely slim. There's pretty much no recourse once that money has passed through a few hops.
Can you go into more detail about how multisig helps? I assume one of the signatures is my hardware wallet. Who holds the other signature? Do they have SIPC insurance?
I briefly touched on it above, but it's basically that you can mint as many keys as you like and require quorum to transact.
2/3 and 3/5 are common.
This way it's hard for a theif to find enough keys to steal your BTC, and you get additional backups in case something happens to one or more of your keys.
Yeah, that's how most things work in the physical world. If you want to secure a widget, then you need to "secure a physical object that grants irrevocable ownership" of it. Cryptocurrencies improve on this slightly by allowing you set up multisignature schemes, so you can get redundancy in the event of a loss.
>Is there a way I can get my crypto held my an institution with SIPC insurance, the way I hold stocks at a brokerage, so I can outsource this issue to someone else who is backed by a government guarantee?
If you want government guarantees, crypto might not be right for you.