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There has been a recent crackdown on naughty games on steam and itch.io. The game platforms say the crackdown has come from payment processors. Payment processors have said they don't want their business associated with unsavory practices, and that adult products have higher charge back rates. Some people have blamed activist religious groups on aggressively lobbying the payment processors for this crackdown.
I mostly feel a sense of annoyance. My libertarian leanings have me feeling certain ways about all this.
Last time we saw this exact same play, Operation Choke Point came directly from the DOJ. I can easily understand how Federal investigations and lawsuits would apply significant pressure; I have to wonder how much pressure activist groups can really apply to these institutions? They seem unlikely to me to be the real driving force. On the other hand, Trump's first DOJ shut down Operation Chokepoint, so I don't see why his 2nd one would boot it back up. Maybe this really is just something payment processors have decided is in their own interest.
I don't have any special insight into the payment processors internal discussions of these policies. I suspect they are happy to go along with these requests, and just want someone else to be blamed or sued for the decision.
As I said the most important thing is the very incestuous relationship between government and private industry, and the lack of competition that this relationship causes.
In my head the optimal response to "these three payment processors don't accept porn games" should be something like "use one of the other dozen payments processors". Right now those other dozen mostly don't exist. That was supposed to be the dream of crypto.
I mean, it seems clearly possible to run a business with crypto and extra steps. The fact that no one is doing it for this indicates either A) thé niche isn’t profitable enough to be worth it or B) thé difficulties with payment processors arent bad enough.
I’m pretty sure it’s B.
The problem with crypto is you run into the same problem of having to explain the source of the funds during the fiat conversion process. It adds additional complexity without much benefit, for example, if someone uses stolen crypto to pay for a service.
Crypto is will never replace the traditional banking system or international financial system. The major selling point behind all crypto at least in the beginning was blockchain tech, which aimed to be able to make electronic payments without relying on trust. Which is a cool and ambitious idea. But it’s just not true. Yeah, bitcoin eliminates 'some' trusted intermediaries that are inherent in other payment systems like credit cards. But you still have to trust bitcoin and consequently everything else about it.
Blockchain tech mostly just ends up reshaping trust. But if you actually think about it and analyze both blockchain and trust, it's pretty obvious that it's all much more hype than value. And blockchain solutions are often worse than what they replace in the beginning.
If you look at the data structures that make up a blockchain, the first is a distributed (which in this case means multiple copies) but centralized (as in there’s only one) ledger. That's a way of recording what happened and in what order. The ledger is public which means that anyone can read it. And it's also immutable that means that no one can change what happened in the past. The second part is the consensus algorithm, which ensures all the copies of the ledger are the same. That's what "mining" is. And a critical part of the system is that anyone can participate. It's also distributed, which means that you don’t have to trust any particular node in the consensus network. It's also extremely expensive, both in data storage and in the energy required to maintain it. Bitcoin has the most expensive consensus algorithm the world has ever seen, by a 'long' shot. The last element is the currency itself. Some type of digital token that has value and is publicly traded. Currency is necessary of a blockchain to align the incentives of everyone involved. Transactions involving these tokens are stored on the ledger.
All three elements of a public blockchain fit together as a single network that offers new security properties. But the relevant thing to ask is: "Is it actually good for anything?" It’s all a matter of trust. Most blockchain enthusiasts have far too narrow of a definition of trust. They’re fond of catchphrases like “in code we trust,” “in math we trust,” and “in crypto we trust.” This is trust as verification. But verification isn’t the same as trust. Interpersonal trust can work very good on the basis of morals and individual reputation, but the problem is they often only scale to a certain population size. Primitive systems were good enough for small communities, but larger communities required delegation, and more formalism. This is where political institution's come into play. Institutions have rules and laws that induce people to behave according to the group norm, and they impose sanctions on people who don't. What laws do in this context is they formalize reputation.
If you look at banking and the financial system, financial institutions, merchants, and individuals are all concerned with their reputations, which prevents theft and fraud. The laws and regulations surrounding every aspect of banking keep everyone in line, including backstops that limit risks in the case of fraud. And there are lots of security systems in place, e.g., anti-counterfeiting technologies to widespready internet security technologies.
What blockchain does is shift some of the trust in people and institutions to trust in technology. You have to trust the cryptography, the protocols, the software, the computers and the network. And you need to trust them absolutely, because they’re often single points of failure. When that trust turns out to be misplaced, far too often there is 'no' recourse. If your bitcoin exchange gets hacked, you lose all of your money. If your bitcoin wallet gets hacked, you lose all of your money. If you forget your login credentials, you lose all of your money. If there’s a bug in the code of your smart contract, you lose all of your money. If someone successfully hacks the blockchain security, you lose all of your money. In many ways, trusting technology is harder than trusting people. Would you rather trust a human legal system or the details of some computer code you don’t have the expertise to audit?
Blockchain supporters love point to the more traditional forms of trust like bank processing fees as expensive. But what blockchain trust does is also costly, the cost is just hidden from you. For bitcoin, that’s the cost of the additional bitcoin mined, the transaction fees, and the enormous environmental waste. It doesn’t eliminate the need to trust human institutions. There will always be a big gap that can’t be addressed by technology alone. People still need to be in charge, and there is always a need for governance outside the system. This is obvious in the ongoing debate about changing the bitcoin block size, or in fixing the DAO attack against Ethereum. There’s always a need to override the rules, and there’s always a need for the ability to make permanent rules changes. As long as hard forks are a possibility—that’s when the people in charge of a blockchain step outside the system to change it.
Any blockchain system will have to coexist with more conventional systems. The advantage modern banking has is that it's designed to be reversible in real time. Crypto isn't. That makes it hard to make the two compatible and that makes things more insecure. Steve Wozniak got scammed out of $70K in bitcoin because he forgot this.
Blockchain technology is centralized. Crypto might theoretically be based on distributed trust but in practice it's not. Just about everyone using bitcoin has to trust one of the few available wallets and use one of the few available exchanges. People have to trust the software and the operating systems and the computers everything is running on. And we’ve seen attacks against wallets and exchanges. We’ve seen Trojans and phishing and password guessing. Criminals have even used flaws in the system that people use to repair their cell phones to steal bitcoin. These issues are not bugs in current blockchain applications, they’re inherent in how blockchain works. Any evaluation of the security of the system has to take the whole system into account. Too many blockchain enthusiasts focus on the technology and ignore the rest.
To the extent that people don’t use bitcoin, it’s because they don’t trust bitcoin. That has nothing to do with the cryptography or the protocols. In fact, a system where you can lose your life savings if you forget your key or download a piece of malware is not particularly trustworthy. And no amount of explaining how SHA-256 works to prevent double-spending will fix that.
To the extent that people do use blockchains it's because they trust them. People either own crypto or not based on reputation. That’s true even for speculators who own bitcoin simply because they think it will make them rich quickly. People choose a wallet for their cryptocurrency, and an exchange for their transactions, based on reputation. We even evaluate and trust the cryptography that underpins blockchains based on the algorithms reputation.
You can see how this will fail too. Look at the various supply chain security systems that are using blockchain. A blockchain isn’t a necessary feature of any of them. The reasons they’re successful is that everyone has a single software platform to enter their data in. Even though the blockchain systems are built on distributed trust people don’t always accept that. Some companies don’t trust the IBM/Maersk system because it’s not 'their' blockchain.
Do you need a public blockchain? The answer is almost certainly no. A blockchain probably doesn’t solve the problems you think it solves. The problems it solves are probably not the ones you have. Manipulating audit data is probably not your major risk. A false trust in blockchain can itself be a risk. The inefficiencies, especially in scaling, are probably not worth it. If you look at different blockchain applications, all of them could achieve the same security properties without using a blockchain.
And to the point about crypto more generally... Honestly, cryptocurrencies are useless. They’re only used by speculators looking for quick riches, people who don’t like government-backed currencies for different reasons, and criminals who want a black-market way to exchange money; which are the real use cases we see involved.
To answer the question of whether the blockchain is needed, just ask yourself: Does the blockchain change the system of trust in any meaningful way, or just shift it around? Does it strengthen existing trust relationships, or try to go against them? How can trust be abused in the new system, and is this better or worse than the potential abuses in the old system? But most importantly: What would your system look like in the first place if you didn’t even use blockchain at all?
For most people that would ask themselves those questions, I think it's likely they’ll choose solutions that don’t use public blockchain. And that’ll prove to be a good thing in the end.
Sure, crypto aims to eliminate the middlemen; but middlemen are sometimes useful.
Why not both? Why not have crypto act as a threat that keeps bankers from ripping off their customers?
Payment systems are rigged. You need to be a large bank to participate, and regulators will fight for large banks to keep competitors out. Sure, they might say this is for a good reason like financial stability or anti-money laundering (AML); but they don’t even have good arguments for why this is worthwhile (in the case of AML) or whether it is effective (in the case of financial stability.
You might be right that, in some ideal, free-market world, there wouldn’t be crypto. But, in this world, there should be even if it is only to push against the inefficiencies imposed by governments, bureaucrats, and regulators.
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