Yes because if we want to exchange BTC via non-custodial wallets then I don't have to send them to you via a financial institutution or third-party. The funds don't go from me - via a miner - to you as they do in the traditional banking industry. The function of consensus is to confirm whether the funds are there to transfer and not being double-spent only. Exchanges and custodial wallets on the other hand act like traditional banks as the assets held on my behalf are their liabilities. From my understanding the Lightning network is a payment channel, the funds being sent through that payment channel are not liabilities of the Lightning network so it is still a P2P network I'd say.
But then i can say the same thing about the banking system as it is now. When i submit a transfer request the bank acts like a miner as it confirms with its ledger that you have credit to transfer and then updates its ledger. Same with BTC, you submit a request to transfer funds, the miner takes the request from a pool, confirms the funds exist and adds that transaction into a new block then updates the chain/ledger. Also don't forget due to the high centralisation of miners today, they can choose to not process an address and therefore in theory can block translations.
The difference is that while the banking system carries out a similar function to miners ie consensus, the funds are the liabilities of the bank. Miners never take on our funds as liabilities, hence the transfer of funds is a P2P process. That's true, but it's a network thing rather than a "trust" thing.
I feel the idea of assets and liabilities with the big banks today is an outdated mindset (like with government debt). The big banks don't really care about matching books anymore and the reality is they don't match. They only focus on the processing function. In reality today they receive nothing and they send nothing, they act to verify and update ledgers.
Another note, Proof-of-stake acts like the old banking system. Those who have the capital control the system. And when you have a lot of capital (to lose) you are more insensitive to play ball with government as you don't want a target on your back. So Ethereum's decentralised/unregulated future doesn't look bright. Won't be long until they have black a list.
Funny enough the only true global P2P accounting tool we have today is precious metals. It goes from person A to person B with no other steps between. It has no counterpart risk and most important its history of past transaction can't be seen, unlike the banking system and cryptos.
Assets and liabilities remain a function of double-entry book keeping, but yes after the close of business banks settle their transactions by simply verifying and updating numbers on a screen. Any imbalances are corrected using reserves. In relation to the point we're discussing around P2P, when we use the banking system we hand over ownership of our funds to a third-party for both "safe-keeping" and in order to be able to digitally transact with others. By using DLTs the miners do the verification bit that banks do but we can transfer the assets directly to each other without the need to hand them over to another firstly.
There's no counter party risk exchanging Australian currency face-face either as it is a liability of the State and as a liability of the State it carries next to zero risk weighting. Regarding transaction history, if it can't be seen it can't be verified. This increases the risk that the person exchanging the asset/item may not have the right to exchange those goods in the first place. This is applicable to everything in life, even when we exchange precious metals with each other, we have to trust the other parties involved. That's why banks have audits, issue statements etc and why blockchains have explorers and "trustless" permission systems.
I guess there is a middle man in verification of purity and weight. Until it has .9999 on it from a trusted source it isn't fungible.
I think this start becoming grey and i bounce back and forth a bit. So both with the banking system and DLT you don't hold anything. With a bank they have a centralised node/ledger, while with DLT there are many nodes/ledgers and all the data always remains on these ledgers. Both with the banking system and DLT we have the ability to instruct how the ledgers changes. With a bank we have a password to access changes to the ledger and with a crypto we also have a password/private key to access changes to the ledger. I guess the main difference is, a bank ledger change can be made within the bank without your authorisation, while with a DLT a change requires your key. Though Ethereum has show in the past that it can organise with the main miners to undo a transaction by creating a new dominant branch. So at the end of the day you still have to trust something. Either trust the bank doesn't mess with your account or trust the DLT will remain stable and functional into the future.
So TLDR gold is the OG and time tested Bitcoin? Glad it only took ten years for everyone to catch up.
That's not the definition of "trustless" as commonly apllied in the crypto industry. Again, the simplest way to understand it is to ask yourself "Whose liability is the funds that I am attempting to transfer?" If the funds are a liability of the bank or a crypto exchange that keeps the assets in a custodial wallet then it is not a "trustless" system as they have to conduct the transfer on your behalf. If the private keys are held by you ie not the liability of another, then the system is "trustless" as you are conducting the transfer.
Fair enough. Though i would say bank deposits today is a liability of the entire system and no longer to an individual bank. So it's in the interest of the system that the bank processes the transfer request, just like it's in the interest of the crypto system that a miner process a transfer request. Though i understand there is a "technical" difference. I wonder what percentage of the crypto market care about it being trustless and therefore use it in a trustless way? Maybe 1%? Which makes you think what's the point of all the extra instability/volatility to make it trustless if it's of no importance to 99% of trades?
I'm 140% in agreement with you there, that's one reason why governments introduced deposit insurance schemes for example. I don't think the instability/volatility makes it trustless, I'm of the opinion that if indeed 99% of the market are only in it to make a quick buck especially by leveraging, then that creates the instability and volatility. I'd like to think at least 2% of the market are in it because of the fundamentals. That doesn't mean you have to be a HODLer though.
