22 sats \ 4 replies \ @kepford OP 27 Mar \ parent \ on: Is Lightning a Big Fat Target for the State? bitcoin
I think you are missing my point. I'm aware of how Lightning works.
What I'm saying is the Lightning protocol something states will be tempted to regulate/ban? There are plenty of things individuals can do and fly under the radar but a business which operates in the state system can't.
Strike for example is required to demand KYC info. Some businesses will not sell their good to people in certain jurisdictions due to laws/rules. This is the kind of attack I'm talking about.
I think it's likely something like that could happen.
My first thought, though, is that if a business can find suppliers who accept lightning payments, they could essentially have a bitcoin side of the business and not mix that accounting with the fiat side.
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Yeah, I can think of workarounds too. Not trying to spread FUD.
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It's a worthwhile point to bring up. Many businesses wouldn't be able to do that, plus they wouldn't want to advertise that they accept lightning payments. I think it would be a serious friction.
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This is something we knew was coming, but it's not specific in any way to Lightning.
Any centralised structure serving as a ramp exchanging Bitcoin and fiat will come to a series of realisations:
- Bitcoin, where pseudonymity is key, is not compatible with the legacy financial system, where KYC is deemed necessary.
- Bitcoin, which offers a public, transparent ledger of all transactions (of which Lightning does not have the liquidity to compete with at this time), is not compatible with the PII-linking that fiat demands.
- Centralised exchanges are the targets themselves, ripe for regulatory pressure and capture. Lightning is not. Lightning is a protocol. A protocol is language. Language cannot be viably regulated.
- Centralised exchanges which contain PII, rely on centralised, often third-party security, many times out-sourced.
Their business cannot be sustained under the centralised model that the fiat system nurtured, while attempting to provide services to individuals invested in a unique decentralised counterpart of said system.
Think about what happens when that PII is linked to BTC funds in a world where BTC continues to go up and fiat which the majority of people hold goes down, along with an ever-decreasing level of trust in government and an ever-increasing level of stress.
These, and others realisations, in my opinion, will amount to a series of incidents, of which we've already begun to see in the vein of CEX rugpulls over the years, regulatory burdening which Coinbase is beginning to feel, along with Chainalysis and LinkingLion, and now we begin to see with countries making it known they definitely plan to have their hand over any centralised exchange offering a custodial wallet service.
I don't think it's all doom and gloom though, but I do believe there's a harsher fighting period ahead as we disjoin money from state, and as this happens and the general economy goes downhill in fiatland, a lot of people who bought into the KYC nonsense may very well become targets themselves - All it takes is a data breach, internal or external, against that SQL DB that so securely holds all the info mentioned above, and a $5 wrench.
I think BTC will win out, but there will be a period where fiat gasps for air - And that's the most concerning period of all.
In summary, yes, any centralised exchange and its users specifically will become targets, be it in the eyes of government, or in the eyes of thieves and crackers - At least for a period.
The big mistake was creating Bitcoin businesses BASED ON fiat rules.
Businesses that are fully bitcoin-only will outlive and outperform.