Understanding the Risks of Cryptocurrencies
Bitcoin was born with the principle of eliminating the need to trust third party payment systems, banks, and brokerage houses. Today, financial intermediaries' role is to provide trust has emerged from the necessity of the direct connection between the two parties, thanks to Bitcoin's underlying technology.
understanding the risks of bitcoin/crypto... the real risks
though bitcoin did hit the news due to viruses blackmailing for funds of bitcoin. the amount of such bitcoin value linked to such cybercrimes was miniscule compared to the 'legit' bitcoin activities.
and yes the 'legit' activities have become even more stronger in recent years.
however your assumptions of the crypto community being 'eliminating need of third party trust' has actually been changing in the opposite direction
yes you subtly hinted at it, but in a positive narrative. so let me describe the real risks.
crypto is shifting away from the promise of eliminating the need to trust third parties
crypto developers are purposefully making bitcoin limited capacity and expensive utility to advertise other services that require third party trust.
even some bad codelines in the bitcoin client that does not allow spending untill synced. which makes users hate using the bitcoin client if they are not regular users.. and thus they rely on lite wallets(third party custody).
the fees of bitcoin is going up due to lack of interest in expanding tx capacity per block. and the preference of bloating up blocks with large transactions is prefered by devs. thus making people not want to use bitcoin for spending on daily things.
these tactics force people to use third party services just to get easy/smooth/fast and cheap utility.
but here is what people lose by these third party services
LN requires vaulting up funds with third parties and requiring them to be online and give permission via signature to allow you to transact. meaning people that want to spend need the other person to be online not just to spend but also to make sure their funds are not lost.
...
i personally have been a bitcoin hoarder since 2012 and i want to keep the utility of bitcoin principles by allowing bitcoin to expand. however the main devs are trying to shift people into the traditional banker model via sidechains/shadowchains and LN services. and not want bitcoin to expand
what you will find is these service offerings (channels to multiple users) is that they will end up having to register as MSB (money service businesses) and have to obide by regulations and policies of KYC
and be held accountable to certain limitations of use and also prevention of moving funds under court order.
yes there may be a blackmarket network of unregistered service providers but if they get wrapped up in legal issues where they are asked to cease operation. then those locked funds become part of the order. and thus legally frozen. and if any movement occurs those involved can then be in legal trouble.
(mtgox users didnt get funds back the day mtgox got locked. and that was pre channel)
the developers are droping the bitcoin principles not for legal/independant freedoms. but instead for profit.
by sacrificing peoples independant freedom to actually solely own assets. yep they want you to lock your funds with them so they can syphon funds out of your control.
sidechains and shadowchains and LN are not systems where the units of measure on those platforms are the true bitcoin. their inchannel daily spend units are different measures altogether. while you play with their mini units of measure. they are hoping you then run out of their units. and so need to sign your bitcoin value over to them
but if you manage to not spend all their units of measure. but then those systems are shutdown/channel owners are put offline. users dont have the same independant freedom to get their coin back
LN's major flaw is that channel partners need to be online to give permission. channel partners need funds elsewhere to route your payment. meaning to make a payment from a->z requires b-x to be available and funded.. this is not the original principles and promises of bitcoin.
and are far more of a problem then the worries of regulation of those partners that operate as service providers