People Don't Want To Run Their Own Bank


When I was young, I had a piggy bank. A piggy bank is incredibly secure. It's fairly big - so it is hard to lose. It is brightly coloured - so you can find it easily. No one else can see how much money there is in there. The only way to get money out is to smash it - providing visible evidence if someone has robbed you. And smashing makes a noise - deterring would-be thieves.

A piggy bank is close to perfect security. If you are seven and your adversary is a younger sibling.

Storing your own money is a mug's game. Having a fiver on you for emergencies might be sensible - but stuffing cash under your mattress is not advisable. Loss, theft, and fire are all real concerns.

The world is moving away from cash. Just before the pandemic, I went a year without using cash. Since then, I haven't withdrawn any notes.

Holding on to cash is like running your own bank. You have to check that the money you're given isn't counterfeit, store it safely, insure against loss, protect against theft, project future needs, etc. It is a massive faff.

So people use banks. In the UK, they're mostly free. I give an institution my money and, due to a combination of their size, insurance, and regulators, I'm confident that my money will still be there tomorrow. They are unlikely to give me fake notes, and they can refund me if I've been defrauded. I trust them.

Enter the crypto-dudes with their plaintive cry "But I shouldn't have to trust anyone!"

Sure. I fully support your right to get paid in cash and to store all of it in a lockable box guarded by your dog.

But don't come running to me when the dog eats all over your notes and shits them out in the middle of nowhere.

As Moxie wrote a few weeks ago that most people don't want to run their own servers. I'm a massive nerd and run a few servers. And it is a pain in the arse! This website runs on someone else's cloud infrastructure so it doesn't break too often. I don't have the time, energy, or skill to securely run important servers all by my self.

Do people want to manage their own cryptographic keys? I doubt it. It's complicated and fragile.

The complexity can be magically managed away with better technology and usability. Up to a point. You no longer need a degree in electronics to tune in to a radio station. But look at the number of people who don't know how to re-tune their car radio's presets.

So people will gather around big institutions. Those which have the funds, insurance, and regulatory oversight to provide a reasonable degree of trust.

Sure, some people will hold on to their own cryptokeys - just like some people only want to be paid in cash. But, just as now, they'll be the minority.

There's an inherent fragility built into cryptocurrencies. If your physical bank notes are damaged, the bank will replace them. If you are defrauded, the bank will reimburse you. If your loved one dies, and you inherit their assets, the bank is legally obliged to give you access.

Cryptocurrency has none of that.

  • If your hardware wallet or keys are destroyed, you've lost everything.
  • If you are defrauded, you've lost everything.
  • If your loved one dies and didn't give you access, you've lost everything.

Would you carry around your life savings in your wallet? Would you store everything of value in your home in a safe? Would you want to run your own banking infrastructure?

I doubt it.

The "not-your-keys-not-your-crypto" folk want us to return to an almost prehistoric means of storing and transporting money. Thankfully, most people realise how backwards that is.


14 thoughts on “People Don't Want To Run Their Own Bank

  1. """
    The "not-your-keys-not-your-crypto" folk want us to return to an almost prehistoric means of storing and transporting money. Thankfully, most people realise how backwards that is.
    """ — @edent

    Quite.

  2. says:

    I think you haven't considered the aspect of Central banks in this post. There were many banks that stopped allowing customers to their own funds in the light of the 2008 crash.

    With regards to losing a hardware wallet and losing all your coins that's not really true. 24 word seed phrases are widely used to prevent this exact issue.

    1. @edent says:

      I'm amazed that you think the average person can remember a 24 word phrase. Do you know how many people can't remember a 4 digit PIN?

  3. S C says:

    Thanks to crypto, I can bypass US and EU sanctions and help the people I care about with money. Banks gladly comply with war criminals in office, I choose not to.

    1. @edent says:

      Just so I'm clear - it is bad when the banks break the law, but it is good when you break the law?

      1. S C says:

        If the banks let people freely give money to their loved ones in countries with sanctions against them, then it is fine in my book.

  4. Shibu says:

    So you are saying living in a rental properties is better because people dont want to own/run their own houses?
    Same with cars? lease is better than owning!!!

    1. @edent says:

      Well… yes, for some people. I lease a car because I can't afford a band new car, and I want something reliable with a warranty. I can easily hand it back if my circumstances change. I don't need to worry about maintenance or servicing. Nor do I have the hassle of trying to buy from a dealership.

      Similarly, when I used to rent it was because I couldn't afford home ownership. The building's insurance, repairs, redecorating, etc. It's easier to move if you get a new job or you have crappy neighbours.

      Is ownership of assets right for everyone? No. Assets come with unexpected liabilities. Sure, renting / leasing isn't perfect - but it is a choice which many people make.

    2. Rob says:

      I’m not sure this is quite the same thing - if I own a house and the roof leaks I don’t start boiling the tar and climbing up there - I get a specialist (roofer) to fix it. Same with my money - I don’t want to constantly be worrying about it.

      Crypto/gold in a box under the floorboards/cash in a mattress are attractive where trust in institutions to protect property rights is weak. I’m grateful that I am privileged enough to live in a country where this isn’t a concern.

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