> due to the interfce with fiat and they also tend to be where all of the fraud occurs.

Yes, because that's where the actual value is at the end of the day. Regardless of how much people want to pump crypto, when push comes to shove, the recognized value of crypto for the vast majority of people is it's conversation rate to fiat currencies.

I use my airline miles before dollars when buying plane tickets. This does not mean I value airline miles over dollars.

> where all of the fraud occurs

Might want to look into the rug-pulling with shitcoins, NFTs etc.

That is far more insidious since it is targeted at young adults/children by influencers such as Jake Paul, Lil Uzi, David Dobrik etc.

Yes, smart contracts can be programmed to allow terrible human behavior. Banks also have this feature.

But... they can also be programmed NOT to allow terrible human behavior. Banks do not have this feature.

Banks interact with the legal system at every level.

So yes there maybe terrible human behaviour at times but very quickly it results in either (a) people being fined or going to jail or (b) laws improving to prevent it e.g. KYC/AML.

Also as someone who works at a bank there is a lot of code which governs what people can and can't do.

Are you suggesting that KYC/AML protects consumers from the bank?

> But... they can also be programmed NOT to allow terrible human behavior.

Maybe, if you are a god tier programmer. On a long enough timescale the probability of your crypto project ending up on the rekt.news leaderboard is 1.

Banks actually do have terrible behavior if you think fractional reserve banking is a scam. If banks were not backed by the government printing press they would all collapse.

What's also interesting is that decision-making power is very rarely fully centralized in large financial companies. Boards of directors, fiduciary duties, third-party audits, attorneys, and so on, all structurally serve to decentralize decision making. There is, of course, individual variability, and such structures are not always successful.... E.g. I've read that the board of FTX wasn't an independent board in any meaningful sense.

> exchanges are the one centralized part of crypto

Crypto is immensely more centralised than the American banking system. That’s what makes it resilient. Every wallet’s state is always globally known. Compare that with the series of subpoenas one must serve to learn what’s in whose bank account.

I believe 'centralization' here refers to centralized control. The ledger is distributed anyhow, so not very central.

To correct your comment a bit, fraud occurs much more on centralized human-run exchanges that do NOT handle fiat. Handling fiat => licenses => regulation => harder to do fraud and get away with it.

It did not seem to make it that much harder for FTX...