[adament]

Assuming you are allowed to transfer into the base layer. Most currencies and finance have a similar decentralized base layer: Cash. However in many jurisdictions your ability to transfer into that base layer is severely restricted due to money laundering, anti-terror-financing and / or currency-control regulation.

[derefr]

This is not guaranteed as a general property of blockchain systems, but can be guaranteed on a case-by-case basis by the immutable nature of smart-contract systems. I.e., if a centralized system sets up a lockup contract such that value can be forcibly unlocked by making a request on the blockchain side, and the centralized system just has to observe the event and deal with that — then for the company running the centralized system, that contract becomes an immutable part of "the way things are"; they can't decide to later renege on it, keeping people's funds locked up, because nothing can change the working of the [non-upgradable] contract once deployed — it just "is what it is."

By deploying such an immutable contract to be the custodian of customer funds, such an entity is essentially making a hard/inescapable precommitment to doing for users, whatever the contract happens to do. In a sense, the central entity's owner is not the true custodian of people's locked funds; rather, the contract itself is, and the contract can be independently audited by anyone who cares, before anyone begins using it, to prove that it will only ever be able to act in the public interest, rather than in the corporation's interest.

[cryvate1284]

Why can't they renege on it? What if a judge orders them renege?

[whatisweb3]

Three properties of cash make it tend toward centralization: physical size, difficulty of movement, and ease of access.

If you store a lot of cash in your home safe, eventually you will need more space - this is one reason banks exist. If you try to move a lot of cash quickly from one person or location to another, you will have a hard time - this is another reason banks and money transfer exists. If somebody breaks into your home safe, they probably will have immediate access to your cash - see smart contract wallets[1] and social recovery wallets[2] as an example of a more secure "crypto safe."

I agree that a concern in blockchain is that regulation and services may restrict users ability to withdraw to the base layer, see my other comment[3]. To me this is not a failing of the blockchain. It would be like governments restricting the use of internet or E2EE chat protocols - which is happening in some parts of the world - this does not mean the protocols have failed to meet their goals.

[1] https://www.argent.xyz/learn/what-is-a-smart-contract-wallet...

[2] https://vitalik.ca/general/2021/01/11/recovery.html

[3] https://news.ycombinator.com/item?id=32422921

[whatisweb3]

To add, cash is not neutral, it is tied to a particular state. It is a US centric view to say that USD cash is the base layer, rather than the EUR or GBP.