I’m blown away by how anti-crypto this discussion is. I hadn’t realized how negative the prevailing sentiment is on Hacker News.
One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment? If you truly believe that cryptocurrency is the basis for a superior economic system, isn’t it rational and wise to put some of your savings there?
Another argument is that crypto enables ransomware attacks. This to me sounds akin to saying “encryption enables child exploitation”. I.e. it focuses on one abhorrent element of society that would take place no matter what and blames its existence on a system which has great potential for good, a kind of propagandist thinking.
Another argument is that Banks will be hurt by crypto. Good! Any epochal transition can be tumultuous, but in my view disrupting the basis of the greatest wealth inequality known to history is a good start. We’re not talking about “banks” that operate on a local or regional basis — these can adapt to using new technology and serve the same people — we’re talking about multinational Banks which went beyond skimming the cream long ago and don’t aparently have people’s best interests in mind.
> One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment?
Most other assets represent ownership of... something. A company, a commodity, property. Cryptocurrency is closest to either a fiat currency without the government backing that typically tries to stabilize those. Or to more exotic and abstract financial instruments like credit default swaps or shorts.
Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions. It's also impossible to even guess at a floor or ceiling for the price of a cryptocurrency. The only thing that determines their price is human sentiment - a very fickle input.
Because of this, it's likely that cryptocurrency is vulnerable to market manipulation. Both through large transactions and through marketing. See also: the ample evidence of wash trading in the NFT space. In these kinds of situations my feeling is that if I'm not the one doing the manipulating then I'm the sucker on the other end.
Ordinary accounting principles already have a concept for this: goodwill. If a business's valuation exceeds the net of its tangible assets minus liabilities, then that intangible asset is called goodwill.
Goodwill is neither a strange concept nor inapplicable to virtual currencies/assets. Instagram's value as a business entity (yes, I know it's owned by Meta) clearly exceeds the value of the source code, real estate, office furnishings, accounts receivable, etc. A competitor could duplicate everything Instagram does, but the competitor wouldn't be as valuable as Instagram. That difference in value is goodwill. In the tech industry, where we give new names to old things, we call it network effects. The Instagram network is an intangible asset that has real value, which you can't derive solely from Instagram's tangible assets. That company had to build a product and become extremely lucky that it caught on and became popular. Instagram is valuable because its users think it's valuable. If you aren't an Instagram user, you probably don't see its benefit and might have trouble understanding why it's a $XX billion business entity.
Same with successful virtual currencies and assets: they're valuable because of the network effects. Bitcoin is valuable because its users think it's valuable. That's true of any valuable network, and it's true of Bitcoin.
Doesn't matter. The competitor could have a (legal) real-time mirror of all the UGC, but no users would interact with it -- they'd give their likes and comments to the real Instagram. Nobody would visit the competitor's app to post new UGC, either -- people post on Instagram for the likes and comments.
> Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions. It's also impossible to even guess at a floor or ceiling for the price of a cryptocurrency. The only thing that determines their price is human sentiment - a very fickle input.
Interestingly, this isn't really true anymore. Most of the newer defi currencies represent a portion of ownership in some protocol that is actually returning profits.
E.g. Maker is a lending platform for DAI. You can borrow DAI by depositing other currencies as collateral. The interest you pay to borrow is then converted by Maker into a sort of "stock buyback" against its Maker token.
As a layperson who doesn't know a whole lot about investing, this sounds like a ponzi scheme.
The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it.
That is close to what most stocks do, but at least with stocks in a company the value is not driven by the mechanism by which it is traded alone, but also by the decisions and profitability that the stocks are backing.
> The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it.
That's the opposite of what I'm saying. The returns are from other people using the platform, not from investors in it.
For Maker, using the platform means borrowing. For Uniswap, the returns are from a small % fee on trades. It's exactly analogous to a traditional company.
> But what is the platform used for? Converting energy into human comfort, or just another layer of financial engineering?
This is essentially the "problem" at heart of all crypto "currencies". There is no real world use case that imparts human value, apart from its utility as a speculative vehicle to grow wealth.
Every new DeFi application is a new layer to lock in current adapters who would've otherwise already cashed out. Crypto as a currency is a concept dead in the water because of the perverse incentives of finding every corner of arbitrage between non distinguishable (and frankly worthless) alt tokens/coins.
The entire world of crypto is nothing else but an experiment of how much one could financialize a fully non-regulated, intangible, and imaginary "good" based on nothing but greed.
> Price to earnings (P/E) ratio. Calculated by dividing the fully-diluted market cap with the annualized protocol revenue. Shows how a project is valued in relation to its protocol revenue.
That's misleading. Revenue is not earnings. For something like Uniswap, you also have to look at how much of earnings is given to liquidity providers versus spent on token buybacks.
They are saying that financially, P/E on a stock (really, E/P) you buy is the same as APY on a deposit/loan, since both are the return on invested capital, and you can cash out your principal later.
Oh course their are subtle details that cause volatility and risk of collpase based on how the company/bank/borrower uses the money you put in.
When you stake, you are using your own money to guarantee that transactions on a network will process successfully. If something happens and they don't, you lose that bag.
Staking is just a very stupid loan that you give out without having any real insight into the people who borrowed from you.
For Bitcoin and other PoW coins, the value is built into the name for minting: Proof of WORK. Less abstractly, today we can think of this as proof of energy consumption / production. In other words, it is sort of crystallizing energy into abstract & transmissible value. By holding a coin, you hold that value / solidified energy.
It takes a certain and increasing amount of energy to generate 1 coin, which binds the value of the coin to physics. This is actually a very good thing, especially given it does not care where the energy comes from. If nuclear, solar, window, hydro, and thermal were our dominant energy sources, it would work in that just as well and without bias. Indeed, it actually has active market incentives to utilize clean and renewable energy sources — something the previous financial mechanisms grossly lack.
Existing banking institutions consume more energy in unmeasurable ways, and they DO care where the energy comes from: oil. They want oil. It’s called the petrodollar for a reason.
Work isn’t value. It’s cost. It’s not crystallized; the capacity to do that work is spent and gone. If you mine and sell a bitcoin, your profit is the revenue -minus- that work.
Good point. I try to identify the work/value that goes behind the USD. All the manhours and energy put into civic duties (military, government, etc). Also largely in the past and similarly uncrystallized, but somehow people find it to be more cyrystalline.
You're right that a lot of waste is miscounted as value -- this is why GDP is not the same as quality of life (even ignoring uneven distribution or logarithmic utility functions.), and part of why "purchasing power parity" and "cost of living" is different in different places.
Except that, in practice, because crypto mining can happen anywhere there is electricity, people exploit weak governments to get their electricity from the cheapest possible source. And to the extent that crypto miners are competing for scarce electricity resources, they increase the cost of electricity for other uses, crowding out, for example, its use for heating and light.
> This is actually a very good thing, especially given it does not care where the energy comes from. If nuclear, solar, window, hydro, and thermal were our dominant energy sources, it would work in that just as well and without bias. Indeed, it actually has active market incentives to utilize clean and renewable energy sources — something the previous financial mechanisms grossly lack.
Bitcoin incentivizes mining using the cheapest source of electricity, not the greenest. Bitcoin miners are more then happy to move their mining rigs to places with cheap coal electricity.
The fact of the matter is, we need to not only move to producing more green power, we need to reduce the global power consumption. Green power still has negative environmental impacts, and there's practical limits to the amount of green power we can generate. Crypto mining is actively hindering efforts to reduce global power consumption, by consuming every spare bit of power it can.
Global warming is an existential threat to human civilization, and will likely negatively impact billions of people, if not everyone. Reducing power consumption is not optional. Bitcoin and POW cryptocurrency are making it harder to do that, and that should be enough to oppose them.
Yes. How many ways do you have to reliably monetize a portion of that $100 that goes to the utility company, though? At its core, proof of work (not Bitcoin's anymore because of ASICs), allows that.
I dont need to monetize it, I can keep the $100 and not buy the energy. And it's not "reliable" if I get rug pulled (extemely common) or someone else has a more effcient mining setup (extremely common).
Maybe if I'm stuck on inefficient resistive heatong in winter, mining makes sense.
This is just one person's opinion, but even with PE ratios, profitability, or any financial statement you can read determining the value of a company's stock (not the same as the company itself) is almost as hard as bitcoin.
If you can reliably price a stock based on any measure of company value then you could be very rich very fast.
There is a reason they say don't stock pick just buy an index fund and hold.
> If you can reliably price a stock based on any measure of company value then you could be very rich very fast.
What you're saying is already true and already is happening. The global financial services industry is a $20T industry.
> There is a reason they say don't stock pick just buy an index fund and hold.
Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements.
>Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements.
This is not what an index is. You are describing a fund, but an index fund explicitly does not evaluate PE ratios, profitability, and financial statements, they buy everything in the index according to the market cap. Some proprietary indices are privately curated in the way you describe, but in common use the "index" means all of the companies, rather than a curated subset.
> they buy everything in the index according to the market cap
You're splitting hairs. I guess I should have clarified. What I meant was that at some level the companies are being valued based on PE ratios, etc. So while the index funds may not be analyzing the underlying securities themselves (other than determining their weighted value), someone is, such that their market cap drives them being in the index (SP500 for example). Point still stands from the parent comment.
A share of stock is a fraction of the cash flow of a company. A share represents a tangible thing which can valued according to any number of mechanisms.
Cryptocurrencies represent nothing but transactions and the ledger of those transactions (which they are exceedingly wasteful and clumsy at achieving).
Satoshi actually had a theory for Bitcoin pricing. He thought it would behave like gold, where over the long run the price converges to the cost of mining it. The cost to run the miners is a floor on the price, because if miners mine unprofitably eventually they go bankrupt.
Miners still receive it from transaction fees, so no. Although the economics of keeping the network secure in the face of no new bitcoin being created and many txns happening in side chains or rollups (or not happening at all) are untested.
Not really. Historically, no global currency since the Byzantine Solidus (whose practical dominance vaned with the Fourth Crusade in 1200-something) has lasted longer than 80-100 years. So, Bitcoin isn't even trying to do so.
That means that the total cost of all the mining divided by the outstanding value of BTC should approximate the floor.
Except when it doesn't. When it becomes unprofitable to mine, all of the miners turn off their machines, and the network dies, it'll go to zero.
Complicating factor is the miners who have free electricity, e.g., setup hooked up to their own solar farm or natgas flare. For them, the cost of mining is the capital investment over their output, so they'd keep their machines running as marginal cost of new energy is essentially zero, but the employees to keep it running? If we're down to very few mining machines running, how quickly does the difficulty scale downwards — fast enough to keep it running?
>P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions
The 2008 crash showed that most of those signals are highly manipulated. Bond ratings can be colluded on. Just a few short years later most of the dust settled on that, it happened again with the LIBOR rate. Traditional markets can be systematically manipulated when the fiduciaries don't act in a very fiduciary manner. (It keeps happening!)
For what it's worth, with an older financial background, the gold standard of P/E ratios were made up at one point as well.
Financial statement analysis and GAAP are much softer indicators than gen pop tends to think. It comes out of a period before behavioral economics took hold, for instance.
> guess at the "true" value of cryptocurrency
How I do it is this:
It's understood today that the Internet fundamentally changed "something" inherent about how we access, interact with and move information. There was a cambrian explosion of availability, and we overtime determined there was some form of "value" to it. It's worth remembering that how to value it had no real peer to compare to in terms of competing information networks - would you price an internet company, or infrastructure like you would a book publishing company or news org? That valuation and how to invest in it broadly took the form of Internet companies, or data-rate charges from infrastructure owners. It's challenging to price the actual data in the network. Arguably, PII/customer data is so valuable because that's easy to price. It's tied to a discrete individual. But for raw information packets, that's more challenging to do for many reasons. So we know this information has value, but we can't easily price it like we can other commodities (1 piece of timber == $$, 1 TCP/IP packet == ?).
Financial transactions are also a form of information. But they didn't experience a correspondingly large boom relative to the full impact on information by the Internet. This is because financial transactions need to be provably discrete, and TCP/IP and related design concepts aren't a good fit for it (yes, packets in transit are discrete, but what I'm referring to goes beyond that). So, we've seen huge explosions of financial activity where it was a simpler financial tx -> internet packet like in heavily digitized financial exchanges, paypal, venmo, and the large uptick in tap-to-pay smart devices. However, we're still entering payment details manually in many payment settings, and the digitization of current finance still ends up requiring a significant amount of manual settlement behind the scenes. This is because it's challenging to prove that "1 digi-buck" is in fact a discrete digi-buck I own and I alone.
So, that's the value that cryptocurrency solved: how to send provably discrete financial data, without relying on a manual, centralized settlement system that's possibly corruptible (what cryptocurrency people would call trustless settlement). It moves the value proposition from the external parties around the internet (ISPs, companies, consumer data) directly into the data transacted, itself. And puts a price on that data.
In my mind, I think of what the Internet did to information, and what cryptocurrency does to financial information, then there's a clear value prop. Edit: the big unknown though is how the tradeoffs between a good-enough service like venmo vs. bitcoin impact user decisions. Digitized finance that's just "good enough" might be good enough for quite a large chunk of the population, and it'll be a long time before we see me paying you for beer in btc.
Hope that helps but also would love to hear counters.
Fascinating explanation (though I’m already bullish BTC). No counters but a question: What’s stopping BTC lightning from being the rails you pay a buddy for a beer on?
- Assuming it's A vs. B platform choices, then network effects: you'll actually have to get users to jump from Venmo, to LighteningMo. Hard stuff if there aren't compelling reasons
- Assuming LN is the infra that the Venmo of 2050 uses: I think you'd need a compelling reason for "Venmo" to drop (edit: or integrate LN into) their underlying infra, which is where I understand Plaid and inside baseball platforms b/t TX processors have very strong holds, and jump over to a blockchain stack.
- The volatility. It has to smooth out. I'm not going to be the next bitcoin pizza guy.
I think the second case is most likely. I don’t see crypto displacing any fiat or even financial rail system completely, but just taking a sizable share. I’ve seen very reasonable use cases in Southeast Asia in remittance. Western Union takes a ridiculous cut, and I wouldn’t be surprised if similar use cases are in Africa and South America as well.
> One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment?
I recommend not using the "what about the stock market?" tactic to defend cryptocurrencies. Crypto is more speculative than the stock market because companies have physical assets, ongoing revenue and profits, dividends that they pay out to their shareholders.
> companies have physical assets, ongoing revenue and profits, dividends that they pay out to their shareholders.
Exactly!
If Uber ever shuts down for any reason, they can take all of their vehicles, buildings, gold, and whatever else they own, and evenly distribute them for all shareholders!
> they can take all of their vehicles, buildings, gold, and whatever else they own
Uber owns billions of dollars of property, equipment and leases [1]. But your broader point holds. Uber has massive intangible value, which is close to impossible to distribute.
The difference between it and Bitcoin is one can buy Uber, all of Uber, and capture that value. M&A is the ultimate disciplinarian of the stock market, much more so than dividend cash flows. (Though the latter ultimately drives the former.) If you buy every Bitcoin, you destroy it.
Highway infrastructure is also anchored in physics and math. It doesn’t mean we should treat highways like a currency that should be purchased and traded.
Starting a business is open for millions “without western privileges” - and stock is owning a business. Starting a profitable business that adds value (people are willing to pay you for a service) is a lot more useful to society than spinning up another coin that does nothing.
> Highway infrastructure is also anchored in physics and math. It doesn’t mean we should treat highways like a currency that should be purchased and traded.
Clearly, the world needs highway-based NFTs. Knowing that their ephemeral infrastructure is represented on the blockchain, something that is permanent, will lead to engineers building safer bridges. It will encourage the development of new fields of engineering, perhaps subfields related to structures and others related to materials.
Contrast that to the stock market, where companies sell ownership shares in their businesses tracked in ledgers maintained by western corporations. And some of the underlying businesses have no plans to ever to distribute cash to their stock owners-- look at Berkshire Hathaway! Look at Google! People buy and sell those shares only because the next person will buy them for more. It's a classic speculative investment, not like crypto which is backed by the full faith and power of NVIDIA.
US currency is backed by the government, a mortgage is backed by property. In my opinion, "physics and math" do not provide the same kind of underlying value as a government or real estate.
Most of the anti-crypto critiques in Silicon Valley bring up these exact arguments: it's speculative, and it enables scams. At its root, it's a hatred of the "get rich quick" aspects of crypto. It evokes the same contempt that old-wealth (people with butlers) have for new-wealth (people with Lamborghinis): that they're childish, didn't earn their privileges, and need to be reined in. It's class signalling.
Thankfully crypto isn't a democracy. Money market funds, banks, stock exchanges, and every other financial institution can be frozen instantaneously by the U.S. President to "prevent another financial collapse". Those who are OK with that much power being concentrated in one person, can continue avoiding crypto. But no amount of public outcry can ban, shut down or criminalize crypto, same as you can't ban IMAP or AES.
> At its root, it's a hatred of the "get rich quick" aspects of crypto. It evokes the same contempt that old-wealth (people with butlers) have for new-wealth (people with Lamborghinis): that they're childish, didn't earn their privileges, and need to be reined in. It's class signalling.
My hatred of get-rich-quick schemes has nothing to do with class signaling. I hate such schemes because they're almost universally scams designed to siphon money from poor people to someone who already has money. I hate them because I see friends and family spending their entire lives throwing away everything chasing get-rich-quick.
So, yes, that crypto has become a focal point for get-rich-quick is a huge red flag to me, but it's unfair of you to summarily dismiss that concern as snobbish.
I agree that get rich quick schemes are sad, but on the other hand, when I turn off my adblock, 99% of ads I get on YouTube are for copytrading with traditional stocks on eToro. Financially illiterate people get given a rope to hang themselves with crypto, but it doesn't take away from the benefits of crypto, which I think has a (small) place in any portfolio, and could potentially be a lifesaver in any cashless+NIRP society. I wouldn't try to pilot a plane without training, and wouldn't buy any crypto without knowing deeply about it. I don't see it as a red flag of the technology that people do stupid things, just a sign of human laziness (surely, getting the proper knowledge before piloting a plane, trading stocks, or buying crypto is common sense).
There are many people who want governments to "step in" and protect people from themselves, but governments will likely have ulterior motives (KYC, AML, financial control) when they do so.
KYC & AML are useful things that protect customers and prevent people doing things with money that we as a society have deemed unlawful (e.g. tax evasion, drug trafficking, sex trafficking, etc.).
Is giving up the ability to detect those things good?
I wouldn’t use a bank that didn’t care to identify who was withdrawing my money…
The media sure likes to point to these things, but I personally have more specific criticisms:
- It provides store of value but limited medium of exchange. Until there is widespread adoption of BTC (i.e. people get paid in their salaries with BTC) then you're missing an important half of the definition of a currency
- Wash sales (see NFTs) and price manipulation is rampant.
> Those who are OK with that much power being concentrated in one person, can continue avoiding crypto.
If this statement is true "A minuscule .01% of Bitcoin holders control nearly a third of the supply"[0] then how is this any different? Isn't that worse then the current setup? To me crypto is simply a shift in power from a small number of people to another shift of small people (bureaucrat to technocrats). As the saying goes "new boss, same as the old boss".
> But no amount of public outcry can ban, shut down or criminalize crypto, same as you can't ban IMAP or AES.
Sure, but if you can't use BTC as a medium of exchange then it'll just be that - a speculative asset. So what other utility does it have? KYC (in the US) basically restricts BTC from ever becoming a medium of exchange.
I'm pro cryptocurrency (the idea) and anti cryptocurrency (the practice).
> Thankfully crypto isn't a democracy. Money market funds, banks, stock exchanges, and every other financial institution can be frozen instantaneously by the U.S. President to "prevent another financial collapse". Those who are OK with that much power being concentrated in one person, can continue avoiding crypto. But no amount of public outcry can ban, shut down or criminalize crypto, same as you can't ban IMAP or AES.
I find this a funny argument. First of all, there's basically no understanding of civics in it. That's not how it works. The President can't just call up banks and tell them not to give people their own money, or shut down every stock market in the world.
Now you have a point if you're talking about control resting with a small number of people: Those in the highest echelons of finance and government. But on the other hand, this is also a problem with crypto as it is: Because it relies on things most people don't understand (the math and computer science), the people who do understand it have the power. It seems to me this argument is just 'No, we don't want that small group of people in charge; put OUR small group in charge instead.'
If so, be honest and make an argument as to why we should trust you more.
I've worked in politics and done tech and I don't trust either further than I could throw them, and I'm a tiny lady cripple.
Also, you can absolutely ban IMAP or AES, it just requires more effort.
> That's not how it works. The President can't just call up banks and tell them not to give people their own money, or shut down every stock market in the world.
Isn’t this what Biden is doing this week with Russian nationals tied to the invasion of Ukraine? I agree with you it’s more complicated than just a phone call, but for the opposing parties they don’t need to think about those details. Those people and companies who will be heavily economically sanctioned—-they’ll be eyeing crypto as a way to sidestep these sanctions.
(And to be clear, I do not agree with Russia is in this situations, but I’m looking at it from a supply/demand perspective. Events such as this are clear demand signals to me.)
Yes, but he only can do that to American companies/companies that do business here. He can't tell, say, the Swiss to keep the Russians' money.
There's a difference between "Money market funds, banks, stock exchanges, and every other financial institution can be frozen instantaneously by the U.S. President to 'prevent another financial collapse'" as thread OP mentioned and what you're talking about. I was addressing only systematic action for the sake of averting economic problems, not financial uses of national security power.
For INDIVIDUALS, you're absolutely correct.
Which is why I'm a large proponent of local currencies.
(Trust me, I understand. I'm a very confused Ukranian-American who would like to go back to not being relevant.)
Ok thanks for repeating those details of the GP comment. I have to agree with you that some facts in there are fundamentally wrong. The U.S. government can do things to restrict uses of USD but they aren’t _that_ arbitrary.
> But no amount of public outcry can ban, shut down or criminalize crypto, same as you can't ban IMAP or AES.
This is a terrible example as the US government really did ban DES for a while - at least for "export", which includes publishing on the internet.
People who say "the government can't ban X" are really badly underestimating how far governments are willing to go if you really do start disrupting the state.
Yes, governments can try, but there will always be ways to fight it; including using sneakernet to exchange hardware wallets, instead of traceable on-blockchain transactions. Crypto is as impossible to ban as the internet at this point.
You end up in a "war on drugs" scenario. You could argue whether it is "possible" or "impossible" to ban drugs, given their continued availability, but they certainly have been criminalized.
California - ground zero for "new wealth" .. no, people do not buy Lamborghini's here.. that is for Miami, Eastern Europeans in Moscow or London, Chinese at Yahoo years ago, or maybe teenage'like guys around New York or Chicago. Here, people like the readers on this site, amass seven figures, and cannot buy a decent house because it is not for sale, and it is too expensive for someone with seven figures of savings. Second, old wealth, zero people have butlers. It does not exist here. But they do have large houses, extensive financial investments including Warren Buffet's stock. A good percentage of wealthy people here do not have children, and therefore grand-children, and among those that do (Catholics etc) the wealthy older people talk non-stop about how to keep the grandchildren out of the money, away from the house, and constant concern for being in a law-suit against a close relative that wants to do any of that.
Unfortunately, reality is complicated and stereotypes die every day. In California I believe we are seeing in real time, a lock up of the system of value (money) where the assets are so large, and so immoveable, compared to what people "earn" by working in a job, that there are strange bucklings visible on the street. With Coinbase founders living within three miles of this place here, I agree, there is no stopping this in reality. Big thieves hate little thieves, and it is no secret that the Federal Reserve itself is making a cryptocurrency, with centralized transaction tracking - it was announced here!
sorry - I forgot, Lambos in Los Angeles, definitely. Angelinos have always been like that, it is part of the scene. So I am talking "not LA California" perhaps.. my bad!
The government can criminalize crypto. Investigation wouldn't be easy, but the FBI and other equivalents (depending on your country) are very good at investigating hard to solve crimes, and if given the budget can track you down in various ways. (tax fraud is often a big one - even if they can't prove you are in crypto they can prove you didn't pay tax on something)
I for one am surprised by the negative sentiment only because the tech industry seems to be all about it. I don’t see the problem it is trying to fix. Crypto by is terrible as a currency, transactions are slow and damn can they cost a lot. And the currency itself fluctuates a lot. It’s not really decentralized, it’s not really anonymous and it can be manipulated. There seems to be no end to people hyping crypto and NFTs, because if I get you to buy in my money may go up. But what exactly am I buying? Sounds like you just need a sucker and I may or may not make money, but since you made up this currency and a small number of people own the lion’s share I guess you all get rich. My take is that the tech industry has just created a new way to become even richer by making some confusing product to prey off everyone. Maybe that wasn’t the initial plan but it sure looks like that’s how it’s shaking out.
> I for one am surprised by the negative sentiment only because the tech industry seems to be all about it.
Between the prevailing trend of rent-seeking subscriptions and shoving NFTs/blockchain into anything that some knucklehead thinks it will fit in, tech is very much becoming grift culture as the nerds get run over by sharks, business types, and crypto bros
There are different types of speculative investments.
Stocks are backed by the company they are behind, when the company goes out of business the stocks stop trading. When you own stocks you vote on company leadership (or at least should). When the company makes money they pay you cash as a dividend (for tax reasons this most often comes in the form of a stock buy back making your stock more valuable. As such stock speculation on the company not stocks in general.
Historically money was backed by gold, and supply and demand of gold is what governed the price. Today cash is not, and it is only backed by the government saying you have to use it. As such cash is more speculative than stocks, but the government forcing you to use it means it has some power behind it. Bitcoin is backed by some governments, so bitcoin is speculation on those governments (this is new in the past few years and makes bitcoin somewhat less speculative than other crypto)
I don't see the point of crypto in the end. Almost everything it can do is better done by a secure central database, and the rest is a niche that can be handled by physical cash, or a contract (ie check) that is reconciled with the database later. Sure you could use cyrpto, but the energy costs are so much larger that I don't think we as a society can afford to use it.
> When the company makes money they pay you cash as a dividend (for tax reasons this most often comes in the form of a stock buy back [...])
Often?
"Nearly 75% of the stocks in the S&P 500 pay a dividend, and the dividend for most of them exceeds the yield on U.S. 10-year Treasury bonds (currently around 2%)"[0]
> I’m blown away by how anti-crypto this discussion is. I hadn’t realized how negative the prevailing sentiment is on Hacker News.
The more I learn about crypto (which isn't a lot), the more I agree that digital currency is the way ahead.
I'm not convinced that decentralized ledger-based crypto is going to win out in the long term. Let's be honest, is there any coin at the moment that you would trust as a stable store of value and not a speculative investment? Fiat currency goes down in value over time, but most central banks are good enough at keeping the rate of loss relatively constant. Most, although not all, coins are also less than ideal for conducting transactions. There's also a regulatory aspect that, for some reason, is generally discounted by advocates.
However, I could definitely see something like GNU Taler gaining widespread adoption, especially if central banks make good on releasing digital currency. There's no reason for consumers or merchants to pay anything more than absolutely minimal transaction fees on purchases. There's also no reason that electronic payments or transfers can't post in near real time.
Even if the future of decentralized ledger cryptocurrency isn't bright, accelerating adoption of digital currencies is a good step forward. If that's all crypto ever accomplishes, I think it'll be a success. Some of course have concerns about privacy, tracking, etc., but the speed of payment rails in our current system is ridiculous given the technology we have.
I somewhat agree with your sentiment: the outcome is sort of the same but for different reasons.
> "but most central banks are good enough at keeping the rate of loss relatively constant"
The past two years clearly demonstrated central banks deliberately set the rate of annual inflation to a desired level in a much more directed way than anyone realized. At least for business as usual economies. Once you see inflation as a tax it starts to make more sense. But the end result is a "mostly" responsible entity in control of the inflation rate, so the sentiment is same: traditional fiat currencies will be more stable for a while to come, maby forever (when compared to crypto).
> "I'm not convinced that decentralized ledger-based crypto is going to win out in the long term"
Blockchain was designed to surpass the problems the pre-Bitcoin E-gold service hit: the government can always smite you by raiding your office and taking the servers. That's the sole problem Blockchain solves, nothing more. In that sense it's already proven itself as a successful technology. Otherwise, if you're a government-sanctioned entity there's no need to fool with Blockchain when rolling a CBDC: your main physical risks are terrorists and natural disasters, not smiting by a police raid.
> "especially if central banks make good on releasing digital currency"
It's coming, but it's not what people want it to be. The Fed is saying "we're not trying to kill off cash" while putting out open calls to investigate all the things they need to do in order to kill off cash. Another issue here that I don't see being talked about is that the very nature of stable-coins exposes these assets to the inflation rate that the asset is pegged to. This means it's getting taxed, and so it makes sense for the Fed to want to get into the crypto world from that standpoint.
The major danger with CBDC is that this is going to be used along with social credit scores. We just saw Canada lock bank accounts of anyone who donated to the trucker protest. These people are f#$%ed. Now imagine if they were locked out of using cash as well - even that emergency stash under the couch cushion would be useless to buy food. It's a nightmare situation and it's coming sooner than later. But again, governments and central banks don't need this level of power, governments have proven they will seize bank accounts of those they disagree with. But cash still allows people to move around these barriers. Once CBDC's roll out it's a very bleak outlook.
>One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment? If you truly believe that cryptocurrency is the basis for a superior economic system, isn’t it rational and wise to put some of your savings there?
I feel like it is a black and white and naive view to categorize every financial instrument as purely speculative. They exist along a spectrum ranging from on one hand, sound investments (i.e. US treasuries), all the way to more speculative plays like sports betting. Where an asset sits on the spectrum is a subjective to the eye of the beholder but concensus among investors at this time would probably place US treasuries, blue chip corporate bonds, US stocks in the sound investment half and crypto in the more speculative half. In part because new technology which makes some wary and in part because crypto is a form of currency where most participants appear to be 'investing' on the basis they can sell it to someone else at a higher price. Which sounds fine but normally stocks or US treasuries are underpinned by interest payments, dividends or promise of future dividends through earnings growth whereas most crypto does not have an of these characteristics.
I am blown away by the number of people claiming to be knowledgeable crypto investors who are dismissive of other investment types as speculative when they themselves appears to have little to no knowledge of the history of investing and why things are the way they have been.
Bitcoin was some neat tech. But, in case you haven’t noticed it’s been taken over by finance bros. Now, it’s just a scam to prey on the poor and ignorant.
I think that’s the argument, why move to a whole new currency if it’s more of the same problems with fewer safeguards for the non technical and no way to get lost items back?
> Why would the poor have wanted to switch to the Internet?
Look at the history and this is easily answered: it let them do things better/easier/cheaper. That could be shopping, accessing government services, dealing with companies, finding a job, seeking educational material, entertainment, dating, connecting with friends and family (email was a pretty sweet alternative to long distance phone calls), etc. The internet picked up sharply as computers came down in price and people tried even cheaper options like WebTV because there was so much demand, and that started happening very quickly.
In contrast, cryptocurrency had much lower barriers to entry but despite having at least twice as many years by that point it has very little non-speculative usage because it doesn’t do anything most people care about. Even being a cheaper PayPal/Venmo would be an improvement.
"really early days" is an argument that a lot more work is needed, not that everyone should go all in knowing there is going to be a lot of collateral damage along the way even _if_ it works out.
You can pay your taxes, fines, and court ordered debts with fiat currency. It's arguably THE MOST stable thing in a functioning society above pure barter.
Try saving for retirement. At 2% inflation (the target rate), after 20 years you'd lose 1 - (.98 ^ 20) = 33.2% of the purchasing power of your savings.
But right now, inflation is 7.5% year-over-year. And that's the official measure, which uses "owners' equivalent rent" based on a survey, instead of actual rent prices.
In the past 20 years (Jan 2002 - Jan 2022), the CPI went from 177.7 to 281.933, or a 58.6% increase. This means a 2.3% average inflation rate.
> Try saving for retirement. At 2% inflation (the target rate), after 20 years you'd lose 1 - (.98 ^ 20) = 33.2% of the purchasing power of your savings.
People shouldn't be holding dollars for retirement. People should be investing in productive assets. Its not good to have society's wealth locked up in paper notes or shiny metals hidden under a mattress or buried in the backyard.
This implies that your retirement savings are in cash, which is inaccurate for most folks. And certainly, I'd rather have it invested in the stock market than the wild fluctuations of the crypto market, especially with its uncertain withdrawal ability and complete inability to recover if someone steals it (which is, again, typically much easier with crypto than a brokerage).
Yes, existing financial systems are terrible. They are rampant with abuse, manipulation, and people converting human behavior into abstract objects that they can gamble on so that they can extract wealth without providing value and they do this to the point that they introduce systemic risk to our entire society.
Cryptocurrency is this times 1000. It is the financialization of everything. Instead of mortgages being packaged up into bonds and then derivatives of those bonds, everything gets packaged up into financial instruments and then derivatives of those instruments. Something like ETH makes it very easy to write programs that move tokens that are worth dollars based on inputs taken from the ledger itself. That inevitably encourages a sort of hyper-financial system.
Agree with you on all of that. The general HN sentiment towards cryptocurrency is so acutely negative. I generally don’t even bother clicking links related to it because of this issue. Its just asking for whiny diatribes about how crypto sucks and will ruin everything. It’s ironic to me how freedom loving HN can be, until it is finance related and threatening governments and banks but empowering the masses. Seems bizarre to me.
I’ll exit before the “uses too much energy” dissertations enter. I bet your stacks of bare metal severs and electric cars and hairdryers and ovens and water furnaces and electric heaters and gaming machines and four monitor dev setups are super green. Could crypto be better at using less energy? Probably. Could those other things? Yep. Is progress on efficiency being made? Well, yes, at least crypto is trying to do so with PoS etc. can’t say the same for your heavy old appliances.
So all the things you have listed consuming energy have uses. They are doing something. Can they be more efficient, sure. What exactly is crypto doing? What is it solving? The crypto industry keeps growing and consuming video cards, processors and energy. To do what? So if it’s a currency it’s not even close to the efficiency and speed of the current financial system. Ease of use too, not even close. People are making money though, so I guess we don’t question it?
Anyone saying this is talking bollocks. Wall Street hasn’t seen a bonanza like crypto since ‘06. Hedge funds are having their best fundraising years since the 80s, largely on the back of crypto-related trading.
The best balance I can come up for crypto is to mandate KYC at all on and off ramps, tax its trading like the luxury good it is (maybe using the proceeds to fund law enforcement around scams) and ban or surtax mining using American power sources. (Let others spike their power prices and pay us for it.)
One, KYC in America does nothing for the rest of the world. Two, we know that’s not true. The aforementioned hedge funds could keep the flywheel going on their own.
>Do you have a single fact to back up this extraordinary claim?
Name one single use of Bitcoin that legitimizes the trillion dollar market cap, and that fiat currency doesn't provide in a safer, more legitimate way. The "sneaking across the border with my life savings" scenario doesn't count. That has nothing to do with the current market cap of Bitcoin.
Crypto can be an income-generating asset just like any stock that pays dividends. You can use lending protocols or act as a liquidity provider and, in many cases, have your income earned in a stable coin (such as USDC).
Hilariously, crypto has reinvented fractional reserve banking. "Staking" is just traditional fixed-duration lending, but with some weird caveats and liquidation rules borrowed from margin trading that you need to read carefully.
Most importantly, it has no real guarantee. There is no reason why our beloved Tether inc can't just vanish from its Cayman Islands headquarters one day
> Another argument is that crypto enables ransomware attacks.
Whether or not you have a positive opinion of cryptocurrencies, this is factual. In order to successfully demand a ransom, you must have a way to get paid. For ransomware, you need something you can do remotely around the world, and something that can’t be blocked or reversed by the authorities. Cryptocurrencies were the first solution for this.
>I’m blown away by how anti-crypto this discussion is. I hadn’t realized how negative the prevailing sentiment is on Hacker News.
There was a dream that was crypto once upon a time. It is now exclusively the domain of organized crime, grifters, and every imaginable permutation of ne'er-do-well you can possibly scrape up on the web. The entire space sickens and disappoints me.
All of those things exist with anything that is easily exchangeable and valuable. I am confident there are more people using crypto for legitimate purposes than there are scammers. I would question why examples of ne'er-do-wells in crypto is all you hear about.
Crypto isn't about getting rid of middle men, it is about putting new ones in their place with much less consumer protections for those who are harmed by the actions of those middlemen.
> One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment? If you truly believe that cryptocurrency is the basis for a superior economic system, isn’t it rational and wise to put some of your savings there?
So the thing about investments is that they are a transaction that gives you a share of property in exchange for a share of the future income stream, albeit this mechanism is often imperfect and valuation may not so directly correspond to the current value of the underlying property or income stream. Even if many people are buying investments solely with the intention of selling them to somebody else for the higher price, the reason to gamble and expect the price to go higher is because of the valuation of the property. Even the miserly interest you get from parking cash in a bank account is tied to the income the bank makes from using the money you so parked.
But with Bitcoin, when you buy a bitcoin, you get a share of... well, nothing. And the way you make money with that share of nothing is to sell it to somebody else for a higher value. That's the only way to make money: you can't make money except by enticing new entrants, which is literally the definition of Ponzi scheme. And other investments aren't Ponzi schemes because there are other ways to make money from the investment, even if they aren't necessarily the most common way of making money.
This doesn't necessarily hold true for all cryptocurrencies; I'll concede that I'm not a connoisseur of the cryptocurrency community. But it feels to me like it's the standard tech-bro "X, but unregulated", except "X" here is finance, an industry which is famous for its unregulated elements not only resulting in lots of people losing all of their money but also bringing the economy down with it. So forgive me if I'm not exactly enthusiastic here.
Before a stupid argument breaks out, everyone please note that a stock buyback is basically equivalent to a dividend with a different tax treatment; both are returning money to investors.
It's also theoretically possible for some of the crypto-token-organisation things to pay dividends, but it's far more common for them to simply take the money and run. Because a token is not a legal framework like a company is.
> I hadn’t realized how negative the prevailing sentiment is on Hacker News.
I think cryptocurrency is polarizing. While the technology is interesting, the current landscape of related businesses is discouraging.
> One argument seems to be that cryptocurrency is purely speculative
With stock you get part ownership. Buying gold relies on the inherent demand for and usefulness of gold as a metal.
Cryptocurrency is like exchanging your country’s paper money for other paper money that is hard to counterfeit but is not backed by any country. It might be okay if your country’s money is crap.
Even assuming that crypto currency does provide value and wins out in the end - why would it be any of the existing ones as opposed to a new one started by the right players?
> If you truly believe that cryptocurrency is the basis for a superior economic system
This is the reason for the prevailing negative sentiment though. "Postgres will revolutionize the economy! Put all your money in unique keys!" Sounds crazy right?
I mean, it might not be wrong, we all trade assets using special government cotton, but it is still a wild thing to hear as a software engineer, and an even wilder thing to see people bet their life savings on.
> Another argument is that crypto enables ransomware attacks. This to me sounds akin to saying “encryption enables child exploitation”. I.e. it focuses on one abhorrent element of society that would take place no matter what and blames its existence on a system which has great potential for good, a kind of propagandist thinking.
You are biased too.
How about comparing "crypto enables ransomware" to "unregulated gun sales enable mass shootings" ?
Most western countries have regulated gun sales to avoid mass shootings, it works and the people sees this as a positive thing.
OK, it's controversial so replace "gun" with something else that is forbidden in the US for the greater good.
Compared to "guns for everyone", encryption has a lot of usages that are necessary (and beneficial). That's why banning encryption on the pretense of child exploitation is a mistake.
What does crypto bring to the table that is as necessary and beneficial as encryption ? Is it more like encryption or more like guns ?
On the other hand you also have to compare the bad side : is enabling ransomware as bad as enabling child exploitation or mass shootings ? (certainly not).
You want to trade a system that has decayed with a system that is deliberately rotten. Banks and securities are regulated, have some limited democratic governance, and crypto is designed to not have these things. That’s definitely propagandist thinking, mixed with a cherry picking and a dash of confirmation bias. What’s shocking is that people share your views in good faith.
I actually got so stressed defending Crypto because a lot of the attacks get very personal (all people working on it are scammers, I’d never hire someone with web3 on their cv, etc). I kind of wish @dang would add a new rule regarding crypto because it’s always the same conversation but does hurt those working in the field on HN earnestly.
One of my concerns about cryptocurrency is the potential for the lack of regulation to allow for scammers, pyramid and pump&dump scemes, etc. I’ve heard of more than one undereducated immigrant family having life savings absolutely devastated due to this in a way that one would at least have case law and existing recourse if this happened in a traditional structure.
Additionally I doubt that cryptocurrency is disrupting wealth inequality. The major participants were all wealthy to begin and all of the increased interest seems to circle around the most wealthy… so it actually just contributes to wealth inequality. (In the documentary there is even apparently an mmo that people play to earn cryptocurrency tokens that goes into the wallet of an employer who then pays them a wage, with performance reviews and firings. Idk this looks to me only of recreating the same wage slavery and wealth grift that the original money system has.)
It has become more and more obvious that cryptocurrency, like the gold as sound money movement before it, has a strong political side and is deep in bed with the alternative right.
I think that explains part of the strong hn reaction to it.
The other side is software architecture of it, where crazy resources are spent making some parts decentralized, while other parts are centralized and ignore, creating a broken, overcomplex beast.
1. Crypto's primary use today seems to be money laundering and other unsavory "darknet-ish" things. It seems like it would be an unnecessary risk to associate your financial persona with such illicit activities.
2. When markets tanked due to Coivd, crypto went right down with it.
What's weird is I don't see any anti-crypto comments except in reply to your anti-anti thoughts. The arguments you're stating seem mostly straw-men to me.
Some people get very very excited about crypto and kind of overly sensitive to discourse. I think some of that is early-adopter fervor.
Some of it, too, could be the understanding that the more adoption it gets the better the party is. The higher coin-caps go, the more respect, legitimacy and outside resources they command.
Take stocks on the other hand. If you tell me the stocks I'm buying are worthless-- that's good for me! It means you're not buying and driving the prices up when I buy and better prices when the businesses repurchase shares. So maybe that's partly why I don't care when people disparage stock ownership.
Point is, sometimes I wish labels like "pro-" or "anti-" crypto fell out of use-- it's a complex topic and most thoughtful people have more nuanced views.
So, there may be more, but there are at least four types of goods one might hold:
* Consumer/durable goods meant to be used - i.e. dishwashers, houses you live in, furniture
* Appreciating assets meant to grow long-term wealth - i.e. ownership shares in productive companies expected to last a while and earn profits, houses you rent to others, land itself
* Bets and hedges - i.e. insurance policies, credit default swaps, futures contracts, the Bengals at +3500 or whatever
* A medium of exchange - some highly liquid, low fee, stable-valued token meant to be held temporarily to eliminate the need for either direct barter or trust in delayed-delivery transactions
Cryptocurrency just needs to get its story straight on which of these it is. Clearly a good can cross categories. People make bets in foreign exchange markets for currencies, as well as hedges when they actually do business internationally. Even owner-occupied housing can be seen as a strategy to grow intergenerational wealth. Beanie babies and baseball cards are consumer goods that may or may not over some limited period of time see dramatic increases in dollar-denominated value.
But fundamentally, you don't want a medium of exchange to cross over into other categories, at least not often. Rapidly decreasing value causes panic and social collapse. Rapidly increasing value encourages holding rather than spending, which brings the productive economy to a halt. Even just having direct use value may do that. You don't want collectible stamps or commemorative silver coins to be a primary medium of exchange because many holders will not want to exchange them, and same problem, the trade of real goods grinds to a halt.
Cryptocurrencies seemed to start off as a basically sound idea. Hashcash and proof of work were originally developed as anti-spam, anti-DoS measures. Make a client prove it did a bunch of useless work before it can send a request or message, as a natural rate-limiter. Satoshi came along and realized the tokens generated by this useless work have some level of fundamental value, and when traded on a blockchain, can allow for trustless transactions without the need for a single authority. All fine. But as soon as it got pulled almost entirely into the realm of speculators whose primary aim is to increase the dollar-denominated value of the tokens, it lost any potential to replace normal currency.
I don't think there is anything inherently bad or immoral about people sending each other what amounts to gigantic piles of dirt proving they have the strongest automated digging machine and convincing others who have a lot of cash that buying the dirt piles is a better wealth growing strategy than buying companies and land and other traditional investments, but it isn't exactly the revolution we were promised.
I still have not found the HN-like community that gets cryptocurrencies. Maybe it's just being created today. People say Twitter but it's still pretty meme oriented. /r/ethfinance is ok but not enough content. Zero Knowledge podcast is solid but podcasts are one way communication. And the forums for cryotocurrency developers are beyond my level of tech knowledge.
I wonder if at some point anthropologists will even study "tech's rejection of crypto" as a rift that
became something more.
Oh, we “get” crypto. What we also “get”, and what crypto people don’t, are the systems crypto is trying to replace and why the aspects crypto people think are flaws (centralization, arbitration, ability to reverse transactions) are all features
I've noticed a correlation in attitudes between strong buy-in to establishment narratives on almost any topic and a rather overt hostility toward any challengers to fiat monetary systems.
As the downvotes illustrate perfectly. The shared characteristic in both points is the presupposition that coercion is an acceptable foundation for building systems.
Despite other comments, I'm concerned there isnt enough anti-crypto here.
Let's be clear: this is what a graph of the values of currencies looks like: https://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y . Micro-value adjustments up-and-down, and if you comapred to the price of bread, midly inflationary.
Regardless of whether you think (this obvious scam designed to enrich a handful of early stakers) is a scam or not: it cannot be a currency.
A currency cannot be this massively and necessarily deflationary, as it is never rational to spend it. If your currency is guaranteed to increase in value, it is always better to hold it. Thus rendering the only alleged use of crypto economically incoherent.
Where did you acquire this point of view? You sound very certain, but I think you've got it completely backwards: You say bitcoin cannot be a currency because it is highly volatile, but I'd argue that it's just as true that Bitcoin has high volatility because it isn't in widespread use as a currency. I suppose they can both be true: it's a network bootstrapping problem. This is the future bitcoin long-term buyers are speculating on, that the network will succeed and become more widespread.
And though the network is small, people spend bitcoin all the time. You say this is irrational, and maybe it is in some very static model of economic action, but as we know, the real world is dynamic. That is, it has a time component, the future is unknowable and there are very few guarantees. It turns out, that at some point people tend to decide they would rather have something now than wait for later and potentially get it more cheaply. A man's gotta eat, and sometimes he wants to enjoy a few luxuries as well. People didn't stop trading things when there were "massively deflationary" commodity monies in the past, and I don't see why that would be different today.
In fact, the whole "deflation" bugaboo is only indirectly about price. The real core of the matter is credit: "deflation" acts like a higher interest rate, which makes life difficult for debtors. We can already create debt products linked to inflation, and I see no reason why that term can't have a negative sign next to it. This changes one's view of what investments look wise or not, but that is not necessarily a bad thing at all.
My issue isnt it's volatility, which is dramatic and a barrier to adoption. But it's inherently deflationary -- we know how deflationary currency works, and it's a nightmare. The only people able to spend on luxuries are those who have so much wealth that holding it has lower marginal utility than the luxuries they want.
Everyone else spends only when they absolutely have to on necessities, as everything else is irrational. It's just better to hold the currency. This is the poverty trap of human history.
Crypto will never be a currency because it is designed as a speculative asset which transfers wealth to early adopters, in the manner of a bigger-fool scam. The early buyers paid $10/coin, and the fools paying $100k/coin will be the ones funding the cash-out by providing that USD liquidity just before the collapse.
If it collapses to $1k/coin, the early adopters will make their 10,000% return, second phase 100%, and the vast majority of people will be running at -100000%+
You could not design a worse system to be used as actual currency. It is incredibly slow, incredibly inefficient, a handful of early adopters hold all the power, etc. etc.
I recently sent a low-fee, nearly instantaneous payment over the lightning network with exactly zero trusted intermediaries. LN may or may not be ready for wider-scale adoption, but it was incredibly cool. It gave me that same feeling of power and possibilities as when I first learned to program a computer. I'm not sure if I can convince you but there is actually some there there.
If, as I predict, volatility goes down as the network grows and bitcoin becomes used for more things, so does average return. In other words, the "deflation" rate reaches some small but steady level. The days of number go up will be over, bitcoin would be something boring that goes up only slowly over decades. Like the foreign exchange of a virtual country, its market price vs other currencies would be determined more by balance of trade than by currency speculation.
Of course, that future is far from certain. Buying bitcoin now is like buying an option that pays out if that future comes to pass. The price of an option is very volatile, but it is never zero until it expires. Bitcoin might wax or wane in popularity, but it will never expire.
This is all that the words "speculative asset" entail: they are risks that work out in some possible futures and don't in others. So it doesn't bother me that some people bought bitcoin and $10 and are now sitting on a nice stack. That bitcoin could have easily gone to 0.01 today. They took that risk. Why shouldn't they reap that reward? Without those early market participants in bitcoin, wouldn't be even more highly concentrated? My advice to such whales would be to spend their bitcoin on business investments that help spread the coins and bootstrap the network. Bitcoin-related businesses that pay employees in bitcoin. There are still bold people out there who want to live in an alternate future and try to make it real.
Of course, I don't think everyone should get into speculation... It's got a pretty high attrition rate even among the professionals. But you know, oddly enough, it's when inflation rates are higher that the more people are forced to be speculators just to stay in place.
Being on the cutting edge means that most of the time, what you are doing just doesn't work.
I've been listening to old timers tell stories about working at MOS technology back in the 70s. MOS was rather vertically integrated, with chip design and fabrication feeding all the way to consumer products. So chip designers dealt with buggy manufacturing processes, board engineers got buggy new chips hot off the wafer, and software guys got buggy dev boards. A lot of time was spent trying to go back and fix bugs at the lower layers, sometimes all the way down to manufacturing defects. It might sound crazy today, but for a time they could do things that very few other companies could.
"It's slow", "it's buggy", "it's inefficient"... all of these are ways of saying "I can't, I won't". Expressions of fatigue. They don't lead anywhere.
"I'll make it fast," "I'll make it work," "I'll make it efficient"... all are expressions of will. This is the attitude that the builds the future.
Sure, this is the defence. Some basic questions that would be asked in any (ordinary) policy proposal conversation:
* What are the major problems with existing currency systems?
* Which of these specific problems does crypto solve?
* What problems does crypto create? Are these less serious than the existing ones?
* How well/reliably does crypto solve them?
* Who are the stakeholders that will determine crypto adoption?
* Which of these stakeholders would switch to crypto, and why?
* Why wouldn't they?
* If crypto sees no widespread adoption, is there any market value to it as an asset? What would this value be? Why?
Let me remind you: crypto is backed by a highly centralised companies largely controlled by early adopters who hold the vast amount of the crypto value within the system; their relative control can only increase overtime as the asset is deflationary. The entire economy is determined by the immutable blockchain, unless its forked to preserve the interests of those with massive holdings. The immutability of the blockchain makes fraud irreversible, unless the chain is forked -- so fraud is only reversible against high stakeholders. The chain is incredibly operationally expensive to run, centralising service control to a few companies, and incredibly slow. The whole economy is public, so once your identitity is known, you're entire economic life is visibile to everyone -- making blackmail, fraud, and "ruthless and abtiary credit checks" easy.
We know what a society based on a deflationary stake captured-early is like: its called feudalism.
Crypto is an anti-democractic economically illiterate project to create a feudal society in which power is proportional to holdings; and redress requires convincing the powerful to "fork the economy".
If it had any chance of success at all, it would be necessary immediately to organize a massive political project to ensure it was stopped. The reality is its just a group of fanatics engaged in a get-rich-quick scheme thinking that in the future where they are rich, they'll have the power (by design of the system)!
Thankfully it's genuinely silly and ineffective, and the only thing crypto has ever done is be sold to the next fool along. No one really needs to worry, within the decade crypto will have collapsed. I'd say 5 years, but of course, bernie madeoff ran his greater-fool scheme for 30.
Why would anybody continue operating nodes once all the pre-programmed bitcoins are minted? It's currently minted over 18 million and the max is a little over 21 million. It rewards its miners with new btc every so often. If it loses miners then transactions take longer to complete. Paraphrasing from this: https://www.quora.com/What-if-everyone-stop-mining-Bitcoin
If the main developers decide, no, we can mint more coins then the premise gets even more muddy.
> Why would anybody continue operating nodes once all the pre-programmed bitcoins are minted?
There are two parts to the reward for mining a block: newly minted bitcoins, which follow a fixed distribution and decrease over time (halving every four years), and transactions fees. The intent is that as the supply of new bitcoins decreases the transaction fees will make up the difference to sustain a reasonable level of competition among miners even with no new bitcoins entering circulation.
> If it loses miners then transactions take longer to complete.
Only in the short term. As long as the loss isn't too sudden, over time the difficulty will adjust until one block is once again being solved every ten minutes on average. (There is some risk from sudden reductions in the hash rate, as the adjustment takes some time—and that time is measured in blocks mined at the higher, unadjusted difficulty.)
I think people holding the major amounts know it's a scam. They're waiting for enough liquidity to exit.
Perhaps at some point it'll "go to the moon", and people will start to cash-out. In many ways, the more popular crypto becomes, the less stable/usable/sensible it will be.
I am probably not going to change your mind. But I think some stuff you should consider are:
Is the volatility an inherent problem built into the code and design of bitcoin et al? Or does the volatility stem from external factors like it being new, difficult to value, and much lower market cap then other currencies? I personally believe that bitcoin's volatility is not by design and will not last forever.
Secondly, you should rethink whether comparing bitcoin to fiat is correct (I would suggest gold) and rethink if bitcoin really is deflationary. Bitcoin has a lot of similarities to Gold. Check out this report: https://www.fidelitydigitalassets.com/bin-public/060_www_fid...
There is nothing in bitcoin's code that makes it deflationary. The reward for mining bitcoin does decrease over time, but never does the supply decrease - it only grows or eventually stops growing at 21 million
Yes, gold is another awful deflationary currency that drives people to poverty. The vast majority of people were poor on the gold standard. (Consider also, how much https://en.wikipedia.org/wiki/Cross_of_Gold_speech spoke to the people).
In any case, crypto isnt a currency. Comparing it to any currency presumes vastly too much, let alone "fiat" which has enabled the fastest increase in general wealth in human history.
Crypto is a extremely slow, extremely operationally expensive, nightmarish system of baseball card printing. Designed explicitly to progressively, over time, dramatically increase the power and wealth of the early-stakers. Its value only exists whilst people continue to buy it.
Whether deflationary currency is a good idea or not (it isnt: it's horrific); whether digital currency is a good idea or not (it might be); crypto isn't (really, sorry: its scam -- pushed knowingly by scammers, and unknowingly by those holding very very very expensive tulip bulbs, who "just cant see" why everyone doesnt want tulips).
The game crypto people play is this: talk about the tech with finance guys to bamboozle; talk about the finance with the tech guys, to bamboozle. Talk about fiat/politics/gov with everyone because "presumably there's something wrong with the economy right guys!!11! financial crash, etc etc.".
Despite, of course, the last half-century being the most wealth-productive for everyone in human history.
This is a confidence trick. Crypto has nothing to do with why blockchains are useful (mostly, they arent). Nothing to do with non-fiat currency (an inflationary one might be useful). Nothing to do with politics (a system which increases the power of a few early adopters is NOT! better than democratic politics).
Crypto is a scam. Blockchain, non-fiat, digital, anti-gov blah blah is the mask the scam wears. If you want a digital non-fiat anti-gov currency, go ahead and make one. Crypto *is not that*.
> I personally believe that bitcoin's volatility is not by design and will not last forever.
If the entire premise of bitcoin's valuation is an open market exchange based on supply (finite and fixed) and demand (variable), then logically, the outcome is perpetual volatility.
There will be zero cases where demand will flatline because this has never in human history occurred organically. For unforseen reasons (a business deal gone bad, a divorce, etc) a btc whale may decide to liquidate, causing a cascading effect of running out of USDT, bringing the entire market crashing down. Bezos may decide to add 4B worth of liquidity to BTC as a speculative portion of his portfolio. Shit like this will happen and only add to more volatility in valuation.
> There is nothing in bitcoin's code that makes it deflationary.
Depends on how strict you want to be. The number of coins the system allows is fixed. But the number of usable coins will decrease as coins are trapped in lost wallets. Software bugs, hardware failures, deaths, and simple forgetfulness will always make some coins unusable.
On the other hand, while "Bitcoin" on its own is deflationary, the whole ecosystem is wildly inflationary. There are uncounted forks of Bitcoin and related systems filling every speculation niche people can imagine.
I'm concerned that there isn't nearly enough concern over the incredible environmental and energy waste that is core to crypto, and the already enormous wealth disparity on display within the Ponzi scheme.
It seems many adherents are starry eyed about some vague prospect of crypto somehow replacing the status quo, with little clarity over how that will be better for society - how it could replace the current structure with something that is less exploitative, less damaging, and more fair.
Quite frankly I get the impression that many are just salivating over the chance to be the new elite in a parallel system, new technology but in all other respects the same, and damn the consequences to the earth and humanity.
I'm not sure inflation tax should be used as a tool to pressure people to promptly spend their wealth rather than accumulating it. But even if we agree with that premise -
Those who wish to avoid inflation tax already have access to stocks, bonds, gold, etc. Doesn't your argument apply equally to those assets? And yet, people regularly sell those assets as needed to cover their expenses.
> safeguarding the integrity of the nation’s economy
Without question crypto, now +2 trillion in market cap, is a systemic risk to the US economy, notwithstanding serious policy mistakes the Congress, Treasury & the Fed have made since QE1. I'm hoping USSS and other entities cleans house.
USDT fully diluted market cap is about equal to that of PNC Bank, America's 7th largest bank. If PNC Bank's reserves and market action (eg. questionable "minting") were anything like USDT's we would've seen investigation and likely indictments & convictions.
A flea buzzing around the ankles of the big 4 giants.
A bank’s assets include the amount in customers’ deposit accounts, as well as loans, mortgages and credit card accounts. Some of these banks have thousands of branches, while others are mostly, or exclusively, online. All of these banks are FDIC insured.
7. PNC Bank: $4.49B
As of July 2021, PNC Bank acquired BBVA USA and is transitioning customers and accounts. Including BBVA branches, PNC Bank now has branches in over half the country.
ATMs: About 18,000; the bank may reimburse up to two out-of-network ATM fees per statement period.
Branches: 2,800+ in 27 states and Washington, D.C., with high concentrations in Pennsylvania and Texas.
1. Chase: $2.45 Trillion
Chase, the largest bank for consumers and small businesses, is part of JPMorgan Chase & Co. It has one of the largest branch networks out of all the biggest banks, with locations in the most states.
ATMs: 16,000; some or all out-of-network ATM fees waived for premium accounts.
Branches: 4,700+ in 48 states and Washington, D.C., with high concentrations in California, the East Coast and Texas; no branches in Alaska or Hawaii.
Perhaps grandparent's comparison of USDT market cap to the total value of the Financial Services Group stock is peculiar, but let's use correct numbers in the discussion. The grandparent comment refers to USDT market cap, which is ~$80B USD. That's roughly equivalent to PNC Financial Services Group ("PNC" on NYSE) market cap of ~$85B. JPMorgan Chase ("JPM" on NYSE) market cap is ~$450B USD.
USDT creators originally claimed that every Tether was backed with USD, but then switched away from that years ago (if my memory serves me correctly). They now mention that they are backed by reserves, assets, etc.
USDT creators have for a long time said that they are not obliged to honor every redeption and will instead only selectively allow redemption. (The implicit understanding is that they will honor Tethers that exchanges require exchanged, but not from users directly).
Banks by design hold a fraction of what their clients deposit with them. This is one of the key mechanisms by which the economy expands... so a comparison against some "ideal" USDT is apples to oranges, but ends up being closer than expected when you use the actual USDT operating model.
In the cryptocurrency world, there is minimal distinction between the token and the "bank." This is by design. USDT can go to zero in a flash in a way that dollars cannot.
People keep using this word and don't know what it means. Why it's used for crypto still boggles my mind.
> USDT fully diluted market cap is about equal to that of PNC Bank, America's 7th largest bank. If PNC Bank's reserves and market action (eg. questionable "minting") were anything like USDT's we would've seen investigation and likely indictments & convictions.
You're comparing apples and bananas. They might be related but they're not the same.
From my recollection of the 2008/09 financial crisis, systemic risks were those in which entities were deeply intertwined with one another on a massive scale, such that there failure would potentially bring down the entire system of finance. We're talking: retail banking (payments, savings, lending), commercial banking (idk?), public debt markets (bigco and gov funding), but most especially short term commercial funding. Again, going on memory, failure of short term funding (repo (?)) markets would have caused real, non-finance companies to become insolvent or at the very least massively impair their working capital positions. This has the knock on effect of reducing demand throughout their supply chains and major cost cutting (job loss). Etc etc. In other words, massive recession or even deep depression.
Crypto, on the other hand, seems to be mostly a casino, a big one, yes. But one that is not deeply intertwined with other parts of the financial system. Coinbase, for instance, is not systemically important. It doesn't (yet) have tendrils in so many important lines of business as did the megabanks of yesteryear.
When that much money goes “poof”, it’s going to have real world consequences. And the people who are going to get burned are the last ones on the bus - the least technical, the ones who think it will make them rich, the ones who can’t afford it.
Yes, but the parent's point (and my concern as well) is that "market crash" does not necessarily mean widespread fallout (e.g. Black Monday in '87); that only happens when the losers are tightly coupled to other critical parts of the economy, which isn't necessarily the case here: GS/JP Morgan won't have to default on loans to critical counterparties in a crypto crash, for example.
Any time a big group loses wealth all at once, there's some consequence, but that's not the same as "systemic risk" where it causes catastrophe in areas not directly related.
It’s becoming widespread with all of the apps, super bowl ads, and reduced friction in getting into crypto “investing”.
It used to be people who purchased crypto had to know what they were doing (and know the risk). Now anyone can buy crypto without any understanding of anything after seeing a 30 second commercial about smart investing.
Again: being widespread is not the same as being a systemic risk. That just means it's a casino everyone wastes money in. Who is defaulting on critically important obligations because of a crypto crash? What creditworthy business isn't getting a loan to cover cash flows for the quarter because BTC fell to 10k?
likely not, the dotcom bubble was a big deal but it wasn't catastrophic like 2008 was and that's because of the greater coupling with financial institutions.
Look at the percentage of retail investors in the dotcom bubble. It’s much easier to make very stupid plays with money today than it was then, and a lot of “average” people are going to get burned.
I think you're not understanding. While a bunch of people losing money is bad, it wouldn't create another Great Depression, per se. A huge investment bank with millions of counterparties going under absolutely could cause massive, long term damage to both the financial markets and the real economy. For example, people losing their hats in crypto wouldn't cause commercial paper markets to dry up. A big IB going down almost did in 2008. That would have resulted in huge businesses that employed, collectively, millions of people becoming effectively insolvent. Now you're talking about a Great Depression. Big difference. This is where the keyword "systemic" comes into play–as in, this entity is a critical node in the system. Its collapse could jeopardize the system.
Anyone with a smart phone can now spend their life savings on crypto or sports betting with almost zero friction.
We have a trillion each in student loans, auto, and credit card debt. Those (besides student loans) have requirements for credit worthiness. So those people were screened and some weren’t allowed to take on debt.
Not handled well (or ignored because it’s not viewed as a systemic risk), it’s a non-negligible portion of the population that is financially wrecked and unable to meet their debt obligations. And we can’t just make policy that says the idiots that blew their money on gambling and crypto don’t need to pay back their debt… it gets ugly fast.
If the Tether people are to be believed, there is $80bn of "cash" that's held "somewhere" (neither investors nor investigators are clear where). That may turn out to evaporate. Allegedly it has come from "institutional investors" (which ones?)
On the other hand, it's still not up to the size of Lehman ($600bn!). It's heading there.
The difference (systemic vs non-systemic) is not just about magnitude, but also in who Lehman's counterparties were and the effects when those counterparties (those who were exposed to Lehman) could not get their expected capital (and the chain reaction of events that sets off throughout the capital markets and then the real economy). I remember reading some stat that claimed Lehman had derivative contracts with total notional value in the 10s of trillions.
Wow to that video. I have thing about aggrandizing law enforcement and seeing over the top propaganda so I was forced to stop watching at the 30 second mark but that there exists a law enforcement agency for whom it is legal to even plan on producing such a thing is a problem in and of itself. Thinking about the supply of voters who absorb this sort of thing hook line and sinker is devastatingly depressing.
And where is the hub. All I can find is /investigation/DigitalAssets but that can't be it. Usually when law enforcement does something their actions at least result in an accidentally positive side effect, like a crime getting solved. Here I would have expected that side effect to be a some sort of an informational website the public could access.
And why were they all stock trading? "We are cool and do donuts in our chargers"... lol Like at least have etherscan up ? "Did you get that address?" XD I mean, if their aim is to help people get stolen funds , ok. But, that is a slippery slope. The whole idea of crypto is self sovereignty.
They should mention this in their website: Cryptocurrencies are harmful to the banking system and may weaken the state apparatus. Hence, citizens shouldn’t buy them.
And equally so, they should mention that scammers around the world took home a record $14 billion in cryptocurrency in 2021, thanks in large part to the rise of DeFi [1].
This is a public information campaign; the sole purpose is to provide public awareness information on digital asset security and how to ensure it remains secure.
Most ICOs, NFTs and smart contracts are just more complicated versions of regular securities, that evade regulation simply by taking advantage of the time lag that authorities have in terms of understanding them and enforcing existing regulation.
If you look under the hood, each supposedly decentralized, non-custodial service tends to have a centralized component coordinating or in some way controlling the entire thing. For example, a platform that pegs the value of an asset on the Ethereum blockchain to the US dollar, could depend on a single server to inject information about the price of the US dollar in terms of Ethereum or smart contract tokens.
Most do not depend on a single server for price feeds, they use a quorum of independent servers operated by different entities. The data is then combined on chain, and on chain code flags if there is disagreement on the price.
They should also say, “We know a lot of idiots you know might have become millionaires, but that doesn’t mean you too will become a millionaire. Not anymore at least.”
I argue that they strengthen the "state apparatus".
Through competing with the national currency, cryptos force it to innovate and become faster, more resilient, more inclusive, and less prone to inflation.
The fact that more and more capital is directed towards them is a symptom of the fact the national currencies have shortcomings.
> The fact that more and more capital is directed towards them is a symptom of the fact the national currencies have shortcomings.
I literally laughed out loud. People buy crypto because they think it will rise in value, nor because it has any relevance as a currency (outside of certain illicit markets).
>People buy crypto because they think it will rise in value, nor because it has any relevance as a currency (outside of certain illicit markets).
Source?
As far as I can see, Bitcoiners are especially hammering the messages about Austrian economics, the right of freedom to transact, self-custody, separating money from the state and so on. Their scripture material, rarely talk about "price" at all. The maxis will even make fun of you with 1 bitcoin = 1 bitcoin meme. I don't want to make an equally ridiculous claim about "why people buy Crypto" - but clearly not everyone buys Crypto to sell in a week and make more USD.
Not to cast too broad a brush, but humans are really good at rationalizing things and denying their true motivations.
Sure, there are some true believer libertarian cryptonerds still living the original dream.
I suspect, though, that for every "true believer" out there with actual deeply held beliefs about financial systems, you'll find countless others in it purely to ride the wave and speculate, who learn just enough of the jargon to befuddle objections in casual conversation.
Source: several non-technical, non-economist relatives who have "gotten into" cryptocurrencies in the past few years, trying to explain their merits to me.
Yup, which is very compatible with the view that crypto is more accurately described as an asset than as a currency. If it were a currency, the constant large fluctuations and inflation of its “price” would be a bad thing, but as an asset? Great! Best of luck finding the greater fool before the rug is pulled out though.
Deflationary currency encourages savings, inflationary currency encourages spending. We're just so accustomed to a world where our money is steadily becoming worthless that sometimes we forget there are other options.
The "inflation/deflation" argument is a red herring. The shape of mining curves is much more important than their upper limit. For all of the bluster that deflationary systems are better for the little guy because their wealth isn't eaten by inflation, the logarithmic mining curves are the biggest source of wealth consolidation seen perhaps in human history, shifting absolutely bonkers amounts of wealth from latecomers to early adopters.
And while individual coins can be designed not to inflate, the overall proliferation of new tokens, forks, and entire blockchains does mean that there are way more assets over time. This sucks some of the investment out of older systems like BTC, putting downward pressure on their price. This can function similar to inflation and, in the extreme, send a very large number of these systems back down to zero.
Every year the federal government is creating trillions of new dollars diluting the value of your money and shifting the wealth to whoever gets their hands on that new currency, which is mostly large corporations and the wealthy.
Early adopters making a bunch of money doesn't concern me at all because that's a short-term issue compared to the USD wealth transfer which will continue forever into the future.
Crypto is new, and there's definitely a lot of volatility there with new coins popping up and being destroyed far more frequently than legacy currencies. I expect this will die down over time.
FWIW my time horizon for thinking about these things is 50+ years.
Imagine I tried to convince you to use my new foo-coin. The hand full people of who have the most foo-coins can issue themselves as many new foo-coins as they want, but nobody else can create any foo-coins. You would probably think this is a nonsensical currency that no one would think is reasonable to use. Except that is practically how the USD works. The USD is designed specifically for the purposes of corruption.
They're not logarithmic though.
Most are exponential in that they are of the form
Lim * (1-e^time)
which might look like a log function initially, but has different asymptotics.
Several coins have a quick ramp up (high block subsidy) followed by a tail emission of fixed low block subsidy.
Only one coin has a pure linear emission, which helps to deter speculation.
Its true that fiat money's value is somewhat speculative, but speculation still has a specific meaning. It means you are investing not because you believe in the future value proposition of the asset (such as dividend payments, or liquidity value increase if all fixed assets of an enterprise were sold), but only because you expect the market price to increase. Often you expect the market price to increase for no reason other than you know many other people are speculating, so there is really no there, there.
Counter example, I have part of my savings in crypto for no other reason that to protect it from the inflationary policies of the Fed. The ability to use crypto directly in trade is a bonus.
I am just hoping to maintain purchasing power of money I have earned by getting out of fiat currencies however I can. I shouldn't need to invest in anything to maintain the value of my money.
Staying ahead of - or keeping pace with - inflation is actually a primary purpose of investments and why many people invest in stable bond and money market funds.
Until the creation of the Fed and the destruction of gold money holding your money was how you maintained value. Investing was to grow your wealth. We are now forced to invest to maintain value and for most it is a losing proposition. If your investments cant beat inflation every year you are losing value.
By saying that investment is how you maintain value you are saying that the dollar is a bad store of value. Stability, which USD doesn't have, is a property of good money.
None of that changes what crypto is. Another property of good money is performing transactions in a few seconds and being accepted by local markets for goods and services.
The opposite may be the case in the long-term. Cryptocurrency ownership may shift global power and non-participation could be harmful to the state, in the same way participation in the global economy may weaken the national economy, but strengthens it from the perspective of the neoliberal order.
Prediction: Western currencies are on the way out. The US in particular can never repay its debt, it can't even normalize interest rates because it can't afford the interest. What will replace it is government-issued crypto-currency that will give them total control over how you spend money. If the Mayor of New York doesn't want you to buy soda, your currency will not be capable of being traded for soda in NYC.
The government likes it's debt. If they had (only) crypto, first thing they'd do is borrow more of it, or, if that's impossible, create it using tax-funded supercomputers, which is even worse than printing it the old way.
I think you mean: "permissionless" and "self-custodial". Yes, a GovCoin would be antithetical to the current crop of crypto. That doesn't preclude a GovCoin from being wildly popular and useful though!
The state could use public resources better by providing uniform education on cryptocurrencies. Most of the terms aren't standardized and even their use isn't.
For example, if you put up a Google Form and asked for people's Ethereum addresses, many will provide the 0xAbc123 version and many others will provide the Abc123 version without the 0x. Both audiences may not realize that the 0x is purely cosmetic and addresses and transaction IDs can be resolved without it.
Furthermore the state could go further and have examples of smart contracts that help trade, business and commerce function well, instead of malicious contracts that undermine confidence in that system. Similar to the role OpenZeppelin has taken with standardized smart contracts. The US Federal Government has created multiple federal agencies before, specifically to provide confidence and order to markets where there wasn't. So just take some inspiration from 100 years ago and apply the same standard here, as opposed to a CNBC article about the value of scams justifying your aversion to this market.
The state could go even further by writing and collaborating on smart contracts, even submitting pull requests or other equivalent contributions to OpenZeppelin contracts or other smart contracts. This would make it easy for market participants to quickly evaluate a smart contract and see how closely it conforms.
> The state could use public resources better by providing uniform education on cryptocurrencies. Most of the terms aren't standardized and even their use isn't.
I'm not sure that the USG defining standard terms of use would mean that those terms become adopted by the entire crypto ecosystem.
I'm also not sure how a USG regulated contract market would play in a space whose main attraction seems to be "no regulations"
The same way the IETF started out as a US Government supported activity.
The same way Tor started out as a US Government funded activity.
The similarity being that they are just standards, not required by anyone. For anyone passing by, analogies exclusively compare similarities, not dissimilarities. Here we are exclusively comparing similarities.
In this case the US government would be helping with optional standards that help provide the glue between market participants faster.
The ethos of the space has nothing to do with the technology. I don't even get what the no regulation meme even means to you as a government helping contract formation and lending credence to one path while showing why is not regulation. Its freedom of association all the way down. Everyone is free to associate with a state contributed contract standard, and free to associate with a random one.
It is noteworthy that I used the words "help" and "collaborate" and you read "USG defining" and "USG regulate". Its the allergy to the word government that has room for re-evaluation. The concept of an adversarial state is familiar, but not all that there is, governments can also be gigantic nonprofits actually functioning in collaboration with the public. Sometimes I use them that way.
From the USG perspective, no good smart contracts exist, because good contracts are impossible to create on the existing Blockchain architecture. From USG perspective, a good blockchain requires all nodes to be registered banks with KYC. But that's not important because no one is really interested in those, because the purpose of Blockchain is to avoid regulation.
There is no amorphous opinion of the US government. It is many entities and many offices and many representatives, and there is no consensus amongst them on what you wrote. Not even close. There are representatives that understand and like smart contracts, there are delegates from states that have enshrined smart contracts into their legal code, there are agencies staffed and headed by individuals that are well educated on smart contracts and how to use them favorably, and so on and so forth. There are still influential adversaries also part of that institution.
Right in the introduction: "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party."
"Trusted third party" includes regulators, among a wider array of other institutions.
What's difficult about the anti-crypto discussions is that a pro-crypto decision has already been made by quite a lot of parties that just don't discus it publicly.
For every editorial or govt statement critical and concerned about cryptocurrency, there are, for lack of a better term, a corresponding number of "elites" plowing money into it, sitting on cryptocurrency company boards, building infrastructure and so on.
It sometimes feel like interference is being ran to buy time to get the "right people" strong hooks into crypto-infra before everyone else does.
Serious financial service entities actively trading and account in raw crypto (vs. normal-finance derivatives) and supporting the infrastructure, for one. Good example - Mastercard just bought Ciphertrace.
I hate most the hypocrisy. Crypto-enthusiasts want to evade central authority, taxation, etc, but also welcome/demand assistance from central authorities like USSS when things go wrong.
Watch transactions that people make and compare to what they do in real life. It is tedious work and takes time, but governments do similar things to investigates lots of crimes. If you murdered one person you would probably get away with it so long as you are not obvious about it (don't murder your wife - you become the obvious suspect and probably can't hide your trail), but most criminals commit several crimes and eventually all the different trail of evidence add up to an arrest. Likewise if you only have one crypto transaction you won't be found, but for crypto to be useful you need to use it and eventually that leaves enough of a real world trail to figure out who did what.
Hoarding money on exchanges is the only thing you can do with cryptocurrency aside from buying jpegs and maybe (if you're lucky) drugs.
E.g. https://www.nber.org/papers/w29396 points out that only 10% of bitcoin transactions are economically meaningful and only 2.5% do not involve an exchange.
That would be an issue if you only had crypto. It does not in any way negate the fact that there are ways to employ crypto profitably which do not require exposing your real-world identity.
> Since crypto doesn't do anything fundamentally new
Bitcoin, for instance, merely reverts to a scarce accounting standard, like the gold standard, preventing the overburdening of future generations with interest payments incurred by the government, owed to the national bank.
I think Canada was only willing to do this under overwhelming popular support(popular support to shut the protest down), of which I don’t think crypto exchanges have a similar amount of public and sustained animosity towards.
Mining in Bitcoin (and the other cryptos) adapter to the amount of miners, and will still produce a similar amount of coins and work as normal.
Sure, there are extreme cases like if a very significant amount of miners would suddenly stop, then the blocks would come in at a much reduced rate until the algorithm adapts itself.
And if too many stops mining though, then the chain becomes too easy to attack, which would (err, should) destroy its value.
A lot of crypto isn't mined in the first place. For those that are mined, increasing mining changes nothing, decreasing also unless you decrease it so much as to be trivial to outmine 50% of the total.
Halfway down the page in the "Useful Definitions" section, I thought the layout was using a CSS grid. When I opened up the DOM inspector, I was horrified to find nested <div> elements that got increasingly deeper with each grid row.
> Our obligation to enforce crimes against the nation’s financial systems includes both informing the public on how digital assets work and partnering with them to identify, arrest, and prosecute those engaging in crimes involving digital assets. The Secret Service will continue to expand its capabilities, collaboration, and effectiveness related to all financial crimes investigations.
TLDR; it's the end of crypto currency as a refuge for criminals.
So, people will have to pay taxes, register exchange of value between parties, wallets will be trazable to individuals, etc.
Crypto currencies are the new home bubble derivatives. A complex economic vehicle to hide the absurdity of its valuation. A pyramid scheme, a hot potato game. It is bad that we have learned so little from previous crisis.
Curious isnt the role of the secret service to protect the president and other elected officials/representatives? Why are they charged with launching crypto currency awareness? It almost feels like the executive branch is pushing for cryptocurrency crackdown through sketchy agencies.
Until 2003, the Secret Service was part of the Department of the Treasury, as the agency was founded in 1865 to combat the then-widespread counterfeiting of U.S. currency.
They are treated as commodities for tax purposes: when you sell them or use them to buy something, there is a tax consequence because you saw a gain or loss.
They were founded to investigate currency fraud and forgery and even were under the Treasury Department until 2003. I'm think that this fits in as a modern continuation of that role as there are some fraudulent activities going on in the crypto space.
For historical reasons, the Secret Service does both VIP protection and prevention of financial fraud.
They were originally the Treasury Department's enforcement arm. After Lincoln's assassination, the federal government realized it needed bodyguards, and the Treasury Department police were the only federal civilian police force that existed at the time.
"The ongoing growth in decentralized financial ecosystems, peer-to-peer payment activity and obscured blockchain ledgers presents additional risks to the American people and our foreign partners."
Wow, the Secret Service started up their own cryptocurrency team!
Now I know why lots of terrorists, extremists and dark net criminals are running to Signal with the release of a private untraceable cryptocurrency called MobileCoin, which allows them to fund their operations anywhere in the world.
They seem to be starting to learn that Signal's USP is great for criminals and scammers.
To Downvoters: I'm sorry to report that it is true: [0] [1].
In the US we have a right to be secure in our persons, houses, papers, and effects, against unreasonable searches and seizures. Signal and encryption in general are just locks on the doors of my house protecting my papers and effects.
Nobody should be labeled a terrorist or extremist for practicing their rights.
> There's plenty of us that use Signal and aren't terrorists or extremists.
That is my point. The road to hell is paved with good intentions isn't it?
Except that on Signal, it has gotten better for terrorists, extremists and criminals with E2EE, and a private, unregulated, untraceable cryptocurrency (MobileCoin) which they can use to fund their activities.
> Do you drive a car or use cash? Terrorists do those things also.
The authorities can easily trace them up with their number plate and catch them trying to move that physical cash anywhere and it can be seized off of them.
Why would they want to go a high risk of losing it all when Signal + E2EE + MobileCoin sounds more of an attractive very low risk route and extremely untraceable form of communication for them to continue to fund their illegal activities from anywhere in the world?
One mans X is another man’s Y.
The benefit of this technology is we don’t need to be arbiters. We are all equal and indistinguishable under strong cryptography. Don’t worry. If the bad guys are protected, the good guys are too. It can be no other way.
One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment? If you truly believe that cryptocurrency is the basis for a superior economic system, isn’t it rational and wise to put some of your savings there?
Another argument is that crypto enables ransomware attacks. This to me sounds akin to saying “encryption enables child exploitation”. I.e. it focuses on one abhorrent element of society that would take place no matter what and blames its existence on a system which has great potential for good, a kind of propagandist thinking.
Another argument is that Banks will be hurt by crypto. Good! Any epochal transition can be tumultuous, but in my view disrupting the basis of the greatest wealth inequality known to history is a good start. We’re not talking about “banks” that operate on a local or regional basis — these can adapt to using new technology and serve the same people — we’re talking about multinational Banks which went beyond skimming the cream long ago and don’t aparently have people’s best interests in mind.