Coinbase from YC to DPO
blog.ycombinator.com
blog.ycombinator.com
Gary Tan made a YT video about his experience backing them very early and getting a 6000x return: https://www.youtube.com/watch?v=x5YApjnTG10
It's remarkable that Brian Armstrong gave up what would have been very valuable options in Airbnb—the most valuable YC company at the time—to found a new company that surpassed it.
Any early companies out there right now seem like it could potentially offer even a 10th of that in ~5-10 years?
In practice, cashing out billions of dollars worth of stocks is easier than cashing out billions of dollars worth of crypto.
Another option is, now that it's becoming clear to people that Bitcoin is here to stay, you can just borrow against it to spend (avoid taxes, hold on to the upside). Case in point, this person/group borrowed 300M$ with about 1B$ net worth[1].
It's also kind of unclear what the interest is from that page. edit: apparently it's 8.5% https://mkr.tools/governance/stabilityfee
There are also centralized versions with blockfi if you prefer traditional loans.
If it dips below 150% the contract is automatically liquidated. Should give ample time for the creditor to get their money back.
And one more thing, it's not technically an interest rate, it's a stability fee (which btw, gets burned, used to go back to stakers, but they removed that).
This is misleading. The markets definitely move, they just don't show a massive spike in the charts.
Are people just banking on the assumption that it's going to go up higher than how much they have to pay back over time? What if that stops being true 5 years from now somehow, like another coin becomes dominant? Not saying it's likely, I do think Bitcoin will probably still be doing well in 5 years, but I'm not certain of it.
I haven't looked at Coinbase stock liquidity, but I would be it is worse as BTC liquidity.
it's not like the btc must be sold on an exchange
You phrase it like he made a mistake and lost out on a huge profit but the ROI is exactly the same so really don't understand your comment.
Paul stumbled on an absolute goldmine by just giving a bunch of promising companies with good founders 10k in exchange for a decent portion of equity and then some of these companies being worth billions.
NOw you know what those homes and are so expensive in Palo Also and elsehwre, You got of these guys making fortunes, and that money tricked down everywhere.
But remember that unlike the stock market, investing in a VC means locking up your money for 10 years. Slightly beating the market is not worth the liquidity loss, you have to do a good bit better.
YC is a massive outlier and they have insanely good deal flow because of their brand.
You won't find a better group of truly qualified, highly accomplished people giving advice to startups, holding talks for cohorts, etc. in any other accelerator anywhere, period.
I know in the past though that, at a minimum, the amount of money was different. I'd say it's still safe to assume they own 7% though - so more than a billion USD on paper, not bad.
Selection bias. There are a heap of other companies that tried the YC model, and failed. It isn’t “just” good founders and 10k.
Personally I'm very sceptical that current valuation for Coinbase is justified. It is a great company for sure but there definitely arent similar network effects as with Airbnb. There's plenty of competition in the crypto exchange space.
(You can adjust the currency for whatever country you might be considering if dollars are not the local currency.)
Don't kid yourself -- without exchanges of some sort (including payment processors) cryptocurrency is basically worthless.
In this case convenience is necessity, for practical, real-world definitions. Sure, in a theoretical sense, there is no reason why I couldn't use Bitcoin to buy food and clothing, make rent/mortgage payments, buy plane/train/bus tickets, buy furniture, tools, electronics, etc. But the reality is that I can't do it (with some narrow exceptions), and I don't see that materially changing within my lifetime, not to the point where using Bitcoin (or any other up-and-coming cryptocurrency) is more convenient that using fiat currency.
What do you think US real estate is?
You can’t drive a house.
Bitcoin as chaos insurance (or schmuck insurance as Chamath calls it) is the use case that makes the most sense to me.
If you backup your private key in a redundant way, multiple storage locations can be completely destroyed without any loss. If you were really paranoid, you could distribute it around the world to mitigate geographic and geopolitical risk.
So, that's what I think is more likely the mentality of western people holding long term. A check against incompetent government.
this to me is where the comparison to gold falls off. i can hold physical gold and silver and trade it at will even without power, pricing updates, etc. this does not apply to crypto. considering cutting internet access is now a normal thing during unrest, being able to pay with anything that is not physical, probably wont work out.
If the global internet goes down and stays down, then I think it's safe to say that global civilization is permanently collapsing, in which case billions of people are going to die in the resulting famine and the survivors probably won't be able to maintain enough technology to survive long term as climate change continues to snowball.
In this scenario, yeah bitcoin is worthless. But so is gold. The only thing worth stockpiling for this scenario is brass and lead (and a strong local community of other preppers who can organize into a new micro state after the collapse). And even then, you have to ask if the reward of surviving is even worth the cost of prepping.
you see, gold can still be traded without power and internet, as could cash or really anything physical, as the value is assigned by those trading it at that time for whatever use they have but BTC is totally useless, toilet paper would literally have more value. brass/lead(killing people) isn't the only way to survive.
The caffeine addicts will be desperate when the beans stop flowing.
People keep using that argument about gold, but is it really realistic? If the SHTF and the USA goes dark for whatever reason, how good is gold really going to be?
First, how does someone know you're really giving them pure gold and not some worthless alloy that looks and feels like gold?
Second, how much is gold going to be worth? Will a gold bar buy you a house, or a loaf of bread? (probably not a good example, after a month or so, houses will probably be less valuable than food)
And without any government to enforce a stable market, how will you even trade safely when the guy who has all the stuff you want can just hit you over the head and take your gold and whatever other possessions you may have with you?
Eventually these things would be sorted out by forming some sort of communal groups for protection and resource gathering, and barter prices will eventually be set, but will the guy with the most gold be valuable, or the guy with real survival skills (or at least some more immediately usable possessions like weapons, farming tools, etc)?
For the short term disruptions that are far more likely (like a regional power outage), cash is probably going to be just as good or better than gold because it's got an accepted value and everyone knows what it is (product values may rise, but in a society that's not used to using gold as currency with infrastructure to do so, it's a lot easier to sell a loaf of bread for $60 than for a gram of gold)
Get real. When governments collapse gold is not even remotely as useful as people seem to assume. There is no hedge against a failure of civilization. When things break down like that, you need to think on your feet and start organizing people (or joining up with a group someone else organized) to stand guard against the roving gangs of murderers, rapists, and thieves. "Trade" beyond the level of barter involving food, fuel, medicine, and weapons does not enter the picture until some new form of government can be established and some semblance of order is restored.
You can flee with some gold, but I'd expect that to all be taken from you by the border guards or smugglers you have to pay off to get out. They can't take your bitcoin if they don't know you have it.
It doesn't take anything this drastic. All it takes is the country you are in deciding to cut off access. This has happened in various unstable countries many times over the last decade so it's not unprecedented.
The very time you would need something more stable than a currency is the time when the local telecom infrastructure would mean you can't transfer bitcoin.
> Pretty sure I am going to want either some other country's currency -- because I still need to buy imported food or fuel or whatever
Explain why, just saying you want Euros or something isn't a very convincing argument. Importing cash Euros is non trivial, and good luck finding banks and credit cards that let you transact in them.
It is much harder to transport gold and silver, and those can be easily confiscated. A mnemonic seed can be stored in your head, and you can add a passphrase as a salt on top of that to create an infinite number of permutations, each being their own wallet, and provide just one of those if under duress.
You might say that any type of travel is a luxury. Ok, I guess. This trip was for a funeral. The flight was under $100. While I'm fortunate to be able to afford such a thing, no part of the trip was "luxury travel".
Airbnb serves a wide variety of customers, via a large range of temporary housing options.
It took a significant pivot for AirBnB to recover and maintain revenues.
What you probably have in mind is "direct network effects", more like what you'd see with a chat app or social network (though social networks also have cross-side effects between users and advertisers).
Coinbase seems less threatened by regulations
There is also an "inverse" regulatory risk for Coinbase. In the best case (where cryptocurrencies are actually being used as payment systems at any significant scale) cryptocurrencies fill a need that is not being filled by existing banks as a result of regulations on the financial industry. Instead of more stringent regulations being imposed on cryptocurrencies, less stringent regulations could be imposed on the mainstream financial system that would allow banks to create more convenient electronic payment systems. The need for a cryptocurrency exchange could implode if the relevant technologies (e.g. offline ecash) were deployed; you would "withdraw" or "deposit" money in the bank just like paper notes. There is even a case for such a system if banking regulations became stricter e.g. if banks were forced to deploy a less fraud-prone and more privacy-preserving system than the credit/debit card system in use today.
That actually improves the situation for them. (Similar to how GPDR improved Google and Facebook's position in the ad market against competitors)
Hotels have much more guest nights than apartments, so the network effects are much smaller there.
There were companies trying to compete with AirBnB, but I'm not sure if they are still used, at the same time with hotel sites I just find the cheapest one for the hotel that I like.
There is a whole professional services coinbase for institutional investors, custody, etc that has a huge potential.
He could have bought 833-2500 bitcoins, with a current value of $5.2500.000 - $157.500.000.
He choose to do more than "HODL" and go through the hard work of building a product and a company, which in my book, makes him a true hero. Even though he went the casino/shitcoin rout later...
Coinbase is huge because of the user demand, not the other way around.
And early-stage help and intros are crucial for startups - between YC and Garry's network I'm sure a ton of that contributed to their success as well. At the end of the day still a bet, but just saying.
I didn't launch mine, nor participate in his (obviously). I suggested that a business in that space, if successful, would result in a similar outcome as happened to other founders of international money transmission systems that weren't under direct government control: i.e. swatting.
He was not dissuaded, to his credit. Score one for the "founders must have grit" camp.
To be honest, I'm still not sure why the hammer hasn't come down on something like Coinbase by now. It seems that cryptocurrencies in general are the exact opposite of the regime outlined by the BSA, PATRIOT, et c. My unsubstantiated theory is that it has something to do with pmarca, but that's just a guess. The founder of Kraken has expressed his feelings that it's coming soon.
I'm glad that Coinbase has permitted so many to participate in the ecosystem, but I wonder about how much of a benefit heavily regulated, custodial wallets bring to the ecosystem as a whole. It seems to me that Bitcoin existed to replace banks, and here we have a bank serving as the Bitcoin equivalent of gmail, re-centralizing everything in a place that is easily and instantly censored by the exact system it was built to replace. The fact that they're listed on a stock exchange and not as an ERC-20 or other permissionless token tells the whole story, in my view.
I have a special respect for those who can function in heavily regulated, guilty-until-proven-innocent style markets like financial services in the USA. I personally would not be able to handle it.
Perhaps you have a answered yourself: “re-centralizing everything in a place that is easily and instantly censored by the exact system it was built to replace”.
To me, it's a shame to see. Now that Gmail and Coinbase have captured so much of their markets, they (or anyone who can coerce them) are now free to start censoring what goes in or out, turning a federated, permissionless system into effectively a dictatorship.
https://cryptobriefing.com/bitstamp-begins-track-off-exchang...
I really hope that's not what ends up happening. It's a bummer that financial services in the global west engage in such legally-mandated gatekeeping, locking billions out of the most lucrative payments markets. The internet and cryptocurrencies present a new opportunity there, and re-using the same decades old regulation to segregate the technology into the haves and have-nots is, to me, a tragedy.
I fear that neither is true.
There's a lot of hidden soft power in the USA amongst the ultra-wealthy, I've come to learn.
(Note that this is not a criticism specifically against Coinbase, per se; more an indictment of the lack of equal protection under the law in the USA in general. All animals are equal, but some animals are more equal than others.)
Bitcoin was designed to replace fiat money, it can't replace swats.
Props are owed for bringing some true innovation to the space.
I'd love to know how this turned out. Did he eventually find a co-founder? Or did he continue in his YC application as a sole-founder?
For those that don't want to click through: There are replies in that thread such as..
- "No thanks. I'd rather sell sugared water."
- "Because bitcoin worked out so well. Have fun with that, dude."
Sure props to him to pull it off, you don't get net worth of $20B by accident or pure luck... but in terms of his vision of the world more united where it is easier to send and receive money without paying outrages fees, he definitely failed on that promise.
It was Bitcoin that failed to deliver that promise, not him.
At this point, there is no way to trade for free on Coinbase or Coinbase Pro. However, maker orders do still have a lower fee vs taker orders on Coinbase Pro, depending on the pricing tier / how much you trade per month (https://help.coinbase.com/en/pro/trading-and-funding/trading...).
IIRC, he did - they met on Reddit.
Their retail platform has a 1% withdrawal fee unless you are using USDC in which case it is 0%
And their trading platforms have 20 basis points and less commissions
We also charge a Coinbase Fee (in addition to the spread), which is the greater of (a) a flat fee or (b) a variable percentage fee determined by region, product feature, and payment type. The flat fees are set forth below:
If the total transaction amount is less than or equal to $10, the fee is $0.99 If the total transaction amount is more than $10 but less than or equal to $25, the fee is $1.49 If the total transaction amount is more than $25 but less than or equal to $50, the fee is $1.99 If the total transaction amount is more than $50 but less than or equal to $200, the fee is $2.99
Edit: There's another section about how they charge 4% to deposit dollars unless you use ACH (and wait 1 week) or wire transfer (then they charge you $10 to deposit or $25 to withdraw)
But what I find interesting is that his vision was way off- crypto is nowhere near replacing credit cards, now or in the future.
But he did build a huge company because crypto became a speculative asset bubble instead.
Similar for the so called 'tech bubble' around the start of the millennium: if you bought all the tech stocks back then and held them until today, you would have made an OK return.
(Of course, many companies have gone out of business, but there were a few outsized winners to make up for it.
Any individual tech stock was extremely risky, but the overall sentiment that 'tech is the future' was right on the money.
If anything, it's not the high valuations of the 'dot-com bubble' that seem off, but the low valuations of the bust.
This story doesn’t likely have a happy ending.
And energy is cheap where it is subsidised or in abundance. The first is often 'China'. The second, currently often hydro.
A lot of mining is now moving to Iceland, Canada etc. Where energy is becoming cheaper than CPC funded energy.
And that's exactly what you would expect when extrapolating from the economic argument above!
To come back to the analogy with dot-com companies:
In a field where a winners might give you outsized 100x returns, you expect perhaps 99 out of 100 companies to be total garbage losers that go bust. So that the average return from investing in all companies in that field is something normal.
Otherwise, rational investors will keep pumping money into that field and funding more and more companies until that's true.
Same here: even if you believe that in 20 years cryptocurrencies will dominate the world economies (just like 20 years after the dot-com boom and bust, internet companies like Amazon and Google dominate economies), still most almost all cryptocurrencies will fail.
The political risks, that you are alluding to, fit this argument just like any other risk would.
Thanks to eg bitcoin futures, it's not relatively easy to go shortsell (something like) bitcoins, so I expect the market price to be roughly in line with the best forecasts possible.
(Only 'roughly', because the market for bitcoin is still pretty tiny, and not very developed, compared to eg US inflation forecasting markets like https://fred.stlouisfed.org/series/T5YIE )
Bitcoin - not. On the other hand, modern altcoins who are faster, PoS-based, low fees, etc are on the path to exactly this.
An expert in the space, Andreas Antonopoulos, speaks to this topic here: https://www.youtube.com/watch?v=U0T49duRt74&t=2720s
Proof of Stake is more secure than Proof of Work because it's not possible to use external resources to take control of the system. The cost of hijacking PoS is exponential, not linear.
With PoW, someone who has no stake in the network could buy or rent mining hardware using fiat and take control of the network for a linear cost - This is because, unlike cryptocurrency tokens, hardware is not a scarce resource; it's always possible to produce more of it.
With PoS, the only way to take control of the network is to buy more than 50% of all tokens. The cost of acquiring 50% of all tokens is non-linear since tokens become more expensive as the attacker purchases more. This is because the attacker will generate continuous demand against fixed supply of tokens; in accordance with the law of supply and demand, the price will keep increasing as they buy more tokens. Also, the incentive to follow through on the attack decreases as the attacker accumulates more tokens.
If an attacker wanted to not raise the price of a coin, couldn't they use crypto OTC markets to buy large amounts while not raising the price (i've seen OTC at least marketed that way)?
Aren't cryptocurrencies also only a scarce resource if they have a hard supply cap? Or do you figure in something like inflation vs coin burning to this as well?
I do understand your point that the incentive to follow through on the attack decreases as the attacker accumulates more tokens, since it would be in their interest for the network to function properly at that point due to how many tokens / how much stake they have in the network.
The only reason I could see the attack making financial sense at that point would be if it was a competitor who was trying to kill a competing PoS network and it was worth it to them to do so in order to promote their own network (or maybe it could be a government trying to protect their fiat currency)?
I've been involved with Lisk (LSK) for several years. It's Delegated Proof of Stake though so you can use your LSK to vote for block forgers who offer a good % share of their block rewards and earn interest that way.
>> If an attacker wanted to not raise the price of a coin, couldn't they use crypto OTC markets to buy large amounts while not raising the price
Yes, that can happen in theory but in practice it's not feasible. In DPoS especially, whales would rarely agree to sell more than 50% of their own stake because if they did they could lose their forging delegate spot (which yields higher rewards than just voting). Because the blockchain is public, delegates all watch each other's on-chain activity and they can lose votes if they try to sell too many tokens (doesn't matter if it's OTC or exchange).
>> Aren't cryptocurrencies also only a scarce resource if they have a hard supply cap? Or do you figure in something like inflation vs coin burning to this as well?
If there is inflation, it doesn't affect the security of the blockchain because the attacker must acquire 50% of all tokens in any case. The more tokens there are in total, the more tokens the attacker needs to buy to get to 50%.
>> The only reason I could see the attack making financial sense at that point would be if it was a competitor who was trying to kill a competing PoS network and it was worth it to them to do so in order to promote their own network
Early days of any blockchain are always more risky. That said, the early days of most PoW blockchains are even more precarious than those of PoS. This is because with PoW, the community has no say over who can start forging blocks on its new blockchain (anyone who owns some crypto mining hardware can compete to produce blocks on potentially any PoW blockchain).
If just a tiny % of Bitcoin's miners were temporarily repurposed (e.g. minor software changes) to mine any new PoW blockchain, those miners could easily take over the new blockchain and create any transaction they want. With PoS, in the early days, the community gets to decide who will receive the initial tokens; so outsiders cannot highjack the network unless then find a way to buy more than 50% of the tokens from existing token holders.
1. Armstrong was so concerned about privacy that he used a throwaway, but ended up giving his identity away anyway.
2. Those responses! The negativity on Bitcoin has been there from the start on HN especially for some reason.
3. That whole payment angle has not worked out the way most people thought. Most enthusiasts in 2012 saw Bitcoin as a PayPal replacement. Instead, Bitcoin has taking its own path, confounding the predictions of skeptics, professional economists, and enthusiasts alike.
2. Bitcoin was always a dumb idea from the perspective of building a business or an economy on it.
3. Anyone who really looked at Bitcoin in 2012 could see it was not a realistic replacement for PayPal unless you were thinking about paying on a place like SilkRoad.
Not following the law is not a "metric" legitimate businesses usually brag about.
Anybody who use FUD as an argument for something is pushing some kind of snake oil. FUD stands for "Fear, uncertainty, doubt." Why does FUD exist? Because historically when we did dumb things there were consequences. Is fearing consequences an irrational thing?
Bitcoin has low transaction fees compared to US domestic wire transfers or compared to using a credit card on a purchase of $1000 or more.
I would argue though that the magic of Crypto isn't buying coffees. After Silkroad we have seen very little interest in using Crypto as money, and even with "high" fees, alternatives have not become desirable for their ability to transact cheaply. I would also point out that even the likes of Coinbase have a 0.5% fee before spreads. Using crypto over cash or card (at least in Europe) isn't a cheaper of faster process end to end.
IMHO Bitcoin IS an offshore account, and the ability to move wealth anywhere in the world, without a middle man, entirely permission-less and trust-less for even at $15 is a massive achievement. Don't get me wrong, it can be cheaper, but what Bitcoin can do, and how individuals from retail investors to publicly listed companies are holding Bitcoin its a massive signal in terms of whats actually desired.
I wonder if he's kicking himself now for not taking the job.
The title is wrong, there is no IPO. Presumably "IPO" is meant as "public offering." If there's a place to be specific about these things, isn't this thread it?
So there is a difference in structure, but to your point immediately after launch it does not really matter to the general investing public
In an IPO the company puts private shares in the open market and gets money from it, priced at the IPO price. Whoever has (private) shares now has public shares and can trade whenever they want.
In a Direct Listing the company often already traded shares "openly" but not in a "public" way, but now wants it listed publicly so retail investors can trade it, and there's no immediate need of capital so the objective isn't to get a funding from offering shares in an IPO.
That's the least charitable way to write it, but it's somewhat close to the truth (the other part of the truth is that pricing is hard which is why we have markets).
DPOs allow companies to list at a reference price without losing out on money - they can sell at the true price later.
Banks naturally make up a bunch of reasons why this is bad, but it's mostly nonsense.
When one side does many of these types of transactions per year (banks) and one side may only do one or two in a lifetime (founders) expect the side with more experience to both tilt the deal in their favor and to have a compelling narrative of why it's actually better for you.
See: https://podcasts.apple.com/us/podcast/bill-gurley-direct-lis...
There's a funny story (I searched briefly, but couldn't find) that when Elon took Tesla public via an IPO and the bankers told him the initial price he just said "no, at least $XX or no deal". I think the bank price was $17 and he said at least $19, but I could be off on the numbers. They did his price and that price was still too low.
It's a mistake for any company to IPO from now on imo, SPACs are even worse really (unless you're running a fraud in which case SPACs are great).
You can list and put up shares on the market later.
I think there's something new where you can list directly and then sell to the public too without the bank underwriting rip off thing, but that's the edge of my knowledge. I'm not super confident here, so definitely possible I'm wrong about specifics.
Citation please. Lots of companies IPO while losing money.
If this was a thing, it's ancient history and not relevant to IPO vs DPO discussion.
2. Open up to the public market only once you've reached the max theoretical valuation. The company is still hugely overvalued on hype and future growth is unlikely. Ideally, you quickly make it into the S&P 500 so you can hand off the bag to passive index holders who have very predictable buy rate (mostly retirement savings).
3...
4. The rich profit of the plebs like always.
https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf
> Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3546668
> Recent influential work finds large increases in inequality in the U.S. based on measures of wealth concentration that notably exclude the value of social insurance programs. This paper revisits this conclusion by incorporating Social Security retirement benefits into measures of wealth inequality. We find that top wealth shares have not increased in the last three decades when Social Security is properly accounted for. This finding is robust to assumptions about how taxes and benefits may change in response to system financing concerns.
Auten & Splinter came out with the most widely accepted[1] rebuttal, which showed that Piketty's theoretical model was based on a reality that ignored major taxes and transfers, and once you account for those, the effect goes away completely.
http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequali...
> Top income share estimates based only on individual tax returns, such as Piketty and Saez (2003), are biased by tax-base changes, major social changes, and missing income sources. Addressing these issues requires numerous assumptions, especially for broadening income beyond that reported on tax returns. This paper shows the effects of adjusting for technical tax issues and the sensitivity to alternative assumptions for distributing missing income sources. Our results suggest that top income shares are lower than other tax-based estimates, and since the early 1960s, increasing government transfers and tax progressivity resulted in little change in after-tax top income shares.
[1] https://www.economist.com/briefing/2019/11/28/economists-are...
Capital > labor, still. But I guess not as badly as I thought.
https://taxfoundation.org/labor-share-net-income-within-hist...
They just opened up a share selling shop on the stock exchange, instead of selling it to banks (that already have shops) at wholesale price.
Any shareholder can sell through that shop window, including the company.
I think Coinbase as a publicly traded company will be very interesting to follow. Not only is it a massively cyclical industry, but the supposed point of crypto is to reducing the reliance on, and grifting from, companies like Coinbase. It's very success should be inverse to the goals of crypto, and over time, one would think the relationship can only get more fragile.
That was the pitch of crypto. In practice, people are buying it as a bet that it will go up. I suspect most people are only buying it because the value is going up. If bitcoin actually worked like a currency and traded between $8k and $12 for the past 5 years, no one would care.
Banks obviously don't use anywhere near this much energy. Bitcoin is estimated to use more energy than all other server farms put together.
So we are using 0.6% of the world's energy to store 0.5% of the world's wealth. And < 0.6% of the world's energy to store the other 99.5% of the world's wealth.
Doesn't seem like the ideal wealth storage technology.
It takes a relatively minuscule amount of energy to maintain a database of numbers associated with certain people and entities, but quite a significant amount to make it mean something.
I find it much more likely that military resources would be diverted to somewhere upstream of mining in the value chain. For example, if we continue relying on carbon-intensive proof-of-work blockchains, why wouldn't armies simply be diverted to secure energy resources?
Either way, it’s very convoluted and tough to tease out line item costs, but I don’t think comparing electricity usage is a good proxy.
It also implies that the goal of storing wealth is optimizing for low energy usage, which seems less important than security/safety, ease of transfer, taxation, automation, and other factors.
I’m not making an argument for or against PoW. Just want to point out it’s possible >.6% of humans energy output may in fact go towards banking and payments.
Given that we are nearing the irreversible destruction of our climate and that existing electronic systems offer all the benefits you mention, but with massively lower energy cost, your claim that energy “seems less important” is unsupported.
The US doesn't even use 20% of the world's energy. So you would need to think that 125% of the energy the US produces and consumes goes directly into fighting wars and "supporting the petro dollar" - which is absurd. Almost 50% of energy is spent on transportation and utilities alone...
In the most generous of worlds, Bitcoin is 10x less efficient than the current systems. It is probably closer to 1000x less efficient (or more).
This is one of the biggest selling points of crypto, it’s not tied to a government that may decide to commit mass murder for its sake.
The idea behind this proof-of-work scheme is that creating an alternative blockchain history becomes prohibitively expensive, pushing the network to achive a distributed consensus. However, it's tremendously wasteful because the energy isn't actually being spent on "useful" work.
Although higher prices make larger mining operations more enticing and profitable.
It's even worse in terms of energy per transaction.
But the success of BNB which is basically just a corporate database on a blockchain shows there is a big part of the community that doesn't care about decentralization at all.
Just an anecdote but, much to my chagrin, I've had a largely dormant Coinbase account since 2013 and haven't received any notable spam or evidence that my contact info has been handled sloppily.
Recently I started the enrollment process for a couple other popular exchanges and almost immediately start getting some gnarly spam of topical relevance.
> Recently I started the enrollment process for a couple other popular exchanges and almost immediately start getting some gnarly spam of topical relevance.
So...you're happy now, right?
Coinbase brought a true sense of legitimacy and trustworthiness to Bitcoin exchanging.
Coinbase was the first company that made the whole process feel pretty safe and reliable.
I could be wrong but to me this makes every shill for crypto that says "it's anonymous!" a joke.
I had to provide a driver's license and do checking account verification to be approved on Coinbase. Does that not remove the anonymity or am I missing something?
Do we know if Coinbase would cooperate with US government in such a situation? I would imagine they would.
I'd imagine they are also going to be sending IRS 1099-like forms for all crypto transactions, right?
Every transaction is part of the public ledger. If you ever want to get money in or out from fiat you need some point that is going to require ID.
You could try and avoid this doing in person and cash, but if make any mistake ever your entire history of transactions is known.
Some people have tried to do things to obscure this (coin mixing), some coins exist to do something clever to make it private, but BTC isn't and the other stuff doesn't really work.
Coinbase is great because the original exchanges like "Magic The Gathering Exchange" (Mt. Gox) were amateur hour, they were routinely hacked and lost everyone's money. Coinbase was the first real company that showed up and did what they were supposed to do. They also made things easy with good UI.
I think this is partly because in the Mt. Gox days it wasn't taken too seriously, (most) people were playing with it because they thought it was cool not because they expected it to grow in to a trillion dollar monster.
But yeah, otherwise I agree with you. Once you've bought your Bitcoin from Coinbase, your name is attached to a Bitcoin address. Law enforcement might not know where the coins go once you spend them, but they could subpoena you or otherwise make some sort of legal demand to know who you sent them to if they suspected you of buying illegal things.
How do you get a Bitcoin wallet registered and get funds into it?
If you download the desktop client, you have a wallet, and you don't need to log in or register anywhere. You can then create a Bitcoin address and have Bitcoin sent to it.
Commissions tend to come down as markets mature (with some exceptions like real estate) so I will be curious to see if this occurs in the crypto market as well. I suspect that appeal to the masses will not be a long-term durable advantage.
Not necessarily, the point of crypto is to reduce reliance on fiat money, due to the high fees of crypto it makes sense to build centralized services on top backed by decentralized cryptocurrencies, these exchanges dont hold real power, as you can just switch exchanges (unlike credit card processors). Bitcoin is like the internet gold, but you dont buy stuff with gold.
Yes, that is still the case? Decentralized exchanges like Uniswap are dominating (over $1B volumes daily) and growing very rapidly. Crypto is and always has been about decentralization.
How does Coinbase ever manage to justify a valuation this high? 100B....
Ping me when the stock price is under $100.
Of course anybody can run a service like that, but Coinbase has the brand name and a leg up on compliance/legal so they'll get to charge a big premium on this stuff.
How is Doordash "worth" ~$50B?
We're all in a delusion when it comes to public markets.
We're not ALL in a delusion, but market movers certainly seem to be.
Less likely as time goes on, especially now with a $100B US company on the books.
> How does Coinbase ever manage to justify a valuation this high?
Millions of active users, strong financials.
https://investor.coinbase.com/news/news-details/2021/Coinbas...
- Government intervention tends to benefit incumbents.
- Coinbase employs a lot of lawyers [1].
- Coinbase invests a lot in lobbying [2].
- While fees are lowering for international exchanges, those who serve US customers are still able to get away with very high fees.
- People are less sensitive to fees when the assets they are buying are very volatile.
- NYSE serves brokers, that then themselves serve the final clients. Coinbase is able to serve customers directly, thus it can keep all the fees for themselves.
[1] https://news.bloomberglaw.com/business-and-practice/coinbase...
[2] https://seekingalpha.com/news/3679495-square-fidelity-coinba...
https://www.coindesk.com/cryptocurrency-ceo-donated-second-l...
Now we have crypto currency companies floating as public companies, and others (e.g. Tesla) heavily invested, speculatively, in Bitcoin - maybe crypto currency had now reached a point where it's too big to fail?
OTOH, some western governments and their security apparatus are all-in on mass surveillance and privacy invasion, and they are going to hate any real degree of currency anonymity, so more regulation could still be on the cards, but perhaps in (secret) consultation with the likes of CoinBase. The likes of Monero and Zcash are likely targets.
It's as if all transactions, of any size, can be perpetually tracked, with a courtroom-ready digital signature reducing evidence doubt about who made a transaction.
maybe they were always like this, but recently the valuations seem bloated by various measures.
It's a revolution and we as IT sector have been sleeping on it (at least it feels like there is a lot of negative feedback concerning this technology). We are good people, but we refused to follow that hype since 2009 as any RDBM could do the same ... nearly ... on a local scale. Well, not really imho
Now it's there and it wont go away. Tesla, VISA, Master, Coinbase, ... (I'm just from the west and know these, look at Asia, they are the future. They are much further than us)
There will be billions if not trillions pumping into that market. And it will continue, as the industrial revolution in late 19th century. It's a paradigm shift and nothing less!
That is a transparent market. NYSE will no be able to compete with it. Even thought it 100x more old and established. It'll look like a little shop in no time compared to Coinbase, Binance, TFX ....
There have been pseudo "mafia" structures for so long in traditional finance. DeFi and Crypto will show/shows the world how much money can be made handling money. Basically banks have been earning more than all money in the world combined, and they did NOTHING!!! They just got richer, while generating no value for society. They even harmed the society and we accepted it as we had no option.
Now we can shift that over generating value to the normal person. This is not less "crazy", generating value from basically nothing, but it's the only way to show that the current system is flawed.
Any gov. trying forbid with crypto will fail. It's too late! There is no way of shutting anything like ETH down. It's technically impossible if there is enough incentive for the mines/staker!
We need a better world! If the cost for doing so is to burn down NYSE (not literally), we should do so today. And not wait another 50 years.
I'm doing a little side project with my brokerage account where I pick 20 good socks and 20 bad stocks. Sell the bad ones short and double down on the good ones.
That's how hedge funds work. It's interesting because as long as your picks are mostly right you can make money regardless of of the market is going up or down. Plus it'll be fun to say I started a hedge fund at parties.
Coinbase is my number 1 bad pick.
For coinbase to ever grow into it's valuation crypto would have to become an integral part of society at large.
After 12 years, it's still largely useless and offers no advantages over centralized financial solutions. The only advantage it had is it is decentralized. But in practice this turned out to be false. So what concrete use case could it have that can't be done better with a traditional database?
My bet is this is a bubble, and it will pop sooner or later. Having some short exposure to that is desirable. Especially if it's not in bitcoin which could rise a lot, but an overvalued company that would take a long time to grow into its valuation.
Most companies or banks offering crypto are not really built on it, they are just UI brokerages and buy the coins somewhere else. Same way they handle other assets. The trades are "free" because they take portion on off the spread. They buy a coin for $99 on the market and sell it to you for $100. It's easy to do but something Coinbase didn't want to do because it's not transparent and honest.
Ironically finance and banking institution are the worst at tech. Building on top of crypto is hard. Crypto trading is hard. Crypto security is hard. Financial instigation security is based on the fact that you can always fix things manually, call and fax in changes. That doesn't work for crypto.
And it's not like you can build all these capabilities and the legal framework over night or over months. Competition has been there from the very beginning but they are still the market leader in the western world.
Overall bullish on Coinbase in the long run. It's more of a platform than it is bank or an exchange.
Disclaimer: ex-Coinbase employee.
Again, I don't think this will ever happen, ever. But NYSE isn't a great comparison.
Trading fees in the crypto-world are getting more competitive as more established players support crypto. I don't see a defensible market position here, let alone established track record or strong potential for growth in future earnings.
This is all feeling very dotcom bubble 2.0.
How many dotcom era companies had net income of $800mil in a single quarter?
Man, almost forgot how it's spelled it's been so long.
Only MSFT outperformed from dot com heights. Valuation matters.
I don't see how that is sustainable at all.
I think Coinbase may still be overvalued but don't think it is directly comparable to NYSE or other major exchanges.
I would agree; Coinbase is competing against traditional brokerages and fintech (PayPal, Cash app), who can run their own nodes and key/wallet infra (as the network is the global exchange). Traditional brokerages can even identity proof their customers IRL with their branches and provide an appropriate level of customer service.
Alternatively, it would be somewhat humorous if Coinbase becomes the DTC and Cede & Co of digital assets (for brokerages who would rather pay and plug in vs build their own custody systems). What is old is new again.
That's a good point. So a fairer comparison would be to compare Coinbase to the market cap of NYSE ($66B) + a stock broker who has roughly the same userbase as Coinbase. For example Schwab ($127B) has about half as many accounts as Coinbase. So NYSE+Schwab = $193B. Suddenly Coinbase valued at $100B while having twice as many accounts and trading fees per dollar transacted ten-fold higher than NYSE+Schwab seems like a bargain... !
If Coinbase has network effects, they're incredibly weak. I'll drop my Coinbase account tomorrow if I find a cheaper, safe place to buy coins. Schwab on the other hand has inarguably the best checking account out there, incredible customer service, and a great brokerage.
Coinbase is in a race to the bottom and they're gonna get smashed against the floor by established, defensible financial services. Grandma ain't making a Coinbase checking account. That's my thinking anyways.
90%+ of industries are. It's what capitalism is all about. It's not unique to Coinbase.
«Grandma ain't making a Coinbase checking account»
She already did. They have 56 million verified user accounts. Twice more than Schwab. A lot of grandmas in this user base :)
This is a very simple understanding of economics that's ~100 years outdated. Most of the world's largest companies sell goods and services with relatively inelastic demand and/or significant barriers to market entry. What IP does Coinbase have that makes their service/good inelastic? Tomorrow when all coins are supported on Robinhood, Cash app, and Venmo, why use Coinbase? COIN investors haven't given me a good answer here. It just comes off delusional to me.
> They have 56 million verified user accounts.
This is a deceptive number. Coinbase has ~6M monthly active users at a time when crypto grew in value 10x. Average account duration is, I'm sure, very low. Schwab has ~30M active brokerage accounts. These are actual, comparable numbers. 56M is pretty much anyone that made an account with a linked email, no?
Probably at least 10x that
I looked at the NYSE daily volumes...unless I'm reading them wrong, they did $800m USD worth of trades today. Coinbase did $5b USD worth of trades today. So if you compare a company that's almost 200 years olds volume against a 9 year old company, and find that the startup is doing more than 5 times the volume of the incumbent (with zero lock in, since clients are free to trade cryptos on any exchange), then I'd say your comparison is actually a ringing endorsement for Coinbase.
https://www.nasdaqtrader.com/trader.aspx?id=FullVolumeSummar...
You are orders of magnitude off here. If you really think the stock market is that small you probably shouldn't be here commenting about it
https://www.coingecko.com/en/global_charts
Roughly 1Tn of that from 01/01/2021.
I mean it’s not really like any of these things, the comparisons are totally arbitrary.
I don't see Coinbase having a future in payment processing. Not unless cryptocurrencies become drastically more stable and energy efficient. Even then, you're hoping for the goodwill of the government not to implement serious restriction.
Dotcom bubble was unique among other market crashes, because the main prediciton that fueled the dotcom bubble — that internet is the future and internet-based companies will be worth a lot of money — turned out to be completely right.
I think it's pretty clear by now that they are.
We just hope that the stupidity on the buy and sell sides more or less balances out, and what's left to determine the price is people with some real insight.
If you add up all the brokers/investment banks, clearing companies that are related to ICE you get to a way larger number.
where can I buy things with my beenz and flooz?
Yeah, what a shame, that Internet thing never really took off.
In line with the ethos of crypto? No, not at all, but a bridge has been made between the old world and the new. This IPO will load the coffers of some of the most innovative VCs, engineers, and people who took the risk of investing in, and working at Coinbase.
The antiquated low-tech equity exchanges charge less than 1 bp in trading fees on average, if I'm not mistaken.
The hip new high-tech crypto exchange charges between 50 and 200 bp in trading fees (unless you trade a lot), around 60 bp on average, it seems.
So, crypto trading on Coinbase is two orders of magnitude more expensive than good old fashioned equity. Yay for progress!
So the ratio between the value of the exchange is about 1/10 - 1/15 of the total value of the market it trades. (For comparison take say Interactive Broker's market value to the market value of the total stock market.)
And Coinbase far from the only exchange out there. With this valuation I bet the value of the exchanges is higher than the value of the total cryptocurrency market.
However for crypto exchanges ... well ... what is going on here?
FOMO.
With that said, I think they are overvalued at $100B. Not because of the total market cap size of crypto, but because their revenue doesn't justify a valuation that high.
I've seen numbers around 250k to 350k transactions per day for Bitcoin and more than 1 million for Ethereum. So if Coinbase can capture a decent percent of that market then you're talking about tens of millions in revenue per day (if not more).
From a quick search it looks like Coinbase had around $1.8 billion in revenue in the first quarter. That could/should grow along with popularity of crypto in general.
https://blog.coinbase.com/a-follow-up-to-coinbase-as-a-missi...
Employees who had been with the company two years or more would have seven years to exercise. Those who had been there between one and two years would have 90 days.
Employees who had not yet been there a year would not have reached the vesting cliff, and would not have had vested options available to exercise.
In the wake of the George Floyd killing last summer, it became virtually obligatory for every large corporation to proclaim support for the #BlackLivesMatter agenda even though many, if not most, had never previously evinced the slightest interest in questions of racial justice or policing.
One of the very few companies that refused to do so was the Silicon Valley-based cryptocurrency exchange platform called Coinbase — which announced that it would remain apolitical and not involve itself in partisan debates or causes of social justice unrelated to its core business mission. When announcing that policy of political neutrality, the company’s co-founder Brian Armstrong explained that “the reason is that while I think these efforts are well intentioned, they have the potential to destroy a lot of value at most companies, both by being a distraction, and by creating internal division.” That once-anodyne announcement — to stay out of politics as a corporate entity — produced instant backlash. And exactly two months after, the notoriously censorious and politicized “tech reporters” of The New York Times punished the company for its heresy of neutrality with a lengthy article depicting Coinbase as a bastion of racism and toxic bigotry (the company was also savaged by journalists because of its audacity to reveal and respond to the NYT’s allegations in advance of the paper’s decision to publish).
The recently announced products to take on zscaler, crowdstrike et al looks commendable whilst they are also at the same time going after the cloud incumbents with Workers. I'd reckon, they've got the engineering chops and the infrastructure to bat both those out of the park.
It's very difficult to value futuristic things, it might succeed beyond our wildest dreams or completely flop.
I'd if you try to start with a clean slate and no biases against it from the get go, spend some time researching and understanding it alonside what money is and it's history, etc. You'll probably start to see some usefulness to it.
If you trust those metrics, yes everything is perfect. Prices at grocery might not have inflated, but assets certainly have, real estate is crazy expensive, stock market P/E ratios have also exploded. For the working class whose income has relatively stayed stable, it means life is a lot harder.
The money is very much flowing in the crypto world, just look at DeFi, it has more or less the equivalent services available elsewhere, but everyone has access, you don't need trust, it has large volumes and billions of dollars in capital in these protocols.
It's great if you want a predictable global monetary system not controlled by any single entity. If you don't see any value in that (as in you really trust your gov and the politicians/bankers), I don't think there's anything I could tell you to convince you otherwise.
Not all cryptos are like this, but for bitcoin and other ones that have the incentives right: bitcoin's massive breakthrough is a protocol that can send verifiably discrete entities across a network, without a central party needing to verify the discrete-ness. This is a huge breakthrough in a lot of ways, but basically consider if you network could send payments as exactly as easily as it does HTTP packets, and w/o a client-server model, just p2p. HTTP changed the world, and that's the idea behind bitcoin's value. If you could somehow buy a slice of HTTP in 1997, or TCP/UDP, now knowing how important and valuable those became (valued by the size of the internet economy), would you?
Defi could make sense... but I think people underestimate the value of a physical bank with real people running the show. But a lot of rent extraction too... so idk.
And the timing seems right -- Bitcoin is sky-high and could crash tomorrow. (I'm presuming here that Coinbase and BTC will be highly correlated, but who knows.)
1: https://www.coinbase.com/listingday 2: https://www.youtube.com/watch?v=FuqkjklLSCY
https://cointelegraph.com/news/coinbase-listing-is-crypto-s-...
Always curious to see what a win looks like from the accelerator side.
https://www.sec.gov/Archives/edgar/data/1679788/000162828021...
But that's true of pretty much any IPO. All the biggest winners are winners mostly on paper, they can't really dump it all on day one.
My understanding is that there are firms that specialize in buying up assets from VCs that need to close out their funds, so things like this or private companies that they've held for 10+ years already, stuff like that.
There are probably ways to sell all the shares from one entity to another all at once that won't tank the shares, but I'm not totally sure.
I know, at a minimum, the dollar amount has changed over the years (gone up) but I'm not certain if the percentage has changed.
So if they can realize all of that at current price, a lot. Enough to keep running for many years.
Anyway, Coinbase is a good case study on how UX/UI makes all the difference. I'll definitely study them in the future.
edit: why the downvotes?
Is this true?
If you look back at the price graphs, there's typically a huge run up every 1-3 years, followed by a crash, followed by another run up 1-3 years later. We're in the middle of a run up.
The run up is when people get excited and buy. After the crash, I would guess that enthusiasm about crypto will lessen, until the next run up.
I think this is somewhat supported by the fact that Coinbase's most recent quarter brought in an insanely higher amount of revenue compared with previous quarters before the latest run up.
Yes. Go here: https://coinmarketcap.com/charts/ and select before February this year (big spike in volume) and look at the transaction volume chart below the price chart. Steadily increasing rather than jumping, going down and jumping again. I'm guessing transaction volume for Coinbase looks the same way, as people need fiat money for cryptocurrencies and others place fiat money in cryptocurrencies no matter if the price goes up or down.
See also: Metalab's showcase of their collab with the Coinbase design team: https://projects.metalab.com/coinbase
10-15 years ago, it was much more difficult for companies to raise this much before going public, which forced companies to go public much earlier, before all upside was realized by private investors.
The result is private equity and VC funds benefit from the early gains, and by the time the company becomes public (and is accessible to retail investors) there's typically not much of a lucrative near-term upside opportunity.
The same thing will happen with Stripe once they finally IPO. They'll debut at an insane valuation, and there won't be much upside opportunity for retail investors to benefit from. Because if there were, they would be able to more easily raise the capital from private investors rather than the public market.
Coinbase is getting a 10x valuation from public markets compared to what they got from private markets just two years ago. In theory, they've left a lot of money on the table by waiting so long to go public and raising from VCs instead.
(The price is dropping, so who knows if this will be true for very long.)
Exit valuation of uber was 82.4$Billion, which we considered as insanely high then. Now it sits at 100.2 Market cap.
I have been aggregating some of them in my google sheet. Its very peculiar https://docs.google.com/spreadsheets/d/1IPIyrn-36GpepXXkfoLF...
Coinbase isn’t raising capital though because it’s a direct listing.
It seems not to be trading yet, or at least Google and Yahoo don’t have it.
Thank you anyone who can help.
In case anyone curious, S1 page 99:
Historically, a significant portion of Trading Volume and transaction fee revenue has been driven by the purchase, sale, and trading of Bitcoin and Ethereum, and in 2019, Litecoin. For example, for the year ended December 31, 2019, Bitcoin, Ethereum, Litecoin, and other crypto assets represented approximately 58%, 14%, 10%, and 18% of Trading Volume and 60%, 11%, 8%, and 21% of our transaction revenue, respectively, and for the year ended December 31, 2020, Bitcoin, Ethereum, and other crypto assets represented approximately 41%, 15%, and 44% of Trading Volume and 44%, 12%, and 44% of our transaction revenue, respectively.
Apparently I got $5 of free bitcoin at some point in 2016 and it's now worth $800. Sweet!
Main difference: Instead of ETFs, you buy the different crypto coins.
The similarities are actually extensive:
1. People go to Coinbase mainly to invest their money. Sure, maybe, one day, in the distant future, perhaps, coins will be used for commercial purposes; but now and in the foreseeable future they are investment (speculation) vehicles
2. Vanguard has a direct relationship with consumers; you can open an account, wire money, and buy Vanguard funds. Same with Coinbase (and not the case with stock exchanges as some have suggested)
3. There is a certain amount of trust in the brand that makes people want to buy the funds/assets or wire their money to these brands. But that has limited power (see point below)
4. Vanguard's products are commodities, just like crypto coins are (you can buy the same bitcoin in many places, and you can buy essentially the same S&P 500 ETF from many platforms)
The difference is that Vanguard is successful thanks to a focus on low cost funds; Coinbase still rides first movers advantage. But inevitably it'll have to compete on cost.
Vanguard is managing $6+ T of actual assets; that's many times the total market cap of all cryptos.
And now here's the question: if they had the same valuation, would you put your money on Vanguard or Coinbase?
Well, 3 times more.
>And now here's the question: if they had the same valuation, would you put your money on Vanguard or Coinbase?
Depends on what the bet is. For growth of stock price? Obviously coinbase. The company that is more likely to last another hundred years? Probably Vanguard.
I must admin that I bought my first cryptos on Coinbase but soon realized how expensive it was and looked for alternatives.
I don't understand what is so unique about Coinbase and why this insane valuation. I am skeptical and not going to buy, at least not at this price.
Long term I expect exchanges to having to drop fees like stock exchanges. At that point, unless they can offer juicy interests rates like Celsius, how would they make money ?
And they are very well integrated and trusted within the US financial system.
There were no authorized private markets in the last week,and Coinbase's stock issuance documents forbid sales without company approval.
FTX was trading over $600 at one point, but that was a synthetic asset and based off of an inaccurate estimate of the share count. Was that what you were referring to?
People also asking why a company would go to the public stock market when they are an alternative market, well part of it is to legitimize it and reduce the chance for regulation. Once enough people are making money from it then it becomes harder to put back in the bottle. It is also part marketing, many people will for the first time hear about cryptocurrency soon because of it even though it has been around a decade+. It also makes the investors rich and fuels more cryptocurrency investments. This event alone will create many wealthy crypto entrepreneurs.
Coinbase is like cryptocurrency being merged into Wall Street main/master on git. This is the moment that truly merges the Wall Street investment world with cryptocurrency, for better or worse. The roller coaster has reached the precipice, no turning back now.
Not to mention that Binance has 9x the volume, much much more crypto and is pro-competition and lists Coin on day 1 while CB wouldn't even consider listing BNB or anything by competitors.
They're one of Team Tether's top partners in crime.
How on earth can you believe their volume numbers haha.
That's blatantly false. Many have been caught trying to circumvent via VPN or similar, it's just impossible to catch quite everyone no matter how hard you try.
>which country they're domiciled.
Malta?
https://www.coindesk.com/binance-doesnt-have-a-headquarters-...
In fact "Malta ... question mark?" is about as much information as we have.
And the KYC evade is just based on opening more accounts before you reach their threshold. Because rather than operating like a real business, requiring everyone to provide KYC during onboarding, they just look the other way.
Binance has never been in Malta, in fact they are not located anywhere. I would be very cautious in dealing with them because to me that kind of approach to regulation doesnt sound healthy.
Oh my god lol.
> [Binance established their headquarters in Malta] soon after the Maltese government passed laws that provided a regulatory framework for businesses operating in the Cryptocurrency and Blockchain industry. The regulation officially passed into a law on July 4th 2018. Malta remains the only country in the world to officially pass such laws.
The Coindesk article from 2020 states:
> Until February [of 2020], Binance was considered to be based in Malta. That changed when the island European nation announced that, no, Binance is not under its jurisdiction. Since then Binance has not said just where, exactly, it is now headquartered.
And quotes CZ:
> “Well, I think what this is is the beauty of the blockchain, right, so you don’t have to … like where’s the Bitcoin office, because Bitcoin doesn’t have an office.” [1]
The Wikipedia article is stale, and incorrect on the basis of the subsequent statements from executives involved.
The beauty of blockchain indeed.
[1] https://www.coindesk.com/binance-doesnt-have-a-headquarters-...
They might be inflating their numbers but they are definitively huge. Everyone I know who is involved in Crypto is using them.
Remember that ETF that was trying to list a few years ago said 95% of all volume in the crypto space was fake. [1] Now, at the time, they included Binance as a legitimate exchange but you know nobody's looking and they can do literally whatever they want.
That designation is especially suspect as:
> Of the 10 exchanges, only Binance isn’t a money services business (MSB)
Consider of course this was 2 years ago.
This whole space is utterly uninvestable.
So let me reverse the question -- on what basis do you believe these unregulated fly by night bucket shops are on the up and up? What have they done to prove their legitimacy to you?
[1] https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-o...
Those things aren't just arbitrary numbers with no effect, if you are trading it's pretty noticable where the volume is higher even if you don't look at the order book.
You know 99% of all LTC trading on Coinbase was one account trading back and forth with itself a couple years ago. Spoof trading involves putting up a big order, then yanking it at the last second before it gets executed.
If you're the house, you can do literally anything if only the fox is watching the henhouse. As the peer response states, if you're the house, you know which orders are yours so there's zero risk of them accidentally getting filled. You put fake orders on the books, you fake close them, and report them as a real transaction in the log. The liquidity can just be pretend.
[1] https://www.complianceweek.com/regulatory-enforcement/cftc-f...
It's especially obvious when trading higher amounts or trading a smaller liquidity token in the first place. Maybe I can't verify the actual numbers but I can very much verify there's more liquidity etc. than when I do the same transactions on a smaller exchange (and I'm on ~5 exchanges).
If I use a slot machine a million times and I get higher payouts than at the casino next door, why should I consider it rigged?
This is just nonsense. I am getting all the benefits of high liquidity and volume, my orders actually execute and I take advantage of the smaller spread. You can posit whatever you want, but the more likely explanation is that the volume is indeed higher.
This was a common growth hack for exchanges. When a new exchange launched they wanted to feign liquidity to establish a sense of credibility. They literally copied feeds from peer exchanges until they bootstrapped.
After all, why would anyone trade at an illiquid exchange? How do you get the first people onboard? You pretend you already have a lot of people onboard. More volume = more credibility.
The question you should ask yourself is if nobody is looking, why would they ever stop?
[note] by "growth hack" I mean literally a felony in any other context, but in the crypto space shrug who cares I guess. After all in which jurisdiction would you even sue them lol. Thanks to the "beauty of the blockchain" they won't even tell you where they're based.
I dont agree and what you are incorrectly talking about is probably BSC, not BNB.
Arbitrary gatekeeping in an attempt to avoid the regulatory banhammer is somewhat of a lame kludge, in my view.
There is a ton of value available on chains and in tokens that regulators don't like.
as XRP aspires not to be within the securities framework, there is still a desire of the market for more forthcoming disclosure and many people (including myself) don't like prior - but extremely successful - marketing of XRP/Ripple that didn't separate Ripple Inc activities from XRP use
but in the crypto space, scam is not defined at all and has complete dilution of any meaning. it is typically rooted in ignoring market sectors, in favor of a general all encompassing single cryptocurrency attracting all capital in the world at all times in perpetuity, so any crypto asset that dilutes some of that capital is called a scam because it slows down the desired world view. obviously people outside of the crypto space consider all of that to be an absurdity. the "middle" view is that there are assets that share a technology feature set that are simply bearable by the market, like any commodity or equity they can attract trillions of value even while a different technology matures that better matches an ideology of elitist enthusiasts.
It may become more decentralized over time as more validators are added.
Today might not be a great day to try that. But reach out to them and ask.
Pulled all my coins out and will never use this scummy product again.
This might not be completely legal. How much Bitcoin was it and what it is the date of liquidation?
The complaints I've seen about Coinbase support are usually people who withdraw coins to the wrong address or something and are upset that Coinbase won't reimburse them for their own fuckups.
I have had several cryptocurrency exchanges straight up steal money from me and then ghost me. Coinbase has been a pleasure to work with relative to everything else in the crypto space.
I've been trading crypto for a while and exchanges are as sketchy as it gets. Sometimes, you have anecdotal experiences that bubble up on the internet but i truly believe coinbase is the most trust-worthy exchange.
If you want to operate with/within the US, you pay the dollar. That's fairly "sound" reasoning.
Btw im invested heavily in crypto but just saying.
Valid points on use, but paypal adoption might cause a jump and a few others in that direction, but still small.
Barrier to entry, paypal or not, is fairly small actually. Good wallet and transaction ecosystem that works via QR code. Depending on what way CB and places like BlockFi go, links to dollar economy get a lot stronger too.
What sound reasoning is behind all this: bitcoin's massive breakthrough is a protocol that can send verifiably discrete entities across a network, without a central party needing to verify the discrete-ness. This is a huge breakthrough in a lot of ways, but basically consider if you network could send payments as exactly as easily as it does HTTP packets. HTTP changed the world, and that's the idea behind bitcoin's value. If you could somehow buy a slice of HTTP in 1997, or TCP/UDP, now knowing how important and valuable those became (valued by the size of the internet economy), would you?
Yeah if you're 70 years old, don't throw in half of your net worth.
Kudos to the team!
Between your examples and Bitcoin, would betting against the HN hivemind a winning strategy?
But that's okay. The world is large, and we're free to all feel however we feel. There also isn't a "hive mind," just a lot of people with surprisingly similar viewpoints and feelings that don't necessarily match the reality of how to build businesses over long periods of time.
At one point, I was an ardent opponent of Coinbase, having lost most of my money in the (at the time) recent implosion of Mt Gox. But time has proven me wrong. So, it's also not so easy to distance yourself from "the hivemind," you see – it's surprisingly easy to fall into the same patterns.
Last I read it basically matches the income inequality of the world.
Fails to process a withdrawal within specified time limits gets a broker in serious trouble. Institutional clients stop dealing with you within hours. See Drexel Burnam Lambert for an example. Then FINRA lands on you.
Coinbase is, in spirit, a modern pets.com.
I don't know of a better way.
In this case, even if the same person criticized Brian Armstrong then later congratulated him, I don't see the issue. Humans sometimes achieve things, sometimes do controversial things, it's as mundane as it gets.
Markets are efficient.
sells pumped speculation
Store of wealth? Aight, you got me. Solid arguments to be made for it as a new anti-fiat. Its recent divergence from gold concerns me though. That seems bubbly.
As a settlement protocol between nations and financial institutions? Already well proven out and in use. No argument to be made.
How do you justify your $1000m valuation of a company that generated $700m of PROFIT in a single quarter?
Coinbase did $1.28B revenue in 2020 with something like half of it coming in q4. This was before Venmo, Cashapp, Paypal, etc. started selling crypto. The cost for customer acquisition is about to skyrocket at the same time fees are about to plummet.
There's a reason Coinbase is rushing to DPO right now. The stars are perfectly aligned for them to get out while the getting is good.
Does anyone know what the value of assets under management by Coinbase is?
By the way, Coinbase revenue in the last quarter was nearly 0.1% of the entire crypto market cap.
So, Coinbase took around 60$ of any 10,000$ traded on Coinbase, and 10$ of any 10,000$ crypto market cap, which implies that 1/6 of the entire crypto market cap traded through Coinbase once this quarter, unless I'm mistaken.
See the second story in Matt Levine's Money Stuff: https://www.bloomberg.com/opinion/articles/2021-04-14/good-a...
[1] more likely, the percentage is fairly constant, while the USD value fluctuates a lot with crypto prices, so "AUM" might be around USD 200 billion now (as crypto market cap is USD 2 tr).
Also, since when does anyone care if casino's business is based on pumped up gambling. As long as there are millions of transactions going on, the business model will stay 'efficient'.
I have a timeshare to sell you.
The real money is in crypto-timeshares.
We have all the advantages of a timeshare business, and also blockchain.
With the emergence of a new group of people that have massive crypto reserves at their disposal, paying for a timeshare in crypto would make that asset accessible to them natively.
It’s not a bad idea. If crypto is a new paradigm, the world will need crypto-XYZ to appeal to that crowd. Cars (Tesla), and timeshares are among them.
* Completely made up digital money with no government backing that you have to convince some sucker to take so they give you two free pizzas.
In the 90s this would be:
* Keeping track of your friends on your computer!
* Carrying a computer around that you use to take pictures of yourself and send them to friends!
In the 80s this was
* Electronic music without words.
* Reading books on your computer
Given we have financial crises in the global economy on roughly a decade basis, and the last one was 2008, there might be another one soon ..
They are certainly great at turning air into gold. Maybe that was always their true purpose.
Arbitration, insurance, etc. can also be recreated on-chain and already exist to some extent although it is quite early days still.
What do you think makes crypto useful?
1) The energy consumption of bitcoin mining alone is estimated to have reached the levels of entire countries (Argentina was the latest country I've heard it being compared to), while actual usage of bitcoin (except for speculation) is still a fringe niche thing
2) When shown that the coins do not scale, instead of moving on to an improved version, those coins continue to grow. Instead of 'okay, proof of concept done, it does not scale, let's move on to an improved version', the bonanza just continues.
There are probably more reasons like these, but I think it would be straight-up weird if the technically versed audience of HN would disregard the reasons above as much as the current crypto-markets do.
But yeah the valuation for Coinbase is also insane!
a company that inefficiently mines a resource that's going to be stored forever and mostly used to speculate
If you look at production vs. consumption in the world there's usually a bit more consumption than production. If you look per country on the US there's more production than consumption. That's because "extraction" is heavily played with to speculate with the price.
Well first of all everything is speculation, it goes both ways, you mentioned BP, well people use barrels of oil today because they think it won't be worth more tomorrow
Coinbase takes a fee for every transaction in the assets traded on the platform.
The asset in question is the one which people choose as the asset to hold on to express their fears of inflation
This is not unlike 2010 when people like Stanley Druckenmiller and libertarians alike predicted hyperinflation due to QE.
Normies are where Druckenmiller was back in 2010, they have an irrational fear of inflation and they express it by buying BTC.
Coinbase is perfectly positioned to gain from this movement which emerged, and it will only continue given that like anything the more authorities tell humans what to do (in this case to spend) the more they rebel by doing the opposite
Why is that worth celebrating? A company made money. That is what companies are created to do. I suppose if you invested in Coinbase, you could celebrate it. Otherwise, who cares?
Not that many humans are consistent in that way, but someone out there must be!
Coinbase provides a regulated environment for trading crypto-currencies as well as on-off ramps to traditional finance. It's definitively a plus to have them around.
I think Coinbase was absolutely crucial in changing the public opinion of "buying bitcoin is for criminals" and "you just get hacked and lose it all".
But some of it is based on Coinbase's actions against Bitcoin over the years. They've promoted and helped pump up a lot of s*t coins, including forks of Bitcoin. And they've done little to support or further the values Bitcoin was built on or core development.
Happy to have done business with Coinbase back in 2015..
Of course later on I looked for a better and cheaper exchange, but really, Coinbase helped Bitcoin grow as much as Bitcoin helped Coinbase grow...
Today Coinbase is just one of many faceless shitcoin casinos but they had their use, once upon a time...
I've worked in tech for a long time now, and I believe the stereotype about amoral techies is completely untrue - yet seeing the adoption of crypto among my peers is really depressing. I'm not sure how so many of my peers who would never ever work for a defense contractor or a vaping company are willing to work in crypto at this point. My objections are not ideological - if someone invented a cryptocurrency that was completely green and it would take over the market, I'd be totally in favor of it.
I would genuinely like someone to explain it to me, because, the kinds of essays I've read that try to argue that crypto is actually good for global warming are so shoddy that I can't believe people would take them seriously absent a huge dose of motivated reasoning.
(ETA: 23% of household energy use is by always-on devices. The scale of this waste is MASSIVE.)
Devices in our life consume energy 24/7 when we're not even using them or needing them to be on. Energy conservation has a LONG way to go.
In fact, one could argue that the current stock market system is a huge waste of energy compared to the benefit it actually brings to "raising money for companies".
Further, I worry that crypto will grow massively. If that happens, all bets are off. In its current state, crypto consumes more energy than several large countries - imagine a world where that's 10x or 100x and we've still not moved off of proof of work. What's global warming going to look like?
23% of energy used by households is by always on devices.
Not "tiny".
Yes, unnecessary energy waste of other devices is bad and should be reduced. Fortunately, we're making strides to reduce electronics inefficiency all of the time.
Proof-of-work cryptocurrencies are uniquely bad because they become less efficient with each additional miner. The maximum number of Bitcoin transactions was the same a decade ago as it is now, but the energy consumption is many orders of magnitude higher and continues to increase.
When someone adds an additional server to a server rack or buys a new laptop, we also get a net increase in value. The new technology is likely to be more efficient, so we get a net increase in efficiency. Proof-of-work is the only technology that gets worse and worse over time, and literally pays people to continue making it worse.
I am especially interested in assessment about CO2 emissions from credible sources (please, no VCs with zero training in physical sciences posting thought leadership pieces, I beg you).
What the long term inflation rate will be then is really set by the demand for transactions and how much congestion there will be on their network, driving up transaction prices and fees burned (or not).
Unless people are actively trading bitcoin enough where the transaction cost because an issue, there's little reason to trade in their tulip bulbs for iris bulbs. A bet on a cryptocurrency is a bet that people will think it's worth more money, not an investment in the underlying technology.
Does it though? There are so many things to consider when talking about the "energy usage" of traditional money. All the vans moving money around, manufacturing, items to support PoS systems, sorting, protecting the money and so on.
Yes, so many things that BTC will never do. It's vastly less efficient and offers nothing like the range of services and products of the existing finance system.
Cardano is the top cryptocurrency currently on PoS, and while I agree that the next cycle will be the ETH cycle, I think the one after that could be the ADA cycle.
Much of energy production is meant to meet peak demand and storage is difficult. Bitcoin mining is a great way to monetize energy that has a low market value and would likely go to waste.
If you want to price energy or put a tax, by all means. But you shouldn't discriminate against particular usages of energy. You're angry at the wrong thing
It's 2021, and transmitting energy across the power grid is easier and more efficient than ever before. No one is building hydroelectric dams in the middle of nowhere without a way to transmit that energy to somewhere else. It's still better to send the energy somewhere where they can replace coal-fired power plants than it is to burn it up mining cryptocurrency.
> Bitcoin mining is a great way to monetize energy that has a low market value and would likely go to waste.
It's exceedingly rare for energy to "go to waste".
Miners do not really care about anything other than profit. As long as the profit out of their operations is greater than the cost of electricity going in, the machines will be running.
These negative prices don't coincide worldwide, indicating that there is not sufficient electrical transmission capacity.
Exactly my point. That's why they choose the global lowest cost of energy provider. And if you allow the price system to work, this would be the least valuable undesirable energy. Anything else would be uneconomical.
Mining BTC is literally a waste.
There is no value creation at all.
Though some individuals may value it - it's not actually useful. The world economy does not grow one bit due to BTC or BTC mining - lives are not improved, products are not developed or made, or enabled etc..
Even if BTC were a very useful currency, it would still be wasteful to use considerable electricity to support it, because it's not necessary - it just happens to be the mechanism chosen to mine new coins.
It's not really remaining mainstream. Bitcoin is soon going to be the only big project (in terms of electricity used) with it. The industry as a whole is moving away from it quite fast at this rate, with ETH (second biggest) moving to PoS within a year, and almost every new project being a or on a non-PoW chain.
Bitcoin is no longer the scrappy renegade alternative currency. It's big business now, with big institutional money behind it. The investors in these Bitcoin businesses do not want to see Bitcoin fall out of favor, and they're going to do everything in their power to keep it popular and profitable to mine.
And let's face it - all the projects being built on crypto which can cause it to grow much further cannot be built on Bitcoin in the first place.
You can't substitute one for the other. Both will likely continue to exist indefinitely.
Believe it when I see it.
https://www.coindesk.com/frustrating-maddening-all-consuming...
The major player in PoW will remain Bitcoin, which won’t change.
But as soon as solar/wind become cheaper than coal, it will switch to green without a blink of an eye.
A random thought - I’m genuinely surprised Bitcoin folks didn’t yet crowdfund building a nuclear reactor for mining purposes ;) They crowdfunded first ASIC production lines which are 1000x cheaper, but at the time when Bitcoin was 1000x cheaper as well :)
Bitcoin probably wouldn't switch - there is no single person or group who could get majority support to force such a change.
And yet, look at the market for Nvidia and AMD GPUs right now. The miners already know that gamers have been pushed out of the high end GPU market. Supply and demand doesn't go away. People still need electricity for doing things other than mining Bitcoin. All that happens is their electricity rates go up.
It now has about 4 Million ETH locked and staking which cannot be withdrawn - that's almost $8 billion worth of ETH locked until the move to PoS happens. Which means now there is some real pressure to make it happen soon enough (between 8-15 months).
The situation now with the Beaconchain live and running is very different from the past 4 years of research and planning.
Could there be an equilibrium where energy efficiency is achieved because miners have avoid using a noticeable amount of electricity to avoid legal trouble?
- In today’s news: https://www.zerohedge.com/crypto/critics-claim-bitcoin-threa...
- From earlier: https://pomp.substack.com/p/bitcoin-mining-is-good-for-the-e...
The premise of the first article is that the carbon footprint of fiat currency needs to include the impact of an endless cycle of debt, inflation, recessions, and wars that fiat currency enables. Regardless of whether or not that cycle is true and driven by fiat currency is one thing... assuming that cycle would end if we could flip over to crypto is solidly ridiculous.
The second article talks about the fact that 75% of miners use renewable energy. Dig a level deeper into the source they cite and you see that it's 75% of miners who use renewable energy as a part of their "energy mix" (LOL) - and that it's more like 39% of the energy used in mining is renewable. They go on to talk about Great American Mining's efforts to mine using captured methane emissions from oil & gas production. It's an intriguing concept but it's literally in its infancy, and the source they are focused on looks like it accounts for less than 1/3 of methane emissions - https://www.epa.gov/ghgemissions/overview-greenhouse-gases#m...
The fact that the reasoning is so very thin in both of these examples tells me everything I need to know. People just want a headline to point to.
The cryptofolks are trying for gaslighting and Firehose of Falsehoods to cover up for their energy wastage projects.
But last night, I re-watched Waterworld. It was the first time in quite a while.
And I found myself thinking, “Man, that life would be pretty cool. Global warming would be pretty cool. Why haven’t the ice caps melted yet?”
Honestly, I remember they were supposed to be totally melted by 2007. And then it got pushed up to 2014. And then 2018. And now here we are in 2021 with the same thick, boring ice caps, and Dryland is still not a myth.
I don’t know about you, but I’m getting tired of our boring pre-apocalyptic world.
If Bitcoin is now what will bring about the Waterworld, then I’ll tell you what: I’m all for it.
Just call me “The Mariner.” ‘Cause I’ll be marinatin’ in BTC awaiting the end of this world, and the dawning of a far more watery one.
I struggle to comprehend how an energy obliterating and (relatively speaking) primitive technology like Bitcoin is the top dog in this space. Sure, first mover advantage counts for something, but come on - how has superior tech not yet left it in the rearview.
In a space that moves at such rapid pace with heavy investment and buckets of innovation, at some point the crowd surely will migrate en masse to a PoS based blockchain like (most likely but won't be fully operational until ~2022) Eth2, or (less likely but still in with a shout) Algorand, Tezos, etc.
When it comes to money and value, the utmost important thing is security, that's the tradeoff that Bitcoin makes and that's what people are buying into. Everything else is secondary.
it also theoretically supports 1MM tx/second - to put that into perspective VISA does somewhere in the ballpark of 2k tx/second (but theoretically can do much more than that I'm sure)
There are certain ways that Cardano is not yet fully decentralised to be sure but the network is operating as a proper decentralised PoS network.
The network has been transitioning from Federated nodes to Decentralised nodes (transferring by about 2% every 5 to 10 days) for the past few months. The d parameter (marking the transfer from 100% federated(1.0) to 100% decentralised(0.0)) ticked down to 0 at the end of last month and block production is fully decentralised.
Where it is still centralised:
- Peering between block producing nodes is currently manual however automatic peering will be enabled before the end of the quarter.
- Development is largely controlled by the Cardano Foundation, IOG, and EMURGO. This isn't unusual in the decentralised software space however the plan is to transition to handling development/feature contracts via on-chain voting and treasury disbursement (and this is already being trialled through Project Catalyst as a decentralised accelerator program) within a year or so. All feature integration and HFC event mechanics however are properly decentralised.
- The network is decentralised and running Proof of State.
- The network is not currently running automated peering. Block producing peers are manually selected by stake pool operators at the moment. This doesn't necessarily make the network more centralised but it exposes certain risks. A node update (and I believe a protocol update as well) will be coming out in the next 2-3 months that will transition SPOs to running automated peering.
- The network currently sits around 250-300tx/s max.
- A near term (next 6 or so months) protocol revision will be raising that limit to around 1k tx/s.
- Hydra (isomorphic state channels) allows 1k tx/s to be processed per state channel (which then periodically checkpoints against the network) and was demonstrated to maintain these performance metrics up to 1k state channels.
So the network is decentralised and it is doing very well however it is not currently capable or currently theoretically capable of handling 1MM tx/s. It can however handle an impressive amount of transactions compared to many other decentralised networks at the moment. The protocol revisions that will allow close to the stated 1MM tx/s are completed with corresponding papers (containing formal proofs and simulations to support tx rate and security claims) already accepted to or well received at cryptography conferences.
Cardano is doing very well and moving at a solid pace however overstating where the project is and what it is capable of will only serve to undermine outside perception of the project.
Other coins are easy to change and so cannot be relied upon to preserve any properties, including emission schedule.
Vast majority of coins is also not decentralized at all and being so prone to get effectively regulated.
Bitcoin is hard to change the similar way TCP/IP protocol stack is hard to change.
[0] https://news.bitcoin.com/5-mining-50-btc-hashrate/ (I fully understand this is a pro-BCH site but their sources are accurate)
To me it demonstrates perfectly that this market is largely speculation based on brand recognition and number-go-up-tech rather than any use of the currency. If it was based on use and capabilities then yes, we would expect BTC to be superseded by its more capable cousins.
But it's not.
The Forbes list of world billionaires features 2755 names. They gained $5 trillion in wealth over the past year. Bitcoin is a trivial toy next to the wealth in the world today. A fun little token play thing, a place to hedge a couple of bucks, it goes in the basket.
Best of luck.
I feel like there is a good sci-fi book here. Bitcoin continues to gain speculators, continues to rise in "value", and humans are largely powerless to stop it. It ends up forcing humans to produce more and more electricity, thus heating up the planet in a horrible feedback loop. A crypto twist on the nanontech "gray goo" threat.
The simple solve: price the externality.
Any industry such as fossil fuel power plants must buy carbon offset credits/tokens from industries or companies that sequester carbon. Then let the market solve the problem. The credits/tokens may turn out to be very cheap.
All studies that have looked at seeming decoupling of emissions from the economy have found that they decoupling was due to outsourcing the emissions to other countries. Markets cannot solve emissions as long as value is a function of production.
Wouldn't this eliminate the incentive to outsource the emissions? You could even add some margin to the tariff such that it is more economical for countries to tax the emissions themselves rather than pay the tariff.
You do that by increasing the cost of consumption. Everyone has, even wealthy people, have a price point beyond which something is too expensive for them.
Still better would be to start taxing natural resource usage, or even setting quotas with strict penalties. But it's hard to see politicians going along with it and I don't know if it can be monitored sensibly.
I'd go with taxing fossil fuel extraction. Every barrel of oil, liter of nat gas, or ton of coal is taxed. The revenue from these taxes should go towards either a) carbon capture or b) tax credits for lower-income households or c) UBI. The costs of these taxes will propagate throughout the economy and everyone will adjust their consumption accordingly.
This seems like one of those Overton-window true-if-and-only-if-the-media-say-it's-true things, like the supposed taboo against vaccine challenge trials which was recently falsified in a poll.
> where does that money go?
To the low-income people who are supposed to be the insuperable political obstacle to carbon taxes in the first place?
Politics is hard, yes, but this Overton-window kind of reasoning just drags at any real solution to anything. It's not worth any allegiance.
Normally, we wouldn't want to target one line of business over another because we want the market to figure out where the most value creation is, but it's not always the case.
In this case it makes sense to target people who are literally wasting electricity for supporting a Ponzi scheme. Even if BTC or Crypto is eventually a useful medium of exchange, there's still no reason at all to waste energy in it's proliferation.
Electricity transportation, and to some extent production - is partly socialized in most countries.
The market is not 'all knowing', it's full of asymmetries, we regulate all sorts of things for that reason.
I don't get this logic.
Let Bitcoin be Bitcoin, let the G7 (or whoever finds himself responsible) quickly regulate the power consumption issue, then PoW will likely disappear for mainstream applications. Luckily there are alternatives.
I just plotted some Chia. I left my laptop open to do this. Usually I would just put the laptop in power save mode all night.
My understanding is that to actually make any Chia, I would need to wait ~1 year with my one 100GB plot with full-power mode enabled. Vs mostly with the case closed, as it is now, while I do other things.
And this doesn't even account for the rare elements etc needed to fabricate my hard disk.
So, general naive questions:
1. Vs Proof of Work, just how much better are Proof of Space/Proof of Stake/$HDOS_SUPER_AWESOME_PROOF in terms of energy consumption but also other standard measures of environmental impact?
2. How much worse, if at all, are they vs the null hypothesis of "modern" pre-crypto finance?
Has anyone run credible numbers on these things?
I think "no miners, still (distributed) datacenters" would be more accurate.
Proof of stake involves using staking of cryptocurrency to secure the currency. In theory it avoids the resource usage of the other types of proof. In theory.
People are afraid of making the same mistake here as well. "I don't know how BTC will generate cashflow outside of being a Ponzi scheme, but I assume the technology will advance and revolutionize finance" so they buy.
If the number has already gone up, you are too late. If everyone is talking about it, you are too late.
"The number has gone up" for Google almost since it has gone public.
If you bought BTC at $1 and it went to $10 - is $10 too late? The number went up.
The hard part is it's hard to know the underlying value of things and a lot of value is socially determined by how others value something.
Why is gold traded as an expensive commodity? It has some tiny practical uses, but is that why the price fluctuates? People trade it because they think other people will trade it and use it as a store of value when other stuff is volatile.
Some people think BTC's scarcity guarantees provide a similar digital version of that. It's volatile now because it's still early and uncertain, but if that's true then BTC's price could be very high and it's hard to know if you're too late.
For other Non-BTC coins unlikely to get the same level of social buy-in their value is a lot more questionable imo. ETH has some real underlying applications (uniswap decentralized exchange, powering contracts, other tokens etc.). The privacy coins maybe can leverage that for a reason for people to use them. The others seem like even more fringe bets and more likely to be FOMO bubbles.
If you swap out POW for POS (or worse clearing house type trust orgs like Stellar) then aren't you just putting trust into some incentive based system no different than existing financial systems? Just instead a government you're trusting some other entity. You get faster throughput and less energy waste, but you lose the mathematical guarantee that was kind of the entire point?
I think climate change is a serious issue that would lead to change (likely bad), but I'm not sure it's a true e-risk or that cryptocurrency POW changes the tide that much. Feels like an irrelevant (somewhat identity-ish/political) side debate to me? (see Matt Yglesias' comments in this: http://rationallyspeakingpodcast.org/show/episode-251-the-ca...)
Happy to think about arguments that would change my mind.
PoS is closed-membership with a veneer of open-membership, because the means of coin production are tied to owning a coin already. What this means in practice is that no rational coin-owner is going to sell you coins at a fast enough rate that you'll be able to increase your means of coin production. Put another way, the price you'd pay for the increased means of coin production will meet or exceed the total expected revenue created by staking those coins over their lifetime. So unless you know something the seller doesn't, you won't be able to profit by buying your way into staking.
Overall, this makes PoS less resilient and less egalitarian than PoW. While both require an up-front capital expenditure, the expenditure for PoS coin-production will meet or exceed the total expected revenue of those coins at the point of sale. So, the system is only as resilient as the nodes run by the people who bought in initially, and the only way to join later is to buy coins from people who want to exit (which would only be viable if these folks believed the coins are worth less than what you're buying them for, which doesn't bode well for you as the buyer).
With PoW however the GPUs or ASICs don't disappear or lose value after the attack (caveat that the ASICs can lose value if networks switch away from the algorithm it is built for). The hardware can be used to attack "competitor" networks or used again in another attack against the network or other networks in the future.
In this sense, I suspect that PoS networks are able to properly recover from successful attacks far easier as well as dissuade attacks from the offset.
Most PoS algorithms I've seen instead reserve stake slashing as a penalty for malicious behaviour. Going offline isn't by any means inherently malicious. There are however plenty of actively malicious actions that can be detected and reacted against. Often for the more severe penalties it will require some level of community involvement in the recovery stage to limit opportunities for abuse.
Additionally, it shouldn't be easy to take a block producer offline and Stake Pool(or node) Operators should be preparing for these types of attacks. I've been watching some of the work being done in the Cardano Stake Pool Operator community and the various SPO guilds have decently sophisticated architectures. "Nodes"/"Pools" are broken up into Relays, Producers, and sometimes additionally Key Generators. Key Generators produce the periodically expiring KES keys and pass them to the Producers on a schedule (to minimise potential attack surfaces). The Producers actually engage in the consensus using the keys provided by the key generators and communicate through the relays. The Relays handle the throughput and communication. This allows the producers (and by extension the key generators if used) to be largely shielded from the open net. This also allows producers and relays to have a certain amount of redundancy/failover. An architecture like that may cost more (and eat into rewards a bit more) however they are far more difficult to DDoS or compromise.
Since the barrier for the hardware is so low, a 1x2x2 or 1x2x3 (keygen x producer x relay) architecture can still be more than profitable (retaining 25% to 75% of the SPO rewards as profit). Additionally this has the advantage that various other income streams can be integrated in (state channel operation, compute nodes, storage nodes, etc) over time and the operation can be scaled up without compromising security or requiring a significant re-architecture.
Proof of Stake can be just as secure as Proof of Work but it requires that the incentives be structured properly and sufficiently hedged against potential risks.
This is fundamentally a double-edged sword -- the harsher your penalties are for bad behavior, the easier it is for someone to use a zero-day and kill your staking coins. But the laxer your penalties are, the more damage a buggy or malicious node can do with impunity.
Either way, the resilience of PoS comes down to the resilience of the majority of its staking nodes, because once you lose that, the system is dead. Once you control majority stake, it doesn't matter how many other offline coins exist -- you, as the majority staker, simply never mine their transactions.
This isn't true for PoW systems. A PoW system can always be brought back to life, even after an arbitrarily long amount of inactivity, and even if all the previous miners cease mining. All you need is one miner, somewhere, that has a copy of the chainstate, and the system makes forward progress.
Recovery is an inherently manual process as either stake pools or miners must actively choose to switch to the new fork (at least initially). This doesn't return to an automated process until the ball actually starts rolling again. I say this is inherently manual as all 51% attacks violate the proof (of work, stake, or any other resource) that allows untrusted collaboration. Instead the community is required to cooperate momentarily based on the collective investment and trust that has been built parallel to the operation of the network.
The difference with PoS compared to PoW during this recovery process is that in a pure attack (i.e. one not due to a software bug/zero day), the resource is permanently burned (slashed) and the recovery can occur. With PoW however the resource doesn't disappear and can always either come back or come from another ecosystem for a second attack.
Outside of the bootstrap and the recovery phase, PoS and PoW are effectively equivalent in security. PoS is slightly weaker in the bootstrap phase and PoW is slightly weaker in the recovery phase. This isn't inherently bad for either system, it's just a matter of trade-offs. Arguably I'd say this is why transitions from PoW to PoS will be much safer than a clean bootstrap. The existing network strength from the PoW era is able to protect the PoS segment while it works through the bootstrap phase.
I have no interest in talking to bagholders. The science and engineering details of cryptocurrency design and implementation are by definition beyond a bagholder's comprehension. The act of holding bags precludes formulating a dispassionate understanding of cryptocurrencies -- as Upton Sinclair put it, "It is difficult to get a man to understand something when his salary depends on his not understanding it."
You see, if I was a bagholder, I would have a hard time comprehending why it's a terrible idea to fall back to the "community" trying to decide which fork is valid. If the community members had high enough trust in one another that they don't need the blockchain (specifically, a fork-ranking protocol) to come to a valid majoritarian decision on which fork is the right fork, then we really don't need the blockchain in the first place! The same sinews of trust can be used to decide what everyone's balance is at all times, since after all, the community members already trust one another to decide which transaction histories (out of many) is the true ledger. But thankfully, I'm not a bagholder, which means I can see that this assumption about the community is not viable.
Also, if I was a bagholder, I would have a hard time comprehending why attackers don't just try and buy 51% of the stake. It would be difficult for me to understand that attackers are going to take the path of least-effort, which would be the act of knocking nodes offline and/or exploiting zero-days on nodes hosting staking coins in a bid to get the network to slash enough of the honest coins that quorum can no longer be met. But thankfully, I'm not a bagholder, which means I understand this weakness.
In addition, if I was a bagholder, I would have a hard time understanding that PoW and PoS security in their "happy paths" is irrelevant. The resilience of blockchains is determined by their unhappy path behaviors. PoW requires less proactive trust and coordination between community members than PoS -- and thus is better able to recover from both liveness and safety failures -- precisely because it both (1) provides a computational method for ranking fork quality, and (2) allows anyone to participate in producing a fork at any time. If the canonical chain is 51%-attacked, and the attack eventually subsides, then the canonical chain can eventually be re-established in-band by honest miners simply continuing to work on the non-attacker chain. In PoS, block-producers have no such protocol -- such a protocol cannot exist because to the rest of the network, it looks like the honest nodes have been slashed for being dishonest. Any recovery procedure necessarily includes block-producers having to go around and convince people out-of-band that they were totally not dishonest, and were slashed due to a "hack" (and, since there's lots of money on the line, who knows if they're being honest about this?). But thankfully, I'm not a bagholder, so I understand the difference.
It's great to know that you, too, are not a bagholder, and you're continuously bringing up Cardano solely because it's a motivating but misguided example, and has nothing to do with how many Cardano tokens you own. Otherwise, I'd have nothing to say to you at all, and if HN had the feature, I'd have simply blocked you already.
You have to own coins to produce blocks.
Producing blocks != coin production
I don't care for Algorand's shell game of trying to say that all tokens have been minted already, and are just being distributed. If it's the case that nodes who stake more coins are getting paid more coins, then all of my analysis holds.
Thats fine, but it's an important clarification. All the tokens _have_ been minted already, and _are_ just being distributed. The mechanics are different. Owning 1 coin is one potential vote in a lottery to determine the validity of a proposed block. This is not the generation of new coins.
In any case, regarding nodes and payment, that process is being phased out by their new governance model which was just released the other day: https://algorand.foundation/the-algo/algo-governance.
As an example, any sufficiently powerful entity can temporarily and affordably commandeer computational resources with the intention of disrupting the chain.
Under PoS doing so would devalue your (presumably enormous) stake, so participants are at least incentivized to act in the interest of the chain.
> As an example, any sufficiently powerful entity can temporarily and affordably commandeer computational resources with the intention of disrupting the chain.
A sufficiently powerful entity can DoS enough staked nodes that quorum can't be reached, and thereby force a PoS chain offline indefinitely for far less energy. If they're clever, they'll buy some PoS coins first, so that once the offline nodes all get slashed, they'll be the majority staker.
> the system is only as resilient as the nodes run by the people who bought in initially
This point applies to any assets that generate cash flow, like stocks, yet they seem to have plenty of trading volume. And looking at some numbers on CoinMarketCap, it doesn't seem like PoS coins have lower trading volume than PoW coins. As one example, XTZ seems to have ~double BTC's turnover in the past 24h.
> these folks believed the coins are worth less than what you're buying them for, which doesn't bode well for you as the buyer
This could be said about most assets, even ones without cash flow like PoW coins. In practice there are other reasons for selling, like wanting to offset gains/losses for tax purposes, or wanting to buy food.
It's very problematic if the system's liveness is tied to owning a coin. If I can knock PoS nodes offline, I can not only cause a quorum failure, but also I can cause the offline nodes's coins to get slashed (which is usually how PoS chains deal with this problem). Moreover, there's no recovery from this -- the temporarily-offline nodes are forever slashed, even if they come online later. (EDIT: I'm not limited to knocking nodes offline -- if I can commandeer them through a zero-day, the effect is the same: I make your nodes commit a slashable offense).
Contrast this to PoW, where even if you manage to knock a majority of miners offline, you ultimately have to keep them offline in order to prevent them from later generating and broadcasting a better chain than the one you want to exist. Even if you can physically destroy the majority of miners, the chain still lives on, and new miners can be built and brought online elsewhere.
> This point applies to any assets that generate cash flow, like stocks, yet they seem to have plenty of trading volume
Trading volume is easily faked in crypto-land -- a whale just sends coins to themselves. I'd like to see some hard evidence that the volumes are not from wash-trading. Also, this isn't relevant at all to the system's resilience.
> In practice there are other reasons for selling, like wanting to offset gains/losses for tax purposes, or wanting to buy food.
I didn't say you don't sell coins. I said you don't sell enough of them that the buyer can use them to increase their rate of coin production.
With PoW coin you are constantly devaluing your share of the blockchain by paying some third parties operating giant gpu farms and hydroelectric dams.
I stopped reading at this point.
My (possibly incorrect) understanding is that POW is computationally expensive because that large investment of computation is what creates a chain of successive blocks (the blockchain). This prevents someone from rewriting history of transactions on the public chain (which would allow them to 'double-spend' or to take their money back).
POW currencies are guaranteed to prevent this kind of abuse unless any individual entity is able to get more than 51%. There's an incentive in addition to this because corrupting the integrity of the network would also devalue the currency. Larger networks (like BTC) are harder to do a hostile take over of because it's harder to get that much compute (though mining centralization is a risk).
POS relies on some variant individuals 'staking' coins to enable transactions, this means putting them up in escrow sort of in the network (they are paid small fees for this based on how much they stake) and if abuse is attempted, the system takes those staked coins away. There are no mathematical guarantees outside of this incentive.
POS is not as standardized across different currencies so I may be missing important bits in my understanding.
Couldn't this be re-written as:
> POS currencies are guaranteed to prevent this kind of abuse unless any individual entity is able to get more than 51% of the staked currency. There's an incentive in addition to this because corrupting the integrity of the network would also devalue the currency. Larger networks (like ETH) are harder to do a hostile take over of because it's harder to get that much stake (though validator centralization is a risk).
My (non-expert) interpretation is that staking is just an abstraction of mining, and they are secured by the same incentive system
It seems to me like they're arguing that PoW is more egalitarian/decentralized, which may be a fair point. But using the same argument, attackers being forced to buy stake in the open market should make PoS even more secure against 51% attacks than PoW.
I think this is a good post explaining the tradeoffs: https://vitalik.ca/general/2020/11/06/pos2020.html
I don't think it's a coincidence that even a decade plus later, the primary use cases for crypto still seem to be grey/black market deals, speculative investments, and pyramid schemes.
Last I checked BTC primarily uses excess electricity in the cheapest regions of the world. What if BTC only ran on solar power?
It's a pretty tangly web, so hard to know what to lump in as a comparison but in the superlative case consider: the federal reserve, many bank/FI departments tasked with securing and transferring money safely, auditing (public ledger has many benefits for transparency and reporting), money transfer industry, international relations, lobbyism, US military dominance, etc.
Bitcoin has zero employees, probably only thousands of people working on Bitcoin-interfaced systems. The network uses a large amount of electricity, but that's kind of it - there are few other costs to account for. All of those industries above collectively employ millions of people - should we account for only organizational energy consumption or do we also account for salaries and thus private energy consumption of all of the individuals necessary to support dollar hegemony?
I think it would be really interesting to find a number for "for each dollar in existence, how much is spent per year preserving the dollar's position as the global reserve currency?" How does this number compare to inflation? If it is greater than inflation, does that mean that dollar hegemony is unstable and its fall is inevitable?
Interesting applications do exist: https://news.ycombinator.com/item?id=24242005
Its applications are more interesting in countries that have unreliable governments and inflationary currencies (for now).
It also does provide something new (one way 'cash' transfers across a decentralized network).
The CO2 emission externality need have nothing to do with Bitcoin or any other proof-of-work chain. Tax carbon at whatever level makes sense and Bitcoin will adjust. (As I understand it, even currently Bitcoin mining mainly uses renewable energy, because it's cheaper; and it's trending cheaper still.)
The externality is at the power plant, not the use. Banning a use is like basing your server's security on client-side Javascript.
> The externality is at the power plant, not the use. Banning a use is like basing your server's security on client-side Javascript.
How would that work? Applying the same carbon tax on farming as on bitcoin? You always need to differentiate on use. Otherwise we could also just have a single income tax and be done with it. However taxing food as much as a Ferrari doesn't really make sense.
Say you're a bitcoin miner powered by a coal plant. A carbon tax is imposed. The price of your power goes up. Your competitors, powered by solar, are unaffected. Maybe you keep going at the higher price; more likely, if the tax was set at anything like the genuine externality, you shut down. Possibly you keep going for a while, winding down your ops at this location but moving any new ones to find affordable power. Sucks to be you if you didn't anticipate the tax (which seems implausible, they won't announce it effective next Monday), but Bitcoin itself will hardly notice.
Say you're a farmer also in coal-plant-land. Aren't farmers powered more by internal-combustion engines than grid power? That should be carbon-taxed too in this world, and that's good: you want farming, where it's climatically most expensive, to shift to less-CO2-costly methods and crops. Farming spends energy on a much wider set of tasks, some of them more essential to the output than others, and some outputs more inelastically demanded than others. For some of them you adjust, for some you continue and pay the higher price. The ones you adjust were not worth the carbon cost; the ones you don't were. You have to charge your customers some amount more, depending on how essential the coal turns out to be in your case. Maybe, like the bitcoin miner, you stop farming, or shift to some sort of less-intensive organic farming; maybe you don't. Either way, it's more likely the right decision for the planet! We stopped pretending that dumping carbon is side-effect free.
You don't "differentiate on use" by politicians and bureaucrats deciding what's naughty or nice. They don't even know! It's an incredibly complicated problem! They further have no real incentive to do it even vaguely right, rather the opposite: any competent politician can look to the public like they're public-spirited while favoring concentrated interests. Was the FDA just stupid for banning the J&J vaccine the other day? No, they're fundamentally misaligned with the public interest.
Re painting cryptocurrency as a nobody-needs-it Ferrari, see https://news.ycombinator.com/item?id=26654767
That is one IPv4 address -> one unit of vote
Difficulty adjusts based on how many IPv4 addresses participate
Sure, it gives advantage to Apple, MIT or anyone with /8 block and disadvantages citizens from some countries with very small allocations but otherwise it could be scaled to whole world while staying truly green.
I suppose the hard part is figuring out the stake when multiple people on the same IP address want to participate.
This does sound a lot saner to me than having some cabals operating giant computer farms and hydroelectric dams to generate new blocks. Their interests are different than those of token holders and having to pay for all those gpus and electricity is just stupid.
What mathematical properties are you losing?
Externalities that pollute the ocean, air, rivers and cities are not present in crypto at all in the amounts that other industries and human activities produce.
There will be more people jumping on carnivorous and meat heavy diets than there will be people using electricity powered cryptocurrencies. Keto is trending more than cryptocurrencies.
The amount of destruction that factory farming will inflict on this world and is inflicting will never be reached by cryptocurrencies. There will be no deforestation, no waste mismanagement, no fertilizer drain, nothing.
What about Gold's, the current financial system's?
https://www.zerohedge.com/crypto/critics-claim-bitcoin-threa...
2. Most currencies are fiat, not gold-backed
2. You didn't read my link
This is the opposite of other major currencies.
BTC is an environmental travesty.
The answer is to lobby governments for green energy, not rail against people doing PoW. People who fold at home are using a lot of energy also.
Power companies have been burning shitty fuel to save money forever, and it's astounding that they've managed to shift the blame to consumers.
When all debt was erased everyone filled with panic flocked to the evilcorp coin.
The system exists today for a reason. Discover and elimate each reason to change the system.
Thankfully, this is a bonafied bubble and in a few months, it'll all tank again.
A transfer of BTC between two Coinbase users can happen off-chain, which means skipping the work necessary to mine a block including the given transaction.
Capital/currency represents someone doing work, something being dug out of the ground, something being created -- because these things cannot be created out of thin air. When the Fed creates money, it is doing so in tandem with some physical output of the economy (unless they are purely inflating unbacked by actual goods/services activity).
A US $ is not without cost as well, isn't that right? Currency is based on scarcity of something. Is it possible to have scarcity limited currency without some kind of work involved?
>Does a Bitcoin (for the $ value it represents) cost more to manufacture than an equivalent US $1?
Yes, because it costs quote a lot of electricity. And...
>After all, a $1 of US currency represents some creation of work too, doesn't it?
Nope. Costs effectively nothing. Not at all tied to anything tangible - even electricity - whatsoever. Via fractional reserve banking - for some reason we just...let banks do this - they create it with a keystroke and it costs nothing whatsoever.
It's why we have inflation every year. Banks are constantly creating USD and then charging interest for the privilege they were given to do so.
>A US $ is not without cost as well, isn't that right?
Nope. Gets made up out of thin air every day. A bank creates a loan. How do you think we got to $14 trillion USD? The treasury has never printed that much money. Only ~10% of USD physically exists (according to the Fed itself), and that's counting $100 bills minted decades ago. And banks only have to have 10% of the money to cover their loans. The number being the same right now is just a coincidence.
>Currency is based on scarcity of something.
Currency is based on whether or not people will accept it in trade. There are countless examples that prove that that is the sole criterion. Even stupid, shitty, hard to use currencies get used if they're what's accepted. Getting initial buy in for USD was based on gold. Then silver, and then in 1971, literal faith in the US government and nothing else whatsoever:
"and the unilateral cancellation of the direct international convertibility of the United States dollar to gold." (https://en.wikipedia.org/wiki/Nixon_shock)
>Is it possible to have scarcity limited currency without some kind of work involved?
Not in my opinion. Gold requires mining. BTC requires computing. But USD isn't a scarcity limited currency.
I saw the buzz around NFTs, and thought - “hey, cool! A new way for artists to make some money directly from their fans.” Sounds great. Minted a few NFTs to learn how it all works.
And then I read incredibly distressing figures - some comparing the cost to a years’ worth of family carbon emissions. From clicking a button and waiting a few minutes!
I haven’t been able to get a straight answer on how true these stats are. But the possibility that minting a few tokens caused that much damage frankly makes me want to cry.
You might say, well, that’s stupid — but honestly, when you care about something deeply like the climate and you take pains to reduce emissions and do things to try and help — well, it’s incredibly upsetting.
The algorithm sort of worked, but the costs are too high. In the end those high costs led to efficiencies of scale leading to a few large miners controlling the whole blockchain. So it never lived up to the decentralized dream anyway.
Now it mostly serves to fuel rampant speculation and crime. It enabled a whole new category of crime through cyberlocker attacks (well not new, but made it so, so much more successful.)
The harm well outweighs the good. If it continues unabated proof-of-work crypto could double the energy requirements of the planet in just a few decades. It's not worth that. Kill it now before the consequences get worse.
Using electricity and emitting CO2 are only loosely correlated, and in the case of cryptocurrencies are even less correlated because cryptocurrencies are dis-proportionally mined with energy from hydroelectric dams.
All of these articles about the ecological impact of cryptocurrencies only exist to divert public and regulatory attention away from the energy companies that are actually doing all the damage.
Oil companies did the same thing in the 70s when there was public outcry about plastic pollution, so they funded the "reduce reuse recycle" campaigns, and the crying Indian commercial etc, all to divert responsibility from the companies manufacturing the plastics to the consumers who use them.
There is a documentary called "The Story of Plastic" which covers this strategy, and how successful it has been for them in the past.
It's slowly chipping away at Ethereum's use case and with smart contracts coming soon that are backwards compatible with Ethereum solidity code, it will overtake Ethereum over time.
There's other PoS blockchains that work and solve the concerns you have outlined.
You only need to look at what the current monetary system is based on -- the petro-dollar. Backed by the might of the US military, consuming crazy amounts of energy. What if Bitcoin eliminates the need for this?
I'd be in favor of banning the trade of all PoW cryptocurrencies for this reason alone. There is no proper way of banning mining in general, and neither should anyone desire to ban specific types of computation. Banning its trade to strongly disincentivize the sheer senseless resource consumption is more important and much more clear cut than any financial arguments to do it.
I realize this would utterly devastate the current cryptocurrency market, but that's the point (at least for anything that isn't proof of stake). We should get this over with before our dependency on it further increases and the environmental damage gets worse.
The zeitgeist around this has changed substantially. PoW cryptocurrencies really aren't credibly grassroots and have been captured by whales. And there really isn't any application of PoW ledger designs outside of cryptocurrencies with significant mindshare either. For all of this - proof-of-stake cryptocurrencies should be an alternative. Not a direct replacement, but able to cover most use cases.
Coinbase was founded under a different zeitgeist and I don't blame them for jumping into this market. But I think that banning PoW cryptocurrencies should be strongly advocated, and once this realization catches up at the right level, they have a significant liability on their hands.
[0]: For the record, all financial instruments are "made up". PoW cryptocurrencies are the only one that come with blatant resource consumption however.
[1]: https://techcrunch.com/2021/03/21/the-debate-about-cryptocur...
(For the record, if a ban on PoW cryptocurrencies would come into effect today I'd lose money over it.)
First of all energy is not fungible, not in time and not in space. There are times where consuming electricity is actually beneficial for renewables and the environment. I think the main mental block people have is that are trained to "save electricity" and that "all energy usage is negative." I would argue that using electricity during periods of wind or solar oversupply is actually positive for the environment. Because of this non-fungibility of energy, proof of work mining can be a positive sum game for the environment. Let me explain:
Back in the days where all our electricity came from fossil fuels, I completely agree that marginal electricity usage was bad for the environment. However I think that thought has persisted with us even though it is no longer true 100% of the time. With renewables sometimes the marginal cost of electricity to our environment is near 0 or even negative (eg, during periods of higher winds and lower demand)
I predict that in the future as bitcoin mining becomes more and more of an efficiency game that you will see bitcoin mining be kind of a load balancer for the grid, effectively turning off during peak demand (or low supply) times and contributing to the base load during regular times. Of course this would be distributed across the globe, and you would see more plants running midday (with solar oversupply) and overnight (with wind oversupply) than you would during early morning and evening peak hours.
For example, it may even help the economics of building new wind plants. Eg, currently it may not be profitable to build a new wind plant because base load is too low that the excess power generated would need to be sold off at 0 or even negative prices. However if bitcoin mining could be turned on during these times and off during periods of high demand, there will need to be fewer peaker plants in operation and it would positively affect the economics of opening a new wind plant.
Bitcoin mining only cares about the cost of electricity at a given time, it is not like most other electricity demands that are very time based. With the large variance of electricity generation by renewables, I think bitcoin can in the future help smooth demand according to the real supply/demand curve.
It's kind of like a different implementation of the Tesla utility grid batteries. Instead of deploying power, you force the grid to build more renewable capacity (that the miners are paying for) that you use except in peak periods, where you turn off and effectively provide the grid with more power.
Here are 2 articles of a bitcoin mining company doing just this: https://www.bloomberg.com/news/articles/2020-09-01/bitcoin-m... https://www.forbes.com/sites/christopherhelman/2020/05/21/ho...
I stopped reading here.
Other things that contribute more to global warming than Bitcoin include: the meat industry, Christmas lights, and the mining and supply chain around gold.
And of course I was not joking... you should have tried it yourself... only bankers get the best price.
[1] https://www.statista.com/statistics/320793/median-time-ventu...
I know there's certain pressures - like the 7 year clock on RSUs, and there's still a cap on outside investors right?
Really says a lot of their faith in Crypto's future.
Just because you won't accept your salary in Euros, doesn't mean you don't have faith in the future of it.
You would think the currency of the future would be liquid enough to provide capital for their growth no?
Why resort to raising USD?
1. I bet most shareholders already have plenty of crypto and should diversify.
2. Opening up a private market for Bitcoin-only sales really doesn’t help liquidity much.
It’s important to remember - this wasn’t a move for Coinbase to raise money, it was to enable people who have shares in Coinbase to be able to more easily sell.
Unfortunately there’s no liquidity in crypto hence why they want USD.
This was almost certainly a blatant due process violation, though. FDR was fond of those.