Why Cryptocurrency Is A Giant Fraud
currentaffairs.org
currentaffairs.org
Just to use his analysis to compare to a credit card in my wallet.
Decentralization: It takes almost no time to transact. The transaction is 100% free to me (the merchant pays for it, but I get charged the same price as a cash payer). Those both happen because of strong centralization.
Security: Further, that strong centralization, and laws around it, provides the best security I can imagine. If goes wrong, I can call the company and get the charges reversed. For instance if I'm defrauded. If my credit card number winds up on a public website, I'm only out the use of it in the couple of days it takes for them to fed-ex me a new one.
Privacy: Yes, my CC company (and the merchant) have all my purchase history. That's not great. But the blockchain makes my entire history public. I can hide behind a pseudonym, but that only works so long. If there's one indisputable thing over the past couple of decades, it's that fingerprinting exists and technical privacy is very brittle.
First, a centralized solution will not even allow you to make the transaction; they are in control of who you pay.
And the privacy, while still not perfect, requires considerable effort to break. Maybe the FBI or NSA are doing it, but if so they aren't revealing it.
The US is on a money printing spree and many are expecting high inflation. If you want to park your money and ensure it keeps growing in value to counteract inflation BTC seems like a good way to do it. In some countries, these effects are way more pronounced where inflation is significantly higher and capital controls are so stringent that you have limits on how many dollars you can take out of the country or what you can buy online with a credit card. In these countries, they don't want you to save in dollars because it keeps devaluing the local currency. In fact, they make it incredibly difficult to even get access to dollars. So what are you to do if you work hard, make money, and want to save? You know that your money is getting discounted every single year.
Look at how various cryptocurrencies have performed in practice: sure, Bitcoin has skyrocketed recently, but overall it's been incredibly volatile. Most other coins have either remained obscure and niche, or followed a similar trajectory to Bitcoin at various points in its lifetime—that is to say, volatile and very subject to the whims of speculators.
Even now, there's enough uncertainty around the whole space that Bitcoin could still crater spectacularly if, say, the US or EU outlaws cryptocurrencies, or imposes some other new kind of regulation that changes the cost/benefit analysis to speculators. Because that's the majority of the reason for their value: speculators looking to cash in. That's no way to build a stable digital economy.
Yea, as with any risk, it's possible for the risky bet you are taking to end up being.....risky...that's why it provide asymmetric returns.
Obviously the appetite for risk is an extremely personal preference. The way I see it, this is a once in a life time opportunity to get in as institutional money is pouring in and its legitimacy is still being debated. Because once it becomes legitimized there won't be any real opportunity. It will become boring and very predictable.
Also in some countries there's literally no choice. It's either the local bank which forces you to save in the local currency and your savings become discounted every year, or this, which, while risky, seems to solve two problems (retain and grow your nest egg).
Stocks or housing sound like a better long term way to keep up with inflation.
Also with houses, they are incredibly illiquid unless your property is in a very hot zone, which also generally tend to be part of demand cycles.
Ok, umm, next please!
Ethereum shares most of the problems for now while adding complexity of designing bug free contracts. (If that fails, someone will steal your gas.)
Monero is the third and both smaller, maybe more private, more expensive to mine.
And value of all three are rather strongly correlated.
I imagine any mined minerals would stay in orbit and people would “own” that material while never taking possession of it. It’s not too different from what we do today. If you buy gold for your IRA you’re basically purchasing a share of some gold hoard you’re never going to see.
Sending gold down to earth is very cheap. As a bonus, you can also take out a city you are tired of.
In addition to owning orbiting gold, I imagine the real use will be to feed orbital factories, to produce satellites/space stations/rockets in orbit. Everyone on a space station can have a golden toilet.
(edited: typo fix)
I recommend Kerbal Space Program game, it's really fun to do orbital maneuvers there.
Oh, and instead of burning you can use solar sails too. Or shoot lasers or explosives at them to vaporize and give them momentum.
The biggest problem is actually getting to the rocks, chunking them and then not causing a rerun of the movie Armageddon. (Which made changing asteroid direction seem way too easy.) Once the rock is on a trajectory, it will be rather hard to deflect in time, and even then could collide later on. Or hit a newly deployed space station.
Once you fire it, you will end up ruining someone's day, somewhere and some time. It's a weapon of mass destruction.
One can get a 3 to 12% APY on stablecoins on decentralized lending/yield platforms. Meanwhile, a 1+% APY on a savings account at a regular bank in the US is an anomaly. It doesn't have to be political or ideological, there is a good financial case to be made for crypto-currency based solutions.
If you're seeing differences like that, it's not an apples to apples comparison. Those greater yields almost certainly represent greater risk (like with junk bonds).
There are certainly more risks than letting the money sit in a savings account: smart contract risk (hack), regulatory risk and a failure of either of the two stable coins to maintain their peg. However I'd describe each of these risks as "black swans".
In contrast, a C rated junk bond these days will have around a 4% yield. I may be overly bullish on crypto, but I don't think the risk of investing in a company that is about to default compares to being a liquidity provider on Uniswap in the USDT-USDC stablecoin pool, where (asides from the risks mentioned above) your capital will sit at a constant (USD) value and accrue fees from traders.
It seems like in both the cryptocoin case and fiat case, the risk is priced similarly.
With the liquidity pools, you are adding your money to literally 100s of millions of dollars already in the pool. No one can really take off with the money because you can track everything. I'd say the risk is significantly less.
In practice this means that the large, established stable coin liquidity pools which have existed for years, have never been hacked which means your loss rate is 0%. The loan repayment rates, I am sure are not 100%.
It looks as though that the buyback is not a guarantee on all their loans, just some. I'm guessing this also comes with lower yields because they would need to take insurance to cover their risk. So unless you compare it to the lower yields, my point stands.
With a default rate of 5% last year [1], I'd say the loans are way riskier.
Maybe you should stop making assumptions about things you have no idea about.
Maybe you should stop assuming I didn't do any research before replying.
[1] https://p2pmarketdata.com/twino-review/ [2] https://jeangalea.com/twino-review/
> Many believe in it because they have swallowed libertarian dogmas that do not reflect how the world actually works.
Quite humble to assume they know how the world actually works.
There are too many straw man arguments used about what core crypto enthusiasts/developers actually believe and want with no respective for narrative evolution over time.
There is no steel manning of how crypto enthusiasts may respond to some of the criticisms leveled, and the author takes a cheap out- starting out with the assertion that they will use cryptocurrency and Bitcoin interchangeably, absolving them of any need to discuss other cryptocurrencies and their novel functions and goals.
There is no criticism of the current fiat monetary system and its shortcomings (though admittedly I started to skim).
Great article if you’re not interested in your viewpoint being challenged.