Comment by arcticbull | Hacker News Reader

Comment by arcticbull | Hacker News Reader

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So this one time the entire economy of Albania imploded requiring a bail-out from the IMF because everyone got into a massive Ponzi scheme. [1]

Interestingly enough, it happened at a period of serious political instability - switching over from communism to capitalism. This lack of confidence in social institutions caused people to seek refuge in snake oil salesmen.

There's an awful lot of parallels in this story.

Cryptocurrencies are really, super stupid currencies. They fly in the face of everything we know about modern economics. They're slow, they're expensive, they're deflationary. People don't spend deflationary things, and an economy is built on the idea of money changing hands. They're stupid assets because they're backed by nothing. They're not productive, and the biggest are negative-sum investment vehicles with value constantly skimmed off by miners.

Crypto advocates are basically the anti-vaxxers of finance. If I've learned one thing from history and "Extraordinary Popular Delusions and the Madness of Crowds" it's not to underestimate this kind of insanity.

So, with that in mind, let me address your question head on:

> Do most money managers want to buy casino chips?

I mean, most money managers in 2008 wanted people to buy mortgage-backed securities did they not?

> Is the market in chips large enough to cause the government to copy the chip market and tax the exchange of chips?

85% of all trading volume is ersatz counterfeit dollars. [2] It really is an open question just how big this market actually is. If it wasn't there would be a Bitcoin ETF. This is in fact the reason there isn't one.

Instead you've got Michael Saylor's next hell-ride, brought to you by the gentleman who lost more money in one day than anyone to date in 2000 when it came to light he was cooking the company books. The MicroStrategy company books. He settled for $11M. [3]

[1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...

[2] https://coinlib.io/coin/BTC/Bitcoin

[3] https://www.nytimes.com/2000/12/15/business/microstrategy-ch...

Your only legitimate point about them being really stupid is that they are slow.

But this evolving and improving. It's the only hurdle to crypto having all the properties of a real currency. And it will be fixed.

On the other side you have technology that has now been working for 10 years. Have scammers used it? Yes. But that doesn't mean the technology doesnt work.

Is it deflationary? Yes. So was almost all currency before the 1970s. Do you stop buying TVs and electronics because they'll be cheaper in a few years? Not many people do. Deflationary currencies can work too.

Well done on the ad hominem attack of crypto people being anti vaxxers though. Very good. Why not add trumper in as well? That will really scare people away.

> Is it deflationary? Yes. So was almost all currency before the 1970s.

Do you have a source on that? As I recall deflation is associated with economic depressions, and from what I'm seeing it looks like the inflation rate has been almost always positive since the 40s.

Ok, so I disagree with everything else you posted but this is the most egregious.

> Is it deflationary? Yes. So was almost all currency before the 1970s.

Currency was not deflationary before the 1970s. It stopped being redeemable for gold at the end of Bretton Woods. That's not the same thing. You can see rates as high as +15% and as low as -12.5% in the early 1900s using CPI as a benchmark [1]. Gold isn't deflationary in the Austrian sense either, it continues to be mined meaning the supply continues to grow, and central banks could and in fact continue to adjust their supply.

> Do you stop buying TVs and electronics because they'll be cheaper in a few years? Not many people do. Deflationary currencies can work too.

That's simply not the case. [2]

[1] https://www.in2013dollars.com/current-inflation-rate

[2] https://www.investopedia.com/terms/d/deflationary-spiral.asp

> Your only legitimate point about them being really stupid is that they are slow.

And only really relevant to those that are reliant upon nakamoto consensus…

Even the former SEC head[0] trying to get in on the "scams"

[0] https://news.ycombinator.com/item?id=28271199

Former top officials seem to have a nose for this. [1]

> Former acting Comptroller of the Currency Brian Brooks has resigned as the CEO of Binance U.S. after just over three months. He cited “differences over strategic direction.” Meanwhile, Binance is facing regulatory scrutiny worldwide, including in the U.K., Malaysia, Japan, Cayman Islands, Hong Kong, Thailand, Germany, and Lithuania. [editors note: that list has since grown]

> And only really relevant to those that are reliant upon nakamoto consensus…

Regarding speed and efficiency, yes, they principally apply to PoW coins.

[1] https://news.bitcoin.com/binance-us-ceo-steps-down-crypto-ex...

> Former top officials seem to have a nose for this. [1]

They must see it all the time with all the rehypothication going on with sovereign paper on clearing house desks (and that's just what they see in their jurisdiction), so what's another "scam" on their resume.

> Regarding speed and efficiency, yes, they principally apply to PoW coins.

There are PoW chains that don't use nakamoto consensus algos…

> There are PoW chains that don't use nakamoto consensus algos…

Curious to learn more if you have some links!

I came across this[0] back in april, still doesn't address state growth (not many do except for the zk only contract capable chains i've seen under dev) but was the first PoW chain not using nakamoto consensus I saw (and I haven't been looking closely for non nakamoto consensus PoW stuff).

[0] https://developer.confluxnetwork.org/docs/introduction/en/co...

> Your only legitimate point about them being really stupid is that they are slow.

There are significantly more hurdles.

> It's the only hurdle to crypto having all the properties of a real currency. And it will be fixed.

It won't. The real value of a currency (and any other tech, really) is enforcement. Cryptocurrencies don't have that and won't have that.

> Yes. But that doesn't mean the technology doesnt work.

Yes, it works. For scammers.

On cryptocurrencies in particular and on blockhains in general these two posts are evergreen: https://medium.com/@kaistinchcombe/ten-years-in-nobody-has-c... and https://medium.com/@kaistinchcombe/decentralized-and-trustle...

> Is it deflationary? Yes

No, it isn't. A deflationary currency doesn't lose 50% of its value in one evening, as Bitcoin did recently.

On the timescale of a fruit fly yes. The price of Bitcoin was 10k a year ago. I think people will be fine right now at 50k.

So, your point is that bitcoin is deflationary because sometimes its price goes up and sometimes it goes down? Go look up what delation means.

>85% of all trading volume is ersatz counterfeit dollars. [2] It really is an open question just how big this market actually is. If it wasn't there would be a Bitcoin ETF. This is in fact the reason there isn't one.

Can you explain this? I'm interested in what you mean.

USDT is a fascinating story that I can't do justice in a quick post. The overwhelming majority of crypto trading isn't carried out against fiat currency but against a Stablecoin called Tether [1]. They settled recently with the NYAG, and lost access to doing business in New York at all a few months ago. The AG says:

> “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system."

The PDF is worth a read, pretty riveting stuff [3]. At various times they were completely unbacked by anything.

All their executives aparently received target letters from the DOJ as the subjects of a grand jury investigation re: bank fraud, and since printed up another $3B USDT. Rumor has it they only have 2 actual customers: Cumberland/DRW and Alameda/FTX.

As for the ETF connection, an ETF hoping to list disclosed that 95% of all crypto trading volume was fictional in 2019 [4].

More about USDT here: [older, 5, newer, 6]. Including a great episode of This Week in Startups by Calacanis. [7]

[1] tether.to

[2] https://ag.ny.gov/press-release/2021/attorney-general-james-...

[3] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...

[4] https://www.technologyreview.com/2019/03/26/1206/nearly-all-...

[5] https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/

[6] https://bennettftomlin.com/2021/06/21/a-non-exhaustive-list-...

[7] https://thisweekinstartups.com/biden-targets-big-corporation...

The way I see it the entire Crypto space is not valued in USD but USDT. And who knows what USDT is really worth?

Some lucky people will manage to cash out to USD, but current valuations will crash.

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