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Comment by patio11 | Hacker News Reader

Happy to answer any questions or take requests for future issues, HN. (This is the second issue of my new weekly newsletter.)

Edit to add: Incidentally, while I’m always thrilled when my stuff ends up on the front page, I’m also a member of this community and know that there’s a limited tolerance for the same sites ending up on here on a weekly basis. In previous years I spaced out releasing essays to not annoy y’all, but I can’t do that with a weekly newsletter, so if folks can be selective in submitting these here I’d appreciate it.

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Unfortunately the market-clearing price (in karma) for someone posting your article is greater than zero, ensuring that nothing short of regulation would prevent it.

Okay, so the obvious question is... crypto. Do these large institutions have any interest in opening up interfaces to the crypto ecosystem, are they skeptical as hell about the concept generally, is the technology mature enough to start seeing integration with common tasks like sending money in these popular "instant" apps (e.g. Venmo uses a stablecoin to transfer money, without even showing the crypto part to the user)?

I'm wondering if my local credit union wants to hold my BTC for me, if I wanted to do something like that.

> I'm wondering if my local credit union wants to hold my BTC for me, if I wanted to do something like that.

They'll do that now with a piece of paper in a safe deposit box, no? Other options for their holding your BTC, including ones that let them make money off it and so offer interest to depositors, seem like they'd open up the same risks as existing relatively-reputable exchanges.

A piece of paper in a safe deposit box is, unfortunately, not risk-free. There have been some incidents where, for example, the owner of box #1343 loses his key and asks the bank to drill the box, so they drill box #1434 and give him the contents (hopefully your paper wallet does not say "MILLIONS OF DOLLARS IN UNTRACEABLE EASY-TO-STEAL CRYPTO" at the top!) Also, floods have resulted in box contents being destroyed (a bigger problem in some cities than others.)

Not to mention most safe deposit boxes are insured for a few hundred dollars max unless you've specifically bought additional insurance. So if the bank does screw up and give your box contents to someone else, you can only recover a very minimal amount of the value.

At that point you might as well buy insurance directly and skip a step

You mean a system built on Proof of Waste where it takes minutes to confirm transactions using large amounts of energy purely to guess random numbers, that's literally designed to get harder and generate more waste the more it's used, and is full of scams and treated purely as a highly volatile commodity with limited realized practical use, where blockchain "technology" is so poor that you can only put a URL in a block, so NFTs aren't connected to anything (and used for many scams), and where each news article about smart contract failures is somehow more hilarious than the last? I sure hope banks don't navigate into this space.

I'm hardly a crypto-stan, but I get tired of the same recycled complaints.

There's a move towards PoS, crypto is not synonymous with PoW.

You'll be displeased to know that scams occur with fiat as well as crypto.

Buy a nft. See if that changes your perspective.

Hey Patrick, I always enjoy reading your stuff. For this particular piece, it's a pity that you don't have a specific view on Europe. I'm sure it's difficult to know every detail. Perhaps it's a good opportunity to involve someone at Stripe who knows e.g. the European side of things? Or even how things are in Africa? (Matteo Rizzi of Fintechstage comes to mind, amazing experience in anything fintech-related in Africa).

Not to be super cynical, but it would be embarrassing and reveal that there is not really any innovation. I kept cringing and thinking “didn’t they do this in Europe (Netherlands) decades ago?”

Great post that provides an overview of recent changes in banking.

Something you should add here is that free banking is also made possible due to the economics of the Durbin Amendment of the 2010 Dodd Frank act that allows smaller financial institutions to charge a higher interchange fees on debit transactions.

Most Fintech/Neobank players like Chime fall into this bucket and they are able to fund the operational cost of the checking account with the interchange fees of the debit card.

I believe he mentioned that in the first newsletter!

The innovation I've been waiting for is FedCoin (digital dollar).

The details are a little hazy, but I'm expecting real instant transfers (not just between people but also between your own accounts at different institutions) and free access for everybody in the US.

Like crypto, but with real money.

> free access for everybody in the US.

As long as you're not previously convicted, registered sex offender, poor credit score or otherwise a "lower" human.

> Like crypto, but with real money.

"FedCoin" (a digital currency operated and maintained by a central authority) sounds like the opposite of a cryptocurrency.

I agree completely- the overhead of bitcoin and other crypto is only useful if we don't trust our governments / banks. As we trust them exactly as much as we do, we may as well have a blockchain run by the Fed / BoE and just have zero margin cost per transaction.

I am slightly terrified of the short term consequences but it's a good idwa

Central Bank Digital Currencies are a dystopian nightmare. They permit all kinds of financial shenanigans like automated negative interest rate, demurrage, financial censorship and control.

Cryptocurrency already is real money. Its more real than anything the state can print from nothing.

Most of the advantages cryptocurrency fall into one two categories.

1. Speed improvements over the legacy infrastructure e.g. instant transfers without a middleman. Itself, mostly a problem just in the USA. 2. Bypassing various international and national regulations.

Central bank digital currency retains #1 while rejecting #2 which is important for a nation's sovereignty.

Don't forget (the primary reason Bitcoin was invented) 3. The lack of ability for central banks to inflate the monetary supply.

"The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust." --SN

3. is important for ensuring you don't have the time value of your savings destroyed by inflation.

The tradeoff is lack of controls and ridiculous price volatility. The fed may not be perfect with the USD, but at least it's stable and supports global economies.

> it's stable

In what sense? We are observing massive devaluation, no?

>massive devaluation

No, we're not. USD is stable in the sense that it's not volatile like bitcoin and supports global economies.

So, it's stabler than bitcoin or stocks. But can you see the hike in May 2021? [1]

[1] https://ycharts.com/indicators/us_inflation_rate

"The lack of ability for central banks to inflate the monetary supply."

I am not clear how this helps. If bitcoin/ether becomes the dominant currency, 2008 crisis is still possible, but the recovery is not. So it seems like it would make things worse, not better?

Countries used to go to war over gold and silver, it does not seem to be economically beneficial to have a deflationary currency.

Being deflationary isn't the problem there. Stealing gold/silver happens because they are small physical objects with objective value that can be stolen from people guarding it with enough people with guns. Stealing crypto-assets is much different and given competent security policy, seems much harder to do. These assets are not guarded in vaults by people, but in computers by strong access controls and encryption algorithms.

You would not give up your (hypothetical) bitcoin wallet password even if mafia put a gun to your head?

https://xkcd.com/538/

I would, but that is a different problem, not specific to deflationary currency. It can happen whether I have dollars, gold, diamonds, crypto-assets. But with crypto-assets, being non-physical, it is possible to easily hide them and also hide who owns them, and then mafia has a very hard time figuring out who to hit with the wrench to get them.

Deflationary currency would be bad for the current inflationary system and the small group of extremely rich people, but could be good for most people, who don't want to be in debt their whole life.

I think you forgot the most important advantage: zero trust by design. Short of a 51% attack, you do not need to trust any other entity while still being able to transact freely.

Even transactions for physical goods are possible with a neutral third party facilitating escrow (zero-trust unless there is a dispute).

"Central Bank Digital Currencies are a dystopian nightmare. They permit all kinds of financial shenanigans like automated negative interest rate"

We've had that for years, all banks can adjust interest rate and block accounts.

But you could change the bank or use some alternative. If legacy currency is sunset in favor of centrally controlled currency (where the bank has no latitude and just does what central bank says), all those alternatives may disappear.

It's supposed to be centralized, no nothing like crypto-assets. More like tighter FED/government control of the "new dollar".

Reading this segment feels like it was terminated prematurely?

> Free checking wasn’t free. Instead of most depositors paying a predictable (and relatively small) fee for their checking account, a tiny portion of the depositor base was assessed many, many $25-$35 fees stochastically based on how frequently their incomings and outgoings were temporarily mismatched.

Specifically the "depositor base was assessed many, many" part. Feels like the many before the comma is missing something. Maybe it should be times? "a tiny portion of the depositor base was assessed many times, many $25-$35 fees stochastically"

Not certain though.

It is an odd piece of grammar, but I've heard it fairly often. I'm not sure if it's proper English or not.

"many, many" is a different way of emphasizing the word "many". So "assessed many, many fees" implies that there were more fees assessed than if they had just stated "assessed many fees".

Interesting, thanks for the heads up.

Some of the depositors were assessed "many, many $25-$35 fees."

Could have been rewritten as "repeatedly assessed $25-$35 fees" but it's understandable to me.

I'd agree with that rewording =)...

Just was a bit of a mental hiccup when I was reading which is probably why I picked up on it.

How does the best price you give for JPY->USD ($10 for $1,000 with Wise) compare with OANDA fxTrade?

I think their current posted fees are 1.4% spread-only ($14 for $1000) or 0.3% spread plus core fees. I can't quite tell from the rate sheet but looks like 550 JPY for a 100,000 JPY trade. I guess that would work out to about … $8.50 per $1000? Is that right?

If you have a local bank that allows foreign depositors to exchange at 0.3 JPY/1 USD, does that mean you pay about $2.50 to convert 1000 USD?

If one has to do this frequently and in size the best way I’m aware of is Interactive Brokers, but for most customers doing $1k transactions (like me back in 2004 to pay my student loans) $8.50 and $10 are the same number but the $60 the best option cost back then (GoLloyds, now operated by Shinsei, if anyone is curious) was not.

This is key I think. Paying a couple extra dollars for convenience to avoid getting screwed by retail rates on $1000 or so once in a while is an easy yes.

OTOH, if you are even at 5-6 figures regularly you start paying attention to all the fractions, and bit more pain in the ass interface is fine. At one point I used to do this directly with a FX desk which was a bit fiddly but saved me a bunch over a few years.

It's true when I was routinely repatriating income with a forex trading desk the experience was not totally streamlined and paying attention to the spread and rates pretty closely. But also I got out "lucky" by exiting at 1 GBP/1.62 USD (moved home a while back), and the timing mattered a lot more than the rates

Oanda uses Western Union in its back end. They gave up their license for money transfer a while back due to regulatory issues.

Stellar blockchain is trying to do something innovative in this space but is slow to get volumes.

You left out fee-free stock trading which is commonplace now. Maybe you were intentionally focused more on the banking side.

Is the innovation in this space for the individual trader or for the other firms that are buying the trade order data to frontrun the market?

I didn't know about this. I'm intrigued.

Just let the market decide ;)

What about security? A number of innovations seem to overrely on new options which could offer potential for breach.

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