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Comment by eqmvii | Hacker News Reader

I’m exhausted by cryptocurrency.

There’s a kernel of neat tech innovation and a reasonable argument about monetary policy obliterated by an avalanche of greed, hype, fraud, and magical thinking.

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The most innovative part of crypto is how it encourages "normal" people to become personally financially invested in promoting it.

"Mary Kay for men."

Financial herpes

I like that metaphor. I see where it falls short, but I see the spreadable aspect and like that.

This is much closer, imo.

How long until Mary Kay is pushing NFT's?

Too many grass-roots movements failed, or at least struggled, because money was an after thought.

Decentralised MLMs. That and nobody wants to be the bag holder.

Let's call it "Scamtech"

I’m exhausted by the fiat money scam

2% annual inflation over a 40 year career amounts to 40% less earnings. Inflation is theft. Bitcoin fixes this. No one has ever explained a better solution to inflation than Bitcoin.

Fiat money printing is a scam that lets politicians spend more money without directly raising taxes. Bitcoin is honest sound money with a fixed inflation policy forever that cannot be manipulated by any central actors.

It is an idea who’s time has come, given the inflationary realities of today.

I’m always a bit surprised when people seem to imply that there’s a fundamental human right to perfectly stable stores of value (if you could even define such a quality), and that the absence of that—inflation, price fluctuation, etc—is somehow unfair.

Gold bugs like to say that “value” is what gold is worth, but if you look at the real value of gold over time—in terms of its ability to be exchanged for things that you might, you know, want—it’s anything but: https://www.macrotrends.net/1333/historical-gold-prices-100-.... Over a number of multi-decade ranges in the last century, a purchase of gold at the start of the period would leave the buyer the poorer at the end of it.

In reality, there just isn’t such a thing as a single “real” definition of “value.” Prices—of commodities, of securities, and, yes, of both fiat and cryptocurrencies fluctuate. A saver who wants to put money away to spend in the future must, unfortunately, make some sort of bet. (Even if such a magical instrument existed, savers who bought it would still be making a bet that the opportunity cost of avoiding growth investments does not outweigh the value of stability!)

Keeping all your savings in crypto—or in fiat, or in gold, or in your employer’s stock—isn’t a fantastic idea. But that’s not because someone is scamming you; it’s because there just isn’t such a thing as “the one true value”, and no asset that allows you to safely track it. That’s life.

> I’m always a bit surprised when people seem to imply that there’s a fundamental human right to perfectly stable stores of value

If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.

I don’t think I am being entitled to believe that this option should exist for those who wish to take advantage of it. Forcing everyone into the stock or real estate markets just to stay ahead of inflation is a crime against the people.

> A saver who wants to put money away to spend in the future must, unfortunately, make some sort of bet.

This is only true because of the fradulent fractional reserve fiat money system we have been subjected to which allows the central bankers to steal from the populace to enrich their banker friends. If it were not for money printing, the saver would not have to risk their savings just to preserve purchasing power.

“If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”

Hmm. How would that work?

Yes, it's very mysterious. If everybody put their money in the bank they would all be guaranteed a positive return on their investment, but there is no inflation and the money supply is fixed. So where does the money come from?

It’s simple really. In finance this is called ‘the time value of money.’ Essentially, in order for me to be incentivized to use a savings vehicle, there must be a real incentive. This incentive is what motivates the saver to save. If not for the incentive, why would they lend their money out?

I mean it already works like that in cryptocurrency today. Look at the rates paid on stablecoins. For example look at UST a US dollar stablecoin. It currently pays 19.4% APY on savings. There are risks but for 2% on Nexus Mutual you can be insured against a failure of the dollar peg or a failure in the smart contract. The net yield on a USD pegged stablecoin with insurance is 17.4% - handily beating inflation risk-free.

If the central bankers couldn’t print money you could beat inflation with any bank account.

Where do you think the zero-risk interest comes from?

Similar to other stablecoins, over-collateralized lending against the value of staked crypto assets.

See here for details on UST (Anchor protocol) https://www.anchorprotocol.com/docs/anchor-v1.1.pdf

OK. And what if the borrower defaults?

Per https://docs.anchorprotocol.com/protocol/money-market#borrow..., it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)

There is no magic to make these loans riskless.

These are OVER-collateralized loans.

Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance.

It’s not really much different from a mortgage or another asset-backed loan, except that the borrower must send the collateral to an account controlled by the lender and the lender can instantly liquidate the collateral if the LTV falls below a threshold.

If you think about it, crypto such as Bitcoin or Ethereum are really the most perfect form of capital for a lender to accept as collateral for a loan. Unlike a home mortgage or a car loan the lendor takes full custody of collateral valued greater than the loan. The crypto assets are volatile but they are marked to market in real-time 24/7. At any time if the value of the collateral falls below som safe threshold, the borrower is notified that their collateral is at risk of liquidation and given the opportunity to add collateral. If the LTV ratio isn’t corrected and the market reduces the value of the collateral further, then the lender can instantly liquidate the collateral and unwind the loan.

I’ll happily lend you $1 if you deposit $2 in collateral first. :)

However, I suspect the market for such loans is rather small.

It’s more like I will lend you $1 if you post >$1 in collateral. In crypto, this is often in the form of a speculative token that is growing at potentially 200+% per year. The borrower is posting their collateral as security for the loan but they continue to own the collateral and enjoy the upside of price appreciation as long as the loan is in good standing.

As the sister comment pointed out, it is currently a $50 Billion industry and it didn’t exist a couple years ago. In fact, DeFi is probably the fastest growing industry in the history of fast growing industries. You would be wise to have a curious mind in this field instead of being closed to the possibilities.

I'm aware of this. But again, your original claim was “If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”

I've yet to understand where you got that idea from, or what it has to do with all of your nonsensical followup comments.

> I've yet to understand where you got that idea from, or what it has to do with all of your nonsensical followup comments.

Which of my comments do you find non-sensical, specifically?

> original claim was “If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”

Let me lay out my logic:

- If not for central bankers, artificially printing money and putting it in circulation, there would be no inflation. No printing by central bankers = No dilution of the purchasing power of everyone's money -> therefore no inflation.

- In a no inflation environment, any nominal gains are real-gains because there is no inflation to worry about

- In a no inflation environment, for a banker to attract deposits from savers, they would have to offer savers a nominal rate of savings in order to attract those deposits

- In a no inflation environment, any nominal rate paid on savings is a real return, since there is no inflation

- In an FDIC insured savings account savings are insured, therefore not risk

- Unfortunately in our current environment where the Fed is printing money at 25-40% increases in M2 y/y, and CPI reaching 6.8% at last reading, and bank savings accounts paying 0.1%, it is hard to appreciate that a bank account could ever pay a real rate on savings, net of inflation. However, in a world without central bank money printers this is exactly what we would enjoy.

one of the common moves is borrowing ETH using an illiquid otherwise-unsaleable shitcoin as collateral. Oh no, you defaulted, and you've lost your shitcoins for half their alleged face value in highly liquid ETH! Oh well.

> it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)

Help me see what I am missing, what is the point of loans that is defeated by requiring an LTV >= 1.0?

To my knowledge all collateral backed lending is based on the principal that the collateral value must always be greater than the value of the loan in order to remain solvent. Since crypto is a volatile asset, you would expect lenders to require higher relative LTV than vs real-estate, which for the most part they do.

Of course, even collateralized loans to buy real estate are not, despite what you said earlier, risk-free--see 2008 (and google the term "CDO", in case you've never heard of it) for a rather dramatic example of this.

More to the earlier point, though, this is really not how most lending works, so the idea that this somehow means that "absent central bankers, we'd all make 2% APY risk-free on bank deposits" is just silly. The global equity market is $50T, the global corporate bond market something like $100T. Total cash-equivalents (M2) in the US is $21T.

Even if "pledging shitcoins as collateral for speculating on coinbase" were zero-risk--which of course it isn't--the market for such loans is, unfortunately, too small for all of us to retire risk-free.

> Bitcoin fixes this. No one has ever explained a better solution to inflation than Bitcoin.

Does anyone seriously claim that Bitcoin is currently solving inflation? I've heard some claims that it will eventually be the case, but claiming it is already a "solution to inflation" sounds like a stretch even for bitcoin supporters.

Bitcoin was apparently at 30kUSD some time in July this year after reaching 60kUSD in June, while it is now at 48kUSD. I don't see how this indicates that bitcoin is any protection against inflation. Or if it is and you're fine with this kind of volatility, I wonder why you discarded other investments such as stocks.

"The brakes are not perfect so we removed them entirely"

if you could wave your magic wand and suddenly BTC was the only currency possible to be used? Yeah that sort of fixes inflation.

But the world isn't a computer simulation on a desktop PC and that scenario doesn't and wont ever exist.

Isn't fiat money much more reliable than cryptocurrencies? We frequently cite the failures that led to hyperinflation, but nobody bats an eye when a cryptocoin fluctuates by a double digit amount in a single day.

The central authority that controls the money supply might not be perfect, but I trust it vastly more than a currency with no brakes that's mostly used for speculation.

That, and I can buy a hotdog with money. Peer to peer, without it being logged into a permanent record tied to my pseudonym.

> 2% annual inflation over a 40 year career amounts to 40% less earnings. Inflation is theft. Bitcoin fixes this.

Try living with deflation. To paraphrase Churchill: an inflationary regime is the worst monetary system, except for all the others that have been tried.

> Bitcoin is honest sound money with a fixed inflation policy forever that cannot be manipulated by any central actors.

Not being able to manipulate the money system is bad thing, as the Great Depression showed. Bitcoin is basically a digital form of gold, which was moved away from for good reasons:

* https://www.theatlantic.com/business/archive/2012/08/why-the...

* https://archive.md/FWKcL

From the article, the two charts referenced don’t say what I think you were hoping they say.

The first chart claims to show how CPI fluctuated wildly on the gold standard, except if you read the * and footnote in the article you will see it discloses that the US actually went off the gold standard at the same time as the increase in inflation.

The second chart aims to show how low and stable CPI has been under the current fiat standard not backed by gold. However the chart is old and doesn’t include the recent CPI readings of 6.4% and 6.8% annualized inflation that were reported in the most recent 2 months by the BLS. In other words if chart 2 were continued to today they would include spikes of 3x, not exactly the narrative someone arguing in favor of the current system would want to show.

I don’t buy your argument that allowing a handful of central bankers to manipulate the money supply and print money out of thin air, is a good thing.

> except if you read the * and footnote

…it says:

> These restrictions on gold exports continued until June 1919, at which point we returned to the full gold standard. I have started from this last date, because there is no question that we were operating under the gold standard at this point.

So the gyrations were occurring when the gold standard was full-on.

> However the chart is old and doesn’t include the recent CPI readings of 6.4% and 6.8% annualized inflation that were reported in the most recent 2 months by the BLS.

The chart is "old" because the article was written in 2012. It was written during a period when QE was going on and there was much tearing of garments about 'money printing':

> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.

* https://economics21.org/html/open-letter-ben-bernanke-287.ht...

And for the next decade the CPI was doing not a whole lot. So much for Friedman's "always a monetary phenomenon"—which he was wrong about even in the 1980s when Volcker was doing his thing.

Further a spike in inflation was expected and predicted, and that a number of folks said it could last a year, like happened during the Korean War:

* https://www.piie.com/blogs/realtime-economic-issues-watch/in...

In the fact last month's numbers were not surprising because of their value, but because they so closely matched predictions:

> The consumer price index increased 0.8% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.7% advance.

* https://www.marketwatch.com/story/coming-up-u-s-consumer-pri...

* https://www.reuters.com/business/biden-says-inflation-data-d...

> you will see it discloses that the US actually went off the gold standard

Being "on" the gold standard will take as much political will as not printing money. Probably more, because of the economic suffering that deflation causes… as was seen Greece in the 2010s (Gold Dawn), and Japan and Germany in the late 1930s.

> I don’t buy your argument that allowing a handful of central bankers to manipulate the money supply and print money out of thin air, is a good thing.

Not being able to print money when it is needed in the economy can cause depressions:

* https://www.nber.org/books-and-chapters/financial-markets-an...

And the folks who like the gold standard tend to also like balanced budgets and austerity, which is another bad idea:

* https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da...

It should be noted that historically 'printing money' has mostly not the cause of (hyper)inflation, but rather printing money was the effect of something else:

* https://clintballinger.com/2021/01/12/the-myth-of-hyperinfla...

> In this paper I will argue why the common misconception that “inflation is always and everywhere a monetary phenomenon” cannot be used to explain most historical hyperinflations. I will argue that “money printing” is often the response to exogenous and unusual events and not the direct cause of the hyperinflation.

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102

Further, "printing money" isn't what people think it is:

> This paper provides a general understanding of the workings of the modern fiat monetary system in the United States within the context of the global economy. The work is primarily descriptive in nature and takes an operational perspective of the monetary system using the understandings of Monetary Realism.

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

If anyone is still thinking about bank reserves and multipliers then they are severely out of date. Tobin described this as the "Old View" in 1963:

* https://cowles.yale.edu/sites/default/files/files/pub/d01/d0...

I can see you subscribe to modern monetary theory and believe that central bankers and their ability to freely print money without limit are essential to a functioning modern economy.

Further, I see that you don’t share my concerns about increasing inflation. In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation.

In my mind inflation is theft by central powers, stealing the most from those with the least leverage (aka the poor and middle class). A 2% annual rate of inflation over a 40 year career will steal 40% of the purchasing power of the wage-earner. We are currently experiencing 6.4% inflation based on official data.

> I can see you subscribe to modern monetary theory

Nope. I generally lean more towards Krugman (whose not too hot on MMT):

* https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wo...

> Further, I see that you don’t share my concerns about increasing inflation.

I've been hearing people yammer on about inflation for a while now (at least 2009). The constant droning on about it is becoming like background tinnitus. It's not that it doesn't matter when it gets "too high", but given the modern secular stagnation we've been seeing in the developed world, little growth and deflation seems like a higher probability. Japan has had a bank rate of <1% since April 1995 and has printed money and… nothing.

> In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation.

In my eyes economists see inflation in the context of the time that is (or is not) occurring. They can work towards preventing it, stopping it, encouraging it, or letting it run for a while depending on the situation.

Annualized inflation was -0.36 in 2009, was that a good thing?

* https://fred.stlouisfed.org/series/FPCPITOTLZGUSA

If they can predict inflation then it implies they have a decent understanding of what various policies are doing / will do. It allows them to tailor those policies towards various objectives: the current objective could be that they want to get people employed again, and as the unemployment number decreases (or the participation rate increases) they can scale back the program(s). At least in the US, remember that the central bank has a dual mandate:

* https://twitter.com/ritholtz/status/1468924345703706631

> In my mind inflation is theft by central powers, stealing the most from those with the least leverage (aka the poor and middle class).

Contra:

> Inflation redistributes from creditors to debtors — not exactly a burden on the bottom half of the income distribution 2/

* https://twitter.com/paulkrugman/status/1469728251643838467

A good portion of people have debt, the largest portion of which is often their mortgage.

> A 2% annual rate of inflation over a 40 year career will steal 40% of the purchasing power of the wage-earner.

Assuming that wages don't rise. Fight for inflation-indexed minimum wage (at state and federal levels), and fight for unions. Having 0 or negative inflation (deflation) is worse from the reading I've done (see 1930s).

> We are currently experiencing 6.4% inflation based on official data.

And we'll see what it is over the next year. I'll go with the prediction of a spike over the course of 12-18 months (probably ending late-2022):

* https://www.piie.com/blogs/realtime-economic-issues-watch/in...

The Krugman article you linked is behind a paywall so I couldn’t read it. I did, however find this other article on his take on MMM [1]. Per the article, Krugman’s take is that most other economists aren’t pro-MMM enough for his taste. He thinks we should be even further to the left on MMM. Is that your position also?

Do you also support Krugman’s position that the internet would never be more valuable to society than the fax machine? [2] I have no doubt you concur with his repeatedly articulated position that Bitcoin is also worthless? Perhaps as worthless as the internet vs the illustrious fax machine?

As for the rest of your comments, I’ll summarize them as follows:

1. Inflation is not a problem as long as economists can predict it because, reasons.

2. Inflation isn’t really a problem for regular people because they can just go and get an over-sized mortgage at an interest rate below inflation and get free money without consequence.

3. Inflation will be over soon, which ignores the trillions in new money recently injected into the economy, and people maybe won’t notice or won’t mind the new higher prices for things as prices magically stabilize in 12-18 months? - despite the fact that the money printer isn’t likely to stop printing money in that timeframe.

[1] https://www.businessinsider.com/paul-krugman-modern-monetary...

[2] https://www.businessinsider.com/paul-krugman-responds-to-int...

If you make 2% more money every year than you did the year before, then how does that lead to 40% less earnings over 40 years?

0.98 ^ 40 = 0.445. But that’s income in the last year, not fraction of the total. You’d have to add up 1 + 0.98 + 0.98^2… to get that, but I’m too stupid to figure out a closed formula or anything else I can solve with the Google calculator. It does get pretty close to 0.6, I believe, making this the least insane part of the post.

You’d have a better point if transactions were fast AND cheap. Until crypto gets there, it won’t be viable as an actual currency yet. I’m not saying it’s impossible like this hit piece, but it’s not there yet.

1) Bitcoin isn't about fast and cheap transactions. It is about censorship-resistant transactions and sound money with a fully fixed and transparent monetary policy, protected by the most powerful supercomputer in the history of the world. No other crpyto currency or asset class offers this.

2) Lightning already offers fast AND cheap payments at nation-state scale. The future is already here, it just isn't evenly distributed yet.

Have you heard of asking for a raise?

Also, last I checked, the price of essential good in Bitcoin, assuming the contra-factual that it were possible to buy such things with Bitcoin, hasn’t exactly been constant for 40 years.

Asking for a raise works for me and you since we have pricing power, but what of those less fortunate? What about those on minimum wage, or fixed salaries or pensions or welfare? They don’t have the ability to continuously increase their prices to match inflation.

TL;DR your solution works for the most in-demand workers in society but it causes greater and greater income inequality over time leading those who are most vulnerable to fall further and further behind.

For more details, see https://wtfhappenedin1971.com/

Inflation is not caused directly and only by printing.

But imagine it was. We'd see inflation apply evenly everywhere. So wages would rise too. Inflation would not eat into your earnings in any compounding fashion.

The reason inflation isn’t applied equally everywhere is called the Cantillon Effect. Here are the details https://azizonomics.com/2012/08/07/the-cantillon-effect/

For a given level of money velocity, what other factors cause inflation - other than money printing? Clearly money printing is the most obvious cause of artificial manipulation of the money supply and in my understanding the primary cause of inflation. What am I missing?

> For a given level of money velocity, what other factors cause inflation - other than money printing?

Many economists consider that view a myth by the way: https://blogs.cfainstitute.org/investor/2021/04/19/myth-bust...

These are the same economists who predicted there would:

- be no inflation, then

- inflation would be mild, then

- inflation would be transitory, then

- inflation isn't really a problem

Still, I'm waiting for your response on what causes inflation, other than money printing. If we look at correlation, money printing appears to be related to inflation. What am I missing?

Inflation is not some unfortunate built-in side effect of fiat but a deliberate policy choice by specific organizations and people. Why would they all of a sudden give up those policies and embrace the crypto-land?

Money-printing has enriched a cohort of corrupt central bankers and their cronies such as politicians. I don’t expect them to give up a policy that has unjustly enriched them for so long.

Luckily we don’t need their support for Bitcoin to work. Bitcoin operates on the game theory that offers individuals a choice to save in a currency that cannot be manipulated. Over time, more and more individuals will choose the better money.

I remember being shocked that my uncle was doing NFT trading and buying and selling digital land in the metaverse over Thanksgiving (though not his primary job).

I thought I was an early adopter for having 1.4 ETH.

Your uncle is gambling, just like every day-trader on the traditional stock market before crypto was ever invented.

At this point the equities market is also gambling based on what the fed decides to do next.

I agree.

> At this point the equities market is also gambling.

FTFY

"Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.

"Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

- John Maynard Keynes (ironically)

Technically he was talking about short term high inflation, but there is no mechanistic reason why this would be false for long-term low inflation, and it is exactly what we are seeing after 50 years of secular inflation as a policy.

> Technically he was talking about short term high inflation, but there is no mechanistic reason why this would be false for long-term low inflation

I was with you until this point. There are absolutely reasons why there is a difference.

Time is directional and irreversible and human life is exceedingly finite. Thus there will always be a higher value placed on money you get today versus money you get in the future. Given that money, itself, is not a productive or useful asset at rest, inflation at a rate consistent with the gradual increase of aggregate wealth is a natural and healthy outcome of the system.

> Thus there will always be a higher value placed on money you get today versus money you get in the future

Yeah, that SHOULD be the case because "money you get in the future" should be subject to existential risk. If you want to artificially "mobilize money" then you are going to get all sorts of fucked up things like environmental destruction in the service of thoughtless consumption ("spending on crappy shit from china is good for the economy!!1"), ponzi schemes, incentivised malinvestment, and cheating labor out of their wages:

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

"it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."

Think about it this way: If we did not inflate the money, increased productivity (e.g. through technological efficiency gains) would result in everyone reaping the benefits, capitalism would be a rising tide that lifts all boats. Instead, we funnel those societal gains to the most privileged in our society, i.e. bankers and people who are good at writing government grants and good at getting awarded contracts.

"In the long run we are all dead." -- also Keynes

When you say "metaverse", what do you mean?

I'm not interested in the trade itself, I just don't see the metaverse as really properly established yet so where is this taking place? Maybe I'm out of touch.

Probably Decentraland. Here's a parcel selling for 125k Mana units ~$400k:

https://market.decentraland.org/contracts/0xf87e31492faf9a91...

I have literally no idea why anyone would care about blockchain digital land - his words not mine.

For me, one of the saddest things about the El-Salvador Bitcoin saga is seeing people here turn a blind eye to Bukele's power grabbing, because he plays into the narrative of their crypto greed.

There's a lot of hype but there's also a lot of potential to revolutionize commerce. imagine if you could pay 10 cents to read an article or tip a web site. How badly does this torpedo googles ad biz?

> imagine if you could pay 10 cents to read an article or tip a web site.

1) nobody actually wants to pay this, though; the whole set of pre-existing arguments against micropayments apply, too many to list here. My fave one is "micropayments enable microfraud", though. And if you think cookie banners are annoying wait until you see the cryptobanners.

2) you definitely can't scale this on a blockchain, and any scalable system you build to do it will be Not A Blockchain. How many web pages does the world view in the time of a single bitcoin block? Would you say it was more or less than ten million?

1) Why do people buy "pro" apps to remove ads but would not do that for content on the web? Also the micro fraud argument is kinda funny since everyone knows the ad business is full or fraud and everyone somehow involved with ads pays a huge junk for this. I think micropayment is far move fraud resistant because all the bots pretending to be humans and clicking ads do not work anymore.

2) That true. but it doesn't have to be a blockchain in fact there is already proposed protocols to do micropayment on global scale its called Interledger Protocol (ILP). Its a protocol like TCP/IP it scales the same way. And as the name suggest it can be used with multiple ledgers including blockchains but it doesn't have to be one.

Every model has been tried from standard subscriptions to bundled subscriptions (Mogul, Subscribd) to ads replacement (Google Contributor, Sterling) to pay-per-article (Blendle) and they've all found limited success.

1) Most people do not value written content and news the same as other forms of entertainment. 2) There's too much decision friction and it gets worse when you have to decide per article. 3) Ads subsidize far more than most people could afford to pay for directly.

Crypto doesn't solve any of these human behavior or budget problems.

Check out coil.com

Also who said content has to be written? If the demand for written paid content is low there is no way to fix this. Demand for stuff changes over time and certain business go obsolete. This has nothing to do with the topic, those who dont adapt die out. No one claims that somehow crypto would magically make people earn money with stuff no one want to pay for.

>3) Ads subsidize far more than most people could afford to pay for directly.

That is mathematically impossible every ad is paid by thous who buy the product. Thous who just see ads but never buy factually dont pay and dont ad any value at all they just force thous who buy to pay more.

There are many people who dont use ad-blockers because they think its the morally right thing to do, to support the content creators through ads. They make this logic mistake all the time. There is nothing morally right about raising the product pirce for others so ad companies get more revenue and a tiny but also goes to the content creator. Its a best Robin Hood like moral gymnastics, it does not ad value to the system and you dont pay for the content you consumes.

> remove ads but would not do that for content on the web

The "pro" app equivalent is existing paywalls, NYT-style.

> micropayment is far move fraud resistant because all the bots pretending to be humans and clicking ads do not work anymore

But different sorts of fraud are imaginable, especially if you don't confirm every single payment. If you do confirm every single payment that's probably unacceptable user friction. Or the copyright problem already seen with NFTs and content farms: copy someone else's pages, charge for access to them.

Paywalls are walled gardens even if I would want to use them I cant because the internet is global but paywalls are not. Beside that its not feasible as paywalls are usually a subscription, the average user would need to have 10-100 subscriptions to cover their browsing habit. Not only is this way to expensive its also completely impractical. And it would self inflict a incentive to not leave your subscription bubble.

Micropayment make it possible that I can pay without subscription without giving my personal data and without some absurd premium price that is justified by the fact that I could consume other stuff for the rest of the month/year which I likely dont want.

>But different sorts of fraud are imaginable

Sure and we find solutions for these. Unlike with ads everyone should be onboard blocking and fighting the fraud. with ads however thous who dont commit it can still profit from it.

>If you do confirm every single payment that's probably unacceptable

But there are solutions for these problems. Lets say you want to watch a youtube video, it could be free for the first 10% and then ask you to confirm payment. Then it steams payment as you watch so if you stop halfway trough you only paid half the price.

>Or the copyright problem already seen with NFTs

There is no such NFT copyright problem its made up nonsense. People just dont understand what they buy usually a public price of art. So its already released when sold and people can copy or store it however they want. Its worthless just like an MP3 file of a radio hit is worthless the rights on that track however may not be worthless if the owner know how to make money from it.

>copy someone else's pages, charge for access to them.

Already possible now. Micropayments does not change anything here. People steal stuff and "sell" it. There is no technical solution for this problem.

Crypto is not necessary for micropayments and they have been tried several times already including by Google as well. It’s not a technical problem.

I'm curious about what Facebook/WhatsApp is doing in Guatemala, right next to El Salvador. They are integrating WhatsApp, the main messaging app, with a stable coin Pax Dollars and Zero fee remittances between U.S. and Guatemala.

The countries are next to each other and are similar in many ways. But one difference is that Guatemala, has their own stable local currency (Quetzal/GTQ), and the exchange rate margins charged by banks are the highest from any Central American Country. And also unofficial USD currency exchange can easily cost about 25% of the transaction.

WhatsApp is so widespread in Central America that FB has a big potential of doing what El Salvador has attempted to do with Chivo/Bitcoin.

This reminds me of the old stories of how Facebook choose which universities to allow sign up from. It was by choosing the universities close to others that had Facebook competitors.

What they're doing is not actually using the USDP in any manner. The USDP sits in Novi's account in Coinbase Custody. The USDP in the Novi app is just accounting entries in their system.

wrote this up here: https://davidgerard.co.uk/blockchain/2021/11/02/facebooks-no...

I'd be amazed if the new Novi-in-WhatsApp thing didn't work the same way.

It's the best possible way to use the blockchain: say "blockchain" in the press release, absolutely do not touch the thing with your system.

Hi David!

Thank you for sharing that link. I'm a reader of yours and never imagined you replying one of my comments.

By the way thank you for the coverage in English you do about my country which summarizes many of the things that are happening here. And specially for reporting about the political context in which all of these is happening. As this is something not covered much by other news outlets.

I was curious about Novi/WhatsApp because the potential it has for becoming a new widespread payment method due to the market share of WhatsApp in these countries. Not much about the underlying technology.

So many transactions here involve sharing screenshots of bank payments confirmations or photos of bank deposit slips via WhatsApp messages. From small stuff to even loans, that Whatsapp could easily move from sending screenshots to sending payments by adding a "pay" button on their app.

If they get the end user experience right, and regulatory approvals which is a bigger challenge by itself. I don't think the end users will think much about the underlying technology.

thank you! As literally just some guy with a news blog, I'm humbled by Salvadoran readers telling me that my coverage is useful to them. Obviously, I depend heavily on Salvadoran contacts telling me interesting things, and checking my stuff before it goes live - they checked this Foreign Policy article especially :-)

Some kind of crypto IS necessary in the end. Not for the micropayment[1] itself but for funding/withdrawing. If this is done over traditional banking system it excludes half the world with access to the internet + adds fees that go to the bank.

If its implemented trough internet mega corps instead of banks they get even more power than they already have + they will take a cut too + they will fight it to ever become a thing because it directly destroys their business model. On top of that comes privacy concerts and all that. It would be horrible. We dont know anything other than crypto that would globally work and isn't controlled by a single authority.

https://interledger.org/rfcs/0003-interledger-protocol/

Crypto isn't a currency so you still need exit nodes to fiat at some point, and these are banks (or exchanges using banks on your behalf). New fintech services like Cashapp, Venmo, Paypal, Sofi, etc have done much more to improve banking access with technology than any crypto so far.

None of these services can do what crypto can and you should not want to use them anyway. They take a cut, screw you over whenever possible, have zero respect for you privacy and personal data, can exclude you from service without due process and basically put you on a no-fly list but without justification or any feasible way to fight it. Every other week these is some HN post about peoples accounts getting suspended, do you want to live in future where this happens to your "wallet"? I know people who can not open a paypal account since 10+ years. There is no way to appeal it.

Also within 10 years they will all be bought up by the largest 2-3 players creating another mega corp oligopoly that makes everything worse for everyone. Wait until they exchange their "no-fly lists" and a AI gets to ruin peoples life because of statistically anomalies or something.

If you dont want that you should root for crypto even if today crypto is mostly garbage and scams the tech can be used to do better.

> imagine if you could pay 10 cents to read an article or tip a web site.

This doesn't need crypto. This can be done with something like Paypal.

> How badly does this torpedo googles ad biz?

A solution based on spite is a bad solution.

A monthly fee could work. Like Spotify.

Look at Google Contributor. Users didn’t want to pay even $0.01/page, and publishers didn’t want to sign up to receive those payments. More non specifically, pubs people would pay for didn’t want to dilute their existing revenue streams with micropayments, and not enough users paid for the pubs on board. The program shut down twice.

There was also a product called TipJar that they similarly launched and killed that solve the first and second opportunity.

In both cases, Google had a huge structural advantage of already having so many cards on file and publishers with their banks hooked up and still couldn’t cross the chasm.

Somebody would need to solve these issues — not sure it’s a question of centralization

How does this scheme address the concept of decision fatigue?

I’ve heard that various cryptocurrencies are going to revolutionize the web economy and even replace AWS. Maybe I’m dumb. But it sounds like profound nonsense.

And I mined Bitcoin when you could still do it profitably with a GPU. I bought a new computer in March 2021 for $1,900 and used it to mine over $2,300 in ETH so far. I understand cryptocurrency fairly well but I just don’t get it.

And what feature of cryptocurrency allows and or benefits this whereas traditional finance systems cannot?

Everybody suddenly uses same currency, and it makes it pretty easy for all to get involved. It removes currency barriers.

We did. It didn't work. Probably will never. Instead you should consider what you want. You want good writing content that's easily available and persistent? Okay, Wikipedia 100% has done this, amazingly. What can we learn from THEIR model?

10c tip, $31 gas fee.

In some chains it is 1c

trouble is the interface to actual money - the only coins that have any depth of dollar liquidity are BTC and ETH, both of which are proof-of-work. Even if your low-fee shitcoin just happens to have a USD pair, it's startlingly unlikely to have enough depth not to have massive slippage on trades; so functionally, buyers have to go via BTC or ETH. This is also the fallacy of non-PoW NFT chains.

Looking at SOL/USDT on Binance.com [1] as an example, it looks like there are typically orders for a few thousand USDT within a 1 cent spread (0.006% of the price), or orders for a few hundred thousand USDT within a 25 cent spread (0.15% of the price).

Most of us aren't trading millions at a time, and these spreads seem fairly insignificant compared to fees extracted by banks, credit card networks, etc, so is this really an issue?

[1] https://www.binance.com/en/trade/SOL_USDT?layout=pro

that's why I said actual money, not USDT - which is absolutely not actual money.

If you don't want USDT, you can trade SOL/BUSD instead. The order book may be a little thinner, but not a big deal if you're not moving millions.

While you might claim that BUSD isn't real money, you can just immediately withdraw it as fiat in your bank account, as long as Binance remains solvent.

Or if you're still uncomfortable with BUSD for whatever reason, just trade e.g. SOL/USD on Coinbase.

I am talking about USD, not about stablecoins, and particularly not about stablecoins on tether exchanges. You are not refuting in any way whatsoever my point about the serious lack of actual-money liquidity for your favourite coin.

What is the depth of SOL against USD? Not against USDT, not against BUSD, but against actual-money dollars?

See for yourself: https://pro.coinbase.com/trade/SOL-USD

Again, there's hundreds of thousands in orders within a $0.25 spread - plenty of liquidity if you're not moving millions.

We really need to stop using the term stablecoins

ScamCoin maybe?

> How badly does this torpedo googles ad biz?

Google itself offered this very product. A system for micropayments that would eliminate all of the ads. Nobody used it.

Not to be flippant but I would still just wait for someone to post the archive link.

I love this sentence. Might steal it. Thanks

With respect, do you see currencies just consed up out of thin air as free of the avalanche of negatives you mentioned?

No crypto asset is currency or will be currency. They're tradable assets, not unlike Beanie Babies.

And I don't see fiat that way because:

1. I use if every day. It's widely usable as currency, it's inflationary, and its value doesn't fluctuate wildly.

2. Fiat only ever promised to fix the problems with gold, and it did that (in the US and Europe at least). It didn't ride a wave of hype that it couldn't live up to.

3. No one's hobby is talking about fiat. They don't harass me when I say I don't think it's interesting. They don't talk about the world falling apart and fiat plucking us from the ashes.

Also, ironically, crypto is at least as conjured up out of thin air as a properly operated "fiat" currency. A person decided - for whatever reason - that there should be up to 21 million of a new type of token in existence, and his software started printing them and dishing them out to random participants in the network. With a "fiat" currency the actual number in circulation goes up and down according to actual market demand for debt, and in a properly run "fiat" currency the active intervention in that market is taken by named individuals with set targets who publish minutes of the decisions they're going to take.

Crypto is fiat currency without even so much as the fiat. Meaning it floats completely at random based on the mood of the participants... which now is driven solely by wanting to sell that crypto to some Greater Fool.

What about company stocks, maybe Evergrande. Hold them while waiting for Greater Fool.

Do you genuinely not see a difference between Bitcoin and a stock?

Stock is ownership of a company and entitlement to its profits. If you gamble on an unprofitable company with no assets, then sure, your stock could be worth very little. But even then, the company likely has cashflow or something in its financials that's valuable.

Companies selling stock are also analyzed to death and publish their audited financials.

Sure, if the company becomes insolvent, then the stocks will be backed by as little as Bitcoin, and more fixed in supply. Perhaps HODLers of crappy stocks should just forget about the whole revenue-generating business that was supposed to be behind them, and insist that they're a store of value

"Currency" is still mostly not there, but there's things between that and tradable assets. A lot of people do, today, use crypto to e.g. send money back home.

There’s plenty of fiat criticism outside of crypto, maybe you are in a bubble of neoliberalism

I don't know what you're arguing against in my comment, but it's not something I actually said.

Fiat, The Fed, and active monetary policy are certainly criticized from all angles. I never said otherwise.

Not by anybody taken seriously.

I’ll take my discussions about money without the added gatekeeping, thank you.

* 3% taken by credit card companies from merchants shows a rigged economy. It must get fixed

* 3% interest should be paid on savings accounts (like 1900 - 1980). ~0% today is a rigged economy

* Many other examples of the financial system being the root of the rigged economy (2008 Mortgage crisis, Libor rigged, front running trades, etc.).

Crypto brings the freedom to compete. We need to fix the rigged financial system by using competition.

https://ec.europa.eu/commission/presscorner/detail/hr/IP_15_... : "As a general rule, the Regulation will cap interchange fees at 0.2% of the transaction value for consumer debit cards and at 0.3% for consumer credit cards." Problem solved.

> 3% interest should be paid on savings accounts

By whom? I'm quite happy with my 1.2% mortgage, why do you want to impoverish me by driving that up? What's the interest rate on a 25 year mortgage in Bitcoin again?

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