International transfer of value Protection from monetary policies Money laundering (real for some)
- My country imposes export controls on foreign currency. I want to move my money out of my country.
- I am unbanked and want to buy a good or service on the internet.
- I do not trust the counterparty that I am dealing with on the internet. Using cryptocurrency means that my maximum loss is the vavlu of the transaction (I don't have to give credit card or banking info)
- My government wants to seize my assets, I want to make it difficult.
- I want to send money back home to my family. Currently the only option is Western Union which is charging 20% commission. Cryptocurrency results in less than 1% commission.
- I've lost my phone and wallet, I can still get cash from a bitoin ATM using the crypto I'm storing in my brain.
Background: my mother had her account and assets frozen for a crazy long time after changing her name. Turns out accounts are bound to your name only, and support is unhelpful at best, so when her business started turning profit and she wanted to change her private acc to business they locked up her funds and refused to process the needed papers, citing she is not the account holder (despite sending ample proof). it's been a nightmare getting someone on the phone who was willing to clear it up.
Individual experience, but paypal to me has ever since been a prime example of why you might not want to use a large private corp for money transfers
How would crypto have solved this ?
Can she do business accepting only bitcoin ?
How does crypto accounting work ?
A crypto payment processor allows setting up a payment gateway like Paypal, but accepting USDC instead. When accepting payment, the amount is deposited into the business owner's own wallet. The business owner can choose to accept payment in USDC. USDC is a ERC20 token, each backed by 1 USD or Treasury equivalent, operated by Circle, registered with FinCEN and dozens of other regulators, with monthly reports published by Grant Thornton. USDC token is available for use on the Polygon network, where a transfer costs between a tenth to one cent.
The main advantage over Paypal using the above process involving USDC on Polygon is, she can run her business via a wallet she controls without worrying about a clumsy corporate locking up her funds, and lower transaction fees.
The main disadvantage is - her customers must use USDC on the Polygon network - and adoption of crypto for ecommerce payments, let alone on a specific network like Polygon, is still early.
By holding the funds in the business' own wallet, if the payment provider suspends services, the funds are not seized by default - and not having liquidity immediately seized during the crucial moments where the business is suspended have important advantages for many businesses.
The payment provider and the bank are separate. It seems to me that you could substitute the word “bank account” for “wallet” in your second paragraph and it would still be true. Bank accounts have very well proven reliability at this point, plus the fact that currency in a bank account does not fluctuate in value like a stock. So again, it’s hard to see how that virtue is unique to cryptocurrency.
Yes, and cryptocurrency is one take on it, while adoption is still early, it has traction, more so than previous attempts.
Central banks are also working in this area with CBDC's, they can see the benefits of bypassing corporate financial intermediaries too.
We can use bank accounts to gain similar benefits, if it's remade or improved, though the retail banking industry is very resource intensive compared to running the Polygon network.
What other remake are you aware of, people can work with today?
However, it could be, at the end of it, by spurring competition, we have Central Bank CBDC's bypassing the retail bank to build a relationship with all currency users instead of cryptocurrency specifically replacing the financial system. That's another way to go about it.
Cryptocurrency have demonstrated the fundamentals of technology are mature enough, the retail bank, financial institutions, and the billions of dollars they earn being an inefficient middle man recording shared facts, it's ripe for disruption from two ends - Towards complete centralisation at the central bank (blockchain or not), or towards decentralisation via cryptocurrency.
To be a bit mean but how do you find the Bitcoin ATM?
This is worse than if you use a credit (or debit in some places) card. With a credit card you have a legal protection and the card issuer has to refund you if the product or service isn’t delivered, it’s called a chargeback. Crypto has no consumer protections, traditional payments do.
Crypto is irreversible (in most cases) by design, that will always be worse for the consumer and “better” for the vendor. Essentially making it easier to defraud people trying to make purchases.
The only time this works is if the vendor is unable to take credit card payments because they are selling something illegally, but that’s not the example you used.
The point about currency collapse is interesting to me, because (like almost all crypto apologist points) it assumes you already have a bunch of it/made a bunch of money on it before the bad thing happens. Everyone else gets to suck eggs, as the saying goes.
Of course if everyone in the hypothetical country had crypto, it would cause the crypto to collapse as well…
If you were Lebanese I would argue that having a bank account was a silly thing to do. Foreign bank accounts were illegal/difficult and domestic bank accounts are now worthless. You could own crypto or some kind of real good, such as a warehouse full of a commodity like wheat or diesel. Those are your options for hanging on to your wealth.
Summarizing & paraphrasing :-) Greece instated capital controls virtually over night, likely illegally as there is freedom of capital movement in the EU [1]. The money on a bank account resides in a particular country, so its legislation applies. Which country's legislation applies to funds in a globally distributed blockchain, whose copies reside all over the globe?
[1] https://www.bbc.com/news/business-33303540
edited for spelling
Bitcoin fixes that and removes the middlemen.
>- My country imposes export controls on foreign currency. I want to move my money out of my country.
Never understood who is the counter-party in these scenarios. Someone must sell you the crypto for seemingly worthless local currency. (Unless you somehow smuggle mining equipment in and buy local electricity)
Who would make that trade? Specially if currency was collapsing or not usable.
I meant mostly that if you store your assets in crypto - it can help a lot in situations like this, presenting a great use case.
But let's say you are in Africa and have a lot of local hyper-inflating currency. Who will give you crypto for that? Or at least more than they need for immediate needs.
It's already hard to find unregulated exchanges
Forex exchange is pretty cheap these days with things like Wise.
You can technically charge your debit / credit card just by knowing the number.
All the others are political problems and they can't beat a state actor. Eg. You won't stop the government from seizing your assets: they'll put you in jail until you give them up. We should think about a political solution, not a technical one (I'm all for abolishing the government).
I'm surprised they didn't crack down on crypto earlier, I suspect they're using it as a sort of inflationary device. Having extra unbacked crypto in the world means you have more money in the world, making the rest of the money a little bit less valuable - but I don't think crypto was considered seriously enough to affect fiat, at the beginning. Now, when you want to push your currency or local assets up you can just ban/harm crypto (which is what Russia proposed with the RUB going down a month ago).
I’m not sure what you would be doing where that would make sense that’s not an illegal/illicit transaction.
When I enter my debit card and PIN into an ATM belonging to a legally regulated bank, I can be reasonably certain that it won't directly steal all my money. Using a BTC ATM, however, sounds like a convenient way to have all your funds stolen without having to wait for the next big crypto hack/fraud.
A Government forces a private company to restrict 9 million CAD donated to a cause.
The narrative behind crypto reminds me a lot of gold bugs who rave on and on and on about how defective the existing fiat monetary system is , in hopes to push up the fiat prices of their asset.
Every speculative asset needs to have a narrative tied to it to help newcomers rationalize buying in their fomo. (Look at GME, louisiana bonds etc etc etc). That doesn’t mean that it’s not a good tool to make a quick buck if your timing is right.
You are making assumptions.
It might have been your motivation back then.
It most certainly wasn't the motivation for many people I know in the space.
I was introduced to bitcoin by someone who was also promoting this:
https://www.youtube.com/watch?v=2nBPN-MKefA
and the interest I developed for it was both because the tech. was interesting and new and it resonated with my political sensibilities.
Strictly nothing to do with drugs.
What other real world use case has there been for crypto so far that’s actually 1-useful and 2-adoptable ?
The government will just crack down on it eventually and the transparency of the blockchain will be used against you.
We need a political solution, not a technical one. In my ideal society I would still have private banks and I would have a currency 100% backed by real goods. There just wouldn't be a government bailing out banks when they screw up, vomiting up regulations and stealing your money every year.
That said, some of my friends went all in on BTC and got insanely rich, started buying islands in the Caribbean and places in Switzerland. Hopefully some of the crypto money will start a government-less society experiment somewhere, somehow, at some point.
> Then you have to actually give people money. > > You know how, whenever there’s a debate about cryptocurrency, some crypto fanboy gushes about how it makes sending money so much easier? And if you’re like me, you think “yes, but right now you can just enter a number into Paypal, that already seems pretty easy to me”? > > I take it all back. The crypto future can’t come soon enough. Sending money is terrible. > > Paypal charges 2-3% fees. If you’re sending $50K, that’s a thousand dollars. Your bank might do wire transfers for you, but they have caps on how much you can send, and that cap may be smaller than your grant. Wires can involve anything from sending in a snail mail form, to going to the bank in person, to getting something called a “Medallion Signature Guarantee” which I still have not fully figured out. Sometimes a recipient would tell me their bank account details, and my bank would say “no, that account does not exist”, and then we would be at an impasse. If you have double (or God forbid, triple) digit numbers of recipients, it all adds up.
[0] - https://www.coindesk.com/learn/what-are-ethereum-gas-fees/
Regarding the transfer cap, I really don't understand this. Is that a cap on personal transfers?
Regarding Paypal price, let me ask this: Is the 3% Paypal asks required costs o working with fiat currencies? NO.
Then that is that? That is the price Paypal asks for using their product. Is a price on a free market.
So how will this happen in the crypto space?
Will everybody know how to do transfer with crypto? Or will there appear some products that might charge a fee to facilitate the transfer? And if they will appear what stops them to add 3% fee?
If the answer is everybody will know how to keep a personal wallet and do transfers then the answer is probably wrong. People (outside our small IT bubble) don't want to learn complicated technologies so a nice product with a good UX might appear that will do what PayPal did for credit cards transfers and they will find a way to charge their users.
If you’re not trying to avoid legally-owed taxes or commit crimes, these things can all be done by traditional means.
I can even get free (both personal and business) bank accounts.
Free bank accounts are becoming pretty rare, unfortunately. Give it a couple of years and they'll be extinct :-(
A brief comparison between getting paid on Payoneer and a crypto exchange.
Payoneer - Sends invoice, client pays. Payment takes 1 or 2 days to hit my Payoneer account, and withdrawal takes another 1 day to hit my local bank account. If you withdraw on a Friday when the banks have closed, you'll have to wait till Monday to get your money.
Crypto - Sends invoice, client pays. Money hits my account immediately, and I can convert to fiat in less than 30 mins.
Now, I'm not even a fan of crypto because I think the field is spoiled with fraud, shysters, snakes, and all that...but crypto solves a good problem for me of getting instant payments. Notably, I only use stablecoins and abhor speculation.
Edit: Just to add, some mainstream payment platforms like PayPal and TransferWise are blocked in my country, and I've lost a significant number of jobs for this reason because clients refuse to use other payment options.
I think people in the first-world may not have much of a use case for crypto, but people in underdeveloped, unstable countries like mine have an important use case.
Whether you like it or not, financial infrastructure powers our world (chicken nuggets wouldn't be possible without hedge funds, all large corporations eventually pivot into financial services etc), so having a network where innovation of this infrastructure and the products built on top can happen at a faster pace is incredibly compelling. It's a matter of time before most of the new and compelling products and services show up in crypto before TradFi (because easier they're easier to build there), which will in turn onboard more users into the ecosystem.
- Trust: you don’t need to trust any authority or money emitter when using a cryptocurrency.
- Anti-inflation: It’s not possible to print e.g. bitcoin so you are not hit by the “inflation tax”
- Nowadays, governments and other institutions can easily block a bank account with very little reasons and then you need to go through a long process of proving your innocence. Crypto won’t be blocked. It’s like modern swiss bank hiding place
- A real property: it is one of the things that nobody, especially a government, can take away from you
- A war, blackout hedge: it’s hard to travel with gold when you can easily run away from a hot place to a better one keeping your whole fortune
- Probably way more use cases like easily transferring money around the globe etc
I also believe that crypto are in very early stage of their existence so some of the points may not fully apply yet but they are valid in a long run.
This has been happening to immigrants from Hong Kong to the UK who have an HSBC Bank account... On the request of the Chinese government. HSBC has quite a big presence in China and Hong Kong, so I'm not sure they have much of a choice. Sucks either way.
https://www.reuters.com/business/finance/hsbc-aiding-crackdo...
Governments can absolutely still imprison you or seize your other property until you pay your taxes.
The value fluctuates wildly and can collapse at any instant. Unlike gold or many other assets, it has zero intrinsic value.
Bitcoin solves both of these problems, the code really does what the whitepaper says, I can read it and understand a big part of it (there are a few difficult parts for me).
Towards the end of the last millennium we ditched that standard and let central banks juggle the pools from which money is derived.
I always liked how Bitcoin went back to the mining principle: a scarce resource that is hard to produce being used as an intermediary for the exchange of goods.
The ultimate reduction of this, for me, is to base mining purely off of time. Every citizen is given a certain number of tokens per day — the same for everyone — because in the end, time is all we have in the mortal world.
I don’t know how to square that off with cryptocurrency in its current form (the rich get richer — those with lots of electricity run the mines.) Maybe there’s a future for my proof of life coin?
It’s abstract, but the usefulness in the current cryptocurrency whirl is in making me even think this might be possible. If Bitcoin is Perl 4, then what instruments will be the equivalent of Go?
1. "store of value" - no single entity (US Fed, Chinese dictators, De Beers etc) controls its issuance. Supply is fixed and cannot be monkeyed around.
2. ease of transfer - we can transfer $10 or $1B worth of Bitcoin easily in 10min for a relatively little cost. While Gold also satisfies #1, it is not easy to transfer.
3. programmability - bitcoin can be wrapped and opens up a lot of possibilities (lending, collateral etc) on other chains like Ethereum.
4. other people believe in it too - I can trivially fork and create my own ShitCoin. But a harder step is getting other people to adopt it. Bitcoin adoptees, on the other hand, range from gen-Z WSB-ers to staid institutions. The later bucket - US senators, S&P500 companies (MSTR), countries (El Salvador), hedge funds, HNWI's - in particular is providing critical momentum.
Ten years down the line, I see new arguments. Store of value is very common. My understanding of digital currency is as follows, You get a small file that's encrypted, and you give someone large sums of money. I can have a 10 year old write up gibberish in Word, and encrypt it for you, if you want to give me money. Digital currency has no value, but what people are willing to pay for it. So if you want small, gibberish files with a password, please ask, I'll give you as many as you want as long as the price is right.
Digital currency is scarce. There are thousands of forms of digital currency out there, and thousands more will be created, making a unlimited amount of files with nonsense in them, that people want to buy. I remember there was a site on HN several years back that you could create your own digital currency. I created one. I never checked it out afterwards. Digital currency is not scarce.
Ease of transfer. I don't know how it is today, but back in the day, it was not easy. You had to set up a wallet, they had to set up a wallet. Information had to be exchanged. Just no. When a mom and a dad, can hand a 2 dollars to a clerk and get a gallon of milk. Ask that same person to try that with a digital currency. Ease of use in a big no.
Digital currency is secure. I just saw a post on HN that someone hit the wong button and delete 1/2 million dollars of digital currency. I remember Mt Gox. I see stories every week about how insecure digital currency is, and not 100s or thousands of dollars, but millions and billions. No not secure.
Digital currency is not subject to inflation. Lol, you drank the cool aid. Big players like investment institutions have gotten in the market. Everything that can't do on the stock market they can do in the digital currency market. You don't think they can be manipulated. Digital currency go up and down every day. In otherwords, if you actually think this is a currency, which it is not. Then, you have deflation and inflation in extreme amounts, daily.
On a side note, the energy use for creating these worthless files is not good for the planet, and should be used somewhere else with a real purpose.
I hope I'm wrong, and digital currency unites the world, ends poverty, homelessness, war, and hunger. But until then, miss me on this insecure, difficult to use, worthless, gibberish files.
[0] https://youtu.be/A651oDZvb0E?t=266
[1] https://tallyco.in/s/lzxccm/
[2] https://www.cbc.ca/news/canada/toronto/freedom-convoy-2022-d...
People have always found alternatives, for example in South Korea index option trading was historically popular. In the United States it was originally illegal online poker, now single stock options are popular. In Europe trading FX was once popular.
Many of these outlets that either replace or augment gambling have now been supplanted by crypto trading. In many markets you can actually see how declining activity in one aligns with increasing activity in crypto.
No government can mint more crypto due to awful monetary policy.
Also, no, money laundering is not possible on most chains since all transactions are public.
Citation needed — as far as I know there are cryptocurrencies where this is not the stated goal. Also public does not equal no money laundering, because the transactions are at least pseudonymized.
Dubious sales on the darknet were literally the real world problem that made cryptocurrencies what they are today.
You can have anonymous BTC address. You can tumble it and you can exchange it at anonyy location.
It is the most anonymous digital currency after cash cards.
> It is the most anonymous digital currency after cash cards.
Monero is far, far more private. There is a reason why most reputable cryptocurrency exchanges don't accept it and it's because of its privacy features.
These make it impossible to trace your transaction history (and comply with regulations), which is quite trivial to do with Bitcoin.
1. I don't know of any other way send and receive USD(USDC) anywhere in the world with instant settlement for < $0.00025. Previously used Payoneer and Paypal which has much higher % fees (also USDC trades at ~6% premium in my country :D).
2. Good ways to earn yield on USDC on exchanges and smart contracts.
Without them the only way to keep your money not in cash is give them to 3rd party (banks/investment funds etc) which is just absurd.
And if you are not in top country, those third parties can collapse/be blocked in a blink of an eye (and they always and often do).
More generally, crypto can do most things that a bank can do. It’s not the best at many of those things yet. But it’s evolving much faster than banks do.
Here’s Yanis Varoufakis on disintermediation from banks:
“ Today, you use digital money (phone apps or plastic cards) to buy a cup of coffee at your local Starbucks. But, to do so, you first need an account with a commercial bank. In other words, to grant you access to digital fiat money, the state forces you to fall into the embrace of the commercial banks.
So, today, the state guarantees a monopoly over payments to commercial banks. And that is only one gift to the oligarchy. A second, even greater gift, is that only commercial banks are allowed to have an account with the central bank.” [https://the-crypto-syllabus.com/yanis-varoufakis-on-techno-f...]
(He’s very critical of crypto in the rest of the interview - great read.)
Even more generally, with smart contracts, the blockchain becomes a platform not only for finance and trade, but also law. Every country has laws written in their own language. Smart contracts are our laws, written in code. So, anything done by authorities which involves record-keeping is a candidate for disruption by the blockchain.
The trouble is that many of the best use cases for crypto (land deeds, electric car charging, scientific publishing and citations) are public goods – beneficial for the society as a whole, but not profitable for any individual to build. Once we get over baseball cards and apes, it will be exciting to see public goods flourish on the blockchain.
They eventually should make it possible to do this unstoppably.
Whether or not these systems, communities, and economies solve any problems for you primarily depends on two things:
1. How accepted they become by the rest of the world (they are more likely to be useful if they can become part of, and enhance, our lives - for example by cutting out exploitative middlemen from some types of transaction or providing for cheap, frictionless, ubiquitous micropayments)
2. How abusive and/or broken our meatspace societies become (you might feel differently about bitcoin, Tor and the rest in an authoritarian fascist regime with hyperinflation than you do in today’s America, for example)
In a few cases we have solved real problems that require this new digital realm to solve, but there’s certainly more to do (as is evident if you try using current iterations of the tech, or better, ask a non technical friend to!).
Some examples:
- The problem of slow innovation in finance. DeFi might be a toy that’s currently learning everything we already know but it’s doing so rapidly and already creating a few innovations on the edges
- The problem of rebellion and civil disobedience — which are important democratic acts that have shaped much of the world we live in today — in an age of ubiquitous information and financial surveillance and control
- the problem of moving US dollars (or somethings close enough for many uses) around if you, your organisation, or even your country is locked out of the US correspondent banking system, because like it or not, dollars are the world’s reserve currency at this point in time
- etc.
1. https://www.investopedia.com/financial-edge/1011/how-the-tri...
Crypto, with mining, allows conversion of other energy sources, eg hydro or unwanted flare gas, into currency.
Not saying it's good or bad, just making an observation.
With fiat book money any payment processor (banks, CC, paypal) can create dept and thus money. We have to hold a gun against their heads and never look away to make sure that they don't cheat. Crypto solves that problem.
Please note, that you asked for solution. Crypto is creating way more problems then it solves. The VISA Network is processing 2G transactions per day. With crypto you can be happy if you get beyond 100k per day. There is better reasons to burn fossil fuel, etc. pp.
https://twitter.com/sweis/status/1049047164117078016
IMO the main use case is a decentralized currency that isn't centralized by any specific government (but may be, given enough power). Also things like escrow in a 0 trust system are possible.
That being said, like everything, there are _massive_ tradeoffs to this. Almost nobody actually needs this. IMO buying and selling drugs on the internet was one of few actual use cases, whther "right" or not.
The only way to outperform that consistently, that I have found, is to Dollar Coast Average: to buy small amounts of Bitcoin per day/week/month.
For example: if You start on 01/01/2019 and put in $10 every week, then by now you would have put $1630 into bitcoin. But there is the thing: the value of that stash of bitcoins today is .... $6,330.56
See how this fights inflation?
You can make your own calculations easily here: https://www.bitcoindollarcostaverage.com
This only works as long as the price of Bitcoin (and other crypto currencies) "goes up". If it stagnates or drops, you can lose money, even more than the current inflation.
E.g. Calculating the Dollar Cost Average for the last year would show that you probably would have lost money, with a negative ROI of -11%.
Specifically one where the other party is laying claim to assets you earned?
In these type situations, an asset that:
1) no one knows you own
2) even if people know you own them, can't be seized short of torturing you to regurgitate the password
3) can be transferred to any person of your choosing and in any jurisdiction of your choosing in a matter of minutes.
Says you.
You can buy crypto person to person. The transaction isn't registered on any exchange.
You can mine it. Nothing gets registered anywhere.
If you choose to buy cryptos on regulated exchanges (why would you ?), bear the consequences of your choices.
Assuming you have any other or the bulk of your net worth is not stored as crypto.
I mean this is already a silly scenario where you’ve got married to someone you have an intensely adversarial relationship with and tried to hide all your assets by making them unusable.
In societies so broken and unsolidaric that individuals have to fall back on such matters, maybe. Also very useful if you are a drug cartel, a shady bussines or similar — so people that totally won't do damage to the cohesion of society in historic experience.
The current divorce laws in most western societies pretty much match my description, especially the US.
If in your world, those count as "broken and unsolidaric (sic)", then: sure dude.
So while I understand (and empathically feel) the circumstances leading to male divorcees in the US thinking this would be a good idea, I think there are easier solutions with much, much less side effects.
Or have people in the US given up on changing society via democratic means to such an degree they don't see a viable way to change such a simple thing like divorce laws?
Crypto would change nothing unless you are much better at laundering money than everybody else.
A sample:
Can't have a bank run with closed banks! (Taps forehead).
So, crypto is a bank always open. It's better money than actual money.
A few years ago I had a client in Indonesia, who couldn't pay me via banks, because Indonesia banks just said 'no' to transfers to Russia, and Paypal/WesterUnion fees were exorbitant. We tried bitcoin and were blown away: the whole operation (buying btc for Indonesian currency, sending it, selling it for Russian currency) transaction did cost far less than just converting USD to RUB in a bank.
One acquaintance of mine lives in Turkey and Turkish banks refuse to open an account for him. So he receives his payments via Bitcoin and converts them to local cash currency via a local trader.
Also, Bitcoin is the last available way to fund anti-Putin opposition in Russia, our authoritarian government has blocked all other ways to do it.
When the world went off the gold standard they changed how their currency functions. The thing is, forex basically kept them in balance with each other. So instead of a gold standard it became a forex standard.
Countries still couldn't just print money, but they did.
Countries like Denmark, Germany, Finland, UAE, and some others who didn't... their inflation is under control. The relative wealth of their people is going to be that much higher.
Hungary is a great research point. https://tradingeconomics.com/hungary/central-bank-balance-sh...
They did print money in 2009 and didnt pay it back, now they did it again in 2020. Comparatively it's not as bad as other countries but opps 7.9%
https://tradingeconomics.com/hungary/inflation-cpi
and who did this? https://en.wikipedia.org/wiki/Fidesz A right-wing party who opposes globalization and I believe is fiscally conservative.
The polticians don't matter. The fundamentals of the currency matters post-gold standard. The politicians can and will1 print money but they cant get away with it for free.
That's where crypto comes in. It's not unlike buying Picassos or Hypercars. You are actively hedging your money against the politicians ability to print money and abuses by the financial system.
There's also a very obvious threat here. When countries can effectively no longer print money. Socialism dies again. Hence why communist countries effectively have crypto banned. China and Vietnam have explicit bans. Cuba and Best Korea don't have free access to the internet.
Yes, I'm aware of the fact that the ledger is public, but not everyone is.
The base fundamental use case is this: We (humanity) need a digital native currency. If I can web / email / interact with pretty much any human on the planet, over a commonly owned and shared infrastructure using openly developed protocols and software, why can't I send / receive money from them too?
Pretty much every other use case I have heard is a subset of this
- my government stops me from doing X (X being reasonable from our nice Western point of view like avoiding currency controls, or unreasonable like buying heroin from the supplier) - I am unbanked (similar to government stops me ...) - Why should the world pay a Visa tax?
1. there is a difference between "permissioned" and "permissionless" crypto. Roughly speaking permissioned crypto is where some trusted third party (Bank of England, ECB, the Fed) gets involved in creating the crypto-currency and being the validation point to prevent double spending.
The double spending thing is the issue - it is the core of what makes all this difficult. If A spends with B and tries to double spend with C you need some public ledger that says A has already spent with B so C is out of luck. The easy way is A and B post the transaction on the Fed's website and the Fed just takes whoever comes in first. The hard way is to say we don't trust the Fed and have a clever way of agreeing what posts are "true" - blockchain, mining etc etc.
2. Ok - so we now just invent a working permissioned crypto-dollar. Surely this is all good? Well maybe - the basic use case is really important - we want to spend money as easily as sending email - but :
a. Deposits are a big thing. if I can hold crypto-dollars on my phone and send them to Jeff Bezos with no marginal cost or intermediary then why do I have a bank account? Why deposit my salary into my bank? And if I do not deposit my salary into my bank then the wikipedia article on fractional reserve banking goes all funny.
If deposits go out the window, all sorts of second and third order consequences hit.
- If no deposits, then no lending via the banks. and so no monetary supply expansion. Monetary supply expansion in fact needs to be explicit at the permissioned base.
- we could try having banks produce their own currency "under" the Fed but the history of that is total disaster
(it's worth nothing that the history of bitcoin is roughly a fast forwarding of 200+ years of bank failures and fraud that lead to the current state of regulation. Crypto is a wild west that needs a marshal.)
- Yes we can "trick" everyone into holding their currency in a wallet that routes through a bank account, but most banks will fuck that up in the initial implementation and even so people are stupid, especially for bank accounts that charge - and will simply leave quickly .
These sort of consequences of a working crypto-currency were what was being talked about in 2009/10/11 - the downfall of fiat currency etc. Before lots of people found that the number just go up - and speculation (and money laundering / currency control avoidance) became the basis of bitcoin.
References: https://blog.dshr.org/2022/02/ee380-talk.html?m=1