U.S. Secret Service Launches Cryptocurrency Awareness Hub
secretservice.gov
secretservice.gov
One argument seems to be that cryptocurrency is purely speculative, which is apparently a dirty word. What about the stock market? What about any kind of investment? If you truly believe that cryptocurrency is the basis for a superior economic system, isn’t it rational and wise to put some of your savings there?
Another argument is that crypto enables ransomware attacks. This to me sounds akin to saying “encryption enables child exploitation”. I.e. it focuses on one abhorrent element of society that would take place no matter what and blames its existence on a system which has great potential for good, a kind of propagandist thinking.
Another argument is that Banks will be hurt by crypto. Good! Any epochal transition can be tumultuous, but in my view disrupting the basis of the greatest wealth inequality known to history is a good start. We’re not talking about “banks” that operate on a local or regional basis — these can adapt to using new technology and serve the same people — we’re talking about multinational Banks which went beyond skimming the cream long ago and don’t aparently have people’s best interests in mind.
Most other assets represent ownership of... something. A company, a commodity, property. Cryptocurrency is closest to either a fiat currency without the government backing that typically tries to stabilize those. Or to more exotic and abstract financial instruments like credit default swaps or shorts.
Basically what's missing is the ability to even guess at the "true" value of cryptocurrency. There's no P/E ratios to consider because the only thing Crypto "produces" is Crypto transactions. It's also impossible to even guess at a floor or ceiling for the price of a cryptocurrency. The only thing that determines their price is human sentiment - a very fickle input.
Because of this, it's likely that cryptocurrency is vulnerable to market manipulation. Both through large transactions and through marketing. See also: the ample evidence of wash trading in the NFT space. In these kinds of situations my feeling is that if I'm not the one doing the manipulating then I'm the sucker on the other end.
Ordinary accounting principles already have a concept for this: goodwill. If a business's valuation exceeds the net of its tangible assets minus liabilities, then that intangible asset is called goodwill.
Goodwill is neither a strange concept nor inapplicable to virtual currencies/assets. Instagram's value as a business entity (yes, I know it's owned by Meta) clearly exceeds the value of the source code, real estate, office furnishings, accounts receivable, etc. A competitor could duplicate everything Instagram does, but the competitor wouldn't be as valuable as Instagram. That difference in value is goodwill. In the tech industry, where we give new names to old things, we call it network effects. The Instagram network is an intangible asset that has real value, which you can't derive solely from Instagram's tangible assets. That company had to build a product and become extremely lucky that it caught on and became popular. Instagram is valuable because its users think it's valuable. If you aren't an Instagram user, you probably don't see its benefit and might have trouble understanding why it's a $XX billion business entity.
Same with successful virtual currencies and assets: they're valuable because of the network effects. Bitcoin is valuable because its users think it's valuable. That's true of any valuable network, and it's true of Bitcoin.
You left out IP other than source code, specifically all the User Generated Content they have.
The value is in the network, not the IP.
Interestingly, this isn't really true anymore. Most of the newer defi currencies represent a portion of ownership in some protocol that is actually returning profits.
E.g. Maker is a lending platform for DAI. You can borrow DAI by depositing other currencies as collateral. The interest you pay to borrow is then converted by Maker into a sort of "stock buyback" against its Maker token.
The Maker token has a P/E ratio, as do many other coins. https://www.tokenterminal.com/
To your point though, the P/E ratio for most of these is denominated in other cryptocurrencies, not in USD.
The way that I am interpreting this is that if I were to invest in one of these (i.e. Maker) then the returns that I would see are there purely because other people are investing in it.
That is close to what most stocks do, but at least with stocks in a company the value is not driven by the mechanism by which it is traded alone, but also by the decisions and profitability that the stocks are backing.
That's the opposite of what I'm saying. The returns are from other people using the platform, not from investors in it. For Maker, using the platform means borrowing. For Uniswap, the returns are from a small % fee on trades. It's exactly analogous to a traditional company.
This is essentially the "problem" at heart of all crypto "currencies". There is no real world use case that imparts human value, apart from its utility as a speculative vehicle to grow wealth.
Every new DeFi application is a new layer to lock in current adapters who would've otherwise already cashed out. Crypto as a currency is a concept dead in the water because of the perverse incentives of finding every corner of arbitrage between non distinguishable (and frankly worthless) alt tokens/coins.
The entire world of crypto is nothing else but an experiment of how much one could financialize a fully non-regulated, intangible, and imaginary "good" based on nothing but greed.
If it was a ponzi scheme they would be spending millions on advertising and use fear of missing out to get more people to invest.
Wait....
But what is the value of the protocol?
> actually returning profits
Are there actually profits if the protocol is worthless?
Wish I knew! Investing would be a lot easier.
> Are there actually profits if the protocol is worthless?
Nope, therefore these protocols are not worthless?
That's misleading. Revenue is not earnings. For something like Uniswap, you also have to look at how much of earnings is given to liquidity providers versus spent on token buybacks.
For example crypto.com offers 12% pa. on your USD account.
P/E just like normal company ...
Oh course their are subtle details that cause volatility and risk of collpase based on how the company/bank/borrower uses the money you put in.
And it is not loan, it is a "stake".
An example of the mumbojumbo obvious fraud that is out there.
It has nothing to do with a company making money by producing useful products or services that has actual real world value.
Staking is just a very stupid loan that you give out without having any real insight into the people who borrowed from you.
It takes a certain and increasing amount of energy to generate 1 coin, which binds the value of the coin to physics. This is actually a very good thing, especially given it does not care where the energy comes from. If nuclear, solar, window, hydro, and thermal were our dominant energy sources, it would work in that just as well and without bias. Indeed, it actually has active market incentives to utilize clean and renewable energy sources — something the previous financial mechanisms grossly lack.
Existing banking institutions consume more energy in unmeasurable ways, and they DO care where the energy comes from: oil. They want oil. It’s called the petrodollar for a reason.
(Not anti-crypto, just contesting this point.)
These are not good things.
Bitcoin incentivizes mining using the cheapest source of electricity, not the greenest. Bitcoin miners are more then happy to move their mining rigs to places with cheap coal electricity.
The fact of the matter is, we need to not only move to producing more green power, we need to reduce the global power consumption. Green power still has negative environmental impacts, and there's practical limits to the amount of green power we can generate. Crypto mining is actively hindering efforts to reduce global power consumption, by consuming every spare bit of power it can.
Global warming is an existential threat to human civilization, and will likely negatively impact billions of people, if not everyone. Reducing power consumption is not optional. Bitcoin and POW cryptocurrency are making it harder to do that, and that should be enough to oppose them.
Maybe if I'm stuck on inefficient resistive heatong in winter, mining makes sense.
If you can reliably price a stock based on any measure of company value then you could be very rich very fast.
There is a reason they say don't stock pick just buy an index fund and hold.
What you're saying is already true and already is happening. The global financial services industry is a $20T industry.
> There is a reason they say don't stock pick just buy an index fund and hold.
Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements.
This is not what an index is. You are describing a fund, but an index fund explicitly does not evaluate PE ratios, profitability, and financial statements, they buy everything in the index according to the market cap. Some proprietary indices are privately curated in the way you describe, but in common use the "index" means all of the companies, rather than a curated subset.
You're splitting hairs. I guess I should have clarified. What I meant was that at some level the companies are being valued based on PE ratios, etc. So while the index funds may not be analyzing the underlying securities themselves (other than determining their weighted value), someone is, such that their market cap drives them being in the index (SP500 for example). Point still stands from the parent comment.
Cryptocurrencies represent nothing but transactions and the ledger of those transactions (which they are exceedingly wasteful and clumsy at achieving).
What you are leaving out is growth. Stock prices include expected growth of future profits which by no means is a science.
Not to mention all kinds of other things can affect a stock price such as global macroeconomic conditions, interest rates, etc...
That means that the total cost of all the mining divided by the outstanding value of BTC should approximate the floor.
Except when it doesn't. When it becomes unprofitable to mine, all of the miners turn off their machines, and the network dies, it'll go to zero.
Complicating factor is the miners who have free electricity, e.g., setup hooked up to their own solar farm or natgas flare. For them, the cost of mining is the capital investment over their output, so they'd keep their machines running as marginal cost of new energy is essentially zero, but the employees to keep it running? If we're down to very few mining machines running, how quickly does the difficulty scale downwards — fast enough to keep it running?
$PTON (Peloton) is -77% in the past year
$ZM (Zoom) -67%
$CLOV -82%
$HOOD (Robinhood) -70%
$ROKU -71%
$TWLO (Twilio) -59%
$DOCU (Docusign) -52%
Bitcoin is -28% over the same time period. Ethereum +51%.
The 2008 crash showed that most of those signals are highly manipulated. Bond ratings can be colluded on. Just a few short years later most of the dust settled on that, it happened again with the LIBOR rate. Traditional markets can be systematically manipulated when the fiduciaries don't act in a very fiduciary manner. (It keeps happening!)
Financial statement analysis and GAAP are much softer indicators than gen pop tends to think. It comes out of a period before behavioral economics took hold, for instance.
> guess at the "true" value of cryptocurrency
How I do it is this:
It's understood today that the Internet fundamentally changed "something" inherent about how we access, interact with and move information. There was a cambrian explosion of availability, and we overtime determined there was some form of "value" to it. It's worth remembering that how to value it had no real peer to compare to in terms of competing information networks - would you price an internet company, or infrastructure like you would a book publishing company or news org? That valuation and how to invest in it broadly took the form of Internet companies, or data-rate charges from infrastructure owners. It's challenging to price the actual data in the network. Arguably, PII/customer data is so valuable because that's easy to price. It's tied to a discrete individual. But for raw information packets, that's more challenging to do for many reasons. So we know this information has value, but we can't easily price it like we can other commodities (1 piece of timber == $$, 1 TCP/IP packet == ?).
Financial transactions are also a form of information. But they didn't experience a correspondingly large boom relative to the full impact on information by the Internet. This is because financial transactions need to be provably discrete, and TCP/IP and related design concepts aren't a good fit for it (yes, packets in transit are discrete, but what I'm referring to goes beyond that). So, we've seen huge explosions of financial activity where it was a simpler financial tx -> internet packet like in heavily digitized financial exchanges, paypal, venmo, and the large uptick in tap-to-pay smart devices. However, we're still entering payment details manually in many payment settings, and the digitization of current finance still ends up requiring a significant amount of manual settlement behind the scenes. This is because it's challenging to prove that "1 digi-buck" is in fact a discrete digi-buck I own and I alone.
So, that's the value that cryptocurrency solved: how to send provably discrete financial data, without relying on a manual, centralized settlement system that's possibly corruptible (what cryptocurrency people would call trustless settlement). It moves the value proposition from the external parties around the internet (ISPs, companies, consumer data) directly into the data transacted, itself. And puts a price on that data.
In my mind, I think of what the Internet did to information, and what cryptocurrency does to financial information, then there's a clear value prop. Edit: the big unknown though is how the tradeoffs between a good-enough service like venmo vs. bitcoin impact user decisions. Digitized finance that's just "good enough" might be good enough for quite a large chunk of the population, and it'll be a long time before we see me paying you for beer in btc.
Hope that helps but also would love to hear counters.
- Assuming LN is the infra that the Venmo of 2050 uses: I think you'd need a compelling reason for "Venmo" to drop (edit: or integrate LN into) their underlying infra, which is where I understand Plaid and inside baseball platforms b/t TX processors have very strong holds, and jump over to a blockchain stack.
- The volatility. It has to smooth out. I'm not going to be the next bitcoin pizza guy.
I recommend not using the "what about the stock market?" tactic to defend cryptocurrencies. Crypto is more speculative than the stock market because companies have physical assets, ongoing revenue and profits, dividends that they pay out to their shareholders.
Exactly!
If Uber ever shuts down for any reason, they can take all of their vehicles, buildings, gold, and whatever else they own, and evenly distribute them for all shareholders!
Uber owns billions of dollars of property, equipment and leases [1]. But your broader point holds. Uber has massive intangible value, which is close to impossible to distribute.
The difference between it and Bitcoin is one can buy Uber, all of Uber, and capture that value. M&A is the ultimate disciplinarian of the stock market, much more so than dividend cash flows. (Though the latter ultimately drives the former.) If you buy every Bitcoin, you destroy it.
[1] https://www.sec.gov/ix?doc=/Archives/edgar/data/1543151/0001...
Starting a business is open for millions “without western privileges” - and stock is owning a business. Starting a profitable business that adds value (people are willing to pay you for a service) is a lot more useful to society than spinning up another coin that does nothing.
Clearly, the world needs highway-based NFTs. Knowing that their ephemeral infrastructure is represented on the blockchain, something that is permanent, will lead to engineers building safer bridges. It will encourage the development of new fields of engineering, perhaps subfields related to structures and others related to materials.
Contrast that to the stock market, where companies sell ownership shares in their businesses tracked in ledgers maintained by western corporations. And some of the underlying businesses have no plans to ever to distribute cash to their stock owners-- look at Berkshire Hathaway! Look at Google! People buy and sell those shares only because the next person will buy them for more. It's a classic speculative investment, not like crypto which is backed by the full faith and power of NVIDIA.
/s. Or is it?
The real value is in the consensus, which is gotten by having:
Trust (longest chain) Technical security/other intangibles lowering risk Liquidity
Not necessarily in that order for all people.
Forever is a mighty long time.
Thankfully crypto isn't a democracy. Money market funds, banks, stock exchanges, and every other financial institution can be frozen instantaneously by the U.S. President to "prevent another financial collapse". Those who are OK with that much power being concentrated in one person, can continue avoiding crypto. But no amount of public outcry can ban, shut down or criminalize crypto, same as you can't ban IMAP or AES.
My hatred of get-rich-quick schemes has nothing to do with class signaling. I hate such schemes because they're almost universally scams designed to siphon money from poor people to someone who already has money. I hate them because I see friends and family spending their entire lives throwing away everything chasing get-rich-quick.
So, yes, that crypto has become a focal point for get-rich-quick is a huge red flag to me, but it's unfair of you to summarily dismiss that concern as snobbish.
There are many people who want governments to "step in" and protect people from themselves, but governments will likely have ulterior motives (KYC, AML, financial control) when they do so.
Is giving up the ability to detect those things good?
I wouldn’t use a bank that didn’t care to identify who was withdrawing my money…
The media sure likes to point to these things, but I personally have more specific criticisms:
- It provides store of value but limited medium of exchange. Until there is widespread adoption of BTC (i.e. people get paid in their salaries with BTC) then you're missing an important half of the definition of a currency
- Wash sales (see NFTs) and price manipulation is rampant.
> Those who are OK with that much power being concentrated in one person, can continue avoiding crypto.
If this statement is true "A minuscule .01% of Bitcoin holders control nearly a third of the supply"[0] then how is this any different? Isn't that worse then the current setup? To me crypto is simply a shift in power from a small number of people to another shift of small people (bureaucrat to technocrats). As the saying goes "new boss, same as the old boss".
> But no amount of public outcry can ban, shut down or criminalize crypto, same as you can't ban IMAP or AES.
Sure, but if you can't use BTC as a medium of exchange then it'll just be that - a speculative asset. So what other utility does it have? KYC (in the US) basically restricts BTC from ever becoming a medium of exchange.
[0] - https://fortune.com/2021/12/20/001-percent-bitcoin-holders-c...
> Thankfully crypto isn't a democracy. Money market funds, banks, stock exchanges, and every other financial institution can be frozen instantaneously by the U.S. President to "prevent another financial collapse". Those who are OK with that much power being concentrated in one person, can continue avoiding crypto. But no amount of public outcry can ban, shut down or criminalize crypto, same as you can't ban IMAP or AES.
I find this a funny argument. First of all, there's basically no understanding of civics in it. That's not how it works. The President can't just call up banks and tell them not to give people their own money, or shut down every stock market in the world.
Now you have a point if you're talking about control resting with a small number of people: Those in the highest echelons of finance and government. But on the other hand, this is also a problem with crypto as it is: Because it relies on things most people don't understand (the math and computer science), the people who do understand it have the power. It seems to me this argument is just 'No, we don't want that small group of people in charge; put OUR small group in charge instead.'
If so, be honest and make an argument as to why we should trust you more.
I've worked in politics and done tech and I don't trust either further than I could throw them, and I'm a tiny lady cripple.
Also, you can absolutely ban IMAP or AES, it just requires more effort.
Isn’t this what Biden is doing this week with Russian nationals tied to the invasion of Ukraine? I agree with you it’s more complicated than just a phone call, but for the opposing parties they don’t need to think about those details. Those people and companies who will be heavily economically sanctioned—-they’ll be eyeing crypto as a way to sidestep these sanctions.
(And to be clear, I do not agree with Russia is in this situations, but I’m looking at it from a supply/demand perspective. Events such as this are clear demand signals to me.)
There's a difference between "Money market funds, banks, stock exchanges, and every other financial institution can be frozen instantaneously by the U.S. President to 'prevent another financial collapse'" as thread OP mentioned and what you're talking about. I was addressing only systematic action for the sake of averting economic problems, not financial uses of national security power.
For INDIVIDUALS, you're absolutely correct.
Which is why I'm a large proponent of local currencies.
(Trust me, I understand. I'm a very confused Ukranian-American who would like to go back to not being relevant.)
This is a terrible example as the US government really did ban DES for a while - at least for "export", which includes publishing on the internet.
People who say "the government can't ban X" are really badly underestimating how far governments are willing to go if you really do start disrupting the state.
Unfortunately, reality is complicated and stereotypes die every day. In California I believe we are seeing in real time, a lock up of the system of value (money) where the assets are so large, and so immoveable, compared to what people "earn" by working in a job, that there are strange bucklings visible on the street. With Coinbase founders living within three miles of this place here, I agree, there is no stopping this in reality. Big thieves hate little thieves, and it is no secret that the Federal Reserve itself is making a cryptocurrency, with centralized transaction tracking - it was announced here!
sorry - I forgot, Lambos in Los Angeles, definitely. Angelinos have always been like that, it is part of the scene. So I am talking "not LA California" perhaps.. my bad!
Between the prevailing trend of rent-seeking subscriptions and shoving NFTs/blockchain into anything that some knucklehead thinks it will fit in, tech is very much becoming grift culture as the nerds get run over by sharks, business types, and crypto bros
Social media allows for efficient targeting, and even if you know how marketing works it will work on you eventually.
Stocks are backed by the company they are behind, when the company goes out of business the stocks stop trading. When you own stocks you vote on company leadership (or at least should). When the company makes money they pay you cash as a dividend (for tax reasons this most often comes in the form of a stock buy back making your stock more valuable. As such stock speculation on the company not stocks in general.
Historically money was backed by gold, and supply and demand of gold is what governed the price. Today cash is not, and it is only backed by the government saying you have to use it. As such cash is more speculative than stocks, but the government forcing you to use it means it has some power behind it. Bitcoin is backed by some governments, so bitcoin is speculation on those governments (this is new in the past few years and makes bitcoin somewhat less speculative than other crypto)
I don't see the point of crypto in the end. Almost everything it can do is better done by a secure central database, and the rest is a niche that can be handled by physical cash, or a contract (ie check) that is reconciled with the database later. Sure you could use cyrpto, but the energy costs are so much larger that I don't think we as a society can afford to use it.
Often?
"Nearly 75% of the stocks in the S&P 500 pay a dividend, and the dividend for most of them exceeds the yield on U.S. 10-year Treasury bonds (currently around 2%)"[0]
[0] https://cabotwealth.com/daily/dividend-stocks/highest-paying...
The more I learn about crypto (which isn't a lot), the more I agree that digital currency is the way ahead.
I'm not convinced that decentralized ledger-based crypto is going to win out in the long term. Let's be honest, is there any coin at the moment that you would trust as a stable store of value and not a speculative investment? Fiat currency goes down in value over time, but most central banks are good enough at keeping the rate of loss relatively constant. Most, although not all, coins are also less than ideal for conducting transactions. There's also a regulatory aspect that, for some reason, is generally discounted by advocates.
However, I could definitely see something like GNU Taler gaining widespread adoption, especially if central banks make good on releasing digital currency. There's no reason for consumers or merchants to pay anything more than absolutely minimal transaction fees on purchases. There's also no reason that electronic payments or transfers can't post in near real time.
> "but most central banks are good enough at keeping the rate of loss relatively constant"
The past two years clearly demonstrated central banks deliberately set the rate of annual inflation to a desired level in a much more directed way than anyone realized. At least for business as usual economies. Once you see inflation as a tax it starts to make more sense. But the end result is a "mostly" responsible entity in control of the inflation rate, so the sentiment is same: traditional fiat currencies will be more stable for a while to come, maby forever (when compared to crypto).
> "I'm not convinced that decentralized ledger-based crypto is going to win out in the long term"
Blockchain was designed to surpass the problems the pre-Bitcoin E-gold service hit: the government can always smite you by raiding your office and taking the servers. That's the sole problem Blockchain solves, nothing more. In that sense it's already proven itself as a successful technology. Otherwise, if you're a government-sanctioned entity there's no need to fool with Blockchain when rolling a CBDC: your main physical risks are terrorists and natural disasters, not smiting by a police raid.
> "especially if central banks make good on releasing digital currency"
It's coming, but it's not what people want it to be. The Fed is saying "we're not trying to kill off cash" while putting out open calls to investigate all the things they need to do in order to kill off cash. Another issue here that I don't see being talked about is that the very nature of stable-coins exposes these assets to the inflation rate that the asset is pegged to. This means it's getting taxed, and so it makes sense for the Fed to want to get into the crypto world from that standpoint.
https://www.federalreserve.gov/publications/files/money-and-... https://www.federalreserve.gov/econres/ifdp/files/ifdp1334.p...
The major danger with CBDC is that this is going to be used along with social credit scores. We just saw Canada lock bank accounts of anyone who donated to the trucker protest. These people are f#$%ed. Now imagine if they were locked out of using cash as well - even that emergency stash under the couch cushion would be useless to buy food. It's a nightmare situation and it's coming sooner than later. But again, governments and central banks don't need this level of power, governments have proven they will seize bank accounts of those they disagree with. But cash still allows people to move around these barriers. Once CBDC's roll out it's a very bleak outlook.
https://www.youtube.com/watch?v=rpNnTuK5JJU https://www.coindesk.com/policy/2021/12/30/mexico-plans-to-i...
I feel like it is a black and white and naive view to categorize every financial instrument as purely speculative. They exist along a spectrum ranging from on one hand, sound investments (i.e. US treasuries), all the way to more speculative plays like sports betting. Where an asset sits on the spectrum is a subjective to the eye of the beholder but concensus among investors at this time would probably place US treasuries, blue chip corporate bonds, US stocks in the sound investment half and crypto in the more speculative half. In part because new technology which makes some wary and in part because crypto is a form of currency where most participants appear to be 'investing' on the basis they can sell it to someone else at a higher price. Which sounds fine but normally stocks or US treasuries are underpinned by interest payments, dividends or promise of future dividends through earnings growth whereas most crypto does not have an of these characteristics.
I am blown away by the number of people claiming to be knowledgeable crypto investors who are dismissive of other investment types as speculative when they themselves appears to have little to no knowledge of the history of investing and why things are the way they have been.
Presumably the people you’re talking about don’t think that, so no it wouldn’t be rational for them.
After all, it required expensive custom hardware, and know-how.
What changed?
Have you considered it's just really early days?
Look at the history and this is easily answered: it let them do things better/easier/cheaper. That could be shopping, accessing government services, dealing with companies, finding a job, seeking educational material, entertainment, dating, connecting with friends and family (email was a pretty sweet alternative to long distance phone calls), etc. The internet picked up sharply as computers came down in price and people tried even cheaper options like WebTV because there was so much demand, and that started happening very quickly.
In contrast, cryptocurrency had much lower barriers to entry but despite having at least twice as many years by that point it has very little non-speculative usage because it doesn’t do anything most people care about. Even being a cheaper PayPal/Venmo would be an improvement.
How many years do early days last?
But right now, inflation is 7.5% year-over-year. And that's the official measure, which uses "owners' equivalent rent" based on a survey, instead of actual rent prices.
In the past 20 years (Jan 2002 - Jan 2022), the CPI went from 177.7 to 281.933, or a 58.6% increase. This means a 2.3% average inflation rate.
https://tradingeconomics.com/united-states/inflation-cpi
https://www.investopedia.com/terms/o/owners-equivalent-rent....
People shouldn't be holding dollars for retirement. People should be investing in productive assets. Its not good to have society's wealth locked up in paper notes or shiny metals hidden under a mattress or buried in the backyard.
Fiat currencies crash all the time. I believe the latest to collapse was Lebanon's currency.
Yes, existing financial systems are terrible. They are rampant with abuse, manipulation, and people converting human behavior into abstract objects that they can gamble on so that they can extract wealth without providing value and they do this to the point that they introduce systemic risk to our entire society.
Cryptocurrency is this times 1000. It is the financialization of everything. Instead of mortgages being packaged up into bonds and then derivatives of those bonds, everything gets packaged up into financial instruments and then derivatives of those instruments. Something like ETH makes it very easy to write programs that move tokens that are worth dollars based on inputs taken from the ledger itself. That inevitably encourages a sort of hyper-financial system.
That's worse.
I understand that the negative sentiment is a counter-reaction to the crypto bros, but a little more nuance would be welcome.
I’ll exit before the “uses too much energy” dissertations enter. I bet your stacks of bare metal severs and electric cars and hairdryers and ovens and water furnaces and electric heaters and gaming machines and four monitor dev setups are super green. Could crypto be better at using less energy? Probably. Could those other things? Yep. Is progress on efficiency being made? Well, yes, at least crypto is trying to do so with PoS etc. can’t say the same for your heavy old appliances.
Anyone saying this is talking bollocks. Wall Street hasn’t seen a bonanza like crypto since ‘06. Hedge funds are having their best fundraising years since the 80s, largely on the back of crypto-related trading.
The best balance I can come up for crypto is to mandate KYC at all on and off ramps, tax its trading like the luxury good it is (maybe using the proceeds to fund law enforcement around scams) and ban or surtax mining using American power sources. (Let others spike their power prices and pay us for it.)
That would drive the value basically to zero, since the entirety of all crypto market caps are based on their ability to facilitate digital crimes.
Name one single use of Bitcoin that legitimizes the trillion dollar market cap, and that fiat currency doesn't provide in a safer, more legitimate way. The "sneaking across the border with my life savings" scenario doesn't count. That has nothing to do with the current market cap of Bitcoin.
Which claim?
Whether or not you have a positive opinion of cryptocurrencies, this is factual. In order to successfully demand a ransom, you must have a way to get paid. For ransomware, you need something you can do remotely around the world, and something that can’t be blocked or reversed by the authorities. Cryptocurrencies were the first solution for this.
There was a dream that was crypto once upon a time. It is now exclusively the domain of organized crime, grifters, and every imaginable permutation of ne'er-do-well you can possibly scrape up on the web. The entire space sickens and disappoints me.
So the thing about investments is that they are a transaction that gives you a share of property in exchange for a share of the future income stream, albeit this mechanism is often imperfect and valuation may not so directly correspond to the current value of the underlying property or income stream. Even if many people are buying investments solely with the intention of selling them to somebody else for the higher price, the reason to gamble and expect the price to go higher is because of the valuation of the property. Even the miserly interest you get from parking cash in a bank account is tied to the income the bank makes from using the money you so parked.
But with Bitcoin, when you buy a bitcoin, you get a share of... well, nothing. And the way you make money with that share of nothing is to sell it to somebody else for a higher value. That's the only way to make money: you can't make money except by enticing new entrants, which is literally the definition of Ponzi scheme. And other investments aren't Ponzi schemes because there are other ways to make money from the investment, even if they aren't necessarily the most common way of making money.
This doesn't necessarily hold true for all cryptocurrencies; I'll concede that I'm not a connoisseur of the cryptocurrency community. But it feels to me like it's the standard tech-bro "X, but unregulated", except "X" here is finance, an industry which is famous for its unregulated elements not only resulting in lots of people losing all of their money but also bringing the economy down with it. So forgive me if I'm not exactly enthusiastic here.
You mean the kind that pay dividends?
It's also theoretically possible for some of the crypto-token-organisation things to pay dividends, but it's far more common for them to simply take the money and run. Because a token is not a legal framework like a company is.
https://www.nerdwallet.com/article/investing/how-to-invest-d...
I think cryptocurrency is polarizing. While the technology is interesting, the current landscape of related businesses is discouraging.
> One argument seems to be that cryptocurrency is purely speculative
With stock you get part ownership. Buying gold relies on the inherent demand for and usefulness of gold as a metal.
Cryptocurrency is like exchanging your country’s paper money for other paper money that is hard to counterfeit but is not backed by any country. It might be okay if your country’s money is crap.
This is the reason for the prevailing negative sentiment though. "Postgres will revolutionize the economy! Put all your money in unique keys!" Sounds crazy right?
I mean, it might not be wrong, we all trade assets using special government cotton, but it is still a wild thing to hear as a software engineer, and an even wilder thing to see people bet their life savings on.
You are biased too. How about comparing "crypto enables ransomware" to "unregulated gun sales enable mass shootings" ? Most western countries have regulated gun sales to avoid mass shootings, it works and the people sees this as a positive thing.
OK, it's controversial so replace "gun" with something else that is forbidden in the US for the greater good.
Compared to "guns for everyone", encryption has a lot of usages that are necessary (and beneficial). That's why banning encryption on the pretense of child exploitation is a mistake.
What does crypto bring to the table that is as necessary and beneficial as encryption ? Is it more like encryption or more like guns ?
On the other hand you also have to compare the bad side : is enabling ransomware as bad as enabling child exploitation or mass shootings ? (certainly not).
Edit: Even this gets downvoted lol
Additionally I doubt that cryptocurrency is disrupting wealth inequality. The major participants were all wealthy to begin and all of the increased interest seems to circle around the most wealthy… so it actually just contributes to wealth inequality. (In the documentary there is even apparently an mmo that people play to earn cryptocurrency tokens that goes into the wallet of an employer who then pays them a wage, with performance reviews and firings. Idk this looks to me only of recreating the same wage slavery and wealth grift that the original money system has.)
I think that explains part of the strong hn reaction to it.
The other side is software architecture of it, where crazy resources are spent making some parts decentralized, while other parts are centralized and ignore, creating a broken, overcomplex beast.
1. Crypto's primary use today seems to be money laundering and other unsavory "darknet-ish" things. It seems like it would be an unnecessary risk to associate your financial persona with such illicit activities.
2. When markets tanked due to Coivd, crypto went right down with it.
Some people get very very excited about crypto and kind of overly sensitive to discourse. I think some of that is early-adopter fervor.
Some of it, too, could be the understanding that the more adoption it gets the better the party is. The higher coin-caps go, the more respect, legitimacy and outside resources they command.
Take stocks on the other hand. If you tell me the stocks I'm buying are worthless-- that's good for me! It means you're not buying and driving the prices up when I buy and better prices when the businesses repurchase shares. So maybe that's partly why I don't care when people disparage stock ownership.
Point is, sometimes I wish labels like "pro-" or "anti-" crypto fell out of use-- it's a complex topic and most thoughtful people have more nuanced views.
* Consumer/durable goods meant to be used - i.e. dishwashers, houses you live in, furniture
* Appreciating assets meant to grow long-term wealth - i.e. ownership shares in productive companies expected to last a while and earn profits, houses you rent to others, land itself
* Bets and hedges - i.e. insurance policies, credit default swaps, futures contracts, the Bengals at +3500 or whatever
* A medium of exchange - some highly liquid, low fee, stable-valued token meant to be held temporarily to eliminate the need for either direct barter or trust in delayed-delivery transactions
Cryptocurrency just needs to get its story straight on which of these it is. Clearly a good can cross categories. People make bets in foreign exchange markets for currencies, as well as hedges when they actually do business internationally. Even owner-occupied housing can be seen as a strategy to grow intergenerational wealth. Beanie babies and baseball cards are consumer goods that may or may not over some limited period of time see dramatic increases in dollar-denominated value.
But fundamentally, you don't want a medium of exchange to cross over into other categories, at least not often. Rapidly decreasing value causes panic and social collapse. Rapidly increasing value encourages holding rather than spending, which brings the productive economy to a halt. Even just having direct use value may do that. You don't want collectible stamps or commemorative silver coins to be a primary medium of exchange because many holders will not want to exchange them, and same problem, the trade of real goods grinds to a halt.
Cryptocurrencies seemed to start off as a basically sound idea. Hashcash and proof of work were originally developed as anti-spam, anti-DoS measures. Make a client prove it did a bunch of useless work before it can send a request or message, as a natural rate-limiter. Satoshi came along and realized the tokens generated by this useless work have some level of fundamental value, and when traded on a blockchain, can allow for trustless transactions without the need for a single authority. All fine. But as soon as it got pulled almost entirely into the realm of speculators whose primary aim is to increase the dollar-denominated value of the tokens, it lost any potential to replace normal currency.
I don't think there is anything inherently bad or immoral about people sending each other what amounts to gigantic piles of dirt proving they have the strongest automated digging machine and convincing others who have a lot of cash that buying the dirt piles is a better wealth growing strategy than buying companies and land and other traditional investments, but it isn't exactly the revolution we were promised.
I still have not found the HN-like community that gets cryptocurrencies. Maybe it's just being created today. People say Twitter but it's still pretty meme oriented. /r/ethfinance is ok but not enough content. Zero Knowledge podcast is solid but podcasts are one way communication. And the forums for cryotocurrency developers are beyond my level of tech knowledge.
I wonder if at some point anthropologists will even study "tech's rejection of crypto" as a rift that became something more.
Don't sweat, this will all take place on Layer 2.
Let's be clear: this is what a graph of the values of currencies looks like: https://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y . Micro-value adjustments up-and-down, and if you comapred to the price of bread, midly inflationary.
This is what all (necessarily deflationary) crypto "currencies" look like: https://www.xe.com/currencycharts/?from=XBT&to=USD&view=10Y . Extreme swings, compared to the price of bread, massively deflationary.
That is also the graph of the value of tulips during https://en.wikipedia.org/wiki/Tulip_mania .
Regardless of whether you think (this obvious scam designed to enrich a handful of early stakers) is a scam or not: it cannot be a currency.
A currency cannot be this massively and necessarily deflationary, as it is never rational to spend it. If your currency is guaranteed to increase in value, it is always better to hold it. Thus rendering the only alleged use of crypto economically incoherent.
At this point, tulips in hand, you should start to wonder why you're being sold on the idea of a tulip-based economy. Clue: https://en.wikipedia.org/wiki/Greater_fool_theory .
And though the network is small, people spend bitcoin all the time. You say this is irrational, and maybe it is in some very static model of economic action, but as we know, the real world is dynamic. That is, it has a time component, the future is unknowable and there are very few guarantees. It turns out, that at some point people tend to decide they would rather have something now than wait for later and potentially get it more cheaply. A man's gotta eat, and sometimes he wants to enjoy a few luxuries as well. People didn't stop trading things when there were "massively deflationary" commodity monies in the past, and I don't see why that would be different today.
In fact, the whole "deflation" bugaboo is only indirectly about price. The real core of the matter is credit: "deflation" acts like a higher interest rate, which makes life difficult for debtors. We can already create debt products linked to inflation, and I see no reason why that term can't have a negative sign next to it. This changes one's view of what investments look wise or not, but that is not necessarily a bad thing at all.
Everyone else spends only when they absolutely have to on necessities, as everything else is irrational. It's just better to hold the currency. This is the poverty trap of human history.
Crypto will never be a currency because it is designed as a speculative asset which transfers wealth to early adopters, in the manner of a bigger-fool scam. The early buyers paid $10/coin, and the fools paying $100k/coin will be the ones funding the cash-out by providing that USD liquidity just before the collapse.
If it collapses to $1k/coin, the early adopters will make their 10,000% return, second phase 100%, and the vast majority of people will be running at -100000%+
You could not design a worse system to be used as actual currency. It is incredibly slow, incredibly inefficient, a handful of early adopters hold all the power, etc. etc.
If, as I predict, volatility goes down as the network grows and bitcoin becomes used for more things, so does average return. In other words, the "deflation" rate reaches some small but steady level. The days of number go up will be over, bitcoin would be something boring that goes up only slowly over decades. Like the foreign exchange of a virtual country, its market price vs other currencies would be determined more by balance of trade than by currency speculation.
Of course, that future is far from certain. Buying bitcoin now is like buying an option that pays out if that future comes to pass. The price of an option is very volatile, but it is never zero until it expires. Bitcoin might wax or wane in popularity, but it will never expire.
This is all that the words "speculative asset" entail: they are risks that work out in some possible futures and don't in others. So it doesn't bother me that some people bought bitcoin and $10 and are now sitting on a nice stack. That bitcoin could have easily gone to 0.01 today. They took that risk. Why shouldn't they reap that reward? Without those early market participants in bitcoin, wouldn't be even more highly concentrated? My advice to such whales would be to spend their bitcoin on business investments that help spread the coins and bootstrap the network. Bitcoin-related businesses that pay employees in bitcoin. There are still bold people out there who want to live in an alternate future and try to make it real.
Of course, I don't think everyone should get into speculation... It's got a pretty high attrition rate even among the professionals. But you know, oddly enough, it's when inflation rates are higher that the more people are forced to be speculators just to stay in place.
Being on the cutting edge means that most of the time, what you are doing just doesn't work.
I've been listening to old timers tell stories about working at MOS technology back in the 70s. MOS was rather vertically integrated, with chip design and fabrication feeding all the way to consumer products. So chip designers dealt with buggy manufacturing processes, board engineers got buggy new chips hot off the wafer, and software guys got buggy dev boards. A lot of time was spent trying to go back and fix bugs at the lower layers, sometimes all the way down to manufacturing defects. It might sound crazy today, but for a time they could do things that very few other companies could.
"It's slow", "it's buggy", "it's inefficient"... all of these are ways of saying "I can't, I won't". Expressions of fatigue. They don't lead anywhere.
"I'll make it fast," "I'll make it work," "I'll make it efficient"... all are expressions of will. This is the attitude that the builds the future.
* What are the major problems with existing currency systems?
* Which of these specific problems does crypto solve?
* What problems does crypto create? Are these less serious than the existing ones?
* How well/reliably does crypto solve them?
* Who are the stakeholders that will determine crypto adoption?
* Which of these stakeholders would switch to crypto, and why?
* Why wouldn't they?
* If crypto sees no widespread adoption, is there any market value to it as an asset? What would this value be? Why?
Let me remind you: crypto is backed by a highly centralised companies largely controlled by early adopters who hold the vast amount of the crypto value within the system; their relative control can only increase overtime as the asset is deflationary. The entire economy is determined by the immutable blockchain, unless its forked to preserve the interests of those with massive holdings. The immutability of the blockchain makes fraud irreversible, unless the chain is forked -- so fraud is only reversible against high stakeholders. The chain is incredibly operationally expensive to run, centralising service control to a few companies, and incredibly slow. The whole economy is public, so once your identitity is known, you're entire economic life is visibile to everyone -- making blackmail, fraud, and "ruthless and abtiary credit checks" easy.
We know what a society based on a deflationary stake captured-early is like: its called feudalism.
Crypto is an anti-democractic economically illiterate project to create a feudal society in which power is proportional to holdings; and redress requires convincing the powerful to "fork the economy".
If it had any chance of success at all, it would be necessary immediately to organize a massive political project to ensure it was stopped. The reality is its just a group of fanatics engaged in a get-rich-quick scheme thinking that in the future where they are rich, they'll have the power (by design of the system)!
Thankfully it's genuinely silly and ineffective, and the only thing crypto has ever done is be sold to the next fool along. No one really needs to worry, within the decade crypto will have collapsed. I'd say 5 years, but of course, bernie madeoff ran his greater-fool scheme for 30.
It appears the “greater fool” + deflationary currency creates a sustainable feedback loop for rebound.
If the main developers decide, no, we can mint more coins then the premise gets even more muddy.
There are two parts to the reward for mining a block: newly minted bitcoins, which follow a fixed distribution and decrease over time (halving every four years), and transactions fees. The intent is that as the supply of new bitcoins decreases the transaction fees will make up the difference to sustain a reasonable level of competition among miners even with no new bitcoins entering circulation.
> If it loses miners then transactions take longer to complete.
Only in the short term. As long as the loss isn't too sudden, over time the difficulty will adjust until one block is once again being solved every ten minutes on average. (There is some risk from sudden reductions in the hash rate, as the adjustment takes some time—and that time is measured in blocks mined at the higher, unadjusted difficulty.)
Perhaps at some point it'll "go to the moon", and people will start to cash-out. In many ways, the more popular crypto becomes, the less stable/usable/sensible it will be.
Is the volatility an inherent problem built into the code and design of bitcoin et al? Or does the volatility stem from external factors like it being new, difficult to value, and much lower market cap then other currencies? I personally believe that bitcoin's volatility is not by design and will not last forever.
Secondly, you should rethink whether comparing bitcoin to fiat is correct (I would suggest gold) and rethink if bitcoin really is deflationary. Bitcoin has a lot of similarities to Gold. Check out this report: https://www.fidelitydigitalassets.com/bin-public/060_www_fid...
There is nothing in bitcoin's code that makes it deflationary. The reward for mining bitcoin does decrease over time, but never does the supply decrease - it only grows or eventually stops growing at 21 million
In any case, crypto isnt a currency. Comparing it to any currency presumes vastly too much, let alone "fiat" which has enabled the fastest increase in general wealth in human history.
Crypto is a extremely slow, extremely operationally expensive, nightmarish system of baseball card printing. Designed explicitly to progressively, over time, dramatically increase the power and wealth of the early-stakers. Its value only exists whilst people continue to buy it.
Whether deflationary currency is a good idea or not (it isnt: it's horrific); whether digital currency is a good idea or not (it might be); crypto isn't (really, sorry: its scam -- pushed knowingly by scammers, and unknowingly by those holding very very very expensive tulip bulbs, who "just cant see" why everyone doesnt want tulips).
The game crypto people play is this: talk about the tech with finance guys to bamboozle; talk about the finance with the tech guys, to bamboozle. Talk about fiat/politics/gov with everyone because "presumably there's something wrong with the economy right guys!!11! financial crash, etc etc.".
Despite, of course, the last half-century being the most wealth-productive for everyone in human history.
This is a confidence trick. Crypto has nothing to do with why blockchains are useful (mostly, they arent). Nothing to do with non-fiat currency (an inflationary one might be useful). Nothing to do with politics (a system which increases the power of a few early adopters is NOT! better than democratic politics).
Crypto is a scam. Blockchain, non-fiat, digital, anti-gov blah blah is the mask the scam wears. If you want a digital non-fiat anti-gov currency, go ahead and make one. Crypto *is not that*.
If the entire premise of bitcoin's valuation is an open market exchange based on supply (finite and fixed) and demand (variable), then logically, the outcome is perpetual volatility.
There will be zero cases where demand will flatline because this has never in human history occurred organically. For unforseen reasons (a business deal gone bad, a divorce, etc) a btc whale may decide to liquidate, causing a cascading effect of running out of USDT, bringing the entire market crashing down. Bezos may decide to add 4B worth of liquidity to BTC as a speculative portion of his portfolio. Shit like this will happen and only add to more volatility in valuation.
Depends on how strict you want to be. The number of coins the system allows is fixed. But the number of usable coins will decrease as coins are trapped in lost wallets. Software bugs, hardware failures, deaths, and simple forgetfulness will always make some coins unusable.
On the other hand, while "Bitcoin" on its own is deflationary, the whole ecosystem is wildly inflationary. There are uncounted forks of Bitcoin and related systems filling every speculation niche people can imagine.
It seems many adherents are starry eyed about some vague prospect of crypto somehow replacing the status quo, with little clarity over how that will be better for society - how it could replace the current structure with something that is less exploitative, less damaging, and more fair.
Quite frankly I get the impression that many are just salivating over the chance to be the new elite in a parallel system, new technology but in all other respects the same, and damn the consequences to the earth and humanity.
No impression. It's pretty much written in the comments elsewhere in this thread.
That's what makes them exploitable.
Those who wish to avoid inflation tax already have access to stocks, bonds, gold, etc. Doesn't your argument apply equally to those assets? And yet, people regularly sell those assets as needed to cover their expenses.
Without question crypto, now +2 trillion in market cap, is a systemic risk to the US economy, notwithstanding serious policy mistakes the Congress, Treasury & the Fed have made since QE1. I'm hoping USSS and other entities cleans house.
USDT fully diluted market cap is about equal to that of PNC Bank, America's 7th largest bank. If PNC Bank's reserves and market action (eg. questionable "minting") were anything like USDT's we would've seen investigation and likely indictments & convictions.
PNC Market cap, or assets they hold? A currency is not the same as the bank that holds it.
Also, how big is PNC compared to #1?
A bank’s assets include the amount in customers’ deposit accounts, as well as loans, mortgages and credit card accounts. Some of these banks have thousands of branches, while others are mostly, or exclusively, online. All of these banks are FDIC insured.
7. PNC Bank: $4.49B As of July 2021, PNC Bank acquired BBVA USA and is transitioning customers and accounts. Including BBVA branches, PNC Bank now has branches in over half the country.
ATMs: About 18,000; the bank may reimburse up to two out-of-network ATM fees per statement period.
Branches: 2,800+ in 27 states and Washington, D.C., with high concentrations in Pennsylvania and Texas.
1. Chase: $2.45 Trillion Chase, the largest bank for consumers and small businesses, is part of JPMorgan Chase & Co. It has one of the largest branch networks out of all the biggest banks, with locations in the most states.
ATMs: 16,000; some or all out-of-network ATM fees waived for premium accounts.
Branches: 4,700+ in 48 states and Washington, D.C., with high concentrations in California, the East Coast and Texas; no branches in Alaska or Hawaii.
Perhaps grandparent's comparison of USDT market cap to the total value of the Financial Services Group stock is peculiar, but let's use correct numbers in the discussion. The grandparent comment refers to USDT market cap, which is ~$80B USD. That's roughly equivalent to PNC Financial Services Group ("PNC" on NYSE) market cap of ~$85B. JPMorgan Chase ("JPM" on NYSE) market cap is ~$450B USD.
The creators of USDT claim that every holder can exchange it back to 1USD each.
Although legally this is very different from a bank, I would argue that economically, it’s similar.
USDT creators originally claimed that every Tether was backed with USD, but then switched away from that years ago (if my memory serves me correctly). They now mention that they are backed by reserves, assets, etc.
USDT creators have for a long time said that they are not obliged to honor every redeption and will instead only selectively allow redemption. (The implicit understanding is that they will honor Tethers that exchanges require exchanged, but not from users directly).
Banks by design hold a fraction of what their clients deposit with them. This is one of the key mechanisms by which the economy expands... so a comparison against some "ideal" USDT is apples to oranges, but ends up being closer than expected when you use the actual USDT operating model.
Minus liabilities of $412bn gives you $54bn of free equity, which is a decent enough reserve ratio (capacity to absorb losses) for a bank.
People keep using this word and don't know what it means. Why it's used for crypto still boggles my mind.
> USDT fully diluted market cap is about equal to that of PNC Bank, America's 7th largest bank. If PNC Bank's reserves and market action (eg. questionable "minting") were anything like USDT's we would've seen investigation and likely indictments & convictions.
You're comparing apples and bananas. They might be related but they're not the same.
From my recollection of the 2008/09 financial crisis, systemic risks were those in which entities were deeply intertwined with one another on a massive scale, such that there failure would potentially bring down the entire system of finance. We're talking: retail banking (payments, savings, lending), commercial banking (idk?), public debt markets (bigco and gov funding), but most especially short term commercial funding. Again, going on memory, failure of short term funding (repo (?)) markets would have caused real, non-finance companies to become insolvent or at the very least massively impair their working capital positions. This has the knock on effect of reducing demand throughout their supply chains and major cost cutting (job loss). Etc etc. In other words, massive recession or even deep depression.
Crypto, on the other hand, seems to be mostly a casino, a big one, yes. But one that is not deeply intertwined with other parts of the financial system. Coinbase, for instance, is not systemically important. It doesn't (yet) have tendrils in so many important lines of business as did the megabanks of yesteryear.
Any time a big group loses wealth all at once, there's some consequence, but that's not the same as "systemic risk" where it causes catastrophe in areas not directly related.
It used to be people who purchased crypto had to know what they were doing (and know the risk). Now anyone can buy crypto without any understanding of anything after seeing a 30 second commercial about smart investing.
On the other hand, it's still not up to the size of Lehman ($600bn!). It's heading there.
And where is the hub. All I can find is /investigation/DigitalAssets but that can't be it. Usually when law enforcement does something their actions at least result in an accidentally positive side effect, like a crime getting solved. Here I would have expected that side effect to be a some sort of an informational website the public could access.
This is a public information campaign; the sole purpose is to provide public awareness information on digital asset security and how to ensure it remains secure.
[1] https://www.cnbc.com/2022/01/06/crypto-scammers-took-a-recor...
I have to hand it to the cryptocurrency scammers, though, they are definitely more sophisticated than phone scammers.
If you look under the hood, each supposedly decentralized, non-custodial service tends to have a centralized component coordinating or in some way controlling the entire thing. For example, a platform that pegs the value of an asset on the Ethereum blockchain to the US dollar, could depend on a single server to inject information about the price of the US dollar in terms of Ethereum or smart contract tokens.
Through competing with the national currency, cryptos force it to innovate and become faster, more resilient, more inclusive, and less prone to inflation.
The fact that more and more capital is directed towards them is a symptom of the fact the national currencies have shortcomings.
I literally laughed out loud. People buy crypto because they think it will rise in value, nor because it has any relevance as a currency (outside of certain illicit markets).
Source? As far as I can see, Bitcoiners are especially hammering the messages about Austrian economics, the right of freedom to transact, self-custody, separating money from the state and so on. Their scripture material, rarely talk about "price" at all. The maxis will even make fun of you with 1 bitcoin = 1 bitcoin meme. I don't want to make an equally ridiculous claim about "why people buy Crypto" - but clearly not everyone buys Crypto to sell in a week and make more USD.
True. Recent price action seems to suggest that people actually may end up with less USD.
Sure, there are some true believer libertarian cryptonerds still living the original dream.
I suspect, though, that for every "true believer" out there with actual deeply held beliefs about financial systems, you'll find countless others in it purely to ride the wave and speculate, who learn just enough of the jargon to befuddle objections in casual conversation.
Source: several non-technical, non-economist relatives who have "gotten into" cryptocurrencies in the past few years, trying to explain their merits to me.
With crypto"currency" (which I agree is more like an asset), you can, if the supply is fixed and the demand were roughly the same.
And while individual coins can be designed not to inflate, the overall proliferation of new tokens, forks, and entire blockchains does mean that there are way more assets over time. This sucks some of the investment out of older systems like BTC, putting downward pressure on their price. This can function similar to inflation and, in the extreme, send a very large number of these systems back down to zero.
Early adopters making a bunch of money doesn't concern me at all because that's a short-term issue compared to the USD wealth transfer which will continue forever into the future.
Crypto is new, and there's definitely a lot of volatility there with new coins popping up and being destroyed far more frequently than legacy currencies. I expect this will die down over time.
FWIW my time horizon for thinking about these things is 50+ years.
Imagine I tried to convince you to use my new foo-coin. The hand full people of who have the most foo-coins can issue themselves as many new foo-coins as they want, but nobody else can create any foo-coins. You would probably think this is a nonsensical currency that no one would think is reasonable to use. Except that is practically how the USD works. The USD is designed specifically for the purposes of corruption.
They're not logarithmic though. Most are exponential in that they are of the form Lim * (1-e^time) which might look like a log function initially, but has different asymptotics.
Several coins have a quick ramp up (high block subsidy) followed by a tail emission of fixed low block subsidy.
Only one coin has a pure linear emission, which helps to deter speculation.
If it places controls while offering no advantages, capital will be on its way out as well, to friendlier jurisdictions.
For example, if you put up a Google Form and asked for people's Ethereum addresses, many will provide the 0xAbc123 version and many others will provide the Abc123 version without the 0x. Both audiences may not realize that the 0x is purely cosmetic and addresses and transaction IDs can be resolved without it.
Furthermore the state could go further and have examples of smart contracts that help trade, business and commerce function well, instead of malicious contracts that undermine confidence in that system. Similar to the role OpenZeppelin has taken with standardized smart contracts. The US Federal Government has created multiple federal agencies before, specifically to provide confidence and order to markets where there wasn't. So just take some inspiration from 100 years ago and apply the same standard here, as opposed to a CNBC article about the value of scams justifying your aversion to this market.
The state could go even further by writing and collaborating on smart contracts, even submitting pull requests or other equivalent contributions to OpenZeppelin contracts or other smart contracts. This would make it easy for market participants to quickly evaluate a smart contract and see how closely it conforms.
I'm not sure that the USG defining standard terms of use would mean that those terms become adopted by the entire crypto ecosystem.
I'm also not sure how a USG regulated contract market would play in a space whose main attraction seems to be "no regulations"
The same way Tor started out as a US Government funded activity.
The similarity being that they are just standards, not required by anyone. For anyone passing by, analogies exclusively compare similarities, not dissimilarities. Here we are exclusively comparing similarities.
In this case the US government would be helping with optional standards that help provide the glue between market participants faster.
The ethos of the space has nothing to do with the technology. I don't even get what the no regulation meme even means to you as a government helping contract formation and lending credence to one path while showing why is not regulation. Its freedom of association all the way down. Everyone is free to associate with a state contributed contract standard, and free to associate with a random one.
It is noteworthy that I used the words "help" and "collaborate" and you read "USG defining" and "USG regulate". Its the allergy to the word government that has room for re-evaluation. The concept of an adversarial state is familiar, but not all that there is, governments can also be gigantic nonprofits actually functioning in collaboration with the public. Sometimes I use them that way.
The purpose of a cryptocurrency is:
- Provide a digital transfer of value without a trusted third party
- Provide an alternative form of digital money, without a third party that controls its supply
Which imare both legal. That it allows people to more easily avoid some regulation is coincidental, but not it's purpose.
Citation needed.
I use Blockchain as resilient storage for the accounting of a scarce digital asset.
Right in the introduction: "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party."
"Trusted third party" includes regulators, among a wider array of other institutions.
I guess some people use it for the resistance to regulation (un-freeze-able accounts), others for speculation (like me).
Then again, with what is going on in Canada, I am starting to see the risk that the "trusted third party" betrays that trust.
Permissionless means they can operate just as much as anyone else, nobody relies on them
For every editorial or govt statement critical and concerned about cryptocurrency, there are, for lack of a better term, a corresponding number of "elites" plowing money into it, sitting on cryptocurrency company boards, building infrastructure and so on.
It sometimes feel like interference is being ran to buy time to get the "right people" strong hooks into crypto-infra before everyone else does.
I suspect bailing crypto speculators out will be relatively unpalatable.
Some Crypto people may believe that they are immune to the governments of the world but they really aren't.
Whoever can kick down your door has the ability to make some rules and especially after a significant economic crash rules will be demanded.
Since crypto doesn't do anything fundamentally new I predict that most of those rules will look like current financial laws "but on the blockchain".
That or the industry will just fizzle out once it turns out that you can't escape the society you are living in.
E.g. https://www.nber.org/papers/w29396 points out that only 10% of bitcoin transactions are economically meaningful and only 2.5% do not involve an exchange.
Or digital goods (services). Which you can do without providing any real-world identification.
Bitcoin, for instance, merely reverts to a scarce accounting standard, like the gold standard, preventing the overburdening of future generations with interest payments incurred by the government, owed to the national bank.
Mining in Bitcoin (and the other cryptos) adapter to the amount of miners, and will still produce a similar amount of coins and work as normal.
Sure, there are extreme cases like if a very significant amount of miners would suddenly stop, then the blocks would come in at a much reduced rate until the algorithm adapts itself.
And if too many stops mining though, then the chain becomes too easy to attack, which would (err, should) destroy its value.
The following reply to this question makes it sound pretty dire:
I wonder when we’ll see a secret service telegram channel for trading tips.
Halfway down the page in the "Useful Definitions" section, I thought the layout was using a CSS grid. When I opened up the DOM inspector, I was horrified to find nested <div> elements that got increasingly deeper with each grid row.
TLDR; it's the end of crypto currency as a refuge for criminals.
So, people will have to pay taxes, register exchange of value between parties, wallets will be trazable to individuals, etc.
Crypto currencies are the new home bubble derivatives. A complex economic vehicle to hide the absurdity of its valuation. A pyramid scheme, a hot potato game. It is bad that we have learned so little from previous crisis.
-- https://en.wikipedia.org/wiki/United_States_Secret_Service
https://www.irs.gov/businesses/small-businesses-self-employe...
And further, you have to pay capital gains on forex transactions anyway.
They were originally the Treasury Department's enforcement arm. After Lincoln's assassination, the federal government realized it needed bodyguards, and the Treasury Department police were the only federal civilian police force that existed at the time.
Wow, the Secret Service started up their own cryptocurrency team!
They seem to be starting to learn that Signal's USP is great for criminals and scammers.
To Downvoters: I'm sorry to report that it is true: [0] [1].
[0] https://www.theverge.com/22872133/signal-cryptocurrency-paym...
[1] https://support.signal.org/hc/en-us/articles/360057625692-In...
Nobody should be labeled a terrorist or extremist for practicing their rights.
That is my point. The road to hell is paved with good intentions isn't it?
Except that on Signal, it has gotten better for terrorists, extremists and criminals with E2EE, and a private, unregulated, untraceable cryptocurrency (MobileCoin) which they can use to fund their activities.
> Do you drive a car or use cash? Terrorists do those things also.
The authorities can easily trace them up with their number plate and catch them trying to move that physical cash anywhere and it can be seized off of them.
Why would they want to go a high risk of losing it all when Signal + E2EE + MobileCoin sounds more of an attractive very low risk route and extremely untraceable form of communication for them to continue to fund their illegal activities from anywhere in the world?