Moving money internationally
bam.kalzumeus.com
bam.kalzumeus.com
To simplify heavily, is SWIFT just an accepted and legal alternative to the hawala system?
SWIFT is a messaging system which those trust chains use to communicate.
(Simplified because on phone, etc.)
No. To simplify heavily, Swift is the network on which the hawala system runs.
To transfer cash from a bank to another bank, one can : * call the other bank * send an email * send a letter * send a swift message
Since transfering cash is not as simple as it seems (trust is the key), using an established network with clear fields and backups is a good choice. Thus Swift.
If I want to wire you some cash from bank A to bank B, my bank (A) will debit my account,and credit their account (called a nostro). There, we have two possibilities :
* The two banks are connected (meaning B has an account in A), A will debit their nostro and credit the account of B in A (called a loro) and inform bank B via swift. B will debit the account of A in B, credit their nostro, debit their nostro and credit your account
* The two banks are not directly connected : A will debit my account and credit their nostro. They will then debit their nostro and credit the account of a third institution (another bank or a clearing house). They will send a message to the bank B and the third institution, telling them that the cash should be credited to you. If the bank B and the third institution are connected, see above. If not, the process goes on, until the cash "reaches" bank B.
This is highly simplified, but it's the principle.
https://en.wikipedia.org/wiki/Nostro_and_vostro_accounts
the loro is used when a third bank is in the process or however is not as common as the two above.
https://www.investopedia.com/ask/answers/051815/what-differe...
As I said, Nostro is also used for own accounts. The account refleting the position of the bank (its own money and assets, not the money or assets deposited by its clients) is also called a nostro, at least in Europe.
Ultimately the debts and credits either cancel out, or when there is a flow from one country to another - the creditor countries ends up holding them as foreign currency reserves (in $ in bank accounts) or converts them into treasury bonds, gold or other investments - that may or not be transferable from one country to another.
This tweet lists Russia's foreign reserves:
Page 3 is interesting (ignore the rest, they're mostly buzzwords). It shows you the numbers behind the financial infrastructure of the world for international transactions.
>FIN availability: 99.996% >Institutions connected: 11k >FIN messages: 9.5b
That's about ~300 messages/sec, although I imagine it's mostly bursty and peaks during US/EU common business hours
Because people in places like Japan, China, Australia, New Zealand, India, Singapore, Hong Kong, UAE, South Korea, and many others are hibernating.
Nahhh they are all just subsistence living workers and farmers bartering over rocks and other money like objects, unlike us sophistocated folk quaffing Châteauneuf-du-Pape with a side of caviar while we wait for the casino to settle the million dollar wire transfer of our baccarat winnings for the night.
I know there is significant traffic from those countries. I'm from one of those countries.
If you had to pick a peak (and most workloads have a peak), what timezone do you think it would be? It doesn't matter what timezone as long as there's a peak. There could even be multiple peaks and that's better.
Wait, does that mean no more 4AM phone calls when the batch is failing?
It was designed for High Frequency Trading, after iMatix has a contract with JP Morgan Chase in New York.
I was in the team to maximize the number of messages of OpenAMQ, the broker was the bottleneck, then iMatix bought a slovakian company to maximize the speed between A and B (without a broker in the middle).
See more here:
http://wiki.zeromq.org/whitepapers:measuring-performance http://wiki.zeromq.org/results:multicore-tests
It was designed for High Frequency Trading, after iMatix has a contract with JP Morgan Chase in New York.
I was in the team to maximize the number of messages of OpenAMQ, the broker was the bottleneck, then iMatix bought a slovakian company to maximize the speed between A and B (without a broker in the middle).
See more here:
http://wiki.zeromq.org/whitepapers:measuring-performance http://wiki.zeromq.org/results:multicore-tests
* https://media.ccc.de/v/33c3-8315-a_world_without_blockchain
Being from a country no one gives a fuck about, I have experienced the sort of "discrimination" described many times. Banks, ISPs, stores, local ad users would just refuse to sell to me. It's a sad reality, but a reality nonetheless.
I still remember a needlessly lengthy email from an incorporation service explaining to me the difference between "lawyer" and "attorney". Seeing as I learned English from TV shows and the Internet... I still don't get why using the word "lawyer" got them so offended :D
(Though I suppose I also have learned most things from tv shows and the internet.)
Thus the definitions are in usage synonyms.
To the GP comment, 100% someone being an asshole.
A permissioned value transfer network, like the traditional financial system, poses problems that blockchain-based finance doesn't suffer from, and the trade-offs in using it are worth it for some people.
I guess that's the biggest problem with it, there's not enough people using it for "real world" transactions.
This sounds like what I heard from a lot of non-US financial companies when I used to be American and then didn't want to open accounts. Frustrating but predictable and probably intended outcome from regulator behavior.
- "you have a niche web browser which breaks our js fingerprinting so screw you"
- "you had a dispute on your airbnb account and we don't have time to figure out whether you or the host are wrong so we'll just kick you both off"
If that sounds shitty, we also have:
- Another company had marked you as risky, and since we trade risk profiles with each other, we just don't want to deal with you.
Except in most cases you won't ever learn the reason, much less have a fair appeals process.
I have a feeling we have a LOT more of this than people think already, but companies aren't talking about it and it's not regulated except for a few sectors. In the future though, it'll be a lot more. With the expansion of tracking, we're gonna get a LOT more persona non grata/shadowbanning and social credit systems.
It actually costs you money, $2,350, to give up your citizenship.
The filings to give up a Green Card is equally byzantine.
FACTA requires an overseas bank to identify US account holders and then report their personal and other details to the IRS, including balances and withdrawals.
So now some bank in a foreign country has to not only do due diligence on you and as soon as you say you are a US taxpayer or there are signs you are, it is required to report your account to the IRS, and if it doesn't it's subject to a 30% withholding tax on transfers to it as an institution from the US.
Of course, under the rules, it's up to the bank to be careful, but the local tax authority doesn't care, so often there's a "Don't Ask, Don't Tell" sort of attitude.
I'm going to ignore the last bit since that is tangential to the topic and ripe for starting a flame war.
“Easily” is the squishy bit here. If they’re settling in dollars, probably not, unless someone’s carting around paper dollars. (This has been done.)
If they’re settling in rubles or yuan, for most definitions of “easily,” yes.
Completely agree with your comment, just wanted to add that the vast majority of international companies will require a settlement in DM currencies (mainly dollar). This ensures that the relative size of the deal stays stable, as these currencies are highly stable and not subject to domestic manipulation. For a deal to be settled in, say, yuan, you would have to be pretty darn sure that your exposure to yuan is highly predominant: your in/outflows will be yuan-relative.
The problem with Yuan are more with its low convertibility (read: usage rate outside China), but that may change eventually. Using currency sanctions to achieve political goals are simultaneously expending trust in those currencies.
Stable or gaining 20%?
Also its not stable, nor trustworthy. You can't trust china to not manipulate it.
Personally, I've always liked Singapore's approach of anchoring the Singapore dollar to a basket of major currencies. However, they also give themselves leeway by not publishing the basket's constituents or weightings, meaning they can still make the dollar dance by tweaking those.
Rather you 'can* trust China to manipulate it when needed, they need the currency to serve specific macroeconomic policy decisions and they will use the levers on their power to achieve it, the fact that western speculators might get burned for it is not a core government interest at this time, maybe in the future
The Euro had much larger fluctuation in the same time frame.
Lecture me, are your definition of stable tied to data, or is it tied specifically to your own opinion?
How long would it be until you admit it was actually stable? 10 more years? 100? A millennia?
Can you truly call them stable with 7+% official inflation, negative real interest rates, and China owning 3+ trillion USD-nominated assets, which it probably will start to gradually sell in the wake of sanctions against the Central Bank of Russia?
Compared to every other currency, historical and extant, the major trading currencies of the day are highly stable across multiples of even the longest transaction time frames. They aren’t good long-term stores of value because that’s not what they’re built for.
Please explain. I don’t understand how that’s true.
In last night’s SOTU President Biden said inflation was mostly due to car prices or something equally silly. I don’t see any nation seriously addressing inflation which is officially 7.5% but I believe to be much higher for most.
The last time the US had inflation this high Volcker had to raise rates to double-digits in order to break the back of inflation.
Also, don't forget that 20% of all USD ever printed were printed in the past year and the Fed has made no claims that they plan to taper the money printer anytime soon.
However, is it just drawing forward future demand, which would mean the inflation is temporary?
I mean after a 2 year recession caused by the pandemic, in terms of large consumer items, like vehicles, you'd expect that. People want/need to start travelling again.
If I understand it correctly, in this case, isn't the thing prohibiting that transaction the US sanctions (i.e. https://home.treasury.gov/news/press-releases/jy0612), rather than exclusion from SWIFT?
However, transacting through the route that goes from consumer -> Russian Bank -> CBR -> Fed -> US Bank -> US merchant (or in the reverse direction) is not the only route. A Russian bank could also transact with a correspondent bank in another country that transacts with a US bank that transacts with the Fed. So the following transaction might still be possible: consumer -> VTB (Russian bank) -> ABN Amro (dutch bank) -> Citi (US bank) -> Fed -> Bank of America -> US merchant. In fact this is probably the more common path (except VTB might have directly transacted with Citi before last week).
The easiest way to stop these other routes is to ban all Russian Banks from the SWIFT system. This is because pretty much every US bank uses SWIFT to serve as the messaging platform by which they transact with correspondent banks (And they will NOT use any other system -- because of US regulations). So simply preventing SWIFT messaging for all Russian banks makes it enormously difficult for Russian Banks to transact in USD.
Hence the emphasis on blocking SWIFT.
But it is not the end of the world for Russia. They still have three avenues for international trade:
1. Trade in another currency, preferably of a country that is less susceptible to US pressure (e.g. China, and eventually their own) This avoids SWIFT, the US Fed and US controllable financial entities altogether.
2. Use proxies. Have an entity located in another country trade in USD on behalf of a Russian entity. It is usual to keep such proxy relationships secret. However, should US govt. discover the proxy aiding a sanctioned entity, they may sanction the proxy itself, and the jurisdiction in which the proxy does business. So this method of transacting is risky for many entities (both banks and other non-financial entities.) So most won't do it. But some will.
3. Barter. This is not as ridiculous as it sounds. For example India had to use this system to buy critically needed oil from Iran, initially, after the latter was banned from SWIFT. For a very large country like India or (especially) China, that domestically produce a very wide range of goods and services, it can be very viable way to trade. But it is still limiting. Both countries have since moved to their own SWIFT like systems to trade with Iran. But of course, one cannot buy US produced (or more generally western goods) this way. So no iPhones.
I take it that it means there's an account in the Fed that says the CBR has a credit of $650B with it, but it refuses to accept any transactions against that account. So the money is still "there", just can't move.
First off, only a fraction of the CBRs reserves are held as US dollar denominated holdings. Most central banks hold a variety of assets (currencies and gold) to diversify currency risk (and in the case of the CBR sanctions risk)
Secondly, even most of the USD holding are not held as actual deposits at the Fed. For one thing, Fed deposits do not pay interest. There are also relatively illiquid (even if we don't consider sanctions.)
Instead dollar holdings are held as US Treasury bonds. The US Treasury bond market is the largest financial market in the world and extremely liquid. And treasury bonds do pay a small interest. A US treasury bond is the closest thing to being an actual dollar without actually being a currency.
These bonds are held in the bond market accounts of large US and foreign banks. These accounts are frozen too.
However, because US treasury bonds need not be held directly, the vast bulk of the CBRs dollar denominated holdings are probably not directly held by it and so harder to trace. Indeed, only the CBR will know exactly how much USD denominated holdings it actually has.
Are you sure about that? How about USD accounts outside America, commonly known as Eurodollars? Ultimately those dollars originally came from the Fed but they are effectively outside their control.
These accounts, as you point out, are not subject to US regulations in the sense that US laws regarding bank deposits need not be complied with. A domestic USD checking account at Bank of America is regulated by the FDIC with insurance against fraud etc. For Eurodollar accounts these protections don't apply. (Other protections provided by their home-country laws might apply though.)
However, if you were to actually try to transact in USD with that account, the transaction path would still touch an institution that has an account with the Fed. And hence be controllable by the US government.
For example if you were to withdraw $50 in cash from your eurodollar account, the bank would still have to purchase the dollars (or more generally acquire them in some way) to give them to you. They cannot print the dollars themselves. The same thing applies to electronic transactions, except that now, there will be a corresponding set entires in the electronic ledgers of some US bank that has an account with the Fed.
So for the purposes of sanctions-busting, Eurodollar accounts are no good.
Eurodollar accounts are, of course, extremely useful for international trade. Most exporters will need a Eurodollar account to keep transaction costs low. Expats often hold a Eurodollar account with banks in their home countries to insulate them from exchange rate risk. There are a myriad other uses. But evading sanctions is not one of them.
Wires, as the article explains, are just debits and credits. And all non-paper debits and credits of dollars are ultimately governed by the banks’ credits and debits with the Fed. So no, you can’t wire dollars with a phone number if the other side is sanctioned. You can if they’re off SWIFT, but you need someone with an account at the Fed to make those changes.
Not all banks are affected, only the most popular ones, it seems (e.g. VTB, Open).
All of them, including the "unavailable" ones, still have USD and EUR transfer options open to use, not sure if they are SWIFT-based or using something else now.
I don't know what's going on, perhaps DDoS from Anonymous or an overreaction from the banks themselves, but I'm pretty sure Putin hasn't even noticed this unavailability. Are they sure they know what they're doing?
In the past week I myself and many people I know were not able to receive a USD wire from US to their accounts in different Russian banks, none of which are even in the list of sanctioned entities (Tinkoff and Avangard banks are the most common example). In all these cases the transfer was declined by a US bank, probably due to compliance considerations. Sending USD or EUR outside doesn't work either, and in some cases you cannot even exchange the remaining USD on your account to RUB. The options are indeed available in the bank's web or mobile application, but clicking 'Send' just gives you a 'something went wrong' error and that's it.
It is true that Putin might be not noticing any inconvenience, just as most employees of state-owned companies (who happen to be the core Putin supporters), but people who rely on international payments for living (who happen to be the least loyal to Putin part of the population) are being severely hit by the sanctions and have spent the last week in the state of permanent panic trying to figure out what are the remaining options they have and how they'll pay their expenses in a month from now.
Also, got bless crypto currencies! It would be not that easy to shut down P2P withdrawals until the internet is working at all. I have to admit, I was a big crypto sceptic right until the moment it became the only way to get paid. Now I'm a believer!
Absolutely. Even the criminals, scammers and extremists using Signal and its E2EE also use it to communicate with each other whilst sending/receiving funds via a private cryptocurrency called 'MobileCoin' which uses an encrypted blockchain and all transactions are untraceable and scrambled. Even they would agree.
Got to thank Moxie and his friends for creating a great tool used and adored by many criminal masterminds all around the world. /s
My only point was, whatever comments people are making in the past few years which fit under the umbrella of "For those saying that crypto is useless", it feels like those have been directed at all the other stuff in the eco-system - while "moving their property across borders" is something which was solved by Bitcoin along time ago.
As a BTC proponent, I just want to say, I don't think this is what gives BTC value.
Maybe at that point there would be two worlds of crypto: you can trade it on the above-the-board exchanges, but can’t move those coins out onto the blockchain in any meaningful amounts. Or you can have it on the blockchain, but you can’t convert it to USD/EUR in any meaningful amounts unless you find a private buyer.
In fact these separate worlds already exist — it’s not like most Coinbase users ever interact with the actual chains, they just trade inside Coinbase’s SQL database. But a lot of the appeal of crypto is about theoretical possibilities, and government regulation can put a real damper on that enthusiasm.
So Bitcoin therefore ends up being more useful to ordinary Russian citizens under sanctions than it does for oligarchical, globe-spanning wealth; the exchanges hold a similar role to the banks and can be brought to heel, but at a small scale you can self-bank. There's always a leak in the system because of this, even if you brought down the hammer on every exchange. Destroy Bitcoin and it'll just mushroom up again in some other form.
Crypto is game-theoretically useful even to elites who suspect they're under threat of being frozen out; they might not be able to keep 100% of what they have, but even 0.1% of vast riches is enough to sustain a comfortable life for some time. And if they lobby to keep exchanges open, they have the possibility of keeping more. This explains why there hasn't been a strong global consensus on crypto yet.
This seems rather naïve. If you can't leave a country because your government requires you to fight a war rather than leave, how do you get yourself, or any physical property, out? If you're in jail, justified or not, how does crypto help you move your property? Or the government you live under simply doesn't allow exiting? What if all international airports refuse to allow flights originating in your country to land, and trains and roads and ships are far beyond capacity? Even your intangible crypto wealth can't be moved across borders, if you yourself aren't able to cross a border.
Crypto has utility, yes. But it is far from a panacea and actually does not "fix" many of the problems its supporters claim it does.
I would also pose a question, in the case where you have to leave NOW in order to cross that border -- would you rather have all your money in a bank with accounts currently frozen, or have crypto keys stored physically in an apartment or bank in an active war zone that you are unable to reach and faces a real possibility of being destroyed/bombed/flattened at any moment?
If crypto is not currency, it needs to be converted to currency before use and as such can trivially be blocked with KYC rules at conversion.
If crypto desires to be a serious currency, it needs to greatly improve efficiency and stop being deflationary.
(Funnily enough, Tesla accepts dogecoin but not USDT, so maybe I am wrong with the second requirement; but maybe not - it's likely just a gimmick in this case)
Deflation is not an inherent attribute of crypto currency. Only some of them are deflationary, most notably Bitcoin.
Dogecoin for example is inflationary. Exactly five billion new Dogecoin will be created and enter circulation every year.
Fiat is based on people's trust with governments. Crypto is based on people's distrust with governments...
The question is not if "crypto is a novelty that enables some people to go around some laws" - everybody can readily agree to that. The question is whether it is a systemic force/ agent of change, that can e.g. prevent enforcement of some kind of laws forever and thus have long-lasting societal impact. I think the jury is very much out on that. (and no, you can't rely on criminals as exit nodes if you claim to be an unstoppable agent of change)
The deflationary bit, is sort of a problem on the centralization of wealth yeah, but that's a macro problem, not a barrier of entry to individuals
I think that your comment tries to take digs at Crypto in an overly contrarian way, Crypto is digital gold which can be easily hidden, I guess that you could buy a bunch of paper Swiss bonds hide them on a bag or whatever and take a flight with these, but that already has a higher barrier of entry than buying wherever amount you want on ether and put it on a thumb drive, I guess both methods could work, certainly both are easier and sneakier than carrying a brick of gold around on your flight luggage
What you're actually saying it suddenly doubles in value when converted to another currency.
Just the same as if I owe someone $10, in the same currency, then it doesn't matter if the ratio of the dollar to the ruble doubles or triples at the same time. It's still $10 to both of the parties.
Maybe a distinction without a difference to some, but it makes sense that a country that bucks the consensus of a number of member nations would be excluded from a consortium of institutions like this. (Leaving discussion of disparate impact and whether this actually achieves national goals for another forum)
I don't personally see a huge distinction between crypto and global banking. Just a different set of ledger-holders. Miners, instead of institutions. Just because it's a different set of folks controlling the ledger doesn't mean this can't happen with a blockchain. Maybe I missed something and the tech prevents this somehow? But not that I've been able to figure out.
Miners are distributed and there is the well known problem of 51% of the mining pool being controlled by a single party, but they would have to control 100% of the mining pool to be the equivalent of the Fed.
If mining pools conspired to, say, fork a chain because somebody stole a lot of tokens due to a bug, it amounts to the same kind of control.
https://en.wikipedia.org/wiki/Hawala
The US Treasury department has a comprehensive-looking guide:
https://www.treasury.gov/resource-center/terrorist-illicit-f...
You can be sure a system like Hawala works because actual terrorists have used it forever. Like Toyota pickup trucks.
There are notorious pictures of Toyota pickups with frames that have broken in half. Since they have "issues" does it mean insurgents should drive Teslas instead?
Reads like "Russia stronk, Russia do not care" kind of propaganda, SWIFT is exclusively used for wire transfers and exclusion from it leaves companies to conduct their business via Cash-only, just look at the Iran, they only trade with cash when it comes to exports/imports.
So the money does not leave, new owners come into the country and control its flow?
Most reserves (which are needed for interbank settlement) are accounting entries at a central bank these days, and only domestically/regionally licensed banks are usually allowed to hold central bank accounts.
One big exception are foreign-controlled subsidiaries of large foreign banks, but even these are subject to local laws and regulations, in particular sanctions enforcement.
When you hold a foreign currency account at your regional bank, this amounts to a claim in the amount of your balance against them, which is only indirectly backed by your bank‘s claim against its correspondent in the country where your currency‘s central bank is located.
Cefi is great. It's fast, it's secure, you are protected from loss up to a certain degree, it's often cheaper than blockchain transaction fees, etc. But it's just a tool with tradeoffs, much like Defi.
I just don't understand the reason to leave out central bank in these discussions. Yes there's all those agreements, payment rails and so on. However if you look past all that inter-bank transfer results in banks' central-bank reserves getting changed. Let me elaborate.
Banks Foo and Bar have accounts with central bank. When I Transfer USD 100 from my account at Foo to my friend's account at Bar the central bank does -100 to Foo's reserve balance and +100 to Bar's reserve balance. For more details please read this terrific, short and succinct book "Central Banking 101"[1]
International wires, however is a different matter. You have FX market, correspondence banking and what not. But when it comes to moving USD around the NY Fed has absolute and total control over clearance. Any bank that hold USD deposits must have corresponding reserve account with NY Fed. So regardless if SWIFT or any other form of wire transfer, NY Fed can cripple a bank's operations by freezing their reserves. Here's a relevant sanction announced by the US Treasury a week ago [2]. And here's the relevant section.
"Treasury is taking unprecedented action against Russia’s two largest financial institutions, Public Joint Stock Company Sberbank of Russia (Sberbank)and VTB Bank Public Joint Stock Company (VTB Bank), drastically altering their fundamental ability to operate. On a daily basis, Russian financial institutions conduct about $46 billion worth of foreign exchange transactions globally, 80 percent of which are in U.S. dollars. The vast majority of those transactions will now be disrupted. By cutting off Russia’s two largest banks — which combined make up more than half of the total banking system in Russia by asset value — from processing payments through the U.S. financial system. The Russian financial institutions subject to today’s action can no longer benefit from the remarkable reach, efficiency, and security of the U.S. financial system."
Of course they could continue to transfer money through correspondence banks etc., however their existing USD reserves are frozen.
[1] https://www.goodreads.com/en/book/show/56863052-central-bank...
We already just exchange "coins" electronically, but with the Visa or MasterCard network getting involved...
As soon as we hit a population limit on the planet there will be no bigger fool to sell to in the future and the economy becomes stagnant.
As for the literal definition of ponzi scheme I don't think it holds up because everyone is fully aware, or should be of what it is they are buying and where the money is coming from if they want to sell.
What is sometimes up for debate is whether something is serious utility, such as “owning” a picture anyone can look at, or a digital experience in the metaverse with artificial scarcity.
But then again, under the capitalist system, we need to introduce scarcity even where it’s not easy to do so, in order to recoup initial venture capital. So for example, I remember stories about SWAT teams raising grandmas for downloading movies illegally, or about manufacturing companies all forced to cripple their software with DRM, or the blowup at the W3C, or crackz of popular software that kiddies handed out until all these companies like Adobe went full SAAS. It’s an antipattern that is the direct result of any capitalist system.
By contrast, open source, creative commons etc. doesn’t have that issue.
https://www.lynalden.com/bitcoin-ponzi-scheme/
"Bitcoin doesn’t really meet this broader definition of a Ponzi scheme any more than the gold market, the global fiat banking system, or less liquid markets like fine art, fine wine, collectable cars, or beachfront property. In other words, if your definition of something is so broad that it includes every non-cashflow store of value, you need a better definition."
Fiat has value because it's legally recognized by governments that issue it: it extinguishes tax and debt obligations in those jurisdictions. This makes it markedly different to any other of the commodity items listed: my government will only ever tax me fiat currency, which is sufficient to extinguish those taxes and fulfill debts. I can't be ordered to pay them in gold, or bitcoin.
Per wikipedia https://en.wikipedia.org/wiki/Proof_of_stake
The biggest proof-of-stake blockchains by market capitalization in 2021 were Cardano, Avalanche, Polkadot and Solana. Other prominent PoS platforms include Tron, EOS, Algorand, and Tezos.
There have been repeated proposals for Ethereum to switch from a PoW to PoS mechanism. In April 2021, the Ethereum Foundation announced that it planned to switch to a PoS system by the end of 2021. This has since been pushed back to the second quarter of 2022.
---
So if most of crypto transactions are conducted on proof-of-work chains, which do require burning large amounts of electricity, why would this make you think someone doesn't know about the current state of crypto. What exactly about the current state of crypto is incompatible with this critique?
Ethereum is by far the most widely used cryptocurrency network, and while it consumes a lot of energy relative to the number of transactions in processes, and a lot of energy in absolute terms, it consumes on the order of a thousandths (0.1%) of the world's energy output.
It will have switched to Proof of Stake long before it grows large enough for it to account for a materially significant portion of global energy consumption. So the rhetoric used above, which makes the generalization that "Crypto is a planet-destroying ponzi-scheme", is entirely hyperbolic with respect to the environmental criticism (and a blatant mischaracterization with respect to the ponzi-scheme allegation).
It's been "about to go PoS" for several years now. The fact is it hasn't. When it does, you can tell people their concerns are out of date. About Ethereum. Bitcoin isn't even going there and its consumption is as bad or worse.
[1] https://www.statista.com/statistics/1265897/worldwide-ethere...
I'm sure it is closer than ever, if it wasn't then there's something wrong with the development process! I sincerely wish the various people involved good luck in this venture and a speedy success in moving it to production. In the mean time I'm still going to get pissed off at people saying that energy concerns are outdated, especially when they're referring to the whole cryptocurrency ecosystem.
This is a spurious comparison, traditional banks provide orders of magnitude more services to orders of magnitude more people.
> Nothing is free and I'm fairly certain that crypto will end in less energy consumption, not more.
One day, could, will.
But still isn't and doesn't. With a background of a world scrambling for cleaner power to mitigate climate change. That's the problem.
I still prefer Ethereum's variation of Proof of Stake over Proof of Work, but it's by no means clear to me that Proof of Work based blockchains are less resource-efficient than traditional financial systems, and I would wager a comprehensive analysis would show in fact that they have the potential to be vastly more efficient, if they're allowed to scale up their transaction throughput to amortize their energy consumption across more numerous transactions.
This is just more nonsense.
A bunch of automated nodes, strewn across the globe, and connected via the internet, maintain the network, with the network being able to seamlessly/autonomously manage nodes joining/leaving.
There are no legal contracts that need to be drawn up, filled out and signed for someone to start submitting PoW, or validating and propagating transactions, to the network. There is no HR department. No payroll. Just machines, and a deterministic compensation mechanism, managed by a fault tolerant network of machines.
While providing 1/700,000 of the computing power of a Raspberry Pi.
No offence.
As for the transition to PoS, the first phase of the transition was implemented on December 1st, 2020, with the launch of the Proof of Stake Beacon Chain. The Beacon Chain has been running without problems for over a year now.
The testnet for the second phase of ETH2 - which is when the execution chain is merged into the Beacon Chain so that Ethereum can fully switch from PoW to PoS and reduce its energy consumption by 99.95% - was launched on December 20th, 2021:
https://blog.ethereum.org/2021/12/20/kintsugi-merge-testnet/
The second phase is expected to be completed before the end of 2022.
Ethereum, maybe, it's been six months away for years. BTC, nope.
The projections on the completion date of the switch to PoS is now far less speculative / more reliable.
Because it looks to me like the current state of crypto is worse than ever - https://digiconomist.net/bitcoin-less-green-than-ever-before...
Emissions on a par with Greece. And just for one coin. Ethereum is still going to PoS any day now, totally, just a few months off. Like it has been for several years.
So what is it about "the current state of crypto" that you think you know better than these?
BTC mining is creating new business models for renewable energy [0][1], BTC uses less energy than many other activities that don't get the same flack- AC usage, Data Centers, etc [1]
[0] https://www.coindesk.com/policy/2021/10/11/bitcoin-mining-is...
[1] https://blockworks.co/mining-mutualism-renewable-energy-and-....
Finally, if energy is one of your biggest expenses, you're economically incentivized to reduce those costs as much as possible.
Unfortunately, with Bitcoin (and other Proof-of-Work blockchains), the economic incentive is the opposite: to use as much energy as possible, until the return from the block rewards and transaction fees is smaller than the price you pay for that energy. Reducing the energy costs only allows you to use even more energy before reaching that limit, increasing the total costs again.
> BTC mining is creating new business models for renewable energy
It's also helping bring fossil-fuel power plants back online in the US, purely to service cryptocurrency - https://www.bbc.com/news/av/technology-58020010
AFAICT there are others in the works too.
> BTC uses less energy than many other activities
Pointing desperately at other things doesn't change the argument at all.
> Finally, if energy is one of your biggest expenses, you're economically incentivized to reduce those costs as much as possible.
So? This doesn't make bitcoin clean?
There is already huge demand for clean power in this world, adding to it with PoW systems doesn't actually help, and as we can see by the power plant and by the article linked above about a fall in renewable use in BTC, we're not in the "Bitcoin has incentivised green energy and helped the world get cleaner" stage, we're in the "Bitcoin is adding pressure to an already over-pressurised system and is making the problem worse at a critical time" phase.
Even your own linked article is sub-headed "Cryptocurrency mining has the potential to address the obstacles to more widely adopting renewable energy" - not that it has or is, but that it could.
These pseudo-intellectual economic arguments about "helping the world move to renewables" are tripe.
A (traditional) bank does all 3 for me on a regular basis.
Compare that with using something like UST (Terra), which took only ~1 minute with a fixed fee of ~1 UST for a similar transaction. I also have total control over my money.
> Now I'm at the mercy of the bank regarding what I can do with that money.
This is going off-topic, but you are with crypto as well. Unless every merchant you use supports your cryptocurrency, you're going to have to convert it back to fiat.
> There are a ton of alternatives that cost fractions of a penny in transaction fees.
Not saying it is better than the other options presented (and definitely not recommending it as an investment) but BCH does work quite well for transacting.
Transferwise takes much more %.
Otherwise anyone could say they work "for the internet" just because the service is mostly accessed via the internet, but we don't, because seeing it like that is kind of silly.
I wish he could tone those sentiments down a bit in the future, as otherwise the posts tend to be informative and interesting.
It's okay to make a giant ruckus about something important that you believe nobody is paying attention to.
And it's okay to be wrong about that.
But it would be nice to see him publicly reckon with how he got it so wrong, and how he's altered how he reasons about the world to avoid getting it that wrong again.
> I am materially wrong about the most consequential thing I've had to have a view on in 15 years. You should probably degrade your estimate of my ability to think through complex problems.
And yes, that’s exactly what I did.
The dude works at Stripe, not someplace influencing government or health policies.
I'm just following his advice and reducing my confidence in his ability to reason about how the world works.
If your defense of someone has to start with such a hilarious strawman, it might be an indicator you're defending something not worth your time.
The onus is on the outrage to justify it, not on the accused to defend against it.
In this context, someone was expecting another person to exhibit a particular response to earn redemption based on an absolutely benign incident. At a certain point, the yelling just becomes tedious and unproductive regardless of the philosophical value of debate and discussion.
"I'm outraged because someone was wrong and no one was hurt and no harm was done" is just hubris.
Well, to bring the concept of "value" into it only drives this further philosophical; I personally consider all debates of moral relativity to hold some inherent value, due to the topic, but I admit some are vacuous nonetheless.
> This is a perfect example of manufactured moral outrage, justified post-hoc.
I don't really understand what is "manufactured" about this. The individual went and published a hefty claim, in the form of a white paper no less, that Japan was about to see a massive outbreak of COVID[0]; they believed so intently in themselves that they were willing to put this content out there and stake some lofty claims on the "work" of the white paper.
Of course those who find the work sloppy and indeed find the conclusions outlined in the paper to have not occurred at all are going to decry the author. It is their inherent right. I will leave it to you to slog through the details of the thing, I personally only joined to wax philosophical about the nature of debate on the internet.
> The onus is on the outrage to justify it, not on the accused to defend against it.
This language is so silly. The numbers forecasted in the paper didn't occur, seems pretty well justified.
> "I'm outraged because someone was wrong and no one was hurt and no harm was done" is just hubris.
Again, your language is very telling of the media you consume, but "no harm was done" is both difficult to quantify and hard to imagine as true if you consider actions of negative moral relativity to be harmful, which is not an unreasonable stance to take against breathlessly whispered, widely published failed psuedoscience.
[0]: https://www.kalzumeus.com/2020/04/21/japan-coronavirus/
There is no moral position of substance that you can argue from, where Patrick owes anyone an apology. Dead stop. He's been more than humble enough to publish an admission of error, one for which the original OP was too lazy to look for prior to impugning Patrick for it.
He's not Fauci. He created a bingo card creator and shared the experience and his personal perspective with this community. This does not oblige him to meet everyone's unrealistic expectations of how he should conduct himself.
It says far more about the people caught up in the orbit of his mistake, than he does about him.
> Again, your language is very telling of the media you consume
How do you imagine throwing an ad-hominem was going to help make for a more productive debate?
"The core result was correct."
"This prediction was correct."
"I doubt every claim is exactly correct."
He refused to even acknowledge how wrong he was, much less grapple with how his methods of research and reasoning got it so wrong.
But I'm also in that vague sphere that is often called "public intellectuals" despite not being in a line of work that traditionally contributes public intellectuals. I don't work for a newspaper, though my writing has run in newspapers. I am not a tenured professor, but some tenured professors seem to think I occasionally understand and explain things worth understanding and explaining.
This is further complicated by "That public intellectual thing is something that is expected of me but in the way that a university expects a professor to conduct scholarship without endorsing all conclusions of it, not like a company expects publicly visible employees to stay relentlessly on-message." And by the fact that everyone expects me to, at some point in the future, continue doing much the same thing while not sitting in the same seat I'm currently sitting in.
That is what I mean by "works for the Internet." Which feels sort of self indulgent, and a bit long, to need to shove into every time I stamp out my disclaimer, so it is here rather than every time I need to stamp out my disclaimer.
I think the world would be a better place if you could all truly be this proud of our work. Is there anything we can do to make a material difference here?
I like his writing, but his miss on that Japan covid thing (linked in threads elsewhere) and his knee-jerk (imo, at least overly general) anti-crypto hostility has caused me to down-rank my prior for him a bit.
That said, if you write a lot publicly you're going to be wrong sometimes. I don't expect people to be perfectly consistent or perfectly correct (I'm certainly not).
I also don't care that brilliant people sometimes come off a little abrasively, it's better imo than pseudo-humble crap. I don't even think it really applies to patio11 who comes across earnest and helpful in his writing and goes out of his way to do good (salary negotiation article is still best source on the net, the vaccine availability thing).
No, you've just upped your expectations. Public figures are still humans, with all the flaws and mistakes that come with the experience.
> Unless "Internet at Stripe" is some internal Stripe group
Maybe the generous interpretation is that patio11 knows his audience reaches beyond individuals employed at digital companies, maybe folks in finance or government or education. Stripe isn't a well-known provider in brick-and-mortar, or used by fintech, so on a topic on something like SWIFT it makes sense.
IDK, i genuinely don't understand but would like to..
EDIT: or just downvote and move on that's cool too i guess. i have learned my lesson. he is disliked based on instinct and the reasoning is just post-hoc rationalization i guess. maybe asking for a justification in this regime is considered an attack.
It reminds me of a time when stripe was the underdog against paypal and everyone championed them. Fast forward we have thought leaders from stripe thinking they work at the internet. Even paypal never pretended that. By replacing paypal with stripe did we end up with a worse paypal?
If I am a high net work person with a hundred-million property in the UK, I'm going to find a way to let my friend use it, even if the british legal system refuses to let me receive money for it. In some future date, what goes around comes around, and he lets me use his yacht.
If you rip too many people off, then one of the discount to values is "services rendered" and you can imagine what these services might be.
You don't think Abramovich runs a vacuum over the rug once a week at home do you?