> cryptocurrency
I don't see the analogy.
I don't see the analogy.
I'm not saying I agree (or disagree) but the analogy is fairly clear to me
The music comparison is not driving to the store compared with downloading.
It's pirating to downloading legally. iTunes made it just as convenient to buy as it did to pirate, which is the main reason people pirate anything - inconvenience. Steam did exactly the same thing for PC gaming. Netflix did the same for TV and Film. (Only now stuff is split between so many streaming services pirating is becoming the path of least resistance again).
It's not perfect, as far as I know Netflix content isn't indexed and frequently it suggests I watch a movie in an app that doesn't actually serve that movie, but it's mostly OK.
Want to finish that tv show? Too bad! We didn’t bother telling you, but we lost the deal.
My US FDIC savings account offers a measly interest rate of 0.03% APY right now. By contrast rates on crypto stablecoins are often 7-10% APY easily with some such as UST on a Terra offering an amazing 19.53% APY.
Yes the crypto stablecoins are riskier in some ways than USD and FDIC insurance is still the gold standard, at least up to their limit. On the other hand, there are now decentralized insurance protocols available on stablecoin yields which cover risks of a stablecoin or an unintended behavior in a smart contract for ~2% APY.
Everyone should do their own research of course, but crypto can be compelling in that at the very least it can allow your savings to preserve their purchasing power net of inflation, something that isn’t possible with a traditional bank savings account.
Else I don't care about 0.03% or 7 to 10%.
Regardless of me thinking that a growth economy is eating the planet. When it comes toy savings I am more conservative as a mythical pope mixed with Ronald Reagan. I don't care about it growing. I care about it not vanishing in the blink of an eye.
Everything else is just playmoney. No problem if I loose it or use it to light a fire in my fireplace at home. Just printed paper (virtual) that I can spend for whatever.
In other words, for a US resident, putting money in the bank is currently virtually guaranteed to lose at least 7.5% of it’s purchasing power per year. It brings new meaning to the expression “safe as money in the bank.”
Here is an example:
1. Purchase UST on an exchange on a 1:1 basis with USD
2. Send it to the Terra Station self-custody wallet on your phone
3. Deposit the UST into a decentralized app (dApp) at www.anchorprotocol.com to earn 19.53% APY accruing every 6 seconds
4. Purchase the equivalent of FDIC insurance for ~2.5% APY from any of Nexus Mutual, InsurAce or Bridge Mutual
5. Enjoy a nice safe net ~17% APY on a USD stable deposit
* Bonus: Because of the payout mechanism this fixed APY yield is considered a capital gain and not interest income so it is taxed more favorably than a traditional savings account and you don’t trigger a taxable event until you sell.
I would suggest it is worth investigating and maybe trying it out with a small amount to see for yourself.
The accounting is transparent and on the Terra blockchain so it certainly isn’t a Ponzi scheme. However the payout rate is not guaranteed or constant and does fluctuate from time to time. The UST/Anchor Protocol payout is likely not sustainable and should come down overtime. That said the Terra Foundation recently put an additional billion dollars into the incentive pool so the rates should continue for at least another year.
I would never advocate putting money into anything without investigating the risks for oneself. That said, even money in the bank isn’t always safe as savers in Cyprus learned the hard way after the GFC when their government decided the banks needed a bailout more than depositors needed their savings.
The Anchor Protocol offers the accrual of UST at a specified rate (currently 19.53%) but just like your bank does not guarantee the interest rate paid in savings deposits for any fixed period of time, the payout rates on Anchor and other similar protocols can and does vary over time, though Anchor Protocol has paid just shy of 20% APY for over a year and the fund has been backstopped with an extra billion dollars so should be stable for at least another year.
Notably due to the mechanics of the Terra blockchain recording these transaction, you deposited UST balance (which is protected by insurance if purchased) is updated every 6 seconds.
Therefore, while the payout rate varies (like a bank) and is not guaranteed over time (like a bank), you can move your funds if it ever drops below an acceptable level for you and you would only be out the interest on a few seconds to a day - depending on how closely you watch it.
Since this is all on-chain via smart contracts it is transparent to monitor or move programmatically for the paranoid.
My only argument is that anyone dismissing crypto as a scam with no use case who hasn’t taken the time to investigate is doing themselves a disservice.
This is a rapidly evolving field with lots of innovation and while it pays to be skeptical, it also pays to be curious.
- The insurance company scamming you,
- The insurance company using you to scam their investors.
- All of the above.
The principle and any interest earned to date is insured if you purchase the insurance. Again, I don’t endorse the insurance products as I haven’t done the research, but elsewhere on this thread I mention Ozone Insurance which claims to be a trustless on-chain stablecoin insurance protocol.
That said, this is a fast-moving space with new entrants coming online all the time.
For example I just Learned about Ozone Insurance which claims to be a 100% trustless on-chain insurance plan [0]
[0] https://cointelegraph.com/news/risk-harbor-set-to-take-over-...
However did you know that FDIC insurance only requires 1.35% reserves? Of course they can also have the FED print money which drives further inflation for everyone.
Net, net, no the guarantees are not the same but government-backed insurance isn’t as safe as we would like to assume.
Also, outside the US, deposits are only 100% insured up to very modest limits. Banks offer no insurance above these modest limits.
As a timely example in Ukraine only deposits up to 200,000 UAH are insured. At the current UAH:USD conversion rate, that means only up to $6,600USD of deposits are protected. Anything over that amount has zero coverage.
Crypto stablecoins can provide options for those in need. Please don’t immediately dismiss them simply because you personally may not see the use-case.
I hadn't heard of this, how would someone get set up with something like this?
Fair warning, I am not endorsing any of these as I haven’t done the research on the insurance options yet.
This is not possible unless there's production available denominated in the stablecoin, you have to buy whatever currency they'll accept first.
Even then it's not possible to "preserve purchasing power" by keeping a currency, because that's not what currencies do - they're a medium of exchange not a store of value. Imagine if everyone held a stable currency, but one day got tired of going to McDonald's and stopped trading with them. Eventually they go out of business; now you can't buy it anymore. You have failed to store value measured in McDonald's purchases. If you want to invest to rebuild it, then it's more expensive and that's supply shock inflation. This is more or less why central banks target 2% and not 0% inflation, to encourage occasional maintenance spending.
There isn't really much that can actually store value. Gold and bitcoin obviously rely on bagholders. But in general "storing value" means compelling other people to do work for you, and they're not always going to be there to do that.
When Apple introduced iTunes, the appeal to consumers was obvious: You can buy only the songs you want, you are not forced to buy a whole album. You can do it from the comfort of your home. And you don't have to go through the (then time consuming) process of ripping a CD to get it on your iPod.
With cryptocurrencies, I see no such obvious benefits that would compel consumers to trade their bank accounts and credit cards for ethereum wallets. The transaction fees are considerably higher. Their decentralized nature, often touted as their greatest asset, becomes and anti-feature once you need to issue a chargeback for a purchase from a fraudulent seller. Crypto does not solve a problem people regularly deal with, and nothing about it is fundamentally easier than the systems it seeks to replace.
For example, Terra is a Proof of Stake blockchain with negligible fees and a 6 second settlement time. It is currently widely used as a payment system in South Korea.
There is a joke about how the things we want are getting cheaper (iPhones, TVs, music streaming) while the things we need are getting more expensive (food, housing, healthcare, higher education)
Offering society a high-yield stablecoin savings option finally allows people to grow their savings and stay ahead of inflation with low relative risk.
I think that’s a honking good idea.
Still, it is important to appreciate that consumers do pay a premium for this feature on all transactions built into the price because merchant account for the risk of chargebacks when setting their prices. I can’t estimate the amount of premium but I would guess it adds up to a few percent.
https://chai.finance/ Chai is the Payments solution. I’m told they have 2 million users in Korea but you may know better. It can be used to pay in MacDonalds and Starbucks to name a couple examples.
I still find it interesting to know that one can pay for a Big Mac or a Latte using stablecoins as an option in Korea.
Stopped paying attention here. So, so..so incorrect.
I see these as worse, because they suggest to the average consumer American that sending money is free, reducing pressure on a proper low-delay settlement system with sufficiently low fees to allow users to ignore the fees in most instances. Say, 1ct + 0.05%. (That's AFAIK comparable to SEPA's version of electronic checks (i.e., asynchronous pull), and fees for low-latency push shouldn't exceed 0.2%, either. With delayed settlement, even push should allow the very low fees, though.)
The transaction-cost problem has many possible solutions.
Remember, that payment includes final settlement, something that can take months for a credit card merchant.
Also, there are many other Proof-of-stake chains that offer faster and cheaper settlement.
> something that can take months for a credit card merchant
OK, instant closing is desirable for sellers - but why would a consumer care?