Lebanese turn to cryptocurrency as economy tanks | Hacker News Reader

Lebanese turn to cryptocurrency as economy tanks

al-monitor.com

What I expected to read about in this article, was about people using cryptocurrencies for something. But it's only briefly touched upon at the end of the article in a paragraph

> The increasing demand for cryptocurrency mining in Lebanon has prompted many shops across the country to accept payments in USDT, which is a cryptocurrency with a value that is meant to mirror the value of the US dollar.

How many? What can you buy? How often are they used? Demographics, any insight?

Otherwise this "turn to cryptocurrency" article seems to be just about an increase of local miners. The only two interesting aspects on that topic are that:

- hotels might connect to data mining operations to provide surplus electricity "bandwidth", as their occupancy is lower due to the pandemic

- Lebanon has an iffy electricity grid, and households are starting (have been for a while now?) to feel as consumers the extra strain on the grid caused by miners.

So as usual, the cryptocurrency story here is that a few people may be finding an opportunity to make money, while it's acting as an overall negative for the society in general.

That is an all too common story in general these days.

Are they trying to make money,

or protect what they already had, and need?

Crytocurrency seems to have an extra amount of spamy / blog spam / low quality news sources surrounding it compared to other topics.

That may be true, but I don't think applies to al-monitor.

Yeah I meant generally. I don't know that site well enough to say. Although that particular story is pretty content free as it relates to the title.

Used to be that shilling snake-oil (or penny stocks) to gullible citizens required you to spend significant time and effort (and money) to be present in person. And the reach of any given huckster was limited by the strength of their voice and the number of handbills they could pass out.

The wonder of the internet is that now they can do it to a virtually unlimited degree, for minimal effort/outlay. No wonder we're drowning in it.

> for minimal effort/outlay.

Could you explain this part? I've always seen internet publicity the same as traditional, its a pay to play game and rich people have it locked up.

Yep.

I also find it very disingenuous how crypto enthusiasts use people in third world countries under oppressive regimes as their go to "why crypto matters" example while they themselves are only actually only in it for a big payday.

For the incumbents and newcomers it is impossible to exit without another huge ROI (10x, 100x) since crypto billionaires cannot cash out to billions of US dollars. They need to routinely pump & dump and hope that the music doesn't stop.

Somebody doing taxes this year is going to be on the hook for last year's BTC prices, and by god, they need it at least 100% ROI just to break even after paying taxes in the US.

Capital gains are paid on cash, not on unrealized gains against unsold assets.

So someone doing taxes this year either sold at a profit and has gains to pay on cash, sold at a loss and has no tax to pay, or bought and held, again, no taxes to pay.

There's no being "on the hook for last year's BTC prices" in any of these.

The part you're missing is that those people also believe "first world" countries are at risk of having the same things happen: hyperinflation, debt crises, confiscation of wealth/assets.

And if the risk of those things goes up, a rational person increases their bets as a hedge. Because the payday does go up, but only because everything around it is collapsing.

The difference is that you don't think those things could ever happen here; in our peaceful, stable, bourgeois society.

This demonstrates one of the particular ironies of Bitcoin: it's not an alternative to the US dollar insomuch as it's an extralegal way to acquire US dollars.

It sounds as if nobody in Lebanon is using Bitcoin to pay for milk and bread. Instead, they're exchanging it for a stable non-local fiat, which in turn pays for the milk and bread.

Bitcoin being used as an extralegal way to acquire anything isn’t an irony necessarily, just a part of functioning money.

The "irony" mentioned is that it isn't serving any of its myriad purported goals: it isn't a functional store of value and it isn't itself a mechanism of exchange or liquidity. Extralegality is merely a circumstantial property.

Bitcoin is a tool that can be used to enable something. If I want to get value out of a hammer, I don't care whether that value comes from me using it directly or indirectly, and I don't care whether the useful properties of my hammer are intentionally designed or are circumstantial.

The article mentions USDT (the stable non-local fiat) though, not Bitcoin. The article doesn't say whether people are interested in BTC for anything but mining.

I am aware. I was responding to the comment emphasizing how using BTC (via mining or not) to get USDT is a known/anticipated use of Bitcoin and highlights Bitcoin performing at least one of money’s functions.

It's a sign of mistrust in their own currency. The easiest way to use crypto is to load a debit card with it and pay in your local currency as needed. Layer 2 networks provided by debit card providers avoid transaction fees and waiting for transactions to clear.

Theoretical arguments aren't very convincing. We need more real-world reports. How long do these transactions take, compared to credit card transactions in the same shop? What's the total cost for each?

It's not theoretical - coinbase, crypto.com, gemini, blockfi, etc.. all have debit cards. Use your crypto to buy stuff, get % rewards back in crypto as well.

Do any of those companies offer debit cards in Lebanon?

The cards should work wherever visa/mastercard is accepted. Here's one the specifically calls out Lebanon - https://spectrocoin.com/en/bitcoin-in-Lebanon.html

Yes, because they go over a common network, Whether they can be used in Lebanon is different from whether they issue cards to citizens in Lebanon

I remember reading that Lebanon had been experiencing a dual exchange rate phenomenon. In which the official one is much less than the market rate. This has happened in other countries like Argentina and Venezuela before too

If this were the case. The benefits of using a foreign card would depend on the exchange rate in which card payments are settled.

Are Lebanon's card transactions with foreign cards settled at the official or at the market exchange rate? Is the difference between both rates still significant?

Binance and Coinbase cards are not available for cardholders in Lebanon according to the FAQ on their sites. They are mostly for EU and US cardholders.

That's still not a concrete comparison by direct observation. Someone needs to actually use these cards and describe how the user experience differs.

That is, the sort of thing people do when writing a product review.

I believe this thinking is exactly the reason we haven't seen more government crackdowns on Bitcoin and cryptocurrencies.

Think about it - Bitcoins stated aim is to remove government control of currency, something some governments have gone to war over. Yet bitcoin has relatively received very little attention from the US government.

I believe thats because while the US government sees bitcoin as a threat to their currency monopoly, they also see it as more of a threat to other smaller countries with weaker economies. Hence, overall it benefits the USA.

How is it a threat if it's pegged to the dollar?

They were talking about non-pegged cryptocurrencies such as BTC.

China already started cracking down on cryptocurrency. Wealthy Chinese had been using crypto mining to evade currency controls and get their wealth out of the country. That still happens now but to a lesser extent.

Ascribing a single actor and single motivation to "US government" is a common mistake (usually made by non-Americans). It misses the multi-polar nature of the US political and lobbying/advocacy system, and the fact that US policy is usually emergent. The reason there hasn't been a crackdown is that Bitcoin is traceable and intermediaries serving US citizens are abiding by Know Your Customer banking rules.

> while the US government sees bitcoin as a threat to their currency monopoly, they also see it as more of a threat to other smaller countries with weaker economies

Bitcoin is no threat to the U.S. We have an open capital account. If Congress made Bitcoin legal tender tomorrow virtually nothing would change overnight. (Hell, if Congress abolished the Fed tomorrow and switched to exclusively Bitcoin, we'd just have to dust off old central banking books from the specie days. We'd also enter a deflationary recession.)

For a capital controlled country, on the other hand, cryptos enable currency flight. Hence the lockdowns in China, Russia and India.

This is on point! BTC in general is a threat to bad government. Maybe we will see days when governments are way weaker than today, much more effective, and citizens willingly, voluntarily and happily pay taxes a la ancient Greece.

I believe the current US Gov strategy is to get entities submitting under their control to work in controlling bigger and bigger stakes of BTC. If they outright ban it before it is the case, they will create a scenario where people withdraw their BTC to private holding instead of using exchanges. The only way USGov comes out unscathed is if the exchanges are under its control and they control most of the BTC in the world.

However, I think even this scenario is not ideal for them, as BTC outside the system will be worth differently than the one inside USGov. The question will be which one will be worth more, and the bigger the diffference, the more the other BTC will flow in that direction

> I believe thats because while the US government sees bitcoin as a threat to their currency monopoly, they also see it as more of a threat to other smaller countries with weaker economies. Hence, overall it benefits the USA.

Honestly, I don't think the US government sees Bitcoin as a threat to anything.

Cryptocurrency proponents have often indoctrinated themselves into thinking it is a powerful technology of world-shattering importance ("just give it time!"), but what if that just isn't so? Maybe it's just a cultish sideshow that's occasionally pushed up into fad territory.

crypto is simply a hedge against incompetent/corrupt government, obviously blatant speculation has driven up the prices but at its core it still has value. I think the future is an abstraction layer to simplify converting to local currency and countries/governments having to compete for citizens by proving their competence

Not sure how you can use an asset whose price is fluctuating so wildly (and is correlated/anti-correlated to indicators and trends having little to do with your local government) as an effective hedge against incompetent/corrupt government.

I can certainly see its value for overcoming transaction barriers, whether they exist due to incompetence/corruption/backwardness of the financial system involved, or due to rule of law and anti-fraud legislation.

When it comes to storing wealth, it seems to me that it's either speculative or illicit, and not much else. Illicit users find it attractive because its anonymity and "transaction smoothness" benefits outweigh the potential losses, much like losing 30% when laundering money is just cost of doing business.

Gold fluctuates +/- 20% vs. the dollar in any given year which I would consider quite "wild" and it's used globally as the currency of last resort. And the current demand for gold as a commodity in e.g. semiconductors hardly justify its lofty price. So I'd say gold is just as speculative as bitcoin in that sense, but perhaps less volatile.

The value of bitcoin is predicated on the belief there is a limited supply, just like gold. The difference is that in one case the mechanism for limited supply is the Earth and the other is proof of work (which is more fallible than Earth obviously).

In any case I don't think BTC is meant to be _used_ as a daily transaction medium (just like gold is not), no matter how much BTC bulls would have you believe it should be. But as a long term store of wealth holding BTC is like a riskier version of holding gold, with the same fundamentals driving the price.

Gold isn't a currency of last resort. It hasn't been used as currency for almost a century. It isn't a good investment, either. [1] It's "value" (you mean price?) is determined by supply and demand, like everything else. Limited supply doesn't imply anything about price.

[1] https://cdn2.vox-cdn.com/assets/4718370/siegel_returns.png

>Not sure how you can use an asset whose price is fluctuating so wildly (and is correlated/anti-correlated to indicators and trends having little to do with your local government) as an effective hedge against incompetent/corrupt government.

The few legit / non-speculative uses of crypto are denominated in pegged stable coins like USDC, USDT, and some lower volume options denominated in EUR and other currencies. You can deposit these into crypto banks for a ~3-8% APY. A few of these options are even FDIC insured (e.g. Gemini's GUSD).

(this is unrelated to Bitcoin, which is more or less a volatile meme asset)

GUSD isn't FDIC insured, unless their homepage has it wrong. It's the dollar accounts in Gemini's name that are FDIC insured.

So if there's an exploit where GUSD can be stolen/duplicated, or if Gemini defaults the insurance is meaningless.

What it means is that if a bank where Gemini holds an account defaults, the government will pay Gemini up to $250k.

Sorry for the somewhat sloppy phrasing. GUSD is 1:1 backed by USD, the bank accounts holding that USD are FDIC insured, and this arrangement has regulatory oversight: https://www.gemini.com/cryptopedia/gusd-stablecoin-gemini-do...

You're right that if you store your GUSD off Gemini and it gets stolen, then you're out of luck. I am not sure what happens if Gemini closes but my impression is that since they are a NYS trust they would have to their customers the 1:1 backing (rather than paying creditors with that money).

> Not sure how you can use an asset whose price is fluctuating so wildly (and is correlated/anti-correlated to indicators and trends having little to do with your local government) as an effective hedge against incompetent/corrupt government.

If you don't plan on leaving your country, useful land is a much better hedge.

Other than that, the thought is that you can always flee your country with a digital wallet. IMO crypto is a terrible "societal collapse"/"dollar collapse"/"fleeing authoritarianism" for Americans.

A much better hedge is a set of skills that allow you to easily emigrate, a globally distributed personal+professional network, and a portion of your portfolio held as hard assets outside the reach of your country (eg a new life startup fund held as physical currency in another country outside their banking system -- or a personal network that has the same effect). But that's a very difficult set of things to cultivate for most people.

Crypto isn't supposed to replace the hedges you mentioned- it's supposed to complement them.

Crypto is "supposed" to do 27 different, contradictory things.

What it does do is provide a speculative bubble with no backing assets.

I don't need to complement them, and I don't sink hard earned money into hedges I don't need.

You enjoy your tulips, I'll enjoy my hilltops an friends.

I don’t think you understand how hard it is to protect your savings when all you have access to is 3rd world banks. I’d rather have 10k in eth then say Russian roubles or whatever shit local currency

The post I replied to was, in turn, replying to my post.

I do not live in a 3rd world country.

People in Eastern Ukraine did not have to protect their money from Puting until very recently. Now people are taping cash to their bodies in order to evade the war zone without getting it stolen.

I cover that scenario in the next paragraph of my original post.

Congratulations, I guess.

Actually, Ukraine ranks above average and median when it comes to HDI. At least a couple of weeks ago.

> I don't need to complement them, and I don't sink hard earned money into hedges I don't need.

> You enjoy your tulips, I'll enjoy my hilltops an friends.

If only all people who are not interested in crypto would be like this.

It does not have to be for everyone, but if it is so useless, I wonder, why it makes so many fiat enthusiasts so anxious to the point that they attack crypto enthusiasts.

>If you don't plan on leaving your country, useful land is a much better hedge.

What? Land is about the easiest thing for a government to seize (and protect, for that matter).

> portion of your portfolio held as hard assets outside the reach of your country (eg a new life startup fund held as physical currency in another country outside their banking system -- or a personal network that has the same effect)

I don't see why you're ruling out crypto as not satisfying the desiderata here. There's no need for it to be physical, so long as it can be converted to a currency you want, and maintains most of the value you put in. Stablecoins would work, then, and avoid the need to keep them in a physical location in the target country.

Terra has implemented stablecoins for ~20 currencies other than the US Dollar, including the IMF's special drawing rights (a basket of the five big ones): https://station.terra.money/swap

> Land is about the easiest thing for a government to seize (and protect, for that matter).

...and just killing people even easier. What's your point?

The purpose of "If you don't plan on leaving your country" is to describe situations where the threat is exogenous to governance. E.g., starvation-level crop failures/grid failure/energy shock/etc. Or even just a massive depression during which I can't find employment. In those cases, I'm less concerned about governmental overreach than figuring out where the next year of food and energy come from.

The moment I'm thinking about the government taking my land unexpectedly, I'm FAR outside of "If you don't plan on leaving your country" territory. That risk is hedged in other ways.

But, most importantly, I can enjoy land independent of its hedging value. I try not to invest significant chunks of time into acquiring pure hedges. How am I supposed to use stablecoin to ride a horse to a hilltop or sit around a fire with friends...

> I don't see why you're ruling out crypto as not satisfying the desiderata here

This is like asking why I would rule out a humanoid robot for vacuuming my floors. Because I already have an existing solution that is easier, safer, and simpler. Social connections and hard skills are an indisputably better asset to have in "fuck this I'm leaving the country" situations.

And, again, having friends & family all over the place is its own reward. As is cultivating useful skills. Not sure how I'm supposed to enjoy a vacation or find meaning in life with a stablecoin.

...also, all of this is independent of the fact that crypto really isn't even a good hedge for these sorts of long-tail risks in the context of the USA.

>...and just killing people even easier. What's your point?

That a hedge needs to be robust against the threat you're using it to hedge. Land ownership becomes the most precarious during exactly the times you're using it as a hedge for, which is a bad idea. Times of crisis are exactly when land seizure is the most likely and ease of protecting and securing it is the highest.

>But, most importantly, I can enjoy land independent of its hedging value.

Not in a crisis, when (in addition to the above) governments have the least resources available for protecting your land from randos.

I'm imagining you with a grain silo during a famine, thinking "no biggie, of course the government will protect me against theft of this super valuable food".

>This is like asking why I would rule out a humanoid robot for vacuuming my floors. Because I already have an existing solution that is easier, safer, and simpler.

I'm sorry, do people generally have a hard time understanding the concept of "a better alternative exists" that you need an analogy to explain it? I don't know what the purpose of that analogy was other than to intimidate others from asking honest questions about your argument.

>Social connections and hard skills are an indisputably better asset to have in "fuck this I'm leaving the country" situations. And, again, having friends & family all over the place is its own reward. As is cultivating useful skills.

Right, I got that part. Do you remember the rest of your post, where you said:

>But that's a very difficult set of things to cultivate for most people.

So what is it? You said it's difficult. Why is it hard to understand, then, why I would suggest crypto satisfies the desiderata here? I guess it must have something to do with me thinking that you should use a humanoid robot to vacuum your floors.

So yes, you may have already accomplished the difficult thing. But before you moved the goalposts, you seemed to be concerned with the average person. And now that you've moved the goalposts, you can't help but brag about what a jet setter you are.

>...also, all of this is independent of the fact that crypto really isn't even a good hedge for these sorts of long-tail risks in the context of the USA.

I agree you should have started with this, as a better argument than "holding physical banknotes in another country is easier than holding stablecoins".

As I said, you enjoy your crypto and I'll enjoy my fire pit on a hill.

It didn't add anything to the conversation the first time you said it either.

> Not sure how you can use an asset whose price is fluctuating so wildly (and is correlated/anti-correlated to indicators and trends having little to do with your local government) as an effective hedge against incompetent/corrupt government.

The informal market rate for the Lebanese Pound is even more absurd, though:

https://lirarate.org/#pills-graph-market

This dynamic already exists to some degree between fiat currencies.

> crypto is simply a hedge against incompetent/corrupt government

Adding this to my increasingly long list of "things that bitcoin actually is".

I kind of agree, but it seems crypto is only a hedge against incompetent/corrupt government insofar as

1. It can act as an actual alternative currency and 2. Those governments do not adopt it their citizens' alternative currencies themselves or choose to tax it

It seems like in this story the actual alternative currency the Lebanese are "foreign currencies", and crypto is seen as a potentially profitable speculation in the midst of an economic downturn.

The extent to which cryptocurrencies actually server as currencies, and therefore actually hedge against national currencies, is inversely proportional to the extent to which they are used as a speculative asset class. People have a really low tolerance for price volatility, and if the value of currency swings up and down it can make it really stressful to participate in an economy.

> extralegal way to acquire US dollars

This is so well put, I am going to take it.

I would add that it is also a extralegal & illiquid medium to acquire fiat.

The order books on Bitcoin is thin, its even thinner for Ethereum, even more so for Monero and dogecoin etc.

Companies like Coinbase and Binance recognizes this, if they were to sell all the bitcoin in posession it would tank the prices due to illiquidity. Thus their main business model becomes quite similar:

- easy onramp of fiat to crypto

- difficult offramp from crypto to fiat (when price moves around, you can't even login as servers frequently "go offline")

- in Binance's case, they are able to see all the orders in their books and routinely cause short/long position to be margin called

- wash trading and other classic unregistered securities manipulation.

So what we needed the whole time was a digital settlement layer, not solely a currency?

Hm.

buys ETH

Eth layer 1 is too expensive for daily transactions.

I hope they can find something that works for them. I've been intensely critical of cryptocurrency, but if it can perform better than regular currency, especially in a war-torn/economically devastated area even for a few months/years, it's serving a useful function.

"War-torn"? The civil one that ended in 1990, or you referring to something else?

Well there are some who believe the Beirut explosion a few years ago was actually orchestrated by a foreign nation as an act of war.

Perhaps this one?

https://en.m.wikipedia.org/wiki/2006_Lebanon_War

Or maybe these:

https://en.m.wikipedia.org/wiki/2008_Lebanon_conflict

https://en.m.wikipedia.org/wiki/Syrian_civil_war_spillover_i...

I have to concede that actually is one of the use cases for cryptocurrencies or more concretely: stable coins.

I guess using cryptocurrencies make sense if you are completely left to your own devices and can't rely on the government for help.

I'm just worried how this will turn out long term:

- Is using a cryptocurrency run by a company registered in Hong Kong, backed by a bank on the Bahamas really that great of an idea? - Are large parts of the population able to store their assets correctly. Are they storing their coins on their own wallets or are they using exchanges. If they use exchanges, does the government have an interest in letting them do whatever or are they imposing sanctions? If they store their coins in their own wallets, is the majority of the population able to properly secure their assets? - Will mining operations have an impact on the existing infrastructure if it becomes to profitable. I can totally see mining operations by powerful individuals prioritizing their profit over a nearby town's electricity needs.

But most importantly: what will happen if the value of cryptocurrencies decreases or even crashes? I don't see regular people highly invested in crypto just walking away from a crash.

In these unstable countries you can see people walking away from cash. How much inflation in the US and around the world will people tolerate before diversifying into crypto. Looks like the ball is already rolling.

The market cap for bitcoin is only a trillion, once it's up to around 100 trillion the price will be a lot more stable just like the dollar itself.

I'd replace "once" with "if" because that isn't a given at this point.

That is true. No one knows the future. I do think bitcoin is still the most likely to get there first for various reasons.

> How much inflation in the US and around the world will people tolerate before diversifying into crypto.

Diversifying from cash (which is impacted by inflation) into (most) cryptoassets with such volatilities doesn't make sense. People who have cash rather than appreciating assets want zero risk and some idea of how much they'll still have in one year. Cryptoassets don't provide that.

> once it's up to around 100 trillion the price will be a lot more stable just like the dollar itself.

Why? You seem to imply that USD is stable because of how big it is. I'm not sure where you get that from. The Fed targets a 2% inflation, so by definition, when it doesn't fail, the USD is stable.

If market cap is really the relevant metric, then you might as well compare BTC and CHF, and you'll reach your threshold faster.

USD is manually managed to ‘tax’ holders 3% per year in the form of inflation. It is stable, but you do pay for that stability.

Bitcoin on the other hand is not centrally managed for better or worse. It relies on a broad number of holders to ensure stability. Any small crytpo currency is a lot more volatile due to whales rocking the boat. At 100 trillion, there are no whales big enough to move the market significantly on their own.

> At 100 trillion, there are no whales big enough to move the market significantly on their own.

So you're saying that if the market cap of BTC increases, that necessarily means that whales have less power. I could sympathize with this argument if that a bigger market cap entailed that BTC would be well spread among independent actors (that would thus compensate each other's behavior), but there's no evidence for this. Wealth inequality is increasing in a lot of places, why do you think it's not the case for BTC? Of course we can't know given the pseudonymous nature of the ledger, but I wouldn't bet on this.

Now, even if I grant you that, that's just one cause of instability, and there are many others. When Elon Musk influences the BTC/USD rate using social networks, he's not acting as a whale, he's just acting as a celebrity. It's also unclear how BTC will perform through the next financial crisis, but I don't think it'll be the last asset people will sell during a panic.

Practically speaking, there's also little sign of the volatility of BTC going down. So either its usage is not spreading, or its stability has little to do with how spread it is, but you can't have both.

> Is using a cryptocurrency run by a company registered in Hong Kong, backed by a bank on the Bahamas really that great of an idea?

No, but I've never had Binance or Localbitcoins steal my money, Paypal and banks have done so, and I've been using both for around the same time.

> Are large parts of the population able to store their assets correctly.

With great power comes great responsability.

> Are they storing their coins on their own wallets or are they using exchanges.

Usdt over binance (0 fees) seems to be popular with a lot of people that don't want to deal with bitcoin's swings. Most people aren't using USDT real (-ish[0] erc20) wallets because it costs $30 to $60 to send anything. USDT over Bitcoin Lightning (already in the works) will fix this.

> If they use exchanges, does the government have an interest in letting them do whatever or are they imposing sanctions?

Lightning will fix this, it will make exchanges not hold any coins at all, thus they will be unseizable as everything will be done over Lightning,

> If they store their coins in their own wallets, is the majority of the population able to properly secure their assets?

I expect aunt Jane will be using a centralized entity that can recover her funds for her, young people, like anyone under 40 will use Lightning and enjoy their freedom.

> Will mining operations have an impact on the existing infrastructure if it becomes to profitable.

Lightning, halving cycles, etc will reduce mining, though maybe not fast enough if you're thinking in terms of climate change. Reminder that the US military is the single largest polluter in the world, not Bitcoin.

> But most importantly: what will happen if the value of cryptocurrencies decreases or even crashes?

Bitcoin will never crash, when enough people use it, but it might crash a few times before we get there (e.g. covid crash).

[0] It's realISH because ERC20 runs on Ethereum, which is not a real decentralized system like Bitcoin, and the upcoming switch to Proof of Stake switch will only make it more centralized/brittle.

Do tell how a bank stole your money.

I'm not the OP, but this is a thing:

"Yes, Banks Are Reordering Your Transactions And Charging Overdraft Fees"

https://www.forbes.com/sites/halahtouryalai/2013/06/11/yes-b...

Lightning is a very bad solution for a problem that should not exist. It fragments people from being on the actual bitcoin network to being in tiny side channels that still need to sync with the main chain. It solves the problem of someone being able to send a hundred small transactions to the same person, which is a use case that never happens.

Bitcoin is only congested because it has the bandwidth of a 28.8 modem (700KB blocks every 10 minutes)

https://bitinfocharts.com/comparison/size-btc.html#6m

A stablecoin is basically a bank, unregulated or poorly regulated.

If the total outstanding coins isn't fully backed by real USD, then that bank will eventually run.

Fine if you just need to conduct a transaction. You can risk it. Not fine to hold. Not particularly relevant to Lebanon.

Also - to preempt any statements about USDT having a higher backing rate than most banks... US banks have something USDT doesn't - FDIC account insurance. When it comes to banks the buck doesn't stop with the bank - it stops with the US government.

Devil's advocate: USDT might not have FDIC insurance, but there are stablecoins that do

In that case, and with the caveat that deposit insurance is wired and uncertain at the best of times, that makes stablecoin a regulated bank.

This makes it for for the user. I don't see how a bank can comply with banking law though. How does a bank prevent criminals, sanctioned orgs, money launderers or whatnot from using it?

It's possible that regulators will leave a loophole like this in play. They aren't always sharp.

What that is, is a bank where account are a wallet. It's still a USD bank account.

AFAIK there are no FDIC insured stable coins - there's apparently USDF[1] which is being promoted by FDIC insured banks but the coins themselves aren't subject to FDIC insuring and could quite possibly either bankrupt the backing entity or be abandoned in the case of a bank run.

Which stablecoins were you talking about?

1. https://www.coindesk.com/markets/2022/01/13/fdic-still-uncle...

What about algorithmic stablecoins?

UST is an algorithmic stablecoin and briefly de-pegged when it had a "bank run", but the incentives to keep it pegged ultimately won. As long as LUNA doesn't go to 0, then UST should always re-peg (theoretically).

Sure, or just Dai.

One version of a stablecoin is. There are lots of other forms (ex: algorithmic stablecoins) that are transparently backed by other assets that you yourself can audit.

The value of other assets can change. Only the USD is USD.

It's still the case that users take all the long tail risk, and earn none of the reward.

This is so close to the truth it hurts.

When you think about it, banks simply agree to transact with each other and thereby offer a payment network. When you have a Chase bank account what your balance is showing is how many "Chase dollars" Chase is owing you. Those dollars can be redeemed 1:1 for physical dollars.

>If the total outstanding coins isn't fully backed by real USD, then that bank will eventually run.

Well, the way banks operate they also only need to keep a fraction of their deposits liquid and immediately withdrawable. However, there is one big difference here. The Fed is actually the one providing the inter bank payment infrastructure with so called bank reserves which can only be held on servers owned by the Fed. A lot of the QE stuff is just there to make treasuries as liquid as deposits. It's not money printing. It's more like lending liquid money in bank accounts that isn't locked up via a certificate of deposit.

The big problem that Tether and so on have is that the central bank isn't on their side. So the only safe investment is just plain dollars. Running an unregulated bank is going to backfire at some point.

What's interesting with most stable coins is that you end up trusting a third-party anyway, so a blockchain or a trustless technology serves no purpose there, if you just trade in this cryptocurrency. Technically (not legally) speaking, the USDT mentioned in the article could be replaced by another token pegged to the USD delivered by a company based in the US and allowing Lebanese clients to transact in it, everything via a regular website and database on which transactions would happen.

Here's my dumb question that I always want to ask- why can't the people of Lebanon, or other residents of poor & unstable countries, just use digital dollars? (Or euros?) People in developing countries have access to payment technology like Payoneer and other methods of money transfer, and the dollar is vastly more stable than any cryptocurrency. Why don't they just.... ignore their local currency and do everything in dollars? What am I missing?

Becouse you need dollars in the central bank too buy dollars And You need dollars I the central banks too sustenance of the currency Mean that I you don't have dollars too sustenance of the currency you also don't have dollars to buy, but people can produce crypto, meaning that the country can sell it.

Yes but do dollars come with unlockable content such as EXCLUSIVE access to the Bored Alpaca Polo Club Discord server?

Why do you specify "digital" dollars or euros? Both the dollar and the euro are mostly digital currencies already. Dollars that only exist in a computer system somewhere out-value coins and notes by a factor of (IIRC) 10 or more.

I created an account just to answer this question, seems it seems like a lot of people in the first world can't even phantom the need for people to use an unregulated currency.

Source: I'm from Argentina. I can't speak for the situation in Lebanon or any other place, but I imagine there are similarities. I know there are similarities with Venezuela and (I believe) Iran.

Long story short: when your government deems illegal or at least suspicious for you to save in USD/EUR, Payoneer/Paypal/etc are risky to use. You have several problems:

1. You can't easily use the money on (say) Payoneer. You need a credit card. Credit cards are easy to tract. You'll quickly have someone asking where the money came from. I understand this seems like a good idea in a sane country, but it is not desirable when the only way for you to save is to bend the rules somewhat.

2. You can't put your money into Payoneer/Paypal/etc because, remember, you don't have any USD. You can't buy them. So the only way these are a fix is for people who work for USA/Europe and can maybe get paid directly there.

3. Cryptocurrency is not yet as regulated nor it is easily regulated. Payoneer has to comply with Argentinian law because they are a financial entity. Cryptos are still young and are (at least in Argentina) still somehow being able to sell USD-like assets without selling USD. Example: in Argentina you can buy up to 200 USD per month (well, the lucky ones get 200 USD... won't get into details), but you can buy as many USDC as you want.

4. The _your keys, your money_ moto may be a meme for the YCombinator crowd, but it is not for many people. Payoneer/Paypal and banks *will* ask for documents baking up your funds. Again, this is a good idea if you live in a sane country, but many people do not. You can't just go to the bank and tell them: no, I don't have these dollars declared anywhere because they are illegal to own in my country. I've seen colleague's accounts getting closed due to "suspicious activity" and their assets are frozen. The Argentinian answer is generally: be grateful you are earning in USD, look for the next Payoneer (I think we are using a lot of Dukascopy lately) _or_ switch to crypto.

Anyway. Make of crypto what you will, but people in high-inflation countries with an excess of love for regulation intuitively understand their appeal.

> What am I missing?

People in wealthy and stable countries have it very nice that their strong and stable currency is also legal exchange medium in their country. It's common for governments to make it literally illegal to transact in anything but the official currency of a country.

So your poor and unstable country needs to be wealthy and stable enough for people to actually afford dollars, smartphones, Payoneers (hard to do that when your monthly income is $10). And at the same time the country has to be poor and unstable enough for fiscal law enforcement to be pretty low on government's priorities.

The state would not allow you to exchange your local currency into US dollars. In other words, you can’t ask your bank to convert local currency to the dollar: that’s heavily regulated by the state.

>“The idea of a decentralized network and people being the owners of it is what influenced many people in Lebanon to invest in bitcoin mining,” said Iskandar.

I'm pretty sure it had more to do with Lebanon's economy tanking and the people trying to find ways to make money. They didn't lose trust in Lebanon's bank due to ideological reasons, they lost trust in its bank because the economy is in chaos. For them, crypto is one of their last resorts.

They're not trying to 'make money' more like maintain what they have. In the past 5 years this same situation has played out in many countries. Bitcoin really is the new gold.

Like others have said, I didn’t expect this article to be largely about mining crypto coins, I think they missed a larger more important point. I think it is an important point a lot of cryptocurrency deniers should consider.

It’s one thing if you live in a country with a strong, stable currency. Quite another if your local economy/ currency tend to be more volatile. Cryptocurrency can play an important and valuable role in protecting your wealth for those people.

Imagine your local currency’s value is tanking, or experiencing a period of hyper inflation. By shifting some of your wealth into a stable coin, or anything more stable than what you have, this can provide a huge benefit to the user.

How is this use-case different from someone in the struggling country buying USD, which is way less volatile? Is it because converting local currency to crypto is easier than converting local to USD?

In practice the article mentions that this is what they do: buying USDT.

So the entire apparatus is coming into existence in order to essentially buy/sell goods in USD. And the reason this cannot be done directly is because of financial/legal restrictions on the Lebanese populace? Just trying to understand the value-add for the people on the ground using it in everyday life.

To be fair, I live in the US so this is pure speculation. But I think you are trivializing the complexity of purchasing fiat from a foreign country. I doubt it’s as easy as you are suggesting.

Also, I want to point out my original point has nothing to do with buying/ selling goods in USD. It only has to do with transferring value from one currency, whatever that is, into something more stable. USD is irrelevant.

I can’t imagine walking into my local bank and reasonably expect to withdraw $1000 in GBP, or whatever foreign currency I desire. They don’t just keep large amounts of foreign currency on hand. I’m sure they can do it upon request, but it’s not going to be fast, and it will probably cost an exorbitant fee.

Cryptocurrency on the other hand is always available at a moments notice. You will pay a fee for the transfer sure, but the transaction is nearly instant. Being able to actually use the crypto for something useful is another problem. But it’s not that hard to imagine a scenario where folks in an embattled local economy all agree to use and trade a particular coin.

But even besides being able to use it day to day, it’s still a powerful mechanism as a pure value store, when your local currency is going through the ringer. And you don’t need a centralized bank to facilitate it.

>cryptocurrency deniers

lmao, nobody's claiming that cryptocurrency doesn't exist...

Haha, that’s fair. I could have picked a better choice of words, but you know what I meant

If you want to protect your wealth I'm not sure investing huge capital sums in mining machines, dependent on huge energy consumption to work, in a country with an energy crisis. That seems absurdly high risk to me. I can sort of buy the idea of moving your money to crypto as a way to get your money out of the country whilst evading your government's capital controls. But doing that by starting a crypto mining business is such a weird way.

Yeah, I didn’t really like the article very much. I don’t really agree with the miners here in this case. But it’s also highly variable depending on what you’re mining. Not everything is as energy intensive as Bitcoin. I’m not an expert, but it seems like most newer coins we designed in a way to limit power consumption.

But my point has nothing to do with mining. Imagine you have $1000 to your name, and for whatever reason your local currency is tanking & the value of your money is racing towards zero.

You would be wise to convert some of it into something more stable, as a pure value store. It’s a fast & relatively cheap way to defend against volatile market conditions.

Cryptocurrencies don't do anything to actually help the underlying economic issues that cause rapid inflation. All it does is allow a handful of people to shield themselves from the economic crisis. This will only ever be a small percentage of people, because in order to secure your wealth, you need to have wealth in the first place. Cryptocurrency can't help the people that are struggling the most.

I've met many Lebanese immigrants, both in North and South America. Crazy to see how well they integrated and succeeded in such little time. Entrepreneurship seems to run strong in their community. Lots of really large companies are run by Lebanese and their descendants. Very similar to Indian immigrants.

Unfortunately this success has not been mirrored in their own country. There is nothing valuable being produced there, both in natural and human resources. I can only conclude that all the smart ones left the country.

I also do not see how turning to cryptocurrencies is going to make a difference this late in the game. There are not that many places in the World that can run a profitable mining operation. That's why most mining pools are Chinese. You also need capital to set up a rig.

Crypto only works as a inflation hedge for a collapsing currency, does not make it easier to transact.

Yes, I think the “unregistered security” description of crypto is most accurate.

It is definitely a hedge against fiat currencies. People are losing faith in central banks self control to not run the money printers full speed.

Crypto is also way easier to transact compared to ACH and wire transfers. No need to interact with a bank whatsoever to move as much money you want to whoever you want.

what evidence do you have to back this claim? how does crypto a wildly fluctuating asset offer a protection against the USD? Bitcoin can go swing anywhere from 40% range on any given week. How is this a stable hedge against currency or stocks for that matter? Gold has statistical evidence of holding its value and its frustrating to me to see half baked claims that crypto is hedge.

Clearly we have different definition of what hedge is.

The evidence is in the news everyday. Financial institutions, companies and individuals are all diversifying into crypto. It is a new asset class, and yes a volatile one.

but that isn't a hedge against currency like the parent comment says. buying a risky asset as part of your small portfolio isn't what I classify as hedging.

That doesn't say they're losing trust in central banks though, only that they see an asset to diversify to

I think Lebanon demonstrates, perhaps, more of a counternarrative.

Even though the Lebanese currency collapsed while bitcoin exploded, crypto still is not being used for everyday uses.

I suppose "something tradeable" is not an empty niche. Local currency still works if you don't hold it long. Foreign currency works for everything else.

There's not a replacement for fiat. The Lebanese lost trust in almost every aspects of their government. Sure, that's a problem for their national currency. But, you don't get that much mileage from crypto in this case.

Plenty of people use crypto to buy things in local currency with a debit card from their crypto storage provider.

This seems backwards. In a country where there is a shortage of energy, they are using it to run bitcoin mining operations? Lord help us.

Shortages are the result of mispriced electricity. Taking advantage of such mispricing is a good thing.

For whom?

The people taking advantage of the price difference, but also “the market” as a whole.

A lot of people in Lebanon get 2 hours of a electricity a day, if that. Regional slumlords are renting out generators and smuggle oil. The electricity is not so much "mispriced" as it is controlled by various mafias and terrorist organizations.

Sometimes cool cyberpunk theories crash upon the harsh shores of reality.

Then the market isn’t a benefactor because it isn’t properly functioning/free (from corruption) as they so often aren’t.

Harsh shores of reality also crash on capitalism.

There is almost an insight here.

Yes, people in lebanon don't value electricity as much as the miner, and so are allocating their resources in a more effective way.

Who loses here?

82% of the people in Lebanon are currently in poverty, many are living on $2/day and have to choose between food, fuel, and medicine. They have no resources to allocate. It is a failed state.

The miner in this case would be, once again to be painfully clear, a warlord.

https://en.wikipedia.org/wiki/Project_Cassandra

https://www.politico.com/interactives/2017/obama-hezbollah-d...

The losers predominantly would be the people of Lebanon, forever subsisting on the largesse of the UN and foreign powers with their own interests - their meager allowances paid out in dollars only to be completely squandered (the more UN donates the higher the prices will go, reliably soaking up all foreign assistance completely) on an artificially inflated energy "market" that enables narco terrorists to launder money via bitcoin.

People in Lebanon in general. Especially the poorest. Obviously.

So some newborns will freeze to death, but hey at least the markets are efficient!

For everyone.

The one doing the mining is being compensated with wealth.

And society in general is being compensated with a more effective allocation of resources.

No, you’re definitely right. I’m not sure where the author of this article got the idea that Lebanese citizens are in any way “turning to cryptocurrency”. Most blanket statements about losing faith in banks and whatnot come from a Mark Iskandar, who is a CEO of a cryptocurrency company, the one who set up the bitcoin atms mentioned.

The article briefly mentions power problems, before misleadingly suggesting a solution is to trade bitcoin instead of mining it, because “no machines are involved in the trading process” (false). Later on in the article, the crypto company responsible for the atms says their solution is to rent electricity from other people to mine in exchange for a bit of money, which is heavily downplaying the amount of power needed to make mining profitable.

Unless I’m missing something, this article seems to have a lot of text, but doesn’t actually say much.

with the government severely limiting people's ability to buy dollars in Russia recently the USDT has become much more popular there.

Speaking about the economy in the Mid East - the 2011 Arab Spring was triggered by the bread prices rise (due to lower Russian exports due to 2010 fires). With Ukraine and Russia being major exporters of wheat, in particular into the Arab Spring region, and both countries expected to export much less this year due to the war - one can see that an even larger Arab Spring II is in the making now, and probably in some other regions of the world too. The food prices drastically rising will in particular lead to inflation and local currencies devaluations if not a total crash.

So what is the actual increase in usage? Most of the quotes are from crypto CEOs and the like.

unsurprising as this trend is seeing popularity in south america as well as other countries the US deems of ill repute. Frankly im convinced this is the quiet death of Kissinger era soft power, the American monetary policy cudgel.

The US currently sanctions monetarily ten percent of the financial world. If you take into account various chinese sanctions, its easily more than this.

https://home.treasury.gov/policy-issues/financial-sanctions/...

when your country racks up yearly multi-trillion dollar debts and expects other countries to continue financing them amidst such sanctions it tends to betray a certain disconnect and highlight the delineation between the political class and the capital class. Politicians have taken a very serious tool and run wild with it like a child with a pocket knife to such an extent over forty years that i think most players have simply had their fill of fair-weather ethical discourse from the land of the free.

This claim isn't substantiated by the particulars: Bitcoin miners in these countries seem more than happy to cash their efforts out in USD, or in USD equivalents. Bitcoin itself remains speculative in nature, meaning that the amount of actual organic settlement via it remains relatively small.

The EU also has sanction against Lebanon. These sanctions are typically against specific individuals and not the entire population.

> the American monetary policy cudgel.

We're trading it for having the safe subset of crypto denominated in USD pegged stables. Less direct power over other countries but still keeps the world transacting in dollars.

> The increasing demand for cryptocurrency mining in Lebanon has prompted many shops across the country to accept payments in USDT

I don’t blame you for missing the part of the post that actually addresses which cryptocurrency they’re resorting to, since it’s literally at the end.

But, you do realise that USDT is a stable pegged (with super shaky/shady backing) to the USD, right?

Don't they mean "as the currency is used to take their resources"?

Hasn't there been a massive energy crisis in Lebanon? How much of that energy consumption is cryptocurrency fueled?

bitcoin energy use is around ~0.5% of total worldwide, so we can probably guess the Lebanon energy crisis isn't because of crypto.

There is no logical link between your first and your second statement since it doesn't give us any info on how much it contributes to energy use in Lebanon. The second statement is true though.

The article does mention that it's creating tensions in some villages relying on hydropower where miners installed their operation.

Doesn't USDT remain famously overleveraged and just one bank-rush away from an economic crisis?

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