Not your keys, not your crypto. Anyone storing their crypto on any exchange has this risk.
Ha, this is becoming my go-to definition of the lottery.
All current crypto"currencies" which use transaction fees (which is practically all of them) are negative sum games and thus are scams.
This is so simple and people waste billions on not understanding it.
Companies can sell stock to fund useful activity.
This is useful activity for society because senior management deserves more money and they work really hard to earn it. /s
Basically all the DeFi ecosystem boils down to trading one coin for another coin, there is no productive work at the core generating value.
Wow, that's so real, concrete and down-to-earth :-)
> The business is out there building widgets supplying people with a service
Or perhaps not doing these things, but making performative presentations on how its groundbreaking unproven innovation is certain to bring in a lot of money in the future. Or a mix of the former and the latter.
> Most coins are just hollow marketing gimmicks designed to move money around.
One could argue that some, or many, publicly-traded companies - when one considers the listed trade value of their stock - are 10% real business and 90% hollow marketing gimmicks serving as parking space for speculators' money.
The stock price represents likelihood of future earnings. That's going to be influenced by a bunch of things not in financial reporting.
That does happen. About a decade ago I dug into FX flows. The trade in USD was eighty times trade flows.
FX is a nasty business, huge profits to be made, profits that can be multiplied by the slightest bit of undetectable (now the traders know how to cover their communication traces) fraud.
Cryptocurrency is pure scam, true. But, in my educated opinion, the international financial system is dominated at the highest levels by out and out crooks.
The state of international finance, how it works against its consumers and saps the life out of the very economic activity it fosters (economic activity at the level we have would not be possible without sophisticated financial systems) is a huge incentive for developing crypto.
I just wish that there was a better solution (even a viable solution) than crypto
Complex social and economic problems do not have simple easy answers.
Michael Milken even got a presidential pardon,
Currency trading is negative sum. (Zero sum less friction.) So are most derivatives.
One must encapsulate broader effects to find a net gain. Incorporating crypto’s benefit to the poor is such an attempt.
What benefit is that? Not speculative, maybe in the future benefit, but current, concrete, demonstrable benefit.
I don’t see one, but that’s a separate discussion. The narrow one is that every crypto-trader’s gain comes at another’s loss. Cash in and out of the system is entirely conserved across all timelines.
"Possibly marginally less bad than an unstable fiat currency propped up by a corrupt regime" is not high praise.
Also, notably most banks will do SEPA transfers for free. There's nothing inherent in money which would make the action of moving it force giving a fraction of it to some other entity.
Indeed, the only disagreement I am aware of is whether the scam being run by multiple entities ("miners") is a significant difference to a Ponzi and so it's a new kind of scam (suggested name: "Nakamoto scheme") or the difference is aking to an LCD vs CRT TV, nothing significant and it's just a Ponzi. But the fact it is a scam is an indisputable and rather simple mathematical fact.
To quote Preston Byrne who coined the phrase Nakamoto scheme:
> The Nakamoto Scheme is an automated hybrid of a Ponzi scheme and a pyramid scheme which has, from the perspective of operating a criminal enterprise, the strengths of both and (currently) the weaknesses of neither.
Crypto fees are just much more straightforward. You pay a small amount to use the network and there are no strings attached, no hidden subsidy. In theory at least that is because most networks are still funded by inflationary payouts. But no one is forcing you to hold anything more than you need to pay for fees in the crypto currency at any moment in time.
Just like with most things crypto has been widely oversold and 99% of coins are basically scammy penny stocks. No one disputes this. But as someone who has moved internationally quite a bit I would LOVE for all my ETFs and bank accounts to live on an open Blockchain so I don't have to worry about migrating everything when I move to a new country. Even if I don't fully custody them, moving USDC through Ethereum or Solana is just 100x better than any international wire transfer. Stocks are basically stuck in whatever country you bought them in, I don't even want to know how difficult it would be to move my depot from one country to another. You'd have to sell everything.
Not sure what you mean. It's not significantly more difficult that it would be (and maybe easier) to be constantly transferring blockchain assets to local currencies/equities etc. ACATS makes the process pretty straightforward and handles most common financial instruments like stocks, cash, bonds, ETF's, and more. Then you're done, your entire portfolio transferred in a few days. Just choose a good brokerage firm in the first place: ACATS participation should be a prime criteria if you might move country at any point, ever.
Similarly, USDC/Ehtereum/Solana only seem superior to a wire transfer until you have to use them in a local economy. Then converting them to something compatible with the local economy isn't significantly better.
If you're imagining a future where local economies accept these things directly then I think that future is, at best, possible but mostly theoretical at this point. Crypto is not a major threat to sovereign-dictated monetary policy at the moment, and I suspect that the second it appears it might be then there will be rapid action to cut off that potential.
I don't see a way that crypto can bootstrap fast enough around such things when a government can, pretty much overnight, make every business own and retail cashier who accepts a crypto payment into a criminal if they so choose. Gray and black markets might still prosper, but it would make any vision of mainstream use, much less institutional use for things like inter-country investment portfolio transfers completely impossible.
> But the fact it is a scam is an indisputable and rather simple mathematical fact.
And:
> negative sum games and thus are scams
I don't think you know what the word "scam" means.
Merriam Webster defines it as "a fraudulent or deceptive act or operation". I don't think either Satoshi or Vitalik did anything deceptive or fraudulent.
Whether or not something is a scam is not a matter of "simple mathematical fact", but rather of intent.
That doesn't change the fact they run the scam.
I wrote this up before but here it comes: if there's an empty room and a few people come, play a few rounds of a card game and then leave and the room is empty then it is obvious the sum of their money couldn't change. Some won, some lost but the sum is the same. This is called a zero sum game. If they decide to use plastic chips during the game and only use real money in the beginning and the end, nothing has changed.
However, if someone takes a cut every time the chips are being moved around then that person is guaranteed to win and the players in total are guaranteed to lose and a game where we know who wins without knowing anything about the game is quite obviously a scam.
Your only way to win is to hype up the game and sell your chips to an outsider who will now sit on an even bigger loss. Might not be realized yet but it is there.
There really aren't a lot of good possibilities here, how did these exchanges get so large before anyone thought of audits?
Who said no one thought of this? There was simply no one to enforce this.
Look at Coinbase. They made a point of being “regulated in the US”. They’re audited. They’re legit (most likely. I’m not the auditor). They’re complying with disclosure laws as a publicly traded company.
Look at Patio11, he’s been publicly making claims about tether and the crypto ecosystem for years. If it all blows up and his speculation /research was right, then who is to blame? We’ll have years of boy crying wolf and we thought it was a sheep.
There are many banks in europe that will not open accounts for people who just moged there, unless they bring along plenty of money.
This simply means that having your coins on an exchange is the same a forfeiting them unless otherwise proven.
But the crypto exchanges double down on that, they speculate like the banks do, but with zero risk managment and oversight, the biggest accounting firms do not want to offer their services to them.
They have also leveled up their exit strategies, instead of the plain old run away, they run the business while they can extract money and then later they seek legal cover under the umbrella of bankruptcy laws.
Oh boy are you in for a surprise:
"In its quarterly report, Coinbase added a risk disclosure: if the company were to file for bankruptcy, the court might treat customer assets that the exchange is custodian for -- their Bitcoin, Dogecoin or whatever -- as Coinbase’s assets. And they’d be at the back of the line for repayment, forcing normal people, unaccustomed to the ins and outs of federal bankruptcy court, to claw back their money along with everybody else owed money by the exchange."
From Bloomberg: https://www.bloomberg.com/news/articles/2022-05-11/coinbase-...
Basically, there's no legal precedent. It's anyone's best guess.
We’re about to find out soon.
There's nothing prohibiting a crypto exchange from having a separate company to hold customer's assets. In a bankruptcy, the custody company should still be solvent. That's required in Japan.[1] Customers of FTX Japan still have their assets.
[1] https://www.coinfirm.com/blog/japan-crypto-asset-regulations...
You can't have the protections of "money" without the regulations of "money". As long as everything was going fine and government was still dragging its feet catching up to technology, the people who got in early got to pretend there was something special about cryptocurrency that made it possible to have their cake and eat it too.
Now, they're starting to find out why that's not the case.
> Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.
> Further, we place great importance on safeguarding crypto assets we custody and keeping them bankruptcy remote from our general creditors, and in June 2022 we updated our Retail User Agreement to clarify the applicability of UCC Article 8 to custodied crypto asset — the same legal protection that our institutional custody and prime broker clients also rely upon. UCC Article 8 provides that financial assets held by Coinbase are not property of Coinbase and not subject to the claims of its general creditors. In light of UCC Article 8, we believe that a court would not treat custodied crypto assets as part of our general estate; however, due to the novelty of crypto assets, courts have not yet considered this type of treatment for custodied crypto assets
Source: page 96: https://s27.q4cdn.com/397450999/files/doc_financials/2022/q3...
https://finance.yahoo.com/news/coinbase-keep-customer-balanc...
What are your keys worth if the price of Bitcoin is close to zero?
https://cointelegraph.com/news/bitcoin-is-already-at-40-of-a...
Their argument is that a currency being “replaced” for “political, economic, and cultural reasons” isn’t a currency failing. What?
If they’ve “debunked” the 27 year figure, then what is the correct average lifespan of fiat currencies?
Did the Deutsche Mark fail when it was replaced by the Euro? Come on.
Yes!
You are cherry picking by choosing the Euro. The point is that valuation loss to currency printing is currency failure. The vast majority of currency “replacements” are just abrupt failures, and generally coincide with a country being overthrown by a new authority.
Straw man. Nobody argued fiat never fails.
> vast majority of currency “replacements” are just abrupt failure
What is your source? You posted a statistic. A comment found it was based on B.S. You disagreed. I clarified the debunking argument. Now you’re throwing out straw men and a new unsourced claim.
Again, the broader point is that measuring a "failure" as a total collapse vs. a replacement with a possible devaluation is the strawman.
Abrupt "failures" (or "replacements"... choose your euphemism) are noticed, but modern fiat currencies are constantly failing. It is easy to measure. The metric is currency debasement, what you would call "inflation" and what I would call "state sanctioned counterfeiting".
The Rentenmark was legitimately an absolute debacle, one of the worst of all time right up there with the Zimbabwean dollar
The question is kind of ill-formed in the first place. Take the current US dollar. How long has it been around? Per Wikipedia, it was established by Congress in 1792, which gives it a sedate 230 years of existence. But given that the original analysis is by a gold bug, I suspect the intent is to limit it only to the 51 years that have passed since the end of the gold standard in 1971.
If the goal of the question is to work out how long a fiat currency not backed by gold will last before it's hyperinflated into nothingness, then it stands to reason that the metric which best reaches that conclusion would be in fact the earlier date: the Nixon Shock wasn't an episode of hyperinflation (inflation reached a measly 10-20% annualized). Events like the creation of the euro are even more starkly not relevant to answering that question.
There's also severe methodological issues with completely omitting currencies that haven't failed yet, which ought to be patently obvious. There's another severe bias in terms of the inclusion of currencies on the list, since there's going to be several currencies for which is there is likely insufficient data to establish the lifespan correctly, because records tend not to preserve very well after several centuries.
To attempt to answer your question, I don't have any hard data in front of me. But I would be shocked if the mean lifespan of a currency were substantially less than a century--there are several currencies that lasted several centuries during the Medieval period, such as the ducat lasting ~730 years.
> If the goal of the question is to work out how long a fiat currency not backed by gold will last before it's hyperinflated into nothingness
That isn't completely fair. The ducat lasted ~730 years and preserved a reasonably consistent amount of value all through that time. Someone holding a dollar in 1971 has effectively lost 95% the value that they expected it to have vs gold. Even as demand for gold has presumably plummeted now that it is no longer officially involved int he monetary system.
Just because they are destroying the value of the currency on purpose doesn't change the fact that the value will be destroyed. It doesn't need to be an unexpected event like a hyperinflation - normal inflation is also enough.
Not really. Inflation long predates modern times, there's a reason that the terminology is called "debasement" (adding base metal to gold coins). I don't have hard numbers on the value of the ducat (because that pretty much requires trawling historian journals I don't have access to), but judging from other coins that pop up, the annual inflation rate would have averaged perhaps 0.5% for the Medieval and Early Modern.
Why should a steady 2-5% inflation rate in modern times be considered destructive to value, but not the steady 0.2-1% of earlier periods?
Because they are different by an order of magnitude. Over a 70 year lifetime, at 0.2% inflation a coin is worth 90% of its value at the start of the life. At 2%, it is worth a hair less than 25% (at 5%, it would be effectively worthless because the coin has lost 97% of its initial value). That is quite a different outcome - one of those rates I could save using coins and not do too terribly in real terms.
If not, in what way is BTC a fiat currency?
Also, coins eith a fixed possible supply, such as Bitcoin, act more like commodities than fiat money.
Bitcoin and other crypto is definitely not fiat currency, because virtually nobody will sell me a pack of cigarettes or a croissant for crypto currency.
Then comes office infrastructure, if any and cloud assets.
They have >4k employees. Assuming they make US minimum wage, they would cost almost 240,000,000/yr. It’s almost certainly MUCH higher.
They spend $550b a quarter on R/D. That’s likely mostly salary.
https://s27.q4cdn.com/397450999/files/doc_financials/2022/q3...
What does b stand for again…
It didn't
> Even if their effective fee is only 1/100 of a percent that's $4 million.
It's not.
The reason? They "traded" fictitious currencies whose "value" is pure speculation and nonsense. Their fees are also denominated in these fictitious currencies.
However, neither the offices they rent nor the people they employ have any interest in these, because rent and salaries are paid in something that actually has value: the dollar.
Now, where does the actual money come from is a good question, but I'm too lazy to read their SEC filing.
In 2018, 90% of employees received their salaries in BNB
https://www.ccn.com/90-of-employees-at-major-crypto-exchange...
Given their "grossly inaccurate filings" I wouldn't trust random tweets https://www.ft.com/content/3fb2f6cf-e132-43f4-9d6a-34fd13eb8...
They had $365mm in revenue from transactions. They has $1.1b in expenses. $550mm is employee/r&d.
On top of that KYC and other operational costs really add up, and without another revenue stream than the transactions themselves it may simply not be enough of a slice to be viable.
If I win, I keep the money. If I lose... You'll have a problem a few years down the road, when you try to withdraw.
Every one of the allergic-to-sunlight exchanges has a huge incentive to do what I described.
They were making money with the current amount of spending but then crypto flipped
They probably will have to lay off more people and give up on their current pace of development. Tickets will take 5 months to complete instead of 2
Seriously, though, the NASDAQ matching engine runs on a 1U server, and I doubt coinbase needs anywhere near that amount of processing power. Clouds just make it really hard to run a fair matching engine.
what % of BTC is held in binance / crypto.com / coinbase?
if one of them fails/has an issue, how much more can BTC fall and then never recover?
what are the % chances something good happens to one of those exchanges and crypto value/demand goes up?
what are the % chances the inverse/opposite happens and crypto goes even lower?
Coinbase stock is going to zero.