Binance commingled customer funds and company revenue, former insiders say
reuters.com
reuters.com
We have financial systems that are certifiably broken, there are countless ideas about how to fix them, the digital era makes new ideas easy to explore and everybody would objectively be better off with some genuine innovation
yet all we've got is this manic obsession spawned by bitcoin that has no economic objective whatsoever.
If that is "efficient allocation of capital" one wonders what inefficiency looks like.
What?
Say you're trying to invent a lightbulb. The first one ever, and it explodes when you plug it in. How would you describe its state?
My square wheel isn't broken, because it's square.
It's popular to look things like the gold standard through rose tinted glasses, but economic numbers don't support it.
Bernie Madoff scammed people, so we should abolish the dollar. No money, no scams. This is the level of thinking of people crying about "crypto" in general. It's like saying "drugs are bad."
The reason why no one uses Bitcoin is because it's a nascent technology full of rough corners that needs to be smoothed out with time. Until a few months ago, it would've taken 15 minutes for the payment to go through. Is this reason enough to throw the baby out with the bathwater?
But for some weird reason, many software engineers look at Bitcoin as a finished unchanging product. It is like looking at ARPANET and saying "this is bollocks, it's never gonna work."
I guess drive-by criticism is less work than sitting down and improving something with is new, exciting, a bit crap but with huge potential.
The cause of the thing is more than 'there are no shops'. There are no shops because no one wants to do it.
Prove me wrong. Open a Bitcoin grocery store.
The entire economy of Bitcoin is not spent on its core developers to improve it. At this point I have to assume trolling if anything that hasn't reached global domination to be a failure. We are talking about a worldwide currency that is working against any law, government, bank.
If it takes 50 years to reach maturity, is it a failure? Why is time taken to mature an important metric? Nothing is born in a vacuum, but builds upon what existed before.
In any case, neither Amazon nor Netflix have global, unlimited reach like Bitcoin. So it makes your question even more silly.
One can lose paper money. No one out here is trying to solve that problem. Just put it in some shitty bank to avoid that issue, but the problem wasn't solved, just avoided.
> The bugs are self-imposed
I can send BTC to an address and it is there instantly. If you want to be more sure, wait until other nodes have confirmed. Even more safe? Wait for 6 blocks to be written after the one your transaction is on. It's up to you whether you want instant and less secure or wait a while and more secure. Does that make sense as far as coherence?
It is possible you are getting upset because you are having a completely different conversation than the one you joined.
Obtuse?
Deflationary money hasn't been proven to not work. Set amount of tokens has its advantages over fiat that is printed infinitelt by the govt that issues it.
Science is a big differentiator - that said it gets used and abused in much the same way.
Bitcoin has a sustained 13 year wave, at far greater in amplitude than tulips, and spawned many bubbles along the way of even greater amplitude given the even shorter time periods, and now sustaining even during a period of quantitative tightening
It’s attractive to fraud for the same reasons why it’s attractive to people who take issue with legacy finance. Your “account” (wallet) can’t really be shut down or frozen, you can transact quickly and easily with only an internet connection and a phone regardless of borders or capital controls, and the currency itself can be audited and resists inflation. All those things continue to be true, but unfortunately the current largest, visible use case is fraud.
The original use case for Bitcoin was right in the title of the white paper: P2P electronic cash. Unfortunately, that hasn’t taken off, and some governments like the US have done their best to kill it. See the IRS guidance for Bitcoin taxes from 2013 which made it practically impossible to use as cash in a legally compliant way. That was the first, and clearest, regulation of cryptocurrency I’m aware of. All other currencies are treated differently. Only Bitcoin/cryptocurrency was singled out for particularly onerous tax treatment.
Well, that's because Bitcoin is not a currency, by many reasonable definitions.
Bitcoin does not meet the desires laid out in the whitepaper, not even close. Bitcoin isn't even a currency by it's own standards.
A currency has to be widely accepted as a medium of exchange, and it has to have a relatively stable value. Bitcoin fails bitterly at both of these. And experiments with bitcoin payments in the mainstream quickly failed (Steam, Tesla).
I beg your pardon? Because we haven't heard of any Madoff or subprime loans lately, you are willing to say that with a straight face?
Noone who is ideologically consistent with the crypto ethos would expect that ideology overrides greed.
Bitcoin yo-yo’s between hyperinflation and hyperdeflation. Unchecked inflation is a problem. But a currency as volatile as Bitcoin is obviously not the solution.
[0] https://buybitcoinworldwide.com/volatility-index/
[1] https://www.bloomberg.com/news/articles/2022-10-20/uk-pound-...
Measured against a basket of goods, Bitcoin’s value soars and free falls.
Using a 17th-century definition of inflation, which in modern parlance is called money supply, Bitcoin is simply inflationary, but that definition swap concedes that it is a curiosity, not a currency.
You are confusing inflation and debasement. When price levels rise, it's inflation. Even if the money supply shrinks.
This difference is meaningful because for a currency user, stability in value is more important than stability in the number of imaginary things. In 2008, U.S. dollar broad money supply crashed while central bank money surged. That is less meaningful to a currency user, or even financial market participant, than the amount of goods and services each dollar today buys compared with yesterday and tomorrow.
We can all agree that the current traditional and digital finance systems are broken but I don't see any solutions being provided as an alternative.
In every industry which involves innovation, there will be speculation and definitely people who like to profit off that which results in ponzi schemes but in the end, there are some genuinely hard working people who truly believe in the mission they signed up for 10 years ago and still continue to work. I would suggest you to take a look around and dig deeper into some of the blockchain projects and you will understand how much blood, sweat and bits have been poured into this.
Could you expand on that? That's quite a strong opinion to assume everybody agrees on.
While the recent losses were in big part because of bonds and currency rate risk, so not a particularly abstract or difficult to understand instrument.
Not that being hard to understand is a bad thing. Something can be complex and still valuable.
There's value to be had in payment solutions and banking solutions being decoupled . Banks should more deal with lending and deposits , injecting cash flows into the economy , insuring deposits, etc. Payments should be , well, payments similar to from a wallet, with less regulation overall.
All the issues you've mentioned aren't issues core to our financial system, they can all be solved through iterative innovation - many countries are solving this, like Poland (which I use as an example cause I live here), which has free instantaneous cashless transactions both for payments and p2p use that work with all banks here (blik, slowly trying to expand to more countries).
Similar systems are in place in many other countries. Open banking standardized APIs have already spread across Europe, etc.
So tldr, no need to redesign the financial system to fix these, just disrupt it a little bit.
ISO isn't perfect but most things are just a minor XML adjustment, and the schema is well structured.
Europe/SEPA has free non-urgent transfers up to a certain amount. [3]
How do you increase adoption for this except to get involved politically and lobby? Unless you plan on rolling your own - in which case good luck.
[2] https://www.ecb.europa.eu/paym/integration/retail/sepa/html/...
[3] https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
Now imagine you're not a techie, that has no idea what's what? The propaganda concept of "rotten herring", that mars the whole, will take effect on the whole cryptocurrency concept.
For laypeople cryptocurrency is as much a mystery with it's own gatekeepers, as fiat money systems. Engineers becoming the gatekeepers, are definitely more open an excited about it... but to others swapping a banker to an anonymous engineer is not much of an upgrade.
So many gatekeepers have failed in providing essential protections that old gatekeepers still provide.
Crypto made fraud and mismanagement obvious and grandiose, even though the exact same happens with traditional financial system.
Technology can't catch on just because "there are some great projects"
How? So much of the fraud has been both more common and just as opaque as the traditional finance sector (see FTX).
By volume traditional banking had more fraud and mismanagement, but it hasn't had literally years of massive headlines. (See "rotten herring") And in the end it doesn't build any confidence, because all of our money is literally based in trust. Even the value of gold is plain trust in it's value(see Mansa Musa's gold devaluation "pre fiat currency").
I don't remember a single year, without some massive cryptocurrency related headline... Even SVB and CreditSuisse failures were managed out better, than FTX.
There are no doubt many things wrong with our financial systems, but I suspect they'll be fixed by gradual evolution that maintains what works, and not by a revolution that seeks to replace what we have with something that sounds good from a naive perspective, but is in reality much worse.
And we won't be replacing anything overnight. That would be disastrous to the whole economy. But I really doubt that people who benefit from keeping things the way they are will actually work towards fixing any of them. You are actually asking them give up their incentives for the betterment and I don't think there are enough altruistic people who wanna do that.
Not that I am saying that crypto is any better but we need a strong counter party which questions fundamentals of any belief system (in this case, our current financial system) we have such that they will be forced to innovate otherwise they will go extinct
Do you really believe that it was one person or group of people that said 'hunting and gathering sucks, let's plant seeds and make forges and smelt iron'?
Or was it 'hey, I dropped some seeds and now they are growing, lets put some in dirt and see what happens', i++, goto 1?
To put it another way, how many times has 'let's scrap this working system that has some flaws and start over using an ideology as a back-end' worked out?
No we can't. I think the traditional and digital finance systems fundamentally work quite well. It's not all perfect, but it mostly works.
Do we all agree? I think the traditional system is pretty good, and attempts to remove or bypass good regulation are steps in the wrong direction.
Weirdly, there's still plenty of speculation in this space, and still plenty of people getting rich off of it. Look at the price of bitcoin for example, it's rebounded substantially since the FTX collapse. People have become millionaires from this nonsense and a great many people seem to feel like there's still a lot of value.
I just don't understand it at all at this point. I understand how people would have been duped by the scams before all of the prominent failures, but why are people still willing to trade crypto for so much actual money?
Who cares about the price? Seriously. Its not that important.
What are the systems in place to prevent another FTX-like collapse in the bitcoin space? Answer: None. In fact, Tether remains a fully unaudited, potential house-of-cards, situation.
People aren't worried about the price going up or down. Its really not that important. People are worried about losing $X0,000+ as the next random exchange or cryptocoin-service collapses randomly.
It has become abundantly clear that not only is cryptocoin vulnerable to incredible collapses of financial services... but the cryptocoin community is wholly uninterested in solving that problem. Mt. Gox collapsed. Celsius collapsed. Voyager collapsed. FTX collapsed. Each situation, individuals lost anywhere from thousands, to millions, of dollars in one fell swoop.
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Meanwhile, every SIVB and First Republic Bank customer has been made whole. Yes, the banks collapsed, but no one actually lost any money over it. In fact, the mainstream banking collapses occurred over the weekend (when the banks were closed anyway), and everything was fixed by Monday Morning.
I'm not necessarily saying that an "FDIC-of-cryptocoins" needs to be setup. But the cryptocoin community needs to come together and figure this crap out... how to provide assurances to the public that these systems are safe and worth using.
Because it isn't a problem to them. By and large, the people running sketchy "exchanges" and crypto companies make shitloads of money even as their "business" fails. SBF only went to jail because he is a sociopath that's never been punished in his life, and thinks he can do no wrong.
Most of the Bitcoin believers. They buy Bitcoin because they believe its value will be higher than the worthless currencies they have to put up with. See the latest news: https://www.coindesk.com/consensus-magazine/2023/05/22/why-t...
> Seriously. Its not that important.
Price (in the long run) is all that matters.
> People are worried about losing $X0,000+ as the next random exchange or cryptocoin-service collapses randomly.
I read this somewhere and it rings true - centralized exchanges are like public toilets. Try to avoid them as much as possible. If you have to use them, get in, do your job quickly and get out. Use such exchanges only to buy Bitcoin with your fiat and then move that bitcoin to your own wallet. In a lot of countries, it is much easier to maintain your own wallet compared to preserving your wealth via other means. I have compiled some real world examples here: https://news.ycombinator.com/item?id=32406095
> Yes, the banks collapsed, but no one actually lost any money over it.
If everyone lived in the US / Canada / Western Europe, maybe. What about people in Venezuela, Russia, Turkey, Iran, China or Sri Lanka. From the article I shared above: "Yet crypto use in Pakistan is nevertheless active, as people are reportedly converting their salaries into stablecoins to prevent currency erosion. The rupee has dropped more than 20% against the U.S. dollar year-to-date, more than 30% over the past year. Meanwhile, BTC in rupee terms is up 103% so far in 2023 (vs 63% in U.S. dollar terms). It’s probably not a coincidence that a 2022 report from forensics company Chainalysis placed Pakistan 6th in terms of global crypto adoption."
I sometimes feel the visceral reactions to Bitcoin are mainly from people who have experienced only great governance. They simply fail to see that Bitcoin[1] is a lifeline for a lot of people trapped in shitty places.
[1] and every diehard Bitcoiner will agree with you: don't buy shitcoins. not your keys, not your coins. centralized systems should be avoided or else minimally used.
Centralized exchanges are a natural result of the absurd transaction fees that the BTC community refuses to fix. If it costs $30 to make a transaction, it makes more sense to centralize and perform off-chain transfers of BTC.
Even today, where the BTC Transaction fee has dropped to "only" $3.60 / transaction, many natural uses of BTC are simply priced out. At least... using a hardware wallet is priced out. A centralized exchange which performs off-chain transactions doesn't have to pay of course.
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The price of Magic the Gathering Black Lotus just keeps rising higher and higher as well. But no one actually plays with the card in practice. Similarly, since BTC transaction fees are denominated in... BTC... the higher the BTC price, the higher the transaction fee, and the less likely everyone is to use the base system.
Seems like lose-lose over the long term. The only ones who want to buy BTC are speculators. Everyone who wants to "use" it for transactions is priced out, or rug pulled.
It doesn't have to be like this by the way. But its like this because the community doesn't care.
> Price (in the long run) is all that matters.
The Yen is 1/100th, or less, than the Dollar. No one doubts that Japan is still an economic power.
As far as currencies go, I think people care about the number of transactions. How much trade occurs with the currency? There's also a desire to keep prices consistent, rather than going up or down over time (too much inflation, and too much deflation, is both bad. A balance of keeping prices steady is best).
With regards to the Stock Market, companies mostly care about IPOs and SPOs, how many $Billions they can raise by selling stock. Trade volume is kind of a side-show, and even price is a side-show and easily manipulated (see BRK.A shares, which are overpriced on purpose... by having fewer shares control a larger % of the company)
If it is akin to one-time transaction of buying gold as a safe asset, then people gladly pay 30$. Even in poor countries. If you want to use BTC to buy coffee, then 30$ transaction fee is a hassle. But trying to judge the merits of BTC on how easily you can buy coffee with it is as dumb as trying to judge a fish by its ability to swim. They are not meant for that activity.
> The Yen is 1/100th, or less, than the Dollar. No one doubts that Japan is still an economic power.
Sure and it has been in that range for the last 30 years. It has held its value which actually proves my point that Yen is backed by some good governance and hence Japanese citizens may not actually need BTC. Now look at Zimbabwe where government printed 100Trillion bank bills and the currency's value was destroyed in a few years. That is the target market for BTC.
Why can't they use US Dollars or Japanese Yen instead?
And if they're a country like Argentina where they print a ton of money and then ban US Dollars/Japanese Yen (etc. etc.), what prevents them from banning BTC as a means to protect the local currency?
Either the country is working in the global economic system (and therefore has access to global currencies like USD / Yen / etc. etc.), or it isn't and its probably cut off (including from BTC).
> But trying to judge the merits of BTC on how easily you can buy coffee with it is as dumb as trying to judge a fish by its ability to swim. They are not meant for that activity.
At larger than $1000+ valued denominations, you've now got the problem of counterparty risk, because BTC organizations disappear every few months. Who and/or what are you buying in BTC, and why do you trust that the other guy is going to keep existing 6 months from now? Even large companies like FTX turn out to be shams and disappear overnight.
Why do you want to transact with denominations of that size with people who are clearly untrustworthy?
On the other end, trying to use smaller denominations to experiment and grow the community... we have the random price of transactions (ex: $30) that prevents the use of cup-of-coffee-like transactions.
So BTC is dead on the small-end due to transaction fees. And its dead on the high-end due to unreliability of the community. What exactly should I use BTC for?
If you burnt by your own government, chances are you will not trust a foreign government either, especially the one which has a recurring record of bullying other countries and freezing dollar assets for foreign entities over geopolitical matters. There is a reason why Gold is so popular world over - people had shitty rulers for most of our history and they trusted no one, not even a benign ruler from some other country.
> its probably cut off (including from BTC).
You can't cut off BTC. That's the beauty - as long as you have internet, you can use BTC.
> you've now got the problem of counterparty risk
Which is why you don't trade it every day. Trade it only occasionally when you want to do big value transfer with trusted parties. See how Afghan girls used it to escape Taliban: https://www.reuters.com/article/crypto-currency-afghanistan/...
> Why do you want to transact with denominations of that size with people who are clearly untrustworthy?
Strawman. I didn't propose that at all.
> And its dead on the high-end due to unreliability of the community.
No it's not. You can store your wealth in BTC and use it sparingly with trusted parties, just like people have done it with Gold for centuries.
> What exactly should I use BTC for?
Store of value. Just like Gold. Con: it doesn't have long history of Gold. Pro: it is much easier to transfer or take it with you (just 12 words) when you are fleeing.
Uh huh. And... you don't see any problems with the argument you just made?
Hint: a lot of countries controls utilities/internet. Literally as a government organization.
These are key differences in the comparison.
Regardless, the point was not to compare the utility of Bitcoin to that of the web. It was to highlight that the prevalence of bad investments and fraudsters in a given technology sector is not necessarily linked with the merits or potential of the underlying technology.
The utility of bitcoin is well defined in my eyes. It is a store of value that can be borrowed against. People will complain all day long on the day to day volatility, but that is irrelevant in the long term when you're using it for collateral.
The volatility is very relevant if you are using it as collateral because it increases the risk of margin calls.
I don't believe there is any way to borrow against bitcoin that isn't susceptible to some kind of margin call when the price of bitcoin drops.
Any way... this is something that can be managed, while still giving BTC a lot of utility.
Also see the latest news: https://www.coindesk.com/consensus-magazine/2023/05/22/why-t...
"Yet crypto use in Pakistan is nevertheless active, as people are reportedly converting their salaries into stablecoins to prevent currency erosion. The rupee has dropped more than 20% against the U.S. dollar year-to-date, more than 30% over the past year. Meanwhile, BTC in rupee terms is up 103% so far in 2023 (vs 63% in U.S. dollar terms). It’s probably not a coincidence that a 2022 report from forensics company Chainalysis placed Pakistan 6th in terms of global crypto adoption."
Probably the same reason people throw money at casinos. Despite tales of people losing the shirts on their backs, there are also those that hit the jackpot. The biggest winners are of course the casinos who facilitate the transfer of wealth between the aforementioned groups while directly or indirectly taking a nice cut for themselves.
You can trace back almost everything that is broken in financial systems to government regulations. It's not a technical problem. The only technical solution is to build a decentralized system that is difficult to regulate (aka Bitcoin). Its "economic objective" is to replace those traditional systems.
Maybe, just maybe, the damn actor from california didn't know much about economics?
Nah, obviously fintech just wasn't free enough to explore weird money games!
> cryptofinance will not leave much to show for it
I completely disagree with this. I can confidently bet that Bitcoin's price will cross 50K USD in the next 5 years, and 100K in the next 10 years. I am personally putting my money where my mouth is.
You cannot divorce the existing financial system from cryptocurrency. Rampant speculation and bubble mania isn't happening in a vacuum. Rather, it is a symptom of easy money and cheap credit. When regulators remove barriers to a natural rate of credit by no longer centrally planning interest rates, speculative mania will be naturally disincentivized.
Binance has no known headquarters or transparent books. If you keep money there and you lose it, it's your fault. The same applies to Tether. You're only betting on trust instead of regulations, which never bodes well in the long run.
As a side note, Binance was founded in 2017 and grew to process hundreds of billions of dollars in transactions in a few years. In a hypothetical world as the CEO of such company, how would I even handle such growth without my mind exploding?
However, the regulated banks also appear to be gangs of thieves run by charlatans. Except everyone is forced to signal, financially, that they have confidence in firms when they turn out to be insolvent. And the people involved with crypto can't be forced to bail out Binance unless they trust them with their funds. I have a lot more faith in the value of my Monero than the USD - which I say for rhetorical effect since I don't trust the USD enough to own any.
Silicon Valley Bank has detoothed a lot of criticism of the crypto industry, and it hasn't even been the biggest collapse this year. Then there is the inflation problem that that fiat currencies have which is on display right now.
I've heard people say this about various cryptocurrencies over the last few years and I just cannot take the statement seriously. It just always comes across as a deliberately exaggeration of belief in a cryptocurrency in an attempt to persuade others to get in on it. Not only that, I cannot imagine a world where USD collapses and somehow things like Monero or Ethereum stick around and continue to work just fine.
One is a highly centralized system, the other is relatively decentralized. They have different threat models, strengths, and weaknesses. I would hazard a guess that your demographic profile is similar to the members of the current cabal that try to control USD's supply and value but to those who don't have similar priorities, crypto offers a different set of values than the 'traditional' finance system. The two aren't mutually exclusive, and the person you're replying to didn't say either would be 'just fine' without the other...
Not sure why you're proud of your inability to defeat a straw man!
> Not sure why you're proud of your inability to defeat a straw man!
Pardon?
That leads me to a big, big tangent, completely unrelated to crypto. Recently I followed online discusions of a certain car model in comparison to well known alternatives and, no idea why actually, soccer clubs. And one thing I found funny, is to which length people go to, well, rationalize and defend their preferances. E.g. interior finish is just bad of model a compared to brand b, while obviously the fact that brand b can be had without leather interior is better because of animals suffering. Or model b is better because it can be had with a V6, while model a cannot, ignoring the fact that the majority of engines for model b are inline fours as well. That actually did sound a lot like convincing oneself that the preferance for model b is totally rational. You have similar vibes whem it comes to sport teams, it basically boils down to fanboyism.
Which is fine, which car or club people prefer doesn't have to be rational. It gets risky so, if that attitude is extended to finance.
Nobody is making a claim of general superiority except you. The guy you're responding to simply says THEY have more faith in one particular currency. Why is that so hard to believe? They may not be a US citizen! It's not an objective statement they're making about the quality of USD, but a personal one. The straw man you're attacking seems to be a reflection of your own general idea that USD is the 'supreme' currency and anything having comparable properties in any way is some foundational challenge to this multi-faceted strict dominance. The impure and complicated truth is that each currency has strengths and weaknesses. It is a fact that for any given application and person any given currency can be better/worse for their application. If you exist exclusively in the United States and never break any laws, I can see why this might be difficult to imagine.
For example, some people place great value on being able to transact without the enforcement of American cultural values. This quality of the currency for many is objectively a negative property. Since all currency are largely valued based on fiat anyway these days, why is it so hard to imagine people having preferences more closely aligned with groups other than one of the most geriatric and monochromatic governments on earth?
Constructing a straw man to attack while accusing someone else of doing a straw man. Folks, we love to see it.
Look this is a dumb argument to be having in 2023. These cryptocurrency projects are going to fizzle out and disappear once enough of those involved find a new grift (either ChatGPT/LLM-based things or whatever comes after that). If you want to be holding the bag when that happens then that's on you.
Why is Etherium be better than South African Rand?
1. USD fails
2. All the other currencies are "dying"
3. (let's say) Monero exists and is not dying
So yes in the scenario you've constructed where everything but a cryptocurrency dies or is dying, crypto is more successful.
This "thought experiment" amounts to "suppose I'm right; then I'd be right wouldn't I? Checkmate."
The entire question here hinges on whether there could be scenario where the USD— and only the USD— collapses, without causing so much chaos that cryptocurrencies also become functionally useless. I would argue there is no such plausible scenario.
I am imagining a scenario where USD fails, but some other state currencies (and the internet) continue to exist.
So looking at the millenia that currencies have existed we can say that it's not impossible that a currency fails. Looking at cryptocurrencies it's extremely possible that any given crypto project fails.
tl;dr; numerous failures is a positive economic signal
Alright look the only outcome here for me is good. Either cryptocurrencies melt away into nothing and you guys all go off and find a new Thing. Or Cryptocurrencies surprise everyone and somehow a decade after achieving nothing other than hype they finally find a thing they are useful at, and I can use them for that thing. For now I'm going to continue to treat them all like they're means of buying and selling Ape JPEGs until they can do something else though.
No, its not.
Heck, history isn't even littered with global reserve currencies; there's maybe three total—the Spanish Dollar, British Pound Sterling, and US Dollar—and the Pound Sterling is iffy, given the emergence of the gold standard.
(Regional reserve currencies existed previously, but nothing approximating global.)
Name six and the time period during which each was the global reserve currency. (Not that six would be enough for history to be “littered with” examples anyway, but...)
florentine florin
venetian ducat
portugese real
spanish real
dutch guilder
french livre
british sterling
USD
everyone is capable of deciding if changing reserve currencies every ~100 years is "littered" or not, but it easily passes as being commonplace in my opinion when you're talking about a millennia of history.
I guess it comes down to how far you're willing to stretch "like" there. Progress is glacial, but crypto is becoming more useful. Meanwhile, traditional finance appears to be getting worse. Eventually those lines will cross. Although I doubt the cryto's of that time will look very much like what we have today.
It's value is pegged to the dollar so we can see massive shifts in its "value" constantly happening.
There are almost an infinite number of cryptocurrencies and new ones still being created. Each is a different currency, so how should we determine which of these fake currencies actually have value and which don't?
To name a few instances of this: This is old news, but I remember when zcash introduced halo and got rid of trusted setup--that's a legit increase in what's possible. NFT's as ownership of digital assets is maybe a silly application of the tech, but the sort of uniqueness constraint that they enforce is useful in centralized databases and I expect it'll find a similar niche in the distributed systems of the future. TCL's that use token price to encourage curation appear to be a non-starter, but coupled with a web of trust I think we can use the same concept to have consensus on a wide variety of useful things.
Their use as money? Sure, wildly inconvenient. But like... duh. Emulated systems are slower than ones running on bare metal because you have to embrace the constraints of both systems--it's the same with the use of cryptocurrencies within the existing financial system.
The point was never to make something that's just as good as traditional money--why bother? The point is to make traditional money obsolete in favor of something else. Something whose rules matter not because the guy who wrote them own has a gun, but because people consent to participate based on their merits.
> how should we determine which of these fake currencies actually have value and which don't?
By their side effects. If you value the endless consumption of electricity and zero sum games, you should value bitcoin. If you value politicians playing chicken over the debt ceiling, you should value USD. As it stands, the options are all pretty bad, but the ability to craft new ones is getting better and the cancer that our current one has is getting worse, so eventually there will be something worth switching to.
Suppose somebody approached you in the grocery store and offered to buy your shoes. I assume you have a price, right? I'd walk home from the grocery store shoeless for $100.
Why do we participate in a system which empowers this guy? What about the abstraction he's handing out makes us willing to exchange it for something with less abstract value (there's broken glass on the way home, I'd be taking a risk)? The shallow response is that we can later exchange the abstraction for, for instance, a nicer pair of shoes. But that'll work with anything, so far as somebody else is likely to accept the trade down the line. We could use pebbles or bottlecaps or dogecoin or whatever.
But why USD in particular? What is it about the US government's (or if you prefer, the banks') behavior that entitles them to issue the tokens that we use for bullying people into giving up their shoes (or you know, whatever other economic activity we chose to engage in).
Do you dispute that trust in the government and the banks is steadily declining?
They're fundamentally harder to improve than to erode. It's why nature came up with reproduction: eventually the parasites take over and you have to start fresh. It's why there are very few companies around today that were also around 100 years ago. Entropy wins, it's just what happens to centralized systems over time.
Or to put it less abstractly: We've got banks collapsing and politicians playing chicken over the debt ceiling. Does that not threaten the idea that we can walk home with that $100 and buy a nicer pair of shoes with it? Wouldn't we be better off with a system that was less susceptible to the kind of cancer that ours has?
Can I do that with crypto currency? Not so much, really.
I started with the idea that I'd question whether the guy got his money by doing more harm than good, USD being issued based on whether a loan is expected to be profitable, not whether it benefits the people who are expected to accept it. Maybe it's in your best interest to not blindly support whatever the loan was for by accepting his money. Maybe it was for mining that's poisoning your drinking water. That failure to align incentives (i.e. implicit global fungibility) is the specific deficiency that I see killing USD and it's equivalents.
But specifics aren't necessary for the broader argument: Power corrupts, and enough corruption ends the tenure of the powerful. The details of how that is playing out for USD aren't especially relevant.
Yes. Was that it?
The Binance CEO wouldn't backstop his firm any farther than he can throw his yacht.
Cryptocurrency, by comparison, is a mosquito bite, but there's enough blood to have started attracting the real bad bacteria across from the traditional finance world.
Silicon Valley Bank is a great positive example, where the depositors were protected even despite the fact that the thieves and charlatans wanted to take on unacceptable risk by successfully managing in 2018 to lobby exemptions to the Dodd-Frank regulations that would have prevented the thieves and charlatans from doing so. So any financial institution that tries to circumvent even slight parts of regulations should be treated with extreme suspicion (as thieves and charlatans who want to take your money), and any financial process which tries to stay outside regulations as such (e.g. Monero) needs no suspicion at all, as this means that they're explicitly publicly acknowledging that yes, our gang of thieves and charlatans want to re-enable the ways of taking your money which were limited for the other gangs of thieves and charlatans.
Ah yes, Monero. Trying to replace bitcoin as the preferred dark web currency when collecting ransoms from hospitals and pensioners.
A few banks went south, so the entire system is just as bad as the ponzi crypto circus run by the Tether mafia?
Man bets on hyperinflation, obviously loses, and to the surprise of almost everyone it pays out. I'm fairly sure you yourself have been banging on about USD hyperinflation for years, too, without it happening.
Incidentally, I don't know if Manifold is reflective of 'almost everyone', but they had it at >50% for almost the entire duration: https://manifold.markets/chrisjbillington/will-the-1m-vs-1bt...
The problem with SVB was not the same as what we get with FTX and Binance. Let alone, the promise of crypto is to "be transparent", and this proves that they are not at all transparent.
SVB made bad bets, that we knew were made. SVB collapse was not a result of them lying about how they operate, it was a result of the risk they took.
FTX and Binance lied, which is not exactly what you want from someone who you should trust.
That seems like a pretty terrible answer from binance. It's like they are saying, "We're not commingling customer funds and company revenue! We're defrauding our customers by misrepresenting purchases as deposits!"
While I don't have a Twitter profile with laser eyes just yet, I enjoy seeing what I think is a technological and political game changer just chugging along, uncaring of scams, maxis, haters, governments, volatility.
I am surprised that few can notice how impressive it is for a currency with limited usability and extreme volatility to still be worth something, improving and growing. Because at one point, all the concerns one has about it will have been solved, and, as economists love to say, good money tends to drive out bad money. The Internet is still in need of its digital cash.
So I enjoy seeing all the Ponzi schemers, con artists and grifters get their comeuppance, but would also love to see the crypto-Luddites inhabiting this forum to be proven wrong eventually. Because Bitcoin doesn't care, Bitcoin still goes brrr.
You're repeating the propaganda lines from big corporation and big government, while they keep subsidizing oil companies and ultra-rich take their private jet to have dinner in Paris. Also it feels good to believe climate change is within our (we the people) grasp, and we just have to recycle a bit more.
This is literally putting the masses at each other's throats, while Unilever hopes to make billions if you buy their vegan products, and petrol companies go brrr.
Divide et impera.
--
Bitcoin turns energy into money. The problem is that we need more clean energy, not cry that people are using off-grid energy to mine Bitcoins.
Build more nuclear. Invest in fusion research. But you nor I can't, so we're at each other's throat. Saying we need to consume less energy is misguided and absurd.
[1] https://www.statista.com/statistics/881541/bitcoin-energy-co...
I find it disturbing how engineers in here can only claim for the prohibitionism of an inefficient yet radical technology. This ain't no hacker spirit.
That's a load of nonsense but to address your question: with one Bitcoin transaction, with Lightning, you can have millions of transactions with little than hashing a few numbers each. There is no theoretical limit. With one single Bitcoin transaction that you claim is killing the Earth.
This information was just a Google away if you really wanted an answer, but crypto has become like football or party politics: my camp is always good, the other are the literally Satan. Since you started by saying I am immortal and should feel bad for even just talking positively about Bitcoin, there is no intelligent discussion to be had here. I don't even own Bitcoin, for crying out loud.
I'll go back causing climate change or whatever you think I do.
Imagine Bitcoin gets very popular, so much so that 10% of the world is using it. They all will at least need to open a lightnight channel, and then settle that channel back to Bitcoin. What is the minimum number of Bitcoin transactions needed, and how long would it take to settle all those transactions? For this exercise, assume world population stays fixed at current levels.
(For those not so drunk on the cool aid, it's 6 years. 6 years minimum to settle one meaningful transaction for any reasonable number of people.)
In engineering, when there is a problem, we don't go crying about it or feel good because we have identified a bug, but work to fix it.
What you said is true. What you said will not be true forever. So it's a constant moving of the goalposts with people like you that measure everything in a vacuum and as an absolute unit.
Technology tends to improve over time. But apparently you are able to design perfect global distributed systems that are infinitely scalable from day 1, so chapeau.
As I said elsewhere, I am not invested, but I am an engineer, and I approach it as such. The kool aid is being drunk by the anti-crypto-at-all-costs cult, attacking with dishonest and frankly ridiculous arguments for people working with distributed systems and networks all day.
I can tell you how many times iPhone has upgraded their specs in approximately the same time period.
One of those is a cult, another a product of engineering. Don't confuse them.
Try doing that with a fiat currency of your choice. Because it's invisible doesn't make it free.
I very well think that Bitcoin itself is going to zero, lest it migrates off PoW technolgoy. I am certain that at some point in the future governments will regulate and maybe even ban that wasteful use of electricity. Particularly when way better double-spending/integrity protection algorithms exist to replace PoW.
Nevertheless, Blockchains and crypto-tokens are here to stay. Ethereum is here to stay and similar networks will keep progressing, as GP said, without regard to scammers, fraudsters, naysayers and skeptics around the world. Technology will keep improving and becoming better performing. This is exciting to me!
It's a distributed, cryptographically secure, decentralised append-only log. It's a data structure that would have a lot of potential in real-world applications, e.g. auditing public institutions, defending against falsifiability, etc. it provides an impartial proof-of-time, which is huge.
Bitcoin might live or die, but blockchains and digital currencies based on it are here to stay.
It means it keeps chugging along with no care in the world.
Actually, it's the other way around: https://en.wikipedia.org/wiki/Gresham's_law
But otherwise, I agree: rumors of Bitcoin's death have been greatly exaggerated.
I was recently reading an essay from Hayek that explained why a better currency tends to drive out a bad one. I might need a refresher, though this seems to be one of those things that are true depending on how you look at it.
On the other you have the "radical anti-crypto(currency) ludites" who is anyone on this forum who holds a different opinion.
Guess it is fortunate for them they are not a US company governed by U.S. financial rules.
“Binance allowed U.S. customers to trade on its platform from 2019 to this year despite publicly claiming to restrict access to Americans, the U.S. Commodity Futures Trading Commission alleged in a complaint against the exchange in March.”
The very next sentence in the article. If you're going to quote, quote with context.
"Binance allowed U.S. customers to trade on its platform from 2019 to this year"
There is no accountability or recourse of any kind in cryptoland. You and your money are totally at the mercy and trust of the exchanges.
Even with your own wallet, the exchanges set the value of what is in it. Even if you trade P2P, the exchanges are still an overarching influence and can easily manipulate prices as they see fit using their unlimited supply of "stable coins".
Face facts, cryptoland is owned by the exchanges. They operate with all the power of the Federal Reserve minus any oversight or accountability. There is nothing accountable or transparent or "free market" about it. When trading crypto, you are totally at their whim and mercy.
The exchanges have all the crypto gold they need --- if/when they need more, they can just make it by way of "stable coins".
Sure, you've got some businesses with poor risk and treasury management who might be carrying a bunch of cash in a demand deposit account that isn't covered, but your vast majority of depositors will be fine.
I don’t think the $250k was ever intended to be an absolute upper limit.
Yes, 95% of the US population don't have more than $250,000. Let's say that that 95% has on average something like $5,000 in saving/actives. The problem is not that the FDIC will not "honor" those millions of $5,000 checks. The problem is that most of those "actives" are actually managed by other entities, who "bulk load" the money into bank accounts. Adding those up will make more than $250,000 pretty quickly. So the question still remains: If a bank goes under, and say, a hedge-fund with retirement money is saving a good chunk of its customer funds in said bank under a consolidated account with more than $250,000. Will the FDIC cover the excess to make the hedge-fund whole?
It's like the farce that a lot of those Crypto centralized companies put in their websites: "We are FDIC insured" ... well yeah, their accounts might be FDIC insured, but it is only THEIR first $250,000 that is insured, not the first $250,000 of each of their customers.
After decades of reruns and annual 24-hour marathons of "It's a Wonderful Life" I don't think the general public is unaware of this very basic aspect of the banking industry. I knew by the time I was 8 that the money was in Joe's house etc., and I didn't grow up in a household that had any particular knowledge of the banking & finance industry.
If you asked most people "Do banks keep all of the money everyone deposits in one big vault, or a bunch of little vaults, all of the time?" I think most people would at least have some vague notion that the answer is "Um, No?"
Mixing shareholder equity with depositor funds is a totally different thing. In general, depositors are a bank's most senior creditors (they get money before the electric bill gets paid) and shareholders are the least senior (they only get money after ever single other bill is paid). Mixing these funds makes a mess of that promise and should rightfully reduce trust that Binance would be willing or able to pay depositors in a crisis.
> I don't think any modern (post-1600AD) bank ever just kept depositors money ready for withdrawal.
I'd have thought it was a more modern issue, but let's agree. And that seems in any case perfectly fine for most, or at least for many people. Incidentally, playing with customer money was what FTX has been doing, albeit it was amateur, no official oversight, ...
Banks already exist, don't inflict more similar behaviour on us! Please!
Part of KYC is also not sending dollars to sanctioned international corporations & individuals as well.
https://amp.cnn.com/cnn/2023/03/27/business/binance-cftc-law...
So this makes sense to me in that users buy a deposit dollars to buy a shitcoin, but the deposit and purchase are a single operation. If I buy BUSD and then I want to withdrawn, I need to sell my BUSD back to Binance, and it it's value has drifted down, then I will get less dollars. How is that commingling and how is there ab expectation of safeguarding deposits?
Instead, simply require that if any customer funds and corporate funds are in the same account, then customers have priority in any liquidation of the contents of that account.
Then, companies have an incentive to separate their funds, but don't need to.
The answer is straightforward. It is obviously possible to spend all of the money in an account. This is bad if some of that money was customer money which the fiduciary was not supposed to spend.
Spending all the money in an account can be the result of bad business decisions. But equally, it can be the result of a series of negative events. For example, a business line of credit could pledge as security funds in an account. Later, the business runs into trouble due to rare macro events (e.g. war, pandemic, natural disaster, etc.) and the loan goes into default. The creditor can then seize the funds in the account. It is better for customers if that pledged account did not contain their money.
> customers have priority in any liquidation of the contents of that account.
Neither of the scenarios above results in the ability to prioritize in any kind of orderly liquidation. Bankruptcy will likely come eventually, but by the time the courts get involved all the customer funds are gone and unrecoverable.
Preventing commingling provides a mechanism for the fiduciary to fail without having lost all of the customers' money.
How does “the news agency reviewed a bank record showing that on Feb. 10, 2021, Binance mixed $20 million from a corporate account with $15 million from an account that received customer money” not satisfy the headline?
> These accounts were not used to accept user deposits; they were used to facilitate user purchases” of crypto, said spokesperson Brad Jaffe. “There was no commingling at any time because these are 100% corporate funds.” When users sent money to the account, he said, they were not depositing funds but buying the exchange’s bespoke dollar-linked crypto-token, BUSD. This process was “exactly the same thing as buying a product from Amazon,”
The article has a lot of details and infographics - but ends with no conclusion, just guesswork. I appreciate the work and time that went into an article like this - it would be nice if it was more factual and less "blind-sourced" extrapolated hypothesis.
So why do it? The only benefit appears to be that you don't need to do precise/accurate accounting and it's easier to hide fraud.
That's assuming it wasn't done for less honest purposes.
There is still a monumental amount of notional markups that need to be erased - this is not a real market and there is no real price discovery. The real $ have been round tripped many times over, I don't think there's a single "stablecoin" out there that's worth any constant amount.
I bet US gov will go after binance/coinbase at some point this/next year
https://www.reuters.com/legal/coinbase-issued-wells-notice-b...
[1] https://cointelegraph.com/news/crypto-community-members-disc...