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Comment by cobbal | Hacker News Reader

I really hate to be defending cryptocurrency, but doesn't this same argument apply to banks? They don't produce anything either, they just shift made up numbers around.

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Banks produce economic services: they provide the structure and liquidity needed to convey value through the rest of the economy.

(A typical form of blockchain apologia is that blockchains also do this. This is true only if you ignore the social and regulatory structure that allows companies and individuals to treat banks as mostly interchangeable assets.)

Loans. They control money supply.

Who is "they"?

Your mom. Jk. The central bank. Chairman of the fed.

Banks are service providers. They are the middlemen between entities that have money and entities that need money. They make the deal (a loan/mortgage) and then skim some off the top. There is real economic benefits derived from banks.

There are some real economic benefits to Bitcoin as well, but I don't believe they justify the valuation though that's neither here nor there.

> They make the deal (a loan/mortgage) and then skim some off the top.

Thanks to fractional reserve banking (i.e. institutionalized fraud), they also create new money along the way (i.e. debase the existing currency).

Thus, the amount they're skimming off is even more than one would originally think, since they're charging interest on something they didn't entirely have in the first place (second-order fraud).

That is quite the service being provided. How fortunate we all are!

Creating new money helped propel economies since a long time ago. It has downsides but almost universally countries have agreed that the positives are worth the downsides.

> How fortunate we all are!

I think so.

As someone who makes things, they solve a really important chicken-and-egg problem for me.

i.e. Where does the money needed to make a thing come from before you make it so that you can sell it and make money from selling the thing?

I suppose technically I could risk my money, assuming I have some. But I'd much rather risk the bank's, and I understand that they will charge me for that.

You can say that banks manage risk of lending and charge for that. Imagine that instead everyone can take a loan from a government without any checks. Soon financial system would collapse as a lot of irresponsible or too optimistic people would take loans for various purposes and those loans wouldn't be paid back. You need an institution that manages it and take the hit of unpaid loans for the system to be stable.

A loan, say, _is something_. You loan money to a company, they use it to build a factory, which produces, in the long run, more economic value than the cost of building it (hopefully). They pay you back, with interest. It’s a somewhat abstract something, but it is still something-by-proxy. This is generally not the case for a cryptocurrency (it might be for a lender dealing _in_ cryptocurrency, though, well, historically those usually turn out to be scams of some sort).

As a very specific example, I can go to a bank with my W-2s and credit history and get a mortgage. That’s a complex and valuable decades-long relationship they’re facilitating.

It's not hard to imagine your tokenized income stream and tokenized assets, algorithmically qualifying you for a defi loan with out need for some guy at a physical desk in a physical building. Hence it's also not hard to imagine the economic value you attribute to banks, as value eventually accruing to crypto.

One important difference here is I don’t have to imagine a mortgage.

Bitcoin proponents always talk about how it has the potential to do x, y, and z. Okay so do it already.

Banks provide a service to the economy of connecting people with more money than needed right now (savings) to people with less money than needed right now (loans). They make money in between when this goes well. So I would contend the shifting of numbers around actually does provide a good to the economy

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