The politics of cryptocurrency (1 Viewer)

[Juxtatarot]

Will they revolutionize the world against corrupt governments? Are they an unnecessary energy drain? Are ordinary people getting caught up in a bubble that will bilk them out of their life savings? How much government regulation is necessary?
 

Discuss it here.

 

[Terminalxylem]

Will they revolutionize the world against corrupt governments? Are they an unnecessary energy drain? Are ordinary people getting caught up in a bubble that will bilk them out of their life savings? How much government regulation is necessary?
 

Discuss it here.

Thanks for moving this topic outside the Twitter discussion. Presumably, a lot of this stuff has been elaborated in the FFA crypto thread, though it seems like primarily investment advice.

To answer your questions:

No, corrupt governments have many tools at their disposal besides centralized currency (esp. control of public information). As far as I can tell, crypto shifts some control (and potential for corruption) from government and financial institutions to a bunch of repurposed hackers.

At the current level of utilization, crypto adds little to existing currency and creates a tool for anonymized illegal activity. Plus, their value is far too volatile atm to supplant old fashioned money. Until it gains more widespread acceptance/integration, cc is mainly an investment vehicle, and a risky one at that. Since we don't really need parallel financial universes, the energy drain is unwarranted imo.

Hopefully people aren't investing their life savings, but certainly many are losing money gambling on crypto.

While I love the idea of making banks obsolete, shifting trust to anonymous programmers isn't necessarily better. Anything that involves a bunch of money will require oversight imo. I don't know the best way to regulate it though.

 

[FairWarning]

I think a lot of the rogue countries are into the alt currencies. 

Totally agree with Term’s take about the usage of them right now.  

I know people who have hit HUGE on Bitcoin, like buying at $20 for bitcoin.  I don’t hear much buzz about Alt coins anymore, so I don’t know how the others are doing.  I have heard a lot of stories about people going all-in on them at awful prices >$40,000+.  I also know people who got scammed hard on the computer setups to mine.  It really was a Wild West scenario a few years back involving crypto.  It’s a mature market now, much harder to make money 

With all of the governments control of freedom (all countries), I can’t believe that some of them aren’t involved in crypto.

 

[Sand]

I think a lot of the rogue countries are into the alt currencies. 

Negatory.  What you see are countries, particularly those that have substantial inflation issues, turn to bitcoin to stabilize the country.  El Salvador and Central African Republic have adopted BTC as legal tender.  Argentina is on the brink.  It's all based on bitcoin, not alts.

Are they an unnecessary energy drain?

In a word, no.  Everything but BTC has moved to proof of stake.  BTC is still proof of work - however, this is a great take on why the energy usage item is a canard.

 

[Terminalxylem]

Negatory.  What you see are countries, particularly those that have substantial inflation issues, turn to bitcoin to stabilize the country.  El Salvador and Central African Republic have adopted BTC as legal tender.  Argentina is on the brink.  It's all based on bitcoin, not alts.

In a word, no.  Everything but BTC has moved to proof of stake.  BTC is still proof of work - however, this is a great take on why the energy usage item is a canard.

While I have no background in finance/monetary policy, I don’t usually think of El Salvador and CAR as thriving economies. I’ll have to read more to understand how cryptocurrency has stabilized those countries.

And much like deaths from covid, I don’t like the idea of looking at world % to understand the significance of cryptocurrency energy usage. Even if the percentage is small on a global scale, if the industry isn’t providing a useful product, any energy consumed is wasted. While things may certainly change, right now crypto doesn’t provide much more than a volatile investment for most of us. It will interesting to see if that changes, and crypto eventually lives up to the hype.

 

[MTskibum]

Negatory.  What you see are countries, particularly those that have substantial inflation issues, turn to bitcoin to stabilize the country.  El Salvador and Central African Republic have adopted BTC as legal tender.  Argentina is on the brink.  It's all based on bitcoin, not alts.

In a word, no.  Everything but BTC has moved to proof of stake.  BTC is still proof of work - however, this is a great take on why the energy usage item is a canard.

Let me know when Ethereum moves to proof of stake 

The energy concern is real and valid.

 

[MTskibum]

Will they revolutionize the world against corrupt governments? Are they an unnecessary energy drain? Are ordinary people getting caught up in a bubble that will bilk them out of their life savings? How much government regulation is necessary?
 

Discuss it here.

My biggest problem with cryptocurrency is they facilitate small scale ransomware attacks against the general population.

 

[Sand]

My biggest problem with cryptocurrency is they facilitate small scale ransomware attacks against the general population.

As it turns out there is way, way less of this type of activity in the crypto world than in traditional finance.  It's a boogeyman.

This is a good video - go to about 4:00.  Illegal activity accounted for 0.15% of all crypto transactions (regular transactions are 2-5%).  It's really quite small.  Another great video about a recent hearing on this very subject.  

 

[MTskibum]

As it turns out there is way, way less of this type of activity in the crypto world than in traditional finance.  It's a boogeyman.

This is a good video - go to about 4:00.  Illegal activity accounted for 0.15% of all transactions.  It's really quite small.  Another great video about a recent hearing on this very subject.  

I watched the first part of that video and you are making the case against crypto, it is crazy that .15%  of transactions are for illicit activity. I do not think that is a percentage that should be bragged about.

I also liked how he showed the graph go down in illicit activity(as a "percentage"), that is some fine manipulating of statistics because the number of ransomware attacks and the total value of money lost to illicit activity has gone up.

https://purplesec.us/resources/cyber-security-statistics/ransomware/

The estimated cost of ransomware attacks:

2020 – $20 billion

2019 – $11.5 billion

2018 – $8 billion

 

[Sand]

I watched the first part of that video and you are making the case against crypto, it is crazy that .15%  of transactions are for illicit activity. I do not think that is a percentage that should be bragged about.

When you consider that 2-5% of cash transactions are illicit it put things into perspective.  I don't think a number that is an order of magnitude less than fiat is something to be ashamed of.

 

[Snotbubbles]

I'm just putting my money into YieldNodes now.  Earn 7% interest each month and compound it.  I don't need a ton of volatility.

 

[MTskibum]

When you consider that 2-5% of cash transactions are illicit it put things into perspective.  I don't think a number that is an order of magnitude less than fiat is something to be ashamed of.

That may not be correct, I am unsure where you are getting your source from but I am seeing numbers drastically lower and there are a few 0's after the decimal point for cash transactions.

Can you provide a link?

 

[Sand]

That may not be correct, I am unsure where you are getting your source from but I am seeing numbers drastically lower and there are a few 0's after the decimal point for cash transactions.

Can you provide a link?

That second video.  Those numbers were from the Chainalysis guy at that hearing.

 

[MTskibum]

That second video.  Those numbers were from the Chainalysis guy at that hearing.

It is at 21:21 in your second for reference and they did not explain how they arrived at that number, but a quick google search seems to indicate it is from the below site.

https://www.unodc.org/unodc/en/money-laundering/overview.html

The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Due to the clandestine nature of money-laundering, it is however difficult to estimate the total amount of money that goes through the laundering cycle.

However, this is comparing apples to oranges because GDP is not the same as the amount transacted in a single year.  Forex alone has a 2,409 Trillion dollars in transactions in a single year.

Even if we use only a single financial institution and we use the larger 2 trillion in money laundering we get the below percentage.

(2/2409)*100 = 0.08%

And that is just a single financial institution!!!!

There is a reason that .15% should be alarming.

 

[Captain Cranks]

We've digitized communication. We've digitized information. We've digitized music. We've digitized books. The next step is to digitize money, property, and our monetary system. That's what blockchain technology does.  Yes, it's in its early stages of  development and needs to become more efficient, secure, user friendly, and regulated before it's adopted by the masses. Consider, however, that a lot of the critiques I see above were also said about the internet 30 years ago. 

 

[Whyatt]

We've digitized communication. We've digitized information. We've digitized music. We've digitized books. The next step is to digitize money, property, and our monetary system. That's what blockchain technology does.  Yes, it's in its early stages of  development and needs to become more efficient, secure, user friendly, and regulated before it's adopted by the masses. Consider, however, that a lot of the critiques I see above were also said about the internet 30 years ago. 

I'm a crypto skeptic, but I think open to learn.

Information, music, books are not on blockchain technology. Since on average I use paper currency < 1 time/month, and maybe 20 paper checks/year, I'm thinking my currency use is digitized. 90+% of my transactions are VISA. I transfer >$20,000 chunks with no fee from my laptop to pay college tuition on a seemingly routine basis. 

Why do I need blockchain technology? and what does that mean for the utility of Cryptocurrency?

 

[MTskibum]

We've digitized communication. We've digitized information. We've digitized music. We've digitized books. The next step is to digitize money, property, and our monetary system. That's what blockchain technology does.  Yes, it's in its early stages of  development and needs to become more efficient, secure, user friendly, and regulated before it's adopted by the masses. Consider, however, that a lot of the critiques I see above were also said about the internet 30 years ago. 

You can digitize all of that without using cryptocurrency, the difference is that a database is centralized where as a blockchain is decentralized.

 

[Juxtatarot]

You can digitize all of that without using cryptocurrency, the difference is that a database is centralized where as a blockchain is decentralized.

Yes, we can pay for stuff now on our phones and watches. From a consumer’s perspective, it couldn’t be easier. 

(Heck, in comparison, it can take bitcoin over an hour to complete a transaction.)
 

 

[Sand]

Yes, we can pay for stuff now on our phones and watches. From a consumer’s perspective, it couldn’t be easier. 

(Heck, in comparison, it can take bitcoin over an hour to complete a transaction.)
 

That's BTC's biggest drawback, for sure.  El Salvador says they run on BTC, but they really run on top of Algorand.  I regard BTC as more like gold - a store of value.  Other chains, like Solana, have more bandwidth than Visa with roughly the same transaction time.

I see blockchain as a wonderful record keeper.  Pharma counterfeiting could largely be stopped.  I can see a huge market for tokenization of assets that are hard to invest in in small denominations - individual bonds, real estate, art, etc.  It will, I think, allow for investment into things that currently are reserved for those with deep pockets.

 

[MTskibum]

That's BTC's biggest drawback, for sure.  El Salvador says they run on BTC, but they really run on top of Algorand.  I regard BTC as more like gold - a store of value.  Other chains, like Solana, have more bandwidth than Visa with roughly the same transaction time.

I see blockchain as a wonderful record keeper.  Pharma counterfeiting could largely be stopped.  I can see a huge market for tokenization of assets that are hard to invest in in small denominations - individual bonds, real estate, art, etc.  It will, I think, allow for investment into things that currently are reserved for those with deep pockets.

I have not read any studies on bitcoin's effect of El Salvador. Right after they adopted bitcoin as their currency it went up quite a bit and then crashed down.

I am highly interested in this topic, but I am worried that it is still too early to tell, I want some real academic studies by PHD eggheads to read.

If you ever come across any and remember, you should flag me.

 

[Captain Cranks]

Yes, we can pay for stuff now on our phones and watches. From a consumer’s perspective, it couldn’t be easier. 

(Heck, in comparison, it can take bitcoin over an hour to complete a transaction.)
 

In this example, at worst, it's settled in an hour. Your credit card transactions don't settle anywhere close to that. Of course, most people don't (and shouldn't) use the layer 1 Bitcoin network to send consumer grade transactions. Quicker and cheaper layer 2 solutions are built for that.

Now, rather than buying a sandwich at Chick-Fil-A, let's talking about sending large amounts of money. Let's say you need to send someone $100,000. What options does your bank give you? How long does it take and how much does it cost? What if you need to do it at 10 pm at night? What about Sunday?

 

[Captain Cranks]

Just out of curiousity, what is everyone's experience with cryptocurrency? Have you used Web3 at all?

 

[Captain Cranks]

You can digitize all of that without using cryptocurrency, the difference is that a database is centralized where as a blockchain is decentralized.

The centralization is a big part of the inefficiency, cost, and lack of control over personal assets. Bitcoin also provides a monetary system that can't be manipulated by central banks. The inflation schedule is fixed and supply finite. Leaving your assets in USD guarantees a loss of value over time. 

 

[Captain Cranks]

That's BTC's biggest drawback, for sure.  El Salvador says they run on BTC, but they really run on top of Algorand.  I regard BTC as more like gold - a store of value.  Other chains, like Solana, have more bandwidth than Visa with roughly the same transaction time.

I see blockchain as a wonderful record keeper.  Pharma counterfeiting could largely be stopped.  I can see a huge market for tokenization of assets that are hard to invest in in small denominations - individual bonds, real estate, art, etc.  It will, I think, allow for investment into things that currently are reserved for those with deep pockets.

Lightning Network

As I mentioned above, this isn't an issue. Bitcoin serves as the layer 1 settlement layer while networks like Lightning work as a speed of light transaction layer. 

 

[Captain Cranks]

I'm a crypto skeptic, but I think open to learn.

Information, music, books are not on blockchain technology. Since on average I use paper currency < 1 time/month, and maybe 20 paper checks/year, I'm thinking my currency use is digitized. 90+% of my transactions are VISA. I transfer >$20,000 chunks with no fee from my laptop to pay college tuition on a seemingly routine basis. 

Why do I need blockchain technology? and what does that mean for the utility of Cryptocurrency?

You don't necessarily need blockchain technology if you're content with the current financial system. However, blockchain technology allows us to eliminate the middle man, giving you more control of your assets and at a cheaper cost. Tackling the examples you mentioned, Visa charges the merchant 1.3 - 3.5% on each transaction. You don't see that as a consumer, but it's a charge for merchants so it's embedded in the price you pay. Regarding the college tuition, that $20,000 is likely being used by the banking system to make money. They're nice enough to give you "free" ACH's for the privilege. If you had control of the money on the blockchain, you could be earning 7.1% interest on USD pegged crypto until you were ready to send the money to the college. Why is the interest rate so high? Because you are getting a large portion of what the banks usually keep for themselves. You'd also be able to send it whenever you wanted without regard for banking hours or limitations. As a small business owner, I can't tell you how many times I've been hamstrung because it was too late in the day or the wrong day to set up a payment. 

I will concede that the user experience for blockchain (Web3) is not where it needs to be. Ultimately it should be seamless with our current internet (Web2) experience, but the tools haven't been created yet, so there's a huge, aggravating learning curve involved. We will get there, however, and there's a good chance you'll be using blockchain technology without even knowing it.

 

[MTskibum]

The centralization is a big part of the inefficiency, cost, and lack of control over personal assets. Bitcoin also provides a monetary system that can't be manipulated by central banks. The inflation schedule is fixed and supply finite. Leaving your assets in USD guarantees a loss of value over time. 

Can you define what you mean as part of the above bolded?

Also, doesn't  centralization and scale drive efficiency. For example a factory farmer is going to be much more efficient at producing food than a local coop. What are you basing your opinion on? Do you have efficiency metrics of both financial systems?

 

[MTskibum]

You don't necessarily need blockchain technology if you're content with the current financial system. However, blockchain technology allows us to eliminate the middle man, giving you more control of your assets and at a cheaper cost. Tackling the examples you mentioned, Visa charges the merchant 1.3 - 3.5% on each transaction. You don't see that as a consumer, but it's a charge for merchants so it's embedded in the price you pay. Regarding the college tuition, that $20,000 is likely being used by the banking system to make money. They're nice enough to give you "free" ACH's for the privilege. If you had control of the money on the blockchain, you could be earning 7.1% interest on USD pegged crypto until you were ready to send the money to the college. Why is the interest rate so high? Because you are getting a large portion of what the banks usually keep for themselves. You'd also be able to send it whenever you wanted without regard for banking hours or limitations. As a small business owner, I can't tell you how many times I've been hamstrung because it was too late in the day or the wrong day to set up a payment. 

I will concede that the user experience for blockchain (Web3) is not where it needs to be. Ultimately it should be seamless with our current internet (Web2) experience, but the tools haven't been created yet, so there's a huge, aggravating learning curve involved. We will get there, however, and there's a good chance you'll be using blockchain technology without even knowing it.

What companies are looking into allowing you to use cryptocurrency when you checkout from the local grocery store? If so are they estimating how much their network and hardware will cost?

For example the scanner that reads your visa card today, will the new technology work on top of that? If that is the case do they have a cost structure in place for their fees?

What makes you assume that the blockchain technology will allow this to happen cheaper than the current financial system?

 

[Captain Cranks]

Can you define what you mean as part of the above bolded?

Also, doesn't  centralization and scale drive efficiency. For example a factory farmer is going to be much more efficient at producing food than a local coop. What are you basing your opinion on? Do you have efficiency metrics of both financial systems?

Lack of control in that I am at the bank's mercy. I have to abide by their rules, their limits, and their schedule. I can't emphasize enough how easy and fast it is to transfer $100K over the blockchain. I don't have to talk to anyone. I don't have limits on how much I transfer. Most importantly, I can do whatever I want 24 hours a day, 365 days a year.

Yes, scale drives efficiency. Centralization, in this circumstance, only acts as a middleman to extract value and slow the process down. Imagine you and your buddy just finished a round of golf where you won $20 from a skins game. You ask him to pay up. What's faster? He takes $20 out of his wallet and hands it to you or he has to ask a mutual friend who owes him $20 to give it to you?

 

[MTskibum]

Lack of control in that I am at the bank's mercy. I have to abide by their rules, their limits, and their schedule. I can't emphasize enough how easy and fast it is to transfer $100K over the blockchain. I don't have to talk to anyone. I don't have limits on how much I transfer. Most importantly, I can do whatever I want 24 hours a day, 365 days a year.

Yes, scale drives efficiency. Centralization, in this circumstance, only acts as a middleman to extract value and slow the process down. Imagine you and your buddy just finished a round of golf where you won $20 from a skins game. You ask him to pay up. What's faster? He takes $20 out of his wallet and hands it to you or he has to ask a mutual friend who owes him $20 to give it to you?

This is a good example, we use paypal in my family and amongst a few of my friends and this would be fast to do. For my friends that do not have paypal i would have to use zelle which would take me a little longer, around 5-10 minutes to setup the transfer by inputting their information.

How would you use crypto to do this transaction? Do you have an app on your phone? I assume you have to login to your exchange and get information about your buddies account???

I honestly have no idea, can you walk me through the process of describing a transaction if you were both on the same exchange and if you are both on different exchanges if that makes a difference.

What is the expected time that it takes for this type of transaction and what is the sort of processing fee you are seeing?

 

[Captain Cranks]

What companies are looking into allowing you to use cryptocurrency when you checkout from the local grocery store? If so are they estimating how much their network and hardware will cost?

For example the scanner that reads your visa card today, will the new technology work on top of that? If that is the case do they have a cost structure in place for their fees?

What makes you assume that the blockchain technology will allow this to happen cheaper than the current financial system?

Quick Example

I think it's reasonable to assume that the cost of running a software network is a lot cheaper than the brick and mortar infrastructure of the traditional banking system. In case you weren't following along in the Elon Musk thread, we went on a crypto tangent where I detailed what was required for me to send a wire with my bank.

1. Check their website in hopes I can set up the wire online. Nope. Wires over $10K have to be done in person. Website says I need to schedule a time. Assign some energy cost to the website infrastructure.

2. Website scheduling shows no available times that day. I need to wait until tomorrow.

3. I call the bank to tell them I need to come in that day. I'm sent to automated system that tells me no times are available. Assign some energy cost to that infrastructure.

4. I call my local branch and tell them I'm coming in. They say ok. Assign some energy cost to that infrastructure.

5. I show up to the branch where I see no one other than employees chit-chatting. It takes the rep 30 minutes, a phone call, printer paper, etc. to send my wire. Assign some energy cost to that infrastructure.

That just consider the energy cost and doesn't even recognize the enormous property costs, personnel costs and profits associated with our banks.

 

[MTskibum]

Quick Example

I think it's reasonable to assume that the cost of running a software network is a lot cheaper than the brick and mortar infrastructure of the traditional banking system. In case you weren't following along in the Elon Musk thread, we went on a crypto tangent where I detailed what was required for me to send a wire with my bank.

1. Check their website in hopes I can set up the wire online. Nope. Wires over $10K have to be done in person. Website says I need to schedule a time. Assign some energy cost to the website infrastructure.

2. Website scheduling shows no available times that day. I need to wait until tomorrow.

3. I call the bank to tell them I need to come in that day. I'm sent to automated system that tells me no times are available. Assign some energy cost to that infrastructure.

4. I call my local branch and tell them I'm coming in. They say ok. Assign some energy cost to that infrastructure.

5. I show up to the branch where I see no one other than employees chit-chatting. It takes the rep 30 minutes, a phone call, printer paper, etc. to send my wire. Assign some energy cost to that infrastructure.

That just consider the energy cost and doesn't even recognize the enormous property costs, personnel costs and profits associated with our banks.

10,000 dollar wires are a pain in the butt, I had to do a wire transfer a few years ago to buy a boat and it was not fun.

However i am more concerned about day to day transactions since I do these much, much more frequently. How would you send 20 bucks to your friend on a golf course?

 

[Captain Cranks]

This is a good example, we use paypal in my family and amongst a few of my friends and this would be fast to do. For my friends that do not have paypal i would have to use zelle which would take me a little longer, around 5-10 minutes to setup the transfer by inputting their information.

How would you use crypto to do this transaction? Do you have an app on your phone? I assume you have to login to your exchange and get information about your buddies account???

I honestly have no idea, can you walk me through the process of describing a transaction if you were both on the same exchange and if you are both on different exchanges if that makes a difference.

What is the expected time that it takes for this type of transaction and what is the sort of processing fee you are seeing?

Pardon me if you know this already, but I feel the need to explain just in case. Layer 1 blockchain transactions mean a user is sending transactions directly on the blockchain. Layer 2 means you're using an application on top of the blockchain that later settles on the layer 1. So think of it as paypal or Visa (layer 2s) processing a bunch of transactions between their users but only settling with the layer 1 in bulk transactions. 

So now to answering your question, if you wanted to stick with the more user friendly layer 2 solution like Paypal, you could use Block or CashApp. It's similar to Paypal except it lets you transfer crypto to friends and family. If you wanted to do a layer 1 transaction where you cut out the middleman, you could use an app like Bitcoin Depot App Walkthrough.

 

[Captain Cranks]

10,000 dollar wires are a pain in the butt, I had to do a wire transfer a few years ago to buy a boat and it was not fun.

However i am more concerned about day to day transactions since I do these much, much more frequently. How would you send 20 bucks to your friend on a golf course?

I'd probably use cash  but if I were to go the crypto route, I'd probably use the Cashapp mentioned above.

 

[Juxtatarot]

Layer 2 means you're using an application on top of the blockchain that later settles on the layer 1

Is layer 2 confirming to the receiver in real-time that the sender has the balance sufficient to cover the transaction?

 

[TwinTurbo]

Lack of control in that I am at the bank's mercy. I have to abide by their rules, their limits, and their schedule. I can't emphasize enough how easy and fast it is to transfer $100K over the blockchain. I don't have to talk to anyone. I don't have limits on how much I transfer. Most importantly, I can do whatever I want 24 hours a day, 365 days a year.

Yes, scale drives efficiency. Centralization, in this circumstance, only acts as a middleman to extract value and slow the process down. Imagine you and your buddy just finished a round of golf where you won $20 from a skins game. You ask him to pay up. What's faster? He takes $20 out of his wallet and hands it to you or he has to ask a mutual friend who owes him $20 to give it to you?

To provide another example, during the pandemic, I located a very hard to find item that I wanted to purchase from a seller that happened to be local. If I don't move quickly to buy this now, there is a long line of other people that would buy it the next day. I initially attempted to pay the seller through my bank. The seller also had an account at the same bank. The transaction was flagged for fraud and was not able to be completed. Numerous phone calls later by both parties to said bank, it remained unresolved. I ended up just paying in crypto. It took a few min to complete. I would never use a bank again if that was entirely possible. 

 

[TwinTurbo]

That just consider the energy cost and doesn't even recognize the enormous property costs, personnel costs and profits associated with our banks.

Yes and fiat takes up physical space. The energy costs associated with creating, transporting, storing, and securing it likely vastly exceed the costs associated with crypto.

 

[Juxtatarot]

To provide another example, during the pandemic, I located a very hard to find item that I wanted to purchase from a seller that happened to be local. If I don't move quickly to buy this now, there is a long line of other people that would buy it the next day. I initially attempted to pay the seller through my bank. The seller also had an account at the same bank. The transaction was flagged for fraud and was not able to be completed. Numerous phone calls later by both parties to said bank, it remained unresolved. I ended up just paying in crypto. It took a few min to complete. I would never use a bank again if that was entirely possible. 

Pay “through my bank” how?  Zelle?

 

[TwinTurbo]

Pay “through my bank” how?  Zelle?

Yes 

 

[Captain Cranks]

Is layer 2 confirming to the receiver in real-time that the sender has the balance sufficient to cover the transaction?

Yes. The transaction wouldn't be confirmed if the funds weren't there. 

 

[Captain Cranks]

 I would never use a bank again if that was entirely possible. 

Same.  Can't stand them at this point. 

 

[Sand]

Pay “through my bank” how?  Zelle?

Just as a note be very careful with Zelle.  Despite being pushed by banks they take no responsibility for the system.  If something goes awry you're completely screwed.  

Another reason to hate banks.

 

[Terminalxylem]

In this example, at worst, it's settled in an hour. Your credit card transactions don't settle anywhere close to that. Of course, most people don't (and shouldn't) use the layer 1 Bitcoin network to send consumer grade transactions. Quicker and cheaper layer 2 solutions are built for that.

Now, rather than buying a sandwich at Chick-Fil-A, let's talking about sending large amounts of money. Let's say you need to send someone $100,000. What options does your bank give you? How long does it take and how much does it cost? What if you need to do it at 10 pm at night? What about Sunday?

How often do you make those types of transactions? How often do you need to make them quickly?

ETA I guess business owners might do so frequently. But like Wyatt, I’m trying to understand the utility for the average consumer.

Also, how do crypto transactions account for market volatility? The dollar value of an item doesn’t change much from day to day, but the cryptocurrency price might, correct?

So the bitcoin equivalent of $20K you provide to whomever might not retain its $20K value, if bc crashes the next day, for example.

I suppose the idea is never converting to traditional money at all, but having two (or more) parallel systems of currency doesn’t make that very practical atm.

 

[shader]

Thanks for moving this topic outside the Twitter discussion. Presumably, a lot of this stuff has been elaborated in the FFA crypto thread, though it seems like primarily investment advice.

To answer your questions:

No, corrupt governments have many tools at their disposal besides centralized currency (esp. control of public information). As far as I can tell, crypto shifts some control (and potential for corruption) from government and financial institutions to a bunch of repurposed hackers.

At the current level of utilization, crypto adds little to existing currency and creates a tool for anonymized illegal activity. Plus, their value is far too volatile atm to supplant old fashioned money. Until it gains more widespread acceptance/integration, cc is mainly an investment vehicle, and a risky one at that. Since we don't really need parallel financial universes, the energy drain is unwarranted imo.

Hopefully people aren't investing their life savings, but certainly many are losing money gambling on crypto.

While I love the idea of making banks obsolete, shifting trust to anonymous programmers isn't necessarily better. Anything that involves a bunch of money will require oversight imo. I don't know the best way to regulate it though.

Cash is much easier for anonymous illegal activity than crypto 

 

[Terminalxylem]

Cash is much easier for anonymous illegal activity than crypto 

In person, sure. But what about remote transactions?

 

[Sand]

Also, how do crypto transactions account for market volatility? The dollar value of an item doesn’t change much from day to day, but the cryptocurrency price might, correct?

That's why stable coins are a huge part of the market right now.

 

[whoknew]

I don't know if this is the right place to put this link, but it seems like it. This is a long interview, but I thought it was really interesting. I want to also say - I'm an idiot as far as cryptos go. So while I thought his critiques were interesting, I've no idea if he is accurate. I'd love to hear from others who know more.

Also - the interview is really long so I'm not going to post it - just the link.

Why this Computer Scientist Thinks All Cryptocurrencies Should 'Die in a Fire'

One of cryptocurrency’s most vocal skeptics is Nicholas Weaver, senior staff researcher at the International Computer Science Institute and lecturer in the computer science department at UC Berkeley. Weaver has studied cryptocurrencies for years. Speaking with Current Affairs editor-in-chief Nathan J. Robinson, Prof. Weaver explains why he views the much-hyped technology with such antipathy. He argues that cryptocurrency is useless and destructive, and should “die in a fire.” 

 

[Toby2ElectricBugaloo]

That's why stable coins are a huge part of the market right now.

2 weeks later...

No offense to my friend @Sand, but this line followed by the auto "two weeks later ..."  thing was just too perfect 

Hope you didn't get caught up in the Terra mess, GB 

 

[Sand]

No offense to my friend @Sand, but this line followed by the auto "two weeks later ..."  thing was just too perfect 

Hope you didn't get caught up in the Terra mess, GB 

Stung a bit.  I got out as it was dropping, so could have been worse.  85% or so of my stablecoin stuff is in USDC, so I'm (mostly) ok.  I'm moving that out into cash as we go here.  I don't think those companies are going to go down, but better not to get caught up there.

 

[Juxtatarot]

I don't know if this is the right place to put this link, but it seems like it. This is a long interview, but I thought it was really interesting. I want to also say - I'm an idiot as far as cryptos go. So while I thought his critiques were interesting, I've no idea if he is accurate. I'd love to hear from others who know more.

Also - the interview is really long so I'm not going to post it - just the link.

Why this Computer Scientist Thinks All Cryptocurrencies Should 'Die in a Fire'

One of cryptocurrency’s most vocal skeptics is Nicholas Weaver, senior staff researcher at the International Computer Science Institute and lecturer in the computer science department at UC Berkeley. Weaver has studied cryptocurrencies for years. Speaking with Current Affairs editor-in-chief Nathan J. Robinson, Prof. Weaver explains why he views the much-hyped technology with such antipathy. He argues that cryptocurrency is useless and destructive, and should “die in a fire.” 

Thanks for posting this.  His position (that it’s mostly a pyramid scheme) has been my default position. I think the stuff will eventually be worthless, I just don’t know when. 
 

This is the concern for me. There will be innocent people who will lose substantial amounts of money. We’ll look back someday as a society and ask “Why didn’t we stop this?” It’s sad.

As you say, it’s a long article and most people’s time in limited. I’d like to at least post this section:

ROBINSON: 

Well, what you said suggests that to some degree they’re working carefully within legal loopholes but also that there are ways in which regulators ought to be stepping up. You wrote an article in Slate with the security expert Bruce Schneier about the way that, without banning cryptocurrency outright, we can regulate it sensibly. So perhaps you could outline what you think is the necessary approach to mitigating the various harms that this is doing.

WEAVER: 

The first thing is, you don’t in many cases need new laws. You just need existing laws to be enforced. So every initial coin offering, every single one of them, checks every box of the Howey Test. The SEC has the authority to stop those proactively rather than reactively. They choose not to. 

Most of these “decentralized” organizations are not actually decentralized. They are identifiable entities. So when you have regulations that apply to identified entities, like say money transmission laws, apply them to the named entities. Cryptocurrency is pseudonymous, not anonymous. So actually enforce requirements on transfers to make sure that money that’s been contaminated by bad stuff is not allowed. That would disrupt a whole bunch of bad activity. 

To put it bluntly, the SEC needs to grow a pair. Because this space is provably negative sum. It can only harm investors. Everything in this space, for the most part, ticks boxes for stuff that the SEC is allowed to regulate, which it should regulate. 

Basically, there’s a fear among regulators—that I think started in the ‘80s—of being accused of “stifling innovation.” There’s no innovation to stifle. So regulate away. Because the problem with the current regulation model is they’re doing “let’s pick up the pieces afterward.” So after the things fall apart we’re going to go pick up the pieces, rather than “Hey, let’s stop things from falling apart in the first place,” which would save billions of dollars of investor money. 

ROBINSON:

What is the future of cryptocurrency in the absence of changes to existing regulation? Is it doomed inherently through features internal to it? Where’s this going if allowed to follow its own logic? 

WEAVER: 

It will implode spectacularly. The only question is when. I thought it would have actually imploded a year ago. But basically, what we saw with Terra and Luna, where it collapsed suddenly due to these downward positive feedback loops—situations where basically the system is designed to collapse utterly and quickly—those will happen to the larger cryptocurrency space. Because, for example, the mining process is horribly expensive. We’re talking [a measurable percentage] of the world’s electricity consumption, most of that has not been paid for. So the mining companies for the most part have been taking the cryptocurrency and borrowing against the cryptocurrency that they create, rather than sell it, because the market’s actually very thin. 

This means there’s a huge amount that is subject to potentially catastrophic margin calls. And that creates a feedback loop where the price drops a little, somebody’s forced to sell. That drops the price more. They’re forced to sell more. This creates a feedback loop that drives the price into the ground, catastrophically.

The previous times this has happened, we had the bubble at 100, powered by fraud at Mt. Gox. And that imploded down to 10. We had a bubble a 1000 powered by fraud, it imploded and went back down to 100. We had a bubble at 10,000 powered by Tether, it blew up and went back down to 1,000. And now we’re at a bubble where Bitcoin blew up to 60,000, fueled by Tether and falling. But I don’t think there’ll be a fifth bubble. Because basically, they will have broken all the suckers left to break. There’s only so many more suckers that can be brought into that space. Once you burn out a sucker, they don’t come back. They’re a non-renewable resource. So they’re going to end up running out of greater fools. 

So I suspect that the cryptocurrency space will go fine absent regulation, until one day it goes and collapses greatly. 

ROBINSON:

What you said about finding suckers, I think I’d like to end on this. Because I was in New York City recently on the subway, looking around at the ads, and a bunch were for investing in some new crypto thing. They were encouraging people to put their money in, saying it was a safe investment. And I mentioned the Super Bowl ads earlier. And I think the thing that it might be worth emphasizing is when we say “sucker,” we’re talking about people being taken advantage of. When you talk about the ransomware, the fraud, the child exploitation material, when you talk about people who put their savings into these things, even leaving aside the environmental destruction, we’re talking about pain being inflicted upon people by the proliferation of this.2

WEAVER:

Yes. That’s the problem, and that’s why I’ve actually changed my view over the past decade. Back in 2013, I thought it was amusing and silly, and I could get cool papers out of it. In 2018, I thought it was amusing, but pretty bad. [In 2022], it’s time to really think about burning it down. Now I just want to take the entire cryptocurrency space and throw it into the sun. I know astronomers will tell you it’s easier to throw something into the void of space than to throw it into the sun. But it’s worth the extra energy to make sure some alien doesn’t find this mental virus. 

ROBINSON:

Well, good luck. You’re battling Bill Clinton and Tony Blair, who both showed up at a cryptocurrency conference recently.  

WEAVER: 

And I bet they got paid in actual money. Like, the Washington Nationals just the other day started doing a lot of tweets for their business relationship with Terra. That was $5 million for five years prepaid in advance in cash. So for the next five years, the Washington Nationals are obliged to hype a cryptocurrency that failed spectacularly already.

 

[FairWarning]

Thanks for posting this.  His position (that it’s mostly a pyramid scheme) has been my default position. I think the stuff will eventually be worthless, I just don’t know when. 
 

This is the concern for me. There will be innocent people who will lose substantial amounts of money. We’ll look back someday as a society and ask “Why didn’t we stop this?” It’s sad.

As you say, it’s a long article and most people’s time in limited. I’d like to at least post this section:

A lot of sheep will be led to slaughter, agree.  It seemed when Wall St started investing, it was the beginning of the end.