[HN Gopher] Report on Stablecoins [pdf]
___________________________________________________________________
Report on Stablecoins [pdf]
Author : TheAlchemist
Score : 318 points
Date : 2021-11-01 19:38 UTC (3 hours ago)
(HTM) web link (home.treasury.gov)
(TXT) w3m dump (home.treasury.gov)
| kim0 wrote:
| For a stable coin to actually work, it needs to be private and
| algorithmic. The only such crypto I know of, is Haven protocol.
| This is based on a fork of Monero the largest fungible crypto
| network, with a system of private synthetic assets on top. Things
| like synthetic USD, CHF, GBP, also gold and silver...etc. If you
| find this interesting, read more at
| https://havenprotocol.org/knowledge/
| andred14 wrote:
| Haven is cool but the Secret Network (SCRT) is better Imo :)
|
| I don't like how the wallet for Haven is web based ie. if the
| website goes down then we lose access to our funds?
|
| In December the Shade protocol and associated stable coin comes
| out for Secret it's going be awesome.
|
| https://shadeprotocol.io/ https://scrt.network
| aresant wrote:
| TL;DR - Stablecoin issuers should operate under same regulatory
| structure as banks !
| Zamicol wrote:
| I've previously named Tether "rat poison" and I hope they are
| regulated/banned. Tether is an easy problem to "solve", and imho,
| should fall under existing regulation.
|
| However, I would love to see an explanation on how the treasury
| recommendation of regulating stablecoins as banks should apply to
| (what I see as beneficial) "algorithmic"/DAO stablecoins.
|
| The treasury's continued omissions, ignoring the real elephant in
| the room Maker, will only confuse regulators instead of
| addressing the "hard problem" of Maker.
|
| There are gorging differences between a centralized and "trusted"
| service like Tether and the algorithmic, automatic,
| decentralized, and trustless Maker.
| vineyardmike wrote:
| > To address risks to stablecoin users and guard against
| stablecoin runs, legislation should require stablecoin issuers to
| be insured depository institutions, which are subject to
| appropriate supervision and regulation, at the depository
| institution and the holding company level.
|
| > To address concerns about payment system risk, in addition to
| the requirements for stablecoin issuers, legislation should
| require custodial wallet providers4 to be subject to appropriate
| federal oversight. Congress should also provide the federal
| supervisor of a stablecoin issuer with the authority to require
| any entity that performs activities that are critical to the
| functioning of the stablecoin arrangement to meet appropriate
| risk-management standards.
|
| > To address additional concerns about systemic risk and
| concentration of economic power, legislation should require
| stablecoin issuers to comply with activities restrictions that
| limit affiliation with commercial entities. Supervisors should
| have authority to implement standards to promote interoperability
| among stablecoins. In addition, Congress may wish to consider
| other standards for custodial wallet providers, such as limits on
| affiliation with commercial entities or on use of users'
| transaction data.
|
| AKA StableCoin operators should be banks. (Stable Coins will be
| bank notes)?
| wpietri wrote:
| Stablecoin issuers are already effectively banks. In
| particular, wildcat banks:
|
| https://en.wikipedia.org/wiki/Wildcat_banking
|
| Spoiler alert: there's a reason we had 150 years without
| wildcat banks.
| CryptoPunk wrote:
| The popular conception of the so-called free banking era, and
| the cause and prevalence of wildcat banking, is wrong.
|
| https://www.alt-m.org/2021/07/06/the-fable-of-the-cats/
| [deleted]
| NationalPark wrote:
| Even the Cato blogger here concedes that wildcat banks
| failed more often and were probably fraudulent from the
| beginning some of the time (but you can't prove it!). His
| argument more or less boils down to regulation being
| inherently bad, therefore it's worth it to try this all
| over again with stablecoins, in case it works this time,
| also sometimes people got back like 95 cents on the dollar
| so if you don't count those cases as wildcat banks the
| story looks a lot better. Not surprising, but it's a lot of
| words to make such a banal point.
| CryptoPunk wrote:
| You've totally missed and mischaracterized the point of
| the article. That wildcat banks failed was never in
| dispute. They failed, by definition.
|
| As the monetary historian notes, wildcat banks were very
| rare, and the cause of wildcat banking was not, as
| alleged, lack of centralized regulatory gatekeeping: the
| failures were generally directly due to regulatory
| intervention that exacerbated risk, like prohibitions on
| bank branching which precluded diversification.
| [deleted]
| colinmhayes wrote:
| Tether was invented to provide bitfinex with banking services
| after the banks refused to deal with them. Not super surprising
| that regulators are treating this banking replacement as a
| bank.
| eightysixfour wrote:
| I think this is a pretty decent set of recommendations
| considering the power stablecoin issuers have, personally.
|
| > Stable Coins will be bank notes.
|
| Exactly.
| pjc50 wrote:
| > Stable Coins will be bank notes
|
| What do you call an institution that takes deposits and lends
| them out, such as by buying ""commercial paper"" that Tether
| repeatedly talks about? A bank. (Or possibly a money market
| fund)
| the_optimist wrote:
| You call it a 0% interest money market fund. You do not call
| it a bank. A bank does something entirely different: create
| 'bank loans'. A non-bank does not have the ability to create
| bank loans.
| JumpCrisscross wrote:
| > _A bank does something entirely different: create 'bank
| loans'. A non-bank does not have the ability to create bank
| loans._
|
| I agree with you, broadly, though I have to comically point
| out that Tether was absolutely also originating loans.
| cinquemb wrote:
| > A non-bank does not have the ability to create bank
| loans.
|
| A decentralized derivatives protocol can lend its credit
| balance (and fractions of its stablecoin balance, if it
| exists at all at the point when a position is opened) to a
| decentralized liquidity pool when there is demand by end
| users to open a position (ex. a user can deposit frax to
| buy options/forwards/interest rate swaps/etc against a
| liquidity pool while the exchange allows the pool to borrow
| collateral into existence [and destroyed when the users
| position is closed, modulo the type of derivative the user
| bought]) without the liquidity pool providing all or any
| the collateral to back the position if it ends up moving
| against the liquidity pools exposure.
|
| Such a protocol can also issue debt against their
| stablecoin flows in accordance the protocol code, that can
| also float on a dex at a premium or a discount and also be
| used as collateral in other decentralized stable coins that
| allow for differing collateral underlying (like some
| decentralized credit/debt backed stablecoins out there now,
| or allow themselves to be collateralized by any combination
| of ERC20 underlying).
| 5faulker wrote:
| We've seen that card played before.
| lottin wrote:
| What card?
| [deleted]
| m0zg wrote:
| Treasury at least knows what it's talking about. The Congress
| (whom they're asking for legislation here) not only won't
| understand any of this, but worse, will write whatever laws big
| bank lobbyists want them to write, with the primary intent to
| make all of this non-viable for anyone but Goldman Sachs and
| JPMorgan through regulatory capture.
|
| I'll leave it to you to decide whether this preferential
| treatment is better than the current lax regulation.
| Trias11 wrote:
| Word "risk" appears in this doc 130+ times.
|
| However the sole existence of stablecoins and crypto is due to
| the fact that legacy, corrupt financial institutions and
| irresponsible government fiscal policies present the biggest risk
| to people wellbeing.
|
| So all these "risk" talks is a prerequisite for more taxes and
| more regulations that will only accelerate the natural evolution
| away from outdated, corrupt, centralized legacy institutions.
| okareaman wrote:
| Historically, we've had major bubbles and crashes in all kinds of
| financial markets, from stocks and bonds, to property and dotcom
| stocks. Is there any reason to believe that cryptocurrency is
| more stable and we won't have a catastrophic crash?
| X6S1x6Okd1st wrote:
| this is practically what cryptocurrency is known for
| spir wrote:
| Crypto "expert" here. We will have a catastrophic crash, it's
| normal and natural. But, the tech is here to stay and is 100x
| better than existing solutions. Crypto is changing the world,
| one crash at a time :)
| TomSwirly wrote:
| > 100x better than existing solutions.
|
| And after ten years, there isn't one actual application of
| cryptocurrencies except for speculation and crime.
| icelancer wrote:
| I've responded to several commenters who say this with my
| real world examples, the most notable of which are paying
| people in Venezuela to do work for me when most mainstream
| forms of monetary exchange are nearly impossible in/out of
| that country.
| spir wrote:
| I'm with you, where are the actual applications?
|
| I'd say this criticism was mostly fair up until about two
| years ago. Within the last two years, the actual
| applications have flourished.
|
| For example, have a look through this list
| https://defipulse.com/
|
| If you remain skeptical, that's fair. The good news is,
| Ethereum is reaching adulthood this year by switching to
| proof of stake and launching the web of layer-2 networks.
| Within another three years or so, the "actual applications"
| will become so ubiquitous as to be impossible to ignore.
| santiagobasulto wrote:
| Thanks for that link. I've been long on BTC since the
| beginning, and I fully love the concept of crypto.
|
| But busy with work (and I sold my startup 2 years ago) I
| went completely dark on the Crypto world. Now I'm trying
| to catch up with it and both DeFi and everything Layer 2
| seem to be the future.
|
| Do you have any other resources to recommend?
| lvl100 wrote:
| This is just pathetic.
| spir wrote:
| There's a large subset of the talented people on HN that
| were wrong about crypto years ago-- they couldn't see
| that the casino and the innovation are, unfortunately,
| inseparable-- and many now cling to their original
| incorrect points of view, even as crypto is clearly
| changing the world like the internet did in the 90s and
| mobile in the 00s.
|
| I have been full-time in crypto for years. I could write
| you a 10,000-word essay on crypto's promising use cases.
| But, I believe that you, and many others on HN, don't
| want to hear it.
|
| That's too bad, because you guys grew up on sci-fi and
| rigor, and now you're ignoring that crypto is both
| rigorously successful and cypherpunk sci-fi come to life.
| lvl100 wrote:
| It's pathetic because you're just writing nonsense and
| can't even describe anything practically productive about
| crypto. None.
|
| By the way, I could ALSO write you 10,000 word salad
| about how commonly found stones can solve the wrongs in
| modern finance. That doesn't say anything about common
| stones. It just says modern finance is FLAWED.
| mediocregopher wrote:
| I buy legal goods with them. Just because you don't _want_
| to use them doesn't mean no one else does.
| bduerst wrote:
| Do you really? Or does your binance/coinbase debit card
| convert your crypto to USD and send dollars out via ACH?
| mminer237 wrote:
| The only practical differences in the tech is that it wastes
| more power, has no insurance, has no fraud remediation, and
| has no safeguard against volatility. I guess the potential
| anonymity too, but that's only really a practical benefit if
| making an illegal transaction.
|
| The only time I can ever see a cryptocurrency being worth it
| is if you do not have any central authority you can trust. If
| we ever get to the point where you can't trust the courts to
| somewhat reasonably protect your money, then I think we have
| worse problems. Especially since you wouldn't have any
| physical protection from the legal system.
| mailbag wrote:
| Arguably, we've already seen multiple catastrophic crashes in
| cryptocurrencies.
| chizhik-pyzhik wrote:
| In theory, cryptocurrency should be more resilient through
| greater transparency; anyone can inspect a smart contract and
| see how it works, what collateral it holds.
|
| In practice, non-algorithmic stablecoins like Tether have very
| little transparency. I hope in the long run the market will
| gravitate towards algorithmic stablecoins like DAI.
| aetherspawn wrote:
| > Conversely, mass adoption of a well-regulated and supervised
| stablecoin with strong AML/CFT protections built into the
| stablecoin could provide greater transparency into illicit
| financial activity and could mitigate ML/TF risks, especially if
| the stablecoin takes market share away from riskier alternatives.
|
| Interesting.
|
| The blockchain is public, so they see benefit in being able to
| audit it.
| gzer0 wrote:
| This is specifically referring to non-algorithmic stablecoins.
|
| "Stablecoins that are purportedly convertible for an underlying
| fiat currency are distinct from a smaller subset of stablecoin
| arrangements that use other means to attempt to stabilize the
| price of the instrument (sometimes referred to as "synthetic" or
| "algorithmic" stablecoins) or are convertible for other assets.
| Because of their more widespread adoption, this discussion
| focuses on stablecoins that are convertible for fiat currency."
| chizhik-pyzhik wrote:
| This is a very good point. The risk profile of centralized
| stablecoins like Tether and USDC is way, way different from
| something algorithmically controlled like DAI.
| X6S1x6Okd1st wrote:
| Although DAI allows minting with USDC right now
| chairmanwow1 wrote:
| I have been waiting for some regulatory movement in this space. I
| am not really familiar enough with government agencies to know
| how a document like this filters into Congress for actual
| regulations to start getting drafted and debated, but to my
| ignorant eyes this is great news!
| frisco wrote:
| > To address risks to stablecoin users and guard against
| stablecoin runs, legislation should require stablecoin issuers to
| be insured depository institutions, which are subject to
| appropriate supervision and regulation, at the depository
| institution and the holding company level.
|
| How does this interact with the concept of algorithmic
| stablecoins? Not every stablecoin is simply backed by deposits.
| yokem55 wrote:
| The primary targets here are going to be folks issuing stables
| backed by real world assets and fiat. Under-collateralized
| algo-stables will probably be targeted as securities by the
| SEC, while overcollaterized debt based ones will probably just
| be ignored for now because of how capital inefficient they are.
| svachalek wrote:
| I think it would make them illegal. As it probably should, I'm
| not aware of any that are not an elaborate scam.
| __MatrixMan__ wrote:
| I read your comment and then started reading about at
| MakerDAO's governance model. It doesn't jump out as a scam to
| me, just a clever bit of game theory.
|
| What am I missing?
| [deleted]
| bduerst wrote:
| DAO is crypto backed by crypto. I think GP is referring to
| the lack of transparency with fiat-backed stable coins,
| like tether.
| [deleted]
| sputknick wrote:
| Do you have any thoughts on how you would do that? Isn't that
| as practical as outlawing Bitcoin?
| lottin wrote:
| They can make it illegal to buy and sell these stablecoins.
| The exchanges where the stablecoins are bought and sold
| would have to delist these coins or face criminal action.
| risho wrote:
| someone has never heard of uniswap
| svachalek wrote:
| I'm not the government or even a lawyer. But I'd imagine
| they'd block companies from trading Bitcoins for dollars or
| mining Bitcoin. Turn off all the ETFs and options trading.
| Say Tesla and MicroStrategy can't hold it in their
| treasury. I doubt they can make it disappear but that would
| certainly put a dent in US adoption.
| swamp40 wrote:
| I'm sure they could ask for China's help with that. Maybe
| the US Gov could even get a copy of their Great Firewall?
| Good times.
| longhand wrote:
| You guys are ridiculous - delicate geniuses who envy not
| having purchased bitcoin years ago! LOL
| sputknick wrote:
| Excellent question, also synthetics. This is my big question.
| If you make fiat backed stable coins to onerous to manage, then
| everyone just moves to algorithmic stable coins.
| ayngg wrote:
| This is what I wonder, since I thought what most consider
| stablecoins now (like Tether) are basically steppingstones
| towards things like Maker/ Dai, which I am unsure how they
| would fit into this kind of regulation.
| cinquemb wrote:
| > How does this interact with the concept of algorithmic
| stablecoins? Not every stablecoin is simply backed by deposits.
|
| Relegated to a footnote (just like Jeffery Snider at Alhambra
| Partners talks a lot of the typical chatter by frbny et al wrt
| the (euro)dollar system gets relegated to footnotes and nick
| named the phenomena "footnote dollars") on page 4:
|
| "Stablecoins that are purportedly convertible for an underlying
| fiat currency are distinct from a smaller subset of stablecoin
| arrangements that use other means to attempt to stabilize the
| price of the instrument (sometimes referred to as "synthetic"
| or "algorithmic" stablecoins) or are convertible for other
| assets. Because of their more widespread adoption, this
| discussion focuses on stablecoins that are convertible for fiat
| currency."
|
| i.e we'll pretend that people cant swap dollar denominated non
| centralized corporate issued stablecoins for any kind of fiat
| at the floating rate of the denomination of the stablecoins
| underlying to the fiat in typical fx markets (also ignoring
| that higher amount of those other stable coins are being used
| in defi protocols relative to their supply than the centralized
| ones).
|
| So of course, those like FEI, FRAX and others will get ignored.
| pulse7 wrote:
| This is a "regulated cybercurrency".
| gt565k wrote:
| Value of crypto got too big, now the govt wants in.
|
| Can't say we didn't see this coming.
|
| This is good for crypto as it opens the doors for mainstream and
| institutional adoption at higher levels.
|
| Plus, stable coins should be regulated and audited. Looking at
| you tether.
| animal_spirits wrote:
| I see it more as People who are given the job to protect the
| American People and the American economy from financial
| manipulation see that stablecoins have a high risk of financial
| manipulation rather than "govt wants in"
| natch wrote:
| > Stablecoins are digital assets that are designed to maintain a
| stable value relative to...
|
| Is this always technically true? Or are they sometimes just
| (inserting word) *purportedly* designed to do that?
| fancyfredbot wrote:
| "If well-designed and appropriately regulated, stablecoins could
| support faster, more efficient, and more inclusive payments
| options."
|
| Anyone else find it bizarre that the solution to slow payments
| might turn out to be distributed ledgers based on proof of work?
| It feels like the last thing you'd expect - especially since
| we're starting from a position of managing money through trusted
| centralised authorities. It's actually really weird we can't
| settle payments in seconds already.
| X6S1x6Okd1st wrote:
| really the thing that makes traditional payments slow is
| chargebacks
| mgamache wrote:
| All traditional methods use gatekeepers that control the flow
| of money. If you can't do what you want with your money is it
| really yours? The Trustless nature of BTC involves a seeming
| waste of energy, but you get a lot in return (like ownership of
| your money).
| fancyfredbot wrote:
| Sure, but my point was not really about trust. My point is
| that speed is easier to achieve without Blockchain than with
| it. It's strange that the centralised solution is slower.
| robmerki wrote:
| Tether and other pose a critical systemic risk to all
| cryptocurrency. Anything to increase trust/transparency with
| stablecoins is a big with for crypto.
| Aaronstotle wrote:
| Tether absolutely poses a large risk to crypto. If companies do
| issue stablecoins, they should have links to third-party
| attestations that verify proof of reserves like Circle (USDC)
| does.
|
| Tether could end all of their "FUD" if they ever published such
| a report.
|
| Circle's reporting: https://www.circle.com/en/usdc#transparency
| (edited to change audits --> attestations)
| yashap wrote:
| IMO "FUD" about Tether will never end, because it's a fairly
| clear scam. The fear/uncertainty/doubt around it is not due
| to an easily remedied lack of transparency, the lack of
| transparency is just an attempt to disguise the scam.
|
| I see Tether heading towards collapse, not legitimacy, and
| any actual increase in transparency would just hasten the
| collapse.
| lavezzi wrote:
| Circle are not audited, Grant Thornton provide an
| attestation. There's a big difference.
| Aaronstotle wrote:
| This is true, I'll edit my comment.
|
| I still think a third-party attestation provides a lot more
| trust than the shady-stuff going on with Tether.
| lottin wrote:
| The problem is an independent audit would also uncover
| Tether's likely involvement in various illegal schemes to
| pump up the prices of cryptocurrencies. It's not only that
| they don't want to be audited but that they just can't.
| [deleted]
| rburhum wrote:
| SEC Comments about this report:
| https://www.sec.gov/news/statement/gensler-statement-preside...
| colatkinson wrote:
| From the "Recommendations" section:
|
| > Legislation should address the risks outlined in this report by
| establishing an appropriate federal prudential framework for
| payment stablecoin arrangements.29 In particular, with respect to
| stablecoin issuers, legislation should provide for supervision on
| a consolidated basis; prudential standards; and, potentially,
| access to appropriate components of the federal safety net. To
| accomplish these objectives, legislation should limit stablecoin
| issuance, and related activities of redemption and maintenance of
| reserve assets, to entities that are insured depository
| institutions.
|
| > The standards to which these [insured depository] institutions
| are subject include capital and liquidity standards that are
| designed to address safety and soundness and, for the largest
| banking organizations, also include enhanced prudential standards
| that address financial stability concerns. Under the Federal
| Deposit Insurance Act, insured depository institutions also are
| subject to a special resolution regime that enables the orderly
| resolution of failed insured depository institutions by, among
| other mechanisms, protecting customers' insured deposits, and
| according priority to deposit claims over those of general
| creditors, and limits any potential negative systemic impacts in
| the event of bank failure.
|
| I suspect that we're going to very quickly (by legislative
| standards) find out which stablecoins are backed by real currency
| and which are "backed by real currency." I'm betting short-term
| there'll be some issues with liquidity, especially on smaller
| exchanges. But longer-term, having the gaps filled in by stabler
| stablecoins can't hurt.
| X6S1x6Okd1st wrote:
| we already know that USDT isnt actually backed by currency
| [deleted]
| Animats wrote:
| This is good. The backing of stablecoins is a very real issue. As
| the Treasury points out, there's a very real possibility of a
| run. Two stablecoins have crashed so far, SafeDollar SDO, and
| $TITAN. They went all the way to zero.
|
| Can Tether survive a net outflow? Probably not. They don't have
| the collateral.
|
| Dai is really a derivative of Etherium. Dai is backed by Etherium
| at 150%. So value in Dai is at risk if the price of Etherium
| drops more than 1/3. Etherium dropped by half back in May 2021,
| but recovered. DAI could have crashed at that time if it faced a
| net outflow. It didn't, though.
|
| The real question is what happens in the next recession.
| yokem55 wrote:
| 150% is the _minimum_ amount of collateral. If the USD value of
| your locked eth falls below that 150% threshold relative to
| your DAI denominated debt, a liquidator will pay off your debt
| and take your collateral.
|
| So, a conservatively managed Maker CDP's regularly are
| collateralized to the tune of 300% if not more.
| Zamicol wrote:
| Currently the whole Dai system is 215% collateralized.
| There's about $8 billion on loan and $17 billion in assets
| locked in the system.
|
| https://daistats.com/
| zzleeper wrote:
| Is there a way to find out what was the market cap of those
| two? Searched coingecko and a few other places and came empty
| handed (they just list "price" but no historical market cap or
| outstanding coins)
| anonporridge wrote:
| Currently $70 billion Tether,
| https://coinmarketcap.com/currencies/tether/?period=7d
| dustingetz wrote:
| Risk is that a tether run causes all of crypto to collapse, not
| just USDT. How many actual dollars are in the system?
| Everything real has been exfiltrated through electricity bills,
| taxes and early adopters selling, the entire crypto economy is
| a hollow shell, leveraged on retail deposits.
| wpietri wrote:
| Exactly. Ultimately cryptocurrencies are a negative-sum game
| in that they take in real money and just move that money
| around, while spending some on overhead.
|
| In contrast, imagine investing in, say, a new fast-food
| franchise joint. They money you put in there is used to
| acquire assets that are used to produce goods that people
| will pay to consume. If it's a well-run business, the value
| of the outputs will be more than the value of the inputs,
| making it a positive-sum effort.
| scrubs wrote:
| Agree! If there was no way for ppl playing in crypto to get
| their hands on bonafide fiat currency, I don't think
| anybody would really care about crypto. Remember the Gemini
| exchange adds looking for qualified investors? Why? because
| such people have US dollars, which is what Gemini wants to
| bank.
| swader999 wrote:
| Right now that's the case but there's no guarantee any
| currency will always remain the one of choice. And BTC
| doesn't need exchanges, but of course it does help,
| especially in the early stages.
| mattnewton wrote:
| I'm a crypto bear myself, but I'm not sure I agree with
| this argument. Plenty of services are built around "just
| moving money around" - accounting in this way has a ton of
| real value or else stripe, visa, paypal etc wouldn't be the
| huge companies they are. The questions are, whether
| "investing" by buying and holding is the right way to
| capture the value that this produces, and whether the
| benefits of doing it on a distributed blockchain outweigh
| the costs.
| BoiledCabbage wrote:
| visa, paypal... all provide value in allowing commercial
| transitions. Exchange of goods and services, digitally or
| on credit. The value it is providing is eliminating the
| inefficiency of barter (which cash also does), and
| allowing remote digital transactions, again good for
| societal benefit.
|
| There is no societal benefit to buying, holding, selling
| a crypto currency.
|
| The thing that could provide societal value is smart
| contracts - but that has nothing to do with crypto. Visa
| (or Stripe) could implement smart contracts in javascript
| on top of their platform and society gets pretty much all
| of the benefits without needing any of the crypto.
| swader999 wrote:
| There is value in having a monetary system though. And if
| BTC is a better system and more people find it's utility
| for barter or wealth preservation better it might
| appreciate more in relation to something like the USD
| which has many different characteristics.
| bduerst wrote:
| There is value in having a _useful_ monetary system.
|
| That ship sailed (multiple times) during the block size
| debacle for bitcoin, and there isn't nearly enough
| adoption with other cryptos to make them a useful payment
| system (aside from Monero if you're doing illegal
| activities)
| arcticbull wrote:
| It's a strictly worse monetary system by any measure.
| It's massively more expensive to transact, it's
| unbelievably inefficient - requiring as much power as
| Thailand and generating as much e-waste as the
| Netherlands to scribble 2-3 tx/sec into a ledger. That's
| 60 days of power for the average US household and 1 iPad
| of e-waste _per transaction_. [1] [edit](97% of all
| mining hardware will be thrown away without ever winning
| a single block reward).
|
| If adopted as an actual currency it would immediately
| lead to a deflationary spiral savaging the job market.
| [2] Even the dictator of El Salvador wasn't nuts enough
| to adopt it as an actual currency. All pricing continues
| to be in USD and exchanged for BTC at the point of sale -
| and the point of a gun. (Keep in mind legal tender laws
| in ES _require_ everyone to accept your Bitcoin for
| purchases or you face criminal charges).
|
| To call it wholly unfit for any purpose except exchanging
| for black tar heroin would be an understatement.
|
| [1] https://digiconomist.net/bitcoin-energy-consumption
|
| [2] https://www.investopedia.com/terms/d/deflationary-
| spiral.asp
| arcticbull wrote:
| That's not quite correct, although I understand your
| sentiment.
|
| When you own a share of Square (or Visa, or PayPal) each
| time a transaction takes place on their network, a
| portion of that transaction (revenue minus costs) accrues
| to the company - and by extension increases the intrinsic
| value of your share. The transaction revenue is spent on
| furniture, on R&D, on employees and on buffing up their
| cash position. As a shareholder, you _benefit_ from every
| single transaction made on their network.
|
| On the other hand with cryptocurrencies like Bitcoin, as
| a holder of Bitcoin you are a customer not an owner. You
| lose money on every transaction. That value accrues to
| miners, and by extension, your local PE firm re-opening a
| fossil fuel power plant or the Kazakh coal mining
| complex.
|
| Square shares ~= Hut8 shares.
|
| Bitcoin ~= a Starbucks gift card you hope appreciates in
| value when Starbucks sells more coffee. Currently there
| are enough, uh, savvy investors who think it should, so
| it does. In accounting terms, it won't though because
| that benefit accrues to shareholders of mining companies,
| which you are not. You hold a gift card. One that costs
| money to spend so must be worth less than face value.
|
| Bitcoin is a strongly negative sum MLM, or if you agree
| with jstolfi, a Ponzi scheme with a fresh coat of paint.
| [1] The network currently costs $60M per day to operate.
| That's $21B per year in new money that has to come in to
| prop up the price. [edit](And all that money goes to
| burning coal and throwing away mining hardware).
|
| [1] https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-
| bitcoin...
| jbusma wrote:
| As a holder of crypto, you are both a customer and an
| owner.
|
| You pay a fee for each transaction you send, just like
| any other service. b
|
| However, your holdings increase in value the more other
| people use the same chain because the value of the entire
| ecosystem needs to scale proportionally to the value
| people are attempting to transact across it.
|
| Financial systems, like social networks, and most
| businesses coming out of SV rely on network effects for
| much of their value.
|
| USD has been the default option for the world, and
| enforced through violence when people attempt to create
| their own networks of trade.
|
| The positive sum value that cryptocurrency is attempting
| to create is the ability to send anyone in the world any
| amount of value (money or otherwise) not subject to
| government permission, or sabotage (ie money printing)
|
| It's like any one being able to suggest a Federal Reserve
| policy, and the vote being handled by the people, not
| representatives or a committee.
|
| It is revolutionarily democratic.
| arcticbull wrote:
| > As a holder of crypto, you are both a customer and an
| owner.
|
| You own nothing. You a customer of the network.
|
| > However, your holdings increase in value the more other
| people use the same chain because the value of the entire
| ecosystem needs to scale proportionally to the value
| people are attempting to transact across it.
|
| This is a lovely narrative, but its false. Holding
| bitcoin does not create value. It creates nothing, and
| your value is extracted by miners.
|
| > The positive sum value that cryptocurrency is
| attempting to create is the ability to send anyone in the
| world any amount of value (money or otherwise) not
| subject to government permission, or sabotage (ie money
| printing)
|
| This is not the definition of "positive sum." It's a use
| case basically only criminals have.
|
| > It's like any one being able to suggest a Federal
| Reserve policy, and the vote being handled by the people,
| not representatives or a committee.
|
| The Federal Reserve is a democratic institution created
| by Congress and operates at the whim of congress. The
| head is appointed by congress. No different than the head
| of the EPA really.
|
| > It is revolutionarily democratic.
|
| It's the opposite of democratic. It's owned by a handful
| of unaccountable wealthy individuals who move the markets
| around at whim to collect as much USD from players in a
| global casino as possible.
|
| The Federal Reserve is democratic, you vote for
| leadership and they enact policies on your behalf.
|
| You're completely twisted up. This is largely tinfoil hat
| economics and conspiracy theories.
| DennisP wrote:
| On Ethereum, the majority of transaction fees are burned.
| In effect, they are distributed to ETH holders in the
| same way that stock buybacks distribute corporate
| revenues.
| caf wrote:
| This all sounds intuitively correct, and it seems that
| similar arguments can be made about gold bullion, right?
| It costs some amount of money every year to mine, refine,
| transport and store it, and none of that is accruing to
| the actual holders of bullion. (One difference being that
| there is some residual value of the gold for industrial
| and jewellery uses, but that's hardly what's keeping the
| bullion price where it is).
| RustyConsul wrote:
| Also, not quite correct.
|
| Bitcoin isn't figuratively a store of value, it actually
| is. The amount of bitcoin on DeFi, backing collateral for
| flash loans and Stablecoin minting is astounding.
|
| >When you own a share of Square (or Visa, or PayPal) each
| time a transaction takes place on their network, a
| portion of that transaction (revenue minus costs) accrues
| to the company - and by extension increases the intrinsic
| value of your share.
|
| All the V3 crypto protocols have exactly as you describe
| above. However, instead of the money going into the
| coffers of the company, it goes into a 'Development fund'
| That will award the crypto to people who have applied and
| been voted on by the community to launch a
| project/technology in the protocol. [1]
|
| https://fintechs.fi/2021/10/29/as-parachain-auctions-
| launch-...
| wyager wrote:
| The positive externalities from sound money and the
| concomitant demonetization of other assets (like real
| estate, oil, etc.) are _massive_ , especially in the long
| term.
| trophycase wrote:
| Humanity is just a negative sum game in that we take in
| real resources and just move those resources around and
| then die, all while increasing entropy of the universe.
| samtheprogram wrote:
| That would be true if the human population didn't
| consistently increase over time; but it has.
| swader999 wrote:
| You could make the same claim about any kind of money
| though. Whose to say the USD or GOLD or CAD or tree bark is
| real money? A productive asset is an entirely different
| thing. It's not easy to convert an asset for instance or
| walk across a border with it.
|
| People make the fundamental mistake thinking these things
| are investments, they aren't, it's just currency or forex
| speculation that we are doing here.
| adamc wrote:
| In the case of the USD, the existence of a powerful
| government with a variety of powers (including coercive
| ones). Nothing is guaranteed in life, but it is orders of
| magnitude different from a digital currency offered by
| private individuals.
| swader999 wrote:
| Sure and I agree the USD at the moment has an incredible
| backing. Also it being the reserve currency and base for
| most other currencies and commodities is no small thing.
|
| You could argue that BTC is backed by one of the most
| powerful networks of computing power on the planet. I
| don't think that's better than what the USD has, but it
| isn't 'Nothing'. The fact it can't be debased as easily
| as fiat currencies is not a tangible thing but it does
| compel interest in it.
| arcticbull wrote:
| Its network doesn't create value, it extracts value. $60M
| per day, $21B per year.
|
| > The fact it can't be debased as easily as fiat
| currencies is not a tangible thing but it does compel
| interest in it.
|
| That is not a benefit to a currency, quite the opposite.
| A deflationary currency would likely lead to a
| deflationary spiral, savaging the job market [1]
|
| It also leads to a monetary system that cannot adjust to
| a changing population or to transient issues such as
| COVID. If BTC were the currency of record in 2020, the
| economy would likely have been utterly devastated.
|
| [1] https://www.investopedia.com/terms/d/deflationary-
| spiral.asp
| anonporridge wrote:
| Yes, the USD is backed by the most absurd proof of
| violence the world has ever seen. No organization of
| human civilization has ever been able to summon as much
| death and despair as the United States.
|
| However, most of the ability of the United States to
| execute such power is centralized in Washington D.C. and
| New England. Centralization brings immense efficiency,
| but also vulnerability. Those geographic regions are a
| potential target that takes a lot of energy to defend.
| Why do you think the 9/11 terrorists chose New York and
| D.C.?
|
| Meanwhile, China just fully outlawed cryptocurrency and
| mining, and it was a minor hiccup in the network.
| Bitcoin's hash rate as already recovered. The price has
| doubled. It's stronger than it's ever been.
|
| That's what makes bitcoin such a potentially powerful
| store of value. It's security mechanism is incredibly
| anti-fragile. There's no throat anyone can choke. It's
| also globally available and permissionless, so it accepts
| everyone and anyone without judgement. These traits are
| powerful, in a different way than the power that backs
| the USD.
|
| That's why bitcoin matters.
| jafo wrote:
| > They money you put in there is used to acquire assets
| that are used to produce goods that people will pay to
| consume
|
| Is a decentralized, public ledger not a good people will
| pay (via cryptocurrency) to consume?
| bduerst wrote:
| For the vast majority of use cases, the answer is no,
| though I'm certain someone will dig up an outlier use
| case or vaporware implementation of blockchain though.
| TomSwirly wrote:
| For what specific purpose?
| brightball wrote:
| I always love looking at "market cap" for these things. As if
| every coin there could actually be sold for the price listed
| making it worth hypothetical billions.
|
| Even a small cash out will cut the value to pieces.
| swader999 wrote:
| That's the same with many markets though. Market cap is a
| pretty silly metric to use for almost any market.
| mminer237 wrote:
| For stocks though the market cap is judged against
| earnings typically. The price can never get too low or
| the shareholders can just force a dividend to make the
| money directly from the underlying equity.
| bduerst wrote:
| Market cap for publicly traded corporations is still a
| good measure of value since there are laws, regulations,
| public disclosures, etc. ensuring they're equally
| measured to a degree.
|
| If I paid $50000 for a cowry shell cone and said the
| market cap of cowry shells is more than MasterCard then
| there's a few problems...
| dragontamer wrote:
| The stock market won't collapse in the same way because
| stocks have earnings and dividends (which is what the
| value is largely based upon).
|
| Sure: securities can go up, or down, in price almost
| arbitrarily. But they largely can't go below zero (aka:
| bankruptcy law protects against that), and they can't
| really go below the expected profits of the company
| (because shareholders are entitled to those profits.
| Worst-comes-to-worst, the shareholders can demand
| dividends and cash out through those means)
|
| A lot of companies are 20x or 30x, or more of their
| expected profits (representing maybe 20 years of profits
| is roughly the fair price for a typical company's stock
| price). There are exceptions, especially in growth stage
| companies (where "profits" is now "expected profits" of
| the far future: the shareholders believe the company is
| onto a good idea and are willing to pay more on the hopes
| that the company becomes very large in the future).
| habitue wrote:
| It's a useful metric in one particular case, which is if
| you're looking to buy out the stock
| [deleted]
| swader999 wrote:
| It depends on the stock and what each individual holder
| is prepared to sell for. So it's exactly the same. In a
| corporate buyout the individual sellers typically agree
| on a sale price, but that's a contract on top of the
| market. Without that in play you'd be subject to the same
| unknowns and market cap wouldn't guarantee any buyout
| price. Hostile takeover is one example.
| vineyardmike wrote:
| I want to preface this by saying I don't own crypto and I
| think its often full of scams (eg. squid coin). But it has
| some real potential and isn't always as bad as it seems.
|
| Tether is a real risk, I agree.
|
| > Everything real has been exfiltrated through electricity
| bills, taxes and early adopters selling, the entire crypto
| economy is a hollow shell, leveraged on retail deposits.
|
| Yeah, but that's not untrue for banks. Conceptually, a bank's
| job is to store money for depositors. That has a real cost,
| so theoretically you should have to _pay_ for banking
| service. We know that banks make that money back from lending
| the money with interest (profiting off interest). This
| lending behavior is theoretically possible for individuals to
| do while skipping banks, but it is not practical at scale.
| So, basically depositors "pay" with opportunity cost - and
| since the world fiat currencies have inflation, this is
| essentially paying the devalued difference of money.
|
| Crypto is similar... it costs real money to maintain the
| deposits - aka POW to secure the ledger. Instead of lenders'
| interest paying the cost, it is paid by deflation by
| depositor by more currency being circulated. Not too
| different than fiat-at-banks.
|
| Crypto also is potentially more egalitarian since anyone can
| mine (at a small scale at least) to potentially make some
| small income, and certain complex financial actions can be
| done for "free-ish" in contracts (conditional swaps/lending,
| escrow, multi-sig transactions).
| fnord77 wrote:
| so basically crypto is deflationary?
| deafcalculus wrote:
| You mean what happens when economy does well enough that it
| starts overheating which forces an exit from the liquidity trap
| and turns real interest rates positive? I guess we'll find out
| soon.
| bradly wrote:
| Is Dai similar to Gemini's GUSD stable coin? It too is backed
| by Etherium. I think Gemini is paying 8 or 9% APR for holding.
| Where is that money coming from? Are they loaning out for a
| higher rate than that?
| rabbitonrails wrote:
| If you are referring to Gemini Earn, they take your GUSD (or
| other currency) and take a spread then lend it to Genesis,
| who takes a spread and then lends it to big institutions.
| None of this is insured.
|
| https://support.gemini.com/hc/en-
| us/articles/360056367771-Ar...
| Zamicol wrote:
| Maker Dai is nothing like GUSD.
| https://en.wikipedia.org/wiki/Dai_(cryptocurrency)
|
| >Dai is a stablecoin cryptocurrency which aims to keep its
| value as close to one United States dollar (USD) as possible
| through an automated system of smart contracts on the
| Ethereum blockchain. [...] Dai is created from an
| overcollateralized loan[.]
| swader999 wrote:
| Ampleforth is the most interesting 'stable coin' I've seen.
| trophycase wrote:
| Some of it is likely them promoting the use of their
| stablecoin (paying out of pocket) while a lot of it probably
| comes from lending it out at higher rates. It is VERY easy to
| make more than 8-9% on stablecoins.
| webinvest wrote:
| It's spelled Ethereum.
| santiagobasulto wrote:
| Thank you, it was driving me crazy.
| yreg wrote:
| Don't worry, that's just the way bridley spells it.
| CryptoPunk wrote:
| FYI, this individual has been deliberately misspelling Ethereum
| for 5+ years on Hackernews, as a form of mockery:
|
| https://news.ycombinator.com/item?id=9988438
| Lordarminius wrote:
| He can have fun remaining poor.
| X6S1x6Okd1st wrote:
| I thought dai would continuously be bought and used to
| liquidate positions as the price drops.
|
| I.e. if someone mints 100 dai with 150 worth of ETH and the
| price of ETH drops then anyone can acquire dai and use that dai
| to access the collateral.
|
| Through that mechanism the supply of dai should contract not
| the spot price. The bigger worry is that they allow minting Dai
| from USDC which could freeze their assets
| andred14 wrote:
| You are out of it when has the government actually something
| good for you?
|
| It should be obvious now, with thousands dead from the
| 1nject1ons and no end in sight:
|
| All your leaders want is to hurt and control you.
|
| If used properly, ie. use Monero and other private solutions,
| cryptocurrencies can provide us with freedom but if we allow
| the government to force THEIR crypto verions down our throats
| then freedom as we knew it will truly be over for us.
| trophycase wrote:
| Actually a huge fraction of DAI is backed by USDC and other
| assets.
| Scott_Sanderson wrote:
| Correct, OP seems to be referring to single-collateral DAI
| aka SAI, which is deprecated. The current DAI is backed by a
| basket of assets.
|
| IMO, the basket is too heavily weighted towards centralized
| stablecoins like USDC. I rotated some of my MKR holdings to
| Terra/Luna, which may have a better peg mechanism (although
| it is similar to Titan, which exploded).
| chizhik-pyzhik wrote:
| > Dai is really a derivative of Etherium. Dai is backed by
| Etherium at 150%. So value in Dai is at risk if the price of
| Etherium drops more than 1/3. Etherium dropped by half back in
| May 2021, but recovered. DAI could have crashed at that time if
| it faced a net outflow. It didn't, though.
|
| DAI didn't collapse because the drop in Ethereum value wasn't
| sudden. As the price falls, bots are allowed to liquidate your
| debt and keep the overall collateral ratio healthy.
| agotterer wrote:
| This is why I'm excited about Djed (https://djed.xyz). Input
| Output Global (creator of Cardano) has been researching stable
| coins and drafted a pretty extensive white paper on their
| solution (https://eprint.iacr.org/2021/1069.pdf). The white
| paper also include a mentions for how they will prevent bank
| runs.
| andred14 wrote:
| Djed is garbage Coti, Cardano and friends are all about
| CBDCs, KYC and tracking people.
|
| No thanks.
| fMwhy wrote:
| I read the first two sentences and immediately pondered "so
| how could one profit if they knew which volatile coin the
| bank kept as it's reserve?"
| tick_tock_tick wrote:
| > Input Output Global (creator of Cardano)
|
| I worry there target release date of 2042 seems extremely
| aggressive for them based on past performance and some of
| there research might not be relevant by the time it comes
| out.
| tome wrote:
| 2042? Perhaps 2024?
| JumpCrisscross wrote:
| One of the problems this class of mechanisms runs into, in
| the real world, is that--particularly in times of crisis--
| liquidity and prices are discontinuous.
|
| Djed doesn't seem to be vulnerable to the former. (Reserve
| coin holders transparently give up liquidity for their yield.
| Though, as the paper admits, reserve coin holders _are_
| subject to run mechanics.) It would be to the latter.
|
| Still, fascinating stuff.
| lamontcg wrote:
| Tether can survive a net outflow because Tethers aren't
| redeemable in that way. If you show up with 1M USDT, they won't
| give you $1M USD.
|
| It'll have to collapse on exchanges with more sellers than
| buyers, and to determine how that happens you need to actually
| understand what specific mechanism underlies how the peg is
| maintained.
|
| I suspect Tether is all crypto-backed debt issuance which is
| denominated in real $USD which gives the counterparty incentive
| to maintain the peg on exchanges.
|
| It'll likely fall apart when crypto falls apart and exchanges
| have already failed and those counterparties have already gone
| broke. Tether imploding will probably come after crypto is in
| the middle of a collapse and be more of a symptom and an
| accelerant. I doubt that Tether detonating will be the first
| sign of trouble.
| paulgb wrote:
| > Tether can survive a net outflow because Tethers aren't
| redeemable in that way
|
| I think it's worth distinguishing here between Tether _the
| company_ and Tether _the coin_. Tether the company isn 't
| automatically destroyed by a net outflow for the reasons you
| mention, but if they are indeed not fully backed, a net
| outflow could certainly break the peg and kill the coin as we
| know it.
| BoiledCabbage wrote:
| Tether will collapse the same way that Squid Game Coin
| collapsed - extremely quickly.
|
| Assuming a power distribution of coins across accounts, it's
| likely that 99% of tether accounts don't meet the 100,000
| $USDT threshold to cash out. If you have a coin, where 99% of
| people/accounts aren't allowed to cash out that reeks of
| scam.
|
| You can come up with tons of smoke to disguise it, and the
| whole "well you have to sell on another exchange, but prices
| there will be propped up due to 'arbitrage'" disguises and
| delays things nicely. But fundamentally it is propped up
| because people can't get out directly. There is no fair price
| discovery right now on Tether w.r.t. USD.
| Tenoke wrote:
| I've cashed out way less USDT, just not through Tether
| themselves. Comparing it to Squid Game which you can't even
| sell to others is ridiculous.
| BoiledCabbage wrote:
| While I assume I know what you did, rather than go with
| that, describe how you cashed out and I'll explain how I
| believe that supports why it's ultimately a ponzi scheme.
| lamontcg wrote:
| I think its very clear by now that if it were that simple
| it would have already happened.
|
| And yes, the fact you can't cash out directly shows that it
| is a scam, yet counterparties are willing to continue to do
| business with them. That again suggests that the mechanism
| isn't that simplistic.
|
| And I don't doubt that Tether will collapse very quickly,
| but I don't think Tether is the det cord that sets off the
| collapse. Tether is the ricketty-ass foundation that causes
| the entire building to slide over and take out multiple
| downtown city blocks of collateral damage. The det cord is
| going to simply be a bubble followed by a panic collapse in
| the price. The blasting charges that then go off will be a
| bunch of major exchanges and counterparties to Tether going
| under. Then Tether implodes as a mechanism for the
| contagion to spread and wipe out pretty much everyone else.
| RustyConsul wrote:
| The thing that is working slightly in the background to ensure
| net outflows don't happen is during time of downward
| volatility, stablecoins is what the prudent crypto investor is
| transitioning into and stores his wealth until they are ready
| to buy again.
| dragontamer wrote:
| > The real question is what happens in the next recession.
|
| Well, there was a recession just last year and the stock market
| / BTC market went crazy.
|
| The real question is what happens in the next market downturn
| (specifically the cryptocoin market downturn, since these
| "stablecoins" look like they're "stable" only because of
| assumptions underlying the cryptocoin markets). The cryptocoin
| markets don't necessarily match up with the general economy.
| nwiswell wrote:
| > Well, there was a recession just last year and the stock
| market / BTC market went crazy.
|
| Ultimately this is because central banks are in the driver's
| seat for asset prices these days. It's been trending that way
| since the Greenspan Put in the 90's. The economic
| fundamentals matter, but not as much as the monetary policy
| backdrop; after all, if there's more cash chasing the same
| number of shares, it can't help but drive up stock prices.
| Similarly, low borrowing rates reduce the equity risk
| premium, drive up growth valuations, etc.
|
| So really, the real test for crypto is when the monetary
| policy regime shifts. But to be honest with you, I don't see
| that happening. Maybe inflation finally forces the issue --
| but then there's the fact that inflation will drive flight to
| alternative assets anyway.
| webinvest wrote:
| It's spelled Ethereum...
| andred14 wrote:
| The government needs to go away they are doing nothing positive
| for the people.
|
| There are no laws written for cryptocurrencies and it should stay
| that way. What gives them the right to just make up laws about
| stuff when they feel like it?
|
| Cryptocurrencies are hurting nobody but government and their
| "regulations" are definitely hurting people.
|
| Therefore, by common law, the government cannot "regulate"
| anything that is not doing any harm just because they feel like
| it.
|
| Government should to go back to fixing roads and infrastructure.
| That is all we need from them the rest is tyranny.
| nostrademons wrote:
| Interesting to read this with an eye on the authors' mindset.
| Their understanding of stablecoins seems largely centered on
| Tether (and to a lesser extent, BUSD/USDC). A lot of their
| understanding is incorrect when applied to algorithmic
| stablecoins like Dai, eg. there is no central issuing authority;
| Dai is minted in exchange for Ethereum (and other
| cryptocurrencies), not fiat currencies; the effect of a run on
| Dai is unlikely to spill over into the mainstream financial
| system; a "custodial wallet" in DeFi is not a company but just an
| Ethereum address, i.e. a hash of a public/private keypair.
|
| Overall I get the sense that the government is still
| people/organization centric and cannot wrap its head around a
| future where reality is determined by computer code and people
| are bit players in the script.
| williamtrask wrote:
| Perhaps I'm oversimplifying your comment, but it seems like a
| _very_ good thing that the government continues to be people
| /organization centric and doesn't embrace a future where
| "reality is determined by computer code and people are a bit
| players". We should hope our democratic institutions continue
| to operate this way.
| nostrademons wrote:
| I'm value-neutral in this comment thread, I'm just describing
| a.) how things are and b.) how the authors of this report are
| making assumptions about how things are. I can see plusses
| and minuses for both people-centric and code-centric
| approaches.
|
| I get that it's pretty natural that _people_ would consider
| it a bad thing for _people_ to hand over power to computer
| code. It makes perfect sense if you consider yourself not as
| a person but as a collection of electrical impulses floating
| around in your brain, though. Computers are the same thing,
| they just transmit those electrical impulses millions of
| times faster.
| panic wrote:
| Why are you so committed to erasing the difference between
| humans and computers in order to place humans below
| computers?
| nostrademons wrote:
| Realistically I don't have the power to put humans either
| above or below computers. That'll depend upon the
| independent choices of billions of humans and hundreds of
| billions of microprocessors.
|
| I've found that having an accurate model of the world -
| one that can generate likely predictions - is very
| important for profit now and potentially for survival in
| the near future. Knowing that people are frequently blind
| to changes in the world that do not place them at the
| center of the universe, it's worth correcting for that
| bias in myself and envisioning a world where humans are
| _not_ necessarily on top. What would that look like, and
| what 's my best chance for survival in such a world,
| given that I am human?
| panic wrote:
| Sure, but your comment doesn't reflect an accurate model
| of the world -- brains and computers are not the same
| kind of thing, and humans are more than just a brain. I
| know there are powerful people trying to convince us that
| your model is accurate, though, with the goal of getting
| us to allow their computers more control over our lives.
| I'm worried that people are buying into this view, not
| because they believe it's an accurate model of the world,
| but because they think it's inevitable that these
| powerful people and their computers actually will end up
| in control, so they'd better prepare for that future.
| swader999 wrote:
| Everything is already under control of three companies
| world wide. Vanguard, Blackrock and Berkshire Hathaway
| own everything worth owning. Who owns them?
| nightpool wrote:
| Computers are a tool built to improve the lives of people.
| It does not make sense to consider them an end in-and-of-
| themselves.
| nostrademons wrote:
| So is capitalism, and yet capitalism has seemingly taken
| over human behavior in a way that many people find is not
| an improvement, and yet are powerless to stop.
|
| Complex systems often exhibit complex emergent behavior.
| Humans are part of that system. Humans are not the _only_
| part of that system, and it makes sense that agents
| interacting at speeds millions of times greater than us
| might eventually come to dominate the system.
| dragonwriter wrote:
| > capitalism has seemingly taken over human behavior in a
| way that many people find is not an improvement, and yet
| are powerless to stop.
|
| Lots of people banded together to rollback the degree to
| which capitalism dominanted life in the developed world,
| and were pretty successful at it over the last century.
| MonkeyClub wrote:
| > a future where reality is determined by computer code and
| people are bit players in the script.
|
| When you put it like that, it does sound a bit creepy.
| colonelxc wrote:
| From the footnotes:
|
| """Stablecoins that are purportedly convertible for an
| underlying fiat currency are distinct from a smaller subset of
| stablecoin arrangements that use other means to attempt to
| stabilize the price of the instrument (sometimes referred to as
| "synthetic" or "algorithmic" stablecoins) or are convertible
| for other assets. Because of their more widespread adoption,
| this discussion focuses on stablecoins that are convertible for
| fiat currency."""
| nostrademons wrote:
| Ah, interesting. Dai is mentioned several times within the
| body of the report, though, so it's implied that it's covered
| within the scope of the report.
|
| I'm sure that the distinction will be lost on whatever press
| cycle or legislative output this report generates.
| ajross wrote:
| > Overall I get the sense that the government is still
| people/organization centric and cannot wrap its head around a
| future where reality is determined by computer code and people
| are bit players in the script.
|
| Conversely, people in government tend to view crypto folks as
| senselessly computer-centric and unable to view macroeconomics
| as the result of _human interaction_.
|
| There is no such thing as value without exchange. That's a
| definitional thing. Coins themselves are just numbers.
| eightysixfour wrote:
| I think they approached it from two directions:
|
| One is that they broke down stablecoins into the following
| activities:
|
| * Governance
|
| * Management of Reserve Assets
|
| * Custody of Reserve Assets
|
| * Settlement
|
| * Distribution
|
| Just because one, more, or all of those functions are managed
| by smart contracts does not mean that the others cannot be
| regulated. Regulation may be the requirement to have regular
| contract audits for example and, in the case of Dai, the Maker
| Foundation would be responsible for adhering to those
| regulations.
|
| Second, I don't think the writers of this paper perceive nearly
| as large of a risk from algorithmic stablecoins as they do
| institutions which claim to maintain asset backing in the
| normal financial system. The former have the transparency of
| the chain as a backing, and that transparency makes the
| currency peg safer. The latter have no transparency and
| regularly seek to obscure, which makes them extremely dangerous
| as they grow in scope.
|
| DAI has a market cap of ~$6.5b and the transactions happen on
| chain. USDT has a market cap of ~$70.3b and has 0 transparency.
| It is clear where regulation should be focused.
| vineyardmike wrote:
| > there is no central issuing authority; Dai is minted in
| exchange for Ethereum (and other cryptocurrencies), not fiat
| currencies
|
| Its not fiat-stable, which is probably their focus. fiat-stable
| coins are basically crypto bank notes:
|
| https://en.wikipedia.org/wiki/Banknote
|
| Also,
|
| > a future where reality is determined by computer code and
| people are but players in the script.
|
| Corporations are "things" in a legal sense - but they're still
| managed by people, created by people and owned by people. DEFI
| contracts and orgs are still made by people, and sometimes also
| managed by people. You can probably be held liable and tied to
| your misbehaving contract.
| DennisP wrote:
| The 9th Circuit ruled that source code is protected under the
| First Amendment in the Bernstein case, which legalized the
| export of cryptography. If you just publish the contract and
| don't have any ongoing administration, I would think that
| gives you a pretty strong legal defense.
| [deleted]
| paxys wrote:
| It is the government's job to translate abstract concepts to be
| people centric, simply because the world itself is people
| centric. Digital bits have no power unless they is a shared
| recognition of that power, same as a written contract, a book
| of laws, an election or anything else.
| erikerikson wrote:
| > a future where reality is determined by computer code and
| people are bit players in the script.
|
| As opposed to a reality determined by physics? Perhaps you're
| referencing AI overlords? I suggest that you may not understand
| the purpose of states. Even algorithms are the expressions of
| people.
|
| Perhaps you can explain what you meant in a way that I'll more
| easily understand?
| wegwerfbenutzer wrote:
| DAI is not considered an algorithmic stablecoin, but an asset
| backed stablecoin. Algorithmic stablecoins like FEI do not seem
| to work as well as asset backed stablecoins.
| xvector wrote:
| Wait, why is DAI not algorithmic?
| RC_ITR wrote:
| I mean what's the point of that other than to serve the very
| small number of people who own the resources to edit 'the
| computer code'?
|
| The internet and computers, despite being very complicated
| tools, are still just made by humans to serve humans.
|
| I suggest you ask yourself which humans want the outcome you
| described and why.
| toomuchtodo wrote:
| That computer code runs somewhere and every IP address leads to
| a person eventually.
| [deleted]
| vmception wrote:
| The lifecycle of an autonomous program (colloquially called
| smart contract) is that it is deployed by an address of a
| human being or that human being's server, and then the
| address' first transaction to the autonomous program is to
| delete the address' administrative capabilities of that
| program. Autonomous programs live on every validating node of
| that blockchain, and those validating nodes have no knowledge
| of the behavior of those programs. The deployment feature
| publishes the code on all validating nodes, no different than
| any other transaction. All future behavior of the autonomous
| program comes from individual users who do not control it.
|
| So for what grandparent poster was referring to, stablecoins
| collateralized by digital assets, all the collateral is
| provided by users and all the stablecoins issued were caused
| by users providing collateral. Those users clearly do not run
| the autonomous program, no different than a depositor at a
| bank is not responsible for the bank when they ask for a loan
| from the bank. There is nobody to sanction, and there is no
| way to disable the autonomous program that accepts collateral
| and issues collateralized stablecoin loans.
|
| Also, within EVMs (a type of development platform, growing
| category of blockchains), the users do not have a record of
| an IP address (although the node they connect to can record
| it, to mitigate that the user can run a relaying node from
| their personal computer. relaying nodes forward to validating
| nodes. no nodes in an EVM have knowledge of other nodes IP
| address and no nodes are even aware of which node saw a
| transaction first). And regarding the tracing of their
| onchain address, a user can provide collateral from a virgin
| address funded by other autonomous programs like Tornado
| which sufficiently mix funds. The programs and the regulators
| are not capable of factoring in our opinion about that.
| nostrademons wrote:
| Except it doesn't. On Ethereum and other blockchains, that
| computer code runs _everywhere_ , and every IP address is a
| gossip protocol that may have originated an undetermined
| number of hops backwards.
| alex504 wrote:
| Would the act of regulating Tether and other stablecoins in and
| of itself crash the market? If the government shut Tether down,
| wouldn't that cause the run they are afraid of?
|
| The money is already missing, it is only a question of when the
| market realizes it.
| clintonb wrote:
| The best time to stop the fraudulent scheme was yesterday. The
| next best time is now.
|
| It's better the Tether market crash now than after it's grown
| even more. This will suck for the folks that lose money, but it
| was going to hurt at some point.
| lvl100 wrote:
| Gary Gensler should be the LAST person to regulate crypto.
| LatteLazy wrote:
| The only real point of stable coins seems to be tax/sanctions
| evasion. Given that, no respectable institution (tier 1 banks
| etc) will run one. Given that, all stable coins are only stable
| till the disreputable nature of the operator catches up with
| them...
| Lordarminius wrote:
| > The only real point of stable coins seems to be tax/sanctions
| evasion.
|
| Do you have any hands on experience with crypto ?
| dbmikus wrote:
| Stablecoins are useful if you want to participate in DeFi with
| stable currencies.
| sschueller wrote:
| If the US would just provide its own stable coin it would kill
| all other USD stable coins and there would be no more issues.
|
| Who would want tether if you can get government backed USD stable
| coins?
| paulgb wrote:
| > Who would want tether if you can get government backed USD
| stable coins?
|
| People who wanted to hold USD outside of the US's jurisdiction,
| for one. I suspect this is one reason that apparently "more
| legitimate" stablecoins haven't caused huge Tether outflows.
| trophycase wrote:
| Nobody. The alternative to government backed USD stable coins
| isn't tether. It's algorithmic stablecoins (FEI, FRAX, etc.)
| and collateralized stablecoins (DAI, MIM, LUSD, DOLA, etc.).
| dexwiz wrote:
| All these coins are proven to be worthless. When speculation is
| making everyone money, the money isn't worth much.
|
| Edit: Love the immediate fear downvote. No one wants to hear
| their gold is really just shiny dirt.
| biztos wrote:
| I just went through the process of buying something expensive
| in a "trustless" system in an IRL country. It was pretty
| painful and very expensive -- I paid $300 just to get a
| guaranteed check cut!
|
| Of course this is a trivial problem to solve with smart
| contracts, if you can have things like real-life identity and
| real-life money mapped to them.
|
| While I don't think any of the crypto stuff out there today
| solves any of these problems realistically, at least Ethereum
| sure looks like an experiment in that direction.
|
| That a lot of people are getting rich speculating on crypto
| absolutely triggers my FOMO, and sometimes my disdain (cf.
| certain NFT sales) -- but I definitely wouldn't call it
| worthless.
|
| Some day we may have free, secure, trustless escrow via smart
| contracts, and a bunch of other neat stuff. I think that's
| unlikely to be on any of the current networks, but I also think
| we'll get it decades earlier because of them.
| throwawaygh wrote:
| _> Of course this is a trivial problem to solve with smart
| contracts, if you can have things like real-life identity and
| real-life money mapped to them._
|
| This reminds me of talking to a salesperson at $BIG_CO about
| their "blockchain platform cloud" offering for "ending
| inventory tracking system inaccuracy problems once and for
| all".
|
| I could never figure out how cryptography was supposed to
| help with the "is the physical thing actually where it's
| supposed to be in the physical warehouse" problem. That
| seemed like the non-trivial part. Everything else you could
| just do with a flat-file CSV or whatever.
|
| The free drinks were nice.
| jollybean wrote:
| "Of course this is a trivial problem to solve with smart
| contracts, "
|
| No, it doesn't. The 'contract' was never the issue really. We
| need a judicicial and regulatory system in which the contract
| is valid, the means to redress issues, undo transactions.
|
| Now, $300 is probably too much to move money and speaks to
| the incumbency of financial actors ... but a good chunk of
| that cost is actually the reality of the fact that it takes a
| lot of very smart, very conscientious and super 'small-c'
| conservative running financial infrastructure.
|
| I think regular fintech startups will beat down that $300
| cost faster than crypto will.
| sharperguy wrote:
| I think it would be helpful here to compare the theory of a
| ponzi scheme to that of bitcoin.
|
| In the beginning, buyers buy into a ponzi scheme because of a
| story that the creators are telling about their scheme. As time
| goes on, people buy in because the early investors are making a
| ton of money, as the value of the asset begins to skyrocket.
| Later on, people buy in because of previous hype, even though
| returns are actually beginning to level off, people don't
| notice. In the end, returns start to go negative, and the asset
| plummets, because nobody else has any reason to buy the asset
| anymore.
|
| With bitcoin the theory goes: In the beginning, buyers buy into
| bitcoin because of the vision and idea of a decentralized
| currency made by an anonymous hacker on the internet. As time
| goes on, people buy in because the early investors are making a
| ton of money, as the value of the asset begins to skyrocket.
| Later on, people buy in because of previous hype, even though
| returns are actually beginning to level off. In the end,
| however, due to the properties of the currency, and its
| penetration throughout the population, people continue to buy
| even though there is little profit to be made anymore. It has
| been shown to be a better long term store of value than fiat
| currency, but with similar liquidity, unlike other assets with
| higher returns such as bonds and real estate. It can be easily
| transferred around the globe and is highly divisible, making it
| useful for payments large and small, avoiding complex VISA
| networks and regulatory red tape. Due to its enforced scarcity,
| it isn't possible to create any more of it, and so it maintains
| its high price rather than simply being overproduced back down
| to a lower valuation.
| swader999 wrote:
| A ponsi scheme is fundamentally different than a market.
|
| With a market one day you trade five USD for one BTC. The
| next the best offer your able to get from anyone might be two
| USD for one BTC. That's just the nature of any market for
| anything. Value for anything depends on who comes to the
| market and their bias.
|
| A ponsi scheme is nefarious and more of a shell game. When
| the asset is gone, it's really gone and not coming back.
| There eventually aren't units to redeem because the
| originator took the aasset.
|
| If BTC or crypto were a ponsi the analogy would be satoshi
| hacking your wallet and draining your funds.
|
| In traditional crypto there aren't returns, there's just
| potential for it's perceived value relative to a base like
| the USD to change.
| neaanopri wrote:
| Nice balanced take, though you're leaving out the incredibly
| harmful environmental impact
| dragontamer wrote:
| The downvotes are because "worthless" is hyperbolic and
| unhelpful. Clearly, the coins have value because someone out
| there feels like paying money for them.
|
| More importantly: we _HAVE_ to understand the market dynamics
| here. What's going on is very human and very important to
| realize.
|
| Matt Levine from Bloomberg has a very simple explanation: the
| cryptocoin world has discovered "senior debt vs junior debt",
| and are using this concept to create stablecoins.
|
| ------------------
|
| The issue is, the rest of the world _REMEMBERS_ 2008, and what
| happened the last time we relied upon the senior/junior debt
| split. The concept is simple:
|
| Junior debt is high-risk. Senior debt is low-risk. Through the
| use of structuring your economy around this concept, your
| junior debt "supports" senior debt.
|
| A stable-coin, is simply the senior-debt on some other
| cryptocoin.
|
| -------
|
| Lets take BTC for example. Lets say I want to "create" a
| stablecoin out of BTC, despite its widely varying valuation.
| Lets say I set up a senior set of notes: it stays at $1 as long
| as BTC stays above $10,000.
|
| But what about all the "risky part" ? Well, someone out there
| in the world wants to bet it all on the risky part. When BTC
| rises from $10,000 to $50,000, they want to make $40,000 with
| $0 investment. Because the "senior" guy already took the risks
| for $10,000 and below, I can now offer the "rest of the gains"
| to the junior guy, who can play with all the values of BTC
| above $10,000 (except, without having to pay any money in the
| first place).
|
| When BTC goes up to $20,000, the junior guy spent $0 and made
| $10,000. Senior guy still has $10,000.
|
| When BTC goes up to $50,000, junior guy now has $40,000 and
| senior guy has $10,000.
|
| This sounds hypothetical, but its in fact very similar to how
| the stablecoin TITAN / IRON was structured, with Titan as the
| "senior" stablecoin and Iron as the junior.
|
| Now just wrap it all up in a smart contract, maybe tie the
| concept to Ethereum (or whatever other cryptocoin suits your
| fancy), and you too can reinvent senior/junior debt structures
| and pretend you're a genius.
|
| ------
|
| You see? Senior is "just" the stablecoin guy. Junior is the WSB
| idiot who might lose all of his money.
|
| Or in other terms: your CDO of CDOs is truly and 100% secure.
| You may have a pile of shit, but you can extract stable values
| out of it.
|
| Or at least, so went the theory of 2008 housing crisis, CDOs,
| and CDSes and all that. We know where that went however.
|
| It hasn't even been 13 years and everyone's forgotten about the
| underlying assumptions that broke the market in the 00s.
| mrandish wrote:
| Your post makes a lot of sense to me from a fundamental econ
| perspective, however, I _know_ I don 't know enough about the
| topic of crypto-currencies in general to trust my opinion
| much. I'd love to see the strongest possible counter-argument
| to yours to help me understand why so many people seem to
| disagree.
| [deleted]
| dragontamer wrote:
| All crytocoins have their own programming and therefore
| their own general behaviors that fail to generalize.
|
| My post was largely based on the TITANIUM / IRON saga of
| the cryptocoin world, just a few months ago ("Titan" for
| short). I'd suggest you read up on the mechanics of how /
| why that crashed.
| wpietri wrote:
| > Clearly, the coins have value because someone out there
| feels like paying money for them.
|
| That's not a great definition of worth. Is the correct value
| for a Ponzi scheme really determined by the most recent
| dollar they took in? I'd say not.
| wizzwizz4 wrote:
| It's the main definition of worth that is used when
| discussing the value of commodities in economics on the
| internet.
| wpietri wrote:
| I certainly agree that worth and current market price are
| correlated. But I disagree that they're definitionally
| the same.
|
| Indeed, pretending they're equivalent is a great way to
| lose a lot of money. I used to work for financial traders
| and I got some very fat bonus checks paid for by people
| who confused the two during high-volatility events while
| our traders stayed more flexible.
| wizzwizz4 wrote:
| I also agree that it's a bad definition.
|
| Perhaps "worth is what people will pay for something for
| the sake of having it, rather than out of expectation
| that they can re-sell it for more"?
| null_object wrote:
| > When BTC goes up to $20,000, the junior guy spent $0 and
| made $10,000. Senior guy still has $10,000. When BTC goes up
| to $50,000, junior guy now has $40,000 and senior guy has
| $10,000.
|
| You used a lot of words to describe a Ponzi scheme.
| dragontamer wrote:
| I'm describing a CDO scheme. Its important to remember the
| difference. Ponzi is a very, very different structure.
|
| CDOs do well as long as the underlyings don't crash beyond
| a certain value. The "junior" guys have lots of risk (and
| they _WANT_ the risk and enjoy it). The "senior guys" think
| they're safe.
|
| Indeed: senior/junior is roughly how we split up fiat
| dollars: banks do this with our money all the time (under
| tight regulations of course, to ensure that the banks are
| following the rules). Senior/junior can work, but in
| practice... someone out there will want to cheat the
| system. At that point, it all comes crashing down.
|
| Regulating the heck out of banks to ensure that no one
| cheats is a big part of the solution.
| hestefisk wrote:
| Very interesting. Can you recommend any good books on
| this topic to learn more?
| dragontamer wrote:
| For 2008, I think one of the most approachable references
| is the PBS "Inside the Meltdown":
| https://www.pbs.org/wgbh/pages/frontline/meltdown/
|
| * https://www.pbs.org/wgbh/frontline/film/meltdown/
|
| The 2012 lookback has a bit more depth, since it had more
| time to do interviews and stuff:
| https://www.pbs.org/wgbh/frontline/film/money-power-wall-
| str...
|
| There's of course, "The Big Short" if you want a stupid
| 2-hour movie. But that movie glosses over so many details
| and is straight up hyperbole at many points... so its not
| "realistic" but maybe a better thing to watch if you
| really don't want to put in much effort?
|
| -------
|
| I guess my post was based off of the Bloomberg blogpost
| "Looking for Tether's Money" by Matt Levine. So read that
| for my original inspiration, though you may need a
| Bloomberg subscription to be able to read it.
| JumpCrisscross wrote:
| > _CDOs do well as long as the underlyings don 't crash
| beyond a certain value_
|
| Which, to be clear, didn't happen in 2008. People assumed
| that super safe meant super liquid. The AAA tranches of
| every CDO I've looked at performed as promised, in terms
| of not losing money. Even when the underlying securities
| performed abysmally. They just didn't trade in a crisis
| like the Treasuries their buyers were using them to
| replace.
|
| (Side note: a lot of algorithmic stablecoins similarly
| assume perfect liquidity and continuous pricing.)
| seph-reed wrote:
| Even less than people want to hear that gold is just shiny
| dirt, people don't want to hear that almost all perceptions of
| value are inherently subjective and meaningless.
|
| That social credit, and money, and everything we hold dear and
| true is just narrative we've crafted around ourselves to cope
| with the uncaring void that is the cosmos.
|
| So -- my guess -- people are probably going to keep thinking
| that things are valuable so long as everyone else around them
| does. And technically everything can be reduced to nothing more
| than a set worthless human brain farts.
|
| Edit: except for your values of course. Whoever you are, your
| values are certainly meaningful, and your life is a story that
| _really_ matters.
| playpause wrote:
| Where do you get that people "don't want to hear" this? I
| find it's a tedious revelation that people seem to love
| having. Yes, things are only valuable if people believe
| they're valuable. Deep. So what though?
| satellite2 wrote:
| You have to be careful with your choice of words. Especially on
| an engineering / science forum. The word "proven" implies a
| definitive certainty backed by solid theoretical foundation and
| a massive body of evidence. Very few things are proven in
| social science and economics. And most of them are simply
| definition.
|
| You are free to express your opinion though, but please mark it
| as such and make at least a small effort to explain how you
| reached it as otherwise your post is not adding value to the
| conversation.
| mmaunder wrote:
| This public official laying down rules "you are free to...
| but please" tone has become commonplace on HN in the past few
| years. Anyone know the origin? Perhaps a shift in public
| enthusiasm for controlling speech? Did it start at
| universities? It seemed to just show up one day around 2018.
| It's incredibly distracting.
| alonsonic wrote:
| The audience of hackernews has grown and old users are
| trying to maintain the culture of the site. The value of
| this site comes from its community. Let's not turn it into
| reddit. I personally welcome this type of policing.
| nostrademons wrote:
| There's a certain irony in creation dates here:
|
| mmaunder: 2007. satellite2: 11 months ago. dexwiz: 2015.
| alonsonic: 2016. burnished: 8 months ago. nostrademons:
| 2007.
|
| Anyway, I don't think such tone-policing is all that off-
| culture for HN, nor do I mind it all that much. PG
| explicitly said back around 2008 that posts which keep
| the discourse civil and intellectually honest are welcome
| even if they don't directly add content. I just thought
| that there's a certain irony about "old users trying to
| maintain the culture of this site" when the users in
| question are less than a year old and are responding to
| someone who's been here for 14 years.
| TigeriusKirk wrote:
| Some of us change account names as a matter of internet
| hygiene. I think I've had 6 or 7 here over the years, and
| even this old one was dormant for most of its life.
| Anyway, the point is you never know just based on account
| age.
| satellite2 wrote:
| I'm not a public official, but I like my readings to be
| informatives and display a good faith attempt to convey the
| truth. HN is one of the rare place on Internet that manages
| to do both. And I think everyone can contributes when given
| the opportunity to do so, so I think a small remainder can
| be better than an outright downvote / ban.
| burnished wrote:
| Seems like you are confused about why people might respond
| negatively to you (the comment thinking the issue is around
| 'shiny dirt'), and that some one had the time to try and
| explain what might be going on.
|
| I see some one stating outright their respect for your
| freedoms, but it seems to trouble you. Why is that?
| swarnie wrote:
| While absolutely correct you've picked the wrong audience and
| you know it.
| nscalf wrote:
| Amazing how many people are die hard advocates of being closed
| minded. The net market for crypto hits over a trillion dollars,
| and you still say things like this declaring they are proven to
| be worthless. This is posted on a report by the US government
| on a technology that is effectively a digital wrapper to use
| the US dollar easily online. How is there no worth in that?
|
| Out of curiosity, what would it take to change your mind on
| this? Is there not even a single dollar of real value in the
| crypto world?
| mosdl wrote:
| I can already use the us dollar easily online.
| rglullis wrote:
| Now to go Argentina and dare to say the same thing.
|
| Or go sell something with a high risk of fraud and see how
| how much the credit card companies will charge you.
| lowkey wrote:
| Yes, but you likely live in a first-world country with
| generous options for banking. Bitcoin can serve anyone
| anywhere, regardless if they live in a privileged country
| or not. Try using your USD bank to send/receive money as a
| citizen of Iran or Libya or Nigeria. There are over 1
| billion unbanked in the world today. They cannot use the US
| dollar easily online.
| SavantIdiot wrote:
| This is the fallback argument crypto enthusiasts use when
| their primary arguments fail. I'd like to learn more
| about the truth to this claim.
| pcwalton wrote:
| > The net market for crypto hits over a trillion dollars
|
| At its peak, the gross size of Madoff's investment scheme was
| $64.8 billion.
|
| > a digital wrapper to use the US dollar easily online. How
| is there no worth in that?
|
| Because it's harder, and less safe, to use Tether than to
| enter my credit card number on a Web site.
| rglullis wrote:
| Then don't use Tether. Plenty of more reputable companies
| and projects providing stabletokens with strong (USDC,
| GUSD) or soft (DAI, sUSD) pegs to the dollar.
|
| Also, you are missing the point of view of the merchant and
| the amount of possibilities that open with crypto. E.g, you
| can sell digital goods with zero risk of fraud or
| chargebacks, to anyone in the world, at whatever price
| point. No credit card operator will ever be able to do
| that.
| emerongi wrote:
| I think what would change people's minds is crypto surviving
| an economic downturn.
|
| I'd expect crypto as a whole to survive, but all the useless
| hype-/shitcoins to get wiped out. Same as with the dotcom
| bubble and housing bubble.
| ForHackernews wrote:
| Monero and other privacy coins have some real utility for
| enabling drug sales, tax evasion and ransomware. In terms of
| above-board use cases, I'm deeply skeptical.
| SavantIdiot wrote:
| I'd like to see people actually spending it day to day items,
| rather than hoarding it or spending it on blackmarket/illegal
| goods. There's a claim that people send money home to
| families in other countries, but I don't see how that could
| be trillions? And when pressed, enthusiasts hide behind
| "third world" claims.
|
| No one is buying groceries with it. No one is buying
| commodities with it. People are buying it to get rich. Even
| in El Salvador, it failed immediately because the transaction
| fees were too high and the stipend given to citizens swung in
| value too radically.
|
| I will be convinced when people are buying groceries with it
| and not trying to become crypto mill/billionaires overnight.
| [deleted]
| dang wrote:
| You broke the site guidelines badly -- first with the shallow
| dismissal, and then with the off-topic complaint about
| downvotes and name-calling.
|
| If you'd please review
| https://news.ycombinator.com/newsguidelines.html and stick to
| the rules when posting here, we'd appreciate it.
|
| We detached this subthread from
| https://news.ycombinator.com/item?id=29072552.
|
| (p.s. This is just about comment quality and HN guidelines -
| not any position on the underlying topic)
| Oberbaumbrucke wrote:
| A Pet rock
| silentsea90 wrote:
| There's a canonical toxic response to this = HFSP. I don't like
| that because we're all still learning. I hope you see how the
| money printer is making scarce assets outside of Govt
| manipulation more valuable. The Bitcoin rabbit hole goes deep.
| You're right in that stablecoins might actually be worthless in
| the long run since they're backed by USD which might be
| worthless in due course of time. Zoom out of the day to day
| movement - we're in price discovery stage where nothing makes
| sense in the short term.
| NikolaNovak wrote:
| >>There's a canonical toxic response to this = HFSP.
|
| I don't feel this was your actual response, but I still need
| to address it because I don't understand how anybody ever can
| have that as a remotely legitimate, thought-out response.
|
| How can any financial instrument/currency make _everybody_
| "rich", in any real terms?
|
| If you gave everybody million USD tomorrow, it'd crash so bad
| that we'd be right back where we came from.
|
| Is there anybody that believes that we could all invest fiat
| money into X.coin, and after some period of time, we'd all be
| rich? If so, how? What wonderful value does it produce, what
| mechanism would magically elevate all without disruption?
|
| From where I'm sitting, any currency or investment is a re-
| distribution of wealth/money/value. A person who bought
| X.coin yesterday can only derive/extract value tomorrow if
| somebody _else_ buys it for more. We didn 't
| gain/extract/create value out of thin air by virtua of
| fintech, it's a simple exchange.
|
| So what if everybody DID get some X.coin, so that nobody did
| "HFSP"? What'd happen then?
| silentsea90 wrote:
| I will restrict myself to Bitcoin as I don't believe as
| strongly in the rest though I do own some of those as well.
| Bitcoin is at a market cap of 1T. That's less than major
| tech cos (Apple 2.5T, Google ~2T), gold(10T), total USD
| (~30-40T) etc. If you believe BTC will be used as the
| global store of wealth and currency, buying anytime (until
| the time BTC gets there) will make anybody who buys rich.
|
| Of course, after price discovery is more or less complete,
| we can't all be rich as the value relative to goods and
| services will stagnate, and BTC will become as boring as
| gold.
|
| > From where I'm sitting....if somebody else buys it for
| more.
|
| Sure, and they will if the value of said coin keeps going
| up. Note that you don't need to sell it for USD, you could
| be paying for services in said coin directly. Point being
| that the exchange doesn't need to happen in USD, it can
| happen in any form of value.
| roenxi wrote:
| A central plank of the US dollar (all fiat currencies,
| really) is that if you hold on to them for long enough all
| the wealth you had when you first picked them up gets
| transferred to someone else.
|
| Compared to that baseline holding literally anything else -
| including crypto - has a better theoretical chance of
| preserving your wealth. When measured in terms of US
| dollars, that has the appearance of everyone who owns it
| getting richer.
|
| > How can any financial instrument/currency make everybody
| "rich", in any real terms?
|
| You have resources, someone else has a really good idea for
| how to use them. Financial instruments let the situation
| play out sensibly (you lend them resources, get back
| resources + something) with easy-to-manage legal
| enforcement if something goes wrong.
|
| More complicated financial instruments let that scenario
| play out in more abstract ways. All in theory, in practice
| most people are bad with debts and more complicated
| concepts.
| NikolaNovak wrote:
| >>You have resources, someone else has a really good idea
| for how to use them. Financial instruments let the
| situation play out sensibly (you lend them resources, get
| back resources + something) with easy-to-manage legal
| enforcement if something goes wrong.
|
| I agree with that in general; however, that's not the
| current premise of most cryptocurrencies - I see them
| more like gold in that you buy them and hold on to them;
| not as a capitalist investment into anything specific or
| generic. I may be wrong...
| iskander wrote:
| For newer cryptocurrencies you often buy them and then
| either (1) stake them (earn rewards for contributing to
| network security) or (2) deposit them in a crypto-bank
| like Aave and earn yield from having your money loaned
| out. Increasingly people don't look to cash out to USD
| but rather stay within the crypto ecosystem.
|
| I do think that BTC and its clones engender a certain
| dragon-cache hoarding mentality that aligns with either
| plans to eventually cash out at a higher price or some
| kind of apocalyptic vision where eventually USD is no
| longer used at all.
| jollybean wrote:
| No, crypto does not 'theoretically' hold out better than
| USD or other things.
|
| An asset - no matter what it is - is only going to have
| value in the future depending on how others are going to
| a value it.
|
| This means does it survive war? National collapse? etc..
|
| USD is a currency, not a store of value, it's designed to
| be slightly inflationary. That's policy and public
| information. Don't hold them for 'long term' but it will
| at least have some value.
|
| Gold and Real Estate (to the extent you can control that
| real estate, which depends on rational social
| organization etc.) - will probably hold their value. As
| will some other things.
|
| Crypto would be the last choice among many as a store of
| value, as they could all be wiped out in a second, forget
| the issues of what financial fashions might come into
| place in the future.
|
| Crypto is still 100% experimental, and every dollar
| traded in crypto, is at least today, purely speculative,
| no different than trading Baseball Cards. But without at
| least the Baseball Cards. That's where it is today and
| while something might come along, nothing is quite on the
| horizon just yet.
| nostrademons wrote:
| There's a bunch to unpack here, on both sides.
|
| To start with, I'll say that I agree with the mainstream
| view that cryptocurrency isn't actually _creating_ wealth,
| in the sense of non-financial real goods that improve
| people 's lives. It's _redistributing_ it. Everybody 's
| crypto gain comes at the expense of somebody else's crypto
| loss.
|
| I'll also throw in that folks who say "HFSP" are often the
| losers, because they're the ones who FOMO in because of
| greed and ego at the top of the cycle and then panic-sell
| at the bottom when they actually become poor. The folks who
| are making millions in crypto are the ones who buy at
| cyclical bottoms - 2012, and 2015, and 2019 - and hold on
| to sell at the tops, when everybody else is making fun of
| the folks sitting on the sidelines.
|
| However, they're on to something. Imagine that you're
| inside a group with superior military technology - the
| Mongols in 1200, for example, or an American settler in
| 1840 - and you're looking at the people you are about to
| conquer. Or less bloodily, you're going into software in
| 2002, aware that a computer program will replace the jobs
| of whole industries, and trying to figure out which
| profession to go into. It's much better to be on the inside
| of change than on the outside.
|
| They aren't necessarily wrong, either - they're correctly
| perceiving that the fiat currency system is unsustainable
| and is its own Ponzi scheme, and creating an alternative
| Ponzi scheme to recruit participants into. Game
| theoretically, if you have an inflationary currency and a
| deflationary currency, it makes sense for everybody to
| spend the inflationary currency and save the deflationary
| currency (Gresham's Law) which further drives up the
| relative price of the deflationary currency so long as
| there's an excess of savings available. If we enter a time
| of shortages (which we might), then the value of the
| deflationary currency will collapse (since everybody needs
| to spend money, and merchants are accustomed to taking the
| inflationary currency) - but if that happens, Bitcoin and
| its electricity & Internet demands are screwed anyway. In
| the meantime, as long as labor and savings both remain
| abundant, holders benefit at the expense of new adopters.
|
| The actual claim isn't that crypto is going to make
| _everybody 's_ life better. The claim is that it's going to
| make the life _of holders_ better, at the expense of late
| adopters. People can 't come out and say that directly -
| "Hi, I'm going to fuck you over and take all your wealth".
| I'm sure that'd go over great with the general public. So
| they say it in coded egoisms like "have fun staying poor",
| where you can write it off as somebody blowing off steam.
| jonwinstanley wrote:
| Can you explain how all gains are from other peoples
| losses?
|
| Someone invented a technology. Initially it was worth
| zero. Now it's worth 1tn. The gains are from the gradual
| realisation that the technology has some merits. There
| are way more gains than losses... so far at least.
| [deleted]
| whatshisface wrote:
| > _How can any financial instrument /currency make
| everybody "rich", in any real terms?_
|
| By organizing economic activity in a more efficient way
| than our present system of centrally planned debt supplies.
| That's what currency is "for" - organizing real activities.
| Muromec wrote:
| So what kinds of economic activities, besides ransom,
| drug sales and donations to wikileaks and others not
| liked by u.s. government does bitcoin facilitate?
| Remittances to countries under repressive economical
| regime or under embargo?
|
| Not saying those are good or bad, just aiming to quantify
| the market size.
| iskander wrote:
| If you cut past the gold rush and speculative bubble, the
| current uses are pretty mundane fintech stuff. Deposit
| savings, take out loans, &c.
| whatshisface wrote:
| The potential of cryptocurrency is a lot brighter than
| the potential of Bitcoin. The right investment to make in
| cryptocurrency isn't buying it, it's thinking about it
| and economics to try to figure out how it can be
| gainfully used. Ethereum has many potential applications
| and so _may_ be worth buying, but only if you have a use
| for it. (The price of every asset is such that buying it
| is a martingale.)
|
| BTC isn't even truly decentralized - it's Chinese.
|
| https://www.statista.com/statistics/1200477/bitcoin-
| mining-b...
| jmstfv wrote:
| This summer, China banned Bitcoin mining, which resulted
| in a temporary drop in the hash rate. We're almost back
| where we were before the ban:
| https://www.blockchain.com/charts/hash-rate
|
| That speaks volumes about how resilient Bitcoin's
| ecosystem is.
|
| Bitcoin isn't Chinese. Bitcoin doesn't belong to any
| country, nation, tribe, political party, institution, or
| person at all.
| NikolaNovak wrote:
| I get that, at some high level; but I'm not really seeing
| any of the current coins being actively used as
| currencies as much as investment / static store of value.
| They all look more like Gold than Dollar, to my ignorant
| eye
| young_unixer wrote:
| Who said speculation is making everyone money? Some people are
| going to lose money, specially those who buy at the top.
|
| And the fact that millions of people are willing to pay 60000
| USD for one of these coins proves that they aren't really
| "worthless".
|
| Is the dollar worthless because you can't use it to buy the
| same things you could buy in 1995 with the same amount?
| neaanopri wrote:
| Fed should make a commitment NOT to bail out crypto people under
| ANY circumstances!
| webinvest wrote:
| They might one day bail out the banks that use Ripple (XRP)...
| as well as the banks that don't use it.
|
| Bitcoin was literally created due to bailouts. Just read the
| genesis block of Bitcoin.
| bduerst wrote:
| Ripple has a lot of "partner" banks, not actual users.
| They're notorious for hamming that up:
|
| https://www.forbes.com/sites/jasonbloomberg/2019/03/01/is-
| ri...
| asasidh wrote:
| the people who "crypto" and the people who look for handouts
| are two very different groups.
| felixbraun wrote:
| Interesting to see Mastercard, Square, Stripe, FIS, Fiserv and
| Visa all mentioned in "Market Participants".
|
| None of those actively today use/settle stablecoins publicly?
| spir wrote:
| Visa uses Ethereum mainnet today (for about 6 months or more?)
| to settle obligations between a small subset of their merchants
| whose businesses are in crypto.
| TheAlchemist wrote:
| Also no mention of FTX. Pretty surprising given their
| importance in the market.
| vineyardmike wrote:
| > None of those actively today use/settle stablecoins publicly?
|
| No but they settle financial transactions today, and the SEC is
| basically saying there should be no difference.
| JumpCrisscross wrote:
| > _No but they settle financial transactions today, and the
| SEC is basically saying there should be no difference_
|
| This report is from the Treasury. Not the SEC.
|
| Also, the SEC doesn't regulate financial transactions. Just
| securities and exchanges. The SEC has argued that stablecoins
| are securities. That is an interesting argument, and I sort
| of see both sides of it, but somewhat unrelated to this
| paper.
| rewtraw wrote:
| I don't believe they support them today, but all of these
| companies have announced plans to adopt crypto in some form,
| including stablecoin support or Ethereum-based settlement.
| inter_netuser wrote:
| all of the above are heavily involved in crypto.
| sub7 wrote:
| From a Coinbase exec: "Tether is a ticking time bomb. Whenever it
| goes off, it'll be a 70-80% market correction for 2-3 years"
|
| Crypto continues to help nobody and achieve nothing in the real
| world. This administration has been criminally slow in shutting
| it down, lobby is strong.
| webinvest wrote:
| No there won't be a big long term correction from Tether
| because there are dozens of other stable coins now for people
| to temporarily sell into. There's also the ability to short
| crypto and buy puts on crypto. All of that provides ways for
| speculators, investors, middle class savers, and early
| technology adopters to stay in the game.
|
| You're like a doomsday predictor that will never see a doomsday
| happen.
|
| No real value? The AAVE crypto platform alone already holds
| more value ($23B) than the entire market cap of Ecuador's stock
| market ($11B). The AAVE platform is literally more valuable
| than a country.
|
| AAVE is just one of many applications built on the Ethereum
| network. It speaks nothing of Uniswap, Maker, Yearn, Balancer,
| USDC, Compound, and many others.
|
| Bitcoin alone secures over 1 Trillion dollars.
| liquidise wrote:
| > Crypto continues to help nobody and achieve nothing in the
| real world
|
| Crypto posts on HN seem to be a hotbed for these sorts of
| hyperbolic, wholly unsubstantiated and objectively false
| comments. I wish i understood what the motivation was for these
| sorts of replies.
| md2020 wrote:
| Spoken like somebody who knows nothing about crypto
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