[HN Gopher] Crypto exchange AAX suspends withdrawals
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Crypto exchange AAX suspends withdrawals
Author : JumpCrisscross
Score : 601 points
Date : 2022-11-14 13:33 UTC (9 hours ago)
(HTM) web link (trends.aax.com)
(TXT) w3m dump (trends.aax.com)
| creshal wrote:
| https://archive.ph/tSMYs
| yewenjie wrote:
| How likely is this cascade to reach Binance?
| BitwiseFool wrote:
| If I were a betting man, and I am because I am involved in this
| crypto-calamity, yes, do expect this cascade to reach them
| eventually. Putting aside the philosophical questions about
| contributing to a bank-run, if you have assets on Binance it
| may behoove to you start withdrawals sooner rather than later.
| risho wrote:
| anyone who claims to know is lying to you. historically
| speaking, a good heuristic would be: not your keys not your
| coins, no matter what the exchange is. if you control your own
| keys then you don't need to wonder about whether binance is
| solvent or not.
| eptcyka wrote:
| If Binance was to topple, the price of coins would drop. Most
| people using crypto exchanges don't care about holding keys,
| they only care about making a profit in a fiat currency.
| VBprogrammer wrote:
| Honestly, I've never really understood crypto so maybe I'm
| mistaken, however if pretty much all of the major exchanges
| disappear off the face of the earth, can there be any other
| outcome than the value of crypto going, as near as makes no
| difference, to zero? You may still be able to transfer
| ownership of your coins but for what purpose?
| nordsieck wrote:
| > if pretty much all of the major exchanges disappear off
| the face of the earth, can there be any other outcome than
| the value of crypto going, as near as makes no difference,
| to zero?
|
| Presumably someone will make a new one; it seems unlikely
| to me that all crypto will go to zero in the near to mid
| future, even assuming what you say.
| PKop wrote:
| New exchanges will emerge, plus there is Coinbase and
| Gemini and other regulated ones. You don't need to store
| your coins on the exchange if you're not selling them. If
| you want to buy, other people who want to sell will have
| their coins on the exchange, and after you buy you can
| withdraw them. I'm not sure why people conflate "liquidity"
| for trading with people just leaving them there when
| they're not selling them. Even when people _do_ leave them
| on the exchange, these coins are not contributing to
| trading liquidity because they are not up for sale.
|
| The fact that crypto severely and relatively quickly
| punishes bad custodians who fractionally reserve and trade
| customer funds is a feature not a bug. And the reason this
| punishment happens quickly to crush bad actors is the "bank
| runs" necessary to trigger the event can occur within
| minutes of rumors or information being revealed to the
| market, and assets can be withdrawn globally very quickly.
| No other "banks" or exchanges or brokers are exposed to
| this much pressure punishing insider schemes like this.
|
| Even the gold and silver markets have a lot of people
| claiming there is paper leverage way in excess of physical
| supply, and that large geopolitical interests suppress the
| price of gold so as to defend against it taking value from
| sovereign debt and currencies. I think there is some truth
| to this, but the reason it is allowed to persist and that
| there may not be true "price discovery" in gold and other
| commodity markets is that no one takes delivery, and so
| many simply leave their physical asset on custodian banks.
| Who knows what they are doing with this, or if their asset
| is truly allocated. It would require a crypto style "bank
| run" to punish these potential bad actors. Only crypto has
| this over and over again at scale.
| happyopossum wrote:
| > if you control your own keys then you don't need to wonder
| about whether binance is solvent or not.
|
| That's not really true though, is it? The value of those
| coins is directly tied to the existence and function of
| (enough) exchanges to facilitate their use. Enough exchanges
| fold, and your coins won't be worth the bits they're taking
| up.
| dragontamer wrote:
| How much of Binance's $500-million worth of FTT did they manage
| to salvage before FTT / FTX went bankrupt? We already know that
| Binance had at least one giant pile of FTT, as they tweeted
| about this before FTX / FTT troubles started to go down.
|
| In some sense, it has already reached Binance. The real
| question is whether or not Binance has enough funds to weather
| that kind of storm.
| bushbaba wrote:
| Depends on the cost basis. When FTT was created Binance could
| have received 500MM worth of tokens for providing say 10MM of
| UST. Such is common for early token sales to gain support of
| large players to convince commoners to pump the token.
| vkou wrote:
| I doubt anyone at Binance would lose any sleep over a 500
| million hole in their balance sheet. (Because I believe that
| Tether is, was, and will be significantly undercapitalized.)
|
| The only thing that can unravel Binance and Tether is a big
| enough bank run.
| ChrisClark wrote:
| What does Tether have to do with Binance? Are you thinking
| Bitfinex?
| fshbbdssbbgdd wrote:
| The FTT is one thing. Another question is whether Binance is
| levered in a way that can cause insolvency when the value of
| its assets drops (many cryptos have been dropping in value).
| CZ says no, but SBF said the same.
| firstSpeaker wrote:
| If/when this cascades to Binance we can it will be a big big
| setback for crypto and probably slows down adoption of
| decentralised currencies by decades.
| latchkey wrote:
| Small sample set, but I recently saw a poll on a DeFi fb group
| that I'm in and the question was: "where are you moving your
| crypto during this sh*t show?"
|
| The majority of the people answered 'binance'.
| coffeebeqn wrote:
| I would certainly not move mine to another entity that can
| disable withdrawals
| roody15 wrote:
| The problems we are seeing are with for profit Crypto
| Exchanges... not crypto itself.
| gizajob wrote:
| And so the whole house of cards starts to come crashing down...
| me551ah wrote:
| Recent exchange shutdowns have spooked investors who are taking
| out money in droves. These crypto exchanges maintain fractional
| reserves, instead of acting like a wallet and holding 1:1. As
| more people withdraw their money, more exchanges will shut down
| and that will lead even more people wanting to withdraw their
| money from crypto. What we are seeing is just the beginning.
| [deleted]
| SevenNation wrote:
| A common, tired take on HN: crypto bros will re-invent every
| piece of financial regulation they condemned.
|
| I doubt it.
|
| The reason is simple. If you think this latest round of panics
| and collapses is anything new, you haven't been paying attention.
| This is but the latest round in a 10+ year history of
| shenanigans. They come in waves spaced roughly 4 years apart.
| Regulation has not and never will fix it.
|
| Nor did that highly-touted financial regulation do anything to
| stop the panics, scams, and financial idiocy of the 20th and
| early 21st centuries. Lots of regulation. Lots of oversight.
| Congressionally-empowered regulators with fancy degrees and
| highfalutin titles. None of it stopped the Great Depression, the
| S&L collapse, the crash of 2000, the GFC, or the current brewing
| crisis in the Eurodollar system.
|
| Indeed, there's an argument to be made that regulation and
| regulators _incited_ those catastrophes through moral hazard.
|
| Clucking at all the rubes losing their shirts on exchanges is an
| old game with no reward. It leads nowhere and advances no new
| insights.
|
| For those interested in a possibly more eye-opening perspective,
| consider that Bitcoin not only makes financial regulation
| unnecessary, but practically impossible.
| dhruval wrote:
| Not super knowledgeable on this but Decentralized exchanges exist
| why are they not more widely used by the crypto community?
| zeroclip wrote:
| They are widely used and process billions per day.[1]
|
| There are other problems with DeFi: protocol risk, transaction
| fees, speed, UX. They are newer and less known than CEXes and
| most users who buy and hold crypto on FTX or BlockFi do not
| know how to use the blockchain. Most of these problems can be
| overcome, like see L2 development, but it will take some time.
|
| [1] https://defillama.com/chain/Ethereum
| bogomipz wrote:
| Could you elaborate on what exactly is the "protocol risk" in
| DEX?
| zeroclip wrote:
| A protocol is just code, code can have bugs. Another risk
| is around governance. Some protocols use proxy contracts,
| so a single developer or team can upgrade them. But they
| can accidentally push out a bug in a new version. Other
| protocols like Uniswap opt for non-upgradeable contracts,
| users have to opt-in to the new version.
| shuntress wrote:
| The entire point of a cryptocurrency is to be a decentralized
| electronic currency.
|
| Centralized exchanges exist to handle the problems with
| decentralized electronic currency.
|
| If there was a good way to decentralize a centralized exchange,
| that solution would just be part of the decentralized currency
| and the exchange wouldn't need to exist.
| edwnj wrote:
| There is no on/off ramps to the fiat world.
|
| Other issues like complexity/bad ux are being rapidly fixed but
| the on/off ramp issue is one thing that technology can't fix.
| Its a legal issue.
| aeternum wrote:
| Usability is still not great. Slippage risk is hard to
| communicate and txn costs were high since they require on-chain
| txns.
| SparkyMcUnicorn wrote:
| It all comes down to usability.
|
| ETH transaction costs are high, but L2s and side-chains like
| Arbitrum, Optimism, and Polygon are all quite cheap still.
| shmatt wrote:
| BlockFI was offering 8.5% APY on deposits. FTX was offering 8%
|
| A true exchange, where you just buy and sell, will never pause
| withdrawals because they won't be acting with these ponzi-like
| methods
|
| A decentralized exchange won't give you free money, so less
| people will use it. Also the same with a centralized exchange
| offering you 0% APY and full liquidity at all times. You
| _could_ build one, but will people sign up?
| gruez wrote:
| >A true exchange, where you just buy and sell, will never
| pause withdrawals because they won't be acting with these
| ponzi-like methods
|
| While operating a ponzi scheme in addition to an exchange
| certainly wouldn't help, even ponzi-less exchange is still
| susceptible, if they offer leverage.
|
| >You will have some customers who owe you money, and others
| whom you owe money. You will be like a bank. If everyone to
| whom you owe money demands their money back at once, you will
| need to get the money back from the ones who owe you money,
| which might be hard. (You might not have a contractual right
| to demand the money back right away, or it might be rude and
| bad for business, or you might have to liquidate them to get
| the money back and that would blow up the value of your
| collateral.) In broad strokes this is a reasonable
| description of what happened to Bear Stearns, a brokerage
| that financed its customers' positions. If you are a crypto
| exchange that provides leverage, then you are probably bank-
| like enough for a run on the bank.
|
| https://www.bloomberg.com/opinion/articles/2022-11-08/binanc.
| ..
| dragontamer wrote:
| > A true exchange, where you just buy and sell, will never
| pause withdrawals because they won't be acting with these
| ponzi-like methods
|
| Coinbase is also offering APY on its deposits through
| Coinbase Rewards, as does Binance.
|
| This "true exchange" sounds like the no-true-Scotsman
| fallacy. Literally no one does what you claim. Everyone in
| the cryptocoin world is doing this "staking" == crappy loans
| / bonds business.
| dibt wrote:
| >Coinbase Rewards
|
| You are referring to staking. FTX was giving a static yield
| on deposits. The funding for this came from their marketing
| budget. Very different from what Coinbase does.
|
| >"staking" == crappy loans / bonds business.
|
| Staking is not a loan. It is a component of proof of stake
| networks to maintain security. Coinbase provides stacking
| services, but all they do is pass the yield onto the
| customer while taking a cut for the resources required for
| staking (e.g. AWS bill).
|
| Some token networks may market a mechanism as "staking"
| when it's just a way to keep people from selling. That's a
| different topic.
| dragontamer wrote:
| > Staking is not a loan.
|
| Yes it is. You give your money over to another
| organization, and that organization promises a % yield /
| APY in return. You aren't allowed the money back until
| later.
|
| Its totally a bond.
|
| > Some token networks may market a mechanism as "staking"
| when it's just a way to keep people from selling. That's
| a different topic.
|
| I'm feeling some "no true Scotsman" fallacy here. If
| those guys call it staking, then its staking.
| stickfigure wrote:
| >> Staking is not a loan.
|
| >Yes it is.
|
| Sort of? The risk profile is significantly different.
| dragontamer wrote:
| Real life bonds range from Savings accounts (which are
| tied to the overnight Fed rate, with an assumed repayment
| within days or one week at the worst), to "Junk" bonds to
| companies and/or governments that are currently going
| through default and/or bankruptcy (See Greek bonds
| between 2009 and 2017)
|
| At the lowest risk end, we have the "risk-free rate",
| guaranteed by the central bank. At the higher risk end,
| we have highly risky loans (ex: Greek Bonds in 2014 or
| so). Or mortgaged backed securities. Or student loans.
| Etc. etc.
|
| --------
|
| Bonds / loans are a very old economic subject that have
| been around for hundreds of years (maybe thousands?).
| There's a myriad of historical subjects and writings on
| this subject.
|
| In general, the more trustworthy the issuer and the
| shorter the maturity, the safer the loan is. An overnight
| loan with the Fed (aka: Central bank of the United
| States) will be lower risk than a 30-year subprime
| mortgage. The economics will demand that the longer-loan
| will (usually) be priced higher (except in times of
| inverted yield curves, where people think there's more
| near-term risk than long-term risks). Etc. etc. Its a big
| complex subject.
|
| But its all about loans and bonds, and money and IOUs and
| promises and trust.
| dibt wrote:
| > You give your money over to another organization, and
| that organization promises a % yield / APY in return.
|
| Coinbase is not promising a yield. It would be illegal
| for them to do so. They are advertising the current
| market rate defined by the token's network. That rate
| incentivizes stakers. It is defined in code. If too many
| people are staking on, for example Ethereum, the network
| would lower the rate automatically. Just as they are
| doing, you could stake the tokens yourself with your own
| hardware/connectivity, or use hosted resources (e.g.
| AWS).
|
| > You aren't allowed the money back until later.
|
| The yield is paid out according to a defined schedule.
| Unstaking is possible on some hosted platforms (e.g.
| Coinbase) even if the network doesn't allow it, but there
| is usually a penalty.
|
| > "no true Scotsman" fallacy
|
| It's nothing to do with it. I haven't made any
| qualitative judgements on which network is a "true"
| staking mechanism.
|
| This article describes the confusion caused by some token
| networks:
|
| https://cobie.substack.com/p/apecoin-and-the-death-of-
| stakin...
|
| "Somehow, over time, the word 'staking' has been
| repurposed and redefined. Instead of receiving rewards
| for contributing to chain security with collateral at
| stake, modern "staking" just seems to mean idk we give
| you more coins as a reward if you don't sell your current
| coins lol."
|
| > If those guys call it staking
|
| I don't know which "guys" you're referring to. Different
| networks treat it differently. That's all. It's a
| designed mechanism. The Ethereum devs have no say in how
| the Solana devs implement staking. Platforms then just
| provide a hosting service.
|
| I've only provided facts. I don't personal do any
| staking, or encourage others to do it. Seems you are only
| interested in arguing, and prefer to not understand
| reality. Good luck on your crusade!
| zoklet-enjoyer wrote:
| Look up how consensus works on proof of stake
| blockchains. Specifically Tendermint chains, Ethereum,
| Tezos, Algorand.
| dragontamer wrote:
| Just because its a complicated loan/bond doesn't mean its
| not a loan/bond.
|
| Lending money to somebody else, with a promise for future
| returns, is fundamentally a bond. It will act like a
| bond, subject to the economic principles of a bond /
| loans / etc. etc.
| dibt wrote:
| > Lending money to somebody else
|
| It is not a loan!
|
| > promise for future returns
|
| There is no such promise!
|
| It is an alternative to proof-of-work, which requires
| capital investment to provide security to the network
| (e.g. purchase and run Bitcoin mining machines). Staking
| is a substitute for that capital requirement. You are
| refusing to understand this simple fact.
|
| If you loan a business money or buy a government bond,
| they are SPENDING that money to run the
| business/government. The Ethereum network is not selling
| your staked ETH to maintain security.
| dragontamer wrote:
| > It is not a loan!
|
| So lets say I own 10 ETH. Explain to me how I get my
| staking rewards.
|
| Because step #1 involves me transferring that ETH to
| Coinbase (or some other entity with a large enough ETH
| basis to serve as a trusted staking entity). That is a
| loan. I don't own ETH anymore, I gave it to Coinbase.
|
| Coinbase creates an "IOU", saying "I promise that
| dragontamer will get his 10 ETH back", through some
| system of trust, contracts, databases and whatnot. It
| doesn't really matter what the details are, the whole
| thing is an IOU, a promise to return my ETH later.
|
| Similarly, when I deposit $10,000 into a bank (be it a
| savings account, or money market account), the Bank
| writes down an IOU saying it owes me $10,000. The bank
| then sends the money to the market (and worst-case, to
| the Fed Overnight loans), and lends the money out. Later,
| I withdraw the money, the bank undoes the process.
|
| --------
|
| The only difference is that ETH doesn't allow you to
| withdraw the money as often as a savings account or
| money-market account/fund. So its kind of crappier than a
| normal savings/money market style loan that goes on.
|
| I guess ETH also gives a different level of rewards,
| seems to be 4.4% (though denominated in ETH rather than
| dollars).
| dibt wrote:
| > I don't own ETH anymore, I gave it to Coinbase.
|
| You DO own the ETH. Regardless of whether you are staking
| it yourself, or have given it to Coinbase to stake.
| Similar to how you maintain ownership of your rental
| property even if you allow a property management company
| to run it.
|
| This is true if you move your ETH from a self-custody
| wallet to coinbase (custodial wallet). Either way, you
| maintain ownership. The tokens earned are taxable as
| income, just as income from a paying tenant on your
| rental property is taxed.
|
| Also, the IRS defines crypto tokens as "property." As far
| as I know, there is no such distinction for bonds or
| loans.
|
| From https://www.irs.gov/businesses/small-businesses-
| self-employe...:
|
| "For federal tax purposes, digital assets are treated as
| property."
| dragontamer wrote:
| > You DO own the ETH.
|
| Personal wallets cannot participate in ETH staking and
| you know it. The first step is to transfer your ETH to a
| large scale, trusted wallet, like Coinbase's wallet.
|
| What you own is an IOU from Coinbase saying they owe you
| the ETH at a future date. The value of this IOU is
| taxable of course. But the important thing is that if
| Coinbase goes bankrupt, it is an unsecured IOU / bond
| that is junior to Coinbase's other creditors.
|
| -----
|
| Just like how depositors into Celsius "owned" IOUs saying
| they had BTC or ETH or USDC in Celsius... it turns out
| that the value of those IOUs is worthless as the
| bankruptcy proceedings carried forward. Customer
| deposits, in the USA, are junior to investment banker's
| bonds that funded the business to begin with.
| dibt wrote:
| > Similarly, when I deposit $10,000 into a bank (be it a
| savings account, or money market account), the Bank
| writes down an IOU saying it owes me $10,000. The bank
| then sends the money to the market (and worst-case, to
| the Fed Overnight loans), and lends the money out.
|
| Incorrect! My understanding is it would be illegal for
| them to give away your deposits. That includes the
| Reverse-Repo market (RRP), which is the source of the
| overnight rate you referring to. The RRP is a contract,
| not a transfer. Factional-reserve banking means they
| don't loan out customer's deposits.
|
| Also, you are confused about the users of RRP. It is
| overwhelmingly money-market funds, NOT checking/saving
| accounts. This would include Vanguard, Fidelity, Schwab,
| etc. which are not banks.
|
| From:https://fedguy.com/the-on-rrp-will-never-be-a-floor/
|
| "In practice, the vast majority of ON RRP usage is done
| by MMFs, who have $4.5 trillion in assets. That enormous
| pool of capital is the mechanism through which Fed policy
| is transmitted in the money markets."
|
| ON RRP = Overnight Reverse-Repo MMF = Money-Market Fund
|
| And it is never "spent" by the fed. It is held as a
| liability on their balance sheet. The reason you see such
| a high RRP now is due to a shortage of low duration
| treasuries. They want the RRP to be high in case there is
| a run on MMFs like in 2008.
| wizeman wrote:
| > > Staking is not a loan.
|
| > Yes it is. You give your money over to another
| organization, and that organization promises a % yield /
| APY in return. You aren't allowed the money back until
| later.
|
| > Its totally a bond.
|
| But in a bond and in a loan you are not guaranteed to get
| your money back (or the yield), while in staking, you are
| always guaranteed to get it back because of the consensus
| rules, right?
|
| So I don't think it's the same thing, as in staking there
| is no such default risk because the staked coins remain
| yours [0] (with cryptographic assurance) and the yield is
| financed by currency inflation, which is guaranteed to
| happen (assuming there are no major bugs in the consensus
| rules, and that Coinbase and Binance don't become
| malicious and try to cheat the rules and get penalized
| for doing so).
|
| [0] Well, technically they belong to Coinbase / Binance
| at that time if you use them to stake the coins, because
| in that case they are the holders of the cryptographic
| keys.
| dragontamer wrote:
| You're guaranteed to get your money back from an
| Overnight loan to the Fed. (literally a 1-day loan to the
| USA's central bank).
|
| This "risk free rate" serves as the basis of the theory
| behind our entire banking system. The fact that Ethereum
| decided to recreate this under separate principles is
| somewhat amusing, but its just that. A recreation of what
| we're already familiar with in the financial world.
|
| The next question is if the cryptocoin world realizes how
| important it is to set the risk-free rate as appropriate
| for their ecosystem to function. Given how arbitrary it
| was to set the Etherium rate however, I don't think there
| was much thought put into that in practice. But baby
| steps I guess. The cryptocoin world is learning things at
| a different rate than the historians / financial experts
| who already see where things are going. Bad things happen
| if you set the risk-free rate too high, or too low by the
| way.
| wizeman wrote:
| > You're guaranteed to get your money back from an
| Overnight loan to the Fed. (literally a 1-day loan to the
| USA's central bank).
|
| Well, then those loans are also risk-free, right? Because
| they are also financed by increasing the money supply and
| the Fed can't spend the money that was loaned to them.
|
| But normal loans and bonds are not risk-free, they have a
| default risk. Which is the entire reason why when you
| loan your money, sometimes you can't get it back.
|
| Staking, however, is risk-free, so the following
| statements of yours are wrong.
|
| > Everyone in the cryptocoin world is doing this
| "staking" == crappy loans / bonds business.
|
| > > Staking is not a loan.
|
| > Yes it is. You give your money over to another
| organization, and that organization promises a % yield /
| APY in return. You aren't allowed the money back until
| later.
|
| > Its totally a bond.
| dragontamer wrote:
| Frankly, I see no contradiction, with what I said in any
| of my posts. Could you lay out more clearly where you
| think a contradiction has occurred?
| wizeman wrote:
| > Frankly, I see no contradiction, with what I said in
| any of my posts. Could you lay out more clearly where you
| think a contradiction has occurred?
|
| Sure. You said (in the context of talking about Binance
| and Coinbase):
|
| > Everyone in the cryptocoin world is doing this
| "staking" == crappy loans / bonds business.
|
| This phrase, in the context of the news we're discussing
| (about suspending withdrawals), implies that Coinbase and
| Binance are also incurring in a risk of suspending
| withdrawals because they might run out of liquidity due
| to staking (which you said is equivalent to a "crappy
| loans / bonds business").
|
| However, staking is not equivalent to a "crappy loans /
| bonds business".
|
| To argue that point, someone said that "Staking is not a
| loan", implying that unlike loans you can't lose money
| because of staking, but you said "it's totally a bond"
| because, I suppose, you're not allowed to get the money
| back until a certain time.
|
| However, I think that you are missing the fact that
| unlike with loans and bonds, there is no risk of running
| out of liquidity because of staking.
|
| If Coinbase and Binance were operating a real loans and
| bonds business (like banks do), and suddenly all
| customers demanded their deposits back, these exchanges
| couldn't force the borrowers to pay back their
| loans/bonds immediately so that they could fulfill the
| withdrawal demand. Not to mention that if the borrowers
| went bankrupt, the money would be lost, which would lead
| to Coinbase and Binance potentially losing customer
| funds, also becoming bankrupt and suspending withdrawals.
|
| This seems to be more or less what is happening with some
| of these exchanges that are running out of liquidity,
| because they seem to be essentially gambling with
| customer funds.
|
| But I think in staking it's completely different,
| because, as I argued, in staking there is no risk that
| borrowers go bankrupt and default on the loan/bond, as
| there are no borrowers. Instead, the yield is financed
| through inflation and the staked coins remain your
| property throughout the whole staking process -- nobody
| can spend them, so there is no risk that they can't be
| payed back.
|
| And on top of that, customers aren't allowed to withdraw
| the staked amount until the staking expires, so there is
| no risk that Coinbase and Binance can't fulfill
| withdrawals because of staking.
|
| Which means there is no risk of running out of liquidity
| because of staking.
|
| In fact, coins can only be staked if the customer decides
| to stake them. Which is also completely unlike the
| loans/bonds business, which happens behind the customer's
| back, essentially. The latter leads to broken customer
| expectations (and ruined lives) if/when the loans/bonds
| business goes under.
|
| Well, that's my understanding at least, but I'm sure I
| may be missing some points as I'm not actually an expert
| (or anything close to it) on staking.
| dragontamer wrote:
| > real loans and bonds business
|
| You mean, like a Money Market fund like VMFXX?
|
| https://investor.vanguard.com/investment-products/mutual-
| fun...
|
| VMFXX has federal regulations, where it is _required_ to
| prove your liquidity reserves _DAILY_. EVERY SINGLE DAY,
| VMFXX publishes how much money they have that can be
| satisfied within 1-day, 1-week, and other such
| benchmarks.
|
| The entire publication is available online, every single
| day, not only from VMFXX, but also all of VMFXX's
| competitors (such as SWVXX).
|
| https://www.schwabassetmanagement.com/products/swvxx
|
| ----------
|
| What Coinbase / Binance is doing is "Crappy" because
| their reporting guidelines are so much worse than what
| "the real banks" are doing. There's no one checking or
| double-checking these reserves.
|
| Every single dollar (and even penny) is tracked in a
| money market fund. The _EXACT_ makeup of the loans is
| also tracked. The rules for how a "bank run" would be
| handled, are regulated and stated in advance. Everything
| has been planned out, discussed, debated, in Congress
| over-and-over again for the past 100 years as our laws
| have evolved.
|
| VMFXX handles over $200 Billion of assets, and has been
| doing so for decades, in a tradition that follows US
| legal rules for nearly a hundred years (established since
| the times when the banks did lose a lot of money: back in
| the Great Depression). Its battle tested, pragmatic, and
| cheap (0.11% fees/year), extremely transparent, well
| regulated, well understood.
|
| The comparison to Coinbase and Binance is laughable.
| There's no regulations, they haven't even been around for
| a decade, Binance isn't even being checked by anybody
| (being an offshore accounts), though I admit that
| Coinbase is at least in the USA and subject to US Law.
| But even Coinbase's reports on their assets pales in
| comparison to the information I get from VMFXX's pages.
|
| -------
|
| I'm trying to show you what a "real bank" does, such as
| VMFXX / Vanguard, with their "equivalent stablecoins"
| (aka, money market fund).
| wizeman wrote:
| > > real loans and bonds business
|
| > You mean, like a Money Market fund like VMFXX?
|
| No, I mean like when a bank buys government bonds,
| company bonds, or loans money to customers and
| businesses.
|
| That's the kind of business that leads to bankruptcy if
| all your customers suddenly ask for their money back
| (which you have been lending behind their backs).
|
| > What Coinbase / Binance is doing is "Crappy" because
| their reporting guidelines are so much worse than what
| "the real banks" are doing. There's no one checking or
| double-checking these reserves.
|
| I'm not sure if that's the case, but if it is, then I
| agree with you.
|
| Crypto exchanges should be the subject of periodic
| financial audits by reputable firms and as far as I know,
| some of the more reputable ones are already moving in
| that direction out of their own free will (to assure
| customers that are getting worried by their less
| reputable competitors that are now going bankrupt), even
| going so far as publishing cryptographic Merkle proofs of
| crypto reserves (but traditional financial audits are
| also necessary).
|
| > Every single dollar (and even penny) is tracked in a
| money market fund. The _EXACT_ makeup of the loans is
| also tracked. The rules for how a "bank run" would be
| handled, are regulated and stated in advance. Everything
| has been planned out, discussed, debated, in Congress
| over-and-over again for the past 100 years as our laws
| have evolved.
|
| It doesn't matter, bank runs can still happen when you're
| in the crappy loans and bonds business.
|
| And when they do, nowadays not only banks get rewarded
| with government bailouts, but it's always the tax payer
| that ends up paying the bill, even though those tax
| payers are not responsible for the bank's risky and
| immoral (due to lack of customer consent) money managing
| policies. And the vast majority of those tax payers are
| not even customers of the bank!
| dragontamer wrote:
| > No, I mean like when a bank buys government bonds,
| company bonds, or loans money to customers and
| businesses.
|
| Did you see the asset sheets on VMFXX? Its all government
| bonds, loans, and so forth. There's no "cash" just
| sitting there. Its all, completely composed of various
| kinds of loans (averaging 11-days in maturity).
|
| I've given you a "real bank" (Vanguard, an investment
| bank specifically but yes, a bank), that's conducting
| these "loans" / bonds that you're talking about.
|
| I've also brought up SWVXX, Schwab's competitor fund, is
| a "prime" MMF that consists _mostly_ of commecial paper
| (ie: loans to non-government entities), with higher
| levels of risk involved.
|
| --------
|
| Based on how this discussion is going, perhaps I should
| focus on SWVXX instead.
|
| http://hosted.rightprospectus.com/SF/MMD/Fund.aspx?cu=808
| 515...
|
| There's even "less cash" here than in VMFXX. That's why
| I'm talking about these money-market funds. These are...
| the things you're trying to talk about, right? These
| banks / entities that are making a ton of loans / bonds
| to each other?
|
| I'm thinking of real-world entities and trying to match
| them up to what you're talking about. These things have
| names ya know. They're not just mysterious "banks" out
| there. People invest into SWVXX or VMFXX, or other such
| tickers / funds.
|
| > Weighted Average Maturity: 9 days
|
| You see that? It will take 9 days for most of those funds
| to mature and turn into cash, on the average for SWVXX
| today. This isn't "cash", its a pile of loans. Very
| short-term high-quality loans, but its a pile of loans.
| Is this not what you were trying to talk about?
|
| > That's the kind of business that leads to bankruptcy if
| all your customers suddenly ask for their money back
| (which you have been lending behind their backs).
|
| Yes. That's why there's strict liquidity tests, liquidity
| reserves, and publication requirements for entities such
| as SWVXX. The risk is real, and we need to keep an eye on
| it to make sure that Schwab and Vanguard aren't cheating
| the books.
|
| Those publication requirements simply do not exist for
| Binance or Coinbase. There's no asset sheet vs
| liabilities sheets. There's no reporting guidelines.
| There's nothing.
| wizeman wrote:
| > I've given you a "real bank" (Vanguard, an investment
| bank specifically but yes, a bank), that's conducting
| these "loans" / bonds that you're talking about.
|
| Investment banks are not problematic because the customer
| is the one who decides how much and where their money is
| getting invested (therefore he knows how much he is
| risking, and how it is getting risked).
|
| This is unlike what happens with traditional banks, which
| is what I was referring to when talking about the crappy
| loans and bonds business (and lending the customer's
| funds behind their backs, even if the customer is aware
| of it and does not consent).
|
| > Those publication requirements simply do not exist for
| Binance or Coinbase. There's no asset sheet vs
| liabilities sheets. There's no reporting guidelines.
| There's nothing.
|
| If that's the case, then I agree, this should change. I
| would prefer if exchanges themselves would do this and
| customers would verify this, but even though I'm a
| libertarian, I wouldn't object to the government
| requiring reasonable, periodic financial audits of crypto
| exchanges by reputable financial audit firms because I am
| in favor of complete transparency[0] (be it regarding
| government or companies) and I recognize that too many
| bad apples are entering the crypto business and ruining
| its reputation (and customers of crypto exchanges are
| obviously not doing sufficient due diligence).
|
| [0] More transparency can greatly increase the benefits
| of market-based capitalism, because it works more
| efficiently (i.e. market participants make better
| decisions and get more value out of it) when the
| participants are acting with more information than when
| they are acting with less information.
| dragontamer wrote:
| > Investment banks are not problematic because the
| customer is the one who decides how much and where their
| money is getting invested (therefore he knows how much he
| is risking, and how it is getting risked).
|
| Do... you know what a MMF is? (money market fund)
|
| A MMF is a federally regulated investment product where
| 1-share equals $1. Investors invest into MMFs because
| they are "safe", and have a huge amount of federal
| regulations to almost-guarantee the 1-share == $1 price
| point. (but not "totally" guarantee). Small levels of
| risk are acceptable.
|
| Yes, they're offered by investment banks rather than
| traditional banks. But the "fundamental trust" that
| 1-share in VMFXX == $1 is extremely deep.
|
| That's why I keep bringing up this comparison. MMFs are
| allowed to loan out their money and partake in various
| investment schemes to generate a yield. HOWEVER, there's
| reporting requirements, there's investment requirements,
| there's rating requirements, there's transparency, etc.
| etc.
|
| All of this giant exercise with crytocoins trying to
| "make a stablecoin", where 1-stablecoin == $1 all the
| time is just a crazy scheme to recreate MMFs. That's my
| overall point and viewpoint.
| wizeman wrote:
| > That's why I keep bringing up this comparison. MMFs are
| allowed to loan out their money and partake in various
| investment schemes to generate a yield. HOWEVER, there's
| reporting requirements, there's investment requirements,
| there's rating requirements, there's transparency, etc.
| etc.
|
| I think that's a good thing, although there are 2 things
| I disagree with:
|
| 1) I believe the investment requirements are a scheme
| that is unfair and can lead to forced (and unnatural)
| inequality.
|
| I would replace this with (sufficiently strict) tests of
| investment knowledge for new investors.
|
| 2) In practice the ratings agencies have a less than
| stellar record, as the way they are set up, they have an
| inherent conflict of interest. This leads to a false
| sense of security.
|
| So I would just get rid of these, but I don't see
| anything wrong with the rest in general (I'm sure there
| would be some specifics I would disagree with).
|
| > All of this giant exercise with crytocoins trying to
| "make a stablecoin", where 1-stablecoin == $1 all the
| time is just a crazy scheme to recreate MMFs. That's my
| overall point and viewpoint.
|
| It's quite different, as stablecoins can be traded in a
| completely decentralized way (i.e. peer-to-peer) with
| blockchain protocols using cryptographic assurances.
|
| But yes, in theory an MMF-backed stablecoin could be
| traded on a blockchain, and I see nothing wrong with
| that. That said, an MMF-backed stablecoin would be a bit
| more risky than a USD-backed stablecoin, due to an MMF
| being inherently a bit more risky than the USD.
|
| However, yeah.. another point is that the companies that
| issue stablecoins are also quite far from being
| sufficiently transparent. They also need to be subject to
| the same periodic financial audit requirements by a
| reputable firm as a crypto exchange should!
| dragontamer wrote:
| USDC doesn't keep its USD in "cash". Its claiming its got
| "commercial paper" backing it. ("Commercial paper" being
| a codeword for loans, the same 5-day / 9-day loans that
| make up an entity such as SWVXX). Or government loans,
| etc. etc. Its the same thing, but worse.
|
| Its no more secure than an MMF as it is. In fact, due to
| the much weaker reporting guidelines, USDC is likely
| worse than an MMF like SWVXX.
|
| No stablecoin promises "cash" holdings. Literally none.
| The best you've got in the cryptocoin world is MMF-like
| promises, except without any of the MMF regulations.
|
| -------
|
| There's no guarantees that USDC's backing of "commercial
| paper" has any good rating at all. What 5-day loans are
| USDC banking on? Is it Bank of America? Or is it a loan
| to Binance? No one knows.
|
| > USDC has always been backed by the equivalent value of
| U.S. dollar denominated assets; USDC reserves are kept in
| the management and custody of leading U.S. financial
| institutions, including BlackRock and Bank of New York
| Mellon
| wizeman wrote:
| Yeah, I know... what these companies are doing is
| absolute crap and I suspect that in the future this is
| going to lead to an even bigger crisis than what's
| happening right now in the crypto industry.
|
| I suspect that this is a side effect of 1) being
| impossible to store large amounts of USD cash in a bank,
| at least without incurring into significant risks of
| losing it or actually even losing money over time due to
| negative interest rates and/or 2) being more lucrative to
| hold these paper products rather than keep everything
| strictly in cash, perhaps even also 3) lack of moral
| standards? I don't know.
|
| I think this is even worse than what the traditional
| banks are doing and I'm completely against it. Especially
| due to the lack of transparency that you are mentioning.
| dibt wrote:
| I think the confusion is that they believe the token that
| is staked is a sunk cost, the same way a business would
| spend the money from a loan. Like you said, the token
| will be returned when unstaked.
|
| If I take a loan out to buy and run a pizza restaurant, I
| can't just give the principal back if it fails. I would
| have to liquidate the business, which would not be
| equivalent to the starting capital costs.
| dragontamer wrote:
| The Fed always can return the money, because they control
| how much money is printed. Therefore, the money loaned to
| the Fed through the overnight rate is risk-free. That's
| why its called the risk-free rate.
|
| It may only be a singular day worth of bond / IOU, but
| its still a loan/bond/debt instrument.
|
| -------
|
| Similarly, the Ethereum rewards are printed out of thin
| air, are they not? By the Ethereum staking system? Its
| not like the Ethereum they print existed beforehand.
| gruez wrote:
| >Coinbase is also offering APY on its deposits through
| Coinbase Rewards, as does Binance.
|
| >This "true exchange" sounds like the no-true-Scotsman
| fallacy. Literally no one does what you claim. Everyone in
| the cryptocoin world is doing this "staking" == crappy
| loans / bonds business.
|
| If coinbase statements[1] and SEC filings[2] are to be
| believed, customer funds should be segregated and not used
| for loans.
|
| >We will never repurpose your funds: We do not lend or take
| any action with your assets, unless you specifically
| instruct us to. Many banks and financial institutions use
| customer funds for commercial purposes including lending
| and trading, meaning that they often hold only a fraction
| of their customer assets at any given time. Coinbase always
| holds customer assets 1:1. This means that funds are
| available to our customers 24 hours a day, 7 days a week,
| 365 days of the year.
|
| Presumably the coinbase rewards product is treated
| separately. ie. if you put your money there and whatever
| difi lending platform it's being invested in blows up,
| you'll lose your money that's in coinbase rewards, but
| everything else should be fine.
|
| [1] https://www.coinbase.com/blog/setting-the-record-
| straight-yo...
|
| [2] https://www.sec.gov/ix?doc=/Archives/edgar/data/1679788
| /0001...
| shmatt wrote:
| I mean, what are they doing to generate you that money, and
| how safe is it?
|
| FTX gave customer deposits to Alameda, without much
| knowledge I'd guess they wanted Alameda to generate that 8%
| APY, but customers weren't in the know
|
| "literally no one does what you claim", except in the FIAT
| world, which I see crypto enthusiasts claim FTX was under
| just as strict government oversight as a FIAT exchange/bank
|
| If your point is to say, even Coinbase are risking traders
| money, then yeah they are. If someone were to build "the TD
| ameritrade" of the crypto world, I guess they'd fail
| because they aren't giving away free money
| latchkey wrote:
| > A decentralized exchange won't give you free money, so less
| people will use it.
|
| UNI and SUSHI are prime examples of a DEX giving out free
| money.
| baobabKoodaa wrote:
| How?
| herval wrote:
| they are:
| https://www.benzinga.com/markets/cryptocurrency/22/11/295847...
| RobLach wrote:
| DEXs don't interface with state backed currencies, which makes
| them have limited utility for typical users who want to engage
| in economies they actively live in.
| AkshatJ27 wrote:
| Most people use fiat, there is no way to use a credit card to
| buy crypto on a DEX. Also, transaction fees are usually higher
| and some coins just cannot be supported unless wrapped, like
| trading bitcoin on an ethereum DEX requires you to use WBTC or
| similar tokens, which are usually costly to wrap/unwrap and
| might even be centralized.
| root_axis wrote:
| Decentralized exchanges can't offer 0 fee trading.
| wg0 wrote:
| Whenever people need to withdraw, "systems can't handle load" is
| a constant theme with crypto exchanges or is this an
| overstatement?
| rabuse wrote:
| Having worked on a crpyto exchange myself in the past, it's
| almost never a technical issue; the traffic isn't bloated with
| media resources or anything, and those requests were just
| thrown in a backend queue until they were pushed to the chains.
| coffeebeqn wrote:
| It's almost like they got greedy and didn't keep adequate
| reserves
| [deleted]
| rejectfinite wrote:
| A completely deregulated market will be great! /s
|
| With no demands of a bank, why expect them to?
| adql wrote:
| See, bank and bank regulations have some problems and are not
| bulletproof, but we don't want to just have some problems, we
| want to have all the problems!
| rubyist5eva wrote:
| And another one bites that dust. Hopefully this is a sign that
| the entire crypto craze is collapsing.
| rickreynoldssf wrote:
| These morons didn't think to stage whatever massive
| change/upgrade they did and then toasted user data forcing them
| to manually restore data. Yeah I can totally trust them with my
| assets.
|
| ...or they're flat out lieing and are rug-pulling before they
| join SBF and friends in Argentina.
| adammarples wrote:
| "Industry"
|
| People gave us money and now they want it back but we spent it
| roody15 wrote:
| Well said. It is exactly this simple.
| bmmayer1 wrote:
| This.
|
| If an exchange cannot 1:1 fund withdrawals it is not an
| exchange, it's a ponzi scheme. Full stop.
|
| All real exchanges should be releasing evidence of 1:1 backed
| customer deposits ASAP like Coinbase has. And if they don't, it
| should be considered a canary of systemic risk.
| LawTalkingGuy wrote:
| Until recently all crypto exchanges _had to be scams_. They
| can only profit by selling /loaning customer funds or by
| trading with a dishonest advantage by being the house. If an
| exchange was profitable, and they all were, it was because it
| was a scam.
|
| This is the same analysis that shows that Tether is a fraud.
| If they took a dollar for every dollar token sold and then
| paid to store those dollars as collateral they'd be losing
| money, and would have no profit because they sell $1 for $1.
| They are wildly profitable though which proves that it's from
| crime because their base model has zero profit.
|
| Recently though, the last few years, you can loan crypto for
| zero time and with zero risk in a process called a flash
| loan. You structure a single transaction to borrow funds,
| spend those funds and profit, and return those funds with
| interest. This actually allows an exchange to use user funds
| without risking them.
|
| Hopefully we're done with centralized exchanges though,
| because even if they can be made possible they can never
| actually be made safe for the users.
| bmmayer1 wrote:
| Not necessarily -- you can create a profitable exchange by
| having a standard taker fee or commission. That's how
| exchanges have made money since the dawn of time and
| there's nothing wrong with it.
|
| The issue with FTX etc is that they didn't segregate their
| revenue model from their customer accounts. That's a no-no
| not only from a legal perspective but from a risk
| management perspective.
| cykros wrote:
| Indeed. There's a reason FTX had a spread charged of 0.1%
| while more legitimate (hopefully) operations such as
| Coinbase and Kraken charge around 10x as much. If they're
| not making their money there, where exactly are they
| taking...err, making it from?
| justoreply wrote:
| Do you know what are you talking about? Banks don't have all
| the funds. Are they Ponzi scheme? No.
| Gwypaas wrote:
| Banks are also incredibly tightly regulated and your
| deposit is in almost all developed countries insured [1] by
| something like FDIC [2].
|
| What the failing crypto exchanges are doing is similar to
| you buying stock in Apple, but they figure that Wal-Mart
| will give a better return, so they buy that instead, and
| when you go to sell your Apple, they hope to pocket the
| difference. With the fintech variety of financial
| engineering on top of this.
|
| [1]: https://en.wikipedia.org/wiki/Deposit_insurance
|
| [2]: https://en.wikipedia.org/wiki/Federal_Deposit_Insuranc
| e_Corp...
| bilbo0s wrote:
| Banks are not exchanges.
|
| Those two entities have two different functions in any
| financial system.
|
| You should not be using your exchange like a bank. Even
| more importantly, your exchange should not be using your
| assets as a bank would.
| typon wrote:
| > Banks are not exchanges.
|
| This is the most important sentence to say over and over
| again in this entire discussion. Crypto people have
| somehow forgot this idea or maybe most of them never
| realized it in the first place. Your wallet is where your
| coins should be stored - the exchange is a place where
| you have pointers to your N wallets for N coins - not the
| freaking contents of the wallets themselves!
| rossdavidh wrote:
| If only we had some kind of electronically transferable
| currency, in which there was government regulation to
| guarantee this kind of thing, and secure your deposits...
| thr0wawayf00 wrote:
| Problem is that exchanges are getting caught fudging their
| "proof-of-reserve" reports. Crypto.com just got called out
| for "accidentally" sending $400M to a rival exchange that
| used the balance to prop up their reserve reports. It's
| becoming a joke at this point.
|
| https://www.benzinga.com/fintech/22/11/29692377/crypto-
| com-r...
| bmmayer1 wrote:
| Yes and no. That's why third party auditors exist. It's not
| like you're just asking people to trust your bank balance
| screenshots.
| [deleted]
| dhruval wrote:
| Decentralized exchanges like dydx still don't seem to have taken
| off.
|
| Seem like an actual good use case
| yrgulation wrote:
| This is hilarious. Buying "down" coins on binance. Seems like all
| real coins will drop in value, and "down" will go up. Splashed
| 100PS. Guess i'm buying twitter soon.
| [deleted]
| ulfw wrote:
| Crypto for retail consumers is dead. The end.
|
| I just don't see how consumer confidence can come back after
| losing thousands.
| ProAm wrote:
| 21st Century Beanie Babies
| tgtweak wrote:
| The playblook seems to be the following:
|
| 1) Freeze withdrawals
|
| 2) Announce they are being frozen at some later time
|
| 3) Anyone who is powerful/influential enough to "get to you" gets
| their withdrawal processed
|
| 4) The rest are not dangerous enough to worry about having a hit
| taken out on you
|
| I hope everyone recognizes that it's about transparency and
| common sense more than regulation. Sadly this will probably
| cascade to other exchanges as general awareness forces more
| people to withdraw from exchanges. Hopefully the stronger
| exchanges persist.
|
| The real question everyone should be asking is: who is the
| counterparty to these "losing" leveraged deals?
| anticristi wrote:
| Pardon for living under a rock, but why are crypto exchanges
| affected by the mood in the crypto market?
|
| I thought that a crypto exchange functions like a currency
| market: I put an offer to sell 10,000 EUR for 1 BTC and someone
| else puts an offer to buy 10,000 EUR for 1 BTC. When orders
| cross, a transaction happens and the exchange gets a fee, whether
| in currency or crypto units.
|
| What are crypto exchanges fundamentally doing differently that
| they are suddenly losing money?
|
| Surely a drop in transactions would make them lose fees and
| require them to fire some staff, but I expected a "Facebook-like"
| downsizing, not a full-blown bankruptcy.
|
| What am I missing?
| TacticalCoder wrote:
| > What am I missing?
|
| That most of them, not _all_ of them but, by very far, most of
| them are downright scams, planned as scams from day one, just
| like in the FTX case. Evidence is mounting quickly that both
| Alameda Research and FTX were mounted as scams (despite the
| narrative that 's going to be sold that it was bad luck / bad
| trades that sent them in a death spiral).
|
| There are people who warned about the very scam Alameda and FTX
| were putting the very day FTX launched.
| michaelt wrote:
| Well, a lot of people will keep some $$$ and some
| cryptocurrency in their account at the exchange. Maybe because
| they want to play the day trader, being able to buy and sell at
| a moment's notice.
|
| So the exchange ends up with a big account of client funds
| containing cash, and a big wallet of clients' cryptocurrencies.
|
| If a bit of that money goes missing, they can cover it up for a
| long time, if cryptocurrencies are growing and there's net more
| money flowing in than flowing out. You just pay departing
| customers' withdrawals from new customers' deposits.
|
| It is only when the tide goes out we find out which swimmers
| have lost their trunks.
|
| And once a company's demise becomes inevitable, perhaps
| insiders decide to help it along. If you've already been hacked
| for $10 million, why not make it $100 million given the
| company's going under anyway and you'll be the prime suspect?
| Nifty3929 wrote:
| You have to look at the business model of the exchange. They
| way you describe it is how it SHOULD work. The exchange makes
| money directly from you through transaction fees or just
| account fees. They would not need to "invest" your crypto in
| anything, because they have other ways to make money. This is
| (I think) the way Binance and Coinbase operate.
|
| But a lot of these exchanges have attracted customers by
| offering interest (rather than charging a fee) and/or free
| transactions. But then how can the exchange make money and keep
| the lights on? Well they have to "invest" the customer's money.
| Then the investments go bad and it all blows up.
| XCSme wrote:
| I think they are more like a bank, when everyone wants to
| withdraw at the same time, bad things happen.
| vbezhenar wrote:
| Crypto exchanges always have lots of money because plenty of
| people keep their money inside. Those lots of money are getting
| withdrawn by owners and spend. It would be stupid not to do so.
| Free money yo. It works as long as exchange grows (more money
| to spend) or at least does not shrink. It stops working when
| lots of people want to withdraw their assets which are already
| gone. Time to hide.
| benjaminwootton wrote:
| Firstly, people keep their Crypto with the exchange for trading
| purposes and because it is easier than self custody. This means
| if the exchange goes bankrupt they potentially lose their
| money.
|
| Secondly, as it is an unregulated space, we have instances such
| as FTX where they were using clients funds which should be
| segregated. This arguably crosses into fraud, and we do not
| really know which exchanges have been doing this and which ones
| have been properly segregating client funds. Coinbase is
| probably the only one we know for sure as they are an audited
| US publically traded company.
|
| Finally, we also have situations where exchanges are doing
| things such as not matching client deposits to their reserves
| 1-1, or hold those reserves in less liquid investments. This
| could range from another fraudulent situation to good practice,
| but leaves them very exposed to situations where everyones
| wants their money back now.
| smcl wrote:
| Re point #2 - this is one of the crazy things for me. When
| you work in finance, in the UK at least, you get it drilled
| into your head what "client money" is, what that implies,
| what you can do with it, and notably you get reminded during
| any training session the size of the fines that get imposed
| on people who fuck with client money.
|
| So to me it suggests that they simply don't employ anyone
| with any experience in banking or compliance, if they did
| those people would be raising hell or at least leaking or
| whistleblowing
| jasonwatkinspdx wrote:
| It's worse than that. FTX's regulation and compliance
| officer was previously the legal representation for a shady
| online poker operation that used a bunch of offshore shell
| companies and whatnot to avoid US law for years. It's clear
| FTX's posture was to maximally avoid regulation.
| pjc50 wrote:
| Well, yes, it was a startup by a bunch of twentysomethings
| with no real banking experience. There was no partitioning.
|
| > the size of the fines that get imposed on people who fuck
| with client money.
|
| This is crypto, law doesn't apply here.
|
| Well, that's the marketing pitch at least. So far a lot of
| exchanges and such like have gone bankrupt or been
| blatently stolen by their operators and nowhere near enough
| people have gone to jail.
| digianarchist wrote:
| 3.5 years at Jane Street Capital. No excuse really...
| smcl wrote:
| I should say that what surprised me wasn't that a bunch
| of kids started up a company and during that process
| skirted, if not regulations, at least common sense. But
| that once serious money got involved and they grew into
| the millions and then _billions_ of assets under
| management, nobody was around who could tell them that
| this was reckless and dangerous
| thatguy0900 wrote:
| All of the modern startups have skirting laws as a
| selling point to investors, they want them to be like
| that. Look at the Greyballing Uber was doing when it was
| a multinational billion dollar corperation. They actively
| don't want to play it the right way, they're going for
| the money.
| MarkPNeyer wrote:
| On the contrary, they were being touted as a shining
| example of responsible crypto. They paid for a good
| reputation by donating to the "correct" causes and
| politicians.
| roywiggins wrote:
| Even if an exchange doesn't start out as a scam, it might
| become insolvent due to a partial hack, or losing a wallet by
| accident, or some other screwup.
|
| An exchange can be technically insolvent for a long time
| without anyone noticing, and try to fill the hole with money
| from fees etc. All will look normal from the outside... until
| too much money gets taken out too fast.
| Jerrrry wrote:
| Bingo.
|
| The only way to be profitable is to fee transactions.
|
| There are a magnitude more ways to be unprofitable, however,
| and because of rampant incompetence, the the scales are
| clearly favoring the bold/gullible holding large bags of
| those who have fleeced.
| yonixw wrote:
| For FTX, turns out they called themselves "crypto exchange" but
| lent the money just like a bank, making them, surprisingly,
| vulnerable to bank run, which happened.
|
| Unfortunately, this is common, just like $LUNA called
| themselves "stable coin" but it was stable only against assets
| in the crypto that were not stable at all.
|
| Live by "Do your own research" and die by it. I guess.
| ffmpegy wrote:
| crime.
| giaour wrote:
| Crypto exchanges also function like banks (holding customer
| deposits, making loans/investments with customer funds), just
| without reserve requirements or FDIC insurance. The protections
| against bank runs that we have in place in TradFi are largely
| lacking in crypto, and the whole sector seems to have reached
| 1929 in its speed run of modern economic history.
| nwah1 wrote:
| Most of them are committing massive fraud. Gambling with
| customer funds. Misreporting trading volume via wash trading,
| and using that to create false impressions in the market that
| they can trade on. For instsnce, using their own tokens or
| "stablecoins" and then juicing the numbers for those.
| jandrese wrote:
| The thing that you are missing is that crypto transactions are
| slow and expensive. When I say slow I mean hours to complete a
| single transaction. That's why people keep their money on the
| exchange, it's far more efficient and usable. Of course it's
| also risky because exchanges do rug pulls all the time. Knowing
| when to pull your crypto and bail is a trick. If you're seeing
| news articles about "minor irregularities" and "temporarily
| suspended trading" it is too late. Your money is gone.
| lui8906 wrote:
| Name one Crypto chain that takes hours to confirm a
| transaction. Bitcoin has a blocktime of 10 minutes and
| Ethereum is 10 to 20 seconds. More modern networks process
| transactions in orders of magnitude less time, eg. Solana has
| a slot time of 0.5 seconds and time to finality being 1 or 2
| seconds.
| Hallucinaut wrote:
| All things are liquid if the transaction fees are big
| enough
| anticristi wrote:
| Okay, so if I replace the word "exchange" with "Ponzi
| scheme", then all "crypto exchange" news make a lot more
| sense to me.
|
| Thanks!
| nemo44x wrote:
| As far as I know, Coinbase works this way. They don't transact,
| trade, or create derivatives of the crypto coins they manage.
| They simply make a profit by charging a fee per trade. They are
| regulated and a publicly traded company (which means certain
| standards of accounting) so they might be one of the only ones
| standing when this thing is done falling down.
|
| These other exchanges are doing far more exotic things like
| creating their own coins to grant status on their exchange and
| creating derivatives so traders have more leverage and
| therefore action. Coinbase would be considered boring to these
| users since it is a vanilla exchange.
| Pepe1vo wrote:
| From a legal perspective there are no required internal
| controls on the flow of crypto going in and out. Apparently
| when there is a couple of hundred million worths of crypto
| sitting in a wallet, it becomes real tempting to go to the
| racetrack so to say.
|
| Also, most of these exchanges have their own tokens which they
| control the supply of and keep as "assets" on their books. In
| doing so they can use these self printed tokens as collateral
| for loans. Add to that some nicely leveraged positions in all
| kinds of shitcoins and you start to understand how we got here.
| paulpauper wrote:
| Never heard of this one. There are 100s of exchanges. Despite
| recent bad news, the vast majority of exchanges have not failed.
| ChrisClark wrote:
| AAX isn't even in the top 100 crypto exchanges by volume. We just
| cherry picking scammy, unknown exchanges now for news?
| ulfw wrote:
| Crypto for your average retail customer is dead.
|
| I just don't see how consumer confidence can come back after
| losing thousands.
| [deleted]
| gjvc wrote:
| contaigon
| bogomipz wrote:
| I found it difficult to parse this sentence and not think this is
| maybe one of the worst euphemisms in public relations I have
| seen:
|
| >"Due to the failure of our third-party partner, some users'
| balance data were found abnormally recorded in our system."
| kensai wrote:
| My God, what is next, Kraken?!
| Zamicol wrote:
| This is why decentralized exchanges that run on top of smart
| contracts, like Uniswap, were built.
| HenriTEL wrote:
| Those exchanges don't have the ability to trade crypto for fiat
| (to my knowledge) so it's not a real alternative.
| Lichtso wrote:
| Not an exchange, but still a decentralized system which can
| be used as off- and on-ramp: https://bisq.network/
| HenriTEL wrote:
| Very interesting. You still need bitcoin as proof of good
| will to make a trade but then you've plenty of ways to
| proceed to the actual trade in fiat.
| speakfreely wrote:
| > Due to the failure of our third-party partner, some users'
| balance data were found abnormally recorded in our system. Hence,
| limiting our services to prevent further risks, the technical
| team has had to manually proofread and restore the system to
| ensure maximum accuracy of all users' holdings.
|
| "Abnormally recorded" ... "prevent further risks" ... "manually
| proofread" ... "maximum accuracy".
|
| Wow.
| jwitthuhn wrote:
| That also really stuck out to me.
|
| "We're aren't sure customer's recorded balances are accurate
| and it may be possible for money to simply appear or disappear
| in our system, but we definitely have enough money to pay out
| everyone's balance (which as already mentioned is inaccurate)"
| bilbo0s wrote:
| This will be a hard lesson but a good lesson for a lot of
| people.
|
| To be honest, crypto doesn't even need exchanges. Some even
| have smart contract capability that can explicitly outline
| the terms and conditions of any single trade. An exchange is
| superfluous. So as soon as you see people going to an
| exchange en masse, to trade assets with smart contracts on
| them, you know something is out of place.
| expazl wrote:
| My take is more like "We might technically be in debt since
| our system recorded exchanges of now worthless crypto for
| other denominations, but we're going to manually go back on
| those orders and claims its due to system errors."
|
| But lets see how this turns out.
| jeremyjh wrote:
| We've already stolen your money, but hopefully as a community
| we can work through these troubling times together.
| throwayyy479087 wrote:
| We're sorry for your loss
| SV_BubbleTime wrote:
| And..... It's gone.
| lambda_dn wrote:
| Some of you will lose all your money that's a risk I am
| willing to take (CEO of random crypto company)
| smileybarry wrote:
| Everything ends up being an Excel sheet, I guess.
| Ocha wrote:
| Sounds like it was written by GPT3.
| 55555 wrote:
| It actually makes sense if they were "dropshipping" lol, which
| an exchange might do to increase liquidity. In other words,
| when you deposited to their exchange they actually held your
| money and executed your trades at FTX for certain pairs. Then
| FTX suddenly zeroed everyone's balances (! or at least many
| people's) so their crappy scraping system overwrote your old
| balance with zero and they have to manually check backups to
| see how much money you had with them. Definitely possible as an
| exchange is a chicken and egg problem and they seem to be a
| nobody.
| MichaelCollins wrote:
| I think it's safer to assume they saw the implosion of FTX
| and figured now was a good time to take the money and run. No
| crypto exchange deserves the benefit of the doubt in the
| court of public opinion; everybody is safer if they assume
| all crypto exchanges are thieving snakes.
|
| At the very least, if you _really_ want to be in on the
| crypto thing, keep the funny money yourself in your own
| wallet, and wait a few years / _decades_ for government
| regulation to catch up before you trust any crypto exchange.
| EMM_386 wrote:
| If they are going to make stuff up at least make it half-
| believable.
| anon291 wrote:
| This is a major indictment of blockchain technology.
| Supposedly, all these accounts are recorded on an immutable,
| verifiable chain. Manual proofreading means something is wrong
| with your blockchain code, or you're lying to users about where
| the recording happens.
| pokeymcsnatch wrote:
| Transactions on the exchange don't take place on the
| blockchain. The data they're "proofreading" is probably in a
| traditional db.
| bussierem wrote:
| I mean this as a genuine question (not an indictment), and
| as a complete blockchain/crypto noob who has just been a
| spectator:
|
| Why is this the case? Isn't this like one of the best use
| cases of the blockchain in crypto? Why would they not
| utilize the technology to prevent this exact thing from
| happening? Are there tradeoffs I'm not aware of?
| pokeymcsnatch wrote:
| The practical tradeoff for not using the actual currency
| blockchain is instant settling time and 0 cost for
| transactions. If every transaction was on the chain, they
| may take hours or longer to settle (not unlike trading
| shares on a "real" stock exchange), and there'd be a fee
| for each one.
|
| As for why they don't keep them on an internal
| blockchain, there's really no advantage in doing this vs
| a proper setup with a database. The part that makes
| crypto work isn't necessarily the blockchain, it's the
| public record part.
|
| Blockchain and crypto go together because the blockchain
| acts as a public ledger between parties who don't (or
| don't need to) trust each other. On an exchange, there's
| no trust issues- you and the person you're trading with
| have both agreed to trust the exchange and their records.
|
| Edit: I'm not super up-to-date on the crypto world, but
| I'm reasonably sure that there are on-chain/decentralized
| exchanges. I also think that there's been a lot of
| development towards making pseudo-on-chain exchanges
| through projects like the Lightning network in regards to
| BTC.
| RexM wrote:
| Don't most of the exchanges pool the coins and keep their own
| ledgers for who owns what? Once the coins go into the
| exchange it's kind of just a black box and you lose the
| blockchain audit trail, right?
| [deleted]
| overgard wrote:
| Can someone actually explain what the intrinsic use of coins is
| supposed to be (aside from speculating). Their value is so
| volatile they suck as actual currency, not to mention if you were
| the guy that spent 10,000 bitcoins on a pizza back in the day
| you'd feel pretty stupid about your 300 million dollar pizza.
| They're not even particularly good for illegal purchases -- you
| have to know what you're doing to keep your blockchain
| transactions actually anonymous.
|
| Besides the uselessness, let's not ignore the awful downsides.
| They're a huge boon for randsomeware. Oh and they're an
| environmental disaster.
|
| Frankly I'm not really sad to see this stuff collapse, because
| when you get rid of speculation there's not much good about
| crypto.
|
| I do think we need some sort of crypto currency in the future. I
| believe in the _idea_ of it. But the current implementation is
| ridiculous and awful. It needs to function as an actual currency,
| that you would be willing to spend, not as some sort of
| incomprehensible "investment" vehicle.
| HDThoreaun wrote:
| I can see some value in ethereum's VM. The upside there is a
| bootstrapped cloud that every computer can join when not in
| use, unlocking tons of value that currently is just sitting
| around. Seems reasonable to believe that 10 years from now ML
| training/other compute intensive async tasks might be done via
| the ethereum VM.
|
| Probably would be easier to just do this via a centralized
| organizer, but getting enough buy in to actually attract users
| might be difficult. Ethereum already has it.
| herval wrote:
| Volatility aside, stuff like Bitcoin _is_ already used for
| payments, albeit in a much lower volume than the crypto
| proponents wish it would be. I pay contractors now and then
| with BTC, particularly in South America and Africa, and works
| MUCH better than SWIFT (even if I have to convert from USD to
| BTC and they have to convert from BTC to whatever on their
| side).
|
| Projects like Ripple also have their use - it's mostly a
| replacement for SWIFT & similar systems (you'd be surprised by
| just how fragile these interbank systems are).
|
| Some countries are implementing their own "digital currencies"
| as well (notably China), and they may end up being some flavor
| of crypto currency (although a public blockchain is not
| mandatory for these cases - see the example of PIX in Brazil,
| which works incredibly well without any public chain
| shenanigans).
|
| So yea, there's value on the whole thing, but the amount of
| fraud, money laundering and flat out scams (in particular now
| that mainstream VCs are propping up the entire system) is
| really too big of a downside to ignore.
| theturtletalks wrote:
| Cryptocurrency is Pandora's Box and the last thing to escape
| it will be decentralization.
|
| Everything you listed is the cost of decentralization and
| making sure a few powerful players can be held in check.
| Before someone chimes in and says things are still
| "centralized" in crypto, things are slowly progressing to
| decentralization. And even if it takes decades, some
| industries like payment processing are the ideal case for
| crypto (Pornhub only takes Bitcoin for payment).
|
| Decentralization has a cost, but understanding if it will
| even work has a even bigger cost.
| happyopossum wrote:
| > and works MUCH better than SWIFT (even if I have to convert
| from USD to BTC and they have to convert from BTC to whatever
| on their side).
|
| Assuming the exchange you're converting in doesn't collapse
| before giving you your money...
| yieldcrv wrote:
| Avoiding all regulatory scrutiny and delays of an
| international wire transfer by converting them to domestic
| transfers in both countries is a major use of crypto that has
| almost no way of being quantified. International wires are
| fraught with painful user experiences and costs and time
| issues and its all unknown beforehand.
|
| This works even better when you already have inventory of ANY
| crypto, or keep stablecoins on hand because you use them.
| then the request to pay doesn't require you to get USD over
| to a crypto exchange and convert, just the near instant act
| of transferring. When your contractor is able to get goods
| and services and invest in crypto, they don't need their
| local fiat either, just a common reality, not something to
| convince anybody of (unlike when we were doing this during
| the last decade).
| herval wrote:
| That requires you to trust stablecoins, though. Not a very
| wise idea IMO, for any meaningful amount of money
| doorman2 wrote:
| I find it helpful to think about blockchains as the next step
| in the fintech ladder. Imagine you want to represent ownership
| of a company, i.e. stock. You don't need electricity to do
| that. You can accept orders in person, record ownership in a
| book, issue paper certificates, etc. However, when the
| mainframe was invented, it became easier to track ownership
| electronically. Using electronic transactions also made it
| possible for many more people to trade and expanded the types
| of products offered, e.g. options became commonplace. Now, the
| blockchain has arrived. It does everything a mainframe at a
| large financial institution can do, but it opens up the
| platform so that more complicated transactions can happen and
| democratizes the platform so that anyone with a computer can
| write their own smart contract.
|
| What we're seeing now is akin to the the dotcom boom / bust in
| the late 90s and early 2000s. A new technology has appeared on
| the scene which leads to two things:
|
| 1) People get ahead of themselves. In the late 90s, people
| could envision all the cool things the internet would unlock
| and tried to start businesses to realize the potential. Many of
| those business ideas would be viable today, but the tech wasn't
| there at the time leading to a lot of empty promises being
| sold. Today, people can envision how the blockchain will lead
| to the securitization of everything, but the tech isn't quite
| there to make the transition yet.
|
| 2) As with any optimism boom, there will always be crooks ready
| to separate a fool from their money.
| strangescript wrote:
| Its not practical as a global currency with regards to BTC. It
| never really has been. It is too slow and too expensive
| compared to centralized options. The idea of a neutral all
| digital currency sounds fantastic but it glosses over a key
| advantage of the US dollar. The dollar is backed by the US
| Gov't and the US military. It didn't just randomly become the
| defacto monetary standard in the world by accident.
|
| Price fluctuations would diminish with more adoption as well.
| We also interact with things that vary wildly in price year
| over year too, like the price of gas (oil). We have just become
| used to it. The dollar itself fluctuates a fair bit, the DXY
| index is at 106, and it will probably get much higher next year
| indicating a strong dollar if there is a global recession.
| Actual price adjustments are just slow to trickle down to
| consumers because of a lack of practicality of changing on the
| shelf prices each day. Also, inflation will drive prices
| higher, but even after the economy is back under control,
| prices rarely will go back down.
| legitster wrote:
| Theoretically, the coins also act as an ownership share in
| their respective technology. Or are a transaction unit for it.
| You could have a deed to something on a blockchain instead of
| at a title company.
|
| But to your point, if 99.99% of the technology the coins
| represent is... more coins? Then yeah, it's a big ol' Ponzi
| scheme.
|
| I always thought it would be interesting to have a coin
| specifically based on its demand. You have to post something
| for sale in that coin for a new coin to be minted. So the coin
| only propagates so long as there is actual demand for it.
| capableweb wrote:
| I don't use a ton of cryptocurrency, but I have a few uses for
| it.
|
| My primary use case right now is using Filecoin to pay for off-
| site backups of various kinds, encrypted with (supposedly)
| quantum-proof cryptography that I encrypt my data with before
| finally replicating it to numerous instances across the world.
| This is together with also writing my backups to CDs, using
| online services like rsync.net and one big USB stick at one.
| One time I lost my backups so I'm trying to make sure this
| never happens again...
|
| Secondly, I've used Algorand, Ethereum and Bitcoin for
| transferring funds to relatives and friends to/from South
| America and Africa, which ended up being the cheapest way of
| transferring funds to them, even accounting for me buying it,
| the transfer fee and them cashing it out. It also was way
| faster than anything we tried before, so pretty good experience
| overall.
|
| But to your main point, most if not 99% of all cryptocurrency
| is definitely over-hyped beyond anything I've ever seen. I
| wouldn't touch most of the ecosystem with a ten-foot pole,
| doing a lot of research and actually understanding the
| protocols that you use. Most people don't, so they tend to get
| burned. Countless of times I've had to help family and friends
| to avoid scams that they come across, and it honestly makes me
| kind of glad that what is happening now is happening, it'll
| shake off all of these scammy projects that are just trying to
| scam people.
| [deleted]
| jeffreyrogers wrote:
| The only real use case for crypto has always been buying drugs
| online (and other, similarly illegal things that normal payment
| processors won't touch). Tons of hot air has been generated
| proposing other things but none of them have any product market
| fit once you remove the traders/speculators.
| shuntress wrote:
| >Can someone actually explain what the intrinsic use of coins
| is supposed to be
|
| It's _supposed to be_ a digital equivalent to physical cash.
| Specifically the ability to be transferred directly from one
| individual to another without either having any special
| permissions, access, or power. The ultimate goal is for all
| transactions to be completely stateless. Meaning, you should be
| able to "drop" a bitcoin into a digital "bucket" without
| needing _any kind_ of pre-existing authorization
| /account/identification/association/etc with the holder of the
| bucket (or any third-party acting on their behalf).
|
| You are correct in your assessment that in their current (and
| foreseeable future) states, cryptocurrencies are completely
| useless as actual currency.
| nikanj wrote:
| Drugs. Other contraband too. Blackmail, ransomware,
| circumventing anti-money laundering / taxation / capital
| controls / etc
|
| Not many legal use cases,k but there are massive dark
| industries that would suffer greatly if cryptos disappered.
| nlitened wrote:
| I can explain seriously and answer follow-up questions. I will
| simplify and just highlight the most valuable current use case,
| there might or might not be others now or in the future.
|
| The value of ether (ETH) is to be a currency that you need to
| spend in order to include transactions into Ethereum's
| distributed ledger. Most useful transactions are transfers of
| stablecoins like USDT or USDC. USDT and USDC can be exchanged
| for goods and services all over the world, and are very
| convenient for any international transfers and cash exchanges
| bigger than 500 USD.
|
| Price of stablecoins is ideally tethered to the underlying fiat
| currency, so price swings don't matter. Price of ether is
| _whatever_, because usually your stablecoin ledger transaction
| fee is low enough, so price swings don't matter again.
| secondcoming wrote:
| So in order to transact on 'The Blockchain' I'll need a
| stablecoin for the purchase and ETH in order to submit my
| transaction?
| nlitened wrote:
| Yes, like when you go to a shopping mall, you do need fiat
| currency to purchase goods, _but_ you also need to keep
| your car's gas tank topped up to get there. Your car's gas
| price also fluctuates, but usually it does not affect your
| shopping plans too much, unless you're doing very large-
| scale shopping.
| aeyes wrote:
| I fail to understand how this use of stable coins is better
| than licensed currency transfer companies. You still need to
| exchange your local currency twice on shady unlicensed crypto
| exchanges.
|
| Or am I missing something here? I regularly transfer
| thousands of Dollars to different countries, the provider I
| use usually gets the job done on the same day.
|
| There are also huuuge differences in crypto exchange rates
| depending on country. Crypto exchanges work with unfavorable
| FX rates when selling USDT unless you already have USD.
| Binance in my country is currently showing a 4% difference
| compared to exchange rates on XE.com. Even my bank gives me a
| better FX rate than that.
| nlitened wrote:
| > I fail to understand how this use of stable coins is
| better than licensed currency transfer companies.
|
| It's not better--if you have access to licensed currency
| transfer companies. But 220 million people from Russia and
| Iran don't nowadays, and likely from many other "third
| world" countries where people still want to do honest work,
| buys stuff, pay salaries, feed their kids, etc. Hundreds of
| millions of people all over the world can't just walk in
| and open a low-fee bank account, they just instantly get
| rejected.
|
| Previously I thought that "think of the unbanked" was a
| rather silly excuse, until this year it happened to me and
| my business.
| agumonkey wrote:
| one dude explained that they wanted to make a loan platform
| that would avoid usual bank management costs since it's
| automated, so he claimed the higher yields came from that. It
| seemed a coherent explanation to me (he could be lying too, but
| at least his talk had some foundations and not moonshots of
| potential decentralized nirvanian future)
| pavlov wrote:
| How does the automated loans-on-blockchain platform discover
| someone's real income and existing debts in a way that can't
| be forged? If it doesn't do that, it's not really automating
| anything that banks currently do when deciding to extend you
| a loan. And if it uses existing sources like credit scores
| and the salary data sold by employers, then it's merely the
| same as the systems banks and other consumer lenders already
| use.
| agumonkey wrote:
| The risk managing part was not discussed indeed.
| [deleted]
| kranke155 wrote:
| When Ethereum/ another crypto VM becomes fast enough,
| decentralised applications will be the new iPhone - stuff we
| can't imagine will be built there.
|
| As far as NFTs, 90-99% of the activity is nonsense, fraud and
| money laundering, but there are real artists in the space.
| Whether that's satisfactory for you is really a matter of
| perspective.
| jankyxenon wrote:
| The use case is "stuff we can't imagine"?
| kranke155 wrote:
| I can imagine lots of apps, and I also think lots of
| currently centralised apps would be replicated in crypto
| VMs, when they become fast enough.
|
| But even talking about Uber on chain or Airbnb on chain is
| silly right now, since the whole space is yet again on
| "collapse" days.
|
| I wouldn't judge crypto for 10-20-30 years. I think we're
| on the ARPANET days, and even suggesting Amazon would get
| you laughed out of the room.
| damon_c wrote:
| Imagine someone told you in 1989 when all the internet did
| was email and ftp, that the internet was going to do a lot
| of other things but they didn't really know what yet.
| Tao3300 wrote:
| > all the internet did was email and ftp
|
| In retrospect, that would have been a nice stopping
| point...
| hn_throwaway_99 wrote:
| There was still _plenty_ that could be imagined in 1989
| that the Internet could be capable of - there was none of
| this "it is just too unimaginable to even consider"
| nonsense.
|
| E.g. there were plenty of dialup BBS services and things
| like Prodigy with GUI, chat, etc. in the 80s. It wasn't
| that much of a great leap to see how moving those types
| of things from proprietary networks to the Internet would
| occur.
| kranke155 wrote:
| DAOs are fantastically interesting and if you look into
| the ones that work, Vitalik's ideas for Quadratic Voting,
| there's a lot toucan imagine could happen there.
|
| DAOs and NFTs are already incredible in my view, they are
| just in pre-alpha stage and everything is kind of a mess.
| But people see the pre-alpha and goes "this will never
| work". I really disagree. I see for instance how DAOs and
| blockchain could help developers receive compensation for
| commits to open source software, creating a possibility
| for the commercialisation of open source that competes
| with even large companies. I know people who looked into
| this. And I hope it happens.
|
| It would dramatically change the incentives if you could
| get as much or even more money from open source software
| as a developer, and even more so if you could colect
| royalties for your work wherever it's used. The entire
| digital economy would change if you could have open
| source software that's fully open, permission less and
| paid for.
| hn_throwaway_99 wrote:
| > I see for instance how DAOs and blockchain could help
| developers receive compensation for commits to open
| source software, creating a possibility for the
| commercialisation of open source that competes with even
| large companies. I know people who looked into this. And
| I hope it happens.
|
| I was appropriately reprimanded by dang yesterday for
| starting a comment with an attack, so I'll slow down and
| just point out the following:
|
| 1. GitHub, for example, already makes it extremely easy
| to contribute to open source developers. It's called
| GitHub Sponsors.
|
| 2. I have actually donated to a developer that writes a
| library I love using GitHub Sponsors. It was trivial to
| do, I just entered my credit card, the money came out on
| a monthly basis, and I cancelled after a year (I told the
| dev I'd support them for a year). I'll also note that I
| don't live in the same country as the developer and the
| developer's country uses a different currency.
|
| 3. The thing that gets me about these kinds of examples
| proposed by crypto fans is that the _mechanics_ of how
| to, for example, pay open source devs is zero part of the
| problem. The problem is that a lot of people are willing
| to work for free, and software users don 't like to pay
| for stuff that they can get for free.
|
| Again, I see a lot of "hand-wavy utopianism" from crypto
| enthusiasts, but I see zero examples of (a) why this
| would be better than GitHub Sponsors, or (b) why do you
| think GitHub Sponsors hasn't been more successful (hint,
| it's not that actually making payment with a GH
| Sponsorship is difficult).
| kranke155 wrote:
| I've gotten some flak from dang as well ;) happens
| sometimes
|
| I think we are describing fundamentally different
| economies. GitHub Sponsors is optional. I'm talking about
| a way to have mandatory payments in open-source, with
| fully transparent automatic payment mechanisms to all
| contributors.
|
| And before you say well how, MakerDAO is kind of already
| working like this (I'd have to look into it more but
| that's my impression).
|
| Imagine you buy a piece of software - and it costs you
| 20$. It's open source but when you buy it you get an NFT
| that lets you run the software. The commit tree and their
| importance are valued by the community. And when you buy
| the software everyone who's contributed gets a piece. If
| you add or extend to it, you'll also get a share, or you
| can sell your modules on the side and make your own money
| on top. But using the blockchain as a method of developer
| verification, open source becomes profitable in a way
| that's verifiable, decentralised and permission less.
| Anyone can fork but whatever much of the software youve
| re used still goes to the original developers.
|
| I'm talking about full open source software that would
| always be paid, where the devs would be IDed on chain,
| where anyone could write new modules for and get paid on
| chain for their contributions. All of this is not crypto
| Utopianism - again some DAOs are already there or close.
|
| Im not talking about "hey sponsor this dev". I'm talking
| about a way to earn money while keeping software open
| source and rewarding people for expanding it in a
| completely novel way. This is already partially true,
| even if my whole vision at the moment is a bit fuzzy, it
| would solve a major challenge that I think we have now.
|
| I am a bit sleepy so I wonder if my comment will make
| sense but I hope it does.
|
| But fundamentally I believe MakerDAO already does this,
| it's just a web app and you pay to use it. Part of that
| revenue goes to Ethereum miners/stakers, some goes to the
| protocol, and the protocol decides who to reward.
|
| I don't see why that model wouldn't work for a lot of
| other things. Essentially with crypto VMs you can enforce
| a model that A. Is open source B. Rewards contributors
| financially.
|
| Asking why this is better than GitHub Sponsors is a bit
| like asking why people didn't pay for digital art before
| NFTs. It's just fundamentally different imo.
| richardwhiuk wrote:
| The difference is that email and FTP on their own were
| really useful.
| pclmulqdq wrote:
| That was the premise of Solana, but it turns out speed in a
| distributed system needs some form of centralized
| coordination.
| kranke155 wrote:
| For now that's true. I'm not giving judgment on crypto VMs
| for 10-20-30 years.
|
| Right now 90-99% of the space is scams and nonsense, which
| happened because of the lack of a regulatory environment.
| Any smart white collar criminal and fraudster with brains
| knows they can make millions to billions on crypto and
| never be charged of a crime.
|
| Crypto is in its ARPANET whatever days. It's purpose is not
| fully clear, there are a few usable applications (Uniswap,
| NFTs, MakerDAO) but really it's purpose will only be
| realised when the main snags are solved:
|
| - it needs massive throughput - it needs some form of hack
| resistance, even if that means the ability to reverse
| transactions - it needs some form of regulations to avoid
| rampant crime and fraud - UX/UI need to be dramatically
| improved (I've heard good things about Rainbow and Argent
| Wallets).
|
| Then user facing applications will show up naturally. You
| just need it to be able to process some X amount of
| quantity of transactions, and potentially, reversibility.
| sweetheart wrote:
| > decentralised applications will be the new iPhone.
|
| What makes you think that? Genuinely curious. I can think of
| lots of reasons that the opposite might be true, so I'm
| curious as to what my blind spots may be.
| kranke155 wrote:
| It's a long discussion.
|
| Unfortunately in order to learn about crypto you have to
| ignore virtually everything that exists in the space right
| now, since white collar criminals have realised this is a
| free for all space where they can commit fraud at will and
| never get charged (with some exceptions).
|
| Really there is only one interesting thing you need to
| study. And that's Ethereum. Bitcoin is pretty much stuck in
| the past and it's a mummified open source project imo. And
| all the other interesting chains are just Ethereum clones
| with some changes - Polkadot, Algorand, Tezos are perhaps
| the very few that matter. But everything comes from
| Ethereum, and if you study and earn about ETH you will
| understand the whole space.
|
| So look at the interesting ideas and read the books from
| the good people who've done their research - Cryptopians
| came out recently and that's a good one even though I
| haven't read it I trust Laura Shin (her podcast is also
| excellent ). Out of the Ether is also good.
|
| But here are some thoughts:
|
| - DAOs are already working in making fully decentralized
| open source dev collectives and rewarding them for work
| done. See MakerDAO
|
| - dapps running in cryptoVMs can be made to run at no cost
| to the developer. That's pretty cool, since a lot of the
| "moat" that Uber, FB and Twitter build is two-fold - first
| they own your data, then they build giant infrastructure to
| serve you the app. With crypto VMs you don't need this -
| people pay for usage. If you could figure out an algorithm
| that's better than Uber's at allocating people who want to
| drive point to point, you don't need to go "oh well I guess
| I go fund raising to build the infra". Crypto VMs give you
| that for free, since the user pays for the usage of the
| application in the transaction.
|
| - decentralised applications can be made safely, even
| though again they are hard to make and lots of them are
| just copy paste by fraudsters and schemers (and inevitably
| get hacked). Uniswap, Compound, Lido, Curve Finance. There
| are multiple dapps that have never been hacked as far as I
| know.
|
| - Gitcoin is already quite an incredible little way to fund
| projects, I believe it's implemented some form of Quadratic
| Voting, which Vitalik Buterin has talked about
|
| - NFTs actually work - in the sense that there are real
| artists building communities and selling their digital art
| (not monkey pictures) I know of multiple artists who quit
| mind numbing work at big Corp and became quite successful
| in NFTs. Again 99% of the space is money laundering, fraud,
| wash trading - but so is real art (the idea that NFTs are
| special in that regard is a fiction only someone who hasn't
| interacted with the "art world" can hold).
|
| I can go on but illl have to think. But DAOs, NFTs,
| decentralised VMs with immutable data are pretty cool
| already. The reason I say I can't predict what's going to
| happen is because even being a digital artist myself, I had
| no idea about NFTs. And when I discovered them I was blown
| away. The possibilities that NFTs open up as a digital
| artist are pretty incredible - you could in theory make
| "designer levels" for Mario Maker and sell only 7 copies of
| the map! Making it a collector's item. And you would colect
| royalties forever on chain if people sold your map to each
| other. That's pretty cool and just couldn't be done before.
|
| So I have no faith in my ability to predict the future, but
| I like the internet better with DAOs and NFTs, instead of
| likes and digital feudal lords who own all your data.
|
| https://overcast.fm/+YVsUUTgOg - the Blockchain Socialist's
| interview with Buterin is really interesting, giving you a
| nice overview of Vitalik's thinking about the space atm.
| hn_throwaway_99 wrote:
| > When Ethereum/ another crypto VM becomes fast enough,
| decentralised applications will be the new iPhone - stuff we
| can't imagine will be built there.
|
| In other words, "we have no idea, trust us".
| cokeandpepsi wrote:
| as opposed to the new penny stock which is what it is now?
| kranke155 wrote:
| The penny stock phenomenon comes from the Bitcoin fantasy
| of it becoming a currency. Cryptos are not currencies and I
| don't think they will ever be. Ethereum is just liquidity
| for a decentralized VM, and whether that idea will work out
| or not is decades away from being clear.
|
| Basically it's programmable money.
| MrMan wrote:
| I think algorand is by far the best crypto platform out there,
| but the sad part is that it's the economic / behavioral issues
| that hold crypto back. if you could earn Algo and it was widely
| adopted, it would be an attractive alternative currency and
| smart contract platform.
|
| but for me tech and adoption are like two out of four things
| needed to make crypto non-evil (literally) - the third is
| democratic governance. the fourth is environmental impact which
| Algorand checks off. But it's not democratically organized or
| run, which is a complete non-starter.
|
| the foundation that runs it is probably the least corrupt org I
| can think of in crypto (I am not an expert) but its still a
| group that hold a giant percentage of the existing coins, which
| is a huge non-starter as well, and there is no concept of
| citizen ship or personhood that maps to the real world.
|
| I dont believe in the decentralization nonsense and this pseudo
| anonymous thing over crypto is not good. to really run a DAO
| you need real people interacting in something like a co-op.
| kind of like the internet, actually.
|
| what some people call decentralization I call by an old
| fashioned name - distributed. there is another concept which is
| more to the point than the term centralization and it is
| concentration. The Gini index of a logical dimension of a
| system is more important to me than whether it is centralized
| per se.
|
| So voting power should not be too concentrated, wealth should
| not be too concentrated.
|
| We are a long way from a workable model for crypto that
| fulfills these criteria. Buterin who is a frontman for
| libertarians (and worse) who are actually evil is the closest
| thing we have besides the Algo founder to a non-greedy
| figurehead, but we need no figurehead.
|
| what has proven good enough for countries will prove good
| enough for crypto. democracy.
| paxys wrote:
| Speculating _is_ the intrinsic use
| tacker2000 wrote:
| I put all my coins into a cold wallet after the tether crash.
|
| History just keeps on repeating here. At the beginning Mt Gox,
| now this FTX and AAX meltdown. People stealing billions of
| dollars.
|
| The problem is now that the trust in the exchanges has been
| eroded.
|
| How can it go back up?
|
| Probably im the end we will really need government guarantees
| like in the normal banking system, so eventually we will have
| come full circle.
| brnt wrote:
| So, having been around since the early bitcoin days, core to the
| salespitch back then was the fact you would have control. You'd
| have your coins in your wallet, and no need for banks etc.
| Apparently nobody does this anymore, and gives their wallets to
| these exchanges (i.e. banks) and balks when the obvious happens
| in pyramid schemes. People just don't get distributed currency if
| they promptly undistribute it.
|
| Or is it I who's doing the not getting things?
| probiab wrote:
| You do have control. You can start your own blockchain and keep
| the transactions flowing. Of course, transactions imply other
| people will use your chain. It's like you can create value not
| by gold, or tobacco, or even math, but by the very trust people
| have in your asset. And this brings us to a concept that some
| may be familiar with but is relatively new to the crypto
| community. A new kind of coin is here.
|
| This is a concept that probably never existed before crypto,
| called "fiat." "fiat" is the latest and greatest in crypto
| technology. True decentralization. Multiple countries. Multiple
| municipalities. Multiple systems, multiple institutions,
| multiple protocols and multiple contracts, the picture of
| decentralization that crypto could only dream of. And of
| course, if you make a mistake, you can revert your transaction,
| a form of technology crypto has not yet mastered. Oh, NFTs?
| Please. "fiat" utilizes advanced art international HS92
| commodities exchange codes to kick start the burgeoning modern
| art scene of completely legitimate businesses.
| julianlam wrote:
| No, that's exactly it. People love the idea of decentralization
| and doing things on your own, except then they realize that
| it's actually kind of hard to be off-exchange and still be
| liquid (whatever the hell that means in crypto-land).
|
| So basically no real change except they're much more exposed to
| risk (fraud and market swings notwithstanding)
| dralley wrote:
| Distributed currency turns out to be too difficult for most
| people, and a currency that only 5% of the population can use
| isn't very useful.
| zeroclip wrote:
| A lot of crypto investors are day traders or naive hodlers who
| have no idea what blockchain and DeFi means. But DeFi protocols
| like Uniswap and Aave are holding up fine and are incapable of
| pausing user withdrawals.
| alasdair_ wrote:
| There is still the question of how to convert your crypto to
| actual spendable dollars again. Sure, uniswap will let you
| get another token but you still need an exchange to get
| dollars. This gets particularly important when, say, the
| giant scam that is Tether finally crashes and burns,
| zeroclip wrote:
| Yes, a regulated centralized exchange is valuable for on
| and off ramp. All they would need to do is process user
| transactions, take a small fee, and not gamble with user
| funds. Regulators could do audits and keep consumers
| protected.
|
| But regulators have failed to provide clear framework for
| exchanges in the US[1], so most CEXes are running off
| shore.
|
| [1] https://www.cnbc.com/2022/11/11/op-ed-crypto-markets-
| need-re...
| tootie wrote:
| I read an interesting thread on why this isn't a pyramid
| scheme. Basically there's no one at the top. It's decentralized
| so there's a loose federation of edges arranged in a many-sided
| polygon. So we need a new name. Instead of Ponzi, this is a
| Nakamoto Scheme.
| oblio wrote:
| That's much better. It's not a monopoly, it's an oligopoly
| :-)
| abruzzi wrote:
| DePy - decentralized pyramid.
|
| I say this in jest. There are more than one reason to be
| interested in crypto, but when bitcoin suddenly went from
| 1BTC=USD$1 to $1BTC=USD$100 (I don't actually know when the
| boom happened--I wasn't watching that closely) the
| individualist, libertarians were obscured by the quick-buck
| types looking to turn their thousand into a million. Thats
| when the scammers all came out.
| ransom1538 wrote:
| Fuck. Exchanges. I lost all my dogecoin in the early days to an
| exchange. I knew no better it was too early.
| IndrekR wrote:
| > _People just don 't get distributed currency if they promptly
| undistribute it._
|
| Same as with source code version control. As soon as
| distributed VCS appears (git), people promptly centralize it
| with another abstraction layer (github, gitlab, bitbucket,
| etc).
| rchaud wrote:
| > Apparently nobody does this anymore, and gives their wallets
| to these exchanges (i.e. banks) and balks when the obvious
| happens in pyramid schemes.
|
| The name of the game is pump and dump, you can't play the game
| (speculation) if you're not on the field (the exchange).
|
| Crypto's marketing is 'financial freedom' as in get-rich-quick,
| not free as in libre.
| qudat wrote:
| That's right. Not to mention the transaction fees are so high
| that moving from a wallet you own to an exchange can cost
| non-insignificant amount of money.
|
| Add on top of that the general volatility of crypto, people
| not wanting to deal with maintaining their own wallet, and
| you have a recipe for people keeping their funds on
| exchanges.
| bogomipz wrote:
| >"Not to mention the transaction fees are so high that
| moving from a wallet you own to an exchange can cost non-
| insignificant amount of money."
|
| I realize that transaction fees are probably a moving
| target but is there a ballpark figure you or someone else
| could say? I'm guessing it's percentage-based?
| xanthrax wrote:
| It is not percentage based but based on the demand for
| the next block space. That demand is on the basis who
| will pay the most per byte for each transaction so your
| is based on the number of bytes in your transaction
| (usually directly proportional to the number of inputs
| and outputs) and how quickly you want it in the next
| block. Currently about 44 cents will guarantee you in the
| next block - note this is a moving target based on the
| competition for block space. mempool.space is a good
| visualisation.
| michaelt wrote:
| According to https://ycharts.com/indicators/bitcoin_avera
| ge_transaction_f... it's varied between $2 and $0.5 in
| the last 6 months. There have been times (mid-2021) where
| it was >$20 for a single payment.
|
| Needless to say, this is much more affordable for a
| million-dollar transaction than for buying a cup of
| coffee :)
| qudat wrote:
| I used to trade with eth every once in awhile. It wasn't
| uncommon for a tx fee to be on the order of $5-20.
| ncallaway wrote:
| > I realize that transaction fees are probably a moving
| target but is there a ballpark figure you or someone else
| could say?
|
| I'll give the answer for Bitcoin as of a couple of years
| ago, and others can chime in for things like Etherium and
| other cryptocurrencies.
|
| With bitcoin it's not a fixed fee, it's more like a
| priority bid. So, there's a pool of "pending"
| transactions that any miner can grab from. Each pending
| transaction has a bid for its transaction fee. Each miner
| will then grab whatever set of transaction it wants to
| bundle into a block, and try and compute the hash for
| that block. Once a miner finds a hash for that block, all
| the transactions in that block are added to the chain and
| the transaction is "complete" (in practice, people will
| often wait until one or two blocks are added _after_ the
| transaction is included in the block chain to be _sure_
| it's done).
|
| So, to your question, ultimately the transaction fee is a
| bid for how quickly you want your transaction included.
| You can bid $0, and it's likely your transaction will
| _never_ be included. It doesn't really matter how _much_
| you're transferring, but _how quickly_ you need it
| included in the chain.
|
| How much you'd practically pay for a transaction (in USD)
| has been _super_ variable over the lifetime of Bitcoin.
| It fluctuates with how many miners there are, how many
| transactions are happening, and the exchange rate of BTC
| to USD (since the feeds are paid in BTC). See the chart
| at the bottom of this page:
| https://privacypros.io/tools/bitcoin-fee-estimator/
|
| It looks like it's generally between $0.75-$1.00 right
| now. So if you're making a transaction of $1M the fee is
| trivial, but if you're buying a cup of coffee for $5
| it's...pretty high.
| treffer wrote:
| Well, run a full bitcoin node. I am doing thwt.
|
| It's close to just running your own email / fileserver etc.
| IMHO.
|
| So while possible it's also annoying and not worth it for most
| people, and I get that.
| kkielhofner wrote:
| As I've noted before on HN the entire concept of people being
| able to manage their own wallets flies against everything we
| know about people. People forget stuff, make mistakes, and lose
| things. The margin of error for a wallet is tiny. It's not rare
| for crypto forums, twitter, etc to prescribe completely
| ridiculous processes and systems for securing wallets, backing
| up seed phrases, etc. There's an entire cottage industry built
| around people etching their seed phrases on steel plates for
| people to (I'm not kidding) bury them like they're gold in the
| 1800s.
|
| Plus funds in a wallet require extra steps when you want to
| trade on an exchange (extra costs via gas, time, possible
| errors, etc). The use cases for crypto are so minimal for the
| general population one could argue it's only survived this long
| through making trades on exchanges - to what essentially
| amounts to gambling. You can't gamble with funds in a wallet
| which defeats the entire purpose of crypto for the vast
| majority of the "users" in the space.
| timemct wrote:
| > There's an entire cottage industry built around people
| etching their seed phrases on steel plates for people to (I'm
| not kidding) bury them like they're gold in the 1800s.
|
| "I write these words in steel, for anything not set in metal
| cannot be trusted." - The Well of Ascension, by Brandon
| Sanderson
| poulpi wrote:
| Actually, if you want something to stay, you should go for
| stone rather than metal.
|
| Stone have low market value while metal can always be
| melted to do something else (like weapons).
|
| It's one of my main take away of my art history lessons ->
| most antic art done on metal has been lost, but the stone
| remains!
| itronitron wrote:
| A friend of mine would use fiberglass resin, bondo, and
| plywood because they wanted their sculptures, which they
| then boxed into custom-sized crates, to last for at least
| one hundred years.
| bussierem wrote:
| I know this type of comment (and my own) is more common to
| reddit and commonly frowned upon in HN threads, but by god
| this made my morning thank you.
| Karzyn wrote:
| FYI, that's what the little arrow next to their name is
| for.
| narcraft wrote:
| I like this informative reply
| Animats wrote:
| There's a market here for a safe way to store crypto.
| Something like a thing you carry with you, a thing you can
| keep at home, a thing you have a friend hold, a thing you
| have in a safety deposit box, and info a service holds for
| you. Some combination of majority votes, time delays in days
| or weeks, and warning messages lets you recover from loss and
| damage. With backup from an insurance company. But nobody has
| addressed that market.
| bredren wrote:
| Variations of this have been tried many times, for example
| hardware wallets.
|
| But a lot of this is too troublesome or adds too many hoops
| to jump through than is practical for many people.
| Animats wrote:
| Yes. Someone has to get the user experience right.
| bredren wrote:
| FWIW, that user experience is most likely Coinbase, or
| something very much like Coinbase. Not only is the UX
| good, but customer funds are taken seriously now and have
| been for a long time.
| chromatin wrote:
| I can speak only about Bitcoin, not "cryptocurrencies"
| generally (and in fact, all of the real innovation in
| secure storage that I am aware of is happening on Bitcoin,
| with crypto lagging by many years).
|
| > But nobody has addressed that market.
|
| Au contraire! You've correctly identified an important
| market! There is both existing work and ongoing development
| that tries to satisfy exactly what you've asked about (and
| doesn't involve burying etched steel plates).
|
| Encumbering your bitcoin with the requirement for multiple,
| M of N threshold signatures ("multisig") is an important
| way to protect large amounts. Companies like Unchained
| Capital [0] provide a service wherein the user holds two
| keys and the company holds 1 key in a 2-of-3 multisig
| setup; if the company key is needed, video authentication
| and other procedures are required.
|
| Other, non-company-assisted multisig setups use schemes
| such as you propose; one example is the Nunchuk wallet [1]
| which allows you to sign multisig transactions on your own,
| or request signature(s) from a key held by a family member
| or friend, passing the PSBT (partially signed Bitcoin
| transaction) over a secure communication channel.
|
| Finally, two great examples of physical devices to protect
| your Bitcoin are (1) the Tapsigner [2], which is an NFC-
| enabled smartcard holding your secp256k1 private key that
| does on-card signatures; and (2) Jack Dorsey's Block
| (formerly Square) is developing a hardware wallet that
| integrates with your smartphone [3] -- one neat innovation
| here is that policies can be set such that the user may
| spend small amounts of funds with the phone only; but
| larger transactions require a thumbprint or pin on a
| physical device.
|
| You also mentioned time delays -- this is also supported by
| Bitcoin script; advancements such as miniscript [4] allow
| you to express complex spending conditions in a tree-like
| way.
|
| [0] https://www.unchained.com/ [1] https://nunchuk.io/ [2]
| https://tapsigner.com/ [3] https://wallet.build/ [4]
| https://miniscript.fun/
| smileybarry wrote:
| > There's an entire cottage industry built around people
| etching their seed phrases on steel plates for people to (I'm
| not kidding) bury them like they're gold in the 1800s.
|
| I was stunned to see so many of these products on Amazon last
| time I searched for smartcard stuff. On that note, I hate
| that you can't search for smartcard products anymore without
| 80% of your results being crypto wallets.
| zen21 wrote:
| It's a great way to make money out of crypto!
| wedn3sday wrote:
| If there's one thing we should learn from gold rushes,
| its that you dont make it rich panning for gold, you make
| it rich selling gold panning gear.
| MichaelCollins wrote:
| Print your private key on paper and lose it all when your
| house burns down.
|
| vs
|
| Give your private key to an exchange, and enrich the
| shitheads running the exchange when they run away with your
| money.
|
| First option seems preferable. If you're going to lose your
| money, better for the money to be truly lost than to enrich a
| thief.
| 8ytecoder wrote:
| Print your key works fine if I'm locking my "money" under a
| mattress. If the point of Bitcoin I was to replace currency
| then I'd still need an easy way to keep it close with my
| all times. So, carry your signed transfer title to your
| house in the wallet and lose your entire house to a mugging
| seems more appropriate as an analogy.
| andybak wrote:
| > If you're going to lose your money, better for the money
| to be truly lost than to enrich a thief.
|
| I'd quite like an option C
| HideousKojima wrote:
| Become a goldbug?
| nemo44x wrote:
| You could put it in a fireproof safe or a safety deposit
| box or both.
| [deleted]
| alana314 wrote:
| Put it on encrypted distributed backup that you control. I
| don't know why more people don't do this.
| unilynx wrote:
| How do you manage the keys to this encrypted backup ?
| notch656a wrote:
| I'm amazed how many people think the average person can't
| memorize a 12 word phrase. Most people I know can memorize
| their social security number, address, at least one if not
| more passwords, their own phone number as well as the phone
| number of at least one loved one for emergencies, the DOB
| of their children and their own DOB. Most of that is a
| gobligook of numbers rather than words.
|
| Absolutely no one needs to be putting a private key on
| paper in their house, that is insanity.
|
| ---------------
|
| RE:
|
| >The question is if you can reliably remember it in ten or
| twenty years without ever using it in the interim.
|
| I check my bank account daily for fraudulent transactions;
| it would behoove anyone storing any sizeable amount of
| value to check/refresh on that daily, however that looks
| like for your form of storage.
| alasdair_ wrote:
| >I'm amazed how many people think the average person
| can't memorize a 12 word phrase.
|
| The question is if you can reliably remember it in ten or
| twenty years without ever using it in the interim.
| horsawlarway wrote:
| Can we acknowledge that both of those options are utter
| trash compared to conventional banking, though?
|
| The system that the crypto advocates hate on, but provides
| 250k per person + per bank + per account type as insurance
| by default to all registered financial institutions?
| tablespoon wrote:
| > Can we acknowledge that both of those options are utter
| trash compared to conventional banking, though?
|
| Yes, yes we can.
|
| The only things that _ever_ justified the use of
| cryptocurrency were ideological fantasies and speculative
| gambling. _Every other justification_ is just hype
| created as a post-hoc rationalization for one of those
| two things. If you look at any of them closely, they
| completely fall apart when compared with competitor
| technologies (such as fiat paper money esp. the US
| dollar, conventional banking, and even gold).
|
| I look forward to a future where "crypto" again
| unambiguously means cryptography.
| alasdair_ wrote:
| Buying drugs online was a real use case that actually
| worked, as was being able to smuggle wealth out of a
| country with exit restrictions.
|
| As for _legal_ uses, yeah, there are not many at the
| moment. Maybe some day there will be a DAO-type org that
| is worth being invested in or something but not today.
| tablespoon wrote:
| > Buying drugs online was a real use case that actually
| worked,
|
| Kinda sorta. Wasn't that back when people assumed
| cryptocurrency provided the same kind of privacy that
| cryptography does, which was (in retrospect), pretty
| dumb?
|
| > as was being able to smuggle wealth out of a country
| with exit restrictions.
|
| That one doesn't make much sense either. How are you
| supposed to get your cryptocurrency to smuggle out in
| such a country? Wire your money to a foreign exchange?
|
| > As for legal uses, yeah, there are not many at the
| moment. Maybe some day there will be a DAO-type org that
| is worth being invested in or something but not today.
|
| I agree the "best" actual use cases involve illegal
| activity, but I think even those are sketchy. Most of the
| ideas don't actually work unless cryptocurrency is
| ubiquitous, but that doesn't matter since it will never
| become ubiquitous without compelling use cases. And given
| the illegal activity it enables, even if it did have
| compelling use cases, it would probably be made illegal
| if it was on its way to becoming ubiquitous (which would
| instantly marginalize it in a way it could never
| overcome).
| sweetbitter wrote:
| > Kinda sorta. Wasn't that back when people assumed
| cryptocurrency provided the same kind of privacy that
| cryptography does, which was (in retrospect), pretty
| dumb?
|
| Well, there are currencies that do provide strong
| anonymity, so no?
|
| But yeah agreed that cryptocurrency doesn't have that
| many use cases, just as cash has a declining number of
| them. I hope someone makes an Amazon-like platform for
| it.
| alasdair_ wrote:
| For me, my one and only use of crypto (back in the day)
| was to put it through a mixer and then use it to pay for
| hosting for some TOR exit nodes in Iceland that I didn't
| want tied to me personally.
| tablespoon wrote:
| > For me, my one and only use of crypto (back in the day)
| was to put it through a mixer and then use it to pay for
| hosting for some TOR exit nodes in Iceland that I didn't
| want tied to me personally.
|
| That use case at least makes some sense and isn't
| illegal, but there are probably only dozens of users
| who'd ever want to do something like that, which isn't
| enough to support a payment ecosystem.
|
| There are also probably conventional alternatives that
| probably work for that. I'm somewhat paranoid about
| getting doxxed based on some teenage internet
| experiences. There are a couple of forums out there with
| paywalls that exist mainly to reduce moderator workload,
| and (10-15) years ago I was able to subscribe with a
| combination of Visa gift cards and PayPal. The gift cards
| let you enter (un-validated) identity information so they
| could be used like credit cards online, and PayPal didn't
| seem to like them but there was a long delay before they
| were detected. So I created a throwaway PayPal account
| with a small-denomination gift card as a payment source,
| paid for the membership, and abandoned the PayPal account
| (which would eventually get locked).
| MichaelCollins wrote:
| Abso-fucking-lutely. The best time to not be involved in
| crypto was always, and the second best time is now. Get
| out now if you have any sense.
| nobody9999 wrote:
| >Abso-fucking-lutely. The best time to not be involved in
| crypto was always, and the second best time is now. Get
| out now if you have any sense.
|
| But I have drugs to buy and cannabis to smoke and joints
| to roll before I sleep.[0]
|
| More seriously, there are use cases for cryptocurrency
| (smart contracts are a different think, unaddressed
| here), they're just _mostly_ illegal.
|
| Whether that illegality is appropriate or not is another
| question.
|
| That said, there are use cases for cryptocurrency.
|
| [0] With apologies to Robert Frost.
| rglullis wrote:
| Have you seen how much wealth was destroyed in 2008?
| Filligree wrote:
| 2008 doesn't seem like a good argument for "Re-running
| the entire history of finance scams, up to and including
| 2008 if we can get that far".
| rglullis wrote:
| 2008 wasn't caused by a finance scam. It was caused by an
| already heavily-regulated banking industry, supported by
| governments addicted to growth.
|
| Not that different from what is happening now with the
| crypto "exchanges", by the way.
| bboygravity wrote:
| Wow, you must've missed that little something about Glass
| Steagal.
| rglullis wrote:
| Wow, you must've missed the point entirely.
|
| I'm talking about how both bubbles were a consequence of
| all the money being pumped relentlessly by governments.
| That it was going to pop, we should not have no doubt. If
| it wasn't for crypto "exchanges", it would be a dot-com
| v2 (which is _also_ happening, but without crypto to take
| all that capital this crisis would be bigger still), or
| it would be something else entirely... but at the end of
| the day, as long as we have governments addicted to
| growth, we will have boom and bust cycles.
| dvngnt_ wrote:
| I've never seen it as a replacement, but a supplement
| with it's own pros and cons
| gureddio wrote:
| Well it can't be a replacement anyway. You can't really
| spend it anywhere
| rufusroflpunch wrote:
| In Lebanon, people are robbing banks to get their own
| money out. Maybe they are a little bit more comfortable
| than you are with holding keys to an unseizable asset.
| asoneth wrote:
| If you live in the US and are hedging against the
| collapse of the FDIC you may be better served by
| investing in things like dried goods and seeds than
| cryptocurrencies.
| horsawlarway wrote:
| Correct.
|
| Banking may well collapse in the US (I'm not betting it
| will - quite the opposite, to be honest - but
| historically speaking it's not an impossibility.)
|
| The issue is that if banking in the US collapses... well
| - we have much, _much_ bigger issues than "crypto".
| You'd be far better served with a stash of dried/canned
| products and a gun or three.
|
| Also - it won't be crypto that matters in this case. It
| will be the new currency of whatever regional nation
| states pop up in the US after the collapse, or if the
| federal gov manages to hang on, the new USD.
|
| Side note - last time I bought in bulk (because hedging
| against this is relatively cheap, all things considered)
| split peas were the best bang for the buck in terms of
| cost/calorie. Just slightly beating out plain white
| sugar.
|
| 75 days of food for 4 people at 2000 calories per day
| cost about $350 (not including storage containers) and
| will last a _very_ long time if it 's composed of dried
| legumes, flour, oats, sugar, rice, oil, etc... in
| airtight containers.
|
| If you cook yourself and rotate through, it's actually a
| fairly cost effective way to eat cheap and healthy
| (although without any additional inputs - also very
| bland) while also keeping storage on hand and not feeling
| like a complete prepper.
| alextheghost wrote:
| You do know there are fireproof safes that you can keep in
| your home right?
| SV_BubbleTime wrote:
| FYI, there is a world of BS around "fire proof" anything.
| It's all about the _time_ it 's around fire.
|
| If your house burns to the ground and collapses in on
| itself, the extreme majority of fire proof safes, aren't.
| If the fire dept shows up and it's out in an hour and it
| wasn't buried, your things will probably be alright.
|
| I dealt with a guy's gun collection stored in his $10,000
| "fire proof" safe stored in his garage. Almost everything
| was garbage. Saved a handful of parts here and there.
| alangibson wrote:
| Exactly. Given enough time the inside of the safe will be
| the same temperature as the outside.
| bbarnett wrote:
| No, man, it's like insulated and stuff!
| [deleted]
| nanna wrote:
| > As I've noted before on HN
|
| One of the joys of HN is that on the whole no one knows who
| anyone else really is nor keeps track of what they've argued
| previously.
| skinnymuch wrote:
| Some of us put out real info in our profiles.
| CliffStoll wrote:
| some of us use our real names
| skinnymuch wrote:
| haha I never thought of that.
| zen21 wrote:
| Some people copy and paste other people's profile info
| into their profiles.
| boppo1 wrote:
| >There's an entire cottage industry built around people
| etching their seed phrases on steel plates for people to (I'm
| not kidding) bury them like they're gold in the 1800s.
|
| I was about to say this isn't the _worst_ opsec until I
| realized you mean people are _sending businesses their
| passphrases_ and not purchasing an etching kit to make the
| plate themselves.
| ChadNauseam wrote:
| Your first instinct was right, they come with little steel
| squares with individual letters pre-etched, and when you
| receive them you arrange them yourself into your seed
| phrase
| SV_BubbleTime wrote:
| The venn of arts and crafts, paranoid delusions, and
| blockchain.
| sydd wrote:
| Heh I would not call them paranoid after all these crypto
| collapses.
|
| Say I'd have $100000 in a crypto wallet, I'd etch it too
| and keep it in a safe instead of giving it to a website
| with no state backed guarantees.
| danaris wrote:
| The delusion part is believing that it would still be
| worth $100k after an amount of time that would warrant
| burying something in the ground.
| zukzuk wrote:
| The paranoia pertains to burying metal plates
| underground, preparing for a post-collapse future. As if
| bitcoin will be a viable currency when we're all trying
| to figure out food and shelter.
| 2sk21 wrote:
| Also, this assumes that there is plentiful electricity in
| this post apocalyptic future to mine bitcoins!
| grey-area wrote:
| You could just print it on a piece of paper and put it in
| a safe!
| JackFr wrote:
| The funny part of that is that you literally cannot have
| $1000000 in a crypto wallet, because that's not how
| dollars work. Oh, you've got something in your crypto
| wallet, but it ain't dollars.
| matai_kolila wrote:
| Of course he can have $100,000 in his wallet, that $80k
| will be usable to exchange in return for $50k of goods,
| for sure!
| asoneth wrote:
| The use of intermediaries is due to the deficient user
| experience of cryptocurrencies and cryptocurrency community:
|
| 1) They downplay the expertise and knowledge required to manage
| your own tokens.
|
| 2) They advocate for the use of cryptocurrencies by normal
| (i.e. non-expert) users as this increases the value of their
| holdings.
|
| 3) They prefer to blame users who make mistakes, are
| hacked/scammed, or otherwise lose (real) money for their lack
| of technical expertise.
|
| Given this, it's not surprising that the enormous gap between
| naive engineering assumptions and human reality is filled by
| intermediaries despite how consistently they fail. As long as
| cryptocurrencies continue to exist beyond a tiny niche I don't
| see this changing.
| nobody9999 wrote:
| Agreed.
|
| The knowledge gap between "normies" and "crypto-aficionados"
| is pretty large.
|
| Which is, of course, why so many crypto "businesses" turn out
| to be scams of one sort or another -- the asymmetry of
| information makes most folks easy meat for scammers.
|
| To point up this asymmetry, go ahead and watch this[0]. The
| lack of knowledge WRT crypto-currencies (let alone smart
| contracts) among the hoi polloi is striking in comparison to
| those who are in the know.
|
| [0] https://www.pbs.org/wgbh/nova/video/crypto-decoded/
| (Recent NOVA episode).
| hristov wrote:
| The crypto community is very much to blame for this. Initially,
| back when bitcoin was hovering about $1 per coin, everyone was
| talking about personal wallets, and educating people how the
| wallet was just a bunch of numbers you can write on a piece of
| paper and which you can keep hidden in the lining of your
| pants, etc.
|
| But then bitcoin started getting popular and emerging towards
| mainstream culture, the talk about wallets seized. All the new
| crypto firms started marketing accounts and "cloud wallets" and
| the personal pocket wallet was never mentioned.
|
| Crypto then continued to advance in mainstream culture and
| personal wallets were kept a secret. I doubt the average crypto
| user even knows about personal wallets.
|
| And if you disagree, please prove me wrong. There are many
| crypto commercials on mainstream media, show me one that has
| mentioned that you can keep a personal wallet.
|
| So the crypto industry is to blame for this. They basically hid
| the most important part of crypto from the public because they
| would make more money without it.
| bbarnett wrote:
| Greybeard here. This just sounds like AWS to me. The cloud!
| The wondrous cloud!
| remram wrote:
| Is that the right takeaway? People didn't know
| cryptocurrencies could be kept on your computer? Or could it
| be that users just _don 't want to_ deal with the complexity
| enabled by cryptocurrencies, and the bank model is just the
| natural one that always appears when the public starts making
| use of money?
| pc86 wrote:
| The same thing has happened with git over time, no?
| Decentralized source control, forking whatever you want/have
| access to when you have a flash of inspiration, etc.
|
| Now everything is in github, gitlab, or bitbucket, and
| centralized there.
| anon84873628 wrote:
| Pretty good analogy. Discovery and trade (clones/PRs) are so
| much easier in a centralized system.
|
| At one point I asked (rather naively - not trying to sound
| wise here) whether our dependence on GitHub was an outage
| risk. Response from CTO was that git is distributed and
| everyone has a copy and whatnot. In retrospect, yeah, the
| code is not lost, but we had never actually built the
| infrastructure / tested the procedures to actually handle
| that fallback to a distributed world...
| amadeuspagel wrote:
| > Apparently nobody does this anymore
|
| The right way to do that is to use a hardware wallet. There are
| many companies making and selling those, so there's definitely
| a market for that.
| [deleted]
| ineedasername wrote:
| You get things, I think, but bitcoin's transaction bottleneck
| meant it was never going to be able to handle anything
| approaching wide scale adoption for day to day transactions.
| Attempts to address that with other coins or centralized
| exchanges is at least one of the major factors that lead to
| this point.
| setgree wrote:
| Trading is addictive. Like all forms of gambling, it lights our
| reward centers up.
|
| On decentralized exchanges, you pay each time you trade (gas
| fees and such). That cuts right through the endorphin rush.
|
| Centralized exchanges keep those fees low by making everything
| centralized. It's akin to casinos keeping their guests
| comfortable and liquored up.
|
| As a person who works in crypto, I'd like to see us engage with
| this more forthrightly. When we cut out gambling, how many use
| cases are left? How many are viable _today_?
| SevenNation wrote:
| The user growth is high enough that at any given time roughly
| half of the people involved have been at it for less than 18
| months. So the space is dominated by the least-savvy and has
| been for some time.
|
| Many people will never be capable of self-custody because the
| lack the interest to do it. They see money to be made and
| ignore the warnings of those who try to explain what they have
| on an exchange is a promise of money, not money itself.
|
| When you say "nobody does this anymore," that's kind of true,
| but also not true. Those who have learned the hard way do, the
| newbies (which vastly outnumber the first group) don't.
|
| Self custody requires knowledge of some basic math,
| cryptography, and the ability to understand basic security
| principles.
|
| User growth explodes with exchange rates. Those diving in
| understand very little about what they're doing and should stay
| out. They don't listen to people saying such things and the
| result is, well, predictable.
| dotnet00 wrote:
| "Not your keys, not your coin" is a popular adage, but it
| doesn't really seem like many people follow it. Thus the
| popularity of coins with high transaction fees.
|
| The original crypto culture which emphasized privacy (although
| speaking of a public list of all transactions ever performed on
| the network as privacy oriented is pretty hilarious), control
| and decentralization has for the most part been lost to
| crypto's eternal September.
| knorker wrote:
| You're not taking crazy pills. It's become abundantly clear
| that the vision of everybody being their own bank will never
| work.
|
| People don't want to be their own bank, just like they don't
| want to be their own bakery, or their own farmer.
|
| Sure, some people do bake their own bread, but they do it
| either because they have to, or because they enjoy it.
|
| So the people who control their own keys need to have a reason
| to do so. Because it takes more effort than _not_ managing your
| own bank.
|
| What exactly are the reasons to run your own bank? What
| problems in your life are solved by it?
|
| I can think of a two:
|
| * You want to hold more cash than FDIC guarantees. * You think
| the government will seize money out of savings accounts, as
| happened in Cyprus.
|
| These have to be weighed against the facts that while not
| literally in your mattress, the money becomes pretty easy to
| steal, for anyone willing to point a gun at you. And being your
| own bank comes with obligations, too, so the government will
| come after you if they want to drain your bank. And the justice
| system can put you in a box if you don't comply.
|
| Basically: If you already have a bank, why would you not just
| use it? And if they refuse to do your thing (like order a hit),
| then buy tokens and pay a hitman in tokens.
|
| If there were FDIC for tokens at your real bank, redeemable in
| same number of tokens, then any general public that wanted to
| use cryptocurrency would likely just use that. Because outside
| of fringe LARPing nobody wants to run their own bank.
| eternalban wrote:
| > Basically: If you already have a bank, why would you not
| just use it?
|
| Basic corollary: if you already use a bank, why not just use
| money?
|
| > If there were FDIC for tokens at your real bank, redeemable
| in same number of tokens, then any general public that wanted
| to use cryptocurrency would likely just use that. Because
| outside of fringe LARPing nobody wants to run their own bank.
|
| So the only remaining question is why would normies who say
| (according to you) amen to all above would need crypto
| besides a ponzi-speculative joy ride?
|
| On one hand we have funny money backed by a world power and
| all its resources, and protected by ICBMs and an impressive
| navy and bases around the world and a financial
| infrastructure around USD & convertibles.
|
| On the other hand we have funny tokens issued by "genius"
| -mushrooms- who are elevated into the spotlight by the likes
| of Forbes magazine and the rest of the media circus,
| protected by nothing [though the genius scammers themselves
| are apparently protected ..]
| knorker wrote:
| > So the only remaining question is why would normies who
| say (according to you) amen to all above would need crypto
|
| Exactly. They don't. Not as a currency. It's gambling. And
| "normies" don't want to run a bank just to gamble.
|
| > money backed by a world power and all its resources, and
| protected by ICBMs
|
| And e.g. in the US the USD is not just protected from
| outside threat (ultimately) by ICBMs, but also internally
| by the fact that tax is due in USD.
|
| There are cryptocurrency advocates who say that the USD is
| backed by nothing. Which is a very odd thing to say because
| as long as the US has tax laws there will be demand for the
| USD (under penalty of prison), to pay your taxes. Demand
| for a thing creates value for that thing.
|
| Anyone who thinks that backing is not real is likely to
| feel the physical effects of its reality.
| JumpCrisscross wrote:
| > _You want to hold more cash than FDIC guarantees_
|
| This is a solved problem up to millions of dollars [1]. Past
| that, you buy Treasuries. The real third case is you're doing
| something illegal.
|
| [1] https://accountopening.fidelity.com/ftgw/aong/aongapp/fdi
| cBa...
| mikeyouse wrote:
| Yeah - there's a whole industry of this.. I worked with a
| large nonprofit that had something like $50M FDIC insured
| through CDARs.
|
| https://www.intrafinetworkdeposits.com/
|
| I suspect the government / Fed will have something to say
| about these in the future since it's a bit contra the
| purpose/intent of FDIC insurance but for the moment, you
| can abstract away all of the complications.
| lawn wrote:
| That's because nobody really cares about what crypto can do
| anymore, and only cares about making fast money.
|
| If you internalize this fact, then it explains why people just
| keep their coins on exchanges, why they buy centralized
| "cryptocurrencies" , why they leap at the chance of buying the
| latest Paris Hilton NFT and why they keep defending Tether as
| legitimate.
|
| Fundamentals are thrown out of the window unfortunately.
| spamizbad wrote:
| Most people hold Bitcoin these days in the hopes of making
| money. The distributed consensus nature of crypto is
| irrelevant.
| Ajedi32 wrote:
| This is the key to understanding a lot of things about the
| "cryptocurrency community". There are two groups there with
| wildly different interests.
|
| A large chunk (probably even a majority) of the people
| involved in the cryptocurrency space don't actually care
| about cryptocurrency as a technology at all, they're just
| there to make money. To these people, market price is
| everything, and the technology is irrelevant except to the
| extent that it affects the market price.
|
| Then in the other camp there's a group of people who don't
| care about the current trading price, they're just interested
| in the technology and the new capabilities it enables.
|
| I'm in that second camp (perhaps unsurprisingly, since this
| is Hacker News), so in my view this story isn't really all
| that interesting or surprising. From a legal/societal
| perspective, yeah this is terrible and probably someone
| should go to jail. But from a technical perspective, the fact
| that exchanges can scam people out of their money is hardly
| new information. As the saying goes: not your keys, not your
| crypto.
|
| Though obviously for those who are interested in
| cryptocurrency solely to make money on speculation, yeah this
| is a big story.
| 0xAFFFF wrote:
| The core truth in this day and age is that nobody (understand
| this a non-significant minority if you prefer) wants to host
| their own stuff. It's way more convenient to use centralized
| services that do the heavy lifting for you. If you don't have
| that convenience, you can't have mass adoption.
| Watchwatcher wrote:
| Another way to say, you reap what you sow, right?
| matt_s wrote:
| I think once crypto gained traction beyond early adopters into
| more mainstream people it became an "app" and that "app" was
| the exchange and non tech, non crypto people don't put more
| effort into it then that.
|
| What is alarming and becoming more revealing is how much of
| this crypto was being back-doored from one crypto "product"
| (exchange, fund, coin, ICO, etc.) into another. In programmer
| terminology: it looks like there are (were) a lot of pointers
| to the same memory address.
| tylersmith wrote:
| Many people are managing our own coins, you just don't hear
| from us because we don't get burned every year.
| ryandrake wrote:
| Somehow, humanity has gotten good at taking systems that were
| designed to be decentralized and distributed (like crypto,
| E-mail, personal websites, and so on) and instead, surrender
| them to a few big companies who become single points of
| failure. We keep failing to learn from this every time.
| Apocryphon wrote:
| It's almost as if most people are too busy to figure out
| the complex processes at doing things themselves, and the
| very concept of civilization is built on exchanging good
| and services for money whereby tasks are delegated to
| parties that are better suited to focus on them.
| asoneth wrote:
| I suspect the problem is due to the fact that designers of
| decentralized systems often underestimate the importance of
| the user experience.
|
| Managing your own mail server, website, social media
| instance, music streaming, cryptocurrency wallet, power
| grid, vegetable garden, etc requires more time and skill
| than just paying someone else to do it for you. The result
| is that most people end up using a handful of centralized
| offerings except for a small niche of enthusiasts who
| derive enjoyment from the work and/or can justify spending
| the additional time.
|
| Ultimately it's up to the designers of distributed systems
| to make them trivially easy to use if they want them to be
| popular and remain distributed. (Napster and maybe
| BitTorrent are the examples that come to mind.) Otherwise
| it remains a niche for enthusiasts and/or ends up with
| centralized intermediaries.
| phone8675309 wrote:
| The people who were pushing the fact that you'd have sole
| control over your wallet were those who wanted to be immune
| from the government seizing their money: scammers, criminals,
| tax dodgers, and exchange runners (a combination of the first
| three).
|
| Those people put a bunch of money into bitcoin to inflate the
| price, but they need a bunch of rubes trading the currency to
| keep the value of the coin (relatively) stable so they can
| withdraw their holdings, but they don't care much if those
| rubes have full control, and that's where exchanges come in.
|
| Exchanges are there as a way for the first movers and the
| ultra-wealthy to extract wealth from uninformed, naive new
| investors into crypto.
| cypress66 wrote:
| > The people who were pushing the fact that you'd have sole
| control over your wallet were those who wanted to be immune
| from the government seizing their money: scammers, criminals,
| tax dodgers, and exchange runners
|
| How sad that you think the only people that cares about not
| giving governments control of everything are "scammers,
| criminals, tax dodgers, and exchange runners".
| runeb wrote:
| That is still the promise and unlock of cryptographic
| currencies. But that does not seem to be the use case for much
| of the people I've seen in the space the last years. I think
| the fact it is crypto currencies is incidental, it is all about
| earning money through appreciation of some popular asset.
| fleddr wrote:
| The thing is that the people that are most active in crypto and
| typically have the largest stacks are traders. They grow their
| stack by shorting/longing, leverage, staking and DeFi, all of
| which require an exchange.
| tomjakubowski wrote:
| I think so many cryptocurrency users avoid maintaining their
| own wallet for the same reasons most people (these days) don't
| store all their wealth as cash or gold under the mattress: it's
| both inconvenient and easy to lose.
|
| Of course what folks are seeing now is that it's real easy for
| exchanges to lose their buttcoin deposits too.
| kypro wrote:
| I think it depends on your goals.
|
| I mean, do you store all your cash under your bed in case your
| bank go bust? People keep crypto on the exchange because it
| makes transactions easier, and in some cases you might have
| other perks such as being able to lend it for interest or spend
| it with crypto credit cards.
|
| This idea that you can have a digital currency without some
| kind of bank or exchange is fundamentally flawed imo. Unless
| you believe the only valid usecase of crypto is as a digital
| alternative to physical gold then it probably makes more sense
| on an exchange. The main issue here is that the exchanges are
| not regulated.
|
| But I suppose given the lack of regulation I would have to
| agree with you that the only safe use case right now is as a
| "store of value" in a cold wallet.
| dqpb wrote:
| I do this (for the most part). Whenever I buy currency on an
| exchange, I Immediately transfer it to a personal wallet. This
| is actually what drove me away from anything based on Ethereum,
| because the transfer speed and fee system for Ethereum is so
| horrendous, I found myself leaving that currency in the
| exchange managed wallets.
| goodoldneon wrote:
| You still have people with their own wallet. But the vast
| majority of people don't want to deal with the complexity of
| decentralization so they prefer centralization
| chasd00 wrote:
| I think the vast vast majority of people just want to
| increase the balance of their checking account. The fastest
| way to do that with crypto is speculating on an exchange. I
| bet 95% of the people getting burned on these exchanges don't
| even know what a "wallet" is (in the context of crypto
| currencies).
| z9znz wrote:
| Pull enough cards out, and the house will collapse completely.
|
| Ironically, an exchange may not be in actual danger at this
| moment, but they may recognize the coming (what's a word for
| worse than a winter?...), and they may decide to close up shop,
| use the failures of others as an excuse, and walk away with as
| many marbles as they can liquidate.
|
| Yes this is a pessimistic view, but it has already happened many
| times in history (not just crypto).
| [deleted]
| gzer0 wrote:
| "At this point I'm convinced Satoshi Nakamoto was actually a
| public administration professor trying to teach kids why
| financial institutions have the rules in place that they do.
|
| Given enough time, the entire crypto space will have reinvented
| every regulation they tried to get rid of and understood why they
| existed in the first place."
| memish wrote:
| Totally, if only they had been regulated and too big to fail as
| a result of regulatory capture, which is how our system works,
| the taxpayers would get to bail them out and award SBF a
| multimillion dollar bonus. Bailing out the banks and execs in
| 2008 to perpetuate this was just great.
|
| Would you be surprised to learn that SBF was the champion for
| regulation, was advising congress and a top political donor?
| Apocryphon wrote:
| Does regulation inevitably lead to too big to fail?
| memish wrote:
| That's a good question. I would hope it's not inevitable,
| but you would need a system that is vigilant about avoiding
| regulatory capture.
| tootie wrote:
| People look at all the market failures and declare the system
| is broken. Crypto is here to show us all the market failures
| that didn't happen.
| MichaelCollins wrote:
| That's the way I see it. Anarcho-libertrian cryptobros who
| think government regulation is a net negative are like people
| who don't wear seat belts because they know somebody who died
| in a crash despite wearing one. It is true that sometimes
| these safety measures don't prevent the bad thing from
| happening, but if you focus on those cases then you miss all
| the times it _did_ work.
| oblio wrote:
| Basic statistics, really.
|
| Nothing is yes/no. Everything is maybe/maybe not. We're
| just moving the needle towards maybe or towards maybe not.
|
| A seat belt moves the needle a lot in the "maybe not"
| section for the "dying in a car crash" category.
|
| Government regulation is mixed but guess what, the
| empirical evidence shows it works. How do we know that?
| What do we call countries with crap, weak and abused
| regulation? Failed states.
| racl101 wrote:
| Maybe the name 'Satoshi Nakamoto' is an anagram that I'm too
| stupid to decipher.
| ineedasername wrote:
| It's like the thing schools used to do, give kids an egg they
| had to carry around for a week without breaking.
| olalonde wrote:
| At this point? This platitude has been reposted on about every
| cryptocurrency thread on HN for the past decade.
|
| In case, I'm getting downvoted because I didn't provide a
| source, see for yourself:
| https://www.google.com/search?q=rediscover+regulation+site%3...
| rglullis wrote:
| Hopefully, people will understand that crypto is about self-
| sovereignty and not get-rich-quick schemes.
| disruptalot wrote:
| This was a failure of traditional financial institutions and
| people who are ok with them, not of crypto.
|
| Satoshi wouldn't be encouraging people to put their coins on a
| trusted third party like that. All fundamental crypto values
| say this.
| Tao3300 wrote:
| I'll bet you use the word "fiat" a lot.
| 300bps wrote:
| _Satoshi wouldn 't be encouraging people to put their coins
| on a trusted third party like that._
|
| I find this sentiment of "not your coins, not your crypto"
| unsettling. The average person doesn't even back up the
| pictures on their computer or phone and they are one storage
| device failure away from losing all of their wedding
| pictures, baby pictures, etc.
|
| The big push now is for people to use hardware wallets. I
| guarantee that 50% of people over the span of a decade will
| lose access to 100% of their funds.
|
| 2023 will be about everyone learning how much of a joke
| cryptocurrency is.
| criddell wrote:
| > will lose access to 100% of their funds
|
| Or, if you think like foreignpolicy.com thinks:
|
| > The crypto bag-holders all actually lost their money long
| before, when they bought the bitcoins. In the time since,
| they'd been telling themselves and everyone else that their
| magic beans were worth money and never mind the lack of
| buyers. But this was not the case. The beans were always
| worthless, and the only way to make money from them was to
| sell them off before other people caught on.
| ethanbond wrote:
| But you realize that banks (and individuals) could have all
| the advantages of decentralization if they just chose to be
| decentralized too, right? This prompts the question: why are
| they so centralized? It turns out the advantages of
| centralization are more significant than the advantages of
| decentralization, _and this is true even in a market with
| religious orientation toward decentralization_.
|
| All you've gotta do to get people to keep their coins
| "correctly" is eliminate the benefits of agglomeration. Good
| luck!
| more_corn wrote:
| There are benefits to both centralization and
| decentralization. In fact this tension drives a lot of
| technological improvement.
| mtkhaos wrote:
| Issue is they reinvented the wheel in the crypto space.
| Centralized or decentralized it's all on the same market is
| only a matter of scale. As even in centralized markets the
| concept of edge is just hitting parity.
|
| What really surprised me about the space was the refusing
| of not registering as a speculative asset. As even if you
| look into the regulations, it's merely making the
| mechanisms transparent and creating reporting.
|
| As if DeFi followed through with the true promise of
| decentralization and transparency. The FTX situation would
| never have happened in the first place. So with that, the
| crypto space actually went against its principles and we
| are seeing the result.
| gruez wrote:
| >But you realize that banks (and individuals) could have
| all the advantages of decentralization if they just chose
| to be decentralized too, right?
|
| The closest you can get to decentralization with the
| traditional finance system is to withdraw and store cash,
| which is expensive/risky and causes inflation to eat away
| at your savings. Good luck with other parts of the finance
| system (eg. investments or loans). It's ironic how you
| portray centralization as something that people willingly
| engaged in because it was beneficial, considering that the
| disadvantages are all there by design (eg. the government
| refusing to make high denomination bills, or instituting a
| monetary policy that causes inflation).
| dncornholio wrote:
| Centralisation isn't even a problem. Not getting any money
| is a problem though. Doesn't matter if the place where it's
| at is centralised or not.
|
| The decentralised instances are experiencing all kinds of
| trouble.
|
| I fucking love centralisation!
| warinukraine wrote:
| > But you realize that banks (and individuals) could have
| all the advantages of decentralization if they just chose
| to be decentralized too, right?
|
| What are the advantages of decentralization in this
| context? Be specific.
| ethanbond wrote:
| Namely no risk of you losing your assets due to technical
| glitch, fraud, or overextension. Of course this is not a
| substantial advantage, especially in the US, given the
| various non-technical (i.e. legal/cultural) guarantees
| against these failure modes. It doesn't overcome the
| disadvantages of e.g. having to physically protect your
| own assets - thus why people tend to use financial
| institutions.
| warinukraine wrote:
| Exactly, this isn't an advantage. If there's a technical
| glitch, there's insurance for that.
|
| What else?
| ethanbond wrote:
| You may be missing the point of my original post. It is
| that there _are not_ substantial advantages to
| decentralization.
| yuvadam wrote:
| Banks can't choose to be decentralized when the whole point
| of their existence is to custody centralized fiat money.
| lottin wrote:
| The banking industry is not centralised. Banks provide
| financial services and compete against each other for
| customers. DeFi can't even get the most basic terminology
| right, yet somehow thinks that it can replace the entire
| financial sector.
| mikepurvis wrote:
| Individuals can, though. Just stuff your cash into your
| mattress-- boom, decentralization achieved.
| toyg wrote:
| The point is to custody _money_ , of any sort. And for
| that, they are excellent - the economy of scale in having
| a single organization arrange for security of such money
| for thousands or millions of customers, is unbeatable.
| Unless you enjoy employing security guards, building
| vaults (digital or otherwise), and arranging transports,
| you _want_ to use a bank - or risk losing all your
| valuables to skillful thugs every single day.
| chitowneats wrote:
| Banks existed long before fiat currency. If you're
| ignorant of the history, I suggest you look up "history
| of the bank note".
| GrabbinD33ze69 wrote:
| Traditional institutions will always be dominant in some
| capacity, as many people are attracted to the convenience
| they offer. Unless something catastrophic occurs, crippling
| traditional financial systems or are truly compelling/easy to
| use platform releases, I can't imagine anything not owned by
| a "Traditional institution", let alone anything close to what
| Web 3 proponents preach regarding decentralization & where
| ownership lies.
| anonymousab wrote:
| > All fundamental crypto values say this.
|
| This feels mighty similar to the old "communism didn't fail
| people, people failed to do real communism" rationalization.
| roflyear wrote:
| Then it proves that crypto is flawed for other reasons.
| WFHRenaissance wrote:
| Literally a non-argument lol
| roflyear wrote:
| There's some flaw there if people are saying "YOU'RE
| USING CRYPTO WRONG" in response to these issues and in
| defense of the tech, but the "WRONG" way of doing it is
| so popular, and there aren't alternatives.
| disruptalot wrote:
| Alternatives:
|
| - Crypto is being used and abused by people and purposes
| that don't need it.
|
| - Fundamental practices haven't matured yet.
| anon291 wrote:
| Unfortunately, absent the crypto exchanges, which let you
| easily convert crypto to fiat, there is no reason why crypto
| has any value. Given that bitcoin transaction times are
| nowhere near VISA or cash times, bitcoin is fairly useless to
| purchase things in person and few online vendors take bitcoin
| alone (most use an exchange to convert bitcoin to cash
| instantly).
|
| So without exchanges, there is literally no purpose or use of
| bitcoin. Currently it mainly serves as a way to record a
| store of fiat value.
|
| There is no conspiracy here. The reason exchanges came into
| being and were successful was that there was no other purpose
| to bitcoin. Few users successfully use bitcoin as it was
| intended.
| alangibson wrote:
| I can't believe it's been 5 minutes and no one has said
| 'lightning network' yet.
| m348e912 wrote:
| It's because the ones who would have said it now know.
| anon291 wrote:
| I'm fully aware of the lightning network. I'm also aware
| of something called VISA and American express. Which
| number do I call to get concierge service with bitcoin?
| That's what I thought.
| raspberry1337 wrote:
| > there is no reason why crypto has any value. Given that
| bitcoin transaction times are nowhere near VISA or cash
| times,
|
| You interchanged crypto with bitcoin, but bitcoin is not
| all crypto. The value of crypto comes from them being
| decentralized and independent of a financial bank. This has
| the negative side effect of it being very valuable to
| illegal and fradulent activity, too.
| this_user wrote:
| > The value of crypto comes from them being decentralized
| and independent of a financial bank.
|
| The value of that is exactly zero when you live in a
| stable and developed country, and you are not engaged in
| criminal activity.
| selectodude wrote:
| Cryptocurrency has value because people are willing to
| trade for it, whether money or goods. I don't understand
| _why_ people are willing to trade for it, but to say it
| has literally zero value isn 't exactly accurate.
| anon291 wrote:
| Who is willing to trade it other than exchanges to
| purchase fiat currency? I've never found an item that I
| can actually buy with crypto, where the seller is not
| simply using crypto as a money transfer service. If a
| seller 'accepts' crypto via an exchange that converts it
| to fiat... that's not really crypto. That's just using it
| for money transfer, but we have way better solutions for
| that.
|
| Other than one off gags, I've never actually seen
| anything being sold for crypto. Perhaps things are
| different where you live
| selectodude wrote:
| If it can be exchanged for money that can be exchanged
| for stuff, it has value. I can't spend gold or equities
| at the grocery store but those are priced in dollars and
| have value as well.
| anon291 wrote:
| Equities are not currency. Equities have value because of
| the dividends they pay (or retain).
|
| Gold has value because it is scarce and can easily be
| verified, and has industrial uses. Moreover, you don't
| need a third party to check for gold. It is
| straightforward to ensure that gold is real if you have
| basic tools. However, if gold brokers did not exist and
| gold were not also easily divisible, gold would have
| little utility.
|
| Bitcoin has value because of the exchanges. If there are
| no exchanges, then it has no value.
|
| But, what all three of the above have in common is that
| the only reason they currently have any value in our
| markets is because they can be exchanged for pieces of
| paper that governments will throw you in jail for should
| you fail to pay them upon transfer of any of the above
| assets.
| status200 wrote:
| Having sent $100k via traditional banks as well as crypto,
| I can add my anecdote that the latter was far easier. Some
| would argue that it shouldn't be that easy, and I agree to
| some extent.
|
| Setting up our tax system to be transparent and auditable
| by any citizen would be the greatest benefit to a
| distributed ledger, but something tells me that the current
| institutions would heavily resist that transition, so you
| are correct that it has little current value.
| base wrote:
| With online payments I had a different experience. Tried
| to pay in a store that had coinbase payments with a
| binance account. So many issues:
|
| - The QR code to pay didn't work with the binance app
|
| - Had to find a way to copy the hash tag of the account
| from desktop to mobile to pay (luckily if you have a
| macbook pro and iphone this is easy)
|
| - Initially chose the incorrect network for payments on
| binance so the transfer didn't go through. Had to read
| online which network to select.
|
| With a card payment is normally just putting the cards
| details and in a few cases do an additional
| authentication.
| phailhaus wrote:
| > Satoshi wouldn't be encouraging people to put their coins
| on a trusted third party like that. All fundamental crypto
| values say this.
|
| You can literally say this about "regular" currency. Just
| don't put your money in banks! But people do, why? Once you
| answer that, you'll realize why people do it for crypto too.
| You can't complain that it's "against fundamental crypto
| values" when it doesn't have any mechanism for preventing it.
| It's convenient, it has benefits, therefore people do it.
| criddell wrote:
| I put my money into a bank because the bank is FDIC
| insured. The risk is less than keeping it in a safe in my
| house.
| qclibre22 wrote:
| Plus (during normal times) you get an interest rate that
| equals inflation. Mattress loses during inflation.
| rejectfinite wrote:
| A bank is insured and has a guarantee...
| gruez wrote:
| >But people do, why?
|
| 1. cash is bulky and risky to keep at home
|
| 2. inflation eats away at your savings
|
| Bitcoin is designed to solve both issues.
| Nursie wrote:
| Then it is an utter failure at both.
| jmartin2683 wrote:
| except it doesn't solve either, because it's still risky
| to keep (whether with a 'trusted third party' or at home
| on some physical device... at the end of the day it can't
| be better than physical possession.. i.e. cash).
| volatility is a lot worse than stable inflation, and
| deflation (just HODL!) is much, much worse to the point
| of demonstrating the degree to which bitcoin is _not_
| useful as a monetary unit of exchange.
| gruez wrote:
| >it's still risky to keep (whether with a 'trusted third
| party' or at home on some physical device... at the end
| of the day it can't be better than physical possession..
| i.e. cash).
|
| I'm not sure how you can conclude that password
| protected, geographically distributed (eg. 2 of 3
| multisignature) storage "can't be better than physical
| possession.. i.e. cash".
| jmartin2683 wrote:
| I mean a realistic use case that a normal person would
| actually do... people who are used to just tapping their
| iPhone twice to pay for things. My mom has absolutely no
| clue what you're talking about... at best she might have
| a ledger nano one day
| Victerius wrote:
| Bank robberies are no longer a thing in the 21st century.
| No one loses their savings because of thieves.
| notch656a wrote:
| They still do, it's just the thieves have the backing of
| the court system.
|
| https://ij.org/report/seize-first-question-later/
| jmartin2683 wrote:
| At least when you do, you're fdic insured up to 100k
| typically
| megous wrote:
| Of course it's still a thing, both regular robberies and
| digital ones. And people lose savings to online thieves
| and cheats who take control of their accounts, or manage
| to perform transfers on their behalf.
| greedo wrote:
| How's that working for you? As a hedge against inflation,
| Bitcoin seems a remarkable failure.
| roland35 wrote:
| 1. Bitcoin may not be bulky but there are still many
| risks. Losing the wallet, forgetting a password, or theft
| are still issues!
| iamthirsty wrote:
| 1. Loose the password to your crypto wallet or your
| physical machine and all your money is gone. Regular
| people won't go farther than that.
|
| 2. Deflationary currencies reduce the urgency to invest
| or spend and crush economies.
|
| Bitcoin makes both issues worse.
| monkmartinez wrote:
| Bitcoin is designed to combat inflation? Please show me
| how it does this. I am very skeptical of this claim.
| leaf8937 wrote:
| Because there will be maximum only 21 millions of bitcoin
| while US dollar in circulation is doubling every decade
| or so.
| Nursie wrote:
| This seems to use the uncommon, Austrian and _wrong_
| definition of inflation as being purely an effect of
| monetary supply.
| bigyikes wrote:
| There is ultimately a fixed supply of Bitcoin, so the
| money printer can't go brrrrrt.
| RC_ITR wrote:
| Yes, but _that_ happening is a failure of crypto.
|
| If decentralized were actually better, then why would people
| flock to centralization?
| ushtaritk421 wrote:
| Crypto can't fail, it can only be failed.
| gjulianm wrote:
| Precisely the failure of crypto is thinking that people will
| follow "fundamental crypto values" and underestimating the
| power of convenience and ignorance. "Traditional financial
| institutions" are inevitable in crypto.
| xur17 wrote:
| But at least in crypto I have the OPTION of storing it
| myself.
|
| Also, if I do decide to use a custodial provider, I can
| choose to use a provider that publishes proof of reserves
| [0], giving me more confidence in the provider.
|
| [0] https://www.kraken.com/proof-of-reserves
| jjulius wrote:
| >But at least in crypto I have the OPTION of storing it
| myself.
|
| ... what do you call putting cash in your wallet?
| xur17 wrote:
| The equivalent of writing my seed phrase down and storing
| it in 1 location.
|
| With crypto I can:
|
| * lock my cash on a device behind a pin (with forced
| reset after a few attempts)
|
| * back it up in multiple physical locations, and require
| n of the m recovery locations to be accessed for recovery
|
| * memorize the seed phrase before escaping from an
| oppressive regime
|
| None of this is possible with cash in my wallet.
| Apocryphon wrote:
| That's great, and also moot when the vast variety of coin
| holders opt for the convenience of a centralized third
| party service instead.
|
| With fiat, you also have the option of storing gold
| yourself.
| selectodude wrote:
| You can fit $1 million in a briefcase in a safe. No need
| to rely on fractional reserve banking to store your
| money.
|
| Granted, that would be stupid, but it's certainly an
| option.
| notch656a wrote:
| The problem with fiat is a completely unknown monetary
| supply function. Gold makes a lot more sense IMO in your
| scenario as there's a finite amount in and on the earth,
| and it would take a scientific breakthrough to
| economically create more than that.
| Closi wrote:
| > But at least in crypto I have the OPTION of storing it
| myself.
|
| You have the option with Fiat too - you can get paper
| currency and store it yourself in a secure location.
| $10,000 can be stored in $100 bills in as little as c0.03
| meters^3.
|
| Using a bank is much more convenient to store Fiat though
| if you want to buy/sell things, much like using an
| exchange to store Crypto is much more convenient if you
| want to trade crypto (because let's be honest, not that
| many people are using Crypto to buy pizzas!).
| xur17 wrote:
| > You have the option with Fiat too - you can get paper
| currency and store it yourself in a secure location.
| $10,000 can be stored in $100 bills in as little as c0.03
| meters^3.
|
| That's really not the same though. With crypto I can
| store on a hardware wallet that requires a pin to unlock
| (and resets after 3 attempts) with a backup seed stored
| elsewhere (potentially split up in n of m shares). How do
| I backup my cash? How do I lock up my cash in a similar
| way?
|
| In addition, I can setup "smart" wallets that require an
| approval from another person to initiate the transfer. Or
| forces a cooldown period on transfers. None of this is
| possible with cash.
| Closi wrote:
| > How do I lock up my cash in a similar way?
|
| You buy a vault or a safe, which you can access with a
| 'pin-code' (in the fiat world this is called a
| combination lock). Safes come with two keys, which allows
| you to keep a backup of your 'secret' elsewhere, and you
| can also insure the cash inside if you want to pay for a
| full 'backup'.
|
| In addition, "smart" safes and dual lock safes are
| available which have two keys, mean you need approval
| from another person to initiate the transfer.
|
| It's not an exact 1:1, but you can hardly say that you
| don't have the option of storing Fiat by yourself.
| throwaway1777 wrote:
| Indeed cash and gold have existed forever for people who
| didn't trust banks...
| notch656a wrote:
| Storing a 12/13 word string in your head for a cold
| wallet puts it into territory a lot closer to a bank
| account, and in the US normally words in your head can't
| be seized via court order (there are some exceptional
| circumstances, but they're far more limited than freezing
| bank accounts).
| Closi wrote:
| I think it's closer to hiding a pile of money personally.
|
| The security is based on you remembering a 12 word string
| or geolocation, and the string/geolocation can't be
| siezed via court order (other than exceptional
| circumstances, or by finding the location/keys).
|
| The 'storage' in both instances is decentralised. If you
| forget your 12 word string or geolocation, you lose your
| money.
|
| Banks on the other hand:
|
| * Provide convenient and safe access
|
| * Will invest your money (in exchange for interest).
|
| * Allow you to reset your credentials if they are
| forgotten (by proving identity)
|
| * Are centralised
| notch656a wrote:
| Clearly the advantages and disadvantages have both
| overlapping and mutually exclusive elements. For this
| reason It makes sense to me that some may choose to
| diversify their holdings by taking advantage of both. To
| me relying fully on the bank doesn't seem safe at all, as
| the IRS and other agencies have been known to arbitrarily
| seize accounts based on absurd claims of 'structuring'
| even for sub 10k deposits [0]. Crypto is volatile, and
| you can forget your seed string, but nearly impossible to
| seize if appropriate precautions taken. Local value like
| land/durable goods retain value largely as long as you
| can defend them by force, but are poor choices when
| fleeing.
|
| As time moves on it's clear to me all these assets are
| becoming important members of the financial landscape. If
| crypto were merely a degraded version of the dollar, then
| I don't think so many people would use.
|
| [0] https://ij.org/report/seize-first-question-later/
| irae wrote:
| crypto has a lot of traits of a bank without the bank.
| Fast transactions (as opposed to carrying money to
| different locations), secure storage (as compared to
| having guards for your hoard of gold), it does not
| rot/burn (if you backup keys adequately) and many others.
|
| All of those are more convenient than storing dollar
| bills or gold bars. So, yes, fiat has options, crypto is
| another kind of option and probably the most convenient
| for self custody, hence a very good one to avoid trusting
| institutions.
| gjulianm wrote:
| That's nice, but it's unrelated to the issue I'm talking
| about. If we care about crypto widespread usage, we have
| to look at what most people will do, and most people will
| choose convenience and won't have enough
| knowledge/interest/time to make informed decisions.
| Relying on "but you have the OPTION to do it properly"
| just leaves all those people behind and vulnerable to
| scams and situations like this. And ultimately, as the
| parent comment says, crypto will just speedrun financial
| history and find out why regulations exist.
| narrator wrote:
| Fractional reserving is taken as something that is good and
| wonderful, but before you had the fed who could print money
| at will, you had banking crashes caused by it on a regular
| basis.
|
| In a fixed money supply currency, fractional reserve
| banking should be illegal and banks should instead make
| money off fees. Venture capital should put their own money
| at risk to invest in the economy. How will people afford
| houses though? The housing market booms and busts because
| of the wildly fluctuating availability of credit caused by
| the money multiplier rapidly creating and destroying money
| which is tied to the fractional reserve banking concept.
| Homes would be drastically cheaper and people would
| actually be able to save to buy them if it weren't for the
| huge supply of rapidly created and later contracting credit
| available to buy them. Things we buy with credit like
| housing and education have gone up steadily in price, while
| things bought with cash have not.
|
| The fractional reserve people are so sick of crypto, that
| ,in one platform, you can buy bitcoin but you can't send it
| to a crypto address. You have to get your friend on the
| platform, you can send it to them, and then they can
| convert it back into fiat. It's ridiculous, you're
| basically just buying and selling a security that tracks
| Bitcoin and not Bitcoin itself.
| anon84873628 wrote:
| I can't really follow the comment. You seem to start a
| thesis about
|
| >In a fixed money supply currency, fractional reserve
| banking should be illegal and banks should instead make
| money off fees
|
| Which, ok... But then jump to
|
| >The housing market booms and busts because of the wildly
| fluctuating availability of credit caused by the money
| multiplier
|
| Which seems to be a thesis about our current world. I
| can't figure out the connection between them. Are you
| saying this is evidence of why the first thesis is
| correct? But USD is not a "fixed money supply currency",
| which was how we started out.
|
| I understand that easy credit induces demand for housing
| which has inelastic supply and somewhat sticky prices.
| This doesn't seem to be a problem of Fractional Reserve
| banking though. The VCs in your proposed system will
| still invest in mortgages as a fairly safe bet, because
| people are highly motivated to have a place to live.
|
| And mortgages are an important tool so people have a
| place to live _before_ saving for 30 years. Given our
| current population dynamics and everything else...
| zeroclip wrote:
| A lot of day traders on FTX are learning first hand the
| value of DeFi and self custody.
| Nursie wrote:
| Yes, because DeFi never suffers from collapses or hacks.
| Nobody every drained a DAO with a flash-loan, or used one
| to cash-out illiquid assets with no intention of paying
| it back... DeFi is as much of a joke as the rest of the
| ecosystem.
| zeroclip wrote:
| Different category of risk.
|
| CEX and DEX can both have hacks. An open source DEX can
| be verified, formally tested, and made immutable and un-
| upgradable on chain, like Uniswap.
|
| Uniswap V2 contract is 2 years unchanged, $3.8B TVL and
| $1B daily volume, close to 10 year old Coinbase CEX. Not
| bad for being a joke.
| Nursie wrote:
| So we've gone from "Everyone is learning the value of
| DeFi" to "I can come up with a single example of a DeFi
| system that hasn't been hacked (yet)"
|
| Hardly says that DeFi as a category is reliable.
| zeroclip wrote:
| Here's a bigger list for you[1], the top 10 all have $1B+
| TVL.
|
| [1] https://defillama.com/
| Apocryphon wrote:
| Those stories about smart contract programming errors
| leading to money getting permanently frozen are quite
| scary. Though admittedly in the grand scheme of things
| they seem to have "only" lost millions of USD, not
| billions.
| zeroclip wrote:
| Yes, it's a risk. If a contract or protocol is several
| years old, processing billions per day, and the code is
| un-upgradeable, you might say the risk is lower.
|
| I'd rather gamble with Uniswap protocol risk than FTX
| human fraud and greed risk.
| xtracto wrote:
| I remember when WikiLeaks first decided to accept Bitcoin's
| for donations. Nakamoto cautioned that Bitcoin was not
| mature enough fr something like that.
|
| I think that the problem with the Cryptocurrencies movement
| has been that the use peopel want to give to it has
| surpassed the technological advances that it provides. At
| some point, the ETH network will get there, providing
| "trustless" alternatives for a lot of the stuff that CeFi
| services are giving. But that is still several years away.
| gjulianm wrote:
| And at the point that the ETH network provides its
| alternatives, centralized services will have better
| products, more users, and more features simply because
| building centralized services is far, far easier and less
| time consuming than building decentralized ones.
| bornfreddy wrote:
| Well yeah - but they still won't be decentralized.
|
| If that proves to be important in the long run is
| something that we will see in the future, of course.
| gjulianm wrote:
| > Well yeah - but they still won't be decentralized.
|
| But people don't care too much about that. If so many
| crypto users, who we can assume are more informed and
| care more about decentralization than the average person,
| massively flock to centralized exchanges, why would the
| general population use decentralized services if they're
| worse?
| jrm4 wrote:
| I love this observation, because I think it's the perfect
| wedge point. Will most people fail at this? Yes.
|
| But -- will every single entity that actually does follow
| "fundamental crypto values" be destroyed? Almost certainly
| not. That's where the good (and healthy) action is. Follow
| THAT, everyone.
| dagmx wrote:
| I'd argue that your comment is a failure to understand human
| desire for convenience and trusted services however.
|
| Decentralization is at odds with that. It's not convenient.
| It's not easy. It's not simple. Not for a lay person anyway.
|
| When an ecosystem comes along and can solve those for the
| masses, it'll be revolutionary.
| andybak wrote:
| I'm technically competent and (before I got out entirely)
| my coins were on Coinbase.
|
| Why? Because I decided the odds of Coinbase going down were
| less than the odds of losing the coins myself without their
| help. There were just too many ways I could have messed up
| my own wallet.
| skinnymuch wrote:
| We don't even know if Satoshi is an intelligence agency or
| not.
|
| In any case. Satoshi was about using Bitcoin as a currency
| not a store of value, right? So either way this view is
| butchering what Satoshi wanted
| bmitc wrote:
| The only way for crypto to ever be a thing will be to
| integrate with traditional financial systems, to a degree.
| Continually beating the drum of "this isn't crypto" has not
| worked and will never work aside from making crypto
| fundamentalists feel like they're the only ones on the one
| true path.
| hwbehrens wrote:
| The best large-scale example of Chesterton's Fence that I've
| seen so far.
| WFHRenaissance wrote:
| Maybe... depending on where you say the fence is.
| febusravenga wrote:
| I like to call it "eventual civilisation" ...
| fritzo wrote:
| Nice, like there's a CAP theorem for finance. Pick two:
|
| - civil: transactions are just
|
| - accessible: customers can withdraw their assets
|
| - partitioned: customers can exchange assets with other
| customers
| netheril96 wrote:
| Centralized exchanges are the polar opposite of what Satoshi
| was advocating for.
| rtkwe wrote:
| Exchanges are the primary reason crypto value is as high as
| it is though. Without the easy way to get money in (and
| usually out) of $COINs there's less speculation, less money
| flowing in, less market to drive prices. If we were back in
| the days of Local Bitcoin being the best way to buy coins
| there'd be even less of the meager adoption we've seen in
| business too.
| koheripbal wrote:
| Satoshi also never said Bitcoin should have a high value or
| be an investment vehicle.
| cmsj wrote:
| A high value is certainly an implicit outcome of taking
| this literally:
|
| "What is needed is an electronic payment system based on
| cryptographic proof instead of trust, allowing any two
| willing parties to transact directly with each other
| without the need for a trusted third party"
|
| One could make the argument that crypto ownership could
| be a short-lived thing - you buy some crypto, use it
| immediately for an electronic payment, then you have no
| more crypto, which would keep its value low, but then you
| need a trusted third party to buy the crypto from, and
| the retailer needs one to sell the crypto to.
|
| Removing a third party means that you need to be paid in
| crypto, and do all your transactions with crypto. Given
| that Bitcoin was created with a finite pool of coins,
| it's obviously necessary that each coin be worth a vast
| amount of money, for it to replace all fiat currently
| used for electronic payments.
| littlestymaar wrote:
| Right, they said it should be a payment method over the
| internet. But they failed, mostly for two reasons:
|
| - they not anticipate ASICs, or even GPUs, which
| destroyed the idea of decentralized mining where
| individuals would just mine to get coins to spent, and
| forced people to buy coins instead (leading to the rise
| of exchanges).
|
| - their Austrian economics prejudice misled them about
| the nature of money, and the link between money and
| scarcity. The bitcoin supply was much too small, and too
| limited in growth, to accommodate for a exponential
| growth in usage. As a result, bitcoin instantly became
| deflationary, which is the second worse thing that can
| happen to something aiming to be a mean of payment (the
| first one being hyperinflation). For something to be a
| mean of payment, you need people to be willing to _spend_
| their tokens. Economies survive two-digit inflation, but
| even 10% deflation makes as much damage as Venezuela or
| Zimbabwe-like hyperinflation.
|
| Had Satoshi not been libertarian, and decided for
| instance to index the amount of mined bitcoin to the
| difficulty of the block, they'd have not created an
| investment asset headed to the moon but they'd have been
| much closer to create the payment system over the
| internet they dreamed about (putting aside the privacy
| and scalability issues of course).
| bmitc wrote:
| > their Austrian economics prejudice misled them about
| the nature of money, and the link between money and
| scarcity
|
| Do you have any references or more to say on this? Not
| arguing. I'd just like to look into it.
|
| I agree with your assessment that they were overly
| idealist and libertarian in their outlook. It has bled
| into crypto fundamentalists touting "this isn't crypto!".
| rtkwe wrote:
| Also the network is far too slow to handle even a
| fraction of the day to day transactions handled by VISA.
| Even if you relegate it to more substantial transfers
| SWIFT handles around 35 million transfers per day and for
| the whole month of October this year the main chain only
| handled 7.9 millionish from what I can find. It's so slow
| there's a whole opaque secondary layer that had to be
| built to get it even close to potentially handling day to
| day transactions.
| littlestymaar wrote:
| True, but if you think about the initial goal of a
| decentralized payment method over the internet and not in
| a crypto-maximalist perspective, it doesn't necessarily
| make sense to compare it with VISA or Swift which mostly
| process payments IRL.
|
| When bitcoin was designed, its throughput was a
| significant fraction of Paypal's which doesn't sound so
| bad. In fact, having a decentralized, uncensorable and
| open-source payment system taking 20% of Paypal's market
| share would have been a major success regarding Satoshi's
| stated goals, and this was something achievable even with
| the slow network. But it never happened, and all we have
| instead is this gigantic VC-funded distributed Casino
| where hackers and fraudsters thrive.
| ethanbond wrote:
| Thinking that competitive advantages will not accrue to
| centralized entities may as well be the very definition of
| wishful thinking.
| 0xAFFFF wrote:
| Satoshi was advocating for "digital cash", i.e. something you
| could do mundane transactions with, yet it's utterly unfit
| for that puropose. It's 2022, nobody gives a damn about what
| Satoshi was advocating for and especially not people
| believing in Bitcoin.
| narrator wrote:
| You obviously haven't heard of the lightning network.
| 0xAFFFF wrote:
| If your comment is a joke, nice one. If not, yes I have
| heard about it and it's unreliable, doesn't scale and is
| nowhere near close to make Bitcoin "digital cash", but
| nice try.
| sweetbitter wrote:
| Well, what about Monero? That has low fees and is pretty
| reliable and private.
| m348e912 wrote:
| >nobody gives a damn about what Satoshi was advocating for
|
| I do.
|
| >and especially not people believing in Bitcoin.
|
| You're partially right there.
| bmitc wrote:
| It is interesting to me that Satoshi's name gets thrown about
| like a sort of crypto Jesus or, maybe more accurately,
| Bokonon. No one knows who he is or if he even existed as a
| single person or what his deal was.
|
| Certainly privacy is a thing, but one does have to wonder who
| they (single person or group) were and what their true
| motivations were. It's possible they were just a cryptography
| enthusiast with an overly idealistic way of how monetary
| systems could work in reality.
| codedokode wrote:
| Regulated banks and currencies have similar issues, for
| example:
|
| - the government can print more money and devaluate your
| savings (it's like a form of tax one cannot avoid). But it is
| difficult to "print" more cryptocurrency.
|
| - the government can put limits on amount of money one can
| withdraw from a bank account. So you legally have the money but
| cannot use it.
|
| - the bank can refuse to deal with you under AML acts without
| need to prove anything. But nobody will ban you from mining and
| exchanging crypto.
|
| - the bank can go bankrupt
|
| The most reliable way to keep your savings safe seems to be to
| store it as gold. However, there are usually high taxes for
| buying/selling gold (because why let people store their savings
| safely) and often governments outright ban gold (folks from US
| are probably familiar with such situations [1]).
|
| [1] https://en.wikipedia.org/wiki/Executive_Order_6102
| dpbriggs wrote:
| A lot of these exchanges have suddenly died because they
| printed more currency than could be reasonably liquidated on
| short notice. And borrowed heavily against these tokens.
|
| When the bank goes bust there's insurance on your deposits.
| If the amount stored is greater than that insurance you may
| want to invest the difference.
|
| And gold is practically hard to work with and barely
| functions as an inflation hedge (point 1) over reasonable
| time periods (your lifetime).
| codedokode wrote:
| > When the bank goes bust there's insurance on your
| deposits
|
| Usually it covers only limited amount, not full deposit. In
| US it seems to be generous $250 000 but in other countries
| it is much lower (e.g. just about $20 000 here).
|
| > gold is practically hard to work with and barely
| functions as an inflation hedge
|
| And deposit interest rates are often below inflation in
| developed countries.
| awinder wrote:
| And gold costs money to store, i.e there's an interest
| rate charged to you. Its value does change though -- in
| positive & negative directions that don't correlate to
| inflation or an underlying monetary fundamental. Because
| it's not money or a money equivalent.
| parkingrift wrote:
| >But it is difficult to "print" more cryptocurrency.
|
| Except it's not. It's trivially easy. Any exchange (or
| person/entity) can mint a coin, and FTX collapsed in-part
| because they were backed by their own coin.
| codedokode wrote:
| I meant cryptocurrency like Bitcoin which is incredibly
| difficult to mint.
| onlyrealcuzzo wrote:
| > Regulated banks and currencies have similar issues, for
| example:
|
| And, yet, it's not an everyday occurrence that some US
| regulated financial institution loses all customer
| deposits...
| diogenescynic wrote:
| >The most reliable way to keep your savings safe seems to be
| to store it as gold.
|
| This is nonsense. FDIC insurance is adequate for most people
| and you can open multiple bank accounts without any issues to
| expand your coverage limit. Stop giving people bad advice.
|
| And everything you said about banks is an issue with gold.
| Most people don't have a vault at home they are storing gold
| in... they are simply buying a certificate that says they own
| gold in someone else's vault--which has all the same issues
| as banks and exchanges.
| codedokode wrote:
| As I understand, the interest rates for deposits in
| developed countries are too low to compensate inflation.
| awinder wrote:
| Most people are, in fact, willing to trade the government
| preventing lawlessness with money for the protection of the
| law with regards to their money. It's a great trade, for non-
| criminals.
|
| It also addresses the bankruptcy problem with government loss
| protection + regulation on net reserves (which worked and are
| tweaked as multiple overlapping failure conditions are
| tested, last in 2008).
| jupp0r wrote:
| Like: "you don't gamble with other people's money that they
| didn't give you for that purpose"?
| jimbokun wrote:
| That's a great quote. What's the source?
|
| EDIT: Ah, looks like it's from wise Hacker News contributor
| gzer0:
|
| https://news.ycombinator.com/item?id=32415093
| cm2187 wrote:
| Mostly agree. But not all those regulations. The power given to
| Trudeau to freeze the bank accounts of his political opponents
| does not serve any public good. Those regulations are also
| being abused all over the place at various degrees. Doesn't
| mean there shouldn't be any regulation but over regulation is a
| thing.
| [deleted]
| garyclarke27 wrote:
| 2nd largest gone https://financefeeds.com/aax-ranked-worlds-
| second-largest-sp...
|
| Binance next???
| gruez wrote:
| "second largest"? Did they pop out of nowhere? Today is
| literally the first time I heard of them.
| zzleeper wrote:
| Same here; never heard of them and aren't even in the list in
| coingecko: https://www.coingecko.com/en/exchanges
| ChrisClark wrote:
| They are on the last page, with 0 volume. But the volume 2
| days ago puts them at about 150th largest exchange.
| Practically an unknown and unused one.
| rapsey wrote:
| crypto.com, kucoin and others are way likelier. All the
| exchanges that passed ETH around to "demonstrate" their
| reserves.
| tibbydudeza wrote:
| How can it be a reserve to hold your own or other "coins"
| ???. This sector really needs proper regulatory framework
| like banks.
| tibbydudeza wrote:
| Way back to get a Schengen tourist visa you have to prove
| you had a certain amount of money available to cover
| expenses - you just borrowed money from friends and family
| for a few days, got a letter from the bank stating you had
| X in your bank account and then went over living in
| backpacker lodges and moonlight as a waitron to make money
| while travelling.
|
| I presume it is more difficult now.
| ceejayoz wrote:
| > How can it be a reserve to hold your own or other "coins"
| ???
|
| It isn't. They're defrauding folks.
|
| Tether got caught doing exactly this, passing money around
| between themselves and Bitfinex (same ownership) to pad out
| reserves for an attestation.
|
| https://ag.ny.gov/press-release/2021/attorney-general-
| james-...
|
| > In the face of persistent questions about whether the
| company actually held sufficient funds, Tether published a
| self-proclaimed 'verification' of its cash reserves, in
| 2017, that it characterized as "a good faith effort on our
| behalf to provide an interim analysis of our cash
| position." In reality, however, the cash ostensibly backing
| tethers had only been placed in Tether's account as of the
| very morning of the company's 'verification.'
|
| > On November 1, 2018, Tether publicized another self-
| proclaimed 'verification' of its cash reserve; this time at
| Deltec Bank & Trust Ltd. of the Bahamas. The announcement
| linked to a letter dated November 1, 2018, which stated
| that tethers were fully backed by cash, at one dollar for
| every one tether. However, the very next day, on November
| 2, 2018, Tether began to transfer funds out of its account,
| ultimately moving hundreds of millions of dollars from
| Tether's bank accounts to Bitfinex's accounts. And so, as
| of November 2, 2018 -- one day after their latest
| 'verification' -- tethers were again no longer backed one-
| to-one by U.S. dollars in a Tether bank account.
| zzleeper wrote:
| And still, Tether's market cap is many times higher than
| it was in 2017 or 2018... are investors just too stupid?
| throwayyy479087 wrote:
| Those still putting money are
| humbleMouse wrote:
| IceWreck wrote:
| 7-10 days for a so called "system upgrade" lol
| nadieyninguno1 wrote:
| I've had a store credit card (via Comenity Bank) having "system
| maintenance issues" since early June, refusing to pay out the
| money owed per their rewards scheme. No one at either the
| store's corporate office can tell you anything nor will the
| backing bank say anything other than "We value you as a
| customer and appreciate your patience."
|
| It's a common industry tactic, sadly, to scapegoat IT
| operations for internal failures.
| sidewndr46 wrote:
| Comenity is probably one of the scummiest organization's I've
| ever dealt with. I got one card with them & never will again.
| They actively charged me late fees on a closed account for
| months until I called them and suddenly they 'fixed the
| problem'
| kkielhofner wrote:
| Somewhat unrelated but unless it's absolutely dire
| circumstances do not EVER get a "store credit card".
|
| They have obscenely low limits which adversely affects your
| credit score as relatively small purchases can end up using a
| substantial portion of the available credit. Balance vs total
| credit (available credit) is a very important factor in
| calculating scores and credit worthiness.
|
| The interest rates are extremely high even when compared to
| most other major CCs from the usual suspects. All of these
| merchants don't push these things because they're doing you a
| favor - they likely have agreements in place with the issuing
| bank to get kickbacks on interest.
|
| As you already know most of them are issued through "Comenity
| Bank" which all signs point to as a bottom feeder and
| absolute joke. It's not a "real" bank as your experience
| demonstrates.
| to11mtm wrote:
| > They have obscenely low limits which adversely affects
| your credit score as relatively small purchases can end up
| using a substantial portion of the available credit.
| Balance vs total credit (available credit) is a very
| important factor in calculating scores and credit
| worthiness.
|
| I mean yes but if you have other credit cards that aren't
| maxed out, it should not make a huge overall difference
| compared to if you put that same amount on another card;
| while one card having a high balance load has an impact,
| the overall load on your credit is the bigger store factor.
|
| > The interest rates are extremely high even when compared
| to most other major CCs from the usual suspects. All of
| these merchants don't push these things because they're
| doing you a favor - they likely have agreements in place
| with the issuing bank to get kickbacks on interest.
|
| They get kickbacks, and the high interest rates help cover
| some of the cost of store CC customers that use promotional
| financing but consistently pay the item off before interest
| gets added.
| MichaelCollins wrote:
| > _All of these merchants don 't push these things because
| they're doing you a favor_
|
| Generalized, this is good advice. If somebody is shilling
| something to you, it's not for your own good. Ads aren't
| PSAs and even many PSAs aren't really PSAs.
| nadieyninguno1 wrote:
| > They have obscenely low limits which adversely affects
| your credit score as relatively small purchases can end up
| using a substantial portion of the available credit.
| Balance vs total credit (available credit) is a very
| important factor in calculating scores and credit
| worthiness.
|
| I would say this was my experience with them - having large
| credit limits elsewhere, I could only get an initial 300
| later increased to 1500.
|
| I was stupidly lured in by an initial 25% off a 4-figure
| purchase and 5 cents on the dollar reward.
|
| Ultimately, I was a responsible pay-off-the-balance
| customer so one wonders if this wasn't a way of ridding
| themselves of an unprofitable consumer...
|
| Hard lessons learned there, sadly.
| jasonwatkinspdx wrote:
| This is off the mark. I used to research credit reports for
| mortgage loans. The "perfect" report has a mortgage, auto
| loan, edu loan, bank credit card, and a retail store credit
| card.
|
| While the balances vs limits are a factor in scoring, it's
| just one factor among many. Retail credit cards won't trash
| your report unless you hit on specific bad patterns, like
| opening a bunch at once.
|
| I see this pattern all the time, where someone will take a
| true statement, like that the balance to limit ratio and
| absolute high water mark are a factor in the scoring, and
| then mistakenly turn it around into normative advice about
| how you should shape your report. You're not going to fix a
| bad score by dropping a retail card or two.
|
| Here's the secret to having a good credit report: use
| credit often, pay it on time, don't run large balances
| relative to your regular spending. That's what lenders want
| to see and what the score aims for.
| kkielhofner wrote:
| Appreciate the correction! Credit (to most people
| including myself) is somewhat of a black box. I've just
| always done what I've done and maintained scores high
| enough to get access to credit with great rates, etc. I'm
| very surprised to hear having a store card (who they seem
| to hand out to anyone with a pulse) with a $300 limit can
| ever be a good factor on a report. This goes against
| everything I've ever "heard" and read about these cards.
| I trust your experience but I'm really struggling to
| understand how being issued a card in minutes at checkout
| at Best Buy (or wherever) is any sign of credit
| worthiness and a contributer to a "perfect" report.
|
| To be pedantic I don't think I ever implied dropping a
| store card will have any significant impact on an
| otherwise bad (or good) credit report.
|
| That said, OP started with his nightmare of an experience
| with the shady banks store cards end up with so (to me)
| that's reason enough to stay away from them.
| jasonwatkinspdx wrote:
| Yeah, it's very opaque, way more than most consumers
| know.
|
| For example you don't have a single FICO or XPN score.
| When a lender pulls a report they pick an option for the
| purpose, and that picks one of a couple dozen different
| models. All the models come from Fair Isaac but are
| tweaked to context.
|
| I have a bit of a unique perspective on all this because
| my job was basically to research negative items on
| mortgage applicant credit reports, and if I could get the
| creditor to say something that met one of a couple dozen
| criteria then I could pull the item off the report and
| resubmit it to the big 3 for a new score.
|
| A big part of my job was explaining to loan officers what
| the score impact of particular changes to the report
| would be. Fair Isaac obviously keeps the details of their
| models proprietary, but doing my job you'd accumulate an
| intuition for what would do what. This was all in the
| early 00's and I've no doubt things have changed in
| detail but not really in the overall picture I'm
| presenting.
|
| The main thing to understand about credit scores is
| creditors want to see you using credit but paying
| reliably. They want to see you carry some balance because
| that's where they make money, but they don't want to see
| you running into what looks like unsustainable balance
| growth relative to your payment history. Retail credit
| cards are a positive signal because it shows you're a
| good little consumer that will float a balance for a few
| months to buy that new whatever but you always end up
| paying on time.
|
| The mistake a lot of people think about these scores is
| that they're some sort of measure of personal fiscal
| discipline. They aren't. They're a score of how likely
| you are to make a lender money as a borrower. They want
| debt addicts that pay interest reliably, something that
| is pointed a different direction from personal fiscal
| prudence in most cases.
|
| As long as I'm rambling a couple other tips:
|
| Creditors will often remove negative payment history if
| you simply ask. You've got nothing to lose by trying, and
| it works doubly well if you're applying for a new product
| at the same bank. There is no more effective bank
| customer service agent than a loan officer determined to
| get that commission. They will go on a hilarious scorched
| earth warpath of conference calls with the borrower to
| get it done.
|
| Most lenders are only really interested in the last 2
| years of history. If you're in a bad spot just make
| getting 2 years of clean payments on a couple sources of
| credit your goal. Get a secured card if you have to. Use
| it for ordinary daily expenses vs a cash or debit card,
| and pay it off each month.
|
| If you want to game the system, the most effective way is
| to file a dispute with the big 3 on Monday, then apply
| for the loan or whatever on Tuesday. Disputes temporarily
| knock items off the report, so you can try to work within
| the lag time of the bureau processing the dispute. This
| is particularly effective vs Transunion, which is the
| main reporter for collection agencies and other really
| bad stuff on reports, and also is a hilariously lazy and
| incompetent company.
|
| As to your last point I totally agree about that part.
| But it's getting hard to avoid the shady in banking. I
| worked for Wells Fargo, and it was very apparent to me
| that quality control was structured to whitewash not find
| fraud. So much obvious fraud that met the law and rules
| came across my desk. I was totally unsurprised by the
| 2008 crash as well as the story about Wells Fargo branch
| managers opening second accounts for customers with
| forged permission.
|
| The whole credit reporting industry needs severe reform,
| but it's not even a visible issue on capital hill.
| tibbydudeza wrote:
| Nothing is really "free" - somebody is always paying for it
| usually via some clever marketing budget allocation from the
| store - they probably realized that too many people are
| redeeming their rewards (usually 20% don't bother) and it is
| costing them actual money.
| x86_64Ubuntu wrote:
| I think a rewards program is far less priority compared to
| processing actual transactions. If a credit card provider
| can't process transactions, it's essentially a dead company.
| Same for these exchanges stopping withdrawals.
| thedangler wrote:
| jacknews wrote:
| This all seems like less a problem of crypto as such, and more
| that exchanges are making a virtual fractional reserve currency
| by leveraging customer deposits for loans/investments.
|
| ie it's a 'banking' problem, specifically a 'fractional reserve
| banking' problem, not a crypto problem.
|
| This is exactly why fractional reserve banking is heavily
| regulated.
| p0pcult wrote:
| This is the correct take, and why American regulators need to
| address crypto sooner rather than later.
| gitfan86 wrote:
| But the WHOLE point of crypto was to avoid governmental
| control. If the government is regulating it that means they
| can control it. And it becomes completely worthless. If you
| want digital gold as an inflation hedge you can literally buy
| a GLD ETF. It gives you digital shares in actual GOLD.
| epgui wrote:
| There's nothing you can invent which can be beyond
| government control. If government cares to control
| something, it will.
| jacknews wrote:
| There's nothing to stop people using crypto to buy/sell
| goods directly, or to trade directly between themselves,
| completely outside of government control. And crypto itself
| can't be inflated away, or obsoleted, or otherwise really
| controlled by government, except by attacking it; making it
| illegal to own or trade, to operate nodes, to write code,
| or use CIA shenanigans, etc.
|
| But if an exchange claims that they hold your crypto
| 'frozen' and completely separate from their trading
| activities, and especially if the exchange also deal in
| government currency, then I think it's quite right for
| government to regulate, and ensure the exchanges are
| compliant.
| gitfan86 wrote:
| Vendors of goods and services have virtually no interest
| in self custody. They want deposits going to a
| bank/exchange. So you are not going to be able to buy
| many goods or services directly. How many businesses are
| CASH only today? That is best case scenario for buy/sell
| crypto directly.
| chasd00 wrote:
| > But the WHOLE point of crypto was to avoid governmental
| control
|
| I think from a purist perspective that is true. I said this
| upthread but what people really want is more USD in their
| checking account. These exchanges are a place where they
| can roll the dice and maybe make that happen. As I said
| before, i bet 95% of the people burned couldn't care less
| about the philosophical aims of crypto currencies and just
| want a chance to get rich (in USD).
| p0pcult wrote:
| No, that was the whole point of Bitcoin. Crypto > Bitcoin.
| knorker wrote:
| Sure, without the safeguards. No FDIC. No lessons learned from
| the history of banking.
|
| I agree it's a banking problem in that they're trying to
| streamline a new economy by not doing what "legacy banking"
| does. Which is like streamlining airlines by starting the rule
| book from scratch. But the rules and regulation of the airlines
| have been paid for in blood. Discard them at your own peril.
|
| Or, in the case of cryptocurrencies, at the peril of the
| finances of anyone investing in your experiment.
| amalcon wrote:
| None of these collapses have been due to fractional reserve
| banking, because fractional reserve banking requires being open
| about what you're doing. These collapses have been about
| _fraud_. There are lots of other kinds of fraud; getting rid of
| this type would barely make an impact.
|
| While there's nothing intrinsic about cryptocurrency that would
| make it more prone to fraud than anything else, the culture
| around it seems _highly_ susceptible to it.
| cortesoft wrote:
| > While there's nothing intrinsic about cryptocurrency that
| would make it more prone to fraud than anything else
|
| There are absolutely intrinsic things that make
| cryptocurrency more prone to fraud. The inability to reverse
| transactions, quasi-anonymity, and lack of any central
| authority to resolve disputes.
|
| To limit fraud to the levels you see in traditional finance,
| you would need the regulations and oversight by centralized
| organizations that you have in the traditional space. The
| entire purpose of cryptocurrencies are to avoid those things,
| so while you technically could have them with a
| cryptocurrency, you would end up with no good reason to have
| a cryptocurrency at all.
| sweetbitter wrote:
| > The entire purpose of cryptocurrencies are to avoid those
| things, so while you technically could have them with a
| cryptocurrency, you would end up with no good reason to
| have a cryptocurrency at all.
|
| I will substitute a word from your post that will help you
| understand this easier:
|
| "The entire purpose of cash is to avoid those things, so
| while you technically could have them with cash, you would
| end up with no good reason to have cash at all."
|
| Cryptocurrency is not antithetical to banks just like cash
| and gold are not. It is a digital version of cash, not
| credit.
| cortesoft wrote:
| The entire purpose of cash is NOT to avoid a central
| authority... in fact, all cash has a central authority in
| the form of the government who issues the currency.
| amalcon wrote:
| This sort of rhetoric is suboptimal. It only seems
| persuasive because you consider cryptocurrency to be
| analogous in purpose to cash, but the person you're
| trying to convince likely does not believe this. If they
| did, then they likely would already see purposes of
| cryptocurrency other than avoiding regulation, via the
| analogy.
|
| If you're going to argue through analogy, you ideally
| need to ensure agreement with the analogy. Since
| asynchronous discussions make this difficult, we often
| need to settle for motivating the analogy instead. Simply
| assuming it is usually not persuasive.
| sweetbitter wrote:
| Thanks for the advice. I use synchronous media like chat
| protocols much more often, and was blind to this- and
| yep, it does seem like the primary objection to that
| argument was born out of a flawed understanding of the
| analogy.
| strogonoff wrote:
| Cryptocurrencies are nothing like cash for one important
| reason: they are not subject to physical constraints.
|
| You cannot easily scam millions of people around the
| world out of their hard-earned cash in a couple of days.
| You cannot easily move millions of dollars in cash
| without conspicuously hauling objects around and/or
| engaging many people to help with that. You can reverse a
| cash transaction immediately by grabbing the person and
| calling the police. You cannot maintain anonymity when
| dealing in cash without giving strong cues to bystanders
| and counterparties and risking being recorded on video.
| It is not the purpose of cash to avoid any of those
| "downsides"; but it clearly is a feature of
| cryptocurrencies.
|
| Cryptocurrencies are a qualitatively new thing humanity
| has never had to deal with ever, no matter how insistent
| are cryptocurrency aficionados' in calling it merely "a
| digital version of cash". This serves their wallets, by
| suspending deserved wariness and encouraging
| unsophisticated people to invest into a financial
| pyramid, but not truthful description of reality.
| sweetbitter wrote:
| > Cryptocurrencies are a qualitatively new thing humanity
| has never had to deal with ever, no matter how insistent
| are cryptocurrency aficionados' in calling it merely "a
| digital version of cash". This serves their wallets, by
| suspending deserved wariness and encouraging
| unsophisticated people to invest into a financial
| pyramid, but not truthful description of reality.
|
| Holding no cryptocurrency myself (I don't need to buy
| anything with it atm :D) I would hardly call myself an
| 'aficionado'. But you must understand that to compare
| does not mean to equate. All I was saying is that
| cryptographic currencies have some of the properties that
| cash has, but that they also have the ease of transport
| and storage afforded to us by credit.
|
| I don't see the issue with being able to transport cash
| across the 'net. Governments can still regulate
| businesses, banks, so if you go and buy a car and your
| government wants to know to tax it, the business selling
| you the car can just report this income. If a bank held
| your asset for you, they could just be subject to similar
| regulations as when they hold other assets for you. Once
| you stop treating it like credit or like some amorphous
| blob that cannot be regulated, this stuff gets pretty
| simple to understand.
| fundad wrote:
| I crypto fans call it the "five-finger-fractional-reserve,
| have fun being poor" if you ask them.
| bobro wrote:
| Of all the problems listed in critiques of fiat currency, what
| percent is just banking?
|
| Seems hard to try to disentangle money and how money gets
| managed at scale.
| yashg wrote:
| One more gambling den down. How many more to go?
| edf13 wrote:
| Some of their wallets look decidedly low (Check the BTC wallet):
| https://twitter.com/BlocklyticsNet/status/159216491279237939...
| xeromal wrote:
| Yeah, very low. Damn.
| UncleOxidant wrote:
| Dominoes.
| ineedasername wrote:
| _> withdrawals have been suspended to avoid fraud and
| exploitation_
|
| That... no.
| londons_explore wrote:
| Sounds to me like "We're running out of cash, so we want to
| prioritize our friends withdrawals and delay everyone else".
|
| Next week, we'll announce insolvency, and all those withdrawals
| in the queue that haven't been processed never will be.
| nemo44x wrote:
| These guys won't be around in 2 weeks. Clearly they are
| experiencing a liquidity crisis and are buying time, hoping to
| somehow get needed funds in that time.
|
| Scams always end this way - the exit gets crowded as more people
| are trying to get out than are coming in and it unravels.
| hn_throwaway_99 wrote:
| The language used in announcements like these just convince me
| that "absolute laughing stock" is the correct term to describe
| these outfits.
|
| "We are hopeful that as a community, we can brave through these
| troubling times together."
|
| It sounds to me like a speech given by a middle school candidate
| for school president when the cafeteria has decided to cancel
| Taco Tuesdays, not a professional organization responsible for
| safeguarding billions in assets. I can't imagine a large
| traditional bank or trading outfit in the US giving a similar
| sounding press release.
| gsibble wrote:
| So they're next?
| moitoi wrote:
| They may be next. It's not 100% sure but very plausible.
| beefield wrote:
| I feel bad that my tax money is going to be spent to feed crypto
| scammers when they end up in jail. I wonder if we could come up
| with a law that makes crypto-related fraud, scams, hacking and
| theft completely legal? After all, one of the main selling points
| of crypto has been that they do not want to have anything to do
| with centralized government, so why should government care? Let
| them sort it themselves.
|
| (There are some challenges with this idea on what comes to
| violence and threat of violence, as I am not probably willing to
| make those legal in any case, but maybe those could be solved
| somehow.)
| moneywoes wrote:
| Domino effect perhaps
| ramesh31 wrote:
| More like house of cards
| lbriner wrote:
| Forgive my ignorance but it seems that one major problem with
| crypto-exchanges is that they don't necessarily have any assets
| other than the crypto that has been deposited there, which means
| all overheads (which I am assuming for some of these guys is
| $Ms/year) can only come from trading crypto unless they are
| charging reasonable money for the privilege of using their
| exchanges.
|
| In the FIAT world, banks make tonnes of money from things like
| loans and mortgages so they can handle some risk by holding onto
| cash.
|
| If this is true, how does it get fixed? Is there any reason
| someone would take out a loan in crypto and pay interest on the
| repayments?
| colechristensen wrote:
| >If this is true, how does it get fixed?
|
| It's not true, they're just dipping into customer funds to make
| risky bets on extremely volatile instruments (more crypto
| assets) and losing. Along with straight up fraud stealing
| customer funds and having shit security and getting robbed.
|
| It gets "fixed" by regulatory bodies like the SEC appropriately
| and quickly requiring a set of rules and regulations on any
| exchange that operates in country along with auditing, fines,
| and general fast and effective enforcement.
|
| These exchanges aren't failing because of accidents or inherent
| risk, they're committing fraud and taking foolish risks that
| traditional banks aren't allowed to take.
| itake wrote:
| > Is there any reason someone would take out a loan in crypto
| and pay interest on the repayments?
|
| People want to increase their exposure to crypto via leverage.
| For example:
|
| 1. Collatorize BTC to get USDT
|
| 2. Use the USTDT to buy ETH.
|
| 3. Use ETH to collatorize to get USDT
|
| 4. Use USDT to buy sh*tcoin
|
| 5. wash, rinse, repeat
|
| If everything goes up, you can make a ton of money. If things
| go down... you lose everything.
| benj111 wrote:
| Or the opposite. Short bitcoin or whatever
| PaulHoule wrote:
| It's pretty dangerous though. Even though crypto is mostly
| on the way down and out some coins will predictably lurch
| upward from time to time.
|
| If you hold an asset long you have a finite potential for
| loss but infinite potential for gain. Short it's the other
| way around. Algo traders and hedgies often treat short and
| long positions as symmetrical as they almost are when
| linearized but over long periods of time and large
| princemovements that's wrong. It leaves you with the hedgie
| viewpoint that it's as bad a "risk" that the stock market
| goes up too much as if it goes down which is not the way
| most people think.
| yvdriess wrote:
| It's very risky. The price has a tendency to jump up
| briefly when a large short needs to cover its position.
| glerk wrote:
| > unless they are charging reasonable money for the privilege
| of using their exchanges
|
| If the trading volumes they are claiming are real, these
| exchanges should be printing money from transaction fees alone.
| ta988 wrote:
| That's the money that the owners take and hide for when they
| are out of jail.
| londons_explore wrote:
| Nearly all trading platforms are fee-free for any big player
| who asks nicely...
|
| The platforms themselves like big players making their order
| book deeper and bumping up the volume figures.
|
| I would be surprised if even 10% of the trades paid the
| advertised fees.
| flanked-evergl wrote:
| > Nearly all trading platforms are fee-free for any big
| player who asks nicely...
|
| Too bad they could not figure out how to both give fee-free
| trading and keep their businesses solvent.
| wiredfool wrote:
| But why settle for 1% of trades when you can have 100% of
| assets?
| [deleted]
| twblalock wrote:
| The problem is that the people who run the exchanges can't stop
| themselves from using customers' money to try to get rich.
|
| In theory it is possible that an exchange could just take
| customer money, keep it in a lockbox, and make their revenue by
| charging transaction fees. But does that ever happen?
|
| The kind of people who are so into crypto that they build a
| business out of it are fundamentally incapable of that kind of
| self control. They think they are revolutionaries who are
| remaking the financial system. They do really dumb financial
| stuff that the rest of us learned was bad after the 19th
| century. They aren't the kind of people who would just leave
| customer deposits alone.
|
| Remember that FTX was supposed to be the responsible exchange.
| All the other ones were considered to be worse.
| Spooky23 wrote:
| Banks have regulatory requirements that reduce risk. There are
| insurance mechanisms to protect bank deposits and securities
| insurance to protect custodial assets.
|
| The problem with crypto stuff is that it was the Wild West and
| that atmospheric attracts and breeds crooks.
|
| Wrt loans, people were pretending that these coins were cash.
| The reality is that they are sort of like virtual silver. All
| debts get settled in legal tender.
| benjaminwootton wrote:
| They should make money in the same way that the New York Stock
| Exchange does - by taking a small fee from every trade.
| asah wrote:
| um, that's exactly what they do.
| fallingknife wrote:
| That's how they made their money for most of their existence,
| and how crypto exchanges still do, but not anymore. The NYSE
| actually makes most of its money now by charging for
| colocated server space which HFT's use to get super low
| latency connections to the market.
| notamy wrote:
| Wait, really? That sounds weirdly counterintuitive. Do you
| know if there's any public information about this? The only
| thing I could find from a quick search was [0] which
| doesn't provide a huge amount of info...
|
| [0] https://www.reddit.com/r/algotrading/comments/2c1r4e/ho
| w_muc...
| flanked-evergl wrote:
| I'm not aware of any crypto exchange that does not charge
| some manner of fees.
| nannal wrote:
| There are some 0 fees exchanges, often requires significant
| volume or occasionally it's for limited periods and/or on a
| small list of pairs, but I wouldn't be suprised that
| someone's running fractional reserve with an exchange and
| offers 0 fees because they make money elsewhere.
| rdtwo wrote:
| You have to be. There is no money to be made at 0 fee
| exchanges unless you lend the money out or give
| unfavorable swap rates
| mccorrinall wrote:
| Binance and bybit offer 0% fees on spot, but you usually
| want some kind of leverage, so you pay interest in your
| margin loan.
|
| If you are not a small retail and want to trade crypto,
| you usually need to use futures - which are associated
| with fees - because of liquidity and tighter spreads.
| 867-5309 wrote:
| it costs them money to exchange, and they add profit on
| top of this. the "0 fees" are therefore the sum of these
| masked in an inflated exchange rate
| lxgr wrote:
| That's not how an exchange works, though.
|
| Exchanges provide the infrastructure for trades to happen
| (i.e. they maintain order books, match market orders
| against these, ensure that settlement will eventually
| happen etc.), but do not take on financial positions
| themselves.
|
| The "exchange rate" is only determined by the order book,
| i.e. ultimately by supply and demand.
|
| So if an exchange makes money, it needs to charge at
| least some of its participants for these services. That
| can happen through transparent fees, or through less
| obvious mechanisms (like making retail trades free, and
| charging an exclusive market maker for the privilege of
| that exclusivity).
| 867-5309 wrote:
| >The "exchange rate" is only determined by the order
| book, i.e. ultimately by supply and demand.
|
| if that were true then all exchange rates would be
| uniform across all providers
| lxgr wrote:
| What do you mean by "providers"? Different exchanges?
|
| Long-standing price differences are usually reflective of
| market inefficiencies that can't easily be arbitraged
| away, such as difficulties funding a given exchange
| account, insufficient volume to make it worth trading
| there, or many others.
| fisherjeff wrote:
| Ah but think of all the money that leaves on the table!
| DebtDeflation wrote:
| Crypto exchanges are more like a bank grafted onto a hedge
| fund that happens to also do some exchange stuff on the side.
| oldgradstudent wrote:
| Recent collapses have shown that Crypto exchanges are more
| like a casino grafted to a Ponzi scheme.
| pclmulqdq wrote:
| Which is remarkably similar to a bank grafted to a hedge
| fund.
| oldgradstudent wrote:
| There's a reason why Glass-Steagal prohibited grafting
| banks to hedge funds.
| giancarlostoro wrote:
| This is how CoinBase works basically.
| baxtr wrote:
| It's in the name, isn't it? An exchange is where assets are
| exchanged.
|
| For that service they get a fee, usually tied to the
| transaction volume. Pay any expenses out of that fee and keep
| transactions rates high is a good mode for survival.
|
| Unfortunately, if asset prices depreciate, fees tank too. But
| that's manageable.
|
| What's not manageable though if you start using assets of your
| customers to create a new revenue stream by locking those
| assets up somewhere or by using them for high-risk trades.
|
| When people start asking their assets back you suddenly have a
| problem.
| [deleted]
| oneoff786 wrote:
| In the fiat world banks are regulated and can't do crazy shit
| with their reserves.
| flanked-evergl wrote:
| In the real world all organizations are regulated and fraud
| is illegal. But sadly something being illegal does not
| prevent if from happening, and greasing political palms
| always help:
|
| https://fortune.com/2022/11/10/sam-bankman-fried-ftx-joe-
| bid... (https://archive.ph/BBpQN#selection-417.0-424.0)
|
| > The 30-year-old Bankman-Fried has been a major force in
| Democratic politics, ranking as the party's second-biggest
| individual donor in the 2021-2022 election cycle, according
| to Open Secrets, with donations totaling $39.8 million. That
| ranks only behind George Soros (about $128 million) but ahead
| of many other big names, including Michael Bloomberg ($28.3
| million). What's more, he had promised to spend far more on
| Democrats moving forward, predicting in May that he'd fund
| "north of $100 million" and had a "soft ceiling" of $1
| billion for the 2024 elections.
| spywaregorilla wrote:
| SBF spent about 33% Republican / 66% Democrat
|
| EDIT: Not accurate ^
|
| Yet 18 of the 25 top donors were Republican leaning.
| Billionaires comprise 20% of Republican funding vs. 14% for
| Dems. Most republican megadonors were entirely republican.
| The big ones are from hedge funds.
|
| So yeah, SBF donated to the dems. We need more regulation
| to get money out of politics. But let's not kid ourselves
| into thinking the republican party is immune to this. They
| are in it. They tend to be more in it.
|
| 96% of house seats were won by the party that spent more in
| their race.
|
| https://web.archive.org/web/20221113221316/https://www.nyti
| m...
|
| https://web.archive.org/web/20221113013307/http://www.opens
| e...
| flanked-evergl wrote:
| > So yeah, SBF donated to the dems. We need more
| regulation to get money out of politics. But let's not
| kid ourselves into thinking the republican party is
| immune to this. They are in it. They tend to be more in
| it.
|
| Fair enough and thanks for the context, but politically
| connected is politically connected. Can be politically
| connected to democrats or republicans.
| mcrad wrote:
| Some people will never understand how damaging this level
| of tech money tied up in politics is. Apparently it's
| easier to jump on one side and do finger-pointing than to
| actually accept the level of fraud happening.
| zmgsabst wrote:
| SBF spent 99.9% Dems and 0.1% Repub, according to your
| first link.
|
| You're telling untrue facts according to your own sources
| -- to minimize that the second largest Dem donor was a
| criminal stealing customer funds. Your comparison to
| Repubs is unfounded as none of their donors engaged in
| organized crime like SBF.
|
| Why are you spreading election misinformation?
| skinnymuch wrote:
| Those other billionaires donating a ton may be mostly
| legally doing their huge business. That doesn't make it
| moral or ethical or completely legal. If the entire
| system is corrupt, pointing all fingers at the corrupt
| Dem party when the Repub part is just as corrupt if not
| more so is weird, uniformed, and biased. Are you
| spreading election misinformation?
| zmgsabst wrote:
| Excusing criminality by saying "well, legitimate business
| isn't totally ethical!" is nonsense gaslighting.
| nobody9999 wrote:
| >Excusing criminality by saying "well, legitimate
| business isn't totally ethical!" is nonsense gaslighting.
|
| I think the point was not whataboutism, but rather that
| the sewer of filthy lucre that we call "campaign
| finance," regardless of who gives/receives such funds,
| creates perverse incentives in the political system and
| should be discouraged/done away with.
|
| That's not a partisan take IMHO.
| skinnymuch wrote:
| Who is excusing it? I'm not! You have to lock SBF up
| assuming everything we have heard so far is close to the
| truth.
|
| I want the lot of billionaire donors to have their and
| their company's finances and political involvement
| investigated and made transparent for the public. Keep
| them all accountable. But ofc SBF is worse than all the
| rest because of how bad his actions have been. The worst.
| But overall we shouldn't allow any one to have such
| outsized power. Don't make it legal to politically donate
| this much money to any one.
|
| On the other hand, you appear to be excusing the
| Republican donor's. Your comments are saying "go after
| this visibly criminal (according to our justice system)
| Democrat. Focus on that! Ignore all the republican [and
| other Democratic] ones". Being as partisan as can be.
|
| nobody9999 summarized my side perfectly as well.
| spywaregorilla wrote:
| Ok buddy, look, one. You're right, it was a mistake. I
| misremembered something. I cited a source containing the
| right information and you pointed it out. Thanks.
|
| > Why are you spreading election misinformation?
|
| Two, Fuck off. This is needlessly passive aggressive.
| There is no need to throw in a worst-faith assessment of
| my motivations for posting all of this.
| zmgsabst wrote:
| reallythisguy wrote:
| This is more misinformation than the OP - there's more
| criminal money flowing into republicans by far, the below
| is just two examples (edit: two examples) from 10 seconds
| of searching for an article:
|
| https://www.politico.com/news/2021/09/20/gop-operatives-
| char... https://www.wsj.com/articles/former-gop-donors-
| charged-in-in...
|
| Even if talking just about people who are later found to
| have acted improperly, look at the CEO of FTX Ryan D.
| Salame, one of the largest Republican donors.
| mcrad wrote:
| 10 seconds of searching is where your argument falls
| apart, good luck with that.
|
| Anyway you are justifying this destructive behavior with
| more destructive behavior? It's no wonder you don't take
| more time to understand these things.
| skinnymuch wrote:
| I'll reiterate my comment to the original OP.
| Billionaires donating may generally be legally doing
| their business. That doesn't make it moral or ethical or
| completely legal. If the entire billionaire system is
| corrupt, pointing all fingers at the corrupt Dem party
| when the Repub party is just as corrupt, if not more so,
| is weird, uniformed, and biased. Are you spreading
| election misinformation?
| rhaway84773 wrote:
| Good post.
|
| > 96% of house seats were won by the party that spent
| more in their race.
|
| I don't think the causality here is clear. A lot of
| companies/billionaires/millionaires and even regular
| people tend to donate money towards the people who are
| likely to win the race. If you wanna be in the good
| graces of the person representing a certain district in
| the House the best way to do that is to make a bet on the
| likely winner ahead of the elections.
| spywaregorilla wrote:
| I would say... mostly true? The 96% isn't as sobering as
| it first sounds because most races are not competitive at
| all.
|
| https://www.opensecrets.org/outside-
| spending/by_race/2022?di...
|
| Many have literally $0 by outside spenders (ignoring the
| parties themselves).
|
| On the other hand you don't see a ton of money going to
| non-competitive races because it doesn't really matter.
| The politician doesn't benefit all that much so it's not
| exactly a great way to earn favors. Or at least, that's
| what I'd assume. Lobbying is cheaper than people expect
| but a lot of these totals are so low I can't imagine it
| really matters to anyone.
|
| The highest spending race was Nevada 3. With ~$15M for
| Republicans and ~$5M for Democrats. Predicted a likely
| democrat Win by 538 and ultimately won by democrats
| 52-48. Contradicting kind of all points here we're
| making. It's fuzzy of course. Need to get money out
| regardless.
| cool_dude85 wrote:
| >On the other hand you don't see a ton of money going to
| non-competitive races because it doesn't really matter.
| The politician doesn't benefit all that much so it's not
| exactly a great way to earn favors.
|
| Just my own speculation, but this is probably only true
| to a certain point. A politician in a non-competitive
| race is not going to have anything productive to do with
| 15 million as in NV3, but money that goes to the PAC run
| by your former aide helps to grease his palm (so 100k
| goes in and 50k is spent on ads, 50k on the PAC CEO's
| salary for example), or to similarly grease the palm of
| your various consultants, friends, and family, or to
| grease the palms of friendly industry groups who you
| sincerely hope will hire you on a do-nothing job once you
| retire from politics.
|
| Money coming in to a certain point is always a good
| thing, and I speculate being in a foregone conclusion
| race probably helps limit the scrutiny on how you spend
| it.
| hotpotamus wrote:
| It would seem that there are other failures and frauds
| predating Bankman-Fried, wouldn't it?
|
| While I'm told that the ideological and technical
| underpinnings of crypto are designed to avoid government
| regulation, I hope that he is prosecuted thoroughly for any
| crimes he may have committed.
|
| But further, I hope that this high profile Democratic donor
| drives Republicans in the House and Senate to support
| strong regulation on this burgeoning financial asset
| class/stateless currency (I'm still unsure of what it is).
| And in fact stronger regulation on the financial industry
| generally.
| skinnymuch wrote:
| Republicans are about de-regulation. Whatever they may do
| for optics temporarily means nothing for their actual
| focus and goal. Democrats are not much better but I'm not
| hoping only one of the two parties is going to do legit
| sustained regulation against the way they actually behave
| in the medium and long term.
|
| Why are you only looking to the Repub party? Ilhan Omar
| for example doesn't care much if Biden was given corrupt
| money. She's not going to suddenly do everything centrist
| Biden does. Biden has more in common with your average
| neoliberal Repub than a progressive Democrat, who
| themselves are normally only center-left.
|
| > And in fact stronger regulation on the financial
| industry generally.
|
| Both parties and neoliberals across the board have done
| the opposite since Reagan has been in power. Republicans
| specifically are publicly about deregulation while Dems
| will flip how they talk but are also about de-regulation
| and keeping class divides.
|
| Look at the top donors on both sides. They are all non-
| working class. They all make more money via de-regulation
| and a capitalist society where the rich have more power
| than others. They already show their hands. They vote for
| the establishment to maintain their money and power.
| [deleted]
| tablespoon wrote:
| > In the FIAT world, banks make tonnes of money from things
| like loans and mortgages so they can handle some risk by
| holding onto cash.
|
| Also, IIRC, conventional stock exchanges make their money from
| transaction fees on trading volume. Are there cryptocurrency
| exchanges not doing that? I suppose even if they are, they're
| probably in trouble, since once the bubble bursts there will be
| a lot less trading activity going on.
| surfsvammel wrote:
| I know nothing about the world of crypto currencies, but I do
| know finance.
|
| The exchange does not hold the trades
| instruments/currencies/securities as assets. The business of a
| normal exchange is normally risk free (just matching buyers to
| sellers). Some exchanges step in as middle man in the trades, a
| process that I believe is called novation of the trade. The
| original trade between the buyer and the seller is novated,
| transformed into two trades, both against the exchange, one for
| each party and opposite direction. In this case the main risk
| is counterparty risk, the risk that one of the counterparties
| fail in some way.
|
| An exchange never holds its own positions.
|
| What is the difference in these cases? Have the crypto
| exchanges somehow used their users cryptosecurities as assets?
| startupsfail wrote:
| Crypto exchanges usually combine a function of an exchange
| and a clearing house. And tend to create ad-hock financial
| instruments. Hence the risk.
|
| To me it feels like it is time to rethink at least the proof-
| of-work coins, particularly the CO2 emissions and energy use.
| It is crazy that people go cold in Europe while the energy is
| spent to mine bitcoins. And that the amount of CO2 produced
| by mining bitcoins is that of a small country. While the
| benefits of of all these coins seem to be nonexistent.
| numlock86 wrote:
| > If this is true, how does it get fixed?
|
| The root problem is people buying to pyramid schemes (read as:
| crypto).
| willturman wrote:
| It's time to pivot to tangible long term assets, like tulip
| bulbs.
| jldl805 wrote:
| Ding ding ding ding ding!
| LatteLazy wrote:
| The issue here is that crypto exchanges DO make a tonne of cash
| from trading: the fees are high and the spreads are wide.
|
| Yet they have ALSO been "dipping in" to customer money to make
| "loans" of questionable quality with...
| H8crilA wrote:
| This part is not actually that much different with respect to
| banks, where the cushion is the equity (the stock). Also, if
| I'm not mistaken the debt securities (bonds) issued by the bank
| are below the bank account claims, so that's your regular
| customer cushion too.
|
| Bankruptcy is essentially drawing a horizontal line across the
| pyramid of liabilities, where everyone below the line gets
| nothing, everyone above the line gets fully paid back, and
| everyone on the line is the new shareholder. This line is
| called "fulcrum".
|
| The difference is in government oversight (regulations) and the
| social agreement that bank accounts will be bailed out. Because
| of the former the latter rarely happens (yes I know, 2008, but
| this concept has been around for a century and a significant
| minority of protected liabilities such as bank accounts have
| had to be rescued since then world-wide).
| constantcrying wrote:
| An _exchange_ shouldn 't count deposited crypto as their asset.
| It is an asset of their customer.
|
| I do not think the actual problem here is crypto exchanges
| being unprofitable. Even if a crypto exchange goes under, it
| _could_ (and frankly _should_ ) still be able to go under
| gracefully, e.g. letting all customers withdraw their assets
| for a month (and E-Mailing private keys as a last resort). The
| issue here is crypto exchanges severely mismanaging the assets
| of their customers.
|
| Banks need to be heavily regulated because they are investing
| the assets of their customers. An _exchange_ should not be
| doing that, it should be holding customer assets and making
| them available on request.
| partiallypro wrote:
| One thing that FTX was doing was minting a new totally BS
| coin, putting out a small float but retaining the vast
| majority of it. Then propping up their financials using that
| completely illiquid asset as collateral. On top of that,
| allowing Alameda to front run announcements about different
| coins. There's no way FTX is the only one doing this. How
| such a thing is allowed is absolutely baffling. It's very
| Enron-mtm-esque.
| beezle wrote:
| An exchange facilitates trades between two parties and should
| not hold client assets at all, not even custodial basis.
|
| A clearing house settles trades between two counter parts
| often acting as counterpart to both sides of the trade for a
| nominal fee. Some clearing houses also hold performance bonds
| (think of margin on futures).
|
| For instance, NYSE uses National Securities Clearing
| Corporation (NSCC) which is a subsidary of the Depositary
| Trust Clearing Corporation (DTCC). DTCC is a private company
| owned by many banks and brokers.
| branko_d wrote:
| > An exchange shouldn't count deposited crypto as their
| asset. It is an asset of their customer.
|
| Exactly. A brokerage firm doesn't own your stocks, so if it
| goes bankrupt you can still recover what is yours.
|
| FTX pretended to be that, but they just plain lied.
| tinco wrote:
| You can say that, but when MtGox went bankrupt, and also lost
| 4 fifths of its stored crypto, the court just heaped together
| all assets into one big pile and all creditors into one big
| pile and let them fight it out.
|
| So now there's a bunch of assholes including but not limited
| to Peter Vessenes, that are suing the bankrupt entity for
| billions (completely frivolous of course) and all the
| depositors have waited for 8 years now to get a fraction back
| that the vultures have been picking on.
|
| It's completely unfair, but the courts simply don't
| distinguish between someone who partners with an exchange,
| and someone who deposits money at an exchange.
| [deleted]
| mtsr wrote:
| To do this legally, one can have a separate legal entity to
| hold on to third party assets. In the Netherlands this can
| be done using a foundation (stichting derdengelden).
|
| Any transactions of third party assets go through this
| entity and don't touch the company at all. And this entity
| doesn't take on any risk, whatsoever.
|
| Fees etc, of course, happen separately and are paid to the
| company.
|
| So in closing: this has nothing to do with fairness and
| everything with the exchanges (whether purposefully or
| through negligence) not working this way.
| jandrese wrote:
| MtGox was pretty much stripped bare long before it was
| finally closed down. In fact it was effectively insolvent
| before it was even bought out by the last owner and running
| in pure Ponzi mode while the guy tried to make creative
| "investments" to get the exchange solvent again. Even with
| the incredible bull market on Bitcoin he couldn't make it
| work.
|
| So nobody should expect to get much of anything out of the
| remains of MtGox.
|
| https://en.cryptonomist.ch/2022/08/15/mt-gox-how-bitcoin-
| sto...
| jonas21 wrote:
| Despite these issues, and despite and the hack, creditors
| are still set to make at least a 4x return (in USD) based
| on appreciation of the bitcoin that wasn't stolen.
|
| [1]
| https://www.bloomberg.com/news/articles/2022-07-07/mt-
| gox-cr...
| stefan_ wrote:
| Crypto isn't money. You are not a bank customer depositing
| cash. I'm not sure why their customers should be creditors
| at all, it's a bit like asking GMail for your emails back
| when Google goes bankrupt.
| tinco wrote:
| > a bit like asking GMail for your emails back when
| Google goes bankrupt.
|
| And I sure as heck would want by e-mails back if Google
| goes bankrupt. Google shouldn't own them, they're just an
| exchange for e-mails. The idea that another entity would
| buy those e-mails and do with them what they like is
| ridiculous, regardless of any juristic reality.
| arcticbull wrote:
| I'm not so sure actually. I think your hypothetical is
| actually exactly what would happen.
| anamexis wrote:
| Let's not forget that "crypto" here is short for
| cryptocurrency.
| singlow wrote:
| Well, I call my crypto BabyCoins, so when you confiscate
| them you are kidnapping right?
| rchaud wrote:
| Gmail lets you download your emails to a POP setup on
| your local disk. That's more than reasonable IMO.
| danaris wrote:
| And that's largely _because_ of the lack of regulation that
| so many cryptocurrency fans tout.
|
| If it's not legally regulated as a currency, or a security,
| or anything of the sort, then why would it be considered to
| belong to you, and not Mt Gox, once you've given it to
| them?
|
| All you have is a digital account that's basically the
| legal equivalent of an IOU on a napkin.
|
| Welcome to your libertarian utopia.
| johannes1234321 wrote:
| > And that's largely because of the lack of regulation
| that so many cryptocurrency fans tout.
|
| In next sentence they will tell you, that you shouldn't
| have kept the private keys at the exchange. Use your own
| wallet and keep your copy of the Blockchain.
| calimac wrote:
| lottin wrote:
| Your "own wallet" is just a piece of software, so it
| could potentially steal your "coins" could it not?
| wizeman wrote:
| Hardware wallets, which are recommended for holding
| significant amounts of cryptocurrency, are designed so
| that even if your normal computing devices get hacked or
| trojaned, the software running on them cannot steal the
| coins.
|
| This is because the private keys are securely stored in
| the hardware wallet, which never reveals them to the
| outside world. The user has to physically confirm a
| transfer on the hardware wallet itself before funds can
| be spent (which is why they usually have either a small
| touchscreen or a non-touch screen plus physical buttons).
| krzyk wrote:
| Basic common sense, not your keys not your coins.
| freejazz wrote:
| Yet, not a legal position. If it wasn't your coins, SBF
| taking them to do whatever he wanted with them would not
| be illegal.
| wizeman wrote:
| The point is that the holder(s) of the cryptographic keys
| is the only one(s) that can effectively manage (and
| transfer) the coins on the blockchain.
|
| When you transfer the coins to a crypto exchange, the
| exchange becomes the holder of the keys and therefore you
| run into the risk of the crypto exchange mismanaging the
| coins, getting hacked, losing them, etc.
|
| This can't happen if you securely hold the keys yourself
| (with a proper hardware wallet, seed backups and a
| reasonable amount of OPSEC).
|
| But even in the case the crypto exchange is holding your
| coins (or they get stolen), legally, the coins are still
| yours, of course (well, unless the crypto exchange goes
| through bankruptcy proceedings, I suppose).
|
| But you run the risk of never getting them back even if
| they are legally yours.
|
| Which is why it's better to hold them yourself if you
| can.
| freejazz wrote:
| Thanks for explaining something to me that I did not
| require explanation of
| wizeman wrote:
| > Thanks for explaining something to me that I did not
| require explanation of
|
| It didn't seem like you understood the value of the
| expression "not your keys, not your coins", because you
| argued for the legal position, which implied that the
| legal position was more significant and that holding the
| keys didn't have as much value (even though it's the only
| one that actually ensures that you don't lose the coins).
|
| Another interpretation is that you understood "not your
| keys, not your coins" literally, because you said
| (paraphrasing) "no, in fact they are your coins,
| otherwise stealing them wouldn't be illegal". Which
| implies that you did not understood the meaning and
| utility of the expression.
|
| So maybe I misinterpreted you, or maybe you didn't
| express yourself as well as you think you did.
|
| Either way, you're welcome.
| kinnth wrote:
| Defi is not this. In defi exchanges you place your coins
| into a smart contract or have them always on your
| account.
|
| If anything a crypto exchange is a misnomer as it's not
| even needed. The only reason it exists is because smart
| contracts didn't exist when they first started.
| dmitriid wrote:
| > In defi exchanges you place your coins into a smart
| contract
|
| Oh, you mean the "smart" "contracts" (which are neither)
| that routinely have trivial exploitable errors that even
| their authors are unaware of?
| charcircuit wrote:
| >The only reason it exists is because smart contracts
| didn't exist when they first started.
|
| Calm down. That is not true. Smart contract based
| exchanges do not let people exchange real money into
| crypto. There will always need to be offchain exchanges
| for trading USD for crypto. Additionally, trading off
| chain is much cheaper than on chain.
|
| Centralized exchanges will always exist because people
| want on / off ramps, people want low fees, and because
| people are willing to trust others.
| MomoXenosaga wrote:
| The flaw of BTC: everyone wants to cash out in dollars,
| euros or Swiss francs. Real money
|
| BTC is barely used as an actual currency to buy things
| with. I could be wrong but I thought the idea was that
| you'd be using BTC in daily life so that you wouldn't
| need to go "off the ramp".
| arcticbull wrote:
| Well yes but at 2-3tx/sec, that supports a large flea
| market or a mid-sized costco, not a global economy. Even
| onboarding everyone onto Lightning would take 75 years,
| the entire rest of the block reward, about a trillion
| dollars worth of electricity and many gigatons of
| e-waste.
| wizeman wrote:
| I wouldn't say that's a flaw.
|
| There are people, even today, who have no better choice
| but to use BTC for transactions or for storing value.
|
| The point is that if you want to (or need to), you can do
| it. So people now have that option, which they didn't
| have before BTC was created.
|
| As an example, it might be the best option for doing
| transactions and storing value for large amounts of
| people in some area, in times of crisis (e.g. financial
| crisis, war, oppressive governments, etc). You might not
| be able to use a fiat currency in such cases without
| significant downsides, such as extreme inflation,
| confiscation, blocking of bank withdrawals or
| transactions, going to prison, etc. Bitcoin is available
| and can be used whenever such events happen.
|
| In fact, if you ever run into a situation like this, you
| might even desperately need BTC and will be very glad it
| exists, so don't discount its value so easily.
|
| That said, sure, it would be better if there was more
| adoption. I think there should be and hope there will be.
|
| But it's not exactly a flaw, in the same way as you not
| being able to use the currency of some obscure country in
| your daily life is not a flaw with that currency.
| oblio wrote:
| > Additionally, trading off chain is much cheaper than on
| chain.
|
| How this does not wake up all the idiots, I will never
| understand.
|
| How come your superior technology is inferior in one of
| the crucial axes of trading technology???
| pclmulqdq wrote:
| You can't forget that it's also usually slower than
| trading off-chain.
|
| It's inferior in a lot of ways, which is why it never
| took over the way its proponents thought.
| SuoDuanDao wrote:
| it's superior in terms of not having the trusted third
| party that facilitates your trade make off with your
| money, as is happening in these self-described exchanges
| _right now_. Keeping a trusted third-party in the loop is
| always cheaper than automating that function using a
| blockchain, unless the risk is factored in.
| cma wrote:
| The risk of misplacing your keys/passphrase or getting
| hacked with it in plaintext on your computer may be
| higher across the end-user population.
| somenameforme wrote:
| If you let somebody borrow your car and they steal it,
| that's still a crime. You don't need to be a regulated
| and registered automotive lender to make it anymore or
| less of a crime. The law has surprisingly strong
| enforcement of even informal agreements (such as e.g. an
| email), and these agreements were anything but informal.
|
| Incidentally, protection of property rights is one of the
| primary roles of the government in a libertarian
| ideology. It's not anarchy.
| JumpCrisscross wrote:
| > _you let somebody borrow your car and they steal it,
| that 's still a crime_
|
| Agreed. But there is no public requirement to direct
| prosecutorial resources towards your recovery. If the
| criminal is prosecuted, recovery is a secondary concern,
| an enforcement cost often borne by the victims through
| civil action.
| tinco wrote:
| Let the record show that I have always supported
| (explicit) regulation of cryptocurrency. In addition I
| have always held the opinion that Ripple is a security,
| not a cryptocurrency, and that it should never have been
| tolerated by the SEC. The reality there is that no one is
| actually doing anything about anything unless there's a
| big scandal. Maybe FTX will change things.
| anon291 wrote:
| An IOU on a napkin has legal weight.
| MrStonedOne wrote:
| rippercushions wrote:
| Well, let's not forget that BTC has gone up from $300 to
| $15,000 in the meantime, meaning those fractions are still
| worth 50x what they were back in 2014. Although who knows
| what the value of BTC will be once the funds are released,
| which is itself an event that's likely to crash the market
| through oversupply.
| kibwen wrote:
| _> Well, let 's not forget that BTC has gone up from $300
| to $15,000_
|
| Depending on how one measures. Prior to Gox's implosion,
| BTC was $1,000, which is the price people were actually
| depositing at. Meanwhile, the fact that we're
| denominating in USD means that we have to account for
| inflation if we want to compare historical data, which
| means the current price is more like $13,000 in 2014.
| There's quite the difference between 13x and 50x.
| tinco wrote:
| I prefer to use the trustee's watermark which reflects
| the value of Bitcoin after the price manipulation of fake
| Bitcoin being sold by MtGox had been taken out of the
| market at $460. But your point is made even stronger if
| you consider that same money could have been safely
| invested with a steady interest of 2-4%. And that's if
| you disregard that the sort of risky investments that
| that sort of play money could have gone to, nearly all of
| those investments have been extremely lucrative the past
| 8 years.
| bombcar wrote:
| The exchanges work very hard to not distinguish between
| those legally, because if they admit it, they're admitting
| bank-like aspects and regulations kick in, which they're
| often trying to avoid.
| JumpCrisscross wrote:
| > _exchange shouldn 't count deposited crypto as their asset_
|
| An exchange shouldn't have deposits. That's a word for banks
| and brokers. In practice, these shops act like funds.
| NovemberWhiskey wrote:
| Crypto exchanges act like brokers _and_ exchanges. They
| match orders and they also hold client money.
| JumpCrisscross wrote:
| > _match orders and they also hold client money_
|
| Matching orders is what brokers canonically do. Exchanges
| came about to consolidate their activity. There is
| nothing resembling a true exchange in the crypto space.
| NovemberWhiskey wrote:
| That's fair - in any case, the segregation of customer
| cash and securities from proprietary activities is a
| (the?) fundamental obligation of broker-dealers.
| cortesoft wrote:
| Isn't the blockchain itself the "true exchange" of the
| crypto space?
| NovemberWhiskey wrote:
| No; that's a ledger. In the context of traditional
| securities flows, that's more like the post-trade process
| and share registration etc.
|
| If you think about Bitcoin; the blockchain can literally
| only tell you about how Bitcoin was transferred between
| addresses.
| pjc50 wrote:
| OK, so it's bucket shop and an exchange. With a side
| order of boiler room.
| oldgradstudent wrote:
| > The issue here is crypto exchanges severely mismanaging the
| assets of their customers.
|
| "Severely mismanaging" is a euphemism for fraud and theft,
| right?
| zach_garwood wrote:
| When you steal $1000 from someone, it's theft. When you
| steal $1000 from a million people it's "mismanaging
| assets".
| a4isms wrote:
| Related:
|
| _" One man with a briefcase can steal more money than a
| hundred men with guns."_
|
| --Don Corleone, "The Godfather"
| constantcrying wrote:
| Absolutely.
| eschneider wrote:
| Those of us who were around during the Saving and Loan
| Crisis learned that the best way to rob a bank is to own
| one.
| nulbyte wrote:
| > An exchange shouldn't count deposited crypto as their
| asset. It is an asset of their customers.
|
| Yes they should. A deposit liability arises from the fact
| that they received an asset in a deposit transaction.
| Liabilities and assets aren't mutually exclusive in any
| transaction, and both must increase when you receive a
| customer's deposit, or else where does the liability come
| from?
|
| > Banks need to be heavily regulated because they are
| investing the assets of their customers. An exchange should
| not be doing that, it should be holding customer assets and
| making them available on request.
|
| If the exchange doesn't spend assets they received from their
| customers, they still have assets. If they sit on them until
| they receive instruction from a customer to dispose of it,
| it's still an asset on their books until they carry out the
| instruction.
| remcob wrote:
| > Yes they should. A deposit liability arises from the fact
| that they received an asset in a deposit transaction.
| Liabilities and assets aren't mutually exclusive in any
| transaction, and both must increase when you receive a
| customer's deposit, or else where does the liability come
| from?
|
| Does a cash transporter count the contents of their armored
| vans as assets? Does DHL count the contents of their
| vehicles and warehouses as assets? Why should exchanges be
| different?
|
| I know it's the law for exchanges to account custodial
| funds as assets (SAB121), but I don't see why it should be
| this way. In fact it seems to achieve the opposite of
| consumer protection.
| [deleted]
| krzyk wrote:
| > An exchange shouldn't count deposited crypto as their
| asset. It is an asset of their customer.
|
| But banks do, multiple times. (one dolar produces n dollars
| in loans). A test with Bank run can confirm it.
| roflyear wrote:
| Unless the exchange is only crypto-crypto they need cash as
| well.
|
| > can only come from trading crypto
|
| "trading" is a really broad term. They will get fees from
| trading, but they will probably also be doing things like
| providing liquidly to other exchanges and arbitrage (crypto is
| of course very volatile so arb opportunities are all over the
| place).
| noelsusman wrote:
| It gets fixed by largely replicating the traditional finance
| system, which would of course be completely pointless. The
| whole point of crypto is to evade government regulations, which
| means this kind of stuff is inevitable.
| xtracto wrote:
| The problem with all these current Crypto "projects" is that
| they don't want to be _boring_. Banks and other typical
| financial institutions are boring; and there 's a good reason
| for that. There's a reason why you have all those audits,
| certifications, compliance programmes and red tape. We (as
| developers/workers) may like it or not; but as customers we
| love it.
|
| Banks are audited every month to verify that their reserves
| are there. They are also audited to see the balance between
| their risks and assets. Their systems are audited to ensure
| accountability (everyone must take at least 5 days of PTO a
| year, to ensure no single point of failure/fraud).
|
| But the kids that are creating these new Crypto CeFi
| companies hate being boring. They got in because of the
| millions and the whirlwind of excitement that the Crypto
| space brings. And for that reason they have a mess in their
| internal ledgers.
|
| I love Blockchain technologies, Bitcoin and Ethereum. But I
| couldn't care less for all the "cool kids" wanting to get
| into this train without proper adult supervision.
| strangescript wrote:
| Most of the exchanges are considered international and dance
| around laws and regulations. Some have versions of their site
| that are supposed to be dedicated to certain countries laws,
| but as we have seen lately that seems to be a lot of lies for a
| some of these exchanges as well. They make money on customer
| trades, but when the market is down, trade volume craters. If
| they were responsible with funds they would know this is coming
| and have planned accordingly, but most of these exchanges
| operate like its a perma-bull market. On top of all of that,
| they are leveraging heavily into other financial devices using
| customer funds on their books. Its a recipe for disaster.
| fallingknife wrote:
| It would be fine if it were only an exchange. If the only
| assets are those of the customers deposited, then everyone can
| withdraw at the same time without issue. The problem is that
| they are also lending on margin, which means they are lending
| customers money to use to buy more crypto.
|
| Each customer has their margin loan secured by the crypto in
| their account, but in a steep drop in crypto valuations, the
| value of the crypto can drop below the loan principal. And if
| individuals don't cough up the cash to pay the balance, the
| exchange is on the hook for it.
|
| And it gets worse. Where does the exchange get the cash to lend
| in the first place? They borrow it, of course. And like the
| individual traders use the securities in their account as
| collateral for their loans, the brokerage uses all of the
| securities they hold as collateral for their loan. Problem is
| that they don't own these securities, but rather hold them on
| behalf of customers. So in a situation where the exchange as a
| whole is undercolateralized, the brokerage as a whole can get a
| margin call. And then they will have to liquidate securities
| they hold (your crypto). This means that even if you are a
| customer with a low risk portfolio, you can lose your
| securities because the exchange took on risk to finance someone
| else's risky trade. This exact process happened at MF Global
| back in the financial crisis, and would have happened to a lot
| more firms if the government hadn't bailed them out.
|
| Margin lending in the stock market is heavily regulated, and
| I'm sure you can see why. Crypto is the wild west. A lot of
| lessons were learned about this in the crash of 1929, and the
| crypto market is learning them now.
| djbebs wrote:
| There is nothing wrong with this, and indeed it's a good thing.
| acomms wrote:
| In a regulated market sure, but here they seem to be trading
| with customer assets - which is so much worse.
| djbebs wrote:
| No regulation would have prevented this crime from
| happening.
|
| I want to be clear here, what happened here is already
| illegal as is, and no regulation would have prevented it
| from happening in the first place.
|
| Hell, the firm was already being audited, and those
| auditors didn't catch the accounting discrepancies, so it's
| doubtful that any additional regulation would have found
| this earlier either...
| freejazz wrote:
| Regulation would have prevented it from occurring. FTX
| didn't sell its services in the US (FTX US did) and they
| certainly didn't have a NYS Bitlicense. I think this is
| facially obvious.
| acomms wrote:
| You aren't wrong, maybe it's my wishful thinking. What do
| you think the solution is here? Do you think the house of
| cards stayed propped up because a lot of people were in
| on the fraud? Were the auditors just incompetent or were
| they in on it? Auditors are reasonably well known firms.
| mring33621 wrote:
| I know some people in the auditing field and they have
| told me that they "don't try too hard to find problems,
| but sometimes they do anyway"
|
| It's a balancing act between appearing to be
| credible/rigorous and maintaining a long-term customer
| relationship.
| djbebs wrote:
| The solution is simple, relegate centralized exchanges to
| niches that so far can't be fulfilled in any other way
| (namely fiat-crypto transactions), and use them only
| briefly and immediately withdraw any assets from it once
| the transaction you need is complete.
|
| You may also take on insurance against such malfeasance
| on the part of the exchange, increasing your likelihood
| of recovering your funds. On the plus side insurance
| agencies now have a financial incentive to ensure the
| exchanges they insure are honest.
|
| In other words, see centralized entities as the
| unreliable partner that they are and work accordingly.
| acomms wrote:
| If you're on HN you can be knowledgable and proactive
| regarding your security with crypto, but I just don't see
| mainstream adoption without trusted 3rd parties. I don't
| think insurers would underwrite that sort of thing given
| crypto's history.
| roflyear wrote:
| back in the day (as in like 30-60 years ago) a popular
| scam was to create a situation where frontrunning trades
| was really easy. there are a million examples of similar
| things.
|
| i don't think regulation is a good thing when a single
| person is trading with a single person. but, at some
| point an exchange becomes so big (they deal, seemingly
| fairly and with honestly, with many people) where people
| start to trust it. there is an inflection point where
| people can take advantage of that part of the human
| condition. then, you need regulation, not because people
| are stupid, but because we're human and it is easy to
| fall victim.
|
| in these cases regulation helps to preserve the trust in
| the systems. otherwise, people just will not use them, or
| they will use them in ways that are not beneficial to the
| group.
| bestcoder69 wrote:
| Said by the dog in the burning house meme.
| jakelazaroff wrote:
| Is this... sarcasm? It's a good thing that crypto exchanges
| are streaming their customers' money?
| djbebs wrote:
| I'm 100% serious.
|
| Exchanges are not and should not be banks. They should not
| be comingling their assets with client assets.
| jakelazaroff wrote:
| (*stealing their customers' money, but I can't edit it
| without making it seem like you're replying to something
| else entirely)
|
| Okay, but that's only half of what OP said. They're also
| trading on customer assets. That is an extremely bad
| thing no matter how you look at it.
| djbebs wrote:
| They shouldn't be, just like a pumpkin exchange shouldn't
| be trading using pumpkins that don't belong to them (or
| at all).
|
| That's where the crime comes in.
| manholio wrote:
| Yes, exchanges _shouldn 't_ commingle their assets with
| clients funds, yet they have large operational outlays
| (coding &security, traditional financial fees, meth &
| luxury condos in Bahamas, etc.) that seem unlikely to be
| coverable with trading fees alone. Even if we allow them
| to work like banks, they still can't seem to justify the
| tens of billion valuations.
| djbebs wrote:
| If the fees aren't enough to cover it then the company
| isn't profitable and should shut down.
|
| Or raise fees.
|
| "I don't make a profit if I don't steal my customers
| assets" isn't a valid business plan.
| melenaboija wrote:
| With your description I am guessing that what you call FIAT
| world is a financial system that is regulated where in fact
| banks (not exchanges, although they are also regulated in terms
| of what they can do with whatever is deposited and how they
| create revenue) are forced to hold cash to handle the risk and
| ensure some safety for the deposits.
|
| > If this is true, how does it get fixed?
|
| So far the only way to fix this seems to be with regulations,
| which seems to go against one of the main arguments in favor of
| these assets.
| mightypirate wrote:
| rr888 wrote:
| That's an interesting related problem - their costs are real
| dollars/Euro/Peso etc, but their revenue is in crypto. Eg they
| have to pay rent, salaries, AWS bill but their revenue is in
| ETH or BTC or SOL which is a fraction of what it used to be.
| Banks dont have that problem - their costs are denominated in
| same currency as their revenues.
| jallasprit wrote:
| The warning bells should be going off in the entire crypto sector
| right now. If you have money in crypto, I'd strongly recommend
| going off-exchange
| slaw wrote:
| I recommend going off all crypto, not only on exchange.
| rapsey wrote:
| Crypto has really only lived in a zero interest rate policy
| world and it is shitting the bed majorly now when rates are
| going up. It is likely far from the bottom.
| tootie wrote:
| Is it? There's no reserve rate on the books but there's
| still a natural interest rate. And I'd estimate that for
| something like Bitcoin it's sky high. That's how it
| produced massive returns with no equity or assets. When
| Bitcoin was first launched, economists said the mining and
| splitting algorithm would be massively deflationary and
| that seems to have come true.
| JumpCrisscross wrote:
| > _would be massively deflationary and that seems to have
| come true_
|
| Bitcoin makes Argentina and Venezuela look like bastions
| of hard money. It's lost purchasing power, _i.e._
| inflated, at an astronomical rate.
| qnr wrote:
| This is blatantly untrue. Venezuelan bolivar has lost
| 100% of its value (within a rounding error) - current
| exchange rate is something like 800 trillion of old
| bolivars to USD. Argentine peso is doing somewhat better
| than bitcoin this year, only losing 40%, but you don't
| have to go far back for it to become much, much worse. In
| the entire history of bitcoin there are very few periods
| when you'd come out on top holding argentine pesos rather
| than bitcoins.
| tootie wrote:
| In the past year, yes. I'm talking about the bull run
| years. It's well below it's peak but still trading around
| $16k when it was worth $0 15 years ago.
| isolli wrote:
| It depends on the observation window, really. Bitcoin is
| deflationary in the sense that there is a maximum amount
| of BTC that will ever be mined. So, all else equal, the
| price of bitcoin should go up relative to other assets as
| the economy grows (and the stock of bitcoin does not). Of
| course, it might implode along the way, and there are
| plenty of wild swings on the way up (which what we've
| seen so far).
| endorphine wrote:
| Why do you believe that is the case? How is this hypothesis
| explained?
| alasdair_ wrote:
| Crypto is highly correlated with equities and is
| sensitive to interest rates in the exact opposite way
| than you'd expect for something that is supposed to be
| inflation-proof.
|
| As a simple example: BTC stopped dropping and actually
| rose $1000 on Thursday when the CPI numbers came out
| indicating that inflation grew less than expected last
| month. This shouldn't happen if crypto was actually an
| inflation hedge. Instead, almost all of crypto's value is
| speculation-based and so when the supply of money is more
| expensive (i.e. higher interest rates), the value of
| crypto assets in USD tends to decline and vice versa when
| interest rates are predicted to be lower (or not rise as
| much as expected).
| jerf wrote:
| It is important to separate _goals_ from _results_.
|
| It is a _goal_ of crypto to be an independent medium of
| exchange, free from governments and to some extent the
| rest of the economy, and perhaps even someday become the
| basis of the economy itself.
|
| That does not mean it has done these things. It does not
| mean it has failed these things either, because goals
| frankly don't mean much. This is in one of my favorite
| classes of wisdom, "things that sound obvious when I say
| them but observably by their actions most people aren't
| thinking this way." Do not be too quick to say to
| yourself "oh, yes, jerf I know that goals aren't
| results", because, again, by their actions many people
| observably do not have this as clear in their head when
| they are planning and acting as they may think.
|
| As for the _results_ of crypto, it is certainly clear
| that crypto is a haven for scams, pyramid schemes, and
| pump-and-dumps. That also on its own does not disqualify
| it; I think there 's more in crypto proportionally than
| the US dollar but all fiat currencies have also had
| scams, pyramid schemes, and pump-and-dumps denominated in
| them. It is much _less_ clear that crypto has attained
| its listed goals; there is non-zero evidence that they
| are in play, but it is also very mixed evidence and you
| can find plenty of evidence to the contrary of all the
| things I list.
|
| Crypto has largely existed in a regime with 0% interest,
| as was mentioned. It is a very viable theory that despite
| the _goals_ of crypto of being an independent currency,
| that it is in fact a _derivative_ of existing fiat
| currency. As for the evidence, there is the fact that it
| is acting exactly like a very leveraged fiat derivative
| would be acting when money stops being free, which doesn
| 't necessarily perfectly logically prove the case but is
| strong evidence. Perhaps someday crypto will be
| independent but it isn't putting on a very convincing
| show of it right now. Instead it's looking an awfully lot
| like the _most_ leveraged fiat currency derivative there
| is out there at the moment, or at least the most
| leveraged one us normals can see.
| bparsons wrote:
| It is only an attractive investment when the world is
| awash with excess fiat currency.
| TheOtherHobbes wrote:
| Which is when you get bubbles of all kinds. Because with
| a bit of painting snd decorating - and wishful thinking,
| of which there is always plenty - you can make almost any
| bubble look like a safe profitable investment.
|
| Then the tide goes out and everyone says "How could this
| have happened?"
|
| Again.
|
| It's all suspiciously faith-based and aggressively anti-
| realistic.
| fortuna86 wrote:
| Crypto was a play thing for people with too much money
| that didn't know what to do with it. The money dries up,
| the only use case for crypto (gambling) disappears.
| rapsey wrote:
| Crypto very much follows the stock market. Interest rates
| are inversely correlated to stock market performance.
| After 2008 the stock market went into the longest bull
| run in history which has now reversed this year. Stock
| market is down and crypto is collapsing because it is the
| wild west. There are for sure going to be multiple
| exchange collapses not just FTX.
| andruby wrote:
| > Crypto very much follows the stock market.
|
| Is that based on observing a correlation between both or
| is there an underlying hypothesis/theory/mechanism why
| crypto follows the stock market?
|
| I'm genuinely curious, not trying to imply this isn't the
| case.
| tome wrote:
| I assume the hypothesis is that people threw cheap money
| into both. Now cheap money is over, people are
| withdrawing from both.
| rapsey wrote:
| Both. It follows it observably and the reason it does is
| because with low interest rates there is an excess of
| capital. Money is too cheap so it flows into speculative
| asset classes like stocks and crypto.
| mshron wrote:
| Higher interest rates mean that investors can earn money
| by buying bonds, which are lower risk. Riskier
| investments (stocks, real estate, cryptocurrencies) are
| less attractive to investors as a result, unless they can
| provide even more return to compensate for the risk,
| which is unlikely.
| isolli wrote:
| The can provide more return by becoming cheaper first ;)
| chinathrow wrote:
| I recommend going off and not going in on crypto, everywhere,
| anytime. It's what I told peers asking me about this crypto
| thing for years.
| esotericimpl wrote:
| jmull wrote:
| Why wouldn't you get out of any/all crypto you can right now?
|
| If you're bullish on crypto's long-term prospects you can
| always buy back in after the crash. There will be a new "ground
| floor". (I would suggest _no one_ do that... just saying, even
| if you believe whole-hog in the future of crypto, now 's the
| time to sell any way you can.)
| dredmorbius wrote:
| And this will be how the cryptocurrency / DeFi world learns
| another concept of regulated banks: _bank run_.
| throwup wrote:
| Not your keys, not your cheese. It's sad how many people have
| to learn this the hard way.
| chitowneats wrote:
| Also not your cheese if you bought BTC any time in the last
| few years. Without the exchanges, and especially without
| investor confidence, the days of wild speculation are ending.
| The price is going to continue to fall and everyone with BTC
| in their personal wallets gets to take a haircut too.
| nicbou wrote:
| It's still your cheese if no one wants to buy it. It's
| arguably even more yours.
| chitowneats wrote:
| Cheese typically refers to money. Cryptocurrency isn't
| money.
| warinukraine wrote:
| Take your magic beans off-exchange, because otherwise someone
| might steal them.
| FollowingTheDao wrote:
| Bitcon is up 1% on the newz!
|
| Bitcoin and all crypto is only the medium for the fraud on the
| exchanges. Without the exchanges there is no use for Bitcoin or
| crypto.
|
| You see, they were pumping coins not for the coins, but for the
| exchanges.
|
| Bitcoin's intrinsic value is exchange fraud. Now that the fraud
| is finally being exposed? Bitcoin to the center of the earth!
| warinukraine wrote:
| > Bitcoin's intrinsic value is exchange fraud.
|
| That's a really funny and clever take.
| Zaskoda wrote:
| Hacker news is one of those places I love to visit because of
| the insightful and informative perspectives on issues of
| technology and culture... that is, until the topic has
| anything to do with Bitcoin.
| thepasswordis wrote:
| While I agree with you generally, it's a bit absurd to compare
| these bizarre degen exchanges with something like coinbase.
| f0e4c2f7 wrote:
| In the current climate, I'm left wondering who still has their
| crypto on exchanges. Which maybe thats the problem - people
| withdrawing funds causing even more bank runs.
| stingraycharles wrote:
| People usually have crypto on exchanges for leverage, which is
| a valid reason. People do this with many stock brokers as well,
| e.g. for option trading.
| coffeebeqn wrote:
| That's probably a fairly small minority who really really
| like gambling. I had some ETH on coinbase until earlier this
| year when I sold it because that was the easiest method.
| cypress66 wrote:
| You underestimate the amount of degens in this space.
| boppo1 wrote:
| I had mine on Gemini, which I actually trust as the most
| reliable exchange. I don't expect them to run into trouble[0]
| as they've submitted to NY finance regulations and haven't
| dabbled in obvious scams like Tether.
|
| However I'm taking them off today on principle. I bought-to-
| hold because I think the tech is cool and I like the 'emotion'
| of having an investment to motivate me to keep an eye on the
| space. But if I really think the tech is interesting at the
| protocol level and think it might find future application, I
| should embrace self-custody, which is the whole point.
| bearjaws wrote:
| knowing how lazy & comfortable people are with banks probably
| 90% of the 'casual' investor space is entirely on exchanges.
| mderazon wrote:
| Correct, there seems to be an exodus from exchanges or at least
| moving to decentralized exchanges
| wollsmoth wrote:
| This is going to be an interesting week or two in the crypto
| world.
| albertopv wrote:
| Who's next?
| jfk13 wrote:
| https://www.youtube.com/watch?v=oRLON3ddZIw
| [deleted]
| spaintech wrote:
| https://youtu.be/x5RCfQyTDFI
| jakear wrote:
| https://www.youtube.com/watch?v=8kyWDhB_QeI
| ineedasername wrote:
| _> We are shocked and dismayed by the news regarding FTX and
| Alameda_
|
| The classics never die:
| https://media.tenor.com/SgK-2pYa_bEAAAAC/casablanca-shocked....
|
| Truly though I have a lot of sympathy for users of these
| platforms, the portion that thought they were on the ground floor
| of something that would change how the economy functions, and any
| speculators who were not simply operating on the "greater fool"
| theory.
|
| I myself thought "heck, this could work, if institutional money
| gets involved and the stronger coins find a real economic
| outlet." After all, pure faith in the entrenched financial
| systems of the world is a big part of what keeps them going when
| times get tough too. Though I was still entirely too cynically
| skeptical to risk my own money, I was cautiously optimistic that
| some interesting shakeups could be in the works.
|
| As it turns out, crypto was still entirely too much of a closed
| system to sustain shocks like this, assets entirely too
| correlated with each other, fraudsters entirely too prevalent,
| many who were entirely too ready to throw the baby out with the
| bath water when it came to ignoring lessons learned by
| traditional finance, and on and on.
|
| I think part of what this all reveals is that blockchain
| transparency of coin transactions is not enough. The rebuilding
| phase to come needs to focus on the next level up. A blockchain
| providing a level of brutally clear transparency into all the
| layers of their own dealings that operating on top of or along
| side of or in connection to coins/tokens. This is needed for all
| of the somewhat centralized entities that are useful (and, IMHO
| necessary) to reduce friction & increase usability of crypto.
|
| ^^Regarding that, maybe it's not even a problem that tech can, by
| itself, solve. Though often derided, legalese is professional
| jargon that has developed over the course of centuries in an
| attempt to minimize ambiguities in transactions between people,
| and _we still_ need courts with human judgement to sort things
| out around edge cases, oversights, etc. It may simply be
| impossible to solve, at least at the level of "code is law",
| issues like we see with FTX and its contagion to all levels of
| crypto that were (either deliberately or in good faith) not
| operating carefully.
|
| I don't know. I'm conflicted on the topic, as perhaps the above
| rant-ish ramblings show. I was rooting for this generation of
| crypto tech to take hold as it shook off the scammers and other
| barnacles of the industry, rooting for it to find a bridge to
| utility with the actual economy, but even as I rooted for things
| to go well I am unsurprised by this outcome.
|
| I think what it comes down to is that the folks who really want
| to make this happen and change the way financial systems run
| society (rather than _only_ to become rich themselves) need to
| take a step back reassess their philosophy. They need to
| determine if technology really can address the goals derived from
| their philosophy. If it can then they start the hard work of
| building it. If it can 't, then there's the even harder work of
| pruning away the goals derived from their philosophy that can't
| be achieved by tech, software, etc.
|
| For myself, the core part of the philosophy that I think is
| fundamentally flawed is the "trustless" pillar. I think it may be
| fundamentally impossible to build something systemic to the
| infrastructure of society that does not, at a fundamental level,
| also rely on trust to one degree or another. Bruce Schneier's
| book _Liars and Outliers_ is an excellent exploration on the
| topic of trust, and it 's hard to come away from that book &
| still believe in the vision of a truly trustless financial system
| which, at some level, underpins a great majority of our lives.
| jbverschoor wrote:
| AAX is nr 242 on CMC by marketcap.
| logicalmonster wrote:
| Every new form of money and trade had the people learning
| important financial concepts and took many, many years to start
| to iron out their weaknesses through better technology or best
| practices.
|
| For instance, when barter and basic trade was used, people had to
| figure out new methods to do accounting and record-keeping:
| whether through sticks, tablets, papyrus, etc. It seems simple
| now, but these basic methods were incredibly huge technological
| leaps that took a long time, perhaps centuries in some cases, to
| develop.
|
| When silver/gold were beginning to be used, different lessons had
| to be learned such as making the edges of coin ridged to prevent
| certain people from clipping chunks off of coins and taking a
| small piece of precious metal.
|
| With fiat currencies that are not backed by anything, people had
| to learn the lessons of inflation. I'd argue that not all humans
| have even learned this lesson even today. While inflation is
| particularly glaring today, all people alive today have been
| systematically robbed of their savings every day, yet this fact
| is commonly ignored. The amount of value lost by people to
| inflation is much more glaring than any loss that's happened in
| the crypto space. In comparison, crypto doesn't have this flaw:
| there can be no circumstance that changes the fact that Bitcoin
| only ever has 21 million units and cannot ever be inflated.
|
| Crypto has much smaller problems in comparison to other forms of
| money. It certainly needs better user interfaces and best
| practices and a little time for social acclimatization, but the
| progress from what was a proof of concept in just 13 years has
| been remarkable.
| dmitrygr wrote:
| > there can be no circumstance that changes the fact that
| Bitcoin only ever has 21 million units and cannot ever be
| inflated
|
| Yes it is deflationary, which is worse for a currency. Why buy
| anything with a currency whose value will always rise? Better
| to just hold it. Thus it fails as a currency
| logicalmonster wrote:
| > Yes it is deflationary, which is worse for a currency.
|
| Cui bono?
|
| Who told you that deflationary currencies are inherently bad?
| Perhaps you're repeating this lesson from central bankers and
| politicians who would have no ability to manipulate for power
| if they didn't have the printing press.
|
| > Why buy anything with a currency whose value will always
| rise? Better to just hold it. Thus it fails as a currency
|
| IMO, this has always been a dumb criticism of a deflationary
| setting.
|
| People still save their money in an inflationary setting and
| will also spend during deflation because people still need to
| eat and live their lives. Certainly people would tend to be
| more cautious about their spending during deflation: not
| inherently a bad thing.
| dmitrygr wrote:
| > Perhaps you're repeating this lesson from central bankers
|
| Yup. That's what they taught me at the secret anti-buttcoin
| training camp. (Or it could be that I studied economics,
| who knows?)
| logicalmonster wrote:
| I'm going to ignore the other comment, but I'd be curious
| about which school of economic thought you learned from.
| Care to share?
|
| It's not hard to see why a Keynesian for instance might
| be against a deflationary environment.
| [deleted]
| obnauticus wrote:
| Small nit, there is no evidence that barter and trade economies
| ever existed.
|
| When there is a utility for it, humans invent a form of
| currency nearly immediately.
| [deleted]
| culanuchachamim wrote:
| I'm sorry for the ignorance, but why a crypto exchange is
| expected to keep the money of the customers in case they want to
| change back their crypto, and it's not like a regular exchange
| house where you exchange one currency for another currency, and
| once the transaction was made, they not obligated to exchange
| back.
| jgeralnik wrote:
| It seems you are thinking of the crypto exchange as selling
| crypto to customers and then "holding on" to their money.
| That's not the right model.
|
| Party A deposits 1 BTC into the exchange. Party B deposits
| $1000 into the exchange. Party A wants to sell a BTC for $1000
| and party B wants to buy a BTC. They trade through the
| exchange, pay some fee to the exchange, and an entry in a
| database is changed such that the $1000 in the exchange now
| belongs to A and the 1BTC in the exchange's wallet now belongs
| to B.
|
| Since actually holding cryptocurrency is inconvenient for
| users, many will just choose to keep the BTC on the exchange
| until they want to use it/sell it for cash or a different
| cryptocoin. Many crypto users are speculators who view it the
| same as holding stocks in brokerage accounts and not as just an
| exchange.
|
| This money is held in the exchange platform but belongs to the
| users. They should in theory be able to withdraw it whenever
| they want.
|
| Instead the crypto exchange decides to make use of these idle
| customer funds and invest in speculative funds/embezzle all the
| money and all of a sudden there is not enough funds in the
| exchange for all users to withdraw.
| detaro wrote:
| It's not expected to exchange back, it is expected to give back
| cryptocurrency deposited there.
| XCSme wrote:
| Wait, so they don't allow even for sending the crypto to a
| different wallet?
| culanuchachamim wrote:
| But from what I understood from the article is that they
| halting withdrawals of cash, the crypto themselves seems
| fine...
| detaro wrote:
| Where does it say that? I don't see anything that would
| suggest it isn't about all withdrawals?
| coffeebeqn wrote:
| That's always the slow walk with these. Expect more bad
| news in subsequent updates
| realce wrote:
| I believe in Crypto, but have less than zero faith in "Big
| Crypto"
|
| The whole point of the tech is that centralized players are
| simply not needed. Why did an engineer design a system where
| they're not needed? Because they commit fraud whenever given a
| chance. Greed and ignorance is what reinstalled them into the
| stack.
| londons_explore wrote:
| There are plenty of ways to commit fraud with fully
| decentralized protocols. For example, build in a well hidden
| backdoor, and then steal all the users funds with it (via a
| good VPN of course, so nobody knows it was you, and you can
| publicly claim you were hacked).
| mkagenius wrote:
| > you can publicly claim you were hacked
|
| 1) What
|
| 2) H
|
| Ref: https://twitter.com/SBF_FTX/status/1591989554881658880
| xeromal wrote:
| lmao. I can't believe this is real.
| codetrotter wrote:
| I have USD or EUR. I want BTC or ETH. To sell my USD or EUR in
| exchange for BTC or ETH, I use a centralised exchange. Then I
| immediately transfer the BTC or ETH that I bought to a wallet
| that I control.
|
| Centralised exchanges are useful.
| jliptzin wrote:
| Why do people leave their money at exchanges? When you go to the
| airport to exchange foreign currency do you leave your entire
| bank account there until the next time you need an exchange?
| ninth_ant wrote:
| Because the money you exchange for at an airport currency
| exchange can be used for goods and services, which is the
| primary use case. With crypto, the primary use case is
| speculation and trading, so it makes more sense to leave it
| there.
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