15 ms·

IMF Head Foresees the End of Banking and the Triumph of Cryptocurrency

263 points by imartin2k 9y ago

chx 9y ago
Note: > For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked. This I can fully accept: there can be a future where some cryptocurrency becomes the world standard. Sure. Doesn't change all my critiques about the current situation which are so often downvoted.
- colordrops 9y ago
  The problem is that every single article about crypto has people like you coming out of the woodwork and commandeering the thread to "critique" cryptocurrency. Not everyone who uses or is interested in crypto claims it is perfect or will save humanity. The incessant criticism with every thread is about as sensible as complaining about python's general shortcomings in every article about a new python library.
  - richardknop 9y ago
    It's a healthy to do this as otherwise there would be just too much hype posts on cryptocurrency. I am actually quite interested in blockchain and have been observing the Bitcoin and other crypto space for years now but it gets quite frustrating to read some of the hype articles written in order to pump prices. So in those cases I try to balance the discussion with some valid critique.
  - vixen99 9y ago
    commandeer v. To force into military service. v. To seize for military use; confiscate. v. To take arbitrarily or by force. See Synonyms at appropriate. Who is forcing whom?
    - nkohari 9y ago
      That's a common English idiom, meaning the same thing as "co-opt".
  - fauigerzigerk 9y ago
    This article isn't the equivalent of talking about a new Python library though. It's the equivalent of "W3C Head Foresees the End of Programming and the Triumph of Python".
    - jl6 9y ago
      A good analogy.
    - colordrops 9y ago
      I agree actually. I'm just explaining why the person gets downvoted in other threads.
  - posterboy 9y ago
    No, noone claims python was a conspiratory pyramid scheme designed to track users and beat privacy. That's not a meaningful analogy although pythons are poisonous.
  - AnIdiotOnTheNet 9y ago
    What do you expect? It's a natural reaction to evangelism and hype. When everywhere you go someone is extolling the virtues of X and how everyone should be using X and X is so much greater than everything else and you're an idiot for not using X, you're going to get people who push back against it. See: Linux Desktop, Rust, and The Cloud.
    - cm2187 9y ago
      AI, VR, Augmented Reality, Functional Programming, etc...
      - chx 9y ago
        Except functional programming has its uses already (actually it is probably the future) while Bitcoin currently is... well, it doesn't have any legal uses. (And yes we had this discussion one too many times, no, money transfer is unusable because the recipient needs to jump through hoops to get their money, you can't ask that from normal people.)
        colordrops 9y ago
        > doesn't have any legal uses. That statement just demonstrates your total ignorance and completely nullifies your opinion.
        chx 9y ago
        I have had this conversation so many times and I have yet to hear about a legit use, one that ordinary people can and want to use.
  - posterboy 9y ago
    well, this is funny, my comment was removed and resubmission is nuked as well. Now I'm just testing how secure the automation is: original comment: >No, noone claims python was a conspiratory pyramid scheme designed to track users and beat privacy. That's not a meaningful analogy although pythons are poisonous.
- placebo 9y ago
  From the little that I've managed to learn, it seems like cryptocurrencies have immense potential but, beside the natural opposition from those who prefer the "conservative way of doing things" (due to a variety of reasons, some legitimate and some less so), it seems that the blockchain (as ingenious as it is) does not really scale well to handle a global economy. There are ongoing efforts and solutions to solve this but I think they are all essentially equivalent to a person trying to do crazy contortions in order to wear in a badly made suit. There are a few projects that propose interesting and scalable alternatives to blockchain but once the herd has decided then I assume more money will be poured on making a wrong solution workable than making a right solution the standard.
  - atupis 9y ago
    There are a few projects that propose interesting and scalable alternatives Any examples?
    - placebo 9y ago
      Two examples I know of are: https://github.com/metacurrency/holochain/wiki/FAQ https://github.com/metacurrency/holochain/wiki/FAQ and http://bitlattice.org/ http://bitlattice.org/ Although I'm far from being knowledgable enough to know the disadvantages of these methods in relation to blockchain nor whether they can really deliver on their claims. From what I've learned, my intuition says they're more suited to the task - could be a wrong impression though, hope someone here more knowledgeable on the subject could expand on it.
    - grondilu 9y ago
      The most ambitious one imho is qbitcoin[1]. It's based on quantum teleportation and quantum digital signatures. That gives it quite a low Technology Readiness Level[2], but hey, we see articles about actual implementation of quantum teleportation everyday, so who knows? 1. https://arxiv.org/abs/1708.04955 https://arxiv.org/abs/1708.04955 2. https://fr.wikipedia.org/wiki/Technology_readiness_level https://fr.wikipedia.org/wiki/Technology_readiness_level
dandare 9y ago
> too volatile, too risky, too energy intensive I am no expert but those three are features, not defects. 1/ Until there will be a central authority linking cryptocurrencies to the old financial system - impose taxes in CC - it will be volatile. 2/ Computer security is not something that can be definitely solved. 3/ Proof of work is the core concept of the blockchain. Maybe there will be some other CC technology in the future not based on blockchain that will not require proof of work, but that is outside of this discourse.
- amelius 9y ago
  If only we could replace "proof of work" by "proof of useful work".
  - whiskers08xmt 9y ago
    The problem with useful proof of work, is that the emission rate becomes very hard to control. In most PoW consensus algorithms, a difficulty parameter is constantly updated to keep the average block-time around 10 minutes. To do useful PoW consensus, you'd need to find a useful problem, where the difficulty of solving the different problems is easily solved, while the solution to the next block, is still dependent on the solution from the last block.
    - quickthrower2 9y ago
      In addition, you need a problem that is hard to solve but quick to verify. I reckon most useful problems would not be quick to verify.
      - ben_w 9y ago
        My gut feeling says a set of open AI challenges, where the work is “train to solve this with accuracy > $difficultyParameter”, and the proof is something that both tests the accuracy of the work, and (if this idea is even possible) demonstrates that it wasn’t over-fitting/memorising.
      - 9y ago
ploggingdev 9y ago
One question : the deflationary nature of cryptocurrencies means that early adopters are rewarded disproportionately. Is this a bug or a feature? It seems unfair for the late adopters and is also one of the reasons people draw parallels to a ponzi scheme. I've not come across a good explanation for this, so any thoughts?
- gizmo 9y ago
  I think the deflationary nature only reflects the ideological beliefs of the creators. Inflation is a type of tax, therefore for a currency to be a "true" store of value it cannot be deflationary. If extra crypocurrency can be printed, who decides when the monetary base gets expanded and by how much? That's not an easy question to answer in a distributed system. So you end up with a fixed monetary base (and therefore deflation).
  - mbrock 9y ago
    This is a really complex topic that I don't really understand, but I think there's quite a lot of interesting nuance to the deflationary cryptocurrency question. For example, you could consider Bitcoin as being like a "specie" or "hard currency" within an ecosystem that also includes various types of "scrip" or "credits". Ether behaves a lot like that. It's the hard base currency in an ecosystem of tokens ("soft currencies") all with different monetary policies. There are very interesting Ethereum tokens without fixed supply, for example the token that will be issued by Maker (the "dai") which is basically an asset-backed credit token with an autonomous monetary policy to stabilize the token's market value measured against the IMF's currency basket index (XDR). This seems to be a really natural pattern: you have a small number of deflationary hard currency (precious metals, basically) that act as global store of value, hedge against local volatility, and neutral means of settlement; and then you have a whole range of other credit instruments. Random thought: to people brought up with cryptocurrencies, we might be explaining gold as "well, it's like nature's bitcoin: scarce, hard to mine, and very expensive."
  - alexasmyths 9y ago
    " who decides when the monetary base gets expanded and by how much" You allow entities to trade assets for currency at a central bank. The central bank can do it (i.e. Fed exchanging currency for TBills). The ECB allows banks to exchange assets (like property) for Euros. This is good because it allows flexibility in the amount of currency in circulation. Without this, you can get into all sorts of trouble, for example, Spain, Greece, et. al. in the 'Euro trap'. Monetary policy can be dangerous, of course, like anything powerful, but it can be used for good. Also to the commenters point about 'inflation is a tax' - well, it's a 'tax on cash' and a 'negative tax to everything else'. It's really nothing like a tax at all, it shouldn't be referred to as such. Inflation/deflation is just the changing value of one good vis-a-vis another. There are a lot of 'stores of value' out there and anyone with significant enough portfolio can easily take advantage of those if they chose for whatever reason not to hold a specific currency.
creatrixcordis 9y ago
i’m surprised not a single interest group has hired a company like cambridge analytica to influence popular opinion of bitcoin, or a fake news network to aid in pushing the price higher, not that we would know about it, the big players in bitcoin would benefit from a scheme like this, it would be a small investment for greater returns, i am interested to see if it will ever reach a point where people will feel comfortable with it’s volatilty, but i strive to understand how the control of bitcoin network and its software is not in the hands of who contribute code, are we trusting a few now compared to a few banking institutions, is that the underlying tradeoff?
- whiskers08xmt 9y ago
  The open source nature of Bitcoin, makes sure that development can always be forked. We saw this as recently as with the creation of Bitcoin Cash, which forked form Bitcoin to implement bigger blocksizes, and which is not developed by Blockstream. In the end, if you don't read the code, you'll have to trust someone else did, and would raise a fuss about any shady findings.
- lucaspiller 9y ago
  How do you know they have not? As I understand Cambridge Analytica work rather discretely, so how do you know a piece on Bitcoin by say NYT (or even this!) isn’t funded by them?
  - creatrixcordis 9y ago
    it is a possibility, i guess they would pay the journalist or influence his sources, i guess the old adage of who controls context or environment somewhat therefore controls opinion... similar to the sort of things that spy agencies engage in
  - endgame 9y ago
    While they probably work on discrete campaigns, you may have meant "discreetly".
cm2187 9y ago
I'd keep in mind that the head of the IMF is a political appointee, and in this case a former lawyer and politician. I would take technological and banking advice from Lagarde with a pinch of salt.
- mseebach 9y ago
  She's been a very well respected minister of finance for a major economy. She's literally an expert on the subject she's speaking on (which is economy, not technology) - and she's not giving advice, she's offering an analysis.
cs702 9y ago
These sections of the speech resonate with me: "For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked. But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies." "IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008." "Why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable." The person speaking: Christine Lagarde, Head of the International Monetary Fund.
- cm2187 9y ago
  Where I find her position slightly disingenuous is that the role of central banks and of the IMF is precisely to bend the rules when they think it is required, by either printing money or making funds available to states to support them or their currency. So neither central banks nor the IMF will have any interest in a currency which cannot be somewhat manipulated. Where cryptocurrencies might fit in nevertheless is that they are only as strong as the convention to use a common algorithm. And the choice of this algorithm can be influenced or controlled by law or regulations. Hence the said authorities can achieve the same thing they currently do with crypto currencies than with fiat currencies. Might have defeated the original purpose but is a more likely scenario if cryptocurrencies become mainstream.
  - lr4444lr 9y ago
    What I don't understand is this: if the supply of bitcoin is controlled by a monotonically rate decreasing algorithm which "approximates the rate at which commodities like gold are mined"[0], how is it going to avoid the mismatch between the cyclical and random nature of economic output and the currency to properly represent it, ie, what central banks are fundamentally designed to do? [0] https://en.bitcoin.it/wiki/Controlled_supply https://en.bitcoin.it/wiki/Controlled_supply
ubernostrum 9y ago
Remember that when a government or government-ish bureaucracy does something that hurts Bitcoin/cryptocurrency, it's proof that big-government bureaucrats are hopelessly incompetent and shouldn't be trusted with anything. But when they do something that helps Bitcoin/cryptocurrency, it's validation from the wise, eminently competent leaders who have proved once again why we trust them with such power.
- optimuspaul 9y ago
  that's sarcasm right?
bandrami 9y ago
Meh. She's got a history of being an austerity fan. Since cryptocurrencies basically guarantee pro-cyclic austerity programs, of course she's going to push them.
- alfonsodev 9y ago
  > cryptocurrencies basically guarantee pro-cyclic austerity programs I never heard about this, can you elaborate a bit more this idea, or point me to some article about it?
  - grey-area 9y ago
    If you can't print your way out of debt (fixed money supply), the corollary is that you would be forced to cut in times when debt was in short supply (not able to borrow, no surplus), you wouldn't be able to simply create debt out of thin air as all the central banks have over the last decade, with yet to be seen side-effects (aside from the asset bubbles).
watertom 9y ago
That’s possible the funniest thing I’ve read in years. Governments, banks and corporations aren’t going to let it happen. Cryptocurrency will either be co-opted by these groups or outlawed altogether. The people who run the world aren’t about to give up control. In the U.S. we can’t get net neutrality, because the people who run things want more control.
- hossbeast 9y ago
  You're assuming they have the power to stop it.
emodendroket 9y ago
Seems like the headline oversells what she's saying.
deepGem 9y ago
I have a question. This might turn out to be stupid. What happens if the value of 1 bitcoin falls below the required threshold i.e the cost of energy + hardware to mine. I do understand that the probability of such an eventuality might be close to 0.
- hossbeast 9y ago
  Mining fees will grow.
  - nosuchthing 9y ago
    *as the network stops processing transactions
- jcbrand 9y ago
  It will become uneconomical to mine and therefore people will stop doing so, causing the hash rate (and therefore the cost of energy + hardware required to mine) to plummet, eventually making it economical again.
  - klochner 9y ago
    Hashing does not materially impact the global price of electricity. Also, hardware is a fixed cost, fixed costs don't affect the price at which miners would stop mining.
upofadown 9y ago
>... no clearing delays, ... I think ultimately this is the aspect of virtual currencies that will create the biggest change in the world. The great majority of the messing around with money has traditionally involved overcoming time delays in the system. A world without payables or receivables would have to look quite different. Without the friction of delayed payments the whole world economy might turn into a giant kanban[1] system. Everything would be a gig at whatever scale. * [1] https://en.wikipedia.org/wiki/Kanban https://en.wikipedia.org/wiki/Kanban
liberte82 9y ago
Christine Lagarde is one smart lady. The fact that she's talking about this is very interesting.
andreif 9y ago
Can a bank make huge amounts of crypto money out of thin air? Then lend them to other banks so that they can also make more crypto money out of thin air? And then lend them to people for buying houses and cars, paying for education and medical services, so that our economy can reach record heights? It seems to be an important part of money, required for our civilization to exist.
- DennisP 9y ago
  Sure they can. And so can you.

263 points by imartin2k 9y ago

chx 9y ago

Note: > For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked. This I can fully accept: there can be a future where some cryptocurrency becomes the world standard. Sure. Doesn't change all my critiques about the current situation which are so often downvoted.

colordrops 9y ago
The problem is that every single article about crypto has people like you coming out of the woodwork and commandeering the thread to "critique" cryptocurrency. Not everyone who uses or is interested in crypto claims it is perfect or will save humanity. The incessant criticism with every thread is about as sensible as complaining about python's general shortcomings in every article about a new python library.
- richardknop 9y ago
  It's a healthy to do this as otherwise there would be just too much hype posts on cryptocurrency. I am actually quite interested in blockchain and have been observing the Bitcoin and other crypto space for years now but it gets quite frustrating to read some of the hype articles written in order to pump prices. So in those cases I try to balance the discussion with some valid critique.
- vixen99 9y ago
  commandeer v. To force into military service. v. To seize for military use; confiscate. v. To take arbitrarily or by force. See Synonyms at appropriate. Who is forcing whom?
  - nkohari 9y ago
    That's a common English idiom, meaning the same thing as "co-opt".
- fauigerzigerk 9y ago
  This article isn't the equivalent of talking about a new Python library though. It's the equivalent of "W3C Head Foresees the End of Programming and the Triumph of Python".
  - jl6 9y ago
    A good analogy.
  - colordrops 9y ago
    I agree actually. I'm just explaining why the person gets downvoted in other threads.
- posterboy 9y ago
  No, noone claims python was a conspiratory pyramid scheme designed to track users and beat privacy. That's not a meaningful analogy although pythons are poisonous.
- AnIdiotOnTheNet 9y ago
  What do you expect? It's a natural reaction to evangelism and hype. When everywhere you go someone is extolling the virtues of X and how everyone should be using X and X is so much greater than everything else and you're an idiot for not using X, you're going to get people who push back against it. See: Linux Desktop, Rust, and The Cloud.
  - cm2187 9y ago
    AI, VR, Augmented Reality, Functional Programming, etc...
    - chx 9y ago
      Except functional programming has its uses already (actually it is probably the future) while Bitcoin currently is... well, it doesn't have any legal uses. (And yes we had this discussion one too many times, no, money transfer is unusable because the recipient needs to jump through hoops to get their money, you can't ask that from normal people.)
      - colordrops 9y ago
        > doesn't have any legal uses. That statement just demonstrates your total ignorance and completely nullifies your opinion.
        chx 9y ago
        I have had this conversation so many times and I have yet to hear about a legit use, one that ordinary people can and want to use.
- posterboy 9y ago
  well, this is funny, my comment was removed and resubmission is nuked as well. Now I'm just testing how secure the automation is: original comment: >No, noone claims python was a conspiratory pyramid scheme designed to track users and beat privacy. That's not a meaningful analogy although pythons are poisonous.
placebo 9y ago
From the little that I've managed to learn, it seems like cryptocurrencies have immense potential but, beside the natural opposition from those who prefer the "conservative way of doing things" (due to a variety of reasons, some legitimate and some less so), it seems that the blockchain (as ingenious as it is) does not really scale well to handle a global economy. There are ongoing efforts and solutions to solve this but I think they are all essentially equivalent to a person trying to do crazy contortions in order to wear in a badly made suit. There are a few projects that propose interesting and scalable alternatives to blockchain but once the herd has decided then I assume more money will be poured on making a wrong solution workable than making a right solution the standard.
- atupis 9y ago
  There are a few projects that propose interesting and scalable alternatives Any examples?
  - placebo 9y ago
    Two examples I know of are: https://github.com/metacurrency/holochain/wiki/FAQ https://github.com/metacurrency/holochain/wiki/FAQ and http://bitlattice.org/ http://bitlattice.org/ Although I'm far from being knowledgable enough to know the disadvantages of these methods in relation to blockchain nor whether they can really deliver on their claims. From what I've learned, my intuition says they're more suited to the task - could be a wrong impression though, hope someone here more knowledgeable on the subject could expand on it.
  - grondilu 9y ago
    The most ambitious one imho is qbitcoin[1]. It's based on quantum teleportation and quantum digital signatures. That gives it quite a low Technology Readiness Level[2], but hey, we see articles about actual implementation of quantum teleportation everyday, so who knows? 1. https://arxiv.org/abs/1708.04955 https://arxiv.org/abs/1708.04955 2. https://fr.wikipedia.org/wiki/Technology_readiness_level https://fr.wikipedia.org/wiki/Technology_readiness_level

dandare 9y ago

> too volatile, too risky, too energy intensive I am no expert but those three are features, not defects. 1/ Until there will be a central authority linking cryptocurrencies to the old financial system - impose taxes in CC - it will be volatile. 2/ Computer security is not something that can be definitely solved. 3/ Proof of work is the core concept of the blockchain. Maybe there will be some other CC technology in the future not based on blockchain that will not require proof of work, but that is outside of this discourse.

amelius 9y ago
If only we could replace "proof of work" by "proof of useful work".
- whiskers08xmt 9y ago
  The problem with useful proof of work, is that the emission rate becomes very hard to control. In most PoW consensus algorithms, a difficulty parameter is constantly updated to keep the average block-time around 10 minutes. To do useful PoW consensus, you'd need to find a useful problem, where the difficulty of solving the different problems is easily solved, while the solution to the next block, is still dependent on the solution from the last block.
  - quickthrower2 9y ago
    In addition, you need a problem that is hard to solve but quick to verify. I reckon most useful problems would not be quick to verify.
    - ben_w 9y ago
      My gut feeling says a set of open AI challenges, where the work is “train to solve this with accuracy > $difficultyParameter”, and the proof is something that both tests the accuracy of the work, and (if this idea is even possible) demonstrates that it wasn’t over-fitting/memorising.
    - 9y ago

ploggingdev 9y ago

One question : the deflationary nature of cryptocurrencies means that early adopters are rewarded disproportionately. Is this a bug or a feature? It seems unfair for the late adopters and is also one of the reasons people draw parallels to a ponzi scheme. I've not come across a good explanation for this, so any thoughts?

gizmo 9y ago
I think the deflationary nature only reflects the ideological beliefs of the creators. Inflation is a type of tax, therefore for a currency to be a "true" store of value it cannot be deflationary. If extra crypocurrency can be printed, who decides when the monetary base gets expanded and by how much? That's not an easy question to answer in a distributed system. So you end up with a fixed monetary base (and therefore deflation).
- mbrock 9y ago
  This is a really complex topic that I don't really understand, but I think there's quite a lot of interesting nuance to the deflationary cryptocurrency question. For example, you could consider Bitcoin as being like a "specie" or "hard currency" within an ecosystem that also includes various types of "scrip" or "credits". Ether behaves a lot like that. It's the hard base currency in an ecosystem of tokens ("soft currencies") all with different monetary policies. There are very interesting Ethereum tokens without fixed supply, for example the token that will be issued by Maker (the "dai") which is basically an asset-backed credit token with an autonomous monetary policy to stabilize the token's market value measured against the IMF's currency basket index (XDR). This seems to be a really natural pattern: you have a small number of deflationary hard currency (precious metals, basically) that act as global store of value, hedge against local volatility, and neutral means of settlement; and then you have a whole range of other credit instruments. Random thought: to people brought up with cryptocurrencies, we might be explaining gold as "well, it's like nature's bitcoin: scarce, hard to mine, and very expensive."
- alexasmyths 9y ago
  " who decides when the monetary base gets expanded and by how much" You allow entities to trade assets for currency at a central bank. The central bank can do it (i.e. Fed exchanging currency for TBills). The ECB allows banks to exchange assets (like property) for Euros. This is good because it allows flexibility in the amount of currency in circulation. Without this, you can get into all sorts of trouble, for example, Spain, Greece, et. al. in the 'Euro trap'. Monetary policy can be dangerous, of course, like anything powerful, but it can be used for good. Also to the commenters point about 'inflation is a tax' - well, it's a 'tax on cash' and a 'negative tax to everything else'. It's really nothing like a tax at all, it shouldn't be referred to as such. Inflation/deflation is just the changing value of one good vis-a-vis another. There are a lot of 'stores of value' out there and anyone with significant enough portfolio can easily take advantage of those if they chose for whatever reason not to hold a specific currency.

creatrixcordis 9y ago

i’m surprised not a single interest group has hired a company like cambridge analytica to influence popular opinion of bitcoin, or a fake news network to aid in pushing the price higher, not that we would know about it, the big players in bitcoin would benefit from a scheme like this, it would be a small investment for greater returns, i am interested to see if it will ever reach a point where people will feel comfortable with it’s volatilty, but i strive to understand how the control of bitcoin network and its software is not in the hands of who contribute code, are we trusting a few now compared to a few banking institutions, is that the underlying tradeoff?

whiskers08xmt 9y ago
The open source nature of Bitcoin, makes sure that development can always be forked. We saw this as recently as with the creation of Bitcoin Cash, which forked form Bitcoin to implement bigger blocksizes, and which is not developed by Blockstream. In the end, if you don't read the code, you'll have to trust someone else did, and would raise a fuss about any shady findings.
lucaspiller 9y ago
How do you know they have not? As I understand Cambridge Analytica work rather discretely, so how do you know a piece on Bitcoin by say NYT (or even this!) isn’t funded by them?
- creatrixcordis 9y ago
  it is a possibility, i guess they would pay the journalist or influence his sources, i guess the old adage of who controls context or environment somewhat therefore controls opinion... similar to the sort of things that spy agencies engage in
- endgame 9y ago
  While they probably work on discrete campaigns, you may have meant "discreetly".

cm2187 9y ago

I'd keep in mind that the head of the IMF is a political appointee, and in this case a former lawyer and politician. I would take technological and banking advice from Lagarde with a pinch of salt.

mseebach 9y ago
She's been a very well respected minister of finance for a major economy. She's literally an expert on the subject she's speaking on (which is economy, not technology) - and she's not giving advice, she's offering an analysis.

cs702 9y ago

These sections of the speech resonate with me: "For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked. But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies." "IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008." "Why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable." The person speaking: Christine Lagarde, Head of the International Monetary Fund.

cm2187 9y ago
Where I find her position slightly disingenuous is that the role of central banks and of the IMF is precisely to bend the rules when they think it is required, by either printing money or making funds available to states to support them or their currency. So neither central banks nor the IMF will have any interest in a currency which cannot be somewhat manipulated. Where cryptocurrencies might fit in nevertheless is that they are only as strong as the convention to use a common algorithm. And the choice of this algorithm can be influenced or controlled by law or regulations. Hence the said authorities can achieve the same thing they currently do with crypto currencies than with fiat currencies. Might have defeated the original purpose but is a more likely scenario if cryptocurrencies become mainstream.
- lr4444lr 9y ago
  What I don't understand is this: if the supply of bitcoin is controlled by a monotonically rate decreasing algorithm which "approximates the rate at which commodities like gold are mined"[0], how is it going to avoid the mismatch between the cyclical and random nature of economic output and the currency to properly represent it, ie, what central banks are fundamentally designed to do? [0] https://en.bitcoin.it/wiki/Controlled_supply https://en.bitcoin.it/wiki/Controlled_supply

ubernostrum 9y ago

Remember that when a government or government-ish bureaucracy does something that hurts Bitcoin/cryptocurrency, it's proof that big-government bureaucrats are hopelessly incompetent and shouldn't be trusted with anything. But when they do something that helps Bitcoin/cryptocurrency, it's validation from the wise, eminently competent leaders who have proved once again why we trust them with such power.

optimuspaul 9y ago
that's sarcasm right?

bandrami 9y ago

Meh. She's got a history of being an austerity fan. Since cryptocurrencies basically guarantee pro-cyclic austerity programs, of course she's going to push them.

alfonsodev 9y ago
> cryptocurrencies basically guarantee pro-cyclic austerity programs I never heard about this, can you elaborate a bit more this idea, or point me to some article about it?
- grey-area 9y ago
  If you can't print your way out of debt (fixed money supply), the corollary is that you would be forced to cut in times when debt was in short supply (not able to borrow, no surplus), you wouldn't be able to simply create debt out of thin air as all the central banks have over the last decade, with yet to be seen side-effects (aside from the asset bubbles).

watertom 9y ago

That’s possible the funniest thing I’ve read in years. Governments, banks and corporations aren’t going to let it happen. Cryptocurrency will either be co-opted by these groups or outlawed altogether. The people who run the world aren’t about to give up control. In the U.S. we can’t get net neutrality, because the people who run things want more control.

hossbeast 9y ago
You're assuming they have the power to stop it.

emodendroket 9y ago

Seems like the headline oversells what she's saying.

deepGem 9y ago

I have a question. This might turn out to be stupid. What happens if the value of 1 bitcoin falls below the required threshold i.e the cost of energy + hardware to mine. I do understand that the probability of such an eventuality might be close to 0.

hossbeast 9y ago
Mining fees will grow.
- nosuchthing 9y ago
  *as the network stops processing transactions
jcbrand 9y ago
It will become uneconomical to mine and therefore people will stop doing so, causing the hash rate (and therefore the cost of energy + hardware required to mine) to plummet, eventually making it economical again.
- klochner 9y ago
  Hashing does not materially impact the global price of electricity. Also, hardware is a fixed cost, fixed costs don't affect the price at which miners would stop mining.

upofadown 9y ago

>... no clearing delays, ... I think ultimately this is the aspect of virtual currencies that will create the biggest change in the world. The great majority of the messing around with money has traditionally involved overcoming time delays in the system. A world without payables or receivables would have to look quite different. Without the friction of delayed payments the whole world economy might turn into a giant kanban[1] system. Everything would be a gig at whatever scale. * [1] https://en.wikipedia.org/wiki/Kanban https://en.wikipedia.org/wiki/Kanban

liberte82 9y ago

Christine Lagarde is one smart lady. The fact that she's talking about this is very interesting.

andreif 9y ago

Can a bank make huge amounts of crypto money out of thin air? Then lend them to other banks so that they can also make more crypto money out of thin air? And then lend them to people for buying houses and cars, paying for education and medical services, so that our economy can reach record heights? It seems to be an important part of money, required for our civilization to exist.

DennisP 9y ago
Sure they can. And so can you.