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The author uses a slide to say: > fiat currencies issued by strong stable states capable of taxing their citizens, with banking systems effective at encouragin

The author uses a slide to say: > fiat currencies issued by strong stable states capable of taxing their citizens, with banking systems effective at encouraging widespread borrowing, with large, diversified domestic economies (and so the capacity to do with fewer imports if necessary) that borrow in their own currency, and do not have sizable debts in foreign currency aren't weak. This speaks to me as if the author has a modicum of trust in the current banking industry, saying: "I trust that we can still solve the problems we've created." Call me a skeptic, but I don't. That is the fundamental problem that cryptocurrencies were created to solve; trustless money. I agree with the author on the part of currency needing to be stable, and cryptocurrencies in their current state are not stable. However, as more and more value is attributed to cryptocurrencies, and more and more people adopt it, those fluctuations will even out. I feel comparing crypto's stability with most fiat money is like comparing the gait of a toddler with that of a grown man. It takes time, effort, and entropy to gain the momentum needed to be stable, crypto is still in its early-adoption-phase. > Fiat currencies are no more “created from thin air” than... Fractional Reserve Banking would like a word.

pjc50 9y ago
> That is the fundamental problem that cryptocurrencies were created to solve; trustless money. What's the actual problem here? "Trustless money" is a philosophical objection. Cryptocurrency tends to move the trust locus to your software and hardware stack, along with a choice of crypto-to-real-money gateways, none of which seem particularly trustworthy.
- once_inc 9y ago
  Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. Any transaction between fiat and crypto requires a modicum of trust, in the same sense that buying something with a credit card requires some trust. Once you are inside the crypto bubble, that trust is no longer required.
  - pjc50 9y ago
    Yes, you've moved the trust to the user's computer. Now the question becomes "which would you trust with a large chunk of money, a regulated financial institution or the information security of a personal computer", which for me would be the institution. For most people I know, it would definitely be the institution, because personal computer security is terrible.
  - littlestymaar 9y ago
    > Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. This used to be true in the beginning of Bitcoin (when CPU mining on your desktop was OK) but it's not true anymore. The integrity of the ledger is guaranteed by the miners, and now the miners are not individuals but companies with ASIC farms. You have basically no guaranties that these companies aren't going to plot against you to tamper with the ledger. Of course at the moment it would be a terrible idea because it would destroy the confidence in Bitcoin (and that would destroy them) but it's not that different from what stops a central banker to print a huge amount of money.
    - pjc50 9y ago
      Tampering with the ledger is sufficiently difficult that it's not a real risk in cryptocurrency. There are plenty of other real risks that are far more relevant.
      - littlestymaar 9y ago
        If a cartel controls more than 50% of the mining power, it's not difficult : they make authority on the ledger. (IIRC you don't even need 50% of the mining power to control the ledger in practice but it's not as straightforward).
littlestymaar 9y ago
> I agree with the author on the part of currency needing to be stable, and cryptocurrencies in their current state are not stable. […] It takes time, effort, and entropy to gain the momentum needed to be stable, crypto is still in its early-adoption-phase. The problem is : if you want a stable currency you need a money supply that grow as much as `inflation + growth + the slowdown of the money flow`, if you don't have that your economy collapses. All of this is changing over time, then you need to adjust the supply of money dynamically. And unless someone finds a way to do this automatically, you'll need a pilot in charge of this. This is currently the job of the director of the central bank, it can also be the president of the country, the parliament, or anyone but you need someone (or some cleverly designed distributed mechanism that doesn't exist yet). If you don't address this, cryptocurrencies aren't better than gold money, which historically proved inefficient in an industrialized society.
- zodiac 9y ago
  There are project like MakerDAO that indeed use smart contracts (plus fiat price oracles and some other things) to implement monetary policy without any "pilot".
  - KGIII 9y ago
    I think one of the problems is that there are now, what, a few thousand cryptocurrencies? The optics of the multitudes of ICOs? Those aren't good. No, no they are not. A part of me wonders if this popularity boom might actually be the reason it dies out. How many hacks, thefts, and scams have there been? Sure, those happen with real money but real money isn't the one needing to work on its optics. We already accept real currency. This one is anonymous, this one is for burgers in Russia, this one is tied to fiat currency, this one is for an online file system... The list goes on. I'm not sure that diversity in choice is a net benefit with this, at least not in the long term. Someone important is going to lose some money and it's not that hard for a government to make it illegal. Depending on your jurisdiction, it's just a stroke of the pen. If I did want to invest, or use, I'd barely have an idea of where to start and I'm pretty technically literate. Hell, I even mined some BTC when it was new. Now, there are so many varieties. Maybe too many choices. There are even sites to let you easily make new ones.

pjc50 9y ago

> That is the fundamental problem that cryptocurrencies were created to solve; trustless money. What's the actual problem here? "Trustless money" is a philosophical objection. Cryptocurrency tends to move the trust locus to your software and hardware stack, along with a choice of crypto-to-real-money gateways, none of which seem particularly trustworthy.

once_inc 9y ago
Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. Any transaction between fiat and crypto requires a modicum of trust, in the same sense that buying something with a credit card requires some trust. Once you are inside the crypto bubble, that trust is no longer required.
- pjc50 9y ago
  Yes, you've moved the trust to the user's computer. Now the question becomes "which would you trust with a large chunk of money, a regulated financial institution or the information security of a personal computer", which for me would be the institution. For most people I know, it would definitely be the institution, because personal computer security is terrible.
- littlestymaar 9y ago
  > Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. This used to be true in the beginning of Bitcoin (when CPU mining on your desktop was OK) but it's not true anymore. The integrity of the ledger is guaranteed by the miners, and now the miners are not individuals but companies with ASIC farms. You have basically no guaranties that these companies aren't going to plot against you to tamper with the ledger. Of course at the moment it would be a terrible idea because it would destroy the confidence in Bitcoin (and that would destroy them) but it's not that different from what stops a central banker to print a huge amount of money.
  - pjc50 9y ago
    Tampering with the ledger is sufficiently difficult that it's not a real risk in cryptocurrency. There are plenty of other real risks that are far more relevant.
    - littlestymaar 9y ago
      If a cartel controls more than 50% of the mining power, it's not difficult : they make authority on the ledger. (IIRC you don't even need 50% of the mining power to control the ledger in practice but it's not as straightforward).

littlestymaar 9y ago

> I agree with the author on the part of currency needing to be stable, and cryptocurrencies in their current state are not stable. […] It takes time, effort, and entropy to gain the momentum needed to be stable, crypto is still in its early-adoption-phase. The problem is : if you want a stable currency you need a money supply that grow as much as `inflation + growth + the slowdown of the money flow`, if you don't have that your economy collapses. All of this is changing over time, then you need to adjust the supply of money dynamically. And unless someone finds a way to do this automatically, you'll need a pilot in charge of this. This is currently the job of the director of the central bank, it can also be the president of the country, the parliament, or anyone but you need someone (or some cleverly designed distributed mechanism that doesn't exist yet). If you don't address this, cryptocurrencies aren't better than gold money, which historically proved inefficient in an industrialized society.

zodiac 9y ago
There are project like MakerDAO that indeed use smart contracts (plus fiat price oracles and some other things) to implement monetary policy without any "pilot".
- KGIII 9y ago
  I think one of the problems is that there are now, what, a few thousand cryptocurrencies? The optics of the multitudes of ICOs? Those aren't good. No, no they are not. A part of me wonders if this popularity boom might actually be the reason it dies out. How many hacks, thefts, and scams have there been? Sure, those happen with real money but real money isn't the one needing to work on its optics. We already accept real currency. This one is anonymous, this one is for burgers in Russia, this one is tied to fiat currency, this one is for an online file system... The list goes on. I'm not sure that diversity in choice is a net benefit with this, at least not in the long term. Someone important is going to lose some money and it's not that hard for a government to make it illegal. Depending on your jurisdiction, it's just a stroke of the pen. If I did want to invest, or use, I'd barely have an idea of where to start and I'm pretty technically literate. Hell, I even mined some BTC when it was new. Now, there are so many varieties. Maybe too many choices. There are even sites to let you easily make new ones.