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Ugh. Yes, we need central banks, if for no other reason than that distributed systems are hard. Central banking helps prevent things like double-spends and crea

Ugh. Yes, we need central banks, if for no other reason than that distributed systems are hard. Central banking helps prevent things like double-spends and creating currency out of thin air. Yes, technically cryptocurrencies "solve" the same problem, but at 1000x the energy expenditure and with no guarantee of avoiding a 51% attack by a coordinated network of rogue actors. It's almost like cryptocurrency zealots don't know shit about system design or something.

Toine 8y ago
Most "cryptocurrency zealots" don't know shit about crypto or currencies.
- spookthesunset 8y ago
  Or math, computer science, finance, politics, government, sociology, scaling, economics or seemingly. Crypto zealots have truly drunk the kool aid and have shut off their critical thinking.
  - DickingAround 8y ago
    Let's try not to over-generalize a group of people. Crypto might be a fad, but that doesn't mean there are no intelligent, knowledgeable people in it.
optimuspaul 8y ago
+1 on those thoughts. I'd add that there are a lot of other things that central banks do that keep the banking system(s) in check and closer to honest. Setting interest rates for example.
joker3 8y ago
In addition, it's not clear how to keep a currency's value stable without some kind of central authority. It may not even be possible to do in a distributed fashion.
0x445442 8y ago
> creating currency out of thin air But this is one of the main things central banks do. They have a monopoly to counterfeit money. And in conjunction with their affiliated government people are forced to use it to pay taxes.
- philippoi 8y ago
  "They have a monopoly to counterfeit money." No. That's not what counterfeiting is. Counterfeiting is creating imitation money to be passed off as the genuine article.
  - DoctorOetker 8y ago
    What if currency is in fact counterfeit respect?
dnautics 8y ago
> Central banking helps prevent things like double-spends and creating currency out of thin air. Actually you mean central banking enables these things. The whole point of central banking is double spending and money creation.
mendelsd 8y ago
>> Yes, technically cryptocurrencies "solve" the same problem >> It's almost like cryptocurrency zealots don't know shit This is a straw man. The article does not advocate for cryptocurrencies at all.
DickingAround 8y ago
Not all crypto attacks the same problem; they should not be all lumped together. Bitcoin's transation rate and energy use are a big deal. But Bitcoin does solve the problem of the central bank itself creating too much money, which has been an issue in the past and is generally recognized to be a big temptation on the part of governments in general. I'm not saying it's going to replace any major currency, just that there is a goal Bitcoin is meeting not mentioned above.
lend000 8y ago
> Ugh. Yes, we need central banks, if for no other reason than that distributed systems are hard. I can't count how many people there are who assume that because the problem is too hard for them, they need the government to intervene. > but at 1000x the energy expenditure and with no guarantee of avoiding a 51% attack by a coordinated network of rogue actors. Was double-spending a major problem prior to 1917? No, because there were assets that couldn't be double spent to move around (cash) as well as a somewhat decentralized trust-based system between banks that didn't fail just because the government wasn't there to hold your hand. We don't need cryptocurrencies for decentralized banking transactions, but they could definitely optimize the system and bridge the gap for the modern world, where money moves to the other side of the world frequently (not v0 Bitcoin-based protocols like you are familiar with, but assets which use a combination of proof-of-stake and master nodes which prioritize reputation in the system over computational power -- Dash is one example, although not yet good enough for this purpose). I suspect the environmental/economic cost of maintaining such a network would be much less than physically moving cash or gold around for backbone transactions. One somewhat useful (although still not without controversy) function central banks perform (and really, it's mostly the US Fed for most of the world's financial system) is indeed clearing bulk transactions between banks worldwide. However, the true value is the ability to reverse "mistakes" or theft -- for a VERY short time, we should note -- although this is also a negative if you are on your government's naughty list. Cryptocurrencies enable both more autonomy (the Saudi government wouldn't necessarily be able to freeze the assets of a dissenting citizen who is trying to escape, for example), and less ability to reverse mistakes, so I am torn on whether or not any existing cryptos would be ideal for this role, although I'm sure emerging cryptos/upgrades will continue to be better suited. In any case, it's kind of a tangent to the whole central bank discussion.
logfromblammo 8y ago
Central banking doesn't prevent creation of currency out of thin air. It just ensures that only the governing body of the central bank can do it. And the governing body of a central bank will likely have an agency problem. There is a significant incentive to capture some of the growth in the markets that use the currency via manipulation of the money supply. The market would prefer that nobody be in a position to capture that growth, because then everybody wins in an expansion, but then the downside is that everybody loses in a contraction. But then again, the market also prefers a currency with a stable value. The fixed coin-creation schedule in Bitcoin was intended to remove any central authority for currency creation. But as it turns out, it's really hard to predict the demand for a currency that far into the future. For a long time, the old standard, gold, was mined, refined, and coined at roughly the same rate as economic growth. The world economy grew by 2-3% per year, and the total gold supply grew by 2-3% per year. So gold was a very stable currency. It took large movements of metal, such as Mansa Musa going on Hajj, or the exploration and exploitation of the Americas, to push the markets out of tolerance. Central banks have the capability to replicate that stability. But they do not. They skim off the top with monetary inflation that outpaces economic growth, to make currency that is held slowly lose its buying power, and prices slowly rise over time. The public justification is that currency that appreciates in value is spent less frequently, but that buying power has to go somewhere. It doesn't go to the people already holding currency. It goes to the one that creates the new money. I'm not certain that cryptocurrencies have the ability to mint new coins at exactly the rate of economic growth and also distribute the new coins fairly. At the least, spends within the system could be gamed to simulate growth that does not actually exist, and at the worst, someone could figure out how to profit from that.

Toine 8y ago

Most "cryptocurrency zealots" don't know shit about crypto or currencies.

spookthesunset 8y ago
Or math, computer science, finance, politics, government, sociology, scaling, economics or seemingly. Crypto zealots have truly drunk the kool aid and have shut off their critical thinking.
- DickingAround 8y ago
  Let's try not to over-generalize a group of people. Crypto might be a fad, but that doesn't mean there are no intelligent, knowledgeable people in it.

optimuspaul 8y ago

+1 on those thoughts. I'd add that there are a lot of other things that central banks do that keep the banking system(s) in check and closer to honest. Setting interest rates for example.

joker3 8y ago

In addition, it's not clear how to keep a currency's value stable without some kind of central authority. It may not even be possible to do in a distributed fashion.

0x445442 8y ago

> creating currency out of thin air But this is one of the main things central banks do. They have a monopoly to counterfeit money. And in conjunction with their affiliated government people are forced to use it to pay taxes.

philippoi 8y ago
"They have a monopoly to counterfeit money." No. That's not what counterfeiting is. Counterfeiting is creating imitation money to be passed off as the genuine article.
- DoctorOetker 8y ago
  What if currency is in fact counterfeit respect?

dnautics 8y ago

> Central banking helps prevent things like double-spends and creating currency out of thin air. Actually you mean central banking enables these things. The whole point of central banking is double spending and money creation.

mendelsd 8y ago

>> Yes, technically cryptocurrencies "solve" the same problem >> It's almost like cryptocurrency zealots don't know shit This is a straw man. The article does not advocate for cryptocurrencies at all.

DickingAround 8y ago

Not all crypto attacks the same problem; they should not be all lumped together. Bitcoin's transation rate and energy use are a big deal. But Bitcoin does solve the problem of the central bank itself creating too much money, which has been an issue in the past and is generally recognized to be a big temptation on the part of governments in general. I'm not saying it's going to replace any major currency, just that there is a goal Bitcoin is meeting not mentioned above.

lend000 8y ago

> Ugh. Yes, we need central banks, if for no other reason than that distributed systems are hard. I can't count how many people there are who assume that because the problem is too hard for them, they need the government to intervene. > but at 1000x the energy expenditure and with no guarantee of avoiding a 51% attack by a coordinated network of rogue actors. Was double-spending a major problem prior to 1917? No, because there were assets that couldn't be double spent to move around (cash) as well as a somewhat decentralized trust-based system between banks that didn't fail just because the government wasn't there to hold your hand. We don't need cryptocurrencies for decentralized banking transactions, but they could definitely optimize the system and bridge the gap for the modern world, where money moves to the other side of the world frequently (not v0 Bitcoin-based protocols like you are familiar with, but assets which use a combination of proof-of-stake and master nodes which prioritize reputation in the system over computational power -- Dash is one example, although not yet good enough for this purpose). I suspect the environmental/economic cost of maintaining such a network would be much less than physically moving cash or gold around for backbone transactions. One somewhat useful (although still not without controversy) function central banks perform (and really, it's mostly the US Fed for most of the world's financial system) is indeed clearing bulk transactions between banks worldwide. However, the true value is the ability to reverse "mistakes" or theft -- for a VERY short time, we should note -- although this is also a negative if you are on your government's naughty list. Cryptocurrencies enable both more autonomy (the Saudi government wouldn't necessarily be able to freeze the assets of a dissenting citizen who is trying to escape, for example), and less ability to reverse mistakes, so I am torn on whether or not any existing cryptos would be ideal for this role, although I'm sure emerging cryptos/upgrades will continue to be better suited. In any case, it's kind of a tangent to the whole central bank discussion.

logfromblammo 8y ago

Central banking doesn't prevent creation of currency out of thin air. It just ensures that only the governing body of the central bank can do it. And the governing body of a central bank will likely have an agency problem. There is a significant incentive to capture some of the growth in the markets that use the currency via manipulation of the money supply. The market would prefer that nobody be in a position to capture that growth, because then everybody wins in an expansion, but then the downside is that everybody loses in a contraction. But then again, the market also prefers a currency with a stable value. The fixed coin-creation schedule in Bitcoin was intended to remove any central authority for currency creation. But as it turns out, it's really hard to predict the demand for a currency that far into the future. For a long time, the old standard, gold, was mined, refined, and coined at roughly the same rate as economic growth. The world economy grew by 2-3% per year, and the total gold supply grew by 2-3% per year. So gold was a very stable currency. It took large movements of metal, such as Mansa Musa going on Hajj, or the exploration and exploitation of the Americas, to push the markets out of tolerance. Central banks have the capability to replicate that stability. But they do not. They skim off the top with monetary inflation that outpaces economic growth, to make currency that is held slowly lose its buying power, and prices slowly rise over time. The public justification is that currency that appreciates in value is spent less frequently, but that buying power has to go somewhere. It doesn't go to the people already holding currency. It goes to the one that creates the new money. I'm not certain that cryptocurrencies have the ability to mint new coins at exactly the rate of economic growth and also distribute the new coins fairly. At the least, spends within the system could be gamed to simulate growth that does not actually exist, and at the worst, someone could figure out how to profit from that.