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Can anyone explain what the point of a pegged cryptocurrency is? Since you are dependent on the issuing entity to honour the stated peg, why not just have your

by wz1000 7y ago

Can anyone explain what the point of a pegged cryptocurrency is? Since you are dependent on the issuing entity to honour the stated peg, why not just have your balance be an entry in a regular database maintained by that entity? What exactly does the blockchain gain you here? One thing it does _not_ get you is censorship resistance. If the central authority wants to take away coins from a wallet, all it needs to do is to simply state that it will not honour the peg for coins originating from that wallet. This can be tracked by FIFO, dilution or any other stated accounting principle, and renders the balance in that wallet worthless.

arisAlexis 7y ago
no fees, easy to send money to relatives abroad. PayPal was for eBay. this is for FB
A2017U1 7y ago
Have you transferred money across borders to an individual lately? As much as I want to criticize this FB is probably in an excellent position to navigate the kyc minefields.
- vbezhenar 7y ago
  That does not really answer the question.
- wz1000 7y ago
  My question was "what does blockchain bring to the table compared to a regular database?". How does using a blockchain/cryptocurrency make it easier to sidestep regulations compared to a regular old database?
  - kolinko 7y ago
    Sidestep regulations - if you build a system that doesn't allow you to do certain things (e.g. change balances at will), then the government cannot force you to do them. But again - it's not about regulations. It's about interoperability. Centralised money transfer stuff is not new (PayPal? Banks?), the problem with it was always integration with other systems. Also, if it's a centralised database, it's hard to build real startups on top of it. Look at what happened to startups building on top of Twitter APIs when Twitter decided to change them. If you build some parts on top of a public blockchain, it gives guarantees related to accessibility of those parts in the future.
  - A2017U1 7y ago
    fair call, considering it's all permissioned, to pathetically argue the point I don't really care much for: I guess you could claim some sort of providence of money movements using a git like system but realistically I think it's likely the marketing department had far more to do with the decision than the engineering dept. You only have to look at wechat's dominance thoughout Asia to realise whatapp could get absolutely blown away by the all-in-one messenger/payment system if it took off in the West.
  - callmeal 7y ago
    >My question was "what does blockchain bring to the table compared to a regular database?". You cannot compare blockchain with a regular database. A blockchain is more like an append-only store, or a WORM drive where each "file" or "record" is digitally authenticated and signed/hashed in a way to make undetectable modifications extremely difficult and/or expensive.
    - dragonwriter 7y ago
      > You cannot compare blockchain with a regular database. Yes, you can. That it is different, and the resulting difference in utility, is the exact point of such a comparison.
- CaptainZapp 7y ago
  Have you transferred money across borders to an individual lately? Actually yes. From Switzerland to my brother in Belgium. It was transferred on the same business day at no expense to him or me. Look up SEPA[1] for details. Just because the American banking system is the complete shits this does not necessarily apply to the rest of the world. [1] https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
  - alehul 7y ago
    Across very cooperative borders in wealthy Europe, sure. Do you think it's as easy for those in India, China, or Kenya, for instance?
    - CaptainZapp 7y ago
      Kenya is a relatively bad example. While a lot of people are underbanked mobile banking and - payments took off in a spectacular way.[1] It's probably easier to transfer funds via M-Pesa then from a bank account in Delaware to a bank account in Detroit And, at least in theory, America is a wealthy country without any borders. [1] https://en.wikipedia.org/wiki/M-Pesa https://en.wikipedia.org/wiki/M-Pesa
      - eng101 7y ago
        You’re right. I find it stupendously easy to move money within/into Kenya. I can easily pay a street seller from my US bank account, directly to his/her phone, in seconds. Pains me to say this because I had this international bank/credit card to M-Pesa transfers idea a decade ago, a professor dissuaded me from pursuing it. 5 years later, a bunch of services launched and many are thriving.
    - A2017U1 7y ago
      Entirely this, many in the West have no idea how difficult crossborder banking actually is for the vast majority of human beings on Earth.
- nabla9 7y ago
  What minefields? Wetern Union, HiFX, PayPal, MoneyGram,Azimo work just fine.
- peteretep 7y ago
  > Have you transferred money across borders to an individual lately? Yes, frequently. Using TransferWise or FairFx, depending on where the recipient was, but inclusive of Thailand, USA, Ecuador, and Canada. The process was entirely painless, fast, and the transfer was cheap as chips, while bringing to bear the full weight of European bank regulations to protect me as a customer.
  - elliekelly 7y ago
    > The process was entirely painless, fast, and the transfer was cheap as chips, while bringing to bear the full weight of European bank regulations to protect me as a customer. I wish more people on HN would understand the importance of this. I've said it here before but I think it's worth repeating. Banks want to send your money internationally and, as you've said, are more than capable of sending your money quickly and cheaply. Any time an international bank transfer is a pain in the ass it's by design to protect consumer interests and/or to protect government interests. There's a reason you can't just rock up to the teller at Wells Fargo and send $1,000 to North Korea the same way you can if you needed to send $1,000 to Canada.
    - stale2002 7y ago
      Ok, well what if I want to send money cheaply? Lol, it seems like that is a good usecase.... I don't care about the reason that banks have for sabotaging their own service. That is not my problem.
  - aianus 7y ago
    > transfer was cheap as chips I used TransferWise once a few years ago from USD to CAD and it cost ~1.4% all-in. That's cheaper than my bank but still very expensive if you're transferring your whole salary every pay period like I was. I ended up using Bitcoin instead. Is it cheaper now?
    - peteretep 7y ago
      I paid 0.5% all in on a salary-sized GBP/THB transfer a few days ago.
- briodf 7y ago
  Have you transferred money across borders with good recommendations lately? Sending money across borders is historically super complex and expensive, you're right. The WorldBank estimates that it costs an average of 8% in total fees (transfer fees + exchange rate mark-up) to transfer money internationally. For international transfers with banks and cash-based money transfers, this is still true. But, in the last 10 years, we've seen hundreds of new online money transfer operators innovating in the field (way before crypto) starting with Xoom in the first wave and then TransferWise, Remitly, WorldRemit, InstaRem, Azimo and hundreds of others... Sending $300 to Mexico to any agent location to pickup cash will cost you $2 with the cheapest option: https://www.monito.com/send-money/united-states/mexico/usd/mxn/300 https://www.monito.com/send-money/united-states/mexico/usd/m... $1000 from Canada to a bank account in the Philippines in minutes? $6 https://www.monito.com/send-money/canada/philippines/cad/php/1000 https://www.monito.com/send-money/canada/philippines/cad/php... etc... These new innovative services are up to 10x cheapers than banks or traditional cash-based money transfers, often faster and much more convenient.
  - baby 7y ago
    Don't know about Monito but I've used TransferWise many times. First it's not straight forward, it takes time (several days), and it's freaking expensive. These numbers you quote are pretty far from what I spend when transferring money between France, the UK and the US.
- rafiki6 7y ago
  I can almost guarantee you that regulators will step in and regulate the living crap out of this system if it's found to be actively used for high rates of cross-border transfers and foreign exchange. Governments are a lot smarter than people give them credit for. Once the regulation kicks in, all of a sudden the value of this diminishes greatly.
netrikare 7y ago
This will probably be great for people who trade a lot of cryptocurrencies. In some countries crypto-crypto trading is free from taxation. When cyclic crypto bubble bursts and multi-year downtrend starts, you have to sell those cryptocurrencies for USD and pray exchange does not go bankrupt/hacked/exit scam or withdraw and pay taxes. Right now there are some forms of stable coins issued by private companies with no guarantee of buying back issued tokens. Very unstable market. FBCoin may change this. I believe first customers will be cryptcurrency exchanges.
m-i-l 7y ago
> Can anyone explain what the point of a pegged cryptocurrency is? Since you are dependent on the issuing entity to honour the stated peg In this case there wouldn't be a single issuing entity: "the cryptocurrency would indeed be pegged to a basket of currencies". I had written about the idea of a stablecoin tied to a basket of currencies, e.g. J M Keynes' Bancor and the Word Currency Unit, a few years back. > why not just have your balance be an entry in a regular database maintained by that entity? What exactly does the blockchain gain you here? If it is controlled by a centralised organisation there would appear to be little point of "blockchain", but maybe as the article says "By introducing a level of decentralization to the governance of the project, Facebook may be able to avoid regulation related to it holding too much power over a global currency".
awrence 7y ago
On paper, you're basically entirely right. Stablecoins including FB are all smokescreens to sell managing fiat on an internal database for you with "blockchain" wrapped around it. This project and stablecoins in general have nothing to do with cryptocurrencies. With that said i can tell you at least one solid reason why any issuer would do it. At a bare minimum they can earn overnight on the holdings since stablecoins don't kick back interest to date. Although with stablecoin competition that should probably start happening until it squeezes to 0 and then it really wouldn't make any sense except to like monetize spying on you I suppose or something. But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. It's the crypto equivalent of a "free" checking account that doesn't pay interest. Not that any exchange was paying interest for fiat deposits in the first place so i'm not sure to what extent that's relevant for cryptoexchangess, but for FB obviously it would since they're starting from 0. With that said I can imagine one reason why users would care for USD stablecoins. The US has made owning and dealing with USD directly an absolute horrendous nightmare for international users and US citizens abroad following FATCA et al. And this way you can claim you never owned or touched USD which means whoever is holding stablecoins for you instead of USD doesn't have to file truckloads of paperwork for you to open the account. That's a regulatory loophole though one could imagine the US would start complaining about if this really took off. There's one remote reason I can think of that people would flip to stablecoins vs fiat if they had some tax view that that wasn't a constructive sale and it could benefit from some likekind kind of treatment since its a "crypto" and not a "fiat". It's obviously a silly argument and there's no way the IRS would fall for it (nor do they even accept it between regular cryptos) but i can't speak for other jurisdictions.
- omarchowdhury 7y ago
  > But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. Tether has got hundreds of millions of dollars worth of funds seized from their banks.
  - awrence 7y ago
    True. But they still 2-3 billion working for them for free. And then that's a specific example where they went and made poor choices with their funds etc. On paper if all you do is create a "stablecoin" and segregate funds in an interest bearing account and don't touch them then its free running interest to you.
granaldo 7y ago
somehow there seem to be many roll outs of stable coins of late.. the infamous Tether, DAI by Maker, USDC by Circle, GUSD by Gemini, TUSD and countless more https://www.coingecko.com/en?category_id=36&view=market https://www.coingecko.com/en?category_id=36&view=market
- wtfrmyinitials 7y ago
  Worth noting that Maker is different than those other because there's no central authority holding fiat money to maintain the peg. Their stablecoin Dai is minted "out of thin air" and the price peg is maintained via an interest rate mechanism built into the smart contract.
will_brown 7y ago
>Can anyone explain what the point of a pegged cryptocurrency is? What was the point of arcades taking your quarters and issuing you tokens for the machines? Why not just allow the machines to take your quarters? The idea is for the issuer to take real money from you and issue you Monopoly money which the issuer can track and control. In a worst case scenario the issuer can make up new rules (change their terms and conditions on you) or declare bankruptcy/dissolve and not honor the redemption of your stable coins at all.
- mc32 7y ago
  And importantly the tokens can be unilaterally devalued without having to change the slots or recalibrate. So instead of 25¢ and next step being 50¢ if using the same config, they can charge you 27, or 48 or 50¢ for the token and not have to reconfigure the machine one bit.
  - chabes 7y ago
    So, there’s obvious benefits for FB. What are the benefits for users? Are people actually going to want to use this?
    - will_brown 7y ago
      Probably have to wait for the whitepaper to come out to give a fair opinion/analysis (rather than an article about the future release of the whitepaper). Once the actual use case/function of the token is know then one could answer if there is a benefit to users and if a Blockchain token makes sense over a database.
    - bitreality 7y ago
      For users, the advantage would be an easy to use stable-coin, that is more accessible to the average person. Right now, most crypto currency has plenty of complexity to it. FacebookCoin will probably work more similarly to CashApp vs. Bitcoin. It means most people using it won't even realize it's a Blockchain token. It'll be like "Facebook Bucks". But then it also offers the flexibility of a blockchain token to more advanced users (withdraw to your own wallet, send to an exchange, etc).
mrlala 7y ago
>Can anyone explain what the point of a pegged cryptocurrency is? Because it has a completely stable value, from the standpoint of someone who always uses that currency. Let's say it's pegged to USD. Boom, if I'm in the US and everything I do is in USD, this cryptocurrency can suddenly be the same as actual dollars from my standpoint. There's virtually no difference. The USD has an almost completely stable value to the standard person in the US. Everything they do is in USD. They don't care about some fluctuations vs other currencies vs EUR etc. I'm not saying there are zero affects, of course there are, but there's really nothing they can do about it. EUR goes up 10% to the USD, ok something they buy which is imported from europe is maybe 10% more expensive in USD.. there is nothing they can do about that, so the USD is still completely stable from their perspective. It's not like most people are saying "Oh 1% of my purchases this year are coming from Europe, so I'm going to hold 1% of my assets in EUR to mitigate this affect". >What exactly does the blockchain gain you here? Given the above, that means that the crypto currency is now 100% the same as holding USD. I'm not holding cyrpto as a diversifier, or to get magically rich by a big crypto move. I would actually hold crypto TO USE IT. Maybe I want to send my brother $50 who lives in a different place. Wouldn't it be cool to just send some crypto knowing that it's virtually exactly $50 when I send it and always after that? Open the phone on some app, click a button and boom. Without having to worry about any intermediary bank etc. This whole notion that crypto SHOULD NOT be pegged is looking at some dystopian future where a currency like the USD is not stable anymore. And hey, I'm not saying that could never happen.. but the world will have pretty much exploded if that ever happens so I'm not sure your cryptocurrency will help much in that case. Crypto right now is a get rich quick scheme with extremely little actual use cases. Pegging one to the USD would make it usable- which should be the whole point...
tim333 7y ago
The main use so far has been to allow crypto exchanges to let you trade between cyptocurrencies and dollar equivalents without getting involved with banking regulations or banks. If you set up a crypto exchange doing say bitcoin - usdt, it's basically just software you can upload without needing accounts, licenses etc assuming the owners are nominally not in regulated countries.
thefounder 7y ago
Well, one good reason to use cryptocurrencies is that you don't have to deal with visa/mastercard crap. You can send and accept payments without all kind of requirements(i.e pci). Stable coins are really what bitcoin should have been: digital money! Now bitcoin is just a big casino owned and run by dubious entities/exchangers/trading platforms with no oversight.
akerro 7y ago
They're doing it to skirt GDPR laws. When GDPR passed, all users were automatically opted out of personal data sharing, targeted marketing, etc. With ZuckCoin, they're going to pay users a small amount of coins to use the site, but in order for users to be eligible for that they'll be required to opt into all of the personal data sharing stuff. And since it will be considered a monetary transaction, Facebook will be required to keep the data from every transaction for 10 years for tax purposes. People won't even be able to ask that Facebook delete their data because they'll be required to store it for 10 years. edit: If you want to listen to the explanation in more detail, Meanhash explained it on a recent episode of the Hashr8 podcast: https://h4shr8.libsyn.com/meanhash https://h4shr8.libsyn.com/meanhash https://www.reddit.com/r/CryptoCurrency/comments/bx9dik/facebook_will_reportedly_announce_cryptocurrency/ https://www.reddit.com/r/CryptoCurrency/comments/bx9dik/face...
- PeterisP 7y ago
  I don't see how that brings any benefits GDPR-wise. "required to opt into" doesn't count as freely given consent, so it doesn't change anything; GDPR-wise doing this is exactly the same as simply using the data without asking for the opt-in. If they're "required to keep the data from every transaction for 10 years for tax purposes" means that they're allowed to use that data for that particular purpose only; GDPR-wise taking data gathered for tax purposes and using it for ad targeting is just as forbidden as "simply" taking data without permission and using it for ad targeting.
bufferoverflow 7y ago
There's only one real advantage of a pegged crypto currency: easy and cheap transfer. It's generally a pain in the ass to move money, everyone wants a cut. Wire transfer, international wire tranfer, paypal - they all want their cut. For a simple update of a single row in some database.
bparsons 7y ago
I suspect the answer is micro transactions. No one has figured out how to do it at scale using USD. Cryptocurrency theoretically offers a solution, but is still mostly unproven. Whoever figures it out could potentially save the news business.
gesman 7y ago
Extra detailed tracking of users.
anonymous5133 7y ago
One potential reason is you can get the token listed on a cryptocurrency exchange but other than that. I do not know. If you use cyrptocurrency you are almost always better off with a decentralized crypto.
rafiki6 7y ago
You asked two different questions. I'm not going to answer the one about why Facebook is creating a pegged cryptocurrency (other commenters have done a good job of that). As for the value of blockchain here, there is absolutely none. Facebook is creating a currency and labeling it a cryptocurrency which denotes the use of a blockchain, when in reality considering they're the central issuing authority of the currency and are the ones who determine it's value/inflation rate (i.e. pegging as you rightly described). Therefore using a blockchain for decentralized settlement and provenance here serves absolutely no real purpose and you are correct in pointing out that they can just keep everything in a database (which is likely what they will actually do).
devit 7y ago
It prevents covert malicious behavior by the issuer (i.e. they can't just change a database entry and deny they did so).
- elcomet 7y ago
  But they can since they control the chain.
- Barrin92 7y ago
  how often has your bank or paypal suddenly changed the balance in your account? This is a fictional problem because no large institution is going to cheat you out of twenty bucks to risk a billion dollar lawsuit and their customers.
olalonde 7y ago
Funny how 90% of the commenters seem to totally miss parent's point. We get why a pegged digital currency is useful, just not why it has to be a "blockchain". A pegged "cryptocurrency" can just be designed as a centralized service (e.g. a REST API backed by a traditional database) without losing any of its properties. The "crypto" and "blockchain" bits are marketing. A good rule of thumb is this: could someone have come up with this pre-Bitcoin? If the answer is yes, it's not a (decentralized) cryptocurrency.
- stale2002 7y ago
  A "Blockchain" is merely a public database. That's it. Git is a Blockchain. Do you think that git is useless?
  - olalonde 7y ago
    Well that's precisely what I have issue with. No I don't think a "blockchain" is merely a public database nor that git is a "blockchain". The term "blockchain" was initially defined as the proof-of-work data structure that Bitcoin uses to store transactions and its definition was later slightly expanded to describe that same data structure used in other cryptocurrencies. If it now just means "public database" then we've lost a useful word. > Git is a Blockchain. Do you think that git is useless? Git also uses merkle trees but the similarity pretty much ends there.
    - stale2002 7y ago
      Proof of work is merely one form of consensus algorithms. There are many forms of consensus algorithms. > Git also uses merkle trees Blockchains are not a complicated concept. They are merely a merkle tree combined with a consensus algorithm. That's it. People try to make these concepts way more complicated than they actually are. A lot of this crypto stuff is actually quite simple.
      - olalonde 7y ago
        It was the only one at the time. Since then a few alternatives have been proposed but none that rival PoW, at least in terms of security. > Blockchains are not a complicated concept. They are merely a merkle tree combined with a consensus algorithm. That's it. I wouldn't say so, the block chain is a chain, not a tree. Actually, the use of merkle trees to represent transaction data is an implementation detail. Bitcoin would have worked fine without them (though "lightweight" clients would have suffered a bit). I second that it's a simple concept though.
pmorici 7y ago
Is Facebook going to get a banking license? If not this lets them offer bank like services while holding everyone's deposits and making money off the interest.
HALtheWise 7y ago
I think the primary value from having a public hash chain in this case is that Facebook can't really do malicious things secretly. If they were to perform the procedure you describe, it would require very publicly listing all the accounts they are devaluing, and it isn't actually obvious that the impact on the value of the coins in those accounts would be significant. The value of the USD didn't instantly drop when it stopped being backed by the gold standard, and a coin that Facebook refuse to trade for cash would just be a "fiat" version of the currency, which could definitely retain value. Today, when PayPal or Patreon shuts down an account, we only find out if that person complains and anybody pays attention. I imagine creators might prefer a platform that doesn't have obvious ways to easily shut them down, and where Facebook can claim to a court that doing so requires fundamentally compromising the security of the system.
cipherpro 7y ago
The few reasons to use blockchain at this time is to maintain an optic of trust: that even if you don't fully trust the provider of the token, you can trust the transparency provided by the technology. My judgment is that FB is positioning itself to be ready for when or if the space finds its "mosaic" moment. Otherwise, it is still an investment in a novel tech that is already proven useful for money transference; large sums of money have already been put up by the sector to mitigate and update regulatory risk and compliance.

by wz1000 7y ago

arisAlexis 7y ago

no fees, easy to send money to relatives abroad. PayPal was for eBay. this is for FB

A2017U1 7y ago

Have you transferred money across borders to an individual lately? As much as I want to criticize this FB is probably in an excellent position to navigate the kyc minefields.

vbezhenar 7y ago
That does not really answer the question.
wz1000 7y ago
My question was "what does blockchain bring to the table compared to a regular database?". How does using a blockchain/cryptocurrency make it easier to sidestep regulations compared to a regular old database?
- kolinko 7y ago
  Sidestep regulations - if you build a system that doesn't allow you to do certain things (e.g. change balances at will), then the government cannot force you to do them. But again - it's not about regulations. It's about interoperability. Centralised money transfer stuff is not new (PayPal? Banks?), the problem with it was always integration with other systems. Also, if it's a centralised database, it's hard to build real startups on top of it. Look at what happened to startups building on top of Twitter APIs when Twitter decided to change them. If you build some parts on top of a public blockchain, it gives guarantees related to accessibility of those parts in the future.
- A2017U1 7y ago
  fair call, considering it's all permissioned, to pathetically argue the point I don't really care much for: I guess you could claim some sort of providence of money movements using a git like system but realistically I think it's likely the marketing department had far more to do with the decision than the engineering dept. You only have to look at wechat's dominance thoughout Asia to realise whatapp could get absolutely blown away by the all-in-one messenger/payment system if it took off in the West.
- callmeal 7y ago
  >My question was "what does blockchain bring to the table compared to a regular database?". You cannot compare blockchain with a regular database. A blockchain is more like an append-only store, or a WORM drive where each "file" or "record" is digitally authenticated and signed/hashed in a way to make undetectable modifications extremely difficult and/or expensive.
  - dragonwriter 7y ago
    > You cannot compare blockchain with a regular database. Yes, you can. That it is different, and the resulting difference in utility, is the exact point of such a comparison.
CaptainZapp 7y ago
Have you transferred money across borders to an individual lately? Actually yes. From Switzerland to my brother in Belgium. It was transferred on the same business day at no expense to him or me. Look up SEPA[1] for details. Just because the American banking system is the complete shits this does not necessarily apply to the rest of the world. [1] https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
- alehul 7y ago
  Across very cooperative borders in wealthy Europe, sure. Do you think it's as easy for those in India, China, or Kenya, for instance?
  - CaptainZapp 7y ago
    Kenya is a relatively bad example. While a lot of people are underbanked mobile banking and - payments took off in a spectacular way.[1] It's probably easier to transfer funds via M-Pesa then from a bank account in Delaware to a bank account in Detroit And, at least in theory, America is a wealthy country without any borders. [1] https://en.wikipedia.org/wiki/M-Pesa https://en.wikipedia.org/wiki/M-Pesa
    - eng101 7y ago
      You’re right. I find it stupendously easy to move money within/into Kenya. I can easily pay a street seller from my US bank account, directly to his/her phone, in seconds. Pains me to say this because I had this international bank/credit card to M-Pesa transfers idea a decade ago, a professor dissuaded me from pursuing it. 5 years later, a bunch of services launched and many are thriving.
  - A2017U1 7y ago
    Entirely this, many in the West have no idea how difficult crossborder banking actually is for the vast majority of human beings on Earth.
nabla9 7y ago
What minefields? Wetern Union, HiFX, PayPal, MoneyGram,Azimo work just fine.
peteretep 7y ago
> Have you transferred money across borders to an individual lately? Yes, frequently. Using TransferWise or FairFx, depending on where the recipient was, but inclusive of Thailand, USA, Ecuador, and Canada. The process was entirely painless, fast, and the transfer was cheap as chips, while bringing to bear the full weight of European bank regulations to protect me as a customer.
- elliekelly 7y ago
  > The process was entirely painless, fast, and the transfer was cheap as chips, while bringing to bear the full weight of European bank regulations to protect me as a customer. I wish more people on HN would understand the importance of this. I've said it here before but I think it's worth repeating. Banks want to send your money internationally and, as you've said, are more than capable of sending your money quickly and cheaply. Any time an international bank transfer is a pain in the ass it's by design to protect consumer interests and/or to protect government interests. There's a reason you can't just rock up to the teller at Wells Fargo and send $1,000 to North Korea the same way you can if you needed to send $1,000 to Canada.
  - stale2002 7y ago
    Ok, well what if I want to send money cheaply? Lol, it seems like that is a good usecase.... I don't care about the reason that banks have for sabotaging their own service. That is not my problem.
- aianus 7y ago
  > transfer was cheap as chips I used TransferWise once a few years ago from USD to CAD and it cost ~1.4% all-in. That's cheaper than my bank but still very expensive if you're transferring your whole salary every pay period like I was. I ended up using Bitcoin instead. Is it cheaper now?
  - peteretep 7y ago
    I paid 0.5% all in on a salary-sized GBP/THB transfer a few days ago.
briodf 7y ago
Have you transferred money across borders with good recommendations lately? Sending money across borders is historically super complex and expensive, you're right. The WorldBank estimates that it costs an average of 8% in total fees (transfer fees + exchange rate mark-up) to transfer money internationally. For international transfers with banks and cash-based money transfers, this is still true. But, in the last 10 years, we've seen hundreds of new online money transfer operators innovating in the field (way before crypto) starting with Xoom in the first wave and then TransferWise, Remitly, WorldRemit, InstaRem, Azimo and hundreds of others... Sending $300 to Mexico to any agent location to pickup cash will cost you $2 with the cheapest option: https://www.monito.com/send-money/united-states/mexico/usd/mxn/300 https://www.monito.com/send-money/united-states/mexico/usd/m... $1000 from Canada to a bank account in the Philippines in minutes? $6 https://www.monito.com/send-money/canada/philippines/cad/php/1000 https://www.monito.com/send-money/canada/philippines/cad/php... etc... These new innovative services are up to 10x cheapers than banks or traditional cash-based money transfers, often faster and much more convenient.
- baby 7y ago
  Don't know about Monito but I've used TransferWise many times. First it's not straight forward, it takes time (several days), and it's freaking expensive. These numbers you quote are pretty far from what I spend when transferring money between France, the UK and the US.
rafiki6 7y ago
I can almost guarantee you that regulators will step in and regulate the living crap out of this system if it's found to be actively used for high rates of cross-border transfers and foreign exchange. Governments are a lot smarter than people give them credit for. Once the regulation kicks in, all of a sudden the value of this diminishes greatly.

netrikare 7y ago

This will probably be great for people who trade a lot of cryptocurrencies. In some countries crypto-crypto trading is free from taxation. When cyclic crypto bubble bursts and multi-year downtrend starts, you have to sell those cryptocurrencies for USD and pray exchange does not go bankrupt/hacked/exit scam or withdraw and pay taxes. Right now there are some forms of stable coins issued by private companies with no guarantee of buying back issued tokens. Very unstable market. FBCoin may change this. I believe first customers will be cryptcurrency exchanges.

m-i-l 7y ago

> Can anyone explain what the point of a pegged cryptocurrency is? Since you are dependent on the issuing entity to honour the stated peg In this case there wouldn't be a single issuing entity: "the cryptocurrency would indeed be pegged to a basket of currencies". I had written about the idea of a stablecoin tied to a basket of currencies, e.g. J M Keynes' Bancor and the Word Currency Unit, a few years back. > why not just have your balance be an entry in a regular database maintained by that entity? What exactly does the blockchain gain you here? If it is controlled by a centralised organisation there would appear to be little point of "blockchain", but maybe as the article says "By introducing a level of decentralization to the governance of the project, Facebook may be able to avoid regulation related to it holding too much power over a global currency".

awrence 7y ago

On paper, you're basically entirely right. Stablecoins including FB are all smokescreens to sell managing fiat on an internal database for you with "blockchain" wrapped around it. This project and stablecoins in general have nothing to do with cryptocurrencies. With that said i can tell you at least one solid reason why any issuer would do it. At a bare minimum they can earn overnight on the holdings since stablecoins don't kick back interest to date. Although with stablecoin competition that should probably start happening until it squeezes to 0 and then it really wouldn't make any sense except to like monetize spying on you I suppose or something. But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. It's the crypto equivalent of a "free" checking account that doesn't pay interest. Not that any exchange was paying interest for fiat deposits in the first place so i'm not sure to what extent that's relevant for cryptoexchangess, but for FB obviously it would since they're starting from 0. With that said I can imagine one reason why users would care for USD stablecoins. The US has made owning and dealing with USD directly an absolute horrendous nightmare for international users and US citizens abroad following FATCA et al. And this way you can claim you never owned or touched USD which means whoever is holding stablecoins for you instead of USD doesn't have to file truckloads of paperwork for you to open the account. That's a regulatory loophole though one could imagine the US would start complaining about if this really took off. There's one remote reason I can think of that people would flip to stablecoins vs fiat if they had some tax view that that wasn't a constructive sale and it could benefit from some likekind kind of treatment since its a "crypto" and not a "fiat". It's obviously a silly argument and there's no way the IRS would fall for it (nor do they even accept it between regular cryptos) but i can't speak for other jurisdictions.

omarchowdhury 7y ago
> But to take an example, at this point tether is generating 75mm a year for free for it owners at 0 risk. Tether has got hundreds of millions of dollars worth of funds seized from their banks.
- awrence 7y ago
  True. But they still 2-3 billion working for them for free. And then that's a specific example where they went and made poor choices with their funds etc. On paper if all you do is create a "stablecoin" and segregate funds in an interest bearing account and don't touch them then its free running interest to you.

granaldo 7y ago

somehow there seem to be many roll outs of stable coins of late.. the infamous Tether, DAI by Maker, USDC by Circle, GUSD by Gemini, TUSD and countless more https://www.coingecko.com/en?category_id=36&view=market https://www.coingecko.com/en?category_id=36&view=market

wtfrmyinitials 7y ago
Worth noting that Maker is different than those other because there's no central authority holding fiat money to maintain the peg. Their stablecoin Dai is minted "out of thin air" and the price peg is maintained via an interest rate mechanism built into the smart contract.

will_brown 7y ago

>Can anyone explain what the point of a pegged cryptocurrency is? What was the point of arcades taking your quarters and issuing you tokens for the machines? Why not just allow the machines to take your quarters? The idea is for the issuer to take real money from you and issue you Monopoly money which the issuer can track and control. In a worst case scenario the issuer can make up new rules (change their terms and conditions on you) or declare bankruptcy/dissolve and not honor the redemption of your stable coins at all.

mc32 7y ago
And importantly the tokens can be unilaterally devalued without having to change the slots or recalibrate. So instead of 25¢ and next step being 50¢ if using the same config, they can charge you 27, or 48 or 50¢ for the token and not have to reconfigure the machine one bit.
- chabes 7y ago
  So, there’s obvious benefits for FB. What are the benefits for users? Are people actually going to want to use this?
  - will_brown 7y ago
    Probably have to wait for the whitepaper to come out to give a fair opinion/analysis (rather than an article about the future release of the whitepaper). Once the actual use case/function of the token is know then one could answer if there is a benefit to users and if a Blockchain token makes sense over a database.
  - bitreality 7y ago
    For users, the advantage would be an easy to use stable-coin, that is more accessible to the average person. Right now, most crypto currency has plenty of complexity to it. FacebookCoin will probably work more similarly to CashApp vs. Bitcoin. It means most people using it won't even realize it's a Blockchain token. It'll be like "Facebook Bucks". But then it also offers the flexibility of a blockchain token to more advanced users (withdraw to your own wallet, send to an exchange, etc).

mrlala 7y ago

>Can anyone explain what the point of a pegged cryptocurrency is? Because it has a completely stable value, from the standpoint of someone who always uses that currency. Let's say it's pegged to USD. Boom, if I'm in the US and everything I do is in USD, this cryptocurrency can suddenly be the same as actual dollars from my standpoint. There's virtually no difference. The USD has an almost completely stable value to the standard person in the US. Everything they do is in USD. They don't care about some fluctuations vs other currencies vs EUR etc. I'm not saying there are zero affects, of course there are, but there's really nothing they can do about it. EUR goes up 10% to the USD, ok something they buy which is imported from europe is maybe 10% more expensive in USD.. there is nothing they can do about that, so the USD is still completely stable from their perspective. It's not like most people are saying "Oh 1% of my purchases this year are coming from Europe, so I'm going to hold 1% of my assets in EUR to mitigate this affect". >What exactly does the blockchain gain you here? Given the above, that means that the crypto currency is now 100% the same as holding USD. I'm not holding cyrpto as a diversifier, or to get magically rich by a big crypto move. I would actually hold crypto TO USE IT. Maybe I want to send my brother $50 who lives in a different place. Wouldn't it be cool to just send some crypto knowing that it's virtually exactly $50 when I send it and always after that? Open the phone on some app, click a button and boom. Without having to worry about any intermediary bank etc. This whole notion that crypto SHOULD NOT be pegged is looking at some dystopian future where a currency like the USD is not stable anymore. And hey, I'm not saying that could never happen.. but the world will have pretty much exploded if that ever happens so I'm not sure your cryptocurrency will help much in that case. Crypto right now is a get rich quick scheme with extremely little actual use cases. Pegging one to the USD would make it usable- which should be the whole point...

tim333 7y ago

The main use so far has been to allow crypto exchanges to let you trade between cyptocurrencies and dollar equivalents without getting involved with banking regulations or banks. If you set up a crypto exchange doing say bitcoin - usdt, it's basically just software you can upload without needing accounts, licenses etc assuming the owners are nominally not in regulated countries.

thefounder 7y ago

Well, one good reason to use cryptocurrencies is that you don't have to deal with visa/mastercard crap. You can send and accept payments without all kind of requirements(i.e pci). Stable coins are really what bitcoin should have been: digital money! Now bitcoin is just a big casino owned and run by dubious entities/exchangers/trading platforms with no oversight.

akerro 7y ago

They're doing it to skirt GDPR laws. When GDPR passed, all users were automatically opted out of personal data sharing, targeted marketing, etc. With ZuckCoin, they're going to pay users a small amount of coins to use the site, but in order for users to be eligible for that they'll be required to opt into all of the personal data sharing stuff. And since it will be considered a monetary transaction, Facebook will be required to keep the data from every transaction for 10 years for tax purposes. People won't even be able to ask that Facebook delete their data because they'll be required to store it for 10 years. edit: If you want to listen to the explanation in more detail, Meanhash explained it on a recent episode of the Hashr8 podcast: https://h4shr8.libsyn.com/meanhash https://h4shr8.libsyn.com/meanhash https://www.reddit.com/r/CryptoCurrency/comments/bx9dik/facebook_will_reportedly_announce_cryptocurrency/ https://www.reddit.com/r/CryptoCurrency/comments/bx9dik/face...

PeterisP 7y ago
I don't see how that brings any benefits GDPR-wise. "required to opt into" doesn't count as freely given consent, so it doesn't change anything; GDPR-wise doing this is exactly the same as simply using the data without asking for the opt-in. If they're "required to keep the data from every transaction for 10 years for tax purposes" means that they're allowed to use that data for that particular purpose only; GDPR-wise taking data gathered for tax purposes and using it for ad targeting is just as forbidden as "simply" taking data without permission and using it for ad targeting.

bufferoverflow 7y ago

There's only one real advantage of a pegged crypto currency: easy and cheap transfer. It's generally a pain in the ass to move money, everyone wants a cut. Wire transfer, international wire tranfer, paypal - they all want their cut. For a simple update of a single row in some database.

bparsons 7y ago

I suspect the answer is micro transactions. No one has figured out how to do it at scale using USD. Cryptocurrency theoretically offers a solution, but is still mostly unproven. Whoever figures it out could potentially save the news business.

gesman 7y ago

Extra detailed tracking of users.

anonymous5133 7y ago

One potential reason is you can get the token listed on a cryptocurrency exchange but other than that. I do not know. If you use cyrptocurrency you are almost always better off with a decentralized crypto.

rafiki6 7y ago

You asked two different questions. I'm not going to answer the one about why Facebook is creating a pegged cryptocurrency (other commenters have done a good job of that). As for the value of blockchain here, there is absolutely none. Facebook is creating a currency and labeling it a cryptocurrency which denotes the use of a blockchain, when in reality considering they're the central issuing authority of the currency and are the ones who determine it's value/inflation rate (i.e. pegging as you rightly described). Therefore using a blockchain for decentralized settlement and provenance here serves absolutely no real purpose and you are correct in pointing out that they can just keep everything in a database (which is likely what they will actually do).

devit 7y ago

It prevents covert malicious behavior by the issuer (i.e. they can't just change a database entry and deny they did so).

elcomet 7y ago
But they can since they control the chain.
Barrin92 7y ago
how often has your bank or paypal suddenly changed the balance in your account? This is a fictional problem because no large institution is going to cheat you out of twenty bucks to risk a billion dollar lawsuit and their customers.

olalonde 7y ago

Funny how 90% of the commenters seem to totally miss parent's point. We get why a pegged digital currency is useful, just not why it has to be a "blockchain". A pegged "cryptocurrency" can just be designed as a centralized service (e.g. a REST API backed by a traditional database) without losing any of its properties. The "crypto" and "blockchain" bits are marketing. A good rule of thumb is this: could someone have come up with this pre-Bitcoin? If the answer is yes, it's not a (decentralized) cryptocurrency.

stale2002 7y ago
A "Blockchain" is merely a public database. That's it. Git is a Blockchain. Do you think that git is useless?
- olalonde 7y ago
  Well that's precisely what I have issue with. No I don't think a "blockchain" is merely a public database nor that git is a "blockchain". The term "blockchain" was initially defined as the proof-of-work data structure that Bitcoin uses to store transactions and its definition was later slightly expanded to describe that same data structure used in other cryptocurrencies. If it now just means "public database" then we've lost a useful word. > Git is a Blockchain. Do you think that git is useless? Git also uses merkle trees but the similarity pretty much ends there.
  - stale2002 7y ago
    Proof of work is merely one form of consensus algorithms. There are many forms of consensus algorithms. > Git also uses merkle trees Blockchains are not a complicated concept. They are merely a merkle tree combined with a consensus algorithm. That's it. People try to make these concepts way more complicated than they actually are. A lot of this crypto stuff is actually quite simple.
    - olalonde 7y ago
      It was the only one at the time. Since then a few alternatives have been proposed but none that rival PoW, at least in terms of security. > Blockchains are not a complicated concept. They are merely a merkle tree combined with a consensus algorithm. That's it. I wouldn't say so, the block chain is a chain, not a tree. Actually, the use of merkle trees to represent transaction data is an implementation detail. Bitcoin would have worked fine without them (though "lightweight" clients would have suffered a bit). I second that it's a simple concept though.

pmorici 7y ago

Is Facebook going to get a banking license? If not this lets them offer bank like services while holding everyone's deposits and making money off the interest.

HALtheWise 7y ago

I think the primary value from having a public hash chain in this case is that Facebook can't really do malicious things secretly. If they were to perform the procedure you describe, it would require very publicly listing all the accounts they are devaluing, and it isn't actually obvious that the impact on the value of the coins in those accounts would be significant. The value of the USD didn't instantly drop when it stopped being backed by the gold standard, and a coin that Facebook refuse to trade for cash would just be a "fiat" version of the currency, which could definitely retain value. Today, when PayPal or Patreon shuts down an account, we only find out if that person complains and anybody pays attention. I imagine creators might prefer a platform that doesn't have obvious ways to easily shut them down, and where Facebook can claim to a court that doing so requires fundamentally compromising the security of the system.

cipherpro 7y ago

The few reasons to use blockchain at this time is to maintain an optic of trust: that even if you don't fully trust the provider of the token, you can trust the transparency provided by the technology. My judgment is that FB is positioning itself to be ready for when or if the space finds its "mosaic" moment. Otherwise, it is still an investment in a novel tech that is already proven useful for money transference; large sums of money have already been put up by the sector to mitigate and update regulatory risk and compliance.