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Isn't it curious that he writes a lengthy post about frauds made possible with the current banking system (trust-based reserve) and then doesn't find any use fo

by Geee 7y ago

Isn't it curious that he writes a lengthy post about frauds made possible with the current banking system (trust-based reserve) and then doesn't find any use for cryptocurrency? This is exactly the reason why Bitcoin was invented; its supply is mathematical and can't be over-inflated. Satoshi even included the criticism in the Bitcoin's Genesis block: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". Obviously Tether (or any private stablecoin like Libra) is even worse than a regulated fiat currency, and should be strictly illegal.

tptacek 7y ago
He was writing descriptively, not normatively. You think there should be other uses for cryptocurrency besides speculation; he's saying it is overwhelmingly used for speculation.
- simonebrunozzi 7y ago
  Agreed - also IMHO it's mostly used for speculation, and hopefully shouldn't be the case. Speculation can't last forever, but a few good use cases might.
  - deleted 7y ago
    [deleted]
  - mirekrusin 7y ago
    Why can't it last? Casionos/betting seem to be doing well.
    - mdorazio 7y ago
      The thinking probably goes "eventually, enough people will either want their money back or a positive ROI on their investment that they'll pull out of crypto and the price will stabilize around people who actually intend to use it". I personally don't think this is necessarily the case in the current economic environment of ridiculously low interest rates.
      - vkou 7y ago
        People who actually intend to use BTC for making transactions don't actually care whether the BTC/USD exchange rate is $0.02, or $20,000. All the goods they buy are denominated in USD. What they want is stability in the exchange rate.
  - nostrademons 7y ago
    Interestingly a lot of the speculation - at least today - is actually a bet on disaster. Many wealthy individuals and institutions are buying Bitcoin as a hedge against currency collapse. It's not so much that they think Bitcoin will be worth more in the future: it's that they believe the U.S. dollar and all other financial assets will be worth less. (Or in some cases, it's just part of a hedge: the rest of the hedge fund's portfolio will increase in value under any situation other than collapse of the economy, while Bitcoin will massively increase in value if there's a collapse. There's value in uncorrelated returns.) Fear is often a lot stickier than greed as an emotion. If you believe you're going to get rich quick and it doesn't happen, you reevaluate your choices. If you believe you're insuring against becoming poor and it doesn't happen, well clearly your insurance worked.
    - simonebrunozzi 7y ago
      I'm not sure I agree with you. What we constantly hear is exactly that, hedging against global economic collapse. But I see no strong evidence that in the face of such an event, Bitcoin's price should rise. What I see, instead, is a bet on this big speculation bubble to continue for another few years, hoping to cash out before it happens.
      - nostrademons 7y ago
        Like the original thread, I'm speaking descriptively, not normatively. People believe that in the event of a collapse, Bitcoin's value will rise. The evidence for that is a.) people say exactly that b.) people frequently compare Bitcoin to "digital gold", and gold has similar hedging properties c.) wealthy Bitcoin holders pay large sums of money for custodial services that store their private keys in nuclear-blast-resistant underground bunkers and d.) if they were hoping to cash out in the speculative bubble, they would've given up by now, with the current bear market lasting for nearly 2 years now. Whether they're correct or not is a different matter, but correctness doesn't bear on their motivation for hodling. Nobody's going to know until the collapse comes or everybody gives up waiting, in which case either they're rich or dead. Personally I think there's a certain sweet spot magnitude of a collapse where Bitcoin or some other cryptocurrency will be useful, and it's where the political and financial system has broken down yet infrastructure remains intact. In other words, you still have power and Internet, but no effective central government. Something like Hong Kong or the Soviet Union but not as serious as Venezuela or Syria. Less than that and people will just use $USD; more than that and guns & food will be more useful than Bitcoin. (I suspect that the same people who are buying lots of Bitcoin are also stocking up on guns & food, too, though.)
- Geee 7y ago
  I don't think there are as many speculators as he thinks. Most cryptocurrency users believe that it's a better form of money and want to own it. That is not speculation.
  - bigbluedots 7y ago
    Right, but would those people want to own it if they didn't also expect the value to increase?
bko 7y ago
> Obviously Tether (or any private stablecoin like Libra) is even worse than a regulated fiat currency, and should be strictly illegal. Having a system of tokens that serve as an IOU to a stable basket of goods should be illegal? That's essentially how banks work, you give them money, they give you an IOU. I imagine a stable coin could be designed with enough proofs and audits to give you certainty. I think a well administered stable coin could have a transformative role in many areas that have capital controls, similar restrictions or high inflation.
- Geee 7y ago
  The learning rate of markets is too slow for it to work. There will be too many tethers and other scams before they can be properly proofed and audited. And after that we learn that it requires tax payers, law makers and nukes to properly secure a stablecoin.
- arcticbull 7y ago
  The only reason people use tether is to avoid AML/KYC. It's why the other stable-coins from "legitimate" sellers like Coinbases' USDC aren't used by anyone for anything. If I just wanted "electronic dollars" dollars I'd just fire up my web banking portal. The only value it provides is crime. Yes, it should be illegal. In fact it probably is.
vrodic 7y ago
It's good that the banks can be bailed out. It's good there's some inflation. It saves capitalism from itself (the rich acummulating all or practically all the coins).
john_moscow 7y ago
Except limited supply isn't your silver bullet. In fact, before the Great Depression, most of the world's currencies were backed by gold [0], being very similar to Bitcoin. And then it turned out that when an economic downturn happens, limited supply leads to a deflationary spiral [1], that has much worse long-term effects than a controlled inflation. This eventually evolved into the current system where the inflation is controlled via quantitative easing by the central bank, which is more or less accountable to the political party in power, which is more or less accountable to the voters. The system isn't perfect and is prone to abuse by the banks and politicians, but IMO is more resilient than a purely algorithmic solution. [0] https://en.wikipedia.org/wiki/Great_Depression#The_gold_standard_and_the_spreading_of_global_depression https://en.wikipedia.org/wiki/Great_Depression#The_gold_stan... [1] https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral

by Geee 7y ago

tptacek 7y ago

He was writing descriptively, not normatively. You think there should be other uses for cryptocurrency besides speculation; he's saying it is overwhelmingly used for speculation.

simonebrunozzi 7y ago
Agreed - also IMHO it's mostly used for speculation, and hopefully shouldn't be the case. Speculation can't last forever, but a few good use cases might.
- deleted 7y ago
  [deleted]
- mirekrusin 7y ago
  Why can't it last? Casionos/betting seem to be doing well.
  - mdorazio 7y ago
    The thinking probably goes "eventually, enough people will either want their money back or a positive ROI on their investment that they'll pull out of crypto and the price will stabilize around people who actually intend to use it". I personally don't think this is necessarily the case in the current economic environment of ridiculously low interest rates.
    - vkou 7y ago
      People who actually intend to use BTC for making transactions don't actually care whether the BTC/USD exchange rate is $0.02, or $20,000. All the goods they buy are denominated in USD. What they want is stability in the exchange rate.
- nostrademons 7y ago
  Interestingly a lot of the speculation - at least today - is actually a bet on disaster. Many wealthy individuals and institutions are buying Bitcoin as a hedge against currency collapse. It's not so much that they think Bitcoin will be worth more in the future: it's that they believe the U.S. dollar and all other financial assets will be worth less. (Or in some cases, it's just part of a hedge: the rest of the hedge fund's portfolio will increase in value under any situation other than collapse of the economy, while Bitcoin will massively increase in value if there's a collapse. There's value in uncorrelated returns.) Fear is often a lot stickier than greed as an emotion. If you believe you're going to get rich quick and it doesn't happen, you reevaluate your choices. If you believe you're insuring against becoming poor and it doesn't happen, well clearly your insurance worked.
  - simonebrunozzi 7y ago
    I'm not sure I agree with you. What we constantly hear is exactly that, hedging against global economic collapse. But I see no strong evidence that in the face of such an event, Bitcoin's price should rise. What I see, instead, is a bet on this big speculation bubble to continue for another few years, hoping to cash out before it happens.
    - nostrademons 7y ago
      Like the original thread, I'm speaking descriptively, not normatively. People believe that in the event of a collapse, Bitcoin's value will rise. The evidence for that is a.) people say exactly that b.) people frequently compare Bitcoin to "digital gold", and gold has similar hedging properties c.) wealthy Bitcoin holders pay large sums of money for custodial services that store their private keys in nuclear-blast-resistant underground bunkers and d.) if they were hoping to cash out in the speculative bubble, they would've given up by now, with the current bear market lasting for nearly 2 years now. Whether they're correct or not is a different matter, but correctness doesn't bear on their motivation for hodling. Nobody's going to know until the collapse comes or everybody gives up waiting, in which case either they're rich or dead. Personally I think there's a certain sweet spot magnitude of a collapse where Bitcoin or some other cryptocurrency will be useful, and it's where the political and financial system has broken down yet infrastructure remains intact. In other words, you still have power and Internet, but no effective central government. Something like Hong Kong or the Soviet Union but not as serious as Venezuela or Syria. Less than that and people will just use $USD; more than that and guns & food will be more useful than Bitcoin. (I suspect that the same people who are buying lots of Bitcoin are also stocking up on guns & food, too, though.)
Geee 7y ago
I don't think there are as many speculators as he thinks. Most cryptocurrency users believe that it's a better form of money and want to own it. That is not speculation.
- bigbluedots 7y ago
  Right, but would those people want to own it if they didn't also expect the value to increase?

bko 7y ago

> Obviously Tether (or any private stablecoin like Libra) is even worse than a regulated fiat currency, and should be strictly illegal. Having a system of tokens that serve as an IOU to a stable basket of goods should be illegal? That's essentially how banks work, you give them money, they give you an IOU. I imagine a stable coin could be designed with enough proofs and audits to give you certainty. I think a well administered stable coin could have a transformative role in many areas that have capital controls, similar restrictions or high inflation.

Geee 7y ago
The learning rate of markets is too slow for it to work. There will be too many tethers and other scams before they can be properly proofed and audited. And after that we learn that it requires tax payers, law makers and nukes to properly secure a stablecoin.
arcticbull 7y ago
The only reason people use tether is to avoid AML/KYC. It's why the other stable-coins from "legitimate" sellers like Coinbases' USDC aren't used by anyone for anything. If I just wanted "electronic dollars" dollars I'd just fire up my web banking portal. The only value it provides is crime. Yes, it should be illegal. In fact it probably is.

vrodic 7y ago

It's good that the banks can be bailed out. It's good there's some inflation. It saves capitalism from itself (the rich acummulating all or practically all the coins).

john_moscow 7y ago

Except limited supply isn't your silver bullet. In fact, before the Great Depression, most of the world's currencies were backed by gold [0], being very similar to Bitcoin. And then it turned out that when an economic downturn happens, limited supply leads to a deflationary spiral [1], that has much worse long-term effects than a controlled inflation. This eventually evolved into the current system where the inflation is controlled via quantitative easing by the central bank, which is more or less accountable to the political party in power, which is more or less accountable to the voters. The system isn't perfect and is prone to abuse by the banks and politicians, but IMO is more resilient than a purely algorithmic solution. [0] https://en.wikipedia.org/wiki/Great_Depression#The_gold_standard_and_the_spreading_of_global_depression https://en.wikipedia.org/wiki/Great_Depression#The_gold_stan... [1] https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral