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Seeing bitcoin reinvent the banking system they set themselves to destroy has a very Animal Farm-y feeling to it.

by lz400 6y ago

reportgunner 6y ago
Coinbase is not bitcoin.
TazeTSchnitzel 6y ago
The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which
Semaphor 6y ago
But that’s coinbase being a bank, not BTC. There are coins that have loans via smart contracts, but they aren’t BTC. What’s happening here is closer to "An exchange is offering banking services" which sounds a lot less weird.
- notahacker 6y ago
  But the real question is why this particular banking service exists? If Bitcoin is the stable currency it was designed to be, then it would be nonsensical for a person already holding it to borrow 30% of its value in USD at 8% APR. The answer of course is that some people are so convinced that BTC will rise in value by more than 8% over the loan duration they're prepared to go into debt to keep large portions of their net worth in it, and some might even fancy buying more BTC with the cash they've borrowed, and maybe borrowing against that too. In this analogy BTC isn't the bank, it's the houses people were taking out the subprime mortgages on (minus the upside of avoiding rental payments)
  - deleted 6y ago
    [deleted]
  - Semaphor 6y ago
    > If Bitcoin is the stable currency it was designed to be, My impression is, that this is a pretty contentious statement ;)
    - chii 6y ago
      but bitcoin wasn't designed to be stable (or unstable). it was designed to match the properties of gold, but digitally. I think it has somewhat succeeded.
      - maps7 6y ago
        Bitcoin was designed to be a Peer-to-Peer Electronic Cash System
    - anon9001 6y ago
      1 BTC is still worth 1 BTC. Seems pretty stable to me.
      - drdeca 6y ago
        This doesn’t really work as an argument. Obviously the thing to look at is the purchasing power. If the amount of bread, industrial equipment, and land, that you can purchase with a given amount of currency A, varies much more than it does for currency B, then the purchasing power of currency A varies much more over time than that of currency B. This is obvious.
        uoylj 6y ago
        How exactly does a currency go from a value of zero to trillions (were it to become a major global settlement currency) in a decentralised way while maintaining stable purchasing power? That would imply that since it was worth nothing in 2009/2010 it should remain worthless forever to maintain its purchasing power.
  - solotronics 6y ago
    Loans aren't subject to taxation in the US.
ur-whale 6y ago
That's Coinbase, not Bitcoin. Coinbase's business model has been, from day one, to shoehorn the traditional banking business model into the Bitcoin ecosystem, knowing fully well that for the vast majority of people, being exposed to the raw Bitcoin stuff was damn near impossible, both psychologically (being the custodian of your own money) and skill-wise (operating and properly managing a Bitcoin wallet). This is just another application of the same principle.
kanox 6y ago
> Seeing bitcoin reinvent the banking system they set themselves to destroy This somehow assumes that bitcoin was somehow ideologically opposed to finance, banking or capitalism. At most it was opposed to government-backed fiat currency. Reimplementing all banking services on top of blockchain instead of a "trusted" database makes a lot of sense.
- abi 6y ago
  Don't know why you're being downvoted. What you're saying is exactly it. Loans are not somehow antithetical to Bitcoin, crypto or Coinbase.
MadSudaca 6y ago
This is an improvement in my opinion. Normally banks only need a small % of the loan in deposits (see fractional-reserve banking), with BTC we see a bank asking you to have more than 3 times the amount of your loan in collateral. What's the result of this? For the loaner and borrower, less loans and more careful allocation of resources. For society as a whole, a smaller but more robust banking system not dependent on bogus money.
- ethor 6y ago
  I love how you refer to old traditional money (fractional reserve banking) backed by states with military power as bogus money, in regards to Bitcoin.
  - MadSudaca 6y ago
    In the end everything is backed by our ability to kill each other. Bitcoin as well, because equipment needs to be somewhere and it must be protected. However, it's bogus because more can be created at a whim, as we've seen in the last months.
- chii 6y ago
  if this indeed be the result, you will see growth slow, and investment in innovation difficult. The fact that you can create "bogus" money out of thin-air (which, i dont deny is a huge responsibility given to the central banks) means that economic problems have solutions. Imagine the scenario such as this pandemic, where a gov't (or really, any entity) needed to borrow to weather the storm, but is unable to as nobody wants to lend. The world would be worse off than today.
  - MadSudaca 6y ago
    Shouldn't it be individual's responsibility to save for bad times? This also includes the US government. Stop spending so much and start saving. Now the USD is being debased and the whole world will suffer. Maybe this change ends up being worse, but given that central banks are a century's long experiment, I say we should give a new system a chance. It looks like more power would be given to the individual and this is a good thing in my opinion.
godzillabrennus 6y ago
Bitcoin is not reinventing the banking system. Bitcoin is being used by a centralized party (Coinbase) to offer banking services. Instead of lending fiat they can lend a digital asset (Bitcoin). Coinbase is centralized and highly regulated. Their mission is not in line with the original mission for bitcoin to be a global currency. Bitcoin has a volatile value that makes it a poor store of value and/or currency. I’ll probably get downvoted for this but que sera sera. Bitcoin is at best a speculative investment akin to trading baseball cards. At worst it’s a decentralized Ponzi scheme.
- e1ghtSpace 6y ago
  Downvoted?
- mrkramer 6y ago
  @godzillabrennus I agree with you. Bitcoin was meant to decentralize trust and not to centralize it all over again. Bitcoin supports variety of transactions like "Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc."[1] Satoshi made Bitcoin Script language so people can make smart contracts and if they want even give loans. [1]https://bitcointalk.org/index.php?topic=195.msg1611#msg1611 https://bitcointalk.org/index.php?topic=195.msg1611#msg1611
- biolurker1 6y ago
  You were probably commenting on the posts of why blockchain is useless until the world starts running on blockchain governments and banks running their systems on it etc. Some people just want anti. Now my comment will be downvoted.
  - throwaway-9320 6y ago
    Could you name any projects that are based on a blockchain and which could not have been viable with any other technical solution, such as an SQL-based database like PostgreSQL?
    - yomly 6y ago
Traster 6y ago
Silicon Valley very often falls into this: Step 1: Claim you're disrupting an existing industry (or creating a new industry that didn't previously exist because it was unviable - eg, electric scooters). Step 2: Claim that this is going to make you far more profitable than that industry has traditionally been. Get Angel Investment. Step 3: Raise money at a ridiculous valuation due to step 2. Series A. Step 4: Use that money to undercut competitors in the existing market and gain marketshare whilst taking huge losses. Series B, C. Step 5: Realise that you've just built another company that's exactly the same as all the existing companies in that industry with no real way of making a profit. IPO. Step 6: Having thrown so much money at the problem that you've now got enormous market share (and driven the traditional companies out of business because they can't operate at a loss), pivot to using your monopolistic position to drive down costs and inflate prices. Step 7: Slowly melt-down as investors realise Step 2 was all bullshit and regulators start catching up with step 6.
- maps7 6y ago
  Which companies seem to follow these steps? Lyft, Uber, Airbnb, WeWork?
  - Traster 6y ago
    Yeah, ride hailing, those scooter companies, Wag, WeWork, a huge amount of smart city projects (although they generally fail to even get to stage 4). Theranos is a great example - literally running into the laws of physics.
- kanox 6y ago
  Phone-based ride hailing and scooter sharing did not exist before. These services are significantly better than previous alternatives. Legacy taxi services in particular are extremely shitty and widely hated because of scammers.
  - drdeca 6y ago
    Has anyone here tried libretaxi? (An open-source phone-based ride hailing service, where payments are made directly to the driver) It sounds appealing to me, but I haven’t tried it, and I imagine that it could be lacking in the network effect department. Also, I am not sure if it has a reputation system like Uber and Lyft do. Edit: Suddenly unsure whether my comment here is sufficiently on-topic/relevant to fit with the community norms here. My apologies if it is not.

Seeing bitcoin reinvent the banking system they set themselves to destroy has a very Animal Farm-y feeling to it.

by lz400 6y ago

Seeing bitcoin reinvent the banking system they set themselves to destroy has a very Animal Farm-y feeling to it.

reportgunner 6y ago

Coinbase is not bitcoin.

TazeTSchnitzel 6y ago

The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which

Semaphor 6y ago

But that’s coinbase being a bank, not BTC. There are coins that have loans via smart contracts, but they aren’t BTC. What’s happening here is closer to "An exchange is offering banking services" which sounds a lot less weird.

notahacker 6y ago
But the real question is why this particular banking service exists? If Bitcoin is the stable currency it was designed to be, then it would be nonsensical for a person already holding it to borrow 30% of its value in USD at 8% APR. The answer of course is that some people are so convinced that BTC will rise in value by more than 8% over the loan duration they're prepared to go into debt to keep large portions of their net worth in it, and some might even fancy buying more BTC with the cash they've borrowed, and maybe borrowing against that too. In this analogy BTC isn't the bank, it's the houses people were taking out the subprime mortgages on (minus the upside of avoiding rental payments)
- deleted 6y ago
  [deleted]
- Semaphor 6y ago
  > If Bitcoin is the stable currency it was designed to be, My impression is, that this is a pretty contentious statement ;)
  - chii 6y ago
    but bitcoin wasn't designed to be stable (or unstable). it was designed to match the properties of gold, but digitally. I think it has somewhat succeeded.
    - maps7 6y ago
      Bitcoin was designed to be a Peer-to-Peer Electronic Cash System
  - anon9001 6y ago
    1 BTC is still worth 1 BTC. Seems pretty stable to me.
    - drdeca 6y ago
      This doesn’t really work as an argument. Obviously the thing to look at is the purchasing power. If the amount of bread, industrial equipment, and land, that you can purchase with a given amount of currency A, varies much more than it does for currency B, then the purchasing power of currency A varies much more over time than that of currency B. This is obvious.
      - uoylj 6y ago
        How exactly does a currency go from a value of zero to trillions (were it to become a major global settlement currency) in a decentralised way while maintaining stable purchasing power? That would imply that since it was worth nothing in 2009/2010 it should remain worthless forever to maintain its purchasing power.
- solotronics 6y ago
  Loans aren't subject to taxation in the US.

ur-whale 6y ago

That's Coinbase, not Bitcoin. Coinbase's business model has been, from day one, to shoehorn the traditional banking business model into the Bitcoin ecosystem, knowing fully well that for the vast majority of people, being exposed to the raw Bitcoin stuff was damn near impossible, both psychologically (being the custodian of your own money) and skill-wise (operating and properly managing a Bitcoin wallet). This is just another application of the same principle.

kanox 6y ago

> Seeing bitcoin reinvent the banking system they set themselves to destroy This somehow assumes that bitcoin was somehow ideologically opposed to finance, banking or capitalism. At most it was opposed to government-backed fiat currency. Reimplementing all banking services on top of blockchain instead of a "trusted" database makes a lot of sense.

abi 6y ago
Don't know why you're being downvoted. What you're saying is exactly it. Loans are not somehow antithetical to Bitcoin, crypto or Coinbase.

MadSudaca 6y ago

This is an improvement in my opinion. Normally banks only need a small % of the loan in deposits (see fractional-reserve banking), with BTC we see a bank asking you to have more than 3 times the amount of your loan in collateral. What's the result of this? For the loaner and borrower, less loans and more careful allocation of resources. For society as a whole, a smaller but more robust banking system not dependent on bogus money.

ethor 6y ago
I love how you refer to old traditional money (fractional reserve banking) backed by states with military power as bogus money, in regards to Bitcoin.
- MadSudaca 6y ago
  In the end everything is backed by our ability to kill each other. Bitcoin as well, because equipment needs to be somewhere and it must be protected. However, it's bogus because more can be created at a whim, as we've seen in the last months.
chii 6y ago
if this indeed be the result, you will see growth slow, and investment in innovation difficult. The fact that you can create "bogus" money out of thin-air (which, i dont deny is a huge responsibility given to the central banks) means that economic problems have solutions. Imagine the scenario such as this pandemic, where a gov't (or really, any entity) needed to borrow to weather the storm, but is unable to as nobody wants to lend. The world would be worse off than today.
- MadSudaca 6y ago
  Shouldn't it be individual's responsibility to save for bad times? This also includes the US government. Stop spending so much and start saving. Now the USD is being debased and the whole world will suffer. Maybe this change ends up being worse, but given that central banks are a century's long experiment, I say we should give a new system a chance. It looks like more power would be given to the individual and this is a good thing in my opinion.

godzillabrennus 6y ago

Bitcoin is not reinventing the banking system. Bitcoin is being used by a centralized party (Coinbase) to offer banking services. Instead of lending fiat they can lend a digital asset (Bitcoin). Coinbase is centralized and highly regulated. Their mission is not in line with the original mission for bitcoin to be a global currency. Bitcoin has a volatile value that makes it a poor store of value and/or currency. I’ll probably get downvoted for this but que sera sera. Bitcoin is at best a speculative investment akin to trading baseball cards. At worst it’s a decentralized Ponzi scheme.

e1ghtSpace 6y ago
Downvoted?
mrkramer 6y ago
@godzillabrennus I agree with you. Bitcoin was meant to decentralize trust and not to centralize it all over again. Bitcoin supports variety of transactions like "Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc."[1] Satoshi made Bitcoin Script language so people can make smart contracts and if they want even give loans. [1]https://bitcointalk.org/index.php?topic=195.msg1611#msg1611 https://bitcointalk.org/index.php?topic=195.msg1611#msg1611
biolurker1 6y ago
You were probably commenting on the posts of why blockchain is useless until the world starts running on blockchain governments and banks running their systems on it etc. Some people just want anti. Now my comment will be downvoted.
- throwaway-9320 6y ago
  Could you name any projects that are based on a blockchain and which could not have been viable with any other technical solution, such as an SQL-based database like PostgreSQL?
  - yomly 6y ago

Traster 6y ago

Silicon Valley very often falls into this: Step 1: Claim you're disrupting an existing industry (or creating a new industry that didn't previously exist because it was unviable - eg, electric scooters). Step 2: Claim that this is going to make you far more profitable than that industry has traditionally been. Get Angel Investment. Step 3: Raise money at a ridiculous valuation due to step 2. Series A. Step 4: Use that money to undercut competitors in the existing market and gain marketshare whilst taking huge losses. Series B, C. Step 5: Realise that you've just built another company that's exactly the same as all the existing companies in that industry with no real way of making a profit. IPO. Step 6: Having thrown so much money at the problem that you've now got enormous market share (and driven the traditional companies out of business because they can't operate at a loss), pivot to using your monopolistic position to drive down costs and inflate prices. Step 7: Slowly melt-down as investors realise Step 2 was all bullshit and regulators start catching up with step 6.

maps7 6y ago
Which companies seem to follow these steps? Lyft, Uber, Airbnb, WeWork?
- Traster 6y ago
  Yeah, ride hailing, those scooter companies, Wag, WeWork, a huge amount of smart city projects (although they generally fail to even get to stage 4). Theranos is a great example - literally running into the laws of physics.
kanox 6y ago
Phone-based ride hailing and scooter sharing did not exist before. These services are significantly better than previous alternatives. Legacy taxi services in particular are extremely shitty and widely hated because of scammers.
- drdeca 6y ago
  Has anyone here tried libretaxi? (An open-source phone-based ride hailing service, where payments are made directly to the driver) It sounds appealing to me, but I haven’t tried it, and I imagine that it could be lacking in the network effect department. Also, I am not sure if it has a reputation system like Uber and Lyft do. Edit: Suddenly unsure whether my comment here is sufficiently on-topic/relevant to fit with the community norms here. My apologies if it is not.