4 ms·

Yes, but that's only possible because of the underlying monetary policy, which is controlled by the Fed. In contrast, there is no way you can do this with (mos

by bhupy 6y ago

Yes, but that's only possible because of the underlying monetary policy, which is controlled by the Fed. In contrast, there is no way you can do this with (most) cryptocurrencies. The monetary policy of Bitcoin is dictated by the physical bounds of the proof-of-work algorithm. There is absolutely nothing that Coinbase can do to "create" more Bitcoin outside of just mining it like everyone else.

xadhominemx 6y ago
No money creation at banks is not controlled by central bank monetary policy. And it’s very easy to create new crypto assets. Bitcoin has gone from 100% to 60% of crypto market cap in the past 5 years - that’s 10% “inflation”
- bhupy 6y ago
  If it is, then that means Coinbase can create new "Bitcoin" on demand; which we both know that it cannot do. In your own source, the banks ability to increase money supply through the multiplier effect is capped by the capital adequacy ratios, which are defined by the Fed. It is also an inevitability of any currency that isn't backed by an asset. To be clear, I don't have problems with the concept of fiat currencies, but we have to be honest about what it actually is and how it works, and how Bitcoin is different.
  - pjc50 6y ago
    It absolutely can, because all exchange users put their money in a big pot (the exchange's "cold wallet" and "hot wallet") rather than having individual wallets - this allows for instant trading. Exchange accounts aren't quite like banks but they are like brokerage accounts. Numerous exchanges have blown up when the wallet got stolen from underneath them - but in the gap between the theft and the discovery, the users thought they had bitcoin when in fact they had a bitcoin balance.
    - bhupy 6y ago
      Okay, but you're talking about a completely different thing. Your Bitcoin balance, as it's shown in Coinbase's UI, is very different from your Bitcoin balance as it's understood by everyone else on the public blockchain; and that too only temporarily. There is nothing that Coinbase can do to permanently alter that supply of Bitcoin. That is what we're talking about. In contrast, the permanent US Dollar supply can and is permanently altered due to the monetary policy which governs it.
      - leereeves 6y ago
        Even if Bitcoin replaces fiat money, governments will find ways to enforce monetary policy, because the power to put people in prison trumps any algorithm. A government absolutely can declare that the correct blockchain is actually this other blockchain, or the only legal algorithm is now a version of their own invention (like the split between Bitcoin and Bitcoin Cash, but enforced by law). If the gov wants inflation, they can replace the algorithm with one that allows inflation, or achieve a similar effect by publishing an official root block every year with a portion of all holdings transferred to the government. But they probably wouldn't do that, when it's so much easier to simply seize cryptocurrency ("give us your private keys or spend thirty years in prison") or heavily tax it. None of this has been done because crypto is still a novelty, but if it ever becomes a serious threat to government policy, governments will find ways to deal with it. And centralizing Bitcoin in exchanges like Coinbase makes this far easier; the government only needs to enforce its policy on Coinbase, and Coinbase in turn will enforce it on customers.
        tablespoon 6y ago
        > A government absolutely can declare that the correct blockchain is actually this other blockchain, or the only legal algorithm is now a version of their own invention (like the split between Bitcoin and Bitcoin Cash, but enforced by law). To that point, I found this blog post pretty interesting: https://juraj.bednar.io/en/blog-en/2020/11/12/how-could-regulators-successfully-introduce-bitcoin-censorship-and-other-dystopias/ https://juraj.bednar.io/en/blog-en/2020/11/12/how-could-regu... tl;dr: Bitcoin mining is mostly done by businesses, businesses will choose legal compliance over bitcoin-idealism, governments could wrest control of blockchain transactions through legal penalties (e.g. blacklist certain addresses and make it illegal for miners to process transactions from them OR mine blocks based off ones with illegal transactions). Economic incentives will encourage miners too small for enforcement to conform to the regulations. Bitcoin idealists can't do anything about it because their hashrate is puny and no one legit will deal with their forks.
- koonsolo 6y ago
  > No money creation at banks is not controlled by central bank monetary policy There is in fact an upper limit set by the fractional reserve. I see US has abolished that limit right now (March 2020), but when they would set it to 100%, there would be no money multiplying at all.
virgilp 6y ago
You can't create more bitcoin but you can create more USDT and exchange it for bitcoin.
- koonsolo 6y ago
  When banks use bitcoin instead of fiat, they could in fact create more 'bitcoin' in the same way. You wouldn't own the bitcoin, just as now you don't own the real fiat. There would just be a number on your bank account that says how many bitcoin you own, but it's multiplied the same way as they do now. It all comes down to the % of reserve they need to hold.
  - virgilp 6y ago
    This might very well be what Revolut already does :D (you can 'purchase bitcoin' or sell it at the prices they determine; but you can't transfer it out of Revolut).
- bhupy 6y ago
  That doesn't impact the value of Bitcoin. When you exchange USDT for Bitcoin, the loser isn't holders of Bitcoin, the loser is (potentially) holders of USDT. Exchanging USDT for Bitcoin doesn't create new Bitcoin. Coinbase, as a marketplace, engages in the exchange of (potentially) bad tokens like USDT, as well as tokens like BTC that are provably finite. All of this is orthogonal to the fact that there is nothing hypocritical or internally inconsistent about holding and using Bitcoin or Ethereum and using Coinbase.
  - rtrdea 6y ago
    Coinbase doesn't trade USDT. They have their own USD pegged stablecoin called USDC and also trade Dai, which is pegged to the USD and is over collateralized
lottin 6y ago
You don't understand how commercial banks create money.

by bhupy 6y ago

xadhominemx 6y ago

No money creation at banks is not controlled by central bank monetary policy. And it’s very easy to create new crypto assets. Bitcoin has gone from 100% to 60% of crypto market cap in the past 5 years - that’s 10% “inflation”

bhupy 6y ago
If it is, then that means Coinbase can create new "Bitcoin" on demand; which we both know that it cannot do. In your own source, the banks ability to increase money supply through the multiplier effect is capped by the capital adequacy ratios, which are defined by the Fed. It is also an inevitability of any currency that isn't backed by an asset. To be clear, I don't have problems with the concept of fiat currencies, but we have to be honest about what it actually is and how it works, and how Bitcoin is different.
- pjc50 6y ago
  It absolutely can, because all exchange users put their money in a big pot (the exchange's "cold wallet" and "hot wallet") rather than having individual wallets - this allows for instant trading. Exchange accounts aren't quite like banks but they are like brokerage accounts. Numerous exchanges have blown up when the wallet got stolen from underneath them - but in the gap between the theft and the discovery, the users thought they had bitcoin when in fact they had a bitcoin balance.
  - bhupy 6y ago
    Okay, but you're talking about a completely different thing. Your Bitcoin balance, as it's shown in Coinbase's UI, is very different from your Bitcoin balance as it's understood by everyone else on the public blockchain; and that too only temporarily. There is nothing that Coinbase can do to permanently alter that supply of Bitcoin. That is what we're talking about. In contrast, the permanent US Dollar supply can and is permanently altered due to the monetary policy which governs it.
    - leereeves 6y ago
      Even if Bitcoin replaces fiat money, governments will find ways to enforce monetary policy, because the power to put people in prison trumps any algorithm. A government absolutely can declare that the correct blockchain is actually this other blockchain, or the only legal algorithm is now a version of their own invention (like the split between Bitcoin and Bitcoin Cash, but enforced by law). If the gov wants inflation, they can replace the algorithm with one that allows inflation, or achieve a similar effect by publishing an official root block every year with a portion of all holdings transferred to the government. But they probably wouldn't do that, when it's so much easier to simply seize cryptocurrency ("give us your private keys or spend thirty years in prison") or heavily tax it. None of this has been done because crypto is still a novelty, but if it ever becomes a serious threat to government policy, governments will find ways to deal with it. And centralizing Bitcoin in exchanges like Coinbase makes this far easier; the government only needs to enforce its policy on Coinbase, and Coinbase in turn will enforce it on customers.
      - tablespoon 6y ago
        > A government absolutely can declare that the correct blockchain is actually this other blockchain, or the only legal algorithm is now a version of their own invention (like the split between Bitcoin and Bitcoin Cash, but enforced by law). To that point, I found this blog post pretty interesting: https://juraj.bednar.io/en/blog-en/2020/11/12/how-could-regulators-successfully-introduce-bitcoin-censorship-and-other-dystopias/ https://juraj.bednar.io/en/blog-en/2020/11/12/how-could-regu... tl;dr: Bitcoin mining is mostly done by businesses, businesses will choose legal compliance over bitcoin-idealism, governments could wrest control of blockchain transactions through legal penalties (e.g. blacklist certain addresses and make it illegal for miners to process transactions from them OR mine blocks based off ones with illegal transactions). Economic incentives will encourage miners too small for enforcement to conform to the regulations. Bitcoin idealists can't do anything about it because their hashrate is puny and no one legit will deal with their forks.
koonsolo 6y ago
> No money creation at banks is not controlled by central bank monetary policy There is in fact an upper limit set by the fractional reserve. I see US has abolished that limit right now (March 2020), but when they would set it to 100%, there would be no money multiplying at all.

virgilp 6y ago

You can't create more bitcoin but you can create more USDT and exchange it for bitcoin.

koonsolo 6y ago
When banks use bitcoin instead of fiat, they could in fact create more 'bitcoin' in the same way. You wouldn't own the bitcoin, just as now you don't own the real fiat. There would just be a number on your bank account that says how many bitcoin you own, but it's multiplied the same way as they do now. It all comes down to the % of reserve they need to hold.
- virgilp 6y ago
  This might very well be what Revolut already does :D (you can 'purchase bitcoin' or sell it at the prices they determine; but you can't transfer it out of Revolut).
bhupy 6y ago
That doesn't impact the value of Bitcoin. When you exchange USDT for Bitcoin, the loser isn't holders of Bitcoin, the loser is (potentially) holders of USDT. Exchanging USDT for Bitcoin doesn't create new Bitcoin. Coinbase, as a marketplace, engages in the exchange of (potentially) bad tokens like USDT, as well as tokens like BTC that are provably finite. All of this is orthogonal to the fact that there is nothing hypocritical or internally inconsistent about holding and using Bitcoin or Ethereum and using Coinbase.
- rtrdea 6y ago
  Coinbase doesn't trade USDT. They have their own USD pegged stablecoin called USDC and also trade Dai, which is pegged to the USD and is over collateralized

lottin 6y ago

You don't understand how commercial banks create money.