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The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. I'm certain thi

The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. I'm certain this technology will find a place in the future after it has matured, but hoo boy are there gonna be big winners and big losers until it shakes out.

beervirus 6y ago
> I'm certain this technology will find a place in the future after it has matured Why? It doesn’t solve any real problem that anyone has ever had.
- radicalbyte 6y ago
  It solves the problem of: how can I start a pyramid scheme relatively anonymously.
- haolez 6y ago
  While you wrote this, your country's Central Bank printed a few billions (or trillions, if you are american) in your currency, so that your money now is worth a lot less than before.
  - arcticbull 6y ago
    This is a dramatic misunderstanding of economics. Inflation is a function of both supply and velocity. Velocity is low because US savings are at an all-time high. The central bank has a number of tools to contract the supply once velocity increases. [1] Your statement that an increase in supply leads to a commensurate reduction in the value of each unit is strictly false. And something you can measure by going to the grocery store and checking if your bill is 100% higher this year than last. [1] https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us https://www.stlouisfed.org/on-the-economy/2014/september/wha...
    - o_p 6y ago
      You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.
      - arcticbull 6y ago
        No, that's not what I'm doing. What I'm telling you is that supply is simply half the picture, and you're neglecting the other half of the picture. If you print a $10 trillion dollar coin, then give it to me and I throw it into a vault, has that increased the price of goods? No. Supply went up, velocity went down commensurately. This is what you're seeing in a macro scale. Yes the central bank actively manages the money supply, and maintains a consistent 2% inflation rate. Inflation is good for debtors (i.e. most people) as debts are denominated in the currency of the year of issue and repaid with inflated money. So long as wages keep pace (they do [1]) it's generally a benefit. Money isn't long-term savings. It's a short-term store of value that only needs to be fungible, cheap to transact, and retain the bulk of its value for as long as you hold it. Above all, it just needs to be predictable. Anything else is honestly a non-goal. Your job as a participant in the economy is to spend that money on basic needs or invest it productively. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
        o_p 6y ago
        But the central bank doesnt print money to throw it into a vault. The commercial banks borrow that money to lend it themselves to the people for consumption and investing, so printing money definitely haves an effect on your buying power even if its not 1 to 1. Maybe you live in a country with a independent central bank but many countries are far more corrupt and the goverments make their central bank print money for themselves and have huge inflation rates. Cryptocurrency gives them a way to protect their savings from that.
        arcticbull 6y ago
        > But the central bank doesnt print money to throw it into a vault. Correct, however US personal savings rates are at all-time highs. [1] So, you are correct, the banks aren't taking the money and locking it into vaults. However, people are taking their money and locking it up in savings accounts and investment accounts. This is reducing velocity. The "printing" was to offset this reduction in velocity and avoid a deflationary spiral. Through lending, so they can be used for productive things. This also explains how asset prices spiked without actually causing inflation. > Cryptocurrency gives them a way to protect their savings from that. I don't want to get too far down this rabbit hole, but literally everything that isn't currency is inflation-proof. Inflation only affects currency. So, if you buy real estate, or stocks, or even un-productive assets like gold, silver or cryptocurrencies, you're equally protected from inflation. It may underperform, but now we're talking about rate of return in constant-dollar terms. Cryptocurrencies do protect you from inflation, yes, but they have massive deficiencies that make them a poor choice relative to their peer investments, in my opinion. Such as the rampant fraud in the space. This hinders price discovery, and makes it impossible to determine a real value. It also causes massive swings of 27% week-to-date. That's an annualized inflation rate of 25,000,000% when measuring the value of a bitcoin against CPI. [1] https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
  - anyfoo 6y ago
    https://en.wikipedia.org/wiki/Deflation#Effects https://en.wikipedia.org/wiki/Deflation#Effects
  - deleted 6y ago
    [deleted]
  - Yizahi 6y ago
    Government printing press can be abused and often is. But it can be used responsibly (for economy long term). On the other hand crypto apologists propose us currencies which are uncontrollably printed by some anonymous guys in the non extradition offshore. Just last year 75% of all Tethers were printed out of thin air, since USDT trading amount is 14 times bigger than USD (not even counting tricks like Bitfinex listing USD while actually trading tethers behind the scenes) we can assume that whole crypto community is propped up by a lot of hot air and cut paper. tl;dr - Look, USD currency management looks bad (or suboptimal). - Let's replace it with even worse scheme! HODL!
- Kinrany 6y ago
  It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down.
  - hoppyhoppy2 6y ago
    >It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down. You could say the same thing about Walmart's money orders and check-cashing services, but that doesn't use an entire country's worth of electricity, suck up the world's supply of GPUs, or support the same number of scammers.
- nyolfen 6y ago
  how about this: https://i.imgur.com/lSfdTfK.jpg https://i.imgur.com/lSfdTfK.jpg
  - arcticbull 6y ago
    This chart affects 0.35% of the global population. This one is far more representative [1]. Notice how after Bretton-Woods ended, things got really nice and stable? That's successful active management. Venezuela's problem isn't inflation - that's a symptom. Venezuela's problem is the Maduro government. Solve the latter and you solve the former. [1] https://fred.stlouisfed.org/series/FPCPITOTLZGUSA https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
    - arberx 6y ago
      "If only they did this!" -- that's not a solution. The goal is to prevent this from even being possible in the first place. There are very real challenges from inflationary monetary supplies in countries like Argentina, Turkey, Venezuela and notably Zimbabwe.
      - arcticbull 6y ago
        When you have a bad government, the currency is the least of your problems. When you resolve the government, the currency is no longer a problem. Seriously, in Venezuela there have been recently shortages of: milk, meat, coffee, rice, oil, precooked flour, butter, toilet paper, personal hygiene products and medicines. Some Venezuelans have resorted to eating wild fruit and garbage [1]. Somehow resolving inflation through a cryptocurrency with $50 transaction fees that loses 27% of its value in one week every few months doesn't change any of that. It's just a different set of problems. However, overthrowing the government will resolve both issues. Sometimes there are no easy answers. [1] https://en.wikipedia.org/wiki/Shortages_in_Venezuela https://en.wikipedia.org/wiki/Shortages_in_Venezuela
        deleted 6y ago
        [deleted]
- _Microft 6y ago
  Crypto technologically solves the social problem of trust. I‘ll leave the interpretation of this statement up to you ;)
  - zepto 6y ago
    Crypto really has nothing to do with trust. It provides a mechanism that enables distant parties to be confident that they hold copies of the same document. That’s all.
    - Udik 6y ago
      Enables distant parties to be confident that there is only one specific version of the document that is valid, even when each of the parties could have an interest in creating and spreading its own version.
      - zepto 6y ago
        Valid for what?
    - _Microft 6y ago
      The blockchain, consensus algorithms and the whole shebang are only needed because cryptocurrencies do not want transactions to be mediated by a central authority that would need to be trusted. Crypto is about trust, or rather a lack thereof.
      - zepto 6y ago
        Crypto users may be distrustful, but crypto doesn’t create trust or solve any problems to do with it. It’s just currency for the distrustful.
      - Hjfrf 6y ago
        Despite all that, people mostly trade crypto on centralized exchanges. The users really hate the decentralized aspect of crypto, as shown by immediately giving away their wallet to some "trusted" third party if it reduces fees.
- FDSGSG 6y ago
  It solved the problem of paying for drugs which you ordered online. It solved the problem of ransomware payments, before winlockers used to ask for gift cards which didn't scale well. It solved the liberty reserve problem where the US government shuts down your sketchy no-KYC money transfer platform. At a very general level cryptocurrency has solved the "anonymous online payments"-problem. These are all very real problems solved by cryptocurrency.
  - oblio 6y ago
    So what you're saying is that it solves a set of problems for a bunch of very problematic people for which we'd rather have a better solution? (maybe jail?)
    - FDSGSG 6y ago
      What's your point? Those people have money.
- base698 6y ago
  Ever want your money to earn interest? Banks used to do this, and you could get good returns on savings. You can earn interest parking your crypto here: https://compound.finance/ https://compound.finance/
  - aphextron 6y ago
    You can also do this with the stock market by investing in revenue generating companies that are innovative and creating value. This is literally no different than investing in gold.
    - rawtxapp 6y ago
      But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. The parent comment is talking about interest, which is "risk-free" money (risk-free if the smart contract doesn't have any bugs, etc).
      - aphextron 6y ago
        >But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. Then just invest in a Vanguard ETF. There's no such thing as "risk free" money short of US treasuries or an FDIC insured CD, and those don't require any research.
    - o_p 6y ago
      Unless you are participating in an IPO. Buying stocks its not investing in the true sense you mention, you are just transfering ownership of stocks but that money doesnt fund any enterprise.
      - 8192kjshad09- 6y ago
        But the share price going up enables the company to raise money easier by offering more shares. See TSLA for example.
- o_p 6y ago
  I hoped HN to have a more informed take but I guess not. Blockchains solve the problem of having a decentralized public database, currency is just a particular use
  - dilyevsky 6y ago
    So like git?
    - o_p 6y ago
      But you host git on a centralized server, blockchain git when
      - dilyevsky 6y ago
        That’s github model, you can host it on many “servers” if you so choose
        Udik 6y ago
        It's not guaranteed to be unique. Blockchains are.
  - Nasrudith 6y ago
    A decentralized public database is a solution, not a problem (snark aside about bitcoin). The question is "What is the purpose of it being decentralized and public?".
  - oblio 6y ago
    > Blockchains solve the problem of having a decentralized public database. That's not a problem. A problem is something like this: "as a video editor/doctor/..., I need something that helps me...". Yours is just a tech description.
  - bryananderson 6y ago
    What problem does a decentralized public database solve? As far as I can tell, over a decade in, blockchain is still hunting for one.
- SavantIdiot 6y ago
  Un-alterable ledgers like blockchain are incredibly useful for legal and economic applications. Unfortunately there are a lot of caveats that need to be worked out, and crypto is finding them at scale.
arcticbull 6y ago
> The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. We have very little evidence to substantiate the actual quantity of real dollars in this system. The NYAG settlement with Tether shows that it's backed by bailing wire, chewing gum and hope [1]. USDC has stopped publishing their attestations as of January (which, btw, - and I can't believe I'm going to cite Tether's Saul Goodman but - aren't audits [2]) and since then it's market cap has doubled. USDT and USDC both use similar weasel wording about the nature of what backs them. An attempted ETF a couple of years ago admitted 95% of all trading volume in the crypto space was fake. [3] The CFTC smacked Coinbase because literally 99% of all Litecoin trading volume in 2017 was one dude, Charlie Lee - the LTC founder, wash trading internally [4]. Lee then took advantage of the market cap he synthesized, dumped literally all his holdings at the peak and sailed off to an island. This is just a couple of examples off the top of my head. It's all fraudulent. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... [2] https://twitter.com/bitcoinlawyer/status/1386146486359150597 https://twitter.com/bitcoinlawyer/status/1386146486359150597 [3] https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-of-bitcoin-trade-volume-is-fake-real-market-is-or https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-o... [4] https://cftc.gov/PressRoom/PressReleases/8369-21 https://cftc.gov/PressRoom/PressReleases/8369-21
- SavantIdiot 6y ago
  This is really useful information. I have a cadre of friends who are serious crypto heads and I almost dread hanging out with them because they are so deep into it. I'd be curious to hear their perspective after I understand these links.
- Animats 6y ago
  We have very little evidence to substantiate the actual quantity of real dollars in this system. This is especially true of NFTs. With each item unique, there's no meaningful market price. There are just occasional stories about sales. This is important. With a commodity that has an active market, prices have some meaning. You can usually sell your asset at roughly the current market price. This is not true of unique items. You have to find a buyer who wants your specific thing. This works just like collectables on eBay. Here's a current collectable.[1] "Rare Tag Error Retired Ty Beanie Baby Claude The Crab 1996 Collector - US $1,235.00 [ 0 bids ]" Note the "0 bids". Now keep scrolling down until something shows up with a bid.[2] "Princess diana beanie baby 1st edition 1997 w/o tag US $0.99 [ 1 bid ]" That's what a willing buyer is prepared to pay. You can scroll through page after page of Beanie Baby asking prices without seeing anything with a bid. That's what an NFT market looks like when you want to sell. The NFT market is useful only to those with a fan base they can monetize. If you're the fan, you're the sucker. [1] https://www.ebay.com/itm/194065105880 https://www.ebay.com/itm/194065105880 [2] https://www.ebay.com/itm/254955747357 https://www.ebay.com/itm/254955747357
rawtxapp 6y ago
Similar to dot-com bubble where people were investing their life savings into companies that just had a domain name with no business plan whatsoever. Lots of them blew up, but the ones that made it through ended up becoming trillion dollar companies.
- arcticbull 6y ago
  Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s. That's why it's much, much worse. The dot-com bubble was driven by margin, enthusiasm and poor decision making. This one's got all those plus the hallmarks of the 20s: insane leverage (see: DeFi), bonkers leverage (see: BitMEX), and a fictional currency being printed at a rate of billions of dollars per week that's then used to prop up the prices of the assets themselves. It's basically the dot-com bubble, the roaring 20s and 2008's CDO shell game rolled into one.
  - SavantIdiot 6y ago
    Exactly. I -really- hope crypto ETFs don't end up in ordinary people's 401Ks, but I fear it is heading that way.
  - aphextron 6y ago
    >"Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s." If you think the modern day SEC is doing anything about the current levels of market manipulation and wild speculation, I've got a bridge to sell you.
- grey-area 6y ago
  Only if you use a circular definition of made it through which means became a trillion dollar company. Plenty of companies made it through but never recovered their dotcom market cap or prestige, a few prominent examples: Csco, hpq (only recently passed the 2000 price), yhoo, emc, vrsn, real networks. There were plenty of also-rans who limped through but didn’t justify the hype pricing years later, and the real revolution came to fruition years later with mobile computing and mass-market online stores, but there was definitely underneath it all an obvious and real information revolution which the dotcom bubble was merely irrational euphoria about - everyone knew sonething big was happening, even if they rejected the crazy prices. I sincerely don’t think this crypto bubble is similar, because there is no there there amd because almost all assets are severely overpriced right now - crypto is full of scams and nobody is actually using it any more as a currency, this means all these joke coins worth 100s of millions are going to zero, no doubt just after joe public buys in. There’s a reason coin base insiders are frantically selling as soon as they can and more and more frauds are coming to light. Even the more legitimate companies in this space are full of fraud.
Zamicol 6y ago
>being thrown around a technology that is dodgy at best I have yet to meet someone that says this who has foreseen the implications of defi. In my mind, as an early bitcoiner, that was the original promise of bitcoin. A list of coins by market cap is full of absolute junk: https://www.coingecko.com/en https://www.coingecko.com/en A list of tokens by locked in value is full of systems that are revolutionizing finance: https://defipulse.com/ https://defipulse.com/ Defi protocols are providing useful services and are making money. I doubt I could overstate their enormity. There's a huge difference between the two worlds. Don't confuse dogecoin's "I like the stonk" hype with Maker's muscle. The "blockchain" isn't the point. The systems made possible on top were always the point, and that's what makes "blockchain" so valuable.
- TechBro8615 6y ago
  FYI, but this is HN, so you might like to know that "enormity" has a specific meaning with negative connotation, it's not just a way to describe something as "really big," (enormous) but rather "really evil."
  - staticautomatic 6y ago
    It’s bizarre that this is being downvoted. I wouldn’t call it “really evil” but the negative connotation is legit. See...any dictionary.
    - deleted 6y ago
      [deleted]
    - Udik 6y ago
      (in neutral use) large size or scale. "I began to get a sense of the enormity of the task"
      - staticautomatic 6y ago
        Is that a quote from a dictionary or what?
jrochkind1 6y ago
Yes. And I think the OP correctly suggests that this... not unique, it's increasing parts of the economy. > It is understandable enough to want to participate in such collective delusions. It’s much more fun to be awed by not getting a movie than to realize that you do get it and it’s just boring. This same idea also helps explain speculative bubbles. It’s more fun to believe in magic than to recognize how much of financialized capitalism is just scams and pyramid schemes. Nonetheless, if the popular press is full of explainers “clarifying” what a “very complicated” investment phenomenon is all about, hide your wallet: You are being shilled into a game of Three-Card Monte.
danaris 6y ago
> The fact that there is so much money, SO much money, being thrown around This is the kind of thing that happens when the wealthiest people have so much more than everyone else: there are enough people with vast amounts of money that they have no idea what to do with that they can easily fund a bubble like this, especially when they are promised by smart-sounding geeks that this is The Next Big Thing that will a) let them get in on the ground floor of a whole new currency, and b) give them a way to leverage their wealth to retain and increase their power as we gradually move more and more toward a post-scarcity society.
wickoff 6y ago
It's understandable why people consider 100% of crypto to be a scam. But several projects have an actual P/E ratio now. You can't deny a P/E ratio. Value is being created here. In 2013 bubble everything was bitcoin clone but "better". No cash flow. In 2017 it was unregulated securities - illegal, no cash flow. In 2021 with Defi you don't need to struggle to explain anything. People get paid for providing capital at a higher rates than in traditional finance because smart contracts are removing friction. Stakeholders get paid dividends for governance, just like a normal company.
- meltedcapacitor 6y ago
  LOL defi is a neat idea but the current reality is order of magnitude slower and orders of magnitude more expensive than "legacy". It adds a lots of friction. Players "get paid" because folks can't read smart contracts and see that behind the cover story it's just flows from new players to exiting players, which looks good as long as inflows are larger than outflows, which of course will last forever.
- Daishiman 6y ago
  > now. You can't deny a P/E ratio. Value is being created here. Which ones?
  - wickoff 6y ago
    https://sushi.com https://sushi.com is the best example.
- Nasrudith 6y ago
  Madoff had a price to earning ratio too. I don't think that variable doesn't say what you think it does. Higher rates implies more risk which certainly applies to cryptocurrencies.
- SavantIdiot 6y ago
  > You can't deny a P/E ratio. Value is being created here. Oh yes, yes you can. You're talking about a currency exchange, not a commodity. I guess you weren't around for the last two bubbles. There literally is no value being created. Coinbase earnings are based on people paying to use its service, and that service is trading imaginary currency with no intrinsic value. Unlike a semiconductor, oil, or even industrial labor.
legulere 6y ago
A lot of people that invest simply lack better alternatives. On the other hand the people that could invest reasonably like homeowners in energy efficiency do not have the money to do so, with the current monetary policy. Even if they had, they would gain more from investing in overvalued assets that have a growth in value detached from reality, driven by loose money supply for investors.
- dehrmann 6y ago
  > A lot of people that invest simply lack better alternatives Yeah, stocks haven't had a good year in over a decade /s
  - legulere 6y ago
    Widespread access to low-fee index-fonds is pretty new and alternatives were not as bad as they are now. You could at least get inflation back by just letting your money stay at the bank, which is not possible now anymore.
    - dehrmann 6y ago
      The biggest change has been free trades and lower account minimums. For a long time, as long as you could hit the minimum (usually $2500-$5000), Vanguard was an amazing choice. The minimum wasn't great, but really, investing less isn't all that interesting, at least not as a missed opportunity for building wealth. Low-fee ETFs have also been around for a while, but the $10 per trade you'd pay in 2005 meant you didn't really want to buy less than $1,000 of anything.
- SavantIdiot 6y ago
  > lack better alternatives What?! Wow, this is a painfully misinformed statement. Like, so misinformed I want to hug you. Index funds have consistently beaten inflation by double digits and have practically nil management fees. They are vastly more secure alternative to imaginary crypto exchanges.
  - 6y ago
one2three4 6y ago
That. Combined with the fact that so many productive people and healthy business have limited or no access to it.
api 6y ago
The last part is why so much money is in it. Everyone remembers how everyone said dot.com was over in 2002 when the biggest dot.coms were yet to come. Everyone remembers when everyone laughed at Tesla and SpaceX. Everyone remembers Bitcoin at $1. There is a hell of a lot of FOMO around. There are also record low interest rates not just in the USA but globally, and that is inflating every asset at once. If there is a crash I don’t think it will just be cryptocurrency. It will be broad and deep.
- berryjerry 6y ago
  I see this too. Almost every asset class is moving together. When interest rates can't be dropped further then the real problems will begin. Banks have built floors into their loans so that variable rates can't drop below zero already. At the point when interest rates drop below zero, lower interest rates will actually harm the economy rather than help it and then we'll see everything come crashing down.
gofreddygo 6y ago
Crypto space feels like a decentralized slot machine spiraling out of control with shiny lights, loud sounds and exponential payouts. Always worth reiterating: the house always wins.

beervirus 6y ago

> I'm certain this technology will find a place in the future after it has matured Why? It doesn’t solve any real problem that anyone has ever had.

radicalbyte 6y ago
It solves the problem of: how can I start a pyramid scheme relatively anonymously.
haolez 6y ago
While you wrote this, your country's Central Bank printed a few billions (or trillions, if you are american) in your currency, so that your money now is worth a lot less than before.
- arcticbull 6y ago
  This is a dramatic misunderstanding of economics. Inflation is a function of both supply and velocity. Velocity is low because US savings are at an all-time high. The central bank has a number of tools to contract the supply once velocity increases. [1] Your statement that an increase in supply leads to a commensurate reduction in the value of each unit is strictly false. And something you can measure by going to the grocery store and checking if your bill is 100% higher this year than last. [1] https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us https://www.stlouisfed.org/on-the-economy/2014/september/wha...
  - o_p 6y ago
    You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.
    - arcticbull 6y ago
      No, that's not what I'm doing. What I'm telling you is that supply is simply half the picture, and you're neglecting the other half of the picture. If you print a $10 trillion dollar coin, then give it to me and I throw it into a vault, has that increased the price of goods? No. Supply went up, velocity went down commensurately. This is what you're seeing in a macro scale. Yes the central bank actively manages the money supply, and maintains a consistent 2% inflation rate. Inflation is good for debtors (i.e. most people) as debts are denominated in the currency of the year of issue and repaid with inflated money. So long as wages keep pace (they do [1]) it's generally a benefit. Money isn't long-term savings. It's a short-term store of value that only needs to be fungible, cheap to transact, and retain the bulk of its value for as long as you hold it. Above all, it just needs to be predictable. Anything else is honestly a non-goal. Your job as a participant in the economy is to spend that money on basic needs or invest it productively. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
      - o_p 6y ago
        But the central bank doesnt print money to throw it into a vault. The commercial banks borrow that money to lend it themselves to the people for consumption and investing, so printing money definitely haves an effect on your buying power even if its not 1 to 1. Maybe you live in a country with a independent central bank but many countries are far more corrupt and the goverments make their central bank print money for themselves and have huge inflation rates. Cryptocurrency gives them a way to protect their savings from that.
        arcticbull 6y ago
        > But the central bank doesnt print money to throw it into a vault. Correct, however US personal savings rates are at all-time highs. [1] So, you are correct, the banks aren't taking the money and locking it into vaults. However, people are taking their money and locking it up in savings accounts and investment accounts. This is reducing velocity. The "printing" was to offset this reduction in velocity and avoid a deflationary spiral. Through lending, so they can be used for productive things. This also explains how asset prices spiked without actually causing inflation. > Cryptocurrency gives them a way to protect their savings from that. I don't want to get too far down this rabbit hole, but literally everything that isn't currency is inflation-proof. Inflation only affects currency. So, if you buy real estate, or stocks, or even un-productive assets like gold, silver or cryptocurrencies, you're equally protected from inflation. It may underperform, but now we're talking about rate of return in constant-dollar terms. Cryptocurrencies do protect you from inflation, yes, but they have massive deficiencies that make them a poor choice relative to their peer investments, in my opinion. Such as the rampant fraud in the space. This hinders price discovery, and makes it impossible to determine a real value. It also causes massive swings of 27% week-to-date. That's an annualized inflation rate of 25,000,000% when measuring the value of a bitcoin against CPI. [1] https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
- anyfoo 6y ago
  https://en.wikipedia.org/wiki/Deflation#Effects https://en.wikipedia.org/wiki/Deflation#Effects
- deleted 6y ago
  [deleted]
- Yizahi 6y ago
  Government printing press can be abused and often is. But it can be used responsibly (for economy long term). On the other hand crypto apologists propose us currencies which are uncontrollably printed by some anonymous guys in the non extradition offshore. Just last year 75% of all Tethers were printed out of thin air, since USDT trading amount is 14 times bigger than USD (not even counting tricks like Bitfinex listing USD while actually trading tethers behind the scenes) we can assume that whole crypto community is propped up by a lot of hot air and cut paper. tl;dr - Look, USD currency management looks bad (or suboptimal). - Let's replace it with even worse scheme! HODL!
Kinrany 6y ago
It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down.
- hoppyhoppy2 6y ago
  >It does solve the problem of being unable to get a bank account. In theory, once the scaling problems are solved and the transactiom fees go down. You could say the same thing about Walmart's money orders and check-cashing services, but that doesn't use an entire country's worth of electricity, suck up the world's supply of GPUs, or support the same number of scammers.
nyolfen 6y ago
how about this: https://i.imgur.com/lSfdTfK.jpg https://i.imgur.com/lSfdTfK.jpg
- arcticbull 6y ago
  This chart affects 0.35% of the global population. This one is far more representative [1]. Notice how after Bretton-Woods ended, things got really nice and stable? That's successful active management. Venezuela's problem isn't inflation - that's a symptom. Venezuela's problem is the Maduro government. Solve the latter and you solve the former. [1] https://fred.stlouisfed.org/series/FPCPITOTLZGUSA https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
  - arberx 6y ago
    "If only they did this!" -- that's not a solution. The goal is to prevent this from even being possible in the first place. There are very real challenges from inflationary monetary supplies in countries like Argentina, Turkey, Venezuela and notably Zimbabwe.
    - arcticbull 6y ago
      When you have a bad government, the currency is the least of your problems. When you resolve the government, the currency is no longer a problem. Seriously, in Venezuela there have been recently shortages of: milk, meat, coffee, rice, oil, precooked flour, butter, toilet paper, personal hygiene products and medicines. Some Venezuelans have resorted to eating wild fruit and garbage [1]. Somehow resolving inflation through a cryptocurrency with $50 transaction fees that loses 27% of its value in one week every few months doesn't change any of that. It's just a different set of problems. However, overthrowing the government will resolve both issues. Sometimes there are no easy answers. [1] https://en.wikipedia.org/wiki/Shortages_in_Venezuela https://en.wikipedia.org/wiki/Shortages_in_Venezuela
      - deleted 6y ago
        [deleted]
_Microft 6y ago
Crypto technologically solves the social problem of trust. I‘ll leave the interpretation of this statement up to you ;)
- zepto 6y ago
  Crypto really has nothing to do with trust. It provides a mechanism that enables distant parties to be confident that they hold copies of the same document. That’s all.
  - Udik 6y ago
    Enables distant parties to be confident that there is only one specific version of the document that is valid, even when each of the parties could have an interest in creating and spreading its own version.
    - zepto 6y ago
      Valid for what?
  - _Microft 6y ago
    The blockchain, consensus algorithms and the whole shebang are only needed because cryptocurrencies do not want transactions to be mediated by a central authority that would need to be trusted. Crypto is about trust, or rather a lack thereof.
    - zepto 6y ago
      Crypto users may be distrustful, but crypto doesn’t create trust or solve any problems to do with it. It’s just currency for the distrustful.
    - Hjfrf 6y ago
      Despite all that, people mostly trade crypto on centralized exchanges. The users really hate the decentralized aspect of crypto, as shown by immediately giving away their wallet to some "trusted" third party if it reduces fees.
FDSGSG 6y ago
It solved the problem of paying for drugs which you ordered online. It solved the problem of ransomware payments, before winlockers used to ask for gift cards which didn't scale well. It solved the liberty reserve problem where the US government shuts down your sketchy no-KYC money transfer platform. At a very general level cryptocurrency has solved the "anonymous online payments"-problem. These are all very real problems solved by cryptocurrency.
- oblio 6y ago
  So what you're saying is that it solves a set of problems for a bunch of very problematic people for which we'd rather have a better solution? (maybe jail?)
  - FDSGSG 6y ago
    What's your point? Those people have money.
base698 6y ago
Ever want your money to earn interest? Banks used to do this, and you could get good returns on savings. You can earn interest parking your crypto here: https://compound.finance/ https://compound.finance/
- aphextron 6y ago
  You can also do this with the stock market by investing in revenue generating companies that are innovative and creating value. This is literally no different than investing in gold.
  - rawtxapp 6y ago
    But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. The parent comment is talking about interest, which is "risk-free" money (risk-free if the smart contract doesn't have any bugs, etc).
    - aphextron 6y ago
      >But then you need to research and understand the companies you're investing in. If you're busy with your daytime job, you might not have as much time for this research. Then just invest in a Vanguard ETF. There's no such thing as "risk free" money short of US treasuries or an FDIC insured CD, and those don't require any research.
  - o_p 6y ago
    Unless you are participating in an IPO. Buying stocks its not investing in the true sense you mention, you are just transfering ownership of stocks but that money doesnt fund any enterprise.
    - 8192kjshad09- 6y ago
      But the share price going up enables the company to raise money easier by offering more shares. See TSLA for example.
o_p 6y ago
I hoped HN to have a more informed take but I guess not. Blockchains solve the problem of having a decentralized public database, currency is just a particular use
- dilyevsky 6y ago
  So like git?
  - o_p 6y ago
    But you host git on a centralized server, blockchain git when
    - dilyevsky 6y ago
      That’s github model, you can host it on many “servers” if you so choose
      - Udik 6y ago
        It's not guaranteed to be unique. Blockchains are.
- Nasrudith 6y ago
  A decentralized public database is a solution, not a problem (snark aside about bitcoin). The question is "What is the purpose of it being decentralized and public?".
- oblio 6y ago
  > Blockchains solve the problem of having a decentralized public database. That's not a problem. A problem is something like this: "as a video editor/doctor/..., I need something that helps me...". Yours is just a tech description.
- bryananderson 6y ago
  What problem does a decentralized public database solve? As far as I can tell, over a decade in, blockchain is still hunting for one.
SavantIdiot 6y ago
Un-alterable ledgers like blockchain are incredibly useful for legal and economic applications. Unfortunately there are a lot of caveats that need to be worked out, and crypto is finding them at scale.

arcticbull 6y ago

> The fact that there is so much money, SO much money, being thrown around a technology that is dodgy at best, and a scam at worst, is terrifying. We have very little evidence to substantiate the actual quantity of real dollars in this system. The NYAG settlement with Tether shows that it's backed by bailing wire, chewing gum and hope [1]. USDC has stopped publishing their attestations as of January (which, btw, - and I can't believe I'm going to cite Tether's Saul Goodman but - aren't audits [2]) and since then it's market cap has doubled. USDT and USDC both use similar weasel wording about the nature of what backs them. An attempted ETF a couple of years ago admitted 95% of all trading volume in the crypto space was fake. [3] The CFTC smacked Coinbase because literally 99% of all Litecoin trading volume in 2017 was one dude, Charlie Lee - the LTC founder, wash trading internally [4]. Lee then took advantage of the market cap he synthesized, dumped literally all his holdings at the peak and sailed off to an island. This is just a couple of examples off the top of my head. It's all fraudulent. [1] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... [2] https://twitter.com/bitcoinlawyer/status/1386146486359150597 https://twitter.com/bitcoinlawyer/status/1386146486359150597 [3] https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-of-bitcoin-trade-volume-is-fake-real-market-is-or https://cointelegraph.com/news/bitwise-calls-out-to-sec-95-o... [4] https://cftc.gov/PressRoom/PressReleases/8369-21 https://cftc.gov/PressRoom/PressReleases/8369-21

SavantIdiot 6y ago
This is really useful information. I have a cadre of friends who are serious crypto heads and I almost dread hanging out with them because they are so deep into it. I'd be curious to hear their perspective after I understand these links.
Animats 6y ago
We have very little evidence to substantiate the actual quantity of real dollars in this system. This is especially true of NFTs. With each item unique, there's no meaningful market price. There are just occasional stories about sales. This is important. With a commodity that has an active market, prices have some meaning. You can usually sell your asset at roughly the current market price. This is not true of unique items. You have to find a buyer who wants your specific thing. This works just like collectables on eBay. Here's a current collectable.[1] "Rare Tag Error Retired Ty Beanie Baby Claude The Crab 1996 Collector - US $1,235.00 [ 0 bids ]" Note the "0 bids". Now keep scrolling down until something shows up with a bid.[2] "Princess diana beanie baby 1st edition 1997 w/o tag US $0.99 [ 1 bid ]" That's what a willing buyer is prepared to pay. You can scroll through page after page of Beanie Baby asking prices without seeing anything with a bid. That's what an NFT market looks like when you want to sell. The NFT market is useful only to those with a fan base they can monetize. If you're the fan, you're the sucker. [1] https://www.ebay.com/itm/194065105880 https://www.ebay.com/itm/194065105880 [2] https://www.ebay.com/itm/254955747357 https://www.ebay.com/itm/254955747357

rawtxapp 6y ago

Similar to dot-com bubble where people were investing their life savings into companies that just had a domain name with no business plan whatsoever. Lots of them blew up, but the ones that made it through ended up becoming trillion dollar companies.

arcticbull 6y ago
Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s. That's why it's much, much worse. The dot-com bubble was driven by margin, enthusiasm and poor decision making. This one's got all those plus the hallmarks of the 20s: insane leverage (see: DeFi), bonkers leverage (see: BitMEX), and a fictional currency being printed at a rate of billions of dollars per week that's then used to prop up the prices of the assets themselves. It's basically the dot-com bubble, the roaring 20s and 2008's CDO shell game rolled into one.
- SavantIdiot 6y ago
  Exactly. I -really- hope crypto ETFs don't end up in ordinary people's 401Ks, but I fear it is heading that way.
- aphextron 6y ago
  >"Yes, it's like that, but with the completely unregulated trading environment reminiscent of the Roaring 20s." If you think the modern day SEC is doing anything about the current levels of market manipulation and wild speculation, I've got a bridge to sell you.
grey-area 6y ago
Only if you use a circular definition of made it through which means became a trillion dollar company. Plenty of companies made it through but never recovered their dotcom market cap or prestige, a few prominent examples: Csco, hpq (only recently passed the 2000 price), yhoo, emc, vrsn, real networks. There were plenty of also-rans who limped through but didn’t justify the hype pricing years later, and the real revolution came to fruition years later with mobile computing and mass-market online stores, but there was definitely underneath it all an obvious and real information revolution which the dotcom bubble was merely irrational euphoria about - everyone knew sonething big was happening, even if they rejected the crazy prices. I sincerely don’t think this crypto bubble is similar, because there is no there there amd because almost all assets are severely overpriced right now - crypto is full of scams and nobody is actually using it any more as a currency, this means all these joke coins worth 100s of millions are going to zero, no doubt just after joe public buys in. There’s a reason coin base insiders are frantically selling as soon as they can and more and more frauds are coming to light. Even the more legitimate companies in this space are full of fraud.

Zamicol 6y ago

>being thrown around a technology that is dodgy at best I have yet to meet someone that says this who has foreseen the implications of defi. In my mind, as an early bitcoiner, that was the original promise of bitcoin. A list of coins by market cap is full of absolute junk: https://www.coingecko.com/en https://www.coingecko.com/en A list of tokens by locked in value is full of systems that are revolutionizing finance: https://defipulse.com/ https://defipulse.com/ Defi protocols are providing useful services and are making money. I doubt I could overstate their enormity. There's a huge difference between the two worlds. Don't confuse dogecoin's "I like the stonk" hype with Maker's muscle. The "blockchain" isn't the point. The systems made possible on top were always the point, and that's what makes "blockchain" so valuable.

TechBro8615 6y ago
FYI, but this is HN, so you might like to know that "enormity" has a specific meaning with negative connotation, it's not just a way to describe something as "really big," (enormous) but rather "really evil."
- staticautomatic 6y ago
  It’s bizarre that this is being downvoted. I wouldn’t call it “really evil” but the negative connotation is legit. See...any dictionary.
  - deleted 6y ago
    [deleted]
  - Udik 6y ago
    (in neutral use) large size or scale. "I began to get a sense of the enormity of the task"
    - staticautomatic 6y ago
      Is that a quote from a dictionary or what?

jrochkind1 6y ago

Yes. And I think the OP correctly suggests that this... not unique, it's increasing parts of the economy. > It is understandable enough to want to participate in such collective delusions. It’s much more fun to be awed by not getting a movie than to realize that you do get it and it’s just boring. This same idea also helps explain speculative bubbles. It’s more fun to believe in magic than to recognize how much of financialized capitalism is just scams and pyramid schemes. Nonetheless, if the popular press is full of explainers “clarifying” what a “very complicated” investment phenomenon is all about, hide your wallet: You are being shilled into a game of Three-Card Monte.

danaris 6y ago

> The fact that there is so much money, SO much money, being thrown around This is the kind of thing that happens when the wealthiest people have so much more than everyone else: there are enough people with vast amounts of money that they have no idea what to do with that they can easily fund a bubble like this, especially when they are promised by smart-sounding geeks that this is The Next Big Thing that will a) let them get in on the ground floor of a whole new currency, and b) give them a way to leverage their wealth to retain and increase their power as we gradually move more and more toward a post-scarcity society.

wickoff 6y ago

It's understandable why people consider 100% of crypto to be a scam. But several projects have an actual P/E ratio now. You can't deny a P/E ratio. Value is being created here. In 2013 bubble everything was bitcoin clone but "better". No cash flow. In 2017 it was unregulated securities - illegal, no cash flow. In 2021 with Defi you don't need to struggle to explain anything. People get paid for providing capital at a higher rates than in traditional finance because smart contracts are removing friction. Stakeholders get paid dividends for governance, just like a normal company.

meltedcapacitor 6y ago
LOL defi is a neat idea but the current reality is order of magnitude slower and orders of magnitude more expensive than "legacy". It adds a lots of friction. Players "get paid" because folks can't read smart contracts and see that behind the cover story it's just flows from new players to exiting players, which looks good as long as inflows are larger than outflows, which of course will last forever.
Daishiman 6y ago
> now. You can't deny a P/E ratio. Value is being created here. Which ones?
- wickoff 6y ago
  https://sushi.com https://sushi.com is the best example.
Nasrudith 6y ago
Madoff had a price to earning ratio too. I don't think that variable doesn't say what you think it does. Higher rates implies more risk which certainly applies to cryptocurrencies.
SavantIdiot 6y ago
> You can't deny a P/E ratio. Value is being created here. Oh yes, yes you can. You're talking about a currency exchange, not a commodity. I guess you weren't around for the last two bubbles. There literally is no value being created. Coinbase earnings are based on people paying to use its service, and that service is trading imaginary currency with no intrinsic value. Unlike a semiconductor, oil, or even industrial labor.

legulere 6y ago

A lot of people that invest simply lack better alternatives. On the other hand the people that could invest reasonably like homeowners in energy efficiency do not have the money to do so, with the current monetary policy. Even if they had, they would gain more from investing in overvalued assets that have a growth in value detached from reality, driven by loose money supply for investors.

dehrmann 6y ago
> A lot of people that invest simply lack better alternatives Yeah, stocks haven't had a good year in over a decade /s
- legulere 6y ago
  Widespread access to low-fee index-fonds is pretty new and alternatives were not as bad as they are now. You could at least get inflation back by just letting your money stay at the bank, which is not possible now anymore.
  - dehrmann 6y ago
    The biggest change has been free trades and lower account minimums. For a long time, as long as you could hit the minimum (usually $2500-$5000), Vanguard was an amazing choice. The minimum wasn't great, but really, investing less isn't all that interesting, at least not as a missed opportunity for building wealth. Low-fee ETFs have also been around for a while, but the $10 per trade you'd pay in 2005 meant you didn't really want to buy less than $1,000 of anything.
SavantIdiot 6y ago
> lack better alternatives What?! Wow, this is a painfully misinformed statement. Like, so misinformed I want to hug you. Index funds have consistently beaten inflation by double digits and have practically nil management fees. They are vastly more secure alternative to imaginary crypto exchanges.
- 6y ago

one2three4 6y ago

That. Combined with the fact that so many productive people and healthy business have limited or no access to it.

api 6y ago

The last part is why so much money is in it. Everyone remembers how everyone said dot.com was over in 2002 when the biggest dot.coms were yet to come. Everyone remembers when everyone laughed at Tesla and SpaceX. Everyone remembers Bitcoin at $1. There is a hell of a lot of FOMO around. There are also record low interest rates not just in the USA but globally, and that is inflating every asset at once. If there is a crash I don’t think it will just be cryptocurrency. It will be broad and deep.

berryjerry 6y ago
I see this too. Almost every asset class is moving together. When interest rates can't be dropped further then the real problems will begin. Banks have built floors into their loans so that variable rates can't drop below zero already. At the point when interest rates drop below zero, lower interest rates will actually harm the economy rather than help it and then we'll see everything come crashing down.

gofreddygo 6y ago

Crypto space feels like a decentralized slot machine spiraling out of control with shiny lights, loud sounds and exponential payouts. Always worth reiterating: the house always wins.