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> Providing better financial services at lower costs. How can anything than runs a blockchain offer a service at a lower cost? It can't. The only competitive

by lottin 5y ago

> Providing better financial services at lower costs. How can anything than runs a blockchain offer a service at a lower cost? It can't. The only competitive advantage that crypto has over the financial sector is that crypto is by and large operating with disregard for financial regulations. Let's see how long it's gonna last.

carlosdp 5y ago
It very much can, because these protocols can do the same things the traditional equivalents can (trading, lending, etc.) fully-automated with smart contracts. When you don't have to pay a ton of salaries to push paper around, you can make things extremely efficient. And like OP said, a lot of the prices for financial services are artificially high due to lack of competition as it is.
- lottin 5y ago
  A "smart contract" is nothing new, it's simply a computer program, and computer programs are already widely used in the financial sector. So that cannot be it.
  - nybble41 5y ago
    A smart contract is much more than "simply a computer program". It's a computer program which is intimately linked to a distributed ledger such that the output of the program directly determines who is allowed to make use of the assets. The "distributed" part is important since it means that you're not dependent on particular party to enforce the contract—the entire distributed system does that.
    - lottin 5y ago
      Yes, we already know that. The point is everything that can be automated with a smart contract can also be automated with a computer program in conventional finance. Therefore "smart contracts" do not provide a competitive advantage, contrary to what the other poster suggested.
- pavlov 5y ago
  > “A lot of the prices for financial services are artificially high due to lack of competition as it is.” But this is completely independent of any cryptocurrency solutions. Look at retail stock trading. We now have zero-fee trading, but it’s not because some wonderful blockchain thing happened — new competitors like Robinhood made it the standard across the industry. It wasn’t a technological problem. Some high-cost services in the USA that seem like technological problems are actually due to insufficient regulation. For example, wire transfers can cost $25 here, whereas they’re free and instant in Europe+UK. This is not because Europe has a magic blockchain — it’s simply the result of EU-level regulation that forced banks to interoperate. (Apparently the Fed is finally doing something similar now, decades late.) The problems that exist can be solved by markets and regulation. The technology layer of cryptocurrencies is a useless substrate and primarily serves to reenact financial scams from the 20th century.
  - matthewdgreen 5y ago
    It is hard to look at the state of today's financial services and say everything is optimal: even in the EU, most of the regulation you mention (free wire transfers, low-fee credit cards) was a reaction to egregious inefficiencies that a more dynamic and competitive industry would have squashed by itself, without the need for a years-long process of regulation and legislation. There is absolutely a place for disruptive technical experiments like cryptocurrency in a small part of the system, and to have good regulation of the rest of the financial system. It seems to me that the current balance is doing exactly that. Why are people dogmatically assured that technical advances in payments can only be driven by governments, when technical advances in virtually every other IT-adjacent industry have not worked like this?
    - pavlov 5y ago
      > "There is absolutely a place for disruptive technical experiments like cryptocurrency in a small part of the system, and to have good regulation of the rest of the financial system. It seems to me that the current balance is doing exactly that." Sure, I agree in principle. But the crypto science experiment is out of hand. It's providing negligible actual value to the system while consuming more energy than a mid-size European nation. This is an egregious failure. If Bitcoin and Ethereum mining were shut down today, nobody would lose access to any necessary financial service, and we (mankind) would be at least 1% closer to the fossil fuel reduction goals we absolutely must meet. Seems like a no-brainer in the current state of emergency. There are many other things we need to do, but it's distressing that we're not even able to stop this novel waste that didn't exist ten years ago.
- lxgr 5y ago
  > these protocols can do the same things the traditional equivalents can (trading, lending, etc.) fully-automated with smart contracts. This very much remains to be seen. Much of the complexity of finance (and the value being provided) arises from the need to quantify risks of many different kinds. Not nearly all of that information is available on-chain, and for many scenarios I can't imagine it ever will be.
BLKNSLVR 5y ago
Regulation has worked pretty well so far to ensure the 99% don't get screwed over by the hedge fund managers at JP Morgan and Goldman Sachs, and that a big stick is wielded when rules are broken. /s Cryptocurrency, namely bitcoin, has lasted 13 years and only looks to be getting stronger and more widely adopted. Bitcoin's theory, based on its white paper, is that Blockchain offers to remove the middleman, or at least decentralise the middleman. Maybe it won't lower the cost, but it will hopefully spread those costs over a larger group of participants.
wavefunction 5y ago
There's a lot of overhead in the traditional finance system which leads to gatekeeping by those interested parties. I'd rather pay some crypto fees "to the system" than pay fees that ultimately end up in the pockets of overcompensated executives at a middle-man rent-seeking org.

by lottin 5y ago

carlosdp 5y ago

It very much can, because these protocols can do the same things the traditional equivalents can (trading, lending, etc.) fully-automated with smart contracts. When you don't have to pay a ton of salaries to push paper around, you can make things extremely efficient. And like OP said, a lot of the prices for financial services are artificially high due to lack of competition as it is.

lottin 5y ago
A "smart contract" is nothing new, it's simply a computer program, and computer programs are already widely used in the financial sector. So that cannot be it.
- nybble41 5y ago
  A smart contract is much more than "simply a computer program". It's a computer program which is intimately linked to a distributed ledger such that the output of the program directly determines who is allowed to make use of the assets. The "distributed" part is important since it means that you're not dependent on particular party to enforce the contract—the entire distributed system does that.
  - lottin 5y ago
    Yes, we already know that. The point is everything that can be automated with a smart contract can also be automated with a computer program in conventional finance. Therefore "smart contracts" do not provide a competitive advantage, contrary to what the other poster suggested.
pavlov 5y ago
> “A lot of the prices for financial services are artificially high due to lack of competition as it is.” But this is completely independent of any cryptocurrency solutions. Look at retail stock trading. We now have zero-fee trading, but it’s not because some wonderful blockchain thing happened — new competitors like Robinhood made it the standard across the industry. It wasn’t a technological problem. Some high-cost services in the USA that seem like technological problems are actually due to insufficient regulation. For example, wire transfers can cost $25 here, whereas they’re free and instant in Europe+UK. This is not because Europe has a magic blockchain — it’s simply the result of EU-level regulation that forced banks to interoperate. (Apparently the Fed is finally doing something similar now, decades late.) The problems that exist can be solved by markets and regulation. The technology layer of cryptocurrencies is a useless substrate and primarily serves to reenact financial scams from the 20th century.
- matthewdgreen 5y ago
  It is hard to look at the state of today's financial services and say everything is optimal: even in the EU, most of the regulation you mention (free wire transfers, low-fee credit cards) was a reaction to egregious inefficiencies that a more dynamic and competitive industry would have squashed by itself, without the need for a years-long process of regulation and legislation. There is absolutely a place for disruptive technical experiments like cryptocurrency in a small part of the system, and to have good regulation of the rest of the financial system. It seems to me that the current balance is doing exactly that. Why are people dogmatically assured that technical advances in payments can only be driven by governments, when technical advances in virtually every other IT-adjacent industry have not worked like this?
  - pavlov 5y ago
    > "There is absolutely a place for disruptive technical experiments like cryptocurrency in a small part of the system, and to have good regulation of the rest of the financial system. It seems to me that the current balance is doing exactly that." Sure, I agree in principle. But the crypto science experiment is out of hand. It's providing negligible actual value to the system while consuming more energy than a mid-size European nation. This is an egregious failure. If Bitcoin and Ethereum mining were shut down today, nobody would lose access to any necessary financial service, and we (mankind) would be at least 1% closer to the fossil fuel reduction goals we absolutely must meet. Seems like a no-brainer in the current state of emergency. There are many other things we need to do, but it's distressing that we're not even able to stop this novel waste that didn't exist ten years ago.
lxgr 5y ago
> these protocols can do the same things the traditional equivalents can (trading, lending, etc.) fully-automated with smart contracts. This very much remains to be seen. Much of the complexity of finance (and the value being provided) arises from the need to quantify risks of many different kinds. Not nearly all of that information is available on-chain, and for many scenarios I can't imagine it ever will be.

BLKNSLVR 5y ago

Regulation has worked pretty well so far to ensure the 99% don't get screwed over by the hedge fund managers at JP Morgan and Goldman Sachs, and that a big stick is wielded when rules are broken. /s Cryptocurrency, namely bitcoin, has lasted 13 years and only looks to be getting stronger and more widely adopted. Bitcoin's theory, based on its white paper, is that Blockchain offers to remove the middleman, or at least decentralise the middleman. Maybe it won't lower the cost, but it will hopefully spread those costs over a larger group of participants.

wavefunction 5y ago

There's a lot of overhead in the traditional finance system which leads to gatekeeping by those interested parties. I'd rather pay some crypto fees "to the system" than pay fees that ultimately end up in the pockets of overcompensated executives at a middle-man rent-seeking org.