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Risk is that a tether run causes all of crypto to collapse, not just USDT. How many actual dollars are in the system? Everything real has been exfiltrated throu

Risk is that a tether run causes all of crypto to collapse, not just USDT. How many actual dollars are in the system? Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits.

wpietri 5y ago
Exactly. Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead. In contrast, imagine investing in, say, a new fast-food franchise joint. They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume. If it's a well-run business, the value of the outputs will be more than the value of the inputs, making it a positive-sum effort.
- wyager 5y ago
  The positive externalities from sound money and the concomitant demonetization of other assets (like real estate, oil, etc.) are massive, especially in the long term.
  - arcticbull 5y ago
    Real estate and oil are not money and therefore cannot be demonetized. One is a productive asset, the other a commodity. Words have meaning.
    - wyager 5y ago
      > Words have meaning. Have you considered that you may simply be failing to comprehend the meaning? In particular, "monetization" literally means "the process of turning into money" - one of several more specific meanings, which should be clear from context, is the conversion of a non-monetized asset with sufficient monetary properties into a monetized asset. A monetized asset (not monetary - that term is too overloaded, although "monetized" isn't much better) is precisely an asset which has a higher value than would be predicted from its expected revenues, commodity consumption value, etc. If people are concerned about currency devaluation, where do they put their money? Whatever set of assets people turn to (equities, commodities, whatever) will be subject to additional demand purely qua wealth storage, pushing up the price of those assets beyond what you would expect from a pure discounted cash flow model - i.e. they become monetized (begin to function as money, in addition to whatever asset class one might naively assign them to). So, with that in mind, let's address: > Real estate and oil are not money and therefore cannot be demonetized If people are using real estate, oil, (gold, equities, ...) as a place to stash their wealth to protect it from inflation or whatever, and all of a sudden there's a better option available for this purpose, demand for random "not money" assets qua money is going to drop, and they will cease to behave like money - demonetization.
- trophycase 5y ago
  Humanity is just a negative sum game in that we take in real resources and just move those resources around and then die, all while increasing entropy of the universe.
  - samtheprogram 5y ago
    That would be true if the human population didn’t consistently increase over time; but it has.
- jafo 5y ago
  > They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume Is a decentralized, public ledger not a good people will pay (via cryptocurrency) to consume?
  - TomSwirly 5y ago
    For what specific purpose?
    - drdeca 5y ago
      There were timestamping services which people paid for before bitcoin. So, there is some price people will pay in order to be able to demonstrate in the future that some data existed at or before a given time. A decentralized ledger also provides this purpose. Of course, at current transaction fees on most blockchains, it would be wasting quite a bit of money to make a transaction just to timestamp a single thing. This is why there are services (one of which, iirc, has gotten a, uh, endowment(?) in order to provide the service for free?) which collect large quantities of (hashes of) data that people want to establish existed before a given time, and produce a Merkle tree of all of that, so that all those people can demonstrate that their data existed before a given time. So, that's one useful service. Is it enough to justify all the stuff that goes into blockchain stuff? That's a different question. But, if the question is "Do they have any genuine use?", the answer is "yes." .
      - arcticbull 5y ago
        The blockchain is a pretty terrible timestamping service as the block time varies based on the current hash rate and difficulty. From as little as 5.5 minutes to as much as 15 minutes. [1] It's at best a coal-powered monotonic counter. Given the massive variability you have to correlate it with an actual clock you trust lol, and if you trust the clock you may as well just use that. [1] https://bitinfocharts.com/comparison/bitcoin-confirmationtime.html#3y https://bitinfocharts.com/comparison/bitcoin-confirmationtim...
        5y ago
- mattnewton 5y ago
  I'm a crypto bear myself, but I'm not sure I agree with this argument. Plenty of services are built around "just moving money around" - accounting in this way has a ton of real value or else stripe, visa, paypal etc wouldn't be the huge companies they are. The questions are, whether "investing" by buying and holding is the right way to capture the value that this produces, and whether the benefits of doing it on a distributed blockchain outweigh the costs.
  - BoiledCabbage 5y ago
    visa, paypal... all provide value in allowing commercial transitions. Exchange of goods and services, digitally or on credit. The value it is providing is eliminating the inefficiency of barter (which cash also does), and allowing remote digital transactions, again good for societal benefit. There is no societal benefit to buying, holding, selling a crypto currency. The thing that could provide societal value is smart contracts - but that has nothing to do with crypto. Visa (or Stripe) could implement smart contracts in javascript on top of their platform and society gets pretty much all of the benefits without needing any of the crypto.
    - swader999 5y ago
      There is value in having a monetary system though. And if BTC is a better system and more people find it's utility for barter or wealth preservation better it might appreciate more in relation to something like the USD which has many different characteristics.
      - arcticbull 5y ago
        It's a strictly worse monetary system by any measure. It's massively more expensive to transact, it's unbelievably inefficient - requiring as much power as Thailand and generating as much e-waste as the Netherlands to scribble 2-3 tx/sec into a ledger. That's 60 days of power for the average US household and 1 iPad of e-waste per transaction. [1] [edit](97% of all mining hardware will be thrown away without ever winning a single block reward). If adopted as an actual currency it would immediately lead to a deflationary spiral savaging the job market. [2] Even the dictator of El Salvador wasn't nuts enough to adopt it as an actual currency. All pricing continues to be in USD and exchanged for BTC at the point of sale - and the point of a gun. (Keep in mind legal tender laws in ES require everyone to accept your Bitcoin for purchases or you face criminal charges). To call it wholly unfit for any purpose except exchanging for black tar heroin would be an understatement. [1] https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption [2] https://www.investopedia.com/terms/d/deflationary-spiral.asp https://www.investopedia.com/terms/d/deflationary-spiral.asp
- swader999 5y ago
  You could make the same claim about any kind of money though. Whose to say the USD or GOLD or CAD or tree bark is real money? A productive asset is an entirely different thing. It's not easy to convert an asset for instance or walk across a border with it. People make the fundamental mistake thinking these things are investments, they aren't, it's just currency or forex speculation that we are doing here.
  - adamc 5y ago
    In the case of the USD, the existence of a powerful government with a variety of powers (including coercive ones). Nothing is guaranteed in life, but it is orders of magnitude different from a digital currency offered by private individuals.
    - swader999 5y ago
      Sure and I agree the USD at the moment has an incredible backing. Also it being the reserve currency and base for most other currencies and commodities is no small thing. You could argue that BTC is backed by one of the most powerful networks of computing power on the planet. I don't think that's better than what the USD has, but it isn't 'Nothing'. The fact it can't be debased as easily as fiat currencies is not a tangible thing but it does compel interest in it.
      - arcticbull 5y ago
        Its network doesn't create value, it extracts value. $60M per day, $21B per year. > The fact it can't be debased as easily as fiat currencies is not a tangible thing but it does compel interest in it. That is not a benefit to a currency, quite the opposite. A deflationary currency would likely lead to a deflationary spiral, savaging the job market [1] It also leads to a monetary system that cannot adjust to a changing population or to transient issues such as COVID. If BTC were the currency of record in 2020, the economy would likely have been utterly devastated. [1] https://www.investopedia.com/terms/d/deflationary-spiral.asp https://www.investopedia.com/terms/d/deflationary-spiral.asp
- scrubs 5y ago
  Agree! If there was no way for ppl playing in crypto to get their hands on bonafide fiat currency, I don't think anybody would really care about crypto. Remember the Gemini exchange adds looking for qualified investors? Why? because such people have US dollars, which is what Gemini wants to bank.
  - swader999 5y ago
    Right now that's the case but there's no guarantee any currency will always remain the one of choice. And BTC doesn't need exchanges, but of course it does help, especially in the early stages.
    - headsoup 5y ago
      Are we still in 'the early stages?' We seem to always be in the early stages of blockchain/bitcoin.
- robocat 5y ago
  > imagine investing in, say, a new fast-food franchise joint Let us imagine instead that you want to invest in Burger King. You buy some shares in Restaurant Brands International (QSR). When you own those shares, what does that actually mean - how is that connected to the purchase of burgers? I think share ownership is often a better metaphor for many cryptocurrencies than fiat currency. Especially when considering shares like Tesla, Hertz, or GameStop. Where does the value of a share come from? Can a company steal all your money? What actually records your share ownership? How are profits calculated, and how do you get them?
  - giaour 5y ago
    As an unaccredited investor, your investment funds can only be accepted by publicly traded corporations (with all the legal protections and reporting requirements that entails). Investing in GameStop is definitely riskier than putting your money in a savings account, but fraud is substantially easier in a totally anonymous and unregulated market like the crypto sector. I mean, just think about how hard the Enron execs had to work to defraud their investors! They had to come up with a novel scheme to hide losses, collude with their accountants to avoid detection, and some of them even had to spend some time in prison. Yesterday, I read about an NFT scam where the anonymous developer just transferred funds to his personal wallet and then disappeared.
  - wpietri 5y ago
    The value of a share typically comes from the productive assets the company owns. If you buy all 468 million shares of QSR, you get all the restaurants, the brands, the vendor relationships, the employee relationships, the customer relationships. If you have a smaller fraction, you have a smaller fraction of that, plus you are entitled to a share of the profits generated. But if you buy a Bitcoin, you own no productive asset and therefore are entitled to no profits. At one point the theory was you could trade it for something useful, like other currencies. But it's a pretty bad currency, so people mostly have stopped pretending it is useful for that. There are answers to the rest of your questions, which are complicated and depend on exchange and jurisdiction, but people can look up the details if they want.
- nl 5y ago
  > Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead. I'm no Crypto fan, but this is wrong. Plenty of new coins get minted which are redeemed for real money. This is basically the credit creation cycle[1] as seen in traditional banking (where banks create money by lending the same deposit out multiple times simultaneously) except in this case there is often no equivalent of a deposit (except sort-of staking in some cases). [1] https://www.economicsnetwork.ac.uk/archive/starkey_banking https://www.economicsnetwork.ac.uk/archive/starkey_banking
brightball 5y ago
I always love looking at “market cap” for these things. As if every coin there could actually be sold for the price listed making it worth hypothetical billions. Even a small cash out will cut the value to pieces.
- swader999 5y ago
  That's the same with many markets though. Market cap is a pretty silly metric to use for almost any market.
  - habitue 5y ago
    It's a useful metric in one particular case, which is if you're looking to buy out the stock
    - swader999 5y ago
      It depends on the stock and what each individual holder is prepared to sell for. So it's exactly the same. In a corporate buyout the individual sellers typically agree on a sale price, but that's a contract on top of the market. Without that in play you'd be subject to the same unknowns and market cap wouldn't guarantee any buyout price. Hostile takeover is one example.
    - deleted 5y ago
      [deleted]
  - mminer237 5y ago
    For stocks though the market cap is judged against earnings typically. The price can never get too low or the shareholders can just force a dividend to make the money directly from the underlying equity.
  - bduerst 5y ago
    Market cap for publicly traded corporations is still a good measure of value since there are laws, regulations, public disclosures, etc. ensuring they're equally measured to a degree. If I paid $50000 for a cowry shell and said the market cap of cowry shells is more than MasterCard then there's a few problems...
vineyardmike 5y ago
I want to preface this by saying I don't own crypto and I think its often full of scams (eg. squid coin). But it has some real potential and isn't always as bad as it seems. Tether is a real risk, I agree. > Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits. Yeah, but that's not untrue for banks. Conceptually, a bank's job is to store money for depositors. That has a real cost, so theoretically you should have to pay for banking service. We know that banks make that money back from lending the money with interest (profiting off interest). This lending behavior is theoretically possible for individuals to do while skipping banks, but it is not practical at scale. So, basically depositors "pay" with opportunity cost - and since the world fiat currencies have inflation, this is essentially paying the devalued difference of money. Crypto is similar... it costs real money to maintain the deposits - aka POW to secure the ledger. Instead of lenders' interest paying the cost, it is paid by deflation by depositor by more currency being circulated. Not too different than fiat-at-banks. Crypto also is potentially more egalitarian since anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in contracts (conditional swaps/lending, escrow, multi-sig transactions).
- bubbleRefuge 5y ago
  Banks do not lend deposits in fiat currency regimes such as the ones most western countries have. Banks create deposits out of thin air to 'fund' loans. The have capital and reserve requirements to meet, of coarse, but they do not lend out deposits or depend on deposits for lending.
fnord77 5y ago
so basically crypto is deflationary?
viraptor 5y ago
This is a possibility of course, but the second claim is something that would really need some proof. It's sure fun to say, but did you calculate it or do you just want it to be true?

wpietri 5y ago

Exactly. Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead. In contrast, imagine investing in, say, a new fast-food franchise joint. They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume. If it's a well-run business, the value of the outputs will be more than the value of the inputs, making it a positive-sum effort.

wyager 5y ago
The positive externalities from sound money and the concomitant demonetization of other assets (like real estate, oil, etc.) are massive, especially in the long term.
- arcticbull 5y ago
  Real estate and oil are not money and therefore cannot be demonetized. One is a productive asset, the other a commodity. Words have meaning.
  - wyager 5y ago
    > Words have meaning. Have you considered that you may simply be failing to comprehend the meaning? In particular, "monetization" literally means "the process of turning into money" - one of several more specific meanings, which should be clear from context, is the conversion of a non-monetized asset with sufficient monetary properties into a monetized asset. A monetized asset (not monetary - that term is too overloaded, although "monetized" isn't much better) is precisely an asset which has a higher value than would be predicted from its expected revenues, commodity consumption value, etc. If people are concerned about currency devaluation, where do they put their money? Whatever set of assets people turn to (equities, commodities, whatever) will be subject to additional demand purely qua wealth storage, pushing up the price of those assets beyond what you would expect from a pure discounted cash flow model - i.e. they become monetized (begin to function as money, in addition to whatever asset class one might naively assign them to). So, with that in mind, let's address: > Real estate and oil are not money and therefore cannot be demonetized If people are using real estate, oil, (gold, equities, ...) as a place to stash their wealth to protect it from inflation or whatever, and all of a sudden there's a better option available for this purpose, demand for random "not money" assets qua money is going to drop, and they will cease to behave like money - demonetization.
trophycase 5y ago
Humanity is just a negative sum game in that we take in real resources and just move those resources around and then die, all while increasing entropy of the universe.
- samtheprogram 5y ago
  That would be true if the human population didn’t consistently increase over time; but it has.
jafo 5y ago
> They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume Is a decentralized, public ledger not a good people will pay (via cryptocurrency) to consume?
- TomSwirly 5y ago
  For what specific purpose?
  - drdeca 5y ago
    There were timestamping services which people paid for before bitcoin. So, there is some price people will pay in order to be able to demonstrate in the future that some data existed at or before a given time. A decentralized ledger also provides this purpose. Of course, at current transaction fees on most blockchains, it would be wasting quite a bit of money to make a transaction just to timestamp a single thing. This is why there are services (one of which, iirc, has gotten a, uh, endowment(?) in order to provide the service for free?) which collect large quantities of (hashes of) data that people want to establish existed before a given time, and produce a Merkle tree of all of that, so that all those people can demonstrate that their data existed before a given time. So, that's one useful service. Is it enough to justify all the stuff that goes into blockchain stuff? That's a different question. But, if the question is "Do they have any genuine use?", the answer is "yes." .
    - arcticbull 5y ago
      The blockchain is a pretty terrible timestamping service as the block time varies based on the current hash rate and difficulty. From as little as 5.5 minutes to as much as 15 minutes. [1] It's at best a coal-powered monotonic counter. Given the massive variability you have to correlate it with an actual clock you trust lol, and if you trust the clock you may as well just use that. [1] https://bitinfocharts.com/comparison/bitcoin-confirmationtime.html#3y https://bitinfocharts.com/comparison/bitcoin-confirmationtim...
      - 5y ago
mattnewton 5y ago
I'm a crypto bear myself, but I'm not sure I agree with this argument. Plenty of services are built around "just moving money around" - accounting in this way has a ton of real value or else stripe, visa, paypal etc wouldn't be the huge companies they are. The questions are, whether "investing" by buying and holding is the right way to capture the value that this produces, and whether the benefits of doing it on a distributed blockchain outweigh the costs.
- BoiledCabbage 5y ago
  visa, paypal... all provide value in allowing commercial transitions. Exchange of goods and services, digitally or on credit. The value it is providing is eliminating the inefficiency of barter (which cash also does), and allowing remote digital transactions, again good for societal benefit. There is no societal benefit to buying, holding, selling a crypto currency. The thing that could provide societal value is smart contracts - but that has nothing to do with crypto. Visa (or Stripe) could implement smart contracts in javascript on top of their platform and society gets pretty much all of the benefits without needing any of the crypto.
  - swader999 5y ago
    There is value in having a monetary system though. And if BTC is a better system and more people find it's utility for barter or wealth preservation better it might appreciate more in relation to something like the USD which has many different characteristics.
    - arcticbull 5y ago
      It's a strictly worse monetary system by any measure. It's massively more expensive to transact, it's unbelievably inefficient - requiring as much power as Thailand and generating as much e-waste as the Netherlands to scribble 2-3 tx/sec into a ledger. That's 60 days of power for the average US household and 1 iPad of e-waste per transaction. [1] [edit](97% of all mining hardware will be thrown away without ever winning a single block reward). If adopted as an actual currency it would immediately lead to a deflationary spiral savaging the job market. [2] Even the dictator of El Salvador wasn't nuts enough to adopt it as an actual currency. All pricing continues to be in USD and exchanged for BTC at the point of sale - and the point of a gun. (Keep in mind legal tender laws in ES require everyone to accept your Bitcoin for purchases or you face criminal charges). To call it wholly unfit for any purpose except exchanging for black tar heroin would be an understatement. [1] https://digiconomist.net/bitcoin-energy-consumption https://digiconomist.net/bitcoin-energy-consumption [2] https://www.investopedia.com/terms/d/deflationary-spiral.asp https://www.investopedia.com/terms/d/deflationary-spiral.asp
swader999 5y ago
You could make the same claim about any kind of money though. Whose to say the USD or GOLD or CAD or tree bark is real money? A productive asset is an entirely different thing. It's not easy to convert an asset for instance or walk across a border with it. People make the fundamental mistake thinking these things are investments, they aren't, it's just currency or forex speculation that we are doing here.
- adamc 5y ago
  In the case of the USD, the existence of a powerful government with a variety of powers (including coercive ones). Nothing is guaranteed in life, but it is orders of magnitude different from a digital currency offered by private individuals.
  - swader999 5y ago
    Sure and I agree the USD at the moment has an incredible backing. Also it being the reserve currency and base for most other currencies and commodities is no small thing. You could argue that BTC is backed by one of the most powerful networks of computing power on the planet. I don't think that's better than what the USD has, but it isn't 'Nothing'. The fact it can't be debased as easily as fiat currencies is not a tangible thing but it does compel interest in it.
    - arcticbull 5y ago
      Its network doesn't create value, it extracts value. $60M per day, $21B per year. > The fact it can't be debased as easily as fiat currencies is not a tangible thing but it does compel interest in it. That is not a benefit to a currency, quite the opposite. A deflationary currency would likely lead to a deflationary spiral, savaging the job market [1] It also leads to a monetary system that cannot adjust to a changing population or to transient issues such as COVID. If BTC were the currency of record in 2020, the economy would likely have been utterly devastated. [1] https://www.investopedia.com/terms/d/deflationary-spiral.asp https://www.investopedia.com/terms/d/deflationary-spiral.asp
scrubs 5y ago
Agree! If there was no way for ppl playing in crypto to get their hands on bonafide fiat currency, I don't think anybody would really care about crypto. Remember the Gemini exchange adds looking for qualified investors? Why? because such people have US dollars, which is what Gemini wants to bank.
- swader999 5y ago
  Right now that's the case but there's no guarantee any currency will always remain the one of choice. And BTC doesn't need exchanges, but of course it does help, especially in the early stages.
  - headsoup 5y ago
    Are we still in 'the early stages?' We seem to always be in the early stages of blockchain/bitcoin.
robocat 5y ago
> imagine investing in, say, a new fast-food franchise joint Let us imagine instead that you want to invest in Burger King. You buy some shares in Restaurant Brands International (QSR). When you own those shares, what does that actually mean - how is that connected to the purchase of burgers? I think share ownership is often a better metaphor for many cryptocurrencies than fiat currency. Especially when considering shares like Tesla, Hertz, or GameStop. Where does the value of a share come from? Can a company steal all your money? What actually records your share ownership? How are profits calculated, and how do you get them?
- giaour 5y ago
  As an unaccredited investor, your investment funds can only be accepted by publicly traded corporations (with all the legal protections and reporting requirements that entails). Investing in GameStop is definitely riskier than putting your money in a savings account, but fraud is substantially easier in a totally anonymous and unregulated market like the crypto sector. I mean, just think about how hard the Enron execs had to work to defraud their investors! They had to come up with a novel scheme to hide losses, collude with their accountants to avoid detection, and some of them even had to spend some time in prison. Yesterday, I read about an NFT scam where the anonymous developer just transferred funds to his personal wallet and then disappeared.
- wpietri 5y ago
  The value of a share typically comes from the productive assets the company owns. If you buy all 468 million shares of QSR, you get all the restaurants, the brands, the vendor relationships, the employee relationships, the customer relationships. If you have a smaller fraction, you have a smaller fraction of that, plus you are entitled to a share of the profits generated. But if you buy a Bitcoin, you own no productive asset and therefore are entitled to no profits. At one point the theory was you could trade it for something useful, like other currencies. But it's a pretty bad currency, so people mostly have stopped pretending it is useful for that. There are answers to the rest of your questions, which are complicated and depend on exchange and jurisdiction, but people can look up the details if they want.
nl 5y ago
> Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead. I'm no Crypto fan, but this is wrong. Plenty of new coins get minted which are redeemed for real money. This is basically the credit creation cycle[1] as seen in traditional banking (where banks create money by lending the same deposit out multiple times simultaneously) except in this case there is often no equivalent of a deposit (except sort-of staking in some cases). [1] https://www.economicsnetwork.ac.uk/archive/starkey_banking https://www.economicsnetwork.ac.uk/archive/starkey_banking

brightball 5y ago

I always love looking at “market cap” for these things. As if every coin there could actually be sold for the price listed making it worth hypothetical billions. Even a small cash out will cut the value to pieces.

swader999 5y ago
That's the same with many markets though. Market cap is a pretty silly metric to use for almost any market.
- habitue 5y ago
  It's a useful metric in one particular case, which is if you're looking to buy out the stock
  - swader999 5y ago
    It depends on the stock and what each individual holder is prepared to sell for. So it's exactly the same. In a corporate buyout the individual sellers typically agree on a sale price, but that's a contract on top of the market. Without that in play you'd be subject to the same unknowns and market cap wouldn't guarantee any buyout price. Hostile takeover is one example.
  - deleted 5y ago
    [deleted]
- mminer237 5y ago
  For stocks though the market cap is judged against earnings typically. The price can never get too low or the shareholders can just force a dividend to make the money directly from the underlying equity.
- bduerst 5y ago
  Market cap for publicly traded corporations is still a good measure of value since there are laws, regulations, public disclosures, etc. ensuring they're equally measured to a degree. If I paid $50000 for a cowry shell and said the market cap of cowry shells is more than MasterCard then there's a few problems...

vineyardmike 5y ago

I want to preface this by saying I don't own crypto and I think its often full of scams (eg. squid coin). But it has some real potential and isn't always as bad as it seems. Tether is a real risk, I agree. > Everything real has been exfiltrated through electricity bills, taxes and early adopters selling, the entire crypto economy is a hollow shell, leveraged on retail deposits. Yeah, but that's not untrue for banks. Conceptually, a bank's job is to store money for depositors. That has a real cost, so theoretically you should have to pay for banking service. We know that banks make that money back from lending the money with interest (profiting off interest). This lending behavior is theoretically possible for individuals to do while skipping banks, but it is not practical at scale. So, basically depositors "pay" with opportunity cost - and since the world fiat currencies have inflation, this is essentially paying the devalued difference of money. Crypto is similar... it costs real money to maintain the deposits - aka POW to secure the ledger. Instead of lenders' interest paying the cost, it is paid by deflation by depositor by more currency being circulated. Not too different than fiat-at-banks. Crypto also is potentially more egalitarian since anyone can mine (at a small scale at least) to potentially make some small income, and certain complex financial actions can be done for "free-ish" in contracts (conditional swaps/lending, escrow, multi-sig transactions).

bubbleRefuge 5y ago
Banks do not lend deposits in fiat currency regimes such as the ones most western countries have. Banks create deposits out of thin air to 'fund' loans. The have capital and reserve requirements to meet, of coarse, but they do not lend out deposits or depend on deposits for lending.

fnord77 5y ago

so basically crypto is deflationary?

viraptor 5y ago

This is a possibility of course, but the second claim is something that would really need some proof. It's sure fun to say, but did you calculate it or do you just want it to be true?