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>you end up trusting the unregulated gatekeepers to the block chain --- the exchanges. how exactly are exchanges gatekeepers? blockchains would function comple

by dylkil 5y ago

>you end up trusting the unregulated gatekeepers to the block chain --- the exchanges. how exactly are exchanges gatekeepers? blockchains would function completely fine without exchanges. In fact, on chain exchanges like uniswap and 0x require zero trust whatsoever.

jqpabc123 5y ago
In fact, on chain exchanges like uniswap and 0x require zero trust whatsoever. Who determines how much your crypto is worth? Does uniswap do this? No, not on their own. They can't --- their daily trading volume is too small. They are literally forced to follow the "marketplace". The 800lb gorillas that make up the crypto "marketplace" are the centralized exchanges --- Binance and others. They set the price using whatever method they choose. And they can easily influence the price by buying and selling themselves. Binance has access to unlimited funds to do so --- by simply minting more Tethers --- which they have done repeatedly --- and the price remains pegged at $1USD (wink, wink, nod, nod). With unlimited funds, effective control over the pricing mechanism and no regulation --- the centralized exchanges have all the ingredients for the ultimate form of insider trading fraud. If you trade crypto as it exists today, you are *trusting* the centralized exchanges who have overwhelming influence over the "marketplace". You have no other option.
- rosndo 5y ago
  Exchanges decentralize trust, you don’t have to work with any specific exchange.
  - jqpabc123 5y ago
    LOL! Sure, pick any exchange you want and I'll bet you a BTC that the price of USDT is effectively $1 USD. USDT remains pegged at $1 USD regardless of how many new Tethers are minted. Have you ever thought about why or how this happens? Once you do, your *trust* in the crypto exchanges/marketplace will start to unravel.
    - rosndo 5y ago
      Tether/Bitfinex has more than enough funds to back USDT, especially after the recent DOJ seizure. Would I hold funds in USDT myself? No, I learned my lesson after losing 50k with Liberty Reserve.
      - jqpabc123 5y ago
        Tether/Bitfinex has more than enough funds to back USDT And you know this how? Trust? Be honest. If the people running things used all the funds to buy a private island in the South Pacific, you wouldn't have any way to know.
        rosndo 5y ago
        I’m not sure what you are getting at. Who gives a shit about tether?
        jqpabc123 5y ago
        This is the attitude that makes fraud so easy. This is like saying, who gives a shit if the NYSE is minting and selling stocks? Anyone with an IRA or a 401K should. Who gives a shit if Liberty Reserve was a money laundering operation? Maybe you should have. More than half of all crypto trades involve tether. The market prices of most crypto is being influenced by it whether you use it personally or not. If/when the price of Tether crumbles, most crypto will have no choice but to follow. https://www.forbes.com/sites/francescoppola/2019/03/14/tethers-u-s-dollar-peg-is-no-longer-credible/?sh=50d5b9aa451b https://www.forbes.com/sites/francescoppola/2019/03/14/tethe...
- jl2718 5y ago
  Uniswap is algorithmic liquidity. It doesn't "follow" anybody. It is true that the exchanges have more volume, but that is not necessarily 'real' volume. The operating model of a centralized exchange is that they get paid to both provide and consume liquidity, so much of the volume is their own. On Uniswap, there is no privileged entity, so everybody pays to consume liquidity. This is a huge damper on volumes. Note that there are MEV forks that also massively increase the Uniswap volume too, but they have to pay at least the trade fee on both sides of a sandwich.
  - jqpabc123 5y ago
    It doesn't "follow" anybody. The uniswap "algorithm" has no other choice but to follow the "market". Otherwise, it would do no trades. Binance's trading volume is 40-50 times that of uniswap. What Binance does affects the price on uniswap --- way more than the other way around. If Binance mints USDT and uses it to buy lots of BTC, what happens to the price of BTC on uniswap? Once the price on uniswap and other exchanges starts going up, others see it and jump in to avoid getting left behind --- driving it even higher. What happens when Binance then sells BTC? This is a classic "pump and dump". It happens all the time because there is nothing to stop it. Binance is the one controlling "the market". Uniswap with their "algorithm " just plays along.
    - jl2718 5y ago
      Unless I misunderstand you, I think you need to look into the “automatic market maker” concept. Their paper is the best source to cut through the chatter: https://uniswap.org/whitepaper.pdf https://uniswap.org/whitepaper.pdf
      - jqpabc123 5y ago
        I haven't looked at their paper but I think I understand the concept. Algorithm or not, they are just a little fish that can't possibly do very much to alter the direction of a marketplace whale they don't control. The only way for this concept to have any real overall significance is if they establish their own separate crypto and be the only "market maker" for it. But then this is "centralization" all over again.
- mateuszf 5y ago
  > Who determines how much your crypto is worth? As with other things - the people who want or don't want to buy it.
  - jqpabc123 5y ago
    What happens if the biggest player has an unlimited supply of money they can just mint at will and use it to drive up the price that you pay? What happens if they also also get to see your order before it is executed and have every opportunity to insert their own in front of yours just to drive up the price that you pay (aka "front running")?
    - louloulou 5y ago
      > What happens if the biggest player has an unlimited supply of money they can just mint at will and use it to drive up the price that you pay? That's the situation we are in with fiat currency. That's what central banks do.
      - jqpabc123 5y ago
        With one big difference --- centrals banks are motivated by overall economic benefit rather than private, personal gain.
        louloulou 5y ago
        Certainly that's what they want you to think.
        jqpabc123 5y ago
        And crypto wants you to think that unregulated exchanges are just as fair, honest and trustworthy as the highly regulated financial markets. The question remains, who are you gonna trust?
    - mateuszf 5y ago
jjtheblunt 5y ago
> blockchains would function completely fine without exchanges. I must be misunderstanding, but don't blockchains track references, through sequences of indirection (i.e., encrypted on the chain), to what is ultimately fiat currency?

by dylkil 5y ago

jqpabc123 5y ago

In fact, on chain exchanges like uniswap and 0x require zero trust whatsoever. Who determines how much your crypto is worth? Does uniswap do this? No, not on their own. They can't --- their daily trading volume is too small. They are literally forced to follow the "marketplace". The 800lb gorillas that make up the crypto "marketplace" are the centralized exchanges --- Binance and others. They set the price using whatever method they choose. And they can easily influence the price by buying and selling themselves. Binance has access to unlimited funds to do so --- by simply minting more Tethers --- which they have done repeatedly --- and the price remains pegged at $1USD (wink, wink, nod, nod). With unlimited funds, effective control over the pricing mechanism and no regulation --- the centralized exchanges have all the ingredients for the ultimate form of insider trading fraud. If you trade crypto as it exists today, you are *trusting* the centralized exchanges who have overwhelming influence over the "marketplace". You have no other option.

rosndo 5y ago
Exchanges decentralize trust, you don’t have to work with any specific exchange.
- jqpabc123 5y ago
  LOL! Sure, pick any exchange you want and I'll bet you a BTC that the price of USDT is effectively $1 USD. USDT remains pegged at $1 USD regardless of how many new Tethers are minted. Have you ever thought about why or how this happens? Once you do, your *trust* in the crypto exchanges/marketplace will start to unravel.
  - rosndo 5y ago
    Tether/Bitfinex has more than enough funds to back USDT, especially after the recent DOJ seizure. Would I hold funds in USDT myself? No, I learned my lesson after losing 50k with Liberty Reserve.
    - jqpabc123 5y ago
      Tether/Bitfinex has more than enough funds to back USDT And you know this how? Trust? Be honest. If the people running things used all the funds to buy a private island in the South Pacific, you wouldn't have any way to know.
      - rosndo 5y ago
        I’m not sure what you are getting at. Who gives a shit about tether?
        jqpabc123 5y ago
        This is the attitude that makes fraud so easy. This is like saying, who gives a shit if the NYSE is minting and selling stocks? Anyone with an IRA or a 401K should. Who gives a shit if Liberty Reserve was a money laundering operation? Maybe you should have. More than half of all crypto trades involve tether. The market prices of most crypto is being influenced by it whether you use it personally or not. If/when the price of Tether crumbles, most crypto will have no choice but to follow. https://www.forbes.com/sites/francescoppola/2019/03/14/tethers-u-s-dollar-peg-is-no-longer-credible/?sh=50d5b9aa451b https://www.forbes.com/sites/francescoppola/2019/03/14/tethe...
jl2718 5y ago
Uniswap is algorithmic liquidity. It doesn't "follow" anybody. It is true that the exchanges have more volume, but that is not necessarily 'real' volume. The operating model of a centralized exchange is that they get paid to both provide and consume liquidity, so much of the volume is their own. On Uniswap, there is no privileged entity, so everybody pays to consume liquidity. This is a huge damper on volumes. Note that there are MEV forks that also massively increase the Uniswap volume too, but they have to pay at least the trade fee on both sides of a sandwich.
- jqpabc123 5y ago
  It doesn't "follow" anybody. The uniswap "algorithm" has no other choice but to follow the "market". Otherwise, it would do no trades. Binance's trading volume is 40-50 times that of uniswap. What Binance does affects the price on uniswap --- way more than the other way around. If Binance mints USDT and uses it to buy lots of BTC, what happens to the price of BTC on uniswap? Once the price on uniswap and other exchanges starts going up, others see it and jump in to avoid getting left behind --- driving it even higher. What happens when Binance then sells BTC? This is a classic "pump and dump". It happens all the time because there is nothing to stop it. Binance is the one controlling "the market". Uniswap with their "algorithm " just plays along.
  - jl2718 5y ago
    Unless I misunderstand you, I think you need to look into the “automatic market maker” concept. Their paper is the best source to cut through the chatter: https://uniswap.org/whitepaper.pdf https://uniswap.org/whitepaper.pdf
    - jqpabc123 5y ago
      I haven't looked at their paper but I think I understand the concept. Algorithm or not, they are just a little fish that can't possibly do very much to alter the direction of a marketplace whale they don't control. The only way for this concept to have any real overall significance is if they establish their own separate crypto and be the only "market maker" for it. But then this is "centralization" all over again.
mateuszf 5y ago
> Who determines how much your crypto is worth? As with other things - the people who want or don't want to buy it.
- jqpabc123 5y ago
  What happens if the biggest player has an unlimited supply of money they can just mint at will and use it to drive up the price that you pay? What happens if they also also get to see your order before it is executed and have every opportunity to insert their own in front of yours just to drive up the price that you pay (aka "front running")?
  - louloulou 5y ago
    > What happens if the biggest player has an unlimited supply of money they can just mint at will and use it to drive up the price that you pay? That's the situation we are in with fiat currency. That's what central banks do.
    - jqpabc123 5y ago
      With one big difference --- centrals banks are motivated by overall economic benefit rather than private, personal gain.
      - louloulou 5y ago
        Certainly that's what they want you to think.
        jqpabc123 5y ago
        And crypto wants you to think that unregulated exchanges are just as fair, honest and trustworthy as the highly regulated financial markets. The question remains, who are you gonna trust?
  - mateuszf 5y ago

jjtheblunt 5y ago

> blockchains would function completely fine without exchanges. I must be misunderstanding, but don't blockchains track references, through sequences of indirection (i.e., encrypted on the chain), to what is ultimately fiat currency?