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Blockchain has two proven use cases: 1.) Speculative investment assets. 2.) Moving value outside of a financial system. Unregulated stable coins have proven
by johnebgd 4y ago
Blockchain has two proven use cases:
1.) Speculative investment assets.
2.) Moving value outside of a financial system.
Unregulated stable coins have proven to be as stable as the titanic was unsinkable.
Number 1 is really a problem because of Number 2. Number 2 is a fancy way to describe a primary use case being money laundering. Of course though there are some instances where that’s helpful like backing a foreign government you agree with. Unfortunately, it also means countries like North Korea can use it to evade sanctions.
Blockchain is largely a solution in search of a problem with speculators throwing money into stuff they don’t understand.
I’m a reformed blockchain enthusiast.
- syzygyhack 4y ago> Unregulated stable coins have proven to be as stable as the titanic was unsinkable. When in the last five years have you had difficulty cashing out USDT, USDC, or DAI at dollar value?
- polygamous_bat 4y agoBecause past performance is _always_ indicative of future performance, am I right? > When in the last five years have you had difficulty cashing out USDT, USDC, or DAI at dollar value? You could have said the exact same thing about Terra/UST right until sometimes last week. It works until it doesn't.
- tomrod 4y agoTypically, past performance is indicative of future behavior. This is why statistical modeling in social sciences works somewhat okay. But there are extrapolation regions or shorter memory missing prior events that cause behavior to deviate from status quo expectation.
- polygamous_bat 4y agoYes, you could say that sometimes past performance can indicate future behavior, but it doesn't hold for crypto the same reason it doesn't hold for perpetual motion machines.
- everfree 4y agoAlgorithmic and partially backed stablecoins (like Luna's TerraUSD) are perpetual motion machines. Fully backed stablecoins (all other popular stablecoins with the arguable exception of Tether) are not perpetual motion machines.
- austinkhale 4y agoWhat do you mean “fully backed”? The last time I checked on USDT (which was a while ago) I thought they admitted it was a fractional reserve, primarily denominated in undisclosed commercial paper. Additionally, they had not yet received an unqualified audit report from any of the big four. Has something changed in the last year or so?
- everfree 4y agoAs I said, Tether (USDT) is an arguable exception. You seem to be arguing that exception. I don't disagree with you.
- polygamous_bat 4y agoTether is the largest stablecoin in existence. If you are intent on arguing that the biggest example of your mentioned category is an exception, how do you propose the average person goes about find out what's an exception and what's following the norm?
- everfree 4y agoPicking any regulated, US-based stablecoin is a great start. https://news.ycombinator.com/item?id=31381864 https://news.ycombinator.com/item?id=31381864 Tether is large because it got a head start on network effect before the proper regulatory frameworks were put into place, in the USA at least. There's a massive amount of momentum there even though their product is inferior.
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- Jerrrry 4y ago"The reaper didn't come today, so he won't tomorrow"
- everfree 4y agoFor technology, that assumption is more likely than not, in a general sense. https://en.wikipedia.org/wiki/Lindy_effect https://en.wikipedia.org/wiki/Lindy_effect
- tdub311 4y agoValue of an asset doesn't really count as technology though. The technology of UST/Luna still "works" even though the value crashed.
- everfree 4y agoUST was intended to be a dollar-pegged stablecoin. The failure of its dollar peg was certainly a failure of technology, because a "dollar-pegged" coin that is not actually pegged to the dollar is not a "working" system.
- z9znz 4y agoThe thing is, you're right many times until you're wrong. Unfortunately when you're wrong, it can be catastrophic.
- IshKebab 4y ago... is a pretty good approximation. The problem is that you don't care if a stablecoin collapses tomorrow; you care if it collapses in the next 50 years and "the stablecoin hasn't collapsed in 50 years so it won't collapse in the next 50 years" obviously doesn't apply.
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- arcticbull 4y agoHave you heard the tale of the inductivist turkey and thanksgiving? This turkey found that, on his first morning at the turkey farm, he was fed at 9 a.m. However, being a good inductivist, he did not jump to conclusions. He waited until he had collected a large number of observations of the fact that he was fed at 9 a.m., and he made these observations under a wide variety of circumstances, on Wednesdays and Thursdays, on warm days and cold days, on rainy days and dry days. Each day, he added another observation statement to his list. Finally, his inductivist conscience was satisfied and he carried out an inductive inference to conclude, “I am always fed at 9 a.m.”. Alas, this conclusion was shown to be false in no uncertain manner when, on Christmas eve, instead of being fed, he had his throat cut. An inductive inference with true premises has led to a false conclusion. (via Alan Chalmers, What is this thing called Science, 2nd edition, University of Queensland Press, St. Lucia, 1982)
- SilasX 4y agoHave you heard of faster ways of conveying the insight that “turkeys seem safe until the day they get slaughtered” and less toxic ways of formatting quotes? And was it a fully general argument against induction, or do you disagree with the conclusion you were promoting?
- syzygyhack 4y ago1. UST hasn't existed for 5 years, the others have. 2. "Algostable" coins are experimental, and this one was propped up by ponzinomics on Anchor. It is not comparable to collateralized stablecoins, and claiming otherwise is intellectually dishonest.
- stouset 4y ago1. The beanie baby craze lasted a bit shy of 5 years. 5 years is nothing. 2. Collateralized stablecoins are stable insofar as they actually have enough liquid collateral to redeem. None of these coins have even remotely been tested yet.
- syzygyhack 4y agoYou don't think USDT holders have been scrambling to exit USDT over the last few days? Actually the sensible ones started cashing out around 1-2 months ago. You say that they have "not been remotely tested?" How are you quantifying that claim?
- arcticbull 4y agoUSDT can only be redeemed by non-US-person "authorized participants" as determined solely by Paolo Ardoino per their terms and conditions. Just who do you think these APs are? Best guess, they're exchanges, whose existence depends on USDT continuing to hold it's peg. Yes, I do think the holders have been scrambling to exist - one guy lost $4M trying to swap for USDT - but I think it's not Tether cashing it out, but instead exchanges eating the losses. That can only get you so far. The failure mode is a step function.
- SemanticStrengh 4y agono, terra is an algorithmic coin, the ones that are 100% backed by IRL assets are flawless
- arcticbull 4y agoDepends on the assets doesn't it.
- bushbaba 4y agoWhat if those assets decline in Value by 50% where assets held is 50% or less than equivalent usd value?
- practice9 4y agoSame could be said for US dollar as a world currency, couldn't it? Do you think its model is sustainable? British pound has enjoyed a long history and was used as a currency for international trade until early 20st century. Then dollar took over. One could argue it's because USA emerged from WW2 as a super-power. But it would be foolish to say that only a major war or a fall of the empire will change what currency people use. I'm not arguing for Terra as it was really a bad design. But it is odd that so many people just reject the idea of cryptocurrencies. It's a big sandbox, big experiment with thousands of people working on the new primitives. Even if 80% projects are scam or failures, 20% might be revolutionary. The US dollar as it is today went through several iterations It was kind of a stablecoin in the early days, pegged to the value of Spanish dollar which was more popular. There were also Continentals that failed and many colonial currencies that were outlawed IIRC.
- polygamous_bat 4y agoCurrencies rise and fall, and US dollar may as well get replaced by the Chinese yen as the world reserve currency by 2050. But that does not in any way merit cryptocurrencies, whose uselessness is independent of the failures of the US monetary policy. Your argument reminds me of the Politician's fallacy, which goes like: "we should invest in an alternative asset in case the US dollar fails, cryptocurrency is something, thus we should invest in cryptocurrencies." Go read this thread to understand the numerous criticisms of cryptocurrencies and then think why any of the existing cryptocurrencies should be worth beyond $0 (or slightly more, I admit they are novel and thus could be a collectible). [1] https://en.wikipedia.org/wiki/Politician%27s_syllogism https://en.wikipedia.org/wiki/Politician%27s_syllogism
- Traster 4y agoWhat you're describing is totally different in scale though. When the British pound got displaced as the currency for international trade it didn't suddenly lose 99.9999% of its value in a weekend. And whilst the Dollar isn't guaranteed to be the most popular currency for international trade, it's still going to be the currency a bunch of guys with guns insist Americans pay taxes in. There are real reasons people must hold real currencies. There are no reasons that anyone needs to hold crypto. I'm not saying crypto has no value, but I'm saying it's not comparable to a modern currency. You might be right that it's similar to some historical examples of weak upstart currencies most of which failed, but even those were backed by a lot more than just... what? In this case we're literally comparing to currencies that are often backed by nothing.
- Marazan 4y agoHave you ever redeemed Tether? As opposed to selling it to another chump on am exchange? Have you ever taken your Tether holdings and redeemed them at Tether.io for US Dollars?
- syzygyhack 4y agoWith a corporate account, not personal, but yes. They make it relatively simple. I don't imagine it's any different for an individual, aside from the verification process.
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- gruez 4y agoMy impression is that at certain exchanges that accept USDT (eg. bitfinex), you can withdraw your USDT for "real" USD wired to your bank account. Isn't this effectively redeeming it, even if you're not directly transacting with Tether Operations Limited?
- bushbaba 4y agoNo. That’s you selling your usdt for usd to a non tether entity.
- arcticbull 4y ago> When in the last five years have you had difficulty cashing out USDT, USDC, or DAI at dollar value? Wow, naming USDT was a bold choice since Paolo's answer as to why they can't tell you what backs it was almost verbatim what Skilling said when asked why Enron couldn't provide a balance sheet. [1] [1] https://www.youtube.com/watch?v=kp5kv7aENxw https://www.youtube.com/watch?v=kp5kv7aENxw
- formerly_proven 4y agoI thought I was listening to a podcast but it seems I accidentally stumbled into a butcher.
- low_tech_love 4y agoIf you can’t learn from examples, I guess you’re gonna have to learn by experience.
- renonce 4y agoUSDT and USDC are certainly not "unregulard stable coins". DAI is collateralized and well-designed. In fact its value were often above $1 in the SAI days until the USDT-USDC-DAI pool was created and it became possible to mint $1 DAI with $1.01 USDC.
- logifail 4y ago> When in the last five years have you had difficulty [snip] When until 2008 did anyone have problems with their holdings in Bear Stearns and Lehman Brothers stocks? Things are OK right up until they aren't any more. Afterwards this can seem (painfully) obvious. Beforehand, less so.
- jxi 4y agoThis type of argument always uses the same conjectures: - crypto can be used for money laundering therefore it is mostly used for money laundering - one big stablecoin has failed therefore all stablecoins are unsustainable (the first one usdt is still around btw, and so is dai) - etc
- nyolfen 4y agoyour talking points are from like 2012 man. off the top of my head: remittances, online retail, trustless decentralized computational systems
- messutied 4y agoCan you link a couple of sources that show companies that successfully leverage this use cases?
- dubswithus 4y agohttps://brave.com/transparency/ https://brave.com/transparency/
- nyolfen 4y agoi run a small retail business that only accepts crypto and it's been doing fine
- arcticbull 4y agoIs it a small laundromat, or do you just not want to accept money from all customers?
- low_tech_love 4y agoCould you tell us why you chose to do that?
- nyolfen 4y agopartly to seize a market niche and avoid fees, partly as a proof of concept for others (i wrote up the technical details), and partly because the product is crypto-adjacent, which most CC processors won't touch. i highly recommend the software i use, you can fairly easily turn it into an automated vending machine for digital goods that relies on no middlemen: https://btcpayserver.org/ https://btcpayserver.org/ my business is not even close to legally questionable but i prefer not to dox myself on this account. i found a friendly CC processor that i'm waiting on approval from, so it will be hybrid eventually.
- yowlingcat 4y ago> Number 2 is a fancy way to describe a primary use case being money laundering. That's not entirely true. I think a more principal use case for Number 2 is purchasing things (dark web drugs, gambling, etc) outside of the usual centralized financial system rails which would stop them at the edges. Bitcoin seems like a poor choice for money laundering because of how traceable it is; you'd need to use privacy coins for that, and even then, it's questionable (51% attack is doable in the same way that many Tor nodes are compromised).
- clippablematt 4y agoStablecoins without collateral backing them have repeatedly failed (and they failed when they were tried before crypto too), but dai/rai/usdc are working fine. At this point I’d like to sees US regulation around $ stablecoins so we can use something else and reduce the power of the US dollar in the world. Go ahead America, regulate yourselves.
- SemanticStrengh 4y ago> they failed when they were tried before crypto too do you have references to non-crypto based coins? also recent ones?
- paulpauper 4y agoThe main value proposition of crypto is cryptographic security. You cannot confiscate crypto like you can other assets (unless obv. you have the key or miners somehow collude). Is this worth $1 trillion? Probably not.
- stouset 4y ago> You cannot confiscate crypto like you can other assets. You're correct. In most cases it's dramatically easier to confiscate the crypto. See: the horde of people who've had their cryptocurrency and NFTs stolen. To say nothing of the uncountable Bitcoin billionaires who've had a hard drive crash, lost their keys, forgotten a password, etc.
- paulpauper 4y agothis is not the same as the cryptography being broken losing crypto due to hardware failure or forgetting keys is not the same as someone taking it by breaking the cryptography . If this were possible, there is tons of crypto right now for the taking. It's a self-funding bug bounty.
- polygamous_bat 4y agoYes, but being cryptographically broken is not matter, does it? First rule of computer security is any system is no more strong than its weakest link. Relevant xkcd [1]: why worry about breaking advanced cryptography when you can just socially engineer the passphrase out of people? [1] https://xkcd.com/538/ https://xkcd.com/538/
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- skinnymuch 4y agoWhy does that matter? People care if they do or don’t have their money. Not if their money was taken or screwed up for a whitelisted type of reason.
- low_tech_love 4y agoWhat do you mean it’s a “solution in search of a problem”? It solves a very clear problem: lack of scalability of traditional Ponzi schemes. That’s why most of the answers to criticism of cryptocurrencies is usually “it’s not much worse than the kind of thing that led to the 2008 crash”. For crypto enthusiasts the problem is not that scams exist; it’s that they didn’t get to join them early enough.
- SahAssar 4y agoTraditional ponzi schemes didn't have a scalability problem, they had a marketing problem. Cryptocurrency solves that by adding hand-wavy tech hype.
- lpolovets 4y agoI disagree strongly that moving outside of the financial system is primarily used for money laundering. Bitcoin is great for censorship resistance, and for offering an alternative to oppressive monetary policies. Here's a good article touching on some of the use cases outside of the US: https://bitcoinmagazine.com/culture/check-your-financial-privilege https://bitcoinmagazine.com/culture/check-your-financial-pri... In the long run, I hope Bitcoin's existence will also lead to better monetary policies since governments have always assumed a monopoly on money, and now there's finally some true competition. And competition leads to better outcomes for consumers/citizens.
- 8note 4y agoCurrencies did a lot of centralizing on their own. One currency is much more useful to its owner than 500. Ain't nobody want to spend time converting from the 500 down into one so they can buy an expensive widget that only accepts a specific currency