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I’m don’t own any crypto but this is overly dismissive. Encoding game theoretic concepts into a “token” such that various parties can be incentivized in the cor

I’m don’t own any crypto but this is overly dismissive. Encoding game theoretic concepts into a “token” such that various parties can be incentivized in the correct way such that the value of the overall ecosystem is maximized is a valuable concept. There are many great cons, the current monetary system could easily be considered one of them. Fractional reserve banking is a fraudulent concept at its core. Yet, we keep it because it kind of works to create the right incentives (we accept some level of corruption for this reason). It isn’t (at all) clear to me that we have landed on an optimal system.

only_human 4y ago
There is absolutely nothing to stop fractional reserve banking from re-occurring in crypto. In fact it's already happening on a massive scale with stablecoins, which are pretty much doing all the same things as banks, but even less regulated. If you think the current capitalistic system is a fraud then it makes no sense why you would search for solutions in the form of unregulated "tokens" minted by random people and backed by nothing and it all can vanish in the blink of an eye. It's all the same scams but somehow worse.
- osigurdson 4y ago
  How does one lend out more Bitcoin / Ethereum than they currently have?
  - only_human 4y ago
    You can just mint your own token and then lie to people about how much bitcoin/dollars/euros/pesos/whatever is backing it, or not disclose it at all, which is exactly what they already do. At least central banks require lenders to have minimum reserves and you can know that regulated banks aren't going below that limit. No such thing exists in crypto, it's the wild west.
    - osigurdson 4y ago
      One could also create their own gravel pebble based token and state that it is backed by something valuable. I don’t see how the existence of crypto changes much in this regard.
      - only_human 4y ago
        Yes, that's my point. Crypto doesn't change anything. It's just more of the same. And FYI there is nothing wrong with fractional reserve banking when it's done in the right way with some mechanism (like regulation) to stop the banks from lending out too much and becoming insolvent or causing runaway inflation. It is not a big scam for the banks to take your money. Central banks all over the world are using it successfully to finance their economies. It actually works and occurs naturally in any banking system, including those in crypto. Except in crypto there is no central bank to cover for bank failures, the only option crypto lenders have in the case of a bank run is to just halt withdrawals or go bankrupt like old times. Which has happened extremely often in crypto to every prominent crypto company I can think of, like the one that just caused the crash earlier this year. In my experience, people loudly saying on social media that fractional reserve banking doesn't work are trying to sell you a narrative of conspiracy theories, likely to promote their alternative "investments" that often seem to include, surprise surprise, selling you crypto.
        osigurdson 4y ago
        It would be quite incredible to be able to lend out and charge interest on $1000 when only having $100. On the surface, that's pretty dumb and it's history has entirely fraudulent roots. However, it ultimately provides the needed entropy in the system to appropriately incentivize participants in the economy to produce goods and services at the lowest possible cost (in other words, optimize quality of life - or at least starvation avoidance). It isn't at all clear to me however that the current system is optimal as it favours participants closer to the money printing source yet these participants are not providing any goods or services - just measures of value. The size of the financial services sector of an economy is likely a reasonable proxy for how suboptimal the system is.

only_human 4y ago

There is absolutely nothing to stop fractional reserve banking from re-occurring in crypto. In fact it's already happening on a massive scale with stablecoins, which are pretty much doing all the same things as banks, but even less regulated. If you think the current capitalistic system is a fraud then it makes no sense why you would search for solutions in the form of unregulated "tokens" minted by random people and backed by nothing and it all can vanish in the blink of an eye. It's all the same scams but somehow worse.

osigurdson 4y ago
How does one lend out more Bitcoin / Ethereum than they currently have?
- only_human 4y ago
  You can just mint your own token and then lie to people about how much bitcoin/dollars/euros/pesos/whatever is backing it, or not disclose it at all, which is exactly what they already do. At least central banks require lenders to have minimum reserves and you can know that regulated banks aren't going below that limit. No such thing exists in crypto, it's the wild west.
  - osigurdson 4y ago
    One could also create their own gravel pebble based token and state that it is backed by something valuable. I don’t see how the existence of crypto changes much in this regard.
    - only_human 4y ago
      Yes, that's my point. Crypto doesn't change anything. It's just more of the same. And FYI there is nothing wrong with fractional reserve banking when it's done in the right way with some mechanism (like regulation) to stop the banks from lending out too much and becoming insolvent or causing runaway inflation. It is not a big scam for the banks to take your money. Central banks all over the world are using it successfully to finance their economies. It actually works and occurs naturally in any banking system, including those in crypto. Except in crypto there is no central bank to cover for bank failures, the only option crypto lenders have in the case of a bank run is to just halt withdrawals or go bankrupt like old times. Which has happened extremely often in crypto to every prominent crypto company I can think of, like the one that just caused the crash earlier this year. In my experience, people loudly saying on social media that fractional reserve banking doesn't work are trying to sell you a narrative of conspiracy theories, likely to promote their alternative "investments" that often seem to include, surprise surprise, selling you crypto.
      - osigurdson 4y ago
        It would be quite incredible to be able to lend out and charge interest on $1000 when only having $100. On the surface, that's pretty dumb and it's history has entirely fraudulent roots. However, it ultimately provides the needed entropy in the system to appropriately incentivize participants in the economy to produce goods and services at the lowest possible cost (in other words, optimize quality of life - or at least starvation avoidance). It isn't at all clear to me however that the current system is optimal as it favours participants closer to the money printing source yet these participants are not providing any goods or services - just measures of value. The size of the financial services sector of an economy is likely a reasonable proxy for how suboptimal the system is.