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Precisely the failure of crypto is thinking that people will follow "fundamental crypto values" and underestimating the power of convenience and ignorance. "Tra

Precisely the failure of crypto is thinking that people will follow "fundamental crypto values" and underestimating the power of convenience and ignorance. "Traditional financial institutions" are inevitable in crypto.

zeroclip 4y ago
A lot of day traders on FTX are learning first hand the value of DeFi and self custody.
- Nursie 4y ago
  Yes, because DeFi never suffers from collapses or hacks. Nobody every drained a DAO with a flash-loan, or used one to cash-out illiquid assets with no intention of paying it back... DeFi is as much of a joke as the rest of the ecosystem.
  - zeroclip 4y ago
    Different category of risk. CEX and DEX can both have hacks. An open source DEX can be verified, formally tested, and made immutable and un-upgradable on chain, like Uniswap. Uniswap V2 contract is 2 years unchanged, $3.8B TVL and $1B daily volume, close to 10 year old Coinbase CEX. Not bad for being a joke.
    - Apocryphon 4y ago
      Those stories about smart contract programming errors leading to money getting permanently frozen are quite scary. Though admittedly in the grand scheme of things they seem to have “only” lost millions of USD, not billions.
      - zeroclip 4y ago
        Yes, it's a risk. If a contract or protocol is several years old, processing billions per day, and the code is un-upgradeable, you might say the risk is lower. I'd rather gamble with Uniswap protocol risk than FTX human fraud and greed risk.
    - Nursie 4y ago
      So we’ve gone from “Everyone is learning the value of DeFi” to “I can come up with a single example of a DeFi system that hasn’t been hacked (yet)” Hardly says that DeFi as a category is reliable.
      - zeroclip 4y ago
        Here's a bigger list for you[1], the top 10 all have $1B+ TVL. [1] https://defillama.com/ https://defillama.com/
        Nursie 4y ago
        Great, you can point to some that haven't been hacked, exploited or just plain collapsed yet. You said "day traders on FTX are learning first hand the value of DeFi", but DeFi is just as much of a shitshow as the rest and has had just as many collapses.
        zeroclip 4y ago
        Uniswap, AAVE, MakerDAO traders will disagree with you. I am one of these people: I had funds locked into a CEX, was lucky to pull them out some days before turmoil but others not so lucky. During that time my DeFi holdings were fine. I would now rather take on protocol risk of something established and proven like Uniswap, instead of risking with an unregulated CEX.
xtracto 4y ago
I remember when WikiLeaks first decided to accept Bitcoin's for donations. Nakamoto cautioned that Bitcoin was not mature enough fr something like that. I think that the problem with the Cryptocurrencies movement has been that the use peopel want to give to it has surpassed the technological advances that it provides. At some point, the ETH network will get there, providing "trustless" alternatives for a lot of the stuff that CeFi services are giving. But that is still several years away.
- gjulianm 4y ago
  And at the point that the ETH network provides its alternatives, centralized services will have better products, more users, and more features simply because building centralized services is far, far easier and less time consuming than building decentralized ones.
  - bornfreddy 4y ago
    Well yeah - but they still won't be decentralized. If that proves to be important in the long run is something that we will see in the future, of course.
    - gjulianm 4y ago
      > Well yeah - but they still won't be decentralized. But people don't care too much about that. If so many crypto users, who we can assume are more informed and care more about decentralization than the average person, massively flock to centralized exchanges, why would the general population use decentralized services if they're worse?
      - bornfreddy 4y ago
        Right now they are flocking away from them. We'll see.
xur17 4y ago
But at least in crypto I have the OPTION of storing it myself. Also, if I do decide to use a custodial provider, I can choose to use a provider that publishes proof of reserves [0], giving me more confidence in the provider. [0] https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves
- Apocryphon 4y ago
  That’s great, and also moot when the vast variety of coin holders opt for the convenience of a centralized third party service instead. With fiat, you also have the option of storing gold yourself.
  - selectodude 4y ago
    You can fit $1 million in a briefcase in a safe. No need to rely on fractional reserve banking to store your money. Granted, that would be stupid, but it's certainly an option.
    - notch656a 4y ago
      The problem with fiat is a completely unknown monetary supply function. Gold makes a lot more sense IMO in your scenario as there's a finite amount in and on the earth, and it would take a scientific breakthrough to economically create more than that.
- Closi 4y ago
  > But at least in crypto I have the OPTION of storing it myself. You have the option with Fiat too - you can get paper currency and store it yourself in a secure location. $10,000 can be stored in $100 bills in as little as c0.03 meters^3. Using a bank is much more convenient to store Fiat though if you want to buy/sell things, much like using an exchange to store Crypto is much more convenient if you want to trade crypto (because let's be honest, not that many people are using Crypto to buy pizzas!).
  - notch656a 4y ago
narrator 4y ago
Fractional reserving is taken as something that is good and wonderful, but before you had the fed who could print money at will, you had banking crashes caused by it on a regular basis. In a fixed money supply currency, fractional reserve banking should be illegal and banks should instead make money off fees. Venture capital should put their own money at risk to invest in the economy. How will people afford houses though? The housing market booms and busts because of the wildly fluctuating availability of credit caused by the money multiplier rapidly creating and destroying money which is tied to the fractional reserve banking concept. Homes would be drastically cheaper and people would actually be able to save to buy them if it weren't for the huge supply of rapidly created and later contracting credit available to buy them. Things we buy with credit like housing and education have gone up steadily in price, while things bought with cash have not. The fractional reserve people are so sick of crypto, that ,in one platform, you can buy bitcoin but you can't send it to a crypto address. You have to get your friend on the platform, you can send it to them, and then they can convert it back into fiat. It's ridiculous, you're basically just buying and selling a security that tracks Bitcoin and not Bitcoin itself.
- anon84873628 4y ago
  I can't really follow the comment. You seem to start a thesis about >In a fixed money supply currency, fractional reserve banking should be illegal and banks should instead make money off fees Which, ok... But then jump to >The housing market booms and busts because of the wildly fluctuating availability of credit caused by the money multiplier Which seems to be a thesis about our current world. I can't figure out the connection between them. Are you saying this is evidence of why the first thesis is correct? But USD is not a "fixed money supply currency", which was how we started out. I understand that easy credit induces demand for housing which has inelastic supply and somewhat sticky prices. This doesn't seem to be a problem of Fractional Reserve banking though. The VCs in your proposed system will still invest in mortgages as a fairly safe bet, because people are highly motivated to have a place to live. And mortgages are an important tool so people have a place to live _before_ saving for 30 years. Given our current population dynamics and everything else...
jrm4 4y ago
I love this observation, because I think it's the perfect wedge point. Will most people fail at this? Yes. But -- will every single entity that actually does follow "fundamental crypto values" be destroyed? Almost certainly not. That's where the good (and healthy) action is. Follow THAT, everyone.

zeroclip 4y ago

A lot of day traders on FTX are learning first hand the value of DeFi and self custody.

Nursie 4y ago
Yes, because DeFi never suffers from collapses or hacks. Nobody every drained a DAO with a flash-loan, or used one to cash-out illiquid assets with no intention of paying it back... DeFi is as much of a joke as the rest of the ecosystem.
- zeroclip 4y ago
  Different category of risk. CEX and DEX can both have hacks. An open source DEX can be verified, formally tested, and made immutable and un-upgradable on chain, like Uniswap. Uniswap V2 contract is 2 years unchanged, $3.8B TVL and $1B daily volume, close to 10 year old Coinbase CEX. Not bad for being a joke.
  - Apocryphon 4y ago
    Those stories about smart contract programming errors leading to money getting permanently frozen are quite scary. Though admittedly in the grand scheme of things they seem to have “only” lost millions of USD, not billions.
    - zeroclip 4y ago
      Yes, it's a risk. If a contract or protocol is several years old, processing billions per day, and the code is un-upgradeable, you might say the risk is lower. I'd rather gamble with Uniswap protocol risk than FTX human fraud and greed risk.
  - Nursie 4y ago
    So we’ve gone from “Everyone is learning the value of DeFi” to “I can come up with a single example of a DeFi system that hasn’t been hacked (yet)” Hardly says that DeFi as a category is reliable.
    - zeroclip 4y ago
      Here's a bigger list for you[1], the top 10 all have $1B+ TVL. [1] https://defillama.com/ https://defillama.com/
      - Nursie 4y ago
        Great, you can point to some that haven't been hacked, exploited or just plain collapsed yet. You said "day traders on FTX are learning first hand the value of DeFi", but DeFi is just as much of a shitshow as the rest and has had just as many collapses.
        zeroclip 4y ago
        Uniswap, AAVE, MakerDAO traders will disagree with you. I am one of these people: I had funds locked into a CEX, was lucky to pull them out some days before turmoil but others not so lucky. During that time my DeFi holdings were fine. I would now rather take on protocol risk of something established and proven like Uniswap, instead of risking with an unregulated CEX.

xtracto 4y ago

I remember when WikiLeaks first decided to accept Bitcoin's for donations. Nakamoto cautioned that Bitcoin was not mature enough fr something like that. I think that the problem with the Cryptocurrencies movement has been that the use peopel want to give to it has surpassed the technological advances that it provides. At some point, the ETH network will get there, providing "trustless" alternatives for a lot of the stuff that CeFi services are giving. But that is still several years away.

gjulianm 4y ago
And at the point that the ETH network provides its alternatives, centralized services will have better products, more users, and more features simply because building centralized services is far, far easier and less time consuming than building decentralized ones.
- bornfreddy 4y ago
  Well yeah - but they still won't be decentralized. If that proves to be important in the long run is something that we will see in the future, of course.
  - gjulianm 4y ago
    > Well yeah - but they still won't be decentralized. But people don't care too much about that. If so many crypto users, who we can assume are more informed and care more about decentralization than the average person, massively flock to centralized exchanges, why would the general population use decentralized services if they're worse?
    - bornfreddy 4y ago
      Right now they are flocking away from them. We'll see.

xur17 4y ago

But at least in crypto I have the OPTION of storing it myself. Also, if I do decide to use a custodial provider, I can choose to use a provider that publishes proof of reserves [0], giving me more confidence in the provider. [0] https://www.kraken.com/proof-of-reserves https://www.kraken.com/proof-of-reserves

Apocryphon 4y ago
That’s great, and also moot when the vast variety of coin holders opt for the convenience of a centralized third party service instead. With fiat, you also have the option of storing gold yourself.
- selectodude 4y ago
  You can fit $1 million in a briefcase in a safe. No need to rely on fractional reserve banking to store your money. Granted, that would be stupid, but it's certainly an option.
  - notch656a 4y ago
    The problem with fiat is a completely unknown monetary supply function. Gold makes a lot more sense IMO in your scenario as there's a finite amount in and on the earth, and it would take a scientific breakthrough to economically create more than that.
Closi 4y ago
> But at least in crypto I have the OPTION of storing it myself. You have the option with Fiat too - you can get paper currency and store it yourself in a secure location. $10,000 can be stored in $100 bills in as little as c0.03 meters^3. Using a bank is much more convenient to store Fiat though if you want to buy/sell things, much like using an exchange to store Crypto is much more convenient if you want to trade crypto (because let's be honest, not that many people are using Crypto to buy pizzas!).
- notch656a 4y ago

narrator 4y ago

Fractional reserving is taken as something that is good and wonderful, but before you had the fed who could print money at will, you had banking crashes caused by it on a regular basis. In a fixed money supply currency, fractional reserve banking should be illegal and banks should instead make money off fees. Venture capital should put their own money at risk to invest in the economy. How will people afford houses though? The housing market booms and busts because of the wildly fluctuating availability of credit caused by the money multiplier rapidly creating and destroying money which is tied to the fractional reserve banking concept. Homes would be drastically cheaper and people would actually be able to save to buy them if it weren't for the huge supply of rapidly created and later contracting credit available to buy them. Things we buy with credit like housing and education have gone up steadily in price, while things bought with cash have not. The fractional reserve people are so sick of crypto, that ,in one platform, you can buy bitcoin but you can't send it to a crypto address. You have to get your friend on the platform, you can send it to them, and then they can convert it back into fiat. It's ridiculous, you're basically just buying and selling a security that tracks Bitcoin and not Bitcoin itself.

anon84873628 4y ago
I can't really follow the comment. You seem to start a thesis about >In a fixed money supply currency, fractional reserve banking should be illegal and banks should instead make money off fees Which, ok... But then jump to >The housing market booms and busts because of the wildly fluctuating availability of credit caused by the money multiplier Which seems to be a thesis about our current world. I can't figure out the connection between them. Are you saying this is evidence of why the first thesis is correct? But USD is not a "fixed money supply currency", which was how we started out. I understand that easy credit induces demand for housing which has inelastic supply and somewhat sticky prices. This doesn't seem to be a problem of Fractional Reserve banking though. The VCs in your proposed system will still invest in mortgages as a fairly safe bet, because people are highly motivated to have a place to live. And mortgages are an important tool so people have a place to live _before_ saving for 30 years. Given our current population dynamics and everything else...

jrm4 4y ago

I love this observation, because I think it's the perfect wedge point. Will most people fail at this? Yes. But -- will every single entity that actually does follow "fundamental crypto values" be destroyed? Almost certainly not. That's where the good (and healthy) action is. Follow THAT, everyone.