6 ms·

>Coinbase Rewards You are referring to staking. FTX was giving a static yield on deposits. The funding for this came from their marketing budget. Very differen

by dibt 4y ago

>Coinbase Rewards You are referring to staking. FTX was giving a static yield on deposits. The funding for this came from their marketing budget. Very different from what Coinbase does. >"staking" == crappy loans / bonds business. Staking is not a loan. It is a component of proof of stake networks to maintain security. Coinbase provides stacking services, but all they do is pass the yield onto the customer while taking a cut for the resources required for staking (e.g. AWS bill). Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic.

dragontamer 4y ago
> Staking is not a loan. Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. Its totally a bond. > Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic. I'm feeling some "no true Scotsman" fallacy here. If those guys call it staking, then its staking.
- zoklet-enjoyer 4y ago
  Look up how consensus works on proof of stake blockchains. Specifically Tendermint chains, Ethereum, Tezos, Algorand.
  - dragontamer 4y ago
    Just because its a complicated loan/bond doesn't mean its not a loan/bond. Lending money to somebody else, with a promise for future returns, is fundamentally a bond. It will act like a bond, subject to the economic principles of a bond / loans / etc. etc.
    - dibt 4y ago
      > Lending money to somebody else It is not a loan! > promise for future returns There is no such promise! It is an alternative to proof-of-work, which requires capital investment to provide security to the network (e.g. purchase and run Bitcoin mining machines). Staking is a substitute for that capital requirement. You are refusing to understand this simple fact. If you loan a business money or buy a government bond, they are SPENDING that money to run the business/government. The Ethereum network is not selling your staked ETH to maintain security.
      - dragontamer 4y ago
        > It is not a loan! So lets say I own 10 ETH. Explain to me how I get my staking rewards. Because step #1 involves me transferring that ETH to Coinbase (or some other entity with a large enough ETH basis to serve as a trusted staking entity). That is a loan. I don't own ETH anymore, I gave it to Coinbase. Coinbase creates an "IOU", saying "I promise that dragontamer will get his 10 ETH back", through some system of trust, contracts, databases and whatnot. It doesn't really matter what the details are, the whole thing is an IOU, a promise to return my ETH later. Similarly, when I deposit $10,000 into a bank (be it a savings account, or money market account), the Bank writes down an IOU saying it owes me $10,000. The bank then sends the money to the market (and worst-case, to the Fed Overnight loans), and lends the money out. Later, I withdraw the money, the bank undoes the process. -------- The only difference is that ETH doesn't allow you to withdraw the money as often as a savings account or money-market account/fund. So its kind of crappier than a normal savings/money market style loan that goes on. I guess ETH also gives a different level of rewards, seems to be 4.4% (though denominated in ETH rather than dollars).
        dibt 4y ago
        > I don't own ETH anymore, I gave it to Coinbase. You DO own the ETH. Regardless of whether you are staking it yourself, or have given it to Coinbase to stake. Similar to how you maintain ownership of your rental property even if you allow a property management company to run it. This is true if you move your ETH from a self-custody wallet to coinbase (custodial wallet). Either way, you maintain ownership. The tokens earned are taxable as income, just as income from a paying tenant on your rental property is taxed. Also, the IRS defines crypto tokens as "property." As far as I know, there is no such distinction for bonds or loans. From https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets https://www.irs.gov/businesses/small-businesses-self-employe...: "For federal tax purposes, digital assets are treated as property."
- stickfigure 4y ago
  >> Staking is not a loan. >Yes it is. Sort of? The risk profile is significantly different.
  - dragontamer 4y ago
    Real life bonds range from Savings accounts (which are tied to the overnight Fed rate, with an assumed repayment within days or one week at the worst), to "Junk" bonds to companies and/or governments that are currently going through default and/or bankruptcy (See Greek bonds between 2009 and 2017) At the lowest risk end, we have the "risk-free rate", guaranteed by the central bank. At the higher risk end, we have highly risky loans (ex: Greek Bonds in 2014 or so). Or mortgaged backed securities. Or student loans. Etc. etc. -------- Bonds / loans are a very old economic subject that have been around for hundreds of years (maybe thousands?). There's a myriad of historical subjects and writings on this subject. In general, the more trustworthy the issuer and the shorter the maturity, the safer the loan is. An overnight loan with the Fed (aka: Central bank of the United States) will be lower risk than a 30-year subprime mortgage. The economics will demand that the longer-loan will (usually) be priced higher (except in times of inverted yield curves, where people think there's more near-term risk than long-term risks). Etc. etc. Its a big complex subject. But its all about loans and bonds, and money and IOUs and promises and trust.
- dibt 4y ago
  > You give your money over to another organization, and that organization promises a % yield / APY in return. Coinbase is not promising a yield. It would be illegal for them to do so. They are advertising the current market rate defined by the token's network. That rate incentivizes stakers. It is defined in code. If too many people are staking on, for example Ethereum, the network would lower the rate automatically. Just as they are doing, you could stake the tokens yourself with your own hardware/connectivity, or use hosted resources (e.g. AWS). > You aren't allowed the money back until later. The yield is paid out according to a defined schedule. Unstaking is possible on some hosted platforms (e.g. Coinbase) even if the network doesn't allow it, but there is usually a penalty. > "no true Scotsman" fallacy It's nothing to do with it. I haven't made any qualitative judgements on which network is a "true" staking mechanism. This article describes the confusion caused by some token networks: https://cobie.substack.com/p/apecoin-and-the-death-of-staking https://cobie.substack.com/p/apecoin-and-the-death-of-stakin... "Somehow, over time, the word ‘staking’ has been repurposed and redefined. Instead of receiving rewards for contributing to chain security with collateral at stake, modern “staking” just seems to mean idk we give you more coins as a reward if you don’t sell your current coins lol." > If those guys call it staking I don't know which "guys" you're referring to. Different networks treat it differently. That's all. It's a designed mechanism. The Ethereum devs have no say in how the Solana devs implement staking. Platforms then just provide a hosting service. I've only provided facts. I don't personal do any staking, or encourage others to do it. Seems you are only interested in arguing, and prefer to not understand reality. Good luck on your crusade!
- wizeman 4y ago
  > > Staking is not a loan. > Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. > Its totally a bond. But in a bond and in a loan you are not guaranteed to get your money back (or the yield), while in staking, you are always guaranteed to get it back because of the consensus rules, right? So I don't think it's the same thing, as in staking there is no such default risk because the staked coins remain yours [0] (with cryptographic assurance) and the yield is financed by currency inflation, which is guaranteed to happen (assuming there are no major bugs in the consensus rules, and that Coinbase and Binance don't become malicious and try to cheat the rules and get penalized for doing so). [0] Well, technically they belong to Coinbase / Binance at that time if you use them to stake the coins, because in that case they are the holders of the cryptographic keys.
  - dragontamer 4y ago
    You're guaranteed to get your money back from an Overnight loan to the Fed. (literally a 1-day loan to the USA's central bank). This "risk free rate" serves as the basis of the theory behind our entire banking system. The fact that Ethereum decided to recreate this under separate principles is somewhat amusing, but its just that. A recreation of what we're already familiar with in the financial world. The next question is if the cryptocoin world realizes how important it is to set the risk-free rate as appropriate for their ecosystem to function. Given how arbitrary it was to set the Etherium rate however, I don't think there was much thought put into that in practice. But baby steps I guess. The cryptocoin world is learning things at a different rate than the historians / financial experts who already see where things are going. Bad things happen if you set the risk-free rate too high, or too low by the way.
    - wizeman 4y ago
      > You're guaranteed to get your money back from an Overnight loan to the Fed. (literally a 1-day loan to the USA's central bank). Well, then those loans are also risk-free, right? Because they are also financed by increasing the money supply and the Fed can't spend the money that was loaned to them. But normal loans and bonds are not risk-free, they have a default risk. Which is the entire reason why when you loan your money, sometimes you can't get it back. Staking, however, is risk-free, so the following statements of yours are wrong. > Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business. > > Staking is not a loan. > Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. > Its totally a bond.

by dibt 4y ago

dragontamer 4y ago

> Staking is not a loan. Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. Its totally a bond. > Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic. I'm feeling some "no true Scotsman" fallacy here. If those guys call it staking, then its staking.

zoklet-enjoyer 4y ago
Look up how consensus works on proof of stake blockchains. Specifically Tendermint chains, Ethereum, Tezos, Algorand.
- dragontamer 4y ago
  Just because its a complicated loan/bond doesn't mean its not a loan/bond. Lending money to somebody else, with a promise for future returns, is fundamentally a bond. It will act like a bond, subject to the economic principles of a bond / loans / etc. etc.
  - dibt 4y ago
    > Lending money to somebody else It is not a loan! > promise for future returns There is no such promise! It is an alternative to proof-of-work, which requires capital investment to provide security to the network (e.g. purchase and run Bitcoin mining machines). Staking is a substitute for that capital requirement. You are refusing to understand this simple fact. If you loan a business money or buy a government bond, they are SPENDING that money to run the business/government. The Ethereum network is not selling your staked ETH to maintain security.
    - dragontamer 4y ago
      > It is not a loan! So lets say I own 10 ETH. Explain to me how I get my staking rewards. Because step #1 involves me transferring that ETH to Coinbase (or some other entity with a large enough ETH basis to serve as a trusted staking entity). That is a loan. I don't own ETH anymore, I gave it to Coinbase. Coinbase creates an "IOU", saying "I promise that dragontamer will get his 10 ETH back", through some system of trust, contracts, databases and whatnot. It doesn't really matter what the details are, the whole thing is an IOU, a promise to return my ETH later. Similarly, when I deposit $10,000 into a bank (be it a savings account, or money market account), the Bank writes down an IOU saying it owes me $10,000. The bank then sends the money to the market (and worst-case, to the Fed Overnight loans), and lends the money out. Later, I withdraw the money, the bank undoes the process. -------- The only difference is that ETH doesn't allow you to withdraw the money as often as a savings account or money-market account/fund. So its kind of crappier than a normal savings/money market style loan that goes on. I guess ETH also gives a different level of rewards, seems to be 4.4% (though denominated in ETH rather than dollars).
      - dibt 4y ago
        > I don't own ETH anymore, I gave it to Coinbase. You DO own the ETH. Regardless of whether you are staking it yourself, or have given it to Coinbase to stake. Similar to how you maintain ownership of your rental property even if you allow a property management company to run it. This is true if you move your ETH from a self-custody wallet to coinbase (custodial wallet). Either way, you maintain ownership. The tokens earned are taxable as income, just as income from a paying tenant on your rental property is taxed. Also, the IRS defines crypto tokens as "property." As far as I know, there is no such distinction for bonds or loans. From https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets https://www.irs.gov/businesses/small-businesses-self-employe...: "For federal tax purposes, digital assets are treated as property."
stickfigure 4y ago
>> Staking is not a loan. >Yes it is. Sort of? The risk profile is significantly different.
- dragontamer 4y ago
  Real life bonds range from Savings accounts (which are tied to the overnight Fed rate, with an assumed repayment within days or one week at the worst), to "Junk" bonds to companies and/or governments that are currently going through default and/or bankruptcy (See Greek bonds between 2009 and 2017) At the lowest risk end, we have the "risk-free rate", guaranteed by the central bank. At the higher risk end, we have highly risky loans (ex: Greek Bonds in 2014 or so). Or mortgaged backed securities. Or student loans. Etc. etc. -------- Bonds / loans are a very old economic subject that have been around for hundreds of years (maybe thousands?). There's a myriad of historical subjects and writings on this subject. In general, the more trustworthy the issuer and the shorter the maturity, the safer the loan is. An overnight loan with the Fed (aka: Central bank of the United States) will be lower risk than a 30-year subprime mortgage. The economics will demand that the longer-loan will (usually) be priced higher (except in times of inverted yield curves, where people think there's more near-term risk than long-term risks). Etc. etc. Its a big complex subject. But its all about loans and bonds, and money and IOUs and promises and trust.
dibt 4y ago
> You give your money over to another organization, and that organization promises a % yield / APY in return. Coinbase is not promising a yield. It would be illegal for them to do so. They are advertising the current market rate defined by the token's network. That rate incentivizes stakers. It is defined in code. If too many people are staking on, for example Ethereum, the network would lower the rate automatically. Just as they are doing, you could stake the tokens yourself with your own hardware/connectivity, or use hosted resources (e.g. AWS). > You aren't allowed the money back until later. The yield is paid out according to a defined schedule. Unstaking is possible on some hosted platforms (e.g. Coinbase) even if the network doesn't allow it, but there is usually a penalty. > "no true Scotsman" fallacy It's nothing to do with it. I haven't made any qualitative judgements on which network is a "true" staking mechanism. This article describes the confusion caused by some token networks: https://cobie.substack.com/p/apecoin-and-the-death-of-staking https://cobie.substack.com/p/apecoin-and-the-death-of-stakin... "Somehow, over time, the word ‘staking’ has been repurposed and redefined. Instead of receiving rewards for contributing to chain security with collateral at stake, modern “staking” just seems to mean idk we give you more coins as a reward if you don’t sell your current coins lol." > If those guys call it staking I don't know which "guys" you're referring to. Different networks treat it differently. That's all. It's a designed mechanism. The Ethereum devs have no say in how the Solana devs implement staking. Platforms then just provide a hosting service. I've only provided facts. I don't personal do any staking, or encourage others to do it. Seems you are only interested in arguing, and prefer to not understand reality. Good luck on your crusade!
wizeman 4y ago
> > Staking is not a loan. > Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. > Its totally a bond. But in a bond and in a loan you are not guaranteed to get your money back (or the yield), while in staking, you are always guaranteed to get it back because of the consensus rules, right? So I don't think it's the same thing, as in staking there is no such default risk because the staked coins remain yours [0] (with cryptographic assurance) and the yield is financed by currency inflation, which is guaranteed to happen (assuming there are no major bugs in the consensus rules, and that Coinbase and Binance don't become malicious and try to cheat the rules and get penalized for doing so). [0] Well, technically they belong to Coinbase / Binance at that time if you use them to stake the coins, because in that case they are the holders of the cryptographic keys.
- dragontamer 4y ago
  You're guaranteed to get your money back from an Overnight loan to the Fed. (literally a 1-day loan to the USA's central bank). This "risk free rate" serves as the basis of the theory behind our entire banking system. The fact that Ethereum decided to recreate this under separate principles is somewhat amusing, but its just that. A recreation of what we're already familiar with in the financial world. The next question is if the cryptocoin world realizes how important it is to set the risk-free rate as appropriate for their ecosystem to function. Given how arbitrary it was to set the Etherium rate however, I don't think there was much thought put into that in practice. But baby steps I guess. The cryptocoin world is learning things at a different rate than the historians / financial experts who already see where things are going. Bad things happen if you set the risk-free rate too high, or too low by the way.
  - wizeman 4y ago
    > You're guaranteed to get your money back from an Overnight loan to the Fed. (literally a 1-day loan to the USA's central bank). Well, then those loans are also risk-free, right? Because they are also financed by increasing the money supply and the Fed can't spend the money that was loaned to them. But normal loans and bonds are not risk-free, they have a default risk. Which is the entire reason why when you loan your money, sometimes you can't get it back. Staking, however, is risk-free, so the following statements of yours are wrong. > Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business. > > Staking is not a loan. > Yes it is. You give your money over to another organization, and that organization promises a % yield / APY in return. You aren't allowed the money back until later. > Its totally a bond.