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> 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 a

> 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.

dragontamer 4y ago
Frankly, I see no contradiction, with what I said in any of my posts. Could you lay out more clearly where you think a contradiction has occurred?
- wizeman 4y ago
  > Frankly, I see no contradiction, with what I said in any of my posts. Could you lay out more clearly where you think a contradiction has occurred? Sure. You said (in the context of talking about Binance and Coinbase): > Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business. This phrase, in the context of the news we're discussing (about suspending withdrawals), implies that Coinbase and Binance are also incurring in a risk of suspending withdrawals because they might run out of liquidity due to staking (which you said is equivalent to a "crappy loans / bonds business"). However, staking is not equivalent to a "crappy loans / bonds business". To argue that point, someone said that "Staking is not a loan", implying that unlike loans you can't lose money because of staking, but you said "it's totally a bond" because, I suppose, you're not allowed to get the money back until a certain time. However, I think that you are missing the fact that unlike with loans and bonds, there is no risk of running out of liquidity because of staking. If Coinbase and Binance were operating a real loans and bonds business (like banks do), and suddenly all customers demanded their deposits back, these exchanges couldn't force the borrowers to pay back their loans/bonds immediately so that they could fulfill the withdrawal demand. Not to mention that if the borrowers went bankrupt, the money would be lost, which would lead to Coinbase and Binance potentially losing customer funds, also becoming bankrupt and suspending withdrawals. This seems to be more or less what is happening with some of these exchanges that are running out of liquidity, because they seem to be essentially gambling with customer funds. But I think in staking it's completely different, because, as I argued, in staking there is no risk that borrowers go bankrupt and default on the loan/bond, as there are no borrowers. Instead, the yield is financed through inflation and the staked coins remain your property throughout the whole staking process -- nobody can spend them, so there is no risk that they can't be payed back. And on top of that, customers aren't allowed to withdraw the staked amount until the staking expires, so there is no risk that Coinbase and Binance can't fulfill withdrawals because of staking. Which means there is no risk of running out of liquidity because of staking. In fact, coins can only be staked if the customer decides to stake them. Which is also completely unlike the loans/bonds business, which happens behind the customer's back, essentially. The latter leads to broken customer expectations (and ruined lives) if/when the loans/bonds business goes under. Well, that's my understanding at least, but I'm sure I may be missing some points as I'm not actually an expert (or anything close to it) on staking.
  - dragontamer 4y ago
    > real loans and bonds business You mean, like a Money Market fund like VMFXX? https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx https://investor.vanguard.com/investment-products/mutual-fun... VMFXX has federal regulations, where it is _required_ to prove your liquidity reserves _DAILY_. EVERY SINGLE DAY, VMFXX publishes how much money they have that can be satisfied within 1-day, 1-week, and other such benchmarks. The entire publication is available online, every single day, not only from VMFXX, but also all of VMFXX's competitors (such as SWVXX). https://www.schwabassetmanagement.com/products/swvxx https://www.schwabassetmanagement.com/products/swvxx ---------- What Coinbase / Binance is doing is "Crappy" because their reporting guidelines are so much worse than what "the real banks" are doing. There's no one checking or double-checking these reserves. Every single dollar (and even penny) is tracked in a money market fund. The _EXACT_ makeup of the loans is also tracked. The rules for how a "bank run" would be handled, are regulated and stated in advance. Everything has been planned out, discussed, debated, in Congress over-and-over again for the past 100 years as our laws have evolved. VMFXX handles over $200 Billion of assets, and has been doing so for decades, in a tradition that follows US legal rules for nearly a hundred years (established since the times when the banks did lose a lot of money: back in the Great Depression). Its battle tested, pragmatic, and cheap (0.11% fees/year), extremely transparent, well regulated, well understood. The comparison to Coinbase and Binance is laughable. There's no regulations, they haven't even been around for a decade, Binance isn't even being checked by anybody (being an offshore accounts), though I admit that Coinbase is at least in the USA and subject to US Law. But even Coinbase's reports on their assets pales in comparison to the information I get from VMFXX's pages. ------- I'm trying to show you what a "real bank" does, such as VMFXX / Vanguard, with their "equivalent stablecoins" (aka, money market fund).
    - wizeman 4y ago
      > > real loans and bonds business > You mean, like a Money Market fund like VMFXX? No, I mean like when a bank buys government bonds, company bonds, or loans money to customers and businesses. That's the kind of business that leads to bankruptcy if all your customers suddenly ask for their money back (which you have been lending behind their backs). > What Coinbase / Binance is doing is "Crappy" because their reporting guidelines are so much worse than what "the real banks" are doing. There's no one checking or double-checking these reserves. I'm not sure if that's the case, but if it is, then I agree with you. Crypto exchanges should be the subject of periodic financial audits by reputable firms and as far as I know, some of the more reputable ones are already moving in that direction out of their own free will (to assure customers that are getting worried by their less reputable competitors that are now going bankrupt), even going so far as publishing cryptographic Merkle proofs of crypto reserves (but traditional financial audits are also necessary). > Every single dollar (and even penny) is tracked in a money market fund. The _EXACT_ makeup of the loans is also tracked. The rules for how a "bank run" would be handled, are regulated and stated in advance. Everything has been planned out, discussed, debated, in Congress over-and-over again for the past 100 years as our laws have evolved. It doesn't matter, bank runs can still happen when you're in the crappy loans and bonds business. And when they do, nowadays not only banks get rewarded with government bailouts, but it's always the tax payer that ends up paying the bill, even though those tax payers are not responsible for the bank's risky and immoral (due to lack of customer consent) money managing policies. And the vast majority of those tax payers are not even customers of the bank!
dibt 4y ago
I think the confusion is that they believe the token that is staked is a sunk cost, the same way a business would spend the money from a loan. Like you said, the token will be returned when unstaked. If I take a loan out to buy and run a pizza restaurant, I can't just give the principal back if it fails. I would have to liquidate the business, which would not be equivalent to the starting capital costs.
- dragontamer 4y ago
  The Fed always can return the money, because they control how much money is printed. Therefore, the money loaned to the Fed through the overnight rate is risk-free. That's why its called the risk-free rate. It may only be a singular day worth of bond / IOU, but its still a loan/bond/debt instrument. ------- Similarly, the Ethereum rewards are printed out of thin air, are they not? By the Ethereum staking system? Its not like the Ethereum they print existed beforehand.

dragontamer 4y ago

Frankly, I see no contradiction, with what I said in any of my posts. Could you lay out more clearly where you think a contradiction has occurred?

wizeman 4y ago
> Frankly, I see no contradiction, with what I said in any of my posts. Could you lay out more clearly where you think a contradiction has occurred? Sure. You said (in the context of talking about Binance and Coinbase): > Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business. This phrase, in the context of the news we're discussing (about suspending withdrawals), implies that Coinbase and Binance are also incurring in a risk of suspending withdrawals because they might run out of liquidity due to staking (which you said is equivalent to a "crappy loans / bonds business"). However, staking is not equivalent to a "crappy loans / bonds business". To argue that point, someone said that "Staking is not a loan", implying that unlike loans you can't lose money because of staking, but you said "it's totally a bond" because, I suppose, you're not allowed to get the money back until a certain time. However, I think that you are missing the fact that unlike with loans and bonds, there is no risk of running out of liquidity because of staking. If Coinbase and Binance were operating a real loans and bonds business (like banks do), and suddenly all customers demanded their deposits back, these exchanges couldn't force the borrowers to pay back their loans/bonds immediately so that they could fulfill the withdrawal demand. Not to mention that if the borrowers went bankrupt, the money would be lost, which would lead to Coinbase and Binance potentially losing customer funds, also becoming bankrupt and suspending withdrawals. This seems to be more or less what is happening with some of these exchanges that are running out of liquidity, because they seem to be essentially gambling with customer funds. But I think in staking it's completely different, because, as I argued, in staking there is no risk that borrowers go bankrupt and default on the loan/bond, as there are no borrowers. Instead, the yield is financed through inflation and the staked coins remain your property throughout the whole staking process -- nobody can spend them, so there is no risk that they can't be payed back. And on top of that, customers aren't allowed to withdraw the staked amount until the staking expires, so there is no risk that Coinbase and Binance can't fulfill withdrawals because of staking. Which means there is no risk of running out of liquidity because of staking. In fact, coins can only be staked if the customer decides to stake them. Which is also completely unlike the loans/bonds business, which happens behind the customer's back, essentially. The latter leads to broken customer expectations (and ruined lives) if/when the loans/bonds business goes under. Well, that's my understanding at least, but I'm sure I may be missing some points as I'm not actually an expert (or anything close to it) on staking.
- dragontamer 4y ago
  > real loans and bonds business You mean, like a Money Market fund like VMFXX? https://investor.vanguard.com/investment-products/mutual-funds/profile/vmfxx https://investor.vanguard.com/investment-products/mutual-fun... VMFXX has federal regulations, where it is _required_ to prove your liquidity reserves _DAILY_. EVERY SINGLE DAY, VMFXX publishes how much money they have that can be satisfied within 1-day, 1-week, and other such benchmarks. The entire publication is available online, every single day, not only from VMFXX, but also all of VMFXX's competitors (such as SWVXX). https://www.schwabassetmanagement.com/products/swvxx https://www.schwabassetmanagement.com/products/swvxx ---------- What Coinbase / Binance is doing is "Crappy" because their reporting guidelines are so much worse than what "the real banks" are doing. There's no one checking or double-checking these reserves. Every single dollar (and even penny) is tracked in a money market fund. The _EXACT_ makeup of the loans is also tracked. The rules for how a "bank run" would be handled, are regulated and stated in advance. Everything has been planned out, discussed, debated, in Congress over-and-over again for the past 100 years as our laws have evolved. VMFXX handles over $200 Billion of assets, and has been doing so for decades, in a tradition that follows US legal rules for nearly a hundred years (established since the times when the banks did lose a lot of money: back in the Great Depression). Its battle tested, pragmatic, and cheap (0.11% fees/year), extremely transparent, well regulated, well understood. The comparison to Coinbase and Binance is laughable. There's no regulations, they haven't even been around for a decade, Binance isn't even being checked by anybody (being an offshore accounts), though I admit that Coinbase is at least in the USA and subject to US Law. But even Coinbase's reports on their assets pales in comparison to the information I get from VMFXX's pages. ------- I'm trying to show you what a "real bank" does, such as VMFXX / Vanguard, with their "equivalent stablecoins" (aka, money market fund).
  - wizeman 4y ago
    > > real loans and bonds business > You mean, like a Money Market fund like VMFXX? No, I mean like when a bank buys government bonds, company bonds, or loans money to customers and businesses. That's the kind of business that leads to bankruptcy if all your customers suddenly ask for their money back (which you have been lending behind their backs). > What Coinbase / Binance is doing is "Crappy" because their reporting guidelines are so much worse than what "the real banks" are doing. There's no one checking or double-checking these reserves. I'm not sure if that's the case, but if it is, then I agree with you. Crypto exchanges should be the subject of periodic financial audits by reputable firms and as far as I know, some of the more reputable ones are already moving in that direction out of their own free will (to assure customers that are getting worried by their less reputable competitors that are now going bankrupt), even going so far as publishing cryptographic Merkle proofs of crypto reserves (but traditional financial audits are also necessary). > Every single dollar (and even penny) is tracked in a money market fund. The _EXACT_ makeup of the loans is also tracked. The rules for how a "bank run" would be handled, are regulated and stated in advance. Everything has been planned out, discussed, debated, in Congress over-and-over again for the past 100 years as our laws have evolved. It doesn't matter, bank runs can still happen when you're in the crappy loans and bonds business. And when they do, nowadays not only banks get rewarded with government bailouts, but it's always the tax payer that ends up paying the bill, even though those tax payers are not responsible for the bank's risky and immoral (due to lack of customer consent) money managing policies. And the vast majority of those tax payers are not even customers of the bank!

dibt 4y ago

I think the confusion is that they believe the token that is staked is a sunk cost, the same way a business would spend the money from a loan. Like you said, the token will be returned when unstaked. If I take a loan out to buy and run a pizza restaurant, I can't just give the principal back if it fails. I would have to liquidate the business, which would not be equivalent to the starting capital costs.

dragontamer 4y ago
The Fed always can return the money, because they control how much money is printed. Therefore, the money loaned to the Fed through the overnight rate is risk-free. That's why its called the risk-free rate. It may only be a singular day worth of bond / IOU, but its still a loan/bond/debt instrument. ------- Similarly, the Ethereum rewards are printed out of thin air, are they not? By the Ethereum staking system? Its not like the Ethereum they print existed beforehand.