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Bonds are a "promise" because they can fail - the issuer can fail and the bonds can become worthless. So there may be a reasonable expectation of return, but st

by beaned 4y ago

Bonds are a "promise" because they can fail - the issuer can fail and the bonds can become worthless. So there may be a reasonable expectation of return, but still risk. Staking is not the same, because it is the algorithmic inflation of the currency itself, and can't "fail" the same way.

freejazz 4y ago
Bonds are a promise, because they are a contractual obligation to satisfy "the promise". That's what a promise is. That the fulfillment of the promise is predicated upon the efforts of another, is what makes a promise a security.
- beaned 4y ago
  Thanks, this phrasing makes more sense to me than the other explanations I've read. But if kraken already is approved to hold crypto for users, what makes staking it different? Aren't they already promising just to hold it and return it? It feels like the same promise.
  - freejazz 4y ago
    Well in this case it depends on their conduct and ability to do so which isn't solely algorithmically determined as is evidenced by the numerous other centralized stakers that have collapsed, taking the money with them. I'm under the impression Kraken can take the crypto and do what they want with it, so long as they keep their promise to you. That's exactly what a security is. I think the distinction is that with a bank's savings account, you are guaranteed your money back, they have all sorts of rules that apply to banks to make that true. Obviously crypto folks don't want it characterized as such an account as that would result in even more onerous limitations. In a decentralized system, there is no person in the way, whose conduct can change whether or not you get the money.
lottin 4y ago
Staking "can't fail" in the same way that a sovereign bond can't fail, since the issuer can always make the promised payments by issuing more worthless tokens. In other words, staking can absolutely fail.
- beaned 4y ago
  It might be possible that you have a point but you have to expound on it for it to be clear. When you jump to "in other words..," I don't know what you're talking about.

by beaned 4y ago

freejazz 4y ago

Bonds are a promise, because they are a contractual obligation to satisfy "the promise". That's what a promise is. That the fulfillment of the promise is predicated upon the efforts of another, is what makes a promise a security.

beaned 4y ago
Thanks, this phrasing makes more sense to me than the other explanations I've read. But if kraken already is approved to hold crypto for users, what makes staking it different? Aren't they already promising just to hold it and return it? It feels like the same promise.
- freejazz 4y ago
  Well in this case it depends on their conduct and ability to do so which isn't solely algorithmically determined as is evidenced by the numerous other centralized stakers that have collapsed, taking the money with them. I'm under the impression Kraken can take the crypto and do what they want with it, so long as they keep their promise to you. That's exactly what a security is. I think the distinction is that with a bank's savings account, you are guaranteed your money back, they have all sorts of rules that apply to banks to make that true. Obviously crypto folks don't want it characterized as such an account as that would result in even more onerous limitations. In a decentralized system, there is no person in the way, whose conduct can change whether or not you get the money.

lottin 4y ago

Staking "can't fail" in the same way that a sovereign bond can't fail, since the issuer can always make the promised payments by issuing more worthless tokens. In other words, staking can absolutely fail.

beaned 4y ago
It might be possible that you have a point but you have to expound on it for it to be clear. When you jump to "in other words..," I don't know what you're talking about.