4 ms·

What's wrong with the existing financial system?

beeflet 2y ago
If you've been reading the news, you might laugh if I told you that the original goals of cryptocurrency were to combat the high fees, surveillance, and insecurity associated with centralized payment infrastructure. But that just goes to show how deeply original goals of cryptocurrency have been undermined by speculators and gamblers.
- jxjnskkzxxhx 2y ago
  I pay zero fees tho. And centralised Vs decentralized doesn't really affect my use, it's just an implementation detail.
  - beeflet 2y ago
    The vendors you spend at have to pay for credit card processing fees. That cuts into the margin for the business and ultimately the consumer pays for that, whether they recognize it or not. Issues like surveillance and insecurity are largely political and by the time they are realized on an individual level they are too late to solve. It is pretty easy track down protestors when the government has access to the network of all their transactions. Not to mention control: payment processors are private companies and can simply choose not to do business with you, locking you out of the market. With a typical bank, your money is protected by "open source" information like your name, address, and such. If you can copy information from a credit card you have everything you need to authorize a transaction: skimming is a major issue. When this security inevitably breaks down, it's called "identity theft" and the responsibility is pushed onto the consumer who has no agency to secure themselves. In a cryptocurrency, it's a keypair so the information needed to authorize the transaction (private key) is separate from the information needed to verify it (public key). And the end user has ownership of the keypair so they can take initiative in their own security. If they want to use a certain hardware token, they can do that. If they want to outsource some security to a third party, they can do that voluntarily with a multi-signature scheme.
    - jxjnskkzxxhx 2y ago
      Isn't that a problem for the vendors though? In lots of corners of capitalism you gave two parties fighting over who pays what. And that's a good thing.
      - beeflet 2y ago
        Yes, it is a problem for vendors. Vendors will need to increase their prices to cover their costs, which by proxy is a problem for the consumer. > In lots of corners of capitalism you gave two parties fighting over who pays what. And that's a good thing. Yes, the goal of cryptocurrency is to fight against rent-seeking payment infrastructure in this manner.
        jxjnskkzxxhx 2y ago
        > Yes, the goal of cryptocurrency is to fight against rent-seeking payment infrastructure in this manner. Another failure of crypto.
globular-toast 2y ago
The existing financial system is one where the money supply is controlled by private bankers. Money is created by banks when they issue loans (mostly mortgages) and destroyed when people pay the loans back. When a bank issues a mortgage to a first time buyer of, say, 300,000 credits, that 300k is brand new money injected into the system. The loan will be slowly paid off, but over the span of maybe 30 years that single loan will contribute on average 150k of money in the system. Almost all of the money in the system is just people's loans they haven't paid back yet. If the banks issue more loans, the money supply increases, if they issue fewer it decreases. This sounds stupid and most people usually think "there must be something more to it, but I don't understand". Well, there isn't. Money is just made up numbers that we use to do accounting. The only thing that is real is physical (houses, food, minerals, energy etc.) To attempt to reign in the stupidity, governments have created layers upon layers of regulation to the extent that much of finance is basically working out how to keep legally creaming off the top of the money supply. They play silly games with each other where they trade bits of paper until one of them is left holding the bag. The trouble is the silly games end up affecting everyone else because we actually use this money to do real finance, like paying for food and shelter, insurance, savings etc. Read up on the 2008 financial crisis. There's a very entertaining book and subsequent film called The Big Short which is highly recommended. Bitcoin was started as a direct response to the events that played out around 2008.
- jxjnskkzxxhx 2y ago
  Creating credit out of thin air isnt a property of our financial system, it's a property of debt. If I owe you in bitcoin, we're also creating bitcoin denominated debt out if thing air.

If you've been reading the news, you might laugh if I told you that the original goals of cryptocurrency were to combat the high fees, surveillance, and insecurity associated with centralized payment infrastructure. But that just goes to show how deeply original goals of cryptocurrency have been undermined by speculators and gamblers.

jxjnskkzxxhx 2y ago
I pay zero fees tho. And centralised Vs decentralized doesn't really affect my use, it's just an implementation detail.
- beeflet 2y ago
  The vendors you spend at have to pay for credit card processing fees. That cuts into the margin for the business and ultimately the consumer pays for that, whether they recognize it or not. Issues like surveillance and insecurity are largely political and by the time they are realized on an individual level they are too late to solve. It is pretty easy track down protestors when the government has access to the network of all their transactions. Not to mention control: payment processors are private companies and can simply choose not to do business with you, locking you out of the market. With a typical bank, your money is protected by "open source" information like your name, address, and such. If you can copy information from a credit card you have everything you need to authorize a transaction: skimming is a major issue. When this security inevitably breaks down, it's called "identity theft" and the responsibility is pushed onto the consumer who has no agency to secure themselves. In a cryptocurrency, it's a keypair so the information needed to authorize the transaction (private key) is separate from the information needed to verify it (public key). And the end user has ownership of the keypair so they can take initiative in their own security. If they want to use a certain hardware token, they can do that. If they want to outsource some security to a third party, they can do that voluntarily with a multi-signature scheme.
  - jxjnskkzxxhx 2y ago
    Isn't that a problem for the vendors though? In lots of corners of capitalism you gave two parties fighting over who pays what. And that's a good thing.
    - beeflet 2y ago
      Yes, it is a problem for vendors. Vendors will need to increase their prices to cover their costs, which by proxy is a problem for the consumer. > In lots of corners of capitalism you gave two parties fighting over who pays what. And that's a good thing. Yes, the goal of cryptocurrency is to fight against rent-seeking payment infrastructure in this manner.
      - jxjnskkzxxhx 2y ago
        > Yes, the goal of cryptocurrency is to fight against rent-seeking payment infrastructure in this manner. Another failure of crypto.

globular-toast 2y ago

The existing financial system is one where the money supply is controlled by private bankers. Money is created by banks when they issue loans (mostly mortgages) and destroyed when people pay the loans back. When a bank issues a mortgage to a first time buyer of, say, 300,000 credits, that 300k is brand new money injected into the system. The loan will be slowly paid off, but over the span of maybe 30 years that single loan will contribute on average 150k of money in the system. Almost all of the money in the system is just people's loans they haven't paid back yet. If the banks issue more loans, the money supply increases, if they issue fewer it decreases. This sounds stupid and most people usually think "there must be something more to it, but I don't understand". Well, there isn't. Money is just made up numbers that we use to do accounting. The only thing that is real is physical (houses, food, minerals, energy etc.) To attempt to reign in the stupidity, governments have created layers upon layers of regulation to the extent that much of finance is basically working out how to keep legally creaming off the top of the money supply. They play silly games with each other where they trade bits of paper until one of them is left holding the bag. The trouble is the silly games end up affecting everyone else because we actually use this money to do real finance, like paying for food and shelter, insurance, savings etc. Read up on the 2008 financial crisis. There's a very entertaining book and subsequent film called The Big Short which is highly recommended. Bitcoin was started as a direct response to the events that played out around 2008.

jxjnskkzxxhx 2y ago
Creating credit out of thin air isnt a property of our financial system, it's a property of debt. If I owe you in bitcoin, we're also creating bitcoin denominated debt out if thing air.