
Bitcoin Rally Fuels Market in Crypto Derivatives - JumpCrisscross
https://www.wsj.com/articles/bitcoin-rally-fuels-market-in-crypto-derivatives-11562146202?mod=rsswn
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nikolay
All these articles try to add the illusion of sophistication of the this space
full of scammers and questionable characters. I mean, what kind of mind will
spend their limited amounts of life on something, which hides its main purpose
- speculation and getting rich without actually doing anything but just
HODL'ing. What a sad space!

~~~
seieste
At least with corn and soy futures there is an asset with intrinsic value and
some unpredictability due to weather / disease / yield / etc.

In contrast, Bitcoin is only valuable because people assume others find it
valuable. That seems like a currency, but most currencies have lower
volatility and are used by a whole lot more people.

So, bitcoin trading really doesn’t make any sense to me.

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politician
I don't want to come across as an advocate, so I won't name names, but does
anyone know why Proof of Capacity-based cryptocurrency schemes haven't taken
off? They seem strictly superior to the BTC mechanism and, honestly, the Proof
of Stake mechanism envisioned for ETH.

Schemes vary on certain details, but the gist on PoC is that you precompute
answers to puzzles that take up a bunch of space on a disk and miners search
their disks for the best answers to mine a block. It's hard to compute the
solutions during the window for the next block on the fly, so precomputation
and storage are required. Everyone's answers are different because the miner's
account identity is part of each solution. This approach seems strong from an
efficiency, transaction rate, and decentralization standpoint, but it hasn't
taken off, and I'm at a loss to why.

(Like I said, this space is full of scams, so it's hard to ask a question
honestly without sounding like a shill. Maybe I shouldn't have bothered
asking.)

~~~
rejschaap
Proof-of-Work initiated an arms race to do more work. Proof-of-Capacity would
initiate an arms race to have more capacity. And you still need to do work to
prepare the proof that you have the capacity. On face value it doesn't seem to
offer many benefits.

~~~
politician
The main feature that attracts my attention is that PoC claims to require
orders of magnitude less electricity per block than existing PoW solutions.
That, to me, seems like a huge benefit that reduces the need for participants
to locate themselves near hydroelectric power plants.

However, to your point, it does replace a dependence on ASICs with a
dependency on the HDD supply chain.

~~~
camjohnson26
The work done is a feature not a bug. The fact that a miner has to locate
their equipment by a hydroelectric power plant is what makes the network so
secure. That just shows that work is difficult to fake.

All these efforts to limit bitcoin’s energy expenditure seem environmentally
motivated, which is good. But the arguments seem equivalent to praising a
safe’s security but criticizing how hard it is to open. Those features are
linked.

Yes proof of stake or some other algorithm may take over eventually but we
don’t know if they are as secure yet. Proof of work is the good idea that made
the whole bubble possible and it remains to be seen if any of the other ideas
can beat it.

~~~
politician
Please don't misunderstand, I'm not suggesting that Bitcoin (or Proof-of-Work)
is broken or bad or unsafe or even a bad investment.

Rather, my original question was why Proof-of-Capacity has not seen stronger
adoption given that it appears to provide similar security guarantees with
better decentralization properties due to a lower $/W/block cost profile.

~~~
improv32
The $/W/Block profile is where the security comes from. Insofar as a miner can
spend dollars to increase their chance of getting the block, they will, until
MR=MC. See this article which explains it very well, though it is talking
about PoS: [http://www.truthcoin.info/blog/pow-
cheapest/](http://www.truthcoin.info/blog/pow-cheapest/)

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earthtolazlo
This type of gambling is already risky on liquid, highly regulated markets.
But doing it on heavily manipulated markets that are currently being propped
up by billions of fake dollars is just baffling.

~~~
verroq
Sorry but this is simply not true. Derivatives markets can be/is used to hedge
risk on the spot market (or take leveraged directional positions). The
development of derivatives markets is a natural complement to the spot market,
with derivatives markets usually providing a order of magnitude of liquidity
compared to spot. If anything, having a liquid derivatives market increases
the amount of capital required to manipulate the spot market.

>This type of gambling is already risky on liquid, highly regulated markets.

Risk is always balanced with return. No one is forcing you to trade nor is
there any systemic risk. People who take the risk know what they are getting
into.

>But doing it on heavily manipulated markets that are currently being propped
up by billions of fake dollars is just baffling.

Didn’t realise you were talking about SPX ;)

~~~
earthtolazlo
I don’t see how that matters when cryptocurrency exchanges are able to print
money and liquidate leveraged positions at will (Bitfinex/Binance/Bitmex +
Tether). Couple that with miner fees of over 10 million dollars worth of
cryptocurrency every day and the market feels like a giant black hole for any
fiat going in.

~~~
verroq
>I don’t see how that matters when cryptocurrency exchanges are able to print
money and liquidate leveraged positions at will (Bitfinex/Binance/Bitmex +
Tether)

If you start with a position as ridiculous as this then any further dialogue
is futile. Goodbye.

~~~
earthtolazlo
Can you explain where I’m going wrong? The evidence of Tether not being backed
1:1 is pretty overwhelming by now and Bitfinex has printed nearly two billion
new ones since the start of April.

~~~
wickoff
Honestly the reply you got was sort of justified. I find that when HN
discusses crypto almost nobody has any idea what they are talking about.

>The NYAG, in its original injunction, said they did not want to prevent
Bitfinex or Tether from continuing operations, but did move to prevent Tether
from lending any further funds to Bitfinex, a move Bitfinex opposed.

I am not sure what evidence you are talking about, but if NYAG is satisfied
then I am too. Also in the grand scheme of things Tether is irrelevant. There
are bunch of stablecoins available these days.

What is your complaint against binance? They are solvent, they don't liquidate
people because they don't have margin trading enabled yet, they are opening a
regulated US exchange in September. When they got hacked they've covered the
loss themselves despite being unregulated.

Of course Bitmex automatically liquidates people, what other option do they
have? Collect KYC info and hire an of army of international debt collectors?
You know your liquidation price before you open a position. If your position
gets anywhere near it's because you are being an overleveraged gambler rather
than a disciplined trader. It's 100% your fault.

I've heard more complaints about Coinbase or Kraken not processing fiat
withdrawals for months at a time, than I've heard about Binance or Bitmex
doing anything wrong.

~~~
earthtolazlo
Nearly all trading volume occurs in Tether, compared to dollars or other
stablecoins. Tether by their own admission says that they're only 74% backed
by "cash and cash equivalents."

[https://www.bloomberg.com/news/articles/2019-04-30/tether-
sa...](https://www.bloomberg.com/news/articles/2019-04-30/tether-says-
stablecoin-is-only-backed-74-by-cash-securities)

I'm assuming that "cash equivalents" refers to Bitcoin and other
cryptocurrency that would crater the market if actually sold for fiat. Not to
mention this was before nearly two billion tethers were dropped on the market.
I have a hard time believing that institutional investors sent billions of
dollars to an unregulated and unaudited institution that used this guy to move
around its money:

[https://www.bloomberg.com/news/articles/2019-05-03/ex-nfl-
ow...](https://www.bloomberg.com/news/articles/2019-05-03/ex-nfl-owner-is-
said-to-have-ties-to-850-million-crypto-mystery)

When Tether/Bitfinex blow up (either by indictment or by finally just running
out of greater fools' money), so will the rest of the cryptocurrency market,
particularly Tether-based exchanges like Binance. Mt Gox will look tiny by
comparison.

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tbabb
I wish we'd stop calling bitcoin "currency"— that is not remotely what it is.
Currency has a number of important properties that allow it to fill its
function, and cryptocurrency has basically none of them.

I wrote about this in 2017, but it is as relevant now as it was then:
[https://www.bzarg.com/p/what-bitcoin-shows-us-about-how-
mone...](https://www.bzarg.com/p/what-bitcoin-shows-us-about-how-money-works/)

~~~
wysifnwyg
After reading through your blog, I'm still unsure which properties Bitcoin
lacks which nation sponsored currency has.

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chadmeister
How about national sponsorship for one...

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sedeki
What exactly does it mean when people say that a currency is backed by a
government? ”Backed” to me implies, e.g., redeemable for gold which is clearly
not the case for the US dollar. Is it that the government issue bonds
denominated in that currency? But that has nothing to do with the money supply
per se...?

Please explain.

~~~
DenisM
The US dollar, if you live here, can be traded for a bit of freedom - pay off
the IRS and avoid jail time. It's also good to settle a debt - the government
will force the creditor to accept USD.

~~~
gdhbcc
If I try to buy a macbook in cash in Portugal, that is illegal. I will be
fined for it.

Does that mean the euro is not a currency?

