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Another key drawback of USDC is that your account can be frozen by the centralized authority:

USDC tokens are ERC-20 compatible and can be used with any ERC-20 compatible digital wallet. However, a global blacklist is maintained by CENTRE for USDC, which prevents tokens from being sent into or from blacklisted addresses. Reasons for blacklisting could include known fraudulent or illegal activity, or a legal order or process. Reserves associated with USDC balances held on blacklisted addresses may be wholly and permanently unrecoverable.


How bad this is is yet to be seen. Anyone who has experience with PayPal freezing their account knows that it can be very frustrating when a company freezes your accounts for some unknown reason and then does not communicate with you.

I don't see how this won't result in rebuilding the current regulated banking system on top of an inefficient system bottlenecked by proof-of-work.

"Rebuilding the current regulated banking system" just with different people in charge can be quite lucrative if you are one of the new builders who is now in charge.

I can definitely see the attraction for entrepreneurs, just not the value for anyone else.

It's a form of time-arbitrage.

The cost of regulation is a decrease in both convenience and innovation. By eliminating regulation, you get a whole host of new startups that were previously held back, some of which solve genuine problems that have no existing solution. Consumers flock to these startups because right now, in this moment, they solve problems better and are more responsive to customers than the existing regulated incumbents.

Many regulations solve problems that only appear at scale, so as long as the new startups are small and voluntary, regulators take a hands-off approach and let these startups enjoy their competitive advantage. It takes time for regulators to catch up, so for several years, these new solutions can grow and get new adopters. Eventually all the bad behavior that caused the regulations in the first place appears, and there're calls for regulation, and the new boss starts to look an awful lot like the old boss. But people don't make their purchasing decisions based on what's going to happen in 20 years, they make their purchasing decisions based on what they need now.

You see this with a lot of dot-com era startups. People knew in 1997 that Amazon was going for monopoly and was just going to jack up prices when they achieved it; hell, Jeff Bezos even told investors as such. But consumers didn't care: we wanted convenience and low prices now, and even if we did without, other people would give Amazon their business, and all we'd succeed at is disadvantaging ourselves. Similar with Facebook; most people knew they were trading away their privacy (Zuckerburg's "dumb fucks" IM was made public in 2010, and he said it in 2004), but goddamnit, people wanted to see what their grandkids were up to.

Thank you for pointing out one of the big upsides to entrepreneurial bubbles. (Not necessarily all "speculative" bubbles.)

The simplified form is that a "gold-rush" mentality in an entrepreneurial bubble, even though it misprices risk generally, incentivizes builders to go build things more than they would, and since on balance building things is good, a hyper period of new venture formation still leads to net gains even if most are failures.

But nostrademons has a next-level mechanic here -- the idea that stage and scale are not fractal, and hence that rebuilding an ecosystem de novo (perhaps in a sort of sheltered petri dish) can yield big interesting beneficial outcomes because of the plasticity of things at the smaller scale and earlier stage.

(Still, I think it's a monumentally bad idea to acquiesce in the rebuilding of the financial system de novo by amateurs.)

I like your idea of time-arbitrage. I think Uber and AirBnB are good examples of startups that have created value by operating in loosely regulated areas. Still, I haven't anything emerge from the crypto space that appears to have a true value proposition and is not intimately connected to the exchange rate of virtual tokens

People knew in 1997 that Amazon was going for monopoly and was just going to jack up prices when they achieved it

Is that really the story of the past 21 years though? Instead it seems like Amazon has still not achieved monopoly in retail, and they still aren't getting amazing margins from it.

How do you fix our current monetary system??? You cant... its also generally much easier to make change by starting from scratch rather than trying to move an entire establishment. If the innovation catches on, the old establishement will crumble.

Your premise is to "fix" the monetary system, but you failed to articulate the issues that you want to resolve.

Currency debasement.

This all comes down to "MV=PQ", a description of the relation between money supply and real economic activity. Normally as the real economy expands (+Q) the amount of money is increased to keep it growing (+M). Without that either the quantity of transactions falls (-V) or the price level falls (deflation, -P).

Alternatively, think about what price stability really means. If a loaf of bread costs $1, an hour of work $10, a barrel of oil $50, and a house $500k today ... how do you really ensure that they cost exactly that in 50 years when you come to retire? You can't. In a real economy there are real reasons for shifts in the price level.

If you have a fixed money supply that is infinitely divisible, prices would be expected to fall due to deflation and increased purchasing power. Relative values of bread, hour of work, barrel of oil and a house should remain the same (with the caveat that their real values actually change - eg if we become an electric car economy then the relative price of oil in big macs will change). This makes no difference to anything of substance, it is just mathematics and psychology. The only real substantive issue is with debt repayments with deflationary currency, in which case I'd advise thinking hard about your loan terms.

I think your point about infinite divisibility is an interesting one. But the main downside is that there is no incentive to exchange the currency (a pizza or ownership in a business) when you know that the currency will be more in a year than it is worth today.

Inflation is a desirable feature in a currency. A currency should be a medium of exchange. Deflation encourages people to hold currency rather than exchange it.

I don't find it at all desirable that some people have the right to devalue my holdings. It is farcical to think that people would hold the medium of exchange forever if it kept increasing in value because at some point they would either have so much that they would prefer to convert (some of) it into material wealth or chase something with a higher rate of return. Alternatively they would have so little that they would have no choice but to convert it to survive. You cannot eat the medium of exchange.


Define "economy growing", all the way to the end.

You can replace "grow" with "function" if you prefer.

No, I'm going to hold you to the original word, because, if you look around - that's what's happening.

Our population grows. Our footprint grows. Our consumption and waste grow.

Nobody, besides those highest, benefit from this style of function.

Yes, human civilization has been doing this for quite a long time. I'm not really sure what your point is relative to inflation.

Maybe the "economy" continuing to rally is not a good thing, for, yknow, society?

There must some ironic meaning of "economy" that I'm not aware of. Societies have gone through many recessions and depressions. Is that what you're advocating?

Don't take this the wrong way, but you sound illiterate since you clearly don't understand the words I wrote in context "medium" and "exchange". The statement "You can't eat the medium of exchange" implies that it is to be spent.

There already many ways to exchange cash for assets that are likely to appreciate in value (gold, real estate, equities, bitcoin). Won’t a depreciating asset like cash always make for better incentives to participate in trade than an appreciating one?

Please explain the advantages you see in the simplest terms you can.

The features that make cash good as a medium of exchange are not appreciation or depreciation, but all of the other features of divisibility, fungibility, transferability, common acceptance etc. A good medium of exchange need to be valued such that it can be reliably exchanged. Ideally you don't want it going up too fast nor down two fast, but stable enough to make trade. It just happens that Bitcoin is/ was very small relative to the global economy. It also has the benefit that it can't be debased, which makes it a better money - even for trade as well as saving. I just wouldn't consider it "investing" despite the fact it still has room to grow as a currency. It still needs much more work on the fungibility side.

If the primary medium of exchange is an inflating currency then possessors are incentivized to exchange it. If debt is owed in a deflating currency than the burden of all debts will only grow. Could you address these points rather than simply dismiss them as irrelevant?

Please note that I haven't dismissed any point you have made despite your initial dismissal of me.

To your point, is a currency is inflating then you are incentivised to not hold it. But who has the right to benefit from the inflation of the supply? How do you fairly determine that? Often inflation is conflated with the rise in prices rather than strictly the inflation of supply, so strictly referring to the latter - inflation occurs, while at the same time economic growth is also occurring, so it isn't 100% clear that the incentive scheme for devaluing a currency will work as it must balance against this growth. Even if it is not balanced, and successfully devalues for your incentive, what is the appropriate rate? Is VEF too much, USD just enough? Wouldn't it make more sense to just have a fixed/known rate of currency supply - eg Bitcoin - decreases to 0, Monero decreases to small.

The problem isn't so much the inflation, it is the unpredictable nature of the debasement and the fairness of who benefits from it. A currency doesn't need to incentivise people to spend it so long as it can always be available as a medium. Infinite divisibility ensures this. Having the medium be a universal standard measure as a unit of account by virtue of being a stable and accessible medium is also essential. Bitcoin achieves this. As for debt burdens growing, this is not always true. If I take a low interest BTC loan for mining equipment and have measured my risk and profit correctly I should be able to pay it off since I am working in this currency. If I borrow USD to start a Venezuelan corner store, I might be in for a bad time.

Inflation benefits borrowers more than hoarders. Your example is strange because in the one you compare a base currency to economic activity in that currency and in the other you take a loan in one currency in order to transact in another. If you borrow bolivars to start a Venezuelan corner store, at least your debt would lose value as rapidly as the currency you receive from your customers. If the price of BTC continues to rise indefinitely, you would be in for an even worse time if you borrowed BTC to start your Venezuelan corner store.

I also don't see how infinite divisibility helps. It's still deflation. Let's say the world converts to BTC. Now if I take a loan of 1 BTC to start my corner store, the value of that 1 BTC will continue to increase, but if the goods selling do not increase in price, I will have to charge less and less for them over time. There's the same amount of space between 1 and 0 as there is between 1 and infinity.

You can rephrase that as inflation benefits borrowers more that savers. And borrowers benefit lenders. In the opposite paradigm, savers benefit savers and savers benefit investors. Think of a scenarios that is made up of an economy of a single currency, that is deflationary and everybody saves as much as they can, but they have to eat, so trade still occurs. Those that can save more accumulate more purchasing power until they think it wise to invest and get a greater return. Assuming all perfect investment execution, wealth would tend to aggregate as we see, but overall everybody benefits and see the rising tide lift all boats.

Savers can choose to loan their currency to a bank for some guaranteed returns, they can loan it to corporations and public institutions in the form of bonds, or they can purchase ownership of real estate and businesses through equities. They can buy bitcoin if they consider it a wise investment. Only lenders and the people who insist on hoarding cash suffer from inflation.

Historically deflation has resulted in economic stagnation and depression. The reason is that there is no incentive to borrow or spend money on a risky investment when increasing value of currency over time is guaranteed. What exactly is supposed to be different this time?

> you sound financially illiterate

That's not really something that can be taken as anything other than an insult. On HN we like points to be made without personal swipes. Aside from making this place a more pleasant place to be, points are often more persuasive that way.

I was just trying to be direct. What would be a more polite way to say that?

You can just deliver the counterpoint, explanaining how you think the parent was mistaken, without the personal insult. “The key point this comment fails to recognise is [useful new info]” might work well.

Thanks Tom, I felt bad making the retort as well as I like HN to be a happy place. For the record, I am majored in finance, mathematics and cryptography well before these things were linked. I discussed Bitcoin with Hal Varian in 2011 and staked our differing positions. It may be too early to call, but Bitcoin seems quite successful so far, and has served me well. I prefer not to rely on my credentials to make a point about economics since this is a logical fallacy.

About as perfect an analysis of the current state of affairs as one could give.

If Ethereum successfully migrates to proof-of-stake then it won't be bottlenecked by proof-of-work any more ;-)

It may end up rebuilding the current regulated banking system. But if the regulated banking system and the unregulated banking system are sitting next to each other using tokens that are interchangeable with smart contracts, that seems like it could be useful.

If a regulated banking system mixes with an unregulated banking system everything becomes an unregulated banking system.

Also proof-of-stake has been promised for so long I would be embarrassed to talk about it if I worked at the Ethereum Foundation. Delivering things that work isn't their strong suit.

this challenge cannot be circumvented.

Division of tasks, and specialization naturally trend to hierarchical organization for the same reason divide and conquer algorithms are so efficient. Separation of concerns is powerful.

There is much different of 5-6 shoemakers picking the same person to handle their finances so they can focus on making shoes. But, how many shoe makers can offload their finances until you have a bank?

Could you try saying this some other way? I don't grasp your meaning at all.

I always look at askance to USD-in-a-bank-account backed stablecoins. There's no innovation in them.

Their value also depends on how many USD's stored in that bank account (not transparent to ordinary people), and the inherent problem with USD - that the FED, a central authority prints it, remains still.

There are other - in my opinion more honest - crypto-only stablecoins, like Dai (of MakerDAO) or Augmint, which are not freezable by any authority, nor cheatable by bribed auditors. They are backed solely by crypto assets, all transparent.

Crypto assets are only valuable insofar as they can be exchanged for real world goods and services (mostly people seem to want US dollars). Purely crypto backed stable coins lack a stable relationship to the real world.

Interestingly, in dark web markets, it is often exactly the opposite scenario. No one wants USD and they all want crypto.

At some point they'll want to exchange their profits for real goods and services. They will rely on some exchange service to cash out eventually.

If most of the criminal money is used to transact with other criminals, then most of the money doesn't need to convert to USD.

The real kicker is whether the other criminals are willing to accept bitcoin which they know won't convert to USD.

Those crime bosses eventually want to buy a new mansion, Porche, a yacht, jewellery/stuff for their wife/gf, you know, anything to actually enjoy their life in real world. They eventually need to exchange their ill-gotten gains for real money. They can't stay in BTC forever. Basically they want to turn the BTC they got from their criminal activities to a clean cash not linked to crime. There are various way they might go about it, basically similar techniques as money launderers use.

You could certainly accept bitcoin for black market transactions and spend bitcoin on black market transactions, but wouldn't most participants want to transport their gains to the real world eventually?

Same drawback applies to Bitcoin. Send BTC from Coinbase to a blacklisted entity and see how quickly CB, Gemini, etc. shut down your accounts. Then you’re left with your local client but you can’t trade anywhere... and speculation is crypto’s only use case today.

At least according to this document, when your USDC account is blacklisted you may no longer send or receive tokens from it. With Bitcoin, even if Coinbase blacklists you, you can still send your Bitcoin to other accounts and exchange it for things. I'm sure it's a huge pain but your Bitcoin will not just be lost forever.

> With Bitcoin, even if Coinbase blacklists you, you can still send your Bitcoin to other accounts and exchange it for things

This is not so. Coinbase and Gemini (I haven't checked others but I'm sure they're the same) will freeze your assets entirely if required by law or if you violate the user agreements in some flagrant way [0] [1].

[0] https://support.coinbase.com/customer/en/portal/articles/190...

[1] https://gemini.com/user-agreement/#account-closure

I think they mean if you are using your own wallet to store your bitcoin, then coinbase and gemini have no control over what you do with it, except not using their own services

Then back to my original point: If no exchanges allow you to deposit BTC, what are you doing with it?

Once you've shamir-secret-split your multi-sig cold-storage private keys, laminated them, placed them in fireproof envelopes and dug them deep in the ground in 5 different continents... what exactly do you DO with your BTC?

Your original point was that _Coinbase and Gemeni_ had prevented you from exchanging your BTC for fiat currency. There's nothing preventing you from taking your BTC to some other exchange, or just some guy that accepts BTC for goods or services. That's the beauty of this whole decentralized thing.

No, you misread. "et cetera" is latin for "and the rest"... I put that there because exchanges are all tied. A ban on one leads to a ban on another, depending on the severity of your crime.

> There's nothing preventing you from taking your BTC to some other exchange

I've already showed you that exchanges can freeze your assets, so yes they can prevent you from sending to other exchanges.

> some guy that accepts BTC for goods or services. That's the beauty of this whole decentralized thing.

If your marker for decentralization is currency adoption, then USD is the most decentralized.

I thought we were passed this whole "Bitcoin is not created by humans" meme...

> "I've already showed you that exchanges can freeze your assets"

Your point is well taken, however it needs to be made clear: exchanges can only freeze those assets which you yourself have placed in their control.

Can’t you just do a private transfer to a fresh wallet?

It doesn't work that way, every transaction is fully traceable all the way back to the block the coin was mined in.

> Can’t you just do a private transfer to a fresh wallet?

Isn’t the point of Bitcoin not to have private transfers?

You might have to tumble it first.

Washing your coins through monero / Zcash is a simple option (With enough splits and spread over time so amount correlation is harder).

If you have some time, rent mining power with BTC, and get freshly minted totally clean bitcoin in return.

You can exchange your bitcoin for stuff outside of those exchanges. Lot of ways to spend bitcoin without having to use an exchange ;)

p2p trades

That's not actually true. If you attempt to send a transaction from Coinbase to an address they have blacklisted they will immediately suspend your account. You will be allowed to withdraw your funds before the account is closed.

How effective do you suppose that is, when best practice for some time has been to use a new receiving address for every transaction?

> but you can’t trade anywhere

Just trade on all the other less regulated exchanges. Or localbitcoin. Or, you know, buy stuff.

> and speculation is crypto’s only use case today.

Or you buy stuff... For example:

* Webhallen (huge Swedish online shop)

* scan.co.uk (uk based computer online shop)

* purse.io (buy stuff from amazon)

* fastmail (emails)

* VPN/VPS/domains from various providers

* darknetmarkets

Why the hell would I buy Bitcoin to buy stuff on Amazon through a proxy site that sells my BTC for me instead of just... buying on Amazon like a normal person? BTC will be way slower and more expensive than just using my credit card... Plus Visa will refund me in the case of fraud.

Like I side, speculation is the only thing you buy BTC for (moon!!!111), and the exchanges will prevent you from doing this if you are related to blacklisted accounts.

> Why the hell would I buy Bitcoin to buy stuff on Amazon through a proxy site

Because they give discounts up to 15%.

I'm sorry it doesn't fit your narrative but there are reasons to prefer cryptocurrencies.

Like a lot of the crypto currency space purse.io is shady and likely promoting thinly veiled money laundering.

Ask yourself if the discount is worth the risk of experiences like this:


15% sounds about right to offset the fraud risk, volatility risk, exchange fees, network fees, network congestion, transfer delays, fork risk, catastrophic bugs, and theft risk :)

We all have narratives, buddy. Mine just doesn't hinge on gambling and crypto-anarchic utopia.

Why are they giving such a big discount? The transaction fees are nowhere near that high. Could it be that they're reselling fraudulent giftcards?

> Like I side, speculation is the only thing you buy BTC for

You've ignored the rest of the list in the comment you’re replying to.

If they don't use the blacklist, will they get added to the blacklist? (Is it viral?)

Yes. This is what Chainalysis does, among many other things — track tainted coins that people are intentionally obscuring the origin of.

You can avoid gemini and coinbase if you use bitcoin. You cannot avoid them if you use USDC/GUSD.

When you say "use bitcoin", what do you mean?

edit: Perhaps the lesson here is the more useful something is, the less freedom you have in using it. After all, why would regulators care if you can "use bitcoin" when "use" means "play with my private keys".

Transfer the bitcoin from your wallet to any other non Gemini/Coinbase wallet. Most crypto people have private wallets. You can also use something like localbitcoins or Bitcoin ATM. Or you can literally meet with a person selling something for a coffee, transfer BTC to their wallet, they wait few minutes for on chain confirmation, give you stuff you bought, done.

Coinbase and Gemini aren't the only places that accept Bitcoin.

Coinbase is not a wallet.

But guys who will own this "stablecoin" somewhere in Cook island offshore would surely provide support in a timely and legal manner.

That seems like a huge disadvantage. If people are doing what the crypto community likes to call "tethering", they're probably going to lean toward a decentralized smart contract token. Tether has not always been a favorite due to auditing concerns, so I see the need for something more reliable. But it doesn't seem like being able to freeze tokens is an attractive quality even if Coinbase is more "trusted" and releases frequent audits.

Does anyone have the token contract address? I am assuming the blacklist is part of the smart contract based on the above wording, though haven't had a chance to look at the code. If it's not part of the code and only exists on exchange wallets then I see what Coinbase is doing as more reasonable.

So what benefits does this have over PayPal then?

>Use cases for USDC today include:

>Improved send and receive. Two Ethereum wallets can quickly send and receive any amount of USDC at any time of day. Large transfers for business purposes become as easy as small e-commerce payments. Consumers can use the Coinbase app to send USDC to someone, while remaining confident the value is stable.

>Use in dApps and exchanges. There is a burgeoning ecosystem of crypto dApps, exchanges, and blockchain-based games. A USDC follows the ERC20 standard, which means it can be used with any app that accepts tokens based on that standard. The USDC can thus be used as a stable digital dollar to buy items in the crypto ecosystem, from Cryptokitties to tickets for blockchain-based games.

>A programmable dollar. For developers and fintech companies, a digital dollar like USDC is easier to program with. For example, given the private keys for USDC, a program can easily send and receive them back and forth using the public Ethereum blockchain.

If your example use case is CryptoKitties you are selling vaporware.

Since it's an Ethereum token, you can write a smart contract that uses USDC.

'key drawback' aka a centralized system.

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