I know talking smack about crypto is in vogue, but the author clearly doesn't know anything about crypto.
They really think inflation == price? Inflation is about total supply of something, not cross asset trade price (i.e BTC/USD, or EUR/USD).
>This idea that a central entity can’t regulate cryptocurrencies is pushed around by crypto enthusiasts. However, governments are trying to bring regulations into cryptocurrencies and stable coins.
Literally nobody claimed they were going to control the actions of governments and force them to not regulate crypto. Where did this idea come from? The claim is that they would be effective despite attempted control by governments (see Monero)
There are so many valid criticisms of cryptocurrencies that you could make. But then you'd have to actually learn something about them and that's hard to do if you've already made up your mind on something.
Inflation is when the value of your money goes down because prices go up (i.e. the prices "inflate"). If I could buy 1000 loaves of bread with 1BTC last year, but this year I can only buy 900 loaves with that same 1BTC, that's inflation.
The most common form of inflation is due to an increasing money supply, but it (as demonstrated with Bitcoin) can have other causes.
> The most common form of inflation is due to an increasing money supply
Not really. The money supply only affects inflation in that it increases demand for some things quicker than supply can meet demand. In that regard, untargeted stimulus money did that. Let's not forget though that there is also significant supply disruptions with covid, the war in Ukraine... There's also strong supply-side factors to the inflation we're experiencing.
> The money supply only affects inflation in that it increases demand for some things quicker than supply can meet demand.
My Econ 101 understanding is that if there is more money available to buyers but the amount of goods available stays the same, and if the goods have elastic prices, the prices will go up.
Depends on where you took Econ 101, I guess. When I took Econ 101, it did cover monetary policy and inflation. I believe it was covered in AP Macroeconomics/Microeconomics in high school as well.
To be transparent, I took Econ 101 over a decade ago and don’t remember.
A better way to have phrased my post is that economics fundamentally understands price levels as being driven by supply and demand, and everything else influences prices though effects on supply and demand.
I don't know how accurate it is when you get down into actually calculating it (which is a really complicated topic unto itself), but the best description I've heard of inflation is that it's about the balance between the monetary supply and the available "goods" to spend it on. In crypto's case "goods" is a bit of a weird term to use, but the point is the same -- it's about the balance between money "sources" and money "sinks". If you have more money sources than money sinks, then you get inflation; the other way around, and you get deflation.
>If I could buy 1000 loaves of bread with 1BTC last year, but this year I can only buy 900 loaves with that same 1BTC, that's inflation.
No, that's just an increase in the price of bread. If all the inputs in making the bread were in BTC, then it would be inflation.
If all of the inputs that went into making that bread were paid for in USD, and the relative price in BTC went up, that's called "currency risk". That's a completely different thing from inflation.
Wikipedias definition of inflation sounds exactly like op said and what I assume as well:
'In economics, inflation is a general increase in the prices of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.'
I can afford less for the same unit of currency (Bitcoin) therefore I have inflation or deflation if I get more.
And people claim that Bitcoin is inflation save due to a limit amount of bitcoins being produced (I read that multiple times) while this is just not true.
Intuitively laymen really care about purchasing power, not its cause, they just use inflation as a short synonym for reduction of purchasing power, because inflation is often the cause of reduction of purchasing power, but I think they aren't really synonyms.
It's not really safe from inflation, more correctly it is deflationary by design. The limited supply means you can't dilute the existing value by creating more coins, as you can do with USD (or any fiat currency)
The point of this discussion as I understand it is that the limited supply of bitcoin does not help with inflation in practice and, further, that monetary supply is not the only source of inflation to begin with.
It is correct that bitcoin is designed with limited supply in mind, but that does not necesaarily stop inflation and definitely doesn't in practice because currency risk dominates the perceived value of bitcoin.
As far as i remember, people often claimed that bitcoin protects against inflation, that statement has so many requirements attached so it doesn't matter in practice.
People buy smaller and smaller denominations of Bitcoin then.
Which means earlier you invest more your Bitcoin is worth.
Until someone realizes that who ever was rich before is now loosing valur by investing in BTC too late and making early adopters rich.
The question is only when this ruse gets so outbalanced that no one wants to invest anymore which will either lead to inflation or the big crypto burn.
> No, that's just an increase in the price of bread.
> Definition of inflation: a general increase in prices and fall in the purchasing value of money.
It feels like you are jumping through hoops to avoid the definition of inflation.
The parent comment's mention of bread is literal and figurative. When talking about inflation, "bread" a whole sector of goods. The specific mention of bread is to reference necessity - basic needs like food/shelter/clothing.
Clearly the lines of inflation are fuzzy but if 'large enough' people's basic buying power decreases then you have inflation.
With BTC, the parent comment is simply talking about being able to buy less with BTC because they can't go to someone who will give it to them for a lower price. Do that with enough goods and you've got inflation?
But I think parent commenter is correct. The bread price increases because of inflation of the USD denominated inputs. What you can buy with BTC changes because of changes in currency swap prices. In Zimbabwe during hyperinflation a dollar would buy you the same amount of e.g. bread because the goods inputs were priced in USD, but it would cost vastly more in Zimbabwe dollars on a day to day basis.
Look up inflation as it is used by governments and economists, journalists and really everyone except internet 'Austrian' fans.
It's a measure of the increase of prices compared to currency value. Currency supply change can be one of the forces which affect it, but it's far from the whole picture.
If it only happened to bread, sure. But at some point it has to be inflation if it ends up being across the board. So its not just bread, its bread, soda, car, houses, a computer, toilet paper, meat, etc.
Sure, it may or may not fit the classical definition of inflation, but if it happens across the board, then functionally it is the same.
Currency is itself a financial good that is bought and sold, and has value. It's not divorced from other goods and is not special. You even have currency factories (banks) and competition.
Also, any currency devaluing (which BTC is doing) is inflationary for an economy based in that currency.
Sure, the things being traded with a money supply can decrease and if the money supply doesn't decrease alongside, it also is inflationary. BTC was used to trade USD, supply of USD is decreasing while BTC is algorithmically not decreasing, so it shows a great deal of inflation in the purchase of USD (and the reverse during the run-up), which unfortunately you cannot prevent unless you instituted capital controls.
That's the modern definition of inflation. In crypto circles, when referring to crypto inflation the classic definition is used, which was increased supply of a currency.
In vogue? It's been the status quo for nearly a decade. People are unwilling to recognize that cryptocurrency can have both positive and negative elements. It's all or nothing.
There's the usual fact that the more extreme or fundamentalist someone's viewpoint is, the more like they seem to want to yell it (and the easier it is to say it, concisely). With cryptocurrency, I think that there are many people with a financial and/or political stake in it, who argue from a technical perspective about the merits, so the usual-moderate person senses this disingenuousness and, annoyed, responds more negatively than they usually would. So, in other words, the same dynamics that drive polarization on contentious political issues apply (and I'd actually argue that cryptocurrency is more of a political issue than a technical one).
The problem with crypto is the same problem as always. Bad humans come along and destroy what could have been a good thing in an attempt to fill their bottomless empty pit of greed at the expense of everyone and everything else. Happens every time any human(s) try to create something that's meant to be beneficial for everyone - along come a few scammy ass-hats who decide they're gonna ruin it for everyone (by weaponizing it, turning it into a scam, or what-have-you), and inevitably a whole bunch more scammy ass-hats always gotta jump on that same bandwagon, increasing the momentum of the downfall. Yay, humans!
And the people who criticize crypto don't really understand why would you use crypto.
They have a stable government, a stable currency, a free Democratic system, they see no reason to use crypto because they have never lived in a sanctioned or very corrupt country with no freedom and Dependant on a financial system and a mother countries decisions without any influence over them.
These people are only about 15% of the world, you are lucky if you are born or living there.
I think this video explains it very well, from a north Korean citizens point of view, even though I don't agree that BTC is good for this, its similar to digital gold now, its vrry inefficient almost no one uses it IRL.
The current marketcap of crypto is made up of people in the first world investing.
I don't want to be a dick but if you live in Venezuela or North Korea you are irrelevant to the world economy.
There is a Dutch saying "wie betaalt bepaalt".
Only if you've fallen down the Austrian rabbit-hole. It's not what mainstream news sources, economists, politicians or really anyone else means by that term.
Inflation is to do with the amount of goods purchasable with a unit of currency, a relative decrease in the value of that currency compared to (usually) a cross-section of prices of goods which are commonly bought by users of the currency.
>>This idea that a central entity can’t regulate cryptocurrencies is pushed around by crypto enthusiasts. However, governments are trying to bring regulations into cryptocurrencies and stable coins.
> Literally nobody claimed they were going to control the actions of governments and force them to not regulate crypto. Where did this idea come from? The claim is that they would be effective despite attempted control by governments (see Monero)
Are you interpreting the statement differently from how I do? It's absolutely they case that cryptocurrency enthusiasts often use "take control away from government" and "code is law" (implying law is not law, or at least not law that overrules code).
Your reply here seems to be imply that you read it as a claim that cryptocurrencies would blackmail and bully governments to do their bidding.
If so then I don't see how you get there from that quote.
But then you seem to be saying that indeed regulation is ineffective. Which is the point of what you quoted to begin with.
The original (austrian economics) inflation definition was about supply, but it was changed in Keynsian economics to mean price increase.
The main question for me trusting Bitcoin is that I believe that supply inflation leads to price inflation over time, but I accept that some people don't believe it.
I use the terms "supply inflation" and "price inflation" to distinguish them.
The relation between supply and prices is also influenced by velocity, which has been swinging wildly at least for the dollar.
Velocity suddenly went low in Q2 2020. That means people are holding on to their USD more, and therefore the value of USD goes up.
So, in spite of supply inflation going up, velocity crashed, which means price inflation was close to nothing during 2020.
IF velocity picks back up, we will see price increase, but if not, then no. This depends on how much people want to spend versus save, and not as much on central banks.
And people tend to suffer from the bandwagon effect, and that is how we get business cycles.
I'm not quite sure where did the author found those "cryptocurrency promises". Bitcoin's promises from the start are straightforward:
- P2P money/value transfer, no banks, no intermediary => delivered;
- nobody owns Bitcoin network => delivered;
- no government with no amount of regulation can stop a transaction from happening => delivered;
- everybody can take a part in Bitcoin network, you don't need anyone permission to join (ie. oppressive government) => delivered;
All currency systems are based on faith and trust. USD value comes from faith and trust in US government. If that trust is breached or lost, and it will eventually like with every empire before US, USD will collapse. With Bitcoin is similar. As long are there people who believe in those principles and promises I mentioned above, Bitcoin will have value. Bitcoin will live. And I think those are universal principles of freedom, which will outlive most (if not all) currencies and empires existing today.
The issue with those promises is that they're pretty much empty promises because while they are true at their core, they don't hold much basis in reality for every day use.
"P2P money/value transfer, no banks, no intermediary => delivered;"
At it's core, yes. For any sort of adoption/usage ability for the 'average day person', there will always be a requirement for some sort of intermediary company.
"nobody owns Bitcoin network => delivered;"
At it's core, yes. However, having no 'owner' is rather meaningless as governments can regulate it and decide how Bitcoin is used; which has the same effects/problems as an 'owner'.
"no government with no amount of regulation can stop a transaction from happening"
At it's core, yes. However, again, this is pretty much meaningless because they can make it illegal for a transaction to happen or they can make transactions allowed but under their rules.
- everybody can take a part in Bitcoin network, you don't need anyone permission to join (ie. oppressive government)
At it's core, yes. But again it's not based on reality of life. If an oppressive government outlawed bitcoin, you wouldn't be able to take part in the Bitcoin network unless you wanted to break the law. Bitcoin would be on its knees if the only people that could use it were purely illegal users. (compared to its current situation)
Pretty much all these arguments boil down to "yeah, but Bitcoin wouldn't be worth as much if X happened".
I don't think you'd find anyone to disagree with you.
There are absolutely drawbacks and tradeoffs. If Bitcoin becomes banned/regulated by a significant number of countries it will still perform exactly as it is doing so today in those conditions. It just might be "worth" 1/100th of what it is today.
If you take "price speculation" out of the picture, I think your rebuttals here are entirely invalidated.
> At it's core, yes. For any sort of adoption/usage ability for the 'average day person', there will always be a requirement for some sort of intermediary company.
Even if this may be true, these services can still be decentralized for the most part. For example there is localbitcoins where you can trade bitcoins without ever having to go to any other third party except the listing on the site.
> At it's core, yes. However, having no 'owner' is rather meaningless as governments can regulate it and decide how Bitcoin is used; which has the same effects/problems as an 'owner'.
> [...] However, again, this is pretty much meaningless because they can make it illegal for a transaction to happen or they can make transactions allowed but under their rules.
Governments can regulate it but it's going to be hard to follow through if you take proper precautions. If you live in an oppressive state you most likely break the law all the time any way. That's the thing about oppressive regimes, it's almost impossible to abide by the law completely and life a proper life.
> But again it's not based on reality of life. If an oppressive government outlawed bitcoin, you wouldn't be able to take part in the Bitcoin network unless you wanted to break the law. Bitcoin would be on its knees if the only people that could use it were purely illegal users. (compared to its current situation)
You don't even need to live in an oppressive government. I live in a western society and still see the value of cryptocurrencies. Whenever I talk to a bank I have a strong feeling that cryptocurrencies are the future and my recent connections with my bank completely convinced me.
I don't know where you live, but in my country banks are open like 10am to 2pm, there is no handling of cash at all basically and their customer service is completely shit. It's obvious that their power over the society is so strong that they feel they can treat their customers like total crap and get away with it.
I know of many people that have had their accounts closed because they have incorrect political opinions, use too much cash or doesn't want to answer questions about what they're going to use their money for. If I have cash, I cannot submit them to my bank account without being harassed and there is a very small limit on the amount of cash I can deposit even if I take the harassment. I also have to travel quite far to a special office with open hours like a couple of hours per week and call them before hand to inform them that I want to do a cash deposit. That is only for deposits, but the same rules also apply for withdrawals where people simply get denied from withdrawing money from the accounts. If you go to an automated place, usually you can only withdraw about $200-$500 if you're lucky. If you want to withdraw more you need again go to a special office with horrible opening hours where they again will harass you, ask you a bunch of questions. My father that does this regularly usually loudly claims he's going to buy sex toys in order circumvent the system and shame the person into stop asking more questions.
This is a description of real life in the western democracy of Sweden which is often described like a poster child for western democracies. This is why I believe in cryptocurrencies, because even in one of the most open societies on earth you get treated as a criminal while the banks themselves launder millions.
I used to be negative towards cryptocurrencies, but I am totally convinced that it is the future now because there is no other real alternative that's not a dystopia.
> For example there is localbitcoins where you can trade bitcoins without ever having to go to any other third party except the listing on the site.
Localbitcoins is an exchange though? Bitcoin started out decentralized. It has quickly evolved into a centralized ecosystem because it is not practical for it to be decentralized. The core premise of decentralization has been proven bunk.
>- P2P money/value transfer, no banks, no intermediary => delivered;
Except I need an exhange to get the coins and turn the coins into usable currency
>nobody owns Bitcoin network => delivered;
Meh, the biggest investors are still in control in practice.
>- no government with no amount of regulation can stop a transaction from happening => delivered;
Yet they can claim taxes on transactions, seize funds, stop you from exhanging the funds into usable currency. But yeah they can't stop the transaction itself, which is also true of cash, except cash isn't also completely traceable.
>- everybody can take a part in Bitcoin network, you don't need anyone permission to join (ie. oppressive government) => delivered;
Last time I bought some bitcoin I had to scan my passport just to buy it on an exchange.
> Except I need an exhange to get the coins and turn the coins into usable currency
I bought my phone with bitcoin, graphic card, many house hold items with bitcoin (no conversion). But I do understand your point. Thing is, bitcoin is still in very early stage.
> Meh, the biggest investors are still in control in practice.
that's false. tell me how big investors can stop or take my bitcoin?
> Yet they can claim taxes on transactions, seize funds, stop you from exhanging the funds into usable currency. But yeah they can't stop the transaction itself, which is also true of cash, except trash isn't also completely traceable.
that's totally fine and by design. nothing wrong with paying taxes. They can confiscate, but they can not target you and confiscate because you belong to some group, deplatform you. That's the point.
> Last time I bought some bitcoin I had to scan my passport just to buy it on an exchange.
you have 1000s ATMs around the world, you can exchange without any ID. I've sold and bought p2p many times as well. This will improve with wider adoption.
> Except I need an exhange to get the coins and turn the coins into usable currency
Not any more than you need a bank to convert your left-over € from your Europe holiday into US$. You wouldn't need a bank, you could try to look for another person who is about to leave for Europe to trade, just as you can try to look for a person that is willing to trade your BitCoin against whatever else you desire or another crypto (say on localbitcoins.com). Yes, there are marketplaces that bring these traders together, just as there are institutions that specialize in those exchange in larger amounts (for a fee). You also wouldn't need to exchange your gold into US$ with a bank, but some offer this as a service and its easier to find a buyer yourself.
> Last time I bought some bitcoin I had to scan my passport just to buy it on an exchange.
There are plenty of exchanges that don't care one bit about KYC. Of course, you get a significantly shittier exchange rate and sometimes waiting times of up to 90 days before you can do anything with your coins.
"I will continue to openly demonstrate my willful ignorance" doesn't support your position well, and doesn't seem in line with the general tone of HackerNews, IMO.
We keep pretending as if crypto market isn't a get rich quick scheme that draws in naive people who invest (and lose).
Everything you wrote is true, except that the tool isn't being used for what it's made for and we keep playing possum, refusing to realize that each and every one of us is the same as these "evil" regulatory bodies that we're apparently at odds with.
Crypto, used for money purposes - failed. And the reason is human selfish nature and desire to get ahead with little or no effort.
U235 was meant to be used to accelerate society via free energy. It’s being held in the Earth instead, steadily decaying with time. It’s primary purpose as been destroyed.
The thing about U235 is that it has no such purpose. It is a tool that can be used in all kinds of ways. If humans were better, we could have power all of civilization in an age of abundance and peace, until unlocking a more portable fusion energy source than the sun. Unfortunately, most human beings lack that desire. It was used to blow people up instead, and brought us an age at least without large scale world war.
Crypto is being used in a greedy, speculative way. It doesn’t need to be. It could also run an entire world’s economy absent corrupt intermediaries. Fundamentally it will not change human nature, but it makes guarantees that anyone can verify. Which is desperately needed in a world of otherwise unaccountable money.
Just because people wield a tool poorly does not change the nature of the tool. These things have no emotions, they just exist. And bitcoin as a tool is an incredible invention. I just wish more people could appreciate it for what it is.
U235 is a physical element that exists (in small quantities) naturally, and a deliberate process was discovered to make more.
The universe had no "purpose" or "meaning" in mind for U235, because (philosophical discussions aside) the universe has no consciousness, agency, or intent.
Bitcoin was not discovered. It is entirely man-made, and its creators absolutely had purposes and meanings in mind for it when they created it.
There is no known process to make more U235. There is a process to refine U238 and extract primarily the U235 in concentrations sufficient for neutron chain reaction.
There is a process to create P238 via breeder reactors using U235, so could say “create” in that circumstance.
Bitcoin as a process can be considered “discovered”. The fundamental method doesn’t need any intention behind it — intention is irrelevant. It’s the first solution to the Byzantine Generals Problem. Any knowledge work involves discovery connected to the forces of nature.
Bitcoin is fundamentally bound to energy. It has a direct connection with energy, in that its value is derived from energy instead of the word of man.
While it may be trivial in implementation, its unrealistic due to the cost.
>In reality, the Bitcoin network has proven resilient enough to withstand a 51% attack over the years. In fact, due to the size of the Bitcoin network and the extent to which hash power is decentralized, along with the cost of mining equipment, it’s prohibitively expensive to attack Bitcoin. We estimate it would cost over $13 billion
I doubt it would work in practice. If an actor repeatedly used ASICs to run a 51% attack, it wouldn’t take long for the community to switch hashing algorithm and render all that hardware useless.
You have to continue executing the 51% attack forever, or else when you stop, the network goes back to normal. And about the worst thing you can do during such an attack is prevent transactions from confirming. You can't unilaterally rewrite the ledger, you can't steal money from people. So saying you "own the network" while executing such an attack is... pretty dumb.
> And about the worst thing you can do during such an attack is prevent transactions from confirming.
You can also double, triple or quadripule spend bitcoins and have those transactions confirm.
Yes, they’ll get marked as double spends, along with everything down that chain, but that’ll only happen once the network goes back to normal, and it would absolutely wreak havoc.
So no, it’s not just “all you can do is a denial of service”.
if someone "mounts" a 50% attack and is successful, do you think the rest of the world will simply accept their "attack"? bitcoin was forked into bitcoin cash once, why cant it happen again?
By what mechanism would they not accept? Sure you can leave and create a new network, as much as you can choose one of the many other cryptos already out there.
There's two ways in which bitcoin is less decentralised than you make it seem
1. Proof of work has a strong economy of scale, the cost per amount of mining reward gets less as your mining infrastructure increases, incentivising huge mining pools. I expect that within a few years 90% of the hash power will be controlled by 2 or 3 large organisations. Even at 33% hash power you can do funky things to fuck up the chain, but of course at 51% it is game over. Proof of stake is favourable because it has no economy of reward: you get rewards exactly proportional to what you stake. Really both are bad because they're both plutocratic
2. As far as I can tell, a vast majority of nodes run Bitcoin Core, which is a single community-developed piece of software. All of the nodes run this same piece of software, so the blockchain is really an emergent system from this one piece of software. Of course this makes the network bug prone, but it also means that it's only luck that the community hasn't decided on hard forks which effectively will force everyone to move over to a new version of the chain. Not only this, but soft forks are also coercive in a similar way
It is not yet clear that bitcoin will continue to deliver on its promise of decentralisation
> For example, in Sri Lanka, there is no way for someone to accept payments or send money through PayPal or Stripe. However, people will be able to send money through the blockchain and bypass these restrictions if more people begin to trust crypto.
If Sri Lanka blocks PayPal and Stripe are you sure they will not block commercial entities from converting between rupees and crypto-assets? Individual and small scale operators might still do it, flying under the radar, but that is not a scalable proposition.
Imagine cryptocurrencies are banned in your country.
The exchange of goods and services you describe might work between individuals. However businesses are much more visible. OK, you run a business accepting cryptocurrency payments for your goods. How will you explain it to the tax office? What if someone tips the police you accept it and they try to purchase something? OK, so only the small businesses will do it. They're numerous enough the police can't catch everyone. How will they transact with the bigger companies that can't accept illegal payments? Purchase utilities, tools etc. OK, somehow you make enough money with legal payments to pay your bills and keep the cryptocurrencies only as profit. Now try buying a car or a house with illegal currency.
Everything has a workaround, but if the state outright bans cryptocurrencies, the market will be severely crippled.
> Everything has a workaround, but if the state outright bans cryptocurrencies, the market will be severely crippled.
Like how they effectively enforced their prohibition on drugs and people working for cash-in-hand to avoid income tax and reductions in government benefits. Right.
I don't know about how it is where you live, but where I live it's a lot easier to buy something that is legal than something that is illegal and most people pay most of their taxes.
Now that marijuana, for example, is largely being legalized through the U.S., illegal sales of marijuana have completely vaporized.
Very few will opt to use crypto if a government has deemed it illegal if there is a legal alternative.
I guess there is value in crypto if your government and civil society is completely collapsing, but those blockchains are being sustained entirely by first world gamblers hoping to make a buck on cryptos prices increasing.
Once they realize that crypto has been reduced to (as its backers are now insisting) a currency for failed states, they won’t gamble in crypto and they won’t fund the enormous amounts of energy needed to keep a blockchain running.
Maybe a non profit can run a blockchain that people in failed states can depend on. But then the question arises, why would that non profit use an expensive technology like the blockchain as opposed to simply using a Postgres DB. Something which all the biggest crypto exchanges already do to provide immediate transactions because the blockchain isn’t fast enough.
Which brings us to the point that the only reason anyone is using the blockchain is because it’s been successfully marketed to lay people as this magical inflation defying, freedom providing magic money tree that only goes up in value, when in reality it’s at best a pretty terrible database with some niche uses.
To be fair, crypto has some value for illicit transactions and money laundering.
It's not obvious to me whether this value is greater than the mining costs or not. I think the value is in fact smaller and therefore the valuation is just a bubble.
Plus of course they mostly run their drug operations using USD, so if your definition of "uncensorable money" is that people are able to do something to a limited extent illegally if they can obfuscate their relationship with the publicly visible part of the transaction and avoid asset seizure, we had it before blockchains were invented...
I paid people with crypto (a client paid me in crypto so I thought why not) for work and goods; these were people who were told by believers this will be a currency like you suggest. After (in 2018) they asked me if they could get money instead if they gave that crypto back to me. As long as people cannot actually buy flower and yeast with crypto from the wholesale supplier, it is kind of doomed.
There's a blog post I read once which title was something like "How I accidentally started a bank" about a dev who added a chatbot in his work's internal chat (I don't think Slack was a thing yet back then) that tracked what each colleague owed to each other for lunch, coffee, etc. The bot expanded to track monetary value, and in the end he realized he made a bank, where each colleague had their balance, and transactions can be made.
In theory a group of people (expandable to a society, depending on trust) could just use such an app (or even just a WhatsApp chat) to do their business transactions, e.g. in China people probably just keep a balance in their WeChat accounts, and the money just moves between WeChat accounts.
Effectively blocking entities from converting currencies in person is much harder than banning inter-country trade.
My dear home country made it illegal to trade foreign currency except at government exchanges, which trade only one way and at an exchange rate 50% worse than the real one. This just made illegal exchange shops pop up everywhere, and the biggest difference is that it's now dangerous and inconvenient to change money.
Crypto is one of the few ways I can wire money back to my family and friends.
People bringing cases like Sri Lanka honestly never cared about it and issues people there have. It's just hypothetical usecase they use to their advantage. Solution to this is right there - its political, its development, its financial aid.
Just imagine how could Sri Lanka farmers run their bitcoin nodes and wallets and pay the fees for transactions... idea is frankly insane. The reasons people are "unbanked" is because when you have 0 money you don't need a bank huh.
Regarding algorithmic stablecoins, Vitalik Buterin (Ethereum founder) wrote a great and easy to read blog post about why Terra failed and why a coin that continually beats the economy also isn't possible
Color me sceptical of the in depth knowledge of this author, if he insists on writing "BitCoin" which isn't the way the entire industry writes it. This leads me to believe that the author isn't well-versed enough in the industry to be able to make claims such as these.
Surely if you think the author isn't well versed enough in the industry you can explain why from the content they've written, rather than nitpicking on the capitalisation of a word. This just seems overly dismissive.
I've been involved in bitcoin since 2010. (1) Not once have I ever encountered someone who knew what they were talking about and yet spelled it BitCoin. (2) Every time I've encountered "BitCoin" the author had a truly dismal understanding of the bitcoin protocol or incentive structure.
Shibboleths are annoying, but they do serve as pretty accurate heuristics for assessing someone's familiarity with a domain, as in this particular case.
The author lays out some pretty straight forward points, though. The fact that no one bothers to rebut them but instead focus on OPs credentials is quite telling of the typical crypto-bro-hype that dismisses all criticisms...
Every single one of his points are against strawmwn arguments. The involved botcoiners I know talk about fixed supply, programmable money being inherently volatile and carry the extreme added risk of self-custody. There’s nothing new here.
Isn't that almost definitionally ad hom? Maybe it's the one allowed form: Show me your competency to form an opinion. But that said, it feels ad hommy.
I'm a crypto currency skeptic, I made $600 for $200 put in 5 years ago, it felt like gambling and I have no doubt it's hype and all my fellow CS peers seem to agree, as do most economists. It's not capable of doing what most people claim and also be the stonks vehicle most people in practice want, and the fundamentals under contract in code are pretty awful: formal verification won't fix the problem.
Merkle trees and public signed ledger on the other hand, and trusted third parties and PKI are pretty rock solid. Do them, they're good.
No, you don't have to be an expert to voice observations, but my point is that you have probably not investigated Bitcoin long enough if you write BitCoin to be able to see the nuances in most of the points you've made.
An example: The comparison between the two charts of Bitcoin and Apple stocks looks similar at first glance, but if you exclude the last week, most of that similarity is gone. Yes, Bitcoin is being invested/speculated with in mostly the same way that tech stocks are getting invested/speculated with, but that doesn't prove inflation resistance; that's a long-term trend, not a short-term trend.
Your points on stablecoins is fine; I agree that those networks tend to overpromise and underdeliver.
Regarding regulation: I don't see the direct relevance, because most cryptocurrency projects don't explicitly (or even implicitly) promise to be/remain unregulated. Anonymity isn't a thing on a public blockchain, and never was.
Your point on smart contracts is broadly correct, but I'd like to point out that most contracts were exploited because either the security was flawed (by human action mostly), the contract was poorly constructed and participants didn't care to actually read and understand it (also human action, though I do admit that most people on Earth won't ever (be able to) read a smart contract), or because of malicious actions of the smart contract creator (also human action).
I agree with your final conclusions. We do need a way to prevent rugpulls. The most straightforward way to do this is by realising that most altcoins are insecure or technically flawed in such a way that rugpulls aren't disincentivised. If you built smart contracts on Bitcoin (see: RSK) people will be a lot more hesitant, because Bitcoin is the only blockchain that is both secure, and thus digitally scarce. You can easily spot the difference in perception between Bitcoin and altcoins in the way people describe their interactions and goals for them: Bitcoin is a means to store wealth, altcoins are investment/speculation vehicles generally used to make more money with. You can nitpick about wether those definitions boil down to the same thing, but the perception and philosophy differs.
Colour me sceptical of the in depth knowledge of this poster, since he insists on making nitpicks about orthography, without providing any substantive comments of his own. The leads me to believe that the poster isn't well-versed enough in the article to be able to make comments such as these.
The author has no evidence that this is true. USDT temporarily trading under $1 during extreme market conditions does not in any way suggest that Tether ever came near to stopping 1:1 redemptions.
And USDT is not indicative of all stablecoins. For instance for fiat-backed stablecoins, USDC is still doing better than USDT in maintaining its peg and being more transparent than Tether was. But both did not have a full depegging like what happened to UST which is an algorithmic stablecoin.
Thus, This post looks like a blanket outrage bait to get the worst out of either side.
According to Tether, USDT was never close to collapsing. Even USDD which depeged a bit still holding strong at 0,97$. Considering how unstable the market is I find that pretty good.
I wouldn’t place much value on what Tether has to say. However, market prices can be irrational and will not tell you if it’s close to collapsing or not.
It’s in fact likely that Tether printed huge amounts of money by buying up large amounts of USDT at <$1
> I wouldn’t place much value on what Tether has to say. However, market prices can be irrational and will not tell you if it’s close to collapsing or not.
I don't think neither USDT or USDC are risking collapse. I'd be more worried with the state of global economy...
"People are selling high-risk assets such as cryptocurrencies and stocks in favor of classical assets with little risks attached, such as gold."
These trading explanations are nearly always completely made-up and usually BS. Almost everything has been going down lately, including gold and silver, albeit by far less than crypto. People move to cash in these conditions.
It's also flat over 10 years, and lost in the last couple of month, meanwhile inflation is raging at 8%.
I'm far from condoning the crypto trainwreck, but gold does not act as a safe haven in these conditions, it usually tanks along with everything else, just less maybe.
And mining gold is probably not much better than mining crypto, and is often produced under similar 'less than open and enlightened' regimes.
Not really. Gold is up about 10% over 10 years and CPI change over 10 years is about 27%. In the grand scheme of things that's flat. You forgot all the deflationary years in between.
10% is the best case depending when exactly you measure, but even then it's still actually lost 15% purchasing power.
Even against CPI, which must at this point be decisively regarded as fake news.
For example, apparently your TV is much better now than 10 years ago, along with your your PC etc, thus you're better off with the same $$, and so in theory inflation is lower by that 'hedonic adjustment'. But let's be real, you still need to buy a TV, and the market no longer offers 2012-era specifications at the same relative price. And the slightly -cheaper or stagnant prices of what is on offer, if we ignore meaningless specification inflation, are a result of everything getting crappier (Eg Ads built into the TV!).
Meanwhile DJIA and SP500 have almost doubled in 10 years, and almost everything essential; healthcare, tuition, housing, etc, has vastly outpaced 'CPI'.
Time and time again, low-substance high-hate articles about cryptocurrencies rise to #1 spot. This is not healthy. At this point I think it would be good to discourage all cryptocurrency discussion: I don’t think we are yet capable of having them.
We have a lack of curiosity and skepticism, and too much passion. There is quite a bit of echo-chamber effect going on, entrenching current view. Suppressing an emotional topic might help later on. Hopefully in 5-10 years cryptocurrencies will either be boring or dead: either way passion will have died out and we can properly discuss it.
Hi, I'm not the GP but I have a couple thoughts here.
I can't speak to the first point because I do not know enough about that statement on inflation to either confirm or refute it.
- The author singled out UST as their primary example of "stablecoins are anything but stable". This dismisses every other stablecoin out there which has not had issues, USDC being the main one I'm thinking of. Were they to make the claim that "algorithmic stablecoins are not stable" I would 100% agree with them, especially considering what may happen with USDD in the near future.
They also bring up Tether in this section, which as far as I am aware was not at risk of being insolvent at the time.
I do not like Tether. I find Patio11's take on Tether to be convincing enough and I would never consciously choose to hold any Tether.
But to claim that Tether was close to collapsing a few weeks ago is, using Hanlon's Razor, a minsunderstanding of what happened during that time. There was fear that Tether would lose its peg, it lost its peg on exchanges for a few hours, and the company which issues Tether continued to process cashouts honoring the peg.
If Tether Limited were to begin putting obstacles in the way of withdrawals, I would be incredibly worried. As of this time, it has not happend. And because it has not happened, this section was not factual.
- The author stated that the claim of "no one can regulate cryptocurrencies" has been broken, but presented one example of mining being banned in one country and intended (but not enacted) legislation in another.
This does not present enough evidence in my opinion to form a valid statement.
- The author makes several claims about the presentation of smart contracts, and refrences a category of protocols and projects which had fatal flaws in the coding of their contracts.
I agree that poorly written contracts and/or overlooked bugs have caused a lot of financial damage. But this point is made with the implication that all code should be perfect and flawless is a very odd approach to take. To be clear, I do expect better from the engineering efforts that come out of these DeFi protocols which get compromised.
However, there was always going to be someone writing the code for the smart contracts being deployed and that means that bugs were always going to happen.
Perhaps if there was more rigorous regulation in this space we will have protocols in the future staffed by hundreds if not thousands of individuals all working to ensure regulatory complicance first, just like big banks. But even then, I would never expect them to deploy code with zero bugs.
I can't speak to the intended definition of the term "smart contract" nor the author's suggestion that the implication of having the word "contract" in the term would betray trust in users, that's just not a can of worms I'd like to try my hand at.
Decentralised trust will likely never work because trust relies on consequences for when it’s broken.
I think the author simultaneously gets and misses this with this article. The Sri Lanka example is really a perfect example of what happens when the consequences in a monetary system stop being enforced and how it drives people to lose trust in that system. You could maybe build a cryptocurrency with enough regulation and enough force of consequences that you could replace other financial systems, but at that point it would simply be a more globalised version of our current banking system.
I think trust is easier understood with the “smart” contracts in the form of how we deal with landownership around the world. In countries with stable low-corruption governments you don’t need “smart” contracts because you can trust the system to uphold your rights, but, in countries with a high level of instability or corruption you can’t use your “smart” contract because nobody is going to enforce your right.
The assertions here are far from what I’d point at first with regards to broken promises. The article also implicitly backs up some claims that are just not true.
The two biggest issues being that the market is heavy centralised and has unlimited supply, contrary to claims by holders on twitter.
It’s amazing how many people still believe that only 21 million Bitcoins will ever exist, even in 2022, contrary to what the Bitcoin core team has said multiple times (that inflation will be needed for the network to function).
Furthermore, there is already an infinite supply of alternative tokens whenever any of them spike in value, as has been shown in multiple cycles now. The market favours going to alternative tokens that have “moon” potential, making the forward supply also infinite, and thereby rendering the entire space worthless.
In short the entire industry is an encrypted linked list with some hashes, recycled ideas that have been done better in the past (De-Fi), and the entire world is crazy and stupid.
I have to admit I don't really understand cryptocurrency. But I've been leery of buying into something that is electronically produced and using it as money. (I know printed paper isn't any better. But people have accepted printed paper for a very long time.)
The phenomenal returns given to people who put money into crypto also concerned me. Unlike stock trading, nothing of value was being produced, yet people were reaping huge sums of money from it.
My best guess is that government will have to control it before it becomes viable. As long as it's just individuals running the show we'll probably continue to have boom/bust cycles.
Any shite article is a great excuse for another cryptocurrency hatefest, right guys?
The thing that really makes me feel a lack of respect for cryptocurrency haters is the fact that at the core cryptocurrency is an obvious and very important improvement to the way digital payments work. That is leveraging cryptography so that payments don't require giving away credentials (such as the way credit cards do) and to verify the integrity of the ledger.
Has anyone ever noticed how hard it is to criticize crypto?
Like, when you do it you wind up defending it from anti-crypto people that were going to agree with you no matter what except they have stupid arguments and you’re like “dude wait no thats not how it works”
There were like a billion ways this all could have been really simple, anonymous digital cash. But y'all had to make it overly complex and y'all had to get greedy and all y'all libertarian fedora vape ass dudes had to inject your absurd capitalist ideologies about currency speculation into it.
Saying cryptocurrency isn't a grift is like saying Amway isn't a pyramid scheme because their cleaning products really can clean things. Maybe, but the wrong people got in the door and now the regular people, the non-cypherpunks and non-Galties wanting some way to buy ketamine on their little floating pirate utopia or whatever, have realized that you can't actually use a currency as a currency when even the "stable" ones are about as stable as Ezra Miller with an eight-ball at a karaoke joint.
And all of this bullshit has managed to completely derail the tech industry as everybody tries to figure out a way to shoehorn crypto into every other useless idea, the same way they did with "social" for the last decade. Here's an NFT of my balls, go find some actor to pimp it for you at Super Bowl halftime.
Between crypto and the various dippy con artists getting miniseries of the week made about them, people are starting to realize that the higher tiers of tech - not the people who, y'know, actually make things people use, but the hustlers and rain-makers who get all the column inches, so to speak - are just absolutely full of people you wouldn't leave in a room without double checking your wallet is still in your pocket and your napkin is still on top of your drink.
You can drone on about economic and number theory all day - and a lot of you do - but it doesn't change the fact that everybody thinks this shit is one big Dutch flower market where you can trade black tulips for heroin or piss away your savings on ScroteCoins that some geek in Belarus will inevitably gank outta your virtual deposit box at the exchange, leaving you just as confused as when you started but twice as poor.
I'm tired of the whole crypto discussion, because the articles that get traction are mostly echo chambering what the audience wants to hear; either pro - or against.
Meanwhile crypto remains an enabler of a new application paradigm, a decentralized one.
We are now in the dotcom crash of crypto. Lots of hype has created a bubble, but from the ashes the phoenix might rise.
If you are a tech enthousiast, be happy that lots of research and development in an exiting new space was funded!
If you are an investor, be happy that your investor accumen is being put to the test, which projects will flourish?
It does not enable decentralised applications. The internet already did that decades ago.
Comparing this to the dotcom crash is disingenuous - people were over-excited in the dotcom bubble because the potential was real and clear, and eventually realised with time.
The potential here is deeply debatable and this is already the fourth or fifth such crash.
As for the technology, here is a summary of everything novel that’s been built in the space:
1) A mechanism to avoid double-spending by burning obscene amounts of energy to make it prohibitively expensive to forge.
2) A mechanism to avoid double-spending by taking the word of rich guys that all is well.
3) End of list.
Everything else already existed, and has been done significantly better in the past (e.g. De-Fi).
The author speaks heavily of stable coins. The first stable coin came a half decade after BTC...
Also, the author doesn't know how to spell Bitcoin...
Also, wtf are major promises? 1 Bitcoin still equals 1 Bitcoin, and YRMV is the watchword of the space--snake oil salesmen aside.
That said, for the space as a whole, plenty of people are pro and plenty are anti. Unfortunately either take gets upvoted these days due to the polarizing emotions.
If 1btc equaled 1btc, then why does virgin bitcoin hold a premium over circulated ones? And why do coins seized by law enforcement sell for bellow market value?
Clearly, when you have a transparent and traceable ledger, your coin's history will come back to bite you.
> why does virgin bitcoin hold a premium over circulated ones
Because people doing bad things are happy to swap their dirty coins for clean ones that can be spent in the developed world. The people mining the clean coins in Mongolia couldn't care less about the other party selling weed on the internet in Germany and happily take the generous premium.
> And why do coins seized by law enforcement sell for bellow market value?
Because the onerous requirements to purchase such bitcoin from the government adds cost and simply buying the same amount on market has very little friction or overhead.
I stopped reading these crypto blogs/twitters with anime/pepe emojis. This market is full of grifters, I don't trust anyones intention - and it's difficult to ascertain any conflicts of interest.
What happend to the so called leak that was all over HN last week, disappeared into the "ether" - pun intended.
Cryptocurrencies will IMO always have some sort of residual value simply because of their usability for illicit activities. The specific value is debatable, but I'd guess a "round" number will be where psychological effects will naturally converge towards.
I don’t think these activities need a specific value, they can pay for a hedged position or just be fine with funding/withdrawal slippage tax (provided that exchanges are still functional). Also are you sure that psychological effects naturally converge to anything at all on the crypto market or in general? It’s usually strange attractors all the way down rather than a stable point.
They really think inflation == price? Inflation is about total supply of something, not cross asset trade price (i.e BTC/USD, or EUR/USD).
>This idea that a central entity can’t regulate cryptocurrencies is pushed around by crypto enthusiasts. However, governments are trying to bring regulations into cryptocurrencies and stable coins.
Literally nobody claimed they were going to control the actions of governments and force them to not regulate crypto. Where did this idea come from? The claim is that they would be effective despite attempted control by governments (see Monero)
There are so many valid criticisms of cryptocurrencies that you could make. But then you'd have to actually learn something about them and that's hard to do if you've already made up your mind on something.