The Case Against Crypto

https://www.watershed.co.uk/studio/news/2021/12/03/case-against-crypto

by djelal • 5 years ago

93 158 5 years ago

watershed.co.uk

rvz5• 5 years ago

While the points made by the author are still true of some cryptocurrencies (including Bitcoin, and Ethereum which are still unsuitable for fast, cheap and efficient payments), it is yet another cryptocurrency rant which bundles only Bitcoin and Ethereum as having the same characteristics and faults in all cryptocurrencies.

Many cryptocurrencies will not survive new regulations once introduced, but it seems that Stellar has a great chance of surviving given that it is making the interesting case for CBDCs [0] [1] and being used by money transfer companies and also powering stable-coins. [2]

So, some cryptocurrencies are more useful than others.

[0] https://stellar.org/blog/the-case-for-cbdcs-on-stellar

[1] https://resources.stellar.org/stellar-for-cbdcs

[2] https://ir.moneygram.com/news-releases/news-release-details/...

JumpCrisscross2• 5 years ago

given that it is making the interesting case for CBDCs

It's an interesting pitch, but irrelevant. If a central bank is launching a digital currency, they're going to do so on their own terms.

rvz5• 5 years ago

How so? Care to elaborate further? Why are you ignoring this valid use-case?

Is it because you know it is relevant?

rvz5• 5 years ago

So, no explanation or elaboration as to why it is 'irrelevant'.

So it has been admitted and my point is still not refuted.

block_dagger• 5 years ago

BTC and ETH can not be stopped, ever. Their utility for society is far too high, despite the tradeoffs.

bsagdiyev• 5 years ago

And what, exactly, is this utility?

fnord123• 5 years ago

Ecoterrorist Ponzi scheme.

rajamaka• 5 years ago

Money laundering

quietbritishjim• 5 years ago

This sort of comment is exactly why articles like this will never result in constructive discussion on HN (or elsewhere). It doesn't address any of the comments in the article and doesn't even give any concrete examples of its point (in this case the "utility to society"). Don't take this personally, crypto always results in comments like this. It just turns into a vacuous slinging match. I tend to flag the articles about cryptocurrency/blockchain unless they contain some actually new technical innovation.

luka-birsa2• 5 years ago

Oh come on, we're on HN.

This is the most anti-cryptocurrency tech page that I can think of, with daily negative sentiment articles popping up. It's either bitcoin will destroy the world, ether is a giant cesspool that can be implemented with a database or the favourite Tether is a huge scam and will destroy the world. Let's not forget the NFT's are full-on money laundering scheme and LOL why would you buy JPGs if you can right click and save.

Trust me, people (as in cryptocurrency realists) tried explaining in the comments, but the sentiment is too strong. Due to the meteoric rise in value and the fact that a lot of HN somehow ended sitting on the sidelines, people can't stop foretelling the impending doom and gloom while being oblivious to the underlying tenet that all of this crypto technology brings.

I fully agree with you that articles like this turn into vacuous slinging match between camps. It's not tho because there are no concrete answers from the crypto side, it's simply due to the population on HN - it's impossible to have a constructive discussion if the sentiment is so negative. So yes, I also flag such content, because these discussions represent catnip for me and provide zero value.

matheusmoreira6• 5 years ago

Well, what's the point? We've argued the same points with the same people over and over again. It's always the same arguments and nobody is convincing anyone of anything.

usrbinbash3• 5 years ago

What's the utility for society exactly?

As a currency? I have that already. And its stable, accepted almost everywhere, doesn't waste tons of energy and cannot be lost by forgetting a password.

As ownership verification for items? I have that as well: Contracts, Bills and Agreements. They can even be digitally signed, which has all the advantages of an NFT (integrity, authentication, non-repuditation) with none of the disadvantages.

So what tangible advantages does "crypto" have in these areas for society?

Feeble4• 5 years ago

As a currency? I have that already. And its stable, accepted almost everywhere, doesn't waste tons of energy and cannot be lost by forgetting a password.

So you were born (or at least live) in a country that has a stable currency which is accepted almost everywhere, and you can trust your politicians to not undermine this currency by bad economic policies and/or creating very high inflation. Congratulations! However, a large part of earth's population do not enjoy this stability. For them crypto offers a way to store wealth that cannot be debased nor easily seized by authorities in bad faith.

Some estimates are that 2 billion adults do not even have banking.

You say your currency does not waste tons of energy. How much energy would you say the financial system in your country use in order to keep a sound ledger and enforce the monetary rules & policies?

Bitcoin uses less energy than the gold industry. And gold mines wreck the environment (https://earthworks.org/campaigns/no-dirty-gold/impacts/). But you don't hear much about that even though most gold is used as a store of wealth, much like Bitcoin is.

Energy usage should also not be equated to bad energy production, though of course miners can use bad energy source instead of sustainable energy.

useful2• 5 years ago

You could have a currency where taxes are already built into the transfer system and the government is funded by those transfers.

Your argument is kind of like saying your paper filling system is as good as a database. With a database your don't have to be physically present like a paper filing system. With block chain you don't need permission to access the database, it is a new thing that enables more things that centralized systems used to control and rent seekers built walls around.

user-the-name6• 5 years ago

The utility for society is basically negative, given that they enable far more crime and fraud than anything else.

hk__23• 5 years ago

The utility for society is basically negative, given that they enable far more crime and fraud than anything else.

This could be said about money in general, but in both cases it’s not really helpful for the debate.

almostkorean• 5 years ago

This argument is categorically false, illicit activity accounts for 0.34% of all crypto activity in 2021: https://go.chainalysis.com/rs/503-FAP-074/images/Chainalysis...

burnished• 5 years ago

What specifically? I haven't heard of anything yet.

JumpCrisscross2• 5 years ago

We're close to having the world's No. 1 and No. 3 economies, by GDP based on PPP, ban crypto. This lets us run a natural experiment.

In ten or twenty years years, will the massive diversion of power and talent to cryptocurrencies leave the U.S., EU and others better off? Or will crypto be remembered as America's backyard steel furnaces [1]? Until we're there it will be difficult to either confirm this is the right course or build the political will to ban crypto.

[1] https://en.wikipedia.org/wiki/Backyard_furnace

NicoJuicy• 5 years ago

Seems like FOMO without an actual use-case to be honest.

krageon• 5 years ago

We're close to

We've been close since it started becoming popular. At this point, "being close" is like the being close of fusion: It's really close, but always just too far away.

arcticbull16• 5 years ago

It's less a backyard furnace and more the MLMs that everyone in Albania invested in in 1997. They at one point locked up [edit](50%) of their GDP - and their economic advisor - before having a civil war about it. This required the IMF to airdrop big bags of money to bail them all out. [1]

There's nothing to wait for proof on, it's been 13 - almost 14 - years and it does nothing better than a classical system other than regulatory arbitrage, grift and crime.

The fundamentals are crystal clear. It's hot garbage - rather, it's Mary Kay for young men. [2] And that's if we're lucky.

[edit] It's an unholy fusion of a grey goo coal-powered linked list and anarchocapitalist libertarianism [3].

[1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...

[2] https://mobile.twitter.com/tracyalloway/status/1467720876741...

[3] https://i.redd.it/1fwrkwoec7281.jpg

oblio5• 5 years ago

I'll probably steal both this:

It's an unholy fusion of a grey goo coal-powered linked list an anarchocapitalist libertarianism

and your third link :-D

arcticbull16• 5 years ago

By the way, what does this sound like?

The wide appeal of Albania's schemes can be attributed to several factors, including Albanians' unfamiliarity with financial markets; the deficiencies of the country's formal financial system, which encouraged the development of an informal market and, within this market, of the pyramid schemes; and failures of governance.
There were also governance problems, both in the financial sector and more generally. The regulatory framework was inadequate, and it was not clear who had responsibility for supervising the informal market. Even after the approval of a banking act in February 1996 that appeared to give the Bank of Albania the power to close illegal deposit-taking institutions, the central bank could not obtain the government's support. Indeed, the government was supportive of the companies: senior government officials frequently appeared at company functions, and, in November 1996, even as the pyramid schemes began to crumble, the prime minister and the speaker of the parliament accepted medals in honor of the anniversary of one of the companies. During the 1996 elections, several of the companies made campaign contributions to the ruling Democratic Party. There were allegations that many government officials benefited personally from the companies.

If y'all don't think this is embodied by Hester Pierce I don't know what to say.

[1] https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.ht...

Communitivity• 5 years ago

I wish people would differentiate between crypto that's based on proof of [algorithmic] work vs based on proof of [other] work vs proof of stake vs other methods. The reasons people are giving to ban crypto all point to proof of [algorithmic] work, primarily Bitcoin, which was crypto 1.0. The algorithms work and there is a lot of interesting innovation that's come out of Bitcoin. However, it's not sustainable. Ethereum and other cryptocurrencies are moving to other proof mechanisms, or have already done so. That means those cryptocurrencies do not have the environmental impact of Bitcoin, including the power demands.

There are problems with proof of stake, so it's not like everything is rosy, but those problems are being worked. Cryptocurrency in some form is here to stay in my opinion, though there may be a prohibition-like period for a decade if it gets banned.

oblio5• 5 years ago

The problem with this approach:

There are problems with proof of stake, so it's not like everything is rosy, but those problems are being worked.

Is that it's like cold fusion. Some stuff was worked on for centuries before we managed to solve it. Some stuff we still haven't, after millennia.

Bitcoin was a breakthrough due to Proof of Work. It was a major breakthrough. The other Proofs of Whatever are far from guaranteed to raise to the same level.

There's a huge mix of wishful thinking and G.R.E.E.D.

imtringued4• 5 years ago

If people buy cryptocurrencies instead of holding dollars they contribute to financial stability of the US economy. Why? Because holding dollars is risk free through the deposit insurance program. Meanwhile holding Bitcoin also forces you to bear all its risks. Nobody sheds a tear when Bitcoin crashes. It's doing it all the time! Meanwhile, a systemic break down of the dollar would also ruin the real economy.

naveen99• 5 years ago

India can’t ban math / bitcoin signatures anymore than China can ban tutoring and california can ban learning calculus. non resident Indians control a lot of wealth, maybe more than resident Indians, and they remit a decent amount to india.

PPP is useful for buying chai and vegetables, but useless at buying iPhones, teslas, nvidia hardware. Also Chinese and indian real estate isn’t price in the same property tax regime as the usa, so it’s priced 4x too high and their economic numbers all inflated.

India and china have capital control (limit on foreign investments into and out of their countries). but no export control on the fruits of their labor and their literal labor leaving the country (which is convertible to Capital at scale). it’s all theater. the world is global full stop.

pennaMan2• 5 years ago

This is presented as an ownership record for the media, often with no legal basis

Ah yes, the mystical "legal basis" meaning that a nation state can use violence and kidnapping to enforce ownership in whatever way it sees fit instead of having palpable, trustless, mathematical proof of ownership.

maxerickson2• 5 years ago

There is no such thing as mathematical proof of ownership, because proof of ownership isn't something that exists in the abstract.

You can have a claim of ownership that has some mathematical properties of course.

lostmsu4• 5 years ago

Oh, but there's. One can make a chip, that would only work when provided with a proof of ownership from some blockchain.

JohnFen• 5 years ago

Proof of ownership is meaningless without some mechanism to enforce said ownership. If I take something of yours and you can prove it's yours, so what? Without some means of enforcement, your proof has no actual effect.

pennaMan2• 5 years ago

You are correct. I suggest you look up the paper Stasohi Nakamoto published about a proposed solution for a mechanism of enforcement :)

q-big• 5 years ago

The Case Against Crypto

Crypto != Cryptocurrencies (or more generally: cryptoassets)

teekert• 5 years ago

This, I mean one expects a piece from the government against Signal or something because the children, etc... No, crypto now seems to mean cryptocurrencies. Pretty bad trend. I can imaging you feel the same when you work with corona viruses these days ;)

But what can we do?

Aachen• 5 years ago

I mean, yes, but also that ship has sailed. You can't force language upon people, this is going to be how people refer to it, similar to the media's hacker and what a hacker means in the field.

Findecanor• 5 years ago

You can not choose which language people use when talking to you, but you can set a good example yourself.

"Crypto" being an abbreviation will still only mean "cryptoasset" in some contexts, and retain other meanings in other contexts.

acdha• 5 years ago

Marketing people try to redefine terms all of the time. That doesn’t mean the rest of us should help them, especially when it’s being done to defraud buyers. During the mortgage bubble, realtors and bankers tried to redefine common terms, too, but that didn’t stick past it popping.

rvz5• 5 years ago

At this point, that battle has been lost and the ship has sailed years ago.

denton-scratch4• 5 years ago

Battle lost.

Ship has sailed.

Train has left platform.

"Crypto", "cyber", "literally", "exponential": I wish language wouldn't change under my feet. I feel as if I'm standing on linguistic jelly.

mnw21cam• 5 years ago

I choose to interpret crypto as https://www.cdc.gov/parasites/crypto/index.html

netheril96• 5 years ago

Nothing in this article is new at all (except NFT which wasn't in fad before). I've heard the same arguments ten years ago and repeatedly during the ten years. They never stopped the spread or appreciation of BTC. Whether you like to dislike BTC, it is here to stay.

arcticbull16• 5 years ago

Well, not in China though, huh. Yes the case remains the same, because the fundamentals remain the same. It was bad then and it's bad now. What's changed is the scale of the risk it poses to global economies. This is triggering a different response. Let's see how it plays out.

adam_arthur2• 5 years ago

Big difference between making money on something and it having actual real world utility, and long run viability as anything other than speculative vehicle.

"I made money so that proves me right" is a pretty weak argument, that could be said about any pyramid scheme. People who made money buying dotcom stocks in the late 90s or houses in the mid 2000s were "right" too, until they weren't.

Things without intrinsic value tend not to hold their market value over the long term.

I do think Bitcoin has some marginal value, e.g. for countries with hyperinflation and no capital markets, use as payment for illicit activities... But not very compelling overall.

Still, gold is a close analogue. But there are important differences there.

MereInterest3• 5 years ago

Still, gold is a close analogue. But there are important differences there, still.

The biggest difference is that gold does not require significant upkeep to maintain. Mining gold extracts a resource, which can then be used at low marginal cost. Running proof of work computations enables transactions to occur, and is rewarded as compensation. If the proof of work computations stop, then the reward can no longer be spent. This is why I refuse to use the term "mining", as it brings in a large number of incorrect assumptions of the process.

rvz5• 5 years ago

Whether you like to dislike BTC, it is here to stay.

Some cryptocurrencies are here to stay. However, with the Tether scam situation unveiling itself, Bitcoin and many other cryptocurrencies are in danger of losing their 'value' and it will cause a crash in prices in some useless cryptocurrencies.

arcticbull16• 5 years ago

They'll always be with us, like beanie babies. But like the fall of Steg the $40,000 stuffed Stegosaurus - now valued at $900 - history will not be kind to the valuations.

shawabawa33• 5 years ago

However, with the Tether scam situation unveiling itself

The Tether scam situation has been unveiling itself since 2016.

Is there any recent news that's made it more likely Tether will default soon?

MereInterest3• 5 years ago

Well, yes, none of the points raised are new. But none of them have been satisfactorily addressed, either. If somebody is shouting that the emperor has no clothes, saying that you heard the same thing yesterday doesn't magically erase the emperor's nudity.

throwaway554212• 5 years ago

So don't use it. Done.

Do people not get bored of telling others what to do?

What next, "The Case Against Popcorn"?

gostsamo• 5 years ago

yes, I especially hate when someone shows up and starts telling me to invest in crypto.

carrja99• 5 years ago

Then you'll enjoy this quick video from the "slumdoge millionaire" in why you should "invest" in dogecoin.

https://twitter.com/TikTokInvestors/status/14672257141642649...

sodality2• 5 years ago

So don't do it. Done.

Do you argue for banning the sale of something when someone shills it to you? No, you tell them to shut up

MereInterest3• 5 years ago

If you don't like pollution, then don't pollute. Do people not get bored of telling others not to dump waste in the water supply?

matheusmoreira6• 5 years ago

Cryptocurrencies don't represent even 1% of global energy consumption. Whatever pollution it's responsible for pales in comparison to the lifestyle of developed nations.

throwaway554212• 5 years ago

I agree, don't pollute.

False equivalence.

We can talk about carbon taxes and renewable energy if you'd like, but if we're going to go down the path of "any energy use is sin unless I approve of it", then I ask again; do you not bore of telling others what to do?

nicoburns• 5 years ago

Huh, that's a domain name I didn't expect to see here. For those who don't know, the Watershed is a not-for-profit organisation that comprises a cafe/bar, independent cinema, and a media studio and a bunch of other miscellaneous functions in a single building in Bristol, UK.

The name is a pun in that it's a media organisation (with watershed being a common term in broadcast media), but it's also literally a shed near the water.

portportport• 5 years ago

The biggest case against crypto seems to be proof of work is inherently bad, because wasting power is bad for the environment. This completely side steps the fact that the entire world is moving towards carbon neutrality in electricity generation, in which case power consumption will no longer be an environmental issue. I'm yet to hear a convincing argument against proof of work under the assumption of carbon neutral electricity generation.

isoprophlex• 5 years ago

The sheer wastefulness of it. Can you see the objection in making a million cookies (completely carbon neutral of course), and throwing 999.999 of them away?

POW is that, but worse.

arcticbull16• 5 years ago

No, it doesn't. Every TWh wasted on proof of work delays decarbonizing the rest of the economy. There's no benefit to anyone to build a whole ton of solar and wind capacity then literally wasting it on a sudoku puzzle of global scale. That doesn't help. If anything it hurts because it generates e-waste. 27 thousand tons of e-waste per year. [1] E-waste without a disposal strategy, that gets buried or burned or dumped on poor countries.

97% of all bitcoin miners will never mine a block in their entire useful lives. They will be manufactured, plugged in, they'll sit there, desperately guessing, never guess right, and be thrown out.

[1] https://digiconomist.net/bitcoin-energy-consumption

Nursie5• 5 years ago

in which case power consumption will no longer be an environmental issue.

But it is right now.

We don't live in a world with carbon neutral power generation. We're not there. PoW is even encouraging people to bring fossil-fuel based generation back online just for mining and making the transition to low-carbon economies slower.

I'm yet to hear a convincing argument against proof of work under the assumption of carbon neutral electricity generation.

Yeah, let's have that argument when we're closer to actually having that. Oh, and before you say "Increased demand will get us there sooner"... no, it won't, we already have a huge amount of demand that can't be met, it's making things worse.

furry-worry• 5 years ago

See rest of article. Only paragraph 3 is about proof of work; 4-10 are arguments unrelated to environmental impact.

matheusmoreira6• 5 years ago

We simply need ways to use the heat generated by miners for useful purposes. That way the power used to generate that heat will not be wasted.

oblio5• 5 years ago

* left as an exercise for the reader.

malermeister2• 5 years ago

the entire world is moving towards carbon neutrality in electricity generation

Yes, and increasing energy demand for crypto is slowing down that move towards carbon neutrality. If you have more demand, you need more carbon neutral energy generation until you can be fully neutral.

mypastself• 5 years ago

“The laws of supply and demand mean that the amount of energy consumed closely tracks the price of the cryptocurrency in question: increases in demand correspond directly to increases in energy use. Although some newer cryptocurrencies avoid this through alternative protocols (“proof of stake” etc), they remain a distinct minority. Additionally, inter-currency trading means that their value closely tracks that of the larger cryptocurrencies, meaning that changes in their price have a similar effect on the total energy consumption.”

I’m a little confused by that last part, maybe a more economically-minded commenter can help me. How does the price change of a small-cap proof-of-stake currency have a similar effect on energy consumption as a larger, proof-of-work one?

tubignaaso• 5 years ago

I believe the author is saying the reverse is true. The larger currency directly correlates and effects the smaller one. In my experience watching the markets, it does seem to hold true. And the smaller currencies are too small to really effect the larger ones.

andrewdubinsky2• 5 years ago

There's at least two of these articles a week written by people without a finance background. It's laughable now how completely foolish they sound.

If you don't understand why these new systems are so important, please read up about the 2008 crash before deriding trustless settlement. Why did the financial system seize up so quickly? How are settlements handled between financial institutions? How does the flow of assets actually work in practice? Who owns the settlement systems and where are financial assets kept and why? Not the digital accounting, but the actual custodial functions.

Cryptocurrencies, especially NFTs, have a very important use case in these areas.

arcticbull16• 5 years ago

There's at least two of these articles a week written by people without a finance background. It's laughable now how completely foolish they sound.

Everyone with a finance background hates crypto. Just like every doctor believes in vaccination. And every scientist believes in climate change. Just because you made money doesn't invalidate their premises.

Cryptocurrencies, especially NFTs, have a very important use case in these areas.

Name literally one concrete example of a concrete and specific problem better solved by crypto than a classical solution. Just one. I know you can't because if you could you'd be richer than Bezos and Musk combined.

PretzelPirate2• 5 years ago

Everyone with a finance background hates crypto.

This is clearly an exaggeration. There are many people in the finance industry who have put money into cryptocurrencies.

Name literally one concrete example of a concrete and specific problem better solved by crypto than a classical solution.

There are people who believe that digital asset ownership (including money) via the blockchain is superior to classical solutions of centralized custodians/governments controlling those assets (while still having chargebacks, recovery from lost private keys, and all the things people think you can’t have on blockchains even though you can).

Many people also trust large companies/their government not to freeze/confiscate their assets and think this is a silly use case. Those same people have likely never had their account closed and lost thousands of dollars of digital assets, and have never had to flee their homes for safety from their own governments.

Having different trust models is why people fundamentally disagree on whether blockchain is valuable.

GoldenMonkey• 5 years ago

SWIFT banking transactions being done by XRP blockchain. Settlement takes place in minutes vs 1-2 weeks. Is just one.

I don’t have the time to do your research for you. If you want to ignore the paradigm disruption that is happening. That’s on you.

Accounting 101…

Eliminating the need for a centralized party, one must trust, in the middle of transactions. Enabling triple entry accounting.

Eliminating fraud between counter parties. Eliminating the middle man.

So many industries rely on a trusted central party/authority. What happens when they get disrupted. Peer to peer is happening.

Defi is currently paying 19.5% interest on stable coins. And loans are at 1% interest. Financial services are being turned into software contracts.

Eliminating physical infrastructure, employees, overhead. With costs so low, rates are better.

gordian-mind3• 5 years ago

Everyone with a finance background hates crypto. Just like every doctor believes in vaccination. And every scientist believes in climate change. Just because you made money doesn't invalidate their premises.

You have a severe case of 'groupthink'.

https://en.wikipedia.org/wiki/Groupthink

initialized2• 5 years ago

Everyone with a finance background hates crypto. Just like every doctor believes in vaccination. And every scientist believes in climate change. Just because you made money doesn't invalidate their premises.

Nope. but nice try associating us with anti-vaxxers and climate change deniers so that you can ignore it and make us seem evil and corrupt. gg.

Name literally one concrete example of a concrete and specific problem better solved by crypto than a classical solution. Just one. I know you can't because if you could you'd be richer than Bezos and Musk combined.

first off is a shared ledger, imo thats enough right away.

a film about Stuart Brand gated by an NFT https://weareasgods.structurefilms.com/ i can watch it, then share/sell/rent my access token to others. These tokens also used for gating discord groups/chatrooms/physical access to buildings e.g. Mila kunis and Ashton kutchers new animation stonercats.com

sybil resistance + ubi: proofofhumanity.id brightid.org joincircles.net

borrowing and lending assets: aave.com

savings accounts: yearn.finance

self repaying loans: alchemix.fi

community groups / clubs / memberships: web3baddies.com fwb.help songaday.world creators.mirror.xyz dune.foundation daohaus.club citydao.io

publishing/crowdfunding: mirror.xyz

voting: snapshot.org

auction houses: docs.zora.co

proofs+attestations for privacy layer: sismo.io

games: zkga.me

public goods + foss funding: clr.fund gitcoin.co

.... just a small sample of the thousands of things being built, accessed with the same api, and you dont have to give over email addresses and passwords. people experimenting with ideas for money and government and ip and coordination/communication systems. pretty neat.

also the inevitable response is to pick one of these things out and say "you can do this with firebase", yes. but we are doing ALL of this on e.g. ethereum. all open and composable. one person builds a lending platform, someone else builds a management contract on top of it, another builds loans ontop of that, etc

shawabawa33• 5 years ago

Name literally one concrete example of a concrete and specific problem better solved by crypto than a classical solution

Well let's skip past money transfer as it's too obvious

1. Collateralised loans: The ability to take out loans on crypto-assets without any gate-keeper or credit checks

2. Accessible market-making: The ability to provide capital to a decentralised exchange to operate as an automated market-maker. Traditional financial markets require multiple millions in investment and advanced software to market make, but this could be opened to anyone. Imagine for example being able to invest not in SPY, but in market making a SPY order book

3. Quick and final settlement. For example stock transfers still take 2 business days to clear, a tokenised stock on a blockchain could settle in minutes and irreversibly

NFTs have all sorts of uses for ownership tracking. An obvious one is event tickets - these could have anti-scalping measures enforced (only able to sell back to venue instead of being able to sell at increased prices to others)

mgamache2• 5 years ago

"Name literally one concrete example of a concrete and specific problem better solved by crypto than a classical solution"

Okay it cost hundreds of dollars to send money to my family as part of an estate close. It also took a week to get all the transactions completed. This would have been a few minutes and a few dollars with crypto.

andrewdubinsky2• 5 years ago

Settlement

The reason behind the financial crisis was that no one trusted the collateral was unencumbered. No one would send their collateral expecting their counterpart was insolvent.

Market Making

It's trivial to add liquidity without a dedicated market maker. Multiple platforms do this quite effectively now with thousands of instruments.

International Transfers

Worth mentioning this works almost instantly and costs almost nothing. Transfers can take days and have significant fees today.

oblio5• 5 years ago

Cryptocurrencies, especially NFTs, have a very important use case in these areas.

Do you have any links for this?

beepbooptheory2• 5 years ago

I would think the seizing up of the financial system in 2008 was more a symptom, than the actual thing itself that needs fixing. How would trustlessness prevent the mortgage/real estate crisis that happened? Doesn't seem like in itself these things would remove the incentive to design predatory mortgages, and exploit an inflated market. Real estate is already non fungible, no?

lostmsu4• 5 years ago

I think the point is to let the banks tank instead of buying them out with taxpayer money.

RedBeetDeadpool6• 5 years ago

The reason the financial system bubbles up then crashes is due to fractional reserve banking. Its what caused the the great depression. Its what caused the great recession. If fractional reserve banking and all its sneaky variants can't exist, and the value of a currency is static, immutable, with custody solely held by the person who owns it(not the bank, not some federal institutions), bubbles become impossible and thereby so do the crashes.

The current financial system has layered over the original concept of money so many things its unrecognizable to its natural form. Go back to where money originated, and you'll realize its an evolutionary necessity for social cooperation, a mediator of morality between selfish actors. Think about the natural formation of seashell necklaces, to the cigarette packs as money traded by prisoners, the rocks traded by penguins, the gold coins by the roman empire, to the nutrients traded by trees in mycelial networks. The control and manipulation of a currency is the perversion of the transfer of work between agents in an economic system. It corrodes the network and does not allow the system to function properly, and when that system fails to function, so do the moral obligations and contracts that the money represents. What happened in 2008 was a result of a system that can't fulfill its promise to uphold the necessary thermodynamic laws that should be maintained by an economic system.

The problem with real estate is its not divisible, its not consistent, and its not exactly fungible, but investors found ways to turn it into a tradeable asset class during the mortgage crisis. With bitcoin what are these creative investors going to do? Create bitcoin derivatives? You can already trade it near instantly at any fraction or denomination you wish.

imtringued4• 5 years ago

If you don't understand why these new systems are so important, please read up about the 2008 crash before deriding trustless settlement.

That is literally just a symptom of not having a land value tax. Any reduction of the interest rate, for whatever reason (justified or not), makes the speculators go wild. The big difference between housing and stocks is that housing is a basic need and excluding people from being able to meet their basic needs has been a common source of unrest.

People already figured this crap out centuries ago. They always demand the same things. "Free the land, forgive the debts"

Freicoin was an interesting experiment but it also showed that there is nothing of substance in the cryptocurrency space. Almost nobody wants to actually run an economy on cryptocurrencies if they have a good enough fiat currency offered by their government. Everyone is in it for the speculation but I personally don't care as long as it doesn't become legal tender in my country.

imtringued4• 5 years ago

Let's write a microblog!

The case against crypto.

Crypto is credit money with zero obligations allowing all participants to walk away without notice.

Modern fiat currency is credit money created in accordance to promised obligations that bind participants over a time period.

Limited supply crypto is trying to be exclusive akin to feudalism, past economic power is strongly entrenched, families can pass their amassed wealth to their heirs while late comers are doomed to have very little economic power.

Unlimited supply fiat is trying to be non exclusive akin to democracy, past economic power means very little and is eroded through inflation, new comers can go to a bank and get newly created money if there isn't enough in the economy.

Fiat currencies are a tool of trade that serve their institutions/governments to increase the efficiency of their real world economy. Militaries protect themselves, the land and its people but not the currency.

Cryptocurrencies do not interact with the real world beyond expending energy, they are bounded by their underlying blockchain. The miners(supposedly equivalent to militaries) only protect the blockchain/currency, they don't even protect themselves let alone the land and its people.

If you want to gamble buy cryptocurrencies, they are better than the casino.

lostmsu4• 5 years ago

Most of these statements are the opposite of truth.

For example, creation of crypto has no or extremely little variability in obligations for many years. Statement about no obligations is false. There's at least an obligation to be able to transact.

Creation of fiat can be changed on a whim with a poorly formalized goals. Obligations change too.

mgamache2• 5 years ago

You could replace Crypto with Gold to see your arguments make no sense. Including the energy required to mine. Also many cryptos aren't unlimited (like Ethereum).

ItsMonkk2• 5 years ago

When the percentage increase of the currency is slower(gold, most crypto) than the value of that currency increases over time, and as you say, it becomes entrenched.

When the percentage increase of the currency is faster(most fiat) than the value of the assets increases over time, and opposite of what you say, it(being assets) also becomes entrenched.

The only fair system is one in which is stable over the long-term, and where past value is equal to current value.

tfehring• 5 years ago

When the percentage increase of the currency is faster(most fiat) than the value of the assets increases over time, and opposite of what you say, it(being assets) also becomes entrenched.

Productive assets don't entrench wealth because of inflation, they entrench wealth because they create returns to capital. The generationally wealthy would be just as wealthy relative to the rest of the population if fiat inflation had been zero for the last century. If you don't want wealth to beget more wealth you need to not only avoid deflation, but also eliminate interest, dividends, and other mechanisms by which holders of capital receive real returns to that capital.

oxymoran• 5 years ago

Only roughly 2% of my portfolio is in crypto so I am far from an evangelist but I don’t feel that this is a very compelling argument. I don’t disagree with these points, but it is only half the story. A)doesn’t mention that ethereum is in the process of changing to proof of stake so that should largely decouple the energy correlation. B)most importantly, fails to note rising global inflation and central banks running wild printing money. Large, Non meme coins can act as a store of value similar to gold given their network effects. C)of late, the stock market has become every bit the casino that crypto is so I don’t see this as a purely crypto problem. Hell, the stock market has been rife with fraud and greed for decades.

Importantly, a criticism that he missed would be to the digital gold argument. If things ever do “hit the fan”, there is no guarantee of electricity or of governments not shutting down the internet. Poof, crypto all gone.

Nursie5• 5 years ago

doesn’t mention that ethereum is in the process

It's been in process for years. This is a meme in itself.

gordian-mind3• 5 years ago

Makes sense since it's a difficult problem. And it's progressed quite a bit during that time.

onlyrealcuzzo• 5 years ago

For the foreseeable future, crypto will be denominated predominately in fiat.

Why does central banks printing money have anything to do with crypto?

It affects crypto the same as it affects corn and soybeans and gold and the S&P and any other investment.

Central banks printing money seems inherently unfair if you're a creditor and a boon if you're a debtor.

Until the majority of global debt is denominated in Crypto (ie never) - it doesn't change anything WRT central banks.

tromp• 5 years ago

It's interesting to contrast these two observations:

The most popular blockchains use a protocol called “proof of work”, which requires vast amounts of computation (and thus electricity) to operate at scale.
One popular way of making money through cryptocurrency is to start a new currency, while retaining a large chunk of it for yourself.

when the only way for coin creators to avoid retaining large chunks for themselves is to distribute it fairly through proof-of-work (most still end up concentrating wealth by issuing the majority of coins in the first few years, but a never changing block subsidy would avoid that).

amgando• 5 years ago

the most interesting news to come out of crypto in the last decade is the fact that we now have the means to stand up a globally accessible digital clock that pays people to keep it ticking

3 of 8 references in the Bitcoin whitepaper are about decentralized time keeping

incentives around consensus (agreement about history, tick by tick by tick) can get a little confusing but basically all ticks hold some data (merkle proofs of a tree of transactions) and Proof of Work leaks some money per tick while Proof of Stake pays people interest on their "at risk" investment to keep ticking

Ethereum adds a Turing complete virtual machine onto the clock, tracking function arguments, return values and code deployed to the virtual machine as data in each tick of the clock

there are a bunch of modern implementations of the Ethereum model in NEAR, Solana, Polkadot, Avalanche and others who have found a viable way to parallelize the single threaded virtual machine of Ethereum -- driving to make everything faster and cheaper so this idea can operate at scale and www shopping cart speeds

if you can get past the emotionally charged hype and news cycles vying for our attention, you will notice, with few exceptions, that the coins of 2017 and NFTs of 2021 are very early and relatable applications about things we care about and understand: money and shiny things. DeFi (decentralized finance) is about porting the financial system to this new new forever-clock

but the brand new primitives of (a) identity, enabled by public/private key cryptography (b) money, enabled by irrefutable record of time-bound value (c) ownership, identity + money and (d) provenance, identity + money + time ... are all just starting to build up

we're only just now learning to use this digital clock so we're thinking of it, naturally, as a permutation of what we already know, not something completely new. see tech adoption cycle, etc

your best bet in this environment, imho, is to focus on the actual tech -- it's no more complicated than a slow, expensive database that can't tell a lie (as long as it's economically viable to keep the clock ticking, and who knows how long that will be). at least that's good enough for the first year or so until you get used to it.

disclosure:

I'm learning how to teach people about this stuff at https://near.university and we're hiring 1000 teachers

come help us, please

(edit: formatting)

The Case Against Crypto

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