HN’s never ending hatred of crypto is so funny to me. On the one hand it’s “Disrupt incumbents! Software eats the world! Through the Internet all things can be made better!” But when it comes to crypto “No! We love our stodgy ancient corrupt banking system and the money laundering crooks that run them and extract ridiculous fees for terrible service!” Permanent “psyduck confused” look on my face.
Why not? If anyone can launder money with a click of a button, why would you pay corrupt bankers to do it? It's the same idea behind legalizing drugs to put cartels out of business.
Because the lack of centralized authority de facto means that you accept money laundering as a non-issue. Your thesis that by "not paying corrupt bankers" the issue goes away is nuts. Entire technology stacks - Zcash, Monero, tumblers - exist to satisfy this desire. This idea that not paying middle men makes money laundering go away is bananas.
Legalizing drugs doesn't make drugs go away. Legalizing drugs makes the middle men go away. If you're trying to stop drugs, this is a dreadful way of doing it. The argument implicit in legalization is there's no reason to stop people using drugs, and that the real harm comes from the middle men. This is not the case against money laundering.
There's good reason to stop money money laundering. If you're intent on concealing the original source of your funds it's because you're attempting to conceal criminal activity and/or tax evasion. This criminal activity is what AML laws are attempting to stop.
C'mon now, a full 1/3 of Tether's bankroll was seized by regulators due to their having been a massive party to laundering.
You can't really be making this argument with a straight face... can you?
The narrative has moved on to Decentralized Finance.
Over $9 billion is now locked in DeFi apps - https://defipulse.com - Instead of being like the ICO bubble, in DeFi you lock your money up (not exchange it for a worthless token built on vaporware).
Its the strange higher standard put on crypto that’s oddest to me.
Those ICO issuers have a great business model, haven’t cracked recurring revenue yet, but alot of revenue!
There is also a large services sector, no different than the adtech sector or any other sector with questionable utility.
I worked on many mobile apps that weren’t worth it for the company, and was praised for it. But crypto is the one that has to convince you of...... what?
“There are alot of customers, go where the customers are - Except if it’s crypto, then I’ll just spend all my energy talking about unrelated crypto issues in a incoherent tirade.“
The "future of money revolution" is one user story. It offers a place to express angst in monetary policy, no different than startup founders talking about disrupting whatever, it's the same wave. It offers some utility in that regard and is still growing at a noteworthy pace. (capital is bypassing bitcoin and going straight into stablecoins which settle on bitcoin and ether. bitcoin and ether are becoming primarily used as fuel. check the marketcap growth of stablecoins over the last 6 months, it is new capital.)
I completely understand how to hold seizure-free assets, some of that involves the discretion of a judge with cash and physical property held in trust's name, some of that involves the permissionless nature of crypto, stored properly. Its just a tool and it's actually pretty okay at what it does.
In other areas, 10 years ago I couldn't convert an international wire transfer into a domestic wire transfer, now I can and it avoids greater compliance scrutiny and speed, while retaining unlimited amounts, and inherits same day settlement. (corporate transaction another country paid in crypto, converted to fiat in local bank, transferred to local brokerage account, 6-7 figures or higher.)
Without crypto, I as of recently have transferwise and now Revolut to do the same thing, which both have an extremely long list of unsupported businesses and transfer limits that are pretty decent but not as good.
There is a slower regulatory process of making any of this practical, which is still happening, such as the processes that allowed Kraken to get that bank charter. Wyoming's laws were passed in 2018, went into force 2019, and Kraken was in regulatory approval since then. On the federal level, of OCC just gave its gracings to national banks to custody digital assets, this year! This will be challenged, primarily by Wyoming lobbyists, who wants Congress to make that order or not. Only Bitcoin has risk management financial products, not even Ethereum yet, in 2020.
There is also a large market of customers in the crypto arena, and high margin business models that don't require that many customers in order to book 7 figures of revenue.
Another thing that's exciting about crypto is that it lets users participate in more fair borrowing/lending.
As it stands today, you can lend at your coins at a yield rate close to the borrow's lending rate. That effectively makes all lenders, collectively, "the bank". It also means that borrowers will get a competitive rate for borrowing against their collateral.
This will end the days of getting 0% in your savings accounts while the bank is getting 10% lending out your money once people realize they can lend out their dollars themselves for a much higher yield.
It also lets you lend out your speculative crypto investments. Imagine if you could buy AMZN or NFLX and also lend it out to other people on margin. That's exactly how a margin account works, but of course your brokerage isn't going to let you do it. Crypto lets you play the role of issuing the margin rather than borrowing it, if you so choose.
People that are dismissing crypto have no idea what a revolution in finance this is going to cause.
People have been able to lend actual coins since before the banking system existed and there's a vast ecosystem of financial products and intermediaries that will allow you to get higher yields than bank accounts from lending directly to specific companies or people (or buying their debt) without touching crypto.
And you can't buy and hold but also lend AMZN or NFLX with crypto. Sure, you can buy assets that don't have real profit streams attached and lend them to short sellers, but I have no idea why anyone would think that revolution would be a net benefit to them....
How many people are involved in processing that vast ecosystem of intermediaries? It's a wild amount of inefficiency. Every major city has giant buildings filled with people pushing numbers on spreadsheets to make those products work. They're extremely inefficient. And to interact with those systems, you need to go through a middleman like a brokerage.
I think the analogue is Ally bank, which is known to give the largest returns on savings accounts, currently yielding a whopping 2%. Compare that with a crypto-ecosystem lender like Nexo which is yielding 8-10% on the same asset (USD).
> Sure, you can buy assets that don't have real profit streams attached and lend them to short sellers, but I have no idea why anyone would think that revolution would be a net benefit to them...
That's one of the profit streams my stock broker uses. Why shouldn't it be available to me?
The reason why you don't have access to any of these money-making "institutional" products (like lending stocks, underwriting insurance, or serving as a market-maker) is because they require a lot of administrative overhead. When you replace them with smart contracts, you democratize all of these services.
In a few years, it will be common for people to buy/sell/lend/insure all kinds of assets (physical, virtual, derivatives) from their phone without a middleman.
You can do it today if you're an advanced user with enough money to overcome the currently high transaction costs.
Only if you think that due diligence and actually collecting the repayments is inefficient. Someone like LendingClub will do all that for a 1% overhead with plain old fiat though if you don't want maturity transformation and deposit insurance.
I'd say it's a bug rather than a feature of the crypto ecosystem that people who sneer at 'numbers on spreadsheets' can 'earn 10% interest' if they buy enough tokens from a website whose 'institution license' page tells you what a license is but doesn't tell you which country they're headquartered in, never mind what licenses they actually hold. It's not removed the middleman so much as anonymised him and made it more likely he's running a Ponzi scheme.
> Only if you think that due diligence and actually collecting the repayments is inefficient.
I do think that! The due diligence you're describing is only necessary because the custodians can actually improperly handle the money. Embezzlement is a real thing in the traditional system.
Give smart contracts a few more years, and you're going to be more skeptical of the existing system of due diligence with custodians (which we know can be abused) when compared provably secure smart contracts (which we know can have bugs, but will eventually be stable).
If you think crypto is all a Ponzi scheme, you probably haven't been following it for the last couple of years.
Also if you think the traditional system is not a Ponzi scheme, you probably don't understand how it works.
> The due diligence you're describing is only necessary because the custodians can actually improperly handle the money. Embezzlement is a real thing in the traditional system.
Due diligence with loans has nothing to do with 'embezzlement' and everything to do with evaluating the creditor's probability of repayment from future earnings. You can't assess whether someone's business plan is high or low risk with a smart contract.
Embezzlement is more likely to be a problem when you're giving your money to a service as obviously shady as Nexo (a website which in addition to having the unusual model of borrowing fiat at 10% to lend it out at 5.9%, pointedly avoids saying where its based even in its legal documents, or what licenses it holds on its 'view licenses' page, but is very keen to promote what licenses and audits its founders' other business has in its marketing material...)
Wait, Nexo is your rebuttal here? The stuff the other person was talking about is a successor to Nexo.
Firms like Nexo use the yield farming services to make their questionable business plan viable! We will never know exactly what they were doing before but now they use decentralized versions of themselves.
Now this inevitably requires you to move the goal post to the critique that customers money is being put in smart contracts, good news there is also smart contract insurance that many people buy. I’m not kidding, 70% serious, that’s it’s own nuanced discussion but requires you to get off of a hill stuck in 2018.
My rebuttal to the suggestion smart contracts somehow change everything is that smart contracts can't do due diligence on ability to repay in future, and only the sort of sucker that thinks Nexo looks like a legitimate operation would consider due diligence an unnecessary overhead to lending. Smart contracts can't make lending below the cost of capital a sustainable business model either. And whilst not all crypto is a Ponzi, 'yield farming' involving people being rewarded for propping up the value of a token by paying into its smart contract by printing even more of that token is pretty much the definition of a Ponzi. Even someone as heavily invested in smart contracts as Buterin acknowledges as much.
I mentioned Nexo way earlier up the thread, comparing them to Ally, because they're both custodial retail shops that make their money behind the scenes without the user knowing anything.
But it is incredible how much crypto has changed since 2018. Back then I thought, well, maybe some day this will work. Now it's obvious that it will work, and I think adoption will be rapid once it starts happening.
I won't be surprised if there's a big wave of crypto stuff on HN/reddit/elsewhere again soon. Just like 2017, but this time it's actually useful for something.
It's not a brand new technology, it's 12 years old. Back in 2008, the iPhone was new technology -- look at it now. Bitcoin remains unchanged, as does the fundamental technology underlying substantially any relevant cryptocurrency. Proponents need to get over this whole "it's new" business. It's not new. It's old. Can you think of any other piece of software or hardware you continue to use from 2008 that you consider "new technology?" Do you consider the original iPhone (2G) to be "new technology?"
I don't think anyone was disappointed with where the Internet was in the early 80s and 90s, and that's because it fundamentally opened up new avenues for people to express themselves, new ways to interact. It wasn't perfect, but it created something new nobody had before. Many things!
The ability to move money online has been with us for decades. It's not new, either. Crypto doesn't open up any new capabilities except harder-to-track ransomware payments.
Ethereum was introduced in 2014, so I'd say blockchain based smart contracts are only 6 years old max. Try looking past bitcoin and see what's happening in DeFi. https://defipulse.com - any of the top projects are worth looking into. Don't be so quick to judge. A lot of progress has been made the past year and DeFi is much more sustainable.
Smart contracts are the worst idea in history of bad ideas, maybe even ever.
As a software engineer you know bugs exist. Software as immutable monetary contract law which cannot be appealed to anyone is a doubly bad idea as any bug is a vector for literally everyone losing literally everything, forever. Plenty of examples exist. Remember the DAO? Nothing's changed since then except people decided to "be more careful next time."
> Imagine if Facebook did something like this with $FB stock to reward it's early users.
Why would a company do that? It doesn't make sense. If a service is valuable you don't need to pay people to use it, they pay you to use it. You know, business, where money is exchanged for goods and services?
it’s because it only compounds the existing problems of the current banking system: more anonymity, not actually that decentralized, not less corrupt, still concentrated power.
the only improvement is possibly fees.
I think it’s because if bitcoin continues this trend, we might not like who we have just enriched. Do you really want the new largest currency market to be dominated by a handful of families from one or two nations?
>“Disrupt incumbents! Software eats the world! Through the Internet all things can be made better!”
I don't see much of that to be honest. Lots of fears about the impact of things like AI, broken VC system having a net negative impact, advantages of limiting freedom of speech on online platforms, abuses by large software companies, etc, etc. If anything there's a pervasive view against rampant unrestricted capitalism and crypto generally ties itself to rampant unrestricted capitalism.
"We want to decentralize money!"
"Here is what you have asked - completely decentralized money printed out of thin air by 3 guys in the non-extradition offshore island. Enjoy your freedom!"
Something like that.
1) > “Disrupt incumbents! Software eats the world! Through the Internet all things can be made better!”
Yes, through the internet lots of things can be made better. That hardly means that every attempt is right, good, or laudable. That hardly means that every attempt should be free of judgement, free of having to stand on its own merits, free from being challenged. You get that yeah?
2) > But when it comes to crypto “No! We love our stodgy ancient corrupt banking system and the money laundering crooks that run them and extract ridiculous fees for terrible service!”
"Stodgy, ancient, corrupt" is a strong judgement you have not provided any support for whatsoever. Portions of the system folks assume fit that description they frequently simply do not understand and love to use as their perennial whipping boy.
For instance, inflation. There's nothing corrupt about inflation. Inflation is designed to incentivize investment. Money as designed is meant to be a temporary, lossy store of value. Inflation is designed to push you towards investment. That can frequently even just be a savings account -- which collateralizes loans. Inflation is the benchmark "rate to beat" in order to make your capital allocations, and pick winners.
3) > "... extract ridiculous fees for terrible service!”
Do... do they? My bank charges me nothing. Ally charges nobody anything for, well, anything. So does this entire generation of online banking. Schwab. Just check out nerdwallet for a list.
I've had nothing but good experience with them.
4) Permanent “psyduck confused” look on my face.
Let me try and explain with a few salient points.
- Bitcoin has a worse wealth distribution than any banana republic. This means that a small few folks possess literally all the wealth there is to be had and the rest of the plebs are playing with pennies. This is not the "new money" people deserve.
- No centralization means all sorts of garbage things are permitted: money laundering, crime facilitating, scams, schemes, separating folks from their wealth.
- It uses more power than an average country to record 7 transactions per second. BTC uses 70TWh per year of power and generates 12kT of e-waste. For nothing. Each transaction requires as much power as an average US household uses in 21 days, and generates 105g of e-waste. TWO transactions is the same as chucking an iPhone out the window. This is intended behavior.
- 15,000 coins are lost per day. Massive deflation results, or as the community puts it "SFYL". This is intended behavior.
- It's a user-hostile technology that punishes users in the amount of their net worth if they make tiny understandable mistakes. This is intended behavior.
- More than 50% of the hash power is centralized in 5 mining pools in the PRC. Using BTC would be the equivalent of giving China control of the currency. This is a natural consequence of proof-of-waste schemes.
- At an average $0.14 per kWh, a single BTC transaction actually costs $84, which is currently being socialized across the block reward. As the reward drops fewer people will mine it, this in turn reduces the security of the system. The system will not survive.
There's really truly nothing to like. It's old, crap tech that supports money laundering and speculation. Nothing more.
