I recently watched some traditional cable and was shocked by the number of crypto ads bombarding viewers. I have to imagine that this market was goosed up by retail investors trading on coinbase and binance just as the e-betting market was. The only difference between crypto and e-betting is that everyone got to be a winner on the crypto markets for a while. As users lose out, and exchanges stop ad campaigns - how long will that last?
Crypto needed a tangible market/reason d'etre to be valuable. This required lower transaction fees, cheap audits, and a reasonable degree of price stability. We haven't seen any of that materialize except for cheap auditing. Cheap auditing isn't much use if there isn't anything of interest to audit.
I'd doubt BTC will go to zero, but I wouldn't be surprised if the entire covid rally gets wiped out and we see BTC 6k again.
I visited Brazil recently (3-4 months ago), I got into cryptocurrency-talk or some shitcoin peddled by cashiers, Uber drivers, waiters in some restaurants, acquaintances that aren't tech-savvy at all, etc. That's when it downed on me how big this whole thing got outside of internet chatter, it downed how many vulnerable people are exposed to the fallout of a crypto implosion.
... but yeah. It's depressing. Countries with already bad economic conditions (like "we literally don't have functioning currency" level, not the things US residents complain about) seem particularly susceptible to it.
Because they're actually using it as a currency. Consequently, they probably won't feel as much of the pain speculators are feeling right now / will continue to feel; as long as the amount of $FOO earned from a day's work pays for the day's expenses, they have little reason not to continue adopting and using $FOO (for whatever value of $FOO we're using).
Put differently: when the options are "failed local currency" v. "hard to obtain foreign currency" v. "easy to obtain electronic currency", you and I would probably be inclined to use the third option.
It's so ironic how all those libertarian crypto-bros think they've got the inside track and they're so much smarter than everyone else, when actually they're just as gullible and common and deluded as random cashiers, Uber drivers, waiters, bartenders, used car salesmen, chiropractors, cosmeticians, shoeshine boys, and ordinary hoi polloi on the street, all being influenced by the exact same mass market ads and hype all over the world.
Well, people that got in early and got out about 6m ago (or now, still) might have made good money. Attributing it to a deep understanding of the technology is almost certainly wrong; attributing it to a certain street-smart understanding of bubbles, marketing, and hype might be correct. Though I'm inclined to just call it luck.
Not to be flippant, but nobody who I've heard promote crypto has any real, deep training in economics. Computer science yes, totally, but not econ. There are obvious problems with the entire concept of decentralized money if you've studied economic/financial history. We already experienced it back in the 19th Century and it's following pretty much the same pattern. Wildcat banks, frontrunning, wash trading, bank runs, and much more.
Some brilliant computer scientists created crypto and Dunning-Kruger'ed themselves into thinking that they were also experts in finance.
This article is off by 3.5 years and I bet that most FAANG stocks are still above their values when it was published.
Tech “growth” companies has been overpriced but it made kind of sense as long as interest rates were negative and their revenue was growing… people believed in positive returns because they assumed the only way is up.
Truth is … in any healthy public market no company has any business being at a higher than 20 p/e ratio. Unless maybe for a transitioning period of time (market making)
Boom and bust seem to be the prevailing pattern for the development of complex systems. Happens in ecosystems, and in economies. I don't even think it's detrimental... That was how we get a lot of otherwise unthinkable infrastructure development. The dotcom bubble left a lot of very cheap fiber connections that fueled later internet adoption, for example.
I've stayed away from crypto, but my shoeshine boy moment was when we went on a road trip around Wales last summer. We happened to wander into a small shop in a small harbour town in Wales, literally about 4-6 streets in total. The guy behind the counter had some 'pay with crypto' machine and was singing the praises of crypto to all of the old ladies, moms and dads that were ahead of us in the queue...
I often see the ads in advertising billboard. I usually go to a public park every other day, and the road will pass through a major intersection with large billboard. At one point, a billboard of cryptocurrency broker appeared every time I passed through that intersection. The particular broker also advertises into a convenience store (7-11), so I will be pretty much guarantee to see its ads every day.
Another broker dared to register the domain name "Join the Crypto Revolution" to promote its scheme. I wish we could have an enforceable rules on prohibition to market cryptocurrency to general public like Singapore did (see [1]). We did open for comments regarding this, but it has not been set in stone as cryptocurrency broker tried to game the rules.
About a year ago I was chilling in my bedroom and overheard some crypto-bro shilling just outside my window. That clinched my conviction that it was just a matter of time for it all to collapse.
> I'd doubt BTC will go to zero, but I wouldn't be surprised if the entire covid rally gets wiped out and we see BTC 6k again.
I agree. We invest a small amount of money into $BTC and I feel pretty neutral on the topic and my comments come from an intention of neutral observation.
I think $BTC is in a bad spot that's about to get worse in the short-term. It's getting hit from both ends: expensive energy, and high interest rates. Many believe it's supposed to be a hedge, and I think it still is, but it's not a hedge against a high interest rate environment in which the dollar and fiat currency (primary reserve currencies: USD, EUR, YEN, GPB, etc.) are still normalized and valued. It's more of a hedge against low interest rates and the central banks printing money in that environment IMO.
Long-term I'm bullish because it's a deflationary asset. Eventually we'll get to the point where, similar to maybe Japan or South Korea a pack of gum costs 1000 units of fiat, which will necessitate $BTC being "worth" hundreds of thousands of dollars (or it's worthless, I don't think there is a middle ground here). Unless something crazy happens, deflationary environments in fiat currency will always be avoided, and if you target 2% inflation every year it's all but guaranteed that $BTC will simply be "worth" a lot of dollars (or $0).
So I wouldn't be surprised to see $BTC hit $6,000 or even less. I would be surprised if within, say, 15 years it's worth that amount and not $0 or $1,000,000 (or something).
Long term I'm bearish because it's a deflationary asset. Deflationary value stores have a tendency to cause all sorts of social ills by encouraging hoarding. There's a reasonable line of thought that observes that it's no coincidence that the end of the age of European colonialism coincided with the demise of the gold standard.
More concretely: if crypto is deflationary, then its value works similarly to how an Amway or Herbalife membership's value does. You get rich by getting in first and then convincing others to join after you.
> Long term I'm bearish because it's a deflationary asset. Deflationary value stores have a tendency to cause all sorts of social ills by encouraging hoarding. There's a reasonable line of thought that observes that it's no coincidence that the end of the age of European colonialism coincided with the demise of the gold standard.
It's definitely an interesting theory - any particular articles or books you've read on the subject? I find the story of money fascinating.
On the other hand, however, States are no longer constrained by how much gold they have. In the past you could wage war until you ran out of gold and then that was that - you couldn't print money out of thin air. Now you can just print money and at least up until some point (which we don't know yet) it works. I guess you could argue back to your first point that this is what caused wars - you needed to accumulate resources in order to have wealth so you'd start wars and take stuff.
I think deflationary economies have bad attributes - like why take risks when you can do nothing and the value of your assets goes up? On the other hand, (and someone else mentioned something related to this) inflation literally destroys wealth so how can someone working a non-high paying job store wealth when the value of that wealth is destroyed at a minimum of 2% per year?
Inflation doesn't destroy wealth, inflation erodes the value of money. Wealth and money are two separate but related ideas. One shouldn't tie up the majority of their wealth in money, its non-productive.
> how can someone working a non-high paying job store wealth when the value of that wealth is destroyed at a minimum of 2% per year?
By investing in productive assets instead of holding pieces of paper under their mattress.
In my opinion mixing the functions of medium of exchange and store of value has caused untold amounts of needless suffering. You see 2% inflation is the middle ground. Rich people may want to save and increase their wealth but my mom just wants a job to pay rent and buy groceries, she has no grand ambitions to become super wealthy. When you mix the two functions into cash, one of the two is going to dominate the economy and with gold it was the rich, with fiat it is mostly average people because having a job is more important than maintaining purchasing power.
Maybe the issue is just that we no longer have a store of wealth that isn't tied to a speculative asset? Fiat currency is a fantastic currency - even terrorists who hate America use dollars. But it's a terrible store of wealth because it loses at least 2% of its value by intention (this fluctuates - just going off the stated Federal Reserve targets).
I think this is where things like houses becoming collateralized assets start coming into the picture. You can buy stocks or index funds, but those can lose value and they're definitely not guaranteed to increase in value. Houses are a pretty "hard" asset in physical reality and with inflation basically they go up in value while also providing utility. And to buy a house you need fiat currency so they're somewhat liquid in that sense. So what do you do? Buy gold? Maybe. Bitcoin is another option similar in some ways to gold (in function at least). Other cryptocurrencies are assets in my view more similar to a stock with products or platforms behind them. I'm just not sure what to do. If you make cash inflation neutral or deflationary that sounds ideal, but how do you do that? And would people be likely to take risk in such an environment? Do we need to? Is it bad that we are encouraging the use of fiat currency by threatening to devalue it over time? I'm not sure.
> Maybe the issue is just that we no longer have a store of wealth that isn't tied to a speculative asset?
You say speculative, I say productive.
Is a non-productive store of value actually a thing which exists in nature?
For most things, you can't store a thing itself: grain rots, chickens die, houses decay, iron rusts, water is fouled.
If you want to have a thing in the future, you need a way to produce the thing: fields of grains, lineages of chickens, maintenance and construction of houses, refinement of iron, the purification of water.
All investment in these future means of production is speculative; you have no guarantee the bet you made on how you will obtain a chicken in 20 years will play out.
Oh I totally agree! Stocks in companies are absolutely productive assets. Though they are still speculative. I guess the first thought that comes to mind is well, so what? Does it make sense for individuals to plow money into the stock market even at all-time highs? Should you basically have to perform an investor level due diligence for buying these productive assets? Sometimes I think we are duped by the liquidity in ways we wouldn't be if we were deciding whether or not to buy a farm or a movie theater.
> Is a non-productive store of value actually a thing which exists in nature?
Gold is probably the closest we've ever gotten. Besides that I'm not sure. But then that begs the question I was responding to regarding savings for "regular people". Is it impossible to save money without buying into the stock market? Idk.
Gold famously doesn't decay, but why should I expect prices to remain constant in terms of gold? If I sell you a chicken today for 80 milligrams of gold, why would you be obligated to sell me an equivalent chicken for 80 milligrams of gold in twenty years?
Gold isn't a perfect store or value, it's just a perfect store of gold.
Yea - I was just saying it's probably the closest we have ever gotten. The chicken example is interesting b/c what would you actually compare gold to? Say chickens were commonplace today and could be had for 80 milligrams of gold but then some disease wiped them out and only 10,000 could be grown and sold each year. Obviously they'd be worth more than 80 milligrams of gold - but as prices for other things perhaps come down and become more plentiful (or new products/services emerge) 80 milligrams of gold may buy something completely different at a great price.
I mostly agree with you here. Keep in mind I was preliminary responding to someone else w.r.t stores of wealth. It may even be the case that storing wealth is nonsensical as a matter of physics (either natural physics or economic physics). Perhaps what we refer to as wealth storage is really just scarcity of a physical item, whether that be a house, a collector's edition widget, a car or piece of art, or in your example, a chicken. Maybe the goal in what we would call wealth preservation is to find assets that either do not decay over time, or that decay very, very slowly over time? One thing that comes to mind then is how fiat currency plays into this decay? What would it represent?
So the question is basically "How fast does credit decay?"
Let's switch from goods to services and favors. Let's suppose you're in a real bind one day, and need some help -- painting your house, moving cross-country, who knows -- and I step up and help you as a favor, and spend a solid week of my time.
How long do I have to redeem that favor and get a week's worth of time out of you? How does the intervening time affect the answer? If I disappear for twenty years and show up on your doorstep expecting the favor to be repaid in full, is that a reasonable expectation? What if we are close friends for those twenty years, trading favors back and forth?
There aren't necessarily right or wrong answers to those questions, but that's basically the question inflation answers -- it's the price for not participating. You do a job, you get your currency, and then you can roll your currency into participating in the shared risk for maintaining our systems of production, or you can stand back, and see the credit for your past contributions decay over time. Sometimes it decays slowly, when everything is going fine. Sometimes it decays quickly; if things begin going badly and you're not invested in the outcomes improving, your credit for your past contributions declines faster.
People say gold is a good store or value because it has relatively inelastic (hard to ramp up) supply and relatively modest and stable demand (jewelry, industrial uses etc).
The cost of chicken has actually plummeted over the last century, even adjusting for inflation, because we can battery farm them now and they produce way more meat than they used to due to selective breeding etc.
Gold is still a speculative asset! You're speculating what it will be worth in the future. Its current value varies a good bit compared to other goods and dollars.
So your proposal is, what, you have a warehouse of grain, and each day you sell your grain at price $X and buy new grain (N days more recently harvested) at the same price? Because you're trading nominally fungible commodities they're priced the same, but when you go back twenty years later you'd have an equivalent quantity of grain to withdrawal regardless of how the price fluctuated in between?
The main problem is that you'd need to pay for storage over the 20 years in between, which would take the form of selling some Y% of your grain each year to pay the storage on the remaining percent, which is basically the same as inflation.
How do you get "at least"? The target used to be "below, but close to 2%", but has been increased to around 2% (symmetrically). It has been less than 2.5% over the last 20 years (https://fred.stlouisfed.org/series/CPIAUCSL) including the recent spike, and has been 2.02% from Jan 2001 to Jan 2021, which I'd call precisely on target.
Needless to say, if you parked your extra money in the stock or housing markets, you handily beat inflation. And if you don't have money to invest in the markets, then you don't care about inflation anyway (but rather real wage growth).
The indexes used to measure inflation are picked to stay under 2%.
I kept track of my groceries and rent for 10 years up to last year and my perceived inflation was way higher than 2% (even allowing some margin of error). This year is being completely insane but it's hard for me to compare as I moved.
Wages don't grow with inflation (the sad 1% yearly raise) unless you job hop.
Stocks don't give you always the best window to withdraw your annualised 7-8% profit. If you'll need to buy a house or if you'll go to pension you may end up withdrawing at bad times.
Houses have been mostly going up.
Good to beat inflation, terrible for youngsters who need a place to live without paying someone else's mortgage.
That's a common fallacy. Hoarding, saving, preparing for the future is one of most fundamental human needs and the bedrock for a functioning economy and society. There's no fundamental economic principle which would indicate that an inflationary money would do any good to a society. It destroys savings, which is opposite of what is good for an individual and a society.
Money isn't wealth. What you can get for it is. Hoarding casino chips does not prepare you for the future. It just makes the people running the casino richer with goods you traded for the chips.
Oh you say, I can trade the chips with other people. Also the chips are numbered and we have an agreement to never accept a casino chip numbered over 1 trillion. Then we pay the casino one chip every time we trade. So the casino always has some chips to trade.
The casino always wins. You're even paying their horrendous electricity bill.
Money allows optionality - instead of hoarding food and fuel, you can hoard money and buy the things you need in the future. If you know for sure that you need food and fuel, and hoard them in advance, they will rot and evaporate by the time you need them.
Inflationary money is like rotting food, instead of canned food. It makes no sense at all to store your wealth in rotting and evaporating things.
Well, you don't really know, but you can make certain assumptions. Money is like a social network with network effects, which means that people want to hoard casino chips which are most popular, and thus they also want to accept them in trade and reject everything else. This keeps them in the most popular economic network, and also keeps the casino chips valuable.
However, if there's something wrong in the casino chips itself (like inflation), people start to switch to a better version of casino chips, and they can assume that everyone switches, sooner or later, to the best alternative available, with least issues and largest network. Network effects will keep the new casino chips valuable as long as there's no better alternative.
Network effects go to a certain point yes. Then having people who hoarded chips is a detriment to the network. Because after that, people with actual resources like food or fuel will just invent their own chips to trade.
It won't get to that point, because no one wants to hoard too much. Hoarding chips endlessly is pointless. It's basically just a riskless buffer for future spending or investing. People will either spend or invest all extra chips. Rich people would own all the factories that produce food and fuel. They wouldn't sit on a pile of chips.
If someone is endlessly hoarding chips, it means that they are producing more than they are consuming. This would be positive for the economic network, but negative for the individual (because they are working more than needed).
If someone has a lot of chips, but isn't producing anything, they'll eventually lose their chips, because they have to spend them to stay alive.
Well fine. But now you're contradicting what you said two comments up:
> instead of hoarding food and fuel, you can hoard money and buy the things you need in the future.
Again, how do you know people won't just start trading with other chips? That will devalue the hoarded chips.
The argument started with paper thalers being a poor store of value. Casino chips were pitched as an alternative. And now here we are. Turns out the chips too are a poor store of value. Both can be true at the same time.
More importantly it's only "bitcoin" because it's the first; even if everything crypto takes off the world could collectively decide to use something else (Etherium being an obvious choice, but there could be others).
What does Bitcoin provide that a cheaper coin doesn't? The only thing pushing the price up is speculation, all digital coins are worth pennies as they're all completely interchangeable from an end user perspective.
The network effect is strong, if BTC actually was to take over for USD then people would have to have trust that BTC wouldn't evaporate the next day. BTC's incentive model and network effect provide that.
I see BTC in the same class as Gold (hard assets without any intrinsic value and valued only because everyone else values it). USD is a different asset type - Fiat currencies which are essentially debts owed by various governments to the holders of those currencies.
And yet its market cap, >10T USD, is not at all commensurate to the uses you cited. Governments hold gold in their reserves because they see it as a hard asset.
From what I gather, and certainly someone may come in with a much better explanation or refutation is that Bitcoin is in a sense a finite resource (let's just look at the mechanics right now) and if appetite for Bitcoins increases you can't make more of them.
If a central bank is inflating a currency, it means each year that more of that currency exists than it did previously, so people can effectively bid for resources with more currency which increases the relative price. A pack of gum used to cost $.05. Now it's like $2.99 (or whatever). This is primarily due to inflation as far as I can tell.
Likewise the same is true for Bitcoin, except that it has an additional feature in that it's transmutable into a pack of gum, or a share of JPMorgan stock, or a house, or a car, or some service. It's also transferrable - you can move it (again let's ignore how well it works right now) from place to place without having to actually ship it anywhere.
So because Bitcoin is transmutable like a Euro or Dollar it can do similar things, except the difference is that more Euros and Dollars are effectively "mined" and created, whereas there's a limit to how many Bitcoins can ever exist. So as more and more Euros and Dollars are created, you can spend more of those to buy the same Bitcoin.
Granted, this is very much at face value and some of the mechanics aren't quite there - it's actually very expensive right now to move Bitcoin around and it appears to make for a pretty bad currency, but I think this should at least touch on the mechanics or logic.
Prices don't rise 'due to inflation'. Inflation is just another name for price rise. This 'transmutability' you speak of is called currency. Bitcoin has some but very little compared to cash. Also the so-called 'deflacionary' nature of bitcoin, supposedly caused by the supply cap assumes a constant or growing demand for it, which is far from assured. Bitcoin only needs to collapse once to become worthless forever, there will be no cold re-start. Whereas precious metals don't need one. That, IMHO, is the crucial difference that advocates seem to forget.
Prices rise for more than one reason. For example marble is more expensive because it’s more difficult to find and mine than it was in the past (just a contrived example). But prices also rise due to increases in money supply.
I agree that Bitcoin is a poor currency compared to fiat currency, but conversely a dollar is a very poor store of wealth while Bitcoin is looking like it may be a good store of wealth. The confusion comes when you (not you specifically) don’t recognize that you can assess the utility and value of these “things” across various traits. Gold is a decent store of wealth, but a very bad currency. Stocks are great at producing and storing value and are highly liquid but awful currencies.
I’m not a Bitcoin advocate. I’m a neutral investor. You are correct in my view that if Bitcoin collapses it may become worthless forever. We have examples of this happening with fiat currency as well, though, so it’s not a unique trait of Bitcoin.
Diversification and asset accumulation are what I focus on. Bitcoin could turn out to be totally worthless. So could Amazon stock. So could GBP.
I agree with most of what you said, except that Bitcoin looks like a good store of wealth. It has a very short track record, and has shown huge volatility. How does that indicate a good store of wealth?
Well I would just mention it looks like it to me but that’s an opinion, not a fact. I don’t think it’s dissimilar to any other financial advice though. Like some people think Amazon stock is a good investment. I personally don’t. That’s all :)
I think there's some serious liquidity issues coming up ahead. You need a buyer at the other end to sell, and I think there's an unknown point where there are effectively no buyers.
Right now there are still plenty of crypto-bugs out there that will provide some liquidity because they think things will eventually turn around, but even these people only have so much cash. There's a moment where all of these unsophisticated investors (people that bought crypto based on the ads you're describing) will panic and want to cash out (or need to for personal financial reasons).
We may already be seeing the crypto equivalent of a bank run.
So much of crypto's "value" is based on the assumption of the future success. A big enough of a collapse in the belief in this future and it will be "trading" back at the levels when BTC was just a hobby project for techies (because that's what it will become again).
The problem is, when does bitcoin actually crash? I agree it is a scam and should crash in a sane rational world. But I’ve heard these exact arguments like 5 years ago. It’s the scam that just keeps going!
Eventually it has to end, right? What is the thing that makes it end? Or will it just fizzle out with no real implosion? Maybe after 10 years to most people it would be just a distant memory?
This is much easier to answer, at least in general, than many of the other "bubble" questions out there.
The growth simply requires a larger and larger pool of new investors. It first started with tech enthusiasts who were really interested in the principles of cryptocurrency and people who also knew how they worked. The was a time when everyone in crypto had read the original Bitcoin whitepaper.
Then it spreads to less savvy technical investors, people working at tech companies but not really able to understand it. This was the first bubble a few years back. The crypto boom could have ended here, relatively harmlessly.
But then a ton of money started flowing into the market and into individuals pockets as well. Suddenly the pool of potential "investors" opened up and crypto also appeared to be much more liquid than before with the rapid rise of crypto exchanges. This is when you start seeing TV ads for crypto and hear of people on reddit, with no technical knowledge or skills, pouring all their surplus income into crypto.
It ends when there aren't enough new "investors" to keep the illusion up, and it crashes as people start to need to liquidate that investment. During the artificial pandemic boom there was money flowing everywhere, people could throw tons of money into crypto and still eat and pay their mortgage. Very soon people are going to need to get that money out, or desperately want to, and then liquidity will be a problem because there aren't any people left to feed into the scheme.
The faster the price drops coupled with people needing that money, the more likely a panic is to happen which will cause a sudden crash.
> I’ve heard this exact argument 5 or 10 years ago. Yet here we are.
We've had an unprecedented boom period and non-stop money flooding the market for the last 5-10 years so there's no way possible the argument could have come to it's logical fulfillment in that period of time.
As long as money is flowing insanely anything is possible, there is no reality. Look at how many startups there are with non-sensical products, insane hiring practices and out of control leadership. When the money just pours in the top of the funnel all kinds of wacky stuff happens.
We're starting to reality come back, and I think it may bite us this time.
You said it for years… but for years there hasn’t been a trigger.
There’s a trigger now.
The FED keeps raising rates. There’s a looming recession (or perceived to be. Same thing.). Markets, incl crypto are dropping hard. Several crypto projects are suspending withdrawals, locking peoples money away. “Stable” coins are getting dépêgged, which is destabilizing DeFi.
We’re starting to see dominos start to fall. Your broken clock may finally be right.
I was bored and had $100 lying around when BTC was at ~$39k so I dropped it in the machine and have watched the investment go all the way up to $150... Checking my investment today, it's around $50...
It's not that bad for risking tiny amounts of money if you're into losing cash.
If you're into losing vast amounts of money, I highly recommend dumping your life savings into BTC.
So many large companies have their hands in creating the BTC/Crypto cookie jar that it's guaranteed to fail, it's promoted in every setting because it is their drinking money generator. The factor (they didn't account for) that added a ton of volatility was that independent (whale) investors like Elon would jump in and screw up the entire works with tweets and strategic buying and dumps... Meanwhile, it's all the small people who saw the commercials and though it was legit that totally got hosed.
It's literally the rich and corporations robbing the poor, and on top of that in one of the most dire economic points in time ever... It's the pits of humanity I tell you.
Bitcoins reason d'etre is to permit an exchange of value without involving the banks/classic financial infrastructure. It could go down to fractions of a penny and still be able to do that.
Energy expended to mine BTC in the past is a sunk cost and so is irrelevant to the discussion. In the future, if the price of energy required to mine a BTC is below the value of the BTC there will be an incentive to mine BTC. There is no equivalent incentive in the opposite direction. You can convert energy to BTC, you can't convert BTC to energy.
What happens if the value collapses bellow the point where it's profitable to mine it then? Wouldn't this only reinforce the collapse as miners flee the system? Then once it goes below a threshold where it would be trivial to attack it and take it over it's a free for all for the remaining market value and that would be the coup de grace...
Real question, has anyone actually developed an attack that could be executed? I know “what it would look like” is easy to explain, but is there any implementation?
I’m not sure we’re super susceptible to an attack. Assuming you could spot an attack on the network post-hoc (anyone can read the blockchain), if an attack occurred it would destroy the value of bitcoin. This would probably destroy the value of the attackers coins and the attackers mining rigs… which seems like a net loss.
If no one mines, the difficulty decreases to where you can mine on a laptop again. People will do it then, like they did at the start. A 51% attack is designed to be less profitable than just mining it. But maybe some gov does it to try to shut it down, well then, the chain gets forked and we go on with our lives. That's the point of everyone having their own node.
even if there is an energy cost, for some markets (illegal substances/darknet), it's "cheaper" to pay that energy cost than the cost of laundering fiat money.
> Crypto needed a tangible market/reason d'etre to be valuable.
The reason, as we have been reminded so many times, is that it's an inflation-resistant store of value.
Pay no attention to BTC tanking right after actual inflation started.
It's weird how, as an inflation-resistant store of value, it only seems to work when we have asset-inflation, but stops working when we have main-street-grocery-prices-inflation.
Perhaps it's some web 3.0 financial wizardry that I'm just not smart enough to understand, but it seems to me that the only reason it was going up in price was because printed money (USD or USDT) was chasing yield.
Please please please don't use Bitcoin for crime. The tx logs are public so you're much more likely to get caught. Use Monero, or if you're cashing out a defi hack or scam or whatever then use Tornado Cash. Hope this helps.
By rational, I mean the only time it is better than other methods. Buying legal things with bitcoin is slower, more expensive, dramatically more environmentally harmful, and dangerous to the consumer (no regulation). Truly no upside in real life applications unless you're trying to do illegal things.
(And before you ask, NO, there were no other possible ways for me to do those donations to people in war or purchase those stuff where crypto and PayPal were the only way to pay and PayPal is blocked in my corrupted country)
> Crypto needed a tangible market/reason d'etre to be valuable.
I have recently paid $40 for a $240 SWIFT transaction that I made on behalf of my father, as his bank (with most Russian banks) have been cut of from the world's financial system. Crypto is fulfilling a real need felt by many people all around the globe; it's just most of those people don't live in first world nations.
tbh, that example kind of underlines the lack of linkage between crypto assets' market value and real world use cases. A significant number of hitherto law-abiding, middle class and computer literate Russians who suddenly wanted to take all their money out of Russia and/or realised they needed a different way to continue to paying for services as their banks were hit with unexpected sanctions is pretty much the ideal real world use case for BTC.
But BTC actually fell in value sharply this year instead (and the spike in ruble/BTC trades was surprisingly small and short lived), because Bitcoin's peak valuation was more or less entirely unlinked to its theoretically increased usefulness for possessors of rubles.
I would prefer if Europe actually put in place oil/gas embargo and stop giving Putin's regime billions of dollars to wage war instead of blocking the people who have spent years protesting and are now trying to flee the totalitarian regime, but here we are.
The systems that execute the code for and track the values of stablecoins are themselves networks that only work because of consensus systems designed around a cryptocurrency incentive. So if you want to be able to send some large amount of USDC you need some small amount of ETH or MATIC or AVAX or whatever to pay for the usage of the shared ledger, and that's where these cryptocurrencies then get their underlying value.
Why would one expect Bitcoin which is more-or-less trying to disrupt the world order to be stable at this point in its evolution? Maybe in 20 years it'll be stable, but now? Sort of like saying that there was political instability in US following the revolutionary or civil wars and that therefore the US would never be a country that could be depended upon for international trade.
> I have recently paid $40 for a $240 SWIFT transaction
That is way more than it should be, but could easily be solved with traditional methods (banks & fintech) with some competition and sensible regulation (like SEPA transfers in Europe being basically free).
I recently had to pay nearly 100$ for accidentally data roaming a few MB abroad, but the conclusion is not that the internet and 5G is fundamentally flawed and need to be replaced by web3.
> Crypto is fulfilling a real need felt by many people all around the globe
Yes, the need to circumvent regulations regarding money transfers.
So, what you're saying is that sanctions are in place and you're unhappy about them ? sounds exactly like what sanctions are for, and all crypto is good for is evading sanctions that a massive part of the world has agreed in.
That is the point yes. We have collectively decided that assassinating heads of state was pretty bad, and moved on to applying sanctions, so that if they hit hard enough back, said innocent people do need to get rid of the leader or the system that got them in such a situation.
It was the same thing for football (or soccer, as you call it in the US) over here in Europe, at some time late last year I started to notice that a lot of European clubs were advertising for this crypto thing, much of it related to Binance. It so happens that most of the tokens “released” by those clubs (yes, they also did that) are 90% or more bellow their peak value, there were a few threads about it on /r/soccer recently.
Crypto is having it's DOT COM moment right now. A lot of companies with not much value crashed and never recovered. After the dot.com bust, the internet didn't go away, it only grew and grew. And, I don't have to tell you what happened to amazon, if you had invested during the dot.com bust.
I predict Matt Damon's career will suffer greatly in the next couple years. Being the face of that crypto.com ad that played 5(?) times during the super bowl and regularly thereafter in prime time slots. I think many Baby Boomers invested last winter based on these ads and will forever associate Matt Damon with a scam that cost them dearly.
Bitcoin Core (and most of the rest) have been digital ponzi scheme since around 2017 when Blockstream and other corporate interests successfully temporarily hijacked control of the "BTC" GitHub repo and inject the malicious code know as RBF.
This attack effectivly killed the number one and tititular usecase of Bitcoin, Peer-to-Peer Digital Cash.
99% of the industry is a fraud propt up by Blockstream's parent company Bitfinx and Tether. Only a few actual real projects (out of thousands of frauds) remain, namly XMR, BCH and maybe a few others. If you are "investing" in any other cryptocurrency or NTF you are participating in a convoluted ponzi scheme.
> As usual crypto in practice is the opposite of decentralized because people. Will. Not. Run. Their. Servers.
"My theory would be perfect if only I could convince humans to stop acting like humans," is the original sin of bad economics.
I would submit that it is approximately impossible to have a cryptocurrency that is simultaneously popularly successful, and has even a significant minority of its users owning their own wallets. Because only a fraction of a percent of the general public has both the skill and the inclination to do something like that.
There was recently an article posted to HN [0] about a startup founder doing this very thing, blaming his customers for behaving like humans.
>I was fighting human nature and losing.
>Everyone swears they will eat right and exercise, but most don’t. Everyone agrees they need to spend less to be financially secure later, but most won’t. Our users were telling us they would use ContractBeast to achieve those long-term benefits, but most weren’t.
>When I looked at the contracts the users were creating, I found most of them were ones in which a particular feature provided a clear and immediate benefit. Usually involving contract review and approval.
I read the article. He didn't blame his product, he blamed users for not utilizing his product to its full potential, and compared them with people who don't eat right and exercise.
Is that a failure of implementation though? I ask because you also said "impossible".
Computers themselves were impossibly unfriendly for so long. What if someone created a UX friendly cryptocurrency. Like any computer, deep down it could be insanely complex, but is it a requirement that the UX reflect that complexity?
The thing is user friendly UX usually creates user friendliness by removing the user's ability to control the product. For example, macOS vs BSD. The GUI makes it much more user friendly, but at the cost of limiting the user a bit more. Then again, perhaps there are exceptions.
Well not really. the parent I replied to specifically qualified it as users holding their own wallets. I agree that is a critical component. Exchanges are a bit of a farce from the perspective of "not your wallet, not your coins".
Like you say, exchanges that abstract this too much, for their benefit not yours, are probably distorting the original intent of a cryptocurrency. macOS doesn't have to hide all the knobs; they could have an advanced interface, which they do for some things. Why can't there be a wallet hardware/software that does the same? Is there something inherent that prevents this, making it "impossible"? Or is there just no business model around it, that can overcome the gravity of the kind of exchanges we have today.
For example, are wallet addresses inherently unmanageable?
Case in point: was an early adopter of Eth, mined many of the very early blocks. Sold it all back in February. One of the reasons? The whole Eth 2.0 upgrade requires both a base level node (Ethererum sanctioned) and a "2.0 validator node" where one is supposed to trust a 3rd party implementation with minimally 10s of thousands of dollars per stake. At least with a 1st party node the Ethereum Foundation stood behind it but now there is no official release backing the future of the project, only a spec.
How is anyone sane supposed to run their own servers in this case?
Shipping an endorsed EF implementation would undermine that requirement.
So instead, they publish and regularly update a spec, the major clients are all open source, to some extent the EF has sponsored the development of multiple clients, there is continuous interop testing between all the major clients going on, and the client teams meet at weekly EF meetings.
Ideally they would like to see client diversity in the execution layer as well (Geth et al), and consider single-client (Geth) dominance to be a weak part of the system.
Ethereum sanctioned, you mean Geth? Geth does not go away in 2.0. You will still need it, as it's still the main software that executes the transactions.
"2.0 validator" is not a node, it's more like a client that talks to the PoS chain nodes (Beacon).
Until there's an Ethereum Foundation backed validator, a huge number of people are going to stay away.
The Ethereum Foundation can do things like roll back a broken DAO. A 3rd party offering a potentially broken validator cannot force a fork to fix things.
It's also super weird the foundation is not building the validation code into Geth and making it a baseline part of a reference node as PoW certainly is.
Nope. The Ethereum Foundation foundation cannot do anything either.
Think of the foundation as someone like the World Wide Web Consortium. They research and lead the protocol(s) standardisation, but it's not up to them to do the implementation, besides perhaps providing a reference implementation.
I found this to be a very interesting feature, but yes, it's woefully inefficient, competes with efficient tech, and I'm not convinced it'll follow a Moore's Law trend and be a viable 286 replacement in 2035.
Are there any useful programs that aren't about creating or moving tokens or "play to earn" style games? (Which, to be clear, I do not consider useful)
Why would programmable money be useful for anything beyond financial engineering. It’s literally engineering + finance.
Why is financial engineering inherently universally without qualification bad?
I have a mortgage, an index fund, and an ATM card. I :heart: financial engineering.
I cited three examples of financial engineering.
Just to be clear you oppose mortgages, index funds, and ATM machines?
I agree all of these or at least mortgages and index funds probably increase inequality especially given uneven access. As far as tangible goods — home ownership, retirement savings, and less time spent waiting at the bank.
The first Master of Financial Engineering degree programs were set up in the early 1990s. The earliest financial engineers (under a different name) might have started around in the late 1970s. [Wikipedia - Financial engineering]
Mortgages were invented way earlier. ATMs are an earlier invention. If you use todays categories they would have been invented by automation engineers.
While index funds are a financial product they were invented before financial engineering became a thing. Financial engineers are not needed to run index funds. They are employed to out perform them.
"Financial engineering plays a key role in the customer-driven derivatives business — delivering bespoke OTC-contracts and "exotics", and implementing various structured products — which encompasses quantitative modelling, quantitative programming and risk managing financial products in compliance with the regulations and Basel capital/liquidity requirements."
And i am not alone with my distain.
"The financial innovation often associated with financial engineers was mocked by former chairman of the Federal Reserve Paul Volcker in 2009 when he said it was a code word for risky securities, that brought no benefits to society. For most people, he said, the advent of the ATM was more crucial than any asset-backed bond."
The term financial engineering is also used insofar as it is about the use of innovative financing and risk hedging instruments. In this sense, financial securities are first broken down into their basic elements, e.g. interest, repayment, currency, maturity, security, additional rights (»stripping«) in order to be able to evaluate them (individually) better. Based on this, new, optimal financial titles are created during »Replicating«, in which the modules are optimally combined according to the respective financing case.
The concept of financial engineering can be seen in summary as the design, development and implementation of innovative financial instruments and processes as well as the realization of creative, tailor-made solutions for investors and buyers
Super interesting and over my head but to oversimplif: automation and old financial “tools” (mortgages, index funds) good but (excessively?) “innovative financial instruments” is a bridge too far.
Still hard for people not deep in it — me — to see clearly that crypto doesn’t contain the seeds of a better index fund or a cheaper mortgage.
My definition: Financial engineering is the quantitative isolation and amplification of financial risk/reward, usually through leveraged/synthetic derivative products. There's no perfect source, but you can see similar definitions here [0] [1] [2]
To give you a crypto example of this, Aave is financial engineering, because it allows users to make a bet that they can execute high-volume short-duration trades that yield more than Aave lending fees.
In terms of what is financial services, my definition is: Any action taken that allows capital holders to better deploy their capital into the real (read: goods and services) economy. Again, no prefect source, but [3] [4] [5]
Again the key nuance here is financial services primarily focus on supporting the real economy, while financial engineering is primarily focused on risk/reward
And to be frank, I would absolutely love it if cryptocurrencies supported the real economy in literally any way shape or form. I would get "BTC4Life" tattooed on my forehead, I would dedicate my life to working for the innovators in the space, but unless you've got some secret, I don't think you can give me an example of literally anything cryptocurrency does to support the real economy that a centralized solution couldn't also do.
Strong parallels between your definition with “isolation” and that offered by freemint in terms of decomposition into elements.
The nuance makes sense on its face. Although I don’t trust my own judgement of what impacts the real economy and what is just shuffling of decomposed elements of risk and reward.
Not only you can make this up but it's literally happened hundreds of times in the history of cryptocurrency. So much that there is even a catchphrase for it: "Not your keys, not your Bitcoin". MtGox being the most infamous example.
> As usual crypto in practice is the opposite of decentralized because people. Will. Not. Run. Their. Servers.
1) Only a small percentage of the total Bitcoin supply is held on Binance.
2) Self-custody doesn't require running your own server.
Why is this the top comment? I don't know (but I have my suspicions).
I was there for it. I mined my first coins in late 2011.
Few people want to run their local node (server), few people want to point their wallet at their own node, and fewer people want to run code they've compiled themselves. If you aren't running your own node you are relying on someone else's.
As a mass adoption decentralized trust-less technology for transacting, bitcoin has failed.
That people are still getting burned by trusting major exchanges is hard to believe, and why you really can't make this up. It's stranger than fiction.
>(but I have my suspicions).
Yes, it is me. Jamie Dimon. Warren Buffett and George Soros are here next to me too. Bill Gates is on the way, and he's bringing chips and guac. We're all out to get those pesky crypto entrepreneurs.
I'd say you have a more black-and-white vision than me.
While it's not perfectly decentralized, e.g. some users do delegate their trust to centralized services for convenience or security, it is still more decentralized than fiat where (digital) self-custody is simply not possible. Decentralization and trust are a spectrum, not a binary. Even compiling the software yourself wouldn't get you 100% there [0].
I also feel that it's a bit early to call Bitcoin a failure but I do agree that it has a long way to go for mass atoption. Bitcoin is not disrupting the taxi or the hotel industry. It is disrupting the most entrenched and powerful "status quo" there is on Earth. We're talking about global banking, global finance, powerful governments, etc. Most people have no conception of what money really is or even that it could be different.
> That people are still getting burned by trusting major exchanges is hard to believe, and why you really can't make this up. It's stranger than fiction.
Surely you knew that Binance existed prior to this tweet?
> Yes, it is me. Jamie Dimon. Warren Buffett and George Soros are here next to me too. Bill Gates is on the way, and he's bringing chips and guac. We're all out to get those pesky crypto entrepreneurs.
My suspicion was simply that many HNers tend to reflexively upvote any comment that paints crypto in a bad light.
>I'd say you have a more black-and-white vision than me.
I definitely do. If a part of bitcoin's chain of usage requires enough trust to ask the government to intervene to protect me, why not just trust the government?
>My suspicion was simply that many HNers tend to reflexively upvote any comment that paints crypto in a bad light.
I think that many people agree with me, and that it's not some reflex, fud, or deception.
> I definitely do. If a part of bitcoin's chain of usage requires enough trust to ask the government to intervene to protect me, why not just trust the government?
I am not sure I understand the question, Bitcoin does not require trust or intervention from the government.
Your original comment is objectively incorrect in two different ways. It's not even remotely a surprising event[0] and most importantly, self-custody does not require running a server. Therefore I maintain my suspicion but enjoy your upvotes.
>It is disrupting the most entrenched and powerful "status quo" there is on Earth. We're talking about global banking, global finance, powerful governments, etc.
Quite the opposite. It's getting disrupted by rich, powerful people, who are rocking it as hard as they can to disabuse common people of the notion that they have any alternative.
meanwhile anybody who has their own keys is able to transact with it as per usual. “not your keys not your coin.” holding keys are not trivial but far simpler than running a server, better analogy might be to do with people not wanting to stake with a validator because it’s easier to use a centralized staking service.
Transacting with it is one thing, withdrawing into fiat is quite another. Let's not pretend that most people holding BTC are holding it to buy goods and services rather than as a speculative vehicle.
Sure. many of those speculators will be forced to wait for Binance to resume BTC orders, or use another centralized exchange, or use a bridge to swap BTC to another crypto asset..
Edit: swapping BTC needs a centralized bridge as child commenter notes
Unfortunately there is no decentralized exchange for BTC. There is no smart contracts on BTC so you have to somehow bridge it to something like Ethereum before you can swap it. And to bridge it you have to rely on some centralized party, such as WBTC. (I know renBTC but it's unclear who their validators are so I'd just assume it's centralized)
Not true, BTC does have smart contracts. They called it op-code and most people don't use it anymore, but me and my friends built a poker game and we play every Thursday.
The original wallet download also had a poker game, but they decided to take it out after a while to ensure btc wasn't labeled as "Gambling"
Leave it on an exchange and have access to customer support, etc in the event you get locked out of your account or whatever.
-OR-
Be the next news story of the person who messed up the transfer, forget their seed, etc. The entire blockchain ecosystem is still so incredibly difficult to use with bad UI/UX on top of it that this is the more likely outcome for the vast majority of people.
If all the exchanges lock users out, you can “transact” with BTC But can you convert it into US dollars? Where does one spend BTC these days, buy some furniture off overstock?
Pawn shop? Or maybe at a supervillain's lair, where sellers are known to accept briefcases full of gold.
Usually you need to convert your gold to a legal tender currency in order to be able to spend it. You normally lose money on the conversion at a retail volume, though.
Does it even matter? What is interesting and actually-important is that it is even possible. Just because most people do something dumb doesn't mean we should throw up our hands in defeat and build systems where it isn't even possible to do something smart.
It matters very much who the owner is of the currency you are saying can be transacted. If a large chunk of bitcoin adopters don't own the currency, can't transact, and can't withdraw into fiat, what do you have exactly? Just a theory that this could work if just everyone played by a very specific set of rules.
I honestly don't understand how you can possibly come to that conclusion, and in all honesty that people like you exist is part of why tech is so demoralizing these days. If a large chunk of Bitcoin adopters--or smart phone adopters or Internet users or ANYTHING--don't know how the technology they are using works and put themselves in a bad situation with it, it simply doesn't mean that the technology doesn't work... it just doesn't; and it certainly doesn't mean we should just give up and re-centralize everything. If you build something that can't be used wrong--or hell: that most people who aren't trained don't use wrong--you probably built something evil :/.
The fact that you don't understand means that you are looking at this through some very rosey glasses. The principle of blockchain and decentralization is fine, but we've come full circle where the easiest way to access and track the only marginally useful implementation of blockchain is through a centralized service. So far, the biggest headlines from blockchain and bitcoin have been fraud.
The biggest adoption came when people saw that money (fiat) could be made off of "investing". Bitcoin is a clown show. Blockchain, while probably useful, just doesn't seem to have any truly great applications yet.
Alternatively: Many people will not pass an opportunity of a "risk-free" 20% APY. (Not sure if Binance in particular is paying interest on deposits, but many exchanges do, as far as I know.)
Also, how are wallets the same thing as servers? That analogy seems a bit stretched.
If people spend the time I think you could learn the "details" - but even knowing the difference between running a node and a miner and server and what a wallet is and the keys associated with it, etc, even knowing and doing all that - it's still a hassle and more expensive! If you "trade" bitcoin inside an exchange and not on-chain, they don't have to pay the chain fees and therefore don't have to charge you to cover them.
It's the same with email - it's actually relatively easy to run an email server even with all the issues; but the spam and deliverability issues are enough that basically nobody except the "true nerds" bother. I suspect most people on HN could run their own email server on a $5 node, but don't bother.
Anybody who thinks 20% APY is risk free is asking for trouble. S&P gives you an average of 6% a year so getting to 10% is hard and 20 and above is probably a scam or has extreme risk.
Of course they are not. What the author means here is that people create wallets without owning servers, so they are in fact delegating chain verification to thrid parties like Etherscan, rather than by themselves. This is effectively centralizing the crypto on a few entities.
Exactly, thank you. Generally, wallets need to connect to nodes, and nodes are servers. People do not run their own nodes, they connect to existing ones.
Nobody wants to download the blockchain on a desktop, start up a node, write their keys in a note pad, and configure their phone’s wallet app to point to their new locally hosted node.
God help you if you didn’t even compile your node and wallet app yourself.
Anything less than that involves trust
At least with Fiat if someone running my local Chase Bank branch siphons money out of my account, I can trust that a guy with a shiny badge will walk over with a baton to beat them up.
And more importantly there's a whole procedure for Chase to make you whole, and if Chase itself fails, FDIC steps up, and if they fail, the Fed steps up, and if they fail, the US will nuke someone.
I saw a finance TikTok of someone advertising how they were able to afford a $1M+ home by essentially having crypto interest cover payments. This video was taken down a few weeks ago (lol).
The point that Moxie was making at the time was that, pragmatically, most users would end up not doing this. Just as most people share their thoughts on Facebook or Twitter and not on their own blogs, and if they do have their own blogs they don't run their own server, and if they do it's a virtual machine on Amazon's hardware.
So something can be theoretically capable of enabling enormous decentralisation but actually not have that effect at all.
People look at decentralization as an ideology rather then a threat model. The security you might implement to protect $100 vs $100k vs $100 million is different. Running your blog on AWS is running your own server in a decentralized sense; but if your threat model includes Amazon shutting you down or something like the US Govt/public compelling Amazon to shut you down then it might not be good enough. Which is why Target, Walmart, Parler (assuming that's still true) don't run on AWS. Any threat model is about mitigation and acceptance of risk. Easiest way to secure a database/system is to isolate it from the internet and let nobody read/write from it; probably wouldn't be a very useful system for most usecases but something you might do for the nuclear weapons arsenal.
Centralization vs Decentralization is a similar concept to closed source vs open source. Just because the code is open source doesn't mean that people are going to download the source code and compile it themselves. The option to fork the codebase is also there. Neither of those options are possible for a closed source project. And to your point, the fact that a project is open source might not "actually have any effect at all". Doesn't mean the concept is inherently bad.
> The security you might implement to protect $100 vs $100k vs $100 million is different.
This almost makes sense, except that you have to take into the relative value of that amount, in particular relative to one's total net worth. If I want to protect $100, and that is all the money I have, I'll worry about security a lot. If I have $1,000,000, protecting $100 is not a priority.
The general assumption is that people put all of their money in one place, which is not true for anyone I know -- poor, middle class, or rich. Everyone has cash, bank accounts, various physical valuables, stock, etc.
It could be absolute and/or relative depending on the mechanisms. Relying on FDIC insurance to protect $1 million in a bank account is probably not a good idea.
Hm, I am not quite sure I understand. Are you saying that people should not have the ability to withdraw their USD into cash either? Cryptographic currencies are exactly the same thing imo- they are not meant to replace trusted third parties in the traditional sense, they are just the digital equivalent of cash. A cryptocurrency wallet is far closer to a physical object than being a 'promise' from networks of trusted authorities. Apples and oranges.
If this is true, crypto is dead in the water and always has been. It's not hard to understand that people are simply not going to go through that trouble in order to own something.
They absolutely do not. They put their savings in an account held by a centralized 3rd party (bank) with the backing of government-guaranteed insurance (FDIC).
Maybe some people store cash or gold in a secret place but that is the exception.
I think it's because bitcoin trading can't actually use the network - it's too slow and expensive.
So the exchanges and the stable coins are used as a proxy which then means that they are disconnected from the actual currency. This means that there is an amplifier (leverage) on the way up, leading to spectacular bull runs.
Crypto trading on exchanges never uses the network. You send your crypto to an exchange on-chain, and all trading happening on the exchange then is off-chain: just adjustment of a few positions in the exchange's databank (as it should be: quick and efficient, within a centralised trusted institution).
"Not wanting to run your own server" is not the primary issue. People might run their own servers if it was as easy as running a Mac or a smart phone.
People hate manual IT and system administration. They will sacrifice money, freedom, privacy, control, even ownership of their own works to avoid having to futz around with that stuff. They hate it that much.
(There are a small number of people this doesn't apply to. These are called enthusiasts. There are also car enthusiasts who like to change their own oil or even rebuild their own engines. We are talking about 99% of the market here though. Enthusiasts are a small niche.)
It's easy to understand why if you count time as money. Lets say you value your time at $60/hour, which is probably on the low side for people here but lets be conservative. Now lets say you have to spend three hours a month messing with your servers. That means it's costing you $180/month or $2,160/year. That doesn't count the additional cognitive load of having to worry about it or the inconvenience of something going down and needing attention at an inopportune time.
If those issues were addressed, you would see more people running their own servers. Unfortunately the "ease of use is for stupid people" meme goes way back in tech culture:
^^^ This is why FOSS has never crossed the chasm. It's a cultural problem.
Another contributing factor is the love that some developers have for complexity. They see complexity as a sign of intelligence. It's not. Simple systems are far more difficult and require much more intelligence than complex systems.
That’s why ultra light clients are important. See Plumo and Mina where you don’t need to run a node to interact with the blockchain in a secure way (you get cryptographic proofs of the latest state)
> As usual crypto in practice is the opposite of decentralized
Binance is a centralized exchange. There are both centralized and decentralized exchanges.
> people. Will. Not. Run. Their. Servers. Moxie nailed it
People don't need to run their own servers. They just need to use a light client which is even light even for mobile and browser extensions https://eth.wiki/concepts/light-client-protocol Light clients existed before Moxie's post
The only problem is adoption of secure practices by popular publishers, like Metamask.
Side note: Opensea isn't decentralized either, its a centralized NFT exchange.
Can you explain your comment a bit more? How does Binances' actions affect Bitcoin users who don't use Binance? And how do you arrive at your comment from this tweet? It doesn't say or imply how many people are using Binance.
Futhermore, people who use Binance might also use a number of other options.
Sure thing - once again people were unable to move around their coins due to depending on a tool hosted on someone else's computer.
We've seen this many times, and it's a shame because letting another party manage your wallet or run a node for you defeats what I find attractive about bitcoin - the ability to be a peer in a decentralized peer-to-peer system.
If Binance went under in that time, people would have simply been screwed and lost their coins Mt.Gox-style.
Bitcoin only achieves it's decentralized promise if everyone hosts their own node and connects their wallet to it, and I'm personally not seeing that.
Why don't people run their own nodes and connect their wallets to their nodes exclusively? Because it's a pain, and nobody wants to host their own servers. They'll pick gmail over a mail server 99% of the time, and that is bad for the promise of bitcoin.
I would wager most/all cryptocurrencies have similar problems.
Moxie's web3 blog touched on this, and he nailed it.
Having your own keys and using a wallet application that connects to someone else's node is better than keeping your coins on an exchange, but you're still relying on someone else's node to not screw you.
Compare the meager 16k nodes people trust with the 100 million who claim to own bitcoin.
Oh, I see what you mean. I own BTC but don't run a node.. so your point is that I am dependent on other people running nodes? It's a good point alright.
All monetary systems are built on trust. You can say the same thing about a run on traditional banks, which only have a fraction of reserves to cover deposits and would result in similar price depression.
False. Fiat monetary systems are built on a state monopoly on violence. Trust is merely a byproduct. You are required to pay taxes in the local fiat currency, and if you fail to pay then the government will eventually seize your assets by force, or perhaps put you in jail. This is a feature, not a bug, and it generally works fairly well in practice as long as the government is at least minimally competent.
The original purpose of money is seignorage, the difference between face value and actual value of the currency. It doesn't get better then printing hundred dollar bills that get out of circulation - almost pure profit.
Taxing in kind is way better, it's inflation proof.
"generally works fairly well" - I agree with this, but I doubt we would agree at what it does fairly well. In the fiat systems the people with the most coins can issue themselves more coins on a whim, thereby devaluing all the other coins held by the poor. This too is a feature, not a bug, and it works really well for all the people with the most coins. They get to slowly and consistently extract wealth from the poor without having to do any work.
Poor people don't hold coins (or really any significant assets), by definition. They live paycheck to paycheck. We should find ways to increase economic mobility for poor people, but cryptocurrency isn't going to help.
Do you think constantly applying downward pressure on their wages and whatever minimal savings they might acquire through inflation could have something to do with economic mobility? The Fed Chairman recently complained that workers had too much power in the market (because they were demanding higher wages) and stated openly that he was going to create policy to stop that.
I really encourage you to think about what that means, and if you didn't know he said that, what it means about the places you get your news from. Why would it not be one of the biggest news stories of the year that one of the most powerful men in the world stated he was going to reduce the power of the worker?
No I don't think that moderate fiat monetary inflation has any negative impact on the economic mobility of poor people. Rather the opposite. Poor people don't really have enough savings in the first place for inflation to make a difference one way or another. Their "assets" are generally in the form of job skills and social capital, plus possibly a car or family home purchased on credit. None of those things are devalued by money printing.
I don't think you've actually thought this through at all and you don't understand even the basics of how it really works.
When the money printer prints, the people who touch the money first get to spend it before inflation fully comes to fruition. They use that money to scoop up and raise the costs of assets, which the poor never get to slowly accumulate. Meanwhile, wages always lag price inflation, and wages haven't kept up with inflation for the last 40+ years. Inflation is a slow, exponential wealth transfer that happens a little bit every year.
You also didn't address my specific question about fed policy when the Chairman himself said he was going to tip the balance of power away from workers. Do you believe the fed chairman doesn't understand economics?
What is Moxie? A regional beverage that is the origin of the word, now the official soft drink of the state of Maine: https://en.wikipedia.org/wiki/Moxie
You're welcome to try and claim that, but the sheer success of Signal and Moxie's approach is proof you're arguing in bad faith.
Privacy and anonymity are not the same thing. Signal foregoes the latter to provide the former to a much wider range of people; foregoing the latter enables substantially better usability for non-technical people.
Eh, look at the full timeline. When MobileCoin stuff was happening, when Moxie left Signal, and when he posted the Web3 criticisms.
I've been using Bitcoin since 2009, and RedPhone/TxtSecure (Now called Signal) since 2010, and I still have zero clue how I'm even supposed to obtain MobileCoin. It's really a toy project at this point with no real adoption.
Being able to send money via a secure chat network is a super important utility that is currently under-served in a big way, but MobileCoin itself is basically a whitepaper and a bunch of toy code that has a novel re-implementation (in rust) of Monero as a stableishcoin, which, last I checked makes it completely incompatible with the rest of the blockchain ecosystem.
They are making zero effort to shill, or push MobileCoin in any way, and neither Moxie nor anyone on the team stands to profit greatly from massive MobileCoin adoption.
It does not matter. We know it is another scam coin, the fact is the crypto wallet is still in the Signal app. If it is a 'toy' project why didn't they remove it already after years of developing it in the first place?
The CEO of MobileCoin already admitted to using MobileCoin to fund Signal [0] and Moxie being the original CTO and paid advisor of the coin as mentioned in the article; also meaning he was a paid shill and part of the scam.
They already made the effort to create, shill, and then dump the tokens as soon as it was listed on the exchanges. The fact that Signal already accepted the tokens in the first place tells us that they were most certainly involved from the beginning and were part of the pump-and-dump scheme of the token.
Since MobileCoin was pre-allocated with them owning over 50% of the supply with that being the only supported token on Signal tells you that both Signal, Moxie and MobileCoin are all complicit in the scam.
The only reason the price went into the stratosphere was the millions of speculators using custodial wallets. So it seems that many (likely most?) users didn't actually care about the "feature" of being able to self-host - what they actually wanted was a higher yielding bank account. Hence the reason so many people don't really believe it has much of a future as a fiat replacement.
Its like a list of all the small shop money exchanges that exists. But it doesn't mean its decentralized. It also means you always need a trusted third party for the exchange.
Wasn't crypto about going rid of those trusted third parties?
No, I mean actual decentralized exchanges. They are applications running on the blockchain. There is no owner, no physical location, no entity controlling access. All you need to do is have a crypto wallet and execute the contracts.
Yes. You can trade one of the many ERC-20 tokens that wrap bitcoin (e.g, WBTC, renBTC) and later you can swap these tokens for "real" BTC, also just by executing the smart contracts from the wrappers.
Thanks. Do you have some good link to explain the mechanics, particularly the "unwrapping" of eg. WBTC? That involves a trusted third party, doesn't it?
> That involves a trusted third party, doesn't it?
For most cases, yes. Binance, Gemini and some others provide a version of their token that can run in multiple chains. It's supposed to be 1:1 backed by BTC, but you have to trust them fully.
It's a little bit better for WBTC [0]. WBTC is a consortium of 30+ crypto projects who keep the BTC under their control through a multi-sig wallet, and that can be audited on-chain. In this case, the majority of the signers would have to conspire in order to steal the funds or do anything malicious.
renBTC is even more decentralized. It is part of the ren "network" [1], which provides inter-blockchain applications. I haven't looked yet how it works exactly, but my understanding is custody of BTC happens though a proper dapp. Last year I wanted to get rid of all my BTC, and I did it though ren. It was BTC -> renBTC -> DAI.
Now that is hyperbole. There are still good actors out there. Monero is doing its job dutifully. Don't know much about Zcash, but it seems to be doing well.
What is its job? How often do you think goods and services are paid for with Monero? How often do you think the coin is used purely as a speculative asset?
Being what Bitcoin was supposed to be. Minimal transaction fees, maximum privacy, no need for extra layers.
It's certainly used far less often for small-scale, personal transactions. Businesses mostly don't support it yet. I'm hoping that will change. The only company I do business with that supports Monero is Mullvad, and that was only a recent addition. The media is certainly doing a good job of pinning the "Monero = bad guy naughty money" connotation to it. That connotation means it's doing its job though. If organized crime thinks it's secure and private enough, then it's definitely good enough for me.
I honestly can't answer the speculative asset usage part with any empirical evidence, but it seems to be used speculatively no where near as much as Bitcoin and Ethereum. I don't see crypto hype-guys chanting "MO-NER-O!" at all really in comparison to the other two.
> There are still good actors out there. Monero is doing its job dutifully.
I don't crypto, but, isn't monero the coin whose primary intended use case is enabling illegal transactions by rendering them untraceable even to the police?
Are ... we calling that a good actor? Or do I just misunderstand what they're for?
.
> Now that is hyperbole.
No, it's not. Hyperbole doesn't mean "thing I don't agree with" or "thing I believe is wrong."
The person speaking very clearly wasn't exaggerating and very clearly meant themselves to be taken literally.
As I see it, if any crypto wasn't a scam, crypto fans would have long since agreed to give that thing as an example. The fact that the entire "industry" can't come up with a single compelling example, a decade and a half and twenty billion dollars in, is about as clear and obvious a proof as is actually possible.
If you are saying 'ALL crypto is a scam' this also includes all and any crypto offerings by any company. Stripe, Coinbase, FTX, Binance, Moneygram etc are included. Not to mention the 'DeFi' space as well.
They are merely facilitating, participating and offering the services in the crypto scam no?
Stripe went in to Bitcoin, exited Bitcoin, then invested into a shitcoin called 'Stellar' and went back into crypto again supporting crypto exchanges like FTX, NFTs and offering crypto payments with 'Polygon'.
That is hardly getting 'suckered in'. I would argue that they are 100% fully complicit in the crypto scam.
Since we agree that 'crypto is all a scam', it should mean that Stripe, Coinbase and all the other companies that have crypto operations should be called out for their participation in the scam and they should immediately shut down their operations since 'all crypto is a scam' right?
Stripe and Moneygram have a business model that can exist outside of crypto. The others you listed enable people to be scammed. I won't go so far as to call them a scam company themselves.
We both know that Stripe are actually fully involved in the crypto scam.
They have a crypto division that will be used for crypto payments and NFTs. They also invested into a crypto token called 'Stellar' back in 2014 and said nothing since on the matter.
Plus the CEO of Stripe advises Stellar. [0] Moneygram is also working on the scam as well with this Stellar token.
I don't know about you but it seems that both Stripe and Moneygram are complicit in the crypto scam the same way that the crypto exchanges are.
Also you said 'ALL' by the way so this means no exceptions.
> Stripe and Moneygram have a business model that can exist outside of crypto...I won't go so far as to call them a scam company themselves.
Contradicts:
> All crypto is a scam.
As you are trying to legitimise both of them of having a 'use-case' for their crypto offerings, holdings, etc which regardless of their business models and what they do as companies, it is still all a scam.
If we agree that both Stripe and Moneygram are fully involved in the scam by having heavy involvement in crypto offerings, holdings, etc, Then yes. They are a scam as well as everything they are offering is as well. No exceptions.
No it doesn't. You're making a lot of mental leaps that I'm not able to follow. Those companies existed and were profitable BEFORE crypto. They don't NEED crypto. They're NOT CRYPTO COMPANIES.
I'm going to politely bow out of this debate, this isn't a productive use of time.
In case you forgotten, you said: 'All crypto is a scam.' [0]
That means everything including anyone who is using it, or has holdings or are insiders which includes Stripe, Moneygram, Square (now Block) and especially Signal who are still directly involved in the entire scam. All the ones I've listed either got no backlash or did have some but never removed their crypto products, which certainly still makes them fully involved in the entire crypto scam as they continue to offer it.
Trying to give exceptions to companies like Moneygram and Stripe, Square, etc is legitimising their crypto offerings as a 'use-case' which contradicts what you said with it all being a scam, since we both know what they are offering is nothing but still a scam which they are all involved in.
There is no mental leaps here, No exceptions or any use-cases with that statement. If another commenter got the point straightaway [1], it is not hard to recognise that.
Days like today, when price volatility – and thus transaction volume – is high, are exactly the kind of days you'd expect systems issues to manifest. As opposed to some random Thursday where no price action is happening.
To actually withdraw Bitcoin like this, you'd have to bridge your BTCB to WBTC on Ethereum, and from there bridge it back to BTC (using a custodial bridge, AFAIK there are no WBTC/BTC decentralised bridges)
You'd eat 2 sets of fees along the way plus gas, probably costing you 0.3% or more
Holding crypto on an exchange is like giving money to a guy on the corner who knows a broker to put in the stock market and telling them you don't need the account numbers, you trust them.
If you're going to do crypto, get a wallet setup where you have the keys to it.
There's two counter points to this. The first is that in terms of day to day likelihood of losing the bitcoin, you're probably generally safer with an exchange than holding the crypto yourself. Secondly, if the exchanges actually do collapse, then whilst you won't lose your BTC if you're not on the exchange, your BTC are probably going to be worth a lot less anyway, so you're still exposed to the risk of exchanges collapsing. If you're the average joe who has bitcoin (you probably shouldn't have bitcoin) but using an exchange isn't crazy.
> The first is that in terms of day to day likelihood of losing the bitcoin, you're probably generally safer with an exchange than holding the crypto yourself.
> Secondly, if the exchanges actually do collapse, then whilst you won't lose your BTC if you're not on the exchange, your BTC are probably going to be worth a lot less anyway
This is nonsense. Hundreds of Bitcoin exchanges have collapsed over the last 10 years.
> if the exchanges actually do collapse, then whilst you won't lose your BTC if you're not on the exchange, your BTC are probably going to be worth a lot less anyway
I hear this repeated often. Very short term, sure. But long term, shouldn't your slice of magical internet money pot be worth more simply because there's now less of it in total?
Practically speaking, coins proven stolen from a CEX are "blacklisted" on most of the other exchanges where crypto interfaces with fiat. If you happen to come into possession of coins that originated from a "blacklisted" address, you will have to prove that you obtained them legally.
So yes... a majority of stolen coins are for all intents and purposes, "burnt". Will the major exchanges care about coins stolen from a CEX 10 years ago? Probably not, but I guess we will cross that bridge when we get to it.
Of course, it is possible to "tumble" these coins, but it's an arms race between criminals and chain analysis, and while they can evade the analysts in the short-term, the crime is recorded in a distributed ledger for eternity allowing near unlimited opportunity for future review.
I keep being told by maxis that P2P crypto->fiat is alive and kicking. Looking at recent hacks (Axie, Crypto.com, etc) seems like tumbling is quite doable too.
It is surely seems crazy to me as long as these exchanges can withhold your money - which brings me to the question how this practice could possibly by legal. Is it in the contract of these pseudo-banking services that they can withhold their clients' money whenever and as long as they wish? Why would anybody agree to such a contract?
Because people aren't reading the fine print. They just assume it's a better bank until this happens.
While this might change in the future, I would guess bitcoin isn't technically money. It's more like a gift card some people will exchange for real money.
But even a gift card has more protection than crypto lol
Generally safer with an exchange I would disagree with, you’re at the whim of whatever is in the TOS for that exchange, it’s not a bank or securities broker. If you’re relatively good with keeping secrets/passwords then setting up your own wallet should be easy.
It seems like exchanges kind of are counterintuitive for a decentralized financial product (for holding your crypto). One could argue that exchanges that fail when people are selling off a lot of volume might not have a good business model. My naive brain thinks an exchange will make money on transactions so it shouldn’t matter if the exchange from crypto_bucks to USD is different. If volume falls drastically then maybe your operating costs are too high?
> Holding crypto on an exchange is like giving money to a guy on the corner
I’m sorry, what?
A CEX /should/ be comparable to a brokerage like Charles Schwab or even Robinhood. This comes with legal protections - they can’t gamble with my unused money or invested stocks.
Also, and this is the most disingenuous part - how do you buy crypto with fiat? Literally everyone I know uses a CEX to on/off-ramp, and sadly this is widely seen as an acceptable evil.
Sure, that’s technically feasible if you’re willing to pay all the greedy fees.
Here’s how it looks for me using Coinbase:
- On-ramp (fiat to CEX-fiat): 0.15€ flat
- Conversion (CEX-fiat to CEX-crypto): ~4%
- Self-custody (CEX-crypto to wallet-crypto): Depends on coin, average ~10€ flat
And if I want to off-ramp, I need to follow all these steps in the opposite order.
Meanwhile, atleast in the non-US countries I’ve lived in, all fiat transactions are free. I can top-up my bank account, send digital money to others, withdraw fiat, etc etc with ZERO fees.
Holding BTC for the long term has historically been a lucrative investment. Just not holding it on one of the many centralized exchanges that always seem to get hacked or go bust.
It's not a "lucrative investment". It's a bigger fool scam. The only way to make money in BTC is for someone else to buy in for more than you did originally. It makes it appear as if BTC's price is always going up, but in reality the number of fools is limited - especially with the buy-in getting higher and higher.
Sure, the price will always go up in the long run. But it will become less and less liquid, and at some point those who are left will have hundreds of thousands or millions of theoretical money that's completely unspendable, because no-one else will buy in for more than they did.
> The only way to make money in BTC is for someone else to buy in for more than you did originally. It makes it appear as if BTC's price is always going up
I'm not a crypto expert but that statement seems incorrect to me, since as far as I know BTC has deflation built into it. The more is mined the harder it is to mine more. So as long as investors are keeping some trust in it and are not selling at large scale, the BTC value should continue to go up in the long run (ignoring smaller fluctuations). That's why people have been flocking to it in the first place.
The person you're replying to was very careful to say "has historically been a lucrative investment". They have not claimed it to be a lucrative investment right now.
I can list a number of valid, real-world use cases. Bitcoin can be easily held either online or offline, in a number of solutions ranging between paper wallets, through hardware wallets, to dedicated laptops.
Holding bitcoin on exchange is like giving people the keys to your safe because it is easier if they can open the safe for you while you gamble.
I dislike cryptocurrency, generally, but plenty of people hold their own keys. It's rarer, now, but that's because mass consumers are generally stupid, not because the technology is flawed. If you can do the correct thing, and you choose not to (or just are ignorant enough to not do the correct thing), it's kind of your fault.
I still think we should legislate it, but let's be honest: Most people who lose, here, kind of deserve it, for not doing the bare minimum of research.
This doesn't have much to do with people being stupid. If you want to trade more than once a month, you pretty much have to keep the funds on an exchange. Otherwise transfer fees would kill any profit you made. If you're not trading often, you may still want to take the risk due to free in-exchange transfers.
Sounds like the problem's with trading, rather than using it like currency. I've used it for legal, in-person transactions just fine. There are also decentralized exchanges, but the peanut gallery and the incompetent masses would hardly know about them.
Shockingly, "get rich quick" schemes are a bad idea. Who would have thought? Oh, wait. Everyone.
I still think most cryptocurrencies should be highly legislated, because most adults in society are more or less children who can't be trusted around shiny objects, but we should really stop pretending the problem is with the technology. It's with the users, trying to shoehorn it into a use-case it's unsuited for (get rich quick schemes).
> Sounds like the problem's with trading, rather than using it like currency.
The context here is an exchange limiting withdrawals, so... Yes, exactly?
Decentralised exchanges have massive fees in practice. If you want to buy in and cash out after a year, sure. But show me one that takes <0.1% for the whole transaction including transfer/signing fees and supports BTC.
That doesn't mean people aren't stupid, in contrast to what you implied in another comment. Unwittingly day-trading cryptocurrency is stupid, and the people who desire to do it are not very smart.
That said, I do know a decentralized exchange that fits your criteria. I'm not going to mention it, because I refuse to enable such incredibly harmful behavior.
i believe eth (just like bitcoin before) has chosen 2nd layers as a primary scaling solution. which obviously affects compatibility of code across different 2nd layers. basically we are talking about futures years ahead.
so, either trade on exchanges with Lighntning or pick the one at least in jurisdiction that gives you some kind of protection like if you held money for any other service / broker.
real crypto works just fine for millions. it is not problem of crypto that there are people falling for ponzis (not refering to Binance now). also, even quality of cefi exchanges like binance, coinbase, kraken, bitfinex has been outstanding in recent years so really, not sure what are we even talking about here. you get much more often blocked by credit card company or bank because of suspicious nonsense they dont explain.
sure they aren't the problem of crypto because they're a feature of the surrounding ecosystem not the underlying implementation, but when the ecosystem gains the reputation of a scam filled hellscape and most of the value and "use cases" is tied up in artificial hype - that has to pose some amount of worry in terms of future regulation and adoption does it not?
i really hate this analogy but if you want to avoid scams avoid internet. crypto, for whatever reason is treated as special while most are commited with all sorts of hacks or social engineering.
on the other hand i do recognize this is an issue but imo the only thing you can do is education. crypto has valid unique amazing usecases and it enables things that were not possible before.
I'm still waiting for the actual bitcoin infrastructure or algorithm to break. It's been 10 years and a trillion dollar network.
Just because exchanges fail, and there are shitloads of scams, doesn't mean the underlying technology isn't super interesting and can actually grow into something amazing in a few decades.
A few decades from now, the underlying technology will still be super interesting and will still have the potential to actually grow into something amazing in a few more decades.
Satoshi was an excellent C++ programmer but s/he wasn't quite good at creating GUI and "Crypto" consumer apps that's why s/he open sourced it and left it to the community to build upon it and expand the Bitcoin ecosystem.
Btw at the time Bitcoin was in the experimental phase and Satoshi left the Bitcoin community pretty early that's why "Crypto" was user hostile and maybe still is.
Satosh was NOT an excellent C++ programmer. As someone who heavily dug into bitcoin code, the whole thing was a mess from the beginning. Poorly architected. Insane amount of global variables. It was just a huge mess and still is.
IMO it was initially written by someone deep in government (but I have no proof, just my opinion from looking at the code).
I'm not a programmer but that is what Gavin Andresen said[1]; he said something like this "Satoshi was an excellent C++ programmer but he wasn't a cryptographer" and "Satoshi wasn't familiar with Cryptography 101" in a sense that Satoshi was sometimes mixing up basic cryptographic concepts.
And yea I know Bitcoin had plenty of bugs I heard of notorious Value overflow incident[2].
>IMO it was initially written by someone deep in government (but I have no proof, just my opinion from looking at the code).
My assumption is someone from the academia e.g. university professor. Maybe someone who was teaching freshmen basics of Computer Science and basic C++ programming then your point might be valid that Bitcoin's codebase was poorly written looking from the practical and from the professional point of view.
The point is you store your crypto on a non-custodial software wallet (Metamask) or a hardware wallet (Ledger Nano) and not on an exchange, so it cannot be 'held hostage'.
It is not your keys, not your coins if it is on an exchange which uses custodial wallets, but doesn't apply if it is on a non-custodial wallet.
Thanks for highlighting the bad UX of crypto currencies, as it provides a nice segue into the financial danger that UX causes, as it creates customer-demand for simplifications that exchanges provide – so every time an exchange does something rugpull-ish we're actually testing how much of crypto's market-cap is based on maybe not-so-sturdy confidence of retail investors...
This is great if I want to store it, or spend it on places that accept Bitcoin (or other coins) but what if I want to exchange it for another currency? Seems to me only two options, an exchange or a face to face trade?
So crypto is fine for transactions that I can wait a few tens of minutes to a few hours to resolve, but not ones that I want to make at the rate of every fiat currency I hold.
I can see how other people would have that use-case.
You do understand that proof of stake has absolutely nothing to do with transaction speed or fees -- speed depends on how many nodes you want to agree on any transaction (decentralization) while the fees depend on how congested the network gets in an open pricing model for fees?
Unless you are a crypto expert in it for the technology, that you happened to learn from random shiller YouTube videos.
Exchanges allow for sub-second resolution of a transaction because the resolution is actually pushing numbers around in the exchange's own internal tables (or between trusted exchanges). Banks offer similar service when trading fiat currency (either because they can resolve an internal account-to-account transaction or because they'll float the risk of fraud until they can resolve a cross-firm transaction). But if you want to have the Bitcoin network agree on a transaction, it has to get buried several blocks deep in the chain, and that takes time.
Ah, yes I don't disagree. IMO, I don't think the use case for crypto is to replace fiat, but I can see how those that operate from that assumption/desire would experience friction.
Guess one, they made a big transaction with most of their hot wallet, partially paying out to someone who withdrew, with the rest going back to the hot wallet. This transaction is in the queue but not finalized yet.
The network won't accept any other spends of that money. Because that would be a double spend. So until that transaction is finalized (or it gets to old) that bitcoin is 'stuck'.
Or alternatively their hot wallet is empty and they have an outstanding transaction to refill it from their cold wallet. (They have the cash, but they have to wait until they can get it from their 'vault', and there is a traffic jam on the way to the vault).
I am not sure the first guess actually still works this way, I vaguely recall there are now mechanisms for one transaction to 'override' another non-confirmed transaction.
Ah ofcourse child pays for parent essentially always works. If I recall correctly replace-by-fee requires wallet support perhaps even at the time of creating the original transaction. But child pays for parent is just universal because it doesn't need to replace the transaction in the mempool, it just pays the miners to move it out of the mempool.
> What queue? Is there a queue in the bitcoin network?
Yes, that's what the mempool is.
>I thought it was a question of paying a high enough transaction fee and you would get your transaction done faster / within 10 minutes.
that's broadly true, but if transaction volume spikes then your initial fee estimate might be too low. there are ways around this (RBF, CPFP), but it's unknown whether their wallet software handles it.
They just described a situation where most of their readily available bitcoin (exchanges do not keep more than a minimum of their available cryptocurrencies in a programmatrically available wallet) could be stuck in the mempool.
It's a queue, but not a first-come first serve one.
The problem I imagine is that, once you set your transaction fee, and it turns out to be too low, it is hard to retroactively pay more fee. Just because the system doesn't allow two spends of the same output in the mempool at the same time, and canceling a transaction is hard.
The only thing that comes to mind here is that there was a fee spike [1] and they've got too many unspents stuck in the mempool and can't initiate further withdrawals because their wallet is effectively "spent" until those pending transactions complete and they receive their change. I find this a bit hard to believe though...wallet management isn't simple when it comes to the scale that Binance handles, however I'd be shocked if they didn't have code written to trigger CPFP (Child Pays For Parent) [2].
I can think of many of exchanges pausing withdrawals in times of extreme volatility - either close to peaks or during massive selloffs.
I think Binance probably doesn't have enough liquidity to cover their withdrawals and you probably don't need to look much farther to find an explanation.
When I'm not sure I always google "bitcoin meme graph" and it's always correct, it's actually crazy how all major coins follow this pattern. Welcome to "capitulation" stage
a) Think we are overreacting on the particular comment. It is like gmail or github saying service is down/issue in Binance.
b) As other people commented to people's comments: unusual days is when bugs manifest
c) The whole stock and bond market is down. Everything is down. It is the "reddest" state we have been. Feel free to check.
We are watching the whole world economy going down. We can of course carry on burying Crypto, but let us not kid ourselves that the practices do not exist in the rest of the commodity space. Or that the world is booming meanwhile crypto is just getting what it deserves. Now if that is bad and scary, I agree. Good luck.
While I somewhat agree, there's likely some irony in the upvotes since this is a mantra more often said than done. How many here self custody their gold?
The problem is exactly the same as in crypto, where they also say "not your keys, not your coins": You can self custody and it's 100% yours, until someone takes it off you and then it isn't. Trusting third parties is a risk, but so is taking care of your own security. In reality it depends a lot on the situation, you have to weigh the pros and cons of different strategies. As always, it's a lot more important that people are informed, not that everyone follow the same advice. A computer illiterate person who has no idea what a private key is better just leave their coins on a reputable exchange (obviously not Binance). And if I had no place to safely store my gold, I'd not take the risk of self custody with any substantial amounts.
I am so happy about this. I hope this is going to sour crypto for "investors". I use quotes, because they really are not -- investing should be reserved for fronting cash to create some value (like buying stock to infuse capital into a corporation). As it is all crypto trading is purely speculation.
The world would be so much better if money tended to be exchanged in good faith, to improve something rather than just to exploit market instability.
>investing should be reserved for fronting cash to create some value (like buying stock to infuse capital into a corporation). As it is all crypto trading is purely speculation.
Ok but let's be real- buying a stock is not really "creating value". The stock already exists. Company A has issued 100 shares. People are buying/selling it in the market.. no one is creating value there. Sure they may be arbitrarily driving the value up, but that's not creating real value.
If you want to argue that an IPO is "creating value" because people basically front the money to give capital.. ok fine. But let's not pretend you as a random person buying and selling google shares that already exist is creating value.
Also, I would say the people sitting here buying and selling stocks are most of the time 99% pure speculation. They have zero control over what actually happens in the company. Sure they can do "research" and guess what might happen.. but it's still nearly all gambling.
Investing is the horrible word for how nearly the entire financial system works. People have created gambling as a way of life, and convinced everyone else that they must gamble their money to make more. Which, surprise surprise, nearly always benefits the rich. Guaranteed pension/good social security? Nah, throw your money into our 401k so we can prop up the rest of the market arbitrarily and continue to drive up everything the rich own so they are richer! And you've all fallen for it.
> Ok but let's be real- buying a stock is not really "creating value". The stock already exists. Company A has issued 100 shares. People are buying/selling it in the market.. no one is creating value there. Sure they may be arbitrarily driving the value up, but that's not creating real value.
If it wasn't possible to resell stocks, capital acquired via stock issuance would be much more expensive. The stock market allows stocks to function as a means of seeding capital.
It's like saying "paying back your mortgage doesn't get buy you a house." The mortgage only exists because it gets paid back.
> Also, I would say the people sitting here buying and selling stocks are most of the time 99% pure speculation. They have zero control over what actually happens in the company. Sure they can do "research" and guess what might happen.. but it's still nearly all gambling.
Yes, which general advice is to spread your capital across the whole market. It used to be that you had to spend your capital building up your own business, which is even worse than trying to pick your own stocks. Now you can diversify your risk world-wide, as to avoid any sort of local calamities.
The difference between speculation and investing isn't in that you want to earn money (everybody who buys stock want to increase their wealth). The reason is for why you pick this particular instrument.
When I buy stock (or when Berkshire Hathaway does it) I buy into business that I hope has sound fundaments and is going to grow and create more value over time. I spend considerable effort trying to understand the situation the business is in, do they have dangers ahead of them, do they have sound leadership, etc. This is investing -- buying things that you hope are going to increase in value over long time.
Speculation is when you buy things for reasons that are not at all connected with the thing you are buying. For example you noticed people are buying crypto, the price is going up, so why not jump in on the wagon and get your cut of the profit. This is speculation because it totally ignores what is it that you are buying, and the only thing that you care is that the price is going up.
Unless you have an equity position you haven't given the company anything for the shares when you buy Berkshire stock. You are essentially riding off of Buffett's success and making money without doing any work.
By buying existing stock you help create a functioning market, which in turn helps other people make investments. That they can sell their stock in the future factors into investment decisions. Therefore imp it is incorrect to say buying existing stocks doesn't create value.
> As it is all crypto trading is purely speculation.
The reason I stay invested is the supply-side economics.
The supply is well-known in advance, and is advantageous to Bitcoin. US M2 money supply grew 8.04% in the past year [0], while Bitcoin's grew ~1.75% [1].
Yes, demand has its 80% ups and downs, but each crash was to a level higher than the previous.
> Yes, demand has its 80% ups and downs, but each crash was to a level higher than the previous.
You're actually looking at demand more than supply. You're right that supply isn't going up much, but you have no evidence or theory about why people will be more interested in Bitcoin in 5 years than they are now. You really have to look at both.
The supply of my toenail clippings has grown by less than either of these over the past year. If you'd like to apply your supply-side economics and invest, send me a DM.
Being happy about retail investors losing money is immoral. I hope you realize that.
We have a lot of investments in the US that do nothing except force people to grind even harder. Look at the housing market. Why should housing be an investment when we absolutely need it to live and there are other investment vehicles that do just as well if not better?
> Being happy about retail investors losing money is immoral. I hope you realize that.
No, it is not immoral. Retail "investors" should know better than "invest" into things with very shaky connection to reality where it is predicted value next Wednesday can be anywhere between zero and infinity. If they loose all your money on crypto that is purely their fault for "investing" into something which has no real value and can loose its virtual value in no time.
They wanted their chance at huge profits on an extremely volatile market and extreme volatility is what they got.
How are you being bullied? Someone just stated their opinion with regards to crypto investors knowing the risks when they invested in such a volatile asset.
>investing should be reserved for fronting cash to create some value (like buying stock to infuse capital into a corporation).
Low interest rates have killed this cause. If corporations can get cash from the banks at near zero rates, the only remaining use case for investments is heavy speculation. In a sense, the post-2008 monetary policy was about making things look good on paper, while hollowing out the economy with bullshit jobs, bullshit stocks and bullshit business models.
As bad as the spiraling inflation could be, I hope the shock coming from it will bring the economy back to the common sense.
The stock market isn't speculation (though there is a lot of speculation on stock market -- these two sentences are not in conflict).
Speculation is something that happens when you start buying and selling for reasons that are not at all connected to the performance of the company.
There is a lot of useful, value-creating reasons for people to be able to sell their share they bought at initial stock offering.
And think about how useful/worthwhile a share would be if you could never sell it. Remember, there isn't selling if there isn't buying. If you want to sell your share there must be somebody ready to buy from you.
Crypto is not a technology, it's a religion. The reason behind this is that it takes faith to believe that today does not represent tomorrow.
There is more nuance behind crypto besides its technological innovation like AMM's ,ZK-proofs & distributed computing. It's the idea that you can be a self-soverign individual, owing fealty to no nation.
It's often brought along at the disillusionment of the current united states world order. We see rampant corruption, an absolutely ancient leadership completely out of touch with the current generation and an economy that seems to forever favor the rich. There is no light at the end of the tunnel in the current economic system for a large majority of the population.
Bitcoin promises(ed?) the ability to transact with anyone on the planet outside the vieew of the current regime. Bitcoin promised "Proof of work" over "Proof of violence". It has allowed us to create "ad-hoc governance" like neveer before. it gave an entire generation of people light at the end of the tunnel.
I am not saying that any of these things are correct, or 'Right'. Simply stating how i've seen the community evolve and why.
I don't agree with GP but there are legitimate reasons why people are sympathetic to this.
One reason would be the increased difficulty of a government to seize or freeze assets for people who are determined to be politically problematic (see: e-CNY and SWIFT).
Another would be the accelerating debasement of currencies which provides opportunity for the rich to become richer in wealth & assets, while wages for the working class are diminished by inflation.
> This is due to an earlier batch of transactions getting stuck from low transaction fees submitted and hence, resulting in a backlog of Bitcoin (BTC) network withdrawals. The Binance team is working on a solution to resume Bitcoin (BTC) network withdrawals soon.
I believed very strongly in Bitcoin until the first time I tried to accept it as payment at by business. It’s fundamentally incapable of providing any real value… unless you’re into money laundering or tax evasion.
Smaller banks are vulnerable to bank runs. So a lot of banks during crisis (before FDIC / Centralized Banking in the USA) would close up to stop bank runs.
Closing up shop during a bank run only made people angrier, and exacerbated the problem. What was invoked as a solution, was for every bank in the nation to be FDIC insured by the central bank.
The smaller and more decentralized banks are, the more frequently the bank-runs are, forcing the small banks to close to protect themselves.
Imagine if this was some Oceans 11 type heist where the BTC owner (Binance, not you plebs holding coins in someone else's wallet) thinks one thing is happening, all while someone unauthorized got a hold of some hot wallet keys and is draining them
30 minutes have come and passed, BTC still not in sight
I would like to provide some context to people unfamiliar with how the bitcoin mempool works and what you can do to avoid getting your transaction stuck. The mempool is all of the transactions that have ben gossiped about but have not yet been mined (finalized) into a block. Each node has their own mempool. You can see [1] that there are roughly 6 hrs worth of transactions in this node's mempool (everyone should have a similar mempool, though not identical).
So Binance's claims of network congestion are "true" on the surface, however there are a few interesting points that lead me to believe that they are acting fishy.
1. Why does Binance not have RBF enabled on their withdrawal transactions?
RBF mean "replace by fee" and it's a way you can mark an unconfirmed transaction as replaceable by a similar transaction that pays higher fees. This is extremely useful when you need to ram a transaction into a block by increasing the fee you're willing to pay miners to mine your transaction. I highly recommend you only use a wallet that allows you to use RBF & to have RBF enabled by default. Of course Binance knows about RBF so why aren't they using it?
2. Why does Binance not use 'Child Pays for Parent'?
CPFP is a little hard to understand if you don't understand that bitcoin transactions are linked together in a graph structure. In short, a bitcoin transaction is a data structure that points to previous transactions to spend. CPFP is when you make a new transaction that spends from your previous unconfirmed transaction (un-mined transaction in the mempool) and over pay in fees to cover the cost of both transactions. This incentivizes miners to include BOTH transaction in the same block. Once again Binance should be doing this. An ideal way to do this would be to batch a bunch of customer withdrawals in a single transaction. This would save a lot on network fees. They would make this big transaction payout a large amount back to themselves so that they could CPFP this batched withdrawal transaction.
3. Binance has their own mining pool with 11% of the network hash[2].
Binance could easily prioritize their "stuck" withdrawal transaction in their pool's blocks. Of course if they didn't subsidize their miners for this they risk them switching to another pool. One would think that halting withdrawals is an existential risk to their business so temporarily paying their miners to ram transactions through should be worth it?
So what is the take away from all of this?
There are numerous tools at Binance's disposal. Why did they not work/why are they not using them? My hunch is that they don't have all of their ducks in a row & are running a fractional reserve. (this is pure speculation on my part) They likely had a lot of (your) bitcoin tied up in "risk-free" interest accounts (Celsius) and are scrambling to get ahold of bitcoin to give back to customers.
Basically you bid for someone to deliver a packet for you. They promise to deliver it as soon as your bid is high enough to get into bunch of deliveries they are going to do. If others pay more they might end up never delivering your packet...
There is an informational asymmetry, so rogue exchanges can lie all they want without you knowing for sure, and those that do not want to give you your money for whatever reason always do (lie that is).
This happened with MtGox and permanent withdrawal problems, both with USD and BTC.
With USD, it was "Oh, no, its the banks, they are limiting us to $50.000 per day, it's not us".
With BTC, it was "Oh, no, Bitcoin network has a bug, we cannot process withdrawals, it's not us".
Agreed, that’s the one domino I’m waiting for to fall. Once tether collapses it’s instantly going to take about 25% of Bitcoins price down with it, and a whole other series of events will probably set in motion. Everything will start trending to zero.
How many investors actually understand the technology? Who (even here at HN) has read a whitepaper? I've read some, and have to say it became a personal running gag of how many pages it would take until the authors completely descend into fogging the reader with a mumbo-jumbo of made up words ("The Tangle").
But more specifically Tether stands at half the marketcap of Etheruem [0] and represents the largest trade volume (ie that of Bitcoin and Etherium combined) [1]
I love how cocksure people are of Tether's decline. Do you believe reading a bitcoin (or IOTA) whitepaper is sufficient to understanding market structure because I get the sense that you do not understand it.
USDT ticks all the checkboxes of prior Ponzi's I've experienced but please, enlighten me.
Stablecoins in principle face the issue of pegging against something that dillutes at will.
But specifically USDT: How is Tether's peg supposed to work if it's alledged backing assets consist of other crypto assets ?! Shouldn't they seek less crypto exposure for stability?
Assets which are BTW unsatisfactory disclosed considering a) comparison with established equity markets and b) that such disclosure only exists at all due to law-enforcement.
Is there a place one can short Tether, that can also be trusted to pay out on a short position in the event of a catastrophic Tether collapse? I.e. not a crypto exchange?
1. Shorting practicalities for Tether not clear.
2. Need confidence 3rd party will pay out.
3. Market can stay irrational longer than I can stay solvent.
4. Especially high risks when dealing with an entity which for the moment can print money to manipulate markets.
In short, I’m confident it will fail and fairly spectacularly but I don’t know when and I’m also not sure how to go about shorting it.
In response to the usual comments about how "we need legislation on crypto, and we need it now!", can we just have one thing that isn't legislated to shit? Please? Yes, there are scams. If you fail to even do the bare minimum research, that's your fault. If you suck at detecting sketchy investments (or use crypto as an investment in general, rather than its intended purpose), that's your fault.
Crypto needed a tangible market/reason d'etre to be valuable. This required lower transaction fees, cheap audits, and a reasonable degree of price stability. We haven't seen any of that materialize except for cheap auditing. Cheap auditing isn't much use if there isn't anything of interest to audit.
I'd doubt BTC will go to zero, but I wouldn't be surprised if the entire covid rally gets wiped out and we see BTC 6k again.