[Discussion] Cryptocurrency

Cryptocurrency! Either it's going to disrupt everything and usher in a new era of artistic and consumer freedom, or it'll hasten the climate apocalypse while largely benefitting a tiny number of investors. Let's yell about it!

jontra wrote:

possibly new to the concept of money in general.

From the perspective of someone NOT following it closely, this is an accurate summation of crypto in it's entirety.

jontra wrote:
JLS wrote:

Based on the videos and articles on this page it's difficult to conclude that crypto is the answer to wealth inequality.

I find that most mainstream critics of crypto don't have a good grip on how things work technically, and the criticisms are really more motivated by the fact that a lot of grifters and libertarian kooks have gotten super rich off this stuff.

I feel no embarrassment saying I don't understand how blockchain benefits my finances. And if I, a career technology professional, don't get it, I know there are many others. I'm certainly not going to recommend it to my family members, much less as a solution for the impoverished.

Explain me to me like I'm a four-year old. Starting with: Beyond hiding my wealth and purchases, how does putting my money in crypto benefit me more than speculating on the stock market, where I can research an individual company or just toss it in a low-fee index fund?

jontra wrote:
Jonman wrote:

But in this example, the actual wealth-gap between those two has widened dramatically.

Not really. If everyone's bank account is getting credited with 10% interest every year, then the currency is getting devalued by 10% every year as well. So the billionaire's $1,100,000,000 is in real terms worth the same as their $1,000,000,000 last year (and the millionaire's $1,100,000 is worth the same as their $1,000,000 last year). In real terms their relative wealth has remained the same.

It's no different with a crypto-asset. Ethereum's issue rate is about 4% a year so in theory everyone's holdings are being devalued by 4% a year unless they are a miner and are collecting the mining reward. Proof of stake makes this a little fairer by making those rewards more accessible to everyone, instead of only people who own a crypto mining operation.

Going have to stop you there. A bank account interest rate is not a devaluation rate of the currency (if it were we wouldn’t be a difference between nominal and real interest rates). The interest rate paid by the bank is slightly decoupled from the amount of goods in the economy and from the velocity of money (though in most economic models it does influence them).

The GINI increases in a staking mechanism because the costs for the don’t scale. If you have 100 times more capital than me you will receive 100 times more interest than me but your living costs don’t have to be 100 times more than mine. If we have the same living costs each year you will accumulate more capital (and next year you get more interest than me). Failing to deal with this generally leads to oligarchy in the long term.

The peer-reviewed paper I posted discusses some of this, DoveBrown. There are others that I have not dug into. It's not an area that is unexplored, just one that most of us are unfamiliar with.

JLS wrote:

I feel no embarrassment saying I don't understand how blockchain benefits my finances. And if I, a career technology professional, don't get it, I know there are many others. I'm certainly not going to recommend it to my family members, much less as a solution for the impoverished.

Explain me to me like I'm a four-year old. Starting with: Beyond hiding my wealth and purchases, how does putting my money in crypto benefit me more than speculating on the stock market, where I can research an individual company or just toss it in a low-fee index fund?

I would start by separating the questions of crypto as an investment and crypto as something you can use.

As an investment, I can't make any guarantee that it will perform better than an index fund over the next few years. I certainly wouldn't recommend it to someone who is impoverished (too volatile). The argument for it as an investment is that it is a new technology and associated asset class, so there is potential for big gains just like with internet based companies back in the late 90s (if you can weather the crashes). Of course, this is dependant on crypto having real utility, otherwise it is just a ponzi/bubble.

So what's the utility? The first and best use case for crypto is often overshadowed by other, newer things that have come along like NFTs and DAOs, but in my opinion these newer use cases are still a bit half baked. The real utility that exists right now is the ability to have control over your own money with no government or corporation able to deny you access to it. This is pretty important for many different marginalised groups, from sex workers to Russian opposition parties. It's good to remember that Wikileaks was kept alive by Bitcoin donations after the US government cut them off from the financial system, I don't think they would still exist now if it wasn't for crypto.

Yeah it sucks that the truckers/fascists in Ottawa are using crypto to get around the economic sanction that Trudeau put on them, but now that the precedent has been set you can bet that a conservative government would do the same to protests that we do support. Trump would have done the same thing to BLM if he'd thought of it, and I can easily imagine say anti-government protesters in Hong Kong needing this kind of alternative system in the near future.

And crypto can be useful even for people who don't have the government out to get them. I find it so much faster and more pleasant to do things in the crypto ecosystem than having to jump through the hoops and indignities that my bank likes to throw at me. Living in the EU the government apparently does not consider me smart or responsible enough to buy options, although I can buy as many lottery tickets as I want. They can't stop me trading options via crypto though.

I can imagine that one day we will all get used to using blockchain based apps for our finances the way we got used to using Uber instead of calling a taxi (although hopefully with less worker exploitation), because the of the added convenience.

So to answer your question more succinctly, it's worthwhile as an investment because there's real utility and still potentially a lot of growth to be had. As far as using it yourself, I would try it out if you need to transfer money overseas and don't want to get gouged by bank fees, or basically any other time your bank is getting in the way of you doing what you want with your money.

DoveBrown wrote:

Going have to stop you there. A bank account interest rate is not a devaluation rate of the currency (if it were we wouldn’t be a difference between nominal and real interest rates). The interest rate paid by the bank is slightly decoupled from the amount of goods in the economy and from the velocity of money (though in most economic models it does influence them).

The GINI increases in a staking mechanism because the costs for the don’t scale. If you have 100 times more capital than me you will receive 100 times more interest than me but your living costs don’t have to be 100 times more than mine. If we have the same living costs each year you will accumulate more capital (and next year you get more interest than me). Failing to deal with this generally leads to oligarchy in the long term.

Yeah, absolutely correct. I was simplifying a lot of stuff in my example. But I wanted to point out that the article's assertion that proof of stake was bad at decentralisation was false. It's no worse (GINI-wise) than our existing financial system, and is in fact a lot better than proof of work.

jontra wrote:

So what's the utility? The first and best use case for crypto is often overshadowed by other, newer things that have come along like NFTs and DAOs, but in my opinion these newer use cases are still a bit half baked. The real utility that exists right now is the ability to have control over your own money with no government or corporation able to deny you access to it. This is pretty important for many different marginalised groups, from sex workers to Russian opposition parties. It's good to remember that Wikileaks was kept alive by Bitcoin donations after the US government cut them off from the financial system, I don't think they would still exist now if it wasn't for crypto.

My takeaway from this is that there's only utility to niche groups. For the vast majority of people, it's still a solution in search of a problem.

jontra wrote:

So what's the utility? The first and best use case for crypto is often overshadowed by other, newer things that have come along like NFTs and DAOs, but in my opinion these newer use cases are still a bit half baked. The real utility that exists right now is the ability to have control over your own money with no government or corporation able to deny you access to it. This is pretty important for many different marginalised groups, from sex workers to Russian opposition parties. It's good to remember that Wikileaks was kept alive by Bitcoin donations after the US government cut them off from the financial system, I don't think they would still exist now if it wasn't for crypto.

In practice, you still have to exchange that crypto for an actual currency somehow, which will tie that identifier, and its entire public history, to some real-world person, which basically negates the anonymity thing. That's assuming you don't lose your private key, or have it hacked, or accidentally look sideways at a malicious NFT in your wallet. Who would want all their private data put in a public place that could eventually be tied to you when you go to use it?

The only problem crypto solves is man in the middle attacks, and makes everything else more complicated or more prone to malicious users.

Jonman wrote:
jontra wrote:

So what's the utility? The first and best use case for crypto is often overshadowed by other, newer things that have come along like NFTs and DAOs, but in my opinion these newer use cases are still a bit half baked. The real utility that exists right now is the ability to have control over your own money with no government or corporation able to deny you access to it. This is pretty important for many different marginalised groups, from sex workers to Russian opposition parties. It's good to remember that Wikileaks was kept alive by Bitcoin donations after the US government cut them off from the financial system, I don't think they would still exist now if it wasn't for crypto.

My takeaway from this is that there's only utility to niche groups. For the vast majority of people, it's still a solution in search of a problem.

And even for that it is more security through obscurity. When governments catch up, tracking transactions of dissidents will be a snap and blacklisting wallets will leave people with bitcoin no one reputable will touch.

JLS wrote:

Follow-up to Line Goes Up, this Salon article interviews Dan Olson. I really enjoyed it. Lots of comparisons of NFTs to MLM scams.

NFTs aren't art — they're just the Cult of Crypto's latest scam

The biggest problem that's been plaguing crypto since 2009 has been a lack of things to use it on and a lack of respectability

So the answer to the respectability problem is pictures of monkeys.

Interesting article on how the brokenness of our existing system is driving people to crypto. Lot of good quotes in there, and the comparisons between twenty-somethings mindset and older investors is very interesting.

I am still not seeing anything even attempting to refute the argument that pump and dump is not just a hazard, but a design feature of cryptocurrency. Moreover, as the example of Etherium and Etherium Classic aptly points out, when the rich early adopters benefit from the grift, it is "just how it goes", but when they get burned, they reset and branch because f*ck you all.

It's a well known fact that a very small minority hold the bulk of all bitcoin (the "exact" percentages can never really be known but I've seen it as 10% own 90%). So in essence the 10% need a constant flow of new buyers so they can continue to trickle out their holdings over time and cash out over the long haul.

All these new Crypto apps are designed exactly to do this.. get as many new buyers into the ecosystem as possible.

The fact that so few have almost total control over the pricing doesn't seem to bother anybody though.

TheGameguru wrote:

It's a well known fact that a very small minority hold the bulk of all bitcoin (the "exact" percentages can never really be known but I've seen it as 10% own 90%). So in essence the 10% need a constant flow of new buyers so they can continue to trickle out their holdings over time and cash out over the long haul.

All these new Crypto apps are designed exactly to do this.. get as many new buyers into the ecosystem as possible.

The fact that so few have almost total control over the pricing doesn't seem to bother anybody though.

Those crypto app ads really remind me of the Amway ads we saw in previous Super Bowls. Same grift. Different audience.

TheGameguru wrote:

It's a well known fact that a very small minority hold the bulk of all bitcoin (the "exact" percentages can never really be known but I've seen it as 10% own 90%). So in essence the 10% need a constant flow of new buyers so they can continue to trickle out their holdings over time and cash out over the long haul.

A recent study put it at 27% of crypto currenices controlled by just 0.01% of investors.

Compare that to insane inequality of our normal economy where 30% of wealth is controlled by 1% of people.

It's not the banks getting in the way with their regulations. Banks are amoral money suckers and will rip their customers off every chance they can. It is governments that force regulations on banks.

And you should note that there are plenty of fees for transferring crypto and even more for trying to turn crypto in money that can actually be used. The truckers in Canada may have a pile of bitcoins donated to them but they were utterly lost in how to actually use them.

I disagree that there is any utility other than libertarianism or criminality and the evidence that it is nothing but a bubble right now has me advising anyone who will listen to stay as far away as possible.

One of the core points of The Line Goes Up is that the crypto inventors looked at the bank corruption leading up to the 2008 disaster and instead of thinking 'The banking institutions are wrong' they thought 'f*ck I missed out, ok lets invent something where we can do the same sh*t.'

They were the outsiders looking in. They wanted to be the insiders looking out. They wear the cloak of fighting injustice but they're doing the same sh*t.

Putting aside the possible motives of crypto enthusiast, one takeaway from The Line Goes Up as well as other articles I've read is that blockchains as currently realized can't ever be a reliable currency because they can't scale to handle the insane number of transactions needed in real world economic systems.

Interestingly, when I went to google that point just now, by only searching for how many Visa transactions per minute; almost all of the results were instead crypto websites challenging the validity of traditional banking numbers and waving away current performance of bitcoin and eth as growing pains.

Call me a cynic, but the intentional algorithm manipulation of that search result actually makes me more inclined to think the scalability issue is a fatal flaw.

This does have me thinking that if I were a suitably inclined crime lord who needed a currency for trading with other crime lords, crypto seems even pretty inefficient for that purpose. Particularly since it is especially susceptible to market manipulation by a few large players. It would almost be easier and safer to pass around orange juice futures.

Badferret wrote:

Putting aside the possible motives of crypto enthusiast, one takeaway from The Line Goes Up as well as other articles I've read is that blockchains as currently realized can't ever be a reliable currency because they can't scale to handle the insane number of transactions needed in real world economic systems.

This is indeed the biggest problem facing blockchain tech. There are numerous projects underway that attempt to fix this, but until one of them succeeds crypto will not be ready for widespread usage.

Yes, let's make it cheaper to dox people and put revenge porn in a public, immutable ledger. WCGW?

Another high profile f*ckup in crypto land today. OpenSea are the worst. Just nothing redeemable about those fools and shysters.

Bruce wrote:

Another high profile f*ckup in crypto land today. OpenSea are the worst. Just nothing redeemable about those fools and shysters.

As Ivan Drago would put it "if he dies, he dies".

This is some BS right here (bold mine)-

"After China banned Bitcoin mining, everyone was expecting it to become more green, but we are somewhat surprisingly seeing the opposite happening." said de Vries. "A lot of the hydropower these miners got previously in China has now been replaced with natural gas from the US."
Bitcoin mining is still booming in the United States. According to the study, many of the American Bitcoin mines are powered by natural gas and coal. Kentucky now offers subsidies to crypto miners, looking to attract business for the state's coal industry.

f*ck crypto.

How long before the Russian economy turns to crypto and the NATO countries respond by restrictions effectively cratering the value?

Nomad wrote:

How long before the Russian economy turns to crypto and the NATO countries respond by restrictions effectively cratering the value?

That would be a win-win for the world.

JLS wrote:
Nomad wrote:

How long before the Russian economy turns to crypto and the NATO countries respond by restrictions effectively cratering the value?

That would be a win-win for the world.

My thoughts exactly.

Nomad wrote:

How long before the Russian economy turns to crypto and the NATO countries respond by restrictions effectively cratering the value?

A possibly better solution is that Russia switched to crypto but there are no restrictions applied. Russia *has* to start exchanging crypto for actual stuff and fiat currency which reveals there is no actual money left in the system which starts the collapse and then the bad PR of that stems the flow of greater fools investing into the field to finish it off.

We can dream.

Wouldn't the transaction fees and times prevent Russia from really using crypto?