[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!

So NFT's have been the talk of the internet recently and Bitcoin just hit $60K, so I figure I might as well start a thread about Crypto.

My take, in short: Do I think it'll do any of the amazing, world-changing things the advocates say it will?

No. I fully expect it to exacerbate already existing inequalities, and that is before we discuss its environmental impact. (Advocates argue greener methods of mining are coming, but I agree with the counter-argument that we really can't afford any "it'll get better!" stuff as acute as the problem is right now, assuming you believe that greener methods are coming at all.)

Nevertheless, I also think that crypto is, at this point, inevitable, so I can't really get that angry at anyone taking part. Life is full of things I wish would not happen or come to pass inevitably happening or coming to pass.

This is before we begin discussing its current impact on the arts, all of which just feels, as one tweet put it, "Rotten, absurd and kafkaesque."

But it is here, and it's not going anywhere soon.

Prederick wrote:

Do I think it'll do any of the amazing, world-changing things the advocates say it will?

My answer, at least, is "maybe". As I've stressed before in these discussions, blockchain technology is in its infancy and still rapidly developing. It's still entirely possible there are undiscovered flaws that will sink the whole thing.

That said, the biggest concern with blockchain technology in general is that it challenges government control over specific societal functions, namely currency and records of ownership. If you think the world's governments are going to take that lying down, I've got an NFT for some riverside real estate in Brooklyn I'd like to talk you about.

Some advice though:

Whatever you do, do NOT get your crypto news from the BBC. That article is riddled with factual errors, misunderstandings, and misleading statements.

NFTs are the scammingest of scams that have ever been scammed. It is possible that there may be a problem out there somewhere that blockchains happen to be the best solution for, but in the mean time crytocurrency remains the domain of speculators and money launderers.

I just wish they'd stop calling it cryptocurrency. It's far to volatile to ever be useful as an actual currency.

It is all a scam. All of it.

BTC price is soaring based on the volume of Tether that is being printed. They put out more than $US1B in the last month based on....What? Nothing. It is pure market manipulation.

And you can argue about how catastophic the environmental impact is based on disagreeing with the numbers in the BBC article. Maybe it isn't that horrific yet - but it will be. That's how it has to be. The entire crypto system requires it. PoW means it can't be anything else in the long term.

At least you could eat tulip bulbs.

Stengah wrote:

I just wish they'd stop calling it cryptocurrency. It's far to volatile to ever be useful as an actual currency.

They call it a currency because if I had one of several different cryptocurrencies, I could go down the street and buy car or a pizza - people are using it as currency, right now. The only requirement for something to be a currency is that people will accept it as a medium of exchange. Notably, this currently makes cryptocurrencies more of a currency than silver or gold, both of which used to be the only currency.

Bruce wrote:

BTC price is soaring based on the volume of Tether that is being printed. They put out more than $US1B in the last month based on....What? Nothing. It is pure market manipulation.

Given that Tether is 1-to-1 pegged to the US Dollar ... manipulation by whom?

https://fred.stlouisfed.org/series/M1SL

Let's consider bitcoin versus the dollar. One of these systems is completely controlled by a shadowy cabal of financial titans. One of these systems regularly introduces huge amounts of new tokens without any backing. One of these systems is almost entirely digital with no fail-safes, validation, and no cryptographic assurance of ownership. One of these systems requires a huge network of computers to hold the tokens and allow for transfers. One of these systems has physical tokens which are completely anonymous.

The other system is bitcoin.

Tether is *not* pegged 1-1 with the US Dollar. Bitfinex doesn't even pretend that is true any more. They admitted in 2018 that they were no more than 74% backed

Since then the money printer has been going brrrrrrrrr. (The anti-fiat crowd love that phrase.) There are now ~$20B worth of tethers, and more than $16B of them have been printed since March 2020. Are just gunna pretend that all these alleged US dollars got pumped into the system somehow?

If they really are backed 1-1 then surely you could expect to trade between them transparently except:

What Tether features can U.S. residents access?
Unfortunately, Tether has decided to stop serving U.S. individual and corporate customers altogether. As of January 1, 2018, no issuance or redeeming services will be available to these users.
Exceptions to these provisions may be made by Tether, in its sole discretion, for entities that are:
Established or organized outside of the United States or its territorial or insular possessions; and,
Eligible Contract Participants pursuant to U.S. law.

From https://tether.to/faqs/

Hmm.. that's odd. Why can't you get your money out of the system?

But yes you can theoretically use it as a currency, but please hope that not too many other people want to use it at the same time as you. BTC handles less than 10 transactions per second and that is only going to get worse. If Aliexpress were to switch to BTC only then the system would never handle the volume of transactions.

Aetius wrote:
Stengah wrote:

I just wish they'd stop calling it cryptocurrency. It's far to volatile to ever be useful as an actual currency.

They call it a currency because if I had one of several different cryptocurrencies, I could go down the street and buy car or a pizza - people are using it as currency, right now. The only requirement for something to be a currency is that people will accept it as a medium of exchange. Notably, this currently makes cryptocurrencies more of a currency than silver or gold, both of which used to be the only currency.

People exchange all sorts of things, it doesn't make them all currencies. Most places aren't accepting them as payment and the few that do are either only accepting them because they can be changed into an actual currency fairly easily, or they're building up their own supply as an investment.

Bruce wrote:

Since then the money printer has been going brrrrrrrrr. (The anti-fiat crowd love that phrase.) There are now ~$20B worth of tethers, and more than $16B of them have been printed since March 2020. Are just gunna pretend that all these alleged US dollars got pumped into the system somehow?

No, but you should consider the difficulty of keeping up with the Federal Reserve when it comes to printing.

My point was not to defend Tether, because I believe its premise is inherently flawed - it tries to treat the dollar as a stable currency when it obviously is not. My point was that most of their issues stem from the massive inflow of dollars into the larger market, which forces them to print because of their design. In other words, BTC isn't ramping up because of tether - they are both responding to what's going on with the dollar.

There's three things that cause a currency to change in value relative to another currency. One of those is inflation/deflation, which is strictly controlled in the BTC system. The other two are demand and inflation/deflation of the other currency. It's pretty clear that the current BTC runup is a combination of those two factors.

Hmm.. that's odd. Why can't you get your money out of the system?

Welcome to the first bank run on crypto.

But yes you can theoretically use it as a currency, but please hope that not too many other people want to use it at the same time as you. BTC handles less than 10 transactions per second and that is only going to get worse. If Aliexpress were to switch to BTC only then the system would never handle the volume of transactions.

First, the transaction volume is directly determined by block size, which is something that can be changed - and that's an ongoing discussion as the system develops. Second, there are numerous other lesser cryptos that are much better suited for day-to-day transactions - litecoin, dash, zcash, etc.

My point was that most of their issues stem from the massive inflow of dollars into the larger market, which forces them to print because of their design. In other words, BTC isn't ramping up because of tether - they are both responding to what's going on with the dollar.

That is absolute bullsh*t. If Tether were a properly backed currency, they would be holding 20B in US dollars, with a tether issue of 20B, and then be making their cut on conversions back and forth. In that situation, provided they're not hacked, they can never go insolvent. When people sell them tether, they return slightly fewer dollars. Now there's less tether in the world, and they made a small profit. When people sell them dollars, they issue slightly less tether, make a profit, and now there's more of it again. As long as it's 1:1, and they're properly living off their margin, they're always solvent.

Instead, they're just putting themselves into the same position as banks, except without any oversight or regulation. Anytime they want some more money for themselves, they just print a bunch and go on a spending spree.

Which, it should be pointed out, is exactly the reason that cryptocurrencies were started... to stop that behavior.

First, the transaction volume is directly determined by block size, which is something that can be changed - and that's an ongoing discussion as the system develops. Second, there are numerous other lesser cryptos that are much better suited for day-to-day transactions - litecoin, dash, zcash, etc.

There is no ongoing discussion. That discussion was settled by the split with Bitcoin Cash. The powerful big-block advocates went that way, and that currency has largely failed.

In bitcoin, you're subject to the whims and market manipulations of the early movers. The promise was no central oversight, but instead the wealthy set the rules, even more directly than they do in our democratic system. The only actual value bitcoin has is that governments have a hard time controlling it... which means that its value directly derives from crime. It's mostly a method of evading US currency controls. It's a huge smuggling operation.

You know perfectly well that I think the Fed is killing us. But cryptocoins are swapping a bad master for a whole bunch that are even worse.

When I read about things like cryptokitties and NFT auctions, I think to myself, P. T. Barnum would be a very happy camper these days.

Stengah wrote:

People exchange all sorts of things, it doesn't make them all currencies. Most places aren't accepting them as payment and the few that do are either only accepting them because they can be changed into an actual currency fairly easily, or they're building up their own supply as an investment.

Exactly this! A currency is money that's in general use.

None of the crypto-currencies come close to meeting this definition, in part - as you say -because they are so volatile. Last week bitcoin $50k. This week it's £60k. Who knows what it's going to be worth next week? Nobody in their right mind is going to accept money that swings so wildly in value. Which, of course why basically nobody is accepting it.

Sure, there have been a few PR stunts with companies announcing that they are going to accept Bitcoin, but in reality they are few and far between.

Until I can do my monthly food-shop with crypto, it's all b*llocks really.

What worries me most is the fact that unsophisticated retail investors are being sucked in to the crypto whirlpool. If you use an app like e-toro, you'll see bitcoin listed alongside gold, ETFs and blue chip stocks. At some point, the late entrants to these markets are going to lose their shirts.

I really like how if I forget my password, or my wallet gets hacked, or my exchange gets hacked I have no recourse. That's a feature, not a bug.

Mixolyde wrote:

I really like how if I forget my password, or my wallet gets hacked, or my exchange gets hacked I have no recourse. That's a feature, not a bug.

All those pesky regulations that have built up over a century or so were mostly driven by the wish to protect people from thieves, grifters and charlatans. Removal of them has allowed that group to flourish. Which is by design.

India to ban crypto trading mining owning

As mentioned previously governments are on a collision course which makes things more interesting. Not sure how this will work out for India.

I'm sure blockchain will continue to morph in usage and become a very important and interesting technology.

I like NFTs for mainly only one reason. It bridges the gap for me to logically explain to people what Bitcoin is. To me it is no different than spending 300k+ on a Charizard. Pure speculation backed by only everyone elses speculation. The second your coin of the day isn't the popular one there's no reason it's price doesn't tank. Sure people could make an argument that Bitcoin specifically will be the standard but again that's not actually a for sure. I doubt it will happen fast but if the masses decide another Coin is the 'gold standard' then investment will shift.

This doesn't even mean Bitcoin comes crashing to the floor. If money keeps trending towards coins, NFTs, Pokemon cards, sports cards etc as a whole these could continue to grow in total value/ownership. But anyone who thinks they know what's going to accrue the most value from today to a year from now is purely speculating.

Blockchain itself is nothing special, it's just a rolling hash on an ever-expanding file. That's not exactly rocket science.

What I always find weird is that proponents always say crytocurrency is inherently stable and is not affected by speculation like money, inflation and stock markets but isn't the fact that the value can jump thousands of dollars in a day due to news or giant company buy in any different?

Mixolyde wrote:

I really like how if I forget my password, or my wallet gets hacked, or my exchange gets hacked I have no recourse. That's a feature, not a bug.

Not your keys, not your coins; as the kids nowadays say.

PiP wrote:

NFTs are the scammingest of scams that have ever been scammed. It is possible that there may be a problem out there somewhere that blockchains happen to be the best solution for, but in the mean time crytocurrency remains the domain of speculators and money launderers.

Explain It Like I Am 5: NFTs

Bruce wrote:

Tether is *not* pegged 1-1 with the US Dollar. Bitfinex doesn't even pretend that is true any more. They admitted in 2018 that they were no more than 74% backed

The Bit Short: Inside Crypto’s Doomsday Machine

NFTs are TF2 hats. Except more pointless, more speculative, unnecessarily complex, less secure, and won't last as long.

I'll say this for cryptocurrency: it may be mainly useful for money laundering and other criminal enterprises, and a prime example of environmentally ruinous techno-libertarian dipsh*ttery that'll send our species to an early grave. But at least it makes it easy to not stop drinking.

Alien Love Gardener wrote:

I'll say this for cryptocurrency: it may be mainly useful for money laundering and other criminal enterprises, and a prime example of environmentally ruinous techno-libertarian dipsh*ttery that'll send our species to an early grave. But at least it makes it easy to not stop drinking.

People say that and they’re not technically wrong, but the volatile nature of crypto makes it difficult to use in laundering applications. Source - once upon a time I worked fraud cases for a large bank. (My information is perhaps 5 years out of date however.)

Crypto, however, is incredibly easy to just steal. There’s a how to documentary on SIM swapping on hulu. All the encryption in the world doesn’t protect you from Josh the 17 year old Verizon employee in Dayton who just doesn’t care enough about his job not to be socially engineered. And what’s your second form of identification in your two factor system? It’s the secure text they send to your phone number.

Blockchain remains a solution in search of a problem.

Personally I doubt it will ever really find one compelling use-case. There are a whole planet's worth of skunk works projects and PoCs and even massive firms have kicked around various possible options and cryptocurrency remains the only place where it has any hold at all. Like a techno Fermi paradox.

Seth wrote:
Alien Love Gardener wrote:

I'll say this for cryptocurrency: it may be mainly useful for money laundering and other criminal enterprises, and a prime example of environmentally ruinous techno-libertarian dipsh*ttery that'll send our species to an early grave. But at least it makes it easy to not stop drinking.

People say that and they’re not technically wrong, but the volatile nature of crypto makes it difficult to use in laundering applications. Source - once upon a time I worked fraud cases for a large bank. (My information is perhaps 5 years out of date however.)

Crypto, however, is incredibly easy to just steal. There’s a how to documentary on SIM swapping on hulu. All the encryption in the world doesn’t protect you from Josh the 17 year old Verizon employee in Dayton who just doesn’t care enough about his job not to be socially engineered. And what’s your second form of identification in your two factor system? It’s the secure text they send to your phone number.

As an aside unrelated to cryptocoins, this is why I try hard never to use a phone number as a secondary authentication method. Email is okay, and the 2FA apps are okay, but never phone numbers if you have any other option. Having no second factor is better than having one tied to a phone number.

I presently use the Authy client, because it allows me to use it on both the desktop and on my phone, so if I lose either, I can easily deactivate the lost one and install a new one.

Another $1B in USDT printed over the weekend. (Why only on weekends? Maybe they need the off-peak electricty rates.)

$41.6B in the supply now.

March 31, 2020, Tether market cap hits $5 billion.
July 27, 2020, Tether market cap hits $10 billion.
December 18, 2020, Tether market cap hits $20 billion.
March 23, 2021, Tether market cap hits $40 billion.

And you were worried about The Fed printing money with abandon.

First, the SEC is going after LBRY because it wants all cryptocurrencies to be regulated as securities, and apparently has been trying to run LBRY out of business over the course of three years with extensive bureaucracy.

https://www.sec.gov/litigation/litre...
https://helplbrysavecrypto.com/

Malor wrote:

If Tether were a properly backed currency, they would be holding 20B in US dollars, with a tether issue of 20B, and then be making their cut on conversions back and forth. In that situation, provided they're not hacked, they can never go insolvent. When people sell them tether, they return slightly fewer dollars. Now there's less tether in the world, and they made a small profit. When people sell them dollars, they issue slightly less tether, make a profit, and now there's more of it again. As long as it's 1:1, and they're properly living off their margin, they're always solvent.

You're assuming that the dollar is stable. How does Tether maintain its peg when the dollar drops in value? If no Tether were introduced, all Tether would gain value because there are now more dollars chasing the same number of Tether. In order to maintain the peg - even in theory - Tether MUST print more, or accept consistent losses in value. This is, in fact, the exact same problem that every other fiat currency faces when people have tried to peg other currencies to the dollar, and it's usually "solved" in the same way.

Instead, they're just putting themselves into the same position as banks, except without any oversight or regulation. Anytime they want some more money for themselves, they just print a bunch and go on a spending spree.

Weird, right? Maybe you shouldn't use currencies that are constructed this way, regardless of "oversight" or "regulation" ... because what that "oversight" and "regulation" primarily does is protect them from bank runs and fraud lawsuits.

Which, it should be pointed out, is exactly the reason that cryptocurrencies were started... to stop that behavior.

No, bitcoin and several other cryptos were designed to stop that behavior. There are numerous cryptocurrencies that are not designed to stop that behavior, and Tether is one of them. One of the biggest mistakes you can make in crypto is assuming that all cryptocurrencies are essentially similar.

There is no ongoing discussion. That discussion was settled by the split with Bitcoin Cash. The powerful big-block advocates went that way, and that currency has largely failed.

No, it wasn't, and it continues today. There are tradeoffs, however, and the current block size is more than adequate for current volume.

In bitcoin, you're subject to the whims and market manipulations of the early movers.

So ... the early movers can decide to print tons more, devaluing what I have? Hmm, no they cannot. Can the early movers protect themselves legally if the value of their holdings drop precipitously? Hmm, no they cannot. Can the early movers use government force to take what I have to make up their losses? Not yet.

The only actual value bitcoin has is that governments have a hard time controlling it... which means that its value directly derives from crime. It's mostly a method of evading US currency controls. It's a huge smuggling operation.

Umm, good? The hilarity of this comparison is that cash can be described exactly the same way, but doesn't have the controls on inflation.

You know perfectly well that I think the Fed is killing us. But cryptocoins are swapping a bad master for a whole bunch that are even worse.

How so? Please show me where the "early movers" can use the government to recover their losses if there's a drop in the bitcoin exchange rate. I'll wait. The only thing the "early movers" can do is buy or sell bitcoin ... just like everyone else. Does that give them power? Yes, some, just like anyone who is rich. But is that power unlimited, or even a significant problem? Hardly. We saw how being rich and powerful worked out for the financial titans who were shorting GME.

Are there other cryptocurrencies that allow that kind of manipulation? Yes, there are. In my humble opinion, you should avoid those.

sigh.

Aetius wrote:

You're assuming that the dollar is stable. How does Tether maintain its peg when the dollar drops in value? If no Tether were introduced, all Tether would gain value because there are now more dollars chasing the same number of Tether. In order to maintain the peg - even in theory - Tether MUST print more, or accept consistent losses in value. This is, in fact, the exact same problem that every other fiat currency faces when people have tried to peg other currencies to the dollar, and it's usually "solved" in the same way.

No, I'm not assuming that the dollar is stable. I am saying that if Tether is fully backed, it can never go bankrupt. If there's a 1:1 holding ratio and they're living off their margin as they should, then the value of Tether goes up and down directly with dollars. Just like a proper gold reserve currency works, fully backed money directly reflects the value of the backing store.

Instead, you've got a fiat currency partially backed by another fiat currency. It's even worse than before. It's got every weakness of the dollar, plus all the weakness of the over-issuance that the Tether management is using to get rich at your expense.

If you hold that currency in preference to dollars, you will probably not like the outcome. It can never be worth more than dollars, long term, and in fact is already actually worth 75% of a dollar, if the 75% backing number I remember from upthread is correct. (whatever the number is, that's what a Tether is actually worth.)

You're replacing a bad master (the Fed) for two masters, and the new one is just adding new problems, not solving any. You've still got all the Fed's problems plus all of Tether's. Both are diluting the value of your holdings. In Tether's case, they may well be devaluing to zero.

edit: this comment was not necessary, I thought Aetius gave up and deleted his post, but he was just removing a dupe. My error.

Aetius wrote:

sigh.

Aetius, remember I come from the same rough political background that you do, and I know many of your arguments exceedingly well. I've been watching the Fed's malfeasance for two decades.

When I tell you that Tether is a racket, pay attention.

Malor wrote:
Aetius wrote:

sigh.

Aetius, remember I come from the same rough political background that you do, and I know many of your arguments exceedingly well. I've been watching the Fed's malfeasance for two decades.

When I tell you that Tether is a racket, pay attention.

I think that post was originally the post above it but all in a quotebox, so the sigh was just a case of "quote is not edit" frustration and wasn't directed at anyone.