[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!

Top_Shelf, check out the use statistics (and advertising numbers) for African-Americans and tobacco... Yes, crypto has been touted as a way out of poverty for minorities, but there's no evidence that it's any more reliable in that role than in any other population.

Gameguru, there's no evidence that if fiat currencies collapse that any crypto network and the compute behind it will survive. Likewise for the Internet.

The collapse of fiat currency is just another route to billions of deaths and the mass destruction of infrastructure through war, neglect, civil disorder and similar issues. In fact, it's like to be the *result* of one or more of those.

Anyone who bets on their electronics surviving an economy destroying catastrophe is not thinking things through.

Robear wrote:

It is the value reserve that backs the US dollar. It's just not a one-to-one relationship anymore.

I’m not sure if you clicked through to the Federal Reserve link I posted, but that’s not true. They lay out specially how the dollar is backed, and it’s with debt securities.

So gold backs dollars and other currencies in central banks all over the world, through it's use as a reserve. What store of actual value backs cryptocurrencies?

The premise of this question is a little bit wonky, since there’s nothing physical or real that backs the money you spend today. Not all cryptocurrencies are backed by something else, but some are. As I pointed out above, you can buy coins backed 1:1 with dollars, as well as other major currencies. You can buy tokens backed with small amounts of physical gold or silver. There are tokens a backed by all kinds of assets - treasuries, real estate, art and collectibles.

Part of the problem here is that it’s easy (and fun, I guess) to generalize, to take an incident and blow it out into a “crypto is x” type statement. Just like someone can glance at the gaming industry and make a statement like “video games are violent and sexist”, that’s an overly broad position that ignores a bunch of worthwhile and cool experiences. There’s definitely a core of truth in the generalizations, there are many problems that can’t be hand-waved away. Just like gaming, I think viewing the technology here as a spectrum that can be expressed in both negative and positive ways makes the most sense.

Robear wrote:

Top_Shelf, check out the use statistics (and advertising numbers) for African-Americans and tobacco... Yes, crypto has been touted as a way out of poverty for minorities, but there's no evidence that it's any more reliable in that role than in any other population.

Oh, for sure.

I'm not saying that crypto solves ANY problem. I think it's a giant con of, "Achieve financial goals with this one trick!"

I am just trying to caution us on our group assumption (?) that it's white Elon fanboys that are the main demo. I don't know that the evidence bears that out.

I only have one friend that is in Crypto and the caveat is he will always correct us if we lump in all Crypto vs Bitcoin.

With hindsight it's pretty clear the Bitcoin craze spawned all the mimics and especially all the get rich quick snake oil versions of Bitcoin.

So when discussing it with him I'll give him the benefit of the doubt that Bitcoin is not the same as other Crypto.

Rationalizing then falls apart there. Same examples of transferring wealth when moving countries. Or people in countries with suspect governments and monetary policy using it. Ok sure and that's pretty much currently. Still a solution looking for a larger problem. Sure maybe you can argue it is a large problem for people in Argentina. Even then it's pretty specific and isolated.

Then you get into the whole economic arguments of fiat currencies and I just tap out. Bitcoin purists are just a branch of the new gold standard cult. Some probably shuffled over or new ones got recruited in.

In the next while though the argument won't be going away as there's enough people speculating or believers to prop Bitcoin up. Which would be fine until you weigh in all the energy and environmental costs. I'm fine with people doing whatever they want with their money until you analyze the externalities.

Norman, the gold is *part* of the collateral for the US currency, along with various government securities. Yes, most of that backing is US government debt (bonds, etc), but in an emergency, the government can sell or buy bonds to help control the economy. And if that fails, the gold. Each of these things has real value in the marketplace (as long as the US government is a going concern; if it's not, Crypto is not going to save your ass lol).

When you posit that government bonds being debts is a problem, the only way that can fail is for the government to fail to repay. It never has. That's the "full faith and credit" bit everyone talks about.

What backs something like Bitcoin or Dogecoin?

Anyone can set up their own cryptocoins. What happens when someone sets up their own alternative currency in the US? This was possible, back in the 19th century; it was Not Good.

Crypto, in the US, is an asset, not a currency. That means that crypto transactions are, essentially, barter.

TheGameguru wrote:

The problem I have with someone expressing any benefit of crypto as some sort of hedge against anything is that it’s complete horsesh*t. Sure it’s nice to think that it will protect you against government collapse or other sorts of dire fiat currency scenarios crypto bros like to imagine. But in those scenarios food and water will be what is really valuable not some bitcoin wallet that you need the computing power of several data centers to do one transaction.

I gotta push up my glasses, go full nerd here, and point out that mining and transaction signing are different. The chip in your credit card has enough computational power to sign transactions, and it takes almost no power.

Anyway, this is one of those inherently western first-world focused arguments. Fiat currencies fail and governments tank fairly often, just not in places anyone really notices. Millions of people have to worry and plan for this possibility. A currency with triple digit inflation has functionally failed. An economic system where wheelbarrows full of paper are required to buy weekly staples has failed. Crypto can and does help these people.

There we are.

Do the crypto for the unfortunate masses outside the "Western, first-world."

Altruism. For the unfortunate.

The Argentinians are saved!

Viva Nepal!

The highest inflation rate ever, in the US, was in 1778 - 29.78%. The highest modern inflation rate in the US was 20.49%. What are Americans protecting themselves against? Something that's very low probability.

The countries with triple digit inflation this year are:

Zimbabwe - 314.5% - Long term serious mismanagement of the currency.

Sudan - 256.2% since the civil war started in April. War in an impoverished country without much of a functioning government or economy. Structural and war-related.

Argentina - 121.7% - Recession, major drought, and the drawdown of gold and foreign reserves (those value stores you don't believe back currencies, Norman...). However, it's natural resources (agricultural, lithium and other minerals) are such that when the weather comes back, they have a very good chance of recovery. So not a structural problem.

Venezuela - 360% - Massive mismanagement of the currency and economy, followed by an embargo.

Hyperinflation was also seen in Austria (1921 to 1923); Bolivia (1970's to 1990's - now at 4.9%); Brazil (1985 to 1994); China (43-45, 47-49); France (1795 to 1796); Weimar Republic (1920, 1923); Occupied Greece (1941 to 1946); Hungary (1945 to 1946, highest level ever recorded, of 4.19x10exp15% - Zimbabwe doesn't look so bad lol); Japanese Occupation of Malay (1942 to 1945); North Korea (Likely 2010); Peru (1980's); Poland (1920s, 1989-90); Japanese Occupation of the Phillipines (1944); Soviet Union (1917 to 1924); Venezuela (2016 to present); Vietnam (late 1980's); Yugoslavia (1989 to 1994); Zimbabwe (2007 to 2008).

With the four exceptions at the top, each of these countries resolved their economic issues and recovered. Even North Korea. And they did it without a magic token totally dependent on first world technology to be bought and sold (as I noted above, it's an asset, not really a currency - no one would use BTC to buy a pizza these days). It's a barter system for high tech libertarians and desperate first world minorities who have been abused by 160 years of system racism and are now being abused by snake oil digital asset hawkers.

None of the countries mentioned would have avoided the issues they had even if they had all used crypto currencies. Why? Because the problem was not the currencies! It was war, environmental disasters, and massively corrupt and incompetent leadership (Brazils problems occurred after decades of mismanagement by a military junta, for example). But mostly, wars.

Inflation is driven by rising demand (which could come, as it is today in the US, from economic improvements), but also from falling supply (as in wars and disasters). In any of these cases, more of the currency in use will be needed to purchase goods and services, and it won't matter whether the currency is printed by the government, or lives on the blockchain. Except, of course, when the power goes out in wartime, or in Texas in the winter, you don't have access to your digital coins...

The three countries with the highest rate of crypto adoption this year are Ukraine (12.7%), Russia (11.9%) and Venezuela (10.3%). 15 of the top 20 countries with crypto adoption - all at lower rates - are developing countries. Crypto is not a nation-scale currency, it's a fancy electrical barter token for those who are technically capable and relatively well to do. In Bangladesh, a country of more than half the US population (170M), the average middle class income is USD3 a day. It's inflation rate has stayed above 9% all year.

How will crypto fix Bangladesh's economy? I mean, that would be the perfect case, right? Protect the money of extremely poor people in a country with a reasonably bad inflation rate, by Western standards. But the population can't even afford a device to hold an account...

White Kanye did what?

SEC gives bitcoin ETFs the green light

After a false start Tuesday, the Securities and Exchange Commission gave its approval Wednesday for some investment companies to offer “spot bitcoin” exchange-traded funds.

The regulator’s highly anticipated move is expected to make bitcoin investing more accessible to Main Street investors, without requiring them to own the digital asset directly.

SEC Chair Gary Gensler made it clear in a statement on the SEC’s website that the agency remains wary. “While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” he wrote.

The SEC had a deadline of January 10 to offer a decision for just one of the 11 firms that applied to offer bitcoin ETFs. On Wednesday it offered approval to all 11 of them.

Bitcoin, the leading cryptocurrency, has a current market cap of roughly $900 billion. It has seen volatile price swings throughout its 15-year history. Most recently, after hitting an all-time high of nearly $69,000 in November 2021, it fell below $17,000 during the “crypto winter” of 2022 and has mostly been trading north of $45,000 in the run-up to the SEC’s decision.

About an hour after the news Wednesday, the price of bitcoin was up 0.3%% to nearly $46,000, according to data on coinmarketcap.com.

After the stock market close on Tuesday, a post on the SEC’s X account falsely claimed the regulatory agency had approved the listing and trading of spot bitcoin exchange-traded products.

That was quickly debunked by Gensler, and the SEC took down the message. According to X, an “unidentified individual obtaining control over a phone number associated with the @SECGov account through a third party” was responsible for the post. On Wednesday, the SEC said the FBI was looking into the matter.

What could possibli go wrong.

Oh, look, they've legalized financial fraud.

BadKen wrote:

Oh, look, they've legalized financial fraud.

It's not just for congressmen anymore!

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It's sh*t like this that destroys people's confidence that government can/will watch their back.

Bitconned is a scammer’s guide to crypto

Ray Trapani always wanted to be a criminal, he informs us at the beginning of Bitconned, a documentary now streaming on Netflix about the Centra Tech scam. His interests include illicit drugs, nice suits, gambling, and fancy cars. His inspiration was his grandfather, who he says was in the mafia. (His grandmother, looking glamorous in cheetah print and a fabulous belt, disputes this claim; his mother says she saw suitcases of cash.) He’s from Florida, obviously.

Time passes quickly in cryptoland, so I’m not sure many people remember the Centra Tech scandal. Bitconned — which, despite its title, has very little to do with Bitcoin — takes place during the initial coin offering boom of the late 2010s, a period many crypto newcomers may not remember. It’s a blow by blow of a scam, narrated by a scammer. Anyone seriously considering investing in cryptocurrency should watch it, because the scams aren’t gone — they’ve only gotten more sophisticated.

Trapani, our narrator, started his first business as a teen dealing OxyContin with forged prescriptions and a partner named Andrew Aguirre. Trapani describes the high of the crime itself, saying, “It’s always a cool feeling when you hit that first mark.” It didn’t last. Trapani got pulled over, and police found a bottle of Oxy that didn’t have his name on it. Trapani immediately flipped, ratting out his buddies. Aguirre got in trouble; Trapani got off. This is called foreshadowing.

It becomes clear very early on in Bitconned that Ray Trapani’s first love is money and his second love is himself. On-screen, he’s undeniably charismatic, as narcissists often are. And you can tell he’s having a good time — because in order to break up the monotonous talking-head interviews required for this kind of documentary, director Bryan Storkel shows Trapani in action, driving a fancy car or getting fitted for a suit. It’s a clever way to make these interviews more visually interesting that also clearly fits in with Trapani’s view of himself.

Trapani made money hand over fist with a legitimate luxury car rental company called Miami Exotics, in which he lured his family into investing. (He’d also gotten them to cosign for loans.) But it wasn’t enough. He and his partners were spending it on exactly what you might imagine: nightlife; vacations in the Bahamas; shopping; gambling; and, in one case, a $2,000 dog. More troublingly, someone — maybe business partner Sam “Sorbee” Sharma, though he denies it in a statement — was writing checks to “cash” and relieving the company of its money. Trapani found out and blew the remaining money on an all-night baccarat bacchanal. He tried to kill himself by overdosing on pills. He lived. Then he pivoted to crypto.

A computer scientist says he’s the mystery creator of bitcoin. A London judge aims to find the truth

One of the enduring mysteries of the cryptocurrency industry took center stage Tuesday in a London court where a trial could finally settle the debate over the identity of bitcoin’s founder.

Australian computer scientist Craig Wright entered the witness box at the High Court and testified he was the man behind “Satoshi Nakamoto,” the pseudonym that has masked the identity of the creator of bitcoin.

Wright has long asserted that he is Nakamoto. A nonprofit group of technology and crypto companies is trying to prove he’s not. The trial started on Monday and is expected to last a month, before a judge rules at a later date.

“Wright’s claim to be Satoshi is a lie, founded on an elaborate false narrative backed by forgery of documents on an industrial scale,” attorney Jonathan Hough said on behalf of the Crypto Open Patent Alliance (COPA) at the outset of trial. “As his false documents and inconsistencies have been exposed, he has resorted to further forgery and ever more implausible excuses.”

At stake is not just bragging rights to the creation, but control of the intellectual property rights.

Wright has used his claim as bitcoin’s inventor to file litigation to drive developers away from further developing the open-source technology, the alliance claims in their lawsuit. The ruling will affect three pending lawsuits that Wright has filed based on his claim to having the intellectual property rights to bitcoin.

“Wright has threatened to bankrupt developers, sent notices of his intent to sue, and has, in fact, engaged in scorched earth litigation against these volunteers, all premised on the baseless assertion that he is the founder of bitcoin,” the alliance said Monday in a statement.

The murky origins of bitcoin date to the height of the financial crisis in 2008. A paper authored by a person or group using the Nakamoto pen name explained how digital currency could be sent around the world anonymously, without banks or national currencies. Nakamoto seemed to vanish three years later.

Speculation on the true identity swirled for years and the names of several candidates had emerged when Wright first surfaced to claim the identity in 2016 only to quickly return to the shadows, saying he didn’t “have the courage” to provide more proof.

Wright asserted in court Tuesday that he created the technology and the cryptic identity behind it, which he said was based on his admiration for Japanese culture. He said the name was a combination of the surname of philosopher Tominaga Nakamoto and Satoshi David, a figure in a book about American tycoon J.P. Morgan, and a Pokemon character.

He said he didn’t want the creator to be anonymous, so he used an alias to protect his privacy.

“This allowed me to focus on my work and ensured that the spotlight remained on the innovation and potential of bitcoin rather than the individual behind it,” he said.

Defense lawyer Anthony Grabiner said the alliance hadn’t produced positive evidence that Wright wasn’t Satoshi, and only sought to undermine the authenticity of documents that he has relied on to prove that he’s the creator.

“It is striking that no one else has credibly claimed the mantle of Satoshi, despite the high-profile nature of Dr. Wright’s claim to be Satoshi,” Grabiner said. “If Dr. Wright were not Satoshi, the real Satoshi would have been expected to come forward to counter the claim.”

While Wright managed to convince several influential bitcoin enthusiasts that he was the real deal by demonstrating the use of Nakamoto’s secret bitcoin keys, other crypto experts said that they debunked his claims. Despite widespread skepticism in the cryptocurrency community, he has prevailed in court cases.

In 2021, he won a civil case in Florida against the family of a deceased business partner that claimed it was owed half the 1.1 million bitcoin, worth approximately 37.7 billion pounds ($47.5 billion) today, that could only be owned by a person or entity involved with the digital currency from its beginning — such as the creator.

Wright and other cryptocurrency experts testified at trial that he owned the bitcoin in question. His lawyers claimed that while he had collaborated with his deceased friend, David Kleiman, their partnership had nothing to do with bitcoin’s creation or early operation.

Because all bitcoin transactions are public, members of the bitcoin community have regularly called for Wright to move just a fraction of the coins to prove ownership. Wright appears to have never done so, despite vowing to prove that he’s the owner of the fortune.

In the London trial, Hough repeatedly sparred with Wright over the authenticity of documents that he said support his claims.

Hough said that the original white paper on the creation of bitcoin was written on OpenOffice software and that experts on both sides agreed that Wright submitted a version created on software called LaTeX, which didn’t exist when the paper was written.

Hough suggested that numbers misaligned on the document behind the “origin myth” were signs it had been forged.

“If I forged that document, it would be perfect,” said Wright, who is due to testify for another five days.

Over 2 percent of the US’s electricity generation now goes to bitcoin

What exactly is bitcoin mining doing to the electric grid? In the last few years, the US has seen a boom in cryptocurrency mining, and the government is now trying to track exactly what that means for the consumption of electricity. While its analysis is preliminary, the Energy Information Agency (EIA) estimates that large-scale cryptocurrency operations are now consuming over 2 percent of the US's electricity. That's roughly the equivalent of having added an additional state to the grid over just the last three years.

Okay, I think the reporter screwed up somehow? LaTex has been around since 1984; OpenOffice, since 2002. Nakamoto's paper was released on October 31, 2008. I'm completely flabbergasted that someone would claim in open court that the most-used formatting software for scientific papers and books, LaTex, was not released, 24 years after it became available.

Someone has got something *badly* wrong.

Yes, the reporter got it wrong. Wright submitted one version of the white paper that was created using a version of Open Office from later than 2008. He then submitted another version created by LaTex which had a different set of issues.

Hopefully this trial is the last we hear of this fraudster.

Prederick wrote:

Over 2 percent of the US’s electricity generation now goes to bitcoin

What exactly is bitcoin mining doing to the electric grid? In the last few years, the US has seen a boom in cryptocurrency mining, and the government is now trying to track exactly what that means for the consumption of electricity. While its analysis is preliminary, the Energy Information Agency (EIA) estimates that large-scale cryptocurrency operations are now consuming over 2 percent of the US's electricity. That's roughly the equivalent of having added an additional state to the grid over just the last three years.

We All Starve & Freeze Together

Almost a year old, but a really good interview with Molly White, the catalogger of crypto news stories at
https://www.web3isgoinggreat.com/

Bitcoin price surges past $69,000 to new all-time high

The price of the world's largest cryptocurrency, Bitcoin, has hit a new all-time high of more than $69,000.

It surpasses the previous record set in November 2021 - though by 2022 Bitcoin's value had sunk to $16,500.

This new surge in price has been spurred by US finance giants pouring billions into buying bitcoins.

Carol Alexander, professor of finance at Sussex University, said its price could go higher still but warned that crypto was "notoriously volatile."

"Too often in the past the price crash was timed so that ordinary investors buying Bitcoin during the bubble are the ones who lose out," she told the BBC.

The new record represents another dramatic moment in Bitcoin's turbulent history.

It was invented in 2009 by a person or persons calling themselves Satoshi Nakamoto - their true identity remains a mystery.

Conceived as a means to create money for the internet, its roots lay in an anti-establishment ethos encouraging people to live free from the existing power structure of financial institutions and governments.

However, its new all-time high value has come about precisely because those establishment firms have been pouring billions of dollars into acquiring it.

That has been made possible because, in January 2024, US regulators reluctantly approved several spot Bitcoin Exchange-Traded Funds (ETFs).

That allowed giant investment firms like Blackrock, Fidelity and Grayscale to sell products based on the price of Bitcoin.

Between them, they have been buying hundreds of thousands of bitcoins, rapidly driving up their value.

Prof Alexander told the BBC these entrants "are attracting institutional investors into Bitcoin and they are putting a considerable upwards pressure on price."

But she added Bitcoin's "halving" event, expected to take place in April, may also influence the cryptocurrency's value.

"In the past, these events have been accompanied by price surges," she said.