U.S. regulators exploring how banks could hold Bitcoin – FDIC Chairman(reuters.com)
reuters.com
U.S. regulators exploring how banks could hold Bitcoin – FDIC Chairman
https://www.reuters.com/business/finance/us-regulators-exploring-how-banks-could-hold-crypto-assets-fdic-chairman-2021-10-26/
80 comments
The irony here is truly staggering. The whole point of cryptocurrencies is to eliminate the need for trusted third parties, and especially to eliminate the need for trusted third parties who are so heavily regulated that they are essentially arms of the government, like banks. Still, it is far from clear (at least to me) whether the FDIC chair is being clueless or devilishly clever here.
Was that the whole point? "Chancellor on brink of second bailout for banks" is to me more germane. Not allowing the state to issue money at will is more of a core tenet.
I think the a lot of the dream from there is to make it possible to electronically transfer cash. This is currently impossible with conventional money -- the best we can do is transfer deposit records electronically. To make this work we treat deposit records as surrogate cash, and take on a huge amount of systemic risk into the monetary system, which we basically backstop with unlimited government guarantees.
With Bitcoin, at least in theory, we can offer an alternative system. That's not to say that a system can't arise of banks that hold bitcoin deposits and allow you to transfer these deposit record between banks, but the banks need to price in the risk of failure to meet their obligations, so hopefully we can have some mechanism of discounting bank-deposit-bitcoin vs. held-in-wallet-bitcoin. But I think this dream is dying -- there will come a day when you can only buy something with bitcoin, but only with bitcoin deposited in a bank, because it's "easier" and can be unwound, etc., because of correspondence arrangements, and then you'll have the Federal Reserve, that can basically artificially create new "bitcoin deposits", and banks will only let you withdraw 0.01BTC per week, so you'll never notice that they are insolvent, and we'll basically be right back where we started.
I think the a lot of the dream from there is to make it possible to electronically transfer cash. This is currently impossible with conventional money -- the best we can do is transfer deposit records electronically. To make this work we treat deposit records as surrogate cash, and take on a huge amount of systemic risk into the monetary system, which we basically backstop with unlimited government guarantees.
With Bitcoin, at least in theory, we can offer an alternative system. That's not to say that a system can't arise of banks that hold bitcoin deposits and allow you to transfer these deposit record between banks, but the banks need to price in the risk of failure to meet their obligations, so hopefully we can have some mechanism of discounting bank-deposit-bitcoin vs. held-in-wallet-bitcoin. But I think this dream is dying -- there will come a day when you can only buy something with bitcoin, but only with bitcoin deposited in a bank, because it's "easier" and can be unwound, etc., because of correspondence arrangements, and then you'll have the Federal Reserve, that can basically artificially create new "bitcoin deposits", and banks will only let you withdraw 0.01BTC per week, so you'll never notice that they are insolvent, and we'll basically be right back where we started.
I'm lost, how is the government insurance of deposit records any worse than the government insurance of cash?
It's worse, not on a "debasement of the currency" basis, but on a surveillance and censorship basis.
On a systemic basis it is slightly more dangerous than cash just because it reinforces the notion that bank deposits are valued at their face value and are thus a cash equivalent. But banks can fail or become insolvent, and because the money sovereign has decided that bank deposits are equivalent to cash, it is obligated to maintain that (through bailouts or other support), while at the same time banks are for-profit enterprises that are taking non-negligible risks (and sometimes explosively tail-heavy risks) to earn income based on their deposits.
On a systemic basis it is slightly more dangerous than cash just because it reinforces the notion that bank deposits are valued at their face value and are thus a cash equivalent. But banks can fail or become insolvent, and because the money sovereign has decided that bank deposits are equivalent to cash, it is obligated to maintain that (through bailouts or other support), while at the same time banks are for-profit enterprises that are taking non-negligible risks (and sometimes explosively tail-heavy risks) to earn income based on their deposits.
I don't think he's being either devilish or clueless.
Crypto is an asset class that has cultivated a tremendous amount of interest over the years. Banks want to support crypto in the same way they do other asset classes, but doing so is a minefield.
Offering regulatory clarity here is a good thing. This is not an attack on crypto, nor is it about control. Regulators are just providing a framework to allow banks to work with / hold crypto.
Crypto is an asset class that has cultivated a tremendous amount of interest over the years. Banks want to support crypto in the same way they do other asset classes, but doing so is a minefield.
Offering regulatory clarity here is a good thing. This is not an attack on crypto, nor is it about control. Regulators are just providing a framework to allow banks to work with / hold crypto.
The FDIC Chair is a woman, Jelena McWilliams.
Trusted third parties exist because people demand their services. The problems that arise when you stuff cash under your mattress are the same problems that are leading people to turn to third parties to transact in Bitcoin. Bitcoin didn't eliminate these problems, it is simply a system that intentionally ignores them.
Even darkweb markets have turned to escrow services.
Even darkweb markets have turned to escrow services.
Bitcoin failed that requirement. Expensive transactions ensure that nobody will attempt to move their coins in order to actually transact. The exchanges turned into banks instead.
Also, the risks associated with physically holding substantial wealth in bitcoin cannot be ignored. It's just like storing lots of cash at home. We should have the option to store it at a bank if we want to.
Also, the risks associated with physically holding substantial wealth in bitcoin cannot be ignored. It's just like storing lots of cash at home. We should have the option to store it at a bank if we want to.
People don’t transact gold either. It is difficult to transport and verify. Gold is though a reliable store of value as creating more is not easy, just like Bitcoin.
I don't dispute that gold is a good store of value. I'm saying bitcoin was supposed to have been more than that. It was supposed to be a currency. It failed.
Not really, Bitcoins transaction fees, processing times and rate limits have been well known for a decade. If you think Bitcoin was ‘supposed’ to buy a cup of coffee that’s on you. The rest of us have been using it successfully for much bigger things.
Yes, there should be options. Not your keys, not your Bitcoin though!
You can outsource to an exchange/bank but that gives you an IOU only, and not Bitcoin. The IOU is permissioned, censored, and prone to seizure.
You can outsource to an exchange/bank but that gives you an IOU only, and not Bitcoin. The IOU is permissioned, censored, and prone to seizure.
The point of cryptocurrencies is "number go up". Or at least that's why the marketing has been successful.
There's a secondary market in "offshore accounts for everyone", via the shadow-banking stablecoins like Tether.
There's a secondary market in "offshore accounts for everyone", via the shadow-banking stablecoins like Tether.
I don't think the point was to ban centralized options, but to allow decentralized options. A system with freedom would allow sub-systems with "no freedom" as well
Just because banks hold it doesn’t mean Bitcoin is dependent on banks whatsoever.
You see irony, I see a captured government.
Wealthy, envious of seeing their assets outcompeted by crypto are now hoping banks can allow them to further privatize the gains while socializing the losses.
Wealthy, envious of seeing their assets outcompeted by crypto are now hoping banks can allow them to further privatize the gains while socializing the losses.
If you actually dig into all of the services that banking provides, grandiose statements like this fall apart pretty quickly.
One of the biggest problems that crypto hasn't figured that banking is great at is transaction reversal and fraud-prevention. The banking system uses wire transfers that can be reversed if necessary, bitcoin has nothing like this. If an attacker gets your bitcoin wallet ID and key, say goodbye to your coin. That's it, you have no recourse, and frankly, placing all of the responsibility on consumers to safeguard their digital assets without any sort of recourse is pretty ridiculous.
The crypto community loves to talk a bunch of trash about financial regulation, and some of it is true, but a fair amount of regulation actually benefits consumers in ways that crypto just isn't capable of at this time.
One of the biggest problems that crypto hasn't figured that banking is great at is transaction reversal and fraud-prevention. The banking system uses wire transfers that can be reversed if necessary, bitcoin has nothing like this. If an attacker gets your bitcoin wallet ID and key, say goodbye to your coin. That's it, you have no recourse, and frankly, placing all of the responsibility on consumers to safeguard their digital assets without any sort of recourse is pretty ridiculous.
The crypto community loves to talk a bunch of trash about financial regulation, and some of it is true, but a fair amount of regulation actually benefits consumers in ways that crypto just isn't capable of at this time.
That’s true, but I think people overall are pretty happy with crypto. You can move more money, faster, cheaper and with way less hassle than a wire transfer. In addition crypto exchanges and services have proven pretty reliable. It really is night and day vs traditional banking.
> You can move more money, faster, cheaper and with way less hassle than a wire transfer.
My point is that the speed and cheapness a crypto system comes at a pretty significant risk.
Another major benefit to the banking system is that all solid banks are insured by the FDIC, meaning that if the bank fails, the FDIC guarantees all accounts held by the bank for up to $250k. In order to do this, banks have to meet capital liquidity requirements set out by auditors and meet certain benchmarks. Again, another thing that doesn't exist in crypto but should.
When everything goes smoothly, crypto works great. But if the day ever comes that a big company like Coinbase gets hacked and crypto is exfiltrated, it'll be a real test for the community because these are problems that have been solved for decades.
> In addition crypto exchanges and services have proven pretty reliable.
Look at the mt gox hack, millions upon millions in crypto was stolen in that hack, and there was no recourse for any of those folks. Who knows what is going to happen with Tether? You don't have look that hard to find the kind of financial criminality banking is so often accused of persisting in the crypto community as well.
My point is that the speed and cheapness a crypto system comes at a pretty significant risk.
Another major benefit to the banking system is that all solid banks are insured by the FDIC, meaning that if the bank fails, the FDIC guarantees all accounts held by the bank for up to $250k. In order to do this, banks have to meet capital liquidity requirements set out by auditors and meet certain benchmarks. Again, another thing that doesn't exist in crypto but should.
When everything goes smoothly, crypto works great. But if the day ever comes that a big company like Coinbase gets hacked and crypto is exfiltrated, it'll be a real test for the community because these are problems that have been solved for decades.
> In addition crypto exchanges and services have proven pretty reliable.
Look at the mt gox hack, millions upon millions in crypto was stolen in that hack, and there was no recourse for any of those folks. Who knows what is going to happen with Tether? You don't have look that hard to find the kind of financial criminality banking is so often accused of persisting in the crypto community as well.
Mt gox happened 8 years ago, and Tether just survived a pretty big test. These things actually build confidence in crypto. FDIC is only possible because the government can print money which underscores the how prone dollars are to inflation. As with everything - diversify, hold both.
That's why it's either-or and not both-and.
You want reversibility and fraud prevention? Use an intermediary.
You want irrevocable finality and no intermediaries? You can do that too.
You're free to choose, nobody is forcing you to use one or the other.
You want reversibility and fraud prevention? Use an intermediary.
You want irrevocable finality and no intermediaries? You can do that too.
You're free to choose, nobody is forcing you to use one or the other.
Even with an intermediary, you still have to trust them with your credentials and it's not foolproof.
MT Gox was the biggest exchange in the world when it was hacked in 2014 and billions in bitcoin was stolen, it's account holders were totally left to dry. The freedom of choice is nonsense in an immutable, decentralized system where stuff like this can happen. If someone gets your private key from you directly or through a hosted exchange, that's it.
MT Gox was the biggest exchange in the world when it was hacked in 2014 and billions in bitcoin was stolen, it's account holders were totally left to dry. The freedom of choice is nonsense in an immutable, decentralized system where stuff like this can happen. If someone gets your private key from you directly or through a hosted exchange, that's it.
Whose exactly is "their" assets? Assets belong to people, and they're also not broadly stored at banks.
Financial instruments are assets as well. Banks handle those all the time.
Currencies aren't assets. [1]
[1] https://www.commonfund.org/blog/is-currency-an-asset-class#:....
[1] https://www.commonfund.org/blog/is-currency-an-asset-class#:....
One random person's blog post is not sufficient to disqualify centuries of economic and accounting literature that has classically defined cash to be a canonical asset class.
Currencies are universally listed at the top of any balance sheet, small or large company alike.
https://en.wikipedia.org/wiki/Asset
https://en.wikipedia.org/wiki/Cash_and_cash_equivalents
Currencies are universally listed at the top of any balance sheet, small or large company alike.
https://en.wikipedia.org/wiki/Asset
https://en.wikipedia.org/wiki/Cash_and_cash_equivalents
That's fair, I was off base. Withdrawn, but I'll leave it up so folks understand what you're replying to. Thanks for the correction!
1) Banks owning some Bitcoin does not imply Bitcoin needs banks.
2) Banks need Bitcoin though, because long-term everything else is going towards zero in Bitcoin terms.
2) Banks need Bitcoin though, because long-term everything else is going towards zero in Bitcoin terms.
It's funny because right now in New York state you technically can't trade bitcoin without at least one party having a proper BitLicense. [0]
[0]: https://en.wikipedia.org/wiki/BitLicense
[0]: https://en.wikipedia.org/wiki/BitLicense
There are two pretty ginormous exemptions in the regulation that allow transactions in virtual currency without a BitLicense: https://govt.westlaw.com/nycrr/Document/I85908c6b253711e598d...
Ahhh that explains OpenSea operating in NYC.
This would only affect you if operating an exchange on behalf of somebody (eg Coinbase)
This would only affect you if operating an exchange on behalf of somebody (eg Coinbase)
What if they ‘nationalise’ everyones btc holding?
Maybe the FDIC thinks they’re devilishly clever but are actually clueless.
Various world governments have been taking potshots at crypto currencies. It’s pretty obvious they can’t control them, so instead they try to undermine them, but thanks to their own incompetence they actually make crypto more attractive (and intractable) in the process.
Various world governments have been taking potshots at crypto currencies. It’s pretty obvious they can’t control them, so instead they try to undermine them, but thanks to their own incompetence they actually make crypto more attractive (and intractable) in the process.
> Some banks have already begun dabbling in these areas without regulatory clarity. Earlier this month, U.S. Bancorp (USB.N) announced it was launching a cryptocurrency custody service for institutional investment managers.
This is fascinating. Within a mere 10 years, Bitcoin has gone from a toy to something now intersecting directly with the US banking system.
With each integration point, Bitcoin gets more difficult to legislate out of existence or destroy through capricious police action. Aside from Tether, this is one of the biggest risk factors cited by those who have studied Bitcoin in detail.
This is fascinating. Within a mere 10 years, Bitcoin has gone from a toy to something now intersecting directly with the US banking system.
With each integration point, Bitcoin gets more difficult to legislate out of existence or destroy through capricious police action. Aside from Tether, this is one of the biggest risk factors cited by those who have studied Bitcoin in detail.
The fear that governments were going to take down bitcoin was always overblown. It has a basis in the libertarian idea that governments hate & destroy all good things, and bitcoin is a good thing, thus the government will hate & destroy it. Regulators were skeptical at first, but that quickly gave way to accommodation.
But this is what success always looked like for bitcoin. Most people want the ability to assign custodians to their assets; they want people to be able to identify their assets from other peoples' assets; they don't care about the ability to bury digital treasure somewhere. And importantly, most people invest with an eye on ROI, not for some philosophical purpose.
Bitcoin is mainstream, and has been for a while. And now the mainstream buyers are want mainstream financial management structures which are opposed to the views of the people who bought btc before it was cool.
But this is what success always looked like for bitcoin. Most people want the ability to assign custodians to their assets; they want people to be able to identify their assets from other peoples' assets; they don't care about the ability to bury digital treasure somewhere. And importantly, most people invest with an eye on ROI, not for some philosophical purpose.
Bitcoin is mainstream, and has been for a while. And now the mainstream buyers are want mainstream financial management structures which are opposed to the views of the people who bought btc before it was cool.
BTC is mainstream in all the ways that don’t matter. Fundamentally, it doesn’t work for everyday transactions. The only transactions for BTC now are through exchanges where the exchange never actually passes “physical” ownership to the bankee. That’s antithetical to the whole point of BTC.
BTC now is just mass FOMO over not coming in to the Ponzi scheme early enough to still make money.
BTC now is just mass FOMO over not coming in to the Ponzi scheme early enough to still make money.
Bitcoin doesn’t need to be used for everyday transactions, just like gold doesn’t need to be either. That’s not it’s strength. It’s strength is a store of value that is highly resistant to fiat type inflation.
This seems like exactly the kind of centralization bitcoin is trying to avoid.
Fortunately, in Bitcoin whale ownership does not imply control over the network. Fortunately, Bitcoin is PoW and not PoS.
Sure it does, if they own all the money they can just buy all the miners. PoS just elides the step of wasting all the world's resources.
You should watch This Machine Greens https://www.youtube.com/watch?v=PRN4089qufw&ab_channel=SwanS...
Manufacturing solar panels and giant wind turbines, then generating a bunch of power, and then wasting it isn't green. It's greenwashing.
However, that wasn't really the question at issue.
However, that wasn't really the question at issue.
> However, that wasn't really the question at issue.
Weren't you the one who brought up the question in the first place?
> wasting it isn't green
The point is that renewable energy sources tend to produce maximum power at off-peak times. So to serve peak times, we need more wind and solar generation than is required for off-peak times.
Since we don't have good ways to store and time-shift electricity, intermittent Bitcoin mining is one way to soak up the excess capacity off-peak to make the generation capacity economical.
Should we just turn the windmills and solar panels off during off-peak times?
Or should we leave them on and get clean energy at a price that's cheaper than coal?
Weren't you the one who brought up the question in the first place?
> wasting it isn't green
The point is that renewable energy sources tend to produce maximum power at off-peak times. So to serve peak times, we need more wind and solar generation than is required for off-peak times.
Since we don't have good ways to store and time-shift electricity, intermittent Bitcoin mining is one way to soak up the excess capacity off-peak to make the generation capacity economical.
Should we just turn the windmills and solar panels off during off-peak times?
Or should we leave them on and get clean energy at a price that's cheaper than coal?
> Weren't you the one who brought up the question in the first place?
Apologies if I was unclear. I was referring to the parent's statement that "fortunately, in Bitcoin whale ownership does not imply control over the network. Fortunately, Bitcoin is PoW and not PoS."
My retort was that whales in Bitcoin control such a disproportionate share of the currency that if they wanted to control the network itself too, they could simply buy the miners which isn't really too dissimilar from staking in a proof of stake coin. My understanding is that each mining pool provides roughly the same security as a PoS validator.
When I replied "however, that wasn't really the question at issue," what I meant that the "greenness" wasn't really the crux of my reply, rather I was suggesting that network control falls to those with the most coins regardless of whether you're operating PoS or PoW, the only difference is whether resources are consumed or not along the way.
Apologies if I was unclear. I was referring to the parent's statement that "fortunately, in Bitcoin whale ownership does not imply control over the network. Fortunately, Bitcoin is PoW and not PoS."
My retort was that whales in Bitcoin control such a disproportionate share of the currency that if they wanted to control the network itself too, they could simply buy the miners which isn't really too dissimilar from staking in a proof of stake coin. My understanding is that each mining pool provides roughly the same security as a PoS validator.
When I replied "however, that wasn't really the question at issue," what I meant that the "greenness" wasn't really the crux of my reply, rather I was suggesting that network control falls to those with the most coins regardless of whether you're operating PoS or PoW, the only difference is whether resources are consumed or not along the way.
Bitcoin incentivizes miners and energy companies to use otherwise wasted energy. It incentivizes them to innovate in the energy industry unlike other networks bitcoin is able to pay the people that innovate and build better technologies in the space.
No, it really doesn't. It incentivizes the use of the cheapest energy. That's why PE firms are re-opening coal power plants. Burning waste coal is about the worst thing you can do with it. Flaring needs to stop, too. Transmission of power is about 97% efficient within the current network, and there's a whole world of things we can do with that energy - desalination, metalworking.
[edit] Given a choice between reliable power coming out the back of a coal furnace in town and unreliable power in the middle of nowhere coming out the back of a waste plant and a solar farm, for probably 50% more, I know which I'd pick if I were running a business.
This is again greenwashing.
[edit] Given a choice between reliable power coming out the back of a coal furnace in town and unreliable power in the middle of nowhere coming out the back of a waste plant and a solar farm, for probably 50% more, I know which I'd pick if I were running a business.
This is again greenwashing.
> wasting all the world's resources
Not even 0.5% of global energy usage.
Not even 0.5% of global energy usage.
Writing a few bytes into a ledger is consuming 0.5% of global energy, but of course it's also consuming a country worth of power and generating a country of e-waste. So far, and that's just limited by the current price. Its trajectory is clear. [1]
[1] https://digiconomist.net/bitcoin-energy-consumption
[1] https://digiconomist.net/bitcoin-energy-consumption
That energy is supposed to buy us something. A distributed ledger which is supposed to provide us valuable qualities such as anonymity, uncensorability, total economic freedom in general.
The problem is bitcoin has failed to deliver on these promises. It truly is a tragedy that so much energy is being wasted on BTC specifically. It should be redirected towards Monero.
The problem is bitcoin has failed to deliver on these promises. It truly is a tragedy that so much energy is being wasted on BTC specifically. It should be redirected towards Monero.
It's a small fraction of the global energy usage but that's far more than the traditional banking system _despite_ being used by an infinitesimal fraction of people. This is like saying RISC-V manufacturing generates less pollution than x86 without noting the difference in marketshare.
Energy use by traditional banking is not at all comparable. Banks have none of the properties Bitcoin was envisioned to provide. Fundamentally, bitcoin is not even a bank, it's more like cash. It makes no sense to compare the two.
That energy usage is supposed to buy us a monetary system that's completely independent of government. Uncensorable, untraceable, unsanctionable, anonymous, the works. It literally doesn't matter how much energy it uses, as long as those properties are achieved. The problem is BTC failed at all of them. It really is a waste to spend all this energy mining BTC when better projects like Monero exist.
That energy usage is supposed to buy us a monetary system that's completely independent of government. Uncensorable, untraceable, unsanctionable, anonymous, the works. It literally doesn't matter how much energy it uses, as long as those properties are achieved. The problem is BTC failed at all of them. It really is a waste to spend all this energy mining BTC when better projects like Monero exist.
How is it not directly comparable? People use cash, checks, wire transfers, credit cards, etc. to make or receive payments all of the time. There's no reason why you can't compare those from the user's perspective — if I want to buy a cup of coffee, how long does it take, how much does it cost, how hard is it, etc.?
> It literally doesn't matter how much energy it uses, as long as those properties are achieved.
This is like saying it doesn't matter how slow it is as long as your computing machine is Turing complete. It doesn't matter if you achieve those properties on an unworkable system and it especially isn't true that more than a tiny fraction of people value them above cost or utility — a drug deal might care a lot about untraceable but the average person doesn't care enough to pay more or use something inconvenient.
> It literally doesn't matter how much energy it uses, as long as those properties are achieved.
This is like saying it doesn't matter how slow it is as long as your computing machine is Turing complete. It doesn't matter if you achieve those properties on an unworkable system and it especially isn't true that more than a tiny fraction of people value them above cost or utility — a drug deal might care a lot about untraceable but the average person doesn't care enough to pay more or use something inconvenient.
> How is it not directly comparable?
Because banks were never supposed to provide untraceable, uncensorable, unsanctionable, anonymous transactions. They do the opposite.
Cryptocurrencies are not banks. They're coins. Analogous to cash which also allows for private transactions. Cryptocurrency is an attempt to create a digital cash system. It has nothing to do with banks.
> the average person doesn't care enough to pay more or use something inconvenient
Yes, this is why bitcoin failed. Normal people can't transact with it. The world will not change until everyone is transacting in cryptocurrency, leaving USD and all other currencies behind.
Because banks were never supposed to provide untraceable, uncensorable, unsanctionable, anonymous transactions. They do the opposite.
Cryptocurrencies are not banks. They're coins. Analogous to cash which also allows for private transactions. Cryptocurrency is an attempt to create a digital cash system. It has nothing to do with banks.
> the average person doesn't care enough to pay more or use something inconvenient
Yes, this is why bitcoin failed. Normal people can't transact with it. The world will not change until everyone is transacting in cryptocurrency, leaving USD and all other currencies behind.
Don't forget that "the traditional banking system" requires large standing armies and navies. The reason random countries can't print dollars is that there are 20 aircraft carriers floating around the world ready to bomb them back into the barter age. That cost has to be factored in.
No, it really doesn't. The army defends the nation and currency is an emergent property of the nation, but the army isn't out there with guns making sure people accept dollars. If you switched to Bitcoin and killed the US dollar, the army would still be needed to protect the country, to protect America's business interests abroad, its political interests abroad and its people. That would be true even if the currency was old shoelaces. The US army long predates the fiat dollar by about 200 years and there is absolutely, indisputably, no path to reducing cost or energy expenditure on the army when switching to a different currency.
Countries that use other countries currencies (in the way El Salvador uses the US Dollar) still have armies and some countries that use their own fiat dollars (Japan, Iceland) have no armies.
These two are uncorrelated.
Unless there's some straight line between, say, switching to Bitcoin and Xi Jinping realizing Taiwan was always its own country and grabbing some Baijiu with Tsai Ing-wen. I'm very excited to find out how Bitcoin solves the Hong Kong situation too! And I suppose it'll take care of business in the Sudan? Finally that trip to Yemen is back on the table. C'mon now...
Countries that use other countries currencies (in the way El Salvador uses the US Dollar) still have armies and some countries that use their own fiat dollars (Japan, Iceland) have no armies.
These two are uncorrelated.
Unless there's some straight line between, say, switching to Bitcoin and Xi Jinping realizing Taiwan was always its own country and grabbing some Baijiu with Tsai Ing-wen. I'm very excited to find out how Bitcoin solves the Hong Kong situation too! And I suppose it'll take care of business in the Sudan? Finally that trip to Yemen is back on the table. C'mon now...
That's a very reductive view ignoring all of the other things which depend on governments. For example, most cryptocurrency users depend on having functional police and court systems, the open internet, etc. — do we add that to their costs as well?
Unless you’re implying the banks would be mining as well - that’s the type of centralization Bitcoin tries to avoid.
It's gonna be pretty funny to watch all the bitcoin people go into a tizzy when the banks buy a ton of bitcoin and start to regulate the economy by changing the money supply at will. It doesn't matter if there's some kind of theoretical cap on the supply. Say the bank buys 50% of the money supply, they can then double the number of coins at will. If they buy 90%, they can increase it by 10x.
Given the thousands of banks, exchanges, services, countries, etc.. holding Bitcoin it’d be practically impossible for any one entity to acquire enough to begin to have any sort of control over the price.
The only way the number of bitcoins can change is if they change the hardcoded amount. JPMorgan could buy 50% of all bitoin made tomorrow, but they'll have done nothing to the actual bitcoin protocol.
Right, but the number of bitcoins in circulation will change, which is what you might consider the "real" bitcoin economy. Similarly, with the M1 money supply vs the crazy amounts stored up in federal reserve notes.
that would only mean real bitcoins will hold a premium over "promise of a bitcoin" held by banks.
Banks print endless amounts of fiat currencies, meanwhile bitcoin is transparent and capped at 21 million. The chancellor can not print more.
USD money supply increased 9.7% in 2021.
What about crypto? 70-80% of the trades are denominated in USDT. The USDT money supply increased 227% in 2021.
So you have hyperinflation of the currency used in crypto. It makes sense that the price of bitcoins denominated in USDT has gone up, this reflects the money supply increase.
Very little Bitcoin trades against USD and likely those at the center of inflation in crypto are paying out money to preserve the USD-USDT peg and preserve the illusion that crypto is priced in USD.
https://mobile.twitter.com/knmjohansson/status/1453084661043...
What about crypto? 70-80% of the trades are denominated in USDT. The USDT money supply increased 227% in 2021.
So you have hyperinflation of the currency used in crypto. It makes sense that the price of bitcoins denominated in USDT has gone up, this reflects the money supply increase.
Very little Bitcoin trades against USD and likely those at the center of inflation in crypto are paying out money to preserve the USD-USDT peg and preserve the illusion that crypto is priced in USD.
https://mobile.twitter.com/knmjohansson/status/1453084661043...
Printing more is always just a hard fork away.
And yet bitcoin has proven incredibly resilient to hard forks.
By what metric has Bitcoin been resistant to hard forks? How many forks would there have to be for it not to be deemed resilient?
Ok, but why would you want to prevent consenting adults from making promises to each other?
The credit nature of money has become extremely natural to me to the point that I cannot imagine how any other system could possibly make sense.
I've been playing a game where you can create BUY and SELL contracts with a deadline for payment and delivery. If I set the deadline to 20 days and I sell something for 100k the buyer has a 100k liability and the item he bought as an asset and I have a 100k asset and the item I sold as a liability. Now that I am certain I will receive 100k some time in the future I can buy something for 100k the exact same way. The GDP rose by 200k even though neither of us had any money. Ultimately money only acted as a mechanism that lets us settle the contracts.
When you think about it, promising things to each other is completely natural but just like barter it only works between two people and the 100k have to be paid in a single batch (a limitation of the game). As soon as you introduce a third party things get complicated. A owes B but C does not trust A so he does not let B "pay". There has to be a sort of centralized entity that keeps track of the creditworthiness of everyone. That's a bank.
A promises to sell X widgets for Y. The bank takes that promise and grants liquid credit (money) in accordance to A's creditworthiness. A receives the liquid credit and can give it to B. B can use the liquid credit to pay C who trusts the bank but not A. The reason they ultimately accept the bank's money is quite simple. The bank owes the creditors products and the debtors owe the bank products. When debtors receive money by selling products they simply pay their debt off which also gets rid of the liquid credit.
The reason why banks print endless amounts of fiat is therefore quite simple. People are so good at business, they keep making an exponentially growing amount of promises to each other. They are so good at keeping their promises that inflation has been incredibly low despite record low interest rates.
Now Bitcoin. I don't know what to tell you. It's extremely speculative because nobody knows how much it is supposed to be worth. Nobody knows how much it is supposed to be worth because people haven't even done something as simple as promise to work to create the Bitcoin. If nobody promises to accept your Bitcoin then what is the point? It's an asset without a liability on the other side. Money isn't supposed to have any inherent value. It's not supposed to have a net worth in itself. The dollar as a unit of account isn't worth anything, the debt and credit that are measured in dollars are. Add up all debt and credit and you end up with 0.
The credit nature of money has become extremely natural to me to the point that I cannot imagine how any other system could possibly make sense.
I've been playing a game where you can create BUY and SELL contracts with a deadline for payment and delivery. If I set the deadline to 20 days and I sell something for 100k the buyer has a 100k liability and the item he bought as an asset and I have a 100k asset and the item I sold as a liability. Now that I am certain I will receive 100k some time in the future I can buy something for 100k the exact same way. The GDP rose by 200k even though neither of us had any money. Ultimately money only acted as a mechanism that lets us settle the contracts.
When you think about it, promising things to each other is completely natural but just like barter it only works between two people and the 100k have to be paid in a single batch (a limitation of the game). As soon as you introduce a third party things get complicated. A owes B but C does not trust A so he does not let B "pay". There has to be a sort of centralized entity that keeps track of the creditworthiness of everyone. That's a bank.
A promises to sell X widgets for Y. The bank takes that promise and grants liquid credit (money) in accordance to A's creditworthiness. A receives the liquid credit and can give it to B. B can use the liquid credit to pay C who trusts the bank but not A. The reason they ultimately accept the bank's money is quite simple. The bank owes the creditors products and the debtors owe the bank products. When debtors receive money by selling products they simply pay their debt off which also gets rid of the liquid credit.
The reason why banks print endless amounts of fiat is therefore quite simple. People are so good at business, they keep making an exponentially growing amount of promises to each other. They are so good at keeping their promises that inflation has been incredibly low despite record low interest rates.
Now Bitcoin. I don't know what to tell you. It's extremely speculative because nobody knows how much it is supposed to be worth. Nobody knows how much it is supposed to be worth because people haven't even done something as simple as promise to work to create the Bitcoin. If nobody promises to accept your Bitcoin then what is the point? It's an asset without a liability on the other side. Money isn't supposed to have any inherent value. It's not supposed to have a net worth in itself. The dollar as a unit of account isn't worth anything, the debt and credit that are measured in dollars are. Add up all debt and credit and you end up with 0.
Anybody can print more: https://github.com/bitcoin/bitcoin/network/members
This seems rather concerning. I am by no means an expert on banking or finance, but would this not create massive risk of contagion should the price of Bitcoin collapses?
I am all for people being able to experiment and bet their own money on cryptocurrencies, but I do not think that it is right for the general public to be exposed to this kind of risk.
I am all for people being able to experiment and bet their own money on cryptocurrencies, but I do not think that it is right for the general public to be exposed to this kind of risk.
Cryptographic custody of power is important to make sure power is wielded by the people designated to have power by the market. crucially this power can then be anonymous. Makes capture the flag much more difficult for rogue outsiders (outside of the market mechanism).
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FDIC backs dollar deposits with dollars. Seems reasonable to assume bitcoin deposits would be backed by an equivalent bitcoin fund.
Well this is one simple reason why i don't recommend/hype up crypto anymore(or many other "decentralized" technologies).
Anyone who has been in the space could have seen it from miles away.
If people want truly decentralized,secure and anonymous money, you have to work from bottom upwards, starting with an infrastructure that's not centralized: think mesh networks,and you build on top of that.The obvious trade-off is there: performance, usability,etc, but at that point the target audience is vastly different.
Software "decentralization" is ~pointless considering the fact that if a country(US) or in best-case scenario a couple countries decide that it's over, well it is over, because they can quite literally pull the plug.Arguably Starlink looks like the next best choice, which from other aspects is even worse.
Anyone who has been in the space could have seen it from miles away.
If people want truly decentralized,secure and anonymous money, you have to work from bottom upwards, starting with an infrastructure that's not centralized: think mesh networks,and you build on top of that.The obvious trade-off is there: performance, usability,etc, but at that point the target audience is vastly different.
Software "decentralization" is ~pointless considering the fact that if a country(US) or in best-case scenario a couple countries decide that it's over, well it is over, because they can quite literally pull the plug.Arguably Starlink looks like the next best choice, which from other aspects is even worse.
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