How the Feds bounced Binance
programmablemutter.com> But the blockchain’s entire purpose is political. If crypto is no longer about teh magic of decentralization, then why would anyone want to use it?
Making big $$$, obviously.
It's very clear that the whole decentralization tech angle failed a long time ago. I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up.
It seemed completely clear to me that a "Peer-to-Peer Electronic Cash System" couldn't tolerate such dysfunction. Usage as cash wasn't working. In the end capacity had to be promptly increased, or obviously there'd be huge problems for everyone.
The first nail in the coffin was that blocks weren't expanded. The second one was that while there were plenty alternatives, BTC retained dominance, and that even forks that theoretically were superior because they did what they were supposed to do far better, BTC still won out.
So clearly I was wrong, BTC wasn't functioning as a "cash system", and this obviously didn't matter to the BTC users, and didn't matter to the world at large either.
Thus eventually it dawned on me that there were maybe a few people out there that had some interest in a "Peer-to-Peer Electronic Cash System" and the "tech", but the vast majority out there were only interested in a world-wide game of hot potato, where the only point is to accumulate coins early, then sell them to some fool on the top, and cash out.
There’s an important point hidden in your comment: Bitcoin won despite better forks and alternatives, and all its issues, because it managed to achieve the main thing that is required for something to become money: enough people have to think it’s money. When enough people come to think of something as money, it becomes money.
If a fork or alternative to Bitcoin doesn’t get enough people to think of it as money, then it doesn’t really matter if it is ‘superior’. It won’t win against the thing that a very large number of people think is money.
Edit: punctuation.
Better explanation: people didn’t care about how shitty of a currency it was because they loved how good of a speculative instrument it was.
A good speculative instrument is also definitionally a bad currency, even aside from the technical “barriers” BTC faces.
Yours is the important hidden point in the direct parent comment:
As an instrument of enthusiastic speculation with rapid gains and fungibility, cryptocurrency became concentrated holdings of wealthy and unscrupulous speculators.
Oh, and of some governments.
> it managed to achieve the main thing that is required for something to become money: enough people have to think it’s money. When enough people come to think of something as money, it becomes money.
Perhaps they thought it was an asset that others would pay money for, like a pyramid scheme. They were buying shares of Bitcoin, essentially. People were buying financial instruments linked to worthless real estate in the 2000s; they thought they were (sufficiently liquid) assets, not money.
What evidence do we have that people thought Bitcoin was currency and not an investment instrument? I know there's some Bitcoin-as-cash going on, but how much, and how much today?
Bitcoin made a unique imprint in the collective consciousness by painting a believable picture of a world where a decentralized currency is viable. It wasn’t just a white paper. It was a working protocol and an actual network. Think about what it was like to become aware of that and participate in it as an early adopter — to go from not being able to conceive of how such a system could work to participating in an actual working system. It was (and still is) a working peer-to-peer monetary transaction system. If you have Bitcoin, you have units of account in that monetary system. Whether the system is slow or not, it’s money.
I don’t think Bitcoin will be a cash-type unit of account. It’s like gold: it is divisible and fungible, but a pain to actually use as cash. Hundreds of years ago gold became a store of value used to back paper currencies.
Bitcoin has value in that owning Bitcoin means owning a unit of account in a tamper-proof, global, decentralized ledger. To the extent many many people think that the Bitcoin ledger is worth holding units in (and not a fork or alternative), the units of the ledger become valuable.
When people treat Bitcoin as a speculative investment, what they’re really doing is expecting even more people in the future to consider Bitcoin THE ledger to want to own units in, which would make the units in the ledger even more valuable. But the type of value they’re expecting to see more of is already there: a huge number of people think the Bitcoin ledger is the ledger to own units in, and comparatively very few care about owning units in the forks or alternatives.
> When people treat Bitcoin as a speculative investment, what they’re really doing is expecting even more people in the future to consider Bitcoin THE ledger to want to own units in, which would make the units in the ledger even more valuable. But the type of value they’re expecting to see more of is already there: a huge number of people think the Bitcoin ledger is the ledger to own units in, and comparatively very few care about owning units in the forks or alternatives.
Doesn't that describe a pyramid scheme that's not yet bust?
It depends.
If people think bitcoin will become more valuable, because they suspect future people will think it will become valuable, because future people think it will become more valuable, because future people think it will become more valuable, then eventually you run out of people and it collapses.
We can visualize this as the last person on earth not investing in bitcoin because there is nobody after him left to invest in bitcoin to make the price rise more. And by that same logic, the previous-to-last person wouldn't invest either because he knows the last person won't invest, and by that same logic, the previous-to-previous-to-last person wouldn't invest, etc etc etc. At some point the pyramid simply stops because it's used up all the fertile soil, and the growth itself was the only value creation. It stops ways before the last person on earth, the moment the market is saturated the growth stops and the entire thing collapses.
But if people think bitcoin will become more valuable, because they suspect it will be useful as a decentralized currency to more and more people, then it's not a pyramid scheme in the same way. Even the last person on earth would have ample reason to start using bitcoin, it's just a convenient way to be able to pay for goods and services in any context. Early adopters do get a big payout, but that's because they were early in on something that's valuable on it's own.
Obviously these days the later scenario looks less and less likely as Bitcoin's everyday adoption has slowed down, while Bitcoin's role as a growth speculation seems to have taken over.
Right, people predominantly buy bitcoin to speculate on it's future value, not to use as a medium of value exchange.
There is a bitcoin that is useable (and used) as a currency, which has maintained value, and fast transaction speeds. But maximalists don't want to read of it…
People think of it as money but mostly as unusable money.
Even Bitcoin proponents now longer propose "using Bitcoin" but "holding Bitcoin" and cashing out to fiat if they have to use money.
My philosophy on holding Bitcoin is: hold it until cryptocurrency has matured to the point where you are no longer interested in converting back into government-issued money. Once cryptocurrency has the type of optionality that government-issued money has, the “speculative investment” phase will be over and you’ll just have… money.
This argument is the Neo/Morpheus matrix meme. It's a powerful image but it doesn't change the properties of Bitcoin.
You are actually holding digital gold, not digital money which also needs constant maintenance to keep functioning (gold, for all its disadvantages at least doesn't need miners that keep mining just for gold to keep existing).
Like with gold the currency properties just aren't there. You would need to create the same financial constructs as with gold to add those properties. But would you want let entrust your Bitcoin to a custodian so you could use a Bitcoin backed currency? Not your keys, not your coins.
> If a fork or alternative to Bitcoin doesn’t get enough people to think of it as money, then it doesn’t really matter if it is ‘superior’. It won’t win against the thing that a very large number of people think is money.
And that's a huge problem, because the whole point of Bitcoin was decentralization and lack of need to trust anyone. And yet it seems the winner is simply whoever plays the PR game best and has the most inertia.
I see what you’re saying about social contract, but by that logic any speculative investment vehicle becomes money.
That’s not right. Not every speculative investment vehicle can function as money. To function as money something has to be divisible (e.g. cut a dollar into cents, cut a kg of gold into grams, cut a Bitcoin into bits), it has to be fungible (any unit of it is the same as all other units, i.e. a dollar is a dollar), it has to be portable (you can put a gold coin in your pocket), it has to be easily-transferable, it has to walk the razor’s edge between plentiful and scarce, etc.
The other big one is wide acceptance, meaning many different people being willing to accept it as payment for goods and services. You can argue that Bitcoin has achieved this as well, though maybe not as much as one might wish or dream.
Bitcoin was designed to be money, so it has the properties of money. That’s not true of pretty much any other type of speculative investment.
Edit: added more to first paragraph.
> When enough people come to think of something as money, it becomes money
There are many more requirements than that for an artefact to become money
Bitcoin misses out on most
Not really. It is possessible (you possess the key that enables transfer), fungible, divisible, scarce, easily transferred. It has all of the basic qualities of money.
"Has a clear core of acceptance" might be another big qualifier.
For all meaningful fiat currencies, there's at least a moderately sized, easily definable, reasonably contiguous market that will accept the currency without a hassle. Even a stack of 5000KPW notes, you could take them to a shopping centre somewhere and spend them, although that shopping centre is in Pyongyang.
Conversely, Bitcoin acceptance tends to be a few random scattered vendors, and technical obstacles (poor connectivity) make it harder still. Even in El Salvador, despite their attempts to make it a legal tender, you're not going to be able to reliably and seamlessly spend Bitcoin.
Bitcoin is more like gold. There are multiple precious metals and many cryptocurrencies but only one "main" one.
> There are multiple precious metals […] but only one "main" one.
Yeah: silver.
Nah: Etherium
> I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up.
Yes, this was the last straw for a ton of people actually interested in developing the technology, and it's when a lot of people moved their primary focus to Ethereum.
In 2017, the Bitcoin developer community did a hard pivot away from "electronic cash" and towards this "store of value" obsession, where Bitcoin is meant to replace gold. This was an incredibly noisy and disruptive pivot that tore the community in half. These were the "Blocksize Wars", and I could rant for hours about them, but obviously not here.
The thing is, Bitcoin up until that point was functioning very well as cash. Starting in 2013 I was regularly using it to buy coffee from coffee shops, and pay my bill at restaurants, and with literally a one line change it could have kept enabling the cash use case easily for another decade, and with maybe a 20 line change proposed by Jeff Garzik in 2015, it could have easily scaled forever.
The focus on serving the financial industry over everyday users was a very deliberate one. It wasn't a bad move, tactically, just very disappointing.
> and with literally a one line change
Except we know as software engineers that solutions to problems at scale are never that simple. The "just increase the block size limit bro" solution doesn't consider the externalities that increasing it would have on the network performance and decentralization. This is the same line of reasoning about this whole thread, compromising decentralization compromises the ability to use a credibly peer-to-peer (cash) system.
That change was made in many other cryptocurrencies and they did scale just fine. At the time there were a lot of claims that it couldn't be made to work, but history shows that it did work just fine. The bitcoin developers really monumentally screwed up and made a horrible decision (because they wanted to push their own alternative).
They did not "scale just fine" because the situation is so much worse in many newer networks that the default way >99% of users interact with it is through a trusted gateway provider instead of running a full node
Changing from 1 MB every ten minutes to 8 MB every ten minutes is nothing
That's a huge change and putting it in domain specific terms obscures the implications.
It changes the chain growth rate from up to ~52 gigabytes/yr to up to ~410 gigabytes/yr, it also means that the network takes 8 times as long to propagate blocks, which makes selfish mining attacks more viable, which weakens the game theory and adds a mining centralization force. Also consider that network bandwidth is a much more scarce resource for people in developing countries than it is for us in our first world country, and having a relatively-trustworthy payment system has a much greater relative utility for them than it would for us. And consider that full nodes don't only download blocks, they have to rebroadcast them to (ideally) at least 2 other nodes in order for blocks to even propagate at a decent rate.
This is data that has to be kept by somebody forever, even if particular users run pruned nodes, and the best way to ensure that it's readily available for anyone to inspect is to limit how much of it there is.
Since Bitcoin doesn't have state commitments, it's much less safe to use light clients, and increasing the bandwidth also shifts the balance more towards running light clients, compromising users' trust in the network. Making it more difficult to run fully verifying nodes like this is another centralization force.
Also, you should read about induced demand. https://en.wikipedia.org/wiki/Induced_demand
1. People in developing countries aren't running nodes nor do they need to
2. Most people, even today, use light wallets.
> Since Bitcoin doesn't have state commitments, it's much less safe to use light clients, and increasing the bandwidth also shifts the balance more towards running light clients, compromising users' trust in the network
3. Everybody except whales already uses light wallets. Even downloading the ledger in 2014 took a long long time.
> And consider that full nodes don't only download blocks, they have to rebroadcast them to (ideally) at least 2 other nodes in order for blocks to even propagate at a decent rate.
4. Rebroadcasting 8MB is nothing
> Making it more difficult to run fully verifying nodes like this is another centralization force.
5. Verification nodes aren't as important as miners and mining basically requires a lot of money put into ASICs so the system is already designed against the hobbyist enthusiast contributing to the network on their bedroom.
> Also, you should read about induced demand.
6. What's the point of a system if it can't scale?
The core misunderstanding you have here is about the role of miners. The game theory that makes blockchains safe to use in a untrusted distributed fashion is that anyone can just look at the chain and be convinced it's correct under its own logic. If most users are just relying on third parties to tell them about the blockchain then they can't be sure of its correctness. And that gives power to miners to collude between themselves and service providers to just change the consensus rules as they see fit, including in ways that are detrimental to the broader user.
And why shouldn't people in developing countries run full nodes? Are you saying it's fine for them to be dependent on service providers in rich countries that can then control/surveil their activity?
> doesn't consider the externalities that increasing it would have on the network performance and decentralization.
I ran a Bitcoin node on and off for 7 years. I remember the day it cost more to bootstrap an entire node than make a transaction. Your argument about "developing countries" and "internet costs" in other comments is completely disingenuous for this reason alone.
Bitcoin's runway was cut incredibly short by not raising the blocksize. The excitement around decentralization died because it was strangled.
> "We know as software engineers that solutions to problems at scale are never that simple"
Yes, L2s are needed - But it's insane to suggest 10x-ing the throughput at the bottleneck for a rounding error cost is a bad idea.
> I remember the day it cost more to bootstrap an entire node than make a transaction.
In what units?
A lot of the "pivot away from ... cash ... towards store of value" was legislated into place by AML/KYC idiocy. And IRS policies.
If you're referring to the blocksize wars, you aren't looking at a long enough time horizon. No system can afford to keep settlement records of every transaction processed by VISA/Mastercard for the rest of eternity. In order for bitcoin to finish displacing existing payment systems some sort of off-chain settlement is unavoidable.
Refusing to increase the blocksize forced people to start working on this instead of just kicking the can yet again. And hey, guess what, five years later I can use Lightning to upvote posts on https://stacker.news (without even waiting for the next block to be mined!).
You're repeating a false narrative which was commercially financed in order to promote alternatives (ironically). Bitcoin absolutely is electronic cash.
We've seen the alternative play out in forks that have become completely centralized as a result of ignoring the tradeoffs with the technology in use, and as a result have been undermined with "functionality" like confiscation transactions (transactions that let miners take any coins they choose).
What bitcoin isn't is a paypal clone. That already exists and it's not of substantial value to the world to add another centralized high volume payments rail. It's absolutely fine that people also want to use it that way, but optimizing for that case can't come at the expense of the security properties that make Bitcoin interesting in the first place. Alternatives that make different tradeoffs do exist, and I think the results speak for themselves.
If bitcoin does not succeed as a currency but does as a store of wealth, then eventually all of the coins will flow into a few funds and large wallets, right?
So once all the coins are mined and if there are not many p2p transactions occurring, then what incentive is there to mine and support the network?
Will coin owners just mine their own private blocks whenever they need to move coin?
Curious if this has already been considered by the bulls or bears. Seems like bitcoin will need to increase the upper limit of coins to continue to work.
Once the automatic coins are mined, the idea is you pay miners a tip to get your transactions completed.
I'm more curious how they plan to handle a drop in popularity from a security standpoint. Will the total compute always need to remain high enough to keep a bad actor from dominating? As popularity wanes that sounds expensive.
That’s exactly what I’m wondering, if all the bitcoin is held as investment and not utilized as a currency, then there is no incentive to receive tips, so no incentive to crunch hashes, so how does it work then?
Even investments are bought and sold day to day, otherwise stock brokers would all go bankrupt.
To maintain the current level of security then, all else being equal, the total fees collected will have to increase by the amount the subsidy decreases by. So each byte of block space will cost more for the person buying it. That could be an issue, but the solution to that problem is to extend the protocol to allow for more sophisticated "layer 2" systems so that the end-user experience has as small of a footprint as possible.
Ideally without compromising security, which can be done with zero-knowledge proofs and such. But it's unclear if the political will is there from the community around the Bitcoin project.
In this case, wouldn’t institutions mine their own blocks in order to avoid high transaction fees?
There's no such thing as "own blocks".
There's a single world-wide winner of the mining competition per 10 minutes. So if you want to have free transactions 50% of the time, the way to get there is to take the current world-wide mining capacity, and replicate it.
That's obviously not a viable tactic.
When you refer to bitcoin as a "store of wealth" do you mean that a bitcoin will retain its value over time? Which bitcoin do you mean, some coin you recently minted or one that's from a hacked exchange and hard to cash in because it's tied to a known crime?
Is this a bitcoin you have in a cold wallet somewhere? Are you running a connected node with the intention of exchanging your bitcoins with someone else? Or is your "bitcoin" just an entry in an exchange's ledger somewhere, in that case is it a bitcoin or just faith in that exchange?
Is a bitcoin a store of value in the same way a bag of uncut diamonds is a store of value?
> It's very clear that the whole decentralization tech angle failed a long time ago. I had a passing interest, but completely lost it around 2017-ish, when BTC blocks started filling up.
Decentralization was the original tech angle. Email, HTTP, the basic Internet infrastructure is all decentralized with only the minimal necessary coordination. Decentralized money is iffy when it isn't a real thing with intrinsic value like a metal coin or trading commodities directly.
Everything else though can absolutely be decentralized, somebody just needs to be happy about writing open standards and giving people the means to have systems that use them.
"Thus eventually it dawned on me that there were maybe a few people out there that had some interest in a "Peer-to-Peer Electronic Cash System" and the "tech", but the vast majority out there were only interested in a world-wide game of hot potato, where the only point is to accumulate coins early, then sell them to some fool on the top, and cash out."
In this scenario, when do people cash out.
It seems like if people starting cashing out in large numbers, some folks are going to end up losing money.^1
1. Assuming they spent any money to acquire their Bitcoin.
Precisely. Some people will make lots of money, some will make small gains, huge amounts will be screwed.
People liken stability. If you have a lot invested in a currency and then, due to some shortcoming, it is forked to another currency, you have to migrate your life over. Your wallet, your investments are now in bitcoin cash. Once might not be an issue, but this can easily happen every month for every perceived shortcoming. If the forks inherited the BTC name, clients needed no changes and the original were renamed, I think things would be different now. Basically, merge improvements to main.
You can't be serious, Bitcoin Cash has been around for 10 years and is working great just like Satoshi design.
Yeah, except for that obviously nobody cares for it:
https://bitinfocharts.com/comparison/bitcoin%20cash-transact...
BCH has plenty spare capacity, but the actual usage shows it's not taking off. The idea of buying coffee with crypto is dead.
Binance will not only help the US government monitor the money flows (the argument of our book), but plausibly act act as a regulatory super-spreader, transmitting “know your customer rules” across the ecoystem like an epidemiological contagion (the argument of an important academic article on ‘viral governance’ by Gregoire Mallard and Jin Sun).
Or, people will flood out to someone who hasn't been hit by that "contagion", because the entire point is to have unregulated money.
I don't really understand how any crypto is "unregulated money" and it's intrinsically the most tracable money store
[Edited for some horrible mobile autocorrect attrocities]
There are fully anonymous transactions in some of the cryptocurrencies, like in Zcash I believe. I thought such innovations would overtake and make the original bitcoin obsolete, but I've been very wrong, because bitcoin is still popular.
I think this fact points out the disparity between people using crypto for ideological reasons and them using it for investment reasons. Most people don't care about the whitepaper, just that "stonks only go up" and buy accordingly. So small, good projects aren't as reliable an investment vehicle as a larger, more established coin that is almost guaranteed to be sellable if needed.
I’m not aware yet that any cryptocurrency has been proven fully impossible to deanonymize, especially if there’s any off ramps anywhere.
For example: https://crypto.stanford.edu/timings/paper.pdf is for zcash and monero
It’s possible that someone comes up with a robust mechanism but if you interact with any other coin (crypto or fiat) it can expose additional side channels that are impossible to close.
Zcash is flawed lie. They are not fully anonymous or anything. There were several reports how to trace them.
Could you elaborate on that? I wasn't able to confirm that, but I'm massively out of the loop too.
Can you link to one of them? All I can recall is "shielded isn't default" and "if you transact too quickly it's risky" from recent memory.
It is. But you need to connect these addresses to people and events. That might be feasible if you are the USA and can pressure poeple/companies. But most other countries/jurisdiction don’t even have the technical capacity to do such a thing.
Obviously there are different points of view on this point, but I view transparency and regularity as orthogonal features.
Crypto is easy to make both transparent and regular.
Traceable via otherwise anonymous addresses. It’s the de-anonymization that’s hard.
> the de-anonymization that’s hard
In the few cases I’ve seen someone expend effort on it, it was trivial. Most people have terrible opsec. Even if you do, if you transact with someone who doesn’t (or who will deanonymise you for shockingly-trivial compensation), you’re partly compromised.
I think most people using crypto for illegal purposes will mainly be transacting with people that don't know their identity, so that is not a deanonymising risk.
It's true that people sometimes get caught via chainalysis/etc., but I think there is a lot of sampling bias here. Someone who isn't an idiot and washes their funds through dodgy asian exchanges/privacy coins is probably quite safe, even compared to using cash.
> think most people using crypto for illegal purposes will mainly be transacting with people that don't know their identity, so that is not a deanonymising risk
Demonstrably untrue. Also, many people using crypto are unknowingly commiting crimes. They're not the smartest bunch. Between taxes and reporting requirements, you can usually nail a crypto user with less than $1k PI time.
If it's demonstrably untrue then demonstrate that it isn't true
> because the entire point is to have unregulated money.
For some vanishingly small percentage of crypto-faithful, maybe. For the vast majority, the point is to turn (regulated) fiat money into more (regulated) fiat money. Or lose it all trying.
In order to make profit they need a draw. Subverting regulations is one of the few draws. So where the drug dealers go, the speculators will follow.
> the argument of an important academic article on ‘viral governance’ by Gregoire Mallard and Jin Sun
Great reference, I found it at: https://ens-paris-saclay.fr/sites/default/files/Laboratoires...
Reading it right now.
Chainalysis monitors all public chains for law enforcement and regulators. Monero, Zcash, and other privacy focused crypto can be squeezed out under money laundering, KYC, AML laws and regulations. Interestingly, violations of law have a permanent record on an immutable blockchain. You simply need someone technical to perform data analysis and hand it over to enforcement.
TLDR there is always a throat to choke in meatspace.
Don’t even need to be squeezed out. Here’s an attack on zcash: https://crypto.stanford.edu/timings/paper.pdf
Most private crypto coins are private by declaration rather than robust mathematical proofs (often because proving the absence of side channels is very difficult)
The article keeps confusing the blockchain tech (ie: bitcoin) with the centralized exchange business (ie: binance). In 2017-2018, crypto grew so fast that the tech couldn’t catch up. The centralized exchanges indeed won.
However, a significant volume is being traded today on DEXs (ie: uniswap). The OP fails to mention that. Uniswap did around $1bn in volume on a Saturday. These amount are very hard to fake as uniswap fees are simply brutal comparing to CEXs. This means a part of the market has moved off-grid and it’s significant. I don’t think the article argument can ignore that fact.
Except Binance didn't make out too bad in the end anyways. CZ still has billions of dollars and is looking at a pretty good sentence given the allegations. Monitorship does not entail unlimited government access to records, it mostly means a bunch of adult hall-monitors reading off compliance checklists, making sure they are being followed, then writing to the government every quarter about the remaining items on the checklists.
Yes, there's the SAR lookback, but no one reads those anyways and probably won't give the government much because criminals routinely use accounts registered with fake or stolen IDs. Binance still accepts customers from countries like Venezuela, Nigeria, Zimbabwe, etc that "respected" financial institutions wouldn't touch with a 39.5 foot pole. There are still people making $50,000 USDT -> cash transactions every day with Binance P2P.
When will Tether implode?
I've been reading about how that is imminent here for 3 years now.
As always, "market can stay irrational longer than you can remain solvent". I wouldn't bet on Tether collapsing at any specific time period, but there are so many unanswered questions about how that business is run that a reckoning seems broadly inevitable. We'll see I guess.
Theranos seemed ultra sketchy for a long time before something actually happened.
> ... I wouldn't bet on Tether collapsing at any specific time period ...
I think we are completely missing something in the discussion of stable coins such as Tether and USDC even if they are not equal: while the currency is fixed toward the dollar in the blockchain, they receive interest on the real money they have (whatever real balance it is). This could make them very profitable with time.
My guess it won’t. If you have been following the news, they are under a lot of scrutiny (usa/new york) that I doubt they are the disaster people think they are.
That and they are fully cooperating with regulators (ie: they have blacklist functionality in their smart contract)
tether has an ingenious biz model. take in money from entities that cant redeem thru their service and tether doesn't offer interest on the money lol
Since their assets > liabilities it will wind down rather than impload unless the entire economy imploads.
Why would you assume their assets are worth more than their liabilities
Tether publishes the totals daily.
$94,120,164,388.60 > $90,912,507,793.55
The numbers Tether produces don't really make sense. They're widely assumed to be massively fraudulent - although we can't prove this without being able to audit them. And of course their keep pushing back on attempts to do so [1], which pretty much confirms the assumption.
[1] https://blockworks.co/news/tether-pushes-back-timeline-on-au...
Yeah but I can also make a webpage saying I have $10 billion dollars, doesn't mean its a true statement. If it was at least a 3rd party that was auditing it, I would put more stake in it.
In practice people use the blockchain to move assets between accounts tied to some of the many competing centralized trading markets (of which Binance is only the biggest one).
They also use it for OTC transactions, which are typically also hedged on centralized markets due to their uncertainty.
The centralized markets also function as banks, where you can borrow or cross-margin your positions.
So it works, it's just that only using blockchain is not good enough to deal with speculation needs and market volatility.
My understanding of crypto (having worked in the industry for years) is that it's not about decentralisation so much as it is about reliability and transparency.
The decentralization aspect was mostly necessary in the early days to avoid being shut down by government. Now that crypto is widespread, it is not as important. What is important though are things that are missing from our current fiat monetary system; transparency and reliability.
While the fiat monetary system appears to be very reliable for the individual, it is in fact extremely unreliable due to its lack of transparency. Governments can easily manipulate the supply (and therefore the true value) of currency behind the scenes without your knowledge and that is one of the primary mechanisms via which it steals wealth from individuals and deprive them of opportunities.
Arguments against cryptocurrency are essentially saying that these individuals who are being robbed and deprived of opportunities don't matter because the system only needs to work for rich people and fool the poor into thinking that it doesn't harm them.
Unfortunately, many poor people understand exactly how the system robs them.
- It devalues our salary contracts via inflation of buying power.
- Centralized currency creation centralizes opportunities due to the Cantillon Effect and this creates an asymmetric playing field which unfairly benefits corporations and large organizations.
- Given that income tax is levied against each transfer between individuals, newly issued currency cannot travel very far from the government money printers as each hop away from the printers incurs a significant additional tax in the remaining untaxed amount which keeps shrinking. This exacerbates the Cantillon Effect and punishes regional areas and individuals who are far from the centers of money printing. It keeps all economic activity on a very short leash which is held tightly by the government.
> My understanding of crypto (having worked in the industry for years) is that it's not about decentralisation so much as it is about reliability and transparency.
None of those have panned out. Reliability and transparency aren't there either, because the state of crypto so far is that people keep on falling for scam after scam and getting screwed.
No, just like with the original concept of "Peer-to-Peer Electronic Cash System", there's very few true believers that are into it for any such reasons like decentralization, reliability or transparency.
The vast, vast majority just wants to get rich. It's that simple. The technical merits or characteristics of the underlying system are completely unimportant to the vast majority.
That's because quality projects are being suppressed. Governments have been working hard to destroy crypto's reputation by enabling scams. When I worked in crypto, the projects that were receiving EU government funding were usually scams or had a scam aspect to them. The agencies which were supposed to regulate the industry often turned a blind eye to obvious misconduct and suppressed small projects. Why did FTX get away with it for so long? You think the government had no idea? Even I suspected something fishy and I didn't even try to look.
In any case, individuals should be allowed to choose their monetary system and not be coerced into a specific scam which is what the fiat system is. If people could choose who their scammer is, that is already progress from what we have now.
People made SEC and FTC complaints about both FTX and the Earn program at Gemini which received no attention.
I think the theory that they're intentionally enabling scams though fails occam's razor. A simpler explanation is that they're lazy and dysfunctional, it's much much easier to prosecute a scam AFTER its vanished everyone money than before.
It reminds me of Grey's law "Any sufficiently advanced incompetence is indistinguishable from malice."
At that point you may as well admit the system is malicious by design as its complexity facilitates advanced incompetence.
Maybe, but are we worse off with enforcement bodies that fail to go after many things than with none at all?
As far as the sponsorship. I think that is largely due to the general advantage scams have: Real systems have limits and honest people will be willing to admit to them. A scam can promise the moon because they're not beholden to the truth or reality.
Parties who aren't thoughtful will flock to the scams that promise them all they want to hear: "Our blockchain is green, organic, whole food, and promotes equality for disenfranchised African dwarfs at unlimited scale!" --- "Sounds great, you rank 10/10 according to our metrics, here's a grant!"
You are preying on people, that's why you use this type of cult-like language. You can't back up your points with evidence other than vague references to "governments" (which ones?) "scamming people" (who? how? other than "salary deflation" - which country doesn't let people negotiate their salary or has absurdly high inflation?). I'd think by now you'd have listed a good project, but you've only referenced "good projects being suppressed"
Yeah, no. I remember the days when crypto was supposed to be independent from the government. It was supposed to exist independently, without any central party having to say what was good and wasn't. It shouldn't need any regulation.
If crypto has reliability and transparency, then how did FTX happen? Transparency should have made it obvious to everyone something fishy was going on very early on.
Could you provide evidence? How do we differentiate these claims from the many others, in many domains, that blame hidden powers?
> Governments can easily manipulate the supply (and therefore the true value) of currency behind the scenes without your knowledge
Can you provide an example? Central bank fucking with interest rates or doing QE is broadcast widely to the public. If one believes such moves will de-value the currency, there are ways to hedge against that - including the old standby: gold. And what does "true value" mean in this case? The value of anything is what someone is willing to trade for it. There's no "true value" the government can set that won't show up in the market somewhere.
How about people who do not have capital and physically cannot trade against the government's inefficiencies? You're forgetting the majority of people. Myself included.
The government has historically benefited those who understood the system, but it doesn't benefit them now. Quite the opposite. The system is now working against those who understand it most. That's why we're seeing a decline in the west.
> what does "true value" mean
Obviously the number of big macs you can buy per unit currency.
Why is this so? Consider. If a business becomes big and powerful, it becomes more vulnerable to government regulation
This certainly has not been the case with 'big tech' or 'big insurance'. Regulation amounts to slaps on the wrist, fines. Not being shut down or the key people arrested.
A lot of comments here but I have still never seen people talk about the absolutely perfect use case for a block chain.
Mandate that all government spending use a block chain so that all citizens can see government spending. All public finances visible to all citizens.
I think we have got it backwards trying to use the technology as untraceable peer to peer currency, instead focus on visibility into government finances to combat corruption and nepotism.
Couldn't we just as easily publish the government's ledger?
You can already see government budgets. The process is very open (except for some limited secret programs).
https://fiscaldata.treasury.gov/americas-finance-guide/feder...
This doesn't fix corruption. Corrupt spending is often quite conspicuous, it's just people won't or can't do anything about it.
It is going to being very interesting to see all the prosecutions that result from this. The feds know how to make good use of the access they're about to have based what they've been able to do with other exchanges' records.
Feds are doing a stealth CBDC takeover …
I’m so glad I don’t remember how much money was in that wallet. Let’s just call it 5, with no units. Helps.
Hah, yeah, it’s unsurprising that a new asset class isn’t very popular on a forum frequented by the government’s “workhorse” taxpayers. Especially an asset class created by people with the same skills as them, rather than guys in suits. Yes, some programmers made up money and didn’t have to work for an employer or give up half to the government.
I’m not really buying the sociological/political angle in the article. The centralizing force is attention.
The eternal question is, “heyyyy how’d they do that? They have to pay me for that, right?”
If only we could limit problems to death, and not taxes! And I got paid interest rates!