I have philosofised why crypto is unstable and fiat is not (in general). We all know that it is about trust, but why do we trust the US dollar for instance? Well, we trust it, because we expect...
I have philosofised why crypto is unstable and fiat is not (in general). We all know that it is about trust, but why do we trust the US dollar for instance? Well, we trust it, because we expect others to trust it. Others trust it because they think there will continue to be demand. The reason there will be demand is because US citizens need to pay taxes in US dollars and people expect the US state to keep existing. They also trust that tax paying will be enforced by the IRS, by using penalties or, in the end, the state monopoly on force. In other words: value in currency is supported by the states ability to enforce its monopoly on force / force people to pay them in a specific currency. Decentralized crypto will, by definition, never be able to replicate this, which is why I think all decentralised crypto is doomed to fail.
We trust our country currency because we need to, just like you said. We are forced to pay our taxes in said currency. Yet, it isn't the only thing that has value in the end. When a country falls,...
We trust our country currency because we need to, just like you said. We are forced to pay our taxes in said currency. Yet, it isn't the only thing that has value in the end. When a country falls, Gold still has value. So do Silver. They are unique elements that have a value that transcends that of a country currency.
Cryptocurrencies are passing through a probation of utility. A lot of people think of crypto as Bitcoin (BTC) and Ethereum (ETH), but in reality, it's only BTC that is decentralized. BTC already has a network effect big enough to be secure and join Gold and Silver in the long run. It has incredible liquidity and is accepted wide around. ETH is a smart contract network. It's probing Traditional Finance's practices into the crypto space. Yet, it had a lot of fundamental problems, like pre-mine, node centralization in AWS, etc.
People in third-world countries already use BTC to hedge against inflation from their country's currency. Now, people in the US are doing it too. Why? The USD is losing its trust. Third-world countries felt the money printing in their core, since imports are paid in USD, not in local currency.
In the end, Bitcoin isn't for day-to-day transactions, like going to the market, IMHO. It is a hedge against failing centralized systems, just like Gold and Silver. You can buy stuff with it, just like with Gold and Silver, but it's a bit harder. PayPal's centralized stable coin, just like USDC and USDT, is there just to fill the gap between BTC and USD and avoid over-taxation, since turning BTC into USD is taxable and being taxed over and over for day-to-day transactions is abusive, IMHO.
I am still waiting for the next bull run to actually form my final opinion on the matter.
I promise I'm not being obtuse, this is something I genuinely never understood -- why DO people think gold has value? I've heard people say something about how it's used in chip manufacturing, but...
I promise I'm not being obtuse, this is something I genuinely never understood -- why DO people think gold has value?
I've heard people say something about how it's used in chip manufacturing, but that can't be it. People used gold to trade millennia before transistors.
When people trade gold today they don't actually collect the gold themselves and store it in a safe, but just take on faith the certificate they have entitles them to some gold, somewhere, the location and process of collection they neither know nor care about.
It seems to me things like gold and silver have value simply because they're pretty and everyone knows what it is and it's agreed they have value. To me, this seems fundamentally no different to fiat. You can make an argument that gold is physically limited in supply, but so is granite and no is arguing to chizel their countertops in preparation for economic collapse.
Because it was historically used as a currency. That's basically it. It's basically just cultural inertia. It was useful as a currency because of it's properties. Namely it doesn't corrode, it...
Exemplary
why DO people think gold has value?
Because it was historically used as a currency. That's basically it. It's basically just cultural inertia.
It was useful as a currency because of it's properties. Namely it doesn't corrode, it relatively easy to identify, and is soft enough to be easily minted into coins to validate the weight and measure but not so soft that it starts to reshape in normal temperatures. Because of this states prized it very highly as a way to keep track of value traded. They would also mint coins in other easily worked with metals like copper or silver, but since these corrode/varnish more easily they tended to be for lower denominations.
Currency conversions weren't always simple or consistent affairs either. Exchange rates between individual types of currency within the same economy were a thing. In Imperial China they used to collect taxes and conduct large transactions in silver, but everyday commerce was conducted in copper. When the Spanish began raiding the Americas though, they looted all the silver and flooded the global market with it. This led to a weird currency crunch in China because, suddenly, they were collecting taxes in a rapidly devaluing currency (silver), but they had to pay for services in copper which remained steady. This destabilized the entire economy and probably directly contributed to the domestic instability and economic decline within the Qing empire.
Yep, that's absolutely right. The price of anything is only what someone else is willing to pay. Gold is a little different in that it's easier to use gold to flaunt one's wealth. This could be...
It seems to me things like gold and silver have value simply because they're pretty and everyone knows what it is and it's agreed they have value.
Yep, that's absolutely right. The price of anything is only what someone else is willing to pay.
To me, this seems fundamentally no different to fiat.
Gold is a little different in that it's easier to use gold to flaunt one's wealth. This could be why gold and silver were adopted as currencies. They can be used to make jewelry or other items that won't tarnish with the passage of time. Gold is also inherently deflationary, which is different than fiat currency.
Can't argue with that! Seriously though, you summarized very well in your other comment why gold may have been chosen as a currency (and therefore why we perceive it as valuable).
Can't argue with that!
Seriously though, you summarized very well in your other comment why gold may have been chosen as a currency (and therefore why we perceive it as valuable).
Durability, mainly. Gold and Silver can survive millennia with the same shape, weight, etc. while other materials decay and oxide away. They can be used in a lot of fields, too, like engineering,...
Durability, mainly. Gold and Silver can survive millennia with the same shape, weight, etc. while other materials decay and oxide away.
They can be used in a lot of fields, too, like engineering, economics, metallurgy, etc.
This is not exactly correct. Digital does not always mean infinitely copyable. Most crypto currencies use a single unified "ledger" for all transactions on their network. The only way to get...
This is not exactly correct. Digital does not always mean infinitely copyable.
Most crypto currencies use a single unified "ledger" for all transactions on their network. The only way to get Bitcoin (for example) is to get it from an account that already posseses some, or to mine it oneself. There is a finite number of Bitcoins that can ever be mined. Like gold, mining becomes more difficult over time and one day the last remaining piece will be mined and there will be no more.
Where do you think Bitcoin came from? It doesn't exist in the same way that an element like gold does, it's merely a protocol that is agreed upon by a large number of stakeholders. There was a...
Where do you think Bitcoin came from? It doesn't exist in the same way that an element like gold does, it's merely a protocol that is agreed upon by a large number of stakeholders. There was a time before that protocol existed, and after its creation it went through at least one major fork in Bitcoin Cash. It could vanish tomorrow if a single stakeholder gained control of 51% of the network or if a global-scale catastrophe wiped out internet connectivity.
That's indeed the reason why people are using it, which is valid. Especially in countries who have had extreme inflation before, crypto currency is a valid hedge. I just think that people are...
That's indeed the reason why people are using it, which is valid. Especially in countries who have had extreme inflation before, crypto currency is a valid hedge. I just think that people are overvalueing crypto immensly rn, because there is not much use to it for an individual in a country with a stable currency like the euro or USD (as part of a portfolio, sure but not as a main investment).
Aside from BTC, it is still a casino. BTC, LTC and XMR are the only ones I work with, and each has its own use case. IMHO, all PoS chains are just stock market without regulations for rich people...
Aside from BTC, it is still a casino. BTC, LTC and XMR are the only ones I work with, and each has its own use case.
IMHO, all PoS chains are just stock market without regulations for rich people to pump and dump.
The US dollar is trusted because it is backed by the most powerful imperialist nation in the world, with arguably the strongest and most resilient economy in the planet (over time), as well as the...
The US dollar is trusted because it is backed by the most powerful imperialist nation in the world, with arguably the strongest and most resilient economy in the planet (over time), as well as the strongest military, all of which is complemented by history and all kinds of pervasive soft power.
This is way more complex than simply "we trust it because others trust it".
Of course. The thing I meant with "we trust it because others trust it" is to say that it is a social construct which needs a reason to exist. Like I said, one of the main reasons is monopoly on...
Of course. The thing I meant with "we trust it because others trust it" is to say that it is a social construct which needs a reason to exist. Like I said, one of the main reasons is monopoly on force, but like you said, this extends to all types of power. When I said fiat currency, I had the average fiat currency in mind and chose some big examples. In the of a smaller but stable currencies, like the New Zealand dollar, the reasoning may hold up better. You did make me think though, and I realised that it is indeed very hard to find stable currencies that are not big countries, allied with the US, or in the EU (not the euro zone per se though, like the Czech Republic).
Fiat currencies are generally valued by their relationship to the US dollar, and are intrinsically related to some sort of hierarchy of global powers. I'm no academic, but it is possible that the...
Fiat currencies are generally valued by their relationship to the US dollar, and are intrinsically related to some sort of hierarchy of global powers.
I'm no academic, but it is possible that the understanding that fiat currency exists in a vacuum is at the root of quite a few misguided comparisons to cryptocurrencies. As if currency itself was the big problem to solve, at the expense of the messy context in which they exist.
Essentially, cryptocurrency advocates seek to replace the product of a slow and relevant historical process with computation. It's a magical solution. As such, they are not easy, convenient, or immediate replacements for fiat currency. Not because they can't be useful, but rather because they're just one part of the puzzle.
Pretty much. I'd argue that the majority of the value of a currency is also in the states ability to produce/consume that currency. There's a trillion dollars worth of goods and services that you...
Pretty much. I'd argue that the majority of the value of a currency is also in the states ability to produce/consume that currency. There's a trillion dollars worth of goods and services that you gain access to from the US dollar, just within it's borders alone, so that of course affects the value.
In a theoretical situation where somehow a coin is adopted to a similar level, it could in theory have that value (just being defacto used, like in countries with rampant inflation where crypto is see as a safehaven), but in the most extreme cases then the regulating authorities just regulate it and adopt.
This was never a realistic goal and one of the bigger signs that the vast majority of crypto users didn't really know what they were talking about. You've basically got 2 logical stances- Crypto...
and instead, we see cryptocurrency being adopted by the same big centralized tech companies that it was supposed to disrupt, who are quick to point out that they comply with all relevant legal and financial regulations.
This was never a realistic goal and one of the bigger signs that the vast majority of crypto users didn't really know what they were talking about.
You've basically got 2 logical stances-
Crypto is supposed to be for alternative finance, and thus will NEVER see mass adoption. There are those who wanted/still want this, and their stance is consistent. You're probably not getting rich off crypto then, but it serves a purpose.
Crypto is supposed to replace modern finance, and thus will see mass adoption, and all the regulation that comes with it.
A ton of people wanted some magical in-between which was never in the cards. Despite some crypto being made with that express purpose, it doesn't change the fact that economics work the way they do because it's efficient and optimal. The people claiming crypto could be mass adopted and take down the banks/ticketmaster/whatever never understood that the most likely move for those institutions is to adopt tech.
There's this myth that all these companies are just doddering elderly morons who don't know anything, and hell while that's arguably true in some instances, they can afford to pay people who are creative, on the cutting edge, and smart (or buy companies that are). The moment this stuff looks like it's worth adopting, they will.
As for the paypal stablecoin-
Ironically, given all the above, one of the biggest advantages is still skirting regulations. Crypto is in a very awkward place regulation wise (want to tax your gains but can't declare your losses?), and so stable coins have allowed investors to juggle their money without "cashing it out" so to speak and incurring tax. Technically if you buy $1000 of coin A, and it goes to $2000, and then you cash that out to buy $2000 of coin B, you have to pay tax on that. By turning that $2000 into $2000 of Paypal coin (or whatever) you can then buy coin B and never have a taxable event.
I think in theory you could use this for other transactions as well (although in many of the examples i can think of there's already mundane exceptions).
Many people won't need it because there are a wide variety of other services for making payments and money transfers easily. However, it's my understanding that international money transfers are...
Many people won't need it because there are a wide variety of other services for making payments and money transfers easily. However, it's my understanding that international money transfers are often more difficult? Sure, there is Western Union, but there are limitations.
The legal limitations are often deliberate attempts to prevent money laundering and other kinds of crime. It will be interesting to see how Paypal tried to make this legal. Hopefully Matt Levine will write about it tomorrow.
Why now? Interest rates are high. A stablecoin doesn't pay interest and it's pretty low-overhead in other ways. With a stablecoin, it's considered to be like cash in that fraud is your problem, so be careful about transfers. It means Paypal doesn't have to do the expensive anti-fraud stuff they do with their regular payments.
So this should be a profitable business if they can make it legal and popular, from interest payments on investing the reserves alone. People send you money, you invest it and get the interest, and then what they do with the cryptocurrency doesn't matter to you until someone asks for the money back.
Sure, it's philosophically problematic for true believers, but many people who do things with cryptocurrencies aren't true believers. Hence, stablecoins.
Simple answer: it's programmable money, and PayPal is in the business of programmable money. Reality is there will likely be a ton of companies launching their own branded stablecoins, each...
what does this do, exactly?
Simple answer: it's programmable money, and PayPal is in the business of programmable money.
I think the broken parts of cryptocurrency relate to the minting of coins. Proof of work is terrible for the planet. The deflationary aspect brought grifters as it made crypto an automatic Ponzi...
I think the broken parts of cryptocurrency relate to the minting of coins. Proof of work is terrible for the planet. The deflationary aspect brought grifters as it made crypto an automatic Ponzi scheme. But the transfer and ownership powers of crypto don’t have those problems are really do solve issues with existing solutions. As a programmer being able to use a peer to peer network and all open source code to move money gives me power. Big companies like Stripe have great DevEx but they still hold the keys. I wonder how much control PayPal will retain and how peer to peer this will be.
Crypto can give its users cash-like powers online. No approval from a government or company is required to make a transfer (if it’s truly peer to peer). No bank is required to hold digital funds....
Crypto can give its users cash-like powers online. No approval from a government or company is required to make a transfer (if it’s truly peer to peer). No bank is required to hold digital funds. No all powerful payment processor is needed to send money to a website. We’ve lost cash with the move online and that’s a shame.
But in this scenario Paypal is essentially acting as a bank printing its own currency as well as holding the digital funds and acting as the payment processor. And there still needs to be a...
But in this scenario Paypal is essentially acting as a bank printing its own currency as well as holding the digital funds and acting as the payment processor. And there still needs to be a digital process that moves crypto from one person to another. I just don't really understand how they differ from standard currency.
Edit: or how they differ from premium videogame currency for that matter.
And just to emphasize @akselmo's point: no for-profit corporation is trustworthy. This is an important point that cannot be stressed enough these days.
And just to emphasize @akselmo's point: no for-profit corporation is trustworthy. This is an important point that cannot be stressed enough these days.
That's not exactly true. Co-ops are somewhat trustworthy as they serve the customers or employees rather than external shareholders and their focus is not specifically on profit. I shouldn't...
That's not exactly true. Co-ops are somewhat trustworthy as they serve the customers or employees rather than external shareholders and their focus is not specifically on profit. I shouldn't blindly trust them, but you can expect them to more or less do what they say.
There's a blog post that's been gestating in my head along the lines of "Replacing fiduciary duty." Anybody else feel free to steal and experiment with this idea cause I'd enjoy reading it just as...
There's a blog post that's been gestating in my head along the lines of "Replacing fiduciary duty." Anybody else feel free to steal and experiment with this idea cause I'd enjoy reading it just as much as writing it out. Especially since I don't currently have a blog.
The thesis boils down to "Making a profit is the least important thing an economic activity can do." It should be supplanted with a hierarchy along the lines of:
Duty to society. If the economic activity is not a benefit to society as a whole, it should not be done. Costs/Prices must be inclusive of the full cost to society, from creation to disposal. It doesn't matter if it cures cancer if it requires polluting all our freshwater.
Duty to employees. If employees are not benefiting fully from the economic activity they produce, it breeds injustice. It also puts a pillar in to say "Economic activity that relies on exploitation of the people doing it should not be done, regardless of the benefits to the recipients"
Duty to customers. This is somewhat related to #1, and is the point that I'm pondering the most. It's somewhat separate because I want to codify how it is more important for the customer to be receiving the best product with consumer protections than for the last point. But also its more important that society doesn't suffer at the hands of customer demands, so they can't be fully merged.
Only after those first three have been fully satisfied, do extra profits get disbursed to owners (if separate from employees) and/or creditors.
This also has implications for bankruptcy proceedings, which kind of reverses how companies go bankrupt now, which puts the creditors above almost everyone else.
You raise some interesting points about corporate organization! In the US, we can trace shareholder primacy to Dodge v. Ford Motor Company. Ford wanted to reinvest the company's profits into...
You raise some interesting points about corporate organization! In the US, we can trace shareholder primacy to Dodge v. Ford Motor Company. Ford wanted to reinvest the company's profits into worker salaries and improving products, but there was a shareholder lawsuit with some complex politics involved (Wikipedia has the details).
Also, the actual business culture that's cited as "late state capitalism" with modern corporations' extreme focus on short term profits at any cost can be traced back to Jack Welch gutting GE. He became famous and extraordinarily influential for profiteering GE to hell because it looked good on the books for a few years.
Edit: Oh wait, I missed the "don't". Sorry about that. Rest of post for posterity. Back to my coffee. I mean, if your only goal with running a business is funneling your profits to the top, and be...
Edit: Oh wait, I missed the "don't". Sorry about that. Rest of post for posterity. Back to my coffee.
I mean, if your only goal with running a business is funneling your profits to the top, and be willing to destroy any semblance of stability for your employees and quality of your product.
He made himself and his buddies rich, and seeing how GE collapsed shortly after he left and is a shell of its former self...did not actually lead well. A CEO that actually built a strong company would not have seen its valuation halved in less than a decade. He was a robber baron that pushed stack ranking on the rest of the world and the world is better for him no longer being in charge of anything.
Right, but how does "keeping a ledger up to date" meaningfully differ from what banks do? No bank has as much physical cash as they do digital currency on the books, and they function by tracking...
Right, but how does "keeping a ledger up to date" meaningfully differ from what banks do? No bank has as much physical cash as they do digital currency on the books, and they function by tracking deposits/payments and withdrawals/loans of their customers.
You can see how its implemented here: https://etherscan.deth.net/address/0xe17b8adf8e46b15f3f9ab4bb9e3b6e31db09126e#code As far as whats in it for PayPal, it's the interest they get from the USD...
Which payment method are you talking about here? Because I can do that via paypal if I know your email address, or bank transfer from my phone if I know your account number or phone number if...
Which payment method are you talking about here? Because I can do that via paypal if I know your email address, or bank transfer from my phone if I know your account number or phone number if we're with the same bank. All free, all essentially instant.
It stops being free, if I give you a commercial product for those 5 bucks. It stops being instant depending where in the world we are and how backwards both our banks are (and US banks are very...
It stops being free, if I give you a commercial product for those 5 bucks. It stops being instant depending where in the world we are and how backwards both our banks are (and US banks are very backwards). It stops working at all, if any number of people or institutions disagrees with the product you're getting in exchange for those 5 bucks - and it doesn't even have to be illegal for that to start, an uncomfortable NGO or mildly pornographic content is enough for the banks to start turning the thumb screws.
No, it's about solving digital payments online in general. I'm not even in the US, so I have access to instant transfers even between banks (initiated by scanning a QR code and the press of a...
No, it's about solving digital payments online in general.
I'm not even in the US, so I have access to instant transfers even between banks (initiated by scanning a QR code and the press of a single button) and a technically mature local competitor to PayPal/Venmo (that is cheaper and directly goes to my main bank account), but still: if I want to process commercial payments online, I either pay substantial fees to VISA et. al, PayPal et. al, or I tell my customers to transfer money to my account directly - where I pay very minor fees, but have to do all payment processing myself.
Payment processing on bank transfers is, at best, semi-automated and takes an order of magnitude longer than the other options. So long, in fact that the customer needs to wait for an email. It's not feasible to receive a digital product directly on the payment prompt web page. And I don't know a single example of a web store where that works.
And all that doesn't even start to address that VISA et al/PayPal et al have a long history of freezing assets and/or stopping payment processing for... really, any reason at all.
Maybe the "paypal crypto" is but sending money to someone in Cameroon or another area paypal doesn't offer service to is actually something crypto can do.
Maybe the "paypal crypto" is but sending money to someone in Cameroon or another area paypal doesn't offer service to is actually something crypto can do.
Crypto ultimately isn't immune to the same forces that cause banks to police transactions. Banks ultimately don't give a damn if you're using them to launder drug money. If they could, they would...
Crypto ultimately isn't immune to the same forces that cause banks to police transactions. Banks ultimately don't give a damn if you're using them to launder drug money. If they could, they would happily take on the business of drug dealers and organized crime. They only care about making a buck. There are plenty of immoral, but perfectly legal, businesses that banks take on as customers. When was the last time a bank closed the account of a CEO of a tobacco company for being in what they considered to be an immoral business?
No, banks regulate transactions because laws and regulations require them to. There's all sorts of know your customer (KYC) laws that prescribe in detail how banks are required to verify the identities of their account holders. Governments maintain lists of business and transaction categories that the banks shouldn't be involved with. This affects everything from marijuana dispensaries to individuals subject to international sanctions, terrorist organizations, etc. Vladimir Putin is a quite possibly the richest man on Earth, but if tomorrow he walks into a bank in Manhattan, they won't let him open an account. He's under heavy international sanctions and no US bank will do business with him. They would certainly love to take his money if they could, but the law won't allow them to.
There is no reason crypto transactions can't be similarly restricted. The feds have already forced the major crypto exchanges to adopt KYC laws. And those could be extended down to individuals as well. You can require individuals to file paperwork for any crypto transaction over a certain amount. They can require if you're doing a large crypto transaction you need to verify the identity of the person you're transacting with. They might even require this for any crpyto transaction whatsoever.
Will some people ignore these laws? Sure. But some people also ignore laws and regulations on cash transactions and stuff thousands of dollars in their shoes as they go through the airport. Some people will always try to get around the law, but it's not an easy thing to do. And the consequences of getting caught are quite high.
And the same applies to crypto. Crypto transactions are not magically immune from detection. Yes, they're designed to be cryptographically secure, and they typically are. But that doesn't mean the feds can't see that you're performing a crypto transaction. All internet traffic is being packet-analyzed for various law enforcement and intelligence purposes. We've known that since Snowden. The feds might not be able to figure out your private key, but they can certainly look at your internet traffic, see all the packets you're exchanging with the bitcoin network, and see that you're doing some sort of crypto transaction. Once they know that, they can come knock on your door and not so politely ask you to provide them with information on the people you've been transacting with. And if you can't provide that info, you're now in violation of some serious federal laws.
Are there ways to obfuscate your internet traffic to hide that you're making crypto transactions? Sure. But now you're just back in the same cat-and-mouse game that law enforcement has been doing since the dawn of civilization. Criminals will create tools to hide their crypto transactions from detection. Law enforcement develops tools to counter those methods. Rinse and repeat. Evasion will always be possible, but you quickly leave the realm that the average person can meaningfully hope to conduct a secret crypto transaction. Sure, if you have the resources, you can smuggle anything across the border by building a long-range submarine and sailing across the Gulf of Mexico, but that's not something most people have the resources and skills to accomplish. Criminal crypto transactions will always be possible with enough resources, but it becomes something only highly resources organized crime outfits can do.
I mean, while proof of work is absolutely awful, proof of stake is still far less efficient than traditional banking setups. I forget who said it, but it went something along the lines of "As soon...
I mean, while proof of work is absolutely awful, proof of stake is still far less efficient than traditional banking setups.
I forget who said it, but it went something along the lines of "As soon as you have a single trusted party in a transaction, the need for cryptocurrency disappears."
We've seen what happens when you bring cash online (in the current state of affairs). It's kind of a disaster because it's trivial to defraud people and then has them seeking out trusted parties to do the transactions for them.
Proof of Stake was a way to used Traditional Finance known methods of abuse in an unregulated space. It is based on the same concept as the current banking system: Put something in a box, and it...
Proof of Stake was a way to used Traditional Finance known methods of abuse in an unregulated space. It is based on the same concept as the current banking system: Put something in a box, and it will gain value just for being there.
Proof of Work creates value from energy. It had a terrible start, but it largely changed to renewable sources. Over 50% of BTC mining is already in renewables and more to come.
That doesn't really make things better though. There are alternative things we could be using that energy for. This is true even if you only fire up your BTC farm when electricity spot prices drop...
Over 50% of BTC mining is already in renewables and more to come.
That doesn't really make things better though. There are alternative things we could be using that energy for. This is true even if you only fire up your BTC farm when electricity spot prices drop low or go to zero. There are a lot of potential energy storage solutions out there, including some that work on very large scale like pumped hydro. But in order to invest in these large storage projects, there needs to be a clear market case for them. If BTC consumes all the extra energy on the grid when the sun is really shining and the wind is really blowing, then that's energy that can't be used to support, feed, and develop large scale grid energy storage.
We are working hard right now to fundamentally alter the way we power our civilization. And one of the biggest bottlenecks we have is simply mining all the raw materials we need for the solar panels, wind turbines, and batteries we need to run everything on renewables. It's tempting to say, "well BTC is just going to produce more demand for renewables, so this is a good thing!" And in an naive ECON 101 sense, yes, that works. But that kind of economic analysis largely ignores the fact that we live on a finite planet where raw material supplies cannot be expanded to arbitrarily high levels on a whim. The whole species is currently trying to move to renewables, and the mining industry just can't keep up. The cost of all the raw materials for these products have skyrocketed. We're going to need to increase our total mining capacity of lithium, cobalt, and many other elements many fold. And until that mining and refining capacity is enough to provide for everyone, we face a hard cap on the amount of solar panels and wind turbines we can produce each year.
In such a critical period, burning through obscene amounts of electric power to run BTC mining rigs is downright morbid. We need to be using our finite solar and wind capacity to take care of our necessities first. If in 30 years we've managed to move everything to solar and wind, and we have a glut of solar panels on the market. Sure, at that point BTC mining might make sense. At that point you're not frivolously wasting scarce resources. But now, in 2023? We're spending hundreds of billions of federal dollars to try and make everything we can as efficiently as we can. We're trying to move everything to heat pumps, electric vehicles, better insulation, and on and on. We need every watt we have just for our basic living. We simply don't have the energy to waste on such a frivolous activity as BTC mining. At this point we should just make it illegal entirely.
I understand your point and agree with it in part. Because of Bitcoin, Geothermal energy is being explored in El Salvador, bringing up technological advances to add another way to extract energy...
I understand your point and agree with it in part. Because of Bitcoin, Geothermal energy is being explored in El Salvador, bringing up technological advances to add another way to extract energy from the finite resources we have. Also, Bitcoin isn't frivolous, since it saved an awful lot of people these last years from collapsing in third-world countries from the dollar instability and global recession.
It's a tough sell, and I get involved in such discussions to learn more about other people's opinions and realities. I am not trying to change your mind, but understand where you stand and why you think that way.
I am aware of how PoW operates. It's still an arms race of wasted energy. Every kwh spent mining bitcoin is a kwh that would be better spent heating/cooling homes, desalinating water, or literally...
I am aware of how PoW operates. It's still an arms race of wasted energy. Every kwh spent mining bitcoin is a kwh that would be better spent heating/cooling homes, desalinating water, or literally anything else. Which could let it replace fossil fuel usage instead of just supplementing it.
Adding PoS to a financial operation like Paypal is just "how can we turn our traditional database into something more complicated (and thus more expensive to run) than a regular database?"
The only crypto methods that make any level of sense to me are the ones based on data storage, like Filecoin. At least then, it's a tangible good being exchanged for the coin, not just "I wasted this many kwh" or "I already own X coins". Even then, the overhead of processing and distributing all that data is a questionable value-add in my opinion.
Proof of Work got a major change in its power consumption fingerprint since it started to move to renewables. Over 50% or BTC is mined with renewable energy sources and more to come. It's a...
Proof of Work got a major change in its power consumption fingerprint since it started to move to renewables. Over 50% or BTC is mined with renewable energy sources and more to come. It's a problem, but it's being worked on.
Proof of Stake is just Traditional Finance without regulations.
Without making any assumptions about your personal views: this is the standard crypto-bro line. People have addressed some of the issues with it in other posts so I'll just point out the two most...
Without making any assumptions about your personal views: this is the standard crypto-bro line.
People have addressed some of the issues with it in other posts so I'll just point out the two most obvious: Power used for mining is power that can't be used for something else, it doesn't matter what percentage of it comes from renewables.
In a theoretical future when renewable and storage solutions are creating more power than societies can use, that won't be a problem, but we're not there now.
The second issue is mining rigs and all of the resources and footprint associated with building and distributing them, not to mention the waste inherent in the high hardware turnover rate. Without proof of work crypto these machines don't need to exist at all.
exactly, it's the cleanest, safest, most environmentally conscious tire fire we've constructed the truth of the matter is we wouldn't have a tire fire if it didn't make people loads of money.
exactly, it's the cleanest, safest, most environmentally conscious tire fire we've constructed
the truth of the matter is we wouldn't have a tire fire if it didn't make people loads of money.
I agree about the machine turnover, but you're making an implicit assumption that there is a single market for electricity and it's not true. There is such a thing as "stranded power" where there...
I agree about the machine turnover, but you're making an implicit assumption that there is a single market for electricity and it's not true. There is such a thing as "stranded power" where there are no available power lines to get electricity to customers willing to pay for it. (That is, there may be power lines, but they're at capacity.) That means electricity can be locally abundant, even though it's not globally abundant.
One example of this is Bhutan where there is much more hydroelectric power generated during the spring melt, but they don't have the transmission lines to sell more power.
Then the question is why someone doesn't build more power lines? I don't know why Bhutan doesn't do that, but in general, they're expensive and there are environmental concerns, so it can take a while. Maybe they'd have greater incentive to build more power lines if they didn't mine cryptocurrency, though?
(But in any case, I'm favor of proof of stake, which eliminates these concerns altogether. It's weird to pay Bhutan to secure your cryptocurrency and it shouldn't be necessary.)
Yeah, I know that is the "standard" line. I am not denying it, though. I see crypto as an emerging technology still. Not only that, but I am not even sure blockchain will actually catch, I just...
Yeah, I know that is the "standard" line. I am not denying it, though.
I see crypto as an emerging technology still. Not only that, but I am not even sure blockchain will actually catch, I just know that Bitcoin has, and I have used it to avoid predatory banking.
Off topic but, 'paypal-corp.com' does not immediately sound like a legitimate domain of paypal. Why might they not use newsroom.paypal.com? I guess there's a security argument for a non-subdomain...
Off topic but, 'paypal-corp.com' does not immediately sound like a legitimate domain of paypal.
Why might they not use newsroom.paypal.com? I guess there's a security argument for a non-subdomain of user facing service on paypal.com?
Almost certainly that. Press CMS sites like this are usually managed by an external vendor (or at least a different internal team) and you don't want the site to become surface area for attacks...
Almost certainly that. Press CMS sites like this are usually managed by an external vendor (or at least a different internal team) and you don't want the site to become surface area for attacks where the attacker might gain access to *.paypal.com cookies.
Why does anyone even use PayPal in this day and age? I think the last time I had any use for it was 20 years ago when I was a kid who wanted to buy stuff online and didn't have a credit card. I...
Why does anyone even use PayPal in this day and age? I think the last time I had any use for it was 20 years ago when I was a kid who wanted to buy stuff online and didn't have a credit card.
I guess it's still an option for people who cannot get a like of credit?
Does it have some value in ties to merchants like eBay?
Similar to venmo or others in that catagory sending money online via email addresses or usernames is nicer than putting your bank details out there for people to bank transfer you the money.
Similar to venmo or others in that catagory sending money online via email addresses or usernames is nicer than putting your bank details out there for people to bank transfer you the money.
I suppose, but then why not just use Venmo? PayPal is clunky as hell and always has been. Sending via email is already handled by my bank's e-transfer option, the only notable thing is that the...
I suppose, but then why not just use Venmo? PayPal is clunky as hell and always has been. Sending via email is already handled by my bank's e-transfer option, the only notable thing is that the receiver can see your name.
It's just a different UI for the same service provided by the same company. PayPal has thousands of integrations into ecommerce checkout flows which Venmo has not really replaced.
It's just a different UI for the same service provided by the same company. PayPal has thousands of integrations into ecommerce checkout flows which Venmo has not really replaced.
I tried Venmo once to pay someone who didn't have PayPal, and noped out after it offered (defaulted?) to post my transaction on a public timeline somewhere. PayPal can largely be trusted to behave...
I tried Venmo once to pay someone who didn't have PayPal, and noped out after it offered (defaulted?) to post my transaction on a public timeline somewhere. PayPal can largely be trusted to behave how I expect it to, in a way Venmo can't. This might be a generational thing; Venmo feels like it's trying to be PayPal For Hip Young People and I'm just staring at it like "but we already had PayPal".
Sending via email is already handled by my bank's e-transfer option
US banks are largely trash at this, if they offer any form of it at all. (A lot of the ones that supposedly do really just shrug and redirect you to Zelle. One mailed my then-landlord a physical check.)
PayPal is a popular merchant solution, they also offer credit card processing at competitive rates (though less competitive these days). So a merchant can easily offer the option of paying via...
PayPal is a popular merchant solution, they also offer credit card processing at competitive rates (though less competitive these days). So a merchant can easily offer the option of paying via either CC or PayPal, where the latter has lower transaction fees.
I know I lean further toward paranoid than many people, but I always prefer PayPal at checkouts rather than typing in my credit card details directly. I know online encryption is generally safe...
I know I lean further toward paranoid than many people, but I always prefer PayPal at checkouts rather than typing in my credit card details directly. I know online encryption is generally safe enough that I probably shouldn’t worry, but I still do.
I also see it as a line of defence between me and the online store, as I know there are heaps of scam stores out there and I don’t trust myself to spot the clues, so being able to go to PayPal to get my money back feels much safer than if I were giving my credit card details directly (where I’d be hoping that my bank’s opening hours somehow line up with my own schedule.)
There are people in certain circumstances or regions of the world where it's just easier to use Paypal (in either direction), especially for receiving money. (I've never heard of someone getting...
There are people in certain circumstances or regions of the world where it's just easier to use Paypal (in either direction), especially for receiving money. (I've never heard of someone getting paid "into" their credit card.) As a user of Paypal, I believe you're somewhat shielded from the complexities of transferring money across international borders, and only need a bank account instead of applying for credit.
That all said, I really dislike Paypal because they have to deal with so much fraud at their scale that they err on the side of assuming fraud rather than innocence, and then lock up money in their system (you can't withdrawal until you can convince Paypal to do so), and, as the end user with said locked money, you have no power to fight that. Numerous stories online of this happening to people.
That's ironic. I've been comparing fake cryptocurrencies ("stable" coins and other things controlled by a single entity, nothing to do with cryptography-based currencies, or at least not more than...
That's ironic. I've been comparing fake cryptocurrencies ("stable" coins and other things controlled by a single entity, nothing to do with cryptography-based currencies, or at least not more than online banking encrypts your connection) to having a paypal balance
I have philosofised why crypto is unstable and fiat is not (in general). We all know that it is about trust, but why do we trust the US dollar for instance? Well, we trust it, because we expect others to trust it. Others trust it because they think there will continue to be demand. The reason there will be demand is because US citizens need to pay taxes in US dollars and people expect the US state to keep existing. They also trust that tax paying will be enforced by the IRS, by using penalties or, in the end, the state monopoly on force. In other words: value in currency is supported by the states ability to enforce its monopoly on force / force people to pay them in a specific currency. Decentralized crypto will, by definition, never be able to replicate this, which is why I think all decentralised crypto is doomed to fail.
We trust our country currency because we need to, just like you said. We are forced to pay our taxes in said currency. Yet, it isn't the only thing that has value in the end. When a country falls, Gold still has value. So do Silver. They are unique elements that have a value that transcends that of a country currency.
Cryptocurrencies are passing through a probation of utility. A lot of people think of crypto as Bitcoin (BTC) and Ethereum (ETH), but in reality, it's only BTC that is decentralized. BTC already has a network effect big enough to be secure and join Gold and Silver in the long run. It has incredible liquidity and is accepted wide around. ETH is a smart contract network. It's probing Traditional Finance's practices into the crypto space. Yet, it had a lot of fundamental problems, like pre-mine, node centralization in AWS, etc.
People in third-world countries already use BTC to hedge against inflation from their country's currency. Now, people in the US are doing it too. Why? The USD is losing its trust. Third-world countries felt the money printing in their core, since imports are paid in USD, not in local currency.
In the end, Bitcoin isn't for day-to-day transactions, like going to the market, IMHO. It is a hedge against failing centralized systems, just like Gold and Silver. You can buy stuff with it, just like with Gold and Silver, but it's a bit harder. PayPal's centralized stable coin, just like USDC and USDT, is there just to fill the gap between BTC and USD and avoid over-taxation, since turning BTC into USD is taxable and being taxed over and over for day-to-day transactions is abusive, IMHO.
I am still waiting for the next bull run to actually form my final opinion on the matter.
I promise I'm not being obtuse, this is something I genuinely never understood -- why DO people think gold has value?
I've heard people say something about how it's used in chip manufacturing, but that can't be it. People used gold to trade millennia before transistors.
When people trade gold today they don't actually collect the gold themselves and store it in a safe, but just take on faith the certificate they have entitles them to some gold, somewhere, the location and process of collection they neither know nor care about.
It seems to me things like gold and silver have value simply because they're pretty and everyone knows what it is and it's agreed they have value. To me, this seems fundamentally no different to fiat. You can make an argument that gold is physically limited in supply, but so is granite and no is arguing to chizel their countertops in preparation for economic collapse.
Because it was historically used as a currency. That's basically it. It's basically just cultural inertia.
It was useful as a currency because of it's properties. Namely it doesn't corrode, it relatively easy to identify, and is soft enough to be easily minted into coins to validate the weight and measure but not so soft that it starts to reshape in normal temperatures. Because of this states prized it very highly as a way to keep track of value traded. They would also mint coins in other easily worked with metals like copper or silver, but since these corrode/varnish more easily they tended to be for lower denominations.
Currency conversions weren't always simple or consistent affairs either. Exchange rates between individual types of currency within the same economy were a thing. In Imperial China they used to collect taxes and conduct large transactions in silver, but everyday commerce was conducted in copper. When the Spanish began raiding the Americas though, they looted all the silver and flooded the global market with it. This led to a weird currency crunch in China because, suddenly, they were collecting taxes in a rapidly devaluing currency (silver), but they had to pay for services in copper which remained steady. This destabilized the entire economy and probably directly contributed to the domestic instability and economic decline within the Qing empire.
Yep, that's absolutely right. The price of anything is only what someone else is willing to pay.
Gold is a little different in that it's easier to use gold to flaunt one's wealth. This could be why gold and silver were adopted as currencies. They can be used to make jewelry or other items that won't tarnish with the passage of time. Gold is also inherently deflationary, which is different than fiat currency.
If you watch someone light a cigar with a $100 bill that's WAY more flaunting than seeing them wearing some jewelry.
Can't argue with that!
Seriously though, you summarized very well in your other comment why gold may have been chosen as a currency (and therefore why we perceive it as valuable).
Durability, mainly. Gold and Silver can survive millennia with the same shape, weight, etc. while other materials decay and oxide away.
They can be used in a lot of fields, too, like engineering, economics, metallurgy, etc.
Gold has scarcity. Despite what some may tell you, cryptocurrency does not have real scarcity, as it is virtual.
This is not exactly correct. Digital does not always mean infinitely copyable.
Most crypto currencies use a single unified "ledger" for all transactions on their network. The only way to get Bitcoin (for example) is to get it from an account that already posseses some, or to mine it oneself. There is a finite number of Bitcoins that can ever be mined. Like gold, mining becomes more difficult over time and one day the last remaining piece will be mined and there will be no more.
Where do you think Bitcoin came from? It doesn't exist in the same way that an element like gold does, it's merely a protocol that is agreed upon by a large number of stakeholders. There was a time before that protocol existed, and after its creation it went through at least one major fork in Bitcoin Cash. It could vanish tomorrow if a single stakeholder gained control of 51% of the network or if a global-scale catastrophe wiped out internet connectivity.
That's indeed the reason why people are using it, which is valid. Especially in countries who have had extreme inflation before, crypto currency is a valid hedge. I just think that people are overvalueing crypto immensly rn, because there is not much use to it for an individual in a country with a stable currency like the euro or USD (as part of a portfolio, sure but not as a main investment).
Aside from BTC, it is still a casino. BTC, LTC and XMR are the only ones I work with, and each has its own use case.
IMHO, all PoS chains are just stock market without regulations for rich people to pump and dump.
The US dollar is trusted because it is backed by the most powerful imperialist nation in the world, with arguably the strongest and most resilient economy in the planet (over time), as well as the strongest military, all of which is complemented by history and all kinds of pervasive soft power.
This is way more complex than simply "we trust it because others trust it".
Of course. The thing I meant with "we trust it because others trust it" is to say that it is a social construct which needs a reason to exist. Like I said, one of the main reasons is monopoly on force, but like you said, this extends to all types of power. When I said fiat currency, I had the average fiat currency in mind and chose some big examples. In the of a smaller but stable currencies, like the New Zealand dollar, the reasoning may hold up better. You did make me think though, and I realised that it is indeed very hard to find stable currencies that are not big countries, allied with the US, or in the EU (not the euro zone per se though, like the Czech Republic).
Fiat currencies are generally valued by their relationship to the US dollar, and are intrinsically related to some sort of hierarchy of global powers.
I'm no academic, but it is possible that the understanding that fiat currency exists in a vacuum is at the root of quite a few misguided comparisons to cryptocurrencies. As if currency itself was the big problem to solve, at the expense of the messy context in which they exist.
Essentially, cryptocurrency advocates seek to replace the product of a slow and relevant historical process with computation. It's a magical solution. As such, they are not easy, convenient, or immediate replacements for fiat currency. Not because they can't be useful, but rather because they're just one part of the puzzle.
Pretty much. I'd argue that the majority of the value of a currency is also in the states ability to produce/consume that currency. There's a trillion dollars worth of goods and services that you gain access to from the US dollar, just within it's borders alone, so that of course affects the value.
In a theoretical situation where somehow a coin is adopted to a similar level, it could in theory have that value (just being defacto used, like in countries with rampant inflation where crypto is see as a safehaven), but in the most extreme cases then the regulating authorities just regulate it and adopt.
This was never a realistic goal and one of the bigger signs that the vast majority of crypto users didn't really know what they were talking about.
You've basically got 2 logical stances-
Crypto is supposed to be for alternative finance, and thus will NEVER see mass adoption. There are those who wanted/still want this, and their stance is consistent. You're probably not getting rich off crypto then, but it serves a purpose.
Crypto is supposed to replace modern finance, and thus will see mass adoption, and all the regulation that comes with it.
A ton of people wanted some magical in-between which was never in the cards. Despite some crypto being made with that express purpose, it doesn't change the fact that economics work the way they do because it's efficient and optimal. The people claiming crypto could be mass adopted and take down the banks/ticketmaster/whatever never understood that the most likely move for those institutions is to adopt tech.
There's this myth that all these companies are just doddering elderly morons who don't know anything, and hell while that's arguably true in some instances, they can afford to pay people who are creative, on the cutting edge, and smart (or buy companies that are). The moment this stuff looks like it's worth adopting, they will.
As for the paypal stablecoin-
Ironically, given all the above, one of the biggest advantages is still skirting regulations. Crypto is in a very awkward place regulation wise (want to tax your gains but can't declare your losses?), and so stable coins have allowed investors to juggle their money without "cashing it out" so to speak and incurring tax. Technically if you buy $1000 of coin A, and it goes to $2000, and then you cash that out to buy $2000 of coin B, you have to pay tax on that. By turning that $2000 into $2000 of Paypal coin (or whatever) you can then buy coin B and never have a taxable event.
I think in theory you could use this for other transactions as well (although in many of the examples i can think of there's already mundane exceptions).
Many people won't need it because there are a wide variety of other services for making payments and money transfers easily. However, it's my understanding that international money transfers are often more difficult? Sure, there is Western Union, but there are limitations.
The legal limitations are often deliberate attempts to prevent money laundering and other kinds of crime. It will be interesting to see how Paypal tried to make this legal. Hopefully Matt Levine will write about it tomorrow.
Why now? Interest rates are high. A stablecoin doesn't pay interest and it's pretty low-overhead in other ways. With a stablecoin, it's considered to be like cash in that fraud is your problem, so be careful about transfers. It means Paypal doesn't have to do the expensive anti-fraud stuff they do with their regular payments.
So this should be a profitable business if they can make it legal and popular, from interest payments on investing the reserves alone. People send you money, you invest it and get the interest, and then what they do with the cryptocurrency doesn't matter to you until someone asks for the money back.
Sure, it's philosophically problematic for true believers, but many people who do things with cryptocurrencies aren't true believers. Hence, stablecoins.
Simple answer: it's programmable money, and PayPal is in the business of programmable money.
Reality is there will likely be a ton of companies launching their own branded stablecoins, each interchangeable and redeemable for a buck. The competition between them is who can issue the most, because to issue they need to take in USD, and with that USD they can park it in short-dated treasuries and earn risk-free interest. This is how Circle makes so much money: https://www.bloomberg.com/news/articles/2023-08-10/circle-usdc-stablecoin-issuer-says-1-billion-cash-to-counter-paypal-binance
I think the broken parts of cryptocurrency relate to the minting of coins. Proof of work is terrible for the planet. The deflationary aspect brought grifters as it made crypto an automatic Ponzi scheme. But the transfer and ownership powers of crypto don’t have those problems are really do solve issues with existing solutions. As a programmer being able to use a peer to peer network and all open source code to move money gives me power. Big companies like Stripe have great DevEx but they still hold the keys. I wonder how much control PayPal will retain and how peer to peer this will be.
I promise I don't mean to be combative when I ask this: could you elaborate on what problems the transfer and ownership powers of crypto solve?
Crypto can give its users cash-like powers online. No approval from a government or company is required to make a transfer (if it’s truly peer to peer). No bank is required to hold digital funds. No all powerful payment processor is needed to send money to a website. We’ve lost cash with the move online and that’s a shame.
But in this scenario Paypal is essentially acting as a bank printing its own currency as well as holding the digital funds and acting as the payment processor. And there still needs to be a digital process that moves crypto from one person to another. I just don't really understand how they differ from standard currency.
Edit: or how they differ from premium videogame currency for that matter.
I doubt this is for benefit of anyone except themselves. Paypal is not a trustworthy company.
And just to emphasize @akselmo's point: no for-profit corporation is trustworthy. This is an important point that cannot be stressed enough these days.
That's not exactly true. Co-ops are somewhat trustworthy as they serve the customers or employees rather than external shareholders and their focus is not specifically on profit. I shouldn't blindly trust them, but you can expect them to more or less do what they say.
Agreed, that's why I said for-profit corporations, although even there I probably should be more specific.
I mean, co-ops can very much be argued to be for-profit. Just not shareholder or executive profit but rather employee profit...
There's a blog post that's been gestating in my head along the lines of "Replacing fiduciary duty." Anybody else feel free to steal and experiment with this idea cause I'd enjoy reading it just as much as writing it out. Especially since I don't currently have a blog.
The thesis boils down to "Making a profit is the least important thing an economic activity can do." It should be supplanted with a hierarchy along the lines of:
This also has implications for bankruptcy proceedings, which kind of reverses how companies go bankrupt now, which puts the creditors above almost everyone else.
You raise some interesting points about corporate organization! In the US, we can trace shareholder primacy to Dodge v. Ford Motor Company. Ford wanted to reinvest the company's profits into worker salaries and improving products, but there was a shareholder lawsuit with some complex politics involved (Wikipedia has the details).
Also, the actual business culture that's cited as "late state capitalism" with modern corporations' extreme focus on short term profits at any cost can be traced back to Jack Welch gutting GE. He became famous and extraordinarily influential for profiteering GE to hell because it looked good on the books for a few years.
Edit: spelling
Jack Welch was the greatest CEO ever if you don't know anything about running a business.
Edit: Oh wait, I missed the "don't". Sorry about that. Rest of post for posterity. Back to my coffee.
I mean, if your only goal with running a business is funneling your profits to the top, and be willing to destroy any semblance of stability for your employees and quality of your product.
He made himself and his buddies rich, and seeing how GE collapsed shortly after he left and is a shell of its former self...did not actually lead well. A CEO that actually built a strong company would not have seen its valuation halved in less than a decade. He was a robber baron that pushed stack ranking on the rest of the world and the world is better for him no longer being in charge of anything.
Right, but how does "keeping a ledger up to date" meaningfully differ from what banks do? No bank has as much physical cash as they do digital currency on the books, and they function by tracking deposits/payments and withdrawals/loans of their customers.
You can see how its implemented here:
https://etherscan.deth.net/address/0xe17b8adf8e46b15f3f9ab4bb9e3b6e31db09126e#code
As far as whats in it for PayPal, it's the interest they get from the USD you give them.
You give PayPal USD, they give you PYUSD. They park your USD in short-dated treasury bills and earn risk free interest.
You could say the same things of Runescape Gold.
That’s not peer to peer, nor FOSS.
Are either of these things true of PaypalUSD?
Not sure. I’m not supporting PayPal exactly. Just saying I think a well made and supported stable coin would be a nice financial tool.
Which payment method are you talking about here? Because I can do that via paypal if I know your email address, or bank transfer from my phone if I know your account number or phone number if we're with the same bank. All free, all essentially instant.
It stops being free, if I give you a commercial product for those 5 bucks. It stops being instant depending where in the world we are and how backwards both our banks are (and US banks are very backwards). It stops working at all, if any number of people or institutions disagrees with the product you're getting in exchange for those 5 bucks - and it doesn't even have to be illegal for that to start, an uncomfortable NGO or mildly pornographic content is enough for the banks to start turning the thumb screws.
I see, so it's solving US-specific problems rather than general currency problems.
No, it's about solving digital payments online in general.
I'm not even in the US, so I have access to instant transfers even between banks (initiated by scanning a QR code and the press of a single button) and a technically mature local competitor to PayPal/Venmo (that is cheaper and directly goes to my main bank account), but still: if I want to process commercial payments online, I either pay substantial fees to VISA et. al, PayPal et. al, or I tell my customers to transfer money to my account directly - where I pay very minor fees, but have to do all payment processing myself.
Payment processing on bank transfers is, at best, semi-automated and takes an order of magnitude longer than the other options. So long, in fact that the customer needs to wait for an email. It's not feasible to receive a digital product directly on the payment prompt web page. And I don't know a single example of a web store where that works.
And all that doesn't even start to address that VISA et al/PayPal et al have a long history of freezing assets and/or stopping payment processing for... really, any reason at all.
Maybe the "paypal crypto" is but sending money to someone in Cameroon or another area paypal doesn't offer service to is actually something crypto can do.
Crypto ultimately isn't immune to the same forces that cause banks to police transactions. Banks ultimately don't give a damn if you're using them to launder drug money. If they could, they would happily take on the business of drug dealers and organized crime. They only care about making a buck. There are plenty of immoral, but perfectly legal, businesses that banks take on as customers. When was the last time a bank closed the account of a CEO of a tobacco company for being in what they considered to be an immoral business?
No, banks regulate transactions because laws and regulations require them to. There's all sorts of know your customer (KYC) laws that prescribe in detail how banks are required to verify the identities of their account holders. Governments maintain lists of business and transaction categories that the banks shouldn't be involved with. This affects everything from marijuana dispensaries to individuals subject to international sanctions, terrorist organizations, etc. Vladimir Putin is a quite possibly the richest man on Earth, but if tomorrow he walks into a bank in Manhattan, they won't let him open an account. He's under heavy international sanctions and no US bank will do business with him. They would certainly love to take his money if they could, but the law won't allow them to.
There is no reason crypto transactions can't be similarly restricted. The feds have already forced the major crypto exchanges to adopt KYC laws. And those could be extended down to individuals as well. You can require individuals to file paperwork for any crypto transaction over a certain amount. They can require if you're doing a large crypto transaction you need to verify the identity of the person you're transacting with. They might even require this for any crpyto transaction whatsoever.
Will some people ignore these laws? Sure. But some people also ignore laws and regulations on cash transactions and stuff thousands of dollars in their shoes as they go through the airport. Some people will always try to get around the law, but it's not an easy thing to do. And the consequences of getting caught are quite high.
And the same applies to crypto. Crypto transactions are not magically immune from detection. Yes, they're designed to be cryptographically secure, and they typically are. But that doesn't mean the feds can't see that you're performing a crypto transaction. All internet traffic is being packet-analyzed for various law enforcement and intelligence purposes. We've known that since Snowden. The feds might not be able to figure out your private key, but they can certainly look at your internet traffic, see all the packets you're exchanging with the bitcoin network, and see that you're doing some sort of crypto transaction. Once they know that, they can come knock on your door and not so politely ask you to provide them with information on the people you've been transacting with. And if you can't provide that info, you're now in violation of some serious federal laws.
Are there ways to obfuscate your internet traffic to hide that you're making crypto transactions? Sure. But now you're just back in the same cat-and-mouse game that law enforcement has been doing since the dawn of civilization. Criminals will create tools to hide their crypto transactions from detection. Law enforcement develops tools to counter those methods. Rinse and repeat. Evasion will always be possible, but you quickly leave the realm that the average person can meaningfully hope to conduct a secret crypto transaction. Sure, if you have the resources, you can smuggle anything across the border by building a long-range submarine and sailing across the Gulf of Mexico, but that's not something most people have the resources and skills to accomplish. Criminal crypto transactions will always be possible with enough resources, but it becomes something only highly resources organized crime outfits can do.
So a crypto owned and operated by Paypal doesn't solve anything, then.
Paypal can and has held funds.
https://www.dailydot.com/debug/paypal-withholding-funds-small-business/
Considering it's Paypal's crypto currency that began this thread, that seems like a Paypal-problem rather than a currency-problem.
It is a paypal problem but you used paypal as an example of how you can send money easily. The other replies and mine are saying that isn't always so.
I mean, while proof of work is absolutely awful, proof of stake is still far less efficient than traditional banking setups.
I forget who said it, but it went something along the lines of "As soon as you have a single trusted party in a transaction, the need for cryptocurrency disappears."
We've seen what happens when you bring cash online (in the current state of affairs). It's kind of a disaster because it's trivial to defraud people and then has them seeking out trusted parties to do the transactions for them.
Proof of Stake was a way to used Traditional Finance known methods of abuse in an unregulated space. It is based on the same concept as the current banking system: Put something in a box, and it will gain value just for being there.
Proof of Work creates value from energy. It had a terrible start, but it largely changed to renewable sources. Over 50% of BTC mining is already in renewables and more to come.
That doesn't really make things better though. There are alternative things we could be using that energy for. This is true even if you only fire up your BTC farm when electricity spot prices drop low or go to zero. There are a lot of potential energy storage solutions out there, including some that work on very large scale like pumped hydro. But in order to invest in these large storage projects, there needs to be a clear market case for them. If BTC consumes all the extra energy on the grid when the sun is really shining and the wind is really blowing, then that's energy that can't be used to support, feed, and develop large scale grid energy storage.
We are working hard right now to fundamentally alter the way we power our civilization. And one of the biggest bottlenecks we have is simply mining all the raw materials we need for the solar panels, wind turbines, and batteries we need to run everything on renewables. It's tempting to say, "well BTC is just going to produce more demand for renewables, so this is a good thing!" And in an naive ECON 101 sense, yes, that works. But that kind of economic analysis largely ignores the fact that we live on a finite planet where raw material supplies cannot be expanded to arbitrarily high levels on a whim. The whole species is currently trying to move to renewables, and the mining industry just can't keep up. The cost of all the raw materials for these products have skyrocketed. We're going to need to increase our total mining capacity of lithium, cobalt, and many other elements many fold. And until that mining and refining capacity is enough to provide for everyone, we face a hard cap on the amount of solar panels and wind turbines we can produce each year.
In such a critical period, burning through obscene amounts of electric power to run BTC mining rigs is downright morbid. We need to be using our finite solar and wind capacity to take care of our necessities first. If in 30 years we've managed to move everything to solar and wind, and we have a glut of solar panels on the market. Sure, at that point BTC mining might make sense. At that point you're not frivolously wasting scarce resources. But now, in 2023? We're spending hundreds of billions of federal dollars to try and make everything we can as efficiently as we can. We're trying to move everything to heat pumps, electric vehicles, better insulation, and on and on. We need every watt we have just for our basic living. We simply don't have the energy to waste on such a frivolous activity as BTC mining. At this point we should just make it illegal entirely.
I understand your point and agree with it in part. Because of Bitcoin, Geothermal energy is being explored in El Salvador, bringing up technological advances to add another way to extract energy from the finite resources we have. Also, Bitcoin isn't frivolous, since it saved an awful lot of people these last years from collapsing in third-world countries from the dollar instability and global recession.
It's a tough sell, and I get involved in such discussions to learn more about other people's opinions and realities. I am not trying to change your mind, but understand where you stand and why you think that way.
I am aware of how PoW operates. It's still an arms race of wasted energy. Every kwh spent mining bitcoin is a kwh that would be better spent heating/cooling homes, desalinating water, or literally anything else. Which could let it replace fossil fuel usage instead of just supplementing it.
Adding PoS to a financial operation like Paypal is just "how can we turn our traditional database into something more complicated (and thus more expensive to run) than a regular database?"
The only crypto methods that make any level of sense to me are the ones based on data storage, like Filecoin. At least then, it's a tangible good being exchanged for the coin, not just "I wasted this many kwh" or "I already own X coins". Even then, the overhead of processing and distributing all that data is a questionable value-add in my opinion.
Proof of Work got a major change in its power consumption fingerprint since it started to move to renewables. Over 50% or BTC is mined with renewable energy sources and more to come. It's a problem, but it's being worked on.
Proof of Stake is just Traditional Finance without regulations.
Without making any assumptions about your personal views: this is the standard crypto-bro line.
People have addressed some of the issues with it in other posts so I'll just point out the two most obvious: Power used for mining is power that can't be used for something else, it doesn't matter what percentage of it comes from renewables.
In a theoretical future when renewable and storage solutions are creating more power than societies can use, that won't be a problem, but we're not there now.
The second issue is mining rigs and all of the resources and footprint associated with building and distributing them, not to mention the waste inherent in the high hardware turnover rate. Without proof of work crypto these machines don't need to exist at all.
exactly, it's the cleanest, safest, most environmentally conscious tire fire we've constructed
the truth of the matter is we wouldn't have a tire fire if it didn't make people loads of money.
I agree about the machine turnover, but you're making an implicit assumption that there is a single market for electricity and it's not true. There is such a thing as "stranded power" where there are no available power lines to get electricity to customers willing to pay for it. (That is, there may be power lines, but they're at capacity.) That means electricity can be locally abundant, even though it's not globally abundant.
One example of this is Bhutan where there is much more hydroelectric power generated during the spring melt, but they don't have the transmission lines to sell more power.
Then the question is why someone doesn't build more power lines? I don't know why Bhutan doesn't do that, but in general, they're expensive and there are environmental concerns, so it can take a while. Maybe they'd have greater incentive to build more power lines if they didn't mine cryptocurrency, though?
(But in any case, I'm favor of proof of stake, which eliminates these concerns altogether. It's weird to pay Bhutan to secure your cryptocurrency and it shouldn't be necessary.)
Yeah, I know that is the "standard" line. I am not denying it, though.
I see crypto as an emerging technology still. Not only that, but I am not even sure blockchain will actually catch, I just know that Bitcoin has, and I have used it to avoid predatory banking.
Off topic but, 'paypal-corp.com' does not immediately sound like a legitimate domain of paypal.
Why might they not use newsroom.paypal.com? I guess there's a security argument for a non-subdomain of user facing service on paypal.com?
Almost certainly that. Press CMS sites like this are usually managed by an external vendor (or at least a different internal team) and you don't want the site to become surface area for attacks where the attacker might gain access to
*.paypal.comcookies.Why does anyone even use PayPal in this day and age? I think the last time I had any use for it was 20 years ago when I was a kid who wanted to buy stuff online and didn't have a credit card.
I guess it's still an option for people who cannot get a like of credit?
Does it have some value in ties to merchants like eBay?
Similar to venmo or others in that catagory sending money online via email addresses or usernames is nicer than putting your bank details out there for people to bank transfer you the money.
I suppose, but then why not just use Venmo? PayPal is clunky as hell and always has been. Sending via email is already handled by my bank's e-transfer option, the only notable thing is that the receiver can see your name.
It's just a different UI for the same service provided by the same company. PayPal has thousands of integrations into ecommerce checkout flows which Venmo has not really replaced.
I tried Venmo once to pay someone who didn't have PayPal, and noped out after it offered (defaulted?) to post my transaction on a public timeline somewhere. PayPal can largely be trusted to behave how I expect it to, in a way Venmo can't. This might be a generational thing; Venmo feels like it's trying to be PayPal For Hip Young People and I'm just staring at it like "but we already had PayPal".
US banks are largely trash at this, if they offer any form of it at all. (A lot of the ones that supposedly do really just shrug and redirect you to Zelle. One mailed my then-landlord a physical check.)
Venmo is US centric and not available where I live. Sending by email is also not available where I live.
PayPal is a popular merchant solution, they also offer credit card processing at competitive rates (though less competitive these days). So a merchant can easily offer the option of paying via either CC or PayPal, where the latter has lower transaction fees.
I know I lean further toward paranoid than many people, but I always prefer PayPal at checkouts rather than typing in my credit card details directly. I know online encryption is generally safe enough that I probably shouldn’t worry, but I still do.
I also see it as a line of defence between me and the online store, as I know there are heaps of scam stores out there and I don’t trust myself to spot the clues, so being able to go to PayPal to get my money back feels much safer than if I were giving my credit card details directly (where I’d be hoping that my bank’s opening hours somehow line up with my own schedule.)
There are people in certain circumstances or regions of the world where it's just easier to use Paypal (in either direction), especially for receiving money. (I've never heard of someone getting paid "into" their credit card.) As a user of Paypal, I believe you're somewhat shielded from the complexities of transferring money across international borders, and only need a bank account instead of applying for credit.
That all said, I really dislike Paypal because they have to deal with so much fraud at their scale that they err on the side of assuming fraud rather than innocence, and then lock up money in their system (you can't withdrawal until you can convince Paypal to do so), and, as the end user with said locked money, you have no power to fight that. Numerous stories online of this happening to people.
That's ironic. I've been comparing fake cryptocurrencies ("stable" coins and other things controlled by a single entity, nothing to do with cryptography-based currencies, or at least not more than online banking encrypts your connection) to having a paypal balance
I'm going to need a new example
Seems useless. Guess some exec had an IdeaTM and people just had to go with it.