Are there any guides that properly explains the crypto space?
So my only experience with crypto is buying a little bitcoin after big crashes, ignoring it for 5 years and selling it when theres hype in mainstream media. Happens reliably enough and i made a little change. Also did some fruitless blockchain work when it was a corporate craze in 2017 but overall, don't care for the tech much.
Anyway, I've been looking into some things for work and a lot of roads lead to cryoto. I'm decent at picking apart a reasonable technical system and can call on people who understand legal, financial, logistical or company structures. But the crypto space is a weid mess. It feels like kids playing a pretend game of being a central bank.
There's official documents and company filings with full corporate structures, but everything is just a bit too juvenile. Like you'll see a Senior Auditor with 10 years experience at KPMG, next to the head of marketing: YoloSwagger with an animated One Piece profile pic. There's also these ambitious White Papers attached to code base that seems like the same boilerplate example but with stupid variable names.
A bulk of the info i need is the diction and syntax. Don't know if its because I'm old because I don't get it. I see a lot of start-up and investment language thrown around. And it's mixed with a plenty of meme terms and some utter nonsense. I can't get a straight answer on the meaning of Utility even though its thrown around like a core metric. And don't get me started on Wallets because that definition seems to change mid sentence.
The other thing I need to understand is the technicalities involved and accessing the right info. Before my searches were polluted with the meme coin story today, there's not a lot of good info. Most of what I found was exchanges telling you to not worry about it and give them money, or crypto bros telling you not to worry about it and give them money for their course.
I understand transactions and how everything is just a pump-and-dump to get at whatever liquidity was raised. All the evidence for fraud is obvious in hindsight. There must be ways to track those trends before it happens and find consistent factors. At the same tine how the hell can people just start a coin and other people throw small fortunes at it for a laugh.
I'd be grateful for any good primer unpacking things. It really looks like the normal education is to jump in with you life savings and sink or swim.
In video form, this is an older but well respected explainer of underlying concepts: https://www.youtube.com/watch?v=YQ_xWvX1n9g
I recommend reading anything Molly White writes:
Cryptocurrency is complex and hard to understand to make it easier to hide the scams.
I recommend avoiding cryptocurrency.
I'm not sure that's exactly true, so much as it's very easy to understand, and then you're left with "but then why are people throwing money at this". It's very much an emperor's new clothes situation, but that's from someone who does think there's some small validity to crypto.
At the end of the day what crypto does is decentralize a transaction.
You see somewhere that X sent Y $100. How do you know that's legit?
Well normally it's because the banking institutions and a bunch of other systems confirmed through various means at various points that this happened.
The main idea behind crypto is that instead you just make EVERY transaction public, and then everyone confirms them. If 50,000 people all agreed that X sent Y $100, then yeah that happens.
How do you get people to verify these transactions though? You pay them in the coin that they're verifying. This gives the coin value (the value of all the work that goes into verifying those transactions) and gives you circulation.
That's basically it (proof of work/proof of stake is the verification method). With this in mind, bitcoin took off for those who for shady reasons or not wanted to avoid the traditional banking space(while all the transactions are public, who has access to the accounts is not).
It's why it's often called a digital asset, because traditionally the only other way to do some large transaction without banks was by trading some asset. Cash is tricky for a lot of reasons so gold or gems are the currency of choice, being inherently valuable due their properties and perceived value across cultures. Other notable options have included land (because selling land is common) and art (because you can easily set the "value" of art and it's hard to argue).
Crypto has the "value" of gold but still lets you do across the world digital transactions, and thus bitcoin.
Eth and most everything else, to dumb it down a LOT, was the idea that "well it's all digital transactions, so lets put rules on it". So now you can do If X gives Y $100, Y gives Z $200 60 days later. This opens up the world of dynamic solutions, which is awesome, and the world of coding loopholes, which is not (since the bug bounty is now "how many coins can you steal, launder, and sell before anyone notices. good luck).
And that's all there really is. Stable coins exist so people can do transaction's without triggering taxable events in their country of origin since crypto is new and in a weird space and thus every time you convert back to cash (even digital) you're triggering tax laws (maybe sorta kinda).
So with all that in mind, is there a use for crypto?
Well the market has spoken and said YES, but to what level is the question.
The first (digital gold, and thus bitcoin for the most part), is 100% valid and likely not going anywhere. Bitcoin does have some long term issues for sure, but so far no one has been able to dethrone it.
The second, dynamic self enforcing transactions, MIGHT have validity. SOL sorta sticks out as trying to solve some of the problems inherent to all this (transactions per second being a huge one) and having some adoptions/success, but it's a very nebulous space.
A third "sorta" use is staking. Before FTX blew up this was one of the big siren calls. Some people have a nice chunk of savings just sitting in a savings account earning a "fuck you" amount if "interest". Then they see these stable coins earning 5-150% APY! So of course lets throw our money at them at our level of risk (more aware of how money works, maybe 5% is legit. Totally unaware, wow that 20% is awesome and is surely not going to fall apart!).
So...why all the fucking coins then?
That brings us to crypto's final use, which is "stock market without the majority of regulations for anyone on an international level", or shorter, "scams/gambling".
The problem is, scams ARE successful in the short term. Want to raise a lot of capital and there's no laws/repercussions, scams are wonderful. So how much of the money tied up in crypto is literally just that though? How much of that will last if coins finally start settling and solving issues or countries find better enforcement methods? Right now it's the constant chase of the "potential" of crypto that keeps people throwing money at it. Why save your cash when you can chuck it in DOGE and just hope elon says something and you cash it out. It's fundamentally worse roulette but it gives people a different feeling of security, so it "works".
Of note, modern banking EXISTS to solve the issues of people being scammed and to help keep the "velocity" of money going (you're not using it, so we'll loan it out to someone else, and pay you interest for the privilege, and give it back when you need it).
What about it actually being a currency?
This is the final point, which is that its supposed use of "digital currency" really makes little sense as most are designed. All coins that aren't pegged to a currency are volatile as hell, and to have a currency that's not volatile requires much more than crypto provides. It's only a few diehards who still think that's possible, and if a coin resolved into that space, it wouldn't be an investment, which is what everyone is chasing now.
Edit-
Just to ramble a bit more, as someone who has found finance throughout history a FASCINATING subject, crypto has been hilarious to watch up close. Very much the any % speedrun of "why do banks/central orgs exist" and watching stuff that happened in the medici era or earlier happen again in micro communities. It sucks that people are losing money to learn these lessons, and often money they can't afford, but oddly I wonder if crypto and it's rampant scamming will ultimately up financial understanding/responsibility (in a horrifically darwinesque way)
Appreciate the breakdown.
I think one of the ideas I can't get over is the way people keep associating crypto and the blockchain with independence and deregulation. Because outside of Bitcoin, it seems to be the opposite. Hell, the blockchain itself is tailored specifically to enforce oversight by a central party. It's a privacy nightmare and the inefficiency of needing multiple independent verification just add a security nightmare on top of it.
I spent way too much time workshopping "industry ready blockchain solutions" and the whole idea of a decentralized system seemed very nice. We tabled pit-to-port as a system where every handover of raw materials could be tracked and approved by all interested stakeholders. There was also a vehicle lifecycle solution that see a vehicles history from manufacturing to scrapping. Agri-chain to track national food production. Even a system to track nuclear fuel rods and the blockchain recorf would be etched on the side of the disposal barrel.
Every solution involved all parties having full visibility on every transaction and each node validate actions for consensus to be reached. But I would not call any of the blockchain or ETH based coins decentralized or even unregulated. There's still one party designing, maintaining and managing that smart contract. Centralized regulation is a requirement of the system and in the case of coins, they have no commitment or oversight.
And 9.995 out of 10 times they can just grab the bag and run while every other party is powerless to stop them.
There's a couple of reasons for this.
Bitcoin started with that in mind. "hey lets just handle all transactions ourselves and then we don't need banks!". It's a very naive view, but there's lots of hardcore people who still hold to it. It's "fine" if you're ok with scams, a high barrier to entry, and getting screwed on even the slightest mistakes, but since bitcoin people WANT mass adoption so number goes up, you can't have that be the case.
Just because the ledger is public doesn't mean you can't be anonymous. I could spin up a wallet, load it, and then transfer money to someone who just spun up their wallet, and they empty it. Yes you see that the transaction happened, but it can be very very hard to trace who the hell actually had the wallets. Do this for ALL transactions and it can get nasty fast. And that's before stuff like monero which still verifies transactions but is much more opaque.
And yes, most "real world" implementations that might actually have a use, would be far from decentralized or hidden. On the contrary one of the best potential upsides of a coin is that yes, everyone can see the transactions ledger. The "grab the bag and run" problem is very real, but kinda comes down to how we handle that with most every other form of money in society. There are some interesting potential solutions around cryptographic stuff/smart contract stuff, but I haven't seen anything that makes me take it seriously.
This is the important part. When crypto bros weren't able to convince businesses to take their coins to buy stuff, they had to find new ways to get the money out of crypto. That was convincing Stooges to buy NFTs and now it's convincing Stooges to buy meme coins.
You don't invest in Crypto, you gamble that you are the one dumping and not the one pumping.
Appreciate the good sources. A lot of what floats up in my search results tend to be super generalized, outdated or outright propaganda.
I am trying to figure out scams are a result of the complexity or of the made it so overly complex.
I would call that a pretty succinct summary. The entire premise of crypto is (or rather was) that it's an alternative to fiat currency issued by a country.
The problem is that, by and large, it never made it to the place where it could be used as such to purchase any significant variety of goods. It was a currency that couldn't be used as currency, an intellectual curiosity with no backing other than "we spent a lot of electricity to make a row in a spreadsheet".
As such, it mostly became a speculative vehicle, which is what drove the majority of its rise from worthless to multiple 10's of thousands. It's primary value is in how much you can buy and sell it for, like stocks without a backing. Or pesky regulations that exist for all sorts of good reasons.
The vast majority of crypto is generated by one of two means:
This leads nicely into:
It's quite simple: literally anybody can make a cryptocurrency. There are costly but trivial 'piggyback on another network' options, and for anyone with a modicum of technical knowledge, fork DOGE and change some variables. After that, it's just marketing to convince people there's a reason to use your cryptocurrency.
People throw money at it because it's a giant speculative hype bubble. A dot-com level hype bubble with even less legitimate backing. It's less tragic if it's somebody who can afford the loss, but that's a tiny minority of people.
Others can give you more technical answers, but that's the crux of the problems...which makes the rest of the technical details more or less irrelevant. They are not likely solvable until they are fully regulated with the same kind of scrutiny as stock markets and banks....which incidentally removes most of the incentive to use them.
Re. Your technical questions, Wikipedia seems like it’s still a decent resource.
Re. Cryptocurrencies as a whole, they have the same air as penny stock trading, but with a veneer of unearned technical prestige. Fundamentally the math they’re based on is interesting, and some of the originally proposed goals genuinely do underline issues in the modern economy, but effectively all of that has been overwhelmed by get rich quick schemers running market manipulation scams in an area of reduced regulation. Imo.
Important to note that Tildes generally has a strong anti-crypto leaning.
As someone who strongly advocates in favor of this technology, I would encourage you to ignore the hype as much as possible and invest based on underlying principles - i.e. Bitcoin.
If you are looking to invest, my suggestion is to start by visiting bitcoin.org and choosing one of the wallets that they support. Standard financial advice is to invest on a dollar-cost average - i.e. set aside a small amount of money each week or payment cycle ($100 perhaps?) and use that money to purchase Bitcoin and then send it to your own wallet.
"Not your keys, not your coin" is an often-repeated maxim in the crypto-space, and for good reason. Leaving your money on someone else's account is how fraud and scams happen (see FTX). If you are not comfortable with the concepts of cryptocurrency, or you find yourself overwhelmed by the general crypto space, then start small. It's likely that this current hype cycle will result in a crash, but I still think that the best time to invest is whenever you have the financial capacity for it.
Edit: to answer your question more concisely, the main Bitcoin website does a good job of explaining everything you need to know about the modern "crypto space". If it's not BTC, it's probably not worth investing your time/attention/currency into.
The important questions:
The reason there's an anti-crypto slant on Tildes is because there's a better understanding of those answers than the public at large.
These are really poor arguments. To start with, the value of one coin not the same as all. Yes 99.999999% of coins are garbage because it's an unregulated space.
Speaking just to bitcoin though, the answers are basically:
The inherent value comes from the ability to do decentralized transactions. That is a service that the market has put a value on. Speculation has spiked that value, but there's a very real market for just that alone.
See previous. A mix of more market adoption (more people using it, less complex regulations, etc) and rampant speculation (again, unregulated space mixed with people not really understanding).
It's not, it's a totally different speculative asset class and that's like comparing apples to oranges. You would never treat a portfolio in such a way where you shift your stock holdings to crypto. Even if it becomes adopted fully it would be treated as something totally different due to the different use cases and purposes.
Edit-
And to throw out some real arguments against crypto as a whole-
What is the real price when the speculation/scamming goes away? That's extremely hard to determine, but the fact that the entire market moves on BTC seems to imply that the validity of everything else is really in question.
How much of the market is literally backed by massive ponzi scheme like bullshit practices. There's a really concerning theory out there that the last crypto ramp up before FTX was from Tether. Tether was basically the first widely adopted stable coin, and thus allowed you to finally do multiple transactions across multiple coins without exiting the market and thus triggering tax laws. It also gave you a coin to hold your money in while the market fluctuated.
The problem is, what's backing tether? Like modern banking, a run on something like tether would destroy it, but even worse, tether might be backed by.....bitcoin. It goes something like this:
I have $100, so I "sell" $100 in tether. If they all cash out at once, cool I can cover it. However just cash is a lousy way to hold value for all sorts of reasons, and 100% almost certainly shouldn't be in cash. Traditionally you invest some of that cash in safe/stable investments like bonds.
Buuuut...what if i just used my $100 to buy bitcoin. Well it's still worth $100 right, so I can pay them out. But hey, those people who bought $100 in tether....they bought bitcoin with it, so the price went up. So now my coin is worth $150. So i can sell $50 more of Tether/buy $50 more of bitcoin, and so on.
IF this is going on (and there's really no way to know) is very concerning. Even if tether was following exact best banking practices, there's the looming nightmare that suddenly china/US just say "ok you can convert to cash and not incur taxes so long as you don't cash out from your account" and suddenly overnight everyone cashes out their tether. There's no way they could handle that in the BEST case.
But if they're doing the shady shit i just summarized, then it's going to take a massive fraction less of a run to blow up Tether. And god knows how many other stable coins are doing the same thing. And if tether goes down, and it was that feedback loop i talked about that ALSO upped bitcoin, and everything moves based on bitcoin, then that's an entire market crash from one weak point.
This is ONE (although the largest) of many examples of super suspect and concerning practices in the entire market, which makes any and all value extremely speculative because of the lack of regulation. Even if your product is at the end of the day legit, its price might not be if these kinds of practices are vastly inflating its value.
I honestly think we're on more or less the same page, but we're asking different questions based on what we're seeing and the intent behind the questions. Though yours are definitely better IMO.
Your question about value minus speculation is an interesting one that it's fun to probe at. Let's gather some facts. Bear in mind I'm an amateur making some leaps and bounds speculative napkin math, so take with grain of salt as appropriate. My goal is to come up with some garbage algorithm to compare Bitcoin to Apple, then after coming up with a way to "normalize" Apple's value against Bitcoin's, compare that to some other stocks. I'm aware they're not the same investment class, but that's kind of the point...figure out where Bitcoin "belongs" in the broad category of investments. First some facts:
Current price of BTC $100,000. Tangible value is "decentralized transactions"
Transaction volume is around 750k
Current estimated number of BTC: 19.5 million
Maximum number of BTC: 21 million
Price in Dec 2019: Around $8k
Apple's stock is $245. It's tangible value is "Part of Apple"
Transaction volume is around 45 million
Number of shares outstanding: ~15.12 billion
Price in 2019: $66
So total value of Apple stock: $3.7 trillion
Total value of Bitcoin: $1.9 trillion
For reference, Visa, one of the largest payment processors in the world, which makes more money per dollar spent than almost any other company in existence, has a total valuation of about $614 billion. So on paper BTC is worth 3 Visas. More than the nominal GDP of France.
So, by current blurry-vision-chart divination at face value, Bitcoin is worth about 1/2 an Apple, depending on any given minute. There are three ideas that come to mind: Ove price increase, volitility, and volume of transactions. Edit: I ditched most of the ideas behind volitility and volume as I went on, because this was already too much time spent on a whim. If I were going to seriously try to figure this out, I'd probably try to weigh volitility and volume together, to get some degree of 'informed price changes'. Map that against hype cycles. Perhaps normalize that whole thing against some broad index funds to account for overall market feelings spikes.
There are going to be a bunch of wild assumptions and oversimplifications, but then, this is mostly for my own bemusement.
So over the course of 5 years, Apple increased in value 3.7x; Bitcoin increased 12.5x
If we assume that Bitcoins real inherit value did not increase more than Apple's, and that the rest is purely speculation, that would place bitcoin around $30k today, for a total valuation of around $577 billion.
Let's look another 5 years back. Apple was around $27 in Dec 2014. Bitcoin was around $313. So a 2.4x increase for Apple, 25.6x increase for Bitcoin. Doing that same projection puts bitcoin at $751 in 2019, projecting that back forward to today puts it around $2,800.
So, to recap that bit: If we assume that Bitcoin's inherent value of decentralized transactions is equivalent to one of the most valuable companies in the world, and map its value directly to match Apples, that would mean that Bitcoin is currently overvalued by about 97%.
So let's apply this to some garbage that had a hype bubble that burst: ZOM
It went from about $0.12 in 2/2020, to about $0.12 today. The company itself has had no real growth, just a burst of hype and back down to a slow bleed. That hype curve lasted about a year, taking it to $2.91....a 24.25x growth and then a subsequent burst back to real valuation of 0 growth.
How about another fairly stable tech stock? MSFT: $152 in 2019, $440 in 2024. 2.9x growth. $47 in 2019, 3.2x growth.
Another 2020 memestock hype bubble: AMC: $50 in 2020 ( sliding down to $20). Valuation in 2021 (peak bubble): $650. A 13x from point to point, 29.5x from pit to peak. And then it remained mostly flat afterwards for awhile.
I think I might be on to something here....
If we presume a 3x growth for BTC every 5 years since value started 2010's $0.20 valuation, that puts us around a $5 valuation today.
5x growth? $25
10x growth? $200
So, in edit summation: If we assume that BTC outpaces the largest tech companies in the world in non-speclative value, we're up to 3 digits max. At $200, that means that 99.8% of BTC's value is hypetrash. At $25, its 99.975%. That puts its total valuation somewhere between $500 million and $4 billion.
I would understand your transaction arguments for some cryptocurrencies, but bitcoin fucking sucks for transactions last time I checked. Gas fees are crazy, and the network is extremely slow compared to something like Visa or Discover. I struggle to understand its value outside of greater fool theory or the comparison to gold bars (which I'd still consider to fall under greater fool theory).
Fee's are set by the market, but yes transaction fees and scaling are one of the larger issues that need to be addressed (hence projects like sol, but they lose in other areas).
At the end of the day, if I want to send money to someone and I don't want to use traditional banking methods, then ALL of my options are "give them something physical which requires massive travel time, costs, and meeting in person" OR "send them bitcoin".
But realistically bitcoin specifically is a bad choice for sending money. Ethereum is better yet still imperfect. I've made ETH donations for some multinational reasons, so I'm not totally writing it off.
Tether is a symptom of people trying to reinstate current banking trends into the crypto space, and I agree that it's basically bound to fail at some point. Basically the entire crypto exchange market is garbage. It's predicated on having multiple currencies, which is antithetical to the point of Bitcoin.
It fails and the exchange rate of Bitcoin plummets for a bit, just the same as it did in 2021. I still have the same amount of Bitcoin on my wallet and the value continues to trend upwards over time. The 'real price' is ultimately up to however much people are willing to spend on running PoW algorithms. Part of me hopes that the market crashes to the point where I can feasibly run a miner on my laptop but I don't know if that's going to happen anytime soon.
I don't like Tether but disagree that they're "bound to fail." There are reasons to believe that they might survive.
People have been skeptical of Tether for very good reasons, but on the other hand, now that interest rates are higher, running a stablecoin is a spectacularly profitable business model. People give you an interest-free loan and you invest it in treasuries at 4-5%. The hard part (after becoming a popular stablecoin) is getting access to traditional finance to buy the bonds. There's no reason to take any further risks.
They could have bailed themselves out of whatever bad investments and other shady stuff they were doing by now. If not, time is on their side. The Trump administration seems unlikely to act against them.
I suppose there will always be a temptation to juice the earnings further, so who knows, but they don't need to. Whether they survive basically depends on management - have they become competent, or do they take more unnecessary risks? I have no idea. But it doesn't take a genius, just not being stupid.
For people who have reasons to do cryptocurrency transactions (versus speculating), I think the stablecoins have won. On the other hand, since it doesn't pay any interest, it's a bad investment.
What does the government do next about the massive money laundering this enables, though? I guess it helps somewhat that the blockchain gives them lots of transaction records. Perhaps trades with specific Tether-backed accounts could be blocked on at least some exchanges.
Oddly trump is a threat in the other direction. If you could just convert your coin back into cash on an exchange and NOT get taxed until you withdrew it, rather than on the conversion, why would you bother with stable coins? Trump might just do something like that. That's a huge % of tethers use, and the mass amount of people converting back to their fiat could cause issues.
Edit-
The other major concern is the lack of any serious audit of basically all this stuff. Tether has, last i looked, a shady as fuck attestation(which is weak as hell and would never fly for a bank) and that's it. If they have the funds, why not prove it is a very very real concern.
Tether's stability is tied to the US Dollar, and the stability of USD is backed by the United States' military strength. The US Economy has always been driven by war and extraction.
Bitcoin's stability is tied to the core principles and people's willingness to participate with them. It is voluntary, while participation in the US Economy is essentially mandatory.
I think it’s overdetermined. Another explanation is that the US dollar, and government debt as well, are backed by the US government’s ability to collect taxes and the strength of the US economy. A large economy means there are more taxes to collect, compared to a country with a smaller economy. Tax evasion happens, but not like in countries with more widespread corruption. US citizens and businesses largely do pay their taxes, though they also look for ways to avoid them.
The military isn’t directly involved in that, though it does prevent wars from happening that would affect the US economy, and US alliances also protect its many allies. (And being on the US enemies list is bad for any country smaller than China.)
US size and stability also results in foreign investors (and governments) being comfortable having US investments, to the point that there is a “flight to safety” resulting in more US investment in troubled times. Since investments are safe (relatively), other countries can run a trade surplus with the US and be confident that they will eventually get the money out.
So for example, oil producers are mostly comfortable selling lots of oil to the US without matching imports, because owning US investments is just as good. (At least, if they’re not Russia.) Exchange rates vary, but they don’t need to worry about US currency collapse.
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I’m not sure what you mean by Bitcoin’s “stability.” Its price is not stable the way a stablecoin is stable. But it’s also the first successful cryptocurrency, which is a built-in advantage compared to less famous cryptocurrencies. Even Bitcoin after a price collapse is still a decent bet because of its fame, compared to starting from scratch with some cryptocurrency that nobody heard of. And Bitcoin’s instability (that is, volatility) is part of what makes it attractive to investors looking for a fun ride. Stable governance does help in ensuring that the ride never ends, though.
It’s too bad it worked out that way. I’d like to see Bitcoin lose popularity to technically better, more efficient competitors, but apparently investors don’t care as much about that. Technical differences don’t seem to matter as much as fame.
Contrast with stablecoins which are useful, but not for investing. All the popularity of stablecoins versus speculative investments has to come from being somehow useful, since they’re not going to go up. Fame matters for which stablecoins are popular, though, and seems to matter more than rumors about corruption.
I would mostly like to address your last statement, regarding 'better competitors'. I think that Ethereum (for example) is a mistake. The nature of open-source technology is collaborative, not competitive - all necessary competition is already baked into the PoW algorithm. Bitcoin has already been extended to address all of its initial shortcomings (e.g. Lightning, which provides instant/anonymous/untraceable sending, eCash for independence from centralized points, and RGB for smart contracts).
I'm also going to address the other comment for the sake of simplicity here. My point on the origins of banks was that they didn't really solve human problems, contrary to what Eji1700 said. I think that money is a helpful tool, and having a system of money which resolves problems that banks have created or perpetuated is even better.
Looks like USDC trades on 16 different blockchains, but not Bitcoin. Tether is similar. I'm not very familiar with Lightning (etc), but I only hear about it when Bitcoin advocates bring it up, so I wonder if it's getting any traction.
Regarding banks: in any city, what do you see? Lots of buildings. Who paid for the labor and materials to build those buildings? There are many alternatives, but construction loans are pretty common. The evidence that banks are helpful for solving human problems (particularly, shelter) is all around you. Buildings are too expensive for most people to pay for without help from a financial backer with more money.
I've been a Lightning node operator for the past few years so I have a biased perspective. That said, I think the work that's been done is quite impressive. Point-of-Sale systems, ATMs, and NFC tap cards are some examples that I've seen so far. I'm working on weaving it in to my web development stack but I'm trying to avoid canned solutions, so it's slow going.
Re: banks - We live under a banking system that has afforded some people to amass enough wealth to pay out of pocket for the labor and materials required to build houses. Instead, those people choose to put that wealth towards corporations like Blackrock and use their money to earn more money. Urban centers have empty office buildings that could be converted into apartments, but low-income housing doesn't make as much money as building a new subdivision of single detached homes so those office buildings are staying empty.
Now, you said yourself that "we are entirely dependent on money" - i.e. there is no choice but to participate, unless you want to be 1. forcibly evicted from your shelter, 2. sent to jail for being homeless, and then 3. enslaved by a private prison in accordance with the Thirteenth Amendment. In my opinion, the assertion that 'central banks help solve human problems' is like saying 'slavery makes agriculture easier' - it's a system that only works based on involuntary participation of many for the profit of a few.
"There's no choice but to participate" - that is, earn money somehow - is not what "slavery" means. Having to earn a living doesn't make you a slave - this just cheapens the term. You're listening to the wrong people.
I would argue that being being obliged to work within a system where other people can profit off your work by circumstance of their birth is a modern form of slavery.
I am speaking rhetorically here, but I don't think that it's an unfair comparison. I do, however, have a boatload of empathy for people who fill the role of breadwinner for the sake of helping others who cannot do the work to support themselves. I don't mean to criticize anyone in this role, only the system that perpetuates it.
I suggest reading more about human trafficking victims and then see if you still think it’s the same as having to work for a living.
You're right, there's a big difference between being the victim of human trafficking and having a job.
This is so broad it’s useless. You can argue basically the entire of the populace of the world is “slaves”.
That is the argument, yes. Exceptions include monks, homeless people, children, permaculturists, and "the 1%". Broad as it may be, the point is to highlight that this dynamic is perpetuated by the economic system we live in.
I'm not going to make further arguments aside from saying that I am making these points to highlight the reasons why having a system like Bitcoin is important, so you are welcome to dismiss my points as being useless if you feel they don't apply to you.
I don’t see the relation to bitcoin. No one is entitled to food in any economic system. Even in state-planned socialism, you still have to contribute labor for resources. So you’re always obliged to work. Then it’s just about whether or not the system has hereditary controls, and I don’t see what bitcoin helps with that.
Hmm, I had to take a moment to think about this - I want to give a good answer.
We live within a financial system where banks can essentially "eat their cake and have it too". The Federal Reserve has executive control over how much new money is printed and where it goes. This money is distributed to central banks. Fractional-reserve banking means that those banks can "hold" the money and also invest it into ETFs and mutual funds - generally large corporations which guarantee ROI. When banks default and are unable to repay, the government bails them out. This creates a system where people who have invested a certain amount of money into hedge funds are able to live off the dividends without any financial risk, i.e. they are not obliged to work.
This is the inspiration for why Bitcoin was invented. There is no way for anyone to simply 'print more money' in this system. It can be mined, yes, but there are diminishing returns and a hard cap to total supply. Some lucky Bitcoin whales are realistically set for life, yes, but the thermodynamics of a closed system means that the accrued energy will trend towards even distribution over time, resulting in a distribution of wealth where everybody is obliged to work.
Hopefully this was a concise and intuitive answer, but let me know if there's any obvious gaps in my reasoning.
This is conflating two different concepts. The reason why people can hold assets and make a living off of interest or dividends has nothing to do with the fed - it’s about private ownership and the time value of money. People were owning equity and living off of it when we were on the gold standard.
Printing more money has nothing to do with it.
As an aside, I’d note the US public made a net profit from the bailouts. It cost negative money, because the banks were loaned money and paid it back with interest.
Fair enough, I would say that my brain has a tendency to make lateral connections between significantly different concepts and I understand that it doesn't always make for a coherent train of thought.
My understanding is that people can make a living off of interest and dividends because of the state monopoly on violence. If I default on a handshake loan from a friend, I lose social credit but that's the end of it. People who default on loans from central banks can lose their shelter, livelihood, and most of their major possessions to collections.
I get that people lived off equity during the era of the gold standard, and I also know that the US forbade the private ownership of gold and gave the president the ability to dictate the exchange rate between USD and gold bullion, allowing them to print more money based on the same amount of gold in the treasury. Without such measures (along with eventually debasing the US dollar from gold), I think that the mechanisms of deflationary economics would have affected things differently.
There may have been a net profit from the bailouts when adjusting for inflation, but once again - were those profits distributed back to the public, or to shareholders?
No, if you didn't have a state with a monopoly on violence, you just need to provide the violence. It just makes enterprise easier to not have this minimum floor of resources. But if you borrowed money from your friend, then what he (and his family, and friends) can do is beat the shit out of you until you pony it up.
I'm a bit at a loss, because seemingly the implication is that widespread usage of crypto would lead to a dissolution of the state? I don't even think bitcoin maximalist believe that. And in such a world, it would really be the opposite of the socialist ideas you want.
In a world without a global monopoly on violence, then what you have are local monopolies of violence. Wherever you are, there's a local entity who has amassed sufficient capability of violence to control the territory - a warlord. And yes, they'd absolutely take your labor, with recompense, and the position is typically hereditary.
It's no coincidence that Marx advocated for a state with total power to create his ideal government. Certainly monetary policy - or even the dissolution of money - is part of that.
But once again, the state would exist even if everyone used cryptocurrency. Control of fiat currency is but one lever. So it's a bit moot.
To the public. It would balance out the next year's budget.
You make some good points! I could talk about how violence is a function of scarcity in an abundant world (I firmly believe that the problem is not supply but distribution), but at the end of the day I recognize that violence is a historically consistent reality and that my views are more radical than most people are willing to entertain. I appreciate you taking the time to discuss in a non-dismissive way, and I have no further arguments.
For clarity, I suppose what I'm hoping for is less "dissolution" of the state and more of a metamorphosis. I believe that government is ultimately a good thing, but the current implementation we're working with is clunky, slow, and inefficient. I think that taking on the problems that the next few decades throw at us is going to require a better approach than what we rely on today, and my belief is that Bitcoin will play a role in that. I understand if you disagree with my beliefs, however, and I'd be happy to leave it at that.
While I basically disagree with this premise (tether is a symptom of the regulatory state of crypto, first, and a banking trend second), banking trends are going into the crypto space for the same reason banking trends exist now. They have always been a response/solution to a problem, not just some secret man behind the curtain control scheme.
Yes, being the one with a major handle on the money does come with lots of other problems and ton of behind the scenes power, but just "get rid of the banks" leaves you with the original problems they were created to solve, and many of the same ones with even less accountability (decentralized Deutsche bank style handling)
I don't believe that banks were created to solve human problems. My understanding (informed by Richard Graeber's book "Debt: The First 5000 Years") is that central banks were created to establish the authority of a political leader over the state's economy and to pay military forces to enforce that authority.
What is your understanding around why banks were created?
Banking aside, I think that’s roughly right about how money starts being used.
Subsistance farmers in ancient times didn’t necessarily need money since they could grow what they need and rely on relationships with neighbors. (For example, “feasting” your neighbors in good times was a way to build and maintain good relationships.) Ancient rural economies would “monetize” and “demonetize” depending on local conditions. In a demonetized economy, local strongmen would instead take taxes in grain (which is portable and storable, and feeds soldiers directly), or take something else. This isn’t that far removed from armies plundering the countryside to feed themselves.
Being able to pay for things makes it more orderly; people willingly sell food to soldiers and tax collection happens at a different time, in a more peaceful (but still involuntary) way.
But even though military force played a role in getting farmers to use money, once money s widely used, there are so many other uses for it that I’m not sure its origins matter much? Even in ancient times, cities depended on food grown by farmers, and people in non-farming occupations would make things that farmers use. Trade is important in any civilization.
Now we are entirely dependent on money, so far from the point of origin that the origin story doesn’t matter anymore. So I don’t see military origins mattering now since there are so many other reasons why we will keep using money.
Banking is similar. It was certainly useful for trade, and at this point, every country relies heavily on it. Once a cultural technology is widespread, we no longer maintain alternatives and the origin story doesn’t say much about all the ways we use it now.
What value does Bitcoin offer? It's open-source money, which means it is not controlled by central banks.
The value of Bitcoin has gone up over time as more people understand and invest into the technology. There are hype cycles which cause local ups and downs, but the trend is decidedly upwards.
Bitcoin is better than stocks because the latter require you to invest through a central bank. I hold an entire copy of the Bitcoin blockchain, which means I can prove ownership of my coins (and anyone else's) without relying on a third party.
Ok, you've told me the same pitch that's been present since the first coin was minted in 2008. One that I used to buy myself. I'm happy to walk you through this conversationally:
Why is not being controlled by central banks a good thing?
It goes up because Bitcoin is a deflationary currency. Eventually no new Bitcoins will be made. All price increases rely on that premise: that buying it now means it will have more buying power in the future.
But what can you buy with Bitcoin other than other cryptocurrencies or exchanging it for fiat?
Well, I’m actually playing devils advocate here, but there are edge cases.
One edge case is if your central bank is really bad its job. See: Argentina, at least pre Millei. The usual solution is to use another country’s currency, like the dollar, but there are three issues: 1. The country may set and demand official exchange rates, which Argentina did, and are grossly overvaluing the local currency forcing you to trade for dollars on the black market, which is annoying if nothing else 2. The US is sometimes a big meanie and sanctions your country 3. Because of 1 and 2 digital money, and digital purchases, may be impossible with the alternative currency.
There’s also the factor that even though the dollar is fairly stable, its still not your currency, so the US fed will pursue policies in the US’s interest (as it should), and that may involve impoverishing you, but they don’t really care because you’re unofficially using their currency to begin with.
Another edge is international sanctions. I don’t think anyone thinks that US foreign policy is always fair or just. There’s many countries that have some or many degrees of sanctions. If you’re, say, an expat in the US and you want to send money to your dying relatives in one of those countries, crypto may be one of the few ways you can.
As a practical anecdote of one of these, a friend of a friend is an PhD student in the states from Iran. If he does want to send money to the fam, crypto is the main way. I guess you can quibble about the extent that this is supporting the Iranian regime, but personally I’m not sweating it.
I'm going to ponder this more to give a better answer, and I wanted to let you know I'm not just ghosting. But my knee-jerk thoughts:
You're in the same spot because crypto is a defacto black market anyhow. You're almost as well off using bottle caps or sufficiently shiny rocks if the economic situation is that bad. "Digital bottlecaps" isn't the worst description of crypto.
The digital transfer is more interesting, but still fundamentally relies on either the crypto being hyperlocalized to avoid outside influence, or converting to fiat so it can be used.
The thing is that crypto is a high frequency market, and it’s digital. Trading for dollars in the black market is annoying because you need to care about the spread of each individual dealer and whether or not they’re ripping you off. When you’re trading on a high frequency digital market like forex for fiat, or popular crypto markets, realistically the spread isn’t big enough to make that much of a difference.
Secondly, digital is important. It’s convenient, and some things you can only buy digitally.
Additionally, for my friend-of-a-friend from Iran, he literally can’t leave the US because he’d probably never be let in again. So going to Iran with a suitcase of dollars is a) probably going to get him arrested for money laundering and sanctions violations b) even if he succeeds he’ll, well, not be able to complete his PhD if nothing else. Digital is key there.
I guess that's the million dollar question: Can the friend of friend spend the crypto directly, or does it still rely on finding a usable digital market (or local dealer) to convert back to locally usable fiat (and back into the hands of bad central bank)?
My opinion of crypto would be more realistically swayed if there were entire communities in these situations using it as their primary currency.
Well, it would be his relatives, and I’d imagine they convert it into Iranian local currency. But it is two separate edge cases.
One is that the central bank is bad at its job, and although you can use another country’s currency it does lock you out of the digital payments world entirely. So crypto is a currency you can use in absentia, and with no central bank to dictate usage, you can do digital payments.
Two is that sometimes countries use their banks as political weapons, and people get caught in between. There it’s not about whether the Iranian central bank is good or not, it’s that the US central bank can say “you CANNOT send USD to Iran” and you just have to suck it. There crypto would act more as an intermediary. It would be like smuggling gold for the same purposes. Just without the huge effort, and risk of being arrested forever in a foreign country.
If you're going to patronize me by implying that my thought process is somehow skewed (i.e. 'walking me through it') instead of participating in a dialogue where you might actually reconsider your point-of-view, then there's no reason for me to engage with you.
You are looking to validate your existing belief that you are right and I am wrong.
I'm engaging in good faith. But when the first reply to my question is the same thing I used to espouse, it tells me that your understanding is an incomplete one. "Walking you through the conversation" is because the questions are more or less the same, and the answers haven't changed. They're the questions that I had to answer 10 years ago, before the scams really went into hyperdrive.
I also don't want to participate in a dynamic where you believe yourself to have a more 'complete' understanding than me. We are both human beings with unique understandings and viewpoints informed by our life experiences.
Can we agree to disagree?
Matt Levine wrote a primer on it a couple of years ago.
I’m a proponent of crypto and work in the space and still can’t recommend it to friends and family. They’ll get scammed.
And yet the technology itself is relatively simple and potentially profound. I believe it’s on par with the internet itself in terms of potential change to society.
You may want to check out Read, Write, Own by Chris Dixon which attempts to separate “the computer” from “the casino”. The industry right now is >90% casino…so you’ll have to look carefully for people who are building for the right reasons.