I have to say, I think it's dumb. I try not to be a crypto-bro. And some points are accurate (how can something be a stable currency AND increase in price?!). But others are foolish:
* having no ability to reverse a transfer is exactly the point of cash, and reversing transfers is a classic source of fraud in and of itself.
* the claim that crypto has no use case. First it's an opinion, don't lay it next to facts and try and sneak it through. Second, that is fine, don't use it. But don't tell people who do they can't have it because you don't need it.
The thing that amazes me the most about crypto is how it continues to be either the messiah or the anti-christ. It's neither. It's a bit of a novelty, it's useful for some specific cases (hyper inflation, evading state controls be that good or bad). There is a lot of dishonesty, but that isn't the tech's fault. That human nature, refusal to regular and gullible idiots thinking they can get rich quick. It's no different to the early days of any other security.
First, people should separate the technology of cryptocurrency from speculation on centralized exchanges and other bank-like behavior that actually takes money off-chain. Almost everything that people are talking about when they say "crypto" is explicitly NOT using cryptocurrency but rather collecting money with cryptocurrency to help with marketing and onboarding but then speculating with it off chain in the traditional system.
There are three fundamental advances that cryptocurrency brings to digital money: digital signatures which allow transactions without disclosing account secrets, mathematically verifiable public ledgers which prevent cheating, stealing and irresponsible behavior (such as with FTX), and smart contracts that enforce agreements for structured transactions.
Actually problems with FTX and doubts about Tether should make the advantages of cryptocurrency _more_ obvious for those who understand it. Because fundamentally the issue is the secret unverifiable nature of the ledgers, and manual "legal"-(non)enforcement of agreements (as opposed to automated contracts), in the traditional system.
"...Because there is no central authority controlling who can participate, decentralized consensus systems must defend against Sybil attacks, in which the attacker creates a majority of seemingly independent participants which are secretly under his control. The defense is to ensure that the reward for a successful Sybil attack is less than the cost of mounting it. Thus participation in a permissionless blockchain must be expensive, so miners must be reimbursed for their costly efforts. There is no central authority capable of collecting funds from users and distributing them to the miners in proportion to these efforts. Thus miners' reimbursement must be generated organically by the blockchain itself; a permissionless blockchain needs a cryptocurrency to be secure.
Because miners' opex and capex costs cannot be paid in the blockchain's cryptocurrency, exchanges are required to enable the rewards for mining to be converted into fiat currency to pay these costs. Someone needs to be on the other side of these sell orders. The only reason to be on the buy side of these orders is the belief that "number go up". Thus the exchanges need to attract speculators in order to perform their function.
Thus a permissionless blockchain requires a cryptocurrency to function, and this cryptocurrency requires speculation to function
Why are economies of scale a fundamental problem for decentralized systems? Participation must be expensive, and so will be subject to economies of scale. They will drive the system to centralize. So the expenditure in attempting to ensure that the system is decentralized is a futile waste."
What the article doesn't adequately disclose is that Diehl has a phenomenal commercial conflict of interest as the CTO of a "private blockchain" company that considers public blockchains its primary competition.
> "I don’t want to see so many people getting hurt. My generation has been hit by the financial crisis, by Covid, we’re going to have the climate crisis. These people don’t need this extra suffering in their life."
That's a position of profound empathy. There are other arguments mentioned in TFA -- I encourage folks to read it.
"I don’t want to see so many people getting hurt. My generation has been hit by the financial crisis, by Covid, we’re going to have the climate crisis. These people don’t need this extra suffering in their life."
Better get working on fixing the financial system, the health care system, and CO2 production. Hating on crypto won't solve those.
But promoting and adopting cryptocurrency technology actually _will_ improve the financial system. That's the thing that, amazingly, technical people are not picking up on.
Whenever such threads or articles pop up on here, I rarely ever see good discussion into the details around why the GFC even happened (much of what I will say is inspired by Jeff Snider and his excellent Eurodollar University project). I am going to tl;dr it and say (and I know this specific aspect is usually well-covered) that central banking and fiat money itself is at the very heart of it.
An extreme shortage of good-quality collateral was why the GFC happened. The housing/mortgage crisis were merely a side effect of a collateral shortage. The usually-deflationary Eurodollar system (in my limited understanding) essentially causes all collateral to become extremely rare, because collateral is basically acting as an offset to unlimited money printing (yes I know Snider hates this term and I don't care, because essentially that is what's happening).
Bitcoin is a good "out" for people who want to get off the ride of central banks having the power to basically devalue fiat once the collateral is so tight that the only option is to start printing extra dollars to mitigate the deflationary nature of the Eurodollar. It's either that or gold/silver, both would work, Snider (as far as I know) has said as much in his podcasts. Lyn Alden has talked about Bitcoin as the separation of money and state and while this makes sense, I feel like gold/silver already performed this function adequately in the past. As for what I think would be preferable to use in place of fiat money, that would be silver, it's the best placed one-size-fits-all replacement for fiat. It just may take some time/a lot of pain for people to come round to the idea (again).
> I rarely ever see good discussion into the details around why the GFC even happened
There are many, many discussions, spanning nearly a decade now, about why the GFC happened, ranging in all levels of quality.
There are very few good reasons to believe that fiat money had anything to do with it.
The people who predicted it and made money off it based it on their observation that debt was being issued to people who most likely could not pay it off, which is fine. These were marked as low quality debt. But then that debt was bundled with other similarly low quality debt and after bundling and rebuilding the bundles enough times, they were rated at a level which did not mathematically add up.
But what converted this from a financial crisis to the GFC was the issuance of CDS’s worth several orders of magnitude greater than the underlying CDOs which also collapsed at a much greater rate than expected because the underlying assets were much shittier than expected.
Add to this the fact that Paulson, ex-Goldman Sachs President who did not allow it to be bought at cents on the dollar (I don’t remember if this was because he personally hated Lehman or if he personally hated the purchasing bank getting a good deal, but it was entirely because of his personal feelings, which led him to override nearly everyone else) leading to a massive run on all banks, in a middle of an already complicated situation where they still needed to unwind all the different CDS’s and other exotic instruments.
There’s a reason both TARP and Warren Buffett were able to make massive profits by simply promising to backup the Banks’s assets because their biggest issues was a classic bank run, as opposed to them lacking the actual assets (there were some companies that simply lacked assets, such as AIG, but most didn’t).
None of this had anything to do with fiat currency. One reason we know that is that crypto currency based organizations have been speed running a version of this same process many times over the past 6-9 months.
"An extreme shortage of good-quality collateral was why the GFC happened"
It started with a housing boom in America and housing is not generally poor quality collateral. More money was lent than could be repaid because of the way securitization was being done. Then a bunch of "safe" synthetic derivatives we're created off that bad debt too. The real estate collateral underneath it all was probably the only good thing (and part of the justification for the whole mess in the first place)
Diehl again. He really seems to suffer from CDS 'Crypto Derangement Syndrome'. He seems to care and write more about crypto than even its most fervent fans.
I was actually an intern at a tech company where Diehl was the lead dev about 10 years ago. He was a brilliant coder and technical mind but he was always had 'strong opinions' about various topics.
He'd be hard pressed to beat bloomberg news. Used to be my favorite news channel to flip on but past year or so I couldn't stand all the crypto news that seemed to dominate every time I turned it on.
Readit News
I have to say, I think it's dumb. I try not to be a crypto-bro. And some points are accurate (how can something be a stable currency AND increase in price?!). But others are foolish:
* having no ability to reverse a transfer is exactly the point of cash, and reversing transfers is a classic source of fraud in and of itself.
* the claim that crypto has no use case. First it's an opinion, don't lay it next to facts and try and sneak it through. Second, that is fine, don't use it. But don't tell people who do they can't have it because you don't need it.
The thing that amazes me the most about crypto is how it continues to be either the messiah or the anti-christ. It's neither. It's a bit of a novelty, it's useful for some specific cases (hyper inflation, evading state controls be that good or bad). There is a lot of dishonesty, but that isn't the tech's fault. That human nature, refusal to regular and gullible idiots thinking they can get rich quick. It's no different to the early days of any other security.
Errors made should always be reversed by a separate transaction for an audit trail.
There are three fundamental advances that cryptocurrency brings to digital money: digital signatures which allow transactions without disclosing account secrets, mathematically verifiable public ledgers which prevent cheating, stealing and irresponsible behavior (such as with FTX), and smart contracts that enforce agreements for structured transactions.
Actually problems with FTX and doubts about Tether should make the advantages of cryptocurrency _more_ obvious for those who understand it. Because fundamentally the issue is the secret unverifiable nature of the ledgers, and manual "legal"-(non)enforcement of agreements (as opposed to automated contracts), in the traditional system.
Because miners' opex and capex costs cannot be paid in the blockchain's cryptocurrency, exchanges are required to enable the rewards for mining to be converted into fiat currency to pay these costs. Someone needs to be on the other side of these sell orders. The only reason to be on the buy side of these orders is the belief that "number go up". Thus the exchanges need to attract speculators in order to perform their function.
Thus a permissionless blockchain requires a cryptocurrency to function, and this cryptocurrency requires speculation to function
Why are economies of scale a fundamental problem for decentralized systems? Participation must be expensive, and so will be subject to economies of scale. They will drive the system to centralize. So the expenditure in attempting to ensure that the system is decentralized is a futile waste."
https://blog.dshr.org/2022/02/ee380-talk.html?m=1
That's a position of profound empathy. There are other arguments mentioned in TFA -- I encourage folks to read it.
Better get working on fixing the financial system, the health care system, and CO2 production. Hating on crypto won't solve those.
An extreme shortage of good-quality collateral was why the GFC happened. The housing/mortgage crisis were merely a side effect of a collateral shortage. The usually-deflationary Eurodollar system (in my limited understanding) essentially causes all collateral to become extremely rare, because collateral is basically acting as an offset to unlimited money printing (yes I know Snider hates this term and I don't care, because essentially that is what's happening).
Bitcoin is a good "out" for people who want to get off the ride of central banks having the power to basically devalue fiat once the collateral is so tight that the only option is to start printing extra dollars to mitigate the deflationary nature of the Eurodollar. It's either that or gold/silver, both would work, Snider (as far as I know) has said as much in his podcasts. Lyn Alden has talked about Bitcoin as the separation of money and state and while this makes sense, I feel like gold/silver already performed this function adequately in the past. As for what I think would be preferable to use in place of fiat money, that would be silver, it's the best placed one-size-fits-all replacement for fiat. It just may take some time/a lot of pain for people to come round to the idea (again).
There are many, many discussions, spanning nearly a decade now, about why the GFC happened, ranging in all levels of quality.
There are very few good reasons to believe that fiat money had anything to do with it.
The people who predicted it and made money off it based it on their observation that debt was being issued to people who most likely could not pay it off, which is fine. These were marked as low quality debt. But then that debt was bundled with other similarly low quality debt and after bundling and rebuilding the bundles enough times, they were rated at a level which did not mathematically add up.
But what converted this from a financial crisis to the GFC was the issuance of CDS’s worth several orders of magnitude greater than the underlying CDOs which also collapsed at a much greater rate than expected because the underlying assets were much shittier than expected.
Add to this the fact that Paulson, ex-Goldman Sachs President who did not allow it to be bought at cents on the dollar (I don’t remember if this was because he personally hated Lehman or if he personally hated the purchasing bank getting a good deal, but it was entirely because of his personal feelings, which led him to override nearly everyone else) leading to a massive run on all banks, in a middle of an already complicated situation where they still needed to unwind all the different CDS’s and other exotic instruments.
There’s a reason both TARP and Warren Buffett were able to make massive profits by simply promising to backup the Banks’s assets because their biggest issues was a classic bank run, as opposed to them lacking the actual assets (there were some companies that simply lacked assets, such as AIG, but most didn’t).
None of this had anything to do with fiat currency. One reason we know that is that crypto currency based organizations have been speed running a version of this same process many times over the past 6-9 months.
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It started with a housing boom in America and housing is not generally poor quality collateral. More money was lent than could be repaid because of the way securitization was being done. Then a bunch of "safe" synthetic derivatives we're created off that bad debt too. The real estate collateral underneath it all was probably the only good thing (and part of the justification for the whole mess in the first place)
I was actually an intern at a tech company where Diehl was the lead dev about 10 years ago. He was a brilliant coder and technical mind but he was always had 'strong opinions' about various topics.
Come on man. Stop blinding yourself to a scam.