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The ASR Cryptocurrency thread

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JEntwistle

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It's worse than that. Crypto-so-called-currencies have inherent properties that make them idiotic as a basis for an economy. For instance, the limit, whether hard or practical, on the amount of "coins" along with the inevitability of people losing their wallets means that there will ultimately be a diminishing supply of currency. This leads to a deflationary economy, something any number of experts will agree is a Very Bad Thing.

This leaves the possibility of crypto-tulips as potential investment assets. Again, bad idea. The only "value" they represent is the expectation that someone will be willing to pay more for them at some future time, based on the very same expectation. That can't continue forever. Sooner or later, the supply of new buyers, or shall we say marks, will dry up, and the last to enter the game will be left in the hole, having financed the winnings of everybody who came before them. Simply put, it's a Ponzi scheme, plain and simple.

Looking at it from another angle, the evangelists are promoting "crypto" as both a legitimate replacement for traditional currencies _and_ as investment assets. That combination cannot work. Regardless of any other properties, a workable currency must be stable, with the allowance of moderate inflation. A volatile currency only leads to chaos, historical examples of which are plentiful. Meanwhile, the only way to profit from currency-like instruments (tokens without intrinsic value used to represent actual value) is through fluctuations in exchange rates. The more volatile the currency, the greater the potential gains and, crucially, losses. In the long term, currencies of stable economies largely track one another, provided trade volumes are sufficient. If everybody adopted the same cryptocurrency, that profit avenue would instantly become a dead end.

Most of the hype around crypto-tokens these days centres around their valuation in terms of established currencies, usually USD. Any increase is trumpeted with vigour while downturns are dismissed as momentary setbacks. This very thread has several examples of people boasting about how much their holdings have increased in value. What this fails to recognise is that most of this "value" cannot be converted to real, spendable currency. The exchanges have nowhere near the requisite liquidity, should there be a surge in demand. In other words, actually accessing those gains relies on an influx of buyers. In yet other words, it's a Ponzi scheme.

No matter how things are twisted, the inescapable fact remains that every dollar made in "crypto" today is a dollar taken from someone down the line, someone who will get nothing in return. That, to me, makes the entire endeavor unethical.

These points are well said. This first is one of the major issues to me. The second is a good one, too; and scary.

I think the theory and idealism of cryptocurrency is at odds with the ways in which cryptocurrencies are actually enabled. For the "major" currencies, the exchanges and likely the holdings are concentrated in a few hands. I don't see how that meets the ideal of a fully distributed system. Bitcoins and other major cryptos can be tracked, so they are not free of government intervention (maybe a good thing if you are worried about criminal activity). I don't fully understand the mechanics of ETH's new Proof of Stake and how it will solve this, but I'm not an expert. (Just to pile on, remember Mt. Gox and the Ethereum DAO hack - these are not 100% secure against theft or programming errors.)

Jack Dorsey's recent tweet is on the money:
You don’t own “web3.”
The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label.
Know what you’re getting into…
"

I wish I had read the Satoshi Nakamoto white paper 10 years ago (it is brilliant and an easy read) and invested $1,000 in Bitcoin. I even could have mined some at home back then. Those are ~1000x returns. I can't see investing in something this risky today for "only" double digit gains. And I don't know how anyone knows how to evaluate all the thousands of altcoins.

[EDIT: Of course, you could not have predicted 1000x returns 10 years ago. What I should have said is that there is a big difference in taking a flyer when something is priced at $1 than at $60K.)
 
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digicidal

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[EDIT: Of course, you could not have predicted 1000x returns 10 years ago. What I should have said is that there is a big difference in taking a flyer when something is priced at $1 than at $60K.)
Exactly. Even then I decided that buying coins from strangers in a bar for cash was a bit too dicey to engage in... but throwing 3-4 GPU's in a box in my server closet was a different matter entirely.

On the governmental side there's naturally no silver bullet no matter what it is. They will bail out their friends while shafting the tax payers just like everything else... however, the one aspect that still remains true to the original whitepaper is that they can't end it entirely. Many countries have tried (mostly China, Russia, and India) but then a few months later they wind up having to revise because it not only doesn't work... it actually drives even more adoption.

And yes... at current prices, I certainly wouldn't be buying in... and I'm a "hodler" and to some sense a true believer. I don't buy the "digital gold" crap, nor the future of everything perspective... but at the same time, just having a relatively free way of conducting global peer-to-peer transactions without forking over 2-3% to VISA for the conversion alone is a tangible benefit.

Now that I think about it however, maybe "digital gold" is a decent analogy... after all it's one of the most manipulated commodities markets, isn't a very good inflation hedge any longer, and has been subject to governmental seizure and bans in the past. ;)
 

threni

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I think the theory and idealism of cryptocurrency is at odds with the ways in which cryptocurrencies are actually enabled. For the "major" currencies, the exchanges and likely the holdings are concentrated in a few hands. I don't see how that meets the ideal of a fully distributed system. Bitcoins and other major cryptos can be tracked, so they are not free of government intervention (maybe a good thing if you are worried about criminal activity). I don't fully understand the mechanics of ETH's new Proof of Stake and how it will solve this, but I'm not an expert. (Just to pile on, remember Mt. Gox and the Ethereum DAO hack - these are not 100% secure against theft or programming errors.)

You can use an exchange to by crypto but then move it onto your own wallet, so the money is no concentrated anywhere. I don't know the ratio of money in exchanges vs money in private wallets; I'd imagine that most is in the latter but that over time, as crypto gets more popular noobs will come along and just keep it on wallets on the exchanges.
You don't need to worry about the ideals; that's for everyone to decide for themselves. The question is - does any of this work for you? If you want to gamble some money, or you want to be able to buy and sell stuff without recourse to a bank, then yes, it is.
Most crypto can be tracked but the fact people tend to talk about this shows how people misunderstand it; it wasn't designed to be anonymous. There are genuinely anonymous ones (Monero, for example), and you could argue that as regulation comes in this sort of crypto might be treated differently.
Proof Of Stake has absolutely nothing to do with the ability to track crypto; it's simply a way of performing mining (the entering of transactions onto the blockchain) without the huge waste of power that is Proof Of Work. Simply stated: rather than saying "you have to perform this computationally expensive operation to get the right to add this transaction (actually, collection of transactions) to the blockchain, to stop people from just cancelling their own transactions, processing a payment multiple times etc etc", you say "you need to get people to pretend to store their money in your account (pool) and if you get a lot of pretend money this way then you can add transactions to the blockchain". You don't actually give your money to the pool, so no-one can steal it, and you can take it out at any time, and you get paid for pretending to lend it. So, from an attacker point of view, you could potentially spoof transactions by owning a ridiculous amount of CPU power like some companies/governments do (the so-called "51% attack") on Proof of Work, but with Proof of Stake you'd need to actually own and stake a ridiculously large amount of crypto.

I think we're in the really early days of all this, and it's laughable to suggest it's too late to buy any crypto today. Banks and governments are currently trying to keep a straight face while both issuing public statements about risk, and crime, and gambling, and yet at the same time are all investigating their own digital currencies. It's hilarious.
 

digicidal

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I think we're in the really early days of all this, and it's laughable to suggest it's too late to buy any crypto today. Banks and governments are currently trying to keep a straight face while both issuing public statements about risk, and crime, and gambling, and yet at the same time are all investigating their own digital currencies. It's hilarious.
Of course they are... CBDC's are essentially their holy grail. It gives them everything they all want from the current system... along with things that are completely impossible with paper money:
1) Not only can you grow the money supply as you see fit, you can actually shrink it on command as well.
2) Every transaction is traceable on both ends... you can see where and with whom everyone conducts business.
3) You can sanction "problems" at an individual level... or limit transactions to only approved parties.

Now if only there was something like a social credit score to base it all on... oh wait, there is. :p

Naturally the central banks will try anything in their power to scare people away from things they don't control completely. No drug dealer likes someone else setting up shop in their area... especially if the competitor isn't cutting theirs. ;)
 

vilnis

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is there something wrong with the world ?! Currencies are more or less tied to national economies. Bitcoints for the black market or nothing. Where does the value come from ???
 

digicidal

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is there something wrong with the world ?! Currencies are more or less tied to national economies. Bitcoints for the black market or nothing. Where does the value come from ???
I guess I never realized that my Newegg, Apmex, and Overstock purchases were black market deals. Or for that matter that Microsoft and Subway were selling illicit goods. :rolleyes: The government sure hasn't hesitated to cash any of the capital gains taxes I paid on them either.

Not that it's all squeaky clean... but really as opposed to state currencies?! The fact that fiat currencies are tied to national economies (or more precisely the inverse) is part of the problem... it's like stock in a company that can't stop writing checks it knows it can't cover. Then again, I guess what's the problem as long as you trust them implicitly to always do what's best for "the people" right?
 

vilnis

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Es domāju, ka es nekad nesapratu, ka mani Newegg, Apmex un Overstock pirkumi bija melnā tirgus darījumi. Vai arī par to, ka Microsoft un Subway pārdeva nelegālas preces. :rolleyes: Valdība noteikti nav vilcinājusies arī atmaksāt nevienu no kapitāla pieauguma nodokļiem, ko es par tiem samaksāju.

Ne, ka tas viss pīkstošs tīrs ... bet tiešām, kā nevis valsts valūtu ?! Fakts, ka fiat valūtas ir piesaistītas valstu ekonomikām (vai precīzāk apgrieztā veidā), ir daļa no problēmas... tas ir kā akcijas uzņēmumā, kas nevar beigt rakstīt čekus, un zina, ka nevar segt . Un atkal, es domāju, kāda ir problēma, ja vien jūs viņiem netieši uzticaties, ka viņi vienmēr darīs to, kas ir vislabākais "cilvēkiem", vai ne ?
reāla "diršana"! Ar ko saražotu nosedz bitcointus? Ar narkotikām un nolaupītiem cilvēku orgāniem?
 

digicidal

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reāla "diršana"! Ar ko saražotu nosedz bitcointus? Ar narkotikām un nolaupītiem cilvēku orgāniem?
Not 100% sure of the accuracy of translation, but no... there are salaries paid in part and full (for ordinary work) in BTC. (No drugs or stolen organs involved). I could ask the same about fiat currencies... because no governments have ever been involved in corruption, violation of human rights, or any other atrocities in history, right? :facepalm:

Any form of currency is merely a representation of work for purposes of simplifying trade. What some people do with it is immaterial - any "intrinsic value" of money itself is nearly zero. Paper and non-precious metals are just that... without the markets behind them, both fiat and crypto are rendered worthless. The only difference is whether you believe central banks, with a very select few in total control, are inherently more trustworthy than a system that is designed to not trust anyone and where no one has controlling authority.

It seems your government is 100% virtuous and trustworthy in your opinion - so in your case I would recommend relying on them for everything. I don't feel the same however, so I will consider other options as well (not just crypto currencies, of course).
 
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