Can you please not post flamebait to HN? Especially not flamebait that points to tedious, predictable, extremely repetitive flamewar topics like this one.
> Innovation has the potential to make financial services faster, cheaper, and more inclusive and to do so in ways that are native to the digital ecosystem. Enabling responsible innovation to flourish will require that the regulatory perimeter encompass the crypto financial system according to the principle of like risk, like regulatory outcome, and that novel risks associated with the new technologies be appropriately addressed.
The Fed recognizes this is a new tech stack with potentially disruptive consequences. Reconcile that with this anachronistic tulip mania point of view you're parroting.
Crypto may, one day, find utility as part of the financial system (outside of drug deals, sanctions evasion, money laundering, tax minimisation, greater-fool scams, and Ponzi schemes), but its recent volatility has been in no way related to that.
So someone can collatoralize $1,500,000 worth of ETH to take out $1,000,000 worth of DAI loan. [I will let all my millionaire friends know] This isn't exactly useful for home ownership, as I can collatoralize $200,000 deposit to buy the same house with a bank. The difference that the bank does home valuation and risk assessment, and bears the risk that I will default. And MakerDAO charges a few percent interest for the loan [And at the extreme these loans are only repayble because of fiat monetary expansion...]
These pseudo zero-risk loans aren't exactly useful. The hard part of finance is in valuations, risk assessment, and regulatory compliance. And I stress the word pseudo, even DAI is built on a house of cards, although somewhat sturdier than its competition [order of mangitude depreciation, and when the market can't catch a bid it may be game over]
I think the utility is the medium itself. Your TradFi loan was delivered to you using a financial system maintained by thousands of highly specialized bankers and engineers leveraging billions of dollars in infrastructure. A DeFi loan is delivered to you via a smart contract that runs on a generic financial computing platform known as a blockchain. Even if the only thing you can do with a blockchain is implement existing financial systems, that itself is utility because the blockchain has lower barriers to entry, both in terms of knowledge and capital, which thus democratizes the financial system.
I agree with the beanie baby analogy when it comes to the various tokens that people "invest" in. But I wouldn't be so quick to say there was no utility, at least conceptually. It didn't really "click" for me until I implemented a smart contract. I realized that I could implement the entire financial system relatively easily, e.g. I could create an analog for stocks, options, margin lending, etc. Building a similar system without the blockchain would be much more difficult. I certainly couldn't do it alone. And even if I did do it with the blockchain, there would be an additional step of convincing people to trust that my system would stay up. Smart contracts run "forever" (in a sense).
As I stress in another post, the hard part of finance is valuation, risk assessment, and regulation. The transmision of ownership of assets, custody, etc. aren't exactly the hard part. Sure you can move digital tokens around on the worlds most expensive Raspberry Pi, but you could also do this on a permissioned system - and you still haven't solved the hard problems of finance. As an analogy it's kind of like saying you got a webapp to work on your home box, and therefore demonstrated any competence to scale it to hundreds of millions of users.
The billions of dollars of infrastructure doesn’t exist for no reason! The regulations and difficulty of starting a bank or mortgage company aren’t there for the hell of it!
Name the specific parts of mortgages that you believe should not exist and that DeFi eliminates.
Should we not do income checks on homebuyers to ensure that they can reasonably be able to pay the debt?
If they can’t pay their debt, what happens to the home? Is it collectively owned by the smart contract? How does that work? Where does the deed go?
Speaking of the deed, what if there’s a bug in the contract? Are we really going to pretend that these contracts have the force of law and a house can be stolen because someone wrote a bug? Or are we accepting that we can override the contract and none of the benefits of “smart contracts run[ning] forever” are real?
How should a smart contract value a home, to determine if the loan is adequately backed? If the buyer wants a $1m mortgage on what is actually a $10k plot of land, they can default and the contract (?) gets (??) an asset two orders of magnitude less than the check it wrote.
Hand-waving “well every real estate transaction will also be on the blockchain with perfect metadata so AI can make that decision” is not an answer.
How does a DeFi platform prevent money laundering? Should it not? This requires people! And regulations!
This is a tiny slice.
But we cannot pretend that any of this makes sense without thinking more than one layer deep. Which is really the problem.
I think you're entirely missing my point. You're going off on a tangent about mortgages, regulations, and titles. That's at a much higher level than what I'm talking about. To use load balancers as an example, you're talking about L7 stuff, I'm talking about L3 stuff.
Let's use your example of mortgages. When you get a mortgage, your lender wires money to the seller. How do they do that? They use Fedwire, which is a system maintained by the Federal Reserve for banking transfers. Such a system can be totally replaced by a blockchain. If you replaced Fedwire with a blockchain, you wouldn't remove the regulatory and legal requirements, you would just replace a legacy technical system with something that is more powerful. A blockchain can do everything Fedwire can do, and a blockchain implements this functionality in a more generic fashion that allows for additional constructs, like smart contracts, to be added.
Following your mortgage a little further: most mortgages are not held by the bank. The was the main issue in the financial crisis in 2008. Banks don't hold mortgages, so they were very loose in who they lent to. Rather than hold on to the mortgages, the bank sends them to a clearing house that packages up the mortgages into a mortgage backed security. All of this infrastructure could be replaced by a smart contract.
A blockchain can be thought of as a generalization of a financial system (system here meaning the technical system, i.e. the nitty gritty details of how and when money is moved). This is a powerful generalization and can implement existing financial systems in a much more efficient manner. As an individual, I could implement a mortgage-backed security system. That type of productivity is not possible in our current financial system.
This does not mean that I'm advocating for some type of anarchistic hellscape where regulations fall by the wayside. You can still have the same set of regulations, but implement the underlying nuts and bolts financial system in a way that's more efficient, standardized, and democratic.
"Network effects" seem to be a fairly compelling reason that "two highly correlated and intertangled financial systems" is the most we'll get, not two fully separate ones.
As long as people can interact with both easily, they will, and a lot of the risk/rewards will get tied together. Things move up together and down together.
I don’t think fully separate systems is a common goal. Rather, people are building alternatives that make different tradeoffs to the same end. e.g. a DeFi market may have global liquidity, 24/7 operations, but adds exposure to smart contract risks.
Quite a few allegations there. It seems like the simplest way to settle this discussion would be to point out a few practical applications of crypto that provide real utility to the finance system.
I can’t speak to other cryptocurrencies. But at least re: Bitcoin:
1. International settlements of any sum of money (small to large) in 10-20 minutes instead of days
2. Markedly lower money transfer fees compared wire transfer or ACH
3. Ability to be one’s own bank if so desired, avoiding government bank account pillaging (Cyprus, Argentina, many more)
4. Ability to send money anywhere (try paying your staff in Russia with USD these days… we have two; they both get paid in Bitcoin since following Russia’s removal from SWIFT cryptocurrency is now the only way)
5. When comparing Layer 2 transactions, orders of magnitude more transactions processed (global credit card network: 19,000 transactions per second; Bitcoin’s Lightning network: several million transactions per second), for significantly lower fees (very appealing if you are a merchant); payment settlement in hours instead of days
6. Deflationary savings account over medium- and long-term timescales
1-4 boil down to making illegal payments easy. This is not a technological advantage but a regulatory one. As soon as governments regulate Bitcoin the way they regulate banks, this "advantage" vanishes.
5 confuses theoretical maximum throughput with actual throughput. The theoretical maximum throughput of credit card networks is far higher than the actual, and the actual throughput of lightning is far lower than theoretical. Since only three wallets can join the lightning network per second (if all Bitcoin transactions were setting up lightning channels), its utility for actual transactions between arbitrary wallets remains theoretical as well.
6 confuses the value of Bitcoin with its supply. The value quickly approaches 0 when regulation takes away advantages 1-4.
1) Users don't care about final settlement times. Whether CC, wire, etc perception is reality. I pay with a card, it's done. I wire and they get the confirmation the same day (or less). Some may care but the vast, vast majority of the population does not. Ditto PayPal, Venmo, TransferWise (Wise), etc.
2) Debatable because of volatility.
3) Yes but being your own bank also means losing everything is a forgotten/misplaced password/seed phrase, clicking the wrong link, etc away. I don't know how many password resets a big bank in the US does everyday but I'm sure it's a mindbogglingly large number. The vast majority of the population isn't ready for and won't tolerate this. The fees you describe for payments in the financial system have anti-fraud measure costs (reversals, etc) baked in. Yet another feature of the traditional financial system that has been developed (in reality) after decades of real-world experience. It's the equivalent of every single individual building their own hardened vault and hiring armed private security.
4) Fair enough but there are realities in potentially "skirting" the "law" like this. Banks have significant processes to make sure you're not (for example) "funding terrorism" or whatever which is a serious crime in the US and very easy to do with cryptocurrencies. I, for one, don't want to risk the Feds showing up at my door because my funds ended up with someone on my government's enemies list. Just because you can do it with Bitcoin doesn't magically mean the people with guns and prisons will just say "Oh Bitcoin - nevermind - that's ok".
5) Lightning (and for that L2s) are mostly bolt-on hacks that sacrifice one or more features/properties of cryptocurrencies as originally intended when it became clear they fundamentally don't work for anything beyond toy-level. Again, from a users perspective as long as the payment network allows you to swipe a card and walk out with your purchase ASAP transaction rates are invisible to the user. If traditional payment systems needed higher transaction rates they would magically appear.
It’s being used to build an alternative financial system [1]. What sort of utility would you want an alternative financial system to provide to the current financial system?
Generally anytime anyone tries, it devolves into special pleading; basically saying that this or that isn't "real" utility.
As if being able to transact with anyone else on the planet sans middlemen isn't enough utility on its own. I would instead ask people who make comments like the one that started this thread to substantiate their affirmative claims about how crypto is only used for these shady things. For some reason, no such evidence is ever forthcoming.
Indeed, the amount of misinformation and repetitive comments in those threads is something... It's up there with religion and politics at this point, if not worse.
- The Fed decides who can use US dollars and what you can do with them; stable coins provide ways to evade such mechanisms.
- It wants to avoid spillover in case the cryptocurrency market collapses entirely. Shadow banking and eurodollars played a role during the 2008 crisis.
>>Shadow banking and eurodollars played a role during the 2008 crisis.
I would caution against trying to forestall financial crises through imposed centralization. The mundane benefit of a permissionless/dynamic financial system - which is to facilitate investments that produce economic returns - accrue daily, usually in imperceptible increments, while financial crises occur once every few years, with large and sudden drops in market values.
The latter gets the attention, due to their suddenness, but the benefits of the former compound to enormous proportions, and go largely unseen, due to how gradual the process is.
I never understood this analogy, and now I’ve seen it enough to finally ask in good faith —-
If tulips bulbs were of a limited supply, (relatively) infinitely divisible, (relatively) impossible to forge, and could be transferred anywhere in the world, in any amount, (relatively) instantaneously… Would it really be that crazy to imagine that they may have kept significantly more value? Or be used as a kind of currency?
It seems like anything with those properties could be a good basis for a currency, whether it’s Beanie Babies or Pokémon cards (neither of which actually do have those properties), or cryptographically secure blocks of teleporting cheese.
True until another batch of cryptotulip bulbs is released under a new name with slightly different properties and it joins the cryptotulip ecosystem. Any one species of cryptotulip might be a limited supply, but on the whole it's a very inflationary ecosystem, with trust on which is the "true currency" extremely malleable and divided. Even the "original" BitTulip has as many haters expecting its inevitable dethroning as it has proponents.
Even if the original Dutch tulips had somehow limited supply growth per species - say only selling neutered bulbs incapable of reproducing, while "miner" growers do the actual growing - you still have inflation from new sellers growing new species. Are people just supposed to arbitrarily say "Only orange Tulipa gesneriana tulips are a valid currency"? How does that consensus happen in a decentralized environment, when clearly it's not happening in this crypto bubble?
Is the argument that the limited supply comes from limited farmland? (AKA limited miners to generate the underlying security?) If so, how does that scale past the point where farming/mining is taking a significant chunk of the world's energy/land and just maintaining the currency is costing more than it saves on efficient asset transfer of actually productive useful things (like say - growing more crops, or using GPUs for AI)?
"Proof of Stake solves this!" you say? Well, now we're back to arbitrarily naming a tulip species as the only True Currency, with no physical resources backing it, and no particular reason people will stay loyal to it...
(Granted, the current non-crypto alternative is a heavily-armed centralized tulip farm that can grow its supply as it sees fit, and use its military to stifle other growers and guarantee its continued dominance. It allows a few other varieties (CAD, GBP, Yen, etc) but makes sure those growers back their supplies with a large stock of USDtulips, making them subsidiary growers bound to rise and fall with the central farm.)
> How does that consensus happen in a decentralized environment, when clearly it's not happening in this crypto bubble?
The earth is a decentralized environment in which USD, EUR, GBP, and JPY float against each other, and their value at any time is determined by market confidence. You shouldn't expect 100% global consensus on a particular cryptocurrency any more than you expect 100% global consensus on (say) USD or EUR.
If I print a stack of ThrowBills, would you buy them for $1? If I mint ThrowCoins, would you buy them for 1 BTC? If you decline my offer, then you understand that value does not come for free (crypto or not), and merely inventing a new tulip does not inflate existing tulips -- it competes with them.
This is nonetheless a new mechanism of inflation which bypasses the supposed benefits of a fixed supply currency, instead letting inflation float as a hard-to-quantify measure which vaguely resembles the average inflation of the entire coin market, but is actually more like the speculative value of the market cap of each currency (e.g LTC is not really worth $1.5B, that's an abstraction off the price of its latest trades). Moreover this dilution isn't without cost, as it gives a path forward for perpetual splitting of the market into a number of currencies each with a greater chance of losing public trust in a market crash scenario - as each one has a weaker consensus requirement and requires fewer people deciding to no longer hold it before it becomes worthless. All it takes is a temporary lack of confidence - this is why the more widely held a currency is the more stable it is.
Back to tulips: though inventing a new tulip does not inflate existing tulips, any level of public support for that tulip dilutes everyone's confidence in the original tulip, and creates two more unstable tulip currencies vs just the one. This is because everyone has just a bit more doubt on which one they should hold.
"But that's decentralized then. If people lose confidence in one of those tulips - good thing you diversified in both.". Sure, except for losing confidence in one is likely to create a cascading effect of lack of confidence in the others as the public starts to rightfully doubt their magical belief that a useless commodity is valuable. Same panics happen with banks. And a big plethora of smaller currencies means the initial dominos of the panic are that much easier to push over - leading to the possibility of the entire market wiping. Tulips all the way down.
Again, not that this isn't the same process found in conventional finance. There's just additional confidence that there will be (perhaps violent) interventions to stem any such lack of confidence/panic before it becomes critical. And there's been a long history of independent currencies being shut down with the same force due to not wanting to compete.
It is well known, but it is not well understood, especially by those who use it as a comparison for crypto. The popular narrative is akin to a sensationalized tale which is contested by modern research on the subject. There is a misconception of the scope and effect of it, when in reality it was localized to a small number of wealthy merchants engaging in speculation on luxury goods with minimal economic damage overall as opposed to the popular narrative that it was a society wide mania which caused financial ruin for many. Basically the only thing they have in common is that they occurred in wealthy societies.
The number of people who were in tulip mania isn't relevant. Yet, whenever this comparison occurs, people try to debunk a comparison that isn't being made - instead of looking at the actual comparison that is being made.
Instead of being dismissive, could you then explain what is the comparison being made then? I illustrated how they are not very similar but you haven't really given any additional context on what should then be compared.
As an American rooted in the puritanical foundations of my country I do not support speculative financial instruments and believe rather money should come from strong hard work ethics. Therefore I do not approve of these crypto currencies
I can't tell if this is satire. If it is it's pretty good. If not, no offense meant.
The "puritanical" foundations of the US had _tons_ of speculative financial instruments, including the colony/state/US currencies in their early years/decades.
If only the NSA had been spending the past decade hardening our cyber infrastructure rather than spying on its citizens and keeping found exploits secret from our industries
Your statement makes sense if you assume the best while considering the purpose of the NSA. Maybe they're doing exactly what they're supposed to do, and we are just making the wrong assumptions about their goals..
>NSA postures to prevent and eradicate threats and help the United States and its Allies defeat adversaries consistent with its authorities and with guidance from various national strategies.
From their about page [1], assuming you can take it at face value.
Mexico is a scary place. Violence and or the threat of violence reigns supreme. People are afraid to be outside at night. Every scalable wall is covered either with broken glass or razor wire.
I lived in Mexico for a few years but decided to leave last year after getting married and having a child. It's an awful place if you value things like safety, health, education, infrastructure, and most importantly, the rule of law.
For me all the news reports of kidnappings and violence were just background noise until it hit close to home. My wife's sister-in-laws family was kidnapped and badly beaten to the point where her brother developed a permanent mental handicap. They were released and are now scrambling to immigrate to the US.
In a separate incident, the person who organized our wedding was also kidnapped but never found.
These types of cases are so common here that they don't even make the news, whether local or national.
Every state and city in Mexico can be a different story, but it seems to change every year. Guadalajara seemed safe a few years ago and is now considered dangerous, for example. Yucatan seems like it has been safe for a decade.
I happen to live here. The degree of danger depends enormously on where you live and what you do. Not everywhere is this dangerous and not everything is covered in razor wire and broken glass. This is not at all to downplay the grotesque degree of violence that permeates much of Mexico, but a bit of perspective on specifics helps. I do night street photography as a hobby, for example, and in many years of that, wandering the streets of several Mexican cities during late night hours (carefully but not with utter paranoia) I've never once been assaulted or physically threatened so far.
When I lived on the border I was at a family gathering once and was mingling with some folks who used to do business in Mexico. These are all legal and normal businesses run by people with ties to Mexico -- friends or family on both sides, completely bilingual, etc. One by one they were recounting their "The time I decided to close shop and stop going to Mexico..." and I was impressed -- every single story was effectively "Fear local police will kill me". My friend's dad was held at gunpoint, forced to go to an ATM and withdrawl cash, then driven out to middle of nowhere where they pretended they were going to kill him for fun. Like -- super petty lawlessness stuff. Not high brow "send a message" cartel activity. Totally nuts.
These kinds of stories aren't hard to find in people that immigrate from border towns on the Mexican side to the other -- they are everywhere. It made me so sad to live on the border for multiple years and feel too unsafe to ever venture over.
The obvious retort is don't go to those cities. I've never heard anyone pitch a relaxing holiday in Juarez.
On the other hand, there are plenty of cities in Mexico with lower rates than major cities in the US. I've had perfectly lovely times in New Orleans and St Louis, despite the murder rate. I've also had perfectly lovely times in:
Zacatecas 43.0
Morelia 39.7
Guadalajara 38.07
...and dozens of other Mexican cities that didn't make the top 50 list so I'm having a hard time finding statistics.
If you're comfortable in Baltimore or Detroit, you should be vastly more comfortable with most of the cities in Mexico.
"Country XYZ has more murder hotspots" is a useless metric. One of the parent comments said "Mexico is a scary place. Violence and or the threat of violence reigns supreme. People are afraid to be outside at night. Every scalable wall is covered either with broken glass or razor wire." That is nonsense, it's a huge country and very little of it looks like Juarez.
No, because the vast majority of the country doesn't look like the worst cities.
If I said "St Louis is a scary place. Violence and or the threat of violence reigns supreme. People are afraid to be outside at night. Every scalable wall is covered either with broken glass or razor wire." you'd rightfully call bullshit.
Your claim and links are the classic example of using scary specific cases and anecdotes to extrapolate an argument while ignoring statistical and general tendencies. Mexico's homicide rate is several times higher than that of the U.S. as a whole and the two countries simply don't compare in terms of insecurity, at all. Nor do they compare in sheer crappiness of police response. People may complain about U.S police having their major flaws (and rightly so in many cases) but the police in Mexico are a whole different story of ineptitude, corruption, danger and in the least case, simply not showing up to do their most basic job. Also, there are many, many mass shootings in Mexico, almost weekly, sometimes even daily in fact, it's just that they garner little or no major media attention and that they happen under different contexts.
While I can agree that it is several order magnitude higher in Mexico. That does not change my point. Also the links from Wikipedia are statistics on a national level, so I am not cherry picking data. Let's remind of what my point is: it is bad in Mexico, AND it is bad in the United States.
I disagree. Generally it is not terrible in the U.S. and it's much, much worse in Mexico. Truly you miss the basic point on the differences between violence down here and what happens up north. There are certain U.S. cities with abysmal murder rates due to certain parts of them, granted, but most people living in most of the country are incredibly safe and can can count on remarkably effective justice/police institutions from their government compared to the majority of what's the case in Mexico. For much of the U.S. murder rates by area or state are at western European levels. Your comparison is off base enough to be a case of whatsaboutism.
Weird comment. Your first two links are of accidental and out-of-the-ordinary homicides, which are not really 'scary' or an indication of violent society.
I agree! Let’s come to terms with the ubiquity lesson of JavaScript and make a proper vm, that for now interplay’s with ubiquitous-JavaScript. But also will not leave out the evolution of other languages or software concerns at the language level. Let’s go down a layer and have a ubiquitous vm. I think the possibilities for this are huge.
Before you say “ok but the jvm”, “history repeats” - I don’t think that argument is fair. the jvm was built at a very different time and has its own niche and it’s own bloat. Again, we’re transitioning from JavaScript first. Great things will follow.
