Bitcoin, Cryptocurrency and Blockchain Discussion Thread

[Knightshade]

@daniel,

I disagree 100% that "crypto is a scam". No, it's not. Crypto is a currency, like any other.

I mean, except for the fact there's literally nothing backing it's value, and unlike other entirely arbitrary currency like seashells it doesn't even have an attractive physical form.

I think you're having difficulty separating the underlying mechanics of cryptocurrency with the machinations of the scammers who are using the obfuscation and lack of regulation to steal people's money, like Sam Bankman-Fried.

Probably because every actual significant use of it so far has been either massive financial scams, or funding other criminal trade like drugs or cybercrime.

So the confusion might be understandable.

But the FTX scam has nothing to do with the fact that the underlying marbles that were being shuttled around were crypto tokens instead of dollars.

Well, it KIND OF DOES.

Because the value of the dollar doesn't go from $1 to nearly 0 overnight.

And much of the missing $ at FTX is because they had "billions" of dollars "worth" of their own garbage tokens "backing" the loans. So as soon as the value of those went near 0 they no longer had billions backing the loans.

If they'd had dollars backing those loans they'd be fine...or at least only mildly insolvent, not sitting around going "where'd that 8 billion go?" they didn't though because they lent out all the dollars and instead took in now worthless magic beans.

Which is more evidence beans aren't much of a currency.

Enron committed fraud that amounted to $20B-$40B

FWIW, the literal guy who took over Enron to guide it through bankrupcy is the same guy now CEO of FTX.

And he stated FTX is, by far, the worst case he's ever seen. Obviously he's talking about more than just in raw $ terms... but the very unregulated and "just making stuff up" nature of crypto is a major reason why that was possible. Unlike Enron they had no need to try and make their books look good.

 

[heltok]

This thread is going in circles, same arguments come up everytime crypto has a scandal or loses in value. Still crypto is alive and more and more people are finding uses for these useless non currency tokens. And its value is still very high, crypto market cap being higher than Tesla, the company that is losing money on every sold car, with no technological advantages, with its competition around the courner that is an essentially busted growth story.

 

[SomeJoe7777]

@daniel

I find none of your arguments convincing, the same as you find mine. We'll simply have to agree to disagree. Rail against cryptocurrency all you want, I will still hold mine on the blockchain.

 

[daniel]

@daniel

I find none of your arguments convincing, the same as you find mine. We'll simply have to agree to disagree. Rail against cryptocurrency all you want, I will still hold mine on the blockchain.

Good call, keeping your crypto in your own wallet rather than on an exchange where crooks like SBF can steal it. Just don't lose your key, 'cuz if you do, there's no getting it back.

I've read that there's an unknown but massive number of BTC that are lost forever because it was in wallets that were lost and unrecoverable. If I lose my bank account log-in or information, I can get it back by proving to the bank who I am. A p.i.t.a. but doable.

 

[SomeJoe7777]

Good call, keeping your crypto in your own wallet rather than on an exchange where crooks like SBF can steal it. Just don't lose your key, 'cuz if you do, there's no getting it back.

I have the master passphrase backed up in 4 places, including stamped into a metal plate so it's fireproof.

Even if I were to lose my offline hardware key, I can set up a new one with the backed-up passphrase and restore all accounts.

 

[daniel]

I have the master passphrase backed up in 4 places, including stamped into a metal plate so it's fireproof.

Even if I were to lose my offline hardware key, I can set up a new one with the backed-up passphrase and restore all accounts.

Sounds good. Don't let anybody steal that metal plate.

 

[wdolson]

@daniel,

I disagree 100% that "crypto is a scam". No, it's not. Crypto is a currency, like any other. It's a private currency that's not government-backed. This makes it have some risks that a government-backed currency may mitigate.

I agree 100% that scammers are the problem, and the reason that these scammers are the problem is because a) cryptocurrency is new and people don't understand it, thus they're unable to protect themselves, and b) the government has taken a hands-off approach so that the industry is nearly completely unregulated.

While @Daniel in SD's view is libertarian, yours is a socialist view. You believe that the government should step in and regulate it just like they regulate stocks, investments, and the financial industry as a whole. That's counterproductive to the goal of cryptocurrency, which is having a global currency that no government can manipulate.

I think you're having difficulty separating the underlying mechanics of cryptocurrency with the machinations of the scammers who are using the obfuscation and lack of regulation to steal people's money, like Sam Bankman-Fried. So what he did was take the dollars people deposited in his exchange, illegally transferred them to an investment arm, made high-risk investments, and lost a large amount of the money. Meanwhile, the cryptocurrency token he created he pumped up in value by using the investment arm to buy tons of it, then when the value of the token started to collapse he hid the losses in the investment arm rather than have the losses show up in the exchange. This is very similar to the machinations that Enron committed in the early 2000's -- massive debt was hidden off-shore in shell companies so that the US Enron company could continue showing profit. The Madoff scheme was worse, in that it was a true Ponzi scheme that never even attempted to invest money -- the Madoffs just siphoned it all off for their own personal gain over the years.

But the FTX scam has nothing to do with the fact that the underlying marbles that were being shuttled around were crypto tokens instead of dollars. Enron committed fraud that amounted to $20B-$40B, and the Madoff fraud was over $60B. These are 10-50x higher dollar value than the bankruptcy of FTX. Scammers and fraudsters will steal money, regardless of the underlying mechanism because that's what they do. Dollars, crypto, diamonds, gold, or tulip bulbs doesn't matter.

My personal belief is that there needs to be some regulation akin to what brokerage houses have to do for investors that want to invest on margin or trade speculative investment vehicles like futures or options. They need to sign a statement, issued by the exchange, that cryptocurrency is a speculative investment, is not insured, and carries considerable risk. Investors need access to educational materials on cryptocurrency before they buy into it. But I don't think it's actually possible for the government to regulate crypto in the way they regulate fiat currency, as no monetary policy can be applied to crypto. The government can't control it's interest rate, can't control the quantity in circulation, and can't make a meaningful impact on it's stability unless the government were to buy billions of dollars of it.

Sorry this is so long, but your view that since there are so many scammers out there that the whole thing should be shut down is a simplistic, socialist view. Not that you could "shut it down" anyway -- the blockchains are decentralized and there's no company or country that you can go to in order to enforce a "shut down". That's the premise of cryptocurrency. I hold some BTC and ETH right now directly on the blockchain (not in an Exchange). While it's value is volatile and variable, there is not a single person, agency, law enforcement organization, government, army, criminal, or hacker on this planet that has any means to take it away from me. That's pretty special.

The libertarian ideal is a world with no outside regulation. The belief is that if people are left to their own devices they will self regulate. It's a nice idea, but doesn't work well in practice. Without regulation, there will always be somebody who looks to game the system and some of that gaming will eventually lead to something bad happening.

Some industries self regulate. Lawyers have bar associations who will remove members who don't behave within the ethics rules. Doctors also have organizations to self regulate. But if an industry doesn't self regulate sufficiently and problems crop up, the only organization left that can step in and regulate are governments.

Socialism is thrown around in the US like it's equal to communism. There are many forms of socialism all over the world. Every country has it. If you drive on public roads you are participating in a socialist enterprise. Kids are able to go to public school because of the socialist public school system. People don't end up starving to death after they get too old to work because of socialist medicare and social security.

Government regulation is a socialist thing, but it's better than the alternative. The entire world economic system came very close to complete meltdown in 2008 because there was no regulation of the mortgage derivative market. Instead of regulating it before the meltdown happened, governments had to step in and spend billions propping up the system before it completely unraveled. And there were a lot of arguments that the people who caused the problem got away with a lot less damage than the victims.

Government regulation can get to be too much. There are plenty of examples of that too. The trick is to find the sweet spot where regulation does the job of protecting people without becoming a burden or ridiculous. It's the straw man argument to point to some regulations that are onerous and claim all regulation is bad.

 

[Knightshade]

I have the master passphrase backed up in 4 places, including stamped into a metal plate so it's fireproof.

Even if I were to lose my offline hardware key, I can set up a new one with the backed-up passphrase and restore all accounts.

So when you wrote:

I hold some BTC and ETH right now directly on the blockchain (not in an Exchange). While it's value is volatile and variable, there is not a single person, agency, law enforcement organization, government, army, criminal, or hacker on this planet that has any means to take it away from me. That's pretty special.

You actually meant "nobody on earth HAS ANY MEANS to take it away from me, unless they confiscate or steal any of the 4 different things I wrote my password down on"

Which makes it just like the $ in my bank account-- except I don't have to have it written down in all those places since I could always physically go to the bank if I forgot my account number, and I actually have fraud protection there in case of theft- and you don't.

Thus showing once again crypto is measurably and functionally worse than actual money.

Thanks for clarifying!

 

[daniel]

The bottom line on fraud and theft: Somebody can steal your dollars in your bank account, and they might get away with it, but you have ways to try to get it back, including protections offered by the bank and laws enforced to some degree by the government. It's not a guarantee, but there's hope.

When somebody steals your crypto, you have no recourse. Zero. Nada. It's gone and you're never getting it back.

If you lose your bank account credentials you can pretty much always recover them.

If you lose your blockchain credentials you lose your crypto coins. Period. No recovery.

It makes crypto useless as an actual currency to mediate exchange in a national economy. Unless you're doing something so nefarious that the risks are worth the secrecy.

The only other use is high-risk speculation, where the risks of fraud, theft, and loss are dwarfed by the risks of the speculation itself. Or you got into the Ponzi scheme early and latecomers are giving you buckets of money for the crypto you bought for pennies.

 

[SomeJoe7777]

It makes crypto useless as an actual currency to mediate exchange in a national economy. Unless you're doing something so nefarious that the risks are worth the secrecy.

Just some food for thought:

Credit card transactions can be argued to be a form of cryptocurrency. Dollars (or francs, pounds, euros, etc. -- any fiat) are not actually being exchanged when a credit card is processed. At the lowest level, encrypted bits and bytes are being sent back and forth between the credit card terminal and the bank. And then, once the instructions have been received at the bank, then another set of bits and bytes gets exchanged to flag that one account got debited and another got credited. No actual printed cash dollars moved anywhere.

There are only two differences between a credit card transaction and a Bitcoin or Ethereum transaction:

1. The bits and bytes being moved back and forth are equated to dollars, the bank is required to have a certain amount of capital requirements (i.e. must have some value of actual dollars held somewhere), and regulations audit and enforce compliance with those rules. Cryptocurrency stablecoins also enforce some of this (they are also equated to dollars and depending on the issuer, capital is also held), but there are not, as of yet, rigorous regulatory components.

2. The bits and bytes are held in centralized computing services instead of held on a distributed blockchain.

All of these differences amount to a distributed trust. For fiat currency, we must trust the bank, the credit card terminal, the encryption, the centralized computers that will move the bits and bytes (which have no transparency and we cannot examine), the regulations, and the auditing and enforcement of regulations.

Trust is required in the cryptocurrency chain as well, in that you have to trust the encryption, the blockchain security model, the security of your hardware key, and in the case of stablecoins, the issuer and their capital holdings. In this case, the trust is placed in different entities than with fiat, but it's there.

In short, our current financial system is already full of cryptocurrency transactions that we have a lot of distributed and implicit trust in. We have to, because it's needed. Can you imagine that without it we would have to measure out and trade gold for goods and services? I fully acknowledge that cryptocurrency systems contain inherent risks, but we have resolved already to accept risks even in fiat systems.

 

[Knightshade]

Well THAT was a lot of nonsense


If someone steals my credit card and charges $20,000 on it-- I am responsible for zero of that cost and have lost nothing but a little time reporting it and waiting for a new card to be overnighted to me.

If someone steals my crypto key and transfers $20,000 worth out- that money is gone and I'm never getting it back and have no recourse whatsoever.

Ditto if I actually send the funds intentionally and then the person receiving them fails to delivery what I paid for. With the CC I get 100% of my $ back. With crypto I lose 100% of the money and have no recourse.


Further- if a bank runs out of money when they should have $20,000 of my dollars- the FDIC insures I will still get my $20,000.

Whereas again if your crypto just vanishes for any reason- it's gone and you can do nothing at all to get it back.


Trying to paint actual money and crypto with the same brush because they can both be transferred digitally is hilariously delusional.


You can also transfer porn with "encrypted bits and bytes" but that's ALSO not money- though certainly there's folks who exchange actual money for it

 

[daniel]

Thanks, Knightshade. You beat me to it, saved me the bother, and gave a more concise explanation than I would have managed.

 

[Featsbeyond50]

Hey guys, I don't follow crypto very closely but I started watching this channel

after I saw one episode where they perfectly called the FTX SBF debacle before it happened. Of course it could have been luck but they got my attention.

In the video above, they are calling for Genesis to collapse (I have no idea who Genesis is) and they think Greyscale is vulnerable. I know who Greyscale is and I've owned GBTC a few times. What they said about Greyscale sounded pretty bad to me. Most likely, Greyscale doesn't have the funds they claim. I have no exposure to crypto but it sounds like there are many more dominos to fall, and with people having to cover their losses, the dominos will probably extend into the broader market.

 

[bhzmark]

people are finding uses

What are the uses?

 

[heltok]

What are the uses?

Tons of different ones, different for every user. I have paid for coffee, beers, rentals, hard drives, flight tickets etc using Bitcoin. I have settled loans to friends using crypto, ie I pay the restaurant, they send me crypto. I have paid for a few semi shady stuff also like VPN, zbigz, gambling etc. I have donated to causes, streamers, reddit etc.

A few of these could have been done with fiat also, not all of them, but some. We choose to use crypto because once we are set up, it's pretty easy to use and some people prefer them for other reasons such as to avoid taxes, accounting, international fees etc.

 

[bhzmark]

A few of these could have been done with fiat also, not all of them, but some. We choose to use crypto because once we are set up, it's pretty easy to use

More specifically my question is what can crypto (and especially cryptocurrency) do better, faster, more efficiently, with less error and less risk and less friction?

Seems like nearly all of your examples could have been done with fiat and with less hassle fumbling with wallets and keys and, now, being exposed to the risk of a centralized custodian if you try to reduce the wallet hassle.

The one single use case I have ever heard was on this forum from someone who used crypto to pay people outside the US and avoid the hassle of cross border banking issues (although query on tax compliance where paying people and cross-border transfers usually requires various information reporting and sometimes withholding various taxes).

Crypto ought to eventually replace real estate title searches and title insurance and old-fashioned bank ACH and wire transfer and ffs paper checks. And probably some other things. But it hasn’t yet and it doesn’t look promising to do it in the near future.

 

[bkp_duke]

More specifically my question is what can crypto (and especially cryptocurrency) do better, faster, more efficiently, with less error and less risk and less friction?

Seems like nearly all of your examples could have been done with fiat and with less hassle fumbling with wallets and keys and, now, being exposed to the risk of a centralized custodian if you try to reduce the wallet hassle.

The one single use case I have ever heard was on this forum from someone who used crypto to pay people outside the US and avoid the hassle of cross border banking issues (although query on tax compliance where paying people and cross-border transfers usually requires various information reporting and sometimes withholding various taxes).

Crypto ought to eventually replace real estate title searches and title insurance and old-fashioned bank ACH and wire transfer and ffs paper checks. And probably some other things. But it hasn’t yet and it doesn’t look promising to do it in the near future.

Title records would be something that would be great for crypto (this would be a non-modifiable record of property transactions). It would instantly destroy the "title insurance" industry, however.

Aside from that, I have a hard time finding much of a use case for crypto on a day to day basis.

 

[heltok]

More specifically my question is what can crypto (and especially cryptocurrency) do better, faster, more efficiently, with less error and less risk and less friction?

Seems like nearly all of your examples could have been done with fiat and with less hassle fumbling with wallets and keys and, now, being exposed to the risk of a centralized custodian if you try to reduce the wallet hassle.

The one single use case I have ever heard was on this forum from someone who used crypto to pay people outside the US and avoid the hassle of cross border banking issues (although query on tax compliance where paying people and cross-border transfers usually requires various information reporting and sometimes withholding various taxes).

Crypto ought to eventually replace real estate title searches and title insurance and old-fashioned bank ACH and wire transfer and ffs paper checks. And probably some other things. But it hasn’t yet and it doesn’t look promising to do it in the near future.

Faster? Crypto is super fast, pretty much instant and settles within minutes, compared to fiat that takes days to settle.

Efficiently, not even sure what that means?

Friction, at the time I was using crypto, fees were very low. Might have changed to day with Bitcoin, think the other ones are still pretty cheap.

Fumbling with wallets? Scan a qr code, enter/verfify the amount in whatever currency you prefer, press send. Have you even tried to use crypto?

Not sure which alternative can:
1. Pay in restaurants, websites etc
2. Send from person a to person b very fast with low fees
3. Secure and safe
4. Fees <1% for merchant

Revolut? Sure maybe, but is that even available outside of Europe? Any other suggestion?

 

[daniel]

... I have paid for coffee, beers, rentals, hard drives, flight tickets etc using Bitcoin. [...] I have paid for a few semi shady stuff also like VPN, zbigz, gambling etc. I have donated to causes, streamers, reddit etc.

Pretty much certain that all those merchants immediately converted that crypto to actual money. They accept crypto to get your business. And they accept the small losses (small if they convert immediately) to get your business. A business has expenses, and those merchants cannot pay their employees or landlords or suppliers or lenders in crypto. They need actual money for all those things. Having to convert your BTC to dollars to pay their operating expenses is a hassle they accept only because they're desperate for your money. And darn few merchants accept it. The very fact that it can lose half its value in a matter of days means that they could go bankrupt if they accepted more than a minuscule amount crypto.

Title records would be something that would be great for crypto ...

Maybe true, but that's blockchain, not crypto. Cryptocurrency is one set of uses for blockchain, but not all blockchain applications are crypto. And there's a problem with the above idea: Maintaining a blockchain costs money. Crypto pays for the blockchain by allowing the record-keepers to mine coins which they can sell. Using blockchain to keep title records might be possible, but somebody needs to pay the ongoing cost. And how robust is a blockchain really? Sure, it's decentralized, but as soon as nobody is paying to maintain all those nodes (is that the right term?) the owners are going to erase them and use the hardware for something else.

 

[heltok]

Pretty much certain that all those merchants immediately converted that crypto to actual money. They accept crypto to get your business. And they accept the small losses (small if they convert immediately) to get your business. A business has expenses, and those merchants cannot pay their employees or landlords or suppliers or lenders in crypto. They need actual money for all those things. Having to convert your BTC to dollars to pay their operating expenses is a hassle they accept only because they're desperate for your money. And darn few merchants accept it. The very fact that it can lose half its value in a matter of days means that they could go bankrupt if they accepted more than a minuscule amount crypto.

Most of them did and still do. Because right now and at the time very few people accept crypto. But that's okay, they accepted them and if you are gonna bootstrap a currency without force, that's how you do it. As they see that more and more of their expenses could be in crypto, they would start to save more.

But some kept some in crypto mostly as a speculation. This was when the frenzy was high, Bitcoin going from $12 to $1200 in a year. People did notice and wanted to get in the action. When people went to crypto meetups at the only restaurant that accepted Bitcoin in town etc. These guys were sometimes believers themselves, but some only did it to seem modern or to make a quick buck.

Newegg, Overstock, Tesla etc held a lot of their bitcoins at least for a while.

Anyway, lots of these discussion have been held before. Does it matter if prices are in dollar? Does it matter if it's converted to dollars instantly? Etc etc. See these old debates from 2013: