The crypto movement is destroying itself
concoda.substack.com
concoda.substack.com
Binance really was banned from operating in the Cayman Islands.[1] That's an achievement.
China's crackdown on Bitcoin mining halved the hash rate.[2] This time, it's serious. Several weeks ago, power was disconnected by the authorities from major Bitcoin mining operations. This is significant, because Bitcoin was being used as a legal way to move money out of China. It's manufacturing and exporting, which is both legal and encouraged. Or was. The crackdown continues.[3] Over a thousand people arrested so far.
Three stablecoins have gone to zero in recent weeks. When stablecoins crash, they go all the way .
The NFT thing seems to be over, although it's hard to see that, because NFTs stall rather than crashing. As I've pointed out before, NFT markets look like Beanie Baby markets on eBay - offers to sell at high prices, no bids. No liquidity. Highly publicized single transactions at high prices are probably sales between cooperating parties. The real point of NFTs is that they are neither a commodity nor a security, and thus evade regulation.
Most importantly, the cryptocurrency world has never experienced a general recession and the resulting net outflow of capital. Remember what happened to Madoff.
[1] https://www.caymancompass.com/2021/07/02/cima-binance-not-au...
[2] https://www.coinwarz.com/mining/bitcoin/hashrate-chart
[3] https://www.cnbc.com/2021/07/06/china-cracks-down-on-crypto-...
I found Iron Finance (TITAN) and SafeDollar [1]. What's the third?
[1] https://www.newsweek.com/safedollar-price-hits-zero-despite-...
There's also Iron's TITANIUM token, which collapsed as well.
- IRON Titanium Token (TITAN) $0.00000145
- All-Time High $64.19 -100.0% Jun 16, 2021
The whole Iron Finance house of cards collapsed, taking down multiple tokens. Not that you'd know this from their main web site, "https://iron.finance/". The new hype:
Iron Finance relaunch scheduled for Monday, 12 July 2021 at 1PM UTC on Polygon Network The relaunch will include a new token and IronSwap, the Iron Finance stable swap product.
As most of you are already aware, the Iron Finance team has renounced ownership of the old TITAN token, it is now actively managed by the TitanDAO community initiative. As explained in our previous Medium article, STEEL, TITAN and DND tokens are no longer part of the Iron Finance products and ecosystem.
The new official Iron Finance token to replace the TITAN token will be the ICE token (=“TITANv2”). We were inspired by A Song of Ice and Fire novels, where the Iron Throne is a well-known symbol.
Seeing him call anyone a liar - as he does regularly - is downright hilarious.
After all, at one point he had all of Tether's entire backing dollars (a small fraction of outstanding USDT) with his personal funds in his Bank of Montreal account. [2]
[1] https://bennettftomlin.com/2021/03/27/before-bitfinex-and-te...
[2] https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... section 17.
Anyone who plays online poker for money is naive. The temptation for the programmers of such systems to cheat has to be enormous.
It’s impossible and maddening to keep the “movement” on track in messaging. Every era is less educated technically and cares less about ideological or political goals and more about the bottom line of making some wealth.
So of course the movement is diluted. Influencers are rarely true cypherpunks and are the loudest by profession. But it doesn’t mean it isn’t working. IMHO the traditional finance system has only gotten more troubling since Satoshi’s whitepaper while crypto has grown more and more capable. It’s true there have been new challenges that have emerged, some of which are still ongoing, but that’s part of growth.
The DeFi tech is real, but early. Vitalik Buterin is a really good leader for Ethereum and development.
Vitalik Interview: https://www.stitcher.com/show/rationally-speaking/episode/in...
This is a worthwhile list to read through: https://danromero.org/crypto-reading/
The main issue for outsiders is that the industry is surrounded by snake oil salesman and people that don't know what they're talking about (the 'evil central bank' types), but the underlying tech is real and the potential is real (imo). If you look at it quickly you might dismiss it all, but I think that'd be a mistake.
The ability to manage decentralized state is very cool, but there's a lot to build to make it viable (and as a result, there's a lot of opportunity). When something is hard, there's often value in making it easier.
There's also a lot of stuff in legacy finance that requires humans to do and is slow. Multi-day financial transfers for clearing and high associated fees for wires (at some banks) - crypto options are much better and modern implementations of the legacy stack. The current state is still a bit unstable, and the UX is a disaster, but the future is clearly better (imo) in a way legacy systems will have trouble competing with.
As an aside, 'wealth inequality' is a feature you want in effective capitalist systems (you can still protect the lower bound). http://paulgraham.com/ineq.html
In 1999 a lot of people recognized the value of the internet (though many still dismissed it [0]), but there was also a lot of dumb money and failure - loud people who didn't know what was going on. The web obviously became extremely economically relevant despite all of that. There's some similar potential here - I think it'll just take a while to shake out.
[0] "By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s." -Paul Krugman (1998)
Irony of the above quote is it's wrong on two levels - the internet, but also the impact of the fax machine (also huge).
For anyone who's looking into more serious/technical discussions, I think looking through github contributions, whitepapers, technical parts of bitcointalk and in depth interviews of legitimate contributors to the ecosystem (like Vitalik) is much more informative and has better signal to noise ratios.
Sure infinite coins can be fixed later, but the same can be said about Bitcoin. If POS works, it can be implemented on Bitcoin.
> "Sure infinite coins can be fixed later, but the same can be said about Bitcoin. If POS works, it can be implemented on Bitcoin."
In theory yes, in practice no. BTC community elevated a clear con-man fake Satoshi because he took sides in a block size political battle. They can't even agree to increase the block size. This lack of leadership is a problem, moving to ETH2 is a serious project and requires a leader, priorities, direction etc. I don't think BTC can do any of this.
Yes, but can you convince the hardcore PoW maximalists to join your fork? IMO Bitcoin is doing its best to be a raw, pseudo-physical element.
That means immutability, costs rooted in the physical world, etc. The community will change its protocols sparingly and slowly.
To some who prefer rapid change and development this is unattractive. But to Bitcoiners, decentralization and immutability are the foundations of this new type of property. They are uninterested in technical gains that come with complexity and risk.
DOGE is problematic because it's an infinite coin with an inflation rate that is too high.
https://john-tromp.medium.com/a-case-for-using-soft-total-su...
This was before the DAO hack.
I don't recall Vitalik ever claiming that arbitrary smart contracts built on top of Ethereum were provably safe. Back then nobody was applying formal proof to smart contract code, it was just regular devs slamming out Solidity scripts with minimal third-party audits. That's what the vulnerable DAO code was; there wasn't a formal proof within miles of that stuff. The hack did not target the Ethereum protocol itself.
Applying formal proofs to smart contracts does make sense, since failures are expensive and the code is short. There's been gradual movement in that direction but it's been slow.
Once Stanford gets fully restarted, I'll see if I can dredge those up.
Issuance right now is 2 ETH/block. The white paper just promised 5 ETH/block forever.
https://ethereum.org/en/whitepaper/
Net issuance will be lower after 1559 rolls out in August and starts burning a portion of transaction fees. Combining that with the PoS merge in half a year or so, and net issuance may well go negative. (Ethereum's PoS isn't really a scaling solution though.)
There's a lot of datapoints that you can use or you can find reliable people and rely on their judgments. Also, if you're simply looking for investment, you can't go wrong with BTC/ETH portfolio, they have been proven to work over many years now and most of the remaining altcoins are correlated with them in price anyways.
Unfortunately, as is becoming more and more true in our pretty weird modern inter-connected world there's no substitute for getting your own hands dirty, reading primary sources and trying to understand what's true and what's bullshit yourself. Only then can you really evaluate who is worth listening to and what is actually interesting (I found the above stuff I linked to be good, but you should judge them for yourself).
The 'investment' bit is kind of secondary (https://soliditylang.org/), I personally think BTC, ETH, and Coinbase stock are the main long term bets - other stuff has extreme risk and requires a lot of attention to know if it's worthwhile or not. I do think the ZCash privacy model is cool.
Basically, I wouldn't invest unless you're going to sort through the nonsense yourself. Though like any investing the stuff where the value is harder to see is also where the bigger returns are (and the bigger failures).
Also, how many transactions/day does the second-most-used cryptocurrency facilitate?
If so, then you don't want Bitcoin. You can use Paypal.
However if you want to own an asset that can't be debased by central banks, where your transactions can't be censored, where you can participate from anywhere geographically, then you might want Bitcoin.
Those features come at a transaction capacity tradeoff.
If you say "Choose proven cryptocurrencies with transactions" I am going to assume you don't mean ten transactions/day.
I do not think it is unreasonable to ask "How many people are actually transacting with this cryptocurrency?".
2) Type "Bitcoin transactions per day", click search
3) View results
????
Is it really a good idea to invest in such a volatile asset?
(Genuinely asking as a complete noob)
HN is probably fine, I just feel bad for anyone who learns about crypto on YouTube and asks a newbie question in the comments - they are swarmed by bot armies recommending “investment strategies” over WhatsApp
If you dig enough, you'll see a lot of very useful and important projects being built by some very capable engineers.
This kind of comment reminds me of when people were predicting that internet was going to be a useless thing[1].
1: https://www.newsweek.com/clifford-stoll-why-web-wont-be-nirv...
DAOs, and AMMs are interesting - there's a lot of potential in leveraging DeFi to make systems that can work in ways better than existing legacy tech, it's just hard and people don't have it already figured out to the point where looking at it makes it obvious. General public state is a new thing and how it can be used is being figured out (oracles, programmable money, etc.).
When something is new it looks more 'pointless' and toy-like. It takes a while for its value to become truly obvious to everyone (and it requires some people to see that value early).
I believe the great financial speed-run has hit Mid-1929.
Before the Securities Act, Securities Exchange Act, Regulation S and Regulation T, before the SEC, CFTC and FDIC. A world of unrestricted margin, wildcat banks, hucksters, shills, snake-oil salesmen, and some, I assume, are good people.
Crypto is what the stock market would look like if everyone at the SEC decided to take a few months vacation at once, a financial version of The Purge.
If you create a system without a central authority able to correct for incentive failures of system design, you can end up trapped by the incentives themselves. [0]
That can lead to bad outcomes we already see in existing systems (NIMBY housing, partisan politics, etc.)
2008 loans to save the system were wildly successful, in DeFi - there is no authority that can jump in with liquidity temporarily to save the system. Maybe some consensus could be reached, but it definitely seems like there's big future risk in this area.
[0]: Moloch basically: https://slatestarcodex.com/2014/07/30/meditations-on-moloch/
There is no bygone era of highly educated and high minded people.
Pretty cool that a 'garage-scale' team can make a functioning technolibertarian market so rapidly. (But also helped me learn to appreciate the utility of regulation :-P) IIRC I think Trendon Shavers/pirateat40's "miner financing" ponzi's implosion was a significant factor in taking it down.
There were lots of cool little projects popping up every month. Gambling sites that allowed wagers to be made directly on the blockchain - most engineering was around proving to gamblers that outcome determination was being done fairly. Accountless websites where you'd log in by sending a small fraction of a bitcoin, and your address was used as your identity. When bitcoin was less than $20, it was exciting and easy to experiment with - who cares if the $5 you sent disappears - but then the price spiked, and so fees increased and all of the 'loose change' people had everywhere was suddenly a significant amount of money - exit scams became frequent and people stopped being willing to store small amounts with others, because that small amount could 20x in 4 years.
Lots of small businesses posting that they'd accept bitcoin for their products. Found a lovely beekeeper's business that made great honey caramels and beeswax chapstick. I paid a teenager to custom make perler bead pixel art of Liu Kang and Raiden from the original Mortal Kombat (I think I may have paid multiple bitcoins for those :-P - hope they hodled!)
As an example I don’t think Hal would have much interest in shibemoon pump and dump telegram channels and likewise most people joining today don’t have much interest in the implementation details of rootstock.
For example, at the last minute he decided to enter a Gomoku-playing computer programming contest. He learned Gomoku and wrote a program that trashed the competition (including the MIT entry) in a weekend.
I was an Ethereum enthusiast back in 2017, but it didn't take long for me to see that cryptocurrency as it stands will never work. Smart contracts are too fragile, trading is too inaccessible, and keeping assets safe is too difficult.
There has been barely any innovation in scalability over the years, and I'm wondering if that's because proof of work has become too big to fail. Too profitable for it to end.
Everything else is proned for bugs
These are the features that allow the pricing to be manipulated beyond any semblance of connection to reality. Any number you see, any stat you see, any data presented to you is likely fake. This is made possible because of trustlessness, permissionlessness and decentralization. Nobody can stop it by design.
95% of all trading volume is fake. Exchanges fake volume to draw in new gamblers. [1] The pricing is determined by Tethers, which account for 65% of all trading volume [2, 3] but are backed by $0.03USD per USDT and hot air and are not redeemable by anyone [4]. Even USDC is now backed by "approved investments" instead of dollars [5]. That's just a small sliver.
Aparently 1/3 of all small and medium businesses in America accept crypto! Fun fact. Are you sure? Because I haven't seen a single one. [6]
The actual market is roughly speaking totally unrecognizable.
The only thing we know for a fact is that new money has to come into PoW coins equal to the cost of mining just to keep the price stable. Anything above and beyond that is almost impossible to know for sure.
This is what libertarianism looks like (humorous take [7]). It kinda sucks.
[1] https://www.forbes.com/sites/cbovaird/2019/03/22/95-of-repor...
[2] https://onlinelibrary.wiley.com/doi/full/10.1111/jofi.12903
[3] https://coinlib.io/coin/BTC/Bitcoin - among others.
[4] https://www.ft.com/content/529eb4e6-796a-4e81-8064-5967bbe3b...
[5] https://www.coindesk.com/circle-is-not-winning-stablecoin-tr...
[6] https://bitcoinist.com/36-of-u-s-smes-accept-cryptocurrency-...
[7] https://www.newyorker.com/humor/daily-shouts/l-p-d-libertari...
That being said, you're right about it not being a suitable replacement for traditional finance.
The 'old way' makes a nice kind of sense. Company goes to the public to raise money to build a factory or something. In exchange the public gets a share of the company. The company builds the factory and is able to grow as a result, the public ownership of the stock rewards owners with some small cut of the profits.
Today almost none of that is true. There's enough private money that there's no financial need to go to public markets a lot of the time. Going public is mostly done for recruiting and giving employees that helped build the company liquidity. Public share holders no longer even have impactful voting rights a lot of the time (something I'm fine with, but still is relevant in comparing the value). The public invests because of the stock being tied to growth without dividends (and large passive index funds investments in retirement funds).
Why does stock value track company value when there's no actual value coming from it? Am I missing something obvious?
The above is the best case too - the bad case is best described by Matt Levine [0].
In some ways crypto assets are easier to understand - they're often tied to supporting the network infrastructure itself, or in the case of tokens whatever the protocol is doing. It aligns incentives around adoption of a decentralized protocol. The same is sort of true for share holders, but not really to the same extent and not as direct.
[0]: >"There are other business models. For instance you could make a product that people kind of want, or that they would want if it were affordable. Then you convince people to buy it by selling it for much less than it costs you to make it, or by paying them to buy it. If you do this well, you will have high revenue and rapid revenue growth, because lots of people are buying your product. You will not, however, get rich, because you’ll be spending more money making the product than you get from your customers. Your revenue will be high but your net income will be negative; it will cost you money to run this business.
> But then you will go to investors, and you will say “look, I have a company with rapidly growing revenue, that’s worth something, you should pay me for a share of my company.” And they will agree—“we love rapid revenue growth,” they will say—and you will sell stock in the company for hundreds of millions of dollars. And then it will cost them money to run the business, and you will be rich. There are various possible endgames; in some of them you go to prison but in quite a lot of them you just stay rich and become an elder statesman admired for your business acumen."
That would be like a worst case scenario though, right? Which would in turn make those shares worth a lot less to begin with.
Yes. Some of the same scammers are behind both.[1]
[1] https://www.timesofisrael.com/german-police-raid-call-center...
Why even compare a "currency" to the stock market? They are two different things.
Seems pretty similar in this respect...
Most/all of them are crypto-financial. I generally think non-crypto businesses using ICOs are extra scammy, because redemption of services is usually a squishy meatspace process - fungibility is rare. I am not a fan of 'blockchain' companies that fundraise with ICOs for IRL redemption of products or services - really gambling on the integrity of company leadership to not alter the terms before redemption.
(Personally I think 'access rights' is the only subset that is feasible for crypto<>IRL commerce - digital content DRM, event tickets, stuff like that)
Which ones are successful is certainly the subject of debate (I'd probably say "we don't know yet"), but I think over half of the top 40 coins on https://coinmarketcap.com/ were created via ICO.
The recent drop didn't count as a crash?
The world would be worse off with such a distribution, IMO.
For the record, I'm pro wealth inequality and income inequality, so long as its coupled with social mobility and a high standard of living for the lower classes.
It has?
[1] [2018] https://www.washingtonpost.com/news/theworldpost/wp/2018/01/...
[2] [2018] https://medium.com/predict/how-bitcoin-solves-the-problem-of...
[3] [2019] https://www.businessinsider.com/this-is-how-bitcoin-can-end-...
[4] [2021] https://www.forbes.com/sites/martinrivers/2021/06/15/how-bit...
Opinion pieces in mainstream outlets isn't exactly representative of "the community". The dates for those articles are also quite recent, within the last 3 years or so. Where are all the bitcointalk topics from 2011 (ie. "a decade" ago) where everyone collectively thought it was going to end wealth inequality?
[edit] I'll be the first to admit I wasn't there in 2010, but I'm led to believe they were discussing a 'peer to peer digital cash' so I guess a lot can change! Certainly the last 5 years have been filled with inequality narrative.
Further, I would argue that yes in the last 5 years once bitcoin entered the zeitgiest, that these mainstream thought pieces are actually more representative of 'the community' as retail gamblers poured in outnumbering earlier participants.
> Out of the tools we possess to rid the system of crony capitalism, crypto is still our best shot.
What in the DNA of "crypto" suggests that it would ever rid us of "crony capitalism"? Did I not get the memo?
The reality of the blockchain is that its guarantees only extend to what can be wholly represented and encapsulated on-chain. That's why only abstract/fiat currencies have emerged after 14 years of research as viable use cases. The boundary between the chain and reality is where these guarantees break down.
The blockchain cannot guarantee the reserves in Tether's bank account. That's not transparency, that's the illusion of transparency. That's much worse than intentional opacity IMO since it throws people off the trail.
You could say the lack of oversight around cash makes it appeal to criminals. The truth is most criminals have bank accounts. The majority of thief happens with credit cards not bitcoin.
Satoshi mined over 1.1M BTC [1], and designed the emission schedule to give majority of holdings to very early adopters (ie. mostly himself). The coin also has no value source at all (not backed by anything, no income generation), the only way to realize a profit on bitcoin is at the expense of someone else's loss. The name for this economic design is: a ponzi (new variation) and the one reason for a design like that - to become rich at the expense of others.
>Since we’re failing to witness any of this happen, however, the crypto dream is crumbling
Crypto has become less of a ponzi through the years because bitcoin is becoming less and less relevant with each year - transferring, lending and borrowing dollars is the first major use case that isn't fundamentally a ponzi variation. In fact for people in countries with capital controls saving in dollar in defi is probably the single best way to accumulate wealth.
Defi itself as an infrastructure is neutral - it can serve ponzis as well as fundamentally productive use cases (eg. tokenized houses -> defi mortgages), but due to lack of tokenized real assets except for (mostly) dollars, most of activity is related to some new ponzi variation. I think the switch to mostly productive ecosystem is going to happen during this decade - which necessarily requires bitcoin to lose importance to the point that seeing its price on coingecko/cmc requires scrolling.
Potential notwithstanding, the accumulated debt from wealth destruction since 2009 is enormous. Mining alone destroyed wealth equivalent to gdp of a small country, on top of that there's enormous loss of human potential (people playing in crypto instead of doing something actually productive - many very smart) and dangerously big wealth transfer to outright scammers that leverage that to scam even more. I estimate the total cumulative negative impact from crypto (esp. bitcoin) to be in the hundreds of billions of dollars. Even in the optimistic timeline in which defi makes everything significantly more efficient it's going to take a really long time to get back to net zero, and to make it a good investment (compared to other possible investment) - decades.
All of this is sunk cost, so imo banning crypto now would be a mistake, but even as someone who made a fortune from crypto I recently realized that world in 2021 would be a better place if it never existed.
[1] https://bitslog.com/2019/04/16/the-return-of-the-deniers-and...
And nearly every single one of the thousands of altcoins tilt the rewards to early adopters to a greater or same degree as bitcoin. Sadly, there is very little interest in minimizing the concentration of wealth...
Bootstrapping without that incentive would probably require promotion by some major entity like a central bank or FAANG company, which is likely to involve centralized control by that entity. I'm not convinced that's an improvement.
Maybe there's a better way. Any ideas?