Cryptocurrency Is Bunk
jacobinmag.com
jacobinmag.com
Banks don't just create money because they like your smile. They issue their own liabilities at a discount against collateral, the charge over which they take as their own asset.
The collateral has to exist now, and generally not in the future. And it is this that causes the problem with banking - they are renown for wanting to lend you an umbrella when the sun is shining.
Banks are for the most part liquidity providers against existing assets. And it is the existence of existing assets and the market for their liquidation that generates the systemic risk limit on bank lending expansion.
Keep in mind that there's a theory where bank loans are actually a way to create money that doesn't exist nor has any collateral.
The "reserve multiplier" theory of money creation is incompatible with modern bank regulation, or even the meaning of the terms used (banks only lend reserves to each other, never to customers), nor does it describe how money creation works in real economies (despite the fact that it appears in wikipedia).
For a good overview of how money creation works, see this BoE report:
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
No, not really. The only requirement for the "banks create money through loans" theory is that banks practice fractional reserve banking.
I am not educated in the financial workings, but the recent history shows that the people in charge might seems educated, but shouldn‘t be trusted.
There is too much of a gap of interests and understanding between the financial industry and the actual economy.
It's Jacobin magazine, what did you expect exactly? Something unbiased, perhaps?
I mean that is pretty good problem to work on IMO. I think articles like this that talk about monetary politics are missing the point a bit.
I live in Denmark, and even then it takes approx ~10-24 hours to transfer funds between banks, imagine if we could reduce that time to mere seconds- or minutes?
Huh? Is that the story now? I thought cryptocurrencies were about 1) implementing some kind of cyberpunk-libertarian vision of a world free from the control of central bankers, 2) getting rich quick off of speculation, or 3) rushing to apply a faddish technology to be hip and cool.
I would be very surprised if DeFI's relationship to the unbanked was anything besides "uh, so now that we've made this thing, what use cases could we use to sell it?" (e.g. exactly opposite to what you've described).
Concrete example: I have an app on my phone that allows me to instantly transfer funds from my bank account to other people using a QR code with no transaction cost. That was part of the promise of cryptocurrencies and is still trotted out as a potential benefit - but this system does not use cryptocurrency at all and has none of its downsides.
If a problem is solved without cryptocurrency, and without cryptocurrency's crippling problems, cryptocurrency clearly wasn't the answer to begin with.
This take is quite plainly absurd. If anyone has enough access to a working internet connection to make crypto transactions possible, they already meet all the requirements to perform transactions through any other service such as PayPal or even any bank at all.
Storj created an Ethereum-based token and one of its purposes was so they could cheaply issue micropayments to a distributed network of international storage node operators. The issuing micropayments part appears to work, but getting tokens converted to fiat, ie spendable money, appears to be difficult and expensive according to many posts on their forums.
So the idea of cryptocurrencies enabling micropayments, while good in theory, seems to not be working so great in practice. Most of the responses to this problem are "It will get fixed with Etherium 2.0" or something like that. It's funny how most problems in life are "to be fixed later".