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Comment by Traster | Hacker News Reader

My big problem with crypto at the moment is that 99% of normal investors are just using exchanges. It’s like we’ve claimed to invent a new technology to replace rsync and it really does exist but it’s worse than rsync, and everyone who thinks they’ve bought in to the new technology are actually buying things from companies that claim to use the new technology and do genuinely have the ability to use the new technology but actually are using rsync 99.99% of the time. Or to put it another way - almost all the transactions are actually off-chain.

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That doesn't necessarily change how exciting the tech is. The exchanges are working in an asset with known, predictable and locked-in inflation. 3rd parties (cough the US cough) cannot weaponize that asset against the traders. Inter-exchange transfers of wealth are relatively quick and trustworthy, even across borders without trusting any other exchange.

That is a pretty substantial change from any existing asset. It isn't all sunshine and roses, but there are a combination of properties here that never existed before.

there's no regulation, auditing or government backed guarantees / insurance on the exchanges.

so what happens when there is a run on an exchange, and it turns out that it does not hold the assets that it has on its books?

People losing all their money (in an entirely foreseeable way) is a tragedy. But it isn't new, that has been a show on repeat for millennia. This time, at least the losses will be in something new.

Much like how the first dot com bubble doesn't change the transformative nature of the internet, a massive crash in crypto isn't going to be the end of this story. We might outlive Bitcoin, but no-one alive today will outlive cryptocurrencies. The only real question is how much change they will cause.

It's better for society than our current banking system, because the government considers our current system "too big to fail," so banks know that the government will bail them out if things get too bad, and the banks engage in risky behavior accordingly.

That will always be true. Even with a 100% crypto world governments can use taxes/reserves/bonds/tariffs to prop up / bail out failing companies.

They just wouldn’t be able to use quantitative easing (easily - i.e. without global consensus) to do it.

Why not? Tether showed that quantative easing works just fine in cryptoland.

https://www.bloomberg.com/news/features/2021-10-07/crypto-my...

Tether is a counterfeiting operation.

Yes but banks are subject to a wide array of regulations, liquidity requirements and frequent third-party audits. And then, in crypto, you have Tether, whose reserves claims are dubious at best

Plenty of banks went bankrupt or were acquired, so it's not quite true that the government will just bail out failed actors.

https://en.wikipedia.org/wiki/List_of_banks_acquired_or_bank...

And of course the financial system as a whole is "too big to fail", but that would be true regardless of the implementation. Are you saying that if we switch to crypto then suddenly the financial system failing is OK?

Depends which exchange - some are US regulated eg. Coinbase, Kraken.

> there's no regulation, auditing or government backed guarantees / insurance on the exchanges.

I consider this a feature, not a bug.

> an asset with known, predictable and locked-in inflation

What's your definition of inflation, because by my definition Bitcoin experienced more than 100% inflation during this year, since which time it has experienced roughly 30% deflation.

There's going to be about 300k Bitcoin created in the next 12 months, and someone more motivated to care than I am could put some tight boundaries on that estimate if they wanted to.

If a bank is about to send me Euros, how many Euros will they get to create out of nothing in the next 12 months? I could probably make some educated guesses based on past rates; but there is a lot more certainty in Bitcoin.

Ironically given the price swings, the actual asset involved here is more stable and predictable than any asset that has ever existed in human history. That is going to matter somehow, although I'm not going to guess how. In a very similar way to how the internet making communication effectively free had (or; is having) far reaching consequences that were difficult to predict. This sort of never-before-seen certainty is going to have consequences.

land is a fixed resource, and new property is pretty predicable when you factor in planning law.

speculation in property and asset price inflation in this asset class has pretty much universally been a disaster for any change of a coherent, developing and fair society.

It's contributed massively to generational inequality, which has intern massively effected our politics. It's contributed to falling birth rates. It's facilitated organised crime both domestically and caused instability internationally . Plus every 20 years of so it completely crashes the whole economy.

indeed. the promised advantages include de-centralisation, on-chain, and no big financial institutions taking a cut or manipulating rates.

yet to practically trade in it you are back to centralisation, off-chain, and the exchanges taking a cut and manipulating rates.

and if it made any sense to use it as an actual currency, e.g. to buy coffee, then you are back to centralisation, off-chain, and wallet providers taking a cut.

Another interesting comparison is git and GitHub.

We invented a new technology to replace CVS/Subversion/SourceSafe/$CENTRALISED_VCS, and it really does exist, and it's better than all of those old systems partly because it really is decentralised, and it's also based on crypto(graphic) primitives, but 99% of the people who think they've bought into it are actually just using another centralised service all over again. Or to put it another way - when GitHub goes down a disturbingly high proportion of a) git users are unable to get any work done at all, and b) build systems just break.

(Ok, git didn't invent the DVCS. But it was better enough on a number of important axes than those that came before it - including "being used by a high-profile project" - that you can say that it made DVCSs happen.)

using git with github is still a DVCS. You can branch, commit, merge, whatever without access to the central repository. None of that was possible with the classic VCS - if the central server went down, you were stuck with your current working copy, or copying a colleague's state on removable media

Eyeballing the numbers on Coingecko DEXs seem to have a lot more than 1% of the volume (and this has been steadily growing). Further, most of web3 isn't about payments and where people invest and trade in them has little to do with whether those projects have potential.

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