211–220 of 241 posts
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How are credit cards not the most terrible thing ever? Some random number with an expiry date and an additional number is the key to your wealth (subject to a lot of terms and conditions)? I would rather go with a cryptography based solution, where all the terms and conditions are open source code, all day
There is near zero risk of a consumer loosing out with credit card fraud.
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Bitcoin crashes and dips all the time. It's lost over 80% of its value at least four times since it launched, plus the recent big 50% drawdown. It slows the cryptoeconomy for a year or so, but doesn't stop it, and then there's another bubble again ~2yrs later. Bitcoin's high but natural volatility is not the same thing as the price collapsing due to the system itself fundamentally breaking. For example, the Global Fi…
While tether is shady as hell, the fact that it is not deflationary, that the weaknesses in its balance sheets are more visible and that it is tied to a monetary policy that doesn't encourage hoarding makes it tamer than deflationary coins in many ways. Yeah if it collapses, some other cryptocoins are going to be more volatile than usual but even Musk tweets can do that (and this volatility may actually help prevent…
I worry about this too. Essentially, new money creation can go toward financing three objectives - production (manufacturing & innovation), consumption, or asset speculation.
If you have a financial system that’s financing mainly production, and somewhat consumption, you achieve widespread and equitable growth without inflation. This is the ideal. It’s how the Japanese rebuilt their economy after WWII, based on the theories of Osamu Shimomura, focusing new money creation on production.
But if your financial system is financing mainly consumption, you get inflation without growth.
And if it’s financing mainly asset speculation, you get financial instability and crisis, wealth concentration, and inflation.
This is all from Richard Werner’s work and research [1][2].
Deflationary cryptocurrency, at least in its early days, is financing mostly asset speculation.
However, that may be an unavoidable part of bootstrapping a new kind of money technology. But as your blog mentions, at some time in the future it will reach a steady state, no more rapid appreciation, and then what.
One of the big public debates is about whether transaction fees alone will be enough to finance mining and thus security of the network, after both the mining subsidy ends and the price appreciation levels off.
Another less public debate is how “HODLers” may then need to reinvest more of their gains into building value-adding services for the network to continue economic growth, despite the individual incentive being to hoard.
I don’t think the story has been completely written on deflationary cryptocurrencies, and am still watching to see how they deal with this eventual problem. But the sound money religion surrounding some of them is preventing an honest assessment of these problems.
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The problem with that plan is that Tether loaning (outside the interesting relationship exchanges have with Tether) is generally gonna be DeFi loans, which are massively over-collateralized (something like 2:1 collateral to debt). If Tether crashed, it is not clear that your collateral would not be liquidated to cover the nominal value of the original loan, rather than the new (near zero) value of Tether.
Actually, what I've described is called "shorting". In defi it's never the nominal value, but the current value, so it would be very clear that your collateral would unlikely be liquidated. You can also use something like USDC for the collateral for even more safety. (I think you can already see some evidence of this strategy since the interest rates for USDT are always higher) The scenario where all the collateral w…
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Cryptos have intrinsic value because they drive efficiency of value exchange. Specifically they allow for trustless exchange of value, which in an increasingly globalized world has become appealing for various reasons. Some cryptos have value beyond that, like ETH, because the Ethereum network itself has intrinsic value, and ETH is the only thing you can use to pay the Gas fees if you want a program running on the ne…
Hm, is there a theory of pricing ease-of-transfer ? Of course, it would have to depend on the preferences and whatnot, but still, seems like something that there should be some good theory of, but I haven’t heard of one. Side note: Aren’t there tokens that sort of have a kind of stored gas? Like, you can cash it in to get a refund of some of the gas cost of the transaction?
WRT the gas fee thing: yes, technically you can send a miner whatever you want in order to incentivize them to include your tx in a block, but the only thing baked in is ETH. Additionally, after the London hard fork (slated for release next month), EIP-1559 will be live which changes the fee system to become a "burn" fee system rather than a "tip to miner" fee system, which will force all fees to be paid in ETH (and algorithmically determined, rather than somewhat arbitrarily picking a fee that you hope is high enough for miners to include your tx).
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Actually, what I've described is called "shorting". In defi it's never the nominal value, but the current value, so it would be very clear that your collateral would unlikely be liquidated. You can also use something like USDC for the collateral for even more safety. (I think you can already see some evidence of this strategy since the interest rates for USDT are always higher) The scenario where all the collateral w…
AFAIK all DeFi lending based around Tether is predicated on the idea that a Tether is worth $1 USD. I'm not sure the smart contracts / etc involved are particularly resilient if that changes. The attempts at making these DeFi systems robust is almost entirely focused on what the system needs to do when the value of the non-stable crypto fluctuates wildly, not the stablecoin.
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If tether went away tomorrow, 60 billion of "assumed dollars" backing up crypto asset values would also vanish. Such an event would immediately tank the dollar value of all cryptocurrencies (real dollars, not USDT, that one would explode to the moon instead). And not just by 60 billion dollars of total market cap, but more like 600 billion to a trillion. There's a lot of fantasy value for each actual dollar (or USDT,…
Is it possible that such an event would benefit people who keep their btc off exchanges significantly?
I keep thinking of Madoff's fund. It was once called "the Jewish T-bill". It worked just fine until there was a significant net outflow. Then, total crash, because the backing assets were not there. Tether is way too much like that. Remember, Tether has no upside . There is no reason to ever hold Tether for any length of time. [1] https://www.timesofisrael.com/before-dying-bernie-madoff-lif...
> Remember, Tether has no upside. There is no reason to ever hold Tether for any length of time. "There is this product/service X, that is bought and traded fro billions. I don't see any use cases myself so clearly there isn't any reason to use it. Market is wrong and I am right."
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Having all that Tether massively increases trade volume. Exchanges make money on fees, which of course rise proportionally to trade volume.
>Having all that Tether massively increases trade volume. How? Having massive amounts of tether in your wallet doesn't increase trade volume, having users who trade increases trade volume. If I own 1B USDT and deposit it to some random exchange and let it sit there, the volume isn't going to change one bit.
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The suspicion is that Tether is much closer to 5% backed than 75%. A 95% "haircut" would be catastrophic.
Why would that be the case? Can you elaborate?
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While tether is shady as hell, the fact that it is not deflationary, that the weaknesses in its balance sheets are more visible and that it is tied to a monetary policy that doesn't encourage hoarding makes it tamer than deflationary coins in many ways. Yeah if it collapses, some other cryptocoins are going to be more volatile than usual but even Musk tweets can do that (and this volatility may actually help prevent…
> Deflationary coins on the other hand are super insidious, they can get hoarded on a wider scale to the point of displacing productive investment in the economy. With deflationary coins it's not the volatility that's dangerous, it's the lack of it creating gridlocks in other investment markets. I worry about this too. Essentially, new money creation can go toward financing three objectives - production (manufacturin…