Report on Stablecoins [pdf] • Hacker News Board

Re: Report on Stablecoins [pdf]

#411

Post by JeremyReimer » Tue, Nov 02, 2021, 2:04 AM UTC

not-elite wrote: post #309

sub7 wrote: post #143

From a Coinbase exec: "Tether is a ticking time bomb. Whenever it goes off, it'll be a 70-80% market correction for 2-3 years" Crypto continues to help nobody and achieve nothing in the real world. This administration has been criminally slow in shutting it down, lobby is strong.

> Crypto continues to help nobody and achieve nothing in the real world It's kind of surprising how little progress has been made. It is absolutely possible to use privacy-respecting low-fee tokens to purchase ebooks, purchase "no advertisement" article reads, or subscribe to periodicals. Even something like Taler is better than Visa and Mastercard. I would love to know why lwn.net, ars, or the register don't try. I…

I believe the case for micropayments was shot down back in 2002 when Scott McCloud first proposed it as an option for webcomic authors in his comic post "I Can't Stop Thinking" (the original no longer exists at his site, but various rebuttals [1] are still around)

Basically, people hate microtransactions. They hate the very idea of paying per article. They don't want to do it.

Ars, among many other sites, offers yearly subscriptions with various benefits (such as no ads) and that business model has worked well for them for many years.

[1] https://www.penny-arcade.com/comic/2001/06/22/magic-its-what...

Re: Report on Stablecoins [pdf]

#412

Post by qeternity » Tue, Nov 02, 2021, 2:04 AM UTC

arcticbull wrote: post #290

Animats wrote: post #47

This is good. The backing of stablecoins is a very real issue. As the Treasury points out, there's a very real possibility of a run. Two stablecoins have crashed so far, SafeDollar SDO, and $TITAN. They went all the way to zero. Can Tether survive a net outflow? Probably not. They don't have the collateral. Dai is really a derivative of Etherium. Dai is backed by Etherium at 150%. So value in Dai is at risk if the pr…

> Can Tether survive a net outflow? Probably not. They don't have the collateral. Luckily for Paolo & friends, their terms of service clearly state that they do not ever have to offer redemptions of USDT for dollars. Or even whatever IOUs and bits of string they may or may not have in reserve. Out of all the stable coins its the most likely to withstand a "run" because they do not have to pay you if you ask. In fact…

> The Crypto-USDT pairs will quickly go no-bid

I think what you mean is the Crypto-USDT pairs will go no offer (i.e. no USDT bid) as people turn to dump crypto against a fiat leg.

Re: Report on Stablecoins [pdf]

#413

Post by wpietri » Tue, Nov 02, 2021, 2:04 AM UTC

CryptoPunk wrote: post #151

wpietri wrote: post #122

Earlier quoted context omitted.

Stablecoin issuers are already effectively banks. In particular, wildcat banks: https://en.wikipedia.org/wiki/Wildcat_banking Spoiler alert: there's a reason we had 150 years without wildcat banks.

The popular conception of the so-called free banking era, and the cause and prevalence of wildcat banking, is wrong. https://www.alt-m.org/2021/07/06/the-fable-of-the-cats/

You do realize that the publisher of this is very far from a neutral party here, right?

Re: Report on Stablecoins [pdf]

#414

Post by RustyConsul » Tue, Nov 02, 2021, 2:06 AM UTC

jkhdigital wrote: post #388

RustyConsul wrote: post #325

Earlier quoted context omitted.

Do you think we will forever be organized and segregated by governments? Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future? The current financial system is not all software. When i pay in crypto, i give you my money. When i pay in the current financial system I am giving you every bit of information to rob me blind a…

> POW as a consensus method is flawed. It's not flawed, just hardcore. It's like the gold bars sitting in vaults deep underground in London, rarely moved and usually just relabeled to account for change in ownership. Every now and then someone gets spooked and asks to take custody, and it's expensive as hell to move it but you can lay your hands on it and know your ownership is secure.

lol - the cyberpunk future we never saw coming.

Re: Report on Stablecoins [pdf]

#415

Post by jkhdigital » Tue, Nov 02, 2021, 2:08 AM UTC

arcticbull wrote: post #278

caf wrote: post #248

Earlier quoted context omitted.

This all sounds intuitively correct, and it seems that similar arguments can be made about gold bullion, right? It costs some amount of money every year to mine, refine, transport and store it, and none of that is accruing to the actual holders of bullion. (One difference being that there is some residual value of the gold for industrial and jewellery uses, but that's hardly what's keeping the bullion price where it…

It's similar gold, yes. Gold is an unproductive asset. You are correct that there is base demand for it in the form of jewelry and electronics. In fact, a percentage of the world's gold output goes into making Bitcoin miners each year. However, its value is not supported by its demand in these industries. This is why I personally do not invest in gold. The difference is that if you shut down gold mining, existing gol…

> In fact if you reduce your energy expenditure below some unspecified threshold it becomes utterly worthless.

This is not really true--it's not like lowering the security budget means all the old blocks can be rewritten at will. Roughly speaking, the cost of rewriting a block is the cumulative PoW cost of that block and all the blocks after it, although this amount typically decreases over time as better mining equipment lowers the present cost of hashrate.

For current transactions, if the security budget relative to the transacted value gets low, all it means is that one must wait longer to achieve the same level of confidence in transaction finality. It doesn't abruptly render the currency "utterly worthless".

Re: Report on Stablecoins [pdf]

#416

Post by ryan_lane » Tue, Nov 02, 2021, 2:08 AM UTC

tremarley wrote: post #348

arcticbull wrote: post #293

Earlier quoted context omitted.

> Doesn't it seem weird that through this complex system of interactions, we can recreate all of that in Code? All of these systems are already software. > If there was no value in it, why did we create all those institutions in the first place? Centralization makes them massively more efficient than crypto. If there was a way to make them more efficient that did not involve throwing risk models out the window or reg…

The only people that have no issues with centralisation are the people who are benefiting from it. World Bank estimates 31 percent of people globally do not have a bank account. Decentralisation helps these people. When you deposit money into a bank account, it is not your money. It is the bank's money. You aren't allowed to use it, or spend it how you like without the permission of your bank. Crypto doesn't have thi…

The lack of a bank account doesn't have to do with centralization, for the most part, and decentralization doesn't matter if you can't spend the decentralized "money" without turning it into the local currency, because to do that, you need to have a bank account.

Crypto doesn't help bank the unbanked.

Re: Report on Stablecoins [pdf]

#417

Post by wpietri » Tue, Nov 02, 2021, 2:10 AM UTC

mattnewton wrote: post #185

wpietri wrote: post #111

Earlier quoted context omitted.

Exactly. Ultimately cryptocurrencies are a negative-sum game in that they take in real money and just move that money around, while spending some on overhead. In contrast, imagine investing in, say, a new fast-food franchise joint. They money you put in there is used to acquire assets that are used to produce goods that people will pay to consume. If it's a well-run business, the value of the outputs will be more tha…

I'm a crypto bear myself, but I'm not sure I agree with this argument. Plenty of services are built around "just moving money around" - accounting in this way has a ton of real value or else stripe, visa, paypal etc wouldn't be the huge companies they are. The questions are, whether "investing" by buying and holding is the right way to capture the value that this produces, and whether the benefits of doing it on a di…

I think you're stretching my meaning a bit here.

Money transfer services do convey money from one person to another, and along the way they may provide additional services. But the focus there is on the service provided. I don't just put money into my American Express card in hopes that I somehow get more money back later; their job is to give money to merchants I patronize while protecting us both from certain problems and risks.

What I'm talking to is more along the lines of poker games and Ponzi schemes, both of which "just move money around" in the sense that no more money comes out than goes in, even though certain individuals may do better than others.

Buying a cryptocurrency as an "investment" is much more like the latter than the former.

Re: Report on Stablecoins [pdf]

#418

Post by RustyConsul » Tue, Nov 02, 2021, 2:11 AM UTC

foxylad wrote: post #359

RustyConsul wrote: post #325

Earlier quoted context omitted.

Do you think we will forever be organized and segregated by governments? Do you ever think a human being can be a sovereign individual in his own right, without owing fealty, taxes and morality to a government in some future? The current financial system is not all software. When i pay in crypto, i give you my money. When i pay in the current financial system I am giving you every bit of information to rob me blind a…

> When i pay in the current financial system I am giving you every bit of information to rob me blind and hoping you don't take it all. I don't understand this. You're saying if I send you $0.01 via internet banking, you can somehow take everything in the account? It doesn't work this way in NZ, where it is common to put your bank account details on invoices so people can pay you directly.

When i pay for something online, I am giving away my credit card/ debit card/ ACH information away for them to subtract the total amount of my transaction (Or debit it).

I am trusting that outside entity in a number of different ways; To only take the required amount, b.) encrypt my information to prevent my information from leaking.

Credit card data is leaked regularly in mass uploads for pennys on the dollar. Credit card fraud is mediated by the credit companies themselves and is just an insurance issue to them.

Crypto, I sign the transaction to send it to you. You don't get anything but my public id, amount and block time.

Re: Report on Stablecoins [pdf]

#419

Post by anonporridge » Tue, Nov 02, 2021, 2:11 AM UTC

fancyfredbot wrote: post #137

mgamache wrote: post #94

Earlier quoted context omitted.

All traditional methods use gatekeepers that control the flow of money. If you can't do what you want with your money is it really yours? The Trustless nature of BTC involves a seeming waste of energy, but you get a lot in return (like ownership of your money).

Sure, but my point was not really about trust. My point is that speed is easier to achieve without Blockchain than with it. It's strange that the centralised solution is slower.

The removal of human trust is the source of the speed.

It's effectively the automation of slow, human intermediaries in the financial network that allows you to create a programmable money that runs 24/7 and is open and permissionless to boot.

And with this programmable network, we can see an explosion of innovation, because nobody needs to wait around for a person to approve anything you want to try.

Re: Report on Stablecoins [pdf]

#420

Post by paulgb » Tue, Nov 02, 2021, 2:12 AM UTC

kirse wrote: post #357

arcticbull wrote: post #290

Earlier quoted context omitted.

> Can Tether survive a net outflow? Probably not. They don't have the collateral. Luckily for Paolo & friends, their terms of service clearly state that they do not ever have to offer redemptions of USDT for dollars. Or even whatever IOUs and bits of string they may or may not have in reserve. Out of all the stable coins its the most likely to withstand a "run" because they do not have to pay you if you ask. In fact…

After that hedge fund issued a $1M reward on Tether backing I did some more investigation and the thing I realized is that 1) Tether is inherently backed by BS and 2) crafting any sort of Tether short is near impossible because everyone in the game - Tether, the exchanges, etc. - will all be against you if you're winning in the short. There's that scene in "The Big Short" where Mark Baum and crew know the subprime bo…

I’ve been shorting a few bitcoin-related public companies on the theory that in a run on Tether they will have to liquidate large bitcoin holdings and bring down the rest of the market. It’s not as direct, but I’m less worried about counterparty risk. I wrote up my thesis here: https://paulbutler.org/2021/betting-against-bitcoin/