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Cryptocurrency in the 2020s

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Re: Cryptocurrency in the 2020s

#121

Post by hnews_account_1 »

nordsieck wrote: post #46
v64 wrote: post #31

Earlier quoted context omitted.

The complete functioning of the MakerDAO system is publicly documented here [1] and here [2]. Feel free to peruse the documentation and point out which parts seem unbelievable. The system is currently live and I hold a Dai Savings Account and can attest I've been paid according to the system's documentation. [1] https://community-development.makerdao.com/makerdao-mcd-faqs [2] https://docs.makerdao.com/

> Feel free to peruse the documentation and point out which parts seem unbelievable. The system is currently live and I hold a Dai Savings Account and can attest I've been paid according to the system's documentation. The problem with bad financial instruments is not that they don't work at all, but that they work fine for a period of time and then blow up. I think the point your parent was trying to make is that the…

> I think the point your parent was trying to make is that the long term interest rate of any security has an upper bound of the growth rate of the economy.

This is incorrect. Economists won't need it explained, but you're probably not one. Think about it like this - the growth of the economy is a weighted average of the growth of many different assets. By definition, a few of them will have higher rates of growth a few will have lower rates of growth.

What you should've said is that the higher rate ones are typically higher risk. So at the lowest possible risk, you probably cap out at the economic growth rate (also not a truism, but somewhat closer).

Re: Cryptocurrency in the 2020s

#122

Post by nradov »

v64 wrote: post #16
asdfasgasdgasdg wrote: post #7

Consider the source, right? How many people without a large vested interest in the propagation and uptake of cryptocurrency consider further growth likely? My guess is that governments will more and more realize that the main utility of blockchains is money laundering and speculation. As has been remarked over and over again, they don't solve any above board problem more efficiently or with lower expense than existin…

I honestly don't understand where the perception comes from that this technology is only useful for laundering and speculation. Certainly it is currently being used for those purposes. But to say there is no imaginable use outside of that seems unwarranted. I've commented in the past here that the use of public blockchains to automate the functions of clearinghouses and escrow services will be a huge cost reduction f…

Please explain exactly how blockchain technology can reduce costs for clearinghouses. Because they're already extremely efficient. There is very little transaction cost left to cut.

Re: Cryptocurrency in the 2020s

#123

Post by wpietri »

thenewnewguy wrote: post #45
wpietri wrote: post #27

Earlier quoted context omitted.

Exactly. It has been 10+ years since the Bitcoin paper. No cryptocurrency has significant consumer adoption. [1], [2] Except for light financial crime (ransomware, money laundering, gambling, theft, etc), it has no demonstrated advantage over alternative technologies. I don't think it will go away, any more than Ponzi and Make Money Fast schemes have gone away. But like you, I expect it will fade into the background…

> Except for light financial crime (ransomware, money laundering, gambling, theft, etc), it has no demonstrated advantage over alternative technologies. Slight nitpick: Cryptocurrencies have demonstrable advantages over existing solutions (pseudo-anonymity, decentralization, inflation-proof, etc) but consumers don't care about these advantages enough to make the switch.

If an advantage falls in the forest and nobody hears it, does it truly make a sound?

I'll grant those can be characteristics of cryptocurrencies, but they're only advantages to people who need those things. And they're only advantages on net if what goes with those characteristics ends up being net beneficial to somebody. E.g., the "inflation-proof" bit is a nice line, but most of the world had good reason for getting rid of fixed currencies after the collapse of Bretton Woods. And being "inflation-proof" implies a degree of value stability that Bitcoin most certainly does not have in practice.

I'll also grant that pseudo-anonymity and decentralization are useful to a very small set of people, but I think that's pretty well covered under the first part of my sentence. There are also some people who like those things for theoretical, quasi-religious reasons, but I don't think satisfying that counts as any sort of practical advantage.

Re: Cryptocurrency in the 2020s

#124

Post by vinniejames »

chii wrote: post #62
nordsieck wrote: post #55

Earlier quoted context omitted.

> Dilution / inflation is a feature not a bug. Money should be put to work doing productive stuff in the economy, not hoarded. There are few people who are interested in crypto-currency and have not heard this argument in many forms. Crypto-currency fans generally either don't care or don't think it's true.

whether crypto fans think or believe it to be false (or not care) is irrelevant. Crypto has only shown the characteristics of a speculative commodity (like gold), and the laws of economics are as universal as any other law - bitcoins cannot become a currency unless it is done by fiat (like how china is exploring doing so right now, but with their own version of a crypto-currency where they control the chain).

There are no laws of economics, only unprovable theories subject to irrational markets and human behavior

Re: Cryptocurrency in the 2020s

#125

Post by hnews_account_1 »

hendzen wrote: post #119
v64 wrote: post #82

Earlier quoted context omitted.

Those with loans in the system will have to pay a 6% interest rate. Since not all holders of Dai have savings accounts, this allows for the system to use the interest charged to loan holders to pay out the savings rate while accumulating a surplus. A 6% interest rate on USD would be a red flag, but Dai isn't USD. As far as I know, no banks allow you to use Ether as collateral for a USD loan, so the comparison isn't a…

Why would someone agree to take out a loan with a 6% interest rate when the fed funds rate (not incl spread for various retail products etc) is 400+ bps lower. Even with the spread you are going to be paying less than that for a regular margin loan for trading, which is what I assume these loans are used for.

Most people? Personal loan rates are closer to 7-8% on average I think. The fed funds rate is the very basic rate of economic activity. I mean, you obviously included the caveat about the spreads for retail products. What did you think those spreads looked like?

Re: Cryptocurrency in the 2020s

#126

Post by hnews_account_1 »

v64 wrote: post #82
TylerE wrote: post #80

Earlier quoted context omitted.

Paying 6%, or even 4%, on a savings account is a MASSIVE red flag to anyone with a bit of financial sense.

Those with loans in the system will have to pay a 6% interest rate. Since not all holders of Dai have savings accounts, this allows for the system to use the interest charged to loan holders to pay out the savings rate while accumulating a surplus. A 6% interest rate on USD would be a red flag, but Dai isn't USD. As far as I know, no banks allow you to use Ether as collateral for a USD loan, so the comparison isn't a…

> A 6% interest rate on USD would be a red flag, but Dai isn't USD.

Is this written in their documentation? Cos this is where the smart money gets out. The DAI competes against the USD. So all their transactions have to be in USD. No vendor for your products is accepting these magical tokens. No one in the economy except vanishingly small fractions accept digital tokens for trade.

Also, this is how the economy functions. All they've done is create a bank and sprinkled the fairy dust of "tokens" on it so the Fed stays away.

Re: Cryptocurrency in the 2020s

#127

Post by hendzen »

hnews_account_1 wrote: post #125
hendzen wrote: post #119

Earlier quoted context omitted.

Why would someone agree to take out a loan with a 6% interest rate when the fed funds rate (not incl spread for various retail products etc) is 400+ bps lower. Even with the spread you are going to be paying less than that for a regular margin loan for trading, which is what I assume these loans are used for.

Most people? Personal loan rates are closer to 7-8% on average I think. The fed funds rate is the very basic rate of economic activity. I mean, you obviously included the caveat about the spreads for retail products. What did you think those spreads looked like?

The effective cost of borrowing is going to be considerably higher than 6% if a regular person is trying to pay for their living expenses with the principal of a loan denominated in cryptocurrency. Think about exchange fees, taxes for any appreciation/depreciation upon sale, the cost of tracking/filing the taxes etc.

As I said it seems like most of the DAI borrowing is being done by people taking out margin loans to speculate on crypto. Perhaps this might make sense for the limited use case of people trading cryptocurrency (which is its most popular yet pointless application), but I don't see it being useful or economically viable for general purpose loans.

EDIT: upon further thought since the loan has to be secured with crypto assets, its not comparable to a personal loan. The equivalent regular finance product would be for a portfolio line of credit. Those have much lower interest rates, fed funds + 1-3% depending on the source.

Re: Cryptocurrency in the 2020s

#128

Post by vinniejames »

laurus wrote: post #87
Geee wrote: post #77

Earlier quoted context omitted.

> doesn't seem to solve any real problems If you don't see the current monetary systems as a problem, then I guess you don't really have a way to understand Bitcoin. I think it's one of the most important innovations of our civilization; a 'next step', if you will. Personally, it solves my problem of storing value of my work indefinitely.

Are you against private banks being able to create money when they make loans? If so, why?

Banks don't create money, they create debt.

Re: Cryptocurrency in the 2020s

#129

Post by wpietri »

etrabroline wrote: post #108
asdfasgasdgasdg wrote: post #75

Earlier quoted context omitted.

> but consumers don't care about these advantages enough to make the switch. And, more importantly, governments see those attributes as a downside, and would no doubt clamp down hard on crypto on-ramps in the event that they ever started getting significant uptake.

Your view of government is highly authoritarian. If Bitcoin becomes legitimately popular, no government that needs the support of the people to rule can ban it. Uber broke every taxi law on the books until popular support made those monopolistic laws unenforceable. The political actors working against Bitcoin own quite similar and quite unpopular state-backed monopolies of their own.

Bitcoin at this point will never become "legitimately popular". It's had about as long as Uber, and it has only grown less relevant to people's lives for the last few years. M-Pesa, which only operates in a few countries, has something like 100x the transaction volume.

Further, the downsides to the rise of ridesharing were very modest for governments. Increased congestion, regulatory uncertainty, and the eventual need for new laws and regulations. But governments have a very strong interest in preventing money laundering because a) tax evasion means less money for the government, and b) serious, sustained crime requires money laundering to survive.

So even if Bitcoin were to become more popular, governments would still crack down on it, and people would happily go back to using things like Visa, Paypal, Venmo, etc.

Re: Cryptocurrency in the 2020s

#130

Post by hnews_account_1 »

vinniejames wrote: post #120
induetimesir wrote: post #68

Earlier quoted context omitted.

"no demonstrated advantage" - said by someone who doesn't remember what it's like to wait for a large check to clear. or hasn't tried to fund their IRA via an ACH transfer but their bank won't allow it bcs rules.. or hasn't wanted to wire money (or receive a wire) for a fraction of the price (and hassle) of a wire transfer. I have sent hundreds of bitcoin transactions. And I admit that it's not perfect. There's lots…

A good number of these negative arguments appear to have a similar line of thinking. "I don't know much about Bitcoin, or finance in general, but I can adamantly tell you Bitcoin has no benefit, something something money laundering"

As a finance professional, I can tell you without shame that much of my industry doesn't understand finance either. The mask of online anonymity simply emboldens people with no knowledge to come forth and spout. I keep moving platforms trying to get away from that shit. Reddit is horrible in this regard, so I only use it for memes. HN has full credibility professionals in programming, but its finance base is really not upto snuff.
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