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Fiat is Effective: fiat for the crypto crowd [pdf]

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Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#131

Post by Laforet »

thisisit wrote: post #10

On page 4/5 this presentation says: >this might not be true of a sufficiently credible Tether-like stablecoin whose value is pegged to a fiat currency, but there the crypto is piggybacking on the effectiveness of the fiat. I was intrigued by this Tether thing and ended up on the site: https://tether.to/ It says: > Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always…

Tether was allegedly created by Bitfinex to raise capital after the latter was hacked last year and had to find money to reimburse the customers.

In April, Bitfinex was cut off from the US banking system and to this day it had no means to send and receive USD. The supply of tether has expanded 12x under suspicious circumstances* to ensure Bitfinex will have some form of liquidity, without which they would have ended up like MtGox already.

*: There is zero evidence to suggest the tokens are backed by fiat. Nor have I come across anybody who came forward with evidence that they have managed to redeem tethers for fiat.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#132

Post by moduspol »

jbrun wrote: post #85
urza wrote: post #19

So the argument basically comes down to that crypto is too volatile and not usable as unit of account? 1. Crypto is still in its initial stage, where capital is flowing into it. Once it is there, it will be less volatile. You can already see this in Bitcoin[1], where relative volatility is dropping every year. 2. There are projects coming that will enable decentralized trustless peg of fiat currencies into blockchian…

No, that is not at all the argument. The argument is that you cannot have an economy run on a deflationary currency, which bitcoin is. An effective economy requires a bit of inflation and the ability to issue new money when necessary for socio-political reasons. Crypto currencies are a cult, though the underlying tech is interesting.

Even that raises interesting questions, though. That only works as long as people choose or are de-facto forced into using the state currency.

What if enough people would rather have their money increase in value than allow others in power to deflate it for "necessary socio-political reasons?"

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#133

Post by hn_throw_1234 »

wyager wrote: post #94
subroutine wrote: post #64

In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working". For those singing the praises of cryptocurrency I pose this question: Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What prob…

The USD is probably the most well-behaved fiat currency of the last century, so that’s basically the least interesting example, but: USD is inflationary. Ceteris paribus, a rational actor would generally prefer to hold something deflationary. The (epsilon-) no-arbitrage argument suggests that the frequently raised “but then no one will ever invest in things” objection doesn’t actually make any sense. USD is highly co…

> USD is inflationary. Ceteris paribus, a rational actor would generally prefer to hold something deflationary. The (epsilon-) no-arbitrage argument suggests that the frequently raised “but then no one will ever invest in things” objection doesn’t actually make any sense.

This is only true for savers and the vast majority of Americans, likely the world, are debtors (source: http://time.com/money/4709270/americans-die-in-debt/).

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#134

Post by moduspol »

soniman wrote: post #48

Bitcoin is now at the peak of the hype cycle. A lot of the 23 year old traders don't know anything but a bull market. When it inevitably goes through a bear market, like every other asset, when there is $50 billion of sellers higher ready to sell on every uptick, what brings bitcoin back? Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar. All the hodlers are going to turn into b…

Possibly, although we haven't really seen how Bitcoin performs during a 2008-like recession, either, and the market (sans Bitcoin) is already becoming due for a downturn.

I also think it's a little silly to categorize Bitcoin owners as 23 year old traders. It has a $95 billion market cap. I think there's a lot more traders than just 23 year olds.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#135

Post by Laforet »

jameskegel wrote: post #127
Laforet wrote: post #120

Earlier quoted context omitted.

Civil forfeiture is not limited to cash money. Your lambo car, mansion house or any other property could be seized just as easily under the current regime. In case of crypto, the storage media containing the private keys could be seized. Failing that, the government can always obtain an injunction to blacklist your addresses to exchanges, nodes and miners as long as those operate within their jurisdiction. You could…

These days, most of us use an exceedingly long 25 word mnemonic key; also, look into actually fungible currencies like Monero, where transactions are private by default, with the option to decrypt them for a regulatory body.

The mnemonic phrase is a representation of the private key, so the same limitation applies.

I really like XMR but converting your money to XMR would still leave a paper trail.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#136

Post by jezclaremurugan »

subroutine wrote: post #64

In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working". For those singing the praises of cryptocurrency I pose this question: Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What prob…

Its more of a global currency than a US specific one. Speaking from my experience - moving large amounts of money as a student or as someone who wants to send money back home across international borders when one starts earning becomes a pain when it comes to transaction charges, and international payment charges on credit cards etc. Cryptocurrencies can replace USD as a global currency when it gains enough users across the globe.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#137

Post by ttoinou »

sek wrote: post #61
ttoinou wrote: post #49

Earlier quoted context omitted.

Is deflation an awful situation ?

It is believed to be the primary reason for the great depression. https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression Deflation or Hyperinflation on the other side is nothing compared to the crises we have today. They are both a path for disaster, this is the primary fear of economists. Good explanation: https://www.quora.com/Why-is-2-the-ideal-inflation-rate

I hoped for a logic rationale, not an interpretation of an historic fact :(

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#138

Post by wbl »

irln wrote: post #100
subroutine wrote: post #70

Earlier quoted context omitted.

What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). Say we went all-in on crypto and 10-years-in for whatever reason the crypto supply generation rate we set a decade ago wasnt working (the US economy was crumbling). What then? This is an honest…

Not advocating for or against the fed or advocating for or against crypto currency but instead attempting to answer your three main questions. > What do you think the Fed was attempting to do? The Fed was attempting to save a system from complete collapse. > it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates) This is the cru…

Fed policy has really not done any of the terrible things you think it did.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#139

Post by moduspol »

nwah1 wrote: post #128
moduspol wrote: post #117

Earlier quoted context omitted.

Well, whether or not it's a problem depends on who you're asking, but: Remember in the first Captain America movie when his first role in the military was on a tour raising money for the war? That was actually a thing at that point in time. You had to actually convince people to invest or give money to fund a war. The USD was tied to gold in the real world and they couldn't just create more. Nowadays, we don't have t…

But you are asking a sovereign authority, with few restrictions in terms of monetary policy, to voluntarily restrict itself for no benefit.

The benefit is a more free society and less systemic risk.

It doesn't benefit the sovereign authority directly, but neither does freedom of speech, religion, etc.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#140

Post by programmarchy »

pja wrote: post #115
apo wrote: post #105

Earlier quoted context omitted.

Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working. Most knowledgeable cryto enthusiasts I know already know that fiat currencies work well enough for many people. Folks like McKenzie will see no value in Bitcoin and other cryptos because their money needs are already satisfied. Good for them, but their narrow perspective excludes many valid use cases…

So essentially what you’re saying is that the unique value proposition of BitCoin is that it allows you to make payments that break the law in your jurisdiction. I mean, I agree with you entirely: that is BitCoin’s unique value proposition. It’s just good to see it out on the table.

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