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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]

#171

Post by chaosite »

subroutine wrote: post #155
placeybordeaux wrote: post #146

Earlier quoted context omitted.

Yeah as a proponent of bitcoin and cryptocurrencies I think it's important to recognize how they first established value. The only people that really had a self interested reason to use cryptocurrencies are people that were poorly served by the current situation. Cryptocurrencies create a minimum coverage of ability to conduct financial operations, they are assets that a third party can not freeze, they are assets th…

Can you explain something to me- say I wanted to transfer the equvalent of $5 USD to someone using bitcoin. How do I transfer that amount when one coin is worth $5000? If it requires having coin on an exchange is that not a 3rd party? And would it be impossible for them to freeze coins in that wallet?

So this is Bitcoin 101 and you should really be reading up on it, but basically:

Bitcoins can be divided, the smallest fraction is called a "Satoshi" and is a millionith of a Bitcoin (So a cent is 500 Satoshis). The blockchain is a peer-to-peer, which while technically 3rd party, is not something that "you have coin on". The blockchain is basically a cryptographically signed ledger that says a certain public key has this much bitcoins. If you have the matching private key, you have the coins. Exchanges are mostly used to exchange between Bitcoin and some other currency, like US Dollars or another crypto currency.

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

#172

Post by marcosdumay »

jbrun wrote: post #170
DennisP wrote: post #141

Some of these arguments assume a single fixed-supply cryptocurrency, instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. He thought it would be stable without the need for active management. As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems th…

We had privately created money in Europe for centuries. It was a disaster.

It wasn't too different from the recent ICO stuff. Except that it was mainstream.

In other words, I completely agree.

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

#173

Post by DennisP »

dsacco wrote: post #162
DennisP wrote: post #141

Some of these arguments assume a single fixed-supply cryptocurrency, instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. He thought it would be stable without the need for active management. As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems th…

A few questions: > As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems that work by giving vendors the ability to withdraw as much as they want. It's a fundamentally insecure system, made sort of workable by layers of hacky mitigations. Do you think cryptocurrencies are vastly better because they don't allow transaction peers to with…

It's not just about the vendor. It's about anyone who gains access to the information which gives the vendor the ability to withdraw. This has not been a minor problem over the past decade or two.

The idea of making fiat payments work more like crypto is something I mentioned above. For now, we're a long way from it being ubiquitous.

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

#175

Post by DennisP »

simias wrote: post #163
DennisP wrote: post #141

Some of these arguments assume a single fixed-supply cryptocurrency, instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. He thought it would be stable without the need for active management. As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems th…

>instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. That's interesting, it's the first time I hear about this concept. I just barely skimmed a few articles about the concept but I'm not sure how this would solve the problems in TFA. In particular deflation: if I need to invest in a currency why would I even elect to use an infl…

Hayek points out that you wouldn't choose an inflationary currency. He relies on that to limit overall inflation. But you also don't have the deflationary problems of the gold standard, since it's possible to make more money at will if you need it.

Regarding payments: suppose we were starting from scratch, with two proposed systems: (1) user signs transactions that authorize transfers with specific recipients and amounts, or (2) user gives multiple parties enough information to withdraw unlimited amounts, hoping unauthorized parties don't get hold of it, and we make up for the inevitable thefts with statistical antifraud protection, manual intervention, and banks just eating the losses.

I can't imagine anyone choosing the second option.

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

#176

Post by marcosdumay »

annabellish wrote: post #122
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…

Bitcoin does not solve 2, 3, 4, or 5! You have a job, so you get wages. These wages are sent to a bitcoin address. Now your employer can track every transaction you make. There's no reason why this would not also have to be reported for tax reasons, so your government can also track every transaction you make. You buy something, now that company can have a decent chance of tracking your spending too! There are ways a…

It does not solve 1 either. It just changes the action from coercively taking some papers to coercively taking a password/token.

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

#177

Post by DennisP »

emiliobumachar wrote: post #160
DennisP wrote: post #141

Some of these arguments assume a single fixed-supply cryptocurrency, instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. He thought it would be stable without the need for active management. As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems th…

I think that feature could be summed up as: With criptocurrencies, if your software and opsec are good, you're a lot less vulnerable to identity theft and overcharges.

Yes, and with a hardware wallet, opsec is trivial. In my ideal world everyone has one in their leather wallet or on a keychain, and also uses it for secure 2FA on websites.

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

#178

Post by marcosdumay »

sp4ke wrote: post #77
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…

Patrick McKenzie is fortunate enough to not be born in a country that is currently suffering from hyper-inflation neither is he living under a dictatorship that is putting capital controls and deciding how he should use his hard earned money .... yet :) In other words, "the rest of us" of Patrick's folks do not represent the people for whom crypto is a necessity and not a luxury. So if money is already working for yo…

Do you know what we did here in Brazil during our hyperinflation? We traded in Dollars.

Do you know what people are doing in Venezuela right now? They are trading in Dollars, Peruvian Pesos and Brazilian Reals.

I bet Chinese people are also using Dollars to evade their capital controls.

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

#179

Post by notyourday »

DennisP wrote: post #177
emiliobumachar wrote: post #160

Earlier quoted context omitted.

I think that feature could be summed up as: With criptocurrencies, if your software and opsec are good, you're a lot less vulnerable to identity theft and overcharges.

Yes, and with a hardware wallet, opsec is trivial. In my ideal world everyone has one in their leather wallet or on a keychain, and also uses it for secure 2FA on websites.

This is laughable.

An investment of $700 (http://www.gunbroker.com/item/696279983) makes content of one's hardware wallet non-recoverable. Right of redress does not help as the transaction is not reversible.

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

#180

Post by marcosdumay »

quincunx wrote: post #101
jbrun wrote: post #85

Earlier quoted context omitted.

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.

While I understand the desire to have 2% inflation across the economy, wouldn't the individual parties prefer to hold their cash in a deflationary currency? Put differently and going fast forward; how can you have a mildly inflating currency (eg. EUR) when there's a deflationary currency (eg. BTC) as a viable alternative around? Would you propose we prohibit crypto currencies? (What would you propose?)

Well, inflationary currencies have the natural tendency of displacing deflationary ones out of the market. Not the other way around. It takes a lot of inflation to reverse that relationship.
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