Even the most stable currencies of developed world can be influenced by a black swan. For example, see Swiss Franc or British Pound. If some cryptocurrency is adopted for mainstream use (big if), it won't have this risk, inherent to a centrally controlled currency.
Fiat is Effective: fiat for the crypto crowd [pdf]
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Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#22Earlier quoted context omitted.
> That is the fundamental problem that cryptocurrencies were created to solve; trustless money. What's the actual problem here? "Trustless money" is a philosophical objection. Cryptocurrency tends to move the trust locus to your software and hardware stack, along with a choice of crypto-to-real-money gateways, none of which seem particularly trustworthy.
Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. Any transaction between fiat and crypto requires a modicum of tru…
Yes, you've moved the trust to the user's computer.
Now the question becomes "which would you trust with a large chunk of money, a regulated financial institution or the information security of a personal computer", which for me would be the institution. For most people I know, it would definitely be the institution, because personal computer security is terrible.
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#23> unit of value Nope, it's a unit of human work. Value is a subjective measure.
What is a "unit of human work", and how much is it worth? Why are people paid differently for the same work?
>What is a "unit of human work"
Money, obviously?
> Why are people paid differently for the same work?
Do you want me to do a crash course on history of economics in a HN comment?
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#24Earlier quoted context omitted.
> That is the fundamental problem that cryptocurrencies were created to solve; trustless money. What's the actual problem here? "Trustless money" is a philosophical objection. Cryptocurrency tends to move the trust locus to your software and hardware stack, along with a choice of crypto-to-real-money gateways, none of which seem particularly trustworthy.
Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. Any transaction between fiat and crypto requires a modicum of tru…
> Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms.
This used to be true in the beginning of Bitcoin (when CPU mining on your desktop was OK) but it's not true anymore. The integrity of the ledger is guaranteed by the miners, and now the miners are not individuals but companies with ASIC farms. You have basically no guaranties that these companies aren't going to plot against you to tamper with the ledger. Of course at the moment it would be a terrible idea because it would destroy the confidence in Bitcoin (and that would destroy them) but it's not that different from what stops a central banker to print a huge amount of money.
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#25Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. Re effectiveness: Bitcoin itself is not really fast, scalable and transaction fees are not that small anymore, but something like Dash for example can be much more effective than Fiat even at a large scale. (I mean small la…
> Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. This sentence sounds like preaching. Do you have any evidence of this ? IMO this is really unlikely because you can't dynamically adapt the supply of money. See my other comment in this thread[1]. [1] https://news.ycombin…
"This sentence sounds like preaching."
Yes, you are right, I was wondering whether to edit that sentence to sound less confident. :) I have no evidence, and I am not an expert on this. I just think that if a currency is a utility currency, actually used by merchants and everyday users globally across a wide range of industries, countries and people, it has a huge market cap (it is the dominant currency of the world): I just don't see what could cause big fluctuations in its 'price'. (When you start to be the dominant currency 'price' becomes an interesting concept, because the 'relative to what?' aspect starts to be very significant.)
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#26Earlier quoted context omitted.
Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. Any transaction between fiat and crypto requires a modicum of tru…
> Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. This used to be true in the beginning of Bitcoin (when CPU mining on your desktop was OK) but it's not true anymore. The integrity of the ledger is guaranteed by the miners, and now the m…
Tampering with the ledger is sufficiently difficult that it's not a real risk in cryptocurrency. There are plenty of other real risks that are far more relevant.
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#27Even the most stable currencies of developed world can be influenced by a black swan. For example, see Swiss Franc or British Pound. If some cryptocurrency is adopted for mainstream use (big if), it won't have this risk, inherent to a centrally controlled currency.
This kind of exchange risk is nothing to do with central control, but to do with which economy the currency is associated with?
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#28Earlier quoted context omitted.
> Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. This sentence sounds like preaching. Do you have any evidence of this ? IMO this is really unlikely because you can't dynamically adapt the supply of money. See my other comment in this thread[1]. [1] https://news.ycombin…
"This sentence sounds like preaching." Yes, you are right, I was wondering whether to edit that sentence to sound less confident. :) I have no evidence, and I am not an expert on this. I just think that if a currency is a utility currency, actually used by merchants and everyday users globally across a wide range of industries, countries and people, it has a huge market cap (it is the dominant currency of the world):…
The expansion and contraction of the real economy causes a change in the demand for money, resulting in changes in the price level. This is usually summarised in the equation "MV=PQ"; see the economics literature for more detail on this.
(This is independent of what the money actually is, and was a big problem with price fluctuations under the gold standard)
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#29On 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 and it's sister company, Bitfinex have had a long history of extremely suspicious and opaque behavior.
The CEO has been quoted as sympathetic towards a known ponzi scheme after it vanished with everyone's deposits.
https://steemit.com/bitfinex/@gaitan/bitfinex-ceo-suspected-...
Raphaelle Nicole, the CEO of Bitfinex invested in the past years in a number of ponzi schemes and also supported Trendon Shavers, who was found guilty recently for "a classic ponzi scheme" and was sentenced to 18 months in prison. In 2012, Raphaelle tried his own ponzi scheme: “When I need more coins than I have to fill an order, I will ask everyone that previously “registered” with me to lend me some btc. After 7 days, I will return all of it, principal + 2% interests [per week]…. Now the questions you might have: What could you do to make so much profit? Let just say that I do “arbitrage”: I buy low and sell high.”
Here is the summary of Tether:
https://www.reddit.com/r/btc/comments/6xpddt/as_20m_more_tet...
https://medium.com/@bitfinexed/latest
https://twitter.com/Bitfinexed
https://www.reddit.com/r/btc/comments/7059hr/more_25_million...
Re: Fiat is Effective: fiat for the crypto crowd [pdf]
#30Summary of key points: • The case against fiat is an ethical case, much more than an effectiveness case. Crytpo advocates often misunderstand this. * The primary reason fiat succeeds is it offers price stability. But stability is often purchased at the expense of workers and the unemployed. * The management of fiat provides state actors with incredibly powerful, ultimately discretionary, tools which significantly aff…
I don't think this is a good summary of the article at all.
It's mostly about why fiat currency is so entrenched, and why a lot of the things that cryptocurrencies advocates cite as weaknesses are actually strengths.