Decentralized Woo Hoo • Hacker News Board

Re: Decentralized Woo Hoo

#291

Post by lottin » Wed, Nov 17, 2021, 10:33 PM UTC

didericis wrote: post #290

lottin wrote: post #254

Earlier quoted context omitted.

I agree. But the promises that bitcoin makes can only become reality if anarcho-capitalism itself becomes a reality. Otherwise, if the government continues to tax you, and banks continue to hold fractional reserves, what is the point of using something so anti-economical and impractical as bitcoin, when you can just use a more convenient currency?

If the supply of money is distributed it becomes more difficult to manipulate. Fractional reserves in a world backed by bitcoin can’t be bailed out if banks screw up. If people want to exchange whatever government backed medium might sit on top of it to actual bitcoin the banks wouldn’t be able to if they spread themselves too thin. It would create more accountability.

That's not what I meant. The majority of money in circulation is not issued by central banks, but instead is money that is created out of thin air by commercial banks that operate under fractional reserve banking. In other words, fractional reserve banking expands the money supply. This means that if bitcoin became money, the supply of bitcoins would not be fixed at all, contrary to what many of its advocates believe, because fractional reserve banking would create a colossal amount of new bitcoins, just like now it creates colossal amounts of new dollars. So the promise of a fixed supply of money cannot happen, unless a world-wide ban on fractional reserve banking occurs first, somehow.

Re: Decentralized Woo Hoo

#292

Post by groby_b » Wed, Nov 17, 2021, 11:52 PM UTC

jw1224 wrote: post #274

cslarson wrote: post #212

Earlier quoted context omitted.

Cryptocurrency (dumb term) just means token - it is a very broad concept. Tokens can have stable value pegged to a fiat, or represent share of a company, or a non-fungible item like a house, or a fungible share of a house, or claim on profits from a financial protocol, or memecoin, or a way to pay for transactions. Of course traditional valuation models can be assigned - it just depends on the characteristics of the…

Exactly this. I see so many people conflating NFTs with “expensive JPEGs”… No, an NFT is a cryptographically-secured representation of ownership of an economic asset . Yes… It also happens that there’s a ton of money being ploughed into weird, niche, expensive digital art. But this has now created an economic market in a space where previously one was not possible, by virtue of the fact you could never prove somethin…

Except most digital art lacks provenance in the first place, so you paid for a cryptographically-secured link to a bunch of bits somebody claims are original. (It turns out an https link on a domain you own does the same work)

The lack of provable provenance means that a good chunk of NFT "art" is actually stolen from the artists who do the work.

Bored Ape demonstrated that the theft of NFT art is easy, and the supposed ironclad ownership can easily be changed by the sites listing the art work - because they can just decide that those ironclad bits you hold aren't really yours. At which point you have a central authority arbitrating ownership, which is even worse than what the art world has right now.

It's certainly a lovely place for all sorts of cons, but as economic asset or cryptographic representation of ownership it is an utter and complete failure. You still can't prove something's original, unique, or yours. It just has a thin veneer of technobabble to hide that fact.

Re: Decentralized Woo Hoo

#293

Post by didericis » Thu, Nov 18, 2021, 3:12 PM UTC

lottin wrote: post #291

didericis wrote: post #290

Earlier quoted context omitted.

If the supply of money is distributed it becomes more difficult to manipulate. Fractional reserves in a world backed by bitcoin can’t be bailed out if banks screw up. If people want to exchange whatever government backed medium might sit on top of it to actual bitcoin the banks wouldn’t be able to if they spread themselves too thin. It would create more accountability.

That's not what I meant. The majority of money in circulation is not issued by central banks, but instead is money that is created out of thin air by commercial banks that operate under fractional reserve banking. In other words, fractional reserve banking expands the money supply. This means that if bitcoin became money, the supply of bitcoins would not be fixed at all, contrary to what many of its advocates believe…

Bitcoin and fractional reserve banking are compatible. And a fractional reserve system based on bitcoin would be different than what we have now. It’d be similar to what we had before nixon took us off the gold standard.

Banks depend on reserves and rules issued by the fed, and those reserves and rules are subject to arbitrary supply changes.

It is impossible for a non sanctioned bank to get reserve notes or have authorization to create notes banks lend out representative of that (dollars).

In a world where fractional reserve banking still exists, but is backed by bitcoin, you’d have lots of “bitcoin notes” being created, NOT bitcoin. No one would be creating new bitcoin apart from miners.

The faith in a “bitcoin note” would be tied to it’s ability to be exchanged for actual bitcoin in a wallet address.

The benefit (or downside, depending on your perspective) is that a central government would not have complete and total control over the supply of reserves that the banks get, and if banks lent poorly, they couldn’t get new emergency reserves from thin air. They’d have to get bitcoin from someone or go under.

There would be a fixed supply of the underlying reserve that people pass around iou’s for.

Re: Decentralized Woo Hoo

#294

Post by lottin » Thu, Nov 18, 2021, 4:04 PM UTC

didericis wrote: post #293

lottin wrote: post #291

Earlier quoted context omitted.

That's not what I meant. The majority of money in circulation is not issued by central banks, but instead is money that is created out of thin air by commercial banks that operate under fractional reserve banking. In other words, fractional reserve banking expands the money supply. This means that if bitcoin became money, the supply of bitcoins would not be fixed at all, contrary to what many of its advocates believe…

Bitcoin and fractional reserve banking are compatible. And a fractional reserve system based on bitcoin would be different than what we have now. It’d be similar to what we had before nixon took us off the gold standard. Banks depend on reserves and rules issued by the fed, and those reserves and rules are subject to arbitrary supply changes. It is impossible for a non sanctioned bank to get reserve notes or have aut…

> In a world where fractional reserve banking still exists, but is backed by bitcoin, you’d have lots of “bitcoin notes” being created, NOT bitcoin. No one would be creating new bitcoin apart from miners.

No, this is a misunderstanding of how fractional reserve banking works. Bank deposits are money, despite the fact that they might be only partially backed with reserves. Bank deposits are not IOUs. And the same is true of bitcoin deposits held by the public at crypto-exchanges. Theses bitcoin balances are bitcoins, despite the fact that they might be only partially backed with reserves. These are not a "bitcoin notes", but actual bitcoins. And therefore more bitcoins can be created by exchanges simply by lowering their reserve ratio.

Re: Decentralized Woo Hoo

#295

Post by didericis » Sun, Nov 21, 2021, 5:31 PM UTC

lottin wrote: post #294

didericis wrote: post #293

Earlier quoted context omitted.

Bitcoin and fractional reserve banking are compatible. And a fractional reserve system based on bitcoin would be different than what we have now. It’d be similar to what we had before nixon took us off the gold standard. Banks depend on reserves and rules issued by the fed, and those reserves and rules are subject to arbitrary supply changes. It is impossible for a non sanctioned bank to get reserve notes or have aut…

> In a world where fractional reserve banking still exists, but is backed by bitcoin, you’d have lots of “bitcoin notes” being created, NOT bitcoin. No one would be creating new bitcoin apart from miners. No, this is a misunderstanding of how fractional reserve banking works. Bank deposits are money, despite the fact that they might be only partially backed with reserves. Bank deposits are not IOUs. And the same is t…

> the same is true of bitcoin deposits held by the public at crypto-exchanges. These bitcoin balances are bitcoin

No, those balances are not bitcoin.

If it is not a balance assigned in the distributed ledger, it is not bitcoin.

I understand that the ious in the dollar system are the money. You are misunderstanding the difference in how the reserves would be generated in a world backed by bitcoin. Saying bitcoin is the same as an iou not on chain is an egregious misrepresentation.

Bitcoin in a world with “bitcoin notes” backed by fractional reserve banking would be very similar to gold when dollars used to be exchangeable for a set amount of gold. It is not the dollar in that comparison, it is the gold. But it has the added property that it is easily transportable and could also act as a direct form of payment.

It is not practical to buy a sandwich with the equivalent dollar amount of gold, even when there was a static exchange rate between the two when we were on the gold standard.

It would, however, be practical to ALSO directly exchange bitcoin, in addition to exchanging “bitcoin notes”. Direct exchange is the original vision of crypto, but a world where people primarily exchange “bitcoin notes” instead of bitcoin still benefits from the fixed supply of what the note can be exchanged for.