OT: Ray, how's your Bitcoin investment going?

[verticaldoug]

And now back to our regular scheduled programming- Bitcoin.

Fundamentally, why I think crypto is a scam is the cognitive dissonance associated with the ecosystem.

The basic premise of the encryption and the blockchain, is you do not need to trust anyone, and no one actor can control the mining.

1. The rest of the ecosystem is basically running with no guardrails. It is opaque and unaudited. Any financial system is only as strong as it's weakest link, and the lack of audits is an incredibly weak link in the system. This is a system built entirely on 'trust us'/

Today, Mazur's announced they would no longer provide attestations for binance and a couple of other exchanges. In an auditor of a mainstream bank came out and said they would no longer provide audits for the bank, the bank would collapse that day. Even a delayed audit causes serious distress. The point that the crypto-ecosystem poo-poos this, is a tell that this is part of the inside scam.

Oh, and to be clear, the attestations are not even audits since they only discuss the 'asset' side of the balance sheet and not the liability side. Without knowing the liabilities, you can never know the health of an organizations.

2. The whole concept of crypto being decentralized. It may work for the mining, but there is definitely collusion happening across the network. This whole signal chatgroup with Binance, FTX and others is pretty damning.

The concept of 'the whales' controlling the price in the market is also pretty much 180 degrees opposed to decentralization.

3. Finally, the unknown amount of leverage in the system. The 'market' may be trying to assign a value to crypto, but if you do not know the amount of trading being conducted by fiat funding purchases, and stablecoin funding purchases, it is impossible to know how much leverage is in the market determining value. and back to 2, without knowing if the stablecoins are even backed, (FTT wasn't, and the old finance adage , where there is one cockroach'). You cannot have any idea about the amount of leverage in the system.

I 'd expect the next shoe to drop is versus Deltec and their corresponding banks providing dollars and other hard currencies.

[prototoast]

Originally Posted by verticaldoug

And now back to our regular scheduled programming- Bitcoin.

Fundamentally, why I think crypto is a scam is the cognitive dissonance associated with the ecosystem.

The basic premise of the encryption and the blockchain, is you do not need to trust anyone, and no one actor can control the mining.

I would go one step further than this. Even the premise of the "trustless" ecosystem is limited entirely to things that take place on the blockchain. I can "trustlessly" mine some bitcoin and then send those bitcoin to some other wallet but anyone who buys bitcoin with dollars/yen/euro/etc. needs to trust that the entity they're sending their money to will actually send them the bitcoin.

Anyone using bitcoin to pay for goods and services in the real world needs to "trust" both that the digital wallet they're sending the bitcoin to is correctly associated with the entity they want to buy the goods or services from, and that the entity will actually provide those goods and services.

Even in the world with no intermediaries, trustless only goes as far as exchanging one thing on the blockchain for something else on the blockchain. Any linkages to real world goods, services, or assets inherently requires some trust.

The weak point of trust in our current payments system isn't that the money will accurately be transferred from account to account. For merchants, the biggest challenge of trust is whether or not the person using the credit card is actually the authorized user of that credit card. Or once they receive the goods, they will not fraudulently return or contest the payment. For the customer, it's whether or not the merchants actually provide the goods or services that they're being paid for. Or for an investor, whether the company they invest in (e.g., a large crypto exchange) is a legitimate business, and not just an giant embezzlement operation with a ham sandwich in place of an accountant.

Cryptocurrencies make "trustless" the part of the financial system that was already the most trustworthy, while doing nothing for the area where trust is the biggest challenge, and making another part of the system (custodial intermediaries) significantly less trustworthy.

[verticaldoug]

Originally Posted by prototoast

I would go one step further than this. Even the premise of the "trustless" ecosystem is limited entirely to things that take place on the blockchain. I can "trustlessly" mine some bitcoin and then send those bitcoin to some other wallet but anyone who buys bitcoin with dollars/yen/euro/etc. needs to trust that the entity they're sending their money to will actually send them the bitcoin.

Anyone using bitcoin to pay for goods and services in the real world needs to "trust" both that the digital wallet they're sending the bitcoin to is correctly associated with the entity they want to buy the goods or services from, and that the entity will actually provide those goods and services.

Even in the world with no intermediaries, trustless only goes as far as exchanging one thing on the blockchain for something else on the blockchain. Any linkages to real world goods, services, or assets inherently requires some trust.

The weak point of trust in our current payments system isn't that the money will accurately be transferred from account to account. For merchants, the biggest challenge of trust is whether or not the person using the credit card is actually the authorized user of that credit card. Or once they receive the goods, they will not fraudulently return or contest the payment. For the customer, it's whether or not the merchants actually provide the goods or services that they're being paid for. Or for an investor, whether the company they invest in (e.g., a large crypto exchange) is a legitimate business, and not just an giant embezzlement operation with a ham sandwich in place of an accountant.

Cryptocurrencies make "trustless" the part of the financial system that was already the most trustworthy, while doing nothing for the area where trust is the biggest challenge, and making another part of the system (custodial intermediaries) significantly less trustworthy.

Yeah, what he said. ^^^^^^^^

[redir]

Anyone can audit the blockchain and companies like Certify do. Many of the DEX's are not audited and that is obviously a problem. There are a lot of crypto projects that do get audited though and if you see one that is Certik KYC gold then it's a pretty tight project.

[redir]

Originally Posted by rallizes

so this thread is like whatever you want to talk about now?

No.

[verticaldoug]

Originally Posted by redir

Anyone can audit the blockchain and companies like Certify do. Many of the DEX's are not audited and that is obviously a problem. There are a lot of crypto projects that do get audited though and if you see one that is Certik KYC gold then it's a pretty tight project.

We aren't worried about the blockchains. It's all the other stuff which is a problem.

If you think about it, where the rubber meets the road is I/O between fiat and crypto.

Also, from regular economics, if an currency is paying a very high rate for lending, then usually the pressures on the currency mean it is about to devalue. We see this all the time in sovereigns.
With the crazy high APRs in Cryptoland, the economics don't make sense.

[Davist]

exactly, FTX just proves the suspicions about this, no issue with blockchain it's the conversion out that is worrisome. This may be the perceived upside to regulation

[tomato coupe]

Originally Posted by Mr. Pink

The great hidden fact in history that has been obscured and severely distorted by our own Cold War propaganda and intense hate of the Soviet Union is that the Russians sacrificed so much more in WWII than the "west", and they were the army that essentially defeated Hitler and first entered Berlin, victorious.

No one has obscured the great losses of life suffered by the Soviet Union in WWII. And, no, the Soviet Union did not defeat Germany -- the combined Allied forces did.

[Mr. Pink]

Originally Posted by redir

Anyone can audit the blockchain and companies like Certify do. Many of the DEX's are not audited and that is obviously a problem. There are a lot of crypto projects that do get audited though and if you see one that is Certik KYC gold then it's a pretty tight project.

At this point, saying "the Blockchain" is like saying, ey, don't worry, we got you covered, it's cool, furgetaboutit.

[jimoots]

I’m not sure what’s so controversial.

Crypto brokerages should be regulated, they are holding other peoples capital. They’re acting as a bank, holding currency.

When banks are under-regulated, they do shady stuff. We only have to wind back 15 years and you’ve got an example of what goes wrong with the GFC.

[oldpotatoe]

Originally Posted by fellowpicker

I'm not so sure Ukraine was a banner of democracy under Zelinsky. Seems like he silenced all of his political opposition once in power.

Our own government seems to have given Putin every incentive to invade Ukraine with our crazy energy policies and general display of incompetence.

Well, I was going to dive deep into this but I won't. A little research into this little turd called Vlad, his KGB upbringing and how he 'suffered' during the collapse of the Soviet Union, 'might' be a good idea.

I 'guess' the poster is referring to NATO, not sure but if anybody needed a reason to see the value of NATO, putin's invasion of Ukraine is a pretty good reason.

BUT, blaming the US for putin's invasion is a common conspiracist talking point.

Again, I will make this comparison, I don't think the average American would be submissive to an invader either. If Canada invaded and occupied the state of Maine do you thing the rest of America would make concessions and just say, well okay you can have Maine as long as you don't take anything else and no one gets hurt. ?

I'm not so sure of that. To some, 'appeasement', so as to not mess with one's cushy situation, is more important that actually 'fighting' for a cause, for freedom.

I'm a child of the fifties and sixties, and my education was that the good old USA won that war. I went into near adulthood to learn that it wasn't so.

No, victory in WW2 was certainly not that simple. Defeating the Nazis in Russia was as much old man winter as the Soviet Army. And in no small pat, the industrial might of the US and how it aided The Soviet Union played a BIG part as well. The Soviet Union, by itself, would not have defeated Hitler..nor would have Great Britain. The US 'maybe' could have done it, but it would have taken longer. BUT, the industrial might of the US was undoubtedly responsible for the allied victory in WW2.

There is NO doubt that the US 'won' the war in the pacific..Almost single handedly defeated Japan.

BUT, back to bitcoin..which is something I am happy to say, I know zero about...

[Tony T]

Originally Posted by jimmy-moots

I’m not sure what’s so controversial.

Crypto brokerages should be regulated, they are holding other peoples capital. They’re acting as a bank, holding currency.

When banks are under-regulated, they do shady stuff. We only have to wind back 15 years and you’ve got an example of what goes wrong with the GFC.

Brokerages (i.e. Fidelity) can hold crypto.
There must be a reason why someone puts their crypto into unregulated exchanges.

[redir]

Originally Posted by Tony T

Brokerages (i.e. Fidelity) can hold crypto.
There must be a reason why someone puts their crypto into unregulated exchanges.

To hide it, yes.

[prototoast]

Originally Posted by jimmy-moots

I’m not sure what’s so controversial.

Crypto brokerages should be regulated, they are holding other peoples capital. They’re acting as a bank, holding currency.

When banks are under-regulated, they do shady stuff. We only have to wind back 15 years and you’ve got an example of what goes wrong with the GFC.

There are already general purpose laws against fraud. A pure bitcoin would fall neither under the purview of the SEC (it's not a security) nor the CFTC (it's not a derivative), even if some people act like it is. Now, bitcoin (and other cryptoassets) can be made into securities and derivatives, but inherently they are not. Perhaps the SEC and CFTC could be merged and given a mission to regulate "financial markets" more broadly, but there's always going to be some question of what is in or out of scope.

Generally, the U.S. government would get involved when things start to involve dollars. The U.S. government has a strong interest in keeping dollars safe and functional. This is why most of the talk of regulation has focused on stablecoins, because those make specific claims about dollar-values. But if I mine a bunch of dogecoin and deposit it in FTX, does it really make sense for U.S. regulators to make rules mandating the amount of FTT FTX must hold as collateral when it loans out my dogecoin?

What even are these things? Does it matter that FTT is now worthless? Does it matter that Luna is now worthless? I'm not sure the U.S. government has an interest in protecting the stability of these assets. Again, it's still a crime to say "I will take your dollars, convert them to bitcoin for you, and hold those bitcoin until you tell me to sell or trade them" and then steal all the bitcoin for yourself. That's illegal, and that's why SBF has already been arrested

Originally Posted by Tony T

Brokerages (i.e. Fidelity) can hold crypto.
There must be a reason why someone puts their crypto into unregulated exchanges.

(most, presumably) customers of FTX weren't using it for simple custody. They wanted yield, they wanted to trade derivatives, they wanted leverage, they wanted to do things that they couldn't do at more conventional brokerages.

[verticaldoug]

https://direct.mit.edu/asep/article/...tal-Currencies


February 20 2022
Stablecoins and Central Bank Digital Currencies: Policy and Regulatory Challenges