Block Fi seeks bankruptcy protection as 'shocking' FTX contagion spreads Crypto lending firm Block Fi declared bankruptcy on Monday, citing the collapse of cryptocurrency exchange FTX Trading Ltd. and affiliates two weeks ago. "This action follows the shocking events surrounding FTX and associated corporate entities ('FTX') and the difficult but necessary decision we made as a result to pause most …
Pensions and Crypto, what a frightening combination.
Also - Although i freely admit i don't have a thorough understanding of finance and crypto, i can't help thinking that someone somewhere has made a lot of money from this Block Fi balls up. But maybe i'm too cynical.
I have never understood what backed cryptocurrencies. With a national currency there was always the government which could raise taxation to cover their currency. There was, previously the Gold Standard (which is why the statement on BoE notes says "I promise to pay the bearer ...", originally it was in gold). Before that, currency was made of previous or semi precious metals (gold, silver, copper) or cowrie shells (only in Africa). The Yap islanders have enormous stone wheels used for money (they are too big to move, people just know to whom each one belongs)*. But with crypto-currencies, it all seems very ethereal to me.
As Ford Prefect's friend Roosta said: 'I only accept hard currency, if you can't scratch glass with it I won't take it.'**
*'Man on Earth' by John Reader, ISBN 0-00-219247-0
** HHGTTG, first series, I think.
The problems with fiat currencies are well known. However, they have, by and large, been better than the alternatives. Yes, countries default or renegotiate debts sometimes, some even often. But there is rarely a complete default and, even in basket case countries, commerce generally remains possible. By contrast, blockchain as a currency is almost pure speculation.
The only "value" they have is some perceived rarity caused by the amount of compute power required to generate them. I think there's also an enforced rarity in that some parts of the blockchain can only get created after a certain date? That value then has a real world value associated with it because that rarity is worth something.
It always felt like a con, although I do wish I'd gotten in on the scheme 10 years and cashed out last year... Hindsight is wonderful, isn't it?
I find it funny/sad that even here "they" (as in "crypto") gets all lumped together as one category. There's bitcoin, and then there's the crypto-ponzi complex that includes almost everything else. I highly recommend reading the bitcoin white paper if you haven't already. Of course, for those who prefer to form opinions based on what other people have said rather than their own critical analysis of the facts - don't bother.
https://bitcoin.org/bitcoin.pdf
Yawn. I've read the Bitcoin paper. I've read maybe a dozen papers on various aspects of cryptocurrency, DeFi, and the like, and probably twice as many summaries of papers. I've read opinion pieces. I've read code.
Bitcoin is not particularly impressive. All of the technology was well-known before "Satoshi" put the pieces together and tickled the tech-bros and libertarians. Economically Bitcoin is stupid; it's deflationary and has an abysmal transaction rate and consumes vast amounts of resources to no good end. Bitcoin's promises of anonymity and resistance to being subverted by network partitioning have been extensively diminished by both research and practice.
Frankly, Ethereum is better for most use cases, and other cryptocurrencies such as Monero for some niche use cases. And they're still pretty dumb, just the best of a bad lot.
"Economically Bitcoin is stupid; it's deflationary and has an abysmal transaction rate and consumes vast amounts of resources to no good end."
That's a lot of claims in a single sentence. Let's start with the claim that bitcoin is stupid because it's deflationary. The ONLY reason why we need inflation is that our current system is credit based, meaning money is printed out of nothing. This system not only requires inflation to function (thereby constantly eroding our purchasing power), but it also requires perpetual growth. Our planet cannot tolerate perpetual growth, therefore we need to move away from an inflationary, credit-based economy.
Next is the claim that bitcoin has an abysmal transaction rate. Two points here: (1) transaction rate only matters if you want to make bitcoin (or whatever other coin) the unit of everyday transactions. This is irrelevant for other uses such as store of value (similar to gold). (2) I guess you haven't heard of the lightning network, the 2nd layer protocol that allows instant transaction settlement.
Finally, there's the claim that bitcoin consumes vast amounts of resources to no good end. Bitcoin uses proof of work to secure the network. Securing the network will certainly be considered to be an excellent use of resources by users of the network. One could easily argue that this is a much more useful allocation of resources than the entire advertising industry for example (or the video game industry, or Christmas lights, or a hundred other things that are accepted without question in our society). By the way, claims about bitcoin's future energy consumption have been grossly exaggerated. For example, a 2017 article published by the notoriously anti-bitcoin World Economic Forum suggested that by 2020 bitcoin would consume the same amount of electricity as was used by the rest of the world. According to the White House, as of August 2022, all crypto assets (not just bitcoin) accounted for somewhere between 0.4% and 0.9% of global electricity usage, and that's likely a vast overestimation.
Bitcoin is not anonymous, and anyone who thought it was was misinformed. Monero as you say has limited utility for some niche use cases. Ethereum is a Ponzi like the rest of the $hitcoin industry, especially now that they have moved to proof of stake, which is essentially the same as our current system of "he who owns the gold makes the rules". The total supply of eth can be modified by the largest stakeholders whenever they want, just like the supply of dollars and other fiat currencies. This is not true of bitcoin. Anyone with a raspberry pi can run their own bitcoin node and verify transactions.
Finally, you have to look down the road at what is coming. Our present system is not what we will have a couple of decades from now. Governments and central banks around the world are working on their own digital currencies. It will be an Orwellian nightmare, and China is already well down that road. Central bank digital currencies will allow governments to control what your spend your money on and when. They will use this to control speech and behaviour. You said something politically incorrect? Too bad - no tax credit for you. You support the ruling party? Here's $1,000 extra in your account, but you have to spend it in the next month, and only on approved purchases. Bitcoin is a potential way to escape this nightmarish future.
"The only "value" they have is some perceived rarity"
Which, in the beginning, wasn't a bad thing. Fixed money supply, whether due to being backed by gold or some software enforced limit prevented central banks from diddling with the economy (in theory). But when the exchanges became banks and started making loans, they descended to the same level of mistrust that fiat currencies have. Lower even. Because although our Federal Reserve is only a quasi-governmental institution, they to have to explain themselves to Congress from time to time.
SBF answered to no-one but SBF.
If they simply acted as online wallets for depositors then there would be no worry about reserves. But once they decided they could be a bank and loan out those deposits to people but didn't worry about creditworthiness because "crypto will always go up" they (and their customers) were screwed.
Problem is you don't get those multi billion dollar valuations that allow you to buy mansions in the Bahamas if you just act as secure online storage and pay for it via taking a small cut of transfers in/out and advertising new cryptocoins / NFTs / etc. at your customers. That level of valuation will only buy you a McMansion in the suburbs, which was obviously not good enough for the cryptobros.
Alarm bells should have started going off when a lot of them started offering crazy interest rates like 20% on deposits right around the time crypto peaked. When you are having to bribe people to increase your deposits something is obviously wrong in your accounts and you are trying to cover it up by keeping the flow of new money coming in to paper over your losses.
Which, as it turns out, will tank just about any financial instrument or entity when those loan contracts turn out to be worthless when the debtors can't or won't pay.
A big part of this is people trying to use "assets" like cryptocoins that had no native concept of credit and debt brokering baked in. These losses came on the back of mystery meat tokens and opaque holdings of things like bitcoin where the blockchain couldn't adequately reflect the loans or ownership.
So just like the S&L crisis and Lehman Brothers they were able to block visibility of the rising loan fraud until after the bubble burst.
The majority of these cryptocurrency "loan" operations never passed a basic sniff test. Like you point out there was never a big enough market of legitimate and low to moderate risk loans in the "Web 3" space. There were and are plenty of fast and loose speculators looking for a new way to trade on margin using someone else's dime.
The employees of loan companies get paid on making loans, not making good loans. The results speak for themselves.
There were and are plenty of fast and loose speculators looking for a new way to trade on margin using someone else's dime.
And plenty of people and bots making outright fraudulent or exploitative moves, such as exploiting contract bugs and using flash loans to compromise holdings. And DeFi organizers committing rug pulls. And so on.
It's wildcat banking without even the pretense of state supervision.
"I have never understood what backed cryptocurrencies."
Exactly the same as when gold or shells were used as the currency: nothing apart from the idea that this stuff is rare and people will always want it. Both ideas don't always work. When gold was used as a currency, weird things always happened where people found gold somewhere because it had become a lot less rare there until people managed to get it transported thoroughly around the national or global economy. A worse thing happened with silver which, by being stolen from South America by the Spanish managed to destroy several Asian and European economies (it's funny how global economic collapse was possible in the days of year-long ship journeys and could affect countries isolated from global trade. Cryptocurrencies have often been designed so that there's a finite amount of them and they can't be created easily or at all, thus limiting intentional inflation in the supply, but their value depends entirely on who wants them and they are subject to all the same problems that caused the end of the gold standard already.
"With a national currency there was always the government which could raise taxation to cover their currency."
Yes, but they generally don't do that. By the time there's a bad enough problem that spending down reserves of gold or securities isn't enough, the citizenry is unlikely to accept the level of taxation needed to resurrect that currency and have also probably started buying stable currencies with their savings. Current national currencies are mostly backed by their host governments' prudence in monetary policy, which means some countries have much lower trust scores than do others.
Exactly the same as when gold or shells were used as the currency: nothing apart from the idea that this stuff is rare and people will always want it
Something I learned from my favorite museum (BoE) was the value of sticks. So maybe I wanted to transfer a pile of gold, but didn't want to transport it. I'd visit my trusted banker, and give them the gold. They'd hack some notches in a hazel(?) stick/rod, split it down the middle and give me a split bit of wood. Then I could present that at the other end, and if the two halves lined up, they'd exchange my half-stick for my gold, minus a transaction fee.
I thought this was neat and an early form of crypto/key exchange. Convert something valuable into something mildly secure and more portable, and as long as there's trust, there's utility. Problem with crypto is there's no real security, or trust.
"Problem with crypto is there's no real security, or trust."
That's true for crypto writ large, but not for bitcoin. Bitcoin requires no trust, though this is only true if you self-custody (e.g. using a hardware wallet). If you leave it on an exchange, you're trusting the exchange.
FTX is a great example. People thought they had bitcoin and/or various $hitcoins in their account, when in fact FTX were using depositor funds to gamble with. Classic Ponzi scheme.
That's true for crypto writ large, but not for bitcoin. Bitcoin requires no trust, though this is only true if you self-custody (e.g. using a hardware wallet). If you leave it on an exchange, you're trusting the exchange.
I disagree, but that's just a general issue with banking, finance or currency in general. I can wander into a shop and buy stuff with bits of paper. Or just the transfer of bits. I'm happy, the shopkeeper is happy, and if we're not, there's a bunch of legislation to handle disputes. I could use gold, if the shopkeeper accepts this, and there's no tax considerations. But gold is dense, could be stolen etc.
Or I once mined bitcoin. Yey. I have crypto. Now what? We could strike a bargain where I give you 1 coin, and you give me stuff. But that requires trust, and a way to make the trade, ie transfer my bits from my wallet to yours. There's still risks, ie you don't give me stuff, or you steal my wallet. Then there's how to resolve that dispute when there's less regulation and legislation, although contract law probably covers most of that. But because of that challenge, the 'market' solved it in the usual way by mostly copying the banking system. I deposit my bits in their wallet, they facilitate the money transfer for a fee. Except when we then discover the crypto bank has just lost or stolen the bits, or they weren't actually worth anything in the first place.
Basically any transaction requires an element of trust between the parties, which is why we have lawyers, bankers, law enforcement and a massive service industry that supports that trust model. Much of which didn't really seem to exist (and still doesn't) in the crypto world that just made stuff up as it went along.
"I can wander into a shop and buy stuff with bits of paper. Or just the transfer of bits. I'm happy, the shopkeeper is happy, and if we're not, there's a bunch of legislation to handle disputes."
How is that different than paying with BTC over the lightning network?
"We could strike a bargain where I give you 1 coin, and you give me stuff. But that requires trust, and a way to make the trade, ie transfer my bits from my wallet to yours."
How is this different from paying with cash? With BTC, I scan a QR code, confirm the amount I'm sending, and sign the transaction to approve it. The only trust requirement is that you aren't overcharging me for whatever it is I'm paying for, but that's the same regardless of payment method.
"There's still risks, ie you don't give me stuff, or you steal my wallet."
Of course, but those are the same as the risk of using cash, except if you steal my wallet full of cash you can spend it and I can't recover it. If you steal my bitcoin wallet you can't spend it and I can recover the bitcoin using my seed phrase. Also, anyone who operates that way won't be in business long.
"Then there's how to resolve that dispute when there's less regulation and legislation, although contract law probably covers most of that."
Exactly the same as paying with cash, except at least with bitcoin there's a transparent ledger proving the payment was made.
"Except when we then discover the crypto bank has just lost or stolen the bits, or they weren't actually worth anything in the first place."
What "crypto bank" are you talking about? If you self-custody bitcoin there is no central entity involved who can lose or steal "the bits".
Basically you've just demonstrated that you have no clue how bitcoin self custody works.
How is that different than paying with BTC over the lightning network?
How much trust is there in the lightning network? But you're right. I mined some (posibly a lot) when bitcoin was first announced, and most of these problems hadn't been solved. The only wallets that existed were software cold wallets, which required trust that those were cryptographically secure. It's much the same as the elaborate procedures some entities take to cold-store root certs for stuff like DNS though. So I haven't really bothered keeping up with the tech, but I don't understand this example-
https://en.wikipedia.org/wiki/Lightning_Network
Bob wants to pay Alice 1 BTC but Bob and Alice don't have a channel open with each other.
Bob does have a channel open with Carol, and Alice also has a channel open with Carol
To route the payment, Bob sends 1 BTC to Carol, and Carol then sends 1 BTC to Alice
Which is a 'web of trust'. What stops Carol just taking the coin? There also seems the potential for exploits similar to Tor and onion routing in general, ie if I can create a 'trusted' entry/exit node, I have an ability to monitor or manipulate traffic passing through it.
How is this different from paying with cash? With BTC, I scan a QR code, confirm the amount I'm sending, and sign the transaction to approve it. The only trust requirement is that you aren't overcharging me for whatever it is I'm paying for, but that's the same regardless of payment method.
Maybe not much, but seems to have the same risks as regular EFTs. What if I spoof the QR code, so you're sending the coin to me? Much the same as with compromised payment terminals and card payments. At least with physical cash, I can see the shopkeeper taking the notes and placing them in the till, and could have a receipt as confirmation, or VAT.
Exactly the same as paying with cash, except at least with bitcoin there's a transparent ledger proving the payment was made.
But one of the early 'benefits' of crypto was it supposedly allowed anonymity. If there's a ledger, or a blockchain transaction trail, there's security, auditability and non-repudiation, but no anonymity. Plus the obvious problems when the ledger can't be trusted and is hopelessly inaccurate, ie as was just demonstrated by FTX and it's alledged back-door/off-ledger fund transfers.
What "crypto bank" are you talking about? If you self-custody bitcoin there is no central entity involved who can lose or steal "the bits".
Any of the ones that have imploded, as FTX just has. It sucked in crypto, and they vanished. Sure, they weren't a 'central bank' in the traditional sense, but significantly large to have done substantial financial harm to it's depositors and investors.
I wrote:
"What 'crypto bank' are you talking about? If you self-custody bitcoin there is no central entity involved who can lose or steal 'the bits'."
Your response:
"Any of the ones that have imploded, as FTX just has. It sucked in crypto, and they vanished. Sure, they weren't a 'central bank' in the traditional sense, but significantly large to have done substantial financial harm to it's depositors and investors."
You completely ignored the self-custody part. Of course if you let an exchange hold the keys to your bitcoin you're risking losing access to your funds. Not your keys, not your coins. Once again, if you self-custody bitcoin there is no central entity/exchange involved. It's a peer to peer transfer.
As for your question about what's to stop Carol from taking the coin that Bob sent to Alice, I suggest reading Mastering the Lightning Network by Andreas Antonopoulos for a primer on how lightning works. Lightning network capacity was at a recent peak over US $200 million. I'm sure people have been working on how to intercept lightning payments, but they haven't been successful yet. Of course, lightning is meant to be used for relatively smaller transaction compared with transactions on the bitcoin main chain because yes, it is structurally less secure than the main chain (just as carrying cash is less secure than keeping your money in a bank account). If security is paramount (e.g. a very large transaction), the transaction can be made on the main chain, though you then lose the instantaneous settlement of lightning transactions and you typically pay higher fees.
"But one of the early 'benefits' of crypto was it supposedly allowed anonymity. If there's a ledger, or a blockchain transaction trail, there's security, auditability and non-repudiation, but no anonymity."
Bitcoin was never supposed to allow complete anonymity. This is specifically addressed in the original white paper. If anonymity is what you're looking for, Monero was designed with privacy in mind. I wouldn't use Monero for holding any significant amount of funds over time though.
"Plus the obvious problems when the ledger can't be trusted and is hopelessly inaccurate, ie as was just demonstrated by FTX and it's alledged back-door/off-ledger fund transfers."
The bitcoin ledger can be trusted. FTX did not demonstrate any issue with the bitcoin ledger. The problem with FTX is that it was a fraud/Ponzi, not that the bitcoin ledger showed any inaccurate information. Fraud/Ponzi schemes are not crypto specific, though certainly the unregulated crypto environment (fueled by loose monetary policy and the magical money tree) is rife with such scams. Bitcoiners have been calling out these fraudsters for years. They have been begging people to pull their funds off of exchanges since long ago, but their voices have been drowned out by the fast money $hitcoin scammers. Meanwhile the mainstream media was fawning over Scam Bankrupt Fraud, making him out to be a combination of JP Morgan and Mother Teresa. The fact that he's was given a public platform to speak by the NYT 2 days ago is a complete travesty. He should be locked up in jail and not let out until all the people who lost their savings thanks to him have died of old age.
These days the new silver or gold is oil
Having oil has seriously screwed up the economies of virtually every country which has discovered it, usually ending up worse off than they were originally - the economy becomes utterly dependent on selling it and every other industry atrophies because oil income has made the currency ride high and local products become too expensive to export, whilst imports become relatively cheap
Even the UK has suffered this. The disasterous social/economic policies of the last 45 years have been underpinned by oil/gas income which masked the unsustainability of government actions. Now the oil is drying up but the habits persist
"I have never understood what backed cryptocurrencies"
Probably the same thinking that assigns value to diamonds -- of which there is no real shortage, the limited supply being artificially controlled by a cartel. The moment you buy a diamond retail it's worth half what you paid, but "diamonds are [still] a girl's best friend" for some unaccountable reason (unless it's the effectiveness of hype in fooling all the people all the time).
You are right, but diamonds are actually worse, as are any gemstone which can be synthesised. Artificial diamonds can be bought for a few pounds, my (over-the-top hideously expensive 'luxury') wristwatch has a sapphire crystal 'glass', and artificial rubies have been made for years. The 'natural' gems are of higher value because of being natural. There is a high value speaker brand where the tweeter cone is made from artificial diamond (I met one of the people who makes them).
At least with gold you have something you can hit someone over the head with, I suppose. And gold has value because it does not tarnish and so can be kept clean enough to eat off, and is not poisonous. Silver can be polished for eating, but pewter can be attacked by acidic foods such as raw tomatoes which liberate the lead.
OK, end of rambling end of day post.
"At least with gold you have something you can hit someone over the head with, I suppose."
If you're in the blunt instrument weapon business, I advise you to think again. Gold's density means that a thing made of it large enough to be a useful club will be incredibly expensive, but even if gold becomes cheap or you have unlimited funds, actually wielding it as a weapon will require significant upper body strength to lift the massive weapon. It's also soft enough that striking something with it may cause damage that needs to be repaired or it becomes even more unwieldy.
artificial rubies have been made for years
Decades. Hazen mentions interviewing someone making them at home in his 1993 The New Alchemists (primarily about then invention of artificial-diamond manufacture – not to be confused with other books of the same title). Ruby and sapphire aren't particularly difficult to make. For that matter, diamond isn't really difficult, but the engineering of the apparatus is a bit more demanding.
The original alchemists backed the wrong horse when they tried to transmute metals. No one had the lab equipment for that. It's really tough to keep a supernova in a crucible.
> artificial rubies have been made for years
And very useful they are, if you want to make a laser at home (make, as in polishing the ends etc, not just wiring up a laser diode).
I'd give a URL reference but I got the book from the library *way* before URLs were a gleam in Tim's eye.
> As Ford Prefect's friend Roosta said: 'I only accept hard currency, if you can't scratch glass with it I won't take it.'**
> ** HHGTTG, first series, I think.
Have an upvote, any friend of Rooster is a friend on mine.
Rooster turns up in the Christmas episode at the offices of the HHGTTG when Zaphod is left in the lurch by a lift.
See I warmed you I was a pedant but it was required reading at school, all boys (or at least all the ones that counted) were required to know the entire script of HHGTTG and Derek & Clive Live off by heart.
& Roosta leaves in the next episode (Where the comment about debit cards comes into play).
ROOSTA: “Wormhole disco. Loudest noise on Betelgeuse. Free body debit for one night only.” What’s a body debit?
ZAPHOD: Oh you have been roughing it for too long Roosta. You missed out on progressive consumerism. Look, an old style credit card, you press the panel on the card, it makes an instant debit on your bank account and an instant credit to the shop’s account, right?
ROOSTA: I prefer hard cash. If you can’t scratch a window with it I don’t accept it.
ZAPHOD: Yeah, yeah, yeah, but get this: body debit means you press this card and it debits all your molecules from where you’re standing and your body goes into credit somewhere else!
ROOSTA: In the disco!
ZAPHOD: Right!
ROOSTA: Escape!
ZAPHOD: Yeah!
ROOSTA: It’d better be a good disco.
ZAPHOD: Listen, if it was a good disco they wouldn’t have to give away body debit cards. Right Roosta, we are going to grove our way out of here!
"I have never understood what backed cryptocurrencies."
Nothing for the most part, with the exception of bitcoin. Bitcoin is backed by proof of work and a cap of 21 million, unlike national currencies that are now credit-based and can be created out of nothing with a few keystrokes.
"With a national currency there was always the government which could raise taxation to cover their currency."
Raise taxes too much and you kill GDP, especially in the modern world where competition is global. Modern fiat currencies are the largest Ponzi scheme going, and when it all implodes, people will run to hard assets that can't be debased.
"But with crypto-currencies, it all seems very ethereal to me."
Rather than relying on how things "seem" based on feelings, why not read the actual bitcoin whitepaper and learn about it directly from the original source: https://bitcoin.org/bitcoin.pdf
You act like Bitcoin is special. The only special thing about it is that it basically came first. It's not the only proof of work cryptocurrency, and there are other methods of securing a cryptocurrency that are valid. It's not the only limited-supply one either. It also has, in comparison to more modern ones, various core defects that make it even more unsuitable than others at being a practical medium of exchange for the economy as it exists in the real world or obtaining the goals in the paper you've linked. There are things that claim to be cryptocurrencies that are not, ones that are and are clearly worse, and ones that are and are better in various ways.
"You act like Bitcoin is special."
That's because it is.
"It's not the only proof of work cryptocurrency..."
True, but it's the only one with a network it's size (which makes it far more useful and secure), and most of the others started with a pump and dump ICO to make the founders rich. Some exceptions are Monero (currently worth 0.0083 BTC) and Litecoin (0.0046 BTC). There's also Dogecoin (created as a joke, 0.0000062 BTC) and Bitcoin Cash (0.0066 BTC). Bitcoin Cash was a hard fork of bitcoin with larger block sizes. This was desired by scam-pions of industry and miners back in 2017, but was rejected by node operators because it would have caused centralization of the network. The market has figured out what you haven't - that none of these other coins have any significant value compared with bitcoin.
"... and there are other methods of securing a cryptocurrency that are valid."
Such as what? Proof of stake? That's just what we have now: "he who has the gold makes the rules".
With cryptocurrency you can choose 2 of the following 3 things to optimize for:
1) security
2) scalability/transaction speed
3) decentralization
Bitcoin optimized for 1 and 3 (security and decentralization). Others that optimize for scalability/transaction speed must make compromises in security and/or decentralization.
"It also has, in comparison to more modern ones, various core defects that make it even more unsuitable than others at being a practical medium of exchange for the economy as it exists in the real world..."
Care to elaborate on the supposed core defects? Maybe you'd like to increase the block size to increase transaction throughput (sacrifice decentralization)? Perhaps you'd like to move to proof of stake (sacrifice decentralization and security)?
"It's not the only limited-supply one either."
There are a number of crypto $hitcoins that claim to have limited supply, including Binance coin, Cardano, Ripple, etc. But by and large they are only limited in supply for as long as Binance and the other issuers/controllers want it to be. You have to TRUST them not to change the supply in the future. With bitcoin, there is no need to trust anyone. As long as at least 51% of the network wants they supply to stay at a hard cap of 21 million, that's how it's going to stay. Even if someone cloned bitcoin and called it something else (let's call it clonecoin), the cloned network could easily be subject to a 51% attack because it would be quite small. The bitcoin network is so large now that the probability of a 51% attack is extremely small. If it had been possible to do, surely someone would have done it when the price was ~US $70K. From a practical, trustless, verifiable, immutable point of view, bitcoin stands alone.
I'm not saying that bitcoin becoming a significant global reserve asset is a foregone conclusion - far from it. Governments and central banks do not want to give up the level of control they currently have. On the contrary - they want more. Most will fight bitcoin tooth and nail. They can outlaw exchanging bitcoin for fiat currency. They can criminalize ownership of bitcoin, much like the US government did with gold in the past. And they will certainly try to ban cash and shove their own central bank digital currencies down our throats. We should all be hoping that bitcoin becomes a viable alternative that that dystopian future.
Fit the Eighth (Second series) actually.
Where you perchance thinking of this from Fit the Fifth (First series).
Six: ‘Monetary Units’. None. In fact, there are three freely convertible currencies in the universe, but the Altairian Dollar has recently collapsed, the Flainian Pobble Bead is only exchangeable for other Flainian Pobble Beads, and the Triganic Pu doesn’t really count as money. It’s exchange rate of six Ningis to one Pu is simple, but since a Ningi is a triangular rubber coin six-thousand, eight-hundred miles long each side, no one has ever collected enough to own one Pu.
Niginis are not negotiable currency because the Galactic Banks refuse to deal in fiddling small change.
From this Basic premise it’s very simple to prove that the Galactic Banks are also the products of a deranged imagination.
You can't eat gold
ANY currency is only as good as long as people agree it's good and accept it for trading
When 4th century Rome took action to deal with centuries of coin debasement, the unintended effect was that people looked at the new coins and started refusing to accept ANY Roman currency - despite the new coins having more silver in them than the old ones.
The Empire was over in less than 18 months after that
"You can't eat gold"
Actually, gold is one of the few heavy metals that you can eat. It would be a rather expensive meal, though, and not very nutritious. On the bright side, recovery could be near 100% ... and you wouldn't even have to annoy the neighbors with a hammer mill.
It's a tad interesting that Binance helped spook the market around FTX exactly when they did, and then came in with an offer to buy them on the cheap. Coincidental, perhaps? Methinks she doth protest too much...
Still I guess even the Shark will spit out meat that is too rotten. I guess Binance took one look at FTX's finance realised that it was a house of cards, built on a sandbar, with a tsunami bearing down on it, and decided to get the hell away from it...
Yup, but it's not really illegal where they are at, so you get to watch some great market theory in action. The interesting parts for me are where the dominant player parts start to break down.
As people begin to see that Binance is exerting to much control on the market, it may crash the markets for Bitcoin and some of the OG altcoins. When Binance controls enough of the market to be the sole market maker, any blip can start a stampede for the exits, and the more people worry about if they will be able to make it out the exit door before a crash hits, the more likely it is.
That will shift savvy players to look for new projects with less exposure to influence by a single market maker, no 50% attack problem, etc. Interestingly, because of their holdings, Binance is a thing people would be pulling back from. So it's possible that Binance's may be sowing the seeds of it's own downfall, if investors take their ball(capitol) and go home because the game is rigged. Or because the Chineese goverment cracked down, or ours did. There are more ways for it to crash at this point than paths for it to succeed. It's an inverted top, slowly spinning down, and starting to visibly wobble.
> From inception, Block Fi has worked to positively shape the cryptocurrency industry and advance the sector
Cryptocurrency is supposed to be all about rugged individuals getting away from Gubmint and sticking it to The Man, now it is a "sector" in the Military Industrial Complex!
> 150 cryptocurrency firms have applied for bailout funds from Binance, presently the largest cryptocurrency exchange
150 companies whose holdings are all in unicorns[1] "applying for bailouts", doesn't this really just mean they are buggered as well and are wildly hoping to pass on their imaginary friends to join in Binance's stable at whatever low, low price Binance decides to give them? Which in turn indicates that someone in Binance really believes that they'll be able to use the unicorns to corner the leprechaun market; pure madness as that is far too volatile[2] to ever be useful on the exchanges.
[1] other objects of fantasy are available
[2] as the gold can only be found at the end of rainbows and global warming is messing up the rain patterns.
It seems to me that this ginormous Ponzi scheme that is the crypto market shudders violently as soon as something contrary to utopia happens.
Crypto is based on fairy dust and all those exchanges are super professional and reliable, right up until they aren't. Then, like dominos toppling over, other super-professional exchanges suddenly have massive difficulties.
Funny, when Lehman Brothers bit the bullet I don't remember hearing about how Goldman Sachs suddenly froze customer access to their bank accounts.
Ah, the magical world of crypto, where everything is well until suddenly you've lost everything.
But by all means, keep sticking it to The Man !
"Funny, when Lehman Brothers bit the bullet I don't remember hearing about how Goldman Sachs suddenly froze customer access to their bank accounts."
Part of the reason for that is that central banks will lend out money for banks to handle runs like that, but obviously won't (and shouldn't) for cryptocurrency exchanges. There have been banks that had runs of this nature which would have collapsed but for that assistance and a time when that was a lot more common. Cryptocurrency has a lot of risks, but just because they've reinvented bank run 3.0 doesn't mean all the participants are as unethical as FTX was.
Indeed. The run on these exchanges is because people have started to notice they are that unethical.
The fundamental design of most crypto tokens means the entire loan business model can only be a Ponzi scheme.
Crypto doesn't handle the underlying concept of loans - namely that making a loan creates money, repaying it destroys the money. Instead these businesses have been running as a straight up Ponzi.
Part of the reason for that is that central banks will lend out money for banks to handle runs like that
There are two reasons for this. One, the banks are regulated. They have to have capital reserves and cash reserves of certain sizes in order to be allowed to trade.
This also means they have actual, tangible assets which can be pledged as collaterol against massive loans from the Central Bank. Well-rated corporate bonds or government ones, or debt secured against property. If you can't produce collaterol, then you've moved from being illiquid (not enough cash on hand to meet your outgoings and so worth saving) to insolvent (bankrupt). Central Banks aren't supposed to bail out the insolvent, but might forcibly nationalise them in order to save some of the pieces - and to prevent chaos.
Crypto doesn't really have any secure assets. But also doesn't have Central Banks. Nor does it have regulation to ensure that exchanges only trade with their own resources and don't trade with client funds. Or that organisations keep capital reserves, so they can survive taking large losses. Most British banks have to maintain between 10-14% of their loan book in assets owned by the bank, so they can survive an extremely deep recession with no need to raise any more capital to cover losses. But they are required to carry much less cash on hand, as they have assets they can turn into cash, or they can borrow from the Bank of England at a slightly higher than market rate (as a disincentive to end up in that position).
"Funny, when Lehman Brothers bit the bullet I don't remember hearing about how Goldman Sachs suddenly froze customer access to their bank accounts."
The reason you don't remember hearing about it is because they don't publicize it. In fact, this kind of thing happens all the time in traditional finance. Ask Marc Cohodes, who was successfully shorting when Goldman froze his account during the 2008-9 financial crisis. In fact this happens all the time. If the wrong people start losing money, trades are frozen/reversed, and the traders who were on the correct side get screwed. This happened this past March on the London Metal Exchange halted nickel trading and reversed trades to protect moneyed interests. Of course that's different from FTX, which was just a giant Ponzi scheme, much like the one operated by Bernie Madoff (which did not involve crypto but did involve customers losing all their money).
So. You can setup a business that offers loans of real money against a fictitious one that was set-up deliberately to stay clear of all the regulations and rules governing the established financial markets - and when things go titsup, you can claim Chapter 11 protection from the very system you chose to bypass?
The next biggie could be this-
https://en.wikipedia.org/wiki/Tether_(cryptocurrency)
Tether is described as a stablecoin because it was originally designed to be valued at USD $1.00. Tether Limited has stated that it maintains USD $1 of asset reserves for each USD₮ 1 issued, but has been fined by regulators for failing to do this and has failed to present audits showing sufficient asset reserves.
If regulators discover it doesn't actually have sufficient asset reserves, or liquidity in fiat equivalents. That's assuming regulators actually dare look. Which if they want to 'correct' or just pop the crypto-bubble, they probably should. Then there is the law of contagion, or P.T.Barnum's economic theory. Apparently the Miami party/luxury scene did very well from cryptobros throwing their funny money around, and now that money is vanishing. Hard to find sympathy for Miami real-estate sharks, but there's also potential fun from the IRS investigating cryptobros tax filings, or lack thereof. So I guess if you a) have cash and b) a desire to swim with the land sharks, could be a good time to keep an eye on foreclosed property bargains around Florida.
The only people whomever won in crypto were those who set up exchanges, they got in and got first, and those YouTubers who shilled the coins. Start a video sharing channel on YouTube with no experience, set themselves up as financial advisors and then get shilled to the tune of $500k/year to punt dogshit crypto coin to others promising untold wealth. The second it all collapsed they disowned any responsibility for punting this pile of shite crypto.
The YouTube gig is a good one. When the time comes to stop the shilling, they can just post a long rambling talking head piece, all about how they are being stifled because The Algorithm forced them to keep making videos about the one subject. So now they've decided to "keep their artistic integrity as content creators" and "regain their freedom to express themselves" by - simply buggering off, ignoring all the screams from their dupes, not needing to worry about making another post where they may need to backtrack on anything...
Then they can simply shop around for the next hot ticket.
Great way to make an easy buck; works for cryptopoop, Muskrat love, you name.
If only I could manage to spout the bullshit to camera without dissolving into giggles.
Most if not all have a degree of some description with the MBA in the title. I believe these letter stand for Master of Bugger All. This is why the pushers of ephemeral ideas with promises of excessive profits base on some type of Swindle end up in tears. The greedy usually find someone to take their money., be it bookmakers (Insurance Brokers) and or all manner of con. men.
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