Everyone Is Getting Hilariously Rich and You’re Not
January 13, 2018 6:16 PM   Subscribe

Bitcoin is the hottest new investment trend and the New York Times style section is on it.
posted by Nelson (189 comments total) 23 users marked this as a favorite
 
Just so long as they go back and do a profile on these exact same people when this bubble crashes, I'm okay.
posted by EmpressCallipygos at 6:21 PM on January 13 [55 favorites]


🎈📌💥
posted by Krawczak at 6:21 PM on January 13 [13 favorites]


"I used to be with it, but then they changed what ‘it’ was, and now what I’m with isn’t it. And what’s ‘it’ seems weird and scary to me."
posted by killdevil at 6:22 PM on January 13 [45 favorites]


I've long suspected the NYT Style section of trolling but this article is a true masterwork. A few of the amazing quotes that had me rush to posting it:
“I do I.C.O.s. It’s my thing,” he said. He wore a pink button-front and pink pants. “It’s me, a couple V.C.s and a lot of charlatans.”

... The currency’s founder frequently appears in fan art as Jesus with a Lamborghini. Mr. Buttram says he’s renting an orange Lambo for the weekend. And he wears a solid gold Bitcoin “B” necklace encrusted with diamonds that he had made.

... He runs Distributed, a 180-page magazine about cryptocurrency that comes out about once a year.
I can't think of a better way to capture the depraved nihilism of the current cryptocurrency boom.
posted by Nelson at 6:31 PM on January 13 [42 favorites]


I keep saying "this is not The Onion" while reading this, but it's like one of those ambiguous optical illusions where you can only see the old woman.

It's not The Onion, right?
posted by RobotVoodooPower at 6:35 PM on January 13 [13 favorites]


I'm really not sure how anyone expects to escape the banking game when you're playing the same game of producing something that is technically ethereal (the majority of US dollars don't actually physically exist, either, most are just numbers on ledgers or in databases.), and generates "value" based on, what, hopes and dreams and an algorithm?

At least the US monetary system has the weight of sixty years of forcing the petrodollar down the planets throat to sustain the fact that real people don't value those little green pieces of paper very much (and by and large, it's not the little green pieces of paper that are unhappy), and actually value things like food, shelter, clean water, love of family, and generally being left alone to live.

Until I see a monetary system where the "value" is calculated some way that actually makes sense in reality (won't happen, what the fuck is value, anyway, it's different for everyone) that is grounded in what actually helps people, and not what helps individuals say "fuck banking" so they can, in effect, become the new banks. (Unless of course the banks capitalism recuperates cryptocurrency, and then sells it back to the public at a markup. Which is absolutely happening considering you have the CEO of JP Morgan calling bitcoin a "fraud" while simultaneously opening bitcoin futures markets. Talking out of both sides of their mouth a bit for the purpose of sweeping in to win the cryptocurrency game by making everyone think its bupkis.)
posted by deadaluspark at 6:38 PM on January 13 [6 favorites]


"He drew a chart to explain the crypto community: 20 percent for ideology, 60 percent for the tech and 100 percent for the money, he said, drawing a circle around it all."

The incoherency of the numbers certainly seems accurate.
posted by PMdixon at 6:41 PM on January 13 [21 favorites]


I still don’t get it, and I don’t think I ever will. Different level of consciousness indeed.

People turning electricity into a currency, the chief selling-point of which is an unforgeable (so far) ledger. I can see why crooks like it.

So, it makes sense for the biggest miners to be found in places where electricity is cheapest. And that is indeed what is happening. But it also makes sense for power companies to start mining their own coins in that case, and I don’t think that’s started. Makes sense though, right? Power plants often have excess capacity, might as well use it up and make a buck.

And maybe that would be a good thing, if building plants becomes less economically risky, or maybe it will be bad if the plant operator decides to mine instead of seeking contracts to supply the local grid used by, for example, hospitals.

It’s such a typically human thing, you know? Use up a useful resource on something to enrich a few people. No-one questions it. It’s like we focused all of the forestry industry on making paper because the new currency is origami cranes.

No sir, I don’t get it at all.
posted by um at 6:48 PM on January 13 [10 favorites]


I feel obligated to point out the Style Section is now being edited by MeFi’s own Choire Sicha.
posted by 1970s Antihero at 6:48 PM on January 13 [31 favorites]


(Unless of course the banks capitalism recuperates cryptocurrency, and then sells it back to the public at a markup. Which is absolutely happening considering you have the CEO of JP Morgan calling bitcoin a "fraud" while simultaneously opening bitcoin futures markets. Talking out of both sides of their mouth a bit for the purpose of sweeping in to win the cryptocurrency game by making everyone think its bupkis.)

a) I am sure Jamie Dimon makes statements that contradict those of his analysts daily.

b) "Bitcoin is a fraud" and "Bitcoin futures will make it look like a more legitimate asset class" are by no means in contradiction.

c) I'm pretty sure that the institutional money is less saying to themselves "Oh man we missed out on this one better jump on board now cuz he who controls the blockchain controls the world" and more so "wow these goldbugs with computers are willing to give their money to anyone who says the word blockchain three times we should say blockchain and get them to give us their money."
posted by PMdixon at 6:49 PM on January 13 [21 favorites]




This entire bubble could burst today and virtually nobody would notice. Maybe we need to tie our financial system to janitorial services. Now that's important.
posted by cichlid ceilidh at 6:49 PM on January 13 [3 favorites]


there are more interesting things to do with one's life than get rich

those poor kids
posted by pyramid termite at 6:53 PM on January 13 [7 favorites]


Trying to explain mining to my father in law sounds like an old Bob Newhart routine.
“Your computer solves math problems... and rewards you with... with magic coins. Uh huh. Where’s the slot they drop out of? Oh there’s no coins.”
posted by hal9k at 6:56 PM on January 13 [59 favorites]


If nothing else, they’ve discovered the chief virtue of crypto currencies is as a carrier for social interactions with other crypto enthusiasts. That’s not worthless. Same could be said for being a model train hobbyist though.
posted by um at 6:58 PM on January 13 [9 favorites]


"there are more interesting things to do with one's life than get rich"

The best things in life are free (mine!)
I own the beach and the blazing sunset (mine!)
I own the waves and the fresh air (mine!)
I drink the milk of the stars in this beautiful moment,
Say to yourself "All these things are mine!"
Repeat after me:
Money (money, money) money's not our God!

posted by I'm always feeling, Blue at 7:09 PM on January 13 [4 favorites]


Who wouldn't like to be hilariously rich? Unfortunately, becoming hilariously rich seems to involve becoming skin-crawlingly creepy, socializing with terrible, banal people and wanting to spend your money on isolating yourself from everyone except other skin-crawlingly creepy people by building a pleasure dome in destroyed Puerto Rico so you can run some kind of tax scam.

I'm still skeptical, though. US currency is imaginary, except the US government has an army.

Also, this whole thing reminds me of the kinds of magical thinking financial frauds endemic in France right before WWII. We're in a moment of fear and lunacy, and I think it's more likely to be like other moments of fear and lunacy than some new paradigm.
posted by Frowner at 7:16 PM on January 13 [25 favorites]


You can drop in on the bitcoin subreddit if you ever feel the need of more people in your life who think they're smart and everyone else is stupid, and can't stop saying so. It would almost lead you to conclude that people who want to get rich without doing anything to deserve it probably suck, no matter what currency they're stockpiling.
posted by Sing Or Swim at 7:26 PM on January 13 [18 favorites]


And if you want a palate cleanser after that you can hit up /r/dogecoin.
posted by quaking fajita at 7:28 PM on January 13 [5 favorites]


Welp! Wasted all these wasted years high-frequency trading fractions of a cent multiple times per second in order to create wealth out of nothing when I could have simply been crypto-dogging at the right moment. What a fool I was! At least I never fell for the old remuneration-for-services-rendered scam, that shit ain't worth shit!
posted by I'm always feeling, Blue at 7:37 PM on January 13 [11 favorites]


Moist von Lipwig, chairman of the Royal Bank of Ankh-Morpork, wisely moved the foundation of the city's wealth to the golem standard, reasoning that golems produce labor, the most credible basis for any economy.
posted by SPrintF at 7:38 PM on January 13 [32 favorites]


there are some neat ideas in this space being drowned out by a flood of bullshit and when the bubble pops even the good ideas will be discredited for a generation, which sucks.
posted by vogon_poet at 7:56 PM on January 13 [5 favorites]


Forever 21 weighs in.
posted by clawsoon at 8:07 PM on January 13 [2 favorites]




Wasted all these wasted years high-frequency trading fractions of a cent multiple times per second
Can't enable high frequency trading

[rollsafe.jpg]

If your transaction network confirms every 15 minutes.
posted by Talez at 8:09 PM on January 13 [6 favorites]


You can drop in on the bitcoin subreddit if you ever feel the need of more people in your life who think they're smart and everyone else is stupid, and can't stop saying so.

To be fair, that's almost every single other subreddit too.
posted by jason_steakums at 8:09 PM on January 13 [13 favorites]


vogon_poet, do you have an example of a good idea?
posted by chrchr at 8:13 PM on January 13 [3 favorites]




goddammit I'm always feeling, Blue, killing joke has never seemed more relevant...
posted by gorbichov at 8:48 PM on January 13 [1 favorite]


Linked via the dogecoin article: Dentacoin: the first blockchain concept designed for the global dental industry. It surpassed a $1 billion market cap.

The Dentacoin ERC20 token is configured to be used globally by all individuals. Dentacoin aims at improving dental care worldwide and making it affordable through crowd power. Numerous Blockchain-based tools will be developed and implemented.
posted by hexaflexagon at 9:43 PM on January 13 [3 favorites]


Re: second photo in the article: "Rakish young investor" my arse. He looks more like a clueless dude who happened to make a bundle of dosh at the kryptos by betting right but has absolutely no idea what to do with the money and actually voluntarily chooses to live a high-maintenance chav life because he absolutely doesn't know better.
posted by holist at 9:55 PM on January 13 [8 favorites]


The Dentacoin ERC20 token is configured to be used globally by all individuals. Dentacoin aims at improving dental care worldwide and making it affordable through crowd power. Numerous Blockchain-based tools will be developed and implemented.

Sadly, this, and their webpage, is only the third dumbest thing I've read today.
posted by Talez at 10:02 PM on January 13 [5 favorites]


I am extremely anti-crypto-currency in its current form. I am starting to see some level of utility of it, although, not in the bitcoin crap kinda stuff. There are two things that I see crypto-currency being useful for in the next few years.

The first is distributing a company's data securely. Effectively leveraging a closed currency on a bank of mining machines in exchange for space and storage. Think of it as: The server mines expandable security for your network. Effectively the currency and mining is only operationalized for internal machines. The whole power of a ledger is to distribute it wide and prevent anyone who isn't holding from accessing the data, while distributing the risk of compromise via entries. This is sort of an anti-cloud. You distribute your network to itself effectively. The exchange is all internal, meaning that losing a node doesn't hurt you. Now, for a fault tolerant network, you'd need at least two distinct data centers mining your own information, but the data would be pretty damn locked. How is this more secure? Well - it isn't sufficient enough to just hack a network in this case, you also need a key for the ledger - and you can lock permissions for data by what is written to the ledger.

The second is the way in which companies can exchange information between them - generally a question about a business and a service provider. Along with the purchase of an affiliate's crypto-currency you can exchange services - and that means an immediate compensation for each company - particularly with data storage and computational power.

But, Bitcoin? That's something to pass on - I don't want to lock corporate data on a network where the the ledger is dirty, and that the cost to get on is punitive and rewards people who are actively trying to scam their own way to the top of their network.

Also, a buddy of mine that invested early just took two weeks to get access to his money so he could swap exchanges from within bitcoin... instant transaction capabilities nullified by him not exchanging his currency before.
posted by Nanukthedog at 10:07 PM on January 13 [4 favorites]


“Obviously the bubble’s going to burst and everyone’s going to need a lawyer,” she said.

She should totally ICO. I'd buy in.
posted by Coventry at 10:08 PM on January 13 [2 favorites]


It's the perfect hedge.
posted by Coventry at 10:09 PM on January 13 [1 favorite]


Talez: Sadly, this, and their webpage, is only the third dumbest thing I've read today.

I'm willing to bet this makes it into your top 3: legalfling.io: LegalFling is the first blockchain based app to verify explicit consent before having sex.
posted by clawsoon at 10:12 PM on January 13 [4 favorites]


Update on reading article? those are very interesting people. And this shit maybe the next chapter of the history of humans.
posted by holist at 10:16 PM on January 13 [2 favorites]


The second is the way in which companies can exchange information between them - generally a question about a business and a service provider.

Also, homomorphic encryption like ZCash uses is going to revolutionize the handling of private information. For instance, at some point it will be possible for you to provide a cryptographic proof of your credit score without reference to a centrally-managed repository of your personal financial information. Whether that needs to involve a blockchain is another matter, though.
posted by Coventry at 10:16 PM on January 13 [3 favorites]


It blows my mind that we bust our asses to make things more and more energy efficient, and here comes fucking Bitcoin. Are electric ranges and space heaters the hot new appliances too?
posted by Brocktoon at 11:20 PM on January 13 [21 favorites]


Also, homomorphic encryption like ZCash uses is going to revolutionize the handling of private information. For instance, at some point it will be possible for you to provide a cryptographic proof of your credit score without reference to a centrally-managed repository of your personal financial information. Whether that needs to involve a blockchain is another matter, though.

this is more or less the "cool ideas" i was thinking about. having some trusted immutable ledger where you can publish encrypted data and/or hashes turns out to be useful, so something blockchain-esque is probably needed.
posted by vogon_poet at 12:01 AM on January 14 [1 favorite]


also not bitcoin but e.g. ethereum is working on "proof of stake" rather than "proof of work" which would obviate the giant server farms and reduce power consumption by orders of magnitude.
posted by vogon_poet at 12:02 AM on January 14


I hope they figure it out. Then we can have "etherium stake", "etherium", and "etherium classic".
posted by sebastienbailard at 12:05 AM on January 14 [5 favorites]


And if you want a palate cleanser after that you can hit up /r/dogecoin.

I did mine dogecoin back in the day as a joke : ) Seems like a good time to check up on my "investment".

Also, how many times does it need to be said this (bitcoin) is a pyramid and not a joke or a bubble?

Pure, plain, simple, criminal, sleazy and malicious pyramid to shift wealth towards the select few.

But then, all that hollow national fiat money which has been printed since the last crash needs to be disposed of somehow, and this is as good a way as any.
posted by Laotic at 12:20 AM on January 14 [1 favorite]


I earned my diploma, got it verified by BCDiploma, and was Indorsed for my job skills enough that I was invited to a final round interview by a robot hiring manager on RobotVera after submitting my job application on bitJob. After the flight to the interview, I noticed the pilot logged the flight on Aeron. I got the job building the largest aquarium in the world, financed by PAquarium.

With my new job I was able to afford dental insurance on Dentacoin, constantly monitor my personal health with Loomia data-collecting clothing, and sell the health data to Bowhead. Healthcare payments were a snap when I paid them via Healthureum. Once my health was covered, I wanted to ensure a good future for myself. Just in case the worst happens, I bought into the Tontine Trust. If my car needs towed, I can always find a tow service via CarTaxi. Just in case of natural disaster, I made sure I’d be escorted safely out of the disaster area by ex-Navy SEALs by buying a ValhallaCoin.

My work days are nothing out of the ordinary. Before going to work, I always have to set aside time to read the news from Reporter Community, which fights Fake News. Before heading out the door I sometimes send a funny meme to my friend via MeMessenger, which only allows memes instead of words. On the weekends, I like to kick back and relax. I’ll watch a crowdfunded and crowdproduced film via 21million, and on Sundays you’ll find me watching and calling plays on Fan Controlled Football League or playing decentralized poker.

After a bit of work, I built up a sizeable savings account, as well as a pension via Auctus. I always diversify my investments. I invest in apps on AppTrade, domain names in Digital Developers Fund, and student investment property in KexCoin. I’ll occasionally hedge my bets on the Blockchain Board of Derivatives. I’ve even invested in luxury smart house rentals in Croatia with Xaurum Gamma. With the money left over, I invest back into the blockchain because I’m such a fan. The other day I bought a discounted ICO token on ICOS, but later I wanted to diversify into several tokens. I exchanged my ICO tokens on LinkerCoin for tokens in Blockchain Capital (a blockchain VC fund) and AICoin (which invests in crypto portfolios for me using the power of AI).

I always set aside some money for philanthropy, and the blockchain can help bring funding to where it's needed most by cutting across geopolitical lines. I’m helping finance clean hydroelectric equipment in the Austrian Alps on HydroMiner, and I help bring transparency to the Chinese financial markets with Red Pulse.
posted by hexaflexagon at 12:58 AM on January 14 [33 favorites]


vogon_poet, do you have an example of a good idea?

There was a pretty good Ask thread recently about blockchains and what they’re actually good for. Tl;dr a blockchain is just a decentralized, verifiable way to store data, and there are a small set of technical problems for which they’re an elegant and useful solution, but 95% of the shit that people shill cryptocurrencies for aren’t that.
posted by Itaxpica at 1:03 AM on January 14 [3 favorites]


Does each bitcoin come with a case of nutrition powder?
posted by Beholder at 1:03 AM on January 14


I don't understand how a "dental" cryptocurrency makes dental care "more affordable".

Honestly, all this right now seems like people taking in each other's laundry - it looks like everyone is making money, but the connection between the "money" and what it is supposed to do in the world is not at all clear. If I were a bitcoin millionaire, I would take advantage of the moment and get most of my money out of bitcoin, since it's clear that the last-in, poorest and least-informed are going to be left holding the bag.

I am also deeply skeptical of blockchain because the people I've heard talk it up have been almost classically ill-informed tech people - wonderfully good at programming, broadly ignorant of global affairs, totally credulous about the goodwill and innocence of corporations. These have all been people at the peak of their careers, well-off, respected, etc, and while their ignorance doesn't prove anything about blockchain, it does not inspire confidence.
posted by Frowner at 1:24 AM on January 14 [12 favorites]


Can't enable high frequency trading

If your transaction network confirms every 15 minutes.


I heard about two months back that a few kryps can clear in almost real time, fast enough to compete with paying cash in retail situations.
posted by holist at 1:28 AM on January 14


I don't understand how a "dental" cryptocurrency makes dental care "more affordable".

Idk, but I imagine if a sufficient number of dentists opt in, and declare their charges and allow group reviews, then it's like creating a voluntary franchise whose prices can be driven down to the "just worth it" point, because members both cooperate and compete - a kind of Stephensonian Dentist Nation ( :

Honestly, all this right now seems like people taking in each other's laundry - it looks like everyone is making money, but the connection between the "money" and what it is supposed to do in the world is not at all clear. If I were a bitcoin millionaire, I would take advantage of the moment and get most of my money out of bitcoin, since it's clear that the last-in, poorest and least-informed are going to be left holding the bag.

But in most cases it will be a pretty small bag, basically some pretty useless hardware you paid too much for but (if you mine with graphics cards) which still has significant residual value, plus possibly a large electricity bill. And as the article shows very clearly, unlike truly criminal scams, which always include confidence tricks, these people don't belittle the risks at all. Many of my friends and relatives got into krypto, but they are without exception fully aware that this is on a "could lose it all any minute" basis. I'm sure the gullible are taken in, but then... that's why they are gullible. ( :

I am also deeply skeptical of blockchain because the people I've heard talk it up have been almost classically ill-informed tech people - wonderfully good at programming, broadly ignorant of global affairs, totally credulous about the goodwill and innocence of corporations. These have all been people at the peak of their careers, well-off, respected, etc, and while their ignorance doesn't prove anything about blockchain, it does not inspire confidence.

At least in my circles, some fairly formidable an definitely wary freaks and successful urban scum are expressing a high level interest in the blockchain, though not in the get rich quick aspect of it.
posted by holist at 1:39 AM on January 14 [1 favorite]


If I were a bitcoin millionaire, I would take advantage of the moment and get most of my money out of bitcoin, since it's clear that the last-in, poorest and least-informed are going to be left holding the bag.

One of the reasons there are so many bitcoin/alt coin millionaires at the moment is that it is much easier to exchange USD -> BTC than vice versa. Especially at quantity. Given the number of *known* 'exchange' collapses etc, it seems quite implausible to me other than that we're seeing people spending money borrowed against crypto assets at best. I understand it to be pretty common in speculative bubbles that you get a class of people living a pretty comfortable lifestyle on the froth until it pops.

I assume USD/BTC futures were intended to be an offramp that didn't require finding someone willing to buy bitcoin in bulk at spot rates, but it doesn't look like the volume has shown up for that to work - same problem of finding someone willing to take the long position opposite your short (thank the market for being less suicidal than everyone assumed, so far anyway).

At least in my circles, some fairly formidable an definitely wary freaks and successful urban scum are expressing a high level interest in the blockchain, though not in the get rich quick aspect of it.

I dunno what for. A blockchain is an incredibly expensive version of an append-only ledger, which is what most of the putative non-payment uses boil down to. The decentralization is only necessary if it is literally cheaper for every individual node in the network to build their own bank-level security than to trust in third parties. And given that the number of possible entities in control of their own physical transport layer is in the dozens at best, that puts a pretty hard limit on that not-placing-trust-in-third-parties piece. I don't need to know the content of your packets to sever your ability to send them.
posted by PMdixon at 2:00 AM on January 14 [6 favorites]


My Bitcoin story:

Zarkonnen used to belong to a coworking space here in Zürich. They had a fridge full of beers and soda, paid for on the honour system: every time you took a drink, you chucked two francs (~$2) into a fishbowl on the side.

Various techy meetups were held at the space, including the local Bitcoin-enthusiasts group. They had a get-together there, coincidentally, on the night of the MtGox crash.

The next morning, nobody could find the fishbowl.
posted by daisyk at 2:12 AM on January 14 [34 favorites]


After this and the recent "What I Wore (to be taken seriously while reporting the sexual harrassment from my advisor)" piece, I have to say I'm really enjoying the NYT Style Section's current direction.
posted by daisyk at 2:19 AM on January 14 [6 favorites]


...freaks and successful urban scum are expressing a high level interest in the blockchain

They are not alone.
posted by thelonius at 2:47 AM on January 14 [1 favorite]


The thing about the blockchain is that there are some problems that benefit from a decentralised, encrypted, immutable ledger - but there's a lot more problems where you can get pretty good results from a centralised ledger and the problem is about incentivising someone to run it.
posted by Merus at 3:04 AM on January 14 [7 favorites]


Is this transaction cost graph correct? $30 for each transaction? Seems a very expensive handling fee.
posted by 92_elements at 3:15 AM on January 14


Until I see a monetary system where the "value" is calculated some way that actually makes sense in reality (won't happen, what the fuck is value, anyway, it's different for everyone) that is grounded in what actually helps people,

Japan had that covered 500 years ago. A Koku was defined as the amount of rice needed to feed a person for a year. The gold Ryo was equal to one Koku. You can argue about whether you value a koku- you can also starve to death.

Anyway, bitcoin bugs the hell out of me, because it isn't even a currency, it's a commodity. AIt doesn't even behave like a currency, it acts like a commodity like tulips.
posted by happyroach at 3:38 AM on January 14 [8 favorites]


I think most major accounting firms treat cryptocurrency holdings as inventory - it’s going to be a few years before the IASB issues guidelines.
posted by um at 3:44 AM on January 14


Seems a very expensive handling fee.

That's cuz it is. Bitcoin is useless as a payment system. Other altcoins don't have that as baked in.
posted by PMdixon at 4:09 AM on January 14 [1 favorite]


This article makes me want to track down and read in-depth profiles of investors living the high life, talking a big game about how "this is only going to get bigger" and "the dream will never end" riiiight before their chosen bubble popped. Anyone have some good links?
posted by duffell at 4:14 AM on January 14 [2 favorites]


Until I see a monetary system where the "value" is calculated some way that actually makes sense in reality

The only reason Watts or eMergy are not a monetary system is there is no way to store the value of them. (The conversion of Watts to bitcoin are an act of "storage")

The people who are dead or in old folks homes from the creation of the Technocracy movement tried figuring out an alternative back when the industrial revolution was strongly taking hold as that was a moment to move things from a Gold and Silver standard to something else. History shows a different set of ideas won.

The people who are trying to make low loss high capacity solid state capacitors have a shot at watts as money. And once watts become money - BAM! More Enron energy trading type situations. (Watts in a slowly leaking capacitor would incentivize a higher velocity for the "money" though.)


This article makes me want to track down and read in-depth profiles of investors living the high life

McAfee and 'shitcoin' is a story waiting to be compiled. And the bankruptcy of Mt. Gox with the coins being worth far more than the bankruptcy is also an interesting story.
posted by rough ashlar at 4:33 AM on January 14 [1 favorite]


I'm still skeptical, though. US currency is imaginary, except the US government has an army.

And without the 'projection of power' with the deficit spending and 50 or so percent of the budget on the military - what would that currency be worth? History points at the Spanish, the Dutch and the British as possible examples. Cathline Fitts and her big red button story also provides a POV to consider when asking that question.

What happens if anyone with some superconductors, stainless steel, and the MIT SPARC reactor design could make straight up electrical Wattage?

Who's a winner in the world where having sea ports, "empty land" and, say $0.10 a Watt solar panels are a thing? (land and solar in case SPARC and any fusion attempts are failures)
posted by rough ashlar at 4:44 AM on January 14


I got a haircut last week and a bunch of the barbers and customers were setting up a Bitcoin buying group.

I've been hearing for years now about how there are all these great non-bullshit applications for blockchain technology and I have yet to see one that doesn't make me think, have these people never heard of literally every other data store? Sure, they may not have the same mathematical properties (provable immutability), but if you can convince a court that your log file or Postgres or Oracle database or Hadoop cluster or whatever hasn't been tampered with—which people do without ceremony every day—those mathematical properties seem like a parlor trick. The whole banking system runs on mutable, non-provable data stores and seems to do so much more reliably than anything built on the blockchain has managed.
posted by enn at 4:49 AM on January 14 [12 favorites]


but if you can convince a court that your log file or Postgres or Oracle database or Hadoop cluster or whatever hasn't been tampered with

Oh, that parts easy. Just have a Lawyer write an Affidavit that says "I have these records, I've looked at them, and they are True, Accurate and Complete." Then BOOM! Once you challenge it and the Judge says "I deny your motion that challenges the affidavit" its all true!

The power of that gavel. It makes data true!
posted by rough ashlar at 4:56 AM on January 14


And without the 'projection of power' with the deficit spending and 50 or so percent of the budget on the military - what would that currency be worth? History points at the Spanish, the Dutch and the British as possible examples. Cathline Fitts and her big red button story also provides a POV to consider when asking that question.

What happens if anyone with some superconductors, stainless steel, and the MIT SPARC reactor design could make straight up electrical Wattage?

Who's a winner in the world where having sea ports, "empty land" and, say $0.10 a Watt solar panels are a thing? (land and solar in case SPARC and any fusion attempts are failures)


What would happen if you ever actually said something instead of asking weird conspiratorial rhetorical questions that are completely disconnected from fact if taken as meaningful?

(The Dutch never had meaningful force projection, the pound sterling has taken some hits but is doing much better than the Empire is, military spending is more like 16% of the US Federal budget, and Catherine Fitts sure as fuck did not have 99 out of 100 random people tell her that they "would not push [a] red button [that would would immediately stop all narcotics trafficking in their neighborhood, city, state and country because] they said they did not want their mutual funds to go down if the U.S. financial system suddenly stopped attracting" because that explanation makes no sense, drug trafficking and laundering the profits thereof don't have to take place in the same jurisdiction, to the extent this is a correct explanation of the world there is nothing specific to mutual funds about it, which is an odd mistake considering how in-depth an understanding of financial and capital flows one would have to have to back such an argument, and most importantly very few people think in terms of those chains of causation, so when the rest of her writing starts bumping up close to that body of work dedicated to explaining how international financiers have enslaved us all I'm not exactly inclined to assume that if I keep poking on that website I'm not going to have Nazi goldbuggery fall out. If I wanted to read Zero Hedge bullshit I'd go to the source, thanks. I'm not even going to ask what 'having sea ports' means or why 'empty land' got scare quotes.)
posted by PMdixon at 5:04 AM on January 14 [11 favorites]


The reason that it matters that the US has an army is the exact reason why I think most non-horrible bitcoin people are extremely naive.

The left approach to bitcoin seems to be a yearning for revolution without revolutionaries - cryptocurrencies will happen and by their mere existence eeeeeevvvvvverybody will be rich, existing hierarchies will be demolished, tax-avoidance pleasure domes will be available to all, etc. And this will never happen. Shorthand for this is that the US has an army. Longhand is that capital will not let you overturn capital. If bitcoin just means some new tax-avoiding rich people with the usual bad politics and chattel, the existing order won't care - letting new people join is how they succeed. If there's any actual threat to a society organized on financial exploitation, it will get shut down by law or force - law first - right quick. Bitcoin is just another way for another group of unpleasant people (with the usual incredibly boring focus on macho fitness, in-group fashion, entertainment safely tailored to their interests, etc etc) to get rich.

Bitcoin will not make society more equal any more than the stockmarket has. If you're expecting that "empty land" or access to electricity will be allowed to upend the social order, I predict a series of unpleasant surprises coming your way.

Also, it is my sense that on the "I am urban scum" front, people (probably from educated, comfortable backgrounds, since I've never heard, eg, homeless friends call themselves 'scum'), think that they're going to live in a cool future being really inventive and, like, cool. But ten or fifteen years of extreme wealth will turn you into a Peter Thiel like anyone else - you won't be 3Jane or some swashbuckling hero from Stevenson, you'll be another exploitative rich person with iChattel to blow your nose (or whatever else you want blown) dodging taxes and buying boring designer products and riding in helicopters or whatever.

People have such faith in the magic of things. Like, you're going to have really cool things when you're rich, and that is what will make you different from stodgy boring old school rich people - you'll buy a ghost town and make it into a private parkour site, you'll develop injectable technology, you'll take really cool trips to private underwater restaurants or whatever. Your music will be awesome. But you know what? It won't be. It will be boring and banal like every rich person thing, you will be spoiled and entitled and your politics will be selfishness and greed. Getting your money through a totally revolutionary disruption of the banks will not make you different from other rich people.
posted by Frowner at 5:33 AM on January 14 [56 favorites]


The Dutch never had meaningful force projection,

http://penelope.uchicago.edu/Thayer/E/Journals/PacHR/11/1/Dutch_Maritime_power_and_the_Colonial_Status_Quo_1585_to_1641*.html

the pound sterling has taken some hits but is doing much better than the Empire is,

Yet the old British navy is what made "the pound the pound the world round" and "the sun never sets on the British empire"

And once that military was replaced - the money was not as central as it once was.

military spending is more like 16% of the US Federal budget

Its great they have it under control from a decade ago. And that Chalmers Johnson's concerns arn't an issue so his moldering in the grave is peaceful.
https://mibi.deviantart.com/art/Death-and-Taxes-2007-39894058

Zero Hedge/Nazi/whatever

I guess you don't wanna be reminded of Ron Paul's position about slashing the military and the reaction to that idea - from an effect the economy position.

But hey, trying to untangle the economy as a system from the military and policy as a system with a thinly traded electronic token is well out of the ability for The Blue to handle.
posted by rough ashlar at 5:39 AM on January 14 [2 favorites]


At the point you're citing as an authority a deviantart-hosted copy of a poster giving a breakdown of the federal budget that pretends entitlement programs either don't exist or don't enter into the accounting, you're demonstrating that you aren't actually interested in anything that involves paying attention to detail as opposed to just making shit up because it makes you feel like you're in on the secret conspiracy.

Thanks for at least googling Ron Paul for me, thanks. I was completely unaware of this breathtaking visionary and his cruel exclusion from American political discourse especially when you consider how mainstream and widely supported his policy positions are, like considering Medicare and Social Security unconstitutional.
posted by PMdixon at 6:11 AM on January 14 [8 favorites]


/All/ of the spam that gets through to my mailserver at this point is crypto-currency related.

The whole field is a rats nest of get rich quick merchants & a lot of people are going to get burnt. I’ve yet to see a single ICO for a token† that doesn’t simply try and landgrab a piece of the economy without even promising to build anything new - there’s nothing there except a transfer of wealth: what’s being sold is the idea that early adopters will be able to cash out big time just like the early BTC adopters, but there’s no there there: Nothing that creates value, nothing that makes the economy run better or supplies services more effectively, or supplies some new service that people actually want.

I guess this is what the late 2010s is going to be known for - the great crypto bubble. Together with Trump and Brexit; there’s probably a connection there somewhere.

OK. this is a lie:The ones that are actually trying to invest in real companies are illegal share offerings that the SEC is quashing one token at a time, causing much wailing and gnashing of teeth.
posted by pharm at 6:20 AM on January 14 [3 favorites]


If you're expecting that "empty land" or access to electricity will be allowed to upend the social order, I predict a series of unpleasant surprises coming your way.

It has a shot at making life and power more decentralized. Heat islands and the wire to panel up to cover consumption would be an issue, but not "blanket the planet's land" level at this point.

And people seeing photons -> value helps with the understanding of the energy flow (eMergy) economy. Economic activity tied to the natural energy flow VS 24X7 maximization.

If MIT's SPARC (or similar) fusion tech works the hard driving 24X7 economy should become sustainable within the limits of the heat load produced. A hard driving "AI" robot economy was thought about by some members of the Technocracy movement when it got started. Not to mention people fixing that wattage as tradeable tulips crypto-things. Up until Intel or others bump up the 17-> 49 -> qbit machines and the software to effectively attack the crypto behind these token-things and then the value of the crypto-things should drop to whatever the utility of them are.

And from a nation standpoint - having no land and no sea ports is gonna have a FAR rougher time than places with lots of land and ports. The US/Russia/China will be better off than Luxenburg as an example. Stupidly large amounts of easy wattage lets you do things like extract potable water and metals from the sea. Or electrify coral to help it grow. Epicly Stupidly large amounts of wattage + AI should allow the leaving of the gravity well, the consolidation of outside the Earth biosphere material and then return to the biosphere thus making metals a non-useful store of value. Understanding how to place/design solar panels plus layouts of hydrophobic materials should be able to help reverse desertification via collection of water on the panels from dewpoint changes and try to change the water-land cycle. Heck, it seems you can slap electrodes on plants and get a positive growth effect. The electric -> fixed Nitrogen cycle for energy storage or plant growth is a possible alternative to the electric -> bitcoin cycle.

But 3ish grams of Ammonia for a kW of juice (from memory) to place on plants to extract CO2 and then lock it up as biochar at $5.60 a ton doesn't have the same watt/money attraction of the cryptocurrency. And making cryptos while the sun shines is not the same as run your heat-engine 24/7 doing crypto things.
posted by rough ashlar at 6:22 AM on January 14


When KFC Canada accepts Bitcoin for its Bitcoin Buckets, who pays the transaction fee?
posted by clawsoon at 6:25 AM on January 14 [1 favorite]


I guess this is what the late 2010s is going to be known for - the great crypto bubble. Together with Trump and Brexit; there’s probably a connection there somewhere.

I mean how far exactly are we from cstross' Accelerando here? The bit about post-singularity intelligence being nothing but automated Ponzis has only seemed more prescient with time.
posted by PMdixon at 6:26 AM on January 14 [8 favorites]


but there’s no there there: Nothing that creates value, nothing that makes the economy run better or supplies services more effectively, or supplies some new service that people actually want.

The closest I've heard pitched and ONLY one time I can't even find for quoting here. Forbes has reporting here and I'm reminded of the 600 dead coin/token list.

The effort of one person to make a lawsuit coin also seems doomed - but he moved out of the US to follow his coin-dream because he's smart enough to realize US law wouldn't tolerate it. Not sure how being someplace else makes it work....
posted by rough ashlar at 6:31 AM on January 14


rough ashlar: The electric -> fixed Nitrogen cycle for energy storage or plant growth is a possible alternative to the electric -> bitcoin cycle. But 3ish grams of Ammonia for a kW of juice (from memory) to place on plants to extract CO2 and then lock it up as biochar at $5.60 a ton doesn't have the same watt/money attraction of the cryptocurrency. And making cryptos while the sun shines is not the same as run your heat-engine 24/7 doing crypto things.

But a cryptocurrency doesn't store energy. It's just a record of energy spent. Fixed nitrogen at least stores energy in a way that's useful to plants. The capacitors that you mentioned above store energy, too. But thinking of cryptocurrencies as a store of energy, rather than simply a record of energy turned into heat via silicon? That's bizarre.
posted by clawsoon at 6:35 AM on January 14 [7 favorites]


if the cryptocurrency has gold fringe on its logo that means it's actually one of the super-capacitors the navy uses for the railguns they use to shoot chemtrail payloads into the stratosphere
posted by PMdixon at 6:51 AM on January 14 [17 favorites]


But a cryptocurrency doesn't store energy. It's just a record of energy spent.

I agree. But it has assigned an economic value beyond its possibly known utility value.

Right now if a watt is generated its gone the next instant. Like the photon hitting the planet.

Nitrogen fixing, making metallic Al, making a CD/DVD, and even the bitcoin are attempts to fix that watt (or photon) into something that has more permanency with a value associated with it.

The flaw of a wattage or photon based economy is the lack of an ability to store the wealth. Its why the eMergy model only shows up in the occasional lawsuit and is 100 years old with no meaningful adoption. The watt -> heat/computational making bitcoin ends up acting right now as a store of still tradeable value. It has no "scrap" value or ability to be additionally transformative value like fixed Nitrogen to the growth of a plant. Heck the contents of the CD/DVD can be transformed into another intellectual work or the CD can just be something you hang in the garden to scare birds away.

But right now with no effective laws banning cryptos, no long qbits+software and no EMP the fixing of watts into a bitcoin becomes a store of economic value of watts. If you believe in economic charts and think the $19K/$14K price is sustainable at $300 it still acts as a store of value with an otherwise non-storable base of photons/watts.

A tulip is still a tulip afterall.
posted by rough ashlar at 7:11 AM on January 14 [1 favorite]


> If MIT's SPARC (or similar) fusion tech works the hard driving 24X7 economy should become sustainable within the limits of the heat load produced

> The electric -> fixed Nitrogen cycle for energy storage or plant growth is a possible alternative to the electric -> bitcoin cycle.

You're talking about solutions to the problems of effectively free energy generation and nearly free storage of the energy and waste products. IF - and what a wonderfully big if that is - IF those things come about, cryptocurrency will be the least of our concerns. With free energy, you have it all.

Thinking of free energy in terms of implications for cryptocurrency betrays a tragic failure of the imagination.
posted by RedOrGreen at 7:17 AM on January 14 [6 favorites]


a bitcoin becomes a store of economic value of watt

BTC is not a store of value, because BTC has no use value whatsoever: BTC is unforgeable evidence of energy uselessly /expended/. You can’t get those watts back: there’s no 'value' in BTC in the sense that you can get some use out of one. The only value is that it costs energy to get one & they’re divisible & unforgeable. Which makes them commodity money, but a commodity money backed by nothing except the speculative value based on what you think you can sell the one you buy.

It turns out that with a good story behind it, you can drive that speculative value pretty high however!
posted by pharm at 7:22 AM on January 14 [6 favorites]


Bitcoin and the like have value as an unregulated medium of exchange which is hard to confiscate and expensive to suppress.
posted by Coventry at 7:30 AM on January 14 [3 favorites]


It turns out that with a good story behind it, you can drive that speculative value pretty high however!

Also helps if you can persuade people to treat monopoly money as equivalent to USD because you promise them you've got the cash in the back.

Tethers back in September and they've only gotten sketchier since. I seriously cannot believe how fucking stupid a bunch of self-styled geniuses can be; maybe it's because most of my career has been in finance and designing gaming machines but to me every single aspect of the crypto 'markets' (I hesitate to call them that in the absence of a law of one price or anything close) looks damn near designed to enable 'price' (see prev parenthetical) manipulation.

But I don't think it takes that much critical thought or sophistication to take a second look when someone gets cut off from USD liquidity that is essential to their business and then suddenly shows up with a bunch of tokens that they promise are backed by dollars with no explanation of how they got these new dollars in the absence of any banks willing to do business with them or why we're using these tokens instead of just using the dollars that totally exist. Somewhere.
posted by PMdixon at 7:33 AM on January 14 [4 favorites]


I stopped caring about the point where he said that if we fill up all available land with solar panels then the world would be *magically transformed* except if that was true, someone would have done it by now. Like, it's turtles all the way down: we question one bit of woo bullshit and there'll be another one along to justify it, and at no point is it ever going to link up with agreed-upon reality.

Kind of like crypto-currencies! The point at which the people in bitcoin start cashing out and it keeps its value is the point that I believe it's real and I actually did miss the boat.
posted by Merus at 7:37 AM on January 14 [3 favorites]


Bitcoin and the like have value as an unregulated medium of exchange which is hard to confiscate and expensive to suppress.

No one needs to confiscate or suppress anything. You just need to target the financial intermediaries who would be exchange it for actual economic activity that involves things made out of atoms --- no one gives a shit about Starbucks taking it as a stunt if neither Visa nor any US- (or Chinese-) regulated bank will touch transactions derived from it.
posted by PMdixon at 7:38 AM on January 14 [2 favorites]


Also helps if you can persuade people to treat monopoly money as equivalent to USD because you promise them you've got the cash in the back.

Yeah, that’s another can of worms that’s waiting to blow up in people’s faces isn’t it?

(I was going to edit that mixed metaphor, but then decided it was entirely appropriate to the whole clusterfsck that is the crypto-currency world, so have left it in.)
posted by pharm at 7:47 AM on January 14 [3 favorites]


PMDixon: Sure, but that's not happening on any significant scale at this point, so it's valuable to people.
posted by Coventry at 7:51 AM on January 14




Yes, and prices tend to fall in response to those kinds of rumors. When the rumor was discredited, prices rose again.
posted by Coventry at 8:04 AM on January 14


But if the value as a medium of exchange came from being 'hard to confiscate and expensive to suppress,' then there wouldn't be a price effect from any such rumors.
(And the restrictions on 'exchange' activity in China are not so much rumors --- no one should care where the mining happens, but as one of the primary actual uses of bitcoin that actually enriches individuals in the present as measured by changes in state-currency denominated assets is evasion of Chinese capital controls, if they're not able to convert RMB to BTC then that's one of the major/only structural longs gone.)

You can't have it both ways --- either one of the selling points is that it's resistant to state interference in flows, or else it hasn't been tested as to such resistance ("that's not happening on any significant scale") which means that said resistance certainly can't be a selling point.

I'm taking up too much of this thread so going to step back for a while.
posted by PMdixon at 8:28 AM on January 14 [2 favorites]


You actually can have it both ways. I believe state suppression is will eventually pop a cryptocurrency bubble (not necessarily this one), and I also think people get excited by cryptocurrency because they think it'll help them end-run various state regulations and prohibitions. And in the short run, it does.
posted by Coventry at 8:35 AM on January 14


Bitcoin and the like have value as an unregulated medium of exchange which is hard to confiscate and expensive to suppress.

This also hides the ease of a currency to be manipulated, which is what a lot of financial sector people mean when they claim Bitcoin is a fraud. The central authority issue of mistrust has been one of most strident arguments made for crypto-currency, but it is really an argument against it, because people are being asked to trust the hidden parts that oppose regulation. If Bitcoin came crashing down, the handful of exchanges would close, from lack of fresh cash to dispense, sending it to near zero. Exchanges were not part of the imaginary top-down design, which was conceived to reward blockchain overseers with coins, and even told them when they ran out they could charge whatever they wanted for trades. The economic assumptions were naive, but it ironically hyped itself as a way to avoid stable currency to achieve anything. The Knickerbocker Trust fiasco, in the panic of 1907, discovered the value of central bankers to bail them out, which was apparently a good idea. What I think needs to be discussed going forward is what happens when anti-authority and anonymity aspects turn out to be the incentive needed to harm investors.
posted by Brian B. at 8:48 AM on January 14 [3 favorites]


> People get excited by cryptocurrency because they think it'll help them end-run various state regulations and prohibitions. And in the short run, it does.

In the very short run, sure. But I really don't think states with police forces and guns will tolerate a lot of drug dealers making untraceable transactions for very long. In that sense, it's a self-limiting bubble, and the choke point will be the conversion back into real-world assets.

The mistakes of the past are really supposed to be learned from, not just blindly compounded into a tulips+pump and dump+pyramid scheme fraud wrapped in glibertarian rhetoric.
posted by RedOrGreen at 8:51 AM on January 14 [4 favorites]


All I know is, a friend who had slowly over the last year put about $400 into Bitcoin cashed out for around $2000 in December and bought himself a Lego Millennium Falcon because why not, free money. So I put in $50 myself, at exactly the wrong time, because it's stayed more consistently around $44 since then. But I see now that if I'd put that $50 into Ethereum at that point I might have close to $100 now? Oh well.
posted by dnash at 8:54 AM on January 14 [1 favorite]


Came for the tulip references, left satisfied.
posted by Special Agent Dale Cooper at 9:02 AM on January 14 [2 favorites]


untraceable transactions

One person’s untraceable is another person’s immutable tamper-proof public ledger of all transactions. Which is to say that the blockchain is a prosecutor’s dream. Once you can tie an individual to an address, you can quite easily find all the money.
posted by chrchr at 9:05 AM on January 14 [4 favorites]


For years I've bought clutches of $2 bills neat from the bank. I've bound them at the end and pull them off like Post-It notes in front of cashiers just for fun.

So I just ordered a stack of gold-plated BitCoins for cheap - the physical kind they use for stock photos - from Amazon and plan on offering them for whatever value the receiver deems worth. And keep a ledger of the value history. Sort of my own Boggs Notes experiment.
posted by hal9k at 9:06 AM on January 14 [3 favorites]


I really don't think states with police forces and guns will tolerate a lot of drug dealers making untraceable transactions for very long

It's not just drugs, at this point. It's also financial and securities regulations.

I've heard that the SEC is talking to the principals of some ICOs, though.
posted by Coventry at 9:07 AM on January 14


It's also financial and securities regulations.

What do you think capital controls are? What do you think AML/KYC requirements are? What do you think exchange regulations are? What do you think anti-fraud regulations are? Drugs are a side show, regulatory arbitrage has been baked into the cake from the get-go.

And yes, both the SEC and the FCA are (too timidly) starting to say that many ICOs are probably illegal securities offerings.
posted by PMdixon at 9:17 AM on January 14 [1 favorite]


Once you can tie an individual to an address, you can quite easily find all the money.

On the other hand, there are cryptocurrencies like ZCash where the ledger is encrypted, so you can't tell which addresses have transacted without the private keys involved.
posted by Coventry at 9:18 AM on January 14


PMdixon, thanks for the beautiful clarity of your responses here.

A few of the amazing quotes that had me rush to posting it: ...
Oh, you didn't mention the half a dozen cannisters of Lysol wipes? Cos that kinda made me heave...

Beautifully written, cuttingly observed article. I went back to check the gender of the writer after a couple of paragraphs since their reaction is just so visceral (though the language used obscures this.)
posted by glasseyes at 10:04 AM on January 14 [4 favorites]


Re the dental scheme.
a voluntary franchise whose prices can be driven down to the "just worth it" point, because members both cooperate and compete
Um, what's the inducement for actual dentists to join this price-lowering organisation? Are they short of customers?
posted by glasseyes at 10:08 AM on January 14 [3 favorites]


I'm all in on NecronomiCoin and its revolutionary proof-of-horror algorithm.
posted by ryoshu at 10:55 AM on January 14 [6 favorites]


Nobody is going to notice a crypto crash if this is the epicenter. They'll just have to go get jobs to afford their group homes and Lysol wipes. The house cleaner investing $12k is the worrying part.
posted by netowl at 11:07 AM on January 14 [4 favorites]


White supremacists are obsessed with bitcoin, so I can't wait for this fucking bubble to burst.
posted by maxsparber at 11:34 AM on January 14 [3 favorites]


> But it also makes sense for power companies to start mining their own coins in that case, and I don’t think that’s started.

It's hard to tell what's happening in China, but there are rumours that Chinese power companies are shunting spare capacity into ASIC farms.
posted by Leon at 12:22 PM on January 14 [1 favorite]


You can drop in on the bitcoin subreddit if you ever feel the need of more people in your life who think they're smart and everyone else is stupid, and can't stop saying so.

This is true, but also please note that /r/bitcoin is now extremely heavily censored and that the vast majority of early adopters/users have been banned from that subreddit for pointing out things like censorship and a very obvious and heavy handed pro-Segwit, anti-blocksize increase stance.

That place has been a total echo chamber for two years, and it has been in control of pro-bank, pro-centralization forces and players for a while now. /r/bitcoin is not a good place to find either intelligent discussions, experienced users or unbiased information.

/r/btc is the less censored but now mostly pro-BCH subreddit. There are dozens if not hundreds of cryptocoin subreddits now.

More in a bit, err, moment. Damn you, words!
posted by loquacious at 12:23 PM on January 14


The only place for uncensored discussion of crypto-currencies on reddit is r/Buttcoin. You probably thing I’m joking, but it’s true.

Jorge Stolfi & David Gerard are both regular contributors.
posted by pharm at 12:44 PM on January 14 [2 favorites]


lol "Coin Daddy"
posted by stinkfoot at 1:27 PM on January 14 [2 favorites]


Coin Daddy is the only one with a photograph that looks like he belongs in the Style section. The rest are schlubby guys in t-shirts. And a half-unpacked suitcase. Even the photos are trolling.
posted by Nelson at 1:35 PM on January 14 [2 favorites]


Trolling aside, I've talked a little bit about cryptocoins before, so full disclaimer: I have no money in coins. I've just been watching this unfold since about 2010 because it's fascinating and sometimes goofy shit.

At this point I am still undecided about my opinions on a lot of things about crytocurrency itself, pro or con. What I do know is that this technology is not going to go away. It's already being actively used and deployed as a currency, a payment layer and a commodity.

I hear a lot of people saying "this will never happen" but it's already happening right now.

I know more than one person with functioning debit cards that spend one or more coins directly from online wallets.

Another thing that's driving crypto adoption is the legal cannabis industry, because FDIC backed banks refuse to let cannabis industry members open bank accounts or make deposits to store cash. Well, so far the cannabis industry has been pumping a lot of cash into cryptocoins and often turning large profits on their gross and net profits entirely on accident. Like, even some employees are choosing to get paid in crypto instead of cash, and it's not all bitcoin, either - and they're paying taxes on it and any crypto gains because they kind of have to because they work in the legal cannabis industry.

And, well, despite the volatility and weirdness and hassles and even the more recent high fees, if there's one thing that's been right (so far) about bitcoin's self-made claims is that it is itself deflationary, not inflationary. The people I know who were being paid in crypto weren't unhappy about it at all.

So for better or worse this technology has already changed the world, it is currently changing the world and it will be changing the world even more in the near future.

To ignore this or remain unaware of it or to dismiss all things cryptocurrency entirely would be like, say, ignoring Napster, Paypal, Bittorrent and a number of other things that people have recently ignored and even laughed at.

There's also a lot of incorrect information, perceptions and/or FUD in this thread beyond statements of opinions, and some of them are coming from smart and normally readily trustworthy places.

There's no way I can attempt to correct all of them and I certainly don't have the expert knowledge or energy for it. What I can do is ask you to do your own homework, and to not necessarily take anything anyone says at face value or as correct, whether here or elsewhere.

One I would like to briefly correct is power consumption: Not all distributed blockchain networks or currencies consume as much power to function as Bitcoin/segwit does right now. There's a few that require extremely low power to operate that function just fine in a snippet of browser code or a small phone app. AFAIR Zcash is one example of low energy use, as is Ripple and Monero. Ethereum is working towards it by switching to proof of stake instead of proof of work.

But, yeah, bitcoin's power consumption is ridiculous. Apparently the bitcoin network now uses more electricity than Norway. I'm not sure if that's BTC/Segwit itself or both BTC and BCH together.

Anyway, right now there's a lot of weird shit going on. I mean, a lot more than usual.

So, one of the weird things that's going on is the continued battle between what is currently being called Bitcoin (BTC) and Bitcoin Cash (BCH) which is the results of the hard fork in the Bitcoin blockchain late last year.* (Huge side note about forks below.)

Aaaaanyway, contrary to a lot of predictions, BTC didn't exactly bull run to the moon, and BCH didn't plummet to zero. Because of friction due to high fees and network congestion on the BTC chain, people are moving back to BCH as well as to Ethereum and newer networks with less friction, fees and lag.

So on top of this, recently the Blockstream company did this kind of wild thing where they declared Bitcoin/segwit dead due to speculator capture, high fees and a lack of functionality as a payment layer, and therefore they're no longer going to support or develop their block explorer technology for Bitcoin, and they're switching those efforts to Bitcoin Cash. Except they're just going to start calling Bitcoin Cash plain old Bitcoin.

Also, the @bitcoin twitter account recently became active again and has been promoting Bitcoin Cash as the real Bitcoin, leading to a huge crash in commodity salt futures and prices. So much salt.

Oh, and about 2-3 months ago all of the investment scams and spam I was getting switched from real estate and forex autotrading to Bitcoin. They don't seem to be that aware of ICOs or alternative coins yet, but there's a hell of a sign it's a huge bubble waiting to pop, if you needed another one.

And, well, everyone I know who was involved with mining, speculating or trading Bitcoin got out of bitcoin either last year or months ago, or they're just sitting on small amounts of diversified coins that they don't care about losing, because they didn't really put any or much USD in to begin with. The huge, obvious elephant in the room is Tether, which is going to make MtGox look like a kid losing their allowance if/when it collapses.

I was actually betting on paper that BTC would have crashed harder than it did the other week and go back to prices as low as 8-9k USD. The timing was right, but there was a lot more support than I thought, and then futures started being offered and things got a little crazy.

But there's a lot of people who have put a lot in, and we're definitely in "stockbrokers getting tips from shoeshines" territory. When this bubble pops, at this point it is actually going to cause some problems. The total market capacity is large enough now to cause some weird ripples, but in this case it's going to mostly be a lot of little people that get hurt by it that bought into it as a lottery ticket. I have heard way too many stories about (mostly young) dudes that have put their entire meager life savings of 5-10k into coin portfolios and then bought entirely in to the cultish mindset of "hodling" aka just holding on to coins at all costs, which, duh, props up the market for the whales and sharks.

And it's these people along with regular folks who are following them that are going to get burned, hard.

I don't think it's going to be like the entire stock markets tanking during the Great Depression, it's more like a whole lot of people invested in a really complicated pyramid scheme that doesn't sell anything at all, and a lot of that "stored value" is just going to evaporate and get sponged up by the online wallets and exchanges, just like they're doing now.

Like a mini Great Depression just for little people, like you could get a whole class and demographic of regular folks investing in volatile penny stocks almost entirely independently of the existing stock markets.

So yeah, bubbles and tulips. But some of these tulips have weird roots that actually do things, and not all of them are simply tulips. Some are hardy, efficient and drought tolerant cacti. Others have the potential to become entire ecosystems and gardens. (I'm actually really into the concept of the Kodak ICO as a way to prove copyright and ownership for photography, and even sell photo licensing transparently.)

And all that being said, cryptocurrency and blockchains aren't likely to just go away.

Something I want to ask people to think about is a potential negative side effect that governments trying to ban cryptocurrencies may cause - a more vigorous effort or legislation against strong cryptography in general.

The only real way you could completely ban cryptocurrencies is to ban encryption technology itself, and I think people should be prepared to resist this.


(Fork footnote, because there's a lot of misinformation about what a hard fork even is for a lot of people:

A fork is essentially a vote held by the many different people operating full mining nodes to implement a new feature or two or more conflicting features. They're not easy to do on the live network and they take a lot of real world work and consensus building to make an effective fork happen.

You can even think of a fork as a branched update, or an update as an unbranched fork. The only real philosophical difference between an update or fork is whether it's unanimous or not.

Forks aren't necessarily bad, and they do not inherently destroy stored fiat or other market value. If you were holding the original bitcoin pre-fork in a private wallet or friendly/fair online wallet or exchange, you now own the same number of coins on both networks. Why not fork all the time, then? Because it's not that easy, and forking can only really happen when there's enough critical mass and voting consensus over a given issue from miners, node runners and users to support the fork.

You could make your own fork, of course. You can download the bitcoin core code, fire up a full node, code your own fork and theoretically double the number of coins you hold - one on the original chain, and one on the newly forked blockchain, but that new fork has only one node supporting it - you.

Heck, you could even code it to give yourself all the coins from that fork - aka pre-mining. At that point it's your network, you have full consensus with your node. This is, of course, pointless unless you had some use for it or some market or value of exchange. You could, theoretically, set up a town co-op blockchain for exchanging goods or services.

And this is something you can actually do on an experimental level yourself without asking anyone permission for anything. You can even do this right on the live chain. This is why decentralized distribution is baked into the Satoshi white paper and many of these later systems - so anyone can do this and try to make it better in the same way free/open source works, and the GPU works. You could put your forked code up on github, and see if anyone wants to support whatever features you added.
.
You can even set up a node and run bad code, tell it to do all kinds of naughty things and run alternative code and more - but if the nodes you connect to don't like it you'll just get blacklisted and routed around or otherwise rejected

As far as I know, no one has managed to "counterfeit" a bitcoin transaction or illegitimately create coins where they didn't exist in the chain. Thefts so far have only occurred through unsecured wallets, bad online web front end and wallet code, or outright trust violations by exchanges in control of private keys.

And, yes, people have intentionally forked bitcoin with some support or success in obvious attempts to pump and dump - see Bitcoin Gold and now, wtf, Bitcoin Diamond, like diamonds have any real value, either.)
posted by loquacious at 2:36 PM on January 14 [9 favorites]


loquacious: And, well, despite the volatility and weirdness and hassles and even the more recent high fees, if there's one thing that's been right (so far) about bitcoin's self-made claims is that it is itself deflationary, not inflationary.

As has been pointed out by others - maybe even in this thread - deflation encourages hoarding, and that's generally a negative for something aiming to be a circulating medium of exchange.

There's more than one thing about Bitcoin (in particular) which makes me think that its creator was anti-circulation. It's the crypto that's designed to be stuffed into your mattress, not used at the store. This seems a failure that's advertised as a feature.
posted by clawsoon at 3:28 PM on January 14


As far as I know, no one has managed to "counterfeit" a bitcoin transaction or illegitimately create coins where they didn't exist in the chain. Thefts so far have only occurred through unsecured wallets, bad online web front end and wallet code, or outright trust violations by exchanges in control of private keys.

Thefts have occurred, though, and they've revealed another flaw (extensively discussed in a previous thread): There's no way to reverse fraudulent transactions except by forking. Having to reset the entire money supply whenever somebody has their identity briefly compromised is not very scalable.
posted by clawsoon at 3:37 PM on January 14


I know more than one person with functioning debit cards that spend one or more coins directly from online wallets.

You sure about that?

(Unless you're using 'functioning' in a much weaker sense than I would normally understand here.)
posted by PMdixon at 3:50 PM on January 14


The only real way you could completely ban cryptocurrencies is to ban encryption technology itself, and I think people should be prepared to resist this.

I don't think that's true, and to the extent that it is, I don't think it's the whole story. It's like saying that the only way you could completely ban illicit drugs would be to ban private transportation and/or in-person economic transactions. But the partial ban is very significant. I've refrained from ever trying drugs as a result, and I'm not particularly authoritarian.

Also, the law is not the only means sovereign nations have to attack cryptocurrencies. The security of the distributed consensus mechanism is based on economic assumptions which don't apply to sovereign adversaries. It's perfectly feasible for the US or China to undermine bitcoin by 51%'ing it and erasing seemingly settled transactions from the consensus history.

For PoS, it could get trickier, if the majority of the voting power starts off in the hands of trusted agents. But now you're back to trusting someone. It does give you a more explicit representation of your trust assumptions, and that's valuable, at least.

it's these people along with regular folks who are following them that are going to get burned, hard.

People have been asking me to invest in cryptocurrency on their behalf, recently. It's pretty scary... They don't know what it is, they just know they're missing out. There's no way I'm taking that kind of responsibility on, though.

deflation encourages hoarding, and that's generally a negative for something aiming to be a circulating medium of exchange.

I think the point is that deflationary assets make good investments / trading instruments.
posted by Coventry at 4:20 PM on January 14


The ideal industry to be in if you’re technically-oriented and want to transform something into something else and have it accrue in value while you hoard it is probably winemaking.
posted by um at 4:28 PM on January 14 [3 favorites]


Went to a meetup (mainly etherium) and the tech details were interesting and there was some rational discussion of real issues, but chatting after the talk, whew, "it's trivial to do an ICO, just clone from github, the problem is advertising it".
posted by sammyo at 4:42 PM on January 14 [2 favorites]


This is reminding me of a thought that was constantly swirling around my brain a decade or so ago: Trust makes things more efficient. It can be a massive efficiency gain, if there's enough of it. We buy food from strangers; we let strangers walk around in stores without having an attendant for every shopper. We ship our stuff from place to place via strangers. We put our money in banks run by strangers. We get into taxis driven by strangers. We walk down streets full of strangers. We trust that we live in a society where we won't get drugged, stolen from, or assaulted. When one of those bad things does happen, it's a major trauma and violation of expectation.

Without that trust, we'd all have to have (or be part of) a private security force (and who knows if we could trust them). People have lived that way before - plenty of people still live that way - and it's a horribly inefficient way to live. Instead of simply doing what needs to be done, most of our energy has to go into self-protection. A lot less gets done as a result.

I'd rather live in a society where we work on maintaining and increasing - deserved - trust, than working on a system which makes the unfulfillable promise of trustless transactions. Put my transactions in a regular old database, and have a system of institutions that I can trust take care of it.
posted by clawsoon at 4:44 PM on January 14 [8 favorites]


One essential foundation of that trust is the threat of state violence. It would be nice to find ways for people to trust each other which don't fundamentally depend on that, and cryptocurrency is potentially a step in that direction.
posted by Coventry at 4:50 PM on January 14


Coventry: One essential foundation of that trust is the threat of state violence. It would be nice to find ways for people to trust each other which don't fundamentally depend on that, and cryptocurrency is potentially a step in that direction.

As I read through account after account of fraud in the cryptocurrency community (you too, Dogecoin?), it is seeming that the promise is not matching the reality.

Most of us can trust each other without the threat of state violence. Unfortunately, it only takes a small number of violent people to terrorize a peaceful population. A liberal democratic monopoly on legitimate violence isn't the perfect solution, but it's better than most of the other solutions that history has offered. (It's certainly better than the common solution of simply letting the violent minority run things at their whim.)

How a blockchain by itself prevents someone with a wrench and a mean streak from forcing you to give up your private key isn't clear to me.
posted by clawsoon at 5:15 PM on January 14 [1 favorite]


I'm writing* a piece of short fiction featuring a deep neural network whose entire knowledge base consists of Dr. Bronner labels and Compuserve archives of dudes arguing about Neuromancer. The entire story is just the AI arguing with itself about technowoo nonsense.

*Technically I'm not "writing" it, I'm just copying and pasting 80% of this thread.
posted by duffell at 5:16 PM on January 14 [7 favorites]


How a blockchain by itself prevents someone with a wrench and a mean streak from forcing you to give up your private key isn't clear to me.

It doesn't, of course, but it is allowing people to enter into financial arrangements where there threat of violence plays no part, even in the worst case. That's promising, and merits attention, development and experimentation.
posted by Coventry at 5:23 PM on January 14


I just gave an example of a financial arrangement that's not nearly worst-case where violence and blockchain were intertwined. It wasn't hard to come up with.
posted by clawsoon at 5:40 PM on January 14 [2 favorites]


My father came from a religious background which practised non-violence. They were able to enter into financial arrangements where the threat of violence played no part using state-backed fiat currency. This was possible because they refused to go to court; they refused to get the state involved in their financial transactions beyond using the state's currency as tokens.

Blockchain wouldn't have helped them do that any better. They had to trust the members of their community not to go to court. So does any cryptocurrency user, if they want to be free of the taint of state violence. There's nothing inherent in a distributed database which keeps the state out of it once one participant decides to bring the state in.
posted by clawsoon at 5:48 PM on January 14 [5 favorites]


Thefts have occurred, though, and they've revealed another flaw (extensively discussed in a previous thread): There's no way to reverse fraudulent transactions except by forking. Having to reset the entire money supply whenever somebody has their identity briefly compromised is not very scalable.

As far as I know this has only happened once with regards to dealing with a large scale theft, and it was with Ethereum and the flaws in the DAO smart contract system that was running on top of it. Ethereum has hardforked at least two other times that I know of to deal with other issues, but nothing like the DAO clusterfuck.

Ethereum is very difficult to understand and explain, but part of what makes it unique is that it is centrally controlled and developed - yet is still open source and public. There's a lot of details with Ethereum that don't translate into the same terms or concepts in Bitcoin. Comparing Bitcoin to Ethereum is like comparing a single species of sea sponge to an entire class or genus of vertebrates,

Further, Ether (the "coin" that runs on Ethereum) isn't actually supposed to be analogous to a store of value or currency like Bitcoin. It's supposed to be the token with which an individual or service can pay for the costs of distributed computations performed on its network.

There are actually development efforts to try to keep Ether's cash value suppressed because because expensive Ether breaks how the Ethereum network is supposed to function.

One of the strange things that Ethereum offers is a Turing complete virtual machine. This is what things like the DAO pool we're using to execute smart contracts. There's also now so many different services and tokens running on Ethereum as a platform it's difficult to even name them all. The DAO was just one of these smart contract systems and pools.

Many/most of these are unfortunately scams for initial coin offerings, which is what's driving up the cash price of Ether and supporting it.
posted by loquacious at 5:49 PM on January 14 [1 favorite]


There's nothing inherent in a distributed database which keeps the state out of it once one participant decides to bring the state in.

There is if the parties are in incompatible jurisdictions, for instance.
posted by Coventry at 5:52 PM on January 14


Ok, that's not the database excluding the violence, but my point is that people in incompatible jurisdictions now have a way to interact financially which doesn't need a jurisdiction at all.
posted by Coventry at 5:58 PM on January 14


One of the strange things that Ethereum offers is a Turing complete virtual machine. This is what things like the DAO pool we're using to execute smart contracts. There's also now so many different services and tokens running on Ethereum as a platform it's difficult to even name them all.

Cardano seems to be the hot new thing in this space. A recent Meetup about it in Boston was turning people away at the door due to overcapacity, at a venue which seats 600 people.
posted by Coventry at 6:08 PM on January 14


There is if the parties are in incompatible jurisdictions, for instance...my point is that people in incompatible jurisdictions now have a way to interact financially which doesn't need a jurisdiction at all

I think you are not clearly distinguishing between the casual use of "jurisdiction" to mean "any entity asserting legal authority over a particular area, or any such particular area" and the more technical use of "jurisdiction" to mean "the asserted right of a particular entity to regulate conduct." Because, under most circumstances, a person can't altogether opt out of jurisdiction asserted by a state, it's important to distinguish the two.

First, while I hesitate to say that something exists nowhere in the world, it being a big and complex place, I can't think of a situation right now of "incompatible jurisdictions" such that two parties, one in each jurisdiction (casual use), are genuinely prevented from engaging in a financial transaction in a way that cryptocoin allows them to legally evade that other methods of exchange do not. If you're talking about illegal methods of doing so, then there would never be an intention to enforce the terms of the transaction through state power anyway, and hence no expectation of invoking a particular state's jurisdiction (technical use) to do so.

Second, you're always going to need a jurisdiction (technical use) because you're always going to need to convert the cryptocoin to a state-backed currency or to goods and services, and, inasmuch as coke or hookers or really awesome kicks aren't on a blockchain ledger, that transaction is going to have to be regulated by somebody. In fact, cryptocoin enthusiasts seem to get over their aversion to state regulation of transactions quite quickly when it's an exchange holding their coins that evaporates into thin air.

Third, whatever financial transaction you have in mind, the odds that no state entity is going to operate on a theory that would allow it to assert jurisdiction over the transaction are very low. That the funds involved are denominated in Bitcoin really has no effect on that. If someone can invoke state power, sooner or later, someone will invoke state power. A court with appropriate jurisdiction can order a person to refund a payment, can order an exchange to freeze assets, can even toss someone in jail if sufficiently provoked. There are (drastic) means of evading these orders, but they're the same means employed by scammers who deal in state-backed currency.

If you're an American who wants to buy, oh, cigars from Cuba, cryptocoin may provide a means of doing so that is more difficult to detect than if you tried to place a credit card order from a U.S. address to Cuba. But, in terms of the legal implications, it's no different than sending a suitcase full of money. Neither of you would attempt to invoke state power to enforce the terms of the contract, because the subject itself is illegal. But the U.S. government will certainly have an opinion on whether you (the U.S.-based person) are entitled to enter into that contract at all and will feel quite comfortable attempting to enforce that opinion. And for the cryptocoin to be worth anything to the Cuban, such that he will be willing to exchange cigars for it, he's got to be confident that his exchange can't simply walk away with his money instead of converting it to Cuban currency, or that, if he gives the coin to someone in exchange for groceries, that that contract can be enforced.
posted by praemunire at 9:56 PM on January 14 [4 favorites]


Government tax offices have already issued guidelines about crypto-currencies, or are in the process of doing so. Currently, crypto is most frequently regarded as a form of property, and thus subject to capital gains tax. State involvement (along with the 'threat of state violence') in crypto can be assumed the moment people try to engage in any transaction using it.
posted by um at 11:24 PM on January 14


You buy something. The seller takes your money, but does not give you the thing. What do you do?

You sell something. The buyer takes the thing, but does not give you the money. What do you do?

You put the money in escrow. The escrow manager absconds with it. What do you do?

There's only one completely non-violent response: Turn the other cheek*. Whether you're using fiat or crypto, you can turn the other cheek. Whether you're using fiat or crypto, you can't make sure that everyone turns the other cheek.

*And then let others know what happened so that they can shun the person who ripped you off. That's the practical solution used in many functioning non-violent communities, anyway.

There is if the parties are in incompatible jurisdictions, for instance. ... Ok, that's not the database excluding the violence, but my point is that people in incompatible jurisdictions now have a way to interact financially which doesn't need a jurisdiction at all.

That doesn't remove violence, it just moves it from the state sphere back into the private sphere. The theoretically borderless nature of cryptocurrencies means that it can also be used to pay for a cross-border hit on you. And the theoretical anonymity of some cryptocurrencies doesn't help you in that situation; if someone has the ability to send goods to you, then they have the ability to track you down.
posted by clawsoon at 4:02 AM on January 15 [2 favorites]


This morning's Guardian has an article, So You're Thinking of Investing in Bitcoin? Don't which is a kind of bitcoin for dummies thing. The slant of the piece is clear from the title.

There's two statements made which I cannot reconcile. 'We need to separate the usefulness of the underlying technology called “blockchain” from the mania of people turning bitcoin into a big dumb lottery. Blockchain is a computer protocol that allows two people (or machines) to do transactions (sometimes anonymously) even if they don’t trust each other or the network between them.' This point is made again and again in all discussions on bitcoin. As I understand it, the great innovation of blockchain is to do with the unbreakable security of transactions under conditions of anonymity?

'even safely storing it is difficult. Bitcoin exchanges such as Mt Gox in Japan, Bitfinex and various other wallets and exchanges have been hacked.' Woops, look like I was wrong about unbreakable security. The blockchain can be hacked, or... the thing the blockchain records can be hacked? Can anyone explain how the promise of blockchain remains untarnished in spite of known bitcoin security breaches?
posted by glasseyes at 4:19 AM on January 15 [1 favorite]


glasseyes: The blockchain can be hacked, or... the thing the blockchain records can be hacked? Can anyone explain how the promise of blockchain remains untarnished in spite of known bitcoin security breaches?

I believe - and someone please correct me if I'm wrong - that no-one has ever been able to counterfeit a bitcoin, or create a fake record in a blockchain. They've been able to steal bitcoins, though. No-one has been able to deposit counterfeit bills into a bank, but they've been able to steal real bills from a bank.
posted by clawsoon at 5:42 AM on January 15 [5 favorites]


Thanks
posted by glasseyes at 5:48 AM on January 15


Going more specific than clawsoon: BTC are owned by wallets, which are in some sense just private keys. In the simplest case, if you had a wallet that had no passphrase/other encryption on the wallet itself, someone with access could just copy the file and spend the coins therein before you do.

So now you have valuable data that, if you're a realistic end-user or just read Bruce Schneier, you know that you are not as good at protecting as others are at exfiltrating. So you want to give it to a third party to protect on your behalf.

For reasons that I believe are entirely to do with the high cost of on-chain transactions, the way this plays out in practice is not that you give your wallet over to a third party and continue to transact out of the individual wallet, with the third party being something analogous to a safety deposit box. Instead, the model is that you transfer the on-chain ownership of the assets in your wallet to the third party's wallet in exchange for an unenforceable claim to get it back --- so now we're looking like demand deposits in an unregulated bank. You are transferring an asset (the BTC) from your balance sheet to theirs in exchange for an asset issued by them (the claim on the BTC you just gave them). From that point on, no transactions are recorded on the block-chain until you/someone else withdraws BTC from the bank/exchange.

The fact that this exchange involves a great deal of trust in the third party is something that continues to evade people even to the present moment. (Here's some relevant r/bitcoin hilarity on that topic in which they correctly explain the problem and then decide they can solve it by bootstrapping, basically.) This is somewhat surprising considering that one of the supposed selling points of crypto is the removal of any uncertainty induced by the need for trust, so a naive observer might think people would at least generalize that analysis beyond the traditional banking system.

But there's a really strong desire to have all of the convenience/speed provided by the slack of a fractional reserve banking system without doing all of the work to make such a system workable --- there's a deep ideological commitment to full-reserve banking underlying most of the crypto currencies without an understanding of what that tradeoff would actually mean. So you end up with what people have called 'islands of liquidity': Transactions within the same entity's balance sheet happen at a speed people are happy with, but moving assets between balance sheets is painfully slow. This is one of the reasons that the inter-exchange spreads are so wide. Periodically it turns out that one of the balance sheets people have been pretending is/is like a blockchain turns out to have been getting cooked and then there's a bunch of shocked face followed by no lessons whatsoever being learn.

If your reaction to this is that people have taken the security model that they tout as one of the major selling points and made it de facto irrelevant, you are correct. This could be fixed but not as long as some large fraction of the people involved in the project have less trust of the entire concept of credit than any given medieval Pope you could ask, for less coherent reasons than said Pope could give.

Whether the fact that, in favor of placing the trust in balance sheet management and oversight that comes with participating in a (regulated by a central bank) fractional reserve banking system, crypto-boosters are instead choosing to place trust in completely unbacked promises by random people on the internet (who, say, were up until last week running a MTG Online card exchange) to return the valuables just signed over to them in an irreversible-by-design transaction is Alanis-ironic or the other kind is left as an exercise for the reader.
posted by PMdixon at 7:22 AM on January 15 [8 favorites]


Yes, not believing in transactional obligation networks seems to be a serious impediment to recreating a workable structure for operating one. Strange.
posted by glasseyes at 7:44 AM on January 15 [1 favorite]


Thanks for the link, I'm finding it hard to believe it's neither satire nor trolling.
posted by glasseyes at 7:47 AM on January 15


I can't think of a situation right now of "incompatible jurisdictions" such that two parties, one in each jurisdiction (casual use), are genuinely prevented from engaging in a financial transaction in a way that cryptocoin allows them to legally evade that other methods of exchange do not

I strive to live peacefully, so I'm not interested in evading the law. I am interested in contracts and other social arrangements which potentially don't require the law to function. I apologize for any confusion caused by the relatively short posts I sent from my cell phone last night.

Turn the other cheek [And then let others know what happened so that they can shun the person who ripped you off. That's the practical solution used in many functioning non-violent communities, anyway.]

I think there's a way of formalizing that process via reputation and prediction markets. (Augur/REP, mentioned in the original NYT article, is a prediction market.) I think that's a development worth supporting. (I own a fair bit of REP.)

The theoretically borderless nature of cryptocurrencies means that it can also be used to pay for a cross-border hit on you.

I'm not claiming that cryptocurrencies will end violence, or that they can't be used for violent ends. I'm interested in crypto-based arrangements which don't depend on violence as a boundary condition, or at least push that boundary further back.

(Here's some relevant r/bitcoin hilarity on that topic in which they correctly explain the problem and then decide they can solve it by bootstrapping, basically.)

I do agree that things will always be messy at the interface with fiat currency, but I'm not seeing the hilarity, here. Exchange risk is orders of magnitude larger than it needs to be because there's an incentive to keep assets on the exchange for responsive trading. A decentralized exchange can drastically reduce that risk by making it feasible to only trust the exchange at the point of transfer to fiat currency. It's a serious idea with, I believe, multiple working implementations (not something I've followed closely.)
posted by Coventry at 9:19 AM on January 15


A decentralized exchange can drastically reduce that risk by making it feasible to only trust the exchange at the point of transfer to fiat currency. It's a serious idea with, I believe, multiple working implementations (not something I've followed closely.)

No trader worth the name is going to sign up to have their trades de-anonymized, including counter-parties. Both for legit reasons and non. If I know your trades, I can reverse engineer your strategy, by and large. And then if it's a good one and I have more liquidity than you, I will eat your lunch.

Plus it means I can't do fun stuff with wash trades to manipulate prices/PnL any more.

Decentralized exchanges are a non-starter if you want price discovery to happen, and they're definitely a non-starter when the competitor is centralized exchanges that let you get away with as much market manipulation as you want.
posted by PMdixon at 10:45 AM on January 15


Turn the other cheek [And then let others know what happened so that they can shun the person who ripped you off. That's the practical solution used in many functioning non-violent communities, anyway.]

And then I say no, no, no, YOU defrauded ME." And because I have your money, I can afford more advertising and influence buying. And because I have the money and influence, you end up as the one being shunned. That's how it actually usually works.

I think there's a way of formalizing that process via reputation and prediction markets.

So I create a bunch of user accounts that exist only to say how wonderful I am. I also get a bunch of sycophants who's job it is to publicly touted how wonderful I am. Absent extreme edge cases, it's easy to game reputation markets.
posted by happyroach at 10:57 AM on January 15 [4 favorites]


Relevant link from FT's Alphaville (sign-up wall): The Bitcoin drugs trade is highly centralized
posted by PMdixon at 1:07 PM on January 15




happyroach: And then I say no, no, no, YOU defrauded ME." And because I have your money, I can afford more advertising and influence buying. And because I have the money and influence, you end up as the one being shunned. That's how it actually usually works.

Yep. And don't be surprised to find the same thing happening in non-violent religious communities, too...
posted by clawsoon at 4:33 PM on January 15 [1 favorite]


I hope some of the posters upthread will comment on the link Brian P just posted immediately above. I am no expert, and I really don’t have any horses in this race, but it seems that for a currency to be useful, its value needs to not swing all over the place, or be grossly manipulatable by individual actors.
posted by newdaddy at 4:37 PM on January 15


newdaddy: ...it seems that for a currency to be useful, its value needs to not swing all over the place, or be grossly manipulatable by individual actors.

That reminds me of Jacques Parizeau's discussion of what currency an independent Quebec should use:
In the 1990s a great many monetary instruments were concocted. Short-term movement of international capital increased exponentially. At times or on specific days, the movement of Canadian dollars would represent thirty or forty times the value of commercial trade leading to extremely volatile exchange rates. Creating a new currency in that context meant taking an enormous risk. Since the climate could be expected to be hostile, a new currency could be demolished within days. It was much better to declare that the Canadian dollar would be maintained.
And that's a $350 billion per year economy.
posted by clawsoon at 5:03 PM on January 15


I hope some of the posters upthread will comment on the link Brian P just posted immediately above. I am no expert, and I really don’t have any horses in this race, but it seems that for a currency to be useful, its value needs to not swing all over the place, or be grossly manipulatable by individual actors.

A: What is described is entirely plausible, though I'm not going to double check their work to say they're definitely right. But the general scheme has widely been speculated as what happened to MtGox, they did the scut work of following the transaction chains to confirm it.

B: If you think that's bad, check out bitfinex and tethers

C: You are correct! A useful currency cannot behave like that, and a tradeable commodity cannot have order books so thin that these types of price manipulation are possible, let alone profitable. This was referenced in an earlier thread. When there are very few orders in the books, it doesn't take especially deep pockets to buy all the offers up to a given price, especially because at some point you start hitting empty price levels that don't even cost you anything to blow through. As well lots of easy easy easy market manipulation schemes, both on the part of the exchanges and 'market participants', are not just speculated but openly advertised to be happening. (Spoofing, layering, etc)

D: The reason that the ridiculousness has taken the form it has, of a giant price run up, is because people decided that the thing to do with a currency that is ostensibly all about removing the need for trust is to entrust it to third parties with no due diligence whatsoever, enabling those third parties to play fun games with the float.

E: This will end in tears, the question is whose and how many. As someone said above I'm more worried about the woman who had to leave early because parking is too expensive downtown.
posted by PMdixon at 5:06 PM on January 15 [1 favorite]


...it seems that for a currency to be useful, its value needs to not swing all over the place, or be grossly manipulatable by individual actors.

It's another reason why Bitcoin will likely never be adopted beyond its use now as a ransom or stored value for illicit conveyance, or as a refugee stash. It's also slow and expensive to trade when compared to its main rival, Litecoin, which sells at the same exchanges and is valued at about 1/60 of the price of Bitcoin. Though there are three times the number of Litecoins, they should be relatively close, if not equal, because their value as a medium of exchange is their ease of use. What we are seeing is not only manipulation, but a media effect of repeating Bitcoin over and over to represent a class of assets. The simple unrealized truth seems to be that in the digital age, reversing theft in a central ledger is not only far superior than not, but it just may be the only reason no foreign state hasn't stolen everything from us yet.
posted by Brian B. at 6:35 PM on January 15


No trader worth the name is going to sign up to have their trades de-anonymized, including counter-parties.

I don't think the space cares much about traders.

you end up as the one being shunned. That's how it actually usually works.

All reputation systems can be gamed, yes. They're still important, and worth studying and improving.

I am no expert, and I really don’t have any horses in this race, but it seems that for a currency to be useful, its value needs to not swing all over the place, or be grossly manipulatable by individual actors

I'm sure people have said similar things about various stock markets at times. If that were the standard, no new financial arrangements would ever take root. I completely understand where you're coming from, though. There have been a few times where I would have liquidated everything, if it weren't for Mrs Coventry (not her real name)'s suggestion to hold on to a bit of it.

I'm not going to double check their work to say they're definitely right.

I saw a talk by one of the researchers in the Summer. It's pretty convincing. The most gobsmacking thing was that the exchange was probably insolvent when Karpeles bought it.

This will end in tears, the question is whose and how many. As someone said above I'm more worried about the woman who had to leave early because parking is too expensive downtown.

This is true. But it won't be the first time, and won't be the last.

The simple unrealized truth seems to be that in the digital age, reversing theft in a central ledger is not only far superior than not, but it just may be the only reason no foreign state hasn't stolen everything from us yet.

What do you mean?
posted by Coventry at 7:44 PM on January 15


What do you mean?

The risk of theft and incidental loss is higher in the digital age and in need of many safeguards after the fact, while proponents of most digital currencies have gone the other direction to sell the feature of immutability instead. Only a disreputable vendor would want the latter.
posted by Brian B. at 8:24 PM on January 15 [1 favorite]


Bitcoin: The Bubble.
posted by Coventry at 10:18 PM on January 15 [1 favorite]


I just noticed NEO's price. There's a certain someone lurking in this thread who must be very happy. :)
posted by Coventry at 10:24 PM on January 15


I don't think the space cares much about traders.

The space does if it wants someone to be there to make markets.
posted by PMdixon at 11:02 PM on January 15


I'm sure people have said similar things about various stock markets at times.

Stocks are not currencies, nor are they treated as such. You're at the point of saying "Well, instead of kroner, why don't we use tulip bulbs as currency?"
posted by happyroach at 9:57 AM on January 16 [2 favorites]


In their early days, stock markets were sites of massive hope and fraud, just like cryptocurrencies are today. Regulatory institutions grew up around stock markets to cut down a bit on both the hope and the fraud. Cryptocurrencies will probably become useful once they're surrounded by similar institutions.

That's the irony: The promise of cryptocurrencies was that they wouldn't need institutions. But they will.
posted by clawsoon at 10:31 AM on January 16 [2 favorites]


The promise of cryptocurrencies was that they wouldn't need institutions. But they will

I prefer to think of it as my being given the opportunity to watch the 19th century history of money replayed at something like 10x speed.

(As always, it's all to be found in Bagehot. There is rarely something new under the sun.)
posted by PMdixon at 11:55 AM on January 16 [2 favorites]


So, about Dentacoin...
posted by Bugbread at 4:29 PM on January 16 [1 favorite]


I totally want to gloat a little that my guess that BTC was going to go sub 10k before the end of Jan finally happened. (See comment upthread) I've managed to peg a lot of runs and dumps over the last year on about 5 different coins with a mix of gut feeling, watching general mood and news on the boards.

I've also been aware just from watching fast/detailed charts for BTC and other coins it's been super stupid obvious that there are major whales and exchanges or whatever trading cabals manipulating the hell out of things and moving the price basically wherever they want it. There's no reason why this wouldn't be a thing in multiple places and multiple competing cabals/groups.

And I'm just some shlub and armchair nerd and all that, but back in the late 1990s I lived with someone who (in-advisably) was paying for a satellite Bloomberg terminal and something like 15 minute data on major commodity and forex exchanges back when that was pretty fast for some random dude that didn't know what he was doing. Yeah, he wanted to be a commodity trader.

I spent a good 6 months at that remote house messing around with the data and doing some paper trading with it and did really well on paper using a mix of the terminal, general internet news and instinct/feel. I had a good head for general world events, weather, paying attention to labor issues and all that stuff that makes for a good generalist trader, and I was starting to play around with automated/scripted trade programming, because even as non-material as I am, I also loved the idea of some random robots making a crapton of money for me pretending to buy and sell orange juice and coffee.

I'm also self-aware enough that this instinct and dumb luck tends to go to pieces as soon as I think about putting down real money, or even being responsible for someone else's bank. It's really hard not to be emotionally involved and stressed out.

It's also kind of more fun watching crypto from the outside and fairly obvious market corrections happening and people freaking out about it like gravity isn't a thing.

I would argue that the top 10-20 coins are at least still 3-4x overvalued and running on hype, and that the real price floor as it were is a lot lower. The rest of the coins I've seen are worth much, much less and show it in history graphs of wild pump and dump swings and atomic/paired trading.

I know the other snarky answer is "well, duh, they're worth nothing", but I'm basing this 4x overvaluation judgement on a web of parameters like network function, congestion, fees and related frictions caused by higher priced coins and speculation like this - which is a huge elephant in the room not being addressed by cryptocurrency as a whole.

Everyone wants their coins to rocket off to the moon, but they don't realize or stop to ask what that means for everything from hardware prices to network congestion due to increased trading, to capture by greed and interested parties in the dev cycle. And this is something that makes cryptocurrencies a lot different in market behaviors, that there's these complicated factors like network speed and adoption in play, that an overvalued coin can destroy itself, that usual models and metrics of performance for things like stocks, commodities or currency may not apply or fit very well.

But many things do, and when gold is discovered nearby, suddenly the price of picks and shovels goes way up.

There's been a number of discussions and points made by the Ethereum developers along these lines, and I've seen multiple statements that they really want to see Ether's USD value kept down around 200ish or less because it keeps the price of "gas" down to power the computational side of the network and make projects happen at affordable prices, not just fuel pump and dump ICOs. (I'm not saying this works, just relaying the info and philosophy I've heard and interpreting a little.)
posted by loquacious at 4:49 AM on January 17 [2 favorites]


Via r/buttcoin:
Important: We are only talking about HYIPs here, not ponzi schemes or straight up scams. | There is a important difference | An HYIP is actually paying interest, but is based on an unsustainable model. Every HYIP turns into a scam after its breaking point - but until then, it is a real, paying investment with real profit.
Points for sheer brazenness, I guess.
posted by clawsoon at 6:08 AM on January 17 [2 favorites]


This Twitter thread from Verge senior writer Sarah Yeong is pure gold.
posted by pharm at 7:12 AM on January 17 [5 favorites]


That r/buttcoin link from clawsoon has a screenshot of an exchange meltdown, with suicide hotline numbers for advice.
posted by Brian B. at 7:34 AM on January 17


and show it in history graphs of wild pump and dump swings and atomic/paired trading.

Every top coin going up and down the same percentage each day since the bubble last month is indeed suspicious. I think the memo is out that nobody is going to use these as serious currency, therefore not important as a investment. There was an interesting quote in a forgotten interview last month, where a financial analyst said that the payment industry studied cryptocurrency and concluded their existing system was much better. Never underestimate decades of hard work.
posted by Brian B. at 7:51 AM on January 17 [3 favorites]


This Twitter thread from Verge senior writer Sarah Yeong is pure gold

I know it's a derail, but I'd like to understand the bit about hiding her Twitter rant from her bf... Is she worried she's supposed to be paying attention to him instead? Does he not read Twitter?
posted by Coventry at 8:30 AM on January 17


Is she worried she's supposed to be paying attention to him instead?

I think it's more like chagrin to be caught up in a "someone is wrong on the internet" situation.
posted by mhum at 8:46 AM on January 17 [3 favorites]


Also, I see the BitConnect ponzi has finally closed up and headed for the exits.
posted by pharm at 8:53 AM on January 17 [1 favorite]


(That’s the thing that Brian linked to above: Not really an exchange, more a vehicle for fleecing the naïve out of their hard earned cash. Oh wait, who am I kidding. they’re all vehicles for fleecing the naïve out of their hard earned cash.)
posted by pharm at 8:55 AM on January 17 [1 favorite]


I didn't really know what Bitconnect was all about so I found this video of a Bitconnect event was helpful. It may be, um, slightly edited.

When I posted this NYT Style article here I was hoping for yet another tedious discussion of The Meaning of Money, but it seems unavoidable when Bitcoin shows up around here. I liked the article because it gets at the culture of Bitcoin, the kinds of folks who are living the cryptocurrency lifestyle 24/7. Unfortunately it turns out to be nothing nearly as interesting as say, Boiler Room or Glengarry Glen Ross.
posted by Nelson at 9:16 AM on January 17


It doesn't capture the culture of the cryptocurrency meetups in Boston, FWIW. Perhaps I'm just not being invited to the best ones.
posted by Coventry at 9:28 AM on January 17


I liked the article because it gets at the culture of Bitcoin, the kinds of folks who are living the cryptocurrency lifestyle 24/7. Unfortunately it turns out to be nothing nearly as interesting as say, Boiler Room or Glengarry Glen Ross.

I kind of....refrained from discussing the "culture" displayed in the article, because I felt that it seemed what you might call characteristic and I felt like it was difficult to say things that were not pointlessly mean.

Mr. Hummer went out to meet Joe Buttram, 27, for drinks. As a mixed martial arts fighter, Mr. Buttram said he would fight for a couple hundred bucks, sometimes a few thousand, and worked security at a start-up, but his main hobbies were reading 4chan and buying vintage pornography, passions that exposed him to cryptocurrency.

and

“Right now all our entertainers come from outside crypto culture — not inside crypto, and we’ve got to change that,” he said.

struck me in particular, the first because of course his hobbies are 4chan and vintage porn, and the second because it's impressively fratty and cult-like. I mean, I've spent plenty of time in fairly insular political circles, and the idea that our entertainment should be exclusively from our tiny world would never have flown.

Also because it just seems sorta Trumpy, culturally. Of course you'd have chintzy novelty sweaters and comedy costumes and memes and collect porn and lysol wipes for your primary hobbies - the other option is ugly, ill-fitting suits and gold toilets, right? Like the only world left to live in is a dead world - no nature, only fitness and personal trainers; no interiority, only "different level" consciousness; no organizing, just fantasy about how we're going to "get rid of armies" and have a "global order"; no art, craft or noble materials, only pictures of Lamborghenis. Like someone forced you to live inside Grand Theft Auto but it's still all only pixels.
posted by Frowner at 10:29 AM on January 17 [5 favorites]


Well, the one person I know who'll admit to being a "crypto millionaire" is a retirement-age female who thinks Trump is a disgusting human being.

The meetings I've been to involve a powerpoint presentation, a discussion, and maybe continuing the discussion over a drink at a bar afterwards. Maybe that says more about my predilections than the community. There was some crypto christmas party I skipped last week...
posted by Coventry at 10:54 AM on January 17


Huh. How was Bitconnect supposed to work? A little bit of googling suggests that they were claiming to pay "interest" on (I think) the Bitcoins you sent them and also claiming hilariously and implausibly high interest rates. But where were they supposed to be getting the money to pay this interest? I mean, the most likely actual answer is that they were paying out returns (at least in part) out of new investments Ponzi-style. But what was the plausible cover story for this?
posted by mhum at 1:34 PM on January 17


I mean, I think the culture-of-Bitcoin as displayed in this article (leaving open the possibility that other milieux are different) is pretty much the apotheosis of the World As It Is, the Internet of Shit.

The best thing you can have is an expensive car or a date with a model, and first you need a LOT of money. The best thing you can do is move to post-storm Puerto Rico so that you can avoid paying taxes. The best things you can wear are intentionally ugly, chintzy things because other people on the internet are out to knife you and one way to get around that is to control your own uglification. And of course, the desire for sort of a macho immortality - got to do that personal training so that you can have the muscles so that you can imagine that if you do get the money and the date with the model, your performance in bed would be video-worthy if it were videotaped, because what's important is how you look to your audience of Pepe-sters, or how you imagine you look.

Everything that a tabloid wants you to want, everything you'd need if you were to be a tabloid star, always getting to behave like a spoiled child, always having to behave like a spoiled child, profoundly alone because your primary goal is to avoid the kind of actual responsibility which sometimes requires you to do things that you genuinely don't want to do. Everything exactly as it ought to be for the internet age, like what's important about being a person is to be the best possible device for moving money and likes around the internet.
posted by Frowner at 1:37 PM on January 17 [4 favorites]


what was the plausible cover story for this?

There was no plausible cover story. I tried to tell people who were wrapped up in it that it was a blatant ponzi scheme, but couldn't get through. Perhaps I was too polite.
posted by Coventry at 1:39 PM on January 17 [1 favorite]


But what was the plausible cover story for this?

I think it may have been related to the bit I copy-pasted upthread, where they described a Ponzi scheme and then said it wasn't a Ponzi scheme. That seems to be it, really.
posted by clawsoon at 1:40 PM on January 17


Poorly educated people often allow their beliefs to be trained by initial successes (like Ponzi interest payouts.) I saw the same thing prior to the housing crash. Unfortunately, even most highly trained people are poorly educated in this regard.
posted by Coventry at 1:43 PM on January 17


Maybe not most, but many.
posted by Coventry at 1:48 PM on January 17


There was no plausible cover story.

Ok, maybe "plausible" isn't quite the right word I was looking for. I mean, they couldn't just have been saying "give your money to us and we'll give you back a bit more money that we're going to take from some later sucker", right? A bit more googling turns up this medium article which gives a little more color. It seems like the cover story involved some kind of Bitcoin "trading bot" and, I guess, paying out the gains from this trading bot as "interest". Which, of course, raises the question of why they needed outside investment at all if their bot was so good at generating returns. There's some further information in that article about how they would take deposits in Bitcoin but pay out "interest" in Bitconnect coins, which of course they had pre-mined a ton of and also are a "proof of stake" rather than "proof of work" coin which opens up even more opportunities for shenanigans. So, I guess it might have been slightly more complicated than a straightforward Ponzi scheme but still, at heart, a Ponzi scheme.
posted by mhum at 2:13 PM on January 17 [2 favorites]


Yes, it was a magical trading bot. I couldn't get a reasonable answer to "Why do you think that bot is going to do a better job of trading than you could yourself?" The reasoning was "It's paying out, so it must be working."
posted by Coventry at 2:19 PM on January 17 [2 favorites]


I read some of the /r/bitconnect discussion for schadenfreude purposes and about half the people there seemed to know it was a Ponzi scheme but were hoping they could cash out before it collapsed.

I think the theory was that somehow you were gambling arbitrage in the rate of appreciation of different cryptocurrency. The other complaint on /r/bitconnect was that they were only seeing 30% appreciation of their deposits at the same time that Bitcoin was going up 80%. Arguably that would be a legitimate business model for Bitconnect (they pocketed the missing 50%), but also an insanely risky one.

Turns out "con people into giving you money, then run away with it" is a much simpler strategy to pull off.
posted by Nelson at 2:55 PM on January 17 [1 favorite]


Arguably that would be a legitimate business model for Bitconnect (they pocketed the missing 50%), but also an insanely risky one.

It's probably not a coincidence that they shut down on a huge down day.
posted by Coventry at 3:08 PM on January 17


I have no idea what a tether is, but it's making noises like it'll be the next scam to blow up.
posted by clawsoon at 3:59 PM on January 17


Tether is another crypto coin. Bitfinex claims they are 1:1 backed by USD, but there's no evidence of such and the sheer volume of Tethers in existence, combined with the fact that they came into existence when Wells Fargo cut Bitfinex off from USD liquidity, suggests that they're printing monopoly money that the idiots are willing to believe is equivalent to dollars and in the process causing the huge run-up in BTC/USD since November.

Also there's a bunch of wash trades and other sketchy stuff that amounts to price manipulation. It's honestly too depressing for me to get too deep into the weeds --- and I like watching a train wreck.
posted by PMdixon at 4:12 PM on January 17 [2 favorites]


Tether is actually useful in some situations, where you've got more assets on a non-fiat exchange than you're allowed to withdraw and you want to reduce your exposure to crypto prices. I think that's the reason the USD price of tether rose to $1.07 yesterday. But yeah, it's sketchy as hell and those are the times when the risk of tether collapsing is greatest, so you'd better be playing with house money.

I heard of another "stablecoin" idea recently where the key assumption was that the organizers would always be available as the buyer of last resort because they'll be keeping their assets in crypto, and crypto/fiat prices keep going up. It was shocking to actually hear someone say that out loud.
posted by Coventry at 4:36 PM on January 17


The meetings I've been to involve a powerpoint presentation, a discussion, and maybe continuing the discussion over a drink at a bar afterwards. Maybe that says more about my predilections than the community. There was some crypto christmas party I skipped last week...

Coventry, I imagine you're feeling what a normal florist felt like during the Tulip Mania.
posted by clawsoon at 4:37 PM on January 17


I'm sure they couldn't believe their luck, either.
posted by Coventry at 4:39 PM on January 17 [1 favorite]


The worry with Tether is not so much a Ponzi scheme fraud like Bitconnect. It’s that it’s a fake asset which underlies a lot of the crypto economy. If Tethers blow up somehow, many of the exchanges will also blow up. If Tethers are not worth $1 each (and they’re not), a lot of exchanges are insolvent.
posted by chrchr at 4:41 PM on January 17 [2 favorites]


If Tethers are not worth $1 each (and they’re not), a lot of exchanges are insolvent.

Oh shit, if I'm reading correctly, if/when this blows up, it's not going to blow up like a Ponzi scheme but actually much more like one of the main components of the 2007 global financial crisis -- specifically, the markdowns of all those mortgage-backed securities. Like, a whole bunch of people thought the stuff they were holding was worth $1MM and also got a whole bunch of other people to agree that yes, that stuff you're holding is indeed worth $1MM and then structured a whole bunch of other financial stuff based on the premise that that stuff was worth $1MM. But, then suddenly that stuff is found out to be worth, like, only $10K (oops) and then set off a whole series of unfortunate events. So, I guess the fallout from a Tether bust will depend on exactly how much of the Bitcoin economy is really tied to the premise that a Tether is worth exactly $1USD.
posted by mhum at 6:27 PM on January 17 [3 favorites]


There is a fun twitter feed that reports every time Tether materializes new money.

To believe that Tether is real, you have to believe that someone gave Tether real, green American money for every one of these events.
posted by chrchr at 8:29 PM on January 17 [2 favorites]


Hang on. According to this, there are 1.65 billion (with a 'b') Tether tokens out there. We're just supposed to believe that these yahoos have $1.65B USD just parked somewhere? Where did they even get over a billion and a half dollars?

Y'know, for a system that's not supposed to depend on centralized organizations or even mutual trust, this system seems to depend an awful lot on trust in centralized organizations.
posted by mhum at 9:16 AM on January 18 [2 favorites]




I don't have a lot of experience reading audits so I don't know if the following tidbits are just totally normal or wild red flags or somewhere in between:

1) The names of the banks are blacked out. Presumably, these aren't the bank equivalents of Hollywood Upstairs Medical College but who's to say.
2) "FLLP did not evaluate the terms of the above bank accounts and makes no representations about the Client's ability to access funds from the accounts or whether the funds are committed for purposes other than Tether token redemptions." Alright, so the money's in the bank, but we can't say if someone else has any claim on that money.
3) This is a single snapshot as of Sept. 15. This, I think, sounds pretty normal overall but given the generally, shall we say, unorthodox financials of cryptocurrency businesses, I'd really prefer to know that that money was also there on Sept. 14.
posted by mhum at 12:43 PM on January 18 [1 favorite]


Totes normal.

No wait, that would be ludicrous. Since it’s not an audit and this is crypto, they seem to be able to get away with ludicrous sadly.

To my knowledge there have been no published audits of Tether that would constitute an audit that would be acceptable if they were, say, a UK plc. The memoranda that have been published have merely confirmed that a bank account controlled by the company in some unspecified way had a large sum of $ in it on the day in question. Whether that sum was there the day before, or the next day, is unspecified. Whether the company carries matching liabilities apart from issued Tether elsewhere on it’s balance sheet is also unspecified.
posted by pharm at 1:20 PM on January 18 [2 favorites]




Apologies if this has already been linked, but: The official BitConnect song.
posted by Bugbread at 10:56 PM on January 18


« Older Butter me up!   |   It’s never aliens, until it is Newer »


This thread has been archived and is closed to new comments