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Thread: Crypto Madness

  1. #1

    Default Crypto Madness

    Surprised there has not been much discussion here of cryptocurrency. I'm also always surprised to find out who I know actually owns it. None seem to own it because they believe (or can articulate) any particular use for various aspects of the tech.

    Does anyone here have a strong bull/bear case for it?

  2. #2
    Quote Originally Posted by Dreadnaught View Post
    Surprised there has not been much discussion here of cryptocurrency. I'm also always surprised to find out who I know actually owns it. None seem to own it because they believe (or can articulate) any particular use for various aspects of the tech.

    Does anyone here have a strong bull/bear case for it?
    I own bitcoin in Blockfi (interest bearing, and sounds like recent regulatory change will allow me to keep it that way but not add to the interest bearing account) and then also have a sizeable position in my Roth IRA in GBTC which is a reasonable proxy for it. I'm pretty certain that by the time I retire (20+ years) a single bitcoin will be around a million USD. I could be wrong and the bulk of the money I have invested is via my 401k in traditional funds so not really the end of the world if I'm wrong. Bitcoin is the crypto currency of choice and is the most resilient blockchain. For all I know I could drop to 10k next year but it wouldn't just my long term belief that it will eventually rise to new heights. Recent geo-political stuff has made me even more bullish for a way to transfer currency outside of banks and other entities that could be made to obey governments.

  3. #3
    Quote Originally Posted by Dreadnaught View Post
    Surprised there has not been much discussion here of cryptocurrency. I'm also always surprised to find out who I know actually owns it. None seem to own it because they believe (or can articulate) any particular use for various aspects of the tech.

    Does anyone here have a strong bull/bear case for it?
    There have been several threads and discussions, all of which tend to devolve into soap operas where Wraith complains about Wiggin.
    "One day, we shall die. All the other days, we shall live."

  4. #4
    Alright, godamnit. Fuck. Basically? Scams within scams within scams.

    The fundamental problem with crypto is that, as technology, the blockchain is just... well, it's very bad. I wouldn't go so far as to say it has no uses, there may indeed be a situation where a slow ass append-only distributed ledger is the most optimal solution to some problem, but it's hardly something that's going to crop up in day to day life. Here's why blockchain is bad medium for digital cash:


    • It's append only. This means that any crypto transaction is irreversible. Basically a deal breaker all on it's own. Someone hacks your account and takes your money? You have no recourse. You get scammed? You have no recourse. You buy something with Bitcoin, and they either don't send you anything or send you something defective? No recourse. Someone breaks into your house and forces you to disclose your account password with a blowtorch? No recourse. (and this has actually happened to people, it's not a theoretical scenario). You send your money to the wrong address by accident, or a non-existent address? No recourse. At a stroke, bitcoin as an exchange medium achieves the complete and total destruction of any form of consumer protection as well as a good portion of the tools used to combat fraud. This is the main reason the crypto world is so riddled with scams and cons. The other reason being that cryptobros are extremely gullible.
    • It is extremely slow. Bitcoin adds one block to it's chain every 10 minutes. 1 block is 1mb. This is enough for the data of about 2500 transactions, and transactions can need multiple confirmations before approval. All this winds up to with a transactions per second rate of about 4.5 per second. On a bad day when there's a lot of network traffic and everything's backed up you're looking at multi-hour transaction times, with the option to pay a transaction fee (in the 10s of dollars usually) to make your transaction go through faster. The idea that this could ever be used for small, day to day transactions is absolutely farcical. This is with the current relatively niche usage. The carnage unleashed if a medium sized country started using it as the main exchange medium doesn't bare thinking about. Paid for coffee? You transaction will go through some time next week, probably. Here advocates will take about 'layer 2 solutions' like the Lightning Network. Well, they're all still bottlenecked by the intrinsic slowness of the blockchain. The Lightning Network works by opening a channel between two parties where they can exchange bitcoin pretty much instantly, then when they're done the channel is closed and everything is settled on the chain. Unfortunately, both opening an closing a channel requires writing to the blockchain, so there's virtually no improvement except in the extremely rare scenario where you want to do a lot of transactions in quick succession to a particular vendor.
    • It is very, very expensive. The numbers above (10mins/1mb) weren't picked at random, they were chosen to keep the hardware requirements of miners somewhat under control. Basically, to actually enforce the append-only nature of the chain and stopping miners rewriting large sections of the chain, undoing their own transactions and generally wrecking havoc, bitcoin uses a technique call proof of work which requires a math problem of a certain complexity to be solved before a block can be added to the chain. This makes it computationally unfeasible to rewrite large sections of the blockchain. The obvious work around here is to build a huge ass computer, bitcoin solves this issue by escalating the difficulty of said problem in response to the amount of computing power available to the network. This has now got to the point where miners are building full on supercomputers. Also, this is an adversarial process, miners compete to add blocks to the chain and the first one to solve the problem gets to add the block, meaning that there is also a massive amount of redundant work done here. This is what people are referring to when they talk about crypto destroying the environment. It's the power and hardware requirements of this process that give crypto it's sky-high transaction costs. With bitcoin this is somewhat mitigated by the fact that miners are rewarded for successfully adding blocks with new bitcoin. However, this cannot last forever: because the designer(s) of bitcoin wanted it to be a deflationary currency (because they were libertarian goldbug muppets), they hard capped the total amount of bitcoin that will ever exist at 21 million. The amount of bitcoin miners receive halves approximately every four years. Therefore, at some point within the next century, users of bitcoin are going to be hit with the full cost of this absurd, inefficient method of verifying transactions. And sooner if the price of bitcoin doesn't keep up with the escalating cost of mining it. As an aside, miners are already having issues - you can't actually pay for hardware or electricity with bitcoin, so they have to sell it to pay their bills but they can't do that without tanking the price. They work around this with loans secured by their crypto holdings, but it seems a massively shaky business model to me. There is an alternative method called proof of stake, which is not as inefficient but it is resisted by bitcoiners because they (correctly) believe it completely demolishes any claims of 'decentralisation' (fake as they are) and hands control of the network to the directly already rich, rather than indirectly by forcing them to build a massive fucking supercomputer first, I guess.


    So, prone to fraud and unusably slow and expensive. And also not actually decentralised. Great stuff guys. As a comparison, Visa effortlessly performs 1700 transaction per second for cents per transaction, and if someone cons you you can dispute the transaction and stand a chance of getting your money back. And of course, Visa is just one payment network, you also have Mastercard, Amex, etc.

    So, if it's not for cash, what's it for? It can only be an investment, but what are you investing in? It's extremely unclear. The idea that the above problems will somehow be solved in the future? They won't, they're inherent to the technology. The idea that governments can't interfere with it? This is simply untrue, law enforcement seizes crypto all the time. The notion that although people will never use it for day to day transaction, people will use it as a store of their wealth? There's no real reason for people to do this, the price is hugely unstable and it's hard to cash out. It is also likely true (though AFAIK not proven) that the price of bitcoin is massively manipulated, the market is totally unregulated so the kind of bullshit that even walls street wouldn't do seems to be standard practice for people with big holdings.

    There is also something deeply, deeply dodgy going on with the stable coin Tether. The theory goes that their constant printing of billions of dollars worth of USDT is somehow being used to prop-up the price of Bitcoin- basically buying bitcoin with money printed out of thin air to drive the price up, but I do not understand the true nature of this scam and it may not either be true. In any case, betting on such a manipulated market seems unwise - I certainly wouldn't bet for or against Lewks 1 million by 2040 prediction.

    I'm not getting to the clusterfuck that is Ethereum and the myriad of shitcoins, NFTs etc. this is long enough as it is but they're basically much worse.

    TLDR: the tech is trash and the market is populated by hypercapitalist predators trying to out scam each other.
    Last edited by Steely Glint; 02-21-2022 at 12:35 AM.
    When the sky above us fell
    We descended into hell
    Into kingdom come

  5. #5
    Since most government backed currencies are faith based (meaning the only thing that guarantees a dollar is worth two candy bars is our faith in the government saying it is) there might be a place for this tech if faith is lost in a currency. Maybe??
    Faith is Hope (see Loki's sig for details)
    If hindsight is 20-20, why is it so often ignored?

  6. #6
    Quote Originally Posted by Being View Post
    Since most government backed currencies are faith based (meaning the only thing that guarantees a dollar is worth two candy bars is our faith in the government saying it is) there might be a place for this tech if faith is lost in a currency. Maybe??
    Particularly relevant for places like Turkey and many other places that have seen significant and fast inflation.

  7. #7
    There is something called dollarization and it predates crypto by decades.
    Hope is the denial of reality

  8. #8
    Quote Originally Posted by Lewkowski View Post
    Particularly relevant for places like Turkey and many other places that have seen significant and fast inflation.

    You'd be better off just trying to use a more stable fiat currency. If you don't trust any currency because they're fiat well, that just puts all of them in the same boat crypto is already in by its inherent nature*. Put your money in real commodities in that case?

    *Crypto is exactly the same as fiat currencies except it doesn't even have the "dubious" support of government backing. Same faith/fantasy just with even less security.
    Last night as I lay in bed, looking up at the stars, I thought, “Where the hell is my ceiling?"

  9. #9
    Quote Originally Posted by LittleFuzzy View Post
    You'd be better off just trying to use a more stable fiat currency. If you don't trust any currency because they're fiat well, that just puts all of them in the same boat crypto is already in by its inherent nature*. Put your money in real commodities in that case?

    *Crypto is exactly the same as fiat currencies except it doesn't even have the "dubious" support of government backing. Same faith/fantasy just with even less security.
    Bitcoin has a maximum supply. What fiat currency has a cap?

  10. #10
    The faith/fantasy is the collective delusion to invest value into something with no inherent value. It has a maximum supply engineered into it and absolutely nothing backing it but delusional belief. Government currencies don't have a maximum supply but have government power and authority backing them in addition to the delusional belief.
    Last night as I lay in bed, looking up at the stars, I thought, “Where the hell is my ceiling?"

  11. #11
    I mean, Bitcoin isn't projected to actually hit its cap before the 2130s, until then it's 'printing' new bitcoin every 10 minutes, albeit at an ever decreasing rate.

    The reason increasing the supply of bitcoin doesn't cause prices of goods to go up is that virtually no one actually uses it to buy goods. In many ways it actually *is* a good. Well, it's bad, but it's also a ​good. It's a bad good.
    When the sky above us fell
    We descended into hell
    Into kingdom come

  12. #12
    Quote Originally Posted by Aimless View Post
    There have been several threads and discussions, all of which tend to devolve into soap operas where Wraith complains about Wiggin.
    Sometimes I complain about Loki too. And I try to shit on bitcoin whenever I can.

    Have I done my bit here yet about how the NFTs that drove the last bull run were the dumbest possible use case for NFTs?

  13. #13
    Quote Originally Posted by Dreadnaught View Post
    Surprised there has not been much discussion here of cryptocurrency. I'm also always surprised to find out who I know actually owns it. None seem to own it because they believe (or can articulate) any particular use for various aspects of the tech.

    Does anyone here have a strong bull/bear case for it?
    Actually, because Wraith pushed me to do it, I own about $50 worth of various cryptocurrencies after watching their ads on Coinbase. So I guess I'm a crypto bro now.

    My general position hasn't really changed - I am unconvinced about the case to use blockchain based tokens for a currency, for a large number of technical reasons (some of which have been touched upon earlier in this thread). Some tokens are better run than others (with bitcoin not being a particularly good one), but even with the best instantiation that has any appreciable market share right now, there are a lot of fundamental challenges that have yet to be addressed.

    However - and this is a big one - that doesn't mean that all blockchain based systems aren't useful, or valuable assets. I think the basic idea of a trustless system using some sort of distributed ledger (provided it is sufficiently distributed) can be extremely valuable for some applications. In finance, things like settlements (which are currently an absolutely archaic and super-slow system) could be dramatically streamlined. You could imagine very useful (and cheap) alternatives to traditional forms of remittances. There are ways to build marketplaces for heavily distributed resources (e.g. computing) that would likely have remained unused in other contexts. Etc. As a currency, I have my doubts, but as a useful series of systems that can enable cool technologies in the future? I think the potential is there.

    A lot of it will rely on sufficiently widespread buy-in to get network effects where it becomes actually useful. One limitation is how the values of these tokens are being driven by unfounded speculation rather than the actual utility of the token, which makes it hard to drive appropriate incentives. I am hopeful that some of the super-boring iterations of this technology eventually prove their utility, but I am not sure that day will come for a long time - or validate any substantial investment in random tokens until then.

    Also, Lewk - you're suggesting that in 20-25 years you're hoping to see a 26-fold increase in the value of Bitcoin? That's about a 14% return at current prices, which is certainly good (and a bit less than the last decade's average return). But given its volatility, the risk adjusted return doesn't seem all that great compared to other assets. I recognize that backwards looking Sharpe ratios et al are still marginally in favor of Bitcoin at current pricing over e.g. US equities, but the advantage isn't that great given the high level of uncertainty vs. the very long record of US equities and the fundamentals underlying US equities.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  14. #14
    People having been searching for something blockchain might be good at for the better part of a decade now and so far, nothing. I don't rule out that it may have a use, but I think the best approach is to forget about it and if someone comes up with something good in the future, then great, we'll look at it then. No point wasting potentially thousands of developer hours trying to square-peg/round hole this thing.

    The thing is that it has the issues it does because it is trustless, the inefficient consensus protocol, being append-only, these are all issues introduced by attempts to solve the problem of being trustless, but it's not clear that being trustless has any practical value beyond being intellectually appealing to thinkers of a certain disposition. Or even if it is actually trustless or decentralised in anything but the strict technical sense.

    Also, Lewk - you're suggesting that in 20-25 years you're hoping to see a 26-fold increase in the value of Bitcoin?
    I mean, unless it collapses under it's own stupidity or is regulated out of existence it will probably do something approaching this. It's what it's designed to. Terrible idea for a currency, but good for making early adopters rich - provided they can find a way to cash out.
    When the sky above us fell
    We descended into hell
    Into kingdom come

  15. #15
    Quote Originally Posted by Steely Glint View Post
    People having been searching for something blockchain might be good at for the better part of a decade now and so far, nothing. I don't rule out that it may have a use, but I think the best approach is to forget about it and if someone comes up with something good in the future, then great, we'll look at it then. No point wasting potentially thousands of developer hours trying to square-peg/round hole this thing.

    The thing is that it has the issues it does because it is trustless, the inefficient consensus protocol, being append-only, these are all issues introduced by attempts to solve the problem of being trustless, but it's not clear that being trustless has any practical value beyond being intellectually appealing to thinkers of a certain disposition. Or even if it is actually trustless or decentralised in anything but the strict technical sense.



    I mean, unless it collapses under it's own stupidity or is regulated out of existence it will probably do something approaching this. It's what it's designed to. Terrible idea for a currency, but good for making early adopters rich - provided they can find a way to cash out.
    Being good at, and being allowed to happen, are two very different things. For example NFT based tickets for live events would be a god send (for consumers).
    "In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."

  16. #16
    Quote Originally Posted by Ominous Gamer View Post
    Being good at, and being allowed to happen, are two very different things. For example NFT based tickets for live events would be a god send (for consumers).
    Blockchain based ticketing has been talked about for years, with several companies launching functioning products. Not sure why they haven't taken off.
    "One day, we shall die. All the other days, we shall live."

  17. #17
    Quote Originally Posted by Ominous Gamer View Post
    For example NFT based tickets for live events would be a god send (for consumers).
    In what way?
    When the sky above us fell
    We descended into hell
    Into kingdom come

  18. #18
    Quote Originally Posted by Steely Glint View Post
    In what way?
    Lower fees due to the elimination of several layers of middlemen.
    Better fraud protection, especially concerning the reselling market
    Easier memorabilia tracking.
    "In a field where an overlooked bug could cost millions, you want people who will speak their minds, even if they’re sometimes obnoxious about it."

  19. #19
    Quote Originally Posted by Ominous Gamer View Post
    Lower fees due to the elimination of several layers of middlemen.
    I looked up gas fees on Ethereum a couple of hours ago, and they started at $70 and went as high as 200 dollars for higher priority. I looked again just now and it was down to $20, which I guess is a good price for Ethereum but it's still extremely expensive for a small transaction of up to a few hundred dollars.

    So, if you imagine there was a big concert for a major artist and obviously there's limit supply of those so you need to snap them up quick because it's Kanye or Taylor Swift or something, and there's 100s of thousands of people trying to get them at the same time... how high do you think gas would get, with everyone trying to outbid each other to get their transaction through faster? You'd be paying maybe 10x-100x more than the actual price of the ticket in gas?

    Also, you have the minting cost of the NFT itself, which can potentially run into 100s of dollars and you can bet at least some of that is reflected in the price of the ticket.

    Then, of course, you have the exchange, you need to use them to buy the NFT and you also need to use them to buy cryptocurrency to buy the NFT with. Exchanges only take normal fees, the kind you would associate with a debit card, but it's still two more sets of transaction fees. Also, because you're doing this specifically to buy a ticket to go see a popular artist perform there are 100s of thousands of people also buying the cryptocurrency the chain uses, so the price of that is probably also going to spike massively, thereby increasing the relative cost to you.

    So, apart from the miners, the exchange and the person you brought crypto from, and the ticketing company itself, NFT tickets completely eliminate middlemen. And they result in lower fees, except for the potentially hundreds of dollars you'll pay in transaction fees and and possibly being on the wrong side of a massive surge in the price of the cryptocurrency used to purchase the ticket.

    Better fraud protection, especially concerning the reselling market
    How does this work? NFT-land is riddled with fraud. It's fraud central over there. It's gotten so bad Deviant Art had to make a feature where they scan NFT trading sites for stolen artwork, because people are constantly minting NFTs of art they didn't create. People are going to mint a bunch of fake tickets as NFTs. That's just 100% going to happen. If you fall for it, you're screwed because there's no reverting blockchain transactions.

    Easier memorabilia tracking.
    You're going to have to run this one by me also.
    Last edited by Steely Glint; 02-23-2022 at 08:32 PM.
    When the sky above us fell
    We descended into hell
    Into kingdom come

  20. #20
    The material from David Rosenthal's recent talk at Stanford is worth reading - https://blog.dshr.org/2022/02/ee380-talk.html

    I don't see any reason to join the speculation - the only thing increasing the value of this crap is the steady supply of fresh rubes.
    There's a man goin' 'round, takin' names
    And he decides who to free and who to blame

  21. #21
    I could only follow about half of that talk, the rest involved concepts and systems which are too far out of field for me, but it was still enough to terrify me and I already didn't like crypto.

    For Lewk: The TLDR takeaway from Unheard Of's link? You're so afraid of what government control of a currency could result in that you've decided that you should place your trust in a currency controlled by a Chinese companies instead. Brilliant.
    Last night as I lay in bed, looking up at the stars, I thought, “Where the hell is my ceiling?"

  22. #22
    Quote Originally Posted by Steely Glint View Post
    People having been searching for something blockchain might be good at for the better part of a decade now and so far, nothing. I don't rule out that it may have a use, but I think the best approach is to forget about it and if someone comes up with something good in the future, then great, we'll look at it then. No point wasting potentially thousands of developer hours trying to square-peg/round hole this thing.

    The thing is that it has the issues it does because it is trustless, the inefficient consensus protocol, being append-only, these are all issues introduced by attempts to solve the problem of being trustless, but it's not clear that being trustless has any practical value beyond being intellectually appealing to thinkers of a certain disposition. Or even if it is actually trustless or decentralised in anything but the strict technical sense.
    So I think in the financial world it would make sense to use it for settlements. But here's the critical point: it might use a blockchain, but the only people who'd be able to access said blockchain (and who would do the proof of work/stake to keep it going and control it) would be financial entities that are already, say, part of the SWIFT network (or maybe something more directly linked to clearing/settlement like Fedwire or European counterparts). Then you'd have the same players running the system who already do, but you'd have the ability to potentially dramatically increase the speed of clearing and settlement. You could also likely drive down transaction costs dramatically with a closed blockchain system like this. This wouldn't be dramatically decentralized, nor would it really be trustless (only the 'in group' can append to the blockchain), but it could be transformative.

    The reason something like this hasn't taken off is because things like financial clearing and settlements take massive amounts of effort and time to overhaul. You can't just conjure up a random token and expect trillions of dollars of bank settlements to suddenly adopt it - they'd need to study the technology, tweak it, set standards, gain consensus, and carefully roll it out. I wouldn't be shocked if we don't see it being deployed in this kind of a role for at least a decade. It's entirely possible that they'll decide to forego it altogether in favor of some other technology to cut settlement time, but I can see the potential.

    I suspect there are other applications like this that exist, but ones that might not be able to be conjured out of thin air.

    I mean, unless it collapses under it's own stupidity or is regulated out of existence it will probably do something approaching this. It's what it's designed to. Terrible idea for a currency, but good for making early adopters rich - provided they can find a way to cash out.
    I think the regulatory risk is not insignificant, but you're entirely right that various tokens might indeed see outsized average gains over the next few decades. I wasn't really disputing this, I was just pointing out that the risk adjusted return might not be all that good if he's 'only' expecting 14% annual returns.
    "When I meet God, I am going to ask him two questions: Why relativity? And why turbulence? I really believe he will have an answer for the first." - Werner Heisenberg (maybe)

  23. #23
    The only reason you would ever use a blockchain is to be decentralised and trustless. Otherwise, you might as well just use a centralised database, which is massively more efficient and faster. I cannot emphasise enough how much blockchain offers no advantages over existing methods of data storage, except being decentralised and trustless.
    When the sky above us fell
    We descended into hell
    Into kingdom come

  24. #24
    Once again wondering how much of the world's crypto assets are held by Putin, his cronies, and his intelligence agencies.
    "One day, we shall die. All the other days, we shall live."

  25. #25
    EU may ban proof of work cryptocurrencies.

    https://wallstreetpro.com/2022/02/24...o-ban-bitcoin/

    Patrick Hansen, head of growth & strategy at decentralized finance startup Unstoppable Finance, described the proposal as “suicidal,” predicting that it would kill the entire crypto industry in the EU.
    Don't threaten me with a good time.
    When the sky above us fell
    We descended into hell
    Into kingdom come

  26. #26
    Quote Originally Posted by Wraith View Post
    Have I done my bit here yet about how the NFTs that drove the last bull run were the dumbest possible use case for NFTs?
    Genuine question - are there any non-dumb use cases for NFTs?
    There's a man goin' 'round, takin' names
    And he decides who to free and who to blame

  27. #27
    Crypto currency is supposedly a new "liquid asset" that can be traded, but without any governmental regulations or protections, it's both illegal gambling AND a ponzi scheme?

  28. #28
    The government plays no role in crypto...except almost all the crypto exchanges banned Russians from opening accounts after pressure from the EU (and maybe US).
    Hope is the denial of reality

  29. #29
    Were existing accounts frozen, too?

  30. #30
    Not sure.
    Hope is the denial of reality

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