> Except this Bitfinex thing shows that while an amount of bitcoin can't be manipulated or counterfeited, their actual value is relatively easy to influence.

This is because the only usage Bitcoin has left is a lottery ticket. Bitcoin used to actually have utility value (payment) but now with that gone, it is easy to manipulate the price because its value is built on people's perception only.

If Bitcoin was still being used to send money across borders, to buy things with super low transaction cost, send money without censorship-which by the way used to be why a lot of people saw value in it in the first place--it wouldn't be so easy to manipulate the value because any fool can see that there obviously is value in there.

Bitcoin losing utility has singlehandedly created the scam market we're seeing right now. People who want to make money choose the most efficient way to make money. And if they can see that they could make more money by building productive things on top of Bitcoin instead of building their own scam coin or scam scheme to manipulate the idiots who fall for it, they would probably rather work on those instead. But that's not the case, which is why we are where we are.

>If Bitcoin was still being used to send money across borders, to buy things with super low transaction cost, send money without censorship-which by the way used to be why a lot of people saw value in it in the first place--it wouldn't be so easy to manipulate the value because any fool can see that there obviously is value in there.

Bitcoin had all those things - not that long ago. You need volume to ensure stability, not utility.

> You need volume to ensure stability, not utility

Wow you've drunk some serious kool-aid there.

You need both. A huge volume of nothing is still nothing.

The "you need volume for stability" argument is what pro-bitcoin people used to say when Bitcoin could actually be used as a currency. Many people would say "Bitcoin isn't a legit currency because it's so volatile", and we would say "No, that's only because there isn't enough Bitcoins out there yet compared to USD for example". This was a valid argument and used to be my go-to-comment for convincing people. But that's only when Bitcoin can be used for something.

Now Bitcoin is like a pet rock, it's scarce, but very risky because the value that comes from the scarcity is based on people's perception only and not based on utility.

My point was that if the value is based only on perception (speculative value), this is very susceptible to manipulation.

I can't believe people actually believe just because something is scarce it's automatically valuable.

Uh, could the volume here mean the volume of the actual useful transactions, rather than the volume of the currency?

Mere utility is not enough, you need huge volume of such utility to make it stable.

The only type of transaction that exists on BTC chain today is people buying it for investment and HODL. Even that may dwindle in the coming weeks now that it's looking more like a crash.

I never said mere utility is enough. I clearly said "You need both", in response to parent saying it's not about utility but only about volume. So in summary I agree with your comment.

The most interesting thought to me right now is how the situation will develop if or bitfinex/tether crashes the market hard.

I am not a fan of the SEC getting involved. Taking crypto as an experiment, I think it is better for the market to take a hit and then find organic solutions. If the SEC gets involved and busts bitfinex/tether, the community loses the opportunity to become 'unbailable'. Yes , people will lose the money, but if you create the expectation that the sec will protect you as a consumer from the scams, then we will not be sophisticated to actually organically ignore scams.

What will happen next, FDIC and too big to fail institutions?

You could say that humanity has repeatedly and organically come to a solution broadly known as government and regulation.

Worked great in 2008.

It actually did. The market was on it's way to crashing harder than the great depression, but it didn't, probably thanks in some part to government being able to intervene and control monetary policy

A very large amount of Bitcoiners absolutely insisted we were headed towards hyperinflation due to QE back then. In fact that was the very reason a lot of them were interested in Bitcoin in the first place.

Interesting how things have worked out. They were right about Bitcoin's value, but badly wrong on all of the economic related predictions.

Holder, in testimony before the Senate Judiciary Committee, after, well, not doing his job prosecuting banks: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

Soon after he was done with his effective regulation, according to you, he returned to his job...defending large financial institutions...at Covington & Burling LLP, D.C. law firm.

You mean the gov't regulation prevented the GD that it created?

Have you ever heard of the phrase "kicking the can down the road"?

You can play this argument ad infinitum without actually adding anything of value to this conversation.

Central banking is not perfect, but it has a better track record of stability and growth than any other system that’s been tried at a large scale. Try and remember that the alternatives aren’t optimal economic systems that are immune to bubbles, recessions, depressions, hyperinflation, corruption and manipulation.

If anything the Bitcoin experiment is reinforcing why we have existing regulations in place.

How do you know that it has a better track record of "stability" and "growth" than any other system at a large scale? Much of America's growth in the late 19th happened without any central banks in 1913. Most of "depressions" happened prior to that -- and there were 4 such major ones in the 19th century and many of them were directly caused by the govt policy changes -- were nowhere as severe as the Great Depression occurred after the creation of the central banking in the US.

>> You could say that humanity has repeatedly and organically come to a solution broadly known as government and regulation.

> Worked great in 2008.

Wasn't 2008 at least partially the result of having banking regulations withdrawn/weakened over the prior decades?

If so, isn't it pretty bogus and misleading judge the effectiveness of financial regulation from that event? It's like saying airbags don't help in a crashes, because yours was removed and you smacked your face against the steering wheel in a crash.

You still had a system that decided removing airbags was a good idea. Then, when getting smacked in the face, doing nothing to the people involved in removing the airbags or causing the face smacking.

That doesn't really reflect on the suitability or effectiveness of regulation to address the problem. Greedy, ignorant people who failed to study and learn from the past can be the decision-makers, too.

Then you have a systemic problem allowing greedy ignorant people to be decision makers. Not sure how to fix this, but I believe there is a solution.

You know what? It did. You still have running water. Government employees like cops and firefighters and teachers are getting paid (sometimes not enough).

So yeah, it worked great.

"People in Africa are starving, so you're having a great day!"

Bullshit argument, I'm sorry.

I didn't say it was perfect. I doubt that whatever "organic" solution we're hoping the crypto community will self-enforce will be either.

If something bad happens, it will be the will of the 51%, not the .01%.

It did and it didn't. On one hand, we stopped a panic that would have led to a true depression. On the other hand we did so by actually increasing the power and wealth of many of the people and organizations responsible for creating the conditions that led to the panic.

Do that long enough and you get a civilization run by overconfident incompetents and shielded fraudsters. That build up of delusional bozos at the top is one of the things that eventually leads to collapse.

Bitcoin was in some ways a protest in code form. Why can't we create a software defined monetary system that is transparent and where corrupt and incompetent human orgs can be replaced by algorithms?

I like that idea, but Bitcoin itself was really just a proof of concept. We're not there yet. In the meantime we've gotten a silly bubble that's starting to look like a parody of the project's original goals.

It's like people assume the current financial system is perfect and bitcoin is not. Bitcoin never pretended to be, it's still an experiment 10 years in, but its a fun expierment.

It’s fun while it’s worth a bucketload. When people start losing their shirts and dumpster loads of ASICS are being burned for cooking fires... less fun.

(Some hyperbole engaged above)

There's a massive difference in crypto over fiat. In the US, if you have a debt they can take back your home, you can get harassed and taken to court.

The stakes are not that high for crypto wealth. Its unenforceability makes the stakes a lot lower for tragedy.

I disagree vehemently to this proposition. I have never agreed or voted to get those regulations in place. They are not voluntary. But anyone falling for tether today is making an individual decision.

>> You could say that humanity has repeatedly and organically come to a solution broadly known as government and regulation.

> I disagree vehemently to this proposition. I have never agreed or voted to get those regulations in place. They are not voluntary. But anyone falling for tether today is making an individual decision.

Nevertheless, you benefit from them. It's not like you have to sign up to the regulation that makes your murder illegal. Don't you think it would be foolish to expect every generation to have to rediscover, through trial and error, the benefits of society and government?

An important distinction has to be made between law abiding and regulation.

Law against murder is: if you do it, you will be jailed.

Regulation against murder is: you cant have anything that harms another human being, and we need to check you up regularly to make sure you haven't killed anyone.

Regulation is not abiding for the law. Thats what lawsuits are about. Regulation is about preventing law to be broken with preventive measures.

> Don't you think it would be foolish to expect every generation to have to rediscover, through trial and error, the benefits of society and government?

I wish we had that, but we can't, we have to live entire generations with laws designed by previous ones. Isn't the drug war on the US a prime example of that? If you put it up for a vote, the majority would vote to make it legal or not prosecute it.

But this is not a topic about the mere existence of government, its about an ecosystem that was born and fueled about how the government and the banks crap on people, and trying to make it better with banks and government is going the other way.

I think you're confused about the differences between a law and a regulation. As I understand it, at least in the US context, regulations are rules specify the finer details of the implementation of a law. You can be jailed for the violation of a regulation [1].

> I wish we had that, but we can't, we have to live entire generations with laws designed by previous ones.

There's an expression that describes your attitude, it's "throwing the baby out with the bathwater." The thing about "the laws designed by previous [generations]" is that most of them are good, and the ones that aren't will eventually be abolished or modified, in a democratic society.

> and trying to make it better

The attempt is ignorant "disruption" that's repeating, word for word many of the long-solved mistakes of the past. If you want to make something better, you can't focus on the just problems of the current solution, but you also have to focus on all the problems the current solution already solved. To do otherwise is foolishness.

[1] For example, https://en.wikipedia.org/wiki/International_Traffic_in_Arms_... lists several instances.

> I think you're confused about the differences between a law and a regulation. As I understand it, at least in the US context, regulations are rules specify the finer details of the implementation of a law. You can be jailed for the violation of a regulation [1].

Sure, but violating the regulation has no victim. If you sold lemonade on a stand in california, you would be breaking regulations but there is no victim that would ever sue you for damages.

Regulations, at least in general, about preventing something from happening by restricting action. Legal action is about responsibility: if something happens you are going to be accountable for that which happened.

Tether deserves a lawsuit on fraud, because they committed fraud. But we don't need the sec for that.

> There's an expression that describes your attitude, it's "throwing the baby out with the bathwater." The thing about "the laws designed by previous [generations]" is that most of them are good, and the ones that aren't will eventually be abolished or modified, in a democratic society.

Tell that to all the people doing 25+y for doing or dealing pot. They must agree with you!

> For example, https://en.wikipedia.org/wiki/International_Traffic_in_Arms_.... lists several instances.

I'm no expert on arms dealing but isnt the US Gov the one that gives out the most weapons to radicals? I thought the US as a successful exporter of weapons..and certainly of violence!

Don't miss the fact that regulation is excercised by people with the same incentives as anybody else, but with more power.

> Tell that to all the people doing 25+y for doing or dealing pot. They must agree with you!

> I'm no expert on arms dealing but isnt the US Gov the one that gives out the most weapons to radicals? I thought the US as a successful exporter of weapons..and certainly of violence!

I feel like you're just going for cheap points, but the thing is you don't even get those if you can't stay on topic. It's kinda pointless to talk with you if you keep running off on random tangents. Aren't we talking about financial regulation?

Actually, I'm not even sure if there's anything to your comments beyond an emotional hostility to the concept of regulation or something represented by it, so maybe we're not even communicating at all.

I didnt bring guns and arms dealing into the debate, that was you. I mentioned the war on drugs as an example of old laws that would not be voted on today, and the argument of keeping them because they must be good is destroying lives today.

The SEC is killing people today as well. Its barring most of the world on investing in the US on startups that could lift people out of poverty, increase quality of life and even help in fields like medicine, etc. And the ICO market is an example of how much demand for investment there is. The lesson is not that unregulated markets have scam artists and fraudsters, that we always knew, what is new is that the regulated market is silently opressing.

And to add insult to injury, the most egregious cases of mis-regulation have made the regulators screw over the general population instead of the institutions they failed to regulate.

On this very site ,most people can invest in the startups they read about everyday and work for everyday.

> I mentioned the war on drugs as an example of old laws that would not be voted on today, and the argument of keeping them because they must be good is destroying lives today.

You're arguing with a straw man of your own design.

> The SEC is killing people today as well. Its barring most of the world on investing in the US on startups that could lift people out of poverty

Jesus, that's the most ridiculous, hyperbolic thing I've read this month.

> Jesus, that's the most ridiculous, hyperbolic thing I've read this month.

Its basic microeconomics. You will learn a lot of read about it!

> Its basic microeconomics....!

Ah, that explains it. You know just enough to be dangerous.

> I disagree vehemently to this proposition.

I haven't made a proposition. I just pointed out that historically, when societies have made decisions about this sort of thing, they've generally decided that such individuals require protection via regulations.

In general, most of the laws we are expected to follow are not ones we personally agreed to or voted on. I'm not sure that makes them less "organic." If you're arguing that you should not be expected to follow laws that you didn't personally agree to, I think that's a bigger conversation.

Actually, historically all governments started through conquest (military victory), not social contracts. Societies didn't make any decision - governments did, and societies accepted the status quo.

But governments didn't invent society from atomized individuals through conquest. All government did was add another layer in addition to the organically developed pre-existing social contracts.

Just because you personally weren't consulted on those regulations doesn't mean that they weren't come to by people who were democratically elected. And you agreed to abide by the laws of a jurisdiction by living there. Otherwise, what's to stop you from saying, "I never agreed not to kill people"?

> And you agreed to abide by the laws of a jurisdiction by living there. Otherwise, what's to stop you from saying, "I never agreed not to kill people"?

Nobody agreed to not kill people either. Thats why killing is also legal in many circumstances. Also arguing that we all agreed to the rules there in would mean that if slavery were legal it would be ok, becase we all agreed to it. But thats another topic.

The point is that if I believe in an institution without regulation the option between me and that institution is severed by an unrelated third party. I dont want to ask the SEC any permission to buy tethers.

"Also arguing that we all agreed to the rules there in would mean that if slavery were legal it would be ok, becase we all agreed to it"

No. That's a poor argument that, in this case, falsely equivocates slavery with financial regulation.

"I dont want to ask the SEC any permission to buy tethers."

That's not what's happening in the least. But if Tether is a scam, then it will be shut down, as it should be. And no amount of "freedom" will justify running a scam on other people.

> No. That's a poor argument that, in this case, falsely equivocates slavery with financial regulation.

You say its a poor argument, but you dont say why.

> That's not what's happening in the least. But if Tether is a scam, then it will be shut down, as it should be. And no amount of "freedom" will justify running a scam on other people.

Tether will crash itself if it doesnt have the money its supposed to have, we don't need the sec for that ,the same way the SEC didnt start the 2008 meltdown or Enron's demise. Its even more egregious if you consider tether is not in the US and affects non-US citizens the most. So why has the SEC the power to intervene in other countries with people that haven't elected them?

Its purely an act on a position of power, not on agreed rules, and thats some of the spirit that sorrounds crypto. Crypo will be more mature if it deals with this problems without government intervention.

>and then find organic solutions.

I don't understand this perspective. You have a proven, verifiable, simple solution right in front of you. Then you ignore it with some skimpy platitude to dive right into economic mythology.

Regulation is the correct solution.

> Regulation is the correct solution.

I once read (here, perhaps) that Bitcoin is a long demonstration in how regulation comes to exist.

I think many in the Bitcoin community conflate "regulation" with "monetary policy". They assume if bitcoin is treated like money, with laws that protect people from fraud, that must somehow lead to restrictive monetary policy, which the community tends to abhor.

> Bitcoin is a long demonstration in how regulation comes to exist.

Or perhaps a short demonstration, given that BTC appears to be recapitulating the entire history of currency in a few years?

Exactly. It boggles my mind that people can't grasp the difference between the two. I hate the fed and the department of the treasury, and think QE is a horrible policy just like our permanent deficit. But I happily welcome the SEC and FINRA getting involved in cryptocurrency.

I disagree. If the state wants to offer some certification of regulation and an exchange is willing to go through that process to capture consumers, let them be.

Thats not bitfinex nor tether. Let people choose. If the SEC had its way, bitfinex would have not existed and millions of people wouldn't have been served.

History has shown that in certain matter people will, over and over again, commit systemically wrong choices.

So no, in some things we're all in this ship together and as long as that's the case I want people to not collectively fuck things up.

Thats what you want. Why do you feel entitled to make other people do what you want?

The only thing that makes him entitled is learning from history and being able to reason about pretty elementary models in his head.

Why do people with your types of opinion always make it wholly personal, just to try to weasel their way around a subject?

Like, here's another comment you made:

>I like to compare Bitcoin to Land.

Just stop. There is so much fundamentally wrong with that analogy at face value it beggars belief that you are being sincere.

> The only thing that makes him entitled is learning from history and being able to reason about pretty elementary models in his head.

That is his opinion, and even if it were factually true it doesnt give him the entitlement to prevent other people from doing it. If he believes the SEC provides value he can go to SEC regulated places, and let the ones that don't just be.

Today, the SEC regulates the startups right here, depressing wages of workers, reducing founder's returns, increasing investor returns and reducing overall market size. That is an economical fact. The steam of that oppression is coming out in crypto, where millions of people worldwide have a chance to 'invest' or speculate in something they are otherwise barred from doing. Barred by institutions like the SEC.

Crypto in spirit and technology is a way to get around those involuntary and foreign restrictions.

> Just stop. There is so much fundamentally wrong with that analogy at face value it beggars belief that you are being sincere.

I've made my case about it. You don't have to agree with it, and I dont have to agree with you. Do you want to call someone else into this to make sure neither you nor I say the wrong thing at punishment of fines and jail?

>and even if it were factually true it doesnt give him the entitlement to prevent other people from doing it.

Yes it does. In the same way I'm entitled to prevent people from drunk driving, because we know it's factually a bad idea and likely to end in a pretty nasty mess.

>I've built my case about it

In the same way you can build a ship designed to sink maybe.

Why do you think seat belts are mandatory? Apply the same reasoning to your question.

For the wrong reasons. I dont think they should be mandatory at all.

Apply the same reasoning: check.

But this case is even worse. Its the sec regulating a foreign exchange that has foreign investors. You think the SEC can go and try to do that on alibaba?

Because people can make choices collectively and that affects all of us.

No man is an island. If people choose to engage in activities that end up affecting negatively the rest of us through externalities such as pollution, corruption, and the destruction of economic value, sorry, but historically people don't just stand by idly and let others destroy the societies they've built.

How is people buying tether and getting screwed related to you? What is the externality they are imposing on you?

Also even if that were true, it would show something else: the entitlement of doing something unto others to your own benefit. Isnt that always the reason to apply force?

It's related in that those phenomena can cause an economic crash and the the losses of bad investments affect families, dependents, and the long-term health of societies.

Even the most stringent and controlled economies can prevent crashes. Thats not what the SEC does as a purpose or as a result. Let alone in this space.

Bitcoin is entering another stage now where its resistance to this will be tested, hard.

The SEC has instilled a level of trust in the financial markets that has enabled humanity’s most spectacular century. Why is that a problem?

Or in spite of it.

This is a startup website, where thousands of software engineers get paid in lottery tickets that are not regulated, because they cannot sell the lottery tickets (THAT is regulated).

There has been nominally more money coming in to ICO's which are terrible investments than startups in the bay area. Thats how bad SEC regulations are: all that money could have gone to way more promising ventures, but it cant because it is blocked.

There is no problem if you want that level of protection, but rich people dont have it and profit from not having it. You go pay your poor mans tax and let the people that don't want to pay it roam free.

The magical "beat the man" ethos is now gone, some dystopian bureaucracy allusion, the ride's ending, prohibition is over

It’s an experiment that is repeated time and time again, and people refuse to learn.

Without the disincentive of prison and financial ruin, people will always find ways to use leverage and information asymmetry to defraud the public. Always.

HN is often very innocent and naive about people and their motivations. Unfortunately, there are assholes in this world, and the law is what protects us from them.

What the law does is transfer the power to defraud the public from the common grifter to a central authority. In doing so, it adds another, more sinister tool to the ones you mention: forced participation.

Your overestimating the financial intelligence of the average person. Think about the billions people waste on actual pyramid schemes. These are the same types of people who will be screwed over the most by a cryptocurrency crash. Is a slightly more efficient cryptocurrency market really worth the hardship of thousands of people?

Sure, you also have bernie madoff that made the biggest heist in history under the alledged supervision of the SEC.

Or worse, the 2008 bailouts, which were the equivalent of today the US government saying they will buy all the tethers on parity from bitfinex so their insolvency doesnt affect the market. I say let the chips fall where they may. If bitfinex is insolvent it should go down, and the lawsuits on fraud should put the people in charge in jail. Nothing else needed.

Either (most) people are stupid and they need to be protected for their own good - in which case we have the problem that the same people are nevertheless somehow capable to democratically choose their representatives. Or (most) people are fine taking more risks than you would like them to, and - because you believe you know better - you want to prevent them from doing so.

> but if you create the expectation that the sec will protect you as a consumer from the scams, then we will not be sophisticated to actually organically ignore scams.

Why have laws at all if you're unwilling to enforce them?

Why have a gun if you are unwilling to pull the trigger, amirite.

I wish people would find organic solutions, but history shows that people reliably fall for the same scams over and over and over again. Gambling is one of the oldest economic activities and remains as profitable as ever.

I've been shocked before at how little due diligence large investors sometimes do, especially when a mania is in effect. These are professionals whose job it is to invest wisely. What do you think the average person who is ignorant of the depth and complexity of finance is going to do? Are they even qualified to evaluate complex financial products?

"They" or "We"?

I fail to see the need for such "experimentation" considering that this has all happened before, and those lessons were learned.

That, and generally those who advocate that something should "take a hit" are usually not the ones who are going to be harmed by it.

I would argue the exact opposite, the ones that propose regulation are often benefited by it. For example, who could benefit from regulation of bitfinex?

You? Or Coinbase?

Both. Unless you are trying to insinuate that having protection against obvious scams is a bad and selfish thing.

Are you asking the protections for yourself or the protections for other people?

Because i never asked for the SEC to protect me. We can live in a world with both. You have coinbase with way more backing that bitfinex, and people still choose bitfinex. Let people choose, and if they mess up they mess up.

Yeah, no. Again, you're arguing for the "freedom" to scam people. Not gonna happen.

And you don't live in isolation; you are not an island. Those people that get scammed? They're not going to do so in isolation. That's going to have a ripple effect on the rest of society.

coinbase already FDIC insures USD holdings, and 3rd party insures crypto holdings.

risk variability is already organically controllable, and can be observed in the disparity of price movement between different exchanges (gdax is always lagged/dampened)

> coinbase already FDIC insures USD holdings

Which is totally irrelevant to the cryptocurrency.

> 3rd party insures crypto holdings.

Yes, approximately 2% of their crypto holdings, so effectively nothing from the perspective of a customer who loses funds if their cold wallets are attacked.

The problems we're seeing with cryptocurrencies are utterly unsurprising if you know what money really is and how it actually works.

I think people who are excited about cryptocurrencies assume that money is merely a tool to facilitate transactions between parties of people. The fundamental model of this is two people bartering goods, lol, in some sort of imagined "forest primeval" before money was invented. That money is just a substitute for that behavior. It's hopelessly naive.

> if you know what money really is and how it actually works

OK, I'll bite. What is money really and how does it actually work?

>What is money really and how does it actually work?

On of the most interesting ideas I've read on this is from Debt The First 5000 Years, written by an anthropologist who took the approach of studying how societies actually use money rather than the economists approach of coming up with theories without much looking at real people.

Basically he says the idea that it originated from barter is pretty much never found in the historical record. 'Primitive' societies tend more to tally favours so you give someone food one day, it's remembered and they help you fix your roof another, without any formal currency measure. Formal currencies were often forced on people with threats of violence to get the natives to do stuff. Say you want to raise an army you declare a tax on everyone of so many coins which they can earn by feeding or serving in your army and people who don't come up with the tax are attacked in some manner.

Or you come up with some debt everyone owes and that kind of thing. Eg from the book

>In 1895, for example, France invaded Madagascar...

>...and declared the country a French colony. One of the first things General Gallieni did after “pacification,” as they liked to call it then, was to impose heavy taxes on the Malagasy population, in part so they could reimburse the costs of having been invaded...

leading on to in the modern day:

>But owing to IMF-imposed austerity programs, the government had to cut the [malaria] monitoring program. Ten thousand people died. I met young mothers grieving for lost children...

The taxation example you cite is key. That the way history tells the story is that money was invented by state actors to finance military power. This endeavor has the side effect of creating a market economy. So states create markets, which implies markets require states. And the military power is as much turned inward than outward: you end up with police protection over the transaction coming ultimately from state actors.

Over time cryptocurrencies will adopt all these features of government regulation and police protection over the transactions if it is to become ubiquitous. So, just another analog of any other money system we already have.

I would say that money is a measure of inefficiency. Say for example you hire a mechanic to fix your car. You pay the mechanic's shop for parts and labor. The cost of parts represents inefficiencies in how they're manufactured, the markups of middlemen, the high cost of raw materials from nonrecycled sources, etc etc. Labor represents your lack of knowledge about how to fix your own car, plus the time involved to fix things on your car like water pumps that (due to uninspired design) fail much earlier than they should.

In an ideal world where you drive a solar-powered car with a dozen moving parts built by robots from recycled materials, costs would fall to a fraction of what they are now. With the same automation applied across all industries, prices would fall to the point where the opportunity cost for humans to be in debt/servitude to rent-seeking financial institutions would exceed the benefit of using money in the first place.

This is basically what happened on Star Trek and is likely to happen in coming decades with Tesla, Amazon etc as humans can no longer compete with machine labor. Things will cost less but incomes will be so low that we won't be able to afford them anyway. Personally I would argue that that started happening sometime after the late 1960s and has gotten to the point where the status quo can only be propped up by every-growing absurdities on a global scale.

An oldie but goodie:

http://marshallbrain.com/manna1.htm

Really? That’s depressing. Money can be anything you want it to be, so how about this.

Money = thank you points

You give it to people you’re thankful to, who either did something nice for you or gave you something you wanted.

Ya I like that better too. I'd like to see us move beyond a world of artificial scarcity to one where everyone's basic needs are met and people can focus on self-actualization. If people want a mansion, great, they can work for it. But if people want to be left alone so they can explore the meaning of life, then they should be free to do so and whatever money is used at that point should go to things that are special. Kind of a Burning Man philosophy maybe?

Interesting thought experiment! One things that's missing from this is — historically — any economic endeavor that has a continual increase of efficiency ends up being highly volatile in the marketplace. So when prices have this continual downward pressure eventually the market collapses altogether.

Finally created an account to reply to this. There is a great thread on Reddit called - Where has all the world's money gone, explain it like I'm 5. It starts from a convenient barter system. As I was reflecting on the various ICOs I realised that the technology and the blockchain makes the old barter system very efficient. So I do believe that in fact it is a substitute for that behaviour. In fact Im convinced that bitcoin or something like it will become the new gold. If you also think about why we needed to elect representatives, it was so that they would represent the needs of the people. Once I can vote/discuss a topic on the blockchain, I dont need representatives anymore. The blockchain and crypto currencies are going to change the way democracies operate. We're not going to need our elected leaders. This is why you see them spreading so much FUD. Cause they know they're going to be irrelevant in the system and access to all that money is going to go. Tomorrow if I want to build a bridge - going to setup a smart contract - with escrow payments - validated by the people. You hit your milestone and the money gets released. And why not it be digital money. This new wave is being built ground up and govts cannot stop it - even if they want.

>Where has all the world's money gone, explain it like I'm 5. It starts from a convenient barter system. As I was reflecting on the various ICOs I realised that the technology and the blockchain makes the old barter system very efficient.

There was no "old barter system" the way modern people think of it. The idea that pre-commercial economies operated on a "barter system" in the sense that people are directly exchanging goods of similar value is just a simplifying metaphor early economists made to explain how commercial transactions work.

Pre-commercial economies operate more like gift economies. It's not so much about trading objects based on their valuation, it's about doing favors for people with the expectation that they will do favors back for you. It takes strong bonds of social trust and cohesion for this to work. Everyone has to have a sense of obligation to pitch in for the community.

The bartering only comes in as a form of collateral when dealing with outsiders (people you don't trust as much). This is why the earliest form of exchanges in this way were tied to marriages (e.g. dowries, bride prices) or interactions with other political groups (e.g. treaties, armistice).

Barter doesn't actually work, it's basically just a format for giving collateral to make sure people don't welch on deals. Normal currency already solves that problem way better than trust chains based exchange does because the value is obvious and exchanged up front without having to go through any clearing-house to be validated.

One of the leading theories about the invention of written numbers and arithmetic is to handle accounting for debts that would last longer than a few weeks or involve many people -- that is, as a supplement to memory for the purpose of credit/debt.

So at the dawn of agriculture, people weren't using barter -- they were using credit unions.

And it's easy to speculate how someone would come up with something like that to help adjudicate disputes after having enough he said/she said arguments.

Literally chisel some hash-marks into a rock so people don't "forget" and problem solved.

If anybody is interested by (or feels like contesting) this view of how earlier economies functioned without money and/or how money came to be, I highly recommend Debt by David Graeber (a self-declared radical activist, instigator of the Occupy Wall Street movement, and brilliant anthropologist — I had the good fortune of attending some of his letters, and he is enthralling).

Reading this made me even more bullish on crypto currencies. Every time there is a crash I listen to the audiobook.

That’s a long way to go to just proselytize without addressing any of the previous concerns. You seem to be reading from the same script all of the “new accounts” use to boost cryptocurrency as well. Finally you claim governments can’t stop something which creates a cryptographically secure “paper” trail.

No.

Everyone in crypto world knows that Tether is borderline fraud. Everyone's waiting for this correction. It's important for the coin and the people who invested in tether may get shafted. It's an important learning lesson. There are a lot of coins that may just not go anywhere. Don't read the whitepapers and make the right conclusions - and you're burned. Not defending tether at all. The top commenter is absolutely right about tether. Hope it dies fast.

The amazing transparency of the crypto tech has been overshadowed by a total lack of transparency in every other way.

it's almost as if fraud is mostly a societal problem rather than a technological problem...

And that's why anyone who has any experience in the stock market isn't suprised with what's happening: they've seen it before and they've been warning about this.

EDIT: As I was typing a response, your username seemed familiar. Turns out it's not the first time I see you on HN saying sensible stuff. https://news.ycombinator.com/item?id=16268736

I think the underlying assumption that the "amazing transparency" enabled by crypto currencies will necessarily lead to a fairer more humane world is dangerously naive.

Does it not occur to people how an immutable, publicly inspectable ledger that records all your transactions might be abused by criminals and/or corrupt authoritarian governments?

Maybe HN is the wrong place to quote 90s rap songs, but these guys knew a thing or two about criminality and human nature.

"Rule Number Uno, never let no one know

How much dough you hold, cause you know

The cheddar breed jealousy, 'specially

If that man f---ed up, get yo' a-- stuck up" -Biggie Smalls (10 Crack Commandments)

Well to be fair, the reason we're having this discussion now is because people have been watching and questioning the expansion of the Tether supply via its transparent blockchain.

Someone could probably argue this is a step in the right direction from the days of Mt. Gox and its complete lack of transparency.

You mean the transparency of private individuals and organizations managing their own funds? Ok, let's assume, for the sake of argument, that you are entitled to and able to access that information and that it is somehow more available in _existing_ centralized systems. How are you going to enforce or even verify the degree of a centralized governance system's transparency? You can't. So your comment is somewhat deceptive, imo.

I'm not sure what you are saying. Obviously there is no "entitled" or enforcement. The difficulty in doing that makes it no less a problem. It does contrast with what seemed to be a big Bitcoin positive or selling point (call it what you want) transparency.

> They're literally making up money as they see fit.

I'm playing devil's advocate here (I agree that the whole Tether situation is concerning), but also genuinely curious - is this any different than what banks have been doing for forever with fractional reserve? Even if Bitfinex is overcommitted and there's more USDT in circulation than they have in USD reserves, is there a problem unless a lot of people try to convert at once?

To answer your direct question, Tether is sold as a fully-backed instrument, so there's major (potentially billions of dollars of) fraud if it's not fully backed. That's an issue because consumers aren't getting what they paid for, i.e. the underlying risk profile is different from what they thought the were buying.

The big difference with Tether is that in traditional banking, fractional reserves are legal, and regulated (i.e. banks are required to prove their reserves, and are required to hold a certain percentage of their deposits).

If there's a run on a consumer bank, and they don't have enough reserves to repay their customers, then FDIC insurance steps in to protect the customers. In this case, there's no protection, so everyone holding tether will be screwed if there's a run.

So if Tether was FDIC backed, then you’d technically be OK with this situation?

Actually yes, because FDIC backing would mean they've gone through all of the necessary steps to become a real bank. I would have some confidence that they actually have the USD to back up their holdings as they claim. If still turn out to be a scam then at least I'd have something to fall back on, and some people over at the FDIC would have some questions to answer.

Not OP, but I presume the regulations would be important too. Part of being FDIC backed is maintaining a certain amount of currency that is VERIFIED.

Issue here is that there is no one giving confidence that Bitfenix has any currency at all, we have to trust their word.

If Tether was FDIC backed, it'd essentially be a bank with weird procedures for putting money in and getting money out.

No, as I said,

> Tether is sold as a fully-backed instrument, so there's major (potentially billions of dollars of) fraud if it's not fully backed

The fraud issue (not to mention the securities price manipulation issue) is still a big deal.

Fractional reserve banking is about the availability of funds, not their existence.

In a bank with fractional reserves, the assets and the liabilities all add up. If I deposit $100, and the bank lends $80 of that out to someone else, the bank has liability to me of $100 and assets of $20 cash + $80 loan (a loan is an asset on a bank balance sheet). I can't immediately withdraw all $100, but it all exists.

The bitfinex thing is more akin to the Federal Reserve, which actually can just make up money out of thin air. The big difference between bitfinex and the Fed is that the Fed is a federal agency, created through a legislative process and operated with clear public policy goals. Whereas bitfinex is just some random people somewhere claiming they have $billions in the bank.

banks are regulated to ensure they don't over-commit and are backed by a central bank to bail them out. That system isn't perfect, but it's a lot better then no regulation.

An unregulated system that allows fractional reserve banking can only end badly. Competition will cause private entities to take increasingly risky positions (if they don't play along, they get crowded out by those who do), and the systemic risk is unchecked. At its extreme, it becomes a ponzi scheme.

> is this any different than what banks have been doing for forever with fractional reserve

No. They are different. The bank turns liquid cash into much less liquid assets (houses, cars, boats, new businesses) by way of loaning out the money. All of the banks liabilities (the depositors) are backed by the banks assets (loans for stuff).

In a panic (which happens periodically) a lot of people try to convert at once. But there's no central bank to bail them out.

Other than the fact that they're committing fraud by doing so, in a bank run, the FDIC insures people's deposits.

"Of course maybe they're not actually crooks and they do have the money."

Well then, an audit by competent third parties, inspecting where they got their funds, how much they actually have on hand, and whether it covers all potential liabilities (including calls on the supposedly dollar-backed tethers) would go a long way to clearing up the matter.

Bitfinex announced an audit with great fanfare early last year. They disclosed last weekend that their relationship with the auditor had "dissolved". Funny, that.

https://www.coindesk.com/tether-confirms-relationship-audito...

Or they may be crooks and also have the money. I suspect that with people selling bitcoins for tether they didn't bother changing the bitcoins into usd but thought we can hold these things while they go up and pocket the difference. But if they've been smart with bitcoin trading they may be well ahead.

To me this is very strong evidence that Tether is a scam. So why is anyone willing to pay $1 for a Tether?

Is anyone actually paying dollars for Tether, or are they just using them to buy/sell other cryptocurrencies?

Keep in mind that Bitfinex can have the money and still be crooks. The feds probably care more about money laundering than they do about whether or not the money actually exists.

Even if all the money behind Tether is real, the end result for the markets may be the same.

It would be much less of a disruption if they didn't go bust.

What if they were buying gold with their Tethers? Or anything else? There's nothing that makes Bitcoin inherently "vulnerable" to being bought with Tethers beyond being easily trade-able and being available on the same exchanges.

> if Bitfinex is lying about their dollar reserves this might be one of the simplest and most efficient scams of all time

i get what you're saying, but doesn't this mean that value of USDT is fake rather than value of BTC? in the end it's those that hold USDT will run to sell it either for USD or BTC, which would push BTC price even higher? now that would be ironic!

>> i get what you're saying, but doesn't this mean that value of USDT is fake rather than value of BTC?

If two billion tokens which people have taken to be as good as USD have entered the market, they will have inflated the price of BTC and other coins

>> in the end it's those that hold USDT will run to sell it either for USD or BTC, which would push BTC price even higher? now that would be ironic!

The price in USDT and USDT-only exchanges could indeed rocket, but the price in real actual USD would be expected to fall. I don't think that's ironic ... ?

--edit-- I seem to be rate limited at the moment so I am going to reply to the post below, here.

Why do you think, in a situation where tether fails, that the BTC/ETH price on bitfinex would change?

The price of BTC in tethers may rocket, but the price of ETH in tethers also would rocket, as nobody would want tether. The price of ETH in BTC is unlikely to move much.

There's no arb opportunity I can see.

> The price in USDT and USDT-only exchanges could indeed rocket, but the price in real actual USD would be expected to fall.

Wait, would it?

If you were an arb wouldn't you:

1) Buy bitcoin on a different exchange (with a temporarily lower price)

2) Transfer that bitcoin to, say, bitfinex (or another USDT exchange)

3) Sell that bitcoin for, say, ETH

4) Transfer that ETH back to the first exchange

5) Profit

Though I guess that would also flood the market and tank the ETH-BTC price as well (though I guess another arb could take advantage of that discrepancy as well).

Or are you talking about exchanges that only do USDT-BTC?

Regulation doesn't affect the ability of a currency to be influenced. It just puts that ability in the hands of a select few. The US govt prints money to pay off maturing debt. After some time, this scheme will come to a disastrous end. As long as there's trust in the central auth, both Tether and USD can survive.

I'm not very good at these things but it always struck me as odd: SAYING that a bitcoin is worth 1$ doesn't make it magically SO.

Yes, I'm sure that Janet Yellen takes the stress and responsibility of maintaining the world's largest bank for the whopping 200k salary.

Preach brotha! Preach!

You've been posting a bunch of unsubstantive comments. We actually ban accounts that do that because HN is trying for a higher quality level. Trying and failing, often, but we need to keep trying. So could you please not do that in comment threads here?

https://news.ycombinator.com/newsguidelines.html

https://news.ycombinator.com/newswelcome.html

> not knowing if they're trading digital dollar bills or monopoly money

Is there a difference?

I would guess that the traders who hold millions worth of tether have a good business relationship with Bitfinex and have more information than is publicly available. And that information seems to make Tether more trustworthy. A reason why they don’t want to make their bank statements public is that their bank fears being cut off from USD clearing once it gets known that they are handling Bitfinex funds. So there are actually valid reasons to be secretive and the unsatisfactory level of public information is a side effect of the whole regulatory circus the financial sector is burdened with.

They don't have to make the name of their bank public.

They just have to prove it exists to their auditor. Who just severed ties with them and deleted any mention of them from their website.