There's a reason why the middle ages had a huge number of coins. A mint could be trustworthy for a generation as some Noble family takes care of it with high degrees of trust. (Usually proven amounts of silver in each coin, for example)

Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears.

And that ignores issues like the Conquistadors coming back from the new world with literally tons of gold / silver and royally messing up the gold / silver coinage economy.

> And that ignores issues like the Conquistadors coming back from the new world with literally tons of gold / silver and royally messing up the gold / silver coinage economy.

Which was preceded by the exact opposite problem in Europe:

https://en.wikipedia.org/wiki/Great_Bullion_Famine

>>Then the wrong child becomes the leader of the family and and bam, they start reducing the silver weight and replacing the coins with cheaper metals and the entire trust in that coin disappears.

//

That's actually a plot point in an anime called Spice and Wolf[1]. I encourage anybody who has an interest in medieval economics and early capitalism to watch it.

[1]https://myanimelist.net/anime/2966/Ookami_to_Koushinryou

A lot of my historian friends liked that show, especially because it tried to focus more on the mundane issues in the Middle Ages.

Mr. Lawrence had a leg up on his rivals because he's the main character with practically a modern economics degree. So his ability to predict market trends and focus on important information is head-and-shoulders above everyone else.

Holo the Wise Wolf in contrast, is a minor, fictional pagan deity without much understanding of human culture. But her sharp wits gives her a lot of street smarts that stands above even Mr. Lawrence. It seems that she can control the yields of wheat fields to a certain degree, but since the recent invention of crop rotation and some fertilizers, her followers were no longer praying to her (and probably don't need her anymore). So she heads off with Mr. Lawrence (the first merchant to swing by after she decided to leave).

Holo serves as a good stand in for the audience as well: as Mr. Lawrence holds roughly 15+ different coins out and describes their relevant marketplaces, Holo of course gets bored of the discussion (much like the audience probably does).

Giving Mr. Lawrence "knowledge", while giving Holo "wisdom" allows the pair to balance each other out in their journeys. Especially since the basic plot of the show is "follow rumors to make money". Holo can accurately sniff out the truth out of rumors, while Lawrence can predict where the markets go once he's given the facts.

EDIT: In many ways, Holo serves as Watson while Lawrence serves as Sherlock in most situations. Lawrence explains the plans to make lots of money to Holo (much like Sherlock explains the situation to Watson, since Watson is the audience stand-in). But unlike Watson, Holo quickly catches onto the money-making game and is quite capable to changing the plan for the better. So its actually a very fun dynamic to watch the two. Just enough explanation from Lawrence, and just enough improv from Holo to keep things interesting, even though they're just buying and selling things throughout the show.

The US has had periods where banks or even corporations could print their own money.

https://en.wikipedia.org/wiki/Wildcat_banking

It wasn't fiat money, they were deposit notes representing gold or silver. And while outright fraud wasn't much of an issue since physical banks can't just disappear and leave town overnight, if the bank collapsed the currency would probably not be redeemable anymore.

Fraud was high.

It was not fraud by the institutions as such, but counterfeits was a big problem with as many as 7000 unique notes it was next to impossible to know which was genuine.

Post the civil war as much as half the currency was estimated to be counterfeit. The secret service was given the policing money task as a direct result.

There was streamlining of currency issue after that.

George Byron Merrick's book Old Times on the Upper Mississippi: The Recollections of a Steamboat Pilot from 1854 to 1863 [0] has a fascinating chapter on how people got rich on wildcat banking swindles.

[0] https://www.gutenberg.org/ebooks/47262

Nevada, New Hampshire, and Utah have gold notes that are legal tender now.

https://www.jmbullion.com/gold/gold-notes/

https://www.jmbullion.com/1-nevada-goldback-gold-note/

I mean a currency that protects you from government intervention also protects criminals from law enforcement. They're just two sides of the same coin.

The first banks would have dealt mostly with physical money / gold, so it would be a lot harder to pull off this kind of fraud.

Why? Just take the gold and run. Bank robbery was a thing, and it's much easier to rob your own bank.

> a currency that protects you from government intervention also protects criminals from law enforcement.

Not if the government intervention is a smart contract. Why do we fear government intervention?

- (individual) errors - (individual) misconceptions - corruption ( individual incentives )

What if we had direct democracy and your case would be reviewed by every citizen? Would you still fear to be spyed upon? Would you fear to be detained without reason?

That's what Cryptography promises. A uncorruptable system which serves society with incentives correctly alligned.

Reinventing modern finance one disaster at a time.

seems like wheel shaped things enjoy regular reinventions

I think it's more that the problem can seem deceptively simple because you're using the default system everyone's assumptions are based on and you don't need to understand the history behind it to have the basic banking experience. The average cryptocurrency booster hasn't studied the current system or its history[1] so it's easy to focus on the happy path and say you're making things easier until you hit a reminder of just how hard it is to stymie abusers when the rewards are high.

1. education from their fellow salespeople is typically worse, like getting medical advice from a health-supplement vendor.

> the problem can seem deceptively simple

Simple or not, the current solution is far from perfect and will be reinvented and will fail again and again until a better solution emerges. There is no way that the current banking/government/democracy/economy system will survive this century.

There is a great word for this "recapitulation".

"Speed running the last 200 years of financial history..."

I’d like to know this as well. I suspect there’s more because now the entire contents of the vault can fit onto a slip of paper. So just logistically can be moved around more than previous bank eras.

you don't need to go that far back in time to find banking issues basically in every major geography, with different kinds of currencies, digital or not.

Case in point:

https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...

https://www.cnn.com/2021/01/21/europe/vatican-bank-money-lau...

https://www.justice.gov/opa/pr/bank-julius-baer-agrees-pay-m...

Money laundering is a different kind of a problem from what we're talking about here, though. Those are mostly KYC or internal controls failures - I'm not saying they're a good thing but they're not impacting other customers of the bank really.

Find some recent example of the owners of a bank/exchange absconding with their client funds: that would be closer to the matter at hand.

Last example of a bank failure where ordinary people lost a lot of money I’d say was the failure of Lehman Brothers. Lots of risk averse retail investors were sold Lehman certificates with somewhat better yields (“mini-bonds”) because Lehman paid high commissions to the retail banks, eg in Germany and Hong Kong.

Wirecard :)

But you’re right. Mostly the normal banks and exchanges are regulated and incidence of fraud is low. A lot of that regulation is “lessons from past failures”, which crypto hasn’t had yet.

Wirecard wasn't a bank/exchange either. But a payment processor. It was fraudulent though.

Did any customers actually lose money over the Wirecard thing, or was it just the shareholders and lenders that lost out? I couldn't immediately find anything about customer losses.

As far as I know, they weren't any customer losses.

This still happened as recently as 100 years ago. Con men would set up false banks in small towns and make off with a lotnof money. Lookup Yellow Kid Weil.

I wonder how many bank robberies were scams.

Bank owner embezzles for awhile, bank robber shows up, publicly robs the bank, makes off with $1000, bank owner claims $10,000 was stolen. Bank owner now has a reason why he can't give everyone their money back.

So what changed? I'm not concerned with any current bank making off with my money (although I'm more concerned with risky practices leading to them to go under, which is legal and as 2008 proved, the tax payer will absorb).

I think hard currencies took care of trust about intrinsic value. It's only the establishment of rule-of-law and regulations allowed fiat currencies to proliferate. Regulations were written in the tears, fears, and anger of common folk. There's essentially no way to trust someone else with a BTC wallet and there's no trust in BTC's value because there's nothing behind it... it shouldn't be used to store value long-term, only for quick, transactional events.

Banks and municipalities who issued their own fiat currencies I believe encountered many more problems.

> Nothing is known about Diogenes' early life except that his father, Hicesias, was a banker. > Hicesias and Diogenes became involved in a scandal involving the adulteration or debasement of the currency,[10] and Diogenes was exiled from the city and lost his citizenship and all his material possessions.

https://en.wikipedia.org/wiki/Diogenes

Deposit insurance is a relatively new concept, at least in North America. It didn't exist in the US until the Great Depression. Canada did not introduce it until 1967.

A lot of what's happening in the crypto space is just self-professed libertarians re-discovering fire. They start off by being skeptical of banks and monetary authorities, but eventually realize that an unregulated free-for-all attracts bad actors that ruin it for everyone else. Hence the wet blanket of AML + KYC + Deposit ratios.

Even in the modern era there's a lot of fraud and scamming going on. This sounds like a classic Ponzi scheme, and Bitcoin-based Ponzis are just one corner of a broader universe of similar scams all across the globe. They've even brought down governments and the odd country...

What if the exit scams happening today in China are 10x worse than South Africa’s, because it’s so much bigger, but we aren’t hearing about them? Never mind history.

Any examples?

Much more fraud is committed using US Dollars than Bitcoin. It's just not news so you don't read about.

A lot more non-fraud is done with USD too though.

Probably a great time to introduce you to ACH fraud

https://www.afponline.org/publications-data-tools/reports/su...

Its just as large and just as consequence free as bitcoin/crypto heists and fraud despite the paper trail

Some reinforce their respect of one system by looking at the proportions of the money supply and transactions, I would say that isnt that important as the industry / interest in fraud has a fixed size

No, it isn't.

ACH fraud was 1% on 21 billion$. That's 210 million in total, way less than the 4 billion from the article with 1 Bitcoin scam ( of an exchange, again).

None of the ACH frauds were the exchange/bank running away with your money fyi.

And probably a lot of them, if end users, was even insured.

Edit: Sorry. Made a mistake corrected below by a comment and follow-up.

0,08% fraud on 51 T. Is still way less than this sole scam vs. BTC market cap.

> ACH fraud was 1% on 21 billion$

21 Billion per year is close to the annual ACH transaction volume measured in count of transactions.

The total value of those transactions in dollars is somewhere over $50T (Trillion) dollars.

1% of that is $500B.

Mmm. Where did you see those numbers? I haven't found that number.

+ The number i found for fraud in ACH afterwards was actually 0,08 %

> ACH fraud is extremely low at 0.08 basis points, or 8 cents for every $10,000 in payments

https://silamoney.com/ach/understanding-the-basics-of-ach-fr...

https://www.nacha.org/news/ach-network-moves-23-billion-paym... is where I got the data on total volume.

I took the 1% from you, assuming you got it from somewhere reliable or at least that you believed in it. (I looked for it in the report summary; I didn't find it; I assumed you got it from the full report, which I don't have access to.)

If the correct figure is 0.08%, that's almost $41B on $51T (more now, as the network volume continues to grow).

Sure. Thanks for correcting me and sorry for the inconsistent number at first. It wasn't easy to find numbers since most just retold the original mentioned article without absolute numbers.

But the entire fraud /year is way less percentage then this sole scam from the entire Bitcoin market cap valued against its peak.

So his comment is actually a net positive for traditional payments ( even if you neglect insurance, ... )

FWIW, 0.08 basis points = 0.0008% = 0.000008 = 8 in a million = 8 cents in a million cents = 8 cents in 10,000$, as the article says. (0.08% would be 100x more.)

No? 0,08% or 0,0008

One one-hundredth (.01) of a percentage point. For example, eight percent is equal to 800 basis points.

https://www.investor.gov/introduction-investing/investing-ba....

The author of the article made the wrong calculation which makes this extra confusing. Ugh...

Since 8 basis points from 10 k is 8 => https://www.wolframalpha.com/input/?i=8+basis+points+of+1000...

> 0,08% or 0,0008

Where are those numbers from?

> For example, eight percent is equal to 800 basis points.

Correct. 800 bp = 8% = 0.08 = 8e-2, as in your example there (different than the numbers in the linked article).

Also, 8 bp = 0.08% = 0.0008 = 8e-4, as in the numbers you gave at the top (different than the numbers in the linked article).

Also, 0.08 bp = 0.0008% = 0.000008 = 8e-6, as I’ve pointed out (and corresponding to the numbers in the linked article:

> ACH fraud is extremely low at 0.08 basis points, or 8 cents for every $10,000 in payments.

Note that 8 cents are $0.08.)

Omg. 0.08 basis points is indeed in the article.

I checked it 2 times and always parsed it as 8bp... And not 0,08bp.

I feel embarrassed now. Nice job :p

No worries. Basis points are somewhat weird if one is not used to them, and the article is a bit cheeky in that it mixes cents and dollars, making it extra confusing.

The perpetrators are often not prosecuted, which is what I meant by consequence free.

ACH Fraud has also been going on for at least 20 years or so in similar amounts

Yes big bitcoin heist and no insurance for those victims of that exchange

Both true