Something I suspect we often forget about in the world of stable reserve currencies is that the majority of the world can't run floating exchange rates without encountering major volatility. Standard Fiat/Gold backed currencies generally require some large institution to control the currency price either via money supply, foreign currency supply, gold, or government decreed exchange rates. When these institutions fail currencies tend to have rather extreme swings.
I don’t buy it. Those institutional traders have plenty of access in 2021 and it’s still as volatile as ever. The extreme volatility is what makes them their money and also convinces the casual investor to put money into Bitcoin because they think it might 100X again.
If the volatility stops, so does the crypto party. Big traders don’t want it to stop.
Crypto needs a strong financial network of derivative products. There need to be instruments to hedge the price risk for short periods. There's no reason you shouldn't be able to cap movements for a fixed time period, limiting the amount you can lose. So if I want to use it as transfer of fiat, I should be able to do so within a reasonable timeframe.
Crypto is popular with traders because it's volatile and fragmented.
BTC's price itself has grown much less volatile.
> the volatility spikes in Bitcoin were most extreme in 2011, with subsequent spikes in volatility lessening over time
https://bitcoinist.com/looking-at-bitcoin-volatility-over-th...
And as you say, that's the appeal anyway.
"Presumably" is the key word.
There is nobody to verify that the billions in Tether, BUSD and USDC used to buy BTC (and influence the price) are backed by real dollars.
They are not related. Gold, oil and gas are also very volatile and have massive market caps.
This doesn't matter, however. There will be traders who make market that will buy the volatility during the transaction for a fixed fee.
The article is about El Salvador's switch to Bitcoin, so the price of smart contracts in Etherium, or some other system, is beside the point.
[0] According to <https://bitcoiner.live/?confidence=0.9> at 6:31 PM CDT.
> Also, they make use of L2 networks for transfers, but at the end of the day those are still rolled up on to the Bitcoin blockchain
> which are at least amortized across L2 transactions
That's the point of Layer 2 solutions.
Don't worry, there's a lot of progress being made if you keep up with the industry news.
Sorry to nitpick your comment specifically, but I always hear this in the crypto community "we're making progress!". But no one ever cares to provide specifics. Why is that?
It's difficult to define what I've learnt, and maybe that's indicative in the opposite way than I'd like.
You have to dip your toe in to check the temperature.
I've known of Bitcoin since it was $1, and was very skeptical of it until I dipped my toe in. Both my feet are wet now though, right up to my knees.
I believe cryptocurrency has a bright future. Bitcoin is the first, Ethereum added something amazing to bitcoin to become a platform for other ecosystems, and now there are smaller competitors that are going to be "the new Ethereum" by being faster and cheaper and more decentralised so the ecosystems can spread wider to cater to more people.
There are a couple of cryptocurrencies that are hoping to be able to soon compete with the transaction speeds and volumes of Visa but with lower fees.
But, admittedly, that kind of performance level is vaporware after 5 years, but work continues and "revelations" always seem to be round the corner:
Cardano smart contracts go live this weekend (I think, unless it's the last testnet release).
Ethereum 2.0 is scheduled for release in December (this will probably make people 'in the know' smirk - so let's say Q1 2022).
Solana is gaining popularity and has the potential for the Visa stats right now, but it's just waiting for the volume to prove it.
Polkadot has its parachain auctions coming up later this month (or next...).
> coming up later this month (or next...).
> scheduled for release in December (this will probably make people 'in the know' smirk - so let's say Q1 2022).
> couple of cryptocurrencies that are hoping to be able to soon compete
Do you see why people roll their eyes when they hear "we're making progress" now?
However:
Ethereum's controversial "London" hard fork went live a couple of weeks ago.
Kusama's parachain auctions have been live and ongoing for a while now.
Bitcoin's Lightning network is powering El Salvador's transactions.
PayPal allows cryptocurrency purchases.
Square is doing whatever it did with crypto.
Amazon and Walmart are hiring digital cash experts.
It’s misdirection, but the costs of maintaining the Bitcoin blockchain haven’t gone anywhere.
It definitely makes sense for them to use Tether/USDT for sure, I agree there. But making Bitcoin a legal currency is also a political and economic statement that goes far beyond simply facilitating digital payments.
There's hardly anything truly "bitcoin" about El Salvador's system.
https://www.coindesk.com/business/2021/06/21/strike-is-phasi...
This has been suggested as one of the many reasons Bukele is so keen on Bitcoin/Chivo: he can't print USD, but having control of the national wallet system gives him countless avenues to manipulate the system.
Of course it could also allow the government to do worse things like backdoor wallets and confiscate crypto.
There are lots if wallets not registered with the El Salvador government, and it will be impossible for the government to distinguish those that are genuinely foreign from unregistered wallets used by people ot for purposes nominally subject to El Salvador’s laws.
So, no, it won't make tracking any easier, nor wil it make taxes and tariffs easier to enforce generally.
So it's pretty expensive.
On top of that, the person has to have a bank account that can be connected with PayPal. The benefit of WesternUnion (and why its a lot more expensive) is that you can just show up somewhere, show them an ID and get cash that was transferred to you. Crypto is closer to that, where you can download an app, go to an ATM and exchange for fiat in a short timeframe
It’s interesting to see that even their example use case results in the transferred Bitcoin being converted back to dollars right away:
> “Wherever you are now, you can send bitcoin to anyone with a Chivo wallet in El Salvador, and in minutes, they have the value and then they can go to one of the ATMs and take it out in cash without a fee,” said Alex Gladstein, chief strategy officer for the Human Rights Foundation.
I suspect this will be the default behavior for Bitcoin remittances: Buy Bitcoin, send it immediately, then other side sells it as quickly as possible to get back to cash. Bitcoin dropped 20% in the span of minutes on the big launch day in El Salvador. I doubt many people are going to want to hodl their remittances in a highly volatile currency.
It’s also interesting that the costs haven’t actually gone to zero for the Bitcoin model, but they have been obscured and shifted to other parties. This says the receiver can withdraw BTC as cash “without a fee” but what does that mean? Is it like those currency exchange stations at the airport that have “zero fee” but they more than make up for it with unfavorable exchange rates? If not, who is paying to operate and maintain the foreign exchange infrastructure, which isn’t free?
Also, they make use of L2 networks for transfers, but at the end of the day those are still rolled up on to the Bitcoin blockchain, which is unbelievably expensive to run due to the energy requirements that register as a significant fraction of humanities energy usage. That energy must be paid for somehow, which is currently a a mix of block rewards (technically, inflationary money printing) and transaction fees, which are at least amortized across L2 transactions. There may be uses for cryptocurrency yet, but I hope this isn’t the end game because it’s still an inefficient mess. Maybe if we can get away from PoW block chains and also wise up and jettison the arbitrary speculative tokens then maybe we can make some progress.