Crypto Conversation

[OldPhiKap]

I'm with you brother. These normies just don't get the unrealized potential of this paradigm shift because it is a threat to their antiquated patriarchal wealth suppression legacy.

“If you don’t see the problem, you’re part of the problem.”

[fidel]

I am horrified that the government spent my tax dollars (causing inflation!) to protect an economy that is run by elitists.

[snowdenscold]

Gary Gensler (SEC Chair) has a recent "Office Hours" video giving a good summary of the SEC's thoughts on crypto regulation. Only 3:55.

https://www.youtube.com/watch?v=fHQuooCiDUE

He even gets directly addresses of my biggest pet peeves, which is this absurd deflection that's constantly rolled out about a need for "regulatory clarity". It's utterly predictable and, IMO, just dumb.

Crypto markets suffers from a lack of regulatory compliance. It's not a lack of regulatory clarity"

Preach!

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Also, a much longer post by David Rosenthal - "Crypto: My Part In Its Downfall"
https://blog.dshr.org/2023/04/crypto...-downfall.html

It gets fairly technical and/or historical at parts, but still worth reading if you want to skim thru those sections.

The goal of Proof-of-Work in both Bitcoin and LOCKSS was to avoid the need for peers to trust each other. But this didn't mean that the system was perceived as, or was actually, free of trust. In practice peers had to at least trust the core developers of the protocol. Recent DARPA-sponsored research shows many other parties needing to be trusted

Thus, in practice, Nakamoto's goal of avoiding trust in banks was a failure.

Thus only 21 months after Bitcoin launched, Mt. Gox became the first significant Bitcoin exchange. As with exchanges in the real world, the quoted "price" represented what a greater fool would pay, because they believed that an even greater fool would pay an even greater "price" in the future. In Bitcoin's case, the greater fools didn't even have the reassurance of "analysts' estimates" of future earnings, because you didn't need an analyst to know that the future earnings were zero.

So as well as continuing to trust banks, cryptocurrency users ended up trusting exchanges that were much less trustworthy. Mt. Gox, for example, was coded in PHP and run initially by one guy, who then sold it to a convicted fraudster.

Once people tried centralized exchanges, they realized the user experience was far better than transacting directly on the blockchain, so exchanges rapidly became popular. In June 2011 Mt. Gox pioneered one of the major features of the cryptocurrency exchange user experience, getting robbed. About 25,000 BTC vanished from nearly 500 accounts.

Nakamoto's scheme motivated early adoption by rapidly inflating the currency with large block rewards, then exponentially decreasing them, so he could claim the currency was non-inflationary (eventually). The result was that early adopters accumulated large numbers of Bitcoin, and the Gini coefficients of cryptocurrencies became extreme.

If you are one of these early adopter "whales" your ability to buy Lamborghinis depends upon "number go up" because if it doesn't you will get a Greater Fool Supply-Chain Crisis and the number will go down. Because the Gini coefficients are so high, cryptocurrency markets are thinly traded, on occasion a sale of just 150 bitcoin resulted in a 10 per cent drop in the "price". Thus whales have the means, motive and opportunity to manipulate the "price".

And, boy, do they ever. In Making Sure "Number Go Up" I survey research showing the prevalence of wash trading, pump-and-dump schemes, and the un-backed printing of stablecoins. The SEC has steadfastly refused to approve a Bitcoin ETF because the market is completely manipulated. So every time you hear me say "price" you need to imagine it has quotes around it

As the downfall continued, several things became obvious. First, that the entire ecosystem of exchanges and traders was based on fraud. Silicon Valley Bank failed because many of its assets, long-dated bonds, had lost a proportion of their value when they needed to sell them. But the bulk of the assets of exchanges such as Celsius, FTX and Binance were ther own private tokens, CEL, FTT and BNB. And when they needed to sell them the tokens were worth nothing.

Here's how private tokens work. An exchange mints a billion of them, then sells 100 of them to a straw buyer for $1,000. Now the exchange is "worth" $10B. And if, as Celsius and FTX did, they use the customer dollars coming in to buy up any tokens the public want to sell, they can keep the illusion going. Remember, cryptocurrency markets are completely manipulated. But when someone, Ian Allison in the case of FTX, points out the illusion, there are no buyers.

To sum up, permissionless blockchain technology is clever, but the economics of applying it to the real world are stupid for the reasons I published nearly 9 years ago.. Centralization in the information ecosystem is a very serious problem, but it is driven by economics, not technology. So attempting to solve it with technology with inherent economies of scale is futile. Trying to get decentralization with permissionless blockchains comes with enormous costs (25M ASICs to produce results that wouldn't stress a Raspberry Pi), and even after paying them you don't get decentralization.