There’s a kernel of neat tech innovation and a reasonable argument about monetary policy obliterated by an avalanche of greed, hype, fraud, and magical thinking.
2% annual inflation over a 40 year career amounts to 40% less earnings. Inflation is theft. Bitcoin fixes this. No one has ever explained a better solution to inflation than Bitcoin.
Fiat money printing is a scam that lets politicians spend more money without directly raising taxes. Bitcoin is honest sound money with a fixed inflation policy forever that cannot be manipulated by any central actors.
It is an idea who’s time has come, given the inflationary realities of today.
I’m always a bit surprised when people seem to imply that there’s a fundamental human right to perfectly stable stores of value (if you could even define such a quality), and that the absence of that—inflation, price fluctuation, etc—is somehow unfair.
Gold bugs like to say that “value” is what gold is worth, but if you look at the real value of gold over time—in terms of its ability to be exchanged for things that you might, you know, want—it’s anything but: https://www.macrotrends.net/1333/historical-gold-prices-100-.... Over a number of multi-decade ranges in the last century, a purchase of gold at the start of the period would leave the buyer the poorer at the end of it.
In reality, there just isn’t such a thing as a single “real” definition of “value.” Prices—of commodities, of securities, and, yes, of both fiat and cryptocurrencies fluctuate. A saver who wants to put money away to spend in the future must, unfortunately, make some sort of bet. (Even if such a magical instrument existed, savers who bought it would still be making a bet that the opportunity cost of avoiding growth investments does not outweigh the value of stability!)
Keeping all your savings in crypto—or in fiat, or in gold, or in your employer’s stock—isn’t a fantastic idea. But that’s not because someone is scamming you; it’s because there just isn’t such a thing as “the one true value”, and no asset that allows you to safely track it. That’s life.
> I’m always a bit surprised when people seem to imply that there’s a fundamental human right to perfectly stable stores of value
If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.
I don’t think I am being entitled to believe that this option should exist for those who wish to take advantage of it. Forcing everyone into the stock or real estate markets just to stay ahead of inflation is a crime against the people.
> A saver who wants to put money away to spend in the future must, unfortunately, make some sort of bet.
This is only true because of the fradulent fractional reserve fiat money system we have been subjected to which allows the central bankers to steal from the populace to enrich their banker friends. If it were not for money printing, the saver would not have to risk their savings just to preserve purchasing power.
“If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”
Yes, it's very mysterious. If everybody put their money in the bank they would all be guaranteed a positive return on their investment, but there is no inflation and the money supply is fixed. So where does the money come from?
It’s simple really. In finance this is called ‘the time value of money.’ Essentially, in order for me to be incentivized to use a savings vehicle, there must be a real incentive. This incentive is what motivates the saver to save. If not for the incentive, why would they lend their money out?
I mean it already works like that in cryptocurrency today. Look at the rates paid on stablecoins. For example look at UST a US dollar stablecoin. It currently pays 19.4% APY on savings. There are risks but for 2% on Nexus Mutual you can be insured against a failure of the dollar peg or a failure in the smart contract. The net yield on a USD pegged stablecoin with insurance is 17.4% - handily beating inflation risk-free.
If the central bankers couldn’t print money you could beat inflation with any bank account.
Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance.
It’s not really much different from a mortgage or another asset-backed loan, except that the borrower must send the collateral to an account controlled by the lender and the lender can instantly liquidate the collateral if the LTV falls below a threshold.
If you think about it, crypto such as Bitcoin or Ethereum are really the most perfect form of capital for a lender to accept as collateral for a loan. Unlike a home mortgage or a car loan the lendor takes full custody of collateral valued
greater than the loan. The crypto assets are volatile but they are marked to market in real-time 24/7. At any time if the value of the collateral falls below som safe threshold, the borrower is notified that their collateral is at risk of liquidation and given the opportunity to add collateral. If the LTV ratio isn’t corrected and the market reduces the value of the collateral further, then the lender can instantly liquidate the collateral and unwind the loan.
It’s more like I will lend you $1 if you post >$1 in collateral. In crypto, this is often in the form of a speculative token that is growing at potentially 200+% per year. The borrower is posting their collateral as security for the loan but they continue to own the collateral and enjoy the upside of price appreciation as long as the loan is in good standing.
As the sister comment pointed out, it is currently a $50 Billion industry and it didn’t exist a couple years ago. In fact, DeFi is probably the fastest growing industry in the history of fast growing industries. You would be wise to have a curious mind in this field instead of being closed to the possibilities.
I'm aware of this. But again, your original claim was “If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”
I've yet to understand where you got that idea from, or what it has to do with all of your nonsensical followup comments.
> I've yet to understand where you got that idea from, or what it has to do with all of your nonsensical followup comments.
Which of my comments do you find non-sensical, specifically?
> original claim was “If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”
Let me lay out my logic:
- If not for central bankers, artificially printing money and putting it in circulation, there would be no inflation. No printing by central bankers = No dilution of the purchasing power of everyone's money -> therefore no inflation.
- In a no inflation environment, any nominal gains are real-gains because there is no inflation to worry about
- In a no inflation environment, for a banker to attract deposits from savers, they would have to offer savers a nominal rate of savings in order to attract those deposits
- In a no inflation environment, any nominal rate paid on savings is a real return, since there is no inflation
- In an FDIC insured savings account savings are insured, therefore not risk
- Unfortunately in our current environment where the Fed is printing money at 25-40% increases in M2 y/y, and CPI reaching 6.8% at last reading, and bank savings accounts paying 0.1%, it is hard to appreciate that a bank account could ever pay a real rate on savings, net of inflation. However, in a world without central bank money printers this is exactly what we would enjoy.
one of the common moves is borrowing ETH using an illiquid otherwise-unsaleable shitcoin as collateral. Oh no, you defaulted, and you've lost your shitcoins for half their alleged face value in highly liquid ETH! Oh well.
> it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)
Help me see what I am missing, what is the point of loans that is defeated by requiring an LTV >= 1.0?
To my knowledge all collateral backed lending is based on the principal that the collateral value must always be greater than the value of the loan in order to remain solvent. Since crypto is a volatile asset, you would expect lenders to require higher relative LTV than vs real-estate, which for the most part they do.
Of course, even collateralized loans to buy real estate are not, despite what you said earlier, risk-free--see 2008 (and google the term "CDO", in case you've never heard of it) for a rather dramatic example of this.
More to the earlier point, though, this is really not how most lending works, so the idea that this somehow means that "absent central bankers, we'd all make 2% APY risk-free on bank deposits" is just silly. The global equity market is $50T, the global corporate bond market something like $100T. Total cash-equivalents (M2) in the US is $21T.
Even if "pledging shitcoins as collateral for speculating on coinbase" were zero-risk--which of course it isn't--the market for such loans is, unfortunately, too small for all of us to retire risk-free.
> Of course, even collateralized loans to buy real estate are not, despite what you said earlier, risk-free--see 2008 (and google the term "CDO", in case you've never heard of it) for a rather dramatic
A CDO is a synthetic debt derivative - not really the same thing as a loan. As for real estate vs cryptocurrency as collateral for a loan, two key differences that make lending essentially risk-free to the lender, not the borrower:
1. With crypto-lending the lender takes possession of the collateral at the time of loan issuance so they can liquidate if needed at any time
2. Crypto is traded in liquid markets 24/7 and the value of holdings can be marked to market in real-time or liquidated instantly to pay off a loan.
Neither of these options are available in real-estate lending.
> More to the earlier point, though, this is really not how most lending works
I’ll bite, other than asset-backed lending, how else does most lending work?
> Bitcoin fixes this. No one has ever explained a better solution to inflation than Bitcoin.
Does anyone seriously claim that Bitcoin is currently solving inflation? I've heard some claims that it will eventually be the case, but claiming it is already a "solution to inflation" sounds like a stretch even for bitcoin supporters.
Bitcoin was apparently at 30kUSD some time in July this year after reaching 60kUSD in June, while it is now at 48kUSD. I don't see how this indicates that bitcoin is any protection against inflation. Or if it is and you're fine with this kind of volatility, I wonder why you discarded other investments such as stocks.
Isn't fiat money much more reliable than cryptocurrencies? We frequently cite the failures that led to hyperinflation, but nobody bats an eye when a cryptocoin fluctuates by a double digit amount in a single day.
The central authority that controls the money supply might not be perfect, but I trust it vastly more than a currency with no brakes that's mostly used for speculation.
That, and I can buy a hotdog with money. Peer to peer, without it being logged into a permanent record tied to my pseudonym.
> 2% annual inflation over a 40 year career amounts to 40% less earnings. Inflation is theft. Bitcoin fixes this.
Try living with deflation. To paraphrase Churchill: an inflationary regime is the worst monetary system, except for all the others that have been tried.
> Bitcoin is honest sound money with a fixed inflation policy forever that cannot be manipulated by any central actors.
Not being able to manipulate the money system is bad thing, as the Great Depression showed. Bitcoin is basically a digital form of gold, which was moved away from for good reasons:
From the article, the two charts referenced don’t say what I think you were hoping they say.
The first chart claims to show how CPI fluctuated wildly on the gold standard, except if you read the * and footnote in the article you will see it discloses that the US actually went off the gold standard at the same time as the increase in inflation.
The second chart aims to show how low and stable CPI has been under the current fiat standard not backed by gold. However the chart is old and doesn’t include the recent CPI readings of 6.4% and 6.8% annualized inflation that were reported in the most recent 2 months by the BLS. In other words if chart 2 were continued to today they would include spikes of 3x, not exactly the narrative someone arguing in favor of the current system would want to show.
I don’t buy your argument that allowing a handful of central bankers to manipulate the money supply and print money out of thin air, is a good thing.
> These restrictions on gold exports continued until June 1919, at which point we returned to the full gold standard. I have started from this last date, because there is no question that we were operating under the gold standard at this point.
So the gyrations were occurring when the gold standard was full-on.
> However the chart is old and doesn’t include the recent CPI readings of 6.4% and 6.8% annualized inflation that were reported in the most recent 2 months by the BLS.
The chart is "old" because the article was written in 2012. It was written during a period when QE was going on and there was much tearing of garments about 'money printing':
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
And for the next decade the CPI was doing not a whole lot. So much for Friedman's "always a monetary phenomenon"—which he was wrong about even in the 1980s when Volcker was doing his thing.
Further a spike in inflation was expected and predicted, and that a number of folks said it could last a year, like happened during the Korean War:
In the fact last month's numbers were not surprising because of their value, but because they so closely matched predictions:
> The consumer price index increased 0.8% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.7% advance.
> you will see it discloses that the US actually went off the gold standard
Being "on" the gold standard will take as much political will as not printing money. Probably more, because of the economic suffering that deflation causes… as was seen Greece in the 2010s (Gold Dawn), and Japan and Germany in the late 1930s.
> I don’t buy your argument that allowing a handful of central bankers to manipulate the money supply and print money out of thin air, is a good thing.
Not being able to print money when it is needed in the economy can cause depressions:
It should be noted that historically 'printing money' has mostly not the cause of (hyper)inflation, but rather printing money was the effect of something else:
> In this paper I will argue why the common misconception that “inflation is always and everywhere a monetary phenomenon” cannot be used to explain most historical hyperinflations. I will argue that “money printing” is often the response to exogenous and unusual events and not the direct cause of the hyperinflation.
Further, "printing money" isn't what people think it is:
> This paper provides a general understanding of the workings of the modern fiat monetary system in the United States within the context of the global economy. The work is primarily descriptive in nature and takes an operational perspective of the monetary system using the understandings of Monetary Realism.
I can see you subscribe to modern monetary theory and believe that central bankers and their ability to freely print money without limit are essential to a functioning modern economy.
Further, I see that you don’t share my concerns about increasing inflation. In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation.
In my mind inflation is theft by central powers, stealing the most from those with the least leverage (aka the poor and middle class). A 2% annual rate of inflation over a 40 year career will steal 40% of the purchasing power of the wage-earner. We are currently experiencing 6.4% inflation based on official data.
> Further, I see that you don’t share my concerns about increasing inflation.
I've been hearing people yammer on about inflation for a while now (at least 2009). The constant droning on about it is becoming like background tinnitus. It's not that it doesn't matter when it gets "too high", but given the modern secular stagnation we've been seeing in the developed world, little growth and deflation seems like a higher probability. Japan has had a bank rate of <1% since April 1995 and has printed money and… nothing.
> In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation.
In my eyes economists see inflation in the context of the time that is (or is not) occurring. They can work towards preventing it, stopping it, encouraging it, or letting it run for a while depending on the situation.
Annualized inflation was -0.36 in 2009, was that a good thing?
If they can predict inflation then it implies they have a decent understanding of what various policies are doing / will do. It allows them to tailor those policies towards various objectives: the current objective could be that they want to get people employed again, and as the unemployment number decreases (or the participation rate increases) they can scale back the program(s). At least in the US, remember that the central bank has a dual mandate:
A good portion of people have debt, the largest portion of which is often their mortgage.
> A 2% annual rate of inflation over a 40 year career will steal 40% of the purchasing power of the wage-earner.
Assuming that wages don't rise. Fight for inflation-indexed minimum wage (at state and federal levels), and fight for unions. Having 0 or negative inflation (deflation) is worse from the reading I've done (see 1930s).
> We are currently experiencing 6.4% inflation based on official data.
And we'll see what it is over the next year. I'll go with the prediction of a spike over the course of 12-18 months (probably ending late-2022):
The Krugman article you linked is behind a paywall so I couldn’t read it. I did, however find this other article on his take on MMM [1]. Per the article, Krugman’s take is that most other economists aren’t pro-MMM enough for his taste. He thinks we should be even further to the left on MMM. Is that your position also?
Do you also support Krugman’s position that the internet would never be more valuable to society than the fax machine? [2] I have no doubt you concur with his repeatedly articulated position that Bitcoin is also worthless? Perhaps as worthless as the internet vs the illustrious fax machine?
As for the rest of your comments, I’ll summarize them as follows:
1. Inflation is not a problem as long as economists can predict it because, reasons.
2. Inflation isn’t really a problem for regular people because they can just go and get an over-sized mortgage at an interest rate below inflation and get free money without consequence.
3. Inflation will be over soon, which ignores the trillions in new money recently injected into the economy, and people maybe won’t notice or won’t mind the new higher prices for things as prices magically stabilize in 12-18 months? - despite the fact that the money printer isn’t likely to stop printing money in that timeframe.
0.98 ^ 40 = 0.445. But that’s income in the last year, not fraction of the total. You’d have to add up 1 + 0.98 + 0.98^2… to get that, but I’m too stupid to figure out a closed formula or anything else I can solve with the Google calculator. It does get pretty close to 0.6, I believe, making this the least insane part of the post.
You’d have a better point if transactions were fast AND cheap. Until crypto gets there, it won’t be viable as an actual currency yet. I’m not saying it’s impossible like this hit piece, but it’s not there yet.
1) Bitcoin isn't about fast and cheap transactions. It is about censorship-resistant transactions and sound money with a fully fixed and transparent monetary policy, protected by the most powerful supercomputer in the history of the world. No other crpyto currency or asset class offers this.
2) Lightning already offers fast AND cheap payments at nation-state scale. The future is already here, it just isn't evenly distributed yet.
Also, last I checked, the price of essential good in Bitcoin, assuming the contra-factual that it were possible to buy such things with Bitcoin, hasn’t exactly been constant for 40 years.
Asking for a raise works for me and you since we have pricing power, but what of those less fortunate? What about those on minimum wage, or fixed salaries or pensions or welfare? They don’t have the ability to continuously increase their prices to match inflation.
TL;DR your solution works for the most in-demand workers in society but it causes greater and greater income inequality over time leading those who are most vulnerable to fall further and further behind.
Inflation is not caused directly and only by printing.
But imagine it was. We'd see inflation apply evenly everywhere. So wages would rise too. Inflation would not eat into your earnings in any compounding fashion.
For a given level of money velocity, what other factors cause inflation - other than money printing? Clearly money printing is the most obvious cause of artificial manipulation of the money supply and in my understanding the primary cause of inflation. What am I missing?
These are the same economists who predicted there would:
- be no inflation, then
- inflation would be mild, then
- inflation would be transitory, then
- inflation isn't really a problem
Still, I'm waiting for your response on what causes inflation, other than money printing. If we look at correlation, money printing appears to be related to inflation. What am I missing?
Inflation is not some unfortunate built-in side effect of fiat but a deliberate policy choice by specific organizations and people. Why would they all of a sudden give up those policies and embrace the crypto-land?
Money-printing has enriched a cohort of corrupt central bankers and their cronies such as politicians. I don’t expect them to give up a policy that has unjustly enriched them for so long.
Luckily we don’t need their support for Bitcoin to work. Bitcoin operates on the game theory that offers individuals a choice to save in a currency that cannot be manipulated. Over time, more and more individuals will choose the better money.
I remember being shocked that my uncle was doing NFT trading and buying and selling digital land in the metaverse over Thanksgiving (though not his primary job).
I thought I was an early adopter for having 1.4 ETH.
> At this point the equities market is also gambling.
FTFY
"Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.
"Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
- John Maynard Keynes (ironically)
Technically he was talking about short term high inflation, but there is no mechanistic reason why this would be false for long-term low inflation, and it is exactly what we are seeing after 50 years of secular inflation as a policy.
> Technically he was talking about short term high inflation, but there is no mechanistic reason why this would be false for long-term low inflation
I was with you until this point. There are absolutely reasons why there is a difference.
Time is directional and irreversible and human life is exceedingly finite. Thus there will always be a higher value placed on money you get today versus money you get in the future. Given that money, itself, is not a productive or useful asset at rest, inflation at a rate consistent with the gradual increase of aggregate wealth is a natural and healthy outcome of the system.
> Thus there will always be a higher value placed on money you get today versus money you get in the future
Yeah, that SHOULD be the case because "money you get in the future" should be subject to existential risk. If you want to artificially "mobilize money" then you are going to get all sorts of fucked up things like environmental destruction in the service of thoughtless consumption ("spending on crappy shit from china is good for the economy!!1"), ponzi schemes, incentivised malinvestment, and cheating labor out of their wages:
"it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."
Think about it this way: If we did not inflate the money, increased productivity (e.g. through technological efficiency gains) would result in everyone reaping the benefits, capitalism would be a rising tide that lifts all boats. Instead, we funnel those societal gains to the most privileged in our society, i.e. bankers and people who are good at writing government grants and good at getting awarded contracts.
I'm not interested in the trade itself, I just don't see the metaverse as really properly established yet so where is this taking place? Maybe I'm out of touch.
For me, one of the saddest things about the El-Salvador Bitcoin saga is seeing people here turn a blind eye to Bukele's power grabbing, because he plays into the narrative of their crypto greed.
There's a lot of hype but there's also a lot of potential to revolutionize commerce. imagine if you could pay 10 cents to read an article or tip a web site. How badly does this torpedo googles ad biz?
> imagine if you could pay 10 cents to read an article or tip a web site.
1) nobody actually wants to pay this, though; the whole set of pre-existing arguments against micropayments apply, too many to list here. My fave one is "micropayments enable microfraud", though. And if you think cookie banners are annoying wait until you see the cryptobanners.
2) you definitely can't scale this on a blockchain, and any scalable system you build to do it will be Not A Blockchain. How many web pages does the world view in the time of a single bitcoin block? Would you say it was more or less than ten million?
1) Why do people buy "pro" apps to remove ads but would not do that for content on the web?
Also the micro fraud argument is kinda funny since everyone knows the ad business is full or fraud and everyone somehow involved with ads pays a huge junk for this.
I think micropayment is far move fraud resistant because all the bots pretending to be humans and clicking ads do not work anymore.
2) That true. but it doesn't have to be a blockchain in fact there is already proposed protocols to do micropayment on global scale its called Interledger Protocol (ILP). Its a protocol like TCP/IP it scales the same way.
And as the name suggest it can be used with multiple ledgers including blockchains but it doesn't have to be one.
Every model has been tried from standard subscriptions to bundled subscriptions (Mogul, Subscribd) to ads replacement (Google Contributor, Sterling) to pay-per-article (Blendle) and they've all found limited success.
1) Most people do not value written content and news the same as other forms of entertainment. 2) There's too much decision friction and it gets worse when you have to decide per article. 3) Ads subsidize far more than most people could afford to pay for directly.
Crypto doesn't solve any of these human behavior or budget problems.
Also who said content has to be written?
If the demand for written paid content is low there is no way to fix this.
Demand for stuff changes over time and certain business go obsolete. This has nothing to do with the topic, those who dont adapt die out. No one claims that somehow crypto would magically make people earn money with stuff no one want to pay for.
>3) Ads subsidize far more than most people could afford to pay for directly.
That is mathematically impossible every ad is paid by thous who buy the product.
Thous who just see ads but never buy factually dont pay and dont ad any value at all they just force thous who buy to pay more.
There are many people who dont use ad-blockers because they think its the morally right thing to do, to support the content creators through ads. They make this logic mistake all the time. There is nothing morally right about raising the product pirce for others so ad companies get more revenue and a tiny but also goes to the content creator. Its a best Robin Hood like moral gymnastics, it does not ad value to the system and you dont pay for the content you consumes.
> remove ads but would not do that for content on the web
The "pro" app equivalent is existing paywalls, NYT-style.
> micropayment is far move fraud resistant because all the bots pretending to be humans and clicking ads do not work anymore
But different sorts of fraud are imaginable, especially if you don't confirm every single payment. If you do confirm every single payment that's probably unacceptable user friction. Or the copyright problem already seen with NFTs and content farms: copy someone else's pages, charge for access to them.
Paywalls are walled gardens even if I would want to use them I cant because the internet is global but paywalls are not.
Beside that its not feasible as paywalls are usually a subscription, the average user would need to have 10-100 subscriptions to cover their browsing habit. Not only is this way to expensive its also completely impractical. And it would self inflict a incentive to not leave your subscription bubble.
Micropayment make it possible that I can pay without subscription without giving my personal data and without some absurd premium price that is justified by the fact that I could consume other stuff for the rest of the month/year which I likely dont want.
>But different sorts of fraud are imaginable
Sure and we find solutions for these. Unlike with ads everyone should be onboard blocking and fighting the fraud. with ads however thous who dont commit it can still profit from it.
>If you do confirm every single payment that's probably unacceptable
But there are solutions for these problems. Lets say you want to watch a youtube video, it could be free for the first 10% and then ask you to confirm payment.
Then it steams payment as you watch so if you stop halfway trough you only paid half the price.
>Or the copyright problem already seen with NFTs
There is no such NFT copyright problem its made up nonsense.
People just dont understand what they buy usually a public price of art. So its already released when sold and people can copy or store it however they want. Its worthless just like an MP3 file of a radio hit is worthless the rights on that track however may not be worthless if the owner know how to make money from it.
>copy someone else's pages, charge for access to them.
Already possible now. Micropayments does not change anything here. People steal stuff and "sell" it. There is no technical solution for this problem.
I'm curious about what Facebook/WhatsApp is doing in Guatemala, right next to El Salvador.
They are integrating WhatsApp, the main messaging app, with a stable coin Pax Dollars and Zero fee remittances between U.S. and Guatemala.
The countries are next to each other and are similar in many ways. But one difference is that Guatemala, has their own stable local currency (Quetzal/GTQ), and the exchange rate margins charged by banks are the highest from any Central American Country. And also unofficial USD currency exchange can easily cost about 25% of the transaction.
WhatsApp is so widespread in Central America that FB has a big potential of doing what El Salvador has attempted to do with Chivo/Bitcoin.
This reminds me of the old stories of how Facebook choose which universities to allow sign up from. It was by choosing the universities close to others that had Facebook competitors.
What they're doing is not actually using the USDP in any manner. The USDP sits in Novi's account in Coinbase Custody. The USDP in the Novi app is just accounting entries in their system.
Thank you for sharing that link. I'm a reader of yours and never imagined you replying one of my comments.
By the way thank you for the coverage in English you do about my country which summarizes many of the things that are happening here. And specially for reporting about the political context in which all of these is happening. As this is something not covered much by other news outlets.
I was curious about Novi/WhatsApp because the potential it has for becoming a new widespread payment method due to the market share of WhatsApp in these countries. Not much about the underlying technology.
So many transactions here involve sharing screenshots of bank payments confirmations or photos of bank deposit slips via WhatsApp messages. From small stuff to even loans, that Whatsapp could easily move from sending screenshots to sending payments by adding a "pay" button on their app.
If they get the end user experience right, and regulatory approvals which is a bigger challenge by itself. I don't think the end users will think much about the underlying technology.
thank you! As literally just some guy with a news blog, I'm humbled by Salvadoran readers telling me that my coverage is useful to them. Obviously, I depend heavily on Salvadoran contacts telling me interesting things, and checking my stuff before it goes live - they checked this Foreign Policy article especially :-)
Some kind of crypto IS necessary in the end. Not for the micropayment[1] itself but for funding/withdrawing. If this is done over traditional banking system it excludes half the world with access to the internet + adds fees that go to the bank.
If its implemented trough internet mega corps instead of banks they get even more power than they already have + they will take a cut too + they will fight it to ever become a thing because it directly destroys their business model.
On top of that comes privacy concerts and all that. It would be horrible.
We dont know anything other than crypto that would globally work and isn't controlled by a single authority.
Crypto isn't a currency so you still need exit nodes to fiat at some point, and these are banks (or exchanges using banks on your behalf). New fintech services like Cashapp, Venmo, Paypal, Sofi, etc have done much more to improve banking access with technology than any crypto so far.
None of these services can do what crypto can and you should not want to use them anyway. They take a cut, screw you over whenever possible, have zero respect for you privacy and personal data, can exclude you from service without due process and basically put you on a no-fly list but without justification or any feasible way to fight it. Every other week these is some HN post about peoples accounts getting suspended, do you want to live in future where this happens to your "wallet"?
I know people who can not open a paypal account since 10+ years. There is no way to appeal it.
Also within 10 years they will all be bought up by the largest 2-3 players creating another mega corp oligopoly that makes everything worse for everyone. Wait until they exchange their "no-fly lists" and a AI gets to ruin peoples life because of statistically anomalies or something.
If you dont want that you should root for crypto even if today crypto is mostly garbage and scams the tech can be used to do better.
Look at Google Contributor. Users didn’t want to pay even $0.01/page, and publishers didn’t want to sign up to receive those payments. More non specifically, pubs people would pay for didn’t want to dilute their existing revenue streams with micropayments, and not enough users paid for the pubs on board. The program shut down twice.
There was also a product called TipJar that they similarly launched and killed that solve the first and second opportunity.
In both cases, Google had a huge structural advantage of already having so many cards on file and publishers with their banks hooked up and still couldn’t cross the chasm.
Somebody would need to solve these issues — not sure it’s a question of centralization
How does this scheme address the concept of decision fatigue?
I’ve heard that various cryptocurrencies are going to revolutionize the web economy and even replace AWS. Maybe I’m dumb. But it sounds like profound nonsense.
And I mined Bitcoin when you could still do it profitably with a GPU. I bought a new computer in March 2021 for $1,900 and used it to mine over $2,300 in ETH so far. I understand cryptocurrency fairly well but I just don’t get it.
We did. It didn't work. Probably will never. Instead you should consider what you want. You want good writing content that's easily available and persistent? Okay, Wikipedia 100% has done this, amazingly. What can we learn from THEIR model?
trouble is the interface to actual money - the only coins that have any depth of dollar liquidity are BTC and ETH, both of which are proof-of-work. Even if your low-fee shitcoin just happens to have a USD pair, it's startlingly unlikely to have enough depth not to have massive slippage on trades; so functionally, buyers have to go via BTC or ETH. This is also the fallacy of non-PoW NFT chains.
Looking at SOL/USDT on Binance.com [1] as an example, it looks like there are typically orders for a few thousand USDT within a 1 cent spread (0.006% of the price), or orders for a few hundred thousand USDT within a 25 cent spread (0.15% of the price).
Most of us aren't trading millions at a time, and these spreads seem fairly insignificant compared to fees extracted by banks, credit card networks, etc, so is this really an issue?
If you don't want USDT, you can trade SOL/BUSD instead. The order book may be a little thinner, but not a big deal if you're not moving millions.
While you might claim that BUSD isn't real money, you can just immediately withdraw it as fiat in your bank account, as long as Binance remains solvent.
Or if you're still uncomfortable with BUSD for whatever reason, just trade e.g. SOL/USD on Coinbase.
I am talking about USD, not about stablecoins, and particularly not about stablecoins on tether exchanges. You are not refuting in any way whatsoever my point about the serious lack of actual-money liquidity for your favourite coin.
What is the depth of SOL against USD? Not against USDT, not against BUSD, but against actual-money dollars?
No crypto asset is currency or will be currency. They're tradable assets, not unlike Beanie Babies.
And I don't see fiat that way because:
1. I use if every day. It's widely usable as currency, it's inflationary, and its value doesn't fluctuate wildly.
2. Fiat only ever promised to fix the problems with gold, and it did that (in the US and Europe at least). It didn't ride a wave of hype that it couldn't live up to.
3. No one's hobby is talking about fiat. They don't harass me when I say I don't think it's interesting. They don't talk about the world falling apart and fiat plucking us from the ashes.
Also, ironically, crypto is at least as conjured up out of thin air as a properly operated "fiat" currency. A person decided - for whatever reason - that there should be up to 21 million of a new type of token in existence, and his software started printing them and dishing them out to random participants in the network. With a "fiat" currency the actual number in circulation goes up and down according to actual market demand for debt, and in a properly run "fiat" currency the active intervention in that market is taken by named individuals with set targets who publish minutes of the decisions they're going to take.
Crypto is fiat currency without even so much as the fiat. Meaning it floats completely at random based on the mood of the participants... which now is driven solely by wanting to sell that crypto to some Greater Fool.
Do you genuinely not see a difference between Bitcoin and a stock?
Stock is ownership of a company and entitlement to its profits. If you gamble on an unprofitable company with no assets, then sure, your stock could be worth very little. But even then, the company likely has cashflow or something in its financials that's valuable.
Companies selling stock are also analyzed to death and publish their audited financials.
Sure, if the company becomes insolvent, then the stocks will be backed by as little as Bitcoin, and more fixed in supply. Perhaps HODLers of crappy stocks should just forget about the whole revenue-generating business that was supposed to be behind them, and insist that they're a store of value
"Currency" is still mostly not there, but there's things between that and tradable assets. A lot of people do, today, use crypto to e.g. send money back home.
By whom? I'm quite happy with my 1.2% mortgage, why do you want to impoverish me by driving that up? What's the interest rate on a 25 year mortgage in Bitcoin again?
Bitcoin isn't the lone currency in the country and the dollar is still widely used there. Expect more of this as the president of El Salvador has invited the ire of the US government by exposing the US's involvement in corruption in his country: https://twitter.com/nayibbukele/status/1469045510442864642
The media is about to go full court press on this guy, BTC is just one angle they'll use.
"El Salvador’s Bitcoin experiment has been a relative success to date – the country became the first in the world to adopt Bitcoin as legal tender; a larger proportion of the population has a Chivo digital asset wallet than a bank account"
Those who control the output of popular media firms are suddenly really nervous about Latin America in general. The right-wing coups in Bolivia and Brazil have failed, the ones planned in Venezuela never got off the ground, NED electoral interference in recent elections throughout the region didn't work, OAS is replaced by CELAC, the Chinese are preparing to dig an "inter-ocean canal" through Nicaragua, etc. Billionaires are nervous, so turn up the skepticism on anything produced by billionaire mouthpieces.
>I doubt any theories of “the media” having anything to gain from conspiring against the country
Aside from your sweeping and snide remarks on Americans, this is a woefully naive take. The US derives a lot of its power through the global monetary system. It can essentially isolate an entire country from large segments of global trade by simply sanctioning it (severing SWIFT transactions and threatening any banks with loss of settlement/SWIFT access/penalties for dealing with the country). Most of global trade is settled in dollars and a lot of reserves are held in dollars. The US exports dollars. The US takes advantage of those circumstances for its own benefit and seeks to preserve this system. BTC doesn't really pose a threat (not enough of it, slow throughput, too volatile).
Bottom line: There is clear incentives for the US to have its way in El Salvador and elsewhere. There is also a clear track record of the US doing anything it can, legal or illegal, to achieve its desired outcomes in South America. Leveraging a largely US based mega-corporate-owned media to assist in those endeavors is only natural (and blithely dismissed by midwits like yourself). The president of El Salvador has disrespected the empire, so El Salvador delenda est.
I'm not doubting your point that the U.S. has both the incentive and track record to interfere with El Salvador.
How do you back up your suggestion that the media is being controlled by U.S. interests, that there is collusion on the part of the media and U.S. government?
You’re right about all of that, and most people really don’t know the extent of corporate and security state capture in US “free press”… but it’s pretty useless as a defense of BTC policy in El Salvador, or as a critique of this article.
There is no defense of BTC inherent to my point, quite the contrary. BTC is largely irrelevant. What's relevant is that this leader in a South American country has thumbed his nose at the empire and the empire will seek to undermine him through all means at its disposal, media hit pieces included.
How is being a BTC bro thumbing one's nose at empire? The winners from any kind of successful BTC movement will overwhelmingly be just a slightly different set of private, unaccountable, economically (and hence politically) powerful people, who are even more ideologically predisposed to libertarian fairy tales.
BTC success in El Salvador would be a defeat for the vast majority of the populace, and a non-event for empire, except maybe to be used as a model to repeat elsewhere.
I'm not familiar, but can see how different things like that might be thumbing one's nose. There have been coups started over such things in Latin America in just the last couple of years. I'm totally unconvinced that El Salvador is a similar situation.
That’s a few ex-spies that get to spend retirement in relative luxury in return for occasionally and sternly looking into a camera and making some completely obvious point, but with a lot of authority.
There are more military veterans at McDonald’s, maybe even in relative terms. That doesn’t mean the Marines are infiltrating the McNugget supply.
But, yea, top politicians and “the mainstream media” sometimes have similar world views. That’s as non-scandalous as it is obvious and unavoidable.
We're well beyond your cognitive capabilities in this discussion if you're suggesting that a comparison between powerful ex-directors of the US intelligence apparatus landing post-gig jobs as political commentators at media organizations and "Marines" at McDonalds is apt (or even relevant).
If the topic is geopolitics with national security implications, I’d think the opinions and insights of former national security and intelligence officials would be valuable. There doesn’t need to be a conspiracy when Occam’s razor works fine here. They are getting paid to provide commentary people want to hear because of their unique background and perspective.
Now you’re textbook begging-the-question: you were trying to proof that “the media” is somehow corrupt. Your argument was their hiring of some former national security politicos. Now you’re arguing that practice is so obviously evil because of its association with the known-to-be-evil media?
I’ve heard better definitions of porn from the Supreme Court.
The snide remarks against Americans are essential for my point; Even if the media had those interests and ability to coordinate, their efforts are directed at an audience, and that audience needs to care for anything further to happen. And unless you find oil or Muslims in El Sal, they don’t and won’t.
Didn't El Salvador just announce that bitcoin is legal tender a few months ago? Isn't it a bit soon to declare that it failed? Especially considering the state of El Salvador's fiat.
Are people allowed to have opinions any more, allowed to draw conclusions and take a side?
As if Albert Einstein authored anti-quantum hit-pieces, had a classical physics agenda (or choose any other contentious issue in history where people had divided opinions).
It's a reflex I see a lot when crypto comes up. Instead of refuting any claims of the article (which almost nobody in these comments has attempted to do!), any negative commentary on crypto is dismissed as the self-preservation attempts of doomed globalist elites or bitter people who missed the boat.
If only people applied the same media criticism to crypto trade publications, which are awash in conflicts of interest.
>Instead of refuting any claims of the article (which almost nobody in these comments has attempted to do!)
That's the bullshit asymmetry principle in action. Let's go ahead and fact-check the first claim in the article.
>More than 91 percent of Salvadorans want dollars, not bitcoins.
Following the source, we see this quote (google-translated from Spanish):
>University indicates that, when presenting the option of both currencies, 91.4% of Salvadorans favor the dollar, 4.9% for Bitcoin and 3.7% do not. answered.
We also see:
>However, when asked about the decision to adopt Bitcoin as a currency, 35% said they were in favor and 40% against.
These both make perfect sense. Since my landlord won't accept bitcoin as rent payment, I would rather have dollars than be homeless. But in the future, maybe my landlord will accept bitcoin? If the poll is to be believed, 35% of the country wants that future, 40% do not, and 25% are undecided. I think that's a pretty amazing level of public support, accomplished in only a few months, especially in a country where 70% of people don't even have a bank account.
However you feel about it, I don't think a 35%-40% split in the polls is enough to call the president a con artist and declare it a failure one week after the law passes. The author's bias is clear.
---
I'll leave the rest of the article as an exercise for the reader, since (1) no one would take the time to read a fact check of the whole article, and (2) I don't have the time to write one. See also: bullshit asymmetry principle.
Is this bullshit too? (honest question, i don't know)
> but industrial rates in El Salvador are US13¢ to US15¢ per kilowatt-hour. In one four-day period, the Berlín operation mined $US269 of bitcoin — and was estimated to have spent at least $US4672 worth of electricity doing so
because if it's not bullshit, the economics of this are firmly in the scam territory.
This is a problem of echo chambers. Bring the criticisms to a pro crypto forum (or a development discord channel maybe) and you will get actual answers that may or may not satisfy you.
If you haven’t noticed, HN hates crypto. Its why posts like these rise up every other week. Its a losing battle trying to argue the value and merits of crypto, when most have made up their mind and will downvote you anyways or parrot memes.
In his opening paragraph, he calls a sitting president a con artist. The first "source" he cites is his own article, written only a few days after the law passed, already calling it a failure. I don't care which "side" you're on, it's a stretch to call this news.
The real shame is that if the article were less biased, it would never have made it this high on the front page.
It’s pure projection: cryptocurrency holders have to promote their goods for sale constantly because there’s no innate value. This does not constitute an “agenda” to them because recognizing it as such would basically be acknowledging their lack of utility.
While David Gerard has been very critical of El Salvador ( and mostly Bukele), he is giving information/insights about it, that you won't see elsewhere.
I wouldn't dismiss it as a hit piece. He's obviously spending a lot of time researching what's happening in El Salvador with the Chivo wallet.
As far as i checked/found, all the information he gave, is factually correct. But yes, he is very critical of the usage of Crypto for many use-cases, but that's no reason to dismiss his research. For me personally, i like it as an alternative view of what the crypto/defi proponents are claiming.
Eg. Mentioning that it's nuts to mine BTC while they could have used the geothermal energy to lower electricity costs in the country ( since they import 20%), makes more economic sense for it's citizens.
If you want additional facts about all the hacks that are happening, you should check out https://rekt.news . You'll be surpised about the amount of hacks in Defi/Cryto land.
He's pretty open about it that he's opinionated and he mentions it:
> (I must note that Alexander and I know each other a bit, and don’t have a high opinion of each other — so read this post with a dash of salt. I won’t use his surname here, ‘cos this post isn’t really about him. Though Alexander is a slight crypto fan.) [LessWrong]
> Eg. Mentioning that it's nuts to mine BTC while they could have used the geothermal energy to lower electricity costs in the country ( since they import 20%), makes more economic sense for it's citizens.
I think the point is that crypto mining finances the building of power generation in areas where it was not profitable to do so due to lack of electricity transportation infrastructure. This is great for very poor countries that cannot develop low-hanging fruit power generation opportunities due to their nonexistent grid, no paying customers, etc.
Author here. What you describe would be nice, but it's literally not what's happening here.
It turns out you can't just arbitrarily declare "we're setting up geothermal here", as Bukele did - it's complex and susceptible to dangerous screwups.
e.g. the LaGeo plant mentioned in the piece opened a new 95 megawatt well in June. That was the result of years of careful planning, and there's already concerns that it's screwing up the local groundwater - a serious concern, given a lot of the local villages around Berlin don't have running water and rely on the groundwater.
author here. This piece turns out to be doing the numbers big time as far as Foreign Policy articles go, so I'll accept my editors' judgement that I'm on the right track so far.
What does it mean for Bitcoin to fail? Failed to do what and why? Sure, if you do a BTC <> USD, then BTC is volatile, but if BTC is on its own, then is it?
This article is weird. It doesn’t seem to explain why bitcoin “failed”, just seems to suggest that El Salvador is not yet an economic paradise after 8 months.
I like what this guy is doing. Sure it could fail. But obviously the SOP has already failed. Good for him and good for the people of El Salvador.
> More than 91 percent of Salvadorans want dollars, not bitcoins. The official Chivo payment system was unreliable at launch in September—the kiss of death for a new system. Users joined for the $30 signup bonus, spent it or cashed it out, then didn’t use Chivo again.
9% of the population of an entire country wanting bitcoin sounds like a decent win to me. It's not clear to me where that optimistic number comes from though.
Wait this is far from a decent win! In such a fragmented societies as the ones from Latin America, I wouldn't be surprised if this <9% is actually part of the population that benefits from this the most
This is why I'm disappointed that Chivo seems to be a wasted opportunity - there's a lot of businesses in El Salvador that would really like a widely-accepted form of electronic money, and would like Chivo to actually work reliably, which it absolutely doesn't. I think a lot of them are the ones in that 9%, because they want electronic money that much.
In a country where only 30% of the population have bank accounts - and that's with a national ID card, and you can get a basic bank account for the asking with your ID - a government-backed electronic payment system that was reliable and trustworthy could have been a game-changer.
Instead, they got a dysfunctional system written by political cronies and plagued with fraud.
It is possible they'll fix Chivo. But that's the bit I talked about as a failure, 'cos it is. When your system is so bad that people start setting fire to stuff in the streets, I'd be hard put to call that a success.
(The headline was written by the editor, but I'd agree that bitcoin has failed with the populace. Anyone asserting "it's early days yet!" has to account for what's happened so far, and explain why this volatile nonsense would work as actual currency, and not just for the few local Chivo bitcoin day-traders.)
9% adoption rate in 2 months for something optional is amazing. It takes time for people to learn to use it, as it's very different from the traditional banking system.
Sure, and it's fine. The optionality of getting rid of the USD which totally failed and destroyed latin american countries is in itself a great thing. IMF was an asshole with El Salvador during the pandemic, and it was not the first time.
Why loan? US printed trillions of dollars and put into its own markets and helped its own people, but didn’t think at all of giving checks to other countries that use the USD.
Sure, other currencies have problems as well, that’s why it’s probably better to use the dominant open standard that has already shown that it can’t be easily inflated…it just makes sense.
So the key reason for btc adoption in El Salvador is cheaper remittance payments, I find it odd that an article that sets out to criticize btc in El Salvador doesn't even mention the original intended use case.
This may work for smaller payments <$10, like when I had to split a restaurant bill with a foreign friend and paid him using the lightning network. (I wasn't carrying cash, and she no longer had a bank account in El Salvador, and other options would have been more expensive).
What I've seen is that Salvadorans in the U.S., that have bought or sent bitcoin using their U.S. credit/cards with the Chivo Wallet App based in El Salvador, is that have been hit by 1%-3% foreign transaction fees or cash advance fees from their U.S. banks.
So for some larger amounts it may end up being more expensive than a normal remittance.
I'm sad to hear that, I have been optimistic about this helping people actually. Good news is that there are other options besides Chivo, so hopefully conditions improve as the market develops.
Bitcoin doesn't solve the remittance problem any more than any government subsidized app solves it. People still end up using dollars for buy things with. This means for imported goods, dollars still leaves your country. However, only Bitcoins are coming into your country, so government ends up being a bigger and bigger bagholder.
author here. It got dropped for space reasons (it's overlength already), but Chivo didn't get US money transmitter licenses in order as yet, so sending remittances over Chivo is attracting conversion fees from people's banks, even as Chivo doesn't charge them.
I mostly think of Chivo as a real wasted opportunity as a payments system. A government-backed electronic dollar system that worked well, and which subsidised remittances from the US, could have been excellent for El Salvador. Instead they came up with semifunctional rubbish with a massive fraud scandal.
I believe the previous Chivo developers have been fired and a new team is being hired (based on LinkedIn job ads). Trying to find out more about this.
Yeah, isn't it a legal requirement subject to penalties, as you say? Then surely it's fair to measure success of the program on those terms as well -- i.e., is it being used as a currency for daily life? The answer is seemingly not (for technical, social, and speculation reasons), meaning it's fair to comment that this part of the project seems to be a failure. OP can't carve off criticisms they don't like or _personally_ care about.
Cost! And speed! I did a transfer wise last week and it cost me $15 in fees. What is this, ethereum?(a joke cos ethereum is too expensive to be useful for the retail user). I could have sent BTC and it would have been quicker and cheaper.
BTC fees does not include the conversion from currency1 -> btc acc 1-> btc acc 2-> currency 2. Where conversion from 1 currency to another would be more expensive than the BTC fees itselve.
From which currency to which currency did you transfer?
This isn’t true at all. Right now, the actual network costs would be $0.07*2 on chain, and 0.15% for the actual sale at the receiving end on an exchange, and the “true” BTC/foreign currency rate. This beats the bad rates being offered on the forex leg of the wise transfer.
I would rather remit funds by BTC any day, but not everyone at the other end has the competency to handle this yet. One day.
Also, it took days to clear. Most of that time was waiting on the local side for cash to clear. BTC settles every 10 minutes, with a 60 min window for 6 confirmations for security. The markets are 24/7. For countries where withdrawals from exchanges hit the bank account quickly, it can be in the order of days faster…
Wow. That site is very wrong. Their historical data is wrong too. It’s all the same value!! It’s about 100x off reality.
It’s been known since 2020 that it is fiction. Bitcoinfees.net appears to be correct (1-2 sats/vB). https://jochen-hoenicke.de/queue/ Also shows vast majority in last 24 hours paid <10sats/vB.
I notice that earn is also reporting way way too high numbers. The fact is you can send 1sat/vbyte right now and it will confirm. 7 cents. Anyone actually using BTC will agree with me here.
Look at the mempool. If it’s empty, BTC is super cheap. It is empty right now and frequently is on weekends.
I think in thia case remittance is more of a way to create organic currency supply for btc. If you have btc from your son and the store owner you buy your fruits from has some btc from his son, why not to use btc for trade?
Currency has a gigantic network effect and this is seeding the network.
> Bukele came onstage to an animation of beaming down from a flying saucer and outlined his plans for Bitcoin City: a new charter city to be built from scratch, centered on bitcoin mining—and powered by a volcano. Bitcoin City would be paid for with the issuance of $1 billion in “volcano bonds,” starting in mid-2022. The 10-year volcano bonds would pay 6.5 percent annual interest. $500 million of the bond revenue would be used to buy bitcoins. The bitcoins would be locked up for five years, then sold to recover the $500 million purchase price; any profit on the sale would be paid out as an additional dividend. Holding $100,000 in volcano bonds for five years would qualify investors for Salvadoran citizenship.
Furthermore "Blockstream first proposed the volcano bonds ... issued as tokenized securities on Blockstream's proprietary Liquid blockchain. Samson Mow of Blockstream assured Bloomberg that all the numbers would work out, under Mow's rosy assumption that the price of one Bitcoin would hit $1 million within five years ... The bonds are set to be issued via Bitfinex Securities, a new unit of iFinex, which runs the Bitfinex cryptocurrency exchange and the Tether stablecoin".
The thing is, when Bitcoin City fails, it won't make cryptocurrency advocates question their assumptions (like basing your planning on your ROI being 2000%, or that it is perfectly fine to entrust the running of major components vital to its success to convicted fraudsters), it'll make them feel more victimised by the "global elite" conspiracy theories and more aggressive in pursuing future schemes, as happened with the The Crypto-Currency Seasteaders (https://news.ycombinator.com/item?id=28441794).
Can't see how this can end well for the people of El Salvador, and there do seem to be some parallels with Albania in 1997.
Matt Levine had a good take on it: https://www.bloomberg.com/opinion/articles/2021-11-22/be-car... (TL;DR: it's a good marketing play targeting people who want this to be a thing, it's actually better to buy "normal" El Salvador bonds and invest in Bitcoin yourself: the normal bonds give better interest and you'd get the full gains from the bitcoin profit, not just a share)
I think if you're a regulated institution that wants exposure to Bitcoin you buy a Bitcoin ETF, not El Salvadorean government tokens on an unregulated iFinex marketplace which returns strictly less than an equivalent allocation of Bitcoin and El Salvadorean securities you can buy on regulated marketplaces.
I don't think bitcoin "Failed" necessarily there.People should keep the distinction between "politican" promises of hype.In the case of political talk+ crypto talk, the hype is squared and one should take the square root to take a wild guess of where things will probably be.
And i'm no fan of bitcoin by any stretch, but what exactly is the problem?Still better than hyping up and industry and then becoming broke, like venezuela; though i recognize that particular example(which is relevant given the geopolitics here) triggers many.I've personally heard a lot of common people(think shop owners) that at least think this move was a good idea.
These are interesting ideas. I like the idea that coin mining's so-called waste of electricity is creating demand for geothermal energy plants that wasn't there previously.
There is an argument to be made that the reason we don't have pervasive green energy is that a) we don't need (demand) enough of power to force investment in renewables, and b) energy prices are too low to drive green tech innovation in the sector. These two points are essentially the same argument, but nobody is building geothermal plants on volcanos in El Salvador to run smelters, so you need real demand to make those plants happen. Cryptocurrencies create demand for cost efficient power generation that just wasn't there before.
Environmentalists should be happy about the increased demand for electricity instead of complaining about its carbon and climate effects, as the only thing that is going to drive the real technological change and the innovation required to reduce carbon is demand for existing resources at higher levels and prices.
Cryptocurrencies are a big part of solving the environmental problems activists identify. People for whom climate is really just a proxy for arbitrary narrative and for progress toward total centralization probably aren't happy about having the problem they're leveraging solved, but making geothermal and renewables viable by connecting their production directly to infinite demand from the velocity of money itself is how we can drive technology changes that shift us to renewables in a single lifetime.
Necessity is the mother of invention, and if I had to bet on people responding to a crisis narrative vs. having clear incentives to innovate on renewables, I would bet huge on the latter.
> Cryptocurrencies are a big part of solving the environmental problems activists identify
No, they’re not and it’s shameful to try to promote proof-of-waste under the guise of environmentalism rather than just acknowledging that you are trying to find buyers.
There’s no shortage of useful applications for green power. Having constant competition to waste that power has incentivized keeping dirty power online and delays conversion by keeping the prices artificially high. Cryptocurrency mining operations can move quickly so they’ll soak up the cheapest green power which might otherwise encourage industrial users to relocate or accelerate personal electrification by people in the area.
Since cryptocurrency expensively doesn’t solve any real problems, that’s pure waste and obstruction at a time we cannot afford it.
You can't afford not to. The only way we reduce our impact on the planet is by managing its resources effectively, and genuine incentives that drive that efficiency are the only way to achieve that. Poverty is what you get when you don't value what you have, and it's practically the definition of inefficient use of resources.
Making geothermal plants economical by leveraging demand from crypto mining that scales directly in real time to respond to real economic transactions is probably the most elegant and efficient economic system ever conceived of.
The challenge with energy is economic transmission and storage, but by tying currency to it, you don't store or transmit energy, you store and transmit demand for energy in the currency, and this facilitates efficient economic energy production on demand at the time of a transaction for any business conducted in it.
If the ideas in these comments are indeed new, someone should inform the Nobel committee. I don't think they are, but a geothermal energy currency solves a lot of problems.
That doesn’t make any sense — a carbon tax has the positive feedback cycle you’re describing. Cryptocurrency doesn’t have that effect because it doesn’t care about the source of the power it’s wasting — as we’ve seen with coal plants coming online — and the waste has no connection to benefits so the demand is insatiable, and miners will use whatever source is cheapest after exhausting surplus renewables no matter its pollution profile.
I will restate that the incentives of making a geothermal cryptocurrency may be the highest positive impact we can have on the planet in our lifetimes.
How do you exhaust a renewable? By driving up its price, which creates higher rewards on innovation that brings it down. So you don't exhaust it. Carbon taxes were a farce invented and promoted by academic managerialists with no understanding of human desire, as a way to sell their managerialism, and by politicians too meek to stand on their own and so they deferred to con artist experts.
The only reason miners are using coal and nuclear is because it is available, subsidized, and it scales. It's a legacy tech of the past. Geothermal technology isn't available as widely yet, and it requires demand to scale. Miners are that demand.
I wonder what The Boring Company is doing these days, as I think I might have a project.
> How do you exhaust a renewable? By driving up its price, which creates higher rewards on innovation that brings it down.
This is a naive position: geothermal, like hydropower, have only a few locations where they can be feasibly tapped. If that power is used by cryptocurrency miners, that will drive up the price until it's no longer cheaper than the alternatives and that region will not be attractive to relocating industrial operations.
That could be excusable if cryptocurrency was useful but since over a decade and billions of dollars have yet to find a productive application, there's no way it's worth taking capacity away from useful activities. There's no shortage of demand, so anyone who makes a cheap non-carbon electricity source will have customers even without being subsidized by proof-of-waste speculators.
Thank you for indulging this because the opposition refines the idea. The objection I'm interpreting is that this will make the price of electricity in the region too high for anything else because of that demand. I'd say that in exchange for locating there, it provides a certain percentage of power at a loss rate, and this electricity supplied to the region is in effect a tax. Regional energy needs above a certain level would have to pay competitive prices for it.
If I have a hydroelectric dam or geothermal plant in a little remote mining town, and I put the output of whole thing towards miners for proof of work/waste/sacrificial block processing, that means the processors are taking something that is local there (hydro power) and refining it into value (blocks that facilitate economic transactions), and exports the value instantly via satellite uplink to the global economy (completed blocks, proofs, etc).
This means we don't have to transmit electricity hundreds of miles/km and lose it. We just refine electricity into compute processing, and export its service value as processed transactions right there. Since most of the renewable electricity is being used and isn't being transmitted, it doesn't effect broader energy market prices, and creates further incentives to innovate to optimize power use in the region.
I get the sense that most of the objections to cryptocurrencies are because the low bar to entry and decentralized nature makes them the wrong kind of Keynesianism, where instead of government printing money to pay hole diggers and hole fillers, we're using the same proof-of-waste algorithm, but on machines instead of people.
Speculators as a bugbear aren't a thing when you are building something either, so I'm not sure that's a material argument.
Hmm. By this logic, aren't power-efficient appliances a bad thing because they reduce demand for energy and thus reduce incentives to generate greener power?
It's not clear to me that this is how supply and demand work. While increasing demand may increase investment in new capacity, it also should drive up the price of electricity. And since in some markets renewables are cheaper than carbon sources, one would expect that increasing the price per KWH will increase the production of the costlier, more polluting carbon sources.
More speculatively, due to the high volatility of cryptocurrency, I'm skeptical that major power infrastructure investments would be driven by the (presumably) extremely elastic demand of cryptocurrency mining. If I'm investing in energy infra, I'm going to invest in markets of increased consumer and industrial demand, which have fairly inelastic demand curves. Investing more to supply electricity to Bitcoin miners requires me to effectively take a bet on the future price of Bitcoin.
I think there is a solid argument that cryptocurrency mining provides high demand for excess capacity, and thus might provide a sort of credible floor for infrastructure investment returns, but that only makes sense if traditional demand are unreliable.
I'm saying that power-efficient appliances were an innovation that responded to high energy prices, and with the reduced rate of growth in energy demand has come reduced innovation, which has had the effect of enabling the economics of dirty and inefficient energy generation.
Energy production plants aren't public infrastructure, they're productive capital that has been mismanaged as infrastructure for the last 100 years. When you build a geothermal plant to mine coins, you are making it economically viable at every price, and you can collect or divert surplus electricity to use it to power a city. Governments could even compel power generators mining coins to send a percentage of their electricity usage into the grid as a "tax." I'm suddenly optimistic about this.
Right. I get what you're saying, and I think there's probably some validity to the idea that increasing demand drives innovation and (eventually) a reduced unit cost.
Ultimately, though, the goal from a climate change perspective isn't "lower unit cost" or "energy innovation" per se; it's "reduced GHG emissions."
If Bitcoin mining were, say, +50% net demand, I could buy the argument that it will lead to innovations in supply. But it's more like +0.5% demand, so it seems much more likely that it's just driving up prices a small amount, keeping some production sources alive which would otherwise not be. And in at least some cases, those sources are going to be high carbon impact.
I applaud Pres Bukele's ingenuity. Lacking the resources for any military adventures, or illicit cash (narco, petro) to fund terrorism, or a readily available ethnic minority to persecute (pogroms), Bukele cleverly seized and weaponized some fancy jargon.
Huh. I wonder if Bukele's next gig will be on Sand Hill Road. He's gotta do something with his pilfered wealth. There are worse options.
Why does he insist on Bitcoin? Their biggest use cases are 1. incoming USD payments from relatives in the States and 2. Retail USD transactions. BTC is really bad for both of these. Why not stablecoins on some cheaper chain?
They're not building a new economy really. It's a country with incompetent leadership and failed local currency, they don't seem to be able to pull it off.
And regular folks are just trying to survive - they heavily depend on USD from relatives, but they pay massive fees to corrupt institutions. They are trying to work around that using BTC, but it also has high fees, and brutal volatility on top of that. If your monthly income is $500 and you risk losing 20-30% of that to fees & volatility, you're screwed. No wonder people protest in the streets.
What they really need right now it a stablecoin on cheap network. It's not gonna change the world, but it's gonna solve their biggest problems right now.
> What they really need right now it a stablecoin on cheap network. It's not gonna change the world, but it's gonna solve their biggest problems right now.
That, and we could link the El Salvador and U.S. bank transfer ACH networks to make sending and receiving money cheaper. Considering 2.5 million Salvadorans live in the U.S.
I’d love to see El Salvador successfully leave the USD plantation, but there are far too many hucksters and opportunists lurking in their orbit to have any confidence that they’ll make it. Case in point: choosing a Bitfinex-affiliated underwriter for the volcano bonds is either astonishingly poor judgment or willful ignorance.
A few million men and a few dozen women really really REALLY think bitcoin is Jesus Christ. I think it will be another twenty years before this whole thing blows over just because these dudes are so pot-committed and need religion, basically.
The El Salvadorian experiment is most likely on the receiving end of the same strategy used by the West to counter Chile’s Cybersyn project.
TLDR: Chile attempts to escape economic slavery from the US, is subjected to manufactured dissent and ultimately overthrown by a military coup that is funded by and supports the West. 100,000 die from Pinochet’s subsequent war crimes.
I'm sorry, but to me, Bitcoin sounds like a globalist wet dream.
Besides, I find if wired when people use globalist like some sort of insult. As if wanting the whole world to be better and more connected is a bad thing.
Holy mackerel, you're actually going to twist my statement and say it's anti-semitic. What a jerk you are. I am being kind to you; what I'm thinking is quite worse.
Well, here's your chance to explain exactly what you did mean and why you used a poorly-defined term with a lot of baggage in attempt to attack the forum rather than engaging intellectually with the content. The innocent definition of the term isn't a pejorative and certainly doesn't have a meaning which would say it's okay to ignore something just because it ran in Foreign Policy.
Also, while you may have had purely innocent intentions note that your use of that term apparently made someone else feel safe calling me an anti-Jewish slur and telling me to kill myself: https://news.ycombinator.com/item?id=29521708
Globalists desire that everyone conform to one system... of everything. They are against local systems and control. Bitcoin is antithetical to their line of thinking. In the financial world, Janet Yellen is a great example of a globalist. Can you imagine Janet Yellen ever supporting Bitcoin? I certainly can't.
What do you think about Monero? I agree Bitcoin has big privacy problems but Monero seems to solve them.
The other downside to Monero is it's proof of work, which means it needs lots of power to mine. I suppose the ideal crypto would have privacy like Monero and be proof of stake, but proof of stake is still in its infancy.
Let me be clear, I have nothing against the ideea of cryptocurrencies. I think they are a great ideea and... Full disclosure, they have been _ridiculously_ profitable for me. But, the way every one tags the cryptocurrency world with their ideology is tiresome and silly. Cryptocurrency is a profoundly capitalistic ideea, and it comes with all the warts of capitalism. Bitcoin is really well thought of from a game theory point of view. Satoshi had brilliant insight in what money is.
I'm just not convinced that crypto will necessarily make the world a better place. It's going to simply be different, with different tradeoffs.
Monero is interesting, but its privacy is also an advantage and disadvantage. I am a big fan of Ethereum, personally. It's much more alive, much more dynamic, and actively responds to poignant critics of crypto, as opposed to BTC, which to me sounds way more religious than I'm comfortable with.
“Globalist” refers to the idea for one world government effectively. Generally, one set of rules, trade, no borders, etc.
The opposite is nationalist not isolationist. Ie doing what’s best for ones country and country men, not the world at large. At least in the context being discussed.
You are the one using the word “globalist” as a pejorative. The opposite is isolationists and FP is a geopolitics magazine. So where is the isolationist’s geopolitics perspective you seem to claim is missing?
The US is too big for that definition to make sense. Unless people are proposing cutting off the border and trade with Florida. On the other hand, having far-right beliefs like “anti-globalism” (whatever that means) is heavily correlated with a short distance between where one lives now and where they were born.
I am scratching my head here. BTC went up 167.55% in value over the last 12 months. How could this be a failure? If El Salvador invested in ANYWAY in btc they should be a massive success story. Sure people can't use the coin efficiently yet, but it a great place to store currency for a government. (Especially countries with corruption issues - due to the blockchain and accountability).
> The official Chivo payment system was unreliable at launch in September—the kiss of death for a new system. Users joined for the $30 signup bonus, spent it or cashed it out, then didn’t use Chivo again. The system completely failed to check new users’ photos, relying solely on their national identity card number and date of birth; massive identity fraud to steal signup bonuses ensued.
There’s a kernel of neat tech innovation and a reasonable argument about monetary policy obliterated by an avalanche of greed, hype, fraud, and magical thinking.