Chuck Schumer said today, "We all believe in the future of crypto." I say, speak for yourself. There are still a few of us who haven't lost our minds.
This reminds me: Has anyone yet come up with two cases in which crypto is useful to an ordinary person for a legal purpose?¹ By useful, I mean that it's faster or more reliable or cheaper to use than any of the dozens of ordinary payment methods already available.
No drug payments. No transfers to, say, Iranians in contravention of US sanctions. Nothing that's "better" solely because it lets you avoid taxes. Legal, normal, and useful.
Note that I'm not talking about blockchain. That may very well be useful. I'm talking about crypto coins and their supporting architecture.
Anything?
¹Why two? Because you never know. Even the stupidest things can have one redeeming quality.
There's no practical use for the blockchain, either. Solutions in search of a problem.
Investors in search of unrealistic returns.
It is fake money. User beware.
Smart contracts, such as those allowed by Ethereum, have above board uses. For example, an artist could sell their art, and with a smart contract their estate would get a fixed percentage of ALL future sales of that art.
Smart contracts are digital contracts stored on a blockchain that are automatically executed when predetermined terms and conditions are met.
This is all nice and well but how are these an improvement over run of the mill contracts?
The answer is, they're -not-. Oh, and btw, anybody who mentions smart contracts needs to explain how the "DAO hack" doesn't completely invalidate the idea. The DAO was a smart contract on the Ethereum Blockchain that held millions of dollars. Some guy figured out how to hack it, and extracted the ether, of course against the "moral" rules of the contract, but completely legitimately by the "code is law" rules of the contract. Haha, Vitalik (the creator of Ethereum) got a bunch of the biggest Ethereum miner operators together, and they "forked" the Ethereum Blockchain from a point-in-time before the hack.
Let me say that again in English: when somebody broke the DAO smart contract, stealing the ether inside, the operators of Ethereum got together and just unwound the theft. No courts, no due process, no police: they just assembled a cabal of buddies and dispensed rough justice. You may think this is a -feature-; but for normal people, it's a -bug-. We -want- judicial oversight and fiat to remedy injustices we suffer. And we don't want some cabal of cowboys deciding what's what.
All cryptocurrency schemes are designed to "route around censorship" as they call it. "Censorship" is the same as "judicial review and judgments".
Oh, and one last thing: in the real world, a judge can overturn a contract howsoever strongly worded. Again, we should want this, b/c that's how injustices get righted. Smart contracts pretend that this will never happen. So either they're lying, or you shouldn't want them as the basis of your financial system.
Oh, last thing: none of these cryptocurrencies will EVER, EVER, EVER scale up to the tran-rates of the US economy. It ain't gonna happen. That's because the database technology they're built on is fundamentally non-scalable.
It's all a grift.
not just the db; proof of work systems are sort of anti-scale by design
Solar - a smart contract is automatic. Meaning, in the example I demonstrated, the original seller does not have to be aware of subsequent sales, perhaps sales that occurs a hundred years later.
antiscience - yes, similar to the early days on the internet, one can find lots of challenges with the early deployment. Rather, conceptually, the smart contract does things that are hard to replicate.
So you're hand waving away real-life examples that directly contradict your claim instead of honestly addressing the examples given? And insisting these 'smart contracts' will work the way you say? Dude. Proof by assertion is not a good look.
"Solar - a smart contract is automatic. Meaning, in the example I demonstrated, the original seller does not have to be aware of subsequent sales, perhaps sales that occurs a hundred years later."
Pardon my ignorance on this but this seems like an incredibly stupid system that would be easy to abuse to rip off the original seller. For the seller to automatically actually see the money from those unknown future sales some banking information must be in place. What happens if that information is not updated properly? Or what if the original buyer resells the art, but now decides to use a regular paper contract that doesn't have this automatic feature in place and instead asks to be paid in actual dollars. How would the original seller be aware of things, especially if it happens as you say a few generations downs the road? If the profits of future sales are all setup in crypto, given its volatility what happens if that same amount is now only worth cents on the dollar a few years down the road?
It seem that there is a whole sea of possible forms of abuse or getting screwed for the only upside of it being automatic (since everything else can also be done with a traditional contract).
I love Kevin's crypto-skepticism.
It's turds in briefcases all the way down.
Not legal, but justifiable: sneaking money out of corrupt regimes by refugees. Of course, crypto probably does more to establish and prop up said regimes.
North Korea and Russia both have state-sponsored hacker groups who work on stealing crypto.
In NK in particular, this is a major government effort. The top math students in NK get plucked out of high school and sent to elite training to become hackers. They are paid well and get more privileges than most NK citizens. The NK government focuses on this because hacking is a major source of revenue.
The one kind of possibly convincing argument for crypto that I've heard about is for people and businesses outside of relative hard-currency areas. That could be places with ineffective central banking systems that are prone to high inflation, like (proverbially) Argentina, or places with currency systems that effectively control their terms of trade from outside, like the CFA franc zones (which may have changed recently in ways that make that point of view less relevant).
These examples may sound plausible only because I don't know very much beyond generalities. From what I do understand, though, these are cases where the broader context could make doing the same kind of end run around official currencies and institutions more justifiable and/or equitable.
But that's the problem, innit? Bitcoin satisfies none the criteria for money: It's not a unit of account, not a medium of exchange, and as a store of value its utility is um volatile. Or if it is, then bread and beanie babies are also 'money'. Don't get me started on the security vs commodity debate. And if bitcoin is so all that in contrast to dreary, dreary money how come these sharks are so focused on getting you to give them the boring stuff in exchange for their supercool bitcoins?
In my opinion, in the modern world you need two things to be money:
1) You can pay taxes with it.
2) The courts will enforce it as a means of settling debt.
Bitcoin is neither.
It's been pointed out that these schemes aren't scalable. I can complete transactions with a regular credit card in seconds. But if it took five minutes or more to do so while standing in a checkout line I'd go back to carrying paper money. That's what they're talking about when they say there's a scalability problem.
Also, your points 1) and 2) are already addressed in the definition of money in the bit about a medium of exchange.
The problem with that idea, is that the "miners" -- the machines that keep track of the Blockchain -- require power, high-quality networking, and in general, a well-run state to work well. So sure, maybe you can transact from some place in Africa, but the miners are all in Europe, China, etc. So what you're really doing, is using a client/server interface to get to that remote banking application in Europe.
Wow, progress! Also, in Africa there is already a non-bank currency (or there was, 15 years ago): cellphone minutes. That stuff works, and doesn't use blockchain: It uses standard centralized databases, b/c that's what's efficient.
I thought that China banned the hugely energy sucking for no one's benefit bitcoin computer installations there. But anyway every country should INCLUDING THE US IMMEDIATELY.
What's wrong with using hard currencies like the dollar, euro or yuan for that application?
1. To get me rich. Oops, I missed that boat.
2. To marvel at the fact that crypto systems are even possible and work.
Well, it's a great waste of energy and computational power.
"...This reminds me: Has anyone yet come up with two cases in which crypto is useful to an ordinary person for a legal purpose? .."
One would be speculation (or gambling if you prefer). Like buying gold or options or Argentinian bonds. Speaking of which I would rather own bitcoins than Argentinian bonds.
You can pay for Pornhub premium with Bitcoin, and it's more convenient because they don't accept cash or credit cards.
The use case for bitcoin was always laundering money, and it still is.
There is no legitimate use case.
I'll raise the ante and ask if there's any benefit to blockchain in general. That is, is there a use of blockchain that wouldn't be handled more efficiently by a company running a database with users authenticated via some two-step authentication scheme?
Because AFAICT, blockchain is just the world's least efficient database implementation.
One thing I can actually see a use for blockchain databases is in election integrity: if anyone who wants can keep their own copy of a live vote count, the risk of the few people able to access singular election database agreeing to manipulate it can essentially be eliminated.
You think too small. A Donald Trump figure would just order all of his minions to lie about what they counted.
I think cryptocurrencies have found a marginal use as a relatively stable store of transaction-ready value among people living in economies with unstable currencies.
Most of the time they use dollars for that.
+1
Crypto undermines the power of the state to control outflows of wealth and block money laundering, so I'm not sure why Schumer thinks it's a good idea.
It's a good idea when there are large campaign donations attached to it.
If you think the world is too cold, you can do a lot of crypto mining.
I can't think of a 2nd.
I can name one: my wife, who is Russian, inherited property from her mother, an apartment in Moscow. Unfortunately, there's now way for a Russian in America to receive money from a Russian relative in Russia, though crypto is one possibility. There's nothing illegal here: a mother passing along an inheritance to her daughter, with the assistance of a sibling. But ordinary means of banking are off limits, as the US tries to figure out ways to bring pressures to bear on Putin (I'm not objecting to the sanctions, to be clear).
I can imagine similar situations around the world: cases where there are political barriers to the use ordinary banking for transactions that are not inherently problematic.
For any innocent user like your wife there will be thousands of bad actors using it much more often.
True, but we should still acknowledge that qzed has found a partial answer to KD's challenge. There is at least one legitimate application for crypto: moving money out of regimes where currency flows are blocked by sanctions. The fact that this example is swamped by bad actors doing the same thing does not negate it.
I'd argue the example given is the very definition of using crypto to do something illegal. If the money could legally be moved (I.e., no sanctions), you wouldn't need crypto to do it.
+1
The only "valid" uses that people ever come up with in these discussions amount to doing something illegal that is prohibited by an entity that they personally find illegitimate.
I'm with Kevin, it's just crime all the way down.
Hm, that's a solid point, and I need to revise my comment from above. qzed's example is criminal behavior, not just under Russian law but also under US and international law.
qzed, do NOT tell anyone what your wife did. She *will* get arrested for it.
+100
Most crimes have “justifiable” cases to make it seem like they aren’t really crimes. The guy who is starving so he steals a filet mignon from the supermarket. He may very well be starving but theft is against the law and it’s not like he had to steal a steak vs finding a soup kitchen or stealing something that only costs a dollar to eat instead. The woman who cuts off her husband’s penis for hitting her. She could’ve just left him or called the cops or knocked him unconscious to run away or whatever. For every law on the books, someone somewhere can come up with circumstances justifying to many/most/all people that they just had to break that law. But it’s still a crime. Qzed’s wife was perfectly able to hold onto the apartment until eventually sanctions against Russia are lifted. If they’re not lifted in her lifetime, she was free to pass it onto her own descendants. Just because you inherit something doesn’t mean you’re guaranteed the value of it deposited in your bank account - lots of inherited homes in this country never sell because they’re decrepit or the back taxes are too much or whatever. She just didn’t want to wait for her money like other people do when they inherit a shack in the WV mountains or whatever, so she used crypto instead.
"There's nothing illegal here"
Isn't circumventing sanctions by some means illegal? The whole point of the sanctions is to leglly stop some action or activity.
Show support to a political candidate? https://www.cnbc.com/amp/2024/08/14/schumer-says-crypto-legislation-can-pass-the-senate-this-year-on-crypto4harris-.html
Seems this, like the no taxes on tips proposal, is something where the Harris campaign appears to have missed a memo …
The contravention executed are the sanctions imposed by the US against countries like Iran, Venezuela, Cuba, China. If cyrpto enables trade of goods and services for these nations to defeat illegal authority imposed by the US then cyrpto has a legal and moral use.
Lower cost money transfers. For example, Motley Fool has an article about Stellar Lumens which says, 'Money transfers can cost as much as 6.5%, but transactions on Stellar cost a fraction of this.'
I think Bitcoin is trash, but this question can be answered: El Salvador. Not a good thing economically for the country probably, but useful for the ordinary Salvadoran if they want to buy stuff I guess...
No. Ordinary El Salvadorans don't really use bitcoin. At all. It's not useful for regular transactions; commit times are way too high.
Disregard my reply to you up above. I thought it was weird that you didn't know about the commit time problem, my bad.
Here's the best version of the answer that I've seen: https://www.astralcodexten.com/p/why-im-less-than-infinitely-hostile
Basically it's doing real good in countries with bad inflation or dysfunctional banking systems. Is that worth all the money and scam energy that's been poured into it? Dunno.
Cryptid currency has one use, it allows suckers to feel secure exactly as gold coins and guns do, but it's computery, so it's hip to the modern scene, and their not missing anything.
Crypto, credit default swaps, high stakes poker. They all have the same purpose.
Anonymous donations. For example, last time I donated to ActBlue, I was inundated for years with spam from various politician-types wanting money. (Never made that mistake again.) I would like to donate anonymously, which I realize is not allowed for many political contests (although it should). However, some states do allow anonymous political donations, like Washington.
And it's not just for political purposes. Some people would like to donate money just for the reason of doing the right thing, without recognition. (Also, without being harassed for years afterwards by similar groups to whom one's name has been sold). This is the same thing as donating goods to Goodwill without giving your name, or dropping coins in a Salvation Army bucket.
Could anonymous crypto be used by criminals to pay for nefarious deeds. Yes. So can $100 bills, and $50 bills, and $20 bills. If you are not demanding that cash be banned and criminalized, then anonymous crypto is the same as cash.
"If you are not demanding that cash be banned and criminalized, then anonymous crypto is the same as cash."
Not exactly--physical cash transactions have encumberances (it's a physical thing, so buying a car or a house etc. with cash carries its own costs) and liabilities (ownership of cash is hard to ascertain--if some malefactor nabs your briefcase o' benjamins, who's to say who's money that really is?), both of which push people towards the banking system, particularly for large transactions.
Crypto is more like the banking system, with extra steps/costs and less regulation. And also the units themselves are not stable stores of value.
As a hedge against fiat currency. By definition, a fiat currency can be manipulated by a government. Holding a legitimate crypto currency (Bitcoin and Eth as examples, there are others) allows the holder to hedge against the inflation of a fiat currency. You say, well, just hold gold. But gold is not easily fungible. If you want to hold the physical object, it's expensive to hold it safely, and then the cost fees to sell are high. If you hold a crypto that has a decent Layer 2 (like Lightning) then your crypto can easily be sold for a minimal fee.
A big proponent of this is Balaji, whose Substack post titled 'America's $175 Trillion Problem' explains it better than I can. Yes, you may not believe Balaji's arguments, but for those who do, holding crypto makes sense.
There is no such thing as a legitimate cryptocurrency. Fiat currency is the legitimate currency, manipulated by the government for the defensible purpose of keeping the economy stable. Cryptocurrency is constantly being manipulated to a huge degree by tech-savvy randos looking to make money. Fiat currencies that belong to responsible governments are reasonably stable in value, inflating at a low and predicable pace; the value of cryptocurrencies gyrates all over the place with no predictability.
Crypto only seems like a good idea if you think a bunch of tech-savvy snake oil salesmen are more trustworthy than the government. I happily concede that the government isn't 100% trustworthy, but they are still far more trustworthy than the crypto bros.
Don’t bother arguing. The crypto junkies are sure that the governments of stable countries are less trustworthy than anonymous randos they follow on the internet. It doesn’t make any sense to me either, but these people aren’t deep thinkers: they’re the types that, when presented with a chicken sandwich or a shit sandwich to eat, ask “what’s on the chicken sandwich?” first. Just avoid them and hope that when they lose all their government-backed “fiat” money in some crypto scheme, they don’t pick up guns and take out their anger on anyone else.
Oh dear lord; you just had to put 'fiat currency' out there. Tell me you're a libertarian Randroid without telling me you're a libertarian Randroid.
Actually, I have always voted for Democrats, with one exception (I could not stand my local congresscritter) (who thankfully lost a recent primary).
There are those in the middle (I am left of center) who understand the value of cryptocurrency and blockchains. It boggles my mind that others on the Left cannot see the value they can bring.
One, I'm not on the 'Left' as you put it, two, I'm not even a liberal, and three, it's clear you don't know much, if anything about 'fiat currency', else your wouldn't pronounce it like that, nor do you know much, if anything, about the history of money. Here's a link to the Bretton Woods System which I'll throw in for free, my good deed for the day. I _strongly_ suggest you read it. Oh, and here's another one, an extremely basic introduction to commodity vs fiat money systems.This material isn't exactly obscure, nor is it difficult to to understand, in fact, it's routinely taught to incoming freshmen in Econ-101 classes across the nation.
I asked the AI engine Perplexity about 'fiat currency', which said, 'Fiat currency is a type of currency that is issued by a government and is not backed by a physical commodity, such as gold or silver. Instead, its value is derived from the trust and confidence that individuals and businesses have in the government that issues it. This trust allows fiat currency to function as a medium of exchange, unit of account, and store of value.'
Yes, that's the meaning as I understand it. And the poster child for what can go wrong with fiat currency is the Weimar currency collapse.
The point I was making is that some people consider Bitcoin to be a useful hedge against this kind of thing, just like some people buy gold or art or land. It doesn't matter if you personally, or apparently Kevin and most of the commenters, don't like cryptocurrency; if enough people consider Bitcoin to be a rare-enough and stable-enough 'object' to be a store of value, that's what they're using it for.
Tell me you didn't bother to check out my links without telling me you didn't bother to check out my links. There's a reason I put them out there and your refusal to extend the basic courtesy of at least glancing over them is insulting in the extreme. Points for not knowing anything about the fall of the Weimar Republic, BTW,, or for that matter, World Wars I & II. Extra points for saying essentially I, Kevin, and most of the other commenters here don't like being doused with flaming napalm but some people do so we'll just have to agree that we disagree.
Oh, one more thing: Why did you pretend that I claimed you didn't know the definition of fiat money instead of what I really said, that you don't know much, if anything about it? If your reading comprehension is really that poor it would explain a lot of why your comments have been what they are. In which case, I apologize for beating up on a someone with a significant disability?
OK, let's use your second link, which says, '
Under a fiat money system, a dollar is just an accounting unit. A dollar bill is no longer made redeemable in gold or any other asset. However, paper money is stipulated as legal tender. That is to say, people can legally pay their debts, including taxes, using paper money.' Thus communicating the same underlying concept that Perplexity said.
You have consistently insulted me instead of addressing the specific points that I raised. Insults worked great on the Internet in the 2020 time-frame, but nowadays, folks are less impressed by insults.
That link was to the first of five parts and you damn well know it. You're also still refusing to read the linked article about the rise and fall of Bretton Woods System.
IOW, you continue to be abusive and insulting by refusing to read the cites to evidence that your bald assertions are incorrect. Which, of course, is precisely the reason you refuse to read them. And you have the gall to call _me_ insulting for having the temerity to point out your bad faith behaviour. Man up and start doing the right thing for change.
not sure I 100% buy this, but check this out:
https://blog.usv.com/sling
" transfers are performed using Pax Dollars (USDP), a US dollar-backed stablecoin. The Sling app converts between fiat currency and USDP (and back again) instantaneously and for only a fraction of a penny. It handles all KYC/AML and regulatory compliance. Users get fast, cheap, seamless payments and stablecoins allow for speed, cost and reach that otherwise isn’t possible. "
"Stablecoins" are an attempt to reinvent ordinary banking without regulation or deposit insurance. They usually work well until they suddenly don't, and then they collapse completely and everyone who was foolish enough to buy into them is wiped out.
Crypto has been around for over 15 years. If it were going to find a real noncriminal use case, it would have done so already. Its only uses are crime and speculation, full stop.
I confidently expect that crypto will eventually be banned. Probably not right away, because the hype hasn't fully worn off and people who own crypto will lobby against a ban. But the government will eventually wise up. And when that happens, most of the crypto infrastructure will be taken out. Crypto can be traced via reading the blockchain; it resides on hard drives and servers which have to be located in meatspace; the government can absolutely fins ways to make life difficult for people who use it. They probably won't be able to stamp it out completely, but once it is illegal no legitimate organization will dare support it in any way, leaving it only a small niche for tech-savvy criminals.
A while back about 2014/2015 I remember a breathess article in the Seattle Times business section about the first house in the Seattle area bought with bitcoin. I had to read well into the article before it turned out that the bitcoin had to be converted to dollars in a regular bank, S&L, or credit union. The escrow agents back then were still pretty wary of an asset that could change wildly in value (or disappear entirely (Mt. Gox, anyone?) and they weren't about to be the first to do on-the-job training with bitcoin.
So after quite a few paragraphs of wasted eyeball time, it turned out the house was actually purchased and financed the way all 3 of our previous houses and our current house were purchased.
This is a tangent, but when did "use case" enter the vernacular? I assume it's been business jargon for a long time, but just in the last three or four years I've heard actual normal people using it. And they must be dissuaded, because all jargon is bad.
Also wtf does it even mean.
I came across the term 'use cases' in the 1990's, in software development. It makes sense for software, because otherwise programmers will develop what they want to program, rather than programming what the users actually need.