I understand that a lot of folks here are crypto skeptical. But regardless of your overall view, one thing to to understand about the Portman-Warner amendment is that it exempts proof-of-work (PoW) miners but not proof-of-stake (PoS).
When you hear about the environmental consequences of crypto, the massive amounts of electricity, the GPU shortages, that’s all PoW. PoS is designed to eliminate that and make crypto no more resource intensive than any other p2p network like BitTorrent.
Regardless of your view on crypto, there’s no defensible justification for the Portman-Warner amendment. It’d be like passing a bill banning electric vehicles but not gasoline, or shutting down solar plants but not coal plants.
Agreed but for a slightly different reason. PoW vs PoS is a much more nuanced debate for reasons other than the environmental impact talked about in mainstream circles.
Bitcoin is PoW for many reasons, a fork of bitcoin could switch it to PoS and end the discussion, but its decentralized nature where one hash = one vote is part of the core of its economic policy.
Ethereum and other PoS chains take trade off but advantages from utilizing PoS one that it desires to be a blockchain that can settle contracts on its layer 1.
This Portman-Warner amendment favors PoW chains dissuading competition between the two.
Portman-Warner is not just favoring PoW over PoS, it's favoring PoW over ALL alternatives. It completely shuts down all potential for new solutions to gain adoption in the United States.
Even if you don't like PoS, you still shouldn't like the Portman-Warner amendment.
Agreed. There are many subtle and complex trade offs that come between PoW, PoS, and alternative consensus mechanisms. But one thing I can say with confidence is that Rob Portman is in no way qualified to understand, let alone make those decisions.
Then make the very first block PoW, which switches to PoS from there after. I'm sure the bill hasn't been written to take into account any duration and so is merely a binary question.
The exclusion is for "validating distributed ledger transactions through proof of work (mining)" -- is that meant to cover validation by any full Bitcoin node (e.g. random person who wants full control over transactions involving a personal wallet), or adding new transactions to the ledger via mining?
(I guess, this basically comes down to what's meant by "validating through proof of work" -- the actual PoW is provided by the miner, but other full nodes are needed to validate the actual transaction.)
Because to me, either the validators are affected (thereby significantly impacting the overall robustness of the network, which I would hope reduces its trustworthiness and therefore the currency's value as a result, as well as the ability for individuals to control their own wallets), or miners are affected directly.
The text is "validating... through proof of work (mining)", which would seem to imply that it only protects miners. It does seem though like the author's of the text are missing a super important distinction, which is that proof of work mining is _not_ intended to be the main method through which blockchain transactions are validated. The participants in the network are all expected to validate the transactions themselves (independent of the miners).
A mistake like this really suggests that the proposed regulation is not well thought out, and that it should probably be revisited after further education and discussion.
Worth saying a million times: the massive uproar in the crypto industry this week is not because we don't want to be regulated. It's because these proposed regulations are:
+ massively over-reaching
+ proposed at the last minute
+ attached to a must-pass bill
+ given very little room for proper discourse
It's also worth stating that crypto is already regulated. If people are avoiding taxes that's already illegal.
This is an attempt to expand surviellance to make revenue collection easier for the state.
Excuse me if I'm not thrilled about the state having even more information about our lives. I pay my taxes to avoid being jailed, but they're never satisfied until they have complete control over society.
I guess my point is that even PoW systems won't be entirely unaffected (albeit not quite to the extent that PoS systems are), since validators are crucial to the integrity of the blockchain.
To attempt to extend the electric car ban analogy: this feels like adding onerous/infeasible reporting requirements to pipeline operators (PoW validators) and power plants (PoS stakers), neither of whom know anything about the end customer refueling at the pump / charger station, but not the oil refineries (PoW miners).
And yes, the reporting requirements would also be in place for the electric utility (PoS validators), which still doesn't know anything about the charger station's customers.
> A mistake like this really suggests that the proposed regulation is not well thought out, and that it should probably be revisited after further education and discussion.
What kind of sarcasm is most appropriate here? A coy shocked face or faux outrage?
In Bitcoin, it could either be interpreted as exempting both miners and node operators or neither. That is because the Bitcoin node software does both validation and mining, but the economic environment and network topology means typically people running the software will only do one of the two. Very strange turn of events.
It depends how "work" and "mining" are defined in this context.
In PoS, as in PoW, security comes from computations done by network participants. For example, in Algorand, nodes generate a proof that they ran a lottery with the correct seed. That's still work, is it not? Does it matter that it's more efficient work than the work that is done to maintain the Bitcoin blockchain? Can someone formulate an argument as to why this should be excluded from the definition of "mining"?
Without rigorous technical definitions, the result may just be that PoS networks adopt terminology like Efficient PoW and Efficient Mining.
Reading the bills, they are not banning anything. Just changing the reporting requirements. Doesn’t POS supporters want government oversight of the pseudo-decentralised actors required in POS?
Government oversight isn't required at all or even desired in most cases.
Proof of Stake relies almost entirely on the internal game theory of the system and while external influence (such as some level of proof of authority via gov oversight or hybrid PoS/PoW) can be used as a crutch, they open the system up to a new set of vulnerabilities.
Additionally, while the bills are "just" changing the reporting requirements, those new requirements are incredibly vague and whether read in a narrow or a wide sense they impose such a significant reporting requirement that it would be anywhere from very difficult for an individual on their own to legitimately impossible even with unlimited funding and manpower. The reporting requirements would effectively impose KYC reporting on any validator (including full nodes) or software developer involved in a cryptocurrency ecosystem for all users of the ecosystem. This effectively prevents US validators or SW devs from even participating in the ecosystem outside of creating a completely siloed "US only" cryptocurrency ecosystem.
The originally proposed wording is bad, the Warner amendment is worse. The Wyden-Lummis-Toomey amendment is a reasonable compromise that provides some capacity for tax compliance oversight without burdening the entire ecosystem with reporting requirements that are mutually incompatible with 99% of networks.
This is not a problem for the network, its a problem for americans or residents in america that wish to perform this duty safe from state prosecution or punishment.
It is baffling how lawmakers who have so little understanding of the technology write these things into law.
Software should be protected with the same rights we have with speech. If the Wyden/Toomey/Loomis amendment doesn't pass today this will effectively censor and control the code that an American software dev would have to write to comply with proper reporting. This bill, if passed, should be taken to the courts.
"It is baffling how lawmakers who have so little understanding of the technology write these things into law."
It's actually easy to explain: lawmakers don't write laws; lobbyists write laws and lawmakers rubberstamp them. Lawmakers don't even read laws, eg, they routinely vote on legislation that is hundreds of pages long that was modified and printed the night before they voted on it.
> lawmakers don't write laws; lobbyists write laws and lawmakers rubberstamp them
You don’t want generalist lawyers to write laws. You don’t want specialists to write laws and then have generalists debate them, since apparently the current multi-week unfinished legislative process is rubber stamping to you.
> ”Software should be protected with the same rights we have with speech.”
And also regulated the same way as anything else. If you’re operating as an unlicensed money transmitter, you can’t pretend that it’s legit because your ledgers are printed and therefore protected by the First Amendment. Same applies to “but it’s just code”.
Agreed, but the current clause in the infrastructure bill is not about regulating unlicensed money transmitters, the wording of the bill is extremely broad and covers everyone who writes any type of software that handles digital assets, whether or not the author of that code is operating anything.
It's basically saying "if you've made a pull request to the bitcoin-core codebase, even just as a bugfix, you may be responsible for providing KYC'd information on all users of Bitcoin and on all Bitcoin transactions, regardless of where they happen or what your relationship to those people is".
Which is why the entire crypto ecosystem is up in arms. This bill is an extreme over-reach and would threaten the viability of essentially all crypto startups in the entire US.
The bill is also about "digital assets" and previously even in-game currency has been ruled as such (for example World of Warcraft gold, Second Life currency to buy land, etc...).
It also may apply to other non-crypto digital money, although that might be the point of the bill, since it would allow the US more easily to chase anyone evading its sanctions (for example: China is creating digital currency, Iran has some ideas too, they could use this to ignore SWIFT and thus ignore sanctions, this bill would allow US to sanction that thing too)
You're suggesting this is an accident. Lawmakers don't write any laws any more, that happens on K-Street by lobbyists. But the same idea applies to whoever is writing these horrific things. We're still living with the DMCA all these years later too.
It’s baffling how people here continue to insist that anybody disagreeing with them must be stupid.
More specifically:
> this will effectively censor and control the code that an American software dev would have to write to comply with proper reporting
The idea that software today isn’t already, and has been from the times when bugs were actual insects, been the subject of (or had to account for) regulation is simply absurd.
As just the most obvious example, the financial sector is heavily regulated, and that includes the software, from KYC rules similar to those now proposed for cryptocurrencies, to endless requirements for documentation and archival or the exact prescription of the algorithm to be used to settle transactions.
The software in your car, plane, phone, or nuclear plant is required to follow a few dozen regulations, ISO standards, and best practice standards elevated to requirements. Every website accepting payments must implement some minimum of consumer and data protection. Your emails should respect the Oxford Dictionary and The New York Times Manual of Style, and the ADA may or may not include some requirements, although I’m not sure how binding they are.
What’s happening here is the collision of reality with two fundamental misunderstandings in the crypto community: first, they considered themselves valiant warriors challenging the FED/$/governments, certain to be immediately targeted by “the establishment” trying to defend its mighty power. Then, they expected to win that fight with superior technology. Or, as seems to be happening here, the idea that “it’s online” and thereby outside the jurisdiction of the law.
What happened was that for a decade or so, “the establishment” reacted with some mixture of mild interest, bemused looks, and just not giving a shit. Then, when cryptocurrencies had proven worthless except for scams, tax evasion, and CO_2 production, they started cutting it down to size, with maybe a few weeks’ effort at the SEC and probably half a dozen backbenchers’ amendments to the “Stuff We Should Do IDK Could Start To Get Annoying Act of 2022”.
I guess what will be most annoying, besides being the last fool sitting on a million $’ worth of random strings, is how maddeningly unspectacular the end will be.
Do you sincerely think these 70 year old politicians understand the technology and implications? There can be varying amounts of regulation and oversight for software, but the whole point of a decentralized crypto currency is it's ungovernable.
If you're for this increased regulation fine, just understand it will push innovation and capital elsewhere in the world. And despite what you may want, bitcoin will not die.
>Do you sincerely think these 70 year old politicians understand the technology and implications?
Politicians of any age aren't domain experts and don't appear to be any smarter than they have to be to get and hold office. Judging from reading the writings from politicians of yore, I do have to say that the better minds in Congress can't compare to their 19th C. equivalents. It could simply be that a classical education served as a sort of filter.
As far as implications, humans are notably bad at that generally, whether it's tax law or something that involves those computer things. The laws of unintended consequences continue on, but that never stopped the writing (by Congressional staff) of more and more rules for us all.
>If you're for this increased regulation fine, just understand it will push innovation and capital elsewhere in the world.
What does this even mean? What innovation did Bitcoin bring to the world other than an easy way to bypass government control? That cat and mouse game has existed as long as governments existed. This only helps if you are fleeing from a worse government to a better government. Completely avoiding governments is impossible. Even on El Salvador Bitcoin acceptance depends on the government.
Pushing capital doesn't even make any sense. What are you going to do with all your "Bitcoin" capital if nobody is trading their USD for BTC? Is the economy of El Salvador really powerful enough to counteract the loss of USA as your trading partner? USD and BTC are just numbers on a balance sheet. You still need to convince people in the real world to give up their real wealth in exchange for it. For the USD it's pretty obvious. People pay their taxes and debts in USD. If the number of people doing that is shrinking then the amount of real wealth you can extract will shrink. That also applies to BTC. It's not like moving BTC from USA to El Salvador will also move factories (you know, the capital in capitalism) there.
Bitcoin brought a trustless way of moving capital or digital property to any location throughout the world with no intermediary.
Today it might just be El Salvador but bet on more countries joining the network based off of the game theory of the network. This innovation is profound and will revolutionize economies in the 21st century leading to better allocation of capital and the world finally getting off of the petrodollar.
Do you sincerely believe these 70 year old politicians write these amendments themselves, without any input from an army of underpaid graduates of Harvard Law and Caltech, or the ability to call Elon Musk whenever they are having trouble setting up their granddaughter’s bottle rocket?
Except they're not calling Elon Musk either, because Wall Street is sitting right next to them telling them what to type in order to protect their vested interests.
Not true. With the notable exception of malware and an ambiguous thin line on cracking software, these regulations only apply to operational facilitation, usually requiring financial participation in the activity. Of course when the activity is associated with terrorism, treason, or ‘crimes against humanity’, almost anything goes. Admittedly this could be a very wide net, as we saw with crypto regulation in the 90s, although I don’t know that any open source contributors were prosecuted.
But, reality check, it will not be a matter of laws once the threat becomes existential.
It’s a shared planet and resources but unfortunately you don’t own any of it.
Political ownership calls the shots. Might look different if the politically detached organized against rent seeking and monopoly but you’re all busy building rent seeking startups, easily monopolized blockchains for pump and dumpers funded by nation states.
What a shock politics are going fascist.
Remember when taxes were high and people were politically engaged, America was held up as a haven.
I have much the same feeling about this as when I realised that journalists aren't actually experts in any of the topics about which they write stories that society-as-a-whole take as the whole truth.
It took me a long time to know what the phrase "going off half-cocked" meant. This is an excellent example.
It also feels quite exemplary of some of the recent discussion on HN of the stereotypical situation where management makes decisions on a very simplified understanding of a situation and will remain in stoic avoidance of having any exposure to the details that may impinge upon their chosen world view.
Why is crypto even part of an infrastructure bill? If you want to pay for the bridges and stuff just fix all the corporate tax loopholes that add up to more money anyway.
These loopholes have been around for decades with little interest from either side of the political spectrum to address them. They're clearly beneficial. Hence, it's much easier to just drain retail investors who have been very creative at generating wealth and finding investment opportunities lately. I'd say more so than Wall St.
Am I the only one who thinks the term “crypto community” is ambiguous in the article title. I thought I was going to be reading an article about how a particular bill has digital privacy implications due to misunderstood regulation of cryptography.
Similar to the change in definition for the word 'literally', the common parlance has evolved and 'crypto' now means cryptocurrency.
A good test is to look at a sentence like "are you into crypto?". Absent any other context, the majority of the English speaking world will interpret that question as being about cryptocurrency, and most won't even try to disambiguate. Someone who wanted to ask if you are into cryptography would have disambiguated in the first place.
I am sorry to inform you that "crypto" has been completely standard finance jargon for crypto-tokens traded for money for a few years now.
Of course, we know that "crypto" really stands for "cryptosporidium". You can even substitute the full word into most articles about "crypto" tokens and it'll still be accurate.
This is puzzling to me because all this effort would have been more effective if it were spent on fighting the actual problem - people becoming filthy rich and then essentially leaving our system of government and taxation.
Fighting tax loopholes increases the revenue without "tax-increase" optics, and it's extremely popular.
This is happening because our system is completely broken beyond the point of return. Once wealth takes hold of law-making powers, that's it.
Why are they not so eager about tax evasion and avoidance done by big corporations? Tax payer loses much much much more money through that, than through any crypto fiddles.
Makes you think who lawmakers work for...
This tacked on addition to an important bill makes it clear how incredibly threatened the existing power base feels about the growth of cryptocurrency.
The proof-of-work versus proof-of-stake thing is kind of weird. Some people here and elsewhere are saying the gov shouldn't add different reporting requirements to them because the environmental consequences are so different.
I guess you can get around that by targeting both equally. If you're concerned about reporting-- well, just because you're using a technology that technically can be anonymous doesn't mean you're legally entitled to anonymity.
None of the amendments sufficiently clarify the role of mining pools. I.e. the pool does validation, but it also divides up the mined yield. If you regulate pools, this will significantly reduce and centralize the entities with control over distributed ledgers.
Does not come as surprise.
Simply too many unaccounted for scams, money laundering, extortion as a service incidents.
I think many other countries will follow the US steps, more or less willingly.
The govt will not learn any new information just put miners in legal gray area so the businesses move to other countries. People can still use tokens. Cracking down on crime is a different topic
Is it possible to for cryptocurrency projects to rename proof-of-stake to something like proof-of-work 2.0 and validators to miners to get around this? Are these terms clearly defined anywhere?
I don't get what the hate boner for crypto adds to this conversation?
The original wording in the bill and the Warner amendment are horrific overreaches that should be severely concerning. They would render anyone who hosts a validator node (aka a full cryptocurrency node regardless of if you are mining or running a stake pool or just using the network) as a traditional financial broker with all the regulatory oversight, KYC, and tax compliance responsibilities that comes with. Additionally, any developer who writes software for the cryptocurrency space would also be included in that.
The Warner amendment opens a whole new can of worms but on top of that it explicitly excludes PoW miners (but not validator nodes or SW devs) which would near guaranteed kill any alternative consensus protocol development in the US (and likely globally due to the tendency for other nations to follow the US's stance on financial decisions).
The complete infeasibility of this would put a defacto ban on anyone operating any decentralised software in the US as the wording includes anybody who develops or operates effectively any software that "facilitates financial transactions". If this was a reasonable move towards regulatory compliance that would be one thing but the wording here is mutually incompatible with the operation of effectively all cryptocurrency and a significant portion of federated or decentralised software.
Crypto coins are nothing but Ponzi schemes. Wake me up when their value is not tied to how many dollars they buy or used for ransom payments or dark-web payments.
Blockchain though that’s interesting.
The coins have been around for years and years and have not had much success with greater adoption other than another asset class to speculate with. I submit the utility of crypto in coins is zero but the blockchain might be marginally above zero.
And all this will lead to is crypto coins backed by governments built on blockchains where citizens of said governments will be coerced into using because what person is outside of the jurisdiction of their government? The e-yuan and the e-dollar are coming and each will be controlled by a central bank and fiat currency 2.0 will be here and the silly anarcho-capitalist utopia of the crypto hippies will die out to pragmatism.
So yes, crypto-bull tears are sweet because crypto coins are inherently useless.
> I submit the utility of crypto in coins is zero but the blockchain might be marginally above zero.
I disagree. If blockchain had such amazing utility we'd be seeing it successfully applied in different technology sectors, but it isn't despite how long it's been around. It's just a glorified database. In fact, I don't think a blockchain is worthy of any praise without crypto which allows individuals to transact on new basis of trust. This is the innovation, not blockchain.
> Have fun watching your fiat lose value to inflation
Where did crypto fans get this weird idea that the only two options for storing wealth are fiat cash or cryptocurrency?
It’s bizarre that these crypto investors think anyone with significant wealth is keeping it in a bank account earning 0.05% APY and losing to inflation. I suspect many of them aren’t coming from backgrounds with much, or maybe any, education about basic personal finance.
I don’t understand how these crypto people can talk about their crypto prices all day in terms of fiat dollar value, yet not realize that we do the same thing for stocks, bonds, real estate, and other assets too.
This idea that crypto is the only way to escape inflation is one of the weirdest and most easily disprovable myths, but every crypto thread is full of crypto holders who want to believe it’s true. It’s also silly to watch the proliferation of ever-increasing numbers of crypto currencies and crypto assets being generated out of thin air being willfully ignored in the money printing conversations. Do people really not understand that crypto currencies are being printed and injected into the crypto ecosystem all the time?
> but every crypto thread is full of crypto holders who want to believe it’s true.
It's because they want their crypto holdings to go to the moon. HODLing works if you got in early which in the case of BTC when it was around <$9 - $500 with more than 50,000x returns. Right now? It does not.
They do not know how to trade it and take profit, so they just hold it all the way up and never take it out; even if it crashes back down, which you can buy it back at a lower price.
> It’s also silly to watch the proliferation of ever-increasing numbers of crypto currencies and crypto assets being generated out of thin air being willfully ignored in the money printing conversations.
Yes. Everyday there are new worthless tokens and coins being generated and listed on lesser known exchanges and NFTs being minted it out of thin air. Almost all of them have no use case or reason to exist other than having the creator dumping their creation onto the retail crypto holder. Thanks to cointool [0], now anyone can create and list their own ERC-20 scam coin and anyone can create a .PNG, .JPG NFT and mint it out of thin air.
> Do people really not understand that crypto currencies are being printed and injected into the crypto ecosystem all the time?
They will find out the hard way. Some are doing this very quickly until a 2018 style crash will come due to more regulations or a full crackdown.
The issue is that people are forced to hold cash, and this disproportionately impacts the low class that are not financially educated and do not own or understand stocks, bonds, real estate. Inflationary currency is a class warfare attack on the poor. Stocks, bonds, real estate are not a potential replacement to fix this malicious situation because they are not suitable for transactions. It also allows creep into many metrics such as minimum wage which are not fairly adjusted.
Inflation has been at roughly 2% for 20 years. It's been below 5% for at least 40 years. If high inflation is really that bad for the "low class" then how come they are doing so poorly despite avoiding it for so long?
Your insight is doubly poignant because even though inflation has been thoroughly throttled for most of the time Paul Graham has been alive, the average American worker still somehow has ended up earning less, in inflation adjusted dollars, than 40 years ago. https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
Think about that. In 40 years the average worker hasn't even gotten a 5% raise.
So that points to it not being a fiat currency issue, but more something along the lines of labor exploitation? Excluding some industries, there has been no forcing factor to increase wages and the outsourcing of labor just taking money off the table entirely. That's in stark contrast to incredible year over year profits for corps.
The world isn't only USA. And even those percentages add up to be significant over time. I have known people directly that hold all their savings in cash for decades because they dont understand how to invest. It is catastrophic when you consider compound effects
While it's not wrong that there are other options for storing wealth, crypto is the first one that is easily transferable across borders and thus far has shown to be resilient at not being controllable by government.
Multiple attempts have been made over a decade to control crypto. The most recent China banning miners for example showed that crypto just adapts and overcomes.
This of course is scary for the people who used to have complete control over money, and even more so for countries that can no longer control their citizens by seizing their assets.
Crypto is tiny proportion of your assets. Even in the most favourable scenario, where you own nothing but crypto, you're still vulnerable because you have a physical body. The simple fact is that crypto does nothing to hinder the government's ability to control citizens.
Here’s something to consider: Right now AMZN is worth something because it is believed that it can be sold to the next person for more than was paid to the previous holder. What about the last person that will ever hold that share? How will they profit from owning it?
> What about the last person that will ever hold that share? How will they profit from owning it?
They will have voting rights on the board and perceive dividends from one of the most successful companies in recent history?
Even if the company stopped its activities today, liquidating its assets: land, patents, infrastructure, contracts, data, etc. would bar the stock from going to zero.
> Right now AMZN is worth something because it is believed that it can be sold to the next person for more than was paid to the previous holder.
This is not the reason AMZN is worth something at all. The reason is because 1. assets > liabilities and 2. it's a business that generates a stream of net income.
And this is independent from what the stock market thinks AMZN is worth. For example, if the stock market thought AMZN was worth zero, you could buy the entire company for nothing and liquidate it for a profit, or keep it running and pocket the business profits, so it would still be worth something.
We have hundreds of articles complaining about companies doing stock buy backs... how companies value their shareholders more than their employees. There is even an internet myth that companies have to be maximally profitable if they don't want to be in legal trouble versus their shareholders.
It's really quite simple. Companies grow and make profits. They issue dividends or do stock buybacks and return excess cash to investors. The market might be overvalued but bubbles burst eventually.
Can you expand on this? What about crypto will make it such that you can afford a home? That more people throwing in more money will increase your valuation such that you can exit to fiat and leave the bag for someone else to hold for them to hope people throw in more fiat?
Unfortunately I think you’ve nailed it. But speculation on risky assets is a symptom of desperation amidst a growing wealth gap, I just don’t see this disappearing soon. It’s a very clever scam
I agree that some crypto folks may not have basic personal finance education (although some people investing in stocks, and promoting that to others, also do not have basic personal finance education). I also agree though that some cryptos basically print money (as one example, go look into the inflation rate of Curve DAO, a popular DeFi protocol, which I don't invest in, due to the inflation rate).
Bitcoin does not print money or have a high inflation rate, and that is the point of it (it was the original cryptocurrency that took off, so saying that the whole crypto sphere is bad is kind of like saying that because there is some bad software that all software is bad, or that because there is one stock that is bad that all stocks are bad). The max supply of Bitcoin is capped. I don't think that Bitcoin is the only digital asset worth investing in, but I also don't think it is valid to claim that all crypto is printing money, or that all crypto is bad.
I am a crypto fan. I don't think that it's the only way of storing wealth. I also invest in an S&P 500 index. I do think that crypto has a higher potential to beat inflation over time, with inflation currently at 5.4% [1], vs stocks. US stocks have been propped up by The Fed printing USD (which they can due to it being the world reserve currency, which may or may not last forever) and investing it into Wall Street, as well as dropping lending rates to essentially zero, since the March 2020 crash. The Fed has already signaled their intention to raise rates in the next few years, which would damper some of the bullishness of the stock market.
Crypto is a new asset class that investors can consider if they have some risk tolerance, with the potential for a high reward. The thing that I think a lot of people miss is that traditional finance is by no means perfect. There are negative interest rates in some parts of the world (i.e. see Europe). There have been synthetic assets in traditional finance like CDO's (i.e. see The Big Short), which are detached from reality (and assets like that will continue to be created because big money will continue to be bailed out). The current P/E ratios of even some popular stocks (i.e. TSLA) don't reflect traditional fundamentals, so there is a lot of speculation, just like with crypto (I don't think that speculation is bad, there are folks betting on what a company or a technology can become in the future). Also, the US Debt increases every year, with no signal that they will ever pay it back. Based on all this, I think it is worth considering some other asset classes to invest in vs purely traditional finance.
Anyway, just because crypto is not perfect and the space has many digital assets (and not everyone understands them), it doesn't mean that as a whole that it's bad and should be destroyed. There's so much already invested in the crypto space, and it's not just capital, it's startups and human time invested (like any other software project or field). People will continue down this path in one way or another. Regulation will likely mature the space and more people will feel comfortable to invest in it based on that. I think that crypto will at least exist alongside traditional finance, even if it does not completely transform it, and it's worth being open to seeing how this technology can benefit us all.
I hear that argument often, but don't crypto traders always cash out to fiat sooner or later and thus, end up in the same loop?
It was naive to think cryptocurrencies will ever have wide spread adoption without getting regulated at least as much as fiat I think.
The long term goal for many in the crypto community is to get to a point where you don't need to cash out. More merchants accepting crypto, landlords accepting crypto, etc. We aren't there yet, but that remains the goal.
It’s never going to happen unless they can solve the deflation problem. Why would I use a unit of cryptocurrency to pay my rent today, if I think the real value of the cryptocurrency unit will buy even more rent next month? The Internet is full of stories from people who bought like a pizza with Bitcoin years ago and realize that same amount of Bitcoin would be worth like $10,000 today.
Using cryptocurrency to transact every day items is directly contrary to the “HODL” culture around cryptocurrency that exists today. It works in society like an investment, not a currency.
The ever-decreasing value of the dollar is a feature not a bug. It encourages people to transact their dollars for items of real value like pizza, and store their wealth in items of real value like real estate, stocks, etc.
We’ve had pretty long periods of time when currency valuations remained flat or slightly deflationary. In reality, folks buy what they want when they want with the currency that is most convenient. I think you’re overthinking it.
This is a completely invalid argument. You have no choice but to pay rent. If there is an asset that goes up in value, you will want to store your wealth in it. if you can directly pay with something that is also a good store of value, then for the individual that is simply the superior choice.
>Using cryptocurrency to transact every day items is directly contrary to the “HODL” culture around cryptocurrency that exists today. It works in society like an investment, not a currency.
That is due to other factors, not deflation. Not many people accept payment, people are forced to hold dollars, paid in dollars and there is friction when converting. Bad money gets spent first (Gresham's law). If you have dollars from your job anyway and your risk profile is to hold some % in crypto, then of course it doesnt make sense to spend your investment which would need to rebuy to rebalance your portfolio.
The deflation problem that you imagine doesn't exist. There are other more worthwhile arguments against deflation but you didn't use them
>This is a completely invalid argument. You have no choice but to pay rent.
I don't know what you think you are saying but you've just proven the argument. If you only make the minimum necessary transactions then your economy will be of minimum size.
>If there is an asset that goes up in value, you will want to store your wealth in it.
It's just a balance sheet. If the value of the asset goes up it just means the allocation of resources is biased to BTC earned in the past. You also cannot store wealth in Bitcoin. You have to give up real wealth to own Bitcoin.
>if you can directly pay with something that is also a good store of value, then for the individual that is simply the superior choice.
Sure, the individual wants his share of wealth to grow at the expense of everyone else. After all, who the hell would be against free shit that you don't have to work for?
>That is due to other factors, not deflation.
>Not many people accept payment, people are forced to hold dollars paid in dollars and there is friction when converting.
Literally nobody is forced to hold onto dollars. If anything central banks want people to stop holding dollars because of low inflation/the deflation problem.
> Bad money gets spent first (Gresham's law).
I don't know if you have noticed but bad money being spent first is snowwrestlers' argument. You've supported a supposedly completely invalid argument yourself...
>The deflation problem that you imagine doesn't exist. There are other more worthwhile arguments against deflation but you didn't use them
They boil down to the same thing. Deflation doesn't increase real wealth it only responds to real wealth increases by allocating the real wealth to people who held onto more currency. It is equivalent to an income tax that is then redistributed via a UBI that pays out proportional to how much BTC you own.
If you know that you will get more wealth extorting other people you will refuse to spend your Bitcoin because it increases your ability to extort people in the future.
I was replying to "Why would I use a unit of cryptocurrency to pay my rent today, if I think the real value of the cryptocurrency unit will buy even more rent next month?". To be honest I don't understand what you're saying at all, within that context
I do pay my rent with crypto, because I don't have any USD/EUR income and it is less friction for me. Why would I want to go through extra effort to get dollars? Due to my situation I see quite directly that whether individuals choose use it as a payment method has no direct relationship with deflation
>If you only make the minimum necessary transactions then your economy will be of minimum size.
This is completely unrelated to the decision making of individuals
That will never happen. If I were a merchant that accepts Bitcoin I would want to acquire as much today as possible and my desire to adopt it would shrink as its value goes up.
The best years for Bitcoin adoption are already over.
I'm fine with rational regulation that doesn't effectively outlaw the technology and keeps a level playing field, which is the opposite of what they're attempting right now.
Who exactly keeps a significant fraction of their savings in money? It’s function as a medium of exchange is largely independent of it’s fiction as a store of value.
Of course debt is different because that’s paying interest.
What an amusing comment! Fiat is worthless and everyone knows that. It's just an entry in a balance sheet. Wealth doesn't exist in the balance sheet. The balance sheet merely allocates wealth. Inflation can only hurt the balance sheet if it results in people abandoning the instrument. Inflation doesn't destroy real wealth. Deflation doesn't create real wealth.
Inflation causes people to flee into the real world. They instinctively create durable real wealth as a result of inflation because the real world degrades slower than money.
Deflation causes people to flee the real world and seek safety in the balance sheet. Their allocation of resources increases simply because the rules of the balance sheet say so. In fact, people are incentivized to destroy real wealth early as the balance sheet lets their allocated share of wealth grow faster than if they put in the effort to create real wealth.
It's the gold standard that collapsed under deflation and if fiat were to collapse today, it would again collapse under deflation.
Instead of trying to pass an amendment to the bill just for crypto they should be against passing the entire bill. What hypocrites- they do not care about freedom, only about what is good for their industry.
Also, it is clear that congress could care less about understanding what crypto really is in a deep way. They only care about using power and extracting their rents.
All living creatures who want the planet to still be habitable in 20 years celebrate 'wonderful' new bill that will lower incentives for people to burn coal to collect imaginary tokens.
Actually part of the issue is that the bill is worded such that effectively everyone involved in a cryptocurrency (including developers) would be treated as financial brokers and would be subject to all the regulations and tax compliance laws that go with that EXCEPT Proof of Work miners...
The base wording is untenable to a certain extent. The Wyden amendment is a reasonable compromise but the Warner amendment (which is the one with White House support) that came out at the last second includes absolutely everyone in the ecosystem except those that burn extraordinary amounts of power.
You misunderstand, and should actually read the current amendment. Because it actually bans everything but miners. I.e. the electricity guzzling miners would keep running, but all the software devs trying to transition crypto networks to low resource usage consensus mechanisms would be made illegal.
If you feel that crypto is an environmental disaster, you should be vigorously opposed to the Portman-Warner amendment.
Funnily enough, this bill actually does more to quash next-gen green alternatives to bitcoin.
By misrepresenting validators as "brokers", cryptocurrencies such as Nano, which uses six million times less energy per transaction, are effectively outlawed in the US.
Miners, on the other hand, are not penalised by this bill whatsoever.
Clean renewable energy is becoming cheaper and more accessible. Miners are already being incentivized because of economics to move to green energy sources up to 50 percent of mining is done with clean energy.
I've never understood this narrative. There is no narrative about other industries like gold mining that also consume exorbitant amounts of power that you could deem useless. If you do not believe in the thesis of a decentralized currency and the freedom it brings it is easy to say things like this.
> Miners are already being incentivized because of economics to move to green energy sources up to 50 percent of mining is done with clean energy.
That green energy could easily be used to take coal-fired plants offline, if it wasn’t being arbitrarily consumed for crypto. Also I seriously doubt that anywhere near 50% of mining is done with clean energy.
Miners don’t care where energy comes from as long as it’s cheap. Energy consumed for one thing is energy that can’t be used for something else.
It almost doesn’t matter which power plant they’re closest to because we have a power grid that ties everything together. This idea of miners being isolated from the grid and consuming clean energy that would otherwise go to waste is pure myth.
> I've never understood this narrative. There is no narrative about other industries like gold mining that also consume exorbitant amounts of power that you could deem useless.
Gold is extremely useful in many industrial processes and many products. It’s not even close to “useless”.
Crypto mining is literally designed to burn power. No other industrial process is literally designed to be inefficient with energy consumption. Nothing compares.
Proof of work is an algorithm that burns power as an input to the algorithm. Miners have to burn power just to continue the existence of the currency, which isn’t comparable to one-time extraction costs of resources.
Worse, proof of work is literally designed to be more inefficient with every new miner while also incentivizing new miners to join. Can you name any other industry that incentivized everyone to do things to make the system less efficient while burning more power all of the time?
> It almost doesn’t matter which power plant they’re closest to because we have a power grid that ties everything together. This idea of miners being isolated from the grid and consuming clean energy that would otherwise go to waste is pure myth.
It's not a myth it's exactly what happens. Stranded power is a real thing and not every country has the same power grid infrastructure that the US has.
As soon as China actually built out a high voltage grid that can make use of some of their stranded power they kicked out the miners, who moved to other areas with near free power.
so your belief is that China built a bunch of renewable power plants in the middle of nowhere with no demand for them, and generous miners stepped in to use the excess capacity?
When you hear about the environmental consequences of crypto, the massive amounts of electricity, the GPU shortages, that’s all PoW. PoS is designed to eliminate that and make crypto no more resource intensive than any other p2p network like BitTorrent.
Regardless of your view on crypto, there’s no defensible justification for the Portman-Warner amendment. It’d be like passing a bill banning electric vehicles but not gasoline, or shutting down solar plants but not coal plants.