What does Giantitp think of block chain applications?

[Zooeater]

Hello all,

Longtime occasional lurker on different accounts. This used to be my best Dnd resource and really still is, and has always been a great forum I have respect for.

I want to know what the nerds here think of crypto currency and then the block chain in general in terms of applications. I follow a lot of projects in that sphere and it seems like the next innovation driving technology that will bring us even closer to integrating the real and virtual worlds.

Their are more and more projects that use that technology that are becoming closer and closer to mass adoption. One in particular I'm following is using a crypto coin to create a decentralized cloud computing marketplace that would allow individuals and business' to sell cloud compute in an open and competitive market. This would be in contrast to how these services are used currently, where companies and projects have to either use free versions or pay for cloud services from large providers, namely, Google, Amazon, Microsoft.

Their are other regular uses that are being explored using decentralized ledgers to provide conventional services as well. One I have done a little research on is called smart key or some such. They are creating digital locking systems based on crypto tokens for things like car rentals and hotels and things.

So what do you guys think? Is block chain going to bring us into a world like shadowrun? or is it a massive ponzi scheme that will be overwhelmed by huxters before ever serving enough functional use to be mass adopted?

[NichG]

I'm not a fan of the 'any cost to remove the need for trust is worth paying' element. I think that trust-lessness is strongly overvalued in terms of the actual consequences of the specific kinds of protection that decentralization provides, while in practice a lot of the things surrounding crypto have the same problems or worse as existing centralized systems, plus the additional waste associated with proof of work style decentralization. Basically anything someone does with crypto is going to go through an exchange in order to convert to/from fiat, and those transactions are even more vulnerable to malfeasance than standard bank systems because there's a lack of regulatory structure surrounding them. There's also, to me, a strong cult-like mentality possibly reinforced by feedback with price fluctuations where people are encouraged to have blind faith in crypto, nay-sayers are pretty aggressively attacked, etc.

At the same time, the possibility of smart contracts that let artists for example earn royalties whenever their work is resold do seem like an actual novel application, to the extent that those things can actually be enforced (at first I thought this was in code embedded with the tokens, but it looks like its more that its something that particular exchanges implement - and if you take the token off the exchange, it can change wallets without enforcing the royalty payment). So I guess I'm hopeful that someone from that community will figure out how to make that actually work, since that would be an actual application with some value to it to my eyes.

[Mastikator]

I think it's a neat piece of technology that has been a bit overhyped by tech nerds. Dunno about "mass adoption", it has its uses and we'll see it there. Or more likely it'll be under the hood on many systems so we won't see it but it'll be there.

[GeoffWatson]

Cryptocurrency is for criminals and the black market; with "mining" a disgusting waste of resources.

Blockchain is a solution looking for a problem and is massively over-hyped.

[Yora]

Cyber, quantum, e-, smart, AI. I feel block chain is just the latest word that sounds futuristic to sell something to people who don't know what it means.

[warmachine]

Requires massive computing resources to create virtual coins, takes too long to resolve transactions, and fluctuates wildly against other currencies, including the stable ones. And, of course, no method to increase the money supply to match increase in its usage. There is a reason countries dropped the gold standard in favour of fiat currency.

Expensive setup, slow operation, instability deters early adoption, and painful growth. Does have anonymity. So it's good for high value luxuries where price instability matters less where the purchaser wants his acquisition kept a secret, even though high value luxuries are often used as status symbols.

[Rydiro]

Blockchain is a solution looking for a problem and is massively over-hyped.

This. Its a distributed ledger. For most applications centralized databases are way better.

[Tyndmyr]

So what do you guys think? Is block chain going to bring us into a world like shadowrun? or is it a massive ponzi scheme that will be overwhelmed by huxters before ever serving enough functional use to be mass adopted?

It's not quite either.

The decentralization is cool. However, decentralization is needed for fairly few things, and can pose a security problem for a great many.

How many implementations for non-financial ends have stuck around? Actually been implemented and survived?

A couple of blockchain based games have been tried. Honestly, they mostly sucked. Adding a blockchain to a game doesn't make it fun.

Money is actually something where a baked in stability and no centralized point of failure is good, but consider, say, your marketplace interest. Why do you actually need a blockchain for that? Why not centralize it?

[Ravens_cry]

At the risk of getting political, I bet a lot of the appeal is for people who are less than enthusiastic for central governments and institutions.
But, yeah, while the technology certainly has potential applications, I highly doubt it will replace modern currencies any time soon.
Also, as someone interested in building her own PC at some point, the effect bitcoin mining has had on graphics card prices is more than a tad peeving.

[NichG]

And things like fear of inflation while somehow not being afraid of e.g. a whale investor moving to another coin and creating a fluctuation of 25% in value or more on a weekly timescale...

I think a lot of it comes down to something like 'the guys who could wave a hand and destroy my savings in fiat are not like me, but the guys who could wave a hand and destroy my savings in crypto are excited about the same things I am and so they wouldn't betray me like that'.

There's probably also a bit of 'this math is hard to understand, but smart people say it makes things secure' that makes people be a bit less critical even if there are things where e.g. someone arranging to control a bit more than half of the mining of a given cryptocurrency could basically forge whatever transactions they wanted to given a bit of time - beyond most private individuals to do, but easy for a government.

[Zooeater]

Thank you for all of your answers, their is a very interesting variety of people on this forum.

I will elaborate some of my experiences for the sake of conversation though. I like mastikators take the most though, the block chain and other related innovations in software systems will be utilized under the hood of a lot of existing processes. But I totally understand how and why anyone would think that crypto currency is a buzz word filled scam market used to buy drugs on the internet or whatever, that was exactly how I felt about it up until recently watching all of the madness around the gamestock stock market fiasco. I essentially decided that the crypto market was going to benefit from increasing inflation of the US dollar as well as the exodus of regular people who were disillusioned with the currently existing financial markets.

After that I started doing research and have found lots of projects and things that are just interesting and has made me seek outlets to talk about them just in concept. So to talk more about the marketplace interest thing, in my absolute laymens terms, they have created a coin to fund their start up, side stepping traditional investment in many ways. I havent thoroughly researched the origin of their coin, lots of people have many opinions on the different means and ways to launch the coins. I found out about them right before they launched their cloud compute marketplace last monday. Their roadmap involved setting up the coin for people to buy and hold, they receive interest based on an inflation rate which is payed out to the holders of the tokens who "stake" and lock up the tokens in a proportional rate to how much you bought in that if the price goes down and you were to exit you wouldnt lose money if you "staked" all what you invested. Until their marketplace has matured enough to enable a take rate from the marketplace as a whole that will pay out to the token holders.

So functionally, currently the value of the coin is the strength of their team, partnerships, contracts, results, etc and their actual business plan. But theoretically the coin will be worth a percentage of the total value of their whole marketplace exchange value. The current market share of cloud computing is 70% owned by four huge corporations who fail to utilize the servers that are owned by data centers across the world. The decentralized marketplace would give computing providers a place to make use of their whole servers capacity to make money. You could almost think of it as making computing available on tap, payed for only as much as is used. This would be attractive to purchasers as well as providers.

That is just that project, which would potentially service a global market. Another service where I think block chain is going to become standard industry fare, is social media. Their is a block chain that is designed to run a social media platform. Their are already analogs for blogging websites, niche forums, image sharing boards, lifestyle apps like fitness apps. All kinds of social media, and it is designed to create an interoperable network of different social medias that generate money not thru centralized entities exchanging money for advertising space, for your attention, for information about what you look at and what you like, but by distributing the proceeds of the publishing to the people who do it and the people who curate it, so you buy into the network by owning the coins and making an account, and it pays you every time you post or vote depending on how "valuable" the post is. It just seems like a more attractive service model too me.

Their are also different services and protocols running on block chain and using coins that operate kind of like traditional financial services, their are ones that offer lending services of varying kinds that allow people to put their crypto up as collateral to borrow as well as putting their money into different lending and liquidity pools and receiving interest for it. I think these are worth mentioning just to show that their are services that people are using that exist currently.

So in short. I see a lot of different uses for these coins that are going to bleed into everyday life and services. You know they are printing dollars like drunken sailors, you know they already want to get rid of physical currency for at least hygiene reasons which honestly makes sense. But I just don't see the government trying to do anything but tax cryptos and use the law to make the existing crypto entities pay out huge fines for technical reasons.

[GeoffWatson]

The "coin to fund the startup" sounds like a share, but more complicated.

The problem with using crypto as actual currency is that they are too volatile. The value varies a lot, so it's only suitable for gamblers and untraceable transactions.

[asda fasda]

After that I started doing research and have found lots of projects and things that are just interesting and has made me seek outlets to talk about them just in concept. So to talk more about the marketplace interest thing, in my absolute laymens terms, they have created a coin to fund their start up, side stepping traditional investment in many ways. I havent thoroughly researched the origin of their coin, lots of people have many opinions on the different means and ways to launch the coins. I found out about them right before they launched their cloud compute marketplace last monday. Their roadmap involved setting up the coin for people to buy and hold, they receive interest based on an inflation rate which is payed out to the holders of the tokens who "stake" and lock up the tokens in a proportional rate to how much you bought in that if the price goes down and you were to exit you wouldnt lose money if you "staked" all what you invested. Until their marketplace has matured enough to enable a take rate from the marketplace as a whole that will pay out to the token holders.

So functionally, currently the value of the coin is the strength of their team, partnerships, contracts, results, etc and their actual business plan. But theoretically the coin will be worth a percentage of the total value of their whole marketplace exchange value. The current market share of cloud computing is 70% owned by four huge corporations who fail to utilize the servers that are owned by data centers across the world. The decentralized marketplace would give computing providers a place to make use of their whole servers capacity to make money. You could almost think of it as making computing available on tap, payed for only as much as is used. This would be attractive to purchasers as well as providers.

That is just that project, which would potentially service a global market. Another service where I think block chain is going to become standard industry fare, is social media. Their is a block chain that is designed to run a social media platform. Their are already analogs for blogging websites, niche forums, image sharing boards, lifestyle apps like fitness apps. All kinds of social media, and it is designed to create an interoperable network of different social medias that generate money not thru centralized entities exchanging money for advertising space, for your attention, for information about what you look at and what you like, but by distributing the proceeds of the publishing to the people who do it and the people who curate it, so you buy into the network by owning the coins and making an account, and it pays you every time you post or vote depending on how "valuable" the post is. It just seems like a more attractive service model too me.

Their are also different services and protocols running on block chain and using coins that operate kind of like traditional financial services, their are ones that offer lending services of varying kinds that allow people to put their crypto up as collateral to borrow as well as putting their money into different lending and liquidity pools and receiving interest for it. I think these are worth mentioning just to show that their are services that people are using that exist currently.

So in short. I see a lot of different uses for these coins that are going to bleed into everyday life and services. You know they are printing dollars like drunken sailors, you know they already want to get rid of physical currency for at least hygiene reasons which honestly makes sense. But I just don't see the government trying to do anything but tax cryptos and use the law to make the existing crypto entities pay out huge fines for technical reasons.

Well I'm not sure i understend corectly but from your description blockchain isn't vital for services provided, only for payments, which could be organized by other means also. And although this payments thing is interesting field for blockchain as sending money, especially abroad is risky and thus costly, as I understand most of blockchain advantages right now is that it's not regulated but people forget that those regulation was made for a reason, and without them you invite many different fraud risk to your system and anonymity is not always enough reason for scraping them.

[Mastikator]

The "coin to fund the startup" sounds like a share, but more complicated.

The problem with using crypto as actual currency is that they are too volatile. The value varies a lot, so it's only suitable for gamblers and untraceable transactions.

To be fair to crypocurrencies there are regions where the local currency fluctuates even more violently, like when hyperinflation happens. It's nice to have a backup. But for me who lives in a stable country, nah, I aint getting any crypto coins. Nor do I bother to exchange my local currency for foreign ones either (unless I travel, which is impossible in these zombie apocalypse times).

[NichG]

And investing in crypto won't really help protect from inflation or currency instabilities if your employment contract specifies a wage in an unstable local currency anyhow...

[warmachine]

Vast amounts of computing power and bandwidth required for calculating and verifying crypto-micro-rewards to social media users, which must be bought and maintained by every social media platform, blog server, niche forum server, and app server. As well as the currency exchanges and services where the micro-rewards can be spent. Or they can delegate to a trusted crypto-micro-rewards accounting service.

Rather than a standard, virtual currency service for micro-rewards requiring far less computing power and bandwidth.

The crypto-micro-rewards system has the advantage of being very hard to tax, especially if an avoidance of currency exchanges makes it entirely closed. You're just paying the share of the vast computing equipment and electricity bills instead. I regard systematic tax avoidance as offensive. I regard gross design inefficiency as offensive.

[Yora]

Just saw this about unique signatures that verify the owner of a digital artwork, which can be traded to exchange "ownership". It's not encryption that prevents replication, only a certificate that only one person is the official owner.

I can see the appeal for millionaires who buy artworks for ridiculous prices and then leave them in harbor warehouses that are outside national customs areas so they don't have to pay any import and export taxes when they resell them in the future. With a digital file, this becomes even easier.

[Tyndmyr]

Thank you for all of your answers, their is a very interesting variety of people on this forum.

I will elaborate some of my experiences for the sake of conversation though. I like mastikators take the most though, the block chain and other related innovations in software systems will be utilized under the hood of a lot of existing processes. But I totally understand how and why anyone would think that crypto currency is a buzz word filled scam market used to buy drugs on the internet or whatever, that was exactly how I felt about it up until recently watching all of the madness around the gamestock stock market fiasco. I essentially decided that the crypto market was going to benefit from increasing inflation of the US dollar as well as the exodus of regular people who were disillusioned with the currently existing financial markets.

There is buzz, absolutely. Buzz isn't the same thing as being long term useful. I invest in crypto, and I made money off GME. I don't mind riding the buzz where it's a thing, but long term utility is a different matter.

So functionally, currently the value of the coin is the strength of their team, partnerships, contracts, results, etc and their actual business plan

Almost all coins values are entirely speculative. It would be difficult to argue that Bitcoin's value derives from any of the things you listed.

Their roadmap involved setting up the coin for people to buy and hold, they receive interest based on an inflation rate which is payed out to the holders of the tokens who "stake" and lock up the tokens in a proportional rate to how much you bought in that if the price goes down and you were to exit you wouldnt lose money if you "staked" all what you invested. Until their marketplace has matured enough to enable a take rate from the marketplace as a whole that will pay out to the token holders.

Most coins tank pretty hard after the ICO.

Proof of ownership is a pretty normal model, though, probably second most common after proof of work. On it's own, this isn't novel at all. Whichever coin this is, it'll need some sauce elsewhere to make it interesting/viable.

So functionally, currently the value of the coin is the strength of their team, partnerships, contracts, results, etc and their actual business plan. But theoretically the coin will be worth a percentage of the total value of their whole marketplace exchange value. The current market share of cloud computing is 70% owned by four huge corporations who fail to utilize the servers that are owned by data centers across the world.

Many, many of these altcoins fail to provide a compelling technical reason why such a marketplace ought to use their coin, instead of an already popular one or rolling their own.

If I want to sell cloud computing via crypto, why should I join their standard instead of a more established one? What does their standard offer that a new standard does not? If it fails to meet either test, it's not likely to go anywhere.

The decentralized marketplace would give computing providers a place to make use of their whole servers capacity to make money. You could almost think of it as making computing available on tap, payed for only as much as is used. This would be attractive to purchasers as well as providers.

The existing cloud providers do in fact subcontract out hosting in such a fashion. This is already widely in place, though it pays in dollars, not crypto. It pays quite well.

The only reason it doesn't use certain hosting, is because it doesn't meet their specifications. To sell hosting to cloud services, you need to meet performance and reliability standards. This is a fairly reasonable cause for exclusion. Massive companies don't want to host critical infrastructure off a dodgy old computer in the garage.

That is just that project, which would potentially service a global market. Another service where I think block chain is going to become standard industry fare, is social media. Their is a block chain that is designed to run a social media platform. Their are already analogs for blogging websites, niche forums, image sharing boards, lifestyle apps like fitness apps. All kinds of social media, and it is designed to create an interoperable network of different social medias that generate money not thru centralized entities exchanging money for advertising space, for your attention, for information about what you look at and what you like, but by distributing the proceeds of the publishing to the people who do it and the people who curate it, so you buy into the network by owning the coins and making an account, and it pays you every time you post or vote depending on how "valuable" the post is. It just seems like a more attractive service model too me.

Check out the actual service. It's spam and dead content. Very few people actually use it. There's extremely little reason to buy in, because while many people would love to be paid for posting to social media, very few people have a compelling need to pay others for posting to social media.

So in short. I see a lot of different uses for these coins that are going to bleed into everyday life and services. You know they are printing dollars like drunken sailors, you know they already want to get rid of physical currency for at least hygiene reasons which honestly makes sense. But I just don't see the government trying to do anything but tax cryptos and use the law to make the existing crypto entities pay out huge fines for technical reasons.

Inflation is a problem for some physical currencies, but crypto doesn't invariably fix this. Bitcoin sort of does, because it's ultimately deflationary, but that isn't inherent to all crypto.

And even if a coin itself isn't inflationary, the meta-system of all crypto can be, thanks to the addition of new coins, which has proved to be very popular.

There is perhaps some utility for crypto as a hedge against inflation, but that will almost certainly shake out to be only a single coin. It can't be an effective hedge if you're constantly increasing the quantity of coins overall. Thanks to network effects, this will almost certainly be Bitcoin unless we run into a hard technical stop with the size of the blockchain or something.

[Justanotherhero]

The "coin to fund the startup" sounds like a share, but more complicated.

The problem with using crypto as actual currency is that they are too volatile. The value varies a lot, so it's only suitable for gamblers and untraceable transactions.

The "innovative part" is that shares and companies that issue shares normally have to fulfill certain minimum criteria at least in europe as far as I know. Of course this is not yet required for coins.

[Yora]

"The benefit of cryptocurrency is that you can do things that are otherwise forbidden."

Early on, the assumption was that it would be used for drug trading. But it looks more and more like a tool for unregulated banking.

[Justanotherhero]

"The benefit of cryptocurrency is that you can do things that are otherwise forbidden."

Early on, the assumption was that it would be used for drug trading. But it looks more and more like a tool for unregulated banking.

This and I think it has its use as an minimal outlet for asset inflation. All that money in alt coins does not enter the stock market, the housing market or drive other assets up in price. So in a way it has some uses. Although it has made new GPU`s insanely expensive.

[Willie the Duck]

After that I started doing research and have found lots of projects and things that are just interesting and has made me seek outlets to talk about them just in concept. So to talk more about the marketplace interest thing, in my absolute laymens terms, they have created a coin to fund their start up, side stepping traditional investment in many ways. I havent thoroughly researched the origin of their coin, lots of people have many opinions on the different means and ways to launch the coins. I found out about them right before they launched their cloud compute marketplace last monday. Their roadmap involved setting up the coin for people to buy and hold, they receive interest based on an inflation rate which is payed out to the holders of the tokens who "stake" and lock up the tokens in a proportional rate to how much you bought in that if the price goes down and you were to exit you wouldnt lose money if you "staked" all what you invested. Until their marketplace has matured enough to enable a take rate from the marketplace as a whole that will pay out to the token holders.

So functionally, currently the value of the coin is the strength of their team, partnerships, contracts, results, etc and their actual business plan. But theoretically the coin will be worth a percentage of the total value of their whole marketplace exchange value. The current market share of cloud computing is 70% owned by four huge corporations who fail to utilize the servers that are owned by data centers across the world. The decentralized marketplace would give computing providers a place to make use of their whole servers capacity to make money. You could almost think of it as making computing available on tap, payed for only as much as is used. This would be attractive to purchasers as well as providers.

This kind of exemplifies what think of blockchain projects in general. This looks like a startup. They have a product. The product sounds vaguely of value to people (a bar a lot of internet startups can't clear), but it is unclear if the product is wanted. The initial investment model has a neat little weird mechanic (the ' wouldnt lose money if you "staked"' bit) that sounds exciting, but really just means that the company is taking on another speculative risk (which also sounds good to a potential investor, but to me makes me wonder how much VC they have to back that up, and if so, why are the venture capitalists putting so much faith in them?). It would be interesting to see this 'team, partnerships, contracts, results, etc and their actual business plan,' as that would really influence how credible I find any of this. I don't want to say this sounds like you getting sucked into a shaky investment, only that I've heard people talk the same way about literal perpetual motion machine scams.

But that's my main point (sorry for getting sidetracked) -- most blockchains seem to be just the latest investment trend, with no real distinction between them and any other new corporate trend. 10-20 years ago it was social media, with everyone wanting to be the next Facebook and Twitter (despite us already having both of those). 20-30 years ago it was 'the internet' (I bet I still have a few Pets.com memes saved somewhere around here). 5 years ago it was 'the Cloud.' Nothing about the fact that these current startups have a blockchain product really changes anything -- 1-5% will succeed, the rest will fade away (or just wallow in obscurity), and much of the reason will be how much hype they generate, rather than the strength of the actual product (lord knows Bitcoin isn't the most technically competent virtual currency, as the mid-sized nation's worth of electricity that has gone into mining it can attest).

That is just that project, which would potentially service a global market. Another service where I think block chain is going to become standard industry fare, is social media. Their is a block chain that is designed to run a social media platform. Their are already analogs for blogging websites, niche forums, image sharing boards, lifestyle apps like fitness apps. All kinds of social media, and it is designed to create an interoperable network of different social medias that generate money not thru centralized entities exchanging money for advertising space, for your attention, for information about what you look at and what you like, but by distributing the proceeds of the publishing to the people who do it and the people who curate it, so you buy into the network by owning the coins and making an account, and it pays you every time you post or vote depending on how "valuable" the post is. It just seems like a more attractive service model too me.

It is an interesting service model, to be sure. More interesting, however, would be the business model. Why would anyone pay you for your posts, who will curate it*, and how will this system pay for the amazing infrastructure cost such a thing would incur.
*because you know the instant such a thing becomes remotely valuable, 50-90% of all actions taken will be entities trying to game the payment model.

So in short. I see a lot of different uses for these coins that are going to bleed into everyday life and services. You know they are printing dollars like drunken sailors, you know they already want to get rid of physical currency for at least hygiene reasons which honestly makes sense. But I just don't see the government trying to do anything but tax cryptos and use the law to make the existing crypto entities pay out huge fines for technical reasons.

Physical currency has been something of a slowly (slowly, really slowly) dying albatross for a while now. The jump from 'we should get rid of paper money' (or pennies, for godsake pennies!) to crypto is an unclear one. Traditional currencies can exist perfectly well without physical product quite easily. As for governments printing money like drunken sailors or doing nothing but tax and fine crypto, both are pretty much not showing themselves to be the case (relatively speaking). Inflation rates have been surprisingly stable, despite the pandemic and world governments doing epic deficit spending. Almost like governments have seen what happens when one of them tries to just print their way out of financial holes and don't want to kill their respective golden geese. Crypto, likewise, as a new and uncharted product type, has less overall regulation than most other types of similar products, although as you allude to perhaps the stock market in general is about to get some renewed regulatory scrutiny (highlighting something that really has had less regulation or penalty for malfeasance).

So yeah, blockchain has some potential, and occasionally potential to do things that other currencies or business products can't do (or do as well), but a lot of it is just hot-new-investment.

[Tyndmyr]

While I agree with all the rest of what you posted, I have a bit of disagreement with inflation.

Physical currency has been something of a slowly (slowly, really slowly) dying albatross for a while now. The jump from 'we should get rid of paper money' (or pennies, for godsake pennies!) to crypto is an unclear one. Traditional currencies can exist perfectly well without physical product quite easily. As for governments printing money like drunken sailors or doing nothing but tax and fine crypto, both are pretty much not showing themselves to be the case (relatively speaking). Inflation rates have been surprisingly stable, despite the pandemic and world governments doing epic deficit spending.

Ehhh, interest rates are on the rise, as you would expect after a massive increase to M1. Experts are saying that the total rise for the first quarter is likely to be .5 to .75% which is pretty steep for a time period that short, and many expect a much sharper rise later in the year. If any of you have a mortgage in need of a refi, lock that in now while rates are still relatively low.

Worse, there is likely a great deal more inflation out there that isn't captured in common inflation metrics. Asset prices are on the rise. Crypto is one of these, but so is property, and of course the stock market has been on a tear, which would otherwise be extremely odd given, yknow, a pandemic. Disasters are usually terrible for stocks.

If you own a house, you've probably experienced the folks calling around, asking if you want to sell it. Buying property as a hedge against inflation has become so popular that rich people are literally farming out home buying to banks of callers. That's an interesting trend, and one that supports a lot of inflation coming.

Housing and stock market bubbles have fairly routinely led to crunch times, so it seems as if the financial world is not that well under control at all post-pandemic...it simply will take some time for all the effects to shake out.

[Fat Rooster]

It is easy to see the down sides, but the relevant comparisons and side channel up sides are harder to see. The money for bitcoin mining comes partly from transaction fees, but still mostly from the expansion of the currency. This makes it quite unstable for now. The net effect is that about .5% of each transaction goes towards paying the miners. This compares to almost 3% for PayPal. I don't know how much a typical bank would take, but bankers don't exactly seem frugal. A parasitic system that does nothing useful other than move money is a description of the whole banking system, not just crypto.
The vast energy use is scary, but less of a problem than it seems at first. Mining operations are almost entirely mobile, so follow cheap power. Up till recently that has largely meant the big hydro dams in the middle of nowhere in China that were built for aluminium production that wasn't required. Many of them are now moving to places like Iceland, or other areas where electricity is cheap. Fossil fuel power is pretty constant anywhere, so that means they are pumping large amounts of money into energy markets that favour green energy.

Mining set ups are extremely peculiar, in that all they really need is energy. Even data centres want to be relatively close to the users and require good connectivity. Mining needs almost nothing, especially once starlink becomes operational. That means that setting up small scale experimental power setups in the back of beyond is suddenly possible without the massive investment required to connect it to a grid. You know what is often geographically constrained? pretty much every green energy tech. Miners can provide demand at any scale in any location, and that could be a game changer for getting a green energy technology to scale. Miners can say "I will pay $x per day for a constant Y kw supply, anywhere in the world". Sure, the tech isn't actually doing anything useful, but it has a revenue stream. That can let it expand if possible until it is viable to connect it to a grid, or provide enough power for heavier industry.

The other side of the coin is in terms of electronics development. The price of graphics cards has gone sky high, and that money can be largely fed back into R&D. Do you know what crypto miners want above all else? Low powered electronics. Crypto provides a massive pressure towards low power, and that will affect everyone positively.

1% of all electricity is massive, but don't be fooled into thinking that number carries the whole story.

[Willie the Duck]

While I agree with all the rest of what you posted, I have a bit of disagreement with inflation.

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Ehhh, interest rates are on the rise, as you would expect after a massive increase to M1. Experts are saying that the total rise for the first quarter is likely to be .5 to .75% which is pretty steep for a time period that short, and many expect a much sharper rise later in the year. If any of you have a mortgage in need of a refi, lock that in now while rates are still relatively low.

Worse, there is likely a great deal more inflation out there that isn't captured in common inflation metrics. Asset prices are on the rise. Crypto is one of these, but so is property, and of course the stock market has been on a tear, which would otherwise be extremely odd given, yknow, a pandemic. Disasters are usually terrible for stocks.

If you own a house, you've probably experienced the folks calling around, asking if you want to sell it. Buying property as a hedge against inflation has become so popular that rich people are literally farming out home buying to banks of callers. That's an interesting trend, and one that supports a lot of inflation coming.

Housing and stock market bubbles have fairly routinely led to crunch times, so it seems as if the financial world is not that well under control at all post-pandemic...it simply will take some time for all the effects to shake out.

I think where we are disagreeing is just what constitutes a large number. Given, as we both mention, a pandemic, I'm relatively relieved to see quarterly rises below a single digit. That this whole experience has come through without completely overturning the proverbial apple cart is nothing short of a minor miracle.

Anyways, mostly I was just pushing back on OP's 'printing dollars like drunken sailors' and fining crypto comments, which are the same catchphrases we've been hearing since well before the pandemic (and definitely during an era of not-especially-high inflation). If asset prices are on the rise, and Crypto is included, than crypto will also be part of the inflation, so that will need to be included in any crypto vs. traditional currency comparisons. However, yes, you are right, we should all be watching the inflationary indexes in oh, maybe Q3 as a good indicator of how the global economy has handled the pandemic, inflation-wise.

[Tyndmyr]

Ah, that's fair. We're largely in agreement, then.

I definitely agree that crypto at large is not inherently reliable as a hedge. Bitcoin, okay, but with a ton of volatility. Ether...maybe. The further you get out into altcoins, the more wildly unreliable you get. On the fringes, there are a ton of coins that are basically scams.

[NichG]

Somehow I can't help but imagine some kind of speculative fiction about a bunch of people convincing each-other that the collective currencies of the world have been massively overvalued and that their 'true value' is ten thousand times lower. They make their own currencies, invest in them, and keep talking up this view that everyone exchanging dollars for labor and food and whatnot are all deluded, and that drives up the relative value of their currency compared to the outside world while simultaneously restricting its volume and liquidity to only those they can convince to join their collective. Finally, they use the gains from people buying into their system to create a utopia project somewhere in the middle of nowhere such that an outsider coming in would end up having to pay e.g. $50000 to acquire the quantity of local currency needed to buy a cup of coffee; people working at the local fast food joint making the equivalent of hundreds of millions a year, etc, and following how the psychology of that community would develop (perhaps you'd get "Outsiders coming in, working for a few months, selling off their Coin and retiring; how dare they!" sorts of sentiments) and how it'd interact with external needs and things like that. I guess its interesting only when the community is small enough that there's not quite enough going on to make arbitrage worthwhile since someone e.g. selling Coin to buy stuff for import and reselling at a 10000x markup would only be able to turn that into outside money to the extent that outsiders actually can be convinced to buy Coin, and the larger the gap gets the lower that external liquidity would become I guess...

I guess the subtle point is that this relies on a certain kind of cognitive ratchet, compared to standard economic theory of rational actors, because you'd need people who would both say 'I think a cup of coffee is worth $50000' but also 'I'm not willing to give you my $40000 for that coffee, even though I just said I thought that would be a good trade'. But there are psychological effects like that...

[Cikomyr2]

I essentially decided that the crypto market was going to benefit from increasing inflation of the US dollar as well as the exodus of regular people who were disillusioned with the currently existing financial markets.

List of problems:

- inflation concern over the inflation of the US dollar
- desillusionment of the financial markets behavior

Solution: crypto currencies that are heavily inflated by financial markets

See, that's the thing. Cryptocurrencies is a nothing burger that has been imagined to solve an un-existent problem by doing the actual problem even worse.

People say it will take power away from big central banks. How? By becoming an alternative currency. Well, to be a "currency", something has to be used as a reliable means to exchange goods and services.

But at the moment, bitcoins and other made-up currencies are treated like *investments* by people who mainly trade with them. It's not a medium of exchange, it's a repository of wealth for some people and the suckers who just see an increasing number and try to get on board the money train.

It's speculative basis. At least the stock market and bond market have underlying companies, assets and revenues to back their value. At least commodities are *actual* ****.

All currencies in the world are backed by the US dollar. The entire world economy is dependant on the US dollar for all trade, that's as much backing and safety you can possibly have. Not to forget that since the 70s, all OPEC countries accept payment for oil only in American dollars. That means that the major part of the world energy trade is entirely dependant on the US dollar as a stable medium of exchange. That means the US Dollars is actually backed directly by the world's consumption of oil, and that's also a fantastic guarantee of value.

So no. The only money you can make off of crypto currency is indulging in criminal activity or in the very worst behavior that the financial markets are capable of. Your treatment is worse than the disease.

[Yora]

Do places that accept cryptocurrency as payment actually keep their prices stable, or do they adjust them as the exchange rate to dollar changes?

[Tyndmyr]

Do places that accept cryptocurrency as payment actually keep their prices stable, or do they adjust them as the exchange rate to dollar changes?

Usually the latter. There are services that will allow you to take cryptocurrency as payment, automatically handling the exchange into dollars at whatever the current rate is. Just a plugin, mostly.