That‘s what I‘ve been saying all along: Custody and safekeeping is a problem.
But you‘ll never cease to come up with new technical solutions to that issue.
And they don‘t inspire great confidence. Your own linked article spells it out:
„If the idea takes off, there may be a mix of larger, more well-capitalized Fedimints that offer cheaper fees and certain advanced features, and smaller community Fedimints that are truer to the tribe-guardian model.
…
Fedimint critics are quick to point out that the compromise on self-custody is the main tradeoff and biggest risk of all, and that these new platforms could be used for a dizzying array of “rug-pulls,” where mint operators collude to steal funds ** from unsuspecting users.“
And that‘s the thing: Complexity and power in the hands of few operators.
This is the reality: You can‘t trust platform operators - not even the well-intentioned from messing up and allowing hackers and other malicious actor to steal Coins.
It’s not so much the Bitcoin protocol and blockchain itself - it’s rather the custodial and exchange solutions laid on top of it that are abused to steal millions, dozens, hundreds of millions of dollars.
And it‘s happening again and again.
That‘s what undermines public confidence in cryptocurrencies.
Still works over reputation, like drugs (another physical good). You could also split that into multiple exchanges. Parallel with different vendors or sequential with known honest counterparties.
You have to provide a phone number. Organising burner SIM and burner Phone and brushing up on opsec shouldn’t be insurmountable challenges for added convenience and security.
A swiss number is needed though. By law you need to provide your name and address to have a swiss SIM card. Preventing circumvention has proven difficult as you can imagine.
To me the goal of Fedimints is to use it at a trusted level e.g. Family members. So typically most of your family won’t have the technical knowledge for self-custody but a couple of people can take care of it for everyone - - > net positive.
If you use the biggest Fedimint managed by people you don’t know, then you have the exact same trade-off of the usual third-party custody like exchange
I think the problem is that anonymous value already is in the gray zone. On it’s own it is not illegal yet, but nearly everything around it is. What is there left apart from secretly saving income under your mattress? Even then nobody can take that money legally anymore. You can only spend it on small-time consumption. That’s where you secretly withheld it from anyways.
Edit: On a second though you have to declare it for taxes. So a big part of that anonymity is already lost.
If we argue the case of politically persecuted and other criminals. Then we aren’t particularily afraid of breaking the law and also ready to inconvenience ourselves a bit. Especially if that lowers the chance of getting caught and adds nothing significant to the punishment.
Dissidents in particular might also be able to receive donations. Cryptocurrency is highly mobile and enables you to pay for quite some services already. E.g. someone from the other side of the world donates over your website. You use it to pay for hosting space. No compromise of anonymity needed on your side. You might also be able to convert it back to cash through (probably) criminal services. And it is easy to take with you, if you have to flee.
So yes, especially in those cases it has certain benefits over cash (including anonymity). I don’t know about the dissidents, but online drug marketplaces have become a viable economic sector. It functions exclusively over cryptocurrency. The anonymity and convenience seem good enough. Even though the pressure from police agencies all over the world must be severe.
I believe my bitcoin understanding is quite good, even I have not invested in it.
It has some really unique and revolutionary monetary features.
But sth that has really freaked me out, and it is the reason I did not invest in it years ago is why the goverments / central banks are allowing bitcoin to become a real threaten to the establishment.
a) or they are already owing whale wallets.
b) or they are sure they can execute a law that forbidds holding bitcoin, as Roosevelt did in 1933 in USA for gold.
c) or they might be using the crypto burble just as a lab to push the technology enough to build their CBDC. I believe CBDC is a sweet dream for goverments / central banks. They could track any transaction and confiscate any wallet.
For last 10 year a lot of resources and talented people have been working in the crypto wave. Goverment would not have had enough resources to achieve such a progress in so short time by themself. This is the reason why I am some how eventually bearish in bitcoin. So personally I believe we are living the scenario (c) and in a few year (b).
do u have in mind any other reason why the establishment is allowing all this?
I don’t think bitcoin is a real threat to most governments and even central banks, if they are financially properly managed.
Sure the ECB is getting nervous, trying to save the Euro but not knowing how and seeing cryptos as a threat. In the end I don’t think they will go down the same road as China (CBDC), because this is a really dystopian idea if thought through.
The US has basically classified it as commodity, just like Switzerland. It will be taxed the same way as gold and have a similar function as soon as volatility goes down. It is transparent and hard to hide.
I see the real value for bitcoin is in emerging countries where most people are unbanked and/or are getting killed by inflation and their dependency on the IMF.
Most of central banks and governments are broken. Switzerland is not the norm.
Currently USD is a global reserve currency, I believe around 60% is USD.
When bitcoin volatility will be lower many central banks might follow the steps of El Salvador.
If small countries in Africa and South America start to switch there reserve from USD to bitcoin, the global demand of USD would be getting down, then FED might face some problems and US could not export inflation anymore.
Also probably US has much less gold we think they have in Fort Knox. If bitcoin become a new gold alternative, they could not lie there.
Many people think Gaddafi and Hussein regimes were hitting because they wanted to abandon the dollar.
I don’t think US (China, ECB…) would allow a bitcoin standard.
Why wouldn’t they simply use a stable coin? Less volatility and closer to what most people in those countries would want if they have the choice (dollarisation, which does have downsides for the governments tho since they lose control of monetary levers).
Esp. if ethereum removes the concerns around carbon footprint, stable coins on top of ETH (or a CBDC) would be enough for those.
The counter party risk remains with stable coins and most are backed by the dollar that can easily be censored by the US government. Also most stable coins are centralized and created by a single company, an additional risk. For short term daily transactions stable coins are not a bad solution, for long term savings bitcoin is safer. We will have to see how the lightning network evolves.
Etherium is still under development for the next few years, that can be good or bad. Bitcoin is unmutable and undestroyable. Nobody can change that.
I am not sure many countries are going to hold too many dollars after they have seen what happened to the Russian reserves. If you don’t behave how the USA wants you to, your money is gone.
Yes, you better not make the U.S. consider you an enemy.
That said, most “good” countries in the world are aligned with the U.S. Who in their right mind in Switzerland or Europe wants to be less aligned with the U.S., when the alternative is more close alignment with Russia or China?
To be clear: I consider both the Russian and the Chinese government pretty evil organizations and will never defend what they are doing or what they stand for.
I just think the western governments are also becoming more and more authoritarian and over controlling. If you follow the cases of Snowden, Assange or the most recent arrest of Alexey Pertsev, the coder that developed tornado cash it becomes obvious that they don’t always have our best interest at heart. And CBDCs might become might become a really dangerous tool in this sense.
And why do I have to pick sides?
With digital property that can be easily transferred to every place in the world, the world is much bigger than just those two blocks. I can keep my options open.
I’d argue that it’s property that doesn’t belong and isn’t tied to one particular jurisdiction.
The reality is that most places - as in merchants, landlords, transportation companies etc. - around the globe don’t accept Bitcoin. Your Bitcoin, let alone more obscure cryptocurrency, is utterly useless with them, unless converted into local fiat currency.
It’s not that obvious, in my opinion. Whether arresting that particular individual was justified is debatable.
But their objective of curtailing money laundering certainly is in what most (non-criminal) people would consider in their best interests.
I use my crypto visa card to make 90% of daily payments, and it accepts a lot of different cryptos. You are right for the final purchase it’s being exchanged to fiat, but until then it’s still crypto
Due to the very transparent nature of etherium, everybody who knows my address can check my balance and see every transaction I ever made. It is only natural that I don’t want that, that’s not money laundering, it’s just a common sense of privacy and should not be considered illegal. Even Vitalik Buterin used tornado cash to donate to Ukraine.
That’s pretty amazing! Didn’t know lighting works without internet connection.
Here is a recent article on the lighting network from Lyn Alden:
*"Most people in developed countries have an incentive to spend their fiat and hoard their bitcoin like an investment, at least in this stage of the monetization process. The exception is for the subset of people who specifically need Bitcoin/Lightning’s permissionless nature for one reason or another, or for whom the majority of their liquid net worth is in it.
People in developing countries, with higher inflation and weaker payment and banking systems in general, have more of a natural incentive to use Lightning as a medium of exchange earlier on its monetization process. Indeed, adoption rates are rather promising in many of those regions. This isn’t surprising, considering that more people in developing countries have smart phones than bank accounts, in aggregate."*
I plan to set up a node myself and then force everybody around me to use it by not accepting any other form of payment
Yesterday I have a talk with a good Turkish friend living in Istanbul.
He told me that many people there had crypto wallets, but not as inflation hedge, instead for “having a chance to be rich”.
So even in a country with 70% inflation, it is not used as inflation hedge, instead just for speculation.
The point I believe in Turkey they are free to buy USD, and also they have some kind of saving bank account with an interest that matches the inflation. So they prob dont need the features that bitcoin offer.
I believe in Argentina where they can exchange not more than 100 USD a day, bitcoin is used for its unique monetary charasteristics (non confiscable asset).
The real value of bitcoin is that offers liquidity in environments where there a high risk of confiscation.
In how many places bitcoin needs to be used due to this unique feature. Not many.
I believe 300 billion market cap (current btc market cap) is more than enough for such a small market.
We could pay the groceries with a crypto visa, but there is not a need for that.
Even if bitcoin could be a real inflation hedge, we had already assets that helps to beat the inflation.
We might use btc for having transactions in minutes and with low cost, but I really don’t mind if my transaction takes one day. And very often transaction are free. Even if we want fast and low fee transactions there are other cryptos way better than btc.
So it is not a game changer for this use cases.
I believe bitcoin will be with us for decades, but in small niches.
So where is bitcoin used for its unique characteristics? In what cases? Then we could estimate a market cap required for such a market.
I was always fascinated by the concept of the digital money, that works trustless, without governments and banks. Bitcoin will shine, when and where those institutions fail.
I bought my first bitcoin in 2017 at around CHF 2k, it went up to nearly 20 k and then crashed hard back to 4k. I went through the whole emotional rollercoaster before so this time I don’t care that much anymore when I look at the charts.
I think Bitcoin can be both a speculation and an investment, like most assets are. Some buy Bitcoin to keep forever (like me) and some just for a few days. The speculators are mostly gone at the moment, but they will come back as soon as prices go back up. And leave again in the next crash.
Daily transactions need to be made on a second layer. Bitcoin itself is pretty useless to buy some milk.
I guess longterm it could have a similar market cap than gold with 11,5 Trillion USD, so 30 x from it’s current market cap of 0,380 Trillion USD.
Governments never allow that Central Banks will loose their money supply monopoly. They just need to publish a new law, kind of if we detect u are using bitcoin you will get 100K USD fine or kind of 1 year in jail. Then everybody will not want to use bitcoin.
“Bitcoin’s greatest risk is its success,” Ray Dalio
I agree bitcoin was a brilliant idea, but I still think it is an over-engineering solution for most of cases.
We do not need crypto for paying groceries, it is cool but there is not a need. Merchants and customers will not migrate to shopping in bitcoin if there is no a gain. We don’t need a decentralize and unconfiscable solution for paying a bread. Cash/Visa/Mastercard works well enough, also they have a network effect moat, so not easy to beat.
Even we might end paying the shopping with bitcoin. The prices will be kept in FIAT units. Because bitcoin will be ever very volatile. Because it does not have an elastic supply. This is the same reason why gold price is very volatile. If the demand of bitcoin (or gold) increases, the supply can’t increase so the prices rise, and when the demand of bitcoin decreases, the supply can’t absorb bitcoins. So the future of bitcoin will be prob much less volatile than now, but still very volatile to be used as unit of account.
I am just trying to figure out in what scenarios bitcoin is really needed, a game changer, to rationalize a price and my investment.
And by now I only see environments with problems similar to Argentina, and by now they are not many. For such a problem a 400 billion market cap solution (current market cap) maybe is enough.
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, tu confirmes avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/
Durch das Lesen und die Teilnahme an diesem Forum bestätigst du, dass du den auf http://www.mustachianpost.com/de/ dargestellten Haftungsausschluss gelesen hast und damit einverstanden bist.
It’s not so much the Bitcoin protocol and blockchain itself - it’s rather the custodial and exchange solutions laid on top of it that are abused to steal millions, dozens, hundreds of millions of dollars.